<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1997
REGISTRATION NO. 333-30047
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
STERIGENICS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7389 95-3323502
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
4020 CLIPPER COURT
FREMONT, CALIFORNIA 94538-6540
(510) 770-9000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JAMES F. CLOUSER
CHIEF EXECUTIVE OFFICER
STERIGENICS INTERNATIONAL, INC.
4020 CLIPPER COURT
FREMONT, CALIFORNIA 94538-6540
(510) 770-9000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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CARLA S. NEWELL, ESQ. JEFFREY S. MARCUS, ESQ.
OLUFUNMILAYO B. AREWA, ESQ. HANS J. BRASSELER, ESQ.
WILLIAM A. HOLMES, ESQ. MORRISON & FOERSTER LLP
GUNDERSON DETTMER STOUGH 1290 AVENUE OF THE AMERICAS
VILLENEUVE FRANKLIN & HACHIGIAN, LLP NEW YORK, NEW YORK 10104
155 CONSTITUTION DRIVE (212) 468-8000
MENLO PARK, CALIFORNIA 94025
(415) 321-2400
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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, as amended, 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, please 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, 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,
please check the following box. [ ]
------------------------
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH 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
PRELIMINARY PROSPECTUS DATED JULY 21, 1997
2,000,000 SHARES
LOGO
COMMON STOCK
------------------------
All the 2,000,000 shares of Common Stock offered hereby are being sold by
SteriGenics International,
Inc. Prior to the 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 $12.00 and $14.00 per share. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price.
The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol STER.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" AT PAGE 6.
------------------------
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.
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=====================================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions (1) Company (2)
- -----------------------------------------------------------------------------------------------------
Per Share...................................... $ $ $
- -----------------------------------------------------------------------------------------------------
Total(3)....................................... $ $ $
=====================================================================================================
</TABLE>
(1) See "Underwriting."
(2) Before deducting expenses estimated at $850,000, which are payable by the
Company.
(3) Certain stockholders of the Company (the "Selling Stockholders") have
granted to the Underwriters a 30-day option to purchase up to 300,000
additional shares of Common Stock solely to cover over-allotments, if any.
If all such shares are purchased, the total Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company and Proceeds to Selling
Stockholders will be $ , $ , $ and $ , respectively. See
"Underwriting."
------------------------
The Shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to their right to reject orders in whole or in part. It is expected that
delivery of the Common Stock will be made in New York City on or about ,
1997.
------------------------
PAINEWEBBER INCORPORATED
PIPER JAFFRAY INC.
WHEAT FIRST BUTCHER SINGER
------------------------
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 3
MEDICAL PRODUCTS
SteriGenics provides contract
sterilization services to manufacturers
of a broad range of single-use medical
products including syringes, scalpels,
gloves, gowns, cotton balls, surgical
kits, orthopedic implants, blood
collection devices, petri dishes, drug
packaging materials and eyecare
solutions.
NON-MEDICAL PRODUCTS
SteriGenics processes a variety of
non-medical products including
spices and herbs, cosmetics, food
ingredients, fruit and vegetable
products, food packaging, consumer
[SteriGenics Logo] products and polymers.
- --------------------------------------------------------------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF THE COMMON STOCK TO STABILIZE ITS
MARKET PRICE, THE PURCHASE OF THE COMMON STOCK TO COVER SYNDICATE SHORT
POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and Consolidated Financial Statements, including the Notes
thereto, appearing elsewhere in this Prospectus. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results and the timing of certain events could differ materially from
those anticipated in such forward-looking statements as a result of certain
factors discussed in this Prospectus, including those set forth in "Risk
Factors." Prospective investors should consider carefully the factors discussed
in "Risk Factors." Unless otherwise indicated, all information in this
Prospectus (i) gives effect to the reincorporation of the Company in Delaware
which will occur prior to the offering, (ii) gives effect to the conversion of
all outstanding shares of convertible preferred stock into shares of Common
Stock effective upon the closing of the offering, (iii) gives effect to the
redemption of all outstanding shares of Series A Redeemable Preferred Stock upon
the closing of the offering and (iv) assumes that the Underwriters'
over-allotment option will not be exercised.
THE COMPANY
SteriGenics International, Inc. ("SteriGenics" or the "Company") is a
leading provider of high quality contract sterilization services, with over 18
years of experience in the operation, design and development of Gamma
irradiation ("Gamma") facilities. The Company operates 12 Gamma facilities in
six states serving over 850 customers, predominantly in the medical products
market. In recent years, the Company has expanded into various non-medical
sterilization and processing markets. The Company's objective is to be the
leading provider of high quality contract sterilization services for
manufacturers of medical and non-medical products.
Sterilization is an essential step in the manufacturing process across a
number of industries for health, safety, regulatory and economic reasons. A
broad range of single-use, pre-packaged medical products as well as consumer
products are required under government regulations in the U.S. and many other
developed countries to be sterile or to have minimal microbial levels. In
addition, other products such as spices and herbs, cosmetics and food packaging
materials, are sterilized to improve shelf-life and address potential product
liability concerns. There are also a number of potential markets for the
sterilization of food products, including red meat, poultry, shellfish, animal
feed and fresh fruits and vegetables. The development of these potential markets
is subject to regulatory approvals and consumer acceptance of irradiated foods.
The market for commercial sterilization is divided between independent
suppliers of sterilization and processing services ("contract sterilizers") such
as the Company and certain large manufacturers that have in-house sterilization
capabilities ("captive sterilizers"). The Company estimates that the U.S. market
for contract sterilization was approximately $170 million in 1996 and that a
similar volume of product was processed by captive sterilizers. There is also a
significant market for contract sterilization services outside of the U.S.
The two primary methods of commercial sterilization are Gamma and
fumigation using ethylene oxide gas ("EtO"). The Company estimates that in 1996
40-45% of the U.S. contract sterilization market was Gamma. SteriGenics believes
that Gamma has significant advantages under normal operating conditions over EtO
including uniform dosing, predictability, shorter processing times, enhanced
flexibility, ease of handling and less environmental impact. As a result, the
use of Gamma sterilization has increased significantly over the past 10 years as
medical products manufacturers have converted the sterilization method used for
certain products from EtO to Gamma and have increasingly used radiation
compatible materials in the development of new products and packaging.
The Company has developed an integrated strategy intended to increase its
share of the existing sterilization market as well as to develop new markets.
First, the Company will seek to increase its share of the medical products
sterilization market by promoting the conversion from EtO to Gamma and from
captive to contract sterilization. Further, the Company is seeking to expand its
presence in non-medical markets,
3
<PAGE> 5
including the markets for spices and herbs, cosmetics, food and drug packaging
materials and materials processing. The Company will also evaluate potential
markets as they develop. A third element of the Company's strategy is geographic
expansion using the MiniCell, a smaller, single cell irradiator based upon a
proprietary design. The MiniCell takes substantially less time to construct and
is significantly less expensive to construct and operate than a standard
irradiation facility. The Company believes that the economics of the MiniCell
will allow the Company to serve smaller industrial centers, both domestically
and internationally, that could not support a full-size facility. The Company is
also seeking to lease MiniCells with support services to manufacturers with high
volume sterilization needs. The Company also seeks to increase its market share
by offering higher margin, premium services such as GammaSTAT and GammaReserve,
which guarantee rapid turn-around time, and the ExCell, which provides precision
dosing. SteriGenics intends to continue to leverage its engineering and design
capabilities to continue to improve its existing processes and designs and to
create and utilize innovative designs and services. Finally, SteriGenics intends
to pursue strategic acquisitions, both domestically and internationally.
SteriGenics has over 700 customers in the medical products market including
manufacturers of health care and medical devices, pharmaceuticals, labware and
eyecare products. Sales to these customers accounted for 80% of the Company's
revenues in the fiscal year ended March 31, 1997. The Company has over 150
customers in the non-medical market producing a variety of products including
spices and herbs, cosmetics, food ingredients, food packaging, consumer products
and polymers.
The Company's principal executive offices are located at 4020 Clipper
Court, Fremont, California 94538-6540 and its telephone number is (510)
770-9000. The Company was incorporated in California on August 29, 1978 and will
be reincorporated in Delaware prior to the offering. Unless the context
otherwise requires, the term "Company" when used herein shall mean SteriGenics
International, Inc., a Delaware corporation, its California predecessor and its
subsidiaries. GammaSTAT is a registered trademark of the Company. ExCell,
GammaReserve, Gemini, MiniCell and SteriGenics are trademarks of the Company.
THE OFFERING
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Common Stock Offered by the Company.............. 2,000,000 shares
Common Stock to be Outstanding after the
Offering....................................... 6,829,039 shares(1)
Use of Proceeds.................................. To fund capital expenditures, to redeem
the Company's outstanding Series A
Preferred Stock and for working capital
and general corporate purposes.
Proposed Nasdaq National Market Symbol........... STER
</TABLE>
- ---------------
(1) Based on the number of shares outstanding as of June 30, 1997. Excludes an
aggregate of 706,550 shares subject to outstanding options as of June 30,
1997 at a weighted average exercise price of $5.10 per share under the
Company's Second Amended and Restated 1986 Stock Option Plan. See
"Capitalization," "Management -- Stock Plans" and Note 5 of Notes to
Consolidated Financial Statements.
The Company intends to furnish to its stockholders annual reports
containing audited consolidated financial statements, quarterly reports
containing unaudited consolidated financial statements and such other periodic
reports as the Company may determine to be appropriate or as may be required by
law.
4
<PAGE> 6
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED MARCH 31, JUNE 30,
------------------------------------------------- ---------------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................ $21,603 $24,585 $28,661 $30,241 $ 37,668 $ 8,164 $ 10,751
Cost of revenues.................... 11,896 11,679 16,389 16,978 20,425 4,297 5,801
------- ------- ------- ------- --------- --------- ---------
9,707 12,906 12,272 13,263 17,243 3,867 4,950
Costs and expenses:
General and administrative........ 1,628 3,266 5,664 5,213 6,345 1,417 1,637
Marketing and selling............. 1,002 1,258 1,583 1,761 2,482 560 823
Research, development and
engineering..................... 473 518 685 890 1,381 273 312
------- ------- ------- ------- --------- --------- ---------
3,103 5,042 7,932 7,864 10,208 2,250 2,772
------- ------- ------- ------- --------- --------- ---------
Income from operations.............. 6,604 7,864 4,340 5,399 7,035 1,617 2,178
Other income (expense):
Write-down of investments in joint
ventures........................ -- -- (3,011) -- -- -- --
Interest expense, net............. (1,164) (916) (2,402) (1,846) (1,836) (459) (581)
Other income...................... 315 256 139 47 115 7 15
------- ------- ------- ------- --------- --------- ---------
Income (loss) before provision for
income taxes, equity in joint
ventures and discontinued
operations........................ 5,755 7,204 (934) 3,600 5,314 1,165 1,612
Provision for income taxes.......... 2,045 2,479 1,185 1,448 2,099 461 637
------- ------- ------- ------- --------- --------- ---------
Income (loss) before equity in joint
ventures and discontinued
operations........................ 3,710 4,725 (2,119) 2,152 3,215 704 975
Equity in net loss of joint
ventures.......................... (204) (720) (1,360) -- -- -- --
------- ------- ------- ------- --------- --------- ---------
Income (loss) from continuing
operations........................ 3,506 4,005 (3,479) 2,152 3,215 704 975
Discontinued operations:
Income (loss) from discontinued
operations...................... 494 189 (115) -- -- -- --
Loss on disposition of
discontinued operations......... -- -- (1,173) -- -- -- --
------- ------- ------- ------- --------- --------- ---------
Net income (loss)................... $ 4,000 $ 4,194 $(4,767) $ 2,152 $ 3,215 $ 704 $ 975
======= ======= ======= ======= ========= ========= =========
Pro forma net income per share(1)... $ 0.62 $ 0.14 $ 0.19
========= ========= =========
Shares used in computing pro forma
net income per share(1)........... 5,164,679 5,164,679 5,166,679
========= ========= =========
OTHER OPERATING DATA:
EBITDA(2)........................... $11,602 $12,150 $ 6,065 $13,382 $ 15,421 $ 3,540 $ 4,504
Capital expenditures................ $ 9,331 $14,462 $16,549 $ 7,207 $ 18,613 $ 2,821 $ 2,953
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-----------------------
AS
ACTUAL ADJUSTED(3)
------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................................... $ 1,501 $ 23,331
Working capital (deficit)..................................................... (3,837) 17,993
Total assets.................................................................. 92,103 113,933
Total liabilities............................................................. 58,645 58,645
Redeemable preferred stock.................................................... 1,500 --
Stockholders' equity.......................................................... 31,957 55,287
</TABLE>
- ---------------
(1) See Note 1 of Notes to Consolidated Financial Statements included herein for
a description of the computation of pro forma net income per share.
(2) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization expense. EBITDA does not represent cash flows
as defined by generally accepted accounting principles and does not
necessarily indicate that cash flows are sufficient to fund all the
Company's cash needs. EBITDA is a financial measure commonly used in the
Company's industry and should not be considered in isolation or as a
substitute for net income, cash flows from operating activities or other
measures of liquidity determined in accordance with generally accepted
accounting principles.
(3) As adjusted to give effect to the sale of shares of Common Stock at an
assumed initial public offering price of $13.00 per share and the
application of the net proceeds therefrom. See "Use of Proceeds."
5
<PAGE> 7
RISK FACTORS
These securities involve a high degree of risk. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results and the timing of certain events could differ materially from
those anticipated by such forward-looking statements as a result of certain
factors discussed in this Prospectus, including the risk factors set forth
below. Prospective purchasers of the Common Stock should consider carefully the
risk factors set forth below, as well as the other information set forth in this
Prospectus, prior to investing in the Common Stock offered hereby.
UNPREDICTABILITY OF FUTURE OPERATING RESULTS; LIKELY FLUCTUATIONS IN QUARTERLY
OPERATING RESULTS
The Company has experienced, and expects to continue to experience,
significant fluctuations in revenues and operating results from quarter to
quarter. As a result, the Company believes that period-to-period comparisons of
its operating results are not necessarily meaningful, and that such comparisons
cannot be relied upon as indicators of future performance. In addition, there
can be no assurance that the Company's revenues will grow or be sustained in
future periods or that the Company will maintain its current profitability in
the future. A significant component of such quarterly fluctuations results from
the demand by the Company's customers for Gamma sterilization services. Other
factors that could cause the Company's revenues and operating results to vary
significantly from period to period include volatility in the market for medical
devices; the ability of the Company to deliver sterilization services in a
timely and cost effective manner; the ability of the Company to expand
successfully in the non-medical sterilization services market; the timing and
size of orders from the Company's customer base; the ability of the Company to
obtain supplies of Cobalt 60 on a timely basis and at a reasonable cost;
fluctuations in currency exchange rates between the U.S. dollar and the Canadian
dollar; the costs associated with customer product being damaged as a
consequence of overdosing and other factors; changes in interest rates;
regulatory matters; seasonality associated with historical decreases in medical
procedures during the fourth calendar quarter; and litigation, acquisitions and
other extraordinary events. The Company's results of operations are also
influenced by competitive factors, including the pricing and availability of the
Company's and competing sterilization services; the acceptance of Gamma
sterilization as a means of sterilizing products as opposed to other methods of
sterilization; the ability of the Company's competitors to obtain orders from
the Company's customers; the establishment of in-house sterilization
capabilities by the Company's customers; the acquisition of the Company's
customers by entities that do not use the Company's sterilization services; the
timing of new service or technology announcements and releases by the Company
and its competitors; and the entry of new competitors into the market for
sterilization and radiation processing services. A large portion of the
Company's expenses are fixed and difficult to reduce in a short period of time.
If revenues do not meet the Company's expectations, the Company's fixed expenses
would exacerbate the effect of such a shortfall on net income.
Additional factors that have a significant impact on the Company's results
of operations are the timing of construction and commencement of operations of
new facilities. Building new facilities requires significant capital investments
in construction, equipment and Cobalt 60. In addition to incurring costs
associated with building and equipping such facilities, the Company also incurs
costs related to Cobalt 60 and higher personnel costs in the months preceding
initial operation. In the past, as a result of their own internal procedures,
customers have delayed qualification and use of new facilities until they had
been operational for a specified period of time of up to 12 months. As a result,
the Company failed to realize a portion of anticipated revenues for the facility
pending such qualification, while incurring significant start-up costs, both of
which adversely affected the Company's results of operations. See " --
Substantial Debt."
Due to these factors, as well as other unanticipated factors, it is likely
that in some future quarter the Company's operating results will be below the
expectations of public market analysts or investors. In such event, the price of
the Company's Common Stock would be materially adversely affected. See "-- No
Prior Trading Market; Potential Volatility of Stock Price," "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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<PAGE> 8
DEPENDENCE ON MEDICAL PRODUCTS CUSTOMERS
The Company derives a substantial portion of its revenues from the sale of
sterilization services to manufacturers of medical devices, labware and eyecare
products ("medical products"), and the Company expects that the sterilization of
medical products will continue to account for a significant portion of the
Company's revenues for the foreseeable future. The future success of the Company
thus depends to a considerable extent upon the continued growth of the market
for medical products. In particular, a significant aspect of the Company's
medical products business is the sterilization of single-use medical devices. As
a result, the future success of the Company depends in part on continued growth
in the market for single-use medical devices. There has recently been an
increasing focus on reusable medical devices and, therefore, there can be no
assurance that use of reusable medical devices in lieu of single-use devices
will not increase. The Company believes that continued growth in the use of
medical products depends on a number of factors, including the impact of health
reform proposals. The Company believes that government and private insurance
company efforts to contain or reduce health care costs are likely to continue.
These trends may lead to fewer medical procedures being performed or the
increased use of reusable medical devices, either of which could negatively
impact the demand for the Company's services. Loss of significant business from
medical products manufacturers, including reductions caused by large customers
establishing captive facilities, changes in such customers' competitive
position, a decision to purchase contract sterilization services from other
suppliers or a downturn in the medical products market, would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Industry Background."
COMPETITION
The market for sterilization services is intensely competitive and is
characterized by significant price competition. The Company competes with other
companies that provide Gamma sterilization services, the most significant of
which is Isomedix, Inc. ("Isomedix"). In addition, many products that can be
sterilized using Gamma can also be sterilized using either EtO or electron beam
("E-Beam") sterilization. As a result, the Company also competes with companies
that process products using EtO or E-Beam technology. Companies processing
products using EtO include Cosmed Group, Inc., Griffith Micro Science, Inc. and
Isomedix. Certain of the Company's competitors and potential competitors have
substantially greater financial, marketing, distribution, technical and other
resources than the Company or offer multiple sterilization technologies, which
may enable them to address a broader range of the sterilization requirements of
individual customers. In addition, the Company competes with manufacturers that
have or are considering establishing in-house sterilization capabilities. The
Company may also in the future face competition from suppliers of Cobalt 60
radioisotope, particularly MDS Nordion, Inc. ("Nordion"), as well as foreign
providers of sterilization services. In addition, Isomedix has announced its
intention to enter the California market for sterilization services, which would
increase competition in that market. To the extent that the Company expands into
international markets it will also be faced with competition from existing
providers of sterilization in those markets.
In recent years, price competition in the sterilization services industry
has intensified. The Company may in the future face increased competition from
companies that employ new or improved technologies or that offer sterilization
services that are more effective or less costly than those developed and
marketed by the Company. Such competition could have a material adverse effect
on the Company's business, financial condition and results of operations. There
can be no assurance that the Company will be able to continue to compete
effectively or that the competitive pressures faced by the Company will not have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Competition."
UNCERTAINTY OF EXPANSION IN NON-MEDICAL MARKETS
While the Company has traditionally focused primarily on the medical
products market, it has recently increased its efforts in the non-medical
contract sterilization services market. The Company currently sterilizes a wide
range of food ingredients and consumer products, including cosmetics, spices and
herbs. In
7
<PAGE> 9
addition, the Company processes various industrial compounds. These services
accounted for 20% of the Company's revenues in fiscal 1997. Many of the
non-medical markets for Gamma sterilization and processing are new and emerging,
and there can be no assurance that any of these markets will develop at the
anticipated rate, if at all. See "Business -- Markets and Customers."
Approval for the irradiation of food products is regulated by the United
States Food and Drug Administration (the "FDA") and the United States Department
of Agriculture (the "USDA"). The FDA has approved radiation for the processing
of a variety of foods, including pork, poultry and fresh fruits and vegetables.
However, only limited commercial sales of irradiated food have taken place. The
FDA is currently considering a petition to approve the irradiation of fresh
packaged red meats in order to eliminate E. coli and other harmful pathogens.
Any irradiation processing of meat or poultry is also regulated by the USDA,
which requires preapproval of the irradiation process. Although the Company may
in the future seek to take advantage of opportunities to sterilize meat and
poultry products, the sterilization of fresh food products such as meat and
poultry would require significant changes in the Company's processing
techniques, including the redesign of facilities and the addition of
refrigeration capabilities. In addition, current FDA rules and regulations
require the labeling of any retail food product that is irradiated, and to date
there has been significant consumer resistance to irradiated food. As a result,
there can be no assurance that Gamma sterilization of food products will gain
public acceptance or will ultimately prove commercially feasible in the U.S. or
that the Company would undertake to expand its irradiation activities to include
meat and poultry.
RISKS RELATED TO GEOGRAPHIC EXPANSION USING THE MINICELL; RISKS RELATED TO
INTERNATIONAL OPERATIONS
A key element of the Company's strategy is to expand geographically into
smaller regional markets and internationally using the MiniCell. There can be no
assurance that manufacturers in these markets will use the Company's facilities,
that such manufacturers will pay higher sterilization prices in exchange for
lower transportation costs and a decrease in turn-around time or that the
Company will receive enough volume of product to operate such facilities on a
profitable basis. In addition, many manufacturers in these smaller markets
currently use EtO to sterilize their products and would need to convert their
products to Gamma. Failure of the Company to successfully introduce and operate
MiniCells in these new markets could materially adversely affect the Company's
business, financial condition and results of operations.
If the Company is successful in expanding into international markets, it
will be subject to a number of risks related to foreign operations, including
fluctuations in currency exchange rates, political and economic conditions in
various jurisdictions, unexpected changes in regulatory requirements, tariffs
and other trade barriers, difficulties in staffing and managing foreign
operations, longer accounts receivable payment cycles and potentially adverse
tax consequences. There can be no assurance that such factors will not have a
material adverse effect on the Company's future operations outside the U.S. In
addition, in the past the Company has been unsuccessful in its attempts to
penetrate international markets and in fiscal 1995 wrote-off a total of $3.0
million invested in joint ventures in Taiwan and Indonesia. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
UNCERTAINTIES RELATED TO MINICELL LEASING
The Company's ability to successfully lease its MiniCell will depend upon
the acceptance of the Company's technology and the concept of "in-house
outsourcing" (utilizing third party contractors to provide services within a
manufacturer's own facility) by manufacturers with high volume sterilization
needs, as well as upon the Company's ability to enter into favorable leasing
terms with potential customers. The Company has not yet leased a MiniCell, and
there can be no assurance that manufacturers will elect to lease a MiniCell in
lieu of relying on traditional in-house sterilization operations and contract
sterilization providers or that any such leases will be on terms favorable to
the Company. In addition, the leasing of the MiniCell will involve a significant
commitment of management attention and resources by prospective customers and
may require input from and approval at multiple levels of a customer's
organization. Accordingly, the Company anticipates that the MiniCell leasing
process will be subject to long sales cycles typically associated with
significant capital expenditures. Delay in or the failure to lease the MiniCell
could have a material adverse effect on the
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Company's business, financial condition and results of operations. See
"Business -- The SteriGenics Approach."
DEPENDENCE ON A SINGLE TECHNOLOGY
The Company performs all of its sterilization services using Gamma
radiation. Because of its use of a single technology, a decline in the demand
for, or the pricing of, Gamma sterilization services would have a material
adverse effect on the Company's business, financial condition and results of
operations. To remain competitive, the Company may also need to respond quickly
to technological changes and innovations in the sterilization services market,
including changes in the technologies used to perform sterilization services
that could render Gamma sterilization obsolete or noncompetitive. The Company is
also dependent upon continued consumer acceptance of the Gamma sterilization of
medical products. Failure by the Company to quickly and effectively respond to
changes in the sterilization market, including the development of new
technologies, or a significant increase in consumer resistance to products
sterilized by Gamma, could have a material adverse effect on the Company's
business, financial condition and results of operations. See "-- Competition."
GOVERNMENT REGULATION AND STANDARDS COMPLIANCE
The Company's business is subject to various federal, state and local laws,
regulations, agency actions and court decisions. Although the Company believes
it has received all licenses and permits necessary to conduct its current
sterilization business, there can be no assurance that the Company will not be
found in violation of applicable requirements or that governmental bodies will
not seek to impose regulatory requirements not now anticipated on the Company
and its business. In addition, the long-term course of regulatory policy cannot
be predicted and, although the Company believes that all necessary regulatory
approvals have been obtained, there can be no assurance that laws and
regulations will not be applied in a manner that adversely affects the Company.
The imposition of such regulatory requirements could force the Company to alter
or cease operations of its facilities and could otherwise have a material
adverse effect on the Company's business, financial condition and results of
operations.
The design, construction, use and operation of commercial irradiation
facilities such as those operated by the Company, and byproduct materials used
in such facilities, are extensively regulated by the United States Nuclear
Regulatory Commission (the "NRC"), or in some cases by various state regulatory
agencies and authorities that undertake comparable regulatory functions from the
NRC (the "Agreement States"). In addition, the Company is subject to various
local zoning and permit rules in the construction of its facilities. The
Company's facilities are subject to regulation by additional regulatory bodies
at the federal, state and local levels, depending upon the type of product that
is being irradiated. The Company's facilities are subject to the requirements of
the FDA when irradiating medical devices, foods, cosmetics or food or drug
packaging materials. In addition, if the Company were to begin processing meat
or poultry products, it would become subject to the requirements of the Food
Safety and Inspection Service of the USDA, which would require preapproval of
the irradiation process for meat and poultry. The Company is also subject to the
requirements of other federal agencies, such as the United States Occupational
Safety and Health Administration and the United States Environmental Protection
Agency (the "EPA"). In addition, the Company is subject to the regulatory
requirements of the state and local agencies in the jurisdictions where the
various irradiation facilities are located.
In addition to extensive regulation by various governmental bodies and
agencies, the Company is subject to standards, guidelines and requirements
established by industry organizations and other non-governmental bodies, such as
the International Standards Organization ("ISO") and the Association for the
Advancement of Medical Instrumentation ("AAMI").
Changes in, or reinterpretations of, existing requirements and standards or
adoption of new requirements beyond those described below or the failure at any
time to comply with any applicable material regulations and standards could have
a material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that the Company will not incur
significant costs to comply with laws,
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regulations and other requirements in the future or that such laws, regulations
and other requirements will not have a material adverse effect upon the
Company's business, financial condition and results of operations.
NRC Regulation of Irradiation Facilities
The receipt, acquisition, ownership, transfer, possession, use,
transportation and disposal of nuclear byproduct material, as well as the
construction, operation, transfer, closure and decommissioning of commercial
irradiation facilities such as those operated by the Company, are subject to
extensive and rigorous government regulation by the NRC or, in some cases, by
the Agreement States.
Although there can be no assurance, the Company believes it has received
all licenses and permits necessary for the conduct of its business. Commercial
Gamma sterilization facilities, such as those owned or operated by the Company
are subject to both regularly scheduled and unannounced inspections by the NRC
or the Agreement States, with regard to all aspects of their operation,
recordkeeping, compliance with health and safety regulations and all aspects of
the utilization, storage, transfer, possession and transportation of regulated
byproduct materials. Noncompliance with the health and safety regulations of the
NRC and most Agreement States are generally ranked according to levels of
severity. Since 1993, the Company has received notices of violation from the NRC
and the Agreement States concerning items of noncompliance at four of its
facilities, which were not in such categories as to be of "significant
regulatory concern." The Company believes that it has taken appropriate
corrective actions in response to each such notice. In August 1996, the Company
acquired certain assets of RTI, Inc. ("RTI"). The regulatory history of the
former RTI facilities, as operated by RTI, involved, among other things, very
significant regulatory compliance problems, which involved the payment of civil
and criminal penalties by RTI, as well as a facility license suspension for a
period of approximately 80 days. As a consequence of this regulatory history,
there can be no assurance that the former RTI facilities will not be subject to
heightened regulatory scrutiny and inspections for an extended period of time.
Such heightened regulatory scrutiny and a failure by the Company to address
concerns raised from such scrutiny and inspection could result in civil
penalties or the suspension or termination of operations at one or more of the
Company's facilities or could otherwise have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
has no knowledge of any circumstances that would constitute a present
significant violation of applicable state or federal laws or regulations.
However, there can be no assurance that the Company will not in the future be
determined to be in violation of any such laws or regulations.
The terms and conditions of the Company's licenses may be revoked, amended,
revised or modified by reason of changes in the applicable laws, rules,
regulations, or agency orders. Any such action may have a material adverse
effect on the Company's business, financial condition and results of operations.
Violations of or noncompliance with applicable governmental requirements
may result in an enforcement action including, among other things, a notice of
violation, imposition of civil penalties, suspension, modification or revocation
of any applicable license, criminal prosecution, or withholding or recall of the
nuclear byproduct material held by the Company. Any such action would have a
material adverse effect on the Company's business, financial condition and
results of operations.
FDA Regulation of Irradiation Facilities
The Company's facilities are subject to the requirements of the FDA when
irradiating medical devices, foods, cosmetics and food or drug packaging
materials. Failure by the Company at any time to comply with applicable FDA
requirements could lead the FDA to institute materially adverse enforcement
actions against the Company and/or its customers, including, among other things,
warning letters, recall or seizure of products, fines, injunctions, civil
penalties, total or partial suspension of sterilization operations and criminal
prosecution. Such enforcement actions would also harm the Company's business
reputation and could cause the Company to lose customers to competitors.
Medical devices, foods, cosmetics and food or drug packaging materials must
be manufactured and processed in accordance with the FDA's Good Manufacturing
Practices ("GMP"). No assurance can be
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given that the FDA would find that the Company is in compliance with applicable
GMP requirements or that the Company will be found in compliance at all times in
the future.
Irradiation is regulated by the FDA and is considered to be a food
additive. Irradiation may only be used on foods and food packaging materials in
accordance with the requirements established in the food additive regulations.
The existing food additive regulations only approve the use of irradiation for a
limited variety of foods and food packaging materials that are used during the
irradiation of foods. Food packaging materials that are irradiated prior to
filling are exempt from the premarket approval requirements, provided that the
irradiated food packaging material is still suitable for use and complies with
the applicable indirect food additive regulations. Before the Company could
expand its sterilization services to certain foods or food packaging materials,
the food additive regulations would have to be amended to include the
irradiation of foods or food packaging materials not covered by the existing
regulations. There can be no assurance that the FDA would amend the food
additive regulations or that such regulations would be amended in a timely
manner.
Standards Compliance
In addition to governmental regulation, the Company is required to comply
with various standards in order to continue to provide sterilization services to
medical products manufacturers. These standards include ISO 9002 and the
standards for sterilization set by AAMI. The Company may in the future be
required to comply with new and changing standards. There can be no assurance
that the Company will be able to comply with any new standards or that the cost
of such compliance will not have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business -- Quality Assurance and Safety."
RISKS OF OPERATING FACILITIES USING RADIOACTIVE MATERIAL
The operation of the Company's commercial irradiation facilities involves
special risks, potential liabilities, and specific regulatory, radiological
health and safety and environmental requirements and may raise concerns with
respect to both worker safety and community reaction. Should an incident
involving unplanned exposure beyond regulatory limits to radioactive materials
occur at any of the Company's facilities, the resultant liability could be
substantial. Such an incident would also result in adverse community reaction,
which could impact the Company's ability to continue to operate any facility
involved in such an incident, as well as similar facilities. In the event any
losses or liabilities related to such an incident are underinsured or exceed
accumulated funds, or adequate recovery is not possible, the Company's business,
financial condition and results of operations would be materially adversely
affected.
Although the Company believes it has implemented extensive safety
procedures, there is potential risk that workers in the Company's facilities may
be exposed to radiation beyond regulatory limits. In addition, the Company may
encounter resistance from those in the communities where it seeks to build
additional facilities or be subject to protests or other actions in areas where
it has facilities based on perceived risk of exposure to radiation on the part
of those living in the communities surrounding the Company's facilities. Any
actual or perceived exposure to radiation as a result of the Company's
activities or a failure related to the Company's safety procedures could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company is not aware of any incidences of worker exposure to radiation
beyond regulatory limits and has not experienced any contamination related to
its use of Cobalt 60. However, in the spring of 1985, due to a temporary
shortage in Cobalt 60 supply and in response to a program by the United States
Department of Energy (the "DOE"), the Company leased over 400 stainless steel
capsules of radioactive Cesium 137 ("Cesium") from the DOE for use at the
Company's Decatur, Georgia and Westerville, Ohio irradiation facilities. On June
6, 1988, the Company discovered that one or more of the DOE's Cesium capsules
had leaked radioactive Cesium, which is water soluble, into the water shielding
pool, contaminating the Company's Decatur, Georgia facility. The Company no
longer uses Cesium capsules in any of its facilities, and such capsules have
generally been withdrawn from commercial use nationwide by the DOE. The Company
is not aware
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of any ongoing environmental or other legal liabilities related to the Cesium
incident. However, there can be no assurance that unspecified third parties,
including former employees, would not in the future, assert claims against the
Company in connection with the contamination of the Decatur facility. See
"-- Environmental Risks."
The Cobalt 60 stored in water shielding pools at each of the Company's
facilities is double encapsulated in stainless steel. Although the water in
these pools is continuously monitored for any potential leakage and is deionized
to protect against corrosion, there can be no assurance that the stainless steel
capsules will not corrode. In 1995, the Company encountered minor corrosion in
the outer encapsulation of certain of its Cobalt 60 rods, requiring their
replacement. Since the quantity of Cobalt 60 in a facility is the key
determinant of the amount of product that can be processed, any significant
delay in the replacement of such Cobalt 60 could have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, if the Company is determined to be responsible for the corrosion, it
could be required to bear the costs of transportation and reencapsulation of the
Cobalt 60. Furthermore, such corrosion, if undetected, could result in
radioactive material being released into the water shielding pool, which could
cause contamination of the pool and potentially the related facility. Any
contamination resulting from such release and the related decontamination
process would have a material adverse effect on the Company's business,
financial condition and results of operations. See "-- Government Regulation and
Standards Compliance," "Business -- Facilities," "Business -- Quality Assurance
and Safety" and "Business -- Regulatory and Environmental Matters."
ENVIRONMENTAL RISKS
The Company's operations are subject to regulation by the EPA as well as
state and local governmental agencies. Although there can be no assurance, the
Company believes it currently maintains all licenses and permits necessary to
conduct its current business and that it is in material compliance with
applicable environmental, health and safety laws and regulations. The loss of
any of the Company's licenses or permits could force the Company to suspend or
terminate operations at one or more of its facilities or could otherwise have a
material adverse effect on the Company's business, financial condition and
results of operations.
Pursuant to an Asset Acquisition Agreement effective August 8, 1996 (the
"Asset Agreement"), the Company purchased certain assets of RTI, including
property located in Haw River, North Carolina and leasehold interests in
property located in Salem, New Jersey and Rockaway, New Jersey (the "Rockaway
Property"). The Rockaway Property was previously owned and operated by Thiokol
Chemical Corporation ("Thiokol"), and is listed on the Superfund National
Priorities List ("NPL"). In 1992, RTI and Thiokol entered into an Administrative
Consent Order ("ACO") with the New Jersey Department of Environmental Protection
(the "NJDEP") requiring, among other things, implementation of a groundwater
remedy estimated to exceed $2.0 million in costs.
Under the Asset Agreement, RTI retained ownership of the Rockaway Property
and all associated environmental liabilities as of the closing date. RTI agreed
to indemnify and hold the Company harmless from and against any and all claims
which may arise directly or indirectly from any use or release of hazardous
substances on or under the leased premises as of the closing date. In addition,
the Company obtained a letter from the NJDEP stating that the NJDEP will not
institute either judicial or administrative civil proceedings against the
Company for any discharge, deposit, release or disposal of hazardous substances
or pollutants existing at the Rockaway Property, emanating therefrom, or
occurring before the closing. However, the Company is required by the NJDEP to
maintain a standby letter of credit in the amount of $500,000, contingent upon
the continued clean up efforts required of RTI. The required amount of the
letter of credit decreases over the life of the leasehold interest, and/or as
the NJDEP requires. Although there can be no assurance, the Company believes,
based on present information available to it, including the indemnification from
RTI, the ACO among RTI, Thiokol and the NJDEP, and the NJDEP's letter stating
that it will not seek recovery or remediation costs from the Company for
contamination that predates the purchase of RTI's assets, that it does not face
any significant environmental liability with respect to the Rockaway Property
that would have a material adverse effect on its business, financial condition
or results of operations.
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In the spring of 1985, the Company leased over 400 stainless steel capsules
of radioactive Cesium from the DOE for use at the Company's Decatur, Georgia and
Westerville, Ohio irradiation facilities. On June 6, 1988, the Company
discovered one or more of DOE's Cesium capsules had leaked radioactive Cesium,
which is water soluble, contaminating the Company's Decatur, Georgia facility.
As a result of the contamination, the Company's Decatur irradiation facility was
completely shut down. The decontamination activities were conducted by the DOE
and its contractors, and the Company filed an administrative claim with the DOE
for damages the Company incurred as a result of the Cesium contamination. The
DOE did not pay or deny the Company's claim within the required six month
period. As a result, the Company filed suit against the U.S. government in June
1991. Although the DOE had orally offered to fund the costs of the cleanup, the
government subsequently asserted a substantial counterclaim against the Company
alleging that the Company had been negligent in its handling and use of the
Cesium capsules. A settlement was reached between the parties to this litigation
on April 9, 1997, following a trial and notice of appeals filed by both
SteriGenics, the U.S. government and two of its contractors. The presiding court
entered a stipulation of dismissal effective May 9, 1997. While the litigation
resulted in significant expenses and was a significant diversion of management
attention, the Company is not aware of any ongoing environmental or other legal
liabilities associated with the Cesium incident. However, there can be no
assurance that unspecified third parties, including former employees, would not,
in the future, assert claims against the Company in connection with the
contamination of the Decatur facility. After the decontamination activities were
completed, final survey reports were prepared by both a contractor for DOE and
by a third party consultant on behalf of the Georgia Department of Human
Resources, which regulates such matters in Georgia, to allow for the
unrestricted use of the Decatur facility consistent with the requirements of the
Georgia Department of Human Resources. The documentation and data prepared by
such third party indicated that any residual radioactivity at the Decatur
facility was beneath that of regulatory concern to the applicable regulatory
authority. While the Company no longer uses Cesium in any of its facilities,
there can be no assurance that it will not experience any incidents of
radioactive contamination resulting from its use of Cobalt 60. See "-- Risks of
Operating Facilities Using Radioactive Materials."
RISKS RELATED TO COBALT 60 SUPPLY
To date, the Company has obtained its supply of the Cobalt 60 radioactive
isotope from three sources. The Company's primary sources of Cobalt 60 are
Nordion, a Canadian company and the world's principal source of Cobalt 60, and
REVISS Services (UK) Limited ("REVISS"), a United Kingdom company and formerly a
division of Amersham International plc. In addition, the Company has purchased
smaller amounts of its Cobalt 60 requirements from Neutron Products Inc., a
Maryland corporation. While the Company has not experienced any shortages in
Cobalt 60 supply since the mid-1980s and has various supply contracts in place,
there can be no assurance that it will be able to obtain sufficient supplies of
Cobalt 60 from Nordion, REVISS or other suppliers on acceptable terms or that it
will be able to identify and qualify alternative sources. In addition, there is
no assurance that Nordion will not in the future become a competitor of the
Company in the delivery of sterilization services, which could result in a
decrease in the availability of Cobalt 60 from Nordion. If interruptions in the
supply or increases in the price of Cobalt 60 were to occur for any reason,
including a decision by any of the Company's suppliers to decrease or
discontinue supplies of Cobalt 60 to the Company, trade restrictions with Canada
or the United Kingdom, political unrest, labor disputes or other factors, the
Company's business, financial condition and results of operations would be
materially adversely affected. Since the Company pays for Cobalt 60 primarily in
Canadian dollars, and the Canadian dollar is currently trading at levels
significantly lower than it has in recent years, the Company's results of
operations may be adversely affected by fluctuations in currency exchange rates.
In addition, the availability and price of Cobalt 60 to the Company and its
suppliers is dependent in part on the political situation in countries with
large deposits of Cobalt 59 (the material that is processed into Cobalt 60),
such as the Democratic Republic of Congo and the republics of the former Soviet
Union. Such countries have recently experienced political unrest. In addition,
since mined Cobalt 59 must be converted into Cobalt 60 in nuclear reactors, the
supply of Cobalt 60 to the Company's suppliers is dependent upon the
availability of nuclear reactors to convert Cobalt 59 to Cobalt 60. An
interruption in the Company's supply of Cobalt 60 or
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significant increase in the price the Company is required to pay for Cobalt 60
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Cobalt 60."
RISKS OF BUSINESS INTERRUPTION
Any prolonged disruption in the operations at any of the Company's
facilities, whether due to technical or labor difficulties, regulatory action,
destruction of or damage to any facility or other reasons, would have a material
adverse effect on the Company's business, financial condition and results of
operations. This risk is increased since customers generally seek to have their
products sterilized within a 300 mile radius of their production or distribution
facilities. The Company is also susceptible to natural disasters, including
earthquakes, hurricanes and tornadoes, as well as other catastrophic events such
as fire. Furthermore, if additional capacity is required as a result of
unplanned increases in demand for the Company's services, the Company may suffer
delays and increased costs in establishing other facilities or increasing
production at existing facilities that could adversely affect customer
relationships, cause a loss of market opportunities and have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, the failure to effectively implement any design or process changes
could disrupt the sterilization process, which could also adversely affect
customer relationships, cause a loss of market opportunities and have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Facilities."
MANAGING GROWTH; POTENTIAL ACQUISITIONS
The Company has recently experienced a period of revenue growth and an
expansion in the number of its employees, the scope of its operating and
financial systems and the geographic area of its operations. This growth has
resulted in and may continue to result in new and increased responsibilities for
management personnel and has placed additional demands upon the Company's
management, operating and financial systems and resources. In order to
successfully integrate its expanded operations and to manage future growth, if
any, the Company will be required to implement new and expanded business and
financial systems, procedures and controls, and to improve its accounting and
other internal management systems. There can be no assurance that the Company's
systems, procedures, controls and staffing will be successfully managed or will
be adequate to successfully support the Company's operations. Failure to manage
any future growth properly would have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company may in the future undertake acquisitions that could present
challenges to the Company's management, such as integrating and incorporating
new operations, technologies and personnel. If the Company's management is
unable to effectively manage these challenges, the Company's business, financial
condition and results of operations could be materially adversely affected.
Furthermore, there can be no assurance that any acquisitions will result in
increased revenue or positively impact the Company's profitability. Moreover,
any new acquisition, depending on its size, could result in the use of a
significant portion of the Company's available cash or the acquisition of
additional debt or, if such acquisition is made utilizing the Company's
securities, could result in significant dilution to the Company's stockholders.
The Company does not currently have any understandings, commitments or
agreements with respect to any potential acquisition or corporate partnering
arrangements. While it is an element of the Company's strategy to pursue
strategic acquisitions, the Company believes that the number of potential
acquisition candidates in the domestic market is limited. Therefore, there can
be no assurance that the Company will successfully complete any such
transaction.
SUBSTANTIAL DEBT
As of June 30, 1997, the Company's total consolidated liabilities were
$58.6 million, of which $41.1 million represents long-term debt (including
current portion), its total consolidated assets were $92.1 million and its total
stockholders' equity was $32.0 million. The Company's substantial level of debt
presents the risk that the Company might not generate sufficient cash to service
the Company's indebtedness, including its Industrial Revenue Bonds ("IRBs"), or
that its debt level could limit its ability to finance an
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acquisition and develop additional projects, to compete effectively or to
operate successfully under adverse economic conditions. As of June 30, 1997, the
Company had $31.5 million of tax-free IRBs outstanding with interest rates as of
June 30, 1997 of 4.0% and 4.4% and a $750,000 tax-free IRB with a fixed interest
rate of 10.0%. The Company expects to issue a tax-free IRB in the amount of $5.0
million to finance its new Fort Worth, Texas facility. The maximum aggregate
amount of tax-free IRBs that the Company may issue is $40.0 million. Once the
Company has issued the maximum amount of tax-free IRBs, it will be required to
obtain any additional financing through higher cost funding sources. Each of the
Company's IRBs is collateralized by certain assets of the Company. See
"Capitalization," "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 3 of Notes to the Consolidated Financial Statements.
DEPENDENCE ON KEY PERSONNEL
The Company's progress to date has been highly dependent upon the skills of
its key technical and management personnel, many of whom would be difficult to
replace. To reach its future business objectives, the Company will need to hire
additional qualified personnel in the areas of sales, engineering and
management. There can be no assurance that the Company will be able to hire such
personnel, as the Company must compete with other companies, academic
institutions, government entities and other agencies. The number of persons with
experience in the Gamma sterilization industry is limited, and as a result,
competition for such personnel is intense. There can be no assurance that the
Company can retain such personnel or that it can attract or retain other highly
qualified personnel in the future. The Company maintains $2.0 million of key
person life insurance on James F. Clouser, the Company's Chief Executive Officer
and President. The loss of any of the Company's senior management, facilities
managers or other key research, regulatory, technical or sales and marketing
personnel, particularly if lost to competitors, or the failure of any key
employee to perform well in his or her current position, could have a material
adverse effect on the Company's business, financial condition and results of
operations. In particular, the loss of James F. Clouser could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Employees" and "Management."
FINANCIAL EXPOSURE TO PRODUCT LIABILITY CLAIMS
The Company faces the risk of financial exposure to product liability
claims alleging that the Company's failure to adequately perform its services
resulted in adverse effects. While the Company's customers are responsible for
determining the appropriate dosage of radiation their products should receive,
the Company is required to certify that such dose level was achieved. There can
be no assurance that the Company will not be held liable for damages that are
alleged to result from improper dosing or incorrect dosage instructions received
from a customer. The Company currently maintains product liability insurance
with a claims limit of $5.0 million per claim and $5.0 million in the aggregate.
However, there can be no assurance that the Company will avoid significant
product liability claims and attendant adverse publicity. Furthermore, there can
be no assurance that the Company's product liability insurance is adequate or
that such insurance coverage will remain available at acceptable costs. A
successful claim brought against the Company in excess of its insurance coverage
could have a material adverse effect on the Company's business, financial
condition and results of operations. Additionally, adverse product liability
actions could negatively affect market acceptance of the Company's services and
the Company's ability to obtain and maintain regulatory approval for its
products.
CONTROL BY EXISTING STOCKHOLDERS
Upon completion of the offering, the Company's officers, directors and
principal stockholders, and certain of their affiliates, will beneficially own
74.0 percent of the Company's outstanding Common Stock (approximately 69.7
percent assuming the Underwriter's over-allotment option is exercised in full).
Such concentration of ownership may have the effect of delaying or preventing a
change in control of the Company. Additionally, these stockholders will have
significant influence over the election of directors of the Company.
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This concentration of ownership may allow significant influence and control over
decisions by the Board of Directors and corporate actions. See "Principal and
Selling Stockholders."
NEED FOR ADDITIONAL CAPITAL
The Company requires substantial working capital to fund its business,
particularly for capital expenditures, including the construction of its
facilities and acquisition of Cobalt 60. The Company believes that the net
proceeds from the offering, together with existing cash balances, funds expected
to be generated from operations and available credit facilities, will be
adequate to fund its operations at least through the end of fiscal 1999. There
can be no assurance, however, that the Company will not require additional debt
or equity financing during such period or thereafter. Further, there can be no
assurance that additional financing, if required, will be available to the
Company on acceptable terms, if at all. If adequate funds are not available, the
Company may be required to delay, scale back or eliminate its planned expansion,
research, development and engineering programs or obtain funds through
arrangements with partners or others that may require the Company to relinquish
rights to certain of its technologies or other assets. Accordingly, the
inability to obtain or difficulty in obtaining such financing could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
PROPRIETARY TECHNOLOGY AND INTELLECTUAL PROPERTY
The Company relies on a combination of copyright and trade secret
protection and nondisclosure agreements to protect its proprietary rights. In
addition, the Company has a U.S. patent application pending on its MiniCell.
There can be no assurance, however, that patent and copyright law and trade
secret protection will be adequate to deter misappropriation of its technology,
that any patents issued to the Company will not be challenged, invalidated or
circumvented, that the rights granted thereunder will provide competitive
advantages to the Company, or that the claims under any patent application will
be allowed. Furthermore, there can be no assurance that others will not
independently develop similar processes or designs, duplicate the Company's
processes or design around any patents issued to the Company. The Company may be
subject to or may initiate interference proceedings in the United States Patent
and Trademark Office, which can demand significant financial and management
resources. The process of seeking patent protection can be time consuming and
expensive and there can be no assurance that patents will be issued from
currently pending or future applications or that any new patents that may be
issued will be sufficient in scope or strength to provide meaningful protection
or any commercial advantage to the Company.
The Company may in the future receive communications from third parties
asserting that the Company is infringing certain patents and other intellectual
property rights of others or seeking indemnification against such alleged
infringement. No assurance can be given that any of these claims will not result
in protracted and costly litigation, that damages for infringement will not be
assessed or that should it be necessary or desirable to obtain a license
relating to one or more of the Company's services or current or future
technologies, the Company will be able to do so on commercially reasonable terms
or at all.
NO PRIOR TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to the offering, there has been no public market for the Common Stock
of the Company, and there can be no assurance that an active trading market will
develop or, if one does develop, that it will be maintained. The initial public
offering price of the Common Stock offered hereby will be determined through
negotiations among the Company and the representatives of the Underwriters, and
may not be indicative of future market prices. There can be no assurance that
the market price of the Common Stock will not be highly volatile or that it will
not decline below the initial public offering price. Factors such as variations
in the Company's financial results, comments by securities analysts, changes in
earnings estimates by securities analysts, fluctuations in the stock prices of
the Company's competitors, the Company's ability to successfully sell its
services in the U.S. and overseas, any loss of key management, adverse
regulatory actions or decisions, evidence regarding the safety or efficacy of
Gamma radiation sterilization activities, announcements of extraordinary events
such as litigation or acquisitions, announcements of technical innovations or
changes in
16
<PAGE> 18
pricing policies by the Company or its competitors, the development of in-house
sterilization capabilities by manufacturers, changing government regulations or
industry standards and developments with respect to FDA or NRC or other
government regulations, developments with respect to patents or other
proprietary rights or public concern as to the safety of sterilization services
performed by the Company, as well as changes in the market for medical products
and general economic, political and market conditions, may have a significant
effect on the market price of the Company's Common Stock. In addition, stock
markets have experienced extreme price and volume trading volatility in recent
years. This volatility has had a substantial effect on the market prices of
securities of many companies for reasons frequently unrelated or
disproportionate to the operating performance of the specific companies. These
broad market fluctuations may adversely affect the market price of the Company's
Common Stock. See "Underwriting."
ANTITAKEOVER EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS
Certain provisions of the Company's Certificate of Incorporation may have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire control of the Company.
The Company's Certificate of Incorporation allows the Board of Directors to
issue and determine the rights, powers and preferences of Preferred Stock
without any vote or further action by the stockholders, and certain provisions
of the Company's Certificate of Incorporation and Bylaws eliminate the right of
stockholders to act by written consent without a meeting, and specify procedures
for director nominations by stockholders and submission of other proposals for
consideration at stockholder meetings. Certain provisions of Delaware law could
also delay or make more difficult a merger, tender offer or proxy contest
involving the Company, including Section 203 of the Delaware General Corporation
Law, which prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years unless
certain conditions are met. The possible issuance of Preferred Stock, the
procedures required for director nominations and stockholder proposals and
Delaware law could have the effect of delaying, deferring or preventing a change
in control of the Company, including without limitation, discouraging a proxy
contest or making more difficult the acquisition of a substantial block of the
Company's Common Stock. These provisions could also limit the price that
investors might be willing to pay in the future for shares of the Company's
Common Stock. See "-- Control by Existing Stockholders" and "Description of
Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering and based on the shares outstanding as of
June 30, 1997, there will be 6,829,039 shares of Common Stock outstanding. Of
these shares, the 2,000,000 shares sold in the offering (assuming no exercise of
the Underwriters' over-allotment option) will be freely tradable without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"), unless purchased by "affiliates" of the Company, as that
term is defined in Rule 144 of the Securities Act. The remaining shares will be
"restricted securities" as that term is defined under Rule 144 (the "Restricted
Shares").
Of the Restricted Shares, an aggregate of 5,392,877 shares of Common Stock
(including 563,838 shares issuable upon exercise of vested stock options), will
be eligible for sale in the public market subject to Rule 144 and Rule 701 under
the Securities Act after expiration of a contractual lock-up ending 180 days
after the date of the Prospectus, unless earlier consented to, in whole, or in
part, by PaineWebber Incorporated.
The Company intends to register on a Form S-8 registration statement under
the Securities Act, during the 180-day lock-up period, a total of 2,312,416
shares of Common Stock which are subject to outstanding options or reserved for
issuance under the Company's stock option plans and stock purchase plan. As of
June 30, 1997, there were options to purchase 706,550 shares of Common Stock
outstanding of which 511,976 were vested and exercisable. See "Shares Eligible
for Future Sale."
After the offering, the holders of approximately 1,104,945 shares of Common
Stock are entitled to certain rights with respect to registration of such shares
under the Securities Act. Registration of such shares under the Securities Act
would result in such shares becoming freely tradable without restriction under
the Securities Act (except for shares purchased by affiliates of the Company)
immediately upon the effectiveness of such registration. If the holders, by
exercising their demand registration rights, cause a large number of
17
<PAGE> 19
securities to be registered and sold in the public market, such sales could have
an adverse effect on the market price for the Common Stock. If the Company were
to include in a Company-initiated registration, any registrable securities
pursuant to the exercise of piggyback registration rights, such sales may have
an adverse effect on the Company's ability to raise needed capital. See
"Description of Capital Stock -- Registration Rights."
DILUTION AND ABSENCE OF DIVIDENDS
The public offering price is substantially higher than the book value per
share of the Common Stock. Assuming a public offering price of $13.00 per share,
investors purchasing shares of Common Stock in the offering, based upon the net
tangible book value per share of Common Stock as of June 30, 1997, will incur
immediate and substantial dilution in the amount of $4.98 per share. Future
equity financings may cause further dilution to investors. The Company has never
paid dividends on its Common Stock and does not expect to pay dividends in the
foreseeable future. See "Dilution" and "Dividend Policy."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$23.3 million, at an assumed initial public offering price of $13.00 per share
and after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company.
The Company currently expects to use approximately $14.0 million of the net
proceeds of the offering for capital expenditures, including new facilities,
equipment and the purchase of additional Cobalt 60, and $1.5 million of the net
proceeds of the offering for redemption of the 15,000 shares of Series A
Redeemable Preferred Stock currently outstanding. The balance of net proceeds
will be used for working capital and general corporate purposes.
The Company may also use a portion of the net proceeds to pursue strategic
acquisitions of sterilization facilities and businesses, both domestically and
internationally, although the Company does not have any agreements or
understandings with respect to any such acquisition, and no portion of net
proceeds has been allocated for any specific acquisition. Pending such uses, the
Company intends to invest the net proceeds from the offering in short-term,
government securities and other investment-grade, interest-bearing securities.
The Company estimates the net proceeds of the offering, together with existing
cash balances, funds expected to be generated from operations and available
credit facilities, will be sufficient to fund the Company's anticipated
operations at least through the end of fiscal 1999.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock and does not expect to do so in the foreseeable future. The payment of
cash dividends on the Company's Common Stock is limited by the terms of the
Company's revolving line of credit.
18
<PAGE> 20
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997 (i) on an actual basis, (ii) on a pro forma basis to reflect the
conversion of all outstanding shares of Convertible Preferred Stock into shares
of Common Stock and (iii) as adjusted to give effect to the redemption of all
outstanding shares of Series A Redeemable Preferred Stock and the sale of the
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $13.00 per share and the application of the estimated
net proceeds therefrom, after deducting underwriting discounts and commissions
and estimated offering expenses payable by the Company, as described in "Use of
Proceeds."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
---------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, including current portion:
Borrowings under Industrial Revenue Bonds, capital leases and
line of credit............................................. $41,075 $41,075 $41,075
------- ------- -------
Series A Redeemable Preferred Stock, $0.001 par value:
100,000 shares authorized actual and pro forma; 15,000 shares
issued and outstanding, actual and pro forma; no shares
authorized, issued and outstanding, as adjusted............... 1,500 1,500 --
------- ------- -------
Stockholders' equity:
Preferred Stock, $0.001 par value;
10,000,000 shares authorized, actual; 1,000,000 shares
authorized, pro forma and as adjusted; no shares issued and
outstanding, actual, pro forma and as adjusted............. -- -- --
Convertible Preferred Stock, Series B and C, $0.001 par value:
1,772,728 shares authorized, actual; 1,772,727 shares
issued and outstanding, actual; no shares authorized,
issued and outstanding, pro forma and as adjusted.......... 2 -- --
Common Stock, $0.001 par value;
15,000,000 shares authorized; 3,056,312 issued and
outstanding, actual; 4,829,039 shares issued and
outstanding, pro forma; 6,829,039 shares issued and
outstanding, as adjusted(1)................................ 3 5 7
Additional paid-in capital.................................... 14,728 14,728 38,056
Notes receivables from stockholders........................... (87) (87) (87)
Retained earnings............................................. 17,311 17,311 17,311
------- ------- -------
Total stockholders' equity................................. 31,957 31,957 55,287
------- ------- -------
Total capitalization.................................. $74,532 $74,532 $96,362
======= ======= =======
</TABLE>
- ---------------
(1) Excludes as of June 30, 1997 (i) 706,550 shares of Common Stock issuable
upon exercise of outstanding options and 5,866 shares of Common Stock which
remained available for option grants under the Company's Second Amended and
Restated 1986 Stock Option Plan, (ii) 1,200,000 shares of Common Stock
reserved for future issuance under the Company's 1997 Equity Incentive Plan
and (iii) 400,000 shares of Common Stock reserved for future issuance under
the Company's 1997 Employee Stock Purchase Plan. See "Management -- Stock
Plans."
19
<PAGE> 21
DILUTION
The net tangible book value of the Company at June 30, 1997 was $31.4
million or $6.50 per share of Common Stock. "Net tangible book value" per share
represents the amount of total tangible assets of the Company less its total
liabilities, divided by the total number of shares of Common Stock outstanding,
after giving effect to the conversion of the outstanding shares of Preferred
Stock (except for the 15,000 shares of Series A Preferred Stock currently
outstanding) into Common Stock upon the closing of the offering. After giving
effect to the sale of 2,000,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $13.00 per share, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company, the pro forma net tangible book value of the Company as of June
30, 1997 would have been $54.7 million or $8.02 per share. This represents an
immediate increase in net tangible book value of $1.52 per share to existing
stockholders and an immediate dilution in pro forma net tangible book value of
$4.98 per share to purchasers of Common Stock in the offering.
<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $ 13.00
Net tangible book value per share before the offering..... $ 6.50
Increase per share attributable to new investors.......... 1.52
-----
Pro forma net tangible book value per share after the
offering.................................................. 8.02
------
Dilution in net tangible book value per share to purchasers
in the offering........................................... $ 4.98
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1997,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by
existing stockholders and by new investors in the offering:
<TABLE>
<CAPTION>
TOTAL CASH
SHARES PURCHASED CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing
stockholders......... 4,829,039 70.7% $14,733,146 36.2% $ 3.05
New investors.......... 2,000,000 29.3 26,000,000 63.8 $ 13.00
--------- ----- ----------- -----
Total........ 6,829,039 100.0% $40,733,146 100.0%
========= ===== =========== =====
</TABLE>
The foregoing tables do not give effect to the exercise of any options
subsequent to June 30, 1997. At June 30, 1997, 706,550 shares of Common Stock
were issuable upon exercise of outstanding options at a weighted average
exercise price of $5.10 per share. To the extent outstanding options are
exercised, there will be further dilution to new investors. See
"Management -- Stock Plans" and Note 5 of Notes to Consolidated Financial
Statements.
20
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of March 31, 1996 and
1997 and for each of the three years in the period ended March 31, 1997 are
derived from the Consolidated Financial Statements of the Company which have
been audited by Ernst & Young LLP, independent auditors, and are included
elsewhere in this Prospectus. The selected statement of operations data for the
years ended March 31, 1993 and 1994 and balance sheet data as of March 31, 1993,
1994 and 1995 are derived from audited Consolidated Financial Statements not
included herein. The selected statement of operations data for the quarters
ended June 30, 1996 and 1997 and balance sheet data as of June 30, 1997 are
derived from the Company's unaudited financial statements included elsewhere in
this Prospectus, and include, in the opinion of the Company, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the Company's financial position as of that date and results of
operations for those periods. The results of operations for the quarter ended
June 30, 1997 are not necessarily indicative of the results for any future
periods. The financial data are qualified by reference to and should be read in
conjunction with the Company's Consolidated Financial Statements, related Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED MARCH 31, JUNE 30,
------------------------------------------------- ---------------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................ $21,603 $24,585 $28,661 $30,241 $ 37,668 $ 8,164 $ 10,751
Cost of revenues................................ 11,896 11,679 16,389 16,978 20,425 4,297 5,801
------- ------- ------- ------- --------- --------- ---------
9,707 12,906 12,272 13,263 17,243 3,867 4,950
Costs and expenses:
General and administrative.................... 1,628 3,266 5,664 5,213 6,345 1,417 1,637
Marketing and selling......................... 1,002 1,258 1,583 1,761 2,482 560 823
Research, development and engineering......... 473 518 685 890 1,381 273 312
------- ------- ------- ------- --------- --------- ---------
3,103 5,042 7,932 7,864 10,208 2,250 2,772
------- ------- ------- ------- --------- --------- ---------
Income from operations.......................... 6,604 7,864 4,340 5,399 7,035 1,617 2,178
Other income (expense):
Write-down of investments in joint ventures... -- -- (3,011) -- -- -- --
Interest expense, net......................... (1,164) (916) (2,402) (1,846) (1,836) (459) (581)
Other income.................................. 315 256 139 47 115 7 15
------- ------- ------- ------- --------- --------- ---------
Income (loss) before provision for income taxes,
equity in joint ventures and discontinued
operations.................................... 5,755 7,204 (934) 3,600 5,314 1,165 1,612
Provision for income taxes...................... 2,045 2,479 1,185 1,448 2,099 461 637
------- ------- ------- ------- --------- --------- ---------
Income (loss) before equity in joint ventures
and discontinued operations................... 3,710 4,725 (2,119) 2,152 3,215 704 975
Equity in net loss of joint ventures............ (204) (720) (1,360) -- -- -- --
------- ------- ------- ------- --------- --------- ---------
Income (loss) from continuing operations........ 3,506 4,005 (3,479) 2,152 3,215 704 975
Discontinued operations:
Income (loss) from discontinued operations.... 494 189 (115) -- -- -- --
Loss on disposition of discontinued
operations.................................. -- -- (1,173) -- -- -- --
------- ------- ------- ------- --------- --------- ---------
Net income (loss)............................... $ 4,000 $ 4,194 $(4,767) $ 2,152 $ 3,215 $ 704 $ 975
======= ======= ======= ======= ========= ========= =========
Pro forma net income per share.................. $ 0.62 $ 0.14 $ 0.19
========= ========= =========
Shares used in computing pro forma net income
per share..................................... 5,164,679 5,164,679 5,166,679
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF MARCH 31, JUNE
--------------------------------------------------- 30,
1993 1994 1995 1996 1997 1997
------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 914 $ 5,945 $ 1,673 $ 9,906 $ 1,957 $ 1,501
Working capital (deficit)............................... 1,306 2,246 (3,576) 3,296 (3,179) (3,837)
Total assets............................................ 47,692 66,861 74,588 84,729 91,667 92,103
Total liabilities....................................... 28,863 35,161 47,546 55,464 59,187 58,645
Redeemable preferred stock.............................. 1,500 1,500 1,500 1,500 1,500 1,500
Stockholders' equity.................................... 17,329 30,200 25,542 27,765 30,980 31,957
</TABLE>
21
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the Consolidated
Financial Statements and the related Notes thereto included elsewhere in this
Prospectus. This Prospectus contains forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ materially from
those anticipated by the forward-looking statements as a result of certain
factors, including, but not limited to, those set forth in Risk Factors and
elsewhere in this Prospectus. The Company's fiscal year ends on March 31. The
fiscal year ended March 31, 1995 is referred to as fiscal 1995, the fiscal year
ended March 31, 1996 is referred to as fiscal 1996, the fiscal year ended March
31, 1997 is referred to as fiscal 1997 and the fiscal year ending March 31, 1998
is referred to as fiscal 1998.
OVERVIEW
Since its inception, SteriGenics has engaged primarily in the business of
operating, designing and developing Gamma facilities to provide contract
sterilization and radiation processing services to manufacturers of medical and
non-medical products. The Company currently operates 12 Gamma facilities in six
states. In fiscal 1995, the Company opened mega-facilities in Corona, California
and Charlotte, North Carolina. In fiscal 1997, the Company opened a
mega-facility in Gurnee, Illinois and began operating three additional
facilities in connection with its acquisition of certain assets of RTI. In
fiscal 1998, the Company began operation of its first MiniCell facility in
Hayward, California and opened its second Fort Worth, Texas facility. With the
addition of these facilities, the Company's maximum Cobalt 60 capacity has
increased from 32 million curies at the end of fiscal 1994 to a current level of
101 million curies.
In order to more effectively address its customer base, the Company has
divided its operations into two divisions: medical products and non-medical.
While the Company's primary market continues to be the sterilization of medical
products, the Company has increased its focus on the sterilization and
processing of non-medical products. The percentage of the Company's revenues
generated from the non-medical market increased from 17% in fiscal 1996 to 20%
in fiscal 1997. The Company has dedicated four of its facilities to processing
primarily non-medical products.
The Company's revenues have increased significantly from fiscal 1995 to
fiscal 1997 as the Company opened and acquired additional facilities, increased
its loaded curies of Cobalt 60 and expanded its customer base. In addition, in
recent years the Company generated incremental revenues by offering its
customers premium services such as ExCell and GammaSTAT. Revenues are recognized
upon completion of the sterilization or processing services.
The Company's cost of revenues is comprised primarily of the depreciation
of Cobalt 60, facilities and equipment; direct labor costs; facilities rental;
and costs associated with facility quality assurance personnel. Since Cobalt 60
represents a significant portion of the Company's cost of revenues, Cobalt 60
efficiency and utilization are key determinants of the Company's gross margin.
Cobalt 60 is amortized using an accelerated method (approximately 12.3% of net
book value per year), which corresponds to its natural decay rate. As the
Company periodically increases its installed capacity of Cobalt 60 in existing
facilities or when it opens a new facility, it typically has excess capacity for
some period of time which can adversely affect gross margin. Correspondingly,
since costs associated with Cobalt 60 are fixed costs, once a facility reaches
its break-even point for a given amount of Cobalt 60 there are relatively low
costs associated with incremental revenues. The Company's gross margin is also
affected by the mix of standard services and higher margin premium services such
as ExCell and GammaSTAT.
From time to time, the Company has built or expanded facilities. The cost
of construction of a facility is reflected as construction-in-progress until
start-up of the facility, at which time depreciation commences. Building new
facilities requires significant capital investments in building construction,
equipment and Cobalt 60. In addition to incurring costs associated with Cobalt
60, the Company also incurs incremental personnel costs in the months preceding
initial operation and typically incurs substantial personnel and other operating
expenses during the first several months of operations. These costs have
historically exceeded revenues during
22
<PAGE> 24
the initial months of operation. In the past, as a result of their own internal
procedures, certain customers have delayed qualification and use of a new
facility until it had been operational for periods of up to 12 months. As a
result, the Company failed to realize a portion of anticipated revenues for the
facility pending such qualification. See "Risk Factors -- Unpredictability of
Future Operating Results; Likely Fluctuations in Quarterly Operating Results."
RESULTS OF OPERATIONS
The following table provides a breakdown of the Company's consolidated
statements of operations on a percentage of revenues basis for the periods
indicated:
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED MARCH 31, JUNE 30,
------------------------- ----------------
1995 1996 1997 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues.................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues............................ 57.2 56.1 54.2 52.6 54.0
------ ---- -- ---- -- ---- -- ---- --
42.8 43.9 45.8 47.4 46.0
Costs and expenses:
General and administrative................ 19.8 17.2 16.8 17.4 15.2
Marketing and selling..................... 5.5 5.8 6.6 6.9 7.7
Research, development and engineering..... 2.4 3.0 3.7 3.3 2.9
------ ---- -- ---- -- ---- -- ---- --
27.7 26.0 27.1 27.6 25.8
------ ---- -- ---- -- ---- -- ---- --
Income from operations...................... 15.1 17.9 18.7 19.8 20.2
Other income (expense):
Write-down of investments in joint
ventures............................... (10.5) - - - -
Interest expense, net..................... (8.4) (6.1) (4.9) (5.7) (5.3)
Other income.............................. 0.5 0.1 0.3 0.1 0.1
------ ---- -- ---- -- ---- -- ---- --
Income (loss) before provision for income
taxes, equity in joint ventures and
discontinued operations................... (3.3) 11.9 14.1 14.2 15.0
Provision for income taxes.................. 4.1 4.8 5.6 5.6 5.9
------ ---- -- ---- -- ---- -- ---- --
Income (loss) before equity in joint
ventures and discontinued operations...... (7.4) 7.1 8.5 8.6 9.1
Equity in net loss of joint ventures........ (4.7) - - - -
------ ---- -- ---- -- ---- -- ---- --
Income (loss) from continuing operations.... (12.1) 7.1 8.5 8.6 9.1
Discontinued operations:
Loss from discontinued operations......... (0.4) - - - -
Loss on disposition of discontinued
operations............................. (4.1) - - - -
------ ---- -- ---- -- ---- -- ---- --
Net income (loss)........................... (16.6%) 7.1% 8.5% 8.6% 9.1%
====== ====== ====== ====== ======
</TABLE>
QUARTERS ENDED JUNE 30, 1996 AND 1997
Revenues. Revenues increased 31.7%, from $8.2 million in the first quarter
of fiscal 1997 to $10.8 million in the first quarter of fiscal 1998 primarily as
a result of the addition of the former RTI facilities, the increase in installed
curies of Cobalt 60 in its existing facilities which enabled the Company to
process higher volumes of products, the expansion of both the Company's medical
and non-medical businesses and, to a lesser extent, an increase in revenues from
the Company's premium services.
Cost of revenues. Cost of revenues increased from $4.3 million in the first
quarter of fiscal 1997 to $5.8 million in the first quarter of fiscal 1998.
Gross margin decreased from 47.4% in the first quarter of fiscal 1997 to 46.0%
in the first quarter of fiscal 1998, due primarily to costs associated with the
opening and initial operation of new facilities in Gurnee, Hayward and Fort
Worth, which were offset in part by greater utilization of the Company's
existing facilities and a higher percentage of revenue attributable to premium
services.
23
<PAGE> 25
General and administrative. General and administrative expenses increased
15.5%, from $1.4 million in the first quarter of fiscal 1997 to $1.6 million in
the first quarter of fiscal 1998. As a percentage of revenues, these expenses
decreased from 17.4% in the first quarter of fiscal 1997 to 15.2% in the first
quarter of fiscal 1998. The increase in absolute dollars from the first quarter
of fiscal 1997 to the first quarter of fiscal 1998 was primarily attributable to
the addition of the former RTI facilities, the Gurnee facility, the Hayward
facility and the new Fort Worth facility. The decrease in general and
administrative expenses as a percentage of revenues was primarily due to
economies of scale achieved as the Company's revenues increased.
Marketing and selling. Marketing and selling expenses increased 47.0%, from
$560,000 in the first quarter of fiscal 1997 to $823,000 in the first quarter of
fiscal 1998. As a percentage of revenues, these expenses increased from 6.9% in
the first quarter of fiscal 1997 to 7.7% in the first quarter of fiscal 1998.
These increases were primarily attributable to the addition of sales and
marketing personnel at the facility and corporate level and, to a lesser extent,
higher travel costs.
Research, development and engineering. Research, development and
engineering expenses increased 14.5%, from $273,000 in the first quarter of
fiscal 1997 to $312,000 in the first quarter of fiscal 1998. As a percentage of
revenues, these expenses decreased from 3.3% in the first quarter of fiscal 1997
to 2.9% in the first quarter of fiscal 1998. The increase in absolute dollars is
primarily attributable to salary and related expenses for additional design and
systems engineers as the Company expanded its internal process and design
engineering capabilities. The decrease in research, development and engineering
expenses as a percentage of revenue was primarily due to economies of scale
achieved as the Company's revenues increased.
Interest expense, net. Net interest expense increased 26.7%, from $459,000
in the first quarter of fiscal 1997 to $581,000 in the first quarter of fiscal
1998. The increase in net interest expense is a result of lower average cash
balances in the first quarter of fiscal 1998 due to the Company's funding of the
development of new facilities and increased interest rates on the Company's
IRBs.
FISCAL YEARS ENDED MARCH 31, 1995, 1996 AND 1997
Revenues. Revenues increased 5.5%, from $28.7 million in fiscal 1995 to
$30.2 million in fiscal 1996 and 24.6% to $37.7 million in fiscal 1997. Revenues
increased from fiscal 1995 to fiscal 1996 primarily as a result of a full year
of operations for the Company's Charlotte, North Carolina and Corona, California
facilities and increased installed capacity of Cobalt 60 in its existing
facilities, which enabled the Company to process higher volumes of products.
Revenues in fiscal 1997 increased primarily as a result of the addition of the
former RTI facilities and the Gurnee facility, increased installed capacity of
Cobalt 60 in its existing facilities which enabled the Company to process higher
volumes of products, the expansion of the Company's non-medical business and an
increase in revenues from the Company's premium services. Growth in revenues
attributable to premium services in fiscal 1997 contributed to the Company's
ability to maintain its revenues per curie despite opening new facilities. One
customer, Baxter International Inc. ("Baxter"), accounted for approximately 13%
of revenues during fiscal 1995 and 1996. No customer accounted for more than 10%
of revenues during fiscal 1997 due to a restructuring of Baxter, which resulted
in the processing volume being divided between two companies.
Cost of revenues. Cost of revenues increased from $16.4 million in fiscal
1995 to $17.0 million in fiscal 1996 and $20.4 million in fiscal 1997. Gross
margin increased from 42.8% in fiscal 1995 to 43.9% in fiscal 1996 and 45.8% in
fiscal 1997. The increase in gross margin from fiscal 1995 to fiscal 1996 was
primarily attributable to greater utilization of facilities opened in fiscal
1995 that enabled the Company to leverage the fixed costs associated with such
facilities. The increase in gross margin from fiscal 1996 to fiscal 1997 was
primarily attributable to greater utilization of the Company's existing
facilities and a higher percentage of revenue attributable to premium services,
which were offset in part by the impact of the opening of the Gurnee facility
and transition of the former RTI facilities. The Company expects gross margin to
fluctuate in future periods, and that it may be negatively impacted to the
extent the Company adds facilities and continues to expand its installed
capacity of Cobalt 60.
General and administrative. General and administrative expenses decreased
8.0%, from $5.7 million in fiscal 1995 to $5.2 million in fiscal 1996 and
increased 21.7% to $6.3 million in fiscal 1997. As a percentage of
24
<PAGE> 26
revenues, these expenses decreased from 19.8% to 17.2% and 16.8% in fiscal 1995,
1996 and 1997, respectively. The decrease from fiscal 1995 to fiscal 1996 was
primarily attributable to higher legal expenses in fiscal 1995 relating to the
Company's litigation with the DOE. The increase in absolute dollars from fiscal
1996 to fiscal 1997 was primarily attributable to increased headcount at the
facility level as four new facilities (including the three former RTI
facilities) were added during the fiscal year and, to a lesser extent, related
increases in corporate overhead. The decrease in general and administrative
expenses as a percentage of revenue from fiscal 1996 to fiscal 1997 was
primarily due to economies of scale achieved as the Company's revenues
increased, which were offset in part by costs related to the Company's
acquisition of certain assets of RTI. The Company expects general and
administrative expenses will increase in absolute dollars as the Company adds
facilities and incurs additional costs related to being a public company.
Marketing and selling. Marketing and selling expenses increased 11.2%, from
$1.6 million in fiscal 1995 to $1.8 million in fiscal 1996 and increased 40.9%
to $2.5 million in fiscal 1997. As a percentage of revenues, these expenses
increased from 5.5% to 5.8% and 6.6% in fiscal 1995, 1996 and 1997,
respectively. The increase from fiscal 1995 to fiscal 1996 was primarily
attributable to the addition of sales and marketing personnel at the facility
level and, to a lesser extent, higher travel and advertising expenses. The
increase in fiscal 1997 was primarily attributable to increased sales and
marketing personnel at the facility and corporate level and, to a lesser extent,
higher travel and advertising expenses. Additional headcount at the corporate
level enabled the Company to focus on large national customers as well as new
non-medical markets. The Company expects marketing and selling expenses will
continue to increase in absolute dollars.
Research, development and engineering. Research, development and
engineering expenses increased 29.9%, from $685,000 in fiscal 1995 to $890,000
in fiscal 1996 and increased 55.2% to $1.4 million in fiscal 1997. As a
percentage of revenues, these expenses increased from 2.4% to 3.0% and 3.7% in
fiscal 1995, 1996 and 1997, respectively. The increase from fiscal 1995 to
fiscal 1996 is primarily attributable to salary and related expenses for
additional design and systems engineers as the Company expanded its internal
process and design engineering capabilities. The increase in fiscal 1997 was
primarily attributable to the addition of engineering personnel and, to a lesser
extent, increased travel expenses related to the installation of new systems.
The Company expects research, development and engineering expenses will continue
to increase in absolute dollars.
Investments in joint ventures. Through December 1994, the Company had
invested a total of approximately $4.7 million for 35% of the common stock of
China Biotech Corporation ("China Biotech"), a joint venture formed to provide
contract sterilization services in Taichung, Taiwan. During fiscal 1995, based
upon revised market data and issues related to the Company's minority position
in the joint venture, the Company determined that the carrying value of this
investment would not be realized. Accordingly, the Company recorded a write-down
of the carrying value of $2.2 million in fiscal 1995. The Company's investment
in China Biotech was accounted for under the equity method with losses of $1.3
million recorded through fiscal 1995. During fiscal 1996 and 1997, although
China Biotech generated losses, the Company did not record its share of these
losses as the carrying value of the investment continued to be less than its
share of the net assets of China Biotech. In January 1997, the Company sold the
majority of its holdings in China Biotech for $1.2 million, resulting in no gain
or loss.
As of March 31, 1995, the Company had invested a total of approximately
$1.8 million for 35% of the common stock of PT Perkasa SteriGenics, a joint
venture formed to provide sterilization services in Indonesia. The Company's
investment in PT Perkasa SteriGenics was also accounted for under the equity
method with losses of $960,000 recorded through fiscal 1995. During fiscal 1995,
the Company decided to withdraw from its investment in PT Perkasa SteriGenics
and wrote off the remaining carrying value of its investment of $860,000 to
reflect what it believed to be a total and permanent impairment in the value of
the asset.
Interest expense, net. Net interest expense decreased 23.2%, from $2.4
million in fiscal 1995 to $1.8 million in fiscal 1996 and remained relatively
unchanged at $1.8 million in fiscal 1997. The decrease from fiscal 1995 to
fiscal 1996 relates to interest charges recorded in fiscal 1995 associated with
various potential tax liabilities. Net interest expense remained relatively
unchanged from fiscal 1996 to fiscal 1997 as higher levels of borrowings were
offset by lower interest rates on tax-free IRB financing ($31.5 million at 3.6%
and 3.7%
25
<PAGE> 27
and $750,000 at a fixed interest rate of 10.0% at March 31, 1997), which
replaced higher rate bank financing and other debt. As a percentage of revenue,
interest expense decreased from 8.4% to 6.1% and 4.9% in fiscal 1995, 1996 and
1997, respectively. The maximum aggregate amount of tax-free IRBs that the
Company may issue is $40.0 million. Once the Company has issued the maximum
amount of tax-free IRBs, it will be required to obtain any additional financing
through higher cost funding sources.
Provision for income taxes. The provision for income taxes for fiscal 1995
relates primarily to unbenefited capital losses related to investments in
foreign joint ventures. In fiscal 1996 and fiscal 1997, the total provision for
income taxes differs from the statutory rate primarily due to state income taxes
and increased consecutively from fiscal 1995 as a result of the Company's
increasing profitability. The Company's net deferred tax liabilities in fiscal
1996 and fiscal 1997 relate primarily to tax depreciation taken in excess of
book depreciation.
Discontinued operations. The Company entered into the aerosol business as
an ancillary business to its sterilization of eyecare solutions in its Decatur
facility. This business was profitable until the Company was required to shut
down the irradiator at its Decatur facility due to Cesium contamination. During
fiscal 1995, the Company discontinued its manufacture and sale of aerosol saline
solution for contact lens care and sold the associated assets. During fiscal
1995 the Company recorded losses of $1.3 million associated with the disposal
and discontinuation of this operation. See "Risk Factors -- Environmental
Risks."
QUARTERLY RESULTS
The following tables set forth consolidated statements of operations data
for the eight quarters in the period ended June 30, 1997. This information has
been derived from unaudited consolidated financial statements that, in the
Company's opinion, reflect all normal recurring adjustments that the Company
considers necessary for a fair presentation of the results of operations in the
quarterly periods. The data set forth should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Prospectus. The operating results for any quarter are not necessarily indicative
of results for future quarters.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------------
SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1996 1996 1996 1996 1997 1997
---------- --------- ---------- --------- ---------- --------- ---------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.............. $7,239 $ 7,359 $8,105 $ 8,164 $9,863 $ 9,657 $9,984 $10,751
Cost of revenues...... 4,150 4,211 4,385 4,297 4,846 5,498 5,784 5,801
------ ------ ------ ------ ------ ------ ------ ------
Gross margin.......... 3,089 3,148 3,720 3,867 5,017 4,159 4,200 4,950
As a percentage of
revenues.......... 42.7% 42.8% 45.9% 47.4% 50.9% 43.1% 42.1% 46.0%
Costs and expenses:
General and
administrative.... 1,264 1,356 1,384 1,417 1,820 1,527 1,581 1,637
Marketing and
selling........... 449 389 528 560 708 576 638 823
Research,
development and
engineering....... 227 227 218 273 386 381 341 312
------ ------ ------ ------ ------ ------ ------ ------
1,940 1,972 2,130 2,250 2,914 2,484 2,560 2,772
------ ------ ------ ------ ------ ------ ------ ------
Income from
operations.......... 1,149 1,176 1,590 1,617 2,103 1,675 1,640 2,178
As a percentage of
revenues.......... 15.9% 16.0% 19.6% 19.8% 21.4% 17.3% 16.4% 20.2%
Other income
(expense):
Interest expense,
net............... (465) (432) (435) (459) (472) (525) (380) (581)
Other income
(expense)......... 15 10 7 7 (293) 214 187 15
------ ------ ------ ------ ------ ------ ------ ------
Income before
provision for income
taxes............... 699 754 1,162 1,165 1,338 1,364 1,447 1,612
Provision for income
taxes............... 276 293 485 461 528 539 571 637
------ ------ ------ ------ ------ ------ ------ ------
Net income............ $ 423 $ 461 $ 677 $ 704 $ 810 $ 825 $ 876 $ 975
====== ====== ====== ====== ====== ====== ====== ======
As a percentage of
revenues.......... 5.8% 6.3% 8.4% 8.6% 8.2% 8.5% 8.8% 9.1%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
26
<PAGE> 28
Quarterly Fluctuations. Revenues increased from the first to the second
quarter of fiscal 1997, primarily as a result of the addition of the three
former RTI facilities. General and administrative expenses also increased
between these periods due to additional legal and accounting expenses incurred
in the RTI acquisition. Gross margin decreased in the third quarter of fiscal
1997 due to expenses relating to the new Gurnee facility. Gross margin decreased
from the third to the fourth quarter of fiscal 1997 as the Gurnee facility
commenced operation, the Company increased its installed curies of Cobalt in
existing facilities and expenses increased significantly. Gross margin increased
from the fourth quarter of fiscal 1997 to the first quarter of fiscal 1998
primarily as a result of greater utilization of the Company's new and existing
facilities. Marketing and selling expenses increased from the fourth quarter of
fiscal 1997 to the first quarter of fiscal 1998 due primarily to the addition of
sales and marketing personnel at both the corporate and facility levels and, to
a lesser extent, increased travel expenses.
The Company has experienced, and expects to continue to experience,
significant fluctuations in revenues and operating results from quarter to
quarter. As a result, the Company believes that period-to-period comparisons of
its operating results are not necessarily meaningful, and that such comparisons
cannot be relied upon as indicators of future performance. In addition, there
can be no assurance that the Company's revenues will grow or be sustained in
future periods or that the Company will maintain its current profitability in
the future. A significant component of such quarterly fluctuations results from
the demand by the Company's customers for Gamma sterilization services. Other
factors that could cause the Company's revenues and operating results to vary
significantly from period to period include volatility in the market for medical
devices; the ability of the Company to deliver sterilization services in a
timely and cost effective manner; the ability of the Company to expand
successfully in the non-medical sterilization services market; the timing and
size of orders from the Company's customer base; the ability of the Company to
obtain supplies of Cobalt 60 on a timely basis and at a reasonable cost;
fluctuations in currency exchange rates between the U.S. dollar and the Canadian
dollar; the costs associated with customer product being damaged as a
consequence of overdosing and other factors; changes in interest rates;
regulatory matters; seasonality associated with historical decreases in medical
procedures during the fourth calendar quarter; and litigation, acquisitions and
other extraordinary events. Another factor that has a significant impact on the
Company's results of operations is the timing of construction and commencement
of operations of new facilities. The Company's results of operations are also
influenced by competitive factors, including the pricing and availability of the
Company's and competing sterilization services; the acceptance of Gamma
sterilization as a means of sterilizing products as opposed to other methods of
sterilization; the ability of the Company's competitors to obtain orders from
the Company's customers; the establishment of in-house sterilization
capabilities by the Company's customers; the acquisition of the Company's
customers by entities that do not use the Company's sterilization services; the
timing of new service or technology announcements and releases by the Company
and its competitors; and the entry of new competitors into the market for
sterilization and radiation processing services. A large portion of the
Company's expenses are fixed and difficult to reduce in a short period of time.
If revenues do not meet the Company's expectations, the Company's fixed expenses
would exacerbate the effect of such a shortfall on net income. See "Risk
Factors -- Unpredictability of Future Operating Results; Likely Fluctuations in
Quarterly Operating Results."
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date with cash flow from
operations, capital leases, IRB and bank financing, and the private placement of
equity securities. At June 30, 1997, the Company had $1.5 million in cash and
cash equivalents and a $3.8 million working capital deficit. This working
capital deficit is a result of costs incurred in the construction of the
Company's new Fort Worth facility. The Company expects to finance the Fort Worth
facility through the issuance of a $5.0 million IRB in the second quarter of
fiscal 1998.
Net cash provided by operating activities was $8.7 million, $11.0 million,
$12.2 million and $3.2 million in fiscal 1995, 1996 and 1997 and the quarter
ended June 30, 1997, respectively. Net cash provided by operating activities in
fiscal 1995 consisted primarily of depreciation and amortization, a write-down
of investments in joint ventures and a deferred tax liability, which were offset
in part by losses from operations and a deferred
27
<PAGE> 29
tax asset. Net cash provided by operating activities in fiscal 1996, fiscal 1997
and the quarter ended June 30, 1997 was primarily attributable to net income
plus depreciation and amortization.
Net cash used in investing activities was $15.6 million, $7.6 million,
$19.1 million and $3.2 million in fiscal 1995, 1996 and 1997 and the quarter
ended June 30, 1997, respectively, primarily attributable to the purchase of
property, plant and equipment (including Cobalt 60).
Net cash provided by (used in) financing activities was $2.6 million, $4.7
million, $(1.0) million and $(471,000) in fiscal 1995, 1996 and 1997 and the
quarter ended June 30, 1997, respectively. Net cash provided by financing
activities in fiscal 1995 was generated primarily from the financing of Cobalt
60 purchases from Nordion. Net cash provided by financing activities in fiscal
1996 was generated primarily from an increase in IRB financing ($9.0 million)
and offset by the repayment of bank and Cobalt 60 financing. Net cash used in
financing activities in fiscal 1997 was primarily attributable to repayment of a
term loan and Cobalt 60 financing, offset in part primarily by increases in IRB
financing. Net cash used in financing activities for the quarter ended June 30,
1997 was primarily attributable to the repayment of Cobalt 60 financing which
was offset in part by an increase in borrowings under the Company's line of
credit.
Noncash financing activities included the acquisition of Cobalt 60 through
capital leases totaling $7.8 million, $2.4 million and $2.5 million in fiscal
years 1995, 1996 and 1997, respectively. These leases have terms of 15 years.
The Company has a $3.5 million revolving line of credit with a bank, with a
variable interest rate (8.5% at June 30, 1997), collateralized by certain assets
of the Company. The line of credit is payable on demand, and at June 30, 1997,
approximately $400,000 was outstanding under this line of credit.
At June 30, 1997, the Company had $31.5 million in IRB financing which
bears interest at market rates (4.0% and 4.4% at June 30, 1997) and $750,000 in
IRB financing which bears interest at a fixed rate of 10.0%. For a description
of the terms of the individual IRBs, see "Business -- Leases and Financing
Terms". The IRBs are collateralized by certain assets of the Company and by
letters of credit with a bank. Following the anticipated issuance of the IRB for
the second Fort Worth facility, the Company will be able to issue only $2.7
million of additional tax-free IRBs until it reaches the maximum aggregate
tax-free IRB limit of $40.0 million. Thereafter, the Company will be required to
obtain any additional financing through higher cost funding sources. See "Risk
Factors -- Substantial Debt."
The Company had capital expenditures of $16.5 million, $7.2 million, $18.6
million and $3.0 million in fiscal 1995, 1996 and 1997, and the quarter ended
June 30, 1997, respectively. The Company currently expects to make additional
capital expenditures of approximately $2.5 million during the remainder of
fiscal 1998.
SteriGenics believes that the net proceeds of the offering, together with
existing cash balances, cash expected to be generated from operations and
available credit facilities, will be sufficient to fund the Company's
anticipated capital expenditures and operations at least through the end of
fiscal 1999. There can be no assurance that the adequate sources of capital will
be available in the future or, if available, will be on terms acceptable to the
Company. See "Risk Factors -- Need for Additional Capital."
28
<PAGE> 30
BUSINESS
OVERVIEW
SteriGenics International, Inc. ("SteriGenics" or the "Company") is a
leading provider of high quality contract sterilization services, with over 18
years of experience in the operation, design and development of Gamma
irradiation ("Gamma") facilities. The Company operates 12 Gamma sterilization
facilities in six states serving over 850 customers. SteriGenics has expanded
its presence in the medical products sterilization market through the opening
and acquisition of new facilities, addition of new customers and conversion of
products of new and existing customers from ethylene oxide gas ("EtO")
sterilization to Gamma sterilization. In recent years, the Company has expanded
into various non-medical sterilization and processing markets. The Company's
objective is to be the leading provider of high quality contract sterilization
services for manufacturers of medical and non-medical products.
INDUSTRY BACKGROUND
COMMERCIAL STERILIZATION
Sterilization is an essential step in the manufacturing process across a
number of industries for health, safety, regulatory and economic reasons. A
broad range of single-use, pre-packaged medical products as well as consumer
products are required under government regulations in the U.S. and many other
developed countries to be sterile or to have minimal microbial levels. In
addition, other products such as spices and herbs, cosmetics and food packaging
material are sterilized to improve shelf-life and address potential product
liability concerns. In order to provide safe and sterile products and to comply
with applicable government regulations, manufacturers have either developed
their own in-house or "captive" sterilization capabilities or have had their
products processed by a provider of contract sterilization services. The two
primary methods of commercial sterilization are Gamma and EtO sterilization. A
third alternative, electron beam ("E-Beam") sterilization, is utilized for
certain limited market applications.
Gamma Sterilization. Gamma sterilization is accomplished by exposing
products to Cobalt 60, an isotope that emits Gamma radiation. The exposure
sterilizes the product by disrupting the DNA structure of microorganisms on or
within the product, thereby eliminating their ability to reproduce. Gamma
radiation is generated by the spontaneous decay of radioactive isotopes. Because
Cobalt 60 decays at a constant rate, its effect on exposed products is highly
predictable. While Cobalt 60 emits radioactive energy, this energy does not
cause exposed substances to become radioactive. As a result, products exposed to
Cobalt 60 have no residual radioactivity and can be safely shipped to customers
immediately after processing.
Gamma sterilization is a one-step process that does not require any
preconditioning or post-processing treatment of the product. In a typical
commercial Gamma facility, packaged products are loaded onto conveyer systems
which transport the products through an irradiation chamber or "cell." The
radiation dose applied to the product is determined by the amount of Cobalt 60
(measured in curies) in the cell, the distance from the radiation source and the
duration of exposure to the radiation source. The dose received is verified by
reading a dose monitor ("dosimeter") that is placed on product containers.
Commercial use of Gamma as a means of sterilization began in the early
1960s as several large medical products manufacturers installed irradiators at
their facilities. However, widespread use of Gamma sterilization did not occur
until the 1980s when radiation compatible plastics became readily available for
use in products and packaging materials. The use of Gamma sterilization has
increased significantly over the past 10 years as medical products manufacturers
have converted the sterilization method used for certain products from EtO to
Gamma and have increasingly used radiation compatible materials in the
development of new products.
EtO Sterilization. EtO sterilization is accomplished by exposing products
to EtO gas in a three-step process: (i) preconditioning, involving an increase
in temperature and humidity to ensure that microorganisms are active and
therefore more susceptible to the effects of gas sterilization, (ii) fumigation
of the product in a vacuum chamber and (iii) aeration of the product to allow
the gas residue to dissipate to acceptable levels.
29
<PAGE> 31
During the fumigation phase, active microorganisms that absorb a sufficient
amount of the EtO gas are killed. EtO processing requires careful monitoring and
control of numerous variables including time, temperature, humidity, pressure,
gas concentration and vacuum. Because of these multiple variables, biological
indicators need to be placed in a number of locations within the product
containers and tested in a biological laboratory to verify the desired reduction
in microbial levels.
Through the early 1980s, the volume of medical products, consumer products
and spices and herbs processed with gas fumigation steadily increased. During
this time, a large number of medical products manufacturers built EtO
sterilization chambers in their facilities. Beginning in the late 1970s, several
governmental limitations were placed on gas fumigation due to the discovery that
EtO was a mutagenic substance with possible carcinogenic properties and that
freon, a stabilizing agent mixed with EtO, was a major cause in the depletion of
the ozone layer. Increased governmental regulation eventually led to higher
costs and longer processing times for EtO sterilization. The subsequent U.S. ban
on the production and importation of freon increased the risks and costs of
handling and storing EtO since EtO is more volatile in its pure form. As a
result of these increased costs and concerns of manufacturers about worker
exposure, many manufacturers sought to outsource their sterilization processes
to contract sterilizers using either Gamma or EtO.
E-Beam Sterilization. E-Beam sterilization is accomplished by exposing a
product for a predetermined time to a high-energy electron beam. The electron
beam is produced by an accelerator that converts electricity into an electron
beam. To provide a shield from the energy produced, products are processed in a
concrete cell. Exposure to E-Beam disrupts various chemical and biological bonds
in a microorganism, rendering the exposed product sterile. The first E-Beam
sterilization system was developed in the 1950s. Although the use of E-Beam
systems has increased in recent years with the development of improved high
voltage accelerators, the use of E-Beam sterilization has been limited due to
the complexity of the machinery required, the limited ability of E-Beam to
penetrate various materials and related dosimetry problems. Poor penetration
limits the applicability of E-Beam for large scale commercial applications, such
as the sterilization of high volume medical devices. As a result, the principal
use of E-Beam to date has been in the area of materials alteration, such as
crosslinking polymers.
COMPARISON OF PRIMARY STERILIZATION TECHNOLOGIES
Gamma has a number of advantages over the use of EtO under normal operating
conditions, including uniform dosing, predictability, reduced processing times,
enhanced flexibility, ease of handling and less environmental impact. Gamma is
able to penetrate all forms of materials, including metals and glass, thereby
providing uniform dosing throughout a given container. In addition, the effect
of Gamma sterilization is inherently more predictable than the effect of EtO
sterilization since, for a given amount of Cobalt 60, time and distance from the
source are the only variables that must be controlled in the process. In
contrast, EtO sterilization requires more complex monitoring and control of
variables such as temperature, humidity pressure and gas concentration.
Furthermore, while industry average turn-around time (measured from intake of
the product to shipment back to the manufacturer) for Gamma sterilization is
three to five working days, products are typically processed using Gamma in less
than eight hours. Due to the three-step EtO process, the processing time for EtO
generally ranges from seven to 14 days, with turn-around time being slightly
longer. The significantly shorter processing time required for Gamma provides
far greater flexibility for both processors and their customers. Gamma also has
less environmental impact than EtO under normal operating conditions since there
are no chemical residuals on the sterilized product or emissions released by
either the process or the sterilized product.
One factor that has limited the use of Gamma to date has been the
compatibility of radiation with certain plastics and other materials that may
discolor, deform or become brittle when exposed to Gamma. In addition, Gamma
cannot be used to sterilize multiple product surgical kits if they contain any
item that is not Gamma compatible or medications that have not been approved by
the United States Food and Drug Administration (the "FDA") for Gamma
sterilization. However, as a result of the many benefits of Gamma, there has
been an ongoing conversion of existing products from EtO to Gamma, and new
medical products are increasingly being developed using radiation compatible
materials.
30
<PAGE> 32
The following table sets forth various comparisons of Gamma and EtO:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
CONSIDERATION GAMMA ETO
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Industry average turn-around 3-5 days 8-15 days
time
- ----------------------------------------------------------------------------------------------
Total processing time Less than 8 hours 7-14 days
- Preconditioning - None - 1-3 days
- Processing - Less than 8 hours - 1-2 days
- Post-processing - None - 5-10 days of aeration
- ----------------------------------------------------------------------------------------------
Product design No restrictions Limited sealed cavities
- ----------------------------------------------------------------------------------------------
Materials compatibility Must be radiation compatible Can be used on variety of
materials
- ----------------------------------------------------------------------------------------------
Product packaging Must be radiation compatible Permeable materials only
No stress placed on seals Seals must withstand pressure
and vacuum
- ----------------------------------------------------------------------------------------------
Processing variables Time Time
Distance from Cobalt 60 source Temperature
Curies of Cobalt 60 Humidity
Pressure
Gas concentration
Vacuum
- ----------------------------------------------------------------------------------------------
Post-sterilization testing Dosimeter reading at end of Biological indicators tested
for processing in
dose verification laboratory
- ----------------------------------------------------------------------------------------------
Environmental impact of No residue on product EtO residue remains on product
processing No release into the atmosphere Release of EtO during aeration
Disposal of spent Cobalt 60 Handling of flammable and
explosive EtO gas
- ----------------------------------------------------------------------------------------------
Price of services 0.1-3.0% of unit manufacturing 0.1-3.0% of unit manufacturing
cost cost
- ----------------------------------------------------------------------------------------------
</TABLE>
THE STERILIZATION AND RADIATION PROCESSING MARKET
The sterilization and radiation processing market consists of independent
suppliers of sterilization and processing services ("contract sterilizers") and
certain large manufacturers that have in-house sterilization capabilities
("captive sterilizers"). Although there are no published industry statistics and
precise numbers are difficult to determine, the Company estimates that the U.S.
market for contract sterilization and radiation processing services (including
Gamma, EtO and E-Beam) was approximately $170 million in 1996 and that a similar
volume of product was processed by captive sterilizers. Of the U.S. contract
sterilization market, the Company estimates that in 1996 approximately 40-45%
was Gamma, 50-55% was EtO and 5% was E-Beam. There is also a significant market
for sterilization services outside of the U.S. In the international market, EtO
maintains a significantly larger share of the market than Gamma.
In determining the total cost of various sterilization services,
manufacturers must consider not only the cost of the actual sterilization
services, but also the cost of transportation and cost of processing time. As a
result, manufacturers typically do not send product for sterilization beyond a
300 mile radius since the cost of transportation would likely exceed the cost of
sterilization, which typically ranges from 0.1% to 3.0% of unit manufacturing
cost for medical products. Because of these limitations, contract sterilizers
have needed to strategically locate their facilities in close proximity to their
customer base.
The Company believes there are a number of manufacturing trends that may
have a significant impact on contract providers of Gamma sterilization services.
The first trend is closer coordination between manufacturers and their suppliers
in order to reduce inventory exposure, improve the manufacturer's level of
service to its customers and to facilitate new product launches. By closely
coordinating the sterilization process with the
31
<PAGE> 33
manufacturing process, the planning of production is simplified and the number
of days of raw materials and finished goods inventory can be reduced. As a
result, manufacturers are increasingly demanding shorter turn-around times for
sterilization services. The second of such trends is the "outsourcing" of
non-core elements of the manufacturing process where services can be obtained
from third party providers on a more cost-effective basis. While several large
corporations continue to perform either all or a portion of their sterilization
in-house, the trend has been away from building in-house sterilization capacity
due to cost, safety, flexibility and regulatory issues associated with
maintaining an in-house irradiator or EtO chamber. Finally, an emerging concept
is "in-house outsourcing," utilizing third party contractors to provide services
within a manufacturer's own facility. This emerging concept has the potential to
provide the cost advantages and core-business focus of outsourcing, while also
providing benefits such as reduction of finished goods inventory, elimination of
transportation costs and greater control associated with a captive facility.
MEDICAL PRODUCTS MARKET
The medical portion of the sterilization market includes manufacturers of
single-use medical products. The types of products sterilized include items such
as syringes, needles, scalpels, dental implants, hospital packs, gloves, gowns,
bandages, cotton balls, cotton swabs, cotton gauze, cotton towels, surgical
drapes, surgical kits, suture staples, specimen bottles, intravenous tubes and
bottles, blood collection devices, drug packaging materials, orthopedic
implants, petri dishes, contact lenses, and eyecare solutions. Based upon
industry sources, the Company estimates that the U.S. market for contract
sterilization of these types of medical products was approximately $130 million
in 1996.
NON-MEDICAL MARKETS
The market for sterilization and processing of non-medical products
includes a diverse group of products. Growth in these markets is primarily being
driven by concerns over health risks and potential product liability as well as
economic considerations such as losses due to infestation and spoilage. In
addition, concerns over foodborne illnesses have contributed to an increased
awareness of the need for sterilization. While the vast majority of the
processing of non-medical products is currently done with EtO, the percentage
being processed using Gamma sterilization has increased in recent years. A
number of manufacturers have converted to Gamma sterilization for their products
since Gamma does not leave any chemical residues and is better able to penetrate
products such as spices and cosmetics which are often processed in bulk. The
following are the primary non-medical products being processed using all of the
various methods:
Spices and Herbs. Spices and herbs constitute the largest portion of the
current non-medical sterilization market. According to The American Spice Trade
Association, of the approximately 850 million pounds of spices sold in the U.S.
in 1995, approximately 300 million pounds were processed using Gamma or EtO to
extend shelf-life and/or reduce microorganisms. Examples include black pepper,
garlic, nutmeg, mustard seed, paprika and cinnamon.
Cosmetics. Cosmetics often require processing to reduce microorganisms in
either finished goods or certain cosmetic ingredients that have naturally high
microbial content. Examples include shampoo, eye make-up remover, mascara and
compounds used in lipstick.
Food Packaging Products. As the market for pre-packaged foods has grown,
increasing the shelf-life of these products has become a critical economic
issue. By reducing the microbial count in the packaging material, producers are
able to reduce the risk that microorganisms contained in the packaging material
will come into contact with the food product and reduce its shelf-life. Examples
include milk cartons and meat packaging materials.
Materials Processing. Materials processing involves the use of Gamma
irradiation to alter the physical properties of a specific material at the
molecular level. For example, irradiation is used to strengthen certain plastics
as well as to break down teflon.
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POTENTIAL MARKETS
According to the World Health Organization, illness due to contaminated
food is one of the most widespread health problems in the world and a cause of
reduced economic productivity. As a consequence, the Company believes that there
are a number of large potential markets for the sterilization of food products
such as red meat, poultry, shellfish, animal feed, and fresh fruit and
vegetables. The FDA has approved radiation as a safe and effective means of
processing a variety of foods including pork, poultry, fresh fruits and
vegetables. Currently, the FDA has not approved the use of radiation to control
food-borne pathogens in red meat and shellfish, although there is a petition
before the FDA to grant approval for the irradiation of red meat. The USDA would
also have to authorize the use of irradiation in the treatment of red meat, and
it would also likely require preapproval of the irradiation process. In
addition, the FDA and USDA both require any retail foods that have been
irradiated to be labeled and, to date, there has been only a minimal amount of
food processed using Gamma radiation. While there is increased interest in
evaluating food irradiation in light of the heightened public concern over
recent outbreaks of E. coli and salmonella, the development of these potential
markets is subject to regulatory approvals and consumer acceptance of irradiated
foods. In addition, if these markets do develop, facilities will have to be
built or modified to address the specific requirements of these markets.
THE STERIGENICS APPROACH
SteriGenics is a leading provider of high quality Gamma sterilization
services, with over 18 years of experience in the operation, design and
development of Gamma facilities. The Company operates 12 facilities in six
states serving over 850 customers. The Company has expanded its presence in the
medical products market through the opening of new facilities, addition of new
customers and conversion of products of new and existing customers from EtO to
Gamma sterilization. In recent years, the Company has begun to expand into
various non-medical sterilization and processing markets. While SteriGenics
expects the majority of its revenues to continue to be derived from the
processing of medical products, it believes that non-medical markets offer
significant opportunities for expansion.
SteriGenics has always strived to be the innovator in its industry,
maintaining the only internal engineering and design capability in the Gamma
sterilization market. The Company's engineering and design expertise includes
the design and development of major facets of the irradiation system, from basic
conveyor systems to proprietary software systems. This expertise has allowed the
Company to introduce several innovations to the industry including the first
multi-cell facilities designed to provide improved turn-around times, increase
processing volume and improve operational efficiencies. Other innovations
include the Gemini cell, a dual-sided irradiator that enhances processing
flexibility and increases operating efficiencies by allowing the Company to
simultaneously process products with two different dose requirements in the same
cell, and the ExCell, the industry's first automated precision dose irradiation
system. The Company has also been able to introduce service innovations
including GammaSTAT, the industry's first guaranteed variable time-based
sterilization program.
SteriGenics is continuing its leadership in providing flexible approaches
to sterilization with its recent introduction of the MiniCell. Based upon a
proprietary design, the MiniCell allows a smaller single cell irradiator to be
constructed in an existing manufacturing facility or warehouse. The Company
plans to use the MiniCell to provide contract sterilization services to smaller
regional and international markets as well as to offer an in-house outsourcing
alternative to large manufacturers that want to maintain greater control of the
sterilization process, but do not want to incur the expense and regulatory
burden of owning and operating a captive facility. The MiniCell requires
significantly less capital investment and can generally be constructed in four
to six months as opposed to the 18 to 24 month construction period that is
typical for the Company's larger facilities. The Company has installed its first
MiniCell in Hayward, California to serve the Northern California market.
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STRATEGY
The Company's objective is to be the leading provider of high quality
contract sterilization and processing services for manufacturers of medical and
non-medical products. Key elements of the Company's strategy include the
following:
Increase Share of Medical Products Sterilization Market. The Company is
seeking to expand its share of the medical products sterilization market through
its continued focus on Gamma sterilization, promotion of increased use of
outsourcing by manufacturers and introduction of new and innovative services
such as GammaSTAT and GammaReserve. As a key element of its focus on Gamma
sterilization, the Company actively promotes the conversion of products from EtO
to Gamma. In addition, although the Company intends to maintain its focus on
Gamma sterilization and processing, it will evaluate new technologies as they
emerge.
Expand Non-medical Business. The Company is seeking to expand its presence
in various non-medical sterilization and processing markets, such as the markets
for spices and herbs, cosmetics, food packaging and materials processing. To
effectively address these markets, the Company has created its non-medical
products division, with an independent sales and marketing organization and four
processing facilities dedicated primarily to processing non-medical products.
SteriGenics also continually monitors developments in other potential markets
such as the sterilization of poultry, red meat, shellfish, animal food and fresh
fruits and vegetables.
Exploit MiniCell Opportunity. The Company intends to use its new MiniCell
design to continue to expand geographically, primarily into smaller regional and
international markets. SteriGenics believes that the economics of the MiniCell
will allow the Company to serve smaller industrial centers which could not
support a full-size Gamma irradiation facility. The Company believes that by
offering manufacturers in these markets decreased transportation costs and
reduced total turn-around time, it has an opportunity to convert a portion of
the dollars currently spent on transportation into sterilization revenues.
The Company is also seeking to provide an in-house outsourcing alternative
by leasing MiniCells to manufacturers with high volume sterilization needs that
want to have sterilization processing capability within their own facilities.
The Company would also provide varying levels of staffing and management,
depending on customer requirements, as well as manage the Cobalt 60 in the
MiniCell. The Company believes that MiniCell leasing offers manufacturers the
cost advantages and core-business focus associated with outsourcing, while also
providing advantages of in-house facilities, including reduced costs associated
with inventory and transportation and greater control over the sterilization
process. The Company has recently introduced this program and has not yet leased
a MiniCell.
Expand Premium Services. SteriGenics seeks to differentiate itself from its
competitors by offering its customers a variety of higher margin premium
services, such as GammaSTAT, a guaranteed variable time-based service, and
ExCell precision dosing and validation services. The Company recently introduced
GammaReserve, a new service that utilizes proprietary software to allow
customers to reserve processing time on a specific day.
Leverage Leading Engineering and Design Capabilities. SteriGenics is
seeking to leverage its leading internal engineering and design capabilities to
continue to improve its existing processes and designs and to create and utilize
innovative designs and services. The Company is the only provider of Gamma
contract sterilization services with an in-house engineering and design staff.
The Company's engineering staff continually evaluates new processing methods,
equipment requirements and software options to increase operating efficiencies,
optimize Cobalt 60 utilization and improve flexibility. The Company's
engineering expertise will also play a critical role in the Company's plans to
construct and lease its MiniCells.
Pursue Strategic Acquisitions. SteriGenics intends to pursue strategic
acquisitions of sterilization facilities and businesses both domestically and
internationally. The Company began to implement this strategy with the
acquisition of certain assets of RTI Inc. ("RTI") in August 1996, which added
three facilities in the Eastern U.S. and significantly expanded the Company's
presence in certain non-medical markets. The Company does not currently have any
agreements or understandings with respect to any such acquisition.
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<PAGE> 36
SERVICES
SteriGenics offers a number of services to its customers including its
standard processing services, time-based services and value-added services such
as validation and testing. In addition, the Company is seeking to lease its
MiniCells to large medical products manufacturers or other customers with high
product volumes for installation in such customers' facilities.
STANDARD SERVICE
SteriGenics' standard service is a five working day turn-around time on the
product, which is an industry standard. The processing time of any particular
product is dependent upon several factors, including the dose required, the
density of the product and the number of curies of Cobalt 60 present in the
cell. In general, a higher dose requirement or density of material has the
effect of increasing the amount of time the product needs to be exposed to Gamma
radiation. Once these elements are determined, the Company determines the
processing time for the specified product. It is the responsibility of the
Company's customers to determine the level of microorganisms or other
contamination that exists in their respective products, as well as the dose of
Gamma radiation that will reduce such microorganisms or contamination to the
required levels. After performing sterilization services, dosimeter readings are
taken and documented to verify that the customer's dose requirements were
attained. The Company then issues a certification that the product received the
specified dosage. The fee charged for this service is dependent primarily upon
the required dose of Gamma radiation, density of the product, permissible dose
range and the volume of product to be processed.
GAMMASTAT I AND II SERVICES
GammaSTAT I and II are premium services that guarantee a turn-around time
of 23 or 48 hours, respectively. The Company does not limit the volume or type
of product to be processed. Pricing for both GammaSTAT services is at a premium
to standard service and is based upon the time (23 hours or 48 hours) in which
the customer requires the product to be processed and available for shipment.
GammaSTAT was introduced in fiscal 1996 and revenues resulting from GammaSTAT
increased significantly in fiscal 1997.
GAMMARESERVE SERVICES
GammaReserve is a premium service that utilizes proprietary software to
allow customers to reserve processing time on a specific day. The customer is
then charged for the reserved processing time whether or not it is used. The
Company began offering GammaReserve in April 1997.
EXCELL SERVICES
The ExCell is an automated precision dose irradiator. SteriGenics has an
ExCell in operation in both Charlotte, North Carolina and Corona, California.
The ExCell service can be used for several different purposes, including
production services for finished goods that require a very limited dose range,
dosage auditing to allow customers to verify their dosage requirements,
validation work and materials testing. ExCell services are offered at a premium
price based upon the nature of the service being provided.
MINICELL LEASING
The Company plans to lease MiniCells to larger medical products
manufacturers for installation in their existing facilities. SteriGenics is
offering the MiniCells pursuant to an operating lease which would include Cobalt
60 replenishment, dosimetry management and maintenance. If the customer so
desires, SteriGenics will provide operating personnel, as well as a radiation
safety officer, relieving the customer of many regulatory burdens. The monthly
lease payment will be based upon the level of service and the curies of Cobalt
60 required. The Company recently began to offer the MiniCell for lease and, to
date, no MiniCells have been leased.
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<PAGE> 37
FACILITIES
The Company has a network of 12 Gamma facilities, of which eight perform
sterilization services for the medical products market. The remaining four
facilities provide services primarily to non-medical customers. These 12
facilities have an aggregate design capacity of 101 million curies of Cobalt 60.
All of the Company's medical products facilities (other than the Gurnee and
Hayward facilities) are ISO 9002 certified. The Company expects the Gurnee and
Hayward facilities to receive ISO 9002 certification upon satisfaction of the 12
month minimum operating period requirement. See "-- Quality Assurance and
Safety."
The Company's sterilization facilities are designed on stand alone sites of
various sizes and capacities. The Company has three basic types of facilities:
mega-facilities, mid-facilities and mini-facilities. Mega-facilities have two or
more cells and a Cobalt 60 capacity of approximately 14-20 million curies, and
mid-facilities have one cell with a Cobalt 60 capacity of approximately 8
million curies. Both mega-facilities and mid-facilities generally require 18 to
24 months to construct. Mini-facilities have one cell which can be a standard
cell or the MiniCell and a Cobalt 60 capacity of approximately 3 million curies.
All of the Company's facilities are designed to operate 24 hours a day, seven
days a week.
The Company was the first in the Gamma sterilization industry to build
multi-cell facilities with Cobalt 60 capacities in excess of 14 million curies
and has strategically placed them in markets that have a high demand for
sterilization of services. The Company believes that the number of additional
U.S. markets that can support mega-facilities, based on current market
conditions, is limited. To continue its geographic expansion, the Company has
designed the MiniCell which it believes will enable it to address smaller
regional markets and to take advantage of international opportunities.
The following table sets forth information regarding the Company's
facilities as of June 30, 1997:
<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
DESIGN
CAPACITY(1) APPROXIMATE
LOCATION (IN CURIES) SQUARE FEET TYPE OF FACILITY NUMBER/TYPE OF CELLS
- -------------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS FACILITIES
Corona, California (2) 19,000,000 100,000 Mega-Facility 3 cells (1 ExCell)
Hayward, California 3,000,000 25,000 Mini-Facility 1 cell (MiniCell)
Fort Worth I, Texas(2) 8,000,000 22,000 Mega-Facility(3) 1 cell
Fort Worth II, Texas(2) 6,000,000 58,000 Mega-Facility(3) 1 cell (Gemini cell)
Gurnee, Illinois 17,000,000 78,000 Mega-Facility 3 cells (will have 4 when
fully equipped)
Westerville, Ohio(2) 8,000,000 22,000 Mid-Facility 1 cell
Charlotte, North 15,000,000 64,000 Mega-Facility 2 cells (1 ExCell)
Carolina(2)
Haw River, North 3,000,000 25,000 Mini-Facility 2 cells (pallet and under-
Carolina(2)
water systems)
- -------------------------------------------------------------------------------------------------------
NON-MEDICAL FACILITIES
Tustin, California(2) 8,000,000 32,000 Mid-Facility 1 cell
Schaumburg, Illinois(2) 8,000,000 32,000 Mid-Facility 1 cell
Rockaway, New Jersey 3,000,000 25,000 Mini-Facility 1 cell (batch system)
Salem, New Jersey 3,000,000 20,000 Mini-Facility 1 cell (pallet system)
- -------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Shows maximum design capacity. The Company currently does not utilize a
substantial portion of its Cobalt 60 design capacity. See "-- Cobalt 60."
(2) ISO-9002 Certified facilities.
(3) The two Forth Worth facilities together constitute a Mega-Facility and
operate under the same license.
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The sterilization systems in each of the Company's facilities consist of
four major components: the biological shield, the source system, the conveyor
system and the safety system.
The Biological Shield. The cell where the Cobalt 60 is maintained is also
known as the "biological shield." The Company utilizes a steel reinforced
concrete cell with a ceiling and walls that are over six feet thick (other than
the MiniCell which utilizes a three-foot thick steel wall) which provides a
complete shield from any Gamma radiation. Each cell (other than the MiniCell)
has a maze at its entrance and exit to prevent radiation from escaping from the
cell. Because of its small dimensions, the MiniCell uses a two foot-thick lead
door in lieu of the maze.
The Source System. Inside the cell, stainless steel rods containing Cobalt
60 isotope sources are positioned on source racks, which when not in use are
stored inside a shielding pool containing 18 to 30 feet of water. The water
shielding pool provides a complete shield from any Gamma radiation. Once the
sources are removed from the water, the product within the cell is exposed to
Gamma radiation.
The Conveyor System. The main operating component of the Company's
sterilization system is the conveyor system comprised of either stainless steel
or aluminum rectangular containers or totes, in which the customer's material is
placed. After being loaded, the totes are placed on specially designed three
level overhead conveyor systems used to transport customer products and
materials into the cell and around the source racks. The conveyer system passes
through the cell making periodic stops at specific locations to provide uniform
dose distribution to the product being sterilized. The conveyor system is
controlled by programmable logic controllers interconnected with diagnostic
computers that monitor all conveyor functions.
The Safety System. Each cell has separate and redundant safety systems that
the Company believes meet or exceed all applicable regulations. The safety
system is designed to prevent entry into the cell when the source racks are
exposed and to automatically lower the Cobalt 60 into the water in the event of
a system failure.
COBALT 60
The quantity of Cobalt 60 in a cell is the primary factor in determining
the amount of product that can be processed in that cell. As additional curies
of Cobalt 60 are added, processing times decrease allowing for the processing of
increased volumes of products. In addition to being the primary determinant of
capacity, Cobalt 60 also represents a substantial cost element in operating a
sterilization facility. As a result, the point at which a facility becomes
profitable depends, to a significant extent, on the amount of Cobalt 60 that is
loaded and the efficiency of the Cobalt 60 utilization. Correspondingly, since
costs associated with Cobalt 60 are fixed costs, once the break-even point is
reached for a given amount of Cobalt 60 there are relatively low costs
associated with incremental volume. Since Cobalt 60 continuously decays, the
Company generally operates its facilities 24 hours a day, seven days a week, at
a Cobalt 60 capacity which is significantly less than maximum design capacity.
As a result, the Company has the ability to significantly increase the volume of
product it can process by adding more Cobalt 60 to existing facilities.
Cobalt 60 has a useable life of approximately 20 years with the energy
level declining at approximately 12.3% of the then current capacity per year. To
account for this natural decay and to increase processing capacity, the Company
acquires additional Cobalt 60 on a regular basis. Cobalt 60 capsules are shipped
to the facility in licensed shipping containers from one of the Company's
suppliers. Each facility is equipped with a custom set of tools and equipment
designed to handle both the shipping containers and Cobalt 60 source capsules.
Specially trained corporate staff and facility personnel perform the actual
loading process. All loading work is performed underwater in a facility's source
storage pool. Each capsule loaded into a facility has a unique serial number
that is tracked by both SteriGenics and its suppliers. Because the loading
process usually takes two to three days, during which the facility is not
operational, loading is performed at each facility only once every 12 to 18
months depending on business activity. To account for the decay of Cobalt 60,
the conveyer system cycles at each facility are reset monthly.
The Company's primary suppliers of Cobalt 60 are MDS Nordion, Inc.
("Nordion"), a Canadian company, and REVISS Services (UK) Limited ("REVISS"), a
United Kingdom company and formerly a division of Amersham International plc.
The Company also purchases a smaller amount of Cobalt 60 from Neutron Products,
Inc., a Maryland corporation. The Company acquires Cobalt 60 from its suppliers
under a
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variety of purchase arrangements, capital leases and operating leases. The
Company's Cobalt 60 leases have terms of three to 15 years. All of the Company's
agreements provide for the suppliers to handle the eventual disposal of "spent"
Cobalt 60. The Company has not experienced Cobalt 60 shortages in the last
decade, and based on current conditions, the Company believes that sufficient
supplies of Cobalt 60 will continue to be available for the foreseeable future.
However, there were shortages of Cobalt 60 in the mid-1980s and there can be no
assurance that the Company will not experience shortages of Cobalt 60 in the
future. Such shortages could result in a decrease in the availability of Cobalt
60 supplies or a significant increase in the price the Company is required to
pay for Cobalt 60, which would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Risk
Factors -- Risks Related to Cobalt 60 Supply."
STERIGENICS' PROCESS AND DESIGN TECHNOLOGY
The Company is the only provider of contract Gamma sterilization services
with in-house engineering and design capabilities. The Company's in-house
engineering expertise and continual interaction with its customers have enabled
it to develop technological innovations in facility and process design that have
increased the Company's Cobalt 60 efficiency and utilization to meet its market
and customer requirements.
Product Overlap Design. The Company's irradiation system utilizes a product
overlap design as opposed to the more commonly used source overlap design. In a
product overlap system, the source racks in which the Cobalt 60 is stored are
smaller in height than in a source overlap system. In a source overlap system,
the source racks extend above and below the conveyor system. The product overlap
system makes more efficient use of Cobalt 60 by moving the level at which the
product passes by the source racks, which results in greater consistency in
dosing and tighter maximum to minimum dose ratios. A product overlap design is
incorporated in nine of the Company's facilities.
Continuous Flow Technology. The standard SteriGenics conveyor system is a
continuous flow system in which the conveyer system is continuously moving the
product into and out of the cell during processing. In contrast, most
irradiation systems are batch systems, which operate by placing the number of
totes designed for the system in the cell housing the source racks and moving
the totes around the source racks. The SteriGenics continuous flow system
improves Cobalt 60 efficiency by constantly having product in the cell being
exposed to Gamma radiation. In contrast, in a batch system, the source racks are
lowered into the water shielding pool when the product inside the cell is ready
to be removed. A batch system is used in one of the Company's standard
facilities. Due to its compact design and cost considerations, the MiniCell also
uses a batch system.
Proprietary Software. The Company uses proprietary software systems to
automate product handling. These software systems handle both the actual
operation of the irradiation systems as well as the overall facility process
control. The irradiator in each facility is controlled by a programmable logic
controller system. The software designed for this purpose has been both
installed and validated for FDA purposes. This control system provides all the
critical controls for both the actual irradiator mechanism as well as all safety
systems in the irradiator. The process control software used by each facility is
an Oracle-based software system called STARS (SteriGenics Tracking and
Reservation System), which was written, tested and validated for FDA purposes by
the Company. This STARS system operates on a local area network at each facility
and is designed to provide control of all aspects of the operation from product
receiving to shipping. The STARS system also generates and tracks customer
billing and collection information.
Cell Design. The cell design innovations developed by the Company include
the MiniCell, Gemini cell and ExCell:
- MiniCell. The MiniCell, introduced in 1997, is a product overlap, batch
irradiator developed to combine the benefits of a large-scale production
system with the specialized features of a smaller batch irradiator. The
cell is constructed of three foot-thick steel and uses a two level
conveyor system. Instead of a maze, the MiniCell uses a lead door that
is two feet-thick. The computer control systems
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on the MiniCell are substantially similar to the Company's larger systems,
with a few modifications to accommodate the MiniCell's conveyor system.
- Gemini Cell. The Gemini cell, introduced in 1996, is a double-sided cell,
allowing two separate conveyor systems to operate in the same cell on
opposite sides of the source rack. The Gemini design enables the Company
to process products with two different dose requirements in the same cell
simultaneously by varying the speeds of the two conveyor systems. The
system gives the Company additional flexibility in scheduling its
sterilization services, increases the efficiency of the Company's Cobalt
60 utilization and enhances the Company's ability to offer time-based
processing services. The Company installed its first Gemini cell in its
Gurnee, Illinois facility.
- ExCell. The ExCell, introduced in 1995, was the industry's first
automated precision dose irradiator system. The ExCell technology offers
the ability to achieve a more precise dose range than a standard
commercial irradiator. The ExCell was designed to conduct various
required audit and validation functions for medical device manufacturers.
The ExCell also enables the Company to offer customers high precision
dosing for certain dose sensitive products.
MARKETS AND CUSTOMERS
MEDICAL PRODUCTS MARKET
The medical products market is comprised of manufacturers of healthcare and
single-use medical products. The medical products division of the Company had
over 700 customers in fiscal 1997, including many of the largest manufacturers
of single-use medical products. Sales to medical products customers accounted
for 80% of the Company's revenues in fiscal 1997. The following is a
representative list of the Company's medical products customers:
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------
REPRESENTATIVE CUSTOMERS
- ----------------------------------------------------------------------------------------------
Alcon Laboratories, Inc. Medical Action Industries Inc.
Allegiance Healthcare Corporation Nalge Nunc International
Allergan, Inc. Orion Life Systems, Inc.
Ansell Perry Inc. Regent Medical (a division of London
International Group, Inc.)
Aramark Cleanroom Services Inc.
Richard-Allan Medical Industries
Conco Medical Company (a division of UROHEALTH
Systems, Inc.)
ConvaTec (a division of E.R. Squibb
& Sons, Inc.) Smith & Nephew Orthopedics, Inc.
DePuy Orthopedics, Inc. WEL Industries, Inc.
Endodent, Inc. Zimmer (a subsidiary of Bristol-Myers
Squibb Company)
Lincoln Training Center
- ----------------------------------------------------------------------------------------------
</TABLE>
NON-MEDICAL MARKET
The non-medical division of the Company provided services in fiscal 1997 to
over 150 customers producing a variety of products, including spices and herbs,
cosmetics, food ingredients, fruit and vegetable products, food packaging,
consumer products and polymers. Sales to non-medical customers accounted for
approximately 20% of the Company's revenues in fiscal 1997.
SALES AND MARKETING
The Company has separate sales and marketing groups servicing the medical
products and non-medical markets. The Company's services are sold primarily by
its direct sales force, based throughout the country. Facilities managers and
other personnel at the Company's facilities also take an active role.
SteriGenics maintains a customer service and support operation within each of
its facilities.
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<PAGE> 41
The Company's marketing of its Gamma services emphasizes technical
assistance to customers in all aspects of the sterilization process and
participation by facility and corporate staff members on technical committees
responsible for the implementation of industry standards pertaining to the
sterilization of products and materials. The Company's salespersons and senior
management draw upon their backgrounds in radiation, engineering, microbiology,
packaging, material compatibility and regulatory compliance to provide customers
a full range of services. SteriGenics' promotional activities consist of printed
media advertising (primarily trade journals), participation in trade shows,
mailing campaigns to selected territories, addressing industry organizations and
sponsoring promotional events. In addition, as part of its efforts to expand its
potential markets, the Company has sponsored and supported FDA petitions related
to the sterilization of various products and product labeling.
In 1996, the Company introduced a new program to further encourage the
conversion of medical products from EtO to Gamma. Through this program the
Company provides technical assistance to customers and potential customers who
are interested in converting their products to Gamma. These technical assistance
services are provided at no charge to the customer. The conversion program has
been successful both with customers who have in-house EtO sterilization
facilities and with those using an EtO contract sterilizer. During fiscal 1997,
the first year of the program, SteriGenics converted slightly over 2 million
cubic feet of product to Gamma sterilization.
RESEARCH, DEVELOPMENT AND ENGINEERING
The Company believes its future competitive position will depend, in part,
on its ability to develop and introduce process and design innovations in Gamma
radiation systems. Research, development and engineering expenses for the fiscal
years ended March 31, 1995, 1996 and 1997, were $685,000, $890,000 and $1.4
million, respectively, and $312,000 for the quarter ended June 30, 1997. The
Company intends to continue to make significant investments in research,
development and engineering for the foreseeable future. Although the Company
maintains an active research, development and engineering program to improve its
process and design technology, there can be no assurance such efforts will be
successful or the Company's process and design innovations will enable it to
offer new services that will achieve customer acceptance. Failure to develop, or
introduce on a timely basis, such new process and design technology could
adversely affect the Company's business, financial condition and results of
operations. See "Risk Factors -- Competition."
QUALITY ASSURANCE AND SAFETY
The Company has quality assurance departments at both the corporate and
facility levels. The corporate quality assurance group has the primary
responsibility for structuring the Company's quality system, developing quality
assurance policies, operating procedures and work instructions and ensuring that
such policies, procedures and work instructions are in compliance with national
and international standards, federal, state and local regulations, as well as
customer requirements. The department is also responsible for monitoring quality
related activities at all locations, changes in the federal, state and local
regulatory environment, each facility's compliance with the quality system,
national standards working groups and technical assistance to customers. At the
facility level, quality assurance personnel are given the authority and
responsibility to ensure compliance within that facility with SteriGenics'
quality policies, procedures, work instructions and customer specifications.
Eight of SteriGenics' facilities are certified to International Standards
Organization ("ISO") 9002, Quality System -- Model for Quality Assurance in
Production, Installation and Servicing. Certification to the ISO 9002 standard
demonstrates that the Company has implemented the essential elements necessary
for an effective quality control system. The Company received its initial
certification in 1993 from Det Norske Veritas ("DNV"), an approved Quality
Registrar, and is subject to quality system surveillance audits every six months
by DNV.
The Company has implemented a number of safety procedures for its workers.
Each cell has a separate safety system designed to ensure that no individual is
exposed to the Gamma radiation. The Company believes it has redundant safety
precautions that meet or exceed all applicable safety regulations imposed by
federal
40
<PAGE> 42
regulations. Safety backup precautions also exist in the event of power outages
and natural disasters. In the event of a failure of electric power, the Cobalt
60 source racks are automatically lowered into the pool on a gravity feed basis.
There can be no assurance that such safety precautions will prove effective
under normal operating conditions or in the event of a power outage or natural
disaster. A failure in safety precautions would have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Risk Factors -- Risks of Operating a Facility Using Radioactive Material."
COMPETITION
The market for sterilization services is intensely competitive and is
characterized by significant price competition. The Company competes with other
companies that provide Gamma sterilization services, the most significant of
which is Isomedix, Inc. ("Isomedix"). In addition, many products that can be
sterilized using Gamma can also be sterilized using either EtO or E-Beam
sterilization. As a result, the Company also competes with companies that
process products using EtO or E-Beam technology. Companies processing products
using EtO include Cosmed Group, Inc., Griffith Micro Science, Inc. and Isomedix.
Certain of the Company's competitors and potential competitors have
substantially greater financial, marketing, distribution, technical and other
resources than the Company or offer multiple sterilization technologies, which
may enable them to address a broader range of the sterilization requirements of
individual customers. In addition, the Company competes with manufacturers that
have or are considering establishing in-house sterilization capabilities. The
Company may also in the future face competition from suppliers of Cobalt 60
radioisotope, particularly Nordion, as well as foreign providers of
sterilization services. In addition, Isomedix has announced its intention to
enter the California market for sterilization services, which would increase
competition in that market. To the extent that the Company expands into
international markets it will also be faced with competition from existing
providers of sterilization in those markets.
In recent years, price competition in the sterilization services industry
has intensified. The Company may in the future face increased competition from
companies that employ new or improved technologies or that offer sterilization
services that are more effective or less costly than those developed and
marketed by the Company. Such competition could have a material adverse effect
on the Company's business, financial condition and results of operations. There
can be no assurance that the Company will be able to continue to compete
effectively or that the competitive pressures faced by the Company will not have
a material adverse effect on the Company's business, financial condition and
results of operations.
The Company believes that price, processing time, quality of services and
sterilization method are the primary factors upon which it competes. The Company
believes that it compares favorably on all of these factors. In order to be
successful in the future, the Company must continue to respond promptly and
effectively to the challenges of technical change and competitors' innovations.
Performance in these areas will, in turn, depend upon the Company's ability to
attract and retain highly qualified technical and sales personnel. See "Risk
Factors -- Competition."
REGULATORY AND ENVIRONMENTAL MATTERS
The design, construction, use and operation of commercial irradiation
facilities such as those operated by the Company, and byproduct materials used
in such facilities, are extensively regulated by the United States Nuclear
Regulatory Commission (the "NRC"), or in some cases by various state regulatory
agencies and authorities that undertake a comparable regulatory function from
the NRC (the "Agreement States"). In addition, the Company is subject to various
local zoning and permit rules in the construction of its facilities. The
Company's facilities are subject to regulation by additional regulatory bodies
at the federal, state and local levels, depending upon the type of product that
is being irradiated. The Company's facilities are subject to the requirements of
the FDA when irradiating foods, cosmetics or food and drug packaging materials.
In addition, if the Company were to begin processing meat or poultry products,
it would become subject to the requirements of the Food Safety and Inspection
Service of the USDA, which requires preapproval of the irradiation process for
meat and poultry. The Company is also subject to the requirements of other
federal agencies, such as the United States Occupational Safety and Health
Administration and the United States Environmental Protection Agency (the
"EPA"). In addition, the Company is subject to the regulatory
41
<PAGE> 43
requirements of the state and local agencies in the jurisdictions where the
various irradiation facilities are located.
In addition to extensive regulation by various governmental bodies and
agencies, the Company is subject to standard guidelines and requirements
established by industry organizations and other non-governmental bodies, such as
ISO and the Association for the Advancement of Medical Instrumentation.
Changes in, or reinterpretations of, existing requirements or adoption of
new requirements beyond those described below or the failure at any time to
comply with any applicable material regulations and standards could have a
material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that the Company will not incur
significant costs to comply with laws, regulations and other requirements in the
future or that such laws, regulations and other requirements will not have a
material adverse effect upon the Company's business, financial condition and
results of operations.
NRC REGULATION OF IRRADIATION FACILITIES
The receipt, acquisition, ownership, transfer, possession, use,
transportation and disposal of nuclear byproduct material, as well as the
construction, operation, transfer, closure and decommissioning of commercial
irradiation facilities such as those operated by the Company, are subject to
extensive and rigorous government regulation by the NRC or, in some cases, by
the Agreement States.
Although there can be no assurance, the Company believes it has received
all licenses and permits necessary for the conduct of its business. Commercial
irradiation facilities, such as those owned or operated by the Company are
subject to both regularly scheduled and unannounced inspections by the NRC or
the Agreement States, with regard to all aspects of their operation,
recordkeeping, compliance with health and safety regulations and all aspects of
the utilization, storage, transfer, possession and transportation of regulated
byproduct materials. Noncompliance with the health and safety regulations of the
NRC and most Agreement States are generally ranked according to levels of
severity. Since 1993, the Company has received notices of violation from the NRC
and the Agreement States concerning items of noncompliance at four of its
facilities, which were not in such categories as to be of "significant
regulatory concern." The Company believes that it has taken appropriate
corrective actions in response to each such notice. In addition, the regulatory
history of the former RTI facilities, as operated by RTI, involved very
significant regulatory compliance problems, which involved among other things,
the payment of civil and criminal penalties by RTI, as well as a facility
license suspension for a period of approximately 80 days. As a consequence of
this regulatory history, there can be no assurance that the former RTI
facilities will not be subject to heightened regulatory scrutiny and inspections
for an extended period of time. Such heightened regulatory scrutiny and a
failure by the Company to address concerns raised from such scrutiny and
inspection could result in civil penalties or the suspension or termination of
operations at one or more of the Company's facilities or could otherwise have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company has no knowledge of any circumstances which
would constitute a present significant violation of any applicable state or
federal laws or regulations. However, there can be no assurance that the Company
will not in the future be determined to be in violation of any such laws or
regulations.
The terms and conditions of the Company's licenses may be amended, revised
or modified by reason of changes in the applicable laws, rules, regulations, or
agency orders. Any such action may have a material adverse effect on the
Company's business, financial condition and results of operations.
Violations of or noncompliance with applicable governmental requirements
may result in an enforcement action including, among other things, a notice of
violation, imposition of civil penalties, suspension, modification or revocation
of any applicable license, criminal prosecution, or withholding or recall of the
nuclear byproduct material held by the Company. Any such action would have
material adverse effect on the Company's business, financial condition and
results of operations.
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<PAGE> 44
FDA REGULATION OF IRRADIATION FACILITIES
The Company's irradiation facilities are subject to the requirements of the
FDA when irradiating medical devices, foods, cosmetics and food or drug
packaging materials. The FDA implements the Federal Food, Drug, and Cosmetic Act
("FFDCA"), which establishes premarket approval requirements for certain drugs
and medical devices and for all food additives. In addition, the Company is
subject to inspection by the FDA for compliance with the FDA's Good
Manufacturing Practices ("GMP") and other applicable FDA requirements. The FFDCA
also prohibits the introduction into interstate commerce of adulterated or
misbranded drugs, medical devices, foods and cosmetics. Products are deemed
adulterated if, for example, they are manufactured or processed in facilities
that fail to comply with GMP requirements.
Failure by the Company at any time to comply with applicable FDA
requirements could lead the FDA to institute materially adverse enforcement
actions against the Company and/or its customers, including, among other things,
warning letters, recall or seizure of products, fines, injunctions, civil
penalties, total or partial suspension of sterilization operations and criminal
prosecution. Such enforcement actions would also harm the Company's business
reputation and could cause the Company to lose customers to competitors with
better records of regulatory compliance.
Medical Device Regulation. The Company's contract sterilization of medical
devices is subject to pervasive and continuing regulation by the FDA. The FFDCA
defines a medical device, in part, as including an instrument, apparatus,
implement, machine, contrivance, implant or other similar or related article
that is intended for use in the mitigation, treatment, or prevention of disease
in man or other animals. The Company sterilizes finished devices made by other
manufacturers, who commercially distribute them.
The Company's contract sterilization activities render it a device
manufacturer for purposes of the FDA's Quality System Regulation ("QSR"), which
sets forth detailed GMP requirements. As a result, the Company is required to
adhere to the requirements of the QSR that apply to its contract sterilization
activities. The QSR revises the previous GMP regulation (which also applied to
the Company's activities) and imposes certain enhanced requirements that are
likely to increase the cost of compliance. There can be no assurance that the
FDA would find that the Company is in compliance with applicable GMP
requirements or that the Company will be found in compliance at all times in the
future. The Company may also be subject to other FDA requirements such as the
medical device reporting requirements.
Drug Regulation. Contract sterilizers used by manufacturers of aseptic
filled drug products are subject to applicable provisions of the FDA's drug
GMPs. There can be no assurance that the FDA would find that a contract
sterilizer is in compliance with applicable GMP requirements now or at any time
in the future.
Food Regulation. The FFDCA requires premarket approval for food additives.
Irradiation is regulated by the FDA and is considered to be a food additive.
Irradiation may only be used on foods and food packaging materials in accordance
with the requirements established in the food additive regulations. The existing
food additive regulations only approve the use of irradiation for a limited
variety of foods and food packaging materials that are used during the
irradiation of foods. Food packaging materials that are irradiated prior to
filling are exempt from the premarket approval requirements, provided that the
irradiated food packaging material is still suitable for use and complies with
the applicable indirect food additive regulations. Before the Company could
expand its sterilization services to certain foods or food packaging materials,
the food additive regulations would have to be amended to include the
irradiation of foods or food packaging materials not covered by the existing
regulations. There can be no assurance that the FDA would amend the food
additive regulations or that such regulations would be amended in a timely
manner. Irradiation currently is approved for use on a limited number of foods
and for disinfection of a variety of food packaging materials. Any use of food
irradiation outside of that covered in an existing food additive regulation is
prohibited.
The irradiation of foods must be conducted in accordance with the general
GMP requirements for foods. In addition, special labeling is required to appear
on foods that have been irradiated. The label and labeling of retail packages of
the irradiated food must bear an irradiated logo and a statement such as
"treated with radiation." No special labeling is required, however, on the label
of foods that contain irradiated food ingredients. For example, if a spice is
being irradiated, the irradiation logo and statement would need to appear
43
<PAGE> 45
on the label of the spice when it is sold directly to the consumer, but no
special labeling would be required on the label of a pasta sauce that uses the
irradiated spice ingredient.
Cosmetics Regulation. Cosmetics are defined under the FFDCA as including
articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced
into, or otherwise applied to the human body or part thereof for cleansing,
beautifying, promoting attractiveness, or altering the appearance. There
currently are no statutory or regulatory provisions, other than the general
adulteration and misbranding provisions, that limit the use of radiation in the
processing or labeling of cosmetics.
PROPRIETARY TECHNOLOGY AND INTELLECTUAL PROPERTY
The Company relies on a combination of copyright and trade secret
protection and nondisclosure agreements to protect its proprietary rights. In
addition, the Company has a U.S. patent application pending on its MiniCell.
There can be no assurance, however, that patent and copyright law and trade
secret protection will be adequate to deter misappropriation of its technology,
that any patents issued to the Company will not be challenged, invalidated or
circumvented, that the rights granted thereunder will provide competitive
advantages to the Company, or that the claims under any patent application will
be allowed. Furthermore, there can be no assurance that others will not
independently develop similar processes or designs, duplicate the Company's
processes or design around any patents issued to the Company. The Company may be
subject to or may initiate interference proceedings in the United States Patent
and Trademark Office, which can demand significant financial and management
resources. The process of seeking patent protection can be time consuming and
expensive and there can be no assurance that patents will be issued from
currently pending or future applications or that any new patents that may be
issued will be sufficient in scope or strength to provide meaningful protection
or any commercial advantage to the Company.
The Company may in the future receive communications from third parties
asserting that the Company is infringing certain patents and other intellectual
property rights of others or seeking indemnification against such alleged
infringement. No assurance can be given that any of these claims will not result
in protracted and costly litigation, that damages for infringement will not be
assessed or that should it be necessary or desirable to obtain a license
relating to one or more of the Company's services or current or future
technologies, the Company will be able to do so on commercially reasonable terms
or at all.
LEASES AND FINANCING TERMS
The following is a summary of the terms for the Company's leased facilities
and financing for facilities owned by the Company. All obligations of the
Company under the Industrial Revenue Bonds ("IRBs") are secured by certain
assets of the Company and by letters of credit with a bank:
Fremont, California -- Fremont is the location of the Company's
headquarters. The building is subject to a lease with a term that expires in
July 1999.
Corona, California -- The Corona facility is subject to a lease with an
initial lease term that expires in 2004. After the initial lease term the
Company has four five-year renewal options.
Hayward, California -- The Hayward facility is subject to a lease with a
term that expires in 2001.
Tustin, California -- The Tustin facility is subject to a lease with a term
that expires in 2002. The owner of the Tustin property is Charles King &
Associates, of which Charles W. King, Jr., a director of the Company, is an
affiliate. See "Certain Transactions."
Fort Worth I, Texas -- The Fort Worth I facility is owned by the Company.
The facility was financed through the issuance of two IRBs. These IRBs were
issued in 1985 in an aggregate amount of $4.6 million, with interest payable
monthly and principal due in full in 2005. The interest rate on the IRBs adjusts
monthly, based upon market conditions. The interest rate as of June 30, 1997 was
4.0%.
Fort Worth II, Texas -- The Fort Worth II facility is owned by the Company.
The Company expects to finance this facility through the issuance of a $5.0
million IRB in the second quarter of fiscal 1998.
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<PAGE> 46
Schaumburg, Illinois -- The Schaumburg facility is subject to a lease with
a term that expires in 2002. The owner of the Schaumburg property is Charles
King & Associates, of which Charles W. King, Jr., a director of the Company, is
an affiliate. See "Certain Transactions."
Gurnee, Illinois -- The Gurnee facility is owned by the Company. The
facility was financed through the issuance of an IRB. The IRB was issued in 1996
in an aggregate amount of $7.8 million. The IRB has a 20 year maturity with an
18 year repayment schedule with interest payable monthly. The interest rate is
adjustable weekly, based upon market conditions. The interest rate as of June
30, 1997 was 4.4%.
Westerville, Ohio -- The Westerville facility is owned by the Company. The
facility was financed through the issuance of an IRB. The IRB was issued in 1984
in an aggregate amount of $4.9 million with interest payments due monthly and
principal due in 2004. The interest rate is adjustable monthly, based upon
market conditions. The interest rate as of June 30, 1997 was 4.0%.
Charlotte, North Carolina -- The Charlotte facility is owned by the
Company. The facility was financed through the issuance of an IRB. The IRB was
issued in 1996 in the aggregate amount of $9.0 million and has a 20 year
maturity with an 18 year repayment schedule with interest payable monthly. The
interest rate is adjustable weekly, based upon market conditions. The interest
rate as of June 30, 1997 was 4.4%.
Haw River, North Carolina -- The Haw River facility is owned by the
Company. There is no debt outstanding on this facility.
Rockaway, New Jersey -- The Rockaway facility is leased from RTI. The lease
is for a 6 year period beginning in August 1996, with a 5 year renewal option
exercisable by the Company. The Company has an option to purchase the Rockaway
facility at the end of the initial lease term. See "Risk Factors --
Environmental Risks."
Salem, New Jersey -- The Salem facility is a leased facility. The facility
was financed through the issuance of an IRB. The IRB has a fixed interest rate
of 10.0% with interest payable monthly and principal repaid annually through
1999. The lease is renewable at the option of the Company for a 10 year period.
The lease is a 20 year lease and expires in the year 2016. There are no payments
due on the lease.
Decatur, Georgia -- The Decatur facility is owned by the Company. The
facility was financed through issuance of an IRB. The IRB was issued in 1985 in
the aggregate amount of $5.3 million with interest payments due monthly and
principal due in full in 2005. The interest rate is adjustable monthly, based
upon market conditions and was 4.0% as of June 30, 1997. The facility is
currently being leased to a third party. See "Risk Factors -- Environmental
Risks."
EMPLOYEES
At June 30, 1997, the Company had 283 employees. The Company believes the
success of its business will depend, in significant part, on its ability to
attract and retain such personnel. No employee of the Company is represented by
a collective bargaining agreement, nor has the Company experienced any work
stoppage. The Company considers its relations with its employees to be good. See
"Risk Factors -- Dependence on Key Personnel."
LITIGATION
The Company is not currently subject to any material legal proceedings.
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<PAGE> 47
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- --------------------------------------------
<S> <C> <C>
James F. Clouser................... 46 President, Chief Executive Officer and
Director
Eric W. Beers...................... 37 Senior Vice President of Engineering
Donald A. Currie................... 40 Vice President of Operations, Non-medical
Eugene C. Davis.................... 49 Vice President of Operations, Western Region
Lisa C. Foster..................... 36 Vice President of Quality Assurance
David E. Meyer..................... 46 President of Medical Products Division
Edward M. Miller, Jr............... 45 Vice President of Finance
Carla S. Newell.................... 37 Secretary
Charles W. King, Jr................ 62 Chairman of the Board
Walter G. Kortschak(1)............. 38 Director
Thomas F. Stephenson(1)............ 55 Director
</TABLE>
- ---------------
(1) Member of Audit Committee and Compensation Committee.
All directors hold office until the next annual meeting of the stockholders
and until their successors have been duly elected and qualified. Officers are
elected by and serve at the direction of the Board of Directors. There are no
family relationships among the directors or officers of the Company.
James F. Clouser joined SteriGenics in June 1988 as President and Chief
Executive Officer. Previously, from 1984 to 1988 he served as Chief Operating
Officer of Attain, Inc., a high technology start-up manufacturer of automatic
test equipment for semiconductor devices. Mr. Clouser has a Bachelor of Science
degree in Electrical Engineering from Pennsylvania State University, a Masters
of Business Administration degree in Finance from Wayne State University, and a
Masters of Science degree from Rochester Institute of Technology.
Eric W. Beers joined SteriGenics in February 1994 as Senior Vice President
of Engineering. Prior to joining SteriGenics, Mr. Beers held several engineering
and managerial positions with Nordion, a supplier of Cobalt 60 and irradiation
equipment, since 1980, the most recent of which was as manager of the Industrial
Irradiation Engineering Department. Mr. Beers has a degree in
Mechanical/Aeronautical Engineering from Carleton University in Canada and is a
Member of the Association of Professional Engineers of Ontario, Canada.
Donald A. Currie joined SteriGenics in March 1991 as General Manager of the
Westerville facility. In August 1994, Mr. Currie became Director of Operations
overseeing the Westerville and Schaumburg facilities and was promoted to Vice
President of Operations, Non-medical in November 1996. Mr. Currie has a Bachelor
of Arts degree in Materials and Operations Management from Michigan State
University.
Eugene C. Davis joined SteriGenics in April 1994 as Vice President of
Quality Assurance and Regulatory Affairs. In January 1996, he became Vice
President of Sales and Marketing, and in July 1997, he became the Vice President
of Operations for the Western Region. From 1979 to 1993 Mr. Davis held various
positions with the Opthalmic Surgical Products Division of Optical Radiation
Corporation, an opthalmic surgical products company, the most recent of which
was Vice President of Quality Assurance. Mr. Davis has a Bachelor of Arts degree
from California State Polytechnic University at Pomona.
Lisa C. Foster joined SteriGenics in January 1989 as Quality Assurance
Manager at the Decatur facility. In February 1990, Ms. Foster transferred to the
Schaumburg facility as Quality Assurance Manager. Later that year she joined the
Corporate staff, assuming the responsibility of Corporate Quality Assurance
Manager. In April 1992, Ms. Foster was promoted to Director of Corporate Quality
Assurance and in June 1997 was promoted to Vice President of Quality Assurance.
Ms. Foster has a Bachelor of Science degree in Food and Nutrition from
Mississippi University for Women and a Masters of Science degree in Food
Chemistry from Mississippi State University.
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<PAGE> 48
David E. Meyer joined SteriGenics in November 1989 as General Manager of
the Schaumburg facility and in May 1991 was promoted to Senior Vice President of
Operations. In July 1997, Mr. Meyer was promoted to President of Medical
Products Division. From 1976 to 1989, Mr. Meyer held various positions with the
Barber-Greene Company, a producer of road construction equipment, most recently
that of Manufacturing Manager. Mr. Meyer has a Bachelor of Science degree in
Business Administration from Valparaiso University and a Masters of Science
degree in Management from Aurora University.
Edward M. Miller, Jr. joined SteriGenics in June 1994 as Vice President of
Finance and Assistant Secretary. Prior to joining SteriGenics, Mr. Miller served
as Vice President Finance and Corporate Secretary for Quality Technologies
Corporation, a producer of optoelectronic components, since 1990. Quality
Technologies Corporation was a subsidiary of General Instrument Corporation
until November 1990. Mr. Miller has a Bachelor of Arts degree in Finance from
Ohio University.
Carla S. Newell became the Secretary of SteriGenics in June 1994. Ms.
Newell has been a partner with the law firm of Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP ("Gunderson Dettmer") since February 1996.
Prior to that time, Ms. Newell was a member of the law firm of Gray Cary Ware &
Freidenrich. Gunderson Dettmer serves as corporate counsel to the Company.
Charles W. King, Jr., a founder of the Company, has been Chairman of the
Board of SteriGenics since its inception. Mr. King is a private investor and
real estate developer and has been a Managing Partner in Charles King &
Associates since 1965.
Walter G. Kortschak became a director of the Company in September 1993. Mr.
Kortschak is a General Partner of Summit Partners, L.P., where he has been
employed since June 1989. Summit Partners and its affiliates manage a number of
venture capital funds, including Summit Ventures III, L.P. and Summit Investors
II, L.P., which are principal stockholders of the Company. Mr. Kortschak also
serves as a director of Aspec Technology, Inc., Diamond Multimedia Systems,
Inc., HMT Technology Corporation, Mecon, Inc., and Simulation Sciences Inc. Mr.
Kortschak formerly served as a director of McAfee Associates, Inc.
Thomas F. Stephenson became a director of the Company in September 1993.
Mr. Stephenson is a General Partner of Sequoia Capital, where he has been
employed since 1988. Sequoia Capital and its affiliates manage a number of
venture capital funds, including Sequoia Capital Growth Fund and Sequoia
Technology Partners III, which are principal stockholders of the Company. Mr.
Stephenson is a director of Sequana Therapeutics and several private companies.
47
<PAGE> 49
EXECUTIVE COMPENSATION
The following summary compensation table sets forth information concerning
cash and non-cash compensation earned during the fiscal year ended March 31,
1997 by the Company's Chief Executive Officer and each of the Company's other
four highest paid executive officers whose total compensation for services in
all capacities to the Company exceeded $100,000 during such year (the "Named
Officers").
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 1997
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
------------------------ OPTIONS
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) (#)
- ------------------------------------------------------- ---------- --------- ------------
<S> <C> <C> <C>
James F. Clouser....................................... 179,667 89,834 --
President, Chief Executive Officer and Director
Eric W. Beers.......................................... 95,918 43,163 5,000
Senior Vice President of Engineering
Eugene C. Davis........................................ 99,105 39,642 5,000
Vice President of Operations, Western Region
David E. Meyer......................................... 96,088 48,044 5,000
President of Medical Products Division
Edward M. Miller, Jr................................... 96,586 19,317 5,000
Vice President of Finance
</TABLE>
STOCK OPTIONS GRANTED IN FISCAL 1997
The following table provides information concerning grants of options to
purchase the Company's Common Stock made during the fiscal year ended March 31,
1997 to the Named Officers:
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------- ANNUAL RATES
NUMBER OF OF STOCK PRICE
SECURITIES % OF TOTAL EXERCISE APPRECIATION FOR
UNDERLYING OPTIONS PRICE PER OPTION TERM (2)
OPTIONS GRANTED TO SHARE EXPIRATION ----------------
GRANTED(#) EMPLOYEES ($)(1) DATE 5%($) 10%($)
---------- ------------ --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
James F. Clouser................ -- -- -- -- -- --
Eric W. Beers................... 5,000 5.15 4.90 5/31/06 15,408 39,047
Eugene C. Davis................. 5,000 5.15 4.90 5/31/06 15,408 39,047
David E. Meyer.................. 5,000 5.15 4.90 5/31/06 15,408 39,047
Edward M. Miller, Jr............ 5,000 5.15 4.90 5/31/06 15,408 39,047
</TABLE>
- ---------------
(1) All options were granted at an exercise price equal to the fair market value
of the Company's Common Stock as determined by the Board of Directors of the
Company on the date of grant. The exercise price may be paid in cash, check,
promissory note or in shares of the Company's Common Stock valued at fair
market value on the exercise date. The options vest with respect to 24% of
the shares one year after the option grant date and with respect to 2% of
the shares on a monthly basis for the next 38 months.
(2) The assumed 5% and 10% rates of stock price appreciation are provided in
accordance with rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the future Common Stock
price. Actual gains, if any, on stock option exercises are dependent on the
future
48
<PAGE> 50
performance of the Common Stock, overall market conditions and the option
holders' continued employment through the vesting period. This table does
not take into account any appreciation in the price of the Common Stock from
the date of grant to the current date. Unless the market price of the Common
Stock appreciates over the option term, no value will be realized from the
option grants made to the Named Officers.
OPTION EXERCISES AND FISCAL 1997 YEAR-END VALUES
No options were exercised by the Named Officers in fiscal 1997. The
following table provides the specified information concerning unexercised
options held as of March 31, 1997 by the Named Officers:
FISCAL 1997 YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT MARCH 31, 1997(#) AT MARCH 31, 1997($)(1)
-------------------- -----------------------
NAME VESTED UNVESTED VESTED UNVESTED
- ---------------------------------------------------- ------- -------- --------- --------
<S> <C> <C> <C> <C>
James F. Clouser.................................... 289,043 10,957 1,012,584 39,445
Eric W. Beers....................................... 7,900 14,600 28,440 52,560
Eugene C. Davis..................................... 6,600 13,400 23,760 48,240
David E. Meyer...................................... 21,950 10,550 77,270 37,980
Edward M. Miller, Jr................................ 10,200 17,300 36,720 62,280
</TABLE>
- ---------------
(1) Calculated by subtracting the exercise price from the estimated fair market
value of the underlying securities as of March 31, 1997 of $8.50 per share.
STOCK PLANS
1997 EQUITY INCENTIVE PLAN
The Company's 1997 Equity Incentive Plan (the "Plan") was adopted by the
Board on June 23, 1997, subject to stockholder approval. The number of shares of
Common Stock reserved for issuance under the Plan is equal to (i) 1,200,000 plus
(ii) the aggregate number of shares remaining available for grants under the
Company's Second Amended and Restated 1986 Stock Option Plan (the "Predecessor
Plan") on June 23, 1997. As of June 30, 1997, no options had been granted under
the Plan. Under the Plan, employees, non-employee members of the Board ("Outside
Directors") and consultants may be awarded options to purchase shares of Common
Stock, stock appreciation rights ("SARs"), restricted shares or stock units.
Options may be incentive stock options designed to satisfy Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") or nonstatutory stock
options not designed to meet such requirements. If restricted shares or shares
issued upon the exercise of options granted under this Plan or the Predecessor
Plan are forfeited, then such shares will again become available for awards
under the Plan. If stock units, options or SARs granted under this Plan or the
Predecessor Plan are forfeited or terminate for any other reason before being
exercised, then the corresponding shares will again become available for awards
under the Plan. As of January 1 of each year, commencing with the year 1999, the
number of shares reserved for issuance under the Plan will be increased
automatically by the lesser of (i) 5% of the total number of shares of Common
Stock then outstanding or (ii) 250,000 shares.
The Plan is administered by the Company's Compensation Committee (the
"Committee"). The Committee has the complete discretion to determine which
eligible individuals are to receive any award, determine the type, number,
vesting requirements and other features and conditions of such award, interpret
the Plan and make all other decisions relating to the operation of the Plan.
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<PAGE> 51
The exercise price for options granted under the Plan may be paid in cash
or in outstanding shares of Common Stock. Options may also be exercised by using
a cashless exercise method, a pledge of shares to a broker or promissory note.
The payment for the award of newly issued restricted shares will be made in
cash, by promissory note or the rendering of past or future services.
The Committee has the authority to modify, extend or assume outstanding
options and SARs or may accept the cancellation of outstanding options or SARs
in return for the grant of new options or SARs for the same or a different
number of shares and at the same or a different exercise price.
Each Outside Director who first becomes a member of the Board after the
date of the offering will receive a one-time option grant for 15,000 shares of
Common Stock upon taking office. Upon the conclusion of each regular annual
meeting of the Company's stockholders held in the 1998 calendar year and
thereafter, each Outside Director who will continue to serve as a Board member
will receive an option for 3,000 shares of Common Stock, except that an Outside
Director will not receive an annual grant for 3,000 shares in the same year he
or she received the one-time option grant for 15,000 shares.
The Board may decide to implement a program that allows an Outside Director
to elect to receive his or her annual retainer payments and meeting fees from
the Company in the form of cash, options, restricted shares, stock units or a
combination thereof. The number and terms of such options, restricted shares or
stock units to be granted to Outside Directors in lieu of annual retainers and
meeting fees will be calculated in a manner determined by the Board.
The Committee may determine that upon a Change in Control (as defined in
the Plan) an award of an option, SAR, stock units or restricted shares will
become fully exercisable as to all shares subject to such award. A Change in
Control includes a merger or consolidation of the Company after which the
Company's then current stockholders own less than 50% of the surviving
corporation, sale of all or substantially all of the assets of the Company, a
proxy contest that results in replacement of more than one-third of the
directors over a 24-month period or acquisition of 30% or more of the Company's
outstanding stock by a person other than a trustee of any of the Company's
employee benefit plans, a corporation owned by the stockholders of the Company
in substantially the same proportions as their stock ownership in the Company or
a person who owns stock of the Company before the effective date of the
offering. In the event of a merger or other reorganization, outstanding options,
SARs, restricted shares and stock units will be subject to the agreement of
merger or reorganization, which may provide for the assumption of outstanding
awards by the surviving corporation or its parent, for their continuation by the
Company (if the Company is a surviving corporation), for accelerated vesting and
accelerated expiration or for settlement in cash.
The Board may amend or terminate the Plan at any time. Amendments may be
subject to stockholder approval to the extent required by applicable laws.
1997 EMPLOYEE STOCK PURCHASE PLAN
The Board adopted the Company's 1997 Employee Stock Purchase Plan (the
"Purchase Plan") on June 23, 1997, subject to stockholder approval. A total of
400,000 shares of Common Stock have been reserved for issuance under the
Purchase Plan. The Purchase Plan is intended to qualify under Section 423 of the
Code. Each calendar year, two overlapping offering periods consisting of 24
months will commence on April 1 and October 1 (except that the first offering
period will commence on the effective date of the offering and end on September
30, 1999). Each offering period contains four six-month accumulation periods,
with purchases occurring at the end of each six-month accumulation period.
However, the initial accumulation period will begin on the effective date of the
offering and end on March 31, 1998. The Purchase Plan will be administered by
the Committee. Each employee will be eligible to participate if he or she is (i)
employed by the Company for at least 20 hours per week for more than five months
per year and (ii) is an employee on the effective date of the offering or has
been employed by the Company for at least three consecutive months. The Purchase
Plan permits each eligible employee to purchase Common Stock through payroll
deductions, which may not exceed 15% of an employee's compensation, nor more
than 5,000 shares on any purchase date. The price of each share of Common Stock
purchased under the Purchase Plan will be 85% of the lower of (i) the fair
market value per share of Common Stock on the date immediately prior to the
first date of the applicable
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<PAGE> 52
accumulation period (except that in the case of the first offering period, the
price per share will be the price offered to the public in the offering) or (ii)
the date at the end of the applicable accumulation period. Employees may end
their participation in the Purchase Plan at any time during the accumulation
period, and participation ends automatically upon termination of employment with
the Company. In the event of a merger or consolidation, all offering periods and
accumulation periods will terminate and each outstanding purchase right will be
exercised. The Board may amend or terminate the Purchase Plan at any time.
However, the Board may not, without stockholder approval, increase the number of
shares of Common Stock reserved for issuance under the Purchase Plan.
COMPENSATION OF DIRECTORS
Directors receive no remuneration for serving on the Board of Directors,
although directors are reimbursed for all reasonable expenses incurred by them
in attending Board and Committee meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee consists of Messrs. Kortschak and Stephenson.
Neither of these individuals has at any time since the formation of the Company
been an officer or employee of the Company. No executive officer of the Company
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to the provisions of the Delaware General Corporation Law (the
"Delaware Law"), the Company has adopted provisions in its Certificate of
Incorporation which provide that directors of the Company shall not be
personally liable for monetary damages to the Company or its stockholders for a
breach of fiduciary duty as a director, except for liability as a result of (i)
a breach of the directors' duty of loyalty to the Company or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) an act related to the unlawful stock
repurchase or payment of a dividend under Section 174 of the Delaware Law and
(iv) transactions from which the director derived an improper personal benefit.
Such limitation of liability does not affect the availability of equitable
remedies such as injunctive relief or rescission.
The Company's Certificate of Incorporation also authorizes the Company to
indemnify its officers, directors and other agents, by bylaws, agreements or
otherwise, to the fullest extent permitted under the Delaware Law. The Company
has entered into separate indemnification agreements with its officers and
directors which are, in some cases, broader than the specific indemnification
provisions contained in the Delaware Law. The indemnification agreements require
the Company, among other things, to indemnify such officers and directors
against certain liabilities that may arise by reason of their status or service
as directors or officers, to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance if available on reasonable terms.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding which may result in a claim for such indemnification.
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<PAGE> 53
CERTAIN TRANSACTIONS
AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS
The Company has leased its Tustin, California facility since April 1980
from Charles King & Associates, an entity of which Charles W. King, Jr., a
director and major stockholder of the Company, is an affiliate. In June 1997,
the Company executed a five year lease, with a term that expires in the year
2002, that provides for payments of $19,750 per month with 3% annual rent
increases in years two through five of the lease. Lease payments were $219,000
in each of the fiscal years ended March 31, 1995, 1996 and 1997.
The Company has leased its Schaumburg, Illinois facility since January 1982
from Charles King & Associates, an entity of which Charles W. King, Jr., a
director and major stockholder of the Company, is an affiliate. In June 1997,
the Company executed a five year lease, with a term that expires in the year
2002, that provides for payments of $13,100 per month with 3% annual rent
increases in years two through five of the lease. Lease payments were $253,000
in each of the fiscal years ended March 31, 1995, 1996 and 1997.
Through June 29, 1997, Charles W. King, Jr. guaranteed bank letters of
credit related to IRBs issued by the Company for approximately $31.5 million for
several of the Company's facilities. These IRBs have 20 year terms with interest
rates as of March 31, 1997 of 3.6% and 3.7% adjustable based upon market
conditions. Mr. King received no consideration for the guarantee of these IRBs.
As of June 30, 1997, Mr. King continues to guarantee a bank letter of
credit related to one IRB issued by the Company for approximately $5.3 million
for one of the Company's facilities. This IRB has a 20 year term with an
interest rate as of June 30, 1997 of 4.0%, adjustable based upon market
conditions. Mr. King received no consideration for the guarantee of this IRB.
The Company intends to use $1.5 million of the net proceeds of the offering
to redeem the 15,000 shares of Series A Preferred Stock currently outstanding.
The Charles W. King, Jr. Revocable Trust, of which Mr. King is the trustee and
beneficiary, is the sole holder of the Series A Preferred Stock. See "Use of
Proceeds."
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans between the
Company and its officers, directors, principal stockholders and their affiliates
will be approved by a majority of the Board of Directors, including a majority
of the independent and disinterested outside directors on the Board of
Directors, and will continue to be on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.
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<PAGE> 54
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 30, 1997, and as adjusted to
reflect the sale of the shares offered hereby, (i) by each person who is known
by the Company to own beneficially more than 5% of the Company's Common Stock,
(ii) by each of the executive officers named in the table under "Executive
Compensation" and by each of the Company's directors, and (iii) by all officers
and directors of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL(1)(2)
------------------------
NUMBER OF SHARES BEFORE THE AFTER THE
NAME AND ADDRESS BENEFICIALLY OWNED OFFERING OFFERING
- ----------------------------------------------------- ------------------ ---------- ---------
<S> <C> <C> <C>
Summit Partners, L.P.(3)............................. 736,630 15.3% 10.8%
499 Hamilton Avenue, Suite 200
Palo Alto, CA 94301
Sequoia Capital(4)................................... 368,315 7.6 5.4
3000 Sand Hill Road
Suite 280, Building 4
Palo Alto, CA 94025
Charles W. King, III Trust(5)........................ 1,006,454 20.8 14.7
c/o King Asset Management Corporation
1999 South Bascom Avenue, Suite 925
Campbell, CA 95008
Michael J. King Trust(5)............................. 1,006,454 20.8 14.7
c/o King Asset Management Corporation
1999 South Bascom Avenue, Suite 925
Campbell, CA 95008
Patricia Morley King Trust(5)........................ 1,006,454 20.8 14.7
c/o King Asset Management Corporation
1999 South Bascom Avenue, Suite 925
Campbell, CA 95008
Charles W. King, Jr. Revocable Trust(6).............. 572,000 11.8 8.4
c/o King Asset Management Corporation
1999 South Bascom Avenue, Suite 925
Campbell, CA 95008
James F. Clouser(7).................................. 291,072 5.7 4.1
Eric W. Beers(8)..................................... 11,050 * *
Eugene C. Davis(9)................................... 9,500 * *
David E. Meyer(10)................................... 24,350 * *
Edward M. Miller, Jr.(11)............................ 13,850 * *
Charles W. King, Jr.(12)............................. 572,000 11.8 8.4
Walter G. Kortschak(13).............................. 736,630 15.3 10.8
Thomas F. Stephenson(14)............................. 368,315 7.6 5.4
All Officers and Directors as a group (11
persons)(15)....................................... 2,050,057 39.4 28.5
</TABLE>
- ---------------
* Represents less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of June 30, 1997 are
deemed outstanding. Such shares, however, are not deemed outstanding for
the purposes of computing percentage ownership of each other person. The
address for each listed director and officer is c/o SteriGenics
International, Inc., 4020 Clipper Court, Fremont, California 94538. Except
as set forth in the footnotes to this table and subject to applicable
community property laws, each person has sole voting and investment power
with
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<PAGE> 55
respect to the shares set forth opposite such person's name. Information with
respect to beneficial ownership is based upon the Company's stock records and
data supplied to the Company by the holders.
(2) Percentage ownership is based on 4,829,039 shares of Common Stock
outstanding on June 30, 1997 and 6,828,769 shares of Common Stock
outstanding after completion of the Offering. Shares owned do not include
15,000 shares of Series A Preferred Stock, all shares of which are owned by
Charles W. King, Jr. Revocable Trust and none of which are convertible into
Common Stock. See "Description of Capital Stock." Assumes no exercise of
the Underwriters' over-allotment option.
(3) Includes 727,095 and 9,535 shares of Common Stock held of record by Summit
Ventures III, L.P. and Summit Investors II, L.P., respectively.
(4) Includes 346,216 and 22,099 shares of Common Stock held of record by
Sequoia Capital Growth Fund and Sequoia Technology Partners III,
respectively.
(5) The Charles W. King, III Trust, the Michael J. King Trust and the Patricia
Morley King Trust (the "Selling Stockholders") have granted to the
Underwriters an over-allotment option to purchase up to an aggregate of
300,000 additional shares of Common Stock. See "Underwriting." If the
over-allotment option is exercised in full, the number of shares
beneficially owned by each of the Selling Stockholders will be reduced to
906,454 shares, or 13.3% of shares outstanding.
(6) Does not include 15,000 shares of Series A Preferred Stock, all shares of
which are owned by the Charles W. King, Jr., Revocable Trust and none of
which are convertible into Common Stock. Charles W. King, Jr., a director
of the Company, is the trustee and beneficiary of this trust.
(7) Includes 291,072 shares issuable upon exercise of options that are
currently exercisable or exercisable within 60 days of June 30, 1997.
(8) Includes 11,050 shares issuable upon exercise of options that are currently
exercisable or exercisable within 60 days of June 30, 1997.
(9) Includes 9,500 shares issuable upon exercise of options that are currently
exercisable or exercisable within 60 days of June 30, 1997.
(10) Includes 24,350 shares issuable upon exercise of options that are currently
exercisable or exercisable within 60 days of June 30, 1997.
(11) Includes 13,850 shares issuable upon exercise of options that are currently
exercisable or exercisable within 60 days of June 30, 1997.
(12) Includes 572,000 shares held by the Charles W. King, Jr. Revocable Trust.
Mr. King does not have any beneficial ownership of the Charles W. King, III
Trust, the Michael J. King Trust or the Patricia Morley King Trust.
(13) Includes 727,095 and 9,535 shares of Common Stock held of record by Summit
Ventures III, L.P. and Summit Investors II, L.P., respectively. Mr.
Kortschak, a director of the Company, is a general partner of Summit
Partners, L.P., which, with its affiliates, manages Summit Ventures III,
L.P. and Summit Investors II, L.P. (collectively, the "Summit Entities").
Mr. Kortschak disclaims beneficial ownership of shares held by the Summit
Entities, except for his pecuniary interest therein.
(14) Includes 346,216 and 22,099 shares of Common Stock held of record by
Sequoia Capital Growth Fund and Sequoia Technology Partners III,
respectively. Mr. Stephenson, a director of the Company, is a general
partner of Sequoia Partners (CF), which, with its affiliates, manages
Sequoia Capital Growth Fund and Sequoia Technology Partners III
(collectively, the "Sequoia Entities"). Mr. Stephenson disclaims beneficial
ownership of shares held by the Sequoia Entities, except for his pecuniary
interest therein.
(15) Includes 373,112 shares issuable upon exercise of options that are
currently exercisable or exercisable within 60 days of June 30, 1997.
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<PAGE> 56
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of the
Company will consist of 15,000,000 shares of Common Stock, $0.001 par value, and
1,000,000 shares of Preferred Stock, $0.001 par value.
COMMON STOCK
As of June 30, 1997, there were 4,829,039 shares of Common Stock
outstanding (assuming the conversion of the Company's Convertible Preferred
Stock into 1,772,727 shares of Common Stock) that were held of record by
approximately 29 stockholders. There will be 6,829,039 shares of Common stock
outstanding (assuming no exercise of the Underwriters' over-allotment option and
assuming no exercise after June 30, 1997 of outstanding options) after giving
effect to the sale of the shares of Common Stock to the public offered hereby
and the conversion of the Company's Convertible Preferred Stock into 1,772,727
shares of Common Stock.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of the liquidation, dissolution, or winding up
of the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior distribution
rights of Preferred Stock, if any, then outstanding. The Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and nonassessable, and the
shares of Common Stock to be issued upon completion of this offering will be
fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of Convertible
Preferred Stock will convert into 1,772,727 shares of Common Stock, and all
outstanding shares of Series A Redeemable Preferred Stock will be redeemed by
the Company. See "Use of Proceeds" and "Capitalization." Thereafter, the Board
of Directors will have the authority to issue up to 1,000,000 shares of
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of such series, without further vote or action by the stockholders.
The issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
stockholders and may adversely affect the voting and other rights of the holders
of Common Stock. The issuance of Preferred Stock with voting and conversion
rights may adversely affect the voting power of the holders of Common Stock,
including the loss of voting control to others. At present, the Company has no
plans to issue any of the Preferred Stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
CERTIFICATE OF INCORPORATION AND BYLAWS
The Certificate of Incorporation provides that, effective upon the closing
of this offering, all stockholder actions must be effected at a duly called
meeting and not by a consent in writing. Further, provisions of the Bylaws and
the Certificate of Incorporation provide that the stockholders may amend the
Bylaws or certain provisions of the Certificate of Incorporation only with the
affirmative vote of the holders of 75% of the Company's capital stock. These
provisions of the Certificate of Incorporation and Bylaws could discourage
potential acquisition proposals and could delay or prevent a change in control
of the Company. These provisions are intended to enhance the likelihood of
continuity and stability in the composition of the Board of Directors and in the
policies formulated by the Board of Directors and to discourage certain types of
transactions that may involve an actual or threatened change of control of the
Company. These provisions are designed to reduce the vulnerability of the
Company to an unsolicited acquisition proposal. The provisions also are intended
to discourage certain tactics that may be used in proxy fights. However, such
provisions could
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<PAGE> 57
have the effect of discouraging others from making tender offers for the
Company's shares and, as a consequence, they also may inhibit fluctuations in
the market price of the Company's shares that could result from actual or
rumored takeover attempts. Such provisions also may have the effect of
preventing changes in the management of the Company. See "Risk
Factors -- Antitakeover Effect of Certain Charter and Bylaw Provisions."
DELAWARE TAKEOVER STATUTE
The Company is subject to Section 203 of the Delaware Law ("Section 203"),
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder, unless: (i) prior to such date, the board of directors
of the corporation approved either the business combination or the transaction
that resulted in the stockholder becoming an interested stockholder; (ii) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or subsequent
to such date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
REGISTRATION RIGHTS
After this offering, the holders of approximately 1,104,945 shares of
Common Stock (the "Registrable Securities") will be entitled to certain rights
with respect to the registration of such shares under the Securities Act. Under
the terms of the agreement between the Company and the holders of such
Registrable Securities, if the company proposes to register any of its
securities under the Securities Act, either for its own account or for the
account of other security holders exercising registration rights, such holders
are entitled to notice of such registration and are entitled to include their
Registrable Securities. Additionally, such holders are also entitled to certain
demand registration rights pursuant to which they may require the Company to
file a registration statement under the Securities Act at its expense with
respect to their Registrable Securities, and the Company is required to use its
best efforts to effect such registration. Further, holders may require the
Company to file additional registration statements on Form S-3 at the Company's
expense. All of these registration rights are subject to certain conditions and
limitations, among them the right of the underwriters of an offering to limit
the number of shares included in such registration and the right of the Company
not to effect a requested registration within six months following an offering
of the Company's securities, including the offering made hereby.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock will be U.S. Stock
Transfer Corporation.
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<PAGE> 58
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering and based on the shares outstanding as of
June 30, 1997, there will be 6,829,039 shares of Common Stock outstanding. Of
these shares, the 2,000,000 shares sold in the offering (assuming no exercise of
the underwriters' over-allotment option) will be freely tradeable without
restriction or further registration unless purchased by "affiliates" of the
Company as that term is defined in Rule 144 under the Securities Act. The
remaining shares will be "restricted securities" as that term is defined under
Rule 144 (the "Restricted Shares"). Sales of Restricted Shares in the public
market, or the availability of such shares for sale, could adversely affect the
market price of the Common Stock.
Of the Restricted Shares, an aggregate of 5,392,617 shares of Common Stock
(including 563,578 shares issuable upon exercise of vested stock options) will
be eligible for sale in the public market subject to Rule 144 and Rule 701 under
the Securities Act after expiration of a contractual lock-up ending 180 days
after the date of the Prospectus, unless earlier consented to, in whole or in
part, by PaineWebber Incorporated.
In general, under Rule 144, beginning 90 days after the date of this
Prospectus, a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least one year, including persons
who may be deemed to be "affiliates" of the Company, would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of: (i) one percent of the number of shares of Common Stock then
outstanding (which will equal approximately 68,290 shares immediately after the
offering); or (ii) the average weekly trading volume of the Common Stock as
reported through the Nasdaq National Market during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. Sales under Rule
144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about the
Company. Under Rule 144(k), a person who is not deemed to have been an affiliate
of the Company at any time during the 90 days preceding a sale, and who has
beneficially owned the Restricted Shares proposed to be sold for at least two
years (including the holding period of any prior owner except an affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Rule 701 permits resales of shares issued pursuant to certain compensatory
benefit plans and contracts and prior to the date the issuer becomes subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), subject to certain limitations on the aggregate offering
price of a transaction and certain other conditions, commencing 90 days after
the issuer becomes subject to the reporting requirements of the Exchange Act, in
reliance upon Rule 144, but without compliance with certain restrictions,
including the holding period requirements, contained in Rule 144. In addition,
the Securities and Exchange Commission has indicated that Rule 701 will apply to
typical stock options granted by an issuer before it becomes subject to the
reporting requirements of the Exchange Act, along with the shares acquired upon
exercise of such options (including exercises after the date of this
Prospectus). Securities issued in reliance on Rule 701 are restricted securities
and, subject to the contractual lock-up restrictions described above, beginning
90 days after the date of this Prospectus, may be sold by persons other than
affiliates subject only to the manner of sale provisions of Rule 144 and by
affiliates under Rule 144 without compliance with its one-year minimum holding
period requirements.
The Company has agreed that it will not issue, sell or grant options to
purchase or otherwise dispose of any shares of its Common Stock or securities
convertible into or exchangeable for its Common Stock, except in connection with
the exercise of options or other rights outstanding on the date of this
Prospectus or pursuant to the Company's stock plans, for a period of 180 days
after the date of this Prospectus, without the prior written consent of
PaineWebber Incorporated.
The Company intends to register on a Form S-8 registration statement under
the Securities Act, during the 180-day lock-up period, a total of 2,312,416
shares of Common Stock which are subject to outstanding options or reserved for
issuance under the Company's stock option plans and stock purchase plan. Such
registration will permit the resale of shares so registered by non-affiliates in
the public market without restriction under the Securities Act.
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<PAGE> 59
Prior to the offering, there has been no public market for the Common
Stock, and any sale of substantial amounts of Common Stock in the open market
may adversely affect the market price of the Common Stock offered hereby. In
addition, beginning 180 days after the date of this Prospectus, the holders of
approximately 1,104,945 shares of Common Stock are entitled to certain rights
with respect to registration of such shares under the Securities Act.
Registration of such shares under the Securities Act would result in such shares
becoming freely tradeable without restriction under the Securities Act (except
for shares purchased by affiliates of the Company) immediately upon the
effectiveness of such registration. See "Description of Capital Stock --
Registration Rights." If such holders, by exercising their demand registration
rights, cause a large number of securities to be registered and sold in the
public market, such sales could have an adverse effect on the market price for
the Common Stock. If the Company were to include in a Company-initiated
registration, any registrable securities pursuant to the exercise of piggyback
registration rights, such sales may have an adverse effect on the Company's
ability to raise needed capital.
58
<PAGE> 60
UNDERWRITING
The underwriters named below (the "Underwriters"), for whom PaineWebber
Incorporated, Piper Jaffray Inc. and Wheat, First Securities, Inc. are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions of the Underwriting Agreement among the Company, the
Selling Stockholders and the Underwriters (the "Underwriting Agreement"), to
purchase from the Company, and the Company has agreed to sell to the
Underwriters the number of shares of Common Stock set forth opposite their names
below at the price per share set forth on the cover page of this Prospectus
under "Proceeds to Company."
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITERS SHARES
------------------------------------------------------------ --------
<S> <C>
PaineWebber Incorporated....................................
Piper Jaffray Inc. .........................................
Wheat, First Securities, Inc................................
----------
Total.................................................. 2,000,000
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to purchase the shares of Common Stock listed above are subject to
certain conditions. The Underwriters are committed to purchase all of the shares
of Common Stock offered by this Prospectus, (other than those covered by the
over-allotment option described below), if any are purchased. The Underwriting
Agreement provides that, in the event of a default by an Underwriter, in certain
circumstances, the purchase commitments of non-defaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public initially at the public
offering price set forth on the cover of this Prospectus and to certain dealers
at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession to other
dealers not in excess of $ per share. After the initial public offering
of the Common Stock, the public offering price, the concessions to selected
dealers and reallowance to other dealers may be changed by the Representatives.
The Selling Stockholders have granted the Underwriters an option,
exercisable during the 30 business day period after the date of this Prospectus,
to purchase up to an additional 300,000 shares of Common Stock at the initial
public offering price set forth on the cover page of this Prospectus, less the
underwriting discounts and commissions. To the extent the Underwriters exercise
such option, each Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares of Common Stock as the percentage it was obligated to purchase pursuant
to the Underwriting Agreement. The Underwriters may exercise such option only to
cover over-allotments, if any, made in connection with the offering of the
shares of Common Stock offered hereby.
The Representatives have informed the Company that they do not expect the
Underwriters to confirm sales of Common Stock to any account over which they
exercise discretionary authority.
The Company and the Selling Stockholders, in the event the over-allotment
option is exercised, 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 each of its directors, executive officers and stockholders
holding approximately 4,763,607 shares of Common Stock have agreed, without the
prior written consent of PaineWebber Incorporated, not to offer to sell, sell,
contract to sell, grant any option to sell, or otherwise dispose of or require
the Company to file with the Securities and Exchange Commission a registration
statement under the Securities Act to register any shares of Common Stock or
securities convertible into or exchangeable for
59
<PAGE> 61
Common Stock or warrants or other rights to acquire shares of Common Stock owned
by any of them prior to the expiration of 180 days from the date of this
Prospectus, except (i) for shares of Common Stock offered hereby, and (ii) in
the case of the Company, the grant of options, at market value, to purchase
shares of Common Stock under the Company's 1997 Equity Incentive Plan.
Prior to the offering, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined through
negotiations among the Company and the Representatives. Among the factors to be
considered in determining the initial public offering price, in addition to
prevailing market conditions, will be certain financial information of the
Company, the history of, and the prospects for, the Company and the industry in
which it competes, an assessment of the Company's management, its past and
present operations, the prospects for, and timing of, future revenues of the
Company, the present state of the Company's development, and the above factors
in relation to market values and various valuation measures of other companies
engaged in activities similar to the Company.
The initial public offering price set forth on the cover page of this
Prospectus should not, however, be considered an indication of the actual value
of the Common Stock. Such price is subject to change as a result of market
conditions and other factors. There can be no assurance that an active trading
market will develop for the Common Stock or that the Common Stock will trade in
the public market subsequent to the offering at or above the initial public
offering price.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an
exception to these rules, the Representatives are permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representatives may
reduce that short position by purchasing shares of Common Stock in the open
market. The Representatives may also elect to reduce any short position by
exercising all or part of the over-allotment option described above.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group members
who sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security before the distribution is completed.
Neither the Company nor any Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above might have on the price of the Common Stock. In addition,
neither the Company nor any of the Underwriters makes any representation that
the Representatives will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
Wheat, First Securities, Inc., a Representative, has in the past served as
an underwriter, placement agent and the remarketing agent and currently serves
as the remarketing agent with respect to certain of the Company's IRBs, for
which it has received customary compensation. See "Business -- Leases and
Financing Terms" and Note 3 of Notes to Consolidated Financial Statements.
60
<PAGE> 62
LEGAL MATTERS
The validity of the shares offered hereby and general corporate legal
matters will be passed upon for the Company by Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP ("Gunderson Dettmer"), Menlo Park,
California. Carla S. Newell, a partner of Gunderson Dettmer, is the Secretary of
the Company. Certain legal matters relating to the sale of the shares of Common
Stock in the offering will be passed upon for the Underwriters by Morrison &
Foerster LLP, New York, New York.
EXPERTS
The consolidated financial statements of SteriGenics International, Inc. at
March 31, 1996 and 1997, and for each of the three years in the period ended
March 31, 1997, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall include any amendments
thereto) on Form S-1 under the Securities Act with respect to the Common Stock
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain items of which are contained in exhibits to the Registration
Statement as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement, including the exhibits
thereto, and the Consolidated Financial Statements and related Notes filed as a
part thereof. Statements made in this Prospectus concerning the contents of any
document referred to herein are not necessarily complete. With respect to each
such document filed with the Commission as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved.
As a result of the offering, the Company will become subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended. As long as the Company is subject to such
periodic reporting and informational requirements, it will file with the
Commission all reports, proxy statements and other information required thereby.
The Registration Statement, as well as such reports and other information filed
by the Company with the Commission, may be inspected at the public reference
facilities maintained by the Commission at its principal office located at 450
Fifth Street, N.W., Washington, D.C. 20549 and at its regional offices located
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World
Trade Center, 13th Floor New York, New York 10048. Copies of such material may
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the site is http://www.sec.gov.
61
<PAGE> 63
STERIGENICS INTERNATIONAL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors..................................... F-2
Consolidated Balance Sheets........................................................... F-3
Consolidated Statements of Operations................................................. F-4
Consolidated Statements of Stockholders' Equity....................................... F-5
Consolidated Statements of Cash Flows................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 64
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
SteriGenics International, Inc.
We have audited the accompanying consolidated balance sheets of SteriGenics
International, Inc. as of March 31, 1996 and 1997, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended March 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these 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 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of SteriGenics
International, Inc. at March 31, 1996 and 1997, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended March 31, 1997, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
San Jose, California
May 9, 1997, except Note 14 as to which the
date is , 1997
- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon the completion of
certain events as described in Note 14 to the consolidated financial statements.
/s/ Ernst & Young LLP
San Jose, California
June 23, 1997
F-2
<PAGE> 65
STERIGENICS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
MARCH 31, EQUITY AT
----------------------------- JUNE 30, JUNE 30,
1996 1997 1997 1997
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents:
Unrestricted...................................... $ 9,062,328 $ 1,072,342 $ 611,181
Restricted........................................ 844,169 885,058 889,909
Accounts receivable, net of allowance of $242,000,
$253,000 and $150,000 at March 31, 1996 and 1997 and
June 30, 1997....................................... 3,476,737 4,591,611 4,689,981
Prepaid expenses and other current assets........... 560,243 801,404 827,468
Deferred income taxes............................... 959,322 1,108,717 1,108,717
------------ ------------ ------------
Total current assets.................................. 14,902,799 8,459,132 8,127,256
Property, plant and equipment, net.................... 67,430,439 80,330,124 80,995,721
Other assets.......................................... 1,146,113 2,876,281 2,978,703
Investment in joint venture........................... 1,250,000 1,000 1,000
------------ ------------ ------------
Total assets.......................................... $ 84,729,351 $ 91,666,537 $ 92,102,680
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 382,031 $ 1,461,758 $ 1,152,092
Income taxes payable................................ 86,179 677,192 1,073,595
Accrued liabilities................................. 6,305,238 6,096,785 5,935,863
Borrowings under line of credit..................... - - 400,400
Current portion of capital lease obligations........ 2,543,965 3,152,394 3,152,394
Current portion of long-term debt................... 2,289,059 250,000 250,000
------------ ------------ ------------
Total current liabilities............................. 11,606,472 11,638,129 11,964,344
Capital lease obligations, less current portion....... 7,406,387 6,139,685 5,272,246
Long-term debt, less current portion.................. 27,783,641 32,000,000 32,000,000
Other long-term liabilities........................... 92,703 - -
Deferred income taxes................................. 8,574,879 9,408,691 9,408,691
Series A redeemable preferred stock $0.001 par value:
Authorized shares -- 100,000
Issued and outstanding shares -- 15,000 as of March
31, 1996 and 1997 and June 30, 1997............... 1,500,000 1,500,000 1,500,000
Stockholders' equity:
Preferred stock, $0.001 par value:
Authorized shares -- 10,000,000 actual, 1,000,000
pro forma
Issued and outstanding shares -- none at March 31,
1996 and 1997, June 30, 1997 and pro forma...... - - - $ -
Convertible preferred stock, Series B and C, $0.001
par value:
Authorized shares -- 1,772,728
Issued and outstanding shares -- 1,772,727 at
March 31, 1996 and 1997 and June 30, 1997 and
none pro forma.................................. 1,773 1,773 1,773 -
Common stock, $0.001 par value:
Authorized shares -- 15,000,000 at March 31, 1996
and 1997, June 30, 1997 and pro forma
Issued and outstanding shares -- 3,056,042 at
March 31, 1996 and 1997, 3,056,312 at June 30,
1996 and 4,829,039 pro forma.................... 3,056 3,056 3,056 4,829
Additional paid-in capital.......................... 14,726,994 14,726,994 14,728,317 14,728,317
Notes receivable from sale of common stock to
employees......................................... (88,170) (88,170) (87,153) (87,153)
Retained earnings................................... 13,121,616 16,336,379 17,311,406 17,311,406
------------ ------------ ------------ ------------
Total stockholders' equity............................ 27,765,269 30,980,032 31,957,399 $ 31,957,399
============
------------ ------------ ------------
Total liabilities and stockholders' equity............ $ 84,729,351 $ 91,666,537 $ 92,102,680
============ ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 66
STERIGENICS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED MARCH 31, JUNE 30,
--------------------------------------- -------------------------
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues......................... $28,661,287 $30,240,840 $37,668,198 $ 8,164,453 $10,750,521
Cost of revenues................. 16,389,018 16,977,930 20,425,350 4,297,302 5,800,593
----------- ----------- ----------- ----------- -----------
12,272,269 13,262,910 17,242,848 3,867,151 4,949,928
Costs and expenses:
General and administrative..... 5,664,413 5,212,719 6,345,112 1,416,907 1,636,576
Marketing and selling.......... 1,582,875 1,761,026 2,482,124 560,110 822,932
Research, development and
engineering................. 685,154 889,815 1,380,821 272,704 312,249
----------- ----------- ----------- ----------- -----------
7,932,442 7,863,560 10,208,057 2,249,721 2,771,757
----------- ----------- ----------- ----------- -----------
Income from operations........... 4,339,827 5,399,350 7,034,791 1,617,430 2,178,171
Other income (expense):
Write-down of investments in
joint ventures.............. (3,011,022) -- -- -- --
Interest expense, net.......... (2,402,336) (1,846,141) (1,836,310) (458,733) (581,009)
Other income................... 139,578 46,741 115,347 6,732 14,453
----------- ----------- ----------- ----------- -----------
Income (loss) before provision
for income taxes, equity in
joint ventures and discontinued
operations..................... (933,953) 3,599,950 5,313,828 1,165,429 1,611,615
Provision for income taxes....... 1,185,000 1,447,888 2,099,065 460,957 636,588
----------- ----------- ----------- ----------- -----------
Income (loss) before equity in
joint ventures and discontinued
operations..................... (2,118,953) 2,152,062 3,214,763 704,472 975,027
Equity in net loss of joint
ventures....................... (1,359,983) -- -- -- --
----------- ----------- ----------- ----------- -----------
Income (loss) from continuing
operations..................... (3,478,936) 2,152,062 3,214,763 704,472 975,027
Discontinued operations:
Loss from discontinued
operations (net of income
tax benefit of $51,271)..... (115,193) -- -- -- --
Loss on disposition of
discontinued operations (net
of income tax benefit of
$521,951)................... (1,172,694) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net income (loss)................ $(4,766,823) $ 2,152,062 $ 3,214,763 $ 704,472 $ 975,027
=========== =========== =========== =========== ===========
Pro forma net income per share... $ 0.62 $ 0.14 $ 0.19
=========== =========== ===========
Shares used in computing pro
forma net income per share..... 5,164,679 5,164,679 5,166,679
=========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 67
STERIGENICS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOTES
RECEIVABLE
CONVERTIBLE FROM SALE
PREFERRED STOCK COMMON STOCK ADDITIONAL OF COMMON TOTAL
------------------ ------------------ PAID-IN STOCK TO RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EMPLOYEES EARNINGS EQUITY
---------- ------ ---------- ------ ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994......... 1,772,727 $1,773 3,000,120 $3,000 $14,530,307 $(71,600) $15,736,377 $30,199,857
Issuance costs related to Series
C preferred stock............. - - - - (23,440) - - (23,440)
Repurchase of options........... - - (400) - (2,000) 2,000 - -
Income tax benefit from stock
option transactions........... - - - - 132,450 - - 132,450
Net loss........................ - - - - - - (4,766,823) (4,766,823)
--------- ------ --------- ------ ----------- -------- ----------- -----------
Balance at March 31, 1995......... 1,772,727 1,773 2,999,720 3,000 14,637,317 (69,600) 10,969,554 25,542,044
Exercise of options............. - - 56,322 56 89,677 (18,570) - 71,163
Net income...................... - - - - - - 2,152,062 2,152,062
--------- ------ --------- ------ ----------- -------- ----------- -----------
Balance at March 31, 1996......... 1,772,727 1,773 3,056,042 3,056 14,726,994 (88,170) 13,121,616 27,765,269
Net income...................... - - - - - - 3,214,763 3,214,763
--------- ------ --------- ------ ----------- -------- ----------- -----------
Balance at March 31, 1997......... 1,772,727 1,773 3,056,042 3,056 14,726,994 (88,170) 16,336,379 30,980,032
Repayment of notes receivable
(unaudited)................... - - - - - 1,017 - 1,017
Exercise of options
(unaudited)................... - - 270 - 1,323 - - 1,323
Net income (unaudited).......... - - - - - - 975,027 975,027
--------- ------ --------- ------ ----------- -------- ----------- -----------
Balance at June 30, 1997
(unaudited)..................... 1,772,727 $1,773 3,056,312 $3,056 $14,728,317 $(87,153) $17,311,406 $31,957,399
========= ====== ========= ====== =========== ======== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 68
STERIGENICS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
QUARTER ENDED
YEARS ENDED MARCH 31, JUNE 30,
------------------------------------------- --------------------------
1995 1996 1997 1996 1997
------------ ----------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Cash flows from operating activities:
Income (loss) from continuing operations........... $ (3,478,936) $ 2,152,062 $ 3,214,763 $ 704,472 $ 975,027
Income (loss) from discontinued operations......... (1,287,887) -- -- -- --
Reconciliation to net cash provided by operating
activities:
Depreciation and amortization from continuing
operations..................................... 5,879,670 7,575,835 8,271,016 1,915,539 2,311,047
Depreciation and amortization from discontinued
operations..................................... 1,365,044 -- -- -- --
Equity in net loss of joint ventures............. 1,359,983 -- -- -- --
Write-down of investments in joint ventures...... 3,011,022 -- -- -- --
Deferred income tax liability.................... 1,860,341 519,879 833,812 -- --
Deferred income tax asset........................ (1,624,710) 665,678 (149,395) -- --
Changes in assets and liabilities:
Accounts receivable............................ 506,696 28,640 (1,114,874) 8,783 (98,370)
Prepaid expenses and other current assets...... 252,022 (104,348) (241,161) (95,804) 107,235
Accounts payable and accrued liabilities....... 119,515 172,741 1,369,584 555,351 (74,185)
Net assets of discontinued operations.......... 723,276 -- -- 15,206 --
------------ ----------- ------------ ----------- -----------
Net cash provided by operating activities............ 8,686,036 11,010,487 12,183,745 3,103,547 3,220,754
INVESTING ACTIVITIES
Purchases of property, plant and
equipment -- continued operations.................. (16,546,736) (7,207,495) (18,613,378) (2,820,993) (2,952,539)
Purchases of property, plant and
equipment -- discontinued operations............... (2,205) -- -- -- --
Proceeds from sale of property -- continuing
operations......................................... 1,551,744 -- -- -- --
Proceeds from sale of property -- discontinued
operations......................................... 66,008 -- -- -- --
Investments in joint ventures........................ (590,792) -- -- -- --
Proceeds from sale of investment in joint venture.... -- -- 1,249,000 -- --
Other assets......................................... (28,548) (369,076) (1,779,364) (132,759) (258,809)
------------ ----------- ------------ ----------- -----------
Net cash used in investing activities................ (15,550,529) (7,576,571) (19,143,742) (2,953,752) (3,211,348)
FINANCING ACTIVITIES
Issuance costs related to Series C preferred stock... (23,440) -- -- -- --
Exercise of stock options............................ -- 71,163 -- -- 1,323
Borrowings under industrial revenue bonds............ -- 9,000,000 8,750,000 7,750,000 --
Borrowings under term loan and line of credit........ 7,322,726 -- 2,881,619 2,081,619 1,100,400
Repayments on term loan, line of credit, industrial
revenue bonds and capital leases................... (4,706,987) (4,271,103) (12,620,719) (2,064,122) (1,567,439)
Increase in restricted cash.......................... (12,300) (51,713) (40,889) (10,891) (4,851)
------------ ----------- ------------ ----------- -----------
Net cash provided by (used in) financing
activities......................................... 2,579,999 4,748,347 (1,029,989) 7,756,606 (470,567)
------------ ----------- ------------ ----------- -----------
Net increase (decrease) in unrestricted cash and cash
equivalents........................................ (4,284,494) 8,182,263 (7,989,986) 7,906,401 (461,161)
Unrestricted cash and cash equivalents at beginning
of period.......................................... 5,164,559 880,065 9,062,328 9,062,328 1,072,342
------------ ----------- ------------ ----------- -----------
Unrestricted cash and cash equivalents at end of
period............................................. $ 880,065 $ 9,062,328 $ 1,072,342 $16,968,729 $ 611,181
============ =========== ============ =========== ===========
NONCASH FINANCING ACTIVITIES
Assets acquired under capital leases................. $ 7,818,369 $ 2,372,252 $ 2,508,127 $ -- $ --
Income tax benefit from stock options................ $ 132,450 $ -- $ -- $ -- $ --
Notes receivable issued on exercise of stock
options............................................ $ -- $ 18,570 $ -- $ -- $ --
</TABLE>
See accompanying notes.
F-6
<PAGE> 69
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
SteriGenics International, Inc. (the "Company") was incorporated in the
state of California in 1978 to perform contract sterilization services using
Gamma radiation. The Company operates Gamma sterilization facilities in several
states. In addition, the Company also manufactured, sterilized, and marketed
aerosol saline solution for contact lens care (see Note 12). During fiscal 1995,
the Company discontinued its manufacture and sale of aerosol saline solution.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, SteriGenics East Corporation,
SteriGenics International Holding Corporation Inc. and RSI Leasing, Inc.
SteriGenics East Corporation includes three facilities located along the eastern
seaboard of the United States (see Note 13). SteriGenics International Holding
Corporation Inc. holds investments in the Company's joint venture in Taiwan (see
Note 11). RSI Leasing, Inc. leases Cobalt 60 to the Company. All significant
intercompany accounts and transactions have been eliminated.
Interim Financial Statements
In the opinion of management, the unaudited interim financial statements at
June 30, 1997 and for the quarters ended June 1996 and 1997 include all
adjustments, consisting only of normal recurring accruals, necessary to present
fairly the Company's financial position at June 30, 1997, and results of
operations and cash flows for the quarters ended June 30, 1996 and 1997. Results
for the quarter ended June 30, 1997 are not necessarily indicative of the
results to be expected for the entire year.
Use of Estimates in the Preparation of Financial Statements
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 and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates, and such
differences may be material to the financial statements.
Revenue Recognition
Revenue from contract manufacturing is recognized upon the completion of
sterilization. One customer accounted for approximately 13% of net revenue
during fiscal 1995 and 1996. No customer accounted for more than 10% of net
revenue during fiscal 1997.
Advertising Costs
Advertising costs are recorded as an expense when incurred. Advertising
costs were approximately $134,000, $191,000, $243,000 and $82,000 for the years
ended March 31, 1995, 1996 and 1997, and for the quarter ended June 30, 1997,
respectively. The Company does not incur any direct response advertising costs.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity from the date of purchase of three months or less to be cash
equivalents. The Company maintains deposits with banks and invests excess cash
in a money market account. The Company has not experienced any losses on its
investments.
F-7
<PAGE> 70
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
Financial Instruments
The estimated fair values of financial instruments approximate the carrying
values at March 31, 1996 and 1997 and June 30, 1997, using available market
information and appropriate valuation methodologies. The fair value of long-term
debt is estimated using discounted cash flow analysis and the Company's current
incremental borrowing rate.
Risks, Uncertainties, and Significant Concentrations
The Company's trade receivables consist principally of amounts due from its
customers in the sterilization industry. The Company's trade customers are
primarily in the US. Management believes any concentration of credit risk is
substantially alleviated by the Company's credit evaluation and collection
practices. The Company generally requires no collateral. Bad debt experience and
expenses have been insignificant.
The Company's operations are dependent on its ability to obtain Cobalt 60
isotope or an equivalent radioactive material. Cobalt 60 isotope is a controlled
substance, supplied only by a limited number of vendors. If the Company is
unable to obtain adequate supplies of Cobalt 60 isotope at commercially
reasonable terms, its operations may be materially adversely affected.
Long-Lived Assets
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (FAS 121). FAS
121 requires recognition of impairment of long-lived assets in the event the net
book value of such assets exceeds the future undiscounted cash flows
attributable to such assets. FAS 121 is effective for the fiscal years beginning
after December 15, 1995. The adoption of FAS 121 did not have a material impact
on the Company's financial position or results of operations.
Depreciation and Amortization
Cobalt 60 isotope is amortized using an accelerated method (approximately
12.3% of net book value per year) which relates to the natural decay of the
isotope. For all other property, plant, and equipment, depreciation is computed
using the straight-line method over estimated useful lives of three to thirty
years. Amortization is included with depreciation expense in the accompanying
consolidated financial statements.
Construction-In-Progress
From time to time, the Company will build or expand facilities. The cost of
construction of these facilities is reflected as construction-in-progress until
start-up of the facility, at which time the costs are reclassified to the
appropriate fixed asset category.
Stock-Based Compensation
In fiscal 1997, the Company implemented the disclosure requirements of
Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). As permitted under FAS 123, the Company continues to
account for its employee stock option plan in accordance with the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB Opinion No. 25) and will provide pro forma disclosures of net
income and earnings per share as if the fair value basis method prescribed by
FAS 123 had been applied in measuring employee compensation expense (see Note
5).
F-8
<PAGE> 71
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
Net Income (Loss) Per Share
Except as noted below, net income (loss) per share is computed using the
weighted average number of shares of common stock and common equivalent shares,
when dilutive, from convertible preferred stock (using the as-if-converted
method) and from stock options (using the treasury stock method). Pursuant to
the Securities and Exchange Commission Staff Accounting Bulletins, common and
common equivalent shares issued by the Company at prices below the initial
public offering price during the twelve-month period prior to the offering have
been included in the calculation as if they were outstanding for all periods
presented (using the treasury stock method at an assumed initial public offering
price.)
Per share information calculated on the above noted basis is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
YEARS ENDED MARCH 31, JUNE 30,
--------------------------------- ---------------------
1995 1996 1997 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations.............................. $ (1.15) $ 0.43 $ 0.62 $ 0.14 $ 0.19
Loss from discontinued operations......... (0.42) - - - -
---------- ---------- ---------- ---------- ----------
Net income (loss)......................... $ (1.57) $ 0.43 $ 0.62 $ 0.14 $ 0.19
========== ========== ========== ========== ==========
Shares used in computing net income (loss)
per share............................... 3,032,037 5,004,200 5,164,679 5,164,679 5,166,679
========== ========== ========== ========== ==========
</TABLE>
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (FAS 128), which
is required to be adopted on December 31, 1997. At that time, the Company will
be required to change the method currently used to compute earnings per share
and to restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact is not expected to increase primary earnings per share for
the year ended March 31, 1995 but is expected to increase primary earnings per
share for the years ended March 31, 1996 and 1997, and the quarters ended June
30, 1996 and 1997 to $0.70, $1.04, $0.23 and $0.32 per share, respectively. The
impact of FAS 128 on the calculation of fully diluted earnings per share for
these periods is not expected to be material.
Pro Forma Net Income Per Share
Pro forma net income per share has been computed as described above and
also gives effect, even if antidilutive, to common equivalent shares from
convertible preferred stock that will automatically convert upon the closing of
the company's initial public offering (using the as-if-converted method).
F-9
<PAGE> 72
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
2. BALANCE SHEET COMPONENTS
Property, plant and equipment
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
--------------------------- JUNE 30,
1996 1997 1997
------------ ------------ ------------
<S> <C> <C> <C>
Land............................................... $ 1,568,397 $ 1,605,245 $ 1,605,245
Buildings.......................................... 7,340,648 12,091,744 13,563,243
Cobalt 60 isotope.................................. 69,442,173 71,776,948 72,778,731
Furniture and fixtures............................. 2,704,230 3,932,708 4,066,395
Machinery and equipment............................ 18,341,205 24,846,155 24,812,826
Construction-in-progress........................... 6,563,966 9,016,290 9,395,189
------------ ------------ ------------
105,960,619 123,269,090 126,221,629
Accumulated depreciation and amortization.......... 38,530,180 42,938,966 45,225,908
------------ ------------ ------------
$ 67,430,439 $ 80,330,124 $ 80,995,721
============ ============ ============
</TABLE>
Other Assets
Other assets consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
----------------------- JUNE 30,
1996 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
Industrial revenue bond costs (net of
accumulated amortization of $406,000 in
1996, $455,000 in 1997 and $464,000 at
June 30, 1997)......................... $ 459,441 $ 791,477 $ 782,772
Goodwill................................. - 558,769 549,619
Investment in RTI Inc. (see Note 13)..... 236,000 - -
Other.................................... 479,742 1,576,735 1,697,012
---------- ---------- ----------
1,175,183 2,926,981 3,029,403
Less current portion of bond costs....... 29,070 50,700 50,700
---------- ---------- ----------
$1,146,113 $2,876,281 $2,978,703
========== ========== ==========
</TABLE>
Accrued Liabilities
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
----------------------- JUNE 30,
1996 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
Compensation............................. $1,070,563 $1,717,429 $2,167,238
Property tax............................. 778,314 582,960 704,978
Legal and accounting..................... 198,469 418,463 359,189
Sales and other nonincome taxes.......... 2,088,948 1,628,539 1,714,810
Other.................................... 2,168,944 1,749,394 989,648
---------- ---------- ----------
$6,305,238 $6,096,785 $5,935,863
========== ========== ==========
</TABLE>
F-10
<PAGE> 73
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
3. BORROWING ARRANGEMENTS
Long-term debt at March 31 consists of:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Industrial revenue bond, due in March 2005, with
interest at the contract formula rate of 3.6% at
March 31, 1997.................................. $5,250,000 $5,250,000
Industrial revenue bond, due in December 2004,
with interest at the contract formula rate of
3.6% at March 31, 1997.......................... 4,900,000 4,900,000
Industrial revenue bond, due in November 2005,
with interest at the contract formula rate of
3.6% at March 31, 1997.......................... 4,600,000 4,600,000
Industrial revenue bond, due in annual principal
installments of $500,000 beginning in March
1999, with interest at the contract formula rate
of 3.7% at March 31, 1997....................... 9,000,000 9,000,000
Industrial revenue bond, due in annual principal
installments of $430,000 beginning in April
1999, with interest at the contract formula rate
of 3.7% at March 31, 1997....................... - 7,750,000
Industrial revenue bond, due in annual
installments of $250,000 with interest at a
fixed rate of 10.0%............................. - 750,000
Bank term loan, due in monthly installments of
$70,175, with interest at the bank's reference
rate plus 1.0% (9.25% at March 31, 1996)........ 1,052,632 -
Note payable, due in quarterly installments of
$30,442, with interest at 9.50% at March 31,
1996............................................ 306,451 -
Note payable, due in monthly installments of
$147,590, with interest at 9.75% at March 31,
1996............................................ 4,963,617 -
----------- -----------
30,072,700 32,250,000
Less current portion.............................. 2,289,059 250,000
----------- -----------
$27,783,641 $32,000,000
=========== ===========
</TABLE>
As of June 30, 1997 long-term debt outstanding was unchanged from March 31,
1997.
Industrial revenue bonds are collateralized by certain assets of the
Company and by letter of credit agreements with a bank, the majority of which
are guaranteed by the Chairman of the Board of Directors (who is also a
stockholder). The Company is required under certain industrial revenue bond
agreements to maintain cash reserves in the amount of the bond interest payments
due within one year. At March 31, 1996 and 1997, and June 30, 1997, there were
approximately $844,000, $885,000 and $890,000 recorded as restricted cash
associated with the outstanding industrial revenue bonds, respectively.
The Company has a $3,500,000 revolving line of credit with a bank, payable
on demand, with a variable interest rate of 8.5% at June 30, 1997,
collateralized by certain assets of the Company. At March 31 and June 30, 1997
$0 and $400,400 were outstanding under this line of credit, respectively.
Notes payable are collateralized by the Cobalt 60 isotope to which they
relate. Certain of the notes payable by the Company contain covenants pertaining
to profitability levels and certain other financial ratios. These notes were
voluntarily paid off during fiscal 1997.
F-11
<PAGE> 74
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
The bank term loan is subject to provisions that place restrictions on
fixed asset expenditures and require maintenance of specified net worth levels
and financial statement ratios. This loan was voluntarily paid off during fiscal
1997.
Payments of principal due on long-term debt for the five-year period from
March 31, 1997 are:
<TABLE>
<S> <C>
1998.......................................... $ 250,000
1999.......................................... 750,000
2000.......................................... 1,180,000
2001.......................................... 930,000
2002.......................................... 930,000
Thereafter.................................... 28,210,000
-----------
Total......................................... $32,250,000
===========
</TABLE>
Cash payments for interest in fiscal 1995, 1996 and 1997 and the quarter
ended June 30, 1997 were approximately $1,395,000, $996,000, $1,875,000 and
$511,000, respectively.
4. REDEEMABLE PREFERRED STOCK
Series A redeemable preferred stock is not convertible and has no voting
rights. Dividends may be declared at the discretion of the Board of Directors
and are noncumulative. In any fiscal year, dividends of $10.00 per share for
Series A preferred stock must be paid before any dividends on common stock. In
the event of liquidation, Series A stockholders are entitled to receive $100.00
per share plus all declared but unpaid dividends prior to any distribution to
the common stockholders. In the event of a merger or other reorganization, the
Series A preferred stock will be redeemed at $100.00 per share.
5. STOCKHOLDERS' EQUITY
Convertible Preferred Stock
Each share of Series B preferred stock is convertible into one share of the
Company's common stock, has voting rights, has a liquidation preference of $5.00
per share, is subordinate to the Series A preferred stock, and permits
noncumulative dividends to be declared at the discretion of the Board of
Directors. In any fiscal year, dividends of $0.50 per share for Series B
preferred stock must be paid before any dividends on common stock.
Each share of Series C preferred stock is convertible into one share of the
Company's common stock, has voting rights, has a liquidation preference of
$11.00 per share, is subordinate to the Series A and B preferred stock, and
permits noncumulative dividends to be declared at the discretion of the Board of
Directors. In any fiscal year, dividends of $1.10 per share for Series C
preferred stock must be paid before any dividends on common stock.
No dividends have been declared to date by the Board of Directors on any of
the outstanding preferred stock.
F-12
<PAGE> 75
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
Stock Option Plans
Under the 1985 Incentive Stock Option Plan and the Second Amended and
Restated 1986 Stock Option Plans the Board of Directors may grant options to key
employees to purchase up to 1,210,000 shares of common stock at not less than
fair value on the date of grant, as determined by the Board of Directors. The
options generally vest with respect to 24% of the shares one year after the
options grant date and with respect to 2% of the shares on a monthly basis for
the next 38 months. The option term is ten years, and options expire at the end
of the term.
Activity under the option plans was as follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
---------------------------
WEIGHTED
NUMBER AVERAGE PRICE
OF SHARES PER SHARE
--------- -------------
<S> <C> <C>
Balance at March 31, 1994............................ 591,458 $5.36
Granted............................................ 99,064 $9.15
Exercised.......................................... - $ -
Canceled........................................... (27,725) $7.81
-------
Balance at March 31, 1995............................ 662,797 $5.82
Granted............................................ 253,764 $4.90
Exercised.......................................... (56,322) $1.59
Canceled........................................... (221,314) $8.27
-------
Balance at March 31, 1996............................ 638,925 $4.98
Granted............................................ 97,000 $5.64
Exercised.......................................... - $ -
Canceled........................................... (33,000) $4.91
-------
Balance at March 31, 1997............................ 702,925 $5.07
Granted............................................ 5,500 $8.50
Exercised.......................................... (270) $4.90
Canceled........................................... (1,605) $4.94
-------
Balance at June 30, 1997............................. 706,550 $5.10
=======
</TABLE>
During fiscal 1996, the Company offered all optionees the right to amend
the terms of their outstanding options to lower the exercise price to the then
fair value of $4.90 per share, and to reset the vesting schedule. Included above
are options to purchase 172,564 shares of common stock canceled and regranted
during fiscal 1996 with the amended terms.
F-13
<PAGE> 76
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
At March 31, 1997, options outstanding under the stock option plans were as
follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -----------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- --------------------------------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$4.90-$5.00............................ 658,925 5.37 $ 4.96 477,014 $ 4.98
$6.18-$7.00............................ 44,000 8.19 6.81 10,000 6.18
------- ---- ----- ------- -----
702,925 5.54 $ 5.07 487,014 $ 5.01
======= ==== ===== ======= =====
</TABLE>
At March 31, 1996, options to purchase 433,095 shares of common stock were
exercisable at an average exercise price of $5.02 per share. At March 31, 1997
314,841 shares were available for future grant under the plans.
The Company has elected to follow APB Opinion No. 25 and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123), requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB Opinion No. 25,
when the exercise price of the Company's employee stock options equals the fair
value of the underlying stock on the date of grant, no compensation expense is
recognized.
Pro forma information regarding net income and earnings per share is
required by FAS 123 and has been determined as if the Company had accounted for
its employee stock options under the fair value method of FAS 123 using the
following weighted average assumptions for the years ended March 31:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Risk-free interest rate(%)..................................... 5.91 6.37
Dividend yield................................................. - -
Expected option life (years)................................... 3.57 3.57
</TABLE>
The Minimum Value option valuation method may be used by nonpublic
companies to value an award. In addition, option valuation models require the
input of highly subjective assumptions, including the expected option life.
Because the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in 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.
Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of FAS 123, the Company's net income and net
income per share would have been decreased to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Pro forma net income................................ $2,076,193 $3,139,858
Pro forma net income per share...................... $0.41 $0.61
</TABLE>
The weighted average fair value of options granted in fiscal 1996 and 1997
was $0.90 and $1.10 per share, respectively.
F-14
<PAGE> 77
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
Because FAS 123 is applicable only to options granted subsequent to March
31, 1995, its pro forma effect will not be fully reflected until the year ending
March 31, 2000.
Notes Receivable From Sale of Common Stock to Employees
At March 31, 1997, the Company had notes receivable in the amount of
$88,170 arising from the sale of common stock to employees. Such notes bear
interest at 7% to 9%, are collateralized by the related stock of the Company and
are due between April 1998 and August 2000.
6. TAXES ON INCOME
The provision for income taxes for the years ended March 31 consists of the
following:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Federal:
Current.............................. $ 602,000 $(419,606) $1,276,373
Deferred............................. 538,000 1,717,191 614,517
---------- ---------- ----------
1,140,000 1,297,585 1,890,890
State:
Current.............................. 4,000 334,236 138,274
Deferred............................. 41,000 (183,933) 69,901
---------- ---------- ----------
45,000 150,303 208,175
---------- ---------- ----------
$1,185,000 $1,447,888 $2,099,065
========== ========== ==========
</TABLE>
The total provision for income taxes differs from the amount computed by
applying the statutory federal income tax to income before taxes as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Expected provision at 34%.............. $(317,000) $1,223,983 $1,806,702
State taxes, net of federal benefit.... 30,000 99,200 137,395
Foreign joint venture losses........... 1,338,000 - -
Other.................................. 134,000 124,705 154,968
---------- ---------- ----------
$1,185,000 $1,447,888 $2,099,065
========== ========== ==========
</TABLE>
The provision for income taxes for the quarters ended June 30, 1996 and
1997 is based upon the Company's estimated annual effective tax rate for fiscal
1997 and 1998, respectively.
F-15
<PAGE> 78
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Significant components of
deferred tax assets and liabilities at March 31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Deferred tax assets:
Tax credit and loss carryforward................ $1,857,029 $2,530,896
Reserves and accruals........................... 1,461,013 1,626,070
Other........................................... 619,152 198,077
---------- ----------
Total deferred tax assets......................... 3,937,194 4,355,043
Deferred tax liabilities:
Depreciation.................................... 11,504,083 12,564,094
Other........................................... 48,669 90,923
---------- ----------
Total deferred tax liabilities.................... 11,552,752 12,655,017
---------- ----------
Net deferred tax liabilities...................... $7,615,558 $8,299,974
========== ==========
</TABLE>
Management has concluded that a valuation allowance against the deferred
tax assets is not required based on its assessment that current levels of
taxable income will be sufficient to realize the related tax benefits.
At March 31, 1997, the Company had federal and state alternative minimum
tax credit carryforwards of approximately $2,326,000 and $136,000, respectively,
which do not expire, and other carryforwards of approximately $173,000 expiring
in fiscal 2004. Utilization of the carryforwards may be subject to a substantial
annual limitation due to the ownership change limitations provided by the
Internal Revenue Code of 1986 and similar state provisions.
Cash payments made for income taxes during fiscal 1995, 1996 and 1997 were
$942,000, $11,000 and $805,000, respectively.
7. EMPLOYEE BENEFIT PLAN
Effective February 1, 1990, the Company established a defined contribution
retirement plan with 401(k) plan features. The plan covers all employees, age 21
or older, with at least six months of service. Employees may make contributions
by a percentage reduction in their salaries of up to a statutory limit of $9,500
per year for calendar 1996. Company contributions consist of matching funds
equal to 50% of the first 5% of employee eligible earnings contributed as well
as discretionary profit sharing amounts. Effective April 1, 1996, the Company
increased the matching contribution percentage from 25% to 50%. Company
contributions were $38,000, $44,000, $122,000 and $39,000 for fiscal 1995, 1996
and 1997 and for the quarter ended June 30, 1997, respectively.
F-16
<PAGE> 79
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
8. COMMITMENTS AND CONTINGENCIES
The Company leases a portion of its Cobalt 60 isotope under capital leases
having terms of 15 years. Assets acquired by the Company under such lease
arrangements are included on the consolidated balance sheet as follows:
<TABLE>
<CAPTION>
MARCH 31,
--------------------------- JUNE 30,
1996 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cobalt 60 isotope, at cost.......................... $13,928,361 $16,389,051 $16,389,051
Less accumulated amortization....................... 2,426,047 3,995,319 4,387,876
----------- ----------- -----------
$11,502,314 $12,393,732 $12,001,175
=========== =========== ===========
</TABLE>
The Company leases certain facilities and a portion of its Cobalt 60
isotope under noncancelable operating leases. At March 31, 1997, future minimum
lease payments under operating leases and capital leases are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
----------- ----------
<S> <C> <C>
1998............................................... $ 3,403,294 $1,851,748
1999............................................... 3,069,705 1,747,293
2000............................................... 1,437,627 1,156,281
2001............................................... 673,011 709,464
2002............................................... 316,343 593,620
Thereafter......................................... 1,185,799 866,320
----------- ----------
Total payments..................................... 10,085,779 $6,924,726
==========
Less amount representing interest.................. 793,700
-----------
Present value of minimum lease payments............ 9,292,079
Less current portion............................... 3,152,394
-----------
$ 6,139,685
===========
</TABLE>
In conjunction with the RTI Inc. Asset Acquisition Agreement (see Note 13)
the Company leases a facility in Rockaway, New Jersey and is required by the New
Jersey Department of Environmental Protection (NJDEP) to maintain a standby
letter of credit in the amount of $500,000, contingent upon the continued
environmental clean up efforts required of the property owners, RTI Inc. The
required amount of the letter of credit decreases over the life of the building
lease, and/or as the NJDEP deems required.
Additionally, RTI Inc. has the option to require the Company to purchase
the Rockaway land and buildings on the sixth anniversary of the lease
commencement date for a purchase price equal to $138,376. RTI Inc. may only
exercise the option upon receipt of proof that environmental remediation of the
property was complete to the extent that the Company would not have any material
liability for further environmental remediation and the property has been
removed from the national priorities list.
9. LITIGATION
In June 1988, management became aware that dissolved cesium 137 ("cesium")
was present in the containment pool at the Company's Decatur, Georgia
sterilization facility. As a result, the plant was closed and cesium removal and
cleanup procedures began. Since fiscal 1989, all of the Company's operations
have
F-17
<PAGE> 80
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
used Cobalt 60 isotope which management believes, due to its physical
properties, cannot cause the type of contamination experienced with cesium.
In 1991, the Company filed a suit against the U.S. Government seeking, as
amended, $280,000,000 for damages, including loss of future earnings, loss of
market value upon the sale of the Decatur facility, plant burial costs, cleanup
costs, and out-of-pocket expenses. In 1993, the government filed a counterclaim
against the Company seeking $105,000,000 for negligence, cost of cleanup,
recovery, testing of the cesium capsules, and for storage, collection, and
transportation of the capsules to the Department of Energy facilities. On
January 10, 1995, the government's counterclaim was reduced to $18,906,754 due
to the government's inability to produce documentation supporting an amount of
$105,000,000. On May 23, 1995, both of these suits were dismissed; however, both
parties filed notice of appeal. The Company's claim and the counterclaim filed
by the government went to mediation under the direction of a circuit court
mediator, and a settlement agreement was reached among the parties to this
litigation on April 9, 1997. The presiding court entered a stipulation of
dismissal effective May 9, 1997.
In the normal course of the Company's operations, it is subject to various
claims and litigation, the outcomes of which, in the opinion of management, will
not have a material adverse effect on the Company's financial position or
results of operations.
10. TRANSACTIONS WITH RELATED PARTIES AND MINORITY STOCKHOLDERS
The Company rents two sterilization facilities from its chairman on a month
to month basis (see Note 14. Subsequent Events). Rent expense attributable to
these related party leases was approximately $472,000 in each of the fiscal
years ended March 31, 1995, 1996 and 1997, as compared to total rent expense of
$1,131,000, $1,246,000 and $1,318,000 for fiscal 1995, 1996 and 1997,
respectively. Rent expense attributable to these related party leases was
$112,000 for the quarter ended June 30, 1997 compared to total rent expense of
$304,000 during this period. The Company also leases one facility and its
corporate offices from a publicly traded real estate investment trust of which
its chairman is a minority shareholder, but neither a director nor an officer.
Included in costs and expenses are approximately $1,414,000, $1,189,000,
$2,116,000 and $111,000 for fiscal 1995, 1996 and 1997 and for the quarter ended
June 30, 1997, respectively, relating to payments to a minority stockholder for
administrative, maintenance and engineering services.
11. INVESTMENTS IN JOINT VENTURES
Through the end of calendar 1994, the Company had invested approximately
$4,724,000 for 35% of the common stock of China Biotech Corporation (formerly
China Nuclear Corporation), a sterilization facility in Taiwan. This investment
was accounted for under the equity method. In fiscal 1995, the Company
determined that the carrying value of this investment would not be realized
through future cash flows. Accordingly, the Company recorded a write-down of the
carrying value of $2,150,000 in that year. Losses recognized by the Company on
the Taiwan joint venture amounted to $798,999, $0 and $0 in fiscal 1995, 1996
and 1997, respectively. During 1996 and 1997, although China Biotech generated
losses, the Company did not record its share of these losses as the carrying
value of its investment continued to be less than its share of the net assets of
China Biotech. In January 1997, the Company sold the majority of its holdings in
China Biotech for $1,249,000. No gain or loss was recorded related to this
transaction. Management fees recognized by the Company for services provided to
the Taiwan joint venture amounted to approximately $61,000, $19,000 and $0 in
fiscal 1995, 1996 and 1997, respectively.
At March 31, 1995, the Company had invested approximately $1,821,000 for
35% of the common stock of PT Perkasa SteriGenics, a sterilization facility in
Indonesia. This investment was accounted for under the equity method. Losses
recognized by the Company on the Indonesian joint venture amounted to $560,984
in
F-18
<PAGE> 81
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
fiscal 1995. During fiscal 1995, the Company decided to withdraw from its
investment in PT Perkasa SteriGenics and, accordingly, wrote off the remaining
carrying value of its investment (approximately $860,000) to reflect what it
believed to be a total and permanent impairment in the value of the asset.
12. DISCONTINUED OPERATIONS-AEROSOL BUSINESS
In August 1994, the Company sold its aerosol business to a competitor for
cash and future consideration and recorded a loss of $1,172,694 (net of tax
benefit of $521,951) during fiscal 1995 associated with the sale of the aerosol
business.
13. RTI INC. ASSET ACQUISITION AGREEMENT
On February 26, 1996, the Company, through its subsidiary SteriGenics East
Corporation, entered into an agreement to acquire certain assets and liabilities
of RTI Inc., a New York corporation and its subsidiaries that operated three
irradiation facilities along the eastern seaboard of the US. At March 31, 1996,
the Company had an initial investment of $236,000 in RTI Inc. The acquisition
was finalized in August 1996 with a net purchase price of approximately
$4,872,000 and was accounted for as a purchase. The initial investment was
applied toward the purchase price upon completion of the acquisition. The
consolidated statements of operations include the results of operations of RTI
Inc. subsequent to the acquisition date. The Company recorded approximately
$580,000 of goodwill which is being amortized over a fifteen-year period.
Accumulated amortization of goodwill is approximately $21,000 at March 31, 1997.
The following unaudited pro forma summary represents the Company's
consolidated results of operations for the two years ended March 31, 1997 as if
the acquisition of RTI Inc. had occurred at the beginning of the periods
presented and does not purport to be indicative of what would have occurred had
the acquisitions been made as of those dates or the results which may occur in
the future.
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Pro forma net revenues............................ $34,592,867 $39,980,890
Pro forma net income.............................. 1,627,419 3,147,568
Pro forma income per share........................ 0.33 0.61
</TABLE>
14. SUBSEQUENT EVENTS
In June 1997, the Company entered into operating leases with its chairman
on the two sterilization facilities previously rented on a month to month
basis. The leases expire in June 2002.
On June 23, 1997, the Board of Directors approved the following actions:
- The filing of a registration statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock to
the public. If the offering contemplated by this Prospectus is
consummated, all of the convertible Preferred Stock outstanding as of the
closing date will automatically be converted into an aggregate of
approximately 1,773,000 shares of common stock based on the shares of
convertible preferred stock outstanding at March 31, 1997. Unaudited pro
forma stockholders' equity at March 31, 1997, as adjusted for the
conversion of preferred stock, is disclosed on the consolidated balance
sheet.
- The adoption of the 1997 Equity Incentive Plan, subject to stockholder
approval, under which a total of 1,200,000 shares of the Company's
authorized but unissued common stock has been reserved for issuance
thereunder.
F-19
<PAGE> 82
STERIGENICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND
1997 IS UNAUDITED)
- The adoption of the 1997 Employee Stock Purchase Plan, subject to
stockholder approval, under which a total of 400,000 shares of the
Company's authorized but unissued common stock has been reserved for
issuance thereunder.
- The reincorporation of the Company in the State of Delaware, subject to
stockholder approval.
- The redemption of the Series A Redeemable Preferred Stock.
F-20
<PAGE> 83
Appendix--Description of Graphics
Inside Front Cover--Pictures of Miscellaneous Disposable Medical Products
Inside Front Cover--Pictures of Miscellaneous herbs and spices and other
non-medical products
Inside Back Cover--Picture of the Company's Schaumburg, Illinois facility
Inside Back Cover--Picture of a MiniCell irradiator
Inside Back Cover--Picture of a Mega Loading System
<PAGE> 84
============================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................... 3
Risk Factors................................ 6
Use of Proceeds............................. 18
Dividend Policy............................. 18
Capitalization.............................. 19
Dilution.................................... 20
Selected Consolidated Financial Data........ 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 22
Business.................................... 29
Management.................................. 46
Certain Transactions........................ 52
Principal and Selling Stockholders.......... 53
Description of Capital Stock................ 55
Shares Eligible for Future Sale............. 57
Underwriting................................ 59
Legal Matters............................... 61
Experts..................................... 61
Additional Information...................... 61
Index to Consolidated Financial
Statements................................ F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
============================================================
============================================================
2,000,000 SHARES
LOGO
COMMON STOCK
------------------------
PROSPECTUS
------------------------
PAINEWEBBER INCORPORATED
PIPER JAFFRAY INC.
WHEAT FIRST BUTCHER SINGER
------------------------
, 1997
============================================================
<PAGE> 85
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 9,758
NASD filing fee................................................... 3,720
Nasdaq National Market listing fee................................ 50,000
Printing and engraving expenses................................... 150,000
Legal fees and expenses........................................... 350,000
Accounting fees and expenses...................................... 200,000
Blue sky fees and expenses........................................ 11,000
Transfer agent fees............................................... 5,000
Miscellaneous fees and expenses................................... 70,522
--------
Total................................................... $850,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article VII, Section 6, of the Registrant's
Bylaws provides for mandatory indemnification of its directors and officers and
permissible indemnification of employees and other agents to the maximum extent
permitted by the Delaware General Corporation Law. The Registrant's Certificate
of Incorporation provides that, pursuant to Delaware law, its directors shall
not be liable for monetary damages for breach of the directors' fiduciary duty
as directors to the Registrant and its stockholders. This provision in the
Certificate of Incorporation does not eliminate the directors' fiduciary duty,
and in appropriate circumstances equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws. The Registrant has entered into
Indemnification Agreements with its officers and directors, a form of which is
attached as Exhibit 10.1 hereto and incorporated herein by reference. The
Indemnification Agreements provide the Registrant's officers and directors with
further indemnification to the maximum extent permitted by the Delaware General
Corporation Law. Reference is made to Section 6 of the Underwriting Agreement
contained in Exhibit 1.1 hereto, indemnifying officers and directors of the
Registrant against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since April 1, 1994, the Registrant has issued and sold the following
unregistered securities:
1. The Registrant has issued and sold 54,822 and 1,720 shares
(assuming no exercise of stock options after June 30, 1997) of its Common
Stock to employees pursuant to exercises under its 1985 Incentive Stock
Option Plan and Second Amended and Restated 1986 Stock Option Plan,
respectively.
II-1
<PAGE> 86
2. The Registrant has granted options to purchase an aggregate of
455,328 shares of Common Stock to employees under its Second Amended and
Restated 1986 Stock Option Plan.
The issuances of the securities set forth above were deemed to be
exempt from registration under the Securities Act in reliance upon Rule 701
promulgated thereunder.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- --------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement (preliminary form).
3.1++ Certificate of Incorporation of the Registrant, as amended to date.
3.2++ Form of Restated Certificate of Incorporation to be filed upon the closing of
the offering made pursuant to this Registration Statement.
3.3 Bylaws of the Registrant.
4.1 Reference is made to Exhibits 3.1, 3.2 and 3.3.
4.2* Specimen Common Stock certificate.
4.3++ Investors' Rights Agreement, dated September 20, 1993 among the Registrant and
the investors and the founders named therein.
5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP.
10.1++ Form of Indemnification Agreement.
10.2++ Second Amended and Restated 1986 Stock Option Plan.
10.3++ 1997 Equity Incentive Plan.
10.4++ 1997 Employee Stock Purchase Plan.
10.5++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond Series 1985A ($2,150,000) -- Loan Agreement.
10.6++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond Series 1985B ($2,450,000) -- Loan Agreement.
10.7++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond Series 1985A ($2,150,000) -- Trust Indenture Agreement.
10.8++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond Series 1985B ($2,450,000) -- Trust Indenture Agreement.
10.9++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond -- Bond Purchase Agreement.
10.10++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond Series 1985A ($2,150,000) -- Reimbursement Agreement.
10.11++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond Series 1985B ($2,450,000) -- Reimbursement Agreement.
10.12++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond Series 1985A ($2,150,000) -- Letter of Credit.
10.13++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond Series 1985B ($2,450,000) -- Letter of Credit.
10.14++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond Series 1985A ($2,150,000) -- Intercreditor Agreement.
10.15++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond Series 1985B ($2,450,000) -- Intercreditor Agreement.
</TABLE>
II-2
<PAGE> 87
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- --------------------------------------------------------------------------------
<S> <C>
10.16++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond Series 1985A ($2,150,000) -- Pledge and Security
Agreement.
10.17++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond Series 1985B ($2,450,000) -- Pledge and Security
Agreement.
10.18++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond -- General Continuing Guarantee.
10.19++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond -- Company Security Agreement.
10.20++ Trinity River Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bond -- Guaranty Security Agreement.
10.21++ County of Delaware, Ohio Variable Rate Demand Industrial Development Revenue
Bonds ($4,900,000) -- Loan Agreement.
10.22++ County of Delaware, Ohio Variable Rate Demand Industrial Development Revenue
Bonds ($4,900,000) -- Trust Agreement.
10.23++ County of Delaware, Ohio Variable Rate Demand Industrial Development Revenue
Bonds ($4,900,000) -- Letter of Credit Agreement.
10.24++ County of Delaware, Ohio Variable Rate Demand Industrial Development Revenue
Bonds ($4,900,000) -- General Continuing Guaranty.
10.25++ County of Delaware, Ohio Variable Rate Demand Industrial Development Revenue
Bonds ($4,900,000) -- Pledge and Security Agreement.
10.26++ County of Delaware, Ohio Variable Rate Demand Industrial Development Revenue
Bonds ($4,900,000) -- Bond Purchase Agreement.
10.27++ Mecklenburg County Industrial Facilities and Pollution Control Financing
Authority Industrial Development Revenue Bonds Series 1996
($9,000,000) -- Indenture of Trust.
10.28++ Mecklenburg County Industrial Facilities and Pollution Control Financing
Authority Industrial Development Revenue Bonds Series 1996 ($9,000,000) -- Loan
Agreement.
10.29++ Mecklenburg County Industrial Facilities and Pollution Control Financing
Authority Industrial Development Revenue Bonds Series 1996
($9,000,000) -- Reimbursement Agreement.
10.30++ Mecklenburg County Industrial Facilities and Pollution Control Financing
Authority Industrial Development Revenue Bonds Series 1996
($9,000,000) -- Letter of Credit Agreement.
10.31++ Mecklenburg County Industrial Facilities and Pollution Control Financing
Authority Industrial Development Revenue Bonds Series 1996
($9,000,000) -- Pledge and Security Agreement.
10.33++ Development Authority of DeKalb County Variable Rate Demand Industrial
Development Revenue Bonds, Series 1985 ($5,250,000) -- Bond Purchase Agreement.
10.34++ Development Authority of DeKalb County Variable Rate Demand Industrial
Development Revenue Bonds, Series 1985 ($5,250,000) -- Loan Agreement.
10.35++ Development Authority of DeKalb County Variable Rate Demand Industrial
Development Revenue Bonds, Series 1985 ($5,250,000) -- Trust Indenture.
10.36++ Development Authority of DeKalb County Variable Rate Demand Industrial
Development Revenue Bonds, Series 1985 ($5,250,000) -- Letter of Credit
Agreement.
10.37++ Development Authority of DeKalb County Variable Rate Demand Industrial
Development Revenue Bonds, Series 1985 ($5,250,000) -- Pledge and Security
Agreement.
</TABLE>
II-3
<PAGE> 88
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- --------------------------------------------------------------------------------
<S> <C>
10.38++ Development Authority of DeKalb County Variable Rate Demand Industrial
Development Revenue Bonds, Series 1985 ($5,250,000) -- Letter of Credit.
10.39++ Development Authority of DeKalb County Variable Rate Demand Industrial
Development Revenue Bonds, Series 1985 ($5,250,000) -- Security Agreement.
10.40++ Development Authority of DeKalb County Variable Rate Demand Industrial
Development Revenue Bonds, Series 1985 ($5,250,000) -- Agreement Re: Letter of
Credit and Assignment of Collateral.
10.41++ Village of Gurnee, Illinois Industrial Development Revenue Bonds, Series 1996
($7,750,000) -- Loan Agreement.
10.42++ Village of Gurnee, Illinois Industrial Development Revenue Bonds, Series 1996
($7,750,000) -- Indenture of Trust.
10.43++ Village of Gurnee, Illinois Industrial Development Revenue Bonds, Series 1996
($7,750,000) -- Reimbursement Agreement.
10.44 Village of Gurnee, Illinois Industrial Development Revenue Bonds, Series 1996
($7,750,000) -- Letter of Credit.
10.45 Village of Gurnee, Illinois Industrial Development Revenue Bonds, Series 1996
($7,750,000) -- Intercreditor Agreement.
10.46++ Village of Gurnee, Illinois Industrial Development Revenue Bonds, Series 1996
($7,750,000) -- Pledge and Security Agreement.
10.47++ Village of Gurnee, Illinois Industrial Development Revenue Bonds, Series 1996
($7,750,000) -- Placement and Remarketing Agreement.
10.48 City of Salem Municipal Port Authority, Port Development Revenue Bonds, Series
of 1984 ($2,500,000) -- Bond Purchase Agreement.
10.50++ City of Salem Municipal Port Authority, Port Development Revenue Bonds, Series
of 1984 ($2,500,000) -- Letter of Credit Agreement.
10.51++ City of Salem Municipal Port Authority, Port Development Revenue Bonds, Series
of 1984 ($2,500,000) -- Pledge and Security Agreement.
10.53++ City of Salem Municipal Port Authority, Port Development Revenue Bonds, Series
of 1984 ($2,500,000) -- Trust Indenture.
10.54++ City of Salem Municipal Port Authority, Port Development Revenue Bonds, Series
of 1984 ($2,500,000) -- Sublease and Security Agreement.
10.55++ City of Salem Municipal Port Authority, Port Development Revenue Bonds, Series
of 1984 ($2,500,000) -- Irrevocable Letter of Credit.
10.56 Facility lease dated February 8, 1993 between SCI Lt. Partnership and the
Registrant for the Fremont corporate facility.
10.57 Facility lease dated June 25, 1997 between Charles King & Associates and the
Registrant for the Tustin facility.
10.58 Facility lease dated June 25, 1997 between Charles King & Associates and the
Registrant for the Schaumburg facility.
10.59 Facility lease dated December 2, 1991 between Galloway Industrial Properties and
the Registrant for the Westerville warehouse facility.
10.60++ Facility lease dated February 8, 1993 between Aetna Investment Group and the
Registrant for the Corona facility.
10.61 Facility lease dated August 16, 1996 between SCI Ltd. Partnership and the
Registrant for the Hayward facility.
</TABLE>
II-4
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- --------------------------------------------------------------------------------
<S> <C>
10.62 Facility lease dated August 8, 1996 between RTI Inc. and the Registrant for the
Rockaway facility.
10.63 Asset Acquisition Agreement between RTI Inc. and the Registrant effective as of
August 8, 1996.
11.1++ Computation of Earnings Per Share.
21.1++ Subsidiaries of the Registrant.
23.1++ Consent of Ernst & Young LLP, Independent Auditors (see page II-8).
23.2 Consent of Counsel. Reference is made to Exhibit 5.1.
24.1++ Power of Attorney (see page II-7).
27.1++ Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment
++ Previously Filed
(B) FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts (see page S-2)
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
consolidated financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
The 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.
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 Delaware General Corporation Law, the Certificate of
Incorporation or the Bylaws of the Registrant, the Underwriting Agreement, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange 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 hereunder, 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 of 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.
The 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 a
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.
II-5
<PAGE> 90
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 Fremont, State of California, on this 18th day of July 1997.
STERIGENICS INTERNATIONAL, INC.
By: /s/ EDWARD M. MILLER, JR.
------------------------------------
Edward M. Miller, Jr.
Vice President of Finance
POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<C> <S> <C>
/s/ JAMES F. CLOUSER* President, Chief Executive July 18, 1997
- --------------------------------------------- Officer (Principal Executive
James F. Clouser Officer) and Director
/s/ EDWARD M. MILLER, JR. Vice President of Finance July 18, 1997
- --------------------------------------------- (Principal Financial and
Edward M. Miller, Jr. Accounting Officer)
/s/ CHARLES W. KING, JR.* Chairman of the Board July 18, 1997
- ---------------------------------------------
Charles W. King, Jr.
/s/ WALTER G. KORTSCHAK* Director July 18, 1997
- ---------------------------------------------
Walter G. Kortschak
/s/ THOMAS F. STEPHENSON* Director July 18, 1997
- ---------------------------------------------
Thomas F. Stephenson
*By: /s/ EDWARD M. MILLER, JR.
- ---------------------------------------------
Edward M. Miller, Jr.
Attorney-in Fact
</TABLE>
II-6
<PAGE> 91
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the consolidated financial statements of SteriGenics
International, Inc. as of March 31, 1996 and 1997, and for each of the three
years in the period ended March 31, 1997, and have issued our report thereon
dated May 9, 1997 (except Note 14 as to which the date is , 1997)
(included elsewhere in this Registration Statement). Our audits also included
the financial statement schedule listed in Item 16(b) of this Registration
Statement. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, information required to be included
therein.
ERNST & YOUNG LLP
San Jose, California
, 1997
- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon the completion of
certain events as described in Note 14 to the consolidated financial statements.
/s/ Ernst & Young LLP
San Jose, California
July 23, 1997
S-1
<PAGE> 92
STERIGENICS INTERNATIONAL, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
MARCH 31, 1997
<TABLE>
<CAPTION>
ADDITIONS
----------------------
BALANCE AT CHARGED TO CHARGE TO BALANCE AT
BEGINNING COSTS AND OTHER END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS(1) OF PERIOD
- ------------------------------------------- ---------- ---------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1997 deducted from
asset account:
Allowance for doubtful accounts............ $242 $ -- $ 23 $ (12) $253
---- ---- ---- ---- ----
Year ended March 31, 1996 deducted from
asset account:
Allowance for doubtful accounts............ $ 50 $ -- $ 192 $ -- $242
---- ---- ---- ---- ----
Year ended March 31, 1995 deducted from
asset account:
Allowance for doubtful accounts............ $ 30 $ -- $ 26 $ (6) $ 50
---- ---- ---- ---- ----
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of recoveries.
S-2
<PAGE> 93
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
------- --------------------------------------------------------------------
<S> <C> <C>
1.1* Form of Underwriting Agreement (preliminary form).
3.1++ Certificate of Incorporation of the Registrant, as amended to date.
3.2++ Form of Restated Certificate of Incorporation to be filed upon the
closing of the offering made pursuant to this Registration
Statement.
3.3 Bylaws of the Registrant.
4.1 Reference is made to Exhibits 3.1, 3.2 and 3.3.
4.2* Specimen Common Stock certificate.
4.3++ Investors' Rights Agreement, dated September 20, 1993 among the
Registrant and the investors and the founders named therein.
5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP.
10.1++ Form of Indemnification Agreement.
10.2++ Second Amended and Restated 1986 Stock Option Plan.
10.3++ 1997 Equity Incentive Plan.
10.4++ 1997 Employee Stock Purchase Plan.
10.5++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond Series 1985A
($2,150,000) -- Loan Agreement.
10.6++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond Series 1985B
($2,450,000) -- Loan Agreement.
10.7++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond Series 1985A
($2,150,000) -- Trust Indenture Agreement.
10.8++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond Series 1985B
($2,450,000) -- Trust Indenture Agreement.
10.9++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond -- Bond Purchase Agreement.
10.10++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond Series 1985A ($2,150,000) --
Reimbursement Agreement.
10.11++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond Series 1985B ($2,450,000) --
Reimbursement Agreement.
10.12++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond Series 1985A
($2,150,000) -- Letter of Credit.
10.13++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond Series 1985B
($2,450,000) -- Letter of Credit.
10.14++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond Series 1985A ($2,150,000) --
Intercreditor Agreement.
</TABLE>
<PAGE> 94
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
------- --------------------------------------------------------------------
<S> <C> <C>
10.15++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond Series 1985B ($2,450,000) --
Intercreditor Agreement.
10.16++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond Series 1985A
($2,150,000) -- Pledge and Security Agreement.
10.17++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond Series 1985B
($2,450,000) -- Pledge and Security Agreement.
10.18++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond -- General Continuing Guarantee.
10.19++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond -- Company Security Agreement.
10.20++ Trinity River Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bond -- Guaranty Security Agreement.
10.21++ County of Delaware, Ohio Variable Rate Demand Industrial Development
Revenue Bonds ($4,900,000) -- Loan Agreement.
10.22++ County of Delaware, Ohio Variable Rate Demand Industrial Development
Revenue Bonds ($4,900,000) -- Trust Agreement.
10.23++ County of Delaware, Ohio Variable Rate Demand Industrial Development
Revenue Bonds ($4,900,000) -- Letter of Credit Agreement.
10.24++ County of Delaware, Ohio Variable Rate Demand Industrial Development
Revenue Bonds ($4,900,000) -- General Continuing Guaranty.
10.25++ County of Delaware, Ohio Variable Rate Demand Industrial Development
Revenue Bonds ($4,900,000) -- Pledge and Security Agreement.
10.26++ County of Delaware, Ohio Variable Rate Demand Industrial Development
Revenue Bonds ($4,900,000) -- Bond Purchase Agreement.
10.27++ Mecklenburg County Industrial Facilities and Pollution Control
Financing Authority Industrial Development Revenue Bonds Series 1996
($9,000,000) -- Indenture of Trust.
10.28++ Mecklenburg County Industrial Facilities and Pollution Control
Financing Authority Industrial Development Revenue Bonds Series 1996
($9,000,000) -- Loan Agreement.
10.29++ Mecklenburg County Industrial Facilities and Pollution Control
Financing Authority Industrial Development Revenue Bonds Series 1996
($9,000,000) -- Reimbursement Agreement.
10.30++ Mecklenburg County Industrial Facilities and Pollution Control
Financing Authority Industrial Development Revenue Bonds Series 1996
($9,000,000) -- Letter of Credit Agreement.
10.31++ Mecklenburg County Industrial Facilities and Pollution Control
Financing Authority Industrial Development Revenue Bonds Series 1996
($9,000,000) -- Pledge and Security Agreement.
10.33++ Development Authority of DeKalb County Variable Rate Demand
Industrial Development Revenue Bonds, Series 1985
($5,250,000) -- Bond Purchase Agreement.
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
------- --------------------------------------------------------------------
<S> <C> <C>
10.34++ Development Authority of DeKalb County Variable Rate Demand
Industrial Development Revenue Bonds, Series 1985
($5,250,000) -- Loan Agreement.
10.35++ Development Authority of DeKalb County Variable Rate Demand
Industrial Development Revenue Bonds, Series 1985
($5,250,000) -- Trust Indenture.
10.36++ Development Authority of DeKalb County Variable Rate Demand
Industrial Development Revenue Bonds, Series 1985
($5,250,000) -- Letter of Credit Agreement.
10.37++ Development Authority of DeKalb County Variable Rate Demand
Industrial Development Revenue Bonds, Series 1985
($5,250,000) -- Pledge and Security Agreement.
10.38++ Development Authority of DeKalb County Variable Rate Demand
Industrial Development Revenue Bonds, Series 1985
($5,250,000) -- Letter of Credit.
10.39++ Development Authority of DeKalb County Variable Rate Demand
Industrial Development Revenue Bonds, Series 1985
($5,250,000) -- Security Agreement.
10.40++ Development Authority of DeKalb County Variable Rate Demand
Industrial Development Revenue Bonds, Series 1985
($5,250,000) -- Agreement Re: Letter of Credit and Assignment of
Collateral.
10.41++ Village of Gurnee, Illinois Industrial Development Revenue Bonds,
Series 1996 ($7,750,000) -- Loan Agreement.
10.42++ Village of Gurnee, Illinois Industrial Development Revenue Bonds,
Series 1996 ($7,750,000) -- Indenture of Trust.
10.43++ Village of Gurnee, Illinois Industrial Development Revenue Bonds,
Series 1996 ($7,750,000) -- Reimbursement Agreement.
10.44 Village of Gurnee, Illinois Industrial Development Revenue Bonds,
Series 1996 ($7,750,000) -- Letter of Credit.
10.45 Village of Gurnee, Illinois Industrial Development Revenue Bonds,
Series 1996 ($7,750,000) -- Intercreditor Agreement.
10.46++ Village of Gurnee, Illinois Industrial Development Revenue Bonds,
Series 1996 ($7,750,000) -- Pledge and Security Agreement.
10.47++ Village of Gurnee, Illinois Industrial Development Revenue Bonds,
Series 1996 ($7,750,000) -- Placement and Remarketing Agreement.
10.48 City of Salem Municipal Port Authority, Port Development Revenue
Bonds, Series of 1984 ($2,500,000) -- Bond Purchase Agreement.
10.50++ City of Salem Municipal Port Authority, Port Development Revenue
Bonds, Series of 1984 ($2,500,000) -- Letter of Credit Agreement.
10.51++ City of Salem Municipal Port Authority, Port Development Revenue
Bonds, Series of 1984 ($2,500,000) -- Pledge and Security Agreement.
10.53++ City of Salem Municipal Port Authority, Port Development Revenue
Bonds, Series of 1984 ($2,500,000) -- Trust Indenture.
10.54++ City of Salem Municipal Port Authority, Port Development Revenue
Bonds, Series of 1984 ($2,500,000) -- Sublease and Security
Agreement.
10.55++ City of Salem Municipal Port Authority, Port Development Revenue
Bonds, Series of 1984 ($2,500,000) -- Irrevocable Letter of Credit.
10.56 Facility lease dated February 8, 1993 between SCI Lt. Partnership
and the Registrant for the Fremont corporate facility.
</TABLE>
<PAGE> 96
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
------- --------------------------------------------------------------------
<S> <C> <C>
10.57 Facility lease dated June 25, 1997 between Charles King & Associates
and the Registrant for the Tustin facility.
10.58 Facility lease dated June 25, 1997 between Charles King & Associates
and the Registrant for the Schaumburg facility.
10.59 Facility lease dated December 2, 1991 between Galloway Industrial
Properties and the Registrant for the Westerville warehouse
facility.
10.60++ Facility lease dated February 8, 1993 between Aetna Investment Group
and the Registrant for the Corona facility.
10.61 Facility lease dated August 16, 1996 between SCI Ltd. Partnership
and the Registrant for the Hayward facility.
10.62 Facility lease dated August 8, 1996 between RTI Inc. and the
Registrant for the Rockaway facility.
10.63 Asset Acquisition Agreement between RTI Inc. and the Registrant
effective as of August 8, 1996.
11.1++ Computation of Earnings Per Share.
21.1++ Subsidiaries of the Registrant.
23.1++ Consent of Ernst & Young LLP, Independent Auditors (see page II-8).
23.2 Consent of Counsel. Reference is made to Exhibit 5.1.
24.1++ Power of Attorney (see page II-7).
27.1++ Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment
++ Previously Filed
<PAGE> 1
EXHIBIT 3.3
BYLAWS OF
STERIGENICS INTERNATIONAL, INC.
A DELAWARE CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I OFFICE AND RECORDS.......................................................................4
Section 1.1 Delaware Office..........................................................................4
Section 1.2 Other Offices............................................................................4
Section 1.3 Books and Records........................................................................4
ARTICLE II STOCKHOLDERS.............................................................................4
Section 2.1 Annual Meeting...........................................................................4
Section 2.2 Special Meeting..........................................................................4
Section 2.3 Place of Meeting.........................................................................4
Section 2.4 Notice of Meeting........................................................................4
Section 2.5 Quorum and Adjournment...................................................................5
Section 2.6 Proxies..................................................................................5
Section 2.7 Notice of Stockholder Business and Nominations...........................................5
Section 2.8 Procedure for Election of Directors......................................................7
Section 2.9 Inspectors of Elections; Opening and Closing the Polls...................................8
Section 2.10 Consent of Stockholders in Lieu of Meeting...............................................8
ARTICLE III BOARD OF DIRECTORS.......................................................................9
Section 3.1 General Powers...........................................................................9
Section 3.2 Number, Tenure and Qualifications........................................................9
Section 3.3 Regular Meetings.........................................................................9
Section 3.4 Special Meetings.........................................................................9
Section 3.5 Notice...................................................................................9
Section 3.6 Conference Telephone Meetings............................................................9
Section 3.7 Quorum..................................................................................10
Section 3.8 Vacancies...............................................................................10
Section 3.9 Committee...............................................................................10
Section 3.10 Removal.................................................................................10
ARTICLE IV OFFICERS................................................................................11
Section 4.1 Elected Officers........................................................................11
Section 4.2 Election and Term of Office.............................................................11
Section 4.3 Chairman of the Board...................................................................11
Section 4.4 President...............................................................................11
Section 4.5 Secretary...............................................................................12
Section 4.6 Treasurer...............................................................................12
Section 4.7 Removal.................................................................................12
Section 4.8 Vacancies...............................................................................12
ARTICLE V STOCK CERTIFICATES AND TRANSFERS........................................................12
Section 5.1 Stock Certificates and Transfers........................................................12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE VI INDEMNIFICATION.........................................................................13
Section 6.1 Right to Indemnification................................................................13
Section 6.2 Prepayment of Expenses..................................................................13
Section 6.3 Claims..................................................................................13
Section 6.4 Nonexclusivity of Rights................................................................14
Section 6.5 Amendment or Repeal.....................................................................14
Section 6.6 Other Indemnification and Prepayment of Expenses........................................14
ARTICLE VII MISCELLANEOUS PROVISIONS................................................................14
Section 7.1 Fiscal Year.............................................................................14
Section 7.2 Dividends...............................................................................14
Section 7.3 Seal....................................................................................14
Section 7.4 Waiver of Notice........................................................................14
Section 7.5 Audits..................................................................................14
Section 7.6 Resignations............................................................................15
Section 7.7 Contracts...............................................................................15
Section 7.8 Proxies.................................................................................15
ARTICLE VIII AMENDMENTS..............................................................................15
Section 8.1 Amendments..............................................................................15
</TABLE>
3
<PAGE> 4
ARTICLE I
OFFICES AND RECORDS
Section 1.1 Delaware Office. The registered office of the Corporation
in the State of Delaware shall be located in the City of Dover, County of Kent.
Section 1.2 Other Offices. The Corporation may have such other offices,
either within or without the State of Delaware, as the Board of Directors may
designate or as the business of the Corporation may from time to time require.
Section 1.3 Books and Records. The books and records of the Corporation
may be kept at the Corporation's headquarters in Fremont, California or at such
other locations outside the State of Delaware as may from time to time be
designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
Section 2.1 Annual Meeting. The annual meeting of the stockholders of
the Corporation shall be held at such date, place and/or time as may be fixed by
resolution of the Board of Directors.
Section 2.2 Special Meeting.
A. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning at least ten
percent (10%) in amount of the entire capital stock of the corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
B. Notwithstanding the above provisions of this Section 2.2(A),
effective upon a closing of an initial public offering of the Corporation's
securities pursuant to a registration statement filed under the Securities Act
of 1933, as amended, the stockholders of the corporation may be called only by
the President, the Chairman of the Board or by the Board of Directors pursuant
to a resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies (the "Whole Board").
Section 2.3 Place of Meeting. The Board of Directors may designate the
place of meeting for any meeting of the stockholders. If no designation is made
by the Board of Directors, the place of meeting shall be the principal office of
the Corporation.
Section 2.4 Notice of Meeting. Written or printed notice, stating the
place, day and hour of the meeting and the purposes for which the meeting is
called, shall be prepared and
4
<PAGE> 5
delivered by the Corporation not less than ten days nor more than sixty days
before the date of the meeting, either personally, or by mail, to each
stockholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail with
postage thereon prepaid, addressed to the stockholder at his address as it
appears on the stock transfer books of the Corporation. Such further notice
shall be given as may be required by law. Meetings may be held without notice if
all stockholders entitled to vote are present (except as otherwise provided by
law), or if notice is waived by those not present. Any previously scheduled
meeting of the stockholders may be postponed and (unless the Certificate of
Incorporation otherwise provides) any special meeting of the stockholders may be
cancelled, by resolution of the Board of Directors upon public notice given
prior to the time previously scheduled for such meeting of stockholders.
Section 2.5 Quorum and Adjournment. Except as otherwise provided by law
or by the Certificate of Incorporation, the holders of a majority of the voting
power of the outstanding shares of the Corporation entitled to vote generally in
the election of directors (the "Voting Stock"), represented in person or by
proxy, shall constitute a quorum at a meeting of stockholders, except that when
specified business is to be voted on by a class or series voting separately as a
class or series, the holders of a majority of the voting power of the shares of
such class or series shall constitute a quorum for the transaction of such
business. The chairman of the meeting or a majority of the shares of Voting
Stock so represented may adjourn the meeting from time to time, whether or not
there is such a quorum (or, in the case of specified business to be voted on by
a class or series, the chairman or a majority of the shares of such class or
series so represented may adjourn the meeting with respect to such specified
business). No notice of the time and place of adjourned meetings need be given
except as required by law. The stockholders present at a duly organized meeting
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
Section 2.6 Proxies. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder or as may be permitted by
law, or by his duly authorized attorney-in-fact. Such proxy must be filed with
the Secretary of the Corporation or his representative at or before the time of
the meeting.
Section 2.7 Notice of Stockholder Business and Nominations.
A. Annual Meeting of Stockholders.
(1) Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders: (a) pursuant
to the Corporation's notice of meeting delivered pursuant to Section 2.4 of
these Bylaws; (b) by or at the direction of the Chairman of the Board or the
Board of Directors; or (c) by any stockholder of the Corporation who is entitled
to vote at the meeting, who has complied with the notice procedures set forth in
clauses (2) and (3) of this paragraph (A) of this Bylaw and who was a
stockholder of record at the time such notice was delivered to the Secretary of
the Corporation.
5
<PAGE> 6
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to a clause (c) of
paragraph (A)(1) of this Bylaw, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such other business
must otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not less than seventy days nor more than
ninety days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than twenty days, or delayed by more than seventy
days, from such anniversary date, notice by the stockholder to be timely must be
so delivered not earlier than the ninetieth day prior to such annual meeting and
not later than the close of business on the later of the seventieth day prior to
such annual meeting or the ten day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 14a-11 thereunder, including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected; (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner. In no event shall the public announcement of an adjournment of
an annual meeting commence a new time period for the giving of a stockholder's
notice as described above.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by the
Corporation at least eighty days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Bylaw shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Corporation.
B. Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting pursuant to Section
2.4 of these Bylaws. Nominations of persons for election to the Board of
Directors may be made at a special meeting
6
<PAGE> 7
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) by any stockholder of the Corporation who is entitled to vote
at the meeting, who complies with the notice procedures set forth in this Bylaw
and who is a stockholder of record at the time such notice is delivered to the
Secretary of the Corporation. In the event the Corporation calls a special
meeting of stockholders for the purpose of electing one or more directors to the
Board of Directors, any such stockholder may nominate a person or persons (as
the case may be), for election to such position(s) as are specified in the
Corporation's Notice of Meeting, if the stockholder's notice as required by
paragraph (A)(2) of this Bylaw shall be delivered to the Secretary at the
principal executive offices of the Corporation not earlier than the ninetieth
day prior to such special meeting and not later than the close of business on
the later of the seventieth day prior to such special meeting or the tenth day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
C. General.
(1) Only persons who are nominated in accordance with
the procedures set forth in this Bylaw shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Bylaw. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in this Bylaw and, if any proposed nomination or business is not in compliance
with this Bylaw, to declare that such defective proposal or nomination shall be
disregarded.
(2) For purposes of this Bylaw, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
Bylaw, a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect
any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 2.8 Procedure for Election of Directors. Election of directors
at all meetings of the stockholders at which directors are to be elected shall
be by written ballot, and, except as otherwise set forth in the Certificate of
Incorporation with respect to the right of the holders of any series of
Preferred Stock or any other series or class of stock to elect additional
directors under specified circumstances, a plurality of the votes cast thereat
shall elect directors.
7
<PAGE> 8
Except as otherwise provided by law, the Certificate of Incorporation or these
Bylaws, all matters other than the election of directors submitted to the
stockholders at any meeting shall be decided by the affirmative vote of a
majority of the voting power of the outstanding Voting Stock present in person
or represented by proxy at the meeting and entitled to vote thereon.
Section 2.9 Inspectors of Elections; Opening and Closing the Polls.
A. The Board of Directors by resolution shall appoint one or
more inspectors, which inspector or inspectors may include individuals who serve
the Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives of the Corporation, to act at the meeting
and make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act, or if all inspectors or alternates who
have been appointed are unable to act, at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging his or her duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspectors
shall have the duties prescribed by the General Corporation Law of the State of
Delaware.
B. The chairman of the meeting shall fix and announce at the
meeting the date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting.
Section 2.10 Consent of Stockholders in Lieu of Meeting.
A. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. Any written consent may be
revoked by a writing received by the Secretary of the Corporation prior to the
time that written consents of the number of shares required to authorize the
proposed action have been filed with the Secretary.
B. Notwithstanding the above provisions of this Section 2.10(A),
effective upon a closing of an initial public offering of the corporation's
securities pursuant to a registration statement filed under the Securities Act
of 1933, as amended, the stockholders of the corporation may not take action by
written consent without a meeting but must take any such actions at a duly
called annual or special meeting.
8
<PAGE> 9
ARTICLE III
BOARD OF DIRECTORS
Section 3.1 General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and authorities by these Bylaws expressly conferred upon
them, the Board of Directors may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by law, by the Certificate of
Incorporation or by these Bylaws required to be exercised or done by the
stockholders.
Section 3.2 Number, Tenure and Qualifications. Subject to the rights of
the holders of any series of Preferred Stock, or any other series or class of
stock as set forth in the Certificate of Incorporation, to elect directors under
specified circumstances, the number of directors shall be fixed from time to
time exclusively pursuant to a resolution adopted by a majority of the Whole
Board, but shall consist of four(4) directors.
Section 3.3 Regular Meetings. A regular meeting of the Board of
Directors shall be held without notice other than this Bylaw immediately after,
and at the same place as, each annual meeting of stockholders. The Board of
Directors may, by resolution, provide the time and place for the holding of
additional regular meetings without notice other than such resolution.
Section 3.4 Special Meetings. Special meetings of the Board of Directors
shall be called at the request of the Chairman of the Board, the President or a
majority of the Board of Directors. The person or persons authorized to call
special meetings of the Board of Directors may fix the place and time of the
meetings.
Section 3.5 Notice. Notice of any special meeting shall be given to each
director at his business or residence in writing or by telegram or by telephone
communication. If mailed, such notice shall be deemed adequately delivered when
deposited in the United States mails so addressed, with postage thereon prepaid,
at least five days before such meeting. If by telegram, such notice shall be
deemed adequately delivered when the telegram is delivered to the telegraph
company at least twenty-four hours before such meeting. If by facsimile
transmission, such notice shall be transmitted at least twenty-four hours before
such meeting. If by telephone, the notice shall be given at least twelve hours
prior to the time set for the meeting. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice of such meeting, except for amendments to these
Bylaws as provided under Section 8.1 of Article VIII hereof. A meeting may be
held at any time without notice if all the directors are present (except as
otherwise provided by law) or if those not present waive notice of the meeting
in writing, either before or after such meeting.
Section 3.6 Conference Telephone Meetings. Members of the Board of
Directors, or any committee thereof, may participate in a meeting of the Board
of Directors or such committee by means of conference telephone or similar
communications equipment by
9
<PAGE> 10
means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at such
meeting.
Section 3.7 Quorum. A whole number of directors equal to at least a
majority of the Whole Board shall constitute a quorum for the transaction of
business, but if at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of the directors present may adjourn the
meeting from time to time without further notice. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 3.8 Vacancies. Subject to the rights of the holders of any
series of Preferred Stock, or any other series or class of stock as set forth in
the Certificate of Incorporation, to elect additional directors under specified
circumstances, and unless the Board of Directors otherwise determines, vacancies
resulting from death, resignation, retirement, disqualification, removal from
office or other cause, and newly created directorships resulting from any
increase in the authorized number of directors, may be filled only by the
affirmative vote of a majority of the remaining directors, though less than a
quorum of the Board of Directors, and directors so chosen shall hold office for
a term expiring at the annual meeting of stockholders at which the term of
office of the class to which they have been elected expires and until such
director's successor shall have been duly elected and qualified. No decrease in
the number of authorized directors constituting the Whole Board shall shorten
the term of any incumbent director.
Section 3.9 Committee.
A. The Board of Directors may designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of the
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent permitted by law and to the extent provided in the resolution of
the Board of Directors, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it.
B. Unless the Board of Directors otherwise provides, each
committee designated by the Board of Directors may make, alter and repeal rules
for the conduct of its business. In the absence of such rules each committee
shall conduct its business in the same manner as the Board of Directors conducts
its business pursuant to these Bylaws.
Section 3.10 Removal. Subject to the rights of the holders of any series
of Preferred Stock, or any other series or class of stock as set forth in the
Certificate of Incorporation, to elect additional directors under specified
circumstances, any director, or the
10
<PAGE> 11
entire Board of Directors, may be removed from office at any time, but only for
cause and only by the affirmative vote of the holders of at least 80 percent of
the voting power of the then outstanding Voting Stock, voting together as a
single class.
ARTICLE IV
OFFICERS
Section 4.1 Elected Officers. The elected officers of the Corporation
shall be a Chairman of the Board, a President, a Secretary, a Treasurer, and
such other officers as the Board of Directors from time to time may deem proper.
The Chairman of the Board shall be chosen from the directors. All officers
chosen by the Board of Directors shall each have such powers and duties as
generally pertain to their respective offices, subject to the specific
provisions of this Article IV. Such officers shall also have powers and duties
as from time to time may be conferred by the Board of Directors or by any
committee thereof.
Section 4.2 Election and Term of Office. The elected officers of the
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Subject to Section
4.7 of these Bylaws, each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign.
Section 4.3 Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors. The
Chairman of the Board shall be responsible for the general management of the
affairs of the Corporation and shall perform all duties incidental to his office
which may be required by law and all such other duties as are properly required
of him by the Board of Directors. Except where by law the signature of the
President is required, the Chairman of the Board shall possess the same power as
the President to sign all certificates, contracts, and other instruments of the
Corporation which may be authorized by the Board of Directors. He shall make
reports to the Board of Directors and the stockholders, and shall perform all
such other duties as are properly required of him by the Board of Directors. He
shall see that all orders and resolutions of the Board of Directors and of any
committee thereof are carried into effect.
Section 4.4 President. The President shall act in a general executive
capacity and shall assist the Chairman of the Board in the administration and
operation of the Corporation's business and general supervision of its policies
and affairs. The President shall, in the absence of or because of the inability
to act of the Chairman of the Board, perform all duties of the Chairman of the
Board and preside at all meetings of stockholders and of the Board of Directors.
The President may sign, alone or with the Secretary, or an Assistant Secretary,
or any other proper officer of the Corporation authorized by the Board of
Directors, certificates, contracts, and other instruments of the Corporation as
authorized by the Board of Directors.
11
<PAGE> 12
Section 4.5 Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors and all other notices
required by law or by these Bylaws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the Chairman of the Board or the President, or by the Board of Directors,
upon whose request the meeting is called as provided in these Bylaws. He shall
record all the proceedings of the meetings of the Board of Directors, any
committees thereof and the stockholders of the Corporation in a book to be kept
for that purpose, and shall perform such other duties as may be assigned to him
by the Board of Directors, the Chairman of the Board or the President. He shall
have custody of the seal of the Corporation and shall affix the same to all
instruments requiring it, when authorized by the Board of Directors, the
Chairman of the Board or the President, and attest to the same.
Section 4.6 Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate receipts and
disbursements in books belonging to the Corporation. The Treasurer shall deposit
all moneys and other valuables in the name and to the credit of the Corporation
in such depositaries as may be designated by the Board of Directors. The
Treasurer shall disburse the funds of the Corporation as may be ordered by the
Board of Directors the Chairman of the Board, or the President, taking proper
vouchers for such disbursements. The Treasurer shall render to the Chairman of
the Board, the President and the Board of Directors, whenever requested, an
account of all his transactions as Treasurer and of the financial condition of
the Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond for the faithful discharge of his duties in such amount
and with such surety as the Board of Directors shall prescribe.
Section 4.7 Removal. Any officer elected by the Board of Directors may
be removed by the Board of Directors whenever, in their judgment, the best
interests of the Corporation would be served thereby. No elected officer shall
have any contractual rights against the Corporation for compensation by virtue
of such election beyond the date of the election of his successor, his death,
his resignation or his removal, whichever event shall first occur, except as
otherwise provided in an employment contract or an employee plan.
Section 4.8 Vacancies. A newly created office and a vacancy in any
office because of death, resignation, or removal may be filled by the Board of
Directors for the unexpired portion of the term at any meeting of the Board of
Directors.
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
Section 5.1 Stock Certificates and Transfers.
A. The interest of each stockholder of the Corporation shall be
evidenced by certificates for shares of stock in such form as the appropriate
officers of the Corporation may from time to time prescribe. The shares of the
stock of the Corporation shall be transferred on the books of the Corporation by
the holder thereof in person or by his attorney,
12
<PAGE> 13
upon surrender for cancellation of certificates for the same number of shares,
with an assignment and power of transfer endorsed thereon or attached thereto,
duly executed, and with such proof of the authenticity of the signature as the
Corporation or its agents may reasonably require.
B. The certificates of stock shall be signed, countersigned and
registered in such manner as the Board of Directors may by resolution prescribe,
which resolution may permit all or any of the signatures on such certificates to
be in facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Right to Indemnification. The Corporation shall indemnify
and hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person (an "Indemnitee") who
was or is made or is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director or officer of the
Corporation or, while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or nonprofit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses (including
attorneys' fees) reasonably incurred by such Indemnitee. Notwithstanding the
preceding sentence, except as otherwise provided in Section 6.3, the Corporation
shall be required to indemnify an Indemnitee in connection with a proceeding (or
part thereof) commenced by such Indemnitee only if the commencement of such
proceeding (or part thereof) by the Indemnitee was authorized by the Board of
Directors of the Corporation.
Section 6.2 Prepayment of Expenses. The Corporation shall pay the
expenses (including attorneys' fees) incurred by an Indemnitee in defending any
proceeding in advance of its final disposition, provided, however, that, to the
extent required by law, such payment of expenses in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the Indemnitee to repay all amounts advanced if it should be ultimately
determined that the Indemnitee is not entitled to be indemnified under this
Article VI or otherwise.
Section 6.3 Claims. If a claim for indemnification or payment of
expenses under this Article VI is not paid in full within sixty days after a
written claim therefor by the Indemnitee has been received by the Corporation,
the Indemnitee may file suit to recover the unpaid amount of such claim and, if
successful in whole or in part, shall be entitled to be paid the
13
<PAGE> 14
expense of prosecuting such claim. In any such action the Corporation shall have
the burden of proving that the Indemnitee is not entitled to the requested
indemnification or payment of expenses under applicable law.
Section 6.4 Nonexclusivity of Rights. The rights conferred on any
Indemnitee by this Article VI shall not be exclusive of any other rights which
such Indemnitee may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders
or disinterested directors or otherwise.
Section 6.5 Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any right or
protection hereunder of any Indemnitee in respect of any act or omission
occurring prior to the time of such repeal or modification.
Section 6.6 Other Indemnification and Prepayment of Expenses. This
Article VI shall not limit the right of the Corporation, to the extent and in
the manner permitted by law, to indemnify and to advance expenses to persons
other than Indemnitees when and as authorized by appropriate corporate action.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1 Fiscal Year. The fiscal year of the Corporation shall begin
on the first day of January and end on the thirty-first day of December of each
year.
Section 7.2 Dividends. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and its Certificate of
Incorporation.
Section 7.3 Seal. The corporate seal shall have inscribed the name of
the Corporation thereon and shall be in such form as may be approved from time
to time by the Board of Directors.
Section 7.4 Waiver of Notice. Whenever any notice is required to be
given to any stockholder or director of the Corporation under the provisions of
the General Corporation Law of the State of Delaware, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at, nor the purpose of, any
annual or special meeting of the stockholders of the Board of Directors need be
specified in any waiver of notice of such meeting.
Section 7.5 Audits. The accounts, books and records of the Corporation
shall be audited upon the conclusion of each fiscal year by an independent
certified public accountant selected by the Board of Directors, and it shall be
the duty of the Board of Directors to cause such audit to be made annually.
14
<PAGE> 15
Section 7.6 Resignations. Any director or any officer, whether elected
or appointed, may resign at any time by serving written notice of such
resignation on the Chairman of the Board, the President or the Secretary, and
such resignation shall be deemed to be effective as of the close of business on
the date said notice is received by the Chairman of the Board, the President, or
the Secretary or at such later date as is stated therein. No formal action shall
be required of the Board of Directors or the stockholders to make any such
resignation effective.
Section 7.7 Contracts. Except as otherwise required by law, the
Certificate of Incorporation or these Bylaws, any contracts or other instruments
may be executed and delivered in the name and on the behalf of the Corporation
by such officer or officers of the Corporation as the Board of Directors may
from time to time direct. Such authority may be general or confined to specific
instances as the Board may determine. The Chairman of the Board, the President
or any Vice President may execute bonds, contracts, deeds, leases and other
instruments to be made or executed for or on behalf of the Corporation. Subject
to any restrictions imposed by the Board of Directors or the Chairman of the
Board, the President or any Vice President of the Corporation may delegate
contractual powers to others under his jurisdiction, it being understood,
however, that any such delegation of power shall not relieve such officer of
responsibility with respect to the exercise of such delegated power.
Section 7.8 Proxies. Unless otherwise provided by resolution adopted by
the Board of Directors, the Chairman of the Board, the President or any Vice
President may from time to time appoint any attorney or attorneys or agent or
agents of the Corporation, in the name and on behalf of the Corporation, to cast
the votes which the Corporation may be entitled to cast as the holder of stock
or other securities in any other corporation or other entity, any of whose stock
or other securities may be held by the Corporation, at meetings of the holders
of the stock and other securities of such other corporation or other entity, or
to consent in writing, in the name of the Corporation as such holder, to any
action by such other corporation or other entity, and may instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent, and may execute or cause to be executed in the name and on behalf of
the Corporation and under its corporate seal or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
ARTICLE VIII
AMENDMENTS
Section 8.1 Amendments. These Bylaws may be amended, altered, added to,
rescinded or repealed at any meeting of the Board of Directors or of the
stockholders, provided notice of the proposed change was given in the notice of
the meeting and, in the case of a meeting of the Board of Directors, in a notice
given no less than twenty-four hours prior to the meeting; provided, however,
that, notwithstanding any other provisions of these Bylaws or any provision of
law which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of any particular class or series of the
stock required by law, the Certificate of Incorporation or these Bylaws, the
affirmative vote of the holders of at least 80 percent of the voting power of
the then outstanding Voting Stock, voting together as a single
15
<PAGE> 16
class, shall be required in order for stockholders to alter, amend or repeal any
provision of these Bylaws or to adopt any additional bylaw.
16
<PAGE> 1
[SPECIMEN] EXHIBIT 10.44
[LOGO]
IRREVOCABLE DIRECT PAY LETTER OF CREDIT
[COMERICA BANK-CALIFORNIA LETTERHEAD]
April 19, 1996
Bank One, Columbus, N.A.
c/o Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43215-0181
Attention: Corporate Trust
Dear Sirs:
We hereby issue in your favor, as trustee ("Trustee") under the
Indenture of Trust ("Indenture") dated as of April 1, 1996, by and between you
and the Village of Gurnee, Illinois ("Issuer") this Irrevocable Direct Pay
Letter of Credit (this "Credit") No. 532562 for the account of SteriGenics
International ("Account Party"), in an amount not exceeding Seven Million Eight
Hundred Eighty Thousand dollars ($7,880,000.00) (the "Stated Amount") of which
amount not exceeding $7,750,000 ("Principal Amount") may be drawn upon with
respect to the payment of principal and $130,000 ("Interest Amount") may be
drawn upon with respect to the payment of interest of Village of Gurnee,
Illinois Industrial Development Revenue Bonds (SteriGenics International
Project), Series 1996 (the "Bonds"). Funds under this Credit are available to
you against drawing certificate(s) ("Drawing Certificate(s)"), duly signed and
presented to us at 333 W. Santa Clara Street, San Jose, California 95113 as
follows:
1) If a drawing is being made with respect to the payment of interest on
the Bonds, or with respect to the payment of principal on the Bonds, your
request for payment shall be presented in the form of a certificate, with the
blanks appropriately filled in, as attached to this Credit as Annex A.
2) If a drawing is made with respect to the payment of interest and
principal in connection with the purchase of tendered Bonds or Bonds deemed
tendered, your request shall be presented in the form of a certificate, with
the appropriate blanks filled in, as attached to this Credit as Annex B.
Any Drawing Certificate may be presented in person or by telecopier at
408-556-5216 to the attention of Manager International Operations providing the
drawing by telecopy is confirmed by telephone at 408-556-5214 and the original
certificates have been sent by overnight mail. The
<PAGE> 2
[SPECIMEN]
certificate shall have all blanks appropriately filled in and shall be duly
executed by your authorized officer.
A Drawing Certificate presented prior to 10:00 a.m., Pacific time, on
any Business Day (as defined herein) shall be honored and the amount shall be
paid in immediately available funds on the same business day or such later
Business Day as specified in the Drawing Certificate. A Drawing Certificate
presented at or after 10:00 a.m., Pacific time, on any Business Day shall be
honored and the amount of the draft paid in immediately available funds on the
following business day by 10:00 a.m. Pacific time or such later Business Day as
specified in the Drawing Certificate. Payment under this Credit shall be made
in accordance with the payment instructions set forth in the completed Drawing
Certificate accompanying each draft. All payments made by us under this Credit
shall be made from our own funds. Business Day for purposes hereof means any
day other than (i) a day on which the banking institutions in (a) New York, New
York or (b) the City of San Jose, California or (c) Detroit, Michigan or (d)
the cities in which the Trustee or the Paying Agent (as defined in the
Indenture) or the Remarketing Agent (as defined in the Indenture) have their
respective principal offices are authorized to close or (ii) a day on which the
New York Stock Exchange is closed.
This Credit is transferable in its entirety, but not in part, to any
transferee who has succeeded you as Trustee under the Indenture and may be
successively so transferred. Transfer of this Credit to such transferee shall
be affected by the presentation to us of this Credit accompanied by a
Certificate substantially in the form of Annex C.
Each payment of a Drawing with respect to the payment of interest on or
principal of the Bonds honored by us shall reduce the portion of the Principal
Amount and the Interest Amount available under this Credit subject to
reinstatement as provided below. The Stated Amount of this Credit shall also be
reduced by the amount stated in a written notice of reduction executed by the
Trustee. A reduction of the Stated Amount through the use of such a written
notice of reduction shall be effective as of the actual date of receipt by us
of such notice at our above stated address.
Following the honoring of a Drawing hereunder to pay interest on the
Bonds (other than interest in connection with redemption, maturity,
acceleration or purchase upon tender of the Bonds in whole or in part), the
available Interest Amount shall be reinstated on the sixth day following such
drawing to the original amount unless you shall have received our notice to you
by hand delivery or telecopier notice at (614) 248-5195, receipt of which has
been confirmed by you to us in writing via telecopy at (408) 556-5216, within
five (5) days of such drawing, followed by delivery of the original notice by
overnight delivery that we have not been reimbursed for such payment in
accordance with the terms of the Reimbursement Agreement, dated as of April 1,
1996, by and between the Account Party and this Bank ("Reimbursement
Agreement"), or any other Event of Default under the Reimbursement Agreement
has occurred and is continuing, and as a consequence thereof there shall be no
such reinstatement, or if the sixth calendar day after such Drawing would be
after the expiration of this Credit.
Page 2 of 6 all of which constitute an
integral part of this Letter of Credit
<PAGE> 3
[SPECIMEN]
Following the honoring of a Drawing hereunder to pay principal and/or
interest of the Bonds in order to purchase the Bonds on behalf of the Account
Party, the available principal and interest amount shall not be reinstated to
the original amount unless you shall have received our notice to you by hand
delivery or telecopier notice at (614) 248-5195, receipt of which has been
confirmed by you to us in writing via return telecopy at (408) 556-5216,
followed by the delivery of the original notice by overnight delivery that
there shall be reinstatement of the Principal Amount and Interest Amount.
This Credit is subject to the Uniform Customs and Practices for
Documentary Credits (1993 Revision) International Chamber of Commerce,
Publication No. 500 (the "Uniform Customs"); provided, however, that Article
48(g) shall not apply to this Credit. As to matters not covered by the Uniform
Customs, this Credit shall be governed by the internal laws of the State of
California.
This Credit, unless extended, shall expire on the earliest of (i) May
15, 2001, (ii) the date of receipt by us of notice from the Trustee and the
Account Party that the issuance of an alternate credit and liquidity facility
in substitution of this Credit has occurred, (iii) five (5) days following the
Conversion Date as stipulated in the Notice of Trustee delivered to us, or (iv)
the date that we receive notice from the Trustee that none of the Bonds are
outstanding under the Indenture.
We undertake that your Drawing Certificate(s), drawn and presented on
or before the expiration of this Credit in conformity with the terms of this
Credit, will be duly honored.
Very truly yours,
COMERICA BANK-CALIFORNIA
By: /s/ [SIG]
------------------------
Vice President
Page 3 of 6 all of which constitute an
integral part of this Letter of Credit
<PAGE> 4
[SPECIMEN]
COMERICA
Letter of Credit Division
ANNEX A
REGULAR DRAWING CERTIFICATE
Comerica Bank-California
333 W. Santa Clara Street, 2nd Floor
San Jose, California 95113
Attention: Manager International Operations
We refer to your Letter of Credit No. 532562 issued in support of The
Village of Gurnee, Illinois Industrial Development Revenue Bonds (SteriGenics
International Project), Series 1996 (the "Credit"). Terms defined in the Credit
not otherwise defined herein shall have the same meaning herein as therein.
1. As Trustee pursuant to the Indenture, we hereby make demand for payment
under the Credit to pay or provide for the payment of interest on such Bonds in
the amount of $____________ and principal in the amount of $____________. This
Drawing is made as [a regularly scheduled interest payment] [an extraordinary
redemption] [an optional redemption] [a mandatory redemption] [a mandatory
sinking fund redemption] [maturity of the Bonds] [in connection with
acceleration], under the provisions of Section ___ of the Indenture. (DELETE
INAPPROPRIATE CLAUSES]
2. The amount demanded for the payment of principal and/or interest does
not exceed the amount available on the date hereof to be drawn under the Credit
in respect to the payment of principal and interest on the Bonds and the stated
amount of the Credit will be permanently reduced by the amount demanded herein
in respect to the payment of principal.
3. Upon receipt of the amount demanded under this Credit, we will apply
the same directly to payment when due in respect to interest and/or principal
on account of such Bonds.
4. Please remit your payments on [INSERT DATE] as follows:
-----------------------------------
-----------------------------------
______________, 199__
Bank One, Columbus, N.A.,
as Trustee
By:
---------------------------
Its:
--------------------------
Page 4 of 6 all of which constitute an
integral part of this Letter of Credit
[ORIGINAL]
<PAGE> 5
[SPECIMEN] [COMERICA LOGO]
ANNEX B
Letter of Credit Division
Purchase Drawing
Comerica Bank-California
333 W. Santa Clara Street, 2nd Floor
San Jose, California 95113
Attention: Manager International Operations
We refer to your Letter of Credit No. 532562 issued in support of The
Village of Gurnee, Illinois Industrial Development Revenue Bonds (SteriGenics
International Project), Series 1996 (the "Credit"). Terms defined in the Credit
not otherwise defined herein shall have the same meaning herein as therein.
1. As Trustee pursuant to the Indenture, we hereby make demand for
payment under the Credit to pay or provide for the payment of interest in the
amount of $__________ and for payment of principal in the amount of $________
for the purchase of tendered Bonds (or Bonds deemed tendered) under the
provisions of Section(s) _____ of the Indenture. We certify to you that we are:
(i) either contemporaneously delivering to you an amount of money equal to the
drawing under this paragraph or (ii) we have directed the Depository to reflect
beneficial ownership in Bonds for your benefit as a secured party together with
an amount of money to be transmitted to you and the aggregate amount of such
Bonds and money to be transmitted is equal to the amount of the drawing under
this paragraph.
2. The amount demanded for the payment of principal and/or
interest does not exceed the amount available on the date hereof to be drawn
under the Credit with respect to the payment of principal and interest on the
Bonds.
3. The stated amount of the Credit will be permanently reduced by
the amount demanded herein in respect to the payment of principal, unless you
otherwise advise us as provided in the Credit.
4. Upon receipt of the amount demanded under this Credit, we will
apply the same directly to payment when due with respect to interest and/or
principal on account of such Bonds.
5. Please remit your payments on [insert date] as follows:
--------------------------------------------
--------------------------------------------
- ----------------, 199__
Bank One, Columbus, N.A.,
as Trustee
By:____________________________________
Its:___________________________________
Page 5 of 6 all of which constitute an
integral part of this Letter of Credit
[ORIGINAL]
<PAGE> 6
[SPECIMEN] [COMERICA LOGO]
Letter of Credit Division
INSTRUCTIONS FOR TRANSFER
Comerica Bank-California
333 W. Santa Clara Street, 2nd Floor
San Jose, California 95113
Attention: Manager International Operations
We refer to your Letter of Credit No. 532562 issued in support of The
Village of Gurnee, Illinois Industrial Development Revenue Bonds (SteriGenics
International Project), Series 1996 (the "Credit"). The undersigned, as
Trustee, is named as beneficiary of the Credit. The Transferee named below has
succeeded the undersigned as Trustee under the Indenture defined in the Credit:
----------------------------
Name of Transferee
----------------------------
Address
Therefore, for value received, the undersigned hereby irrevocably
instructs you to transfer to such Transferee all rights of the undersigned to
draw under the Credit.
Bank One, Columbus, N.A.,
as Trustee
By:
-------------------------------------
Its
-------------------------------------
The undersigned (Name of Transferee) hereby accepts the foregoing
transfer of rights under the credit and has accepted the obligations of the
Trustee under the Indenture.
-------------------------------------
(Name of Transferee)
By:
-------------------------------------
Title
-----------------------------------
Address of Principal Corporate
Trust Office:
----------------------------------------
----------------------------------------
----------------------------------------
Telephone
-------------------------------
Fax
-------------------------------------
Page 6 of 6 all of which constitute an
integral part of this Letter of Credit
[ORIGINAL]
<PAGE> 1
[SPECIMEN]
[COMERICA LOGO]
EXHIBIT 10.45
Letter of Credit Division
TELEX: 3772134 MNB INTL DET ONE DETROIT CENTER
SWIFT: MNBD US 33 500 WOODWARD AVENUE
FAX : (313) 222-9115 24TH FLOOR, MC 3341
DETROIT, MI 48226
DATE; APRIL 19, 1996
COMERICA BANK
BANK ONE, COLUMBUS, N.A.
100 EAST BROAD STREET
COLUMBUS, OHIO 43271-0181
ATTENTION: CORPORATE TRUST DEPARTMENT
GENTLEMEN:
COMERICA BANK-CALIFORNIA HAS ISSUED TO YOU ITS IRREVOCABLE DIRECT PAY
LETTER OF CREDIT. NO. 532562 IN THE AMOUNT OF $7,880,000.00. AT THE REQUEST OF
COMERICA BANK-CALIFORNIA WE HEREBY CONFIRM SAID CREDIT AND UNDERTAKE TO HONOR
ANY CONFORMING DRAWINGS UNDER SAID LETTER OF CREDIT, WHICH WILL BE PAID BY US
PRIOR TO 3:00 P.M., DETROIT, MICHIGAN TIME, THE SAME DAY SUCH DRAWING IS
PRESENTED IF RECEIVED BY US PRIOR TO 11:00 A.M., DETROIT, MICHIGAN TIME, AND ON
THE NEW BUSINESS DAY IF RECEIVED BY US AFTER 11:00 A.M. DETROIT, MICHIGAN TIME.
DRAWINGS UNDER THIS CONFIRMATION ARE PAYABLE AGAINST YOUR SIGNED
STATEMENT ADVISING THAT A DRAWING CERTIFICATE UNDER THE ABOVE-DESCRIBED LETTER
OF CREDIT HAS BEEN PRESENTED BY YOU TO COMERICA BANK-CALIFORNIA, OR THAT LETTER
OF CREDIT NO. 532562 HAS BEEN REPUDIATED, AND HAS NOT BEEN HONORED IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF COMERICA BANK-CALIFORNIA'S LETTER
OF CREDIT NO. 532562, TO WHICH STATEMENT SHALL BE ATTACHED COPIES OF THE
DOCUMENTS PRESENTED BY YOU TO COMERICA BANK-CALIFORNIA, OR, IN THE CASE OF A
REPUDIATION, DRAWING CERTIFICATES, IN THE SAME FORM, DIRECTED TO US, WHICH
DOCUMENTS SHALL COMPLY WITH THE TERMS AND CONDITIONS OF SAID LETTER OF CREDIT.
YOUR SIGNED STATEMENT SHALL ALSO INDICATE YOUR PAYMENT INSTRUCTIONS.
DRAWINGS MAY BE MADE BY FACSIMILE TRANSMISSION TO NUMBER (313)
222-9324, PROVIDED RECEIPT OF YOUR FACSIMILE IS CONFIRMED BY TELEPHONE TO
MANAGER-STANDBY LETTERS OF CREDIT AT (313) 222-3162, AND THE ORIGINAL DOCUMENTS
ARE SENT BY OVERNIGHT COURIER TO COMERICA BANK, ATTN: MANAGER-STANDBY LETTERS
OF CREDIT, ONE DETROIT CENTER, 500 WOODWARD AVENUE, 24TH FLOOR, DETROIT, MI
48226.
ALL DRAWINGS HEREUNDER WILL BE PAID FROM OUR OWN FUNDS. THIS
CONFIRMATION EXPIRES ON MAY 15, 2001.
<PAGE> 2
[SPECIMEN]
[COMERICA LOGO]
Letter of Credit Division
PLEASE ATTACH THIS CONFIRMATION LETTER TO THE ORIGINAL CREDIT AND QUOTE
OUR REFERENCE NO. 532576 ON ALL CORRESPONDENCE.
VERY TRULY YOURS,
COMERICA BANK
BY: /s/ PAUL A. ???????
---------------------
ITS: VICE PRESIDENT
[ORIGINAL]
<PAGE> 3
[COMERICA]
TELEX: 3772134 MNB INTL DET ONE DETROIT CENTER
SWIFT: MNBD US 33 500 WOODWARD AVENUE
FAX: (313) 222-9115 24TH FLOOR, MC 3341
DETROIT, MI 48226
DATE: APRIL 19, 1996
COMERICA BANK
BANK ONE, COLUMBUS, N.A.
100 EAST BROAD STREET
COLUMBUS, OHIO 43271-0181
ATTENTION: CORPORATE TRUST DEPARTMENT
GENTLEMEN:
COMERICA BANK-CALIFORNIA HAS ISSUED TO YOU ITS IRREVOCABLE DIRECT PAY
LETTER OF CREDIT NO. 532562 IN THE AMOUNT OF $7,880,000.00. AT THE REQUEST OF
COMERICA BANK-CALIFORNIA WE HEREBY CONFIRM SAID CREDIT AND UNDERTAKE TO HONOR
ANY CONFORMING DRAWINGS UNDER SAID LETTER OF CREDIT, WHICH WILL BE PAID BY US
PRIOR TO 3:00 P.M., DETROIT, MICHIGAN TIME, THE SAME DAY SUCH DRAWING IS
PRESENTED IF RECEIVED BY US PRIOR TO 11:00 A.M., DETROIT, MICHIGAN TIME, AND ON
THE NEXT BUSINESS DAY--IF RECEIVED BY US AFTER 11:00 A.M. DETROIT, MICHIGAN
TIME.
DRAWINGS UNDER THIS CONFIRMATION ARE PAYABLE AGAINST YOUR SIGNED
STATEMENT ADVISING THAT A DRAWING CERTIFICATE UNDER THE ABOVE-DESCRIBED LETTER
OF CREDIT HAS BEEN PRESENTED BY YOU TO COMERICA BANK-CALIFORNIA, OR THAT LETTER
OF CREDIT NO. 532562 HAS BEEN REPUDIATED, AND HAS NOT BEEN HONORED IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF COMERICA BANK-CALIFORNIA'S LETTER
OF CREDIT NO. 532562, TO WHICH STATEMENT SHALL BE ATTACHED COPIES OF THE
DOCUMENTS PRESENTED BY YOU TO COMERICA BANK-CALIFORNIA, OR, IN THE CASE OF A
REPUDIATION, DRAWING CERTIFICATES, IN THE SAME FORM, DIRECTED TO US, WHICH
DOCUMENTS SHALL COMPLY WITH THE TERMS AND CONDITIONS OF SAID LETTER OF CREDIT.
YOUR SIGNED STATEMENT SHALL ALSO INDICATE YOUR PAYMENT INSTRUCTIONS.
DRAWINGS MAY BE MADE BY FACSIMILE TRANSMISSION TO NUMBER (313) 222-9324,
PROVIDED RECEIPT OF YOUR FACSIMILE IS CONFIRMED BY TELEPHONE TO MANAGER-STANDBY
LETTERS OF CREDIT AT (313) 222-3162, AND THE ORIGINAL DOCUMENTS ARE SENT BY
OVERNIGHT COURIER TO COMERICA BANK, ATTN: MANAGER-STANDBY LETTERS OF CREDIT, ONE
DETROIT CENTER, 500 WOODWARD AVENUE, 24TH FLOOR, DETROIT, MI 48226.
ALL DRAWINGS HEREUNDER WILL BE PAID FROM OUR OWN FUNDS. THIS
CONFIRMATION EXPIRES ON MAY 15, 2001.
<PAGE> 4
[COMERICA LOGO]
PLEASE ATTACH THIS CONFIRMATION LETTER TO THE ORIGINAL CREDIT AND QUOTE
OUR REFERENCE NO. 532576 ON ALL CORRESPONDENCE.
VERY TRULY YOURS,
COMERICA BANK
BY: [SIG]
----------------------------
ITS: VICE PRESIDENT
[ORIGINAL]
<PAGE> 1
EXHIBIT 10.48
================================================================================
SUBLEASE AND SECURITY AGREEMENT
Dated as of December 1, 1984
between
CITY OF SALEM MUNICIPAL PORT AUTHORITY
as Sublessor
and
SOUTH JERSEY PROCESS TECHNOLOGY, INC.
as Sublessee
(and Assignment of Sublessor's Interest to
THE FARMERS AND MERCHANTS NATIONAL BANK OF BRIDGETON,
as Trustee)
================================================================================
Prepared By:
Drinker Biddle & Reath
1100 PNB Building
Philadelphia, PA 19107
- ----------------------------
Elizabeth J. Youse, Esq.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties .............................................................. 1
Recitals ............................................................. 1
Article I - Definitions .............................................. 3
Article II - Sublease of Project Facilities
and Term Thereof ...................................... 4
Article III - Construction of the Projects ........................... 5
Article IV - Concerning Rentals and Additional
Sums .................................................. 9
Article V - Consultants .............................................. 14
Article VI - Insurance, Insurance Consultant,
Casualty and Condemnation ............................ 15
Article VII - Additional Covenants of the Company.................... 23
Article VIII - Events of Default and Remedies........................ 28
Article IX - Miscellaneous........................................... 32
</TABLE>
-i-
<PAGE> 3
THIS SUBLEASE AND SECURITY AGREEMENT, dated as of December 1, 1984
(the "Sublease"), by and between CITY OF SALEM MUNICIPAL PORT AUTHORITY, a body
corporate and politic organized and existing under the laws of the State of New
Jersey (the "Authority"), as Sublessor, and SOUTH JERSEY PROCESS TECHNOLOGY,
INC., a corporation organized and existing under the laws of the State of New
Jersey (the "Company"), as Sublessee.
W I T N E S S E T H:
WHEREAS, the Authority is a public body corporate and politic
constituting a political subdivision of the State of New Jersey established as
an instrumentality exercising public and essential governmental functions under
the provisions of the New Jersey Municipal Port Authorities Law (N.J. Stat. Ann.
Section 40:68A 29 et seq. (West)) (the "Act"); and
WHEREAS, the Authority is empowered pursuant to the Act to issue
bonds for the purpose of raising funds to pay the cost of any part of its port
system; and
WHEREAS, pursuant to the Act, and in order to obtain funds necessary
to pay the costs of the Project (hereinafter defined), the Authority has duly
adopted a resolution authorizing the execution and delivery of a Trust Indenture
dated as of December 1, 1984 between the Authority and The Farmers and Merchants
National Bank of Bridgeton and the issuance of $2,500,000 principal amount of
its Port Development Revenue Bonds, Series of 1984 (South Jersey Process
Technology, Inc. Project) (the "Bonds"), to be issued pursuant to the Indenture;
and
WHEREAS, in furtherance of the purposes of the Act, the Authority
proposes to undertake a project (the "Project") consisting of, inter alia, the
application of the proceeds of the Bonds to the cost of (1) constructing,
improving and equipping a radiation processing system, with related facilities
(collectively the "Project Facilities"), for the irradiation of agricultural
products prior to shipping thereof, to be situated on certain real estate more
particularly described in Exhibit A hereof (the "Premises"), and (2) the payment
of costs of issuance of the Bonds; and
WHEREAS, the Authority and the Company desire to enter into this
Sublease, pursuant to which the Authority will sublease the Premises to the
Company, to permit the Company to operate the Project Facilities and to provide,
inter alia, for the payment of the interest on and the principal of the Bonds;
and
<PAGE> 4
WHEREAS, certain rights of the Authority under this Sublease are
being assigned to the Trustee for the benefit of the Owners of the Bonds
pursuant to an Assignment attached hereto (the "Assignment"); and
WHEREAS, the Bonds are being issued for the purpose of providing
funds to: (i) pay the costs of the Project; and (ii) pay the costs of issuance
of the Bonds; and
WHEREAS, the Bonds are to be secured by a pledge and assignment of
certain rentals payable by the Company hereunder, which rentals are intended to
be in an amount sufficient to pay, inter alia, the debt service on the Bonds and
the Administrative Expenses of the Authority;
NOW, THEREFORE, THIS SUBLEASE AND SECURITY AGREEMENT WITNESSETH:
That the parties hereto, intending to be legally bound hereby and in
consideration of the mutual covenants hereinafter contained, DO HEREBY AGREE to
all provisions contained in this Sublease.
-2-
<PAGE> 5
ARTICLE I.
DEFINITIONS.
The terms defined in this Article I shall have the following
meanings, unless the context clearly otherwise requires:
SECTION 1.01 Definitions. In this Sublease and any supplement hereto
(except as otherwise expressly provided or unless the context otherwise
requires) terms used as defined terms in the recitals hereto shall have the same
meanings throughout this Sublease, and, in addition, the following terms shall
have the meanings specified below:
"Event of Default" shall mean any of the events described in Section
8.01 hereof.
"Indenture" shall mean the Trust Indenture dated as of December 1,
1984 between the Authority and the Trustee, as amended or supplemented at the
time in question.
All words importing persons include firms, associations and
corporations, and all words importing the singular number include the plural
number and vice versa.
A reference herein to a statute or to a regulation issued by a
governmental agency includes the statute or regulation in force as of the date
hereof, together with all amendments and supplements thereto and any statute or
regulation substituted for such statute or regulation, unless the specific
language or the context of the reference herein clearly includes only the
statute or regulation in force as of the date hereof.
A reference herein to a governmental agency, department, board,
commission, or other public body or to a public officer includes an entity or
officer which or who succeeds to substantially the same functions as those
performed by such public body or officer as of the date hereof, unless the
specific language or the context of the reference herein clearly includes only
such public body or public officer as of the date hereof.
All words and terms used in the Sublease and not defined above or
elsewhere herein shall have the same meanings as set forth in the Indenture, if
defined therein.
-3-
<PAGE> 6
ARTICLE II.
SUBLEASE OF PROJECT FACILITIES AND TERM THEREOF
Section 2.01. The Authority, as lessor, does hereby demise and lease
the Premises, as described in Exhibit A hereto, to the Company, as lessee, for
operation and use, and the Company does hereby lease, hire and take the same
hereby from the Authority.
TO HAVE AND HOLD the same unto the Company, as lessee, for a term
beginning as of December 1, 1984, and ending December 1, 2004, unless extended
or sooner terminated in accordance with the terms hereof or in accordance with
the terms of that certain operating agreement among the Authority, the Company
and Radiation Technology, Inc. dated as of December 28, 1984.
Section 2.02. The Company shall construct or cause to be constructed
that part of the Project requiring construction in accordance with the plans and
specifications therefor and shall provide and maintain all fixtures,
furnishings, equipment and other related facilities necessary for the proper
operation and use of the Project Facilities and meeting standards no less than
the minimum standards lawfully established by regulatory bodies having
jurisdiction; provided, however, that nothing herein shall prevent or prohibit
the Company from contesting in good faith and by appropriate proceedings the
legality or reasonableness of any such standards, or the imposition of any such
standards upon it with respect to the Project Facilities, so long as the
operation of the Project Facilities would not be adversely affected by reason
thereof.
Section 2.03. The Sublease is executed in part to induce the
purchase by others of the Bonds and, accordingly, all covenants and agreements
on the part of the Company and the Authority, as set forth in the Sublease, are
hereby declared to be for the benefit of the Owners from time to time of the
Bonds Outstanding under the Indenture.
Section 2.04. The Authority makes no warranty, either express or
implied, as to the Premises or the condition thereof, or that the Premises will
be suitable for the purposes or needs of the Company. The Authority covenants
that the Company on paying the rent and additional rent provided for herein and
performing the terms, covenants and conditions hereof, shall and may have quiet
and peaceful possession of the Premises for the term of this Sublease. The
Company accepts the Premises in their present condition, with no assurances as
to riparian rights, and subject to any present conditions or restrictions as to
Wetlands Restrictions, Coastal Area Regulations, Flood Hazard area, as
-4-
<PAGE> 7
well as any limitations upon the property by virtue of being a former landfill
area.
-5-
<PAGE> 8
ARTICLE III.
CONSTRUCTION OF THE PROJECT
Section 3.01. The Company, as lessee, shall cause that portion of
the Project requiring construction to be constructed in accordance with the
plans and specifications and in connection therewith shall cause to be purchased
the materials therefor. Copies of the plans, specifications and architectural
renderings and all amendments thereto shall be filed with the Trustee and the
Authority.
Section 3.03. The construction schedule of that portion of the
Project requiring construction and the estimated costs shall be filed with the
Trustee. The construction and installation of the Project shall conform to the
schedule on file with the Trustee and to the plans and specifications prepared
and approved by the Company and the Authority and filed with the Trustee, as
hereinafter mentioned, provided, however, that the schedule on file with the
Trustee and said plans and specifications may from time to time be amended,
modified or changed and deletions may be made therefrom, but no change orders
with respect to construction contracts shall be made unless the conditions and
requirements of Section 4.01 of the Indenture shall have been complied with in
full. The Company shall pay the Costs of completing the Project to the extent
moneys in the Construction Fund are not sufficient.
Section 3.04. The Company and the Authority will comply with all
present and future laws, acts, rules, regulations, orders and requirements
lawfully made relating to any acquisition or construction undertaken hereby.
Section 3.05. (a) All payments to suppliers and contractors due
under the construction contracts shall be made, upon order or requisition of the
Company, by the Trustee in accordance with the terms of the Indenture.
(b) The Company shall enforce any construction contracts and
will cause the Project to be constructed and installed substantially in
accordance with the plans and specifications therefor, subject, however, to the
right of the parties hereto to make amendments, modifications and changes in the
schedule on file with the Trustee, and in the plans and specifications as
provided in Section 3.03 hereof. The Company and the Authority will not do or
refrain from doing any act whereby any surety on any bond may be released in
whole or in part from any obligations assumed by it or from any agreement to be
performed by it under any surety bond.
-6-
<PAGE> 9
(c) The Company and the Authority will use their best efforts
to cause the construction portions of the Project to be completed in accordance
with the schedule on file with the Trustee, or as soon thereafter as may be
practicable, except for delays incident to riots, sabotage, fire, floods,
differences with workmen, insurrections, acts of God, war, governmental acts,
difficulties with contractors or suppliers, inability to obtain material or
supplies or to transport the same to the Premises, shortages of energy or other
cause beyond the reasonable control of the parties hereto; but if for any reason
such acquisition, construction and installation is not completed by said date
there shall be no resulting liability on the part of the Authority and no
diminution in or postponement of the rent required by Article IV hereof to be
paid by the Company.
(d) In the event of default of any contractor or subcontractor
or supplier under any contract made by it in connection with the Project, or in
the event of a breach of warranty with respect to any materials, workmanship or
performance guaranty, the Company will notify the Authority and the Trustee and
will proceed, either separately or in conjunction with others, to pursue such
remedies against the contractor or subcontractor or supplier so in default and
against each surety for the performance of such contract as it may deem
advisable. The Company agrees to advise the Authority of the steps it intends to
take in connection with any such default. If the Company shall so notify the
Authority, the Company may, and, at the direction of the Authority, shall in its
own name or in the name of the Authority, prosecute any action or proceeding or
take any other action involving any such contractor, subcontractor, supplier, or
surety which the Company deems reasonably necessary, and in such event the
Authority hereby agrees to cooperate fully with the Company. If the Company,
after direction from the Authority, refuses to prosecute any action or
proceeding or take any other action against such contractor, subcontractor,
supplier or surety, the Authority may proceed to take all such action in the
name of the Company or in its own name and the Company shall pay all
administrative expenses in connection therewith.
Section 3.06. The Company will maintain or cause to be maintained
builder's risk (or equivalent coverage) insurance upon any work done or
materials furnished with respect to construction phases of the Project except
excavations, foundations and any other structures not customarily covered by
such insurance. The policies shall be issued by responsible companies qualified
to do business in New Jersey and satisfactory to the Company and the Insurance
Consultant and shall be written in completed value form for 100% of the
insurable value of the construction in the names of the Company, the Authority,
the Trustee, the contractor
-7-
<PAGE> 10
and subcontractors as their interests may appear. Any amounts payable to the
Company or the Authority thereunder shall be deposited in the Construction Fund.
During the period of any construction, the Company will also
maintain or cause to be maintained (a) workmen's compensation insurance and
employer's liability insurance underwritten by responsible companies qualified
to do business in New Jersey and satisfactory to the Company and the Insurance
Consultant, covering all employees of contractors and subcontractors in amounts
required by law, (b) general liability insurance, including umbrella coverage,
in amounts not less than $1,000,000 liability for personal injury for each
occurrence and in the aggregate per annum, and $100,000 for property damage for
each occurrence with an annual aggregate of not less than $1,000,000; and (c)
comprehensive automobile liability insurance covering owned, non-owned and hired
automobiles in amounts not less than $500,000 liability for injury to any one
person, $500,000 liability for each occurrence, and $100,000 for property damage
for each occurrence.
Each policy of insurance required by this Section 3.06, or a copy
thereof, or an insurance certificate in respect thereof, shall be deposited with
the Trustee and the Authority.
Section 3.07. (a) The Completion Date shall be evidenced to the
Authority and the Trustee by an Officers Certificate of the Company approved by
a Consulting Engineer stating that, except for amounts retained by the Trustee
at the Company's direction to pay any Cost of the Project not then due and
payable, (i) construction of the Project Facilities has been completed and all
costs of labor, services, materials and supplies used in such construction have
been paid, (ii) all equipment for the Project Facilities has been installed,
such equipment so installed is suitable and sufficient for the operation of the
Project Facilities, and all costs and expenses incurred in the acquisition and
installation of such equipment have been paid, and (iii) all other facilities
necessary in connection with the Project Facilities have been acquired,
constructed, improved, and equipped and all costs and expenses incurred in
connection therewith have been paid. Notwithstanding the foregoing, such
Certificate shall state that it is given without prejudice to any rights against
third parties which exist at the date of such Certificate or which may
subsequently come into being. Forthwith upon completion of the acquisition,
construction, improving, and equipping of the Project Facilities, the Company
agrees to cause such Certificate to be furnished to the Authority and the
Trustee. Upon receipt of such Certificate, the Trustee shall retain in the
Construction Fund a sum equal to the amounts necessary for
-8-
<PAGE> 11
payment of the Costs of the Project not then due and payable according to such
Certificate. If any such amounts so retained are not subsequently used, prior to
any transfer of said amounts to the Bond Fund as provided below, the Trustee
shall give notice to the Company of the failure to apply said funds for payment
of the Costs of the Project. Any amount not to be retained in the Construction
Fund for payment of the Costs of the Project, and all amounts so retained but
not subsequently used, shall be transferred by the Trustee into the Bond Fund.
(b) If at least ninety-five percent (95%) of the sum of (a)
the actual amount of the proceeds received by the Authority from the sale of the
Bonds less amounts expended for issuance expenses and (b) any investment
earnings on moneys in the Construction Fund, have not been used (i) for the
acquisition, construction, reconstruction or improvement of land or property of
a character subject to the allowance for depreciation under the Code, or (ii)
for payment of amounts which are, for federal income tax purposes, chargeable to
the Project Facilities' capital account or would be so chargeable either with a
proper election by the Company or but for a proper election by the Company to
deduct such amounts, any amount (exclusive of amounts retained by the Trustee in
the Construction Fund for payment of Costs of the Project not then due and
payable) remaining in the Construction Fund shall be segregated by the Trustee
in a separate sub-account of the Bond Fund and used by the Trustee at such time
as such amounts become Available Moneys (a) to redeem Bonds on the earliest
redemption date permitted by the Indenture without a premium, (b) to purchase
Bonds on the open market prior to such redemption date at prices not in excess
of one hundred percent (100%) of the principal amount of such Bonds, or (c) for
any other purpose provided that the Trustee is furnished with an opinion of
nationally recognized bond counsel to the effect that such use is lawful under
the Act and will not adversely affect the exclusion from federal income taxation
of interest on any of the Bonds. Until used for one or more of the foregoing
purposes, such segregated amount may be invested as permitted by the Indenture
provided that prior to any such investment the Trustee is provided with an
opinion of nationally recognized bond counsel to the effect that such investment
will not adversely affect the exclusion from federal income taxation of interest
on any of the Bonds.
<PAGE> 12
ARTICLE IV.
CONCERNING RENTALS AND ADDITIONAL SUMS
Section 4.01. The Company shall pay on the dates hereinafter set
forth to the Authority or its assigns the following sums as rent hereunder at
the following times:
(a) on or before any interest payment date for the Bonds or
any other date that any payment of interest, premium, if any, or
principal is required to be made in respect of the Bonds pursuant to
the Indenture, until the principal of, premium, if any, and interest
on the Bonds shall have been fully paid or provision for the payment
thereof shall have been made in accordance with the Indenture, in
immediately available funds, a sum which, together with any
Available Moneys available for such payment in the Bond Fund, will
enable the Trustee to pay the amount payable on such date as
principal of (whether at maturity or upon redemption or acceleration
or otherwise), premium, if any, and interest on the Bonds as
provided in the Indenture; provided, however, that the obligation of
the Company to make any payment hereunder shall be deemed satisfied
and discharged to the extent of the corresponding payment made by
the Bank to the Trustee under the Letter of Credit.
It is understood and agreed that all payments payable by the
Company under subsection (a) of this Section 4.01 are assigned by
the Authority to the Trustee for the benefit of the Owners of the
Bonds. The Company assents to such assignment. The Authority hereby
directs the Company and the Company hereby agrees to pay to the
Trustee at the Principal Office of the Trustee all payments payable
by the Company pursuant to this subsection.
(b) The Company shall pay as due any Administrative Expenses
of the Authority and the fees of the Trustee.
(c) The Company covenants, for the benefit of the Owners of
the Bonds, to pay or cause to be paid, to the Tender Agent, such
amounts as shall be necessary to enable the Tender Agent to pay the
Purchase Price of Bonds delivered to it for purchase, all as more
particularly described in sections 3.01, 3.02 and 3.06 of the
Indenture; provided, however, that the obligation of the Company to
make any such payment under this subsection (c) shall be reduced by
the amount of
-10-
<PAGE> 13
moneys available for such payment described in subsections (i) or
(ii) of Section 3.07 of the Indenture; and provided, further, that
the obligation of the Company to make any payment under this
subsection (c) shall be deemed to be satisfied and discharged to the
extent of the corresponding payment made by the Bank under the
Letter of Credit.
(d) In the event the Company should fail to make any of the
payments required in this Section 4.01, the item or installment so
in default shall continue as an obligation of the Company until the
amount in default shall have been fully paid, and the Company agrees
to pay the same with interest thereon, to the extent permitted by
law, from the date when such payment was due, at the Late Payment
Rate.
Additionally, from time to time, the Company shall be required to
make payments necessary to make up any deficiency in the funds established under
the Indenture or to pay for any cost overruns with respect to the Project.
Section 4.02. As additional rent hereunder, the Company during the
term of the Sublease shall pay or cause to be paid to the public officers
charged with the collection thereof promptly as the same become due, all taxes
(or contributions or payments in lieu thereof), including but not limited to
income, profits or property taxes, which may now or hereafter be imposed by the
United States of America, any state or municipality or any political subdivision
or subdivisions thereof, and all assessments for public improvements or other
assessments, levies, license fees, charges for publicly supplied water or sewer
services, excises, franchises, imposts and charges, general and special,
ordinary and extraordinary (including interest, penalties and all costs
resulting from delayed payment of any of the foregoing) of whatever name, nature
and kind and whether or not now within the contemplation of the parties hereto
which are now or may hereafter be levied, assessed, charged or imposed upon or
which are or may become a lien upon the Sublease, the Premises, the Project
Facilities, the use or occupation thereof or upon the owner or occupants in
respect of or upon the basis of the rent or the estate hereby created, or upon
the Company or the Authority, or upon any franchises, businesses, transactions,
income, earnings and receipts (gross, net or otherwise) of the Authority in
connection with the Premises or Project Facilities, for payment or collection
of which the Authority otherwise would be liable or accountable under any lawful
authority whatever by reason of the Sublease, or its earnings, profits or
receipts from, or its subleasing of, the Premises or Project
-11-
<PAGE> 14
Facilities; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any tax, assessment, lien or other
matter hereunder so long as the validity thereof is being contested in good
faith and by appropriate legal proceedings diligently pursued and neither the
Premises nor any rent or income therefrom or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost. The Company will,
upon request, provide the Authority or the Trustee with copies of any tax
returns and receipts for payments of taxes.
Section 4.03. The Company may make payments in advance from time to
time, on account of rentals payable hereunder, in installments, which amounts
shall be credited against the rental at the time next due. All such payments
made in respect of amounts due under Section 4.01(a) hereof shall be made
directly to the Trustee and shall be deposited by the Trustee in the Bond Fund
created under the Indenture.
Section 4.04. The Company shall pay rentals and additional sums
required hereunder without suspension or abatement of any nature,
notwithstanding that all or any part of the Project Facilities shall have been
wholly or partially destroyed, damaged or injured and shall not have been
repaired, replaced or rebuilt. So long as any of the Bonds remain Outstanding or
sufficient Available Moneys for the payment of the Bonds, in full, including
principal, interest and premium for redemption, if any, shall not be held by the
Trustee in trust therefor, the obligation of the Company to pay rentals shall be
absolute and unconditional and shall not be suspended, abated, reduced,
abrogated, waived, diminished or otherwise modified in any manner or to any
extent whatsoever, regardless of any rights of setoff, recoupment or
counterclaim that the Company might otherwise have against the Authority or the
Trustee or any other party or parties and regardless of any contingency, act of
God, event or cause whatsoever and notwithstanding any circumstances or
occurrence that may arise or take place after the date hereof, including but
without limiting the generality of the foregoing:
(a) any damage to or destruction of any part or all of the
Project Facilities;
(b) the taking or damaging of any part or all of the Premises
or Project Facilities, by any public authority or agency in the
exercise of the power of or in the nature of eminent domain or
through a conveyance in lieu of such exercise or otherwise;
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<PAGE> 15
(c) any assignment, novation, merger, consolidation, transfer
of assets, subleasing or other similar transaction of or affecting
the Company, whether with or without the approval of the Authority
or the Trustee;
(d) the expiration of the term of this Sublease pursuant to
the provisions hereof;
(e) any failure of the Authority or the Trustee to perform or
observe any agreement or covenant, whether express or implied, or
any duty, liability or obligation arising out of or connected with
this Sublease, the Indenture or the Bonds;
(f) any acts or circumstances that may constitute an eviction
or constructive eviction;
(g) failure of consideration, failure of title or commercial
frustration;
(h) any change in the tax or other laws of the United States
or of any state or other governmental authority; and
(i) any determination that the Bonds are subject to federal
taxation.
Except to the extent provided in and subject to this Section 4.04,
nothing contained herein shall be construed to prevent or restrict the Company
from asserting any rights which it may have under this Sublease or any provision
of law against the Authority or the Trustee.
Section 4.05. Rentals and additional sums required to be paid by the
Company shall be received by the Authority or its assigns as net sums and the
Company covenants to pay all charges against or which might diminish such net
sums.
Section 4.06. The Company may provide for the delivery to the
Trustee of a Substitute Letter of Credit. Any Substitute Letter of Credit shall
be delivered to the Trustee not less than sixty (60) days prior to the
expiration of the Letter of Credit it is being issued to replace; provided,
however, that on or before the date of such delivery of a Substitute Letter of
Credit to the Trustee, the Company shall furnish to the Trustee written evidence
from each rating agency by which the Bonds are then rated, to the effect that
such rating agency has reviewed the proposed substitute Letter of Credit and
that the substitution of the proposed Substitute Letter of Credit will not, by
itself,
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<PAGE> 16
result in the reduction of the then applicable rating(s) of the Bonds.
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<PAGE> 17
ARTICLE V.
CONSULTANTS
Section 5.01. The Company covenants to employ, or to cause to be
employed, such consultants from time to time as may be required to carry out the
provisions hereof. Such consultants shall be approved by the Authority, which
approval shall not be unreasonably withheld. As provided herein, such
consultants consist of a Certified Public Accountant and a Consulting Engineer.
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<PAGE> 18
ARTICLE VI.
INSURANCE, INSURANCE CONSULTANT, CASUALTY
AND CONDEMNATION
Section 6.01. The Company covenants to provide and maintain
continuously unless otherwise provided herein, the following:
(a) Insurance against loss and/or damage to the Project
Facilities (which may also cover other property of the Company)
under a policy or policies in form and amount covering such risks as
are ordinarily insured against by similar companies including
without limiting the generality of the foregoing, fire and uniform
standard extended coverage endorsements, limited only as may be
provided in the standard form of extended coverage endorsements at
the time in use in the State. Such insurance shall be for an amount
at least equal to the amount required to pay the principal of, and
interest on, the Bonds and any other indebtedness from the Company
to the Authority as they mature and come due or for the full
insurable value of the Project Facilities if such insurable value is
less than the aforesaid amount. No policy of insurance shall be so
written that the proceeds thereof will produce less than the minimum
coverage required by the preceding sentence, by reason of
co-insurance provisions or otherwise, without the prior consent
thereto in writing by the Trustee, except that each policy of
insurance required hereunder may contain a loss deductible clause
specifying such sum or sums as the Company may determine and as are
acceptable to an Insurance Consultant as the sum or sums to be
deducted from the amount of loss resulting from particular perils.
The Authority will request the Trustee to consent to such
co-insurance or other like reductions upon approval thereof by an
Insurance Consultant.
(b) (i) General liability insurance protecting the Company
against injuries to persons in the minimum amount of $500,000 per
occurrence and $500,000 in the aggregate per annum, and for property
damage in amounts of $100,000 per occurrence and $500,000 in the
aggregate per annum; and (ii) Comprehensive automobile liability
insurance protecting the Company against liability for injuries to
any one person in amounts not less than $500,000, $500,000 liability
for each
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<PAGE> 19
occurrence and $100,000 for property damage for each occurrence.
(c) Workmen's Compensation and employer's liability insurance
meeting the Company's statutory obligations; provided, however,
that, if the Company becomes an approved self-insured, employer's
liability coverage in the amount of at least $100,000 shall be
purchased.
(d) Boiler and machinery coverage (direct damage) on a
replacement cost basis where deemed advisable by the Insurance
Consultant, or when required by ordinance or law.
(e) Excess liability coverage, either straight excess or
umbrella excess, covering excess of subsection (b)(i) above to be
maintained in force so that the total coverage available under the
aforementioned subsection, including this subsection, is not less
than $2,000,000 for any one occurrence and $2,000,000 in the
aggregate per annum for personal injury, and $2,000,000 for any one
occurrence and $2,000,000 in the aggregate, per annum, for property
damage, which requirements may be met by any State mandated
insurance fund.
(f) Insurance, if any available, against any claims under the
Spill Compensation and Control Act, N.J.S.A. 58:10-23.11, et. seq.,
the Environmental Cleanup Responsibility Act, N.J.S.A. 13:1(k)-6,
et. seq., and any similar state or federal laws or regulations now
or hereafter applicable thereto.
All policies of insurance and bonds required by this Section 6.01
shall be in such amounts and contain such provisions as comply with the
foregoing requirements or as shall have been recommended in writing by an
Insurance Consultant, if higher; provided, however, that the Company shall not
be required to insure for risks not normally covered or carry insurance coverage
in excess of standard requirements for companies of similar size and nature
engaged in similar activities. All such policies and bonds shall provide, to the
extent obtainable, that coverage shall not be reduced or canceled without 30
days prior written notice to the Authority and the Trustee.
All policies of insurance and fidelity bonds shall be issued by
responsible insurance or fidelity bonding companies, acceptable to the Company,
qualified to do business in the State and qualified under the laws of the State
to
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<PAGE> 20
assume risks covered by such policy or policies or bond or bonds and shall be
nonassessable.
All policies of insurance, trusts evidencing insurance and fidelity
bonds required under subparagraphs (a) through and including (f) above shall be
for the benefit of the Authority, the Company and the Trustee, as their
respective interests may appear. All policies of insurance required under
subparagraphs (a) and (d) above shall be made payable to the Trustee and the
Trustee shall have the exclusive right to receive the proceeds from such
insurance. The Company, with the consent of the Authority and the Trustee which
consent shall not be unreasonably withheld, shall have the right to settle all
claims thereunder. The Company shall have the right to receive payments due and
to receipt for claims under policies of insurance required by subparagraphs (b)
and (e) above. The original or a copy of each policy or a copy of any
self-insurance trust or fidelity bond or a certificate that the same has been
issued and is currently in effect, shall be delivered to the Trustee.
In the event that any insurance required by this Section 6.01 is
commercially unavailable at a reasonable cost or has been otherwise provided, as
evidenced by an Officer's Certificate of the Company, the Authority, with the
approval of the Company, may accept such substitute coverage as is recommended
by the Insurance Consultant.
Section 6.02. If the Premises shall be wholly or partially destroyed
or damaged by fire or other casualty covered by insurance required under Section
6.01(a), or shall be wholly or partially condemned, taken or injured by any
Person, including any Person possessing the right to exercise the power of or a
power in the nature of eminent domain or transferred to such a Person by way of
a conveyance in lieu of the exercise of such a power by such a Person, the
Authority and the Company covenant that they will take all actions and will do
all things which may be necessary to enable recovery to be made upon such
policies of insurance or on account of such taking, condemnation, conveyance,
damage or injury in order that moneys due on account of losses suffered may be
collected and paid to the Trustee. The Company is authorized, in its own name,
but only upon consent of the Trustee, which shall not be unreasonably withheld,
to demand, collect, sue, settle claims, receipt and release moneys which may be
due and payable under such policies of insurance or on account of such
condemnations, damage or injury.
Any appraisement or adjustment of loss or damage and any settlement
or payment therefor, which may be agreed upon by the Authority, the Company and
the appropriate insurer or condemnor or Person, shall be evidenced to the
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<PAGE> 21
Trustee by the certificate and approvals set forth in Section 9.05 of the
Indenture. The Trustee may rely conclusively upon such certificates.
Section 6.03. Unless the Company shall have exercised its option to
redeem the Bonds in whole pursuant to the provisions of Section 6.05(a) or
Section 6.05(b) hereof, if prior to the full payment of the Bonds (or prior to
provision for payment thereof having been made in accordance with the provisions
of the Indenture)(i) the Premises or any portion thereof is destroyed (in whole
or in part) or is damaged by fire or other casualty or (ii) title to or any
interest in, or the temporary use of, the Premises or any part thereof shall be
taken under the exercise of the power of eminent domain by any governmental body
or by any Person acting under governmental authority, the Company shall be
obligated to continue to pay the amounts specified in Section 4.01 hereof.
Section 6.04. If moneys are collected under policies of insurance
required under Section 6.01(a) or (d) or on account of any event described in
Section 6.03 hereof, such moneys shall be paid to the Trustee for deposit in the
Construction Fund, if received prior to the Completion Date, or in a separate
trust fund if received subsequent to the Completion Date, and applied in one or
more of the following ways as shall be elected by the Company in a written
notice to the Trustee:
(a) to the prompt repair, restoration, modification or
improvement of the Premises, and the Authority has, in the
Indenture, authorized and directed the Trustee to make disbursements
from such separate trust fund for such purposes. Such disbursements
shall be made by the Trustee only upon receipt of proper
requisitions therefor. Any balance of the insurance or condemnation
proceeds remaining after such work has been completed shall be
transferred into the Bond Fund to be applied in accordance with
subsection (b) below, or if the Bonds have been fully paid (or
provision for payment thereof has been made in accordance with the
provisions of the Indenture), any balance remaining in such separate
trust fund shall be paid in accordance with Section 6.08 of the
Indenture.
(b) at such time as such funds constitute Available Moneys, to
the redemption of Bonds on the earliest practicable redemption date
as specified in a written notice by the Company to the Trustee,
provided that no part of such insurance or condemnation proceeds may
be applied for such redemption unless (1) all of the Bonds are to be
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<PAGE> 22
redeemed in accordance with the Indenture upon exercise by the
Company of its option to redeem the Bonds in whole pursuant to the
provisions of Section 6.05(a) or Section 6.05(b) hereof or (2) in
the event that less than all of the Bonds are to be redeemed, the
Company shall furnish to the Bank and the Trustee an Officer's
Certificate of the Company stating that (i) the property forming the
part of the Premises that was damaged or destroyed by such casualty
or was taken by such condemnation proceedings is not essential to
the use or possession of the Premises by the Company or (ii) the
Premises have been repaired, restored, modified or improved to
operate as designed.
Section 6.05. The Authority and the Company agree that the Bonds
shall be subject to extraordinary redemption in whole, at the option of the
Company upon the occurrence of any of the events set forth below:
(a) The Premises shall have been damaged or destroyed (i) to
such extent that they cannot, in the Company's judgment, be
reasonably restored within a period of six (6) months to the
condition thereof immediately preceding such damage or destruction,
or (ii) to such extent that the Company is thereby prevented, in the
Company's judgment, from carrying on its normal operations at the
Project Facilities for a period of six (6) months or more.
(b) Title to, or the temporary use for a period of six (6)
months or more of, all or substantially all the Premises, or such
part thereof as shall materially interfere, in the Company's
judgment, with the operation of the Project Facilities for the
purpose for which the Project Facilities are designed, shall have
been taken under the exercise of the power of or power in the nature
of eminent domain by any governmental body or by any Person acting
under governmental authority or transferred to such Person by way of
a conveyance in lieu of the exercise of such power by such Person
(including such a taking or takings as results in the Company being
thereby prevented from carrying on its normal operations at the
Project Facilities for a period of six (6) months or more).
(c) Changes which the Company cannot reasonably control or
overcome in the economic availability of materials, supplies, labor,
equipment and other properties and things neces-
<PAGE> 23
sary for the efficient operation of the Project Facilities for the
purposes contemplated by this Sublease shall have occurred, or
technological or other changes shall have occurred which in the
judgment of the Company render the continued operation of the
Project Facilities uneconomic for such purposes.
(d) As a result of any changes in the Constitution of the
State or the Constitution of the United States of America or of
legislative or administrative action (whether state or federal) or
by final decree, judgment or order of any court or administrative
body (whether state or federal) entered after the contest thereof by
the Company in good faith, this Sublease shall have become void or
unenforceable or impossible of performance in accordance with the
intent and purposes of the parties as expressed in this Sublease, or
unreasonable burdens or excessive liabilities shall have been
imposed on the Company in respect of the Project Facilities,
including, without limitation, federal, state or other ad valorem,
property, income, or other taxes not being imposed on the date of
this Sublease.
Section 6.06. To exercise its option to effect an extraordinary
redemption of all Bonds then Outstanding pursuant to Section 6.05 hereof, the
Company shall within ninety (90) days following the event authorizing such
redemption, give written notice to the Authority, the Bank and the Trustee and
shall specify therein the date of redemption of Bonds pursuant to Section 8.01
of the Indenture, which date shall be the next interest payment date in respect
of the Bonds for which the required notice of redemption can practicably be
given, and shall make arrangements satisfactory to the Trustee for the giving of
the required notice of redemption. In order to exercise such option, the Company
shall pay, or cause to be paid, on or prior to the applicable redemption date,
to the Trustee, an amount equal to the sum of the following:
(1) An amount of money which, when added to the amount
then on deposit and available in the Bond Fund, will be
sufficient to retire and redeem all the Outstanding Bonds on
the earliest possible redemption date after notice as provided
in the Indenture, including, without limitation, the principal
amount thereof, all interest to accrue to said redemption
date, and the applicable redemption premium, if any, plus
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<PAGE> 24
(2) An amount of money equal to the Trustee's fees and
expenses under the Indenture accrued and to accrue until such
final payment and redemption of the Bonds, plus
(3) An amount of money equal to the Authority's fees and
expenses under this Sublease accrued and to accrue until such
final payment and redemption of the Bonds.
The Company's obligation to make any payments under this Section
6.06 shall be deemed satisfied and discharged to the extent of the corresponding
payment made by the Bank under the Letter of Credit.
Section 6.07. The proceeds of all general liability and
comprehensive automobile liability insurance shall be applied by the Company to
the payment of any judgment, settlement or liability incurred for risks covered
by such insurance. The proceeds of insurance obtained pursuant to 6.01(f) hereof
shall be used to satisfy claims under the Spill Compensation Control Act, the
Environmental Cleanup Responsibility Act, or other similar laws or regulations,
as applicable.
Section 6.08. The Company covenants to furnish to the Authority and
the Trustee on or before the execution and delivery hereof, and thereafter prior
to the beginning of each Fiscal Year, an Insurance Consultant's Certificate,
setting forth amounts and types of insurance then in force with respect to the
Project Facilities and operation thereof, stating whether in the opinion of such
Consultant, such insurance then in force is in compliance with such Consultant's
recommendations made in fulfillment of the requirements of Section 6.01 hereof,
and stating the amounts and types of insurance to be maintained during the next
ensuing Fiscal Year. The Company covenants to maintain such amounts and types of
insurance.
Section 6.09. If the proceeds of insurance as a result of damage or
injury to the Premises or condemnation awards resulting from condemnation of the
Premises are insufficient to pay in full the cost of any repair, restoration,
modification or improvement referred to in Section 6.04(a) hereof, the Company
will nonetheless complete the work and will pay any cost in excess of the amount
of such proceeds or awards held by the Trustee. The Company agrees that if by
reason of any such insufficiency the Company shall make any payments pursuant to
the provisions of this Section, the Company shall not be entitled to any
reimbursement therefor from the Authority, the Trustee or the Owners of any of
the Bonds, nor shall the Company be entitled to
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<PAGE> 25
any diminution of the amounts payable under Section 4.01 hereof.
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<PAGE> 26
ARTICLE VII.
ADDITIONAL COVENANTS OF THE COMPANY
Section 7.01. The Company covenants and agrees that whenever the
services of an Architect or Consulting Engineer are required to carry out the
provisions hereof, it will, upon request of the Authority, retain or cause to be
retained an Architect or Consulting Engineer.
Section 7.02. The Company covenants to keep accurate records and
books of account, and to have made a certified audit of such records and
accounts by a Certified Public Accountant for each Fiscal Year. Within 120 days
after the end of the Fiscal Year, a signed counterpart of such audit shall be
furnished to the Authority and the Trustee and copies thereof shall be available
for inspection at reasonable times by Owners of the Bonds.
Section 7.03. The Company covenants to maintain the Premises in good
repair and operating condition, to operate the same continuously in an
economical and efficient manner in accordance with applicable laws, and to make
all ordinary repairs, renewals, replacements and improvements required to
continuously operate the Premises. The Company further covenants that it will
not commit or suffer any stripping or waste of the Premises.
Section 7.04. The Company covenants that all actions heretofore and
hereafter taken by the Company or by the Authority upon the recommendation or
request of any officer of the Company to acquire and carry out the Project,
including the making of contracts, have been and will be in full compliance with
all pertinent laws, ordinances, rules, regulations and orders applicable to the
Company. In connection with the construction, operation, maintenance, repair and
replacement of the Premises, the Company covenants that it shall comply with all
applicable ordinances, laws, rules, regulations and orders of the government of
the United States of America, the State and any department, agency or political
subdivision thereof, and any requirement of any board of fire underwriters
having jurisdiction or of any insurance company writing insurance on the
Premises. Provided, however, that nothing herein shall prevent or prohibit the
Company from contesting in good faith and by appropriate proceedings the
legality or reasonableness of any such standards, or the imposition of any such
standards upon it with respect to the Premises so long as the operation of the
Premises or the receipt of income therefrom would not be adversely affected by
reason thereof. The Company covenants that it shall not take any action or
request the Authority to execute any release which would cause the Premises to
be in violation of such laws or ordinances or such that a convey-
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<PAGE> 27
ance of the Premises or of any portion of the Premises would create a violation
of such laws and ordinances. The Company acknowledges that any review by the
Authority's staff or Counsel of any action heretofore or hereafter taken by the
Company has been or will be solely for the protection of the Authority. Such
reviews shall not prevent the Authority from enforcing any of the covenants made
by the Company. The Authority hereby covenants that it will use its best efforts
to assist the Company in obtaining necessary permits, approvals and consents
from appropriate governmental authorities in connection with the construction,
operation, maintenance, repair or replacement of the Premises.
Section 7.05. The Company covenants to preserve and to maintain its
existence as a corporation under the laws of the State, and to preserve and
maintain its authority to operate the Premises. The Company covenants that
during the term of the Sublease it shall not initiate any proceedings or take
any action whatsoever to dissolve, liquidate or to terminate its existence as a
corporation or otherwise dispose of substantially all of its assets, except as
otherwise provided herein or in the Indenture, except to consolidate or to merge
with any other corporation as provided herein. The Company covenants that during
the term of the Sublease it shall not consolidate with or merge into any other
corporation, unless the following conditions shall be met:
(a)the successor formed by such consolidation or merger
shall be a legal entity organized under the laws of the United
States or any state, district or territory thereof;
(b)such successor corporation shall be financially
capable of fulfilling, and agrees to fulfill, the obligations
of the Company under this Sublease, the Remarketing Agreement,
the Credit Agreement, the Tender Agent Agreement and the
Pledge Agreement;
(c)the successor formed by such consolidation or merger
shall have a net worth immediately subsequent to such
consolidation or merger at least equal to that of the Company
immediately prior to such consolidation or merger;
(d)immediately after such consolidation or merger, the
Company, or such successor corporation, shall not be in
default in the performance or observance of any duties,
obligations or covenants of the Company under the Sublease;
and
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<PAGE> 28
(e) The Authority and Trustee shall have received an
opinion of Counsel satisfactory to each of them that the
exemption from federal income taxes of the interest on the
Bonds will not be affected by the merger, transfer or
consolidation.
Section 7.06. The Company will fully and faithfully perform all the
duties and obligations which the Authority has covenanted and agreed in the
Indenture to cause the Company to perform and any duties and obligations which
the Company is required in the Indenture to perform. The foregoing shall not
apply to any duty or undertaking of the Authority which by its nature cannot be
delegated or assigned.
Section 7.07. The Company covenants and represents that it is a
corporation duly organized and existing in good standing under New Jersey law
with full power and legal right to enter into the Sublease and perform its
obligations hereunder. The making and performance of the Sublease, the
Remarketing Agreement, the Credit Agreement, the Tender Agent Agreement and the
Pledge Agreement on the Company's part have been duly authorized by all
necessary corporate action and will not conflict with or constitute a breach of
or default under its Articles of Incorporation, By-Laws or any bond, contract,
indenture, agreement or any other instrument by which the Company or its
property is bound.
Section 7.08. The Company will not take any action or permit any
action to be taken on its behalf, or cause or permit any circumstances within
its control to arise or continue, if such action or circumstances would cause
the interest paid by the Authority on the Bonds to be subject to federal income
tax in the hands of the Owners thereof.
Section 7.09. The Company covenants that the Authority, the Bank and
the Trustee by their duly authorized representatives, at reasonable times, for
purposes of determining compliance with the Sublease may inspect any part of the
Premises.
Section 7.10. The Company agrees, whenever requested by the
Authority, the Bank or the Trustee to and certify or cause to be provided and
certified such information concerning the Premises, the Company, the finances of
the Company, and other topics as the Authority, the Bank or the Trustee
consider necessary to enable it to make any reports or supply any information
required by the Indenture, law, governmental regulation or otherwise.
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<PAGE> 29
Section 7.11. Upon termination hereof, or upon termination of all
rights of the Company hereunder, either by reason of default or expiration of
the term, the Company covenants that it will deliver up peaceable possession of
the Premises, without delay, in case of such termination, upon demand made by
the Authority or, in case of such default, upon demand made by the Authority or
the Trustee, in good repair and operating condition, excepting reasonable wear
and tear and damage, injury or destruction by fire or other casualty which,
under terms hereof, shall not have been repaired, reconstructed or replaced.
Section 7.12. Promptly after the Company first becomes aware of any
Determination of Taxability (as defined in the Indenture), the Company shall
give written notice thereof to the Authority and the Trustee. The Company shall
be obligated to cause the Bonds to be redeemed within one hundred eighty (180)
days after any such Determination of Taxability shall have occurred.
Section 7.13. The Company agrees to execute and file or cause to be
executed and filed any and all financing statements or amendments thereof or
continuation statements necessary to perfect and continue the perfection of the
security interests granted in the Indenture. The Company shall pay all costs of
filing such instruments.
Section 7.14. The Company covenants not to sublease the Premises or
any portion thereof without the prior written consent of the Authority or the
Trustee and without obtaining the opinion of nationally recognized bond counsel
described in Section 9.13 hereof, and any sublease shall be subject to the
following conditions:
(a) No such sublease shall relieve the Company of its
obligation to make the payments required under Sections 4.01 or 4.02
hereof or its obligation for the performance of all other covenants
hereunder, for which the Company shall remain primarily liable;
(b) The Company shall deliver to the Authority and the Trustee
a copy of any sublease within 15 days subsequent to the execution of
any sublease;
(c) Any tenant or any person "related" to such tenant within
the meaning of Section 103(b)(6)(C) of the Code, shall not have made
and shall covenant not to make any "capital expenditures" as defined
in Section 103(b)(6)(D) of the Code and the regulations thereunder
which
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<PAGE> 30
would cause a violation of Section 7.08 of this Agreement;
(d) If any tenant shall be deemed a "principal user" of the
Project Facilities within the meaning of Section 103(b)(6)(D) of the
Code, such tenant shall covenant to file such statements of capital
expenditures as are required by any regulations promulgated under
Section 103(b)(6) of the Code, and to provide the Company, the
Authority and the Trustee with copies of such statements; and
(e) The tenant shall covenant in the sublease not to make any
use of the Premises which violates Section 103(b)(6) of the Code.
Section 7.15. The Company shall at all times comply with all
environmental requirements of applicable governmental authorities, and shall, at
its own cost and expense, cure, clean-up, and/or correct, any environmental
deficiencies caused by, arising from or relating to the operation of the
Company's business on the Premises or in the Port District, or any part thereof,
wherever the alleged contamination may be located, whether on the Premises, or
within or without the Port District, and the Company shall pay all charges which
are or may be chargeable by reason thereof to the Authority, the Premises, the
Port District, or any part thereof under the Spill Compensation and Control Act,
N.J.S.A. 58:10-23.11, et seq., and any similar state or Federal laws or
regulations now or hereafter applicable thereto. In the event any meritorious
claim is made by or through any governmental authority as to any environmental
deficiency above described, the Company on ten (10) days' written notice from
the Authority shall make, execute and deliver to the Authority a bond with a
cash deposit, or in lieu thereof a surety company bond satisfactory to the
Authority, in the estimated amount to cover the alleged claim.
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<PAGE> 31
ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES
Section 8.01. If any of the following events (herein called "Events
of Default") shall happen,
(a) if the Company fails to make any payment required by
Section 4.01 (a) or (c) hereof when the same shall become due and
payable, except, in the case of any payment under subsection (a) of
Section 4.01 hereof corresponding to interest on the Bonds, the
Company shall not be in default if such payment is made within three
(3) days following the due date thereof; or
(b) if the Company fails to pay any other payment required
hereby and such failure continues for 30 days after the Authority or
the Trustee gives notice that such other payment is due and unpaid;
or
(c) if the Company fails to perform any of its other covenants
or conditions or fails to perform any of its obligations hereunder
and such failure continues for 30 days after the Authority or the
Trustee gives the Company written notice thereof; provided, however,
that if such performance requires work to be done, actions to be
taken, or conditions to be remedied, which by their nature cannot
reasonably be done, taken or remedied, as the case may be, within
such 30 day period, no Event of Default shall be deemed to have
occurred or to exist if, and so long as, the Company shall commence
such performance within such 30 day period and shall diligently and
continuously prosecute the same to completion; or
(d) if the Company commits any act of bankruptcy under Federal
or state bankruptcy laws or laws providing for reorganization or
relief for debtors or files or has filed against it a petition of
bankruptcy or for arrangement or for reorganization pursuant to the
Federal Bankruptcy Code or other similar laws, Federal or state, or
if, by the decree of a court of competent jurisdiction, it is
adjudicated bankrupt or declared insolvent, or makes an assignment
for the benefit of creditors, or admits in writing its inability to
pay its debts generally when or as they become due, or consents to
the appointment of a trustee, receiver or liquidation of all or any
part of the Company or any of its facilities or the Project Fa-
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<PAGE> 32
cilities, provided that, if any such proceeding is commenced by a
person other than the Company, there shall be no Event of Default if
such proceedings are dismissed within 60 days of the filing of
initial pleadings therein; or
(e) the occurrence of an Event of Default under the Indenture.
then and at any time thereafter while such Event of Default is continuing, the
Authority may in addition to its other remedies at law or equity or provided for
in this Sublease, with the consent of the Bank by notice to the Company
specifying the Event of Default, terminate this Sublease. Anything in this
Sublease to the contrary notwithstanding, if, the Trustee under the Indenture
shall, pursuant to Section 10.02 thereof, declare the principal of the then
Outstanding Bonds immediately due and payable then there shall become
immediately due and payable hereunder as then current damages of the Authority
under this Sublease an amount equal to all amounts then due and payable by the
Authority under said Section 10.02 of the Indenture. Until said amount is paid
by the Company at the time or times and in the manner required to permit the
Authority to meet its obligations pursuant to the Indenture, the Authority shall
continue to have all of the rights, powers and remedies herein set forth, and,
for such time as may be necessary to enable the Authority to satisfy in full its
obligations under the Indenture, the term of this Sublease shall be extended as
a tenancy at the will of the Authority, and the Company's obligations hereunder
shall continue in full force and effect.
Section 8.02. If this Sublease is terminated under Section 8.01,
(a) such termination shall not relieve the Company of
previously accrued obligations under the Sublease; and
(b) the Company shall peaceably surrender the Premises failing
which, the Authority shall have the right to enter upon and
repossess the Premises by force, ejectment or otherwise; and
(c) the Authority may relet any or all of the Premises on such
terms as it elects, but the Authority shall not be liable for any
failure to relet or to collect any rent due upon reletting; and
(d) thereafter, as liquidated current damages for its default,
the Company shall pay to the Authority, on the dates on which
payments required
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<PAGE> 33
hereunder or under the Indenture would have been payable, amounts
equal to such installments less the net proceeds of any reletting
effected under (c) above.
Additionally, it is understood that in determining "net proceeds"
the Authority shall deduct from all sums collected amounts equal to all charges,
expenses or commissions reasonably incurred in collecting such sums and/or
operating and administering the Project Facilities.
Section 8.03. In case of any proceeding of the Authority:
(1) to foreclose or terminate the estate or interest of the
Company, based upon a default hereunder (if the Authority
shall elect so to proceed); or
(2) wherein appointment of a receiver may be permissible, the
Authority, as a matter of right and immediately upon
institution of each proceeding, upon written notice to the
Company, shall be entitled to appointment of a receiver of the
Premises with such powers as the court making such appointment
can confer; subject, however, to limitations and restrictions
of the Act.
Section 8.04. As part of the consideration for the Sublease, the
Company hereby waives any applicable exemption laws now or hereafter in force.
No failure by either party to insist upon strict performance hereof or to
exercise any remedy upon the occurrence of an Event of Default shall constitute
a waiver of such default, or a waiver or modification of any provision hereof.
Upon the occurrence of an Event of Default, the Authority may exercise any one
or more of the remedies available to it separately or concurrently and as often
as required to enforce the Company's obligations. In addition to the other
remedies provided herein, the Authority shall be entitled to the restraint by
injunction of the violation, or attempted or threatened violation by the Company
of any of the covenants, conditions or provisions hereof, or to a decree
compelling specific performance of any of such covenants, conditions or
provisions.
Section 8.05. With respect to any amounts payable by the Company to
the Authority hereunder, the Authority shall have, in addition to any other
rights and remedies, the same rights and remedies as are provided by law and in
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<PAGE> 34
this Sublease in the case of default by the Company in the payment of rentals.
-32-
<PAGE> 35
ARTICLE IX.
MISCELLANEOUS
Section 9.01. The Company acknowledges that it has received an
executed copy of the Indenture, and that it is familiar with its provisions, and
agrees that, as sublessee hereunder, it will take all such actions as are
required or contemplated of it under the Indenture to preserve and protect the
rights of the Trustee and of the Owners of Bonds thereunder and that it will not
take any action which would cause a default thereunder. It is agreed by the
Company and the Authority that payment of all costs relating to the exchange or
transfer of Bonds and which are not paid by the owner of such Bonds will be paid
by the Company.
Section 9.02. The Authority and the Company agree that all repairs,
renewals, replacements, improvements, additions and extensions, extraordinary
repairs and capital additions or property in the nature thereof, which shall be
made or acquired by the Authority or the Company during the term hereof in
connection with the Project Facilities shall become part of the leasehold estate
of the Authority and the Project Facilities; and the Company agrees to execute
such instruments as may be required, from time to time, by the Authority to
effect the foregoing.
Section 9.03. If the Company at any time fails to pay any taxes or
other impositions payable by it in accordance with Section 4.02 hereof, or to
take out, pay for, maintain or deliver any of the bonds or insurance or surety
policies provided for in Articles III and VI, or shall fail, within the time
provided for in Article VIII after the notice therein specified of any Event or
Default, as therein defined, has been given thereunder, to make any other
payment or perform any other act on its part to be made or performed, then the
Authority may, but shall not be obligated so to do, upon prior written notice to
the Company and without waiving or releasing the Company from any of its
obligations in this Sublease contained, (a) pay any taxes or other impositions
payable by the Company in accordance with Section 4.02 hereof, (b) take out, pay
for and maintain any of the insurance policies provided for in Articles III and
VI, or (c) make any other payment or perform any other act on the Company's part
to be made or performed as in this Sublease provided. All sums so paid by the
Authority and all necessary incidental costs and expenses in connection with the
performance of any such act by the Authority shall be payable to the
Authority, on demand or at the option of the Authority may be added to any
installment of rent then due or thereafter becoming due under the Sublease, and
the Company covenants to pay any such sums.
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<PAGE> 36
Section 9.04. If any term or provision hereof or the application
thereof for any reason or circumstances shall to any extent be held to be
invalid or unenforceable, the remaining provisions or the application of such
term or provision to persons other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision hereof
shall be valid and enforced to the fullest extent permitted by law.
Section 9.05. In the exercise of the power of the Authority and its
members, officers, employees and agents hereunder including (without limiting
the foregoing) the application of moneys, the investment of funds and the
letting or other disposition of the Premises in the event of default by the
Company, neither the Authority nor its members, officers, employees, or agents
shall be accountable to the Company for any action taken or omitted by it or its
members, officers, employees and agents in good faith and believed by it or them
to be authorized or within the discretion or rights or powers conferred. The
Authority shall be protected in its or their acting upon any paper or document
believed by it or them to be genuine, and it or they may conclusively rely upon
the advice of Counsel and may (but need not) require further evidence of any
fact or matter before taking any action. No recourse shall be had by the Company
for any claims based hereon or on the Indenture against any member, officer,
employee or agent of the Authority alleging personal liability on the part of
such person unless such claims are based upon the bad faith, fraud or deceit of
such person.
The Company will indemnify and hold harmless the Authority and each
member, officer, and employee of the Authority against any and all claims,
losses, damages or liabilities, joint and several, to which the Authority or any
member, officer or employee of the Authority may become subject, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of the Project or are based upon any other alleged act or omission in connection
with the Project by the Authority unless the losses, damages or liabilities
arise from an adjudication of malfeasance or nonfeasance in office, bad faith,
fraud, negligence or deceit of the member, officer or employee of the Authority.
In the event any claim is made or action brought against the Authority, or any
member, officer, or employee of the Authority, the Authority may direct the
Company to assume the defense of the claim and any action brought thereon and
pay all reasonable expenses incurred therein; or the Authority may assume the
defense of any such claim or action, the reasonable costs of which shall be paid
in the same manner as other Administrative Expenses of the Authority; provided,
however, that counsel selected by the Authority to conduct such defense shall be
approved by the Company, which
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<PAGE> 37
approval shall not be unreasonably withheld, and further provided that the
Company may engage its own counsel to participate in the defense of any such
action. The defense of any such claim shall include the taking of all actions
necessary or appropriate thereto. In the event of adjudication of malfeasance or
nonfeasance in office, bad faith, fraud, negligence or deceit, the Authority
shall pay or reimburse the Company for the defense.
Section 9.06. A reference herein to a statute or to a regulation
issued by a governmental agency includes the statute or regulation in force as
of the date hereof, together with all amendments and supplements thereto and any
statute or regulation substituted for such statute or regulations, unless the
specific language or the context of the reference herein clearly includes only
the statute or regulation in force as of the date hereof.
A reference herein to a governmental agency, department, board,
commission or other public body or to a public officer includes an entity or
officer which or who succeeds to substantially the same functions as those
performed by such public body or officer as of the date hereof, unless the
specific language or the context of the reference herein clearly includes only
such public body or public officer as of the date hereof.
Section 9.07. Laws of the State shall govern construction hereof.
Section 9.08. The parties hereto, from time to time may enter into
any amendments hereto (which thereafter shall form a part hereof) to the extent
set forth in Article XIII of the Indenture.
Section 9.09. All notices required or authorized to be given by the
Company, the Authority or the Trustee pursuant to this Sublease shall be in
writing and shall be sent by registered or certified mail, postage prepaid to
the following addresses:
to the Company to:
South Jersey Process
Technology, Inc.
c/o Radiation Technology, Inc.
P.O. Box 185
108 Lake Denmark Rd.
Rockaway, NJ 07866
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<PAGE> 38
to the Authority to:
City of Salem Municipal
Port Authority
62 Front Street
Salem, N.J. 08079
to the Trustee to:
The Farmers and Merchants
National Bank of Bridgeton
53 South Laurel Street
Bridgeton, NJ 08302
or to such other addresses as may from time to time be furnished to the parties,
effective upon the receipt of notice thereof given as set forth above. Each of
the above agrees that it shall send a duplicate copy or executed copy of all
certificates, notices, correspondence or other data and materials sent one of
the above to both other parties.
Section 9.10. The Sublease may be executed in multiple counterparts,
each of which shall be regarded for all purposes as an original, and such
counterparts shall constitute but one and the same instrument.
Section 9.11. Headings are for convenience of reference only and
shall not affect the interpretation of the Sublease.
Section 9.12. Either party may record this Sublease or a memorandum
thereof.
Section 9.13. This Sublease may not be assigned by the Company and
the Premises may not be subleased by the Company, as a whole or in part, except
as provided in Section 7.05 hereof, without obtaining the consent of either the
Authority or the Trustee and the opinion of nationally recognized bond counsel
that such assignment or sublease shall not result in interest on any of the
Bonds becoming subject to federal income taxation, or otherwise violate any
provisions of the Act; provided further, however, that no such sublease shall
relieve the Company of any of its obligations under this Sublease. Nothing
herein contained shall be construed as prohibiting the Company from granting to
Simon Engineering P.L.C., as guarantor of the Company's obligations under the
Credit Agreement, a lien on or security interest in, the Company's rights in the
Premises.
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<PAGE> 39
Section 9.14. The Company shall have and is hereby granted the
option to cause all or a portion of the Bonds to be redeemed at the times
permitted by the Indenture. The Authority, at the request of the Company, shall
forthwith take all steps (other than the payment of the money required for such
redemption) necessary under the applicable redemption provisions of the
Indenture to effect redemption of all or part of the Outstanding Bonds, as may
be specified by the Company, on the date established for such redemption.
Section 9.15. The parties hereto agree that the Authority shall
assign to the Trustee, in order to secure payment of the Bonds, all of the
Authority's right, title and interest in and to this Agreement, except for the
Authority's rights under Sections 401(b), 9.03 and 9.05 hereof.
Section 9.16. The Company shall and hereby agrees to indemnify the
Trustee for, and hold the Trustee harmless against, any loss, liability or
expense (including the costs and expenses of defending against any claim or
liability) incurred without gross negligence or willful misconduct by the
Trustee and arising out of or in connection with its acting as Trustee under the
Indenture.
Section 9.17. The Authority covenants that it will not pledge the
amounts derived from this Sublease other than as contemplated herein or in the
Indenture.
Section 9.18. The Authority covenants, during the term of this
Sublease, not to terminate, or amend in any way which would interfere with the
Company's ability to operate the Project Facilities, the lease dated March 16,
1983 between the Authority, as tenant, and the Mayor and Common Council of the
City of Salem, as landlord (the "Lease"). The Authority further covenants to
perform its obligations under the Lease during the term of the Sublease. In the
event the Authority fails to pay any amount owed under the Lease, the Company
may, but shall not be required to, pay such amounts and shall be entitled to
reimbursement for such amounts from the Authority.
Section 9.19. Subject to the provisions of Section 6.08 of the
Indenture, it is agreed by the parties hereto that any amounts remaining in the
Bond Fund, the Construction Fund, or any other fund created under the Indenture
upon expiration or earlier termination of this Sublease, as provided in this
Sublease, after payment in full of the Bonds (or provision for payment thereof
having been made in accordance with the provisions of the Indenture) and
repayment of any funds loaned by the Authority to the Company, and the fees and
expenses of the Trustee in accordance
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<PAGE> 40
with the Indenture, shall belong to and be paid to the Company by the Trustee.
IN WITNESS WHEREOF, CITY OF SALEM MUNICIPAL PORT AUTHORITY has
caused this Sublease to be executed in its name and on its behalf by its
Chairman or Vice Chairman and its official seal to be affixed hereunto and
attested by its Secretary or Assistant Secretary, and SOUTH JERSEY PROCESS
TECHNOLOGY, INC. has caused this Sublease to be executed in its name and on its
behalf by the President of the Company and its corporate seal to be affixed
hereunto and attested by its Secretary, all as of the day and year first above
written.
CITY OF SALEM MUNICIPAL
PORT AUTHORITY
By /s/ ????????
-------------------------------
Chairman
[CORPORATE SEAL]
Attest:
/s/ ?????????
- -------------------------------
(Assistant) Secretary
SOUTH JERSEY PROCESS
TECHNOLOGY INC.
By /s/ ????????
-------------------------------
President
[CORPORATE SEAL]
Attest:
/s/ ?????????
- -------------------------------
Vice President
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<PAGE> 41
STATE OF NEW JERSEY :
: ss:
COUNTY OF SALEM :
BE IT REMEMBERED, that on this 28th day of December, 1984, before
me, the subscriber, personally appeared James N. Acton, Jr., the Chairman of the
City of Salem Municipal Port Authority, who I am satisfied is the person who
executed the foregoing instrument on behalf of the said Corporation; and he
thereupon acknowledged that he signed, sealed with the corporate seal and
delivered said instrument as such officer, as that said instrument is the
voluntary act and deed of said Corporation, made by virtue of authority from its
Board of Directors.
[SIG]
----------------------------
Attorney at Law
STATE OF NEW YORK :
: ss: COUNTY OF NEW YORK :
BE IT REMEMBERED, that on this 28th day of December, 1984, before
me, the subscriber, personally appeared Martin A. Walt, the President of South
Jersey Process Technology, Inc., who I am satisfied is the person who executed
the foregoing instrument on behalf of the said Corporation; and he thereupon
acknowledged that he signed, sealed with the corporate seal and delivered said
instrument as such officer, as that said instrument is the voluntary act and
deed of said Corporation, made by virtue of authority from its Board of
Directors.
CONNIE LICCIONE
----------------------------
NOTARY PUBLIC
[STAMP]
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<PAGE> 42
EXHIBIT "A"
TO
SUBLEASE
Dated as of December 1, 1984
Between
CITY OF SALEM MUNICIPAL PORT AUTHORITY, As Lessor
and
SOUTH JERSEY PROCESS TECHNOLOGY, INC., As Lessee
The "Premises" referred to in this Sublease consist of that part of
the property known as Block 46, Lot 1 and Block 46, Lot 11 that is included in
the area bounded by Grieves Parkway on the East, Tilbury Road on the North,
Second Oak Creek on the South, and Block 46, Lot 6 on the West, as shown on the
City of Salem Tax Duplicate.
-40-
<PAGE> 43
[MAP]
-41-
<PAGE> 44
ASSIGNMENT
KNOW ALL MEN BY THESE PRESENTS that CITY OF SALEM MUNICIPAL PORT
AUTHORITY (the "Authority"), pursuant to a Resolution of its Board heretofore
duly adopted, does hereby sell, assign, transfer and set over to The Farmers and
Merchants National Bank of Bridgeton, organized and existing under the laws of
the United States of America, having its principal corporate trust office in
Bridgeton, New Jersey, as Trustee under the Trust Indenture dated as of December
1, 1984, of the Authority, all the right, title and interest of the Authority in
and to the Sublease and Security Agreement dated as of December 1, 1984, between
the Authority and South Jersey Process Technology, Inc., as well as all fixed
rentals and other payments payable or which may become payable thereunder
(except for amounts payable pursuant to Sections 4.01(b), 9.03 and 9.05 thereof)
and all security therefor, the same to be held in trust and applied by said
Trustee as provided in said Indenture; and the Authority does hereby constitute
and appoint Trustee as aforesaid, its true and lawful attorney for it and in its
name to collect and receive payment of any and all of said fixed rentals and
other payments and to give good and sufficient receipts therefor, hereby
ratifying and confirming all that said attorney may do in the premises. Said
Trustee may, but, except as otherwise provided in said Indenture shall not be
required to, institute any proceedings or take any action in its name or in the
name of the Authority to enforce payment or collection of any or all of such
rentals and contributions and payments on accounts of such rentals.
Notwithstanding such assignment and transfer, so long as the
Authority shall not be in default under the Indenture:
(a) the Authority shall have the right and duty to give all
approvals and consents permitted or required under the Sublease;
(b) the Authority shall have the right to execute supplements
and/or amendments to the Sublease to the extent and in the manner
permitted by the Indenture;
(c) the Authority shall have the right to execute supplements
and/or amendments to the Sublease containing terms not adversely
inconsistent with the Sublease or the Indenture; provided, however,
that the Sublease, as so supplemented and/or amended, shall provide
at least the same security for Owners of Bonds of the Authority
issued under the Indenture as the Sublease in the foregoing form;
and
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<PAGE> 45
(d) there shall be no responsibility on the part of the
Trustee for duties or responsibilities of the Authority contained in
the Sublease and in any supplements and/or amendments thereto.
IN WITNESS WHEREOF, CITY OF SALEM MUNICIPAL PORT AUTHORITY has
caused this Assignment to be duly executed in its name by its Chairman or Vice
Chairman, and its corporate seal to be hereunto affixed, attested by its
Secretary or Assistant Secretary, and this Assignment to be dated as of the day
and year above written, and this Assignment has been accepted by the Trustee.
CITY OF SALEM MUNICIPAL
PORT AUTHORITY
By /s/ ????????
-------------------------------
Chairman
[SEAL]
Attest:
/s/ ?????????
- -------------------------------
Secretary
THE FARMERS AND MERCHANTS
NATIONAL BANK OF BRIDGETON
By /s/ ????????
-------------------------------
Vice President and
Trust Officer
[SEAL]
Attest:
/s/ ?????????
- -------------------------------
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<PAGE> 46
STATE OF NEW JERSEY :
: ss:
COUNTY OF SALEM :
BE IT REMEMBERED, that on this 28th day of December, 1984, before
me, the subscriber, personally appeared James N. Acton, Jr., the Chairman of
the City of Salem Municipal Port Authority, who I am satisfied is the person who
executed the foregoing instrument on behalf of the said Corporation; and he
thereupon acknowledged that he signed, sealed with the corporate seal and
delivered said instrument as such officer, as that said instrument is the
voluntary act and deed of said Corporation, made by virtue of authority from its
Board of Directors.
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<PAGE> 1
EXHIBIT 10.56
BAYSIDE BUSINESS PARK, FREMONT, CALIFORNIA
STANDARD INDUSTRIAL LEASE-NET
LEASE SUMMARY
The following information is incorporated into the terms of the attached Basic
Lease.
I. LANDLORD: Bayside Spinnaker Partners *
II. TENANT: Radiation Sterilizers, Inc.
III. PREMISES: 4020 Clipper Court, Fremont, California
IV. BUILDING: Building H, Bayside Plaza III
V. TERM:
Lease Term: Sixty (60) months.
Lease Commencement (check one):
X Subject to completion of improvements. Landlord's current
estimate of the substantial completion date is July 28, 1989.
Commencement Date: ________________, 19___
Landlord initials:___ Tenant initials:___
VI. OPTION TO EXTEND, if any:
VII. CHARGES:
Base Rent: See Exhibit D.
Security Deposit: Five Thousand One Hundred Seventy ($5,171).
One Dollars
Tenant's Percentage Share of Building
Operating Expenses: Sixteen and Two Tenths percent (16.2%)
Tenant's Percentage Share of Outside
Area and Real Property Tax Expenses: Seven and Seven Tenth (7.7%)
Estimated Monthly Expense: Six Hundred Thirty Eight ($638)
Rental Adjustment Schedule: See Exhibit E
VIII. ATTACHMENTS: The following Exhibits are attached to and a part
of this Lease, for the purpose stated in the Basic Lease:
Exhibits A-1, A-2, B, D, E, F, I and Addendum
IX. EXECUTION: The undersigned Landlord and Tenant agree to the
provisions of this Lease, including the attached Basic Lease and the
Exhibits identified.
Dated as of 7/17, 19*
Landlord: Bayside Spinnaker Partnership, a
California limited partnership
By King & Lyons, a California
general partnership, general partner
By: /s/
-------------------------------
Its: Partner
Tenant: Radiation Sterilizers, Inc., a
By: /s/
-------------------------------
Its: Vice President Administration
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Premises and Outside area 4
2. Term 4
2.1 Commencement 4
2.2 Postponement 4
2.3 Option to Extend 4
3. Rent 4
3.1 Payment of Rent 4
3.2 Expense Reimbursements 5
3.3 Late Payment Charge; Interest 5
3.4 Security 5
4. Uses 6
4.1 Premises 6
4.2 Exterior 6
4.3 Hazardous Materials 6
4.4 Covenants, Conditions and Restrictions 6
4.5 Rules and Regulations 6
5. Alterations and Additions 7
6. Maintenance and Repair 7
6.1 Tenant's Obligations 7
6.2 Landlord's Obligations 7
6.3 Tenant's Obligation to Reimburse 7
7. Taxes 8
7.1 Tenant's Personal Property 8
7.2 Tenant's Obligation to Pay Real Property Taxes 8
7.3 Definition 8
7.4 Supplemental Assessments 9
8. Utilities and Services 9
9. Indemnity 9
10. Waiver of Claims 9
11. Insurance 9
11.1 Tenant's Liability Insurance 9
11.2 Tenant's Property Insurance 9
11.3 Landlord's Liability Insurance 9
11.4 Landlord's Property Insurance 9
11.5 Payment 9
11.6 Waiver of Subrogation 10
11.7 Insurance Policies 10
12. Damage of Destruction 10
12.1 Damage 10
12.2 Tenant's Property 10
12.3 Waiver 10
13. Condemnation 10
14. Advertisements and Signs 10
15. Entry by Landlord 11
16. Assignment and Subletting 11
16.1 Landlord's Conceit Required 11
16.2 Documentation 11
16.3 Terms and Conditions 11
16.4 Partnership 11
16.5 Corporation 11
16.6 Landlord's Remedies 12
</TABLE>
2.
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
17. Default 12
17.1 Event of Default 12
17.2 Remedies 12
17.3 No Relief From Forfeiture After Default 13
17.4 Landlord's Right To Perform Tenant's Obligations 13
17.5 Remedies Not Exclusive 13
17.6 Termination, Surrender and Abandonment 13
18. Effect of Conveyance 13
19. Instruments Required by Lender 13
20. Tenant's Certificate 13
21. Subordination and Attornment 13
22. Notices 14
23. No Accord and Satisfaction 14
24. Attorneys' Fees 14
25. Holding Over 14
26. General Provisions 14
26.1 Entire Agreement 14
26.2 Time 14
26.3 Captions 14
26.4 California Law 15
26.5 Partial Invalidity 15
26.6 No Warranties 15
26.7 Joint and Several Liability 15
26.8 Binding on Successors 15
26.9 Authority 15
26.10 Memorandum of Lease 15
Exhibits
- --------
A-1 The Premises
A-2 The Building
B Work Letter Agreement
D Base Rent
E Rent Adjustment Schedule
F Sign Standards
I Floor Plan
</TABLE>
3.
<PAGE> 4
BAYSIDE BUSINESS PARK
BASIC LEASE
This Lease is made and entered into by and between "Landlord" and
"Tenant" as these terms are defined in the Lease Summary.
1. Premises and Outside Area. Landlord hereby leases the Premises to
Tenant and Tenant leases the Premises from Landlord for the term, at the rental,
and upon all of the conditions set forth herein and in the Lease Summary. The
Premises, the Building, and the parcel of land upon which the same are located,
along with all other building and improvements thereon, are herein collectively
referred to as the "Property." A map showing the Premises is attached as Exhibit
"A-1"; a map showing the Building and the Property is attached as Exhibit "A-2".
The Property is part of the Bayside Business Park (the "Park"). The term
"Outside Area" is defined as all areas and facilities in the Park provided by
Landlord or the Bayside Business Park Association for the non-exclusive use of
Landlord, Tenant and other tenants of the Park, including, but not limited to,
parking areas, roadways sidewalks, landscaped areas, loading and unloading
areas, service areas, and trash disposal facilities. Tenant shall have the
non-exclusive right to use the Outside Area, subject to any rights reserved by
Landlord and any rules or restrictions governing the use thereof issued from
time to time by Landlord.
2. Term. This Lease shall begin on the commencement date and continue
for the term stated in the Lease Summary, in accordance with the following:
2.1 Commencement. The commencement date shall be the Commencement Date
stated in the Lease Summary or, if no Commencement Date is stated, the earlier
of (i) the date of substantial completion of the improvements to be constructed
by Landlord on the Premises, according to any description of Landlord work set
forth on Exhibit B to this Lease, or ii) the date on which Tenant first uses a
portion of the Premises in its business. "Substantial completion" shall have
occurred on the first date on which (i) the governmental authority having
jurisdiction has authorized occupancy of the Premises, (ii) electric power is
available at the Premises, and (iii) the architect, engineer, or other person
supervising construction of the improvements certifies that they are
substantially complete and ready for occupancy, subject only to "punch-list"
defects that do not materially diminish the usefulness of the Premises. Landlord
shall advise Tenant, from time to time and in good faith, of the estimated
completion date. Upon ascertaining the commencement date, the parties shall
insert that date in the Lease Summary as the "Commencement Date," and initial
the insertion. If the commencement date is other than the first day of a
calendar month, then the lease term shall extend for the number of months stated
in the Lease Summary, beginning with the first day of the month following the
commencement date.
2.2 Postponement. If, for any reason, Landlord is unable to deliver
possession of the Premises to Tenant on a Commencement Date stated in the Lease
Summary, the commencement of the lease term will be postponed, without liability
to either party or affecting the validity of this Lease, and the term shall
begin on such date as Landlord is able to deliver possession. However, if
Landlord is unable to deliver possession within three (3) months after any such
stated Commencement Date, or within one year after execution of this Lease if no
Commencement Date is stated in the Lease Summary, then this Lease shall
thereupon terminate without liability to either party.
2.3 Option to Extend. If there is an option to extend the term
of the Lease, the provisions of the optional term shall be set forth in attached
Exhibit C-1. Rent during an option term shall be as set forth in Exhibits C-2
and C-3.
3. Rent.
3.1 Payment of Rent. Tenant shall pay to Landlord the Base Rent as set
forth on attached Exhibit D, without deduction, offset, prior notice or demand,
in advance on the first day of each calendar month of the term of this Lease.
Rent shall be payable in lawful money of the United States to Landlord at such
place as Landlord may designate. Tenant's obligation to pay rent for any partial
month shall be prorated on the basis of a thirty (30) day month. Base Rent shall
be increased in accordance with the "Rent Adjustment Schedule" attached to this
Lease as Exhibit E.
4.
<PAGE> 5
3.2 Expense Reimbursements.
(a) Tenant shall pay to Landlord during the term hereof, in
addition to the Base Rent, as additional rent (the "Additional Rent"):
(i) Tenant's allocable share of Building Operating
Expenses and Outside Area Expenses, respectively, as set forth in Paragraph 6.3
herein; and
(ii) Tenant's allocable share of all Real Property
Taxes relating to the Property, as set forth in Paragraph 7.2 herein:
(iii) Tenant's allocable share of insurance premiums,
as set forth in Paragraph 11.5; and
(iv) All charges, costs and expenses which Tenant is
required to pay hereunder, together with all late charges, interest, costs and
expenses including attorneys' damages, reasonable costs and expenses which
Landlord may incur by reason of Tenant's default or breach of this Lease.
(b) In the event of nonpayment by Tenant of Additional Rent,
Landlord shall have all the rights and remedies with respect thereto as Landlord
has for nonpayment of Base Rent.
(c) From and after the Commencement Date, Tenant shall pay to
Landlord on the first day of each calendar month of the lease term an amount
estimated by Landlord to be the monthly Additional Rent. Within ninety (90) days
following the end of each calendar year Landlord shall furnish Tenant a
statement of the actual expenses incurred by Landlord in the calendar year and
the payments made by Tenant with respect to such period. If Tenant's payments do
not equal the amount of the actual expenses, Tenant shall pay Landlord the
deficiency within fifteen (15) days after receipt of such statement. If Tenant's
payments exceed the actual expenses, Landlord shall offset the excess against
the Additional Rent next thereafter to become due to Landlord. The initial
"Estimated Monthly Expense" for the Premises is set forth on the Lease Summary.
The "Estimated Monthly Expense" may be adjusted by Landlord's providing thirty
(30) days written notice to Tenant of the changed Estimated Monthly Expense.
3.3 Late Payment Charge; Interest. If any installment of rent or any
other sum due from Tenant is not received by Landlord within five (5) days after
the due date. Tenant shall pay to Landlord an additional sum equal to ten
percent (10%) of the amount overdue as late charge to compensate for processing
and accounting charges and any charges that may be incurred by Landlord with
regard to any financing secured by the Property. Acceptance of an late charge
shall not constitute a waiver of Tenant's default with respect to the overdue
amount. Any amount not paid by Tenant when due hereunder shall bear interest at
the lower of five percent (5%) per annum plus the ten discount rate of the
Federal Reserve Bank of San Francisco, or the highest rate then allowed by law,
from the date due until paid in full. Payment of such interest shall not excuse
or cure any default by Tenant.
3.4 Security.
(a) Tenant has deposited the Security Deposit with Landlord as
security for the full and faithful performance by Tenant of every term and
covenant of this Lease. In the event Tenant defaults in the performance of any
of its obligations hereunder, Landlord may use or apply any portion of the
Security Deposit to cure the default or to compensate Landlord for its damages
from the default, in which event Tenant shall promptly deposit with Landlord the
sum necessary to restore the Security Deposit to its original amount. Upon
termination of this Lease and performance of all of Tenant's obligations
hereunder, Landlord shall return the Security Deposit or any balance thereof to
Tenant. Tenant shall not be entitled to any interest on the Security Deposit,
and Landlord shall be entitled to commingling the Security Deposit with its
general funds.
(b) Tenant grants Landlord a security interest in all personal
property owned by Tenant, placed upon the Premises, and used by Tenant in its
business on the Premises, not including inventory held for sale and accounts
receivable. Landlord's security interest shall attach on the first date that
such property is placed on the Premises; if Tenant is not then in default
hereunder, any such property may be removed from the Premises during the lease
term, free of Landlord's security interest, if such removal is accomplished in
the ordinary course of Tenant's business or for the purpose of acquiring
replacement property.
5.
<PAGE> 6
At Landlord's request, Tenant shall execute such documents, including form
UCC-1, as may be appropriate to perfect Landlord's possession of the security;
such possession shall be deemed to occur, at Landlord's option, upon any
abandonment, vacating, or surrender of the Premises by Tenant.
4. Uses.
4.1 Premises. The Premises shall be used only for general
industrial, research and development, warehousing, and office purposes. Landlord
makes no warranty or representation regarding the suitability of the Premises
for Tenant's intended use, and Tenant has conducted all investigations regarding
such suitability, including, but not limited to, the determination that Tenant's
intended use is permitted by applicable zoning ordinances and regulations.
Notwithstanding the permitted uses set forth above, Tenant will engage in no
activity on the Premises that would, in the judgment of any insurer of the
Premises, increase the premium on any of Landlord's insurance over the amount
otherwise charged therefor or cause such insurance to be cancelled. In its use
of the Premises, Tenant will comply with all applicable laws, governmental
regulations, and tract restrictions. Tenant will commit no nuisance or waste on
the Premises and will not cause any unreasonable odors, noise, vibration,
electronic emissions, or any other item to emanate from the Premises so as to
damage Landlord's property or interfere with any other person.
4.2 Exterior. No portion of the area outside of the Building
is leased to Tenant. However, Tenant may utilize truck access and turning areas
in a reasonable manner, and Tenant may utilize designated parking areas, in
common with Landlord's other tenants, for daily parking of passenger vehicles.
No rubbish containers may be stored outside of the Premises except inside
existing trash enclosure areas. No other materials may be stored outside of the
Premises. Tenant may not erect or maintain any sign or other marking on, or
visible from, the exterior of the Premises without Landlord's prior written
consent; such consent will not be unreasonably withheld for any sign that
conforms to Park sign standards which standards are set forth on attached
Exhibit F. Tenant shall have no right of access to the Building roof, and Tenant
shall make no penetrations in the roof without Landlord's prior written consent.
4.3 Hazardous Materials.
(a) Tenant shall not cause or permit to be discharged
from or about the Premises or the Building any hazardous, toxic, or radioactive
materials, including, but not limited to, those materials identified in Section
66680 or within the criteria set forth in Section 66693 et seq. of Title 22 of
the California Administrative Code, Division 4, Chapter 30, as amended from time
to time (collectively, "Hazardous Materials"). Tenant shall at its sole expense
comply with all applicable governmental rules, regulations, codes, ordinances,
statutes and other requirements respecting Hazardous Materials in Connection
with Tenant's activities on or about the Premises, the Property or the Park.
Tenant shall at its sole cost perform all clean-up and remedial actions which
may be required of Tenant by any governmental authority.
(b) Tenant shall indemnify and hold Landlord harmless
from all costs, claims, judgments, losses, demands, causes of action,
proceedings or hearings, including Landlord's attorneys' fees and court costs,
relating to the storage, placement or use of Hazardous Materials by Tenant on or
about the Premises. Tenant shall reimburse Landlord for (i) losses in or
reductions to rental income resulting from Tenant's use, storage, or disposal of
Hazardous Materials; (ii) all costs of clean-up or other alterations to the
Premises necessitated in the fair market value of the Property caused by
Tenant's use, storage, or disposal of Hazardous Materials. The obligations of
Tenant under this Paragraph 4.3 shall survive the expiration of the lease term.
4.4 Covenants, Conditions and Restrictions. Tenant shall
comply with the Declaration of Covenants, Conditions and Restrictions recorded
for Bayside Park and any amendments thereto, a copy of which has previously been
provided to Tenant.
4.5 Rules and Regulations. Tenant shall comply with all rules
and regulations set forth in Exhibit "G" hereto (if any), and any subsequent
amendments or additions thereto which Landlord may from time to time promulgate
for the safety, care, cleanliness and orderly management of the Building and
Outside area.
6.
<PAGE> 7
5. Alterations and Additions. Tenant shall not make any alteration,
addition or utility installation (collectively "Changes") to the Premises
without Landlord's prior written consent. In making any approved changes
hereunder, Tenant shall comply with all applicable building codes and other
governmental requirements. Unless Landlord has specifically waived this
provision in writing prior to the installation of the Changes, such Changes (i)
shall be removed from the Premises, and all damage resulting from such removal
repaired by Tenant prior to the expiration or sooner termination of the lease
term, or (ii) shall remain on the Premises at the end of the lease term and
become the property of the Landlord, at Landlord's sole election. In making all
Changes, Tenant shall hold Landlord harmless from mechanics' liens and all other
liability resulting therefrom. Tenant shall not proceed to make any changes
until five (5) days after receipt of Landlord's written consent, in order that
Landlord may post on the Premises appropriate notices to avoid any liability of
liens by reason thereof.
6. Maintenance and Repair.
6.1 Tenant's Obligations. Except as otherwise specifically
provided herein, Tenant shall, at Tenant's expense, keep in good and safe
condition, order and repair the Premises, including without limitations, (a)
plumbing, fire sprinkler, sewage, and heating, ventilation and air conditioning
("HVAC") systems, which service only the Premises, (b) all electrical and
lighting facilities and equipment within the Premises, (c) all fixtures, floors,
and ceilings, and (d) all windows, doors, glass, and skylights located within
the Premises. Landlord may, by written notice to Tenant, elect at any time to
assume responsibility for performing maintenance, repair and replacement of all
HVAC equipment servicing only the Premises. All costs incurred by Landlord in
performing such maintenance, repair and replacement shall be paid by Tenant on a
periodic basis within ten (10) days after receipt of a written invoice therefor
from Landlord. All repairs required to be made by Tenant shall be made promptly
with new materials of like kind and quality. If the repair work affects the
structural parts of the Building, or if the estimated cost of any item of repair
exceeds One Thousand Dollars ($1,000), then Tenant shall first obtain Landlord's
written approval of the scope of work, plans therefor, materials to be used, and
the contractor. Tenant hereby waives the benefit of any statute now or
hereinafter in effect which would otherwise afford Tenant the right to make
repairs at Landlord's expense or to terminate this Lease because of Landlord's
failure to keep the Premises in good condition, order and repair. Tenant
specifically waives all rights it may have under Sections 1932(1), 1941, and
1942 of the California Civil Code, and any similar or successor statute or law.
6.2 Landlord's Obligations. Subject to the provisions of this
Lease dealing with damage or destruction, Landlord shall maintain, at its
expense, the structural soundness of the Building foundation, walls, floors, and
roof. Subject to Tenant's obligation to pay a percentage share of the cost in
accordance with Paragraph 6.3, Landlord shall maintain the Outside Area.
6.3 Tenant's Obligation to Reimburse.
(a) Tenant shall pay (a) Tenant's Percentage Share of
all Building Operating expenses (as defined below) as may be paid or incurred by
Landlord during the term of this Lease, and (b) Tenant's Percentage Share of
Outside Area Expenses (as defined below). If Tenant uses more than its
percentage share of the Outside Area, for parking or other purposes, or more
than its percentage share of any utility service, then Landlord may equitably
increase Tenant's percentage share of costs associated with such items to
account for such additional usage. Tenant shall pay to Landlord on the first day
of each calendar month during the period immediately following the Commencement
Date for the remainder of the Lease term one-twelfth (1/12) of the amount which
Landlord estimates will be Tenant's Percentage Share of all Building Operating
Expenses and Tenant's Percentage Share of all Outside Area Expenses incurred for
such calendar year. Within ninety (90) days following the end of each calendar
year, Landlord shall furnish Tenant a statement of expenses for such calendar
year and the payments made by Tenant hereunder for such period. If Tenant's
payments for said expense were less than the actual amount of said expenses,
Tenant shall pay the deficiency to Landlord within ten (10) days after receipt
of such statement. If said payments exceed the actual expenses, Landlord shall
credit such excess to Additional Rent next due. All Building Operating Expenses
and Outside Area Expenses shall be prorated as of the Commencement Date and
Expiration Date to reflect any portion of a calendar year occurring with the
Lease term.
7.
<PAGE> 8
(b) The term "Building Operating Expenses" shall mean
all costs and disbursements which Landlord shall pay or become obligated to pay
in connection with the maintenance, repair and operation of the Building,
including, but not limited to all labor, materials, supplies and services,
including the cost of all maintenance contracts, used or consumed in performing
Landlord's maintenance obligations hereunder. Building Operating Expenses shall
also include wages and salaries of all employees engaged in the operation,
maintenance and security of the Building, including taxes, insurance and
benefits relating thereto; and the rental cost and overhead of any office and
storage space used to provide such services. The cost of any capital
improvements or expenditures made with respect to maintenance of the Building,
including, without limitation, replacements of the roof membrane, or major
components of the HVAC system, resurfacing, reglazing, or repainting of the
Building exterior, shall be amortized over such reasonable period as Landlord
shall determine and such amortized cost shall be included in Building Operating
Expenses. A fee for administrative expenses incurred by Landlord in connection
with such work equal to five percent (5%) of the total costs and expenses
referred to above shall also be included.
The term "Outside Area Expenses" shall mean all costs and disbursements
which Landlord shall pay or become obligated to pay in connection with the
maintenance, repair and operation of the Outside Area and shall include, without
limitations, CC&R assessments and dues levied against the Property by the
Bayside Business Park Association; the cost of labor, materials, supplies and
services used or consumed in operating, maintaining and repairing the Outside
Area, the cost of security services for the Park, the cost of any capital
improvements or expenditures made to the Outside Area after the Commencement
Date, including but not limited to the repaving of parking areas and replacement
of landscaping, such cost thereof to be amortized over such reasonable period as
Landlord shall determine and included within the Outside Area Expenses; and a
fee for administrative expenses incurred by Landlord in connection with such
work equal to five percent (5%) of the total costs and expenses referred to
above.
7. Taxes.
7.1 Tenant's Personal Property. Tenant shall pay prior to
delinquency all taxes, license fees, and public charges assessed or levied
against Tenant, Tenant's estate in this Lease or Tenant's leasehold
improvements, trade fixtures, furnishings, equipment and other personal
property.
7.2 Tenant's Obligations to Pay Real Property Taxes. Tenant
shall pay Tenant's Percentage Share of Real Property Taxes (as defined in
Paragraph 7.3 below) during the Lease term; provided, however, that if the
Property contains more than one building Tenant shall pay Tenant's share of (a)
all Real Property Taxes fairly allocable to the Building, and (b) proportionate
share (based on the Building Gross Leasable Area as a percentage of the total
leasable area of all existing buildings on the Property) of all real property
taxes assessed with respect to the Property in general which are not fairly
allocable to any one building or the Property. Notwithstanding the foregoing, in
the event there is more than one tenant in the Building, Landlord reserves the
right to adjust Tenant's liability for payment of the Real Property Taxes
respecting the Building to reflect the portion thereof which is equitable
allocable to Tenant based on the tax assessor's worksheets. Tenant shall pay to
Landlord all Real Property Taxes due and payable hereunder on or before three
(3) days after the date on which Tenant receives a copy of the tax bill and
notice of Landlord's determination hereunder. Tenant's liability to pay Real
Property Taxes shall be prorated on the basis of 365-day year to account for any
fractional portion of a tax year included in the lease term at the commencement
or expiration thereof. If Landlord's lender requires Landlord to pay any or all
Real Property Taxes into an impound account on a periodic basis during the lease
term, Tenant, on written notice from Landlord, shall pay a sum of money toward
its liability under this paragraph to Landlord on a periodic basis in accordance
with the Lender's requirements.
7.3 Definition. The term "Real Property Taxes" shall mean all
taxes, general and special assessments, and other charges imposed by any taxing
authority and levied against the Property or against Landlord by virtue of its
ownership thereof or collection of rental income therefrom (excepting only
estate taxes, inheritance taxes, and income taxes that are payable on nonrental
as well as rental income). "Taxing authority" includes all entities having
taxing or assessment authority by law or by virtue of any recorded instrument
binding on the owner of the Premises, including, but not limited to Local
Improvement District No. ___ of the City of Fremont.
8.
<PAGE> 9
7.4 Supplemental Assessments. Tenant shall be liable for
Tenant's Percentage Share of Real Property Taxes on any supplemental assessments
levied against the Property which are applicable to any portion of the lease
term. Tenant's liability for supplemental assessments shall survive the
expiration or earlier termination of the lease term. Tenant shall pay Landlord
such amounts within thirty (30) days of Tenant's receipt of Landlord's invoice
for supplemental assessments.
8. Utilities and Services. Tenant shall pay for all costs of providing
utility services to the Premises, including fire sprinkler monitoring. If
utilities are not separately metered to the Premises, the cost of utilities
shall be included in Building Operating Expenses. No failure or interruption of
any such utilities or service shall entitle Tenant to terminate this Lease or to
withhold rent or other sums due hereunder and Landlord shall not be liable to
Tenant for any such failure or interruption unless caused by the willful
misconduct of Landlord. Landlord shall not be responsible for providing any
security protection for all or any portion of the Premises or the Outside Area,
and Tenant shall at its own expense provide or obtain any security services that
it desires.
9. Indemnity. Tenant hereby indemnifies and holds Landlord harmless
from and against any and all claims, demands, liabilities, and expenses,
including attorneys' fees, arising from Tenant's use of the Premises or from any
act permitted, or any omission to act, in or about the Premises, the Property or
the Park, by Tenant or its agents, employees, contractors, or invitees, or from
any breach or default by Tenant of this Lease, except to the extent caused by
Landlord's active negligence or willful misconduct. In the event any action or
proceeding shall be brought against Landlord by reason of any such claim, Tenant
shall defend the same at Tenant's expense by counsel reasonably satisfactory to
Landlord.
10. Waiver of Claims. Tenant hereby waives any claims against Landlord
for injury to Tenant's business or any loss of income therefrom, for damage to
Tenant's property, or for injury or death of any other person in or about the
Premises, the Property or the Park, from any cause whatsoever, except to the
extent caused by Landlord's active negligence or willful misconduct.
11. Insurance.
11.1 Tenant's Liability Insurance. Tenant shall, at its
expense, obtain and keep in force during the term of this Lease a policy of
comprehensive public liability insurance insuring Landlord and Tenant against
any liability arising out of the condition, use, occupancy or maintenance of the
Premises. Such insurance policy shall have a combined single limit for both
bodily injury and property damage in an amount not less than Two Million Dollars
($2,000,000), which amount shall be increased as reasonably required by
Landlord. The policy shall contain cross liability endorsements and shall insure
performance by Tenant of the indemnity provisions of Paragraph 9 above. The
limits of said insurance shall not limit the liability of Tenant hereunder.
11.2 Tenant's Property Insurance. Tenant shall, at its
expense, keep in force during the term of this Lease, a policy of fire and
property damage insurance in an "all risk" form with a sprinkler leakage
endorsement, insuring Tenant's inventory, fixtures, equipment, personal
property, and leasehold improvements within the Premises for the full
replacement value thereof.
11.3 Landlord's Liability Insurance. Landlord may, at its
option, maintain a policy of comprehensive general liability insurance insuring
Landlord (and such other entities as designated by Landlord) against liability
for personal injury, bodily injury or death and damage to property occurring or
resulting from an occurrence in, on, or about the Property with such coverage as
Landlord may from time to time deem advisable.
11.4 Landlord's Property Insurance. Landlord may, at its
option, maintain a policy or policies of insurance covering loss or damage to
the Building and the Outside Area, including protection from rental loss and
coverage for operating expenses resulting from loss or damage to the Building
and the Outside Area, and such other hazards as are normally insured in the
industry in such amounts and with such coverage as Landlord deems advisable. All
proceeds under such policies shall be payable exclusively to Landlord.
11.5 Payment. Tenant shall pay to Landlord during the term
hereof upon receipt of an invoice therefor Tenant's share of the premiums for
any insurance obtained by Landlord
9.
<PAGE> 10
pursuant to Paragraphs 11.3 and 11.4 above. Landlord may obtain such insurance
for the Building separately, or together with other buildings and improvements
which Landlord elects to insure together under blanket policies of insurance. In
such case Tenant shall be liable for only such portion of the premiums for such
blanket policies as are allocable to the Premises, as reasonably determined by
the insurer or Landlord.
11.6 Waiver of Subrogation. Tenant and Landlord each hereby
waives, and shall cause their respective insurers to similarly waive, any and
all rights of recovery against the other, or against the officers, employees,
partners, agents and representatives of the other, for loss of or damage to the
property of the waiving party or the property of others under its control, to
the extent such loss or damage is insured against under any insurance policy
carried by Landlord or Tenant hereunder.
11.7 Insurance Policies. All of Tenant's insurance shall be
primary insurance written in a form satisfactory to Landlord by companies
acceptable to Landlord and shall specifically provide that such policies shall
not be subject to cancellation or other change except after at least thirty (30)
days' prior written notice to Landlord. Copies of the policies or certificates
evidencing the policies, together with satisfactory evidence of payment of
premiums shall be deposited with Landlord on or prior to the Commencement Date,
and upon each renewal of such policies, which shall be effected not less than
thirty (30) days prior to the expiration date of the term of such coverage.
12. Damage or Destruction.
12.1 Damage. If any structural portion of the Premises that
Landlord is obligated to maintain is damaged or destroyed by any cause, if such
damage is insured against, and if the insurance proceeds are available for
rebuilding, then this Lease will not terminate and Landlord will cause such
damage to be repaired with reasonable diligence, subject to delays in the
disbursement of insurance proceeds and restoration delays caused by inclement
weather, governmental action or inaction, and shortage of materials or services.
Landlord's obligation in this regard shall be enforceable by Tenant only if such
damage interferes with Tenant's reasonable occupancy of the Premises. Tenant's
rent will abate to the extent that the damage and repair period interfere with
Tenant's use of the Premises. If the damage is not insured against, if the
available insurance proceeds are insufficient for the repair, or if the damage
occurs within the last six (6) months of the lease term, Landlord may, at its
option exercised by notice to Tenant within thirty (30) days of the date that
Landlord acquires knowledge of the damage, elect either to complete the repair
at its expense, or to terminate this Lease as of the date of damage. If Landlord
elects to repair, rent will abate in the manner described above; other than the
obligation to repair stated above, Landlord shall have no liability to Tenant on
account of the damage.
12.2 Tenant's Property. Landlord's obligation to rebuild or
restore shall not include Tenant's trade fixtures, equipment, merchandise, or
any improvements, alterations or additions made by Tenant to the Premises.
12.3 Waiver. Tenant waives the provisions of California Civil
Code Sections 1932(2) and 1933(4), and any similar or successor statutes
relating to termination of leases in the event of damage or destruction, and
agrees that the parties' rights and obligations in such event shall instead be
governed by this Lease.
13. Condemnation. If any part of the Premises shall be taken for any
public, or quasi-public use, under any statute or by right of eminent domain or
purchase in lieu thereof, and a part thereof remains which is susceptible to
occupation hereunder, this Lease shall, as to the part so taken, terminate as of
the date title shall vest in the condemnor or purchaser, and the rent payable
hereunder shall be adjusted so that Tenant shall be required to pay for the
remainder of the lease term only such portion of such rent as the value of the
part remaining after such taking bears to the value of the entire Premises prior
to such taking; but in such event Landlord shall have the option to terminate
this Lease as of the date when title to the part so taken vests in the condemnor
or purchaser. If all of the Premises, or such part thereof be taken so that
there does not remain a portion susceptible to occupation hereunder, this Lease
shall thereupon terminate. All compensation awarded upon any taking hereunder
shall belong exclusively to the Landlord.
14. Advertisements and Signs. Tenant shall not place or maintain any
sign, advertisement or notice upon or about the Premises, the Building, the
Property or the Park
10.
<PAGE> 11
without the prior written consent of Landlord, provided that Tenant may display
in a reasonable manner in the Premises a sign to advertise that all or a portion
of the Premises is available to sublet. Any sign, advertisement or notice so
approved shall be removed by Tenant at the end of the Lease term, and Tenant
shall repair any damage caused thereby. If not removed by Tenant, Landlord may
have the same removed at Tenant's expense.
15. Entry by Landlord. Landlord and its agents shall have the right to
enter the Premises for the purpose of inspecting the same, showing the Premises
to prospective purchasers or others, posting notices of non-responsibility, or
making repairs, alterations or additions to any portion of the Building.
Landlord and its agents may, at any time, within ninety (90) days prior to the
expiration of the lease term, place upon Premises "For Lease" signs and exhibit
the Premises to prospective tenants.
16. Assignment and Subletting.
16.1 Landlord's Consent Required. Tenant shall not voluntarily
or by operation of law assign, transfer, mortgage, sublet, or otherwise transfer
or encumber all or any part of Tenant's interest in the Lease or in the
Premises, without Landlord's prior written consent, which shall not be
unreasonably withheld. It shall be reasonable for Landlord to deny consent if
(a) the use to be made of the Premises by the proposed assignee or sublessee (i)
is not generally consistent with the character and nature of all other tenancies
in the Park, or (ii) conflicts with any so-called "exclusive" use then in favor
of another tenant of the Park, or (iii) would be prohibited by any other term of
this Lease; or (b) the character, reputation and financial responsibility of the
proposed assignee or sublessee are not satisfactory to Landlord.
16.2 Documentation. Prior to any assignment or sublease,
Tenant shall (a) provide to Landlord the proposed assignee's or sublessees name,
address, financial statements for the previous three (3) years, and copies of
all documents relating to Tenant's proposed assignment or sublease, and (b)
shall specify all monies and other consideration to be received by Tenant for
such assignment or sublease. Within ten (10) days after the receipt of such
documentation, Landlord shall either (a) consent in writing to the proposed
assignment or sublease subject to the terms and conditions hereinafter set
forth, or (b) notify Tenant in writing that Landlord refuses such consent. In
the event Landlord fails to deliver such written notice within the required
period, consent to the proposed sublease or assignment shall be deemed denied.
16.3 Terms and Conditions. In connection with any proposed
assignment or sublease Tenant shall pay to Landlord: (a) Landlord's processing
costs and attorneys' fees, whether or not Landlord consents to such assignment
or sublease, and (b) fifty percent (50%) of any consideration received by Tenant
in connection with said assignment or sublease that exceeds the rental amount
fixed by this Lease. Each assignment or sublease shall be in form satisfactory
to Landlord and shall be subject and subordinate to the provisions of this
Lease. Once approved by Landlord, such assignment or sublease shall not be
modified without Landlord's prior written consent. Each assignee or sublessee
shall agree to perform all of the obligations of Tenant hereunder and shall
acknowledge that the termination of this Lease shall, at Landlord's sole
election, constitute a termination of every such assignment or sublease. In the
event Landlord shall consent to an assignment or sublease, Tenant shall remain
primarily liable for all obligations and liabilities of Tenant under this Lease.
16.4 Partnership. If Tenant is a partnership, a transfer,
voluntary or involuntary, of all or any part of an interest in the partnership,
or the dissolution of the partnership, shall be deemed an assignment requiring
Landlord's prior written consent.
16.5 Corporation. If Tenant is a corporation, any dissolution,
merger, consolidation, or other reorganization of Tenant, or the transfer,
either all at once or in series of transfers, of a controlling percentage of the
capital stock of Tenant, or the sale or series of sales within any one (1) year
period, of all or substantially all of Tenant's assets located in, on, or about
the Premises, shall be deemed an assignment. The phrase "controlling percentage"
means the ownership of, and the right to vote, stock possessing at least
fifty-one percent (51%) of the total combined voting power of all classes of
Tenant's capital stock issued, outstanding, and entitled to vote for the
election of directors. The provisions of this paragraph shall not apply to
Tenant if it is a corporation the stock of which is listed on a national
securities exchange (as this term is used in the Securities Exchange Act of
1934, as amended) or is publicly traded on the over-the-counter market.
11.
<PAGE> 12
16.6 Landlord's Remedies. Any assignment or sublease without
Landlord's prior written consent shall at Landlord's election be void, and shall
constitute a default under this Lease. The consent by Landlord to any assignment
or sublease shall not constitute a waiver of the provisions of this Paragraph 16
with respect to any subsequent assignment or sublease.
17. Default.
17.1 Event of Default. The occurrence of any of the following
events (an "Event of Default") shall constitute a default and breach of this
Lease by Tenant:
(a) The failure by Tenant to make any payment of rent
or any other required payment, as and when due, and such failure shall not have
been cured within three (3) days after written notice thereof from Landlord;
(b) Tenant's failure to perform any other term,
covenant or condition contained in this Lease and such failure shall have
continued for fifteen (15) days after written notice of such failure is given to
Tenant; provided that where such failure cannot reasonably be cured within said
fifteen (15) day period, Tenant shall not be in default if Tenant commences such
cure within said fifteen (15) day period and thereafter diligently pursues all
reasonable efforts to complete said cure until completion thereof;
(c) Tenant's failure to conduct its business in the
Premises for a period of more than thirty (30) consecutive days, or Tenant's
removal of all or substantially all of its equipment and other possessions from
the Premises: or
(d) Tenant's assignment of its assets for the benefit
of its creditors; the filing of a petition by or against Tenant, where such
action is not dismissed within thirty (30) days, seeking adjudication or
reorganization under the Bankruptcy Code; the appointment of a receiver to take
possession of, or a levy by way of attachment or execution upon, substantially
all of Tenant's assets at the Premises.
17.2 Remedies. Upon any Event of Default, Landlord shall have
the following remedies, in addition to all other remedies now or hereafter
provided by law or equity;
(a) Landlord shall be entitled to keep this Lease in
full force and effect and Landlord may enforce all of its rights and remedies
under this Lease, including the right to recover rent and other sums as they
become due, plus interest at the highest rate then allowed by law, from the due
date of each installment of rent or other sum until paid; or
(b) Landlord may terminate Tenant's rights to
possession by giving Tenant written notice of termination, whereupon this Lease
and all of Tenant's rights in the Premises shall terminate. Any termination
under this paragraph shall not release Tenant from the payment of any sum then
due Landlord or from any claim for damages or rent accrued.
In the event this Lease is terminated pursuant to this Paragraph
17.2(b), Landlord may recover from Tenant all damages incurred by Landlord by
reason of Tenant's default, including but not limited to: (i) The cost of
recovering possession of the Premises; (ii) Expenses of reletting, including
necessary renovation and alteration of the Premises; (iii) Reasonable attorneys'
fees, any real estate commissions actually paid and that portion of any leasing
commission paid by Landlord applicable to the unexpired term of this Lease; (iv)
The worth at the time of award of the unpaid rent which had been earned at the
time of termination; (v) The worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss for the same period that Tenant
proves could have been reasonably avoided; (vi) The worth at the time of award
of the amount by which the unpaid rent for the balance of the term after the
time of award exceeds the amount of such rental loss for the same period that
Tenant proves could be reasonably avoided; and (vii) Any other amount necessary
to compensate Landlord for all the detriment proximately caused by Tenant's
failure to perform Tenant's obligations under this Lease, or which in the
ordinary course of things would be likely to result therefrom.
The "worth at the time of award" of the amounts referred to in
subparagraphs (iv) and (v) of this Paragraph 17.2(b) shall be computed by
allowing interest at the maximum rate then permitted by law. The "worth at the
time of award" of the amount referred to in
12.
<PAGE> 13
subparagraph (vi) of this Paragraph 17.2(b) shall be computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San Francisco at
the time of award plus one percent (1%). The term "rent" as used in this
paragraph shall include all sums required to be paid by Tenant to Landlord
pursuant to the terms of this Lease.
17.3 No Relief From Forfeiture After Default. Tenant waives
all rights of redemption or relief from forfeiture under California Code of
Civil Procedure Sections 1174 and 1179, and under any other present or future
law, in the event Tenant is evicted or Landlord otherwise lawfully takes
possession of the Premises by reason of any Event of Default.
17.4 Landlord's Right to Perform Tenant's Obligations. If
Tenant shall at any time fail to perform any obligation required to be made by
Tenant hereunder, then Landlord may, at its option, perform such obligation to
the extent Landlord deems desirable, and may pay any and all expenses incidental
thereto and employ counsel. No such action by Landlord shall be deemed a waiver
by Landlord of any of Landlord's rights or remedies, or a release of Tenant from
performance of such obligation. All sums so paid by Landlord shall be due and
payable by Tenant to Landlord on the day immediately following Landlord's
payment thereof. Landlord shall have the same rights and remedies for the
nonpayment of any such sums as for default Tenant in the payment of rent.
17.5 Remedies Not Exclusive. No remedy or election hereunder
shall be deemed exclusive but shall, wherever possible, be cumulative with all
other remedies available.
17.6 Termination, Surrender and Abandonment. No act or conduct
of Landlord, including, without limitation, efforts to relet the Premises, an
action in unlawful detainer or service of notice upon Tenant's or surrender of
possession by Tenant pursuant to such notice or action, shall extinguish the
liability of Tenant to pay rent or other sums due hereunder or terminate this
Lease, unless Landlord notifies Tenant in writing of Landlord's election to
terminate this Lease. No act or conduct of Landlord, including the acceptance of
the keys to the Premises, other than a written acknowledgment of acceptance of
surrender signed by Landlord, shall be deemed to be or constitute an acceptance
of the surrender of the Premises by Tenant prior to the expiration of the Lease
term. The surrender of this Lease by Tenant voluntarily or otherwise, shall, at
Landlord's option, operate as an assignment to Landlord of any and all existing
assignments and subleases, or Landlord may elect to terminate any or all of such
assignments and subleases by notifying the assignees and sublessees of its
election within fifteen (15) days after such surrender.
18. Effect of Conveyance. The term "Landlord" as used in this Lease,
means only the current owner(s) of the Building so that in the event of any sale
or other transfer of the Building, the transferor shall be deemed to be relieved
of all obligations of the Landlord hereunder from and after the date of such
sale, and the transferee shall be deemed to have assumed and agreed to perform
any and all obligations of Landlord hereunder arising from and after said date.
Landlord may transfer and deliver the Security Deposit to the transferee upon
any such transfer, and thereupon Landlord shall be discharged from any liability
therefor.
19. Instruments Required by Lender. Upon written request from Landlord,
Tenant agrees to forthwith execute and deliver to Landlord, such instruments,
including a current statement of Tenant's financial condition, as may be
reasonably required by any mortgages or holder of a deed of trust or other
encumbrance on the Property.
20. Tenant's Certificate. Tenant shall, from time to time, within ten
(10) days after receipt by Tenant from Landlord of written request therefor,
deliver a duly executed and acknowledged certificate to Landlord certifying: (i)
that this Lease is unmodified and in full force and effect, or if there has been
any modification, that the same is in full force and effect as modified, and
stating all such modifications; (ii) whether or not there is then existing any
claim by Tenant of default hereunder by Landlord and, if so, specifying the
nature thereof; and (iii) the dates to which the rent and other charges payable
hereunder by Tenant have been paid.
21. Subordination and Attornment. Tenant agrees that this Lease may, at
the option of Landlord, be subject and subordinate to any mortgage, deed of
trust, any other instrument or security, or ground lease which has been or shall
be placed on the Property, provided, so long as Tenant is not in default under
this Lease, no foreclosure or other right or remedy
13.
<PAGE> 14
exercised by the lender holding such security shall terminate this Lease. This
subordination is hereby made effective without any further act of Tenant. Tenant
shall, at any time hereafter, on demand, execute any instruments, releases, or
other documents that may be required by any mortgagee, mortgagor, or trustor or
beneficiary under any security instrument for the purpose of subjecting and
subordinating this Lease to the lien of such instrument. Tenant shall attorn to
any third party purchasing or otherwise acquiring the Premises at any sale or
other proceeding or pursuant to the exercise of any rights, powers or remedies
under any instruments of security or ground leases now or hereafter encumbering
all or any part of the Premises, as if such third party had been named as
Landlord under this Lease.
22. Notices. All notices, demands or requests to be given to Tenant or
Landlord shall be in writing, delivered personally or by commercial courier or
by United States mail, postage prepaid, certified return receipt requested and
addressed (a) to Tenant at the Premises, or (b) to Landlord at such address as
it may from time to time designate to Tenant in writing. Each such notice,
demand or request shall be deemed to have been received by Tenant or Landlord
upon actual delivery.
23. No Accord and Satisfaction. No payment by Tenant, or receipt by
Landlord, of an amount which is less than the full amount of Base Rent and all
other sums payable by Tenant hereunder at such time shall be deemed to be other
than on account of (a) the earliest of such other sums due and payable, and
thereafter (b) to the earliest Base Rent or other sum due and payable hereunder.
No endorsement or statement on any check or any letter accompanying any payment
of Base Rent or such other sums shall be deemed an accord and satisfaction, and
Landlord may accept any such check or payment without prejudice to Landlord's
right to receive payment of the balance of such rent and/or other sums, or
Landlord's right to pursue Landlord's remedies.
24. Attorneys' Fees. If any action or proceeding at law or in equity,
or an arbitration proceeding (collectively, an "action"), shall be brought to
recover any rent under this Lease, or for or on account of any breach of or to
enforce or interpret any of the terms, covenants, or conditions of this Lease,
or for the recovery of possession of the Premises, the prevailing party shall be
entitled to recover from the other party as a part of such action or in a
separate action brought for that purpose, its reasonable attorneys' fees and
costs and expenses incurred in connection with the prosecution or defense of
such action. "Prevailing party" within the meaning of this paragraph shall
include, without limitation, a party who brings an action against the other
after the other is in breach or default, if such action is dismissed upon the
other's payment of the sums allegedly due for performance of the covenants
allegedly breached, or if the party commencing such action or proceeding obtains
substantially the relief sought by it in such action, whether or not such action
proceeds to a final judgment or determination. In addition, Tenant agrees to
reimburse Landlord for all of Landlord's legal fees and expenses incurred in the
enforcement and protection of all of Landlord's rights under the Lease and
applicable laws, whether or not an action has been brought, including reasonable
attorneys' fees and costs incurred in any out-of-court settlement or in
connection with the filing of a bankruptcy petition by or against Tenant.
25. Holding Over. This Lease shall terminate without further notice at
the expiration of the lease term. Any holding over after the expiration of the
lease term, with the express written consent of Landlord, shall be construed to
be a tenancy from month to month, at a monthly rental of one hundred twenty-five
percent (125%) of the last applicable Base Rent, and shall otherwise be on the
terms and conditions herein specified.
26. General Provisions.
26.1 Entire Agreement. This instrument, together with the
exhibits attached hereto, constitutes the entire agreement made between the
parties hereto and may not be modified orally or in any manner other than by an
agreement in writing signed by all of the parties hereto or their respective
successors in interest.
26.2 Time. Time is of the essence with respect to the
performance of each and every provision of this Lease in which time of
performance is a factor.
26.3 Captions. The captions of the numbered paragraphs of this
Lease are inserted solely for the convenience of the parties hereto and shall
have no effect upon the constructions or interpretation of any part hereof.
14.
<PAGE> 15
26.4 California Law. This Lease shall be construed and
interpreted in accordance with the laws of the State of California.
26.5 Partial Invalidity. If any provision of this Lease is
held by a court of competent jurisdiction to be invalid, void, or unenforceable,
the remainder of the provisions hereof shall nonetheless continue in full force
and effect.
26.6 No Warranties. Any agreements, warranties or
representations not expressly contained herein shall not bind either Landlord or
Tenant.
26.7 Joint and Several Liability. If Tenant is more than one
person or entity, each such person or entity shall be jointly and severally
liable under the Lease.
26.8 Binding on Successors. The covenants and conditions
herein contained, subject to the provisions as to assignment, shall apply to and
be binding upon the parties hereto and their respective successors in interest.
26.9 Authority. The parties hereby represent and warrant that
they have all necessary power and authority to execute and deliver this Lease on
behalf of Landlord and Tenant, respectively.
26.10 Memorandum of Lease. Neither Landlord nor Tenant shall
record this Lease or a short form memorandum hereof without the prior written
consent of the other.
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Lease on the dates specified below immediately adjacent to their respective
signatures. Delivery of this Lease to Landlord, duly executed by Tenant,
constitutes an offer by Tenant to lease the Premises as herein set forth, and
under no circumstances shall such delivery be deemed to create an option or
reservation to lease the Premises for the benefit of Tenant. This Lease shall
only become effective and binding upon execution of this Lease by Landlord and
delivery of a signed copy to Tenant.
15.
<PAGE> 16
SECOND ADDENDUM
LANDLORD: Bayside Spinnaker Partners II, a California Limited
Partnership
TENANT: SteriGenics International, a California Corporation
(formerly Radiation Sterilizers, Inc.)
PREMISES: A 6,375 square foot portion of Building H of Bayside Plaza
III commonly known as 4020 Clipper Court, Fremont,
California 94538.
This is a Second Addendum to the Lease dated July 17, 1989 by and
between Bayside Spinnaker Partners II, a California Limited Partnership,
(Landlord) and SteriGenics International a California Corporation (formerly
Radiation Sterilizers, Inc.)
(Tenant).
29.0 Term: This Lease will be extended for a period of Sixty (60)
months and terminate on July 31, 1999.
30.0 Base Monthly Rental: The monthly rent shall remain Five Thousand
Six Hundred Eighty Six Dollars and no Cents ($5,686.00) through July 31, 1999.
31.0 This addendum will also Amend the Lease to correct the Tenant
legal name. The Tenant is SteriGenics International a California Corporation
rather than Radiation Sterilizers, Inc.
ALL OTHER TERMS AND CONDITIONS SHALL REMAIN THE SAME.
LANDLORD: TENANT:
Bayside Spinnaker Partners II, a SteriGenics International
California Limited Partnership a California Corporation
By /s/ By /s/
--------------------------------- ------------------------------
Its Partner Its President & CEO
Dated 12/7, 1993 Dated 12/6,1993
<PAGE> 17
ADDENDUM
LANDLORD: Bayside Spinnaker Partners 11, a California Partnership
TENANT: Radiation Sterilizers, Inc., a California Corporation
PREMISES: A 6,375 square foot portion of Building H of
Bayside Plaza III commonly known as 4020 Clipper Court,
Fremont, California
27.0 Prior Lease. Upon occupancy of the premises at 4020 Clipper Court,
this Lease shall serve to cancel that certain lease dated July 7, 1988 for the
premises located at 46721 Fremont Boulevard, Fremont, California.
28.0 Security Deposit. Tenant shall deposit with Landlord the sum of
Five Thousand One Hundred Seventy One Dollars ($5,171). The sum of $2,200 is
already on deposit for the prior lease and that amount shall be carried over to
this lease. Tenant shall pay the difference of $2,971 upon execution of this
lease.
<PAGE> 18
EXHIBIT A-1
[IMAGE OMITTED]
<PAGE> 19
EXHIBIT A-2
[IMAGE OMITTED]
<PAGE> 20
EXHIBIT B
WORK LETTER AGREEMENT
Construction of Tenant Improvements.
I. Definitions.
(a) The term "Tenant Improvements" shall mean those
improvements that Landlord is obligated to construct in the Premises pursuant to
plans and specifications developed therefor in accordance with Paragraph IL
below.
(b) The term "Tenant Improvement Costs" shall mean all sums
(i) paid to contractors, subcontractors, suppliers, and materialmen for labor
and materials furnished in connection with construction of the Tenant
Improvements; (ii) paid to governmental authorities or agencies for all
necessary governmental permits, licenses, inspections and approvals related to
the Tenant Improvements; (iii) engineering and architectural fees for services
required in connection with the design and construction of the Tenant
Improvements. In no event shall the Tenant Improvement Costs include any costs
of procuring, constructing, or installing Tenant's personal property in the
Premises.
II Plans and Specifications. Landlord shall prepare plans and
specifications (the "Plans and Specifications") for the Tenant Improvements that
Tenant desires Landlord to construct for Tenant's use in the Building. The plans
shall be consistent with the approved space plan attached hereto as Exhibit I.
Tenant shall cooperate diligently with the Landlord's architect )the
"Architect") and shall furnish all information required by the Architect for
completion of the Plans and Specifications. Landlord and Tenant shall indicate
their approval of the Plans and Specifications (the "Approved Plans") by
initialing them and attaching them hereto as Exhibit II.
III. Tenant Improvement Standards.
(a) Office Area.
1) Carpet throughout the office area except for sheet vinyl in the
restrooms. Carpet shall consist of 22 ounce direct glue-down carpet by
Design Weave, without pad. Kitchen area shall consist of vinyl tile
flooring.
2) Suspended acoustical ceiling, consisting of 2'x 4' EX posed grid at
9'in height.
3) Recessed fluorescent lighting fixtures, to code.
4) Heating, ventilating and air conditioning.
<PAGE> 21
5) Doors and partitions as shown with partitions to be textured and
painted. Doors are B-3 prefinished Birch, solid core with 20 minute
label.
6) 2'x 7' sidelights provided with all private offices and conference
rooms.
7) Standard bathroom and shower fixtures, as shown.
8) Electrical service as shown with standard switching Telephone and CRT
outlets include pull wire, cable provided by others.
9) Fire sprinklers to office area, to code.
10) Coffee Bar adjacent to Restrooms shall have hot/cold running water,
sink, and cabinets or cupboards. Dishwasher and garbage disposal to be
provided by Landlord. Tenant to provide refrigerator.
(b) Warehouse Area.
l) Chain hung strip fluorescent lighting as shown.
2) Sealed concrete floor.
3) Electrical service as shown.
4) Fire sprinklers to warehouse area, to code.
(c) Exclusions.
The tenant improvement standard does not include the following:
1) Electrical data gathering lines or security equipment.
2) Telephonic or other communications equipment.
3) Kitchen appliances- to be provided-by-Tenant.
IV.
1) When practicable, Tenant shall be allowed to help decide interior
colors, finishes, etc., so long as cogs are not increased.
2) At Tenant's request, any upgrades from Landlord's tenant improvement
standards shall be allowed with Landlord's approval, at Tenant's
expense.
<PAGE> 22
EXHIBIT D
<TABLE>
<CAPTION>
Month Monthly Rent
<S> <C>
1-3 $ 0
4-60 5,171
</TABLE>
<PAGE> 23
EXHIBIT E
RENT ADJUSTMENT SCHEDULE
The Base Rent of Five Thousand One Hundred Seventy One Dollars ($5,17
1) shall be adjusted as of do expiration of the thirtieth (30th) month of the
lease term (the Rental Adjustment Dates) to reflect any increase in the cost of
living. The adjustment or adjustments, if any, shall be calculated upon the
basis of the United States Department of Labor, Bureau of Labor Statistics
Consumer Price Index for All Urban Consumers, for San Francisco-Oakland
(1967=100), hereafter referred to as the "Index". The last published Index in
effect on the Commencement Date shall be considered the "base". On each rental
adjustment date, the base rent shall be increased to an amount equal to the base
rent multiplied by a fraction, the numerator of which is the Index as of such
rental adjustment date, and the denominator of which is the "Base." When the
adjusted Base Rent is determined upon each Rental Adjustment Date, Landlord
shall give Tenant written notice to that effect indicating how the new base rent
figure was computed in accordance with this, VMS. In no event shall the
adjustment of the Base Rent be greater than eight percent (8%) per year
compounded, or less than four percent (4%) per year, compounded. If the Index
does not exist on any Rental Adjustment Date in the same format as referred to
in this paragraph, Landlord shall substitute in lieu thereof an index reasonably
comparable to the Index referred to above which is then published by the Bureau
of Labor Statistics, or successor or similar governmental agency, or if no
governmental agency then publishes an index, Landlord shall substitute therefor
any comparable index then published by a reputable private organization.
<PAGE> 24
[Company Letterhead]
SIGN CRITERIA
BAYSIDE PLAZA
TENANT IDENTIFICATION WINDOW SIGNS
All window signs are to be made with 3" white vinyl capita! letters only in the
Medium. Helvetica style, Tenant may use one window only either to the left or
the right of the entrance door, whichever provides the best visibility. Company
names and logos are allowed - no slogans,
Copy should start at 5' from grade working down to no more than 4' from grade,
if a company logo or symbol is desired it may be laded under the company name.
Logos or symbols may be any color (based on approval by management) but must be
no larger than a total of 76 (seventy-six) square inches within an imaginary
square,
<PAGE> 25
[EXHIBIT I OMITTED]
<PAGE> 26
[KING & LYONS LETTERHEAD]
SIGN CRITERIA
BAYSIDE PLAZA
TENANT IDENTIFICATION WINDOW SIGNS
All window signs are to be made with 3" white vinyl capital letters only in the
Medium Helvetica style. Tenant may use one window only either to the left or the
right of the entrance door, whichever provides the best visibility. Company
names and logos are allowed - no slogans,
Copy should start at 5' from grade working down to no more than 4' from grade,
if a company logo or symbol is desired it may-be placed under the company name.
Logos or symbols may be any color (based an approval by management) but must be
no larger than a total of 76 (seventy-six) square inches within an imaginary
square.
EXHIBIT F
<PAGE> 27
[EXHIBIT I]
[GRAPHIC OMITTED]
<PAGE> 28
[KING & LYONS LETTERHEAD]
October 28, 1993
Mr. Jim Clouser
SteriGenics International
P.O. Box 5030
Fremont, CA 94537-5030
Dear Jim:
In conjunction with certain financial activities we are pursuing, we require
your signature on the completed Tenant Estoppel letter which is enclosed. Please
obtain the appropriate signature. If you are not the responsible party for
executing these documents, we request mat you please forward to the appropriate
person.
Your assistance in signing the enclosed Estoppel and returning it to us before
November 12, 1993 would be most appreciated.
Should you have any questions or need further information, please do not
hesitate to contact me at 656-1900. Thank you for your prompt handling of this
matter.
Sincerely,
KING & LYONS
/s/ Mary Blaser
- ---------------------------
Mary Blaser
Property Manager
/tk
Enclosures
<PAGE> 29
Building No: H,511
Address: 4020 Clipper Court
Fremont, California
Project: Bayside Plaza III
Tenant: SteriGenics International
ESTOPPEL CERTIFICATE
TO: SCI Limited Partnership
Security Capital Industrial Trust
125 Lincoln Avenue
Santa Fe, New Mexico 87501
NationsBank of Texas, N.A.
901 Main Street, 51st Floor
Dallas, Texas 75202
The undersigned, the tenant ("Tenant") under a certain lease
agreement, a true copy of which is attached hereto as Exhibit A ("Lease"), does
hereby certify as follows:
1. The Lease is presently in full force and effect and
unmodified except as may be evidenced by written instrument attached as part of
Exhibit A, The landlord ("Landlord") Is Bayside Spinnaker Partners II, The Lease
has not in any respect been modified, altered or amended other than as set forth
in Exhibit A and contains the entire agreement between Landlord and Tenant,
2. The lease term has commenced and full rental is now
accruing thereunder. The term of the Lease commenced on August 1, 1989 and
expires on July 31, 1994, unless sooner terminated pursuant to the provisions of
the Lease, The Lease provides no option to extend the term of the Lease.
3. Tenant has accepted possession of the leased premises under
the Lease and any improvements required by the terms of the Lease to be made by
Landlord have been completed to the satisfaction of Tenant. Tenant presently
occupies 6,3375 square feet in the building located at 4020 Clipper Court,,
Fremont, California (the "Building"), Tenant is paying base rent of $5,686.00
per month as rental to Landlord under the Lease. Tenant is responsible for, and
is currently paying to Landlord estimated monthly expenses equal to $1,020.00,
which represents Tenant's estimated share of common area maintenance charges,
real estate taxes, insurance and other costs as outlined in the Lease.
4. No rent under said Lease has been paid more than thirty
(30) days in advance of its due date. Landlord is not in any respect in default
in the performance of the terms and provisions of the Lease, nor to Tenant's
knowledge, is there now any fact or condition which, with notice or lapse of
time or both, will become such a default, Tenant is not in any respect in
<PAGE> 30
default of the Lease (nor is there now any fact or condition which, with notice
or lapse of time or both, will become such a default), and Tenant has not
assigned, transferred, sublet or hypothecated its interest under the Lease,
5. The Tenant, as of this date, has no claim, charge, defense
or offset under the Lease or otherwise, against rents or other charges due or to
become due thereunder. As of the date hereof, Tenant has not asserted any such
offset or credit,
6. Tenant has not made any payment to Landlord as a security
deposit or rental deposit except any payment expressly provided for in the Lease
as follows: $5,171,00 Security Deposit.
7. Except as stated otherwise herein, Tenant does not have any
right to renew or extend the term of the Lease, nor does Tenant have any option
or preferential right to purchase all or any part of the leased premises or all
or any part of the building and premises of which the leased premises are a
part, nor any right, title or interest with respect to the leased premises other
than as Tenant under the Lease, There are no understandings, contracts,
agreements or commitments of any kind whatsoever with respect to the Lease,
Tenant's leased premises or the Building except as expressly provided in the
Lease,
The foregoing provisions may be relied on by and shall inure
to the benefit of the addresses noted above, Landlord and any subsequent owner
and their successors, assigns, and mortgagees and shall be binding upon the
undersigned and its successors and assigns.
DATED: Nov., 4, 1993
SteriGenics International
By: /s/ James F. Clouser
------------------------------
Name: James F. Clouser
Title: President & CEO
-2-
<PAGE> 31
CHANGE OF ADDRESS
Reason for change:
_______ Tenant vacated _________ Tenant relocated ________ Lease terminated
X Billing purposes ONLY __________ Other ________________________
Formerly RSI
New Name Too
Tenant: SteriGenics International
Address: 4020 Clipper Ct
Partnership: BSP II Project/Bldg: B. Plaza III/511 Lease #: 51109
New Address P.O. Box 5030
Fremont, CA 94537-5030
Comments: Have requested copy of corp. name change filed with state
<PAGE> 32
BAYSIDE SPINNAKER PARTNERS II
46750 FREMONT BLVD., SUITE 201
FREMONT, CA 94538
April 23, 1992
BUILDING ADDRESS: 4020 CLIPPER COURT
BUILDING NUMBER: 511
TENANT: STERIGENICS(RSI)
ADDRESS: PO BOX 5030
FREMONT, CA 94537-5030
LEASE#: 511009
LEASE PERIOD: 8/1/89-7/31/94
CALCULATIONS:
<TABLE>
<S> <C>
BASE YEAR RENT* 5,171.00
NEW CPI (Dec-91) 429.80
OLD CPI (Aug-89) 393.80
% RENT APPLICABLE 100.00%
</TABLE>
<TABLE>
<CAPTION>
BASE %CPI MINIMUM PERCENT AMOUNT OF NEW
RENT INCREASE INCREASE ALLOWED" INCREASE MONTHLY RENT
<S> <C> <C> <C> <C>
5,171.00 9.14% 196% 515.03 5,686.00
</TABLE>
RECAP:
The above is an adjustment to our previous rent calculation.
<TABLE>
<CAPTION>
Period Billed Actual Additional Due
<S> <C> <C> <C>
Feb-92 5,171.00 5,686.00 515.00
Mar-92 5,643.72 5,686.00 42.28
Apr-92 5,643.72 5,686.00 42.28
Feb-92 472.72 0.00 -472.72
126.84
</TABLE>
*See Exhibit E of lease agreement
*Rent increase minimum of 4% per year
See attached copies of CPI indexes
<PAGE> 1
EXHIBIT 10.57
STANDARD INDUSTRIAL LEASE
TRIPLE NET
LEASE SUMMARY
The following information affects the terms of the Basic Lease.
I. LANDLORD: CHARLES KING & ASSOCIATES
II. TENANT: STERIGENICS INTERNATIONAL,INC.
III. PREMISES: A reinforced concrete, tilt-up warehouse building of
approximately 31,850 square feet located at 1401
Morgan Circle, Tustin, California, further described
as Lot 6 of Tract 7721 as shown on map recorded in
Book 347, pages 36 and 37, in the Office of the
Orange County Recorder.
IV. TERM:
Lease term: sixty (60) months.
Commencement date (check one):
X Fixed date: July 1, 1997.
------- Subject to completion of improvements. Landlord's current
------- estimate of the substantial completion date is _____, 19__.
V. CHARGES:
<TABLE>
<CAPTION>
Amount
<S> <C>
Base monthly rent: $19,750.00
Rental adjustment period and date:
July 1, 1998 - June 30,1999 $20,350.00
July 1, 1999 - June 30, 2000 $20,950.00
July 1, 2000 - June 30, 2001 $21,580.00
July 1, 2001 - June 30,2002 $22,230.00
Security deposit: None
Total payable by Tenant at Lease execution: $19,750.00
(First month's rent)
</TABLE>
VI. ATTACHMENT:
Basic Lease attached hereto and is part of this lease
VII. EXECUTION:
The undersigned parties agree to the provisions of this Lease, including
the attached Basic Lease.
LANDLORD TENANT
CHARLES KING & ASSOCIATES, STERIGENICS INTERNATIONAL, INC.
a California Limited Partnership a Delaware Corporation
By: /s/ Charles W. King Jr. By: /s/ Edward M. Miller, Jr.
------------------------------- -------------------------------
Charles W. King Jr., Trustee Edward M. Miller, Jr.
On behalf of The Charles W. King Its: Vice President of Finance
Revocable Trust
Dated: June 26, 1997 Dated: June 25, 1997
------------------------------- -------------------------------
<PAGE> 2
Basic Lease
-----------
1. Parties. This Lease is entered into by and between the parties identified in
the foregoing Lease Summary as Landlord and Tenant.
2. Premises. Landlord leases to Tenant, and Tenant hires from Landlord, the real
property identified in the Lease Summary (the "Premises"). The Premises
encompass all space bounded by the outside of the exterior walls and roof, the
centerline of any partition walls, and the upper surface of the floor slab. A
floor or plot plan depicting the building containing the Premises (the
"Building") may be attached hereto as an Exhibit, with the Premises outlined in
some suitable manner, which is incorporated herein solely for the purpose of
designating the location of the Premises.
3. Term. This Lease shall extend for the term stated in the Lease Summary,
beginning on the commencement date.
3.1. Commencement. The commencement date shall be the fixed date stated
in the Lease Summary or, if no fixed date is stated, the earlier of (i) the date
of substantial completion of the improvements to be constructed by Landlord on
the Premises, in accordance with any description of Landlord's work set forth on
an Exhibit to this Lease, or (ii) the date on which Tenant first uses a portion
of the Promises for its business. "Substantial completion shall have occurred on
the first date on which (i) the governmental authority having jurisdiction has
authorized occupancy of the Premises, (ii) electric power is available at the
Premises, and (iii) the architect, engineer, or other person supervising
construction of the improvements certifies that they are substantially complete
and ready for occupancy, subject only to "punch-list" defects that do not
materially diminish the usefulness of the Premises. Landlord shall advise
Tenant, from time to time and in good faith, of the estimated completion date,
and Landlord's current estimate of that date is stated in the Lease Summary. If
the commencement date is other than the first day of a calendar month, then the
lease term shall extend for the number of months stated in the Lease Summary
beginning with the first day of the month following the commencement date.
3.2. Postponement. If, for any reason beyond Landlord's reasonable
control, Landlord is unable to deliver the Premises on the date stated above,
the commencement of the lease term will be postponed, without liability to
Tenant or affecting the validity of this Lease, and the term shall begin on such
date as Landlord is able to deliver possession of the Premises with substantial
completion of any Landlord work. Causes beyond Landlord's reasonable control
shall include, for example, labor difficulties, inclement weather, rationing or
other governmental controls, shortages of materials or services, and failure of
any prior occupant to vacate the Premises. If Landlord is unable to deliver
possession within three months after any fixed commencement date stated in the
Lease Summary, or within six months after execution of this Lease if no fixed
commencement date is stated, then this Lease shall thereupon terminate without
liability to either party.
4. Rental. As rental for the Premises, Tenant shall pay Landlord, when due and
in lawful money of the United States, all sums required to be paid by Tenant
under this Lease and shall promptly discharge all other monetary obligations of
the Tenant hereunder. Any monetary payment not received by Landlord when due
shall thereafter bear interest, at the rate stated in paragraph 17.1, until
received, provided that Landlord will waive interest on any monthly rental
payment received not later than the fifth day of that month (or the first
business day following the fifth if the
INITIAL ________
<PAGE> 3
fifth falls on a weekend or holiday). All such sums shall be paid to Landlord at
such place in California as Landlord may designate.
4.1. Base Monthly Rent. The base monthly rent shall be the amount
stated in the Lease Summary payable in monthly installments in advance on the
first day of each calendar month during the lease term, beginning on the
commencement date. If the commencement date is a day other than the first day of
a calendar month, then the rent for that partial month shall be a fraction of
the base monthly rent, based on the number of days in that partial month,
including the commencement date, in proportion to the total number of days in
the month; such rent shall be payable on the first day of the following month.
Rent for the first calendar month of the term is payable upon execution of this
Lease.
4.2. Rental Adjustment. At the end of the rental adjustment period
(measured from the beginning of the first full calendar month in the lease term)
stated in the Lease Summary, and at like intervals thereafter, or on the
adjustment date stated in the Lease Summary, whichever is applicable, the
monthly rent shall be adjusted so as to equal (i) the base monthly rent, plus
(ii) a percentage of the base monthly rent equal to any percentage increase in
the Consumer Price Index for All Urban Consumers, as published by the Bureau of
Labor Statistics for the San Francisco-Oakland statistical area, between the
amount thereof as last published prior to the beginning of the first full
calendar month in the lease term and the amount thereof as last published prior
to the date on which the rental adjustment is to be made. There shall be no
adjustment for any decrease in the Consumer Price Index during the applicable
period.
5. Security. As security for the performance of its obligations under this
Lease, Tenant gives Landlord the security described in this paragraph.
5.1. Deposit. Tenant shall deposit with Landlord, upon execution of
this Lease, the sum stated in the Lease Summary as the security deposit, which
Landlord shall retain during the lease term, as a debtor and not as a trustee.
Tenant acknowledges that the use value of the security deposit has been
considered in determining the appropriate monthly rent for the Premises, and
Tenant shall be entitled to no credit, offset, or compensation, by way of
interest or otherwise, due to Landlord's possession of the security deposit,
which may be commingled with Landlord's own funds. If Tenant defaults in the
performance of any of its obligations hereunder, Landlord may pay or apply any
portion of the deposit as necessary to cure the default or compensate Landlord
for damage resulting therefrom, and Tenant shall, within ten days after
Landlord's demand therefor, deposit with Landlord such amount of cash as is
necessary to restore the deposit to the full original amount. Upon termination
of this Lease, and after Tenant has vacated the Premises, the amount of such
deposit remaining, after curing Tenant's defaults and compensating Landlord for
damage caused by Tenant, shall be returned to Tenant at its last address known
to Landlord.
5.2. Additional Security. Tenant grants Landlord a security interest in
all personal property owned by Tenant, placed upon the Premises, and used by
Tenant in its business on the Premises, not including inventory held for sale
and accounts receivable. Landlord's security interest shall attach on the first
date that such property is placed on the Premises; if Tenant is not then in
default hereunder, any such property may be removed from the Premises during
the lease term, free of Landlord's security interest, if such removal is done in
the ordinary course of Tenant's business or for the purpose of acquiring
replacement property and not for transfer to a creditor having no prior security
interest in the property. Upon request by Landlord, Tenant shall execute such
additional documents, including form UCC-1, as may be appropriate to perfect
Landlord's security interest. If not previously perfected, Landlord's security
interest will be perfected by Landlord's possession of the security, which shall
be deemed to have occurred upon any abandonment, vacating,
INITIAL ________
-2-
<PAGE> 4
or surrender of the Premises by Tenant.
6. Use.
6.1. Premises. The Premises shall be used only for general industrial,
warehousing, and office purposes. Tenant acknowledges that the Premises are
suitable for Tenant's intended use, and Tenant accepts the Premises without
regard for applicable zoning and other laws or governmental regulations
affecting the Premises, now or hereafter in force. Notwithstanding the uses
permitted by this Lease, Tenant will engage in no activity on the Premises that
would, in the judgment of any insurer of the Premises, increase the premium on
any of Landlord's insurance over the amount otherwise charged therefor or cause
such insurance to be cancelled. In its use of the Premises, Tenant will comply
with all applicable laws, governmental regulations, and tract restrictions.
Whether or not Tenant is in compliance with applicable laws, Tenant will commit
no nuisance on the Premises and will not cause any unreasonable odors, noise,
vibration, electronic emissions, or any other item to emanate from the Premises
so as to damage Landlord's property or interfere with any other person.
6.2. Exterior. No portion of the area outside of the Building is leased
to Tenant. However, Tenant may utilize truck access and turning areas in a
reasonable manner (not to include truck parking except for purposes of loading
or unloading, which shall occur expeditiously) and Tenant may utilize designated
parking areas, in common with Landlord's other tenants, for daily parking of
passenger vehicles. No rubbish containers or other materials may be stored
outside of the Premises. Tenant may not erect or maintain any sign or other
marking on, or visible from, the exterior of the Premises without Landlord's
prior written consent.
7. Maintenance and Repair.
7.1. Original Condition. If the Premises are complete and vacant upon
the execution of this Lease, Tenant acknowledges that the Premises are in good
condition and are not in need of repair. If this Lease is executed while the
Premises are occupied by another tenant or prior to the completion of
improvements on the Premises by Landlord as required by this Lease, then the
Premises shall be deemed to be in good condition and not in need of repair as of
the commencement date of the lease term unless, within ten days thereafter,
Tenant delivers to Landlord a written notice specifying the manner in which the
Premises are not then in good condition and repair.
7.2. Landlord's Obligations. Subject to the provisions of this Lease
dealing with damage or destruction, Landlord shall maintain, at its expense, the
structural portions of the Building foundation, walls, floors, and roof. Subject
to Tenant's obligation to pay a pro rata share of the cost in accordance with
paragraph 8, Landlord shall maintain the exterior of the Building and the
common area, as defined in paragraph B.
7.3. Tenant's Obligations. Throughout the lease term, Tenant shall
maintain the Premises and all improvements and equipment in or about the
Premises in good condition and repair. Tenant's repair obligation is
unconditional and does not depend on whether the repairs are necessitated by
Tenant's use or whether the means of repair or item needing repair is readily
accessible to Tenant. The items to be repaired by Tenant include, for example
and not as a limitation: plumbing; heating, air conditioning, ventilating, and
electrical equipment; walls, floor slab surface and coverings, ceilings, doors,
and glass. Tenant will cause all heating, ventilating, air conditioning, and
electrical equipment to be maintained in accordance with the manufacturers'
recommendations and specifications, and Tenant will place equipment under
service contract as required for proper preventative maintenance. At the
INITIAL ________
-3-
<PAGE> 5
end of the lease term, Tenant shall surrender the Premises to Landlord broom
clean, in the same condition as they existed at the commencement of this Lease,
together with such changes as are permitted to remain pursuant to this Lease,
excepting only such ordinary wear as could not have been avoided by routine
maintenance. Upon reasonable notice to Tenant, Landlord may enter the Premises
during business hours for inspection purposes. If Tenant fails to perform proper
maintenance or repair, including preventative maintenance where appropriate,
Landlord may, after reasonable notice to Tenant (or without notice for emergency
repairs), cause the same to be performed, and the cost thereof will promptly
be paid by Tenant upon receipt of a statement from Landlord setting forth the
amount due.
8. Costs. Tenant shall pay all costs associated with the Premises during the
lease term, including taxes, utility costs, maintenance costs, and insurance
premiums, according to the provisions of this paragraph.
8.1. Taxes. Tenant shall pay all property taxes, as defined below,
levied during the lease term. If the Premises constitute only a portion of the
Building, or if there is more than one building on the land that is taxed,
Tenant shall pay a portion of the taxes, as prorated by Lessor on the basis of
the square footage of the Premises as a fraction of the total square footage of
the buildings on the tax parcel. However, Tenant's share of the total taxes will
be equitably adjusted by Landlord to take account of any disproportionate tax
burden imposed by special improvements or valuations relating to (i) the
Premises, (ii) other portions of the Building, or (iii) other buildings on the
tax parcel, which adjustment may raise or lower Tenant's share as calculated on
the basis of square footage; valuation data contained on tax assessor's
worksheets, if available, shall conclusively determine the manner in which any
equitable adjustment is to be made. As used herein, "property taxes" include all
taxes, special assessments, and other charges imposed by any taxing authority
having jurisdiction and levied against the Premises, or against Landlord by
virtue of its ownership of the Premises or collection of rental income
therefrom, excepting only estate taxes, inheritance taxes, and income taxes that
are payable, at the same or greater rate, against nonrental as well as rental
income. Tenant shall pay all such taxes, or its proportionate share thereof as
calculated by Landlord, to Landlord (and not to the taxing authority, whether or
not Tenant is liable for the entire amount of the tax) at least ten days prior
to the date on which the tax payment would become delinquent or any penalty for
nonpayment would be incurred. Landlord shall provide Tenant with a written
statement of the amount due, not less than ten days prior to the date on which
Tenant's payment is required, and, at Tenant's request, will also provide copies
of any tax bills used in calculating the amount of Tenant's payment. If the
lease term includes only a portion of a taxing period, then Tenant shall pay a
pro rata portion of the total tax, based upon the number of days in the lease
term that are included in the taxing period, if the tax for the period at the
beginning of the lease term has been paid prior to the commencement of the
Lease, then Tenant's pro rata share shall be payable on the lease commencement
date; if the Lease terminates before the due date for payment of the tax for the
period at the end of the lease term, then Tenant's pro rata share for that
period shall be payable at the time that the last monthly rental payment is due
(if the amount of the tax is not then known, it shall be estimated by Landlord
on the basis of the best available information as to the then current
assessments and tax rates or, if no such information is available, shall be
projected at the same rate as was imposed for the last previous taxing period,
but Landlord will reconcile Tenant's account when the tax becomes known).
8.2. Utility and Maintenance Costs. Tenant shall pay for all costs of
utility services to the Premises; if utilities are not separately metered to the
Premises,
INITIAL ________
-4-
<PAGE> 6
Tenant shall pay for its proportionate share. Tenant shall pay its
proportionate share of all costs incurred by Landlord for maintenance and repair
for the building exterior, landscaping, and common area during the lease term,
including but not limited to costs of painting, paving maintenance, and roof
repair. The "common area" includes all sidewalks, parking areas, and other
paving serving the Building. Nonmetered utility, repair, and maintenance
expenses shall be estimated by Landlord, on the basis of historical cost data,
and Tenant shall pay the amount of the monthly estimated costs to Landlord in
advance, on the first day of each month, with the regular rental payment.
Periodically, but not less frequently than annually, Landlord will provide
Tenant with an accounting of all such costs for the preceding period, and an
appropriate sum will be credited or debited against Tenant's next monthly
rental payment so as to equalize Tenant's actual payments and the actual costs
for the period. Landlord may revise its monthly cost estimate, and provide
Tenant with an accounting for the previous period, at any time during the lease
term.
8.3. Insurance. Tenant will pay, when due, its proportionate share of
all premiums on such policy or policies of insurance as may be obtained by
Landlord covering loss or damage to the Building containing the Premises, in the
full insurable value thereof. Such policy may insure against: all perils
included in the classifications of fire, extended coverage, vandalism, malicious
mischief, special extended perils, and all-risk sprinkler leakage; loss of
rents, property taxes, and insurance costs for a period of not more than one
year; such other hazards as are then normally insured against by owners of
commercial buildings of the sort containing the Premises. Landlord may obtain
such insurance under a blanket policy with a deductible of not more than $1,000,
in which event Tenant will indemnify Landlord against all insurable losses
included within the deductible portion of the coverage. Tenant's payment shall
be due and payable within ten days after written notice from Landlord, stating
the amount due and including a copy of the insurer's statement showing the
premium charged; if the premium for the period at the beginning of the lease
term has been prepaid by Landlord, Tenant's pro rata share shall be payable on
the lease commencement date.
8.4. Proportionate Share. Tenant's proportionate share of utility
costs, maintenance and repair costs, and insurance premiums shall be determined
by Landlord on the basis of the square footage of the Premises as a fraction of
the total square footage of the building or buildings insured, in the case of
insurance, or of the buildings benefitted by the utility service or maintenance,
in the case of utility or maintenance costs. However, (i) if Tenant utilizes
more than its proportionate share of common area, for parking or other purposes,
or (ii) if Tenant's occupancy of the Building (with Landlord's consent and
subject to the provisions of paragraph 6.1) adds to the normal insurance costs,
or (iii) if Tenant uses more than a normal amount of any utility service, then
Landlord may equitably increase Tenant's proportionate share of costs to account
for such additional usage or risk.
9. Alterations.
9.1. Tenant Work. Tenant shall make no alteration, addition, or utility
installation (all hereafter called "changes") on or to the Premises without
Landlord's prior written consent. In making approved changes, Tenant shall
comply with all applicable building code requirements. Unless Landlord has
specifically waived this provision in writing prior to the making of a change to
the Premises, all such changes (i) shall be removed from the Premises, and all
damage resulting from such removal repaired by Tenant, prior to the end of the
lease term, or (ii) shall remain on the Premises at the end of the lease term
and become the property of Landlord, at Landlord's election. If Landlord does
not notify Tenant, at least three months prior to the end of the lease term, of
its election to have changes remain on the Premises,
INITIAL ________
-5-
<PAGE> 7
then Landlord shall thereby have elected to require Tenant to remove such
changes. In making all changes, Tenant shall hold Landlord harmless from
mechanics' liens and all other liability resulting therefrom.
9.2. Landlord Work and Entry. Upon execution of this Lease, or at such
later time as is feasible and consistent with the term hereof, Landlord shall
commence construction of any improvements depicted or described as Landlord work
on an Exhibit to this Lease. Construction of such improvements shall be pursued
to completion with reasonable diligence, subject to delays for reasons beyond
Landlord's reasonable control, including, for example, the matters described in
paragraph 3.2. Landlord shall have no liability to Tenant due to faulty work,
but Landlord shall cause any faulty work to be repaired if it receives written
notice of the defect from Tenant within thirty days after completion of the
work. All such improvements shall become part of the Premises and remain thereon
at the termination of the Lease. Landlord may enter the Premises at any time for
the purpose of cleaning, maintenance, or inspection, and may enter during normal
business hours to show the Premises to prospective tenants in the last 180 days
of the lease term. If it may be done without interfering with Tenant's business,
Landlord may also enter the Premises during the last sixty days of the lease
term to prepare the Premises for a subsequent tenant.
10. Damage. If any structural portion of the Premises, that Landlord is
obligated to maintain, is damaged or destroyed by any cause, if such damage is
insured against by the insurance described in paragraph 8.3, and if the
insurance proceeds are available for rebuilding, then this Lease will not
terminate and Landlord will cause such damage to be repaired with reasonable
dispatch, subject to delays for reasons beyond Landlord's reasonable control,
including, for example, delays in the disbursement of insurance proceeds and the
matters described in paragraph 3.2. Landlord's obligation in this regard shall
be enforceable by Tenant only if such damage interferes with Tenant's reasonable
occupancy of the Premises. Tenant's rent will abate to the extent that the
damage and repair period interfere with Tenant's use of the Premises. If the
damage is not insured against, if the available insurance proceeds are
insufficient for the repair, or if the damage occurs within the last six months
of the lease term, Landlord may, at its option exercised by notice to Tenant
within thirty days of the date that Landlord acquires knowledge of the damage,
elect either to complete the repair at its expense, or to terminate this Lease
as of the date of damage. If Landlord elects to repair, rent will abate in the
manner described above; other than the obligation to repair stated above,
Landlord shall have no liability to Tenant on account of the damage.
11. Condemnation. If there is a taking by eminent domain or a transfer under
threat thereof of (i) the entire Premises, or (ii) so much of the Premises, for
the balance of the lease term, as prevents the continued reasonable conduct of
Tenant's business thereon, then this Lease shall terminate as of the date that
possession of the condemned premises is delivered to the condemnor. No other
such taking or transfer shall terminate this Lease. All condemnation proceeds
shall be the property of Landlord, excepting only such portion thereof as is
designated by the condemned as compensation for Tenant's moving expenses, loss
of Tenant's goodwill, or for Tenant's trade fixtures.
12. Liability.
12.1. Insurance. Tenant shall, at its expense, maintain in force during
the lease term a combined single limit policy of bodily injury and property
damage insurance, with a limit of not less than Five Hundred Thousand Dollars
($500,000), insuring Landlord and Tenant against all liability arising out of
the ownership, use,
INITIAL ________
-6-
<PAGE> 8
occupancy, or maintenance of the Premises and appurtenant areas. Such insurance
shall be endorsed as primary and non-contributing, as to any policy carried by
Landlord. Tenant will deliver to Landlord a certificate evidencing such
insurance, which will provide that the insurance will not be cancelled except
on ten days notice to Landlord.
12.2. Indemnity. Tenant shall indemnify Landlord and hold it harmless
from all claims, expenses, and attorney's fees arising out of Tenant's use of
the Premises or from any acts permitted by Tenant on or in the vicinity of the
Premises.
12.3. Waiver of Liability. To the extent allowable by the applicable
insurance policy without reduction of coverage, Landlord and Tenant hereby waive
all rights of recovery against the other for loss or damage that is covered by
insurance. Tenant further waives all rights of recovery against Landlord for
loss or damage to Tenant's personal property on the Premises, or to injury to
persons claiming through Tenant, from any cause and whether or not such loss or
damage is covered by insurance.
13. Transfer.
13.1. Transfer by Tenant. Tenant shall not assign, sublet, or otherwise
transfer, or permit a transfer of, all or any portion of its interest in this
Lease, the Premises, or of a controlling interest in any Tenant entity, without
Landlord's prior written consent, which shall not be unreasonably withheld. No
such consent shall relieve Tenant of any liability under this Lease, nor shall
it constitute consent to any further transfer. As a condition of such consent,
the transferee shall assume all liability hereunder.
13.2. Transfer by Landlord. The liability of Landlord hereunder shall
exist only with respect to the period that Landlord is the owner of the
Premises. Upon any transfer of Landlord's interest in the Premises and
notification thereof to Tenant, Landlord shall be relieved of all liability
except such as may have accrued prior to the transfer.
14. Default.
14.1. Events. The occurrence of any of the following events shall
constitute a material breach of this Lease and default by Tenant:
(a) Failure to pay rent or any other monetary sum when due, if
such failure continues for five days after notice from Landlord;
(b) Failure by Tenant to perform any nonmonetary obligation
under this Lease where such failure continues for more than thirty days or, if
the failure cannot reasonably be cured within thirty days, for a period
exceeding the time within which such failure could be cured with reasonable
diligence;
(c) A general assignment by Tenant for the benefit of creditors;
the filing of a petition by or against Tenant, seeking adjudication or
reorganization under the Bankruptcy Act, the appointment of a receiver to take
possession of, or a levy by way of attachment or execution upon, substantially
all of Tenant's assets at the Premises;
(d) Tenant falsely stating its financial condition to Landlord,
either before or after the execution of this Lease;
(e) Tenant vacating or abandoning the Premises during the lease
term.
14.2. Remedies. After any breach or default by Tenant, Landlord shall
have all rights and remedies afforded by law, including but not limited to the
following:
(a) If Tenant's right to possession is expressly terminated in
writing by Landlord because of such breach, Landlord may recover from Tenant:
(i) the worth at the time of the award of the unpaid rent which had been earned
at the time of termination, together with interest thereon at the rate of one
and one-half percent (1 1/2%)
INITIAL ________
-7-
<PAGE> 9
per month (ii) the worth at the time of the award of the amount by which the
unpaid rent, which would have been earned after termination until the time of
the award, exceeds the amount of such rental loss that the Tenant proves could
have been reasonably avoided, together with interest thereon at the rate of one
and one-half percent (1 1/2%) per month; (iii) the worth at the time of the
award of the amount by which the unpaid rent, for the balance of the term after
the time of the award, exceeds the amount of such rental loss that the Tenant
proves could have been reasonably avoided, as discounted to the then present
value at a rate equal to one percent (1%) over the discount rate of the Federal
Reserve Bank of San Francisco at the time of the award; (iv) any other amount
necessary to compensate Landlord for all of the detriment proximately caused by
Tenant's failure to perform its obligations under this Lease or which, in the
ordinary course of things, would be likely to result therefrom, including, for
example, expenses of reletting and altering the Premises, attorney's fees, and
real estate brokerage commissions. If the interest rate specified in clauses (i)
and (ii) of the preceding sentence exceeds the maximum rate that the parties may
agree upon, as permitted by law, then such maximum rate shall apply.
(b) Without terminating Tenant's right to possession, Landlord
may enforce all of its rights and remedies under this Lease, including the right
to recover rent as it becomes due. For purposes of this provision, any reletting
of the Premises for a term of less than the unexpired term of this Lease or any
reletting of a portion of the Premises shall, at Landlord's option, be deemed to
terminate the Tenant's right to possession only with respect to such portion of
the unexpired term or such portion of the Premises as is the subject of such
reletting.
(c) Landlord may cause a receiver to be appointed to take
possession of the Premises and all of Tenant's property thereon to protect
Landlord's interest therein.
15. Subordination. At the option of the holder of any security interest in the
Premises, this Lease shall be either prior to, or subordinate to, the lien of
such security interest, provided that subordination to a security interest
created after execution of this Lease shall occur only if the security holder
agrees that Tenant's occupancy of the Premises will not be disturbed by such
security holder, or its successor in interest, so long as Tenant is not in
default in the performance of its obligations hereunder.
16. Offset Statement. At the request of any prospective purchaser or encumbrance
of the Premises, and for the benefit of such person, Tenant will, from time to
time as required, within ten days after notice from Landlord:
(a) Execute a written statement certifying (i) that this Lease is
then unmodified and is in effect, or stating the nature of any modification,
(ii) that no rent other than that for the current month has been paid in
advance, (iii) that Landlord is not then in default in the performance of any of
its obligations, or specifying the nature of any such default;
(b) Deliver to such person a copy of Tenant's then most recent
financial statement certified as correct by Tenant, provided that such person
shall agree to maintain the confidentiality of such statement if so requested by
Tenant. Tenant's failure to execute the statement required by clause (a) of this
paragraph 16 within the time stated shall constitute a conclusive admission by
Tenant that this Lease is then in effect without modification, that no advance
rent has been paid, and that Landlord is not then in default.
17. General Provisions.
17.1. Monetary Charges. All monetary payments required to be made by
Tenant hereunder shall constitute additional rent. Any such payment not made
when due shall
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thereafter bear interest at the rate of one and one-half percent (1 1/2%) per
month, unless such rate exceeds the maximum rate that the parties may agree upon
as permitted by law, in which case such maximum rate shall apply. Any interest
payment made by Tenant, at greater than the allowed maximum rate, shall
constitute advance rental and shall be credited against the next rental due.
Tenant shall also pay a notice charge of Twenty-five Dollars, ($25.00) for each
notice of default that Landlord may deliver to Tenant's non-performance of any
obligation hereunder. No acceptance by Landlord of any monetary payment shall
constitute a waiver by Landlord of any default by Tenant hereunder.
17.2. Extension of Lease. If Tenant wishes to continue to occupy the
Premises after the stated end of the lease term, it may do so only by extension
of this Lease, for a term subject to such rental and other provisions as the
parties may agree upon, and no law then in force in the nature of rent control
shall apply to any such extension of this Lease.
17.3. Construction. The rent payable under this Lease has been
determined in light of all other provisions hereof. Both parties have had equal
opportunity to review and comment on this Lease, and it shall be fairly
interpreted in accordance with its reasonable meaning, neither for nor against
either party, neither of which is to be considered as having drafted this Lease.
17.4. Notices. Any notice required to be given to a party hereunder or
by law will be effective upon personal delivery or two days after mailing, if
mailed by first class United States mail posted in California, and addressed to
the party at its address set forth in the Lease Summary. Tenant waives all
rights to receive notices other than those described in this Lease, whether
required by Section 1161 of the California Code of Civil Procedure or otherwise.
17.5. Entire Agreement. This Lease constitutes the entire agreement
between the parties concerning the subject matter hereof, and Landlord has made
no representations or warranties to Tenant except as set forth herein.
17.6. Attorney's Fees. In the event of any action between the parties
arising out of this Lease, the prevailing party shall be entitled to recover its
actual attorney's fees from the other.
17.7. Time. Time is of the essence in the performance of all
obligations required hereby.
17.8. Liability. The liability of multiple persons or entities who
execute this Lease as Tenant shall be joint and several.
END OF BASIC LEASE
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EXHIBIT 10.58
STANDARD INDUSTRIAL LEASE
TRIPLE NET
LEASE SUMMARY
The following information affects the terms of the Basic Lease.
I. LANDLORD: CHARLES KING & ASSOCIATES
II. TENANT: STERIGENICS INTERNATIONAL, INC.
III. PREMISES: A brick warehouse building of approximately 30,484
square feet located at 711 East Cooper Court,
Schaumburg, Illinois, further described as Sublot 37
and all that portion of Sublot 39 in Woodfield
Business Center.
IV. TERM:
Lease term: sixty (60) months.
Commencement date (check one):
X Fixed date: July 1, 1997.
-------
------- Subject to completion of improvements. Landlord's current
estimate of the substantial completion date is _____, 19__.
V. CHARGES:
<TABLE>
<CAPTION>
Amount
<S> <C>
Base monthly rent: $13,100.00
Rental adjustment period and date:
July 1, 1998 - June 30,1999 $13,490.00
July 1, 1999 - June 30, 2000 $13,900.00
July 1, 2000 - June 30, 2001 $14,315.00
July 1, 2001 - June 30,2002 $14,750.00
Security deposit: None
Total payable by Tenant at Lease execution: $13,100.00
(First month's rent)
</TABLE>
VI. ATTACHMENT:
Basic Lease attached hereto and is part of this lease
VII. EXECUTION:
The undersigned parties agree to the provisions of this Lease, including
the attached Basic Lease.
LANDLORD TENANT
CHARLES KING & ASSOCIATES, STERIGENICS INTERNATIONAL, INC.
a California Limited Partnership a Delaware Corporation
By: /s/ Charles W. King Jr. By: /s/ Edward M. Miller, Jr.
------------------------------- -------------------------------
Charles W. King Jr., Trustee Edward M. Miller, Jr.
On behalf of The Charles W. King Its: Vice President of Finance
Revocable Trust
Dated: June 26, 1997 Dated: June 25, 1997
------------------------------- -------------------------------
<PAGE> 2
BASIC LEASE
-----------
1. Parties. This Lease is entered into by and between the parties identified in
the foregoing Lease Summary as Landlord and Tenant.
2. Promises. Landlord leases to Tenant, and Tenant hires from Landlord, the real
property identified in the Lease Summary (the "Premises"). The Premises
encompass all space bounded by the outside of the exterior walls and roof, the
centerline of any partition walls, and the upper surface of the floor slab. A
floor or plot plan depicting the building containing the Premises (the
"Building") may be attached hereto as an Exhibit, with the Premises outlined in
some suitable manner, which is incorporated herein solely for the purpose of
designating the location of the Premises.
3. Term. This Lease shall extend for the term stated in the Lease Summary,
beginning on the commencement date.
3.1. Commencement. The commencement date shall be the fixed date stated
in the Lease Summary or, if no fixed date is stated, the earlier of (i) the date
of substantial completion of the improvements to be constructed by Landlord on
the Premises, in accordance with any description of Landlord's work set forth on
an Exhibit to this Lease, or (ii) the date on which Tenant first uses a portion
of the Premises for its business. "Substantial completion" shall have occurred
on the first date on which (i) the governmental authority having jurisdiction
has authorized occupancy of the Premises, (ii) electric power is available at
the Premises, and (iii) the architect, engineer, or other person supervising
construction of the improvements certifies that they are substantially complete
and ready for occupancy, subject only to "punch-list" defects that do not
materially diminish the usefulness of the Premises. Landlord shall advise
Tenant, from time to time and in good faith, of the estimated completion date,
and Landlord's current estimate of that date is stated in the Lease Summary. If
the commencement date is other than the first day of a calendar month, then the
lease term shall extend for the number of months stated in the Lease Summary
beginning with the first day of the month following the commencement date.
3.2. Postponement. If, for any reason beyond Landlord's reasonable
control, Landlord is unable to deliver the Premises on the date stated above,
the commencement of the lease term will be postponed, without liability to
Tenant or affecting the validity of this Lease, and the term shall begin on such
date as Landlord is able to deliver possession of the Premises with substantial
completion of any Landlord work. Causes beyond Landlord's reasonable control
shall include, for example, labor difficulties, inclement weather, rationing or
other governmental controls, shortages of materials or services, and failure of
any prior occupant to vacate the Premises. If Landlord is unable to deliver
possession within three months after any fixed commencement date stated in the
Lease Summary, or within six months after execution of this Lease if no fixed
commencement date is stated, then this Lease shall thereupon terminate without
liability to either party.
4. Rental. As rental for the Premises, Tenant shall pay Landlord, when due and
in lawful money of the United States, all sums required to be paid by Tenant
under this Lease and shall promptly discharge all other monetary obligations of
the Tenant hereunder. Any monetary payment not received by Landlord when due
shall thereafter bear interest, at the rate stated in paragraph 17.1, until
received, provided that Landlord will waive interest on any monthly rental
payment received not later than the fifth day of that month (or the first
business day following the fifth if the
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fifth falls on a weekend or holiday). All such sums shall be paid to Landlord at
such place in California as Landlord may designate.
4.1. Base Monthly Rent. The base monthly rent shall be the amount
stated in the Lease Summary, payable in monthly installments in advance on the
first day of each calendar month during the lease term, beginning on the
commencement date. If the commencement date is a day other than the first day of
a calendar month, then the rent for that partial month shall be a fraction of
the base monthly rent, based on the number of days in that partial month,
including the commencement date, in proportion to the total number of days in
the month; such rent shall be payable on the first day of the following month.
Rent for the first calendar month of the term is payable upon execution of this
Lease.
4.2. Rental Adjustment. At the and of the rental adjustment period
(measured from the beginning of the first full calendar month in the lease term)
stated in the Lease Summary, and at like intervals thereafter, or on the
adjustment date stated in the Lease Summary, whichever is applicable, the
monthly rent shall be adjusted so as to equal (i) the base monthly rent, plus
(ii) a percentage of the base monthly rent equal to any percentage increase in
the Consumer Price Index for All Urban Consumers, as published by the Bureau of
Labor Statistics for the San Francisco-Oakland statistical area, between the
amount thereof as last published prior to the beginning of the first full
calendar month in the lease term and the amount thereof as last published prior
to the date on which the rental adjustment is to be made. There shall be no
adjustment for any decrease in the Consumer Price index during the applicable
period.
5. Security. As security for the performance of its obligations under this
Lease, Tenant gives Landlord the security described in this paragraph.
5.1. Deposit. Tenant shall deposit with Landlord, upon execution of
this Lease, the sum stated in the Lease Summary as the security deposit, which
Landlord shall retain during the lease term, as a debtor and not as a trustee.
Tenant acknowledges that the use value of the security deposit has been
considered in determining the appropriate monthly rent for the Promises, and
Tenant shall be entitled to no credit, offset, or compensation, by way of
interest or otherwise, due to Landlord's possession of the security deposit,
which may be commingled with Landlord's own funds. If Tenant defaults in the
performance of any of its obligations hereunder, Landlord may pay or apply any
portion of the deposit as necessary to cure the default or compensate Landlord
for damage resulting therefrom, and Tenant shall, within ten days after
Landlord's demand therefor, deposit with Landlord such amount of cash as is
necessary to restore the deposit to the full original amount. Upon termination
of this Lease, and after Tenant has vacated the Premises, the amount of such
deposit remaining, after curing Tenant's defaults and compensating Landlord for
damage caused by Tenant, shall be returned to Tenant at its last address known
to Landlord.
5.2. Additional Security. Tenant grants Landlord a security interest in
all personal property owned by Tenant, placed upon the Premises, and used by
Tenant in its business an the Promises, not including inventory held for sale
and accounts receivable. Landlord's security interest shall attach on the first
date that such property is placed on the Premises; if Tenant is not then in
default hereunder, any such property may be removed from the Premises during
the lease term, free of Landlord's security interest, if such removal is done in
the ordinary course of Tenant's business or for the purpose of acquiring
replacement property and not for transfer to a creditor having no prior security
interest in the property. Upon request by Landlord, Tenant shall execute such
additional documents, including form UCC-1 as may be appropriate to perfect
Landlord's security interest. If not previously perfected, Landlord's security
interest will be perfected by Landlord's possession of the security, which shall
be deemed to have occurred upon any abandonment, vacating,
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<PAGE> 4
or surrender of the Promises by Tenant.
6. Use.
6.1. Premises. The Premises shall be used only for general industrial,
warehousing, and office purposes. Tenant acknowledges that the Premises are
suitable for Tenant's intended use, and Tenant accepts the Premises without
regard for applicable zoning and other laws or governmental regulations
affecting the Premises, now or hereafter in force. Notwithstanding the uses
permitted by this Lease, Tenant will engage in no activity on the Premises that
would, in the judgment of any insurer of the Premises, increase the premium on
any of Landlord's insurance over the amount otherwise charged therefor or cause
such insurance to be cancelled. In its use of the Premises, Tenant will comply
with all applicable laws, governmental regulations, and tract restrictions.
Whether or not Tenant is in compliance with applicable laws, Tenant will commit
no nuisance on the Promises and will not cause any unreasonable odors, noise,
vibration, electronic emissions, or any other item to emanate from the Premises
so as to damage Landlord's property or interfere with any other person.
6.2. Exterior. No portion of the area outside of the Building is leased
to Tenant. However, Tenant may utilize truck access and turning areas in a
reasonable manner (not to include truck parking except for purposes of loading
or unloading, which shall occur expeditiously) and Tenant may utilize designated
parking areas, in common with Landlord's other tenants, for daily parking of
passenger vehicles. No rubbish containers or other materials may be stored
outside of the Premises. Tenant may not erect or maintain any sign or other
marking on, or visible from, the exterior of the Premises without Landlord's
prior written consent.
7. Maintenance and Repair.
7.1. Original Condition. If the Promises are complete and vacant upon
the execution of this Lease, Tenant acknowledges that the Premises are in good
condition and are not in need of repair. If this Lease is executed while the
Promises are occupied by another tenant or prior to the completion of
improvements on the Premises by Landlord as required by this Lease, then the
Premises shall be deemed to be in good condition and not in need of repair as of
the commencement date of the lease term unless, within tan days thereafter,
Tenant delivers to Landlord a written notice specifying the manner in which the
Premises are not then in good condition and repair.
7.2. Landlord's Obligations. Subject to the provisions of this Lease
dealing with damage or destruction, Landlord shall maintain, at its expense, the
structural portions of the Building foundation, walls, floors, and roof. Subject
to Tenant's obligation to pay a pro rata share of the cost in accordance with
paragraph, Landlord shall maintain the exterior of the Building and the common
area, as defined in paragraph 8.
7. 3. Tenant's Obligations. Throughout the lease term, Tenant shall
maintain the Premises and all improvements and equipment in or about the
Promises in good condition and repair. Tenant's repair obligation is
unconditional and does not depend on whether the repairs are necessitated by
Tenant's use or whether the means of repair or item needing repair is readily
accessible to Tenant. The items to be repaired by Tenant include, for example
and not as a limitation: plumbing; heating, air conditioning, ventilating, and
electrical equipment; walls, floor slab surface and covering, ceilings, doors,
and glass. Tenant will cause all heating, ventilating, air conditioning, and
electrical equipment to be maintained in accordance with the manufacturers,
recommendations and specifications, and Tenant will place equipment under
service contract as required for proper preventative maintenance. At the
INITIAL ________
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<PAGE> 5
end of the lease term, Tenant shall surrender the Premises to Landlord broom
clean, in the same condition as they existed at the commencement of this Lease,
together with such changes as are permitted to remain pursuant to this Lease,
excepting only such ordinary wear as could not have been avoided by routine
maintenance. Upon reasonable notice to Tenant, Landlord may enter the Premises
during business hours for inspection purposes. If Tenant fails to perform proper
maintenance or repair, including preventative maintenance where appropriate,
Landlord may, after reasonable notice to Tenant (or without notice for emergency
repairs), cause the same to be performed, and the cost thereof will promptly be
paid by Tenant upon receipt of a statement from Landlord setting forth the
amount due.
8. Costs. Tenant shall pay all costs associated with the Premises during the
lease costs, maintenance costs, and insurance premiums, term, including taxes,
utility according to the provisions of this paragraph.
8.1. Taxes. Tenant shall pay all property taxes, as defined below,
levied during the lease term. If the Premises constitute only a portion of the
Building, or if there is more than one building an the land that is taxed,
Tenant shall pay a portion of the taxes, as prorated by Lessor on the basis of
the square footage of the Premises as a fraction of the total square footage of
the buildings an the tax parcel. However, Tenant's share of the total taxes will
be equitably adjusted by Landlord to take account of any disproportionate tax
burden imposed by, special improvements or valuations relating to (i) the
Premises, (ii) other portions of the Building, or (iii) other buildings on the
tax parcel, which adjustment may raise or lower Tenant's share as calculated on
the basis of square footage; valuation data contained on tax assessors
worksheets, if available, shall conclusively determine the manner in which any
equitable adjustment is to be made. As used herein, "property taxes" include all
taxes, special assessments, and other charges imposed by any taxing authority
having jurisdiction and levied against the Premises, or against Landlord by
virtue of its ownership of the Premises or collection of rental Income
therefrom, excepting only estate taxes, inheritance taxes, and income taxes that
are payable, at the same or greater rate, against nonrental as well as rental
income. Tenant shall pay all such taxes, or its proportionate share thereof as
calculated by Landlord, to Landlord (and not to the taxing authority, whether or
not Tenant is liable for the entire amount of the tax) at least ten days prior
to the date on which the tax payment would become delinquent or any penalty for
nonpayment would be incurred. Landlord shall provide Tenant with a written
statement of the Amount due, not less than ten days prior to the date on which
Tenant's payment is required, and, at Tenant's request, will also provide copies
of any tax bills used in calculating the amount of Tenant's payment. If the
lease term includes only a portion of a taxing period, then Tenant shall pay a
pro rata portion of the total tax, based upon the number of days in the lease
term that are included in the taxing period, if the tax for the period at the
beginning of the lease term has been paid prior to the commencement of the
Lease, then Tenant's pro rata share shall be payable on the lease commencement
date; if the Least terminates before the due date for payment of the tax for the
period at the and of the lease term, then Tenant's pro rata share for that
period shall be payable at the time that the last monthly rental payment is due
(if the amount of the tax is not then known, it shall be estimated by Landlord
on the basis of the best available information as to the then current
assessments and tax rates or, if no such information is available, shall be
projected at the same rate as was imposed for the last previous taxing period,
but Landlord will reconcile Tenant's account when the tax becomes known).
8.2. Utility and Maintenance Costs. Tenant shall pay for all costs of
utility services to the Premises; if utilities are not separately metered to the
Premises,
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<PAGE> 6
Tenant shall pay for its proportionate share. Tenant shall pay its proportionate
share of all costs incurred by Landlord for maintenance and repair for the
building exterior, landscaping, and common area during the lease term, including
but not limited to costs of painting, paving maintenance, and roof repair. The
"common area" includes all sidewalks, parking areas, and other paving serving
the Building. Nonmetered utility, repair, and maintenance expenses shall be
estimated by Landlord, on the basis of historical cost data, and Tenant shall
pay the amount of the monthly estimated costs to Landlord in advance, on the
first day of each month, with the regular rental payment. Periodically, but not
less frequently than annually, Landlord will provide Tenant with an accounting
of all such costs for the preceding period, and an appropriate sum will be
credited or debited against Tenant's next monthly rental payment so as to
equalize Tenant's actual payments and the actual costs for the period. Landlord
may revise its monthly cost estimate, and provide Tenant with an accounting for
the previous period, at any time during the lease term.
8.3. Insurance. Tenant will pay, when due, its proportionate share of
all premiums on such policy or policies of insurance as may be obtained by
Landlord covering loss or damage to the building containing the Premises, in the
full insurable value thereof. Such policy may insure against: all perils
included in the classifications of fire, extended coverage, vandalism, malicious
mischief, special extended perils, and all-risk sprinkler leakage; loss of
rents, property taxes, and insurance costs for a period of not more than one
year; such other hazards as are then normally insured against by owners of
commercial buildings of the sort containing the Premises. Landlord may obtain
such insurance under a blanket policy with a deductible of not more than $1,000
in which event Tenant will indemnify Landlord against all insurable losses
included within the deductible portion of the coverage. Tenant's payment shall
be due and payable within ten days after written notice from Landlord, stating
the amount due and including a copy of the insurer's statement showing the
premium charged; if the premium for the period at the beginning of the lease
term has been prepaid by Landlord, Tenant's pro rata share shall be payable on
the lease commencement date.
8.4. Proportionate Share. Tenant's proportionate share of utility
costs, maintenance and repair costs, and insurance premiums shall be determined
by Landlord on the basis of the square footage of the Premises as a fraction of
the total square footage of the building or buildings insured, in the case of
insurance, or of the buildings benefitted by the utility service or maintenance,
in the case of utility or maintenance costs. However, (i) if Tenant utilizes
more than its proportionate share of common area, for parking or other purposes,
or (ii) if Tenant's occupancy of the Building (with Landlord's consent and
subject to the provisions of paragraph 6.1) adds to the normal insurance costs,
or (iii) if Tenant uses more than a normal amount of any utility service, then
Landlord may equitably increase Tenant's proportionate share of costs to account
for such additional usage or risk.
9. Alterations.
9.1. Tenant Work. Tenant shall make no alteration, addition, or utility
installation (all hereafter called "changes") on or to the Premises without
Landlord's prior written consent. In making approved changes, Tenant shall
comply with all applicable building code requirements. Unless Landlord has
specifically waived this provision in writing prior to the making of a change to
the Premises, all such changes (i) shall be removed from the Premises, and all
damage resulting from such removal repaired by Tenant, prior to the end of the
lease term, or (ii) shall remain on the Premises at the and of the lease term
and become the property of Landlord, at Landlord's election. If Landlord does
not notify Tenant, at least three months prior to the end of the lease term, of
its election to have changes remain on the Premises,
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then Landlord shall thereby have elected to require Tenant to remove such
changes. In making all changes Tenant. shall hold Landlord harmless from
mechanics' liens and all other liability resulting therefrom.
9.2. Landlord Work and Entry. Upon execution of this Lease, or at such
later time as is feasible and consistent with the terms hereof, Landlord shall
commence construction of any improvements depicted or described as Landlord work
on an Exhibit to this Lease. Construction of such improvements shall be pursued
to completion with reasonable diligence, subject to delays for reasons beyond
Landlord's reasonable control, including, for example, the matters described in
paragraph 3.2. Landlord shall have no liability to Tenant due to faulty work,
but Landlord shall cause any faulty work to be repaired if it receives written
notice of the defect from Tenant within thirty days after completion of the
work. All such improvements shall become part of the Premises and remain thereon
at the termination of the Lease. Landlord may enter the Premises at any time for
the purpose of cleaning, maintenance, or inspection, and may enter during normal
business hours to show the Premises to prospective tenants in the last 100 days
of the lease term. If it may be done without interfering with Tenant's business,
Landlord may also enter the Premises during the last sixty days of the lease
term to prepare the Premises for a subsequent tenant.
10. Damage. If any structural portion of the Premises, that Landlord is
obligated to maintain, is damaged or destroyed by any cause, if such damage is
insured against by the insurance described in paragraph 8.3, and if the
insurance proceeds are available for rebuilding, than this Lease will not
terminate and Landlord will cause such damage to be repaired with reasonable
dispatch, subject to delays for reasons beyond Landlord's reasonable control,
including, for example, delays in the disbursement of insurance proceeds and the
matters described in paragraph 3.2. Landlord's obligation in this regard shall
be enforceable by Tenant only if such damage interferes with Tenant's reasonable
occupancy of the Premises. Tenant's rent will abate to the extent that the
damage and repair period interfere with Tenant's use of the Premises. If the
damage is not insured against, if the available insurance proceeds are
insufficient for the repair, or if the damage occurs within the last six months
of the lease term, Landlord may, at its option exercised by notice to Tenant
within thirty days of the date that Landlord acquires knowledge of the damage,
elect either to complete the repair at its expense, or to terminate this Lease
as of the date of damage. If Landlord elects to repair, rent will abate in the
manner described above; other than the obligation to repair stated above,
Landlord shall have no liability to Tenant on account of the damage.
11. Condemnation. If there is a taking by eminent domain or a transfer under
threat thereof of (i) the entire Promises, or (ii) so much of the Premises, for
the balance of the lease term, as prevents the continued reasonable conduct of
Tenant's business thereon, then this Lease shall terminate as of the date that
possession of the condemned premises is delivered to the condemnor. No other
such taking or transfer shall terminate this Lease. All condensation proceeds
shall be the property of Landlord, excepting only such portion thereof as is
designated by the condemnor as compensation for Tenant's moving expenses, loss
of Tenant's goodwill, or for Tenant's trade fixtures.
12. Liability.
12.1. Insurance. Tenant shall, at its expense, maintain in force during
the Lease term a combined single limit policy of bodily injury and property
damage insurance, with a limit of not less than Five Hundred Thousand Dollars
($500,000), insuring Landlord and Tenant against all liability arising out of
the ownership, use,
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<PAGE> 8
occupancy, or maintenance of the Premises and appurtenant areas. Such insurance
shall be endorsed as primary and non-contributing, as to any policy carried by
Landlord. Tenant will deliver to Landlord a certificate evidencing such
insurance, which will provide that the insurance will not be cancelled except on
ten days notice to Landlord.
12.2. Indemnity. Tenant shall indemnify Landlord and hold it harmless
from all claims, expenses, and attorney's fees arising out of Tenant's use of
the Premises or from any acts permitted by Tenant on or in the vicinity of the
Premises.
12.3. Waiver of Liability. To the extent allowable by the applicable
insurance policy without reduction or coverage, Landlord and Tenant hereby waive
all rights of recovery against the other for loss or damage that is covered by
insurance. Tenant further waives all rights of recovery against Landlord for
loss or damage to Tenant's personal property on the Premises, or to injury to
persons claiming through Tenant, from any cause and whether or not such loss or
damage is covered by insurance.
13. Transfer.
13.1. Transfer by Tenant. Tenant shall not assign, sublet, or otherwise
transfer, or permit a transfer of, all or any portion of its interest in this
Lease, the Premises, or of a controlling interest in any Tenant entity, without
Landlord's prior written consent, which shall not be unreasonably withheld. No
such consent shall relieve Tenant of any liability under this Lease, nor shall
it constitute consent to any further transfer. As a condition of such consent,
the transferee shall assume all liability hereunder.
13.2. Transfer by Landlord. The liability of Landlord hereunder shall
exist only with respect to the period that Landlord is the owner of the
Premises. Upon any transfer of Landlord's interest in the Premises and
notification thereof to Tenant, Landlord shall be relieved of all liability
except such as may have accrued prior to the transfer.
14. Default.
14.1. Events. The occurrence of any of the following, events shall
constitute a material breach of this Lease and default by Tenant:
(a) Failure to pay rent or any other monetary sum when due, if
such failure continues for five days after notice from Landlord;
(b)Failure by Tenant to perform any nonmonetary obligation under
this Lease where such failure continues for more than thirty days or, if the
failure cannot reasonably be cured within thirty days, for a period exceeding
the time within which such failure could be cured with reasonable diligence;
(c)A general assignment by Tenant for the benefit of creditors;
the filing of a petition by or against Tenant, seeking adjudication or
reorganization under the Bankruptcy Act; the appointment of a receiver to take
possession of, or a levy by way of attachment or execution upon, substantially
all of Tenant's assets at the Premises;
(d)Tenant falsely stating its financial condition to Landlord,
either before or after the execution of this Lease;
(e) Tenant vacating or abandoning the Premises during the lease
term.
14.2. Remedies. After any breach or default by Tenant, Landlord shall
have all rights and remedies afforded by law, including but not limited to the
following:
(a) If Tenant's right to possession is expressly terminated in
writing by Landlord because of such breach, Landlord may recover from Tenant:
(i) the worth at the time of the award of the unpaid rent which had been earned
at the time of termination, together with interest thereon at the rate of one
and one-half percent (1 1/2%)
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per month; (ii) the worth at the time of the award of the amount by which the
unpaid rent, which would have been earned after termination until the time of
the award, exceeds the amount of such rental loss that the Tenant proves could
have been reasonably avoided, together with interest thereon at the rate of one
and one-half percent (1 1/2%) per month; (iii) the worth at the time of the
award of the amount by which the unpaid rent, for the balance of the term after
the time of the award, exceeds the amount of such rental loss that the Tenant
proves could have been reasonably avoided, as discounted to the then present
value at a rate equal to one percent (1%) over the discount rate of the Federal
Reserve Bank of San Francisco at the time of the award; (iv) any other amount
necessary to compensate Landlord for all of the detriment proximately caused by
Tenant's failure to perform its obligations under this Lease or which, in the
ordinary course of things, would be likely to result therefrom, including, for
example, expenses of reletting and altering the Premises, attorney's fees, and
real estate brokerage commissions. If the interest rate specified in clauses
(i), and (ii) of the preceding sentence exceeds the maximum rate that the
parties may agree upon, as permitted by law, then such maximum rate shall apply.
(b)Without terminating Tenant's right to possession, Landlord may
enforce all of its rights and remedies under this Lease, including the right to
recover rent as it becomes due. For purposes of this provision, any reletting of
the Premises for a term of less than the unexpired term of this Lease or any
reletting of a portion of the Premises shall, at Landlord's option, be deemed to
terminate the Tenant's right to possession only with respect to such portion of
the unexpired term or such portion of the Premises as is the subject of such
reletting.
(c)Landlord may cause a receiver to be appointed to take
possession of the Premises and all of Tenant's property thereon to protect
Landlord's interest therein.
15. Subordination. At the option of the holder of any security interest in the
Premises, this Lease shall be either prior to, or subordinate to, the lien of
such security interest, provided that subordination to a security interest
created after execution of this Lease shall occur only if the security holder
agrees that Tenant's occupancy of the Premises will not be disturbed by such
security holder, or its successor in interest, so long as Tenant is not in
default in the performance of its obligations hereunder.
16. Offset Statement. At the request of any prospective purchaser or
encumbrancer of the Premises, and for the benefit of such person, Tenant will,
from time to time as required, within ten days after notice from Landlord:
(a)Execute a written statement certifying (i) that this Lease is
then unmodified and is in effect, or stating the nature of any modification,
(ii) that no rent other than that for the current month has been paid in
advance, (iii) that Landlord is not then in default in the performance of any
of its obligations, or specifying the nature of any such default;
(b)Deliver to such person a copy of Tenant's then most recent
financial statement certified as correct by Tenant, provided that such person
shall agree to maintain the confidentiality of such statement if so requested by
Tenant. Tenant's failure to execute the statement required by clause (a) of this
paragraph 16 within the time stated shall constitute a conclusive admission by
Tenant that this Lease is then in effect without modification, that no advance
rent has been paid, and that Landlord is not then in default.
17. General Provisions.
17.1. Monetary Charges. All monetary payments required to be made by
Tenant hereunder shall constitute additional rent. Any such payment not made
when due shall
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thereafter bear interest at the rate of one and one-half percent (1 1/2%) per
month. unless such rate exceeds the maximum rate that the parties may agree upon
as permitted by law, in which case such maximum rate shall apply. Any interest
Payment made by Tenant, at greater than the allowed maximum rate, shall
constitute advance rental and shall be credited against the next rental due.
Tenant shall also pay a notice charge of Twenty-five Dollars ($25.00) for each
notice of default that Landlord may deliver to Tenant's non-performance of any
obligation hereunder. No acceptance by Landlord of any monetary payment shall
constitute a waiver by Landlord of any default by Tenant hereunder.
17.2. Extension of Lease. If Tenant wishes to continue to occupy the
Premises after the stated end of the lease term, it may do so only by extension
of this Lease, for a term subject to such rental and other provisions as the
parties way agree upon, and no law then in force in the nature of rent control
shall apply to any such extension of this Lease.
17.3. Construction. The rent payable under this Lease has been
determined in light of all other provisions hereof. Both parties have had equal
opportunity to review and comment on this Lease, and it shall be fairly
interpreted in accordance with its reasonable meaning, neither for nor against
either party, neither of which is to be considered as having drafted this Lease.
17.4. Notices. Any notice required to be given to a party hereunder or
by law will be effective upon personal delivery or two days after mailing, if
mailed by first class United States mail, posted in California and addressed to
the party at its address act forth in the Least Summary. Tenant waives all
rights to receive notices other than those described in this Lease, whether
required by Section 1161 of the California Code of Civil Procedure or otherwise.
17.5. Entire Agreement. This Lease constitutes the entire agreement
between the parties concerning the subject matter hereof, and Landlord has made
no representations or warranties to Tenant except as set forth herein.
17.6. Attorney's Fees. In the event of any action between the parties
arising out of this Lease, the prevailing party shall be entitled to recover its
actual attorney's fees from the other.
17.7. Time. Time is of the essence in the performance of all
obligations required hereby.
17.8. Liability. The liability of multiple persons or entities who
execute this Lease as Tenant shall be joint and several.
END OF BASIC LEASE
INITIAL [INIT]
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<PAGE> 1
EXHIBIT 10.59
STANDARD INDUSTRIAL LEASE
BETWEEN
Samuel K. Freshman, dba Galloway Industrial Properties
("LANDLORD")
AND
Radiation Sterilizers, Inc., a California Corporation
("TENANT")
"PREMISES"
341 Enterprise Drive
Westerville, Ohio 43081-8827
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C> <C>
Basic Lease Information................................................. 3
1. Lease of Premises....................................................... 5
2. Term.................................................................... 5
3. Rent.................................................................... 5
4. Security Deposit........................................................ 6
5. Alterations and Liens................................................... 7
6. Utilities............................................................... 8
7. Financing............................................................... 8
8. Personal Property....................................................... 9
9. Assignment and Subletting............................................... 9
10. Condemnation; Eminent Domain............................................ 10
11. Taxes................................................................... 11
12. Use and Occupancy....................................................... 11
13. Damage and Destruction.................................................. 12
14. Maintenance and Repairs................................................. 14
15. Insurance............................................................... 15
16. Surrender; Holding Over................................................. 15
17. No Merger............................................................... 16
18. Default................................................................. 16
19. Remedies................................................................ 16
20. Exculpation............................................................. 18
21. Sale by Landlord........................................................ 19
22. Access to Premises...................................................... 19
23. Estoppel Certificate; Financial Statements.............................. 19
24. Signature............................................................... 20
25. Net Lease............................................................... 20
26. Indemnification......................................................... 20
27. Notice.................................................................. 20
28. Interpretation.......................................................... 20
29. Successors and Assigns.................................................. 21
30. Non-Waiver ............................................................. 21
31. No Recordation of Lease................................................. 21
32. Legal Proceedings....................................................... 21
33. Corporate Authority; Partnership Authority ............................. 21
34. Force Majeure........................................................... 22
35. Brokers................................................................. 22
36. Quiet Possession........................................................ 22
37. Binding Effect.......................................................... 22
</TABLE>
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<PAGE> 3
BASIC LEASE INFORMATION
1. Date of Lease Dec 2, 1991 (Preamble)
2. Landlord: Samuel K. Freshman, dba Galloway Industrial Properties
Address: c/o Standard Management Company
6076 Busch Blvd., Suite #2
Columbus, Ohio 43229
Attn: Vice President, Eastern Region
3. Tenant: Radiation Sterilizers, Inc.
Address: 305 Enterprise Drive
Westerville, Ohio 43081-8827
4. Address of Premises: 341 Enterprise Drive
Westerville, Ohio 43081-8827
Gross Leasable Area ("GLA"): 12,000 square feet [Paragraph la]
Land Area of Premises 58,501 square feet
5. Commencement Date: December 1, 1991
[Paragraph 1B]
6. Initial Term: Two (2) Years and Two (2) Months [Article 2]
7. Minimum Rent: [Paragraph 3a]
<TABLE>
<CAPTION>
YEAR PER YEAR PER MONTH
---- -------- ---------
<S> <C> <C> <C>
1: Mos. 1-2 $3,500,00 - Abated
Mos. 3-12 $42,000.00 $3,500.00
2: Mos. 1-12 $48,000.00 $4,000.00
3: Mos. 1-2 $48,000.00 $4,000.00
</TABLE>
8. Consumer Price Index (Metropolitan Area): Cleveland, Ohio
[Paragraph 3b]
9. Security Deposit: $3,500.00 [Article 4]
10. Minimum Assignment Processing Fee: $500.00 [Paragraph 9b]
11. Fiscal Year: January 1 to December 31
12. Permitted uses: Offices, and a warehouse for medical supplies, aerosols
and spices. [Paragraph 13a]
13. Comprehensive General Liability Insurance Minimum Policy Requirements
[Subparagraph 15a(l)]:
$1,000,000.00 per occurrence for personal injury, bodily injury, and
property damage.
14. Federal Reserve Bank: Cleveland, Ohio (Subparagraph 19a(2)]
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<PAGE> 4
15. Brokers or Agents (if none, so state):
[Article 36]
The Paragraphs of the Standard Industrial Lease (the "Lease") identified above
in brackets are those provisions where reference to particular items from the
Basic Lease Information appear and such items are incorporated in the Lease as
part thereof. In the event of any conflict between any Basic Lease Information
and the Lease, the former shall control.
Exhibits and Addenda [Article 33]:
- ----------------------------------
Exhibit A - Legal Description of Premises
Exhibit B - Site Plan of Premises
Exhibit C - Rules and Regulations (2 pages)
Exhibit D - Control Zone Criteria (2 pages) Addenda - The following
Addenda are attached to and made a part of this Lease (if none, so
state):
- Extension Option (Fair Rental Value) Lease Rider/Industrial
- Corporate Resolution of Radiation Sterilizers, Inc.
- Addendum to Lease
- Notice to Prospective Real Estate Purchasers/Tenants
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<PAGE> 5
STANDARD INDUSTRIAL LEASE
THIS LEASE (the "Lease") is made as of the date specified in Item 1 of the Basic
Lease Information (the "BLI") by and between the parties named in Items 2 and 3
of the BLI as "Landlord" and "Tenant", respectively.
1. LEASE OF PREMISES.
a. Landlord leases to Tenant the "Premises" described in Item 4 of the BLI and
more particularly described on attached Exhibit A and Exhibit B. The rent
payable by Tenant is for the Premises as they exist regardless of actual square
footage. "GLA" means the total gross leasable area designated for tenant
occupancy and exclusive use measured in square feet from the center line of
joint partitions to the outside wallfacing of exterior walls and/or the exterior
face of service corridor walls, including without limitation utility ducts,
basements, columns, stairs, elevators, mezzanines and upper floors.
b. Landlord shall endeavor to deliver possession of the Premises to Tenant on or
before the "Commencement Date" specified in Item 5 of the BLI. If Landlord is
unable for any reason to deliver the Premises to Tenant by the Commencement
Date, Landlord shall not be liable for any resulting damage, but the
Commencement Date shall be postponed by the number of days of delay until
Landlord actually delivers the Premises to Tenant, unless the delay is due to an
act or omission of Tenant or its agents, employees, or contractors, in which
event no postponement shall occur. Tenant shall, upon request, execute an
Addendum confirming the actual Commencement Date and expiration date of the
Lease.
c. Except as otherwise set forth in this Lease, Tenant accepts the Premises "as
is" subject to all existing liens, encumbrances, deeds of trust, reservations,
restrictions and other matters of record and to all zoning, building and fire
ordinances and governmental statutes, rules and regulations affecting the
Premises or relating to the use or occupancy of the Premises. Landlord shall not
be liable for latent defects in the Premises, Tenant acknowledges that, except
as otherwise expressly set forth in the Lease, (1) neither Landlord nor any of
Landlord's agents, contractors, licensees, employees, directors, officers,
partners, trustees or invitees (collectively, "Landlord's Employees") has made
any representation or warranty regarding the Premises or the suitability of the
Premises for Tenant's intended use; (2) no representations or warranties as to
the state of construction or repair of the Premises have been made by Landlord
or Landlord's Employees; and (3) no Premises to alter, remodel, improve, repair,
decorate of paint the Premises have been made by Landlord or Landlord's
Employees, Tenant's acceptance of possession of the Premises shall constitute
Tenant's acknowledgement that Landlord has performed all its work (if any) with
respect to the Premises and that the Premises are in good and acceptable
condition and repair.
2. TERM. The "Term" of this Lease shall consist of the following three
components: the "Interim Term" shall commence on the date specified in Item 1 of
the BLI and expire at midnight on the date preceding the Commencement Date. The
"Initial Term" shall commence at 12:01 a.m. on the Commencement Date and
continue for the period specified in Item 6 of the BLI (unless sooner terminated
in accordance with the provisions of this Lease).
3. RENT. Commencing on the Commencement Date and continuing throughout the Term,
Tenant
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<PAGE> 6
shall pay to Landlord the following sums in lawful U.S. money as rental for the
Premises, at the times and in the manner provided below, without deduction or
offset:
a. "Minimum Rent" specified in Item 7 of the BLI in advance on or before the
first of each month during the Term. If the Commencement Date occurs other than
on the first of the month of if the Term ends other than on the last day of a
month, the applicable payment of Minimum Rent shall be pro-rated on a 30-day
month basis.
b. The Minimum Rent shall be periodically adjusted in accordance with increases
in the cost of living. As used in this Paragraph 3b, (1) "Base Month" means the
calendar month in which the Commencement Date occurs; (2) "Price Index" means
the Consumer Price Index for All Urban Consumers published by the Bureau of
Labor Statistics, U.S. Department of Labor for the area set forth in Item 8 of
the BLI. All Items (1967 = 100), or any successor index or substitute therefor;
(3) "Adjustment Date" means the first day of January of each year during the
Term; (4) "Adjustment Factor" means a fraction, the numerator of which shall be
the Price Index for the month in which the applicable Adjustment Date occurs and
the denominator of which shall be the Price Index for the Base Month. On each
Adjustment Date, the Minimum Rent shall be adjusted to an amount equal to the
then Minimum Rent multiplied by the Adjustment Factor. In no event, however,
shall the Minimum Rent, as adjusted, be less than the Minimum Rent payable
during the month immediately preceding the applicable Adjustment Date. Such new
amount shall be payable for the period from such Adjustment Date to the next
Adjustment Date. If the information necessary to calculate the Adjustment Factor
is not immediately available on any Adjustment Date, Tenant shall continue to
pay the Minimum Rent in effect immediately prior to such Adjustment Date;
provided, however, that, upon the subsequent determination of the Adjustment
Factor, the Minimum Rent shall be adjusted accordingly and, on the first day of
the month following such adjustment, Tenant shall pay Landlord, in addition to
the adjusted Minimum Rent, an amount equal to the aggregate rental adjustments
which should have been paid for the months elapsed since such Adjustment Date.
No adjustments or recomputations, retroactive or otherwise, shall be made due to
any revision subsequently made in the first published figure of the Price Index
for any month. Any delay or failure of Landlord in computing or billing for the
foregoing rent adjustments shall not constitute a waiver of or in any way impair
the continuing obligation of Tenant to pay such rent adjustments.
c. All sums to be paid under this Lease by Tenant to Landlord in addition to
Minimum Rent shall be considered "Additional Charges", whether or not
specifically designated as such herein.
4. SECURITY DEPOSIT. Concurrently with execution and delivery of this Lease,
Tenant shall pay Landlord the amount set forth in Item 9 of the BLI to be held
without interest as security for Tenant's performance of this Lease. Landlord
may apply the whole or any part of such deposit to the payment of any sum in
default or which Landlord expends by reason of Tenant's default. In such event,
Tenant shall, on demand, restore the security deposit to its original amount. If
the Premises are conveyed by Landlord, the security deposit or any balance
thereof may be turned over to Landlord's grantee. In such event, Tenant shall
release Landlord from all liability with respect to the security deposit, and
shall look solely to Landlord's grantee for application or return. The security
deposit is not an advance rental deposit, an advance payment of any other kind
or a measure of Landlord's damages in case of Tenant's default. Landlord shall
not be required to keep the security
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<PAGE> 7
deposit separate from its general accounts unless required by law. If Tenant
complies with all of the covenants of this Lease, the security deposit or any
balance thereof shall be returned to Tenant (or, at the option of Landlord, to
the last assignee of Tenant's interest in this Lease) within 30 days after the
later of (a) the expiration or earlier termination of this Lease; (b) the date
Tenant has paid all amounts required to be paid under this Lease; or (c) the
date Tenant surrenders possession of the Premises to Landlord in accordance with
this Lease.
5. ALTERATIONS AND LIENS.
a. Tenant shall not make or permit any alterations, additions, leasehold
improvements or utility installations (collectively, "Alterations") to the
Premises or attach any fixture or equipment, without Landlord's prior written
consent. "Utility Installation" means carpeting, window coverings, air lines,
power panels, electrical distribution systems, lighting fixtures, space heaters,
air conditioning, plumbing and fencing. Prior to commencement of construction of
installation, Tenant shall submit plans and specifications for any proposed
Alterations for Landlord's approval. All Alterations shall be constructed or
installed (1) at Tenant's sale cost and expense by contractors acceptable to
Landlord; (2) in conformity with applicable building codes and all other
necessary or advisable permits and licenses, copies of which shall be furnished
to Landlord before work commences; (3) in compliance with attached Exhibit D:
and (4) in a good and workmanlike manner and diligently prosecuted to
completion. Tenant shall reimburse Landlord for all costs and expenses
(including without limitation architect's and/or engineer's fees) incurred by
Landlord in approving or disapproving Tenant's Alterations. Any work not
acceptable to any governmental authority or agency having or exercising
jurisdiction over such work, or not reasonably satisfactory to Landlord, shall
be promptly replaced and corrected at Tenant's expense. Notwithstanding any
failure to object to any such work, Landlord shall have no responsibility or
liability with respect thereto, Upon completion, Tenant shall record a Notice of
Completion as required or permitted by law, Tenant shall deliver to Landlord,
within 30 days after completion of such work, a copy of the Certificate of
occupancy with respect thereto, two (2) complete sets of "as-built" plans of the
Alterations and copies of all contracts and other evidence of the cost of
construction. No work shall proceed without Landlord's prior written approval of
certificates of insurance from approved companies for Builder's Risk Insurance,
Workers' Compensation as required by law and Combined Single Limit Bodily Injury
and Property Damage Insurance covering comprehensive general liability and
automobile liability in an amount not less than $1,000,000 per occurrence, which
policies shall be endorsed to name Landlord as an additional insured and shall
show a waiver of subrogation by the insurer to any claims Tenant's contractor,
subcontractors or suppliers may have against Landlord. Tenant need not obtain
Landlord's consent to any Interior, non-structural, non-mechanical Alterations
which do not exceed, in the aggregate, $10,000 in cost in any 12-month period
during the Term.
b. Landlord may at any time (1) make alterations or additions and build
additional stories above or below the Premises, (2) eliminate or relocate public
entrances to the Premises, so long as there is at all times one ground level
public entrance to the Premises, (3) construct other buildings or improvements
adjacent to the Premises from time to time and make alterations and/or additions
thereto, above, below and/or adjoining the same, and (4) construct multi-level,
elevated or subterranean parking facilities.
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<PAGE> 8
c. Tenant shall keep the Premises free of all liens arising from any work
performed, materials furnished or obligations incurred by or for Tenant, its
subtenants, assignees, licensees or concessionaires. If Tenant fails within 10
days following imposition to cause any such lien to be released of record,
Landlord may, at its election, and in addition to all other remedies provided
herein and by law, cause same to be released by any means it deems proper,
including payment of the claim. Tenant shall, promptly upon demand, reimburse
Landlord for all sums paid and expenses incurred for such purpose, including
attorneys' fees, with interest from the date of demand at the rate specified in
Paragraph 19e below. Tenant shall indemnify, defend and hold Landlord harmless
from and against any and all liability, loss, damage, costs, attorneys' fees and
expenses on account of claims of lien or other actions of laborers, materialmen
or others for work performed or materials supplied to Tenant, its
subcontractors, assignees, licensees or concessionaires. If any claim of lien be
filed against the Premises or any action relating to or affecting title to the
Premises be commenced, the party receiving notice of such lien or action shall
immediately give the other party written notice thereof. Tenant shall give
Landlord at least 10 days' prior written notice of commencement of any
construction on the Premises.
6. UTILITIES. Commencing an the Commencement Date, Tenant shall be responsible
and pay for all public utility services to the Premises during the Term,
including heat, ventilation and air conditioning ("HVAC"), water, gas, electric,
etc., together with all taxes, levies, deposits, fees or other charges, which
shall be due and payable promptly upon demand, Landlord shall not be liable for
the quality, quantity, interruption or failure of such utilities, nor shall
Tenant be entitled to terminate this Lease or stop paying rental or the
payments, unless due directly to Landlord's negligence. If Tenant fails to pay
any such amounts, Landlord may cut off and discontinue, without further notice
to Tenant, any utilities furnished to the Premises and paid for by Landlord
until such payments are paid in full. During the Term, Tenant agrees to maintain
adequate heating to the Premises (whether or not occupied) so as to avert any
damage to the Premise on account of weather. If the Premises are not separately
metered, Tenant shall, at its sole cost and expense, install separate meters.
Tenant shall not, without landlord's prior written consent, use any device in
the Premise which overloads or jeopardizes the integrity of the existing utility
system in the Premises. Tenant shall not connect any device to water pipes or
electrical current (except through existing electrical outlets in the Premises).
7. FINANCING. This Lease is and shall remain subject and subordinate to (1) all
ground or underlying leases now or hereafter executed and all amendments,
renewals, modifications, supplements and extensions thereof affecting the
Premises, and (2) the lien of all mortgages, deeds of trust or other debt
instruments now or hereafter encumbering Landlord's interest or estate in the
Premises and/or any ground or underlying leases, without execution by Tenant of
any additional documents. If, for whatever reason, landlord requests Tenant's
execution from time to time of additional instruments or documents to effectuate
such subordination, Tenant shall promptly execute and deliver all such documents
or instruments. Tenant irrevocably constitutes and appoints Landlord, such
appointment being coupled with an interest, as Tenant's special attorney-in-fact
to execute, deliver and record any such documents or instruments if Tenant fails
to do so. As a condition to Tenant's foregoing obligation to execute documents
subordinating this Lease, Landlord shall procure from each mortgagee an
agreement in writing that, as long as Tenant faithfully discharges its
obligations under this Lease, in the event of a foreclosure, its tenancy will
not be disturbed. Any notice given to Landlord under this Lease shall also be
given to all
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mortgagees of which Tenant has received notice. Such mortgages shall have the
same rights as Landlord to cure Landlord's default. If any mortgage lender
requires, as a condition to the financing, any modification of the terms or
conditions of this Lease, Tenant shall execute such modification or amendment,
provided such modification shall not (1) increase the rental or Tenant's share
of any costs, (2) reduce the Term of the Lease, or (3) materially interfere with
Tenant's use or occupancy of the Premises. If Tenant refuses to execute any
modifications within 10 days after receipt, Landlord may, by 30 days written
notice, cancel this Lease. In such event, Landlord shall refund any unearned
rental or security deposit and neither party shall have any further liability
under this Lease.
8. PERSONAL PROPERTY. All personal property, trade fixtures and machinery in the
Premises shall be at the risk of Tenant or those claiming under Tenant, whether
damaged or lost by water, fire, explosion, wind, earthquake, theft or any other
casualty. Landlord shall not be liable for damage to Tenant's personal property
entrusted to Landlord or Landlord's Employees, no for loss thereof or damage
thereto by theft or otherwise.
9. ASSIGNMENT AND SUBLETTING.
a. Tenant shall not voluntarily or by operation of law sell, transfer, assign,
mortgage or sublet this Lease or any interest in the Premises, enter into
license or concession agreements or allow the occupancy of any part of the
Premises by another (collectively, "transfer"), without, in each case, procuring
Landlord's prior written consent. If Tenant is a partnership, any cumulative
transfer of more than 40% of partnership interests shall constitute a transfer.
If Tenant is a corporation, any change in control, as defined in the Federal
Securities Laws, shall constitute a transfer. Tenant's request for consent to a
transfer shall include a detailed written statement of the proposed transfer,
including the name, address, business, intended use, financial condition of the
prospective transferee, financial details of the proposed transfer, a copy of
the proposed transfer documents and any other information Landlord deems
relevant. Upon receipt, Landlord shall have the right (1) to withhold consent,
if reasonable; (2) to grant consent, subject to the terms and provisions of this
Lease, provided that if the proposed transfer is an assignment or a sublease,
then all rent payable by the transferee which exceeds the aggregate rent payable
by Tenant under this Lease (including any additional payments or other
consideration for the transfer, however characterized, and whether paid by lump
sum or periodic payments) shall be paid 75% to Landlord and 25% to Tenant; or
(3) to the extent permitted by law, and provided the proposed transfer is an
assignment or a sublease, to terminate the Lease as of the proposed effective
date of such transfer, in which case Landlord may elect to enter into a direct
lease agreement with the proposed assignee or sublessee. Landlord shall not be
deemed to have unreasonably withheld consent if the net worth of the proposed
transferee is less than Tenant's as of the Commencement Date or if the proposed
use of the Premises by the transferee is materially different than Tenant's use
or is in conflict with existing or proposed uses. Subject to compliance with
this Article, Landlord shall not withhold its consent to an assignment of this
Lease or a subletting of the Premises or any part thereof by Tenant to an
affiliate, subsidiary or parent of Tenant; an entity with which Tenant has
merged or consolidated or an entity to which substantially all of Tenant's
assets are transferred by stock purchase or otherwise, provided such entity
continues to use the Premises for the purposes specified herein and
substantially in the same manner as Tenant (collectively, "Tenant's
Affiliates").
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b. Notwithstanding any transfer permitted herein, Tenant and any Guarantor
hereof shall at all times remain directly, primarily and fully responsible and
liable for all Payments owed by Tenant under the Lease and for compliance with
all obligations under the terms, provisions and covenants of the Lease. Any
attempted transfer without Landlord's prior written consent shall be void and of
no force or effect and shall, at the option of Landlord, terminate this Lease.
Tenant agrees to reimburse Landlord for Landlord's reasonable costs including
attorneys' fees incurred in conjunction with the processing and documentation of
any such requested transfer. Tenant shall submit with any request for consent,
clear funds sufficient to compensate Landlord for its costs, including
attorneys' fees and the cost of investigation the credit, experience, skill,
character, reputation and ability of the proposed transferee, but in no event
less than the amount set forth in Item 10 of the BLI. All transfers shall be by
instruments in form reasonably satisfactory to Landlord executed by the
transferor and the transferee, whereby each transferee assumes and agrees to be
bound by and perform all of Tenant's obligations under this Lease. One original
copy of such instrument shall be delivered to Landlord.
c. Tenant irrevocably assigns to Landlord, for security purposes, all rents and
other payments becoming due to Tenant under any sublease by Tenant of the
Premises or any part thereof, Landlord, as assignee and attorney-in-fact for
Tenant, or a receiver appointed on Landlord's application, may collect such
rents and other payments and apply them toward Tenant's obligations under the
lease; provided, that (1) such right shall be in addition to any other remedies
provided herein or by law or in equity; and (2) such collection or application
shall not be deemed a novation or release of Tenant from further performance of
its obligations under the Lease, Landlord shall not exercise the foregoing
rights so long as Tenant is not in default under this Lease.
10. CONDEMNATION: EMINENT DOMAIN. If all or any portion of the Premises are
taken under the power of eminent domain or sold under the threat of that power
(all of which are called "Condemnation"), this Lease shall terminate as to the
part taken or sold an the date the condemning authority takes title or
possession, whichever occurs first. If more than twenty percent (20%) of the
floor area of the building in which the Premises are located, or which is
located in the Premises, is taken, either Landlord or Tenant may terminate this
Lease as of the date the condemning authority takes title or possession, by
delivering written notice to the other within 10 days after receipt of written
notice of such taking (or in the absence of such notice, within 10 days after
the condemning authority takes possession). If neither Landlord nor Tenant
terminates this Lease, this Lease shall remain in effect as to the portion of
the Premises not taken, except that the Minimum Rent shall be reduced in
proportion to the reduction in the floor area of the Premises. Any Condemnation
award or payment shall be distributed in the following order: (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust encumbering the
Premises, the amount of its interest in the Premises; (b) second to Tenant, only
the amount of any award specifically designated for loss of or damage to
Tenant's trade fixtures or removable personal property; and (c) third, to
Landlord, the remainder of such award, whether as compensation for reduction in
the value of the leasehold, the taking of the fee, or otherwise. If this Lease
is not terminated, Landlord shall repair any damage to the Premises caused by
the Condemnation, except that Landlord shall not be obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay for such
repair, Landlord shall have the right either to terminate this Lease or to make
such repair at Landlord's expense.
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11. TAXES.
a. Prior to each calendar year, Landlord will submit an estimate of all real
property taxes an the Premises. Tenant shall pay 1/12 of such share monthly,
Landlord shall submit a statement of actual taxes paid each subsequent calendar
year. If the actual amount exceeds the estimated amounts previously paid by
Tenant, the difference shall be promptly paid by Tenant to Landlord. If the
actual share is less than the estimated amounts previously paid by Tenant,
Tenant's payment of real property taxes next coming due shall be reduced by the
overpayment. If no further payments shall become due, such overpayment shall be
refunded to Tenant, "Real property taxes" means (1) any fee, license tax,
commercial rental tax, levy, charge, assessment, penalty or tax imposed by any
taxing authority against the Premises; (2) any tax on Landlord's right to
receive rent or income from the Premises or on its business of leasing the
Premises; (3) any tax or charge for fire protection, streets, sidewalks, road
maintenance, refuse or other services provided by any governmental agency; (4)
any tax or reassessment imposed upon this Lease or the Premises due to a change
in ownership or transfer of all or part of the Premises; and (5) any charge or
fee replacing any tax previously included within the definition of real property
tax. Real property taxes do not include Landlord's federal, state or municipal
income, franchise, inheritance or estate taxes.
b. Tenant shall pay before delinquency all taxes, assessments, license fees and
public charges assessed upon Tenant's improvements, fixtures, trade fixtures,
equipment, furniture, inventories, merchandise or other personal property in the
Premises, whether made against Tenant and/or Landlord separately or as part of
the assessment of other property. Tenant's personal property shall be assessed
separately from the Premises and the Project.
c. Tenant may contest the real property taxes, Tenant shall pay all costs of
such proceedings, including any costs or fees incurred by Landlord. Upon the
final determination of any proceeding or contest, Tenant shall immediately pay
the real property taxes due, together with all costs, charges, interests and
penalties incidental to the proceedings. If Tenant does not pay the real
property taxes when due and contests such taxes. Tenant shall not be in default
under this Lease for non-payment of such taxes if Tenant deposits funds with
Landlord or opens an interest bearing account reasonably acceptable to Landlord
in the joint names of Landlord and Tenant in amount sufficient to pay the real
property taxes plus a reasonable estimate of the interest, costs, charges and
penalties which may accrue if Tenant's action is unsuccessful, less any
applicable tax impounds previously paid by Tenant to Landlord. The deposit shall
be applied to the real property taxes due, as determined at such proceedings.
The real property taxes shall be paid under protest from such deposit if such
payment under protest is necessary to prevent the Premises from being sold under
a "tax sale" or similar enforcement proceeding.
12. USE AND OCCUPANCY.
a. The Premises shall be used solely for the purposes specified in Item 12 of
the BLI, and for no other purpose without Landlord's prior written consent.
Tenant shall comply with all regulations adopted from time to time by Landlord
governing signs, advertising material and lettering, including building,
free-standing, pylon or other signs. No other sign or advertising media is
permitted without Landlord's prior written consent.
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b. Tenant shall use, maintain and occupy the Premises in a careful, safe and
proper manner. Tenant shall not do, bring, keep or permit anything in or about
the Premises (1) prohibited by law, statute, or ordinance or governmental rule
or regulation now or hereafter enacted or by any fire or liability insurance
policy; (2) which increases the existing rate or which cancels or otherwise
affects any insurance covering the Premises or any part thereof or its contents;
(3) which causes a stress on the floor or any other portion of the Premises in
excess of that which it is designed to bear; (4) which will in any way obstruct
or interfere with the rights of tenants of adjacent property of annoy them; (5)
which is improper, immoral, unlawful or objectionable; or (6) which constitutes
waste or a nuisance or menace to Landlord, other tenants or the owners or
tenants of adjacent property.
c. Tenant shall not, without Landlord's prior written consent, (1) advertise any
distress, fire, bankruptcy, liquidation, relocation or going out of business
sale; (2) install or permit the installation in the Premises of any pinball,
video or gaming machines or other devices or equipment for amusement or
recreation; (3) install or permit the installation in the Premises of vending
machines, newspaper racks, pay telephones or other coin-or-token-operated
devices, except for the exclusive use of Tenant's employees; (4) use or permit
the use of the Premises for the sale or display of pornography, drug-oriented
paraphernalia or any goods and/or services; or (5) use the name or logo of
Premises for any purpose other than as the address of Tenant's business nor do
or permit anything in connection with Tenant's business or advertising which, in
the reasonable judgment of Landlord, may reflect unfavorably on Landlord or
confuse or mislead the public as to any apparent connection or relationship
between Landlord and Tenant.
d. Tenant shall, at its expense and at all times, comply with (1) all laws,
ordinances and regulations affecting the Premises or otherwise applicable to
Tenant's business; (2) the requirements of any board of fire underwriters or
other similar body now or hereafter instituted; (3) any order, directive or
certificate of occupancy issued pursuant to any law, ordinance or regulation
affecting the condition, use or occupancy of the Premises; and (4) any
requirements of structural changes related to or affected by Tenant's acts,
occupancy or use of the Premises. Tenant shall obtain and pay for all permits,
including a Certificate of Occupancy, required for Tenant's occupancy of the
Premises. Tenant shall immediately furnish Landlord with a copy of any notice
received from any governmental agency, insurance company or inspection bureau
affecting the Premises. The judgment of any court of competent jurisdiction or
the admission of Tenant in any action against Tenant, whether or not Landlord is
a party to such action, shall be conclusive as between Landlord and Tenant in
establishing such violation.
e. Tenant shall faithfully observe and comply with the Rules and Regulations
attached to this Lease as Exhibit D and, upon delivery of a copy thereof to
Tenant, all reasonable modifications and additions thereto from time to time
adopted by Landlord. Landlord shall not be responsible to Tenant for the
non-performance by any other tenant or occupant adjacent to the Premises.
13. DAMAGE AND DESTRUCTION.
a. Tenant shall notify Landlord in writing immediately upon the occurrence of
any damage to the Premises. If the Premises are only partially damaged and if
the proceeds received
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by Landlord from the insurance policies described in Paragraph 15b (including
the deductible amounts to be paid by Tenant, if any) are sufficient to pay for
the necessary repairs, this Lease shall remain in effect and Landlord shall
repair the damage as soon as reasonably possible. Landlord may elect to repair
any damage to Tenant's fixtures, equipment, or improvements. If the insurance
proceeds received by Landlord (including the deductible amounts to be paid by
Tenant, if any) are insufficient to pay the entire cost of repair, or if the
damage is not covered by Landlord's insurance policies, Landlord may elect
either (a)to repair the damage as soon as reasonably possible, in which case
this Lease shall remain in full force and effect, or (b) to terminate this Lease
as of the date the damage occurred. Landlord shall notify Tenant within 30 days
after receipt of notice of the occurrence of the damage whether Landlord elects
to repair the damage or terminate the Lease. If Landlord elects to repair the
damage, Tenant shall pay Landlord the "deductible amount' (if any) under
Landlord's insurance policies and, if the damage was due to an act or omission
of Tenant, the difference between the actual cost of repair and any insurance
proceeds received by Landlord. If Landlord elects to terminate this Lease,
Tenant may elect to continue this Lease in full force and effect, in which case
Tenant shall repair any damage to the Premises and any building in which the
Premises are located. Tenant shall pay the cost of such repairs, except that,
upon satisfactory completion of such repairs, Landlord shall reimburse Tenant
for any such repair costs from any insurance proceeds received by Landlord for
the damage repaired by Tenant. Any excess proceeds shall be retained by
Landlord, Tenant shall give Landlord written notice of such election within 10
days after receiving Landlord's termination notice. If the damage to the
Premises occurs during the last 6 months of the Term, Landlord may elect to
terminate this Lease as of the date the damage occurred, regardless of the
sufficiency of any insurance proceeds. In such event, Landlord shall not be
obligated to repair or restore the Premises and Tenant shall have no right to
continue this Lease, Landlord shall notify Tenant of its election within 30 days
after receipt of notice of the occurrence of the damage.
b. If the Premises are totally or substantially destroyed by any cause, or if
the Premises are in a building which is substantially destroyed (even though the
Premises are not totally or substantially destroyed), this Lease shall terminate
as of the date of the destruction occurred regardless of whether Landlord
receives any insurance proceeds, However, if the Premises can be rebuilt within
one (1) year after the date of destruction, Landlord may elect to rebuild the
Premises at Landlord's own expense, in which case, this Lease shall remain in
full force and effect, Landlord shall notify Tenant of such election within 30
days after the occurrence of such destruction. If the destruction was caused by
an act or omission of Tenant, Tenant shall pay Landlord the difference between
the actual cost of rebuilding and any insurance proceeds received by Landlord.
c. If the Premises are damaged and Landlord or Tenant restores the Premises
pursuant to the provisions of this Article 137 any rent payable during the
period of such damage and restoration shall be reduced according to the degree
to which Tenant's use of the Premises are impaired. The reduction shall not
exceed the sum of one year's payment of Minimum Rent, insurance premiums and
real property taxes. Except for the foregoing reduction, Tenant shall not be
entitled to any compensation, reduction, or reimbursement from Landlord as a
result of any damage, destruction, repair or restoration of or to the Premises.
d. Tenant waives the protection of any statute or code of judicial decision
which grants a tenant the right to terminate a lease in the event of the
substantial destruction of the
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leased property. Tenant agrees that the provisions of Paragraph 13b above shall
govern the rights and obligations of Landlord and Tenant in the event of any
substantial or total destruction to the Premises.
14. MAINTENANCE AND REPAIRS. During the Term, Tenant shall, at its expenses,
keep and maintain the Premises in good and sanitary order, condition and repair,
and shall make all structural and non-structural repairs and replacements
thereto, interior and exterior, above or below ground, ordinary or
extraordinary, to the satisfaction of Landlord, regardless of whether the
benefit of such repairs or replacements extend beyond the expiration or earlier
termination of the Term. If Tenant fails to repair or maintain the Premises or
any part thereof in a manner reasonably satisfactory to Landlord, Landlord may,
upon written notice, make such repairs or perform such maintenance on behalf of
Tenant. The cost thereof shall be paid by Tenant as an Additional Charge
promptly upon receipt of an invoice therefor, together with interest at the rate
specified in Paragraph 19e below. Landlord shall not be liable to Tenant for any
loss or damage that may accrue to Tenant's stock or business by reason of such
work or its results. Tenant shall contract with a qualified service company
acceptable to Landlord for the monthly maintenance of the HVAC system
exclusively serving the Premises. Tenant shall furnish a copy of such contract
(any subsequent contract) to Landlord for approval prior to execution.
15. INSURANCE.
a. Tenant shall maintain during the Term, at its sole expense, the following
policies of insurance:
(1) Comprehensive liability insurance, including property damage,
insuring Landlord, Tenant and any mortgagee, ground lessor and other
designated persons with insurable interests in the Premises
(collectively, "additional designated insureds"), against all claims,
demands, actions, causes of action and liability for injury to or death
of any persons in the amounts set forth in Item 13 of the BLI, per
occurrence and for damage to property arising from or related to the
use, occupancy or operation of the Premises or Tenant's business. Such
insurance shall contain a contractual coverage endorsement expressly
insuring Tenant's indemnity obligations under Article 26 below. The
foregoing coverages shall be increased as necessary if, in Landlord's
opinion, they are no longer adequate due to inflation, Tenant's
activities, substantial increases in recovered liability claims,
increased claims consciousness by the public or any combination thereof;
(2) Workers' compensation and Employer's Liability Insurance as required
by law;
(3) Insurance on all plate glass an the Premises; and
(4) All risk fire and casualty insurance with standard extended coverage
endorsement, including theft, vandalism, malicious mischief, sprinkler
damage and, if applicable, boiler and machinery, for 100% of the
replacement value of the Premises and all furnishing, trade fixtures,
improvements, equipment, merchandise, inventory, records and personal
property from time to time in the Premises. The proceeds therefrom,
together with any deductible amounts thereunder, shall be paid to
Landlord by Tenant and held in trust to be used only for the repair or
replacement of such items.
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All such policies shall (1) be placed with insurance companies acceptable to
Landlord; (2) name Landlord as an additional insured and contain loss payable
clauses satisfactory to Landlord; (3) provide that Landlord, and any additional
designated insureds, although not named as insureds, shall be entitled to
recover any loss to them, their servants, agents and employees due to the
negligence of Tenant, its officers, agents or employees; (4) provide that, if
required by Landlord's mortgagee, the proceeds of any insurance shall be paid to
a trustee or depository designated by Landlord's mortgagee; (5) be written as
primary policies, not contributing with and not in excess of coverage which
Landlord may carry and (6) not be cancellable or subject to reduction of
coverage except after 30 days' prior written notice to Landlord. Tenant shall
deliver to Landlord prior to occupancy of the Premises, and thereafter at least
30 days' prior to expiration, copies of such policies or certificates thereof,
Tenant shall, at its own cost, maintain any other forms of Insurance as Tenant,
Landlord or the mortgagees, trust deed beneficiaries or ground lessors of the
Premises may reasonably require from time to time. Tenant shall be liable for
the payment of any deductible amounts under such insurance policies.
b. If this Lease is cancelled by reason of damage or destruction, any insurance
proceeds for damage to the Premises and Tenant's improvements (exclusive of
Tenant's personal property and trade fixtures), whether obtained by Landlord or
Tenant, shall belong to landlord, free and clear of any claims by Tenant.
c. The coverage limits required in this Article 15 shall not limit Tenant's
liability to Landlord under this Lease or at law or in equity. If Tenant fails
either to maintain the required insurance or to deliver the required
certificates, Landlord may, at its option, acquire such insurance and Tenant
shall reimburse Landlord therefor immediately upon demand. However, Landlord's
failure or refusal to obtain such insurance shall not constitute a waiver of
Tenant's obligation to maintain such insurance. Tenant shall pay any increased
insurance cost resulting from Tenant's occupancy or vacancy of the Premises.
d. Landlord and Tenant each hereby waive any rights they may have against the
other for loss of or damage to property caused by a peril for which insurance is
maintained hereunder. The parties shall cause their respective insurance
companies to execute a waiver of any rights of subrogation they may have.
However, if such waivers are unavailable, this Article shall not be applicable.
16. SURRENDER: HOLDING OVER
a. Upon the expiration or earlier termination of the Lease, Tenant shall
surrender the Premises to Landlord, broom clean and in the same condition as
received, except for ordinary wear and tear which Tenant was not otherwise
obligated to repair under this Lease. All improvements whether temporary or
permanent in character, made in or upon the Premises (other than furnishings,
trade fixtures and equipment installed by Tenant) shall be Landlord's property
and, at the end of the Term, shall remain on the Premises without compensation
to Tenant. However, upon request, Tenant shall, at its expense, remove all such
improvements from the Premises and return the Premises to the condition in which
they were delivered to Tenant, Tenant shall immediately and fully repair any
damage to the Premises occasioned by such removal. If Tenant makes any
improvements without the prior written approval of Landlord, Tenant shall within
10 days of Landlord's request, remove any or all of the same
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at Tenant's sole expense. In no event shall Tenant remove any of the following
materials or equipment: power wiring or power panels; lighting or lighting
fixtures; wall coverings; drapes, blinds or other window coverings; carpets or
other floor coverings; heaters, air conditioners or any other hearing or air
conditioning equipment; fencing or security gates; or other similar building
operating equipment and decorations, all of which shall become Landlord's
property upon expiration or earlier termination of this Lease.
b. Tenant shall reimburse Landlord for and indemnify landlord against all
damages incurred by Landlord from any delay in vacating the Premises or failure
to surrender the Premises in the required condition. If Tenant does not vacate
the Premises upon the expiration or earlier termination of the Lease and
Landlord thereafter accepts rent from Tenant, Tenant's occupancy of the Premises
shall be a "month-to-month" tenancy subject to all provisions of the Lease
applicable thereto, except that the Minimum Rent shall be immediately increased
to an amount equal to 200% of the then prevailing Minimum Rent on the date of
the expiration or earlier termination of the Lease. Such month-to-month tenancy
may be terminated by either party upon 30 days' prior written notice.
17. NO MERGER. The surrender, mutual cancellation or termination hereof shall
not work a merger, but shall, at Landlord's option, either terminate or operate
as an assignment of all existing subtenancies.
18. DEFAULT. Any of the following shall constitute an event of default by Tenant
under this Lease:
a. Tenant fails to pay any rent or other sum payable hereunder when the same is
due.
b. Tenant fails to observe, keep or perform any of the other terms, covenants,
agreements or conditions contained herein or in the rules and regulations to be
observed or performed by Tenant and such default continues for a period of 30
days following notice from Landlord. However, Landlord shall not be required to
give such notice if Tenant's failure to perform constitutes a non-curable breach
of this Lease. Any notices required to be given pursuant to this Paragraph are
intended to satisfy any and all notice requirements imposed by law on Landlord
and are not in addition to any such requirements.
c. Tenant becomes bankrupt or insolvent; makes a transfer in fraud of creditors
or an assignment for the benefit of creditors; takes or has taken against it any
proceedings under any bankruptcy, insolvency or reorganization act; or a
receiver is appointed for a substantial part of its assets.
d. Tenant vacates or abandons the Premises.
e. This Lease or any estate of Tenant hereunder is levied upon by any attachment
or execution.
19. REMEDIES. Upon any default, Landlord may, at its option without further
notice or demand and in addition to any other rights and remedies hereunder or a
law or in equity, do any or all of the following:
a. Terminate Tenant's right to possession of the Premises by any lawful means
upon at
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least 3 days written notice, in which case Tenant shall immediately surrender
possession of the Premises to Landlord and, in addition to any rights and
remedies Landlord may have at law or in equity, Landlord shall have the
following rights:
(1) To re-enter the Premises then or at any time thereafter and remove
all persons and property and possess the Premises, without prejudice to
any other remedies Landlord may have by reason of Tenant's default or of
such termination, and Tenant shall have no further claim hereunder.
(2) To recover all damages incurred by Landlord by reason of the
default, including without limitation (A) the worth at the time of the
award of the payments owed by Tenant to Landlord under the Lease that
were earned but unpaid at the time of termination; (B) the worth at the
time of the award of the amount by which the payments owed by Tenant to
Landlord under the Lease that would have been earned after the date of
termination until the time of the award exceeds the amount of the loss
of payments owed by Tenant to Landlord under the Lease for the same
period that Tenant proves could have been reasonably avoided; (C) the
worth at the time of the award of the amount by which the payments owed
by Tenant to Landlord for the balance of the Term after the time of the
award exceeds the amount of the loss of payments owed by Tenant for the
same period that Tenant proves could have been reasonably avoided; (D)
all costs incurred by Landlord in retaking possession of the Premises
and restoring them to good order and condition; (E) all costs, including
without limitation brokerage commissions, advertising costs and
restoration and remodeling costs, incurred by Landlord in reletting the
Premises; plus (F) any other amount, including without limitation
attorneys' fees, court costs and accounting and audit expenses,
necessary to compensate Landlord for all detriment proximately caused by
Tenant's failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom, "The
worth at the time of the award," as used in Clauses (A) and (B) of this
Paragraph, is to be determined by computing interest as to each unpaid
payment owed by Tenant to Landlord under the Lease, at the interest rate
specified in Paragraph 19e below, "The worth at the time of the award,"
as referred to in Clause (C) of this Paragraph, is to be determined by
discounting such amount, as of the time of award, at the discount rate
of the Federal Reserve Bank specified in Item 14 of the BLI, plus 1%.
The monthly rent reserved in this Lease shall be deemed to be the sum
of: (1) the Minimum Rent and (2) any Additional Charges due under this
Lease.
(3) To remove, at Tenant's sole risk, any and all personal property in
the Premises and place such property in a public or private warehouse or
elsewhere at the sole cost and expense and in the name of Tenant. Any
such warehouser shall have all of the rights and remedies provided by
law against Tenant as owner of such property. If Tenant shall not
immediately pay the cost of such storage within 3 days, Landlord may
sell any or all such property at a public or private sale in such manner
and at such times and places as Landlord deems proper, without notice to
or demand upon Tenant. Tenant waives all claims for damages caused by
Landlord's removal, storage or sale of the property and shall indemnify
and hold Landlord free and harmless from and against any all loss, cost
and damage, including without limitation, court costs and attorneys'
fees. Tenant hereby irrevocably appoints Landlord as Tenant's
attorney-in-fact, coupled with an interest, with all rights and powers
necessary to effectuate the provisions of the Subparagraph.
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b. Main Tenant's right to possession, in which case this Lease shall continue in
effect whether or not Tenant shall have abandoned the Premises. In such event,
Landlord may enforce all of Landlord's rights and remedies under this Lease,
including the right to recover rent as it becomes due hereunder, and, at
Landlord's election, to re-enter and relet the Premises on such terms and
conditions as Landlord deems appropriate. If Landlord relets the Premises or any
portion thereof, any rent collected shall be applied against amounts due from
Tenant. Landlord may execute any lease made pursuant hereto in its own name, and
Tenant shall have no right to collect any such rent or other proceeds.
Landlord's re-entry and/or reletting of the Premises, or any other acts, shall
not be deemed an acceptance or surrender of the Premises or Tenant's interest
therein, a termination of the Lease or a waiver or release or Tenant's
obligations hereunder. Landlord shall have the same rights with respect to
Tenant's improvements and personal property as under Paragraph 16a above, even
though such re-entry and/or reletting do not constitute acceptance of surrender
of the Premises or termination of the Lease.
c. Cause a receiver to be appointed in any action against Tenant and to cause
such receiver to take possession of the Premises and to collect the rents or
profits derived therefrom. The foregoing shall not constitute an election by
Landlord to terminate this Lease unless notice of such intent is given.
d. Charge late charges as follows: Tenant acknowledges that late payments of
Minimum Rent and other sums due hereunder will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges and late charges imposed on Landlord by any mortgage or
trust deed covering the Premises. Accordingly, without any requirement for
notice to Tenant, Tenant shall pay to Landlord a late charge for each month
Minimum Rent is not paid when due equal to the greater of $50 or 10% of such
overdue amount. If any other sum is not received by Landlord when due, then,
without any requirement for notice to Tenant, Tenant shall pay to Landlord a
late charge equal to 10% of such overdue amount for each 30-day period, or
fraction thereof, during which such amount remains unpaid. Late charges are
deemed Additional Charges. Acceptance of late charges by Landlord shall not
constitute a waiver of Tenant's default nor prevent Landlord from exercising any
other right or remedy hereunder.
e. Charge interest on any amount not paid when due at the lesser of (1) the then
prevailing prime rate being charged by the Local Prime Rate Bank specified in
Item 14 of the BLI plus five percent (5%) per annum or (2) the maximum rate
permitted by law for commercial loans. Interest shall accrue from the date funds
are first due or, if the payment is for funds expended by Landlord on Tenant's
behalf, from the date Landlord expends such funds. Interest shall not be payable
on late charges. Payment of interest shall not excuse or cure any default by
Tenant under this Lease.
20. EXCULPATION. Landlord shall not be liable, and Tenant waives all claims, for
any damage or injury, however caused, to the person, business (or any loss of
income), goods, wares, merchandise or other property of Tenant, Tenant's
employees, invitees, customers or any other persons in or about the Premises,
except for Landlord's gross negligence or willful misconduct. If Tenant obtains
a money judgment against Landlord, its partners, successors or assigns, with
respect to this Lease or any matter, condition or circumstance arising out
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of the relationship of the parties hereunder, Tenant's occupancy of the Premises
of Landlord's ownership of the Project, Tenant shall be entitled to execute such
judgment only on Landlord's fee simple or leasehold estate in the Premises
(whichever is applicable) and not on any other assets of Landlord, its partners,
successors or assigns. Any such judgment shall be so qualified as to constitute
a lien only on such fee simple or leasehold estate.
21. SALE BY LANDLORD. If the original Landlord or any successor owner of the
Premises sells, assigns or transfers the Premises, all liabilities and
obligations under this Lease of the original Landlord or such successor owner
accruing thereafter shall terminate, and thereupon all such liabilities and
obligations shall be binding upon the new owner. Tenant shall attorn to such new
owner. Tenant waives the protection of any statute or rule of law which gives or
purports to give Tenant any right to terminate this Lease or surrender
possession of the Premises upon the transfer of Landlord's interest.
22. ACCESS TO PREMISES. Landlord may enter the Premises at any time in an
emergency and otherwise at reasonable hours (1) to inspect same; (2) to exhibit
same to prospective purchasers, mortgagees or tenants; (3) to confirm Tenant's
compliance with its obligations hereunder; (4) to supply any service to be
provided by Landlord hereunder; (5) to post notices of non-responsibility; (6)
to post "To Lease" signs during the last 90 days of the Term and (7) to make any
required repairs of the Premises, any adjoining space or the utility services.
Any such entry shall not under any circumstances be construed to be a forcible
or unlawful entry into or a detainer of the Premises or an eviction, actual or
constructive, of Tenant from the Premises or any portion thereof, Landlord may
use all proper means to gain entry to the Premises in an emergency. Tenant
waives any claim for damages, compensation or abatement of rent for any injury
or inconvenience to or interference with Tenant's business, or any loss of
occupancy or quiet enjoyment of the Premises arising from the exercise of the
foregoing rights. In the event of an excavation of land or construction or
alteration of a building adjacent to the Premises, Tenant grants to the
authorized parties a license to enter upon the Premises for the purpose of doing
the work Landlord deems necessary to preserve the Premises or any adjacent
building from injury or damage and to support the same by proper foundations,
without any claim for damages or indemnification against Landlord or diminution
or abatement of rent. Nothing herein shall imply any duty of Landlord to do any
work Tenant is required to do under this Lease, no shall Landlord's performance
of any repairs on behalf of Tenant constitute a release of Tenant's obligation
to do the same.
23. ESTOPPEL CERTIFICATE: FINANCIAL STATEMENTS.
a. From time to time, Tenant will execute, acknowledge and deliver to Landlord,
within 1 days of receipt, an Estoppel Certificate in Landlord's form stating (1)
that this Lease is in full force and effect and whether there have been any
modifications; (2) the date to which rental and other sums are paid in advance;
(3) that no notice of default has been received which has not been cured, except
as specified; and (4) such other reasonably requested matters. Landlord and any
prospective purchaser or encumbrancer may conclusively rely upon the following
facts: that this Lease is in full force and effect without modification except
as stated by Landlord; that there are no uncured defaults by Landlord under the
Lease and that not more than one month's Minimum Rent has been paid in advance.
In such event, Tenant shall be estopped from denying the truth of such facts.
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<PAGE> 20
b. Tenant represents to Landlord and any purchaser or encumbrancer of the
Premises that the information contained in the financial statements delivered by
Tenant in connection with this Lease are true and accurate as of the date
thereof and that, during the Term, Tenant's net worth stated in the original
statements shall not be reduced. Within 30 days of receipt of Landlord's written
request, Tenant shall deliver to Landlord and any prospective purchaser or
encumbrancer Tenant's then current financial statements, including balance
sheets, profit and loss statements and tax returns for the prior fiscal year.
All financial statements shall be confidential and shall be used only for the
foregoing purposes.
24. SIGNATURE. Landlord's submission of the Lease to Tenant is not an offer to
lease. This Lease shall become effective only upon execution by Landlord and
Tenant. By executing and delivering this Lease, Tenant irrevocably offers, for a
period of 14 days from Landlord's receipt thereof, to lease the Premises from
Landlord an the terms hereof. Landlord shall not be bound to execute the Lease.
Thereafter, and so long as Landlord has not executed and delivered this Lease,
Tenant may revoke such offer in writing. In such event, this Lease shall be void
and each party shall return any copies executed by the other.
25. NET LEASE. This is a "net, net, net lease". Landlord shall receive all rents
and payments hereunder free of any charges, assessments, expenses, deductions
and offsets.
26. INDEMNIFICATION. Tenant shall indemnify Landlord against and hold Landlord
harmless from any and all costs, claims or liability arising from (a) Tenant's
use of the Premises; the conduct of Tenant's business or anything done or
permitted to be done in or about the Premises; (c) any breach or default in the
performance of Tenant's obligations under this Lease; (d) any misrepresentation
of breach of warranty by Tenant under this Lease or (e) other acts or omissions
of Tenant. Tenant shall defend Landlord against any such cost, claim or
liability at Tenant's expense with counsel reasonably acceptable to Landlord or,
at Landlord's election, Tenant shall reimburse Landlord for any legal fees or
costs incurred by Landlord In connection with any such claim. Tenant further
indemnifies Landlord against and agrees to reimburse Landlord promptly upon
demand for any expenses incurred by Landlord in reviewing any proposal submitted
for Landlord's consent, including without limitation the fees and charges of any
attorneys, accountants, auditors, architects or other consultants retained by
Landlord in connection therewith. The foregoing provisions shall survive the
termination of this Lease with respect to any claim or cause of action arising
prior to such termination or for which Tenant was a contributing cause.
27. NOTICE. All notices, demands and consents given hereunder shall be in
writing and deemed given when personally delivered or deposited in the U.S.
Mail, certified return receipt requested or such other expedited service where
receipt by addressee can be confirmed, and addressed as follows: To Tenant, at
the Premises and at the address specified in Item 3 of the BLI (or such other
place Tenant designates in writing) and to Landlord, at the address specified in
Item 2 of the BLI (or such other place Landlord designates in writing). Such
service shall be exclusive and Tenant hereby waives, to the fullest extent
permitted by law, the right to any other method of service required by any
statute or law. Tenant appoints, as its agent to receive service of all
dispossessory proceedings, the person in charge of or occupying the Premises at
the time. If no person shall be in charge or occupancy, such service may be made
by attachment to the main entrance of the Premise.
28. INTERPRETATION. This Lease constitutes the entire agreement of the parties
hereto.
Page 20
<PAGE> 21
All prior agreements between the parties, whether written or oral, are merged
and of no force and effect. Any modification or discharge hereof shall be in a
writing signed by the party against whom enforcement thereof is sought. Captions
are inserted for convenient reference and do not define, limit or describe the
scope or intent of the particular provisions thereunder. Any Exhibits and
Addenda referred to herein are attached hereto and by this reference
incorporated herein. This Lease shall be governed by the laws of the state in
which the Premises are located.
29. SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and inure to the
benefit of the parties and their respective heirs, executors, administrators,
representatives, successors and assigns.
30. NON-WAIVER. No waiver by Landlord or Tenant of any term, covenant or
condition of this Lease shall be a waiver of any other breach hereof. No custom
or practice which may develop between the parties in the administration of the
terms hereof shall be construed to waive or lessen either party's right to
insist upon performance by the other in accordance with such terms. No payment
by Tenant or receipt by Landlord or its agents or a lesser amount than the rent
stipulated shall be deemed to be other than on account of the rent stipulated
nor shall an endorsement or statement on any check or any letter accompanying
any check or payment of rent be deemed an accord and satisfaction. Landlord or
its agents may accept such check or payment without prejudice to Landlord's
right to recover the balance of such rent or pursue any other remedy hereunder.
31. NO RECORDATION OF LEASE. Tenant shall not record this Lease without the
prior written consent of the Landlord; provided, however, that upon the request
of Tenant, Landlord shall, if Tenant has occupied the Premises and commenced
payment of Minimum Rent, join in the execution of a memorandum of this Lease for
purposes of recordation, which memorandum shall describe the parties, the
Premises and the Term and shall incorporate this Lease by reference. TEnant
shall pay all costs of preparation, delivery and recordation of such memorandum.
If such memorandum is recorded, the parties shall execute, immediately upon the
expiration or earlier termination of this Lease, a notice of termination for
recordation. If Tenant fails to execute such notice of termination within 10
days following Landlord's request therefore, Tenant hereby irrevocably appoints
Landlord to be its true and lawful attorney in fact with full authority to
execute, deliver and record such notice on behalf of Tenant. Such appointment
shall be coupled with an interest.
32. LEGAL PROCEEDINGS. Tenant shall reimburse Landlord upon demand for any
attorneys' fees and expenses incurred by Landlord in any action (judicial or
non-judicial) or litigation (including appeal) to secure compliance with the
provisions hereof or recover damages therefor, to exercise any rights hereunder
or to terminate this Lease or evict Tenant. If Tenant prevails in any legal
action brought by Landlord, Tenant shall be entitled to recover its reasonable
attorneys's fees. Tenant, to the extent permitted by law, does hereby waive any
further right to attorneys' fees provided by applicable state of federal law,
any right to trial by jury in any action brought upon the terms of this Lease
and any right created by the Landlord/Tenant relationship established herein.
33. CORPORATE AUTHORITY: PARTNERSHIP AUTHORITY. If Tenant is a corporation, each
person signing this Lease on behalf of Tenant represents and warrants that he
has full authority to do so and that this Lease binds the corporation. Within 30
days after execution, Tenant
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<PAGE> 22
shall deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing such execution or other reasonably acceptable evidence of
such authority. If Tenant is a partnership, each person signing this Lease for
Tenant represents and warrants that he is a general partner of the partnership,
that he has full authority to sign for the partnership and that this Lease binds
the partnership and all general partners of the partnership. Tenant shall give
written notice to Landlord of any general partner's withdrawal or addition.
Within 30 days after execution, Tenant shall deliver to Landlord a copy of
Tenant's recorded statement of partnership or certificate of limited
partnership. All signatories of Tenant shall be jointly and severally liable for
all obligations of Tenant.
34. FORCE MAJEURE. If either Landlord or Tenant are unable to perform any of
their respective obligations hereunder due to events beyond their control, such
obligations shall be stayed for the duration of such events. such events
include, without limitation, acts of God, war, civil commotion, labor disputes,
strikes, fire, flood or other casualty, shortages of labor or material,
government regulation or restriction and weather conditions.
35. BROKERS. Landlord and Tenant each represent to the other that it has had no
dealings with any broker or agent entitled to or claiming any commission or fee
in connection with this Lease, except those listed in Item 15 of the BLI, and it
knows of no other broker or agent who is entitled to or claims any such
commission or fee. Each party indemnifies and holds the other harmless from and
against any such other fees or commissions.
36. QUIET POSSESSION. If Tenant pays the rent and complies with all other terms
of this Lease, Tenant may occupy and enjoy the Premises for the full Term,
subject to the provisions of this Lease.
37. BINDING EFFECT. Landlord's submission of the Lease to Tenant is not an offer
to lease and shall not confer any rights or impose any obligations on either
party, This Lease shall become effective only upon execution by Landlord and
Tenant and there shall be no obligation on either party to so execute. By Tenant
executing and delivering this Lease to Landlord, Tenant irrevocably offers, for
a period of 14 days from Landlord's receipt hereof, to lease the Premises from
Landlord on the terms set forth herein. Upon Landlord's execution of the Lease
within such 14 day period, or upon Landlord's execution of the Lease after such
14 day period has lapsed provided Tenant has not then revoked its offer to lease
in writing delivered to Landlord, the parties stall only then be bound by the
terms hereof. In the event Tenant revokes its offer to lease in the manner set
forth hereinabove or in the event Landlord has rejected Tenant's offer to lease
in writing delivered to Tenant, this Lease shall be void and each party shall
return any copies executed by the other together with any refundable deposits
then received.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date
first set forth above.
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<PAGE> 23
"LANDLORD"
Samuel K. Freshman,
dba Galloway Industrial Properties
His Managing Agent
BY: /s/ Robert L. Carlen 12/2/91
--------------------------------------
Robert L. Carlen, Vice President,
Authorized Agent
Witnesses:
[SIG]
- ------------------------------------
[SIG]
- ------------------------------------
"TENANT"
Radiation Sterilizers, Inc.
a California corporation
By: /s/ Donald Currie
---------------------------------------
Donald Currie, General Manager
Witnesses:
[SIG]
- ------------------------------------
[SIG]
- ------------------------------------
STATE OF OHIO
COUNTY OF FRANKLIN, ss:
The foregoing instrument was acknowledged before me this 2nd day of Dec, 1991,
by Robert L. Carlen, Vice President, Eastern Region, Standard Management
Company, a California corporation, Managing Agent of Landlord, on behalf of the
corporation.
/s/ BRENDA L. NEWMAN
-------------------------------------
BRENDA L. NEWMAN
NOTARY PUBLIC - STATE OF OHIO,
MY COMMISSION EXPIRES APR. 15, 1992
STATE OF OHIO,
COUNTY OF FRANKLIN, ss:
The foregoing instrument was acknowledged before me this 2nd day of December,
1991, by Donald Currie, General Manager of Radiation Sterilizers, Inc., a
California corporation, on behalf of the corporation.
/s/ BRENDA L. NEWMAN
-------------------------------------
BRENDA L. NEWMAN
NOTARY PUBLIC - STATE OF OHIO,
MY COMMISSION EXPIRES APR. 15, 1992
Page 23
<PAGE> 24
GREEN MEADOWS CORPORATE PARK
PHASE I
[DIAGRAM]
<PAGE> 25
EXHIBIT "C"
RULES AND REGULATIONS
1. Exterior doors shall not remain braced open while the HVAC is functioning.
Doors which are braced must use door stops or hooks made expressly for that
purpose.
2. Except as otherwise permitted by Landlord in writing, the following signs are
prohibited: hand-made signs; "Yes We Are Open" signs; signs attached directly to
any exterior or interior window glass; adhesive stickers applied to any exterior
or interior store front or glass (including credit card stickers, brand name
stickers or other similar stickers); "For Sale", "For Lease", "Fire Sale",
"Discount" or "Going Out Of Business" signs; or signs, advertising media or
changes to the Premises which may be seen from the outside of the Premises. All
exterior signs and Alterations to the Premises will be set forth in Tenant's
plans and specifications made a part hereof. Upon request, Tenant shall
immediately remove any sign, advertising material, lettering or any other object
placed in, on, or about the Premises contrary to the foregoing rules and
regulations. If Tenant fails to do so, Landlord may without liability enter the
Premises and remove same at Tenant's expense.
3. Tenant shall promptly remove all trash and garbage to collection areas
designated by Landlord. The Common Area shall not be used by Tenant for
temporary trash storage nor shall Common Area trash containers be used for trash
disposal.
4. Tenant shall not allow animals other than seeing eye dogs within the Project.
5. Tenant shall not attach seasonal decorations to the exterior store fronts.
6. All Tenant deliveries shall be accepted as quickly as possible in the
designated loading zones.
7. Tenant shall keep its Premises at temperatures sufficiently high to prevent
freezing of water pipes and fixtures.
8. Plumbing facilities shall not be used for any purpose other than for which
they are constructed. No foreign substance of any kind shall be deposited
therein. The expense of breakage, stoppage or damages resulting from a violation
of this rule shall be borne by Tenant.
9. Tenant shall, at its sole cost and expense, keep the Premises pest free. If,
in Landlord's opinion, pest problems can not be resolved other than by a
comprehensive plan of pest control, Tenant shall Join in such plan as
established by Landlord.
10. No cooking or preparation of food shall be permitted in the Premises.
11. Tenant shall not, without prior written consent of Landlord, hold classes or
other assemblies.
12. Entrance doors to the Premises shall remain locked when the Premises are not
in use. Tenant shall maintain control of and responsibility for all Premises
keys.
<PAGE> 26
13. Tenant shall not invite to the Premises, nor permit the visit of, persons in
numbers or under conditions which interfere with the use and enjoyment of the
Common Areas by other tenants.
14. Landlord may refuse admission to the Project outside of ordinary business
hours to any person not having a pass issued by a tenant or not properly
identified, and may require all persons admitted to or leaving the Project
outside of ordinary business hours to register in and out.
15. Tenant shall keep display windows and signs well lighted at night for the
periods prescribed by any applicable policies or regulations adopted, from time
to time, by any utility or governmental agency.
16. Tenant agrees to pay Landlord $200 as minimum damages for each separate
violation of these rules.
<PAGE> 27
EXHIBIT "D"
CONTROL ZONE CRITERIA
1. All work to be performed will be coordinated with the management of the
Project or its representative.
2. All construction work will be confined to the Premises, including equipment,
tools, materials, etc. The Common Area shall not be used by Tenant or its
contractors without the prior written approval of Landlord. All deliveries and
removal of construction spoil shall be made via routes reasonably determined by
Landlord and scheduled so that materials are delivered to or removed from the
Premises prior to or after normal business hours. No tools or materials shall be
transported in wheelbarrows or wheeled vehicles in the Common Area during normal
business hours. Construction workers shall not eat in the Common Area.
3. Loading zones are for loading and unloading purposes only. No parking will be
permitted in these loading areas and any vehicles parked therein are subject to
towing at Tenant's or vehicle owner's expense. Nothing shall be stored in the
loading docks for any reason at any time. No tools, equipment, gang boxes, etc.,
will be allowed in the loading docks. Anything left in the loading docks will be
removed and backcharged to Tenant at a reasonable rate for labor, material and
equipment charges.
4. All doors shall be made secure at the completion of each work day.
5. All areas will be kept clean and free of hazardous conditions. Compliance
with all O.S.H.A. Safety Regulations is mandatory.
6. Tenant shall regularly remove all debris and construction spoilage from the
Premises. If not so removed, Landlord may remove such matter and backcharge
Tenant at a reasonable rate for labor, material and equipment charges.
7. All construction activities, such as jackhammering and "shot" type mechanical
fasteners which create excessive or explosive type noises, shall be performed at
least 30 minutes prior to or after normal business hours.
8. All contractors' vehicles and equipment shall park in spaces assigned by
Landlord, which may be outside the Project. Tenant and its contractors shall use
only the entrances and roadways within the Project designated by Landlord.
9. Tenant shall not attach or cause to be attached to any structural component
any equipment that may, by virtue of its size or weight, cause structural
damage. Tenant shall not exceed the loading set forth in the Approved Plans for
the floor of the Project or do anything that might alter the structural strength
thereof.
10. Upon request, Tenant shall, at Tenant's expense, provide a mechanical
exhaust system, including a make-up air system, in all high heat, moisture and
odor producing areas. Cooking exhaust hood shall be Econovent or equivalent.
11. Upon request, Tenant shall, at Tenant's expense, connect its smoke and/or
heat detector to the central system.
<PAGE> 28
12. Tenant shall immediately reimburse Landlord for any expenses reasonably
incurred by Landlord on behalf of Tenant for compliance with this Exhibit within
5 days of receipt of an invoice therefor. Late charges, interest and collection
expenses on delinquent payments shall be charged to Tenant in the manner set
forth in the Lease.
13. The provisions herein are in addition to Tenant's obligations to conform
with all terms set forth in the Lease. Tenant shall promptly repair, at Tenant's
expense, any damage to the Common Area and other portions of the Project caused
by Tenant's construction activities.
<PAGE> 29
[RSI LETTERHEAD]
CORPORATE RESOLUTION OF THE BOARD OF DIRECTORS
OF
Radiation Sterilizers, Incorporated, a California corporation
Passed by Consensus in Lieu of a Meeting
The undersigned, being the Corporate Secretary of Radiation Sterilizers,
Incorporated, a California corporation hereby reports that the Board of
Directors has taken the following action through consensus in lieu of a meeting
pursuant to Ohio Revised Code Section 1701.54.
The following resolution with respect to the authority to enter into a
written lease agreement with Samuel K. Freshman, dba Galloway Industrial
Properties, for the premises known as the warehouse portion of 341 Enterprise
Drive, Westerville, Ohio 43081 on behalf of Radiation Sterilizers, Incorporated,
a California corporation, is hereby adopted:
BE IT RESOLVED, that Donald Currie, General Manager, is hereby
authorized to negotiate, execute and deliver in the name on behalf of the
company, any contracts, agreements, conveyances, leases, and any other
instruments that may be deemed by him necessary for the acquisition of assets
and leases of Radiation Sterilizers, Incorporated, a California corporation.
DATE: 11/19/92 X: /s/ Diana Huffman
------------------------------------
Diana R. Huffman, Corp. Secretary
<PAGE> 30
ADDENDUM TO LEASE
This Addendum to Lease, dated Dec 2, 1991, is attached and made a part of that
certain Standard Industrial Lease ("Lease") entered into concurrently herewith
by and between Samuel K. Freshman, dba Galloway Industrial Properties, as
Landlord, and Radiation Sterilizers, Inc., a California corporation, as Tenant,
The parties desire to modify and supplement the Lease as follows:
l. Page 5 Article 1, LEASE OF PREMISES, Paragraph c.: Add at the end:
"Notwithstanding the above, Landlord warrants that the heating, ventilating and
air conditioning system and the plumbing in the Premises is in good working
order."
2. Page 5, Article 3, RENT, Paragraph a.: Add at the end thereof:
"(i) As specified in Item 7 of the BLI, no Minimum Rent shall be
due for the first two months of the Initial Term (collectively the "Abatement
Months.)
(ii) Tenant shall pay all Additional Charges during the Abatement
Months.
(iii) The entire Minimum Rent otherwise due and payable for the
Abatement Months shall become immediately due and payable upon the occurrence of
an event of default by Tenant under this Lease."
3. Page 6, Article 3, RENT, Paragraph b: Delete in its entirety.
4. Page 7, Article 5, ALTERATIONS AND LIENS, Paragraph b.: Add at the end: "In
exercising any of foregoing rights, Landlord shall use reasonable efforts to
minimize interference with Tenant's use and occupancy of the Premises."
5. Pages 8 and 9, Article 7; FINANCING, Line 22 (Line 7 an Page 9): Before
"modifications" insert "reasonable".
6. Page 14, Article 14, MAINTENANCE AND REPAIRS: Line 13, delete "monthly" and
insert "semi-annual".
7. Page 14, Article 14, MAINTENANCE AND REPAIRS: Add at the end thereof:
"Landlord assumes, responsibility for any repairs necessitated as a result of a
structural defect in the building. Should the entire roof of the Premises fail
to the extend that it must in Landlord's sole opinion be replaced, the cost of
such replacement would be Landlord's responsibility."
8. Page 19, Article 22, ACCESS TO PREMISES, Line 2: After "otherwise" insert
"modifications after reasonable notice".
9. Page 19, Article 23, ESTOPPEL CERTIFICATE: FINANCIAL STATEMENTS, Paragraph
a., Line 2: Delete "1" and insert "5".
Page 1
<PAGE> 31
EXTENSION OPTION (FAIR RENTAL VALUE) LEASE RIDER/INDUSTRIAL
This Rider is attached to and made part of a Standard Industrial Lease
(the "Lease") dated December 2, 1991, between Samuel K. Freshman, dba Galloway
Industrial Properties, as Landlord, and Radiation Sterilizers, Inc., a
California corporation, as Tenant, for Premises located at 341 Enterprise Drive,
Westerville, Ohio 43081-8827 (the "Premises"). The terms used herein have the
same definitions as in the Lease. This Rider supersedes any nonconsistent or
conflicting provisions of the Lease.
A. Option(s). Landlord grants to Tenant one (1) option(s) (the "Option(s)") to
extend the Initial Term for additional term(s) of two (2) years each (the
"Extension(s)") on the same terms as set forth in the Lease, but subject to an
increase in the Minimum Rent as set forth below. In addition, Tenant shall
continue to pay all other charges, as provided in the Lease. The Option(s) shall
be exercised only by written notice delivered to Landlord not more than 12
months nor less than 8 months before the expiration of the Initial Term or the
current Extension, as the case may be. If Tenant fails to deliver such notice
within the prescribed time period, such Option and any succeeding Option(s)
shall lapse and there shall be no further right to extend the Term. The
Option(s) shall be exercisable by Tenant on the conditions that (1) at the time
of the exercise, and at all times prior to the commencement of such Extension,
Tenant shall not be in default under the Lease, and (2) at the time of exercise,
and at all times prior to the commencement of such Extension Tenant has not been
ten (10) or more days late in the payment of rent more than a total of three (3)
times during the Term.
B. Personal Options. The Option(s) are personal to the above-named Tenant.
Whether with or without Landlord's consent, if Tenant Transfers prior to the
commencement of the respective Extension, such Option and any succeeding
Option(s) shall lapse and the Term shall expire as if such Option had not been
exercised. If Tenant Transfers after exercise of an Option and after the
commencement of the Extension related to such Option, then the Term, shall
expire upon the expiration of the Extension during which such Transfer occurred
and any succeeding Option(s) shall lapse.
C. Rent. The Minimum Rent shall be increased on the first day of each Extension
("Rental Adjustment Date") to the "Fair Rental Value" of the Premises,
calculated in accordance with the GLA of the Premises, "Fair Rental Value" shall
mean the highest rental per square foot of GLA received from new non-equity
tenants prior to the applicable Rental Adjustment Date since the execution of
the Lease for space located within the Project or, at the option of Landlord,
within a radius of five miles of the Project, which space is comparable in use
to the Premises. In determining whether space is comparable, improvements made
in that space by the tenant thereof shall not be considered, but appropriate
consideration shall be given to annual rental rates per square foot of GLA, rent
escalations (including type, base year and stop), concessions, such as free rent
Page 1
<PAGE> 32
and tenant improvement allowances, brokerage commissions, lease term, size and
location of premises, work letter provisions and other generally applicable
terms. At least 30 days prior to the applicable Rental Adjustment Date, Landlord
shall submit a written proposal to Tenant stating the proposed Fair Rental Value
to be applicable during the Extension. Tenant shall have 10 days from receipt
within which to reject Landlord's proposal. If Tenant fails to give such notice
of rejection within such 10-day period, Tenant shall be deemed to have accepted
such proposal, in which event such proposal shall become effective as of the
applicable Rental Adjustment Date, and the remainder of this Paragraph shall be
inapplicable. If Tenant rejects Landlord's proposal within such 10-day period,
then Landlord shall have the choice of (i) establishing the Fair Rental Value as
the Minimum Rent in effect immediately prior to the Adjustment Date, adjusted
upwards by each annual increase in the CPI since the date of the last rent
increase; or (ii) submitting the matter to arbitration in accordance with the
then-current rules and regulations of the American Arbitration Association (the
"AAA"). The arbitration shall be conducted at the nearest AAA office in the city
in which the Premises are located. The parties shall share equally the costs of
such proceedings, which shall be conducted by a single neutral arbitrator
appointed by application to the AAA, in accordance with the then-current AAA
rules. Such arbitrator shall meet with representatives of Landlord and Tenant as
soon as possible after appointment and shall issue his decisions as to the
issues in dispute within 60 days after his appointment. Notwithstanding Tenant's
rejection of Landlord's original proposal, during the pendency of such
proceedings Tenant shall pay the Fair Rental Value of the Premises as set forth
in Landlord's original proposal. Upon resolution or decision of the arbitrator,
Landlord shall credit the difference, if any, between the Minimum Rent paid by
Tenant pursuant to Landlord's original proposal and the Minimum Rent which
should have been paid for the same period determined by the arbitrator, against
subsequent payments of Minimum Rent thereafter payable by Tenant.
Page 2
<PAGE> 33
[Illegible] CERTIFICATE OF INSURANCE
STERIGE 11/16/95
PRODUCTS THIS CERTIFICATE IS ISSUED AS A MATTER OF
Technology Insurance Services INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE
Inc. CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT
400 Seaport Court, Suite 200 AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY
Port of Redwood City CA 94063 THE POLICIES BELOW.
Charles A. Gillespie COMPANIES AFFORDING COVERAGE
415-367-8700
COMPANY A National Union Fire Ins. Co.
LETTER
COMPANY B Fireman's Fund Ins. Co.
LETTER
INSURED
COMPANY C
LETTER
COMPANY D
LETTER
SteriGenics International COMPANY E
P.O. Box 5030 LETTER
Fremont CA 94537-5030
- --------------------------------------------------------------------------------
COVERAGES
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN
ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED,
NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER
DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY
PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT
TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN
MAY HAVE BEEN REDUCED BY PAID CLAIMS.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CO POLICY EFFECTIVE POLICY EXPIRATION
LTR TYPE OF INSURANCE POLICY NUMBER DATE(MM/DD/YY) DATE(MM/DD/YY) LIMITS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GENERAL LIABILITY GENERAL AGGREGATE $5,000,000
A X COMMERCIAL GENERAL LIABILITY GLA1210495RMA 03/31/95 03/31/96 PRODUCTS-COMP/OP AGG. $5,000,000
X CLAIMS MADE OCCUR. Casualty Insurance PERSONAL & ADV. INJURY $5,000,000
OWNER'S & CONTRACTOR'S PROT. EACH OCCURRENCE $5,000,000
FIRE DAMAGE (Any one time) $ 50,000
MED. EXPENSE (Any one
person) $ 10,000
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE LIABILITY COMBINED SINGLE LIMIT $
ANY AUTO
ALL OWNED AUTOS BODILY INJURY
SCHEDULED AUTOS (Per person) $
HIRED AUTOS BODILY INJURY
NON-OWNED AUTOS (Per accident) $
GARAGE LIABILITY PROPERTY DAMAGE $
- ------------------------------------------------------------------------------------------------------------------------------------
EXCESS LIABILITY EACH OCCURRENCE $
UMBRELLA FORM AGGREGATE $
OTHER THAN UMBRELLA FORM
- ------------------------------------------------------------------------------------------------------------------------------------
WORKER'S COMPENSATION STATUTORY LIMITS
AND EACH ACCIDENT $
EMPLOYERS' LIABILITY DISEASE - POLICY LIMIT $
DISEASE - EACH EMPLOYEE $
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER
B Blkt. Per. Property P89MXI8026886 03/31/95 03/31/96 Special 52300000
B Blkt. Bailee's P89MXI8026886 03/31/95 03/31/96 Form 13200000
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DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS
Building Coverage included in Blanket Building limit of $8920000 subject to $2500 deductible; Limit for 341 Enterprise Dr.,
Westerville is $420000
The Certificate Holder and Samuel K. Freshman dba Galloway Industrial Properties are named as Additional Insured (Landlord) as
respects 341 Enterprise Drive, Westerville, Ohio
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CERTIFICATE HOLDER CANCELLATION
SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE
EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL
30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT,
BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR
Standard Management Company LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS OR REPRESENTATIVES.
Attn: DeWayna Holloy ----------------------------------------------------------------------
6076 Busch Blvd., Suite #2 AUTHORIZED REPRESENTATIVE
Columbus OH 43229 /s/ CHARLES A. GILLESPIE
Charles A. Gillespie
(C) Acord Corporation 1990
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</TABLE>
<PAGE> 1
EXHIBIT 10.61
(California Net Lease with Stops
for Taxes and Insurance)
LEASE AGREEMENT
THIS LEASE AGREEMENT is made this 16 day of August, 1996 between SCI
Limited Partnership-1, a Delaware Limited Partnership ("Landlord"), and the
Tenant named below.
Tenant: SteriGenics International, a California
Corporation
Tenant's representative, James Clouser
address, and phone no.: President and CEO
4020 Clipper Court
Fremont, CA 94538
Phone 510-770-9000 or 800/777-9012
Fax 510/770-1499
Premises: That Building, containing approximately 24,250
rentable square feet, as determined by Landlord,
as shown on Exhibit A. The common address of which
is 2311-239 Lincoln Avenue, Hayward, CA 94545.
Project: Hayward Industrial Center
Building: Building #12(#13612A)
Tenant's Proportionate Share 3.2%
of Project:
Tenant's Proportionate Share 100%
of Building:
Lease Term: Beginning on the Commencement Date and ending on
the last day of the 60th full calendar month
thereafter.
Commencement Date: September 1, 1996
Initial Monthly Base Rent: $13,338
Initial Estimated Monthly 1. Utilities: $150
Operating Expense Payments:
(estimates only and subject to 2. Common Area Charges: $465
adjustment to actual costs and
expense according to the provisions 3. Others: $90
of this Lease)
Initial Total Estimated Monthly
Operating Expense Payments: $705
Initial Total Monthly Base Rent and
Operating Expense Payments: $14,043
Base Year: Taxes: July 1, 1996 - June 30, 1997
Insurance: December 1, 1995 - November 30, 1996
Security Deposit: $14,043
Broker: None
Addenda: Exhibits A, B, C and Addendums 1,2,3 and 4
1. GRANTING CLAUSE. In consideration of the obligation of Tenant to pay
rent as herein provided and in consideration of the other terms, covenants, and
conditions hereof, Landlord leases to Tenant, and Tenant takes from Landlord,
the Premises, to have and to hold for the Lease Term, subject to the terms,
covenants and conditions of this Lease.
2. ACCEPTANCE OF PREMISES. Tenant shall accept the obligation in its
condition as of the Commencement Date, subject to all applicable laws,
ordinances, regulations, covenants and restrictions. Landlord has made no
representation or warranty as to the suitability of the Premises for the conduct
of Tenant's business, and Tenant waives any implied warranty that the Premises
are suitable for Tenant's intended purposes. Except as provided in Paragraph 10,
in no event shall Landlord have any obligation for any defects in the Premises
or any limitation on its use. The taking of possession of the Premises shall be
conclusive evidence that Tenant accepts the Premises and that the Premises were
in good condition at the time possession was taken except for items that are
Landlord's responsibility under Paragraph 10 and any punchlist items agreed to
in writing by Landlord and Tenant.
<PAGE> 2
3. USE. The Premises shall be used only for the purpose of receiving,
storing, shipping and selling (but limited to wholesale sales) products,
material and merchandise made and/or distributed by Tenant and for such other
lawful purposes as may be incidental thereto; provided, however, with Landlord's
prior written consent, Tenant may also use the Premises for light manufacturing.
Tenant shall not conduct or give notice of any auction, liquidation, or going
out of business sale on the Premises. Tenant will use the Premises in a careful,
safe and proper manner and will not commit waste thereon, overload the floor or
structure of the Premises or subject the Premises to use that would damage the
Premises. Tenant shall not permit any objectionable or unpleasant odors, smoke,
dust, gas, noise, or vibrations to emanate from the Premises or take any other
action that would constitute a nuisance or would disturb, unreasonably interfere
with, or endanger Landlord or any other tenants of the Project. Outside storage,
including without limitation, storage of trucks and other vehicles, is
prohibited without Landlord's prior written consent. Tenant, at its sole
expense, shall use and occupy the Premises in compliance with all laws,
including, without limitation, the Americans With Disabilities Act, orders,
judgments, ordinances, regulations, codes, directives, permits, licenses,
covenants and restrictions now or hereafter applicable to the Premises
(collectively, "Legal Requirements"). Tenant shall, at its expense, make any
alterations or modifications, within or without the Premises, that are required
by Legal Requirements related to Tenant's particular use or occupation of the
Premises. Subject to the immediately preceding sentence, but notwithstanding any
other provision hereof to the contrary, Landlord and not Tenant shall be
responsible for complying with Legal Requirements (including performing
alterations or modifications necessary to make the Premises comply with
applicable Legal Requirements) to the extent such compliance (i) relates to
structural components of the Building and the Project or to the exterior of the
Building, or (ii) is mandated generally for commercial and industrial properties
in the City of Hayward and is not the result of Tenant's particular use of the
Premises. The cost of any capital expenditures incurred by Landlord to comply
with applicable Legal Requirements (including the cost of any required
additions, alterations or modifications) under the immediately preceding
sentence shall be amortized as provided in Paragraph 6 below. Tenant shall pay
its Proportionate Share of such amortized costs over the remaining term of the
Lease as provided in Paragraph 6 below. Tenant shall not be responsible for any
costs attributable to maintaining compliance with Legal Requirements to the
extent such compliance is necessitated by the particular use of lessees of the
Project other than Tenant. Tenant will not use or permit the Premises to be used
for any purpose or in any manner that would void Tenant's or Landlord's
insurance, increase the insurance risk, or cause the disallowance of any
sprinkler credits. If any increase in the cost of any insurance on the Premises
or the Project is caused by Tenant's use or occupation of the Promises, or
because Tenant vacates the Premises, then Tenant shall pay the amount of such
increase to Landlord. Any occupation of the Premises by Tenant prior to the
Commencement Date shall be subject to all obligations of Tenant under this
Lease.
4. BASE RENT. Tenant shall pay Base Rent in the amount set forth above.
The first month's Base Rent, the Security Deposit, and the first monthly
installment of estimated Operating Expenses (as hereafter defined) shall be due
and payable on the date hereof, and Tenant promise to pay to Landlord in
advance, without demand, deduction or set-off, monthly installments of Base Rent
on or before the first day of each calendar month succeeding the Commencement
Date. Payments of Base Rent for any fractional calendar month shall be prorated.
All payments required to be made by Tenant to Landlord hereunder shall be
payable at such address as Landlord may specify from time to time by written
notice delivered in accordance herewith. The obligation of Tenant to pay Base
Rent and other sums to Landlord and the obligations of Landlord under this Lease
are independent obligations. Tenant shall have no right at any time to abate,
reduce, or set-off any rent due hereunder except as may be expressly provided in
this Lease.
If Tenant is delinquent in any monthly installment of Base Rent or of estimated
Operating Expenses for more than 5 days after written notice (provided that
Landlord shall not be required to provide notice of monetary default more than
twice in any 12 month period or more than four (4) times during the term of the
Lease, as it may be extended), Tenant shall pay to Landlord on demand a late
charge equal to 5 percent of such delinquent sum. The provision for such late
charge shall be in addition to all of Landlord's other rights and remedies
hereunder or at law and shall not be construed as a penalty.
5. SECURITY DEPOSIT. The Security Deposit shall be held by Landlord as
security for the performance of Tenant's obligations under this Lease. The
Security Deposit is not an advance rental deposit or a measure of Landlord's
damages in case of Tenant's default. Upon each occurrence of an Event of Default
(hereinafter defined), Landlord may use all or part of the Security Deposit to
pay delinquent payments due under this Lease, and the cost of any damage injury,
expense or liability caused by such Event of Default, without prejudice to any
other remedy provided herein or provided by law. Tenant shall pay Landlord on
demand the amount that will restore the Security Deposit to its original amount.
Landlord's obligation respecting the Security Deposit is that of a debtor, not a
trustee; no interest shall accrue thereon. The Security Deposit shall be the
property of Landlord, but shall be paid to Tenant when Tenant's obligations
under this Lease have been completely fulfilled. Landlord shall be released from
any obligation with respect to the Security Deposit upon transfer of this Lease
and the Premises to a person or entity assuming Landlord's obligations under
this Paragraph 5.
6. OPERATING EXPENSE PAYMENTS. During each month of the Lease Term, on
the same date that Base Rent is due, Tenant shall pay Landlord an amount equal
to 1/12 of the annual cost, as estimated by Landlord from time to time, of
Tenant's Proportionate Share (hereinafter defined) of Operating Expenses for the
Project. Payments thereof for any fractional calendar month shall be prorated.
The term "Operating Expenses" means all costs and expenses incurred by Landlord
with respect to the ownership, maintenance, and operation of the Project
including, but not limited to costs of: utilities; maintenance, repair and
replacement of all portions of the Project, including without limitation, paving
and parking areas, roads, roofs, alleys, and driveways, mowing, landscaping,
exterior painting, utility lines, heating, ventilation and air conditioning
systems, lighting, electrical systems and other mechanical and building systems;
amounts paid to contractors and subcontractors for work or services performed in
connection with any of the foregoing; charges paid to contractors and
subcontractors for work or services performed in connection with any of the
foregoing; charges or assessments of any association to which the Project is
subject; fees payable to tax consultants and attorneys for
-2-
<PAGE> 3
or assessments of any association to which the Project is subject; fees payable
to tax consultants and attorneys for consultation and contesting taxes; property
management fees payable to a property manager, including any affiliate of
Landlord, or if there is no property manager, an administration fee of 15
percent of Operating Expenses payable to Landlord; security services, if any;
trash collection, sweeping and removal; and additions or alterations made by
Landlord to the Project or the Building in order to comply with Legal
Requirements (other than those expressly required herein to be made by Tenant)
or that are appropriate to the continued operation of the Project or the
Building as a bulk warehouse facility in the market area, provided that the cost
of such additions or alterations that are required to be capitalized for federal
income tax purposes shall be amortized on a straight line basis over a period
equal to the lesser of the useful life thereof for federal income tax purposes
or 10 years. In addition, Operating Expenses shall include (i) the amount by
which Taxes (hereinafter defined) for each calendar year during the Lease term
exceeds Taxes for the Base Year, and (ii) the amount by which the cost of
insurance maintained by Landlord for the Project for each calendar year during
the Lease term exceeds the cost of such insurance for the Base Year. Operating
Expenses do not include costs, or expenses, or depreciation or amortization for
capital repairs and capital replacements required to be made by Landlord under
Paragraph 10 of this Lease, debt service under mortgages or ground rent under
ground leases, costs of restoration to the extent of net insurance proceeds
received by Landlord with respect thereto, leasing commissions, or the costs of
renovating space for tenants.
If Tenant's total payments of Operating Expenses for any year
are less than Tenant's Proportionate Share of actual Operating Expenses for such
year, then Tenant shall pay the difference to Landlord within 30 days after
demand, and if more, then Landlord shall retain such excess and credit it
against Tenant's next payments. For purposes of calculating Tenant's
Proportionate Share of Operating Expenses, a year shall mean a calendar year
except the first year, which shall begin on the Commencement Date, and the last
year, which shall end on the expiration of this Lease. With respect to Operating
Expenses which Landlord allocates to the entire Project, Tenant's "Proportionate
Share" shall be the percentage set forth on the first page of this Lease as
Tenant's Proportionate Share of the Project as reasonably adjusted by Landlord
in the future for changes in the physical size of the Premises or Project; and,
with respect to Operating Expenses which Landlord allocates only to the
Building, Tenant's "Proportionate Share" shall be the percentage set forth on
the first page of this Lease as Tenant's Proportionate Share of the Building as
reasonably adjusted by Landlord in the future for changes in the physical size
of the Premises or the Building. Landlord may equitably increase Tenant's
Proportionate Share for any item of expense or cost reimbursable by Tenant that
relates to a repair, replacement, or service that benefits only the Premises or
only a portion of to Project or Building that includes the Premises or that
varies with occupancy or use. The estimated Operating Expenses for the Premises
set forth on the first Page of this Lease are only estimates, and Landlord makes
no guaranty or warranty that such estimates will be accurate.
7. UTILITIES. Tenant shall pay for all water, gas, electricity, heat,
light, power, telephone, sewer, sprinkler services, refuse and trash collection,
and other utilities and services used on the Premises, all maintenance charges
for utilities, and any storm sewer charges or other similar charges for
utilities imposed by any governmental entity or utility provider, together with
any taxes, penalties, surcharges or the like pertaining to Tenant's use of the
Premises. Landlord may cause at Tenant's expense any utilities to be separately
metered or charged directly to Tenant by the provider. Tenant shall pay its
share of all charges for jointly metered utilities based upon consumption, as
reasonably determined by Landlord. No interruption or failure of utilities shall
result in the termination of this Lease or the abatement of rent. Tenant agrees
to limit use of water and sewer for normal restroom use.
8. TAXES. Landlord shall pay all taxes, assessments and governmental
charges (collectively referred to as "Taxes") that accrue against the Project
during the Lease Term, Landlord may contest by appropriate legal proceedings the
amount, validity, or application of any Taxes or liens thereof. All capital
levies or other taxes assessed or imposed on Landlord upon the rents payable to
Landlord under this Lease and any franchise tax, any excise, transaction, sales
or privilege tax, assessment levy or charge measured by or based, in whole or in
part, upon such rents from the Premises and/or the Project or any portion
thereof shall be paid by Tenant to Landlord monthly in estimated installments or
upon demand, at the option of Landlord, as additional rent; provided, however,
in no event shall Tenant be liable for any net income taxes imposed on Landlord
unless such net income taxes are in substitution for any Taxes payable
hereunder. If any such tax or excise is levied or assessed directly against
Tenant, then Tenant shall be responsible for and shall pay the same at such
times and in such manner as the taxing authority shall require. Tenant shall be
liable for all taxes levied or assessed against any personal property or
fixtures placed in the Premises, whether levied or assessed against Landlord or
Tenant.
9. INSURANCE. Landlord shall maintain all risk property insurance
covering the full replacement cost of the Building. Landlord may, but is not
obligated to, maintain such other insurance and additional coverages as it may
deem necessary, including, but not limited to, commercial liability insurance
and rent loss insurance. All such insurance shall be included as part of the
Operating Expenses charged to Tenant. The Project or Building may be included in
a blanket policy (in which case the cost of such insurance allocable to the
Project or Building will be determined by Landlord based upon the insurer's cost
calculations). Tenant shall also reimburse Landlord for any increased premiums
or additional insurance which Landlord deems reasonably necessary as a result of
Tenant's use of the Premises.
Tenant, at its expense, shall maintain during the Lease Term:
all risk property insurance covering the full replacement cost of all property
and improvements, installed or placed in the Premises by Tenant at Tenant's
expense; worker's compensation insurance with no less than the minimum limits
required by law; employer's liability insurance with such limits as required by
law; and commercial liability insurance, with a minimum limit of $1,000,000 per
occurrence and a minimum umbrella limit of $1,000,000, for a total minimum
combined general liability and umbrella limit of $2,000,000 (together with such
additional umbrella coverage as Landlord may reasonably require) for property
damage, personal injuries, or deaths of persons occurring in or about the
Premises. Landlord may from time to time require reasonable increases in any
such limits. The commercial liability policies shall name Landlord as an
additional insured, insure on an occurrence and not a claims-made basis, be
issued by insurance companies which are reasonably acceptable to Landlord, not
be cancelable unless 30 days prior written notice shall have been given to
Landlord, contain
-3-
<PAGE> 4
a hostile fire endorsement and a contractual liability endorsement and provide
primary coverage to Landlord (any policy issued to Landlord providing duplicate
or similar coverage shall be deemed excess over Tenant's policies). Such
policies or certificates thereof shall be delivered to Landlord by Tenant upon
commencement of the Lease Term and upon each renewal of said insurance.
The all risk property insurance obtained by Landlord and
Tenant shall include a waiver of subrogation by the insurers and all rights
based upon an assignment from its insured, against Landlord or Tenant, their
officers, directors, employees, managers, agents, invitees and contractors, in
connection with any loss or damage thereby insured against. Neither party nor
its officers, directors, employees, managers, agents, invitees or contractors
shall be liable to the other for loss or damage caused by any risk coverable by
all risk property insurance, and each party waives any claims against the other
party, and its officers, directors, employees, managers, agents, invitees and
contractors for such loss or damage. The failure of a party to insure its
property shall not void this waiver. Landlord and its agents, employees and
contractors shall not be liable for, and Tenant hereby waives all claims against
such parties for, business interruption and losses occasioned thereby sustained
by Tenant or any person claiming through Tenant resulting from any accident or
occurrence in or upon the Premises or the Project from any cause whatsoever,
including without limitation, damage caused in whole or in part, directly or
indirectly, by the negligence of Landlord or its agents, employees or
contractors.
10. LANDLORD'S REPAIRS. Landlord shall maintain, at its expense, the
structural soundness of the roof, foundation, and exterior walls of the Building
in good repair, reasonable wear and tear and uninsured losses and damages caused
by Tenant its agents and contractors excluded. The term "walls" as used In this
Paragraph 10 shall not include windows, glass or plate glass, doors or overhead
doors, special store fronts, dock bumpers, dock plates or levelers, or office
entries. Tenant shall promptly give Landlord written notice of any repair
required by Landlord pursuant to this Paragraph 10, after which Landlord shall
have a reasonable opportunity to repair.
11. TENANT'S REPAIRS. Landlord, at Tenant's expense as provided in
Paragraph 6, shall maintain in good repair and condition the parking areas and
other common areas of the Building, including, but not limited to driveways,
alleys, landscape and grounds surrounding the Premises. Subject to Landlord's
obligation in Paragraph 10 and subject to Paragraph 9 and 15, Tenant, at its
expense, shall repair replace and maintain in good condition all portions of the
Premises and all areas, improvements and systems exclusively serving the
Premises including, without limitation, dock and loading areas, truck doors,
plumbing, water, and sewer lines up to points of common connection, fire
sprinklers and fire protection systems, entries, doors, ceilings and roof
membrane, windows, interior walls, and the interior side of demising walls, and
heating, ventilation and air conditioning systems. Such repair and replacements
include capital expenditures and repairs whose benefit may extend beyond the
Term. Heating, ventilation and air conditioning systems and other mechanical and
building systems serving the Premises shall be maintained at Tenant's expense
pursuant to maintenance service contracts entered into by, Tenant or, at
Landlord's election, by Landlord. The scope of services and contractors under
such maintenance contracts shall be reasonably approved by Landlord. At
Landlord's request, Tenant shall enter into a joint maintenance agreement with
any railroad that services the Premises. If Tenant fails to perform any repair
or replacement for which it is responsible, Landlord may perform such work and
be reimbursed by Tenant within 10 days after demand therefor. Subject to
Paragraphs 9 and 15, Tenant shall bear full cost of any repair or replacement to
any part of the Building or Project that results from damage caused by Tenant,
its agents, contractors, or invitees and any repair that benefits only the
premises.
12. TENANT-MADE ALTERATIONS AND TRADE FIXTURES. Any alterations,
additions, or improvements made by or on behalf of Tenant to the Premises
("Tenant-Made Alterations") shall be subject to Landlord's prior written consent
which shall not be unreasonably withheld provided that such Tenant-Made
Alterations do not effect the structure or mechanical components of the building
or pierce the roof of the building. Tenant-Made Alterations shall cause, at its
expense, all Tenant-Made Alterations to comply with insurance requirements and
with Legal Requirements and shall construct at its expense any alteration or
modification required by Legal Requirements as a result of any Tenant-Made
Alterations. All Tenant-Made Alterations shall be constructed in a good and
workmanlike manner by contractors reasonably acceptable to Landlord and only
good grades of materials shall be used. All plans and specifications for any
Tenant-Made Alterations shall be submitted to landlord for its approval.
Landlord may monitor construction of the Tenant-Made Alterations. Tenant shall
reimburse Landlord for its costs in reviewing plans and specifications and in
monitoring construction. Landlord's right to review plans and specifications and
to monitor construction shall be solely for its own benefit, and Landlord shall
have no duty to see that such plans and specifications or construction comply
with applicable laws, codes, rules and regulations. Tenant shall provide
Landlord with the identities and mailing addressees of all persons performing
work or supplying materials, prior to beginning such construction, and Landlord
may post on and about the Premises notices of non-responsibility pursuant to
applicable law. Tenant shall furnish security or make other arrangements
satisfactory to Landlord to assure payment for the completion of all work free
and clear of liens and shall provide certificates of insurance for worker's
compensation and other coverage in amounts and from an insurance company
satisfactory to Landlord protecting Landlord against liability for personal
injury or property damage during construction. Upon completion of any
Tenant-Made Alterations, Tenant shall deliver to Landlord sworn statements
setting forth the names of all contractors and subcontractors who did work on
the Tenant-Made Alterations and final lien waivers from all such contractors and
subcontractors. Upon surrender of the Premises, all Tenant-Made Alterations and
any leasehold improvements constructed by Landlord or Tenant shall remain on the
Premises as Landlord's property, except to the extent Landlord's requires
removal at Tenant's expense of any such items or Landlord and Tenant have
otherwise agreed in writing in connection with Landlord's consent to any
Tenant-Made Alterations. Tenant shall repair any damage caused by such removal.
Tenant, at its own cost and expense and without Landlord's
prior approval, may erect such shelves, bins, machines and trade fixtures
(collectively "Trade Fixtures") in the ordinary course of its business provided
that such items do not alter the basic character of the Premises, do not
overload or damage the Premises, and may be removed without injury to the
Premises, and the construction, erection, and installation thereof complies with
all Legal
-4-
<PAGE> 5
Requirements and with landlord's requirements set forth above. Tenant shall
remove its Trade Fixtures and shall repair any damage caused by such removal.
13. SIGNS. Tenant shall not make any changes to the exterior of the
Premises, install any exterior lights, decorations, balloons, flags, pennants,
banners, or painting, or erect or install any signs, windows or door lettering,
placards, decorations, or advertising media of any type which can be viewed from
the exterior of the Premises, without Landlord's prior written consent. Upon
surrender or vacation of the Premises, Tenant shall have removed all signs and
repair, paint, and/or replace the building facia surface to which its signs are
attached. Tenant shall obtain all applicable governmental permits and approvals
for sign and exterior treatments. All signs, decorations, advertising media,
blinds, draperies and other window treatment or bars or other security
installations visible from outside the Premises shall be subject to Landlord's
approval and conform in all respects to Landlord's requirements.
14. PARKING. Tenant shall be entitled to park in common with other
tenants of the Project in those areas designated for nonreserved parking.
Landlord may allocate parking spaces among Tenant and other tenants in the
Project if Landlord determines that such parking facilities are becoming
crowded. Landlord shall not be responsible for enforcing Tenant's parking rights
against any third parties.
15. RESTORATION. If at any time during the Lease Term the Premises are
damaged by a fire or other casualty, Landlord shall notify Tenant within 45 days
after such damage as to the amount of time Landlord reasonably estimates it will
take to restore the Premises. If the restoration time is estimated to exceed 6
months, either Landlord or Tenant may elect to terminate this Lease upon notice
to the other party given no later than 30 days after Landlord's notice. If
neither party elects to terminate this Lease or if Landlord estimates that
restoration will take 6 months or less, then, subject to receipt of sufficient
insurance proceeds, Landlord shall promptly restore the Premises excluding the
improvements installed by Tenant or by Landlord and paid by Tenant, subject to
delays arising from the collection of insurance proceeds or from Force Majeure
events. Tenant at Tenant's expense shall promptly perform, subject to delays
arising from the collection of insurance proceeds, or from Force Majeure events,
all repairs or restoration not required to be done by Landlord and shall
promptly re-enter the Premises and commence doing business in accordance with
this Lease. Notwithstanding the foregoing, either party may terminate this Lease
if the Premises are damaged during the last year of the Lease Term and Landlord
reasonably estimates that it will take more than one month to repair such
damage. Tenant shall pay to Landlord with respect to any damage to the Promises
the amount of the commercially reasonable deductible under Landlord's insurance
policy (currently $10,000) within 10 days after presentment of Landlord's
invoice. If the damage involves the premises of other tenants, Tenant shall pay
the portion of the deductible that the cost of the restoration of the Premises
bears to the total cost of restoration, as determined by Landlord. Base Rent and
Operating Expenses shall be abated for the period of repair and restoration in
the proportion which the area of the Premises, if any, which is not usable by
Tenant bears to the total area of the Premises. Such abatement shall be the sole
remedy of Tenant, and except as provided herein, Tenant waives any right to
terminate the Lease by reason of damage or casualty loss.
16. CONDEMNATION. If any part of the Premises or the Project should be
taken for any public or quasi-public use under governmental law, ordinance, or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof (a "Taking" or "Taken"), and the Taking would prevent or materially
interfere with Tenant's use of the Premises or in Landlord's judgment would
materially interfere with or impair its ownership or operation of the Project,
then upon written notice by either party this Lease shall terminate and Base
Rent shall be apportioned as of said date. If part of the Premises shall be
Taken, and this Lease is not terminated as provided above, the Base Rent payable
hereunder during the unexpired Lease Term shall be reduced to such extent as may
be fair and reasonable under the circumstance. In the event of any such Taking,
Landlord shall be entitled to receive the entire price or award from any such
Taking without any payment to Tenant, and Tenant hereby assigns to Landlord
Tenant's interest, if any, in such award. Tenant shall have the right, to the
extent that same shall not diminish Landlord's award, to make a separate claim
against the condemning authority (but not Landlord) for such compensation as may
be separately awarded or recoverable by Tenant for moving expenses and damage to
Tenant's Trade Fixtures, if a separate award for such items is made to Tenant.
17. ASSIGNMENT AND SUBLETTING. Without Landlord's prior written
consent, which landlord shall not unreasonably withhold, Tenant shall not assign
this Lease or sublease the Premises or any part thereof or mortgage, pledge; or
hypothecate its leasehold interest or grant any concession or license within the
Premises and any attempt to do any of the foregoing shall be void and of no
effect. For purposes of this paragraph, a transfer of the ownership interests
controlling Tenant shall be deemed an assignment of this Lease unless such
ownership interests are publicly traded. Notwithstanding the above, Tenant may
assign or sublet the Premises, or any part thereof, to any entity controlling
Tenant, controlled by Tenant or under common control with Tenant (a "Tenant
Affiliate"), without the prior written consent of Landlord. Tenant shall
reimburse Landlord for all of Landlord's reasonable out-of-pocket expenses in
connection with any assignment or sublease. Upon Landlord's receipt of Tenant's
written notice of a desire to assign or sublet a minimum of 75% of the Premises,
(other than to a Tenant Affiliate), Landlord may, by giving written notice to
Tenant within 30 days after receipt of Tenant's notice, terminate this Lease
with respect to the space described in Tenant's notice, as of the date specified
in Tenant's notice for the commencement of the proposed assignment or sublease.
If Landlord so terminates the Lease, Landlord may enter into a lease directly
with the proposed sublessee or assignee. Tenant may withdraw its notice to
sublease or assign by notifying Landlord within 10 days after Landlord has given
Tenant notice of such termination, in which case the Lease shall not terminate
but shall continue.
It shall be reasonable for the Landlord to withhold its
consent to any assignment or sublease in any of the following instances: (i) an
Event of Default has occurred and is continuing that would not be cured upon the
proposed sublease or assignment; (ii) the assignee or subleasee does not have a
net worth calculated according to generally accepted accounting principles at
least equal to the greater of the net worth of Tenant immediately prior to such
assignment or sublease or the net worth of the Tenant at the time it executed
the Lease; (iii) the intended use of the Premises by the assignee or sublessee
is not reasonably satisfactory to Landlord; (iv) the intended use of the
Premises by the assignee or
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sublessee would materially increase the pedestrian or vehicular traffic to the
Premises or the Project; (v) occupancy of the Premises by the assignee or
sublessee would, in Landlord's opinion, violate an agreement binding upon
Landlord or the Project with regard to the identity of tenants, usage in the
Project, or similar matters; (vi) the identity or business reputation of the
assignee or sublessee will, in the good faith judgment of Landlord, tend to
damage the goodwill or reputation of the Project; (vii) the assignee or sublet
is to another tenant in the Project and is at rates which are below those
charged by Landlord for comparable space in the Project; (viii) in the case of a
sublease, the subtenant has not acknowledged that the Lease controls over any
inconsistent provision in the sublease; (ix) the proposed assignee or sublease
is a governmental agency; or (x) there is vacant space in the Premises suitable
for lease to the proposed sublessee or assignee. Tenant and Landlord acknowledge
that each of the foregoing criterion are reasonable as of the date of execution
of this Lease. The foregoing criteria shall not exclude any other reasonable
basis for Landlord to refuse its consent to such assignment or sublease. Any
approved assignment or sublease shall be expressly subject to the terms and
conditions of this Lease. Tenant shall provide to Landlord all information
concerning the assignee or sublessee as Landlord may request.
Notwithstanding any assignment or subletting, Tenant and any
guarantor or surety of Tenant's obligations under this Lease shall at all times
remain fully responsible and liable for the payment of the rent and for
compliance with all of Tenant's other obligations under this Lease (regardless
of whether Landlord's approval has been obtained for any such assignments or
subletting). In the event that the rent due and payable by a sublessee or
assignee (or a combination of the rental payable under such sublease or
assignment plus any bonus or other consideration therefor or incident thereto
exceeds the rental payable under this Lease, then Tenant shall be bound and
obligated to pay Landlord as additional rent hereunder all such excess rental
and other excess consideration within 10 days following receipt thereof by
Tenant.
If this Lease be assigned or if the Premises be subleased
(whether in whole or in part) or in the event of the mortgage, pledge, or
hypothecation of Tenant's leasehold interest or grant of any concession or
license within the Premises or if the Premises be occupied in whole or in part
by anyone other than Tenant, then upon a default by Tenant hereunder Landlord
may collect rent from the assignee, sublessee, mortgagee, pledgee, party to whom
the leasehold interest was hypothecated, concessionee or licensee or other
occupant and, except to the extent set forth in the preceding paragraph, apply
the amount collected to the next rent payable hereunder; and all such rentals
collected by Tenant shall be held in trust for Landlord and immediately
forwarded to Landlord. No such transaction or collection of rent or application
thereof by Landlord, however, shall be deemed a waiver of these provisions or a
release of Tenant from the further performance by Tenant of its covenants,
duties, or obligations hereunder.
18. INDEMNIFICATION. Except for the willful misconduct or negligence of
Landlord, its agents, employees or contractors, and to the extent permitted by
law, Tenant agrees to indemnify, defend and hold harmless Landlord, and
Landlord's agents, employees and contractors, from and against any and all
losses, liabilities, damages, costs and expenses (including attorneys' fees)
resulting from claims by third parties for injuries to any person and damage to
or theft or misappropriation or loss of property occurring in or about the
Project and arising from the use and occupancy of the Premises or from any
activity, work, or thing done, permitted or suffered by Tenant in or about the
Premises or due to any other act or omission of Tenant, its subtenants,
assignees, invitees, employees, contractors and agents. The furnishing of
insurance required hereunder shall not be deemed to limit Tenant's obligations
under this Paragraph 18.
19. INSPECTION AND ACCESS. Landlord and its agents, representatives,
and contractors may enter the Premises at any reasonable time with prior notice
(except in the case of emergency) to inspect the Premises and to make such
repairs as may be required or permitted pursuant to this Lease and for any other
business purpose. Landlord and Landlord's representatives may enter the Premises
during business hours for the purpose of showing the Premises to prospective
purchasers and, during the last year of the Lease Term, to prospective tenants.
Landlord may erect a suitable sign on the Premises stating the Premises are
available to let or that the Project is available for sale. Landlord may grant
easements, make public dedications, designate common areas and create
restrictions on or about the Premises, provided that no such easement,
dedication, designation or restriction materially interferes with Tenant's use
or occupancy of the Premises. At Landlord's request, Tenant shall execute such
instruments as my be necessary for such easements, dedications or restrictions.
20. QUIET ENJOYMENT. If Tenant shall perform all of the convenants and
agreements herein required to be performed by Tenant, Tenant shall, subject to
the terms of this Lease, at all times during the Lease Term, have peaceful and
quiet enjoyment of the Premises against any person claiming by, through or under
Landlord.
21. SURRENDER. Upon termination of the Lease Term or earlier
termination of Tenant's right of possession, Tenant shall surrender the Premises
to Landlord in the same condition as received, broom clean, ordinary wear and
tear and casualty loss and condemnation covered by Paragraphs 15 and 16
excepted. Any Trade Fixtures, Tenant-Made Alterations and property not so
removed by Tenant as permitted or required herein shall be deemed abandoned and
may be stored, removed, and disposed of by Landlord at Tenant's expense, and
Tenant waives all claims against Landlord for any damages resulting from
Landlord's retention and disposition of such property. All obligations of Tenant
hereunder not fully performed as of the termination of the Lease Term shall
survive the termination of the Lease Term, including without limitation,
indemnity obligations, payment obligations with respect to Operating Expenses
and all obligations concerning the condition and repair of the Premises.
22. HOLDING OVER. If Tenant retains possession of the Premises after
the termination of the Lease Term, unless otherwise agreed in writing, such
possession shall be subject to immediate termination by Landlord at any time,
and all of the other terms and provisions of this Lease (excluding any expansion
or renewal option or other similar right or option) shall be applicable during
such holdover period, except that Tenant shall Pay Landlord from time to time,
upon demand, as Base Rent for the holdover period, an amount equal to 150% of
the Base Rent in effect on the termination date, computed on a monthly basis for
each month or part thereof during such holding over. All other
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payments shall continue under the terms of this Lease. In addition, Tenant shall
be liable for all damages incurred by Landlord as a result of such holding over.
No holding over by Tenant, whether with or without consent of Landlord, shall
operate to extend this Lease except as otherwise expressly provided, and this
Paragraph 22 shall not be construed as consent for Tenant to retain possession
of the Premises.
23. EVENT OF DEFAULT. Each of the following events shall be an event of
default ("Event of Default") by Tenant under this Lease:
(i) Tenant shall fail to pay any installment of Base Rent or
any other payment required herein when due, and such failure shall
continue for a period of 5 days after written notice (provided that
Landlord shall not be required to provide notice of monetary default
more than twice in any 12 month period or more than four (4) times
during the term of this Lease, as it may be extended) from the date
such payment was due.
(ii) Tenant or any guarantor or surety of Tenant's obligations
hereunder shall (A) make a general assignment for the benefit of
creditors; (B) commence any case, proceeding or other action seeking to
have an order for relief entered on its behalf as a debtor or to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of it
or its debts or seeking appointment of a receiver, trustee, custodian
or other similar official for it or for all or of any substantial part
of its property (collectively a "proceeding for relief"); (C) become
the subject of any proceeding for relief which is not dismissed within
60 days of its filing or entry; or (D) die or suffer a legal disability
(if Tenant, guarantor, or surety is an individual) or be dissolved or
otherwise fail to maintain its legal existence (if Tenant, guarantor or
surety is a corporation, partnership or other entity).
(iii) Any insurance required to be maintained by Tenant
pursuant to this Lease shall be cancelled or terminated or shall expire
or shall be reduced or materially changed, except, in each case, as
permitted in this Lease.
(iv) Tenant shall not occupy or shall vacate the Premises or
shall fail to continuously operate its business at the Premises for the
permitted use set forth herein, whether or not Tenant is in monetary or
other default under this Lease.
(v) Tenant shall attempt or there shall occur any assignment,
subleasing or other transfer of Tenant's interest in or with respect to
this lease except as otherwise permitted in this Lease.
(vi) Tenant shall fail to discharge any lien placed upon the
Premises in violation of this Lease within 30 days after any such lien
or encumbrance is filed against the Premises.
(vii) Tenant shall fail to comply with any provision of this
Lease other than those specifically referred to in this paragraph 23,
and except as otherwise expressly provided herein, such default shall
continue for more than 30 days after Landlord shall have given Tenant
written notice of such default or such longer period of time reasonably
required if Tenant is actively pursuing such default, but not to exceed
90 days.
24. LANDLORD'S REMEDIES. Upon each occurrence of an Event of Default
and so long as such Event of Default shall be continuing, Landlord may at any
time thereafter at its election: terminate this Lease; and/or pursue any other
remedies at law or in equity. Upon the termination of this Lease or termination
of Tenant's right of possession, it shall be lawful for Landlord, without formal
demand or notice of any kind, to re-enter the Promises by summary dispossession
proceedings or any other action or proceeding authorized by law and to remove
Tenant and all persons and property therefrom. If Landlord re-enters the
Premises, Landlord shall have the right to keep in place and use, or remove and
store, all of the furniture, fixtures and equipment at the Premises.
Except as otherwise provided in the next paragraph, if Tenant
breaches this Lease and abandons the Premises prior to the end of the term
hereof, or if Tenant's right to possession is terminated by Landlord because of
an Event of Default by Tenant under this Lease, this Lease shall terminate. Upon
such termination, Landlord may recover from Tenant the following, as provided in
Section 1951.2 of the Civil Code of California: (i) the worth at the time of
award of the unpaid Base Rent and other charges under this Lease that had been
earned at the time of termination; (ii) the worth at the time of award of the
amount by which the reasonable value of the unpaid Base Rent and other charges
under this Lease which would have been earned after termination until the time
of award exceeds the amount of such rental loss that Tenant proves could have
been reasonably avoided; (iii) the worth at the time of award by which the
reasonable value of the unpaid Base Rent and other charges under this Lease for
the balance of the term of this Lease after to time of award exceeds the amount
of such rental loss that Tenant proves could have been reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or that in the ordinary course of things would be likely to result
therefrom. As used herein, the following terms are defined: (a) the "worth at
the time of award" of the amounts referred to in Sections (i) and (ii) is
computed by allowing interest at the lesser of 18 percent per annum or the
maximum lawful rate. The "worth at the time of award" of the amount referred to
in Section (iii) is computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of award plus one percent;
(b) The "time of award" as used in clauses (i), (ii) and (iii) above is the date
on which judgment is entered by a court of competent jurisdiction; (c) The
"reasonable value" of the amount referred to in clause (ii) above is computed by
determining the mathematical product of (1) the "reasonable annual rental value"
(as defined herein) and (2) the number of years, including fractional parts
thereof, between the date of termination and the time of award. The "reasonable
value" of the amount referred to in clause (iii) is computed by determining the
mathematical product of (1) the annual Base Rent and other
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charges under this Lease and (2) the number of years including fractional parts
thereof remaining in the balance of the term of this Lease after the time of
award.
Even though Tenant has breached this Lease and abandoned the
Premises, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession, and Landlord may enforce all its rights
and remedies under this Lease, including the right to recover rent as it becomes
due. This remedy is intended to be the remedy described in California Civil Code
Section 1951.4, and the following provision from such Civil Code Section is
hereby repeated: "The Lessor has the remedy described in California Civil Code
Section 1951.4 (lessor may continue lease in effect after lessee's breach and
abandonment and recover rent as it becomes due, if lessee has right to sublet or
assign, subject only to reasonable limitations)." Any such payments due Landlord
shall be made upon demand therefor from time to time and Tenant agrees that
Landlord may file suit to recover any sums falling due from time to time.
Notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect in writing to terminate this Lease for such previous breach.
Exercise by Landlord of any one or more remedies hereunder
granted or otherwise available shall not be deemed to be an acceptance of
surrender of the Premises and/or a termination of this Lease by Landlord,
whether by agreement or by operation of law, it being understood that such
surrender and/or termination can be effected only by the written agreement of
Landlord and Tenant. Any law, usage, or custom to the contrary notwithstanding,
Landlord shall have the right at all times to enforce the provisions of this
Lease in strict accordance with the terms hereof; and the failure of Landlord at
any time to enforce its rights under this Lease strictly in accordance with same
shall not be construed as having created a custom in any way or manner contrary
to the specific terms, provisions, and covenants of this Lease or as having
modified the same. Tenant and Landlord further agree that forbearance or waiver
by Landlord to enforce its rights pursuant to this Lease or at law or in equity,
shall not be a waiver of Landlord's right to enforce one or more of its rights
in connection with any subsequent default. A receipt by Landlord of rent or
other payment with knowledge of the breach of any covenant hereof shall not be
deemed a waiver of such breach, and no waiver by Landlord of any provision of
this Lease shall be deemed to have been made unless expressed in writing and
signed by Landlord. To the greatest extent permitted by law, Tenant waives the
service of notice of Landlord's intention to re-enter as provided for in any
statute, or to institute legal proceedings to that end, and also waives all
right of redemption in case Tenant shall be dispossessed by a judgment or by
warrant of any court or judge. The terms "enter," "re-enter," "entry" or
"re-entry," as used in this Lease, are not restricted to their technical legal
meanings. Any reletting of the Premises shall be on such terms and conditions as
Landlord in its sole discretion may determine (including without limitation a
term different than the remaining Lease Term, rental concessions, alterations
and repair of the Premises, lease of less than the entire Premises to any tenant
and leasing any or all other portions of the Project before reletting the
Premises). Landlord shall not be liable, nor shall Tenants obligations hereunder
be diminished because of, Landlord's failure to relet the Premises or collect
rent due in respect of such reletting.
25. TENANT'S REMEDIES/LIMITATION OF LIABILITY. Landlord shall not be in
default hereunder unless Landlord fails to perform any of its obligations
hereunder within 30 days after written notice from Tenant specifying such
failure (unless such performance will, due to the nature of the obligation,
require a period of time in excess of 30 days, then after such period of time as
is reasonably necessary). All obligations of Landlord hereunder shall be
construed as covenants, not conditions; and, except as may be otherwise provided
in this Lease, Tenant may not terminate this Lease for breach of Landlord's
obligations hereunder. All such obligations of Landlord under this Lease will be
binding upon Landlord only during the period of its ownership of the Premises
and not thereafter. The term "Landlord" in this Lease shall mean only the owner,
for the time being of the Premises, and in the event of the transfer by such
owner of its interest in the Premises, such owner shall thereupon be released
and discharged from all obligations of Landlord thereafter accruing, but such
obligations shall be binding during the Lease Term upon each new owner for the
duration of such owner's ownership. Any liability of Landlord under this Lease
shall be limited solely to its interest in the Project, and in no event shall
any personal liability be asserted against Landlord in connection with this
Lease nor shall any recourse be had to any other property or assets of Landlord.
26. WAIVER OF JURY TRIAL. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL
BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS
LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
27. SUBORDINATION. This Lease and Tenant's interest and rights
hereunder are and shall be subject and subordinate at all times to the lien of
any first mortgage, now existing or hereafter created on or against the Project
or the Premises, and all amendments, restatements, renewals, modifications,
consolidations, refinancing, assignments and extensions thereof, without the
necessity of any further instrument or act on the part of Tenant. Tenant agrees,
at the election of the holder of any such mortgage, to attorn to any such
holder. Tenant agrees upon demand to execute, acknowledge and deliver such
instruments, confirming such subordination and such instruments of attornment as
shall be requested by any such holder. Tenant hereby appoints Landlord attorney
in fact for Tenant irrevocably (such power of attorney being coupled with an
interest) to execute, acknowledge and deliver any such instrument and
instruments for and in the name of the Tenant and to cause any such instrument
to be recorded. Notwithstanding the foregoing, any such holder may at any times
subordinate its mortgage to this Lease, without Tenant's consent, by notice in
writing to Tenant, and thereupon this Lease shall be deemed prior to such
mortgage without regard to their respective dates of execution, delivery or
recording and in that event such holder shall have the same rights with respect
to this Lease as though this Lease had been executed prior to the execution,
delivery and recording of such mortgage and had been assigned to such holder.
The term "mortgage" whenever used in this Lease shall be deemed to include deeds
of trust, security assignments and any other encumbrances, and any reference to
the "holder" of a mortgage shall be deemed to include the beneficiary under a
deed of trust.
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28. MECHANIC'S LIENS. Tenant has no express or implied authority to
create or place any lien or encumbrance of any kind upon, or in any manner to
bind the interest of Landlord or Tenant in, the Premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs. Tenant covenants and agrees that it will pay or cause
to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed on the
Premises and that it will save and hold Landlord harmless from all loss, cost or
expense based on or arising out of asserted claims or liens against the
leasehold estate or against the interest of Landlord in the Premises or under
this Lease. Tenant shall give Landlord immediate written notice of the placing
of any lien or encumbrance against the Premises and cause such lien or
encumbrance to be discharged within 30 days of the filing or recording thereof;
provided, however, Tenant may contest such liens or encumbrances as long as such
contest prevents foreclosure of the lien or encumbrance and Tenant causes such
lien or encumbrance to be bonded or insured over in a manner satisfactory to
Landlord within such 30 day period.
29. ESTOPPEL CERTIFICATES. Tenant agrees, from time to time, within 10
business days after request of Landlord, to execute and deliver to Landlord, or
Landlord's designee, any estoppel certificate reasonably requested by Landlord
stating that this Lease is in full force and effect, the date to which rent has
been paid, that Landlord is not in default hereunder (or specifying in detail
the nature of Landlord's default), the termination date of this Lease and such
other matters pertaining to this Lease as may be requested by Landlord. Tenant's
obligation to furnish each estoppel certificate in a timely fashion is a
material inducement for Landlord's execution of this Lease. No cure or grace
period provided in this Lease shall apply to Tenant's obligations to timely
deliver an estoppel certificate.
30. ENVIRONMENTAL REQUIREMENTS. Except for Hazardous Material contained
in products used by Tenant in de minimis quantities for ordinary cleaning and
office purposes, Tenant shall not permit or cause any party to bring any
Hazardous Material upon the Premises or transport, store, use, generate,
manufacture or release any Hazardous Material in or about the Premises without
Landlord's prior written consent. Tenant, at its sole cost and expense, shall
operate its business in the Premises in strict compliance with all Environmental
Requirements, and shall remediate in a matter satisfactory to Landlord any
Hazardous Materials released on or from the Project by Tenant, its agents,
employees, contractors, subtenants or invitees. Tenant shall complete and
certify to disclosure statements as requested by Landlord from time to time
relating to Tenant's transportation, storage, use, generation, manufacture, or
release of Hazardous Materials on the Premises. The term "Environmental
Requirements" means all applicable present and future statutes, regulations,
ordinances, rules, codes, judgments, orders or other similar enactments of any
governmental authority or agency regulating or relating to health, safety, or
environmental conditions on, under, or about the Premises or the environment,
including without limitation, the following: the Comprehensive Environmental
Response, Compensation and Liability Act; the Resource Conservation and Recovery
Act; and all state and local counterparts thereto, and any regulations or
policies promulgated or issued thereunder. The term "Hazardous Materials" means
and includes any substance, material, waste, pollutant, or contaminant listed or
defined as hazardous or toxic, under any Environmental Requirements, asbestos
and petroleum, including crude oil or any fraction thereof, natural gas, or
synthetic gas usable for fuel (or mixtures of natural gas and such synthetic
gas). As defined in Environmental Requirements, Tenant is and shall be deemed to
be the "operator" or Tenant's "facility" and the "owner" of all Hazardous
Materials brought on the Premises by Tenant, its agents, employees, contractors
or invitees, and the wastes, by-products, or residues generated, resulting, or
produced therefrom.
Tenant shall indemnify, defend, and hold Landlord harmless
from and against any and all losses (including, without limitation, diminution
in value of the Premises or the Project and loss of rental income from the
Project), claims, demands, actions, suits, damages (including, without
limitation, punitive damages), expenses (including, without limitation,
remediation, removal, repair, corrective action, or cleanup expenses), and costs
(including, without limitation, actual attorneys' fees, consultant fees or
expert fees and including, without limitation, removal or management of any
asbestos brought into the Premises by Tenant, its agents, employees, contractors
or invitees, or disturbed in breach of the requirements of this Paragraph 30,
regardless of whether such removal or management is required by law) which are
brought or recoverable against, or suffered or incurred by Landlord as a result
of any release of Hazardous Materials for which Tenant is obligated to remediate
as provided above or any other breach of the requirements under this Paragraph
30 by Tenant, its agents, employees, contractors, subtenants, assignees or
invitees, regardless of whether Tenant had knowledge of such noncompliance. The
obligations of Tenant under this Paragraph 30 shall survive any termination of
this Lease.
Landlord shall have access to, and a right to perform
inspections and tests of, the Premises to determine Tenant's compliance with
Environmental Requirements, its obligations under this Paragraph 30, or the
environmental condition of the Premises. Access shall be granted to Landlord
upon Landlord's prior notice to Tenant and at such times so as to minimize, so
far as may be reasonable under the circumstances, any disturbance to Tenant's
operations. Such inspections and tests shall be conducted at Landlord's expense,
unless such inspections or tests reveal that Tenant has not complied with any
Environmental Requirement, in which case Tenant shall reimburse Landlord for the
cost of such inspection and tests. Landlord's receipt of or satisfaction with
any environmental assessment in no way waives any rights that Landlord bolds
against Tenant.
31. RULES AND REGULATIONS. Tenant shall at all times during the Lease
Term and any extension thereof, comply with all reasonable rules and regulations
at any time or from time to time established by Landlord covering use of the
Premises and the Project. The current rules and regulations are attached hereto.
In the event of any conflict between said rules and regulations and other
provisions of this Lease, the other terms and provisions of this Lease shall
control. Landlord shall not have any liability or obligation for the breach of
any rules or regulations by other tenants in the Project.
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32. SECURITY SERVICE. Tenant acknowledges and agrees that, while
Landlord may patrol the Project, Landlord is not providing any security Services
with respect to the Premises and that Landlord shall not be liable to Tenant
for, and Tenant waives any claim against Landlord with respect to, any loss by
theft or any other damage suffered or incurred by Tenant in connection with any
unauthorized entry into the Premises or any other breach of security with
respect to the Premises.
31 FORCE MAJEURE. Landlord shall not be held responsible for delays in
the performance of its obligations hereunder when caused by strikes, lockouts,
labor disputes, acts of God, inability to obtain labor or materials or
reasonable substitutes therefor, governmental restrictions, governmental
regulations, governmental controls, delay in issuance of permits, enemy or
hostile governmental action, civil commotion, fire or other casualty, and other
causes beyond the reasonable control of Landlord ("Force Majeure").
34. ENTIRE AGREEMENT. This Lease constitutes the complete agreement of
Landlord and Tenant with respect to the subject matter hereof. No
representations, inducements, promises or agreements, oral or written, have been
made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant,
which are not contained herein, and any prior agreements, promises,
negotiations, or representations are superseded by this Lease. This Lease may
not be amended except by an instrument in writing signed by both parties hereto.
35. SEVERABILITY. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, then and in that event,
it is the intention of the parties hereto that the remainder of this Lease shall
not be affected thereby. It is also the intention of the parties to this Lease
that in lieu of each clause or provision of this Lease that is illegal, invalid
or unenforceable, there be added, as a part of this Lease, a clause or provision
as similar in terms to such illegal, invalid or unenforceable clause or
provision as may be possible and be legal, valid and enforceable.
36. BROKERS. Tenant represents and warrants that it has dealt with no
broker, agent or other person in connection with this transaction and that no
broker, agent or other person brought about this transaction, other than the
broker, if any, set forth on the first page of this Lease, and Tenant agrees to
indemnify and hold Landlord harmless from and against any claims by any other
broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with Tenant with regard to this leasing
transaction.
37. MISCELLANEOUS. (a) Any payments or charges due from Tenant to
Landlord hereunder shall be considered rent for all purposes of this Lease.
(b) If and when included within the term "Tenant," as used in this
instrument, there is more than one person, firm or corporation, each shall be
jointly and severally liable for the obligations of Tenant.
(c) All notices required or permitted to be given under this Lease
shall be in writing and shall be sent by registered or certified mail, return
receipt requested, or by a reputable national overnight courier service, postage
prepaid, or by hand delivery addressed to the parties at their addresses below,
and with a copy sent to Landlord at 14100 East 35th Place, Aurora, Colorado
80011. Either party may by notice given aforesaid change its address for all
subsequent notices. Except where otherwise expressly provided to the contrary,
notice shall be deemed given upon delivery.
(d) Except as otherwise expressly provided in this Lease or as
otherwise required by law, Landlord retains the absolute right to withhold any
consent or approval.
(e) At Landlord's request from time to time Tenant shall furnish
Landlord with true and complete copies of its most recent annual and quarterly
financial statements prepared by Tenant or Tenant's accountants any other
financial information or summaries that Tenant typically provides to its lenders
or shareholders.
(f) Neither this Lease nor a memorandum of lease shall be filed by or
on behalf of Tenant in any public record. Landlord may prepare and file, and
upon request by Landlord Tenant will execute, a memorandum of lease.
(g) The normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Lease or any exhibits or amendments hereto.
(h) The submission by Landlord to Tenant of this Lease shall have no
binding force or effect, shall not constitute an option for the leasing of the
Premises, nor confer any right or impose any obligations upon either party until
execution of the Lease by both parties.
(i) Words of any gender used in this Lease shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires. The captions inserted
in this Lease are for convenience only and in no way define, limit or otherwise
describe the scope or intent of this lease, or any provision hereof, or in any
way affect the interpretation of this Lease.
(j)) Any amount not paid by Tenant within 5 days after written notice
(provided that Landlord shall not be required to provide notice of monetary
default more than twice in any 12 month period or more than four (4) times
during the term of this Lease, as it may be extended) from the date such payment
was due after its due date in accordance with the terms of this Lease shall bear
interest from such due date until paid in full at the lesser of the highest rate
permitted by applicable law or 12 percent per year. It is expressly the intent
of Landlord and Tenant at all times to comply with applicable law governing the
maximum rate or amount of any interest payable on or in connection with this
Lease. If applicable law is ever judicially interpreted so as to render usurious
any interest called for under this Lease; or contracted for, charged, taken,
reserved, or received with respect to this Lease, then it is Landlord's and
Tenant's express intent that all excess amounts theretofore collected by
Landlord be credited on the applicable obligation (or, if
-10-
<PAGE> 11
the obligation has been or would thereby be paid in full, refunded to Tenant),
and the provisions of this Lease immediately shall be deemed reformed and the
amounts thereafter collectible hereunder reduced, without the necessity of the
execution of any new document, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called for hereunder.
(k) Construction and interpretation of this Lease shall be governed by
the laws of the state in which the Project is located, excluding any principles
of conflicts of laws.
(l) Time is of the essence as to the performance of the parties
obligations under this Lease.
(m) All exhibits and addenda attached hereto are hereby incorporated
into this Lease and made a part hereof. In the event of any conflict between
such exhibits or addenda and the terms of this Lease, such exhibits or addenda
shall control.
-11-
<PAGE> 12
39. Limitation Of Liability Of Trustees, Shareholders, And Officers Of
Security Capital Industrial Trust. Any obligation or liability whatsoever of
Security Capital Industrial Trust, a Maryland real estate investment trust,
which may arise at any time under this Lease or any obligation or liability
which may be incurred by it pursuant to any other instrument, transaction, or
undertaking contemplated hereby shall not be personally binding upon, nor shall
resort for the enforcement thereof be had to the property of, its trustees,
directors, shareholders, officers, employees or agents, regardless of whether
such obligation or liability is in the nature of contract, tort, or otherwise.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first above written.
<TABLE>
<S> <C>
TENANT: LANDLORD:
SteriGenics International, a California Corporation SCI Limited Partnership-I, a
/s/signature unreadable Delaware Limited Partnership
Sr. VP Engineering
By: for By: /s/ signature unreadable
---------------------------------------------- ------------------------------
James F. Clouser Irving F. Lyons, III
Title: President and CEO Title: Managing Director
Address: Address:
4020 Clipper Court 47775 Fremont Boulevard
Fremont, CA 94538 Fremont, CA 94538
</TABLE>
-12-
<PAGE> 13
Rules and Regulations
---------------------
1. The sidewalk, entries, and driveways of the Project shall not be
obstructed by Tenant, or its agents, or used by them for any purpose
other than ingress and egress to and from the Premises.
2. Tenant shall not place any objects, including antennas, outdoor
furniture, etc., in the parking areas, landscaped areas or other areas
outside of its Premises, or on the roof of the Project.
3. Except for seeing-eye dogs, no animals shall be allowed in the offices,
halls, or corridors in the Project.
4. Tenant shall not disturb the occupants of the Project or adjoining
buildings by the use of any radio or musical instrument or by the
making of loud or improper noises.
5. If Tenant desires telegraphic, telephonic or other electric connections
in the Premises, Landlord or its agent will direct the electrician as
to where and how the wires may be introduced; and, without such
direction, no boring or cutting of wires will be permitted. Any such
installation or connection shall be made at Tenant's expense.
6. Tenant shall not install or operate any steam or gas engine or boiler,
or other mechanical apparatus in the Premises, except as specifically
approved in the Lease. The use of oil, gas or inflammable liquids for
heating, lighting or any other purpose is expressly prohibited.
Explosives or other articles deemed extra hazardous shall not be
brought into the Project.
7. Parking any type of recreational vehicles is specifically prohibited on
or about the Project. Except for the overnight parking of operative
vehicles, no vehicle of any type shall be stored in the parking areas
at any time. In the event that a vehicle is disabled, it shall be
removed within 48 hours. There shall be no "For Sale" or other
advertising signs on or about any parked vehicle. All vehicles shall be
parked in the designated parking areas in conformity with all signs and
other markings. All parking will be open parking, and no reserved
parking, numbering or lettering of individual spaces will be permitted
except as specified by Landlord.
8. Tenant shall maintain the Premises free from rodents, insects and other
pests.
9. Landlord reserves the right to exclude or expel from the Project any
person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs or who shall in any manner do any act in
violation of the Rules and Regulations of the Project.
10. Tenant shall not cause any unnecessary labor by reason of Tenant's
carelessness or indifference in the preservation of good order and
cleanliness. Landlord shall not be responsible to Tenant for any loss
of property on the Premises, however occurring, or for any damage done
to the effects of Tenant by the janitors or any other employee or
person.
11. Tenant shall give Landlord prompt notice of any defects in the water,
lawn sprinkler, sewage, gas pipes, electrical lights and fixtures,
heating apparatus, or any other service equipment affecting the
Premises.
12. Tenant shall not permit storage outside the Premises, including without
limitation, outside storage of trucks and other vehicles, or dumping of
waste or refuse or permit any harmful materials to be placed in any
drainage system or sanitary system in or about the Premises.
13. All moveable trash receptacles provided by the trash disposal firm for
the Premises must be kept in the trash enclosure areas, if any,
provided for that purpose.
14. No auction, public or private, will be permitted on the Premises or the
Project.
15. No awnings shall be placed over the windows in the Premises except with
the prior written consent of Landlord.
16. The Premises shall not be used for lodging, sleeping or cooking or for
any immoral or illegal purposes or for any purpose other than that
specified in the Lease. No gaming devices shall be operated in the
Premises.
17. Tenant shall ascertain from Landlord the maximum amount of electrical
current which can safely be used in the Premises, taking into account
the capacity of the electrical wiring in the Project and the Premises
and the needs of other tenants, and shall not use more than such safe
capacity. Landlord's consent to the installation of electric equipment
shall not relieve Tenant from the obligation not to use more
electricity than such safe capacity.
18. Tenant assumes full responsibility for protecting the Premises from
theft, robbery and pilferage.
19. Tenant shall not install or operate an the Premises any machinery or
mechanical devices of a nature not directly related to Tenant's
ordinary use of the Premises and shall keep all such machinery free of
vibration, noise and air waves which may be transmitted beyond the
Premises.
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<PAGE> 14
EXHIBIT A
[DIAGRAM]
HAYWARD INDUSTRIAL CENTER
PHASE III
<PAGE> 15
EXHIBIT B
[DIAGRAM]
HAYWARD INDUSTRIAL CENTER, PHASE III, BUILDING G
2311-2319 LINCOLN AVENUE, HAYWARD, CALIFORNIA
PREMISES
<PAGE> 16
EXHIBIT C
[Company Letterhead]
SIGN CRITERIA
-------------
HAYWARD INDUSTRIAL CENTER
TENANT IDENTIFICATION SIGNS
BASIC IDENTIFICATION SIGN:
Each Tenant is allowed a basic identification sign to display company name in
11" microgramma letters the color of which shall match the accent stripes on the
building. Logos or symbols of the same construction as letters are allowed a
maximum of 20" in any one dimension, color may be determined by Tenant and
approved by ownership. Letters and logos are to be non-illuminated and
individually mounted with the building facade providing the background.
Corporate or company names will be listed in capital letters only, no lower case
letters are allowed. Letter height will remain consistent at 11" with the length
of the sign varying according to the length of the name displayed. Logos or
symbols are to be centered from top to bottom in the sign area. Names will be
mounted depending upon office location as per Exhibits A & B. Logo placement is
dependent upon sign location. This Tenant building sign while be restricted to
company or corporate name and logo or symbol only, no division names,
descriptions of services or slogans are allowed in this sign area. A layout of
letter placement is to be approved by the ownership prior to installation.
WINDOW SIGNS
Identity signs displaying trademarks or logos may be used on the glass panel to
the left or the right of the entrance door depending upon location of basic
identification sign (see above), i.e., if identification sign is mounted to the
right of the outside window frame, then window sign would be placed on glass
panel to the left of the entrance door (see Exhibits A & B). These signs may be
either painted or pressure sensitive vinyl or a combination of both. Company
names shall be listed in 3" white pressure sensitive capital letters in the
microgramma style. Logos and symbols may be in corporate colors as determined by
Tenant. Tenant Is required to submit a layout to the ownership for final
approval.
<PAGE> 17
ADDENDUM I
CONSTRUCTION
(ALLOWANCE)
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED August 16, 1996, BETWEEN
SCI Limited Partnership-I
and
SteriGenics International
a. Initial Tenant Improvements: Allowance. The leasehold improvements to
be constructed by Tenant (the "Initial Tenant Improvements)", at
Tenant's sole cost and expense (except for the hereinbelow described
"Allowance", are generally described in the preliminary plans and
specifications (the "Preliminary Plans") identified on Attachment 1 to
this Addendum and shall be constructed in accordance with the Final
Plans to be submitted by Tenant and reviewed and approved by Landlord
in accordance with the provisions of Paragraph (b) of this Addendum.
Note: Landlord, at Landlord's sole cost and expense, shall construct
the following improvements without regard to the tenant improvement maximum as
stated below:
- repair cracks and protrusions in warehouse floor
- remove, cap, and back-fill existing floor drains in warehouse
- reinstall two rows of fluorescent warehouse lighting (not to
exceed six two- bulb 8' chain hung fluorescent fixtures per
row)
- remove inoperable electrical service panel/disconnect at
exterior of electrical service room on interior of premises.
Landlord shall have no obligation to construct or to pay for the
construction of the Initial Tenant Improvements. However, in addition
to Landlord's obligation to perform the Landlord's Improvements in
accordance with Addendum 1 above, Landlord agrees to contribute toward
the cost of construction of the Initial Tenant Improvements the cash
sum of up to $72,750 (the "Allowance"). The construction costs that may
be reimbursed from the Allowance shall Include only the following:
costs of labor, equipment, supplies and materials furnished for
construction of the Initial Tenant Improvements; governmental fees and
charges for required permits, plan checks, and inspections for the
Initial Tenant Improvements; charges for Tenant's design professionals;
and charges for Landlord's design professionals for review of plans and
monitoring of construction or installation of the Initial Tenant
Improvements. No other costs, fees or expenses of the Initial Tenant
Improvements shall be reimbursable out of the Allowance.
Landlord's payment of the Allowance, or such portion thereof as Tenant
may be entitled to, shall be made within thirty (30) days after each
and all of the following conditions shall have been satisfied: (1) the
Initial Tenant Improvements shall have been substantially completed in
accordance with the Final Plans; (2) Tenant shall have delivered to
Landlord satisfactory evidence that all mechanics lien rights of all
contractors, suppliers, subcontractors, or materialmen furnishing
labor, supplies or materials in the construction or installation of the
Initial Tenant Improvements have been unconditionally waived, released,
or extinguished; (3) Tenant shall have delivered to Landlord paid
receipts or other written evidence satisfactorily substantiating the
actual amount of the construction costs of the Initial Tenant
Improvements; (4) Tenant shall have delivered to Landlord a temporary
or final certificate of occupancy for the Premises; (5) Tenant shall
not then be in default of any of the provisions of the Lease; (6)
Tenant shall have occupied and opened for business at the Premises; and
(7) Tenant has submitted to Landlord the following: (i) original
"jobsite copy" of the permit drawings; (ii) permit cards signed off by
the building Inspector; (iii) a recorded copy of the notice of
Completion issued by the building inspector of the City of Hayward;
(iv) "as-built" drawings of the electrical, HVAC, plumbing and fire
protection system; (v) one copy of all warranties and maintenance and
operating manuals; (vi) a letter from Tenant's architect certifying
that the Initial Tenant Improvements were completed in accordance with
the Final Plans (defined below); and (vii) a copy of the Tenant's
Contractor's (defined below) Application of Payment (ALA Document
G702), certified by Tenant's architect. If Landlord claims any credits
against the Allowance for any costs paid directly by Landlord to third
parties, Landlord shall provide Tenant with evidence of payment of such
costs.
b. Preparation and Review of Plans for Initial Tenant Improvements. The
Preliminary Plans identified on Attachments 1 to this Addendum 1 have
been approved by Landlord and signed by Landlord and Tenant for
identification. However, such Preliminary Plans shall not be used by
Tenant for the purposes of constructing or installing the Initial
Tenant Improvements. Tenant, suing licensed architectural and
engineering firms selected by Tenant and approved by Landlord (which
approval shall not be unreasonably withheld or delayed), shall prepare
or cause to be prepared and submitted, concurrently, and in each case
by receipted courier or delivery service, to (i) Landlord's
construction representative, (i) Kurt Fuller, 47775 Fremont Boulevard,
Fremont, California, 94538, and (ii) Landlord's offices at 14100 East
35th Place, Aurora, Colorado 80011, attn: Mr. Donald Madsen, for
landlord's review, complete and final architectural and engineering
drawings and specifications (hereinafter collectively referred to as
the "Final Plans"), consistent with the description of the Initial
Tenant Improvements set forth on the Preliminary Plans.
<PAGE> 18
Subject to the provisions of Paragraph (c) of this Addendum 1, Landlord
agrees that Tenant may commence construction of the Initial Tenant
Improvements prior to finalization for the Final Plans and Landlord
agrees that it shall cooperate with Tenant to review and approve
portions of the Final Plans for different stages or elements of the
work, or proposed Final Plans submitted at less than 100% completion,
so that construction can proceed on a "fast track" basis. The approval
process for all such portions of the Final Plans shall be substantially
as set forth below, but any objection by Landlord to Final Plans
submitted to Landlord may not be inconsistent with previously approved
portions of the Final Plans. However, in no event shall any portion of
the Initial Tenant Improvements be constructed or installed unless and
until Landlord has approved (or is deemed to have approved) Final Plans
at 100 % completion for such portion of the work.
Each set of proposed Final Plans furnished by Tenant shall include at
least two (2) sets of prints. The Final Plans shall be compatible with
the design, construction, and equipment of the building, and shall be
capable of logical measurement and construction. Unless Landlord shall
otherwise agree in writing, the Final Plans shall be signed/stamped by
Tenant's architect or engineer, as applicable, and shall include (to
the extent relevant or applicable to the portion of the work for which
Tenant is seeking Final Plan approval) each and all of the following:
(i) a Partition (Floor) Plan, @ 1/8" = 1'-0" minimum scale, including
partition types, partition construction sections and details, and
door/frame/hardware schedules; (ii) a Reflected Ceiling Plan, @ 1/8" =
1'-0" minimum scale, including ceiling construction and specifications
for ceiling lighting fixtures; (iii) a
Telephone/Electrical/Communications Plan, @ 1/8" = 1'-0" minimum scale,
including a complete schedule, cross-referenced to said plan, of
Tenant's telephone/electric/communications equipment and providing said
equipment's electrical power specifications, requirements and heat
output: (iv) a Final Plan, including all finish specifications and U.L.
and/or County "approval numbers" where required; (v) Elevations, @ 1/2"
= 1'0" minimum scale, interior, of all walls, with detail/section
cross-references where appropriate; exterior, of Tenant's portion of
the permitted Building-front wall, clearly indicating the appearance of
Tenants space, including its signage, at/through Tenant's permitted
Building window wall (if any); (vi) details and sections, scale as
required, for all partition types, structural elements and connections,
and custom installations where they occur (HVAC, lighting, etc); (vii)
details and sections, scale as required, for all signage and graphics;
(viii) a Structural Engineering plan, locating and detailing any
modifications to the Building required to attach and/or support the
Initial Tenant Improvements or Tenant's trade fixtures or equipment
(this plan must be signed/stamped by a structural engineer licensed in
the State in which the Premises are situated); (ix) Electrical
Engineering Plans, for both electrical power and for lighting,
including but not limited to: circulating diagrams; panel schedules;
electrical equipment and lighting fixture schedules and sections; and
electrical equipment and lighting fixture electrical load tabulations
(these plans and calculations must be signed/stamped by an electrical
engineer licensed in the State in which the Premises are situated); (x)
Mechanical Engineering Plans, for both plumbing and for HVAC, including
but not limited to: plumbing water and waste line plans; HVAC supply,
return and exhaust plans; and HVAC tabulations for electrical equipment
and lighting heat loads, cooling loads and air supply (these plans and
calculations must be signed/stamped by a mechanical engineer licensed
in the State in which the Premises are situated); (xi) a Fire
Protection Plan, locating and detailing any fire protection/fire
suppression system as may be required by code or other regulations
governing Tenant's operations in the Premises (this plan must be
signed/stamped by a fire protection engineer licensed in the State in
which the Premises are situated); and (xii) any other or additional
plans as may be related to Tenant's specific use of the Premises, such
as plans for rooms enclosures, equipment or devices related to Tenant's
permitted storage or use of Hazardous materials at the Premises (if
any), or as may be required by local city ordinance or building code.
Tenant shall submit all Final Plans (or portions thereof) concurrently
to Landlord's construction representative and offices, as designated
above for Landlord's review and approval. Landlord shall have five (5)
business days after Landlord's receipt of the proposed Final Plans (or
each such portion thereof) to review the same and notify Tenant in
writing of any comments or required changes, or to otherwise give its
approval or disapproval of such proposed Final Plans (or the portion
thereof submitted to Landlord). If Landlord fails to give written
comments to or disapprove the Final Plans (or the portion thereof
submitted to Landlord) within such five (5) business day period, then
Landlord shall be deemed to have approved the Final Plans (or portion
thereof) as submitted. Tenant shall have five (5) business days
following its receipt for Landlord's comments and objections to redraw
the proposed Final Plans (or portion thereof submitted to Landlord) in
compliance with Landlord's request and to resubmit the same for
Landlord's final review and approval or comment within three (3)
business days of Landlord's receipt of such revised plans. Such process
shall be repeated as necessary until final approval or deemed approval
by Landlord of the proposed Final Plans (or each portion thereof), at
100% completion, has been obtained. Landlord may at any time by written
notice given in accordance with the notice provisions of the Lease
change the name and/or address of the designated Landlord's
construction representative to receive plans delivered by Tenant to
Landlord.
In the event that Tenant disagrees with any of the changes to the
proposed Final Plans (or portion thereof) required by Landlord, then
Landlord and Tenant shall consult with respect thereto and each party
shall use all reasonable effort to promptly resolve any disputed
elements of such proposed Final Plans (or portion thereof). Landlord
and Tenant agree that if after consultation with each other and their
respective architects they are unable to resolve any disputed items
within three (3) business days of Landlord's written objection, then
within three (3) business days thereafter (I) Landlord's architect
shall select an architect who is unaffiliated with Landlord or tenant
to resolve the dispute (the "Arbitrator")., and (ii) each party shall
state to the Arbitrator its final position in writing as respects the
disputed matter(s) The Arbitrator shall decide on each disputed matter
within three (3) business days of submission of such matter, based
solely on such written submissions and the consistency of the parties'
submissions with the Preliminary Plans or previously approved portion
of the Final Plans, as applicable, the Tenant's permitted use of the
Premises and the
<PAGE> 19
general nature and design of the Project and adjacent properties. The
parties consent to the jurisdiction of any appropriate court to enforce
and enter judgments upon the decision of the Arbitrator. Tile losing
party shall pay the cost of the Arbitrator, but each party shall
otherwise bear its own costs and expenses in connection with the
dispute.
For purposes here, "business days" shall be all calendar days except
Sundays and holidays observed by national banks in Alameda County,
California, but Saturdays shall not constitute or be a business day for
purposes of delivery of documents by one party to the other.
Notwithstanding the preceding provisions of this Paragraph (b)), under
no circumstances whatsoever shall (i) any combustible materials be
utilized above finished ceiling or in any concealed space, (ii) any
structural load, temporary or permanent, be exerted on any part of the
Building without the prior written approval of Landlord, or (iii) any
holes be cut or drilled in any part of the roof or other portion of the
Building shell without the prior written approval of Landlord.
In the event that Tenant proposes any changes to the Final Plans (or
any portion thereof) after the same have been approved by Landlord,
Landlord shall not unreasonably withhold its consent to any such
changes, provided the changes do not, in Landlord's reasonable opinion,
adversely affect the Building structure, systems, or equipment, or the
external appearance of the Premises.
As soon as Final Plans (or a portion thereof sufficient to permit
commencement of construction or installation of the Initial Tenant
Improvements, if Tenant elects to proceed with a "fast track"
construction) are mutually agreed upon, Tenant shall use diligent
efforts to obtain all required permits authorizations, and licenses
form appropriate governmental authorities for construction of the
Initial Tenant Improvements (or such portion thereof, as applicable).
Tenant shall be solely responsible for obtaining any business or other
license or permit required for the conduct of its business at the
Premises.
c. Construction of the Initial Tenant Improvements. Construction or
installation of the Initial Tenant Improvements shall be performed by a
licensed general contractor or contractors selected by Tenant and
approved by Landlord, such approval not to be unreasonably withheld or
delayed (the "Tenant's Contractor", whether one or more), pursuant to a
written construction contract negotiated and entered into by and
between the Tenant's Contractor and Tenant and approved by Landlord
(such approval not to be unreasonably withheld or delayed). Each such
contract shall (i) obligate Tenant's Contractor to work in harmony with
the employees, contractors own suppliers of Landlord involved in the
construction work being performed by Landlord pursuant to Addendum B to
the Lease, and to comply with all rules and regulations of Landlord of
general applicability relating to construction activities in the
Project, (ii) name Landlord as an additional indemnitee under the
provisions of the contract whereby the Tenant's Contractor holds Tenant
harmless form and against any and all claims, damages, losses,
liabilities and expenses arising out of or resulting form the
performance of such work, (iii) name Landlord as a beneficiary of (and
a party entitled to enforce) all of the warranties for the Tenant's
Contractors with respect to the work performed thereunder and the
obligation of the Tenant's Contractor to replace defective materials
and correct defective ownership for a period of not less than one (1)
year following substantial completion of the work under such contract,
(iv) evidence the agreement of the Tenant's Contractor that the
provisions of the Lease shall control over the provisions of the
Contract with respect to distribution or use of insurance proceed, in
the event of a casualty during construction and (v) evidence with
waiver and release by the Tenant's Contractor of any lien or right to
assert a lien on all or any portion of the fee estate of Landlord in
and to the Project as a result for the work performed or to be
performed hereunder (and obligating the Tenant's Contractor to include
a substantially similar release and waiver provision in all
subcontracts and purchase orders entered under or pursuant to the
contract).
Tenant acknowledges and understands that all roof penetrations involved
in the construction of the Initial Tenant improvements must be
performed by the Building shell roofing contractor. All costs, fees and
expenses incurred with such contractor in performing such work shall be
a cost for the Initial Tenant Improvements, payable in accordance with
the provisions of this Addendum. Tenant or Tenant's Contractor shall be
responsible for all water, gas, electricity, sewer or other utilities
used or consumed at the Premises during the construction of the Initial
Tenant Improvements.
Tenant specifically agrees to carry, or cause the Tenant Contractor to
carry, during all such items as the Tenant's work is being performed,
(a) builder's risk completed value insurance on the Initial Tenant
Improvements, in an amount not less than Four Million Dollars
($4,000,000.00), (b)a policy of insurance covering commercial general
liability, in an amount not less than One Million Dollars
($1,000,000.00), combined single limit for bodily injury and property
damage per occurrence (and combined single limit coverage of
$2,000,000.00 in the aggregate), and automobile liability coverage
(including owned, nonowned and hired vehicles) in an amount not less
than One Million Dollars ($1,000,000.00) combined single limit (each
person, each accident), and endorsed to show Landlord as an additional
insured, and (c) workers' compensation insurance as required by law,
endorsed to show a waiver of subrogation by the insurer to any claim
the Tenant's Contractor may have against Landlord. Tenant shall not
commence construction of the Initial Tenant Improvements (or any
portion thereof) until Landlord has issued to Tenant a written
authorization to proceed with construction, which Landlord agrees to
issue to Tenant within one (1) business day after Tenant has delivered
to Landlord's construction representative (i) certificates for the
insurance policies described above, (ii) copies of all permits required
for construction of the Initial Tenant Improvements (or applicable
portion thereof, if Tenant elects to proceed with a "fast track"
construction) and a copy of the permitted Final Plans (or applicable
portion thereof) as approved by the appropriate governmental agency, a
(iii) copy of each signed construction contract for the Initial Tenant
Improvements (a copy of each subsequently signed contract shall be
forwarded to Landlord's construction representative
<PAGE> 20
without request or demand, promptly after execution thereof and prior
to the performance of any work thereunder), and (iv) list of names,
addresses and phone numbers of all subcontractors, contractors and
suppliers involved in performing the Initial Tenant Improvements. All
of the construction shall be the responsibility of and supervised by
Tenant.
d. Requirements for Tenant's Work. All of Tenant's construction with
respect to the Premises shall be performed in substantial compliance
with this Addendum and the Final Plans therefor previously approved in
writing by Landlord (and any changes thereto approved by Landlord as
herein provided), and in a good and workmanlike manner, utilizing only
new materials. All such work shall be performed by Tenant in strict
compliance with all applicable building codes, regulations and all
other legal requirements. All materials utilized in he construction of
Tenant's work must be confined to within the Premises. All trash and
construction debris not located wholly within the Premises must be
removed each day form the Project at the sole cost and expense of
Tenant. Landlord shall have the right at all times to monitor the work
for compliance with the requirements of this Addendum. If Landlord
determines that any such requirements are not being strictly complied
with, Landlord may immediately require the cessation of all work being
performed in or around the Premises or the Project until such time as
Landlord is satisfied that the applicable requirements will be
observed. Any approval given by Landlord with respect to Tenant's
construction of the Preliminary plans or Final Plans therefor, and/or
any monitoring of Tenants work by Landlord, shall not make Landlord
liable or responsible in any way for the condition, quality or function
of such matters or constitute any undertaking, warranty or
representation by Landlord with respect to any of such matters. So long
as Landlord reviews and responds to the plan submissions to Landlord as
provided in this Addendum, no delays in plan approval, and no delays in
construction of the Initial Tenant Improvements, shall delay the
Commencement Date of this Lease.
e. No Liens: Indemnification. Tenant shall have no authority to place any
lien upon the Premises or the Project or any portion thereof or
interest therein, nor shall Tenant have any authority in any way to
bind Landlord, and any attempt to do so shall be void and of no effect.
If, because of any actual or alleged act or omission of Tenant, or
Tenant's Contractor, or any subcontractors or materialmen, any lien,
affidavit, charge or other for the payment of money shall be filed
against Landlord, the Promises, the Project, or any portion thereof, or
interest herein, whether or not such lien, affidavit, charge or order
is valid or enforceable, Tenant shall, at its sole cost and expense,
cause the same to be discharged of record by payment, bonding or
otherwise no later than fifteen (15) days after notice to Tenant of the
filing hereof, but in any event prior to the foreclosure thereof.
With respect to the contract for labor or materials for construction of
the Initial Tenant Improvements, Tenant acts as principal and not as
the agent of Landlord. Landlord expressly disclaims liability of the
cost of labor performed for or supplies or materials furnished to
Tenant. Landlord may post one or more "notices of non-responsibility"
for Tenants work on the Project. No contractor of Tenant is intended to
be a third-party beneficiary with respect to he costs for construction
of the Initial Tenant Improvements. Tenant agrees to indemnify, defend
and hold Landlord, the Premises and the Project, harmless form all
claims (including all costs and expenses of defending against such
claims) arising or alleged to arise from any act or omission of Tenant
or Tenant's agents, employees, contractor, subcontractors, suppliers,
materialmen, architects, designers, surveyors, engineers, consultants,
laborers, or invitees, or arising from any bodily injury or a property
damage occurring or alleged to have occurred incident to any of the
work to be performed by Tenant or its contractors or subcontractors
with respect to the Promises.
Default by Tenant under this Addendum 1 shall constitute a default by
Tenant under the Lease for all purposes.
<PAGE> 21
ATTACHMENT 1
to
ADDENDUM 1
Identification of Preliminary Plans:
The "Preliminary Plans" for the Initial Tenant Improvements
heretofore approved by Landlord are identified as the plans prepared by
D.E.S.; bearing Project No. _______, dated _________________, and
consisting of __ sheets signed by Landlord and Tenant.
<PAGE> 22
ADDENDUM 2
STORAGE AND USE OF PERMITTED HAZARDOUS MATERIALS
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED August 16, 1996 BETWEEN
SCI Limited Partnership-I
and
SteriGenics International
1. Permitted Hazardous Materials and Use.
(a) Tenant has requested Landlord's consent to use the Hazardous
Materials listed below in its business at the Premises (the "Permitted Hazardous
Materials'). Subject to the conditions set forth herein, Landlord hereby
consents to the Use (hereinafter defined) of the Permitted Hazardous Materials.
Any Permitted Hazardous Materials on the Premises will be generated, used,
received, maintained, treated, stored, or disposed in a manner consistent with
good engineering practice and in compliance with all Environmental Requirements.
Permitted Hazardous Material (including maximum quantities):
(To be provided by Tenant on or before September 1, 1996)
The storage, uses or processes involving the Permitted
Hazardous Materials (the "Use") are described below.
Use [If limited to receiving and storage, so specify]:
(To be provided by Tenant on or before September 1, 1996)
2. No Current Investigation
Tenant represents and warrants that it is not currently subject to an
inquiry, regulatory investigation, enforcement order, or any other proceeding
regarding the generation, use, treatment, storage, or disposal of a Hazardous
Material.
3. Notice and Reporting
Tenant immediately shall notify Landlord in writing of any spill,
release, discharge, or disposal of any Hazardous Material in, on or under the
Premises or the Project handled or used by Tenant, its agents, employees,
contractors, or invitees. All reporting obligations imposed by Environmental
Requirements are strictly the responsibility of Tenant relating to hazardous
materials used or handled by Tenant, its agents, employees, contractors or
invitees.
Tenant shall supply to Landlord within 5 business days after Tenant
first receives or sends the same, copies of all claims, reports, complaints,
notices, warnings or asserted violations relating in any way to Tenant's use of
the Premises.
4. Indemnification.
Tenants indemnity obligation under the Lease with respect to azardous
Materials shall include indemnification for the liabilities, expenses and other
losses described therein as a result of the of the ues Hazardous Materials or
the breach of Tenant's obligations or representations set forth above. It is the
intent of this provision that Tenant be strictly liable to Landlord a result of
the use by Tenant, its agents, employees, contractors, or invitees of Hazardous
Materials without regard to the fault or negligence of Tenant, Landlord or any
third party.
5. Disposal Upon Lease Termination.
At the expiration or earlier termination of the Lease, Tenant, at its
sole cost and expense, shall: (i) remove and dispose off-site any drums,
containers, receptacles, structures, or tanks storing or containing Hazardous
Materials (or which have stored or contained Hazardous Materials) placed on
Premises by Tenant, its agents, employees, contractors, or invitees and the
contents thereof; (ii) remove, empty, and purge all underground and above ground
storage tank systems, including connected piping, of all vapors, liquids,
sludges and residues; and (iii) restore the Premises to its original condition.
Such activities shall be performed in compliance with all Environmental
Requirements and to the satisfaction of Landlord. Landlord's satisfaction with
such activities or the condition of the Premises does not waive, or release
Tenant from, any obligations hereunder.
<PAGE> 23
ADDENDUM 3
VACATION OF PREMISES
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED August 16,1996 , BETWEEN
SCI Limited Partnership-I
and
SteriGenics International
Tenant's vacating of the Premises shall not constitute an Event of
Default if, prior to vacating the Premises, Tenant has made arrangements
reasonably acceptable to Landlord to (a) insure that Tenant's insurance for the
Premises will not be voided or cancelled with respect to the Premises as a
result of such vacancy, (b) insure that the Premises are secured and not subject
to vandalism, and (c) insure that the Premises will be properly maintained after
such vacation. Tenant shall inspect the Premises at least once each month and
report monthly in writing to Landlord on the condition of the Premises
<PAGE> 24
ADDENDUM 4
INDEMNIFICATION BY LANDLORD
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED August 16, 1996, BETWEEN
SCI Limited Partnership - I
and
SteriGenics International, a California Corporation
Landlord convenants and agrees to indemnify and save Tenant, its
employees and agents harmless of and from any and all claims, costs, expenses
and liabilities, including, without limitation, attorney' fees, arising on
account of or by reason of claims by third parties for injuries or death to
persons or damages to property resulting from the negligence or willful
misconduct of Landlord or its agents, employees, or contractors, to the extend
not attributable to any negligence of Tenant, any assignee or subtenant of
Tenant, or their respective employees, agents, or contractors. If a claim under
the foregoing indemnity is made against the indemnity which the indemnitee
believes to be covered by an indemnitor's indemnification obligations hereunder,
the indemnitee shall promptly notify the indemnitor of the claim and, in such
notice shall offer to the indemnitor the opportunity to assume the defense of
the claim within 10 business days after receipt of the notice (with counsel
reasonably acceptable to the indemnitee). If the indemnitor timely elects to
assume the defense of the claim, the indemnitor shall have the right to settle
the claim on any terms it considers reasonable and without the indemnitee's
prior written consent, as long as the settlement shall not require the
indemnitee to render any performance or pay any consideration, and the
indemnitee shall not have the right to settle any such claim. If the indemnitor
fails timely to elect to assume the defense of the claim or fails to defend the
claim with diligence, then the indemnitee shall have the right to take over the
defense of the claim and to settle the claim on any Terms the indemnitee
considers reasonable. Any such settlement shall be valid as against the
indemnitor. If the indemnitor assumes the defense of a claim, the indemnitee may
employ its own counsel but such employment shall be at the sole expense of the
indemnitee. If any such claim arises out of the negligence of both Landlord and
Tenant, responsibility for such claim shall be allocated between Landlord and
Tenant based on their respective degrees of negligence. This indemnity does not
cover claims arising from the presence or release of Hazardous Materials.
<PAGE> 25
FIRST ADDENDUM TO LEASE
This FIRST ADDENDUM TO LEASE ("First Addendum") is dated for reference
purposes as of 3/27, 1997 and is made by and between SCI Limited Partnership-1,
a Delaware Limited Partnership ("Landlord"), and Sterigenics International, a
California Corporation ("Tenant") to be a part of that certain Lease dated
August 16, 1996, for the premises located at 2311 Lincoln Avenue, Hayward,
California. Landlord and Tenant hereby agree that the Lease is hereby modified
and supplemented as follows:
1. Base Rent: Per the Lease agreement, Landlord agreed to reduce the
base monthly rent $.01 per square foot per month for every unused dollar per
square foot of Tenant Improvement allowance. The actual Tenant Improvement costs
were $66,747 versus the $72,750 allowance. Therefore, commencing March 1, 1997,
the monthly base rent shall be adjusted to $13,273.
2. Effective Addendum: In the event of any inconsistency between this
First Addendum and the Lease, the terms of this First Addendum shall prevail.
LANDLORD: TENANT:
SCI Limited Partnership-I, a Sterigenics International, a
Delaware Limited Partnership California Corporation
By: /s/ NED K. ANDERSON By: /s/ JAMES F. CLOUSER
-------------------------------- ------------------------------
Print Name: Ned K. Anderson Print Name: James F. Clouser
Title: Senior Vice President Title: President & CEO
Date: 4/29/97 Date: 3/27/97
---------------------- ------------------
<PAGE> 1
EXHIBIT 10.62
LEASE AGREEMENT
THIS AGREEMENT, dated the 8th day of August, 1996.
BETWEEN RTI INC., a New York corporation having a mailing address c/o
Theo Muller, 20 Peach Hill Road, Darien, Connecticut 06820
("Landlord");
AND STERIGENICS EAST CORPORATION, a wholly owned subsidiary of
STERIGENICS INTERNATIONAL, a California corporation having a
place of business at 4020 Clipper Court, Fremont, California
94538-6540 (" Tenant");
CONTENTS
<TABLE>
<CAPTION>
Section Topic Page
------- ------ ----
<S> <C> <C>
1 Basic Terms 1
2 Leasing Provisions 3
3 Rent Provisions 6
4 Tenant and Landlord Work Provisions 9
5 Insurance Provisions 14
6 Condemnation Provisions 17
7 Default and Remedies 18
8 Environmental Provisions 21
9 Miscellaneous 23
10 Defined Terms: Interpretations 26
</TABLE>
W I T N E S S E T H:
1. BASIC TERMS. The following terms are the basic business terms and
conditions of this lease. The capitalized terms used in this lease shall have
the meanings set forth below in this and the following sections of this lease,
including section 10. See section 10 for definitions and rules of
interpretation. The provisions of this section 1 are subject to the more
detailed, specific provisions contained elsewhere in this lease.
1.1 Premises. That certain tract of land of approximately 62 acres and
the improvements located thereon in the Township of Rockaway, County of Morris,
State of New Jersey, as more particularly described in the attached Exhibit A.
The Premises includes all trade and other fixtures located at the Premises.
<PAGE> 2
1.2 Term. The Term of this lease is for a period of 6 years (plus any
fractional month at the beginning of the Term). The "Commencement Date" is
August 8, 1996, and the "Termination Date" is August 31, 2002, or the last day
of be month in which the 6th anniversary of the Commencement Date occurs, or
upon such earlier date as may be provided in this lease whether following an
extension or renewal hereof or otherwise. The lease is subject to extension as
provided in the annexed extension rider for one (1) five (5) year term.
1.3 Base Rent. The Annual Base Rent for the Term is $77,386.00 per year,
payable in monthly installments of $6,486.00. Base Rent shall be absolutely net
and Tenant shall be responsible for all normal and extraordinary costs arising
out of or in connection with the use and operation of the Premises.
1.4 Permitted Use. Tenant may use the Premises for contract irradiation
services and other related businesses, and for any other lawfully permitted use.
1.5 Security Deposit. None.
1.6 Landlord Notices Address:
RTI Inc.
c/o Theo Muller
20 Peach Hill Road
Darien, CT 06820
Telecopier No.: (203) 655-0381
With Courtesy Copy to Counsel:
Warshaw Burstein Cohen Schlesinger Kuh, LLP
555 Fifth Avenue
New York, New York 10017
Attention: Arthur A. Katz
Telecopier No.: (212) 972-9150
1.7 Tenant Notices Address:
Sterigenics International
4020 Clipper Court
Fremont, CA 94538-6540
Attention: James F. Clouser
Telecopier No.: (510)770-9000
-2-
<PAGE> 3
With Courtesy Copy to Counsel:
Gunderson, Dettmer, Stough, Villeneuve, Franklin & Hachigian
600 Hansen Way
Palo Alto, California 94304
Attention: Carla S. Newell
Telecopier No. (415) 843-0314
2. LEASING PROVISIONS.
2.1 Leasing. For and in consideration of the Rents, covenants and
agreements hereinafter mentioned, reserved and contained, to be paid, kept and
performed by Tenant, Landlord does hereby demise and lease unto Tenant, and
Tenant does hereby lease and hire from Landlord, the Premises more particularly
described on Exhibit A annexed hereto subject to the matters disclosed by
Exhibit 6.5(a) of the Agreement ("Title Report") and the ALTA survey
contemplated by section 6.5 of the Agreement ("Survey"). Tenant shall be
responsible for obtaining any certificate of occupancy or other permits,
agreements and approvals in connection with its use or occupancy of the
Premises. From and after the date hereof, Tenant shall have the right and
obligation to maintain and care of Premises in order to preserve, maintain and
prevent any waste or deterioration thereof The parties shall not record this
lease, but at the expense of Tenant shall cause a memorandum of this lease to be
recorded in the form of Exhibit 2.1 hereto.
2.2 Subordination. Tenant's rights under this lease shall have the
priority set forth in the Title Report. Landlord shall discharge (a) exceptions
5(a) through and including 5(f) in Schedule B Section 2 of the Title Report,
along with any encumbrances not disclosed in the Title Report, on or before one
year from the date hereof, and (b) any lien under the Spill Act, any lien,
restriction or encumbrance in connection with the Administrative Consent Order
dated December 7, 1992, as amended, and any listing as a "Superfund Site" under
CERCLA prior to any closing pursuant to section 9.7 hereof
2.3 Term. The Term of this lease shall commence on the Commencement Date
and end on the Termination Date without the necessity of any notice from either
Landlord or Tenant to terminate the same. Tenant hereby, waives notice to vacate
the Premises and agrees that Landlord shall be entitled to the benefit of all
provisions of law respecting the summary recovery of possession from a tenant
holding over to the same extent as if statutory notice had been given. For the
period of 12 months prior to the expiration of the Term, Landlord shall have the
right to show the Premises and all parts thereof to prospective tenants and
purchasers during normal business hours, provided Landlord shall comply with
Tenant's security requirements, not unreasonably interfere with Tenants business
and furnish at least 24 hours advance written notice to Tenant before showing
the Premises.
2.4 Use. Tenant shall use the Premises solely for the Permitted Use and
for no other purpose whatsoever. Tenant shall not use the Premises or permit
anything to be done in or
-3-
<PAGE> 4
about the Premises which will in any way materially conflict with any law,
statute, ordinance or governmental rule or regulation now in force or which may
hereafter be enacted or promulgated.
2.5 Tenant's Operation.
2.5.1 General Conduct. In regard to its use and occupancy of the
Premises, Tenant will at its expense: (a) comply in all material
respects with all laws, ordinances, rules and regulations of
governmental authorities and all recommendations of the Fire
Underwriters Rating Bureau and insurers now or hereafter in effect and,
in no event fail to comply with any laws which impose any civil or
criminal liability on Landlord; (b) conduct its business in all respects
in a dignified manner in accordance with high standards of operation
consistent with the quality of operation of similar properties within
Northern New Jersey; (c) not use or permit the use of any portion of the
Premises for any unlawful purpose; and (d) not place a load upon any
floor which exceeds the floor load which the floor was; designed to
carry or which is allowed by law.
2.5.2 Utility Services. Tenant shall, at its own cost and
expense, arrange for or provide utility connections and service to the
Premises and shall pay all utility meter, connection and service charges
allocable to the Term, including those for gas, sewer, electricity,
water and standby sprinkler and any deposits required by utility
suppliers. Tenant's use of electric energy in the Premises shall not at
any time exceed the capacity of any of the electrical conductors and
equipment serving the Premises. It is the intention of the parties that
Tenant will pay in full the costs and charges of all utilities and
services directly or indirectly charged or billed hi connection with the
Premises during the Term so that the Base Rent provided herein shall be
absolutely net to Landlord, except as expressly provided herein or in
the Agreement.
2.6 Right of Entry.
2.6.1 Inspection. Landlord, its employees and agents shall have
the right to enter the Premises at all reasonable times during normal
business hours upon at least 24 hours advance written notice, and at any
time without notice in case of an emergency, for the purpose of
examining or inspecting the same, showing the same to prospective
mortgagees, making such alterations, repairs, improvements or additions
to the Premises as Landlord may deem necessary or desirable.
2.6.2 Remediation. Landlord and its agents, contractors and
subcontractors shall be entitled to enter the Premises, from time to
time for the purpose of effecting any remediation required to comply
with the Administrative Consent Order or other Remedial Orders. Landlord
shall provide reasonable advance notice to Tenant each time it or any of
its agents, contractors or sub-contractors proposes to enter the
Premises to conduct remediation activities. Landlord and Tenant shall
cooperate in the scheduling of all remediation activities to avoid undue
interference with access by Tenant to the Premises or disruption to
Tenant's business. If any remediation activities are expected to
substantially interfere with all access to the Premises or prevent
Tenant from conducting
-4-
<PAGE> 5
substantially all of its business for a period in excess of seven
consecutive days in any calendar year, Landlord shall provide not less
than 90 days advance written notice to Tenant. If any interference or
disruption exceeds seven consecutive days, Landlord shall be liable to
Tenant for all damages suffered after such seven consecutive day period
in consequence of the disruption.
2.7 Sublease and Assignment. Tenant may not sublet all or any part of
the Premises or assign its interest in this lease without Landlord's consent.
Upon Tenant's notice to Landlord of any such proposed subletting or assignment,
Landlord shall not unreasonably withhold, delay or condition its consent to such
sublease or assignment if Tenant's business will continue to be conducted at the
Premises after such sublease or assignment. If this lease be assigned or if the
Premises or any part thereof be sublet to or occupied by anybody other than
Tenant, Landlord may collect rent from the assignee, sublessee or occupant and
apply the net amount collected to the Rent payable hereunder. Notwithstanding
any such assignment or subletting, the Tenant named herein shall remain
primarily liable for the payment of Rent reserved hereunder and for the
performance of all obligations imposed upon Tenant by this lease with respect to
the Term.
2.8 Surrender. Tenant will surrender possession of the Premises and
remove all goods and chattels and other personal property in the possession of
Tenant, by whomsoever owned, at the end of the Term or at such other time as
Landlord may be entitled to re-enter and take possession of the Premises
pursuant to any provision of this lease, and shall leave the Premises in as good
order and condition as they were at the beginning of the Term, ordinary wear and
tear and damage by the elements and by casualty excepted. In default of such
surrender of possession and removal of goods and chattels, Tenant will pay to
Landlord 150% of the monthly installments of Annual Base Rent together with any
Additional Rent reserved by the terms of this lease for such period as Tenant
holds over in possession of the Premises. If Tenant fails to remove all goods
and chattels and other personal property, by whomsoever owned, at the end of the
Term or at such other time as Landlord may be entitled to re-enter and take
possession of the Premises pursuant to any provision of this lease, Tenant
hereby irrevocably makes, constitutes and appoints Landlord as the agent and
attorney-in-fact of Tenant to remove all goods and chattels and other personal
property, by whomsoever owned, from the Premises to a place of storage, such
moving and storage to be at the sole cost and expense of Tenant. Tenant
covenants and agrees to pay to Landlord all reasonable expenses which Landlord
incurs for the removal and storage of all such goods and chattels. Alternatively
or additionally, at the option of Landlord, Tenant shall be deemed to have
abandoned any or all of such goods, chattels and other personal property and all
or any portion thereof may be disposed of at Tenant's sole cost and expense, in
any manner selected by Landlord. No act or thing done by Landlord shall be
deemed an acceptance of the surrender of the Premises unless Landlord shall
execute a written release of Tenant. Tenant's liability hereunder shall not be
terminated by the execution by Landlord of a new lease of the Premises.
2.9 Quiet Enjoyment. Landlord covenants that Tenant, on paying the Rent
and performing its obligations under this lease, shall and may peaceably and
quietly have, hold and enjoy the Premises for the Term, subject to the
provisions of this lease.
-5-
<PAGE> 6
2.10 Performance of Tenant's Obligations. Tenant covenants and agrees to
perform all obligations herein expressed on its part to be performed, and to
promptly, upon receipt of written notice specifying the action desired by
Landlord in connection with any such obligation (excluding the covenant to pay
Rent which shall be complied with without prior notice), comply with such
notice. If Tenant shall not commence and proceed diligently to comply with such
notice to the reasonable satisfaction of Landlord within 30 days after delivery
thereof, except in the event of an emergency, in which event compliance shall
commence forthwith, Landlord may (but shall have no obligation to do so) enter
upon the Premises and do the things specified in said notice. Landlord shall
have no liability to Tenant for any loss or damages resulting in any way from
such action by Landlord, and Tenant agrees to pay promptly upon demand any
reasonable expense incurred by Landlord in taking such action.
3. RENT PROVISIONS.
3.1 Rent. Tenant covenants and agrees to pay to Landlord, as rental for
the Premises, the Base Rent and any and all Additional Rent not otherwise
payable directly to third parties in accordance with the various sections of
this lease. Annual Base Rent shall be payable in equal monthly installments in
advance on the Commencement Date and on the first day of each calendar month
thereafter during the Term. Additional Rent payable by Tenant shall include the
following charges allocable to the Term:
(a) all Taxes and all utility charges, costs and fees; and
(b) all premiums on insurance policies required to be
maintained by Tenant on, or in connection with the use
off, the Premises pursuant to this lease; and
(c) all costs and expenses of maintaining, repairing and
operating the Premises; and
(d) except as expressly provided herein or in the Agreement,
all other expenses and charges which, from the
Commencement Date until the end of the Term, shall arise,
be levied, assessed or imposed upon or against the
Premises as an incident of the ownership thereof and which
are the kind customarily paid by owners of land and
buildings by reason of such ownership, including the full
cost of complying with all laws and regulations, and the
cost of all repairs required to maintain the Premises in
good repair and condition and to comply with all
applicable provisions of law, it being the intention
hereof that, from the date hereof until the end of the
Term of this lease, Tenant shall be chargeable with and
shall pay all such above sums which an owner of the
Premises would pay.
3.2 Apportionment of Taxes and Other Additional Rent. All Taxes, sewer
and water charges and other governmental charges imposed against or levied upon
the Premises shall
-6-
<PAGE> 7
be apportioned as between Landlord and Tenant at the Commencement Date and the
Termination Date. If single Tax bills attributable to a larger lot of which the
Premises are only a part are submitted during the Term by the municipal or other
authorities having jurisdiction, Landlord shall remit payments to such
authorities and Tenant shall be responsible for (a) that part of the land
portion of such Tax bills determined by multiplying such land portion by a
fraction, the numerator being the total square footage of the land comprising
the Premises and the denominator being the total square footage of the land
comprising the entire lot, plus (b) the amount of Taxes attributable on such Tax
bills to the buildings and improvements located within the entire lot multiplied
by the percentage ratio of building floor space in the Premises to the total
building floor space in the entire lot, which ratio the parties agree for the
purpose of this lease is 100% ("Tenant's Percentage Share"), plus (c) Tenant's
Percentage Share of any bills for general or special assessments. In the event
of a dispute regarding the amount of Taxes attributable to buildings and
improvements, the parties agree that the attribution contained in the records of
the municipal tax assessor shall control. The allocation of Taxes hereunder
shall be done on a tax lot by tax lot basis. Each of the items payable as
Additional Rent to third persons shall be paid by Tenant on or before the date
when each becomes due. If the Landlord collects governmental charges hereunder,
Landlord shall pay the charges to the applicable entity and, at Tenant's
request, it shall provide Tenant with proof of payment to the taxing or other
governmental authority as the case may be. Landlord agrees to elect to pay any
future assessments which may be levied against the Premises in the maximum
number of installments permitted by law. Tenant shall furnish to Landlord,
within 30 days after the date upon which any charge is payable by Tenant as
hereinabove provided, copies of official receipts of the appropriate taxing or
governmental authority, or other proofs satisfactory to Landlord, evidencing the
payment of any Taxes or such other payment obligations of Tenant hereunder. If
Tenant shall fail to make any payment or do any act required of it by any
provision of this lease, Landlord may make such payment or do such act and the
amount of such payment, or the cost of doing such act, together with interest
thereon at an annual rate equal to the Default Rate shall be Additional Rent
payable by Tenant upon demand by Landlord. The making of any such payment or the
doing of any such act by Landlord shall not constitute a waiver by Landlord of
any right or remedy provided by this lease upon Tenant's default in the making
of such payment or the doing of such act. Tenant shall have the right to contest
or review by appropriate proceedings or in any other manner permitted by law, at
Tenant's sole cost and expense, in Tenant's name and/or in Landlord's name
(whenever necessary), any Taxes (including the lowering of any assessed
valuation) or any legal requirements relating to the Premises, and Landlord
shall, without expense or charge to it, cooperate with Tenant and execute any
documents or pleadings required for such purposes. If required by Landlord,
Tenant shall furnish a surety company bond or other security reasonably
satisfactory to Landlord, against any liens by reason of such contest. The
aforesaid contest by Tenant may include appeals from any judgments, decrees or
orders until a final, nonappealable determination shall be made by a court or
governmental department or authority having jurisdiction in the matter.
3.3 Setoff. Tenant covenants to pay all Rent when due and payable,
without any setoff, recoupment, deduction or demand whatsoever, except as
hereinafter provided. Any monies paid or expenses incurred by Landlord to
correct defaults in any of Tenant's obligations hereunder shall be payable to
Landlord as Additional Rent. Any Additional Rent payable to Landlord as provided
for in this lease shall become due with the next installment of Annual Base
-7-
<PAGE> 8
Rent due after Tenant's receipt of notice of the Additional Rent from Landlord,
or on demand if so stated in Landlord's notice. Rent shall be paid or delivered
to Landlord at Landlord's Notice Address unless otherwise directed by Landlord.
Neither the receipt and acceptance by Landlord of any Annual Base Rent or
Additional Rent with knowledge of Tenant's default under any covenant or
condition of this lease, nor the acceptance of any such payment made subject to
conditions imposed by Tenant, whether under a restrictive endorsement, tendered
as payment in full or otherwise, shall be deemed a waiver of such default.
Tenant has provided to NJDEP one or more irrevocable letters of credit,
or any substitute or replacement thereof, in the aggregate amount of $500,000
("Tenant's L/C") to secure certain obligations of Landlord in connection with an
Administrative Consent Order dated December 7, 1992, as amended ("In the Matter
of RTI Inc. Site and RTI Inc. and THIOKOL CORPORATION") ("Landlord's
Environmental Obligations"). Tenant agrees to maintain Tenant's L/C in the
maximum aggregate amount of $500,000, subject to reductions permitted by the
NJDEP and reductions as contemplated by this section 3.3. Landlord agrees to use
Us reasonable efforts and to diligently proceed with and complete Landlord's
Environmental Obligations and to apply from time to time to the NJDEP for
permission to reduce the aggregate amount of Tenant's L/C. Tenant obligation to
maintain Tenant's L/C shall be reduced by $40,000 (per year) commencing on
August 1, 1998 and on August 1 of each year of the lease Term thereafter. The
parties agree to negotiate in good faith with respect to their obligations to
maintain letters of credit during the lease extension, if any, PROVIDED,
HOWEVER, that if the parties are unable to agree, Landlord and Tenant shall be
obligated to maintain letters of credit in the amount of Tenant's L/C and
Landlord's L/C then in effect. Simultaneously with the reduction of $40,000 (per
year) in Tenant's L/C, Landlord agrees that on August 1, 1998 and on August 1 of
each year of the lease Term thereafter, Landlord shall provide to the NJDEP one
or more irrevocable letters of credit in the amount of $40,000 (per year) in
form and substance satisfactory to the NJDEP, PROVIDED, HOWEVER, that if the
NJDEP reduces the aggregate amount of Tenant's L/C required to secure Landlord's
Environmental Obligations, Landlord's L/C shall be equal to an amount, not to
exceed $40,000 (per year), which when added to Tenant's L/C will fully secure
Landlord's Environmental obligations ("Landlord's L/C"). Upon Landlord's default
under this section 3.3, Tenant shall have a right to offset against any Base
Rent and Additional Rent then or thereafter coming due under this lease the
amount of any outstanding Tenant's L/C or Landlord's Substitute L/C (as
hereafter defined) at the time of Landlord's default, up to the amount drawn
upon by the NJDEP. In the event of Landlord's default through Landlord's failure
to provide Landlord's L/C as required in this section 3.3, Tenant shall
undertake to perform Landlord's L/C obligation, in any manner and at the sole
discretion of Tenant ("Landlord's Substitute L/C"), and set off against Base
Rent and Additional Rent the reasonable costs, including attorney's fees, if
any, of undertaking to provide Landlord's Substitute L/C, as well as the full
amount of Landlord's Substitute LIC as calculated hereunder, whether or not the
NJDEP has drawn upon Landlord's Substitute L/C. If Landlord provides Landlord's
L/C subsequent to Landlord's default though its failure to provide Landlord's
L/C and Tenant providing Landlord's Substitute L/C, Landlord shall have the
right to regain the amount offset by Tenant, minus the reasonable costs incurred
by Tenant in providing Landlord's Substitute L/C, PROVIDED, HOWEVER, that no
provision in this section 3.3 shall be construed to require Tenant to return to
Landlord any offset by Tenant for any amount drawn upon by the NJDEP (for
example, if on
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August 1, 1998, the NJDEP has not reduced the amount of Tenant's L/C from
$500,000, and Landlord fails to provide Landlord's L/C, instead of replacing its
$500,000 Tenant's L/C with one $460,000 letter of credit and one $40,000 letter
of credit, Tenant may opt to retain it's $500,000 Tenant's L/C, with $40,000 of
Tenant's LIC becoming Landlord's Substitute L/C. Tenant may then set off $40,000
from Base Rent and Additional Rent. If Landlord later fulfills its obligation to
provide Landlord's L/C, Landlord is entitled to receive the amount set off from
Landlord's Substitute L/C, minus any costs, including attorney fees, and minus
any amount drawn upon any letter of credit in place). Landlord's default under
section 3.3 shall mean and consist of (a) any draw upon Tenant's L/C, (b)
Landlord's failure to comply with Landlord's Environmental Obligations,
reflected by a written notice from the NJDEP, and Landlord's failure to
diligently contest in good faith or comply with Landlord's Environmental
Obligations, or (c) Landlord's failure to provide Landlord's L/C hereunder, TIME
BEING OF THE ESSENCE. If the NJDEP refuses to accept any Landlord's L/C in
partial substitution for Tenant's L/C, then Landlord shall be obligated to
provide cash collateral or make other arrangements satisfactory to NJDEP so that
NJDEP does permit the annual reduction in the aggregate amount of Tenant's L/C
contemplated by this section 3.3. Landlord's obligations under this section 3.3
shall continue through any lease extension. In the event of a default under
section 3.3(b) above, Tenant's setoff shall be limited to a period of six (6)
months of Base Rent and Additional Rent, after which time Tenant's tight to set
off under section 3.3(b) shall cease, PROVIDED, HOWEVER, that a default under
any other provision of this section 33 has not occurred. On the date twelve (12)
months after Tenant commences setoff under section 3.3(b), if Landlord is not
otherwise in default under section 3.3(a) or section 3.3(c), and no additional
event of default under section 3.3(b) has occurred, Tenant shall return to
Landlord the amount setoff under section 3.3(b).
If the lease Term terminates on August 31, 2002, the Landlord shall
provide a letter of credit or such other security as may be required by the
NJDEP, in the amount of the difference between (a) $200,000 and (b) the amount
of the Landlord's LIC in existence on August 31, 2002, which amount shall be
provided in two (2) equal annual installment commencing on August 31, 2002. Upon
the exercise of Landlord's. Put Option as set forth in section 9.7 or upon the
exercise of Tenant's Purchase Option as set forth in section 9.6, Landlord shall
be released from its obligation to provide Landlord's L/C.
3.4 Late Charges; Interest on Late Payments. Without limiting any other
right of Landlord hereunder, there shall be due and owing from Tenant a late
charge and an interest charge on any Annual Base Rent and Additional Rent
provided for hereunder which is not paid by Tenant when due. The late charge
shall be equal to 3% of any amount not paid when due and the interest charge
shall be calculated at the Default Rate, each such calculation to be made from
the date when due, Both charges shall be payable on demand of Landlord with
respect to any Annual Base Rent. not received by the 10th day of each month and
with respect to any other Additional Rent not received within 10 days after its
due date.
4. TENANT AND LANDLORD WORK PROVISIONS.
4.1 Landlord's Work Landlord shall deliver the Premises on the
Commencement Date in the condition contemplated by the Agreement.
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4.2 Tenant Work and Repairs. Tenant shall keep and maintain, or care to
be kept and maintained, the buildings and other improvements now or in the
future constructed on the Premises in good repair and condition. To fulfill the
foregoing obligation and its other covenants under this lease, including Section
4.8, Tenant shall make or cause to be made all reasonably required repairs and
replacements of every kind and character, interior and exterior, structural and
nonstructural, ordinary and extraordinary, including the roof, walls, plumbing,
heating, ventilation, air conditioning, electrical equipment and other systems
on or supplying the Premises, fights and lighting, all glass including plate
glass, stanchions and fences, roadways (other than public streets), sidewalks,
parking lots and other paved areas, and such other public areas the maintenance
and repair of which public areas are the responsibility of the property owner by
law. Tenant will not call upon Landlord, during the Term of this lease, for the
making of any repairs, replacements, alterations or other work whatsoever. All
Tenant's Work, shall (a) be performed in a good and workmanlike manner, and (b)
be at least substantially equal in quality and usefulness to the original work.
4.3 No Liens. If any mechanics' or construction lien shall at any time
be filed against Landlord's or Tenant's interest in any part of the Premises by
reason of work, labor, services or materials performed directly or indirectly
by, through or under or furnished directly or indirectly to Tenant or to anyone
holding the Premises through or under Tenant, Tenant shall forthwith cause the
same to be discharged of record or bonded to the reasonable satisfaction of
Landlord. If Tenant shall fail to cause the lien to be so discharged or bonded
after being notified of the filing thereof, then in addition to any of its other
rights or remedies Landlord may discharge the same by paying the amount claimed
to be due, and the amount so paid by Landlord together with interest thereon at
the Default Rate and all costs and expenses, including reasonable attorneys'
fees, incurred by Landlord in procuring the discharge of such lien shall be due
and payable by Tenant to Landlord as Additional Rent upon demand of Landlord.
Landlord's consent to or acquiescence in any Tenant's Work shall not constitute
an approval by Landlord of Tenant's contracts for such work.
4.4 Trade Fixtures. All trade fixtures and apparatus (as distinguished
from leasehold improvements) owned by the Tenant and installed in the Premises
shall remain the property of Tenant and shall be removable at the expiration of
the Term, provided Tenant repairs and restores any damage to the Premises
relating to such installation or removal. In no event shall Tenant be
responsible for restoration of Tenant's Work or for repairing floor, wall or
ceiling finishes.
4.5 Tenant Alterations.
4.5.1 General. The Tenant shall have the right to make
improvements, alterations and additions to the Premises so long as it
gives Landlord at least 30 days prior written notice thereof and obtains
Landlord's consent and otherwise complies with this section 4.5. No
consent by Landlord shall be required if the cost of the work is less
than $175,000 in any instance or series of related instances. The cost
of such improvements, alterations or additions shall be the sole
responsibility of the Tenant. Tenant may, at
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cost and expense, paint or decorate any part of the interior of the
Premises. Any improvements, alterations or additions to the Premises
shall upon their completion become part of the Premises and the property
of the Landlord and shall be surrendered with the Premises upon
termination of this lease without any compensation being due therefor by
Landlord. However, Tenant shall be entitled to remove any trade fixtures
or other alterations or additions, so long as it repairs any damage to
the improvements on the termination of this lease. If Tenant plans to
make any improvements, alterations or additions to the Premises that are
not consistent with the present use or reasonable continuing use of the
Premises and which is a Permitted Use, Landlord may, prior to the
commencement of an improvement, alteration or addition, give notice to
Tenant that Landlord may require Tenant to remove any such improvement,
alteration or addition at the end of the Term and require Tenant to
restore the Premises to its condition immediately before the
improvement, alteration or addition was made, and require Tenant to
repair any damages such improvement, alteration, or addition may have
caused. Landlord's consent where required in this section 4.5 shall not
be unreasonably withheld, delayed or conditioned.
4.5.2 General Standards. Whenever Tenant makes any alterations
or repairs or does any other Tenant's Work in, to, on or about the
Premises as provided for in this lease:
(a) Tenant shall do the work in a good and workmanlike
manner and in compliance with all applicable laws, ordinances and codes,
and all applicable governmental rules, regulations and requirements, and
in accordance with the standards, if any, of the Board of Fire
Underwriters or other organization exercising the functions of a board
of fire underwriters whose jurisdiction includes the Premises;
(b) Tenant will pay for all work promptly and in a manner
consistent with good business practices and Tenant will, prior to the
commencement thereof, provide Landlord with reasonable assurances of
Tenant's ability to pay for Tenant's work and in the absence of such
proof Tenant shall provide payment and performance bonds in form and
substance reasonably satisfactory to Landlord covering such work;
(c) before commencing any work Tenant shall notify
Landlord of its intention to do so, and shall (i) obtain, provide
Landlord with copies of all permits and authorizations therefor that may
be required by law for doing the work; and (ii) execute, acknowledge and
deliver to Landlord in a form reasonably approved by Landlord an
agreement under which Tenant shall indemnify Landlord against any claims
arising from the work, including the removal of any lien filed against
the Premises, or Landlord's or Tenant's interest therein, or the threat
or notice of any claim, as a result of such work;
(d) the work shall be commenced as promptly as is
practicable under then existing circumstances and once commenced shall
be pursued diligently to
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<PAGE> 12
completion, subject to delays arising out of causes beyond the
reasonable control of Tenant, and upon completion Tenant shall deliver
to Landlord a copy of "as built" plans;
(e) the casualty and comprehensive general liability
insurance provided for in section 5 shall be extended, if necessary, to
apply to the work during the course of construction and after
completion, and a certificate naming Landlord as additional insured
shall be provided to Landlord;
(f) Tenant shall carry or cause its contractors, if any,
to carry worker's compensation insurance as required by law in
connection with the work and provide certificates thereof to Landlord
prior to the commencement of any work;
(g) Tenant shall at all times maintain in full force and
effect all permits and authorization required for such work and obtain
an official final certificate of occupancy or amended certificate of
occupancy upon completion of the work in each instance if, under local
practice, such certificates are issued by a governmental department or
officer having jurisdiction; and
(h) thereafter during the Term, Tenant shall bear the
entire risk of loss, repair, replacement and compliance with law
responsibilities for such alterations.
4.6 Casualty Loss. If any building or any other improvement on the
Premises or any part thereof shall be damaged or destroyed by fire, explosion,
lightning, vandalism or by any other casualty or cause ("Casualty") Tenant shall
(a) give prompt notice thereof to Landlord and (b) at Tenant' s own cost and
expense, and whether or not insurance proceeds shall be sufficient for the
purpose, cause to be repaired, restored, replaced and/or rebuilt such building
or other improvement to substantially the same condition and character as
existed immediately prior to the Casualty; provided, however, that Tenant may
make such changes as it may elect in conformance with and subject to the
provisions of this lease, provided the building shall, in the reasonable opinion
of Landlord after the completion of such changes, have substantially the same
commercial utility and value as it had prior to the Casualty. Such restoration,
repair replacement rebuilding or alteration shall be commenced promptly and
prosecuted with reasonable diligence. All insurance proceeds payable on account
of any such Casualty, less the actual cost, fees and expenses, if any, incurred
in connection with adjustment of the loss ("Net Insurance Proceeds") shall be
payable to a bank, trust company or other entity as shall be designated by
Landlord, to hold as trustee (the "Insurance Trustee") for disposition
hereunder. Provided that Tenant complies with the requirements of section 4.6(a)
and (b), Tenant shall have the right to adjust all losses, provided that, with
the respect to any losses exceeding $175,000, the Landlord's consent shall be
obtained. All Net Insurance Proceeds shall be applied to the payment of the cost
of the demolition, restoration, repair, replacement, rebuilding or alteration,
including the costs of temporary repairs or for the protection of property
pending the completion of permanent restoration, repairs, replacements,
rebuilding or alterations (all of which temporary and permanent repairs,
replacement, rebuilding or alterations are hereinafter collectively referred to
as "Restoration"), and shall be paid out from time to time as Restoration
progresses upon the written request of Tenant which shall be accompanied by the
following:
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(a) A certificate signed by Tenant, dated not more than 30 days
prior to such request, and if the Restoration cost is expected to exceed
$175,000, signed by a licensed architect, setting forth the following:
(i) That the sum then requested either has been paid by
Tenant or is justly due to contractors, subcontractors,
materialmen, engineers, architects or other persons who have
rendered services or furnished materials for the Restoration
therein specified, the names of such persons, a brief description
of such services and materials, the several amounts so paid or
due to each of said persons in respect thereof, that no part of
such expenditures has been made the basis, in any previous or
then pending request, for the withdrawal of insurance money or
has been made out of the proceeds of insurance received by
Tenant, and that the sum then requested does not exceed the value
of the services and materials described in the certificate.
Tenant shall, from time to time, upon request provide proof of
payment of all sums previously requisitioned by Tenant;
(ii) That except for the amount, if any, stated pursuant
to the foregoing clause (a) (i) in such certificate to be due for
services or materials, there is no outstanding indebtedness known
to the persons signing such certificate, after due inquiry, which
is then due for labor, wages, materials, supplies or services in
connection with such Restoration which, if unpaid, might become
the basis of a vendor's, mechanic's, laborer's, contractor's or
materialman's statutory or similar construction lien upon such
Restoration, the Premises or any part thereof or upon Landlord's
or Tenant's interest therein; and
(iii) That the cost, as estimated by the persons signing
such certificate, of the Restoration required to be done
subsequent to the date of such certificate in order to complete
the same, is not expected to exceed the insurance money; plus any
amount which either has been deposited by Tenant to defray such
cost and remaining in the hands of the Insurance Trustee after
payment of the sum requested in such certificate, plus the
unexpended or undisbursed portion of any amount which has been
committed in writing to Tenant by a third party lender for
purposes of Restoration. Tenant will provide Landlord with
reasonable assurances of Tenant's ability to pay for Tenant's
work and in the absence of such proof Tenant shall provide
payment and performance bonds in form and substance reasonably
satisfactory to Landlord covering such work
(b) Evidence reasonably satisfactory to Landlord to the effect
that there has not been filed with respect to the Landlord's interest in
the Premises or any part thereof any construction, vendor's, mechanic's,
laborer's, materialman's, contractor's or other lien, or any notice
thereof, which has not been discharged of record or bonded, except such
as will be discharged by or concurrently with the payment of the amount
then requested. Upon compliance with the foregoing provisions of this
section, the Insurance Trustee shall, out of such remaining Net
Insurance Proceeds, pay or case to be paid to
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Tenant or the persons named in such certificate the respective amounts
stated therein to have been paid by Tenant or to be due to such other
persons, as the case may be. If the Net Insurance Proceeds at the time
held by the Insurance Trustee shall be insufficient to pay the entire
cost of Restoration, Tenant will pay the deficiency or provide a
lender's commitment to fund the deficiency as needed. Upon receipt by
Landlord of satisfactory evidence required by clauses (a) and (b) of
this section that the Restoration has been completed and paid for in
full, that all requirements of this lease relating to the Restoration
have been complied with and that there are no liens of the character
referred to herein, any balance of the Net Insurance Proceeds at the
time held by the Insurance Trustee shall first be paid to Tenant to the
extent of amounts deposited by Tenant pursuant to clause (a)(iii) above,
with any balance then paid to Landlord.
4.7 No Abatement of Rent. No destruction of or damage to the Premises or
any part thereof by fire or any other casualty shall permit Tenant to surrender
this lease or shall relieve Tenant from its obligations to pay all Base Rent and
Additional Rent under this lease or from any of its other obligations under this
lease. Tenant waives any rights now or hereafter conferred upon it by statute or
otherwise to quit or surrender this lease or the Premises or any part thereof,
or to any suspension, diminution, abatement or reduction of Rent on account of
any such destruction or damage. Each party expressly waives any rights now or
hereafter conferred upon it pursuant to N.J.S.A. 46:8-6, 46:8-7, or otherwise to
quit or surrender this lease or the Premises or any part thereof, or to
terminate this lease, or to any suspension, diminution, abatement or reduction
of rent, on account of any such damage or destruction. If there is a Casualty
during the last two years of the Term, the Tenant may terminate this lease,
provided that Tenant's notice of termination shall be accompanied by an
assignment of the proceeds of the casualty insurance required by section 5.1
relating to the Premises.
4.8 Compliance with Laws. Tenant shall suffer no waste or injury in or
about the Premises and shall comply with or cause to be complied with all laws
applicable to the use and occupancy of the land, buildings and other
improvements upon the Premises, including the making of any structural or other
repairs or alterations that may be required in order to comply with said laws.
In addition, Tenant shall effect or cause to be effected the correction,
prevention and abatement of nuisances, violations or other grievances in, upon
or connected with the Premises, including the land, buildings and other
improvements thereon, and shall also promptly comply with or cause to be
complied with all rules, orders, requirements and regulations of the Board of
Fire Underwriters or persons exercising such powers and all insurers of the
Premises.
5. INSURANCE PROVISIONS.
5.1 Casualty Insurance. Tenant shall keep the buildings and other
insurable improvements on the Premises insured under permanent policies and/or
"builder's risk" policies, as the case may be, against loss or damage by fire
and risks embraced within "all risk coverage" available in the locality where
the Premises are located, in an amount sufficient to prevent Landlord or Tenant
from being a coinsurer under the applicable policy, but in any event in an
amount not less than 100% of the full insurance value. The term "full insurance
value" as used herein means the actual replacement cost (excluding foundation,
footings and excavation costs) as
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defined in the standard "replacement cost" provision or endorsement. Tenant
shall also maintain in effect boiler explosion and casualty insurance and plate
glass insurance in amounts reasonably acceptable to the Landlord and rental
insurance covering at least one year's Rent.
5.2 Liability Insurance. Tenant shall obtain and maintain comprehensive
general liability insurance with coverage of not less than $1,000,000.00
combined single limit, for each occurrence and in the aggregate, for bodily
injury to or death of persons, and for property damage. Tenant shall also obtain
and maintain independent contractors and blanket contractual liability
endorsements, as well as such other and additional insurance and endorsements as
reasonably prudent owners of comparable facilities generally maintain and as
reasonably requested from time to time by Landlord.
5.3 Additional Insurance. Landlord and Tenant shall, at the request of
Landlord, consult with each other as to the scope of coverage and adequacy of
the policy limits of the insurance required by the provisions of this section 5
from time to time during the Term and Tenant shall increase the scope of
coverage and/or the policy limits to the extent reasonably required by Landlord
after such review. Tenant will obtain additional coverage and in such amounts as
reasonably required by Landlord provided that such coverage (and in such
amounts) is customarily obtained by owners and operators of similar properties.
5.4 Certificates. On or prior to the date hereof or after any request by
Landlord and at least 30 days prior to the expiration date of any insurance
policies, Tenant shall deliver to Landlord certificates evidencing that the
insurance required by this lease is in effect. Prior to commencement of
construction of any of any alterations or improvements, Tenant shall deliver to
Landlord certificates evidencing the insurance required by sections 4 and 5 is
then in effect. All insurance policies shall provide for 30 days advance notice
in writing to Landlord prior to cancellation.
5.5 Endorsements. All such policies shall name Landlord as an additional
insured mid as loss payee, as applicable, as its interest under this lease may
appear. All insurance obtained by Tenant shall be deemed "primary" over any
other collectible insurance maintained by Landlord. All policies of insurance
shall be issued by insurers authorized to conduct that type of insurance
business in New Jersey, and having at all times a policyholders rating of "A" or
better and a financial rating of "AAA" or better in the then-current edition of
Best's Insurance Guide. If Tenant shall not comply with this section and without
waiving any Event of Default, Landlord may cause insurance as aforesaid to be
issued, and in that event Tenant agrees to pay the premiums for such insurance
upon Landlord's demand as Additional Rent, together with interest at the Default
Rate until the premium cost is reimbursed to Landlord.
5.6 Indemnity. Tenant shall defend, indemnify and save harmless Landlord
and Landlord's owners, principals, directors, officers, representatives, agents
and employees ("Indemnified Persons") against and from losses, liabilities,
obligations, damages, penalties, claims, costs, charges and expenses (including
reasonable attorney's fees) which may be suffered by any Indemnified Person or
asserted by third persons against any Indemnified Person relating to
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the Term or any time that Tenant may have been given access to all of or any
portion of the Premises, out of or in connection with any or all of the
following:
(a) The activities of Tenant or any of its agents, contractors,
subcontractors, servants, employees, assigns, subtenants,
licensees or invitees in or about the Premises;
(b) Any negligent or otherwise wrongful act or omission on the part
of Tenant or any of its agents, contractors, subcontractors,
servants, employees, assigns, subtenants, licensees or invitees;
(c) Any work or thing done in, on or about the Premises by or at the
instance of Tenant or any of its agents, contractors,
subcontractors, servants, employees, assigns, subtenants,
licensees or invitees, including the assertion of any
construction liens or claims relating thereto; and
(d) Any failure on the part of the Tenant to perform or comply with
any of the covenants, agreements, terms, provisions, conditions
or limitations contained in this lease on its part to be
performed or complied with.
If any action or proceeding is brought against any Indemnified Person by reason
of any such claim, upon written notice from any Indemnified Person, Tenant shall
at Tenant's expense resist or defend such action or proceeding by counsel
approved by the Indemnified Person in writing, which approval the Indemnified
Person shall not unreasonably withhold. The provisions of this Section 5.6 shall
survive the Termination Date.
5.7 No Liability of Landlord. Except as provided in the Agreement or
under section 8 hereof, Landlord, whether as landlord, owner, contractor or in
any other capacity, shall not be liable for any damage or injury which may be
sustained by Tenant or any other person claiming under or through Tenant as a
consequence of the failure, breakage, leakage or obstruction of the water,
plumbing, steam, gas, sewer, waste or soil pipes, root drains, leaders, gutters,
valleys, down spouts or the like, or of the electrical, ventilation,
air-conditioning, gas, power, conveyer, refrigeration, sprinkler, heating or
other systems, elevators or hoisting equipment, if any, or any other condition
relating to the Premises; or by reason of the elements; or resulting from acts,
conduct or omissions on the part of Tenant or of Tenant's agents, employees,
guests, licensees, invitees, assignees, subtenants or successors, or on the part
of any other tenant, person or entity.
5.8 Increase in Insurance. Tenant will not do or suffer to be done, or
keep or suffer to be kept, anything in, upon or about the Premises which will
contravene Tenant's or Landlord's policies, if any, insuring against loss or
damage by fire or other hazards (including public liability) or which will
prevent Tenant or Landlord from procuring such policies from companies
acceptable to Landlord. If anything done, omitted to be done or suffered by
Tenant to be done or kept in, upon or about the Premises shall cause the rate of
fire or other insurance on
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the Premises to be increased beyond the minimum rate from time to time
applicable thereto for the customary uses thereof, Tenant will pay the amount of
any such increase as Additional Rent.
5.9 Waivers of Subrogation. Tenant shall include in each of its policies
insuring against loss, damage or destruction by fire or other insured casualty
either (a) a waiver of the insuror's right of subrogation against the other
party (and, in case of Tenant's policies, against any additional insured) or (b)
should such waiver be unobtainable, (i) an express agreement that such policy
shall not be invalidated if the insured waives or has waived before the casualty
the right of recovery against any party responsible for a covered casualty or
(ii) any other form of permission from the insuror for the release of such
responsible party and, in such event the insured shall so waive its right of
recovery or release the responsible party. If such waiver, agreement or
permission shall not be obtainable without additional charge or at all, the
insured party shall so notify the other party promptly. If such waiver,
agreement or permission shall be obtainable at additional charge, then the
Tenant agrees to pay such charge. The provisions of this paragraph shall not by
implication require Landlord to purchase any insurance. If Landlord purchases
insurance of the type described in this Section 5.9, the provisions of this
section shall apply.
6. CONDEMNATION PROVISIONS.
6.1 Awards to Landlord. If the Premises shall be acquired, taken or
condemned by any authority having the power of eminent domain or conveyed under
a threat of eminent domain (a "Taking"), Landlord shall be entitled to collect
the entire award that may be made as a result of the Taking, with the award to
be payable to Landlord pursuant to the following provisions of this section 6.
Tenant agrees to execute any and all further documents that may be required in
order to facilitate collection of the award.
6.2 Total Taking. If at any time during the Term of this lease there
shall be a Taking of the whole of the Premises, or of such major part that the
remaining portion of the Premises is not capable, in Tenant's opinion, of being
used for the Permitted Use (a "Total Taking"), this lease shall terminate and
expire on the date of the Taking and all Base Rent and Additional Rent payable
by Tenant under this lease shall be apportioned and paid to the date of the
Total Taking. In the event of a Total Taking, Landlord shall have the exclusive
right to the proceeds of any award.
6.3 Partial Takings. If at any time during the Term there shall be a
Taking of the Premises other than a Total Taking (a "Partial Taking"), this
lease shall continue in full force and effect as to the Premises not Taken.
Tenant shall repair or replace the building or other improvements affected by
the Partial Taking, and the portion of any award relating to the value of any
Land so taken which shall, for purposes of such valuation, be considered vacant,
unencumbered and unimproved, shall belong to Landlord and the balance of the
award shall be payable to the Insurance Trustee and shall be applied to the cost
of any required Restoration of the buildings and other improvements on the
Premises, substantially in the same manner and subject to the same conditions as
apply to the use of Casualty insurance proceeds. If the costs of Restoration
shall exceed the net award available to Tenant, Tenant shall pay the deficiency.
Any balance remaining in the hands of the Insurance Trustee idler payment of the
costs, of Restoration
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as aforementioned, or if Tenant does not elect to apply the award to Restoration
as set forth above, the entire net award of the Partial Taking, shall be paid to
Landlord as if a Total Taking had occurred.
6.4 Adjustment of Rent. In the event of a Partial Taking, this lease
shall continue but the Base Rent shall be recalculated from the date of the
Partial Taking by multiplying the Base Rent by a fraction, the numerator of
which is equal to the fair market value of the Premises immediately after the
Taking and the denominator is the fair market value of the Premises immediately
prior to the Taking. Any Base Rent becoming due and payable hereunder between
the date of any the Partial Taking and the date of determination of the amount
of the Rent reduction, if any, to be made in respect thereof shall be paid at
the rate theretofore payable hereunder, or the reduced rate, if any, which
Landlord has offered or stated to be the reduced Rent rate under this section.
6.5 Temporary Taking. If the temporary use of the whole or any part of
the Premises shall be taken by any lawful power or authority, by the exercise of
the right of condemnation or eminent domain, or by agreement between Tenant and
those authorized to exercise such right, Tenant shall give prompt notice thereof
to Landlord, the Term of this lease shall not be reduced or affected in any way,
Tenant shall continue to pay in full the Base Rent and Additional Rent herein
reserved, without reduction or abatement, and Tenant shall be entitled to
receive for itself any award or payment made for such use.
6.6 Definitions. The terms "Taking," "condemnation" or similar terms as
herein used shall mean, the acquisition by a public or quasi-public authority
having the right to take the same by condemnation or by power of eminent domain
or otherwise, regardless of whether such taking is the result of actual
condemnation or voluntary conveyance.
7. DEFAULT AND REMEDIES.
7.1 Events of Default. If before or during the Term there shall occur
any of the following events ("Events of Default"):
(a) if Tenant shall make a general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its
debts as they become due, or shall file a petition in bankruptcy
or shall have an order for relief entered against it or be
adjudicated a bankrupt or insolvent or shall file a petition
seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under
any law, or shall file an answer admitting or not contesting the
material allegations of a petition against it in any such
proceeding, or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of Tenant or
any material part of its assets; or
(b) if, within 60 days after the commencement of any proceeding
against Tenant seeking any reorganization, arrangement,
composition,
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readjustment, liquidation, dissolution or similar relief under
any law, such proceeding shall not have been dismissed, or if,
within 60 days after the appointment without the consent or
acquiescence of Tenant of any trustee, receiver or liquidator of
Tenant, or of any material part of its assets, the appointment
shall not have been vacated; or
(c) if the interest of Tenant in the Premises shall be sold under
execution or other legal process; or
(d) if Tenant shall fail to pay any installment of Annual Base Rent
or Additional Rent on its due date and the failure continues for
10 days after Landlord gives Tenant written notice thereof; or
(e) if Tenant shall fail to perform or observe any requirement,
obligation, agreement, covenant or condition of this lease,
other than the payment of any installment of Annual Base Rent or
Additional Rent, and the failure shall continue for 30 days
after Landlord gives Tenant written notice thereof (if the
failure is of a nature such that it cannot be remedied within 30
days, then there shall not be an Event of Default if Tenant
diligently commences to remedy the failure within the 30-day
period and prosecutes the same to completion with diligence, and
in any event within 90 days);
THEN AT ANY TIME FOLLOWING ANY OF SUCH EVENTS OF DEFAULT, Landlord, without
waiving any other rights herein available to Landlord at law or in equity, may
either (i) give Tenant notice of termination of this lease or (ii) without
terminating this lease, give Tenant notice of Landlord's intention to re-enter
and take possession of the Premises. The giving of either of such notices to
Tenant shall terminate Tenant's right to possession of the Premises under this
lease, without prejudice to the rights of Landlord to exercise all other
available legal remedies and without discharging Tenant from any of its
liabilities hereunder.
7.2 Damages. If Landlord elects to terminate Tenant's right to
possession of the Premises under section 7.1 following an Event of Default,
Landlord may re-enter and take possession of the Premises, with or without legal
process, whether by force or otherwise, and Tenant shell be obligated to pay to
Landlord as damage upon demand, and Landlord shall be entitled to recover of and
from Tenant (a) all Annual Base "Rent and Additional Rent payable to the date of
termination of Tenant's right to possession, plus (b) the cost to Landlord of
all reasonable legal and other expenses and costs (including attorney's fees)
incurred by Landlord in obtaining possession of the Premises, in enforcing any
provision of this lease, in preserving the Premises during any period of
vacancy, in making any repairs as Landlord may reasonably deem necessary or
advisable in operating and maintaining the Premises, and in reletting the
Premises, including all reasonable brokerage commissions therefor, plus (c)
either (i) in the event of Landlord's giving notice of its intention to re-enter
and take possession without terminating this lease, damages (payable in monthly
installments, in advance, on the first day of each calendar month following the
giving of such notice and continuing until the date originally fixed herein for
the expiration of the then current Term of this lease) in amounts equal to the
Base Rent and
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Additional Rent herein reserved, less the net amount of rent, if any, which may
be collected and received by Landlord from the Premises for and during the
balance of the Term; Landlord may relet the Premises, or any part or parts
thereof (but in no event shall Landlord be obligated to do so), for a term or
terms which may at Landlord's option be less than or exceed the period
constituting the balance of the Term hereof, and Landlord may grant concessions
or charge a rental in excess of that provided in this lease (Tenant shall have
no right to any excess); or (ii) in the event of Landlord's giving notice of
termination of this lease, an award for liquidated damages in an amount which,
at the time of the termination, is equal to the excess, if any, of the
installments of Base Rent and the aggregate of all sums payable hereunder as
Additional Rent (for such purpose considering the annual amount of Additional
Rent to equal the amount thereof payable for the 12 months immediately preceding
the termination, or the annualized portion of Additional Rent payable from the
Commencement Date to the date of the termination if this lease then shall have
been in effect for less than 12 months) reserved hereunder for the period which
would otherwise have constituted the unexpired portion of the then current Term
of this lease, plus the value of all other considerations to be paid or
performed by Tenant during such period, over the fair rental value of the
Premises, as of the date of such termination, for such unexpired portion of the
then current Term of this lease, said liquidated damage amount to be discounted
at the then "generic" prime rate of interest as set forth in the most recently
published Wall Street Journal to determine its present value at the time of the
award. If the Entire Premises or any part thereof be relet by Landlord for the
unexpired Term or any part thereof before presentation of proof of liquidated
damages to any court, commission or tribunal, the amount of rent reserved upon
such reletting shall be deemed to be the fair and reasonable rental value for
the part or the whole of the Premises so relet during the term of the reletting.
Prior to Tenant's full payment of any liquidated damages awarded to Landlord,
Tenant shall continue to pay punctually to Landlord all Base Rent and Additional
Rent to the same extent and at the same time as if this lease had not been
terminated and receive full credit for such payments against the award for
liquidated damages. If Landlord shall elect to re-enter and take possession
without terminating this lease, Landlord shall have the right at any time
thereafter to terminate this lease for the previous default, whereupon the
provisions of this subsection with respect to termination will thereafter apply
7.3 Multiple Actions. Landlord may sue for and collect any amounts which
may be due pursuant to the provisions of section 7.2 from time to time as
Landlord may elect, but no such suit shall bar or in any way prejudice the
rights of Landlord to enforce the collection of amounts due at any time or times
thereafter by like or similar proceedings. All legal fees and expenses incurred
by Landlord in enforcing its rights under this lease shall be deemed Additional
Rent and due and payable by Tenant upon demand. If Landlord brings any summary
action for dispossession of Tenant for failure to pay Rent, Landlord's
attorney's fees and legal expenses shall be added to and included as part of the
Rent due and owing by Tenant with respect to the periods hi default. Tenant
expressly waives service of any notice of intention to re-enter that may be
required by law, and waives any and all rights to recover or regain possession
of the Premises, or to reinstate or to redeem this lease, or other right of
redemption as permitted or provided by or under any law now or hereafter in
force and effect.
7.4 No Remedy Exclusive; No Waiver. No remedy conferred upon or reserved
to Landlord in this lease is intended to be exclusive of any other remedy herein
or by law provided,
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but each shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law, in equity or by statute.
The receipt and acceptance by Landlord of Annual Base Rent or Additional Rent
with knowledge of the default by Tenant in any of Tenant's obligations under
this lease shall not be deemed a waiver by Landlord of the default. Nothing
contained in this lease shall limit or prejudice the right of Landlord to prove
for and obtain in proceedings for bankruptcy or insolvency an amount equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, the damages are to be proved, whether or
not the amount be greater than, equal to, or less than the amount of the loss or
damages referred to above. No waiver by Landlord of any Event of Default or any
default by Tenant in any covenant, agreement or obligation under this lease
shall operate to waive or affect any subsequent Event of Default or default in
any covenant, agreement or obligation hereunder, nor shall any forbearance by
Landlord to enforce a right or remedy upon an Event of Default or any such
default be a waiver of any of its rights and remedies with respect to such or
any subsequent default or in any other manner operate to the prejudice of
Landlord.
8. ENVIRONMENTAL PROVISIONS.
8.1 Additional Definitions. The terms "Environmental Laws," "Hazardous
Substances," "Material," "Person," "Release," "Environmental Approvals,"
"Governmental Authorities" and "Remedial Orders" defined in Article IV of the
Agreement shall have the same meanings when used in this lease. Remedial Orders
shall include the "Administrative Consent Order" referred to in section 9.9
hereof.
8.2 Landlords Responsibility. Landlord shall be and remain in full
compliance with the Remedial Orders and Environmental Laws and otherwise be
fully responsible for the existence and remediation of any Hazardous Substances
affecting the Premises as of the Commencement Date ("Existing Conditions").
8.3 Landlord Indemnity. Except for matters for which Tenant is
responsible pursuant to Section 8.4 below, Landlord hereby agrees to save,
defend with counsel reasonably satisfactory to Tenant, indemnify and hold
harmless Tenant and its principals, officers, directors, trustees, agents and
employees, from and against any and all claims, losses, liabilities, damages and
expenses (including reasonable cleanup costs and attorneys fees arising under
this indemnity) which may arise directly or indirectly from any use or any
Release of Hazardous Substances by Landlord on or under the Premises, and losses
of and claims against Tenant resulting from (i) Landlord's failure to comply
strictly with the provisions of this section 8, with respect to Existing
Conditions, including the Remedial Orders and the Administrative Consent Order
and (ii) any negligence or misconduct by Landlord, its employees, agents or
contractors, including any negligence in carrying out required remediation
activities.
8.4 Tenant's Responsibility. The Premises shall not be used and/or
occupied to generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer or process Hazardous Substances, except for the use, in
accordance with law, of such substances as are customary in connection with the
Permitted Use. Tenant shall comply with all applicable Environmental Laws in
connection with its use of the Premises. The Tenant shall not permit
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during the Term any intentional or unintentional action or omission of the
Tenant or any other occupant, user and/or operator of the Premises, resulting in
the Release of Hazardous Substances into the waters or onto the lands of the
State of New Jersey, or into the air or the waters outside the jurisdiction of
the State of New Jersey where damage may result to the air, lands, waters, fish,
shellfish, wildlife, biota, air or other resources owned, managed, held in trust
or otherwise controlled by, or within the jurisdiction of, the State of New
Jersey. In addition, Tenant shall be liable for any losses, damages or claims,
including claims arising from personal injury, caused by or resulting from (i)
any excavation activities conducted by Tenant at the Premises, and (ii) any use
by Tenant, its employees or invitees of any water on the Premises, including
well water, ground water or tap water.
8.5 Tenant Indemnity. Tenant hereby agrees to save, defend with counsel
reasonably satisfaction to Landlord, indemnify and hold harmless Landlord and
its principals, officers, directors, trustees, agents and employees, from and
against any and all claims, losses, liabilities, damages and expenses (including
reasonable cleanup costs and attorneys fees arising under this indemnity) which
may arise directly or indirectly from (i) any use or any Release by Tenant of
Hazardous Substances on or under the Premises, (ii) any excavation activities
undertaken by Tenant at the Premises, (iii) any use by Tenant, its employees or
invitees of any water on the Premises, including well water, ground water or tap
water, (iii) the negligence or misconduct of Tenant, its employees, agents or
contractors and (iv) losses of and claims against Landlord resulting from
Tenant's failure to comply strictly with the provisions of this section 8,
including claims for personal injury, but in any event only with respect to the
Term of this lease and any other period of possession of the Premises by Tenant.
8.6 ISRA Compliance. In connection with the termination of this lease or
Tenant's operations hereunder or the change of ownership or other status of
Tenant or other person acting by, through or under Tenant or Landlord, or the
sale of the Premises by Landlord, the Tenant shall obtain ISRA clearance, which
for the purpose of this lease means that Tenant shall either (a) obtain from the
NJDEP a "Letter of Non-Applicability, " or (b) submit to and obtain the approval
by the NJDEP of a "Negative Declaration" or (c) obtain the issuance by NJDEP of
a "No Further Action Letter" pursuant to ISRA and applicable regulations,
guidance and guidelines implementing ISRA ("ISRA Requirements") and the
Environmental Requirements. As part of its obligation to obtain either a "Letter
of Non-Applicability," a 'Negative Declaration" or a "No Further Action Letter"
("ISRA Compliance"), Tenant shall prepare and submit to NJDEP a General
Information Notice and performance and report to NJDEP on, as appropriate, a
Preliminary Site Assessment, a Site Investigation, a Remedial Investigation and
a Remedial Action Workplan. Tenant shall also, as part of its compliance with
ISRA Requirements, obtain and maintain a remediation funding source in form and
amount acceptable to NJDEP. The Tenant agrees not to submit any Remedial Action
Workplan (or its regulatory equivalent) which would return the Premises to the
Landlord at the end of the Term in a condition which includes the presence of
Hazardous Substances which were not Existing Conditions. In any event and
notwithstanding any provision to the contrary herein, with respect to Existing
Conditions the Landlord shall have the sole and exclusive responsibility to
comply at its own cost and expense with any Environmental Laws, including ISRA,
in connection with the Premises, the termination of this lease, any sale or
other change in status of Landlord or Tenant, the cessation of Tenant's
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operations on the Premises or in connection with a change in ownership of
Landlord's interest in the Premises.
8.7 Other Laws' Survival. Whenever the terms ISRA and similar terms and
regulatory and statutory references are used in this lease, they shall be deemed
to include any similar, predecessor, future or successor regulatory and
statutory references and/or terms under past or future laws as may apply to the
Premises and its use and occupancy under this lease. Landlord's and Tenant's
obligations under this section 8 shall survive the termination of this lease.
9. MISCELLANEOUS.
9.1 Bind and Inure. This lease and the covenants and conditions herein
contained shall (a) inure to the benefit of and be binding upon Landlord, its
successors and assigns, and (b) inure to the benefit of Tenant and only such
successors or assigns of Tenant whose subletting or assignment has been carried
out in accordance with this lease.
9.2 Notices. All notices from Tenant to Landlord shall be directed to
Landlords Notice Address. All notices from Landlord to Tenant shall be directed
to Tenant's Notice Address. Either party may designate in writing a substitute
address for notices, and thereafter notices shall be directed to the substitute
address. Every notice shall be deemed to have been given or served at the time
that the same shall be telecopied, hand-delivered, deposited with a nationwide
overnight courier service or deposited in the United States mails, by registered
or certified mail, postage prepaid, return receipt requested, in the manner
aforesaid.
9.3 Broker. Except as disclosed in the Agreement, Landlord and Tenant
respectively represent and warrant to each other that no broker has been
involved in connection with the consummation of this lease or the granting of
the purchase option or the put option and that no commission shall be paid to
any broker in consequence of the lease, the purchase option or the put option,
or the exercise of the foregoing options. Each party agrees to indemnify the
other from and against any loss, damage or expenses (including litigation costs
and reasonable attorneys' fees) by reason of any claim for compensation or
commission by any broker based upon an allegation of relations or negotiations
between the claimant and the indemnitor inconsistent with the representations
and warranties herein made. This representation, warranty and covenant shall
survive the Termination Date.
9.4 Integration. This writing is intended by the parties as a final
expression of their agreement and as a complete and exclusive statement of the
terms thereof, all negotiations, considerations and representations between the
parties having been incorporated herein. No course of prior dealings between the
parties or their affiliates shall be relevant or admissible to supplement,
explain or very any of the terms of this lease. Acceptance of or acquiescence in
a course of performance rendered under this or any prior agreement between the
parties or their affiliates shall not be relevant or admissible to determine the
meaning of any of the terms of this lease. No representations, understandings,
or agreements have been made or relied upon in the making of this lease other
than those specifically set forth herein. This lease can only be modified by a
writing signed by all of he parties hereto or their duly authorized agents.
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9.5 Authority. If Landlord or Tenant is a corporation, partnership or
limited liability company, the undersigned officer, partner, member or manager
hereby warrants and certifies to the other party that such party is an entity in
good standing and duly organized under the laws of the state of its organization
and is authorized to do business in New Jersey. The undersigned officer, partner
member or manager hereby further warrants and certifies to the other party that
he or she, as such officer, partner, member or manager is authorized and
empowered to bind the entity to the terms of this lease by this or her signature
thereto.
9.6 Tenant's Purchase Option. Tenant shall have the option to purchase
the Premises from Landlord. If the option is exercised on or after the 1st
anniversary of the Commencement Date, the purchase price shall be equal to
$405,039.00; if exercised on or after the 2nd anniversary of the Commencement
Date, the purchase price shall be equal to $358,913.00; if exercised on or after
the 3rd anniversary of the Commencement Date, the purchase price shall be equal
to $309,905.00; if exercised on or after the 4th anniversary of the Commencement
Date, the purchase price shall be equal to $256573.00; if exercised on or after
the 5th anniversary of the Commencement Date, the purchase price shall be equal
to $200,357.00; and if exercised on the 6th anniversary of the Commencement
Date, the purchase price shall be equal to $138,376.00. Tenant may exercise its
option to purchase the Premises only by delivering to Landlord a written notice
of its intention to exercise the option ("Tenant Exercise Notice") at least 60
days prior to the closing date desired by Tenant. The Tenant Exercise Notice
must be accompanied by an updated Title Report and Survey, together with written
notice of any title objection disclosed thereby or otherwise known to Tenant and
which Tenant believes it is not required to take title "subject to." If Tenant
exercises its option hereunder, Landlord shall deliver insurable title, subject
only to the exceptions as set forth in the Survey and Title Report, not
including any exceptions which Landlord agrees to discharge as set forth in
section 2.2 hereof Landlord shall take no action after the date hereof which
would create any encumbrance or title question. Notwithstanding Tenant's
exercise of its option hereunder, this lease shall remain in full force and
effect until the closing of title. Tenant may not exercise this option it either
at the time of the Tenant Exercise Notice or at the time of closing of title,
there exists any Event of Default or any event which would become an Event of
Default after the giving of notice and/or the lapse of time. The closing of
title shall terminate this lease and the date thereof shall be deemed the
Termination Date. TIME IS OF THE ESSENCE WITH RESPECT TO THE GIVING OF THE
TENANT EXERCISE NOTICE HEREUNDER STRICTLY IN ACCORDANCE WITH THE PROVISIONS OF
THIS SECTION 9.6. If this lease shall terminate for any reason prior to Tenant's
exercise of its option to purchase hereunder, the Tenant's option shall also
terminate.
9.7 Landlords "Put" Option. Landlord shall have the option to require
that Tenant purchase the Premises from Landlord on the 6th anniversary of the
Commencement Date for a purchase price equal to $138,376.00. Landlord may
exercise its option only by delivering to Tenant a written notice of its
exercise of this right ("Landlord Exercise Notice") at least 60 days prior to
the Termination Date, accompanied by proof that environmental remediation of the
Premises has been completed to such an extent that Tenant would not have any
material liability for further environmental remediation and the Premises has
been removed from the National
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Priorities List established under CERCLA. The Landlord Exercise Notice must be
accompanied by an updated Title Report and Survey showing no changes except for
the discharge of the exceptions set forth in section 2.2 hereof. If Landlord
exercises its option hereunder, Landlord shall deliver insurable title, subject
only to the exceptions as set forth in the Survey and Title Report, not
including any exceptions which Landlord agrees to discharge as set forth in
section 2.2 hereof Landlord shall take no action after the date hereof which it
knows or should know would create any encumbrance or title question.
Notwithstanding Landlord's exercise of its option hereunder, this lease shall
remain in full force and effect until the closing of title. Landlord may not
exercise this option if, either at the time of the Landlord Exercise Notice or
at the time of closing of title, there exists any default by Landlord hereunder,
under any Remedial Orders or under the Agreement. The closing of title shall be
on the Termination Date. TIME IS OF THE ESSENCE WITH RESPECT TO THE GIVING OF
THE LANDLORD EXERCISE NOTICE HEREUNDER STRICTLY IN ACCORDANCE WITH THE
PROVISIONS OF THIS SECTION 9.7. If this lease shall terminate for any reason
prior to Landlord's exercise of its Landlord's option hereunder, the option
shall also terminate.
9.8 Tenant Right to File Applications. Tenant shall have the right to
file site plan and other land use applications with respect to the Premises
prior to the expiration of the purchase option, provided that no such activities
by Tenant shall impose any present or future financial or other burdens,
conditions or other encumbrances on the Premises or Landlord. Tenant shall bear
the entire cost of any such applications and Landlord shall provide any
necessary consent thereto.
9.9 Remedial Order Restriction. This lease and any sublease, assignment,
sale or other transfer of any interest in the Premises is and shall be subject
to the following provisions, each of which is set forth in an Administrative
Consent Order dated December 7, 1992, as amended, affecting the Premises and
shall be included in the recorded memorandum of this lease:
(a) At least ninety (90) calendar days prior to the date of any
alienation, Landlord shall notify the NJDEP in writing of the proposed
alienation, the name of the grantee, the extent of the alienation, and a
description of the grantor's continuing obligations, if any, which grantee has
agreed to perform.
(b) At least ninety (90) calendar days prior to transfer of ownership of
the Premises, Landlord shall verify to the NJDEP that such notice of alienation
has been given.
(c) Any contract to alienate the Premises shall require the grantee to
allow the implementation and continuation of all activities and obligations
pursuant to the Administrative Consent Order and to allow Landlord, the NJDEP
and its authorized representatives access to the Premises for purposes of such
activities and obligations. No alienation shall affect Landlord's obligations
under the Administrative Consent Order.
(d) Landlord shall include in any instrument of conveyance, including a
deed, title, lease, easement or license of or for the Premises, a written notice
that the Premises is the subject of the Administrative Consent Order. Any such
instrument of conveyance shall be subject
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to the requirements set forth in the Administrative Consent Order regarding the
use of the Premises and deed restrictions.
The Administrative Consent Order shall be binding, jointly and severally, on the
Landlord, its successors, assignees and any trustee in bankruptcy or receiver
appointed pursuant to a proceeding in law or equity. The use and access
restrictions set forth in the Administrative Consent Order shall run with the
land and be for the benefit of and enforceable by the NJDEP and any citizen
which is or may be damaged as a result of violations of the use and access
restrictions. The use and access restrictions shall provide actual and
constructive notice to any subsequent grantee of the locations and
concentrations of all contaminants which remain at the Premises and of the use
and access restrictions imposed. Within thirty (30) calendar days after
Landlord's receipt of a written request from the NJDEP, Landlord shall record
the restrictions with the Morris County Clerk, Morris County, State of New
Jersey, and provide the NJDEP with a copy of this Administrative Consent Order
stamped "Filed" by the Morris County Clerk.
9.10 Cross-Estoppel Certificate. Each party agrees that at any time and
from time to time at reasonable intervals, within 10 days after written request
by the other party, the party will execute, acknowledge and deliver to the other
party and/or to its assignee, mortgagee or other secured party as may be
designated, a certificate stating: (i) that this lease is unmodified and in full
force and effect (or if there have been modifications, that this lease is in
full force and effect as modified, and identifying the modification agreements,
or if this lease is not in full force and effect the certificate shall so
state); (ii) the date to which Rent has been paid under this lease; (iii)
whether or not there is any existing default by Tenant in the payment of Rent or
other sum or money under this lease, and whether or not there is any other
existing default by either party under this lease with respect to which a notice
of default has been served, and if there is any such default, specifying the
nature and extent thereof, (iv) whether or not there are any set-offs, defenses
or counterclaims against enforcement of the obligations to be performed by the
party under this lease; and (v) such other matters relating to this lease as may
be reasonably requested by the other party or any of its designees.
9.11 Tenant's Recourse. Except for claims which Tenant may have against
Landlord arising under Section 2.6.2, Article 8 or Section 9.6 of this lease,
Tenant shall look solely to the Premises and Landlord's equity therein for the
payment of any damages or satisfaction of any liabilities or obligations of
Landlord, and no judgment obtained by Tenant shall be enforceable against
Landlord or any property of Landlord, other than the Premises.
10. DEFINED TERMS: INTERPRETATIONS.
10.1 Defined Terms: Terms identified in the heading, recitals and in
other provisions of this agreement shall have the meanings assigned to them
either wherever initially capitalized in this agreement or as set forth below:
Additional Rent. Any and all charges or amounts other than Base
Rent payable by Tenant, whether to Landlord or directly to other persons, under
the various sections of this lease.
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Agreement. The Asset Acquisition Agreement between the parties
dated as of February 26, 1996.
Annual Base Rent or Base Rent. The Base Rent, payable in monthly
installments in accordance with section 1.3.
Default Rate. A fluctuating rate of interest per annum equal to
the Prime Rate plus 4%.
Events of Default. Events of Default shall have the meanings
assigned in section 7. 1.
Force Majeure. Any cause beyond a party's reasonable control,
including acts of God, strikes, labor troubles, shortage of materials or
services, governmental pre-emption in connection with a national or local
emergency or by reason of any rule, order or regulation of any governmental
agency or by reason of the conditions of supply and demand which have been or
are affected by war, hostilities or similar emergency.
Permitted Use. Permitted Use shall have the meaning set forth in
section 1.4.
Premises. The Premises commonly known as 108 Lake Denmark Road,
Rockaway, New Jersey, as shown on the site map annexed as Exhibit A hereto. The
Premises includes the buildings, driveways, parking areas and other improvements
located thereon. The Premises includes all trade and other fixtures located at
the Premises on the date hereof
Prime Rate. A fluctuating rate of interest per annum as published
from time to time by The Wall Street Journal as the generic "prime rate" of
interest.
Rent. All Base Rent and Additional Rent provided for herein.
Rental Year. The first Rental Year for the Premises shall
commence on the Commencement Date and shall end at the close of the 12th full
calendar month following the Commencement Date; thereafter each Rental Year
shall consist of successive periods of 12 calendar months. Any portion of the
Term remaining at the end of the last full Rental Year shall constitute the
final Rental Year and Rent shall be apportioned therefor. Landlord reserves the
right to change the Rental Year from time to time.
Taxes. Any real estate tax, special or general assessment real
estate rental receipt or gross receipt tax, unforeseen and foreseen, including
any other charge imposed with respect to the Premises or leases or rents payable
with respect thereto, by federal, state or local authorities. If at any time
during the term of this lease under the laws of the State of New Jersey or any
political subdivision thereof a tax or excise on rents is levied or assessed
against Landlord or the Base Rent as it substitution in whole or in part for or
as an addition to taxes assessed or
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<PAGE> 28
imposed on land and buildings or on land or buildings, such substitute tax shall
be calculated as if the Premises were the only real property owned by the
Landlord, and the same shall be deemed to be included within the term "Taxes."
In no event shall Taxes include inheritance, estate or transfer taxes. Landlord
agrees to pay any special or general assessments in the maximum number of
installments permitted by the taxing authority and Taxes shall only include
those installments which are allocable to the Term.
Tax Year. Tax Year means each 12 month period (deemed for the
purposes of this section to have 365 days) established as the tax year by the
taxing authorities having lawful jurisdiction over the Premises.
Termination Date. The date provided in this lease for the end of
the Term, whether as a result of the expiration of this lease, an Event of
Default or otherwise.
10.2 Interpretations. Unless otherwise specified, the following rules of
construction shall be applicable for all purposes of this lease and all
documents or instruments supplemental hereto:
10.2.1 All references herein to numbered sections, subsections,
schedules or exhibits are references to the sections and subsections
hereof, and the schedules and exhibits attached hereto.
10.2.2 The terms "include," "including" and similar terms shall
be construed as if followed by the phrase "without being limited to."
10.2.3 The terms "Premises" and "improvements" and like terms
shall be construed as if followed by the phrase "or any part thereof."
10.2.4 Singular words include the plural and plural words include
the singular.
10.2.5 The term "person" shall include natural persons, firms,
partnerships, trusts, corporations, limited liability companies and any
other public and private legal entities.
10.2.6 The term "provisions," when used with respect hereto or to
any other document or instrument, shall be construed as if preceded by
the phrase "terms, covenants, agreements, requirements, conditions
and/or."
10.2.7 The terms "hereto," "herein," "hereof," "hereunder" and
similar terms shall refer to this agreement in its entirety, unless the
context clearly indicates otherwise.
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<PAGE> 29
10.2.8 Any table of contents or section, subsection, schedule and
exhibit captions are used for convenience and reference only and in no
way define, limit or affect the construction of the provisions hereof.
10.2.9 No inference in favor of any party shall be drawn from the
fact that any other party has drafted any portion hereof.
10.2.10 All recitals set forth in, and all schedules and exhibits
to, this agreement are incorporated in this agreement.
10.2.11 The terms "lease" or "sublease" shall mean "lease,
sublease, tenancy, subtenancy, letting, subletting, license or
sublicense" and the term "Tenant" or "tenant" shall mean "subtenant,
lessee, sublessee, licensee, sublicensee or occupant."
10.2.12 Words importing any gender or number shall be deemed to
refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or item requires.
10.2.13 This lease shall be construed, governed, and enforced
under the laws of the State of New Jersey.
10.2.14 If any provision of this lease shall to any extent be
invalid or unenforceable, the remainder of this lease, or the
application of such term or provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term and provision of this lease shall be
valid and be enforced to the fullest extent permitted by law.
10.2.15 The term "date hereof" shall mean the date a completely
executed copy of this lease has been delivered to the Landlord or its
attorney. All time periods hereunder shall commence and be measured
starting on the first calendar day following the date hereof which is
not a Saturday, Sunday or holiday on which national banks are closed for
business within the State of New Jersey.
10.2.16 The term "law" shall mean and include any present or
future statute, ordinance, rule, regulation, code, order, opinion or
similar governmental action or directive, including any executive, court
or administrative order or decision enforcing or interpreting any of the
foregoing. References to any particular statutes, ordinances, rules or
regulations shall be deemed to include any predecessor, successor or
replacement statutes, ordinances, rules or regulations.
10.2.17 The submission of this agreement for examination does not
constitute an offer, reservation of or option for the Premises, and this
agreement shall become binding and effective only upon execution and
delivery by all parties.
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<PAGE> 30
10.2.18 This agreement is intended by the parties as a final
expression of their agreement and as a complete and exclusive statement
of the terms hereof. All negotiations, considerations and
representations between the parties have been incorporated herein. No
course of prior dealing between the parties or their principals, agents
or affiliates, shall be relevant or admissible to supplement explain or
vary any of the terms of this agreement. Acceptance of or acquiescence
in a course of performance rendered under this or any prior agreement
between the parties or their principals, agents or affiliates shall not
be relevant or admissible to determine the meaning of any of the terms
of this lease. No representations, understandings or agreements have
been made or relied upon in the making of this agreement other than
those specifically set forth herein. This agreement cannot be modified
orally, but only by a writing signed by all of the parties hereto or
their duty authorized agents.
10.2.19 This agreement may be executed in any number of
counterparts (and by facsimile signature pages), all of which taken
together shall constitute the original hereof. When counterparts have
been executed by and delivered to all parties hereto, or their counsel,
they shall have the same effect and if the signatures were all on the
same copy hereof.
IN WITNESS WHEREOF, the undersigned have caused their duly
authorized representatives to set their hands and affix their seals as of the
date first above written.
RTI INC., Landlord
By: /s/ THEO MULLER
----------------------------------------
Theo Muller, President
STERIGENICS LAST CORPORATION,
Tenant
By: /s/ EDWARD M. MILLER
----------------------------------------
Edward M. Miller, Vice-President
LIST OF EXHIBITS
Exhibit A - Description of Premises
Exhibit B - Extension Option Rider
Exhibit 2.1 Form of Memorandum of Lease
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<PAGE> 31
EXHIBIT A
[Description of Premises]
<PAGE> 32
EXHIBIT B
EXTENSION OPTION RIDER
The lease dated August 8, 1996 ("Lease") between RTI INC. ("Landlord")
and STERIGENICS EAST CORPORATION ("Tenant") is modified as RAW:
1. All defined terms and interpretations set forth in the Lease shall
be fully applicable to this Rider.
2. Tenant shall have one (1) option, exercisable by notice to Landlord
at least 12 months prior to the expiration of the then remaining Term, to extend
the Term for a period of 5 years upon the same terms and conditions as are
contained in the Lease. No option shall be exercisable by Tenant unless at the
time of exercise and a the beginning of the renewal Term (a) the Lease is then
in full force and effect, (b) there has been no Event of Default thereunder
during the Term (whether or not waived by Landlord or cured by Tenant) and (c)
there is no event which, upon a lapse of time or the giving of notice, or both,
would become an Event of Default. TIME IS OF THE ESSENCE for the exercise of any
option hereunder.
RTI INC., Landlord
By: ____________________
Theo Muller, President
STERIGENICS EAST CORPORATION,
Tenant
By: _____________________
Edward M. Miller, Vice-President
<PAGE> 33
EXHIBIT B
GUARANTY
In order to induce RTI, Inc., ("Landlord") to enter into a lease dated
August 8, 1996, ("Lease") with STERIGENICS EAST CORPORATION ("Tenant") for the
Premises located in the Township of Rockaway, County of Morris, State of New
Jersey, and as more particularly described on Exhibit A to the Lease
("Premises"), the undersigned ("Guarantor") in consideration of the sum of Ten
($10.00) Dollars and other good and valuable consideration, the receipt and
sufficiency whereof is hereby acknowledged, irrevocably and unconditionally
guarantees to Landlord the due, prompt and punctual payment and the prompt
performance by the Tenant of all of its obligations pursuant to the Lease,
including, without limitation, Tenant's obligations, if any, under Section 9.7
of the Lease ("Obligations"), all irrespective of the validity, binding effect,
legality or enforceability of the Lease or whether the Lease shall have been
duly executed by Tenant, any other circumstance which might now or hereafter or
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Guarantor shall, upon demand, pay, perform or observe any term, covenant or
condition of the Lease in the same place and stead as Tenant. Capitalized terms
defined in the Lease and not defined herein shall have the same meanings when
used herein.
Guarantor is the parent corporation of Tenant and acknowledges that the
lease of the Premises to Tenant will provide substantial direct and indirect
benefits to Guarantor.
Guarantor agrees further that this Guaranty and Guarantor's liability
hereunder shall not be impaired or affected by any assignment, subleasing,
modification, supplement, extension or amendment of the Lease, nor by any
modification, release or other alteration of any of the Obligations hereby
guaranteed, nor by any other agreements or arrangements whatever with the Tenant
or anyone else. This Guaranty is an absolute, unconditional and irrevocable
guaranty of payment and performance (and not merely of collection). The
liability of Guarantor, as set forth above, is co-extensive with that of Tenant
and this Guaranty shall be enforceable against Guarantor without the necessity
of any suit or proceedings on Landlord's part of any kind or nature whatsoever
against Tenant and without the necessity of any notice of non-payment,
nonperformance or non-observance, or any notice of acceptance of this Guaranty,
or any other notice or demand to which Guarantor might otherwise be entitled,
all of which Guarantor hereby expressly waives.
Guarantor hereby expressly waives any right of contribution from or
indemnity against Tenant, whether at law or in equity, arising from any payments
made by Guarantor pursuant to the terms of this Guaranty and Guarantor
acknowledges that Guarantor has no right whatsoever to proceed against Tenant
for reimbursement of any such payments. In connection with the foregoing,
Guarantor expressly waives any and all rights of subrogation or otherwise to any
rights of Landlord against Tenant, and Guarantor hereby waives any rights to
enforce any remedy which Landlord may have against Tenant. In addition to and
without any way limiting the foregoing, Guarantor hereby subordinates any and
all indebtedness of Tenant now or hereafter owed to Guarantor to all Obligations
of Tenant to Landlord, and agrees with Landlord that Guarantor shall
<PAGE> 34
not demand or accept any payment of principal or interest from Tenant and shall
not claim any offset or other reduction of Guarantor's obligations hereunder
because of any such indebtedness.
Guarantor hereby expressly agrees that this Guaranty shall be a
continuing guaranty and that the validity or this Guaranty and the obligations
and liability of Guarantor hereunder shall in no way be terminated, affected,
diminished or impaired by reason of (a) the assertion of or the failure by
Landlord to assert against Tenant any of the rights or remedies reserved to
Landlord pursuant to the terms, covenants and conditions of the Lease, (b) any
assignment of the Lease or subletting of the Premises, (c) any renewal or
extension of the Lease or any modification thereof, whether pursuant to the
Lease or by subsequent agreement of Landlord and Tenant, (d) any extension of
time that may be granted by Landlord to Tenant, (e) any consent, indulgence or
other action, inaction or omission under or in respect of the Lease, or (f) any
dealings or transactions or matter or thing occurring between Landlord and
Tenant, (g) any bankruptcy, insolvency, reorganization, arrangement, assignment
for the benefit of creditors, receivership or trusteeship affecting Tenant or
Tenant's successors or assigns whether or not notice thereof is given to
Guarantor, (h) any modification, amendment, revision, supplement or other change
to the Lease, whether or not made with the consent of Guarantor, or (i) any
matter or thing whatsoever, whether or not specifically mentioned herein, other
than full payment and performance of all of the Obligations.
Guarantor also agrees to indemnify Landlord and hold Landlord harmless
against all obligations demands and liabilities, by whomever asserted, and
against all losses in any way suffered, incurred or paid by Landlord as a result
of or in any way arising out of, or following, or consequential to a breach by
Tenant of any of its Obligations and to pay all costs and expenses, including
reasonable attorneys' fees, of any proceeding by Guarantor to enforce the Lease
or this Guaranty.
Guarantor expressly waives the following: notice of acceptance hereof,
presentment and protest of any instrument and notice thereof notice: of default;
and all other notices to which such Guarantor might otherwise be entitled.
Guarantor represents and warrants to Landlord as follows:
A. The execution, delivery and performance by Guarantor of this
Guaranty have been duly authorized by all necessary corporate action.
B. Guarantor is not in material default in the terms and conditions of
any material agreement to which it is a party or by which it is bound, such as
would materially and adversely affect its ability to carry out the terms,
covenants and conditions of this Guaranty.
C. Guarantor has the full power, authority and legal right to execute
and deliver, and to perform and observe the provisions of, this Guaranty
including the payment of all moneys hereunder. This Guaranty constitutes the
legal, valid and binding obligation of Guarantor enforceable in accordance with
its terms, except as enforcement thereof may be limited by (a) bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting
creditors'
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<PAGE> 35
rights generally or (b) the nonavailability of equitable or legal remedies which
are discretionary with the courts.
D. Guarantor is not in violation of any decree, ruling judgment, order
or injunction applicable to it, nor any law, ordinance, rule or regulation of
whatever nature which taken alone or in the aggregate, would materially and
adversely affect its ability to carry out any of the terms, covenants, and
conditions of this Guaranty. There are no actions, proceedings, or
investigations pending or, to the best of Guarantor's knowledge, threatened
against or affecting Guarantor (or any basis therefor known to Guarantor) before
or by any court, arbitrator, administrative agency or other governmental
authority or entity, which, taken alone or in the aggregate, if adversely
decided, would materially and adversely affect its ability to carry out any of
the terms, covenants and conditions of this Guaranty.
E. Tenant is a wholly-owned subsidiary of Guarantor and accordingly
Guarantor has a substantial financial interest in Tenant and its performance
under the Lease.
No failure or delay on the part of Landlord in exercising any right,
power or privilege under this Guaranty shall operate as a waiver of or otherwise
affect any such right, power or privilege, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
Guarantor agrees at any time and from time to time during the Term,
within 10 days after written request from Landlord, to execute, acknowledge and
deliver to Landlord or to a third party a statement in writing certifying that
this Guaranty is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified and stating
the modifications). Landlord and any such third party shall have the right to
rely upon the contents of any such written statement of Guarantor.
Guarantor acknowledges and agrees that all disputes arising directly or
indirectly, out of or relating to this Guaranty, and all actions to enforce this
Guaranty, may be dealt with and adjudicated in the state courts of New Jersey or
the Federal courts sitting in New Jersey; and hereby expressly and irrevocably
submits the person of Guarantor to the jurisdiction of such courts in any suit,
action or proceeding arising, directly or indirectly, out of or relating to this
Guaranty. So far as is permitted under applicable law, this consent to personal
jurisdiction shall be self-operative and no further instruction or action, other
than service of process in one of the manners specified in this Guaranty, or as
otherwise permitted by law, shall be necessary in order to confer jurisdiction
upon the person of Guarantor in any such court.
Provided that service of process is effected upon Guarantor in one of
the manners hereafter specified in this Guaranty or as otherwise permitted by
law, Guarantor irrevocably waives, to the fullest extent permitted by law, and
agrees not to assert, by way of motion, as a defense or otherwise, (a) any
objection which it may have or may hereafter have to the laying of the venue of
any such suit, action or proceeding brought in such court as is mentioned in the
previous paragraph, (b) any claim that any such suit, action or proceeding
brought in such a court has been brought in an inconvenient forum, or (c) any
claim that it is not personally subject to the
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<PAGE> 36
jurisdiction of the above-named courts. Provided that service of process is
effected upon Guarantor in one of the manners hereafter specified in this
Guaranty or as otherwise permitted by law, Guarantor agrees that final judgment
from which Guarantor has not appealed or may not appeal or further appeal in any
such suit, action or proceeding brought in such a court of competent
jurisdiction shall be conclusive and binding upon Guarantor and may, so far as
it is permitted under applicable law, be enforced in the courts of any state or
any Federal court and in any other courts to the jurisdiction of which Guarantor
is subject, including, without intending any limitation, as to the Guarantor,
the courts of New Jersey by a suit upon such judgment and that Guarantor will
not assert any defense, counterclaim, or set off in any such suit upon such
judgment.
Guarantor agrees to execute, deliver and file all such further
instructions as may be necessary under the laws of the State of New Jersey, in
order to make effective the consent of Guarantor to jurisdiction of the state
courts of New Jersey and the Federal courts sitting in New Jersey.
Guarantor hereby consents to process being served in any suit, action
or proceeding of the nature referred to in this (Guaranty by the mailing of a
copy thereof by registered or certified mail, postage prepaid, return receipt
requested to Sterigenics International, 4020 Clipper Court, Fremont, CA
94538-6540, Attn: James F. Clouser, or to any other address of which Guarantor
shall have given written notice to Landlord (said notice being actually
received). Provided that service is made in accordance with this Section or
otherwise as permitted by law, Guarantor irrevocably waives, to the fullest
extent permitted by law, all claim of error by reason or any such service and
agrees that such service (a) shall be deemed in every respect effective service
of process upon Guarantor in any such suit, action of proceeding and (b) shall,
to the fullest extent permitted by law, be taken and held to be valid personal
service upon and personal delivery to Guarantor.
Should Landlord be obligated by any bankruptcy or other law to repay to
Tenant or Guarantor or to any trustee, receiver or other representative of
either of them, any amounts previously paid, then this, Guaranty shall be
reinstated in the amount of such repayment, Landlord shall not be required to
litigate or otherwise dispute its obligation to make such repayments if it in
good faith and on the advice of counsel believes that such obligation exists.
In the event that this Guaranty shall be held ineffective or
unenforceable by any court of competent jurisdiction, Guarantor shall be deemed
to be a tenant under the Lease with the same force and effect as if Guarantor
were expressly named as a joint tenant therein with joint and several liability.
All remedies afforded to Landlord by reason of this Guaranty are
separate and cumulative remedies and it is agreed that no one of such remedies,
whether exercised by Landlord or not, shall be deemed to be in exclusion of any
other remedy available to Landlord and shall not limit or prejudice any other
legal or equitable remedy which Landlord may have.
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<PAGE> 37
If any provision of this Guaranty or the application thereof to any
person or circumstance shall to any extent be held void, unenforceable or
invalid, then the remainder of this Guaranty or the application of such
provision to persons or circumstances other than those as to which it is held
void, unenforceable or invalid shall not be affected thereby and each provision
of this Guaranty shall be valid and enforced to the fullest extent permitted by
law.
As a further inducement to Landlord to make and enter into the Lease
and in consideration thereof, Guarantor hereby waives trial by jury and the
right thereto in any action or proceeding of any kind or nature, arising on,
under or by reason of or relating to, this Guaranty or any agreement collateral
hereto.
No waiver or modification of any provision of this Guaranty nor any
termination of this Guaranty shall be effective unless in writing and signed by
Landlord, nor shall any waiver be applicable, except in the specific instance
for which it is given.
If the Guarantor is a corporation or partnership, attached hereto is a
true, certified copy of corporate resolutions of the Guarantor pursuant to which
its entering into this Guaranty has been authorized by all requisite corporate
or partnership action. If this Guaranty is signed by more than one party, the
parties' liabilities, shah be joint and several.
Each individual signing below represents and warrants to Landlord that
he is authorized to execute this Guaranty on behalf of Guarantor or other entity
for which he signed and that said corporation or entity is bound thereby.
This Guaranty, all acts and transactions hereunder, and the rights and
obligations of the parties hereto shall be binding upon successors and assigns
of Guarantor, may not be changed or modified orally, and shall inure to the
benefit of Landlord's successors and assigns.
STERIGENICS INTERNATIONAL, INC.
(Guarantor)
BY: /s/ EDWARD M. MILLER
--------------------------------
Edward M. Miller, Vice President
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<PAGE> 38
CORPORATE ACKNOWLEDGEMENT
STATE OF NEW YORK:
ss:
COUNTY OF New York
BE IT REMEMBERED, that on this 8th day of August, 1996, before me, the
subscriber, a notary public of the State of New York, personally appeared Edward
M. Miller, who, being by me duly sworn on his oath, deposed and made proof to my
satisfaction that be is the, Vice President of Sterigenics International, and
the person who has signed the within instrument; and I having first made known
to him the contents thereof, he did acknowledge that he signed and delivered the
same as such officer on behalf of the corporation as its voluntary ad and deed,
made by virtue of authority from its board of directors, for the uses and
purposes therein expressed.
/s/ MICHAEL D. SCHWAMM
--------------------------
Michael D. Schwamm
Notary Public
(Apply Raised Seal and Stamp indicating expiration
date of Commission)
MICHAEL D. SCHWAMM
Notary Public, State of Now York
No. 31-4807247
Qualified in New York County
Commission Expires September 30, 199
<PAGE> 1
EXHIBIT 10.63
ASSET ACQUISITION AGREEMENT
This Agreement is entered into as of February 26, 1996, by and among
Sterigenics International, a California corporation ("Sterigenics"), and RTI
Inc., a New York corporation ("RTI").
RECITAL
RTI desires to sell and Sterigenics desires to purchase certain
tangible and intangible assets of RTI, and Sterigenics agrees to assume certain
liabilities and obligations of RTI, as set forth under the terms of this
Agreement.
NOW, THEREFORE, in consideration of the representations, warranties and
agreements herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein, when used in this Agreement the
following terms shall have the following meanings:
1.1 "Assumed Liabilities" shall mean (a) the Contracts, (b) the
Trade Payables, (c) the Salem Guarantee, to the extent RTI is not released
therefrom at or prior to the Closing, and (d) the obligations of RTI under
leases and notes related to the financing of the Cobalt acquired by RTI in the
ordinary course of business from the date hereof through the Closing Date.
1.2 "Closing" shall mean the closing of the transactions
contemplated by this Agreement.
1.3 "Closing Date" shall mean the third business day after the
conditions set forth in Articles IX and X are satisfied but not later than
November 27, 1996, or such other date as the parties mutually have agreed to
in writing.
1.4 "Cobalt" shall mean the Cobalt 60 listed by serial number of
Schedule 1.4 attached hereto and any additional Cobalt 60 acquired hereafter by
RTI through the Closing in the ordinary course of business.
1.5 "Contracts" shall mean the contracts calling for future
payments to or from RTI of less than $25,000 per annum, the contracts listed
on Schedule 1.5 attached hereto and any contracts entered into by RTI through
the Closing in accordance with Section 6.3.
1.6 Excluded Liabilities" shall mean any and all liabilities,
obligations or commitments of any nature of RTI and its Subsidiaries (other than
the South Jersey Subsidiary),
<PAGE> 2
whether known or unknown, contingent or fixed or otherwise, including without
limitation, all liabilities related to Hazardous Materials or compliance with
Environmental Laws (each as defined in Section 4.15 below), all liabilities
related to the employment and/or termination of personnel on or prior to the
Closing, all taxes due and all sales, use, withholding and payroll taxes
accrued to (but not including) the Closing, except the Assumed Liabilities.
1.7 "Immaterial Liens" shall include liens on any Purchased Assets
where the aggregate value of the Purchased Assets subject to all such liens is
less than $30,000.
1.8 "Improvements" shall mean all structures, buildings,
improvements and fixtures, including without limitation all equipment and
appliances used in connection with the operation or occupancy thereof, such as
heating and air-conditioning systems and facilities used to provide any utility
services, parking services, refrigeration, ventilation, trash disposal or other
services owned by RTI or its Subsidiaries and located on or used in connection
with the Real Properties.
1.9 "Intangible Assets" shall mean all of RTI's and its
Subsidiaries' interests in intellectual property rights, including without
limitation, patents, trademarks, service marks, copyrights and applications
therefor and registrations thereof, trade names, trade styles, trade secrets,
know-how, processes, formulae, business and marketing plans, and confidential
and other proprietary information that are owned by RTI and its Subsidiaries or
that may be assigned by RTI and its Subsidiaries; and all of RTI's and its
Subsidiaries' interest in computer software and data, including without
limitation, all source and object codes, all manuals and other user materials,
and all intangible data contained in or stored on computer hardware used in
RTI's and its Subsidiaries' business as of the Closing Date.
1.10 "IRB" shall mean the City of Salem Municipal Port Authority
Port Development Revenue Bond (South Jersey Process Technology, Inc. Project)
Series of 1984 Financing.
1.11 "IRB Documentation" shall mean all documents relating to the
indebtedness evidencing the IRB, including without limitation all indenture
agreements, lease agreements, security agreements, guaranties, and bonds
relating to the Salem Property (all as amended) and as set forth in Exhibit
10.1 to RTI's Annual Report on Form 10-KSB for the year ended December 31, 1994
and as set forth in the Trust Indenture dated as of December 1, 1984 between
the City of Salem Municipal Port Authority and The Farmers and Merchants
National Bank of Bridgeton.
1.12 "North Carolina Property" means the real property and the
Improvements thereon located in Haw River, North Carolina, owned by RTI or its
Subsidiary and legally described in Exhibit 1.12 hereof.
1.13 "Permitted Encumbrances" shall mean (i) the assessments due
under the IRB, (ii) the liens and encumbrances incurred by RTI or its
Subsidiaries in connection with obtaining financing for the purchase of the
Cobalt, (iii) the Permitted Exceptions (as defined in Section 6.5(a) hereof),
(iv) liens for taxes not yet due, (v) Immaterial Liens, (vi) encumbrances other
than liens which do not materially affect or interfere with the use of the Real
Property in
2
<PAGE> 3
the manner presently used by RTI, value or transferability of the Purchased
Assets, (vii) UCC financing statements filed by lessors of personal property
which relate solely to property owned by such lessors and leased to RTI; and
(viii) liens held by NJDEP provided that the condition set forth in Section 9.8
below is satisfied.
1.14 "Prepaid Expenses" shall mean any prepaid expenses of RTI in
the following categories: prepaid taxes, prepaid insurance premiums (to the
extent such insurance policy is assignable) and prepaid supplies.
1.15 "Purchased Assets" shall mean the Cobalt, the Tangible Assets,
the Real Property Assets, the Subsidiary Stock, the Prepaid Expenses, the
Receivables and the Intangible Assets.
1.16 "Real Property" and "Real Properties" means, individually and
collectively as the case may be, each of the North Carolina Property, the
Rockaway Property and the Salem Property.
1.17 "Real Property Assets" means the right, title and interest of
RTI in the North Carolina Property and RTI's right to lease the Rockaway
Property, together with the right, title and interest of RTI in the
Improvements (other than improvements located on the Rockaway Property which
shall be leased to Sterigenics) and in and to all intangible property owned by
RTI and used in connection with such Real Properties (other than the Rockaway
Property), including (i) all right, title and interest in all plans, drawings,
specifications, land surveys, entitlements and approvals, engineering reports
and other technical reports, if any, in the possession of RTI or which are
available to RTI without additional cost and which were prepared in connection
with the development of the Real Properties or the construction of the
Improvements for such Real Properties; (ii) all hereditaments, privileges,
tenements and appurtenances belonging to the Real Properties; (iii) all right,
title and interest of RTI in and to all open or proposed highways, streets,
roads, avenues, alleys, easements, strips, gores and rights-of-way in, on,
across, in front of, contiguous to, abutting or adjoining the Real Properties;
(iv) all right, title and interest of RTI in and to any transferable licenses,
permits and warranties now in effect with respect to the Improvements; and (v)
all right, title and interest of RTI in and to any transferable warranties,
guaranties, indemnities and claims relating to the construction, operation or
maintenance of the Real Properties and/or the Improvements.
1.18 "Receivables" shall mean all accounts receivable of RTI as of
the Closing.
1.19 "Rockaway Property" shall mean the real property shown as lots
1 through 10 of Block 30102 as shown on the assessment maps for the Township of
Rockaway attached as Exhibit 1.19 hereof and the Improvements (including RTI's
irradiation facility) thereon located in Rockaway, New Jersey, owned by RTI or
its Subsidiary.
1.20 "Salem Guarantee" shall mean the obligations of RTI pursuant to
the IRB Documentation and the Agreement dated December 28, 1994 among the City
of Salem, Municipal Port Authorities, RTI and the South Jersey Subsidiary, as
amended.
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1.21 "Salem Property" shall mean the real property legally described
on Exhibit 1.21 hereof and the Improvements (including RTI's irradiation
facility) thereon located in Salem, New Jersey, which is leased by the South
Jersey Subsidiary.
1.22 "Subsidiary" or "Subsidiaries" shall mean, with respect to any
party, any corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary of such party
is a general partner (excluding partnerships, the general partnership
interests of which held by such party or any Subsidiary of such party do not
have a majority of the voting interest in such partnership) or (ii) at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or others performing
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such part or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
1.23 "Subsidiary Stock" shall mean all the outstanding shares of
Capital Stock of South Jersey Process Technology, Inc., a New Jersey corporation
and a wholly-owned subsidiary of RTI (the "South Jersey Subsidiary").
1.24 "Tangible Assets" shall mean all of the fixed assets,
furniture, equipment and other tangible assets (other than cash, cash
equivalents, Rockaway Property and the fixtures located on the Rockaway
Property) as of the Closing Date.
1.25 "Trade Payables" shall mean the accounts payable of RTI which
are incurred through the Closing in the ordinary course of business.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale. Subject to and upon the terms and
conditions of this Agreement, on the Closing Date, RTI shall sell, assign,
transfer, convey and deliver to Sterigenics (or its wholly-owned Subsidiaries)
and Sterigenics (or its wholly-owned Subsidiaries) shall purchase from RTI, free
and clear of all liens and encumbrances, except the Permitted Encumbrances, all
of RTI's right, title and interest in and to the Purchased Assets (the
"Acquisition"). RTI acknowledges that Sterigenics intends to assign certain of
its rights and obligations hereunder to its wholly-owned Subsidiaries.
2.2 Further Assurances; Instruments of Transfer. RTI shall execute
and deliver such bills of sale and other recordable instruments of assignment,
transfer and conveyance as Sterigenics shall reasonably request to document the
sale, assignment, transfer, conveyance and delivery of the Purchased Assets;
provided, however, that to the extent that any such request is made after the
Closing, Sterigenics shall pay the out-of-pocket costs incurred by RTI
responding to such request
2.3 Closing Balance Sheet. The book value of the Purchased Assets
and Assumed Liabilities shall be set forth on a separate statement of the
consolidated assets and liabilities as of commencement of business on the
Closing Date (the "Closing Balance Sheet")
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which shall be delivered by RTI to Sterigenics within thirty (30) days of the
Closing Date. The book value of the Subsidiary Stock for purposes of the Closing
Balance Sheet shall exclude any intercompany transactions and any assets and
liabilities unrelated to the business of the Salem Property facility. The
Closing Balance Sheet shall be prepared by RTI in accordance with generally
accepted accounting principles ("GAAP"), applied on a consistent basis with
RTI's preceding year's audited consolidated financial statements. The Closing
Balance Sheet shall contain appropriate pro-rata accruals to the Closing Date
with respect to the Assumed Liabilities. Within thirty (30) days following the
delivery of the Closing Balance Sheet, Sterigenics shall advise RTI as to
whether Sterigenics elects, at its option and sole expense, to have the Closing
Balance Sheet audited by Ernst & Young LLP ("Ernst & Young"). Such audit shall
commence within such thirty (30) day period and shall proceed diligently to
completion. In auditing the Closing Balance Sheet, Ernst & Young shall apply
GAAP on a basis consistent with RTI's prior year's audited consolidated
financial statements and, to the extent consistent with GAAP, shall follow the
same accounting practices as employed by RTI's independent accountants.
Sterigenics' failure to audit the Closing Balance Sheet shall in no manner limit
Sterigenics' claims related to a breach of any representation or warranty
contained in Article IV below.
2.4 Consideration. As consideration for the Purchased Assets,
Sterigenics (or its wholly-owned Subsidiaries) shall pay RTI a sum equal to the
book value of the Purchased Assets less the book value of the Assumed
Liabilities (as derived from RTI's Quarterly Report on Form 10-QSB (the "March
Form 10-QSB") for the period ended March 31, 1996, plus $18,000 (the "Purchase
Price"), subject to adjustment as provided below, to be payable as follows:
(a) Subject to Section 9.1 and Section 9.4, an amount equal
to the Purchase Price less (i) $1,036,000 and (ii) the amount required to be
paid to the New Jersey Department of Environmental protection ("NJDEP") to
release its liens on the Purchased Assets as specified in a letter to RTI from
the NJDEP dated within five (5) business days prior to the Closing (the "Lien
Amount") shall be paid at the Closing, payable, at the option of RTI, by
delivery of a certified check of immediately available funds to RTI or by wire
transfer to an account designated in writing by RTI.
(b) The Lien Amount shall be paid at the Closing by delivery
to RTI by certified check made payable to NJDEP which RTI shall deliver by
courier to NJDEP within one (1)business day following the Closing.
(c) 118,000 shares of convertible, redeemable Series A
Preferred Stock of RTI, valued at $2.00 per share or an aggregate of Two Hundred
Thirty-Six Thousand Dollars ($236,000), to be tendered to RTI.
(d) The sum of Eight Hundred Thousand Dollars ($800,000)
(the "Escrow Amount"), subject to adjustment as described below, shall be held
in escrow and paid as follows: (i) upon the resolution of all claims for a
Purchase Price Adjustment (as defined in Section 11.2 below) or the expiration
of the period in which Sterigenics is entitled to make such a claim as set forth
in clause (e) below, an aggregate of Four Hundred Thousand Dollars ($400,000)
less the amount of any such Purchase Price Adjustment, and (ii) upon the
six-month anniversary of the Closing, an aggregate of Four Hundred Thousand
Dollars ($400,000), less any
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amounts delivered to Sterigenics in satisfaction of Claims (as defined in
Section 11.2 below), other than Claims for a Purchase Price Adjustment, made by
Sterigenics and any amounts subject to pending but unresolved Claims of
Sterigenics pursuant to the terms of the Escrow Agreement attached hereto as
Exhibit 2.4(d) (the "Escrow Agreement"). At the Closing, Sterigenics shall
deposit the Escrow Amount with Lowenstein, Sandler, Kohl, Fisher & Boylan (the
"Escrow Agent"), located at 65 Livingston Avenue, Roseland, New Jersey
07068-1791, pursuant to the terms of the Escrow Agreement.
(e) If the book value of the Purchased Assets less the book
value of the Assumed Liabilities, as contained in the Closing Balance Sheet, is
greater than the Purchase Price less $18,000 (the "Adjusted Price"), Sterigenics
shall pay to RTI by wire transfer to an account designated in writing by RTI an
additional amount equal to the amount of such difference within ten (10) days of
the earlier of (i) the completion of any audit of the Closing Balance Sheet by
Ernst & Young or (ii) Sterigenics' election not to have the Closing Balance
Sheet audited by Ernst & Young, as provided in Section 2.3 above. If the book
value of the Purchased Assets less the book value of the Assumed Liabilities, as
contained in the Closing Balance Sheet, is less than the Adjusted Price,
Sterigenics shall be entitled to indemnification for the amount of any such
difference as provided in Section 11.2 below. If Ernst & Young has conducted an
audit of the Closing Balance Sheet, the book value of the Purchased Assets and
the Assumed Liabilities shall be determined by the Closing Balance Sheet as
audited by Ernst & Young and any differences between the Closing Balance Sheet
provided by RTI and the Closing Balance Sheet as audited by Ernst & Young shall
be identified in reasonable detail to RTI at the time the aduit is delivered to
RTI; provided, however, that if RTI objects in writing to the Closing Balance
Sheet as audited by Ernst & Young within thirty (30) days after the delivery by
Sterigenics to RTI of the results of the Ernst & Young audit, the dispute shall
be conclusively settled by arbitration in accordance with Section 13.14;
provided, however, that the arbitrator shall be a partner of one of the ten
largest certified public accounting firms in the United States, excluding Ernst
& Young and BDO Seideman, who shall be selected by agreement of RTI and
Sterigenics. If RTI and Sterigenics are unable to agree upon an arbitrator
within fifteen (15) days, RTI and Sterigenics shall each select an arbitrator,
and the two arbitrators so selected shall select a third arbitrator who meets
the above criteria.
2.5 Assumption of Liabilities. (a) Subject to the terms and
conditions herein, effective upon the Closing, Sterigenics hereby assumes and
agrees to perform, pay and discharge the Assumed Liabilities. Notwithstanding
the foregoing, Sterigenics does not hereby assume or agree to perform, pay or
discharge, and RTI shall remain unconditionally liable for, from and after the
date hereof, any and all Excluded Liabilities. (b) Nothing herein shall be
deemed to deprive Sterigenics of any defenses, set-offs or counterclaims
against third parties which RTI may have had or which Sterigenics shall have
with respect to any of the obligations, liabilities and commitments hereby
assumed (the "Defenses and Claims"). Effective at the Closing, RTI hereby
transfers conveys and assigns to Sterigenics all Defenses and Claims and agrees
to cooperate with Sterigenics at Sterigenics' expense to maintain, secure,
perfect and enforce such Defenses and Claims, including the signing of any
documents, the giving of any testimony or the taking of any such other action
as is reasonably requested by Sterigenics in connection with such Defenses and
Claims. (c) Sterigenics shall pay all sales, use and transfer taxes, if any,
due upon the sale or transfer of the Purchased Assets. All non-delinquent
personal and real property taxes
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arising as a result of the operation of RTI's business (other than taxes on
income) shall be prorated between the parties as of the Closing Date based on
most recently available figures, provided that RTI shall be solely responsible
for all real property taxes related to the Rockaway Property, except as
otherwise provided in the Rockaway Lease (as defined in Section 9.7 hereof). Any
supplemental taxes attributable to events occurring prior to the Closing Date
shall be the sole responsibility of RTI, irrespective of when such taxes are
assessed. If supplemental taxes for which RTI is responsible hereunder are
assessed after the Closing Date, RTI shall promptly pay the same upon receiving
notice thereof from Sterigenics.
2.6 Closing Costs. Sterigenics shall pay all transfer taxes and all
costs for preparing, executing and acknowledging the deeds and other conveyance
documents (including without limitation lease assignment and assumption
instruments) transferring title or a leasehold interest, as the case may be, in
the Real Properties to Sterigenics and any other recorded documents together
with the cost of the Title Policies (as defined in Section 6.5(e) hereof).
2.7 Purchase Price Allocation. The Purchase Price shall be allocated
as set forth in the Allocation of Purchase Price to be provided to RTI by
Sterigenics with ten (10) days prior to Closing. RTI and Sterigenics each agree
to use such allocation in filing Internal Revenue Form 8594.
ARTICLE III
THE CLOSING
3.1 The Closing. The Closing shall take place at the offices of
Warshaw Burstein Cohen Schlesinger & Kuh, LLP or at such other location as RTI
and Sterigenics may agree, at 10:00 a.m. Eastern Daylight Savings Time, on the
Closing Date.
3.2 Instruments of Transfer and Sale. At the Closing, RTI will
deliver to Sterigenics (or its wholly-owned Subsidiaries) all documents and
instruments, including bills of sale and the like, described in Section 9.20 and
Sterigenics (or its wholly-owned Subsidiaries) will deliver to RTI all documents
and instruments described in Section 10.9.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RTI
RTI hereby represents and warrants to Sterigenics that the statements
contained in this Article IV are true and correct, except as set forth in the
disclosure schedule delivered by RTI to Sterigenics on or before the date of
this Agreement (the "RTI Disclosure Schedule"). The RTI Disclosure Schedule
shall be arranged in Sections corresponding to the numbered and lettered
Sections contained in this Article IV; provided, however, that the failure to
make a disclosure in reference to a particular representation shall not give
rise to a breach of this Agreement if the applicability to such representation
of exceptions to other representations is obvious on its face without any
investigation by Sterigenics. No fact or circumstance disclosed to Sterigenics
shall constitute an exception to these representations and warranties unless
such fact or circumstance is set forth in the RTI Disclosure Schedule. As used
in this Agreement,
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"knowledge" shall mean the actual knowledge of the executive officers of RTI
after reasonable inquiry.
4.1 Organization. Each of RTI and the South Jersey Subsidiary is
a corporation duly and validly existing and in good standing under the laws of
the State of New York and New Jersey, respectively. Each of RTI and the South
Jersey Subsidiary is qualified to do business as a foreign corporation in each
state of the United States in which it is required to be qualified, except in
states in which the failure to qualify, in the aggregate, would not have a
material adverse effect on the Purchased Assets or the assets of the South
Jersey Subsidiary. All of the outstanding shares of capital stock of the South
Jersey Subsidiary are duly authorized, validly issued, fully paid and
nonassessable and all such shares are owned by RTI and are held by RTI free and
clear of all limitations on voting rights.
4.2 Subsidiaries. Other than the South Jersey Subsidiary, RTI has
no Subsidiaries which currently are engaged in any active business or have any
material assets or liabilities.
4.3 Authorization. This Agreement and the Option Agreement have
been, and each of the Escrow Agreement, the Rockaway Lease (as defined in
Section 9.7) and lease memorandum, and all deeds and other conveyance documents
used in order to consummate the Acquisition (collectively, the "Ancillary
Documents") will prior to the Closing be, duly and validly executed and
delivered by RTI. This Agreement and the Option Agreement do and the Ancillary
Agreements will constitute valid and binding agreements of RTI, enforceable
against RTI in accordance with their terms. RTI has all requisite power and
authority to execute and deliver this Agreement, the Option Agreement and the
Ancillary Documents and, subject to approval by RTI's shareholders, at the time
of the Closing will have all requisite power and authority to enable it to
carry out the transactions contemplated by this Agreement and the Ancillary
Documents. All necessary corporate action on the part of RTI and its
Subsidiaries has been taken to authorize the execution and delivery of this
Agreement, the Option Agreement and the Ancillary Documents and, subject to
shareholder approval, consummation of the transactions contemplated thereby.
4.4 No Conflicts; Consents.
(a) The execution and the delivery of this Agreement, the
Option Agreement and the Series A preferred stock purchase agreement to be
entered into concurrently with this Agreement between RTI and Sterigenics dated
as of the date hereof do not, the execution and delivery of the other Ancillary
Documents by RTI will not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not,
conflict with, result in a breach by RTI of, constitute a default (with or
without notice or lapse of time, or both) by RTI under or violation by RTI of,
or result in the creation of any lien, charge or encumbrance pursuant to any
provision of the Certificate of Incorporation or Bylaws of RTI or its
Subsidiaries, any order, rule, law or regulation of any court or governmental
authority, foreign or domestic, or any provision of any material agreement,
instrument, understanding, order, judgment or decree to which RTI or its
Subsidiaries is a party or by which any of RTI or its Subsidiaries or any of
their properties or assets is bound or affected, nor will such actions give to
any other person or entity any interests or rights of any kind, including
rights of termination,
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acceleration or cancellation, in or with respect to any of the Purchased Assets
or the assets of the South Jersey Subsidiary.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to RTI or its Subsidiaries in
connection with the execution and delivery of this Agreement by RTI or the
consummation by RTI of the transactions contemplated hereby, except for (i)
filings in order to comply with all applicable bulk sales laws, (ii) the filing
of a definitive proxy statement with the Securities and Exchange Commission
(the "SEC") in accordance with the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country in which
RTI conducts any business or owns any property or assets, (iv) the filing by
RTI of a Current Report on Form 8-K with the SEC, and (v) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not be reasonably likely to have a material adverse effect on RTI.
4.5 SEC Filings; Financial Statements. (a) RTI has filed all forms,
reports and documents required to be filed by RTI with the SEC since January 1,
1995 (collectively, the "RTI SEC Reports"). The RTI SEC Reports (i) at the time
filed, complied in all material respects with the applicable requirements of
the Securities Act of 1933, as amended (the "Securities Act") and the Exchange
Act, as the case may be, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such RTI SEC Reports or
necessary in order to make the statements in such RTI SEC Reports, including
any RTI SEC Reports filed after the date of this Agreement until the Closing,
complied or will comply as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-QSB
of the SEC) and fairly presented or will fairly present in all material
respects the consolidated financial position of RTI as at the respective dates
and the results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which are not expected as of the date
of this Agreement to be material in amount. The audited year-end consolidated
financial statements of RTI as of December 31, 1994 and the unaudited interim
consolidated financial statements for the quarter ended September 30, 1995 are
referred to herein as the "RTI Financial Statements." The date of the RTI
Financial Statements shall be the date of the latest interim balance sheet,
unless otherwise specified; (c) RTI's consolidated balance sheet as of March
31, 1996 (the "March Balance Sheet"), when delivered prior to Closing, will be
accurate and complete in all material respects and will have been prepared in
accordance with GAAP applied on a basis consistent with the preparation of the
RTI Financial Statements; (d) the Closing Balance Sheet, when delivered
pursuant to Section 2.3 above, shall fairly state the Purchased Assets and
Assumed Liabilities and shall have been prepared in
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accordance with GAAP on a basis consistent with the preparation of the March
Balance Sheet. Other than the IRB, there are no liabilities of the South
Jersey Subsidiary that, if they were liabilities of RTI, would not constitute
Assumed Liabilities under the terms of this Agreement.
4.6 Absence of Certain Changes or Events. Since the date of the
RTI Financial Statements, RTI and the South Jersey Subsidiary have conduced
their respective businesses in the ordinary course and in a manner consistent
with past practices, and since such date, except as disclosed in the SEC
Reports, RTI has not: (a) suffered any material adverse change in its financial
condition, results of operations or business, or any material adverse changes in
its consolidated balance sheet (analyzed as if prepared according to GAAP) (a
"Material Adverse Change"), including but not limited to cash distributions or
material decreases in the net assets of RTI; (b) suffered any damage,
destruction or loss, whether covered by insurance or not, materially and
adversely affecting the Purchased Assets, the Rockaway Property, the assets of
the South Jersey Subsidiary or RTI's business; (c) sold, leased, abandoned or
otherwise disposed of any real property or any material amounts of machinery,
equipment or other operating property other than in the ordinary course of
business; (d) sold, assigned, transferred, licensed or otherwise disposed of
any material patent, trademark, trade name, brand name, copyright (or pending
application for any patent, trademark or copyright), invention, work of
authorship, process, know-how, formula or trade secret or interest thereunder or
other material intangible asset except in the ordinary course of its business;
(e) entered into any material commitment or transaction (including without
limitation any borrowing or capital expenditure) that would be included in the
Assumed Liabilities under the terms of this Agreement, other than in the
ordinary course of business; (f) incurred any liabilities that would be
included in the Assumed Liabilities under the terms of this Agreement, except
in the ordinary course of business and consistent with past practice which
would be required to be disclosed in financial statements prepared in
accordance with GAAP; (g) permitted or allowed any of the Purchased Assets, the
assets of the South Jersey Subsidiary or the Rockaway Property to be subjected
to any mortgage, deed of trust, pledge, lien, security interest or other
encumbrance of any kind, except Permitted Encumbrances and any purchase money
security interests incurred in the ordinary course of business and mechanic's
or materialmen's liens incurred in connection with ongoing construction of an
addition to the North Carolina Property; (h) made any material amendment to or
terminated any agreement which, if such agreement not so amended or terminated,
would be required to be disclosed on the RTI Disclosure Schedule; (i) agreed to
take any action described in Section 6.3 or which would constitute a material
breach of any of the representations contained in this Agreement; or (j) taken
any other action that would have required the consent of Sterigenics pursuant
to Section 6.3 of this Agreement (and which has not been obtained) had such
action occurred after the date of this Agreement and that would be reasonably
likely to have a material adverse effect on RTI.
4.7 No Undisclosed Liabilities. Except as disclosed in the RTI SEC
Reports, the South Jersey Subsidiary does not have any liabilities, either
accrued or contingent (whether or not required to be reflected in financial
statements in accordance with GAAP), and whether due or to become due, which
individually or in the aggregate, would be reasonably likely to have a material
adverse effect on the South Jersey Subsidiary other than (i) liabilities
reflected in the RTI Financial Statements, (ii) liabilities specifically
described in this Agreement, and
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(iii) normal or recurring liabilities incurred since the date of the RTI
Financial Statements in the ordinary course of business consistent with
past practices.
4.8 Tangible Assets. The Tangible Assets being used in the operation
of RTI's business are, and at the Closing Date will be, in good operating
condition and repair, ordinary wear and tear and routine maintenance excepted.
4.9 Receivables. The Receivables constitute all of the accounts
receivable of RTI and its Subsidiaries and are valid and genuine; have arisen
solely out of bona fide sales and deliveries of goods, performance of services
and other business transactions in the ordinary course of business consistent
with past practice; are not subject to valid defenses, set-offs or
counterclaims; and are collectible (using a level of effort consistent with
that currently used by RTI) within 12 months of the date hereof at the full
recorded amount thereof, less the customary allowance for collection losses,
which allowance has been determined in accordance with GAAP consistent with
past practices; provided, however, that RTI makes no representation or warranty
as to the ultimate collection thereof.
4.10 Compliance With Other Instruments. Neither RTI nor its
Subsidiaries is a party to, nor bound by, any written or oral material
contract, agreement license, indenture, mortgage, debenture, note or other
instrument under the terms of which performance by RTI or its Subsidiaries
according to the terms of this Agreement, the Option Agreement and the
Ancillary Documents will be a default or an event of acceleration, or whereby
timely performance by RTI or its Subsidiaries according to the terms of this
Agreement, the Option Agreement and the Ancillary Documents may be prohibited,
prevented or delayed.
4.11 Litigation. Except as disclosed in the RTI SEC Reports, there is
no material action, suit, proceeding or investigation in progress or pending
before any court or governmental agency, against or relating to RTI or its
Subsidiaries or their properties (including the Real Properties), assets or
business, nor, to the knowledge of RTI, any threat thereof. Neither RTI nor its
Subsidiaries is a party to any decree, order or arbitration award (or agreement
entered into in any administrative, judicial or arbitration proceeding with any
governmental authority) with respect to any material portion of the properties,
assets, personnel or business activities of RTI's and its Subsidiaries'
business.
4.12 Compliance with Laws and Regulations: Governmental Licenses,
Etc. Except as set forth in the RTI SEC Reports, to RTI's knowledge, each of
RTI and its Subsidiaries and each of the Real Properties and the Improvements
are in compliance in all material respects with all statutes, laws, rules and
regulations with respect to or affecting the Real Properties, the Improvements
and Sterigenics' continued use and enjoyment of the Purchased Assets and the
assets of the South Jersey Subsidiary, including, without limitation, laws,
rules and regulations relating to occupational health and safety, equal
employment opportunities, fair employment practices, and sex, race, religious
and age discrimination, except where the failure to comply would not have a
material adverse effect on RTI. Neither RTI nor its Subsidiaries is subject to
any order, injunction or decree issued by any governmental body, agency,
authority or court which could impair the ability of RTI to consummate the
transactions contemplated hereby or which could materially adversely affect
Sterigenics' ownership, use and enjoyment of the Purchased Assets or the
assets of the South Jersey Subsidiary or the value thereof. RTI and its
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Subsidiaries (i) possess all licenses, permits and governmental or other
regulatory approvals and authorizations which are required in order for RTI and
its Subsidiaries to operate their facilities or carry on their sterilization
business as presently conducted, including, without limitation, all required
licenses, permits and approvals of the Nuclear Regulatory Commission ("NRC"),
NJDEP, the North Carolina Department of Radiological Health ("NCDRH") and the
Food and Drug Administration ("FDA") and (ii) are in compliance in all material
respects with all such licenses, permits, approvals and authorizations, except
where the failure to comply would not have a material adverse effect on RTI.
4.13 Taxes. All Federal, state, local and other returns and reports
relating to any and all taxes or any other governmental charges, obligations or
fees for taxes and any related interest or penalties ("Tax" or "Taxes")
required to be filed with respect to the South Jersey Subsidiary have been
timely filed within the time period for filing or any extension granted with
respect thereto and such returns and reports are true and correct, unless such
late filings or inaccuracies would not have a material adverse effect on the
Purchased Assets, the assets of the South Jersey Subsidiary, the Rockaway
Property or the business of RTI. The South Jersey Subsidiary has paid all
Taxes, if any, shown to be due and payable on said returns and reports and has
withheld with respect to employees all Federal and state income Taxes, FICA,
FUTA and other Taxes required to be withheld and has timely paid all sales, use
and similar Taxes. No income, sales, use or similar Tax return or report with
respect to the South Jersey Subsidiary has been examined or audited by the
Internal Revenue Service or any state taxing authority. There are no pending
or, to RTI's knowledge, threatened audits, examinations, assessments, asserted
deficiencies or claims for additional Taxes with respect to the South Jersey
Subsidiary.
4.14 Employees. Neither RTI nor the South Jersey Subsidiary is a
party to any collective bargaining agreement, nor has RTI experienced any
strikes, written material grievances, claims of unfair labor practices or other
collective bargaining disputes within the past two (2) years. As of the date
of this Agreement, RTI and the South Jersey Subsidiary have not been notified
of any pending claims by employees or former employees for workman's
compensation.
4.15 Environmental Matters.
(a) Except as separately and specifically disclosed otherwise in
the RTI SEC Reports: (i) RTI has obtained all Material Environmental Approvals
required in connection with its business, and all such Environmental Approvals
are current, valid and in good standing in all Material respects, and there are
no proceedings commenced or to RTI's knowledge threatened to revoke or amend any
Environmental Approvals; (ii) all operations of the business on the Real
Property while occupied by RTI, have been and are now in compliance with all
Environmental Laws; (iii) neither RTI nor its operations has been or is now the
subject of any Remedial Order, nor does RTI have any knowledge of any
investigation or evaluation commenced as to whether any such Remedial Order is
necessary nor has any threat of any such Remedial Order been made nor are there
any circumstances which could result in the issuance of any such Remedial Order;
(iv) within the past 10 years, RTI has never been prosecuted for or convicted of
any offense under Environmental Laws, nor has RTI been found liable in any
proceeding to pay any fine or judgment to any Person as a result of any Release
or threatened Release of any Hazardous Material into the Environment or the
breach of any Environmental
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Law and to the knowledge of RTI, there is no basis for any such proceeding; (v)
all material environmental data and studies (including, without limitation, the
results of any environmental audit) relating to the business have been
delivered or made available to Sterigenics; (vi) RTI is not aware of any
Release which is now present in, on or under any of the Real Properties
(including underlying soils and substrata, surface water and groundwater) at
levels which exceed any action levels or remediation standards under any
Environmental laws or standards published or administered by those Governmental
Authorities responsible for establishing or applying such standards; (vii) RTI
has no knowledge of any Hazardous Materials in, on, or under the Real
Properties or any other assets relating to RTI's business; (viii) RTI has no
knowledge of any Hazardous Materials originating from any neighboring or
adjoining properties which has migrated onto, or is migrating towards any of
the Real Properties or any other asset of RTI's business; and (ix) the business
of RTI in New Jersey is not in a Standard Industrial Classification code
covered by the Industrial Site Recovery Act.
(b) With respect to Environmental Matters separately and
specifically disclosed in the RTI SEC Reports: (i) RTI is in full compliance
with all Remedial Orders; (ii) RTI is current with respect to all charges,
assessments, or claims for which a lien against the Real Properties or other
assets of RTI's business under any Environmental Law may be filed or asserted,
and there are no unpaid liens or assessments outstanding; and (iii) RTI is not
in default of any obligation or demand from any Governmental Authority with
respect to investigations or remediation activities which RTI is obligated to
undertake.
(c) As used in this Section 4.15, the following terms have
these meanings:
(i) "Environmental Laws" means all applicable
statutes, rules, regulations, ordinances, orders, decrees, judgments, permits,
licenses, consents, approvals, authorizations, and governmental requirements or
directives or other obligations lawfully imposed by governmental authority
under federal, state or local law pertaining to the protection of the
environment, protection of public health, protection of worker health and
safety (excluding OSHA and comparable state laws, which are covered under
Section 4.12 above), the treatment, emission and/or discharge of gaseous,
particulate and/or effluent pollutants, and/or the Handling of Hazardous
Materials, including without limitation, the Clean Air Act, 42 U.S.C. Section
7401, et seq., the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), 42 U.S.C. Section 9601, et seq., the Federal
Water Pollution Control Act, 33 U.S.C. Section 1321, et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq. ("RCRA"), and
the Toxic Substances Control Act, 15 U.S.C. Section 2601, et seq.
(ii) "Hazardous Material(s)" means any substance,
waste, material, chemical, compound or mixture which is (or which contains any
substance, waste, material, chemical, compound, or mixture which is) flammable,
ignitable, corrosive, reactive, radioactive, or explosive, or is defined,
listed, designated, described or characterized under Environmental Laws or under
any rules, guidances, policies, or regulations promulgated thereunder, as
hazardous, toxic, a contaminant, a pollutant or words of similar import, and
includes without limitation any "hazardous substance" under CERCLA, any
"hazardous waste"
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under RCRA, asbestos, petroleum (including crude oil or any fraction or
distillate thereof), natural gas, natural gas liquids, and liquified natural
gas.
(iii) "Material" means anything that reasonably could be
expected to lead to the imposition of any significant penalties or fines, that
could reasonably be expected to require a capital expenditure of more than
$100,000, or that reasonably could be expected to interfere, interrupt or
threaten to interfere or interrupt in a significant manner the continued
operation of RTI's business as currently conducted.
(iv) "Person" means any natural person, corporation,
partnership, business trust or other business entity or enterprise.
(v) "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing.
(vi) "Environmental Approval(s)" means all permits,
certificates, licenses, authorizations, consents, instructions, registrations,
directions or approvals, issued or required by Governmental Authorities pursuant
to Environmental Laws with respect to the operations of RTI in connection with
its business.
(vii) "Governmental Authorities" means any government,
regulatory authority, governmental department, agency, commission, board,
tribunal, or court or other law, rule or regulation-making entity having or
purporting to have jurisdiction over Environmental Laws on behalf of the United
States, or any state or other subdivision thereof, or any municipality.
(viii) ""Remedial Order(s)" means any judicial or
administrative order, directive, complaint or sanction issued, filed or imposed
by any Governmental Authority pursuant to any Environmental Laws, and includes,
without limitation, any order requiring any remediation or cleanup of any
Hazardous Materials, or requiring that any Release or any other activity be
reduced, modified, abated, or eliminated.
4.16 Proprietary Rights. RTI owns all right, title and interest in
and to or has a license to use all technology, software, software tools,
know-how, processes, trade secrets, trade names and other proprietary rights
used in or necessary for the conduct of RTI's and its Subsidiaries' business as
conducted on the date hereof or contemplated by RTI free and clear of all liens,
claims and encumbrances (all of which are referred to as "Proprietary Rights").
No material claims have been asserted against RTI or its Subsidiaries (and RTI
is not aware of any claims which are likely to be asserted against RTI or its
Subsidiaries or which have been asserted against others) by any person
challenging RTI's or its Subsidiaries' use of any trademarks, tradenames,
copyrights, trade secrets, software, technology, know-how or processes utilized
by RTI or its Subsidiaries or challenging or questioning the validity or
effectiveness of any license or agreement relating thereto.
4.17 Employee Benefit Plans. There is no unfunded prior service cost
with respect to any bonus, deferred compensation, pension, profit-sharing,
retirement, stock purchase, stock option, or other employee benefit or fringe
benefit plans, whether formal or informal,
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maintained by RTI. RTI has no bonus, deferred compensation, pension,
profit-sharing, retirement, stock purchase, stock option, or other employee
benefit or fringe benefit plans, whether formal or informal, which is required
to conform with the Employees Retirement Income Security Act of 1974.
4.18 Contracts.
(a) None of the Contracts related to irradiation services are
currently expected to result in any loss (before allocation of Cobalt
amortization, overhead and administrative costs) upon completion or performance
thereof. Except for the Contracts listed on Schedule 1.5, none of the Contracts
call for fixed and/or contingent payments or expenditures by or to RTI and its
Subsidiaries of more than $50,000.
(b) All material contracts, agreements and instruments to which
RTI and its Subsidiaries are a party are valid, binding, in full force and
effect, and, assuming each is a valid obligation of the other party,
enforceable by RTI in accordance with their respective terms. No such material
contract, agreement or instrument contains any material liquidated-damages,
penalty or similar provision. To RTI's knowledge, no party to any such material
contract, agreement or arrangement.
(c) RTI and its Subsidiaries are not in default under or in
breach or violation of, nor, to RTI's knowledge, is there any valid basis for
any claim of default by RTI or its subsidiaries of, any material contract,
commitment or restriction to which RTI or its Subsidiaries is a party or to
which it or any of its properties is bound, where such defaults, breaches, or
violations would, in the aggregate, have a material adverse effect on the
Purchased Assets, the assets of the South Jersey Subsidiary, the Rockaway
Property or the operation of the business of RTI. To RTI's knowledge, no other
party is in default under or in breach or violation of any Contract listed in
Schedule 1.5.
4.19 No Misrepresentation. No representation, warranty or covenant by
RTI in this Agreement, the Option Agreement, any other Ancillary Document, nor
any statement, certificate or schedule furnished or to be furnished by or on
behalf of RTI pursuant to this Agreement, when taken together with the
foregoing, contains or shall contain any untrue statement of material fact or
omits or shall omit to state a material fact required to be stated therein or
necessary in order to make such statements, in light of the circumstances under
which they were made, not materially misleading. RTI has delivered or otherwise
made available true and complete copies of all documents requested by
Sterigenics and which are referred to in this Article IV or in any Schedule
delivered by RTI to Sterigenics.
4.20 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding on RTI or its
Subsidiaries which has or reasonably would be expected to have the effect of
prohibiting or materially impairing any material current business practice of
RTI and its Subsidiaries, any acquisition of material property by RTI or its
Subsidiaries, or the conduct of business by RTI as currently conducted or as
proposed to be conducted.
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4.21 Transfers. Except for this Agreement, the Option Agreement and the
Ancillary Documents, neither RTI nor its Subsidiaries have entered into any
pending agreement to convey, sell, assign, lease, transfer or encumber the Real
Properties or any material portion of the other Purchased Assets or the assets
of the South Jersey Subsidiary, and neither RTI nor its Subsidiaries shall do so
prior to the Closing Date without Sterigenics' prior written consent, which may
be granted or withheld in Sterigenics' discretion reasonably exercised.
4.22 Title.
(a) Except as set forth in the RTI SEC Reports, RTI or its Subsidiaries
owns the North Carolina Property and the Rockaway Property free and clear of all
liens, leases, occupancy agreements, licenses, encumbrances, covenants,
conditions, restrictions, rights-of-way, easements, and other matters affecting
title, except as to the Permitted Encumbrances, those particular items disclosed
in the applicable Title Reports (as defined in Section 6.5(a) hereof) and other
encumbrances and restrictions which in the aggregate would not have a material
adverse effect on the use in the manner presently used by RTI, value or
transferability of the Real Property Assets. Except as set forth in the RTI SEC
Reports, the South Jersey Subsidiary has a binding and enforceable leasehold
interest in the Salem Property. To RTI's knowledge, except as disclosed in the
Title Reports, no other person or entity has claimed or is entitled to claim any
legal or equitable interest in the Real Properties.
(b) RTI and its Subsidiaries have good and marketable title to
all of the Purchased Assets (excluding the Real Property Assets) and the assets
of the South Jersey Subsidiary owned by RTI and its Subsidiaries and valid,
binding and enforceable leasehold interests in all Tangible Assets that are
subject to leases. Except as disclosed in the RTI SEC Reports, all of the
Purchased Assets (except the Real Property Assets) and all of the assets of the
South Jersey Subsidiary are free and clear of restrictions on or conditions to
transfer or assignment, and free and clear of all claims, liabilities, liens,
pledges, mortgages, restrictions and encumbrances of any kind, whether accrued,
absolute, contingent or otherwise ("Encumbrances") affecting the Purchased
Assets (except the Real Property Assets) or the assets of the South Jersey
Subsidiary except for Permitted Encumbrances. At the Closing, RTI will sell,
convey, assign, transfer and deliver to Sterigenics good, valid and marketable
title and all RTI's right and interest in and to all of the Purchased Assets
(excluding the Real Property Assets), free and clear of any Encumbrances,
except for Permitted Encumbrances. At the Closing, all of the assets of the
South Jersey Subsidiary will be free and clear of any Encumbrances, except for
Permitted Encumbrances.
4.23. No Condemnation. To RTI's knowledge, there is no condemnation or
other like proceeding pending or threatened against the Real Properties or any
part thereof and no such proceeding is being contemplated.
4.24. Governmental Commitments. To RTI's knowledge, no commitment to
or agreement with any governmental or quasi-governmental authority exists which
could affect the Real Properties, including but not limited to any formation of
any special assessment district or community facilities district, except as
disclosed in this Agreement.
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4.25 Easements. To RTI's knowledge, all existing water, drainage,
sewage and utility facilities relating to the Real Properties, from the
boundary thereof until entering the public right-of-way or other public
facility, are situated within valid easements granted by all persons or other
entities having any interest in or right or title to any property which is
subject to such easement and are referenced in the Title Reports.
4.26 Maintenance of Real Properties. Prior to the Closing Date and the
actual transfer to Sterigenics of title to the North Carolina Property and the
Subsidiary Stock and delivery of the executed Rockaway Lease, RTI shall
maintain the Real Properties and the Improvements in substantially their
present condition, reasonable wear and tear or loss due to the elements
excepted. In the event that prior to the Closing any of the Real Properties or
the Improvements are destroyed or damaged and the cost to repair such damage
exceeds Two Hundred Fifty Thousand Dollars ($250,000), such event shall be
deemed to constitute a material adverse change under Section 9.12 hereof.
4.27 Condition of Improvements. To RTI's knowledge the Improvements
(including the roof and roof membrane, exterior and structural walls,
foundations, floor slabs, and other load-bearing components of the
Improvements) are in operable condition and repair (as hereinafter defined). To
RTI's knowledge all elevators, heating, ventilation and air conditioning
systems ("HVAC"), plumbing, electrical, wiring, life safety, and other
equipment, appurtenances, systems and improvements are in operable condition
and repair. For purposes of this Section, the term "operable condition and
repair" means that there are no material defects or state of disrepair that
have a material adverse effect on the operations of the business as currently
conducted by RTI from each of the Real Properties.
4.28 Compliance With Laws. RTI has received no written notice from any
governmental authority that the Improvements fail to comply with any applicable
codes, statutes, ordinances, regulations, permits, orders, directives, or other
laws in any material respects. As of the Closing the Improvements and all parts
thereof shall be in a safe and habitable condition.
4.29 Industrial Revenue Bonds. RTI has provided Sterigenics with true,
complete and correct copies of the IRB Documentation. Except with the prior
written consent of Sterigenics, which may be withheld or granted in
Sterigenics' sole and absolute discretion, RTI and its Subsidiaries shall not
amend or modify the IRB Documentation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF STERIGENICS
Sterigenics hereby represents and warrants to RTI as follows:
5.1 Organization. Sterigenics is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
5.2 Authorization. This Agreement has been, and each of the Ancillary
Documents will prior to the Closing be, duly and validly executed and delivered
by Sterigenics. This Agreement does and the Ancillary Agreements will
constitute valid and binding agreements
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of Sterigenics, enforceable against Sterigenics in accordance with their terms.
Sterigenics has all requisite power and authority to execute and deliver this
Agreement and the Ancillary Documents and to enable it to carry out the
transactions contemplated by this Agreement and the Ancillary Documents. All
necessary corporate action on the part of Sterigenics has been taken to
authorize the execution and delivery of the Agreement and the Ancillary
Documents.
5.3 Effect of Agreement; Consents. The execution and
delivery of this Agreement by Sterigenics and the execution and delivery of the
Ancillary Documents by Sterigenics do not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, result in a breach of, constitute a default (with or
without notice or lapse of time, or both) under or violation of, or result in
the creation of any lien, charge or encumbrance pursuant to any provision of
the Articles of Incorporation or Bylaws of Sterigenics, any order, rule, law or
regulation of any court or governmental authority, foreign or domestic, or any
provision of any material agreement, instrument, understanding, order, judgment
or decree to which Sterigenics is a party or by which Sterigenics is bound. No
consent or approval of any third party or any governmental authority is required
to be obtained on the part of Sterigenics to permit the consummation of the
transactions contemplated by this Agreement or the Ancillary Documents.
5.4 Compliance With Other Instruments. Sterigenics is not a
party to, or bound by, any written or oral contract, agreement, license,
indenture, mortgage, debenture, note or other instrument under the terms of
which performance by Sterigenics according to the terms of this Agreement and
the Ancillary Documents will be a default or an event of acceleration, or
whereby timely performance by Sterigenics according to the terms of this
Agreement and the Ancillary Documents may be prohibited, prevented or delayed.
5.5 Sufficient Financing. Sterigenics has, and at the
Closing will have, sufficient financing available to it to consummate the
Acquisition.
ARTICLE VI
COVENANTS OF RTI
6.1 No Solicitation.
(a) From and after the date of this Agreement until
the Closing Date, RTI shall not, directly or indirectly, through any officer,
director, employee, representative or agent of RTI (i) solicit, initiate, or
encourage any inquiries or proposals that constitute, or could reasonably be
expected to lead to, a proposal or offer for a merger, consolidation, business
combination, sale of all or substantially all of the assets, sale of shares of
capital stock (including without limitation by way of a tender offer) or similar
transactions involving RTI, other than the transactions contemplated by this
Agreement (any of the foregoing inquiries or proposals being referred to in
this Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or
discussions concerning, or provide any non-public information to any person or
entity relating to, any Acquisition Proposal, or (iii) agree to, approve or
recommend any Acquisition Proposal; provided, however, that nothing contained
in this Agreement shall prevent RTI or its Board of Directors from (A)
furnishing non-public information to, or entering into discussions or
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negotiations with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal by such person or entity which is received
after the date hereof or recommending an unsolicited bona fide written
Acquisition Proposal which is received after the date hereof to the
shareholders of RTI, if and only to the extent that (1) the Board of Directors
of RTI believes in good faith (after consultation with its financial advisor)
that such Acquisition Proposal would, if consummated, result in a transaction
more favorable to RTI's shareholders from a financial point of view than the
transaction being contemplated by this Agreement (any such more favorable
Acquisition Proposal being referred to in this Agreement as a "Superior
Proposal") and the Board of Directors of RTI determines in good faith after
consultation with outside legal counsel that such action is necessary to
comply with its fiduciary duties to shareholders under applicable law and (2)
prior to furnishing such non-public information to, or entering into
discussions or negotiations with, such person or entity, the Board of Directors
receives from such person or entity an executed confidentiality agreement with
terms no less favorable to such party than those contained in the
Confidentiality Agreement dated October 3, 1995 between Sterigenics and RTI
(the "Confidentiality Agreement") or (B) complying with Rule 14e-2 promulgated
under the Exchange Act with regard to an Acquisition Proposal. Notwithstanding
the provisions of this Section 6.1(a), in connection with furnishing non-public
information under Section (A), RTI may refer any third party to this Section
6.1 or make a copy of this Agreement available to a third party, and in
response to an unsolicited oral Acquisition Proposal, RTI may notify the party
making the proposal that it is unable to respond to oral offers and provide
such third party with a copy of this Section 6.1(a).
(b) RTI shall notify Sterigenics no later than one
(1) business day after receipt by RTI of any Acquisition Proposal or any request
for nonpublic information in connection with an Acquisition Proposal or for
access to the properties, books or records of RTI by any person or entity that
informs RTI that it is considering making, or has made, an Acquisition Proposal.
Such notice shall be made orally and in writing and shall indicate in reasonable
detail the identity of the offeror and the terms and conditions of such
proposal, inquiry or contact.
6.2 Cooperation. RTI will take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed
with respect to the consummation of the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to
Sterigenics in connection with any such requirements imposed upon Sterigenics
in connection with the consummation of the transactions contemplated by this
Agreement. RTI will take all reasonable actions necessary to obtain (and will
cooperate with Sterigenics in obtaining) any consent, approval, order or
authorization of, or any registration, declaration or filing with, any
governmental entity, domestic or foreign, or other person, required to be
obtained or made by RTI (or Sterigenics) in connection with the taking of any
action contemplated by this Agreement. Sterigenics shall reimburse RTI for all
out-of-pocket costs incurred after the Closing Date pursuant to compliance with
this Section 6.2.
6.3 Conduct of Business. During the period on and from the
date of this Agreement to the Closing, RTI will use its reasonable commercial
efforts to maintain and preserve intact (i) the business organization, rights
and privileges pertinent to RTI's business, and (ii) RTI's relationships with
its employees, consultants, independent contractors, licensors,
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suppliers, distributors and other customers and all others with whom it deals,
all in accordance with the ordinary and usual course of business. During the
period on and from the date of this Agreement to the Closing, RTI and its
Subsidiaries will not without the prior written consent of Sterigenics, which
consent shall not be unreasonably withheld or delayed: (a) encumber or permit to
be further encumbered any of the Purchased Assets, any of the assets of the
South Jersey Subsidiary or the Rockaway property, except mechanic's or
materialmen's liens incurred in connection with ongoing construction of an
addition to the North Carolina Property; (b) dispose of any Purchased Assets,
the Rockaway Property or any assets of the South Jersey Subsidiary, except in
the ordinary course of business; (c) fail to operate its business and facilities
in compliance in all material respects with all material requirements of the
NRC, the NJDEP, the NCDRH and the FDA; (d) fail to maintain the Purchased
Assets, the Rockaway Property and the Improvements thereon and the assets of the
South Jersey Subsidiary in good working condition and repair according to the
general standards it has maintained up to the date of this Agreement, subject
only to ordinary wear and tear; (e) fail to pay and discharge any Trade Payables
in the ordinary course unless disputed in good faith; (f) change accounting
methods; (g) amend or terminate any Contract listed on Schedule 1.5, except in
the ordinary course of business; (h) waive or release any material right or
claim relating to any Purchased Assets or the assets of the South Jersey
Subsidiary, except in the ordinary course of business; (i) enter into any
contract providing for a term of over one (1) year or providing for payments to
or from RTI of more than $50,000 per annum; (j) incur any indebtedness or
obligation that would become an Assumed Liability under the terms of this
Agreement other than in the ordinary course of business; (k) take any action or
fail to take any action where such action or failure to act would not be in the
ordinary course of business; or (l) agree to do any of the things described in
the preceding clauses of this Section 6.3.
6.4 Access to Information. RTI shall make available to Sterigenics
and Sterigenics' agents and representatives all information concerning the
operation, business and prospects of RTI and related entities as may be
reasonably requested by Sterigenics, including, without limitation, the
accounting and tax working papers of RTI's independent certified public
accountants. After the last to occur of (i) satisfaction of the condition set
forth in Section 9.18(ii) and termination or waiver of all contingencies
permitting termination of the Agreement under Section 6.5 hereof, RTI will
reasonably cooperate with Sterigenics for the purpose of permitting Sterigenics
to discuss RTI's business and prospects with RTI's customers, creditors,
suppliers and other persons having business dealings with RTI; provided,
however, that Sterigenics agrees that it shall not have any discussions with
RTI's customers unless a representative of RTI is present. RTI agrees to make a
representative available for such purposes during normal business hours upon at
least three (3) business days' prior notice. Sterigenics further agrees that,
without RTI's prior written consent, it will have no discussions with other
customers of RTI. Unless otherwise required by law, the parties will hold any
such information which is nonpublic in confidence in accordance with the
Confidentiality Agreement. No information or knowledge obtained in any
investigation pursuant to this Section 6.4 shall affect or be deemed to modify
any representation or warranty construed in this Agreement or the conditions to
the obligations of the parties to consummate the Acquisition. RTI shall permit
Sterigenics to audit the financial statements contained in the March Form
10-QSB; provided, however, that no adjustment shall be required to be made
thereto by RTI as a result thereof.
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6.5 Real Estate Matters.
(a) Approval of Title. Sterigenics hereby approves the
condition of title of the Rockaway Property, as shown on the title commitment
for the Rockaway Property attached hereto as Exhibit 6.5(a), excluding only
Exception No's 5(a-h), 6, 9, 11, 12, 13, 14, 18, 19 through 22 and 25 thereof
(but with respect to exceptions 19 through 22 and 25 only to the extent that (i)
such exceptions materially adversely impact or could materially adversely impact
the use of the Rockaway Property as the site of a contract irradiation facility
in the manner heretofore used and (ii) in such event, RTI does not provide
Sterigenics with a title policy insuring that such encumbrances will not
interfere with Sterigenics use of the Rockaway Property as currently used).
Sterigenics hereby approves the condition of title of the North Carolina
Property, as shown on the title commitment attached hereto as Exhibit 6.5(c),
excluding only Exception No's 3, 4, 5 (items a, b, c and g), 6 and 7 thereof.
The foregoing title commitments are referred to herein as the "Title Reports,"
and the exceptions to title approved by Sterigenics including such exceptions as
are approved with respect to the Salem Property under paragraph (b) below and
with respect to the Rockaway Property under paragraph (c) below, are
collectively referred to herein as the "Permitted Exceptions." The title
insurance companies issuing the Title Reports are referred to herein
individually as a "Title Company" and collectively as the "Title Companies."
(b) Approval of Salem Title. Sterigenics shall cause to be
prepared a title report or title commitment showing the condition of title to
the Salem property. Sterigenics shall have five business (5) days after receipt
of such title commitment and copies of all exceptions thereto to deliver to RTI
and the applicable Title Company written notice (the "Preliminary Title Notice")
of Sterigenics' approval, conditional approval, or disapproval of the title
matters disclosed in the title commitment. All matters with respect to the Salem
Property not approved in writing by Sterigenics except the Permitted
Encumbrances shall be deemed disapproved and are referred to herein as "Salem
Disapproved Exceptions;" provided, however, that Sterigenics agrees that the
Salem Disapproved Exceptions shall be limited to those exceptions which (i)
relate to monetary liens securing obligations with a face amount of $10,000 or
more individually or $50,000 or more in the aggregate or (ii) materially
adversely impact or could materially adversely impact the use of the Salem
Property as the site of a contract irradiation facility in the manner currently
used. RTI shall have five (5) business days (or such longer period as RTI may
reasonably request) after receipt of Sterigenics' Preliminary Title Notice to
give Sterigenics and the Title Company written notice (the "Salem Removal
Notice") of those Disapproved Exceptions that have been or will be removed from
title on or before the Closing. If RTI is unable or unwilling to remove a Salem
Disapproved Exception or fails to give notice as to whether it will remove a
Salem Disapproved Exception, Sterigenics shall have the option, within five (5)
business days of receipt of the Salem Removal Notice or, if RTI fails to deliver
such notice, within ten (10) business days (which period shall be extended on a
day for day basis as a result of any extension requested by RTI for delivery of
the Salem Renewal Notice) after delivery of the Preliminary Title Notice, to
terminate this Agreement by written notice to RTI, or to waive its objection to
the Disapproved Exceptions in questions by delivering notice of such waiver to
RTI and thereafter proceed to the Closing. If Sterigenics fails to deliver the
waiver notice described in the preceding sentence, Sterigenics shall be deemed
to have elected to terminate this Agreement.
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(c) Rockaway Survey. RTI and Sterigenics hereby acknowledge
that the Title Report prepared for the Rockaway Property (the "Rockaway Title
Report") describes the real property defined herein as the "Rockaway Property"
together with certain other real property (the "Excluded Property") that RTI
intends to retain and that shall not be leased or otherwise transferred to
Sterigenics pursuant to this Agreement. The parties believe that certain
exceptions in the Title Report relating to tax liens shown in Schedule B of the
Rockaway Title Report relate solely to the Excluded Property and not to the
Rockaway Property. In order to determine the exact boundaries of the Rockaway
Property and which of the title exceptions apply to the Rockaway Property,
Sterigenics shall obtain at its cost an ALTA survey (the "Survey") of the
Rockaway Property which Survey shall locate the easements described in
exceptions Nos. 19-22 and 25 to the extent they affect the Rockaway Property.
During such period, RTI hereby grants Sterigenics and its agents, contractors
and employees the right to enter upon the Rockaway Property to prepare the
Survey and to prepare a legal description of the Rockaway Property. Upon
completion of the Survey, (i) Sterigenics shall provide RTI with a copy of the
Survey and legal description, (ii) from and after the delivery to RTI of the
Survey and the legal description, all references in this Agreement to the
Rockaway Property shall be deemed to mean the real property shown on the Survey
as the Rockaway Property and described by such legal description, and (iii)
Sterigenics shall deliver the Survey and the legal description to the Title
Company and shall cause the Title Company to prepare an update to the Rockaway
Title Report to reflect the new legal description and the title exceptions
thereto. If such updated Title Report shows exceptions other than those shown on
the prior Rockaway Title Report, Sterigenics shall have five (5) business days
after receipt of such updated title report and copies of all exceptions to title
referred to therein to deliver to RTI and the Title Company written notice (the
"Rockaway Title Notice") of Sterigenics' approval, conditional approval, or
disapproval of the title matters disclosed in the updated title commitment. All
matters with respect to the Rockaway Property not approved in writing by
Sterigenics except the Permitted Encumbrances shall be deemed disapproved and
are referred to herein as "Rockaway Disapproved Exceptions;" provided, however,
that Sterigenics agrees that the Rockaway Disapproved Exceptions shall be
limited to those exceptions which (i) relate to monetary liens securing
obligations with a face amount of $10,000 or more individually or $50,000 or
more in the aggregate or (ii) materially adversely impact or could materially
adversely impact the use of the Rockaway Property as the site of a contract
irradiation facility in the manner currently used. RTI shall have five (5)
business days (or such longer period as RTI shall reasonably request) after
receipt of Sterigenics' notice to give Sterigenics and the Title Company written
notice (the "Rockaway Removal Notice") of those Rockaway Disapproved Exceptions
that have been or will be removed from title on or before the Closing. If RTI is
unable or unwilling to remove a Rockaway Disapproved Exception or fails to give
notice as to whether it will remove a Rockaway Disapproved Exception,
Sterigenics shall have the option, within five (5) business days of receipt of
the Rockaway Removal Notice or, if RTI fails to deliver such notice, within ten
(10) business days (which period shall be extended on a day for day basis as a
result of any extension requested by RTI for delivery of the Rockaway Removal
Notice) after delivery of the Rockaway Title Notice to terminate this Agreement
by written notice to RTI, or to waive its objection to the Rockaway Disapproved
Exceptions in question by delivering notice of such waiver to RTI and thereafter
proceed to the Closing. If Sterigenics fails to deliver the waiver notice
described in the preceding sentence, Sterigenics shall be deemed to have elected
to terminate this Agreement.
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(d) Environmental Inspection. RTI hereby grants Sterigenics
the right to enter upon and to inspect the Real Properties and the
environmental risks and conditions (including the soil and groundwater) of the
Real Properties. For the purpose of Sterigenics' physical inspections, RTI
agrees to provide Sterigenics and its authorized agents reasonable access to
each Real Property during normal business hours during the period starting on
the date of this Agreement and ending thirty (30) days thereafter (the "Initial
Due Diligence Period"), upon at least twelve (12) hours' prior notice to RTI,
and Sterigenics shall use reasonable good faith efforts to avoid disruption of
the operation of the Real Properties. Sterigenics may, at its option, extend
the Initial Due Diligence Period for an additional sixty (60) days by giving
notice to RTI prior to the expiration of the Initial Due Diligence Period that
it intends to conduct Phase II environmental investigation at one or more of
the Real Properties. The Initial Due Diligence Period and any such extension
are referred to collectively as the "Due Diligence Period." Without limiting
the foregoing, Sterigenics and Sterigenics' agents may, at the sole cost of
Sterigenics and upon prior notice to RTI, perform engineering and soils
surveys, geological work or other studies desired by Sterigenics. Sterigenics
and Sterigenics' agents shall be entitled, at Sterigenics' own expense, to
conduct Phase I and Phase II environmental investigations of the Real
Properties. Sterigenics agrees to hire as its contractor for such environmental
investigation a firm which maintains adequate liability insurance. If the
Closing does not occur, Sterigenics shall provide to RTI copies of all
environmental reports it caused to be prepared. If the Closing does not occur,
Sterigenics promptly shall repair and restore any damage caused to the North
Carolina Property and the Salem Property by reason of Sterigenics' or
Sterigenics' agents' entry on or investigation of the North Carolina Property
and the Salem Property. Whether or not the Closing occurs, Sterigenics shall
promptly repair and restore any damage caused to the Rockaway Property by
reason of Sterigenics' or Sterigenics' agents' entry on or investigation of the
Rockaway Property. Sterigenics shall provide to RTI copies of all invoices for
work performed to repair and restore any damage to the Real Properties along
with evidence that such invoices have been paid. Sterigenics hereby agrees to
indemnify RTI and to hold RTI, RTI's agents and employees and the Real
Properties harmless from and against any and all losses, costs, damages, claims
or liabilities including, but not limited to, mechanic's and materialmen's
liens and reasonable attorneys' fees, arising out of or in connection with
Sterigenics' or its agent's access to or entry upon the Real Properties under
this Section 6.5. If, upon any such inspection, any aspect of the condition of
the Property would have a material adverse effect on Sterigenics' ability to
operate the business of RTI as currently operated or could result in any
material liability on the part of Sterigenics for environmental remediation,
Sterigenics shall have the right during the Due Diligence Period, which it
shall exercise promptly, to terminate this Agreement by delivering three (3)
business days' prior written notice of such termination to RTI, which notice
shall specifically identify the conditions providing the basis for termination.
(e) Title Policies. At the Closing for the North Carolina
Property the applicable Title Company shall issue to Sterigenics, at
Sterigenics' expense, an ALTA owner's policy of title insurance, form B (as
amended 10-17-92) (the "North Carolina Title Policy"), in the amount of the
Purchase Price allocated thereto pursuant to Section 2.7, subject only to the
Permitted Exceptions therefor. In addition, the Title Company shall issue to
Sterigenics ALTA leasehold and optionee's policies of title insurance, form B
(as amended 10-17-92) for the Rockaway Property (collectively, the "Leasehold
Policy"), in an amount determined by
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Sterigenics, insuring the validity and priority of the Rockaway Lease and
Sterigenics' option to purchase the Rockaway Property granted pursuant to the
Rockaway Lease. Sterigenics shall have the right to have an ALTA survey (the
"ALTA Survey") prepared for any Real Property, the costs of which shall be paid
by Sterigenics. The North Carolina Title Policy and the Leasehold Title Policy
individually are referred to herein as a "Title Policy" and collectively as the
"Title Policies."
6.6 Proxy Statement. As promptly as practical after the execution
of this Agreement and in conjunction with the filing of its Annual Report on
Form 10-KSB, RTI shall prepare a proxy statement (the "Proxy Statement") to
obtain the approval of shareholders of RTI for this Agreement and the
transactions contemplated hereby. RTI shall provide reasonable opportunity for
Sterigenics to review and comment on the contents of the Proxy Statement. The
Proxy Statement shall include the recommendations of the Board of Directors of
RTI in favor of this Agreement and Acquisition; provided that the Board of
Directors believes in good faith that a Superior Proposal has been made and
shall have determined in good faith, after consultation with its outside legal
counsel, that the withdrawal of such recommendation is necessary for such Board
of Directors to comply with its fiduciary duties under applicable law. Promptly
after the last to occur of (i) satisfaction of the condition set forth in
Section 9.18(ii) and termination or waiver of all contingencies permitting
termination of the Agreement under Section 6.5 hereof, RTI shall complete and
file the Proxy Statement with the SEC. Within ten (10) business days after all
SEC comments on the Proxy Statement have been resolved, RTI will cause the
Proxy Statement to be sent to the shareholders of RTI.
6.7 Shareholders Meeting. RTI shall call a meeting of its
shareholders (the "RTI Shareholders' Meeting) to be held as promptly as
practicable after RTI has been advised by the SEC that it has no further
comments on the Proxy Statement for the purpose of voting upon this Agreement
and the Acquisition. RTI shall use reasonable efforts, including the engagement
of a proxy solicitation firm reasonably acceptable to Sterigenics (one half of
the cost of which will be paid directly by Sterigenics), to solicit from its
shareholders proxies in favor of such matters.
6.8 Risk of Loss. Until the Closing, all risk of loss, damages or
destruction to the Purchased Assets or the assets of the South Jersey
Subsidiary shall be borne by RTI.
6.9 Regulatory Approvals; Transfer of Permits. Prior to the
Closing, at Sterigenics' expense, RTI will execute and file, or join in the
execution and filing, of any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
governmental entity that may be reasonably required, or that Sterigenics may
reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement. RTI will promptly prepare and file with the
appropriate Governmental Entity all applications necessary to obtain the
transfer of the licenses, approvals and permits referred to in Section 9.5.
Sterigenics will reimburse RTI for all out of pocket costs, including
reasonable legal fees, incurred in connection with obtaining such transfers.
6.10 Execution of Amendment Agreement. RTI shall use its best
efforts (not including the payment of any monetary amounts) to promptly cause
Farmers Merchant National
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Bank of Bridgeton, as trustee under the IRB, to execute that certain Amendment
Agreement dated April 2, 1985 amending the designation of the Salem Property as
attached as Exhibit A to the sublease for the Salem Property.
ARTICLE VII
COVENANTS OF STERIGENICS
7.1 Access to Documents. If, after the Closing Date, (i) in order to
properly prepare its tax returns or other documents or reports required to be
filed with governmental authorities or its financial statements; (ii) in
connection with any threatened or pending litigation or claim which involves or
may involve RTI; or (iii) for any other reasonable purpose, it is necessary that
RTI be furnished with additional information or documents relating to the
Purchased Assets, the assets of the South Jersey Subsidiary or the Assumed
Liabilities and such information or documents are in Sterigenics' possession,
and can reasonably be furnished to RTI, Sterigenics shall, upon written request
therefor, promptly furnish such information or documents to RTI. RTI shall
reimburse Sterigenics for the cost of copying or shipping any requested
documents.
7.2 Cooperation. Sterigenics will take all reasonable actions necessary
to comply promptly with all legal requirements which may be imposed with
respect to the consummation of the transactions contemplated by this Agreement
and will promptly cooperate with and furnish information to RTI in connection
with any such requirements imposed upon RTI in connection with the consummation
of the transactions contemplated by this Agreement. Sterigenics will take all
reasonable actions necessary to obtain (and will cooperate with RTI in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any governmental entity, domestic or
foreign, or other person, required to be obtained or made by Sterigenics (or by
RTI) in connection with the taking of any action contemplated by this Agreement.
7.3 Future Administrative Support Related to Environmental Issues.
Until the date five (5) years after the Closing, Sterigenics shall provide RTI
with certain administrative services, including (a) supervision of the Rockaway
Property monitoring program (including payment of costs up to $10,000 per
annum) following completion of the clean-up program at the Rockaway Property,
and (b) general corporate administrative support, including reasonable access
to use of former RTI employees who are employed by Sterigenics.
7.4 Employment of RTI Employees by Sterigenics. Sterigenics (or its
wholly-owned Subsidiary) shall offer employment to all existing employees (as
of the Closing) of RTI except Theo Muller. Sterigenics agrees not to terminate
any former RTI employee for at least 90 days after the Closing except for cause.
7.5 Release of Salem Guarantee. Sterigenics shall use reasonable
efforts to cause RTI to be released from the Salem Guarantee.
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ARTICLE VIII
COVENANTS OF STERIGENICS AND RTI
8.1 Legal Conditions. Subject, as to RTI, to Section 6.1(a),
each of Sterigenics and RTI will take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on it with
respect to the Acquisition (which actions shall include, without limitation,
furnishing all information required in connection with approvals of or filings
with any Governmental Entity) and will promptly cooperate with and furnish
information to each other in connection with any such requirements imposed upon
either of them in connection with the Acquisition.
8.2 Public Disclosure. Prior to Closing, Sterigenics and RTI
shall consult with each other before issuing any press release or otherwise
making any public statement (other than at the RTI Shareholders' Meeting) with
respect to the acquisition or this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law.
8.3 Additional Agreements: Reasonable Efforts. Subject to the
terms and conditions of this Agreement, including Section 6.1(a), each of the
parties agrees to use all reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, subject to the
appropriate vote of shareholders of RTI described in Section 6.7, including
cooperating fully with the other party, including by provision of information.
In case at any time after the Closing Date any further action is necessary or
desirable to carry out the purposes of this Agreement or to vest Sterigenics
with full title to all properties, assets, rights, approvals, immunities and
franchises of the Purchased Assets or the assets of the South Jersey
Subsidiary, the proper officers and directors of each party to this Agreement
shall take all such necessary action; provided, however that out-of-pocket
costs incurred by RTI pursuant to this Section 8.3 after the Closing Date shall
be reimbursed by Sterigenics.
8.4 Access to Documents. If, after the Closing Date, (i) in
order to properly prepare its tax returns or other documents or reports
required to be filed with governmental authorities or its financial statements;
(ii) in connection with any threatened or pending litigation or claim which
involves or may involve Sterigenics or RTI; or (iii) for any other reasonable
purpose, it is necessary that Sterigenics or RTI be furnished with additional
information or documents relating to the Purchased Assets, the assets of the
South Jersey Subsidiary or the Assumed Liabilities and such information or
documents are in the possession of the other party, and can reasonably be
furnished to the requesting party, the other party shall, upon written request
therefor, promptly furnish such information or documents to the requesting
party. The requesting party shall reimburse the other party for the cost of
copying or shipping any requested documents.
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ARTICLE IX
STERIGENICS' CONDITIONS PRECEDENT TO CLOSING
The obligations of Sterigenics at the Closing are subject to
satisfaction of the following conditions (any or all may be waived by
Sterigenics in its sole discretion), all of which are for Sterigenics' sole
benefit:
9.1 Representations and Warranties. The representations and
warranties of RTI contained in this Agreement shall be true and correct in all
material respects on the Closing Date with the same effect as though made on
that date; provided that this condition will be deemed satisfied if inaccuracies
in the representations and warranties of RTI would merely result in (a) positive
adjustments to RTI's consolidated balance sheet or (b) negative adjustments to
RTI's consolidated balance sheet of (i) up to $200,000 in the aggregate (which
would give rise to a Purchase Price Adjustment in a corresponding amount), or
(ii) an amount between $200,000 and $500,000 in the aggregate if the cash
portion of the Purchase Price as set forth in Section 2.4(a) is reduced by the
aggregate amount of the resulting adjustments to the consolidated balance sheet.
To the extent that any inaccuracies in the representations and warranties would
not result in adjustments to RTI's consolidated balance sheet, this condition
will be deemed satisfied unless such inaccuracies, in the aggregate, would have
a material adverse effect on the value of the Purchased Assets or the assets of
the South Jersey Subsidiary or on the ability of Sterigenics to conduct the
business of RTI as conducted prior to the Closing.
9.2 Shareholder Approval. This Agreement and the transactions
contemplated by it shall have been approved by RTI's shareholders and RTI shall
have delivered to Sterigenics copies, certified by the Secretary of RTI, of the
resolutions of the shareholders of RTI regarding such approval.
9.3 Ownership of Purchased Assets by RTI. RTI or its
Subsidiaries shall hold all right, title and interest in the Purchased Assets
and the assets of the South Jersey Subsidiary.
9.4 Net Book Value of Purchased Assets. The net book value of
the Purchased Assets (as determined by RTI in good faith) at the Closing shall
be at least $3,500,000; provided, however, that if the net book value (as
determined by RTI in good faith) is between $3,000,000 and $3,500,000, this
condition will be deemed satisfied if the cash portion of the Purchase Price as
set forth in Section 2.4(a) is reduced by an amount equal to the difference
between $3,500,000 and the net book value of the Purchased Assets.
9.5 Receipt of Required Permits. Sterigenics shall have
received all licenses, permits and governmental or other regulatory approvals
and authorizations which are required in order for Sterigenics to engage in the
full operation of RTI's sterilization facilities located on the Real
Properties, including, without limitation, all necessary permits, approvals and
authorizations of the NRC, the NJDEP, the NCDRH and the FDA; provided, if all
of the other conditions set forth in Article IX and X have been satisfied
or waived and this condition is not satisfied by June 30, 1996, Sterigenics
shall be required to waive this condition if RTI undertakes, subject to the
terms of a management agreement to be negotiated in good faith by RTI and
Sterigenics, such management activities as are necessary to permit the full
operation by Sterigenics of RTI's
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sterilization facilities as currently operated until all necessary permits,
approvals and authorizations are obtained and all costs and expenses incurred
by RTI pursuant to its performance of such agreement shall be reimbursed or
paid by Sterigenics as incurred.
9.6 Delivery of All Assets. RTI shall have delivered and conveyed
all of the Purchased Assets and the assets of the South Jersey Subsidiary free
and clear of all Encumbrances, whether direct or indirect, accrued, absolute,
contingent or otherwise, except the Permitted Encumbrances.
9.7 Rockaway Property Lease and Purchase Option. Sterigenics and
RTI shall have entered into a six-year lease and purchase option, with an
option for Sterigenics to extend the lease for five (5) additional years, for
the Rockaway Property in substantially the form attached hereto as Exhibit 9.7,
including a six-year option for Sterigenics to purchase the Rockaway Property
(the "Rockaway Lease"). Pursuant to the Rockaway Lease, RTI shall have the
right to require Sterigenics to exercise the purchase option on the sixth
anniversary of the Closing if the environmental remediation has been completed
to such an extent that Sterigenics would not have any material liability for
further environmental remediation and the Rockaway Property has been removed
from the National Priorities List. In addition, a memorandum or short-form of
the Rockaway Lease shall have been provided to Sterigenics in recordable form
in accordance with applicable New Jersey law so as to impart constructive
notice of the Rockaway Lease to third parties.
9.8 Letter Regarding Spill Act Lien. RTI shall have delivered to
Sterigenics a letter from the NJDEP dated within five (5) business days prior
to the Closing Date stating that NJDEP will take all actions and execute all
documents necessary to release all liens it has on the Purchased Assets and the
Rockaway Property upon receipt of a certified check in the Lien Amount if such
check is delivered within ten (10) days following the date of the letter.
9.9 Title Policies. The Title Companies shall have committed in
writing to issue the Title Policies to Sterigenics for each of the North
Carolina Property and the Rockaway Property, subject only to the Permitted
Exceptions applicable thereto.
9.10 FIRPTA. RTI shall have executed and delivered to the Title
Company a certificate satisfying the requirements of Section 1445 of the
Internal Revenue Code of 1986, as amended (the "FIRPTA Certificate").
9.11 No Insolvency Event. At the Closing there shall not be any
pending sequestration, attachment or foreclosure of or execution on any
material part of the Purchased Assets or any of the material assets of the
South Jersey Subsidiary or any proceeds from the sale thereof nor shall RTI be
subject to a voluntary or involuntary petition to commence a proceeding under
the United States Bankruptcy Code to declare RTI to be bankrupt or insolvent.
9.12 No Material Adverse Change. No material adverse change shall
have occurred in the business of RTI or the assets of the South Jersey
Subsidiary since the execution of this Agreement which, in the reasonable
judgment of Sterigenics, may have a material adverse effect on the value to
Sterigenics of the Purchased Assets or the assets of the South Jersey
Subsidiary.
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9.13 No Legal Prohibition. No temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or prohibition preventing
the consummation of the Acquisition or limiting or restricting Sterigenics'
conduct or operation of the business of RTI after the Acquisition shall have
been issued, nor shall any action or suit related to the Acquisition or its
consummation which could, in the opinion of Sterigenics' counsel, result in
material liability for Sterigenics, be pending or threatened, nor shall any
proceeding brought by an administrative agency or commission or other
governmental entity, seeking any of the foregoing, be pending; nor shall there
by any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Acquisition which makes the
consummation of the Acquisition illegal.
9.14 Escrow Agreement. Sterigenics and RTI shall have entered into
the Escrow Agreement.
9.15 Closing Certificate. RTI shall deliver to Sterigenics a
certificate dated the Closing Date and signed by the President of RTI
confirming that the conditions set forth in Sections 9.1, 9.2, 9.4, 9.6, 9.11,
9.12 and 9.17 have been satisfied.
9.16 Recordable Documents. RTI shall have provided the appropriate
Title Company issuing the Title Policies the special warranty deed for the
North Carolina Property and the memorandum of lease for the Rockaway Property
duly executed, notarized, and otherwise in recordable form at least two (2)
business days prior to the Closing so that the documents are in a position to
be recorded in the applicable public records immediately upon Closing.
9.17 Appraisal Rights. Holders of less than 20% of the outstanding
shares of RTI Common Stock shall continue to be entitled to seek appraisal
rights with respect to the Acquisition pursuant to the New York Business
Corporation Law.
9.18 Environmental Matters. RTI shall have obtained from NJDEP: (i) a
letter of non-applicability pursuant to the Industrial Site Recovery Act
(ISRA), N.J.S.A. 13:1K-6 et seq., with respect to the transactions contemplated
by this Agreement; and (ii) written acknowledgment, in form reasonably
satisfactory to Sterigencis' counsel, that the NJDEP does not and will not
regard Sterigenics or any of its subsidiaries as the successor or assign of RTI
or as otherwise responsible for any ongoing environmental liability of RTI.
9.19 Removal of Title Exceptions. RTI shall provide Sterigenics with
evidence of the removal of all Salem Disapproved Exceptions and all Rockaway
Disapproved Exceptions which were set forth in the Salem Removal Notice and
the Rockaway Removal Notice, respectively.
9.20 Closing Deliveries. Sterigenics shall have received at or prior
to the Closing each of the following documents: (a) a bill of sale in a form
reasonably satisfactory to Sterigenics; (b) such instruments of conveyance,
assignment and transfer, in form and substance reasonably satisfactory to
Sterigenics, as shall be appropriate to convey, transfer and assign to, and to
vest in, Sterigenics, good, clear and marketable title to the Purchased Assets
and the assets of the South Jersey Subsidiary; (c) evidence of termination of
all liens (other than Permitted Encumbrances) filed against the Purchased
Assets and the assets of the South Jersey Subsidiary
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reasonably satisfactory to Sterigenics; (d) cross-receipt executed by
Sterigenics and RTI; (e) March Balance Sheet; (f) with respect to the North
Carolina Property, a special warranty deed in recordable form and in the form
previously approved by Sterigenics properly executed on behalf of RTI,
conveying to Sterigenics title to the Real Properties and the Improvements in
fee simple, subject only to the Permitted Exceptions therefor; (g) with respect
to the Rockaway Property, the Rockaway Lease and a memorandum or short-form
thereof, in form and content approved by Sterigenics, which shall be recorded,
at Sterigenics' expense, in the manner provided under applicable New Jersey law
to impart constructive notice thereof to third parties; and (h) any other
documents, records or agreements called for hereunder that have not been
previously delivered to Sterigenics.
9.21 Landlord Letter. RTI shall deliver to Sterigenics a
letter from the City of Salem Municipal Port Authority confirming that the
South Jersey Subsidiary has a valid and binding leasehold interest in the Salem
Property.
ARTICLE X
RTI'S CONDITIONS PRECEDENT TO CLOSING
The obligations of RTI at the Closing are subject to
satisfaction of the following conditions (any or all of which may be waived by
RTI), all of which are for RTI's sole benefit:
10.1 Representations and Warranties. The representations and
warranties of Sterigenics contained in this Agreement will be true and correct
in all material respects at the date of the Closing with the same effect as
though made at that date, and Sterigenics will have delivered to RTI a
certificate dated that date and signed by the President of Sterigenics to that
effect.
10.2 Shareholder Approval. This Agreement and the
transactions contemplated by it shall have been approved by RTI's shareholders.
10.3 Rockaway Lease. Sterigenics and RTI have entered into
the Rockaway Lease.
10.4 Insolvency Event. At the Closing, Sterigenics shall not
have been subject to a voluntary or involuntary petition to commence a
proceeding under the United States Bankruptcy Code to declare Sterigenics to be
bankrupt or insolvent.
10.5 No Legal Prohibition. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Acquisition or limiting or restricting RTI's
conduct or operation of the business of RTI after the Acquisition shall have
been issued, nor shall any proceeding brought by an administrative agency or
commission or other governmental entity, seeking any of the foregoing be
pending, nor shall there be any action taken, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the Acquisition
which makes the consummation of the Acquisition illegal, nor shall any action
or suit related to the Acquisition or its consummation which could, in the
opinion of RTI's counsel,
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result in material personal liability for RTI directors, be pending or
threatened; provided, however, that RTI shall be required to waive this
condition as to any pending or threatened action or suit if Sterigenics agrees
to indemnify the directors of RTI against any costs, expenses or judgments
resulting from such action or suit.
10.6 Escrow Agreement. Sterigenics, RTI and the Escrow Agent
shall have entered into the Escrow Agreement.
10.7 Closing Certificate. Sterigenics shall deliver to RTI a
certificate dated the Closing Date and signed by an officer of Sterigenics
confirming that the conditions set forth in Sections 10.1, 10.2, 10.4 and 10.5
have been satisfied.
10.8 Appraisal Rights. Holders of less than 20% of the
outstanding shares of RTI Common Stock shall continue to be entitled to seek
appraisal rights with respect to the Acquisition pursuant to the New York
Business Corporation Law.
10.9 Closing Deliveries. RTI shall have received at or prior
to the Closing each of the following documents: (a) payment of the Purchase
Price in accordance with Section 2.4; (b) cross-receipt executed by Sterigenics
and RTI; and (c) such instruments, in form and substance satisfactory to RTI,
as shall be necessary and appropriate for Sterigenics to assume and agree to
perform the Assumed Liabilities.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; ESCROW
11.1 Survival of Representations. The representations and
warranties made by the parties in Articles IV (except Section 4.22(a) and 4.23
through 4.27, which shall terminate upon the Closing) and V of this Agreement
shall survive the Closing for a period of twelve (12) months and shall in no
manner be limited by any investigation of the subject matter thereof made by or
on behalf of either party or by the satisfaction of any condition to the
Closing, provided, however, that if RTI gives Sterigenics written notice prior
to Closing specifying a breach of representation or warranty and as a result
would not be able to meet the condition in Section 9.1 and Sterigenics waives
such breach in order to proceed to Closing, Sterigenics shall not be entitled
to make a Claim (as defined below) as a result of such specified breach. After
the expiration of such period, such representations and warranties shall expire
and be of no further force and effect unless a Claim or Claims (as defined in
Section 11.2 below) with respect to any such representation or warranty shall
have been asserted by Sterigenics with respect thereto on or before the
expiration of such period.
11.2 Indemnification by Parties.
(a) RTI shall indemnify and save harmless
Sterigenics, its wholly-owned Subsidiaries and its and their respective
shareholders, directors, officers and agents from and against (A) any
difference between (i) the Adjusted Price and (ii) the book value of the
Purchased Assets less the book value of the Assumed Liabilities, as contained
in the Closing
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Balance Sheet (as audited by the independent certified accounting firm of Ernst
& Young, if Sterigenics elected to have Ernst & Young audit the Closing Balance
Sheet, provided that RTI may object as set forth in Section 2.4(d) (the
"Purchase Price Adjustment") and (B) any and all losses, liabilities, expenses
(including, without limitation, fees and disbursements of counsel and expenses
of investigation), claims, liens, damages, demands, judgments, fines,
penalties, costs or other obligations whatsoever (hereinafter individually a
"Claim" or collectively "Claims"), which shall not include any component of
damages for business lost after the Closing, imposed on or incurred by
Sterigenics or any such indemnified party as a result of (i) the breach of any
representation or warranty made by RTI in this Agreement or otherwise
thereafter made in writing and delivered by RTI to Sterigenics in connection
with the transactions contemplated hereby; (ii) any failure of RTI to perform
or comply in any material respect with any of its covenants and agreements set
forth herein or in any other document executed in connection with the
transactions contemplated hereby; (iii) any liabilities, obligations or
commitments of, and all claims against RTI, its shareholders, directors,
officers and agents, other than with respect to the Assumed Liabilities and
claims arising as a result of a breach by Sterigenics; (iv) any Excluded
Liabilities or (v) the waiver by Sterigenics of compliance by RTI with the
provisions of applicable bulk sales laws. "Claims" as used herein are not
limited to matters asserted by third parties, but include claims incurred,
sustained or properly accrued by Sterigenics in the absence of claims by a
third party; provided that the amount of any accrual that is not ultimately
utilized shall be paid to RTI. Claims shall first be satisfied pursuant to the
terms of the Escrow Agreement. Notwithstanding anything to the contrary set
forth in this Agreement, RTI shall be liable only as to any individual Claim,
other than Claims with respect to any Purchase Price Adjustment, if it exceeds
Five Thousand Dollars ($5,000). Other than with respect to any Purchase Price
Adjustment, no indemnification obligation shall arise hereunder unless and
until the aggregate amount of Claims which individually exceed Five Thousand
Dollars ($5,000.00) hereunder exceeds One Hundred Thousand Dollars ($100,000)
(the "Basket"). In the event that the amount of all Claims which individually
exceed Five Thousand Dollars ($5,000.00) exceeds the Basket, Sterigenics shall
be entitled to collect the full amount of such Claims.
(b) From and after the Closing, Sterigenics shall indemnify and
save harmless RTI, its shareholders, directors, officers and agents from and
against any and all losses, liabilities or expenses imposed on or incurred by
RTI or any such indemnified party as a result of (i) any failure by Sterigenics
to discharge the Assumed Liabilities or (ii) any failure of Sterigenics to
perform or comply in any material respect with any of the covenants and
agreements of Sterigenics set forth herein or in any document executed in
connection with the transactions contemplated hereby.
(c) As used in this Article XI, the term "Indemnitor" means the
party against whom indemnification hereunder is sought, and the term
"Indemnitee" means the party seeking indemnification hereunder. The following
are conditions precedent to any liability of an Indemnitor under Section
11.2(a) or 11.2(b): (i) Indemnitee shall give Indemnitor prompt written notice
of any event or assertion of which it has knowledge concerning any Claims and
as to which it may request indemnification, which notice must be given within
twelve (12) months of the Closing; (ii) Indemnitee shall cooperate with and
assist Indemnitor in defending or settling the Claims; (iii) Indemnitee shall
permit Indemnitor to control the defense or settlement of the Claims, including
selection of counsel to represent Indemnitor and Indemnitee, provided that
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such counsel shall be reasonably satisfactory to Indemnitee; provided that
Indemnitee may maintain separate counsel at its own cost and expense in
connection with any Claim; (iv) in no event shall Indemnitee compromise or
settle a Claim without the prior written approval of Indemnitor, which approval
shall not be unreasonably withheld; and (v) the assumption of the defense of any
Claim by Indemnitor shall be an acknowledgment by Indemnitee that such Claim is
subject to indemnification under the provisions of this Article XI unless notice
to the contrary is given and that such provisions are binding on Indemnitee. If,
however, Indemnitor fails or refuses to undertake the defense of such Claim
within ten (10) days after written notice of such Claim has been delivered to
Indemnitor by Indemnitee, Indemnitee shall have the right to undertake the
defense, and, subject to Subsection (iv) above, compromise and settlement of
such Claim with counsel of its own choosing. Failure of Indemnitee to furnish
written notice of Indemnitor of a Claim shall not release Indemnitor from
Indemnitor's obligations hereunder, except to the extent Indemnitor is
prejudiced by such failure.
(d) The indemnification obligations of Indemnitor under
Section 11.2(c) shall continue in full force and effect as to any Claim as to
which notice has been given pursuant to Section 11.2(c)(i) above until such
Claim has been settled either by mutual agreement of the parties concerned, by
arbitration in accordance with the provisions of this Agreement or, in the event
of a Claim resulting from legal action by a third party, by the final order,
decree or judgment of a court of competent jurisdiction in the United States of
America (the time for appeal having expired with no appeal having been taken).
The right of an Indemnitee to be indemnified under this Section 11.2 shall not
limit, reduce or otherwise affect any other rights and remedies each may have
with respect to the matters indemnified under this Agreement.
11.3 Resolution of Disputes. Any dispute over an indemnity claim
under Section 11.2 above (a "Contested Claim") shall be settled by arbitration
in the New York City metropolitan area and, except as herein specifically
stated, in accordance with Section 13.15 below. Sterigenics and RTI agree that
any of the parties may elect to postpone the arbitration of all Contested Claims
until one year from the Closing in order to consolidate the arbitration of all
Contested Claims.
ARTICLE XII
TERMINATION AND AMENDMENT
12.1 Termination. This Agreement may be terminated at any time prior
to the Closing (with respect to Sections 12.1(b) through 12.1(g), by written
notice by the terminating party to the other party), whether before or after
approval of the matters presented in connection with the purchase and sale of
the Purchased Assets by the shareholders of RTI: (a) by mutual written consent
of Sterigenics and RTI; or (b) by either Sterigenics or RTI if the Acquisition
shall not have been consummated by November 27, 1996 (provided that the right to
terminate this Agreement under this Section 12.1(b) shall not be available to
any party whose failure to fulfill any material obligation under this Agreement
has been the cause of or resulted in the failure of the Acquisition to occur on
or before such date); or (c) by either Sterigenics or RTI, if a court of
competent jurisdiction or other Governmental Entity shall have issued a
nonappealable final order, decree or ruling or taken any other action, in each
case having the effect of
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permanently restraining, enjoining or otherwise prohibiting the Acquisition,
except, if the party relying on such order, decree or ruling or other action
has not materially complied with its obligations under Article IX or Article X,
as applicable, of this Agreement, or (d) by Sterigenics if any of the conditions
to Sterigenics' obligations to effect the Acquisition which are specified in
Article IX have not been met or waived by Sterigenics at such time as such
condition is no longer reasonably capable of satisfaction, including the
failure to obtain any required approval of shareholders of RTI at a duly held
meeting of shareholders or at an adjournment or postponement thereof (provided
Sterigenics is not otherwise in material breach of its representations,
warranties, covenants or agreements under this Agreement); (e) by RTI if any of
the conditions to RTI's obligation to effect the Acquisition which are
specified in Article X have not been met or waived by RTI at such time as such
condition is no longer reasonably capable of satisfaction (provided RTI is not
otherwise in material breach of its representations, warranties, covenants or
agreements under this Agreement); (f) by Sterigenics or RTI, if there has been
a material breach of any representation, warranty, covenant or agreement on the
part of the other party set forth in this Agreement, which breach shall not
have been cured (in the case of RTI, a breach of representation and warranty
will be deemed to have been cured for purposes of this Section 12.1 if the
condition to Closing set forth in Section 9.1 can be met), in the case of a
representation or warranty, prior to the Closing or, in the case of a covenant
or agreement, within (ten) 10 business days following receipt by the breaching
party of written notice of such breach from the other party; or (g) by
Sterigenics, if (i) the Board of Directors of RTI shall have withdrawn or
modified in a manner adverse to Sterigenics its recommendation of this
Agreement and the Acquisition in a manner adverse to Sterigenics or shall have
resolved to do either of the foregoing; (ii) the Board of Directors of RTI
shall have recommended to the shareholders of RTI an Acquisition Proposal;
(iii) a tender offer or exchange offer for 15% or more of the outstanding
shares of RTI Common Stock is commenced (other than by Sterigenics or an
affiliate of Sterigenics) and the Board of Directors of RTI recommends that the
shareholders of RTI tender their shares in such tender or exchange offer; or
(iv) for any reason RTI fails to hold the RTI Shareholders' Meeting by November
27, 1996.
12.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 12.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Sterigenics,
RTI or their respective officers, directors, stockholders or shareholders, as
the case may be, or affiliates, except as set forth in Sections 12.3 and 12.4
and further except to the extent that such termination results from the
intentional breach by a party of any of its representations, warranties or
covenants set forth in this Agreement; provided that the provisions of Sections
6.4 (5th sentence), 6.5(d) (5th, 6th, 7th and 8th sentences), 12.3 and 12.4 of
this Agreement shall remain in full force and effect and survive any
termination of this Agreement.
12.3 Fees and Expenses.
(a) Subject to Section 12.3(b) and 12.3(c), if (i) the
Acquisition is consummated or (ii) this Agreement is terminated in accordance
with Section 12.1(b), 12.1(c), 12.1(d) or 12.1(e) hereof other than as a result
of a breach by either party, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense.
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<PAGE> 35
(b) Except as otherwise provided in this Section 12.3(b): (i) if
this Agreement is terminated as provided in Section 12.1(f) hereof, the
breaching party shall pay to the terminating party, within five business days
after receipt of a written request therefor, in same day funds, an amount equal
to all costs and expenses reasonably incurred by the terminating party in
connection with this Agreement and the transactions contemplated hereby,
including all reasonable legal, accounting, financial advisory, printing and
other professional and service fees and expenses not to exceed Two Hundred Fifty
Thousand Dollars ($250,000); provided, however, in the event that this Agreement
is terminated by a party as provided in Section 12.1(f) and the breaching party
also has the right to terminate this Agreement as provided in Section 12.1(f)
and notifies the terminating party thereof within ten (10) days after receipt by
the breaching party of notice of termination pursuant to this Section 12.1(f),
then the costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid only as set forth in Section
12.3(a); (ii) if this Agreement is terminated (x) by Sterigenics pursuant to
Section 12.1(b) hereof or (y) by Sterigenics pursuant to Section 12.1(d) as a
result of the failure to receive the requisite vote to approve this Agreement
and the Acquisition at the RTI Shareholders' Meeting (including any adjournments
or postponements thereof) in each case, if, at the time of such failure, there
shall have been announced an Acquisition Proposal which shall not have been
absolutely and unconditionally withdrawn or abandoned, RTI shall pay
Sterigenics, within five (5) business days after receipt of a written request
therefor, in same day funds, an amount equal to all costs and expenses
reasonably incurred by Sterigenics in connection with this Agreement and the
transactions contemplated hereby, including all reasonable legal, accounting,
financial advisory, printing and other professional and service fees and
expenses, not to exceed Two Hundred Fifty Thousand Dollars ($250,000).
(c) If this Agreement is terminated by Sterigenics as provided in
Section 12.1 as a result of the failure of Sterigenics to obtain the permits
necessary to operate the business of RTI, Sterigenics shall pay RTI, within five
(5) business days after receipt of a written request therefor, in same day
funds, an amount equal to all costs and expenses reasonably incurred by RTI in
connection with this Agreement and the transactions contemplated hereby,
including all reasonable legal, accounting, financial advisory, printing and
other professional and service fees and expenses, not to exceed Two Hundred
Fifty Thousand Dollars ($250,000).
12.4 Option to Purchase North Carolina Property. Upon the execution by
RTI of a definitive agreement resulting from an Acquisition Proposal,
Sterigenics shall have the option to purchase the North Carolina Property,
including its Improvements and the plant, property, equipment located thereon,
but excluding all Cobalt, free and clear of all Encumbrances other than the
Permitted Encumbrances for a purchase price equal to the book value of the
North Carolina Property as of the closing associated with the exercise of the
option plus Four Hundred Thousand Dollars ($400,000). The purchase option may
be exercised within sixty (60) days after the execution of such definitive
agreement, and the closing of Sterigenics' acquisition of the North Carolina
Property pursuant to the purchase option shall occur immediately prior to the
closing of the transaction contemplated by such definitive agreement. The terms
of such purchase option shall be as specified in the Option Agreement attached
hereto as Exhibit 12.4.
12.5 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after
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approval of the matters presented in connection with the Acquisition by the
shareholders of RTI, but, after any such approval, no amendment shall be made
which by law requires further approval by such shareholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
12.6 Extension: Waiver. At any time prior to the Closing Date, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf os such party.
ARTICLE XIII
GENERAL
13.1 Expenses. Except as otherwise provided below in this
Agreement, the parties will each pay their own legal, accounting and other
professional expenses in connection with the transactions contemplated hereby.
13.2 Brokers. Each party represents and warrants to the other that
no person has acted as a broker, a finder or in any similar capacity in
connection with the transactions contemplated hereby, except TM Capital
Corporation who shall be paid by Sterigenics. Each party shall indemnify the
other against, and agrees to hold the other harmless from, all liabilities and
expenses (including reasonable attorneys' fees and expenses) in connection with
any claim by anyone for compensation as a broker, a finder or in any similar
capacity, other than TM Capital Corporation, who is to be paid by Sterigenics
at the Closing, by reason of services allegedly rendered to the indemnifying
party in connection with the transactions contemplated hereby.
13.3 Entire Agreement. Except for that certain Confidentiality
Agreement by and between RTI and Sterigenics, dated October 3, 1995, this
Agreement, the Option Agreement and the Ancillary Documents contain the entire
agreement among the parties with respect to the matters contemplated hereby and
all prior negotiations, understandings and agreements among them, are
superseded by this Agreement.
13.4 Assignment. Neither this Agreement nor any right of any party
under it may be assigned without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Sterigenics may assign its rights under this Agreement following the Closing to
any party that acquires Sterigenics through a merger or consolidation, purchase
of substantially all of Sterigenics' stock or a purchase of substantially all
of Sterigenics' assets. Notwithstanding the foregoing, RTI agrees that
Sterigenics may assign its rights to purchase the Purchased Assets and lease
the Rockaway Property and its obligations to assume the Assumed Liabilities to
one or more wholly-owned subsidiaries of Sterigenics; provided, however, that
in the event of such assignment, Sterigenics shall remain liable for the
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<PAGE> 37
performance of such subsidiaries under the terms of this Agreement and shall
execute and deliver to RTI a guarantee in a form reasonably satisfactory to RTI
with respect thereto.
13.5 Notices. Any notice or other communication required or
permitted to be given under this Agreement shall be in writing and will be
deemed effective when delivered in person, on the first business day after the
day on which sent by confirmed facsimile, if promptly confirmed in writing, on
the third business day after the day on which mailed by first class mail from
within the United States of America, or the business day following delivery to
a national overnight courier service to the following addresses or to such
other address as either party may specify in writing to the other party in
accordance with the provisions of this Section 13.5.
If to Sterigenics: With a copy to:
Sterigenics International Gunderson Dettmer Stough Villeneuve
4020 Clipper Court Franklin & Hachigian, LLP
Fremont, CA 94538-6540 600 Hansen Way, Second Floor
Palo Alto, CA 94304
Facsimile No. (510) 770-9000 Facsimile No: (415) 843-0314
Attention: James F. Clouser Attention: Carla S. Newell
If to RTI: With a copy to:
RTI, Inc. Warshaw Burstein Cohen
108 Lake Denmark Road Schlesinger & Kuh, LLP
Rockaway, New Jersey 07866 555 Fifth Avenue
Attention: Theo Muller New York, NY 10017
Facsimile No.: (212) 972-9150
Attention: Arthur Katz
13.6 Governing Law. This Agreement will be governed by, and
construed under, the laws of the State of California without reference to
principles of conflicts of laws.
13.7 Amendment. This Agreement may be amended only by a document in
writing signed by the parties.
13.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
13.9 Public Disclosure. No party shall disclose the terms of this
Agreement without the written consent of Sterigenics and RTI, except as
required by law or pursuant to the disclosure obligations of RTI under the
rules and regulations of the Securities and Exchange Commission.
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13.10 Further Assurances. Each party agrees to execute such further
instruments and documents and to do such further acts as may be reasonably
requested by any other party to carry out the transactions contemplated hereby.
13.11 No Rights Conferred Upon Third Parties. No provisions of this
Agreement are intended or shall be interpreted to provide or create any rights
of any kind in any third party unless specifically provided otherwise herein,
and, except as so provided, all provisions hereof shall be personal solely to
the parties to this Agreement.
13.12 Attorneys' Fees. In any litigation relating to this Agreement,
including litigation with respect to any instrument, document or agreement made
under or in connection with this Agreement, the prevailing party shall be
entitled to recover its costs and reasonable attorneys' fees and expenses.
13.13 Headings. Captions and headings used herein are for convenience
only and are not a part of this Agreement and shall not be used in construing
it.
13.14 Arbitration. Any disputes between Sterigenics and RTI with
respect to this Agreement shall be settled by binding, final arbitration in the
New York City metropolitan area and in accordance with the commercial
arbitration rules of the American Arbitration Association then in effect ("AAA
Rules"). However, in all events, the following arbitration provisions shall
govern over any conflicting rules which may now or hereafter be contained in
the AAA Rules. Any judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction over the subject matter thereof. The
arbitrator shall have the authority to grant any equitable and legal remedies
that would be available. Sterigenics and RTI shall each advance fifty percent
(50%) of the initial compensation to be paid to the arbitrator in any such
arbitration and fifty percent (50%) of the costs of transcripts and other
normal and regular expenses of the arbitration proceedings; provided, however,
that the arbitrator shall have the discretion to grant to the prevailing party
in any arbitration an award of attorneys' fees and costs, and all costs of
arbitration. Arbitration shall be the sole and exclusive remedy of the parties
for a breach of this Agreement in the absence of fraud.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date shown on the first page.
STERIGENICS INTERNATIONAL RTI INC.
By: /s/ JAMES F. CLOUSER By: /s/ T. MULLER
------------------------- -------------------------
Title: PRESIDENT & CEO Title: PRESIDENT & CEO
--------------------- ----------------------
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Exhibits
Exhibit 1.12 -- Legal Description of North Carolina Property
Exhibit 1.19 -- Legal Description of Rockaway Property
Exhibit 1.21 -- Legal Description of Salem Property
Exhibit 2.4(d)-- Escrow Agreement
Exhibit 6.5(a)-- Title Commitment for Rockaway Property
Exhibit 6.5(c)-- Title Commitment for North Carolina Property
Exhibit 9.7 -- Rockaway Lease
Exhibit 12.4 -- North Carolina Option
<PAGE> 41
Exhibit 1.12
Legal Description of North Carolina Property
<PAGE> 42
BOOK 473 PAGE 113
THIS DEED, made this 10th day of June, 1982 by J. LEON PORTER and wife, ELLEN
T. PORTER hereinafter called Grantors, to PROCESS TECHNOLOGY (NC), INC., a
North Carolina Corporation, P.O. Box 185, Rockaway, N.J. 07866, hereinafter
called Grantees. The designations Grantors and Grantees as used herein shall
include singular, plural, masculine, feminine, or neuter as required by the
context.
WITNESSETH: That the Grantors, in consideration of $10.00 and other
valuable consideration to them paid by the Grantee, the receipt of which is
acknowledged, have bargained and sold, and by these presents do bargain, sell
and convey to the Grantees their heirs, successors and assigns, all of the
following described real property:
A certain tract or parcel of land in Haw River Township, Alamance County, N.C.,
adjoining Porter Avenue, John Bakatsias and other lands of J. Leon Porter and
being more particularly described as follows:
BEGINNING at an iron stake and new corner with J. Leon Porter in the East right
of way line of Porter Avenue and located S. 04 deg. 08' 32" E. 356.77 ft. from
the intersection of the East line of said road and the South line of a service
road which said 356.77 ft. is the chord of an arc having the length of 357.79
ft. formed by the East line of said 60 ft. wide road; thence a new line with
said Porter, N. 88 deg. 56' 56" E. 444.13 ft. to an iron stake and new corner
with said Porter; thence a new line with said Porter, S. 11 deg. 38' 05" E.
21.17 ft. to an iron stake and corner with John Bakatsias; thence with the line
of said Bakatsias, S. 11 deg. 38' 05" E. 365 ft. to an iron stake and new
corner with J. Leon Porter; thence a new line with said Porter, S. 87 deg. 18'
W. 441.94 ft. to an iron stake in the East line of Porter Avenue; thence with
the East line of Porter Avenue, N. 11 deg. 38' 05" W. 400 ft. to the POINT OF
BEGINNING AND CONTAINING 3.935 ACRES, more or less.
The above description and determination of area were taken from a survey and
drawing made by John D. Somers, R.L.S., dated 5/18/82, captioned "Final Plat",
property of J. Leon Porter and wife, Ellen T. Porter and plat is recorded in
the office of the Register of Deeds for Alamance County, N.C., in Plat Book 27
at Page 55.
This conveyance is subject to recorded easements, 10 ft. wide utility easement
along rear lot line as shown on recorded subdivision map and sanitary sewer
easement and manhole as shown on recorded subdivision map.
The above property was conveyed to the Grantors by _____________ See
Book No. ________ page __________
TO HAVE AND TO HOLD said real property, with all privileges, and
appurtenances thereunto belonging, to the said Grantees, their heirs,
successors, and assigns forever.
The Grantors covenant that they are seized of said real property in
fee, and have the right to convey the same in fee simple; that the same is free
from all encumbrances (with any exceptions above stated); and that they will
warrant and defend the title to same against the claims of all persons
whomsoever.
IN WITNESS WHEREOF, the Grantors have hereunto set their hands and
seals, or if corporate, have caused this Deed to be signed in their respective
corporate names by their duly authorized officers and their seals to be
hereunto affixed by authority of their Boards of Directors, the day and year
first above written.
/s/ J. LEON PORTER (SEAL)
--------------------------------------
J. LEON PORTER
/s/ ELLEN T. PORTER (SEAL)
--------------------------------------
ELLEN T. PORTER
=============================================================================
STATE OF NORTH CAROLINA, COUNTY OF ALAMANCE
I, JANICE S. SHEPHERD a Notary Public of said County, do hereby certify
that J. LEON PORTER and wife, ELLEN T. PORTER personally appeared before me
this day and acknowledged the due execution of the foregoing deed. Witness my
hands and official seal, this 11th day of June 1982
My Commission Expires: 1/24/85 /s/ JANICE S. SHEPHERD Notary Public
------------------------
=============================================================================
<PAGE> 43
Exhibit 1.19
Legal Description of Rockaway Property
<PAGE> 44
[MAP OF AREA DESCRIBED IN DEED]
<PAGE> 45
EXHIBIT 1.21
LEGAL DESCRIPTION OF SALEM PROPERTY
<PAGE> 46
Schedule 1.21
DESCRIPTION OF LAND
BEING A PORTION OF BLOCK 47, LOT 3, CITY OF SALEM
CITY OF SALEM LEASE TO RADIATION TECHNOLOGY
ALL that certain part and parcel of land situate, lying, and being in
the City of Salem, County of Salem, State of New Jersey, and being more
particularly described as follows:
BEGINNING at a point in the line of land of William R. Darling, said
point being North sixty-nine degrees twenty-four minutes thirty seconds East,
six feet and twenty-two one hundredths of a foot from Darling's southwesterly
corner; thence (1) along Darling's land, North sixty-nine degrees twenty-four
minutes thirty seconds East, three hundred eighty-six feet and twenty-four one
hundredths of a foot to a rod and cap set for a corner; thence (2) through land
of the City of Salem, South eighteen degrees two minutes thirty-seven seconds
East, two hundred eighty feet and twenty-one one hundredths of a foot to a rod
and cap set for a corner; thence (3) still along the same, South fifty-three
degrees fourteen minutes West, four hundred seven feet and forty-two one
hundredths of a foot to a rod and cap set for a corner; thence (4) still along
the same, North eighteen degrees two minutes thirty-seven seconds West, three
hundred ninety-three feet and eighty-two one hundredths of a foot to the place
of beginning.
CONTAINING within said bounds 2.985 acres of land more or less.
BEING a portion of the same land and premises that were conveyed to the
City of Salem by J. Evan Hitchner, widower, by deed dated March 31, 1970, and
recorded in the Salem County Clerk's Office in Book 525 of Deeds, Page 269.
<PAGE> 47
Exhibit 2.4(d)
Escrow Agreement
<PAGE> 48
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is entered into as of
______________, 1996 by and among Sterigenics International, a California
corporation ("Purchaser"), RTI Inc., a New York corporation ("Seller"), and the
Escrow Agent named herein.
RECITALS
A. Purchaser and Seller have entered into an Asset Acquisition
Agreement dated as of February 26, 1996 (the "Asset Agreement"). Capitalized
terms used in this Agreement and not otherwise defined herein will have the
meanings given them in the Asset Agreement.
B. The Asset Agreement provides for Eight Hundred Thousand Dollars
($800,000) of the Consideration (the "Escrow Amount") to be placed in an escrow
account (the "Escrow Account") to secure certain obligations to Purchaser under
the Asset Agreement on the terms and conditions set forth therein and herein.
C. The parties hereto desire to establish the terms and conditions
pursuant to which the Escrow Amount will be deposited, held in, and disbursed
from the Escrow Account.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Escrow.
(a) Escrow of Escrow Amount. The Escrow Amount will be held
in escrow by Lowenstein, Sandler, Kohl, Fisher & Boylan, (the "Escrow Agent"),
located at 65 Livingston Avenue, Roseland, New Jersey 07068-1791, as collateral
for obligations of Seller under Article XI of the Asset Agreement, until such
Escrow Amount is to be released pursuant to the terms of this Agreement. The
Escrow Agent agrees to accept delivery of the Escrow Amount and to hold such
Escrow Amount in escrow subject to the terms and conditions of this Agreement.
(b) Claims Under Indemnity Obligations. The parties agree
that the Escrow Amount will be partial security for the obligations of Seller
under Article XI of the Asset Agreement. Promptly after the receipt by
Purchaser of notice or discovery of any Claim giving rise to rights under
Section 11.2 of the Asset Agreement, Purchaser will give the Seller and the
Escrow Agent written notice of such Claim in accordance with Section 3 hereof.
Failure of Purchaser to furnish written notice to Seller of a Claim shall not
release Seller from Seller's obligations hereunder, except to the extent Seller
is prejudiced by such failure.
2. Deposit of Escrow Amount; Release from Escrow.
(a) Delivery of Escrow Amount. On the Closing Date, the
Escrow Amount will be delivered by Purchaser to the Escrow Agent by certified
check made payable to the Escrow Account.
<PAGE> 49
(b) Distribution to Seller. Promptly following the
termination of the period in which Purchaser is entitled to make a claim for a
Purchase Price Adjustment, the Escrow Agent shall release from the Escrow
Account to the Seller (the "First Release Date") an aggregate of Four Hundred
Thousand Dollars ($400,000), less the amount of any outstanding claims for a
Purchase Price Adjustment (the "First Release Amount"). Promptly following the
resolution of any claim for a Purchase Price Adjustment, the Escrow Agent shall
release from the Escrow Account (the "Second Release Date") to the Seller an
aggregate of Four Hundred Thousand Dollars ($400,000), less (i) the First
Release Amount and (ii) the amount of any Purchase Price Adjustment. On the
six month anniversary of the Closing Date (the "Third Release Date"), the
Escrow Agent shall release from the Escrow Account to the Seller the other Four
Hundred Thousand Dollars ($400,000) of the Escrow Amount, less (i) any amounts
delivered to Purchaser in satisfaction of Claims by Purchaser (other than
Claims with respect to a Purchase Price Adjustment) and (ii) any amounts
withheld with respect to any pending but unresolved Claims of Purchaser (each a
"Release Amount").
(c) Release of Escrow Amount. The Escrow Amount will be held
by the Escrow Agent until required to be released pursuant to Section 2(b)
above. Within three (3) business days after each of the First Release Date,
the Second Release Date and the Third Release Date, the Escrow Agent will
deliver to the Seller the Released Amount to be released on such date, together
with interest accrued on such Released Amount. Amounts retained pursuant to
Section 2(b)(ii) above shall be released to Seller within three (3) business
days after the pending Claim corresponding to the retained amount is
conclusively resolved, less any amounts delivered to Purchaser in satisfaction
of such Claim.
(d) Investment of Escrow Account. The Escrow Agent shall
invest the Escrow Account as directed in writing by the Seller (or by Purchaser
if the Seller does not so direct) in any of the following:
(i) obligations issued or guaranteed by the United
States of America or any agency or instrumentality thereof;
(ii) certificates of deposit or interest bearing
accounts with banks or corporations endowed with trust powers having capital
and surplus in excess of Fifty Million Dollars ($50,000,000);
(iii) commercial paper that at the time of investment
is rated A-1 by Standard & Poor's Corporation or Prime-1 by Moody's Investors
Service, Inc.;
(iv) repurchase agreements with any bank or
corporation described in clause (ii) fully secured by obligations described in
clause (i);
(v) money market mutual funds; or
(vi) as Purchaser and Seller mutually agree in writing.
2
<PAGE> 50
The Escrow Agent will incur no liability with respect to the
insolvency or other loss in value of any investments directed by either the
Seller or the Purchaser.
(e) Interest. Accrued interest on the Released Amounts shall be paid
to the Seller on the Release Date. Accrued interest on the balance of the
Escrow Amount due the Seller at the expiration of any period during which any
Claims are contested pursuant to Section 4(b) below shall be paid to the
Seller. Accrued interest on any amounts delivered to Purchaser in satisfaction
of Claims by Purchaser shall be paid to Purchaser at the time such amount is
delivered to Purchaser. The Seller certifies that its taxpayer identification
number is 11-2163152 and the Purchaser certifies that its taxpayer
identification number is 95-3323502.
(f) No Encumbrance. No interest in the Escrow Account or any
beneficial interest therein may be pledged, sold, assigned or transferred,
other than by operation of law, by any party hereto or be taken or reached by
any legal or equitable process in satisfaction of any debt or other liability
of any party hereto, prior to the delivery to the Seller of the Released
Amounts by the Escrow Agent.
3. Notice of Claim.
(a) Each notice of a Claim by Purchaser (the "Notice of Claim")
shall be in writing to the Seller and the Escrow Agent and shall contain the
following information to the extent it is reasonably available to Purchaser:
(i) Purchaser's good faith estimate of the reasonably
foreseeable maximum amount of the Claim; and
(ii) A brief description in reasonable detail of the facts,
circumstances or events giving rise to the Claim.
(b) Purchaser shall provide written notice of any third party claim
which could result in a Notice of Claim promptly after Purchaser becomes aware
of such third party claim. Purchaser agrees not to settle such claims without
the prior written consent of Seller, which shall not be unreasonably withheld.
(c) The Escrow Agent will not release any of the Escrow Amount held in
the Escrow Account to Purchaser pursuant to a Notice of Claim until such Notice
of Claim has been resolved in accordance with Section 4 below.
4. Resolution of Notice of Claim and Transfer of Escrow Funds. Any Notice
of Claim received by Seller and the Escrow Agent pursuant to Section 3 above
will be resolved as follows:
(a) Uncontested Claims. In the event that the Seller does not contest
a Notice of Claim in writing to the Escrow Agent and Purchaser or pay the amount
demanded within
3
<PAGE> 51
thirty (30) calendar days after such Notice of Claim is deemed delivered
pursuant to Section 6 below, the Escrow Agent will on the second business day
following the expiration of such thirty (30) day period deliver to Purchaser an
amount equal to the amount specified in the Notice of Claim and notify the
Seller of such transfer.
(b) Contested Claims. In the event that the Seller gives
written notice contesting all or a portion of a Notice of Claim to Purchaser
and the Escrow Agent (a "Contested Claim") within the thirty (30) day period
provided above, Seller and Purchaser shall attempt in good faith to agree upon
the rights of the respective parties with respect to such Claim. If Seller and
Purchasers should so agree, a memorandum setting forth such agreement (a
"Memorandum of Agreement") shall be prepared and signed by both parties and
shall be furnished to the Escrow Agent. The Escrow Agent shall be entitled to
rely on any such Memorandum of Agreement and distribute funds from the Escrow
Fund in accordance with the terms thereof.
If no such agreement can be reached after good faith
negotiation, either Seller or Purchaser may demand arbitration of the matter as
provided in Section 13.15 of the Asset Agreement, unless the amount of the
damage or loss is at issue in pending or threatened litigation with a third
party, in which even arbitration shall not be commenced until such amount is
ascertained or both Seller and Purchaser agree to arbitration. Any portion of
the Notice of Claim which is not contested by Seller and is for an agreed amount
shall be resolved as set forth above in Section 4(a). The final resolution of
any Contested Claim as provided above, including any decision of the
arbitrator, shall be furnished to the Escrow Agent, the Seller and Purchaser in
writing and will constitute a conclusive determination of the issue in
question, binding upon the Seller and Purchaser and shall not be contested by
any of them. After notice that the Notice of Claim is contested by the Seller,
the Escrow Agent will continue to hold in the Escrow Account an Escrow Amount
sufficient to cover such Claim (notwithstanding the expiration of Release Date
and subject to Released Amounts released prior to receipt by Seller and Escrow
Agent of the Notice of Claim for such Contested Claim) until (i) execution of a
settlement agreement by Purchaser and the Seller setting forth a resolution of
the Notice of Claim, or (ii) receipt of a copy of the final award of an
arbitrator. Upon the receipt of any settlement agreement or final arbitrator's
award, the Escrow Agent shall promptly deliver all amounts determined to be
immediately due to the parties as a result of such settlement or award.
For the purposes of this Section 4, in any arbitration
hereunder in which any claim or the amount thereof stated in a Notice of Claim
is at issue, Purchaser shall be deemed to be the non-prevailing party unless
the arbitrators award Purchaser more than 50% of the amount in dispute, plus
any amounts not in dispute; otherwise, Seller shall be deemed to be the
non-prevailing party. The non-prevailing party to an arbitration hereunder
shall pay its own expenses, the fees of each arbitrator, the administrative fee
of AAA, and the expenses (including, without limitation, attorneys' fees and
costs) incurred by the other party to the arbitration.
5. Limitation of Escrow Agent's Liability.
(a) The Escrow Agent will incur no liability with respect to
any action taken or suffered by it in reliance upon any notice, direction,
instruction, consent, statement or other
4
<PAGE> 52
document believed by it to be genuine and duly authorized, nor for any other
action or inaction, except its own willful misconduct or gross negligence. The
Escrow Agent will not be responsible for the validity or sufficiency of this
Agreement or any agreement amendatory or supplemental hereto. In all questions
arising under the Agreement, the Escrow Agent may rely on the advice or opinion
of legal counsel, and for anything done, omitted or suffered in good faith by
the Escrow Agent based on such advice or opinion, the Escrow Agent will not be
liable to anyone. The Escrow Agent will not be required to take any action
hereunder involving any expense unless the payment of such expense is made or
provided for in a manner satisfactory to it.
(b) In the event conflicting demands are made or notices are
served upon the Escrow Agent with respect to the Escrow Account, the Escrow
Agent will have the absolute right, at the Escrow Agent's election, to do either
or both of the following: (i) resign so a successor can be appointed pursuant to
Section 9 or (ii) file a suit in interpleader and obtain an order from a court
of competent jurisdiction requiring the parties to interplead and litigate in
such court their several claims and rights among themselves. In the event such
interpleader suit is brought, the Escrow Agent will thereby be fully released
and discharged from all further obligations imposed upon it under this
Agreement, and Purchaser will pay the Escrow Agent (subject to reimbursement
from the Seller pursuant to Section 8 hereof) all costs, expenses and reasonable
attorneys' fees and expenses expended or incurred by the Escrow Agent pursuant
to the exercise of Escrow Agent's rights under this Section 5 (such costs, fees
and expenses shall be treated as extraordinary fees and expenses for the
purposes of Section 8 hereof).
(c) In consideration of its acceptance of the appointment as
Escrow Agent, the other parties hereto, jointly and severally, agree to
indemnify and hold the Escrow Agent harmless as to any liability incurred by it
to any person, firm or corporation by reason of its having accepted the same or
in carrying out any of the terms hereof, and to reimburse the Escrow Agent for
all its costs and expenses, including, but not limited to, reasonable attorneys'
fees and expenses, incurred by reason of any matter as to which an indemnity is
paid; provided, however, that no indemnity shall be paid by reason of the Escrow
Agent's gross negligence or willful misconduct.
(d) The Escrow Agent shall be under no obligation to deliver
any instrument or documents to a court or take any other legal action in
connection with this Agreement or towards its enforcement, or to appear in,
prosecute or defend any action or legal proceeding which, in Escrow Agent's
opinion, would or might involve it in any cost, expense, loss or liability
unless, as often as Escrow Agent may require, Escrow Agent shall be furnished
with security and indemnity reasonably satisfactory to it against all such
costs, expenses, losses or liability.
(e) The Escrow Agent's obligations hereunder shall be as a
depository only, and Escrow Agent shall not be responsible or liable in any
manner whatever for the sufficiency, correctness, genuineness or validity of any
notice, written instructions or other instrument furnished to it or deposited
with it, or for the form of execution of any thereof, or for the identity,
5
<PAGE> 53
authority or rights of any person executing, furnishing or depositing same
except to the extent of its gross negligence or willful misconduct.
(f) The Escrow Agent shall not have any duties or
responsibilities except those set forth in this Agreement, and shall not incur
any liability in acting upon any signature, notice, request, waiver, consent,
receipt or other paper or document reasonably believed by it to be genuine, and
Escrow Agent may presume that any person purporting to give any notice or advice
on behalf of any party in accordance with the provisions hereof has been duly
authorized to do so.
(g) The Escrow Agent shall be entitled to consult with
counsel in connection with its duties hereunder.
(h) The terms and provisions of this Agreement shall create
no right in any person, firm or corporation other than the parties hereto and
their respective successors and permitted assigns, and no third party shall have
the right to enforce or benefit from the terms hereof.
(i) The Escrow Agent has executed this Agreement solely in
order to acknowledge receipt of the Escrow Amount and to confirm that Escrow
Agent will hold same in escrow pursuant to the provisions of this Agreement.
(j) The parties acknowledge that the Escrow Agent is also
local counsel to Purchaser. Seller waives any objections to Escrow Agent's
serving in the capacity of escrow agent hereunder. Purchaser agrees that it
shall not be entitled to have the Escrow Agent serve as its legal counsel with
respect to a dispute under this Agreement or with respect to Contested Claims.
6. Notices. Any notice or other communication required or
permitted to be given under this Agreement shall be in writing and will be
deemed effective when delivered in person, on the first business day after sent
by confirmed facsimile, if promptly confirmed in writing, on the third business
day after the day on which mailed by first class mail from within the United
States of America, or the first business day following delivery to a national
courier service for overnight delivery to the following addresses or to such
other address as either party may specify in writing to the other party in
accordance with the provisions of this Section 6:
If to Purchaser: With a copy to:
Sterigenics International Gunderson Dettmer Stough Villeneuve
4020 Clipper Court Franklin & Hachigian, LLP
Fremont, CA 94538 600 Hansen Way, Second Floor
Facsimile No.: (510) 770-1499 Palo Alto, CA 94304
Attention: James F. Clouser Facsimile No.: (415) 843-0314
Attention: Carla S. Newell
6
<PAGE> 54
If to Seller: With a copy to:
RTI Inc. Warshaw Burstein Cohen
20 Peach Hill Road Schlesinger & Kuh, LLP
Darien, CT 66820 555 Fifth Avenue
Attention: Theo Muller New York, NY 10017
Facsimile No.: (212) 972-9150
Attention: Arthur Katz
If to the Escrow Agent:
Lowenstein, Sandler, Kohl, Fisher & Boylan
65 Livingston Avenue
Roseland, NJ 07068-1791
Attn: Michael Rodburg
7. General.
(a) Governing Law; Assigns. This Agreement will be governed
by and construed in accordance with the internal laws of the State of New Jersey
without regard to conflict-of-law principles and will be binding upon, and inure
to the benefit of, the parties hereto and their respective successors and
assigns.
(b) Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(c) Entire Agreement. Except as set forth in the Asset
Agreement between Purchaser and Seller and the Ancillary Agreements, this
Agreement constitutes the entire understanding and agreement of the parties with
respect to the subject matter of this Agreement and supersedes all prior
agreements or understandings, written or oral, between the parties with respect
to the subject matter hereof.
(d) Waivers. The observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only by a writing signed by the party to be
bound thereby. The waiver by a party of any breach hereof for default in payment
of any amount due hereunder or default in the performance hereof shall not be
deemed to constitute a waiver of any other default or any succeeding breach or
default.
8. Expenses of Escrow Agent. All fees and expenses of the Escrow
Agent incurred in the ordinary course of performing its responsibilities
hereunder will be paid by Purchaser upon receipt of a written invoice by Escrow
Agent. Subject to the provisions of the last paragraph of Section 4(b), any
fees, including, but not limited to, attorneys' fees (either paid to retained
attorneys or amounts representing the value of legal services rendered to itself
based upon its standard hourly rates), or expenses incurred by the Escrow Agent
in connection with a dispute over the distribution of the Escrow Amount or the
validity of a Notice of Claim, will be paid fifty percent (50%) by Purchaser and
fifty percent (50%) by Seller. Escrow fees shall be based on the
7
<PAGE> 55
standard hourly rate of the Escrow Agent. Seller's liability for the fees and
expenses of the Escrow Agent may be paid by Purchaser and recovered as a Claim
hereunder out of the Escrow Amount.
9. Successor Escrow Agent. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign and shall be discharged from its duties or obligations hereunder by
giving resignation to the parties to this Agreement, specifying not less than
sixty (60) days' prior written notice of such a date when such resignation will
take effect. Purchaser and Seller shall agree on a successor Escrow Agent prior
to the expiration of such sixty (60) day period by giving written notice to the
Escrow Agent. The Escrow Agent will promptly deliver the Escrow Amount remaining
in the Escrow Account at such time to such designated successor. In the event no
successor Escrow Agent is appointed as described in this Section 9, the Escrow
Agent may apply to a court of competent jurisdiction for the appointment of a
successor Escrow Agent.
10. Limitation of Responsibility; Notices. The Escrow Agent's duties
are limited to those set forth in this Agreement and the Escrow Agent may rely
upon the written notices delivered to the Escrow Agent hereunder.
11. Amendment. This Agreement may be amended with the written
consent of Purchaser, the Escrow Agent and the Seller, provided that if the
Escrow Agent does not agree to an amendment agreed upon by Purchaser and the
Seller, Purchaser and Seller shall appoint a successor Escrow Agent in
accordance with Section 9 above.
12. Miscellaneous. The Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either directly or
by or through its agents or attorneys.
8
<PAGE> 56
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written and shall be effective when executed by
Purchaser, the Escrow Agent and the Seller.
STERIGENICS INTERNATIONAL
By:__________________________
Title:_______________________
RTI INC.
By:__________________________
Title:_______________________
ESCROW AGENT:
LOWENSTEIN, SANDLER, KOHL, FISHER & BOYLAN
By:__________________________
Title:_______________________
9
<PAGE> 57
Exhibit 6.5(a)
Title Commitment for Rockaway Property
<PAGE> 58
SCHEDULE A
Commitment No. NJT-11087
Prepared For: Daniel K. Seubert, Esq.
Gary, Cary et al
400 Hamilton Avenue
Palo Alto, CA 94301-1825
Termination Date 180 Days
1. Commitment Date: January 18, 1996 after Commitment Date
2. Policy or Policies to be issued: Policy Amount
(a) ALTA Owner's Policy - (Rev. 10-17-92)
(Owner's Form) $ TBA
Proposed Insured: TBA
3. Fee simple interest in the land described in this Commitment is owned, at
the Commitment Date, by: See Schedule A-3 attached.
4. The land referred to in this Commitment is described as follows in Schedule
A-4 attached.
NOTE FOR INFORMATION ONLY:
The land referred to in this Commitment is commonly known as Lts 1 through 10,
Block 30102 on the Tax Map, Township of Rockaway, Morris County, New Jersey.
New Jersey Title Insurance Company
<PAGE> 59
REALALERT:(C)
The following exceptions highlight those areas of our commitment which may
affect marketability of title as well as the lien priority of the mortgage
to be insured, if any. The status of such items as judgments, mortgages,
federal tax liens, etc. are shown so that you are aware at a glance those
issues which need to be cleared for closing. Any item listed below must be
removed at closing or otherwise dealt with by this company in order to
obtain insurance omitting such items. Schedule B-II shows other
traditional exceptions to title such as easements, restrictions, etc. which
will remain as exceptions in the policies to be issued.
File No. NJT-11087
6. Judgment Search of the New Jersey Superior Court and United States
District Court is attached.
The above return(s) appear(s) to be against a present owner of the premises
and, if so, constitute a lien thereon. This Company will require, prior to
closing, that
a. The same be satisfied and discharged of record, or
b. Proper releases be recorded, or
c. Proof be presented prior to closing that said return(s) is/are not
against the present owner(s).
7. Mortgage made by Radiation Technology, Inc., to New Jersey Economic
Development Authority dated December 14, 1978 recorded December 15, 1978 in
Mortgage Book 1658 Page 255. Said mortgage secures the sum of $820,000.00.
Said mortgage was assigned to New Jersey National Bank by Assignment from
New Jersey Economic Authority recorded December 15, 1978 in Book 1658 Page
275. As further assigned to Thiokol Corporation by Assignment from New
Jersey National Bank, dated January 29, 1993, recorded February 25, 1993 in
Mortgage Book 4550 Page 305.
Said Mortgage having been modified by Agreement recorded December 20, 1994
in Mortgage Book 5778 Page 221.
NOTE: Cancellation, release or other disposition of said mortgage must be
produced at or prior to closing.
8. Assignment of Leases and Rents made by Radiation Technology, Inc., to New
Jersey Economic Development Authority, dated December 14, 1978, recorded
December 15, 1978 in Mortgage Book 1658 Page 266.
Said mortgage was assigned to New Jersey National Bank by Assignment from
New
(CONTINUED)
[LOGO] NEW JERSEY TITLE INSURANCE COMPANY
<PAGE> 60
CONTINUATION OF REAL ALERT
Jersey Economic Authority recorded December 15, 1978 in Book 1658 Page 275.
As further assigned to Thiokol Corporation by Assignment from New Jersey
National Bank, dated January 29, 1993, recorded February 25, 1993 in
Mortgage Book 4550 Page 305.
Said Mortgage having been modified by Agreement recorded December 20, 1994
in Mortgage Book 5778 Page 221.
9. Mortgage made by Radiation Technology, Inc., ("RTI") to Simon Engineering
P.L.C., dated December 28, 1984 recorded December 28, 1984 in Mortgage Book
2053 Page 248.
NOTE: Cancellation, release or other disposition of said mortgage must be
produced at or prior to closing.
10. Mortgage made by RTI, Inc., to Thiokol Corporation dated December 18, 1992
recorded March 22, 1993 in Mortgage Book 4593 Page 109.
NOTE: Cancellation, release or other disposition of said mortgage must be
produced at or prior to closing.
11. Tax Sale Certificate No. 125-94 sold to Township of Rockaway recorded
August 12, 1994 in Mortgage Book 5603 Page 158. Covers Lot 2 in Block
30101.
NOTE: Cancellation, release or other disposition of said tax sale
certificate must be produced at or prior to closing.
12. Tax Sale Certificate No. 127-94 sold to Township of Rockaway recorded
August 12, 1994 in Mortgage Book 5603 Page 162. Covers Lot I In Block
30102.
NOTE: Cancellation, release or other disposition of said tax sale
certificate must be produced at or prior to closing.
13. Tax Sale Certificate No. 128-94 sold to Township of Rockaway recorded
August 12, 1994 In Mortgage Book 5603 Page 164. Covers Lot 5 in Block
30102.
NOTE: Cancellation, release or other disposition of said tax sale
certificate must be produced at or prior to closing.
14. Tax Sale Certificate No. 129-94 sold to Township of Rockaway recorded
August 12, 1994 in Mortgage Book 5603 Page 166. Covers Lot 8 in Block
30102.
NOTE; Cancellation, release or other disposition of said tax sale
certificate must be produced at or prior to closing.
15. Financing Statement No. 27063 made by RTI Inc, to Thiokol Corporation filed
on 3/11/93 in the Morris County Clerk/Register's Office.
NOTE: Cancellation, release or other disposition of said financing
statement must be produced at or prior to closing.
16. Financing Statement No. 97026 made by RTI Inc. to Nordion International
Inc. filed on 9/2/92 in the Morris County Clerk/Register's Office.
<PAGE> 61
CONTINUATION OF REAL ALERT
NOTE: Cancellation, release or other disposition of said financing
statement must be produced at or prior to closing.
17. Financing Statement No. 40560 made by RTI. Inc. to Thiokol Corporation
filed on April 14, 1993 in the Morris County Clerk/Register's Office.
NOTE: Cancellation, release or other disposition of said financing
statement must be produced at or prior to closing.
NOTE FOR INFORMATION:
Corporate Status Report vs. RTI Inc., dated 2/2/96 shows said corporation
to be in good standing.
18. Results of a franchise tax report vs. RTI Inc. Said report has been
ordered but not yet received.
<PAGE> 62
NEW JERSEY TITLE
INSURANCE COMPANY
Reply To: P.O. Box 491, 35 Waterview Blvd.
Parsippany, NJ 07054
201-428-8877 800-801-4847
201-428-0929 (FAX)
Daniel K. Seubert, Esq. February 23, 1996
Gary, Cary et al
400 Hamilton Avenue
Palo Alto, CA 94301-1825
Your File No.: 1190987-900000
RE: FILE NO.: NJT-11087
BUYER/MORTGAGOR: TBA
SELLER: Radiation Technology, Inc.
Dear Mr. Seubert,
Thank you for working with us on the above commitment. Enclosed are the
following:
1 Commitment(s) for Title Insurance
It you have any questions, please contact us. We look forward to the next
opportunity to serve you.
Sincerely,
New Jersey Title Insurance Company
CC: Michael Schwamm, Esq.
Warshaw, Burnstein
555 5th Avenue
NY, NY 10017
<PAGE> 63
COMMITMENT NO. NJT-11087
SCHEDULE A-3
AS TO TAX LOTS 3, 4, AND 7, BLOCK 30102:
Radiation Technology, Inc., by deed from Thiokol Chemical Corporation, dated
July 26, 1972 and recorded August 12, 1972 in the Morris County Clerk's Office
in Deed Book 2221, Page 1034.
AS TO TAX LOTS 2 AND 5, BLOCK 30101 AND LOTS 1, 2, 8, 9 & 10 BLOCK 30102:
Radiation Technology, Inc by deed from Thiokol Corporation, dated December 14,
1978 and recorded December 15, 1978 in the Morris County Clerk's Office in Deed
Book 2487, Page 819.
AS TO TAX LOTS 5 AND 6, BLOCK 30102:
RTI, Inc. by deed from ARJ Realty Corp., Trustee, dated May 6, 1991 and recorded
June 6, 1991 in the Morris County Clerk's Office in Deed Book 3441, Page 281.
<PAGE> 64
COMMITMENT NO. NJT-11087
DESCRIPTION, SCHEDULE A-4
ALL that tract or parcel of land and premises, situate, lying and being in the
Township of Rockaway in the County of Morris and State of New Jersey, more
particularly described as follows:
Tract I (Tax Lot 3,4 and 7, Block 30102)
BEGINNING at a monument marking the corner in a division line between lands of
Picatinny Arsenal and Grantor, said monument being also the 12th corner of the
6th tract of the whole tract of which this parcel is a part, and running: thence
(1) By a line through lands of Grantor, South 53 degrees 51 minutes East, 654.72
feet, to a point in the side line of Denmark Road: thence
(2) Along said line, South 40 degrees 50 minutes West 79.59 feet, to a point of
curvature therein: thence
(3) Still along said line in a southerly direction, along a curve curving to the
left, having a radius of 586.02 feet, a central angle of 17 degrees 59 minutes
50 seconds, and a length of 184.08 feet, to a point of tangency therein; thence
(4) Still along said line, South 22 degrees 50 minutes 10 seconds West, 150.00
feet, to a point of tangency therein: thence
(5) Still along said line in a southerly direction, along a curve curving to the
right, having a radius of 1113.34 feet, a central angle of 10 degrees 13 minutes
10 seconds, and a length of 198.58 feet, to a point of tangency therein: thence
(6) Still along said line, South 33 degrees 03 minutes 20 seconds West, 100.00
feet, to a point of curvature therein: thence
(7) Still along said line in a southerly direction, along a curve curving to the
left, having a radius of 2670.79 feet, a central angle of 3 degrees 51 minutes
40 seconds, and a length of 99.70 feet, to a point of reverse curvature therein:
thence
(8) Still along the same line in a southerly direction, along a curve curving to
the right, having a radius of 554.91 feet, a central angle of 16 degrees 14
minutes 30 seconds, and a length of 157.30 feet, to a point of tangency therein:
thence
(9) Still along said line, South 47 degrees 09 minutes 30 seconds West, 77.50
feet, to a point, thence
(CONTINUED)
<PAGE> 65
Commitment No. NJT-11087
CONTINUATION OF DESCRIPTION, SCHEDULE A-4
(10) By a line through lands of Grantor, North 76 degrees 36 minutes 24 seconds
West, 807.53 feet, to a point in line of lands of Picatinny Arsenal, being the
westerly line of the whole tract of which this parcel is a part; thence
(11) Along said line, North 50 degrees 13 minutes 46 seconds East, 640.97 feet,
to a point, being a corner therein; thence
(12) Still along said line, North 26 degrees 18 minutes 46 seconds East, 737.82
feet, to the point at the place of BEGINNING.
Tract 11 (Lots 2 and 5, Block 30101 and Lots 1,2,8,9 and 10, Block 30102)
Beginning at an iron rail found set into the ground at the 6th corner as
described in a Deed of Conveyance from Warren Foundry and Pipe Corporation, a
corporation of the State of Delaware, to Reaction Motors, Inc,, a corporation of
the State of New Jersey, recorded in Book N-43 of Deeds on page 476; said rail
is also the 2nd corner of the first tract as described in a Deed of Conveyance
from Public Service Electric & Gas Company, a corporation of the State of New
Jersey, to Reaction Motors, Inc., dated November 8, 1957 and recorded in the
Morris County Clerk's Office in Morristown, New Jersey in Book X-64 of Deeds on
page 554; thence
(1) along the 6th line of the Warren Foundry conveyance South 45 degrees 18
minutes 54 seconds West 1,626.33 feet to an iron rail found set into the ground;
thence
(2) along the 7th course of said conveyance South 32 degrees 46 minutes 31
seconds East 1,057.22 feet to an iron pipe driven into the ground at the 4th
corner of lands previously conveyed by Warren Foundry & Pipe Corporation to Lake
Telomark, Inc., by Deed Book Z-35 page 131; thence
(3) along lands of Lake Telomark, Inc., South 41 degrees 10 minutes 49 seconds
West 1,782.34 feet to an iron rail found set into the ground at the 9th Corner
of the previously mentioned Deed of conveyance from Warren Foundry to Reaction
Motors, Inc.; thence
(4) North 42 degrees 11 minutes 28 seconds West 2,683.09 feet to a concrete
monument found set into the ground at the 10th corner of said conveyance; thence
(5) North 25 degrees 47 minutes 40 seconds West 1,125.40 feet to a concrete
monument found set into the ground by the shore of Lake Denmark; thence
(6) in part along the 11th line of said conveyance North 51 degrees 35 minutes
37 seconds East 857.32 feet to the 10th corner as described in a Deed of
Conveyance from Thiokol Chemical Corporation to Radiation Technology, Inc.,
<PAGE> 66
COMMITMENT NO. NJT-11087
CONTINUATION OF DESCRIPTION, SCHEDULE A-4
dated July 26, 1972 and recorded in Book 2221 of Deeds on page 1034; thence the
following ten courses along said conveyance;
(7) South 75 degrees 16 minutes 23 seconds East 807.30 feet to a point in the
northerly sideline of Lake Denmark Road; said point is distant 30 feet, measured
at right angles, from the existing centerline of said road; thence the following
eight courses along said road
(8) North 48 degrees 34 minutes 14 seconds East 77.50 feet to the Point of
Curvature of a curve having a radius of 554.91 feet; thence
(9) curving to the left, along said curve, an arc distance of 157.30 feet to a
point; thence
(10) curving to the right; along the arc of a curve having a radius of 2,670.79
feet, a distance of 99.70 feet to a point; thence
(11) North 34 degrees 28 minutes 04 seconds East 100.00 feet to the Point of
Curvature of a curve having a radius of 1,113.34 feet; thence
(12) curving to the left, along said curve, an arc distance of 198.58 feet to a
point; thence
(13) North 24 degrees 14 minutes 54 seconds East 150.00 feet to the Point of
Curvature of a curve having a radius of 586.02 feet; thence
(14) curving to the right, along said curve, an arc distance of 184.08 feet to
a point; thence
(15) North 42 degrees 14 minutes 44 seconds East 79.59 feet to a point; said
point is distant 30 feet, measured at right angles, from the existing centerline
of Lake Denmark Road; thence
(16) leaving said road North 52 degrees 26 minutes 04 seconds West 654.75 feet
to a concrete monument found set into the ground at the 13th corner of the Deed
of Conveyance from Warren Foundry to Reaction Motors, Inc.; thence
(17) North 17 degrees 55 minutes 07 seconds West 448.44 feet to a point; thence
(18) North 30 degrees 32 minutes 02 seconds East 1,026.51 feet to an iron bar
found driven into the ground in the westerly right of way line of the Public
Service Electric and Gas Company right of Way: said point being the 15th corner
of the Warren Foundry Conveyance; thence
(19) along said right of way South 31 degrees 07 minutes 07 seconds East 51.88
feet to an iron bar found driven into the ground at the 16th corner of said
<PAGE> 67
Commitment No. NJT-11087
CONTINUATION OF DESCRIPTION, SCHEDULE A-4
tract; thence
(20) South 49 degrees 30 minutes 59 seconds West 126.08 feet to an iron rail
found set into the ground at the 17th corner of said tract: thence
(21) South 2 degrees 50 minutes 49 seconds East 681.10 feet to a drill steel
found driven into the ground at the 18th corner of said tract: thence
(22) South 76 degrees 18 minutes 51 seconds East 135.14 feet to an iron bar
found driven into the ground at the 19th corner of said tract: thence
(23) North 61 degrees 38 minutes 08 seconds East 338.06 feet to an iron bar
found driven into the ground at the 20 corner of said tract: said bar is in the
westerly sideline of the Public Service Electric and Gas Company right of way;
thence
(24) along said right of way South 30 degrees 06 minutes 26 seconds East 508.67
feet to an iron bar found driven into the ground at the 21st corner of said
tract; said bar is also the 1st corner of the 3rd tract as described in a Deed
of Conveyance from Public Service Electric and Gas Company to Reaction Motors
dated November 8, 1957 and recorded in Book X-64 of Deeds on page 554: thence
(25) crossing said right of way North 42 degrees 16 minutes 55 seconds East
296.95 feet to an iron rail found set into the ground at the 4th corner of the
2nd tract in the Public Service conveyance: thence
(26) South 61 degrees 25 minutes 26 seconds East 1,264.22 feet to an iron pipe
found driven into the ground at the 5th corner of said 2nd tract: thence
(27) North 30 degrees 17 minutes 04 seconds East 269.69 feet to an iron bar
found driven into the ground at the 6th corner of said 2nd tract: thence
(28) in part along the 6th line of the 2nd tract South 19 degrees 44 minutes 15
seconds East 1,052.85 feet to an iron pipe found driven into the ground near the
centerline of the Public Service Right of Way: thence
(29) South 49 degrees 15 minutes 48 seconds West 399.44 feet to the point and
place of beginning.
Tract III (Lots 5 and 6, Block 30102)
ALL those certain parcels of land situate in the Township of Rockaway, County of
Morris and State of New Jersey known as that portion of the former Wharton
Northern Railroad extending from the center line of Hollow Road to Picatinny
boundary, and including branch to the center line of Lake Denmark Road (also
known as Denmark-Marcella Road, Station 15+97). Stations 295+70 to 388+85
estimated, as shown on Right-of-Way and Track Maps W&N/6, 7, 7a and 8.
<PAGE> 68
Commitment No. NJT-11087
CONTINUATION OF DESCRIPTION, SCHEDULE A-4
But only including those lands designated as Block 30102. Lot 5 and Block 30102,
Lot 6 on the Official Tax Map of the Township of Rockaway, County of Morris and
State of New Jersey.
<PAGE> 69
Commitment No. NJT-11087
SCHEDULE B-SECTION I
REQUIREMENTS
The following requirements must be met:
(a) Pay the agreed amount for the interest in the land and/or the mortgage to
be insured.
(b) Pay us the premiums, fees and charges for the policy.
(c) Documents satisfactory to us creating the interest in the land and/or the
mortgage to be insured must be signed, delivered and recorded.
1. Deed from RTI Inc.,(formerly known as Radiation Technology, Inc.) to
proposed insured.
(d) You must tell us in writing the name of anyone not referred to in this
Commitment who will get an interest in the land or who will make a loan on
the land. We may then make additional requirements or exceptions.
(e) A standard form Seller's Affidavit of Title to be executed at the closing
of title and provided to this Company.
(f) A Notice of Settlement pursuant to N.J.S.A. 46:16A-1 et seq., must be filed
prior to closing.
(g) This Company requires that a title rundown be ordered at least 24 hours
prior to closing of title.
(h) Complete and return the enclosed Return Transmittal Letter within 48 hours
of closing.
(i) This Company requires that a copy of (1) the Transmittal Letter to the
County Clerk/Register and (2) all documents, including description, sent
for recording be enclosed with the Return Transmittal Letter requesting
policy issuance.
(j) A copy of the corporate resolution of Radiation Technology, Inc., AKA RTI,
Inc., authorizing the conveyance of the premises must be produced at or
prior to closing of title and provided to this Company. Said corporate
resolution must be certified to be a true copy adopted by the Board of
Directors in accordance with the Certificate of Incorporation, etc., and
that same has not been modified or rescinded.
<PAGE> 70
COMMITMENT NO. NJT-11087
SCHEDULE B-SECTION II
EXCEPTIONS
Any policy we issue will have the following exceptions unless they are taken
care of to our satisfaction.
1. Rights or claims of parties In possession of the land not shown by the
public record.
2. Easements, or claims of easements, not shown by the public record.
3. Any facts about the land which a correct survey would disclose, and which
are not shown by the public record.
4. Any liens on your title, arising now or later, for labor and material, not
shown by the public record.
COPIES OF ALL THE DOCUMENTS REFERENCED BELOW ARE ATTACHED TO THIS COMMITMENT.
5. Taxes, charges and assessments:
AS TO TAX LOTS 2 & 5 IN BLOCK 30101:
a) 1995 & 1996 tax lien. Tax Search No. NJT-11087 dated 2/14/96 shows
taxes open + penalty for first quarter of 1996: 1995 taxes included in
tax lien (see attached)
NOTE: Taxes will not be run down prior to closing unless specifically
requested.
AS TO TAX LOTS 1 & 2 IN BLOCK 30102:
b) 1996 tax lien. Tax Search No. NJT-11087 dated 2/14/96 shows land taxes
paid through first quarter of 1996.
NOTE: Taxes will not be run down prior to closing unless specifically
requested.
c) Possible added or omitted assessments as provided by N.J.S.A.
54:4-63.1 et seq.
AS TO LOTS 3, 4 & 7 IN BLOCK 30102:
d) 1996 tax lien. Tax Search No. NJT-11087 dated 2/14/96 shows taxes paid
through first quarter of 1996.
NOTE: Taxes will not be run down prior to closing unless specifically
requested.
AS TO TAX LOTS 5 & 6 IN BLOCK 30102:
e) 1996 tax lien. Tax Search No. NJT-11087 dated 2/22/96 shows land taxes
paid
(Continued)
<PAGE> 71
COMMITMENT NO. NJT-11087
CONTINUATION OF SCHEDULE B-SECTION II
EXCEPTIONS
through first quarter of 1996.
NOTE: Taxes will not be run down prior to closing unless specifically
requested.
f) Possible added or omitted assessments as provided by N.J.S.A.
54:4-63.1 et seq.
AS TO TAX LOTS 8, 9 & 10 IN BLOCK 30102:
g) 1996 tax lien. Tax Search No. NJT-11087 dated 2/14/96 shows land taxes
paid through first quarter of 1996.
NOTE: Taxes will not be run down prior to closing unless specifically
requested.
h) Possible added or omitted assessments as provided by N.J.S.A.
54:4-63.1 et seq.
AS TO ALL LOTS:
Assessment Search No. NJT-11087 (5 searches attached) dated 2/14/96 &
2/22/96 shows none.
i) Lien for water and/or sewer rents.
6. Judgment Search of the New Jersey Superior Court and United States District
Court is attached.
The above return(s) appear(s) to be against a present
owner of the premises and, if so, constitute a lien thereon. This Company
will require, prior to closing, that
a. The same be satisfied and discharged of record, or
b. Proper releases be recorded, or
c. Proof be presented prior to closing that said return(s) is/are not
against the present owner(s).
7. Mortgage made by Radiation Technology, Inc., to New Jersey Economic
Development Authority dated December 14, 1978 recorded December 15, 1978 in
Mortgage Book 1658 Page 255. Said mortgage secures the sum of $820,000.00.
Said mortgage was assigned to New Jersey National Bank by Assignment from
New Jersey Economic Authority recorded December 15, 1978 in Book 1658 Page
275. As further assigned to Thiokol Corporation by Assignment from New
Jersey National Bank, dated January 29, 1993, recorded February 25, 1993 in
Mortgage Book 4550 Page 305.
Said Mortgage having been modified by Agreement recorded December 20,
1994 in Mortgage Book 5778 Page 221.
NOTE: Cancellation, release or other disposition of said mortgage must be
<PAGE> 72
Commitment No. NJT-11087
CONTINUATION OF SCHEDULE B-SECTION II
EXCEPTIONS
produced at or prior to closing.
8. Assignment of Leases and Rents made by Radiation Technology, Inc., to New
Jersey Economic Development Authority, dated December 14, 1978, recorded
December 15, 1978 in Mortgage Book 1658 Page 266.
Said mortgage was assigned to New Jersey National Bank by Assignment from
New Jersey Economic Authority recorded December 15, 1978 in Book 1658 Page
275. As further assigned to Thiokol Corporation by Assignment from New
Jersey National Bank, dated January 29, 1993, recorded February 25, 1993 in
Mortgage Book 4550 Page 305.
Said Mortgage having been modified by Agreement recorded December 20, 1994
in Mortgage Book 5778 Page 221.
9. Mortgage made by Radiation Technology, Inc., ("RTI") to Simon Engineering
P.L.C., dated December 28, 1984 recorded December 28, 1984 in Mortgage Book
2053 Page 248.
NOTE: Cancellation, release or other disposition of said mortgage must be
produced at or prior to closing.
10. Mortgage made by RTI, Inc., to Thiokol Corporation dated December 18, 1992
recorded March 22, 1993 in Mortgage Book 4593 Page 109.
NOTE: Cancellation, release or other disposition of said mortgage must be
produced at or prior to closing.
11. Tax Sale Certificate No. 125-94 sold to Township of Rockaway recorded
August 12, 1994 in Mortgage Book 5603 Page 158. Covers Lot 2 in Block
30101.
NOTE: Cancellation, release or other disposition of said tax sale
certificate must be produced at or prior to closing.
12. Tax Sale Certificate No. 127-94 sold to Township of Rockaway recorded
August 12, 1994 in Mortgage Book 5603 Page 162. Covers Lot 1 in Block
30102.
NOTE: Cancellation, release or other disposition of said tax sale
certificate must be produced at or prior to closing.
13. Tax Sale Certificate No. 128-94 sold to Township of Rockaway recorded
August 12, 1994 in Mortgage Book 5603 Page 164. Covers Lot 5 In Block
30102.
NOTE: Cancellation, release or other disposition of said tax sale
certificate must be produced at or prior to Closing.
14. Tax Sale Certificate No, 129-94 sold to Township of Rockaway recorded
August
<PAGE> 73
COMMITMENT NO. NJT-11087
CONTINUATION OF SCHEDULE B-SECTION II
EXCEPTIONS
12, 1994 in Mortgage Book 5603 Page 166. Covers Lot 8 in Block 30102.
NOTE: Cancellation, release or other disposition of said tax sale
certificate must be produced at or prior to closing.
15. Financing Statement No. 27063 made by RTI Inc. to Thiokol Corporation filed
on 3/11/93 in the Morris County Clerk/Register's Office.
NOTE: Cancellation, release or other disposition of said financing
statement must be produced at or prior to closing.
16. Financing Statement No. 97026 made by RTI Inc. to Nordion International
Inc. filed on 9/2/92 in the Morris County Clerk/Register's Office.
NOTE: Cancellation, release or other disposition of said financing
statement must be produced at or prior to closing.
17. Financing Statement No. 40560 made by RTI, Inc., to Thiokol Corporation
filed on April 14, 1993 in the Morris County Clerk/Register's Office.
NOTE: Cancellation, release or other disposition of said financing
statement must be produced at or prior to closing.
NOTE FOR INFORMATION:
Corporate Status Report vs. RTI Inc., dated 2/2/96 shows said corporation
to be in good standing.
18. Results of a franchise tax report vs. RTI Inc. Said report has been
ordered but not yet received.
19. Easement(s) contained In Deed Book T19 page 599: C31 Page 103: C31 Page
105; X64 Page 554; 2181 Page 617 and Deed Book 2351 Page 59.
20. Easement(s) contained in Deed Book 2221 page 1034.
21. Mineral Rights as contained in Deed Book N25 Page 8: N43 Page 467 and Deed
Book 2221 Page 1034.
22. Exceptions, Reservations and Easements as contained in Deed Book 2221 Page
1034.
23. Administrative Consent Order in Deed Book 3724 Page 203.
24. Declaration of Environmental Restrictions in Deed Book 4151 Page 326.
<PAGE> 74
COMMITMENT NO. NJT-11087
CONTINUATION OF SCHEDULE B-SECTION II
EXCEPTIONS
25. Rights, public and private, in and to all roads, streets and avenues
crossing, bounding or affecting the premises,
26. Rights, public and private, together with flooding and drainage rights, if
any, in and to all streams, rivers, or water courses, bounding or affecting
the premises.
27. Subject to subsurface conditions not of record. (Fee Policy Only)
NOTE: Please advise as to survey.
<PAGE> 75
Exhibit 6.5(c)
Title Commitment for North Carolina Property
<PAGE> 76
AMERICAN LAND TITLE ASSOCIATION COMMITMENT -- 1966
C H I C A G O T I T L E I N S U R A N C E C O M P A N Y
COMMITMENT FOR TITLE INSURANCE
CHICAGO TITLE INSURANCE COMPANY, a corporation of Missouri, herein
called the Company, for a valuable consideration, hereby commits to issue its
policy or policies of title insurance, as identified in Schedule A, in favor of
the proposed Insured named in Schedule A, as owner or mortgagee of the estate
or interest covered hereby in the land described or referred to in Schedule A,
upon payment of the premiums and charges therefor: all subject to the
provisions of Schedules A and B and to the Conditions and Stipulations hereof.
This Commitment shall be effective only when the identity of the
proposed Insured and the amount of the policy or policies committed for have
been inserted in Schedule A hereof by the Company, either at the time of the
issuance of this Commitment or by subsequent endorsement.
This Commitment is preliminary to the issuance of such policy or
policies of title insurance and all liability and obligations hereunder shall
cease and terminate six months after the effective date hereof or when the
policy or policies committed for shall issue, whichever first occurs, provided
that the failure to issue such policy or policies is not the fault of the
Company.
IN WITNESS WHEREOF, Chicago Title Insurance Company has caused this
Commitment to be signed and sealed as of the effective date of Commitment shown
in Schedule A, the Commitment to become valid when countersigned by an
authorized signatory.
CHICAGO TITLE INSURANCE COMPANY
By:
-------------------------------
Issued by: [SIG ILLEGIBLE]
CHICAGO TITLE INSURANCE COMPANY President.
201 SOUTH COLLEGE STREET
1465 CHARLOTTE PLAZA Attest:
CHARLOTTE, NORTH CAROLINA 29244
(704) 375-0700 /s/ THOMAS J. ADAMS
-------------------------------
Thomas J. Adams
Secretary.
[SIG ILLEGIBLE]
- -----------------------
Authorized Signatory
[SEAL]
Copyright 1966 American Land Title Association
<PAGE> 77
A.L.T.A. COMMITMENT 9600468
CHICAGO TITLE INSURANCE COMPANY SHF
201 South College Street, Suite 1465, Charlotte, NC 28244-4485
Phone: (704) 375-0700 Fax: (704) 332-7509
SCHEDULE A
Number Effective Date
9600468 1ST REVISION January 29, 1996
(Revised 2/8/96 shf) at 5:00 P.M.
1. Policy or Policies to be issued:
OWNER'S: $0.00
Proposed Insured:
STERIGENICS INTERNATIONAL, INC.
LOAN: $0.00
Proposed Insured:
TO BE DETERMINED, and/or its successors and assigns, as their interests
may appear
2. The estate or interest in the land described or referred to in this
Commitment and covered herein is a fee simple, and title thereto is at
the effective date hereof vested in:
RTI INC., A NEW YORK CORPORATION, SUCCESSOR BY MERGER WITH PROCESS
TECHNOLOGY (N.C.), INC.
3. The land referred to in the Commitment is described in Schedule C.
SCHEDULE B - Section 1
The following are the requirements to be complied with:
1. Instrument(s) creating the estate or interest to be insured must be
approved, executed and filed for record, to wit:
(a) General Warranty Deed from RTI INC., A NEW YORK CORPORATION,
SUCCESSOR BY MERGER TO PROCESS TECHNOLOGY (N.C.), INC. to
STERIGENICS INTERNATIONAL, INC.
(b) Deed of Trust from STERIGENICS INTERNATIONAL, INC. to a
designated trustee for a lender TO BE DETERMINED, securing an
amount to be determined.
2. Payment of the full consideration to, or for the account of, the
grantors or mortgagors.
3. Payment of all taxes, charges, assessments, levied and assessed against
subject premises, which are due and payable.
4. Satisfactory evidence should be had that improvements and/or repairs or
alterations thereto are completed; that contractor, subcontractors,
labor and materialmen are all paid. NOTE: This item will be deleted upon
receipt of satisfactory evidence that such liens cannot obtain priority
over the lien of the instrument(s) to be insured.
5. Cancellation, satisfaction or release of the following documents:
(a) Deed of Trust in favor of Simon Engineering, P.L.C. recorded in
Book 549, page 1086, said registry.
UCC Financing Statements as follows:
(b) 80178, continued by 609517, amended by 887984 and continued by
1145887, North Carolina Secretary of State with Simon
Engineering, P.L.C. as secured party.
(c) 856170 with Continental Bank, N.A. as secured party, North
Carolina Secretary of State.
(d) 92-2145 (Alamance County) and 917290 (North Carolina Secretary
of State with Nordion International, Inc. as secured party.
(e) 917289 with Nordion International, Inc. as secured party, North
Carolina Secretary of State.
(f) 95-1397 and 96-194 (Alamance County) and 1236586 and 1303008
(North Carolina Secretary of State), with Central Carolina Bank,
Lessor, as secured party.
(g) 860935 and 1274921 ("Process Technology Holdings, Inc."), North
Carolina Secretary of State.
6. Certificate of Merger for seller to be filed in accordance with North
Carolina statute in the Register of Deeds of Alamance County, North
Carolina.
7. Seller to file 1995 annual report to be current with the North Carolina
Secretary of State.
<PAGE> 78
A.L.T.A. COMMITMENT
CHICAGO TITLE INSURANCE COMPANY
SCHEDULE B - continued
Number 9600468 1ST REVISION
SCHEDULE B - Section 2
Schedule B of the policies to be issued will contain exceptions to the
following matters unless the same are disposed of to the satisfaction of
the Company.
1. Defects, liens, encumbrances, adverse claims or other matters, if any,
created, first appearing in the public records or attaching subsequent
to the effective date hereof but prior to the date the proposed insured
acquires for the value of record the estate or interest or mortgage
thereon covered by this Commitment.
2. Any owner's policy issued pursuant hereto will contain under Schedule B
the standard exceptions set forth at the inside cover hereof. Any loan
policy will contain under Schedule B standard Exceptions 1, 2 and 3
unless a satisfactory survey and inspection of the premises is made.
3. Taxes, dues and assessments for the year 1996, and subsequent years, not
yet due and payable.
4. Deeds of Easement to the City of Graham recorded in Book 425, pages 523
and 525.
5. Easements to Duke Power Company recorded in Book 518, page 127 and Book
329, page 84.
6. Easement reserved in Book 415, page 794. NOTE: This exception may be
removed upon receipt of a current survey which would prove that it is
inapplicable to the insured premises.
7. Any and all matters disclosed on Final Plat recorded in Plat Book 27,
Page 55, Alamance County Register of Deeds, including, but not limited
to, a 10-foot wide utility easement along the rear lot line, sanitary
sewer easement and manhole.
8. Encroachments, overlaps, boundary line disputes, access, deficiency in
quantity of land, and any other matters which would be disclosed by a
current and accurate survey and inspection of the land. NOTE: Upon
receipt of a satisfactory survey and surveyor's report, this exception
will be eliminated or amended in accordance with the facts shown
thereby.
<PAGE> 79
A.L.T.A. COMMITMENT
CHICAGO TITLE INSURANCE COMPANY
SCHEDULE C
Number 9600468 1ST REVISION
The land referred to in this Commitment is described as follows:
Lying and being situated in ALAMANCE County, North Carolina, and more
particularly described as follows:
(See Exhibit A attached hereto)
<PAGE> 80
EXHIBIT A
A certain tract or parcel of land in Haw River Township, Alamance
County, N.C., adjoining Porter Avenue, John Bakatsias and other lands of J.
Leon Porter and being more particularly described as follows:
BEGINNING at an iron stake and new corner with J. Leon Porter in the East right
of way line of Porter Avenue and located S. 04 deg. 08' 32" E. 356.77 ft. from
the intersection of the East line of said road and the South line of a service
road which said 356.77 ft. is the chord of an arc having the length of 357.79
ft. formed by the East line of said 60 ft. wide road; thence a new line with
said Porter, N. 88 deg. 56' 56" E. 444.13 ft. to an iron stake and new corner
with said Porter; thence a new line with said Porter, S. 11 deg. 38' 05" E.
21.17 ft. to an iron stake and corner with John Bakatsias; thence with the line
of said Bakatsias, S. 11 deg. 38' 05" E. 365 ft. to an iron stake and new
corner with J. Leon Porter; thence a new line with said Porter, S. 87 deg. 18'
W. 441.94 ft. to an iron stake in the East line of Porter Avenue; thence with
the East line of Porter Avenue, N. 11 deg. 38' 05" W. 400 ft. to the POINT OF
BEGINNING AND CONTAINING 3.935 ACRES, more or less.
The above description and determination of area were taken from a survey and
drawing made by John D. Somers, R.L.S., dated 5/18/82, captioned "Final Plat",
property of J. Leon Porter and wife, Ellen T. Porter and plat is recorded in
the office of the Register of Deeds for Alamance County, N.C., in Plat Book 27
at Page 55.
<PAGE> 81
ENDORSEMENT
Attached to Policy No.
9600468
Issued by
CHICAGO TITLE INSURANCE COMPANY
SteriGenics International, Inc.
The Company Insures the Insured against loss or damage sustained by reason of
any incorrectness in the assurance that, at Date of Policy:
1. According to applicable zoning ordinances and amendments
thereto, the land is classified Zone I-1 (Light Industrial).
2. The following use or uses are allowed under that classification
subject to compliance with any conditions, restrictions or
requirements contained in the zoning ordinances and amendments
thereto, including but not limited to the securing of necessary
consents or authorizations as a prerequisite to the use or uses:
Manufacturing.
There shall be no liability under this endorsement based on the invalidity of
the ordinances and amendments thereto until after a final decree of a court of
competent jurisdiction adjudicating the invalidity, the effect of which is to
prohibit the use or uses.
Loss or damage as to the matters insured against by this endorsement shall not
include loss or damage sustained or incurred by reason of the refusal of any
person to purchase, lease or lend money on the estate or interest covered by
this policy.
This endorsement is made a part of the policy and is subject to all of the
terms and provisions thereof and of any prior endorsements thereto. Except to
the extent expressly stated, it neither modifies any of the terms and
provisions of the policy and any prior endorsements, nor does it extend the
effective date of the policy and any prior endorsements, nor does it increase
the face amount thereof.
CHICAGO TITLE INSURANCE COMPANY
[SIG]
- -----------------------------
Authorized Signatory
Note: This endorsement shall not be valid or binding
until signed by an authorized signatory.
<PAGE> 82
ENDORSEMENT
Attached to and forming a part of
Policy No. 9600468
Issued by
CHICAGO TITLE INSURANCE COMPANY
ACCESS ENDORSEMENT
This policy assures the Insured that the insured Premises abut a publicly
dedicated right of way known as Porter Avenue and as shown on Final Plat of J.
Leon Porter and wife, Ellen T. Porter recorded in Plat Book 27, page 55,
Alamance County Register of Deeds.
NOTE: In accordance with the Alamance County Branch of the Department of
Transportation, public maintenance of said right of way is limited to
450 feet south of I-85 Service Road.
February 8, 1996
This endorsement is made a part of the commitment or policy. It is subject to
all the terms of the commitment or policy and prior endorsements. Except as
expressly stated on this endorsement, the terms, dates and amounts of the
commitment or policy and prior endorsements are not changed.
CHICAGO TITLE INSURANCE COMPANY
[SIG]
- -------------------------------
Authorized Signatory
Note: This endorsement shall not be valid or binding
until signed by an authorized signatory.
<PAGE> 83
STANDARD EXCEPTIONS FOR OWNER'S POLICY
The owner's policy will be subject to the mortgage, if any, noted under item
one of Section 1 of Schedule B hereof and to the following exceptions: (1)
rights or claims of parties in possession not shown by the public records; (2)
encroachments, overlaps, boundary line disputes, and any matters which would be
disclosed by an accurate survey and inspection of the premises; (3) easements,
or claims of easements, not shown by the public records; (4) any lien, or right
to a lien, for services, labor, or material heretofore or hereafter furnished,
imposed by law, and not shown by the public records; (5) taxes or special
assessments which are not shown as existing liens by the public records.
CONDITIONS AND STIPULATIONS
1. The term "mortgage," when used herein, shall include deed of trust, trust
deed, or other security instrument.
2. If the proposed Insured has or acquires actual knowledge of any defect,
lien, encumbrance, adverse claim or other matter affecting the estate or
interest or mortgage thereon covered by this Commitment other than those
shown in Schedule B hereof, and shall fail to disclose such knowledge to the
Company in writing, the Company shall be relieved from liability for any
loss or damage resulting from any act of reliance hereon to the extent the
Company is prejudiced by failure to so disclose such knowledge. If the
proposed Insured shall disclose such knowledge to the Company, or if the
Company otherwise acquires actual knowledge of any such defect, lien,
encumbrance, adverse claim or other matter, the Company at its option may
amend Schedule B of this Commitment accordingly, but such amendment shall
not relieve the Company from liability previously incurred pursuant to
paragraph 3 of these Conditions and Stipulations.
3. Liability of the Company under this Commitment shall be only to the named
proposed Insured and such parties included under the definition of Insured
in the form of policy or policies committed for and only for actual loss
incurred in reliance hereon in undertaking in good faith (a) to comply with
the requirements hereof, or (b) to eliminate exceptions shown in Schedule B,
or (c) to acquire or create the estate or interest or mortgage thereon
covered by this Commitment. In no event shall such liability exceed the
amount stated in Schedule A for the policy or policies committed for and
such liability is subject to the insuring provisions, the Exclusions from
Coverage and the Conditions and Stipulations of the form of policy or
policies committed for in favor of the proposed Insured which are hereby
incorporated by reference and are made a part of this Commitment except as
expressly modified herein.
4. Any action or actions or rights of action that the proposed Insured may have
or may bring against the Company arising out of the status of the title to
the estate or interest or the status of the mortgage thereon covered by
this Commitment must be based on and are subject to the provisions of this
Commitment.
<PAGE> 84
EXHIBIT A
JAN 14 '96 [Illegible]
BOOK 473 PAGE 113
THIS DEED, made this 10th day of June, 1982 by J. LEON PORTER and wife, ELLEN
T. PORTER hereinafter called Grantors, to PROCESS TECHNOLOGY (NC), INC., a
North Carolina Corporation, P.O. Box 185, Rockaway, N.J. 07866, hereinafter
called Grantees. The designations Grantors and Grantees as used herein shall
include singular, plural, masculine, feminine, or neuter as required by the
context.
WITNESSETH: That the Grantors, in consideration of $10.00 and other
valuable consideration to them paid by the Grantee, the receipt of which is
acknowledged, have bargained and sold, and by these presents do bargain, sell
and convey to the Grantees their heirs, successors and assigns, all of the
following described real property:
A certain tract or parcel of land in Haw River Township, Alamance County, N.C.,
adjoining Porter Avenue, John Bakatsias and other lands of J. Leon Porter and
being more particularly described as follows:
BEGINNING at an iron stake and new corner with J. Leon Porter in the East right
of way line of Porter Avenue and located S. 04 deg. 08' 32" E. 356.77 ft. from
the intersection of the East line of said road and the South line of a service
road which said 356.77 ft. is the chord of an arc having the length of 357.79
ft. formed by the East line of said 60 ft. wide road; thence a new line with
said Porter, N. 88 deg. 56' 56" E. 444.13 ft. to an iron stake and new corner
with said Porter; thence a new line with said Porter, S. 11 deg. 38' 05" E.
21.17 ft. to an iron stake and corner with John Bakatsias; thence with the line
of said Bakatsias, S. 11 deg. 38' 05" E. 365 ft. to an iron stake and new
corner with J. Leon Porter; thence a new line with said Porter, S. 87 deg. 18'
W. 441.94 ft. to an iron stake in the East line of Porter Avenue; thence with
the East line of Porter Avenue, N. 11 deg. 38' 05" W. 400 ft. to the POINT OF
BEGINNING AND CONTAINING 3.935 ACRES, more or less.
The above description and determination of area were taken from a survey and
drawing made by John D. Somers, R.L.S., dated 5/18/82, captioned "Final Plat",
property of J. Leon Porter and wife, Ellen T. Porter and plat is recorded in
the office of the Register of Deeds for Alamance County, N.C., in Plat Book 27
at Page 55.
This conveyance is subject to recorded easements, 10 ft. wide utility easement
along rear lot line as shown on recorded subdivision map and sanitary sewer
easement and manhole as shown on recorded subdivision map.
The above property was conveyed to the Grantors by _____________ See
Book No. ________ page __________
TO HAVE AND TO HOLD said real property, with all privileges, and
appurtenances thereunto belonging, to the said Grantees, their heirs,
successors, and assigns forever.
The Grantors covenant that they are seized of said real property in
fee, and have the right to convey the same in fee simple; that the same is free
from all encumbrances (with any exceptions above stated); and that they will
warrant and defend the title to same against the claims of all persons
whomsoever.
IN WITNESS WHEREOF, the Grantors have hereunto set their hands and
seals, or if corporate, have caused this Deed to be signed in their respective
corporate names by their duly authorized officers and their seals to be
hereunto affixed by authority of their Boards of Directors, the day and year
first above written.
/s/ J. LEON PORTER (SEAL)
--------------------------------------
J. LEON PORTER
/s/ ELLEN T. PORTER (SEAL)
--------------------------------------
ELLEN T. PORTER
=============================================================================
STATE OF NORTH CAROLINA, COUNTY OF ALAMANCE
I, JANICE S. SHEPHERD a Notary Public of said County, do hereby certify
that J. LEON PORTER and wife, ELLEN T. PORTER personally appeared before me
this day and acknowledged the due execution of the foregoing deed. Witness my
hands and official seal, this 11th day of June 1982
My Commission Expires: 1/24/85 /s/ JANICE S. SHEPHERD Notary Public
------------------------
=============================================================================
<PAGE> 85
EXHIBIT 12.4
NORTH CAROLINA OPTION
<PAGE> 86
OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Agreement") is made and entered into as of
this 26th day of February, 1996 (the "Execution Date"), by and between RTI Inc.,
a New York corporation ("RTI"), and Sterigenics International, a California
corporation ("Sterigenics").
RECITALS
A. RTI and Sterigenics are parties to an Asset Acquisition
Agreement dated February 26, 1996 (the "Acquisition Agreement"), pursuant to
which Sterigenics or its wholly-owned subsidiaries acquired the right to
purchase from RTI certain real property and tangible and intangible assets.
B. Pursuant to Section 12.4 of the Acquisition Agreement, RTI has
granted Sterigenics the exclusive right and option to purchase from RTI certain
real property located in Haw River, North Carolina, as more particularly
described in Exhibit "A" attached hereto (the "Real Property"), together with
all Improvements thereon and the Personal Property (as those terms are defined
in Paragraph 1 below).
C. RTI and Sterigenics desire to enter into this Agreement for the
purpose of setting forth the covenants, terms, conditions and price pursuant to
which Sterigenics shall have the right to purchase the Real Property, the
Improvements, and the Personal Property.
NOW THEREFORE, the parties agree as follows:
AGREEMENT
1. Grant of Option. RTI hereby grants to Sterigenics, within the
time period specified in Paragraph 3 below and upon the other terms and
conditions hereinafter set forth, the exclusive right and option (the "Option")
to purchase the following (all of which collectively is referred to as the
"Property"): (a) the Real Property; (b) all structures, buildings, improvements
and fixtures located on the Real Property (collectively, the "Improvements");
(c) all tangible plant, property and equipment located on or used in connection
with the operation or occupancy of the Real Property and the Improvements,
including all heating and air-conditioning systems and facilities used to
provide any utility services, parking services, refrigeration, ventilation, and
trash disposal or other services (collectively, the "Equipment"); and (d) all
right, title and interest of RTI in (i) all plans, drawings, specifications,
land surveys, entitlements and approvals, engineering reports and other
technical reports, if any, in the possession of RTI or which are available to
RTI without additional cost and which were prepared in connection with the
development of the Real Property or the construction of the Improvements for
such Real Property; (ii) all hereditaments, privileges, tenements and
appurtenances belonging to the Real Property; (iii) all open or proposed
highways, streets, roads, avenues, alleys, easements, strips, gores and
rights-of-way in, on, across, in front of, contiguous to, abutting or adjoining
the Real Property; (iv) all transferable licenses, permits and warranties now in
effect with respect to the Improvements; and (v) all transferable warranties,
guaranties, indemnities and claims relating to
<PAGE> 87
the construction, operation or maintenance of the Real Property and/or the
Improvements (the "Intangible Property"). The Equipment and the Intangible
Property collectively are referred to herein as the "Personal Property."
Personal Property expressly excludes any Cobalt 60.
2. Consideration.
2.1 Option Consideration. As the option consideration for
the granting of the Option and for other good and valuable consideration, the
receipt and adequacy of which hereby are acknowledged, Sterigenics has entered
into the Acquisition Agreement and has paid to RTI concurrently with the
execution and delivery of this Agreement the sum of One Thousand Dollars
($1,000.00) (the "Option Consideration"), the receipt of which hereby is
acknowledged by RTI. The Option Consideration shall be nonrefundable to
Sterigenics except as otherwise provided herein.
2.2 Application of Option Consideration. If Sterigenics
exercises the Option as provided in Paragraph 4 below, the Option Consideration
paid to RTI shall be applied as a credit against the Purchase Price (as defined
in Paragraph 5 below).
3. Option Term. The term of the Option (the "Option Term") shall
commence upon satisfaction of both of the Option Conditions (as hereinafter
defined) and shall expire on the first to occur of (a) January 1, 2000, or (b)
the date that is sixty (60) days after the satisfaction of the Option Conditions
or (c) November 27, 1996 if RTI has not received an Acquisition Proposal prior
to such date. For purposes of this Paragraph 3, the term "Option Conditions"
means that (i) the Acquisition Agreement shall have been terminated by
Sterigenics pursuant to Section 12.1(g) thereof and written notice of such
termination shall have been given by Sterigenics or RTI, as the case may be, to
the other party in accordance with the Acquisition Agreement, and (ii) RTI shall
have entered into a legally binding and enforceable agreement relating to an
"Acquisition Proposal" (as defined in Section 6.1(a) of the Acquisition
Agreement). RTI shall notify Sterigenics in writing immediately upon execution
of such agreement.
4. Exercise of Option. The Option shall be exercised, if at all,
prior to the expiration of the Option Term by delivery to RTI of a written
notice executed by Sterigenics and specifying therein Sterigenics' election to
exercise the Option. If Sterigenics fails to exercise the Option in a timely
manner as herein provided, or if Sterigenics is in breach of its obligations to
complete the purchase of Real Property as provided herein, then (i) all Option
Consideration shall be retained by RTI as earned consideration for the granting
of the Option, (ii) all instruments and documents deposited with the Closing
Agent (as defined in Paragraph 9.2 hereof) or delivered to the other party shall
be returned to the depositing parties, (iii) this Agreement shall terminate and
be of no further force or effect; and (iv) neither party shall have any further
obligation hereunder to the other.
5. Purchase Price. Upon exercise of the Option, Sterigenics shall
be obligated to purchase and RTI shall be obligated to sell the Property at a
purchase price equal to the book value of the Property as of the Closing plus
Four Hundred Thousand Dollars ($400,000.00) (the "Purchase Price"). The Purchase
Price shall be payable, at the option of RTI, by certified check
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<PAGE> 88
or wire transfer of immediately available funds on the Closing Date (defined in
Paragraph 9.1), subject to credit to Sterigenics for payment of the Option
Consideration.
6. Documents. To the extent not previously provided by RTI
pursuant to the Acquisition Agreement, within five (5) days after the
commencement of the Option Term, RTI shall deliver to Sterigenics all reports,
tests, studies, diagrams, maps, plans, specifications, and other documents,
including soils, geological and Hazardous Material (as defined in Paragraph
10.9 hereof) reports in its possession or control, prepared for or provided to
RTI with respect to the environmental condition of the Real Property, the
Improvements, and the soil and ground water under or within 1,000 feet of the
boundaries of the Real Property.
7. Inspection. RTI hereby grants Sterigenics the right to enter
upon and to inspect the Real Property during the Option Term and to approve the
environmental risks and conditions (including the soil and groundwater) of the
Real Property. For the purpose of Sterigenics' physical inspections, RTI agrees
to provide Sterigenics and its authorized agents with reasonable access to the
Real Property during normal business hours during the Option Term upon at least
twelve (12) hours' prior notice to RTI, and Sterigenics shall use reasonable
good faith efforts to avoid disruption of the operation of the Real Property.
Without limiting the foregoing, Sterigenics and Sterigenics' agents may, at the
sole cost of Sterigenics and upon prior notice to RTI, perform engineering and
soils surveys, geological work or other studies desired by Sterigenics.
Sterigenics and Sterigenics' agents shall be entitled, at Sterigenics' own
expense, to conduct Phase I and Phase II environmental investigations of the
Real Property. Sterigenics agrees to hire as its contractor for such
environmental investigation a firm which maintains adequate liability
insurance. If the Closing does not occur, Sterigenics shall provide to RTI
copies of all environmental reports it caused to be prepared. If the Closing
does not occur Sterigenics promptly shall repair and restore any damage caused
to the Real Property by reason of Sterigenics' or Sterigenics' agents' entry on
or investigation of the Real Property. Sterigenics shall provide to RTI copies
of all invoices for work performed to repair and restore any damage to the Real
Property along with evidence that such invoices have been paid. Sterigenics
hereby agrees to indemnify RTI and to hold RTI, RTI's agents and employees and
the Real Property harmless from and against any and all losses, costs, damages,
claims or liabilities including, but not limited to, mechanic's and
materialmen's liens and reasonable attorneys' fees, arising out of or in
connection with Sterigenics' or its agent's access to or entry upon the Real
Property under this Paragraph 7 and the agreements, covenants and
indemnification of Sterigenics contained in this Paragraph 7 shall survive any
termination of the Option or this Agreement.
8. Title to Real Property.
8.1 Approval of Title. Sterigenics hereby approves the
condition of title of the Real Property, as shown on the title commitment (the
"Title Report") issued by Chicago Title Insurance Company (the "Title
Company"), 201 South College Street, Suite 1465, Charlotte, North Carolina
282440-4485, as its Order No. 9600468, dated January 29, 1996, a copy of which
is attached hereto as Exhibit B; provided, however, that Sterigenics hereby
disapproves Exception No's 1(b), 3, 4, 5 (items a through g inclusive), 6, and
7 thereof (the "Unpermitted
<PAGE> 89
Exceptions"). All exceptions to title shown in the Title Report (other than
the Unpermitted Exceptions) are referred to herein as the "Permitted
Exceptions."
8.2 Title Policies. At the Closing for the Real Property
the Title Company shall issue to Sterigenics, Sterigenics' expense, an ALTA
owner's policy of title insurance, form B (as amended 10-17-92) (the "Title
Policy"), in the amount of the Purchase Price, subject only to the Permitted
Exceptions therefor.
8.3 Survey. Sterigenics shall have the right to have an
ALTA survey (the "ALTA Survey") prepared for the Real Property, the costs of
which shall be paid by Sterigenics.
9. Closing Date; Closing Meeting; Closing Costs.
9.1 Closing Date. If Sterigenics timely exercises the
Option, the closing date (the "Closing Date") shall occur immediately prior to
the closing of the transaction that results in the satisfaction of the Option
Conditions as set forth in Section 3(b).
9.2 Closing. The parties shall meet at the offices of
Parker, Poe, Adams & Bernstein, 2500 Charlotte Plaza, Charlotte North Carolina
28244, or at such other location in the State of North Carolina acceptable to
the parties, and shall execute such instruments and documents (specifically
excluding any gap indemnity or similar agreement) and deposit such funds with
the Closing Agent as are necessary to consummate on the Closing Date the
purchase and sale of the Property as contemplated by this Agreement. The
Purchase Price shall be delivered to Sterigenics' North Carolina legal counsel,
Parker, Poe, Adams & Bernstein, or other legal counsel designated by Sterigenics
(the "Closing Agent"), to be held by the Closing Agent in a trust account for
the benefit of Sterigenics and released to RTI at the Closing. The term
"Closing" shall mean the moment on the Closing Date at which the warranty deed
conveying the Real Property to Sterigenics is recorded in the Office of the
Recorder of Alamance County, subject only to the Permitted Exceptions.
9.3 Closing Costs. Sterigenics shall pay all transfer
taxes and all costs for preparing, executing and acknowledging the deeds and
other conveyance documents due in connection with the conveyance to Sterigenics
of the Real Property and all other fees and costs of the Closing, together with
the cost of the Title Policy. Real property taxes, assessments, rents and
other costs and income items subject to proration shall be prorated as of the
Closing.
9.4 Possession. At the Closing, RTI shall deliver to
Sterigenics possession of the Real Property and the other Property.
10. Representations and Warranties of RTI.
10.1 General. RTI hereby represents and warrants to
Sterigenics that as of the date hereof the statements contained in this Section
10 are true and correct, except as set forth in the RTI Disclosure Schedule
attached to the Asset Agreement or Closing Certificate (as referred to in
Paragraph 13.9 below). No fact or circumstance disclosed to Sterigenics shall
constitute an
4
<PAGE> 90
exception to these representations and warranties unless such fact or
circumstance is set forth in the Closing Certificate. As used in this
Agreement, "knowledge" shall mean the actual knowledge of the executive
officers of RTI after reasonable inquiry.
10.2 Organization. RTI is a corporation duly and validly existing
and in good standing under the laws of the State of New York. RTI is qualified
to do business as a foreign corporation in North Carolina.
10.3 Authorization. This Agreement has been, and all deeds and other
conveyance documents used in order to consummate this Agreement, will prior to
the Closing be, duly and validly executed and delivered by RTI. This Agreement
constitutes valid and binding agreements of RTI, enforceable against RTI in
accordance with their terms. RTI has all requisite power and authority to
execute and deliver this Agreement and at the time of the Closing will have all
requisite power and authority to enable it to carry out the transactions
contemplated by this Agreement. All necessary corporate action on the part of
RTI has been taken to authorize the execution and delivery of this Agreement
and, subject to shareholder approval, consummation of the transactions
contemplated thereby.
10.4 No Conflicts. The execution and the delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, result in a
breach of, constitute a default (with or without notice or lapse of time, or
both) under or violation of, or result in the creation of any lien, charge or
encumbrance pursuant to any provision of the Certificate of Incorporation or
Bylaws of RTI of any order, rule, law or regulation of any court or
governmental authority, foreign or domestic, or any provision of any material
agreement, instrument, understanding, order, judgment or decree to which RTI is
a party or by which RTI or any of its properties or assets is bound or
affected, nor will such actions give to any other person or entity any
interests or rights of any kind, including rights of termination, acceleration
or cancellation, in or with respect to any of the Property.
10.5 Personal Property. The Personal Property is in good operating
condition and repair, ordinary wear and tear and routine maintenance excepted
and RTI will maintain the Personal Property in substantially the same condition
prior to the Closing Date.
10.6 Compliance With Other Instruments. RTI is not a party to, or
bound by, any written or oral material contract, agreement, license, indenture,
mortgage, debenture, note or other instrument under the terms of which
performance by RTI according to the terms of this Agreement will be a default
or an event of acceleration, or whereby timely performance by RTI according to
the terms of this Agreement may be prohibited, prevented or delayed.
10.7 Litigation. Except as disclosed in the forms, reports and
documents required to be filed by RTI with the Securities and Exchange
Commission since January 1, 1995 (collectively, the "RTI SEC Reports"), there
is no material action, suit, proceeding or investigation in progress or pending
before any court or governmental agency, against or relating to the Property or
the assets or business of RTI conducted from the Real Property nor, to the
5
<PAGE> 91
knowledge of RTI, any threat thereof. RTI is not a party to any decree, order
or arbitration award (or agreement entered into in any administrative, judicial
or arbitration proceeding with any governmental authority) with respect to any
material portion of the Property, or the assets, personnel or business
activities of RTI's business conducted from the Real Property.
10.8 Compliance with Laws and Regulations; Governmental
Licenses, Etc. Except as set forth in the RTI SEC Reports, to RTI's knowledge,
RTI, the Real Property and the Improvements are in compliance in all material
respects with all statutes, laws, rules and regulations with respect to or
affecting the Real Property, the Improvements and Sterigenics' use and
enjoyment of the Personal Property, including, without limitation, laws, rules
and regulations relating to occupational health and safety, equal employment
opportunities, fair employment practices, and sex, race, religious and age
discrimination, except where the failure to comply would not have a material
adverse effect on RTI. RTI is not subject to any order, injunction or decree
issued by any governmental body, agency, authority or court which could impair
the ability of RTI to consummate the transactions contemplated hereby or which
could materially adversely affect Sterigenics' ownership, use and enjoyment of
the Personal Property or the value thereof. RTI possesses all licenses, permits
and governmental or other regulatory approvals and authorizations which are
required in order for RTI to operate the Real Property or to carry on its
sterilization business from the Real Property as presently conducted, including,
without limitation, all required licenses, permits and approvals of the Nuclear
Regulatory Commission ("NRC"), the North Carolina Department of Radiological
Health ("NCDRH") and the Food and Drug Administration ("FDA"). RTI is in
compliance in all material respects with all such licenses, permits, approvals
and authorizations relating to its operations conducted from the Real Property,
except where the failure to comply would not have a material adverse effect
on RTI.
10.9 Environmental Matters.
(a) General. Except as separately and specifically
disclosed in the RTI SEC Reports, (i) RTI has obtained all Material
Environmental Approvals required in connection with its business conducted from
the Real Property, and all such Environmental Approvals are current, valid and
in good standing in all material respects, and there are no proceedings
commenced or to RTI's knowledge threatened to revoke or amend any Environmental
Approvals; (ii) all operations of the business on the Real Property while
occupied by RTI have been and are now in compliance in all material respects
with all Environmental Laws; (iii) neither RTI nor its operations conducted
from the Real Property has been or is now the subject to any Remedial Order, nor
does RTI have any knowledge of any investigation or evaluation commenced as to
whether any such Remedial Order is necessary nor has any threat of any such
Remedial Order been made nor are there any circumstances known to RTI which
could result in the issuance of any such Remedial Order; (iv) within the past 10
years, RTI has never been prosecuted for or convicted of any offense under
Environmental Laws, nor has RTI been found liable in any proceeding to pay any
fine or judgment to any Person as a result of any Release or threatened Release
from the Real Property of any Hazardous Material into the Environment or the
breach of any Environmental Law and to the knowledge of RTI, there is no basis
for any such proceeding; (v) all material environmental data and studies
(including, without limitation, the results of any environmental audit) relating
to the business conduced from the
6
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Real Property have been delivered or made available to Sterigenics; (vi) RTI is
not aware of any Release which is now present in, on or under the Real Property
(including underlying soils and substrata, surface water and groundwater) at
levels which exceed any action levels or remediation standards under any
Environmental laws or standards published or administered by those Governmental
Authorities responsible for establishing or applying such standards; (vii) RTI
has no knowledge of any Hazardous Materials in, on, or under the Real Property
or any other assets relating to RTI's business conducted from the Real Property;
and (viii) RTI has no knowledge of any Hazardous Materials originating from any
neighboring or adjoining properties which has migrated onto, or is migrating
towards the Real Property.
(b) Matters Disclosed in SEC Reports. With respect to
Environmental Matters separately and specifically disclosed in the RTI SEC
Reports relating to the Real Property: (i) RTI is in full compliance with all
Remedial Orders; (ii) RTI is current with respect to all charges, assessments,
or claims for which a lien against the Real Property or other assets of RTI's
business under any Environmental Law may be filed or asserted, and there are no
unpaid liens or assessments outstanding which are currently due; and (iii) RTI
is not in default of any obligation or demand from any Governmental Authority
with respect to investigations or remediation activities which RTI is obligated
to undertake.
(c) Definitions. As used herein, the following terms have
these meanings:
(i) "Environmental Laws" means all applicable
statutes, rules, regulations, ordinances, orders, decrees, judgments, permits,
licenses, consents, approvals, authorizations, and governmental requirements or
directives or other obligations lawfully imposed by governmental authority under
federal, state or local law pertaining to the protection of the environment,
protection of public health, protection of worker health and safety (excluding
OSHA and comparable state laws), the treatment, emission and/or discharge of
gaseous, particulate and/or effluent pollutants, and/or the Handling of
Hazardous Materials, including without limitation, the Clean Air Act, 42 U.S.C.
Section 7401, et seq., the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Section 9601, et seq., the
Federal Water Pollution Control Act, 33 U.S.C. Section 1321, et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,
("RCRA"), and the Toxic Substances Control Act, 15 U.S.C. Section 2601, et seq.
(ii) "Hazardous Material(s)" means any substance,
waste, material, chemical, compound or mixture which is (or which contains any
substance, waste, material, chemical, compound, or mixture which is) flammable,
ignitable, corrosive, reactive, radioactive, or explosive, or is defined,
listed, designated, described or characterized under Environmental Laws or under
any rules, guidances, policies, or regulations promulgated thereunder, as
hazardous, toxic, a contaminant, a pollutant or words of similar import, and
includes without limitation any "hazardous substance" under CERCLA, any
"hazardous waste" under RCRA, asbestos, petroleum (including crude oil or any
fraction or distillate thereof), natural gas, natural gas liquids, and liquified
natural gas.
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(iii) "Material" means anything that reasonably could
be expected to lead to the imposition of any significant penalties or fines,
that could reasonably be expected to require a capital expenditure of more than
$100,000, or that reasonably could be expected to interfere, interrupt or
threaten to interfere or interrupt in a significant manner the continued
operation of RTI's business as currently conducted from the Real Property.
(iv) "Person" means any natural person, corporation,
partnership, business trust or other business entity or enterprise.
(v) "Release" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing.
(vi) "Environmental Approval(s)" means all permits,
certificates, licenses, authorizations, consents, instructions, registrations,
directions or approvals, issued or required by Governmental Authorities
pursuant to Environmental Laws with respect to the operations of RTI in
connection with the Real Property.
(vii) "Governmental Authorities" means any
government, regulatory authority, governmental department, agency, commission,
board, tribunal, or court or other law, rule or regulation-making entity having
or purporting to have jurisdiction over Environmental Laws on behalf of the
United States, or the state of North Carolina or other subdivision thereof, or
any municipality therein.
(viii) "Remedial Order(s)" means any judicial or
administrative order, directive, complaint or sanction issued, filed or imposed
by any Governmental Authority pursuant to any Environmental Laws, and includes,
without limitation, any order requiring any remediation or cleanup of any
Hazardous Materials, or requiring that any Release or any other activity be
reduced, modified, abated, or eliminated.
10.10 No Misrepresentation. No representation, warranty or covenant
by RTI in this Agreement, nor any statement, certificate or schedule furnished
or to be furnished by or on behalf of RTI pursuant to this Agreement, when
taken together with the foregoing, contains or shall contain any untrue
statement of material fact or omits or shall omit to state a material fact
required to be stated therein or necessary in order to make such statements, in
light of the circumstances under which they were made, not materially
misleading. RTI has delivered or otherwise made available true and complete
copies of all documents requested by Sterigenics and which are referred to in
this Agreement.
10.11 Transfers. Except for this Agreement and the Acquisition
Agreement, RTI has not entered into any agreement to convey, sell, assign,
lease, transfer or encumber the Real Property or any material portion of the
other Property, and RTI shall not do so prior to the Closing Date without
Sterigenics' prior written consent, which may be granted or withheld in
Sterigenics' discretion reasonably exercised.
8
<PAGE> 94
10.12 Title to Real Property. Except as set forth in the RTI SEC
Reports or the Title Report, RTI owns the Real Property free and clear of all
liens, leases, occupancy agreements, licenses, encumbrances, covenants,
conditions, restrictions, rights-of-way, easements, and other matters affecting
title, except as to the Permitted Exceptions. To RTI's knowledge, except as
disclosed in the RTI SEC Reports or the Title Reports, no other person or entity
has claimed or is entitled to claim any legal or equitable interest in the Real
Property.
10.13 Title to Personal Property. RTI has good and marketable title to
the Personal Property and Improvements. Except as disclosed in the RTI SEC
Reports, the Personal Property and Improvements are and as of the Closing shall
be transferred to Sterigenics free and clear of restrictions on or conditions to
transfer or assignment, and free and clear of all claims, liabilities, liens,
pledges, mortgages, restrictions and encumbrances of any kind, whether accrued,
absolute, contingent or otherwise affecting the Personal Property and
Improvements.
10.14 No Condemnation. To RTI's knowledge, there is no condemnation or
other like proceeding pending or threatened against the Real Property or any
part thereof and no such proceeding is being contemplated.
10.15 Governmental Commitments. To RTI's knowledge, no commitment to
or agreement with any governmental or quasi-governmental authority exists which
could affect the Real Property, including but not limited to any formation of
any special assessment district or community facilities district, except as
disclosed in this Agreement.
10.16 Easements. To RTI's knowledge, all existing water, drainage,
sewage and utility facilities relating to the Real Property, from the boundary
thereof until entering the public right-of-way or other public facility, are
situated within valid easements granted by all persons or other entities having
any interest in or right or title to any property which is subject to such
easement and are referenced in the Title Reports.
10.17 Maintenance of Real Property. Prior to the Closing Date and the
actual transfer to Sterigenics of title to the Real Property, RTI shall maintain
the Real Property and the Improvements in substantially their present condition,
reasonable wear and tear or loss due to the elements excepted.
10.18 Condition of Improvements. To RTI's knowledge, the Improvements
(including the roof and roof membrane, exterior and structural walls,
foundations, floor slabs and other load-bearing components of the Improvements)
are in operable condition and repair (as hereinafter defined). To RTI's
knowledge all elevators, heating, ventilation and air conditioning systems
("HVAC"), plumbing, electrical, wiring, life safety, and other equipment,
appurtenances, systems and improvements are in operable condition and repair.
For purposes of this paragraph, the term "operable condition and repair" means
that there are no material defects or state or disrepair that have a material
adverse effect on the operations of the business as currently conducted by RTI
from the Real Property.
9
<PAGE> 95
10.19 Compliance With Laws. RTI has received no written notice
from any governmental authority that the Improvements fails to comply with any
applicable codes, statutes, ordinances, regulations, permits, orders,
directives, or other laws in any material respects. As of the Closing the
Improvements and all parts thereof shall be in a safe and habitable condition.
11. Cooperation. RTI will take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed with respect to
the consummation of the transactions contemplated by this Agreement and will
promptly cooperate with and furnish information to Sterigenics in connection
with any such requirements imposed upon Sterigenics in connection with the
consummation of the transactions contemplated by this Agreement. RTI will take
all reasonable actions necessary to obtain (and will cooperate with Sterigenics
in obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any governmental entity, domestic or
foreign, or other person, required to be obtained or made by RTI (or by
Sterigenics) in connection with the taking of any action contemplated by this
Agreement. Sterigenics shall reimburse RTI for all out-of-pocket costs incurred
pursuant to compliance with this Paragraph 11.
12. Termination Memorandum. Sterigenics agrees to promptly execute a
Termination of Memorandum of Option, duly executed and acknowledged and in
recordable form, pursuant to which Sterigenics shall relinquish all right, title
and interest arising under the Memorandum of Option (the "Termination
Memorandum"). The Termination Memorandum shall be held in escrow by Warshaw
Burstein Cohen Schlesinger & Kuh, LLP. Upon the expiration or prior termination
of the Option, RTI shall have the right to require release of the Termination
Option and to record the Termination Memorandum.
13. Risk of Loss. Until the Closing, all risk of loss, damage or
destruction to the Property shall be borne by RTI. In the event that prior to
the Closing all or any part of the Property is destroyed or damaged and the cost
to repair such damage exceeds Two Hundred Fifty Thousand Dollars ($250,000),
Sterigenics shall be entitled to terminate this Agreement (whether or not the
Option has been exercised) and to recover from RTI the Option Consideration paid
upon written notice to RTI within five (5) business days of receipt of notice
from RTI that such a loss has occurred. If Sterigenics does not have the right
to terminate this Agreement in accordance with this paragraph, or if Sterigenics
has the right to terminate this Agreement pursuant to this paragraph but elects
not to exercise (or does not timely exercise) such termination right, then RTI
shall assign to Sterigenics all insurance proceeds (whether or not such
insurance proceeds are sufficient to repair such damage or destruction and
whether or not such proceeds are paid before or after the Closing Date) and this
Agreement shall remain in full force and effect.
14. Sterigenics' Conditions Precedent to Closing. The obligations of
Sterigenics at the Closing are subject to satisfaction of the following
conditions (any or all of which may be waived by Sterigenics in its sole
discretion), all of which are for Sterigenics' sole benefit:
10
<PAGE> 96
14.1 Representations and Warranties. The representations and
warranties of RTI contained in this Agreement shall be true and correct in all
material respects on the Closing Date with the same effect as though made on
that date.
14.2 Receipt of Required Permits. Sterigenics shall have received
all licenses, permits and governmental or other regulatory approvals and
authorizations which are required in order for Sterigenics to operate the Real
Property and its business.
14.3 Delivery of All Assets. RTI shall have delivered and conveyed
all of the Property free and clear of all encumbrances, other than the
Permitted Exceptions.
14.4 Title Policy. The Title Company shall have committed in
writing to issue the Title Policy to Sterigenics for the Real Property, subject
only to the Permitted Exceptions.
14.5 FIRPTA. RTI shall have executed and delivered to the Title
Company a certificate satisfying the requirements of Section 1445 of the
Internal Revenue Code of 1986, as amended (the "FIRPTA Certificate").
14.6 No Insolvency Event. At the Closing there shall not be any
pending sequestration, attachment or foreclosure of or execution on any
material part of the Property or any proceeds from the sale thereof nor shall
RTI have been subject to a voluntary or involuntary petition to commence a
proceeding under the United States Bankruptcy Code to declare RTI to be
bankrupt or insolvent.
14.7 No Material Adverse Change. No change shall have occurred that
would have a material adverse effect on the Property.
14.8 No Legal Prohibition. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of this Agreement shall have been issued, nor
shall any action or suit related to the Agreement or its consummation be
pending or threatened, nor shall any proceeding brought by an administrative
agency or commission or other governmental entity, seeking any of the
foregoing, be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Agreement which makes the consummation of the Agreement illegal.
14.9 Closing Certificate. RTI shall deliver to Sterigenics a
certificate dated the Closing Date and signed by the President of RTI confirming
that since the Execution Date, no action by RTI has resulted in a lien, pledge,
mortgage, restriction or encumbrance of any kind affecting the Real Property and
the Personal Property or Improvements.
14.10 Recordable Documents. RTI shall have provided the Closing
Agent or the Title Company issuing the Title Policy the warrant deed for the
Real Property, fully executed and notarized and in recordable form, at least
two (2) business days prior to the Closing so that
11
<PAGE> 97
the deed may be registered or recorded in the appropriate real estate records
of Alamance County immediately upon Closing.
14.11 Closing Deliveries. Sterigenics shall have received at
or prior to the Closing each of the following documents: (a) a bill of sale in
a form reasonably satisfactory to Sterigenics; (b) a special warranty deed in
form and content appropriate to convey, transfer and assign to, and to vest in,
Sterigenics, good, clear and marketable fee simple title to the Real Property,
subject only to the Permitted Exceptions therefor; (c) any other documents,
records or agreements called for hereunder that have not been previously
delivered to Sterigenics.
15. RTI's Conditions Precedent to Closing. The obligations of RTI
at the Closing are subject to satisfaction of the following conditions (any or
all of which may be waived by RTI in its sole discretion), all of which are for
RTI's sole benefit:
15.1 Representations and Warranties. The representations and
warranties of Sterigenics contained in this Agreement shall be true and correct
in all material respects on the Closing Date with the same effect as though
made on that date.
15.2 No Insolvency Event. At the Closing Sterigenics shall
not be subject to a voluntary or involuntary petition to commence a proceeding
under the United States Bankruptcy Code to declare Sterigenics to be bankrupt
or insolvent.
15.3 No Legal Prohibition. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of this Agreement shall have been issued, nor shall
any proceeding brought by an administrative agency or commission or other
governmental entity, seeking any of the foregoing, be pending; nor shall there
be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Agreement which makes the
consummation of the Agreement illegal.
16. Default; Remedies.
16.1 RTI's Remedies. STERIGENICS AND RTI EACH AGREE THAT IN
THE EVENT OF A MATERIAL DEFAULT OR BREACH HEREUNDER BY STERIGENICS, THE DAMAGES
TO RTI WOULD BE EXTREMELY DIFFICULT AND IMPRACTICABLE TO ASCERTAIN, AND THAT THE
OPTION CONSIDERATION PAID BY STERIGENICS PLUS THE SUM OF TWENTY-FIVE THOUSAND
DOLLARS ($25,000) ("STIPULATED SUM") SHALL SERVE AS LIQUIDATED DAMAGES FOR SUCH
BREACH OR DEFAULT BY STERIGENICS, AS A REASONABLE ESTIMATE OF THE DAMAGES TO
RTI. DELIVERY TO AND RETENTION OF THE OPTION CONSIDERATION AND THE STIPULATED
SUM BY RTI SHALL BE RTI'S SOLE AND EXCLUSIVE REMEDY AGAINST STERIGENICS IN THE
EVENT OF A DEFAULT OR BREACH BY STERIGENICS, AND RTI WAIVES ANY AND ALL RIGHT TO
SEEK OTHER RIGHTS OR REMEDIES AGAINST STERIGENICS WITH RESPECT TO STERIGENICS'
OBLIGATION TO PURCHASE THE PROPERTY, INCLUDING WITHOUT LIMITATION, SPECIFIC
12
<PAGE> 98
PERFORMANCE. THE PAYMENT AND RETENTION OF THE OPTION CONSIDERATION AND THE
STIPULATED SUM AS LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY
BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO RTI. UPON ANY SUCH BREACH OR
DEFAULT BY STERIGENICS HEREUNDER, THIS AGREEMENT SHALL BE TERMINATED AND THE
PARTIES SHALL HAVE NO FURTHER OBLIGATIONS TO EACH OTHER HEREUNDER.
16.2 Sterigenics' Remedies. RTI acknowledges that the
Property is unique and, for that reason, among others, Sterigenics will be
irreparably damaged if this Agreement is not specifically enforced. Accordingly,
in the event of any breach or default of this Agreement or any of the covenants
or agreements contained in this Agreement by RTI, Sterigenics shall have the
right to demand and have specific performance of this Agreement. Provided that
RTI has not taken any action after the date of this Agreement to cause the
representations and warranties in Section 10 to be inaccurate as of the Closing,
RTI shall have no liability to Sterigenics for any failure to meet the
condition set forth in Section 14.1 and Sterigenics shall have no right to sue
RTI for any breach of the representations and warranties.
16.3 Termination of Representations and Warranties. The
representations and warranties contained in this Agreement shall terminate upon
the Closing.
17. General.
17.1 Expenses. Except as otherwise provided in this Agrement,
the parties will each pay their own legal, accounting and other professional
expenses in connection with the transactions contemplated hereby.
17.2 Brokers. Each party represents and warrants to the other
that no person has acted as a broker, a finder or in any similar capacity in
connection with the transactions contemplated hereby, except TM Capital
Corporation who shall be paid by Sterigenics. Each party shall indemnify the
other against, and agrees to hold the other harmless from, all liabilities and
expenses (including reasonable attorneys' fees and expenses) in connection with
any claim by anyone for compensation as a broker, a finder or in any similar
capacity, other than TM Capital Corporation, which is to be paid by Sterigenics
at the Closing, by reason of services allegedly rendered to the indemnifying
party in connection with the transactions contemplated hereby.
17.3 Entire Agreement. Except for that certain
Confidentiality Agreement by and between RTI and Sterigenics, dated October 3,
1995, and those specific provisions and definitions expressly incorporated
herein from the Acquisition Agreement, this Agreement contains the entire
agreement among the parties with respect to the matters contemplated hereby and
all prior negotiations, understandings and agreements among them, are superseded
by this Agreement.
17.4 Notices. Any notice or other communication required or
permitted to be given under this Agreement shall be in writing and will be
deemed effective when delivered in
13
<PAGE> 99
person, first business day after sent by confirmed facsimile, if promptly
confirmed in writing, on the third business day after the day on which mailed
by first class mail from within the United States of America, or the business
day following delivery to a national overnight courier service to the following
addresses or to such other address as either party may specify in writing to
the other party in accordance with the provisions of this Paragraph 15.4.
If to Sterigenics With a copy to:
Sterigenics International Gunderson Dettmer Stough
4020 Clipper Court Villeneuve Franklin & Hachigian
Fremont, CA 94538-3540 600 Hansen Way, 2nd Floor
Facsimile No.: (510) 770-1499 Palo Alto, CA 94304
Attention: James F. Clouser Facsimile No.: (415) 843-0314
Attention: Carla S. Newell
If to RTI: With a copy to:
RTI Inc. Warshaw Burstein Cohen
108 Lake Denmark Road Schlesinger & Kuh, LLP
Rockaway, NJ 07886 555 Fifth Avenue
Attention: Theo Muller New York, NY 10017
Facsimile No.: (212) 972-9150
Attention: Arthur Katz
18. Governing Law. This Agreement will be governed by, and
construed under, the laws of the State of New York.
19. Amendment. This Agreement may be amended only by a document in
writing signed by the parties.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
21. Further Assurances. Each party agrees to execute such further
instruments and documents and to do such further acts as may be reasonably
requested by any other party to carry out the transactions contemplated hereby.
22. No Rights Conferred Upon Third Parties. No provisions of this
Agreement are intended or shall be interpreted to provide or create any rights
of any kind in any third party unless specifically provided otherwise herein,
and, except as so provided, all provisions hereof shall be personal solely to
the parties to this Agreement.
23. Attorneys' Fees. In any litigation relating to this Agreement,
including litigation with respect to any instrument, document or agreement made
under or in connection with this Agrement, the prevailing party shall be
entitled to recover its costs and reasonable attorneys' fees and expenses.
14
<PAGE> 100
24. Headings. Captions and headings used herein are for
convenience only and are not a part of this Agreement and shall not be used in
construing it.
25. No Assignment. The Agreement may not be assigned (including by
operation of law) by either party without the prior written consent of the other
party.
15
<PAGE> 101
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Execution Date.
STERIGENICS INTERNATIONAL RTI INC.
By: By:
------------------------------ -----------------------------
Title: Title:
--------------------------- --------------------------
16
<PAGE> 102
PREPARED BY FORREST C. HALL, ATTORNEY, GRAHAM, NC
BOOK 473 PAGE 113
THIS DEED, made this 10th day of June, 1982 by J. LEON PORTER and wife,
ELLEN T. PORTER hereinafter called Grantors, to PROCESS TECHNOLOGY (NC), INC., a
North Carolina Corporation, P.O. Box 185 Rockaway, N.J. 07866 hereinafter called
Grantees.
The designations Grantors and Grantees as used herein shall include singular,
plural, masculine, feminine, or neuter as required by the context.
WITNESSETH: That the Grantors, in consideration of $10.00 and other
valuable consideration to them paid by the Grantees, the receipt of which is
acknowledged, have bargained and sold, and by these presents do bargain, sell
and convey to the Grantees their heirs, successors, and assigns, all of the
following described real property:
A certain tract or parcel of land in Haw River Township, Alamance County, N.C.,
adjoining Porter Avenue, John Bakatsias and other lands of J. Leon Porter and
being more particularly described as follows:
BEGINNING at an iron stake and new corner with J. Leon Porter in the East right
of way line of Porter Avenue and located S. 04 deg. 08' 32" E. 356.77 ft. from
the intersection of the East line of said road and the South line of a service
road which said 356.77 ft. is the chord of an arc having the length of 357.79
ft. formed by the East line of said 60 ft. wide road; thence a new line with
said Porter, N. 88 deg. 56' 56" E. 444.13 ft. to an iron stake and new corner
with said Porter, thence a new line with said Porter, S. 11 deg. 38' 05" E.
21.17 ft. to an iron stake and corner with John Bakatsias; thence with the line
of said Bakatsias, S. 11 deg. 38' 05" E. 365 ft. to an iron stake and new corner
with J. Leon Porter; thence a new line with said Porter, S. 87 deg. 18' W.
441.94 ft. to an iron stake in the East line of Porter Avenue; thence with the
East line of Porter Avenue, N. 11 deg. 38' 05" W. 400 ft. to the POINT OF
BEGINNING AND CONTINUING 3.935 ACRES, more or less.
The above description and determination of area were taken from a survey and
drawing made by John D. Somers, R. L. S., dated 5/18/82, captioned "Final
Plat", property of J. Leon Porter and wife, Ellen T. Porter and plat is
recorded in the office of the Register of Deeds for Alamance County, N.C., in
Plat Book 27 at Page 55.
This conveyance is subject to recorded easements, 10 ft. wide utility easement
along rear lot line as shown on recorded subdivision map and sanitary sewer
easement and manhole as shown on recorded subdivision map.
The above property was conveyed to the Grantors by
See Book No. page
TO HAVE AND TO HOLD said real property, with all privileges, and
appurtenances thereunto belonging, to the said Grantees, their heirs,
successors, and assigns forever.
The Grantors covenant that they are seized of said real property in fee,
and have the right to convey the same in fee simple; that the same is free from
all encumbrances (with any exceptions above stated); and that they will warrant
and defend the title to same against the claims of all persons whomsoever.
IN WITNESS WHEREOF, the Grantors have hereunto set their hands and
seals, or if corporate, have caused this Deed to be signed in their respective
corporate names by their duly authorized officers and their seals to be
hereunto affixed by authority of their Boards of Directors, the day and year
first above written.
__________________________(SEAL)
J. LEON PORTER
__________________________(SEAL)
ELLEN T. PORTER
================================================================================
STATE OF NORTH CAROLINA, COUNTY OF ALAMANCE
I, JANICE S. SHEPHERD a Notary Public of said County, do hereby certify
that J. LEON PORTER and wife, ELLEN T. PORTER personally appeared before me this
day and acknowledged the due execution of the foregoing deed. Witness my hands
and official seal, this 11th day of June 1982
My Commission Expires: 1/24/85 /s/ JANICE S. SHEPHERD Notary Public
================================================================================
<PAGE> 103
SCHEDULES
Schedule 1.1 -- Cobalt Financing Agreements
Schedule 1.4 -- Cobalt 60
Schedule 1.5 -- Contracts over $25,000
<PAGE> 104
Schedule 1.1
Cobalt Financing Agreements
<PAGE> 105
RTI, Inc.
Schedule 1.1
Cobalt Financing Agreements
1) Nordion International Inc. (Financing Agreement)
Kanata, Ontario
Canada
399,940 Curies (US$1.47 per Curie)
Location: South Jersey
42 month financing, monthly principal payment: $16,333.00
Interest rate: U.S. Prime plus 1.75
Terminates: 3/28/98
2) Amersham International plc. (Lease Agreement)
Little Chalfont, Buckinghamshire, England
Primary term - 4 years; 16 quarterly payments
Secondary term - 11 annual payments; or buyout for 6.75% total
primary term payments
(a) Beginning April 5, 1995 407,693 Curies (US$1.44)
Location: South Jersey
4 year capital lease
Primary term payment - $41,024.11
Secondary term buyout - $44,306.04
(b) Beginning November 27, 1995 205,936 Curies (US$1.44)
Location: South Jersey
4 year capital lease
Primary term payment - $21,365.86
Secondary term buyout - $23,075.12
(c) Beginning October 15, 1993 205,936 Curies (US$1.44)
Location: North Carolina
4 year capital lease
Primary term payment - $42,571.53
Secondary term buyout - $45,977.25
(d) Beginning January 29, 1996 202,008 Curies (US$1.44)
Location: North Jersey
4 year capital lease
Primary term payment - $20,958.33
Secondary term buyout - $22,635.00
<PAGE> 106
3) Neutron Products Inc. (Purchase Agreement)
Dickerson, MD
120,000 Curies ($1.40 per curie)
Location: North Carolina
Terms of purchase: $50,000 downpayment;
$10,000 due 7 days after delivery;
$54,000 due 20 days after delivery;
$54,000 due 60 days after delivery.
<PAGE> 107
Schedule 1.4
Cobalt 60
<PAGE> 108
MODULE TOTALS LOAD: 3 PURIDEC
IRRADIATION TECHNOLOGIES
Content activity in Curies
SOUTH JESEY COBALT LOAD
1 2 3 4
49824 111539 110786 49781
- -------------------------------------------------------------
5 6 7 8
8575 71231 71547 9654
- -------------------------------------------------------------
9 10 11 12
8489 73141 68964 12292
- -------------------------------------------------------------
13 14 15 16
49891 111656 111107 50086
- -------------------------------------------------------------
17 18 19 20
0 0 0 0
Reference Date 01-Dec-1995 R A C Liquorish 23/Nov/95 Amersham
QSA
<PAGE> 109
PLANT: RTI SALEM LOAD 3 PURIDEC
Current activity in Curies
MODULE 1 MODULE 2
<TABLE>
<CAPTION>
POSITION IDENTITY LOAD ACTIVITY POSITION IDENTITY LOAD ACTIVITY
<S> <C> <C> <C> <C> <C> <C> <C>
1 Dummy 0 1 3905EE 2 10689
2 Dummy 0 2 Dummy 0
3 Dummy 0 3 Dummy 0
4 Dummy 0 4 49348 1 8575
5 Dummy 0 5 Dummy 0
6 Dummy 0 6 Dummy 0
7 Dummy 0 7 5353EE 3 11268
8 Dummy 0 8 Dummy 0
9 Dummy 0 9 Dummy 0
10 Dummy 0 10 4123EE 2 10689
11 Dummy 0 11 Dummy 0
12 Dummy 0 12 Dummy 0
13 Dummy 0 13 Dummy 0
14 Dummy 0 14 Dummy 0
15 Dummy 0 15 49533 1 9342
16 Dummy 0 16 Dummy 0
17 Dummy 0 17 Dummy 0
18 Dummy 0 18 Dummy 0
19 Dummy 0 19 Dummy 0
20 3806EE 2 9698 20 3662EE 2 9507
21 Dummy 0 21 Dummy 0
22 Dummy 0 22 6351EE 3 11165
23 Dummy 0 23 Dummy 0
24 Dummy 0 24 Dummy 0
25 49565 1 8575 25 49067 1 10116
26 Dummy 0 26 Dummy 0
27 Dummy 0 27 Dummy 0
28 Dummy 0 28 Dummy 0
29 Dummy 0 29 4333EE 2 9735
30 3647EE 2 9698 30 Dummy 0
31 Dummy 0 31 Dummy 0
32 Dummy 0 32 Dummy 0
33 4198EE 3 12511 33 45775 1 9851
34 Dummy 0 34 Dummy 0
35 49319 1 9342 35 Dummy 0
36 Dummy 0 36 4342EE 2 10602
TOTAL 49824 TOTAL 111539
</TABLE>
MODULE 3 MODULE 4
<TABLE>
<CAPTION>
POSITION IDENTITY LOAD ACTIVITY POSITION IDENTITY LOAD ACTIVITY
<S> <C> <C> <C> <C> <C> <C> <C>
1 3640EE 2 11057 1 4227EE 3 12309
2 Dummy 0 2 Dummy 0
3 Dummy 0 3 49068 1 10116
4 49416 1 8575 4 Dummy 0
5 Dummy 0 5 Dummy 0
6 5330EE 3 10972 6 4379EE 2 10024
7 Dummy 0 7 Dummy 0
8 Dummy 0 8 Dummy 0
9 4547EE 2 12908 9 Dummy 0
10 Dummy 0 10 Dummy 0
11 Dummy 0 11 49747 1 7551
12 Dummy 0 12 Dummy 0
13 Dummy 0 13 Dummy 0
14 49669 1 9342 14 Dummy 0
15 Dummy 0 15 Dummy 0
16 Dummy 0 16 4440EE 2 9781
17 Dummy 0 17 Dummy 0
18 Dummy 0 18 Dummy 0
19 4345EE 2 10699 19 Dummy 0
20 Dummy 0 20 Dummy 0
21 Dummy 0 21 Dummy 0
22 36983 1 2187 22 Dummy 0
23 Dummy 0 23 Dummy 0
24 Dummy 0 24 Dummy 0
25 45780 1 9851 25 Dummy 0
26 Dummy 0 26 Dummy 0
27 5314EE 3 10972 27 Dummy 0
28 36981 1 2187 28 Dummy 0
29 Dummy 0 29 Dummy 0
30 Dummy 0 30 Dummy 0
31 49790 1 10116 31 Dummy 0
32 Dummy 0 32 Dummy 0
33 Dummy 0 33 Dummy 0
34 36984 1 2187 34 Dummy 0
35 Dummy 0 35 Dummy 0
36 4283EE 2 9735 36 Dummy 0
TOTAL 110786 TOTAL 49781
</TABLE>
AMERSHAM
QSA
<PAGE> 110
PLANT: RTI SALEM LOAD 3 PURIDEC
Current activity in Curies IRRADIATION TECHNOLOGIES
<TABLE>
<CAPTION>
MODULE 5 MODULE 6
POSITION IDENTITY LOAD ACTIVITY POSITION IDENTITY LOAD ACTIVITY
<S> <C> <C> <C> <C> <C> <C> <C>
1 Dummy 0 1 Dummy 0
2 Dummy 0 2 5460EE 3 12645
3 Dummy 0 3 Dummy 0
4 Dummy 0 4 Dummy 0
5 Dummy 0 5 49745 1 7726
6 Dummy 0 6 Dummy 0
7 Dummy 0 7 Dummy 0
8 Dummy 0 8 Dummy 0
9 Dummy 0 9 4351EE 2 9735
10 Dummy 0 10 Dummy 0
11 Dummy 0 11 Dummy 0
12 Dummy 0 12 Dummy 0
13 Dummy 0 13 Dummy 0
14 Dummy 0 14 36993 1 2869
15 Dummy 0 15 Dummy 0
16 Dummy 0 16 49749 1 2347
17 Dummy 0 17 Dummy 0
18 Dummy 0 18 Dummy 0
19 Dummy 0 19 Dummy 0
20 Dummy 0 20 Dummy 0
21 Dummy 0 21 4274EE 2 10283
22 Dummy 0 22 Dummy 0
23 Dummy 0 23 Dummy 0
24 Dummy 0 24 Dummy 0
25 Dummy 0 25 Dummy 0
26 Dummy 0 26 49347 1 8575
27 Dummy 0 27 Dummy 0
28 49446 1 8575 28 Dummy 0
29 Dummy 0 29 Dummy 0
30 Dummy 0 30 49750 1 2090
31 Dummy 0 31 49746 1 2231
32 Dummy 0 32 Dummy 0
33 Dummy 0 33 Dummy 0
34 Dummy 0 34 Dummy 0
35 Dummy 0 35 4346EE 2 9928
36 Dummy 0 36 36994 1 2801
TOTAL 8575 TOTAL 71231
</TABLE>
<TABLE>
<CAPTION>
MODULE 7 MODULE 8
POSITION IDENTITY LOAD ACTIVITY POSITION IDENTITY LOAD ACTIVITY
<S> <C> <C> <C> <C> <C> <C> <C>
1 4325EE 2 10410 1 Dummy 0
2 Dummy 0 2 Dummy 0
3 Dummy 0 3 Dummy 0
4 Dummy 0 4 Dummy 0
5 Dummy 0 5 Dummy 0
6 Dummy 0 6 Dummy 0
7 4213EE 3 11603 7 Dummy 0
8 Dummy 0 8 Dummy 0
9 Dummy 0 9 Dummy 0
10 Dummy 0 10 Dummy 0
11 49492 1 9342 11 Dummy 0
12 Dummy 0 12 Dummy 0
13 Dummy 0 13 49278 1 9654
14 Dummy 0 14 Dummy 0
15 Dummy 0 15 Dummy 0
16 Dummy 0 16 Dummy 0
17 4259EE 2 10569 17 Dummy 0
18 Dummy 0 18 Dummy 0
19 Dummy 0 19 Dummy 0
20 Dummy 0 20 Dummy 0
21 Dummy 0 21 Dummy 0
22 Dummy 0 22 Dummy 0
23 Dummy 0 23 Dummy 0
24 Dummy 0 24 Dummy 0
25 Dummy 0 25 Dummy 0
26 Dummy 0 26 Dummy 0
27 Dummy 0 27 Dummy 0
28 4121EE 2 10596 28 Dummy 0
29 Dummy 0 29 Dummy 0
30 Dummy 0 30 Dummy 0
31 5471EE 3 12645 31 Dummy 0
32 Dummy 0 32 Dummy 0
33 48006 1 1382 33 Dummy 0
34 Dummy 0 34 Dummy 0
35 Dummy 0 35 Dummy 0
36 Dummy 0 36 Dummy 0
TOTAL 11547 TOTAL 9654
</TABLE>
Reference Date 01-Dec-1995 R A C Liquorish 23/Nov/95 Amersham
QSA
<PAGE> 111
PLANT: RTI SALEM LOAD 3 PURIDEC
Content activity in Curies IRRADIATION TECHNOLOGIES
<TABLE>
<CAPTION>
MODULE 9 MODULE 10
POSITION IDENTITY LOAD ACTIVITY POSITION IDENTITY LOAD ACTIVITY
<S> <C> <C> <C> <C> <C> <C> <C>
1 Dummy 0 1 Dummy 0
2 Dummy 0 2 5365EE 3 13214
3 Dummy 0 3 Dummy 0
4 Dummy 0 4 Dummy 0
5 Dummy 0 5 Dummy 0
6 Dummy 0 6 Dummy 0
7 Dummy 0 7 Dummy 0
8 Dummy 0 8 4128EE 2 9760
9 Dummy 0 9 Dummy 0
10 Dummy 0 10 Dummy 0
11 Dummy 0 11 Dummy 0
12 Dummy 0 12 Dummy 0
13 Dummy 0 13 48943 1 9521
14 Dummy 0 14 Dummy 0
15 Dummy 0 15 Dummy 0
16 Dummy 0 16 Dummy 0
17 Dummy 0 17 Dummy 0
18 Dummy 0 18 Dummy 0
19 Dummy 0 19 4297EE 2 9543
20 Dummy 0 20 Dummy 0
21 Dummy 0 21 Dummy 0
22 49755 1 1730 22 Dummy 0
23 Dummy 0 23 Dummy 0
24 Dummy 0 24 Dummy 0
25 Dummy 0 25 5372EE 3 11882
26 Dummy 0 26 Dummy 0
27 Dummy 0 27 Dummy 0
28 Dummy 0 28 Dummy 0
29 Dummy 0 29 Dummy 0
30 49762 1 6759 30 Dummy 0
31 Dummy 0 31 49532 1 9342
32 Dummy 0 32 Dummy 0
33 Dummy 0 33 Dummy 0
34 Dummy 0 34 Dummy 0
35 Dummy 0 35 Dummy 0
36 Dummy 0 36 3639EE 2 9879
TOTAL 8489 TOTAL 73141
</TABLE>
<TABLE>
<CAPTION>
MODULE 11 MODULE 12
POSITION IDENTITY LOAD ACTIVITY POSITION IDENTITY LOAD ACTIVITY
<S> <C> <C> <C> <C> <C> <C> <C>
1 4271EE 2 10664 1 Dummy 0
2 Dummy 0 2 Dummy 0
3 Dummy 0 3 Dummy 0
4 Dummy 0 4 49756 1 6759
5 Dummy 0 5 Dummy 0
6 Dummy 0 6 Dummy 0
7 Dummy 0 7 Dummy 0
8 49753 1 2231 8 Dummy 0
9 Dummy 0 9 Dummy 0
10 Dummy 0 10 Dummy 0
11 5315EE 3 10984 11 Dummy 0
12 Dummy 0 12 49754 1 2972
13 Dummy 0 13 Dummy 0
14 49759 1 4754 14 Dummy 0
15 Dummy 0 15 Dummy 0
16 Dummy 0 16 Dummy 0
17 Dummy 0 17 Dummy 0
18 Dummy 0 18 Dummy 0
19 4135EE 2 11339 19 49761 1 2561
20 Dummy 0 20 Dummy 0
21 Dummy 0 21 Dummy 0
22 Dummy 0 22 Dummy 0
23 Dummy 0 23 Dummy 0
24 49751 1 4754 24 Dummy 0
25 Dummy 0 25 Dummy 0
26 Dummy 0 26 Dummy 0
27 Dummy 0 27 Dummy 0
28 4138EE 2 10782 28 Dummy 0
29 Dummy 0 29 Dummy 0
30 Dummy 0 30 Dummy 0
31 Dummy 0 31 Dummy 0
32 49760 1 2484 32 Dummy 0
33 Dummy 0 33 Dummy 0
34 5331EE 3 10972 34 Dummy 0
35 Dummy 0 35 Dummy 0
36 Dummy 0 36 Dummy 0
TOTAL 68964 TOTAL 12292
</TABLE>
Reference Date 01-Dec-1995 R A C Liquorish 23/Nov/95 Amersham
QSA
<PAGE> 112
PLANT: RTI SALEM LOAD 3 [LOGO]
Content activity in Curies
<TABLE>
<CAPTION>
MODULE 13 MODULE 14
POSITION IDENTITY LOAD ACTIVITY POSITION IDENTITY LOAD ACTIVITY
<S> <C> <C> <C> <C> <C> <C> <C>
1 Dummy 0 1 4360EE 2 10314
2 Dummy 0 2 Dummy 0
3 Dummy 0 3 Dummy 0
4 Dummy 0 4 Dummy 0
5 Dummy 0 5 4279EE 2 9712
6 Dummy 0 6 Dummy 0
7 Dummy 0 7 Dummy 0
8 Dummy 0 8 5465EE 3 12953
9 Dummy 0 9 Dummy 0
10 Dummy 0 10 49020 1 9521
11 Dummy 0 11 Dummy 0
12 Dummy 0 12 Dummy 0
13 Dummy 0 13 Dummy 0
14 Dummy 0 14 Dummy 0
15 Dummy 0 15 4344EE 2 9831
16 Dummy 0 16 Dummy 0
17 Dummy 0 17 Dummy 0
18 Dummy 0 18 Dummy 0
19 Dummy 0 19 Dummy 0
20 4134EE 2 11246 20 48978 1 9521
21 Dummy 0 21 Dummy 0
22 Dummy 0 22 Dummy 0
23 Dummy 0 23 Dummy 0
24 49758 1 3692 24 4269EE 2 9426
25 Dummy 0 25 Dummy 0
26 36980 1 2187 26 5446EE 3 10280
27 Dummy 0 27 Dummy 0
28 Dummy 0 28 Dummy 0
29 Dummy 0 29 4267EE 2 9521
30 Dummy 0 30 Dummy 0
31 48981 1 9521 31 Dummy 0
32 Dummy 0 32 48990 1 9521
33 4192EE 3 11906 33 Dummy 0
34 Dummy 0 34 Dummy 0
35 3866EE 2 11340 35 Dummy 0
36 Dummy 0 36 3645EE 2 11057
TOTAL 49891 TOTAL 111656
</TABLE>
<TABLE>
<CAPTION>
MODULE 15 MODULE 16
POSITION IDENTITY LOAD ACTIVITY POSITION IDENTITY LOAD ACTIVITY
<S> <C> <C> <C> <C> <C> <C> <C>
1 4004EE 2 10503 1 5369EE 3 12394
2 Dummy 0 2 Dummy 0
3 Dummy 0 3 49013 1 9521
4 48977 1 9521 4 Dummy 0
5 Dummy 0 5 Dummy 0
6 5393EE 3 10569 6 49309 1 9342
7 Dummy 0 7 Dummy 0
8 4265EE 2 9997 8 Dummy 0
9 Dummy 0 9 Dummy 0
10 49748 1 3135 10 Dummy 0
11 Dummy 0 11 48819 1 7551
12 49752 1 3692 12 Dummy 0
13 Dummy 0 13 Dummy 0
14 Dummy 0 14 Dummy 0
15 Dummy 0 15 Dummy 0
16 49382 1 8832 16 4327EE 2 11278
17 Dummy 0 17 Dummy 0
18 Dummy 0 18 Dummy 0
19 Dummy 0 19 Dummy 0
20 Dummy 0 20 Dummy 0
21 4341EE 2 9831 21 Dummy 0
22 Dummy 0 22 Dummy 0
23 Dummy 0 23 Dummy 0
24 Dummy 0 24 Dummy 0
25 49283 1 9521 25 Dummy 0
26 Dummy 0 26 Dummy 0
27 5348EE 3 11165 27 Dummy 0
28 Dummy 0 28 Dummy 0
29 Dummy 0 29 Dummy 0
30 4310EE 2 10120 30 Dummy 0
31 Dummy 0 31 Dummy 0
32 49757 1 3135 32 Dummy 0
33 Dummy 0 33 Dummy 0
34 Dummy 0 34 Dummy 0
35 Dummy 0 35 Dummy 0
36 4301EE 2 11084 36 Dummy 0
TOTAL 111107 TOTAL 50086
</TABLE>
Reference Date 01-Dec-1995 R A C Liquorish 23/Nov/95 Amersham
QSA
<PAGE> 113
MODULE TOTALS LOAD:A1 [LOGO]
NORTH JERSEY COBALT LOAD
1/16/96
5 1
1/16/96
39,658 221617
6 2
1/16/96
42,936 189883
7 3
183447 94367
8 4
1/16/96
228048 95,542
<PAGE> 114
RTI ROCKAWAY LOAD A1
MODULE 1 [PURIDEC LOGO]
<TABLE>
<CAPTION>
- --------------------------------------------------------
POSITION IDENTITY LOAD ACTIVITY
- --------------------------------------------------------
<S> <C> <C> <C>
1 42112 0 7139
- --------------------------------------------------------
2 20653 0 2610
- --------------------------------------------------------
3 35907 0 5226
- --------------------------------------------------------
4 20662 0 2556
- --------------------------------------------------------
5 28862 0 4114
- --------------------------------------------------------
6 20687 0 2311
- --------------------------------------------------------
7 28863 0 4114
- --------------------------------------------------------
8 5535EE A1 12395
- --------------------------------------------------------
9 20630 0 2357
- --------------------------------------------------------
10 Dummy 0
- --------------------------------------------------------
11 38219 0 5690
- --------------------------------------------------------
12 Dummy 0
- --------------------------------------------------------
13 28864 0 4114
- --------------------------------------------------------
14 5646EE A1 11240
- --------------------------------------------------------
15 38214 0 5690
- --------------------------------------------------------
16 Dummy 0
- --------------------------------------------------------
17 28865 0 4114
- --------------------------------------------------------
18 Dummy 0
- --------------------------------------------------------
19 38196 0 5690
- --------------------------------------------------------
20 Dummy 0
- --------------------------------------------------------
21 28866 0 4114
- --------------------------------------------------------
22 5653EE A1 11661
- --------------------------------------------------------
23 38203 0 5690
- --------------------------------------------------------
24 Dummy 0
- --------------------------------------------------------
25 28869 0 4114
- --------------------------------------------------------
26 Dummy 0
- --------------------------------------------------------
27 37781 0 5833
- --------------------------------------------------------
28 Dummy 0
- --------------------------------------------------------
29 28874 0 4114
- --------------------------------------------------------
30 Dummy 0
- --------------------------------------------------------
31 37782 0 5833
- --------------------------------------------------------
32 Dummy 0
- --------------------------------------------------------
33 28867 0 4114
- --------------------------------------------------------
34 20634 0 2357
- --------------------------------------------------------
35 Dummy 0
- --------------------------------------------------------
36 20646 0 2311
- --------------------------------------------------------
37 Dummy 0
- --------------------------------------------------------
38 42107 0 7139
- --------------------------------------------------------
39 Dummy 0
- --------------------------------------------------------
40 20661 0 2556
- --------------------------------------------------------
41 20642 0 2311
- --------------------------------------------------------
42 28868 0 4114
- --------------------------------------------------------
43 20640 0 2311
- --------------------------------------------------------
44 20633 0 2357
- --------------------------------------------------------
45 35917 0 5226
- --------------------------------------------------------
46 20651 0 2698
- --------------------------------------------------------
47 P157 0 1171
- --------------------------------------------------------
48 38194 0 5690
- --------------------------------------------------------
49 20650 0 2698
- --------------------------------------------------------
50 5552EE A1 12094
- --------------------------------------------------------
51 20656 0 2610
- --------------------------------------------------------
52 33578 0 5655
- --------------------------------------------------------
53 Dummy 0
- --------------------------------------------------------
54 20639 0 2311
- --------------------------------------------------------
55 5671EE A1 12395
- --------------------------------------------------------
56 42113 0 7139
- --------------------------------------------------------
57 20684 0 2311
- --------------------------------------------------------
58 20643 0 2311
- --------------------------------------------------------
59 35951 0 4716
- --------------------------------------------------------
60 20645 0 2311
- --------------------------------------------------------
TOTAL 221617
- --------------------------------------------------------
</TABLE>
<PAGE> 115
RTI ROCKAWAY LOAD A1
MODULE 2 [PURIDEC LOGO]
<TABLE>
<CAPTION>
- --------------------------------------------------------
POSITION IDENTITY LOAD ACTIVITY
- --------------------------------------------------------
<S> <C> <C> <C>
1 20629 0 2357
- --------------------------------------------------------
2 20635 0 2357
- --------------------------------------------------------
3 20674 0 2357
- --------------------------------------------------------
4 20652 0 2698
- --------------------------------------------------------
5 42117 0 7139
- --------------------------------------------------------
6 5636EE A1 11253
- --------------------------------------------------------
7 35797 0 5226
- --------------------------------------------------------
8 20685 0 2311
- --------------------------------------------------------
9 20637 0 2311
- --------------------------------------------------------
10 12406 0 2137
- --------------------------------------------------------
11 12262 0 2137
- --------------------------------------------------------
12 20641 0 2311
- --------------------------------------------------------
13 12401 0 2137
- --------------------------------------------------------
14 12383 0 2137
- --------------------------------------------------------
15 12409 0 2137
- --------------------------------------------------------
16 5545EE A1 12606
- --------------------------------------------------------
17 12256 0 2137
- --------------------------------------------------------
18 12404 0 2137
- --------------------------------------------------------
19 37783 0 5833
- --------------------------------------------------------
20 12407 0 2137
- --------------------------------------------------------
21 12408 0 2137
- --------------------------------------------------------
22 20636 0 2357
- --------------------------------------------------------
23 12265 0 2137
- --------------------------------------------------------
24 20632 0 2357
- --------------------------------------------------------
25 12378 0 2137
- --------------------------------------------------------
26 12412 0 2137
- --------------------------------------------------------
27 12377 0 2137
- --------------------------------------------------------
28 12270 0 2137
- --------------------------------------------------------
29 12271 0 2137
- --------------------------------------------------------
30 12414 0 2137
- --------------------------------------------------------
31 12376 0 2137
- --------------------------------------------------------
32 12274 0 2137
- --------------------------------------------------------
33 Dummy 0
- --------------------------------------------------------
34 42115 0 7139
- --------------------------------------------------------
35 Dummy 0
- --------------------------------------------------------
36 12280 0 2137
- --------------------------------------------------------
37 12257 0 2137
- --------------------------------------------------------
38 12258 0 2137
- --------------------------------------------------------
39 12259 0 2137
- --------------------------------------------------------
40 12260 0 2137
- --------------------------------------------------------
41 12261 0 2137
- --------------------------------------------------------
42 P143 0 2278
- --------------------------------------------------------
43 12384 0 2137
- --------------------------------------------------------
44 20628 0 2357
- --------------------------------------------------------
45 P137 0 2219
- --------------------------------------------------------
46 20676 0 2357
- --------------------------------------------------------
47 20655 0 2610
- --------------------------------------------------------
48 P162 0 2315
- --------------------------------------------------------
49 P145 0 1331
- --------------------------------------------------------
50 5647EE A1 12199
- --------------------------------------------------------
51 42114 0 7139
- --------------------------------------------------------
52 Dummy 0
- --------------------------------------------------------
53 P165 0 1848
- --------------------------------------------------------
54 20677 0 2357
- --------------------------------------------------------
55 Dummy 0
- --------------------------------------------------------
56 35796 0 5226
- --------------------------------------------------------
57 20693 0 2311
- --------------------------------------------------------
58 35795 0 5226
- --------------------------------------------------------
59 5666EE A1 11778
- --------------------------------------------------------
60 20691 0 2311
- --------------------------------------------------------
TOTAL 189883
- --------------------------------------------------------
</TABLE>
<PAGE> 116
RTI ROCKAWAY LOAD A1
MODULE 3 [PURIDEC]
<TABLE>
<CAPTION>
- --------------------------------------------------------
POSITION IDENTITY LOAD ACTIVITY
- --------------------------------------------------------
<S> <C> <C> <C>
1 35960 0 4058
- --------------------------------------------------------
2 12381 0 2137
- --------------------------------------------------------
3 20682 0 2311
- --------------------------------------------------------
4 38208 0 5690
- --------------------------------------------------------
5 35799 0 5111
- --------------------------------------------------------
6 42151 0 7139
- --------------------------------------------------------
7 35891 0 5111
- --------------------------------------------------------
8 38220 0 5690
- --------------------------------------------------------
9 42160 0 7488
- --------------------------------------------------------
10 38216 0 5690
- --------------------------------------------------------
11 20668 0 2311
- --------------------------------------------------------
12 20680 0 2311
- --------------------------------------------------------
13 ??? I 0
- --------------------------------------------------------
14 12278 0 2137
- --------------------------------------------------------
15 ??? II 0
- --------------------------------------------------------
16 37788 0 5833
- --------------------------------------------------------
17 Dummy 0
- --------------------------------------------------------
18 GEP-H 0 1100
- --------------------------------------------------------
19 Dummy 0
- --------------------------------------------------------
20 12282 0 2137
- --------------------------------------------------------
21 Dummy 0
- --------------------------------------------------------
22 GEP-H 0 1100
- --------------------------------------------------------
23 Dummy 0
- --------------------------------------------------------
24 12279 0 2137
- --------------------------------------------------------
25 20654 0 2610
- --------------------------------------------------------
26 Dummy 0
- --------------------------------------------------------
27 GEP-H 0 1100
- --------------------------------------------------------
28 Dummy 0
- --------------------------------------------------------
29 12395 0 2137
- --------------------------------------------------------
30 20683 0 2311
- --------------------------------------------------------
31 Dummy 0
- --------------------------------------------------------
32 Dummy 0
- --------------------------------------------------------
33 Dummy 0
- --------------------------------------------------------
34 Dummy 0
- --------------------------------------------------------
35 12392 0 2137
- --------------------------------------------------------
36 20686 0 2311
- --------------------------------------------------------
37 Dummy 0
- --------------------------------------------------------
38 Dummy 0
- --------------------------------------------------------
39 Dummy 0
- --------------------------------------------------------
40 Dummy 0
- --------------------------------------------------------
41 Dummy 0
- --------------------------------------------------------
42 Dummy 0
- --------------------------------------------------------
43 Dummy 0
- --------------------------------------------------------
44 Dummy 0
- --------------------------------------------------------
45 12390 0 2137
- --------------------------------------------------------
46 20644 0 2311
- --------------------------------------------------------
47 12411 0 2137
- --------------------------------------------------------
48 38217 0 5690
- --------------------------------------------------------
49 Dummy 0
- --------------------------------------------------------
50 Dummy 0
- --------------------------------------------------------
51 Dummy 0
- --------------------------------------------------------
52 Dummy 0
- --------------------------------------------------------
53 Dummy 0
- --------------------------------------------------------
54 Dummy 0
- --------------------------------------------------------
55 Dummy 0
- --------------------------------------------------------
56 Dummy 0
- --------------------------------------------------------
57 Dummy 0
- --------------------------------------------------------
58 Dummy 0
- --------------------------------------------------------
59 Dummy 0
- --------------------------------------------------------
60 Dummy 0
- --------------------------------------------------------
TOTAL 94367
- --------------------------------------------------------
</TABLE>
<PAGE> 117
RTI ROCKAWAY LOAD A1 [PURIDEC LOGO]
MODULE 4
<TABLE>
<CAPTION>
- --------------------------------------------------------
POSITION IDENTITY LOAD ACTIVITY
- --------------------------------------------------------
<S> <C> <C> <C>
1 12391 0 2137
- --------------------------------------------------------
2 Dummy 0
- --------------------------------------------------------
3 36954 0 4789
- --------------------------------------------------------
4 20670 0 2357
- --------------------------------------------------------
5 38222 0 5690
- --------------------------------------------------------
6 Dummy 0
- --------------------------------------------------------
7 Dummy 0
- --------------------------------------------------------
8 Dummy 0
- --------------------------------------------------------
9 38198 0 5690
- --------------------------------------------------------
10 Dummy 0
- --------------------------------------------------------
11 12388 0 2137
- --------------------------------------------------------
12 Dummy 0
- --------------------------------------------------------
13 20647 0 2311
- --------------------------------------------------------
14 Dummy 0
- --------------------------------------------------------
15 12400 0 2137
- --------------------------------------------------------
16 42159 0 7139
- --------------------------------------------------------
17 12410 0 2137
- --------------------------------------------------------
18 20707 0 2311
- --------------------------------------------------------
19 12415 0 2137
- --------------------------------------------------------
20 20648 0 2311
- --------------------------------------------------------
21 Dummy 0
- --------------------------------------------------------
22 12399 0 2137
- --------------------------------------------------------
23 42152 0 7139
- --------------------------------------------------------
24 20675 0 2311
- --------------------------------------------------------
25 12417 0 2137
- --------------------------------------------------------
26 35798 0 5111
- --------------------------------------------------------
27 12393 0 2137
- --------------------------------------------------------
28 20694 0 2311
- --------------------------------------------------------
29 Dummy 0
- --------------------------------------------------------
30 12403 0 2137
- --------------------------------------------------------
31 Dummy 0
- --------------------------------------------------------
32 NPI 700
- --------------------------------------------------------
33 12398 0 2137
- --------------------------------------------------------
34 Dummy 0
- --------------------------------------------------------
35 20672 0 2357
- --------------------------------------------------------
36 P139 0 1574
- --------------------------------------------------------
37 Dummy 0
- --------------------------------------------------------
38 12272 0 2137
- --------------------------------------------------------
39 Dummy 0
- --------------------------------------------------------
40 35890 0 5111
- --------------------------------------------------------
41 Dummy 0
- --------------------------------------------------------
42 42158 0 7139
- --------------------------------------------------------
43 Dummy 0
- --------------------------------------------------------
44 Dummy 0
- --------------------------------------------------------
45 Dummy 0
- --------------------------------------------------------
46 Dummy 0
- --------------------------------------------------------
47 38221 0 5690
- --------------------------------------------------------
48 Dummy 0
- --------------------------------------------------------
49 Dummy 0
- --------------------------------------------------------
50 Dummy 0
- --------------------------------------------------------
51 Dummy 0
- --------------------------------------------------------
52 Dummy 0
- --------------------------------------------------------
53 Dummy 0
- --------------------------------------------------------
54 Dummy 0
- --------------------------------------------------------
55 Dummy 0
- --------------------------------------------------------
56 Dummy 0
- --------------------------------------------------------
57 Dummy 0
- --------------------------------------------------------
58 Dummy 0
- --------------------------------------------------------
59 Dummy 0
- --------------------------------------------------------
60 Dummy 0
- --------------------------------------------------------
TOTAL ?????
- --------------------------------------------------------
</TABLE>
<PAGE> 118
RTI ROCKAWAY LOAD A1 [PURIDEC LOGO]
MODULE 5
<TABLE>
<CAPTION>
- --------------------------------------------------------
POSITION IDENTITY LOAD ACTIVITY
- --------------------------------------------------------
<S> <C> <C> <C>
1 NPI-39 0 918
- --------------------------------------------------------
2 NPI-30 0 655
- --------------------------------------------------------
3 NPI-9 0 713
- --------------------------------------------------------
4 NPI-1 0 916
- --------------------------------------------------------
5 NPI-4 0 879
- --------------------------------------------------------
6 NPI-15 0 832
- --------------------------------------------------------
7 NPI-14 0 647
- --------------------------------------------------------
8 NPI-6 0 710
- --------------------------------------------------------
9 NPI-45 0 852
- --------------------------------------------------------
10 NPI-37 0 677
- --------------------------------------------------------
11 NPI-19 0 660
- --------------------------------------------------------
12 NPI-5 0 777
- --------------------------------------------------------
13 NPI-38 0 667
- --------------------------------------------------------
14 NPI-31 0 803
- --------------------------------------------------------
15 NPI-81 0 778
- --------------------------------------------------------
16 NPI-81 0 778
- --------------------------------------------------------
17 NPI-17 0 789
- --------------------------------------------------------
18 NPI-81 0 778
- --------------------------------------------------------
19 NPI-35 0 672
- --------------------------------------------------------
20 NPI-23 0 636
- --------------------------------------------------------
21 NPI-24 0 645
- --------------------------------------------------------
22 NPI-36 0 725
- --------------------------------------------------------
23 NPI-46 0 854
- --------------------------------------------------------
24 NPI-41 0 848
- --------------------------------------------------------
25 NPI-20 0 903
- --------------------------------------------------------
26 NPI-48 0 698
- --------------------------------------------------------
27 NPI-44 0 846
- --------------------------------------------------------
28 NPI 0 700
- --------------------------------------------------------
29 NPI 0 700
- --------------------------------------------------------
30 GEP-H 0 1100
- --------------------------------------------------------
31 GEP-H 0 1100
- --------------------------------------------------------
32 GEP-H 0 1100
- --------------------------------------------------------
33 GEP-H 0 1100
- --------------------------------------------------------
34 GEP-H 0 1100
- --------------------------------------------------------
35 GEP-H 0 1100
- --------------------------------------------------------
36 GE 0 1100
- --------------------------------------------------------
37 GEP-H 0 1100
- --------------------------------------------------------
38 GEP-H 0 1100
- --------------------------------------------------------
39 GEP-H 0 1100
- --------------------------------------------------------
40 GEP-H 0 1100
- --------------------------------------------------------
41 GEP-H 0 1100
- --------------------------------------------------------
42 GEP-H 0 1100
- --------------------------------------------------------
43 GEP-H 0 1100
- --------------------------------------------------------
44 GEP-H 0 1100
- --------------------------------------------------------
45 GEP-H 0 1100
- --------------------------------------------------------
46 Dummy 0 0
- --------------------------------------------------------
47 Blank 0
- --------------------------------------------------------
48 Blank 0
- --------------------------------------------------------
49 Blank 0
- --------------------------------------------------------
50 Blank 0
- --------------------------------------------------------
51 Blank 0
- --------------------------------------------------------
52 Blank 0
- --------------------------------------------------------
53 Blank 0
- --------------------------------------------------------
54 Blank 0
- --------------------------------------------------------
55 Blank 0
- --------------------------------------------------------
56 Blank 0
- --------------------------------------------------------
57 Blank 0
- --------------------------------------------------------
58 Blank 0
- --------------------------------------------------------
59 Blank 0
- --------------------------------------------------------
60 Blank 0
- --------------------------------------------------------
TOTAL ?????
- --------------------------------------------------------
</TABLE>
<PAGE> 119
RTI ROCKAWAY LOAD A1 [PURIDEC LOGO]
MODULE 6
<TABLE>
<CAPTION>
- --------------------------------------------------------
POSITION IDENTITY LOAD ACTIVITY
- --------------------------------------------------------
<S> <C> <C> <C>
1 NPI-22 0 644
- --------------------------------------------------------
2 NPI-42 0 801
- --------------------------------------------------------
3 NPI-8 0 710
- --------------------------------------------------------
4 NPI-10 0 776
- --------------------------------------------------------
5 NPI-13 0 650
- --------------------------------------------------------
6 NPI-3 0 927
- --------------------------------------------------------
7 NPI-21 0 642
- --------------------------------------------------------
8 NPI-29 0 692
- --------------------------------------------------------
9 NPI-26 0 642
- --------------------------------------------------------
10 NPI-12 0 843
- --------------------------------------------------------
11 NPI-11 0 639
- --------------------------------------------------------
12 NPI-25 0 622
- --------------------------------------------------------
13 NPI-23 0 681
- --------------------------------------------------------
14 NPI-34 0 678
- --------------------------------------------------------
15 NPI-43 0 841
- --------------------------------------------------------
16 NPI-40 0 918
- --------------------------------------------------------
17 NPI-47 0 716
- --------------------------------------------------------
18 NPI-16 0 807
- --------------------------------------------------------
19 GEP-H 0 1100
- --------------------------------------------------------
20 GEP-H 0 1100
- --------------------------------------------------------
21 GEP-H 0 1100
- --------------------------------------------------------
22 GEP-H 0 1100
- --------------------------------------------------------
23 GEP-H 0 1100
- --------------------------------------------------------
24 GEP-H 0 1100
- --------------------------------------------------------
25 GEP-H 0 1100
- --------------------------------------------------------
26 GEP-H 0 1100
- --------------------------------------------------------
27 GEP-H 0 1100
- --------------------------------------------------------
28 GEP-H 0 1100
- --------------------------------------------------------
29 GEP-H 0 1100
- --------------------------------------------------------
30 GEP-H 0 1100
- --------------------------------------------------------
31 GEP-H 0 1100
- --------------------------------------------------------
32 GEP-H 0 1100
- --------------------------------------------------------
33 GEP-H 0 1100
- --------------------------------------------------------
34 GEP-H 0 1100
- --------------------------------------------------------
35 GEP-H 0 1100
- --------------------------------------------------------
36 GEP-H 0 1100
- --------------------------------------------------------
37 GEP-H 0 1100
- --------------------------------------------------------
38 GEP-H 0 1100
- --------------------------------------------------------
39 GEP-H 0 1100
- --------------------------------------------------------
40 GEP-H 0 1100
- --------------------------------------------------------
41 GEP-H 0 1100
- --------------------------------------------------------
42 GEP-H 0 1100
- --------------------------------------------------------
43 GEP-H 0 1100
- --------------------------------------------------------
44 GEP-H 0 1100
- --------------------------------------------------------
45 GEP-H 0 1100
- --------------------------------------------------------
46 Dummy 0 0
- --------------------------------------------------------
47 Blank 0
- --------------------------------------------------------
48 Blank 0
- --------------------------------------------------------
49 Blank 0
- --------------------------------------------------------
50 Blank 0
- --------------------------------------------------------
51 Blank 0
- --------------------------------------------------------
52 Blank 0
- --------------------------------------------------------
53 Blank 0
- --------------------------------------------------------
54 Blank 0
- --------------------------------------------------------
55 Blank 0
- --------------------------------------------------------
56 Blank 0
- --------------------------------------------------------
57 Blank 0
- --------------------------------------------------------
58 Blank 0
- --------------------------------------------------------
59 Blank 0
- --------------------------------------------------------
60 Blank 0
- --------------------------------------------------------
TOTAL 42,936
- --------------------------------------------------------
</TABLE>
<PAGE> 120
RTI ROCKAWAY LOAD A1 [LOGO]
MODULE 7
<TABLE>
<CAPTION>
- --------------------------------------------------------
POSITION IDENTITY LOAD ACTIVITY
- --------------------------------------------------------
<S> <C> <C> <C>
1 5518EE A1 13026
- --------------------------------------------------------
2 P160 0 1275
- --------------------------------------------------------
3 38228 0 5690
- --------------------------------------------------------
4 20681 0 2311
- --------------------------------------------------------
5 42119 0 7139
- --------------------------------------------------------
6 P141 0 1711
- --------------------------------------------------------
7 20678 0 2311
- --------------------------------------------------------
8 Dummy 0
- --------------------------------------------------------
9 P169 0 1152
- --------------------------------------------------------
10 12389 0 2137
- --------------------------------------------------------
11 12413 0 2137
- --------------------------------------------------------
12 29692 0 2311
- --------------------------------------------------------
13 20708 0 2311
- --------------------------------------------------------
14 20673 0 2311
- --------------------------------------------------------
15 20649 0 2311
- --------------------------------------------------------
16 5660EE A1 12094
- --------------------------------------------------------
17 Dummy 0
- --------------------------------------------------------
18 20679 0 2311
- --------------------------------------------------------
19 Dummy 0
- --------------------------------------------------------
20 42165 0 7139
- --------------------------------------------------------
21 38233 0 5690
- --------------------------------------------------------
22 12402 0 2137
- --------------------------------------------------------
23 12266 0 2137
- --------------------------------------------------------
24 12379 0 2137
- --------------------------------------------------------
25 Dummy 0
- --------------------------------------------------------
26 12277 0 2137
- --------------------------------------------------------
27 12281 0 2137
- --------------------------------------------------------
28 12263 0 2137
- --------------------------------------------------------
29 12382 0 2137
- --------------------------------------------------------
30 12283 0 2137
- --------------------------------------------------------
31 12284 0 2137
- --------------------------------------------------------
32 12273 0 2137
- --------------------------------------------------------
33 12276 0 2137
- --------------------------------------------------------
34 35948 0 4716
- --------------------------------------------------------
35 5657EE A1 12395
- --------------------------------------------------------
36 12275 0 2137
- --------------------------------------------------------
37 Dummy 0
- --------------------------------------------------------
38 12264 0 2137
- --------------------------------------------------------
39 42163 0 7139
- --------------------------------------------------------
40 12267 0 2137
- --------------------------------------------------------
41 12386 0 2137
- --------------------------------------------------------
42 Dummy 0
- --------------------------------------------------------
43 Dummy 0
- --------------------------------------------------------
44 P171 0 1968
- --------------------------------------------------------
45 Dummy 0
- --------------------------------------------------------
46 42162 0 7139
- --------------------------------------------------------
47 Dummy 0
- --------------------------------------------------------
48 12285 0 2137
- --------------------------------------------------------
49 Dummy 0
- --------------------------------------------------------
50 12387 0 2137
- --------------------------------------------------------
51 35949 0 4716
- --------------------------------------------------------
52 5513EE A1 12186
- --------------------------------------------------------
53 Dummy 0
- --------------------------------------------------------
54 12405 0 2137
- --------------------------------------------------------
55 Dummy 0
- --------------------------------------------------------
56 12385 0 2137
- --------------------------------------------------------
57 38197 0 5690
- --------------------------------------------------------
58 35950 0 4716
- --------------------------------------------------------
59 38227 0 5690
- --------------------------------------------------------
60 P163 0 1134
- --------------------------------------------------------
TOTAL 183447
- --------------------------------------------------------
</TABLE>
<PAGE> 121
RTI ROCKAWAY LOAD A1 [LOGO]
MODULE 8
<TABLE>
<CAPTION>
- --------------------------------------------------------
POSITION IDENTITY LOAD ACTIVITY
- --------------------------------------------------------
<S> <C> <C> <C>
1 5674EE A1 12620
- --------------------------------------------------------
2 P139 0 1574
- --------------------------------------------------------
3 38215 0 5690
- --------------------------------------------------------
4 35961 0 3846
- --------------------------------------------------------
5 20657 0 2610
- --------------------------------------------------------
6 Dummy 0
- --------------------------------------------------------
7 38205 0 5690
- --------------------------------------------------------
8 20690 0 2311
- --------------------------------------------------------
9 P147 0 1416
- --------------------------------------------------------
10 5650EE A1 12501
- --------------------------------------------------------
11 20688 0 2311
- --------------------------------------------------------
12 28876 0 4114
- --------------------------------------------------------
13 38276 0 5690
- --------------------------------------------------------
14 20671 0 2357
- --------------------------------------------------------
15 28875 0 4114
- --------------------------------------------------------
16 Dummy 0
- --------------------------------------------------------
17 42161 0 7139
- --------------------------------------------------------
18 Dummy 0
- --------------------------------------------------------
19 20663 0 2556
- --------------------------------------------------------
20 28877 0 4114
- --------------------------------------------------------
21 20664 0 2556
- --------------------------------------------------------
22 20669 0 2556
- --------------------------------------------------------
23 42167 0 7139
- --------------------------------------------------------
24 Dummy 0
- --------------------------------------------------------
25 20660 0 2556
- --------------------------------------------------------
26 20659 0 2610
- --------------------------------------------------------
27 20658 0 2610
- --------------------------------------------------------
28 5550EE A1 11673
- --------------------------------------------------------
29 38195 0 5690
- --------------------------------------------------------
30 Dummy 0
- --------------------------------------------------------
31 28878 0 4114
- --------------------------------------------------------
32 Dummy 0
- --------------------------------------------------------
33 38232 0 5690
- --------------------------------------------------------
34 P14 0
- --------------------------------------------------------
35 28889 0 4114
- --------------------------------------------------------
36 Dummy 0
- --------------------------------------------------------
37 38213 0 5690
- --------------------------------------------------------
38 Dummy 0
- --------------------------------------------------------
39 28888 0 4114
- --------------------------------------------------------
40 Dummy 0
- --------------------------------------------------------
41 12397 0 2137
- --------------------------------------------------------
42 38229 0 5690
- --------------------------------------------------------
43 28890 0 4114
- --------------------------------------------------------
44 Dummy 0
- --------------------------------------------------------
45 38193 0 5690
- --------------------------------------------------------
46 28891 0 4114
- --------------------------------------------------------
47 Dummy 0
- --------------------------------------------------------
48 28887 0 4114
- --------------------------------------------------------
49 5570EE A1 11766
- --------------------------------------------------------
50 35908 0 5226
- --------------------------------------------------------
51 Dummy 0
- --------------------------------------------------------
52 P158 0 2977
- --------------------------------------------------------
53 5554EE A1 12290
- --------------------------------------------------------
54 35943 0 4716
- --------------------------------------------------------
55 P161 0 2768
- --------------------------------------------------------
56 37774 0 5833
- --------------------------------------------------------
57 P140 0 2601
- --------------------------------------------------------
58 20665 0 2556
- --------------------------------------------------------
59 42164 0 7139
- --------------------------------------------------------
60 20666 0 2556
- --------------------------------------------------------
TOTAL 228048
- --------------------------------------------------------
</TABLE>
<PAGE> 122
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 1
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 49,388 PERCENT OF TOTAL 3.35%
LOADED BY J. SCHLECHT CHECKED BY M. MOORE
DATE LOADED: AUGUST 20, 1992 DATE VERIFIED: OCTOBER 2, 1993
TYPE NORDION
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY POS PENCIL # ACTIVITY
- --- -------- -------- --- -------- --------
<S> <C> <C> <C> <C> <C>
1 13669 1817 19 SPACER 0
2 13722 1817 20 19289 2029
3 13624 1896 21 13082 1983
4 SPACER 0 22 SPACER 0
5 13711 1847 23 13085 1983
6 SPACER 0 24 13084 1983
7 13090 2006 25 SPACER 0
8 13044 1951 26 19298 2029
9 13080 1983 27 19283 2029
10 SPACER 0 28 SPACER 0
11 13668 1817 29 19285 2029
12 13069 2006 30 19279 1951
13 SPACER 0 31 SPACER 0
14 13629 1817 32 19266 1986
15 13079 2006 33 19275 1986
16 SPACER 0 34 SPACER 0
17 13219 2924 35 13688 1825
18 13627 1817 36 19226 1871
</TABLE>
1
<PAGE> 123
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 2
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 191702 PERCENT OF TOTAL 12.99%
LOADED BY JOHN SCHLECHT CHECKED BY M. MOORE
DATE LOADED: OCTOBER 2, 1993
TYPE Nordian/AMERSHAM
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY POS PENCIL # ACTIVITY
- --- -------- -------- --- -------- --------
<S> <C> <C> <C> <C> <C>
1 0920EE 7589 19 19284 1873
2 42014 9612 20 13185 2840
3 38362 7153 21 38623 5916
4 0883EE 7533 22 19221 1728
5 0890EE 7569 23 0905EE 7066
6 13222 2840 24 13720 1685
7 42226 9612 25 38624 5916
8 38622 6294 26 13217 2669
9 0906EE 7567 27 42012 9612
10 13078 2006 28 13213 2453
11 42222 9612 29 0876EE 7053
12 13216 2840 30 13183 2669
13 19228 1838 31 38355 6723
14 42218 9612 32 13186 2669
15 0917EE 7533 33 O851EE 7661
16 13719 1794 34 13187 2669
17 38363 7153 35 0916EE 7050
18 13181 2840 36 13211 2453
</TABLE>
2
<PAGE> 124
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 3
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 189,418 PERCENT OF TOTAL 12.83%
LOADED BY J. SCHLECHT CHECKED BY M. MOORE
DATE LOADED: OCTOBER 2, 1993
TYPE Nordian/Amersham
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY POS PENCIL # ACTIVITY
- --- -------- -------- --- -------- --------
<S> <C> <C> <C> <C> <C>
1 19232 1879 19 13095 1854
2 0914EE 7721 20 38628 5916
3 38370 7153 21 13096 1854
4 19276 1951 22 38627 5916
5 42250 9770 23 19294 1873
6 38625 6294 24 0915EE 7522
7 13221 2840 25 13182 2669
8 0919EE 7804 26 38369 6723
9 19267 1951 27 13218 2669
10 13625 1731 28 0913EE 7546
11 38626 6294 29 13212 2453
12 19264 1951 30 42235 9612
13 0909EE 7836 31 13214 2453
14 19280 1993 32 0901EE 7677
15 13068 1949 33 42249 9770
16 38364 7153 34 42232 9612
17 13092 1972 35 42248 9770
18 0900EE 7441 36 0902EE 7846
</TABLE>
3
<PAGE> 125
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 4
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 49,564 PERCENT OF TOTAL 3.24%
LOADED BY ERIC HESTER CHECKED BY P.O. SHAPIRO
DATE LOADED: OCTOBER 2, 1993
TYPE NPI
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY
- --- -------- --------
<S> <C> <C>
1 N8122 3152
2 N8161 3161
3 N8147 3730
4 N8151 3551
5 N8159 3022
6 N8112 3696
7 N8172 3119
8 N8102 2627
9 N8168 3841
10 N8166 3764
11 N8177 3852
12 N8128 3351
13 N8140 3040
14 N8175 2400
15 N8179 3258
</TABLE>
4
<PAGE> 126
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 5
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 45,328 PERCENT OF TOTAL 2.83%
LOADED BY ERIC HESTER CHECKED BY P.O. SHAPIRO
DATE LOADED: October 2, 1993
TYPE NPI
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY
- --- -------- --------
<S> <C> <C>
1 N8117 3569
2 N8106 3112
3 N8105 3010
4 N8135 2929
5 N8119 2476
6 N8144 2847
7 N8101 3002
8 N3113 2868
9 N8137 2769
10 N8136 3294
11 N8103 3108
12 N8163 2823
13 N8125 3135
14 N8116 3197
15 N8155 3189
</TABLE>
5
<PAGE> 127
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 6
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 180,113 PERCENT OF TOTAL 6.14%
LOADED BY J. SCHLECHT CHECKED BY M. MOORE
DATE LOADED: October 2, 1993
TYPE Nordian/Amersham
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY POS PENCIL # ACTIVITY
- --- -------- -------- --- -------- --------
<S> <C> <C> <C> <C> <C>
1 1642EE 10289 19 13687 1794
2 19222 1838 20 13714 1794
3 13623 1842 21 1643EE 11074
4 42244 9770 22 13622 1842
5 19282 1993 23 13053 1949
6 1627EE 10715 24 1609EE 9176
7 13051 1949 25 13046 1896
8 1626EE 10979 26 19293 1993
9 19299 1993 27 1623EE 11111
10 19219 1838 28 13715 1794
11 19286 1993 29 19273 1951
12 1641EE 10282 30 1631EE 10616
13 13047 1896 31 19270 1951
14 13717 1794 32 42240 9770
15 1659EE 11016 33 19278 1951
16 13052 1949 34 13640 1765
17 13050 1949 35 19281 1993
18 42241 9770 36 1660EE 11838
</TABLE>
6
<PAGE> 128
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 7
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 180,320 PERCENT OF TOTAL 6.06%
LOADED BY J. SCHLECHT CHECKED BY M. MOORE
DATE LOADED: October 2, 1993
TYPE Nordian/Amersham
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY POS PENCIL # ACTIVITY
- --- -------- -------- --- -------- --------
<S> <C> <C> <C> <C> <C>
1 1636EE 10854 19 13705 1765
2 13710 1794 20 19257 1879
3 13628 1765 21 1654EE 10265
4 19243 1879 22 13704 1765
5 42245 9770 23 1664EE 10673
6 13679 1765 24 19252 1879
7 13692 1765 25 0861EE 7450
8 162SEE 10833 26 13702 1765
9 19224 1838 27 1630EE 10209
10 0918EE 7631 28 13077 1949
11 13677 1765 29 13066 1949
12 1657EE 10262 30 1661EE 10734
13 19274 1951 31 13067 1949
14 13073 1949 32 13680 1765
15 42247 9770 33 1658EE 10255
16 13074 1949 34 13693 1765
17 19236 1879 35 29288 1993
15 1667EE 10690 36 1634EE 10202
</TABLE>
7
<PAGE> 129
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 8
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 43,900 PERCENT OF TOTAL 1.98%
LOADED BY J. SCHLECHT CHECKED BY M. MOORE
DATE LOADED: October 2, 1993
TYPE Nordian
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY POS PENCIL # ACTIVITY
- --- -------- -------- --- -------- --------
<S> <C> <C> <C> <C> <C>
1 13056 1864 19 13673 1688
3 13675 1765 20 spacer 0
3 13700 1688 21 13690 1688
4 spacer 0 22 13706 1765
5 13086 1864 23 13672 1689
6 13678 1765 24 spacer 0
7 13686 1688 25 19300 1792
8 spacer 0 26 13684 1765
9 13048 1814 27 13660 1688
17 13721 1765 28 SPACER 0
11 19272 1867 29 13091 1864
12 spacer 0 30 13691 1688
13 19223 1759 31 13665 1764
14 13703 1765 32 SPACER 0
15 13666 1688 33 13674 1764
16 spacer 0 34 SPACER 0
17 13671 1688 35 SPACER 0
15 13701 1765 36 SPACER 0
</TABLE>
8
<PAGE> 130
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 9
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 44,214 PERCENT OF TOTAL 2.32%
LOADED BY J. SCHLECHT CHECKED BY M. MOORE
DATE LOADED: October 2, 1993
TYPE NORDION
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY POS PENCIL # ACTIVITY
- --- -------- -------- --- -------- --------
<S> <C> <C> <C> <C> <C>
1 SPACER 0 19 13636 1765
2 SPACER 0 20 13638 1765
3 SPACER 0 21 SPACER 0
4 13670 1764 22 13626 1765
5 SPACER 0 23 13631 1764
6 13667 1764 24 13683 1765
7 13630 1764 25 SPACER 0
8 13664 1765 26 13633 1764
9 SPACER 0 27 13689 1776
10 13645 1765 28 13685 1776
11 13642 1765 29 SPACER 0
12 13708 1765 30 13698 1777
13 SPACER 0 31 13694 1777
14 13643 1765 32 13695 1777
15 13646 1765 33 SPACER 0
16 19215 1765 34 13696 1777
17 SPACER 0 35 13699 1777
18 13663 1765 36 13639 1777
</TABLE>
9
<PAGE> 131
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 10
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 176,820 PERCENT OF TOTAL 6.20%
LOADED BY J. SCHLECHT CHECKED BY M. MOORE
DATE LOADED: October 2, 1993
TYPE Nordian/Amersham
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY POS PENCIL # ACTIVITY
- --- -------- -------- --- -------- --------
<S> <C> <C> <C> <C> <C>
1 1645EE 10140 19 13076 1962
2 1637EE 10574 20 19253 1892
3 1652EE 10063 21 13093 1986
4 1638EE 10123 22 1651EE 9431
5 0911EE 7667 23 13697 1777
6 19294 1886 24 19254 1892
7 1633EE 10096 25 42261 10287
8 13072 1962 26 13065 1962
9 13716 1806 27 19268 1965
10 13064 1962 28 19251 1892
11 0903EE 7506 29 13061 1962
12 13718 1806 30 1596EE 9025
13 1604EE 9461 31 13049 1909
14 19296 2007 32 13060 1962
15 13058 1962 33 1663EE 10671
16 1646EE 9317 34 19373 2184
17 13075 1962 35 13089 1962
18 13059 1962 36 42231 9837
</TABLE>
10
<PAGE> 132
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 11
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 177,251 PERCENT OF TOTAL 6.24%
LOADED BY J. SCHLECHT CHECKED BY M. MOORE
DATE LOADED: October 2, 1993
TYPE Nordian/Amersham
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY POS PENCIL # ACTIVITY
- --- -------- -------- --- -------- --------
<S> <C> <C> <C> <C> <C>
1 1611EE 9600 19 19372 2169
2 13088 1949 20 19214 1765
3 42237 9770 21 13055 1949
4 19271 1951 22 13661 1796
5 1648EE 10181 23 19255 1879
6 13637 1765 24 0870EE 7473
7 13676 1765 25 19260 1851
8 19297 1993 26 19248 1879
9 13634 1765 27 1649EE 10250
10 13635 1765 28 13071 1949
11 19374 2169 29 13087 1949
12 13057 1949 30 1644EE 9549
13 42238 9770 31 19247 1879
14 13220 2840 32 1619EE 9589
15 1647EE 9975 33 1616EE 9586
16 13215 2657 34 1639EE 10198
17 13662 1765 35 1653EE 10208
18 1640EE 10218 36 0899EE 7486
</TABLE>
11
<PAGE> 133
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 12
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 41,070 PERCENT OF TOTAL 2.37%
LOADED BY J. SCHLECHT CHECKED BY M. MOORE
DATE LOADED: October 2, 1993
TYPE NPI
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY
- --- -------- --------
<S> <C> <C>
1 N8115 2988
2 N8131 2893
3 N8104 2897
4 N8109 2893
5 N8129 2901
6 N8133 3255
7 N8110 2748
8 N8173 2618
9 N8143 2543
10 N8111 2963
11 N8146 3391
12 N8132 2929
13 N8134 3286
14 N8107 2765
</TABLE>
12
<PAGE> 134
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 13
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 47,543 PERCENT OF TOTAL 3.03%
LOADED BY J. SCHLECHT CHECKED BY M. MOORE
DATE LOADED: October 2, 1993
TYPE NPI
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY
- --- -------- --------
<S> <C> <C>
1 N8126 3447
2 N8154 3579
3 N8123 3281
4 N8164 3105
5 N8178 2951
6 N8170 3113
7 N8171 3193
8 N8160 3288
9 N8124 3491
10 N8108 2987
11 N8165 2895
12 N8142 2997
13 N8156 3216
14 N8162 3252
15 N8120 2748
</TABLE>
13
<PAGE> 135
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 14
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 201,561 PERCENT OF TOTAL 13.65%
LOADED BY J. SCHLECHT CHECKED BY M. MOORE
DATE LOADED: October 2, 1993
TYPE Nordian/Amersham
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY POS PENCIL # ACTIVITY
- --- -------- -------- --- -------- --------
<S> <C> <C> <C> <C> <C>
1 0896EE 7689 19 19256 1879
2 42215 9770 20 13070 1949
3 42217 9770 21 38595 6294
4 42221 9770 22 38715 6115
5 42216 9770 23 19234 1879
6 0898EE 7359 24 0904EE 7472
7 19227 1838 25 13062 1949
8 38608 6294 26 38594 6294
9 42220 9770 27 38714 6115
10 38717 6115 28 13681 1765
11 13673 1765 29 13709 1794
12 0912EE 7672 30 38717 6115
13 19245 1865 31 0840EE 7492
14 38718 6115 32 13712 1794
15 38607 6294 33 13063 1949
16 38716 6115 34 38653 6115
17 0943EE 7381 35 42214 9770
18 19277 1986 36 0891EE 7483
</TABLE>
14
<PAGE> 136
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 15
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 205,612 PERCENT OF TOTAL 13.93%
LOADED BY J. SCHLECHT CHECKED BY M. MOORE
DATE LOADED: October 2, 1993
TYPE Nordian/Amersham
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY POS PENCIL # ACTIVITY
- --- -------- -------- --- -------- --------
<S> <C> <C> <C> <C> <C>
1 0944EE 7388 19 13045 1842
2 19242 1879 20 13713 1794
3 19239 1879 21 0877EE 7405
4 42230 9770 22 13621 1896
5 38616 6294 23 38593 6294
6 38620 6294 24 38776 6115
7 19230 1879 25 38619 6294
A 0884EE 7392 26 0908EE 7406
9 19261 1951 27 19269 1951
10 19250 1879 28 42224 9770
11 38780 6115 29 38775 6115
12 0935EE 7437 30 38617 6294
13 38779 6115 31 42225 9770
14 19233 1879 32 0921EE 7407
15 0926EE 7395 33 38774 6115
16 38777 6115 34 42223 9770
17 38621 6294 35 42227 9770
18 19237 1879 36 42129 9770
</TABLE>
15
<PAGE> 137
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
MODULE NUMBER 16
CURIE COUNT AS OF: SEPTEMBER 30, 1993
TOTAL CURIES 43,258 PERCENT OF TOTAL 2.83%
LOADED BY J. SCHLECHT CHECKED BY M. MOORE
DATE LOADED: October 2, 1993
TYPE Nordian/Amersham
<TABLE>
<CAPTION>
POS PENCIL # ACTIVITY
- --- -------- --------
<S> <C> <C>
1 N8149 3716
2 N8130 2866
3 N8127 2826
4 N8167 2552
5 N8174 3509
6 N8113 2819
7 N8153 2882
8 N8114 3173
9 N8148 2929
10 N8138 3269
11 N8150 3009
12 N8141 3346
13 N8121 3186
14 N8118 3176
</TABLE>
16
<PAGE> 138
PROCESS TECHNOLOGY
OF NORTH CAROLINA
COBALT LOAD AS OF
SEPTEMBER 30, 1993
PROCESS TECHNOLOGY SOURCE LOADING
# OF CURIES % OF TOTAL
<TABLE>
<CAPTION>
AS OF 10/93 08/92 10/93 08/92
<S> <C> <C> <C> <C> <C>
MODULE # 1 49,388 57,550 2.64% 3.35%
MODULE # 2 191,702 223,390 10.25% 12.99%
MODULE # 3 189,418 220,731 10.13% 12.83%
MODULE # 4 49,564 55,766 2.65% 3.24%
MODULE # 5 45,328 48,759 2.32% 2.83%
MODULE # 6 180,113 105,653 9.63% 6.14%
MODULE # 7 180,320 104,256 9.64% 6.06%
MODULE # 8 43,900 34,126 2.35% 1.98%
M0DULE # 9 44,214 39,901 2.36% 2.32%
MODULE # 10 176,820 106,637 9.45% 6.20%
MODULE # 11 177,251 107,347 9.48% 6.24%
MODULE # 12 41,070 40,800 2.33% 2.37%
MODULE # 13 47,543 52,178 2.54% 3.03%
MODULE # 14 201,561 234,883 10.77% 13.65%
MODULE # 15 205,612 239,607 10.99% 13.93%
MODULE # 16 43,258 48,596 2.47% 2.83%
TOTAL 1,867,062 1,720,180 100.00% 100.00%
</TABLE>
<PAGE> 139
PROCESS TECHNOLOGY OF NORTH CAROLINA
Cobalt Inventory
as of 11-Apr-95
<TABLE>
<CAPTION>
Source
Type Manufacturer Location Quantity Activity
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cobalt 60 Amersham Main Pool 77 562,377 curies
Cobalt 60 Nordian Main Pool 286 778,507 curies
Cobalt 60 NPI Main Pool 73 188,351 curies
Cobalt 60 NPI 14" U-1 190 27,427 curies
Cobalt 60 NPI 1" dia. U-1 3 5,095 curies
curies
======================================================================================
</TABLE>
Total Main Pool 1,529,235 curies
Total U-1 34,840 curies
Grand Total 1,564,075 curies
Completed by: /s/ W. MOORE Date: 04/11/95
-----------------------
<PAGE> 140
New NPI Sources for Haw River. Ci content as of 2/1/96.
N9601 - 12,170
N9602 - 12,550
N9603 - 11,450
N9604 - 12,000
N9605 - 11,030
N9606 - 12,870
N9607 - 12,290
N9608 - 11,820
N9609 - 12,090
N9610 - 12,670
Total - 120,940 Ci
<PAGE> 141
Exhibit 9.7
Rockaway Lease
