<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Sterigenics International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
STERIGENICS INTERNATIONAL, INC.
4020 CLIPPER COURT
FREMONT, CALIFORNIA 94538
July 1, 1998
TO THE STOCKHOLDERS OF STERIGENICS INTERNATIONAL, INC.
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of SteriGenics International, Inc. (the "Company"), which will be
held at the Four Points Sheraton Hotel, 5121 Hopyard Road, Pleasanton,
California, on Wednesday, August 5, 1998, at 9:00 a.m.
Details of the business to be conducted at the Annual Meeting are
given in the attached Proxy Statement and Notice of Annual Meeting of
Stockholders.
It is important that your shares be represented and voted at the
meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. Returning the proxy does NOT deprive you of your right to
attend the Annual Meeting. If you decide to attend the Annual Meeting and wish
to change your proxy vote, you may do so automatically by voting in person at
the meeting.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the Company. We look
forward to seeing you at the Annual Meeting.
Sincerely,
/s/ CHARLES W. KING, JR.
Charles W. King, Jr.
Chairman of the Board
<PAGE> 3
STERIGENICS INTERNATIONAL, INC.
4020 CLIPPER COURT
FREMONT, CALIFORNIA 94538
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 5, 1998
The Annual Meeting of Stockholders (the "Annual Meeting") of
SteriGenics International, Inc. (the "Company") will be held at the Four Points
Sheraton Hotel, 5121 Hopyard Road, Pleasanton, California, on Wednesday, August
5, 1998, at 9:00 a.m. for the following purposes:
1. To elect four directors of the Board of Directors to serve until
the next Annual Meeting or until their successors have been duly elected and
qualified;
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending March 31, 1999; and
3. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the
attached Proxy Statement.
Only stockholders of record at the close of business on June 22, 1998
are entitled to notice of, and to vote at, the Annual Meeting and at any
adjournments or postponements thereof. A list of such stockholders will be
available for inspection at the Company's headquarters located at 4020 Clipper
Court, Fremont, California, during ordinary business hours for the ten day
period prior to the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Carla S. Newell
Carla S. Newell
Secretary
Fremont, California
July 1, 1998
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING. IF
YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU
MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.
<PAGE> 4
STERIGENICS INTERNATIONAL, INC.
4020 CLIPPER COURT
FREMONT, CALIFORNIA 94538
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 5, 1998
These proxy materials are furnished in connection with the
solicitation of proxies by the Board of Directors of SteriGenics International,
Inc., a Delaware corporation (the "Company"), for the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Four Points Sheraton
Hotel, 5121 Hopyard Road, Pleasanton, California, on Wednesday, August 5, 1998,
at 9:00 a.m., and at any adjournment or postponement of the Annual Meeting.
These proxy materials were first mailed to stockholders on or about July 1,
1998.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
The Company's Common Stock is the only type of security entitled to
vote at the Annual Meeting. On June 22, 1998, the record date for determination
of stockholders entitled to vote at the Annual Meeting, there were 7,721,846
shares of Common Stock outstanding. Each stockholder of record on June 22, 1998
is entitled to one vote for each share of Common Stock held by such stockholder
on June 22, 1998. Shares of Common Stock may not be voted cumulatively. All
votes will be tabulated by the inspector of election appointed for the Annual
Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes.
QUORUM REQUIRED
The Company's bylaws provide that the holders of a majority of the
Company's Common Stock issued and outstanding and entitled to vote at the Annual
Meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at the Annual Meeting. Abstentions and broker
non-votes will be counted as present for the purpose of determining the presence
of a quorum.
VOTES REQUIRED
PROPOSAL 1. Directors are elected by a plurality of the affirmative
votes cast by those shares present in person, or represented by proxy, and
entitled to vote at the Annual Meeting. The four nominees for director receiving
the highest number of affirmative votes will be elected. Abstentions and broker
non-votes will not be counted toward a nominee's total. Stockholders may not
cumulate votes in the election of directors.
PROPOSAL 2. Ratification of the appointment of Ernst & Young LLP as
the Company's independent public accountants for the fiscal year ending March
31, 1999 requires the affirmative vote of a majority of those shares present in
person, or represented by proxy, and cast either affirmatively or negatively at
the Annual Meeting. Abstentions and broker non-votes will not be counted as
having been voted on the proposal.
PROXIES
Whether or not you are able to attend the Company's Annual Meeting,
you are urged to complete and return the enclosed proxy, which is solicited by
the Company's Board of Directors and which will be voted as you direct on your
proxy when properly completed. In the event no directions are specified, such
proxies will be voted
<PAGE> 5
FOR the Nominees of the Board of Directors (as set forth in Proposal No. 1), FOR
Proposal No. 2 and in the discretion of the proxy holders as to other matters
that may properly come before the Annual Meeting. You may also revoke or change
your proxy at any time before the Annual Meeting. To do this, send a written
notice of revocation or another signed proxy with a later date to the Secretary
of the Company at the Company's principal executive offices before the beginning
of the Annual Meeting. You may also automatically revoke your proxy by attending
the Annual Meeting and voting in person. All shares represented by a valid proxy
received prior to the Annual Meeting will be voted.
SOLICITATION OF PROXIES
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing, and mailing of this Proxy Statement, the proxy,
and any additional soliciting material furnished to stockholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs of
forwarding the solicitation material to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by solicitation by
telephone, telegram, or other means by directors, officers, employees or agents
of the Company. No additional compensation will be paid to these individuals for
any such services. Except as described above, the Company does not presently
intend to solicit proxies other than by mail.
2
<PAGE> 6
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The persons who are being nominated for election to the Board of
Directors (the "Nominees"), their ages as of June 22, 1998, their positions and
offices held with the Company and certain biographical information are set forth
below. The proxy holders intend to vote all proxies received by them in the
accompanying form FOR the Nominees listed below unless otherwise instructed. In
the event any Nominee is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for any nominee who may be
designated by the present Board of Directors to fill the vacancy. As of the date
of this Proxy Statement, the Board of Directors is not aware of any Nominee who
is unable or will decline to serve as a director. The four Nominees receiving
the highest number of affirmative votes of the shares entitled to vote at the
Annual Meeting will be elected directors of the Company to serve until the next
Annual Meeting or until their successors have been duly elected and qualified.
<TABLE>
<CAPTION>
NOMINEES AGE POSITIONS AND OFFICES HELD WITH THE COMPANY
- ------------------------------ --- -----------------------------------------------
<S> <C> <C>
James F. Clouser 47 President, Chief Executive Officer and Director
Charles W. King, Jr. 62 Chairman of the Board
Frederick J. Ruegsegger 42
James R. Yarter 61 Director
</TABLE>
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 in Accounting from Rochester
Institute of Technology.
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.
Frederick J. Ruegsegger has been the Senior Vice President, Finance
and Corporate Development and Chief Financial Officer of AXYS Pharmaceuticals,
Inc. since January 1998. Prior to that he served as Vice President, Finance and
Administration and Chief Financial Officer of Arris Pharmaceutical Corporation
from December 1996 until January 1998. From 1993 to 1996, he was President and
Chief Executive Officer of EyeSys Technologies, Inc., a medical instrument and
software company. Mr. Ruegsegger received a B.S. degree in Economics from the
University of Illinois and a Master of Management from Northwestern University's
Kellogg Graduate School of Management.
James R. Yarter became a director of the Company in January 1998. Mr.
Yarter has been a consultant to medical device manufacturers since April 1996.
From October 1995 to April 1996, Mr. Yarter served as President and Chief
Executive Officer of U.S. Medical, a medical device company. From February 1994
to October 1995, Mr. Yarter was President and Chief Executive Officer of BLOCK
Medical, a medical device company. Mr. Yarter provided private consulting
services to medical device manufacturers from 1990 to February 1994. Previously,
Mr. Yarter served as a corporate officer at C.R. Bard, a medical equipment and
supplies manufacturer.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended March 31, 1998, the Board of Directors
held ten meetings and acted by written consent on two occasions. For such fiscal
year, each of the directors during the term of their tenure attended or
participated in at least 75% of the aggregate of (i) the total number of
meetings or actions by written consent of the Board of Directors and (ii) the
total number of meetings held by all Committees of the Board of Directors on
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<PAGE> 7
which each such director served. The Board of Directors has two standing
committees: the Audit Committee and the Compensation Committee.
During the fiscal year ended March 31, 1998, the Audit Committee of
the Board of Directors held two meetings. The Audit Committee reviews, acts on
and reports to the Board of Directors with respect to various auditing and
accounting matters, including the selection of the Company's accountants, the
scope of the annual audits, fees to be paid to the Company's accountants, the
performance of the Company's accountants and the accounting practices of the
Company. The members of the Audit Committee during the fiscal year ended March
31, 1998 were Walter G. Kortschak and Thomas F. Stephenson. The members of the
Audit Committee for the fiscal year ended March 31, 1999 will be James R. Yarter
and Frederick J. Ruegsegger.
During the fiscal year ended March 31, 1998, the Compensation
Committee of the Board of Directors held two meetings. The Compensation
Committee reviews the performance of the executive officers of the Company and
reviews the compensation programs for other key employees, including salary and
cash bonus levels and option grants under the 1997 Equity Incentive Plan. The
Compensation Committee also administers the Company's stock option plans and
Employee Stock Purchase Plan. The members of the Compensation Committee during
the fiscal year ended March 31, 1998 were Walter G. Kortschak and Thomas F.
Stephenson. The members of the Compensation Committee for the fiscal year ended
March 31, 1999 will be James R. Yarter and Frederick J. Ruegsegger.
DIRECTOR COMPENSATION
James R. Yarter, a director since January 1998, receives $2,000 per
Board meeting with no additional compensation for designated committee meetings,
assuming such meetings will occur at the time of regularly scheduled Board
meetings. Mr. Ruegsegger will receive the same compensation as Mr. Yarter. The
remaining 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.
Non-employee Board members are eligible for option grants pursuant to
the provisions of the Automatic Option Grant Program under the Company's 1997
Equity Incentive Plan. Under the Automatic Option Grant Program, each individual
who first becomes a non-employee Board member after the date of the Company's
initial public offering will be granted an option to purchase 15,000 shares of
the Company's Common Stock on the date such individual joins the Board ("Initial
Grant"). In addition, at each Annual Meeting of Stockholders, each individual
who will continue to serve as a member of the Board after such meeting will
receive an additional option to purchase 3,000 shares of Common Stock ("Annual
Grant"). However, a director will not receive an Annual Grant in the same
calendar year that he received an Initial Grant. The exercise price for each
option granted under the Automatic Option Grant Program will be equal to the
fair market value per share of the Common Stock on the automatic grant date.
Each Initial Grant will become vested and exercisable with respect to 24% of the
option shares on the first anniversary of the date of grant and with respect to
an additional 2% of the option shares upon the completion of each month of
service thereafter, until the option is fully vested and exercisable 50 months
after the date of grant. Each Annual Grant will become fully vested and
exercisable on the first anniversary of the date of grant. Pursuant to the
Automatic Option Grant Program, Mr. Yarter was granted an option to purchase
15,000 shares of Common Stock in January 1998 at an exercise price of $20.375
per share. Pursuant to the Automatic Option Grant Program, Mr. King will be
granted an option to purchase 3,000 shares of Common Stock on August 5, 1998 and
Mr. Ruegsegger will be granted an option to purchase 15,000 shares of Common
Stock on August 5, 1998.
Directors who are also employees of the Company are eligible to
receive options and be issued shares of Common Stock directly under the 1997
Equity Incentive Plan and are also eligible to participate in the Company's
Employee Stock Purchase Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED
HEREIN.
4
<PAGE> 8
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 31, 1998, certain information
with respect to shares beneficially owned by (i) each person who is known by the
Company to be the beneficial owner of more than five percent of the Company's
outstanding shares of Common Stock, (ii) each of the Company's directors and the
executive officers named in the Summary Compensation Table and (iii) all current
directors and executive officers as a group. Beneficial ownership has been
determined in accordance with Rule 13d-3 under the Securities Exchange Act of
1934. Under this rule, certain shares may be deemed to be beneficially owned by
more than one person (if, for example, persons share the power to vote or the
power to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire shares
(for example, upon exercise of an option or warrant) within sixty (60) days of
the date as of which the information is provided; in computing the percentage
ownership of any person, the amount of shares is deemed to include the amount of
shares beneficially owned by such person (and only such person) by reason of
such acquisition rights. As a result, the percentage of outstanding shares of
any person as shown in the following table does not necessarily reflect the
person's actual voting power at any particular date.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
AS OF MAY 31, 1998(1)(2)
----------------------------------------------
BENEFICIAL OWNER NUMBER OF SHARES PERCENTAGE OF CLASS
- ---------------- ---------------- -------------------
<S> <C> <C>
Charles W. King, III Trust
c/o King Asset Management Corporation ....... 681,600 8.9%
1999 South Bascom Avenue, Ste. 925
Campbell, CA 95008
Michael J. King Trust
c/o King Asset Management Corporation ....... 681,600 8.9%
1999 South Bascom Avenue, Ste. 925
Campbell, CA 95008 ..........................
Patricia Morley King Trust
c/o King Asset Management Corporation ....... 681,600 8.9%
1999 South Bascom Avenue, Ste. 925
Campbell, CA 95008 ..........................
Charles W. King, Jr. Revocable Trust
c/o King Asset Management Corporation ....... 431,462 5.6%
1999 South Bascom Avenue, Ste. 925
Campbell, CA 95008 ..........................
James F. Clouser(3) ........................... 247,181 3.1%
Donald A. Currie(4) ........................... 14,968 *
Eric W. Beers(5) .............................. 20,980 *
Eugene C. Davis(6) ............................ 13,429 *
David E. Meyer(7) ............................. 32,270 *
Charles W. King, Jr.(8) ....................... 431,462 5.6%
Walter G. Kortschak(9) ........................ 51,630 *
Thomas F. Stephenson(10) ...................... 68,315 *
James R. Yarter ............................... -- --
All current directors and executive officers as
a group (10 persons)(11) ...................... 897,408 11.2%
</TABLE>
- -----------------------
* Less than 1% of the outstanding shares of Common Stock.
(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 May 31,
1998 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing percentage ownership of each
other person. Except as indicated in the footnotes to this
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<PAGE> 9
table and pursuant to applicable community property laws, the persons
named in the table have sole voting and investment power with respect to
all shares of Common Stock. To the Company's knowledge, the entities
named in the table have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them.
(2) Percentage ownership is based on 7,693,846 shares of Common Stock
outstanding on May 31, 1998.
(3) Includes 244,535 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of May 31,
1998.
(4) Includes 14,290 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of May 31,
1998.
(5) Includes 18,200 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of May 31,
1998.
(6) Includes 12,700 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of May 31,
1998.
(7) Includes 29,250 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of May 31,
1998.
(8) 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.
(9) Includes 50,962 and 668 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.
(10) Includes 64,216 and 4,099 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.
(11) Includes 334,769 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of May 31,
1998.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Company's Board of Directors (the
"Committee") has the exclusive authority to establish the level of base salary
payable to the Chief Executive Officer ("CEO") and the other executive officers
of the Company and has the responsibility of approving the individual bonus
programs to be in effect for the CEO and the other executive officers each
fiscal year. In addition, the Committee administers the Company's 1997 Equity
Incentive Plan under which option grants may be made to the CEO and the other
executive officers and the Company's Employee Stock Purchase Plan under which
the employees of the Company, including the CEO and the other executive
officers, may purchase shares of the Company's Common Stock.
For the fiscal year ended March 31, 1998, the process utilized by the
Committee in determining executive officer compensation levels was based on the
subjective judgment of the Committee. Among the factors considered by the
Committee were the recommendations of the CEO with respect to the compensation
of the Company's executive officers. However, the Committee made the final
compensation decisions concerning such officers.
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<PAGE> 10
GENERAL COMPENSATION POLICY. The Committee's fundamental policy is to
offer the Company's executive officers competitive compensation opportunities
based upon the financial performance of the Company, each officer's individual
contribution to the financial success of the Company and personal performance
and market conditions. It is the Committee's objective to have a significant
portion of each officer's compensation contingent upon the Company's
performance, as well as upon his or her own level of performance. Accordingly,
each executive officer's compensation package consists of: (i) base salary, (ii)
cash bonus awards and (iii) long-term stock-based incentive awards.
BASE SALARY. The base salary for each executive officer is set on the
basis of personal performance and the average salary levels in effect for
comparable positions with companies having total revenues similar to the
Company's. Each individual's base pay is positioned relative to the total
compensation package, including cash bonus incentives and long-term stock-based
incentives.
ANNUAL CASH BONUSES. Each executive officer has an established cash
bonus target. The annual pool of bonuses for executive officers is determined on
the basis of personal objectives established for each executive as well as the
Company's achievement of the financial performance targets established at the
start of the fiscal year. Actual bonuses paid reflect an individual's
accomplishment of both functional and corporate objectives.
LONG-TERM INCENTIVE COMPENSATION. During the fiscal year ended March
31, 1998, the Committee, in its discretion, made option grants to the CEO and
the other Named Officers, Messrs. Clouser, Beers, Davis, Meyer and Currie, under
the 1997 Equity Incentive Plan as a bonus for their personal contributions
towards the Company's successful initial public offering of its Common Stock.
Option grants are generally made at varying times and in varying amounts in the
discretion of the Committee. Typically, the size of each grant is set at a level
that the Committee deems appropriate to create a meaningful opportunity for
stock ownership based upon the individual's position with the Company, the
individual's potential for future responsibility and promotion, the individual's
performance in the recent period and the number of unvested options held by the
individual at the time of the new grant. The relative weight given to each of
these factors will vary from individual to individual at the Committee's
discretion.
Each grant allows the officer to acquire shares of the Company's
Common Stock at a fixed price per share (the market price on the grant date)
over a specified period of time. Each option vests as to 24% of the option
shares upon the completion of 12 months of service and as to 2% of the option
shares upon the completion of each month of service thereafter. Thus, the
vesting of each option is contingent upon the executive officer's continued
employment with the Company. Accordingly, the option will provide a return to
the executive officer only if he or she remains in the Company's employ, and
then only if the market price of the Company's Common Stock appreciates over the
option term.
CEO COMPENSATION. The annual base salary for Mr. Clouser, the
Company's President and CEO, was established by the Board prior to the Company's
initial public offering. The Committee's decision was made primarily on the
basis of Mr. Clouser's personal performance of his duties. The option for
125,000 shares of the Company's Common Stock was granted to Mr. Clouser as a
result of his significant contributions during the fiscal year ended March 31,
1998, including leading the Company's initial public offering of its securities.
The option grant made to the CEO during the fiscal year ended March 31, 1998 was
also intended to reflect his years of service with the Company and to place a
significant portion of his total compensation at risk, because the options will
have no value unless there is appreciation in the value of the Company's Common
Stock over the option term.
The remaining components of the CEO's fiscal year incentive
compensation were dependent upon the Company's financial performance as well as
personal objectives and provided no dollar guarantees. The bonus paid to the CEO
for the fiscal year was based on the same incentive plan for all other executive
officers. Each year, the annual incentive plan is reevaluated with a new
achievement threshold and new targets for revenue and profit.
TAX LIMITATION. Under the Federal tax laws, a publicly-held company
such as the Company will not be allowed a federal income tax deduction for
compensation paid to certain executive officers to the extent that compensation
exceeds $1 million per officer in any year. To qualify for an exemption from the
$1 million deduction limitation, the stockholders were asked to approve a
limitation under the Company's 1997 Equity
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<PAGE> 11
Incentive Plan on the maximum number of shares of Common Stock for which any one
participant may be granted stock options per calendar year. Because this
limitation was adopted, any compensation deemed paid to an executive officer
when he exercises an outstanding option under the 1997 Equity Incentive Plan
with an exercise price equal to the fair market value of the option shares on
the grant date will qualify as performance-based compensation that will not be
subject to the $1 million limitation. Since it is not expected that the cash
compensation to be paid to the Company's executive officers for the fiscal year
ended March 31, 1998 will exceed the $1 million limit per officer, the Committee
will defer any decision on whether to limit the dollar amount of all other
compensation payable to the Company's executive officers to the $1 million cap.
Compensation Committee
Walter G. Kortschak
Thomas F. Stephenson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors was formed in
June 1997, and the members of the Compensation Committee during the fiscal year
ended March 31, 1998 were Messrs. Walter G. Kortschak and Thomas F. Stephenson.
Neither of these individuals was at any time during the fiscal year ended March
31, 1998, or at any other time, 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.
STOCK PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder
return on the Company's Common Stock between August 14, 1997 (the date the
Company's Common Stock commenced public trading) and March 31, 1998, with the
cumulative total return of (i) the CRSP Total Return Index for the Nasdaq Stock
Market (U.S. Companies) (the "Nasdaq Stock Market-U.S. Index") and (ii) the S&P
Major Market Index (the "S&P Market Index"), over the same period. This graph
assumes the investment of $100.00 on August 14, 1997 in the Company's Common
Stock, the Nasdaq Stock Market-U.S. Index and the S&P Market Index, and assumes
the reinvestment of dividends, if any.
The comparisons shown in the graph below are based upon historical
data. The Company cautions that the stock price performance shown in the graph
below is not indicative of, nor intended to forecast, the potential future
performance of the Company's Common Stock. Information used in the graph was
obtained from Standard & Poor's Compustat Total Return Service, a source
believed to be reliable, but the Company is not responsible for any errors or
omissions in such information.
8
<PAGE> 12
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG STERIGENICS INTERNATIONAL, INC.,
THE NASDAQ STOCK MARKET-U.S. INDEX AND THE S&P MAJOR MARKET INDEX
TOTAL SHAREHOLDER RETURN
<TABLE>
<CAPTION>
INDEXED RETURNS
BASE YEARS ENDING
PERIOD
COMPANY / INDEX 13-AUG-97 MAR98
- ------------------------------------------------------------------
<S> <C> <C>
STERIGENICS INT'L. INC 100 183
S&P 500 INDEX 100 120
NASDAQ 100 116
</TABLE>
The Company effected its initial public offering of Common Stock on
August 13, 1997 at a price of $12.00 per share. The graph above, however,
commences with the closing price of $12.875 per share on August 14, 1997 - the
date the Company's Common Stock commenced public trading.
Notwithstanding anything to the contrary set forth in any of the
Company's previous or future filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, that might
incorporate this Proxy Statement or future filings made by the Company under
those statutes, the Compensation Committee Report and Stock Performance Graph
shall not be deemed filed with the Securities and Exchange Commission and shall
not be deemed incorporated by reference into any of those prior filings or into
any future filings made by the Company under those statutes.
9
<PAGE> 13
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following Summary Compensation Table sets forth information
concerning cash and non-cash compensation earned during the fiscal year ended
March 31, 1998 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 $100,000 during such year
(collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
NUMBER OF
SECURITIES
ANNUAL COMPENSATION UNDERLYING
---------------------------------------- ----------
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTIONS (#)
--------------------------- ---- -------- -------- -------
<S> <C> <C> <C> <C>
James F. Clouser 1998 $203,890 $ 89,834 125,000
President, Chief Executive Officer 1997 179,667 89,834 --
and Director
Eric W. Beers 1998 114,467 43,163 17,500
Senior Vice President 1997 95,918 43,163 5,000
of Engineering
Eugene C. Davis 1998 106,070 39,642 7,500
Vice President of Operations, 1997 99,105 39,642 5,000
Western Region
David E. Meyer 1998 111,654 48,055 15,000
President of Medical Products 1997 96,088 48,044 5,000
Division
Donald A. Currie 1998 97,712 17,006 12,500
Vice President of Operations, 1997 84,832 16,964 2,000
Eastern Region
</TABLE>
- ----------
(1) Salary includes amounts deferred under the Company's 401(k) Plan.
10
<PAGE> 14
STOCK OPTIONS GRANTED IN FISCAL 1998
The following table provides information concerning grants of options
to purchase the Company's Common Stock made during the fiscal year ended March
31, 1998 to the Named Officers. No stock appreciation rights were granted during
such fiscal year to the Named Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR 1998
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES PRICE EXPIRATION -------------------------
NAME GRANTED(#) IN FISCAL 1998 PER SHARE($)(3) DATE 5%($) 10%($)
---- ---------- -------------- --------------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
James F. Clouser .......... 125,000 27.9% $ 10.80 7/9/07 $ 849,008 $2,151,552
Eric W. Beers ............. 17,500 3.9 10.80 7/9/07 118,861 301,217
Eugene C. Davis ........... 7,500 1.7 10.80 7/9/07 50,940 129,093
David E. Meyer ............ 15,000 3.4 10.80 7/9/07 101,881 258,186
Donald A. Currie .......... 12,500 2.8 10.80 7/9/07 84,901 215,155
</TABLE>
- ----------
(1) The Company granted options to purchase 447,000 shares of Common Stock
during the fiscal year ended March 31, 1998. The plan administrator has the
discretionary authority to reprice the options through the cancellation of
those options and the grant of replacement options with an exercise price
based on the fair market value of the option shares on the regrant date.
The options have a maximum term of 10 years measured from the option grant
date, subject to earlier termination in the event of the optionee's
cessation of service with the Company. The plan administrator has the
discretion to accelerate the vesting of options upon a change in control.
(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 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.
(3) 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, in shares of the Company's Common Stock
valued at fair market value on the exercise date or a broker-assisted
cashless exercise procedure. The options vest with respect to 24% of the
option shares upon the completion of one year of service after the option
grant date and with respect to 2% of the option shares upon completion of
each month of service thereafter for the next 38 months.
11
<PAGE> 15
OPTION EXERCISES AND FISCAL 1998 YEAR-END VALUES
The following table provides the specified information concerning
options exercised during the fiscal year ended March 31, 1998 and unexercised
options held as of March 31, 1998 by the Named Officers:
AGGREGATED OPTION EXERCISES IN FISCAL 1998
AND FISCAL 1998 YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF
VALUE REALIZED SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES (MARKET PRICE AT UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON EXERCISE LESS AT FY-END (#) AT FY-END ($)(1)
----------------------------- -----------------------------
NAME EXERCISE (#) EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James F. Clouser.... 75,000 $ 900,000 218,911 131,089 $3,722,907 $1,504,122
Eric W. Beers....... -- -- 14,200 25,800 242,820 337,930
Eugene C. Davis..... -- -- 12,300 15,200 210,330 215,670
David E Meyer....... 2,000 23,000 24,450 21,050 416,545 271,455
Donald A. Currie.... -- -- 12,190 15,310 207,699 188,051
</TABLE>
(1) Based on the fair market value of the Company's Common Stock per share at
March 31, 1998 ($22.00) less the exercise price per share payable for
such shares.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
None of the Company's executive officers have employment or severance
agreements with the Company, and their employment may be terminated at any time
at the discretion of the Board of Directors.
The Compensation Committee has the authority under the 1997 Equity
Incentive Plan to accelerate the exercisability of outstanding options, or to
accelerate the vesting of the shares of Common Stock subject to outstanding
options, held by all optionees, including the Chief Executive Officer and the
other Named Officers, in the event of a change in control.
12
<PAGE> 16
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Company is asking the stockholders to ratify the appointment of
Ernst and Young LLP as the Company's independent public accountants for the
fiscal year ending March 31, 1999. The affirmative vote of the holders of a
majority of shares present or represented by proxy and voting at the Annual
Meeting will be required to ratify the appointment of Ernst and Young LLP.
In the event the stockholders fail to ratify the appointment, the
Board of Directors will reconsider its selection. Even if the appointment is
ratified, the Board of Directors, in its discretion, may direct the appointment
of a different independent accounting firm at any time during the year if the
Board of Directors feels that such a change would be in the Company's and its
stockholders' best interests.
Ernst and Young LLP has audited the Company's financial statements
since fiscal year 1991. Its representatives are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
THE SELECTION OF ERNST AND YOUNG LLP TO SERVE AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING MARCH 31, 1999.
CERTAIN RELATIONSHIPS AND RELATED 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 approximately $21,000 per month. Lease
payments were $219,000 in each of the fiscal years ended March 31, 1996 and
1997, and $227,000 in fiscal year ended March 31, 1998.
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 approximately $13,900 per month. Lease
payments were $253,000 in each of the fiscal years ended March 31, 1996 and
1997, and $180,000 in fiscal year ended March 31, 1998.
Through June 29, 1997 and February 28, 1998, Charles W. King, Jr.
guaranteed bank letters of credit related to IRBs issued by the Company for
approximately $31.5 million and $5.3 million, respectively, for several of the
Company's facilities. Mr. King received no consideration for the guarantee of
these IRBs.
The Company used $1.5 million of the net proceeds of the Company's
initial public offering to redeem 15,000 shares of Series A Preferred Stock. The
Charles W. King, Jr. Revocable Trust, of which Mr. King is the trustee and
beneficiary, was the sole holder of the Series A Preferred Stock.
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.
13
<PAGE> 17
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The members of the Board of Directors, the executive officers of the
Company and persons who hold more than 10% of the Company's outstanding Common
Stock are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended, which require them to file reports
with respect to their ownership of the Company's Common Stock and their
transactions in such Common Stock. Based upon (i) the copies of Section 16(a)
reports that the Company received from such persons for their transactions in
the Common Stock and their Common Stock holdings during the fiscal year ended
March 31, 1998 and (ii) the written representations received from one or more of
such persons that no annual Form 5 reports were required to be filed by them for
the fiscal year ended March 31, 1998, the Company believes that all reporting
requirements under Section 16(a) for such fiscal year were met in a timely
manner by its executive officers, Board members and greater than ten-percent
stockholders, except that the following individuals filed a Form 3 that was late
by one day: Charles W. King, James F. Clouser, David E. Meyer, Edward M. Miller,
Jr., Lisa C. Foster, Eugene C. Davis, Donald A. Currie, Eric W. Beers, Thomas F.
Stephenson, Walter G. Kortschak, Summit Investors II, L.P. and Summit Investors
III, L.P.; and Thomas F. Stephenson filed one Form 4 late, reporting one
transaction.
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF
THE COMPANY'S FORM 10-K REPORT FOR FISCAL YEAR ENDED MARCH 31, 1998, INCLUDING
THE FINANCIAL STATEMENTS, SCHEDULE AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT
TO STERIGENICS INTERNATIONAL, INC., 4020 CLIPPER COURT, FREMONT, CALIFORNIA
94538, ATTN: INVESTOR RELATIONS.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 1999
Annual Meeting that are eligible for inclusion in the Company's proxy statement
and related proxy materials for that meeting under the applicable rules of the
Securities and Exchange Commission must be received by the Company not later
than April 6, 1999, in order to be included. Such stockholder proposals should
be addressed to SteriGenics International, Inc., 4020 Clipper Court, Fremont,
California 94538, Attn: Director of Finance.
OTHER MATTERS
The Board knows of no other matters to be presented for stockholder
action at the Annual Meeting. However, if other matters do properly come before
the Annual Meeting or any adjournments or postponements thereof, the Board
intends that the persons named in the proxies will vote upon such matters in
accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
OF STERIGENICS INTERNATIONAL, INC.
Fremont, California
July 1, 1998
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING. IF
YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU
MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.
THANK YOU FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING.
- --------------------------------------------------------------------------------
14
<PAGE> 18
PROXY STERIGENICS INTERNATIONAL, INC. PROXY
4020 CLIPPER COURT, FREMONT, CA 94538
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF STERIGENICS
INTERNATIONAL, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AUGUST 5, 1998
The undersigned holder of Common Stock, par value $0.001, of SteriGenics
International, Inc. (the "Company") hereby appoints James F. Clouser and
Carole-Lynn S. Glass, or either of them, proxies for the undersigned, each with
full power of substitution, to represent and to vote as specified in this Proxy
all Common Stock of the Company that the undersigned stockholder would be
entitled to vote if personally present at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held on Wednesday, August 5th, 1998 at 9:00 a.m.
local time, at the Four Points Sheraton Hotel, 5121 Hopyard Road, Pleasanton,
California, and at any adjournments or postponements of the Annual Meeting. The
undersigned stockholder hereby revokes any proxy or proxies heretofore executed
for such matters.
This proxy, when properly executed, will be voted in the manner as directed
herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE DIRECTORS AND FOR PROPOSAL 2, AND IN ACCORDANCE
WITH THE DETERMINATION OF THE BOARD OF DIRECTORS AS TO ANY OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE MEETING. THE UNDERSIGNED STOCKHOLDER MAY REVOKE
THIS PROXY AT ANY TIME BEFORE IT IS VOTED BY DELIVERING TO THE CORPORATE
SECRETARY OF THE COMPANY EITHER A WRITTEN REVOCATION OF THE PROXY OR A DULY
EXECUTED PROXY BEARING A LATER DATE, OR BY APPEARING AT THE ANNUAL MEETING AND
VOTING IN PERSON.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE DIRECTORS
AND "FOR" PROPOSAL 2. TO VOTE AT THE ANNUAL MEETING IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF STERIGENICS INTERNATIONAL, INC.,
YOU MAY SIGN AND DATE THE REVERSE SIDE OF THIS CARD WITHOUT CHECKING ANY BOX.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
RETURN ENVELOPE. IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN
ALL CARDS IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side)
<PAGE> 19
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
1. To elect the following directors to serve for a term ending upon the 1999
Annual Meeting of Stockholders or until their successors are elected and
qualified: Nominees: James F. Clouser, Charles W. King, Jr., Frederick J.
Ruegsegger and James R. Yarter
[ ] FOR [ ] WITHHELD [ ] FOR all nominees, except for nominees
written below.
-----------------------------------------------------------------------------
NOMINEE EXCEPTION(S).
2. To ratify the appointment of Ernst and Young LLP as the Company's independent
accountants for the fiscal year ending March 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
The undersigned acknowledges receipt of the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement.
Date:
-------------------------------, 1998
Signature:
-------------------------------
Signature (if held jointly):
-------------------------------
Please date and sign exactly as
your name(s) is (are) shown on
the share certificate(s) to
which the Proxy applies. When
shares are held as
joint-tenants, both should
sign. When signing as an
executor, administrator,
trustee, guardian, attorney-in
fact or other fiduciary, please
give full title as such. When
signing as a corporation,
please sign in full corporate
name by President or other
authorized officer. When
signing as a partnership,
please sign in partnership name
by an authorized person.
