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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-12488
ISOMEDIX INC.
(Exact name of registrant as specified in its charter)
Delaware 22-1986189
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11 Apollo Drive
Whippany, New Jersey 07981
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 887-4700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock $.01 par value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
None
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Title of class
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period as the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
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State the aggregate market value of the voting stock held by
non-affiliates of the registrant. The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to the
date of filing.
Aggregate market value as of March 22, 1996........$99,696,035
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value, as of March 22, 1996...6,996,213
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents, all or portions of which are
incorporated by reference herein and the Part of the Form 10-K into which the
document is incorporated:
Annual Report to Stockholders for the fiscal year ended December 31,
1995 -- Part I, Part II and Part IV.
Proxy Statement dated March 29, 1996 -- Part III
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PART I
ITEM 1. BUSINESS.
General
Isomedix Inc. (together with its subsidiaries, where
appropriate, the "Company") has been engaged for more than 20 years in the
business of providing contract sterilization services to manufacturers of
pre-packaged products, such as healthcare and certain consumer products.
Although gamma radiation is becoming the preferred method of
sterilization of healthcare and certain consumer products, there is a continuing
demand for contract ethylene oxide sterilization of those products which cannot
tolerate exposure to gamma radiation. In recognition of a market opportunity for
technologically advanced ethylene oxide sterilization services, the Company
commenced the development of an ethylene oxide sterilization program in 1988 and
by February 1990 had two state-of-the-art ethylene oxide sterilization
facilities operational. In January 1993, another ethylene oxide facility
commenced operations at the Company's gamma radiation facility in Northborough,
Massachusetts. In December 1995, the Company purchased an existing ethylene
oxide sterilization facility in Temecula, California, from an unrelated party.
The addition of an ethylene oxide sterilization program has enabled the Company
to offer many customers a single source for most or all of their sterilization
requirements. The Company believes that its ethylene oxide technology offers
technical, environmental and worker safety advantages which are currently
unavailable at most existing ethylene oxide sterilization facilities in the
United States.
The Company operates a network of eleven contract
sterilization facilities in the United States and Canada, of which seven are
gamma irradiation facilities, three are combined gamma and ethylene oxide
facilities and one is an ethylene oxide facility. The Company is constructing an
advanced design sterilization facility in Libertyville, Illinois which is
expected to become operational in the latter part of 1996, and may construct
other contract sterilization facilities over the next several years.
Through its wholly-owned subsidiary, Skyland Scientific
Services, Inc., the Company also provides contract consulting, calibration and
validation services to assist manufacturers of healthcare products in complying
with Good Manufacturing Practices established by industry and government.
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Industry Overview and Company Strategy
A broad range of healthcare and certain consumer products need
to be free of objectionable microbial levels which is referred to as "sterile"
or to have acceptable microbial levels when sold as nonsterile product, such as
cosmetics and spices. The two principal methods used to achieve sterility or
microbial reduction are irradiation sterilization utilizing gamma radiation from
cobalt-60 and ethylene oxide sterilization utilizing gaseous ethylene oxide.
Ethylene oxide sterilization was first used commercially in the United States in
the late 1940's and gamma radiation sterilization was first used commercially in
the United States in the mid-1960's.
Although precise figures are difficult to determine, the
Company believes that for healthcare products the contract sterilization market
is divided approximately equally between the two methods. With the addition of
ethylene oxide sterilization facilities and a continuing commitment to radiation
sterilization, the Company believes that it has significantly increased the size
of its potential market. In addition, the Company is now able to offer its
customers the flexibility to choose the sterilization method best suited for
their particular product requirements.
Gamma radiation, which is similar to x-ray radiation, is
generated by the spontaneous decay of radioisotopes. As a result, the
radioisotopes must be supplemented regularly and eventually replaced. Since
gamma radiation is electro-magnetic in nature, and is not itself radioactive,
substances exposed to gamma radiation cannot become radioactive. Cobalt-60 is
the radioisotope used for the commercial processing of medical devices and other
products.
Gamma radiation is inherently reliable, predictable and
non-toxic and the only variable which must be controlled during sterilization is
the time of exposure of the product to the energy source. As a result, the
product is deemed to be sterile immediately after it is processed upon
confirmation that a predetermined dose of gamma radiation has been delivered.
Further, gamma radiation is able to penetrate all forms of packaging material
(including sealed foil, glass and metal containers) and to sterilize the product
uniformly without leaving chemical residues or significantly raising product
temperature.
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The Company believes, however, that ethylene oxide
sterilization will continue to be preferred for certain products that are not
well-suited for radiation sterilization. Examples of such products include:
materials that discolor when exposed to gamma radiation, such as certain cotton
products; products treated with special compounds, such as lubricated needles
and catheters; and products consisting of an array of components that are not
otherwise compatible with gamma radiation, such as certain pre-packaged custom
surgical procedure trays and kits. Custom procedure trays and kits often contain
the surgical instruments and medications required for a specific surgical
procedure which cannot be readily radiation sterilized. Most custom procedure
trays and kits are currently sterilized with ethylene oxide.
Developments in governmental regulation of ethylene oxide in
the 1980's forced changes in the technology of ethylene oxide processing, which
created an opportunity for the Company to capture a significant share of the
contract ethylene oxide sterilization market in the United States. Since 1988
the Company has pursued a program to develop contract ethylene oxide
sterilization technology, and hired personnel with substantial expertise in
ethylene oxide sterilization to implement this program.
First, ethylene oxide has been identified as a mutagenic
substance with possible carcinogenic properties, and its use has become subject
to more stringent regulation by the Occupational Safety and Health
Administration ("OSHA"), the Environmental Protection Agency and various state
agencies. These regulations included stricter limits on permissible worker
exposure levels to ethylene oxide and limits on permissible emissions of
ethylene oxide into the earth's atmosphere. The Environmental Protection Agency
published regulations controlling ethylene oxide emissions from industrial
sterilizers in February 1994 which became effective in November 1994.
Second, ethylene oxide had traditionally been utilized either
in its pure form or heavily diluted with Freon, a chlorofluorocarbon.
International concerns about the harmful effects of chlorofluorocarbons on the
ozone layer of the earth's atmosphere resulted in government mandated reductions
in the production of Freon and in political sentiment for a future ban on the
total production of chlorofluorocarbons. Replacement diluents are now available
in commercial quantities. However, their costs are substantially higher in price
than traditional Freon. In addition, Congress imposed a tax of $5.35 per pound
on chlorofluorocarbons effective January 1, 1995. In early
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1992, Congress passed legislation to accelerate the elimination of
chlorofluorocarbons production, including Freon, from the previously agreed upon
year 2000 to 1995. After 1995, Freon will be available in the United States only
in exceptional cases. The alternative to the use of ethylene oxide-Freon mix is
to utilize ethylene oxide in its 100% pure form, which requires special handling
procedures and equipment. All Isomedix ethylene oxide facilities are equipped
with the advance technology 100% pure ethylene oxide processes.
Many device manufacturers which previously operated in-house
ethylene oxide facilities have found that it is uneconomical to undertake the
design costs and capital expenditures required to upgrade or replace their
existing facilities to meet current and impending regulations. Consequently,
many companies have and continue to convert to contract sterilization for their
sterilization requirements.
The Company believes that its innovative approach to ethylene
oxide sterilization, which does not utilize Freon, significantly reduces the
disadvantages associated with traditional ethylene oxide processing. The
Company's ethylene oxide facilities are highly automated, and are designed to
accelerate sterilization (as evidenced by its already proven ability to
significantly reduce product sterilization cycle times in a number of
instances), to minimize ethylene oxide residues in products, to minimize worker
exposure to ethylene oxide and virtually to eliminate ethylene oxide emissions
into the atmosphere. The Company's facilities use undiluted ethylene oxide (or,
for processing of vacuum sensitive products, an ethylene oxide/nitrogen gas
mixture) rather than the traditional ethylene oxide/Freon gas mixture. An
automated and computer controlled product handling system keeps worker exposure
to ethylene oxide well within existing and anticipated regulatory guidelines.
The Company's ethylene oxide facilities utilize turbulent air circulation, as
well as precise temperature controls and a catalytic oxidation system, to
minimize ethylene oxide residue levels in sterilized products. The ethylene
oxide exhaust gas from the sterilization process is converted to carbon dioxide
and water in a thermal oxidizing flare.
Further, a sophisticated infrared telemetry system and
associated computer technology enables the Company to monitor the temperature of
the ethylene oxide operation. The resulting data can be analyzed and used in
part in the determination of product release and the Company uses analytical
techniques similar to those used in its gamma radiation sterilization business
with the goal of achieving the elimination/reduction of biological testing
and/or
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product quarantine after the completion of ethylene oxide processing.
Other Services
The Company is currently pursuing the addition of electron
beam radiation technology as a third sterilization modality. While electron beam
radiation has been available to sterilize medical devices for years, its use has
been limited due to technical limitations. Recent advances in the design of
electron beam accelerators have significantly increased the potential
desirability of this technology as a sterilization method. In addition, electron
beam use for various industrial applications, such as material crosslinking, is
significant and continues to grow rapidly.
Gamma Radiation Sterilization Services
Sterilization services provided by the Company include the
processing of healthcare and consumer products which are either labelled as
"sterile" or which require reduced microbial contamination, the high-level
radiation testing of materials and equipment used in nuclear reactors, space
exploration applications and certain industrial applications of gamma radiation
to alter or improve the physical properties of plastics.
The kinds of healthcare products processed by the Company
range from syringes, needles, scalpels and surgeons' gloves and gowns to
intravenous solution tubing sets and orthopedic implants. Since sterilization is
the final critical stage of manufacture, the Company is required to be
registered with the Food and Drug Administration (the "FDA") as a manufacturer
of medical devices. See "Governmental Regulation" below.
The Company currently has approximately 1,100 customers,
including many of the largest manufacturers of single-use medical devices, most
of which utilize its gamma irradiation service. Although some of the largest of
such manufacturers own and operate their own irradiators, the production levels
of the majority of manufacturing companies do not economically justify ownership
of an in-house gamma radiation sterilizer. The Company has found that it can
select a geographic region, generally encompassing an approximate 300-mile
radius, within which many small or several large manufacturers are located or
have distribution centers and build one irradiation facility to service the
region. It is able to pass on to the customer the benefits associated with
economies of scale achieved in a high volume irradiation facility and in so
doing can compete
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economically with other sterilization methods. The Company expects that, at
times, when one of its larger customers reaches production levels which would
economically justify the conversion from contract radiation sterilization to
in-house radiation sterilization, the customer may do so. However, the Company
does provide sterilization services to certain large companies which operate
their own irradiators, when transportation costs from a distant production
location to the in-house irradiator are prohibitive, when the in-house
irradiator cannot satisfy production peaks, or when the products or packaging
involve unusual technical requirements.
A part of the Company's gamma radiation sterilization activity
is in the area of consumer products which historically either were sterilized
with ethylene oxide or were not sterilized at all. Bandages, cotton balls, empty
milk cartons, food packaging materials, baby bottle nipples, and water-filled
teething rings are examples of items which the Company currently processes for a
number of manufacturers. In addition, the Company sterilizes bulk items such as
talc and ground nutshells and finished products such as brushes and applicators
for the cosmetics industry.
The Company contracts with its customers to expose their
products to dosages of gamma radiation specified by the customer. The cost to
customers of the gamma radiation services provided by the Company varies
depending on such factors as the volume and density of the product to be
irradiated, and the radiation dosage and dosage uniformity required. The Company
assumes no responsibility for the effects of radiation on the product exposed or
the failure of such dosage to sterilize or otherwise have the effect desired by
the customer. The Company is not aware, however, that any customer has
experienced any claim with respect to the lack of sterility of any product
irradiated by the Company.
In the gamma radiation sterilization process, the material to
be sterilized is placed in containers and is conveyed through the irradiator
past the cobalt-60 source for exposure to a predetermined amount of radiation
energy. The total exposure time of the product to the source material depends on
the amount of cobalt-60 in use, the required dose and the density of the
material exposed. After exposure to gamma radiation, the product is conveyed
into a storage area from which it may, in most cases, be immediately released
for distribution to end users. When not in operation, the cobalt-60 source
material is immersed in a 25-foot deep pool of water which absorbs the energy
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being emitted. During use, six-foot thick concrete shielding protects workers
from radiation.
Since its inception, the Company has purchased the majority of
its cobalt-60 from Nordion International Inc., successor to Atomic Energy of
Canada Limited, the world's principal source of cobalt-60. The Company believes
that Nordion has the capacity to produce several times the world's anticipated
requirements for cobalt-60 for the foreseeable future. In addition, the Company
has purchased smaller amounts of its cobalt-60 requirements from Neutron
Products Inc., a United States based supplier. More recently, another major
supplier of cobalt-60, Puridec Corporation, has started to supply cobalt-60 in
North America. The Company contracts with Nordion, Neutron Products and Puridec
for the purchase and installation of the cobalt-60 in the irradiators and the
eventual disposal of "spent" cobalt-60. Nordion also manufactures the irradiator
mechanisms used by the Company at all of its production facilities.
Ethylene Oxide Sterilization Services
The Company's ethylene oxide sterilization technology involves
three basic processing phases: preparation of the product in a conditioning room
to achieve optimal temperature and humidity; exposure of the product to ethylene
oxide in a sterilization chamber; and reduction of ethylene oxide residues in an
aeration cell to minimal levels in the products.
In the Company's facilities, a computer controlled conveyor
system automatically transfers the product directly from the conditioning room
into the sterilization chamber and then, upon completion of sterilization, the
conveyor system transfers the product into the aeration cell. This system
permits simplified cycle development, provides cycle flexibility, allows
statistical data collection, and provides multiple safety checks at each control
point. The Company's ethylene oxide facilities use a sophisticated infrared
telemetry system which provides real time monitoring of product temperature at
numerous checkpoints.
During the conditioning phase, the product is prepared for
sterilization by raising its temperature and humidity to optimal levels at which
microbes are more readily susceptible to the toxic properties of ethylene oxide.
A turbulent air circulation system ensures uniform temperature and humidity
distribution.
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During the sterilization phase, the product is exposed to
controlled amounts of ethylene oxide under precise conditions of pressure,
temperature, humidity and dwell time. Each ethylene oxide facility is designed
to accommodate three or four sterilization chambers. Depending upon the
anticipated volume of product to be processed annually, one or two chambers may
be installed when a facility commences operations, with others added as the
volume of business increases. Each sterilization chamber employs a circulation
system to assure uniform temperature and humidity distribution, improved gas
penetration, reduced product temperature stabilization time and reduced
sterilization cycle time. A high efficiency oil-sealed evacuation system reduces
the time of the sterilization cycle by reducing the time necessary to remove
ethylene oxide from the sterilization chamber. Rate controls on pressure changes
during processing minimize packaging stress. The sterilization chamber and the
room in which it is located are specifically designed to minimize the risks
arising out of the potentially flammable and explosive nature of ethylene oxide
in its pure form.
During the aeration phase, ethylene oxide residues remaining
on the product after sterilization are reduced to minimal levels by subjecting
the product in the aeration cell to turbulent air circulation at elevated
temperatures in conjunction with a highly efficient catalytic oxidation system
which converts the ethylene oxide into carbon dioxide and water.
The Company anticipates that its ethylene oxide facilities
will be part of combined irradiation/ethylene oxide facilities although the
Company also establishes additional free-standing ethylene oxide and radiation
facilities depending on regional market conditions. The combined facilities are
designed to be cost effective in that the key management and sales personnel
required for either method of sterilization will manage the combined facilities.
Ethylene oxide and nitrogen gas are the two principal
materials which the Company utilizes in its ethylene oxide sterilization
facilities. Both are available through domestic sources.
Backlog
At December 31, 1995, the Company had a backlog for contract
sterilization services of approximately $51,617,000 as compared with $27,643,000
at the same time in
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the preceding year. The Company expects approximately 38% of all of such
backlog to be filled during 1996.
Marketing and Sales
The Company markets its contract sterilization services
primarily to manufacturers of single-use medical devices and consumer products.
The Company's marketing of its gamma radiation services
emphasizes technical assistance to customers in all aspects of sterilization and
participation by facility and corporate staff members on technical committees
responsible for the implementation of regulations pertaining to the
sterilization of medical products, as well as the more conventional activities
of customer contact and advertising. The Company's salespersons and senior
management draw upon their extensive backgrounds in radiation, ethylene oxide
processing, engineering, microbiology, packaging, material compatibility and
regulatory compliance to provide customers with a full range of services. See
"Competition" below.
The marketing of ethylene oxide services closely parallels the
marketing of gamma radiation services and frequently is directed to the same
customers. The Company markets its ethylene oxide capabilities to existing
ethylene oxide users, concentrating primarily on manufacturers currently
utilizing in-house facilities who are confronted with the high costs associated
with the increasingly complex regulatory and technological problems related to
ethylene oxide sterilization. Additionally, the Company's marketing efforts
focus on the Company's ability to offer its customers a single source for most
or all of their sterilization requirements and also stress the technological
advantages of the Company's ethylene oxide sterilization system over those
provided by its competitors.
Competition
In gamma radiation sterilization, the Company competes with
other gamma irradiation service companies, all of which are smaller than the
Company in terms of sales, number of gamma irradiation facilities and amount of
radioisotope utilized. The Company also competes with companies that provide
sterilization processes other than gamma radiation (including electron beam and
ethylene oxide processing). The primary competition comes from companies that
sterilize products in-house (with about a 50% combined market share), thereby
bringing the Company into competition with businesses having substantially
larger assets, sales and working capital.
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Generally, the Company competes on the basis of expertise,
quality, customer service, price, geographic proximity to the customer's
manufacturing or distribution system and ability to provide additional services,
such as warehousing, as needed. In recent years, price competition has
intensified. However, the Company believes that its reputation as a leader in
quality and technology in gamma radiation sterilization services is frequently a
more important competitive factor than price in the case of products which
require strict quality control standards and high sterility assurance levels.
In ethylene oxide sterilization, the Company competes with
three established service companies, each of which operates multiple facilities
and one of which is substantially larger than the Company in the ethylene oxide
sterilization market. The Company also competes with numerous smaller service
companies. In addition, almost half of the total sterilization business is done
in-house and, therefore, represents the forecasted new business opportunity. As
in the gamma sterilization market, the Company competes in the ethylene oxide
sterilization market on the basis of expertise, quality, customer service, price
and geographic proximity to the customer's manufacturing or distribution system.
The Company believes that the facilities of some of its competitors will require
costly retrofits or complete replacement to enable them to comply with the
increasingly stringent regulations associated with ethylene oxide sterilization.
It should be noted that the Company's major competitors have built, and continue
to build, new facilities.
Foreign Operations
The Company's Canadian gamma irradiation facility commenced
operations in April 1982 providing the Company with an important market for its
services. There are no unusual or special risks associated with this operation
which are not characteristic of any United States business operating in Canada.
See Note 11 to Notes to Consolidated Financial Statements referred to in Part
IV, Item 14(a)(1) below.
Personnel
The Company employs approximately 336 persons in its
sterilization services business. The Company's employees are not covered by a
collective bargaining agreement with the exception of approximately 40 employees
at the Whippany, New Jersey and Northborough, Massachusetts
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facilities. The Company considers its relationship with its employees to be
satisfactory.
Governmental Regulation
The construction and operation of gamma irradiation facilities
such as those operated by the Company are regulated by the United States Nuclear
Regulatory Commission, or in some cases by various state regulatory agencies and
authorities which have assumed the regulatory function from the Commission. In
addition, the Company is required to register its sterilization facilities with
the FDA as manufacturers of medical devices and drugs.
The construction and operation of ethylene oxide facilities by
the Company are regulated by various state environmental and pollution control
agencies, as well as by the FDA and OSHA. The use of ethylene oxide is subject
to a variety of existing and proposed regulations limiting levels of worker
exposure to ethylene oxide, ethylene oxide residues on sterilized products and
ethylene oxide emissions into the atmosphere. See "Industry Overview and Company
Strategy." The Company believes that its ethylene oxide technology and facility
design will permit it to comply with all such existing and proposed regulations.
The Company has received all licenses and permits necessary to
conduct its current sterilization business and believes that it will be able to
obtain any permits necessary for the future conduct of its sterilization
business.
The gamma radiation and ethylene oxide sterilization
activities of the Company produce virtually no harmful solid, liquid or gaseous
effluents or pollutants.
Food Preservation
A potential market for the Company continues to be the gamma
radiation preservation and disinfestation of food products. Approximately 30 to
40 countries have approved gamma radiation for limited commercial processing of
food and food ingredients. The need for further consumer education is an
important factor in gaining public acceptance of the process in the United
States and Canada. Increased public awareness of the existence of harmful
pathogenic organisms in raw red meat and poultry may assist in gaining public
acceptance of gamma radiation for the processing of food.
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In 1990, the FDA announced clearance for the irradiation of
poultry to eliminate salmonella, campylobacter and listeria. In 1992, the United
States Department of Agriculture published the terms and conditions under which
poultry can be irradiated. This clearance was followed by successful market
tests of irradiated poultry during 1993. Subsequently, only limited commercial
sales of irradiated poultry have taken place. In addition, public apprehension
associated with irradiation of food products is diminishing due to more readily
available information on the subject of food irradiation, and as concern over
contaminated red meats, poultry and seafood in our food supply increases. In
July 1994, the Company prepared and submitted to the FDA a petition for
clearance to irradiate fresh packaged red meats in order to eliminate e-coli and
other harmful pathogens. The Company has received indications that this
clearance is expected to be obtained sometime during 1996.
Disinfestation of spices using gamma radiation was approved by
the FDA in 1986. This method of disinfestation is in limited use today, but may
prove to be the optimum method of microbial control as there is serious concern
that the current method of disinfestation of spices, which uses ethylene oxide,
leaves toxic residues on the spices.
The long-term course of regulatory policy and consumer
reaction cannot be predicted and, although regulatory approvals have been
forthcoming, there can be no assurance that the use of gamma radiation for the
processing of food will ultimately prove commercially feasible in the United
States or Canada.
ISO 9001 Registration
During 1995, the Company was approved for ISO 9001
registration by accredited Quality Registrar, KPMG Peat Marwick. ISO 9001
registration confirms that the quality systems used by Isomedix meet the
requirements as described by the American National Standards Institute and the
American Society of Quality Control. Of the ISO 9000 standards, the ISO 9001 is
the most comprehensive in scope. Demonstrated compliance to these requirements
is becoming a requirement for doing business in Europe, Japan, Australia and
Canada and is fast becoming a standard of performance for many suppliers doing
business in the United States.
Validation Services
The Company's subsidiary, Skyland Scientific Services, Inc.,
primarily provides validation services to
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assist manufacturers of pharmaceutical and medical device products in complying
with FDA Good Manufacturing Practices and industry standards.
Skyland competes with other companies offering substantially
the same services, including several large architect-engineering firms. Such
firms may be employed by a customer to provide a variety of services, including
design and construction of facilities, in addition to validation services.
Skyland competes on the basis of its reputation, expertise, quality and speed of
service and price.
Skyland has approximately 40 employees. Skyland considers its
relationship with its employees to be satisfactory.
Segment Data
See Note 11 to Notes to Consolidated Financial Statements
referred to in Part IV, Item 14(a)1 below.
ITEM 2. PROPERTIES.
The Company operates eleven sterilization facilities in nine
states and Canada. Ten of the eleven sterilization facilities have an aggregate
design capacity of 37,500,000 curies of cobalt-60. Three of the Company's
sterilization facilities are combined irradiation and ethylene oxide facilities
and presently have installed eleven ethylene oxide vessels which allow for the
processing of approximately fourteen million cubic feet of products annually. On
December 29, 1995, the Company purchased an ethylene oxide sterilization
facility located in Temecula, California. This facility allows for the annual
processing of an additional three million cubic feet of products in its four
ethylene oxide vessels.
The Company's gamma irradiation facilities are designed and
built to accommodate anticipated processing requirements for twenty or more
years. Generally, only that amount of cobalt-60 needed for anticipated or actual
initial processing requirements is actually installed. As requirements grow,
additional cobalt-60 can be added up to the facility's design capacity.
Additional cobalt-60 increases the amount of energy emitted thus reducing the
time the product needs to be exposed and thereby increasing the facility's
capacity to process product.
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The Company's executive offices are located in a Company-owned
building at 11 Apollo Drive, Whippany, New Jersey.
Skyland's executive offices and other operations are currently
located in a leased building in Bozeman, Montana.
All of the properties of the Company are well maintained and
in good condition. The Company believes that these properties are adequate and
suitable for the present needs of the businesses presently conducted therein.
The Company has utilized Industrial Development Revenue Bond
("IDRB") financings to finance a substantial portion of the costs of
constructing and equipping (including the initial purchase of cobalt-60) some of
its sterilization facilities. The obligations of the Company under the terms of
the IDRB financings are collateralized by real and personal property (see Note 3
to Notes to Consolidated Financial Statements referred to in Part IV, Item
14(a)1 below). Internally generated funds and sales of common stock have served
as additional sources of funds.
ITEM 3. LEGAL PROCEEDINGS.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
Not applicable.
Executive Officers of the Registrant
<TABLE>
<CAPTION>
Age at
Name Position with the Company December 31, 1995
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<S> <C> <C>
John Masefield Chairman of the Board 62
Peter Mayer President and Chief Executive Officer 52
George R. Dietz Senior Vice President 64
Charles P. Truby Executive Vice President and Chief Operating 58
Officer
Thomas J. DeAngelo Vice President-Finance and Administration and 41
Chief Financial Officer
James Wilson Vice President-Quality Assurance and 56
Regulatory Affairs
Ronald Deahr Vice President-Sales and Marketing 55
</TABLE>
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John Masefield has been Chairman of the Company since its
inception in 1972 and, President and Chief Executive Officer of the Company
since its inception in 1972 until August 1995. Since December 1987, Mr.
Masefield has also been Chairman of Skyland. Between 1960 and 1964, Mr.
Masefield was the head of irradiator design for Atomic Energy of Canada Limited.
In that capacity, he was responsible for the design and development of the first
commercial gamma irradiation sterilization facility in North America for the
gamma radiation sterilization of medical devices. He was also responsible for
the design, development and operation of the first commercial food gamma
irradiation facility in North America. Mr. Masefield has been a lecturer on
industrial uses of ionizing radiation at McGill University in Montreal, Canada
and Carleton University in Ottawa, Canada, has authored or co-authored numerous
articles and studies on the subject, has been invited by the International
Atomic Energy Agency to lecture on radiation processing in the Far East for the
past several years, is the Convener of the Working Group on Radiation
Sterilization to the International Standards Organization on Radiation
Sterilization, is the leader of the U.S. Delegation to the International
Standards Organization's Technical Committee on Sterilization Standards, is the
present Co-Chairman of the Radiation Sterilization Committee of the Association
for the Advancement of Medical Instrumentation (AAMI) and is on the Board of
Directors of AAMI and has participated on various other United States and
Canadian committees that promulgate recommendations and procedures for the
commercial uses of ionizing radiation. Mr. Masefield has a degree in mechanical
engineering.
Peter Mayer has been President and Chief Executive Officer
since August 1995. Mr. Mayer was most recently President of the Ciba
Self-Medication U.S.A. unit of Ciba Geigy, a position he held for five years,
following three years as Group Vice President of R&D and Marketing. Prior to
that, Dr. Mayer held a number of marketing and product development positions
with the Whitehall Laboratories Division of American Home Products. Mayer holds
undergraduate and masters degrees in industrial engineering and a masters degree
in business administration, all from Columbia University.
George R. Dietz has been an executive officer of the Company
since 1972 and a Vice President of the Company since 1983. He is currently
Senior Vice President of the Company. Mr. Dietz also served as Secretary of the
Company from April 1983 through April 1987. Between 1960 and 1969 Mr. Dietz
served as project manager for the United States Atomic Energy Commission's food
irradiation programs, as the
<PAGE> 18
18
United States Army liaison officer to the United States Atomic Energy
Commission, and as project manager for the design, construction and operation of
the first large scale pilot food gamma irradiation facility in North America.
Between 1967 and 1969 he directed the food irradiation engineering activities at
Brookhaven National Laboratories. Mr. Dietz has also authored and co-authored
numerous articles and studies on commercial uses of ionizing radiation and has
participated on various United States committees that promulgate recommendations
and procedures for the commercial uses of ionizing radiation and irradiator
operational safety.
Charles P. Truby has been Executive Vice President and Chief
Operating Officer since March 1995. Mr. Truby joins Isomedix from Sherwood
Medical Company where he was Vice-President of Quality Management for four
years. Prior to that, he was employed by Becton Dickinson for 14 years in a
number of quality management positions. Dr. Truby received his Doctorate degree
in bacteriology and biochemistry at the University of Houston and his Masters
degree from Arizona State University.
Thomas J. DeAngelo joined the Company in 1982 and has been an
officer of the Company since April 1983. He is currently Vice President-Finance
and Administration, Treasurer and Secretary of the Company. He has been the
Chief Financial Officer of the Company since 1993. Mr. DeAngelo served as
Controller of the Company from April 1983 through April 1987 and as Chief
Operating Officer of the Company from September 1993 to February 1994. Mr.
DeAngelo is a Certified Public Accountant.
James D. Wilson has been Vice President of Quality Assurance
and Regulatory Affairs since May 1995. Prior to joining the Company, Mr. Wilson
was employed by Abbott Laboratories for 15 years in a number of managerial
positions, including Manager of Psychological Services and Quality Assurance
Manager of Comformance Biological Services and Evaluation. Mr. Wilson is a
professional microbiologist with over 30 years of diversified experience in
quality management and in the field of sterilization (ethylene oxide, radiation,
dry heat, steam and aseptic). He has been very active in industry and trade
association activities, such as the Parenteral Drug Association and the
Pharmaceutical Manufacturers Association. Mr. Wilson has widely lectured on
decontamination and sterilization.
<PAGE> 19
19
Ronald D. Deahr has been the Vice President of Sales and
Marketing since October 1995. Prior to joining the Company, Mr. Deahr was
employed for 13 years by Griffith Micro Science, Inc. where he held positions of
increasing responsibility in sales/marketing and business development.
<PAGE> 20
20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
For information concerning this item see page 20 of the Annual
Report to Stockholders for the fiscal year ended December 31, 1995 (the "Annual
Report to Stockholders"), which information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
For information concerning this item see page 2 of the Annual
Report to Stockholders, which information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
For information concerning this item see pages 4 through 6 of
the Annual Report to Stockholders, which information is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
For information concerning this item, see pages 8 through 18
of the Annual Report to Stockholders and Item 14(a) below, which information is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
<PAGE> 21
21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT.
For information concerning this item, see text under the caption
"Election of Directors" in the Proxy Statement dated March 29, 1996 (the "Proxy
Statement"), and "Executive Officers of the Registrant" in Part I hereof, which
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
For information concerning this item, see text under the
captions "Executive Compensation," "Compensation of Directors," "Employment
Agreements," "Compensation and Stock Option Committee Interlocks and Insider
Participation," "Performance Graph" and "Report of the Compensation and Stock
Option Committee" in the Proxy Statement, which information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
For information concerning this item, see text under the
captions "Security Ownership of Certain Beneficial Owners" and "Security
Ownership of Management" in the Proxy Statement, which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
For information concerning this item, see text under the caption
"Certain Relationships and Related Transactions" in the Proxy Statement, which
information is incorporated herein by reference.
<PAGE> 22
22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
The consolidated financial statements of the Company and its
subsidiaries incorporated by reference in this Annual Report on Form 10-K are
listed in the attached Index to Consolidated Financial Statements and Schedules.
2. Financial Statement Schedules:
The consolidated financial statement schedules of the Company
and its subsidiaries filed in this Annual Report on Form 10-K are listed in the
attached Index to Consolidated Financial Statements and Schedules.
3. Exhibits:
The exhibits required to be filed as part of this Annual Report
on Form 10-K are listed in the attached Index to Exhibits. Exhibits 10(o),
10(p), 10(q), 10(r), 10(s), 10(t), 10(qq) and 10(rr) are the management
contracts and compensatory plans or arrangements required to be filed as part of
this Annual Report on Form 10-K.
(b) Current Reports on Form 8-K:
None
<PAGE> 23
23
POWER OF ATTORNEY
The Registrant and each person whose signature appears below
hereby appoint Peter Mayer and Thomas J. DeAngelo as attorneys-in-fact with full
power of substitution, severally, to execute in the name and on behalf of the
Registrant and each such person, individually and in each capacity stated below,
one or more amendments to this Annual Report on Form 10-K, which amendments may
make such changes in this Report as the attorney-in-fact acting in the premises
deems appropriate and to file any such amendment to this Report with the
Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 29, 1996
ISOMEDIX INC.
By /s/ Peter Mayer
---------------------------
Peter Mayer
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Dated: March 29, 1996 By /s/ John Masefield
---------------------------
John Masefield
Chairman of the Board
and Director
<PAGE> 24
24
Dated: March 29, 1996 By /s/ Peter Mayer
------------------
Peter Mayer
President and Chief
Executive Officer
Dated: March 29, 1996 By /s/ H. Stuart Campbell
-------------------------
H. Stuart Campbell
Director
Dated: March 29, 1996 By /s/ George R. Dietz
----------------------
George R. Dietz
Director
Dated: March 29, 1996 By /s/ Thomas M. Haythe
------------------------
Thomas M. Haythe
Director
Dated: March 29, 1996 By /s/ David M. Lank
---------------------
David M. Lank
Director
Dated: March 29, 1996 By /s/ Elmer A. Sticco
-----------------------
Elmer A. Sticco
Director
Dated: March 29, 1996 By /s/ Thomas J. DeAngelo
--------------------------
Thomas J. DeAngelo
Vice President-Finance
and Administration,
Secretary, Treasurer,
Principal Accounting
Officer, Principal
Financial Officer
and Director
<PAGE> 25
ISOMEDIX INC.
Index to Consolidated Financial Statements and Schedules
<TABLE>
<CAPTION>
Page Number
-----------------------------------
In Annual
Report to Included
Stockholders Herein
------------ ------
<S> <C> <C>
Financial Statements:
The following consolidated financial statements and notes, together with the
Report of Independent Accountants, included in the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1995, are incorporated
herein by reference:
Consolidated Balance Sheets -- December 31, 1995 8 --
and 1994
Consolidated Statements of Income -- Years Ended 9 --
December 31, 1995, 1994 and 1993
Consolidated Statements of Changes in 10 --
Stockholders' Equity -- Years Ended December 31,
1995, 1994 and 1993
Consolidated Statements of Cash Flows -- Years 11 --
Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements 12-18 --
Report of Independent Accountants 19 --
Financial Statement Schedules:
Report of Independent Accountants -- F-1
II - Valuation and Qualifying Accounts -- F-2
</TABLE>
All other schedules (Nos. I, III and IV) have been omitted because they are
inapplicable or the information is provided in the consolidated financial
statements, including the notes thereto.
<PAGE> 26
Coopers
& Lybrand
REPORT OF INDEPENDENT ACCOUNTANTS
-----
To the Stockholders and
Board of Directors of Isomedix Inc.
Our report on the consolidated financial statements of Isomedix Inc. and
Subsidiaries has been incorporated by reference in this Form 10-K from Page 19
of the 1995 Annual Report to Shareholders of Isomedix Inc. and Subsidiaries. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedules listed in the Index to Consolidated
Financial Statements and Schedules of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
Parsippany, New Jersey
February 16, 1996
F-1
<PAGE> 27
SCHEDULE II
ISOMEDIX INC. and SUBSIDIARIES
VALUATION and QUALIFYING ACCOUNTS
for the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
------ ------ ------ ------ ------
Description Additions
----------- ---------
Allowance for Doubtful Accounts Balance at Charged to Charged to Balance at
Deducted from Beginning Costs and Other End of
Accounts Receivable of Period Expenses Accounts Deductions(1) Period
------------------- --------- -------- -------- ------------- ------
<S> <C> <C> <C> <C> <C>
1995 $350,000 $245,523 $245,523 $350,000
----
1994 $250,000 $120,565 $ 20,565 $350,000
----
1993 $200,000 $ 63,892 $ 13,892 $250,000
----
</TABLE>
- ----------------------
(1) Write-off of uncollectible accounts receivable.
<PAGE> 28
Index to Exhibits
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
3(a) Certificate of Incorporation of the Company, as amended --
(incorporated by reference to Exhibit 3(a) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
3(b) By-Laws of the Company, as amended, (incorporated by reference --
to Exhibit 3(b) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994).
4(a) Articles FOURTH, FOURTEENTH, SIXTEENTH, SEVENTENTH and --
EIGHTEENTH of the Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3(a) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
4(b) Articles III, IX, X, XI, XII, XIII, XIV and XVI of the By-Laws --
of the Company (incorporated by reference to Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
4(c) Specimen certificate representing common stock (incorporated by
reference to Exhibit 4(c) to the Company's Annual Report on Form
10-K for the year ended December 31, 1994).
4(d) Loan Agreement dated as of December 1, 1983 between Isomedix --
(Ohio) Inc., a Delaware corporation, and County of Franklin,
Ohio (incorporated by reference to Exhibit 4(d) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
4(e) Promissory Note dated December 29, 1983 executed by Isomedix --
(Ohio) Inc., a Delaware corporation, in favor of County of
Frankin, Ohio (incorporated by reference to Exhibit 4(e) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
</TABLE>
E-1
<PAGE> 29
Index to Exhibits (cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4(f) Loan Agreement dated as of December 1, 1983 between Isomedix --
(Utah), Inc., a Delaware corporation, and Sandy City, Utah
(incorporated by reference to Exhibit 4(f) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
4(g) Promissory Note dated December 29, 1983 executed by Isomedix --
(Utah), Inc., a Delaware corporation, in favor of Sandy City,
Utah (incorporated by reference to Exhibit 4(g) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
4(h) Loan Agreement dated as of October 1, 1984 between Isomedix, --
Inc., a Nevada corporation, and the Illinois Development Finance
Authority (incorporated by reference to Exhibit 4(h) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
4(i) Promissory Note dated October 29, 1984 executed by Isomedix, --
Inc., a Nevada corporation, in favor of the Illinois Development
Finance Authority (incorporated by reference to Exhibit 4(i) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
4(j) Loan Agreement dated as of June 1, 1984 between Spartanburg --
County, South Carolina and Isomedix, Inc., a South Carolina
corporation (incorporated by reference to Exhibit 4(j) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
4(k) Rights Agreement dated as of June 10, 1988 between Isomedix Inc. --
and Midlantic National Bank which includes the form of
Certificate of Designation setting forth the terms of the Series
A Preferred Stock, par value $1.00 per share, as Exhibit A, the
form of Right Certificate as Exhibit B and the Summary of Rights
to Purchase Preferred Shares as Exhibit C (incorporated by
reference to Exhibit 4(k) to the Company's Annual Report on Form
10- K for the year ended December 31, 1994).
</TABLE>
E-2
<PAGE> 30
Index to Exhibits (cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4(l) Loan Agreement dated as of March 1, 1989 between Isomedix --
Operations Inc., a Delaware corporation, and Spartanburg County,
South Carolina, a body politic and corporate and a political
subdivision of the State of South Carolina (incorporated by
reference to Exhibit 4(l) to the Company's Annual Report on Form
10- K for the year ended December 31, 1994).
4(m) Trust Indenture dated as of March 1, 1989 between Spartanburg --
County, South Carolina, a body politic and corporate and a
political subdivision of the State of South Carolina and Mellon
Bank, N.A., as trustee (incorporated by reference to Exhibit
4(m) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
10(a) Amendment No. 1 dated as of February 1, 1979 to Lease Agreement --
dated as of November 1, 1977 between Isomedix, Inc., a South
Carolina corporation, and Spartanburg County, South Carolina
(incorporated by reference to Exhibit 10(c) to Registration
Statement No. 2-83697).
10(b) Amendment No. 1 dated as of February 1, 1979 to Guaranty --
Agreement dated as of November 1, 1977 among the Company,
certain of the Company's subsidiaries and North Carolina
National Bank (incorporated by reference to Exhibit 10(d) to
Registration Statement No. 2-83697).
10(c) Lease dated May 27, 1981 between Village of Morton Grove and --
Isomedix, Inc., a Nevada corporation (incorporated by reference
to Exhibit 10(r) to Registration Statement No. 2-83697).
10(d) Loan Agreement dated as of December 1, 1983 between Isomedix --
(Ohio) Inc., a Delaware corporation, and County of Franklin,
Ohio (incorporated by reference to Exhibit 4(f) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
</TABLE>
E-3
<PAGE> 31
Index to Exhibits (cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10(e) Promissory Note dated December 29, 1983 executed by Isomedix --
(Ohio) Inc., a Delaware corporation, in favor of County of
Franklin, Ohio (incorporated by reference to Exhibit 4(e) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994.
10(f) Open End Mortgage and Security Agreement dated as of December 1, --
1983 between Isomedix (Ohio) Inc., a Delaware corporation, and
Midlantic National Bank (incorporated by reference to Exhibit
10(f) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
10(g) Guaranty Agreement dated as of December 1, 1983 among the --
Company, certain of the Company's subsidiaries and Midlantic
National Bank (incorporated by reference to Exhibit 10(g) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10(h) Loan Agreement dated as of December 1, 1983 between Isomedix --
(Utah), Inc., a Delaware corporation, and Sandy City, Utah
(incorporated by reference to Exhibit 4(f) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
10(i) Promissory Note dated December 29, 1983 executed by Isomedix --
(Utah), Inc., a Delaware corporation, in favor of Sandy City,
Utah (incorporated by reference to Exhibit 4(g) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
10(j) Mortgage and Security Agreement dated as of December 1, 1983 --
between Isomedix (Utah), Inc., a Delaware corporation, and
Midlantic National Bank (incorporated by reference to Exhibit
10(j) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
10(k) Guaranty Agreement dated as of December 1, 1983 among the --
Company, certain of the Company's subsidiaries and Midlantic
National Bank (incorporated by reference to Exhibit 10(k) to
</TABLE>
E-4
<PAGE> 32
Index to Exhibits (cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
10(l) Mortgage and Security Agreement dated as of October 1, 1984, --
executed by Isomedix, Inc., a Nevada corporation, in favor of
Chemical Bank, as Security Trustee (incorporated by reference to
Exhibit 10(l) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994).
10(m) Guaranty Agreement dated as of October 1, 1984, among Isomedix --
Inc., a Delaware corporation, and certain of its subsidiaries,
and Chemical Bank, as Security Trustee (incorporated by
reference to Exhibit 10(m) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10(n) Guaranty Agreement dated as of June 1, 1984, among Isomedix --
Inc., a Delaware corporation, and certain of its subsidiaries,
and NCNB National Bank of North Carolina (incorporated by
reference to Exhibit 10(n) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10(o) Employment Agreement dated as of February 1, 1988 by and between --
the Company and John Masefield (incorporated by reference to
Exhibit 10(t) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992).
10(p) Employment Agreement dated as of February 1, 1988 by and between --
the Company and Thomas J. DeAngelo (incorporated by reference to
Exhibit 10(u) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992).
10(q) Employment Agreement dated as of February 1, 1988 by and between --
the Company and George R. Dietz (incorporated by reference to
Exhibit 10(v) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992).
10(r) Consulting Agreement, effective January 1993, between the --
Company and Sticco (incorporated by reference to Exhibit 10(w)
to the Company's
</TABLE>
E-5
<PAGE> 33
Index to Exhibits (cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Annual Report on Form 10-K for the year ended December 31, 1992).
10(s) 1982 Stock Option Plan, as amended (incorporated by reference to --
Exhibit 10(s) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994).
10(t) 1992 Stock Option Plan (incorporated by reference to Exhibit --
10(y) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992).
10(u) Agreement and Plan of Reorganization dated as of September 30, --
1987 among the Company, Isomedix Acquisition Corporation and
Skyland (incorporated by reference to Exhibit 10(u) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10(v) Loan Agreement dated as of October 1, 1988 between Isomedix --
Operations Inc., a Delaware corporation, and City of El Paso
Industrial Development Authority, Incorporated, a Texas
non-profit corporation. (incorporated by reference to Exhibit
10(v) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994)
10(w) Indenture of Trust dated as of October 1, 1988 between City of --
El Paso Industrial Development Authority, Incorporated, a Texas
non-profit corporation, and Mellon Bank, N.A., as trustee
(incorporated by reference to Exhibit 10(w) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
10(x) Reimbursement Agreement dated as of October 1, 1988 by and among --
the Registrant, Isomedix Operations Inc., a Delaware
corporation, and NCNB National Bank of North Carolina
(incorporated by reference to Exhibit 10(x) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
10(y) Guaranty Agreement dated as of October 1, 1988 by and between --
the Registrant and NCNB National Bank of North Carolina, as
issuer of the Letter
</TABLE>
E-6
<PAGE> 34
Index to Exhibits (cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
of Credit (incorporated by reference to Exhibit 10(y) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10(z) Guaranty Agreement dated as of October 1, 1988 by and between --
the Registrant and Mellon Bank, N.A., as trustee under the
Indenture (incorporated by reference to Exhibit 10(z) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10(aa) Guaranty Agreement dated as of October 1, 1988 by and between --
Isomedix Investments, Inc., a Delaware corporation, and NCNB
National Bank of North Carolina, as issuer of the Letter of
Credit (incorporated by reference to Exhibit 10(aa) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10(bb) Guaranty Agreement dated as of October 1, 1988 by and between --
Isomedix Investments, Inc., a Delaware corporation, and Mellon
Bank, N.A., as trustee under the Indenture (incorporated by
reference to Exhibit 10(bb) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10(cc) Guaranty Agreement dated as of October 1, 1988 by and between --
Isomedix Management, Inc., a New Jersey corporation, and NCNB
National Bank of North Carolina, as issuer of the Letter of
Credit (incorporated by reference to Exhibit 10(cc) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10(dd) Guaranty Agreement dated as of October 1, 1988 by and between --
Isomedix Management, Inc., a New Jersey corporation and Mellon
Bank, N.A., as trustee under the Indenture (incorporated by
reference to Exhibit 10(dd) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10(ee) Remarketing Agreement dated as of October 1, 1988 between --
Isomedix Operations Inc., a Delaware corporation, City of El
Paso Industrial Development Authority, Incorporated, a Texas
non-profit corporation, and NCNB
</TABLE>
E-7
<PAGE> 35
Index to Exhibits (cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
National Bank of North Carolina (incorporated by reference to
Exhibit 10(ee) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994).
10(ff) Placement Agreement dated as of October 1, 1988 among City of El --
Paso Industrial Development Authority, Incorporated, NCNB
National Bank of North Carolina, as Placement Agent, and
Isomedix Operations Inc (incorporated by reference to Exhibit
10(ff) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
10(gg) Deed of Trust, Security Agreement and Assignment of Rents dated --
as of October 1, 1988 by and among Isomedix Operations Inc., a
Delaware corporation, Mark E. Mendel, Mellon Bank, N.A. and NCNB
National Bank of North Carolina (incorporated by reference to
Exhibit 10(gg) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994).
10(hh) Reimbursement Agreement dated as of March 1, 1989 by and among --
the Company, Isomedix Operations Inc., a Delaware corporation,
and NCNB National Bank of North Carolina (incorporated by
reference to Exhibit 10(hh) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10(ii) Guaranty Agreement dated as of March 1, 1989 by and between the --
Company and NCNB National Bank of North Carolina, as issuer of
the Letter of Credit (incorporated by reference to Exhibit
10(ii) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
10(jj) Guaranty Agreement dated as of March 1, 1989 by and between the --
Company and Mellon Bank, N.A., as trustee under the Indenture
(incorporated by reference to Exhibit 10(jj) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994).
10(kk) Guaranty Agreement dated as of March 1, 1989 by and between --
Isomedix Investments, Inc., a Delaware corporation, and NCNB
National Bank of
</TABLE>
E-8
<PAGE> 36
Index to Exhibits (cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
North Carolina, as issuer of the Letter of Credit (incorporated
by reference to Exhibit 10(kk) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10(ll) Guaranty Agreement dated as of March 1, 1989 by and between --
Isomedix Investments, Inc., a Delaware corporation, and Mellon
Bank N.A., as trustee under the Indenture (incorporated by
reference to Exhibit 10(ll) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10(mm) Guaranty Agreement dated as of March 1, 1989 by and between --
Isomedix Management, Inc., a Delaware corporation, and NCNB
National Bank of North Carolina, as issuer of the Letter of
Credit (incorporated by reference to Exhibit 10(mm) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10(nn) Guaranty Agreement dated as of March 1, 1989 by and between --
Isomedix Management, Inc., a Delaware corporation, and Mellon
Bank, N.A., as trustee under the Indenture (incorporated by
reference to Exhibit 10(nn) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10(oo) Placement and Remarketing Agreement dated as of March 1, 1989 --
between Isomedix Operations Inc., a Delaware corporation,
Spartanburg County, South Carolina, a body politic and corporate
and an instrumentality of the State of South Carolina, and NCNB
National Bank of North Carolina as Placement Agent and
Remarketing Agent (incorporated by reference to Exhibit 10(oo)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
10(pp) Mortgage, Security Agreement and Assignment of Rents dated as of --
March 1, 1989 by and among Isomedix Operations Inc., a Delaware
corporation, Spartanburg County, South Carolina, a body politic
and corporate and an instrumentality of the State of South
Carolina, Mellon Bank, N.A. and NCNB National Bank of
</TABLE>
E-9
<PAGE> 37
Index to Exhibits (cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
North Carolina (incorporated by reference to Exhibit 10(pp) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
10(qq) 1992 Supplemental Stock Option Plan (incorporated by reference --
to Exhibit 10(vv) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993).
10(rr) Special Bonus Plan for Directors and Senior Officers --
(incorporated by reference to Exhibit 10(ww) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1993).
10(ss) New York Stock Exchange, Inc. Listing Agreement (incorporated by --
reference to Exhibit 10(ss) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994)
10(tt) Employment Agreement dated as of March 27, 1995 by and between
the Company and Charles P. Truby.
10(uu) Employment Agreement dated as of May 16, 1995 by and between the
Company and John Masefield.
10(vv) Employment Agreement dated as of August 21, 1995 by and between
the Company and Peter Mayer.
11 Statement re: computation of earnings per share for the years
ended December 31, 1995, 1994 and 1993.
13 Annual Report to Stockholders for the fiscal year ended December
31, 1995.
21 Subsidiaries of the Company. --
23 Consent of Coopers & Lybrand L.L.P.
24 Power of Attorney (see "Power of Attorney" in Form 10-K).
</TABLE>
E-10
<PAGE> 1
EXHIBIT 10(tt)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 27th day of March, 1995 by and
between ISOMEDIX INC., a Delaware corporation (the "Company"), and CHARLES P.
TRUBY (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company wishes to retain the services of the
Employee, and the Employee wishes to serve in the employ of the Company, upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the parties hereto hereby agree as
follows:
1. Employment, Term, Automatic Extension.
1.1 The Company agrees to employ the Employee, and the
Employee agrees to serve in the employ of the Company, for the term set forth in
Section 1.2, in the position and with the responsibilities, duties and authority
set forth in Section 2 and on the other terms and conditions set forth in this
Agreement.
1.2 The term of the Employee's employment under this Agreement
shall commence on the date hereof and shall terminate on the anniversary of the
date hereof, unless extended or sooner terminated in accordance with this
Agreement.
1.3 As of the expiration date of the then-current term of this
Agreement (each, an "Automatic Renewal Date"), unless either party shall have
given a notice of non-extension not less than two (2) months prior to such
Automatic Renewal Date, the term of this Agreement shall be extended
automatically for a period of one year to the anniversary of the expiration date
of the then-current term of this Agreement.
2. Position, Duties. The Employee shall serve in the positions
of Executive Vice President and Chief Operating Officer of the Company. The
Employee shall perform, faithfully and diligently, such duties, and shall have
such responsibilities, appropriate to said positions, as shall be assigned to
him from time to time by the Chairman of the Company or his designee and the
Board of Directors of the Company. The Employee shall report
<PAGE> 2
2
directly to the Chairman of the Company or his designee. The Employee shall
devote his complete and undivided attention to the performance of his duties and
responsibilities hereunder during the normal working hours of executive
employees of the Company. The Employee hereby represents that he is not bound by
any confidentiality agreements or restrictive covenants which restrict or may
restrict his ability to perform his duties hereunder, and agrees that he will
not enter into any such agreements or covenants during the term of his
employment hereunder.
3. Salary, Bonus.
3.1 During the term of this Agreement, in consideration of the
performance by the Employee of the services set forth in Section 2 and his
observance of the other covenants set forth herein, the Company shall pay the
Employee, and the Employee shall accept, a base salary at the biweekly rate of
$5,384.62, payable in accordance with the standard payroll practices of the
Company. The Employee shall be entitled to such increases in base salary during
the term hereof as shall be determined by the Board of Directors of the Company
in its sole discretion.
3.2 The Employee shall have a bonus opportunity with respect
to each fiscal year of the Company ending during the term of this Agreement, up
to a maximum amount of sixty percent (60%) of his base salary for such fiscal
year, in accordance with the terms of the Company's bonus program for senior
executives.
4. Expense Reimbursement. During the term of this Agreement,
the Company shall reimburse the Employee for all reasonable and necessary
out-of-pocket expenses incurred by him in connection with the performance of his
duties hereunder, upon the presentation of proper accounts therefor in
accordance with the Company's policies.
5. Benefits, Stock Options, Relocation.
5.1 Benefits. During the term of this Agreement, the Employee
will be eligible to participate in all employee benefit plans and programs,
including 401(K), pension, stock purchase, dental and medical plans, offered by
the Company from time to time to its employees of comparable seniority, subject
to the provisions of such plans and programs as in effect from time to time.
Commencing after one year of employment, the Employee will be entitled to two
(2) weeks' paid vacation and six (6) paid sick days per year.
<PAGE> 3
3
5.2 Stock Options. The Company shall grant to the Employee
options to purchase 50,000 shares of common stock, $.01 par value, of the
Company under the Company's 1992 Stock Option Plan at an exercise price equal to
the market value of the common stock on the date of grant. Such options shall be
subject in all respects to the terms of the Stock Option Certificate evidencing
the grant and the terms of the 1992 Stock Option Plan.
5.3 Relocation. The Company shall reimburse the Employee for
reasonable moving expenses incurred in his relocation from Ballwin, Missouri to
the Whippany, New Jersey area, as set forth on Schedule A to this Agreement.
6. Termination of Employment.
6.1 Death. In the event of the death of the Employee during
the term of this Agreement, the Company shall pay to the estate or other legal
representative of the Employee the base salary provided for in Section 3 (at the
biweekly rate then in effect) accrued to the date of the Employee's death and
not theretofore paid to the Employee. Rights and benefits of the estate or other
legal representative of the Employee under the benefit plans and programs of the
Company shall be determined in accordance with the provisions of such plans and
programs. Neither the estate or other legal representative of the Employee nor
the Company shall have any further rights or obligations under this Agreement.
6.2 Disability. If the Employee shall become incapacitated by
reason of sickness, accident or other physical or mental disability and shall be
unable to perform his duties hereunder for a period of six (6) consecutive
months or for an aggregate period of nine (9) months in any twelve (12)
consecutive months, the employment of the Employee hereunder may be terminated
by the Company or the Employee, upon thirty (30) days notice to the other party.
In the event of such termination, the Company shall pay to the Employee the base
salary provided for in Section 3 (at the biweekly rate then in effect) accrued
to the date of termination and not theretofore paid to the Employee. Rights and
benefits of the Employee under the benefit plans and programs of the Company
shall be determined in accordance with the terms and provisions of such plans
and programs. Neither the Employee nor the Company shall have any further rights
or obligations under this Agreement, except as provided in Sections 7, 8, 9 and
10.
<PAGE> 4
4
6.3 Due Cause. The employment of the Employee hereunder may be
terminated by the Company at any time for Due Cause (as hereinafter defined). In
the event of such termination, the Company shall pay to the Employee the base
salary provided for in Section 3 (at the biweekly rate then in effect) accrued
to the date of such termination and not theretofore paid to the Employee. Rights
and benefits of the Employee under the benefit plans and programs of the Company
shall be determined in accordance with the provisions of such plans and
programs. For purposes hereof, "Due Cause" shall include (a) if prior to a
Change in Control (as hereinafter defined), (i) the Employee's failure to
discharge his duties and responsibilities under this Agreement, as determined by
a majority of the Board of Directors of the Company, whose good faith
determination with respect thereto shall be conclusive and binding upon the
Employee, or (ii) the Employee's commission of (x) a felony or (y) any crime or
offense involving moral turpitude, or (b) if subsequent to a Change in Control,
(i) willful, gross neglect or willful, gross misconduct in the Employee's
discharge of his duties and responsibilties under this Agreement, or (ii) the
Employee's commission of (x) a felony or (y) any crime or offense involving
moral turpitude; provided, however, with respect to subsection (b) that the
Employee shall be given written notice by a majority of the Board of Directors
of the Company that it intends to terminate the Employee's employment for Due
Cause under subsection (b), which written notice shall specify the act or acts
upon the basis of which the majority of the Board of Directors of the Company
intends so to terminate the Employee's employment, and the Employee shall then
be given the opportunity, within fifteen (15) days of his receipt of such
notice, to have a meeting with the Board of Directors of the Company to discuss
such act or acts. If the basis of such written notice is other than an act or
acts described in subsection (b)(ii), the Employee shall be given seven (7) days
after such meeting within which to cease or correct the performance (or
nonperformance) giving rise to such written notice and, upon failure of the
Employee within such seven (7) days to cease or correct such performance (or
nonperformance), the Employee's employment by the Company shall automatically be
terminated hereunder for Due Cause. After the satisfaction of any claim of the
Company against the Employee incidental to such Due Cause, neither the Employee
nor the Company shall have any further rights or obligations under this
Agreement, except as provided in Sections 7, 8, 9 and 10.
6.4 Other Termination by the Company. The Company may
terminate the Employee's employment at any time for whatever reason it deems
appropriate; provided,
<PAGE> 5
5
however, that in the event that such termination is not pursuant to Sections
6.1, 6.2, 6.3 or 6.5, the Company shall continue to pay to the Employee, for a
period of twelve (12) months commencing on the date of termination, the base
salary provided for in Section 3.1 (at the biweekly rate then in effect). The
Company shall also pay to the Employee, within thirty (30) days of the date of
such termination, a lump sum amount in cash equal to the present value as of the
date of such termination of any unvested benefits which the Employee shall have
accrued to the date of such termination under the Isomedix Inc. Retirement Plan.
The Employee shall be under no obligation to seek subsequent employment and upon
obtaining subsequent employment shall be under no obligation to offset any
amounts earned from such subsequent employment (whether as an employee, a
consultant or otherwise) against such lump sum payments. Rights and benefits of
the Employee under the other benefit plans and programs of the Company shall be
determined in accordance with the provisions of such plans and programs. Neither
the Employee nor the Company shall have any further rights or obligations under
this Agreement, except as provided in Sections 7, 8, 9 and 10.
6.5 Termination of Employment Following a Change in Control.
The Employee may terminate his employment with the Company during the one (1)
year period following a Change in Control. In the event of such termination or a
termination by the Company during such one (1) year period other than for Due
Cause, the Company shall pay to the Employee, within thirty (30) days of the
date of such termination, (i) a lump sum amount in cash equal to two times his
annual base salary (at the biweekly rate then in effect), and (ii) a lump sum
amount in cash equal to the present value as of the date of such termination of
any unvested benefits which the Employee shall have accrued to the date of such
termination under the Isomedix Inc. Retirement Plan. The Employee shall be under
no obligation to seek subsequent employment and upon obtaining subsequent
employment shall be under no obligation to offset any amounts earned from such
subsequent employment (whether as an employee, a consultant or otherwise)
against such lump sum payments. For purposes of this Agreement, a Change in
Control of the Company shall be deemed to have occurred if:
(A) a "person" (meaning an individual, a partnership,
or other group or association as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, other than the Employee or a group including
the Employee), acquires twenty percent (20%) or more of the combined voting
power of the outstanding securities of the Company having a right to vote in
elections of directors
<PAGE> 6
6
and such acquisition shall not have been approved within sixty (60) days
following such acquisition by a majority of the Continuing Directors (as
hereinafter defined) then in office; or
(B) Continuing Directors shall for any reason cease
to constitute a majority of the Board of Directors of the Company; or
(C) the business of the Company is disposed of by the
Company to a party or parties other than a subsidiary or other affiliate of the
Company, in which the Company owns less than a majority of the equity, pursuant
to a partial or complete liquidation of the Company, sale of assets (including
stock of a subsidiary of the Company) or otherwise, and such disposition shall
not have been approved in advance by a majority of the Continuing Directors then
in office.
For purposes of this Agreement, the term "Continuing Director"
shall mean a member of the Board of Directors of the Company who either was a
member of the Board of Directors on the date hereof or who subsequently became a
Director and whose election, or nomination for election, was approved by a vote
of at least two-thirds of the Continuing Directors then in office.
7. Confidential Information.
7.1 The Employee shall, during the Employee's employment with
the Company and thereafter, treat all confidential material confidentially and,
except in accordance with the terms of this Agreement, shall not, without the
prior written consent of a majority of the Board of Directors of the Company,
disclose such material, directly or indirectly, to any party not at the time of
such disclosure an employee or agent of the Company, or remove from the
Company's premises any notes or records relating thereto, copies or facsimiles
thereof (whether made by electronic, electrical, magnetic, optical, laser,
acoustic or other means), or any other property of the Company. The Employee
agrees that all confidential material, together with all notes and records of
the Employee relating thereto, and all copies or facsimiles thereof in the
possession of the Employee (whether made by the foregoing or other means) are
the exclusive property of the Company. The Employee shall not in any manner use
any confidential material, or any other property of the Company, in any manner
not specifically directed by the Company or in any way which is detrimental to
the Company,
<PAGE> 7
7
as determined by a majority of the Board of Directors of the Company in its sole
discretion.
7.2 For the purposes hereof, the term "confidential material"
shall mean all information in any way concerning the activities, business or
affairs of the Company or the Company's customers and clients, including,
without limitation, information concerning trade secrets and the preparation of
raw material for, manufacture of, and/or finishing processes utilized in the
production of, the products or projects of the Company and/or any improvements
therein, together with all sales and financial information concerning the
Company and any and all information concerning projects in research and
development or marketing plans for any such products or projects, and all
information concerning the practices, customers and clients of the Company, and
all information in any way concerning the activities, business or affairs of any
of such customers or clients, as such, which is furnished to the Employee by the
Company or any of its agents, customers or clients, as such, or otherwise
acquired by the Employee in the course of the Employee's employment with the
Company; provided, however, that the term "confidential material" shall not
include information which (i) becomes generally available to the public other
than as a result of a disclosure by the Employee, (ii) was available to the
Employee on a non-confidential basis prior to his employment with the Company or
(iii) becomes available to the Employee on a non-confidential basis from a
source other than the Company or any of its agents, customers or clients, as
such, provided that such source is not bound by a confidentiality agreement with
the Company or any of such agents, customers or clients.
7.3 Promptly upon the request of the Company, the Employee
shall deliver to the Company all confidential material in the possession of the
Employee without retaining a copy thereof, unless, in the opinion of counsel for
the Company, either returning such confidential material or failing to retain a
copy thereof would violate any applicable Federal, state, local or foreign law,
in which event such confidential material shall be returned without retaining
any copies thereof as soon as practicable after such counsel advises that the
same may be lawfully done.
7.4 In the event that the Employee is required, by oral
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process, to disclose any confidential
material, the Employee shall provide the Company with
<PAGE> 8
8
prompt notice thereof so that the Company may seek an appropriate protective
order and/or waive compliance by the Employee with the provisions hereof;
provided, however, that if in the absence of a protective order or the receipt
of such a waiver, the Employee is, in the opinion of counsel for the Company,
compelled to disclose confidential material not otherwise disclosable hereunder
to any legislative, judicial or regulatory body, agency or authority, or else be
exposed to liability for contempt, fine or penalty or to other censure, such
confidential material may be so disclosed.
8. Intellectual Property. Any and all inventions made,
developed or created by the Employee (whether at the request or suggestion of
the Company or otherwise, whether alone or in conjunction with others, and
whether during regular hours of work or otherwise) (a) during the period of this
Agreement, or (b) within a period of one (1) year after the date of termination
of employment hereunder, which may be directly or indirectly useful in, or
relate to, the business of or tests being carried out by the Company, shall be
promptly and fully disclosed by the Employee to the Board of Directors of the
Company and shall be the Company's exclusive property as against the Employee,
and the Employee shall promptly deliver to an appropriate representative of the
Company as designated by the Board of Directors all papers, drawings, models,
data and other material relating to any invention made, developed or created by
him as aforesaid. The Employee shall, at the request of the Company and without
any payment therefor, execute any documents necessary or advisable in the
opinion of the Company's counsel to direct issuance of patents or copyrights to
the Company with respect to such inventions as are to be the Company's exclusive
property as against the Employee or to vest in the Company title to such
inventions as against the Employee. The expense of securing any such patent or
copyright shall be borne by the Company.
9. Interference with the Company. The Employee acknowledges
that the services to be rendered by him to the Company are of a special and
unique character. The Employee agrees that, in consideration of his employment
hereunder, the Employee will not (a) during the period of his employment with
the Company and thereafter for a period of one year commencing on the date of
termination of his employment with the Company (i) solicit or entice or endeavor
to solicit or entice away from the Company any person who was an officer,
employee or consultant of the Company, either on his own account or for any
person, firm, corporation or other organization,
<PAGE> 9
9
whether or not such person would commit any breach of his contract of employment
by reason of leaving the service of the Company, and the Employee agrees not to
employ, directly or indirectly, any person who was an officer or employee of the
Company or who by reason of such position at any time is or may be likely to be
in possession of any confidential information or trade secrets relating to the
businesses or products of the Company or (ii) solicit or entice or endeavor to
solicit or entice away from the Company any present or prospective customer of
the Company, or (b) at any time, take any action or make any statement the
effect of which would be, directly or indirectly, to impair the good will of the
Company or the business reputation or good name of the Company, or be otherwise
detrimental to the interests of the Company, including any action or statement
intended, directly or indirectly, to benefit a competitor of the Company. For
purposes hereof, "prospective customer" shall refer to a customer with whom the
Company has had significiant contact regarding the provision of products or
services to such customer during the three (3) month period preceding the
termination of the Employee's employment hereunder.
10. Equitable Relief. In the event of a breach or threatened
breach by the Employee of any of the provisions of Sections 7, 8 or 9 of this
Agreement, the Employee hereby consents and agrees that the Company shall be
entitled to an injunction or similar equitable relief from any court of
competent jurisdiction restraining the Employee from committing or continuing
any such breach or threatened breach or granting specific performance of any act
required to be performed by the Employee under any of such provisions, without
the necessity of showing any actual damage or that money damages would not
afford an adequate remedy and without the necessity of posting any bond or other
security. Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies at law or in equity which it may have.
11. Successors and Assigns.
11.1 Assignment by the Company. The Company shall require any
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such
succession had taken place. As used in this Section, the "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which otherwise
<PAGE> 10
10
becomes bound by all the terms and provisions of this Agreement by operation of
law and this Agreement shall be binding upon, and inure to the benefit of, the
Company, as so defined.
11.2 Assignment by the Employee. The Employee may not assign
this Agreement or any part thereof without the prior written consent of a
majority of the Board of Directors of the Company; provided, however, that
nothing herein shall preclude one or more beneficiaries of the Employee from
receiving any amount that may be payable following the occurrence of his legal
incompetency or his death and shall not preclude the legal representative of his
estate from receiving such amount or from assigning any right hereunder to the
person or persons entitled thereto under his will or, in the case of intestacy,
to the person or persons entitled thereto under the laws of intestacy applicable
to his estate. The term "beneficiaries", as used in this Agreement, shall mean a
beneficiary or beneficiaries so designated to receive any such amount or, if no
beneficiary has been so designated, the legal representative of the Employee (in
the event of his incompetency) or the Employee's estate.
12. Governing Law. This Agreement shall be deemed a contract
made under, and for all purposes shall be construed in accordance with, the laws
of the State of New Jersey applicable to contracts to be performed entirely
within such State. In the event that a court of any jurisdiction shall hold any
of the provisions of this Agreement to be wholly or partially unenforceable for
any reason, such determination shall not bar or in any way affect the Company's
right to relief as provided for herein in the courts of any other jurisdiction.
Such provisions, as they relate to each jurisdiction, are, for this purpose,
severable into diverse and independent covenants. Service of process on the
parties hereto at the addresses set forth herein shall be deemed adequate
service of such process.
13. Entire Agreement. This Agreement contains all the
understandings and representations between the parties hereto pertaining to the
subject matter hereof and supersedes all undertakings and agreements, whether
oral or in writing, if any there be, previously entered into by them with
respect thereto.
14. Amendment, Modification, Waiver. No provision of this
Agreement may be amended or modified unless such amendment or modification is
agreed to in writing and signed by the Employee and by a duly authorized
representative of the Company other than the Employee.
<PAGE> 11
11
Except as otherwise specifically provided in this Agreement, no waiver by either
party hereto of any breach by the other party hereto of any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of a similar or dissimilar provision or condition at the same or any
prior or subsequent time, nor shall the failure of or delay by either party
hereto in exercising any right, power or privilege hereunder operate as a waiver
thereof to preclude any other or further exercise thereof or the exercise of any
other such right, power or privilege.
15. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or any breach thereof, shall, except as provided in
Section 10, be settled by arbitration in accordance with the rules of the
American Arbitration Association then in effect and judgment upon such award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration shall be held in the area where the Company then has
its principal place of business. The arbitration award shall include attorneys'
fees and costs to the prevailing party.
16. Notices. Any notice to be given hereunder shall be in
writing and delivered personally or sent by certified mail, postage prepaid,
return receipt requested, addressed to the party concerned at the address
indicated below or at such other address as such party may subsequently
designate by like notice:
If to the Company:
Isomedix Inc.
11 Apollo Drive
Whippany, New Jersey 07981
Attention: Mr. John Masefield
If to the Employee:
Charles P. Truby
1976 Woodmoor Ridge Drive
Ballwin, Missouri 63011
17. Severability. Should any provision of this Agreement be
held by a court or arbitration panel of competent jurisdiction to be enforceable
only if modified, such holding shall not affect the validity of the remainder of
this Agreement, the balance of which shall continue to be binding upon the
parties hereto with any such modification to become a part hereof and treated as
though
<PAGE> 12
12
originally set forth in this Agreement. The parties further agree that any such
court or arbitration panel is expressly authorized to modify any such
unenforceable provision of this Agreement in lieu of severing such unenforceable
provision from this Agreement in its entirety, whether by rewriting the
offending provision, deleting any or all of the offending provision, adding
additional language to this Agreement, or by making such other modifications as
it deems warranted to carry out the intent and agreement of the parties as
embodied herein to the maximum extent permitted by law. The parties expressly
agree that this Agreement as so modified by the court or arbitration panel shall
be binding upon and enforceable against each of them. In any event, should one
or more of the provisions of this Agreement be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof, and if such provision or
provisions are not modified as provided above, this Agreement shall be construed
as if such invalid, illegal or unenforceable provisions had never been set forth
herein.
18. Withholding. Anything to the contrary notwithstanding, all
payments required to be made by the Company hereunder to the Employee or his
beneficiaries, including his estate, shall be subject to withholding of such
amounts relating to taxes as the Company may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Company, may, in its sole discretion,
accept other provision for payment of taxes as permitted by law, provided it is
satisfied in its sole discretion that all requirements of law affecting its
responsibilities to withhold such taxes have been satisfied.
19. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
20. Titles. Titles of the sections of this Agreement are
intended solely for convenience and no provision of this Agreement is to be
construed by reference to the title of any section.
<PAGE> 13
13
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
ISOMEDIX INC.
By/s/ John Masefield
--------------------------
/s/ Charles P. Truby
---------------------------
Charles P. Truby
<PAGE> 14
SCHEDULE A
a. Normal moving expense to the new location for:
- Packing and unpacking
- Shipping
- Insurance on household goods and personal
effects
- En route expenses (transportation, meals,
lodging, laundry)
- Automobile moving or mileage allowance for
second vehicle
- Storage expenses for household goods and
personal effects for as many as 30 days
- Normal hook up of utilities at the new
location
b. Reimbursement of points for the residence purchased in New Jersey.
c. Living expenses for up to 90 days in the vicinity of Whippany,
New Jersey, if temporary housing is required.
d. Vehicle rental for up to 90 days prior to permanent move.
e. Required personal travel back to St. Louis upon my approval by the
President of the Company.
f. Normal brokerage commissions applicable to the sale of your present
residence.
<PAGE> 1
EXHIBIT 10(uu)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 16th day of May, 1995 by and between
ISOMEDIX INC., a Delaware corporation (the "Company"), and JOHN MASEFIELD (the
"Executive").
W I T N E S S E T H :
WHEREAS, the Executive has served since September 1972 as
President and Chief Executive Officer of the Company;
WHEREAS, the Executive's knowledge and experience in the
business and financial affairs of the Company as well as his expertise and
judgment are a valuable asset to the Company;
WHEREAS, the Company desires to continue to retain and secure
for itself the experience, knowledge, advice and services of the Executive as an
employee of the Company; and
WHEREAS, this Agreement was duly authorized and approved for and
on behalf of the Company by the Board of Directors of the Company at a meeting
thereof held on May 16, 1995.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. Employment, Term.
1.1 The Company agrees to employ the Executive, and the
Executive agrees to serve in the employ of the Company, for the term set forth
in Section 1.2, in the position and with the responsibilities, duties and
authority set forth in Section 2 and on the other terms and conditions set forth
in this Agreement.
1.2 The term of the Executive's employment under this Agreement
shall commence on June 1, 1996 and shall terminate on May 31, 2003, unless
sooner terminated in accordance with this Agreement.
2. Position, Duties. During the term of this Agreement the
Executive shall serve in the position of Chairman of the Company. The Executive
shall perform, faithfully and diligently, services of an executive,
<PAGE> 2
2
administrative and consultative nature for the Company, appropriate to said
position, pertaining to (a) top-level business and financial affairs of the
Company and (b) such additional consulting services as in the Executive's sole
judgment are pertinent thereto. The Executive shall report directly to the Board
of Directors of the Company.
3. Compensation.
3.1 During the term of this Agreement, the Company shall pay the
Executive, and the Executive shall accept, a salary of $1,750,000 (the
"Aggregate Salary") in equal annual installments of $250,000 payable in equal
monthly installments on the first business day of each month.
3.2 During the term of this Agreement, the Executive shall be
entitled to such bonus payments for exceptional contributions to the Company as
shall be determined by the Board of Directors of the Company.
4. Fringe Benefits. During the term of this Agreement, the
Employee will be eligible to participate in all employee benefit plans and
programs offered by the Company from time to time to its employees of comparable
seniority, including without limitation life, hospitalization, surgical, major
medical and disability insurance plans and programs, stock option and stock
purchase plans and bonus plans, subject to the provisions of such plans and
programs as in effect from time to time.
5. Reimbursement of Expenses; Office Space. During the term of
of this Agreement, the Company shall, consistent with Company policy, reimburse
the Executive and his assistant for all reasonable and necessary travel,
entertainment or other related expenses incurred in carrying out duties and
responsibilities hereunder, against an accounting thereof submitted by the
Executive. The Executive and his assistant shall be furnished, at no cost to
them, during the term of this Agreement, with office space at the Company's
offices. If the Executive desires to substitute such office space with an office
at his residence, the Company shall reimburse the Executive for expenses
incurred in connection with such office at his residence.
6. Use of Automobile. During the term of this Agreement, the
Company shall reimburse the Executive for the operation and reasonable repair
costs of the
<PAGE> 3
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Executive's automobile and for gas and oil expenses, against an accounting
thereof submitted by the Executive.
7. Inability to Perform. It is expressly understood and agreed
by the Executive and the Company that (a) the inability of the Executive to
render services to the Company by reason of absences, illness, disability or
incapacity, or for any other reasonable cause, or (b) the failure of the
Executive to render any services to the Company which he may be asked to render,
other than the services set forth in clause (a) of Section 2, shall not
constitute a failure to perform his obligations hereunder and shall not be
deemed a breach or default by him hereunder. Subject to the foregoing the
Executive agrees to devote his best energy, ability and time as shall be
reasonably requested by the Company, provided, however, that nothing herein
shall be construed as requiring the Executive to spend more than an aggregate of
fifteen (15) business days per calendar quarter in discharging his duties
hereunder.
8. Failure to Make Payments. If the Company shall fail to pay to
the Executive or to his beneficiaries (as defined in Section 14), as the case
may be, any compensation or termination benefit or any other amount payable to
the Executive hereunder for a period of thirty (30) days after the same shall
become due and payable, such amount shall bear interest at the rate of eighteen
percent (18%) per annum or, if less, the highest legal rate per annum permitted
under the laws of the State of New Jersey, from and after the date that such
amount shall have become due and payable to and including the date that such
amount shall have been paid in full.
9. Termination of Employment.
9.1 Death. In the event of the death of the Executive during the
term of this Agreement, the Company shall pay to the Executive's beneficiaries
(as defined in Section 14) the unpaid balance of the Aggregate Salary provided
for in Section 3 in equal monthly installments over a period commencing on the
date of the Executive's death and ending on the first to occur of (a) May 31,
2003 or (b) the third anniversary of the Executive's death. Rights and benefits
of the Executive's beneficiaries or the estate or other legal representative of
the Executive under the benefit plans and programs of the Company shall be
determined in accordance with the provisions of such plans and programs. Neither
the Executive's beneficiaries or the
<PAGE> 4
4
estate or other legal representative of the Executive nor the Company shall have
any further rights or obligations under this Agreement.
9.2 Due Cause. The employment of the Executive hereunder may be
terminated by the Company at any time for Due Cause (as hereinafter defined). In
the event of such termination, the Company shall pay to the Executive the
portion of the Aggregate Salary provided for in Section 3 accrued to the date of
such termination and not theretofore paid to the Executive. Rights and benefits
of the Executive under the benefit plans and programs of the Company shall be
determined in accordance with the provisions of such plans and programs. For
purposes hereof, "Due Cause" shall mean (i) willful, gross neglect or willful,
gross misconduct in the Executive's discharge of his duties and responsibilities
under this Agreement, or (ii) the Executive's commission of (x) a felony or (y)
any crime or offense involving moral turpitude; provided, however, that the
Executive shall be given written notice by a majority of the Board of Directors
of the Company that it intends to terminate the Executive's employment for Due
Cause, which written notice shall specify the act or acts upon the basis of
which the majority of the Board of Directors of the Company intends so to
terminate the Executive's employment, and the Executive shall then be given the
opportunity, within fifteen (15) days of his receipt of such notice, to have a
meeting with the Board of Directors of the Company to discuss such act or acts.
If the basis of such written notice is other than an act or acts described in
clause (ii), the Executive shall be given seven (7) days after such meeting
within which to cease or correct the performance (or nonperformance) giving rise
to such written notice and, upon failure of the Executive within such seven (7)
days to cease or correct such performance (or nonperformance), the Executive's
employment by the Company shall automatically be terminated hereunder for Due
Cause. After the satisfaction of any claim of the Company against the Executive
incidental to such Due Cause, neither the Executive nor the Company shall have
any further rights or obligations under this Agreement, except as provided in
Sections 10, 11, 12, 13, 15, 19 and 20.
9.3 Other Termination by the Company. The Company may terminate
the Executive's employment at any time for whatever reason it deems appropriate;
provided, however, that in the event that such termination is not pursuant to
Section 9.1 or 9.2, the Company shall pay to the Executive, within thirty (30)
days of the date of such
<PAGE> 5
5
termination, a lump sum amount in cash equal to the unpaid balance of the
Aggregate Salary provided for in Section 3. The Executive shall be under no
obligation to seek subsequent employment and upon obtaining subsequent
employment shall be under no obligation to offset any amounts earned from such
subsequent employment (whether as an employee, a consultant or otherwise)
against such lump sum payment. The Company shall continue to carry the group
life, hospitalization, surgical and major medical insurance coverage for the
Executive until the first to occur of (a) May 31, 2003 or (b) the third
anniversary of the date of termination of the Executive's employment. Rights and
benefits of the Executive under the other benefit plans and programs of the
Company shall be determined in accordance with the provisions of such plans and
programs. Neither the Executive nor the Company shall have any further rights or
obligations under this Agreement, except as provided in Sections 10, 11, 12, 13,
15, 19 and 20.
9.4 Constructive Termination Following a Change in Control.
Anything herein to the contrary notwithstanding, if, following a Change in
Control of the Company, the Company:
(A) demotes the Executive to a lesser position than
provided in Section 2;
(B) causes a material change in the nature or scope of
the authorities, powers, functions, duties, or responsibilities attached to the
Executive's position as described in Section 2;
(C) decreases the Executive's salary below the level
provided for in Section 3;
(D) fails to obtain the agreement of a successor company
to assume the obligation of the Company under this Agreement as required by
Section 14;
then such action (or inaction) by the Company, unless consented to in writing by
the Executive, shall constitute a termination of the Executive's employment by
the Company pursuant to Section 9.3. Notwithstanding the preceding sentence,
within thirty (30) days after learning of the action (or inaction) constituting
the basis for a Constructive Termination of Employment, the Executive shall
(unless he gives written consent thereto) advise the Company in writing that the
action (or inaction) constitutes a termination of his employment pursuant to
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Section 9.3 in which event the Company shall have thirty (30) days in which to
correct such action (or inaction) and if the Company does so correct such action
(or inaction) the Executive shall not be entitled to terminate his employment
under this Section as a result of such action (or inaction).
9.5 Termination of Employment Following a Change in Control. The
Executive may terminate his employment with the Company during the one (1) year
period following a Change in Control of the Company, and such termination of
employment shall be deemed to constitute a termination of the Executive's
employment by the Company pursuant to Section 9.3. For purposes of this
Agreement, a Change in Control of the Company shall be deemed to have occurred
if:
(A) a "person" (meaning an individual, a partnership, or
other group or association as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, other than the Executive or a group including
the Executive), acquires twenty percent (20%) or more of the combined voting
power of the outstanding securities of the Company having a right to vote in
elections of directors and such acquisition shall not have been approved within
sixty (60) days following such acquisition by a majority of the Continuing
Directors (as hereinafter defined) then in office; or
(B) Continuing Directors shall for any reason cease to
constitute a majority of the Board of Directors of the Company; or
(C) the business of the Company is disposed of by the
Company to a party or parties other than a subsidiary or other affiliate of the
Company, in which the Company owns less than a majority of the equity, pursuant
to a partial or complete liquidation of the Company, sale of assets (including
stock of a subsidiary of the Company) or otherwise, and such disposition shall
not have been approved in advance by a majority of the Continuing Directors then
in office.
For purposes of this Agreement, the term "Continuing Director"
shall mean a member of the Board of Directors of the Company who either was a
member of the Board of Directors on the date hereof or who subsequently became a
Director and whose election, or nomination for election, was approved by a vote
of at least two-thirds of the Continuing Directors then in office.
<PAGE> 7
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9.6 Limitation on Payments Following a Change in Control.
Notwithstanding the foregoing, if any payment to or for the benefit of the
Executive under this Agreement either alone or together with other payments to
or for the benefit of the Executive would constitute a "parachute payment" (as
defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code")), the payments under this Agreement shall be reduced to the largest
amount that will eliminate both the imposition of the excise tax imposed by
Section 4999 of the Code and the disallowance of deductions to the Company under
Section 280G of the Code for any such payments. The amount and method of any
reduction in the payments under this Agreement pursuant to this Section 9.6
shall be as reasonably determined by the Compensation Committee of the Board of
Directors of the Company.
10. Confidential Information.
10.1 The Executive shall, during the Executive's employment with
the Company and thereafter, treat all confidential material confidentially and,
except in accordance with the terms of this Agreement and as required in the
performance of his duties hereunder, shall not, without the prior written
consent of a majority of the Board of Directors of the Company, disclose such
material, directly or indirectly, to any party not at the time of such
disclosure an employee or agent of the Company, or remove from the Company's
premises any notes or records relating thereto, copies or facsimiles thereof
(whether made by electronic, electrical, magnetic, optical, laser, acoustic or
other means), or any other property of the Company. The Executive agrees that
all confidential material, together with all notes and records of the Executive
relating thereto, and all copies or facsimiles thereof in the possession of the
Executive (whether made by the foregoing or other means) are the exclusive
property of the Company. The Executive shall not in any manner use any
confidential material, or any other property of the Company, in any manner not
specifically directed by the Company or in any way which is detrimental to the
Company, as determined by a majority of the Board of Directors of the Company in
its sole discretion.
10.2 For the purposes hereof, the term "confidential material"
shall mean all information in any way concerning the activities, business or
affairs of the Company or the Company's customers and clients, including,
without limitation, information concerning trade secrets
<PAGE> 8
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and the preparation of raw material for, manufacture of, and/or finishing
processes utilized in the production of, the products or projects of the Company
and/or any improvements therein, together with all sales and financial
information concerning the Company and any and all information concerning
projects in research and development or marketing plans for any such products or
projects, and all information concerning the practices, customers and clients of
the Company, and all information in any way concerning the activities, business
or affairs of any of such customers or clients, as such, which is furnished to
the Executive by the Company or any of its agents, customers or clients, as
such, or otherwise acquired by the Executive in the course of the Executive's
employment with the Company; provided, however, that the term "confidential
material" shall not include information which (i) becomes generally available to
the public other than as a result of a disclosure by the Executive, (ii) was
available to the Executive on a non-confidential basis prior to his employment
with the Company or (iii) becomes available to the Executive on a
non-confidential basis from a source other than the Company or any of its
agents, customers or clients, as such, provided that such source is not bound by
a confidentiality agreement with the Company or any of such agents, customers or
clients.
10.3 Promptly upon the request of the Company, the Executive
shall deliver to the Company all confidential material in the possession of the
Executive without retaining a copy thereof, unless, in the opinion of counsel
for the Company, either returning such confidential material or failing to
retain a copy thereof would violate any applicable Federal, state, local or
foreign law, in which event such confidential material shall be returned without
retaining any copies thereof as soon as practicable after such counsel advises
that the same may be lawfully done.
10.4 In the event that the Executive is required, by oral
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process, to disclose any confidential
material, the Executive shall provide the Company with prompt notice thereof so
that the Company may seek an appropriate protective order and/or waive
compliance by the Executive with the provisions hereof; provided, however, that
if in the absence of a protective order or the receipt of such a waiver, the
Executive is, in the opinion of counsel for the Company, compelled to disclose
confidential
<PAGE> 9
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material not otherwise disclosable hereunder to any legislative, judicial or
regulatory body, agency or authority, or else be exposed to liability for
contempt, fine or penalty or to other censure, such confidential material may be
so disclosed.
11. Intellectual Property. Any and all inventions made,
developed or created by the Executive (whether at the request or suggestion of
the Company or otherwise, whether alone or in conjunction with others, and
whether during regular hours of work or otherwise) (a) during the period of this
Agreement, or (b) within a period of one (1) year after the date of termination
of employment hereunder, which may be directly or indirectly useful in, or
relate to, the business of or tests being carried out by the Company, shall be
promptly and fully disclosed by the Executive to the Board of Directors of the
Company and shall be the Company's exclusive property as against the Executive,
and the Executive shall promptly deliver to an appropriate representative of the
Company as designated by the Board of Directors all papers, drawings, models,
data and other material relating to any invention made, developed or created by
him as aforesaid. The Executive shall, at the request of the Company and without
any payment therefor, execute any documents necessary or advisable in the
opinion of the Company's counsel to direct issuance of patents or copyrights to
the Company with respect to such inventions as are to be the Company's exclusive
property as against the Executive or to vest in the Company title to such
inventions as against the Executive. The expense of securing any such patent or
copyright shall be borne by the Company.
12. Interference with the Company. The Executive acknowledges
that the services to be rendered by him to the Company are of a special and
unique character. The Executive agrees that, in consideration of his employment
hereunder, the Executive will not (a) during the term of this Agreement and
thereafter for a period of one year commencing on the date of termination of his
employment with the Company (i) solicit or entice or endeavor to solicit or
entice away from the Company any person who was an officer, employee or
consultant of the Company, either on his own account or for any person, firm,
corporation or other organization, whether or not such person would commit any
breach of his contract of employment by reason of leaving the service of the
Company, and the Executive agrees not to employ, directly or indirectly, any
person who was an officer or employee of
<PAGE> 10
10
the Company or who by reason of such position at any time is or may be likely to
be in possession of any confidential information or trade secrets relating to
the businesses or products of the Company or (ii) solicit or entice or endeavor
to solicit or entice away from the Company any past, present or prospective
customer of the Company, or (b) at any time, take any action or make any
statement the effect of which would be, directly or indirectly, to impair the
good will of the Company or the business reputation or good name of the Company,
or be otherwise detrimental to the interests of the Company, including any
action or statement intended, directly or indirectly, to benefit a competitor of
the Company. For purposes hereof, "prospective customer" shall refer to a
customer with whom the Company has had significant contact regarding the
provision of products or services to such customer during the three (3) month
period preceding the termination of the Executive's employment hereunder.
13. Equitable Relief. In the event of a breach or threatened
breach by the Executive of any of the provisions of Sections 10, 11 or 12 of
this Agreement, the Executive hereby consents and agrees that the Company shall
be entitled to an injunction or similar equitable relief from any court of
competent jurisdiction restraining the Executive from committing or continuing
any such breach or threatened breach or granting specific performance of any act
required to be performed by the Executive under any of such provisions, without
the necessity of showing any actual damage or that money damages would not
afford an adequate remedy and without the necessity of posting any bond or other
security. Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies at law or in equity which it may have.
14. Successors and Assigns.
14.1 Assignment by the Company. The Company shall require any
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such
succession had taken place. As used in this Section, the "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law and this Agreement shall be
<PAGE> 11
11
binding upon, and inure to the benefit of, the Company, as so defined.
14.2 Assignment by the Executive. The Executive may not assign
this Agreement or any part thereof without the prior written consent of a
majority of the Board of Directors of the Company; provided, however, that
nothing herein shall preclude one or more beneficiaries of the Executive from
receiving any amount that may be payable following the occurrence of his legal
incompetency or his death and shall not preclude the legal representative of his
estate from receiving such amount or from assigning any right hereunder to the
person or persons entitled thereto under his will or, in the case of intestacy,
to the person or persons entitled thereto under the laws of intestacy applicable
to his estate. The term "beneficiaries", as used in this Agreement, shall mean a
beneficiary or beneficiaries so designated to receive any such amount or, if no
beneficiary has been so designated, the legal representative of the Executive
(in the event of his incompetency) or the Executive's estate.
15. Governing Law. This Agreement shall be deemed a contract
made under, and for all purposes shall be construed in accordance with, the laws
of the State of New Jersey applicable to contracts to be performed entirely
within such State. In the event that a court of any jurisdiction shall hold any
of the provisions of this Agreement to be wholly or partially unenforceable for
any reason, such determination shall not bar or in any way affect the Company's
right to relief as provided for herein in the courts of any other jurisdiction.
Such provisions, as they relate to each jurisdiction, are, for this purpose,
severable into diverse and independent covenants. Service of process on the
parties hereto at the addresses set forth herein shall be deemed adequate
service of such process.
16. Entire Agreement. This Agreement contains all the
understandings and representations between the parties hereto pertaining to the
subject matter hereof and supersedes all undertakings and agreements, whether
oral or in writing, if any there be, previously entered into by them with
respect thereto, except for the Employment Agreement dated as of February 1,
1988 between the Company and the Executive which continues in effect until June
1, 1996 and the Indemnification Agreement dated as of February 18, 1994 between
the Company and the Executive which continues in effect during the period of any
employment or
<PAGE> 12
12
other association of the Executive with the Company and thereafter in accordance
with its terms.
17. Amendment, Modification, Waiver. No provision of this
Agreement may be amended or modified unless such amendment or modification is
agreed to in writing and signed by the Executive and by a duly authorized
representative of the Company other than the Executive. Except as otherwise
specifically provided in this Agreement, no waiver by either party hereto of any
breach by the other party hereto of any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or any prior or subsequent time,
nor shall the failure of or delay by either party hereto in exercising any
right, power or privilege hereunder operate as a waiver thereof to preclude any
other or further exercise thereof or the exercise of any other such right, power
or privilege.
18. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or any breach thereof, shall, except as provided in
Section 13, be settled by arbitration in accordance with the rules of the
American Arbitration Association then in effect and judgment upon such award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration shall be held in the area where the Company then has
its principal place of business. The arbitration award shall include an award of
attorneys' fees and costs to the prevailing party.
19. Advance of Defense Expenses. In the event of any action,
proceeding or claim against the Executive arising out of his serving or having
served in his capacity as an officer and/or director of the Company, which in
the Executive's sole judgment requires him to retain counsel (such choice of
counsel to be made in his sole and absolute discretion) or otherwise expend his
personal funds for his defense in connection therewith, the Company shall be
obligated to advance to the Executive (or pay directly to his counsel) counsel
fees and other costs associated with the Executive's defense of such action,
proceeding or claim; provided, however, that in such event the Executive shall
first agree in writing, without posting bond or collateral, to repay all sums
paid or advanced to him pursuant to this Section 20 in the event that the final
disposition of such action, proceeding or claim is one for which the Executive
would not be entitled to
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indemnification pursuant to the provisions of the laws of the State of Delaware
or the Certificate of Incorporation or By-laws of the Company. The rights and
obligations of the Executive and the Company as set forth in this Section 19 are
in addition to their respective rights and obligations under the Indemnification
Agreement referred to in Section 16.
20. Notices. Any notice to be given hereunder shall be in
writing and delivered personally or sent by certified mail, postage prepaid,
return receipt requested, addressed to the party concerned at the address
indicated below or at such other address as such party may subsequently
designate by like notice:
If to the Company:
Isomedix Inc.
11 Apollo Drive
Whippany, New Jersey 07981
If to the Executive:
John Masefield
76-B Roxiticus Road
Far Hills, New Jersey 07931
21. Severability. Should any provision of this Agreement be held
by a court or arbitration panel of competent jurisdiction to be enforceable only
if modified, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and treated as though
originally set forth in this Agreement. The parties further agree that any such
court or arbitration panel is expressly authorized to modify any such
unenforceable provision of this Agreement in lieu of severing such unenforceable
provision from this Agreement in its entirety, whether by rewriting the
offending provision, deleting any or all of the offending provision, adding
additional language to this Agreement, or by making such other modifications as
it deems warranted to carry out the intent and agreement of the parties as
embodied herein to the maximum extent permitted by law. The parties expressly
agree that this Agreement as so modified by the court or arbitration panel shall
be binding upon and enforceable against each of them. In any event, should one
or more of the provisions of this Agreement be held to be invalid,
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14
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions hereof, and if such
provision or provisions are not modified as provided above, this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
been set forth herein.
22. Withholding. Anything to the contrary notwithstanding, all
payments required to be made by the Company hereunder to the Executive or his
beneficiaries, including his estate, shall be subject to withholding of such
amounts relating to taxes as the Company may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Company, may, in its sole discretion,
accept other provision for payment of taxes as permitted by law, provided it is
satisfied in its sole discretion that all requirements of law affecting its
responsibilities to withhold such taxes have been satisfied.
23. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
24. Titles. Titles of the sections of this Agreement are
intended solely for convenience and no provision of this Agreement is to be
construed by reference to the title of any section.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
ISOMEDIX INC.
By /s/ Thomas J. DeAngelo
-------------------------------
/s/ John Masefield
-------------------------------
John Masefield
<PAGE> 1
EXHIBIT 10(vv)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 21st day of August, 1995 by and
between ISOMEDIX INC., a Delaware corporation (the "Company"), and PETER MAYER
(the "Employee").
W I T N E S S E T H :
WHEREAS, the Company wishes to retain the services of the
Employee, and the Employee wishes to serve in the employ of the Company, upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. Employment, Term, Automatic Extension.
1.1 The Company agrees to employ the Employee, and the Employee
agrees to serve in the employ of the Company, for the term set forth in Section
1.2, in the position and with the responsibilities, duties and authority set
forth in Section 2 and on the other terms and conditions set forth in this
Agreement.
1.2 The term of the Employee's employment under this Agreement
shall commence on the date hereof and shall terminate on the first anniversary
of the date hereof, unless extended or sooner terminated in accordance with this
Agreement.
1.3 As of the expiration date of the then-current term of this
Agreement (each, an "Automatic Renewal Date"), unless either party shall have
given a notice of non-extension not less than two (2) months prior to such
Automatic Renewal Date, the term of this Agreement shall be extended
automatically for a period of one year to the anniversary of the expiration date
of the then-current term of this Agreement.
2. Position, Duties. The Employee shall serve in the positions
of President and Chief Executive Officer of the Company. The Employee shall
perform, faithfully and diligently, such duties, and shall have such responsi-
bilities, appropriate to said positions, as shall be assigned to him from time
to time by the Chairman of the Company or his designee and the Board of
Directors of the Company. The Employee shall report to the Chairman of the
<PAGE> 2
2
Company or his designee and to the Board of Directors of the Company. The
Employee shall devote his complete and undivided attention to the performance of
his duties and responsibilities hereunder during the normal working hours of
executive employees of the Company. The Employee hereby represents that he is
not bound by any confidentiality agreements or restrictive covenants which
restrict or may restrict his ability to perform his duties hereunder, and agrees
that he will not enter into any such agreements or covenants during the term of
his employment hereunder.
3. Salary, Bonus.
3.1 During the term of this Agreement, in consideration of the
performance by the Employee of the services set forth in Section 2 and his
observance of the other covenants set forth herein, the Company shall pay the
Employee, and the Employee shall accept, a base salary at the rate of $200,000
per annum, payable in accordance with the standard payroll practices of the
Company. The Employee shall be entitled to such increases in base salary during
the term hereof as shall be determined by the Board of Directors of the Company
in its sole discretion.
3.2 The Employee shall have a bonus opportunity with respect to
each fiscal year of the Company ending during the term of this Agreement, up to
a maximum amount of sixty-eight percent (68%) of his base salary for such fiscal
year, in accordance with the terms of the Company's bonus program for senior
executives.
4. Expense Reimbursement, Car Allowance. During the term of this
Agreement, the Company shall reimburse the Employee for all reasonable and
necessary out-of-pocket expenses incurred by him in connection with the
performance of his duties hereunder, upon the presentation of proper accounts
therefor in accordance with the Company's policies. The Company shall provide
the Employee with a car allowance of $867 per month during the first thirty-six
months of the Employee's employment and $450 per month during the Employee's
employment thereafter.
5. Benefits, Stock Options.
5.1 Benefits. During the term of this Agreement, the Employee
will be eligible to participate in all employee benefit plans and programs,
including 401(K), pension, stock purchase, dental and medical plans, offered by
the Company from time to time to its employees of comparable seniority, subject
to the provisions of such plans and programs as in effect from time to time.
<PAGE> 3
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Commencing after one year of employment, the Employee will be entitled to two
(2) weeks' paid vacation and six (6) paid sick days per year.
5.2 Stock Options. The Company shall grant to the Employee
options to purchase 100,000 shares of common stock, $.01 par value, of the
Company under the Company's 1992 Supplemental Stock Option Plan (the "Plan") at
an exercise price equal to the market value of the common stock on the date of
grant. Such options shall become exercisable as to 20,000 shares on the first
anniversary of the date of grant and as to an additional 20,000 shares on each
of the next four anniversaries of the date of grant, and shall become
exercisable in full upon certain change of control events as specified in the
Plan. Such options shall be subject in all respects to the terms of the stock
option certificate evidencing the grant and to the terms of the Plan.
6. Termination of Employment.
6.1 Death. In the event of the death of the Employee during the
term of this Agreement, the Company shall pay to the estate or other legal
representative of the Employee the base salary provided for in Section 3 (at the
rate then in effect) accrued to the date of the Employee's death and not
theretofore paid to the Employee. Rights and benefits of the estate or other
legal representative of the Employee under the benefit plans and programs of the
Company shall be determined in accordance with the provisions of such plans and
programs. Neither the estate or other legal representative of the Employee nor
the Company shall have any further rights or obligations under this Agreement.
6.2 Disability. If the Employee shall become incapacitated by
reason of sickness, accident or other physical or mental disability and shall be
unable to perform his duties hereunder for a period of six (6) consecutive
months or for an aggregate period of nine (9) months in any twelve (12)
consecutive months, the employment of the Employee hereunder may be terminated
by the Company or the Employee, upon thirty (30) days notice to the other party.
In the event of such termination, the Company shall pay to the Employee the base
salary provided for in Section 3 (at the rate then in effect) accrued to the
date of termination and not theretofore paid to the Employee. Rights and
benefits of the Employee under the benefit plans and programs of the Company
shall be determined in accordance with the terms and provisions of such plans
and programs. Neither the Employee nor the
<PAGE> 4
4
Company shall have any further rights or obligations under this Agreement,
except as provided in Sections 7, 8, 9 and 10.
6.3 Due Cause. The employment of the Employee hereunder may be
terminated by the Company at any time for Due Cause (as hereinafter defined). In
the event of such termination, the Company shall pay to the Employee the base
salary provided for in Section 3 (at the rate then in effect) accrued to the
date of such termination and not theretofore paid to the Employee. Rights and
benefits of the Employee under the benefit plans and programs of the Company
shall be determined in accordance with the provisions of such plans and
programs. For purposes hereof, "Due Cause" shall include (i) the Employee's
failure to discharge his duties and responsibilities under this Agreement, as
determined by a majority of the Board of Directors of the Company, whose good
faith determination with respect thereto shall be conclusive and binding upon
the Employee, or (ii) the Employee's commission of (x) a felony or (y) any crime
or offense involving moral turpitude. After the satisfaction of any claim of the
Company against the Employee incidental to such Due Cause, neither the Employee
nor the Company shall have any further rights or obligations under this
Agreement, except as provided in Sections 7, 8, 9 and 10.
6.4 Other Termination by the Company. The Company may terminate
the Employee's employment at any time for whatever reason it deems appropriate;
provided, however, that in the event that such termination is not pursuant to
Sections 6.1, 6.2 or 6.3, the Company shall continue to pay to the Employee, for
a period of twelve (12) months commencing on the date of termination, the base
salary provided for in Section 3.1 (at the rate then in effect). The giving of a
notice of non-extension by the Company under Section 1.3 of this Agreement shall
constitute a termination by the Company pursuant to this Section, effective as
of the date of expiration of the then-current term of this Agreement. The
Employee shall be under no obligation to seek subsequent employment and upon
obtaining subsequent employment shall be under no obligation to offset any
amounts earned from such subsequent employment (whether as an employee, a
consultant or otherwise) against such lump sum payments. Rights and benefits of
the Employee under the other benefit plans and programs of the Company shall be
determined in accordance with the provisions of such plans and programs. Neither
the Employee nor the Company shall have any further rights or obligations under
this Agreement, except as provided in Sections 7, 8, 9 and 10.
<PAGE> 5
5
7. Confidential Information.
7.1 The Employee shall, during the Employee's employment with
the Company and thereafter, treat all confidential material confidentially and,
except in accordance with the terms of this Agreement, shall not, without the
prior written consent of a majority of the Board of Directors of the Company,
disclose such material, directly or indirectly, to any party not at the time of
such disclosure an employee or agent of the Company, or remove from the
Company's premises any notes or records relating thereto, copies or facsimiles
thereof (whether made by electronic, electrical, magnetic, optical, laser,
acoustic or other means), or any other property of the Company. The Employee
agrees that all confidential material, together with all notes and records of
the Employee relating thereto, and all copies or facsimiles thereof in the
possession of the Employee (whether made by the foregoing or other means) are
the exclusive property of the Company. The Employee shall not in any manner use
any confidential material, or any other property of the Company, in any manner
not specifically directed by the Company or in any way which is detrimental to
the Company, as determined by a majority of the Board of Directors of the
Company in its sole discretion.
7.2 For the purposes hereof, the term "confidential material"
shall mean all information in any way concerning the activities, business or
affairs of the Company or the Company's customers and clients, including,
without limitation, information concerning trade secrets and the preparation of
raw material for, manufacture of, and/or finishing processes utilized in the
production of, the products or projects of the Company and/or any improvements
therein, together with all sales and financial information concerning the
Company and any and all information concerning projects in research and
development or marketing plans for any such products or projects, and all
information concerning the practices, customers and clients of the Company, and
all information in any way concerning the activities, business or affairs of any
of such customers or clients, as such, which is furnished to the Employee by the
Company or any of its agents, customers or clients, as such, or otherwise
acquired by the Employee in the course of the Employee's employment with the
Company; provided, however, that the term "confidential material" shall not
include information which (i) becomes generally available to the public other
than as a result of a disclosure by the Employee, (ii) was available to the
Employee on a non-confidential basis prior to his
<PAGE> 6
6
employment with the Company or (iii) becomes available to the Employee on a
non-confidential basis from a source other than the Company or any of its
agents, customers or clients, as such, provided that such source is not bound by
a confidentiality agreement with the Company or any of such agents, customers or
clients.
7.3 Promptly upon the request of the Company, the Employee shall
deliver to the Company all confidential material in the possession of the
Employee without retaining a copy thereof, unless, in the opinion of counsel for
the Company, either returning such confidential material or failing to retain a
copy thereof would violate any applicable Federal, state, local or foreign law,
in which event such confidential material shall be returned without retaining
any copies thereof as soon as practicable after such counsel advises that the
same may be lawfully done.
7.4 In the event that the Employee is required, by oral
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process, to disclose any confidential
material, the Employee shall provide the Company with prompt notice thereof so
that the Company may seek an appropriate protective order and/or waive
compliance by the Employee with the provisions hereof; provided, however, that
if in the absence of a protective order or the receipt of such a waiver, the
Employee is, in the opinion of counsel for the Company, compelled to disclose
confidential material not otherwise disclosable hereunder to any legislative,
judicial or regulatory body, agency or authority, or else be exposed to
liability for contempt, fine or penalty or to other censure, such confidential
material may be so disclosed.
8. Intellectual Property. Any and all inventions made, developed
or created by the Employee (whether at the request or suggestion of the Company
or otherwise, whether alone or in conjunction with others, and whether during
regular hours of work or otherwise) (a) during the period of this Agreement, or
(b) within a period of one (1) year after the date of termination of employment
hereunder, which may be directly or indirectly useful in, or relate to, the
business of or tests being carried out by the Company, shall be promptly and
fully disclosed by the Employee to the Board of Directors of the Company and
shall be the Company's exclusive property as against the Employee, and the
Employee shall promptly deliver to an appropriate representative of the Company
as designated by the Board of Directors all papers, drawings, models, data
<PAGE> 7
7
and other material relating to any invention made, developed or created by him
as aforesaid. The Employee shall, at the request of the Company and without any
payment therefor, execute any documents necessary or advisable in the opinion of
the Company's counsel to direct issuance of patents or copyrights to the Company
with respect to such inventions as are to be the Company's exclusive property as
against the Employee or to vest in the Company title to such inventions as
against the Employee. The expense of securing any such patent or copyright shall
be borne by the Company.
9. Interference with the Company. The Employee acknowledges that
the services to be rendered by him to the Company are of a special and unique
character. The Employee agrees that, in consideration of his employment
hereunder, the Employee will not (a) during the period of his employment with
the Company and thereafter for a period of eighteen (18) months commencing on
the date of termination of his employment with the Company (i) solicit or entice
or endeavor to solicit or entice away from the Company any person who was an
officer, employee or consultant of the Company, either on his own account or for
any person, firm, corporation or other organization, whether or not such person
would commit any breach of his contract of employment by reason of leaving the
service of the Company, or (ii) solicit or entice or endeavor to solicit or
entice away from the Company any present or prospective customer of the Company.
Neither the Company nor the Employee will at any time, take any action or make
any statement the effect of which would be, directly or indirectly, to impair
the good will of the other or the business reputation or good name of the other,
or be otherwise detrimental to the interests of the other. For purposes hereof,
"prospective customer" shall refer to a customer with whom the Company has had
significant contact regarding the provision of products or services to such
customer during the three (3) month period preceding the termination of the
Employee's employment hereunder.
10. Equitable Relief. In the event of a breach or threatened
breach by the Employee of any of the provisions of Sections 7, 8 or 9 of this
Agreement, the Employee hereby consents and agrees that the Company shall be
entitled to an injunction or similar equitable relief from any court of
competent jurisdiction restraining the Employee from committing or continuing
any such breach or threatened breach or granting specific performance of any act
required to be performed by the Employee under any of such provisions, without
the necessity of showing any actual damage or that money damages would not
afford an
<PAGE> 8
8
adequate remedy and without the necessity of posting any bond or other security.
Nothing herein shall be construed as prohibiting the Company from pursuing any
other remedies at law or in equity which it may have.
11. Successors and Assigns.
11.1 Assignment by the Company. The Company shall require any
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such
succession had taken place. As used in this Section, the "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law and this Agreement shall be
binding upon, and inure to the benefit of, the Company, as so defined.
11.2 Assignment by the Employee. The Employee may not assign
this Agreement or any part thereof without the prior written consent of a
majority of the Board of Directors of the Company; provided, however, that
nothing herein shall preclude one or more beneficiaries of the Employee from
receiving any amount that may be payable following the occurrence of his legal
incompetency or his death and shall not preclude the legal representative of his
estate from receiving such amount or from assigning any right hereunder to the
person or persons entitled thereto under his will or, in the case of intestacy,
to the person or persons entitled thereto under the laws of intestacy applicable
to his estate. The term "beneficiaries", as used in this Agreement, shall mean a
beneficiary or beneficiaries so designated to receive any such amount or, if no
beneficiary has been so designated, the legal representative of the Employee (in
the event of his incompetency) or the Employee's estate.
12. Governing Law. This Agreement shall be deemed a contract
made under, and for all purposes shall be construed in accordance with, the laws
of the State of New Jersey applicable to contracts to be performed entirely
within such State. In the event that a court of any jurisdiction shall hold any
of the provisions of this Agreement to be wholly or partially unenforceable for
any reason, such determination shall not bar or in any way affect the Company's
right to relief as provided for herein in the courts of any other jurisdiction.
Such provisions,
<PAGE> 9
9
as they relate to each jurisdiction, are, for this purpose, severable into
diverse and independent covenants. Service of process on the parties hereto at
the addresses set forth herein shall be deemed adequate service of such process.
13. Entire Agreement. This Agreement contains all the
understandings and representations between the parties hereto pertaining to the
subject matter hereof and supersedes all undertakings and agreements, whether
oral or in writing, if any there be, previously entered into by them with
respect thereto.
14. Amendment, Modification, Waiver. No provision of this
Agreement may be amended or modified unless such amendment or modification is
agreed to in writing and signed by the Employee and by a duly authorized
representative of the Company other than the Employee. Except as otherwise
specifically provided in this Agreement, no waiver by either party hereto of any
breach by the other party hereto of any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or any prior or subsequent time,
nor shall the failure of or delay by either party hereto in exercising any
right, power or privilege hereunder operate as a waiver thereof to preclude any
other or further exercise thereof or the exercise of any other such right, power
or privilege.
15. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or any breach thereof, shall, except as provided in
Section 10, be settled by arbitration in accordance with the rules of the
American Arbitration Association then in effect and judgment upon such award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration shall be held in the area where the Company then has
its principal place of business. The arbitration award shall include attorneys'
fees and costs to the prevailing party.
16. Notices. Any notice to be given hereunder shall be in
writing and delivered personally or sent by certified mail, postage prepaid,
return receipt requested, addressed to the party concerned at the address
indicated below or at such other address as such party may subsequently
designate by like notice:
<PAGE> 10
10
If to the Company:
Isomedix Inc.
11 Apollo Drive
Whippany, New Jersey 07981
Attention: Mr. John Masefield
If to the Employee:
Dr. Peter Mayer
55 East End Avenue
New York, New York 10028
17. Severability. Should any provision of this Agreement be held
by a court or arbitration panel of competent jurisdiction to be enforceable only
if modified, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and treated as though
originally set forth in this Agreement. The parties further agree that any such
court or arbitration panel is expressly authorized to modify any such
unenforceable provision of this Agreement in lieu of severing such unenforceable
provision from this Agreement in its entirety, whether by rewriting the
offending provision, deleting any or all of the offending provision, adding
additional language to this Agreement, or by making such other modifications as
it deems warranted to carry out the intent and agreement of the parties as
embodied herein to the maximum extent permitted by law. The parties expressly
agree that this Agreement as so modified by the court or arbitration panel shall
be binding upon and enforceable against each of them. In any event, should one
or more of the provisions of this Agreement be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof, and if such provision or
provisions are not modified as provided above, this Agreement shall be construed
as if such invalid, illegal or unenforceable provisions had never been set forth
herein.
18. Withholding. Anything to the contrary notwithstanding, all
payments required to be made by the Company hereunder to the Employee or his
beneficiaries, including his estate, shall be subject to withholding of such
amounts relating to taxes as the Company may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Company, may, in its sole discretion,
accept other provision for payment of taxes as
<PAGE> 11
11
permitted by law, provided it is satisfied in its sole discretion that all
requirements of law affecting its responsibilities to withhold such taxes have
been satisfied.
19. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
20. Titles. Titles of the sections of this Agreement are
intended solely for convenience and no provision of this Agreement is to be
construed by reference to the title of any section.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
ISOMEDIX INC.
By /s/ John Masefield
------------------------------
/s/ Peter Mayer
--------------------------------
Peter Mayer
<PAGE> 1
EXHIBIT 11
ISOMEDIX INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE FOR THE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Net income and common shares used in the calculation of earnings per share for
the three years ended December 31, 1995, 1994 and 1993, were computed as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net Income $7,299,505 $8,816,760 $7,974,893
========== ========== ==========
Weighted average number
of common shares
outstanding during the
year 6,993,520 7,132,669 7,090,986
Add: Shares issuable upon
the assumed exercise or
conversion of options
and warrants 223,953 229,047 265,499
---------- ---------- ----------
Common Shares 7,217,473 7,361,716 7,356,485
========== ========== ==========
Earnings per common share $ 1.01 $ 1.20 $ 1.08
========== ========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 13
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------[LOGO]
DESCRIPTION OF BUSINESS
Isomedix Inc. and Subsidiaries (the "Company") provides contract
sterilization services to manufacturers of pre-packaged products, such as
healthcare and certain consumer products, that need to be rendered safe for
their intended use, which is often referred to as "sterile". The Company
utilizes gamma radiation and ethylene oxide in its operations.
In recognition of a market opportunity for technologically advanced
ethylene oxide gas sterilization services, in 1990 the Company added two
ethylene oxide sterilization facilities for products which cannot tolerate
exposure to radiation and expanded one of its existing irradiation facilities to
include ethylene oxide sterilization capability. In December of 1995, the
Company purchased an existing ethylene oxide facility in Temecula, California,
thereby entering the West Coast market. The combination of gamma radiation and
ethylene oxide operations enables the Company to offer many customers a single
source for most or all of their sterilization requirements. The Company believes
that its state-of-the-art ethylene oxide technology offers economic, technical,
environmental and worker safety advantages which are currently unavailable at
most existing ethylene oxide sterilization facilities in the United States.
The Company operates a network of eleven contract sterilization facilities
in the United States and Canada, including three combined irradiation/ethylene
oxide facilities. The Company is considering further opportunities for the
expansion of its network of contract sterilization facilities, including both
irradiation and ethylene oxide facilities, and the addition of ethylene oxide
capability at certain of its existing sterilization facilities.
Through its wholly-owned subsidiary, Skyland Scientific Services, Inc., the
Company also provides contract consulting, calibration and validation services
to assist manufacturers of healthcare products in complying with Good
Manufacturing Practices established by industry and government.
1
<PAGE> 2
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
FIVE-YEAR SELECTED FINANCIAL DATA
For the years ended December 31
(In thousands, except per share and ratio amounts)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Sales $ 45,286 $ 47,241 $ 43,233 $ 36,683 $ 29,027
Gross profit 23,071 25,422 23,394 20,354 15,900
Operating income 11,674 14,479 12,935 11,690 8,302
Net income 7,300 8,817 7,975 7,755 5,531
- ----------------------------------------- ----------- ---------- -------- -------- --------
Net income per share 1.01 1.20 1.08 1.08 .79
- ----------------------------------------- ----------- ---------- -------- -------- --------
Weighted average number of shares
outstanding during the year 7,217 7,362 7,356 7,171 7,039
- ----------------------------------------- ----------- ---------- -------- -------- --------
FINANCIAL CONDITION:
Total assets $ 112,024 $ 106,590 $ 98,962 $ 90,289 $ 87,575
Long-term debt 8,600 9,100 10,025 11,400 19,640
Stockholders' equity 92,173 85,740 78,172 69,050 58,544
Long-term debt-to-equity ratio .09:1 .11:1 .13:1 .17:1 .34:1
Book value per common share $ 13.20 $ 12.17 $ 10.98 $ 9.82 $ 8.62
- ----------------------------------------- ----------- ---------- -------- -------- --------
</TABLE>
2
<PAGE> 3
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------[LOGO]
TO OUR SHAREHOLDERS:
Consolidated sales for 1995 were $45,285,929 compared to sales of $47,241,252 in
1994, a decrease of 4.1%. The Company's sterilization business continued to grow
with respect to the volume of products processed at a modest rate of little over
2%. Skyland Scientific Services sales were down by about $1 million, reflecting
in part a reduced need for validation services due to a slowdown in construction
and new equipment purchasing in the pharmaceutical industry and also due to
client delays in the start of several key service contracts.
Consolidated net income for 1995 was $7,299,505 compared to $8,816,760 in
1994. Earnings per share were $1.01 in 1995 compared to $1.20 for 1994. This
decrease in net income was due in part to competitive pricing pressures,
reflected in lower dollar revenues associated with increased sterilization
volume. Skyland's drop in net income was a result of the decline in sales and
the need to maintain a viable service staff which can take advantage of
projected customer validation needs. Despite the decrease in earnings, after tax
profit margins were a healthy 16% of consolidated sales.
BALANCE SHEET HIGHLIGHTS
The Company saw a further strengthening of its already very strong balance
sheet. This is a result of continued strong earnings and cash flows.
The Company's current assets to current liabilities ratio increased to
11.0:1 at December 31, 1995, compared to 6.8:1 at December 31, 1994.
Stockholders' equity continued to increase reaching $92,172,892 at December
31, 1995, compared to $85,739,547 at December 31, 1994, resulting in an increase
in book value per share to $13.20 from $12.17, an increase of 8.5%. The
Company's long-term debt to equity ratio decreased further to 0.09:1 at December
31, 1995, from 0.11:1 at December 31, 1994.
KEY BUSINESS DEVELOPMENTS
In 1995 several new business developments took place which are expected to
bode well for the Company.
The Company completed its long-range initiative to strengthen its top
management team. Dr. Peter Mayer assumed the responsibility as President and
Chief Executive Officer from John Masefield, who remains on as Chairman. Dr.
Charles Truby joined the Company as Executive Vice President and Chief Operating
Officer. Mr. James Wilson became Vice President of Quality Assurance and
Regulatory Affairs and Mr. Ronald Deahr is now heading the Company's sales and
marketing efforts. The addition of these executives brings to the Company many
additional years of sterilization industry expertise, as well as strong track
records in marketing and building profitable new businesses in highly
competitive environments. The expanded executive team creates what the Company
believes is the strongest, most experienced team of managers in the industry
from the standpoint of technical, sales and marketing, and business-building
know-how.
At the end of 1995, the Company acquired a state-of-the-art ethylene oxide
(EtO) facility in Temecula, California, with a small client base. This is the
Company's first acquisition in eight years and its first facility on the West
Coast, an area which the Company believes will present significant new business
opportunity.
The Company is also aggressively moving to further strengthen and expand
its ties with current and potential customers by leveraging its unique ability
to provide both radiation and ethylene oxide sterilization services, broadening
of its national network of facilities and expansion of its testing capability to
include an EtO test vessel (for sterilization cycle development, validation, and
package integrity testing) in addition to its existing gamma test facility. The
Company has also committed to develop additional radiation sterilization
capability utilizing high energy electron-beam technology. Importantly, the
Company has reconfirmed its commitment to provide superior value to its
customers by being the only sterilization company to achieve ISO 9001
registration for all its facilities combined with competitive pricing for its
services.
BUSINESS OUTLOOK
1996 promises to be another dynamic year for the Company. This will be the
first full year in which the expanded management team will have an opportunity
to have an impact on the Company's business. It is expected that competitive
pressures are going to further increase. The Company, however, expects to be in
the position to withstand such pressures and to emerge competitive, potentially
even stronger, as a result of its determination to leverage its considerable
financial strength and combine it with its technical expertise, its sharpened
sales and marketing program and its commitment to further expansion of
facilities and services offered.
The Company will also continue its efforts to further expand the potential
uses of radiation technology to benefit our customers and the public at large.
This includes further efforts to get broad regulatory and public approval and
acceptance of the health benefits of food irradiation, and to provide contract
capability in the use of electron-beam technology to enhance the physical
properties of polymers used in a broad range of industries, including aerospace,
automotive and construction materials.
As a result of the 1995 developments and the business course charted for
1996, we are confident that the Company is ready to resume its long-term revenue
and profit growth.
As always, we wish to extend our gratitude to all our employees, customers
and shareholders for their support and loyalty.
Sincerely,
John Masefield Peter Mayer
Chairman President
Chief Executive Officer
3
<PAGE> 4
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION
The following discussion analyzes major factors and trends regarding the
financial condition of the Company as of December 31, 1995 and its results of
operations for each of the three fiscal years in the period ended December 31,
1995. It should be read in conjunction with the Consolidated Financial
Statements and Notes appearing in this Annual Report.
RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1995
1995 COMPARED TO 1994
Consolidated sales decreased approximately 4.1% to $45,285,929 in 1995 from
$47,241,252 in 1994. This decrease was due, in part, to a decrease in sales of
sterilization services to $42,122,318 in 1995 from $43,064,832 in 1994, due to
increased competitive factors, including pricing pressures, which, are expected
to continue in 1996. However, the volume of products processed (measured in
cubic feet sterilized) increased at a modest rate of little over 2% in 1995
compared to 1994. The decrease in consolidated sales was further due to a 24.3%
decrease in sales of validation services by the Company's Skyland subsidiary to
$3,163,611 in 1995 from $4,176,420 in 1994, due a reduced need for validation
services resulting from a slowdown in construction and new equipment purchasing
in the pharmaceutical industry and client delays in the start of several key
service contracts.
Gross profit decreased to 50.9% of sales in 1995 compared to 53.8% in 1994.
This decrease is primarily attributable to the decrease in consolidated sales,
from the factors described above. In response to the decline in the sales of
Skyland, management initiated cost containment measures during the third quarter
of 1995, resulting primarily in the reduction of Skyland's payroll and payroll
related costs.
Selling, general and administrative expenses increased 4.1% to $11,396,502
in 1995 from $10,943,370 and, as a percentage of sales, to 25.2% in 1995
compared to 23.2% in 1994. This increase was primarily due to increased payroll
and payroll related costs resulting from the additions to the corporate
management staff.
Consolidated operating income decreased 19.4% to $11,674,339 in 1995 from
$14,478,982 in 1994, and, as a percentage of sales, to 25.8% in 1995 compared to
30.6% in 1994. Operating income from sterilization services (before corporate
overhead) decreased to 34.2% of that segment's sales in 1995 compared to 38.7%
in 1994. These decreases resulted from the factors described above. Operating
income from validation services (before corporate overhead) decreased to 2.6% of
that segment's sales in 1995 compared to 16.1% in 1994, primarily as a result of
the decrease in sales.
Investment income increased to $917,871 in 1995 from $704,371 in 1994,
primarily as a result of additional invested funds in 1995 provided by operating
activities, as partially offset by lower interest rates.
Interest expense decreased to $426,369 in 1995 from $488,753 in 1994 due to
payments of current maturities on long-term debt, partially offset by higher
interest rates, and the capitalization of interest in connection with the
Company's expansion program.
Net income decreased to $7,299,505 in 1995 from $8,816,760 in 1994. This
decrease in net income was attributable to the reasons described above. As a
percentage of sales, net income was 16.1% in 1995 compared to 18.7% in 1994.
1994 COMPARED TO 1993
Consolidated sales increased approximately 9.3% to $47,241,252 in 1994 from
$43,232,722 in 1993. This increase was due to a 8.9% increase in sales of
sterilization services to $43,064,832 in 1994 from $39,550,893 in 1993, due to
higher volumes of products processed for new and existing customers. This
increase was partially offset by increased competitive factors, including
pricing pressures. Increased competition is expected to continue in 1995. Sales
of validation services by the Company's Skyland subsidiary in-creased 13.4% to
$4,176,420 in 1994 from $3,681,829 in 1993 from additional contracts with new
and existing customers.
4
<PAGE> 5
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------[LOGO]
Gross profit decreased to 53.8% of sales in 1994 from 54.1% in 1993. This
decrease was attributable to the loss of higher volume/lower margin business at
certain of the Company's facilities. This decrease was partially offset by
growth in consolidated sales.
Selling, general and administrative expenses, as a percentage of sales,
were 23.2% in 1994 compared to 24.2% in 1993. This decrease was due to the
increase in consolidated sales. However, selling, general and administrative
expenses increased to $10,943,370 in 1994 compared to $10,459,249 in 1993. This
increase was attributable to the capitalization in the first quarter of 1993 of
selling, general and administrative expenses associated with the Company's
Chester, New York gamma radiation facility, an increase in amortization in the
1994 period of deferred pre-operating expenses, an increase in the allowance for
doubtful accounts, and an overall increase in other administrative expenses.
Consolidated operating income increased 11.9% to $14,478,982 in 1994 from
$12,935,063 in 1993, and as a percentage of sales, operating income increased to
30.6% in 1994 compared to 29.9% in 1993. The increase in operating income is
attributable to the reasons previously discussed. Operating income from
sterilization services (before corporate overhead) increased 8.3% to $16,677,246
in 1994 from $15,396,433 in 1993, and as a percentage of sales, operating income
decreased slightly to 38.7% of that segment's sales in 1994 from 38.9% in 1993.
Operating income from validation services (before corporate overhead) increased
12.4% to $674,258 in 1994 from $599,610 in 1993, and as a percentage of sales,
operating income decreased slightly to 16.1% of that segment's sales in 1994
from 16.3% in 1993.
Investment income increased to $704,371 in 1994 from $419,642 in 1993,
primarily as a result of additional capital invested in 1994 and higher
effective interest rates.
Interest expense decreased slightly to $488,753 in 1994 from $491,975 in
1993 as a result of the payments of current maturities on long-term debt, as
partially offset by the capitalization of interest in the 1993 period in
connection with the Company's expansion program.
Net income increased to $8,816,760 in 1994 from $7,974,893 in 1993. This
resulted from the factors previously discussed. This increase in net income is
after an increase in the Company's effective tax rate to 40% in 1994, primarily
due to an increase in the future enacted tax rate affecting deferred income
taxes as compared to 38% in the 1993 period. As a percentage of sales, net
income increased to 18.7% in 1994 from 18.4% in 1993.
1993 COMPARED TO 1992
Consolidated sales increased approximately 17.9% to $43,232,722 in 1993 from
$36,683,273 in 1992. This increase was due to a 19.0% increase in sales of
sterilization services to $39,550,893 in 1993 from $33,231,480 in 1992, due to
higher volumes of products processed for new and existing customers and the
commissioning of the Northborough, Massachusetts ethylene oxide facility and the
Chester, New York gamma radiation facility. Sales of validation services by the
Company's Skyland subsidiary increased 6.7% to $3,681,829 in 1993 from
$3,451,793 in 1992 from additional contracts with new and existing customers.
Gross profit decreased to 54.1% of sales in 1993 from 55.5% in 1992. This
decrease is attributable to the fixed costs associated with the commissioning of
the Northborough, Massachusetts ethylene oxide facility and the Chester, New
York gamma radiation facility, coupled with low initial utilization of these
facilities due to delays in product validation. These delays resulted in low
revenue levels relative to fixed costs.
Selling, general and administrative expenses, as a percentage of sales,
were 24.2% in 1993 compared to 23.6% in 1992. This increase was principally due
to the expenses relating to the commissioning of the Northborough, Massachusetts
ethylene oxide facility and the Chester, New York gamma radiation facility.
On a consolidated basis, operating income increased 10.6% to $12,935,063 in
1993 from $11,690,325 in 1992. This increase was principally due to the reasons
described above. However, as a percentage of sales, operating income decreased
to
5
<PAGE> 6
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
29.9% in 1993 compared to 31.9% in 1992 due to delays in product validation at
the Northborough, Massachusetts ethylene oxide facility and the Chester, New
York gamma radiation facility, resulting in low utilization of these facilities.
Operating income from sterilization services (before corporate overhead)
decreased to 38.9% of that segment's sales in 1993 from 41.7% in 1992, due to
the reasons described above. Operating income from validation services (before
corporate overhead) increased to 16.3% of that segment's sales in 1993 from 9.5%
in 1992, as a result of increased sales.
Investment income decreased to $419,642 in 1993 from $1,120,922 in 1992.
This decrease is attributable to non-recurring interest income of approximately
$370,000 received in 1992 on a tax refund, lower interest rates and a decrease
in invested capital resulting from expenditures to finance the construction of
the Northborough, Massachusetts ethylene oxide facility and the Chester, New
York gamma radiation facility, to purchase radioisotope and to equip existing
facilities.
Interest expense decreased to $491,975 in 1993 from $501,092 in 1992 as a
result of lower interest rates, the reduction of principal on outstanding
indebtedness and the capitalization of interest in connection with the Company's
expansion program.
Net income increased to $7,974,893 in 1993 from $7,755,398 in 1992. As a
percentage of sales, net income decreased to 18.4% in 1993 from 21.1%in 1992.
This resulted from the factors described above.
6
<PAGE> 7
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------[LOGO]
LIQUIDITY AND CAPITAL RESOURCES
The increase in the Company's liquidity was principally attributable to the cash
provided by operating activities, derived from net income for the period as
adjusted for non-cash expense items, such as depreciation and amortization. The
increase in cash from operating activities was partially offset by cash used to
fund investing and financing activities primarily relating to the purchase of an
ethylene oxide sterilization facility in Temecula, California, capital
expenditures for the purchase of radioisotope and equipment for the Company's
existing sterilization facilities, the construction of a new sterilization
facility in Libertyville, Illinois and for purchases of Company common stock.
The Company has utilized industrial development revenue bonds and sales of
common stock to finance a substantial portion of the costs of constructing and
equipping (including the purchase of radioisotope) some of its sterilization
facilities. The obligations of the Company under the terms of the industrial
development revenue bonds are collateralized by the property, plant, equipment
and radioisotope purchased with the proceeds of such bonds and the agreements
relating to such bonds contain various restrictive covenants. More recently,
funds generated from operations have served as a source of funds used to finance
the construction and equipping of facilities.
The Company believes that funds from operating activities will be
sufficient to purchase radioisotope and to equip, on a year to year basis, the
Company's existing sterilization facilities. The Company may utilize existing
credit facilities, which the Company expects to be able to renew annually, to
also fund the working capital needs of the Company, as required. Expansion plans
are expected to be funded from the Company's investments, which will mature in
amounts necessary to cover the foreseeable expansion program of the Company. The
Company's capital expenditures for 1996 are anticipated to be approximately $8
to $10 million, including the continuing construction and equipping of the
Company's new sterilization facility in Libertyville, Illinois, which is
expected to become operational in the latter part of 1996.
INFLATION
Inflation is not expected to have a significant impact on the Company's income,
particularly as the United States economy is presently experiencing a period of
low inflation. Based upon its experience since inception, the Company does not
expect that future increases in the cost of radioisotope, ethylene oxide gas or
other materials will be significant to its operations.
7
<PAGE> 8
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
ASSETS 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 4,860,088 $ 5,961,473
Held-to-maturity securities 17,003,329 11,891,561
Accounts receivable, less allowance for doubtful accounts of
$350,000 at December 31, 1995 and December 31, 1994 8,048,560 8,493,608
Prepaid expenses and other current assets 830,629 1,614,108
- ------------------------------------------------------------------------- ------------- ------------
Total current assets 30,742,606 27,960,750
- ------------------------------------------------------------------------- ------------- ------------
Property, plant and equipment, at cost 66,751,900 55,207,156
Less, Accumulated depreciation and amortization 17,855,870 15,359,400
- ------------------------------------------------------------------------- ------------- ------------
48,896,030 39,847,756
- ------------------------------------------------------------------------- ------------- ------------
Radioisotope, at cost 66,096,338 62,790,850
Less, Accumulated depreciation 36,624,237 32,203,450
- ------------------------------------------------------------------------- ------------- ------------
29,472,101 30,587,400
- ------------------------------------------------------------------------- ------------- ------------
Held-to-maturity securities 5,526,960
Excess of costs over net assets acquired 725,906 753,482
Other assets 2,186,868 1,913,337
- ------------------------------------------------------------------------- ------------- ------------
TOTAL ASSETS $ 112,023,511 $106,589,685
- ------------------------------------------------------------------------- ------------- ------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
LIABILITIES 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 500,000 $ 925,000
Accounts payable and accrued expenses 1,631,453 2,879,191
Contract deposits 119,781 47,572
Income taxes payable 545,888 264,923
- ------------------------------------------------------------------------- ------------- ------------
Total current liabilities 2,797,122 4,116,686
- ------------------------------------------------------------------------- ------------- ------------
Long-term debt 8,600,000 9,100,000
- ------------------------------------------------------------------------- ------------- ------------
Deferred income taxes 8,453,497 7,633,452
- ------------------------------------------------------------------------- ------------- ------------
Commitments and contingencies
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------
Preferred stock, $1.00 par value; 1,000,000 shares authorized;
issued and outstanding -- none
Common stock, $.01 par value; 15,000,000 shares authorized;
Issued:
December 31, 1995 - 7,169,868 shares
December 31, 1994 - 7,152,592 shares
Outstanding:
December 31, 1995 - 6,984,528 shares
December 31, 1994 - 7,042,592 shares 71,699 71,526
Additional paid-in capital 37,719,155 37,505,506
Retained earnings 57,167,649 49,868,144
- ------------------------------------------------------------------------- ------------- ------------
94,958,503 87,445,176
Less, common stock held in the treasury, at cost,
December 31, 1995 - 185,340 shares
December 31, 1994 - 110,000 shares (2,785,611) (1,705,629)
- ------------------------------------------------------------------------- ------------- ------------
Total stockholders' equity 92,172,892 85,739,547
- ------------------------------------------------------------------------- ------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 112,023,511 $106,589,685
- ------------------------------------------------------------------------- ------------- ------------
</TABLE>
See accompanying notes to the consolidated financial statements.
8
<PAGE> 9
ISOMEDIX INC. AND SUBSIDIARIES
- ----------------------------------------------------------------------------LOGO
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 45,285,929 $ 47,241,252 $ 43,232,722
Cost of sales 22,215,088 21,818,900 19,838,410
- --------------------------------------------- ------------ ------------ ------------
Gross profit 23,070,841 25,422,352 23,394,312
Selling, general and administrative expense 11,396,502 10,943,370 10,459,249
- --------------------------------------------- ------------ ------------ ------------
Operating income 11,674,339 14,478,982 12,935,063
Interest expense (426,369) (488,753) (491,975)
Investment income 917,871 704,371 419,642
- --------------------------------------------- ------------ ------------ ------------
Income before provision for income taxes 12,165,841 14,694,600 12,862,730
Provision for income taxes 4,866,336 5,877,840 4,887,837
- --------------------------------------------- ------------ ------------ ------------
Net income $ 7,299,505 $ 8,816,760 $ 7,974,893
- --------------------------------------------- ------------ ------------ ------------
Earnings per share $ 1.01 $ 1.20 $ 1.08
- --------------------------------------------- ------------ ------------ ------------
</TABLE>
See accompanying notes to the consolidated financial statements.
9
<PAGE> 10
ISOMEDIX INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
------------------- --------------------
ADDITIONAL
STOCKHOLDERS' NUMBER PAID-IN RETAINED NUMBER
EQUITY OF SHARES AMOUNT CAPITAL EARNINGS OF SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $69,050,542 7,029,613 $70,296 $35,903,755 $33,076,491 - 0 - - 0 -
Acquisition of treasury stock (420,000) (27,500) ($ 420,000)
Exercise of stock options
and warrants 1,104,082 103,225 1,033 1,005,321 6,400 97,728
Tax benefit from exercise
of stock options and warrants 367,345 367,345
Sale of common stock
under employee stock
purchase plan 94,730 6,736 67 94,663
Net income - 1993 7,974,893 7,974,893
- --------------------------------- ----------- --------- ------- ----------- ----------- -------- -----------
Balance, December 31, 1993 78,171,592 7,139,574 71,396 37,371,084 41,051,384 (21,100) (322,272)
Acquisition of treasury stock (1,705,629) (110,000) (1,705,629)
Exercise of stock options 287,837 7,911 79 17,983 17,667 269,775
Tax benefit from exercise
of stock options 52,594 52,594
Sale of common stock
under employee stock
purchase plan 116,393 5,107 51 63,845 3,433 52,497
Net income - 1994 8,816,760 8,816,760
- --------------------------------- ----------- --------- ------- ----------- ----------- -------- -----------
Balance, December 31, 1994 85,739,547 7,152,592 71,526 37,505,506 49,868,144 (110,000) (1,705,629)
Acquisition of treasury stock (1,275,945) (89,800) (1,275,945)
Exercise of stock options 267,395 12,900 129 131,604 9,205 135,662
Tax benefit from exercise
of stock options 23,505 23,505
Sale of common stock
under employee stock
purchase plan 118,885 4,376 44 58,540 5,255 60,301
Net income - 1995 7,299,505 7,299,505
- --------------------------------- ----------- --------- ------- ----------- ----------- -------- -----------
Balance, December 31, 1995 $92,172,892 7,169,868 $71,699 $37,719,155 $57,167,649 (185,340) ($2,785,611)
- --------------------------------- ----------- --------- ------- ----------- ----------- -------- -----------
</TABLE>
See accompanying notes to the consolidated financial statements.
10
<PAGE> 11
ISOMEDIX INC. AND SUBSIDIARIES
- ----------------------------------------------------------------------------LOGO
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 7,299,505 $ 8,816,760 $ 7,974,893
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 6,930,462 7,194,848 6,549,704
Amortization 706,213 696,368 662,419
Increase in allowance for doubtful accounts 100,000 50,000
(Gain) loss on sale or disposal of assets (5,197) (86) 3,913
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 445,048 (186,364) (1,589,220)
Decrease (increase) in prepaid expenses
and other assets 582,448 239,967 (546,341)
(Decrease) increase in accounts payable and
accrued expenses (1,247,738) 374,682 (310,386)
Increase (decrease) in contract deposits 72,209 (420,278) 68,532
Increase (decrease) in income taxes payable 280,965 (230,759) 368,695
Increase in deferred income taxes 820,045 1,261,377 1,050,209
- --------------------------------------------------------- ------------ ------------ ------------
Net cash provided by operating activities 15,883,960 17,846,515 14,282,418
- --------------------------------------------------------- ------------ ------------ ------------
Cash flows from investing activities:
Purchases of held-to-maturity securities (17,140,946) (14,918,177) (16,235,206)
Proceeds from maturity of held-to-maturity securities 17,556,138 8,706,000 14,514,533
Proceeds from sale of assets 5,197 87 44,365
Additions to property, plant and equipment (11,557,947) (1,792,574) (3,081,500)
Additions to radioisotope (3,087,796) (3,810,419) (8,113,729)
Equipment deposits (740,417) (123,053) (271,611)
Deferred pre-operating costs incurred (135,316) (338,525)
Payments from lease receivable 70,818 109,064
Other (318,491) 341,401
- --------------------------------------------------------- ------------ ------------ ------------
Net cash used in investing activities (15,101,087) (12,185,809) (13,031,208)
- --------------------------------------------------------- ------------ ------------ ------------
Cash flows from financing activities:
Purchases of treasury stock (1,275,945) (1,705,629) (420,000)
Payments of long-term debt (925,000) (1,400,000) (1,625,000)
Proceeds of stock options exercised and employee
stock purchases 409,785 456,824 1,566,157
Other (93,098)
- --------------------------------------------------------- ------------ ------------ ------------
Net cash used in financing activities (1,884,258) (2,648,805) (478,843)
- --------------------------------------------------------- ------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents (1,101,385) 3,011,901 772,367
Cash and cash equivalents at beginning of year 5,961,473 2,949,572 2,177,205
- --------------------------------------------------------- ------------ ------------ ------------
Cash and cash equivalents at end of year $ 4,860,088 $ 5,961,473 $ 2,949,572
- --------------------------------------------------------- ------------ ------------ ------------
Supplemental cash flow information:
- --------------------------------------------------------- ------------ ------------ ------------
Cash paid for interest (net of amounts capitalized) $ 492,273 $ 490,372 $ 559,597
- --------------------------------------------------------- ------------ ------------ ------------
Cash paid for income taxes $ 3,322,094 $ 4,119,998 $ 3,614,930
- --------------------------------------------------------- ------------ ------------ ------------
Supplemental non cash investing activities:
- --------------------------------------------------------- ------------ ------------ ------------
Additions to radioisotope in satisfaction of lease
receivable $ 217,692 $ 694,639
- --------------------------------------------------------- ------------ ------------ ------------
Additions to property, plant and equipment $ 1,413,931
- --------------------------------------------------------- ------------ ------------ ------------
</TABLE>
See accompanying notes to the consolidated financial statements.
11
<PAGE> 12
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of
Isomedix Inc. and Subsidiaries (the "Company"), all of which are wholly owned.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
REVENUE RECOGNITION:
The Company is engaged principally in the businesses of providing contract
sterilization services to manufacturers of pre-packaged products, such as
healthcare and certain consumer products. The Company also provides contract
consulting, calibration and validation services ("validation") to assist
manufacturers of healthcare products in complying with good manufacturing
practices established by industry and government. Sterilization revenue is
recognized at the time the related services are performed and validation revenue
is recognized on the percentage-of-completion method measured by costs incurred.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, including capitalized interest applicable to
the construction of new facilities, are valued at cost. Expenditures for
maintenance and repairs, which do not materially prolong the normal useful life
of an asset, are charged to operations as incurred. Additions and betterments
which substantially extend the useful life of the properties are capitalized.
Upon sale or other disposition of assets, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
reflected in income.
Depreciation of property, plant and equipment is provided under the
straight-line method over the estimated useful lives of the related assets
except for leasehold improvements which are amortized over the shorter of their
estimated useful lives or lease terms.
RADIOISOTOPE:
Radioisotope is valued at cost. Depreciation of radioisotope is determined
by use of the annual decay factor inherent in the material, which is similar to
the sum-of-the-years-digits method, over its estimated useful life of twenty
years.
EXCESS OF COSTS OVER NET ASSETS ACQUIRED:
The excess of costs over the fair value of net assets acquired is being
amortized under the straight-line method over forty years. The Company
continually evaluates the carrying value of the excess of costs over net assets
acquired. Any impairments would be recognized when the expected future operating
cash flows derived is less than the assets carrying value. The carrying value of
the excess of costs over net assets acquired is net of accumulated amortization
of $497,615 and $470,039 at December 31, 1995 and 1994, respectively.
DEFERRED PRE-OPERATING COSTS:
Pre-operating costs in connection with the opening of new facilities are
deferred and amortized over a period of three years commencing with the date
operations begin at the respective facilities. Included in other assets are
deferred pre-operating costs of $202,436 and $683,931 (net of accumulated
amortization of $2,559,821 and $1,943,109) at December 31, 1995 and 1994,
respectively.
DEFERRED FINANCING COSTS:
Direct costs associated with obtaining long-term financing have been
capitalized and are being amortized over the term of the respective loans.
Included in other assets are deferred financing costs of $326,313 and $364,964
(net of accumulated amortization of $544,560 and $505,909) at December 31, 1995
and 1994, respectively.
INCOME TAXES:
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). SFAS 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the Company's financial statements or tax
returns. Undistributed Canadian earnings are reinvested and, therefore, there is
no provision in the financial statements for repatriated earnings.
CASH EQUIVALENTS:
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
DEBT AND EQUITY SECURITIES:
The Company adopted, effective January 1, 1994, Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). SFAS 115 requires a more detailed disclosure of
debt and equity securities held for investment, the methods to be used in
determining fair value and when to record unrealized holding gains and losses in
earnings or in a separate component of stockholders' equity. There was no effect
on income or cash flows as a result of adopting SFAS 115. It is the Company's
policy to invest primarily in federal, state and municipal securities. It is the
Company's intent and ability to hold investments to maturity.
RECLASSIFICATION:
The Company has reclassified certain prior year amounts to conform with the
1995 presentation.
12
<PAGE> 13
ISOMEDIX INC. AND SUBSIDIARIES
- ----------------------------------------------------------------------------LOGO
2. PROPERTY, PLANT AND EQUIPMENT:
Major classes of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
Estimated
1995 1994 Useful Life
- --------------------------------------------------------------
<S> <C> <C> <C>
Land $ 6,015,410 $ 3,523,025
Land
improvements 923,689 901,199 10 years
Buildings 26,500,736 25,000,736 30-40 years
Buildings
improvements 1,336,524 937,107 7 years
Machinery and
equipment 27,421,095 22,956,564 3-10 years
Furniture and
fixtures 1,977,378 1,672,881 5-10 years
Leasehold
improvements 238,668 215,644 Life of lease
Construction
in-progress 2,338,400
------------ -----------
$ 66,751,900 $55,207,156
------------ -----------
</TABLE>
On December 29, 1995, the Company purchased an ethylene oxide sterilization
facility located in Temecula, California, from an unrelated party, for
$4,300,000 in cash.
3. LONG-TERM DEBT:
Long-term debt consists of obligations payable relating to industrial
development revenue bonds, collateralized by substantially all of the property,
plant, equipment and radioisotope purchased with the proceeds from such
industrial development revenue bond transactions, as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Payable in quarterly
installments of $62,500 through
January 1995. Interest is payable
monthly at 75% of the
lender's prime rate. $ - 0 - $ 62,500
Payable in quarterly
installments of $62,500 through
January 1995. Interest is payable
monthly at 75% of the
lender's prime rate. - 0 - 62,500
Payable in semiannual
installments of $50,000
plus interest at 68% of
the lender's prime rate
through June 1995. - 0 - 50,000
Payable in monthly
installments of $25,000
plus interest at 11.67%
through October 1995. - 0 - 250,000
Payable in annual
installments of $400,000
from October 1992
through October 1996
and $500,000 thereafter
through October 2008.(A) 6,400,000 6,800,000
Payable in annual
installments of $100,000
from March 1993
through March 1997,
$200,000 through March
2008, and a payment of
$300,000 in March 2009 (A). 2,700,000 2,800,000
----------- -----------
9,100,000 10,025,000
Less, Current portion 500,000 925,000
----------- -----------
$8,600,000 $ 9,100,000
----------- -----------
</TABLE>
(A) The bonds bear interest at a variable rate based on the bank/marketing
agent's Demand Note index. The interest rate was 5.5% and 5.8% at December 31,
1995 and 1994, respectively. The bondholders can require the Company to redeem
the bonds at any time. If this occurs, the bank/marketing agent will attempt to
sell the bonds to another investor. To enhance the marketability of the bonds,
the bank/marketing agent has issued a letter of credit, to support payment of
the bonds on the Company's behalf. If such bonds are not remarketed, the bank
will pay the bonds under the letter of credit and will not require the Company
to reimburse the bank for at least one year.
The Company has $10,000,000 in unused lines of credit, of which, all was
available at December 31, 1995.
The aforementioned bond agreements contain, among other requirements,
various covenants relating to minimum capitalization, consolidated net worth and
working capital. The maintenance of such covenants indirectly limits the amount
of cash that may be distributed as dividends or used for purchases of Company
common stock. The amount available for such payments at December 31, 1995 is
approximately $11,700,000. There are also certain limitations on additional
indebtedness and capital expenditures.
Aggregate maturities of long-term debt for each of the five years ending
after December 31, 1995 are as follows:
<TABLE>
- --------------------------------------------------------------
<S> <C>
1996 $ 500,000
1997 600,000
1998 700,000
1999 700,000
2000 700,000
- --------------------------------------------------------------
</TABLE>
13
<PAGE> 14
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
4. LEASE COMMITMENTS:
The Company leases certain facilities and equipment under noncancellable
operating leases that expire over the next seven years. Minimum future rental
commitments under these leases at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996 $ 795,873
1997 130,204
1998 66,631
1999 68,589
2000 71,634
Thereafter 41,619
----------
$1,174,550
----------
</TABLE>
The Company incurred total lease expense of approximately $899,516 in 1995,
$961,240 in 1994, and $868,450 in 1993.
5. PREFERRED STOCK PURCHASE RIGHTS:
On June 10, 1988, the Board of Directors of the Company declared a dividend
of one preferred stock purchase right for each outstanding share of common
stock. This action was intended to protect stockholders' value in the Company in
the event of a hostile takeover attempt. Each right entitles the holder to
purchase from the Company one one-hundredth of a share of Series A Preferred
Stock at an exercise price of $20 per one one-hundredth of a preferred share.
The rights are not exercisable or transferable apart from the common stock
until the earlier to occur of (1) ten days following a public announcement that
a person or group of affiliated or associated persons have acquired beneficial
ownership of 20% or more of the outstanding common stock of the Company or (2)
ten business days following the commencement of, or announcement of, an
intention to make a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of 20% or more of
such outstanding common stock. Furthermore, if the Company enters into a
consolidation, merger, combination or other transaction, where shares of common
stock are exchanged for cash, property, stock or securities of any other entity,
each right would entitle the holder upon exercise to receive, in lieu of Series
A preferred shares, that number of shares of common stock of the acquiring
company having a market value of two times the exercise price of the right. The
rights contain antidilutive provisions, are redeemable at the Company's option,
for $.01 per right, and expire on June 10, 1998.
As a result of the rights distribution, the Board of Directors authorized
the issuance of 55,000 shares of a new series of preferred stock designated as
Series A Preferred Stock, $1.00 par value. Stockholders of the Series A
Preferred Stock will be entitled to a cumulative quarterly dividend of the
greater of $1.00 per share or 100 times the per share dividend declared on
common stock. The shares have a liquidation preference equal to the greater of
$100.00 per share or 100 times the aggregate amount per share distributed to the
holders of common stock. Each share will have 100 votes and will vote together
with the common shares.
6. EARNINGS PER COMMON SHARE:
Earnings per share have been computed based upon the weighted average
number of shares of common stock outstanding during the year. The number of
shares used in computing earnings per share was 7,217,473, 7,361,716, and
7,356,485 for 1995, 1994 and 1993, respectively. Included in the calculation, if
dilutive, is the incremental number of shares issuable upon the exercise of
stock options and warrants, assuming the proceeds from such exercise were used
to purchase outstanding common stock at the average market price during the
year. Such incremental shares were not significant for any period.
7. STOCK OPTIONS AND WARRANTS:
The Company has granted stock options to key employees at prevailing market
prices on the date of grant pursuant to the "Isomedix Inc. 1982 Stock Option
Plan". In February 1995, the Board of Directors approved an amendment to change
the option exercise price of certain options in excess of $12.75 per share to
$12.75 per share. Pursuant to this amendment, options to purchase 136,000 shares
of common stock were amended. In June 1993, the Board of Directors approved an
amendment to change the option exercise price for certain options in excess of
$14.00 per share to $14.00 per share. Pursuant to this amendment, options to
purchase 55,800 shares of common stock were amended. At December 31, 1995,
options to purchase 79,300 shares were exercisable (1994 - 84,305). Stock option
activity under the plan for the three years ended December 31, 1995 is
summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
NUMBER OF OPTION PRICE
OPTIONS RANGE
- --------------------------------------------------------------------
<S> <C> <C>
Balance outstanding,
December 31, 1992 313,724 $ 5.00-$19.75
Exercised (27,625) $ 5.00-$19.75
Terminated and cancelled (46,816) $11.75-$19.75
- -------------------------- ------- -------------
Balance outstanding,
December 31, 1993 239,283 $ 5.00-$14.00
Exercised (23,178) $ 5.00-$14.00
Terminated and cancelled (2,800) $11.75-$14.00
- -------------------------- ------- -------------
Balance outstanding
December 31, 1994 213,305 $ 5.00-$14.00
Exercised (10,405) $ 5.00-$12.75
Terminated and cancelled (6,800) $ 9.13-$12.75
- -------------------------- ------- -------------
Balance outstanding
December 31, 1995 196,100 $ 5.00-$12.75
- -------------------------- ------- -------------
</TABLE>
14
<PAGE> 15
ISOMEDIX INC. AND SUBSIDIARIES
- ----------------------------------------------------------------------------LOGO
The Company has granted warrants to purchase shares of Company's common
stock. The warrants expire ten years from the date of issuance. Warrant activity
for the three years ended December 31, 1995 is summarized as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
NUMBER OF WARRANT PRICE
WARRANTS RANGE
- ------------------------------------------------------------------
<S> <C> <C>
Balance outstanding
December 31, 1992 220,500 $5.00-$9.63
Exercised (77,000) $5.00-$9.63
- -------------------------- ------- -----------
Balance outstanding
December 31, 1993 143,500 $5.00-$9.63
- -------------------------- ------- -----------
Balance outstanding
December 31, 1994 143,500 $5.00-$9.63
- -------------------------- ------- -----------
Balance outstanding
December 31, 1995 143,500 $5.00-$9.63
- -------------------------- ------- -----------
</TABLE>
The Company grants stock options to key employees and directors at
prevailing market prices on the date of grant pursuant to the "Isomedix Inc.
1992 Supplemental Stock Option Plan." In February 1995, the Board of Directors
approved an amendment to change the option exercise price of certain options in
excess of $12.75 per share to $12.75 per share. Pursuant to this amendment,
options to purchase 120,000 shares of common stock were amended. At December 31,
1995, options to purchase 65,000 shares were exercisable (1994 - 65,000) and
180,000 shares were reserved for the granting of future options under the plan
(1994 - 280,000). Stock option activity under the plan for the three years ended
December 31, 1995 is summarized as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
NUMBER OF OPTION PRICE
OPTIONS RANGE
- ------------------------------------------------------------------
<S> <C> <C>
Balance outstanding
December 31, 1993 120,000 $16.25-$17.25
- -------------------------- ------- -------------
Balance outstanding
December 31, 1994 120,000 $16.25-$17.25
Issued 100,000 $13.75
- -------------------------- ------- -------------
Balance outstanding
December 31, 1995 220,000 $12.75-$13.75
- -------------------------- ------- -------------
</TABLE>
The Company grants stock options to key employees and directors at
prevailing market prices on the date of grant pursuant to the "Isomedix Inc.
1992 Stock Option Plan". In February 1995, the Board of Directors approved an
amendment to change the option exercise price of certain options in excess of
$12.75 per share to $12.75 per share. Pursuant to this amendment, options to
purchase 456,900 shares of common stock were amended. On December 9, 1994, the
Board of Directors approved an amendment to change the option exercise price for
certain options in excess of $17.25 per share to $14.75 per share. Pursuant to
this amendment, options to purchase 7,000 shares of common stock were amended.
At December 31, 1995 options to purchase 593,100 shares were exercisable (1994 -
298,100) and 6,900 shares were reserved for the granting of future options under
the plan (1994 - 108,700). Stock option activity under the plan for the two
years ended December 31, 1995 is summarized as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
NUMBER OF OPTON PRICE
OPTIONS RANGE
- ------------------------------------------------------------------
<S> <C> <C>
Balance outstanding
December 31, 1992 244,000 $17.25-$18.50
Granted 187,500 $17.25-$18.50
Exercised (5,000) $17.25
Terminated and cancelled (7,000) $14.00-$22.50
- -------------------------- ------- -------------
Balance outstanding
December 31, 1993 419,500 $14.00-$17.25
Granted 95,000 $14.75-$19.75
Exercised (2,400) $14.00
Terminated and cancelled (33,200) $14.00-$18.13
- -------------------------- ------- -------------
Balance outstanding
December 31, 1994 478,900 $14.00-$17.25
Granted 137,000 $12.75-$14.75
Exercised (11,700) $12.75
Terminated and cancelled (35,200) $12.75-$14.50
- -------------------------- ------- -------------
Balance outstanding
December 31, 1995 569,000 $12.75-$14.75
</TABLE>
8. INTEREST COSTS:
The Company's interest expense and capitalized interest related to plant
facilities under construction are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
Interest costs expensed $ 522,825 $ 488,753 $ 491,975
Interest capitalized (96,456) 66,633
- ------------------------ --------- --------- ---------
Total interest cost $ 426,369 $ 488,753 $ 558,608
- ------------------------ --------- --------- ---------
</TABLE>
9. INCOME TAXES:
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 2,948,434 $ 3,332,683 $ 2,834,103
State 469,832 879,335 582,284
Canada 628,025 404,445 421,241
----------- ----------- -----------
4,046,291 4,616,463 3,837,628
----------- ----------- -----------
Deferred:
Federal 412,329 1,251,135 1,038,550
State 414,747 90,021 240,691
Canada (7,031) (79,779) (229,032)
----------- ----------- -----------
820,045 1,261,377 1,050,209
----------- ----------- -----------
$ 4,866,336 $ 5,877,840 $ 4,887,837
----------- ----------- -----------
</TABLE>
A summary of income before provision for income taxes from domestic and
nondomestic sources is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
United States $10,943,040 $13,815,187 $11,740,246
Canada 1,222,801 879,413 1,122,484
- -------------- ----------- ----------- -----------
$12,165,841 $14,694,600 $12,862,730
- -------------- ----------- ----------- -----------
</TABLE>
15
<PAGE> 16
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
The types of temporary differences that give rise to significant portions
of deferred income tax liabilities result from differences between depreciation
expense for financial statement and tax purposes related to property, plant and
equipment and radioisotope. These amounts are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------
<S> <C> <C>
Accelerated depreciation
and amortization $ 8,549,863 $ 7,489,273
Deferred pre-operating costs 25,216 260,532
Other 195,194 156,093
- ------------------------------ ----------- -----------
Gross deferred liabilities $ 8,770,273 $ 7,905,898
- ------------------------------ ----------- -----------
Capitalized interest $ 101,751 $ 115,848
Other 215,025 156,598
- ------------------------------ ----------- -----------
Gross deferred assets $ 316,776 $ 272,446
- ------------------------------ ----------- -----------
Net deferred tax liabilities $ 8,453,497 $ 7,633,452
- ------------------------------ ----------- -----------
</TABLE>
The Company did not have a valuation allowance as of December 31, 1995 and
1994.
The reasons for the difference between the provision for income taxes using
the United States federal statutory income tax rate and the tax provision
reported by the Company are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
Provisions computed
at United States
Federal statutory
income tax rate 34% 34% 34%
State and local
income taxes, net
of federal benefit 5% 4% 4%
Higher net effective
tax rate in Canada 1% 2%
Higher enacted rate on
net deferred tax
liabilities 1%
Other 1% (2%)
-- -- --
40% 40% 38%
-- -- --
</TABLE>
10. EMPLOYEE BENEFIT PLANS:
PENSION PLAN:
The Company has a defined benefit pension plan which covers all domestic
employees (excluding employees of Skyland) who meet certain age and service
requirements. Benefits are based on years of service and compensation during the
last five years of employment. The Company's funding policy is to contribute
annually an amount representing the minimum amount required under applicable
laws and regulations. Such amounts are computed using an actuarial cost method
and assumptions that differ from those used for financial reporting. Plan assets
are principally invested in commingled bank trust funds.
The components of pension expense for 1995, 1994, and 1993 are summarized
as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 202,787 $ 206,718 $ 282,879
Interest cost 145,015 125,650 121,768
Actual return
on plan assets (370,619) 15,954 (75,639)
Net deferral
(amortization) 250,680 (94,371) 34,456
- ------------------- --------- --------- ---------
Net pension expense $ 227,863 $ 253,951 $ 363,464
- ------------------- --------- --------- ---------
</TABLE>
The following table sets forth the funded status of the plan at December
31, 1995 and 1994:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefits $1,807,749 $1,346,894
Nonvested benefits 131,209 81,065
- ---------------------------------- ---------- ----------
Accumulated benefit obligation $1,938,958 $1,427,959
- ---------------------------------- ---------- ----------
Projected benefit obligation
for services rendered
to date ($2,571,214) ($1,725,597)
Plan assets at fair value 2,504,165 1,836,539
- ---------------------------------- ---------- ----------
Funded status (67,049) 110,942
Unrecognized transition asset (11,363) (11,889)
Unrecognized prior service cost 509,861 543,240
Unrecognized loss (gain) 139,329 (283,426)
- ---------------------------------- ---------- ----------
Prepaid pension cost $ 570,778 $ 358,867
- ---------------------------------- ---------- ----------
</TABLE>
The expected long-term rate of return on plan assets was 8.25% for 1995 and
1994. The projected benefit obligation has been determined based upon a discount
rate of 7.25% for 1995 and 8.25% for 1994. In 1995 and 1994 the assumed rate of
compensation increases was 3%.
EMPLOYEE SAVINGS AND PROTECTION PLAN:
The Employee Savings and Protection Plan (the "Plan") is a defined
contribution plan covering all non-union domestic salaried and hourly employees
who have met the age and service requirements under the Plan. The Plan is a
401(k) plan which permits each participant to elect to defer a portion of his or
her compensation and contribute such amount to the Plan on a tax deferred basis.
The Plan also permits the Company to make annual cash contributions from its
revenues as determined by the Board of Directors. These contributions may be
allocated to participant's accounts either on a pro-rated basis based upon
participant compensation or, in the alternative, as a matching contribution
based on the amounts that participants have contributed to the Plan as 401(k)
salary deferral contributions. The Plan expense was approximately $96,000 in
1995, $90,000 in 1994, and $83,000 in 1993.
16
<PAGE> 17
ISOMEDIX INC. AND SUBSIDIARIES
- ----------------------------------------------------------------------------LOGO
EMPLOYEE STOCK PURCHASE PLAN:
Pursuant to the "1983 Employee Stock Purchase Plan" the Company had
reserved and made available common shares for purchase by eligible employees,
including directors and officers, through payroll deductions over successive
six-month offering periods. In 1994, 4,235 shares were purchased at a price of
$13.18. At December 31, 1993, the Plan expired with 58,526 shares available for
purchase.
Pursuant to the "1993 Employee Stock Purchase Plan", the Company has
reserved and made available common shares for purchase by eligible employees,
including directors and officers, through payroll deductions over successive
six-month offering periods. The purchase price of common stock under the plan is
85% of the lower of the last sale price per share (on the New York Stock
Exchange) on either of the first or last day of each six-month offering period.
In 1995, 4,376 and 5,255 shares were purchased at prices of $13.39 and $11.46,
respectively. In 1994, 4,305 shares were purchased at a price of $14.08. At
December 31, 1995, 86,064 shares were available for future purchases under the
Plan.
11. BUSINESS SEGMENTS AND GEOGRAPHIC
DISTRIBUTION OF OPERATIONS:
GEOGRAPHIC DISTRIBUTION OF OPERATIONS:
Information about the Company's operations in different geographic areas is
presented below. Intercompany transfers between geographic areas are not
significant.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------
<S> <C> <C> <C>
Sales:
United States $ 42,706,195 $ 44,922,532 $40,529,230
Canada 2,579,734 2,318,720 2,703,492
- -------------------- ------------ ------------ -----------
Total $ 45,285,929 $ 47,241,252 $43,232,722
- -------------------- ------------ ------------ -----------
Operating income:
United States $ 10,597,238 $ 13,441,004 $11,566,695
Canada 1,077,101 1,037,978 1,368,368
- -------------------- ------------ ------------ -----------
Total $ 11,674,339 $ 14,478,982 $12,935,063
- -------------------- ------------ ------------ -----------
Identifiable assets:
United States $107,779,353 $100,247,420 $93,930,412
Canada 4,244,158 6,342,265 5,031,578
- -------------------- ------------ ------------ -----------
Total $112,023,511 $106,589,685 $98,961,990
- -------------------- ------------ ------------ -----------
</TABLE>
SEGMENT DATA:
The Company's business segments consist of (1) contract sterilization
services rendered to manufacturers of pre- packaged single-use medical devices
and certain consumer products, and (2) validation services consisting of
consulting, calibration and validation services to assist manufacturers of
healthcare products in complying with regulations of industry and government.
Summarized financial information by business segment is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Sales:
Sterilization $ 42,122,318 $ 43,064,832 $ 39,550,893
Validation 3,163,611 4,176,420 3,681,829
- ------------------ ------------- ------------- ------------
Total $ 45,285,929 $ 47,241,252 $ 43,232,722
- ------------------ ------------- ------------- ------------
Operating income:
Sterilization $ 14,414,524 $ 16,677,246 $ 15,396,433
Validation 81,436 674,258 599,610
Less, corporate
overhead (2,821,621) (2,872,522) (3,060,980)
- ------------------ ------------- ------------- ------------
Total $ 11,674,339 $ 14,478,982 $ 12,935,063
- ------------------ ------------- ------------- ------------
Identifiable assets:
Sterilization $ 109,928,142 $ 103,792,876 $ 96,008,586
Validation 2,095,369 2,796,809 2,953,404
- ------------------ ------------- ------------- ------------
Total $ 112,023,511 $ 106,589,685 $ 98,961,990
- ------------------ ------------- ------------- ------------
Depreciation
and amortization:
Sterilization $ 7,456,688 $ 7,709,511 $ 7,020,847
Validation 179,987 181,705 191,276
- ------------------ ------------- ------------- ------------
Total $ 7,636,675 $ 7,891,216 $ 7,212,123
- ------------------ ------------- ------------- ------------
Capital expenditures:
Sterilization $ 14,792,375 $ 6,108,532 $ 12,363,376
Validation 71,060 189,100 245,784
- ------------------ ------------- ------------- ------------
Total $ 14,863,435 $ 6,297,632 $ 12,609,160
- ------------------ ------------- ------------- ------------
</TABLE>
12. UNAUDITED QUARTERLY FINANCIAL DATA:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
(amounts in thousands, except per share amounts)
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Net sales $11,455 $11,479 $11,009 $11,343
Gross profit 5,919 6,017 5,656 5,479
Net income 1,865 1,988 1,857 1,590
Earnings per share (1) $ .26 $ .28 $ .26 $ .22
- ---------------------- ------- ------- ------- -------
1994
Net sales $11,240 $12,029 $12,283 $11,689
Gross profit 5,923 6,713 6,767 6,019
Net income 1,929 2,363 2,475 2,050
Earnings per share $ .26 $ .32 $ .34 $ .28
- ---------------------- ------- ------- ------- -------
1993
Net sales $ 9,573 $10,805 $11,270 $11,585
Gross profit 5,019 5,875 6,214 6,286
Net income 1,670 1,950 2,104 2,251
Earnings per share (1) $ .23 $ .27 $ .29 $ .31
- ---------------------- ------- ------- ------- -------
</TABLE>
(1) Quarterly earnings per share do not sum to annual earnings per share due to
rounding.
17
<PAGE> 18
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
13. CONCENTRATION OF CREDIT RISK:
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash, cash equivalents,
held-to-maturity securities and trade receivables. The Company primarily
maintains all of its held-to- maturity securities, which are federally insured,
with one investment banking firm. The municipal securities are dispersed
geographically. At times, cash accounts may exceed federally insured limits. The
Company routinely assesses the financial strength of its customers.
14. DEBT AND EQUITY SECURITIES:
- --------------------------------------------------------------------------------
Held-to-maturity securities consist of debt instruments from federal,
various states and municipalities. These securities are carried at original
cost, which approximates amortized cost. Any realized gains or losses would be
recognized on the specific identification method. Gross unrealized losses were
$66,830 at December 31, 1995 compared to $469,023 at December 31, 1994.
At December 31, 1995, debt securities had a carrying value of $17,003,329
and a market value of $17,082,809.
Investments in debt securities classified as held-to-maturity at December
31, 1995 have various maturity dates which do not exceed one year.
15. ACCOUNTING FOR STOCK-BASED COMPENSATION:
- --------------------------------------------------------------------------------
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 encourages, but does not require, stock
options to be accounted for under a fair value method. Companies are permitted
to continue accounting for stock options under the intrinsic value method
prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees." If APB Opinion No. 25 is followed, SFAS 123 requires
disclosure of the proforma effect of the new standard on net income and earnings
per share. The Company plans to comply with the proforma disclosure provisions
of SFAS 123. SFAS 123 will be effective for the fiscal year ending December 31,
1996.
16. LONG-LIVED ASSETS:
- --------------------------------------------------------------------------------
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of" ("SFAS
121"), requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
asset in question may not be recoverable. SFAS 121 will be adopted in 1996, and
is not expected to have an effect on the Company's results of operations, cash
flows or financial position, as the Company's current policy is similar, in all
material aspects, to SFAS 121.
17. RISKS AND UNCERTAINTIES:
- --------------------------------------------------------------------------------
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported. Actual results are not
expected to differ from those estimates. Those accounts with estimates are
receivables, employee benefits, taxes and depreciation and amortization.
18
<PAGE> 19
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------[LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF ISOMEDIX INC.:
We have audited the accompanying consolidated balance sheets of
ISOMEDIX INC. and SUBSIDIARIES as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. 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
Isomedix Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Parsippany, New Jersey
February 16, 1996
19
<PAGE> 20
ISOMEDIX INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CORPORATE INFORMATION
DIRECTORS
- ---------------------
John Masefield
Chairman of the Board
Isomedix Inc.
Elmer A. Sticco
Vice Chairman
Isomedix Inc.
Owner, E/S Investments
(Consulting Firm)
David M. Lank
Partner
Dorchester Investment
Management
(Investment Counsel)
Thomas M. Haythe
Partner
Haythe & Curley
(Law Firm)
H. Stuart Campbell
Vice President
and Owner
Highland Packaging
Labs, Inc.
(Manufacturing and
Packaging)
Peter Mayer
President
Isomedix Inc.
George R. Dietz
Senior Vice President
Isomedix Inc.
Thomas J. DeAngelo
Vice President - Finance
and Administration
Isomedix Inc.
EXECUTIVE OFFICERS
- -----------------------
John Masefield
Chairman
Peter Mayer
President and
Chief Executive Officer
Charles P. Truby
Executive Vice President and Chief Operating Officer
George R. Dietz
Senior Vice President
Thomas J. DeAngelo
Vice President - Finance
and Administration and
Chief Financial Officer
James D. Wilson
Vice President -
Quality Assurance and
Regulatory Affairs
Ronald D. Deahr
Vice President -
Sales and Marketing
INDEPENDENT
ACCOUNTANTS
- --------------------------
Coopers & Lybrand L.L.P.
Parsippany, New Jersey
GENERAL COUNSEL
- --------------------------
Haythe & Curley
New York, New York
TRANSFER AGENT
& REGISTRAR
- --------------------------
Midlantic Bank, N.A.
Edison, New Jersey
ANNUAL MEETING
The annual meeting of the stockholders will be held at The Parsippany
Hilton, 1 Hilton Court, Parsippany, New Jersey on May 17, 1996, at 10:00 A.M.
FORM 10-K
Stockholders may obtain, without charge, a copy of the Company's Form
10-K as filed with the Securities and Exchange Commission upon request to:
Vice President - Finance and Administration
Isomedix Inc.
11 Apollo Drive
Whippany, New Jersey 07981
STOCK LISTING
The Company's common stock is traded on the New York Stock Exchange
under the symbol ISO. At December 31, 1995, there were approximately 509
stockholders of record. No dividends have been paid or declared on the common
stock since the Company was originated.
The following table sets forth the range of high and low closing sale
prices for the Company's common stock from January 1, 1994 through December 31,
1995.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1995 1994
HIGH LOW High Low
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $ 17.50 $ 12.88 $ 19.50 $ 17.50
Second quarter 15.75 13.50 19.25 16.50
Third quarter 14.88 12.75 19.50 16.25
Fourth Quarter 15.38 13.13 19.75 14.75
- -----------------------------------------------------------------------------------
</TABLE>
OPERATIONS
Facilities
Morton Grove, Illinois
Spartanburg, South Carolina*
Whitby, Ontario
Northborough, Massachusetts*
Groveport, Ohio
Whippany, New Jersey
Sandy City, Utah
Libertyville, Illinois
El Paso, Texas*
Chester, New York
Temecula, California**
Skyland Scientific Services, Inc.
Bozeman, Montana
* Combined Gamma/Ethylene Oxide Facility
** Ethylene Oxide Facility
11 Apollo Drive, Whippany, New Jersey, 07981 - (201) 887-4700
FAX (201) 887-1476
20
<PAGE> 1
EXHIBIT 21
Isomedix Inc., a Delaware corporation, has the following
wholly-owned subsidiaries:
1. Isomedix Corporation (a corporation of the Province of
Ontario)
2. Isomedix (Puerto Rico), Inc. (a Delaware corporation)
3. Isomedix Management Inc. (a Delaware corporation)
4. Isomedix Investments, Inc. (a Delaware corporation)
5. Isomedix Operations Inc. (a Delaware corporation)
6. Skyland Scientific Services, Inc. (a Delaware corporation)
<PAGE> 1
Coopers EXHIBIT 23
& Lybrand
CONSENT OF INDEPENDENT ACCOUNTANTS
-----
We consent to the incorporation by reference in the registration statements of
Isomedix Inc. and Subsidiaries on Form S-3 (File Nos. 33-52474, 33-40342) and on
Form S-8 (File Nos. 2-87989, 2-87990, 33-41016, 33-48812, 33-73128) of our
report dated February 16, 1996 on our audits of the consolidated financial
statements and financial statement schedules of Isomedix Inc. and Subsidiaries
as of December 31, 1995 and 1994 and for the years ended December 31, 1995, 1994
and 1993, which report is included in this Annual Report on Form 10-K.
Parsippany, New Jersey
March 29, 1996
/s/ Coopers & Lybrand L.L.P.
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