SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
check the appropriate box:
|_| Preliminary Proxy Statement
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.14a-11(c) or ss.14a-12
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
RTI Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|_| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
|_| $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
|_| Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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|X| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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RTI INC.
108 Lake Denmark Road
Rockaway, New Jersey 07866
June 21, 1996
Dear Fellow Shareholder:
You are cordially invited to attend our Company's Annual Meeting of shareholders
on August 6, 1996.
You are being asked to decide on a momentous change in our Company's direction.
This decision requires the approval of two-thirds of all shares to become
effective; so, whatever the number of shares you own, your vote is very
important.
If your shares are held in "street name", you must instruct your broker to vote
your shares, or your vote will not be counted.
Please read the enclosed material and then, please VOTE!
Thank you,
Theo W. Muller
President
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RTI INC.
108 Lake Denmark Road
Rockaway, New Jersey 07866
(800) 874-8980
(201) 625-8400
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held August 6, 1996
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NOTICE IS HEREBY GIVEN that the Annual Meeting of shareholders of RTI Inc.,
a New York corporation ("RTI"), will be held on August 6, 1996, at 11:00 a.m.,
at the Four Points Hotel by Sheraton, 15 Howard Boulevard, Mt. Arlington, New
Jersey 07856 for the following purposes:
(1) To consider and vote upon a proposal to approve the sale of
substantially all of RTI's assets to SteriGenics International and its
wholly-owned subsidiaries, as described in the accompanying Proxy
Statement, and to authorize such further action as may be necessary or
desirable, as more fully described in the Proxy Statement;
(2) To elect four persons to serve as directors until the next Annual
Meeting of shareholders or until their respective successors are elected
and qualified.
(3) To ratify the selection of BDO Seidman, LLP as the independent
auditors for RTI for the fiscal year ending December 31, 1996.
(4) To transact such other business as properly may come before the
meeting or any adjournments thereof.
The close of business on June 26, 1996 has been fixed as the record
date for the determination of shareholders entitled to notice of, and to vote
at, the Annual Meeting and at any adjournments thereof.
Shareholders who do not vote in favor of the proposed transaction with
SteriGenics International may be entitled to exercise dissenters' rights by
following the procedures set forth in Section 623 of the New York Business
Corporation Law, a copy of which is attached as Annex B to the Proxy Statement.
R. Stephen Maico
Secretary
June 21, 1996
IMPORTANT: Management invites you to attend the meeting in person, but if you
are unable to be present, please date, sign and return the enclosed proxy as
promptly as possible. No postage is required if the proxy is returned in the
enclosed postage paid envelope and mailed in the United States.
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TABLE OF CONTENTS
INTRODUCTION............................................................. 1
General........................................................ 1
Voting by Brokers.............................................. 2
Dissenters' Rights............................................. 2
Proxy Solicitation............................................. 2
SUMMARY OF PROXY STATEMENT............................................... 3
The Annual Meeting............................................. 3
The SGI Transaction............................................ 4
Market Prices.................................................. 6
Election of Directors.......................................... 7
Appointment of Independent Auditors............................ 7
VOTING SECURITIES........................................................ 7
THE SGI TRANSACTION...................................................... 8
General........................................................ 8
Background of the SGI Transaction ............................. 8
Advice from Financial Advisor.................................. 10
Reasons for the SGI Transaction................................ 12
The Acquisition Agreement...................................... 13
The Rockaway Lease............................................. 16
The North Carolina Option...................................... 17
The Preferred Stock Purchase Agreement......................... 17
Other Agreements with SGI...................................... 17
Voting Agreements.............................................. 17
Application of Sale Proceeds; Operations after the SGI
Transaction.................................................. 18
Operations of RTI if the SGI Transaction is not Consummated.... 19
Certain Regulatory Matters..................................... 19
Tax Consequences............................................... 19
Rights of Dissenting Shareholders.............................. 21
Required Vote.................................................. 23
Recommendation of the Board of Directors....................... 23
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION......... 23
CERTAIN INFORMATION WITH RESPECT TO THE COMMON STOCK..................... 29
ELECTION OF DIRECTORS.................................................... 29
Nominees....................................................... 29
Executive Officers of RTI...................................... 31
Executive Compensation......................................... 31
Certain Relationships and Related Transactions................. 32
APPOINTMENT OF INDEPENDENT AUDITORS...................................... 33
OTHER MATTERS............................................................ 33
DOCUMENTS INCORPORATED BY REFERENCE...................................... 34
ANNEX A - Asset Acquisition Agreement between RTI Inc. and SteriGenics
International
ANNEX B - Section 623 of the New York Business Corporation Law
ANNEX C - RTI Inc. Quarterly Report on Form 10-QSB/A for the Fiscal Quarter
Ended March 31, 1996
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RTI INC.
108 Lake Denmark Road
Rockaway, New Jersey 07866
PROXY STATEMENT
INTRODUCTION
General
This Proxy Statement is being furnished to the shareholders of RTI in
connection with the solicitation by the Board of Directors of RTI of proxies in
the accompanying form for use at the Annual Meeting to be held on Tuesday,
August 6, 1996, at 11:00 a.m. at the Four Points Hotel by Sheraton, 15 Howard
Boulevard, Mt. Arlington, New Jersey 07856, and at any adjournments thereof, for
the purposes set forth in the accompanying Notice of Annual Meeting. This Proxy
Statement and the accompanying Notice of Annual Meeting, form of proxy and
Annual Report of RTI for its fiscal year ended December 31, 1995 are first being
mailed to RTI shareholders on or about June 28, 1996.
Only shareholders of record at the close of business on June 26, 1996 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting or
any adjournment thereof. On the Record Date, there were issued and outstanding
1,101,888 shares of Common Stock and 118,000 shares of Series A Preferred Stock,
each of which is entitled to one vote per share upon all matters to be acted
upon at the Annual Meeting and all of which will vote as a single class.
Presence in person or by proxy of holders of an aggregate of 609,945 shares
of Common Stock and Series A Preferred Stock will constitute a quorum at the
Annual Meeting. The affirmative vote by the holders of an aggregate of 813,259
of such shares (constituting two-thirds of all outstanding shares entitled to
vote at the Annual Meeting) will be required to approve the proposed transaction
(the "SGI Transaction") with SteriGenics International ("SGI") and its
wholly-owned subsidiaries. Assuming a quorum is present at the Annual Meeting
(i) the affirmative vote by the holders of a plurality of the shares represented
will be required to act on the election of directors, and (ii) the affirmative
vote by the holders of a majority of the shares represented will be required to
act on all other matters to come before the Annual Meeting. If a shareholder,
present in person or by proxy, abstains on any matter, the shareholder's shares
will not be voted on such matter. Abstentions may be specified on all proposals
submitted to a shareowner vote, other than the election of directors.
Abstentions will be counted as present for purposes of determining the existence
of a quorum regarding the proposal on which the abstention is noted. Thus,
abstentions with respect to the proposal to approve the SGI Transaction or to
ratify the appointment of the independent auditors will have the effect of a
vote against such proposals. A proxy also may indicate that all or a portion of
the shares represented by such proxy are not being voted with respect to a
particular matter. This could occur, for example, when a broker is not permitted
to vote shares held in "street name" on certain matters in the absence of
instructions from the beneficial owner of such shares.
A proxy, in the accompanying form, which is properly executed, duly
returned to RTI and not revoked, will be voted in accordance with the
instructions contained therein. If no specification is indicated on the proxy,
the shares represented thereby will be voted FOR (i) the approval of the SGI
Transaction, (ii) the election of the persons nominated herein as directors,
(iii) the ratification of BDO Seidman, LLP as RTI's independent auditors for the
fiscal year ending December 31, 1996, and (iv) the transaction of such other
business as properly may come before the Annual Meeting.
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Each proxy granted may be revoked by the person giving it at any time (i)
by giving written notice to such effect to the Secretary of RTI, (ii) by
execution and delivery of a subsequent proxy, or (iii) by attendance and voting
in person at the Annual Meeting; except as to any matter upon which, prior to
such revocation, a vote shall have been cast pursuant to the authority conferred
by such proxy. The mere presence at the Annual Meeting of a person appointing a
proxy does not revoke the appointment.
Voting by Brokers
Brokers who hold shares in street name have the authority to vote on
certain routine matters on which they have not received instructions from their
beneficial owners. Brokers holding shares in street name, who do not receive
instructions, are entitled to vote on the election of directors and ratification
of the appointment of the independent auditors at the Annual Meeting, since such
matters are considered to be routine, but will not be entitled to vote on the
proposal to approve the SGI Transaction, since such matter is not considered to
be routine. Under applicable New York law, "broker non-votes" on any proposal
(where a broker submits a proxy but does not have authority to vote a customer's
shares on such proposal) will be considered not entitled to vote on that
proposal and thus will not be counted in determining whether such proposal
receives the vote of a majority of the shares present and entitled to vote at
the Annual Meeting. Since a broker is not required to vote shares held in
"street name" in the absence of instructions from the beneficial shareholder
and, in the absence of instructions, is not permitted to vote on the proposal to
approve the SGI Transaction, a shareholder's failure to instruct his or her
broker may result in the shareholder's shares not being voted.
Dissenters' Rights
Under Sections 623 and 910 of the New York Business Corporation Law (the
"NYBCL"), and assuming that the SGI Transaction is consummated, any shareholder
who objects to the SGI Transaction has the right to receive the "fair value" of
such shareholder's shares by filing with RTI a written objection to the SGI
Transaction before the vote of shareholders approving the SGI Transaction is
taken, by otherwise complying with the provisions of Sections 623 and 910 of the
NYBCL, including not voting such shareholder's shares in favor of the SGI
Transaction. A vote against the SGI Transaction does not constitute the required
written objection under the NYBCL and a failure to vote against the SGI
Transaction does not constitute a waiver of a shareholder's rights under the
NYBCL. Theo W. Muller, President and Chief Executive Officer of RTI, and David
Della Donna, Thomas O'Grady, John N. Scandalios and David Smith, shareholders of
RTI, which persons in the aggregate hold 252,093 shares of Common Stock
(approximately 20.7% of RTI's outstanding voting securities) have agreed to vote
their shares in favor of the approval of the SGI Transaction and, therefore,
such persons will be precluded from perfecting dissenters' rights. See "THE SGI
TRANSACTION - Rights of Dissenting Shareholders" and the copy of the text of
Section 623 of the NYBCL attached to this Proxy Statement as Annex B.
Proxy Solicitation
The costs of soliciting proxies in the accompanying form will be paid by
RTI, except that SGI has agreed to pay for one-half of the cost of any proxy
solicitation firm retained by RTI for such purpose. Costs of solicitation
include preparation, printing and mailing of the Notice of Annual Meeting and
form of proxy and this Proxy Statement. In addition to solicitation by mail,
proxies also will be solicited by the executive officers and regular employees
of RTI, without additional compensation, personally or by telephone and
telecopy. RTI has retained Beacon Hill Partners, Inc. to assist in the
solicitation of proxies for a fee of $4,000 plus reimbursement of reasonable
out-of-pocket expenses. Arrangements will be made with brokerage firms and other
custodians, nominees and fiduciaries for proxy materials to be sent to their
principals, and RTI will reimburse such persons for their reasonable expenses in
so doing.
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SUMMARY OF PROXY STATEMENT
The following is a summary of certain information contained in this Proxy
Statement. This summary is not intended to be a complete discussion of all of
the matters contained in this Proxy Statement and is qualified in its entirety
by reference to the more detailed information contained elsewhere in this Proxy
Statement, including the Annexes hereto, and the documents referred to herein.
Shareholders are urged to read this Proxy Statement, the Annexes and such other
documents in their entirety.
The Annual Meeting
Time, Date and Place of the Annual Meeting
The annual meeting of shareholders (the "Annual Meeting") of RTI Inc., a
New York corporation ("RTI") will be held on Tuesday, August 6, 1996, at 11:00
a.m., at the Four Points Hotel by Sheraton, 15 Howard Boulevard, Mt. Arlington,
New Jersey 07856.
Purpose of the Annual Meeting
At the Annual Meeting, shareholders of RTI will be asked to consider and
vote upon (i) the proposed sale to SteriGenics International ("SGI") and its
wholly-owned subsidiaries of substantially all of RTI's assets (the "SGI
Transaction"), (ii) the election of four persons to serve as directors of RTI
until the next Annual Meeting of shareholders or until their respective
successors are elected and qualified, and (iii) the ratification of the
selection of BDO Seidman, LLP as the independent auditors for RTI for the fiscal
year ending December 31, 1996.
Record Date; Shares Entitled to Vote; Required Vote; Dissenters' Rights
The record date for shareholders of RTI entitled to notice of, and to vote
at, the Annual Meeting is the close of business on June 26, 1996. As of such
date, there were outstanding, and entitled to be voted at the Annual Meeting,
1,101,888 shares of RTI's common stock, par value $.08 per share (the "Common
Stock"), and 118,000 shares of RTI's preferred stock, par value $.01 per share
(the "Series A Preferred Stock"), each of which shares have one vote and all of
which shares are entitled to vote as a single class on all matters.
The affirmative vote by the holders of two-thirds of all outstanding shares
will be required to approve the SGI Transaction. Assuming a quorum is present at
the Annual Meeting (i) a plurality of the shares represented will be required to
act on the election of directors, and (ii) a majority of the shares represented
will be required to act on all other matters to come before the Annual Meeting.
Holders of 252,093 shares of Common Stock, including Theo W. Muller,
President and Chief Executive Officer and a director of RTI, have agreed with
SGI to vote in favor of the SGI Transaction. In addition, the other directors of
RTI, who hold an aggregate of 4,677 shares of Common Stock, and SGI, as the
holder of all of the 118,000 outstanding shares of Series A Preferred Stock, are
expected to vote in favor of the SGI Transaction. In the aggregate, such
securities constituted approximately 30.7% of RTI's voting securities on the
Record Date.
Assuming that the SGI Transaction is consummated, shareholders who do not
vote in favor of the SGI Transaction may exercise dissenters' rights by
following the procedures set forth in Section 623 of the New York Business
Corporation Law (the "NYBCL"), a copy of which is attached as Annex B to this
Proxy Statement.
See "INTRODUCTION", "THE SGI TRANSACTION - Voting Agreements; - Rights of
Dissenting Shareholders; - Required Vote".
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The SGI Transaction
Parties to the Transaction
RTI, including its wholly-owned subsidiary, South Jersey Process Technology
Inc. ("South Jersey"), is engaged in supplying gamma irradiation services for a
variety of products, primarily medical devices and disposable medical supplies.
In addition, RTI irradiates, to a much lesser extent, cosmetics and other
consumer products. The principal executive offices of RTI are located at 108
Lake Denmark Road, Rockaway, New Jersey 07866; and its telephone number is (201)
625-8400. See "DOCUMENTS INCORPORATED BY REFERENCE" for further information
concerning RTI.
SGI, a California corporation, is engaged in supplying contract gamma
irradiation services from six facilities located in California, Texas, Illinois,
Ohio and North Carolina, and has two additional facilities under construction.
The principal executive offices of SGI are located at 4020 Clipper Court,
Fremont, California 94538; and its telephone number is (510) 770-9000.
General
Pursuant to the terms of the SGI Transaction, RTI will sell to SGI and its
wholly-owned subsidiaries the capital stock of South Jersey and substantially
all of RTI's operating assets, other than RTI's real property in Rockaway, New
Jersey (62 acres of which will be leased to a wholly-owned subsidiary of SGI),
and SGI and its wholly-owned subsidiaries will assume substantially all of RTI's
liabilities, other than liabilities to the extent not fully reflected on RTI's
balance sheet and RTI's liabilities (including environmental liabilities)
associated with the Rockaway property, for $18,000 plus the net book value of
such assets. As of December 31, 1995, the net book value of such assets
aggregated approximately $4,250,000, and at March 31, 1996, the net book value
of such assets aggregated approximately $4,505,000. RTI estimates that such
purchase price, at the closing of the SGI Transaction, and after payment of
expenses and liabilities required to be paid as a condition of closing, will net
to RTI approximately $3.5 million. $0.8 million of such proceeds initially will
be escrowed for purchase price adjustments, if any, resulting from RTI's closing
balance sheet and for certain RTI indemnification obligations. In connection
with the SGI transaction, RTI sold to SGI 118,000 shares of Series A Preferred
Stock for $238,000 and granted SGI an option to purchase, under certain
circumstances, RTI's North Carolina operating facility. See "THE SGI TRANSACTION
- - The Acquisition Agreement; - The Rockaway Lease; - The North Carolina Option;
- - The Preferred Stock Purchase Agreement".
Recommendation of the Board of Directors
The Board of Directors of RTI has determined that the SGI Transaction is in
the best interests of RTI and RTI's shareholders and is fair to RTI's
shareholders, has unanimously approved the SGI Transaction and unanimously
recommends that RTI's shareholders vote in favor of the SGI Transaction. The
determination made by RTI's Board of Directors was based upon its evaluation of
a number of factors. See "THE SGI TRANSACTION - Background of the SGI
Transaction; - Reasons for the SGI Transaction; - Recommendation of the Board of
Directors".
Conditions to the SGI Transaction
The obligations of RTI and SGI to consummate the SGI Transaction are
subject to the satisfaction of certain conditions. Conditions which, as of the
date of this Proxy Statement, have not yet been satisfied include approval of
the SGI Transaction by the RTI shareholders, obtaining certain assurances from
the New Jersey Department of Environmental Protection (the "NJDEP"), and
obtaining appropriate operating authority from the U.S. Nuclear Regulatory
Commission (the "NRC") and the North Carolina Department of Radiological Health
(the "NCDRH"). Consummation of the SGI Transaction will occur on the third
business day after all conditions are satisfied. If consummation of the SGI
Transaction has not occurred by November 27, 1996, either RTI or SGI may elect
to terminate the transaction. See "THE SGI TRANSACTION - The Acquisition
Agreement -- Conditions; -- Closing Date; --Termination; - Certain Regulatory
Matters".
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Purpose of the SGI Transaction; Operations of RTI if the SGI Transaction is Not
Approved
Since 1982, RTI has had environmental cleanup responsibility for its
Rockaway property, a portion of which is identified on the National Priorities
List as a "superfund site" and, as a result, has been unable to obtain
institutional financing while, at the same time, it has been required to expend
substantial funds for environmental cleanup and oversight, as well as for
related litigations which have been resolved. RTI's operating facilities are
much smaller and less efficient than those of its competitors, and RTI has been
unable to obtain sufficient financing to expand or improve its operations. RTI
has incurred losses in three of its last four fiscal years, and expects to incur
additional losses (before non-recurring items) during the current fiscal year.
At various times during the past year, RTI's competitors have competed for the
business of RTI's customers by quoting processing prices significantly less than
the prices charged by RTI, some of which quotations, if matched by RTI, would
not have fully covered RTI's allocated overhead costs. During the past year, RTI
has been exploring various alternatives in an attempt to remain viable. The
currently proposed SGI Transaction has resulted from these efforts. In the event
that the SGI Transaction is not consummated, there can be no assurance that
another alternative will be forthcoming on terms acceptable to RTI or at all. In
addition, if the SGI Transaction is not consummated, and competitive industry
conditions do not improve, RTI will require additional financing during the
first half of 1997, which during the past year has not been available except
from affiliated parties; and there can be no assurance that such additional
financing, if it can be obtained, will be available on commercially reasonable
terms. See "THE SGI TRANSACTION - Operations of RTI if the SGI Transaction is
Not Consummated".
Tax Consequences of the SGI Transaction to RTI
Although the sale of RTI's assets to SGI will be a taxable transaction to
RTI, RTI's net operating loss carryforward will offset substantially all of
RTI's taxable gain. See "THE SGI TRANSACTION - Tax Consequences -- Tax
Consequences to RTI of the SGI Transaction".
Application of Sale Proceeds; Continuing Environmental Liability; Operations
after the SGI Transaction
The SGI Transaction involves the sale of assets of RTI, and not the sale of
an equity interest in RTI. As a result, RTI shareholders will retain their
equity interests in RTI following the consummation of the SGI Transaction. If,
at some time in the future, the Board of Directors of RTI determines that RTI
should be liquidated, to the extent required by applicable law, such action will
be submitted to the RTI shareholders for approval. See "THE SGI TRANSACTION
Application of Sale Proceeds; Operations after the SGI Transaction" and
"UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION".
Since 1982, the NJDEP has been investigating RTI's Rockaway property. As a
result of the presence of halogenated hydrocarbons in the groundwater, a portion
of the Rockaway property is on the National Priorities List as a "superfund
site". Through March 31, 1996, RTI has expended approximately $2.6 million for
clean-up and regulatory oversight of the clean-up of the Rockaway property and,
as of such date, RTI has reserved an additional $1.46 million for additional
future cleanup and oversight. As a result of the continuing environmental
responsibility for its Rockaway property, and the contingent cost of cleanup and
oversight, RTI does not anticipate making any distribution of assets to its
shareholders in the foreseeable future and until sufficient clean-up has
occurred so that the Rockaway property is no longer considered to be a
"superfund site". See "THE SGI TRANSACTION - Certain Regulatory Matters".
Upon consummation of the SGI Transaction, RTI will cease its contract
irradiation business. RTI is in the process of evaluating possible alternative
uses of the cash proceeds from the SGI Transaction, including the acquisition or
development of a new business which could enable RTI to use its net operating
loss carryforwards, which aggregated approximately $11.4 million for federal
purposes as of December 31, 1995. RTI does not yet know the aggregate net cash
proceeds it will have available after consummation of the SGI Transaction, but
estimates that it will have available cash from the SGI Transaction of
approximately $2.7 million immediately after consummation of the SGI
Transaction, and will receive up to an additional $800,000 upon release of the
unutilized portion of such amount from the escrow being established at closing.
The acquisition or development of a new business will be dependent on the amount
of net cash proceeds available to RTI and there can be no assurance that RTI
will be able to acquire or develop a new business or that such
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new business, if acquired or developed, will be profitable, although the
principal criteria of any such new business will be the ability of such business
to generate profits which may be sheltered from payment of taxes by application
of RTI's net operating loss carryforwards. As part of its identification
process, RTI has decided to make a short-term investment of up to $100,000 to
purchase, at substantial discount, defaulted consumer debt accounts in order to
evaluate the ultimate return on the collectability thereof by third party
collection agencies. Pending use of its cash assets, RTI will invest the
proceeds it receives from the SGI Transaction in money market mutual funds or
similar investments. If RTI is not successful in acquiring or developing a new
business within one year after consummation of the SGI Transaction, it will then
invest any remaining proceeds in U.S. government securities in order to avoid
inadvertently becoming subject to the reporting requirements of the Investment
Company Act of 1940. SGI has agreed to offer employment to all employees of RTI,
except Theo W. Muller, upon consummation of the SGI Transaction. Thereafter, Mr.
Muller would be the only continuing employee of RTI. The current directors of
RTI have advised RTI that if they are reelected by the shareholders at the
Annual Meeting, they intend to assist Mr. Muller in evaluating possible
alternatives for RTI. See "THE TRANSACTION - The Acquisition Agreement
- --Purchase Price; -- Conditions; - Other Agreements with SGI; -Application of
Sale Proceeds; Operations after the Transaction; - Tax Consequences -- Tax
Consequences of RTI Activities after Consummation of the SGI Transaction",
"UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION" and "ELECTION
OF DIRECTORS".
Rights of Dissenting Shareholders
Assuming that the SGI Transaction is consummated, shareholders who do not
vote in favor of the SGI Transaction may exercise dissenters' rights by
following the procedures set forth in Section 623 of the NYBCL. See "THE SGI
TRANSACTION - Rights of Dissenting Shareholders".
Interests of Certain Persons in the SGI Transaction
The proposed SGI Transaction involves several conflicts of interest. SGI is
the holder of 118,000 shares of Series A Preferred Stock, which it purchased for
$236,000 in contemplation of the consummation of the SGI Transaction. If the SGI
Transaction is not consummated, SGI has the right to redeem the Series A
Preferred Stock at a redemption price of $236,000. If such shares are redeemed
prior to January 31, 1997, the redemption price may be paid with an RTI
promissory note maturing ten days after demand which may not be made prior to
January 31, 1997. If the SGI Transaction is not consummated, RTI may not have
adequate funds to redeem the Series A Preferred Stock. See "THE SGI TRANSACTION
- - The Preferred Stock Purchase Agreement". Theo W. Muller, President and Chief
Executive Officer and a director of RTI, owns 122,393 shares of Common Stock and
has a 50.1% interest in Frellum Corporation, which owns 25,000 shares of Common
Stock. Mr Muller has agreed to vote all of his shares of Common Stock to approve
the SGI Transaction and not to encumber or otherwise dispose of any shares of
Common Stock until such time, if at all, as the SGI Transaction is terminated.
RTI has a $315,000 line of credit with Frellum, which is secured by RTI's
accounts receivable. If the SGI Transaction is not consummated, RTI may not have
adequate funds to repay any outstanding balance under the Frellum line of
credit, in which event, Frellum would need to exercise upon its security
interest in RTI's accounts receivable in order to be repaid. See "VOTING
SECURITIES"; "THE SGI TRANSACTION - Voting Agreements"; and "ELECTION OF
DIRECTORS - Certain Relationships and Related Transactions".
Market Prices
The Common Stock is traded on The Nasdaq Small-Cap Market under the symbol
"RTII." The last sales price of the Common Stock on February 26, 1996, the last
trading day prior to the public announcement of the proposed SGI Transaction was
$2-1/8. On June 14, 1996, the last day on which the Common Stock was publicly
traded prior to the date of the printing of this Proxy Statement, the last sales
price of the Common Stock was $2-7/8. See "CERTAIN INFORMATION WITH RESPECT TO
THE COMMON STOCK." Shareholders are urged to obtain current quotations for the
Common Stock.
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Election of Directors
The shareholders of RTI, at the Annual Meeting, will be asked to elect four
directors to serve until the next Annual Meeting. The four current directors of
RTI have all been renominated for election at the Annual Meeting. See "ELECTION
OF DIRECTORS".
Appointment of Independent Auditors
The shareholders of RTI, at the Annual Meeting, will be asked to ratify the
re-appointment of BDO Seidman, LLP as RTI's independent auditors for the fiscal
year ending December 31, 1996. See "APPOINTMENT OF INDEPENDENT AUDITORS".
- --------------------------------------------------------------------------------
VOTING SECURITIES
SGI, with its principal executive offices at 4020 Clipper Court, Fremont,
California 94538, owns beneficially and of record 118,000 shares of Series A
Preferred Stock, which shares are entitled to vote as a single class with the
Common Stock, on all matters submitted to the holders of the Common Stock. The
shares of Series A Preferred Stock held by SGI constitute approximately 9.9% of
the outstanding voting securities of RTI and all the outstanding shares of the
Series A Preferred Stock. In addition, Theo W, Muller, President and Chief
Executive Officer and a director of RTI, who owns 122,393 shares of Common
Stock, and John N. Scandalios, who owns 62,500 shares of Common Stock, both of
whom are listed in the table below, and holders of an additional 67,200 shares
of Common Stock (which shares, in the aggregate, constitute approximately 23.4%
of the outstanding shares of Common Stock) have agreed, pursuant to separate
agreements with SGI, to vote their shares of Common Stock to approve the SGI
Transaction. See "THE SGI TRANSACTION - Voting Agreements".
Set forth below is information, as of the Record Date, with respect to (i)
each person who is known by RTI to be the beneficial owner of more than 5% of
the Common Stock, (ii) each of the current directors of RTI (who also constitute
the nominees for election as directors at the Annual Meeting), and (iii) the
beneficial ownership of Common Stock by all current directors and all executive
officers of RTI, as a group (five persons).
<TABLE>
Number of Shares Percent
Name and Address of Owner of Common Stock of Class
- ------------------------- --------------- --------
<S> <C> <C>
Theo W. Muller 147,393(a) 13.4%
20 Peach Hill Road
Darien, Connecticut 06820
Elmgrove Associates II, L.P. 80,000(b) 7.4%
162 Main Street
Woonsocket, Rhode Island 02895
John N. Scandalios 62,500 5.8%
46 Shrewsbury Drive
Rumson, New Jersey 07760
Sanders Davies 1 ,500 0.1%
C.W. McMillan 52 *
George M. Whitmore, Jr 3,125 0.3%
All directors and executive 153,016(c) 14.1%
officers, as a group
</TABLE>
- ----------
* Represents less than 0.1% of the issued and outstanding shares of Common
Stock.
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<PAGE>
(a) Consists of (i) 122,393 shares owned directly by Mr. Muller, and (ii)
25,000 shares owned by Frellum Corporation ("Frellum") which is 50.1% owned
by Mr. Muller (see "Certain Relationships and Related Transactions").
(b) According to a Schedule 13D, dated April 22, 1996, filed by Elmgrove
Associates II, L.P. ("Elmgrove"), Elmgrove's general partner, Miss Sloan
Capital Ltd, and Mandel Sherman, the President of Elmgrove's general
partner (collectively, the "Elmgrove Entities"), as of April 4, 1996, the
Elmgrove Entities share voting and dispositive power with respect to the
80,000 shares owned of record by Elmgrove.
(c) Consists of (i) 1,500 shares owned by an individual retirement account of
Mr. Davies, 52 shares owned by Mr. McMillan, 122,393 shares owned by Mr.
Muller, and 3,125 shares owned by Mr. Whitmore, Jr., directors of RTI, (ii)
25,000 shares issuable at $1.75 per share upon exercise of a warrant issued
to Frellum, and (iii) 937 shares issuable at $6.50 per share upon exercise
of incentive options granted to R. Stephen Maico under RTI's 1987 Stock
Option Plan.
RTI does not know of any arrangements, including any pledge by any person
of securities of RTI, the operation of which, at a subsequent date, may result
in a change in control of RTI.
THE SGI TRANSACTION
(Item 1 on the Proxy Card)
General
Pursuant to the terms of the Asset Acquisition Agreement, dated as of
February 26, 1996, between RTI and SGI (the "Acquisition Agreement"), RTI will
sell to SGI the capital stock of South Jersey and substantially all of the
operating assets of RTI, other than RTI's real property in Rockaway, New Jersey
(the "Rockaway property") and RTI's operating facility located thereon (the
"Rockaway Facility"), and SGI will assume substantially all of the liabilities
of RTI, other than RTI's liabilities related to the Rockaway property and the
Rockaway Facility and any outstanding liability to Frellum, for aggregate
consideration of $18,000 plus the net book value of such assets less the book
value of such assumed liabilities. As of March 31, 1996, the unaudited net book
value of such assets aggregated approximately $7,480,000 and the unaudited book
value of such liabilities aggregated approximately $2,975,000. In addition, SGI
will lease from RTI a portion of the Rockaway property, including the Rockaway
Facility. The information contained in this Proxy Statement with respect to the
SGI Transaction is qualified in its entirety by reference to the complete text
of the Acquisition Agreement, a copy of which is attached to this Proxy
Statement as Annex A and is incorporated herein by reference.
Background of the SGI Transaction
Excluding research laboratories and universities, RTI believes that there
are approximately 40 gamma irradiation facilities presently in operation
throughout the United States. Approximately half of these facilities are
operated by independent contract irradiator companies and the balance are
operated principally by medical supply manufacturers to irradiate their own
products. RTI competes for contract gamma irradiation processing with the
industry's other contract irradiators, as well as with manufacturers possessing
their own irradiators who determine whether to perform their own irradiation or
use an outside vendor. In addition to RTI, four other U.S. companies perform
contract irradiation. Two of these companies (SGI and Isomedix Inc.) are
substantially larger than RTI in assets and sales and have been expanding by
building additional facilities in RTI's market areas. The other two companies
consist of Neutron Products, Inc, with a single facility, and a medical products
manufacturer which utilizes its excess capacity for contract irradiation. Gamma
irradiation processing competes with other methods of sterilization, primarily
electron-beam sterilization and the use of ethylene oxide, neither of which may
be as effective as gamma processing in certain instances.
8
<PAGE>
At various times during 1995, RTI's competitors have competed for the
business of RTI's customers by quoting processing prices significantly less than
the prices charged by RTI, which quotations, if matched by RTI, would not have
fully covered RTI's allocated overhead costs. As a result of the impact of these
competitive pricing pressures, as well as RTI's financial position, during 1995,
RTI's Board of Directors determined that RTI should explore various alternatives
in an attempt to remain viable, while at the same time considering whether RTI
should remain in the contract irradiation business.
Since 1982, RTI has had environmental cleanup responsibility for its
Rockaway property, a portion of which is identified on the National Priorities
List as a "superfund site". See -"Certain Regulatory Matters". As a result of
(i) RTI's potential environmental clean-up liability and the ability of federal
and State of New Jersey environmental authorities to assert statutory priority
liens on RTI's property, and (ii) RTI's pledge of a substantial portion of its
property to secure third parties for the unpaid portion of the purchase price of
assets sold to RTI and the unpaid portion of advances to fund environmental
liabilities, RTI has been unable to obtain institutional financing while, at the
same time, it has been required to expend substantial funds for environmental
cleanup and oversight, as well as for related litigations which have been
resolved. RTI's operating facilities are much smaller and less efficient than
those of its competitors, and RTI has been unable to borrow sufficient funds to
expand or improve its operations, and all borrowings during the last five years
have been from related parties, have required substantial equity incentives or
have been from a securities broker who lent funds against RTI's then existing
investment portfolio of publicly-traded securities. RTI has incurred losses in
three of its last four fiscal years, and currently expects to incur additional
losses (before non- recurring items) during the current fiscal year if the SGI
Transaction is not consummated.
RTI has been in contact with several investment bankers during the last
four years in an attempt to raise equity financing and, as a result of the
foregoing factors, has not been able to arrange any such financing on terms
which the Board of Directors believed at the time were in the best interests of
RTI and its shareholders. After various discussions with prospective investment
bankers in connection with a possible offering of its securities, in May 1995,
RTI had a one-for-eight reverse split of its Common Stock in an attempt to
achieve a higher market valuation for its Common Stock, which action it believed
necessary to enable it to engage in an offering of its securities.
Unfortunately, because of continued losses, the aggregate market valuation of
the Common Stock continued to decline after the reverse split. See "CERTAIN
INFORMATION WITH RESPECT TO THE COMMON STOCK". Thereafter, and despite continued
discussions, RTI remained unable to obtain viable proposals for third party
financing through the sale of its securities.
In late Summer 1995, Theo W. Muller, the Company's President and Chief
Executive Officer, after consultation with the directors of RTI, determined
that, due to (i) the size and condition of RTI's facilities, (ii) the costs of
operating such facilities, (iii) the cost of constructing and opening, and the
operating efficiencies of, newly built facilities, and (iv) RTI's competitive
position as a marginal participant in the contract irradiation industry, RTI was
unlikely to locate a buyer of its assets who was not already in the contract
irradiation business. Mr. Muller then determined that RTI's business would be
most attractive to SGI, which had no operations in the northeastern United
States. Thereafter, Mr Muller personally contacted and then initiated
preliminary discussions with SGI concerning a possible merger.
On October 3, 1995, SGI entered into a confidentiality agreement with RTI
and, on October 5, 1995, representatives of SGI and SGI's lawyer and financial
advisor met with Mr. Muller and RTI's lawyers to discuss the possibility of a
merger and terms which RTI would be willing to contemplate. At the conclusion of
such meeting, SGI orally advised RTI that it was not willing to engage in a
merger with RTI due to RTI's environmental liabilities, but would be willing to
discuss a possible acquisition of RTI's assets. On October 13, 1996, Mr. Muller
met with SGI's financial advisor, who indicated that SGI would consider the
acquisition of substantially all of RTI's assets, excluding the Rockaway
property, for approximately $4 million. However, at such time, RTI did not
believe that a sale of assets was in the best interests of RTI and its
shareholders since, with its continuing contingent environmental liabilities,
RTI's Board of Directors did not believe that it would be prudent to make any
distribution of proceeds from an asset sale to RTI's shareholders until final
resolution of all environmental liability claims, while a merger would allow RTI
shareholders to receive the proceeds from such a transaction directly from a
third party, who would have assumed RTI's contingent environmental liabilities.
As a result, discussions with SGI terminated.
9
<PAGE>
Later in the fall of 1995, Mr. Muller met with a member of senior
management of Isomedix, RTI's largest competitor, and informally advised him
that RTI would consider a proposal for a possible business combination.
In November 1995, following the continued inability of RTI to obtain any
equity or other financing on terms acceptable to RTI, RTI obtained a $250,000
short-term line of credit from Frellum, which provided RTI with short-term
resources. Such credit line was subsequently increased to $315,000. See
"ELECTION OF DIRECTORS - Certain Relationships and Related Transactions". At
such time, RTI had further discussions with several investment bankers to
determine if long-term financing could be made available, but due to RTI's
financial position, its contingent environmental liabilities, its assets which
were then available to be used as security and the market valuation of its
Common Stock, no viable proposal for long-term financing was obtained.
Thereafter, RTI reevaluated its available alternatives and the Board of
Directors determined that it was unlikely that RTI could negotiate any merger or
other transaction which would give any direct payment to RTI's shareholders from
a third party purchaser. RTI further evaluated its available federal operating
loss carryforward and the possibility of its use in an unrelated business if RTI
determined to sell its assets. Upon such further reevaluation and the increasing
competitive industry pressures, the Board of Director decided to reconsider a
possible sale of assets.
In December 1995, RTI and SGI recommenced their discussions and, during the
first half of January 1996, engaged in negotiations which culminated in SGI
submitting a written proposal to RTI for consideration by the RTI Board of
Directors. Also, in January 1996, RTI received from Isomedix a proposal to lease
the Rockaway facility for $1.00 per year with a right to purchase for a purchase
price of $1.00 and to purchase RTI's other two facilities for a purchase price
of $3 million and the assumption of $3 million of RTI's liabilities.
On January 19, 1996, the RTI Board of Directors met to consider the SGI
proposal and the Isomedix proposal. During such meeting, the Board concluded
that if RTI sold its assets, RTI could not be liquidated due to the outstanding
contingent environmental liabilities on the Rockaway property and the inability
of RTI to make any distribution to its shareholders until the cleanup of the
Rockaway property and the satisfaction of all related liabilities in respect of
such cleanup. The Board then discussed the merits of the two proposals before
it, the risks associated with the continuing operations of RTI in the then
competitive environment with RTI's negative cash flow and the best value for
RTI's shareholders. The Board then determined to form a committee (the "Special
Committee") of its three outside directors (Sanders Davies, C. W. McMillan and
George M. Whitmore, Jr.) to meet with a financial advisor of their choice and to
discuss with such advisor the two proposals.
On February 23, 1996, the Board of Directors of SGI approved the SGI
Transaction and, on February 26, 1996, the Board of Directors of RTI approved
the SGI Transaction. Immediately thereafter definitive documents were executed
by RTI and SGI.
Advice from Financial Advisor
The Special Committee retained Melvin J. Gardner & Co., Inc. (the
"Financial Advisor") on January 22, 1996 to advise it with respect to the SGI
proposal and the Isomedix proposal and also with respect to the option of
remaining an independent company with or without additional equity financing. No
limitation was imposed by the Special Committee with respect to the scope of the
advice to be rendered by the Financial Advisor.
The Financial Advisor is an investment banking, consulting, expert opinion
and litigation support firm, with experience in, among other things, public
offerings and private placements of equity and debt securities, mergers,
acquisitions and valuations for corporations and individuals. The Financial
Advisor has provided financial advise to RTI in the past, the most recent
previous advice being in 1993 in connection with a private
10
<PAGE>
placement of securities of RTI. The Financial Advisor was selected by the
Special Committee on the basis of its financial experience and prior
relationship with RTI, as described above.
The Financial Advisor delivered preliminary advice to the Special Committee
on January 26, 1996, to the effect that the SGI proposal, in the form presented
to the RTI Board of Directors on January 19, 1996, would result in a transaction
that would be fair from a financial point of view, and that acceptance of the
SGI proposal would be an appropriate action for the Board of Directors to take.
The Financial Advisor also reviewed the Isomedix proposal and noted that,
although it provided an overall framework for the negotiation of a possible
transaction, the proposal lacked the specificity and detail required for a
thorough analysis. Nevertheless, the purchase price proposed by Isomedix was
approximately $750,000 less than the SGI proposal, the Isomedix proposal would
not afford any income from the lease of the Rockaway property or from the
possible future sale of the Rockaway property and the net result for the RTI
shareholders would be clearly inferior to the net result based on the SGI
proposal.
The Financial Advisor also preliminarily advised that given (i) the present
irradiation industry competitive pricing environment, (ii) RTI's size, and (iii)
the relative competitive inefficiency of RTI's irradiation facilities due to
their size and rack configurations, it was highly unlikely that RTI would be
able to become a profitable and viable company from an operating standpoint. The
Financial Advisor further preliminarily advised that with the additional
environmental financial burdens imposed on RTI, there was little possibility
that RTI could continue as an independent company even if were able to raise
additional capital commensurate with its size, and that it was highly unlikely
that RTI would be able to raise additional capital from conventional private or
public sources until such time, if at all, that RTI resolved its contingent
environmental liabilities and unless and until RTI's operations become
profitable with at least reasonable prospects for continuing operating
profitability and growth.
In evaluating RTI and the alternatives available to RTI, the Financial
Advisor considered a number of factors including, but not limited to, RTI's
basic operating business, its financial record and financial position, its past
and on-going non-operating problems, its non-operating assets, its capital needs
and efforts to raise additional funds, its likely book value if its assets were
sold to SGI or Isomedix pursuant to their respective proposals and the then
current condition of the contract irradiation market.
In giving its preliminary advice, the Financial Advisor reviewed, among
other things, (i) RTI's Annual Reports on Form 10-KSB for each of the five
fiscal years ended December 31, 1994, (ii) RTI's Quarterly Reports on Form
10-QSB for each of the first three quarters of the fiscal year ended December
31, 1995, (iii) RTI's preliminary unaudited consolidated balance sheet as of
December 31, 1995 and RTI's preliminary unaudited consolidated statements of
income and cash flows for the year then ended, (iv) the proxy statement for
RTI's 1995 annual meeting, (v) RTI management's 1996 business plan, which had
been preliminarily reviewed and approved by RTI's Board of Directors, (vi) the
three most recent internal monthly financial reports presented by management to
RTI's Board of Directors, (vii) the Isomedix proposal, (viii) the SGI proposal,
and (ix) RTI management's analysis of the financial consequences of the SGI
proposal. In addition, the Financial Advisor had discussions with RTI's
President and Chief Executive Officer, two of the three members of the Special
Committee, and RTI's legal counsel concerning, among other things, RTI's
operating business, customers, capital requirements, competition, alternative
courses of available action, previous efforts to raise capital, litigation and
environmental matters, the Isomedix proposal and the SGI proposal. In connection
with its review, the Financial Advisor relied on the information provided to it
by RTI and did not independently verify its accuracy, completeness or fairness.
In addition, the Financial Advisor did not make an independent evaluation or
appraisal of RTI's assets and liabilities nor an independent study or evaluation
of the market for its products, customers or competitors.
Based upon the preliminary advice of the Financial Advisor and the
concurrence of such advice with the independent analysis of the members of the
Special Committee, the Special Committee determined that it was not necessary to
incur the additional expense of having the Financial Advisor finalize its
preliminary advice and render a final report. The Financial Advisor was not
asked for, and did not render, any further advice, and it did not review the
terms of the SGI Transaction as reflected in the definitive Acquisition
11
<PAGE>
Agreement and the transactions contemplated thereby. However, the Board of
Directors believes that the definitive terms of the SGI Transaction were no less
favorable to the shareholders of RTI than those contained in the proposal on
which the Financial Advisor based it preliminary advice.
For its services in rendering the preliminary advice described above, RTI
paid the Financial Advisor a fee of $10,000. RTI has agreed to indemnify the
Financial Advisor and its related parties from certain liabilities and to
reimburse the Financial Advisor for its out-of-pocket expenses incurred in
connection with its services.
The Financial Advisor has advised RTI that, at the time of it undertaking
its review through the time that it rendered its advice, neither the Financial
Advisor, its principal, nor to such principal's knowledge, any member of his
immediate family, owned any securities of RTI.
The Financial Advisor's preliminary advice does not constitute a
recommendation to any holder of Common Stock as to how such holder should vote
on the SGI Transaction.
Reasons for the SGI Transaction
The RTI Board of Directors has determined that the SGI Transaction is in
the best interests of RTI and the RTI shareholders and is fair to the RTI
shareholders. In the course of reaching its decision to approve the SGI
Transaction, RTI's Board of Directors, consulting with its legal counsel and the
Special Committee's financial advisor, as well as RTI's management, considered
the following material factors:
(i) all relevant and reasonably available information concerning RTI's
recent results of operations, declining financial condition and prospects
and the current competitive pricing environment in the contract irradiation
industry, including the fact that RTI had been encountering increasing
competition from competitors with substantially greater resources than RTI,
which competition is expected to continue to adversely impact RTI's ability
to obtain profitable operations in the foreseeable future;
(ii) the age and physical condition of RTI's facilities, the need for
RTI to obtain additional financing and the continuing difficulty in
obtaining financing;
(iii) the per share market value of the Common Stock during the sixty
day period preceding the public announcement of the SGI Transaction (which
was in the range of $1-11/16 (low bid) to $2- 1/4 (high bid)), which did
not fully recognize RTI's book value per share ($2.94 as of December 31,
1995) or RTI's federal operating loss carryforward of approximately $11.4
million as of December 31, 1995;
(iv) the alternatives available to RTI in the event that it did not
undertake the SGI Transaction, including (a) the limited availability of
other possible potential purchasers of its assets, (b) the burdens imposed
on any purchaser of RTI's assets as a result of potential liability arising
from RTI's ownership of a "superfund site", (c) the age, physical condition
and size of RTI's operating facilities, (d) the difficulties which could
arise in negotiating and consummating a substitute transaction, if
obtainable, (e) attempting to remain an independent company with inadequate
capital and difficulty in obtaining additional financing on commercially
reasonable terms, except in very limited instances from related parties,
and (f) the possibility that such financing in a sufficient amount may not
be available from any source, especially in light of RTI's inability to
obtain third party financing in the past;
(v) the results which had recently been obtained from a three well
pilot test conducted in the fall of 1995 which reflected a substantial
"in-situ" reduction in ground water contamination on the Rockaway property
which indicated the possibility that the ultimate cost of clean-up of
environmental contamination on the Rockaway property might be reduced; and
12
<PAGE>
(vi) the inability of RTI to obtain a return on the capital invested
by its shareholders (RTI has never made a cash distribution to its
shareholders and its deficit, as of March 31, 1996, aggregated $12,973,274)
and the possibility of utilizing the net proceeds from a sale of RTI's
assets to fund an alternative investment opportunity which may be able to
generate a positive investment return.
After considering the foregoing factors and the risk to RTI of losing part
of its customer base to SGI by being required to introduce such customers to SGI
before the SGI Transaction was consummated, as well as the projected
out-of-pocket costs which would be incurred by RTI in the event that the SGI
Transaction failed to be consummated, and after reviewing the provisions of the
Acquisition Agreement and the related agreements which had been negotiated with
SGI, RTI's Board of Directors concluded that RTI had negotiated reasonable terms
with SGI, which it believed were the best possible for the purchase of its
assets, and approved the SGI Transaction.
The Acquisition Agreement
General
Pursuant to the terms of the Acquisition Agreement, RTI will sell to SGI
and its wholly-owned subsidiaries the capital stock of South Jersey and
substantially all of the operating assets of RTI (other than cash and cash
equivalents, the Rockaway property and the Rockaway Facility), and SGI and its
wholly-owned subsidiaries will assume substantially all the liabilities of RTI
(other than liabilities to the extent not fully reflected on RTI's balance
sheet, liabilities related to the Rockaway Property (including environmental
liabilities) and the Rockaway Facility, and any liability then owing to
Frellum). As part of the SGI Transaction, RTI will lease to SGI 62 acres of the
Rockaway property (the "Leased Property"), which includes the Rockaway Facility.
See - "The Rockaway Lease". SGI has assigned certain rights under the
Acquisition Agreement and the various related agreements to one or more
wholly-owned subsidiaries; SGI remains responsible to RTI for the performance of
its subsidiaries' obligations to RTI.
Purchased Assets; Assumed Liabilities
Pursuant to the terms of the Acquisition Agreement, RTI will sell to SGI
and its wholly-owned subsidiaries all of its cobalt and its interest in its
leased and financed cobalt, fixed assets, furniture, equipment, prepaid taxes,
prepaid insurance premiums (to the extent such insurance is assignable), prepaid
supplies, accounts receivable, intangible assets, real property and fixtures and
improvements on such real property located in Haw River, North Carolina, which
constitutes RTI's operating facility in North Carolina (the "North Carolina
Facility"), and the capital stock of South Jersey (which subsidiary owns the
assets associated with RTI's operating facility in Salem, New Jersey (the "Salem
Facility") and leases the land on which the Salem Facility is located)
(collectively, the "Purchased Assets"), which assets constitute substantially
all of RTI's assets other than cash and cash equivalents, the Rockaway property
and the improvements (consisting primarily of the Rockaway Facility) located on
the Rockaway property. In addition, SGI and its wholly-owned subsidiaries will
assume all of RTI's obligations under the contracts to be assumed by SGI,
accounts payable, obligations relating to the leasing and financing of cobalt
and obligations relating to the financing of the Salem Facility (collectively,
the "Assumed Liabilities"), which liabilities constitute substantially all the
liabilities of RTI (other than the liabilities related to the Rockaway property
and the Rockaway Facility).
Purchase Price
On the date of closing of the SGI Transaction (the "Closing Date"), SGI and
its wholly-owned subsidiaries will pay to RTI an amount (the "Purchase Price")
equal to $18,000 plus the net book value of the Purchased Assets (approximately
$7,480,000), less the book value of the Assumed Liabilities (approximately
$2,975,000), as reflected on RTI's Quarterly Report on Form 10-QSB for the
fiscal period ended March 31, 1996, subject to adjustment as discussed below.
Within 30 days after the Closing Date, RTI is required to deliver to SGI a
statement setting forth the book value of the Purchased Assets minus the book
value of the Assumed Liabilities as of the Closing Date,
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<PAGE>
determined in accordance with generally accepted accounting principles (the "Net
Book Value"), which SGI, at its option and expense, may have its independent
auditors audit (on a basis consistent with the same accounting practices
employed by RTI's independent auditors). If the Net Book Value (as adjusted to
reflect the resolution of any differences identified by any audit conducted by
SGI (the "Adjusted Net Book Value")) is greater than the amount which is equal
to the Purchase Price less $18,000, then SGI will pay such difference to RTI;
and if the Adjusted Net Book Value is less than such amount, then SGI will
receive such difference (the "Purchase Price Adjustment") from an escrow account
(the "Escrow Account") being funded with $800,000 (the "Escrow Amount") of the
Purchase Price, which is being established with SGI's New Jersey counsel (the
"Escrow Agent") on the Closing Date. The Escrow Amount may be used only for
payment of (i) any indemnification obligation to SGI resulting from RTI's breach
of its representations and failure to perform its agreements to SGI, as provided
under the Acquisition Agreement and the various related agreements, if such
obligations, in the aggregate, exceed $100,000, and (ii) any Purchase Price
Adjustment. Following payment to SGI of any Purchase Price Adjustment (or
expiration of the period of time during which SGI has the right to conduct an
audit), the Escrow Agent will disburse to RTI from the Escrow Account $400,000
less the amount of any Purchase Price Adjustment (unless the Purchase Price
Adjustment equals or exceeds $400,000). The Escrow Amount then remaining (less
any amounts for which SGI has made a claim, then pending, for indemnification
under the Acquisition Agreement) will be paid to RTI six months after the
Closing Date.
Assuming that the SGI Transaction had been completed as of March 31, 1996,
the Purchase Price of approximately $4,523,000 would have been payable as
follows: (i) delivery to RTI of a $575,000 check (the "NJDEP Lien Amount")
payable to the NJDEP, which is required in order to have the NJDEP release its
liens on the Purchased Assets (see -"Certain Regulatory Matters"); (ii) delivery
to RTI of 118,000 shares of Series A Preferred Stock, which shares were issued
by RTI to SGI for $236,000 pursuant to the Preferred Stock Purchase Agreement
and have a redemption price of such amount (see -"The Preferred Stock Purchase
Agreement"); (iii) delivery to the Escrow Agent of the Escrow Amount; and (iv)
payment to RTI of the remaining balance of $2,912,000. Thereafter, RTI would pay
approximately $200,000 of transaction costs and certain other obligations not
being assumed by SGI, leaving remaining cash proceeds of approximately $2.7
million. For a further discussion of RTI's estimate of the Purchase Price, see
"Application of Sale Proceeds; - Operations After the SGI Transaction; -Certain
Regulatory Matters".
Conditions
SGI's obligations to consummate the SGI Transaction are subject to, among
others, the following conditions being satisfied on the Closing Date: (i) the
representations and warranties of RTI contained in the Acquisition Agreement
being true and correct as if made on the Closing Date; (ii) the SGI Transaction
being duly approved by the RTI shareholders; (iii) the net book value of the
Purchased Assets (as determined by RTI in good faith) being at least $3 million;
(iv) SGI obtaining all necessary permits and licenses to operate the North
Carolina Facility, the Rockaway Facility and the Salem Facility; (v) the
Purchased Assets being free and clear of all liens except for those permitted by
the Acquisition Agreement; (vi) the satisfactory resolution of certain matters
with the NJDEP (see -"Certain Regulatory Matters"); (vii) the absence of any
pending sequestration, attachment or foreclosure of, or execution on, any
material part of the Purchased Assets; (viii) RTI not being subject to any
petition to commence a proceeding to be declared a bankrupt or insolvent; (ix)
no adverse change having occurred in the business of RTI since the date of the
Acquisition Agreement which may have a material adverse effect on the value of
the Purchased Assets; (x) no court order or other legal or regulatory restraint
having been issued which prevents the consummation of the SGI Transaction; (xi)
no legal proceedings being pending or threatened which relates to the SGI
Transaction and which could result in material liability to SGI; (xii) no
statute, rule, regulation or order having been enacted, entered, enforced or
deemed applicable to the SGI Transaction which would make consummation of the
SGI Transaction illegal; (xiii) holders of not more than 20% of the outstanding
Common Stock duly electing to seek appraisal rights of their shares of Common
Stock under the NYBCL; (xiv) the removal of all encumbrances on RTI's real
property being acquired by SGI, except to the extent permitted by the
Acquisition Agreement; and (xv) SGI's receipt of a letter from the City of Salem
Municipal Port Authority confirming the validity of the Salem Facility lease.
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RTI's obligations to consummate the SGI Transaction are subject to, among
others, the following conditions being satisfied on the Closing Date: (i) the
representations and warranties of SGI contained in the Acquisition Agreement
being true and correct as if made on the Closing Date; (ii) the SGI Transaction
being duly approved by the RTI shareholders; (iii) SGI not being subject to any
petition to commence a proceeding to be declared a bankrupt or insolvent; (iv)
no court order or other legal or regulatory restraint having been issued which
prevents the consummation of the SGI Transaction; (v) no legal proceedings being
pending or threatened which relates to the SGI Transaction and which could
result in material personal liability to the RTI directors (unless SGI agrees to
indemnify such directors for all costs, expenses or judgments resulting
therefrom); (vi) no statute, rule, regulation or order having been enacted,
entered, enforced or deemed applicable to the SGI Transaction which would make
consummation of the SGI Transaction illegal; and (vii) holders of not more than
20% of the outstanding Common Stock duly electing to seek appraisal rights of
their shares of Common Stock under the NYBCL.
Covenants
RTI has agreed, among other things, that prior to the Closing Date, and
except with SGI's consent, it will: (i) not solicit, initiate or encourage
inquiries or proposals concerning any merger, consolidation, business
combination, sale of all or substantially all of its assets, sale of shares of
capital stock or similar transactions involving RTI, except that RTI may furnish
information to, and enter into negotiations with, any person who makes an
unsolicited bona-fide inquiry or proposal, which the Board of Directors of RTI
believes in good faith, after consultation with its financial advisors, is
financially superior to its shareholders than the SGI Transaction; (ii) take all
reasonable actions necessary to comply with all legal requirements necessary to
consummate the SGI Transaction, and will reasonably cooperate with and furnish
information to SGI to permit SGI to comply with all such legal requirements;
(iii) provide SGI with all reasonable information concerning its business, and
will cooperate with SGI to permit SGI, under certain circumstances, to meet with
RTI's customers, creditors and suppliers; (iv) use its reasonable commercial
efforts to maintain its business organization and its relationship with its
employees, suppliers and customers; (v) not encumber any of the Purchased
Assets; (vi) not dispose of any of the Purchased Assets, except in the ordinary
course of business; (vii) operate its business in compliance with all
governmental regulatory requirements; (viii) maintain the Purchased Asset in
good working condition and the Leased Property in good condition; (ix) pay all
trade payables, except those contested in good faith; (x) not amend or terminate
any material contract or enter into any contract providing for a term of more
than one year or requiring payments of more than $50,000 per year; (xi) not
incur any indebtedness which SGI would be required to assume under the terms of
the Acquisition Agreement, except in the ordinary course of business; and (xii)
not take any other action or fail to take any action which would not be in the
ordinary course of business.
Representations and Warranties
RTI has made certain customary representations and warranties in the
Acquisition Agreement as to the authorization, validity and enforceability of
the Acquisition Agreement and similar corporate matters. RTI also has made
certain representations and warranties relating, among other things, to the
completeness and accuracy of its filings with the Securities and Exchange
Commission, the absence of certain changes in its business, the absence of
undisclosed liabilities, the condition of its tangible assets, the
collectability of its accounts receivables, the absence of material litigation,
compliance with laws and governmental regulations, compliance with environmental
laws and remedial orders, the condition of its real property, and the existence
and enforceability of its material contracts. RTI's representations and
warranties contained in the Acquisition Agreement will survive for a period of
12 months following the Closing Date (other than those relating to real
property, which will terminate on the Closing Date).
SGI and its wholly-owned subsidiaries which are acquiring RTI assets have
made certain customary representations and warranties in the Acquisition
Agreement and other documents as to the authorization, validity and
enforceability of the Acquisition Agreement, such other documents and similar
corporate matters. SGI also has represented and warranted that it has, and on
the Closing Date will have, sufficient financing available to it to consummate
the SGI Transaction.
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Closing Date
Consummation of the SGI Transaction will occur on the third business day
after all the conditions set forth in the Acquisition Agreement are satisfied.
See - "Conditions".
Termination
The Acquisition Agreement may be terminated and the SGI Transaction
abandoned at any time prior to the Closing Date, whether before or after
approval by the RTI shareholders, (i) by mutual consent of RTI and SGI, (ii) by
RTI or SGI if (a) the SGI Transaction is not consummated by November 27, 1996,
(b) the SGI Transaction is prohibited by a final nonappealable order, decree or
ruling of a court of competent jurisdiction, (c) any of the conditions to such
party's obligations (which have not been waived) to consummate the SGI
Transaction cannot be satisfied, (d) there has been a material breach by the
other party of any representation, warranty, covenant or agreement, which breach
cannot be cured prior to the Closing Date, or (iii) by SGI, if (a) the RTI Board
of Directors withdraws or modifies its recommendation to the RTI shareholders to
approve the SGI Transaction, (b) the RTI Board of Directors recommends to the
RTI shareholders an alternative acquisition proposal, (c) a tender or exchange
offer for 15% or more of the outstanding shares of Common Stock is commenced and
the RTI Board of Directors recommends to the RTI shareholders that they tender
their shares of Common Stock in such tender or exchange offer, or (d) RTI fails
to duly call and hold a shareholders meeting to vote upon the SGI Transaction by
November 27, 1996.
Indemnification
RTI and SGI are each obligated to indemnify the other for, among other
things, breach of their respective representations, warranties, covenants and
agreements made under the Acquisition Agreement. SGI also is obligated to
indemnify RTI for its failure to discharge the Assumed Liabilities. These
indemnification obligations will terminate on the first anniversary of the
Closing Date. To the extent that any of the Escrow Amount remains undisbursed,
any payment of a claim against RTI for indemnification by SGI will first be made
from the Escrow Account.
Expenses
The Acquisition Agreement provides that if the SGI Transaction is
consummated, each party will pay its own expenses incurred in connection
therewith. If the Acquisition Agreement is terminated by either party as a
result of a material breach by the other, the breaching party is required to
reimburse the other party for up to $250,000 of its costs and expenses
reasonably incurred by such party in connection with the SGI Transaction. If the
Acquisition Agreement is terminated by SGI as a result of its failure to obtain
all necessary licenses and permits (and SGI is unable to agree with RTI on a
satisfactory arrangement for RTI to temporarily manage the Purchased Assets for
the benefit of SGI), SGI is required to reimburse RTI for up to $250,000 of its
costs and expenses reasonably incurred in connection with the SGI Transaction.
If the Acquisition Agreement is terminated by SGI as a result of (i) failure to
consummate the SGI Transaction by November 27, 1996, or (ii) failure of the RTI
shareholders to duly approve the SGI Transaction at the Annual Meeting, if at
such time there exists an announced alternative acquisition proposal, then RTI
is required to reimburse SGI for up to $250,000 of its costs and expenses
reasonably incurred in connection with the SGI Transaction.
The Rockaway Lease
As part of the SGI Transaction, on the Closing Date, RTI and SGI will enter
into a lease (the "Rockaway Lease") for the Leased Property, which will be for
an initial term of six years, with a five-year renewal option, at a base annual
rent of approximately $77,000. The Rockaway Lease also grants SGI an option,
during the initial term of the Rockaway Lease, to purchase the Leased Property
at a price decreasing from approximately $400,000 on the first anniversary of
the Closing Date to approximately $136,000 on the sixth anniversary of the
Closing Date. If the environmental remediation on the Rockaway property has been
substantially completed and the Rockaway property has been removed from the
National Priorities List by the
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sixth anniversary of the Closing Date, the Rockaway Lease grants RTI the right,
on the sixth anniversary of the Closing Date, to require SGI to purchase the
Leased Property at a price of approximately $136,000.
The North Carolina Option
Simultaneously with entering into the Acquisition Agreement, RTI and SGI
entered into an option agreement, pursuant to which RTI granted to SGI an option
(the "North Carolina Option") to purchase the North Carolina Facility (including
RTI's tangible assets located thereon, but excluding any cobalt) for a price of
$400,000 in excess of the book value thereof. The North Carolina Option will
become exercisable only in the event that (i) the Acquisition Agreement is
terminated by SGI as a result of (a) the RTI Board of Directors (1) withdrawing
its recommendation to the RTI shareholders to approve the SGI Transaction, or
(2) recommending an alternative acquisition proposal to the RTI shareholders
(including a tender or exchange offer for 15% or more of the outstanding shares
of Common Stock), or (b) RTI failing to duly call and hold a shareholders
meeting by November 27, 1996, and (ii) RTI enters into a legally binding
agreement relating to such an alternative acquisition proposal. The North
Carolina Option will expire on the earliest to occur of (i) 60 days after the
date it first becomes exercisable, (ii) November 27, 1996, in the event that, as
of such date, RTI has not received an alternative acquisition proposal, and
(iii) January 1, 2000. If the North Carolina Option becomes exercisable, and SGI
elects to exercise the North Carolina Option, the closing of the sale to SGI of
the North Carolina Facility would occur only upon, but immediately prior, to the
closing of the alternative acquisition proposal that resulted in the North
Carolina Option having become exercisable.
The Preferred Stock Purchase Agreement
In connection with the SGI Transaction, on March 11, 1996, SGI purchased
from RTI, for $236,000 in cash, 118,000 shares of Series A Preferred Stock,
constituting approximately 9.7% of RTI's voting securities. The Series A
Preferred Stock pays dividends at the rate of $0.16 per share per annum, payable
annually, has a liquidation preference of $2.00 per share and is redeemable at
the option of the holder at any time at a price of $2.00 per share; provided,
that if the shares are surrendered for redemption prior to January 31, 1997, RTI
may pay for the redeemed shares with a promissory note maturing ten days after
demand (which demand may not be made prior to January 31, 1997). RTI may call
the Series A Preferred Stock for redemption at a price of $2.00 per share, at
any time after January 31, 1997. Each share of Series A Preferred Stock is
convertible into one share of Common Stock. SGI is required to surrender the
Series A Preferred Stock in payment of a portion of the Purchase Price upon
consummation of the SGI Transaction. SGI has agreed not to sell, transfer,
encumber, convert or surrender for redemption any shares of Series A Preferred
Stock prior to the Closing Date or the termination of the Acquisition Agreement.
See - "Purchase Price".
Other Agreements with SGI
Pursuant to the Acquisition Agreement, SGI has agreed, for a period of five
years following the Closing Date, to provide RTI with certain administrative
services, including (i) supervision of the environmental monitoring program
relating to the Rockaway property (including payment of up to $10,000 of
monitoring costs per year) following completion of RTI's environmental
remediation of the Rockaway property, and (ii) general corporate administrative
support, including use of former RTI employees who remain employed by SGI. SGI
also has agreed to offer employment, immediately following the Closing Date, to
all existing employees of RTI (other than to Theo W. Muller, RTI's President and
Chief Executive Officer), and not to terminate any such employees for a period
of at least 90 days following the Closing Date, except for cause.
Voting Agreements
Simultaneously with RTI entering into the Acquisition Agreement, Theo W.
Muller, RTI's President and Chief Executive Officer, entered into a voting
agreement (the "Voting Agreement") with SGI pursuant to which Mr. Muller agreed
(i) to vote all of his 122,393 shares of Common Stock (constituting
approximately 10.1% of RTI's outstanding voting securities as of the Record
Date), in favor of the SGI Transaction, (ii) not to sell, transfer, pledge or
otherwise encumber, or enter into a voting arrangement with respect to, any of
his
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shares of Common Stock and (iii) not to solicit proxies or otherwise become
involved with any other party for the purposes of opposing or competing with the
consummation of the SGI Transaction, except to the extent that the RTI Board of
Directors, in fulfillment of its fiduciary duties to RTI, directs that Mr.
Muller engage in such activity as an executive officer of RTI.
In addition, certain other RTI shareholders (consisting of David Della
Donna, Thomas O'Grady, John N. Scandalios and David Smith), who, in the
aggregate, held 129,700 shares of Common Stock (constituting approximately 10.6%
of RTI's outstanding voting securities as of the Record Date) entered into
voting agreements with SGI pursuant to which they agreed to vote all shares of
Common Stock which they own on the Record Date in favor of the SGI Transaction.
However, such voting agreements do not in any way restrict such shareholder's
ability to sell or otherwise transfer such holder's shares of Common Stock prior
to the Record Date.
As a result of its purchase of 118,000 shares of Series A Preferred Stock,
SGI holds 9.7% of RTI's voting securities as of the Record Date. See - "The
Preferred Stock Purchase Agreement".
Application of Sale Proceeds; Operations after the SGI Transaction
Upon consummation of the SGI Transaction, RTI will cease its contract
irradiation business. After payment of its expenses associated with the SGI
Transaction, payment of its liabilities required to be settled on the Closing
Date and payment of liabilities remaining immediately after the Closing Date,
RTI estimates that it will have available cash resources from the SGI
Transaction of approximately $2.7 million, before return of any unutilized
portion of the Escrow Amount. See - "The Acquisition Agreement -- Purchase
Price" and "UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION".
As a result of RTI's continuing environmental responsibility for the
Rockaway property, and the contingent cost of cleanup and regulatory oversight,
RTI does not anticipate making any distribution of assets to its shareholders in
the foreseeable future. RTI may take action to liquidate at such time, unless it
is then operating a viable new business; in which event, to the extent required
by applicable law, any plan of liquidation would be submitted to RTI's
shareholders for approval. RTI is in the process of evaluating possible
alternative uses of its available cash resources after consummation of the SGI
Transaction, including the acquisition or development of a new business which
could enable RTI to use its net operating loss carryforwards (which approximated
$11.4 million for federal income tax purposes at December 31, 1995). RTI intends
to be engaged, as soon as is reasonably possible, and in any event within one
year after the Closing Date, primarily in a business other than the business of
investing, reinvesting, owning, holding or trading in securities. RTI has not
identified any specific business or line of business that it will acquire or
develop, and there can be no assurance that RTI will be able to acquire or
develop a new business within such one year period, if at all, or that such new
business will be profitable. As part of its identification process, RTI has
decided to make a short-term investment of up to $100,000 of currently available
funds to purchase, at substantial discount, defaulted consumer debt accounts in
order to evaluate the ultimate return on the collectability thereof by third
party collection agencies. The acquisition or development of a new business will
be dependent on the amount of cash available to RTI after consummation of the
SGI Transaction. RTI estimates that it will have available net cash proceeds
approximating $2.7 million from the SGI Transaction, before return of any
unutilized portion of the Escrow Amount. Pending use of its cash assets, RTI
will invest the proceeds it receives from the SGI Transaction in money market
mutual funds or similar investments. If RTI is not successful in acquiring or
developing a new business within one year after consummation of the SGI
Transaction, it will then invest any remaining proceeds from the SGI Transaction
in U.S. government securities in order to avoid inadvertently becoming subject
to the reporting requirements of the Investment Company Act of 1940. See - "Tax
Consequences -- Tax Consequences of RTI Activities after Consummation of the SGI
Transaction".
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Operations of RTI if the SGI Transaction is not Consummated
In the event that the SGI Transaction is not consummated, RTI will continue
to explore all viable alternatives, including attempting to locate another
possible purchaser of some or all of its assets; however, there can be no
assurance that such a purchaser can be located, or that a suitable transaction
can be negotiated on terms acceptable to RTI. Based upon its current financial
resources, competitive conditions in the contract irradiation business and its
continuing financial obligations, RTI cannot remain a viable entity unless it
obtains additional financing during the first half of 1997. Since RTI continues
to own a "superfund site", which RTI believes it will not be able to dispose of
until such time, if at all, as the site is removed from the National Priorities
List, RTI believes that it will continue to be unable to obtain institutional
financing, but that other financing alternatives may be available. However, such
alternatives, if they can be located, probably will involve substantial dilution
of current shareholder equity and would be at above market costs. There can be
no assurance that any such financing will be available on terms acceptable to
RTI or at all; and if such financing is not available, RTI may have no choice
but to file for reorganization or liquidate RTI, in which event RTI's
shareholders would lose all or substantially all of their investment in RTI. See
- - "Background of the SGI Transaction; - Reasons for the SGI Transaction".
Certain Regulatory Matters
A condition to the consummation of the SGI Transaction is that SGI obtain
all licenses, permits and governmental or other regulatory approvals and
authorizations which are required for SGI to engage in the full operation of the
North Carolina Facility, the Rockaway Facility and the Salem Facility
(collectively, the RTI Facilities"), provided that if all other conditions are
met and, by June 30, 1996, SGI has not obtained all of such approvals and
authorizations, the SGI Transaction can be consummated if RTI agrees to manage
the RTI Facilities for the benefit of SGI (and at SGI's expense) until such time
as such approvals and authorizations are obtained. The RTI Facilities are
regulated by various federal and state agencies, principally the NRC, the NCDRH,
the U.S. Food and Drug Administration (the "FDA")and the U.S. Department of
Agriculture (the "USDA"). Various of SGI's facilities are regulated by the NRC,
the NCDRH, the FDA and the USDA, and RTI has no reason to believe that SGI will
not obtain all required approvals and authorizations to operate the RTI
Facilities.
As previously indicated, a portion of the Rockaway property is on the
National Priorities List. In connection with the remediation of the Rockaway
property, RTI has entered into various agreements and consent orders with the
NJDEP and the NJDEP has asserted a Spill Act lien on certain of RTI's property
located in New Jersey. As a condition to the consummation of the SGI
Transaction, RTI is required to obtain from the NJDEP appropriate confirmation,
reasonably satisfactory to SGI, that (i) the NJDEP will release its Spill Act
lien on RTI's New Jersey property upon payment or escrow of certain moneys, (ii)
the New Jersey Industrial Site Recovery Act is not applicable to the
transactions contemplated by the Acquisition Agreement, and (iii) that the NJDEP
will not regard SGI as the successor or assign of RTI or otherwise responsible
for any ongoing environmental liability of RTI. By letter dated April 26, 1996,
the NJDEP agreed to initiate proceedings to have its Spill Act lien released
upon receipt of $575,000 from the proceeds of the SGI Transaction and confirmed
that SGI will not be considered liable for contamination on the Rockaway
property occurring prior to its occupancy or leasing of the Rockaway property.
Tax Consequences
Tax Consequences to RTI of the SGI Transaction
The aggregate amount RTI will be deemed to have realized from the sale of
the Purchased Assets will be the sum of the Purchase Price and the amount of the
Assumed Liabilities, minus any amount disbursed to SGI from the Escrow Account.
For purposes of determining the amount realized by RTI from the sale of a
specific asset, this aggregate amount will be allocated among all of the
tangible Purchased Assets in proportion to their respective fair market values
immediately after the Closing Date, and if the amount allocated to any tangible
asset exceeds the fair market value of that asset, the excess will be allocated
among the intangible Purchased Assets.
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RTI will recognize gain or loss in the SGI Transaction for federal and
state income tax purposes, which will be determined on an asset-by-asset basis
and will be measured, in each case, by the difference between the amount
realized by RTI from the sale of each asset and the tax basis of that asset.
(Generally, the tax basis of an asset would be equal to RTI's cost of the asset,
increased by the amount of any capital improvements made by RTI to the asset and
decreased by the amount of any depreciation (or cost recovery) deductions
previously claimed by RTI with respect to the asset.) Gain or loss recognized on
the sale of an asset generally will be treated as capital gain or loss,
long-term or short-term, depending on whether RTI had held the asset for more
than one year at the Closing Date.
Any gain recognized by RTI in the SGI Transaction will be offset by the
costs incurred by RTI in connection with the SGI Transaction (including legal
and accounting fees and the cost of preparing and circulating this Proxy
Statement) and by RTI's net operating loss carryforward to the taxable year that
includes the Closing Date. As of December 31, 1995, RTI had operating loss
carryforwards, for federal purposes, of approximately $11.4 million and, for
this reason, RTI does not expect to incur any federal income tax liability on
account of the SGI Transaction (other than federal alternative minimum tax
liability in an amount estimated not to exceed $5,000). RTI does not expect to
incur significant state income tax liability on account of the SGI Transaction
as a result of state operating loss carryforwards.
Tax Consequences to RTI Shareholders
RTI shareholders will not recognize any tax consequences upon consummation
of the SGI Transaction. RTI shareholders, who duly exercise appraisal rights,
generally will recognize capital gain or loss, long-term or short-term, for
federal and state income tax purposes measured by the difference between the
cash received through the appraisal proceedings and their aggregate tax basis in
their shares of Common Stock; however, shareholders who are considered
constructively to own shares of Common Stock actually owned by other persons
may, under certain circumstances, recognize dividend income (taxable as ordinary
income) equal to the full amount they receive. See - "Rights of Dissenting
Shareholders".
Tax Consequences of RTI Activities after Consummation of the SGI Transaction
Use of Net Operating Losses. It is anticipated that RTI's net operating
loss carryforward will be fully available to offset its income (whether arising
from passive investment or from an acquired or developed business enterprise)
for taxable periods ending after the Closing Date. RTI's ability to fully
utilize its net operating loss carryforward may be limited by either or both of
two anti-abuse rules.
The first of these rules would come into effect if RTI were to undergo an
"ownership change" (that is, if more than a 50% change (by value) in the
beneficial ownership of RTI's capital stock were to occur over a three-year
period). In such an event, RTI's use of its net operating loss carryover to
offset its income for any taxable year ending after such ownership change would
be limited and would be based on the equity value of RTI at the time of such
ownership change multiplied by a designated annual rate of return.
The second of these rules would come into effect if RTI were to acquire
control of another entity or were to acquire the assets of another entity in a
tax-free reorganization. In such case, RTI generally could not use its net
operating loss carryforward to offset any gain recognized on a disposition,
prior to the fifth anniversary of such acquisition, of any asset of the
controlled entity or any asset acquired in the tax-free reorganization, except
to the extent that such gain exceeded the unrealized appreciation that was
inherent in such asset at the time of acquisition.
Penalty Tax on Personal Holding Companies It is anticipated that
substantially all of the revenues derived by RTI in taxable years beginning
after the Closing Date and ending with or before the taxable year in which RTI
enters into a new business will consist of investment-type income (including
gains from the sale of marketable securities). RTI will be classified as a
personal holding company for any such taxable year if more than 50 percent in
value of its outstanding capital stock is considered to be owned (whether
directly or indirectly and whether actually owned or owned through application
of certain statutorily prescribed constructive ownership rules) by five or fewer
individuals at any time during the last half of such a taxable year
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(as of the Record Date, the five largest holders of RTI's capital stock were
believed to hold less than 30% of all outstanding capital stock). In such an
event, RTI would be subject to a 39.6% penalty tax for such taxable year on its
"undistributed personal holding company income", which tax would be in addition
to the general corporate income tax and could not be offset by RTI's net
operating loss carryover. RTI's undistributed personal holding company income
for any taxable year would be the excess of (i) its taxable income for such year
(recalculated for such purpose by, among other things, allowing a deduction for
federal income taxes paid or incurred for such year, disregarding capital gains
for such year and the taxes allocable thereto and disallowing the net operating
loss deduction for such year, but permitting a deduction for prior year losses),
over (ii) the sum of the dividends paid (or deemed paid) for such year.
Accumulated Earnings Tax It is anticipated that RTI will have a substantial
deficit in accumulated earnings and profits at the close of its taxable year
that includes the Closing Date. For this reason, RTI does not expect to be
subject to the 39.5% accumulated earnings tax in the foreseeable future.
Rights of Dissenting Shareholders
Holders of Common Stock who dissent from the proposal to approve the SGI
Transaction may be entitled to exercise appraisal rights; however, a condition
to the consummation of the SGI Transaction is that holders of no more than 20%
of the Common Stock duly elect to seek appraisal rights, . The rights of holders
of Common Stock who dissent from the proposal to approve the SGI Transaction and
who seek appraisal rights are governed by Sections 910(a)(1)(B) and 623 of the
NYBCL. The applicable provisions of Section 910 of the NYBCL provide that a
holder of Common Stock, subject to and by complying with Section 623 of the
NYBCL, shall have the right to receive payment of the fair value of such
holder's shares of Common Stock, and the other rights and benefits provided by
Section 623 of the NYBCL, if the shareholder does not vote to approve the SGI
Transaction. Certain RTI shareholders have agreed to vote their shares in favor
of the SGI Transaction and, therefore, such shareholders will be precluded from
perfecting dissenters' rights. The following discussion of the applicable
provisions of Section 623 of the NYBCL is not intended to be a complete
statement of such provisions and is qualified in its entirety by reference to
the full text of Section 623 of the NYBCL, which is set forth in Annex B to this
Proxy Statement.
The following is a summary of the procedural steps which must be taken by a
RTI shareholder if the right of appraisal afforded by Section 623 of the NYBCL
is to be validly exercised.
Any shareholder who elects to exercise such shareholder's dissenter's
rights with respect to the SGI Transaction (a "Dissenting Shareholder") must
file with RTI, before the Annual Meeting, or at such Annual Meeting but before
the vote is taken, a written objection to the SGI Transaction, which includes
(i) a notice of such shareholder's election to dissent, (ii) such shareholder's
name and residence address, (iii) the number of shares of Common Stock which
such shareholder holds, and (iv) a demand for payment of the fair value of such
shareholder's shares of Common Stock if the SGI Transaction is consummated. Such
objection is not required from any shareholder to whom RTI does not give notice
of the Annual Meeting. This written objection to the SGI Transaction must be in
addition to, and separate from, any proxy or vote against the proposal to
approve the SGI Transaction. Under the NYBCL, neither voting against, nor
failure to vote in favor of, the proposal to approve the SGI Transaction will
constitute the written objection required to be filed by a Dissenting
Shareholder. Failure to vote against the proposal to approve the SGI
Transaction, however, will not constitute a waiver of rights under Sections 623
and 910 of the NYBCL provided that a written objection has been properly filed
with RTI. A shareholder voting to approve the SGI Transaction will be deemed to
have waived such shareholder's appraisal rights under Section 623 of the NYBCL.
A shareholder who inadvertently has voted by proxy to approve the SGI
Transaction may revoke the proxy before it is voted by (i) delivering a written
notice of revocation to the Secretary of RTI, (ii) by duly executing a new proxy
and presenting it to the Secretary of RTI prior to the Annual Meeting, or (iii)
by attending the Annual Meeting and voting in person.
A shareholder may not dissent as to less than all of such shareholder's
shares of Common Stock as which such shareholder has a right of dissent. A
nominee or fiduciary may not dissent on behalf of any beneficial owner as to
less than all shares of Common Stock held on behalf of such owner, as to which
such
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nominee or fiduciary has a right to dissent. Furthermore, if the shares of
Common Stock are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, the demand should be made in that capacity, and if the
shares of Common Stock are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand should be made by or for all
owners of record. An authorized agent, including one of two or more joint
owners, may execute the demand for appraisal for a holder of record; such agent,
however, must identify the record owner or owners and expressly state in such
demand that the agent is acting as agent for the record owner or owners of such
shares. All notices of election to dissent should be addressed to RTI at 108
Lake Denmark Road, Rockaway, New Jersey 07866, Attention: Secretary.
If the SGI Transaction is approved at the Annual Meeting by a vote of the
shareholders, RTI must, within ten days after such authorization, give written
notice of such authorization, by registered mail, to each Dissenting Shareholder
who timely filed a written objection to the SGI Transaction, or from whom
written notice of objection was not required because such shareholder did not
receive proper notice of the Annual Meeting, unless such shareholder voted to
approve the SGI Transaction. Shareholders from whom written notice of objection
was not required and who elect to dissent must file a written notice of such
election within twenty days after notice of approval of the SGI Transaction.
Such notice must state the shareholder's name and residence address, the number
and class of shares as to which such shareholder dissents and a demand for
payment of the fair value of such shares.
At the time of filing a notice of election to dissent, or within one month
thereafter, a Dissenting Shareholder must submit the certificates representing
such shareholder's shares of Common Stock to RTI's transfer agent; the transfer
agent, in turn, then shall note conspicuously thereon that a notice of election
to dissent has been filed and shall return the certificates to the Dissenting
Shareholder. Failure to timely submit such certificates will result in the loss
of such Dissenting Shareholder's appraisal rights unless otherwise directed by a
court after a showing to the court of good cause.
Within fifteen days after the expiration of the period within which
Dissenting Shareholders are required to file their notices of election to
dissent, or within fifteen days after the date of consummation of the SGI
Transaction, whichever is later (but in no event later than ninety days from the
date of the Annual Meeting at which the shareholders' vote to authorize the
Transaction is taken), RTI shall make a written offer by registered mail (which,
if the SGI Transaction has not been consummated within ninety days after the
date of such Annual Meeting, may be conditioned upon such consummation), to each
Dissenting Shareholder who has filed a notice of election to dissent, to pay for
such shareholder's shares of Common Stock at a specified price which RTI
considers to be the "fair value" thereof. Such offer shall be made at the same
price per share to all Dissenting Shareholders. If within thirty days after the
making of such offer, RTI and any Dissenting Shareholder agree upon the price to
be paid for such shareholder's shares, payment therefor shall be made within
sixty days after the making of such offer or the date of consummation of the SGI
Transaction, whichever is later, upon the surrender of the certificates
representing such shareholder's shares of Common Stock.
If RTI fails to make such an offer within such period of fifteen days, or
if it makes such an offer and any Dissenting Shareholder fails to agree with RTI
within the period of thirty days thereafter as to the price to be paid for such
shareholder's shares of Common Stock, RTI must, within twenty days after the
expiration of such fifteen or thirty day period, as the case may be, institute a
special proceeding in the appropriate New York State court to determine the
rights of the Dissenting Shareholders and to fix the "fair value" of their
shares of Common Stock. If RTI does not institute such a proceeding within such
period of twenty days, any Dissenting Shareholder may institute such proceeding
for the same purpose not later than thirty days after the expiration of such
twenty day period. If such proceeding is not instituted within such thirty day
period, all dissenters' rights will be lost unless the court otherwise directs.
All Dissenting Shareholders, other than those who agreed with RTI as to the
price to be paid for their shares of Common Stock, will be made parties to such
appraisal proceeding. The court shall fix the value of the shares of Common
Stock which shall be the "fair value" as of the close of business on the day
prior to the date of the Annual Meeting. Within sixty days after the final
determination of such court proceeding, RTI will be required to pay to each
Dissenting Shareholder the amount found to be due to such shareholder, with
22
<PAGE>
interest thereon from the date of the Annual Meeting at which the SGI
Transaction was approved by the RTI shareholders to the date of payment, at such
rate as the court finds to be equitable, upon surrender of the certificates
representing such shareholder's shares of Common Stock. If the court finds that
the refusal of any Dissenting Shareholder to accept an offer of payment by RTI
was arbitrary, vexatious or otherwise not in good faith, no interest will be
allowed such shareholder.
Any Dissenting Shareholder who has filed a notice of election to dissent
will not, after the date of consummation of the SGI Transaction, have any of the
rights of a shareholder with respect to such shareholder's shares of Common
Stock, other than the right to be paid the "fair value" for such shares under
the NYBCL. Any notice of election to dissent may be withdrawn by a Dissenting
Shareholder at any time prior to such shareholder's acceptance in writing of any
offer of payment by RTI, but no withdrawal may be made later than sixty days
after the date of consummation of the SGI Transaction (or, if RTI fails to make
a timely offer to pay such shareholder the "fair value" of such shareholder's
shares of Common Stock, at any time within sixty days after any date on which
such an offer is made), or thereafter with the written consent of RTI.
The foregoing does not purport to be a complete statement of the provisions
of Section 623 of the NYBCL and is qualified in its entirety by reference to
such section, which is reproduced in its entirely in Annex B to this Proxy
Statement. Any RTI shareholder contemplating the exercise of appraisal rights is
urged to review carefully the provisions of Section 623 of the NYBCL. Failure of
any shareholder to follow precisely and timely all of the steps required by
Section 623 of the NYBCL for perfecting appraisal rights will result in the loss
of such rights by such shareholder.
Required Vote
Under New York law, the affirmative vote of the holders of an aggregate of
796,593 shares (constituting two-thirds of all outstanding shares entitled to
vote at the Annual Meeting) is required to approve and adopt the SGI
Transaction. Holders of 252,093 shares of Common Stock (including Theo W.
Muller, President and Chief Executive Officer and a director of RTI) have
entered into separate agreements with SGI pursuant to which each of them has
agreed to vote their shares of Common Stock in favor of the SGI Transaction. In
addition, the other directors of RTI, who hold an aggregate of 4,677 shares of
Common Stock, and SGI, which holds all 118,000 of the outstanding shares of
Series A Preferred Stock, are expected to vote such shares in favor of the SGI
Transaction. In the aggregate, such shares of Common Stock and Series A
Preferred Stock constitute approximately 30.7% of RTI's voting securities on the
Record Date. See - "Voting Agreements".
Recommendation of the Board of Directors
The Board of Directors of RTI has determined that the SGI Transaction is in
the best interests of RTI and RTI's shareholders and is fair to RTI's
shareholders, has unanimously approved the SGI Transaction and unanimously
recommends that shareholders vote FOR approval of the SGI Transaction. See
- -"Background of the SGI Transaction; - Reasons for the SGI Transaction;
"Operations of RTI if the SGI Transaction is not Consummated".
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On February 26, 1996, RTI entered into an asset acquisition agreement (the
"Acquisition Agreement") with SteriGenics International ("SGI") pursuant to
which, subject to various conditions including approval by RTI's shareholders,
RTI will sell substantially all of its operating assets (other than its
Rockaway, New Jersey property) to SGI and its wholly-owned subsidiaries and will
lease a portion of the Rockaway property to one of such subsidiaries. See "THE
SGI TRANSACTION".
The following unaudited pro forma condensed consolidated financial
statements are based upon RTI's consolidated historical financial statements and
have been adjusted to give effect to the SGI Transaction. The
23
<PAGE>
unaudited pro forma condensed consolidated balance sheet of RTI combines RTI's
consolidated balance sheet as of March 31, 1996 (unaudited) with certain
adjustments described in the accompanying notes, as if the SGI Transaction had
occurred on March 31, 1996. The unaudited pro forma condensed consolidated
statements of operations for the three months ended March 31, 1996 and the year
ended December 31, 1995 combine RTI's consolidated statements of operations for
the three months ended March 31, 1996 (unaudited) and the year ended December
31, 1995 with certain adjustments described in the accompanying notes as if the
SGI Transaction had occurred on Janaury 1, 1995.
The unaudited pro forma condensed consolidated financial statements do not
purport to represent RTI's actual results had the SGI Transaction occurred on
the dates indicated or for any future period or date. The pro forma adjustments
described in the accompanying notes give effect to available information and
assumptions that RTI management believes are reasonable. The unaudited pro forma
condensed consolidated financial statements should be read in conjunction with
RTI's historical consolidated financial statements and the notes thereto which
accompany this proxy statement and are incorporated herein by reference. See
"DOCUMENTS INCORPORATED BY REFERENCE".
24
<PAGE>
RTI INC.
Condensed Consolidated Balanced Sheet (unaudited)
March 31, 1996
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
RTI Inc. & Adjustments Pro Forma,
Description Subsidiaries (Note 1) as adjusted
- ------------------------------------ ------------ ----------- -----------
<S> <C> <C> <C>
ASSETS:
Current:
Cash and cash equivalents $ 290 $ 4,524 (a) $ 4,169
(236) (a)
16 (d)
150 (d)
(575) (b)
Accounts receivable, net of allowance 566 (566) (a) 0
Prepaid expenses and other 51 (20) (a) 31
Restricted deposits 16 (16) (d) 0
-------- -------- --------
TOTAL CURRENT ASSETS 923 3,277 4,200
Property, plant, equipment and Cobalt 60, net 7,374 (6,861) (a) 513
Certificates of financial assurance 150 (150) (d) 0
Deferred financing costs 34 (34) (a) 0
-------- -------- --------
TOTAL ASSETS $ 8,481 ($ 3,768) $ 4,713
======== ======== ========
LIABILITIES:
Current:
Current portion of long term debt $ 852 ($ 827) (a) $ 25
Accounts payable 194 (100) (a) 169
75 (c)
Accrued expenses 630 (176) (b) 454
(189) (a)
Current portion of preferred stock 236 (236) (a) 0
-------- -------- --------
TOTAL CURRENT LIABILITIES 1,912 (1,453) 459
Long-term debt, net of current portion 2,107 (1,859) (a) 248
Other liabilities 1,335 (544) (b) 791
-------- -------- --------
TOTAL LIABILITIES 5,354 (3,856) 1,498
Stockholders' Equity:
Common stock 86 86
Additional paid in capital 16,014 16,014
Deficit (12,973) (57) (c) (12,885)
145 (b)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 3,127 88 3,215
-------- -------- --------
TOTAL LIABILITIES & $ 8,481 ($ 3,768) $ 4,713
STOCKHOLDERS' EQUITY
======== ======== ========
</TABLE>
25
<PAGE>
RTI INC.
Condensed Consolidated Statement of Operations (unaudited)
For the Year Ended December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
RTI Inc. & Adjustment Pro Forma,
Description Subsidiaries (Note 2) as adjusted
- ------------------------------------ ------------ ---------- -----------
<S> <C> <C> <C>
Net sales $4,352 ($4,352)(a) $ 0
Cost of sales 2,922 (2,922)(a) 0
----------- ----------- ---------
GROSS PROFIT 1,430 (1,430) 0
Operating expenses:
Selling, general and
administrative 1,556 (1,406)(a) 150
Expenses of Rockaway
Industrial Park Parcel I 76 76
Environmental investigation 224 224
----------- ----------- ---------
LOSS FROM OPERATIONS (426) (24) (450)
Investment income 10 10
Other interest expense (260) 260(c) 0
Other income (expense) 151 77(b) 228
----------- ----------- ---------
Net loss ($ 525) $ 313 ($ 212)
=========== =========== =========
Pro forma net loss per share ($0.20)
=========
Pro forma weighted average
shares outstanding 1,077,077
=========
</TABLE>
26
<PAGE>
RTI INC.
Condensed Consolidated Statement of Operations (unaudited)
For the Three Months ended March 31, 1996
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
RTI Inc. & Adjustment Pro Forma,
Description Subsidiaries (Note 2) as adjusted
- ------------------------------------ ------------ ---------- -----------
<S> <C> <C> <C>
Net sales $1,086 ($1,086)(a) $ 0
Cost of sales 740 (740)(a) 0
----------- ----------- -----------
GROSS PROFIT 346 (346) 0
Operating expenses
Selling, general and administrative 414 (376)(a) 38
Expenses of Rockaway Industrial Park Parcel I 21 21
Environmental investigation, remediation 480 480
----------- ----------- -----------
LOSS FROM OPERATIONS (569) 30 (539)
Investment income 3 3
Other interest expense (68) 68(c) 0
Other income 591 19(b) 610
----------- ----------- -----------
Net income (loss) ($ 43) $ 117 $ 74
=========== =========== ===========
Pro forma net income per share $0.07
===========
Pro forma weighted average shares outstanding 1,076,877
===========
</TABLE>
27
<PAGE>
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. Pro forma adjustments giving effect to the Acquisition Agreement in the
unaudited pro forma condensed consolidated balance sheet reflect the following:
a. The decrease in the assets and liabilities of RTI as a result of RTI
selling to SGI substantially all of its assets (the "Purchased Assets")
(other than cash items and RTI's facilities and real estate in Rockaway,
NJ), and SGI assuming the stated liabilities ("Assumed Liabilities") of RTI
(other than liabilities associated with the Rockaway property) for a
purchase price equal to $18,000, plus the net book value of the Purchased
Assets, minus the book value of the Assumed Liabilities. The increase in
cash of $4,524,000 as a result of the purchase price being equal to
$18,000, plus the net book value of the Purchased Assets of $7,481,000,
minus the book value of the Assumed Liabilities of $2,975,000. The decrease
in the redeemable preferred stock as a result of SGI surrendering the
Series A Preferred Stock for a credit of $236,000 against the purchase
price.
b. The decrease in cash of $575,000, accrued expenses of $176,000, other
liabilities of $544,000 and accumulated deficit of $145,000, as a result of
the payment by RTI to the NJDEP of $575,000 in full satisfaction of
financial obligations up to June 30, 1996 under a 1992 NJDEP Administrative
Consent Order, as amended.
c. An increase of $57,000 in the accumulated deficit, consisting of the
$18,000 gain as a result of the purchase price being $18,000 in excess of
the net book value of the Purchased Assets, minus the book value of the
Assumed Liabilities and a $75,000 increase in accounts payable to reflect
the estimated professional fees and other costs incurred, but not billed,
as of March 31, 1996 associated with consummating the SGI Transaction.
d. The increase in cash as a result of the release of a restricted deposit
relating to NJDEP obligations of approximately $16,000 and the release of
two certificates of financial assurance totaling $150,000 as the
certificates will no longer be required upon issuance of operating licenses
to SGI for RTI's two New Jersey irradiation facilities.
2. Pro forma adjustments giving effect to the Acquisition Agreement in the
unaudited pro forma condensed consolidated statements of operations reflect the
following:
a. The elimination of sales, cost of sales and the majority of selling,
general and administrative expenses of RTI. The remaining general and
administrative expenses of RTI after the SGI Transaction are estimated to
be $150,000.
b. The increase in other income of $77,000 and $19,000 for the year ended
December 31, 1995 and three months ended March 31, 1996, respectively, as a
result of the net lease to SGI for that portion of the property on which
the Rockaway facility is located.
c. The decrease in interest expense as a result of SGI assumption of the
City of Salem Municipal Port Authority, Port Development Bonds and the
outstanding debt associated with Cobalt 60 purchases and leases and RTI
having no short term borrowings.
NOTE: The condensed consolidated statements of operations do not reflect (i) the
estimated loss on the SGI Transaction of approximately $132,000 consisting of
the $18,000 gain as a result of purchase price being $18,000 in excess of the
book value of the Purchased Assets, minus the book value of the Assumed
Liabilities pursuant to the Asset Acquisition Agreement and estimated
professional fees and other costs of $150,000 to consummate the transaction;
(ii) the income of approximately $145,000 resulting from the $575,000 payment to
the NJDEP in full satisfaction of NJDEP financial obligations up to June 30,
1996 under a 1992 NJDEP administrative consent order, as amended; and (iii)
interest income from the investment of cash received as a result of consummation
of the SGI Transaction.
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<PAGE>
CERTAIN INFORMATION WITH RESPECT TO THE COMMON STOCK
The Common Stock is traded on The Nasdaq Small-Cap Market under the symbol
"RTII." Effective May 25, 1995, the Company's certificate of incorporation was
amended to effect a one-for-eight reverse stock split of the Common Stock. The
following table sets forth the high and low bid quotations for the Common Stock
for each quarterly period beginning with the calendar quarter ended March 31,
1994, as reported by The Nasdaq Small-Cap Market. The quotations for the period
prior to May 25, 1995 have been retroactively adjusted to reflect the reverse
stock split. These quotations represent prices between dealers, do not include
retail markup, markdown or commission and do not necessarily represent actual
transactions.
High Bid Low Bid
1st Quarter 1994 $7 $3-1/2
2nd Quarter 1994 4-3/4 3
3rd Quarter 1994 7-1/2 3-1/4
4th Quarter 1994 5-1/2 3
1st Quarter 1995 $4 $3
2nd Quarter 1995 3-1/4 1-1/2
3rd Quarter 1995 1-3/8 1-1/4
4th Quarter 1995 1-7/8 1-1/2
1st Quarter 1996 $2-5/8 $1-3/4
2nd Quarter 1996 (through June 14) 2-7/8 2-3/8
As of the Record Date, RTI had approximately 2,000 holders of record of its
Common Stock. During the fiscal year ended December 31, 1995, there were
transactions in the Common Stock on approximately 62% of all trading days.
RTI has not paid any cash dividends on the Common Stock. The payment of any
cash dividends by RTI will be made only from assets legally available therefor
and will depend generally upon RTI's short-term and long-term cash availability,
current and anticipated capital requirements, restrictions under any then
existing credit and other debt instruments and arrangements and other factors
deemed relevant by RTI's Board of Directors. RTI's Board of Directors does not
anticipate the payment of cash dividends on the Common Stock as long as a
portion of the Rockaway property remains on the National Priorities List as a
"superfund site".
ELECTION OF DIRECTORS
(Item 2 on the Proxy Card)
Nominees
RTI's By-laws provide for a Board of Directors of not less than three
directors nor more than nine directors. The Board of Directors has fixed the
number of directors at four. It is the intention of the persons named in the
accompanying form of proxy, unless otherwise instructed, to vote shares covered
by valid proxies FOR the election to the Board of Directors of the four persons,
designated by the Board of Directors, named in the following table. In the event
that any of the designated persons does not continue to be available for
election, the persons named in the accompanying form of proxy will have
discretionary power to vote for a substitute and will have discretionary power
to vote or withhold their vote for any additional nominees named by
shareholders. There are no circumstances presently known to the Board of
Directors which would render any of the following persons unavailable to serve
as a director, if elected.
29
<PAGE>
Name Age Relationship with RTI
Sanders Davies 49 Director since 1986
C.W. McMillan 70 Director since 1985
Theo W. Muller 57 Director, President and Chief Executive
Officer since January 1995
George M. Whitmore, Jr. 68 Director since 1988
Each director was elected as such at the Annual Meeting of Shareholders
held on May 16, 1995, and holds his office until the next Annual Meeting of
shareholders and until his successor is elected or until his earlier
resignation.
Sanders Davies has been a partner in the firm of O'Connor, Davies & Co.,
certified public accountants, and its predecessor firm, Davies & Davies, for
more than the past five years.
C. W. McMillan has been president of C.W. McMillan Co. and its predecessor,
McMillan & Farrell Associates, Inc., agribusiness consultants, for more than the
past five years. From 1981 through March 1985, Mr. McMillan was an Assistant
Secretary of Agriculture of the United States.
Theo W. Muller was elected President and Chief Executive Officer of RTI on
January 3, 1995. Mr. Muller has been an independent investor for more than the
past five years and is a partner of Saler Associates, a residential real estate
developer. From 1985 until December 1994, Mr. Muller was president of Frellum
Corporation ("Frellum"), an aircraft leasing and oil and gas production company.
Mr. Muller was a director of RTI from May 1990 to November 1993.
George M. Whitmore, Jr. has been managing director of Whitmore & Company, a
management consulting firm for more than the past five years. Mr. Whitmore is
the chairman of the board and secretary of Rathbone, King & Seeley, Inc., an
insurance holding company which, on January 8, 1993, filed a petition for
liquidation under Chapter 7 of the United States Bankruptcy Code; Mr. Whitmore's
duties for such company have been to chair meetings of its board of directors,
occasionally prepare minutes of such meetings and, from time to time, attest to
actions duly taken by such board.
The business and affairs of RTI are managed under the direction of the
Board of Directors. The Board has responsibility for establishing broad
corporate policies and for the overall performance of RTI, rather than
day-to-day operating details. Members of the Board of Directors are kept
informed of RTI's business by various reports and documents sent to them each
month, as well as by reports presented at meetings of the Board and its
Committees by executive officers and other employees of RTI.
RTI's Board of Directors has an Audit Committee, a Compensation Committee
and a Nominating Committee. The members of each committee hold office until the
next Annual Meeting of the Board of Directors and until their respective
successors are elected and qualified. The members of the Audit Committee are
Sanders Davies, C.W. McMillan and George M. Whitmore, Jr. The members of the
Compensation Committee and the Nominating Committee are Sanders Davies, C. W.
McMillan, Theo W. Muller and George M. Whitmore, Jr.
The Audit Committee confers with the independent auditors and the chief
financial officer of RTI, reviews reports submitted by the auditors and reports
and makes recommendations on accounting matters to the Board of Directors. The
Compensation Committee considers compensation to be paid to executive officers
of RTI and reports and makes recommendations thereon to the Board of Directors.
The Nominating
30
<PAGE>
Committee makes recommendations to the Board of Directors regarding nominations
for election to the Board of Directors.
The Nominating Committee will consider nominees recommended by shareholders
of RTI for election as director at the 1997 Annual Meeting, provided that any
such recommendation is submitted in writing by January 31, 1997 to the
Nominating Committee, c/o the Secretary of RTI Inc., 108 Lake Denmark Road,
Rockaway, New Jersey 07866, accompanied by a description of the proposed
nominee's qualifications and other relevant biographical information and the
consent of the proposed nominee to serve.
During the fiscal year ended December 31, 1995, there were seven meetings
of the Board of Directors, one meeting of the Audit Committee, one meeting of
the Nominating Committee and no meeting of the Compensation Committee. During
each of the foregoing periods, each director attended at least 75% of all
meetings of the Board held during the period that he served as a director and of
the committees of the Board on which he served.
RTI pays its directors (other than full-time employees of RTI) at the rate
of $5,000 per year and reimburses its directors for their out-of-pocket expenses
incurred in connection with their services to RTI.
No family relationship exists among the directors of RTI or between any of
such persons and the executive officers of RTI.
Executive Officers of RTI
In addition to Theo W. Muller, RTI's President and Chief Executive Officer,
the only other executive officer of RTI is R. Stephen Maico, age 44, who has
been the Controller, chief financial officer, Secretary and Treasurer of RTI
since January 1990. Each executive officer holds his office at the pleasure of
the Board of Directors.
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers, directors and persons who own more than 10% of the Common Stock to
file within prescribed periods initial statements of beneficial ownership and
statements of changes in beneficial ownership of their shares of Common Stock
with the Securities and Exchange Commission and The Nasdaq Small-Cap Market.
Such persons also are required to furnish RTI with copies of all such statements
they file. Based on its review of the copies of such statements received by it
and written representations from certain of such persons, RTI believes that,
during 1995, all such filing requirements applicable to such persons were duly
complied with, except that Mr. Muller inadvertently failed to report the
acquisition of 18 shares of Common Stock on December 4, 1995 and the acquisition
on November 29, 1995 by Frellum of a warrant to purchase 25,000 shares of Common
Stock, which was corrected when he filed a Form 5 with the Securities and
Exchange Commission in March 1996.
Executive Compensation
General
No person who was an executive officer of RTI in 1995 received annual
compensation exceeding $100,000 per year during any of the three years ended
December 31, 1995. The following table sets forth information concerning
compensation for services in all capacities awarded or paid to, or earned by,
Theo W. Muller, RTI's President and Chief Executive Officer, during the year
ended December 31, 1995. No stock appreciation rights, stock options or other
long-term compensation awards have ever been granted to Mr. Muller. During the
year ended December 31, 1995, Mr. Muller did not hold any options to acquire any
securities of RTI.
31
<PAGE>
Name and Principal Position Annual Compensation
--------------------------- -----------------------
Year Salary
---- ------
Theo W. Muller 1995 $6,000
President and Chief
Executive Officer
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
RTI does not have any employment agreements or termination or change in
control arrangements with any of its executive officers.
1987 Stock Option Plan
RTI's 1987 Stock Option Plan (the "1987 Plan") was adopted by the Board of
Directors of RTI on November 4, 1987 and approved by the shareholders of RTI on
May 25, 1988. The 1987 Plan, as amended, authorized the issuance, within ten
years from the date of its adoption, of options covering up to 90,625 shares of
Common Stock (subject to adjustment in certain circumstances) to such key
employees or other individuals (including executive officers and directors of
and consultants to RTI) who have performed, or reasonably may be expected to
perform, services of special importance to the management, operation or
development of the business of RTI. As of the Record Date, options for an
aggregate of 4,936 shares of Common Stock, at an average exercise price of $5.96
per share, were outstanding under the 1987 Plan and 11,562 shares of Common
Stock were available for the grant of future options under the 1987 Plan. The
1987 Plan is intended to provide an incentive to continued employment of such
key employees and other individuals by enabling them to acquire a proprietary
interest in RTI and by offering comparable incentives to enable RTI better to
attract, compete for and retain highly qualified employees and consultants.
Options granted under the 1987 Plan may be either "Incentive Stock
Options" as that term is defined in Section 422 of the Code, or options which do
not qualify as Incentive Stock Options ("Non-Qualified Stock Options").
Incentive Stock Options may be granted only to key individuals, including
executive officers and directors, who are employees of RTI. An Incentive Stock
Option must expire within ten years from the date it is granted (five years in
the case of such options granted to holders of more than 10% of the outstanding
Common Stock). Incentive Stock Options are first exercisable not earlier than
one year from the date of grant. The exercise price of an Incentive Stock Option
must be at least equal to the fair market value of the Common Stock on the date
such Incentive Stock Option is granted and must be paid in cash or in capital
stock of RTI valued at its then fair market value. To the extent the aggregate
fair market value of Incentive Stock Options that are exercisable for the first
time by an optionee during any calendar year exceeds $100,000, such options will
be treated as Non-Qualified Stock Options. In addition, RTI may issue
Non-Qualified Stock Options under the 1987 Plan to executive officers, directors
and key employees of RTI and advisors and consultants to RTI. The exercise price
of these options is not limited and may be below fair market value.
Incentive Stock Options terminate three months after the optionee's
relationship with RTI is terminated (one year if termination is by reason of
death or disability). In the case of Non-Qualified Stock Options, such options
terminate as determined by the Board of Directors, and set forth in the option
agreement between RTI and the optionee.
Certain Relationships and Related Transactions
In December 1994, Theo W. Muller purchased at par from the remarketing
agent $250,000 aggregate principal amount of 10% City of Salem Municipal Port
Authority Bonds (the "Bonds"), the principal and interest of which are paid by
RTI. The proceeds from the original issuance of the Bonds in 1984 were used to
finance RTI's Salem facility.
32
<PAGE>
In 1993, RTI sold, in a private placement, an aggregate of 175,000 shares
of Common Stock to several investors, including Mr. Muller, and agreed to
register such shares within a period of approximately one year. In December
1994, at the request of RTI and to postpone the cost of such registration, the
investors agreed to defer their rights to registration of such shares for an
indefinite period.
John N. Scandalios was Chairman of the Board, President and Chief Executive
Officer of RTI until his resignation as of December 31, 1994. During the fiscal
year ended December 31, 1994, Mr. Scandalios received compensation from RTI of
$185,260.
During January 1995, Mr. Muller settled for $50,000 an account payable of
the Company, which was repaid to Mr. Muller, without interest, in March 1995.
On November 29, 1995, Frellum, a Delaware company which is 50.1% owned by
Mr. Muller, agreed to make available to RTI a $250,000 line of credit. The line
of credit, which initially was scheduled to expire on October 29, 1996, has been
extended to April 28, 1997 and the line of credit has been increased to
$315,000. Loans under such credit line are secured by RTI's accounts receivable,
bear interest at 8% per annum, may be repaid at any time and become due 30 days
after written demand therefor is made, which demand may not be made prior to the
expiration of such credit line. During the year ended December 31, 1995,
$200,000 of loans were made by Frellum under the credit line, all of which were
outstanding at December 31, 1995, and $1,333 of interest had been accrued with
respect thereto. All of such loans were repaid on February 21, 1996. As part of
such transaction, RTI issued to Frellum a warrant, expiring November 28, 1997,
to acquire 25,000 shares of RTI's Common Stock at $1.75 per share (104% of the
last sale price of the Common Stock on The Nasdaq Small-Cap Market on the day
immediately prior to such issuance). (Such warrant was exercised by Frellum on
June 7, 1996; on such date, the last sale price on The Nasdaq Small-Cap Market
was $2-11/16 per share of Common Stock.) Frellum also was granted certain
piggyback registration rights with respect to such shares if RTI registers its
securities under certain circumstances with the Securities and Exchange
Commission prior to November 28, 1997.
APPOINTMENT OF INDEPENDENT AUDITORS
(Item 3 on the Proxy Card)
The Board of Directors has appointed, subject to ratification by
shareholders at the Annual Meeting, the firm of BDO Seidman, LLP, as the
independent auditors for RTI to audit the financial statements of RTI for the
fiscal year ending December 31, 1996. The Board of Directors recommends a vote
FOR ratification of the appointment of BDO Seidman, LLP. BDO Seidman, LLP has
audited the financial statements of RTI for more than the past five years and,
therefore, is familiar with the affairs and financial procedures of RTI. A
representative of BDO Seidman, LLP is expected to be present at the Annual
Meeting, will have the opportunity to make a statement, if such representative
desires to do so, and will be available to respond to appropriate questions.
OTHER MATTERS
Management does not know of any other business to be presented at the
Annual Meeting. If any other matters are properly brought before the Annual
Meeting, it is the intention of the persons named in the accompanying form of
proxy to vote the shares of Common Stock represented by such proxies in
accordance with their best judgment.
Any shareholder who desires to present a proposal to the shareholders at
the 1997 Annual Meeting must submit such proposal to RTI (to the attention of
the Secretary) no later than January 31, 1997 for such proposal to be considered
for inclusion in the proxy statement for such Annual Meeting. Such proposal must
also meet the other requirements of the Securities and Exchange Commission
relating to shareholder proposals required to be included in RTI's proxy
statement.
33
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DOCUMENTS INCORPORATED BY REFERENCE
RTI is subject to the informational requirements of the Securities Exchange
Act of 1934 (the "1934 Act") and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "SEC"). The following periodic reports filed by RTI with the SEC pursuant
to the 1934 Act (File No. 0-5887) are incorporated by reference into this Proxy
Statement:
1. RTI's Annual Report on Form 10-KSB/A for the fiscal year ended
December 31, 1995, which contains audited financial statements for the Company's
fiscal year ended December 31, 1995.
2. RTI's Quarterly Report on Form 10-QSB/A for the fiscal quarter
ended March 31, 1996, which contains unaudited financial statements for the
fiscal quarter ended March 31, 1996.
A copy of the foregoing Annual Report on Form 10-KSB/A is contained in
RTI's 1995 Annual Report to Shareholders, which has been mailed to shareholders
with this Proxy Statement. A copy of the foregoing Quarterly Report on Form
10-QSB/A is attached to this Proxy Statement as Annex C. RTI will provide to
each person being solicited by this Proxy Statement, upon the written or oral
request of any such person, by first class mail or other equally prompt means
within one business day of receipt of such request, an additional copy of the
foregoing documents (without charge) and a copy of the exhibits to such Annual
Report on Form 10-KSB/A (upon payment of a reasonable duplicating charge) if
request therefor is made to R. Stephen Maico, Secretary, RTI Inc., 108 Lake
Denmark Road, Rockaway, New Jersey 07866; telephone number (201) 625- 8400.
Any statements contained in a document incorporated by reference herein or
contained in this Proxy Statement shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so modified
or superseded.
The reports, proxy statements and other information filed by RTI with the
SEC can be inspected and copied at the public reference facilities maintained by
the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's Regional Office at Suite 1300, 7 World Trade Center, New York, New York
10048. Copies of such materials also can be obtained from the SEC's Public
Reference Section at prescribed rates. In addition, materials filed by RTI
should be available for inspection at the offices of NASDAQ Stock Market, 1735 K
Street, N.W., Washington, D.C. 20006.
By Order of the Board of Directors,
R. Stephen Maico
Secretary
Dated: June 21, 1996
Rockaway, New Jersey
34
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RTI INC.
PROXY - Annual Meeting of Shareholders - August 6, 1996 (SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS)
Know All Men By These Presents, that the undersigned shareholder of
RTI Inc. hereby constitutes and appoints Theo W. Muller and R. Stephen Maico,
and each and either of them, the attorneys and proxies of the undersigned, with
full power of substitution and revocation, to vote for and in the name, place
and stead of the undersigned, at the Annual Meeting of Shareholders of RTI Inc.
to be held at the Four Points Hotel by Sheraton, 15 Howard Boulevard, Mt.
Arlington, New Jersey 07856, on Tuesday, August 6, 1996, at 11:00 A.M., and at
any adjournments thereof, the number of votes the undersigned would be entitled
to cast if present:
(1) Proposal to approve the sale of substantially all of the assets of RTI to
SteriGenics International and its wholly-owned subsidiaries.
|_| FOR |_| AGAINST |_| ABSTAIN
(2) Election of Directors.
FOR all nominees listed |_| WITHHOLD AUTHORITY |_|
below (except as marked to vote for all nominees
to the contrary below)
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below.)
Sanders Davies, C. W. McMillan, Theo W. Muller, George M. Whitmore, Jr.
(3) Proposal to ratify the selection of BDO Seidman, LLP as the independent
auditors for RTI for the fiscal year ending December 31, 1996.
|_| FOR |_| AGAINST |_| ABSTAIN
Each of the foregoing matters has been proposed by RTI and is independent
and not conditioned on the approval of any other matter.
(4) In their discretion, upon such other matters as properly may come before the
meeting.
Both of said attorneys and proxies, or their substitutes (or if only one,
that one) at said meeting, or any adjournments thereof, may exercise all of the
powers hereby given. Any proxy heretofore given is hereby revoked.
(Continued and to be signed on reverse side.)
<PAGE>
Receipt is acknowledged of the Notice of Annual Meeting of
Shareholders, the Proxy Statement accompanying said Notice and the Annual Report
to Shareholders for the fiscal year ended December 31, 1995.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR EACH OF THE ABOVE PROPOSALS.
IN WITNESS WHEREOF, the undersigned has signed this proxy.
Dated:______________________________, 1996
-------------------------------------
Shareholder(s) signature(s)
-------------------------------------
Shareholder(s) signature(s)
NOTE: Signature(s) of shareholder(s) should
correspond exactly with the name(s) shown hereon.
If shares are held jointly, both holders should
sign. Attorneys, executors, administrators,
trustees, guardians or others signing in a
representative capacity should give their full
titles. Proxies executed in the name of a
corporation should be signed on behalf of the
corporation by its president or other authorized
officer.
NOTE: This proxy, properly filled in, dated and signed, should be returned
promptly in the enclosed envelope.
<PAGE>
ANNEX A
ASSET ACQUISITION AGREEMENT
This Agreement is entered into as of February 26, 1996, by and among
SteriGenics International, a California corporation ("Sterigenics"), and RTI
Inc., a New York corporation ("RTI").
Recital
RTI desires to sell and Sterigenics desires to purchase certain tangible
and intangible assets of RTI, and Sterigenics agrees to assume certain
liabilities and obligations of RTI, as set forth under the terms of this
Agreement.
NOW, THEREFORE, in consideration of the representations, warranties and
agreements herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein, when used in this Agreement the following
terms shall have the following meanings:
1.1 "Assumed Liabilities" shall mean (a) the Contracts, (b) the Trade
Payables, (c) the Salem Guarantee, to the extent RTI is not released therefrom
at or prior to the Closing, and (d) the obligations of RTI under leases and
notes related to the financing of the Cobalt set forth on Schedule 1.1 attached
hereto and any leases or notes related to the financing of Cobalt acquired by
RTI in the ordinary course of business from the date hereof through the Closing
Date.
1.2 "Closing" shall mean the closing of the transactions contemplated by
this Agreement.
1.3 "Closing Date" shall mean the third business day after the conditions
set forth in Articles IX and X are satisfied but not later than November 27,
1996, or such other date as the parties mutually have agreed to in writing.
1.4 "Cobalt" shall mean the Cobalt 60 listed by serial number on Schedule
1.4 attached hereto and any additional Cobalt 60 acquired hereafter by RTI
through the Closing in the ordinary course of business.
1.5 "Contracts" shall mean the contracts calling for future payments to or
from RTI of less than $25,000 per annum, the contracts listed on Schedule 1.5
attached hereto and any contracts entered into by RTI through the Closing in
accordance with Section 6.3.
1.6 "Excluded Liabilities" shall mean any and all liabilities, obligations
or commitments of any nature of RTI and its Subsidiaries (other than the South
Jersey Subsidiary), whether known or unknown, contingent or fixed or otherwise,
including without limitation, all liabilities related to Hazardous Materials or
compliance with Environmental Laws (each as defined in Section 4.15 below), all
liabilities related to the employment and/or termination of personnel on or
prior to the Closing, all taxes due and all sales, use, withholding and payroll
taxes accrued to (but not including) the Closing, except the Assumed
Liabilities.
1.7 "Immaterial Liens" shall include liens on any Purchased Assets where
the aggregate value of the Purchased Assets subject to all such liens is less
than $30,000.
1.8 "Improvements" shall mean all structures, buildings, improvements and
fixtures, including without limitation all equipment and appliances used in
connection with the operation or occupancy thereof, such as heating and
air-conditioning systems and facilities used to provide any utility services,
parking services,
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refrigeration, ventilation, trash disposal or other services owned by RTI or its
Subsidiaries and located on or used in connection with the Real Properties.
1.9 "Intangible Assets" shall mean all of RTI's and its Subsidiaries'
interests in intellectual property rights, including without limitation,
patents, trademarks, service marks, copyrights and applications therefor and
registrations thereof, trade names, trade styles, trade secrets, know-how,
processes, formulae, business and marketing plans, and confidential and other
proprietary information that are owned by RTI and its Subsidiaries or that may
be assigned by RTI and its Subsidiaries; and all of RTI's and its Subsidiaries'
interest in computer software and data, including without limitation, all source
and object codes, all manuals and other user materials, and all intangible data
contained in or stored on computer hardware used in RTI's and its Subsidiaries'
business as of the Closing Date.
1.10 "IRB" shall mean the City of Salem Municipal Port Authority Port
Development Revenue Bond (South Jersey Process Technology, Inc. Project) Series
of 1984 Financing.
1.11 "IRB Documentation" shall mean all documents relating to the
indebtedness evidencing the IRB, including without limitation all indenture
agreements, lease agreements, security agreements, guaranties, and bonds
relating to the Salem Property (all as amended) and as set forth in Exhibit 10.1
to RTI's Annual Report on Form 10-KSB for the year ended December 31, 1994 and
as set forth in the Trust Indenture dated as of December 1, 1984 between the
City of Salem Municipal Port Authority and The Farmers and Merchants National
Bank of Bridgeton.
1.12 "North Carolina Property means the real property and the Improvements
thereon located in Haw River, North Carolina, owned by RTI or its Subsidiary and
legally described in Exhibit 1.12 hereof.
1.13 "Permitted Encumbrances" shall mean (i) the assessments due under the
IRB, (ii) the liens and encumbrances incurred by RTI or its Subsidiaries in
connection with obtaining financing for the purchase of the Cobalt, (iii) the
Permitted Exceptions (as defined in Section 6.5(a) hereof), (iv) liens for taxes
not yet due, (v) Immaterial Liens, (vi) encumbrances other than liens which do
not materially affect or interfere with the use of the Real Property in the
manner presently used by RTI, value or transferability of the Purchased Assets,
(vii) UCC financing statements filed by lessors of personal property which
relate solely to property owned by such lessors and leased to RTI; and (viii)
liens held by NJDEP provided that the condition set forth in Section 9.8 below
is satisfied.
1.14 "Prepaid Expenses" shall mean any prepaid expenses of RTI in the
following categories: prepaid taxes, prepaid insurance premiums (to the extent
such insurance policy is assignable) and prepaid supplies.
1.15 "Purchased Assets" shall mean the Cobalt, the Tangible Assets, the
Real Property Assets, the Subsidiary Stock, the Prepaid Expenses, the
Receivables and the Intangible Assets.
1.16 "Real Property" and "Real Properties" means, individually and
collectively as the case may be, each of the North Carolina Property, the
Rockaway Property and the Salem Property.
1.17 "Real Property Assets" means the right, title and interest of RTI in
the North Carolina Property and RTI's right to lease the Rockaway Property,
together with the right, title and interest of RTI in the Improvements (other
than improvements located on the Rockaway Property which shall be leased to
Sterigenics) and in and to all intangible property owned by RTI and used in
connection with such Real Properties (other than the Rockaway Property),
including (i) all right, title and interest in all plans, drawings,
specifications, land surveys, entitlements and approvals, engineering reports
and other technical reports, if any, in the possession of RTI or which are
available to RTI without additional cost and which were prepared in connection
with the development of the Real Properties or the construction of the
Improvements for such Real Properties; (ii) all hereditaments, privileges,
tenements and appurtenances belonging to the Real Properties; (iii) all right,
title and interest of RTI in and to all open or proposed highways, streets,
roads, avenues, alleys, easements, strips, gores and rights-of-way in, on,
across, in front of, contiguous to, abutting
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or adjoining the Real Properties; (iv) all right, title and interest of RTI in
and to any transferable licenses, permits and warranties now in effect with
respect to the Improvements; and (v) all right, title and interest of RTI in and
to any transferable warranties, guaranties, indemnities and claims relating to
the construction, operation or maintenance of the Real Properties and/or the
Improvements.
1.18 "Receivables" shall mean all accounts receivable of RTI as of the
Closing.
1.19 "Rockaway Property" shall mean the real property shown as lots 1
through 10 of Block 30102 as shown on the assessment maps for the Township of
Rockaway attached as Exhibit 1.19 hereof and the Improvements (including RTI's
irradiation facility) thereon located in Rockaway, New Jersey, owned by RTI or
its Subsidiary.
1.20 "Salem Guarantee" shall mean the obligations of RTI pursuant to the
IRB Documentation and the Agreement dated December 28, 1994 among the City of
Salem, Municipal Port Authorities, RTI and the South Jersey Subsidiary, as
amended.
1.21 "Salem Property" shall mean the real property legally described on
Exhibit 1.21 hereof and the Improvements (including RTI's irradiation facility)
thereon located in Salem, New Jersey, which is leased by the South Jersey
Subsidiary.
1.22 "Subsidiary" or "Subsidiaries" shall mean, with respect to any party,
any corporation or other organization, whether incorporated or unincorporated,
of which (i) such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which held
by such party or any Subsidiary of such party do not have a majority of the
voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
1.23 "Subsidiary Stock" shall mean all the outstanding shares of Capital
Stock of South Jersey Process Technology, Inc., a New Jersey corporation and a
wholly-owned subsidiary of RTI (the "South Jersey Subsidiary").
1.24 "Tangible Assets" shall mean all of the fixed assets, furniture,
equipment and other tangible assets (other than cash, cash equivalents, Rockaway
Property and the fixtures located on the Rockaway Property) as of the Closing
Date.
1.25 "Trade Payables" shall mean the accounts payable of RTI which are
incurred through the Closing in the ordinary course of business.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale. Subject to and upon the terms and conditions of this
Agreement, on the Closing Date, RTI shall sell, assign, transfer, convey and
deliver to Sterigenics (or its wholly-owned Subsidiaries) and Sterigenics (or
its wholly-owned Subsidiaries) shall purchase from RTI, free and clear of all
liens and encumbrances, except the Permitted Encumbrances, all of RTI's right,
title and interest in and to the Purchased Assets (the "Acquisition"). RTI
acknowledges that Sterigenics intends to assign certain of its rights and
obligations hereunder to its wholly-owned Subsidiaries.
2.2 Further Assurances; Instruments of Transfer. RTI shall execute and
deliver such bills of sale and other recordable instruments of assignment,
transfer and conveyance as Sterigenics shall reasonably request to document the
sale, assignment, transfer, conveyance and delivery of the Purchased Assets;
provided, however, that to the extent that any such request is made after the
Closing, Sterigenics shall pay the out-of- pocket costs incurred by RTI
responding to such request.
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2.3 Closing Balance Sheet. The book value of the Purchased Assets and
Assumed Liabilities shall be set forth on a separate statement of the
consolidated assets and liabilities as of commencement of business on the
Closing Date (the "Closing Balance Sheet") which shall be delivered by RTI to
Sterigenics within thirty (30) days of the Closing Date. The book value of the
Subsidiary Stock for purposes of the Closing Balance Sheet shall exclude any
intercompany transactions and any assets and liabilities unrelated to the
business of the Salem Property facility. The Closing Balance Sheet shall be
prepared by RTI in accordance with generally accepted accounting principles
("GAAP"), applied on a consistent basis with RTI's preceding year's audited
consolidated financial statements. The Closing Balance Sheet shall contain
appropriate pro- rata accruals to the Closing Date with respect to the Assumed
Liabilities. Within thirty (30) days following the delivery of the Closing
Balance Sheet, Sterigenics shall advise RTI as to whether Sterigenics elects, at
its option and sole expense, to have the Closing Balance Sheet audited by Ernst
& Young LLP ("Ernst & Young"). Such audit shall commence within such thirty (30)
day period and shall proceed diligently to completion. In auditing the Closing
Balance Sheet, Ernst & Young shall apply GAAP on a basis consistent with RTI's
prior year's audited consolidated financial statements and, to the extent
consistent with GAAP, shall follow the same accounting practices as employed by
RTI's independent accountants. Sterigenics' failure to audit the Closing Balance
Sheet shall in no manner limit Sterigenics' claims related to a breach of any
representation or warranty contained in Article IV below.
2.4 Consideration. As consideration for the Purchased Assets, Sterigenics
(or its wholly-owned Subsidiaries) shall pay RTI a sum equal to the book value
of the Purchased Assets less the book value of the Assumed Liabilities (as
derived from RTI's Quarterly Report on Form 10-QSB (the "March Form 10-QSB") for
the period ended March 31, 1996, plus $18,000 (the "Purchase Price"), subject to
adjustment as provided below, to be payable as follows:
(a) Subject to Section 9.1 and Section 9.4, an amount equal to the Purchase
Price less (i) $1,036,000 and (ii) the amount required to be paid to the New
Jersey Department of Environmental Protection ("NJDEP") to release its liens on
the Purchased Assets as specified in a letter to RTI from the NJDEP dated within
five (5) business days prior to the Closing (the "Lien Amount") shall be paid at
the Closing, payable, at the option of RTI, by delivery of a certified check of
immediately available funds to RTI or by wire transfer to an account designated
in writing by RTI.
(b) The Lien Amount shall be paid at the Closing by delivery to RTI by
certified check made payable to NJDEP which RTI shall deliver by courier to
NJDEP within one (1) business day following the Closing.
(c) 118,000 shares of convertible, redeemable Series A Preferred Stock of
RTI, valued at $2.00 per share or an aggregate of Two Hundred Thirty-Six
Thousand Dollars ($236,000), to be tendered to RTI.
(d) The sum of Eight Hundred Thousand Dollars ($800,000) (the "Escrow
Amount"), subject to adjustment as described below, shall be held in escrow and
paid as follows: (i) upon the resolution of all claims for a Purchase Price
Adjustment (as defined in Section 11.2 below) or the expiration of the period in
which Sterigenics is entitled to make such a claim as set forth in clause (e)
below, an aggregate of Four Hundred Thousand Dollars ($400,000) less the amount
of any such Purchase Price Adjustment, and (ii) upon the six-month anniversary
of the Closing, an aggregate of Four Hundred Thousand Dollars ($400,000), less
any amounts delivered to Sterigenics in satisfaction of Claims (as defined in
Section 11.2 below), other than Claims for a Purchase Price Adjustment, made by
Sterigenics and any amounts subject to pending but unresolved Claims of
Sterigenics pursuant to the terms of the Escrow Agreement attached hereto as
Exhibit 2.4(d) (the "Escrow Agreement"). At the Closing, Sterigenics shall
deposit the Escrow Amount with Lowenstein, Sandler, Kohl, Fisher & Boylan (the
"Escrow Agent"), located at 65 Livingston Avenue, Roseland, New Jersey
07068-1791, pursuant to the terms of the Escrow Agreement.
(e) If the book value of the Purchased Assets less the book value of the
Assumed Liabilities, as contained in the Closing Balance Sheet, is greater than
the Purchase Price less $18,000 (the "Adjusted Price"), Sterigenics shall pay to
RTI by wire transfer to an account designated in writing by RTI
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an additional amount equal to the amount of such difference within ten (10) days
of the earlier of (i) the completion of any audit of the Closing Balance Sheet
by Ernst & Young or (ii) Sterigenics' election not to have the Closing Balance
Sheet audited by Ernst & Young, as provided in Section 2.3 above. If the book
value of the Purchased Assets less the book value of the Assumed Liabilities, as
contained in the Closing Balance Sheet, is less than the Adjusted Price,
Sterigenics shall be entitled to indemnification for the amount of any such
difference as provided in Section 11.2 below. If Ernst & Young has conducted an
audit of the Closing Balance Sheet, the book value of the Purchased Assets and
the Assumed Liabilities shall be determined by the Closing Balance Sheet as
audited by Ernst & Young and any differences between the Closing Balance Sheet
provided by RTI and the Closing Balance Sheet as audited by Ernst & Young shall
be identified in reasonable detail to RTI at the time the audit is delivered to
RTI; provided, however, that if RTI objects in writing to the Closing Balance
Sheet as audited by Ernst & Young within thirty (30) days after the delivery by
Sterigenics to RTI of the results of the Ernst & Young audit, the dispute shall
be conclusively settled by arbitration in accordance with Section 13.14;
provided, however, that the arbitrator shall be a partner of one of the ten
largest certified public accounting firms in the United States, excluding Ernst
& Young and BDO Seideman, who shall be selected by agreement of RTI and
Sterigenics. If RTI and Sterigenics are unable to agree upon an arbitrator
within fifteen (15) days, RTI and Sterigenics shall each select an arbitrator,
and the two arbitrators so selected shall select a third arbitrator who meets
the above criteria.
2.5 Assumption of Liabilities. (a) Subject to the terms and conditions
herein, effective upon the Closing, Sterigenics hereby assumes and agrees to
perform, pay and discharge the Assumed Liabilities. Notwithstanding the
foregoing, Sterigenics does not hereby assume or agree to perform, pay or
discharge, and RTI shall remain unconditionally liable for, from and after the
date hereof, any and all Excluded Liabilities. (b) Nothing herein shall be
deemed to deprive Sterigenics of any defenses, set-offs or counterclaims against
third parties which RTI may have had or which Sterigenics shall have with
respect to any of the obligations, liabilities and commitments hereby assumed
(the "Defenses and Claims"). Effective at the Closing, RTI hereby transfers,
conveys and assigns to Sterigenics all Defenses and Claims and agrees to
cooperate with Sterigenics at Sterigenics' expense to maintain, secure, perfect
and enforce such Defenses and Claims, including the signing of any documents,
the giving of any testimony or the taking of any such other action as is
reasonably requested by Sterigenics in connection with such Defenses and Claims.
(c) Sterigenics shall pay all sales, use and transfer taxes, if any, due upon
the sale or transfer of the Purchased Assets. All non- delinquent personal and
real property taxes arising as a result of the operation of RTI's business
(other than taxes on income) shall be pro-rated between the parties as of the
Closing Date based on most recently available figures, provided that RTI shall
be solely responsible for all real property taxes related to the Rockaway
Property, except as otherwise provided in the Rockaway Lease (as defined in
Section 9.7 hereof). Any supplemental taxes attributable to events occurring
prior to the Closing Date shall be the sole responsibility of RTI, irrespective
of when such taxes are assessed. If supplemental taxes for which RTI is
responsible hereunder are assessed after the Closing Date, RTI shall promptly
pay the same upon receiving notice thereof from Sterigenics.
2.6 Closing Costs. Sterigenics shall pay all transfer taxes and all costs
for preparing, executing and acknowledging the deeds and other conveyance
documents (including without limitation lease assignment and assumption
instruments) transferring title or a leasehold interest, as the case may be, in
the Real Properties to Sterigenics and any other recorded documents together
with the cost of the Title Policies (as defined in Section 6.5(e) hereof).
2.7 Purchase Price Allocation. The Purchase Price shall be allocated as set
forth in the Allocation of Purchase Price to be provided to RTI by Sterigenics
with ten (10) days prior to Closing. RTI and Sterigenics each agree to use such
allocation in filing Internal Revenue Form 8594.
ARTICLE III
THE CLOSING
3.1 The Closing. The Closing shall take place at the offices of Warshaw
Burstein Cohen Schlesinger & Kuh, LLP or at such other location as RTI and
Sterigenics may agree, at 10:00 a.m. Eastern Daylight Savings Time, on the
Closing Date.
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3.2 Instruments of Transfer and Sale. At the Closing, RTI will deliver to
Sterigenics (or its wholly-owned Subsidiaries) all documents and instruments,
including bills of sale and the like, described in Section 9.20 and Sterigenics
(or its wholly-owned Subsidiaries) will deliver to RTI all documents and
instruments described in Section 10.9.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RTI
RTI hereby represents and warrants to Sterigenics that the statements
contained in this Article IV are true and correct, except as set forth in the
disclosure schedule delivered by RTI to Sterigenics on or before the date of
this Agreement (the "RTI Disclosure Schedule"). The RTI Disclosure Schedule
shall be arranged in Sections corresponding to the numbered and lettered
Sections contained in this Article IV; provided, however, that the failure to
make a disclosure in reference to a particular representation shall not give
rise to a breach of this Agreement if the applicability to such representation
of exceptions to other representations is obvious on its face without any
investigation by Sterigenics. No fact or circumstance disclosed to Sterigenics
shall constitute an exception to these representations and warranties unless
such fact or circumstance is set forth in the RTI Disclosure Schedule. As used
in this Agreement, "knowledge" shall mean the actual knowledge of the executive
officers of RTI after reasonable inquiry.
4.1 Organization. Each of RTI and the South Jersey Subsidiary is a
corporation duly and validly existing and in good standing under the laws of the
State of New York and New Jersey, respectively. Each of RTI and the South Jersey
Subsidiary is qualified to do business as a foreign corporation in each state of
the United States in which it is required to be qualified, except in states in
which the failure to qualify, in the aggregate, would not have a material
adverse effect on the Purchased Assets or the assets of the South Jersey
Subsidiary. All of the outstanding shares of capital stock of the South Jersey
Subsidiary are duly authorized, validly issued, fully paid and nonassessable and
all such shares are owned by RTI and are held by RTI free and clear of all
limitations on voting rights.
4.2 Subsidiaries. Other than the South Jersey Subsidiary, RTI has no
Subsidiaries which currently are engaged in any active business or have any
material assets or liabilities.
4.3 Authorization. This Agreement and the Option Agreement have been, and
each of the Escrow Agreement, the Rockaway Lease (as defined in Section 9.7) and
lease memorandum, and all deeds and other conveyance documents used in order to
consummate the Acquisition (collectively, the "Ancillary Documents") will prior
to the Closing be, duly and validly executed and delivered by RTI. This
Agreement and the Option Agreement do and the Ancillary Agreements will
constitute valid and binding agreements of RTI, enforceable against RTI in
accordance with their terms. RTI has all requisite power and authority to
execute and deliver this Agreement, the Option Agreement and the Ancillary
Documents and, subject to approval by RTI's shareholders, at the time of the
Closing will have all requisite power and authority to enable it to carry out
the transactions contemplated by this Agreement and the Ancillary Documents. All
necessary corporate action on the part of RTI and its Subsidiaries has been
taken to authorize the execution and delivery of this Agreement, the Option
Agreement and the Ancillary Documents and, subject to shareholder approval,
consummation of the transactions contemplated thereby.
4.4 No Conflicts; Consents.
(a) The execution and the delivery of this Agreement, the Option Agreement
and the Series A preferred stock purchase agreement to be entered into
concurrently with this Agreement between RTI and Sterigenics dated as of the
date hereof do not, the execution and delivery of the other Ancillary Documents
by RTI will not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, result in a
breach by RTI of, constitute a default (with or without notice or lapse of time,
or both) by RTI under or violation by RTI of, or result in the creation of any
lien, charge or encumbrance pursuant to any provision of the Certificate of
Incorporation or Bylaws of RTI or its Subsidiaries, any order, rule, law or
regulation of any court or governmental authority, foreign or domestic, or any
provision of any material agreement, instrument, understanding, order, judgment
or decree
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to which RTI or its Subsidiaries is a party or by which any of RTI or its
Subsidiaries or any of their properties or assets is bound or affected, nor will
such actions give to any other person or entity any interests or rights of any
kind, including rights of termination, acceleration or cancellation, in or with
respect to any of the Purchased Assets or the assets of the South Jersey
Subsidiary.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to RTI or its Subsidiaries in connection with the
execution and delivery of this Agreement by RTI or the consummation by RTI of
the transactions contemplated hereby, except for (i) filings in order to comply
with all applicable bulk sales laws, (ii) the filing of a definitive proxy
statement with the Securities and Exchange Commission (the "SEC") in accordance
with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal and state securities
laws and the laws of any foreign country in which RTI conducts any business or
owns any property or assets, (iv) the filing by RTI of a Current Report on Form
8-K with the SEC, and (v) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not be
reasonably likely to have a material adverse effect on RTI.
4.5 SEC Filings; Financial Statements. (a) RTI has filed all forms, reports
and documents required to be filed by RTI with the SEC since January 1, 1995
(collectively, the "RTI SEC Reports"). The RTI SEC Reports (i) at the time
filed, complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act") and the Exchange Act,
as the case may be, and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated in such RTI SEC Reports or necessary in
order to make the statements in such RTI SEC Reports, in the light of the
circumstances under which they were made, not misleading; (b) each of the
financial statements (including, in each case, any related notes) contained in
the RTI SEC Reports, including any RTI SEC Reports filed after the date of this
Agreement until the Closing, complied or will comply as to form in all material
respects with the applicable published rules and regulations of the SEC with
respect thereto, was or will be prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited statements,
as permitted by Form 10-QSB of the SEC) and fairly presented or will fairly
present in all material respects the consolidated financial position of RTI as
at the respective dates and the results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which are not
expected as of the date of this Agreement to be material in amount. The audited
year-end consolidated financial statements of RTI as of December 31, 1994 and
the unaudited interim consolidated financial statements for the quarter ended
September 30, 1995 are referred to herein as the "RTI Financial Statements." The
date of the RTI Financial Statements shall be the date of the latest interim
balance sheet, unless otherwise specified; (c) RTI's consolidated balance sheet
as of March 31, 1996 (the "March Balance Sheet"), when delivered prior to
Closing, will be accurate and complete in all material respects and will have
been prepared in accordance with GAAP applied on a basis consistent with the
preparation of the RTI Financial Statements; (d) the Closing Balance Sheet, when
delivered pursuant to Section 2.3 above, shall fairly state the Purchased Assets
and Assumed Liabilities and shall have been prepared in accordance with GAAP on
a basis consistent with the preparation of the March Balance Sheet. Other than
the IRB, there are no liabilities of the South Jersey Subsidiary that, if they
were liabilities of RTI, would not constitute Assumed Liabilities under the
terms of this Agreement.
4.6 Absence of Certain Changes or Events. Since the date of the RTI
Financial Statements, RTI and the South Jersey Subsidiary have conducted their
respective businesses in the ordinary course and in a manner consistent with
past practices, and since such date, except as disclosed in the SEC Reports, RTI
has not: (a) suffered any material adverse change in its financial condition,
results of operations or business, or any material adverse changes in its
consolidated balance sheet (analyzed as if prepared according to GAAP) (a
"Material Adverse Change"), including but not limited to cash distributions or
material decreases in the net assets of RTI; (b) suffered any damage,
destruction or loss, whether covered by insurance or not, materially
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and adversely affecting the Purchased Assets, the Rockaway Property, the assets
of the South Jersey Subsidiary or RTI's business; (c) sold, leased, abandoned or
otherwise disposed of any real property or any material amounts of machinery,
equipment or other operating property other than in the ordinary course of
business; (d) sold, assigned, transferred, licensed or otherwise disposed of any
material patent, trademark, trade name, brand name, copyright (or pending
application for any patent, trademark or copyright), invention, work of
authorship, process, know-how, formula or trade secret or interest thereunder or
other material intangible asset except in the ordinary course of its business;
(e) entered into any material commitment or transaction (including without
limitation any borrowing or capital expenditure) that would be included in the
Assumed Liabilities under the terms of this Agreement, other than in the
ordinary course of business; (f) incurred any liabilities that would be included
in the Assumed Liabilities under the terms of this Agreement, except in the
ordinary course of business and consistent with past practice which would be
required to be disclosed in financial statements prepared in accordance with
GAAP; (g) permitted or allowed any of the Purchased Assets, the assets of the
South Jersey Subsidiary or the Rockaway Property to be subjected to any
mortgage, deed of trust, pledge, lien, security interest or other encumbrance of
any kind, except Permitted Encumbrances and any purchase money security
interests incurred in the ordinary course of business and mechanic's or
materialmen's liens incurred in connection with ongoing construction of an
addition to the North Carolina Property; (h) made any material amendment to or
terminated any agreement which, if such agreement not so amended or terminated,
would be required to be disclosed on the RTI Disclosure Schedule; (i) agreed to
take any action described in Section 6.3 or which would constitute a material
breach of any of the representations contained in this Agreement; or (j) taken
any other action that would have required the consent of Sterigenics pursuant to
Section 6.3 of this Agreement (and which has not been obtained) had such action
occurred after the date of this Agreement and that would be reasonably likely to
have a material adverse effect on RTI.
4.7 No Undisclosed Liabilities. Except as disclosed in the RTI SEC Reports,
the South Jersey Subsidiary does not have any liabilities, either accrued or
contingent (whether or not required to be reflected in financial statements in
accordance with GAAP), and whether due or to become due, which individually or
in the aggregate, would be reasonably likely to have a material adverse effect
on the South Jersey Subsidiary other than (i) liabilities reflected in the RTI
Financial Statements, (ii) liabilities specifically described in this Agreement,
and (iii) normal or recurring liabilities incurred since the date of the RTI
Financial Statements in the ordinary course of business consistent with past
practices.
4.8 Tangible Assets. The Tangible Assets being used in the operation of
RTI's business are, and at the Closing Date will be, in good operating condition
and repair, ordinary wear and tear and routine maintenance excepted.
4.9 Receivables. The Receivables constitute all of the accounts receivable
of RTI and its Subsidiaries and are valid and genuine; have arisen solely out of
bona fide sales and deliveries of goods, performance of services and other
business transactions in the ordinary course of business consistent with past
practice; are not subject to valid defenses, set-offs or counterclaims; and are
collectible (using a level of effort consistent with that currently used by RTI)
within 12 months of the date hereof at the full recorded amount thereof, less
the customary allowance for collection losses, which allowance has been
determined in accordance with GAAP consistent with past practices; provided,
however, that RTI makes no representation or warranty as to the ultimate
collection thereof.
4.10 Compliance With Other Instruments. Neither RTI nor its Subsidiaries is
a party to, nor bound by, any written or oral material contract, agreement,
license, indenture, mortgage, debenture, note or other instrument under the
terms of which performance by RTI or its Subsidiaries according to the terms of
this Agreement, the Option Agreement and the Ancillary Documents will be a
default or an event of acceleration, or whereby timely performance by RTI or its
Subsidiaries according to the terms of this Agreement, the Option Agreement and
the Ancillary Documents may be prohibited, prevented or delayed.
4.11 Litigation. Except as disclosed in the RTI SEC Reports, there is no
material action, suit, proceeding or investigation in progress or pending before
any court or governmental agency, against or relating to RTI or its Subsidiaries
or their properties (including the Real Properties), assets or business, nor, to
the knowledge of RTI, any threat thereof. Neither RTI nor its Subsidiaries is a
party to any decree, order or
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arbitration award (or agreement entered into in any administrative, judicial or
arbitration proceeding with any governmental authority) with respect to any
material portion of the properties, assets, personnel or business activities of
RTI's and its Subsidiaries' business.
4.12 Compliance with Laws and Regulations; Governmental Licenses, Etc.
Except as set forth in the RTI SEC Reports, to RTI's knowledge, each of RTI and
its Subsidiaries and each of the Real Properties and the Improvements are in
compliance in all material respects with all statutes, laws, rules and
regulations with respect to or affecting the Real Properties, the Improvements
and Sterigenics' continued use and enjoyment of the Purchased Assets and the
assets of the South Jersey Subsidiary, including, without limitation, laws,
rules and regulations relating to occupational health and safety, equal
employment opportunities, fair employment practices, and sex, race, religious
and age discrimination, except where the failure to comply would not have a
material adverse effect on RTI. Neither RTI nor its Subsidiaries is subject to
any order, injunction or decree issued by any governmental body, agency,
authority or court which could impair the ability of RTI to consummate the
transactions contemplated hereby or which could materially adversely affect
Sterigenics' ownership, use and enjoyment of the Purchased Assets or the assets
of the South Jersey Subsidiary or the value thereof. RTI and its Subsidiaries
(i) possess all licenses, permits and governmental or other regulatory approvals
and authorizations which are required in order for RTI and its Subsidiaries to
operate their facilities or carry on their sterilization business as presently
conducted, including, without limitation, all required licenses, permits and
approvals of the Nuclear Regulatory Commission ("NRC"), NJDEP, the North
Carolina Department of Radiological Health ("NCDRH") and the Food and Drug
Administration ("FDA") and (ii) are in compliance in all material respects with
all such licenses, permits, approvals and authorizations, except where the
failure to comply would not have a material adverse effect on RTI.
4.13 Taxes. All Federal, state, local and other returns and reports
relating to any and all taxes or any other governmental charges, obligations or
fees for taxes and any related interest or penalties ("Tax" or "Taxes") required
to be filed with respect to the South Jersey Subsidiary have been timely filed
within the time period for filing or any extension granted with respect thereto
and such returns and reports are true and correct, unless such late filings or
inaccuracies would not have a material adverse effect on the Purchased Assets,
the assets of the South Jersey Subsidiary, the Rockaway Property or the business
of RTI. The South Jersey Subsidiary has paid all Taxes, if any, shown to be due
and payable on said returns and reports and has withheld with respect to
employees all Federal and state income Taxes, FICA, FUTA and other Taxes
required to be withheld and has timely paid all sales, use and similar Taxes. No
income, sales, use or similar Tax return or report with respect to the South
Jersey Subsidiary has been examined or audited by the Internal Revenue Service
or any state taxing authority. There are no pending or, to RTI's knowledge,
threatened audits, examinations, assessments, asserted deficiencies or claims
for additional Taxes with respect to the South Jersey Subsidiary.
4.14 Employees. Neither RTI nor the South Jersey Subsidiary is a party to
any collective bargaining agreement, nor has RTI experienced any strikes,
written material grievances, claims of unfair labor practices or other
collective bargaining disputes within the past two (2) years. As of the date of
this Agreement, RTI and the South Jersey Subsidiary have not been notified of
any pending claims by employees or former employees for workman's compensation.
4.15 Environmental Matters.
(a) Except as separately and specifically disclosed otherwise in the RTI
SEC Reports: (i) RTI has obtained all Material Environmental Approvals required
in connection with its business, and all such Environmental Approvals are
current, valid and in good standing in all Material respects, and there are no
proceedings commenced or to RTI's knowledge threatened to revoke or amend any
Environmental Approvals; (ii) all operations of the business on the Real
Property while occupied by RTI, have been and are now in compliance with all
Environmental Laws; (iii) neither RTI nor its operations has been or is now the
subject of any Remedial Order, nor does RTI have any knowledge of any
investigation or evaluation commenced as to whether any such Remedial Order is
necessary nor has any threat of any such Remedial Order been made nor are there
any circumstances which could result in the issuance of any such Remedial Order;
(iv) within the past 10 years, RTI has never been prosecuted for or convicted of
any offense under
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Environmental Laws, nor has RTI been found liable in any proceeding to pay any
fine or judgment to any Person as a result of any Release or threatened Release
of any Hazardous Material into the Environment or the breach of any
Environmental Law and to the knowledge of RTI, there is no basis for any such
proceeding; (v) all material environmental data and studies (including, without
limitation, the results of any environmental audit) relating to the business
have been delivered or made available to Sterigenics; (vi) RTI is not aware of
any Release which is now present in, on or under any of the Real Properties
(including underlying soils and substrata, surface water and groundwater) at
levels which exceed any action levels or remediation standards under any
Environmental laws or standards published or administered by those Governmental
Authorities responsible for establishing or applying such standards; (vii) RTI
has no knowledge of any Hazardous Materials in, on, or under the Real Properties
or any other assets relating to RTI's business; (viii) RTI has no knowledge of
any Hazardous Materials originating from any neighboring or adjoining properties
which has migrated onto, or is migrating towards any of the Real Properties or
any other asset of RTI's business; and (ix) the business of RTI in New Jersey is
not in a Standard Industrial Classification code covered by the Industrial Site
Recovery Act.
(b) With respect to Environmental Matters separately and specifically
disclosed in the RTI SEC Reports: (i) RTI is in full compliance with all
Remedial Orders; (ii) RTI is current with respect to all charges, assessments,
or claims for which a lien against the Real Properties or other assets of RTI's
business under any Environmental Law may be filed or asserted, and there are no
unpaid liens or assessments outstanding; and (iii) RTI is not in default of any
obligation or demand from any Governmental Authority with respect to
investigations or remediation activities which RTI is obligated to undertake.
(c) As used in this Section 4.15, the following terms have these meanings:
(i) "Environmental Laws" means all applicable statutes, rules,
regulations, ordinances, orders, decrees, judgments, permits, licenses,
consents, approvals, authorizations, and governmental requirements or
directives or other obligations lawfully imposed by governmental authority
under federal, state or local law pertaining to the protection of the
environment, protection of public health, protection of worker health and
safety (excluding OSHA and comparable state laws, which are covered under
Section 4.12 above), the treatment, emission and/or discharge of gaseous,
particulate and/or effluent pollutants, and/or the Handling of Hazardous
Materials, including without limitation, the Clean Air Act, 42 U.S.C. ss.
7401, et seq., the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), 42 U.S.C. ss. 9601, et seq., the Federal
Water Pollution Control Act, 33 U.S.C. ss. 1321, et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. ss. 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq. ("RCRA"), and
the Toxic Substances Control Act, 15 U.S.C. ss. 2601, et seq.
(ii) "Hazardous Material(s)" means any substance, waste, material,
chemical, compound or mixture which is (or which contains any substance,
waste, material, chemical, compound, or mixture which is) flammable,
ignitable, corrosive, reactive, radioactive, or explosive, or is defined,
listed, designated, described or characterized under Environmental Laws or
under any rules, guidances, policies, or regulations promulgated
thereunder, as hazardous, toxic, a contaminant, a pollutant or words of
similar import, and includes without limitation any "hazardous substance"
under CERCLA, any "hazardous waste" under RCRA, asbestos, petroleum
(including crude oil or any fraction or distillate thereof), natural gas,
natural gas liquids, and liquified natural gas.
(iii) "Material" means anything that reasonably could be expected to
lead to the imposition of any significant penalties or fines, that could
reasonably be expected to require a capital expenditure of more than
$100,000, or that reasonably could be expected to interfere, interrupt or
threaten to interfere or interrupt in a significant manner the continued
operation of RTI's business as currently conducted.
(iv) "Person" means any natural person, corporation, partnership,
business trust or other business entity or enterprise.
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(v) "Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing.
(vi) "Environmental Approval(s)" means all permits, certificates,
licenses, authorizations, consents, instructions, registrations, directions
or approvals, issued or required by Governmental Authorities pursuant to
Environmental Laws with respect to the operations of RTI in connection with
its business.
(vii) "Governmental Authorities" means any government, regulatory
authority, governmental department, agency, commission, board, tribunal, or
court or other law, rule or regulation- making entity having or purporting
to have jurisdiction over Environmental Laws on behalf of the United
States, or any state or other subdivision thereof, or any municipality.
(viii) "Remedial Order(s)" means any judicial or administrative order,
directive, complaint or sanction issued, filed or imposed by any
Governmental Authority pursuant to any Environmental Laws, and includes,
without limitation, any order requiring any remediation or cleanup of any
Hazardous Materials, or requiring that any Release or any other activity be
reduced, modified, abated, or eliminated.
4.16 Proprietary Rights. RTI owns all right, title and interest in and to
or has a license to use all technology, software, software tools, know-how,
processes, trade secrets, trade names and other proprietary rights used in or
necessary for the conduct of RTI's and its Subsidiaries' business as conducted
on the date hereof or contemplated by RTI free and clear of all liens, claims
and encumbrances (all of which are referred to as "Proprietary Rights"). No
material claims have been asserted against RTI or its Subsidiaries (and RTI is
not aware of any claims which are likely to be asserted against RTI or its
Subsidiaries or which have been asserted against others) by any person
challenging RTI's or its Subsidiaries' use of any trademarks, tradenames,
copyrights, trade secrets, software, technology, know-how or processes utilized
by RTI or its Subsidiaries or challenging or questioning the validity or
effectiveness of any license or agreement relating thereto.
4.17 Employee Benefit Plans. There is no unfunded prior service cost with
respect to any bonus, deferred compensation, pension, profit-sharing,
retirement, stock purchase, stock option, or other employee benefit or fringe
benefit plans, whether formal or informal, maintained by RTI. RTI has no bonus,
deferred compensation, pension, profit-sharing, retirement, stock purchase,
stock option, or other employee benefit or fringe benefit plans, whether formal
or informal, which is required to conform with the Employees Retirement Income
Security Act of 1974.
4.18 Contracts.
(a) None of the Contracts related to irradiation services are currently
expected to result in any loss (before allocation of Cobalt amortization,
overhead and administrative costs) upon completion or performance thereof.
Except for the Contracts listed on Schedule 1.5, none of the Contracts call for
fixed and/or contingent payments or expenditures by or to RTI and its
Subsidiaries of more than $50,000.
(b) All material contracts, agreements and instruments to which RTI and its
Subsidiaries are a party are valid, binding, in full force and effect, and,
assuming each is a valid obligation of the other party, enforceable by RTI in
accordance with their respective terms. No such material contract, agreement or
instrument contains any material liquidated-damages, penalty or similar
provision. To RTI's knowledge, no party to any such material contract, agreement
or instrument intends to cancel, withdraw, modify or amend such contract,
agreement or arrangement.
(c) RTI and its Subsidiaries are not in default under or in breach or
violation of, nor, to RTI's knowledge, is there any valid basis for any claim of
default by RTI or its Subsidiaries under, or breach or violation by RTI or its
Subsidiaries of, any material contract, commitment or restriction to which RTI
or its Subsidiaries is a party or to which it or any of its properties is bound,
where such defaults, breaches, or violations would, in the aggregate, have a
material adverse effect on the Purchased Assets, the assets of the
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South Jersey Subsidiary, the Rockaway Property or the operation of the business
of RTI. To RTI's knowledge, no other party is in default under or in breach or
violation of any Contract listed in Schedule 1.5.
4.19 No Misrepresentation. No representation, warranty or covenant by RTI
in this Agreement, the Option Agreement, any other Ancillary Document, nor any
statement, certificate or schedule furnished or to be furnished by or on behalf
of RTI pursuant to this Agreement, when taken together with the foregoing,
contains or shall contain any untrue statement of material fact or omits or
shall omit to state a material fact required to be stated therein or necessary
in order to make such statements, in light of the circumstances under which they
were made, not materially misleading. RTI has delivered or otherwise made
available true and complete copies of all documents requested by Sterigenics and
which are referred to in this Article IV or in any Schedule delivered by RTI to
Sterigenics.
4.20 Restrictions on Business Activities. There is no material agreement,
judgment, injunction, order or decree binding on RTI or its Subsidiaries which
has or reasonably would be expected to have the effect of prohibiting or
materially impairing any material current business practice of RTI and its
Subsidiaries, any acquisition of material property by RTI or its Subsidiaries,
or the conduct of business by RTI as currently conducted or as proposed to be
conducted.
4.21 Transfers. Except for this Agreement, the Option Agreement and the
Ancillary Documents, neither RTI nor its Subsidiaries have entered into any
pending agreement to convey, sell, assign, lease, transfer or encumber the Real
Properties or any material portion of the other Purchased Assets or the assets
of the South Jersey Subsidiary, and neither RTI nor its Subsidiaries shall do so
prior to the Closing Date without Sterigenics' prior written consent, which may
be granted or withheld in Sterigenics' discretion reasonably exercised.
4.22 Title.
(a) Except as set forth in the RTI SEC Reports, RTI or its Subsidiaries
owns the North Carolina Property and the Rockaway Property free and clear of all
liens, leases, occupancy agreements, licenses, encumbrances, covenants,
conditions, restrictions, rights-of-way, easements, and other matters affecting
title, except as to the Permitted Encumbrances, those particular items disclosed
in the applicable Title Reports (as defined in Section 6.5(a) hereof) and other
encumbrances and restrictions which in the aggregate would not have a material
adverse effect on the use in the manner presently used by RTI, value or
transferability of the Real Property Assets. Except as set forth in the RTI SEC
Reports, the South Jersey Subsidiary has a binding and enforceable leasehold
interest in the Salem Property. To RTI's knowledge, except as disclosed in the
Title Reports, no other person or entity has claimed or is entitled to claim any
legal or equitable interest in the Real Properties.
(b) RTI and its Subsidiaries have good and marketable title to all of the
Purchased Assets (excluding the Real Property Assets) and the assets of the
South Jersey Subsidiary owned by RTI and its Subsidiaries and valid, binding and
enforceable leasehold interests in all Tangible Assets that are subject to
leases. Except as disclosed in the RTI SEC Reports, all of the Purchased Assets
(except the Real Property Assets) and all of the assets of the South Jersey
Subsidiary are free and clear of restrictions on or conditions to transfer or
assignment, and free and clear of all claims, liabilities, liens, pledges,
mortgages, restrictions and encumbrances of any kind, whether accrued, absolute,
contingent or otherwise ("Encumbrances") affecting the Purchased Assets (except
the Real Property Assets) or the assets of the South Jersey Subsidiary except
for Permitted Encumbrances. At the Closing, RTI will sell, convey, assign,
transfer and deliver to Sterigenics good, valid and marketable title and all
RTI's right and interest in and to all of the Purchased Assets (excluding the
Real Property Assets), free and clear of any Encumbrances, except for Permitted
Encumbrances. At the Closing, all of the assets of the South Jersey Subsidiary
will be free and clear of any Encumbrances, except for Permitted Encumbrances.
4.23 No Condemnation. To RTI's knowledge, there is no condemnation or other
like proceeding pending or threatened against the Real Properties or any part
thereof and no such proceeding is being contemplated.
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4.24 Governmental Commitments. To RTI's knowledge, no commitment to or
agreement with any governmental or quasi-governmental authority exists which
could affect the Real Properties, including but not limited to any formation of
any special assessment district or community facilities district, except as
disclosed in this Agreement.
4.25 Easements. To RTI's knowledge, all existing water, drainage, sewage
and utility facilities relating to the Real Properties, from the boundary
thereof until entering the public right-of-way or other public facility, are
situated within valid easements granted by all persons or other entities having
any interest in or right or title to any property which is subject to such
easement and are referenced in the Title Reports.
4.26 Maintenance of Real Properties. Prior to the Closing Date and the
actual transfer to Sterigenics of title to the North Carolina Property and the
Subsidiary Stock and delivery of the executed Rockaway Lease, RTI shall maintain
the Real Properties and the Improvements in substantially their present
condition, reasonable wear and tear or loss due to the elements excepted. In the
event that prior to the Closing any of the Real Properties or the Improvements
are destroyed or damaged and the cost to repair such damage exceeds Two Hundred
Fifty Thousand Dollars ($250,000), such event shall be deemed to constitute a
material adverse change under Section 9.12 hereof.
4.27 Condition of Improvements. To RTI's knowledge the Improvements
(including the roof and roof membrane, exterior and structural walls,
foundations, floor slabs, and other load-bearing components of the Improvements)
are in operable condition and repair (as hereinafter defined). To RTI's
knowledge all elevators, heating, ventilation and air conditioning systems
("HVAC"), plumbing, electrical, wiring, life safety, and other equipment,
appurtenances, systems and improvements are in operable condition and repair.
For purposes of this Section, the term "operable condition and repair" means
that there are no material defects or state of disrepair that have a material
adverse effect on the operations of the business as currently conducted by RTI
from each of the Real Properties.
4.28 Compliance With Laws. RTI has received no written notice from any
governmental authority that the Improvements fail to comply with any applicable
codes, statutes, ordinances, regulations, permits, orders, directives, or other
laws in any material respects. As of the Closing the Improvements and all parts
thereof shall be in a safe and habitable condition.
4.29 Industrial Revenue Bonds. RTI has provided Sterigenics with true,
complete and correct copies of the IRB Documentation. Except with the prior
written consent of Sterigenics, which may be withheld or granted in Sterigenics'
sole and absolute discretion, RTI and its Subsidiaries shall not amend or modify
the IRB Documentation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF STERIGENICS
Sterigenics hereby represents and warrants to RTI as follows:
5.1 Organization. Sterigenics is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
5.2 Authorization. This Agreement has been, and each of the Ancillary
Documents will prior to the Closing be, duly and validly executed and delivered
by Sterigenics. This Agreement does and the Ancillary Agreements will constitute
valid and binding agreements of Sterigenics, enforceable against Sterigenics in
accordance with their terms. Sterigenics has all requisite power and authority
to execute and deliver this Agreement and the Ancillary Documents and to enable
it to carry out the transactions contemplated by this Agreement and the
Ancillary Documents. All necessary corporate action on the part of Sterigenics
has been taken to authorize the execution and delivery of the Agreement and the
Ancillary Documents.
5.3 Effect of Agreement; Consents. The execution and delivery of this
Agreement by Sterigenics and the execution and delivery of the Ancillary
Documents by Sterigenics do not, and the consummation of
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the transactions contemplated hereby and compliance with the provisions hereof
will not, conflict with, result in a breach of, constitute a default (with or
without notice or lapse of time, or both) under or violation of, or result in
the creation of any lien, charge or encumbrance pursuant to any provision of the
Articles of Incorporation or Bylaws of Sterigenics, any order, rule, law or
regulation of any court or governmental authority, foreign or domestic, or any
provision of any material agreement, instrument, understanding, order, judgment
or decree to which Sterigenics is a party or by which Sterigenics is bound. No
consent or approval of any third party or any governmental authority is required
to be obtained on the part of Sterigenics to permit the consummation of the
transactions contemplated by this Agreement or the Ancillary Documents.
5.4 Compliance With Other Instruments. Sterigenics is not a party to, or
bound by, any written or oral contract, agreement, license, indenture, mortgage,
debenture, note or other instrument under the terms of which performance by
Sterigenics according to the terms of this Agreement and the Ancillary Documents
will be a default or an event of acceleration, or whereby timely performance by
Sterigenics according to the terms of this Agreement and the Ancillary Documents
may be prohibited, prevented or delayed.
5.5 Sufficient Financing. Sterigenics has, and at the Closing will have,
sufficient financing available to it to consummate the Acquisition.
ARTICLE VI
COVENANTS OF RTI
6.1 No Solicitation.
(a) From and after the date of this Agreement until the Closing Date, RTI
shall not, directly or indirectly, through any officer, director, employee,
representative or agent of RTI (i) solicit, initiate, or encourage any inquiries
or proposals that constitute, or could reasonably be expected to lead to, a
proposal or offer for a merger, consolidation, business combination, sale of all
or substantially all of the assets, sale of shares of capital stock (including
without limitation by way of a tender offer) or similar transactions involving
RTI, other than the transactions contemplated by this Agreement (any of the
foregoing inquiries or proposals being referred to in this Agreement as an
"Acquisition Proposal"), (ii) engage in negotiations or discussions concerning,
or provide any non-public information to any person or entity relating to, any
Acquisition Proposal, or (iii) agree to, approve or recommend any Acquisition
Proposal; provided, however, that nothing contained in this Agreement shall
prevent RTI or its Board of Directors from (A) furnishing non-public information
to, or entering into discussions or negotiations with, any person or entity in
connection with an unsolicited bona fide written Acquisition Proposal by such
person or entity which is received after the date hereof or recommending an
unsolicited bona fide written Acquisition Proposal which is received after the
date hereof to the shareholders of RTI, if and only to the extent that (1) the
Board of Directors of RTI believes in good faith (after consultation with its
financial advisor) that such Acquisition Proposal would, if consummated, result
in a transaction more favorable to RTI's shareholders from a financial point of
view than the transaction contemplated by this Agreement (any such more
favorable Acquisition Proposal being referred to in this Agreement as a
"Superior Proposal") and the Board of Directors of RTI determines in good faith
after consultation with outside legal counsel that such action is necessary to
comply with its fiduciary duties to shareholders under applicable law and (2)
prior to furnishing such non-public information to, or entering into discussions
or negotiations with, such person or entity, the Board of Directors receives
from such person or entity an executed confidentiality agreement with terms no
less favorable to such party than those contained in the Confidentiality
Agreement dated October 3, 1995 between Sterigenics and RTI (the
"Confidentiality Agreement") or (B) complying with Rule 14e-2 promulgated under
the Exchange Act with regard to an Acquisition Proposal. Notwithstanding the
provisions of this Section 6.1(a), in connection with furnishing non-public
information under Section (A), RTI may refer any third party to this Section 6.1
or make a copy of this Agreement available to a third party, and in response to
an unsolicited oral Acquisition Proposal, RTI may notify the party making the
proposal that it is unable to respond to oral offers and provide such third
party with a copy of this Section 6.1(a).
(b) RTI shall notify Sterigenics no later than one (1) business day after
receipt by RTI of any Acquisition
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Proposal or any request for nonpublic information in connection with an
Acquisition Proposal or for access to theproperties, books or records of RTI by
any person or entity that informs RTI that it is considering making, or has
made, an Acquisition Proposal. Such notice shall be made orally and in writing
and shall indicate in reasonable detail the identity of the offeror and the
terms and conditions of such proposal, inquiry or contact.
6.2 Cooperation. RTI will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed with respect to the
consummation of the transactions contemplated by this Agreement and will
promptly cooperate with and furnish information to Sterigenics in connection
with any such requirements imposed upon Sterigenics in connection with the
consummation of the transactions contemplated by this Agreement. RTI will take
all reasonable actions necessary to obtain (and will cooperate with Sterigenics
in obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any governmental entity, domestic or
foreign, or other person, required to be obtained or made by RTI (or by
Sterigenics) in connection with the taking of any action contemplated by this
Agreement. Sterigenics shall reimburse RTI for all out-of-pocket costs incurred
after the Closing Date pursuant to compliance with this Section 6.2.
6.3 Conduct of Business. During the period on and from the date of this
Agreement to the Closing, RTI will use its reasonable commercial efforts to
maintain and preserve intact (i) the business organization, rights and
privileges pertinent to RTI's business, and (ii) RTI's relationships with its
employees, consultants, independent contractors, licensors, suppliers,
distributors and other customers and all others with whom it deals, all in
accordance with the ordinary and usual course of business. During the period on
and from the date of this Agreement to the Closing, RTI and its Subsidiaries
will not without the prior written consent of Sterigenics, which consent shall
not be unreasonably withheld or delayed: (a) encumber or permit to be further
encumbered any of the Purchased Assets, any of the assets of the South Jersey
Subsidiary or the Rockaway Property, except mechanic's or materialmen's liens
incurred in connection with ongoing construction of an addition to the North
Carolina Property; (b) dispose of any Purchased Assets, the Rockaway Property or
any assets of the South Jersey Subsidiary, except in the ordinary course of
business; (c) fail to operate its business and facilities in compliance in all
material respects with all material requirements of the NRC, the NJDEP, the
NCDRH and the FDA; (d) fail to maintain the Purchased Assets, the Rockaway
Property and the Improvements thereon and the assets of the South Jersey
Subsidiary in good working condition and repair according to the general
standards it has maintained up to the date of this Agreement, subject only to
ordinary wear and tear; (e) fail to pay and discharge any Trade Payables in the
ordinary course unless disputed in good faith; (f) change accounting methods;
(g) amend or terminate any Contract listed on Schedule 1.5, except in the
ordinary course of business; (h) waive or release any material right or claim
relating to any Purchased Assets or the assets of the South Jersey Subsidiary,
except in the ordinary course of business; (i) enter into any contract providing
for a term of over one (1) year or providing for payments to or from RTI of more
than $50,000 per annum; (j) incur any indebtedness or obligation that would
become an Assumed Liability under the terms of this Agreement other than in the
ordinary course of business; (k) take any action or fail to take any action
where such action or failure to act would not be in the ordinary course of
business; or (l) agree to do any of the things described in the preceding
clauses of this Section 6.3.
6.4 Access to Information. RTI shall make available to Sterigenics and
Sterigenics' agents and representatives all information concerning the
operation, business and prospects of RTI and related entities as may be
reasonably requested by Sterigenics, including, without limitation, the
accounting and tax working papers of RTI's independent certified public
accountants. After the last to occur of (i) satisfaction of the condition set
forth in Section 9.18(ii) and termination or waiver of all contingencies
permitting termination of the Agreement under Section 6.5 hereof, RTI will
reasonably cooperate with Sterigenics for the purpose of permitting Sterigenics
to discuss RTI's business and prospects with RTI's customers, creditors,
suppliers and other persons having business dealings with RTI; provided,
however, that Sterigenics agrees that it shall not have any discussions with
RTI's customers unless a representative of RTI is present. RTI agrees to make a
representative available for such purposes during normal business hours upon at
least three (3) business days' prior notice. Sterigenics further agrees that,
without RTI's prior written consent, it will have discussions with no more than
ten (10) of RTI's top twenty (20) customers, and will have no discussions with
other customers of RTI. Unless otherwise required by law, the parties will hold
any such information which
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is nonpublic in confidence in accordance with the Confidentiality Agreement. No
information or knowledge obtained in any investigation pursuant to this Section
6.4 shall affect or be deemed to modify any representation or warranty construed
in this Agreement or the conditions to the obligations of the parties to
consummate the Acquisition. RTI shall permit Sterigenics to audit the financial
statements contained in the March Form 10-QSB; provided, however, that no
adjustment shall be required to be made thereto by RTI as a result thereof.
6.5 Real Estate Matters.
(a) Approval of Title. Sterigenics hereby approves the condition of title
of the Rockaway Property, as shown on the title commitment for the Rockaway
Property attached hereto as Exhibit 6.5(a), excluding only Exception No's
5(a-h), 6, 9, 11, 12, 13, 14, 18, 19 through 22 and 25 thereof (but with respect
to exceptions 19 through 22 and 25 only to the extent that (i) such exceptions
materially adversely impact or could materially adversely impact the use of the
Rockaway Property as the site of a contract irradiation facility in the manner
heretofore used and (ii) in such event, RTI does not provide Sterigenics with a
title policy insuring that such encumbrances will not interfere with Sterigenics
use of the Rockaway Property as currently used). Sterigenics hereby approves the
condition of title of the North Carolina Property, as shown on the title
commitment attached hereto as Exhibit 6.5(c), excluding only Exception No's 3,
4, 5 (items a, b, c and g), 6 and 7 thereof. The foregoing title commitments are
referred to herein as the "Title Reports," and the exceptions to title approved
by Sterigenics including such exceptions as are approved with respect to the
Salem Property under paragraph (b) below and with respect to the Rockaway
Property under paragraph (c) below, are collectively referred to herein as the
"Permitted Exceptions." The title insurance companies issuing the Title Reports
are referred to herein individually as a "Title Company" and collectively as the
"Title Companies."
(b) Approval of Salem Title. Sterigenics shall cause to be prepared a title
report or title commitment showing the condition of title to the Salem property.
Sterigenics shall have five business (5) days after receipt of such title
commitment and copies of all exceptions thereto to deliver to RTI and the
applicable Title Company written notice (the "Preliminary Title Notice") of
Sterigenics' approval, conditional approval, or disapproval of the title matters
disclosed in the title commitment. All matters with respect to the Salem
Property not approved in writing by Sterigenics except the Permitted
Encumbrances shall be deemed disapproved and are referred to herein as "Salem
Disapproved Exceptions;" provided, however, that Sterigenics agrees that the
Salem Disapproved Exceptions shall be limited to those exceptions which (i)
relate to monetary liens securing obligations with a face amount of $10,000 or
more individually or $50,000 or more in the aggregate or (ii) materially
adversely impact or could materially adversely impact the use of the Salem
Property as the site of a contract irradiation facility in the manner currently
used. RTI shall have five (5) business days (or such longer period as RTI may
reasonably request) after receipt of Sterigenics' Preliminary Title Notice to
give Sterigenics and the Title Company written notice (the "Salem Removal
Notice") of those Disapproved Exceptions that have been or will be removed from
title on or before the Closing. If RTI is unable or unwilling to remove a Salem
Disapproved Exception or fails to give notice as to whether it will remove a
Salem Disapproved Exception, Sterigenics shall have the option, within five (5)
business days of receipt of the Salem Removal Notice or, if RTI fails to deliver
such notice, within ten (10) business days (which period shall be extended on a
day for day basis as a result of any extension requested by RTI for delivery of
the Salem Renewal Notice) after delivery of the Preliminary Title Notice, to
terminate this Agreement by written notice to RTI, or to waive its objection to
the Disapproved Exceptions in question by delivering notice of such waiver to
RTI and thereafter proceed to the Closing. If Sterigenics fails to deliver the
waiver notice described in the preceding sentence, Sterigenics shall be deemed
to have elected to terminate this Agreement.
(c) Rockaway Survey. RTI and Sterigenics hereby acknowledge that the Title
Report prepared for the Rockaway Property (the "Rockaway Title Report")
describes the real property defined herein as the "Rockaway Property" together
with certain other real property (the "Excluded Property") that RTI intends to
retain and that shall not be leased or otherwise transferred to Sterigenics
pursuant to this Agreement. The parties believe that certain exceptions in the
Title Report relating to tax liens shown in Schedule B of the Rockaway Title
Report relate solely to the Excluded Property and not to the Rockaway
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Property. In order to determine the exact boundaries of the Rockaway Property
and which of the title exceptions apply to the Rockaway Property, Sterigenics
shall obtain at its cost an ALTA survey (the "Survey") of the Rockaway Property
which Survey shall locate the easements described in exceptions Nos. 19-22 and
25 to the extent they affect the Rockaway Property. During such period, RTI
hereby grants Sterigenics and its agents, contractors and employees the right to
enter upon the Rockaway Property to prepare the Survey and to prepare a legal
description of the Rockaway Property. Upon completion of the Survey, (i)
Sterigenics shall provide RTI with a copy of the Survey and legal description,
(ii) from and after the delivery to RTI of the Survey and the legal description,
all references in this Agreement to the Rockaway Property shall be deemed to
mean the real property shown on the Survey as the Rockaway Property and
described by such legal description, and (iii) Sterigenics shall deliver the
Survey and the legal description to the Title Company and shall cause the Title
Company to prepare an update to the Rockaway Title Report to reflect the new
legal description and the title exceptions thereto. If such updated Title Report
shows exceptions other than those shown on the prior Rockaway Title Report,
Sterigenics shall have five (5) business days after receipt of such updated
title report and copies of all exceptions to title referred to therein to
deliver to RTI and the Title Company written notice (the "Rockaway Title
Notice") of Sterigenics' approval, conditional approval, or disapproval of the
title matters disclosed in the updated title commitment. All matters with
respect to the Rockaway Property not approved in writing by Sterigenics except
the Permitted Encumbrances shall be deemed disapproved and are referred to
herein as "Rockaway Disapproved Exceptions;" provided, however, that Sterigenics
agrees that the Rockaway Disapproved Exceptions shall be limited to those
exceptions which (i) relate to monetary liens securing obligations with a face
amount of $10,000 or more individually or $50,000 or more in the aggregate or
(ii) materially adversely impact or could materially adversely impact the use of
the Rockaway Property as the site of a contract irradiation facility in the
manner currently used. RTI shall have five (5) business days (or such longer
period as RTI shall reasonably request) after receipt of Sterigenics' notice to
give Sterigenics and the Title Company written notice (the "Rockaway Removal
Notice") of those Rockaway Disapproved Exceptions that have been or will be
removed from title on or before the Closing. If RTI is unable or unwilling to
remove a Rockaway Disapproved Exception or fails to give notice as to whether it
will remove a Rockaway Disapproved Exception, Sterigenics shall have the option,
within five (5) business days of receipt of the Rockaway Removal Notice or, if
RTI fails to deliver such notice, within ten (10) business days (which period
shall be extended on a day for day basis as a result of any extension requested
by RTI for delivery of the Rockaway Removal Notice) after delivery of the
Rockaway Title Notice to terminate this Agreement by written notice to RTI, or
to waive its objection to the Rockaway Disapproved Exceptions in question by
delivering notice of such waiver to RTI and thereafter proceed to the Closing.
If Sterigenics fails to deliver the waiver notice described in the preceding
sentence, Sterigenics shall be deemed to have elected to terminate this
Agreement.
(d) Environmental Inspection. RTI hereby grants Sterigenics the right to
enter upon and to inspect the Real Properties and the environmental risks and
conditions (including the soil and groundwater) of the Real Properties. For the
purpose of Sterigenics' physical inspections, RTI agrees to provide Sterigenics
and its authorized agents reasonable access to each Real Property during normal
business hours during the period starting on the date of this Agreement and
ending thirty (30) days thereafter (the "Initial Due Diligence Period"), upon at
least twelve (12) hours' prior notice to RTI, and Sterigenics shall use
reasonable good faith efforts to avoid disruption of the operation of the Real
Properties. Sterigenics may, at its option, extend the Initial Due Diligence
Period for an additional sixty (60) days by giving notice to RTI prior to the
expiration of the Initial Due Diligence Period that it intends to conduct Phase
II environmental investigation at one or more of the Real Properties. The
Initial Due Diligence Period and any such extension are referred to collectively
as the "Due Diligence Period." Without limiting the foregoing, Sterigenics and
Sterigenics' agents may, at the sole cost of Sterigenics and upon prior notice
to RTI, perform engineering and soils surveys, geological work or other studies
desired by Sterigenics. Sterigenics and Sterigenics' agents shall be entitled,
at Sterigenics' own expense, to conduct Phase I and Phase II environmental
investigations of the Real Properties. Sterigenics agrees to hire as its
contractor for such environmental investigation a firm which maintains adequate
liability insurance. If the Closing does not occur, Sterigenics shall provide to
RTI copies of all environmental reports it caused to be prepared. If the Closing
does not occur, Sterigenics promptly shall repair and restore any damage caused
to the North Carolina Property and the Salem Property by reason of Sterigenics'
or Sterigenics' agents' entry on or investigation of the North Carolina Property
and the Salem Property. Whether or not the Closing occurs, Sterigenics shall
promptly repair and restore any damage caused
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to the Rockaway Property by reason of Sterigenics' or Sterigenics' agents' entry
on or investigation of the Rockaway Property. Sterigenics shall provide to RTI
copies of all invoices for work performed to repair and restore any damage to
the Real Properties along with evidence that such invoices have been paid.
Sterigenics hereby agrees to indemnify RTI and to hold RTI, RTI's agents and
employees and the Real Properties harmless from and against any and all losses,
costs, damages, claims or liabilities including, but not limited to, mechanic's
and materialmen's liens and reasonable attorneys' fees, arising out of or in
connection with Sterigenics' or its agent's access to or entry upon the Real
Properties under this Section 6.5. If, upon any such inspection, any aspect of
the condition of the Property would have a material adverse effect on
Sterigenics' ability to operate the business of RTI as currently operated or
could result in any material liability on the part of Sterigenics for
environmental remediation, Sterigenics shall have the right during the Due
Diligence Period, which it shall exercise promptly, to terminate this Agreement
by delivering three (3) business days' prior written notice of such termination
to RTI, which notice shall specifically identify the conditions providing the
basis for termination.
(e) Title Policies. At the Closing for the North Carolina Property the
applicable Title Company shall issue to Sterigenics, at Sterigenics' expense, an
ALTA owner's policy of title insurance, form B (as amended 10-17-92) (the "North
Carolina Title Policy"), in the amount of the Purchase Price allocated thereto
pursuant to Section 2.7, subject only to the Permitted Exceptions therefor. In
addition, the Title Company shall issue to Sterigenics ALTA leasehold and
optionee's policies of title insurance, form B (as amended 10-17-92) for the
Rockaway Property (collectively, the "Leasehold Policy"), in an amount
determined by Sterigenics, insuring the validity and priority of the Rockaway
Lease and Sterigenics' option to purchase the Rockaway Property granted pursuant
to the Rockaway Lease. Sterigenics shall have the right to have an ALTA survey
the (the "ALTA Survey") prepared for any Real Property, the costs of which shall
be paid by Sterigenics. The North Carolina Title Policy and the Leasehold Title
Policy individually are referred to herein as a "Title Policy" and collectively
as the "Title Policies."
6.6 Proxy Statement. As promptly as practical after the execution of this
Agreement and in conjunction with the filing of its Annual Report on Form
10-KSB, RTI shall prepare a proxy statement (the "Proxy Statement") to obtain
the approval of shareholders of RTI for this Agreement and the transactions
contemplated hereby. RTI shall provide reasonable opportunity for Sterigenics to
review and comment on the contents of the Proxy Statement. The Proxy Statement
shall include the recommendation of the Board of Directors of RTI in favor of
this Agreement and Acquisition; provided that the Board of Directors of RTI may
withdraw such recommendation if such Board of Directors believes in good faith
that a Superior Proposal has been made and shall have determined in good faith,
after consultation with its outside legal counsel, that the withdrawal of such
recommendation is necessary for such Board of Directors to comply with its
fiduciary duties under applicable law. Promptly after the last to occur of (i)
satisfaction of the condition set forth in Section 9.18(ii) and termination or
waiver of all contingencies permitting termination of the Agreement under
Section 6.5 hereof, RTI shall complete and file the Proxy Statement with the
SEC. Within ten (10) business days after all SEC comments on the Proxy Statement
have been resolved, RTI will cause the Proxy Statement to be sent to the
shareholders of RTI.
6.7 Shareholders Meeting. RTI shall call a meeting of its shareholders (the
"RTI Shareholders' Meeting) to be held as promptly as practicable after RTI has
been advised by the SEC that it has no further comments on the Proxy Statement
for the purpose of voting upon this Agreement and the Acquisition. RTI shall use
reasonable efforts, including the engagement of a proxy solicitation firm
reasonably acceptable to Sterigenics (one half of the cost of which will be paid
directly by Sterigenics), to solicit from its shareholders proxies in favor of
such matters.
6.8 Risk of Loss. Until the Closing, all risk of loss, damages or
destruction to the Purchased Assets or the assets of the South Jersey Subsidiary
shall be borne by RTI.
6.9 Regulatory Approvals; Transfer of Permits. Prior to the Closing, at
Sterigenics' expense, RTI will execute and file, or join in the execution and
filing, of any application or other document that may be necessary in order to
obtain the authorization, approval or consent of any governmental entity that
may be reasonably required, or that Sterigenics may reasonably request, in
connection with the consummation of the
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transactions contemplated by this Agreement. RTI will promptly prepare and file
with the appropriate Governmental Entity all applications necessary to obtain
the transfer of the licenses, approvals and permits referred to in Section 9.5.
Sterigenics will reimburse RTI for all out of pocket costs, including reasonable
legal fees, incurred in connection with obtaining such transfers.
6.10 Execution of Amendment Agreement. RTI shall use its best efforts (not
including the payment of any monetary amounts) to promptly cause Farmers
Merchant National Bank of Bridgeton, as trustee under the IRB, to execute that
certain Amendment Agreement dated April 2, 1985 amending the designation of the
Salem Property as attached as Exhibit A to the sublease for the Salem Property.
ARTICLE VII
COVENANTS OF STERIGENICS
7.1 Access to Documents. If, after the Closing Date, (i) in order to
properly prepare its tax returns or other documents or reports required to be
filed with governmental authorities or its financial statements; (ii) in
connection with any threatened or pending litigation or claim which involves or
may involve RTI; or (iii) for any other reasonable purpose, it is necessary that
RTI be furnished with additional information or documents relating to the
Purchased Assets, the assets of the South Jersey Subsidiary or the Assumed
Liabilities and such information or documents are in Sterigenics' possession,
and can reasonably be furnished to RTI, Sterigenics shall, upon written request
therefor, promptly furnish such information or documents to RTI. RTI shall
reimburse Sterigenics for the cost of copying or shipping any requested
documents.
7.2 Cooperation. Sterigenics will take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed with respect to
the consummation of the transactions contemplated by this Agreement and will
promptly cooperate with and furnish information to RTI in connection with any
such requirements imposed upon RTI in connection with the consummation of the
transactions contemplated by this Agreement. Sterigenics will take all
reasonable actions necessary to obtain (and will cooperate with RTI in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any governmental entity, domestic or
foreign, or other person, required to be obtained or made by Sterigenics (or by
RTI) in connection with the taking of any action contemplated by this Agreement.
7.3 Future Administrative Support Related to Environmental Issues. Until
the date five (5) years after the Closing, Sterigenics shall provide RTI with
certain administrative services, including (a) supervision of the Rockaway
Property monitoring program (including payment of costs up to $10,000 per annum)
following completion of the clean-up program at the Rockaway Property, and (b)
general corporate administrative support, including reasonable access to use of
former RTI employees who are employed by Sterigenics.
7.4 Employment of RTI Employees by Sterigenics. Sterigenics (or its
wholly-owned Subsidiary) shall offer employment to all existing employees (as of
the Closing) of RTI except Theo Muller. Sterigenics agrees not to terminate any
former RTI employee for at least 90 days after the Closing except for cause.
7.5 Release of Salem Guarantee. Sterigenics shall use reasonable efforts to
cause RTI to be released from the Salem Guarantee.
ARTICLE VIII
COVENANTS OF STERIGENICS AND RTI
8.1 Legal Conditions. Subject, as to RTI, to Section 6.1(a), each of
Sterigenics and RTI will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it with respect to
the Acquisition (which actions shall include, without limitation, furnishing all
information required in connection with approvals of or filings with any
Governmental Entity) and will promptly cooperate
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with and furnish information to each other in connection with any such
requirements imposed upon either of them in connection with the Acquisition.
8.2 Public Disclosure. Prior to Closing, Sterigenics and RTI shall consult
with each other before issuing any press release or otherwise making any public
statement (other than at the RTI Shareholders' Meeting) with respect to the
Acquisition or this Agreement and shall not issue any such press release or make
any such public statement prior to such consultation, except as may be required
by law.
8.3 Additional Agreements; Reasonable Efforts. Subject to the terms and
conditions of this Agreement, including Section 6.1(a), each of the parties
agrees to use all reasonable efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, subject to the appropriate vote of
shareholders of RTI described in Section 6.7, including cooperating fully with
the other party, including by provision of information. In case at any time
after the Closing Date any further action is necessary or desirable to carry out
the purposes of this Agreement or to vest Sterigenics with full title to all
properties, assets, rights, approvals, immunities and franchises of the
Purchased Assets or the assets of the South Jersey Subsidiary, the proper
officers and directors of each party to this Agreement shall take all such
necessary action; provided, however that out-of-pocket costs incurred by RTI
pursuant to this Section 8.3 after the Closing Date shall be reimbursed by
Sterigenics.
8.4 Access to Documents. If, after the Closing Date, (i) in order to
properly prepare its tax returns or other documents or reports required to be
filed with governmental authorities or its financial statements; (ii) in
connection with any threatened or pending litigation or claim which involves or
may involve Sterigenics or RTI; or (iii) for any other reasonable purpose, it is
necessary that Sterigenics or RTI be furnished with additional information or
documents relating to the Purchased Assets, the assets of the South Jersey
Subsidiary or the Assumed Liabilities and such information or documents are in
the possession of the other party, and can reasonably be furnished to the
requesting party, the other party shall, upon written request therefor, promptly
furnish such information or documents to the requesting party. The requesting
party shall reimburse the other party for the cost of copying or shipping any
requested documents.
ARTICLE IX
STERIGENICS' CONDITIONS PRECEDENT TO CLOSING
The obligations of Sterigenics at the Closing are subject to satisfaction
of the following conditions (any or all of which may be waived by Sterigenics in
its sole discretion), all of which are for Sterigenics' sole benefit:
9.1 Representations and Warranties. The representations and warranties of
RTI contained in this Agreement shall be true and correct in all material
respects on the Closing Date with the same effect as though made on that date;
provided that this condition will be deemed satisfied if inaccuracies in the
representations and warranties of RTI would merely result in (a) positive
adjustments to RTI's consolidated balance sheet or (b) negative adjustments to
RTI's consolidated balance sheet of (i) up to $200,000 in the aggregate (which
would give rise to a Purchase Price Adjustment in a corresponding amount), or
(ii) an amount between $200,000 and $500,000 in the aggregate if the cash
portion of the Purchase Price as set forth in Section 2.4(a) is reduced by the
aggregate amount of the resulting adjustments to the consolidated balance sheet.
To the extent that any inaccuracies in the representations and warranties would
not result in adjustments to RTI's consolidated balance sheet, this condition
will be deemed satisfied unless such inaccuracies, in the aggregate, would have
a material adverse effect on the value of the Purchased Assets or the assets of
the South Jersey Subsidiary or on the ability of Sterigenics to conduct the
business of RTI as conducted prior to the Closing.
9.2 Shareholder Approval. This Agreement and the transactions contemplated
by it shall have been approved by RTI's shareholders and RTI shall have
delivered to Sterigenics copies, certified by the Secretary of RTI, of the
resolutions of the shareholders of RTI regarding such approval.
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9.3 Ownership of Purchased Assets by RTI. RTI or its Subsidiaries shall
hold all right, title and interest in the Purchased Assets and the assets of the
South Jersey Subsidiary.
9.4 Net Book Value of Purchased Assets. The net book value of the Purchased
Assets (as determined by RTI in good faith) at the Closing shall be at least
$3,500,000; provided, however, that if the net book value (as determined by RTI
in good faith) is between $3,000,000 and $3,500,000, this condition will be
deemed satisfied if the cash portion of the Purchase Price as set forth in
Section 2.4(a) is reduced by an amount equal to the difference between
$3,500,000 and the net book value of the Purchased Assets.
9.5 Receipt of Required Permits. Sterigenics shall have received all
licenses, permits and governmental or other regulatory approvals and
authorizations which are required in order for Sterigenics to engage in the full
operation of RTI's sterilization facilities located on the Real Properties,
including, without limitation, all necessary permits, approvals and
authorizations of the NRC, the NJDEP, the NCDRH and the FDA; provided, if all of
the other conditions set forth in Article IX and X have been satisfied or waived
and this condition is not satisfied by June 30, 1996, Sterigenics shall be
required to waive this condition if RTI undertakes, subject to the terms of a
management agreement to be negotiated in good faith by RTI and Sterigenics, such
management activities as are necessary to permit the full operation by
Sterigenics of RTI's sterilization facilities as currently operated until all
necessary permits, approvals and authorizations are obtained and all costs and
expenses incurred by RTI pursuant to its performance of such agreement shall be
reimbursed or paid by Sterigenics as incurred.
9.6 Delivery of All Assets. RTI shall have delivered and conveyed all of
the Purchased Assets and the assets of the South Jersey Subsidiary free and
clear of all Encumbrances, whether direct or indirect, accrued, absolute,
contingent or otherwise, except the Permitted Encumbrances.
9.7 Rockaway Property Lease and Purchase Option. Sterigenics and RTI shall
have entered into a six-year lease and purchase option, with an option for
Sterigenics to extend the lease for five (5) additional years, for the Rockaway
Property in substantially the form attached hereto as Exhibit 9.7, including a
six-year option for Sterigenics to purchase the Rockaway Property (the "Rockaway
Lease"). Pursuant to the Rockaway Lease, RTI shall have the right to require
Sterigenics to exercise the purchase option on the sixth anniversary of the
Closing if the environmental remediation has been completed to such an extent
that Sterigenics would not have any material liability for further environmental
remediation and the Rockaway Property has been removed from the National
Priorities List. In addition, a memorandum or short-form of the Rockaway Lease
shall have been provided to Sterigenics in recordable form in accordance with
applicable New Jersey law so as to impart constructive notice of the Rockaway
Lease to third parties.
9.8 Letter Regarding Spill Act Lien. RTI shall have delivered to
Sterigenics a letter from the NJDEP dated within five (5) business days prior to
the Closing Date stating that NJDEP will take all actions and execute all
documents necessary to release all liens it has on the Purchased Assets and the
Rockaway Property upon receipt of a certified check in the Lien Amount if such
check is delivered within ten (10) days following the date of the letter.
9.9 Title Policies. The Title Companies shall have committed in writing to
issue the Title Policies to Sterigenics for each of the North Carolina Property
and the Rockaway Property, subject only to the Permitted Exceptions applicable
thereto.
9.10 FIRPTA. RTI shall have executed and delivered to the Title Company a
certificate satisfying the requirements of Section 1445 of the Internal Revenue
Code of 1986, as amended (the "FIRPTA Certificate").
9.11 No Insolvency Event. At the Closing there shall not be any pending
sequestration, attachment or foreclosure of or execution on any material part of
the Purchased Assets or any of the material assets of the South Jersey
Subsidiary or any proceeds from the sale thereof nor shall RTI be subject to a
voluntary or involuntary petition to commence a proceeding under the United
States Bankruptcy Code to declare RTI to be bankrupt or insolvent.
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9.12 No Material Adverse Change. No material adverse change shall have
occurred in the business of RTI or the assets of the South Jersey Subsidiary
since the execution of this Agreement which, in the reasonable judgment of
Sterigenics, may have a material adverse effect on the value to Sterigenics of
the Purchased Assets or the assets of the South Jersey Subsidiary.
9.13 No Legal Prohibition. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or prohibition preventing
the consummation of the Acquisition or limiting or restricting Sterigenics'
conduct or operation of the business of RTI after the Acquisition shall have
been issued, nor shall any action or suit related to the Acquisition or its
consummation which could, in the opinion of Sterigenics' counsel, result in
material liability for Sterigenics, be pending or threatened, nor shall any
proceeding brought by an administrative agency or commission or other
governmental entity, seeking any of the foregoing, be pending; nor shall there
be any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Acquisition which makes the consummation of
the Acquisition illegal.
9.14 Escrow Agreement. Sterigenics and RTI shall have entered into the
Escrow Agreement.
9.15 Closing Certificate. RTI shall deliver to Sterigenics a certificate
dated the Closing Date and signed by the President of RTI confirming that the
conditions set forth in Sections 9.1, 9.2, 9.4, 9.6, 9.11, 9.12 and 9.17 have
been satisfied.
9.16 Recordable Documents. RTI shall have provided the appropriate Title
Company issuing the Title Policies the special warranty deed for the North
Carolina Property and the memorandum of lease for the Rockaway Property duly
executed, notarized, and otherwise in recordable form at least two (2) business
days prior to the Closing so that the documents are in a position to be recorded
in the applicable public records immediately upon Closing.
9.17 Appraisal Rights. Holders of less than 20% of the outstanding shares
of RTI Common Stock shall continue to be entitled to seek appraisal rights with
respect to the Acquisition pursuant to the New York Business Corporation Law.
9.18 Environmental Matters. RTI shall have obtained from the NJDEP: (i) a
letter of non- applicability pursuant to the Industrial Site Recovery Act
(ISRA), N.J.S.A. 13:1K-6 et seq., with respect to the transactions contemplated
by this Agreement; and (ii) written acknowledgment, in form reasonably
satisfactory to Sterigenics' counsel, that the NJDEP does not and will not
regard Sterigenics or any of its subsidiaries as the successor or assign of RTI
or as otherwise responsible for any ongoing environmental liability of RTI.
9.19 Removal of Title Exceptions. RTI shall provide Sterigenics with
evidence of the removal of all Salem Disapproved Exceptions and all Rockaway
Disapproved Exceptions which were set forth in the Salem Removal Notice and the
Rockaway Removal Notice, respectively.
9.20 Closing Deliveries. Sterigenics shall have received at or prior to the
Closing each of the following documents: (a) a bill of sale in a form reasonably
satisfactory to Sterigenics; (b) such instruments of conveyance, assignment and
transfer, in form and substance reasonably satisfactory to Sterigenics, as shall
be appropriate to convey, transfer and assign to, and to vest in, Sterigenics,
good, clear and marketable title to the Purchased Assets and the assets of the
South Jersey Subsidiary; (c) evidence of termination of all liens (other than
Permitted Encumbrances) filed against the Purchased Assets and the assets of the
South Jersey Subsidiary reasonably satisfactory to Sterigenics; (d)
cross-receipt executed by Sterigenics and RTI; (e) March Balance Sheet; (f) with
respect to the North Carolina Property, a special warranty deed in recordable
form and in the form previously approved by Sterigenics properly executed on
behalf of RTI, conveying to Sterigenics title to the Real Properties and the
Improvements in fee simple, subject only to the Permitted Exceptions therefor;
(g) with respect to the Rockaway Property, the Rockaway Lease and a memorandum
or short-form thereof, in form and content approved by Sterigenics, which shall
be recorded, at Sterigenics' expense, in the manner provided under applicable
New Jersey law to impart constructive notice thereof to
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third parties; and (h) any other documents, records or agreements called for
hereunder that have not been previously delivered to Sterigenics.
9.21 Landlord Letter. RTI shall deliver to Sterigenics a letter from the
City of Salem Municipal Port Authority confirming that the South Jersey
Subsidiary has a valid and binding leasehold interest in the Salem Property.
ARTICLE X
RTI'S CONDITIONS PRECEDENT TO CLOSING
The obligations of RTI at the Closing are subject to satisfaction of the
following conditions (any or all of which may be waived by RTI), all of which
are for RTI's sole benefit:
10.1 Representations and Warranties. The representations and warranties of
Sterigenics contained in this Agreement will be true and correct in all material
respects at the date of the Closing with the same effect as though made at that
date, and Sterigenics will have delivered to RTI a certificate dated that date
and signed by the President of Sterigenics to that effect.
10.2 Shareholder Approval. This Agreement and the transactions contemplated
by it shall have been approved by RTI's shareholders.
10.3 Rockaway Lease. Sterigenics and RTI have entered into the Rockaway
Lease.
10.4 Insolvency Event. At the Closing, Sterigenics shall not have been
subject to a voluntary or involuntary petition to commence a proceeding under
the United States Bankruptcy Code to declare Sterigenics to be bankrupt or
insolvent.
10.5 No Legal Prohibition. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or prohibition preventing
the consummation of the Acquisition or limiting or restricting RTI's conduct or
operation of the business of RTI after the Acquisition shall have been issued,
nor shall any proceeding brought by an administrative agency or commission or
other governmental entity, seeking any of the foregoing be pending, nor shall
there be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Acquisition which makes the
consummation of the Acquisition illegal, nor shall any action or suit related to
the Acquisition or its consummation which could, in the opinion of RTI's
counsel, result in material personal liability for RTI directors. be pending or
threatened; provided, however, that RTI shall be required to waive this
condition as to any pending or threatened action or suit if Sterigenics agrees
to indemnify the directors of RTI against any costs, expenses or judgments
resulting from such action or suit.
10.6 Escrow Agreement. Sterigenics, RTI and the Escrow Agent shall have
entered into the Escrow Agreement.
10.7 Closing Certificate. Sterigenics shall deliver to RTI a certificate
dated the Closing Date and signed by an officer of Sterigenics confirming that
the conditions set forth in Sections 10.1, 10.2, 10.4 and 10.5 have been
satisfied.
10.8 Appraisal Rights. Holders of less than 20% of the outstanding shares
of RTI Common Stock shall continue to be entitled to seek appraisal rights with
respect to the Acquisition pursuant to the New York Business Corporation Law.
10.9 Closing Deliveries. RTI shall have received at or prior to the Closing
each of the following documents: (a) payment of the Purchase Price in accordance
with Section 2.4; (b) cross-receipt executed by Sterigenics and RTI; and (c)
such instruments, in form and substance satisfactory to RTI, as shall be
necessary and appropriate for Sterigenics to assume and agree to perform the
Assumed Liabilities.
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ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; ESCROW
11.1 Survival of Representations. The representations and warranties made
by the parties in Articles IV (except Section 4.22(a) and 4.23 through 4.27,
which shall terminate upon the Closing) and V of this Agreement shall survive
the Closing for a period of twelve (12) months and shall in no manner be limited
by any investigation of the subject matter thereof made by or on behalf of
either party or by the satisfaction of any condition to the Closing, provided,
however, that if RTI gives Sterigenics written notice prior to Closing
specifying a breach of a representation or warranty and as a result would not be
able to meet the condition in Section 9.1 and Sterigenics waives such breach in
order to proceed to Closing, Sterigenics shall not be entitled to make a Claim
(as defined below) as a result of such specified breach. After the expiration of
such period, such representations and warranties shall expire and be of no
further force and effect unless a Claim or Claims (as defined in Section 11.2
below) with respect to any such representation or warranty shall have been
asserted by Sterigenics with respect thereto on or before the expiration of such
period.
11.2 Indemnification by Parties.
(a) RTI shall indemnify and save harmless Sterigenics, its wholly-owned
Subsidiaries and its and their respective shareholders, directors, officers and
agents from and against (A) any difference between (i) the Adjusted Price and
(ii) the book value of the Purchased Assets less the book value of the Assumed
Liabilities, as contained in the Closing Balance Sheet (as audited by the
independent certified accounting firm of Ernst & Young, if Sterigenics elected
to have Ernst & Young audit the Closing Balance Sheet, provided that RTI may
object as set forth in Section 2.4(d) (the "Purchase Price Adjustment") and (B)
any and all losses, liabilities, expenses (including, without limitation, fees
and disbursements of counsel and expenses of investigation), claims, liens,
damages, demands, judgments, fines, penalties, costs or other obligations
whatsoever (hereinafter individually a "Claim" or collectively "Claims"), which
shall not include any component of damages for business lost after the Closing,
imposed on or incurred by Sterigenics or any such indemnified party as a result
of (i) the breach of any representation or warranty made by RTI in this
Agreement or otherwise thereafter made in writing and delivered by RTI to
Sterigenics in connection with the transactions contemplated hereby; (ii) any
failure of RTI to perform or comply in any material respect with any of its
covenants and agreements set forth herein or in any other document executed in
connection with the transactions contemplated hereby; (iii) any liabilities,
obligations or commitments of, and all claims against RTI, its shareholders,
directors, officers and agents, other than with respect to the Assumed
Liabilities and claims arising as a result of a breach by Sterigenics; (iv) any
Excluded Liabilities or (v) the waiver by Sterigenics of compliance by RTI with
the provisions of applicable bulk sales laws. "Claims" as used herein are not
limited to matters asserted by third parties, but include claims incurred,
sustained or properly accrued by Sterigenics in the absence of claims by a third
party; provided that the amount of any accrual that is not ultimately utilized
shall be paid to RTI. Claims shall first be satisfied pursuant to the terms of
the Escrow Agreement. Notwithstanding anything to the contrary set forth in this
Agreement, RTI shall be liable only as to any individual Claim, other than
Claims with respect to any Purchase Price Adjustment, if it exceeds Five
Thousand Dollars ($5,000). Other than with respect to any Purchase Price
Adjustment, no indemnification obligation shall arise hereunder unless and until
the aggregate amount of Claims which individually exceed Five Thousand Dollars
($5,000.00) hereunder exceeds One Hundred Thousand Dollars ($100,000) (the
"Basket"). In the event that the amount of all Claims which individually exceed
Five Thousand Dollars ($5,000.00) exceeds the Basket, Sterigenics shall be
entitled to collect the full amount of such Claims.
(b) From and after the Closing, Sterigenics shall indemnify and save
harmless RTI, its shareholders, directors, officers and agents from and against
any and all losses, liabilities or expenses imposed on or incurred by RTI or any
such indemnified party as a result of (i) any failure by Sterigenics to
discharge the Assumed Liabilities or (ii) any failure of Sterigenics to perform
or comply in any material respect with any of the covenants and agreements of
Sterigenics set forth herein or in any document executed in connection with the
transactions contemplated hereby.
(c) As used in this Article XI, the term "Indemnitor" means the party
against whom indemnification hereunder is sought, and the term "Indemnitee"
means the party seeking indemnification
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hereunder. The following are conditions precedent to any liability of an
Indemnitor under Section 11.2(a) or 11.2(b): (i) Indemnitee shall give
Indemnitor prompt written notice of any event or assertion of which it has
knowledge concerning any Claims and as to which it may request indemnification,
which notice must be given within twelve (12) months of the Closing; (ii)
Indemnitee shall cooperate with and assist Indemnitor in defending or settling
the Claims; (iii) Indemnitee shall permit Indemnitor to control the defense or
settlement of the Claims, including selection of counsel to represent Indemnitor
and Indemnitee, provided that such counsel shall be reasonably satisfactory to
Indemnitee; provided that Indemnitee may maintain separate counsel at its own
cost and expense in connection with any Claim; (iv) in no event shall Indemnitee
compromise or settle a Claim without the prior written approval of Indemnitor,
which approval shall not be unreasonably withheld; and (v) the assumption of the
defense of any Claim by Indemnitor shall be an acknowledgment by Indemnitee that
such Claim is subject to indemnification under the provisions of this Article XI
unless notice to the contrary is given and that such provisions are binding on
Indemnitee. If, however, Indemnitor fails or refuses to undertake the defense of
such Claim within ten (10) days after written notice of such Claim has been
delivered to Indemnitor by Indemnitee, Indemnitee shall have the right to
undertake the defense, and, subject to Subsection (iv) above, compromise and
settlement of such Claim with counsel of its own choosing. Failure of Indemnitee
to furnish written notice to Indemnitor of a Claim shall not release Indemnitor
from Indemnitor's obligations hereunder, except to the extent Indemnitor is
prejudiced by such failure.
(d) The indemnification obligations of Indemnitor under Section 11.2(c)
shall continue in full force and effect as to any Claim as to which notice has
been given pursuant to Section 11.2(c)(i) above until such Claim has been
settled either by mutual agreement of the parties concerned, by arbitration in
accordance with the provisions of this Agreement or, in the event of a Claim
resulting from legal action by a third party, by the final order, decree or
judgment of a court of competent jurisdiction in the United States of America
(the time for appeal having expired with no appeal having been taken). The right
of an Indemnitee to be indemnified under this Section 11.2 shall not limit,
reduce or otherwise affect any other rights and remedies each may have with
respect to the matters indemnified under this Agreement.
11.3 Resolution of Disputes. Any dispute over an indemnity claim under
Section 11.2 above (a "Contested Claim") shall be settled by arbitration in the
New York City metropolitan area and, except as herein specifically stated, in
accordance with Section 13.15 below. Sterigenics and RTI agree that any of the
parties may elect to postpone the arbitration of all Contested Claims until one
year from the Closing in order to consolidate the arbitration of all Contested
Claims.
ARTICLE XII
TERMINATION AND AMENDMENT
12.1 Termination. This Agreement may be terminated at any time prior to the
Closing (with respect to Sections 12.1(b) through 12.1(g), by written notice by
the terminating party to the other party), whether before or after approval of
the matters presented in connection with the purchase and sale of the Purchased
Assets by the shareholders of RTI: (a) by mutual written consent of Sterigenics
and RTI; or (b) by either Sterigenics and RTI if the Acquisition shall not have
been consummated by November 27, 1996 (provided that the right to terminate this
Agreement under this Section 12.1(b) shall not be available to any party whose
failure to fulfill any material obligation under this Agreement has been the
cause of or resulted in the failure of the Acquisition to occur on or before
such date); or (c) by either Sterigenics or RTI, if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Acquisition, except, if the party relying on such order, decree or ruling or
other action has not materially complied with its obligations under Article IX
or Article X, as applicable, of this Agreement; or (d) by Sterigenics if any of
the conditions to Sterigenics' obligations to effect the Acquisition which are
specified in Article IX have not been met or waived by Sterigenics at such time
as such condition is no longer reasonably capable of satisfaction, including the
failure to obtain any required approval of shareholders of RTI at a duly held
meeting of shareholders or at an adjournment or postponement thereof (provided
Sterigenics is not otherwise in material breach of its representations,
warranties, covenants or agreements under this Agreement); (e) by RTI if any of
the conditions to RTI's obligation to effect the
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Acquisition which are specified in Article X have not been met or waived by RTI
at such time as such condition is no longer reasonably capable of satisfaction
(provided RTI is not otherwise in material breach of its representations,
warranties, covenants or agreements under this Agreement); (f) by Sterigenics or
RTI, if there has been a material breach of any representation, warranty,
covenant or agreement on the part of the other party set forth in this
Agreement, which breach shall not have been cured (in the case of RTI, a breach
of representation and warranty will be deemed to have been cured for purposes of
this Section 12.1 if the condition to Closing set forth in Section 9.1 can be
met), in the case of a representation or warranty, prior to the Closing or, in
the case of a covenant or agreement, within (ten) 10 business days following
receipt by the breaching party of written notice of such breach from the other
party; or (g) by Sterigenics, if (i) the Board of Directors of RTI shall have
withdrawn or modified in a manner adverse to Sterigenics its recommendation of
this Agreement and the Acquisition in a manner adverse to Sterigenics or shall
have resolved to do either of the foregoing; (ii) the Board of Directors of RTI
shall have recommended to the shareholders of RTI an Acquisition Proposal; (iii)
a tender offer or exchange offer for 15% or more of the outstanding shares of
RTI Common Stock is commenced (other than by Sterigenics or an affiliate of
Sterigenics) and the Board of Directors of RTI recommends that the shareholders
of RTI tender their shares in such tender or exchange offer; or (iv) for any
reason RTI fails to hold the RTI Shareholders' Meeting by November 27, 1996.
12.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 12.1, this Agreement shall immediately become void and
there shall be no liability or obligation on the part of Sterigenics, RTI or
their respective officers, directors, stockholders or shareholders, as the case
may be, or affiliates, except as set forth in Sections 12.3 and 12.4 and further
except to the extent that such termination results from the intentional breach
by a party of any of its representations, warranties or covenants set forth in
this Agreement; provided that the provisions of Sections 6.4 (5th sentence),
6.5(d) (5th, 6th, 7th and 8th sentences), 12.3 and 12.4 of this Agreement shall
remain in full force and effect and survive any termination of this Agreement.
12.3 Fees and Expenses.
(a) Subject to Section 12.3(b) and 12.3(c), if (i) the Acquisition is
consummated or (ii) this Agreement is terminated in accordance with Section
12.1(b), 12.1(c), 12.1(d) or 12.1(e) hereof other than as a result of a breach
by either party, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense.
(b) Except as otherwise provided in this Section 12.3(b): (i) if this
Agreement is terminated as provided in Section 12.1(f) hereof, the breaching
party shall pay to the terminating party, within five business days after
receipt of a written request therefor, in same day funds, an amount equal to all
costs and expenses reasonably incurred by the terminating party in connection
with this Agreement and the transactions contemplated hereby, including all
reasonable legal, accounting, financial advisory, printing and other
professional and service fees and expenses not to exceed Two Hundred Fifty
Thousand Dollars ($250,000); provided, however, in the event that this Agreement
is terminated by a party as provided in Section 12.1(f) and the breaching party
also has the right to terminate this Agreement as provided in Section 12.1(f)
and notifies the terminating party thereof within ten (10) days after receipt by
the breaching party of notice of termination pursuant to this Section 12.1(f),
then the costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid only as set forth in Section
12.3(a); (ii) if this Agreement is terminated (x) by Sterigenics pursuant to
Section 12.1(b) hereof or (y) by Sterigenics pursuant to Section 12.1(d) as a
result of the failure to receive the requisite vote to approve this Agreement
and the Acquisition at the RTI Shareholders' Meeting (including any adjournments
or postponements thereof) in each case if, at the time of such failure, there
shall have been announced an Acquisition Proposal which shall not have been
absolutely and unconditionally withdrawn or abandoned, RTI shall pay
Sterigenics, within five (5) business days after receipt of a written request
therefor, in same day funds, an amount equal to all costs and expenses
reasonably incurred by Sterigenics in connection with this Agreement and the
transactions contemplated hereby, including all reasonable legal, accounting,
financial advisory, printing and other professional and service fees and
expenses, not to exceed Two Hundred Fifty Thousand Dollars ($250,000).
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(c) If this Agreement is terminated by Sterigenics as provided in Section
12.1 as a result of the failure of Sterigenics to obtain the permits necessary
to operate the business of RTI, Sterigenics shall pay RTI, within five (5)
business days after receipt of a written request therefor, in same day funds, an
amount equal to all costs and expenses reasonably incurred by RTI in connection
with this Agreement and the transactions contemplated hereby, including all
reasonable legal, accounting, financial advisory, printing and other
professional and service fees and expenses, not to exceed Two Hundred Fifty
Thousand Dollars ($250,000).
12.4 Option to Purchase North Carolina Property. Upon the execution by RTI
of a definitive agreement resulting from an Acquisition Proposal, Sterigenics
shall have the option to purchase the North Carolina Property, including its
Improvements and the plant, property, equipment located thereon, but excluding
all Cobalt, free and clear of all Encumbrances other than the Permitted
Encumbrances for a purchase price equal to the book value of the North Carolina
Property as of the closing associated with the exercise of the option plus Four
Hundred Thousand Dollars ($400,000). The purchase option may be exercised within
sixty (60) days after the execution of such definitive agreement, and the
closing of Sterigenics' acquisition of the North Carolina Property pursuant to
the purchase option shall occur immediately prior to the closing of the
transaction contemplated by such definitive agreement. The terms of such
purchase option shall be as specified in the Option Agreement attached hereto as
Exhibit 12.4.
12.5 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the
Acquisition by the shareholders of RTI, but, after any such approval, no
amendment shall be made which by law requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
12.6 Extension; Waiver. At any time prior to the Closing Date, the parties
hereto, by action taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE XIII
GENERAL
13.1 Expenses. Except as otherwise provided below in this Agreement, the
parties will each pay their own legal, accounting and other professional
expenses in connection with the transactions contemplated hereby.
13.2 Brokers. Each party represents and warrants to the other that no
person has acted as a broker, a finder or in any similar capacity in connection
with the transactions contemplated hereby, except TM Capital Corporation who
shall be paid by Sterigenics. Each party shall indemnify the other against, and
agrees to hold the other harmless from, all liabilities and expenses (including
reasonable attorneys' fees and expenses) in connection with any claim by anyone
for compensation as a broker, a finder or in any similar capacity, other than TM
Capital Corporation, who is to be paid by Sterigenics at the Closing, by reason
of services allegedly rendered to the indemnifying party in connection with the
transactions contemplated hereby.
13.3 Entire Agreement. Except for that certain Confidentiality Agreement by
and between RTI and Sterigenics, dated October 3, 1995, this Agreement, the
Option Agreement and the Ancillary Documents contain the entire agreement among
the parties with respect to the matters contemplated hereby and all prior
negotiations, understandings and agreements among them, are superseded by this
Agreement.
A-27
<PAGE>
13.4 Assignment. Neither this Agreement nor any right of any party under it
may be assigned without the prior written consent of the other party, which
consent shall not be unreasonably withheld; provided, however, that Sterigenics
may assign its rights under this Agreement following the Closing to any party
that acquires Sterigenics through a merger or consolidation, purchase of
substantially all of Sterigenics' stock or a purchase of substantially all of
Sterigenics' assets. Notwithstanding the foregoing, RTI agrees that Sterigenics
may assign its rights to purchase the Purchased Assets and lease the Rockaway
Property and its obligations to assume the Assumed Liabilities to one or more
wholly-owned subsidiaries of Sterigenics; provided, however, that in the event
of such assignment, Sterigenics shall remain liable for the performance of such
subsidiaries under the terms of this Agreement and shall execute and deliver to
RTI a guarantee in a form reasonably satisfactory to RTI with respect thereto.
13.5 Notices. Any notice or other communication required or permitted to be
given under this Agreement shall be in writing and will be deemed effective when
delivered in person, on the first business day after the day on which sent by
confirmed facsimile, if promptly confirmed in writing, on the third business day
after the day on which mailed by first class mail from within the United States
of America, or the business day following delivery to a national overnight
courier service to the following addresses or to such other address as either
party may specify in writing to the other party in accordance with the
provisions of this Section 13.5.
If to Sterigenics: With a copy to:
Sterigenics International Gunderson Dettmer Stough
4020 Clipper Court Villeneuve
Fremont, CA 94538-6540 Franklin & Hachigian, LLP
600 Hansen Way, Second Floor
Palo Alto, CA 94304
Facsimile No. (510) 770-9000 Facsimile No.: (415) 843-0314
Attention: James F. Clouser Attention: Carla S. Newell
If to RTI: With a copy to:
RTI, Inc. Warshaw Burstein Cohen
108 Lake Denmark Road Schlesinger & Kuh, LLP
Rockaway, New Jersey 07866 555 Fifth Avenue
Attention: Theo Muller New York, NY 10017
Facsimile No.: (212) 972-9150
Attention: Arthur Katz
13.6 Governing Law. This Agreement will be governed by, and construed
under, the laws of the State of California without reference to principles of
conflicts of laws.
13.7 Amendment. This Agreement may be amended only by a document in writing
signed by the parties.
13.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
13.9 Public Disclosure. No party shall disclose the terms of this Agreement
without the written consent of Sterigenics and RTI, except as required by law or
pursuant to the disclosure obligations of RTI under the rules and regulations of
the Securities and Exchange Commission.
13.10 Further Assurances. Each party agrees to execute such further
instruments and documents and to do such further acts as may be reasonably
requested by any other party to carry out the transactions contemplated hereby.
A-28
<PAGE>
13.11 No Rights Conferred Upon Third Parties. No provisions of this
Agreement are intended or shall be interpreted to provide or create any rights
of any kind in any third party unless specifically provided otherwise herein,
and, except as so provided, all provisions hereof shall be personal solely to
the parties to this Agreement.
13.12 Attorneys' Fees. In any litigation relating to this Agreement,
including litigation with respect to any instrument, document or agreement made
under or in connection with this Agreement, the prevailing party shall be
entitled to recover its costs and reasonable attorneys' fees and expenses.
13.13 Headings. Captions and headings used herein are for convenience only
and are not a part of this Agreement and shall not be used in construing it.
13.14 Arbitration. Any disputes between Sterigenics and RTI with respect to
this Agreement shall be settled by binding, final arbitration in the New York
City metropolitan area and in accordance with the commercial arbitration rules
of the American Arbitration Association then in effect ("AAA Rules"). However,
in all events, the following arbitration provisions shall govern over any
conflicting rules which may now or hereafter be contained in the AAA Rules. Any
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction over the subject matter thereof. The arbitrator shall have
the authority to grant any equitable and legal remedies that would be available.
Sterigenics and RTI shall each advance fifty percent (50%) of the initial
compensation to be paid to the arbitrator in any such arbitration and fifty
percent (50%) of the costs of transcripts and other normal and regular expenses
of the arbitration proceedings; provided, however, that the arbitrator shall
have the discretion to grant to the prevailing party in any arbitration an award
of attorneys' fees and costs, and all costs of arbitration. Arbitration shall be
the sole and exclusive remedy of the parties for a breach of this Agreement in
the absence of fraud.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
shown on the first page.
STERIGENICS INTERNATIONAL RTI INC.
By: /s/ James F. Clauser By: /s/ Theo W. Muller
----------------------- ------------------------
Title: President and Chief Title: President and Chief
Executive Officer Executive Officer
A-29
<PAGE>
ANNEX B
BUSINESS CORPORATION LAW OF THE STATE OF NEW YORK
Section 623. Procedure to enforce shareholder's right to receive payment for
shares.
(a) A shareholder intending to enforce his right under a section of this
chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at such meeting
but before the vote, written objection to the action. The objection shall
include a notice of his election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is not
required from any shareholder to whom the corporation did not give notice of
such meeting in accordance with this chapter or where the proposed action is
authorized by written consent of shareholders without a meeting.
(b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall give
written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to the
proposed action and who thereby is deemed to have elected not to enforce his
right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he dissents
and a demand for payment of the fair value of his shares. Any shareholder who
elects to dissent from a merger under section 905 (Merger of subsidiary
corporation) or paragraph (c) of section 907 (Merger or consolidation of
domestic and foreign corporations) or from a share exchange under paragraph (g)
of section 913 (Share exchanges) shall file a written notice of such election to
dissent within twenty days after the giving to him of a copy of the plan of
merger or exchange or an outline of the material features thereof under section
905 or 913.
(d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner, as to which such nominee
or fiduciary has a right to dissent, held of record by such nominee or
fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his acceptance
in writing of an offer made by the corporation, as provided in paragraph (g),
but in no case later than sixty days from the date of consummation of the
corporate action except that if the corporation fails to make a timely offer, as
provided in paragraph (g), the time for withdrawing a notice of election shall
be extended until sixty days from the date an offer is made. Upon expiration of
such time, withdrawal of a notice of election shall require the written consent
of the corporation. In order to be effective, withdrawal of a notice of election
must be accompanied by the return to the corporation of any advance payment made
to the shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall determine that
the shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenter's rights, he shall not have the
right to receive payment for his shares and he shall be reinstated to all his
rights as a shareholder as of the consummation of the corporate action,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim.
B-1
<PAGE>
(f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the shareholder
or other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder of the shares
and a transferee shall acquire no rights in the corporation except those which
the original dissenting shareholder had at the time of transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholders' authorization date),
the corporation or, in the case of a merger or consolidation, the surviving or
new corporation, shall make a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his shares at a
specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action has
been consummated, such offer shall also be accompanied by (1) advance payment to
each such shareholder who has submitted the certificates representing his shares
to the corporation, as provided in paragraph (f), of an amount equal to eighty
percent of the amount of such offer, or (2) as to each shareholder who has not
yet submitted his certificates a statement that advance payment to him of an
amount equal to eighty percent of the amount of such offer will be made by the
corporation promptly upon submission of his certificates. If the corporate
action has not been consummated at the time of the making of the offer, such
advance payment or statement as to advance payment shall be sent to each
shareholder entitled thereto forthwith upon consummation of the corporate
action. Every advance payment or statement as to advance payment shall include
advice to the shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate action has not
been consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than a
twelve month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding the foregoing,
the corporation shall not be required to furnish a balance sheet or profit and
loss statement or statements to any shareholder to whom such balance sheet or
profit and loss statement or statements were previously furnished, nor if in
connection with obtaining the shareholders' authorization for or consent to the
proposed corporate action the shareholders were furnished with a proxy or
information statement, which included financial statements, pursuant to
Regulation 14A or Regulation 14C of the United States Securities and Exchange
Commission. If within thirty days after the making of such offer, the
corporation making the offer and any shareholder agree upon the price to be paid
for his shares, payment therefor shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates for any such shares
represented by certificates.
(h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and any
dissenting shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a special
proceeding in the supreme court in the judicial district in which the office of
the corporation is located to determine the rights of dissenting shareholders
and to fix
B-2
<PAGE>
the fair value of their shares. If, in the case of merger or consolidation, the
surviving or new corporation is a foreign corporation without an office in this
state, such proceeding shall be brought in the county where the office of the
domestic corporation, whose shares are to be valued, was located.
(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such proceeding
for the same purpose not later than thirty days after the expiration of such
twenty day period. If such proceeding is not instituted within such thirty day
period, all dissenter's rights shall be lost unless the supreme court, for good
cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid for
their shares, shall be made parties to such proceeding, which shall have the
effect of an action quasi in rem against their shares. The corporation shall
serve a copy of the petition in such proceeding upon each dissenting shareholder
who is a resident of this state in the manner provided by law for the service of
a summons, and upon each nonresident dissenting shareholder either by registered
mail and publication, or in such other manner as is permitted by law. The
jurisdiction of the court shall be plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as
to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation does not request
any such determination or if the court finds that any dissenting shareholder is
so entitled, it shall proceed to fix the value of the shares, which, for the
purposes of this section, shall be the fair value as of the close of business on
the day prior to the shareholders' authorization date. In fixing the fair value
of the shares, the court shall consider the nature of the transaction giving
rise to the shareholder's right to receive payment for shares and its effects on
the corporation and its shareholders, the concepts and methods then customary in
the relevant securities and financial markets for determining fair value of
shares of a corporation engaging in a similar transaction under comparable
circumstances and all other relevant factors. The court shall determine the fair
value of the shares without a jury and without referral to an appraiser or
referee. Upon application by the corporation or by any shareholder who is a
party to the proceeding, the court may, in its discretion, permit pretrial
disclosure, including, but not limited to, disclosure of any expert's reports
relating to the fair value of the shares whether or not intended for use at the
trial in the proceeding and notwithstanding subdivision (d) of section 3101 of
the civil practice law and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so determined.
(6) The final order shall include an allowance for interest at such
rate as the court finds to be equitable, from the date the corporate action was
consummated to the date of payment. In determining the rate of interest, the
court shall consider all relevant factors, including the rate of interest which
the corporation would have had to pay to borrow money during the pendency of the
proceeding. If the court finds that the refusal of any shareholder to accept the
corporate offer of payment for his shares was arbitrary, vexatious or otherwise
not in good faith, no interest shall be allowed to him.
(7) Each party to such proceeding shall bear its own costs and
expenses, including the fees and expenses of its counsel and of any experts
employed by it. Notwithstanding the foregoing, the court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees incurred by
the corporation against any or all of the dissenting shareholders who are
parties to the proceeding, including any who have withdrawn their notices of
election as provided in paragraph (e), if the court finds that their refusal to
accept the corporate offer was arbitrary, vexatious or otherwise not in good
faith. The court may, in its discretion, apportion and assess all or any part of
the costs, expenses and fees incurred by any or all of the dissenting
shareholders who are parties to the proceeding against the corporation if the
court finds any of the following: (A) that the fair value of the shares as
determined materially exceeds the amount which the corporation offered to pay;
(B) that no offer or required advance payment was made by the corporation; (C)
that the corporation failed to institute the special proceeding within the
period specified therefor; or (D) that
B-3
<PAGE>
the action of the corporation in complying with its obligations as provided in
this section was arbitrary, vexatious or otherwise not in good faith. In making
any determination as provided in clause (A), the court may consider the dollar
amount or the percentage, or both, by which the fair value of the shares as
determined exceeds the corporate offer.
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be due
him, upon surrender of the certificates for any such shares represented by
certificates.
(i) Shares acquired by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be canceled as provided in section 515
(Reacquired shares), except that, in the case of a merger or consolidation, they
may be held and disposed of as the plan of merger or consolidation may otherwise
provide.
(j) No payment shall be made to a dissenting shareholder under this section
at a time when the corporation is insolvent or when such payment would make it
insolvent. In such event, the dissenting shareholder shall, at his option:
(1) Withdraw his notice of election, which shall in such event be
deemed withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if it
is liquidated, be subordinated to the rights of creditors of the corporation,
but have rights superior to the non-dissenting shareholders, and if it is not
liquidated, retain his right to be paid for his shares, which right the
corporation shall be obliged to satisfy when the restrictions of this paragraph
do not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation within
thirty days after the corporation has given him written notice that payment for
his shares cannot be made because of the restrictions of this paragraph. If the
dissenting shareholder fails to exercise such option as provided, the
corporation shall exercise the option by written notice given to him within
twenty days after the expiration of such period of thirty days.
(k) The enforcement by a shareholder of his right to receive payment for
his shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in paragraph (e), and except that this
section shall not exclude the right of such shareholder to bring or maintain an
appropriate action to obtain relief on the ground that such corporate action
will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice
to be given by a corporation to a shareholder under this section shall be given
in the manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as provided
in subparagraph (e) (2) of section 907 (Merger or consolidation of domestic and
foreign corporations).
B-4
<PAGE>
ANNEX C
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
(Amendment No. 1)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT 1934 FOR THE TRANSITION PERIOD FROM ______ TO _____
Commission file number 0-5887
RTI INC.
(Exact name of small business issuer as specified in its charter)
NEW YORK 11-2163152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
108 Lake Denmark Road, Rockaway, New Jersey 07866
(Address of principal executive offices) (Zip Code)
(201) 625-8400
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section l3 or l5(d) of the Exchange Act during the past 12 months (or for such
shorter period that 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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
May 2, 1996 - 1,076,883 shares of common stock
Transitional Small Business Disclosure Form Yes___ No_x_
C-1
<PAGE>
<TABLE>
Part I. Financial Information
Item I. Financial Statements
RTI Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
March 31, December 31,
1996 1995
Assets (unaudited)
- ---------------------------------------------------- ----------- -----------
<S> <C> <C>
Current:
Cash and cash equivalents $ 290,422 $ 77,631
Accounts receivable, net of allowance for doubtful accounts of
$10,000 in 1996 and 1995 566,264 562,811
Prepaid expenses and other 50,545 31,949
Restricted deposits 15,771 15,771
----------- -----------
Total current assets 923,002 688,162
Property, plant, equipment and Cobalt 60, net of accumulated
depreciation and amortization 7,374,520 7,006,886
Certificates of financial assurance - restricted 150,000 150,000
Deferred financing costs 33,828 36,960
----------- -----------
Total assets $ 8,481,350 $ 7,882,008
=========== ===========
Liabilities and Stockholders' Equity
- ----------------------------------------------------
Current:
Current portion of long-term debt (Note 5 ) $ 851,973 $ 1,047,264
Accounts payable 193,534 138,178
Accrued expenses (Note 4) 630,016 618,748
Current portion of redeemable preferred stock, Series A (Note 8(b)) 236,000 --
----------- -----------
Total current liabilities 1,911,523 1,804,190
Long-term debt, net of current portion and discount
of $38,500 and $44,000 (Note 5) 2,107,769 2,024,050
Preferred stock, $.05 par value, Series A, shares authorized 200,000;
issued and outstanding, 118,000, net of current portion (Note 8(b)) -- --
Other liabilities (Note 6) 1,335,383 883,713
----------- -----------
Total liabilities $ 5,354,675 $ 4,711,953
=========== ===========
Commitments and contingencies (Notes 2,3,4,5,6 and 8)
Stockholders' equity (Note 8):
Preferred stock, $.05 par value - shares authorized 2,000,000;
issued and outstanding, 118,000 Series A $ -- $ --
Common stock, $.08 par value - shares authorized 15,000,000;
issued and outstanding, 1,076,887 86,151 86,153
Additional paid-in capital 16,013,798 16,013,851
Deficit (12,973,274) (12,929,949)
----------- -----------
Total stockholders' equity $ 3,126,675 $ 3,170,055
Total liabilities and stockholders' equity $ 8,481,350 $ 7,882,008
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
C-2
<PAGE>
RTI Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
---- ----
<S> <C> <C>
Net sales $ 1,086,171 $ 1,122,480
Cost of sales 740,264 705,227
Gross profit 345,907 417,253
Operating expenses:
Selling, general and administrative expenses 414,231 407,204
Expenses of Rockaway Industrial Park - Parcel I,
including interest expense of $5,500 in 1996 and
1995 (Notes 2 and 3) 21,257 34,003
Environmental investigation and remediation (Note 3) 480,000 --
----------- -----------
Loss from operations (569,581) (23,954)
Other income (expense):
Investment income, net 3,095 3,894
Other interest expense (Note 7) (68,419) (58,385)
Other income (Note 9) 591,580 --
----------- -----------
Net loss $ (43,325) $ (78,445)
=========== ===========
Net loss per share $ (.04) $ (.07)
=========== ===========
Weighted average number of common
shares outstanding (Note 8(c)) $ 1,076,887 $ 1,077,185
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
C-3
<PAGE>
RTI Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
( Note 10 )
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (43,325) $ (78,445)
--------- ---------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 209,237 210,458
Discount of note payable 5,500 5,500
(Increase) decrease in:
Accounts receivable (3,453) 21,187
Prepaid expenses and other (15,464) 27,022
Restricted deposits -- 23,257
Increase (decrease) in:
Accounts payable 55,356 (68,062)
Accrued expenses 11,268 (72,218)
Other liabilities 480,000 --
--------- ---------
Total adjustments 742,444 147,144
--------- ---------
Net cash provided by operating activities 699,119 68,699
--------- ---------
Cash flows from investing activities:
Purchases of fixed assets (306,097) (5,514)
--------- ---------
Net cash used in investing activities (306,097) (5,514)
--------- ---------
Cash flows from financing activities:
Payments on short-term borrowings (200,000) --
Payments on long-term debt (187,847) (32,870)
Payments on other liabilities (28,329) (35,000)
Proceeds from sale of preferred stock (Note 8(b)) 236,000 --
Payments for fractional shares of common stock (Note 8(a)) (55) --
--------- ---------
Net cash used in financing activities (180,231) (67,870)
Net increase (decrease) in cash and cash equivalents 212,791 (4,685)
Cash and cash equivalents, beginning of year 77,631 172,198
--------- ---------
Cash and cash equivalents, end of quarter $ 290,422 $ 167,513
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
C-4
<PAGE>
RTI Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of March 31, 1996 and 1995, and
for the three months then ended is unaudited)
1. Unaudited Information
In the opinion of management of RTI Inc. (with its Subsidiaries, the
"Company"), the accompanying unaudited consolidated financial statements include
all adjustments necessary to present fairly, in all material respects, the
Company's financial position as of March 31, 1996, its results of operations and
its cash flows for the three months ended March 31, 1996 and 1995. Results of
operations for the three month period ended March 31, 1996 are not necessarily
indicative of the results to be expected for the year ending December 31, 1996.
Information included in the consolidated balance sheet as of December 31, 1995
has been derived from the Company's audited consolidated financial statements in
its Annual Report on Form 10-KSB for the year ended December 31, 1995, to which
reference is made. Certain information included in the audited consolidated
financial statements and related notes prepared in accordance with generally
accepted accounting principles may have been condensed or omitted.
2. Rockaway Industrial Park
The Company owns a 248 acre parcel of land ("Parcel I") in Rockaway, New
Jersey, that is contiguous to the 15 acre operating parcel that is the site of
one of its irradiation processing facilities ("Parcel II" and, with Parcel I,
the "Rockaway Industrial Park"). Since 1985, the Company has been seeking a
buyer for Parcel I. However, the Company's ability sell Parcel I is impaired
until the completion of an environmental cleanup and remediation program (Note
3), and its ability to recover its net investment in Parcel I is impaired by
liabilities accruing from outstanding property taxes on approximately 222 acres
of Parcel I for the years 1993, 1994, 1995, and 1996, which have been accrued in
the financial statements.
3. Environmental Investigation and Remediation
As a result of engineering tests that commenced in 1981, the New Jersey
Department of Environmental Protection (the "DEP") issued a directive in 1986
ordering a remedial investigation and feasibility study (the "Study") designed
to determine the nature and extent of contamination on the Rockaway Industrial
Park property. The Company agreed to pay the costs of the Study and entered into
an Administrative Consent Order with the DEP. In 1989, the DEP issued a Second
Directive to pay for an additional environmental study and DEP oversight costs.
In 1993, the Company entered into an Administrative Consent Order ("ACO") with
the DEP. Cost reimbursement to the DEP under the ACO includes applicable DEP
expenditures beginning July 1, 1982 and future DEP oversight costs. At March 31,
1996, the total accrued for reimbursement due the DEP under the ACO was
$720,306, which consisted of outstanding billed DEP expenditures for the period
July 1, 1982 to January 20, 1995, and estimated unbilled DEP expenditures (Notes
4 and 6). In April 1996 the DEP agreed to accept an aggregate payment of
$575,000 as settlement of all outstanding claims asserted under ACO, as well as
all claims which could be asserted for the period ending June 30, 1996.
In April 1996, the DEP responded to the Company's petition to change the
Remedial Action Work Plan under the Record of Decision, and advised the Company
that a pilot test of the CleanOx remediation program, undertaken by the Company
on its Rockaway property, was not considered conclusive. As a result, the
Company has increased its estimate of groundwater remediation programs by
$460,000 to provide for a second pilot test and the possible implementation of a
groundwater remediation plan required by the DEP's Record of Decision.
C-5
<PAGE>
RTI Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of March 31, 1996 and 1995, and
for the three months then ended is unaudited)
In addition, the Company has been named a respondent in an environmental
proceeding relating to a New Jersey disposal site ("Nascolite") to which the
Company shipped a small amount of materials in 1978. The Company has recorded an
accrual of $50,000 for such potential liability.
As a result of ongoing remediation and DEP involvement in these matters,
there can be no assurances that the cleanup, remediation, and DEP oversight
accruals will represent the Company's ultimate liability.
Environmental accruals at March 31, 1996 are:
<TABLE>
Current:
<S> <C>
1983 Consent Order (restricted) $ 15,771
ACO, current portion 160,140
----------
175,911
Long-term:
ACO, net of current portion 544,395
Groundwater remediation 740,988
Nascolite site 50,000
----------
1,335,383
----------
Total $1,511,294
==========
</TABLE>
4. Accrued Expenses
Accrued expenses consist of the following at March 31, 1996:
<TABLE>
<S> <C>
Property taxes (Note 2) $ 216,366
Current portion of remedial investigation
and environmental cleanup costs (Note 3) 175,911
Professional fees and other 152,926
Payroll and related costs 54,980
Interest expense 29,833
---------
Total $ 630,016
=========
</TABLE>
5. Long-term Debt
Long-term debt, net of discount of $38,500, consist of the following at
March 31, 1996:
<TABLE>
<S> <C>
City of Salem Municipal Port Authority,
Port Development Revenue Bonds $1,000,000
Notes payable 273,524
Secured Cobalt 60 financing and capital
lease agreements 1,686,218
----------
Total 2,959,742
Less: Current portion 851,973
----------
Total long-term debt $2,107,769
==========
</TABLE>
C-6
<PAGE>
RTI Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of March 31, 1996 and 1995, and
for the three months then ended is unaudited)
6. Other Liabilities
Other liabilities of $1,335,383 at March 31, 1996 consisted of the
aggregate accrual of $1,511,294 for outstanding billed and estimated DEP ACO
costs, estimated costs of site remediation to be performed at the Company's
Rockaway property, and a reserve related to involvement with the Nascolite site,
less the current portion of $175,911 included in accrued expenses (Notes 3 and
4).
7. Other Interest Expense
Other interest expense is primarily related to long-term debt and includes
amortization of deferred financing costs.
8. Stockholders' Equity
(a) Common Stock Authorized, Issued and Outstanding - Effective May 25,
1995, the Company's Certificate of Incorporation was amended to effect a one for
eight reverse stock split of the common stock. The outstanding common stock at
March 31, 1996 was an estimate (since fractional shares were not issuable) based
on the actual number of shares converted one for eight and the remaining shares
to be converted.
(b) Preferred Stock Authorized, Issued and Outstanding - Effective May 25,
1995, the Company's Certificate of Incorporation was amended to authorize
2,000,000 shares of preferred stock. Effective February 27, 1996 the Company's
Certificate of Incorporation was amended to designate 200,000 of such shares as
Series A Preferred Stock and to establish the relative rights, preferences, and
limitations, of the Series A Preferred Stock, which include:
(i) the shares of Series A Preferred Stock, upon issuance for a
consideration of $2.00 per share, shall be fully-paid and non-assessable,
(ii) the holders of Series A Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available for the purpose, dividends in cash at the rate of $0.16 per share per
annum. Dividends on shares of Series A Preferred Stock will be payable annually
on December 31 of each year. Dividends on shares of Series A Preferred Stock
will be cumulative whether or not earned or declared and whether or not there
shall be funds of the Company legally available for the payment of such
dividends,
(iii) in the event of any liquidation, dissolution, or winding up of
the Company, whether voluntary or involuntary, after payment or provision for
the payment of the debts and other liabilities of the Company, the Company shall
pay to the holders of Series A Preferred Stock, before any distribution shall be
made to the holders of any other capital stock of the Company, an amount equal
to $2.00 per share of Series A Preferred Stock held by each such holder, plus an
amount equal to all accrued dividends unpaid thereon to the date of final
distribution to such holders,
(iv) the holders of record of Series A Preferred Stock shall be
entitled to vote at any election of directors and on any other matter submitted
to the holders of common shares voting together with the
C-7
<PAGE>
RTI Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of March 31, 1996 and 1995, and
for the three months then ended is unaudited)
holders of common shares as a single class, and shall be entitled to one vote
per share of Series A Preferred Stock held by them,
(v) each share of Series A Preferred Stock shall be convertible at any
time, at the option of the holder thereof, into one common share,
(vi) a holder of Series A Preferred Stock shall have the option, but
not the obligation, to require the Company to redeem all, but not less than all,
of such holder's shares of Series A Preferred Stock at a redemption price of
$2.00 per share. Such redemption price is payable in cash, except that if
redemption is made before January 31, 1997, the Company may, at its option, pay
the redemption price by delivery of a note in the principal amount of the
redemption price, payable ten days after demand, which may not be made prior to
January 31, 1997.
(vii) the Series A Preferred Stock may be redeemed, at the option of
the Company, in whole but not in part, at any time after January 31, 1997, at a
price of $2.00 per share, in cash.
On March 4, 1996, the Company issued 118,000 shares of Series A Preferred
Stock at $2.00 per share. Since the issued Series A Preferred Stock is
redeemable, at the holder's option, for cash at any time on and after January
31, 1997, the aggregate redemption price is considered to be a current
liability.
(c) Weighted Average Number of Common Shares Outstanding - The computation
of the weighted average number of common shares outstanding for the three month
periods ended March 31, 1996 and 1995 considered the one for eight reverse stock
split, and excluded outstanding preferred stock, options, and warrants, which
were considered antidilutive.
(d) Warrants - On November 29, 1995, the Company granted to Frellum
Corporation (an affiliated party), in connection with a short-term credit line
provided to the Company, a warrant for the purchase of 25,000 shares of common
stock at the exercise price of $1.75 per share. The warrant, if not exercised,
will expire on November 28, 1997.
(e) Stock Options - The Company's 1987 stock option plan (the "Plan")
authorizes the issuance of options for common stock until November 3, 1997. The
options granted may be either incentive stock options which are exercisable one
year or more from the date of grant or nonqualified stock options which may be
exercisable immediately. Details of stock option transactions for the three
month period ended March 31, 1996 under the Plan are as follows:
<TABLE>
<CAPTION>
Price per Exercisable
Options Share Options
------- ----- -------
<S> <C> <C> <C>
Outstanding at December 31, 1995 4,936 $4.00 - $7.76 3,686
Granted --
Exercised --
Canceled --
-----
Outstanding at March 31, 1996 4,936 $4.00 - $7.76 3,686
=====
</TABLE>
C-8
<PAGE>
RTI Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of March 31, 1996 and 1995, and
for the three months then ended is unaudited)
9. Other Income
Other income of $591,580 in 1996 resulted primarily from a $580,000
settlement of prior environmental insurance claims.
10. Statement of Cash Flows
Supplemental disclosures of cash flow information are as follows:
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
---- ----
<S> <C> <C>
Interest paid $62,497 $42,576
Income taxes paid 5,499 4,985
</TABLE>
The Company financed a purchase of Cobalt 60 amounting to approximately
$314,000 in the first quarter of 1996.
---------------------------------------
Item 2. Management's Discussion and Analysis or Plan of Operation
General
Reference is made to Item 6 - "Management's Discussion and Analysis or Plan
of Operation" contained in the Company's Annual Report on Form 10-KSB for its
fiscal year ended December 31, 1995 (the "1995 Form 10-KSB") for a discussion of
the Company's financial condition as of December 31, 1995, including a
discussion of the Company's anticipated liquidity and working capital
requirements during 1996.
Except for the historical information contained in this Item 2, the
following discussion contains forward looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed herein, as well as in the 1995
Form 10-KSB, including Item 1 ("Description of Business") and Item 3 ("Legal
Proceedings") thereof.
Comparison of Operations for the Three Month Periods Ended March 31, 1996 and
1995
Net sales for the three months ended March 31, 1996 (the "1996 period")
were $1,086,171, a decrease of 3% from net sales of $1,122,480 for the three
months ended March 31, 1995 (the "1995 period"). Decreased net sales in the 1996
period were a result of reduced processing fees resulting from competitive
pricing pressures.
C-9
<PAGE>
Cost of sales in the 1996 period increased 5% to $740,264 from $705,227 in
the 1995 period. The increase was primarily due to increased Cobalt amortization
as a result of Cobalt installations after the end of the 1995 period. Other
direct processing costs such as plant labor increased slightly. As a result, the
gross profit percentage in the 1996 period decreased to 32% from 37% in the 1995
period.
Selling, general and administrative ("SG&A") expenses of $414,231 in the
1996 period increased 2% from $407,204 in the 1995 period. Certain SG&A
expenses, such as executive salaries, were reduced in the 1996 period compared
to the same expenses in the 1995 period, but were offset by increased legal
expenses in the 1996 period resulting from the proposed sale of substantially
all of the Company's assets to SteriGenics International.
Expenses of Rockaway Industrial Park - Parcel I decreased to $21,257 in
the 1996 period as compared to $34,003 in the 1995 period. The decrease was due
to lower maintenance and consultant costs incurred in the 1996 period.
Environmental investigation and remediation expenses in the 1996 period of
$480,000 were the result of a $460,000 increase in the Company's estimates of
the costs to be incurred for groundwater remediation programs at the Rockaway,
New Jersey site and a $20,000 increase in the Company's estimate for involvement
at the Nascolite site (Note 3). No such increases occurred in the 1995 period.
As a result of the foregoing, the loss from operations in the 1996 period
was $569,581 as compared to a loss from operations of $23,954 in the 1995
period.
Investment income was $3,095 in the 1996 period as compared to $3,894 in
the 1995 period, a result of lower amounts available for investing.
Other interest expense of $68,419 in the 1996 period increased by $10,034
over other interest expense in the 1995 period primarily due to the cost of
financing Cobalt acquisitions after the 1995 period.
Other income of $591,580 in the 1996 period was primarily a result of
$580,000 from the settlement of prior environmental insurance claims and the
resale of a small quantity of Cobalt 60 to a Cobalt supplier.
As a result, the Company reported a net loss of $43,325 or $.04 per share
in the 1996 period, as compared to a net loss of $78,445 or $.07 per share in
the 1995 period.
Financial Condition
At March 31, 1996, the Company had a working capital deficit of
$988,521, as compared to a working capital deficit of $1,116,028 at December 31,
1995. The working capital deficit decrease of $127,507 was primarily the result
of $580,000 received from an insurance settlement of prior environmental claims,
which was partially offset by the purchases of Cobalt 60 and other capital
assets. The Company's ability to further improve its working capital position is
dependent on increasing the current level of sales revenues or obtaining
external financing. Also, funds received in the 1996 period allowed the Company
to repay its outstanding short-term credit line.
As discussed in the 1995 Form 10-KSB, the Company has entered into an
Asset Acquisition Agreement ("Asset Sale") with SteriGenics International to
sell substantially all of the Company's operating assets, subject to a number of
conditions including shareholder approval and removal of Spill Act Liens
obtained by the DEP. In April 1996, as a condition to releasing such liens, the
DEP agreed to accept $575,000 as settlement of all outstanding claims asserted
under ACO, as well as all claims which could be asserted for
C-10
<PAGE>
the period ending June 30, 1996. The Company does not currently have available
funds to pay such settlement, but would fund such settlement with proceeds from
the Asset Sale.
The Company anticipates that no additional financing will be needed for
ongoing operations, other than short-term borrowings under an existing $315,000
credit line, unless the Asset Sale is not consummated within the terms of the
agreement. Based on current forecasts, management anticipates that sales
revenues for each of the remaining quarters of 1996 will exceed sales revenues
in the first quarter of 1996.
In the 1996 period, the Company acquired additional Cobalt 60 under an
existing lease agreement and for cash terms of sixty days. Other capital
expenditures in the 1996 period included a warehouse addition at one facility
and purchases of plant processing equipment.
The Company's net cash provided by operating activities in the 1996 period
was $699,119 as compared to $68,699 in the 1995 period. Cash provided by
operations in the 1996 period increased primarily due to the receipt of $580,000
from an insurance settlement. Investing activities in the 1996 period used net
cash of $306,097 primarily for the purchase of Cobalt 60, a warehouse expansion,
and other plant processing equipment, as compared to net cash used of $5,514 in
the 1995 period. Net cash used in financing activities in the 1996 period was
$180,231 and resulted from a net payoff of $200,000 on the short-term credit
line and $187,847 paid on existing long-term debt, offset by $236,000 received
from the sale of Series A preferred stock, compared to net cash used of $67,870
in the 1995 period. The resulting net increase in cash and cash equivalents for
the 1996 period was $212,791 as compared to a net decrease in cash and cash
equivalents of $4,685 for the 1995 period.
Part II. Other Information
Item 1. Legal Proceedings.
Reference is made to Item 3 - "Legal Proceedings - New Jersey Environmental
Proceedings" contained in the Company's Annual Report on Form 10-KSB for its
fiscal year ended December 31, 1995 for a discussion of the environmental
proceedings relating to the Company's Rockaway, New Jersey property.
As of March 31, 1996, the Company had accrued a total of $720,000 for New
Jersey Department of Environmental Protection (the "DEP") billed expenditures
for the period through January 20, 1995 and the Company's estimate of unbilled
expenditures, which expenditures are in accordance with a 1992 Administrative
Consent Order (the "ACO") between the DEP, the Company, and Thiokol Corporation.
In April 1996, the DEP agreed to accept an aggregate payment of $575,000 in full
satisfaction of all financial obligations of the Company accrued during the
period ending June 30, 1996 under the ACO. The DEP also agreed, upon receipt of
such payment, to initiate proceedings to remove its Spill Act lien on the
Company's Rockaway property.
The DEP also has agreed to permit the Company to expand its pilot study,
utilizing the "Clean-Ox" hydrogen peroxide-based remedial system. Assuming
positive conclusive test results from the expanded pilot test, the Company may
petition the DEP for a change in the Remedial Action Work Plan under the 1995
Record of Decision.
Item 2. Changes in Securities. - none
Item 3. Defaults Upon Senior Securities. - not applicable.
Item 4. Submission of Matters to a Vote of Securityholders. - none
C-11
<PAGE>
Item 5. Other Information. - none
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fiscal quarter with
respect to which this report is filed.
Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RTI INC.
Date: May 31, 1996 THEO W. MULLER
--------------------
Theo W. Muller
President
Date: May 31, 1996 R. STEPHEN MAICO
-------------------------
R. Stephen Maico
Treasurer
Principal Accounting and
Financial Officer
C-12
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB/A
(Amendment No. 1)
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [Fee Required] For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
Commission file number: 0-5887
RTI INC.
(Name of small business issuer in its charter)
New York 11-2163152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
108 Lake Denmark Road, Rockaway, New Jersey 07866
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (201) 625-8400
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.08 par value
(Title of Class)
Check whether the issuer (l) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that 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 ___
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year - $4,352,027.
State the aggregate market value of the voting stock held by non-affiliates
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 the past 60
days.
Approximately $2,620,500, based (a) for the Company's Common Stock, on
the published sale price ($2.50) on The Nasdaq Small-Cap Market on March
15, 1996, and (b) for the Company's voting preferred stock, on the sales
price thereof on March 11, 1996.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of March 15,
1996 - 1,076,888 shares
Documents Incorporated by Reference: None.
Transitional Small Business Disclosure Format. Yes ___ No _X_
<PAGE>
PART I
Item 1. Description of Business.
General
RTI Inc., a New York corporation ("RTI"), with a wholly-owned subsidiary
(collectively, the "Company"), is engaged in supplying gamma irradiation
services. RTI was incorporated in August 1968.
The Company's irradiation services are supplied principally to
manufacturers whose products are prepackaged before delivery to the Company. The
Company utilizes Cobalt-60 as the source of its gamma radiation.
The Company operates three irradiation facilities, which are located in
Rockaway, New Jersey (the "Rockaway Facility"), Alamance County, North Carolina
(the "North Carolina Facility") and Salem, New Jersey (the "Salem Facility").
At December 31, 1995, the Company had approximately 220 customers, none of
which accounted for 10% or more of the Company's 1995 revenues. The Company's
top ten customers accounted for less than half of the Company's revenues in
1995. During 1995, approximately 58% of the Company's irradiation processing
volume consisted of medical products (medical devices and disposable medical
supplies) and the balance of cosmetics and other consumer products.
On February 26, 1996, the Company entered into an asset acquisition
agreement with SteriGenics International pursuant to which, subject to various
conditions including due diligence and approval by the Company's shareholders,
the Company will sell substantially all of its assets (other than cash and its
Rockaway, New Jersey property). See "Proposed Transaction with Sterigenics".
Gamma Radiation Processing
Gamma radiation accompanies the spontaneous disintegration of radioactive
materials and has proven useful for a variety of commercial industrial
applications, the most prevalent of which are the sterilization of medical
products and the sanitization of consumer products and spices. Cobalt-60, which
is relatively safe and easy to use, is the radioactive material used for the
commercial processing of the products irradiated by the Company.
Scientifically calculated doses of gamma radiation are effective in
eliminating the viability of virtually all types of micro-organisms. Materials
exposed to gamma radiation do not accumulate radioactive energy as a result of
such exposure.
Gamma radiation has many advantages over other methods of sterilization.
Irradiation is not dependent upon ambient temperature, pressure or humidity,
thereby limiting costly variables which must be controlled in other processes,
requires no post-quarantine hold time and produces no toxic residues in the
product irradiated. In addition, gamma radiation is able to penetrate
substantially all forms of packaging materials, including glass and metal
containers, and sterilize or sanitize the contents in a predictable manner
according to pre-determined specifications.
All products processed by the Company have a pre-determined minimum and
maximum absorbed dose authorized by the customer. Products received by the
Company are scheduled for irradiation with an exposure time based upon the
customer's pre-determined minimum and maximum absorbed dose. The customer's
products are loaded into irradiation carriers or onto specially designed pallet
cars, which transport the products into a shielded irradiation room for a
calculated exposure to gamma radiation. The Company maintains a rigorous quality
control program, which documents and certifies the dose received. A variety of
technical controls and detailed internal procedures minimize the possibility
that a processed product will not meet the customer's pre-determined absorbed
2
<PAGE>
dose specifications. The Company's arrangements with its customers generally do
not limit the Company's legal liability for inadvertent processing errors.
Cobalt-60
The Company has obtained the Cobalt-60 used in its operations from either
Nordion International Inc. or Amersham International plc and its U.S.
affiliates. Cobalt-60 decays at the rate of approximately 12.3% a year and has a
"half-life" of 5.27 years. The Company must periodically replenish decayed
Cobalt-60 in order to maintain its desired level of processing capability. In
1993, the Company entered into a lease purchase agreement to obtain from one of
such suppliers, through 1998, all Cobalt-60 it acquires, up to an agreed amount
per year, if competitively priced. The Company also has obtained Cobalt-60
through direct purchase, normally paying for such Cobalt-60 in negotiated
installments. The Company believes it is unlikely that there will be an
interruption in the supply of Cobalt-60 in the foreseeable future.
Marketing and Sales
The Company sells its services primarily on a current purchase order basis.
A major portion of the Company's business is with customers which have been
served by the Company for more than one year, and the Company has long-term
processing arrangements with several of its customers. To assist in its
marketing efforts, the Company offers processing information, technical guidance
and test irradiation to prospective and current customers.
Food Irradiation
The sale of irradiated food products in the United States has been, and
continues to be, an area surrounded by debate and controversy. Except for the
irradiation of spices, the Company has not received any significant revenues
from the commercial irradiation of foods distributed in the United States. The
Company has no reason to believe that the irradiation of food products will
become a viable commercial enterprise in the United States within the
foreseeable future.
Government Regulations
The business activities of the Company are regulated by the U.S. Nuclear
Regulatory Commission (the "NRC"), state agencies, the U.S. Food and Drug
Administration (the "FDA") and the U.S. Department of Agriculture (the "USDA").
The Company maintains all licenses and permits necessary to conduct its current
business and believes that it will be able to continue to do so in the future.
The loss of any of the Company's licenses or permits could have a material
adverse effect on the Company's operations.
The Company's facilities are subject to periodic inspection by various
regulatory agencies. During the past three years, no enforcement actions have
been instituted by any federal or state agency against the Company. The
Company's licenses of its facilities are in good standing.
Environmental Matters
The Company is subject to regulation under various federal and state laws
which permit regulatory authorities to compel (or perform) cleanup of
environmental contamination.
In 1982, the New Jersey Department of Environmental Protection (the
"NJDEP") commenced an action against the Company alleging violations of the New
Jersey Spill Compensation and Control Act and the New Jersey Water Pollution
Control Act with respect to the Company's Rockaway property. For further
information concerning environmental matters related to the Rockaway property
and the effects thereof on the Company's financial condition and results of
operations, see Item 3 - "Legal Proceedings--New Jersey Environmental
3
<PAGE>
Proceedings" and Item 6 - "Management's Discussion and Analysis or Plan of
Operation". See also Item 3 - "Legal Proceedings--Nascolite Site" for
information concerning environmental proceedings relating to a disposal site the
Company is alleged to have shipped materials to during a period prior to 1982.
Employees
At March 17, 1996, the Company employed two executive officers and 54 other
full-time employees, 46 of whom were in operations. None of the Company's
employees is represented by a labor organization and the Company believes that
its relations with its employees are good.
Competition
Excluding research laboratories and universities, the Company believes that
there are approximately 40 gamma irradiation facilities presently in operation
throughout the United States, half of which are operated by independent
processors, including the Company, and the rest of which are operated
principally by medical supply manufacturers to irradiate their own products. The
Company competes for gamma irradiation processing primarily with two independent
processors, each of which is substantially larger than the Company in assets and
sales and, from time to time, have had substantial excess capacity. At various
times during 1995, the Company's competitors have competed for the business of
the Company's customers by quoting processing prices significantly less than the
prices charged by the Company, some of which quotations, if matched by the
Company, would not have fully covered the Company's allocated overhead costs.
The Company competes on the basis of quality, turnaround time, geographic
proximity and price. With some exceptions, service irradiation is generally
performed for customers within a 300-mile radius of an irradiation facility. The
Company performs most of its service irradiation for customers in the New
Jersey/New York metropolitan/Philadelphia metropolitan area and in the North
Carolina/South Carolina/Virginia area, although some of its customers are
located elsewhere in the United States.
Gamma irradiation processing competes with other methods of sterilization,
primarily the use of ethylene oxide and electron-beam sterilization, neither of
which is as effective as gamma processing in certain instances.
Proposed Transaction With SteriGenics
On February 26, 1996, the Company entered into an asset acquisition
agreement (the "Acquisition Agreement") with SteriGenics International, a
contract irradiation company incorporated and based in California
("SteriGenics"). Pursuant to the Acquisition Agreement, the Company will (a)
sell to SteriGenics substantially all of the assets (the "Purchased Assets") of
the Company (other than cash items and the Company's facilities and real estate
in Rockaway, New Jersey (the "Rockaway property")), and SteriGenics will assume
the stated liabilities (the "Assumed Liabilities") of the Company (other than
liabilities associated with the Rockaway property) for a purchase price (the
"Purchase Price") equal to $18,000 plus the book value of the Purchased Assets
minus the book value of the Assumed Liabilities, in each case determined in
accordance with generally accepted accounting principles ("GAAP"), and (b) net
lease to SteriGenics (the "Lease") 62 acres of the Rockaway property, a portion
of which contains the Rockaway Facility (the "Leased Property") for six years at
an annual rent sufficient to yield to the Company approximately an 8% return on
the book value of the assets being leased, with a five-year renewal option as
well as a purchase option.
In connection with entering into the Acquisition Agreement, on March 11,
1996, SteriGenics purchased for $236,000 from the Company 118,000 shares of a
newly authorized series of preferred stock of the Company (the "Series A
Preferred Stock"), which shares (a) have the same voting rights per share as the
Common Stock, and (b) constitute approximately 9.9% of the Company's voting
securities. The Series A Preferred Stock pays dividends at the rate of $0.16 per
share per annum, has a liquidation preference of $2.00 per share, is convertible
4
<PAGE>
into Common Stock on a share for share basis, is callable by the Company at a
call price of $2.00 per share at any time after January 31, 1997 and is
redeemable by SteriGenics at the call price at any time, except that if
surrendered for redemption prior to January 31, 1997, the Company may redeem the
Series A Preferred Stock for a demand note payable after February 10, 1997.
SteriGenics is required to surrender the Series A Preferred Stock in payment of
$236,000 of the Purchase Price upon the closing under the Acquisition Agreement.
Simultaneously with entering into the Acquisition Agreement, the Company
granted SteriGenics an option (the "North Carolina Option") to purchase the
Company's North Carolina Facility and related assets (excluding cobalt) for a
price equal to the book value thereof (determined in accordance with GAAP) plus
$400,000. The North Carolina Option will become exercisable only (a) if the
Acquisition Agreement is terminated by SteriGenics as a result of (i) the
Company's Board of Directors (A) withdrawing its recommendation to the Company's
shareholders to approve the Acquisition Agreement, or (B) recommending an
alternative acquisition proposal to the Company's shareholders (including the
acceptance of a tender or exchange offer for 15% or more of the outstanding
shares of Common Stock), or (ii) the Company failing to call a meeting of its
shareholders by November 27, 1996, and (b) if the Company enters into a legally
binding agreement relating to such an alternative acquisition proposal. To the
extent that the North Carolina Option is exercised by SteriGenics, the closing
of the sale of the North Carolina Facility will occur immediately prior to the
closing of the alternative acquisition proposal that resulted in the North
Carolina Option having become exercisable.
Closing of the proposed sale to SteriGenics is subject to a number of
conditions, including (a) the correctness of the Company's representations and
warranties at the closing (the "Closing"), (b) approval of the proposed sale by
two-thirds of the Company's shareholders at a duly called meeting thereof, (c)
the net book value (determined in accordance with GAAP) of the assets being
purchased by SteriGenics equalling at least $3 million, (d) receipt by
SteriGenics of all necessary permits and licenses to operate the Company's
facilities, (e) the acknowledgement by the NJDEP that upon receipt of certain
amounts from the Company, the NJDEP will release certain liens on the Leased
Property and the Purchased Assets and that the NJDEP will not regard SteriGenics
as responsible for any ongoing environmental liability of the Company with
respect to the Rockaway property, and (f) the absence of any material adverse
change since February 26, 1996 in the business of the Company. The Acquisition
Agreement may be terminated by either the Company or SteriGenics if the Closing
is not consummated by November 27, 1996.
Although SteriGenics conducted preliminary due diligence prior to entering
into the Acquisition Agreement, SteriGenics did not complete its environmental
due diligence, which is expected to take from 30 to 90 days from February 26,
1996, depending upon whether SteriGenics determines to conduct Phase II
environmental investigations with respect to the Company's real property it will
purchase or lease at the Closing. SteriGenics has the right to terminate the
Acquisition Agreement if such environmental due diligence exposes any condition
that could materially adversely affect its ability to operate the facilities to
be acquired or could result in any material liability for environmental
remediation.
Until Closing, the Company is required to operate its business only in the
ordinary course. The Company has agreed not to (a) solicit any alternative
proposal for a sale of the Company or a substantial part of its assets, or (b)
subject to the fiduciary obligations of the Company's Board of Directors,
negotiate with respect to, or recommend to the Company's shareholders, any such
alternative proposal.
The Company intends to call a shareholders meeting to approve the
Acquisition Agreement after satisfactory completion of SteriGenics' due
diligence review. In connection with such meeting, the Company will furnish its
shareholders with more complete information concerning the proposed transaction.
Under this timetable, the Company does not expect that the proposed transaction
will be consummated any earlier than the summer of 1996. In connection with the
proposed transaction, Theo W. Muller, the President and Chief Executive Officer
and a director of the Company, has entered into a voting agreement (the "Voting
Agreement') with SteriGenics pursuant to which he has agreed (a) to vote all of
his shares of Common Stock, constituting approximately 11% of the Company's
outstanding voting securities, in favor of approval of the proposed transaction,
(b) not to sell, transfer,
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<PAGE>
pledge or otherwise encumber, or enter into any voting arrangements with respect
to, his shares of Common Stock, and (c) not to solicit proxies or otherwise
become involved with any other party for the purposes of opposing or competing
with the consummation of the proposed transaction with SteriGenics, except to
the extent required by the Company's Board of Directors. In addition, certain
shareholders of the Company, who currently hold approximately 12% of the
outstanding Common Stock, in the aggregate, have entered into voting agreements
pursuant to which they have agreed to vote in favor of the proposed transaction
with SteriGenics.
If the proposed transaction with SteriGenics is consummated, the Company
will cease its contract irradiation business. The Company's Rockaway property is
on the Natural Priorities List, as a "superfund site". Until the Rockaway
property is removed from the "superfund" list, which the Company anticipates
will take at least five years, the Company does not intend to make any
distributions to its shareholders unless it is certain that adequate financial
provision has been made to complete the clean-up of the Rockaway property. The
Company is evaluating possible alternative activities, assuming consummation of
the proposed SteriGenics transaction.
Item 2. Description of Property.
The Company has three irradiation facilities, each of which has a design
capacity of approximately 3 million curies.
The Rockaway Facility
The Rockaway Facility is located in Rockaway Township, New Jersey on
approximately 15 acres owned by the Company, and adjoins a 248 acre parcel also
owned by the Company, all of which property (collectively, the "Rockaway
property") was acquired from a predecessor of Morton Thiokol, Inc. ("Thiokol").
The Rockaway Facility, which was first licensed by the NRC in 1970, contains
approximately 30,600 square feet of building space, which includes offices
(including the Company's executive offices), irradiation facilities and a 13,000
square foot warehouse. Approximately 80 acres of the Rockaway property are zoned
as an industrial area and the balance is zoned as a single family residential
area. The Company has not paid taxes on a tax lot consisting of 201 acres of the
Rockaway property in an amount, with interest and penalties, which aggregated
approximately $153,000 as of December 31, 1995, and has been accrued by the
Company in its financial statements. The failure to make such payment is
non-recourse to the Company's remaining Rockaway property and other assets.
Since 1982, the NJDEP has been investigating the Rockaway property for
existing environmental contamination and, in 1992, indicated that the 183-acre
non-industrial portion of the Rockaway property appeared to show no evidence of
contamination. See Item 3 - "Legal Proceedings--New Jersey Environmental
Proceedings".
The North Carolina Facility
The Company owns and operates an irradiation facility on approximately four
acres in Alamance County, North Carolina adjacent to Interstate 85. The North
Carolina Facility, which was first licensed for operation in 1983, contains
approximately 21,000 square feet of space, which includes offices, irradiation
facilities and a 15,000 square foot warehouse. The Company is adding an
additional 4,000 square feet of warehouse space, which is anticipated to be
completed by April 1, 1996.
The Salem Facility
The Company leases an irradiation facility located on approximately three
acres in Salem, New Jersey from the City of Salem Municipal Port Authority
through December 1, 2004. This facility contains approximately 34,000 square
feet of building space which includes offices, irradiation facilities and a
26,000 square foot warehouse. The lease requires the Company to pay the
principal of, and interest on, a City of Salem Municipal Port Authority Port
Development Revenue Bond (the "Salem Bond") in equal annual principal
installments of
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<PAGE>
$250,000 through 1999 (the proceeds of which financed the construction of and
equipment for the facility), plus rentals aggregating $317,000 (which were
prepaid) and all real estate taxes imposed on the property.
General
At March 1, 1996, the ratio of installed Cobalt-60 to design capacity at
the Company's irradiation facilities approximated 39%. Generally, the Company
maintains only the amount of Cobalt-60 needed for currently anticipated
processing requirements. As the Company's business grows, additional Cobalt-60
can be added to a facility to increase its irradiation processing capacity.
The Company believes that its properties are suitable and adequate for its
present use and that such properties offer the Company the appropriate capacity
for operations in the foreseeable future.
A substantial portion of the Company's real property has been pledged to
secure certain obligations of the Company. See Item 6 - "Management's Discussion
and Analysis or Plan of Operation" and Note 5 to Consolidated Financial
Statements included under Item 7 - "Financial Statements". The Company has
granted an option to SteriGenics to acquire its North Carolina real property
under certain circumstances, as well as an option to acquire a portion of the
Rockaway property under other circumstances. See Item 1 - "Description of
Business-Proposed Transaction with SteriGenics". The NJDEP has a priority lien
on the 15 acres of the Company's Rockaway property on which the Rockaway
Facility is located, and on the improvements thereon, to secure expenditures
made by the NJDEP in connection with the investigation of environmental
conditions on the Rockaway property. See Item 3 - "Legal Proceedings--New Jersey
Environmental Proceedings".
See also Notes 2, 3, 4, 5, 7, 9, 10 and 15(a) to Consolidated Financial
Statements included under Item 7 - "Financial Statements".
Item 3. Legal Proceedings.
The Company is involved in various legal proceedings which are incidental
to the conduct of its business and are not expected to have a material adverse
effect on the Company's consolidated financial position or results of its
operations. In addition, the Company is involved in the proceedings described
below.
New Jersey Environmental Proceedings
In 1982, the New Jersey Department of Environmental Protection (the
"NJDEP") commenced an action in the Superior Court of New Jersey, Chancery
Division, Morris County (Docket No. C-2453-81E) against the Company and Dr.
Martin A. Welt (the Company's then President), individually, alleging violations
of the New Jersey Spill Compensation and Control Act and the New Jersey Water
Pollution Control Act and sought injunctive relief, by way of clean-up of the
Company's Rockaway property (which had been purchased from Thiokol), penalties
and damages.
In 1983, a Consent Order was entered into requiring the installation of
monitoring wells, groundwater sampling and analysis. As a result of the analysis
of data showing the presence of halogenated hydrocarbons in the groundwater,
submitted by the NJDEP to the United States Environmental Protection Agency
during this period, a portion of the Rockaway property was placed on the
National Priorities List as a "superfund site". Such listing was based on a 1984
evaluation of a 15 acre portion of the Rockaway property; however, the exact
boundaries of the "superfund site" were not determined. The Company believes
that the boundaries encompass approximately 80 acres of the 263 acres which
comprise the Rockaway property.
In 1986, the NJDEP issued a directive ordering the Company and Dr. Welt,
individually, to fund the cost of a Phase I Remedial Investigation/Feasibility
Study (the "Phase I Study") to determine the nature and extent of contamination
detected primarily on the 15 acre operating portion of the Rockaway property.
Since failure
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<PAGE>
to comply with the directive could have subjected the Company to triple damages,
the Company agreed to fund the Phase I Study and to pay the administrative costs
of the NJDEP. As a result of such agreement, in 1987, a Stipulation of Dismissal
regarding the Company, only, was filed in the 1982 action.
In 1989, the NJDEP issued a second directive to the Company and Thiokol for
a Phase II Remediation Investigation/ Feasibility Study (the "Phase II Study")
primarily with respect to an additional 65 acre portion of the Rockaway
property. According to the directive, both the Company and Thiokol were jointly
and severally liable for all costs of the clean-up and removal of hazardous
substances discharged on the Rockaway property. In 1991, the Phase II Study was
completed and the NJDEP advised the Company and Thiokol that it intended to
perform additional groundwater studies in order to delineate the extent of
groundwater contamination. In 1992, the Company and Thiokol entered into an
administrative consent order (the "ACO") with the NJDEP, pursuant to which the
Company (i) agreed to pay all costs incurred in connection with the Phase II
Study, and (ii) agreed to implement appropriate actions to complete the
remediation of the Rockaway property under the supervision of the NJDEP. In
connection with the ACO, the Company, in 1992, established an accrual for its
estimated costs associated with the Phase II Study and the remediation of the
Rockaway property. During 1993, the Company was assessed additional costs
related to the Phase II Study, and the Company completed the surface cleanup of
the Rockaway property, which included, among other things, excavating soils with
PCB levels above NJDEP non-residential standards.
During 1994, the NJDEP issued a Record of Decision (the "ROD") with respect
to approximately 80 acres of the Rockaway property, which proposed remedial
action involving hydrofracturing of the cracked bedrock and the installation of
a system to pump and treat the groundwater under a portion of the Rockaway
property. During 1995, the Company conducted a three-well pilot study, using the
"Clean-Ox" hydrogen peroxide-based remedial system, to test its effectiveness in
decreasing contaminant levels in the deep aquifer. Based upon the results of the
study, in February 1996, the Company petitioned the NJDEP for a change in the
Remedial Action Work Plan under the ROD to permit broader use of the "Clean-Ox"
system. As of December 31, 1995, the Company had an unfunded reserve of
approximately $309,000 for the anticipated cost of groundwater remediation.
However, the ultimate cost of such remediation will be affected if the Remedial
Action Work Plan under the ROD is modified, as requested by the Company.
Nascolite Site
In August 1994, the US Environmental Protection Agency (the "EPA") issued
an Administrative Order (No. II-CERCLA-94-0124) (the "Order") naming the Company
as a respondent in a proceeding under Section 106(a) of CERCLA, alleging that
the Company, along with two other respondents and eight previously identified
potentially responsible parties (collectively the "PRP Group"), arranged for the
disposal or transport for disposal of one or more hazardous substances to
property owned by Nascolite Corporation (a manufacturer of polymethyl
methacrylate ("MMA") plastic sheet) in Millville and Vineland, New Jersey (the
"Nascolite Site"). The Nascolite Site was operated by Nascolite as a scrap
acrylic reclamation facility from 1953 to 1980 and was placed on the National
Priorities List in 1984. Subsequently, a Remedial Investigation and Feasibility
Study was conducted and various hazardous materials were found to be on the
Nascolite Site. In 1988, the EPA issued a Record of Decision for operative unit
1 ("OU1"), which addressed ground water remediation on the Nascolite Site. A
Preliminary Waste- In-List prepared in 1990 by the EPA indicated that 5,468,455
pounds of hazardous materials, primarily liquid waste MMA, was sent to the
Nascolite Site. The Company has no current record of any such shipments, except
for a 1978 invoice reflecting that 4,400 pounds of "sludge" was picked up by
Nascolite from the Company for transport to the Nascolite Site. The Company's
present operations do not use MMA or generate MMA sludge.
The Order requires that each of the respondents named therein undertake and
complete all response actions to implement the OU1 (estimated to cost between $7
million and $30 million) as a joint effort and that the Company and the PRP
Group are to be jointly and severally responsible for carrying out all of the
requirements of the Order; and that if the EPA incurs any future response costs
due to a failure by the named respondents to comply with the Order, each of the
named respondents will be responsible for triple damages, penalties of up to
$25,000 per
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<PAGE>
day and other penalties under CERCLA. On January 26, 1995, the EPA also notified
the Company that it had incurred previous response costs aggregating in excess
of $3.9 million with respect to the Nascolite Site, demanded payment thereof
plus interest and offered the Company the right to enter into negotiations with
the PRP Group to lead to reimbursement to the EPA of Response Costs. On February
9, 1995, the Company, without admitting any liability, notified the EPA that it
elected to participate in good faith negotiations with the PRP Group.
Simultaneously, the Company entered into a Tolling Agreement with the United
States on behalf of the EPA, pursuant to which the EPA agreed not to institute
the alleged cause of action against the Company prior to September 1, 1995 in
order to permit the Company to pursue good faith efforts to settle with the PRP
Group the claims alleged against the Company in the Order.
The Company has been in contact with the PRP Group and believes that it
will be able to settle with the PRP Group, if it determines to do so, for an
amount between (i) 0.5% of the costs incurred and which may be incurred by the
PRP Group to remediate the Nascolite Site plus a 100% premium for legal and
administrative costs of the PRP Group, and (ii) 0.08% (which percentage is based
upon the Company's identified percentage of the total hazardous materials
shipped to the Nascolite Site) of such costs.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of securities holders of the Company
during the fourth quarter of its 1994 fiscal year.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company's Common Stock is traded on The Nasdaq Small-Cap Market under
the symbol "RTII". Effective May 25, 1995, the Company's certificate of
Incorporation was amended to effect an eight-for-one reverse stock split of the
Common Stock. The following table sets forth the high and low bid quotations for
each quarterly period during the two calendar years ended December 31, 1995 for
the Company's Common Stock, as reported by The Nasdaq Small-Cap Market. The
quotations for the period prior to May 25, 1995 have been retroactively adjusted
to reflect the reverse stock split. These quotations represent prices between
dealers, do not include retail markup, markdown or commission and do not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
High Bid Low Bid
-------- -------
<S> <C> <C> <C>
1st Quarter 1994 $7 $3-1/2
2nd Quarter 1994 4-3/4 3
3rd Quarter 1994 7-1/2 3-1/4
4th Quarter 1994 5-1/2 3
1st Quarter 1995 4 3
2nd Quarter 1995 3-1/4 1-1/2
3rd Quarter 1995 1-7/8 1-1/4
4th Quarter 1995 4-7/8 1-11/16
</TABLE>
As of December 31, 1995, the Company had approximately 2,000 holders of
record of its Commo Stock. During the fiscal year ended December 31, 1995, there
were transactions in the Company's Common Stock on approximately 62% of all
trading days.
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<PAGE>
The Company has not paid any dividends. The payment of cash dividends
by the Company, if any, will be made only from assets legally available therefor
and will depend generally upon the Company's short-term and long-term cash
availability, current and anticipated capital requirements, restrictions under
any then existing credit and other debt instruments and arrangements and other
factors deemed relevant by the Company's Board of Directors. The Company's Board
of Directors does not anticipate the payment of cash dividends on the Company's
Common Stock as long as the Company's Rockaway property remains on the National
Priorities List as a 'superfund site".
Item 6. Management's Discussion and Analysis or Plan of Operation
IN REVIEWING MANAGEMENT'S DISCUSSION AND ANALYSIS, REFERENCE IS MADE TO
THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED AS ITEM
7 - "FINANCIAL STATEMENTS" IN THIS ANNUAL REPORT ON FORM 10-KSB. AS
DISCUSSED IN SUCH NOTES, THE COMPANY OWNS PROPERTY WHICH HAS BEEN THE
SUBJECT OF AN ENVIRONMENTAL INVESTIGATION. SUCH FINANCIAL STATEMENTS, AS
STATED IN THE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
INCLUDED THEREIN, HAVE MADE PROVISION FOR THE COSTS OF SUCH
INVESTIGATION AND RESULTING MONITORING, CLEANUP AND REMEDIATION
OBLIGATIONS IN ACCORDANCE WITH EXISTING STUDIES AND CLEANUP PLANS.
HOWEVER THERE CAN BE NO ASSURANCE THAT SUCH PROVISION CONSTITUTES
THE ULTIMATE LIABILITY THAT MAY RESULT UPON THE FINAL DISPOSITION OF
THE ENVIRONMENTAL INVESTIGATION, CLEANUP AND REMEDIATION PROGRAMS.
Financial Condition
General
Information with respect to total assets, long-term debt (net of
current portion and discount), working capital (deficiency) and certain related
ratios, as of December 31, 1995, 1994 and 1993, is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Total assets (in thousands) $ 7,882 $ 7,920 $ 8,664
Long-term debt, net of current portion $ 2,024 $ 2,022 $ 1,919
and discount (in thousands)
Working capital (deficiency) [current ($1,116) ($ 510) ($ 101)
assets less current liabilities] (in
thousands)
Working capital ratio [current assets .38 to 1 .63 to 1 .93 to 1
to current liabilities]
Percentage of total liabilities to 149% 114% 101%
stockholders' equity
</TABLE>
The Company has a long-term leasing arrangement (with a purchase option)
with a supplier of Cobalt-60 and also has been able to purchase Cobalt-60 with
installment payments after delivery. The Company expects that such arrangements
will continue to be available during 1996. The Company has scheduled 1996
payments of approximately $1 million for Cobalt-60.
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<PAGE>
The NJDEP has the statutory right to obtain a lien on the Company's assets
in an amount equal to any unreimbursed costs incurred by the NJDEP relating to
environmental remediation of the Company's Rockaway property. Although the
Company has been paying all such costs in accordance with its NJDEP agreements,
the Company has received additional NJDEP expenditure statements showing that
reimbursable NJDEP expenditures increased by an aggregate of $143,107 with
respect to NJDEP fiscal year billing periods of 1993, 1994 and 1995. The Company
has protested certain of these oversight expenditures and the NJDEP has
temporarily extended the due dates thereof until further notification.
At December 31, 1995, the Company had cash and cash equivalents of $77,631
and a working capital deficit of $1,116,028, compared to cash and cash
equivalents of $172,198 and a working capital deficit of $509,708 at December
31, 1994. The $606,320 increase in the working capital deficit during 1995 was
primarily due to a $439,664 increase in the current portion of long-term debt, a
$94,567 decrease in cash and a decrease in other current assets. See
Consolidated Statements of Cash Flows included under Item 7 - "Financial
Statements". The Company expects to be able to fund its 1996 operations and
budgeted expenditures, including budgeted capital expenditures of approximately
$237,000, additional cobalt leasing obligations and the anticipated expenses
(principally legal expenses relating to the negotiation of the transaction and
the preparation of proxy solicitation materials to obtain approval thereof) of
the proposed sale of assets to SteriGenics (see Item 1 - "Description of
Business--Proposed Transaction with SteriGenics") from (i) forecasted sales,
assuming competitive industry pressures do not further intensify, (ii)
borrowings under a $250,000 short-term line of credit obtained from Frellum
Corporation (see Item 12 - "Certain Relationships and Related Transactions"),
(iii) the $236,000 of proceeds received in March 1996 from the sale of the
Company's Series A Preferred Stock to SteriGenics, and (iv) a $580,000 insurance
settlement received in February 1996 for an environmental liability claim
previously asserted.
As of March 20, 1996, the Company did not plan to enter into any unsecured
financing arrangements. The Company does not have any current banking credit
relationships and does not know whether it will have the ability to borrow funds
other than from a related party.
As described in Note 10 to Consolidated Financial Statements included under
Item 7 - "Financial Statements", the Company is obligated to remediate a portion
of its Rockaway property. Costs relating to such activity have been provided for
in accordance with existing environmental studies and approved cleanup plans.
There can be no assurance that such provisions will constitute the ultimate
liability of the Company, although the Company believes that such provisions are
adequate. In addition, the Company has been named a respondent in an
environmental proceeding relating to a disposal site, to which the Company
shipped a relatively small amount of materials during a period prior to 1982.
The Company has established a $30,000 unfunded reserve therefor in its financial
statements; although there can be no assurance that such provision is adequate.
See Item 3 - "Legal Proceedings--Nascolite Site".
The Company's operations are not labor intensive and the Company does not
expect any significant changes in the number of its employees during 1995. A
possible increase in the cost of Cobalt-60 in the future is not regarded as
significant in terms of the Company's operations. Inflation is expected to have
a minimal impact on the Company's business.
Proposed SteriGenics Transaction
On February 26, 1996, the Company entered into an asset acquisition
agreement with SteriGenics. See Item 1 - "Description of Business--Proposed
Transaction with SteriGenics". Pursuant to the Acquisition Agreement, the
Company will (a) sell to SteriGenics substantially all of the Company's assets
(other than cash items and the Rockaway property), and SteriGenics will assume
the Company's stated liabilities (other than liabilities associated with the
Rockaway property) for a purchase price equal to $18,000 plus the book value of
the purchased assets minus the book value of the assumed liabilities, in each
case determined in accordance with GAAP, and (b) net lease to SteriGenics 62
acres of the Rockaway property, a portion of which contains the Rockaway
Facility. Simultaneously with entering into the Acquisition Agreement, the
Company granted SteriGenics an option to
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<PAGE>
purchase, under certain circumstances, the Company's North Carolina Facility and
related assets (excluding cobalt) for a price equal to the book value thereof
(determined in accordance with GAAP) plus $400,000.
Closing of the proposed sale to SteriGenics is subject to a number of
conditions. The Acquisition Agreement may be terminated by either the Company or
SteriGenics if the Closing is not consummated by November 27, 1996. Until
Closing, the Company is required to operate its business only in the ordinary
course. The Company has agreed not to (a) solicit any alternative proposal for a
sale of the Company or a substantial part of its assets, or (b) subject to the
fiduciary obligations of the Company's Board of Directors, negotiate with
respect to, or recommend to the Company's shareholders, any such alternative
proposal. The Company intends to call a shareholders meeting to approve the
Acquisition Agreement after satisfactory completion of SteriGenics' due
diligence review.
If the proposed transaction with SteriGenics is consummated, the Company
will cease its contract irradiation business. The Company's Rockaway property is
on the Natural Priorities List, as a "superfund site". Until the Rockaway
property is removed from the "superfund" list, which the Company anticipates
will take at least five years, the Company does not intend to make any
distributions to its shareholders unless it is certain that adequate financial
provision has been made to complete the clean-up of the Rockaway property. The
Company is evaluating possible alternative activities, assuming consummation of
the proposed SteriGenics transaction.
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121 "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
The Company has not completed its analysis of this pronouncement and, thus, the
impact on the Company's results of operations and financial condition has not
been determined.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation". The Company is currently studying SFAS No. 123, but does not
currently plan to adopt the fair value based method of accounting for stock
options or similar equity instruments. Accordingly, the adoption of SFAS No. 123
is not expected to impact the Company's results of operation or financial
condition.
Results of Operations
1995 Compared to 1994
Net sales in 1995 were $4,352,027, a decrease of 3.1% from net sales of
$4,492,630 in 1994. This decrease, despite increased processing volume, was
primarily due to intense competitive pricing pressures resulting from industry
overcapacity within the Company's geographic markets.
Cost of sales in 1995 increased 19.8% to $2,921,752 from $2,438,222 in
1994, as a result of increased product volume in 1995 and the inclusion of
operating costs for a full year of the Salem Facility which resumed irradiation
processing in the fourth quarter of 1994. Cost of sales associated with a full
year of operations of the Salem Facility aggregated approximately $736,000. As a
result, gross profit decreased 30.4% to $1,430,275 in 1995 from $2,054,408 in
1994.
Selling, general and administrative expenses decreased 12.1% to $1,556,450
in 1995 from $1,770,348 in 1994. The decrease was due to lower executive
compensation, legal and other professional fees, partially offset by the
inclusion of a full year of selling, general and administrative expenses
relating to the Salem Facility.
The expenses of the Salem Facility of $156,138 in 1994 represented the
costs incurred during the first nine months of 1994, prior to the resumption of
irradiation processing at the Salem Facility. For the fourth
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<PAGE>
quarter of 1994 and all of 1995, Salem Facility costs were recorded in cost of
sales and selling, general and administrative expenses.
Expenses of the Rockaway Industrial Park in 1995 were $75,505, a 20%
reduction from comparable 1994 expenses due to lower consultant and maintenance
costs. The loss on abandonment of building and equipment of $374,530 in 1994 was
due to the elimination of the net book value of depreciable assets at the
Rockaway Industrial Park; no comparable transaction occurred in 1995.
Environmental investigation, remediation and related legal expenses in 1995
were $223,590 and consisted of NJDEP administrative costs recognized in 1995, a
$30,000 reserve for future expenses related to the Nascolite site, and related
legal expenses. Excluding the Nascolite reserve, the remaining 1995
environmental expenses (which were related to the Rockaway Industrial Park) were
comparable to 1994 expenses.
As a result of the foregoing, the loss from operations in 1995 was $425,270
as compared to a loss from operations of $535,976 in 1994.
Investment income decreased to $9,776 in 1995 from $18,419 in 1994 due to
lower amounts available for investment during 1995.
Other interest expense of $259,968 in 1995 increased by $153,587 over 1994,
primarily due to the interest rate increase on December 1, 1994 from an average
rate of 4.72% to a fixed rate of 10% on $1,250,000 principal amount of City of
Salem Municipal Port Authority Port Development Revenue Bonds ($250,000
principal amount of which was paid in December 1995), and to additional
long-term debt incurred during 1995 related to Cobalt lease agreements. Other
income in 1995 of $150,819 consisted primarily of $144,830 of net proceeds
received in the settlement of all litigation with Dr. Martin A. Welt.
As a result of the foregoing, the Company recorded a loss of $524,643 in
1995 compared to a loss of $623,128 in 1994.
1994 Compared to 1993
Net sales in 1994 were $4,492,630, an increase of 3.4% from net sales of
$4,343,408 in 1993. 1994 sales reflected increased processing volume. However,
such increase in sales was restricted by competitive pricing, shortage of plant
warehouse space and insufficient cobalt loading to meet certain customer demand
at one of its facilities.
Cost of sales in 1994 increased 19.6% to $2,438,222 from $2,039,029 in
1993. The resumption of irradiation processing at the reopened Salem Facility
contributed over half of such increase and the remaining increase was due
primarily to increased direct processing costs, principally employee expense. As
a result, gross profit decreased 10.8% to $2,054,408 in 1994 from $2,304,379 in
1993.
Selling, general and administrative expenses increased 5.3% to $1,770,348
in 1994 from $1,681,061 in 1993. The increase was due primarily to the added
expenses relating to the reopened Salem Facility. Certain other administrative
expenses, such as legal expenses, decreased in 1994 but were offset by expenses
of developing and documenting certain systems and procedures to comply with
existing FDA regulations and to prepare for expected FDA regulations and
possible ISO 9002 registration.
As a result of the foregoing, income from operations in 1994 was $284,060,
a decrease of 54.4%, as compared to $623,318 in 1993.
Investment income increased to $18,419 in 1994 from $14,980 in 1993, due to
higher interest rates and a higher amount of investments during a portion of the
year.
13
<PAGE>
The 1994 expenses of the Salem Facility of $156,138 represented the nine
month period ended September 30, 1994, after which the Salem Facility was
reopened and all such expenses were then recorded in cost of sales, selling
general and administrative expenses and other interest expense. The Salem
Facility expenses for the nine month period in 1994 decreased 19% from
comparable expenses during the same 1993 period.
Expenses of the Rockaway Industrial Park in 1994 were $94,235 and were
slightly less than similar 1993 expenses. As a result of the ongoing
environmental remediation and use restrictions relating to a 65 acre industrial
portion of the Rockaway Industrial Park, the obsolescence of the buildings and
attached assets thereon, and the uncertainty of the Company's ability to sell
such industrial portion, management reduced the net asset value of such
depreciable assets to zero; the resulting charge of $374,530 was recorded as a
loss on abandonment of building and equipment in the Rockaway Industrial Park.
Environmental investigation, remediation and related legal expenses relating to
the Rockaway Industrial Park were $195,133 in 1994 and consisted of
approximately $61,500 of legal, professional and cleanup expenses to complete
surface cleanup and to develop a Remedial Action Work Plan for groundwater
remediation and an approximate $133,500 increase in the existing accrual for
future groundwater remediation and related NJDEP oversight costs. Comparable
1993 expenses aggregated $336,167, which was reduced to $36,167 after
application of $300,000 of related insurance proceeds received in 1993.
Proxy contest and related litigation expenses in 1993 did not recur in
1994. Other interest expense increased to $106,381 in 1994 from $42,545 in 1993
and consisted of $78,000 related to Cobalt-60 financing and $28,000 of fourth
quarter interest expense related to the Salem Facility. Cobalt financing
interest increased due to the acquisition of Cobalt-60 at the end of the third
quarter of 1994. Interest expense related to the Salem Facility was included in
expenses of Salem Facility in 1993, although the amount of 1994 interest
increased as a result of the higher average interest rate in 1994 on the Salem
bonds. Other income in 1993 of $110,000 resulted from the settlement of an
insurance claim under a 1984 insurance policy; no similar item was received in
1994.
As a result of the foregoing, the Company recorded a loss of $623,128 in
1994 compared to income before income taxes of $204,955 in 1993. The estimated
income tax liability of $5,000 for 1993 was the net result of the utilization of
outstanding Federal and State net operating loss carryforwards, offset by
alternate minimum income taxes and applicable franchise taxes. The Company
recorded net income of $199,955 in 1993 as compared to a net loss of $623,128 in
1994.
Item 7. Financial Statements.
Index to Financial Statements
-----------------------------
Page
----
Report of Independent Certified Public Accountants 15
Consolidated balance sheet: December 31, 1995 16
Consolidated financial statements for the years ended December 31:
Statements of operations - 1995 and 1994 17
Statements of stockholders' equity - 1995 and 1994 18
Statements of cash flows - 1995 and 1994 19
Notes to consolidated financial statements 20-31
14
<PAGE>
Report of Independent Certified Public Accountants'
Board of Directors and Stockholders
RTI Inc.
Rockaway, New Jersey
We have audited the accompanying consolidated balance sheet of RTI Inc. and
subsidiaries as of December 31, 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the two 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.
As discussed in Notes 3 and 10 to the consolidated financial statements, the
Company owns property which is the subject of continuing environmental
investigation and significant litigation.
As discussed in Note 15(a), the Company entered into an asset acquisition
agreement with a corporation pursuant to which, subject to various conditions
including due diligence and approval by the Company's stockholders, the Company
will sell substantially all of its assets (other than cash and its Rockaway, New
Jersey property).
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of RTI Inc. and
subsidiaries at December 31, 1995, and the results of their operations and cash
flows for each of the two years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
BDO Seidman, LLP
Woodbridge, New Jersey
March 15, 1996
15
<PAGE>
RTI INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
==============================================
<TABLE>
<CAPTION>
December 31,
1995
---------------
ASSETS
<S> <C>
Current:
Cash and cash equivalents $ 77,631
Accounts receivable, net of allowance for doubtful accounts of $10,000 562,811
Prepaid expenses and other 31,949
Restricted deposits (Note 10) 15,771
---------------
TOTAL CURRENT ASSETS 688,162
Property, plant, equipment and Cobalt 60, net of accumulated depreciati
amortization (Notes 2, 3, 4, 5, 7, 9 and 10) on an7,006,886
Certificates of financial assurance - restricted (Note 11) 150,000
Deferred financing costs (Note 5(a)) 36,960
---------------
$ 7,882,008
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Current portion of long-term debt (Notes 4 and 5) $ 1,047,264
Accounts payable 138,178
Accrued expenses (Notes 7(a) and 10) 618,748
---------------
TOTAL CURRENT LIABILITIES 1,804,190
Long-term debt, net of current portion and $44,000 discount (Notes 4 and 5) 2,024,050
Other liabilities (Notes 7(b) and 10) 883,713
---------------
TOTAL LIABILITIES 4,711,953
---------------
Commitments and contingencies (Notes 3, 4, 6, 8, 9 and 10)
Stockholders' equity (Note 8):
Preferred stock, $.05 par value - shares authorized 2,000,000;
no shares issued and outstanding -
Common stock, $.08 par value - shares authorized 15,000,000;
issued and outstanding 1,076,907 86,153
Additional paid-in capital 16,013,851
Deficit (12,929,949)
---------------
TOTAL STOCKHOLDERS' EQUITY 3,170,055
---------------
$ 7,882,008
===============
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE>
RTI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
====================================================
<TABLE>
<CAPTION>
Year ended Year ended
December 31, December 31,
1995 1994
----------- -----------
<S> <C> <C>
Net sales (Note 13) $ 4,352,027 $ 4,492,630
Cost of sales 2,921,752 2,438,222
----------- -----------
GROSS PROFIT 1,430,275 2,054,408
Operating expenses:
Selling, general and administrative expenses 1,556,450 1,770,348
Expenses of Salem facility, including interest expense of
$54,242 (Note 4) -- 156,138
Expenses of Rockaway Industrial Park - Parcel I, including
interest expense of $22,000 in both years
(Notes 3 and 5(c)) 75,505 94,235
Loss on abandonment of building and equipment in
Rockaway Industrial Park - Parcel I (Note 3) -- 374,530
Environmental investigation, remediation and related legal
expenses (Note 10) 223,590 195,133
----------- -----------
LOSS FROM OPERATIONS (425,270) (535,976)
Other income (expense):
Investment income 9,776 18,419
Other interest expense (259,968) (106,381)
Other income (Note 6) 150,819 810
----------- -----------
NET LOSS $ (524,643) $ (623,128)
=========== ===========
Net loss per share $ (.49) $ (.58)
=========== ===========
Weighted average number of common shares outstanding 1,077,077 1,077,185
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE>
RTI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(NOTE 8)
===============================================================
<TABLE>
<CAPTION>
Common stock
--------------------- Additional
Number of paid-in
shares Amount capital Deficit Total
----------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 1,077,064 $86,165 $16,014,413 $(11,782,178) $4,318,400
Exercise of stock options 125 10 209 - 219
Net loss - - - (623,128) (623,128)
----------- -------- ---------- ----------- ----------
BALANCE, DECEMBER 31, 1994 1,077,189 86,175 16,014,622 (12,405,306) 3,695,491
Purchase of partial shares (282) (22) (771) - (793)
Net loss - - - (524,643) (524,643)
----------- -------- ---------- ----------- ----------
BALANCE, DECEMBER 31, 1995 1,076,907 $86,153 $16,013,851 $(12,929,949) $3,170,055
=========== ======== ========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE>
RTI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTE 14)
======================================================
<TABLE>
<CAPTION>
Year ended Year ended
December 31, December 31,
1995 1994
---------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (524,643) $(623,128)
---------------- ---------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 865,689 682,950
Loss on abandonment of building and
equipment in Rockaway Industrial
Park - Parcel I - 374,530
Recovery of losses on accounts receivable - (2,600)
Discount of note payable 22,000 22,000
(Increase) decrease in:
Accounts receivable (21,061) (5,661)
Certificate of financial assurance - restricted - (75,000)
Prepaid expenses and other 83,290 23,742
Restricted deposits 23,257 78,587
Increase (decrease) in:
Accounts payable (96,994) (34,740)
Accrued expenses 94,869 (36,203)
Other liabilities 47,203 (67,848)
---------------- ---------------
TOTAL ADJUSTMENTS 1,018,253 959,757
---------------- ---------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 493,610 336,629
---------------- ---------------
Cash flows from investing activities:
Purchases of fixed assets (93,426) (167,259)
Decrease in short-term investments - 275,801
---------------- ---------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (93,426) 108,542
---------------- ---------------
Cash flows from financing activities:
Proceeds from notes payable 200,000 100,000
Payments for deferred finance costs - (60,548)
Payments on long-term debt (693,958) (692,065)
Proceeds from exercise of stock options - 219
Payments for partial shares of common stock (793) -
---------------- ---------------
NET CASH USED IN FINANCING
ACTIVITIES (494,751) (652,394)
---------------- ---------------
Net decrease in cash and cash equivalents (94,567) (207,223)
Cash and cash equivalents, beginning of year 172,198 379,421
---------------- ---------------
Cash and cash equivalents, end of year $ 77,631 $172,198
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
============================================================
NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of RTI Inc. and its
wholly-owned subsidiaries (the "Company"). All significant intercompany accounts
and transactions have been eliminated in consolidation.
Business Activities
The Company is engaged in supplying gamma irradiation services to a variety of
products, primarily medical devices and disposable medical supplies. In
addition, the Company irradiates, to a lesser extent, cosmetics and other
consumer products. The Company operates two facilities in New Jersey and one in
North Carolina and performs the majority of its irradiation services for
customers in the New Jersey/ New York metropolitan/Philadelphia metropolitan
area and North Carolina/ South Carolina/Virginia area.
Revenue Recognition
Sales are recorded when irradiation services are complete.
Property, Plant, Equipment and Cobalt 60
Property, plant and equipment are stated at cost. Provision for depreciation and
amortization is made using the straight-line method by annual charges to
operations calculated to absorb costs over the lesser of the estimated useful
lives of the assets or the terms of related leases.
The estimated useful lives are as follows:
Land improvements 10 years
Buildings and improvements 10 - 40 years
Furniture and fixtures 5 - 10 years
Machinery and equipment 4 - 20 years
Cobalt 60 is carried at cost. The balance is being amortized at a rate of 12.3%
per annum using the declining balance method, which is the approximate rate at
which Cobalt 60 decays.
Environmental Expenditures
Environmental expenditures that relate to an existing condition caused by past
operations and which do not contribute to current or future revenues are
expensed. Liabilities are recorded when environmental assessments and/or
remediation are probable and such costs to the Company can be reasonably
estimated.
20
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
============================================================
NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
The Company accounts for its income taxes in accordance with Financial
Accounting Standards Statement No. 109, "Accounting for Income Taxes" ("SFAS
109").
SFAS 109 requires a company to recognize deferred tax liabilities and assets for
the expected future tax consequences of events that have been recognized in a
company's financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement carrying amounts and tax basis of assets and liabilities
using enacted tax rates in effect in the years in which the differences are
expected to reverse. The Company has provided a valuation allowance to offset
the benefit of any net operating loss carryforwards or deductible temporary
differences.
Cash and Cash Equivalents
Cash and cash equivalents include all cash balances and highly liquid debt
instruments with an original maturity of three months or less.
Loss Per Share
Loss per share is computed on the basis of the weighted average number of common
shares outstanding during the year and does not include the effect of common
stock equivalents. The computation of the weighted average number of common
shares outstanding for the years ended December 31, 1995 and 1994, considered
the one for eight reverse stock split (Note 8(a)).
Long-term Debt
The recorded value of the Company's long-term debt approximates fair value based
on the current rates available to the Company for debt of the same remaining
maturities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. The
Company has made various estimates including those related to the valuation
allowance on deferred tax assets (Note 7), and exposure to environmental matters
(Note 10). The costs the Company will ultimately incur and the value of assets
ultimately realized could differ in the near term from the related amounts
reflected in the accompanying financial statements.
21
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
============================================================
NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Effect of New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121 "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
The Company has not completed its analysis of this pronouncement and, thus, the
impact on the Company's results of operations and financial condition has not
been determined. In October 1995, the FASB issued SFAS No. 123 "Accounting for
Stock- Based Compensation." The Company is currently studying SFAS No. 123, but
does not currently plan to adopt the fair value based method of accounting for
stock options or similar equity instruments. Accordingly, the adoption of SFAS
No. 123 is not expected to impact the Company's results of operation or
financial condition.
NOTE 2 - PROPERTY, PLANT, EQUIPMENT AND COBALT 60
Property, plant, equipment and Cobalt 60 consist of the following at December
31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Land and improvements $ 392,477
Buildings and improvements 3,054,025
Furniture and fixtures 157,477
Machinery and equipment 2,275,464
----------------
5,879,443
Less: Accumulated depreciation and amortization 3,227,195
----------------
2,652,248
----------------
Cobalt 60 9,367,832
Less: Accumulated amortization 5,013,194
----------------
4,354,638
----------------
TOTAL $7,006,886
================
</TABLE>
NOTE 3 - ROCKAWAY INDUSTRIAL PARK
The Company owns a 248 acre parcel of land and several buildings ("Parcel I") in
Rockaway, New Jersey, that is contiguous to the 15 acre operating parcel that is
the site of one of its irradiation processing facilities ("Parcel II" and, with
Parcel I, the "Rockaway Industrial Park"). Since 1985, the Company has been
seeking a buyer for Parcel I; however, the Company's ability to sell Parcel I is
impaired until an environmental cleanup and remediation program is completed
(see Note 10).
As a result of management's evaluation of the ongoing environmental proceedings,
the accompanying restrictions on the use of the property and the obsolescence of
the buildings, machinery and equipment on Parcel I, the net book value of the
buildings, machinery and equipment was reduced in the fourth quarter of 1994
from $374,530 to zero.
22
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
============================================================
NOTE 4 - SALEM FACILITY
In June 1986, a Company subsidiary commenced irradiation processing operations
at a facility in Salem, New Jersey. The facility is located on land utilized
pursuant to a long-term lease (see Note 9) with the City of Salem Municipal Port
Authority ("Salem"). Financing for the construction of the facility was provided
primarily from the proceeds of the sale of $2,500,000 of industrial revenue
bonds (see Note 5(a)) and a $1,000,000 Urban Development Action Grant ("Grant").
At the expiration of the lease, ownership of property, plant, equipment and the
remaining Cobalt 60 financed by the bonds and the Grant will pass to Salem. The
lease initially expires in 2004 and permits an extension.
During 1988, due to continuing operating losses, the Board of Directors decided
to suspend operations at the Salem facility. Accordingly, the Company stopped
depreciation and amortization of the assets at the Salem facility and
transferred Cobalt 60 to another of its facilities.
In October 1994, the Company reopened the Salem facility and irradiation
services are ongoing. Depreciation and amortization of the assets at the Salem
facility was based on the remaining term of the lease (ten years) from 1994.
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
City of Salem Municipal Port Authority, Port Development
Revenue Bonds (a) $1,000,000
Note payable (b) 25,000
Note payable (c) 243,000
Note payable (d) 200,000
Secured Cobalt 60 financing and capital lease agreements (e) 1,603,314
----------
TOTAL 3,071,314
Less: Current portion 1,047,264
----------
TOTAL LONG-TERM DEBT $2,024,050
==========
</TABLE>
(a) These bonds (the "Bonds") were issued in 1984 to finance the construction,
improvement and equipping of an irradiation processing facility in Salem,
New Jersey (see Note 4). An irrevocable letter of credit was issued
pursuant to a guaranty agreement among a bank, the Company and a former
licensee of the Company (the "Licensee").
The outstanding Bonds were redeemed on December 1, 1994 and simultaneously
remarketed at the redemption price to new bondholders. At the same time,
the Bonds' interest rate was converted to a fixed interest rate of 10%. The
average interest rate was 4.72% for the eleven months ended November 30,
1994.
23
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
============================================================
NOTE 5 - LONG-TERM DEBT (continued)
The Company is obligated to make equal annual principal installment
payments of $250,000 through December 1999.
(b) Simultaneously with the remarketing of the Bonds, the Company borrowed
$100,000 from the Licensee. The Company is obligated to make quarterly
principal installment payments of $25,000 on March 31, 1995, June 30, 1995,
October 2, 1995 and January 2, 1996. Interest is payable quarterly at the
applicable Federal rate of interest in effect. The borrowings are
collateralized by the following: (i) all rights to the use of the property
constructed with the proceeds of the Bonds; and (ii) certain property,
plant, equipment and Cobalt 60 owned by the Company.
(c) In connection with the Company's settlement of certain litigation (see Note
10), New Jersey Economic Development Authority (the "Authority") bonds were
cancelled, the owner thereof acquired from the Authority the Company's note
in an amount equal to the cancelled bonds and such owner agreed to suspend,
for a period of five years, the Company's obligation to make principal and
interest payments. As a result, a $287,000 obligation was discounted by
$110,000 to $177,000 at December 31, 1992. The resulting credit from this
discounting was applied to reduce the Company's net environmental clean up
expense. The debt will be increased annually by $22,000 and charged as
interest expense (non-cash) during the five year period the Company is not
obligated to make principal and interest payments. Commencing January 1,
1998, the note will bear interest at a rate of 10.61% per annum and
principal payments will be made in annual installments of $41,000 through
January 1, 2004.
(d) In November 1995, the Company entered into an agreement for a revolving
line of credit from a corporation controlled by the President of the
Company. The line of credit provides for maximum principal borrowings of
$315,000 and expires April 28, 1997. Interest payments (fixed rate of 8%)
are due monthly. The revolving credit facility is secured by all accounts
receivable of the Company. In connection with the line of credit, the
Company issued to the corporation a warrant, expiring November 28, 1997, to
acquire 25,000 shares of the Company's Common Stock at $1.75 per share
(104% of the last sale price on the day immediately prior to such
issuance).
(e) In October 1993, the Company entered into an agreement to lease Cobalt 60
which has been accounted for as a capital lease. During the year ended
December 31, 1995, the Company leased additional Cobalt 60 under this
agreement. The total future minimum lease payments are due as follows: 1996
- $454,885; 1997 - $386,505; 1998 - $258,791; 1999 - $179,346; 2000
- $9,232; and thereafter - $64,830. The amount representing interest is
$190,908.
In September 1994, the Company entered into a secured financing agreement
to purchase Cobalt 60. The agreement provides for thirty-six equal monthly
principal installments of $16,333 plus accrued interest beginning April
1995. Interest is adjusted quarterly at prime plus 1.75%.
24
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
============================================================
NOTE 5 - LONG-TERM DEBT (continued)
Principal amounts due in connection with long-term debt for each of the five
years subsequent to December 31, 1995 are as follows:
1996 $1,047,264
1997 782,019
1998 570,426
1999 457,916
2000 45,887
Thereafter 211,802
---------------
$3,115,314
===============
NOTE 6 - EXECUTIVE TERMINATION AGREEMENTS AND LITIGATION
The Company and Dr. Martin A. Welt, who resigned as Chief Executive Officer of
the Company in 1986, have been in litigation since 1987, arising from the
Company failing to pay Dr. Welt under a consulting agreement and the Company's
claims against Dr. Welt for damages arising out of actions of Dr. Welt.
In 1995, the Company and Dr. Welt settled all litigation, whereby, Dr. Welt paid
$144,830 to the Company.
NOTE 7 - ACCRUED EXPENSES AND OTHER LIABILITIES
(a) Accrued expenses consist of the following at December 31, 1995:
Property taxes $200,091
Remedial investigation and environmental
cleanup costs (Note 10) 179,987
Payroll and related costs 104,681
Professional fees 64,482
Other 69,507
---------------
TOTAL $618,748
===============
(b) Other liabilities consists of $883,713 relating to the non-current portion
of remedial investigation and environmental cleanup costs (see Note 10).
25
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
============================================================
NOTE 8 - STOCKHOLDERS' EQUITY
(a) Common and Preferred Stock Authorized, Issued and Outstanding
Effective May 25, 1995, the Company's Certificate of Incorporation was
amended to effect a one for eight reverse stock split of common stock and
authorize 2,000,000 shares of preferred stock. No preferred stock was
issued as of December 31, 1995 and the outstanding common stock as of
December 31, 1995 was an estimate (since fractional shares were not
issuable) based on the actual number of shares converted one for eight and
the remaining shares to be converted.
(b) Stock Options
The Company's 1987 stock option plan (the "Plan") authorizes the issuance
of options for common stock until November 3, 1997. The options granted may
be either incentive stock options, which are exercisable one year or more
from the date of grant or non-qualified stock options, which may be
exercisable immediately. Details, which reflect the one for eight reverse
stock split effective May 1995, of stock option transactions under the 1987
Plan for the two years, are as follows:
<TABLE>
<CAPTION>
Exercise price
Options per share Exercisable
------------ ------------- -----------
<S> <C> <C> <C>
OUTSTANDING, DECEMBER 1, 1993 5,250 $1.76 - 7.76 2,062
===========
Cancelled (500) 6.48 - 7.76
Exercised (125) 1.76
------------ -------------
OUTSTANDING, DECEMBER 31, 1994 4,625 6.48 - 7.76 3,208
===========
Granted 1,250 4.00
Cancelled (939) 6.48 - 7.76
------------ -------------
OUTSTANDING, DECEMBER 31, 1995 4,936 $4.00 - 7.76 3,686
============ ============= ===========
</TABLE>
NOTE 9 - LEASE COMMITMENTS
The Company leases the land for its Salem irradiation processing facility under
a long-term lease (see Note 4). The initial 20-year term of the lease commenced
in December 1984. The lease requires the Company to pay the principal and
interest on the City of Salem Municipal Port Authority, Port Development Revenue
Bonds (see Note 5(a)), and rent aggregating $317,000 for the entire initial term
of the lease, all of which rent was prepaid as of December 31, 1986. The prepaid
rent was charged to operations in 1988. The building and fixed assets located on
this land become the property of the City of Salem Municipal Port Authority at
the end of the lease. The lease contains a provision for negotiation for renewal
for an additional ten-year period.
26
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
============================================================
NOTE 10 - ENVIRONMENTAL INVESTIGATION, REMEDIATION AND RELATED LITIGATION
As a result of engineering tests that commenced in 1981, the New Jersey
Department of Environmental Protection (formerly the New Jersey Department of
Environmental Protection and Energy) (the "DEP") issued a directive in 1986
ordering the Company and its former Chief Executive Officer (Dr. Martin A.
Welt), individually, to fund the cost of a remedial investigation and
feasibility study (the "Study") designed to determine the nature and extent of
contamination detected primarily on the Rockaway, New Jersey operating Parcel II
(see Note 3). The Company agreed to pay the costs of the Study and entered into
an Administrative Consent Order ("ACO") with the DEP. The Company accrued the
estimated cost of the Study (see Note 7) as of December 31, 1986. In accordance
with the terms of the ACO, the Company posted an $825,000 letter of credit which
was an amount equal to the estimated costs of the Study and the DEP
administrative costs. As of December 31, 1995, there is a balance of $15,771
remaining which is held as restricted funds.
In June 1989, the DEP issued a Second Directive ("Directive II") seeking payment
from the Company and the prior owner of the property (the "Prior Owner") for
approximately $1,200,000 to pay for a Phase II Remedial Investigation ("Phase
II"). According to Directive II, both the Company and the Prior Owner were
jointly and severally liable for all costs to investigate and clean up hazardous
substances on the property. The Phase II investigation was designed to conduct
further studies on Parcel II and evaluate the nature of and extent of
contamination, if any, on the 65-acre area of the property where the Prior Owner
conducted its various testing activities. In November 1991, the DEP issued its
"Remedial Investigation Report".
In 1989, the Company filed a lawsuit against the Prior Owner under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"
or "Superfund"), seeking contribution for all costs incurred by the Company in
connection with on-site investigation and cleanup activities. In 1992, the
Company released the Prior Owner from any liability under the Phase I and Phase
II investigations and the Prior Owner paid the Company $900,000 (the "Settlement
Agreement") as a partial payment against the DEP's claims for reimbursement of
expenditures for the Phase II investigation. A portion of these funds was
permitted to be used to support the surface cleanup required by the DEP. The
Prior Owner will only become subject to further liability in the event that the
Company becomes unable to perform the cleanup action(s) required by the DEP. In
addition, the Prior Owner suspended for five years the Company's obligation to
make principal and interest payments on the note issued to support the purchase
of a portion of the Rockaway Industrial Park (see Note 5(c)).
The Company has agreed to indemnify the Prior Owner against generally all claims
for past or future costs associated with studies, cleanups and/or other
remediation activities to the Rockaway Industrial Park. The Company has executed
a mortgage ("Mortgage") on the Rockaway Industrial Park in the amount of
$900,000 securing the Prior Owner to the extent the Company does not meet its
obligations under the Settlement Agreement. After the development of an
acceptable cost estimate for the implementation of remedial actions, the Prior
Owner has agreed to adjust the Mortgage to the amount of the cost estimate. If
the cost estimate exceeds the actual fair value of the mortgaged property (minus
any other liens on the mortgaged property), then the Company will execute an
additional mortgage for the difference which will be secured by the Company's
personal property at its Salem facility. If the cost estimate is less than
$900,000, then the Mortgage will be reduced to the estimated amount.
27
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
============================================================
NOTE 10 - ENVIRONMENTAL INVESTIGATION, REMEDIATION AND RELATED LITIGATION
(continued)
In 1993, and in conjunction with the Settlement Agreement, the Company and the
Prior Owner entered into an Administrative Consent Order ("ACO II") with the
DEP. In accordance with ACO II, the Company agreed to pay DEP's investigation
and oversight costs for the Phase II investigation, estimated to be $1.2
million, which was charged to operations in 1992. An initial payment of $600,000
was made in 1993 under ACO II. The remaining liability for the Phase II study is
being paid in quarterly installments through June 1997. In 1993, the Company
charged approximately $200,000 to operations for additional costs related to the
Phase II study and deposited $100,000 in a segregated interest-bearing account.
Funds in this account were withdrawn after certain provisions of ACO II were met
by the Company.
Both ACO II and the Settlement Agreement provide that the Company is responsible
for all further cleanup actions required by the DEP. Estimated costs under ACO
II and the Settlement Agreement were recorded by the Company in 1992. The
Company and the DEP have entered into a Memorandum of Agreement ("MOA") which
stipulated the responsibilities for an approved work plan for the surface
cleanup and remediation required to be performed by the Company. The Company
accrued and charged to operations approximately $200,000 in 1992 for surface
cleanup which was completed in 1994 and additional costs are not expected.
In 1994, the DEP issued its Record of Decision ("ROD") for the Rockaway
Industrial Park. The Company is required by the DEP to perform certain
groundwater remediation actions and implement a groundwater monitoring program.
A Remedial Action Work Plan ("RAWP") to implement the ROD is being reviewed by
the DEP. As of December 31, 1995, the Company has accrued approximately $309,000
for the anticipated costs of groundwater programs. The Company has petitioned
the DEP for changes in RAWP, which, if accepted, may decrease the anticipated
costs of groundwater programs.
In connection with the Phase II investigation, the DEP filed a First Priority
Lien against Parcel II and 65 acres of Parcel I. A general lien was placed on
all Company properties in the State of New Jersey and all revenues of the
Company. Each lien was in the amount of $329,670. In February 1995, the DEP
discharged all of its liens except for its liens on the revenues of the Company,
on Parcel II and on the Company's property located on Parcel II, and reset its
liens in the aggregate amount of $560,490.
Parcel II and a portion of Parcel I (see Note 3) have been placed on the
National Priorities List (the "List"). The Company believes its ability to
dispose of Parcel I acreage will be impaired until it has been remediated and
removed from the List. Additionally, there can be no assurances that the cleanup
and remediation efforts provided for by the Company will represent its ultimate
liability.
In addition, the Company has been named a respondent in an environmental
proceeding relating to a disposal site, which the Company shipped a small amount
of materials during 1982. The Company has recorded an accrual for the estimated
liability of $30,000 as of December 31, 1995. The Company, based upon all
available information, is of the opinion that the accrual is adequate and that
the ultimate disposition of this environmental proceeding will not have a
material adverse effect on these financial statements.
Environmental accruals at December 31, 1995 are:
28
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
============================================================
Current:
ACO (restricted) $ 15,771
ACO II, current portion 164,216
----------
179,987
Long-term:
ACO II, net of current portion 544,395
Groundwater remediation 309,318
Nascolite site 30,000
----------
Total $1,063,700
==========
NOTE 11 - CERTIFICATES OF FINANCIAL ASSURANCE
During 1990 and 1994, the Company was required by the NRC to post $75,000
Certificates of Financial Assurance ("CFA") in accordance with NRC regulations
applicable to companies with similar NRC licenses. The CFA is intended to
provide assurance that funds will be available if needed for decommissioning
activities and removal of Cobalt 60. The Company has elected to use trust funds
to provide such financial assurance. The funds are on deposit in restricted bank
accounts.
NOTE 12 - INCOME TAXES
At December 31, 1995, the Company had a deferred tax asset amounting to
approximately $5,100,000. The deferred tax asset consisted primarily of the tax
benefit of net operating loss carryforwards and a temporary difference resulting
from environmental accruals (see Notes 7 and 10) and is fully offset by a
valuation allowance of the same amount.
The net change in the valuation allowance for deferred tax assets was an
increase of approximately $150,000 and $500,000 in 1995 and 1994, respectively.
The net change is primarily due to the recording of certain environmental
liabilities (see Note 10) and increases in net operating loss carryforwards.
Recoveries for income taxes differs from the amount of income recoveries
determined by applying the applicable U.S. statutory Federal income tax rate to
pretax loss from continuing operations as a result of the increase in the
valuation allowance to offset the increase in the deferred tax asset.
At December 31, 1995, the Company had net operating loss carryforwards of
approximately $11,400,000 available to offset future Federal taxable income.
These carryforwards will expire from 1997 through 2010.
For state income tax purposes, primarily related to New Jersey, the Company has
net operating loss carryforwards of approximately $9,600,000, which will expire
through 2002.
NOTE 13 - MAJOR CUSTOMER
During 1994, one customer accounted for approximately 12% of net sales.
29
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
============================================================
NOTE 14 - STATEMENTS OF CASH FLOWS
Supplemental disclosures of cash flow information are as follows:
1995 1994
-------------- -------------
Interest paid $283,000 $162,000
============== =============
The Company financed purchases of Cobalt 60 amounting to approximately $914,000
and $588,000 in 1995 and 1994, respectively.
NOTE 15 - SUBSEQUENT EVENTS
a) Proposed Transactions With SteriGenics
On February 26, 1996, the Company entered into an asset acquisition
agreement (the "Acquisition Agreement") with SteriGenics International
("SteriGenics"). Pursuant to the Acquisition Agreement, the Company will
(a) sell to SteriGenics substantially all of the assets (the "Purchased
Assets") of the Company (other than cash items and the Company's facilities
and real estate in Rockaway, New Jersey) and SteriGenics will assume the
stated liabilities ("Assumed Liabilities") of the Company (other than
liabilities associated with the Rockaway property) for a purchase price
equal to $18,000, plus the book value of the Purchased Assets, minus the
book value of the Assumed Liabilities, and (b) net lease to SteriGenics
that portion of the Rockaway property on which the Rockaway Facility is
located for six years at an annual rent sufficient to yield to the Company
approximately an 8% return on the book value of the assets being leased,
with a five-year renewal option, as well as, a purchase option. Book values
are to be determined in accordance with generally accepted accounting
principles.
On March 11, 1996, SteriGenics purchased for $236,000 from the Company
118,000 shares of a newly authorized series of preferred stock of the
Company (the "Series A Preferred Stock"), which shares (a) have the same
voting rights per share as the common stock, and (b) constitute
approximately 9.9% of the Company's voting securities. The Series A
Preferred Stock pays dividends at the rate of $0.16 per share per annum,
has a liquidation preference of $2.00 per share, is convertible into Common
Stock on a share for share basis, is callable by the Company at a call
price of $2.00 per share at any time after January 31, 1997 and is
redeemable at the call price at any time, except that if surrendered for
redemption prior to January 31, 1997, the Company may redeem the Series A
Preferred Stock for a demand note payable after February 10, 1997.
SteriGenics is required to surrender the Series A Preferred Stock in
payment of $236,000 of the Purchase Price upon the closing under the
Acquisition Agreement.
The Company granted SteriGenics an option to purchase the Company's North
Carolina Facility and related assets (excluding Cobalt 60) for a price
equal to the book value, to be determined in accordance with generally
accepted accounting principles, thereof, plus $400,000. The North Carolina
Option will become exercisable only (a) if the Acquisition Agreement is
terminated by SteriGenics as a result of (i) the Company's Board of
Directors (A) withdrawing its recommendation to the Company's shareholders
to approve the Acquisition Agreement, or (B) recommending an alternative
acquisition proposal to the Company's shareholders (including the
30
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
============================================================
acceptance of a tender or exchange offer for 15% or more of the outstanding
shares of common stock), or (ii) the Company failing to call a meeting of
its shareholders by November 27, 1996, and (b) if the Company enters into a
legally binding agreement relating to such an alternative acquisition
proposal. To the extent that the North Carolina Option is exercised by
SteriGenics, the closing of the sale of the North Carolina Facility will
occur immediately prior to the closing of the alternative acquisition
proposal that resulted in the North Carolina Option having become
exercisable.
Closing of the proposed sale to SteriGenics is subject to a number of
conditions, including (a) the correctness of the Company's representations
and warranties at the closing (the "Closing"), (b) approval of the proposed
sale by two-thirds of the Company's shareholders at a duly called meeting
thereof, (c) the net book value of the assets being purchased by
SteriGenics equalling at least $3,000,000, (d) receipt by SteriGenics of
all necessary permits and licenses to operate the Company's facilities, (e)
the acknowledgement by the DEP that upon receipt of certain amounts from
the Company, the DEP will release certain liens and that the DEP will not
regard SteriGenics as responsible for any ongoing environmental liability
of the Company with respect to the Rockaway property, and (f) the absence
of any material adverse change since February 26, 1996 in the business of
the Company. The Acquisition Agreement may be terminated by either the
Company or SteriGenics if the Closing is not consummated by November 27,
1996. The proposed transactions with SteriGenics are subject to the
aforementioned conditions, accordingly, no assurance can be given with
respect to their consummation.
b) Insurance Claim Settlement
On January 29, 1996, the Company and Birmingham Fire Insurance Company
("Birmingham") entered into a Settlement Agreement and Release
("Agreement") for environmental claims primarily relating to the Company's
Rockaway, New Jersey property covered under Birmingham's insurance policy
for the period May 30, 1980 to May 30, 1983. On February 20, 1996, the
Company received a total of $580,000 for settlement in accordance with the
Agreement.
31
<PAGE>
Item 8. Changes In and Disagreements With Accountants On Accounting and
Financial Disclosure.
BDO Seidman, LLP, independent auditors, currently is, and for more than the
Company's last two fiscal years has been, the Company's independent auditors.
Since the beginning of such two fiscal year period (i) BDO Seidman, LLP, has not
expressed reliance, in its audit report, on the audit services of any other
accounting firm and (ii) there have been no reported disagreements between the
Company and BDO Seidman, LLP, on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
Directors of the Company
The directors of the Company are as follows:
Name Age Position with the Company
---- --- -------------------------
Sanders Davies 49 Director since 1986
C.W. McMillan 70 Director since 1985
Theo W. Muller 57 Director, President and Chief
Executive Officer since January 1995
George M. Whitmore, Jr. 68 Director since 1988
Each director was elected as such at the Annual Meeting of Shareholders
held on May 16, 1995, and holds his office until the next Annual Meeting of
shareholders and until his successor is elected or until his earlier
resignation.
Sanders Davies has been a partner in the firm of O'Connor, Davies & Co.,
certified public accountants, and its predecessor firm, Davies & Davies, for
more than the past five years.
C. W. McMillan has been president of C.W. McMillan Co. and its predecessor,
McMillan & Farrell Associates, Inc., agribusiness consultants, for more than the
past five years. From 1981 through March 1985, Mr. McMillan was an Assistant
Secretary of Agriculture of the United States.
Theo W. Muller was elected President and Chief Executive Officer of the
Company on January 3, 1995. Mr. Muller has been an independent investor for more
than the past five years and is a partner of Saler Associates, a residential
real estate developer. From 1985 until December 1994, Mr. Muller was president
of Frellum Corporation ("Frellum"), an aircraft leasing, and oil and gas
production company. Mr. Muller was a director of the Company from May 1990 to
November 1993.
George M. Whitmore, Jr. has been managing director of Whitmore & Company, a
management consulting firm, for more than the past five years. Previously, Mr.
Whitmore was the chairman of the board and secretary of Rathbone, King & Seeley,
Inc., an insurance holding company which, on January 8, 1993, filed a petition
for liquidation under Chapter 7 of the United States Bankruptcy Code; Mr.
Whitmore's duties for such company were
32
<PAGE>
to chair meetings of its board of directors, occasionally prepare minutes of
such meetings and, from time to time, attest to actions duly taken by such
board.
The Company pays its directors (other than full-time employees of the
Company) at the rate of $5,000 per year and reimburses its directors for their
out-of-pocket expenses incurred in connection with their services to the
Company.
No family relationship exists among the directors of the Company or between
any of such persons and the executive officers of the Company.
Executive Officers of the Company
The executive officers of the Company are as follows:
Name Age Position With the Company
---- --- -------------------------
Theo W. Muller 57 President and Director
R. Stephen Maico 44 Controller, Secretary and
Treasurer
The business experience of Theo W. Muller is set forth above.
R. Stephen Maico has been Controller, chief financial officer, Secretary
and Treasurer of the Company since 1990.
Executive officers are appointed by, and serve at the discretion of, the
Board of Directors for a term beginning after the first regular meeting of the
Board of Directors following the Annual Meeting of shareholders and until their
respective successors are duly appointed and qualified.
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers, directors and persons who own more than 10% of the Company's Common
Stock to file within prescribed periods initial statements of beneficial
ownership and statements of changes in beneficial ownership of their shares of
Common Stock with the Securities and Exchange Commission and The Nasdaq
Small-Cap Market, on which the Company's Common Stock is traded. Such persons
also are required to furnish the Company with copies of all such statements they
file. Based on its review of the copies of such statements received by it and
written representations from certain of such persons, the Company believes that,
during 1995, all such filing requirements applicable to such persons were duly
complied with, except that Theo W. Muller inadvertently failed to report the
acquisition of 18 shares of Common Stock on December 4, 1995 and the acquisition
on November 29, 1995 by Frellum of a warrant to purchase 25,000 shares of Common
Stock, which was corrected when he filed a Form 5 with the Securities and
Exchange Commission in March 1996.
Item 10. Executive Compensation.
No person who was an executive officer of the Company in 1995 received
annual compensation exceeding $100,000 during any of the three years ended
December 31, 1995. The following table sets forth information concerning
compensation for services in all capacities awarded or paid to, or earned by,
Theo W. Muller, the Company's President and Chief Executive Officer, during the
year ended December 31, 1995. No stock appreciation rights, stock options or
other long-term compensation awards have ever been granted to Mr. Muller. During
the year ended December 31, 1995, Mr. Muller did not hold any options to acquire
any securities of the Company.
33
<PAGE>
Annual Compensation
Name and Principal Position Year Salary
- --------------------------- ---- ------
Theo W. Muller 1995 $6,000
President and Chief Executive Officer
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company does not have any employment agreement or termination or change
in control arrangement with any of its executive officers.
1987 Stock Option Plan
The 1987 Plan was adopted by the Board of Directors of the Company on
November 4, 1987 and approved by the shareholders of the Company on May 25,
1988. The 1987 Plan, as amended, authorized the issuance, within ten years from
the date of its adoption, of options covering up to 90,625 shares of Common
Stock (subject to adjustment in certain circumstances) to such key employees or
other individuals (including executive officers and directors of and consultants
to the Company) who have performed, or reasonably may be expected to perform,
services of special importance to the management, operation or development of
the business of the Company. As of March 20, 1996, options for an aggregate of
4,936 shares of Common Stock, at an average exercise price of approximately
$5.96 per share, were outstanding under the 1987 Plan and 11,562 shares of
Common Stock were available for the grant of future options under the 1987 Plan.
The 1987 Plan is intended to provide an incentive to continued employment of
such key employees and other individuals by enabling them to acquire a
proprietary interest in the Company and by offering comparable incentives to
enable the Company better to attract, compete for and retain highly qualified
employees and consultants.
Options granted under the 1987 Plan may be either "Incentive Stock Options"
as that term is defined in Section 422 of the Internal Revenue Code of 1986 (the
"Code"), or options which do not qualify as Incentive Stock Options
("Non-Qualified Stock Options"). Incentive Stock Options may be granted only to
key individuals, including executive officers and directors, who are employees
of the Company. An Incentive Stock Option must expire within ten years from the
date it is granted (five years in the case of such options granted to holders of
more than 10% of the outstanding Common Stock). Incentive Stock Options are
first exercisable not earlier than one year from the date of grant. The exercise
price of an Incentive Stock Option must be at least equal to the fair market
value of the Common Stock on the date such Incentive Stock Option is granted and
must be paid in cash or in capital stock of the Company valued at its then fair
market value. To the extent the aggregate fair market value of Incentive Stock
Options that are exercisable for the first time by an optionee during any
calendar year exceeds $100,000, such options will be treated as Non-Qualified
Stock Options.
In addition, the Company may issue Non-Qualified Stock Options under the
1987 Plan to executive officers, directors and key employees of the Company and
advisors and consultants to the Company. The exercise price of these options is
not limited and may be below fair market value.
Incentive Stock Options terminate three months after the optionee's
relationship with the Company is terminated (one year if termination is by
reason of death or disability). In the case of Non-Qualified Stock Options, such
options terminate as determined by the Board of Directors, and set forth in the
option agreement between the Company and the optionee.
34
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
SteriGenics International, with its principal executive offices at 4020
Clipper Court, Fremont, California 94538, owns beneficially and of record
118,000 shares of Series A Preferred Stock, which shares are entitled to vote on
all matters submitted to the holders of the Common Stock, as a single class. The
shares of Series A Preferred Stock held by SteriGenics International constitute
9.9% of the outstanding voting securities of the Company and all the outstanding
shares of Series A Preferred Stock.
Set forth below is information, as of March 15, 1996, with respect to (i)
each person who is known by the Company to be the beneficial owner of more than
5% of the Common Stock, and (ii) the beneficial ownership of Common Stock by all
current directors of the Company and all executive officers of the Company, as a
group (five persons).
<TABLE>
<CAPTION>
Number of Shares Percent
Name and Address of Owner of Common Stock of Class
- ------------------------- --------------- --------
<S> <C> <C>
Theo W. Muller 143,393(a) 13.0%
20 Peach Hill Road
Darien, Connecticut 06820
John N. Scandalios 62,500 5.8%
46 Shrewsbury Drive
Rumson, New Jersey 07760
Sanders Davies 1,500 *
C.W. McMillan 52 *
George M. Whitmore, Jr. 3,125 0.3%
All directors and executive 149,016(b) 13.7%
officers, as a group
</TABLE>
- ----------
* Represents less than 0.1% of the issued and outstanding shares of Common
Stock.
(a) Consists of (i) 118,393 shares owned by Theo W. Muller and (ii) 25,000
shares issuable at $1.75 per share upon exercise of a warrant issued to
Frellum (see Item 12 - "Certain Relationships and Related Transactions").
(b) Consists of (i) 1,500 shares owned by an individual retirement account of
Sanders Davies, 52 shares owned by C.W. McMillan, 118,393 shares owned by
Theo W. Muller, and 3,125 shares owned by George M. Whitmore, Jr.,
directors of the Company, (ii) 25,000 shares issuable at $1.75 per share
upon exercise of a warrant issued to Frellum, and (iii) 937 shares issuable
at $6.50 per share upon exercise of incentive options granted to R. Stephen
Maico under the 1987 Plan.
The Company does not know of any arrangements, including any pledge by any
person of securities of the Company, the operation of which at a subsequent date
may result in a change in control of the Company.
35
<PAGE>
Item 12. Certain Relationships and Related Transactions.
In December 1994, Theo W. Muller purchased at par from the remarketing
agent $250,000 aggregate principal amount of 10% City of Salem Municipal Port
Authority Bonds, the principal and interest of which are paid by the Company.
In 1993, the Company sold, in a private placement, an aggregate of 175,000
shares of Common Stock to several investors, including Theo W. Muller, and
agreed to register such shares within a period of approximately one year. In
December 1994, at the request of the Company and to postpone the cost of such
registration, the investors agreed to defer their rights to registration of such
shares for an indefinite period.
During January 1995, Mr. Muller settled for $50,000 an account payable of
the Company, which was repaid to Mr. Muller, without interest, in March 1995.
On November 29, 1995, Frellum, a Delaware company which is 50.1% owned by
Mr. Muller, agreed to make available to the Company a $250,000 line of credit.
The line of credit, which initially was scheduled to expire on October 29, 1996,
has been extended to April 28, 1997 and the line of credit has been increased to
$315,000. Loans under such credit line are secured by the Company's accounts
receivable, bear interest at 8% per annum, may be repaid at any time and become
due 30 days after written demand therefor is made, which demand may not be made
prior to the expiration of such credit line. During the year ended December 31,
1995, $200,000 of loans were made by Frellum under the credit line, all of which
were outstanding at December 31, 1995, and $1,333 of interest had been accrued
with respect thereto. All of such loans were repaid on February 21, 1996. As
part of such transaction, the Company issued to Frellum a warrant, expiring
November 28, 1997, to acquire 25,000 shares of the Company's Common Stock at
$1.75 per share (104% of the last sale price of the Common Stock on The Nasdaq
Small-Cap Market on the day immediately prior to such issuance). Frellum also
was granted certain piggyback registration rights with respect to such shares if
the Company registers its securities under certain circumstances with the
Securities and Exchange Commission prior to November 28, 1997.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits.*
All financial statements required to be filed as part of this Annual Report
on Form 10-KSB are filed under Item 7 of this Form 10-KSB. A listing of such
financial statements is set forth in Item 7, which listing is incorporated
herein by reference.
3. Articles of incorporation and by-laws.
3.1 (a) Certificate of Incorporation, as filed by the New York Department
of State on August 27, 1968. (1)
(b) Certificate of Amendment of Certificate of Incorporation, as filed
by the New York Department of State on December 18, 1968. (1)
(c) Certificate of Change, as filed by the New York Department of
State on September 28, 1970. (1)
- --------
* Footnotes to Exhibits are at the end of this listing of Exhibits. Except as
specifically noted, the Exhibits listed herein have been filed previously and
are incorporated herein by reference.
36
<PAGE>
(d) Certificate of Amendment of Certificate of Incorporation, as filed by
the New York Department of State on October 15, 1971. (1)
(e) Certificate of Amendment of Certificate of Incorporation, as filed by
the New York Department of State on July 9, 1983. (1)
(f) Certificate of Amendment to Certificate of Incorporation, as filed by
the New York Department of State on June 6, 1988. (3)
(g) Certificate of Merger of Process Technology (NC), Inc. into RTI Inc.,
as filed by the New York Department of State on December 20, 1991.
(11)
(h) Certificate of Amendment to Certificate of Incorporation, as filed by
the New York Department of State on May 25, 1995. (15)
(i) Certificate of Amendment to Certificate of Incorporation, as filed by
the New York Department of State on February 27, 1996. (16)
3.2 By-laws. (14)
4. Instruments defining the rights of security holders, including indentures.
4.1 Form of Common Stock certificate. (1)
4.2 Form of Preferred Stock certificate. (16)
9. Voting trust agreement and amendments -- none
10. Material contracts.
10.1 Salem Facility - City of Salem Municipal Port Authority Port
Development Revenue Bond (South Jersey Process Technology, Inc.
Project) Series of 1984 Financing.
(a) Sublease and Security Agreement, dated as of December 1, 1984,
between City of Salem Municipal Port Authority and South Jersey
Process Technology, Inc., with Assignment of sublessor's interest to
The Farmers and Merchants National Bank of Bridgeton, as trustee. (1)
(b)(i) TENR Services and Remarketing Agreement, dated as of December
1, 1984, between South Jersey Process Technology, Inc. and Bankers
Trust Company. (1)
(b)(ii) Appointment of E.A. Moos & Company, dated November 8, 1994, as
Successor Remarketing Agent under the TENR Services and Remarketing
Agreement. (14)
(b)(iii) Notice of Remarketing Agent, dated November 29, 1994,
establishing a fixed rate on the Bonds. (14)
(b)(iv) Specimen bond. (14)
10.2 (a) Administration Consent Order in the Matter of Radiation
Technology, Inc., dated March 10, 1987, of the State of New Jersey
Department of Environmental Protection Division of Hazardous Waste
Management. (1)
37
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(b) Directive II, dated June 30, 1989, from the State of New Jersey
Department of Environmental Protection in the Matter of the Radiation
Technology Site and Morton Thiokol, Inc. and RTI Inc. respondents. (6)
(c)(i) Administrative Consent Order, dated December 7, 1992, of the
State of New Jersey Department of Environmental Protection and Energy,
in the Matter of RTI Inc. Site, RTI Inc. and Thiokol Corporation. (12)
(c)(ii) Amendment to Administrative Consent Order, dated August 2,
1994, of the State of New Jersey Department of Environmental
Protection and Energy. (14)
(d) Record of Decision - Radiation Technology Incorporated (RTI) with
respect to a site in Rockaway Township, Morris County, New Jersey,
issued in 1994 by the New Jersey Department of Environmental
Protection and Energy. (14)
10.3 Trust Agreement, dated July 24, 1990, between RTI Inc. and National
Community Bank of New Jersey, Trust Division, to fund decommissioning
of facility at 108 Lake Denmark Road, Rockaway, New Jersey. (9)
10.4 (a) Credit Agreement, dated as of December 1, 1978, among New Jersey
Economic Development Authority, Radiation Technology, Inc. and New
Jersey National Bank. (1)
(b) Bond Purchase Agreement, dated as of December 1, 1978, among New
Jersey Economic Development Authority, Radiation Technology, Inc. and
Thiokol Corporation. (1)
(c) Promissory Note, dated December 14, 1978, from Radiation
Technology, Inc. to New Jersey Economic Development Authority in the
principal amount of $820,000. (1)
(d) Mortgage, dated December 14, 1978, between Radiation Technology,
Inc. and New Jersey Economic Development Authority. (1)
(e) Assignment of Leases and Rents, dated December 14, 1978, from
Radiation Technology, Inc. (1)
(f) Settlement Agreement, dated December 18, 1992, between RTI Inc.
and Thiokol Corporation. (12)
(g) Mortgage, dated December 18, 1992, between RTI Inc. and Thiokol
Corporation. (12)
(h) Escrow Agreement, dated January 18, 1993, among RTI Inc., Thiokol
Corporation and Archer & Greiner, a Professional Corporation. (12)
(i) Assignment of Mortgage, Note, Assignment of Leases and Rents,
Credit Agreement and Pledge of Revenues, dated January 29, 1993, by
New Jersey National Bank. (12)
10.5 (a) Administrative Order of the United States Environmental Protection
Agency, dated August 9, 1994, In the Matter of the Nascolite
Corporation Site. (14)
(b) Nascolite Corporation Superfund Site Tolling Agreement, dated
February 2, 1995, between the United States of America and RTI Inc.
(14)
10.6 Agreement, made as of October 1, 1993, between Amersham International
plc and RTI Inc. (13)
38
<PAGE>
10.7 Invoice, dated September 27, 1994, from Nordion International Inc. to
RTI Inc., with related agreement. (14)
10.8 (a) Credit Agreement, dated November 29, 1995, between RTI Inc. and
Frellum Corporation. (16)
(b) Revolving Credit Note, dated November 29, 1995, in the principal
amount of $250,000 from RTI Inc. to Frellum Corporation. (16)
(c) Amendment to Credit Agreement and Revolving Credit Note, dated
February 2, 1996, between RTI Inc. and Frellum Corporation. (16)
(d) Amendment to Revolving Credit Note, dated March 25, 1996, between
RTI Inc. and Frellum Corporation. (16)
(e) Security Agreement, dated November 29, 1995, between RTI Inc. and
Frellum Corporation. (16)
(f) Warrant Agreement, dated November 29, 1995, between RTI Inc. and
Frellum Corporation. (16)
(g) Warrant Certificate for 25,000 shares of RTI Common Stock issued
to Frellum Corporation on November 29, 1995. (16)
10.9 (a) Asset Acquisition Agreement, dated as of February 26, 1996,
between SteriGenics International and RTI Inc. (16)
(b) Option Agreement, dated as of February 26, 1996, between
SteriGenics International and RTI Inc. (16)
(c) Series A Preferred Stock Purchase Agreement, dated as of February
26, 1996, between SteriGenics International and RTI Inc. (16)
(d) Form of Escrow Agreement among SteriGenics International, RTI Inc.
and the Escrow Agent named therein. (16)
(e) Form of Lease Agreement between SteriGenics International and RTI
Inc. (16)
(f) Voting Agreement, dated as of February 26, 1996, between
SteriGenics International and Theo W. Muller. (16)
(g) Form of Voting Agreement between SteriGenics International and
certain shareholders of RTI Inc. (16)
11. Statement re computation of per share earnings - not required since
such computation can be determined clearly from the material contained
in this Annual Report on Form 10-KSB.
13. Annual report to security holders, Form 10-Q or quarterly report to
security holders - not applicable.
16. Letter on change in certifying accountant - not applicable.
18. Letter on change in accounting principles - none.
39
<PAGE>
21. Subsidiaries of the small business issuer.
(a) Process Technology, Inc. (incorporated in Arkansas) (inactive)
(b) South Jersey Process Technology, Inc. (incorporated in New Jersey)
22. Published report regarding matters submitted to vote of security holders -
not applicable.
23. Consents of experts and counsel.
(a) Consent of BDO Seidman, LLP, to incorporation of financial statements
in Form S-8 Registration Statement (No. 33-34063).
24. Power of attorney - none.
27. Financial Data Schedule
28. Information from reports furnished to state insurance regulatory
authorities - not applicable.
99. Additional exhibits - none.
- ----------
(1) Incorporated by reference; filed as an Exhibit to the Company's Annual
Report on Form 10-K for its fiscal year ended December 31, 1986.
(2) Incorporated by reference; filed as an Exhibit to the Company's Annual
Report on Form 10-K for its fiscal year ended December 31, 1987.
(3) Incorporated by reference; filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for its fiscal quarter ended September 30,
1987.
(4) Incorporated by reference; filed as an Exhibit to the Company's Annual
Report on Form 10-K for its fiscal year ended December 31, 1988.
(5) Incorporated by reference; filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for its fiscal quarter ended March 31, 1989.
(6) Incorporated by reference; filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for its fiscal quarter ended June 30, 1989.
(7) Incorporated by reference; filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for its fiscal quarter ended September 30,
1989.
(8) Incorporated by reference; filed as an Exhibit to the Company's Current
Report on Form 8-K dated as of November 30, 1989.
(9) Incorporated by reference; filed as an Exhibit to the Company's Annual
Report on Form 10-K for its fiscal year ended December 31, 1990.
(10) Incorporated by reference; filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for its fiscal quarter ended March 31, 1991.
40
<PAGE>
(11) Incorporated by reference; filed as an Exhibit to the Company's Annual
Report on Form 10-K for its fiscal year ended December 31, 1991.
(12) Incorporated by reference; filed as an Exhibit to the Company's Annual
Report on Form 10-KSB for its fiscal year ended December 31, 1992.
(13) Incorporated by reference; filed as an Exhibit to the Company's Annual
Report on Form 10-KSB for its fiscal year ended December 31, 1993.
(14) Incorporated by reference; filed as an Exhibit to the Company's Annual
Report on Form 10-KSB for its fiscal year ended December 31, 1994.
(15) Incorporated by reference; filed as an Exhibit to the Company's
Quarterly Report on Form 10-QSB for its fiscal quarter ended June 30, 1995.
(16) Incorporated by reference; filed as an Exhibit to the Company's Annual
Report on Form 10-KSB for its fiscal year ended December 31, 1995.
(b) Reports on Form 8-K. No report on Form 8-K was filed by the Company
during the fourth quarter of its fiscal year ended December 31, 1995.
--------------------------------
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May 31, 1996
RTI INC.
By: THEO W. MULLER
--------------------------------
Theo W. Muller, President
(Principal Executive Officer)
In accordance with the Exchange Act, 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: May 31, 1996 /s/SANDERS DAVIES
-------------------------------
Sanders Davies, Director
May 31, 1996 /s/C.W. McMILLAN
-------------------------------
C. W. McMillan, Director
May 31, 1996 /s/THEO W. MULLER
-------------------------------
Theo W. Muller, Director
May 31, 1996 /s/GEORGE M. WHITMORE, JR.
-------------------------------
George M. Whitmore, Jr., Director
41
<PAGE>
May 31, 1996 /s/R. STEPHEN MAICO
-------------------------------
R. Stephen Maico, Controller
(Principal Financial and
Accounting Officer)
42
