<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
STERILE RECOVERIES, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
STERILE RECOVERIES, INC.
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 30, 1997
Dear Shareholder:
The Annual Meeting of Shareholders of Sterile Recoveries, Inc. (the
"Company") will be held on Wednesday, April 30, 1997, at 10:00 a.m., local
time, at The Coastal Building, Fourth Floor, located at 28100 U.S. Highway 19
North, Clearwater, Florida 34621, for the following purposes:
1. To elect two directors to serve until the 2000 Annual Meeting
of Shareholders and to hold office until their successors are
duly elected and qualified.
2. To approve amendments to the Company's 1995 Stock Option Plan.
3. To ratify the appointment of independent auditors.
4. To transact other business that properly comes before the
meeting or any adjournment of the meeting.
These items of business are more fully described in the Proxy
Statement accompanying this Notice.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual Meeting, you are
urged to sign and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the Annual Meeting may vote in person even if he or she has returned a proxy.
THE BOARD OF DIRECTORS
Clearwater, Florida
March 27, 1997
***************************************************************************
* *
* IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE *
* REQUESTED TO COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE *
* ENVELOPE PROVIDED. *
* *
***************************************************************************
<PAGE> 3
STERILE RECOVERIES, INC.
--------------------
PROXY STATEMENT
FOR
1997 ANNUAL MEETING OF SHAREHOLDERS
--------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Sterile Recoveries, Inc.
(the "Company"), a Florida corporation, for use at the Annual Meeting of
Shareholders to be held on Wednesday, April 30, 1997, at 10:00 a.m., local
time, and at any adjournment of the meeting for the purposes set forth in this
Proxy Statement and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at The Coastal Building, Fourth
Floor, located at 28100 U.S. Highway 19 North, Clearwater, Florida. The
Company's principal executive office is located at 28100 U.S. Highway 19 North,
Suite 201, Clearwater, Florida 34621 and its telephone number at that location
is (813) 726-4421.
These proxy solicitation materials were mailed on or about March 27,
1997, together with the Company's 1997 Annual Report to Shareholders, to all
shareholders entitled to vote at the meeting.
RECORD DATE
Only shareholders of record at the close of business on March 21, 1997
(the "Record Date") are entitled to notice of and to vote at the Annual
Meeting. As of the Record Date, 5,652,894 shares of the Company's Common Stock,
$.001 par value, were issued and outstanding. No shares of Preferred Stock
were outstanding. For information regarding security ownership by management
and by the beneficial owners of 5% or more of the Company's Common Stock, see
"Other Information - Share Ownership by Principal Shareholders and Management."
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person.
1
<PAGE> 4
VOTING AND SOLICITATION
Each shareholder is entitled to one vote for each share of Common
Stock on all matters presented at the Annual Meeting. Shareholders do not have
the right to cumulate their votes in the election of directors.
The cost of soliciting proxies will be borne by the Company. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation materials to such beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers, and regular
employees, without additional compensation, personally or by telephone,
telegram, letter or facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual
Meeting is a majority of the shares of Common Stock outstanding on the Record
Date. Shares that are voted "FOR," "AGAINST," or "WITHHELD" from a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as votes eligible to be cast by the holders of Common
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on the subject matter with respect to such matter.
Abstentions are counted in determining whether a quorum is present, but are not
counted in determining the number of shares voted for or against any nominee
for director or any proposal. Broker non-votes are not counted for purposes of
determining whether a quorum is present or the number of shares for or against
any nominee for election as a director or any proposal.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be
presented by such shareholders at the Company's 1998 Annual Meeting of
Shareholders must be received by the Company no later than November 25, 1997,
to be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
FISCAL YEAR END
The Company's fiscal year ends on the Sunday nearest December 31.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
The Company's Board of Directors has been divided into three classes
of two directors each, with the members of each class serving three-year terms
expiring at the third annual meeting of shareholders after their election. Two
directors are to be elected at the Annual Meeting, each to serve a term of
three years. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's two nominees named below, both of
whom are presently directors of the Company. In the event that any nominee of
the Company is unable or declines to
2
<PAGE> 5
serve as a director at the time of the Annual Meeting, the proxies will be voted
for any nominee who shall be designated by the present Board of Directors to
fill the vacancy. It is not expected that any nominee will be unable or will
decline to serve as a director. The term of office of each person elected as a
director will continue until a successor has been elected and qualified.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED
BELOW:
<TABLE>
<CAPTION>
TERM
NAME AGE PRINCIPAL OCCUPATION EXPIRES
---- --- -------------------- -------
<S> <C> <C> <C>
James T. Boosales . . . . . . 53 Executive Vice President, Chief
Financial Officer and Secretary 2000
of the Company
Lee R. Kemberling . . . . . . 71 Owner and President of Kemco
Corporation 2000
</TABLE>
Mr. Boosales has been the Company's Executive Vice President and
principal financial officer and a director since the Company's inception in
1994. He served as President, International, of Fisher-Price, Inc., a $200
million division of this toy and juvenile products company, from 1990 through
1993. Before joining Fisher-Price, Inc., Mr. Boosales served in several
senior executive capacities with General Mills, Inc., including President,
International, for Kenner Parker Toys, Inc./Tonka Corp. from 1985 to 1989,
during and after its spinoff as a public company, and President of Foot-Joy,
Inc. from 1982 to 1985.
Mr. Kemberling, an initial investor in the Company, has been a
director of the Company since its inception. Mr. Kemberling is the founder,
and since 1969 has been sole shareholder and President of, Kemco Systems, Inc.,
a developer and manufacturer of commercial and industrial waste water and heat
recovery systems, including systems used in the Company's operations.
DIRECTORS WHOSE TERMS WILL CONTINUE AFTER THE ANNUAL MEETING
The following directors will continue to serve after the Annual
Meeting for terms that expire in 1998 or 1999 as specified:
<TABLE>
<CAPTION>
TERM
NAME AGE PRINCIPAL OCCUPATION EXPIRES
- - ---- --- -------------------- -------
<S> <C> <C> <C>
Richard T. Isel . . . . . . . 53 President and Chief Executive Officer 1999
Wayne R. Peterson . . . . . . 46 Executive Vice President 1998
of the Company
Bertram T. Martin, Jr. . . . 47 Executive Vice President and Chief 1998
Operating Officer of the Company
James M. Emanuel . . . . . . 48 Chief Financial Officer of Lincare, Inc. 1999
and Lincare Holdings, Inc.
</TABLE>
3
<PAGE> 6
Richard T. Isel has been the Company's President and a director since
the Company's inception in 1994. Mr. Isel in 1991 co-founded the Company's
predecessor, AMSCO Sterile Recoveries, Inc. ("Amsco Sterile"), and served as its
President and a director until November 1993. From November 1993 until the
Company acquired Amsco Sterile in September 1994 (the "Acquisition"), Mr. Isel
engaged in private investment activities and arranged the Acquisition. Before
starting Amsco Sterile, Mr. Isel was a founder and the chief executive officer
of Sterile Design, Inc., a manufacturer of sterile custom procedure trays.
Wayne R. Peterson has been the Company's Executive Vice President and
a director since the Company's inception. Mr. Peterson co-founded Amsco
Sterile and served as a Vice President until the Acquisition. Before joining
Amsco Sterile, Mr. Peterson was President of Agora Development, Inc., a real
estate development company that from 1987 to 1991 developed projects totaling
2,000,000 square feet in four Western States (California, Nevada, Arizona, and
Illinois) for a total combined value of $278 million. Mr. Peterson is Mr.
Isel's brother-in-law.
Bertram T. Martin, Jr. has been a director of the Company since May 2,
1996, and Executive Vice President and Chief Operating Officer of the Company
since July 18, 1996. Between July 1995 and his joining the Company, Mr. Martin
provided consulting services to the Company (from October 1995) and other
businesses through Corporate Strategic Directions, Inc. From 1993 until 1995,
he was President and Chief Operating Officer of Pharmacy Management Services,
Inc., a nationwide provider of medical cost containment and managed care
services and a Nasdaq-listed company, until its acquisition by Beverly
Enterprises, Inc. in June 1995. He served as a director during the five years
Pharmacy Management was a public company. Before joining Pharmacy Management,
Mr. Martin was a Vice President, director, and shareholder of Tunstall
Consulting, Inc., a corporate financial consulting business, from 1985 to 1993.
James M. Emanuel has been a director of the Company since May 2, 1996.
Since January 1984, he has served as the Chief Financial Officer of Lincare
Inc., a national provider of respiratory therapy services for patients with
pulmonary disorders, and has been the Chief Financial Officer of Lincare
Holdings, Inc. since November 1990. Mr. Emanuel has also served as a director
of Lincare Inc. and Lincare Holdings, Inc. since November 1990. Mr. Emanuel
served in numerous financial capacities at Union Carbide Corporation between
1973 and 1984.
REQUIRED VOTE
The two nominees receiving the highest number of affirmative votes of
the shares present or represented and entitled to be voted for them shall be
elected as directors. Votes withheld from any director are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but have no further legal effect under Florida law.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings
and took action by written consent nine times during the 1996 fiscal year.
Each director who served as such during the fiscal year ended December 31,
1996, attended all of the meetings of the Board and the committees of the Board
on which he served during that year. The Board of Directors has a Compensation
Committee and an Audit Committee.
The Compensation Committee, which currently consists of Messrs.
Kemberling and
4
<PAGE> 7
Emanuel, reviews specific compensation plans, salaries, bonuses, and other
benefits payable to the Company's executive officers and makes recommendations
to the Board of Directors with respect to those matters. During fiscal 1996,
the Compensation Committee held one meeting.
The Audit Committee, which currently consists of Messrs. Emanuel and
Kemberling, reviews and evaluates the results and scope of the audit and other
services provided by the Company's independent auditors. During fiscal 1996,
the Audit Committee held one meeting.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive $1,000 per
Board and committee meeting attended. In addition, for each year of any term
to which he is elected, each outside director receives options to purchase
4,000 shares of Common Stock under the 1996 Non-Employee Director Stock Option
Plan. All options become exercisable ratably over the director's term and have
an exercise price equal to the fair market value of the Company's Common Stock
on the date of grant. Upon becoming a director of the Company, James M.
Emanuel was granted options to purchase 7,500 shares of Common Stock at an
exercise price equal to $8.00 per share, which vested one-third on the closing
of the Company's public offering, and will vest one-third at the 1997 Annual
Meeting, and one-third at the 1998 Annual Meeting of Shareholders.
PROPOSAL NO. 2
APPROVAL OF AMENDMENTS OF 1995 STOCK OPTION PLAN
The 1995 Stock Option Plan (the "Option Plan") was adopted by the
Company's Board of Directors and shareholders in December 1995. The Option
Plan was amended in May 1996 to increase its size so that a total of 500,000
shares have been reserved for issuance. The Option Plan provides for the
granting to employees of the Company of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") and for the granting of nonstatutory stock options of the Company. As
of March 21, 1997, options to purchase a total of 338,500 shares were
outstanding under the Option Plan, and 161,500 shares remained available for
future grants (without giving effect to the increase in shares being presented
to the shareholders for approval at the Annual Meeting).
PROPOSAL
In February 1997, the Board of Directors adopted amendments (i) to
increase the aggregate number of shares reserved for issuance under the Option
Plan by 200,000 shares, from 500,000 to 700,000 shares and (ii) to fix at 20%
of shares authorized under the Plan the limitation on the number of shares that
may be subject to options awarded to any one employee under the Plan. At the
Annual Meeting, the shareholders are being requested to approve these
amendments.
The overall effect of these proposed amendments to the Option Plan is
to give the Board of Directors more flexibility to grant stock options. The
amendment to the limitation on individual grants would increase from 76,000 to
140,000 shares the limitation on options that may be awarded to any one
employee, which is consistent with increasing the Plan's size. The Company
believes that grants of stock options motivate high levels of performance and
provide an effective means of recognizing employee contributions to the success
of the Company. Moreover, option grants align the interests of the employees
with the interests of the shareholders. When the Company performs
5
<PAGE> 8
well, employees are rewarded along with other shareholders. The Company
believes that option grants are of great value in recruiting and retaining key
personnel. The Board of Directors believes that the ability to grant options
will be important to the future success of the Company by allowing it to remain
competitive in attracting and retaining such key personnel.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
Affirmative votes constituting a majority of the shares present or
represented by proxy at the Annual Meeting will be required in order to approve
the amendments to the Option Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS
PROPOSAL.
SUMMARY OF 1995 STOCK OPTION PLAN
Certain features of the Option Plan are outlined below.
Purpose. The purposes of the Option Plan are to attract and retain
the best available personnel for positions of substantial responsibility, to
provide additional incentive to employees of the Company, and to promote the
success of the Company's business.
Administration. The Option Plan is administered by the Board (in this
capacity, the "Administrator"). Subject to the other provisions of the Option
Plan, the Administrator has the power to determine the terms of any options
granted, including the exercise price, the number of shares subject to the
option, and the exercisability of the option. Only one Board member currently
participates in the Option Plan.
Eligibility. The Option Plan provides that stock options may be
granted only to employees. An optionee who has been granted an option may, if
he or she is otherwise eligible, be granted additional options. The term of
options granted under the Option Plan may not exceed ten years. The
Administrator selects the optionees and determines the number of shares to be
subject to each option. In making such determination, there is taken into
account the duties and responsibilities of the employee, the value of his or
her services, his or her potential contribution to the success of the Company,
the anticipated number of years of future service, and other relevant factors.
Terms and Conditions of Options. Each option granted under the Option
Plan is evidenced by a written stock option agreement between the optionee and
the Company and is subject to the following terms and conditions:
(a) Exercise Price. The Administrator determines the
exercise price of options to purchase shares of Common Stock at the
time the options are granted. However, the exercise price of an
incentive stock option must not be less than 100% of the fair market
value of the Common Stock on the date when the option is granted. For
so long as the Company's Common Stock is traded on the Nasdaq National
Market, the fair market value of a share of Common Stock is the mean
average of the high bid and low asked prices of the shares as quoted
on such system on the date of grant.
(b) Exercise of the Option. Each stock option agreement
specifies the term of the option and the date when the option is to
become exercisable. The terms of such vesting are determined by the
Administrator. An option is exercised by giving written notice of
6
<PAGE> 9
exercise to the Company, specifying the number of full shares of
Common Stock to be purchased and by tendering full payment of the
purchase price to the Company.
(c) Termination of Employment. In the event an
optionee's continuous status as an employee terminates for any reason
(other than upon the optionee's death or disability), unless otherwise
provided in the option agreement, the optionee may exercise his or her
option for 90 days from the date of such termination, but only to the
extent that the optionee was entitled to exercise it at the date of
such termination (but in no event may the option be exercised later
than the expiration of the term of such option as set forth in the
option agreement).
(d) Disability. In the event an optionee's continuous
status as an employee terminates as a result of permanent and total
disability (as defined in Section 22(e)(3) of the Code), the optionee
may exercise his or her option, but only within 180 days from the date
of such termination, and only to the extent that the optionee was
entitled to exercise it at the date of such termination (but in no
event may the option be exercised later than the expiration of the
term of such option as set forth in the option agreement).
(e) Death. In the event of an optionee's death, the
optionee's estate or a person who acquired the right to exercise the
deceased optionee's option by bequest or inheritance may exercise the
option, but only within 180 days following the date of death, and only
to the extent that the optionee was entitled to exercise it at the
date of death (but in no event may the option be exercised later than
the expiration of the term of such option as set forth in the option
agreement).
(f) Termination of Options. Options granted under the
Option Plan expire ten years from the date of grant. No option may be
exercised by any person after the expiration of its term.
(g) Nontransferability of Options. An option is not
transferable by the optionee, other than by will or the laws of
descent and distribution, and is exercisable during the optionee's
lifetime only by the optionee. In the event of the optionee's death,
options may be exercised by a person who acquires the right to
exercise the option by bequest or inheritance.
(h) Other Provisions. The stock option agreement may
contain such other terms, provisions and conditions not inconsistent
with the Option Plan as may be determined by the Administrator.
Shares covered by options which have terminated and which are not
exercised prior to termination will be returned to the Option Plan.
Adjustment Upon Changes in Capitalization; Corporate Transactions;
Noncompetition. In the event of changes in the outstanding Common Stock of the
Company by reason of any stock splits, reverse stock splits, stock dividends,
mergers, recapitalizations or other change in the capital structure of the
Company, an appropriate adjustment shall be made by the Board of Directors in:
(i) the number and class of shares of stock subject to any option outstanding
under the Option Plan and (ii) the exercise price of any such outstanding
option.
The Option Plan provides for full vesting of the stock options on
certain "Change in Control" transactions, which include a liquidation or
acquisition of the Company. Also, if a Change
7
<PAGE> 10
of Control occurs, at the election of the Board of Directors, the Company may
terminate the Option Plan, in which case the holder of each outstanding stock
option will be entitled to receive the spread between the exercise price of the
stock option and the market value of the Common Stock issuable on exercise of
the stock option on the date of termination.
Unless the Stock Option Agreement provides otherwise, the Plan
provides that the Administrator may cancel any stock options at any time if the
participant does not during the term of his employment and for six months
thereafter comply with the Option Plan, the Stock Option Agreement, and
provisions in the Option Plan regarding noncompetition, confidentiality, and
disclosure of inventions. On any cancellation, the participant must repay to
the Company any gain realized on exercise or the shares received on exercise of
the stock option.
Amendment and Termination of the Option Plan. The Board may at any
time amend, alter, suspend or terminate the Option Plan. The Company must
obtain shareholder approval of any amendment to the Option Plan that (i)
materially increases the benefits under the Plan, (ii) materially modifies the
eligibility requirements for participation in the Plan, (iii) reduces the
minimum exercise price per share of granted stock options, (iv) increases the
number of shares issuable on exercise of stock options, or (v) amends the
foregoing requirements for amendment of the Option Plan. Any amendment or
termination of the Option Plan shall not affect options already granted and
such options shall remain in full force and effect as if the Option Plan had
not been amended or terminated, unless mutually agreed otherwise between the
optionee and the Company, which agreement must be in writing and signed by the
optionee and the Company. In any event, the Option Plan shall terminate in
December 2005. Any options outstanding under the Option Plan at the time of
its termination shall remain outstanding until they expire by their terms.
FEDERAL TAX INFORMATION
Pursuant to the Option Plan, the Company may grant either "incentive
stock options," as defined in Section 422 of the Code, or nonstatutory options.
An optionee who is granted an incentive stock option will not
recognize regular taxable income either at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon the sale or other disposition of the shares more
than two years after grant of the option and one year after the exercise of the
option, any gain or loss will be treated as long-term capital gain or loss. If
these holding periods are not satisfied, the optionee will recognize ordinary
income at the time of sale or disposition equal to the difference between the
exercise price and the lower of (i) the fair market value of the shares at the
date of the option exercise or (ii) the sale price of the shares. A different
rule for measuring ordinary income upon such a premature disposition may apply
if the optionee is also an officer, director, or 10% shareholder of the Company
(collectively "Corporate Insiders"). The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as
long-term or short-term capital gain or loss, depending on the holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any
taxable income at the time he or she is granted a nonstatutory option.
However, upon its exercise, the optionee will recognize taxable income
generally measured as the excess of the then fair market value of the shares
purchased over
8
<PAGE> 11
the purchase price. Any taxable income recognized in connection with an option
exercise by an optionee will be subject to tax withholding by the Company. Upon
resale of such shares by the optionee, any difference between the sales price
and the optionee's purchase price, to the extent not recognized as taxable
income as described above, will be treated as long-term or short-term capital
gain or loss, depending on the holding period. The Company will be entitled to
a tax deduction in the same amount as the ordinary income recognized by the
optionee with respect to shares acquired upon exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the Option Plan, does not purport to be complete, and
does not discuss the tax consequences of the optionee's death or the income tax
laws of any municipality, state or foreign country in which an optionee may
reside.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Grant Thornton, LLP to audit the
financial statements of the Company for the fiscal year ending December 31,
1997. Grant Thornton, LLP has audited the Company's financial statements since
its inception in 1994. A representative of Grant Thornton, LLP is expected to
be present at the meeting, will have the opportunity to make a statement, and
is expected to be available to respond to appropriate questions.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has conditioned its appointment of the
Company's independent auditors upon the receipt of the affirmative vote of a
majority of the shares represented, in person or by proxy, and voting at the
Annual Meeting, which shares voting affirmatively also constitute at least a
majority of the required quorum. In the event that the shareholders do not
approve the selection of Grant Thornton, LLP, the appointment of the
independent auditors will be reconsidered by the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS
PROPOSAL.
OTHER INFORMATION
SHARE OWNERSHIP BY PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of February 25, 1997, with respect to:
(i) each of the Company's directors and the executive officers named in the
Summary Compensation Table below, (ii) all directors and officers of the
Company at fiscal year end as a group; and (iii) each person known by the
Company to own beneficially more than 5% of the Common Stock. Each of the
shareholders listed below has sole voting and investment power over the shares
beneficially owned. The number and percentage of shares beneficially owned is
determined under rules of the Securities and Exchange Commission ("SEC"), and
the information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares for
which the individual has sole or shared voting power or investment power and
also any shares as to which the individual has the right to acquire within 60
days of February 25, 1997, through the exercise of any stock option
9
<PAGE> 12
or other right. A total of 5,652,894 shares of the Company's Common Stock were
issued and outstanding as of February 25, 1997.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIAL OWNER (1) BENEFICIALLY OWNED BENEFICIALLY OWNED
- - -------------------- ------------------ ------------------
<S> <C> <C>
Richard T. Isel . . . . . . . . . . . . . . . . . 960,839 17.0%
James T. Boosales . . . . . . . . . . . . . . . . 846,100 15.0
Wayne R. Peterson(2) . . . . . . . . . . . . . . 907,200 16.1
Bertram T. Martin, Jr.(3) . . . . . . . . . . . . 164,126 2.9
Lee R. Kemberling(4) . . . . . . . . . . . . . . 358,012 6.2
James M. Emanuel(5) . . . . . . . . . . . . . . . 19,000 *
The Kaufmann Fund, Inc. . . . . . . . . . . . . . 425,000 7.5
All directors and officers
as a group (6 persons)(6) . . . . . . . . . . . 3,255,277 56.8%
- - -----------------------
</TABLE>
* Indicates less than 1%.
(1) The business address for Richard T. Isel, James T. Boosales, Wayne R.
Peterson, and Bertram T. Martin, Jr. is 28100 U.S. Highway 19 North,
Suite 201, Clearwater, Florida 34621. The business address for Lee R.
Kemberling is 11500 47th Street North, Clearwater, Florida 34622. The
business address for James M. Emanuel is 19337 U.S. Highway 19 North,
Suite 500, Clearwater, Florida 34624. The business address for The
Kaufmann Fund, Inc. is 140 E. 45th Street, 43rd Floor, New York, New York
10017.
(2) Includes 75,000 shares of Common Stock owned by the Wayne R. Peterson
Trust, as to which Mr. Peterson has sole voting and dispositive power as
trustee, and 75,000 shares of Common Stock owned by the Theresa A.
Peterson Trust, as to which Mrs. Peterson has sole voting and dispositive
power as trustee.
(3) Includes 66,000 shares of Common Stock issuable on the exercise of
outstanding stock options that are currently exercisable or that will
become exercisable within 60 days. Excludes 70,000 shares of Common
Stock issuable on the exercise of stock options that are not exercisable
within 60 days.
(4) Includes 4,000 shares of Common Stock issuable on exercise of stock
options that will become exercisable at the 1997 Annual Meeting.
(5) Includes 9,000 shares of Common Stock issuable pursuant to the exercise
of outstanding stock options that are currently exercisable or that will
become exercisable at the 1997 Annual Meeting. Excludes 10,500 shares of
Common Stock issuable on exercise of stock options that are not
exercisable within 60 days.
(6) Includes 66,000 shares of Common Stock issuable upon the exercise of
outstanding stock options held by Bertram T. Martin, Jr., and 9,000
shares of Common Stock issuable upon the exercise of outstanding stock
options held by James M. Emanuel.
10
<PAGE> 13
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act ("Section 16(a)") requires the
Company's officers and directors and persons who own ten percent or more of a
registered class of the Company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the SEC
and the National Association of Securities Dealers, Inc. Such officers,
directors and ten-percent or more shareholders are also required by SEC rules
to furnish the Company with copies of all such forms that they file.
Based solely on its review of the copies of such forms received by the
Company, or written representations from certain reporting persons that no
Forms 5 were required for such persons, the Company believes that, during the
period from July 18, 1996 (the date on which the Company first became subject
to Section 16(a)) until December 31, 1996, all Section 16(a) filing
requirements applicable to its officers, directors, and ten-percent or more
shareholders were complied with; except that one report covering one
transaction was filed late by each of Messrs. Isel, Boosales, and Peterson.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was formed in May 1996 and is
currently composed of Messrs. Kemberling and Emanuel. No member of the
Compensation Committee is or was formerly an officer or an employee of the
Company. No interlocking relationship exists between the Company's Board of
Directors or Compensation Committee and the board of directors or compensation
committee of any other company, nor has any such interlocking relationship
existed in the past.
In March 1996, the Company borrowed $1,000,000 from Lee R. Kemberling,
a director of the Company, for working capital pursuant to a secured
Convertible Demand Promissory Note (the "Convertible Note"), $750,000 of which
was convertible into Common Stock of the Company at $5.85 per share. The
Convertible Note bore interest at an annual rate of 8.5%, and the entire
principal amount of the Convertible Note was payable on demand on or after
March 1, 1997. On February 24, 1997, Mr. Kemberling converted $750,000 of the
principal amount of the Convertible Note into 128,205 shares of the Company's
Common Stock at $5.85 per share in accordance with its terms, and the Company
repaid the remaining $250,000 principal balance of the Convertible Note. The
Convertible Note was secured by a first lien on the Company's Houston facility
and the equipment located there, which was released in connection with the
conversion and repayment transaction.
Mr. Kemberling is also the director, President, and sole shareholder
of Kemco, Inc., a developer and manufacturer of commercial and industrial waste
water and heat recovery systems that originally furnished the Company's
predecessor with the water and heat reclamation equipment installed at each of
its facilities. The Company paid $55,807 to Kemco in 1996 to design and supply
new components for water reclamation systems for two of the Company's
facilities and expects to pay Kemco as much as $190,000 in 1997 to design and
supply such components for its remaining five facilities. The Company believes
that the terms of its transactions with Kemco approximate those that would be
available from an independent third party.
11
<PAGE> 14
EXECUTIVE OFFICER COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning
compensation paid to or earned by the Company's President and Chief Executive
Officer and each of the Company's other executive officers (the "Named
Officers") for the year ended December 31, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
-------------------
OTHER ANNUAL COMPENSATION
------------
NAME AND PRINCIPAL POSITIONS YEAR SALARY COMPENSATION OPTIONS GRANTED
- - ---------------------------- ---- ------ ------------ ---------------
<S> <C> <C> <C> <C>
Richard T. Isel, President and Chief Executive . . . . 1996 $220,000 6,413 ---
Officer 1995 220,000 3,741 ---
1994 93,000 --- ---
Bertram T. Martin, Jr., Executive Vice President . . . 1996 80,000 --- 70,000
and Chief Operating Officer*
Wayne R. Peterson, Executive Vice President . . . . . . 1996 200,000 --- ---
1995 200,000 --- ---
1994 85,000 --- ---
James T. Boosales, Executive Vice President . . . . . . 1996 200,000 --- ---
and Chief Operating Officer 1995 200,000 --- ---
1994 85,000 --- ---
</TABLE>
__________________________
* Mr. Martin became an executive officer of the Company on July 18, 1996.
None of the foregoing officers received any bonus compensation in 1996.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with all of the Named Officers
that provide for annual salary as follows:
<TABLE>
<CAPTION>
NAME SALARY
---- ------
<S> <C>
Richard T. Isel . . . . . . . . . . . . . . . . . . . . . . . . $220,000
Bertram T. Martin, Jr. . . . . . . . . . . . . . . . . . . . . . $200,000
Wayne R. Peterson . . . . . . . . . . . . . . . . . . . . . . . $200,000
James T. Boosales . . . . . . . . . . . . . . . . . . . . . . . $200,000
</TABLE>
12
<PAGE> 15
The agreements can be terminated by either party without cause at any time,
subject to certain notice requirements. Each officer is prohibited from
competing with the Company during the three year period following termination
of the officer's employment. The Company also has severance agreements with
each of its executive officers that provide for a severance compensation
benefit equal to two times the executive officer's annual cash compensation
(payable in a lump sum) for an involuntary or constructive termination of
employment following a "change of control."
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION GRANT DATE
NAME GRANTED IN FISCAL YEAR ($/ SHARE) DATE VALUE (1)
---- --------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Bertram T. Martin, Jr. . . . 70,000 27.1% $9.50 July 18, 2006 $329,000
</TABLE>
(1) In accordance with SEC rules, the binomial option pricing method was chosen
to estimate the Grant Date Value of the options set forth in this table.
The Company's use of this model should not be construed as an endorsement
of its accuracy at valuing options. All stock option valuation models,
including the binomial model, require a prediction about the future
movement of the stock price. The following assumptions were made for
purposes of collecting the original Grant Date Value: an option term of
five years, volatility at 46.78%, no dividend yield, and interest rate at
6.55%. The real value of the options in this table depends on the actual
performance of the Common Stock during the applicable period.
FISCAL YEAR END OPTION VALUES
The following table sets forth the aggregate value of unexercised
options at December 31, 1996, for each Named Officer. There were no options
exercised during the year ended December 31, 1996, by any Named Officer.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END (1)
-------------------------- ----------------------
NAME UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
- - ---- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Richard T. Isel . . . . . . . . . . . -- -- -- --
Bertram T. Martin, Jr.(2) . . . . . . 70,000 -- $371,875 --
Wayne R. Peterson . . . . . . . . . . -- -- -- --
James T. Boosales . . . . . . . . . . -- -- -- --
</TABLE>
(1) Amounts represent the $1,036,875 market value of the underlying
securities relating to "in-the-money" options at December 31, 1996, minus
the exercise price of such options.
(2) Mr. Martin also holds options to purchase 66,000 shares of the Company's
Common Stock at $4.43 per share that he received in October 1995 as a
consultant to the Company, before he joined the Company as an officer.
These options were not awarded to Mr. Martin as compensation for his
service as a Named Officer.
13
<PAGE> 16
CERTAIN TRANSACTIONS
Between October 1995 and completion of the Company's initial public
offering on July 18, 1996, Bertram T. Martin, Jr. and his company, Corporate
Strategic Directions, Inc., performed consulting services for the Company,
including advising the Company in connection with the offering, its interim
financing, and its strategic plan, for which he received options to purchase
66,000 shares of Common Stock at $4.43 per share and consulting fees of
$226,875 on the completion of the offering. The options were awarded in
October 1995. Mr. Martin became a director and Executive Officer of the
Company and terminated his status as a consultant following completion of the
offering.
The Company engaged in transactions in 1996 with Kemco, Inc., a
company owned by Lee R. Kemberling, a director of the company. See "Other
Information - Compensation Committee Interlocks and Insider Participation."
All future transactions between the Company and its officers,
directors, principal shareholders and their affiliates will continue to be
approved by a majority of the Board of Directors, including a majority of the
independent and disinterested outside directors on the Board of Directors, and
will continue to be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors (the "Committee")
has furnished the following report on the Company's executive compensation
program. The Committee, which consists of the two outside directors listed at
the end of this report, reviews and establishes specific compensation plans,
salaries, option grants, and other benefits payable to the Company's executive
officers. Following review and approval by the Committee, all issues
pertaining to executive compensation are submitted to the entire Board of
Directors for its review and approval.
The Committee's primary objective with respect to executive
compensation is to establish programs that attract and retain executive
officers and align their compensation with the Company's overall business
strategies, values, and performance. For executive officers and key managers
other than Messrs. Isel, Peterson, and Boosales, the Company's founders and
largest shareholders, the Company grants stock options as a component of total
consideration to closely align their interests with the shareholders' long-term
interests. In evaluating annual compensation of executive officers (other than
Messrs. Isel, Peterson, and Boosales) and key managers, the Committee places a
relatively heavy emphasis on stock options as a percentage of total
compensation, consistent with its philosophy that stock incentives more closely
align the interests of company managers with the long-term interests of
shareholders.
The two components of the Company's total compensation program for
executive officers have been:
1. Salary: Base salary is intended to be competitive with that paid
to comparable executives and is also intended to reflect consideration of an
officer's experience, business judgment, and role
14
<PAGE> 17
in developing and implementing overall business strategy for the Company. Base
salaries are based on qualitative and subjective factors, and no specific
formula is applied to determine the weight of each factor.
The Company's executive officers have not historically participated in
its incentive compensation program, and did not in 1996 receive any bonus in
addition to base salary. The Committee believes that the absence of incentive
bonus has been more than offset by the substantial incentives associated with
the executive officers' stock ownership.
Long-Term Stock Incentives: The Company's 1995 Stock Option Plan
(the "Plan") provides for the grant to employees of incentive or nonqualified
stock options. The Plan was originally adopted by the Board of Directors and
shareholders in December 1995. Grants to executives are designed to align a
significant portion of the executive compensation package with the long-term
interests of the Company's shareholders by providing an incentive that focuses
attention on managing the Company from the perspective of an owner with an
equity stake in the business.
Grants of stock options generally are limited to officers (other than
Messrs. Isel, Peterson, and Boosales) and other key employees and managers of
the Company who are in a position to contribute substantially to the growth and
success of the Company. Incentive stock options and nonqualified stock options
are granted for terms up to ten years, and are designed to reward exceptional
performance with a long-term benefit, facilitate stock ownership, and deter
recruitment of key Company personnel by competitors and others. Vesting
requirements encourage loyalty to the Company.
The Company did not grant stock options in 1996 to Messrs. Isel,
Peterson, and Boosales because as the Company's founders and largest
shareholders, their interests are already closely aligned with those of the
Company's other shareholders. The remaining executive officer, Mr. Martin, was
granted options to acquire 70,000 shares of the Company's Common Stock in 1996,
which vest ratably over five years. He owned or had rights to acquire 234,126
shares on the Record Date. The Named Officers appearing in the Summary
Compensation Table held a total of 2,948,265 shares representing 50.9% of the
Company's outstanding Common Stock on February 25, 1997, assuming exercise of
all of Mr. Martin's stock options.
In conclusion, the Company's executive officers' stock ownership and
stock option awards closely align their interests with the Company's
shareholders' long-term interests, consistent with the compensation
philosophies set forth above. This close alignment has existed since the
Company's inception and has contributed significantly to the Company's growth
and profitability.
By the Compensation Committee
Lee R. Kemberling
James T. Emanuel
15
<PAGE> 18
COMPANY STOCK PRICE PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return for the Company, the Nasdaq Stock Market (U.S.) Index, and the Nasdaq
Health Services Index for the period since the Company's Common Stock began
trading on July 18, 1996. This graph assumes that $100 was invested on July
18, 1996 in the Company's Common Stock and in the other indices. Note that
historic stock price performance is not necessarily indicative of future stock
price performance.
[GRAPH]
<TABLE>
<CAPTION>
7/18/96 10/10/96 12/31/96
------- -------- --------
<S> <C> <C> <C>
Sterile Recoveries, Inc. $100.00 $155.26 $155.92
Nasdaq Stock Market (U.S. Index) $100.00 $111.59 $116.16
Nasdaq Health Services Index $100.00 $104.72 $ 96.99
</TABLE>
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Company may recommend.
16
<PAGE> 19
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are, therefore, urged to execute
and return at your earliest convenience, the accompanying proxy card in the
envelope which has been enclosed.
THE BOARD OF DIRECTORS
Clearwater, Florida
March 24, 1997
17
<PAGE> 20
STERILE RECOVERIES, INC.
1995 STOCK OPTION PLAN
Sterile Recoveries, Inc. establishes the following 1995 Stock Option
Plan for the exclusive benefit of its eligible employees and other key persons:
ARTICLE I
PURPOSE AND INTERPRETATION
1.1 PURPOSE. The purpose of this Plan is to further the interests
of the Company, its Subsidiaries (if any), and its shareholders by providing
incentives in the form of Stock Options to key employees and other key persons
who contribute materially to the success and profitability of the Company. The
Plan will enable the Company to attract and retain key employees, to reward
outstanding individual contributions, and to give selected key employees and
other key persons an interest in the Company parallel to that of its
shareholders, thus enhancing their proprietary interest in the Company's
continued success and progress.
1.2 DEFINITIONS. As used in this Plan, the following defined,
capitalized terms have the respective meanings ascribed to them:
"ADMINISTRATIVE COMMITTEE" means the Board of Directors before
the Common Stock is Publicly Held and the committee appointed by the
Board of Directors pursuant to section 2.1 to administer the Plan after
the Company is Publicly Held.
"AFFILIATE" means a Subsidiary of the Company, a corporation
that directly or indirectly owns 80% or more of the voting securities of
the Company, or a corporation of which 80% or more of the voting
securities is owned directly or indirectly by the same corporation that
directly or indirectly owns 80% or more of the voting securities of the
Company.
"BOARD OF DIRECTORS" means the Board of Directors of the
Company.
"CHANGE IN CONTROL" means any of the following: (a) the
shareholders of the Company approve a liquidation of all or
substantially all the consolidated assets of the Company and its
Subsidiaries, other than a liquidation of a
<PAGE> 21
Subsidiary into the Company or another Subsidiary (unless the
transaction is subsequently abandoned or otherwise fails to occur); (b)
the shareholders of the Company approve a sale, lease, exchange, or
other transfer to any person other than the Company or a Subsidiary (in
a single transaction or related series of transactions) of all or
substantially all of consolidated assets of the Company and its
Subsidiaries, excluding the creation (but not the foreclosure) of a
lien, mortgage, or security interest (unless the transaction is
subsequently abandoned or otherwise fails to occur); (c) the
shareholders of the Company approve a merger, consolidation,
reorganization, tender offer, exchange offer, or share exchange in which
the Company will not be the surviving corporation or will become a
majority-owned subsidiary of a person other than a Subsidiary (unless
the transaction is subsequently abandoned or otherwise fails to occur);
or (d) the occurrence of any event, transaction, or arrangement that
results in any person or group becoming a beneficial owner of (i) a
majority of the outstanding Common Stock of the Company or any
Subsidiary that contributed more than 50% of the Company's consolidated
revenues for its last fiscal year, (ii) securities of the Company
representing a majority of the combined voting power of all the
outstanding securities of the Company that are entitled to vote
generally in the election of its directors, or (iii) with respect to any
Subsidiary that contributed more than 50% of the Company's consolidated
revenues for its last fiscal year, securities of that Subsidiary
representing a majority of the combined voting power of all the
outstanding securities of that Subsidiary that are entitled to vote
generally in the election of its directors, unless in each case the
beneficial owner is the Company, a Subsidiary, an employee benefit plan
sponsored by the Company, a person or group who is a record or
beneficial owner of 25% or more of the outstanding Shares on the Date of
Grant, or a person who becomes a beneficial owner of 25% or more of the
outstanding Shares solely by becoming a trustee of an inter vivos trust
created by a person who is the record or beneficial owner of 25% or more
of the outstanding Shares on the Date of Grant.
"COMMON STOCK" means the common stock, $.001 par value, of the
Company.
"COMPANY" means Sterile Recoveries, Inc., a Florida corporation
and the sponsor of this Plan.
"DATE OF GRANT" means, with respect to a Stock Option, the date
as of when it is granted to a Participant.
"EMPLOYEE" means a person who is an officer of the Company or is
employed by the Company or a Subsidiary on a full-time, salaried basis
for at least 30 hours each week.
"EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended, and includes all rules and regulations of the SEC
promulgated under that act.
-2-
<PAGE> 22
"INCENTIVE OPTION" means a Stock Option granted under this Plan
that is intended to qualify as an "incentive stock option," as defined
in section 422 of the Internal Revenue Code, as in effect on the Date
of Grant of the Stock Option.
"INTERNAL REVENUE CODE" means the United States Internal Revenue
Code of 1986, as amended from time to time, or any United States income
tax law subsequently enacted in substitution for that code.
"MARKET VALUE" means, as of any particular date, the mean
average of the high bid and low asked prices of the Shares that were
quoted on the National Association of Securities Dealers Automated
Quotation System on that date, or the weighted mean average of the high
and low sales prices of the Shares on the American Stock Exchange or the
New York Stock Exchange, if the Shares become listed for trading on
either of those securities exchanges or, if the Common Stock is not
Publicly Held, the market value of the Company as determined in the sole
discretion of the Administrative Committee.
"NONQUALIFIED OPTION" means a Stock Option granted under this Plan
that is not designated as an Incentive Option.
"OPTION AGREEMENT" means an agreement between the Company and a
Participant that sets forth the terms, conditions, performance
requirements, and limitations applicable to a Stock Option.
"PARTICIPANT" means an Employee who is selected by the
Administrative Committee to receive a Stock Option pursuant to this
Plan, in the person's capacity as a participant under the Plan.
"PLAN" means this 1995 Stock Option Plan of Sterile Recoveries,
Inc., as originally adopted and as subsequently amended, modified, or
supplemented in accordance with its terms.
"PUBLICLY HELD" means the status of the Shares at any time
subsequent to (i) the sale of Shares of the Company in a registered
offering under the Securities Act of 1933, as amended, or (ii) if
earlier, the registration of the Shares under the Exchange Act.
"SHARES" means shares of the Common Stock or any securities
issued in exchange or substitution for those shares pursuant to a
transaction described in section 5.1.
"STOCK OPTION" means an option to purchase Shares from the Company
that is granted to a Participant pursuant to this Plan, whether as an
Incentive Option or a Nonqualified Option.
"SUBSIDIARY" means a corporation of which 80% of its voting
securities are owned directly or indirectly by the Company.
-3-
<PAGE> 23
1.3 OTHER WORDS. As used in this Plan, the word "or" is not
exclusive; the words "consent" and "approval" are synonymous; the word
"including" is always without limitation; the phrase "beneficial owner" has the
meaning attributed to it under Rule 13d-3 of the Exchange Act; the word "group"
has the meaning attributed to that term in Rule 13d-5(b)(1) under the Exchange
Act; and the phrase "business day" means any day that is not a Saturday,
Sunday, or holiday observed by the New York Stock Exchange. This Plan is
written in the masculine gender solely for convenience, and masculine words
should be construed to include correlative neuter and feminine words. In
addition, words in the singular number include words of the plural number and
vice versa.
1.4 HEADINGS AND REFERENCES. The titles and headings preceding
the text of the articles and sections of this Plan are solely for convenient
reference and neither constitute a part of this Plan nor affect its meaning,
interpretation, or effect. Unless otherwise expressly stated, a reference in
this Plan to a section refers to a section of this Plan.
1.5 LIMITATION OF GRANT. Nothing in this Plan, whether express
or implied, is intended or should be construed to confer upon, or to grant to,
any person (other than the Participants and their respective heirs and personal
representatives) any claim, right, or remedy under or because of this Plan. An
Employee does not have any claim or right to participate in this Plan and will
not acquire any right to continue as an officer or employee of the Company or a
Subsidiary because of his selection as a Participant under this Plan. An
Employee's selection as a Participant does not restrict in any way the right of
the Company or a Subsidiary to terminate his employment at any time.
1.6 GOVERNING LAW. The validity, construction, enforcement, and
interpretation of this Plan are governed by the laws of the United States of
America and the State of Florida, excluding the laws of those jurisdictions
relating to resolution of conflicts with laws of other jurisdictions.
ARTICLE II
PLAN ADMINISTRATION
2.1 ADMINISTRATIVE COMMITTEE. This Plan will be administered by
an Administrative Committee. Before the Shares become Publicly Held, the
Administrative Committee will consist of the Board of Directors. After the
Shares become Publicly Held, the Administrative Committee will consist of at
least two members of the Board of Directors to serve for unspecified terms at
the discretion of the Board of Directors. The Board of Directors may remove a
member of the Administrative Committee (as such) at any time, with or without
cause, and has the exclusive power to appoint a successor to fill any vacancy
on the Administrative Committee. After the Shares become Publicly Held, the
Administrative Committee will not include any person who, for at least one year
before his appointment, received Shares or Stock Options under this Plan or any
other benefit plan entitling a Participant to acquire any stock, stock options,
or other "equity securities" of the
-4-
<PAGE> 24
Company or its Affiliates (as that term is defined for purposes of section 16
of the Exchange Act). A member of the Administrative Committee is ineligible
to receive a grant of an option under this Plan or any other plan of the
Company or any of its Affiliates while serving as a member of the
Administrative Committee.
2.2 POWER AND AUTHORITY. The Administrative Committee has the
exclusive power and authority, and the sole and absolute discretion, to do the
following: (a) construe and interpret this Plan; (b) select the Employees and
other persons who will be Participants in this Plan; (c) amend, prescribe, and
rescind rules and regulations relating to this Plan; (d) grant options under
the Plan, either conditionally or unconditionally, and designate whether they
constitute incentive or nonstatutory options; (e) determine when options will
be granted under the Plan; (f) determine the number of Shares subject to each
option; (g) determine the terms and conditions of each option, including the
exercise price of each option (which must comply with section 3.4 of this
Plan), the time or times when the option will become exercisable and the
duration of the exercise period which must not exceed the limitations specified
in section 3.4 of this Plan), the conditions under which the option will vest
and become exercisable, the methods of exercising options, and the methods for
payment of the exercise price; (h) to approve and recommend amendments to the
Plan for adoption by the Board of Directors and (if necessary or desirable) the
shareholders of the Company; (i) to prescribe the form or forms of agreement or
instruments evidencing options granted under the Plan; (j) to engage the
services of any agent, expert, or professional advisor in furtherance of the
Plan's purposes; and (k) to take all other actions, and make all other
determinations, that are advisable or necessary for the Plan's administration.
In the absence of fraud or mistake, any action or determination by the
Administrative Committee will be final and binding on all persons.
2.3 APPROVAL PROCEDURES. All actions and determinations of the
Administrative Committee must be unanimous. Every action or determination of
the Administrative Committee that is expressly required or permitted under this
Plan will be valid only if undertaken pursuant to a vote, consent, or approval
that is evidenced by either (a) a resolution adopted by the affirmative vote of
all the members of the Administrative Committee at a meeting, or (b) a written
consent signed by all the members of the Administrative Committee. The members
of the Administrative Committee may execute a written consent in counterparts.
Each executed counterpart will constitute an original document, and all of
them, together, will constitute the same document. A properly executed written
consent will be effective as of the date specified in it or, if an effective
date is not so specified, on the date when it is signed by the last person
necessary to validate it, and will be valid if it is executed before, after, or
concurrently with the action or determination to which it applies.
2.4 INDEMNIFICATION. A member of the Administrative Committee
is not liable for, and the Company releases each member of the Administrative
Committee from all liability for, any punitive, incidental, consequential, or
other damages or obligation to the Company or any Employee, Participant, or
other person for any act or omission by the
-5-
<PAGE> 25
member of the Administrative Committee (including his own negligence), or by
any agent, employee, professional advisor, or other expert used or engaged by
the Administrative Committee, if the act or omission does not constitute gross
negligence or willful misconduct and is done or omitted in good faith, on
behalf of the Company, and in a manner reasonably believed by him to be both in
the best interests of the Company and within the scope of the authority granted
to the Administrative Committee by this Plan. The Company shall indemnify each
member of the Administrative Committee, and shall reimburse him from the
Company's assets, for any cost, loss, damage, expense, or liability (including
fines, amounts paid in settlement, and legal fees and expenses) incurred by him
by reason of any act or omission for which he is released from liability
pursuant to this section.
ARTICLE III
STOCK OPTIONS AND PARTICIPANTS
3.1 STOCK OPTIONS. Benefits under this Plan will consist of
Stock Options. The Administrative Committee may designate any Stock Option as
an Incentive Option, in which case the Stock Option must comply with the
requirements of section 3.5. If no designation is made, a Stock Option will
constitute a Nonqualified Option. The Administrative Committee may grant a
Participant both Incentive Options and Nonqualified Options, at the same time
or at different times.
3.2 PARTICIPANTS. Every Employee is eligible to be selected by
the Administrative Committee to participate in this Plan. The Administrative
Committee's designation of an Employee as a Participant at any particular time
does not require the Administrative Committee to designate that Employee to
receive any Stock Options at any other time or to receive the same Stock
Options as any other Participant at any time. The Administrative Committee may
consider such factors as it deems pertinent in selecting Participants and in
determining the amount, nature, and composition of Stock Options awarded to
them, including the following: (i) the financial condition of the Company and
its Subsidiaries; (ii) the expected net income of the Company for the current
or future years; (iii) the contributions of an Employee to the success and
profitability of the Company or an Affiliate; and (iv) the adequacy of the
Employee's other compensation. The Administrative Committee may award Stock
Options to an Employee even if Stock Options previously were granted to the
Employee under this or another plan of the Company or an Affiliate, and whether
or not the previously granted benefits have been fully exercised. An Employee
who participates in another benefit plan of the Company or an Affiliate also
may participate in this Plan.
3.3 BENEFIT LIMITATIONS. The total number of Shares that are
authorized to be issued pursuant to the exercise of Stock Options granted under
this Plan is limited to 380,000 Shares (after the three-for-one stock split in
the form of a stock dividend authorized on December 21, 1995). This amount
automatically will be adjusted in accordance with section 5.1. If a Stock
Option is forfeited or terminated as a whole or in part for any reason other
-6-
<PAGE> 26
than its exercise, the unexercised Shares constituting that Stock Option (or
the part of it so terminated) will be available for future awards of Stock
Options under this Plan. No Participant may receive, under the Plan, Stock
Options the aggregate of which is more than 76,000 Shares or 20% of the Shares
authorized under this Plan.
3.4 EXERCISE PRICE AND DATES; OTHER TERMS AND CONDITIONS. The
purchase price for each Share purchased pursuant to the exercise of a Stock
Option must not be less than the Market Value of a Share on the Date of Grant
of the Stock Option. Stock Options are not exercisable until they have been
accepted by the Participant. An award of a Stock Option to a Participant will
be cancelled automatically if he does not accept the award within 30 calendar
days following the date when he is given written notice of the award. Every
Stock Option must expire not later than ten years after its Date of Grant, and,
except as otherwise provided in section 4.2 or in the Option Agreement, it will
expire on the 90th day following the date when the Participant (other than
non-Employee Participants) to whom it was granted ceases to be an Employee. If
the optionee is an Employee, the optionee shall not dispose of the option
(other than upon its exercise) or any stock acquired pursuant to exercise of
the option for six months following the Date of Grant. Subject to the
foregoing limitations, the Administrative Committee may impose on an award of
Stock Options any terms and conditions that it deems appropriate, including
vesting schedules and forfeiture provisions.
3.5 INCENTIVE OPTIONS. Notwithstanding anything in this Plan to
the contrary, an Incentive Option must satisfy the following additional
requirements:
(a) The Incentive Option must be designated as such by the
Administrative Committee when it is granted;
(b) The Participant must be an Employee;
(c) This Plan must be approved by the shareholders of the Company
within 12 months before or after the effective date of the Plan; and
(d) The Incentive Option must satisfy all conditions and
requirements imposed by the Internal Revenue Code for qualified incentive stock
options and any policies instituted by the Administrative Committee with
respect to incentive stock options.
ARTICLE IV
EXERCISE OF STOCK OPTIONS
4.1 EXERCISE METHOD. Subject to limitations imposed by the this
Plan and the Stock Option Agreement, a Participant may exercise a Stock Option
as a whole, in part, or in increments at any time or from time to time before
it expires. A partial exercise of a Stock Option will not affect a
Participant's subsequent right to exercise the Stock Option as to the remaining
Shares subject to the Stock Option. To exercise a Stock Option, a Participant
-7-
<PAGE> 27
must do the following: (a) deliver to the Company a written notice of exercise
in such form as prescribed by the Administrative Committee; (b) tender to the
Company full payment for the Shares to be purchased pursuant to the exercise of
the Stock Option; and (c) comply with such other reasonable requirements as the
Administrative Committee may establish. The exercise date of a Stock Option
will be the date when the Company has received the notice of exercise and full
payment of the exercise price and all other requirements established by the
Administrative Committee have been satisfied. A Participant may pay all or any
part of the exercise price under a Stock Option for the option shares to be
purchased pursuant to the Stock Option by any combination of the following
methods:
(a) By bank draft, money order, or personal check payable to the
order of the Company; or
(b) By transferring to the Company outstanding Shares that are
owned by the Participant; or
(c) By delivering to the Company the Participant's written
election for the Company to withhold a portion of the Shares otherwise issuable
to the Participant pursuant to the exercise of the Stock Option; or
(d) To the extent approved in advance by the Administrative
Committee, by delivering to a financial institution or a securities
broker-dealer irrevocable instructions to pay promptly to the Company all or a
portion of the proceeds from either a sale of the Shares to be purchased
pursuant to the Participant's exercise of the Stock Option or a loan to be
secured by a pledge of all or a portion of any of those Option Shares.
Any applicable local, state, or federal tax withholding obligation associated
with a Participant's exercise of a Stock Option shall be satisfied by the
Company's withholding a portion of the Shares otherwise issuable to the
Participant pursuant to the exercise of the Stock Option. Shares that are
transferred to, or withheld by, the Company in payment of the exercise price
and any tax withholding will be valued for purposes of payment at their Market
Value on the exercise date of the Stock Option. This provision does not
preclude the exercise of a Stock Option by any other proper legal method
specifically approved by the Administrative Committee. The Administrative
Committee shall determine the acceptable methods for tendering or withholding
Shares as payment for the exercise price of a Stock Option and may impose
limitations and prohibitions on the use of Shares to pay the exercise price of
a Stock Option as it considers appropriate for tax, legal, business, or
accounting reasons. No one has the rights of a shareholder with respect to
Shares subject to a Stock Option until a certificate evidencing those Shares
has been delivered to the person exercising the Stock Option.
4.2 EXERCISE CONDITIONS.
(a) Employees. A Participant who is an Employee may
exercise a Stock
-8-
<PAGE> 28
Option only if he has been in the continuous employment of the
Company or a Subsidiary during the period beginning on the Date of Grant of the
Stock Option and ending on the 90th day before the exercise date. The
Administrative Committee may decide to what extent bona fide leaves of absence
for illness, temporary disability, government or military service, or other
reasons will constitute an interruption of continuous employment. Each Stock
Option is exercisable during the life of the Participant only by him.
A Stock Option expires and ceases to be exercisable on the 90th day
after the Participant to whom it was granted ceases to be an Employee, except
as otherwise provided in this Plan and in the Option Agreement. If a
Participant's employment with the Company or a Subsidiary is terminated
(voluntarily or involuntarily), he may exercise his Stock Options within 90
calendar days following his date of termination. If a Participant dies or
ceases to be an Employee because of disability within the meaning of section
22(e)(3) of the Internal Revenue Code at a time when he is entitled to exercise
a Stock Option, the Stock Option will continue to be exercisable for 180 days
after his death or disability by the Participant (in the case of disability) or
by the Participant's heir or estate (in the case of death). Notwithstanding
the foregoing, a Stock Option is never exercisable later than the stated
expiration date of the Stock Option. After the death, disability, or
termination of employment of a Participant, his Stock Options will be
exercisable only with respect to the number of Shares (if any) that could have
been exercised as of the date when he ceased to be an Employee (subject to any
adjustment required by section 5.1). A Stock Option will terminate, as a whole
or in part, to the extent that, in accordance with this section, it ceases to
be exercisable for any of the Shares subject to it.
(b) Other Persons. Stock Options held by Participants
who are not Employees will be exercisable on the terms and conditions set forth
in the Stock Option Agreement between the Company and the Participant.
4.3 CANCELLATION AND RESCISSION OF STOCK OPTIONS. Unless the
Stock Option Agreement specifies otherwise, the Administrative Committee may
cancel any Stock Options at any time if the Participant is not in compliance
with all applicable provisions of the Plan, the Stock Option Agreement, and
with the following conditions:
(a) A Participant shall not render services for any
organization or engage directly or indirectly in any business which, in the
judgment of the chief executive officer of the Company or other senior officer
designated by the Administrative Committee, is or becomes competitive with the
Company, or which organization or business, or the rendering of services to
such organization or business is or becomes otherwise prejudicial to or in
conflict with the interests of the Company. For a Participant whose employment
has terminated, the judgment of the chief executive officer shall be based on
the Participant's position and responsibilities while employed by the Company,
the Participant's post-employment responsibilities and position with the other
organization or business, the extent of past, current, and potential
competition or conflict between the Company and the other organization or
business, the effect on the Company's customers, suppliers, and
-9-
<PAGE> 29
competitors of the Participant's assuming the post-employment position,
guidelines for business conduct established by the Company, and such other
considerations as are deemed relevant given the applicable facts and
circumstances. A Participant who has retired shall be free, however, to
purchase as an investment or otherwise, stock or other securities of such
organization or business so long as they are listed upon a recognized
securities exchange or traded over-the-counter, and such investment does not
represent a substantial investment to the Participant or a greater than 10
percent equity interest in the organization or business.
(b) A Participant shall not, without prior written
authorization from the Company, disclose to anyone outside the Company, or use
in other than the Company's business, any confidential information or material
relating to the business of the Company, acquired by the Participant either
during or after employment with the Company.
(c) A Participant shall disclose promptly and assign to
the Company all right, title, and interest in any invention or idea, patentable
or not, made or conceived by the Participant during employment by the Company,
relating in any manner to the actual or anticipated business, research or
development work of the Company and shall do anything reasonably necessary to
enable the Company to secure a patent where appropriate in the United States
and in other countries.
(d) Upon exercise pursuant to a Stock Option, the
Participant shall certify in the notice of exercise that he or she is in
compliance with the terms and conditions of the Plan. Failure to comply with
the provisions of paragraph (a), (b), or (c) of this section 4.3 prior to, or
during the six months after, any exercise pursuant to a Stock Option shall
cause such exercise to be rescinded. The Company shall notify the Participant
in writing of any such rescission within two years after such exercise. Within
ten days after receiving such a notice from the Company, the Participant shall
pay to the Company the amount of any gain realized as a result of the rescinded
exercise, pursuant to a Stock Option. Such payment shall be made either in
cash or by returning to the Company the number of Shares that the Participant
received in connection with the rescinded exercise.
4.4 RESERVATION, LISTING, AND DELIVERY OF SHARES. The Company
shall reserve from its authorized but unissued shares of Common Stock and keep
available until the termination of this Plan, solely for issuance upon the
exercise of Stock Options, the number of Shares issuable at any time pursuant
to the exercise of Stock Options granted or available for grant under this
Plan. In addition, the Company shall take all requisite action to assure that
it validly and legally may issue fully-paid, nonassessable Shares upon the
exercise of each Stock Option. Also, after the Shares become Publicly Held,
the Company, at its sole expense, shall reserve for listing on the National
Association of Securities Dealers Automated Quotation System or any national
securities exchange on which the Shares are listed for trading, upon official
notice of issuance pursuant to the exercise of Stock Options, the number of
Shares issuable at any time upon the exercise of Stock Options granted or
available for grant under this Plan, and the Company shall maintain that
listing until this Plan terminates. Promptly after a Stock Option is validly
exercised, the Company shall issue and
-10-
<PAGE> 30
deliver to the order of the person who exercised the Stock Option a stock
certificate evidencing that number of fully-paid and nonassessable Shares that
were purchased pursuant to the exercise of the Stock Option, plus, instead of
any fractional Share to which that person otherwise would be entitled, a cash
sum equal to the product of (a) that fraction, multiplied by (b) the Market
Value of one full Share as of the exercise date of the Stock Option. The
Company shall pay all costs and excise taxes associated with the original
issuance of stock certificates evidencing Shares purchased pursuant to the
exercise of Stock Options.
4.5 LEGAL COMPLIANCE. Stock Options are exercisable, and Shares
are issuable under this Plan, only in compliance with all applicable state and
federal laws and regulations (including securities laws) and the rules of all
stock exchanges on which the Shares are listed for trading. Any certificate
evidencing Shares issued under the Plan will bear such legends and statements
as the Administrative Committee deems advisable to assure compliance with those
laws, rules, and regulations. A Stock Option is not exercisable, and the
Company shall not issue any Shares under this Plan, until the Company has
obtained any consent or approval required from any state or federal regulatory
body having jurisdiction. Upon the exercise of a Stock Option by an heir,
guardian, or personal representative of a Participant, the Administrative
Committee may require reasonable evidence of the person's legal ownership of
the Stock Option and such consents and releases of governmental authorities as
it deems advisable.
ARTICLE V
ADDITIONAL PROVISIONS
5.1 ANTIDILUTION. If the Company does any of the following (a
"Dilutive Event") at any time before the exercise or expiration of a Stock
Option: (a) splits or subdivides its then-outstanding Shares into a greater or
different number of Shares; (b) reduces the then-outstanding number of Shares
by a reverse stock-split or by otherwise combining those Shares into a smaller
number of Shares; (c) effects any other capital adjustment, recapitalization,
reorganization, or reclassification that has the effect of increasing or
decreasing proportionately the number of outstanding Shares then held by each
shareholder; (d) distributes any of its assets to its shareholders pro rata as
a partial liquidation or return of capital; or (e) declares, issues, or
distributes to the holders of its Common Stock, without separate payment
therefor, (i) a noncash dividend payable in any property or securities of the
Company, including additional Shares, or (ii) any cash, property, or securities
in connection with a spin-off, split-up, reclassification, recapitalization,
combination of shares, or similar rearrangement of the Company's capital stock;
then, upon the subsequent exercise of a Stock Option after the record date for,
or the occurrence of, each Dilutive Event, the Participant will be entitled to
receive, in exchange for the exercise price specified in the Stock Option, and
in addition to (or in substitution for in the case of a reduced number of
Shares), the Shares otherwise issuable upon exercise of the Stock Option, the
additional (or reduced) amount of Shares and other securities and property
(including cash) resulting from the Dilutive Event that he would have been
entitled to receive if (A) he had exercised the Stock
-11-
<PAGE> 31
Option on the Date of Grant (even if the Stock Option was not exercisable then)
and had been the record owner of the number of Shares resulting from the
exercise during the period beginning on that date and ending on the actual
exercise date of the Stock Option, and (B) he had retained all Shares and other
securities and property (including cash) receivable by him during that period,
after giving effect to all the Dilutive Events that occurred during that
period.
5.2 CHANGE IN CONTROL.
(a) Generally. If a Change in Control occurs, all
outstanding Stock Options will become fully vested and exercisable as of the
earlier of the effective date of the shareholder approval or the effective date
of any of the Change in Control transaction (the "Effective Date") and, at the
election of the Board of Directors, the Company may terminate the Plan, in
which case the holder of each outstanding Stock Option will be entitled to
payment of the amount by which the Market Value of all Shares subject to the
Stock Option on the Effective Date exceeds the Market Value of all those Shares
as of the Date of Grant of the Stock Option, in full settlement of all the
holder's rights and interests in the Stock Option.
(b) Special Rules Governing Mergers and Stock Exchanges.
In the case of a merger, share exchange, or other transaction in which the
shareholders of the Company receive securities of the acquirer, at the election
of the Board of Directors, the Company may (but is not obligated to) elect to
continue this Plan and each Stock Option granted under the Plan will be
converted into an option to purchase securities of the acquirer being issued in
the transaction. In such case, the exercise price and number of Shares subject
to the Stock Option will be adjusted based on the exchange or conversion ratio
(the "Ratio") used to convert Shares into securities of the acquirer. The
adjusted exercise price will be the exercise price per Share, divided by the
Ratio. The adjusted number of Shares subject to the Stock Option will be the
product of the Ratio multiplied by the number of Shares subject to the Stock
Option before the transaction.
(c) Special Rules in Case of Cash Acquisition. In the
case of a Change in Control transaction in which the Shareholders will receive
consideration for their Shares (such as cash or debt) other than common stock
of the acquirer and the Company has elected pursuant to (a) above to terminate
the Plan and pay the spread of the Market Value on the Effective Date over the
Market Value on the Date of Grant, each holder of a stock option may elect to
defer the payment and settlement following termination of the Plan by up to six
months and one day after the Effective Date.
5.3 ASSIGNMENT, AMENDMENT, AND TERMINATION. Every Stock Option is
not transferable, except pursuant to the death of a Participant, and any
attempted transfer or assignment by a Participant will be invalid and
ineffective as to the Company. The Board of Directors of the Company may
alter, amend, or terminate this Plan without approval of the Company's
shareholders. However, subject to changes in law or other legal requirements
-12-
<PAGE> 32
that would permit otherwise, without the approval of the Company's
shareholders, an amendment will not be valid and effective if it:
(a) materially increases the benefits accruing to Participants
under the Plan;
(b) materially modifies the eligibility requirements for
participation in the Plan;
(c) reduces the minimum exercise price per Share of Stock Options
granted or available for grant under this Plan;
(d) materially increases the aggregate number of Shares that is
issuable upon the exercise of Stock Options; or
(e) amends the requirements of paragraphs (a)-(d) of this section.
An amendment or termination of this Plan, whether with or without the approval
of the Company's shareholders, will not alter or impair any right or obligation
of an outstanding Stock Option without the consent of the person then entitled
to exercise it, except for adjustments expressly provided for in this Plan.
5.4 EXPENSES AND PROCEEDS. The Company shall pay all expenses of
the Plan. The Company may use the cash proceeds received from Participants
upon the exercise of Stock Options for general corporate purposes.
5.5 MARKET VALUE DETERMINATIONS. If, after the Shares are
Publicly Held, trading in the Shares, or a price quotation for the Shares, does
not occur on a date when the Market Value is required to be determined under
either this Plan or a stock option agreement, the next preceding date when
Shares were traded or a price was quoted will control the determination of the
Market Value.
5.6 DURATION AND EFFECTIVE DATE. This Plan will become effective
as of December 21, 1995, subject to approval by the Company's shareholders
within 12 months after that date, and will terminate on the tenth anniversary
of its effective date. The Company is not authorized to award any Stock
Options after the termination date of this Plan.
5.7 RULE 16B-3. With respect to persons subject to section 16 of
the Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of SEC Rule 16b-3 or any rule promulgated by the SEC
under the Exchange Act in substitution for that rule. To the extent any
provision of the Plan or action by the Administrative Committee fails to so
comply, it shall be null and void, to the extent permitted by law and deemed
advisable by the Administrative Committee.
-13-
<PAGE> 33
ADOPTED BY BOARD OF DIRECTORS ADOPTED BY SHAREHOLDERS ON
ON DECEMBER 21, 1995 DECEMBER 21, 1995
STERILE RECOVERIES, INC.
By: /s/ Richard T. Isel
-----------------------------
Richard T. Isel
President
ATTEST: [CORPORATE SEAL]
/s/ James T. Boosales
- - -----------------------------
James T. Boosales
Secretary
-14-
<PAGE> 34
STERILE RECOVERIES, INC.
FIRST AMENDMENT TO 1995 STOCK OPTION PLAN
This First Amendment to 1995 Stock Option Plan (this "Amendment")
amends the 1995 Stock Option Plan of Sterile Recoveries, Inc. adopted on
December 21, 1995 (the "Plan"). Unless otherwise defined in this Amendment,
all capitalized terms used in this Amendment have the meanings ascribed to them
in the Plan, and the definitions of those terms contained in the Plan are
incorporated by reference in this Amendment.
1. AMENDMENT TO THE PLAN. The first sentence of Section 3.3 of
the Plan is amended in its entirety to state as follows:
The total number of Shares that are authorized to be issued pursuant to
the exercise of Stock Options granted under this Plan is limited to
500,000 Shares (after the three-for-one stock split in the form of a
stock dividend authorized on December 21, 1995).
2. COUNTERPARTS. This Amendment may be executed in counterparts.
Each executed counterpart of this Amendment will constitute an original
document, and all executed counterparts, together, will constitute the same
Amendment.
ADOPTED BY BOARD OF DIRECTORS ADOPTED BY SHAREHOLDERS
ON MAY 2, 1996 ON MAY 2, 1996
STERILE RECOVERIES, INC.
By: /s/ Wayne R. Peterson
--------------------------
Wayne R. Peterson
Executive Vice President
ATTEST: [CORPORATE SEAL]
/s/ James T. Boosales
- - --------------------------------
James T. Boosales
Secretary
<PAGE> 35
STERILE RECOVERIES, INC.
SECOND AMENDMENT TO 1995 STOCK OPTION PLAN
OCTOBER 17, 1996
This Second Amendment to 1995 Stock Option Plan (this "Amendment") is
executed by an authorized officer of Sterile Recoveries, Inc. (the "Company")
to record the following amendments to the Company's 1995 Stock Option Plan (the
"Plan") that were approved on October 17, 1996, by the Board of Directors of
the Company:
1. Incorporation by Reference. Unless otherwise expressly defined
in this Amendment, all capitalized terms used in this Amendment have the
respective meanings ascribed to them in the Plan, and the definitions of those
terms in the Plan are incorporated by reference in this Amendment.
2. Amendment to Preamble. The preamble of the Plan is amended to
delete the words "and other key persons."
3. Amendment to Section 1.1. Section 1.1 of the Plan is amended to
delete the words "and other key persons" in the first and second sentences of
that section.
4. Amendment to Section 1.2. Section 1.2 of the Plan is amended to
replace the definition of "Administrative Committee" in its entirety with the
following definition:
"ADMINISTRATIVE COMMITTEE" means the Board of Directors.
5. Amendment to Section 2.1. Section 2.1 of the Plan is amended in
its entirety as follows:
2.1 Administrative Committee. This Plan will be
administered by an Administrative Committee consisting of all the
members of the Board of Directors to serve for unspecified terms at the
discretion of the Board of Directors.
6. Amendment to Section 2.2. Section 2.2 of the Plan is amended to
delete the words "and other persons" from the first sentence of that section.
7. Amendment to Section 2.3. Section 2.3 of the Plan is amended in
its entirety as follows:
2.3 APPROVAL PROCEDURES. A quorum of the Administrative
<PAGE> 36
Committee consists of a majority of its members. If a quorum is
present when a vote is taken, the affirmative vote of a majority of
members present constitutes an act of the Administrative Committee.
Every action or determination of the Administrative Committee that is
expressly required or permitted under this Plan will be valid only if
undertaken pursuant to a vote, consent, or approval that is evidenced
by either (a) a resolution adopted by the affirmative vote of a
majority of the members of the Administrative Committee at a meeting,
or (b) a written consent signed by all the members of the
Administrative Committee. The members of the Administrative Committee
may execute a written consent in counterparts. Each executed
counterpart will constitute an original document, and all of them,
together, will constitute the same document. A properly executed
written consent will be effective as of the date specified in it or,
if an effective date is not so specified, on the date when it is
signed by the last person necessary to validate it, and will be valid
if it is executed before, after, or concurrently with the action or
determination to which it applies. Notwithstanding the foregoing,
the Administrative Committee need not convene a separate meeting if an
action taken by the Administrative Committee is voted upon by the
members of the committee at a duly convened meeting of the Board of
Directors.
8. Amendment to Section 3.4. Section 3.4 of the Plan is amended to
delete the parenthetical "(other than Non-employee Participants)" from the
fourth sentence of that section and to substitute "The" for the phrase "If the
Optionee is an Employee, the" from the beginning of the fifth sentence of that
section.
9. Amendment to Section 4.1. Section 4.1 of the Plan is amended in
its entirety as follows:
4.1 EXERCISE METHOD. Subject to limitations imposed by
this Plan and the Stock Option Agreement, a Participant may exercise a Stock
Option as a whole, in part, or in increments at any time or from time to time
before it expires. A partial exercise of a Stock Option will not affect a
Participant's subsequent right to exercise the Stock Option as to the remaining
Shares subject to the Stock Option. To exercise a Stock Option, a Participant
must do the following: (a) deliver to the Company a written notice of exercise
in such form as prescribed by the Administrative Committee; (b) tender to the
Company full payment for the Shares to be purchased pursuant to the exercise of
the Stock Option; (c) pay to the Company, or make an arrangement satisfactory
to the Administrative Committee for the payment of, any tax withholding
required in connection with the exercise of the Stock Option; and (d) comply
with such other reasonable requirements as the Administrative Committee may
establish. The exercise date of a Stock Option will be the date when the
Company has received the notice of exercise and full payment of the exercise
price, the Company has received, or the holder of the Stock Option has made a
satisfactory arrangement for the payment of any requisite tax withholding, and
all other requirements
2
<PAGE> 37
established by the Administrative Committee have been satisfied. A Participant
may pay all or any part of the exercise price and any applicable tax withholding
for the option shares to be purchased pursuant to the Stock Option by any
combination of the following methods:
(a) By bank draft, money order, or personal check payable to the
order of the Company; or
(b) By transferring to the Company outstanding Shares that are owned
by the Participant; or
(c) By delivering to the Company the Participant's written election
for the Company to withhold a portion of the Shares otherwise issuable to the
Participant pursuant to the exercise of the Stock Option; or
(d) To the extent approved in advance by the Administrative
Committee, by delivering to a financial institution or a securities
broker-dealer irrevocable instructions to pay promptly to the Company all or a
portion of the proceeds from either a sale of the Shares to be purchased
pursuant to the Participant's exercise of the Stock Option or a loan to be
secured by a pledge of all or a portion of any of those Option Shares.
Shares that are transferred to, or withheld by, the Company in payment of the
exercise price and any tax withholding will be valued for purposes of payment
at their Market Value on the exercise date of the Stock Option. This provision
does not preclude the exercise of a Stock Option by any other proper legal
method specifically approved by the Administrative Committee. The
Administrative Committee shall determine the acceptable methods for tendering
or withholding Shares as payment for the exercise price of a Stock Option and
tax withholding and may impose limitations and prohibitions on the use of
Shares to pay the exercise price of a Stock Option or tax withholding as it
considers appropriate for tax, legal, business, or accounting reasons. No one
has the rights of a shareholder with respect to Shares subject to a Stock
Option until a certificate evidencing those Shares has been delivered to the
person exercising the Stock Option.
10. Amendment to Section 4.2. Section 4.2 of the Plan is amended to
delete the words "(a) Employees." and "who is an Employee" from the first
sentence of that section and to delete subparagraph (b) in its entirety.
11. Amendment to Section 4.3. The first sentence of section 4.3 of
the Plan is amended to delete the phrase "Plan, the Stock Option Agreement, and
with the following conditions:" and replaced with "Plan, and the Stock Option
Agreement or if the Participant violates any of the following conditions:".
12. Continued Effectiveness; Effective Date. Except as amended by
this
3
<PAGE> 38
Amendment, the Plan continues in full force and effect. This Amendment
will become effective when adopted by the Board of Directors and is applicable
to all options granted in the future under the Plan and to each outstanding
option under the Plan that is held by a Participant.
ADOPTED BY BOARD OF DIRECTORS STERILE RECOVERIES, INC.
AND ADMINISTRATIVE COMMITTEE
ON OCTOBER 17, 1996
By: /s/ Richard T. Isel
-------------------------------
Richard T. Isel
President
ATTEST: [Corporate Seal]
/s/ James T. Boosales
- - -----------------------------
James T. Boosales
Secretary
4
<PAGE> 39
STERILE RECOVERIES, INC.
THIRD AMENDMENT TO 1995 STOCK OPTION PLAN
This Third Amendment to 1995 Stock Option Plan (this "Amendment") is
executed by an authorized officer of Sterile Recoveries, Inc. (the "Company")
to record the following amendments to the Company's 1995 Stock Option Plan
adopted on December 21, 1995 (the "Plan") that were approved on February 24,
1997, by the Company's Board of Directors and on _________, 1997, by the
Company's shareholders.
1. INCORPORATION BY REFERENCE. Unless otherwise expressly
defined in this Amendment, all capitalized terms used in this Amendment have
the respective meanings ascribed to them in the Plan, and the definitions of
those terms contained in the Plan are incorporated by reference in this
Amendment.
2. AMENDMENTS TO SECTION 3.3. The first sentence of Section 3.3
of the Plan is amended in its entirety to state as follows:
The total number of Shares that are authorized to be issued pursuant
to the exercise of Stock Options granted under this Plan is limited to
700,000 Shares.
The last sentence of Section 3.3 of the Plan is amended in its
entirety to state as follows:
No participant may receive, under the Plan, Stock Options the
aggregate of which is more than 20% of the Shares authorized under the
Plan.
3. CONTINUED EFFECTIVENESS; EFFECTIVE DATE. Except as amended
by this amendment, the Plan continues in full force and effect. This amendment
will become effective when adopted by the Board of Directors and is applicable
to all options granted in
<PAGE> 40
the future under the Plan and to each outstanding option under the Plan that is
held by a Participant.
ADOPTED BY BOARD OF DIRECTORS ADOPTED BY SHAREHOLDERS
ON February 24, 1997 ON __________, 1997
STERILE RECOVERIES, INC.
By:
---------------------------
Richard T. Isel
President and Chief
Executive Officer
ATTEST: [CORPORATE SEAL]
- - -------------------------------
James T. Boosales
Secretary
<PAGE> 41
APPENDIX
1997 ANNUAL MEETING OF SHAREHOLDERS OF
STERILE RECOVERIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Bertram T. Martin, Jr. and James T. Boosales,
and each of them, as proxies, each with full power of substitution, to represent
and to vote all shares of voting common stock of STERILE RECOVERIES, INC., a
Florida corporation (the "Company"), at the Annual Meeting of Shareholders of
the Company to be held on Wednesday, April 30, 1997, at 10:00 a.m., EST, and at
any adjournment thereof:
1. Election of directors for terms expiring in 2000:
[ ] FOR THE ELECTION OF LEE R. KEMBERLING AND JAMES T. BOOSALES (the
"Nominees") for terms expiring in 2000
[ ] WITHHOLD AUTHORITY TO VOTE FOR THE NOMINEES
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list above.)
2. Approval of amendments to the Company's 1995 Stock Option Plan (page 5).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Appointment of Grant Thornton LLP as the Company's auditors (page 9).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(continued, and to be signed on reverse side)
(continued from other side)
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 Nominees, FOR the approval of the amendments to the Company's
1995 Stock Option Plan, and FOR the appointment of Grant Thornton LLP as the
Company's auditors.
DATED: , 1997
------------------
-----------------------------
Signature of Shareholder
------------------------------
Signature of Shareholder if
held jointly
<TABLE>
<S> <C> <C>
Do you plan to attend [ ] [ ]
the Annual Meeting? yes no
</TABLE>
Please sign exactly as your name appears on this proxy. If shares are owned
by more than one person, all owners should sign. Persons signing as executors,
administrators, trustees or in similar capacities should so indicate. If a
corporation, please sign full corporate name by the president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED POSTAGE PAID ENVELOPE.
