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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
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PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: August 31, 1998
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(Date of earliest event reported)
Sterile Recoveries, Inc.
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(Exact name of registrant as specified in its charter)
Florida 000-20997 59-3252632
(State or other juris- (Commission File (I.R.S. Employer
diction of incorporation) Number) Identification Number)
28100 U.S. Highway 19 North, Suite 201
Clearwater, Florida 34621
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(Address of principal executive offices) (Zip Code)
(813) 726-4421
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(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
On August 31, 1998, Sterile Recoveries, Inc. ("SRI"), a Florida
corporation, acquired (the "Acquisition") all of the stock of Repak
Surgical Enterprises, Inc. ("Repak"), an Ohio corporation and wholly owned
subsidiary of Standard Textile Co., Inc. ("Standard Textile"), in exchange
for 566,667 shares of SRI's convertible Series A Preferred Stock ("SRI
Preferred Stock"). SRI made the Acquisition in accordance with an
Acquisition Agreement dated as of August 31, 1998, among SRI, Repak, and
Standard Textile (the "Acquisition Agreement"). SRI concurrently purchased
the facility's real estate for $1.5 million cash from Standard's
affiliates, with funds loaned to SRI by its principal lender. The
Acquisition will be accounted for as a purchase for accounting purposes and
will likely be dilutive for SRI through the first quarter of 1999, due to
acquisition and transition costs and the effect on SRI's earnings per share
of issuing the SRI Preferred Stock. Gary Heiman, President and CEO of
Standard Textile, has become an additional director of Sterile Recoveries.
The SRI Preferred Stock is convertible at any time by its holder into the
same number of shares of common stock. The SRI Preferred Stock is
mandatorily convertible into common stock on certain conditions, including
when the average trading price of SRI's common stock measured over 20
consecutive days has been $18 or more. The SRI Preferred Stock votes
together with the common shareholders as one class on an as-converted
basis, and does not have any special voting rights as a class, except as
provided by law. The SRI Preferred Stock accrues a 2% dividend, payable
quarterly, until the earlier of September 1, 2004 or the date that it is
converted into common stock. SRI granted Standard incidental and under
limited circumstances, demand registration rights with respect to the
common stock issuable on conversion of the SRI Preferred Stock.
Repak Surgical Enterprises, Inc. provides reusable surgical product
services similar to SRI's reprocessing service. Repak serves the Ohio and
Michigan markets from its facility located in the Cincinnati, Ohio area.
The acquisition expands Sterile Recoveries' geographic reach further into
Kentucky and Indiana. Repak adds approximately $8 million in annual revenue
for SRI and increases its customer base by over 10%. The acquisition also
allows STRC to offer its full program to Repak customers, including
reusable basins and disposable accessory packs.
The Acquisition Agreement, Registration Rights Agreement, and First
Amendment to Restated Articles of Incorporation (describing the terms of
the Series A Preferred Stock) are filed as exhibits to this Current Report
on Form 8-K and incorporated by reference in it. The above discussion is
qualified by reference to those agreements.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
Financial statements will be filed with the Securities and
Exchange Commission by amendment to this Current Report on
Form 8-K.
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(b) Pro Forma financial information.
Not applicable
(c) Exhibits.
2.4 Acquisition Agreement, dated as of August 31, 1998, among
Sterile Recoveries, Inc., Standard Textile Co., Inc. and Repak
Surgical Enterprises, Inc. Sterile Recoveries, Inc. is not filing
the schedules and exhibits to this document, but agrees to furnish
them supplementarily at the Securities and Exchange Commission's
request.
4.4 First Amendment to Restated Articles of Incorporation dated as
of August 31, 1998 of Sterile Recoveries, Inc. (designating the
rights, preferences, and limitations of the Series A Preferred
Stock).
10.29 Registration Rights Agreement dated as of August 31, 1998,
between Sterile Recoveries, Inc. and Standard Textile Co., Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by its
undersigned officer.
STERILE RECOVERIES, INC.
By: /s/ James T. Boosales
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James T. Boosales
Executive Vice President and
Chief Financial Officer
Date: September 9, 1998
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
2.4 Acquisition Agreement dated as of August 31, 1998, among Sterile
Recoveries, Inc., Standard Textile Co., Inc., and Repak Surgical
Enterprises, Inc.
4.4 First Amendment to Restated Articles of Incorporation dated as of
August 31, 1998, of Sterile Recoveries, Inc. (creating the Series A
Preferred Stock)
10.29 Registration Rights Agreement dated as of August 31, 1998, between
Sterile Recoveries, Inc. and Standard Textile Co., Inc.
</TABLE>
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EXHIBIT 2.4
ACQUISITION AGREEMENT
This Acquisition Agreement is executed by STERILE RECOVERIES, INC., a
Florida corporation, STANDARD TEXTILE CO., INC., an Alabama corporation, and
REPAK SURGICAL ENTERPRISES, INC., an Ohio corporation, to record their
agreement regarding Purchaser's acquisition of Selling Sub (as those terms are
defined below). In this regard, Purchaser, Selling Parent, and Selling Sub (as
defined below) agree as follows:
1. FORM AND INTERPRETATION.
1.1 DEFINITIONS. As used in this Agreement and in the exhibits
attached to it, the following defined capitalized terms have the respective
meanings ascribed to them:
"AGREEMENT" means this Acquisition Agreement as originally executed by
the parties and as subsequently amended or modified in accordance with its
provisions.
"BUSINESS" means Selling Sub's (formerly Selling Parent's) business of
furnishing hospitals and surgery centers with reusable surgical products,
including gowns, drapes, towels, mayo stand and backtable covers, and other
linen surgical products, through its Mason, Ohio facility.
"CLOSING DATE" means the time and date as of which the transactions
contemplated by this Agreement will be consummated, which will be 10:00 A.M.,
Florida time, on a date specified by the parties' subsequent agreement, but not
later than August 31, 1998.
"CODE" means the Internal Revenue Code of 1986, as amended.
"EFFECTIVE TIME" has the meaning set forth in Section 2.3.
"ENVIRONMENTAL LAW" means any present law, statute, regulation, rule,
order, consent, decree, or governmental requirement which relates to or
otherwise imposes liability or standards of conduct concerning discharges or
releases of any pollutants, contaminants or hazardous or toxic wastes,
substances or materials into ambient air, water or land, or otherwise relating
to the manufacture, operation, maintenance, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport or handling
of Hazardous Materials, including the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended; the Resource Conservation
and Recovery Act of 1978, as amended; any other so-called "Superfund" or
"Superlien" law; the Clean Water Act, Clean Air Act, or any other similar
federal, state or local statutes.
"EQUIPMENT LEASES" means the equipment lease agreements between
Selling Parent or Selling Sub, as lessee, and various other persons, as
lessors, that are described
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on Schedule 5.5 of the Seller's Disclosure Schedule, and includes all of
Selling Parent and Selling Sub's rights under those lease agreements, their
leasehold interests in the Leased Equipment, and all rights of Selling Parent
and Selling Sub to the licenses and warranties (express or implied) received
from the sellers, lessors, and manufacturers of the Leased Equipment and any
related claims, credits, setoffs, and rights of recovery against those sellers,
lessors, and manufacturers.
"EXECUTION DATE" means the date when this Agreement becomes effective,
which will be when each party to this Agreement executes a counterpart of this
Agreement and delivers it to the other party.
"FBCA" means the Florida Business Corporation Act.
"FIXED ASSETS" means the fixtures, equipment, computer hardware,
signage, furniture, machinery, and motor vehicles that are owned by Selling Sub
on the Execution Date or the Closing Date; all tools, dies, and spare and
replacement parts for any of the foregoing that are owned by Selling Sub, and
all rights of Selling Sub to the licenses and warranties (express or implied)
received from the sellers and manufacturers of the foregoing items and any
related claims, credits, setoffs, and rights of recovery against those sellers
and manufacturers. Includes all fixed assets that are used in the Business and
all assets listed on the attached EXHIBIT "A".
"HAZARDOUS MATERIALS" means any flammable explosive, radioactive
material, hazardous waste, hazardous substance, toxic substance, pollutant,
chemical or industrial toxic or hazardous substance or waste, which is
prohibited by or is otherwise regulated under any Environmental Law.
"INTELLECTUAL PROPERTY" means all patents, patent rights, copyrights,
service marks, trade names (including the name "Repak"), trademarks (including
"Repak"), registrations of or applications for any of the foregoing, all
pertinent records, documents and data, and any other related intellectual
property rights. Includes all intellectual property used in the Business.
"INVENTORY" means all of the ingredients, raw materials, work in
process, finished goods, and labeling and packaging materials that are owned by
Selling Sub on the Execution Date or the Closing Date and that are held for
sale, lease, rental, or other use in the Business.
"LEASED EQUIPMENT" means all the property leased to Selling Parent or
Selling Sub pursuant to the Equipment Leases. Includes all leased equipment
used by any person in the Business.
"LEASED PREMISES" means the premises that are leased by Selling Parent
or Selling Sub pursuant to the Premises Leases.
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"LIEN" means a restriction or encumbrance on the use or
transferability of property and a claim or charge on any interest in property
securing, relating to, or in respect of an obligation owed to, or claimed by, a
person other than the owner of the property, whether the claim or charge exists
by reason of statute (including any lien for unpaid Taxes), contract, or common
law, and includes a lien, encumbrance or security interest arising from a
pledge, mortgage, indenture, encumbrance, hypothecation, security agreement,
conditional sale, trust receipt, or collateral assignment and a lease,
bailment, or consignment for security purposes.
"LINEN IN SERVICE" means all reusable surgical products used or held
for use in Selling Parent or Selling Sub's reprocessing business, including the
Linen in Service described in Exhibit "F".
"OWNED PREMISES" means the parcels of real property used in the
Business and owned by affiliates of Selling Parent.
"PREMISES LEASES" means the lease agreements for the Leased Premises
that are described on Schedule 5.5 of the Seller's Disclosure Schedule.
"PURCHASER" means Sterile Recoveries, Inc., a Florida corporation and
a party to this Agreement.
"PURCHASER COMMON STOCK" means the common stock, par value $.001 per
share, of the Purchaser.
"PURCHASER PREFERRED STOCK" means Purchaser's Series A Preferred
Stock, liquidation value $18.00 per share, each share convertible into one
share of Purchaser Common Stock.
"PURCHASER'S DISCLOSURE SCHEDULE" means the disclosure schedule dated
as of the Execution Date contemplated by this Agreement and separately
furnished to Seller by Purchaser.
"SALE ASSETS" means (a) all of the Inventory, Linen in Service,
Intellectual Property, and Fixed Assets;
(b) all tangible personal property owned by Selling Sub on the
Execution Date or the Closing Date, wherever located and whenever and however
acquired;
(c) all know-how, proprietary processes, methods, techniques, trade
secrets, and computer software used in or developed for the Business;
(d) all accounts receivable of Selling Sub;
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(e) all governmental business permits and licenses owned by Selling
Sub;
(f) all of Selling Sub's rights under contracts or other binding
arrangements to which it is a party; and
(g) all of Selling Sub's leasehold interests in the Leased Premises
and Leased Equipment.
"SEC" means the Securities and Exchange Commission.
"SELLER'S DISCLOSURE SCHEDULE" means the disclosure schedule dated as
of the Execution Date contemplated by this Agreement and separately furnished
to Purchaser by Selling Sub and Selling Parent.
"SELLING PARENT" means Standard Textile Co., Inc., an Alabama
corporation and a party to this Agreement.
"SELLING SUB COMMON STOCK" means the common stock, no par value, of
Selling Sub.
"SELLING SUB" means Repak Surgical Enterprises, Inc., an Ohio
corporation and a party to this Agreement.
"TRANSACTION" means Purchaser's acquisition of the issued and
outstanding common stock of Selling Sub in exchange for shares of Purchaser
Preferred Stock pursuant to Article 2 and the other terms and conditions of
this Agreement and the other transactions contemplated to close concurrently
with that acquisition in accordance with this Agreement.
1.2 CERTAIN WORDS. This Agreement is written in the masculine gender
solely for convenience, and words of the masculine gender should be construed
to include correlative neuter and feminine words. Words in the singular number
include words of the plural number and vice versa. As used in this Agreement,
the word "including" is always without limitation, and the word "person"
includes a trust, a business trust, a corporation, a joint venture, a
cooperative, an association, a partnership, an unincorporated organization, a
government, a public body or authority, and a governmental agency or
department, as well as a natural person.
1.3 HEADINGS; REFERENCES; EXHIBITS. The titles and headings preceding
the text of the sections of this Agreement are inserted solely for convenient
reference and neither constitute a part of this Agreement nor affect its
meaning, interpretation, or effect. Unless otherwise expressly indicated, all
sections and exhibits specified in this Agreement refer to the sections of this
Agreement and the exhibits attached to it. All
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exhibits referred to in this Agreement are an integral part of it and are
incorporated by reference in it.
1.4 SEVERABILITY. Each provision of this Agreement should be construed
and interpreted so that it is valid and enforceable under applicable law.
Except as otherwise provided below, if a provision of this Agreement, or the
application of it, is held by a court to be invalid or unenforceable, that
provision will be deemed separable from the remaining provisions of this
Agreement and will not affect the validity, interpretation, or effect of the
other provisions of this Agreement or the application of that provision to a
person or circumstance to which it is valid and enforceable.
1.5 RIGHTS OF THIRD PARTIES. Nothing in this Agreement, whether
express or implied, is intended or should be construed to confer upon, or to
grant to, any person (other than the parties and their respective assignees and
successors) any claim, right, or remedy under or because of this Agreement.
1.6 APPLICABLE LAW. The validity, enforcement, and construction of
this Agreement are governed by the laws of the State of Florida. This Agreement
shall be construed without regard to any presumption or any other rule
requiring the construction of an agreement against the party causing it to be
drafted.
1.7 COMPLETE AGREEMENT. Except for any agreements regarding
confidentiality, which will survive the execution of this Agreement and closing
of the Transaction, this Agreement and the agreements contemplated by it record
the final, complete, and exclusive expression of the understanding among the
parties with respect to the transactions contemplated by this Agreement and
supersedes any prior or contemporaneous agreement, understanding, or
representation, oral or written, by either of them.
1.8 DIRECTLY OR INDIRECTLY AND WAIVERS. When any provision in this
Agreement requires or prohibits any action by a person, the provision applies
regardless of whether the action is taken directly or indirectly by the person.
No delay or course of dealing by any party to this Agreement in exercising any
power, right, or remedy under this Agreement will operate as a waiver of any
power, right, or remedy of that party, except to the extent expressly
manifested in a writing signed by or on behalf of that party. In addition, the
written waiver by a party of a breach of any provision of this Agreement will
not constitute a waiver of any succeeding breach of the provision or a waiver
of the provision itself.
1.9 AMENDMENT AND ASSIGNMENT. An amendment or modification of this
Agreement or any provision of it will be valid and effective only if it is in
writing and signed by each party to this Agreement. This Agreement is not
assignable by either party without the prior consent of the other party, which
it may withhold in its sole discretion. Except as otherwise provided, any
attempted assignment by a party without the prior consent of the other party
will be invalid and unenforceable against the other party. This
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Agreement inures to the benefit of, and is binding on, the respective
successors and assignees of the parties to it.
1.10 EXECUTION. The parties may execute this Agreement in
counterparts. Each executed counterpart will constitute an original document,
and all of them, together, will constitute the same document.
1.11 LEGAL MATTERS. If any dispute arises among the parties with
respect to this Agreement, the parties shall submit the dispute to arbitration
before a panel of arbitrators in accordance with the North Carolina Arbitration
Code by giving the other parties a notice of arbitration in accordance with
section 9.2 of this Agreement. Arbitration will be the sole and exclusive
method of resolving any dispute among the parties with respect to this
Agreement, the other parties must arbitrate the dispute, and each party will be
barred from filing a lawsuit concerning the subject matter of the arbitration,
except to obtain an equitable remedy.
The arbitration panel will consist of three arbitrators, with one
arbitrator selected by Selling Parent, the second selected by Purchaser, and
the third, a neutral arbitrator selected by agreement of the first two
arbitrators. Each party shall select an arbitrator and notify the other party
of the selection within 15 days after the effective date of the notice of
arbitration, and the two arbitrators selected by the parties shall select a
third arbitrator within 30 days after the effective date of the notice of
arbitration. A party who fails to select an arbitrator within the prescribed
15-day period waives the right to select an arbitrator or to have an
additional, neutral arbitrator selected by the arbitrator selected by the other
party, and the arbitrator chosen by the other party will constitute the
"arbitration panel" for purposes of this Agreement.
Every arbitrator must be independent (not an agent, officer, director,
employee, shareholder, or representative of any party) without any economic or
financial interest of any kind in the outcome of the arbitration. Each
arbitrator's conduct will be governed by the Code of Ethics for Arbitrators in
Commercial Disputes (1986) that has been approved and recommended by the
American Bar Association and the American Arbitration Association.
Within 90 days after the effective date of the notice of arbitration,
the arbitration panel shall convene a hearing for the dispute to be held on
such date and at such time and place in Raleigh, North Carolina, as the
arbitration panel designates upon 30 days' advance notice to Selling Parent and
Purchaser. The arbitration panel shall render its decision within 30 days after
the conclusion of the hearing. The decision of the arbitration panel will be
binding and conclusive as to the parties and, upon the pleading of either
party, any court having jurisdiction may enter a judgment of any award rendered
in the arbitration, which may include an award of damages. The arbitration
panel shall hear and decide the dispute based on the evidence produced,
notwithstanding the failure or refusal to appear by a party which has been duly
notified of the date, time, and place of the hearing.
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2. THE TRANSACTION
2.1 THE TRANSACTION. On the terms and subject to the satisfaction (or
waiver, if applicable) of the conditions set forth in Sections 4.4 and 4.5 of
this Agreement, Purchaser shall exchange 566,667 shares of Purchaser Preferred
Stock for all of the outstanding shares of Selling Sub Common Stock at a
closing to be held on the Closing Date. On the Closing Date, Purchaser shall
deliver to Selling Parent a certificate evidencing Selling Parent's ownership
of the requisite number of shares of Purchaser Preferred Stock on Selling
Parent's surrender to Purchaser of a certificate evidencing the Selling Sub
Common Stock, properly endorsed or otherwise in proper form for transfer. The
Transaction will be effective (the "Effective Time") as of August 31, 1998,
when the foregoing exchange of securities has been completed.
2.2 CLOSING BALANCE SHEET; MINIMUM BOOK VALUE ASSURANCE. CLOSING
BALANCE SHEET PREPARATION. Selling Parent has prepared and submitted to
Purchaser a tentative balance sheet for the Selling Sub dated as of the Closing
Date (the "Initial Closing Balance Sheet"), compiled in accordance with
generally accepted accounting principles. The Closing Balance Sheet will
include all liabilities of any kind, whenever due or payable, including all tax
and employment obligations for all periods through August 31, 1998. Purchaser
and Selling Parent shall use their best efforts to agree on a final closing
balance sheet (the "Final Closing Balance Sheet") for the Selling Sub as of the
Closing Date and an income statement for the Selling Sub's history of operation
through the Closing Date, within 30 days after the Closing Date, that is
prepared on the same basis as the Initial Closing Balance Sheet and reflects
any adjustments apparent after the Closing Date. The Final Closing Balance
Sheet will be accompanied by a statement of Arthur Andersen that the Linens in
Service of the Selling Sub were valued in the Final Closing Balance Sheet using
methods consistent with those used for the audited financial statements for the
Business for the year ended December 31, 1997. The Final Closing Balance Sheet
will not be effective until agreed upon by Selling Parent and Purchaser.
Selling Parent shall provide Purchaser and its independent accountants with
full and contemporaneous access to Selling Sub's work papers and shall consult
with Purchaser as it prepares the Initial and Final Closing Balance Sheets. The
Final Closing Balance Sheet will reflect a net book value for the Selling Sub
of $3,200,000 as of the Closing Date.
3. FURTHER AGREEMENTS.
3.1 CONDUCT OF BUSINESS UNTIL CLOSING DATE. Selling Sub covenants
that, from the Execution Date until the Closing Date, it shall operate its
business in the ordinary course of business consistent with past practice and:
(a) Selling Sub shall maintain itself as a corporation incorporated
under the laws of the State of Ohio.
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(b) Selling Sub shall consult with Purchaser with respect to material
business decisions affecting Selling Sub's business.
(c) Selling Sub shall maintain the Fixed Assets in good operating
condition and repair, subject to ordinary wear and tear.
(d) Without the prior consent of Purchaser, Selling Sub shall not:
(i) Materially change the extent or character of its business
operations or make any commitment to purchase or spend other than in
the ordinary course of its business;
(ii) Renew, modify, extend, enter into, breach, reject, assign,
sublease, abandon, execute, or exercise any Premises Lease, Equipment
Lease, or any right or option under any of the Premises Leases or
Equipment Leases, except as expressly contemplated by this Agreement;
(iii) Dissolve, liquidate (completely or partially), acquire any
capital assets, merge or consolidate into or with any other person, or
sell, lease, exchange, transfer, or otherwise dispose of, or grant to
any person a right or option to lease, acquire, or purchase, any
material amount of the Sale Assets (including any part of it or any
interest in it), except in the ordinary course of business and
consistent with past practice or as expressly contemplated by this
Agreement;
(iv) Amend, renew, extend, enter into, or execute any material
contract, agreement or other binding arrangement, unless the contract,
agreement or other binding arrangement is terminable following the
Closing Date on not more than 30 days' advance notice and without any
liability to Selling Sub following the Closing Date;
(v) Remove any of the Fixed Assets from the Leased Premises,
unless any removed Fixed Assets are replaced before the Closing Date
with similar items of equal quality and utility and without the
incurrence of any indebtedness or Lien;
(vi) Issue any shares of its capital stock or any securities
convertible into or exercisable or exchangeable for capital stock or
options to purchase capital stock or other rights in respect of any of
the foregoing;
(vii) Amend, modify, or otherwise change or alter the charter or
bylaws of Selling Sub;
(viii) Incur any indebtedness for borrowings or issue any debt
securities or any securities convertible into debt securities or any
options to purchase debt securities or other rights in respect thereto
or assume, indorse, or guarantee, or
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become a surety, an accommodation party, or responsible in any
other way for, an obligation or indebtedness of another person (other
than Selling Sub);
(ix) Employ additional employees other than hourly employees in
the ordinary course of business or pay to any current or former
employee any compensation or other benefit that is not (A) required by
a plan, trust, agreement, or other arrangement in effect on the
Execution Date and disclosed in the Seller's Disclosure Schedule, or
(B) salaries in the ordinary course of business that are reflected on
Schedule 5.6, or adopt, amend, or increase any benefits payable under,
any Employee Plan as defined in Section 5.9, except as disclosed in
Schedule 5.9 of the Seller's Disclosure Schedule;
(x) Redeem, purchase, or otherwise acquire, split, combine, or
reclassify any shares of its capital stock;
(xi) Pay, declare, or set aside for payment a dividend or other
distribution in respect of any shares of its capital stock or make any
other payment or distribution of any kind to any shareholder;
(xii) Discontinue or materially diminish any insurance coverage
applicable to its assets, properties, and business operations, except
for policy renewals and changes in insurers;
(xiii) Commit to a labor or employment contract of any kind, or
any compensation obligation to any employee that is executory or
requires payment after the Closing Date;
(xiv) Mortgage, pledge or subject to any other Lien any of the
Purchased Property;
(xv) Cancel or compromise any legal right or claim of or debts
owed to Selling Sub; or
(xvi) Agree to do, or acquiesce in, any of the foregoing acts.
3.2 ACCESS, INFORMATION AND DOCUMENTS. Each party shall give the other
party's designated representatives (including lawyers and accountants) full and
unrestricted access, from time to time during normal business hours, to all of
the other party's business offices, premises, properties, books, records, and
business information and shall permit the other party's designated
representatives to make such examination thereof, to make extracts from them,
and to conduct such other investigation as they consider appropriate to verify
and determine the business operations of the other party and the accuracy of
the representations and warranties made in this Agreement, or the physical
condition of the Sale Assets and to consummate the transactions contemplated by
this Agreement. Also, each party shall furnish to the other party and its
designated
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representatives all additional information concerning the assets, affairs, and
business of the party as the other party reasonably requests. In connection
with this examination, each party may make such inquiries of persons having
business relationships with the other party (including customers, suppliers,
and distributors). Purchaser's access to Selling Parent's information will be
limited to information that is relevant to the Business.
3.3 TRANSACTION EXPENSES. Except as otherwise expressly contemplated
by this Agreement, Selling Parent and Purchaser shall pay their respective
expenses (including legal fees and expenses and including the expenses of their
respective subsidiaries) in connection with the transactions contemplated by
this Agreement. Selling Parent shall pay all fees and costs attendant to
Selling Sub or Purchaser's assumption of the Premises Leases and Equipment
Leases, if such assumption is required or attendant to obtaining any required
consent to the Transaction. Selling Parent shall pay all taxes and assessments
incurred in connection with the Transaction, including sales tax obligations.
Selling Sub shall pay the expense incurred by the Selected CPA for its services
pursuant to section 3.13.
3.4 BROKERS. Each party represents that no broker, finder, or other
intermediary has been engaged in connection with any transaction contemplated
by this Agreement.
3.5 THIRD PARTY APPROVALS. Promptly after the Execution Date, the
parties shall use their best efforts to obtain the written consent or approval
of each person whose consent or approval is required to consummate the
transaction or is required to provide the Selling Sub with the benefits of all
agreements to which Selling Sub or Selling Parent is a party and that relate to
the Business.
3.6 SELLING PARENT'S CONSENT AND GUARANTY. By executing this
Agreement, Selling Parent (as Selling Sub's sole shareholder) consents to
Selling Sub's execution, delivery, and performance of this Agreement. This
consent will be treated as an affirmative vote adopted at a meeting of the
Selling Sub's sole shareholder held for that purpose. Selling Parent shall take
all further action that is advisable or necessary to authorize Selling Sub's
execution, delivery, and performance of this Agreement. In addition, Selling
Parent irrevocably and unconditionally guarantees to Purchaser the full and
punctual payment and performance by Selling Sub of all its obligations under
this Agreement.
3.7 [OMITTED.]
3.8 HOLDING PERIOD. Selling Parent shall hold the Purchaser Preferred
Stock (and the Purchaser Common Stock issued on conversion of the Purchaser
Preferred Stock) that it receives in the Transaction for at least one year
following the Closing Date, except for a Permitted Transfer. For purposes of
this Agreement, "Permitted Transfer" shall include a transfer to the principal
shareholder of Selling Parent, to another entity
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owned directly or indirectly by such shareholder, or to such shareholder's
spouse, lineal descendants, or trusts for the benefit of the foregoing parties;
provided, however, that such transferees must agree in writing to hold the
Purchaser Common Stock subject to the terms and conditions of this Agreement.
The certificate evidencing the foregoing certificate will bear a legend
confirming the existence of this transfer restriction.
3.9 EXCLUSIVE NEGOTIATIONS. After the Execution Date and before the
Closing Date or termination of this Agreement, none of Selling Sub, Selling
Parent, or any of their executive officers, directors, agents, or affiliates
shall make an offer to, negotiate with or accept, solicit, or recommend or
encourage an offer from anyone else for the sale and purchase of the capital
stock of Selling Sub or any of the Sale Assets, the merger, consolidation, or
reorganization of Selling Sub, or any similar transaction.
3.10 [OMITTED]
3.11 [OMITTED]
3.12 EMPLOYEES. Selling Parent and Selling Sub shall use their best
efforts to retain the all of Selling Sub's employees and make them available
for the Business pending completion of the Transaction and after the Closing
Date, except for any employees that Purchaser designates it does not desire to
retain, which Selling Parent shall reassign or terminate. Selling Parent shall
bear all severance and other costs, expenses, and liabilities associated with
any such termination.
3.13 FINANCIAL STATEMENTS AND CERTIFICATE. The parties contemplate
that as soon as possible following the Closing Date, but in no event later than
October 31, 1998, Selling Parent shall prepare in conformity with generally
accepted accounting principles consistently applied and deliver to Purchaser
financial statements (including balance sheet, income statement, and statement
of cash flows) for the Selling Sub and for the period before formation of the
Selling Sub, Selling Parent's division engaged in the Business, for the
calendar years ended December 31, 1996 (to the extent requested by Purchaser)
and December 31, 1997, and for the interim six month period ended June 30,
1998, together with a report by the Selected CPA, all of which must be in form
and substance satisfactory to Purchaser. The financial statements for the
calendar year periods must be audited by independent certified public
accountants satisfactory to Purchaser (the "Selected CPA"). Selling Parent
shall deliver to Purchaser with the financial statements a certificate executed
by Selling Parent representing and warranting to Purchaser that the financial
statements are complete and correct and presented fairly and accurately in
conformity with generally accepted accounting principles, consistently applied.
Selling Parent consents to Purchaser filing the financial statements with the
SEC in connection with an offering of its securities and for other purposes and
shall sign any separate form required to evidence its consent.
3.14 POST-CLOSING COOPERATION ON ACCOUNTING. For six months following
the Closing Date, without charge, Selling Parent shall furnish support services
to Selling Sub
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with respect to accounting matters of the same scope and nature furnished
before the Closing Date, including closing its books and providing Purchaser
with monthly, quarterly, and year-end reports of its results of operations
within 15 days after the close of each period.
3.15 POST-CLOSING PASS CARD SALES. Pursuant to a license agreement to
be signed after the Closing Date, Selling Parent shall license non-exclusively
to Purchaser its "Pass Card" product, so that Purchaser may purchase that
product and use it throughout its facilities.
3.16 FIXED ASSET PROTECTION. If at any time after the Closing Date and
before January 1, 2000, a Fixed Asset described on EXHIBIT "G" fails to
function in its intended manner in a material respect, but not as a result of
misuse or improper operation or an "act of God" described below, and
consequently, Purchaser or Selling Sub must either (a) repair the Fixed Asset
at a cost of over $5,000, net of any applicable insurance proceeds, provided
the cost is reasonable for the work performed, or (b) write off the Fixed Asset
from Purchaser or Selling Sub's balance sheet, which results in a loss of over
$5,000 net of insurance proceeds, Selling Parent shall pay to Purchaser or
Selling Sub, regardless of whether the Fixed Asset is actually repaired or
written off, the lesser of either (i) the reasonable repair cost, less
applicable insurance proceeds, to bring the tangible asset back to its
operating condition before the failure, or (ii) the net book value of the
tangible asset as of the date of the failure, less applicable insurance
proceeds. Purchaser's rights under this section are not assignable to any
insurance company, nor shall any insurance company acquire any rights of
Purchaser under this section pursuant to subrogation by contract or operation
of law. For purposes of this section, an "act of God" means a storm, facility
fire, earthquake, flood, or similar event beyond the reasonable control of any
person.
3.17 FURTHER ASSURANCES. At any time and from time to time after the
Closing Date, each party shall make such further assurances of the transactions
consummated pursuant to this Agreement as the other party requests, including
the Selling Parent's execution of additional documents conveying title to the
Sale Assets to the Selling Sub, if the requested assurance does not enlarge or
extend any existing liability or obligation of the party or impose on the party
any new or additional liability or obligation.
4. CLOSING OF TRANSACTIONS.
4.1 CLOSING TIME AND PLACE. The parties shall close the transactions
contemplated by this Agreement on the Closing Date at the law offices of
Purchaser's counsel. If the Closing Date is a Saturday, Sunday, or legal
holiday observed by financial institutions in Tampa, Florida, the Closing Date
will be extended automatically to the next day that is not a Saturday, Sunday,
or legal holiday observed by financial institutions in Tampa, Florida.
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4.2 CLOSING OBLIGATIONS OF SELLING PARENT AND SELLING SUB. On the
Closing Date, Selling Parent and Selling Sub shall deliver to Purchaser the
following:
(a) an original or certified copy of the written approval or consent
of every person whose approval or consent is required for the Transaction or
under the terms of a contract that Selling Parent and Selling Sub were able to
procure pursuant to Section 3.5;
(b) stock certificate for the Selling Sub Common Stock, free and clear
of all liens, claims, charges, and restrictions;
(c) [omitted];
(d) [omitted];
(e) a certificate of Selling Parent certifying as to the accuracy of
Selling Parent and Selling Sub's warranties and representations as of the
Closing Date and that Selling Parent and Selling Sub have performed and
complied with all of the terms, conditions, and provisions to be performed and
complied with by Selling Parent and Selling Sub pursuant to this Agreement, and
certifying as to certain corporate matters, together with the attachments
referred to in the certificate;
(f) a certificate of Selling Sub's agent confirming that the insurance
for Selling Sub in effect on the date hereof remains in effect as of the
Closing Date; and
(g) such other matters that Purchaser reasonably requests.
4.3 CLOSING OBLIGATIONS OF PURCHASER . On the Closing Date, Purchaser
shall deliver to Selling Parent the following:
(a) a certificate evidencing the shares of Purchaser Common Stock that
Selling Parent is entitled to receive in accordance with Section 2.1 (bearing
the legend referred to in Section 3.14);
(b) [omitted];
(c) [omitted];
(d) a certificate of Purchaser certifying the accuracy of its
warranties and representations as of the Closing Date and that they have
performed and complied with all of the terms, conditions, and provisions to be
performed and complied with by them pursuant to this Agreement, and certifying
certain corporate matters, together with the attachments referred to in the
certificate; and
(e) such other matters that Selling Parent reasonably requests.
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<PAGE> 14
4.4 CLOSING CONTINGENCIES OF PURCHASER. Purchaser's closing
obligations under this Agreement are subject to the following conditions
precedent, each of which must be satisfied on or before the Effective Time,
unless waived by Purchaser:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and warranty
of Selling Parent and Selling Sub contained in this Agreement must be true and
complete in all material respects at the Effective Time, as if the
representation and warranty were made as of the Effective Time. If a
representation of Selling Parent or Selling Sub in this Agreement is made
subject to a materiality exception, the foregoing provision that the
representation previously given be "true and complete in all material respects"
will be understood not to increase the level of materiality originally set
forth in the representation.
(b) COMPLIANCE WITH AGREEMENT. Selling Parent and Selling Sub must
have performed in all material respects every agreement and obligation required
by this Agreement to be performed by them on or before the Effective Time.
(c) BUSINESS OPERATIONS. The Business must have been conducted and
operated during the period after the Execution Date and before the Effective
Time in a manner consistent with the requirements of Section 3.1.
(d) NO MATERIAL ADVERSE CHANGE. Since July 1, 1998, Selling Sub must
not have suffered a change in its business or condition, financial or
otherwise, that has had or could reasonably be expected to have a material
adverse effect on the Business, and there shall not have occurred any material
damage to or destruction or loss of (whether or not covered by insurance) any
of the Sale Assets.
(e) ADVERSE PROCEEDINGS. No action, proceeding or governmental
investigation shall have been instituted or threatened against the consummation
of the transactions contemplated by this Agreement.
(f) [OMITTED.]
(g) FIXED ASSETS, LINEN IN SERVICE, AND MISCELLANEOUS SUPPLIES. The
net book value of Selling Subas reflected on the Initial Closing Balance Sheet
must be at least $3,200,000.
(h) DILIGENCE INVESTIGATION. Purchaser must be satisfied with the
results of its diligence investigations.
(i) LEGAL OPINION. Selling Parent and Selling Sub must have delivered
a legal opinion of their counsel in form reasonably satisfactory to Purchaser
addressing Selling Sub's incorporation, Selling Sub's outstanding capital
stock, enforceability of this Agreement, the effectiveness of the Transaction
under Ohio law, and the absence of a conflict with governing documents or any
material contract.
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<PAGE> 15
(j) CONSENTS AND APPROVALS. The parties must have obtained all
material consents, authorizations, and approvals under all statutes, laws,
ordinances, regulations, rules, judgments, decrees and orders of any court or
governmental agency, and of any other person required to be obtained in
connection with the execution, delivery, and performance of this Agreement and
the consummation of the transactions contemplated by it.
4.5 CLOSING CONTINGENCIES OF SELLING PARENT AND SELLING SUB. The
obligations of Selling Parent and Selling Sub pursuant to this Agreement are
subject to the following conditions precedent, each of which must be satisfied
at the Effective Time, unless waived by Selling Parent:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and warranty
of Purchaser contained in this Agreement must be true and complete in all
material respects at the Effective Time, as if the representation and warranty
were made as of the Effective Time.
(b) COMPLIANCE WITH AGREEMENT. Purchaser must have performed and
satisfied in all material respects every agreement and condition required by
this Agreement to be performed or satisfied by them on or before the Effective
Time.
(c) ADVERSE PROCEEDINGS. No action, proceeding, or governmental
investigation shall have been instituted or threatened against the consummation
of the transactions contemplated by this Agreement.
(d) [OMITTED].
(e) LEGAL OPINION. Purchaser must have delivered a legal opinion of
its counsel in form reasonably satisfactory to Selling Parent addressing
enforceability of this Agreement, the effectiveness of the Transaction under
Florida law, the absence of a conflict with governing documents or any material
contract, and the issuance of the Purchaser Common Stock in connection with the
Transaction.
(f) CONSENTS AND APPROVALS. The parties must have obtained all
material consents, authorizations, and approvals under all statutes, laws,
ordinances, regulations, rules, judgments, decrees and orders of any court or
governmental agency, or board, and of any other person required to be obtained
in connection with the execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated by it.
5. REPRESENTATIONS AND WARRANTIES OF SELLING PARENT AND SELLING SUB.
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<PAGE> 16
Selling Parent and Selling Sub jointly and severally represent and
warrant to Purchaser the following:
5.1 CORPORATE POWER AND ORGANIZATION. Each of Selling Parent and
Selling Sub is a corporation incorporated and validly existing in good standing
under its respective state of incorporation, has the requisite corporate power
and authority to carry on its business as currently conducted, and has all
permits, licenses, franchises, and certificates from governmental authorities
that are necessary to conduct its current business. Selling Sub has delivered
to Purchaser complete and correct copies of its charter and bylaws as in effect
at the Execution Date. Schedule 5.1 of the Seller's Disclosure Schedule sets
forth a true and complete list of Selling Sub's directors and officers.
5.2 AUTHORIZATION AND VALIDITY OF AGREEMENT; NO CONFLICTS. Each of
Selling Parent and Selling Sub has the requisite corporate power and authority
to enter into this Agreement, to perform its obligations under this Agreement,
and to consummate the Transaction. This Agreement has been approved by Selling
Parent as Selling Sub's sole shareholder and by the Boards of Directors of
Selling Parent and Selling Sub. The execution, delivery, and performance of
this Agreement by each of Selling Parent and Selling Sub: (a) will not conflict
with their respective charter and bylaws; (b) except for consents required by
the express written terms of contracts furnished to Purchaser and listed on
Schedule 5.2 of the Seller's Disclosure Schedule, will not breach, violate,
suspend, terminate, or accelerate (or create any right of suspension or
termination or acceleration) any liability or obligation of Selling Parent or
Selling Sub, constitute a default or breach (or any event that, with notice or
lapse of time or both, would constitute a default or breach) under any bond,
lease, mortgage, agreement, indenture, instrument, deed of trust, promissory
note, or other commitment to which Selling Parent or Selling Sub is a party or
any of their property is subject; (c) will not result in the creation or
imposition of a Lien on any property of Selling Parent or Selling Sub; (d) will
not violate any law or order applicable to Selling Parent or Selling Sub or any
of their property; and (e) except for consents required by the express written
terms of contracts furnished to Purchaser, does not require any notice to,
filing with, or consent, approval, or authorization of, any governmental
authority or any other person, corporation, or entity. This Agreement has been
executed and delivered to Purchaser by Selling Parent and Selling Sub and is a
valid and binding obligation of Selling Parent and Selling Sub, enforceable
against Selling Parent and Selling Sub in accordance with its terms, except to
the extent that its enforceability is limited by application of general
principles of equity and by bankruptcy, insolvency, moratorium, debtor relief,
reorganization, or other laws of general application affecting the enforcement
of creditor rights and debtor obligations.
5.3 LOCATION AND USE OF SELLING SUB ASSETS. Selling Sub does not and
has not owned any real property. The Owned Premises and the Leased Premises
constitute the only real property that is or has been used by Selling Parent or
Selling Sub in the conduct of the Business. Except as disclosed in Schedule 5.3
of the Seller's Disclosure Schedule, all of the Sale Assets are located on the
Leased Premises or the Owned
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<PAGE> 17
Premises and will not be removed from those locations without the prior
approval of Purchaser, except for delivery and retrieval of reusable surgical
products in the ordinary course of business. The Sale Assets constitute all of
the property of any kind used by Selling Parent or Selling Sub in the Business
or purchased for use in the Business, at any location. The Linen in Service
includes all of the reusable surgical products of Selling Parent or Selling Sub
used in their reusable surgical products reprocessing business. All property
used in the Business is reflected in the Closing Balance Sheet in the manner
and to the extent required by generally accepted accounting principles.
5.4 TITLE TO AND CONDITION OF SALE ASSETS. The Selling has good and
marketable title to the Sale Assets and owns the Sale Assets outright subject
to no Lien, and the Sale Assets will not be subject to any claim of interest or
ownership by any person. To Selling Parent and Selling Sub's knowledge, the
tangible assets of Selling Sub (whether owned or held under lease), including
the Fixed Assets, are in good and working operating condition and repair,
normal wear and tear excepted, and to this date have been repaired and
maintained consistent with good business practice.
5.5 EQUIPMENT LEASES AND PREMISES LEASES. Selling Sub has valid and
enforceable leasehold interests in the Leased Equipment and the Leased Premises
pursuant to the leases described in Schedule 5.5, and each of the Equipment
Leases and the Premises Leases is in full force and effect, and except for
modifications expressly contemplated by this Agreement, has not been modified,
rescinded, or supplemented in any way since the date of it or of the last
amendment or modification to it that has been delivered to Purchaser prior to
the date of this Agreement. Selling Sub has delivered to Purchaser a copy of
each Premises Lease and Equipment Lease, each of which is true and complete
copy as in effect on the Execution Date. Neither Selling Parent nor Selling Sub
is in default under or has received any notices of default with respect to the
Premises Leases or Equipment Leases and neither Selling Parent nor Selling Sub
knows of any default by the other parties to those leases.
5.6 EMPLOYMENT MATTERS. Schedule 5.6 of the Seller's Disclosure
Schedule sets forth a list of each employee employed by Selling Sub and a
description of the rate and basis of their total compensation, their accrued
vacation, and any other obligations presently owed to them by Selling Sub or
which may be owed to them as a result of the Transaction under any plans,
trusts, policies, contracts, laws, agreements, or other arrangements. No
employees of Selling Sub are members of any collective bargaining unit, Selling
Sub is not a party to any union agreement covering any of its employees, and no
union organizing activities are taking place or have taken place within the
past two years. Except as set forth in Schedule 5.6 of the Seller's Disclosure
Schedule, Selling Sub is not liable for any arrearages of wages, any accrued or
vested vacation pay, or any tax, penalty or other payment for failure to comply
with any applicable local, state, or federal law relating to the employment of
labor, and there is not a controversy pending, threatened, or in prospect
between Selling Sub and its employees, nor is there any basis for a
controversy. Except as set forth in Schedule 5.6,
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<PAGE> 18
(a) none of the employees have a contract of employment, express or
implied;
(b) each employee may be terminated "at will" by Selling Sub, subject
only to a common law requirement of reasonable advance notice; and
(c) except for any liability for unemployment insurance and COBRA,
Purchaser and Selling Sub will not incur any severance or other liability or
obligation in connection with the termination of an employee of Selling Sub
after the Transaction, on account of employment practices of Selling Parent or
Selling Sub before the Transaction.
5.7 LITIGATION. Except as set forth in Schedule 5.7, there is no
action, claim, suit, proceeding, arbitration or investigation by any
governmental agency or any third party pending (or to Selling Sub's knowledge,
threatened) against or affecting Selling Parent or Selling Sub and relating to
the Business, or against any asset or business of Selling Sub, including, but
not limited to, OSHA claims, worker's compensation claims, employment
discrimination claims, wage and hour claims or claims involving disputes
between employees and Selling Parent or Selling Sub.
5.8 COMPLIANCE WITH LAWS.
(a) GENERALLY. Selling Sub and the Business are in compliance with all
applicable statutes, laws, regulations, rules, orders, decrees, permits or
licenses that are material to the operation of the Business. Schedule 5.8 of
the Seller's Disclosure Schedule lists all licenses, franchises, permits, and
other governmental authorizations held by Selling Parent or Selling Sub that
are material to operation of the Business. These licenses, franchises, permits,
and other governmental authorizations are valid, and Selling Sub has not
received any notice that any governmental authority intends to cancel,
terminate, or not renew any of them. Selling Sub holds all permits, licenses,
certificates of authority, orders and approvals of, and has made all filings,
applications and registrations with, all governmental or regulatory bodies that
are required for the Business as it is currently conducted.
(b) FDA COMPLIANCE. Since January 1, 1996, neither Selling Parent nor
Selling Sub has been subject to any 483 notices or warning letters relating to
the Business from the Federal Food and Drug Administration ("FDA") or any
comparable state or local agency or otherwise been notified of any violation of
FDA rules and regulations. Selling Parent and Selling Sub have maintained for
the Business and made available to Purchaser complete and accurate files and
documents relating to the following: (a) FDA and comparable state agency
compliance, (b) boiler inspection records, (c) sterilization process
validations and calibrations, (d) QNC reports, (e) product recall files; (f)
internal operations manuals of the Business, including standard operating
procedures and QSR manuals, (g) customers' grievance and complaint files, and
(h) maintenance system logs and records.
5.9 EMPLOYEE BENEFIT PLANS.
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(a) Except as set forth on Schedule 5.9 of the Seller's Disclosure
Schedule, as of 8/31/98 there are no medical, dental, disability, life
insurance, deferred compensation, pension, profit sharing, stock bonus, or
other employee benefit plans, policies, or arrangements of any type (including,
without limitation, plans described in Section 3(3) of ERISA) covering
employees employed in the Business under which Selling Parent or Selling Sub
has or in the future could have directly, or indirectly through a "Commonly
Controlled Entity" (within the meaning of Sections 414(b), (c), (m), and (n) of
the Code), any liability with respect to any current or former employee of
Selling Sub ("Employee Plans") based on circumstances existing on the Closing
Date. The employee policy manual furnished to Selling Parent contains a true
and correct description of Selling Sub's vacation policy. At no time within the
last five years has Selling Sub (or Selling Parent as predecessor employer)
maintained any Employee Plan that is a defined benefit plan or that is subject
to Title IV of ERISA or the minimum funding standards of Section 412 of the
Code. No Employee Plan is a "multi-employer plan" (within the meaning of
Sections 3(37) and 4001(a)(3) of ERISA), a "multiple employer plan" (within the
meaning of Section 413 of the Code), or a "multiple employer welfare
arrangement" within the meaning of Section 3(40) of ERISA.
(b) With respect to each Employee Plan: (i) if intended to qualify
under Section 401(a) or 403(a) of the Code, such Employee Plan has been
maintained and administered at all times in material compliance with its terms
and applicable law and regulation; (ii) no event has occurred and there exists
no circumstance under which Selling Sub (or Selling Parent as predecessor
employer) could incur liability under ERISA, the Code, or otherwise; (iii)
there are no actions, suits, or claims pending or threatened, with respect to
any Employee Plan or against the assets of any Employee Plan; (iv) no
"prohibited transaction" (as defined in section 406 of ERISA or in section 4975
of the Code), has occurred; (v) all contributions and premiums due have been
made on a timely basis; and (vi) all contributions made or required to be made
under any Employee Plan meet the requirements for deductibility under the Code,
and all contributions that have not been made have been properly recorded as
liabilities on the books of Selling Sub in accordance with generally accepted
accounting principles.
(c) With respect to each Employee Plan that is a "welfare benefit
plan" (as defined in Section 3(1) of ERISA): (i) no such plan provides medical
or death benefits (whether or not insured) with respect to current or former
employees beyond their termination of employment; and (ii) with respect to each
Employee Plan that is subject to continuation coverage requirements, Selling
Sub (and Selling Parent as predecessor employer) has substantially complied
with the requirements of Code Section 4980B and Part 6 of Title I of ERISA.
(d) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any individual to severance pay, (ii) accelerate
the time of payment or vesting of, or increase the amount of, compensation due
from Selling Sub to any indiv-
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<PAGE> 20
idual, or (iii) result in the payment of an amount subject to the provisions of
Code Section 280G.
(e) There exists no uninsured liability or obligation of Selling Sub
arising under any Employee Plan maintained by Selling Sub or any Commonly
Controlled Entity relating to claims incurred (whether or not reported) on or
prior to the Closing Date.
5.10 TAX MATTERS. For purposes of this Agreement, "Taxes" or "Tax"
means all net income, capital gains, gross income, gross receipts, sales, use,
ad valorem, franchise, profits, license, withholding, payroll, employment,
excise, intangibles, severance, stamp, occupation, premium, property or
windfall profit taxes, customs duties, or other taxes, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax, or additional amounts imposed by any taxing authority
("Taxing Authority") upon Selling Sub. Except as set forth in Schedule 5.10 of
the Seller's Disclosure Schedule:
(a) Selling Sub has withheld or will withhold amounts from the
compensation and other payments due and payable to its employees and has filed
or will file all federal, foreign, state, and local returns and reports with
respect to employee income tax withholding and social security and employment
taxes for all periods (or portions of a period) ending on or before the Closing
Date, in compliance with the provisions of applicable federal, state and local
laws.
(b) Selling Sub has paid, or provided a sufficient reserve for the
payment of, all federal, state and local Taxes with respect to all periods, or
portions thereof, ending on or before the Closing Date.
(c) Selling Sub has filed (including extensions) all federal, state,
local, and other tax returns required to be filed by it under applicable law,
including estimated tax returns and reports.
(d) There are no material claims or, to the knowledge of Selling Sub,
any investigations by any Taxing Authority pending against Selling Parent or
Selling Sub for any past due Taxes incurred in the Business; and there has been
no waiver of any applicable statute of limitations or extension of the time for
the assessment against Selling Parent or Selling Sub of any Tax incurred in the
Business.
5.11 FINANCIAL STATEMENTS.
(a) Attached as Schedule 5.11 of the Seller's Disclosure Schedule are
the balance sheet of Selling Sub at July 31, 1998, and the income statements of
the Business for the calendar years ended December 31, 1997 and 1996, and the
seven-months period ended July 31, 1998 (the "Financial Statements"). The
Financial Statements were prepared in accordance with generally accepted
accounting principles, consistently
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applied, and fairly present the financial condition and results of operations
at and for the dates and periods indicated, except for the deletion of
footnotes.
(b) Except as set forth in Schedule 5.11 of the Seller's Disclosure
Schedule, there has been no material adverse change in, material loss or
destruction of, or material amount of damage to, Selling Sub's assets, or the
financial condition or business of Selling Sub since January 1, 1998, whether
or not arising from transactions in the ordinary course of business.
(c) The regular books of account of Selling Sub fairly and accurately
reflect in all material respects all transactions since Selling Sub's inception
that were required to be so reflected by generally accepted accounting
procedures and are true, correct, and complete in all material respects.
(d) Selling Sub has no liabilities (absolute, accrued, contingent, or
otherwise), except and to the extent (i) reflected or reserved against in the
July 31, 1998, balance sheet included in the Financial Statements, (ii) as
incurred in connection with the usual and ordinary course of Selling Sub's
business since July 31, 1998 (and in amounts consistent with past experience)
and which liabilities or obligations are reflected in the books of the account
of Selling Sub and will be reflected on the Closing Balance Sheet, or (iii) as
specifically set forth in Schedule 5.11 of the Seller's Disclosure Schedule.
(e) No uncollectible accounts receivable are reflected on the
Financial Statements or Closing Balance Sheet without provision for an adequate
reserve for uncollectible amounts; Linen in Service and Miscellaneous Supplies
reflected in the Financial Statements and Closing Balance Sheet represent only
good and serviceable items priced at the lower of cost or market value with
adequate provision for amortization, obsolescence, shrinkage, excess
quantities, defective materials, and deterioration.
5.12 INSURANCE. All Properties and operations of Selling Sub and of
Selling Parent that relate to the Business are insured for their respective
benefits, in amounts deemed adequate by the respective Board of Directors or
management, against all risks usually insured against by persons operating
similar properties or conducting similar operations in the localities in which
the Properties are located and the Business is conducted, under valid and
enforceable policies issued by insurers of recognized responsibility. Selling
Parent and Selling Sub have furnished to Purchaser copies of all of their
insurance policies that are relevant to the Business.
5.13 AGREEMENTS. Schedule 5.13 of the Seller's Disclosure Schedule
sets forth (and Selling Sub has delivered to Purchaser full and complete copies
of any written contract with respect to) any of the following transactions or
arrangements to which Selling Sub is a party or by which Selling Sub is
obligated and that remain in effect: (i) written contracts for the employment
of any officer or individual employee; (ii) agreements with any labor union;
(iii) any single contract, sales order or commitment for
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<PAGE> 22
the sale of goods for which the aggregate sale price exceeds $50,000; (iv) any
single contract, purchase order or commitment providing for an expenditure by
Selling Sub of more than $50,000; (v) lease of real or personal property in
which Selling Sub is lessor or lessee that involves the payment of more than
$20,000 during any calendar year and that will not be terminable on notice of
30 days or less without further liability of Purchaser or that are otherwise
material to Selling Sub; (vi) option, preferential right of purchase, real
estate mortgage, chattel mortgage, deed of trust, security agreement,
conditional sales agreement, or other encumbrance affecting the title to, or
use of, any assets; (vii) bond, loan agreement, promissory note, indenture,
overdraft agreement or other obligation to pay indebtedness for money borrowed,
indenture, or other instrument relating to municipal or governmental finance or
financial assistance, arrangement for the factoring or assignment of accounts
receivable, guarantee, indemnification agreement or any obligation with respect
to the undertaking of such a relationship; (viii) any license agreement wherein
Selling Sub is a licensor or licensee that is material to Selling Sub; (ix)
advertising contract, consulting agreement, agency agreement, and any other
service agreement that continues in force after the Closing Date with respect
to employment or retention of consultants, agents, legal counsel, accounts or
anyone else who is not an employee and that is not terminable on notice of 30
days or less; (x) power of attorney or other similar authorization to do and
perform any acts for or on behalf of Selling Sub or with respect to the assets
of Selling Sub; (xi) contract for the construction of any plants, equipment,
facilities, buildings or other structures for Selling Sub's use; (xii)
government contract; (xiii) distributorship, dealership, authorized sales
representative or other similar agreement; (xiv) contract containing covenants
limiting the freedom of Selling Sub or any officer, director, or employee to
engage in any line of business, any product line or with any person in any
geographic area; (xv) commitment or arrangement to participate in a
partnership, joint venture or other cooperative undertaking; and (xvi)
commitment, agreement, contract, or understanding with any director or
shareholder of Selling Sub. Selling Sub is not in default under any contract,
agreement, lease, document or other arrangement to which it is a party and no
event has occurred that, with notice or lapse of time, would constitute such a
default thereunder.
5.14 INTELLECTUAL PROPERTY. Schedule 5.14 of the Seller's Disclosure
Schedule contains a complete list and description of all Intellectual Property
used in the Business, including all license agreements pursuant to which any
Intellectual Property is licensed by Selling Parent or Selling Sub. Except for
Intellectual Property used pursuant to such license agreements, Selling Sub
owns its Intellectual Property and all trade secrets, know how, designs, or
other intellectual property proprietary to Selling Sub (the "Proprietary
Rights") free of any rights, claims, pledge, interest, condition or restriction
of any officers, directors, shareholders or employees of Selling Sub, or of any
other persons, corporations or entities and no such Intellectual Property or
Proprietary Rights are licensed for use to any of the foregoing. Selling Sub
owns or licenses all Intellectual Property necessary to engage in the Business.
All applicable registration, renewal or similar fees have been duly and timely
paid. To their knowledge, Selling Sub and Selling Parent have not infringed
upon, conflicted with, or violated the Intellectual Property or other
proprietary rights of others in the operation of the Business before the
Closing Date;
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<PAGE> 23
Selling Sub and Selling Parent have received no notice or claim and no
proceedings are pending or threatened that the Intellectual Property or
Proprietary Rights relevant to the Business are not valid or enforceable or
that Selling Sub or Selling Parent has infringed upon, conflicted with or
violated any patent, patent right, trademark, service mark, trade name,
copyright or proprietary rights of any third party; and Selling Sub and Selling
Parent have not given any notice to a third party, and are not aware, that
enforceable rights of Selling Sub or Selling Parent in their Intellectual
Property or proprietary rights relevant to the Business have been infringed
upon, conflicted with or violated. The use by Selling Sub of the Intellectual
Property pursuant to license agreements as they are presently used does not
violate the terms of any such license agreements and such license agreements
are adequate and enforceable. Selling Sub has delivered to Purchaser a true and
complete copy of any such license agreements.
5.15 EXTRAORDINARY TRANSACTIONS. Except as set forth in Schedule 5.15,
neither Selling Parent nor Selling Sub has or arranged to have (i) except in
the ordinary course of business, since July 1, 1998, sold, leased or
transferred assets that are material to the Business; (ii) sold, assigned or
transferred Intellectual Property that is material to the Business; (iii) since
July 1, 1998, suffered any material change in its relationship or course of
dealing with a material supplier or customer of the Business; (iv) since July
1, 1998, suffered material destruction, loss or damage to assets that are
material to the Business; (v) materially changed its policies with regard to
the provision of services, sales, purchasing or other business, financial,
accounting (including reserves the amounts thereof) or tax policies or
practices relating to the Business; (vi) declared or paid any dividends on or
made any distributions in respect of (or redeemed, purchased, or otherwise
acquired) any outstanding shares of Selling Sub's capital stock; or (vii)
increased salaries, fringe benefits, or other amounts payable to Selling Sub's
employees.
5.16 ENVIRONMENTAL MATTERS.
(a) The facilities used by Selling Parent and Selling Sub for the
Business (collectively, the "Property"), the existing and prior uses of the
Property by Selling Parent and Selling Sub, their predecessors, and other
parties, and Selling Parent and Selling Sub's operation of the Business comply
and have at all times complied with all Environmental Laws.
(b) Selling Sub has all necessary permits, registrations, approvals
and licenses required by any Environmental Law for the Business.
(c) There has been no spill, discharge leak, or emission, injection,
disposal (including off-site disposal), escape, dumping or release of any kind
of any Hazardous Materials on, beneath, from, or above the Property or into the
environment at a site other than the Property or surrounding the Property that
has been or will likely be material to Selling Sub or the Business.
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<PAGE> 24
(d) No asbestos-containing materials, underground storage tanks, or
polychlorinated biphenyls (PCBs) are located on the Property.
(e) There are no claims, notices of violations, notice letters,
investigations, inquiries, litigation, citation or other proceedings now
pending or, to Selling Sub's knowledge, threatened by any governmental entity
or third party with respect to the ownership, use, or operation of the Business
or the Property by Selling Parent or Selling Sub or their predecessors.
5.17 CONSENTS. Except as set forth in Schedule 5.17 of the Seller's
Disclosure Schedule, no material consent or approval of any court, governmental
agency or other public authority, or of any other person, corporation or entity
is required as a condition to (i) the validity or enforceability of this
Agreement or any other instruments to be executed by Selling Parent or Selling
Sub, (ii) the Transaction, or (iii) otherwise effectuate this Agreement or to
the completion or validity of any of the transactions contemplated by this
Agreement.
5.18 CAPITAL STRUCTURE. The authorized capital stock of Selling Sub
consists of 850 shares of Selling Sub Common Stock, of which 600 shares are
outstanding, and all of which are owned by Selling Parent, and no shares of
Preferred Stock. All of the outstanding shares of Selling Sub Common Stock were
validly issued, are fully paid and nonassessable, and were issued in compliance
with all laws including federal and state securities laws. None of the Selling
Sub Common Stock was issued in violation of any preemptive or other right.
There are no outstanding unexercised options, warrants, calls, commitments, or
agreements of any character to which Selling Sub is a party or by which it is
bound, calling for the issuance of securities of Selling Sub or any security
representing the right to purchase or otherwise receive any such security.
Following the Transaction and the delivery of Purchaser Common Stock to the
holders of Selling Sub Common Stock in accordance with Section 2.6, the
Purchaser will not have any further obligations or responsibilities to any
shareholder of Selling Sub, and the sole right of each such shareholder with
respect to Selling Sub will be to receive pursuant to Sections 2.1 and 2.2 the
Purchaser Common Stock and the payment required to be delivered pursuant to
those sections. Selling Sub does not have and has never had any subsidiaries.
5.19 SCOPE OF BUSINESS. Selling Sub has not engaged in any business,
except for the Business.
5.20 PRODUCT WARRANTIES. Except as set forth in Schedule 5.20 of the
Seller's Disclosure Schedule, neither Selling Parent nor Selling Sub makes any
other warranties to its customers, express or implied, with respect to the
products that they furnish to those customers pursuant to the Business. Neither
Selling Parent nor Selling Sub has received any notice of a claim based on any
such product warranty.
5.21 INVESTMENT REPRESENTATIONS. To induce Purchaser to engage in the
Transaction, and understanding that the Purchaser Common Stock delivered in the
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<PAGE> 25
Transaction is being offered and sold without registration under the Securities
Act of 1933, as amended (the "Securities Act"), and in reliance, in part, on
the exemption provided in Section 4(2) of the Securities Act and on Regulation
D, and that such exemption depends in part on, and such securities are being
sold in reliance on, the representations and warranties set forth in this
section, Selling Parent makes the following representations and warranties:
(a) EXPERIENCE; ACCREDITED INVESTORS. Selling Parent's principal
financial officer and principal shareholder have substantial experience in
evaluating and investing in private placement transactions so that they are
capable of evaluating the merits and risks of an investment in Purchaser.
Selling Parent and Selling Parent's principal shareholder are "accredited
investors" as defined in Rule 501 of Regulation D promulgated pursuant to the
Securities Act.
(b) NO INTENTION TO EFFECT DISTRIBUTION. Selling Parent is acquiring
the Purchaser Common Stock for its own account, not as a nominee or agent, for
the purpose of investment, and not with an intention to effect a distribution
of the Purchaser Common Stock or to resell those securities in any transaction
which would be in violation of the federal or state securities laws. Selling
Parent understands that the Purchaser Parent Common Stock must be held for at
least one year in accordance with the holding period required by Section 3.14
of this Agreement, and that any sale of Purchaser Common Stock between the
first and second anniversary of the Closing Date must be registered under the
Securities Act or state securities laws or be exempt from registration
thereunder. Selling Parent agrees that it will not pledge, transfer, convey or
otherwise dispose of the Purchaser Common Stock, or any interest therein,
except in a transaction that is the subject of either (i) an effective
registration statement under the Securities Act and any applicable state
securities laws or (ii) an opinion of counsel to the effect that such
registration is not required (which opinion and counsel shall be reasonably
satisfactory to the Purchaser) is delivered. Selling Parent acknowledges that
transfer of the Purchaser Common Stock will be subject to and restricted by the
terms of this. Selling Parent shall not transfer any of the Purchaser Common
Stock, or any interest therein, without obtaining the written consent and
acknowledgment of each transferee or recipient of such transferred securities
to the terms of this Agreement.
(c) ACCESS TO SEC FILINGS AND OTHER DATA. Selling Parent and its
representatives have been furnished copies of Purchaser's recent filings with
the SEC, including its Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and its Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998. In addition, Selling Parent and its representatives have met
with representatives of Purchaser and have had the opportunity to ask questions
of, and receive answers from, such representatives concerning Purchaser, as
well as to obtain any information requested by Selling Parent. Selling Parent
believes that any questions raised by Selling Parent or its representatives
concerning the transaction have been answered to the satisfaction of Selling
Parent and its representatives.
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<PAGE> 26
(d) RISK FACTORS. Selling Parent understands that there are
substantial risks incident to an investment in the Purchaser Common Stock,
including those set forth in Purchaser's SEC filings. Selling has carefully
considered and understands the risks and other factors affecting the
suitability of the Purchaser Common Stock as an investment.
(e) TAX CONSEQUENCES. Selling Parent understands that none of the
Purchaser, any principal of the Purchaser, or any professional advisor of the
Purchaser makes any representation or warranty to Selling Parent with respect
to, or assumes any responsibility for, the federal income tax consequences to
Selling Parent of the Transaction or an investment in the Purchaser Common
Stock.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to Selling Parent and Selling Sub
the following:
6.1 CORPORATE STATUS AND POWER. Purchaser is a corporation
incorporated and validly existing in good standing in its place of
incorporation and has all requisite corporate power and authority (a) to
execute, deliver, and perform this Agreement and the other agreements to be
executed by it pursuant to this Agreement and (b) to consummate the
transactions as contemplated by this Agreement.
6.2 AUTHORIZATION OF PURCHASE; VALIDITY OF AGREEMENTS. Purchaser's
execution, delivery, and performance of this Agreement and the other agreements
to be executed by them pursuant to this Agreement (a) have been duly authorized
by all requisite corporate action, (b) will not conflict with its articles of
incorporation or bylaws, (c) will not result in a breach of any term,
condition, or provision of, or constitute a default under, any material
mortgage, agreement, instrument, order, decree, judgment, or other commitment
or edict to which the corporation is a party or its property is subject, and
(d) will not violate any law material to the corporation. This Agreement is,
and the other agreements to be executed by Purchaser pursuant to it (when
executed by Selling Parent and delivered to Purchaser) will be, valid, binding,
effective, and enforceable obligations of Purchaser, except to the extent that
their enforceability is limited by application or general principles of equity
and by bankruptcy, insolvency, moratorium, debt or relief, reorganization or
other laws of general application affecting the enforcement of creditor rights
and debtor obligations.
6.3 LITIGATION. Except as disclosed in Schedule 6.3 of the Purchaser's
Disclosure Schedule, there is no action, claim, suit, proceeding, arbitration
or investigation by any governmental agency or any third party pending (or to
Purchaser's knowledge, threatened) against or affecting Purchaser, or against
any asset or business of Purchaser, including, but not limited to, OSHA claims,
worker's compensation claims, employment discrimination claims, wage and hour
claims or claims involving disputes between employees and Purchaser.
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<PAGE> 27
6.4 COMPLIANCE WITH LAWS.
(a) GENERALLY. Purchaser is in compliance with all applicable
statutes, laws, regulations, rules, orders, decrees, permits or licenses that
are material to the operation of Purchaser, and except as disclosed in Schedule
6.4 of the Purchaser's Disclosure Schedule, Purchaser has not received any
notice from any governmental authority that Purchaser is not in compliance with
all such applicable statutes, laws, regulations, rules, orders, decrees,
permits or licenses. Purchaser holds all permits, licenses, certificates of
authority, orders and approvals of, and has made all filings, applications and
registrations with, all governmental or regulatory bodies that are required for
the operation of Purchaser.
(b) FDA COMPLIANCE. Since January 1, 1996, except as disclosed in
Schedule 6.4 of the Purchaser's Disclosure Schedule, Purchaser has not been
subject to any 483 notices or warning letters relating to the Business from the
FDA or any comparable state or local agency or otherwise been notified of any
violation of FDA rules and regulations. Purchaser has made available to Selling
Parent and Selling Sub complete and accurate files and documents relating to
the following: (a) FDA and comparable state agency compliance, (b) boiler
inspection records, (c) sterilization process validations and calibrations, (d)
QNC reports, (e) product recall files; (f) internal operations manuals of
Purchaser, including standard operating procedures and QSR manuals, (g)
customers' grievance and complaint files, and (h) maintenance system logs and
records.
6.5 EXTRAORDINARY TRANSACTIONS. Since June 30, 1998, Purchaser has not
and has not arranged to have (i) except in the ordinary course of business,
sold, leased or transferred assets that are material to its operation; (ii)
sold, assigned or transferred any of its intellectual property that is material
to its operation; (iii) suffered any material change in its relationship or
course of dealing with a material supplier or customer; (iv) suffered material
destruction, loss or damage to assets that are material to its operation; (v)
materially changed its policies with regard to the provision of services,
sales, purchasing or other business, financial, accounting (including reserves
the amounts thereof) or tax policies or practices relating to its operation;
(vi) declared or paid any dividends on or made any distributions in respect of
(or redeemed, purchased, or otherwise acquired) any outstanding shares of
Purchaser's capital stock; or (vii) materially increased salaries, fringe
benefits, or other amounts payable to Purchaser's employees.
6.6 CONSENTS. No material consent or approval of any court,
governmental agency or other public authority, or of any other person,
corporation or entity is required as a condition to (i) the validity or
enforceability of this Agreement or any other instruments to be executed by
Purchaser, (ii) the Transaction, or (iii) otherwise effectuate this Agreement
or to the completion or validity of any of the transactions contemplated by
this Agreement.
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<PAGE> 28
6.7 CAPITAL STRUCTURE. The authorized capital stock of Purchaser
consists of 30,000,000 shares of Purchaser Common Stock, of which 5,660,694
shares are outstanding, and 5,000,000 shares of preferred stock, of which
566,667 shares (including the shares of Purchaser Preferred Stock issued under
this Agreement) are outstanding. The shares of Purchaser Preferred Stock to be
delivered to Selling Parent in the Transaction are validly issued, fully paid
and nonassessable, and issued in compliance with all laws, including federal
and state securities laws. None of the Purchaser Preferred Stock was issued in
violation of any preemptive or other right. Except for employee stock options,
there are no outstanding unexercised options, warrants, calls, commitments, or
agreements of any character to which Purchaser is a party or by which it is
bound, calling for the issuance of securities of Purchaser or any security
representing the right to purchase or otherwise receive any such security.
Purchaser does not have and has never had any subsidiaries.
6.8 SEC FILINGS. Purchaser has furnished to Selling Parent accurate
and complete copies of its quarterly and annual reports and proxy statements
that it has filed with the SEC since the completion of its initial public
offering, as well as a copy of the final prospectus delivered to investors in
its initial public offering (collectively, the "SEC Documents"). As of their
respective dates, the SEC Documents did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated in those
documents to make the statements in those documents not misleading, in light of
the circumstances in which they were made. The SEC Documents included all
exhibits required by the SEC's rules and regulations to be filed with the SEC
Documents.
7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties and agreements made by the parties in this Agreement or pursuant to
this Agreement shall survive the Transaction and any investigation made at any
time by or on behalf of the party.
7.2 INDEMNIFICATION. Subject to the limitations set forth below,
Selling Parent shall indemnify and hold Purchaser harmless against and in
respect of:
(a) any and all debts, liabilities, and obligations of Selling Parent
or Selling Sub of any nature, whether absolute, accrued, contingent or
otherwise existing or incurred on or prior to the Effective Time or arising out
of any transaction or event occurring on or prior to the Effective Time, to the
extent that the debts, liabilities, or obligations were not reflected or
reserved against in the Final Closing Balance Sheet;
(b) any and all damages to Purchaser resulting from any breach of
warranty or misrepresentation of a material fact by Selling Parent or Selling
Sub contained in this Agreement or any statement to be delivered or caused to
be delivered by Selling Parent or Selling Sub pursuant to this Agreement or
resulting from Selling Parent or Selling Sub's
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<PAGE> 29
failure to perform any provision of this Agreement to be performed by Selling
Parent or Selling Sub, as the case may be;
(c) any and all debts, liabilities, and obligations of Selling Parent
or Selling Sub arising out of any defect in any product manufactured, sold, or
leased in the Business by Selling Parent or Selling Sub on or prior to the
Effective Time;
(d) any and all expenses, taxes, debts, liabilities and obligations of
Selling Parent or Selling Sub incurred or to be incurred by Selling Parent or
Selling Sub in the preparation of this Agreement, the Transaction, and the
other performance of the terms and provisions of this Agreement;
(e) to the extent that any required consent or approval pursuant to
section 3.5 is not obtained before the Closing Date, expenses incurred by
Purchaser in facilitating the consent or approval after the Closing Date; and
(f) any suit, action, demand, proceeding, or other act incident to
enforcing this section.
The foregoing indemnification obligations will be subject to the following
limitations:
(1) any claim of Selling Parent's liability for breach of warranty or
misrepresentation of a material fact pursuant to part (b) may not be made by
Purchaser later than December 31, 1999, except that any claim for a
misrepresentation or for breach of warranty under Section 5.10 may not be made
later than a date 30 days after expiration of the period of the applicable tax
statute of limitation;
(2) Selling Parent shall not have any obligation to provide
indemnification pursuant to this Section, except if (i) the amount claimed with
respect to the applicable claim exceeds $1,000 and (ii) the aggregate amount of
all claims to which Purchaser becomes entitled under part (i) exceeds $25,000
(and then only to the extent of the excess); and
(3) any claim for failure of a Fixed Asset as a breach of the warranty
set forth in Section 5.4 will be made under and subject to the limits set forth
in Section 3.15.
8. GUARANTEE OF COLLECTIBILITY OF RECEIVABLES OF SELLING SUB.
8.1 GUARANTEE. Subject to the limitations set forth in this Section 8,
Selling Parent guarantees to Purchaser that, except to the extent of the
reserve for doubtful accounts shown on the balance sheet of Selling Sub in the
Final Closing Balance Sheet, all accounts and notes receivable and other
receivables and amounts due from other persons reflected on said balance sheet
(the "Accounts") will be valid and legally binding
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<PAGE> 30
obligations of the persons owing said amounts to Selling Sub and that the full
amount of the Accounts will be paid to Selling Sub on or before December 31,
1998.
8.2 SETTLEMENT. If any part of the Accounts has not been paid on or
before December 31, 1998, then to the extent that the unpaid part of the
Accounts exceeds the reserve for doubtful accounts shown on the Closing Balance
Sheet, Selling Sub may reassign on or before December 31, 1998, to Selling
Parent all or any part of the unpaid part of the Accounts, free and clear of
any Lien arising on or after the Closing Date, in which event Selling Parent
shall pay to Selling Sub by check that amount equal to such reassigned part of
the unpaid part of the Accounts.
9. MISCELLANEOUS.
9.1 TERMINATION. Notwithstanding anything contained in this Agreement
to the contrary, this Agreement can be terminated, and the transactions
contemplated by it abandoned by the parties, at any time on, before, or after
the Closing Date, but before the Effective Time:
(a) By written agreement between Purchaser and Selling Parent;
(b) unilaterally by Purchaser or Selling Parent at any time after
August 31, 1998, if the Effective Time has not occurred by then, except as a
result of a failure by the party terminating the Agreement to perform its
obligations under this Agreement;
(c) Unilaterally by Purchaser, if any condition set forth in Section
4.4 of this Agreement has not been satisfied in accordance with its terms, is
not waived in writing by Purchaser on the Closing Date, and has not been cured
by Selling Sub or Selling Parent within ten business days' notice from
Purchaser specifying the nature of the failure;
(d) Unilaterally by Selling Parent if any condition set forth in
Section 4.5 of this Agreement has not been satisfied in accordance with its
terms, is not waived in writing by Selling Parent on the Closing Date, and has
not been cured by Purchaser within ten business days' notice from Selling Sub
specifying the nature of THE failure.
Termination of this Agreement in accordance with (a) above will be effective as
of the date specified in the parties' written agreement of termination.
Termination of this Agreement in accordance with (b), (c), or (d) above will be
effective when notice of termination is given to the other party by the party
electing the termination (and upon expiration of the ten day period in the case
of (c) or (d)). If this Agreement is terminated in accordance with the
provisions of this section, a party to this Agreement (and its officers,
directors, and shareholders) will not have any additional right or obligation
with respect to any other party to this Agreement unless (x) in the case of a
termination made in accordance with (b), (c), or (d), the party other than the
party rightfully terminating the Agreement failed to perform all of its
covenants (and not representations) under this Agreement or (y) in the case of
Selling Sub and regardless of whether Selling Sub is the
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<PAGE> 31
party terminating the Agreement, Selling Parent or Selling Sub has breached the
covenant contained in Section 3.9.
9.2 NOTICES. Every notice, demand, consent, request, or approval
required or permitted by this Agreement will be valid only if it is in writing,
delivered personally or by telecopy, telegram, or commercial courier, and
addressed to the appropriate recipient or recipients in the manner set forth
below:
(a) If to Purchaser or Selling Sub:
Sterile Recoveries, Inc.
28100 U.S. Highway 19 North
Suite 201
Clearwater, Florida 33761
Attention: President
with a copy to:
Glenn Rasmussen & Fogarty, P.A.
100 South Ashley Drive, Suite 1300
Tampa, FL 33602
Telecopy: (813) 229-5946
Attention: David S. Felman
(b) If to Selling Parent:
STANDARD TEXTILE CO., INC.
One Knollcrest Drive
Cincinnati, Ohio 45237
Attention: General Counsel
with a copy to:
STRAUSS & TROY
2100 PNC Center
201 E. Fifth Street
Cincinnati, Ohio 45202
Attention: James G. Heldman
or at such other address as a party subsequently designates to the other
parties by notice given in accordance with this section. A validly given
notice, demand, consent, request, or approval will be effective on its receipt.
EXECUTED: as of August 31, 1998
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<PAGE> 32
STERILE RECOVERIES, INC.
By: /s/ Bertram T. Martin, Jr.
----------------------------------
Bertram T. Martin, Jr.
President
STANDARD TEXTILE CO., INC.
By: /s/ Edward M. Frankel
----------------------------------
Name: Edward M. Frankel
-----------------------
Title: Vice President
----------------------
REPAK SURGICAL ENTERPRISES, INC.
By: /s/ Edward M. Frankel
----------------------------------
Name: Edward M. Frankel
-----------------------
Title: Secretary
----------------------
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<PAGE> 1
EXHIBIT 4.4
FIRST ARTICLES OF AMENDMENT
TO
THE RESTATED ARTICLES OF INCORPORATION
OF
STERILE RECOVERIES, INC.
FIRST: The Corporation's name is:
STERILE RECOVERIES, INC.
SECOND: The Corporation adopts the following as new Section 3.5 of its
Restated Articles of Incorporation:
3.5 SERIES A PREFERRED STOCK.
1. DESIGNATION; RANKING. The Corporation is authorized to issue up to
566,667 of its Series A Preferred Stock, having a par value of $.001 per share
and a liquidation value of $18.00 per share. The Series A Preferred Stock ranks
senior to the Common Stock and on a parity with any other class or series of
preferred stock (collectively, the "Parity Securities").
2. DIVIDENDS. (a) The issued and outstanding shares of Series A
Preferred Stock will accrue dividends at a fixed two (2) percent annual rate
from their original issuance date until the earlier of the Conversion Date (as
defined below) or September 1, 2004, and will not accrue after that date. All
accumulated dividends will be payable to holders of Series A Preferred Stock
out of funds legally available for dividend payments quarterly in arrears on
each September 1, December 1, March 1, and June 1 for the preceding three month
period, commencing on December 1, 1998. Any dividends deferred because of the
absence of legally available funds will be paid when funds become legally
available. On any conversion of the Series A Preferred Stock to Common
<PAGE> 2
Stock, the holders will be entitled to a partial dividend payment for the
period between the end of the prior dividend period and the Conversion Date.
(b) The Corporation shall not pay full dividends on any Parity
Securities unless full dividends have been (or contemporaneously will be)
declared and paid on the Series A Preferred Stock for all completed dividend
periods. If any dividends are not fully paid on the shares of Series A
Preferred Stock and any other Parity Securities, all dividends declared on
shares of the Series A Preferred Stock and any other Parity Securities shall be
declared pro rata, so that the amounts of dividends declared per share on the
Series A Preferred Stock and the Parity Securities in all cases bear to each
other the same ratio that accrued dividends per share on the Series A Preferred
Stock and the Parity Securities bear to each other.
(c) Holders of shares of the Series A Preferred Stock will be entitled
to receive the dividends provided for in Section 2(a) in priority over any
dividends on any of the Common Stock. So long as any shares of the Series A
Preferred Stock are outstanding, the Corporation shall not declare or pay any
dividend on any of the Common Stock or make any payment on account of, or set
apart for payment of money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Common Stock or any
warrants, rights, calls or options exercisable for or convertible into any of
the Common Stock, or make any distribution in respect of the Common Stock,
either directly or indirectly, and whether in cash, obligations or shares of
the Corporation or other property (other than distributions or dividends in
Common Stock to the holders of Common Stock), and shall not permit any
corporation or other entity directly or indirectly controlled by the
Corporation to purchase or redeem any of the
2
<PAGE> 3
Common Stock or any warrants, rights, calls or options exercisable for or
convertible into any of the Common Stock, in each case unless the Corporation
first pays all accrued and unpaid dividends on shares of the Series A Preferred
Stock.
(d) Subject to the foregoing provisions of this Section 2, the Board
of Directors may declare and the Corporation may pay or set apart for payment
dividends and other distributions on any of the Common Stock or Parity
Securities, and may purchase or otherwise redeem any of the Common Stock or
Parity Securities or any warrants, rights or options exercisable for or
convertible into any of the Common Stock or Parity Securities, and the holders
of the shares of the Series A Preferred Stock shall not be entitled to share
therein.
3. VOTING. Each holder of Series A Preferred Stock will be entitled to
one vote per share with respect to all matters on which holders of Common Stock
have the right to vote. Each holder's votes will be counted together with the
votes of the holders of shares of Common Stock and not separately as a class,
except as otherwise required by applicable law. In cases in which the holders
of shares of Series A Preferred Stock are entitled by applicable law to approve
a matter or vote separately as a class, each holder will be entitled to one
vote for each of its shares and the vote of a majority of the outstanding
shares of Series A Preferred Stock will constitute the action of that class.
4. LIQUIDATION PREFERENCE. If the Corporation liquidates, dissolves,
or winds up its affairs (voluntarily or involuntarily) (a "Liquidation Event"),
after paying or providing for payment of its debts and other liabilities, the
Corporation shall pay to the holders of Series A Preferred Stock, before paying
any amount to the holders of Common
3
<PAGE> 4
Stock, a cash amount for each share of Series A Preferred Stock equal to
$18.00, plus any accrued and unpaid dividends (the "Liquidation Price"). If its
assets to be distributed among the holders of Series A Preferred Stock on a
Liquidation Event are insufficient to permit the Corporation to pay the full
Liquidation Price for each share of Series A Preferred Stock and the Parity
Securities, the Corporation shall distribute its assets among the holders of
Series A Preferred Stock and the Parity Securities ratably based on the
respective amounts otherwise payable to them.
5. CONVERSION. Each share of Series A Preferred Stock shall be
convertible into Common Stock as follows:
(a) CONVERSION OPTION. Subject to the terms and conditions of this
Section 5, the holder of any share of Series A Preferred Stock may, at the
holder's option, at any time and from time to time (except on or following the
effective date of any Liquidation Event), convert its shares of Series A
Preferred Stock into the same number of fully paid and nonassessable shares of
Common Stock.
(b) MANDATORY CONVERSION. All shares of Series A Preferred Stock then
outstanding will automatically be converted into the same number of fully paid
and nonassessable shares of Common Stock on the earlier of (a) the date that
the average daily closing price per share of the Common Stock, as reported in
the Wall Street Journal for the twenty (20) consecutive trading days ending on
the relevant date, is $18 or more or (b) the date that the Corporation enters
into a definitive agreement that provides for all of the holders of Common
Stock to receive consideration per share with a value of $18 or more.
4
<PAGE> 5
(c) ADJUSTMENTS. If the Corporation declares a distribution with
respect to the Common Stock, directly to holders of Common Stock as a dividend
or indirectly through a reclassification, recapitalization, or similar
rearrangement of the Common Stock, payable in cash, securities, evidences of
indebtedness, or other assets or options or rights, the holders of Series A
Preferred Stock will be entitled to a proportionate share of the distribution.
(d) MECHANICS OF CONVERSION. A holder may exercise the conversion
right specified in Section 5(a) as to all or any part of its Series A Preferred
Stock by surrendering to the Corporation (or to another person designated by
the Board of Directors) the certificates evidencing the shares it elects to
convert, endorsed and assigned to the Corporation in blank, and accompanied by
written notice confirming the holder's exercise of its conversion option as to
all or a specified portion of the shares evidenced by the certificates. Each
holder of outstanding Series A Preferred Stock shall promptly surrender its
stock certificates to the Corporation on a mandatory conversion pursuant to
Section 5(b). Conversion of shares of Series A Preferred Stock to Common Stock
will be effective when the holder delivers to the Corporation notice of its
election to convert and certificates evidencing the converted shares (for a
conversion pursuant to Section 5(a)) or on one of the dates specified in
Section 5(b) (for a conversion pursuant to Section 5(b)) (these respective
dates are the "Conversion Date"). As promptly as practicable after the
Conversion Date and in any event within fifteen (15) days after surrender of
the certificate or certificates representing converted shares of Series A
Preferred Stock, the Corporation shall issue and deliver at its expense to a
converting holder (or to another person designated in writing by the holder), a
certificate evidencing
5
<PAGE> 6
the number of whole shares of Common Stock to which such holder is entitled.
The person in whose name the certificate or certificates for Common Stock are
to be issued will be deemed the holder of such Common Stock as of the close of
business on the Conversion Date. On conversion of only a portion of the number
of shares evidenced by a certificate surrendered for conversion, the
Corporation shall issue and deliver at its expense to the converting holder (or
to another person designated in writing by the holder) a new certificate for
the number of shares of Series A Preferred Stock evidencing the unconverted
portion of the surrendered certificate.
At the close of business on the Conversion Date, (i) the converted
shares of Series A Preferred Stock will cease to be outstanding, (ii) the
holders of the converted shares will cease to have any further rights with
respect to those shares, except to receive Common Stock with respect to the
converted shares and to receive accrued dividends, and (iii) the holders of the
converted shares will be deemed to have become the record holders of Common
Stock for all purposes.
(e) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall reserve out of its authorized but unissued Common Stock, solely for the
purposes of effecting the conversion of the Series A Preferred Stock, the
number of shares of Common Stock issuable on conversion of all outstanding
Series A Preferred Stock.
(f) ADJUSTMENTS FOR MERGER, CONSOLIDATION, ETC. In the case of any
classification, reclassification, or other reorganization of the Corporation's
capital stock, or in the case of the merger or consolidation of the Corporation
with or into another corporation, or the conveyance to another corporation of
all or any major portion of the Corporation's assets, then, as part of the
classification, reclassification, merger,
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<PAGE> 7
consolidation, or conveyance, adequate provision shall be made for each holder
of Series A Preferred Stock, on exercise of its conversion privilege, to
receive on the same basis and conditions set forth in this Section 5 with
respect to the Common Stock, the stock, securities, or other property that the
holder would have been entitled to receive on such classification,
reclassification, merger, consolidation, or conveyance, if the holder had
exercised the conversion privilege immediately before the classification,
reclassification, merger, consolidation, or conveyance, and in any such case
appropriate provision will be made with respect to the rights and interests of
the holder to the end that the provisions of this Section 5 will be applicable
to the shares of stock, securities, or other property deliverable on the
exercise of the conversion privilege; and, as a condition of any consolidation,
merger, or conveyance, any corporation that succeeds to the Corporation by
reason of the merger, consolidation or conveyance shall assume the obligation
to deliver, on exercise of the conversion privilege, the shares of stock,
securities or other considerations that the holders of the Series A Preferred
Stock are entitled to receive pursuant to this Section 5.
6. REISSUANCE OF SHARES. Any shares of Series A Preferred Stock
redeemed or otherwise reacquired by the Corporation will be canceled and not
available for further issuance.
THIRD: All other provisions of the Corporation's Restated Articles of
Incorporation remain in full force and effect.
FOURTH: Each of the foregoing amendments were adopted by the
Corporation's Board of Directors on August 28, 1998. Shareholder approval was
not required.
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<PAGE> 8
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to the Restated Articles of Incorporation to be executed and attested
by its authorized officer this 31st day of August, 1998.
/s/ James T. Boosales
------------------------------------
James T. Boosales, Executive Vice
President and a Director
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<PAGE> 1
EXHIBIT 10.29
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is executed by
STERILE RECOVERIES, INC. (the "Company"), a Florida corporation, and STANDARD
TEXTILE CO., INC. (the "Shareholder"), an Alabama corporation, to record their
agreement regarding the Company's grant to the Shareholder (including its
authorized registered assigns, the "Registered Owner") of certain rights to
register shares of the Company's common stock, $.001 par value per share (the
"Common Stock") issuable on conversion of Series A Preferred Stock issuable
pursuant to the Acquisition Agreement dated the same date as this Agreement,
among the Company, the Shareholder, and the Shareholder's subsidiary (the
"Acquisition Agreement"). The Company and the Shareholder agree as follows:
1. SCOPE AND PURPOSE. This Agreement applies to the following shares
of Common Stock that are owned by, or issuable to, the Registered Owner on and
after the effective date of this Agreement (collectively, the "Shares"): (a)
all the shares of Common Stock that are issued by the Company to the Registered
Owner on conversion of Series A Preferred Stock issuable pursuant to the
Acquisition Agreement; (b) all additional shares of Common Stock issued or
distributed to the Registered Owner in respect of the shares of Common Stock
described in clause (a) above pursuant to a stock split, stock dividend,
capital adjustment, recapitalization, reorganization, reclassification, or
other similar transaction; (c) all shares of Common Stock issued or distributed
to the Registered Owner in respect of any shares of Common Stock acquired
pursuant to any of the transactions described in clauses (a) and (b) above; and
(d) any securities (whether or not Common Stock) issued or distributed to the
Registered Owner in exchange, conversion, or substitution for any of the
foregoing shares of Common Stock, whether pursuant to a merger, split-up,
spin-off, share exchange, consolidation, reorganization, recapitalization,
reclassification, or otherwise. Upon the occurrence of any event or transaction
described in this section, the number of shares specified in section 4(a) will
be proportionately adjusted to reflect any increase or decrease in the total
number of the Shares.
2. TERM. This Agreement is for a term beginning on its execution date
and ending on the earlier of the following: (a) the date when all the Shares
have been registered under the Securities Act of 1933, as amended (the
"Securities Act") and sold in accordance with the registration statement
covering them; or (b) the date when all the Shares can be publicly sold in
compliance with the limitations of SEC Rule 144 under the Securities Act.
Notwithstanding anything in this Agreement to the contrary, the registration
rights conferred on the Registered Owner pursuant to section 3 will be
suspended and inoperative whenever and for so long as the Company otherwise has
a registration statement in effect with the Securities and Exchange Commission
("SEC") under the Securities Act that covers the Shares. The suspension of the
Registered Owner's registration rights under section 3 will not affect the
respective agreements and obligations of the Company and the Registered Owner
under the other provisions of this Agreement, and those provisions will apply
to every sale or issuance of the Shares pursuant to a registration statement of
the Company that
<PAGE> 2
is in effect with the SEC under the Securities Act. In addition, the suspension
of the Registered Owner's registration rights under section 3 will not excuse
the Company from registering in accordance with this Agreement any Shares that
are the subject of a piggy-back registration request that was validly made by
the Registered Owner before the Company notified the Registered Owner of its
intention to file the registration statement of the Company that triggered the
suspension.
3. LIMITED DEMAND REGISTRATION RIGHTS. If a Triggering Event (as
defined below) occurs, on receipt of a written request from the Registered
Owner specifying the number of Shares that the Registered Owner desires to
register for public sale, the Company promptly shall prepare and file with the
SEC under the Securities Act a registration statement covering a public
offering of those Shares and shall use commercially reasonable efforts to cause
the registration statement to become effective as soon as is practicable. The
Registered Owner is entitled to exercise this right one time. The Registered
Owner shall state in its request for registration whether it intends to
distribute the registered shares by means of an underwriting. If the Registered
Owner intends to distribute the registered shares by means of an underwriting,
the Registered Owner shall sell the registered Shares through one or more
underwriters (or a syndicate managed by one or more underwriters) that are
selected by the Company. No request may be made under this Section 3 within 180
days after the effective date of a registration statement covering a firm
commitment underwritten public offering in which the holders of Shares were
entitled to join pursuant to Section 4 below. The Company may include in the
registration any other securities that it or another selling shareholder desire
to sell. For purposes of this section, the term "Triggering Event" means that
(a) at any time during the time period between September 1, 1999 and August 31,
2000, any two of Richard T. Isel, Bertram T. Martin, Jr., James T. Boosales, or
Wayne R. Peterson no longer serve as executive officers of the Company, (b) at
any time during the time period between September 1, 1999 and August 31, 2000,
the letter agreement dated August 31, 1998, between the Company and Standard
Textile Co., Inc. regarding long-term surgical product supply has been
terminated (i) by Standard Textile based on the Company's default or (ii) by
the Company without any default by Standard Textile, or (c) after September 1,
2000, no person affiliated with the Registered Owner serves as a director of
the Company and the Company cannot provide on request to the Registered Owner
an opinion of counsel acceptable to the Registered Owner confirming that
Registered Owner is not an "affiliate" of the Company as that term is defined
in Rule 144(a)(1) promulgated by the SEC under the Securities Act. The Company
shall indemnify Registered Owner for any liability, loss, or damage (including
defense costs) resulting from a claim that its sale of the Shares in reliance
on the foregoing opinion violated the registration requirements of the
Securities Act.
4. INCIDENTAL REGISTRATION RIGHTS. If the Company, at any time or from
time to time during the term of this Agreement, authorizes a registration of
any offering of Common Stock under the Securities Act, whether or not for its
own account, it shall include in that registration that number of Shares that
the Registered Owner elects to register for public sale, to the extent
permitted by the applicable registration form, and subject to any volume
limitations prescribed by this Agreement. The Company promptly shall notify the
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<PAGE> 3
Registered Owner of each proposed registration, and, to exercise its
registration right, the Registered Owner must deliver to the Company within ten
days after the effective date of its notice to the Registered Owner a written
request for registration that specifies the number of Shares that the
Registered Owner desires to include in the registration. The Company may
determine for any reason not to proceed with its registration, so notify the
Shareholder, and be relieved of its obligation to register any Shares at that
time.
The Company is not required to include any of the Shares in a
registration that covers any of the following: (A) debt securities; (B)
securities proposed to be issued in exchange for assets or securities of
another corporation; (C) securities convertible into, or exchangeable for,
shares of the Common Stock; (D) securities to be issued pursuant to a
transaction registered on Form S-4 (or any registration form promulgated by the
SEC in substitution of that form); (E) the initial public offering of the
Common Stock, unless the managing underwriter of the offering does not object
to including all or some of the Shares in the registration; or (F) securities
to be registered on Form S-8 (or any registration form promulgated by the SEC
in substitution of that form) and offered or issued pursuant to an employee
benefit plan (as defined in SEC Rule 405 under the Securities Act) to any
employee or employees of the Company or its subsidiaries or parent corporation
(as defined in General Instruction A.1(a) to Form S-8).
5. CONDITIONS TO REGISTRATION. The Company's obligations under this
Agreement to register any Shares owned by the Registered Owner are subject to
the following conditions:
(a) The minimum number of Shares that the Registered Owner must
include in a registration request is 200,000 Shares or, if less, all
the Shares then owned by the Registered Owner;
(b) The inclusion of the Shares in the registration must not
violate any provisions of the Securities Act, any rule, regulation, or
pronouncement of the SEC under the Securities Act, or any contractual
obligation of the Company;
(c) The Registered Owner must have performed in all material
respects all agreements and obligations under this Agreement that are
required to be performed by it in connection with the registration of
the Shares;
(d) The Registered Owner must provide to the Company all
information, and take all action, as the Company reasonably requests
with reasonable advance notice to enable it to comply with any
applicable law, rule, regulation, or SEC pronouncement or to prepare
the registration statement that will cover the Shares that will be
included in the registration;
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<PAGE> 4
(e) If the registration will involve an underwritten offering of
Common Stock by the Company, (i) the Company will not be required to
include any Shares in the registration, unless the Registered Owner
accepts and agrees to the underwriting terms of the underwriters
selected by the Company, and (ii) the maximum number of Shares that
the Company will be required to include in the registration will be
limited to that number of Shares that, in the opinion of the managing
underwriter of the offering will not adversely affect the public
offering of the shares of Common Stock to be sold by the Company in
the registration, without excluding any of those shares; and
(f) Before the filing of a registration statement pertaining to
the registration, the Registered Owner must deliver to the Company one
or more agreements in form and content reasonably satisfactory to the
Company's legal counsel that:
(i) Reaffirms all or any part of the agreements and
obligations of the Registered Owner that are set forth in this
Agreement;
(ii) Represents and warrants that the Registered Owner has,
and will have at the time of sale of the Shares included in the
registration, good and valid title to those Shares and full right,
power, and authority to sell, assign, transfer, and deliver those
Shares; and
(iii) Designates a law firm satisfactory to the Company to act
as the Registered Owner's legal counsel in connection with the
registration of the Shares (including the execution and delivery
to the Company and any underwriters for the registered offering of
a legal opinion to the effect set forth above).
The Company and the Shareholder acknowledge that the rights of the Shareholder
to include shares of Common Stock in a registration will be subordinate to the
Company and, subject to the foregoing provisions, on a parity with other
persons holding contractual registration rights.
5. ADDITIONAL COVENANTS OF REGISTERED OWNER. The Registered Owner
shall not offer, sell, contract to sell (including any short sale), or
otherwise transfer for a reasonable period of time (to be determined by the
managing underwriter, but not to exceed 14 days before the effective date of
the registration statement or 180 days after the effective date of the
registration statement) any shares of Common Stock that are not included in the
registration, any other equity securities of the Company, or any securities of
the Company that are convertible into, or exercisable or exchangeable for, any
equity securities of the Company, except for any gift of Common Stock to a
donee who agrees to
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<PAGE> 5
be bound by this restriction. In addition, if the Company is required to
register any of the Shares for the Registered Owner pursuant to the exercise of
a registration right provided in this Agreement, the Registered Owner shall:
(a) Promptly furnish to the Company all information, and take all
action, as the Company reasonably requests with reasonable advance
notice, to enable it to comply with any applicable law, rule,
regulation, or SEC pronouncement in connection with the registration;
(b) If the registration will involve an underwritten offering of
Common Stock by the Company, the Registered Owner shall:
(i) sell the registered Shares through the underwriter or
syndicate of underwriters selected by the Company, on the same
terms and conditions as those on which the Company will offer and
sell shares of Common Stock in the registration;
(ii) enter into an underwriting agreement in customary form
with the underwriter or syndicate of underwriters selected by the
Company, which will provide (among other things) for the Company,
the Registered Owner, and each underwriter (and each person who
controls each underwriter within the meaning of Section 15 of the
Securities Act) to grant to each other (and to each person who
controls each of them within the meaning of Section 15 of the
Securities Act) reciprocal indemnification and contribution rights
against liabilities under the Securities Act, subject to such
limitations as are appropriate to reflect the parties respective
interests in the underwriting;
(iii) execute and deliver to the Company an irrevocable power
of attorney naming a person or persons designated by the Company
as attorney-in-fact for the Registered Owner for the purpose of
entering into and carrying out the underwriting agreement and
acting for the Registered Owner in all matters in connection with
the registration, offer, and sale of the Shares to be included in
the registration;
(iv) execute and deliver to the Company a custody agreement in
form and content satisfactory to the Company's legal counsel that
provides for the deposit with an agent designated by the Company
of the certificates representing the Shares to be included in the
registration for the purpose of delivery pursuant to the
underwriting agreement pertaining to
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<PAGE> 6
the registered offering and containing other usual and customary
provisions;
(v) deliver in negotiable form to the agent designated in the
foregoing custody agreement the certificates representing the
Shares to be included in the registration;
(vi) execute and deliver to the Company an agreement to the
effect that the Registered Owner will not take any action which
might reasonably be expected to cause or result in any
manipulation of the price of any security of the Company to
facilitate the sale of any Shares pursuant to the registration
statement; and
(vii) execute and deliver to the Company or the underwriters
all questionnaires, indemnity agreements, selling shareholder
agreements, and other agreements and documents as they reasonably
request and that are usual and customary in connection with a
registered public offering of securities;
(c) Pay all sales commissions, underwriting discounts, and fees
and expenses of its legal counsel and other advisors in connection
with the registration and public offering of the Shares included in
the registration;
(d) Take all action that is necessary or appropriate to assure
that the statements contained in any prospectus pertaining to the
registration, or any amendment or supplement of a prospectus
(including any document incorporated by reference in it), in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Registered Owner for use therein will not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances existing at the time the
prospectus is delivered to a purchaser, not misleading; and
(e) If the Shares included in the registration will not be sold on
the same terms and conditions (including the method of distribution)
as those on which the Company will offer and sell shares of Common
Stock in the registration, the Registered Owner shall:
(i) offer and sell all the Shares included in the registration
in a manner contemplated by the SEC's General Instructions for use
of the applicable registration statement form;
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<PAGE> 7
(ii) promptly notify the Company in writing when all the
Shares included in the registration have been sold, and, if any of
them are not sold before the 91st day after the effective date of
the registration statement, the Registered Owner promptly shall
notify the Company of the number of Shares sold during the
three-month period following the effective date of the
registration and during each ensuing six-month period, until all
the Shares included in the registration have been sold;
(iii) if, during the effectiveness of the registration
statement for the registration, the Company notifies the
Registered Owner of the occurrence of any event that, in the
opinion of the Company's legal counsel, necessitates an amendment
or supplement to any prospectus in order to cause the prospectus
to comply with the Securities Act or to make the prospectus not
misleading in light of the circumstances existing at the time, the
Registered Owner promptly shall cease making any offers, sales, or
other dispositions of the Shares included in the registration
until the Registered Owner receives from the Company copies of an
amendment or supplement to the prospectus;
(iv) during the period when a Prospectus is required to be
delivered under the Securities Act with respect to the offering of
the Shares, the Registered Owner promptly shall notify the Company
of any event that materially affects the Registered Owner's plan
of distribution of the Shares and should be set forth in an
amendment or supplement to any prospectus in order to make the
prospectus not misleading in light of the circumstances existing
at the time it is delivered to any purchaser of the Shares;
(v) deliver copies of the final prospectus contained in the
registration statement, and any amendments or supplements to it,
to purchasers of the Shares as required by applicable laws, rules,
and regulations; and
(vi) use all reasonable efforts to complete the distribution
of the Shares included in the registration as promptly as possible
and in any event within 90 days after the later of the date when
the SEC declares the registration statement effective.
6. PAYMENT OF EXPENSES. The Company shall pay all costs and expenses
incident to every registration of any Shares under this Agreement, including
the following:
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<PAGE> 8
the registration fee of the SEC; the fee of the National Association of
Securities Dealers, Inc.; the expenses of qualifying or registering any of the
Shares for sale under the "Blue Sky" or securities laws of any state (including
the filing fees, legal fees and other costs pertaining to the qualification or
registration and the preparation of any Blue Sky Survey or Memorandum) up to a
maximum aggregate amount of $5,000 per registration for states where the
Company otherwise would not qualify or register the registered offering for its
account; the fees and expenses of the Company's legal counsel and independent
public accountants in connection with the registration; the cost of preparing,
printing, filing on EDGAR, and delivering the registration statement, all
related prospectuses, and all amendments and supplements to the registration
statement or any prospectus; and all other costs and expenses of obtaining and
maintaining the effectiveness of the registration statement. Costs and expenses
paid pursuant to this section exclude underwriting discounts and selling
commissions applicable to the sale of Shares.
7. INDEMNIFICATION. In connection with each registration of any Shares
under the Securities Act pursuant to this Agreement, the Registered Owner (to
the extent of the aggregate offering price of those Shares sold in the
registration) shall indemnify and hold harmless the Company (and every person
who controls the Company within the meaning of Section 15 of the Securities
Act) from and against all cost, loss, claims, damage, expense, and liability to
which any of them becomes subject under the Securities Act or any state
securities laws (including fines, interest, penalties, amounts paid in
settlement, and costs reasonably incurred in investigating, defending, and
settling any claim), to the extent that they arise out of, or are based on, any
untrue statement or alleged untrue statement of a material fact contained in
the registration statement (or any amendment to it), or any prospectus (or any
amendment or supplement to it), that relates to the sale of any Shares, or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, but only if the
untrue statement or alleged untrue statement, or the omission or alleged
omission, was made in reliance upon, and in conformity with, information
furnished to the Company by or on behalf of the Registered Owner for use in the
registration statement (or any amendment to it) or any related prospectus (or
any amendment or supplement to it).
The Company shall indemnify and hold harmless the Registered Owner
(and every person who controls the Registered Owner within the meaning of
Section 15 of the Securities Act) against any and all costs, loss, claims,
damage, expense, and liability to which any of them becomes subject under the
Securities Act or any state securities laws (including fines, interest,
penalties, amounts paid in settlement, and costs reasonably incurred in
investigating, defending, and settling any claim) to the extent that they arise
out of, or are based on, any untrue statement or alleged untrue statement of a
material fact contained in the registration statement (or any amendment to it),
or any prospectus (or any amendment or supplement to it), which prospectus or
registration statement relates to the sale of any Shares, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except for an untrue statement
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<PAGE> 9
or omission, or an alleged untrue statement or omission, that was included in
the registration statement (or any amendment to it) or in any prospectus (or
any amendment or supplement to it) in reliance on, and in conformity with,
information furnished to the Company by or on behalf of the Registered Owner
for use in the registration statement (or any amendment to it) or any related
prospectus (or any amendment or supplement to it).
Each indemnified party promptly shall notify each indemnifying party
of any claim asserted or action commenced against it that is subject to the
indemnification provisions of this section, but failure to so notify an
indemnifying party will not relieve the indemnifying party from any liability
pursuant to these indemnity provisions or otherwise, unless the failure
materially prejudices the rights or obligations of the indemnifying party.
Without limiting what might be materially prejudicial to an indemnifying party,
the failure of an indemnified party to notify an indemnifying party of a
lawsuit within ten days after the date when the indemnified party is served
with a copy of the complaint, petition, or other pleading asserting the
indemnifiable claim will be considered materially prejudicial to the rights and
obligations of any indemnifying party who was not also served with a copy of
the complaint, petition, or other pleading asserting the indemnifiable claim.
An indemnifying party may participate at its own expense in the
defense of any indemnifiable action against an indemnified party or, if it so
elects within a reasonable time, assume the defense of the action against the
indemnified party with legal counsel selected by it but reasonably satisfactory
to each indemnified party who is a defendant in the action. If the indemnifying
party elects to assume the defense of any indemnified action, each indemnified
party who is a defendant in the action will be entitled to employ separate
counsel and participate in the defense of the action at its own expense.
However, each indemnified party who so elects to participate in the defense of
the action shall cooperate, and shall cause its legal counsel to cooperate,
with the indemnifying party and its legal counsel in the defense of the action.
If the indemnifying party does not elect to assume the defense of an
indemnifiable action in a timely manner, or assumes the defense and fails to
employ defense counsel reasonably satisfactory to each indemnified party, or
any indemnified party reasonably determines in its judgment that having common
defense counsel with the indemnifying party would present actual conflicts of
interest, an indemnified party may employ legal counsel selected by it but
reasonably satisfactory to the indemnifying party to defend the action at the
indemnifying party's expense. In no event, however, will an indemnifying party
be liable for the fees and expenses of more than one separate legal counsel for
all indemnified parties in any jurisdiction or in connection with any claim or
action, or any series of separate but similar or related claims or actions,
arising out of the same general allegations and circumstances.
An indemnified party shall not settle an indemnified claim or action
without the prior written consent of the indemnifying party. The indemnifying
party shall notify the indemnified party whether or not it will consent to a
proposed settlement within ten days after it receives from the indemnified
party notice of the proposed settlement, summarizing all the terms and
conditions of settlement. The indemnifying party's failure to notify the
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indemnified party within that ten-day period whether or not it consents to the
proposed settlement will constitute its consent to the proposed settlement.
This indemnity does not apply to any untrue statement or omission, or
any alleged untrue statement or omission that was made in a preliminary
prospectus but remedied or eliminated in the final prospectus (including any
amendment or supplement to it), if a copy of the definitive prospectus
(including any amendment or supplement to it) was delivered to the person
asserting the claim at or before the time required by the Securities Act and
the delivery of the definitive prospectus (including any amendment or
supplement to it) constitutes a defense to the claim asserted by the person.
If the indemnification provided in this Agreement is either
unavailable to any indemnified party for any reason or insufficient to hold an
indemnified party harmless to the extent contemplated by this Agreement, then
each party otherwise obligated to provide the indemnification shall contribute
to the amount paid or payable by the indemnified party for which
indemnification is unavailable or insufficient, except to the extent that
contribution is not permitted under Section 11(d) of the Securities Act. The
parties' relative proportions of contribution will be determined based on the
relative economic benefits received or to be received by the parties from the
registered public offering (measured by their respective shares of the
aggregate net proceeds of the offering) for which indemnification is
unavailable or insufficient and their relative fault in the matter, taking into
account their relative knowledge and access to information regarding the matter
that is the subject of the claim or action, their relative opportunity to
correct or prevent any act, condition, statement, or omission that is the
subject of the claim or action, and other appropriate equitable considerations.
8. GOVERNING LAW; REMEDIES. The validity, interpretation,
construction, and enforcement of this Agreement are governed by the laws of the
State of Florida and the federal laws of the United States of America,
excluding the laws of those jurisdictions pertaining to resolution of conflicts
with laws of other jurisdictions. The proper and convenient (but not exclusive)
venues for all legal proceedings arising out of this Agreement are Pinellas
County, Florida, for state court proceedings, and the Middle District of
Florida, Tampa Division, for federal district court proceedings, and the
Company and the Registered Owner waive any defense, whether asserted by motion
or pleading, that Pinellas County, Florida, or the Middle District of Florida,
Tampa Division, is an improper or inconvenient venue. The Company and the
Registered Owner consent to the personal jurisdiction of the state and federal
courts in the State of Florida with respect to any litigation arising out of
this Agreement.
In any mediation, arbitration, litigation, or other legal proceeding
arising out of this Agreement, the losing party shall reimburse the prevailing
party, on demand, for all costs (including reasonable attorney fees) incurred
by the prevailing party in connection with the proceeding.
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9. NOTICES. Every notice, consent, demand, approval, and request
required or permitted by this Agreement will be valid only if it is in writing,
delivered personally or by telecopy, commercial courier, or first class,
postage prepaid United States mail (whether or not certified or registered and
regardless of whether a return receipt is received by the sender), and
addressed by the sender to the party who is the intended recipient at its
address most recently designated to the other party by notice given in
accordance with this section. A validly given notice, consent, demand,
approval, or request will be effective on the earlier of its receipt, if
delivered personally or by telecopy or commercial courier, or the third day
after it is postmarked by the United States Postal Service, if it is delivered
by United States mail. Each party promptly shall notify the other parties of
any change in its principal mailing address.
10. FORM AND INTERPRETATION. The headings preceding the text of the
sections of this Agreement are solely for convenient reference and neither
constitute a part of this Agreement nor affect its meaning, interpretation, or
effect. Unless otherwise expressly indicated, all references in this Agreement
to a section are to a section of this Agreement. As used in this Agreement, (a)
the word "INCLUDING" is always without limitation, (b) the word "DAYS" refers
to calendar days, including Saturdays, Sundays, and holidays, (c) words in the
singular number include words of the plural number and vice versa, (d) the word
"PERSON" includes, in addition to a natural person, a trust, corporation,
partnership, joint venture, association, unincorporated organization, public
body or authority, and a government or any governmental body, agency,
authority, department, or subdivision, and (e) the word "COSTS" includes the
fees, costs, and expenses of agents, experts, attorneys, witnesses, mediators,
arbitrators, and supersedeas bonds, whether incurred before or after demand or
commencement of any legal proceedings, and whether incurred pursuant to trial,
appellate, mediation, arbitration, bankruptcy, administrative, or
judgment-execution proceedings. Whenever possible, each provision of this
Agreement should be construed and interpreted so that it is valid and
enforceable under applicable law. However, if a provision in this Agreement is
held by a court to be invalid or unenforceable under applicable law, that
provision will be deemed separable from the remaining provisions of this
Agreement and will not affect the validity, interpretation, or effect of other
provisions of this Agreement or the application of that provision to
circumstances in which it is valid and enforceable.
11. ASSIGNMENT; THIRD PARTY RIGHTS. This Agreement is binding on, and
inures to the benefit of, every assignee and successor of a party to this
Agreement (by operation of law or otherwise), except that the Shareholder may
assign its registration rights and obligations under this Agreement only to any
person to whom it transfers all the Shares, except for a purchaser of Shares in
either a transaction under SEC Rule 144 or a public offering that is registered
with the SEC under the Securities Act. If the Shareholder transfers to a person
fewer than all the Shares, only the Shareholder will have the registration
rights and obligations of a Registered Owner under this Agreement. The
Shareholder shall promptly notify the Company of any transfer of its
registration rights under this Agreement. A Registered Owner to whom the
Shareholder transfers its registration rights under this Agreement is not
permitted to retransfer any of those
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<PAGE> 12
registration rights to anyone else. Nothing in this Agreement, whether express
or implied, is intended or should be construed to confer upon, or to grant to,
any person, except the parties to this Agreement and their respective
successors and authorized assignees, any right, remedy, or claim under or
because of either this Agreement or any provision of it. All references in this
Agreement to "Registered Owner" include the Shareholder and its successors and
permitted assignees.
12. INTEGRATION; MODIFICATION. This Agreement records the entire and
exclusive understandings between the parties regarding the subject matter of
this Agreement and supersedes any prior or contemporaneous agreement,
understanding, or representation, oral or written, between them. A waiver,
amendment, discharge, extension, termination, or modification of this Agreement
will be valid and effective only if it is in writing and signed by both the
parties to this Agreement. A written waiver of a right, remedy, or obligation
under any provision of this Agreement will not constitute a waiver of the
provision itself, a waiver of any succeeding right, remedy, or obligation under
the provision, or a waiver of any other right, remedy, or obligation under this
Agreement.
13. PERFORMANCE OF AGREEMENT. Time is of the essence with respect to
the performance or satisfaction of every covenant, agreement, and obligation of
the parties under this Agreement. When any provision of this Agreement requires
or prohibits action to be taken by a person, the provision applies regardless
of whether the action is taken directly or indirectly by the person.
14. EXECUTION; EFFECTIVE DATE. The parties may execute this Agreement
in counterparts. Each executed counterpart will constitute an original
document, and all of them, together, will constitute the same agreement. This
Agreement will become effective on the execution date stated below, when each
party has executed and delivered a counterpart to the other party.
EXECUTED: August 31, 1998.
STERILE RECOVERIES, INC.
WITNESSES: By: /s/ Bertram T. Martin, Jr. (SEAL)
--------------------------------------
/s/ Name: Bertram T. Martin, Jr.
- ----------------------------------- --------------------------------
Name: Title: President
------------------------------ --------------------------------
/s/
- -----------------------------------
Name:
------------------------------
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<PAGE> 13
STANDARD TEXTILE CO., INC.
WITNESSES: By: /s/ Edward M. Frankel (SEAL)
--------------------------------------
/s/ Name: Edward M. Frankel
- ----------------------------------- --------------------------------
Name: Title: Vice President
------------------------------ --------------------------------
/s/
- -----------------------------------
Name:
------------------------------
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