SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
STERILE RECOVERIES, INC.
------------------------
(Name of Registrant as Specified in its Charter)
NOT APPLICABLE
----------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
-------
(2) Aggregate number of securities to which transaction applies: N/A
---------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction: N/A
-----
(5) Total fee paid: N/A
-----
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
-----
(2) Form, Schedule, or Registration Statement No.: N/A
-----
(3) Filing Party: N/A
-----
(4) Date Filed: N/A
-----
<PAGE>
STERILE RECOVERIES, INC.
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 17, 2000
Dear Shareholder:
The Annual Meeting of Shareholders of Sterile Recoveries, Inc. (the
"Company") will be held on Wednesday, May 17, 2000, at 10:00 a.m., local time,
at The Coastal Building, Fourth Floor, located at 28100 U.S. Highway 19 North,
Clearwater, Florida 33761, for the following purposes:
1. To elect two directors to serve until the 2003 Annual Meeting
of Shareholders and to hold office until their successors are
duly elected and qualified.
2. To ratify the appointment of independent auditors.
3. To transact other business that properly comes before the
meeting or any adjournment of the meeting.
These items of business are more fully described in the Proxy Statement
accompanying this Notice.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual Meeting, you are
urged to sign and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the Annual Meeting may vote in person even if he or she has returned a proxy.
THE BOARD OF DIRECTORS
Clearwater, Florida
April 7, 2000
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE
REQUESTED TO COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED.
<PAGE>
STERILE RECOVERIES, INC.
------------------
PROXY STATEMENT
FOR
2000 ANNUAL MEETING OF SHAREHOLDERS
------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed proxy is solicited on behalf of Sterile Recoveries, Inc.
(the "Company") from the Company's Shareholders for use at the Annual Meeting of
Shareholders to be held on Wednesday, May 17, 2000, at 10:00 a.m., local time,
and at any adjournment of the meeting for the purposes set forth in this Proxy
Statement and in the accompanying Notice of Annual Meeting of Shareholders. The
Annual Meeting will be held at The Coastal Building, Fourth Floor, located at
28100 U.S. Highway 19 North, Clearwater, Florida. The Company's principal
executive office is located at 28100 U.S. Highway 19 North, Suite 201,
Clearwater, Florida 33761 and its telephone number at that location is (727)
726-4421.
These proxy solicitation materials were mailed on or about April 7,
2000, together with the Company's 2000 Annual Report to Shareholders, to all
shareholders entitled to vote at the meeting.
VOTING AND SOLICITATION
Only shareholders of record at the close of business on March 28, 2000
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
The Company has two classes of outstanding voting securities, its Common Stock
and its Series A Preferred Stock. As of the Record Date, 5,676,794 shares of the
Company's Common Stock and 566,667 shares of the Company's Series A Preferred
Stock were outstanding. For information regarding security ownership by
management and by the beneficial owners of 5% or more of either the Company's
Common Stock or its Series A Preferred Stock, see "Other Information - Share
Ownership by Principal Shareholders and Management."
Each shareholder is entitled to one vote for each share of Common Stock
and one vote for each share of Series A Preferred Stock on all matters presented
at the Annual Meeting. The holders of Common Stock and Series A Preferred Stock
will vote together as one group in the election of directors and other matters
presented at the annual meeting. Shareholders do not have the right to cumulate
their votes in the election of directors.
The cost of soliciting proxies will be borne by the Company. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation materials to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers, and regular employees, without
additional compensation, personally or by telephone, telegram, letter or
facsimile.
<PAGE>
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual
Meeting is a majority of the shares of both Common Stock and Series A Preferred
Stock outstanding on the Record Date. Shares that are voted "FOR," "AGAINST," or
"WITHHELD" from a matter are treated as being present at the meeting for
purposes of establishing a quorum and are also treated as votes eligible to be
cast by the shareholders present in person or represented by proxy at the Annual
Meeting and entitled to vote on the subject matter with respect to such matter.
Abstentions are counted in determining whether a quorum is present, but are not
counted in determining the number of shares voted for or against any nominee for
director or any proposal. Broker non-votes are not counted for purposes of
determining whether a quorum is present or the number of shares for or against
any nominee for election as a director or any proposal.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Shareholders desiring to have proposals considered for inclusion in the
proxy statement and form of proxy for the 2000 Annual Meeting of Shareholders
must furnish the proposals to the Company before December 8, 2000.
FISCAL YEAR END
The Company's fiscal year ends on the Sunday nearest December 31.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
The Company's Board of Directors has been divided into three classes of
two directors each, with the members of each class serving three-year terms
expiring at the third annual meeting of shareholders after their election. Two
directors are to be elected at the Annual Meeting, each to serve a term of three
years. Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's two nominees named below, both of whom are
presently directors of the Company. In the event that any nominee of the Company
is unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the current
Board of Directors to fill the vacancy. It is not expected that any nominee will
be unable or will decline to serve as a director. The term of office of each
person elected as a director will continue until a successor has been elected
and qualified.
2
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED
BELOW:
<TABLE>
<CAPTION>
TERM
NAME AGE PRINCIPAL OCCUPATION EXPIRES
---- --- -------------------- -------
<S> <C> <C> <C>
James T. Boosales......................... 56 Executive Vice President, Chief 2003
Financial Officer, and Secretary of
the Company
Lee R. Kemberling......................... 74 Owner and President of Kemco Systems, 2003
Inc.
</TABLE>
JAMES T. BOOSALES has been the Company's Executive Vice President and
Chief Financial Officer and a director since the Company's inception in 1994. He
served as President, International, of Fisher-Price, Inc., a $200 million
division of this toy and juvenile products company, from 1990 through 1993.
Before joining Fisher-Price, Inc., Mr. Boosales served in several senior
executive capacities with General Mills, Inc., including President,
International, for Kenner Parker Toys, Inc./Tonka Corp. from 1985 to 1989,
during and after its spinoff as a public company, and President of Foot-Joy,
Inc. from 1982 to 1985.
LEE R. KEMBERLING, an initial investor in the Company, has been a
director of the Company since its inception. Mr. Kemberling is the founder, and
since 1969 has been sole shareholder and President of, Kemco Systems, Inc., a
developer and manufacturer of commercial and industrial waste water heat
recovery systems, including systems used in the Company's operations.
DIRECTORS WHOSE TERMS WILL CONTINUE AFTER THE ANNUAL MEETING
The following directors will continue to serve after the Annual
Meeting for terms that expire in 2001 or 2002 as specified:
<TABLE>
<CAPTION>
TERM
NAME AGE PRINCIPAL OCCUPATION EXPIRES
---- --- -------------------- -------
<S> <C> <C> <C>
James M. Emanuel.................................. 50 Consultant 2002
Gary L. Heiman.................................... 48 President and Chief Executive Officer of 2001
Standard Textile Co., Inc.
Richard T. Isel................................... 56 Chairman, President and Chief Executive 2002
Officer of the Company
Wayne R. Peterson................................. 49 Executive Vice President of the Company 2001
</TABLE>
JAMES M. EMANUEL has been a director of the Company since May 2, 1996.
Between January 1984 and June 1997, he served as the Chief Financial Officer of
Lincare Inc., a national provider of respiratory therapy services for patients
with pulmonary disorders. He also served as the Chief Financial Officer of
Lincare Holdings, Inc. between November 1990 and June 1997. Mr. Emanuel also
served as a director of Lincare Inc. and Lincare Holdings, Inc. from November
1990 to June 1997. Mr. Emanuel has engaged in private investment activities
since his retirement from Lincare Inc. in June 1997.
3
<PAGE>
GARY L. HEIMAN has been a director of the Company since September 1,
1998. Mr. Heiman has served as Chief Executive Officer of Standard Textile Co.,
Inc. since 1994, and as President since 1986. Standard Textile is a developer,
manufacturer and distributor of health care and medical textiles and apparel.
RICHARD T. ISEL has been the Company's Chairman and Chief Executive
Officer since January 1998 and a director since the Company's inception in 1994.
Mr. Isel was the Company's President and Chief Executive Officer from the
Company's inception through December 1997 and reassumed the position of
President in January 2000. Mr. Isel in 1991 co-founded the Company's
predecessor, Amsco Sterile Recoveries, Inc., and served as its President and a
director until November 1993. From November 1993 until August 1994, Mr. Isel
engaged in private investment activities and arranged the Company's acquisition.
Before starting Amsco Sterile, Mr. Isel was a founder and the chief executive
officer of Sterile Design, Inc., a manufacturer of sterile custom procedure
trays.
WAYNE R. PETERSON has been the Company's Executive Vice President and a
director since the Company's inception. Mr. Peterson in 1991 co-founded Amsco
Sterile and served as its Vice President until it was acquired by the Company in
1994. Before joining Amsco Sterile, Mr. Peterson was President of Agora
Development, Inc., a real estate development company that from 1987 to 1991
developed projects totaling 2,000,000 square feet in four states (California,
Nevada, Arizona, and Illinois) for a total combined value of $278 million. Mr.
Peterson is the brother-in-law of Richard T. Isel, the Company's Chairman,
President and Chief Executive Officer.
REQUIRED VOTE
The two nominees receiving the highest number of affirmative votes of
the shares of Common and Series A Preferred Stock present or represented and
entitled to be voted for them shall be elected as directors. Votes withheld from
any director are counted for purposes of determining the presence or absence of
a quorum for the transaction of business, but have no further legal effect under
Florida law.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of four meetings and
took action by written consent eight (8) times during the 1999 fiscal year. Each
director who served as such during the fiscal year ended December 31, 1999,
attended at least 75% of the meetings of the Board and the committees of the
Board on which he served during that year. The Board of Directors has a
Compensation Committee and an Audit Committee.
The Compensation Committee, which currently consists of Messrs.
Kemberling and Emanuel, reviews specific compensation plans, salaries, bonuses,
and other benefits payable to the Company's executive officers and makes
recommendations to the Board of Directors with respect to those matters. During
1999, the Compensation Committee held one meeting.
The Audit Committee, which currently consists of Messrs. Emanuel and
Kemberling, reviews and evaluates the results and scope of the audit and other
services provided by the Company's independent auditors. During 1999, the Audit
Committee held two meetings.
4
<PAGE>
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive $1,000 per Board
or committee meeting attended. In addition, for each year of any term to which
he is elected, each outside director receives options to purchase 4,000 shares
of Common Stock under the 1996 Non-Employee Director Stock Option Plan. All
options become exercisable ratably over the director's term and have an exercise
price equal to the fair market value of the Company's Common Stock on the date
of grant.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company engaged Ernst & Young LLP to audit its financial
statements for the fiscal year ending December 31, 2000. Ernst & Young LLP has
audited the Company's financial statements since 1999. A representative of Ernst
& Young LLP is expected to be present at the meeting, will have the opportunity
to make a statement, and is expected to be available to respond to appropriate
questions.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has conditioned its appointment of the
Company's independent auditors upon the receipt of the affirmative vote of a
majority of the shares represented, in person or by proxy, and voting at the
Annual Meeting, which shares voting affirmatively also constitute at least a
majority of the required quorum. In the event that the shareholders do not
approve the selection of Ernst & Young LLP, the appointment of the independent
auditors will be reconsidered by the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
OTHER INFORMATION
SHARE OWNERSHIP BY PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Common Stock and Series A Preferred Stock as of February
29, 2000, with respect to: (i) each of the Company's directors and the executive
officers named in the Summary Compensation Table below, (ii) all directors and
officers of the Company at fiscal year end as a group; and (iii) each person
known by the Company to own beneficially more than 5% of the Common Stock or the
Series A Preferred Stock. Each of the shareholders listed below has sole voting
and investment power over the shares beneficially owned. The number and
percentage of shares beneficially owned is determined under rules of the
Securities and Exchange Commission ("SEC"), and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under
these rules, beneficial ownership includes any shares for which the individual
has sole or shared voting power or investment power and also any shares as to
which the individual has the right to acquire within 60 days of February 29,
2000, through the exercise of any stock option or other right. A total of
5,676,794 shares of the Company's Common Stock and 566,667 of the Company's
Series A Preferred Stock were issued and outstanding as of February 29, 2000.
5
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIAL OWNER (1) CLASS OF STOCK BENEFICIALLY OWNED BENEFICIALLY OWNED
- -------------------- -------------- ------------------ ------------------
<S> <C> <C> <C>
Richard T. Isel (2) Common 920,829 16.2%
Wayne R. Peterson (3) Common 897,200 15.8
James T. Boosales (4) Common 817,500 14.4
Bertram T. Martin, Jr. (5) Common 255,126 4.4
Lee R. Kemberling (6) Common 362,012 6.4
James M. Emanuel (7) Common 33,500 1.0
Gary L. Heiman and
Standard Textile Co., Inc. Common (8) 570,667 9.1
Preferred (9) 566,667 100.0
Fidelity Management &
Research Co. Common 331,600 5.8
T. Rowe Price Associates, Inc. Common 327,000 5.8
All directors and officers
as a group (7 persons) (10) Common 3,856,834 59.9
Preferred 566,667 100.0%
</TABLE>
- -------------------
*indicates less than 1%
(1) The business address for Richard T. Isel, Wayne R. Peterson, and James T.
Boosales is 28100 U.S. Highway 19 North, Suite 201, Clearwater, Florida
33761. The business address for Bertram T. Martin, Jr. is 2805 Parkland
Blvd., Tampa, Florida 33609. The business address for Lee R. Kemberling
is 11500 47th Street North, Clearwater, Florida 34622. The business
address for James M. Emanuel is 120 14th Street, Belleair Beach, Florida
33786. The business address for Gary L. Heiman is One Knollcrest Drive,
Cincinnati, Ohio 45237. The business address for Fidelity Management &
Research Co. is 82 Devonshire Street, Boston, Massachusetts 02109. The
business address for T. Rowe Price Associates, Inc. is 100 E. Pratt
Street, Baltimore, Maryland 21202.
(2) Includes 720,829 shares of Common Stock owned by the Isel Family Limited
Partnership, a Colorado limited partnership of which Isel Holdings, Inc.,
a Colorado corporation, is the general partner. Mr. Isel and his wife,
Marcy, jointly own all of the issued and outstanding voting stock of Isel
Holdings, Inc.
(3) Includes 75,000 shares of Common Stock owned by the Wayne R. Peterson
Grantor Retained Annuity Trust, as to which Mr. Peterson has sole voting
and dispositive power as trustee, and 75,000 shares of Common Stock owned
by the Theresa A. Peterson Grantor Retained Annuity Trust, as to which
Mrs. Peterson, Mr. Peterson's wife, has sole voting and dispositive power
as trustee. Also includes 747,200 shares of Common Stock owned by the
Peterson Partners, Ltd., a Colorado limited partnership of which Peterson
Holdings, Inc. a Colorado corporation, is the general partner. Mr. and
Mrs. Peterson jointly own all of the issued and outstanding voting stock
of Peterson Holdings, Inc.
(4) Includes 800,000 shares of Common Stock owned by the Boosales Family
Limited Partnership, a Colorado limited partnership of which Boosales
Holdings, Inc., a Colorado corporation, is the general partner. Mr.
Boosales and his wife, Bonny, jointly own all of the issued and
outstanding voting stock of Boosales Holdings, Inc.
6
<PAGE>
(5) Includes 152,000 shares of Common Stock issuable on the exercise of
outstanding stock options that are currently exercisable or that will
become exercisable within 60 days. Excludes 114,000 shares of Common
Stock issuable on the exercise of stock options that are not exercisable
within 60 days. Mr. Martin resigned as President and Chief Operating
Officer on January 10, 2000 and is no longer an officer or director of
the Company.
(6) Includes 16,000 shares of Common Stock issuable on exercise of stock
options that are currently exercisable or will become exercisable at the
2000 Annual Meeting.
(7) Includes 23,500 shares of Common Stock issuable pursuant to the exercise
of outstanding stock options that are currently exercisable or will
become exercisable at the 2000 Annual Meeting. Excludes 8,000 shares of
Common Stock issuable on exercise of stock options that are not
exercisable within 60 days.
(8) Consists of the Common Stock potentially issuable on conversion of the
Series A Preferred Stock held by Standard Textile Co., Inc. Includes
4,000 shares of Common Stock issuable on exercise of stock options that
are currently exercisable or will become exercisable at the 2000 Annual
Meeting. Excludes 8,000 shares of Common Stock issuable on exercise of
stock options that are not exercisable within 60 days.
(9) Consists of 566,667 shares of Series A Preferred Stock owned by Standard
Textile Co., Inc., of which Mr. Heiman is a principal shareholder,
President and Chief Executive Officer. This preferred stock is
convertible at any time into the same number of shares of Common Stock.
(10) Includes 152,000 shares of Common Stock issuable upon the exercise of
outstanding stock options held by Bertram T. Martin, Jr., 23,500 shares
of Common Stock issuable upon the exercise of outstanding stock options
held by James M. Emanuel, and 16,000 shares of Common Stock issuable on
exercise of stock options held by Lee R. Kemberling, and 566,667 shares
of Common Stock potentially issuable on conversion of the Series A
Preferred Stock held by Standard Textile Co., Inc.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act ("Section 16(a)") requires the
Company's officers and directors and persons who own ten percent or more of a
registered class of the Company's equity securities to file reports of ownership
on Form 3 and changes in ownership on Form 4 or Form 5 with the SEC and the
National Association of Securities Dealers, Inc. Such officers, directors and
ten percent or more shareholders are also required by SEC rules to furnish the
Company with copies of all such forms that they file.
Based solely on its review of the copies of such forms received by the
Company, or written representations from certain reporting persons that no Forms
5 were required for such persons, the Company believes that, during the period
from January 1, 1999 until December 31, 1999, all Section 16(a) filing
requirements applicable to its officers, directors, and ten-percent or more
shareholders were satisfied.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is composed of Messrs. Kemberling
and Emanuel. No member of the Compensation Committee is or was formerly an
officer or an employee of the Company. No interlocking relationship exists
between the Company's Board of Directors or Compensation
7
<PAGE>
Committee and the board of directors or compensation committee of any other
company, nor has any such interlocking relationship existed in the past.
Lee R. Kemberling a director of the Company, is also the director,
President, and sole shareholder of Kemco, Inc., a developer and manufacturer of
commercial and industrial waste water and heat recovery systems that originally
furnished the Company's predecessor with the water and heat reclamation
equipment installed at each of its facilities. The Company paid $394,000 to
Kemco in 1999 to design and supply new components for water reclamation systems.
The Company believes that the terms of its transactions with Kemco approximate
those that would be available from an independent third party.
Gary L. Heiman, a director of the Company, is also the President, Chief
Executive Officer, and a principal shareholder of Standard Textile Co., Inc., a
developer, manufacturer, and distributor of healthcare and medical textiles and
apparel. In 1999, the Company paid approximately $7.4 million to Standard
Textile for purchase of reusable textile products. The Company believes that the
terms of this Agreement with Standard Textile approximate those that would be
available from an independent third party.
EXECUTIVE OFFICER COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning
compensation paid to or earned by the Company's Chairman and Chief Executive
Officer and each of the Company's other executive officers (the "Named
Officers") for the years ended December 31, 1999, 1998, and 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
LONG TERM
OTHER ANNUAL COMPENSATION OPTIONS
NAME AND PRINCIPAL POSITIONS YEAR SALARY COMPENSATION GRANTED
---------------------------- ---- ------ ------------ -------
<S> <C> <C> <C> <C>
Richard Isel, Chairman and Chief
Executive Officer. . . . . . . . . . . . 1999 $220,000 $ 12,294 --------
1998 220,000 10,385 --------
1997 220,000 8,482 --------
Bertram T. Martin, Jr., President and
Chief Operating Officer* . . . . . . . . 1999 200,000 -------- $40,000
1998 200,000 -------- ---------
1997 200,000 -------- $90,000
Wayne R. Peterson, Executive Vice
President. . . . . . . . . . . . . . . . 1999 200,000 -------- --------
1998 200,000 -------- --------
1997 200,000 -------- --------
James T. Boosales, Executive Vice
President. . . . . . . . . . . . . . . . 1999 200,000 -------- --------
1998 200,000 -------- --------
1997 200,000 -------- --------
</TABLE>
- ------------------
*Mr. Martin is no longer an officer of the Company.
8
<PAGE>
None of the foregoing officers received any bonus compensation in 1999.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with all of the Named Officers
that provide for annual salary as follows:
NAME SALARY
---- ------
Richard T. Isel..........................................$220,000
Bertram T. Martin, Jr....................................$200,000
Wayne R. Peterson........................................$200,000
James T. Boosales........................................$200,000
The agreements can be terminated by either party without cause at any time,
subject to certain notice requirements. Each officer is prohibited from
competing with the Company during the three year period following termination of
the officer's employment. The Company also has severance agreements with each of
its executive officers that provide for a severance compensation benefit equal
to two times the executive officer's annual cash compensation (payable in a lump
sum) for an involuntary or constructive termination of employment following a
"change of control."
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES IN EXERCISE
OPTIONS FISCAL PRICE EXPIRATION GRANT DATE
NAME GRANTED YEAR ($/SHARE) DATE VALUE (1)
---- ------- ---- --------- ---- ---------
<S> <C> <C> <C> <C> <C>
Bertram T. Martin, Jr..... 40,000 18.6% $11.88 January 4, $273,252
2009
</TABLE>
(1) In accordance with SEC rules, the binomial opinion pricing method was
chosen to estimate the Grant Date Value of the options set forth in
this table. The Company's use of this model should not be construed as
an endorsement of its accuracy at valuing options. All stock option
valuation models, including the binomial model, require a prediction
about the future movement of the stock price. The following assumptions
were made for purposes of collecting the original Grant Date Value: an
option term of five years, volatility at 60.51%, no dividend yield, and
interest rate at 7.50%. The real value of the options in this table
depends on the actual performance of the Common Stock during the
applicable period.
FISCAL YEAR END OPTION VALUES
The following table sets forth the aggregate value of unexercised
options at December 31, 1999 for each Named Officer. There were no options
exercised during the year ended December 31, 1999 by any Named Officer.
9
<PAGE>
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END (1)
-------------------------- ----------------------
NAME UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
- ---- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Richard T. Isel......................... -- -- -- --
Bertram T. Martin, Jr.(2)............... 114,000 152,000 -- $161,370
Wayne R. Peterson....................... -- -- -- --
James T. Boosales....................... -- -- -- --
</TABLE>
(1) Amounts represent the $1,828,750 market value of the underlying
securities relating to "in-the-money" options at December 31, 1999, minus
the exercise price of such options.
(2) Mr. Martin's exercisable options include options to purchase 66,000
shares of the Company's Common Stock at $4.43 per share that he received
in October 1995 as a consultant to the Company, before he joined the
Company as an officer. These options were not awarded to Mr. Martin as
compensation for his service as a Named Officer. As of January 10, 2000,
Mr. Martin is no longer an officer or director of the Company.
CERTAIN TRANSACTIONS
The Company engaged in transactions in 1999 with Kemco, Inc., a company
owned by Lee R. Kemberling, and with Standard Textile Co., Inc., a company whose
President, Chief Executive Officer, and a principal shareholder is Gary L.
Heiman. Mr. Kemberling and Mr. Heiman are both directors of the Company. See
"Other Information - Compensation Committee Interlocks and Insider
Participation."
All transactions between the Company and its officers, directors,
principal shareholders and their affiliates will continue to be approved by a
majority of the Board of Directors, including a majority of the independent and
disinterested outside directors on the Board of Directors, and will continue to
be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors (the "Committee")
has furnished the following report on the Company's executive compensation
program. The Committee, which consists of the two outside directors listed at
the end of this report, reviews and establishes specific compensation plans,
salaries, option grants, and other benefits payable to the Company's executive
officers. Following review and approval by the Committee, all issues pertaining
to executive compensation are submitted to the entire Board of Directors for its
review and approval.
The Committee's primary objective with respect to executive
compensation is to establish programs that attract and retain executive officers
and align their compensation with the Company's overall business strategies,
values, and performance. For executive officers and key managers other than
Messrs. Isel, Peterson, and Boosales, the Company's founders and largest
shareholders, the Company grants stock options as a component of total
consideration to closely align their interests with the shareholders' long-term
interests. Further, in evaluating annual compensation of executive officers
(other than Messrs. Isel, Peterson, and Boosales) and key managers, the
Committee places a relatively heavy emphasis on stock options as a percentage of
total compensation, consistent with its philosophy that stock incentives more
closely align the interests of company managers with the long-term interests of
shareholders.
10
<PAGE>
The two components of the Company's total compensation program for
executive officers have been:
1. SALARY: Base salary is intended to be competitive with that paid to
comparable executives and is also intended to reflect consideration of an
officer's experience, business judgment, and role in developing and implementing
overall business strategy for the Company. Base salaries are based on
qualitative and subjective factors, and no specific formula is applied to
determine the weight of each factor.
The Company's executive officers have not historically participated in
its incentive compensation program, and did not in 1999 receive any bonus in
addition to base salary. The Committee believes that the absence of incentive
bonus has been more than offset by the substantial incentives associated with
the executive officers' stock ownership.
2. LONG-TERM STOCK INCENTIVES: The Company's 1995 Stock Option Plan and
1998 Stock Option Plan provide for the grant to employees of incentive or
nonqualified stock options. Grants to executives are designed to align a
significant portion of the executive compensation package with the long-term
interests of the Company's shareholders by providing an incentive that focuses
attention on managing the Company from the perspective of an owner with an
equity stake in the business.
Grants of stock options generally are limited to officers (other than
Messrs. Isel, Peterson, and Boosales) and other key employees and managers of
the Company who are in a position to contribute substantially to the growth and
success of the Company. Incentive stock options and nonqualified stock options
are granted for terms up to ten years, and are designed to reward exceptional
performance with a long-term benefit, facilitate stock ownership, and deter
recruitment of key Company personnel by competitors and others. Vesting
requirements encourage loyalty to the Company.
The Company did not grant stock options in 1999 to Messrs. Isel,
Peterson, and Boosales because as the Company's founders and largest
shareholders, their interests are already closely aligned with those of the
Company's other shareholders. The remaining executive officer, Mr. Martin, was
granted options to purchase 40,000 shares of Common Stock on January 4, 1999 and
beneficially owned or had rights to acquire 369,126 shares on the Record Date.
The Named Officers appearing in the Summary Compensation Table held a total of
3,004,655 shares representing 50.6% of the Company's outstanding Common Stock on
February 29, 2000, assuming exercise of all of Mr. Martin's vested and unvested
stock options.
In conclusion, the Company's executive officers' stock ownership and
stock option awards closely align their interests with the Company's
shareholders' long-term interests, consistent with the compensation philosophies
set forth above. This close alignment has existed since the Company's inception
and has contributed significantly to the Company's growth and profitability.
By the Compensation Committee,
Lee R. Kemberling
James M. Emanuel
11
<PAGE>
COMPANY STOCK PRICE PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return for the Company, the Nasdaq Stock Market (U.S.) Index, and the Nasdaq
Health Index for the period since the Company's Common Stock began trading on
July 18, 1996. This graph assumes that $100 was invested on July 18, 1996, in
the Company's Common Stock and in the other indices. Note that historic stock
price performance is not necessarily indicative of future stock price
performance.
[GRAPH OMITTED]
<TABLE>
<CAPTION>
12/31/96 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98 3/31/99 6/30/99 9/30/99 12/31/99
-------- -------- ------- ------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sterile Recoveries, Inc. $155.92 $180.26 178.95 178.95 93.42 123.68 107.89 122.37 81.58 72.37
Nasdaq Stock Market (U.S. Index) $116.21 $140.60 166.37 170.99 154.82 200.32 224.88 246.07 252.03 371.32
Nasdaq Health Index $97.58 $99.45 108.72 98.78 74.82 84.99 75.83 94.55 70.04 69.05
</TABLE>
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the enclosed proxy card to vote the shares they represent
as the Company may recommend.
It is important that your shares be represented at the meeting,
regardless of the number of shares which you hold. You are, therefore, urged to
execute and return at your earliest convenience, the accompanying proxy card in
the envelope which has been enclosed.
THE BOARD OF DIRECTORS
Clearwater, Florida
April 7, 2000
12
<PAGE>
STERILE RECOVERIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
STERILE RECOVERIES, INC.
28100 U.S. HIGHWAY 19 NORTH
CLEARWATER, FLORIDA 33122
MAY 17, 2000
10:00 A.M.
- FOLD AND DETACH HERE -
2000 ANNUAL MEETING OF SHAREHOLDERS OF STERILE RECOVERIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY APPOINTS JAMES T. BOOSALES AND WAYNE R. PETERSON,
AND EACH OF THEM, AS PROXIES, EACH WITH FULL POWER OF SUBSTITUTION, TO
REPRESENT AND TO VOTE ALL SHARES OF VOTING COMMON STOCK OF STERILE RECOVERIES,
INC., A FLORIDA CORPORATION (THE "COMPANY"), AT THE ANNUAL MEETING OF
SHAREHOLDERS OF THE COMPANY TO BE HELD ON WEDNESDAY, MAY 17, 2000, AT 10:00
A.M., EST, AND ANY ADJOURNMENT THEREOF:
(1) Election of directors for terms expiring in 2003:
<TABLE>
<S> <C>
[ ] FOR the election of James T. Boosales and Lee R. [ ] WITHHOLD AUTHORITY to vote for the nominees
Kemberling (the "Nominees") for terms expiring in 2003
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name)
(2) Appointment of Ernst & Young LLP as the Company's auditors.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
(3) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(continued, and to be signed on reverse side)
<PAGE>
- FOLD AND DETACH HERE -
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE NOMINEES AND FOR THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
COMPANY'S AUDITORS.
The undersigned hereby acknowledges receipt of (i) the Company's 1999
Annual Report to Shareholders, (ii) the Proxy Statement and (iii) the Notice of
Annual Meeting of Shareholders to be held on May 17, 2000.
Signed:____________________________
Signature of Shareholder
Signed:____________________________
Signature of Shareholder if held
jointly
Please sign exactly as your name
appears on this proxy. If shares
are owned by more than one person,
all owners should sign. Persons
signing as executors,
administrators, trustees or in
similar capacities should so
indicate. If a corporation, please
sign full corporate name by the
president or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
Dated:_______________________, 2000
Do you plan to attend the Annual
Meeting? [ ] Yes [ ] No
PLEASE COMPLETE, SIGN, DATE, AND
RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED POSTAGE PAID
ENVELOPE.
