<PAGE> 1
As filed with the Securities and Exchange Commission on July 29, 1997.
Registration No. 333-__________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------------------
MED/WASTE, INC.
(Exact name of registrant as specified in its charter)
Delaware 65-0297759
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3890 N.W. 132nd Street, Suite K
Opa Locka, Florida 33054
(305) 688-3931
(Address including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------------------------
MICHAEL D. ELKIN
Vice President/Chief Financial Officer
MED/WASTE, INC.
3890 N.W. 132nd Street, Suite K
Opa Locka, Florida 33054
(305) 688-3931
(Name and address, including zip code, and telephone number,
including area code, of agents for service)
With a Copy to:
BRYAN W. BAUMAN, ESQ.
Wallace, Bauman, Fodiman & Shannon, P.A.
2222 Ponce de Leon Boulevard, Sixth Floor
Coral Gables, Florida 33134
(305) 444-9991
--------------------------------------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement has become effective.
--------------------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
- ------------------------- ------------------ ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Common Stock, par value 1,015,349 $4.50 $4,569,070.50 $1,385.00
$0.001 per share
</TABLE>
(1) Pursuant to Rule 416 as promulgated under the Securities Act of 1933,
as amended, there is also being registered such additional shares of
Common Stock as may become issuable pursuant to the anti-dilution
provisions of the Debentures or Warrants.
(2) Pursuant to Rule 457(c), the fee is calculated on the basis of the
average of the bid and asked prices on July 28, 1997 on the NASDAQ
Small Cap Market for the Common Stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
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<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion, dated July 29, 1997
PROSPECTUS
1,015,349 Shares
MED/WASTE, INC.
Common Stock
This Prospectus relates to the public offering of up to 1,015,349
shares of common stock, $0.001 par value per share (the "Common Stock") of
Med/Waste, Inc. (the "Company"). All of the shares of Common Stock offered
hereby may be sold from time to time by the stockholders described herein (each
a "Selling Stockholder," collectively the "Selling Stockholders") in
transactions in which they and any broker-dealers through whom such Common Stock
are sold may be deemed to be underwriters within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), as more fully described herein.
The Selling Stockholders are not restricted in the price or prices at which they
may sell the Common Stock. Any commissions paid or concessions allowed to any
broker-dealer, and, if any broker-dealer purchases such Common Stock as
principal, any profits received on the resale of such shares, may be deemed to
be underwriting discounts and commissions under the Securities Act.
Of the Common Stock being registered hereby, 923,041 shares are
issuable upon conversion of presently outstanding 10% Convertible Redeemable
Debentures due July 1, 2000 (the "Debentures") and 92,308 shares are issuable
upon exercise of common stock purchase warrants (the "Warrants"). The Company
will not receive any of the proceeds from the sale of the Common Stock, but will
pay the expenses incurred in registering the Common Stock, including legal and
accounting fees. All selling and other expenses incurred by individual Selling
Stockholders will be borne by such Selling Stockholder. The Company would
receive an aggregate of $300,001 in gross proceeds from the exercise of the
Warrants. Selling Stockholders will bear all other expenses of this offering,
including brokerage fees, any underwriting discounts or commissions.
Each Debenture is convertible at any time at the option of the holders
at the conversion price of $3.25 in principal for each share of Common Stock
through the maturity date of July 1, 2000. Each Warrant entitles the holder to
purchase one (1) share of Common Stock at an exercise price of $3.25 per share
until February 12, 2001. On July 28, 1997, the Company had 2,330,912 shares of
Common Stock outstanding.
THE COMMON STOCK OFFERED HEREBY INVOLVES CERTAIN RISKS. PROSPECTIVE
PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER THE CAPTION
"RISK FACTORS" LOCATED ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Common Stock is included for quotation on the NASDAQ Small Cap Market
("NASDAQ") under the symbol "MWDS." The last reported sale price of the Common
Stock on NASDAQ on July 28, 1997 was $4.50 per share.
The date of this Prospectus is _____________, 1997.
<PAGE> 4
AVAILABLE INFORMATION
A Registration Statement on Form S-3, relating to the Common Stock
offered hereby has been filed with the Securities and Exchange Commission,
Washington, D.C. 20549 (the "Commission"). This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or any other document referred to are not necessarily complete and
in each instance reference is made to the copy of such contract or other
documents filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. For further information with
respect to the Company and the Common Stock being offered hereby, reference is
made to the Registration Statement and the exhibits and schedules thereto. A
copy of the Registration Statement may be inspected by anyone without charge at
the public reference facilities of the Commission, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549; New York Regional Office, Public Reference Room,
Seven World Trade Center, 13th Floor, New York, New York 10048; and Chicago
Regional Office, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661.
The Commission maintains a World Wide Website that contains filings and other
information filed electronically with the Commission. The address of the
Commission's World Wide Web is http://www.sec.gov.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. These reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549; New York Regional Office,
Public Reference Room, Seven World Trade Center, 13th Floor, New York, New York
10048; and Chicago Regional Office, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Copies of this material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The reports, proxy and other information may also be
viewed through the Commission's World Wide Website.
The Common Stock is included for quotation on the NASDAQ Small Cap
Market and these reports, proxy statements and other information concerning the
Company may also inspected at the office of the National Association of
Securities Dealers, inc., 1735 K Street, N.W., Washington, D.C. 20006.
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus and the documents incorporated by
reference herein may constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Uniform Act of 1995 (the "Reform Act").
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company or industry results, to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things; the
Company's history of operations; the Company's highly competitive industry;
consummation of pending and future acquisitions; the business abilities and
judgment of the Company's personnel; the availability of qualified personnel;
changes in, or failure to comply with, governmental regulations; general and
business conditions; and other factors referenced in this Prospectus. See "Risk
Factors."
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<PAGE> 5
DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company with the
Commission under the Exchange Act are incorporated herein by reference: (i) the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1996;
(ii) the Company's Quarterly Report on Form 10-QSB for the quarter ended March
31, 1997; and (iii) the Company's Proxy Statement dated April 22, 1997 for the
Company's annual meeting of Shareholders held on June 10, 1997.
All documents filed by the Company pursuant to Sections 13(a),13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made by this Prospectus, shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing these documents. Any statements contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so modified
or superseded. All information appearing in this Prospectus is qualified in its
entirety by the information and financial statements (including notes thereto)
appearing in the documents incorporated herein by reference.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS
THERETO) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST BY ANY
PERSON TO WHOM THIS PROSPECTUS HAS BEEN DELIVERED, FROM THE COMPANY. REQUESTS
SHOULD BE DIRECTED TO MICHAEL D. ELKIN, VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER, 3890 N.W. 132ND STREET, SUITE K, OPA LOCKA, FLORIDA 33054 (TELEPHONE:
(305) 688-3931).
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<PAGE> 6
THE COMPANY
Med/Waste, Inc. (the "Company") was incorporated in November 1991 under
the laws of the State of Delaware. The Company provides medical waste management
services through its wholly owned subsidiaries, Safety Disposal system, Inc.
("SDS"), Safety Disposal System of South Carolina, Inc. ("SDSSC") and Safety
Disposal System of Pennsylvania, Inc. ("SDSPA") and commercial cleaning services
through its wholly owned subsidiary, The Kover Group, Inc. ("Kover").
SDS provides collection, transportation, treating, tracking and related
services for the disposal of medical waste throughout Florida. SDS also sells or
leases turnkey autoclave treatment units for large quantity generators. SDSSC
operates an incineration facility in Hampton, South Carolina, which is permitted
to treat municipal, medical and special waste which the Company receives from
generators throughout the United States. SDSSC mainly focuses on the treatment
of medical waste and to a lesser degree special waste. SDSPA manages a medical
waste autoclave treatment facility located in Marcus Hook, Pennsylvania pending
the purchase of such facility by SDSPA. See "Material Events."
Medical waste is generally any waste which may cause an infectious
disease or can reasonably be suspected of harboring pathogenic organisms.
Medical waste includes predominantly all material that comes in contact with
human and animal body fluids. SDS collects medical waste from medical waste
generators, including hospitals, clinics, medical and dental offices,
veterinarians, laboratories, funeral homes, home health agencies and others. In
addition to medical waste collection, SDS provides programs to assist customers
to promote safe handling of medical waste and comply with federal and state
requirements applicable to their operations. Special waste is generally all
non-residential waste which requires more stringent management than municipal
solid waste, but does not include medical or hazardous waste.
Nationally, most medical waste is disposed of by incineration. However,
more stringent government regulation and a generally negative public attitude
toward nearby incineration facilities have resulted in a declining number of
incineration disposal facilities. Relatively few newly permitted incineration
facilities have opened due to the significant cost of compliance with new
environmental legislation. The Company's incinerator is in compliance with all
federal and state regulations dealing with air pollution controls. The
incinerator is a waste to energy facility with a rated capacity for processing
up to 270 tons per day of special medical and municipal waste. The facility is
currently permitted under South Carolina law to incinerate up to 200 tons per
day of waste both, liquid and solid. Prior to July 1, 1997, the incinerator was
limited to processing 1,500 tons of medical waste per month. Effective, July 1,
1997, the South Carolina legislature removed the cap on medical waste permitted
to be burned at the facility. See "Material Events." On June 1, 1997, the
incinerator was temporarily shut down as a result of fire damage. The
incinerators were repaired and became fully operational on June 30, 1997.
The trend against incinerator facilities has encouraged the development
and commercial use of a variety of environmentally acceptable alternative
disposal techniques. The Company manages a 48 ton autoclave medical waste
treatment facility located in Marcus Hook, Pennsylvania, pending the closing of
the purchase of such facility by the Company. See "Material Events--Pending
Acquisition." The autoclave facility is currently running at full capacity.
As part of its comprehensive medical waste services, SDS supplies,
installs and oversees the operations of on-site autoclaves at large quantity
generators, typically hospitals. The autoclaves treat the medical waste through
sterilization, allowing most of such waste to be handled and disposed of as
solid waste. Management believes that autoclaves can reduce each hospital's
medical waste by up to 90%, thus significantly reducing the expense of disposal
both due to decreased volume and the significant cost savings of disposing of
solid, versus medical waste. Hospitals either purchase or lease the autoclave
and related equipment. During the term of the lease the Company provides
maintenance and support of the autoclave on-site and collects the treated waste
and transports it for ultimate disposal at a local landfill.
Kover is engaged in the business of offering, selling and servicing
franchises for commercial building cleaning services through the trade name
"Coverall Cleaning Concepts". Kover is a service franchisor of Coverall North
America, Inc. ("CNA") in the metropolitan area of Cleveland, Ohio and South
Florida.
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<PAGE> 7
Kover is a service franchisee of CNA. CNA operates a business engaged
in the offer and sale of three types of franchises, each of which is related to
commercial building cleaning services using the trade name "Coverall". The three
types of franchises are janitorial franchises, limited area franchises and
services franchises. Kover is a service franchisee of CNA in the metropolitan
areas of Cleveland, Ohio and South Florida. Kover has the exclusive right to
sell janitorial franchises using the Coverall Cleaning Concept in these
metropolitan areas. Kover is required to pay CNA royalty fees of three to four
and one-half percent of monthly revenues. Kover uses the Coverall name, design
and business plan to conduct and promote its independent business of offering,
selling and servicing janitorial franchises pursuant to written agreements
between Kover and its janitorial franchisees. Kover maintains a small staff to
perform emergency cleaning services and temporary cleaning services for accounts
being transferred from one franchisee to another. Most cleaning services are
provided to commercial customers through independent franchisees.
Kover sells franchises for janitorial services in the metropolitan
territories of South Florida and Cleveland, Ohio. As of June 30, 1997, Kover had
in operation approximately 245 janitorial franchises. As of that date, CNA and
its other service franchisees had an additional approximately 4250 janitorial
franchises in operation located in 15 states, as well as in Canada, United
Kingdom, South Africa, Spain and Thailand.
The Company is a Delaware corporation with its principal executive
offices located at 3890 N.W. 132nd Street, Suite K, Opa Locka, Florida 33054.
Its telephone number at such address is (305) 688-3931.
RISK FACTORS
An investment in the Common Stock offered hereby involves a certain
degree of risk. Prospective purchasers should carefully consider the following
risk factors, as well as all of the other information set forth elsewhere in
this Prospectus or incorporated by reference to the Prospectus, before
purchasing any shares of Common Stock offered hereby.
ACCUMULATED DEFICIT; NET LOSSES. The Company has incurred an
accumulated deficit of $1,718677 as of March 31, 1997. For the years ended
December 31, 1994, 1995 and 1996 the Company had net income (losses) of
($422,061), ($1,748,926) and $215,326, respectively. The net loss for the year
ended December 31, 1996 was primarily a result of a non-recurring charge for an
impairment loss of goodwill of $1,622,872. For the three months ended March 31,
1997, the Company had consolidated net income of $150,037. The can be no
assurance that the Company's activities will generate sufficient cash flow to
sustain ongoing operations or that its operations will continue to be
profitable.
IMPACT OF GOVERNMENT REGULATION. The Company operates within the
medical waste disposal industry, which is subject to extensive and frequently
changing local, state and federal laws. This statutory and regulatory framework
imposes compliance burdens and risks on the Company, including requirements to
obtain and maintain government permits. The transport, treatment and disposal of
medical waste is subject to packaging, labeling, handling, notice and reporting
requirements, as well as requirements pertaining to transporter registration,
transportation handling procedures and the preparation of shipping papers. The
treatment and disposal of municipal and special waste are also subject to
extensive government regulation. State and local regulations vary from location
to location and constantly change. State and local regulations may pose
insurmountable barriers, financial or otherwise, to the opening and operation of
facilities in states where the Company intends to operate its business. The
Company believes that it is currently in compliance in all material respects
with all applicable laws and regulations governing its business and has all
appropriate government permits to operate its existing business, including those
required for the operation of its incineration facility and transfer stations.
However, the addition of new, or amendments to existing, statutes and
regulations could require the Company to continually modify its methods of
operations at costs that could be substantial. Further, since the Company
operates its own medical waste treatment facilities, it is subject to additional
permitting requirements at each such location. The permitting process is complex
and time consuming and is generally opposed by local residents. Even after
permits are issued, opposition groups may attempt to compel regulators through
court proceedings to modify permit conditions or reverse decisions with respect
to the initial granting of permits. There can be no assurance that the Company
will be able, for
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<PAGE> 8
financial reasons or otherwise, to comply with future environmental and
permitting laws either in its present market or in those markets in which it
intends to expand. Delays in the permitting process could add significantly to
the cost of developing a medical waste treatment facility or transfer station
and could have a material adverse effect on the Company's business, financial
condition and results of operations.
IMPORTANCE OF GOVERNMENT ENFORCEMENT OF ENVIRONMENTAL REGULATIONS. The
Company believes that its business prospects in the medical waste disposal
industry are significantly enhanced by the stringent enforcement of handling,
transportation, environmental preservation and clean-up requirements by
regulatory agencies. These laws and regulations are, and will continue to be, a
principal factor affecting demand for the Company's medical waste management
services. The intensity and breadth of present and future regulation and
supervision of medical waste disposal procedures and the impact of technological
changes on government regulation cannot be predicted. The level of government
enforcement is subject to constantly changing political and budgetary pressures.
A significant relaxation or reduction in government enforcement could have a
material adverse effect on the Company's business, financial condition and
results of operations.
INTENSE COMPETITION WITHIN INDUSTRY. The Company operates within the
intensely competitive medical waste disposal industry. Competition in the
industry has resulted in substantial price reductions in virtually all
geographic areas in which the Company operates. There can be no assurance that
competitive pressures within the industry will not result in continued or
accelerated price reductions. Substantial continued or accelerated price
reductions would have a material adverse effect on the Company's business,
financial condition and results of operations. The Company faces competition
from several national waste disposal companies and numerous regional and local
entities in its present locations and will in the future be confronted with such
competition in each location where it intends to expand. The Company's business
strategy involves, among other things, selling its services to customers who may
have established relationships with other medical waste management companies and
who may be reluctant to use the Company's services. Several of the Company's
competitors are larger and have substantially greater financial and other
resources than the Company and are well entrenched in their respective markets.
Among these competitors are Browning-Ferris Industries, Inc. ("BFI"), WMX
Technologies, Inc., Laidlaw Waste Systems, Inc., and USA Waste Services, Inc.
The Company's primary competitor is BFI. There can be no assurance that the
Company will be able to profitably compete with such other entities.
GROWTH STRATEGY DEPENDENT UPON ACQUISITIONS. The Company's growth
strategy depends, in part, on its ability to acquire other medical waste
management businesses. There can be no assurance the Company will be able to
continue to identify suitable businesses to acquire, successfully negotiate
their acquisition, or integrate their operations into the Company. The recent
consolidation in the medical waste industry may increase competition for the
acquisition of existing businesses and result in fewer acquisition opportunities
and higher purchase prices. Some of the Company's competitors for acquisitions
are larger and have significantly greater financial resources. Even if the
Company is successful in identifying suitable acquisition candidates, there can
be no assurances that the terms to complete such acquisitions would be
acceptable, or if acceptable, that the Company would have the financial
resources to pay the purchase price. The Company anticipates that future
acquisitions of other medical waste businesses will be made through payment of
cash, issuance of debt or equity securities, or a combination of these methods.
There can be no assurances that the Company will have sufficient resources
available, or if available, on terms acceptable to the Company. The Company may
need to raise additional equity or debt financing to complete such acquisitions.
Any additional equity financings may be dilutive to the Company's existing
shareholders. Debt financings, if available, may not be on terms acceptable to
the Company, if at all. The Company's failure to continue its growth strategy
could have a material adverse effect on the Company's business, financial
condition and results of operations.
POTENTIAL LIABILITY; INSURANCE. The medical waste disposal industry
involves potentially significant risks of statutory, contractual, tort and
common law liability. The failure of the Company to comply with applicable laws
or to manage medical waste in an environmentally sound manner could result in
environmental contamination, personal injury and property damage. The Company
maintains insurance which it considers sufficient to meet regulatory and
customer requirements and to protect the Company's operations. However, a
partially or completely uninsured claim against the Company of sufficient
magnitude could have
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<PAGE> 9
a material adverse impact on the Company's operations. Certain federal and
statutory laws impose strict, joint and several liability on current and former
owners and operators of facilities regarding the release of hazardous substances
and on generators and transporters of the hazardous substances that are brought
to such facilities. Responsible parties may be liable for substantial waste site
investigation and clean up costs as a result of the occurrence of environmental
contamination. If the Company was found to be a responsible party for a
particular site, it could be required to pay the entire cost of waste site
investigation and clean up, even though other parties may also be liable. The
Company's ability to obtain contribution from other responsible parties may be
limited by the Company's inability to identify those parties and by their
financial inability to contribute to investigation and clean up costs. It is
possible that in the future the Company may experience difficulty in obtaining
appropriate insurance at reasonable prices with reasonable coverage, which could
place the Company at a competitive disadvantage. The inability to obtain
necessary insurance coverage, or a successful claim against the Company for
which it does not have adequate insurance, could have a material adverse impact
on the Company's operations and financial condition.
ALTERNATIVE TECHNOLOGIES; TECHNOLOGICAL OBSOLESCENCE. The medical waste
industry presents continuing opportunities for the development of alternate
treatment and disposal methods. Such methods may emphasize cost efficiencies,
reduction in the volume of waste generated, environmental factors or both. The
Company sells autoclave units to hospitals and other large generators. The
development and commercialization of alternative treatment or disposal
technologies that are more efficient or environmentally sound treatment and
disposal methods may have a material adverse effect on the Company's operations.
The Company is aware of certain new medical waste treatment and disposal
technologies including the production of reusable or degradable medical
products, which, if successfully developed and commercialized would have a
material adverse effect on the Company's business, financial condition and
results of operations.
SERVICE FRANCHISE AGREEMENTS. Kover operates as franchisee of Coverall
of North America, Inc. ("CNA") pursuant to Service Franchise Agreements in each
location. The Service Franchise Agreements contain a number of restrictions and
obligations on the part of Kover. The failure of Kover to strictly comply with
these requirements could result in the termination of such franchises and have a
material adverse effect on the Company's business, financial condition and
results of operations.
DEPENDENCE ON FRANCHISOR. CNA contributes to the development of Kover
and its operating systems, clinics, products and formulation of strategies. The
loss of the relationship with the CNA could have a material adverse effect on
Kover's operations and new product development efforts. Further, the long term
success of Kover is in part dependent upon the overall success of the CNA
janitorial system. Accordingly, to a certain extent, the success of Kover is
dependent on part upon the successful operations of CNA's other franchisees, as
well as upon the financial condition, management, marketing and innovative
abilities of CNA. Any event that creates adverse publicity involving CNA
operations may have an adverse impact on the Company, regardless of whether the
event involved Kover.
DEPENDENCE UPON PERSONNEL. The Company is dependent upon the services
of Daniel A. Stauber and Phillip W. Kubec. Mr. Stauber is president of the
Company and its wholly owned subsidiaries, SDS, SDSSC and SDSPA. Mr. Kubec is
the president of the Company's wholly owned subsidiary, Kover. SDS has an
employment agreement with Mr. Stauber which expires in December 2001. Kover has
an employment agreement with Mr. Kubec which expires in June 1999. However, if
either officer's services were to become unavailable to the Company for any
reason, it could have a material adverse effect on the Company's business,
financial results and results of operations. The Company does not carry key man
life insurance.
NO DIVIDENDS. The Company has never paid any cash dividends on its
Common Stock and does not anticipate paying cash in dividends in the foreseeable
future. The payment of dividends by the Company will depend on its earnings,
financial condition and other business and economic factors affecting the
Company at that time as the Board of Directors may consider relevant. The
Company currently intends to retain any earnings to provide for the development
and growth of the Company.
ANTI-TAKEOVER PROVISIONS OF CHARTER AND BYLAWS. Certain provisions of
the Company's charter and by-laws may have the effect of making more difficult
or could delay attempts by others to obtain control
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of the Company, even when these attempts may be beneficial to the interests of
stockholders. For example, the Company's charter and bylaws include advance
notice provisions, provisions that establish a classified Board of Directors,
and provisions that enable the Board of Directors without stockholder approval,
to issue up to 4,000,000 shares of preferred stock in one or more series having
terms fixed by the Board of Directors. In addition, the Delaware General
Corporation Law contains provisions that may have the effect of making it more
difficult or delaying attempts by others to obtain control of the Company.
"PENNY STOCK" RULES. The Company's Common Stock is presently traded on
the NASDAQ Small Cap Market. If the Company fails to maintain such listing for
its Common Stock, and no other exclusion from the definition of "penny stock"
under the Exchange Act is available, then any broker engaging in a transaction
in the Company's securities would be required to provide any customer with a
risk disclosure document and the compensation of the broker/dealer in the
transaction and monthly account statements showing the market values of the
Company's securities held in the customer's accounts. The bid and offer
quotations and compensation information must be provided prior to effecting the
transaction and must be contained on the customer's confirmation. If brokers
become subject to the "penny stock" rules when engaging in transactions in the
Company's securities, they would become less willing to engage in such
transactions, thereby making it more difficult for purchasers to dispose of the
shares of Common Stock.
NOTES RECEIVABLES FROM FRANCHISEES. Notes Receivables from Franchisees
aggregated $2,142,775 and $2,199,126 as at December 31, 1996 and March 31, 1997,
respectively. In connection therewith, $82,441 and $61,853 are reflected as
current liabilities (Deferred Revenue on Franchise Sales) as at December 31,
1996 and March 31, 1997, respectively. Although the Notes Receivables from
Franchisees are personally guaranteed by the individuals who are franchisees,
the ability of the franchisees to pay the notes may be dependent upon the
Company's continued use of the commercial cleaning services provided by the
franchisees.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
by the Selling Stockholders. The Company would receive net proceeds aggregating
$300,001 upon exercise of the Warrants, if all such Warrants, are exercised.
Such proceeds will be added to the Company's working capital and used for
general corporate purposes.
- 8 -
<PAGE> 11
MATERIAL EVENTS
PENDING ACQUISITIONS.
The Company has entered into agreements to purchase a 2.9 acre
industrial site located in Marcus Hook, Pennsylvania, together with related
autoclave equipment used at such site, from K.S. Processing Company, Inc. (the
"KS Facility"). The KS Facility is a medical waste autoclave treatment center
operated by Bonham Management Group, Inc. ("BMG"), a Virginia corporation. The
Company has also entered into an asset purchase agreement with BMG to purchase
certain of the assets of BMG, including the right to manage the KS Facility. BMG
operates the KS Facility under a ten (10) year management agreement. Effective
June 1, 1997, SDSPA has assumed operational control of the KS Facility pending
closing.
The KS Facility consists of two (2) 25 ton per day autoclaves, a 10,000
square foot processing center and a 2,400 square foot administrative building.
The KS Facility receives medical waste from generators located throughout New
York, New Jersey, Connecticut, Pennsylvania, Maryland and Virginia. The KS
Facility currently operates at full capacity. BMG has approximately 50 operating
and management personnel, most of whom will be retained following the Closing.
The KS Facility is currently the only medical waste autoclave facility in
Pennsylvania. The current permitting process for medical waste treatment
facilities in Pennsylvania is a costly, time consuming and politically difficult
procedure. The Company does not anticipate that any additional autoclave or
incinerator permits will be issued by the Pennsylvania Department of
Environmental Protection in the near future. The closing on the KS Facility and
BMG is subject to normal closing contingencies including satisfaction of due
diligence and transfer of all operating permits, and is expected to be
consummated by September 30, 1997.
FIRE DAMAGE.
On June 1, 1997, a fire occurred at the Company's incineration facility
in Hampton, South Carolina. Minor damage occurred in various parts of the
facility, causing the facility to shut down operations. During the shut down
period, the Company continued to accept medical waste, re-package such waste and
route the waste to other facilities for disposal, including the autoclave
facility managed by the Company in Marcus Hook, Pennsylvania. Repairs on the
facility were completed and the facility became fully operational on June 30,
1997.
LEGAL PROCEEDINGS.
Prior to July 1, 1997, the State of South Carolina restricted the
Company's incineration facility's permitted incineration capacity for medical
waste to the greater of (i) 50 tons per day or (ii) on a monthly basis, 1/12 of
the estimated amount of medical waste generated within the State of South
Carolina within one year. The prior owner of the facility instituted litigation
against the State of South Carolina contesting the state's imposition of the
limitation, as well as certain provisions of the South Carolina Infectious Waste
Management Act and the regulations promulgated thereunder. At the trial level,
the Company's prior owner was successful in its challenge to certain fee
requirements under the regulations. However, it was not successful in having the
volume limitation ruled unconstitutional. When the Company purchased the
facility, it continued the litigation on appeal. In June 1997, the Company and
the State of South Carolina entered into a settlement agreement, whereby the
State of South Carolina Legislature approved legislation removing the limitation
on medical waste and the Company dismissed all litigation related to the matter.
Effective July 1, 1997, the incineration is now permitted to incinerated up to
its full 100 ton permitted capacity of medical waste.
- 9 -
<PAGE> 12
SELLING STOCKHOLDERS
An aggregate of up to 1,015,349 shares may be offered by certain
Selling Stockholders. The following table sets forth as of June 30, 1997,
certain information with respect to the Selling Stockholders, based on
information provided by the Selling Stockholders. No Selling Stockholder owns
one percent (1%) or more of the Company's outstanding Common Stock prior to this
Offering, except as indicated below. Beneficial ownership after the Offering
will depend on the number of shares sold by each Selling Stockholder, but
assumes all shares being offered are sold. The Company will not receive any of
the proceeds from the sale of these shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE BENEFICIALLY
OWNED PRIOR TO OFFERING SHARES OWNED AFTER OFFERING
-------------------------- BEING -------------------------
NAME AND ADDRESS OF SELLING STOCKHOLDER SHARES PERCENT OFFERED(2) NUMBER PERCENT(2)
- ------------------------------------------ -------------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Yong S. Ahn -- --
219 Hidden Pond Path
Franklin Lakes, NJ 07417 15,384 * 15,384
Gary l. Alderman
6205 Johnson Road
Indianapolis, IN 46220 7,692 * 7,692 -- --
Robert W. Allen
2400 Bally Bunion Road
Center Valley, PA 18034 15,384 * 15,384 -- --
Kent Au and Connie Au
8 Marie Lane
Edison, NJ 08817 9,230 * 9,230 -- --
Savilla A Bare Trustee, Savilla A Bare Trust
DTD 2/5/75
4021 Hardwoods Drive
West Bloomfield, MI 48323 4,615 * 4,615 -- --
Robert and Mildred Beatty, JTWROS
5053 Janet Lane
Birmingham, AL 35210 9,230 * 9,230 -- --
Russell Bernier
100 Wall Street, 10th Floor
New York, NY 10005 500(3) * 500(3) -- --
Ronald A. Bero
14550 Ridgemoor Drive
Elm Grove, WI 53122 6,153 * 6,153 -- --
Archer L. Bolton, Jr.
33 Spear Street
P.O. Box 806
Rockport, ME 04856 1,538 * 1,538 -- --
Alvin R. Bonnette, Trustee
181 East Dunstable Road
Nashua, NH 03062 7,692 * 7,692 -- --
Michael Brunone
100 Wall Street, 10th Floor
New York, NY 10005 200(4) * 200(4) -- --
Peter M. Burns
100 Wall Street, 10th Floor
New York, NY 10005 9,231(5) * 9,231(5) -- --
Howard A. Caplan
3900 Atlantic Boulevard
Jacksonville, FL 32207 7,692 * 7,692 -- --
Phillip E. Casey
3435 Bayshore Boulevard, #601
Tampa, FL 33629-8874 7,692 * 7,692 -- --
</TABLE>
- 10 -
<PAGE> 13
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE BENEFICIALLY
OWNED PRIOR TO OFFERING SHARES OWNED AFTER OFFERING
-------------------------- BEING -------------------------
NAME AND ADDRESS OF SELLING STOCKHOLDER SHARES PERCENT OFFERED(2) NUMBER PERCENT(2)
- ------------------------------------------ -------------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
William E. Chaney
111 East Main Street
Barnesville, OH 43713 3,076 * 3,076 -- --
Ching-Chang Chang and Debra Chang
202 Tinton Place
East Northport, NY 11731 10,769 * 10,769 -- --
C.C. Partners, Ltd.
Box 832
Shelter Island Heights, NY 11965 23,076 * 23,076 -- --
Joan K. Dass
100 Wall Street, 10th Floor
New York, NY 10005 1,846(6) * 1,846(6) -- --
Joseph D'Amadeo
100 Wall Street, 10th Floor
New York, NY 10005 4,585(7) * 4,585(7) -- --
Guerino De Luca and Frances DeLuca
5953 Belmont Street
Dearbon Heights, MI 48127 9,230 * 9,230 -- --
Dolphin Offshore Partners, L.P.
P.O. Box 438, Tropic Isle Building
Road Town, Tortola
British Virgin Islands 106,923 4.39 106,923 -- --
John W. Egan and Mary Sue Egan
214 South Euclid Avenue
Oak Park, IL 60302 3,076 * 3,076 -- --
Robert D. Farrell and
Patricia M. Farrell, JTWROS
151 Sylvan Avenue
Leonia, NJ 07605 7,692 * 7,692 -- --
Elsa V. Finnel
14422 Industry Avenue, Suite 7-1
I.T.C. Park
Laredo, TX 78041 7,692 * 7,692 -- --
Denis Fortin
26 Brookside Drive
Easton, CT 06612 15,384 * 15,384 -- --
James E. Foy
5 Tall Oaks Court
Mendham, NJ 07945 10,769 * 10,769 -- --
James D. Fralin
P.O. Box 5037
Roanoke, VA 24102 1,538 * 1,538 -- --
B. Ken Garlinghouse
3601 West 29th Street
Topeka, KS 66614 7,692 * 7,692 -- --
James R. Gerchow
64177 Rommel
Sturgis, MI 49091 7,692 * 7,692 -- --
Gerrity Family Co.
P.O. Box 9111
Newton Upper Falls, MA 02164 7,692 * 7,692 -- --
Anthony Girellini
100 Wall Street, 10th Floor
New York, NY 10005 1,000(8) * 1,000(8) -- --
E. D. Grindstaff
3212 West End Avenue, Suite 400
Nashville, TN 37203 4,615 * 4,615 -- --
</TABLE>
- 11 -
<PAGE> 14
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE BENEFICIALLY
OWNED PRIOR TO OFFERING SHARES OWNED AFTER OFFERING
-------------------------- BEING -------------------------
NAME AND ADDRESS OF SELLING STOCKHOLDER SHARES PERCENT OFFERED(2) NUMBER PERCENT(2)
- ------------------------------------------ -------------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Douglas Hailey
100 Wall Street, 10th Floor
New York, NY 10005 9,231(7) * 9,231(9) -- --
J. B. Hargroder and Iris M. Hargroder,
Trustees, The Hargroder Living Trust of
1995
2102 Highway 90 East
P.O. Box 1049
Jennings, LA 70546 3,076 * 3,076 -- --
Richard J. Hess
3114 S.W. Ridge Drive
Portland, OR 97219 3,076 * 3,076 -- --
Frank R. Jazzo
2700 P. Street, N.W.
Washington, D.C. 20007 7,692 * 7,692 -- --
Richard Kraemer
730 Oak Lane
Franklin Lakes, NJ 07417 7,692 * 7,692 -- --
William E. Kuntz
3734 Ligon Road
Ellicott City, MD 21042 6,153 * 6,153 -- --
Lancer Offshore, Inc.
c/o CITCO Fund Services
(Curacao) N.V.
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherlands Antilles 210,000(10) 8.26 210,000(10) -- --
Lancer Partners, L.P.
200 Park Avenue, Suite 3900
New York, NY 10166 210,000(11) 8.26 210,000(11) -- --
Brian Scott Larson and Debra Lynn Larson,
JTWROS
1030 De Gamma Drive
Santa Maria, CA 93454 7,692 * 7,692 -- --
Miles B. Larson and Joan M. Larson,
Trustees, The Larson Family Trust U/A/D
2/2/90
115 44th Street
Newport, CA 92663-2510 15,384 * 15,384 -- --
Michael Lauer
c/o Lancer Partners, L.P.
200 Park Avenue, Suite 3900
New York, NY 10166 210,000(12) 8.26 210,000(12) -- --
Howard A. LeVaux
626 Huron Avenue
Cambridge, MA 02138 7,692 * 7,692 -- --
Harvey Lyon, IRA
158 North Seville Circle
Cedar Park, IL 60302-2462 6,153 * 6,153 -- --
Michael Madie, DVM
277 West End Avenue, #1D
New York, NY 10022 3,076 * 3,076 -- --
Joseph A. Martha
3672 Sanctuary Drive
Bath, OH 44333 3,076 * 3,076 -- --
Robert A. Maurin, III
19354 Highway 190
Hammond, LA 70401 7,692 * 7,692 -- --
</TABLE>
- 12 -
<PAGE> 15
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE BENEFICIALLY
OWNED PRIOR TO OFFERING SHARES OWNED AFTER OFFERING
-------------------------- BEING -------------------------
NAME AND ADDRESS OF SELLING STOCKHOLDER SHARES PERCENT OFFERED(2) NUMBER PERCENT(2)
- ------------------------------------------ -------------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
David F. McCartney
200 Pleaseant Place
Springville, TN 38256 3,076 * 3,076 -- --
William McClatchy
510 Northern Avenue
Mill Valley, CA 94941 7,692 * 7,692 -- --
Donald B. McCulloch and
Jacqueline M. McColloch
820 Oakmere Place
North Muskegon, MI 49445 4,615 * 4,615 -- --
Donald Moline
720 Old Howard Mill Road
Duluth, MN 55807 3,076 * 3,076 -- --
John V. Moynes
P.O. Box 117
Jacksonville, NY 14854 1,538 * 1,538 -- --
Steven Mucciolo
100 Wall Street, 10th Floor
New York, NY 10005 425(13) * 425(13) -- --
Ronald H. Muhlenkamp
511 Buttermilk Lane
Bradford Woods, PA 15015 9,230 * 9,230 -- --
Richard Oh
100 Wall Street, 10th Floor
New York, NY 10005 2,000(14) * 2,000(14) -- --
Vincent Palmieri
100 Wall Street, 10th Floor
New York, NY 10005 2,500(15) * 2,500(15) -- --
Richard P. Nettina
4900 Van Buren Street
Hollywood, FL 33021 3,076 * 3,076 -- --
S.R. Penn, Jr.
c/o Reelcraft Industries, Inc.
P.O. Box 248
Columbia City, IN 46725 15,384 * 15,384 -- --
Lloyd Pillsbury and
Joelyn Pillsbury, JTWROS
413 Briksbury Drive
Franklin, TN 37067 3,076 * 3,076 -- --
Michael E. Recca
100 Wall Street, 10th Floor
New York, NY 10005 14,769(16) * 14,769(16) -- --
Karl Reeves
100 Wall Street, 10th Floor
New York, NY 10005 425(17) * 425(17) -- --
Jeffrey L. Sadar and Barbara A. Sadar
6640 Ridgebury Boulevard
Mayfield Heights, OH 44124 6,153 * 6,153 -- --
Peter and Irene Santulli, JTWROS
9 Barnes Lane
Garden City, NY 11530 6,365(18) * 5,365(18) -- --
Christopher C. Schreiber
175 East 74th Street, Apt. 7A
New York, NY 10021 4,425(19) * 4,426(19) -- --
Robert Schroeder
100 Wall Street, 10th Floor
New York, NY 10005 5,000(20) * 5,000(20) -- --
</TABLE>
- 13 -
<PAGE> 16
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE BENEFICIALLY
OWNED PRIOR TO OFFERING SHARES OWNED AFTER OFFERING
-------------------------- BEING -------------------------
NAME AND ADDRESS OF SELLING STOCKHOLDER SHARES PERCENT OFFERED(2) NUMBER PERCENT(2)
- ------------------------------------------ -------------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Benjamin D. Schulman
7529 Gibraltor
Carlsbad, CA 92009 3,076 * 3,076 -- --
Deana M. Scuola
100 Wall Street, 10th Floor
New York, NY 10005 1,846(21) * 1,846(21) -- --
Shaw Family Living Trust
3701 International Drive, #746
Silver Springs, MD 20906 7,692 * 7,692 -- --
Valdemar A. Skov
1241 Old Rte 1
Waldoboro, ME 04572 3,076 * 3,076 -- --
Dale W. Sobek
6000 S Corporation
42080 Osgood Road
Fremont, CA 94539 7,692 * 7,692 -- --
Sharon Stauber
4080 North 41st Street
Hollywood, FL 33021 7,692 * 7,692 -- --
Michael Stern
100 Wall Street, 10th Floor
New York, NY 10005 100(22) * 100(22) -- --
Garland S. Sydnor, Jr.
8 Tapoan Road
Richmond, VA 23226 15,384 * 15,384 -- --
Eugene Szczepanski
35 Highland Avenue
Worthington, OH 43085 7,692 * 7,692 -- --
Michael N. Taglich
100 Wall Street, 10th Floor
New York, NY 10005 29,489(23) 1.25 29,489(23) -- --
Robert F. Taglich
100 Wall Street, 10th Floor
New York, NY 10005
SS# ###-##-#### 29,489(24) 1.25 29,489(24) -- --
Tha An Thai
100 Wall Street, 10th Floor
New York, NY 10005 1,400(25) * 1,400(25) -- --
Morton L. Topfer
1415 Wooldridge Drive
Austin, TX 78703 15,384 * 15,384 -- --
Thomas Wagner
100 Wall Street, 10th Floor
New York, NY 10005 786(26) * 786(26) -- --
William C. Weick and Elizabeth A. Weick
610 West Idaho Street
Boise, ID 83702 4,615 * 4,615 -- --
Xiaoman Wu
9305 Fifth Avenue
Forest Hills, NY 11375 7,692 * 7,692 -- --
Wynnefield Partners Small Cap Value, L.P.
One Pennsylvania Plaza, Suite 4720
New York, NY 10119 46,153 1.94 46,153 -- --
</TABLE>
- ----------------------------------------
* Less than one percent.
- 14 -
<PAGE> 17
(1) Except as otherwise indicated, the shares of Common Stock being offered
hereby are issuable upon conversion of Debentures at the conversion
rate of $3.25 of principal for each share of Common Stock and are
included in the beneficial ownership tables.
(2) Based upon 2,330,912 shares of Common Stock outstanding. Each
beneficial owner's percentage is determined by assuming that Debentures
and warrants that are held by such person (but not those held by any
other person) have been converted or exercised, respectively.
(3) Includes 500 shares of Common Stock issuable upon exercise of Warrants.
(4) Includes 200 shares of Common Stock issuable upon exercise of Warrants.
(5) Includes 9,231 shares of Common Stock issuable upon exercise of
Warrants.
(6) Includes 1,846 shares of Common Stock issuable upon exercise of
Warrants.
(7) Includes 4,585 shares of Common Stock issuable upon exercise of
Warrants.
(8) Includes 1,000 shares of Common Stock issuable upon exercise of
Warrants.
(9) Includes 9,231 shares of Common Stock issuable upon exercise of
Warrants.
(10) Such shares include (i) 150,000 shares issuable upon conversion of
Debentures; (ii) 105,000 shares issuable upon conversion of Debentures
owned by Lancer Partners, L.P; and (iii) 55,000 shares issuable upon
conversion of Debentures owned by Michael Lauer, a principal of Lancer
Offshore, Inc and Lancer Partners, L.P.
(11) Such shares include (i) 105,000 shares issuable upon conversion of
Debentures; (ii) 150,000 shares issuable upon conversion of Debentures
owned by Lancer Offshore, Inc.; and (iii) 55,000 shares issuable upon
conversion of Debentures owned by Michael Lauer.
(12) Such shares include (i) 55,000 shares issuable upon conversion of
Debentures; (ii) 150,000 shares issuable upon conversion of Debentures
owned by Lancer Offshore, Inc.; and (iii) 105,000 shares issuable upon
conversion of Debentures owned by Lancer Partners, LP.
(13) Includes 425 shares of Common Stock issuable upon exercise of Warrants.
(14) Includes 2,000 shares of Common Stock issuable upon exercise of
Warrants.
(15) Includes 2,500 shares of Common Stock issuable upon exercise of
Warrants.
(16) Includes 14,769 shares of Common Stock issuable upon exercise of
Warrants.
(17) Includes 425 shares of Common Stock issuable upon exercise of Warrants.
(18) Includes 750 shares of Common Stock issuable upon exercise of Warrants
and 4,615 shares of Common Stock issuable upon conversion of
Debentures.
(19) Includes 1,350 shares of Common Stock issuable upon exercise of
Warrants and 3,076 shares of Common Stock issuable upon conversion of
Debentures.
(20) Includes 5,000 shares of Common Stock issuable upon exercise of
Warrants.
(21) Includes 1,846 shares of Common Stock issuable upon exercise of
Warrants.
(22) Includes 100 shares of Common Stock issuable upon exercise of Warrants.
(23) Includes 17,182 shares of Common Stock issuable upon exercise of
Warrants and 12,307 shares of Common Stock issuable upon conversion of
Debentures.
(24) Includes 17,182 shares of Common Stock issuable upon exercise of
Warrants and 12,307 shares of Common Stock issuable upon conversion of
Debentures.
(25) Includes 1,400 shares of Common Stock issuable upon exercise of
Warrants.
(26) Includes 786 shares of Common Stock issuable upon exercise of Warrants.
The number of shares of Common Stock which may actually be sold by the
Selling Stockholders will be determined from time to time by them and will
depend upon a number of factors, including the price of the shares from time to
time. Because the Selling Stockholders may offer all or none of the shares that
they hold and because the offering contemplated by this Prospectus is not being
underwritten, no estimate can be given as to the number of shares that will be
held by the Selling Stockholders.
- 15 -
<PAGE> 18
There are no material relationships between any of the Selling
Stockholders and the Company or any of its predecessors or affiliates, nor have
any such material relationships existed within the past three (3) years, except
as indicated in the footnotes above.
DESCRIPTION OF SECURITIES
The Company has 26,000,000 shares of authorized Common Stock, par value
$0.001 per share, of which 2,330,912 shares of Common Stock are issued and
outstanding, and 4,000,000 shares of preferred stock, none of which are
outstanding. Assuming the conversion of all Debentures and exercise of the
Warrants, the Company would have 3,346,261shares of Common Stock outstanding.
COMMON STOCK. Each share of Common Stock is entitled to one vote either
in person or by proxy in all matters that can be voted upon by the holders
thereof at any and all meetings of the stockholders. The holders of Common Stock
(i) have equal ratable rights to dividends from funds legally available
therefore when, as and if declared by the Board of Directors of the Company;
(ii) are entitled to share ratably in all of the assets of the Company available
for distribution to holders of Common Stock upon liquidation, dissolution or
winding up of the affairs of the Company, after the satisfaction of all
liabilities of the Company any liquidation preference granted to the holders of
any class of Preferred Stock then outstanding, if any; (iii) do not have any
preemptive, subscriptive or conversion rights; and (iv) do not have any
redemption or sinking fund provisions applicable thereto.
The Certificate of Incorporation does not provide for cumulative
voting. Therefore, stockholders do not have the right to aggregate their votes
for the election of directors and, accordingly, stockholders holding more than
50% of the shares of Common Stock outstanding can elect all of the directors.
PREFERRED STOCK. The Company is authorized to issue 4,000,000 shares of
preferred stock, without designation, par value $.01 per share. The certificate
of incorporation grants the board of directors the right to cause the Company to
issue, from time to time, all or part of the preferred shares remaining
undesignated in one or more series, and to fix the number of shares of preferred
stock and determine or alter for each series, the voting powers, full, limited,
or none, and other designations, preferences, or relative, participating,
optional or other special rights and such qualifications, limitations, or
restrictions thereof. As of the date of this Prospectus, there were no preferred
stock outstanding.
DEBENTURES
GENERAL. In February 1997, the Company completed a private placement of
$3,000,000 in principal of Debentures. The following summary of certain
provisions of the Debentures do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all of the provisions of the
Debentures.
PAYMENT OF PRINCIPAL AND INTEREST. The Debentures mature on July 1,
2000. The principal balance is payable on the maturity date, unless sooner
redeemed by the Company as hereinafter described or converted by the holders
thereof prior to the maturity date. The Debentures bear interest at the rate of
ten (10%) percent per annum payable semi-annually on July 1 and January 1 of
each year, commencing on July 1, 1997, to holders of record as of June 15 and
December 15, respectively. Principal, premium, if any, and interest on, the
Debentures are payable to the registered holder of the Debentures by check
mailed to the addresses of the holders thereto as such appear on the register
for the Debentures.
RANKING. The Debentures are subordinated unsecured obligations of the
Company and rank pari passu in right of payment with all existing and future
unsecured indebtedness of the Company. The Debentures are subordinated to all
secured indebtedness of the Company to the extent of the assets securing such
indebtedness, including indebtedness of: (i) up to $5 million pursuant to bank
lending, of which the Company has a $2 million line of credit, secured by a
first lien on all of the Company's assets, inventory and accounts receivable,
other than the incineration facility; (ii) $1.95 million in favor of Chambers
Medical Technologies of South Carolina, Inc., secured by a first lien on all of
the assets of the incineration facility; and (iii) additional secured
indebtedness the Company may incur as the result of acquisitions or leases of
autoclave units .
- 16 -
<PAGE> 19
OPTIONAL REDEMPTION. The Company can redeem all of the outstanding
Debentures at the Redemption Price at any time after December 31, 1997, provided
that on the date notice of redemption is given and on the Redemption Date, the
following conditions are satisfied: (i) the Conversion Shares have been
registered pursuant to the Act and such registration is then currently
effective; and (ii) the average of the closing bid price of the Common Stock as
listed on the NASDAQ, NYSE; ASE or wherever the Company's Common Stock then
trades, is at least 200% of the Conversion Price for twenty (20) trading days
within a thirty (30) consecutive trading day period. Any Notice to redeem must
be given to all holders no less than thirty (30) days nor more than forty-five
(45) days prior to the Redemption Date. The Redemption Price shall equal the sum
of: (a) the face amount of the Debentures; (b) all accrued and unpaid interest
through and including the Redemption Date; and (c) a redemption fee equal to (I)
10% of the face amount of the Debentures if redeemed prior to January 1, 1999;
or (II) 5% of the face amount of the Debentures, if redeemed after January 1,
1999. The holders may only convert principal of the Debentures into Common
Stock. Any accrued interest will be paid in cash through the date of conversion.
CONVERSION. The Debentures are convertible, at each holder's option,
into shares of the Company's Common Stock at any time prior to maturity or the
date fixed for redemption, at a conversion price of $3.25 per share (based on
the outstanding principal amount of the Debentures). The conversion price is
subject to adjustment as described below. The holders may only convert principal
of the Debentures into Common Stock. Upon receipt of the notice of conversion,
the holder shall be entitled to receive accrued and unpaid interest from the
previous interest payment date through the date of conversion.
FORCED CONVERSION. The entire principal amount of the Debentures are
convertible at the option of the Company, into shares of Common Stock at the
Conversion Price, provided that on the day that notice is given and on the
Forced Conversion Date, the following conditions are satisfied: (i) the
Conversion Shares have been registered pursuant to the Act and such registration
is then currently effective; and (ii) the average of the closing bid price of
the Common Stock as listed on NASDAQ, NYSE; ASE or wherever the Company's Common
Stock then trades, is at least 200% of the Conversion Price for twenty (20)
trading days within a thirty (30) consecutive trading day period. Any notice of
forced conversion must be given to all holders no less than thirty (30) days nor
more than forty-five (45) days prior to the Forced Conversion Date. On the
Forced Conversion Date, the Company shall pay to all registered holders of
Debentures, all accrued and unpaid interest on the Debentures through and
including the Forced Conversion Date.
ANTI-DILUTION PROVISIONS. For so long as the Debentures are
outstanding, the holder thereof have anti-dilution protection and adjustment
rights covering the underlying shares of Common Stock. An equitable adjustment
to the number of shares of Common Stock issuable upon conversion of the
Debentures will be made with respect to: (i) any subdivision or reverse split of
the outstanding shares of Common Stock of the Company into a greater or lesser
number of shares of Common Stock; (ii) any declaration of a dividend or other
distribution by the Company upon its Common Stock payable in shares of Common
Stock of the Company; (iii) any capital reorganization or reclassification of
the capital stock of the Company; (iv) any consolidation or merger of the
Company with another entity or (v) the issuance, sale or distribution of shares
of Common Stock by the Company for a consideration per share in cash or property
less than the lesser of (b) the fair market value of the Common Stock on the
date of such issuance, sale or distribution, or (b) the Conversion Price.
EVENTS OF DEFAULT. The Debentures define an Event of Default, among
other things, as : (i) a failure to pay interest on the Debentures for ten (10)
days after the date due; (ii) a failure to pay principal on the Debentures at
maturity; (iii) a failure to comply with any material covenants or agreements
contained in the Debenture or the Debenture Purchase Agreement, if a party
thereto, for a period of thirty (30) days after notice; and (iv) a default by
the Company or any of its subsidiaries under any bond, debenture, note or other
evidence of indebtedness for money borrowed in excess of $500,000 in the
aggregate. The Debenture further provides that an Event of Default with respect
to the Debentures may only be declared by a registered holder or holders of
Debentures owning fifteen (15%) or more of the outstanding principal amount of
Debentures.
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<PAGE> 20
MODIFICATIONS AND WAIVER. Modifications to the Debentures may be made
by the Company and the holders thereof, but only with the consent of the holders
of at least two-thirds (2/3) in the aggregate principal amount of the
outstanding Debentures. Any modification to the principal amount of the
Debentures, the maturity date, the interest rate or the redemption terms would
require the approval of the holders of at least 80% of the outstanding principal
amount of the Debentures. Upon such modification and consent, such modification
shall be binding on all outstanding Debentures, regardless of whether any
individual holder may have consented thereto.
CERTAIN LIMITATIONS IMPOSED ON THE COMPANY BY THE DEBENTURES. The
Debentures provide for certain limitations regarding the Company including,
without limitation, the following: (i) the Company cannot declare or pay any
cash dividends on its Common Stock; (ii) the Company is limited to the grant of
stock options to purchase no more than 500,000 shares of Common Stock; (iii) the
Company and its subsidiaries cannot incur indebtedness senior in ranking to the
Debentures in excess of $5,000,000 other than indebtedness related to
acquisitions or the lease of autoclaves to customers; (iv) the Company may not
make any additional loans to officers, directors or 5% Holder in excess of
$250,000 in the aggregate; and (v) the Company cannot sell its Common Stock to
an officer, director or a 5% Holder other than (a) pursuant to a Stock Option;
(b) for cash at a purchase price at least equal to the closing bid price of the
Common Stock on the day prior to issuance; or (c) for services rendered.
SINKING FUND. There is no mandatory sinking fund payments required on
the Debentures.
WARRANTS. In connection with the private placement of the Debentures,
the Company issued Warrants to purchase 92,308 shares of Common Stock
exercisable until February 12, 2001 at an exercise price of $3.25 per share to
the placement agent of the private placement conducted in February 1997. The
placement agent distributed the Warrants to various employees and agents of the
placement agent.
The Company is not required to issue fractional shares upon exercise of
any Warrants, but may make cash payments thereof, based on the then market price
of the Common Stock. No holder of any Warrants will be entitled to vote, receive
dividends, or be deemed the holder of the Common Stock until such time as the
Warrants shall have been duly exercised and payment of the purchase price shall
have been made. Shares of Common Stock issued upon the exercise of the warrants
and on payment of the purchase price will be legally issued, fully paid and
non-assessable.
The Warrants are subject to equitable adjustment upon certain events,
which include (i) the issuance of Common Stock as a dividend on the outstanding
Common Stock; (ii) subdivisions, combinations, and reclas sifications of Common
Stock; (iii) mergers, consolidations and similar events; (iv) the issuance of
Common Stock for a price less than the lesser of the market price of the Common
Stock or the exercise price of the Warrants. The holders of the Warrants has
certain demand and piggy-back registration rights as described below.
REGISTRATION RIGHTS. The Company agreed to register the shares of
Common Stock issued or issuable upon conversion of the Debentures, as well as
the shares of Common Stock issuable upon the exercise of the Warrants pursuant
to the Securities Act of 1933, as amended within six months following the
closing of the Debenture offering. If such Registration is not declared
effective by July 27, 1997, the conversion price of the Debentures shall be
reduced (and concomitantly the number of shares of Common Stock issuable upon
conversion of the Debentures shall increase) by five (5%) percent for each
month, or any part thereof, beyond the six (6) month period until the initial
registration statement is declared effective. Holders of Debentures also have
certain "piggy-back" registration rights regarding the underlying Common Stock,
subject to certain restrictions. The company agreed to pay all costs of
registration.
CERTAIN ANTI-TAKEOVER PROVISION
Certain provisions of the Company's charter and by-laws, as well as
certain provisions of Delaware law, could have the effect of deterring
takeovers. The Board of Directors believes that the provisions of the Company's
charter and by-laws described below are prudent and in the best interests of the
Company and its stockholders. Although these provisions may discourage a future
takeover attempt in which stockholders might
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<PAGE> 21
receive a premium for their shares over the then current market price and may
make removal of incumbent management more difficult, the Board of Directors
believes that the benefits of these provisions outweigh their possible
disadvantages. Management is not aware of any current effort to effect a change
in control of the Company.
Section 203 of the Delaware General Corporation Law ("Section 203")
restricts certain transactions between a corporation organized under Delaware
law (or its majority-owned subsidiaries) and any person holding fifteen percent
(15%) or more of the corporation's outstanding voting stock, together with the
affiliates or associates of such person (an "Interested Stockholder"). Section
203 prevents, for a period of three (3) years following the date that a person
becomes an Interested Stockholder, the following types of transaction ("Business
Combinations") between the corporation and the Interested Stockholder (unless
certain conditions, described below, are met): (a) mergers or consolidations,
(b) sales, leases, exchanges or other transfers of ten percent (10%) or more of
the aggregate assets of the corporation, (c) issuance or transfers by the
corporation of any stock of the corporation which would have the effect of
increasing the Interested Stockholder's proportionate share of the stock of any
class or series of the corporation, (d) any other transaction which has the
effect of increasing the proportionate share of the stock of any class or series
of the corporation which is owned by the Interested Stockholder, and (e) receipt
by the Interested Stockholder of the benefit (except proportionately as a
stockholder) of loans, advances, guarantees, pledges or other financial benefits
provided by the corporation.
The three-year ban does not apply if either the proposed transaction or
the transaction by which the Interested Stockholder became an Interested
Stockholder is approved by the Board of Directors of the corporation prior to
the date such stockholder became an Interested Stockholder. Additionally, an
Interested Stockholder may avoid the statutory restriction if, upon the
consummation of the transaction whereby such stockholder became an Interested
Stockholder, the stockholder owns at least 855 of the outstanding voting stock
of the corporation without regard to those shares owned by the corporation's
officers and directors or certain employee stock plans. In addition, any
transaction is exempt from the statutory ban if it is proposed at a time when
the corporation has proposed, and a majority of certain continuing directors of
the corporation have approved, a transaction with a party who is not an
Interested Stockholder of the corporation (or who becomes such with board
approval) if the proposed transaction involves (a) certain merger or
consolidations involving the corporation, (b) a sale or other transfer of over
fifty percent (50%) of the aggregate assets of the corporation, or (c) a tender
or exchange offer for fifty percent (50%) or more of the outstanding voting
stock of the corporation.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its charter or by-laws by action of its stockholders to
exempt itself from coverage, provided that such by-law or charter amendment
shall not become effective until twelve (12) months after the date it is
adopted. The Company has not adopted such a charter or by-law amendment.
Included in the rights of any series of preferred stock which may be
set by the Board of Directors may be voting rights, if any. It is possible that
the Board of Directors could authorized and issue to persons, including existing
management, a series of preferred stock with class voting rights which might
have the effect of discouraging a takeover attempt or a tender offer. Any such
issuance would have to be made for a valid business purpose and for adequate
consideration from the recipient of the preferred stock.
The Company's by-laws contain provisions relating to notice of
stockholder meetings which would prohibit a stockholder from nominating a person
for the Board of Directors or proposing certain actions relating to the
Company's business without advance written notice to the Company. Such written
notice must be a minimum of thirty (30) days prior to a stockholders' meeting
and must contain specific information about the nominee and the stockholder who
makes such nomination or proposal.
DIVIDEND POLICY. The Company has never paid any cash dividends on its
Common Stock and does not anticipate paying cash dividends in the foreseeable
future. The payment of dividends by the Company will depend on its earnings,
financial condition, and other business and economic factors affecting the
Company at that time as the Board of Directors may consider relevant. The
Company currently intends to retain any earnings to provide for the development
and growth of the Company.
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<PAGE> 22
TRANSFER AND WARRANT AGENT. The Transfer and Warrant Agent for the
Common Stock and Class A Warrants is Continental Stock Transfer and Trust
Company, 2 Broadway, New York, New York.
INDEMNIFICATION
DELAWARE GENERAL CORPORATION LAW. Section 145 of the Delaware General
Corporation Law ("GCL") empowers a corporation to indemnify a director, officer,
employee, or agent who is, or is threatened to be, made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative by reason of the fact that he is or
was a director, officer, employee, or agent of the corporation or is, or was,
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise (including an employee benefit plan), against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlements actually and
reasonably incurred by him in connection with such action, suit, or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
No indemnification may be made in respect to any claim, issue, or
matter brought by or in the right of the corporation as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine that, despite the adjudication of liability
but in view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
The indemnification provided in Section 145 is not exclusive of any
other right of indemnification. A corporation is empowered to purchase and
maintain insurance on behalf of such persons against any liability asserted
against them in such capacities, whether or not the corporation would have the
right to indemnification against such liabilities under Section 145.
Subsection (b)(7) of Section 102 of the GCL empowers a corporation to
eliminate or limit the personal liability of a director to such corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director
other than (i) for any breach of a director's duty of loyalty to the corporation
or its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law;(iii) under Section
174 of the GCL (which provides that under certain circumstances directors shall
be jointly and severally liable for willful or negligent violations of
provisions regarding the unlawful payment of dividends or unlawful stock
repurchases or redemptions; or (iv) for any transaction from which the director
derived an improper personal benefit.
CHARTER. Article NINTH of the Company's Charter has adopted the
provisions of GCL Section 102(b)(7). Article TENTH of the Company's Charter
provides that the Company shall indemnify all persons entitled to be indemnified
by GCL 145, including officers and directors, to the fullest extent permitted by
such statute.
SECURITIES AND EXCHANGE COMMISSION POLICY. Insofar as indemnification
for liabilities arising under the Securities Act of 1933, as amended, may be
permitted to directors, officers and controlling persons of the Company, the
Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE> 23
PLAN OF DISTRIBUTION
This Prospectus, as appropriately amended or supplemented from time to
time may be used from time to time by the Selling Stockholders, or their
transferees, to offer and sell the Common Stock in transactions in which the
Selling Stockholders and any broker-dealer through whom any of the shares of
Common Stock are sold may be deemed to be underwriters within the meaning of the
Securities Act. The Company will receive none of the proceeds from any such
sales. The Company would receive an aggregate of $300,001 in gross proceeds if
all Warrants are exercised. There presently are no arrangements or
understandings, formal or informal, pertaining to the distribution of the Common
Stock.
The Company anticipates that resales of the Common Stock by the Selling
Stockholders will be effected from time to time on the open market in ordinary
brokerage transactions on the NASDAQ-Small Cap Market ("NASDAQ"), on which the
Common Stock is included for quotation, in the over-the-counter market, or in
private transactions (which may involve block transactions). The Common Stock
will be offered for sale at market prices prevailing at the time of sale or at
negotiated prices and on terms to be determined when the agreement to sell is
made or at the time of sale, as the case may be. The Common Stock may be offered
directly, through agents designated from time to time, or through brokers or
dealers. A member firm of the NASD may be engaged to act as a Selling
Stockholder's agent in the sale of the Common Stock by a Selling Stockholder
and/or may acquire Common Stock as principal. Member firms participating in such
transactions as agent may receive commissions from Selling Stockholders (and, if
they act as agent for the purchaser of such Common Stock, from such purchaser),
such commissions computed in appropriate cases in accordance with the applicable
rates of the NASDAQ, which commissions may be at negotiated rates where
permissible. Sales of the Common Stock by the member firm may be made on the
NASDAQ from time to time at prices related to prices then prevailing. Any such
sales may be by block trade.
Participating broker-dealers may agree with Selling Stockholders to
sell a specified number of shares at a stipulated price per share and, to the
extent such broker dealer is unable to do so acting as agent for the Selling
Stockholder to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer's commitment to the Selling Stockholder. In addition
or alternatively, Common Stock may be sold by the Selling Stockholders, and/or
by or through the broker-dealers in special offerings, exchange distributions,
or secondary distributions pursuant to and in compliance with the governing
rules of the NASDAQ, and in connection therewith commissions in excess of the
customary commission prescribed by the rules of such securities exchange may be
paid to participating broker-dealers, or, in the case of certain secondary
distributions, a discount or concession from the offering price may be allowed
to participating broker-dealers in excess of such customary commission.
Broker-dealers who acquire Common Stock as principal may thereafter resell such
Common Stock from time to time in transactions (which may involve cross and
block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described in the preceding
two sentences) on the NASDAQ, in negotiated transactions, or otherwise, at
market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive commissions from the
purchasers of such shares. Upon the Company's being notified by a Selling
Stockholder that a particular offer to sell the Common Stock is made, a material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution, or secondary
distribution, or any block trade has taken place, to the extent required, a
supplement to this Prospectus will be delivered together with this Prospectus
and filed pursuant to Rule 424(b) under the Securities Act setting forth with
respect to such offer or trade the terms of the offer or trade; including (i)
the number of Common Stock involved, (ii) the price at which the Common Stock
were sold, (iii) any participating brokers, dealers, agents or member firm
involved, (iv) any discounts, commissions and other items paid as compensation
from, and the resulting net proceeds to, the Selling Stockholder, (v) that such
broker-dealers did not conduct any investigation to verify the information set
out in this Prospectus, and (vi) other facts material to the transaction.
Shares of Common Stock may be sold directly by the Selling Stockholders
or through agents designated by the Selling Stockholders from time to time.
Unless otherwise indicated in the supplement to this Prospectus, any such agent
will be acting on a best efforts basis for the period of its appointment.
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<PAGE> 24
The Selling Stockholders and any brokers, dealers, agents, member firm
or others that participate with the Selling Stockholders in the distribution of
the Common Stock may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions or fees received by such persons and any
profit on the resale of the Common Stock purchased by such person may be deemed
to be underwriting commissions or discounts under the Securities Act.
The Selling Stockholders will be subject to the applicable provisions
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, including without limitation Regulation M, which
provisions may limit the timing of purchases and sales of any of the Common
Stock by the Selling Stockholders. All of the foregoing may affect the
marketability of the Common Stock.
The Company will pay substantially all the expenses incident to this
offering of the Common Stock by the Selling Stockholder to the public other than
brokerage fees, commissions and discounts of underwriters, dealers or agents.
In order to comply with certain states' securities laws, if applicable,
the Common Stock will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain states the Common Stock may
not be sold unless the Common Stock has been registered or qualified for sale in
such state or an exemption from registration or qualification is available and
the Company or Selling Stockholders comply with the applicable requirements.
LEGAL MATTERS
The validity of the Common Stock offered by this Prospectus has been
passed upon by Wallace, Bauman, Fodiman & Shannon, P.A., Coral Gables, Florida.
Milton J. Wallace a shareholder of the law firm, beneficially owns 412,125
shares of the Company's Common Stock. Other shareholders of such law firm
beneficially own an aggregate of 22,816 shares of Common Stock.
EXPERTS
The consolidated financial statements included in the Company's Annual
Report on Form 10-KSB for the Year ended December 31, 1996 incorporated by
reference in this Prospectus have been audited by BDO Seidman, LLP, independent
certified public accountants to the extent and for the periods set forth in
their report incorporated herein by reference, and are incorporated herein in
reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
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<PAGE> 25
- -------------------------------------------------------------------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained or incorporated by
reference in this Prospectus, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any sale made hereunder
shall under any circumstances create any implication that there has been no
change in the affairs of the Company since the date hereof. This Prospectus does
not constitute an offer or solicitation by anyone in any jurisdiction in which
the person making such offer or solicitation is not qualified to do so or to
anyone whom it is unlawful to make such offer or solicitation.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
AVAILABLE INFORMATION.........................................................2
DOCUMENTS INCORPORATED BY REFERENCE...........................................3
THE COMPANY...................................................................4
RISK FACTORS..................................................................5
USE OF PROCEEDS...............................................................8
MATERIAL EVENTS...............................................................9
SELLING STOCKHOLDERS.........................................................10
DESCRIPTION OF SECURITIES....................................................16
INDEMNIFICATION..............................................................20
PLAN OF DISTRIBUTION.........................................................21
LEGAL MATTERS................................................................22
EXPERTS......................................................................22
</TABLE>
MED/WASTE, INC.
--------------------------------
PROSPECTUS
---------------------------------
1,015,349
Shares of
COMMON STOCK
($.001 par value)
_________________, 1997
- --------------------------------------------------------------------------------
<PAGE> 26
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION
The following sets forth the estimated expenses and costs in connection
with the issuance and distribution of securities being registered hereby. All
such expenses will be borne by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee..........$1,385.00
Accounting Fees and Expenses................................. 2,000.00*
Legal Fees and Expenses..................................... 10,000.00*
Printing expenses.............................................2,000.00
Miscellaneous................................................ 1,615.00*
----------
Total.......................................................$17,000.00
==========
- ------------
</TABLE>
* Estimated
ITEM 15.INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article TENTH of the Company's Certificate of Incorporation provides
for indemnification of the Company's officers and directors to the fullest
extent permitted by Section 145 of the Delaware General Corporation Law (the
"DGCL"). Section 145 of the DGCL provides for indemnification of directors and
officers from and against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement reasonably incurred by them in connection with
any civil, criminal, administrative or investigative claim or proceeding
(including civil actions brought as derivative actions by or in the right of the
corporation but only to the extent of expenses reasonably incurred in defending
or settling such action) in which they may become involved by reason of being a
director or officer of the corporation if the director or officer acted in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interest of the corporation and, in addition, in criminal actions, if
he had no reasonable cause to believe his conduct to be unlawful. If, in an
action brought by or in the right of the corporation, the director or officer is
adjudged to be liable for negligence or misconduct in the performance of his
duty, he will only be entitled to this indemnity as the court finds to be
proper. Persons who are successful in defense of any claim against them are
entitled to indemnification as of right against expenses actually and reasonably
incurred in connection therewith. In all other cases, indemnification shall be
made (unless otherwise ordered by a court) only if the board of directors,
acting by a majority vote of a quorum of disinterested directors, independent
legal counsel or holders of a majority of the shares entitled to vote,
determines that the applicable standard of conduct has been met. Section 145
also provides this indemnity for directors and officers of a corporation who, at
the request of the corporation, act as directors, officers, employees or agents
of other corporations, partnerships or other enterprises.
Article NINTH of the Company's Certificate of Incorporation limits the
liability of the Company's directors to the Company or its stockholders to the
fullest extent permitted by the DGCL. Section 102(b)(7) of the DGCL provides
that personal monetary liabilities of a director for breaches of his fiduciary
duties as a director may not be eliminated with regard to any breach of the duty
of loyalty, failing to act in good faith, intentional misconduct or knowing
violation of law, payment of an unlawful dividend, approval of an illegal stock
repurchase, or obtainment of an improper personal benefit. Such a provision has
no affect on the availability of equitable remedies, such as an injunction or
recision, for breach of fiduciary duty.
The employment agreements of certain officers contain a provision
requiring indemnification of such officer to the fullest extent permitted by
law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted for directors, officers and controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for
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<PAGE> 27
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT NO. DESCRIPTION
4.1 Form of 10% Convertible Redeemable Debentures
4.2 Form of Warrant
5 Opinion of Wallace, Bauman, Fodiman & Shannon, P.A., regarding
the legality of the Common Stock.
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Wallace, Bauman, Fodiman & Shannon, P.A.(included in
Exhibit 5 above).
24 Power of Attorney (included on signature page of registration
statement).
ITEM 17. UNDERTAKINGS.
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment
to this registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Act;
(ii) To reflect in the prospectus any facts
or events arising after the effective
date of the registration statement (or
the most recent post-effective
amendment thereof) which, individually
or in the aggregate, represent a
fundamental change in the information
set forth in the registration
statement; and
(iii) To include any material information
with respect to the plan of
distribution not previously disclosed
in the registration statement or any
material change to such information in
the registration statement;
Provided, however, that Paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply
if the information required to the included in a post-effective amendment by
those Paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities and Exchange Act of
1934, as amended (the "Exchange Act'), that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any
liability under the Act, each such
post-effective amendment shall be deemed to be a
new registration statement relating to the
securities offered therein, and the offering of
such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities
being registered which remain unsold at the
termination of the offering.
II - 2
<PAGE> 28
(b) The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the
Act, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration
statement shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising
under the Act may be permitted to directors, officers
and controlling persons of the registrant has been
advised that in the opinion of the Securities and
Exchange Commission such indemnification is against
public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other
than the payment by the registrant of expenses
incurred or paid by a director, officer or
controlling person of the registrant in the
successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling
person in connection with the securities being
registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the
final adjudication of such issue.
II - 3
<PAGE> 29
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Opa Locka, State of Florida, on the 28 day of
July, 1997.
MED/WASTE, INC., a Delaware corporation
By: /s/ Daniel A. Stauber
---------------------------------------
DANIEL A. STAUBER
President/Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned, do hereby severally constitute and appoint
DANIEL A. STAUBER and MICHAEL D. ELKIN, and each or either of time, our true and
lawful attorneys and agents, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments or post-effective amendments to this Registration Statement
(including post-effective amendments or any abbreviated registration statement,
and any amendments thereto, filed pursuant to Rule 462(b) increasing the amount
of securities for which registration is being sought), and to file the same with
all exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys and agents, and
each of either of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Milton J. Wallace Chairman July 28, 1997
- --------------------------------------------
Milton J. Wallace
/s/ Daniel A. Stauber Director, President and Chief Executive July 28, 1997
- -------------------------------------------- Officer
Daniel A. Stauber
/s/ Michael D. Elkin Vice President and Chief Financial Officer July 28, 1997
- --------------------------------------------
Michael D. Elkin
/s/ Richard R. Green Director July 28, 1997
- --------------------------------------------
Richard R. Green
/s/ Phillip W. Kubec Director July 28, 1997
- --------------------------------------------
Phillip W. Kubec
Director July __, 1997
- --------------------------------------------
Kendrick Meek
/s/ Arthur G. Shapiro, M.D. Director July 28, 1997
- --------------------------------------------
Arthur G. Shapiro, M.D.
/s/ William Dolan, D.D.S. Director July 28, 1997
- --------------------------------------------
William Dolan, D.D.S.
</TABLE>
II - 4
<PAGE> 1
Exhibit 4.1
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") AND
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM.
MED/WASTE, INC.
SAFETY DISPOSAL SYSTEM, INC.
THE KOVER GROUP, INC.
SAFETY DISPOSAL SYSTEM OF
SOUTH CAROLINA, INC.
10% Convertible Redeemable Debenture Due July 1, 2000
No. R- US$
----------- --------
Med/Waste. Inc., a Delaware corporation, Safety Disposal System,
Inc., a Florida corporation, The Kover Group, Inc., an Ohio corporation and
Safety Disposal System of South Carolina, Inc., a South Carolina corporation
(collectively, the "Issuer"), for value received, hereby jointly and severally
promise to pay to _______________________________________________, or registered
assigns, the principal sum of ________________ (US$_________) Dollars on July 1,
2000 (the "Maturity Date"), and to pay interest thereon from January 27, 1997 or
from the most recent Interest Payment Date (as hereinafter defined) to which
interest has been paid, semi-annually in arrears on July I and January I in each
year, commencing July 1, 1997 (each an "Interest Payment Date") at the rate of
ten (10%) percent per annum until the principal hereof is paid, and (to the
extent that the payment of such interest shall be legally enforceable) at the
rate of fifteen (15%) percent per annum on any overdue principal and on any
overdue installment of interest. The interest so payable, and punctually paid,
on any Interest Payment Date will be paid to the person (the "Registered
Holder") in whose name this Security is registered at the close of business on
June 15 or December 15 (whether or not a business day) as the case may be (each
a "Regular Record Date"), next preceding such Interest Payment Date. Interest
shall be computed on the basis of the actual number of days elapsed and the
actual number of days in the relevant period.
If this Security is converted into shares of common stock, $.001
par value per share, of Med/Waste, Inc. (the "Common Stock") pursuant to
Sections 10 or 11 below: (A) on or prior to the initial Regular Record Date,
interest shall be calculated through and including the date of conversion and
shall be paid on such date; or (B) after any (i) Interest Payment Date and on or
prior to the next Regular Record Date, interest whose Stated Maturity is on the
next Interest Payment Date shall be paid on the date of conversion calculated,
however, only through the date of conversion, and such interest shall be paid to
the Person in whose name this Security is registered at the close of business on
the date of conversion; or (ii) Regular Record Date and on or prior to the next
succeeding Interest Payment Date, interest whose Stated Maturity is on such
Interest Payment Date shall be paid on such Interest Payment Date calculated,
however, only through the date of conversion, notwithstanding such conversion,
and such interest shall be paid to the Person in whose name this Security is
registered at the close of business on such Regular Record Date.
Principal of this Security shall be payable at the earliest of
the Maturity Date, Redemption Date or Acceleration Date against surrender hereof
at the principal executive offices of the Issuer in the United States. Payments
of principal and of any interest on this Security shall be made in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of pubic and private debts. Payments of principal of this
Security shall be made against surrender hereof, and payments of interest on
this Security shall be made, in accordance with the foregoing and subject to
applicable laws and regulations, by check mailed on or before the due date for
such payment to the person entitled thereto at such person's address appearing
on the Security Register or to such other address as the Registered Holder may
have previously given notice to the Issuer in writing. Interest
- 1 -
<PAGE> 2
shall accrue and be payable on this Security through the earlier of the Maturity
Date or Redemption Date. If the principal on this Security is accelerated,
interest shall accrue and be payable until the date of payment. The Issuer
covenants that until this Security has been delivered to it for cancellation, or
monies sufficient to pay the principal of and interest in this Security have
been made available for payment and paid, it will at all times maintain at its
principal executive offices in the United States an office or agency for the
payment of the principal of and interest on the Securities as herein provided.
1. This Security is one of a duly authorized issue of securities
of the Issuer (herein called the "Securities"), designated as "10% Convertible
Redeemable Debentures Due July 1 2000", limited in aggregate principal amount to
$3,000,000. The Securities have been offered and sold pursuant to Med/Waste,
Inc.'s Confidential Private Placement Memorandum dated January 7, 1997 (the
"Memorandum").
The obligations of the Issuer hereunder are not secured by any
mortgage, pledge, encumbrance, security agreement or other security device and
only the full faith and credit of the Issuer are pledged for the payment of all
principal and interest due under this Security. The Securities are joint and
several direct, unconditional and general obligations of the Issuer and will
rank equally with all other evidences of unsecured and unsubordinated
indebtedness of the Issuer.
2. The Securities are issuable only in fully registered form and
in minimum authorized denominations of $ 10,000 and any integral multiple of
$1,000 in excess thereof.
3. So long as any Securities remain outstanding, the Issuer shall
maintain at its principal executives offices in the United States an office or
agency where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange, where
Securities may be surrendered for conversion pursuant to Sections 9 or 10
hereof, and where notices and demands to or upon the Issuer in respect of the
Securities may be served. The Issuer will at all times act as its own security
registrar and paying and transfer agent for such purposes and agrees to cause to
be kept at such office a register (the "Security Register") in which, subject to
such reasonable regulations as it may prescribe, the Issuer will provide for the
registration of Securities and registration of transfers of Securities. As of
the date this Security was originally issued, such principal executive offices
of the Issuer were located at 3890 N.W. 132nd Street, Suite K, Opa Locka,
Florida 33054. The Issuer shall not change the location of its principal
executive offices unless Issuer provides all Registered Holders with no less
than thirty (30) days prior written notice.
The transfer of a Security is registrable on the Security
Register upon surrender of such Security at the principal executive offices of
Issuer duly endorsed by, or accompanies by a written instrument of transfer in
form reasonably satisfactory to the Issuer duly executed by, the Registered
Holder thereof, or the Registered Holder's attorney duly authorized in writing,
together with any certifications and re presentations which Issuer may
reasonably require to reflect compliance with all applicable securities laws,
rules and regulations and the due authorization of the transaction. Upon such
surrender of this Security for registration of transfer, the Issuer shall
execute and deliver, in the name of the designated transferee or transferees,
one or more new Securities, dated the date of the execution thereof, of any
authorized denominations and of a like tenor, form and aggregate principal
amount.
At the option of the Registered Holder, upon request confirmed in
writing, Securities may be exchanged for Securities of any authorized
denominations and of a like tenor, form and aggregate principal amount upon
surrender of the Securities to be exchanged at the principal executive offices
of the Issuer. Whenever any Securities are so surrendered for exchange, the
Issuer shall execute and deliver the Securities which the Registered Holder
making the exchange is entitled to receive. Any registration of transfer or
exchange will be effected only upon the Issuer being reasonably satisfied with
the documents of title and identity of the person making the request and subject
to compliance with applicable Federal and state securities laws.
- 2 -
<PAGE> 3
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Issuer, evidencing
the same debt, and entitled to the same benefits, as the Securities surrendered
upon such registration of transfer or exchange. No service or other charges
shall be made for any registration of transfer or exchange, but the Issuer may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Issuer may treat the person in whose name this Security is
registered as the owner hereof for all purposes, whether or not this Security be
overdue, and the Issuer shall not be affected by notice to the contrary.
4. In any case where the due date for the payment of the
principal of or interest on, any Security shall be at any place of payment a day
on which banking institutions are authorized or obligated by law to close, then
payment of principal or interest, as the case may be, need not be made on such
date at such place but may be made on the next succeeding day at such place
which is not a day on which banking institutions are authorized or obligated by
law to close, with the same force and effect as if made on the date for such
payment, and interest shall accrue and be paid for the period through and
including the date of payment.
5. (a) The Issuer shall pay all stamp and other duties and
taxes, if any, which may be imposed by the United States or any political
subdivision thereof, any state or any political subdivision thereof or any
other taxing authority with respect to the issuance of the Securities.
(b) Except as specifically provided in this
Security, the Issuer shall not be required to make any payment with respect to
any tax, assessment or other governmental charge imposed by any government or
any political subdivision or taxing authorities thereof or therein.
6. The Issuer represents and warrants to the Registered Holder,
as follows:
(a) Each Issuer is a corporation duly organized,
existing and in good standing under the laws of its state of incorporation and
has the corporate power to conduct the business which it conducts and proposes
to conduct.
(b) The execution, delivery and performance of the
Securities by the Issuer will have been duly approved by the Board of Directors
of each Issuer and all other actions required to authorize and effect the offer
and sale of the Securities will have been duly taken and approved.
(c) The Securities and the Conversion Shares have
been duly and validly authorized. The Securities and Conversion Shares, when
issued and paid for in accordance with the terms hereof, will be fully paid and
non-assessable and valid and binding obligations of the Issuer (or Med/Waste,
Inc. in the case of the Conversion Shares) enforceable in accordance with their
respective terms.
(d) Med/Waste, Inc. will at all times that there
are Outstanding Securities have authorized and reserved a sufficient number of
shares of Common Stock to provide for conversion of the Securities into shares
of Common Stock.
(e) Issuer has obtained all licenses, permits and
other governmental authorizations necessary to the conduct of its business; such
licenses, permits and other governmental authorizations obtained are in full
force and effect; and Issuer is in all material respects complying therewith.
(f) Issuer knows of no pending or threatened legal
or governmental proceedings to which Issuer is a party which could materially
adversely affect the business, property, financial condition or operations of
the Issuer.
- 3 -
<PAGE> 4
(g) The Issuer is not in violation of or default
under, nor will the execution and delivery of the Securities, the issuance of
the Common Stock upon conversion of the Securities and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions herein or therein contemplated, result in a violation of, or
constitute a default under the certificate of incorporation or by-laws, the
performance or observance of any material obligations, agreement, covenant or
condition contained in any bond, debenture, note or other evidence or
indebtedness or in any material contract, indenture, mortgage, loan agreement,
lease, joint venture or other agreements or instrument to which any Issuer is a
party or by which it or any of its properties may be bound or in violation of
any material order, rule, regulation, writ, injunction or decree of any
government, governmental instrumentality or court, domestic or foreign.
(h) The financial information contained in the
Memorandum presents fairly the financial condition of the Issuer as of the date
and for the periods indicated.
7. Each Issuer hereby jointly and severally covenants and agrees
that for so long as any of the Securities shall remain outstanding:
(a) it will duly and punctually pay the principal
of and any interest on the Securities in accordance with the terms hereof,
(b) it will, on each due date for payment of the
principal of or any interest on any of the Securities, segregate and hold in
trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the principal and any interest so becoming due until such sums shall have been
paid to such Persons;
(c) it will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(charters and statutory) and franchises;
(d) it will cause all material properties used or
useful in the conduct of its business or the business of its subsidiaries to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
reasonable judgment of the Issuer may be necessary so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times; provided, however, that the foregoing shall not prevent the Issuer from
discontinuing the operation or maintenance of any such properties if such
discontinuance is, in the reasonable judgment of the Issuer, desirable in the
conduct of its business or the business of any of its subsidiaries, and not
disadvantageous in any material respect to the holders of Securities; and,
provided, further that the failure to comply herewith shall not be deemed a
breach hereof unless such failure would have a material adverse effect on the
business, financial condition or results of operations of such Issuer and its
subsidiaries, taken as a whole (a "Material Adverse Effect"),
(e) it will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (I) all taxes, assessments
and governmental charges levied or imposed upon the Issuer or any of its
subsidiaries, or upon the income, profits or property of the. Issuer or any
subsidiaries, and (ii) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon the property of the Issuer or
any subsidiaries- provided, however, that the Issuer shall not be required to
pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings; and, provided, further, that the failure
to comply herewith shall not be deemed a breach if it would not have a Material
Adverse Effect;
(f) it shall not without the prior written consent
of the holders of at least sixty-six and two-thirds (662/3%) percent of the
aggregate principal amount of the Securities then Outstanding, materially alter
the nature of its business or that of its subsidiaries in any manner, or dispose
of the
- 4 -
<PAGE> 5
business or assets of the Issuer or its subsidiaries, either as a whole or any
substantial part thereof, which would have a material adverse effect on (i) its
ability to perform its obligations under the Securities, or (ii) the business,
financial conditions or results of operations of the Issuer and its
subsidiaries;
(g) it shall furnish to each Registered Holder of
Securities a copy of all documents it is required to send to its shareholders at
the time the same are sent to shareholders, including, without limitation,
annual reports and proxy statements;
(h) as soon as it becomes aware of the same, it
shall give written notice to each Registered Holder of Securities of any event
or occurrence which by itself or with notice or lapse of time or both would
entitle the holders of the Securities to declare the principal of and any
interest on the Securities immediately due and payable pursuant to Section 14
hereof,
(i) it will promptly obtain and maintain from time
to time all authorizations, permits, approvals, consents, licenses and
exemptions which are required under any applicable law or regulation to enable
it to perform all of its payment, conversion (as to Med/Waste, Inc. only) and
other material obligations under the Securities or which may be required for the
validity or enforceability of the Securities; provided, however, that the
failure to obtain and maintain such authorizations, permits, approvals,
consents, licenses and exemptions as to material obligations other than payment
and conversion shall not constitute a breach of this provision unless such
noncompliance materially adversely affects the Issuer's ability to comply with
its obligations under the Securities;
(j) it will, and it will cause its subsidiaries to,
duly and punctually comply with and observe all statutes now or hereafter in
force and all ordinances, regulation and bylaws thereunder and all requirements
and orders of any government or other public authority; provided, however, that
any non-compliance with any such statute, ordinance, regulation or by-law shall
not constitute a breach of this provision unless such non-compliance materially
adversely affects the Issuer's ability to comply with its obligations under the
Securities;
(k) it shall permit any representative of any
Registered Holder or Holders of at least $500,000 aggregate principal amount of
the Securities to make inspections of, and to report on, the property of, and
business operations being carried out by, the Issuer or any of its subsidiaries
upon reasonable notice and at reasonable times;
(l) it shall maintain and keep in force with
reputable insurers and in adequate amounts, property, casualty, third party
liability, business interruption and all such other insurances as would
prudently be effected and maintained in the case of a company carrying on a
business similar to that of the Issuer and its subsidiaries;
(m) it shall not:
(i) declare or pay any cash
dividends on its Common Stock or purchase, redeem or
otherwise acquire or retire for value any shares of
Common Stock;
(ii) consolidate with or merge into
any other Person, where the Issuer is not the surviving
corporation or convey, transfer, lease or otherwise
dispose of all or substantially all of its assets,
except in compliance with the terms and conditions set
forth in Section 10(d)(iv) below;
(iii) create any new stock option
plans, amend any existing stock option plans to
authorize additional stock options or otherwise issue
options to purchase shares of Common Stock or other
securities convertible into shares of Common
- 5 -
<PAGE> 6
Stock (other than pursuant to existing stock option
plans), except that the Issuer may issue stock options
to employees, whether pursuant to a new stock option
plan, amendment to an existing plan or otherwise, to
purchase up to 500,000 shares of Common Stock;
(iv) issue or otherwise create any
Indebtedness of the Issuer and its subsidiaries senior
in ranking to the Securities in the aggregate to exceed
$5,000,000; provided, however, that the $5,000,000 limit
shall not apply with respect to: (A) Indebtedness
created in connection with the lease of Autoclaves to
customers which are secured by operating leases and the
Autoclaves themselves and by no other assets of the
Issuer, (B) Indebtedness in connection with acquisitions
of assets where the security for such Indebtedness is
limited to the acquired assets, and (C) Indebtedness
existing in entities that are acquired by the Issuer,
provided that such Indebtedness is not extended to any
other assets of the Issuer;
(v) except for loans existing at January 1,
1997 as disclosed in the Memorandum, make any loans
to any officers, directors or shareholders
beneficially owning five (5%) percent or more of the
Common Stock ("5% Holders") or amend any existing loan
to increase the principal balance or extend the payment
terms thereof, provided, however, that the Issuer may,
in the aggregate, make loans of up to $250,000 to
officers, directors and 5% Holders not including loans
outstanding as of the date hereof,
(vi) sell, gift, transfer, assign or
otherwise issue shares of Common Stock to any officer,
director or 5% Holder, unless: (A) issued pursuant to a
stock option existing at January 1, 1997; (B) issued for
cash at a purchase price equal to or greater than the
closing bid price for the Common Stock on the day prior
to issuance; or (C) issued to an officer, director or 5%
Holder as payment for services rendered where the Board
of Directors has reasonably determined the value of such
services and sets forth its determination in a
resolution;
(vi) create,- purchase or otherwise acquire
any new subsidiary, unless such subsidiary shall
contemporaneously with such creation, purchase or
acquisition become a primary obligor on all Outstanding
Securities and send to all Registered Holders written
confirmation thereof,
(vii) incur or otherwise be liable for any
Contingent Obligation, other than with respect to the
other Issuers or in connection with the leasing of
Autoclaves; or
(ix) invest in the securities of any Person
other than the subsidiaries except for short-term
government obligations and money market accounts.
8. (a) As soon as possible after the Final Closing (as
defined in the Memorandum), but in no event later than six (6) months after the
Initial Closing (as defined in the Memorandum) (regardless of whether the
maximum number of Securities shall have been sold), Med/Waste, Inc. shall, at
its sole cost and expense, file a registration statement on the appropriate form
under the 1933 Act with the Securities and Exchange Commission ("SEC") covering
all of the Conversion Shares and such additional shares of Common Stock that may
be issued pursuant to the anti-dilution rights contained in the Securities and
as set forth in this Section 8(a) (collectively, the "Registrable Securities"),
time being of the essence. Med/Waste, Inc. will use its best efforts to have
such registration statement declared effective as soon as possible thereafter,
and shall keep such registration statement current and effective for at least
three (3) years from the effective date thereof or until such earlier date as
all of the Registrable Securities registered pursuant to such registration
statement shall have been sold or
- 6 -
<PAGE> 7
otherwise transferred. Notwithstanding anything to the contrary contained
herein, if such registration statement shall not be declared effective within
six (6) months after the Initial Closing (regardless of whether the maximum
number of Securities shall have been sold), then the Conversion Price shall be
reduced (and concomitantly the number of shares of Common Stock issuable upon
the conversion of the Securities shall increase) by the percentage resulting
from multiplying five (5%) percent by the number of months, or any part thereof,
beyond said six (6) month period until the initial registration statement
described herein covering the Registrable Securities is declared effective.
(b) In the event Med/Waste, Inc. effects any registration under the
1933 Act of any Registrable Securities pursuant to Paragraphs 8(a) above or 8(g)
below, the Issuer shall indemnify, to the extent permitted by law, and hold
harmless any Registered Holder whose Registrable Securities are included in such
registration statement (each, a "Seller"), any underwriter, any officer,
director, employee or agent of any Seller or underwriter, and each other person,
if any, who controls any Seller or underwriter within the meaning of Section 15
of the 1933 Act, against any losses, claims, damages or liabilities, judgment,
fines, penalties, costs and expenses, joint or several, or actions in respect
thereof (collectively, the "Claims"), to which each such indemnified party
becomes subject, under the 1933 Act or otherwise, insofar as such Claims arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement or prospectus or any
amendment or supplement thereto or any document filed under a state securities
or blue sky law (collectively, the "Registration Documents") or insofar as such
Claims arise out of or are based upon the omission or alleged omission to state
in any Registration Document a material fact required to be stated therein or
necessary to make the statements made therein not misleading, and will reimburse
any such indemnified party for any legal or other expenses reasonably incurred
by such indemnified party in investigating or defending any such Claim; provided
that the Issuer shall not be liable in any such case to the extent such Claim is
based upon an untrue statement or alleged untrue statement of a material fact or
omission or alleged omission of a material fact made in any Registration
Document in reliance upon and in conformity with written information furnished
to Med/Waste, Inc. by or on behalf of any indemnified party specifically for use
in the preparation of such Registration Document.
(c) In connection with any registration statement in which any
Seller is participating, each Seller, severally and not jointly, shall
indemnify, to the extent permitted by law, and hold harmless Med//Waste, Inc.,
each of its directors, each of its officers who have signed the registration
statement each other person, if any, who controls Med/Waste, Inc. within the
meaning of Section 15 of the 1933 Act, each other Seller and each underwriter,
any officer, director, employee or agent of any such other Seller or underwriter
and each other person, if any, who controls such other Seller or underwriter
within the meaning of Section 15 of the 1933 Act against any Claims to which
each such indemnified party may become subject under the 1933 Act or otherwise,
insofar as such Claims (or actions in respect thereof) are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Document or insofar as any Claims are based upon the omission or
alleged omission to state in any Registration Document a material fact required
to be stated therein or necessary to make the statements made therein not
misleading, and will reimburse any such indemnified party for any legal or other
expenses reasonably incurred by such indemnified party in investigating or
defending any such claim; provided, however, that such indemnification or
reimbursement shall be payable only if, and to the extent that, any such Claim
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Registration Document in reliance
upon and in conformity with written information furnished to Med/Waste, Inc. by
the Seller specifically for use in the preparation thereof.
(d) Any person entitled to indemnification under Paragraphs 8(b) or
8(c) above shall notify promptly the indemnifying party in writing of the
commencement of any Claim if a claim for indemnification in respect thereof is
to be made against an indemnifying party under this Paragraph 8(d), but the
omission of such notice shall not relieve the indemnifying party from any
liability which it may
- 7 -
<PAGE> 8
have to any indemnified party otherwise than under Paragraph 8(b) or 8(c) above,
except to the extent that such failure shall materially adversely affect any
indemnifying party or its rights hereunder. In case any action is brought
against the indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it chooses, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party; and, after notice from
the indemnifying party to the indemnified party that it so chooses, the
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
(i) if the indemnifying party fails to take reasonable' steps necessary to
defend diligently the Claim within twenty (20) days after receiving notice from
the indemnified party that the indemnified party believes it has failed to do
so; (ii) if the indemnified party who is a defendant in any action or proceeding
which is also brought against the indemnifying party reasonably shall have
concluded that there are legal defenses available to the indemnified party which
are not available to the indemnifying party; or (iii) if representation of both
parties by the same counsel is otherwise inappropriate under applicable
standards of professional conduct, the indemnified party shall have the right to
assume or continue its own defense as set forth above (but with no more than one
firm of counsel for all indemnified parties in each jurisdiction, except to the
extent any indemnified party or parties reasonably shall have concluded that
there are legal defenses available to such party or parties which are not
available to the other indemnified parties or to the extent representation of
all indemnified parties by the same counsel is otherwise inappropriate under
applicable standards of professional conduct) and the indemnifying party shall
be liable for any reasonable expenses therefor; provided, that no indemnifying
party shall be subject to any liability for any settlement of a Claim made
without its consent (which may not be unreasonably withheld, delayed or
conditioned). If the indemnifying party assumes the defense of any Claim
hereunder, such indemnifying party shall not enter into any settlement without
the consent of the indemnified party if such settlement attributes liability to
the indemnified party (which consent may not be unreasonably withheld, delayed
or conditioned).
(e) If for any reason the indemnity provided in Paragraphs 8(b) or
8(c) above is unavailable, or is insufficient to hold harmless, an indemnified
party, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of any Claim in such proportion as
is appropriate to reflect the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other from the
transactions contemplated by this Agreement. If, however, the allocation
provided in the immediately preceding sentence is not permitted by applicable
law, or if the indemnified party failed to give the notice required by Paragraph
8(d) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
indemnifying party and the indemnified party as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable in respect of any Claim shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such Claim. Notwithstanding the foregoing, no
underwriter or controlling person thereof, if any, shall be required to
contribute, in respect of such underwriter's participation as an underwriter in
the offering, any amount in excess of the amount by which the total price at
which the Registrable Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The obligation of any underwriters to
contribute pursuant to this paragraph (e) shall be several in proportion to
their respective underwriting commitments and not joint.
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<PAGE> 9
(f) The provisions of Paragraphs 8(b) through 8(e) of this
Agreement shall be in addition to any other rights to indemnification or
contribution which any indemnified party may have pursuant to law or contract
and shall remain operative and in full force and effect regardless of any
investigation made or omitted by or on behalf of any indemnified party and shall
survive the transfer of the Registrable Securities by any such party.
(g) The Registered Holders shall have certain "piggyback"
registration rights with respect to the Registrable Securities as hereinafter
provided:
A. If at any time after. the date of the
Initial Closing, Med/Waste, Inc. shall file with the SEC a registration
statement under the 1933 Act registering any shares of Common Stock owned by any
person or entity, Med/Waste, Inc. shall give' written notice to each Registered
Holder thereof prior to such filing.
B. Within fifteen (15) days after such notice
from Med/Waste, Inc., each Registered Holder shall give written notice to
Med/Waste, Inc. whether or not the Registered Holder desires to have all of the
Registered Holder's Registrable Securities included in the registration
statement. If a Registered Holder fails to give such notice within such period,
such Registered Holder shall not have the right to have such Registered Holder's
Registrable Securities registered pursuant to such registration statement. If a
Registered Holder gives such notice, then Med/Waste, Inc. shall include such
Registered Holder's Registrable Securities in the registration statement at
Med/Waste, Inc.'s sole cost and expense, subject to the remaining terms of this
Paragraph 8(g).
C. If the registration statement relates to an
underwritten offering, and the underwriter shall determine in writing that the
total number of shares of, Common Stock to be included in the offering,
including the Registrable Securities, shall exceed the amount which the
underwriter deems to be appropriate for the offering, the number of shares of
the Registrable Securities shall be reduced in the same proportion as the
remainder of the shares in the offering and each Registered Holder's Registrable
Securities included in such registration statement will be reduced
proportionately. For this purpose, if other securities in the registration
statement are derivative securities, their underlying shares shall be included
in the computation. The Registered Holders shall enter into such agreements as
may be reasonably required by the underwriters and the Registered Holders shall
pay to the underwriters commissions relating to the sale of their respective
Registrable Securities.
D. The Registered Holders shall have two (2)
opportunities to have the Registrable Securities registered under this Paragraph
8(g).
E. The Registered Holder shall furnish in
writing to Med/Waste, Inc. such information. as Med/Waste, Inc. shall reasonably
require in connection with a registration statement.
(h) If and whenever Med/Waste, Inc. is required by the
provisions of this Paragraph 8 to use its best efforts to register any
Registrable Securities under the 1933 Act, Med/Waste, Inc. shall, as
expeditiously as possible under the circumstances:
A. Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective as soon as possible and
remain effective.
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<PAGE> 10
B. Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement current and to comply with the provisions of the 1933 Act, and any
regulations promulgated thereunder, with respect to the sale or disposition of
all Registrable Securities covered by the registration statement required to
effect the distribution of the securities, but in no event shall Med/Waste, Inc.
be required to do so for a period of more than three (3) years following the
effective date of the registration statement.
C. Furnish to the Sellers participating in the
offering, copies (in reasonable quantities) of summary, preliminary, final,
amended or supplemented prospectuses, in conformity with the requirements of the
1933 Act and any regulations promulgated thereunder, and other documents as
reasonably may be required in order to facilitate the disposition of the
securities, but only while Med/Waste, Inc. is required under the provisions
hereof to keep the registration statement current.
D. Use its best efforts to register or qualify
the Registrable Securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions of the United States as
the Sellers participating in the offering shall reasonably request, and do any
and all other acts and things which may be reasonably necessary to enable each
participating Seller to consummate the disposition of the Registrable Securities
in such jurisdictions.
E. Notify each Seller selling Registrable
Securities, at any time when a prospectus relating to any such Registrable
Securities covered by such registration statement is required to be delivered
under the 1933 Act, of Med/Waste, Inc.'s becoming aware that the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and promptly prepare and furnish to
each such Seller selling Registrable Securities a reasonable number of copies of
a prospectus supplemented or amended so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
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 not misleading in
the light of the circumstances then existing.
F. As soon as practicable after the effective
date of the registration statement, and in any event within eighteen (18) months
thereafter, make generally available to Sellers participating in the offering an
earnings statement (which need not be audited) covering a period of at least
twelve (12) consecutive months beginning after the effective date of the
registration statement which earnings statement shall satisfy the provisions of
Section 11(a) of the 1933 Act, including, at Med/Waste, Inc.'s option, Rule 158
thereunder. To the extent that Med/Waste, Inc. files such information with the
SEC in satisfaction of the foregoing, Med/Waste, Inc. need not deliver the above
referenced earnings statement to Seller.
G. Upon request, deliver promptly to counsel of
each Seller participating in the offering copies of all correspondence between
the SEC and Med/Waste, Inc., its counsel or auditors and all memoranda relating
to discussions with the SEC or its staff with respect to the registration
statement and permit each such Seller to do such investigation at such Seller's
sole cost and expense, upon reasonable advance notice, with respect to
information contained in or omitted from the registration statement as it deems
reasonably necessary. Each Seller agrees that it will use its best efforts not
to interfere unreasonably with Med/Waste, Inc.'s business when conducting any
such investigation and each Seller shall keep any such information received
pursuant to this Paragraph G confidential.
H. Provide a transfer agent and registrar
located in the United States for all such Registrable Securities covered by such
registration statement not later than the effective date of such registration
statement.
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<PAGE> 11
I. List the Registrable Securities covered by
such registration statement on such exchanges and/or on the NASDAQ as the Common
Stock is then currently listed upon.
J. Pay all Registration Expenses incurred in
connection with a registration of Registrable Securities, whether or not such
registration statement shall become effective- provided that each Seller shall
pay all underwriting discounts, commissions and transfer taxes, and their own
counsel fees, if any, relating to the sale or disposition of such Seller's
Registrable Securities pursuant to a registration statement. As used herein,
"Registration Expenses" means any and all reasonable and customary expenses
incident to performance of or compliance with the registration rights set forth
herein, including, without limitation, (i) all SEC and stock exchange or
National Association of Securities Dealers, Inc. registration and filing fees,
(ii) all fees and expenses of complying with state securities or blue sky laws
(including reasonable fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities but no
other expenses of the underwriters or their counsel), (iii) all printing,
messenger and delivery expenses, and (iv) the reasonable fees and disbursements
of counsel for Med/Waste, Inc. and Med/Waste, Inc.'s independent public
accountants.
(i) Med/Waste, Inc. acknowledges
that there is no adequate remedy at law for failure by it to comply with the
provisions of this Paragraph 8 and that such failure would not be adequately
compensable in damages, and therefore agrees that its agreements contained in
this Paragraph 8 may be specifically enforced. In the event that Med/Waste, Inc.
shall fail to file such registration statement when required pursuant to
Paragraph 8(a) above or to keep any registration statement effective as provided
in this Paragraph or otherwise fails to comply with its obligations and
agreements in this Paragraph 8, then, in addition to any other rights or
remedies the Registered Holders may have at law or in equity, including without
limitation, the right of rescission, the Issuer shall indemnify and hold
harmless the Registered Holders from and against any and all manner or loss
which they may incur as a result of such failure. In addition, the Issuer shall
also reimburse the Registered Holders for any and all reasonable legal fees and
expenses incurred by them in enforcing their rights pursuant to this Paragraph
8, regardless of whether any litigation was commenced.
9. The Issuer can redeem all, but not less than all, Outstanding
Securities at the Redemption Price at any time after December 31, 1997, provided
that on the day that the Redemption Notice is given by the Issuer to a
Registered Holders of the Outstanding Securities and on the Redemption Date, the
following conditions are satisfied: (i) the Conversion Shares have been
registered by Med/Waste, Inc. pursuant to the 1933 Act as provided for in
Section 8 of the Securities and such registration is then currently effective-
and (ii) the average of the closing bid price per share of the Common Stock, as
listed on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), the New York Stock Exchange ("NYSE"), the American Stock
Exchange ("ASE") or wherever Med/Waste, Inc.'s Common Stock then trades, during
twenty (20) trading days out of the thirty (30) consecutive trading days ending
five (5) trading days prior to the' date the Redemption Notice is sent, is at
least two hundred (200%) percent per share of the Conversion Price. Any notice
to redeem ("Redemption Notice") must be given to all Registered Holders no less
than thirty (30) days nor more than forty-five (45) days prior to the date set
forth for redemption ("Redemption Date"). The Redemption Price shall equal the
sum of: (a) the face amount of the Securities; (b) all accrued and unpaid
interest through and including the Redemption Date; and (c) a redemption fee
equal to (I) ten (10%) percent of the face amount of the Securities, if the
Redemption Date is prior to January 1, 1999; or (II) five (5%) percent of the
face amount of the Securities if the Redemption Date is at any time from January
1, 1999 to June 30, 2000. For purposes hereof, the term "Conversion Shares"
shall mean the shares of Common Stock which the Registered Holder would be
entitled to receive upon conversion of Securities pursuant to Section 10 below
or forced conversion pursuant to Section 11 below.
10. (a) Each Registered Holder of Securities may at any time and
from time to time, commencing thirty (30) days after the original issuance of
the Securities, convert all or any amount of
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<PAGE> 12
the principal amount of the Securities then owned by such Registered Holder into
shares of Common Stock of Med/Waste, Inc. at a conversion price equal to $3.25
per share of Common Stock, subject to adjustment as provided in this Section 10.
Notwithstanding the giving by the Issuer of the Redemption Notice, the
Registered Holder may exercise the Registered Holder's conversion rights set
forth in this Section 10 at any time up to one (1) business day prior to the
Redemption Date.
(b) The conversion right granted in Section
10(a) hereof may be exercised only by a Registered Holder of Securities, in
whole or in part, by the surrender of the certificate or certificates
representing the Securities to be converted at the principal executive offices
of the Issuer against delivery of that number of shares of whole Common Stock as
shall be computed by dividing the face amount of the Securities being converted
by the Conversion Price on the Conversion Date. At the time of conversion of
Securities, the Issuer shall pay in cash to the Registered Holder thereof an
amount equal to all accrued and unpaid interest, if any, to and including the
Conversion Date. Each Security surrendered for conversion shall be endorsed by
the Registered Holder. Med/Waste, Inc. will transmit the Common Stock
certificates issuable upon conversion of any Securities and a certificate
representing the balance of the Securities to the Registered Holder via express
courier within three (3) business days after the Conversion Date. The term
"Conversion Date" shall mean the date the original Notice of Conversion and
Securities being converted are received by the Issuer. The term "Notice of
Conversion" shall mean the written notice from the Registered Holder to the
Issuer.
(c) All Common Stock which may be issued upon
conversion of the Securities will, upon issuance, be duly issued, fully paid and
non-assessable and free from all taxes, hens, and charges with respect to the
issue thereof At all times that any Securities are Outstanding, Med/Waste, Inc.
shall have authorized and shall have reserved for the purpose of issuance upon
such conversion into Common Stock of all Securities, a sufficient number of
shares of Common Stock to provide for the conversion of all Outstanding
Securities at the then effective Conversion Price. Without limiting the
generality of the foregoing, if, at any time, the Conversion Price is decreased
or increased, the number of shares of Common Stock authorized and reserved for
issuance by Med/Waste, Inc. upon the conversion of the Securities shall be
proportionately increased or decreased, as the case may be.
(d) The Initial Conversion Price is $3.25 per
share of Common Stock ("Initial Conversion Price"). The Initial Conversion Price
shall be adjusted as provided for below in this Section 10(d) (the Initial
Conversion Price, and the Initial Conversion Price, as thereafter then adjusted,
shall be referred to as the "Conversion Price") and the Conversion Price from
time to time shall be further adjusted as provided for below in this Section
10(d). Upon each adjustment of the Conversion Price, the Registered Holders of
the Securities shall thereafter be entitled to receive upon conversion, at the
Conversion Price resulting from such adjustment, the number of shares of Common
Stock obtained by dividing the face amount of the Securities being converted by
the Conversion Price, as then adjusted. The Conversion Price shall be adjusted
as follows:
(i) In the case of any amendment to
the Certificate of incorporation of Med/Waste, Inc. to
change the designation of the Common Stock or the
rights, privileges, restrictions or conditions in
respect to the Common Stock or division of the Common
Stock, the Securities shall be adjusted so as to provide
that upon conversion thereof the Registered Holder shall
receive, in lieu of each Common Stock theretofore
issuable upon such conversion, the kind and amount of
shares, other securities, money and property receivable
upon such designation, change or division by such holder
issuable upon such conversion had the conversion
occurred immediately prior to such designation, change
or division. The Securities shall be deemed thereafter
to provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments
provided for in this Section 10. The provisions of this
Subsection 10(d)(i) shall apply in the same manner to
successive reclassifications, changes, consolidations
and mergers.
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<PAGE> 13
(ii) If Med/Waste, Inc. shall at any time
subdivide its outstanding shares of Common Stock into a greater
number of shares of Common Stock, or declare a dividend or make any
other distribution upon the Common Stock payable in shares of Common
Stock, the Conversion Price in effect immediately prior to such
subdivision or dividend or other distribution shall be
proportionately reduced, and conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Conversion Price in effect immediately
prior to such combination shall be proportionately increased.
(iii) In case Med/Waste, Inc. shall
issue or otherwise sell or distribute shares of Common Stock for a
consideration per share in cash or property less than the lesser of
the then effective Conversion Price or the Market Price (as defined
below), the Conversion Price then in effect shall be reduced by
multiplying such Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance, sale or distribution plus the
number of shares of Common Stock which the aggregate consideration
received by Med/Waste, Inc. for such issuance, sale or distribution
(such consideration, if other than cash, as reasonably determined by
the Board of Directors of Med/Waste, Inc. including a majority of
the Directors who are not officers or employees of Med/Waste, Inc.
or any of its subsidiaries, whose determination shall be described
in a resolution of the Board of Directors) would purchase at the
Conversion Price per share and the denominator shall be the number
of shares of Common Stock outstanding immediately after giving
effect to such issuance, sale or distribution. The term "Market
Price" shall mean the average of the closing bid price for the
Common Stock for the five (5) consecutive trading days ending two
(2) trading days prior to the relevant date that Med/Waste, Inc.
shall issue or otherwise sell or distribute shares of Common Stock.
(iv) If any capital reorganization or
reclassification of the capital stock of Med/Waste, Inc., or any
consolidation or merger of Med/Waste, Inc. with another corporation
or entity, or the sale of all or substantially all of Med/Waste,
Inc.'s assets to another corporation or other entity shall be
effected in such a way that holders of shares of Common Stock shall
be entitled to receive stocks, securities, other evidence of equity
ownership or assets with respect to or in exchange for shares of
Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale (except as otherwise
provided below in this Section 10(d)(iv)), lawful and adequate
provisions shall be made whereby the Registered Holders shall
thereafter have the right to receive upon the basis and upon the
terms and conditions specified herein, such shares of stock,
securities, other evidence of equity ownership or assets as may be
issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of
shares of Common Stock immediately theretofore purchasable and
receivable upon the conversion of Securities under this Section 10
had such reorganization, reclassification, consolidation, merger or
sale not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the
Registered Holders to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Conversion
Price and of the number of shares of Common Stock receivable upon
the conversion of Securities) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities,
other evidence of equity ownership or assets thereafter deliverable
upon the exercise hereof (including an immediate adjustment, by
reason of such consolidation or merger, of the Conversion Price to
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<PAGE> 14
the value for the Common Stock reflected by the terms of such
consolidation or merger if the value so reflected is less than the
Conversion Price in effect immediately prior to such consolidation
or merger). Subject to the terms of the Securities, in the event of
a merger or consolidation of Med/Waste, Inc. with or into another
corporation or other entity as a result of which the number of
shares of Common Stock of the surviving corporation or other entity
issuable to holders of Common Stock of Med/Waste, Inc., is greater
or lesser than the number of shares of Common Stock of Med/Waste,
Inc. outstanding immediately prior to such merger or consolidation,
then the Conversion Price in effect immediately prior to such merger
or consolidation shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding shares of
Common Stock of Med/Waste, Inc. Med/Waste, Inc. shall not effect any
such consolidation, merger or sale, unless, prior to the
consummation thereof, the successor corporation (if other than
Med/Waste, Inc.) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to the Registered
Holders, the obligation to deliver to such Registered Holders such
shares of stock, securities, other evidence of equity ownership or
assets as, in accordance with the foregoing provisions, such
Registered Holders may be entitled to receive or otherwise acquire.
If a purchase, tender or exchange offer is made to and accepted by
the holders of more than fifty (50%) percent of the outstanding
shares of Common Stock of Med/Waste, Inc., Med/Waste, Inc. shall not
effect any consolidation, merger or sale with the Person having made
such offer or with any Affiliate of such Person, unless prior to the
consummation of such consolidation, merger or sale the Registered
Holders of Securities shall have been given a reasonable opportunity
to then elect to receive upon the conversion of Securities the
amount of stock, securities, other evidence of equity ownership or
assets then issuable with respect to the number of shares of Common
Stock of the Corporation in accordance with such offer.
(e) Whenever the Conversion Price shall be adjusted pursuant
to Section 10(d) hereof, Med/Waste, Inc. shall issue a certificate signed by its
President or Vice President and by its Treasurer, Assistant Treasurer, Secretary
or Assistant Secretary, setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board of Directors of Med/Waste, Inc. made any determination hereunder), and the
Conversion Price after giving effect to such adjustment, and shall cause copies
of such certificates to be mailed (by first-class mail, postage prepaid) to each
Registered Holder of Securities. Med/Waste, Inc. shall make such certificate and
mail it to each such holder promptly after each adjustment.
(f) No fractional Common Stock shall be issued in connection
with any conversion (or forced conversion, if applicable) of Securities, but in
lieu of such fractional shares, the Issuer shall make a cash payment therefor
equal in amount to the product of the applicable fraction multiplied by the
Conversion Price then in effect.
11. All, but not less than all, of the principal amount of the
Outstanding Securities are convertible, at the option of Med/Waste, Inc., into
shares of Common Stock at the Conversion Price, provided that on the day that
the Conversion Notice is given by Med/Waste, Inc. to all Registered Holders and
on the Forced Conversion Date, the following conditions are satisfied: (i) the
Conversion Shares have been registered by Med/Waste, Inc. pursuant to the 1933
Act as provided for in Section 8 of the Securities and such registration is then
currently effective; and (ii) the average of the closing bid price per share of
the Common Stock, as listed on NASDAQ, the NYSE, the ASE or wherever Med/Waste
Inc.'s Common Stock then trades, during twenty (20) trading days out of the
thirty (30) consecutive trading days ending five (5) trading days prior to the
date the Forced Conversion Notice is sent, is at least two hundred (200%)
percent of the Conversion Price. Any notice of Conversion ("Forced
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<PAGE> 15
Conversion Notice") must be given by Med/Waste, Inc. to all Registered Holders
no less than thirty (30) days nor more than forty-five (45) days prior to the
date set forth for conversion (the "Forced Conversion Date"). On the Forced
Conversion Date, the Issuer shall pay to all Registered Holders of Securities,
all accrued and unpaid interest on the Securities through and including the
Forced Conversion Date.
12. If any mutilated Security is surrendered to the Issuer, the
Issuer shall execute and deliver in exchange therefor a new Security of like
tenor and principal amount, bearing a number not contemporaneously outstanding.
If there is delivered to the Issuer (a) evidence to its reasonable
satisfaction of the destruction, loss or, theft of any Security and (b) such
reasonable security or indemnity as may be required by it to save it harmless,
then, in the absence of notice to the Issuer that such Security has been
acquired by a bona fide purchaser, the Issuer shall execute and deliver in lieu
of any such destroyed, lost or stolen Security a new Security of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
Upon the issuance of any new Security under this Section 12, the
Issuer may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith.
Every new Security issued pursuant to this Section 12 in lieu of any
destroyed, lost or stolen Security, shall constitute an original additional
contractual obligation of the Issuer, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone.
Any new Security delivered pursuant to this Section 12 shall be so
dated that neither gain nor loss in interest shall result from such exchange.
The provisions of this Section 12 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
13. A meeting of holders of the Securities may be called at any time
and from time to time to make, give or take any request, demand, authorization,
direction, notice, consent, waiver or other action provided by the Securities to
be made, given or taken by holders of Securities or to modify, amend or
supplement the terms of the Securities as hereinafter provided. Notice of every
meeting of holders of Securities, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting,
shall be given as provided for in the terms of the Securities, not less than
fifteen (15) nor more than sixty (60) days prior to the date fixed for the
meeting. Such meetings may be called at any time for any such purpose by the
Issuer or by the holders of at least twenty-five (25%) percent in the aggregate
principal amount of the Outstanding Securities by, in the case of the holders,
written request to the Issuer setting forth in reasonable detail the action
proposed to be taken at the meeting. Upon receipt of any such request, the
Issuer shall call such meeting for such purposes by giving notice thereof.
To be entitled to vote at any meeting of holders of Securities, a
person shall be a registered holder of Outstanding Securities or a person duly
appointed by an instrument in writing as proxy for such a holder. The persons
entitled to vote more than fifty (50%) percent in principal amount of the
Outstanding Securities shall constitute a quorum. The Issuer may make such
reasonable and customary regulations as it shall deem advisable for any meeting
of holders of Securities with respect to the appointment of proxies in respect
of holders of Securities, the record date for determining the registered owners
of Securities who are entitled to vote at such meeting (which date shall be set
forth in the notice calling such meeting hereinabove referred to and which shall
be not less than fifteen (15) nor more than sixty (60) days prior to such
meeting), the adjournment and chairmanship of such meeting, the appointment and
duties of inspectors of votes, the submission and examination of proxies,
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<PAGE> 16
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall deem appropriate.
At any meeting of holders of Securities duly called and held as
specified above, upon the affirmative vote, in person or by proxy thereunto duly
authorized in writing, of the Registered Holders of not less than sixty-six and
two-thirds (662/3%) percent in aggregate principal amount of Outstanding
Securities, or with the written consent of the Registered Holders of not less
than sixty-six and two-thirds (662/3%) percent in aggregate principal amount of
Outstanding Securities, the Issuer may modify, amend or supplement the terms of
the Securities in any way, and the holders of Securities may make, take or give
any request, demand, authorization, direction, notice, consent, waiver or other
action provided by the terms of the Securities to be made, given or taken by
holders of Securities; provided, however, that no such action may, without the
consent of Registered Holders of Securities owning eighty (80%) percent or more
in the aggregate principal amount of Outstanding Securities affected thereby,
(a) change the due date for the payment of the principal of or any installment
of interest on any Security, (b) reduce the principal amount of any Security,
the portion of such principal amount which is payable upon acceleration of the
maturity of such Security or the interest rate thereon, (c) change the coin or
currency in which or the required places at which payment with respect to
interest or principal in respect of Securities is payable, (d) permit the Issuer
to redeem the Securities (other than as specifically provided in this Security),
or (e) reduce the proportion of the principal amount of Securities the vote or
consent of the holders of which is necessary to modify, amend or supplement the
terms and conditions of the Securities or to make, take or give any request,
demand, authorization, direction, notice, consent, waiver or other' action
provided hereby or thereby to be made, taken or given.
Any instrument given by or on behalf of any Registered Holder of a
Security in connection with any consent to or vote for any such modification,
amendment, supplement, request, demand, authorization, direction, notice,
consent, waiver or other action will be irrevocable once given and will be
conclusive and binding on all subsequent holders of such Security or any
Security issued directly or indirectly in exchange or substitution therefor or
in lieu thereof Any such modification, amendment, supplement, request, demand,
authorization, direction, notice, consent, waiver or other action will be
conclusive and binding on all holders of Securities, whether or not they have
given such consent or cast such vote, and whether or not notation of such
modification, amendment, supplement, request, demand, authorization, direction,
notice, consent, waiver or other action is made upon the Securities. Notice of
any modification or amendment of, supplement to, or request, demand,
authorization, direction, notice, consent, waiver or other action with respect
to the Securities shall be given to each registered holder of Securities
affected thereby, in all cases as provided herein.
Securities executed and delivered after the effectiveness of any
such modification, amendment, supplement, request, demand, authorization,
direction, notice, consent, waiver or other action shall bear a notation in the
form reasonably approved by the Issuer as to any matter provided for in such
modification, amendment, supplement, request, demand, authorization, direction,
notice, consent, waiver or other action. New Securities modified to conform to
any such modification, amendment, supplement, request, demand, authorization,
direction, notice, consent, waiver or other action may be prepared by the Issuer
and executed and delivered in exchange for Outstanding Securities.
For purposes of the provisions of the Securities, any Security
executed and delivered by the Issuer shall, as of any date of determination, be
deemed to be "Outstanding", except:
(a) Securities theretofore cancelled by the Issuer
or delivered to the Issuer for conversion or cancellation or held by the Issuer
for reissuance but not reissued by the Issuer; or
- 16 -
<PAGE> 17
(b) Securities that have become due and payable at
Maturity or otherwise and with respect to which monies sufficient to pay the
principal thereof and any interest thereon shall have been made available to the
Registered Holders thereof, or
(c) Securities in lieu of or in substitution for
which other Securities shall have been authenticated and delivered pursuant to
the terms of the Securities;
provided, however that in determining whether the Registered Holders of the
requisite principal amount of Outstanding Securities are present at a meeting of
holders of Securities for quorum purposes or have consented to or voted in favor
of any request, demand, authorization, direction, notice, consent, waiver,
amendment, modification or supplement hereunder, Securities owned directly or
indirectly by the Issuer or any Affiliate of the Issuer shall be disregarded and
deemed not to be Outstanding.
14. Where the terms of the Securities provide for notice to
the holders of any event, such notice shall be sufficiently given if given in
writing and mailed, first class postage prepaid, to each Registered Holder
affected by such event, at his address as it appears in the register for the
Securities. Any notice may be waived in writing by the Person entitled thereto,
either before or after the event, and such waiver shall be equivalent of such
notice.
15. In the event of:
(a) default in the payment of any interest on any
Security for a period of ten (10) days after Maturity; or
(b) default in the payment of the principal of any
Security at Maturity; or
(c) the breach by the Issuer of any of the
representations and warranties set forth in Section 6 of the Securities; or
(d) default in the performance or breach of any
other material covenant or agreement contained in the Securities for a period of
thirty (30) days after the date on which written notice of such default
requiring the Issuer to remedy the same and stating that such notice is a
"Notice of Default", shall first have been given to the Issuer by a Registered
Holder or Holder(s) owning fifteen (15%) percent or more of Securities; or
(e) default under one or more bonds, debentures,
notes or other evidence of Indebtedness in excess of $500,000 in the aggregate,
whether such Indebtedness is secured or unsecured and whether such Indebtedness
now exists or shall hereinafter be created, which has not been cured within a
period of thirty (30) days; or
(f) any misstatement of a material fact in the
Memorandum or omission of a material fact necessary to make the information in
the Memorandum not misleading (regardless of any investigation made by any
Registered Holders); or
(g) the entry by a court having jurisdiction of (i)
a decree or order for relief in respect of the Issuer in an involuntary case or
proceeding under any applicable bankruptcy, insolvency, reorganization or other
similar law or (ii) a decree or order adjudging the Issuer a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Issuer under any
applicable law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Issuer or of any
substantial part of the property of the Issuer, or ordering the winding up or
liquidation of the affairs of the Issuer, and any such decree or order for
relief or any such other decree or order shall continue unstayed and in effect
for a period of sixty (60) consecutive days, or
- 17 -
<PAGE> 18
(h) commencement by any Issuer of a voluntary case
or proceeding under any applicable bankruptcy, insolvency, reorganization or
other similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by the Issuer to the entry of a decree or
order for relief in respect of the Issuer in an involuntary case or proceeding
under any applicable bankruptcy, insolvency, reorganization or other similar law
or to the commencement of any bankruptcy or insolvency case or proceeding
against the Issuer, or the filing by the Issuer of a petition or answer or
consent seeking reorganization or relief under any such applicable law, or the
consent by the Issuer to the filing of such petition or to the appointment of or
the taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Issuer or of any substantial part
of its property, or the making by the Issuer of an assignment for the benefit of
creditors, or the taking of action by the Issuer in furtherance of any such
action;
a Registered Holder or Registered Holders owning fifteen (15%) percent or more
of the Securities may, at their option, declare the principal of this Security
and the interest accrued hereon to be due and payable immediately (such date
being the "Acceleration Date") by written notice to the Issuer at its principal
executive offices, and unless all such defaults shall have been cured by the
Issuer prior to receipt of such written notice, the principal of this Security
and the interest accrued thereon shall become and be immediately due and
payable.
16. This Security shall be governed by and construed in
accordance with the laws of New York without regard to the conflicts-of-laws
principles thereof The Issuer hereby irrevocably (a) submits to the exclusive
jurisdiction of, and agrees that any action, suit or other proceeding at law, in
equity or otherwise, shall only be brought in the Supreme Court, New York
County, or Federal District Court for the Southern District of New York, for the
purpose of any such suit, action or other proceeding arising out of or based
upon this Agreement or the transactions contemplated hereby ("Action"); (b)
waives, to the extent not prohibited by applicable law, rule or regulation, and
agrees not to assert, by way of motion, as a defense or otherwise, in any such
Action, ,any claim that any such person is not subject personally to the
jurisdiction of the aforementioned courts, that its property is exempt or immune
from attachment or execution, that any such action brought in the aforementioned
court is brought in an inconvenient forum, that the venue of any such action
brought in the aforementioned court is improper, or that this Agreement, or the
transactions contemplated hereby enforced in or by such court, and (c) consents
to service of process in any such Action by recognized overnight courier
service. Nothing herein shall affect the right to serve process ion any other
manner permitted by law.
17. In any Action to protect the rights of the Registered
Holders or to collect on this Security, the Issuer shall pay the reasonable
attorneys fees and costs of the Registered Holder.
18. The following terms shall have the meaning ascribed to
them below: "Affiliate" means any Person directly or indirectly controlling,
controlled by or under direct or indirect control with another Person.
"Contingent Obligations", as applied to any Person, means
any direct or indirect liability, contingent or otherwise, of that Person (i)
with respect to any Indebtedness, lease, dividend or other obligation of another
if the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that person, unpaid bankers' acceptances, bankers' assurances or guarantees or
similar items, or (iii) under any Interest Rate Protection Agreement or any
long-term foreign currency exchange contract, currency swap agreement, currency
futures contract, currency option contract, synthetic capital or similar
arrangement designed to protect the Person entering into the same against
fluctuations in currency values. Contingent Obligations shall include, without
limitation, (A) the direct or indirect guaranty, endorsement, co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (B) the obligation to make
- 18 -
<PAGE> 19
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (C) any liability of such Person for
the obligations of another through any agreement (contingent or otherwise) (x)
to purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise), (y) to maintain the solvency, any balance sheet item, level of
income or financial condition of another, or (z) to make take-or-pay or similar
payments if required regardless of non-performance by any other party or parties
to an agreement (provided that, in the case of any agreement described under
Sub-clauses (C)(x) or (C)(y) of this sentence, the primary purpose or intent
thereof is as described in the preceding sentence). The amount of any Contingent
Obligation of a Person shall be equal to the amount of the obligation so
guaranteed or otherwise supported, subject to any limitation as to amount
contained in the instrument or agreement creating or evidencing such Contingent
Obligation; or in the case of Contingent Obligations referred to in clause (iii)
above, the mark-to-market value of such Contingent Obligation at the relevant
date of determination.
"Control" means possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, wether through the ownership of voting securities, by contract or
otherwise.
"Indebtedness" of any Person means, at any date of
determination, without duplication, (i) all obligations of such Person for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet of such Person in
conformity with GAAP, (iii) notes payable and drafts accepted of such Person
representing extensions of credit whether or not representing obligations for
borrowed money, (iv) any obligation of such Person owed for all or any part of
the deferred price of the property or services, which price or obligation is (x)
due more than (or has not been discharged prior to) three (3) months from the
date of incurrence of the obligation in respect thereof, or (y) evidenced by a
note, instrument or other written agreement, (v) all Contingent Obligations of
such Person, and (vi) all indebtedness of the type described in clauses (i)
through (v) above that is secured by any Lien on any property or asset owned or
held by such person (provided that the amount of such indebtedness included as
Indebtedness under this clause (vi) shall not exceed the market value of the
property or asset subject to such Lien).
"Lien" means any mortgage, pledge, hypothecation,
security interest, encumbrance, charge or lien (statutory or otherwise) or
assignment, deposit arrangement or other preferential arrangement in respect of
an interest in property intended to secure, support or otherwise assure payment
of an obligation (including, without limitation, any conditional sale or other
title retention agreement and any lease having substantially the same economic
effect as the foregoing).
"Maturity" when used with respect to any Security, means
the date on which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration or acceleration, call for redemption or otherwise.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether Federal, state, county, city, municipal or otherwise, including without
limitation, any instrumentality, division, agency, body or department thereof).
"Stated Maturity" when used with respect to any Security
or any installment of interest thereon, means the date specified in such
Security as the fixed date on which the principal of such Security or such
installment of interest is due and payable.
- 19 -
<PAGE> 20
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
duly executed and it corporate seal to be affixed hereto.
Dated: January 27, 1997
MED/WASTE, INC.
By: /s/ DANIEL A. STAUBER
----------------------------------
DANIEL A. STAUBER
President
[Corporate Seal]
SAFETY DISPOSAL SYSTEM, INC.
By: /s/ DANIEL A. STAUBER
----------------------------------
DANIEL A. STAUBER
President
[Corporate Seal]
THE KOVER GROUP, INC.
By: /s/ DANIEL A. STAUBER
----------------------------------
DANIEL A. STAUBER
President
[Corporate Seal]
SAFETY DISPOSAL SYSTEM OF SOUTH
CAROLINA, INC.
By: /s/ DANIEL A. STAUBER
----------------------------------
DANIEL A. STAUBER
President
[Corporate Seal]
- 20 -
<PAGE> 1
Exhibit 4.2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT") OR ANY STATE
SECURITIES LAWS AND SHALL NOT BE SOLD , PLEDGED, HYPOTHECATED,
DONATED, OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR
CONSIDERATION, BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE
COMPANY OF A FAVORABLE OPINION OF ITS COUNSEL OR THE SUBMISSION
TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO
COUNSEL FOR THE COMPANY, IN EITHER CASE, TO THE EFFECT THAT ANY
SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE 1933 ACT AND
APPLICABLE STATE SECURITIES LAWS.
MED/WASTE, INC.
Common Stock Purchase Warrant
to
Purchase _____ Shares
of
Common Stock
This Common Stock Purchase Warrant is issued to:
-----------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
by MED/WASTE, INC., a Delaware corporation (hereinafter called the "Company",
which term shall include its successors and assigns).
FOR VALUE RECEIVED and subject to the terms and conditions hereinafter
set out, the registered holder of this Warrant as set forth on the books and
records of the Company (the "Holder") is entitled upon surrender of this Warrant
to purchase from the Company _______________ (______) fully paid and
nonassessable shares of Common Stock, $.001 par value (the "Common Stock"), at
the Exercise Price (as defined below) per share.
This Warrant shall expire at the close of business on January 31, 2002.
1. (a) The right to purchase shares of Common Stock represented
by this Warrant may be exercised by the Holder, in whole or in part, by the
surrender of this Warrant (properly endorsed if required) at the principal
office of the Company at 3890 N.W. 132nd Street, Suite K, Opa Locka, Florida
33054 (or such other office or agency of the Company as it may designate by
notice in writing to the Holder at the address of the Holder appearing on the
books of the Company), and upon payment to the Company, by cash or by certified
check or bank draft, of the Exercise Price for such shares. The Company agrees
that the shares of Common Stock so purchased shall be deemed to be issued to the
Holder as the record owner of such shares of Common Stock as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such shares of Common Stock as aforesaid. Certificates for the
shares of Common Stock so purchased (together with a cash
<PAGE> 2
adjustment in lieu of any fraction of a share) shall be delivered to the Holder
within a reasonable time, not exceeding five (5) business days, after the rights
represented by this Warrant shall have been so exercised, and, unless this
Warrant has expired, a new Warrant representing the number of shares of Common
Stock, if any, with respect to which this Warrant shall not then have been
exercised, in all other respects identical with this Warrant, shall also be
issued and delivered to the Holder within such time, or, at the request of the
Holder, appropriate notation may be made on this Warrant and the same returned
to the Holder
(b) This Warrant may be exercised to acquire, from and
after the date hereof, the number of shares of Common Stock set forth on the
first page hereof, provided, however, the right hereunder to purchase such
shares of Common Stock shall expire at the close of business on January 31,
2002.
2. This Warrant is being issued by the Company to Taglich
Brothers, D'Amadeo, Wagner & Company, Incorporated ("Taglich Brothers"), or its
designee, pursuant to a Placement Agreement between the Company and Taglich
Brothers dated October 14, 1996, as amended by First Amendment dated January 7,
1997 and Second Amendment dated as of January 31, 1997, whereby the Company
agreed to issue a five (5) year warrant exercisable at the Exercise Price per
share to Taglich Brothers, or its designee, equal to ten (10%) percent of the
total number of shares of Common Stock issuable upon the conversion of the 10%
Convertible Redeemable Debentures Due July 1, 2000 sold by Taglich Brothers in a
Private Placement pursuant to the Company's Confidential Private Placement
Memorandum dated January 7, 1997, as same may be amended.
3. The Company covenants and agrees that all Common Stock upon
issuance against payment in full of the Exercise Price by the Holder pursuant to
this Warrant will be validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof, and, without
limiting the generality of the foregoing, the Company covenants and agrees that
it will take from time to time all such action as may be requisite to assure
that the par value per share of the Common Stock is at all times equal to or
less than the then effective Exercise Price. The Company further covenants and
agrees that during the period within which the rights represented by this
Warrant may be exercised, the Company will have at all times authorized, and
reserved for the purpose of issue or transfer upon exercise of the rights
evidenced by this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant, and will
procure at its sole expense upon each such reservation of shares the listing
thereof (subject to issuance or notice of issuance) on all stock exchanges on
which the Common Stock is then listed or inter-dealer trading systems on which
the Common Stock is then traded. The Company will take all such action as may be
necessary to assure that such shares of Common Stock may be so issued without
violation of any applicable law or regulation, or of any requirements of any
national securities exchange upon which the Common Stock may be listed or
inter-dealer trading system on which the Common Stock is then traded. The
Company will not take any action which would result in any adjustment in the
number of shares of Common Stock purchasable hereunder if the total number of
shares of Common Stock issuable pursuant to the terms of this Warrant after such
action upon full exercise of this Warrant and, together with all shares of
Common Stock then outstanding and all shares of Common Stock then issuable upon
exercise of all options and other rights to purchase shares of Common Stock then
outstanding, would exceed the total number of shares of Common Stock then
authorized by the Company's Certificate of Incorporation, as then amended.
4. The Initial Exercise Price is $3.25 per share of Common Stock
("Initial Exercise Price"). The Initial Exercise Price shall be adjusted as
provided for below in this Section 4 (the Initial Exercise Price, and the
Initial Exercise Price, as thereafter then adjusted, shall be referred to as the
"Exercise Price") and the Exercise Price from time to time shall be further
adjusted as provided for below in this Section 4. Upon each adjustment of the
Exercise Price, the Holder shall thereafter be entitled to
- 2 -
<PAGE> 3
receive upon exercise of this Warrant, at the Exercise Price resulting from such
adjustment, the number of shares of Common Stock obtained by (i) multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Common Stock purchasable hereunder immediately prior to such
adjustment, and (ii) dividing the product thereof by the Exercise Price
resulting from such adjustment. The Exercise Price shall be adjusted as follows:
(i) In the case of any amendment to the Certificate of
Incorporation of the Company to change the designation of the Common
Stock or the rights, privileges, restrictions or conditions in respect
to the Common Stock or division of the Common Stock, this Warrant shall
be adjusted so as to provide that upon exercise thereof, the Holder
shall receive, in lieu of each Common Stock theretofore issuable upon
such exercise, the kind and amount of shares, other securities, money
and property receivable upon such designation, change or division by
the Holder issuable upon such exercise had the exercise occurred
immediately prior to such designation, change or division. This Warrant
shall be deemed thereafter to provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for
in this Section 4. The provisions of this Subsection 4(i) shall apply
in the same manner to successive reclassifications, changes,
consolidations and mergers.
(ii) If the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares of
Common Stock, or declare a dividend or make any other distribution upon
the Common Stock payable in shares of Common Stock, the Exercise Price
in effect immediately prior to such subdivision or dividend or other
distribution shall be proportionately reduced, and conversely, In case
the outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Exercise Price in effect
immediately prior to such combination shall be proportionately
increased.
(iii) In case the Company shall issue or otherwise sell or
distribute shares of Common Stock for a consideration per share in cash
or property less than the lesser of the Exercise Price then in effect
or the Market Price (as defined below), the Exercise Price then in
effect shall be reduced by multiplying such Exercise Price by a
fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance, sale or
distribution plus the number of shares of Common Stock which the
aggregate consideration received by the Company for such issuance, sale
or distribution (such consideration, if other than cash, as reasonably
determined by the Board of Directors of the Company including a
majority of the Directors who are not officers or employees of the
Company or any of its Subsidiaries, whose determination shall be
described in a resolution of the Board of Directors) would purchase at
the Exercise Price per share and the denominator shall be the number of
shares of Common Stock outstanding immediately after giving effect to
such issuance, sale or distribution. The term "Market Price" shall mean
the average of the closing bid price for the Common Stock for the five
(5) consecutive trading days ending two (2) trading days prior to the
relevant date that the Company shall issue or otherwise sell or
distribute shares of Common Stock.
(iv) If any capital reorganization or reclassification of
the capital stock of the Company, or any consolidation or merger of the
Company with another corporation or entity, or the sale of all or
substantially all of the Company's assets to another corporation or
other entity shall be effected in such a way that holders
- 3 -
<PAGE> 4
of shares of Common Stock shall be entitled to receive stocks,
securities, other evidence of equity ownership or assets with respect
to or in exchange for shares of Common Stock, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale
(except as otherwise provided below in this Section 4), lawful and
adequate provisions shall be made whereby the Holder shall thereafter
have the right to receive upon the basis and upon the terms and
conditions specified herein, such shares of stock, securities, other
evidence of equity ownership or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such
Common Stock equal to the number of shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of this
Warrant under this Section 4 had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and
interests of the Holder to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the
Exercise Price and of the number of shares of Common Stock receivable
upon the exercise of this Warrant) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities, other
evidence of equity ownership or assets thereafter deliverable upon the
exercise hereof (including an immediate adjustment, by reason of such
consolidation or merger, of the Exercise Price to the value for the
Common Stock reflected by the terms of such consolidation or merger if
the value so reflected is less than the Exercise Price in effect
immediately prior to such consolidation or merger). Subject to the
terms of this Warrant in the event of a merger or consolidation of the
Company with or into another corporation or other entity as a result of
which the number of shares of common stock of the surviving corporation
or other entity issuable to holders of Common Stock of the Company, is
greater or lesser than the number of shares of Common Stock of the
Company outstanding immediately prior to such merger or consolidation,
then the Exercise Price in effect immediately prior to such merger or
consolidation shall be adjusted in the same manner as though there were
a subdivision or combination of the outstanding shares of Common Stock
of the Company. The Company shall not effect any such consolidation,
merger or sale, unless, prior to the consummation thereof, the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall
assume by written instrument executed and mailed or delivered to the
Holder, the obligation to deliver to the Holder such shares of stock,
securities, other evidence of equity ownership or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to
receive or otherwise acquire. If a purchase, tender or exchange offer
is made to and accepted by the holders of more than fifty (50%) percent
of the outstanding shares of Common Stock of the Company, the Company
shall not effect any consolidation, merger or sale with the Person
having made such offer or with any Affiliate of such Person, unless
prior to the consummation of such consolidation, merger or sale the
Holder of this Warrant shall have been given a reasonable opportunity
to then elect to receive upon the exercise of this Warrant the amount
of stock, securities, other evidence of equity ownership or assets then
issuable with respect to the number of shares of Common Stock of the
Corporation in accordance with such offer.
Whenever the Exercise Price shall be adjusted pursuant to this Section
4, the Company shall issue a certificate signed by its President or Vice
President and by its Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated
- 4 -
<PAGE> 5
(including a description of the basis on which the Board of Directors of the
Company made any determination hereunder), and the Exercise Price after giving
effect to such adjustment and shall cause copies of such certificates to be
mailed (by first-class mail, postage prepaid) to the Holder of this Warrant. The
Company shall make such certificate and mail it to the Holder promptly after
each adjustment.
No fractional Common Stock shall be issued in connection with any
exercise of this Warrant, but in lieu of such fractional shares, the Company
shall make a cash payment therefor equal in amount to the product of the
applicable fraction multiplied by the Exercise Price then in effect.
5. In the event the Company grants rights to all shareholders to
purchase Common Stock, the Holder shall have the same rights as if this Warrant
had been exercised immediately prior to such grant.
6. The Holder shall, with respect to the shares of Common Stock
issuable upon the exercise of this Warrant have the registration rights and
"piggy back" registration rights set forth in the Debenture Placement Agreement
dated January 27, 1997 by and between the Company and Taglich Brothers. Such
registration rights and "piggy back" registration rights are incorporated herein
by this reference as if such provisions had been set forth herein in full.
7. This Warrant need not be changed because of any change in the
Exercise Price or in the number of shares of Common Stock purchased hereunder.
8. The terms defined in this paragraph, whenever used in this
Warrant, shall, unless the context otherwise requires, have the respective
meanings hereinafter specified. The term "Common Stock shall mean and include
the Company's Common Stock, $0.001 par value per share, authorized on the date
of the original issue of this Warrant and shall also include in case of any
reorganization, reclassification, consolidation, merger or sale of assets of the
character referred to in paragraph 4 hereof, the stock, securities or assets
provided for in such paragraph. The term "Company" shall also include any
successor corporation to MED/WASTE, INC. by merger, consolidation or otherwise.
The term "outstanding" when used with reference to Common Stock shall mean at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company. The term "1933 Act" shall mean the Securities Act of
1933, or any similar Federal statute, and the rules and regulations of the
Securities and Exchange Commission, or any other Federal agency then
administering such Securities Act, thereunder, all as the same shall be in
effect at the time.
9. This Warrant is exchangeable, upon the surrender hereby by the
Holder at the office or agency of the Company, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares of Common Stock as shall be designated by the Holder at
the time of such surrender. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant or any such new
Warrants and, in the case of any such loss, theft, or destruction, upon delivery
of a bond of indemnity, reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon surrender or cancellation of this Warrant or such
new Warrants, the Company will issue to the Holder a new Warrant of like tenor,
in lieu of this Warrant or such new Warrants, representing the right to
subscribe for and purchase the number of shares of Common Stock which may be
subscribed for and purchased hereunder.
10. The Company agrees to use its best efforts to file timely all
reports required to be filed by it pursuant to Section 13 or 15 of the
Securities Exchange Act of 1934, as amended, and to
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<PAGE> 6
provide such information as will permit the Holder to sell this Warrant or any
shares of Common Stock acquired upon exercise of this Warrant in accordance with
Rule 144 under the 1933 Act.
11. The Company will at no time close its transfer books against
the transfer of this Warrant or of any shares of Common Stock issued or issuable
upon the exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant. This Warrant shall not entitle the Holder to any
voting rights or any rights as a stockholder of the Company. The rights and
obligations of the Company, of the Holder, and of any holder of shares of Common
Stock issuable hereunder, shall survive the exercise of this Warrant.
12. This Warrant sets forth the entire agreement of the Company
and the Holder of the Common Stock issuable upon the exercise of this Warrant
with respect to the rights of the Holder and the Common Stock issuable upon the
exercise of this Warrant, notwithstanding the knowledge of such Holder of any
other agreement or the provisions of any agreement, whether or not known to the
Holder and the Company represents that there are no agreements inconsistent with
the terms hereof or which purport in any way to bind the Holder of this Warrant
or the Common Stock.
13. The validity, interpretation and performance of this Warrant
and each of its terms and provisions shall be governed by the laws of the State
of New York.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal and to be dated February
12, 1997.
MED/WASTE, INC.
By: /s/ DANIEL A. STAUBER
--------------------------------
DANIEL A. STAUBER
President
[CORPORATE SEAL]
- 6 -
<PAGE> 1
Exhibit 5
[LETTERHEAD OF WALLACE, BAUMAN, FODIMAN & SHANNON, P.A.]
July 28, 1997
Med/Waste, Inc.
3890 N.W. 132nd Street, Suite K
Opa Locka, Florida 33053
Re: MED/WASTE, INC.
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have acted as counsel to Med/Waste, Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing of the
registration statement on Form S-3 (the "Registration Statement"), with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act") and the prospectus contained therein with
respect to the public offering of up to 1,015,349 shares of the Company's common
stock, par value $0.001 (the "Shares"). All of the Shares are being offered on
behalf of certain selling stockholders (the "Selling Stockholders"). In
connection with the registration of the Shares, you have requested our opinion
with respect to the matters set forth below.
For purposes of this opinion, we have reviewed the Registration
Statement. In addition, we have examined the originals or copies certified or
otherwise identified to our satisfaction of: (i) the Company's Certificate of
Incorporation, as amended to date; (ii) the By-laws of the Company, as amended
to date; (iii) records of the corporate proceedings of the Company as we deemed
necessary or appropriate as a basis for the opinions set forth herein; and (iv)
those matters of law as we have deemed necessary or appropriate as a basis for
the opinions set forth herein. We have not made any independent review or
investigation of the organization, existence, good standing, assets, business or
affairs of the Company, or of any other matters. In rendering our opinion, we
have assumed without inquiry the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
these documents submitted to us as copies.
We have not undertaken any independent investigation to determine facts
bearing on this opinion, and no inference as to the best of our knowledge of
facts based on an independent investigation should be drawn from this
representation. Further, our opinions, as hereinafter expressed, are subject to
the following exceptions, limitations and qualifications: (i) the effect of
bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors; and (ii) the effect of general
principles of equity, whether enforcement is considered in a proceeding in
equity or at law and the discretion of the court before which any proceeding
therefore may be brought.
We are admitted to the practice of law only in the State of Florida
and, accordingly, we do not purport to be experts on the laws of any other
jurisdiction nor do we express an opinion as
<PAGE> 2
Med/Waste, Inc.
July 28, 1997
Page 2
to the laws of jurisdictions other than the laws of the State of Florida and the
General Corporation Law of the State of Delaware, as currently in effect.
On the basis of, and in reliance upon, the foregoing, and subject to
the qualifications contained herein, we are of the opinion that the shares of
common stock being sold by the selling shareholders upon exercise of the
warrants or conversion of Debentures, as more fully described in the
Registration Statement will be duly authorized, legally issued, fully paid and
none assessable when the Warrants, stock options or other warrants are exercised
and are paid to the Company.
We hereby consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters."
This opinion is rendered only to you and is solely for your benefit in
connection with the transactions covered hereby. This opinion may not be relied
upon by you for any other purpose or furnished, or quoted to, or relied upon by
any other person, firm or corporation for any purpose without our prior express
written consent.
Respectfully submitted,
WALLACE, BAUMAN,
FODIMAN & SHANNON, P.A.
BRYAN W. BAUMAN
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTS
Med/Waste, Inc. and Subsidiaries
Miami, Florida
We hereby consent to the incorporation by reference in the Prospectus
constituting of part of this Registration Statement of our report dated March 7,
1997, relating to the consolidated financial statements of Med/Waste, Inc. and
Subsidiaries appearing in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1996.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
Miami, Florida BDO Seidman, LLP
July 29, 1997
