<PAGE>
[SHARPS LETTERHEAD]
October 13, 1998
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend the
1998 Annual Meeting of Stockholders of Sharps Compliance Corp. The Annual
Meeting will be held on Thursday, November 12, 1998, at 2:00 p.m. at the
Company's offices, 9050 Kirby, Houston, Texas. The formal Notice of the
Annual Meeting is set forth in the enclosed material.
The matters expected to be acted upon at the meeting are described in the
attached Proxy Statement. During the meeting, stockholders will have the
opportunity to ask questions and comment on the operations of Sharps
Compliance Corp.
It is important that your views be represented whether or not you are able to
be present at the Annual Meeting. PLEASE SIGN AND RETURN THE ENCLOSED PROXY
CARD PROMPTLY.
We appreciate your investment in Sharps Compliance Corp. and urge you to
return your proxy card as soon as possible.
Sincerely,
/s/ Burt Kunik
- -------------------------------------
Burt Kunik
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
SHARPS COMPLIANCE CORP.
9050 KIRBY
HOUSTON, TEXAS 77054
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 12, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Sharps Compliance Corp., a Delaware corporation (the
"Company"), will be held on Thursday, November 12, 1998, at 2:00 p.m. local
time at the Company's offices, 9050 Kirby, Houston, Texas, for the purpose of
considering and voting upon the following:
(1) The election of three directors to hold office until the next Annual
Meeting of Stockholders or until the election and qualification of
their respective successors.
(2) A proposal to ratify the appointment of Arthur Andersen LLP as
independent public accountants of the Company for the fiscal year
ending June 30, 1999.
(3) Such other business as properly may come before the Annual Meeting or
any adjournment(s) thereof. The Board of Directors is presently
unaware of any other business to be presented to a vote of the
stockholders at the Annual Meeting.
The items of business are more fully described in the Proxy Statement
accompanying this notice.
The Board of Directors has fixed October 1, 1998 as the record date (the
"Record Date") for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting or any adjournment(s) or postponement(s)
thereof. Only stockholders of record at the close of business on the Record
Date are entitled to notice of and to vote at the Annual Meeting. The stock
transfer books will not be closed. A list of stockholders entitled to vote
at the Annual Meeting will be available for examination at the offices of the
Company for ten days prior to the Annual Meeting.
By Order of the Board of Directors
W. Audie Long
CORPORATE SECRETARY
Houston, Texas
October 13, 1998
IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER,
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
URGED TO PROMPTLY MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED, SELF-ADDRESSED, STAMPED ENVELOPE SO THAT YOUR SHARES OF STOCK MAY
BE REPRESENTED AND VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE
PRESENCE OF A QUORUM MAY BE ASSURED AT THE ANNUAL MEETING. YOUR PROXY WILL
BE RETURNED TO YOU IF YOU SHOULD BE PRESENT AT THE ANNUAL MEETING AND SHOULD
REQUEST SUCH RETURN OR IF YOU SHOULD REQUEST SUCH RETURN IN THE MANNER
PROVIDED FOR REVOCATION OF PROXIES ON THE INITIAL PAGES OF THE ENCLOSED PROXY
STATEMENT. PROMPT RESPONSE BY OUR STOCKHOLDERS WILL REDUCE THE TIME AND
EXPENSE OF SOLICITATION.
<PAGE>
SHARPS COMPLIANCE CORP.
9050 KIRBY
HOUSTON, TEXAS 77054
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 12, 1998
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement (the "Proxy Statement") and the accompanying
materials are furnished in connection with the solicitation of proxies by the
Board of Directors of Sharps Compliance Corp., a Delaware corporation (the
"Company"), to be used at the Annual Meeting of Stockholders of the Company
to be held on November 12, 1998 (the "Annual Meeting"), at the time and place
and for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders and adjournment(s) or postponement(s) thereof.
The accompanying proxy is designed to permit each holder of the
Company's common stock, par value $0.01 per share (the "Common Stock"), to
vote for or withhold voting for the nominees for election as directors of the
Company set forth under Proposal 1, to vote for or against or to abstain from
voting on Proposal 2 and to authorize the proxies to vote in their discretion
with respect to any other proposal brought before the Annual Meeting. When a
stockholder's executed proxy card specifies a choice with respect to a voting
matter, the shares will be voted accordingly. IF NO SUCH SPECIFICATIONS ARE
MADE, THE PROXIES FOR THE COMMON STOCK WILL BE VOTED BY THOSE PERSONS NAMED
IN THE PROXIES AT THE ANNUAL MEETING: FOR THE ELECTION OF THE NOMINEES
SPECIFIED UNDER THE CAPTION "ELECTION OF DIRECTORS" AND FOR RATIFICATION OF
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR
THE COMPANY. If any other matters properly come before the Annual Meeting,
the Proxies will vote upon such matters according to their judgment.
The Company encourages the personal attendance of its stockholders at
the Annual Meeting, and execution of the accompanying proxy will not affect a
stockholder's right to attend the Annual Meeting and to vote his or her
shares in person. Any stockholder giving a proxy has the right to revoke it
by giving written notice of revocation to W. Audie Long, Corporate Secretary,
Sharps Compliance Corp., at the Company's executive office, 9050 Kirby,
Houston, Texas 77054, at any time before the proxy is voted, by executing and
delivering a later-dated proxy, or by attending the Annual Meeting and voting
his or her shares in person. No such notice of revocation or later-dated
proxy will be effective, however, until received by the Company at or prior
to the Annual Meeting. Such revocation will not affect a vote on any matters
taken prior to the receipt of such revocation. Mere attendance at the Annual
Meeting will not of itself revoke the proxy.
All expenses of the Company in connection with this solicitation will be
borne by the Company. In addition to the solicitation of proxies by use of
the mail, officers, directors and regular employees of the Company may
solicit the return of proxies by personal interview, mail, telephone and/or
facsimile. Such persons will not be additionally compensated, but will be
reimbursed for out-of-pocket expenses. The Company also will request
brokerage houses and other custodians, nominees and fiduciaries to forward
solicitation material to the beneficial owners of shares held of record by
such persons and will reimburse such persons and its transfer agent for their
reasonable out-of-pocket expenses in forwarding such material.
This Proxy Statement, Proxy Card and the Company's Annual Report on Form
10-KSB covering the Company's fiscal year ended June 30, 1998, including
audited financial statements, are first being mailed to the stockholders of
the Company on or about October 13, 1998.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1998 is incorporated by reference in this Proxy Statement. A copy
of such Form 10-KSB is enclosed with this Proxy Statement. In the event this
Proxy Statement was delivered without a copy of such Form 10-KSB, the Company
will, upon written or oral request, provide without charge a copy of such
Form 10-KSB (other than exhibits to such document, unless such exhibits are
specifically incorporated by reference into such document). Requests should
be directed to Sharps Compliance Corp., 9050 Kirby, Houston, Texas 77054,
Attention: Phyllis Ross, telephone (713) 432-0300.
THE DATE OF THIS PROXY STATEMENT IS OCTOBER 13, 1998
<PAGE>
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
GENERAL
The Board has fixed the close of business on October 1, 1998 as the
record date (the "Record Date") for the Annual Meeting. Only holders of
record of the outstanding shares of Common Stock at the close of business on
the Record Date are entitled to notice of and to vote at the Annual Meeting
and any adjournment(s) thereof. At the close of business on October 1, 1998,
7,593,944 shares of Common Stock were outstanding and entitled to be voted at
the Annual Meeting. The Common Stock is the only class of stock entitled to
vote at the Annual Meeting. Each share of Common Stock is entitled to one
vote on each matter presented to the stockholders.
QUORUM AND VOTE REQUIRED
The presence, in person or by proxy, of a majority of the total shares
of Common Stock outstanding at the close of business on the Record Date is
necessary to constitute a quorum for transaction of business at the Annual
Meeting. Abstentions and broker non-votes are counted as shares present for
the purpose of determining the presence or absence of a quorum for the
transaction of business. Assuming the presence of a quorum, the affirmative
vote of the holders on the Record Date of a plurality of shares of Common
Stock outstanding, represented in person or by proxy at the Annual Meeting,
is required to elect directors and the affirmative vote of the holders on the
Record Date of a majority of shares of Common Stock represented in person or
by proxy at the Annual Meeting is required for ratification of the
appointment of the Company's independent public accountants.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table and notes thereto set forth certain information with
respect to the shares of Common Stock beneficially owned by (i) each director
and nominee for director of the Company, (ii) all executive officers of the
Company, including those listed in the Summary Compensation Table set forth
under the caption "Executive Compensation" below, (iii) all directors and
executive officers of the Company as a group and (iv) each person known by the
Company to be the beneficial owner of 5% or more of the outstanding Common
Stock, as of the Record Date:
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------------------------
AMOUNT AND NATURE OF PERCENT OF CLASS
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OWNED BENEFICIALLY(2)
------------------------ ----------------------- ---------------------
<S> <C> <C>
Lee Cooke 127,801(3) 1.7%
John W. Dalton(4) 1,252,076(5) 16.5%
Parris H. Holmes, Jr. (6) 773,350(7) 10.2%
Dr. Burt Kunik(8) 3,000,000 39.5%
Kent D. Manby 0 *
All executive officers and directors
as a group (four individuals) 3,901,151(9) 51.0%
</TABLE>
*Represents less than 1% of the issued and outstanding shares of Common Stock.
(1) Each of the persons named in the table has sole voting and investment
power with respect the shares reported, subject to community property laws
where applicable and the information contained in this table and these
notes.
(2) The percentages indicated are based on outstanding stock options and
stock purchase warrants exercisable within 60 days for each individual and
7,593,944 shares of Common Stock issued and outstanding on the Record Date.
(3) Includes 33,488 shares that Mr. Cooke has the right to acquire upon the
exercise of stock options, exercisable within
2
<PAGE>
60 days, and 5,066 shares that Mr. Cooke has the right to acquire upon the
exercise of stock purchase warrants, exercisable within 60 days.
(4) Mr. Dalton's address is 11325 Somerland Way, Houston, Texas 77024.
(5) Includes 2,076 shares that Mr. Dalton has the right to acquire upon the
exercise of stock purchase warrants, exercisable within 60 days.
(6) Mr. Holmes's address is 7411 John Smith Drive, Suite 200, San Antonio,
Texas 78229.
(7) Includes 14,902 shares that Mr. Holmes has the right to acquire upon
the exercise of stock options, exercisable within 60 days.
(8) Dr. Kunik's address is 9050 Kirby, Houston, Texas 77054.
(9) Includes 48,390 shares that four directors and executive officers have
the right to acquire upon the exercise of stock options, exercisable within
60 days, and 5,066 shares that such directors and executive officers have
the right to acquire upon the exercise of stock purchase warrants,
exercisable within 60 days.
ITEM 1 ON PROXY
ELECTION OF DIRECTORS
NOMINEES
The By-laws of the Company provide that the Board of Directors shall
consist of not fewer than three nor more than fifteen members and that the
number of directors, within such limits, shall be determined by resolution of
the Board of Directors at any meeting or by the stockholders at the Annual
Meeting. The Board of Directors of the Company has set the number of
directors comprising the Board of Directors at three.
The Board of Directors has nominated for director the individuals named
below to be elected at the Annual Meeting. Each of the nominees has agreed
to stand for election as a director of the Company, to serve until the 1999
Annual Meeting or until their respective successors have been duly elected
and qualified.
The table below sets forth the names and ages of the nominees for
director and the year each nominee first became a director of the Company.
Each of the nominees is presently serving as a director of the Company.
Biographical information on the nominees is set forth below under "Management
- - Executive Officers and Directors."
<TABLE>
<CAPTION>
YEAR FIRST BECAME A
NAME AND AGE DIRECTOR OF THE COMPANY
------------ -----------------------
<S> <C>
Lee Cooke (54) 1992
Parris H. Holmes, Jr. (54) 1998
Dr. Burt Kunik (60) 1998
</TABLE>
Unless otherwise indicated on any duly executed and dated proxy, the
persons named in the enclosed proxy intend to vote the shares that it
represents for the election of the nominees listed in the table above for the
term specified. Although the Company does not anticipate that the
above-named nominees will refuse or be unable to accept or serve as directors
of the Company for the term specified, the persons named in the enclosed form
of proxy intend, if either of such nominees is unable or unwilling to serve
as a director, to vote the shares represented by the proxy for the election
of such other person as may be nominated or designated by management, unless
they are directed by the proxy to do otherwise.
3
<PAGE>
Assuming the presence of a quorum, the affirmative vote of the holders
of a plurality of the shares of Common Stock, represented in person or by
proxy at the Annual Meeting, is required for the election of directors.
Assuming the receipt by each such nominee of the affirmative vote of at least
a plurality of the shares of Common Stock represented at the Annual Meeting,
such nominees will be elected as directors. Proxies will be voted in
accordance with the specifications marked thereon, and if no specification is
made, will be voted "FOR" the nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ELECTION OF EACH OF THE INDIVIDUALS NOMINATED
FOR ELECTION AS DIRECTORS.
ITEM 2 ON PROXY
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed the firm of Arthur
Andersen LLP to serve as independent public accountants of the Company for
the fiscal year ending June 30, 1999. Although stockholder ratification is
not required, the Board of Directors has directed that such appointment be
submitted to the stockholders of the Company for ratification at the Annual
Meeting. Arthur Andersen LLP has served as independent public accountants of
the Company with respect to the Company's consolidated financial statements
for fiscal years 1997 and 1998 and is considered by management of the Company
to be well qualified. If the stockholders do not ratify the appointment of
Arthur Andersen LLP, the Board of Directors may reconsider the appointment.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting. They will have an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
stockholders.
Assuming the presence of a quorum, the affirmative vote of the holders
of a majority of the outstanding shares of Common Stock represented at the
Annual Meeting in person or by proxy is necessary for the adoption of the
proposal. Proxies will be voted for or against such approval in accordance
with the specifications marked thereon, and if no specification is made, will
be voted "FOR" such ratification.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS
OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1999
ITEM 3 ON PROXY
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors of the Company does not know of any other matters
which properly may come before the Annual Meeting. However, if any other
matter should be properly presented for consideration and voting at the
Annual Meeting or any adjournment(s) thereof, it is the intention of the
persons named in the accompanying proxy to vote, or otherwise act, in
accordance with their judgment on such issues.
MANAGEMENT
Set forth below is information with respect to each director and
executive officer of the Company as of September 30, 1998. The executive
officers are elected by the Board of Directors and serve at the discretion of
the Board. There are no family relationships between any two directors or
executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
DR. BURT KUNIK 60 Chairman of the Board, Chief Executive Officer
4
<PAGE>
and President
LEE COOKE(1) 54 Director
PARRIS H. HOLMES, JR.(1) 54 Director
KENT D. MANBY 54 Vice President, Chief Financial Officer
and Treasurer
</TABLE>
(1) Member of the Audit and Compensation Committees
The following is a description of the biographies of the Company's
executive officers and directors and nominees for director for the past five
years.
LEE COOKE has been a director of the Company since March 1992. He
served as Chairman of the Board, Chief Executive Officer and President of the
Company from March 1992 until July 1998. Mr. Cooke served several roles in
marketing, manufacturing and human resources at Texas Instruments from 1972
to 1983. He served as Chief Executive Officer of The Greater Austin Chamber
of Commerce from 1983 to 1987. From 1988 to 1991 he served as Mayor of
Austin, Texas. Mr. Cooke is a director of Billing Concepts Corp., an
information systems provider.
PARRIS H. HOLMES, JR. has been a director of the Company since July
1998. He previously served on the Company's Board of Directors from March
1992 until April 1996. Mr. Holmes has served as Chairman of the Board and
Chief Executive Officer of Billing Concepts Corp. since May 1996. He served
as both Chairman of the Board and Chief Executive Officer of USLD
Communications Corp. ("USLD") from September 1986 until August 1996 and
served as Chairman of the Board of USLD until June 2, 1997. Prior to March
1993, Mr. Holmes also served as President of USLD. Mr. Holmes is also
Chairman of the Board of Tanisys Technology, Inc., a developer, manufacturer
and marketer of computer peripheral equipment. Mr. Holmes also served as a
director of Sharps Compliance, Inc. ("SCI"), a wholly owned subsidiary of the
Company, prior to its acquisition by the Company in February 1998. On
December 18, 1996, the Securities and Exchange Commission (the "Commission")
filed a civil injunctive action in the United States District Court for the
District of Columbia alleging that Mr. Holmes failed to file timely 12
reports regarding certain 1991 and 1992 transactions in the stock of USLD as
required by Section 16(a) of the Securities and Exchange Act of 1934, as
amended. Section 16(a) requires officers and directors of such companies to
file reports with the Commission regarding their personal transactions in the
securities of their company. Mr. Holmes settled this action on December 18,
1996, without admitting or denying the allegations of the complaint, by
consenting to the entry of an injunction with respect to these requirements
and paying a civil penalty of $50,000. The Commission Staff also has
notified Mr. Holmes of its decision to terminate its investigation of trading
in the securities of USLD and the securities of Value-Added Communications,
Inc. (In the Matter of Trading in the Securities of Value-Added
Communications, Inc. (HO-2765)).
DR. BURT KUNIK has been a director of the Company since July 1998. He
founded SCI in May 1994 and has served as a director and Chief Executive
Officer of SCI since that time. Dr. Kunik has 24 years of experience as an
endodontist, including management experience of three successful start-up
companies in the medical waste and insurance industries. Prior to starting
Sharps, Dr. Kunik spent five years with 3CI Complete Compliance Corporation,
which he co-founded. Its successor, American 3CI (Nasdaq: TCCC), currently
is engaged in the business of medical waste services in the
southeastern/southwestern United States. Other previous business experience
includes management roles in real estate, oil and gas, cattle ranching and
the travel industry. Dr. Kunik has been very active in the medical waste
industry for nine years. He served as Chairman of the Medical Waste
Institute in 1992 and has served on the board of the Environmental Industry
Association.
KENT D. MANBY joined the Company as Vice President, Chief Financial
Officer and Treasurer in July 1998. He previously served as Partner -
Finance for Irrigation Station, a wholesale supplier of irrigation equipment,
from May 1993 to May 1998. Mr. Manby has approximately 20 years of financial
management experience, including Executive Vice President
5
<PAGE>
and Chief Financial Officer of EnerServe Products, Inc. and successor
companies from 1987 to 1993 and as a partner in Manby, Metzenthin & Company,
Certified Public Accountants, from 1978 to 1986. In addition, Mr. Manby has
business experience in oil and gas, construction and real estate.
COMMITTEES, MEETINGS AND BOARD COMPENSATION
The business of the Company is managed under the direction of its Board
of Directors. The Company's Board of Directors has established two standing
committees: The Audit Committee and the Compensation Committee.
AUDIT COMMITTEE. The Audit Committee is comprised of certain directors
who are not employees of the Company or any of its subsidiaries. Messrs.
Cooke and Holmes are the current members of the Audit Committee. The Audit
Committee acts on behalf of the Board of Directors with respect to the
Company's financial statements, record-keeping, auditing practices and
matters relating to the Company's independent public accountants, including
recommending to the Board of Directors the firm to be engaged as independent
public accountants for the next fiscal year; reviewing with the Company's
independent public accountants the scope and results of the audit and any
related management letter; consulting with the independent public accountants
and management with regard to the Company's independent public accountants;
and reviewing the independence of the independent public accountants.
COMPENSATION COMMITTEE. The Compensation Committee is comprised of
certain directors who are not employees of the Company or any of its
subsidiaries. Messrs. Cooke and Holmes are the current members of the
Compensation Committee. The Compensation Committee reviews and makes
recommendations to the Board of Directors concerning major compensation
policies and compensation of officers and executive employees and administers
the Company's 1993 Stock Plan.
BOARD OF DIRECTOR AND COMMITTEE MEETINGS. The Board of Directors met
five times in the 12 months ended June 30, 1998. During the fiscal year,
each of the directors of the Company attended at least 75% of the aggregate
of the meetings of the Board of Directors and committees of which such
director was a member.
COMPENSATION OF DIRECTORS
MEETING FEES. The Company reimburses its directors for travel expenses
to attend Board meetings but does not provide any other cash compensation.
STOCK OPTIONS. From January 1993 through June 1998, each non-employee
director was granted a stock option to purchase 40,000 shares under the
Company's 1993 Stock Plan (the "Stock Plan") at the time of their election or
appointment to the Board of Directors. Pursuant to an amendment to the
Stock Plan, beginning July 1998, each non-employee director was granted an
option to purchase 25,000 shares under the Company's 1993 Stock Plan upon
election or appointment to the Board of Directors of the Company. See
"Executive Compensation - Employee Benefit Plans - Sharps Compliance Corp.
1993 Stock Plan." These options vest over a three-year period beginning with
the date of service as a director. Options outstanding at February 27, 1998,
the effective date of the Company's acquisition of SCI, became 100% vested
under the terms of the Stock Plan. At June 30, 1998, the non-employee
directors of the Company held the following number and value of options
granted under the Stock Plan:
<TABLE>
<CAPTION>
SECURITIES UNDERLYING UNREALIZED VALUE OF OPTIONS
OPTIONS EXERCISE PRICE AT JUNE 30, 1998 ($)(2)
DIRECTOR EXERCISABLE UNEXERCISABLE PER SHARE EXERCISABLE UNEXERCISABLE
- -------- ----------- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
LEE COOKE 33,488(1) 0 $3.02(1) $56,930 $0
PARRIS H. HOLMES, JR. 14,902(1) 0 $3.02(1) $25,333 $0
</TABLE>
(1) Represents the number of shares and exercise price after giving effect to
the one-for-5.032715 reverse stock split
6
<PAGE>
effective July 23, 1998.
(2) Reflects the aggregate market value of the underlying securities as
determined by reference to the closing price of the Common Stock on the NASD
OTC Bulletin Board on June 30, 1998 ($4.72 per share) minus the aggregate
exercise price for each option.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation paid during each of the Company's last three fiscal years to the
Company's Chief Executive Officer. NO EXECUTIVE OFFICER OF THE COMPANY
RECEIVED SALARY AND BONUS EXCEEDING $100,000 IN FISCAL 1998. Lee Cooke
became an employee of the Company during fiscal 1992 and did not receive
perquisites exceeding 10% of his salary and bonus in fiscal year 1996 through
1998. As a result of the repayment of $23,166 in deferred salary and vacation
owed Mr. Cooke due to voluntary reductions in fiscal 1995, he received
$111,500 in fiscal 1996. Mr. Cooke further agreed to a 30% reduction in
compensation for fiscal 1997 and a 15% reduction in compensation for fiscal
1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS
--------------------------- ----------- ------ -----
<S> <C> <C> <C>
LEE COOKE (1) 1998 $ 92,800 none
CHAIRMAN OF THE BOARD, CHIEF 1997 76,700 none
CHIEF EXECUTIVE OFFICER AND PRESIDENT 1996 111,500 none
DR. BURT KUNIK (2) 1998 $ 60,000 none
CHAIRMAN OF THE BOARD, CHIEF 1997 N/A N/A
EXECUTIVE OFFICER AND PRESIDENT OF SCI (3) 1996 N/A N/A
</TABLE>
(1) Mr. Cooke resigned as Chairman of the Board, Chief Executive Officer
and President of the Company in July 1998 and continues to serve as a member
of the Board of Directors of the Company.
(2) Amount shown reflects Dr. Kunik's salary from February 27, 1998, the
effective date of the Company's acquisition of SCI, through June 30, 1998,
the Company's fiscal year end. Dr. Kunik's annual salary is $180,000.
(3) Dr. Kunik was elected to the Board of Directors and elected Chairman of
the Board, Chief Executive Officer and President of the Company in July
1998.
STOCK OPTION GRANTS IN FISCAL 1998
The following table provides information related to options granted to
the named executive officers during fiscal 1998. The Company has never
granted stock appreciation rights.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED(#)(1) 1998 ($/SH)(1) DATE
---- ------------- ---------- --------- ----------
<S> <C> <C> <C> <C>
LEE COOKE 4,967 100% $3.02 7/24/03
DR. BURT KUNIK 0 -- -- --
</TABLE>
7
<PAGE>
(1) Represents the number and exercise price of Options granted in fiscal
1998, after giving effect to the one-for-5.032715 reverse stock split
effective July 23, 1998.
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND FISCAL YEAR-END OPTION VALUES
There were no option exercises by executive officers during the 1998
fiscal year. The following table provides the number and value of options
held at fiscal year end. The Company does not have any outstanding stock
appreciation rights.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END(#) OPTIONS AT FY-END($)(1)
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
NAME UPON OPTION EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
LEE COOKE 0 N/A 33,488 0 $56,930 $0
DR. BURT KUNIK 0 N/A 0 0 -- --
</TABLE>
(1) Market value of the underlying securities at June 30, 1998 ($4.72)
minus the exercise price.
EMPLOYEE BENEFIT PLANS
SHARPS COMPLIANCE CORP. 1993 STOCK PLAN
GENERAL. Effective November 16, 1993, the stockholders of the Company
approved the Stock Plan. Under the Stock Plan, (a) employees of the Company
and any subsidiary of the Company may be awarded incentive stock options
("ISOs"), as defined in Section 422A(b) of the Internal Revenue Code of 1986,
as amended (the "Code"), and (b) employees, consultants and affiliates or any
other person or entity, as determined by the Administrator to be in the best
interests of the Company, may be granted (i) stock options which do not
qualify as ISOs ("Non-qualified Options"), (ii) awards of stock in the
Company ("Awards"), (iii) stock appreciation rights ("SARs") in conjunction
with, or independently of, options granted thereunder, (iv) performance
awards in the form of units ("Units") representing phantom shares of stock,
(v) non-employee director options and (vi) opportunities to make direct
purchases of stock in the Company ("Purchases"). ISOs and Non-qualified
Options are collectively referred to as "Options," and together with Awards,
SARs, Units, Purchases and non-employee director options are collectively
referred to as "Stock Rights."
SHARES SUBJECT TO THE STOCK PLAN. The Stock Plan authorizes the
issuance of up to 1,000,000 shares, after giving effect to the
one-for-5.032715 reverse stock split effective July 23, 1998. At September
30, 1998, options to purchase 307,640 shares had been granted. If any Stock
Right granted under the Stock Plan terminates, expires or is surrendered, new
Stock Rights may thereafter be granted covering such shares.
ADMINISTRATION. The Stock Plan is administered by the Compensation
Committee of the Board of Directors (the "Administrator"), which is composed
of non-employee members of the Board of Directors. Directors Cooke and
Holmes are the current members of the Compensation Committee. Subject to the
terms of the Stock Plan, the Administrator has the authority to determine the
persons to whom Stock Rights (except non-employee director options) shall be
granted, the number of shares covered by each such grant, the exercise or
purchase price per share, the time or times at which Stock Rights shall be
granted, whether each option granted shall be an ISO or a Non-qualified
Option, whether restrictions such as repurchase options are to be imposed on
shares subject to Stock Rights and the nature of such restrictions, if any.
The
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interpretation or construction by the Administrator of the Stock Plan or with
respect to any Stock Rights granted thereunder shall, unless otherwise
determined by the Board of Directors, be final. The option price for ISOs
may not be less than 100% of the fair market value of the Common Stock on the
date of grant, or 110% of the fair market value with respect to any ISO
issued to a holder of 10% or more of the Company's shares. There is no price
requirement for Non-qualified Stock Options. In no event may the aggregate
fair market value (determined on the date of the grant of an ISO) of Common
Stock for which ISOs granted to any employee under the Stock Plan are
exercisable for the first time by such employee during any calendar year
exceed $100,000. The Stock Plan further directs the Administrator to set
forth provisions in Option agreements regarding the exercise and expiration
of Options according to stated criteria. The Administrator oversees the
methods of exercise of Options, with attention being given to compliance with
appropriate securities laws and regulations. The Stock Plan permits the use
of already owned Common Stock as payment for the exercise price of Stock
Rights.
ELIGIBILITY FOR GRANTING OF STOCK RIGHTS. ISOs may be granted under the
Stock Plan only to employees of the Company. Non-qualified Options, SARs and
Units may be granted to any officer, employee, consultant or affiliate of the
Company, or any other person or entity, as determined by the Administrator to
be in the best interests of the Company.
NON-EMPLOYEE DIRECTOR OPTIONS. Under the Stock Plan, any director who
is not an officer or full-time employee of the Company or a related company
(totaling two eligible individuals at September 30, 1998) is granted a
five-year Option to purchase 25,000 shares of Common Stock at the then fair
market value upon joining the Board of Directors. In addition, non-employee
directors will receive, on the first business day after the date of each
annual meeting of stockholders of the Company commencing with the annual
meeting of stockholders immediately following the full vesting of any
previously granted non-employee director Option, an Option to purchase an
additional 10,000 shares of Common Stock at an exercise price per share equal
to the fair market value of the Common Stock on the date of grant. The
Options vest one-third a year for three years. Non-employee director Options
are not subject to the discretion of the Administrator, except that when a
director resigns, the non-employee director Option may be continued as a
Non-qualified Option under the Stock Plan if the director continues to be
affiliated with the Company.
AWARDS. Restricted stock awards may be granted under the Stock Plan at
the discretion of the Administrator. The grantee purchases the number of
shares subject to the Award, usually for a nominal price such as the par
value. The shares, however, are held in escrow and may not be sold until they
are vested in accordance with the terms of the grant, such as continued
employment for a specific period of time, accomplishment by the Company of
certain goals, or a combination of criteria. Upon termination of the Award,
all unvested shares are repurchased by the Company for the same nominal
purchase price originally paid for the stock. As of September 30, 1998, the
Company had not granted any Awards under the Stock Plan.
STOCK APPRECIATION RIGHTS. Options (except non-employee director
options) granted under the Stock Plan may be granted in tandem with SARs
("tandem SARs") or independently of with an Option ("naked SARs"). SARs will
become exercisable at such time or times, and on such conditions, as
specified in the grant. Any tandem SAR granted with an ISO may be granted
only at the date of grant of such ISO. Any tandem SAR granted with a
Non-qualified Option may be granted either at or after the time such Option
is granted. As of September 30, 1998, the Company had not granted any SARs
under the Stock Plan.
A tandem SAR is the right of an optionee, without payment to the Company
(except for applicable withholding taxes), to receive the excess of the fair
market value per share on the date which such SAR is exercised over the
option price per share as provided in the related underlying Option. A
tandem SAR granted with an Option shall pertain to, and be exercised only in
conjunction with, the related underlying Option granted under the Stock Plan
and shall be exercisable and exercised only to the extent that the underlying
Option is exercisable. The tandem SAR shall become either fully or partially
non-exercisable and shall then be fully or partially unexercisable and fully
or partially forfeited if the exercisable portion, or any part thereof, of
the underlying Option is exercised, and vice versa.
A naked SAR may be granted irrespective of whether the recipient holds,
is being granted or has been granted any Options under any stock plan of the
Company. A naked SAR may be granted irrespective of whether the recipient
holds, is being granted or has been granted any tandem SARs. A naked SAR may
be made exercisable without regard to the exercisability of any Option.
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UNITS. The Stock Plan provides that performance awards in the form of
Units may be granted either independently of or in tandem with a Stock Right,
except that such Units shall not be granted in tandem with ISOs. Units
granted shall be based on various performance factors and have such other
terms and conditions at the discretion of the Administrator. As of September
30, 1998, the Company had not granted any Units under the Stock Plan.
TERMINATION AND AMENDMENT OF THE STOCK PLAN. The Board of Directors may
terminate or amend the Stock Plan in any respect or at any time, except that
(i) no amendment requiring stockholder approval under the provisions of the
Code and related regulations relating to ISOs or under Rule16b-3 will be
effective without approval of stockholders as required and within the times
set by such rules, and (ii) no amendment may be made more than once every six
months to the provisions of the Stock Plan dealing with, relating to,
affecting or governing director Options (other than those required to comport
with changes in the Code, the Employee Retirement Income Security Act or the
rules thereunder).
EMPLOYMENT AGREEMENTS
Effective August 27, 1997, the Company entered into an employment
agreement with Mr. Cooke. This agreement was to expire on August 26, 1999
and provided for a minimum annual base salary (subject to adjustment) of
$110,000. The employment agreement provided that in the event of a
termination without cause, Mr. Cooke would be entitled to two years of
severance pay. The Company entered into a Severance Agreement with Mr. Cooke
effective September 2, 1998 pursuant to which the Company sold to Mr. Cooke
any and all assets and liabilities related to the Company's subsidiary, U.S.
Medical, Inc., including (i) all cash on hand, less $40,000, (ii) all
accounts receivable, (iii) all personal property located at the offices in
Austin, Texas, (iv) all patents and trademarks owned or licensed to U.S.
Medical, Inc., (v) customer lists of U.S. Medical, Inc., (vi) rights to the
name U.S. Medical Systems, Inc. and (vii) all of the capital stock of U.S.
Medical, Inc. As consideration for the sale of the assets described above,
Mr. Cooke waived and released the Company from any and all liabilities in
connection with those certain severance obligations of the Company under his
employment agreement with the Company.
Under the terms of the Agreement and Plan of Reorganization entered into
by and between the Company, SCI and the stockholders of SCI effective
February 27, 1998, the Company assumed the obligations of the employment
agreement entered into effective January 1, 1998 by Sharps with Dr. Burt
Kunik. This agreement provides for a three-year term, unless terminated as
provided therein, an annual salary of $180,000 and an incentive bonus at the
discretion of the Compensation Committee.
The employment agreement with Dr. Kunik provides that if he is
terminated without "cause" (as defined in the employment agreement) or if he
resigns his employment for "good reason" (as defined in the employment
agreement), he will be entitled to, at his election, either (i) a lump-sum
payment in the amount equal to his base salary for the unexpired term of the
agreement or (ii) continuation of his base salary and benefits, including the
loan repayment bonuses, through the unexpired term of the agreement.
Dr. Kunik's employment agreement is subject to early termination as
provided therein, including termination by the Company for "cause" (as
defined in the employment agreement) or termination by the employee for "good
reason" (as defined in the employment agreement). The employment agreement
also provides that if, at any time within 12 months of a change of control,
the employee ceases to be an employee by reason of (i) termination by the
employer without "cause" (as defined in the employment agreement) or (ii)
voluntary termination by the employee for "good reason upon change of
control" (as defined in the employment agreement), in addition to the
severance stated above, he shall receive an additional payment that, when
added to all other payments received in connection with a change of control,
will result in the maximum amount allowed to be paid to an employee without
triggering an excess parachute payment (as defined by the Internal Revenue
Code), and all benefits (as defined by the employment agreement) shall
continue throughout the remainder of the term of the agreement. In the event
the employer is merged or acquires a company in a field outside of the
current product alignment, the employer and the employee could consider the
assignment of existing product lines and technology to the employee or his
assignee as part of or in lieu of the above severance pay.
A change of control is deemed to have occurred if (i) more than 30% of
the combined voting power of the
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employer's then outstanding securities is acquired, directly or indirectly,
or (ii) at any time during the 24-month period after a tender offer, merger,
consolidation, sale of assets or contested election, or any combination of
such transactions, at least a majority of the employer's Board of Directors
shall cease to consist of "continuing directors" (meaning directors of the
employer who either were directors prior to such transaction or who
subsequently became directors and whose election, or nomination for election
by the employer's stockholders, was approved by a vote of at least two-thirds
of the directors then still in office who were directors prior to such
transaction), or (iii) the stockholders of the employer approve a merger or
consolidation of the employer with any other corporation, other than a merger
or consolidation that would result in the voting securities of the employer
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 60% of the total voting power represented by the
voting securities of the employer or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the stockholders of
the employer approve a plan of complete liquidation of the employer or an
agreement of sale or disposition by the employer of all or substantially all
of the employer's assets.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Clark A. Gunderson and Sharri McAnally, who were members of the Board of
Directors of the Company until July 1998, served on the Compensation
Committee during the fiscal year ended June 30, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lee Cooke, a director and nominee for election as a director of the
Company, served as Chairman of the Board, Chief Executive Officer and
President of the Company until his resignation in July 1998. Mr. Cooke owns
89,247 shares of Common Stock of the Company and holds options and stock
purchase warrants to acquire 58,488 and 5,066 additional shares of Common
Stock of the Company, respectively. Dr. Burt Kunik, a director of the
Company, sole director of SCI and the current Chairman of the Board, Chief
Executive Officer and President of the Company, owns 3,000,000 shares of
Common Stock of the Company. Parris H. Holmes, Jr., a director of the
Company and a former director of SCI, owns 758,448 shares of Common Stock of
the Company and holds options to acquire 39,902 additional shares of Common
Stock of the Company. John Dalton, a former director of SCI, owns 1,250,000
shares of Common Stock of the Company and holds stock purchase warrants to
acquire 2,076 additional shares of Common Stock of the Company.
Effective August 27, 1997, the Company entered into an employment
agreement with Mr. Cooke which was to expire August 26, 1999. This agreement
provided for a minimum annual base salary (subject to adjustment) of
$110,000. The employment agreement provided that in the event of a
termination without cause, Mr. Cooke would be entitled to two years of
severance pay. The Company entered into a Severance Agreement with Mr. Cooke
effective September 2, 1998, pursuant to which the Company sold to Mr. Cooke
any and all assets and liabilities related to the Company's subsidiary, U.S.
Medical, Inc., including (i) all cash on hand, less $40,000, (ii) all
accounts receivable, (iii) all personal property located at the offices in
Austin, Texas, (iv) all patents and trademarks owned or licensed to U.S.
Medical, Inc., (v) customer lists of U.S. Medical, Inc., (vi) rights to the
name U.S. Medical Systems, Inc. and (vii) all of the capital stock of U.S.
Medical, Inc. As consideration for the sale of the assets described above,
Mr. Cooke waived and released the Company from any and all liabilities in
connection with those certain severance obligations of the Company under his
employment agreement with the Company.
Effective January 1, 1998, Sharps entered into an employment agreement
with Dr. Kunik. This employment agreement was assumed by the Company under
the terms of the Agreement and Plan of Reorganization effective February 27,
1998. This agreement provides for a three-year term, unless terminated as
provided therein, an annual salary of $180,000 and an incentive bonus at the
discretion of the Compensation Committee. For a complete description of the
terms of Dr. Kunik's employment agreement, including severance provisions,
see "Executive Compensation--Employment Agreements."
Dr. Kunik has executed a personal liability promissory note dated
November 14, 1997 in the principal amount of $400,000 payable to SCI. The
principal amount bears interest at the rate of 8% per annum and is payable in
five equal principal installments, with the first installment due and payable
November 17, 1998 and a like installment due and payable
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each year thereafter. The note is a full recourse obligation of Dr. Kunik.
SECTION 16(A) REPORTING
Paragraph 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who
beneficially own more than 10% of the Company's equity securities, to file
reports of security ownership and changes in such ownership with the
Commission. Officers, directors and greater than 10% beneficial owners also
are required by Commission regulations to furnish the Company with copies of
all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, during the fiscal year ended June 30, 1998,
all Section 16(a) filing requirements applicable to its officers, directors
and greater than 10% beneficial owners were complied with, EXCEPT THAT JOHN
W. DALTON FILED A LATE REPORT COVERING HIS OWNERSHIP IN THE CAPITAL STOCK OF
THE COMPANY.
STOCKHOLDERS' PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders intending to be present at the 1999 Annual
Meeting of Stockholders should be submitted by certified mail, return receipt
requested, and must be received by the Company at its principal executive
offices in Houston, Texas on or before June 15, 1999, to be eligible for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting.
By Order of the Board of Directors
W. Audie Long
CORPORATE SECRETARY
Houston, Texas
October 13, 1998
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IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO
NOT EXPECT TO ATTEND THE SPECIAL MEETING AND WISH THEIR STOCK TO BE VOTED ARE
URGED TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY OR PROXIES IN THE
SELF-ADDRESSED ENVELOPE.
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SHARPS COMPLIANCE CORP.
9050 Kirby
Houston, Texas 77054
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Dr. Burt Kunik and Kent D. Manby, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and vote, as designated below,
all of the shares of the Common Stock, par value $0.01 per share, of Sharps
Compliance Corp. (the "Company") held of record by the undersigned at the
close of business on October 1, 1998, at the Annual Meeting of Stockholders
to be held on November 12, 1998, or any adjournment(s) thereof.
1. PROPOSAL TO ELECT THREE DIRECTORS TO HOLD OFFICE UNTIL THE NEXT ANNUAL
MEETING OF STOCKHOLDERS OR UNTIL THE ELECTION AND QUALIFICATION OF THEIR
RESPECTIVE SUCCESSORS.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for all
(except as marked to the contrary below) nominees listed below
LEE COOKE PARRIS H. HOLMES, JR. DR. BURT KUNIK
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided:
-----------------------------------
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1999.
/ / FOR / / AGAINST / / ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
/ / FOR / / AGAINST / / ABSTAIN
(PLEASE SIGN ON OTHER SIDE)
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(CONTINUED FROM FRONT)
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder(s). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES UNDER PROPOSAL 1 AND
"FOR" THE PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY UNDER PROPOSAL 2, and in the
discretion of the Proxies with respect to any other matter that is properly
presented at the meeting.
Please execute this proxy as your name appears hereon. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
DATED: , 1998
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Signature
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Signature If Held Jointly
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