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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 27, 1998
U.S. MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-22390 68-0206382
(Commission File Number) (IRS Employer Identification No.)
------------------
7600 BURNET ROAD, SUITE 350
AUSTIN, TEXAS 78757
(Address of principal executive office, including zip code)
(512) 458-3335
(Registrant's telephone number, including area code)
<PAGE>
Item 5. OTHER EVENTS.
AGREEMENT AND PLAN OF REORGANIZATION. Effective February 27, 1998, the
Registrant and Sharps Compliance, Inc., a Texas corporation ("Sharps"), with
principal offices located at 8928 Kirby, Houston, Texas 77045, and all of the
Stockholders of Sharps (the "Stockholders") entered into an Agreement and
Plan of Reorganization (the "Agreement") pursuant to which Sharps became a
wholly owned subsidiary of the Registrant. Under the terms of the Agreement,
the Registrant and the Stockholders agreed that all of the outstanding shares
of common stock of Sharps would be exchanged for an aggregate of 1,000,000
shares of Series A 10% Voting Convertible Preferred Stock, $.01 par value, of
Registrant (the "Preferred Stock"), such that each share of Sharps common
stock outstanding on February 27, 1998, not to exceed 7,000,000 shares of
Sharps common stock in the aggregate, was exchanged for .142858 shares of
Preferred Stock (the "Exchange Ratio").
On February 23, 1998, Registrant filed its Certificate Of Designation,
Powers, Preferences and Rights of the Series of the Preferred Stock. Subsequent
to the closing of the Agreement, the holders of the Preferred Stock will be
entitled to 35.190319 votes per share of Preferred Stock on all matters
subject to a vote of stockholders of the Registrant, without any regard to
classification or series. The Preferred Stock shall automatically and
immediately be converted into fully paid and non-assessable shares of common
stock of the Registrant, without any action or election on the part of the
holder thereof, immediately after the Registrant has effected a one-for-five
or greater reverse stock split of Registrant's common stock (the "Automatic
Conversion Date"). The Holders of the Preferred Stock acknowledge that as of
the date of the filing of the Certificate of Designation, the Registrant did
not have sufficient authorized and unissued shares of its common stock to
effect a conversion of the Preferred Stock into common stock. At the
Automatic Conversion Date, each share of the Preferred Stock shall be
converted into seven shares of the Registrant's common stock. Subject to
stockholder approval its annual stockholder meeting, anticipated to be in
April 1998, the Registrant has committed to effect a one-for-five or greater
reverse split of its common stock, at which time the former stockholders of
Sharps will own approximately 91% of the issued and outstanding shares of
common stock of the Registrant.
Sharps focuses exclusively on developing mail disposal services for medical
sharps. Its services are provided primarily to generators of small amounts of
medical waste to facilitate their compliance with state and federal regulations
by tracking, incinerating and documenting the disposed medical waste.
The Agreement and Certificate of Designation are attached hereto as
Exhibits 2.1 and 4.1 and are incorporated herein by reference. The foregoing
description of the Agreement and the Certificate of Designation are qualified
in their entirety by reference to such documents.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibits.
The following exhibits are filed as part of this Report:
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 Agreement and Plan of Reorganization, dated as of
February 27, 1998, between U.S. Medical Systems,
Inc., Sharps Compliance, Inc. and all of the
stockholders of Sharps Compliance, Inc.
4.1 Certificate of Designation, Powers, Preferences
and Rights of the Series of Preferred Stock of
U.S. Medical Systems, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
U.S. MEDICAL SYSTEMS, INC.
March 5, 1998. By: /s/ C. Lee Cooke, Jr.
-------------------------------------
C. Lee Cooke, Jr.,
Chairman of the Board, President
and Chief Executive Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Agreement and Plan of Reorganization, dated as of February 27,
1998, between U.S. Medical Systems, Inc., Sharps Compliance,
Inc. and all of the stockholders of Sharps Compliance, Inc.
4.1 Certificate of Designation, Powers, Preferences and Rights of
the Series of Preferred Stock of U.S. Medical Systems, Inc.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement made as of the 27th day of February, 1998, between U.S.
MEDICAL SYSTEMS, INC., a Delaware corporation with its principal office at 7600
Burnet Road, Suite 350, Austin, Texas 78757 ("Medical"), SHARPS COMPLIANCE,
INC., a Texas corporation with its principal office at 8928 Kirby, Houston,
Texas 77054, and DR. BURT KUNIK, JOHN W. DALTON and PARRIS H. HOLMES, JR.
(collectively, the "Founding Stockholders"), DAVID CARL ANGEL, DR. JERRY A.
ARGOVITZ, ALLEN J. BECKER, GARY and SUSAN BECKER, WILLIAM D. BLAKE, MICHAEL R.
BOILINI, SHELTON W. BOYCE III, C.A. CENTURY LTD. PARTNERSHIP, SUZANNE C. CADE,
WILLIAM S. CANNON, CARLTON L. COOKE, JR., WILLIAM L. CROTHERS, JR., GEORGE W.
DORRANCE, JR., SEAN ELLIOTT, ROBERT WICKLIFFE FENET, W. STANLEY FOSTER, BRUCE
FURR, RAMSAY H. GILLMAN, CLARK A. GUNDERSON, M.D., MICHAEL A. HARRELSON, W.
JAMES HARRISON, PARRIS H. HOLMES, JR., TOMMY E. INGRAM, INTERNATIONAL EUROPEAN
REALTY LIMITED, LARRY M. JAMES, CYNTHIA A. JERGINS, ROBERT G. JONES, RICHARD
HENRY LEE, BARRY M. LEWIS, THOMAS G. and NANCY B. LOEFFLER, W. AUDIE LONG,
RONALD H. MCMILLAN, DAVID M. MITCHELL, B. JACK POGUE, A. MACK POGUE, ALAN W.
SALTZMAN, RICHARD R. AND ROSE M. SCOTT, GEORGE M. SHANKS, JR., SILVERBOND
INVESTMENTS LIMITED, PETER S. WARDENBURG, JARRELL H. WILKE and, BRUCE WILLIS
(collectively, with the Founding Stockholders, the "Stockholders").
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W I T N E S S E T H:
WHEREAS, Sharps Compliance, Inc. is a Texas corporation ("Sharps") with
authorized capital of Ten Million (10,000,000) shares of $.01 par value
common stock, of which Seven Million (7,000,000) shares are outstanding and
owned by the Stockholders ("Sharps Stock");
WHEREAS, Medical desires to acquire from the Stockholders and the
Stockholders desire to convey to Medical all of the Sharps Stock in exchange
solely for the Medical Stock (as defined in Section 1.02 below); and
WHEREAS, it is the intent of the Stockholders and Medical for the
exchange of stock contemplated by this Agreement to qualify as a tax-free
exchange under Section 368 of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
ARTICLE I
PLAN OF REORGANIZATION
1.01 ACQUISITION OF SHARPS STOCK. In reliance upon the representations
and warranties herein and subject to the terms and conditions hereof, on the
Closing Date (as defined in Section 1.03(a) below), Medical shall acquire
from the Stockholders and the Stockholders shall convey to Medical all of the
Sharps Stock.
1.02 EXCHANGE OF SHARES. Medical and the Stockholders agree that the
Sharps Stock shall be exchanged with Medical for an aggregate of One Million
(1,000,000) shares of Series A 10% Voting Convertible Preferred Stock, $.01
par value, of Medical ("Medical Stock") such that each share of Sharps Stock
outstanding on the Closing Date, not to exceed 7,000,000 shares of Sharps
Stock in the aggregate, is exchanged for .142858 shares of Medical Stock (the
"Exchange Ratio"), with any excess shares of Sharps Stock resulting in a
reduction in the per-share Exchange Ratio. In the event that Sharps has
fewer than 7,000,000 shares of Sharps Stock outstanding on the Closing Date,
the Exchange Ratio shall be proportionately increased. On the Closing Date,
the following numbers of shares of Medical Stock, totaling 1,000,000 shares,
will be delivered to the individual Stockholders in exchange for their Sharps
Stock:
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<TABLE>
Number of Number of
Shares of Shares of
Stockholder Sharps Stock Medical Stock
- ----------- ------------ -------------
<S> <C> <C>
Dr. Burt Kunik 3,000,000 428,571.43
John W. Dalton 1,250,000 178,571.43
Parris H. Holmes, Jr. 750,000 107,142.86
David Carl Angel 100,000 14,285.714
Dr. Jerry A. Argovitz 25,000 3,571.4285
Allen J. Becker 75,000 10,714.2855
Gary and Susan Becker 25,000 3,571.4285
William D. Blake 50,000 7,142.857
Michael R. Boilini 50,000 7,142.857
Shelton W. Boyce III 25,000 3,571.4285
C.A. Century Ltd. Partnership 25,000 3,571.4285
Suzanne C. Cade 25,000 3,571.4285
William S. Cannon 25,000 3,571.4285
Carlton L. Cooke, Jr. 50,000 7,142.857
William L. Crothers, Jr. 25,000 3,571.4285
George W. Dorrance, Jr. 40,000 5,714.2856
Sean Elliott 75,000 10,714.2855
Robert Wickliffe Fenet 25,000 3,571.4285
W. Stanley Foster 25,000 3,571.4285
Bruce Furr 25,000 3,571.4285
Ramsay H. Gillman 50,000 7,142.857
Clark A. Gunderson, M.D. 200,000 28,571.428
Michael A. Harrelson 100,000 14,285.714
W. James Harrison 50,000 7,142.857
Parris H. Holmes, Jr. 85,000 12,142.8569
Tommy E. Ingram 25,000 3,571.4285
International European Realty Limited 50,000 7,142.857
Larry M. James 100,000 14,285.714
Cynthia A. Jergins 25,000 3,571.4285
Robert G. Jones 50,000 7,142.857
Richard Henry Lee 25,000 3,571.4285
Barry M. Lewis 25,000 3,571.4285
Thomas G. and Nancy B. Loeffler 50,000 7,142.857
W. Audie Long 25,000 3,571.4285
Ronald H. McMillan 50,000 7,142.857
David M. Mitchell 25,000 3,571.4285
B. Jack Pogue 75,000 10,714.2855
A. Mack Pogue 50,000 7,142.857
Alan W. Saltzman 25,000 3,571.4285
Richard R. and Rose M. Scott 25,000 3,571.4285
George M. Shanks, Jr. 50,000 7,142.857
</TABLE>
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<TABLE>
Number of Number of
Shares of Shares of
Stockholder Sharps Stock Medical Stock
- ----------- ------------ -------------
<S> <C> <C>
Silverbond Investments Limited 75,000 10,714.2855
Peter S. Wardenburg 25,000 3,571.4285
Jarrell H. Wilke 25,000 3,571.4285
Bruce Willis 25,000 3,571.4285
</TABLE>
1.03 THE CLOSING, ETC. (a) THE CLOSING. Consummation of the
acquisition and conveyance and exchange of the Sharps and Medical Stock shall
constitute the Closing, and the date and time upon which the Closing shall
take place shall constitute the Closing Date. The Closing shall take place
at 7411 John Smith Drive, Suite 1500, San Antonio, Texas 78229, at 10:00 a.m.
on February 25, 1998, or at such other place and time as may be mutually
agreeable to the parties hereto.
(b) DELIVERY OF SHARPS STOCK AND INSTRUMENTS. On the Closing Date,
the Stockholders shall deliver to Medical the following and shall take any
and all further action necessary to effectively vest in Medical title to the
Sharps Stock as contemplated by this Agreement:
(i) Stock certificates representing an aggregate of Seven Million
(7,000,000) shares of Sharps Stock, with duly executed separate stock
powers attached;
(ii) Certificate of Officers of Sharps and of the Stockholders,
dated the Closing Date, as described in Article VI hereof;
(iii) Certificate of Good Standing of Sharps in Texas, dated the
Closing Date;
(iv) Consents, if any, as defined in Article VI hereof; and
(v) Such other appropriate documents and instruments of transfer,
certificates and other supporting papers as may reasonably be required by
counsel for Medical.
(c) DELIVERY OF MEDICAL STOCK AND INSTRUMENTS. On the Closing Date,
Medical shall deliver to the Stockholders the following and shall take any and
all further action to effectively vest in the Stockholders title to the Medical
Stock:
(i) Stock certificates representing an aggregate of One Million
(1,000,000) shares of Medical Stock, in such denominations, amounts and
names as may be requested in writing by the respective Stockholders;
(ii) Certificate of Medical, dated the Closing Date, as described in
Article VII hereof;
(iii) Certificates of Good Standing of Medical in the States of
Delaware and Texas, as of the Closing Date;
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(iv) Certificate of the Secretary of Medical containing the
resolution adopted by the Board of Directors of Medical authorizing
execution of this Agreement; and
(v) Such other appropriate documents and instruments of transfer,
certificates and other supporting papers as may reasonably be required by
counsel for the Stockholders.
1.04 APPOINTMENT OF REPRESENTATIVE OF THE STOCKHOLDERS. The
Stockholders hereby constitute and appoint Dr. Burt Kunik (the "Stockholders'
Representative") as their sole and exclusive representative and
attorney-in-fact to tender the Sharps Stock to Medical, to accept delivery of
the certificates of Medical Stock to be issued in their respective names and
to give a good and sufficient receipt and acquittance therefor, to accept
delivery of all other closing documents to be delivered by Medical, to
deliver the certificates for the Sharps Stock to Medical, to deliver all
necessary closing documents to Medical and to execute and deliver all further
documents and certificates and to do and perform such further acts and deeds
as may be necessary, in his sole discretion, to carry the intent and meaning
of this Agreement into effect, and to accept notices to the Stockholders
hereunder. Such appointment of Dr. Kunik as attorney-in-fact and all
authority conferred hereby shall be deemed coupled with an interest and be
irrevocable and shall not be terminated or revoked by any of the Stockholders
or by operation of law, whether by the death, incapacity or dissolution of
any Stockholder.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
OF SHARPS AND THE FOUNDING STOCKHOLDERS
Sharps and the Founding Stockholders represent, warrant to and agree
with Medical that:
2.01 CAPITALIZATION. The authorized capital stock of Sharps is Ten
Million (10,000,000) duly authorized shares of common stock, $.01 par value,
of which Seven Million (7,000,000) shares are validly issued, outstanding,
fully paid and nonassessable.
2.02 ABSENCE OF RIGHT TO PURCHASE. No person, firm or corporation has
any subscription, warrant, agreement, option or right capable of becoming an
agreement for the purchase of any of the Sharps Stock or of any authorized
but unissued shares of the capital stock of Sharps, other than herein granted
to Medical.
2.03 FINANCIAL STATEMENTS. The audited financial statements for the
interim nine-month period ended September 30, 1997 of Sharps, contained in
EXHIBIT "A" attached hereto (the "Sharps Financial Statements"), present
fairly the financial position of Sharps at said date and the results of
operations of Sharps for the fiscal period then ended and the interim periods
covered thereby and were prepared in conformity with generally accepted
accounting principles. Sharps at
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present has no liability, absolute or contingent, of the type required to be
reflected on a balance sheet or notes thereto prepared in accordance with
generally accepted accounting principles which is not shown on the Sharps
Financial Statements, other than current liabilities incurred in the ordinary
course of business since September 30, 1997.
2.04 ABSENCE OF CERTAIN CHANGES. Since September 30, 1997, there has
not been, and the Founding Stockholders and Sharps warrant that pending the
Closing there will not be:
(a) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the property or business of
Sharps; or
(b) Any change in the financial condition of Sharps, whether in assets
or liabilities, other than transactions incurred in the ordinary course of
business which on the whole shall not have been materially adverse.
2.05 INCORPORATION AND STATUS. Sharps is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.
Sharps has corporate power to own its properties and carry on its business in
the manner in which such business is now being conducted. Sharps is duly
qualified as a foreign corporation and is in good standing to do business in
each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification necessary.
2.06 ABSENCE OF EMPLOYMENT CONTRACTS. There are no contracts of
employment, contracts for managerial services, labor contracts or collective
bargaining agreements presently in existence between Sharps and any of its
employees or any union, other than the usual and customary parol employment
agreements having a term equivalent to the payroll period, except as set
forth in EXHIBIT "B" attached hereto.
2.7 ABSENCE OF PENSION AND PROFIT SHARING PLANS. Sharps has no
pension plan, retirement plan, profit sharing plan or stock option plan,
group insurance, welfare or similar plan other than provisions for vacations,
group life, group hospitalization policies and sick leave, substantially the
same as those which were in effect during the period covered by the Sharps
Financial Statements.
2.8 ABSENCE OF LITIGATION. Sharps is not involved in any litigation
which would materially and adversely affect its financial condition,
properties, business operations or prospects, nor, to the knowledge of its
officers or of the Stockholders, is any such litigation pending or
threatened. Sharps has not been, nor is it now, under investigation with
respect to any charge concerning any material violation of any provision of
federal, state, local or administrative regulation with respect to its
business.
2.9 RIGHTS USED IN CONDUCT OF BUSINESS. Sharps is the unqualified
owner of all trademarks, trade names or other marks which it uses in its
business and owns or possesses adequate rights (including rights under
licenses) to use all patents, inventions and copyrights now
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used in the conduct of its business, and has not received any notice of
conflict with the asserted rights of others. Sharps is not a party to any
agreement under which it is obligated to pay royalties or license fees to
others in connection with intellectual property rights.
2.10 PERFORMANCE OF CONTRACT OBLIGATIONS. To the best knowledge and
belief of the officers of Sharps and the Founding Stockholders, Sharps has in
all material respects performed all obligations required to be performed by
it under all material agreements, leases or other documents to which Sharps
is a party, and neither the officers of Sharps nor the Founding Stockholders
know of any default in any material respect under any such agreements, leases
or other documents to which Sharps is a party.
2.11 CONTRACTS. True and correct copies of all such contracts,
agreements, leases, licenses, franchises, applications and other instruments
to which Sharps is a party have been made available to Medical by Sharps.
Sharps has not violated and is not now in default as to any such agreements
in any material respect.
2.12 ABSENCE OF DECREES, ETC. Sharps is not in default with respect to
any judgment, order, writ or injunction, decree, rule or regulation of any
court or administrative agency, nor is it subject to any agreement, judgment,
decree or order which materially adversely affects its business or profits or
its condition, financial or otherwise, or any of its assets or property.
2.13 ABSENCE OF CONFLICTING AGREEMENTS. Sharps is not a party to any
agreement, contract, note or other document requiring the observance by
Sharps of any restrictions or performance of any covenant which will be
violated by this Agreement and the transactions contemplated herein.
2.14 CHARTER OR OTHER RESTRICTIONS. Sharps is not subject to any
charter or other restriction which is being violated by it in the conduct of
its business.
2.15 INSURANCE. Sharps has in full force and effect policies of
insurance with reputable insurers, adequately protecting it against damage to
or loss of property and against tort liabilities.
2.16 INDEMNIFICATION BY THE FOUNDING STOCKHOLDERS. From and after
consummation of the transactions contemplated by this Agreement, the Founding
Stockholders will, at any time and from time to time upon the written request
of Medical, indemnify and hold harmless Medical against and from all loss,
cost, damage, liability and expense incurred or claimed in respect of:
(a) LIABILITIES. Any liability of Sharps of any nature, whether
accrued, absolute, contingent or otherwise, existing as of the date of the
balance sheets contained in the Sharps Financial Statements and which creates
or has created a material liability against Sharps prior to the Closing Date,
regardless of whether:
(i) Such mutual liability is of a type required to be reflected on
a balance sheet or in notes appended thereto, in accordance with generally
accepted accounting principles, and which is not so reflected or reserved
against in Sharps's balance sheet or notes
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appended thereto (including, but without limitation, any tax liability,
whether accrued in respect of or measured by the income of Sharps for any
period ending on or prior to the Closing Date) or otherwise existing, to
the extent not so reflected or reserved against; or
(ii) Such liability is of a type which arises or has arisen under
such circumstances that Sharps could not be deemed to have been aware
thereof, whether as to accrual of such liability or liquidation of the
amount thereof;
(b) BREACH OF WARRANTY. Any damage or deficiency resulting from any
misrepresentation, breach of warranty or nonfulfillment of any agreement on
the part of the Founding Stockholders under this Agreement, or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished to Medical hereunder; and
(c) LITIGATION. All actions, suits, proceedings, demands,
assessments, judgments, costs and expenses incident to any of the foregoing.
Medical agrees that it will not settle or permit the settlement of any matter
as to which it or Sharps is entitled to be indemnified and held harmless
hereunder without the prior written consent of the Founding Stockholders, and
that Medical or Sharps will give prompt written notice to the Founding
Stockholders of any claim or action as to which Medical or Sharps is entitled
to be indemnified and held harmless hereunder, will permit the Founding
Stockholders to conduct at their expense the defense against any such claim
or action and will cooperate with the Founding Stockholders in such defense
in such manner as the Founding Stockholders may reasonably request.
(d) LIMITATION OF LIABILITY. Notwithstanding anything set forth in
this Section 2.16, Medical and/or Sharps will not be eligible to obtain any
indemnification of the Founding Stockholders under this Agreement unless and
until the aggregate amount of all losses, expenses, damages, deficiencies,
liabilities and other obligations arising hereunder exceeds $50,000 in the
aggregate, and then only for the amount of such excess.
2.17 TAX LIABILITY. (a) Sharps has duly filed all federal, state and
other tax returns which are required to be filed by it and has paid or made
provision for the payment of all taxes which have or may become due pursuant
to said returns or pursuant to any assessment received by Sharps.
(b) The Internal Revenue Service has not examined any federal income
tax returns of Sharps filed by it through the taxable year ended December 31,
1996. No waiver of statutes of limitations relating to taxes has been
executed or given by Sharps, or if so, none of them are presently in force.
(c) The representations, warranties and agreements contained in this
Section 2.17 and in any certificate or other instrument in writing delivered
pursuant to this Agreement which relates to this Section 2.17 shall be
considered material and to have been relied upon by Medical in performing its
obligations hereunder, irrespective of any investigation heretofore or
hereafter made, and shall survive until the statute of limitations (including
any extension thereof) for assessing any tax, interest or penalty which may
be the subject of such representations, warranties and agreements has expired.
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2.18 ENVIRONMENTAL MATTERS. Sharps has duly complied with, and its
business operations, assets, equipment leaseholds and other facilities are in
compliance with, the provisions of all federal, state and local
environmental, health and safety laws, codes and ordinances and all rules and
regulations promulgated thereunder, governing (a) air emissions; (b)
discharges to surface water or ground water; (c) solid or liquid waste
disposal; (d) the use, storage, generation, handling, transport, discharge,
release or disposal of toxic or hazardous substances or wastes; or (e) other
environmental, health or safety matters. There is no proceeding pending or
threatened against Sharps relating to the environment, nor is there a basis
for the assertion against Sharps of any proceeding. Sharps has not received
notice of, and does not know of, any past, present or future events,
conditions, facts, circumstances, activities, practices, incidents, actions
or plans that may interfere with or prevent compliance or continued
compliance or that might constitute a violation of any federal, state or
local environmental, health or safety laws, codes or ordinances, and any
rules or regulations promulgated thereunder, which relate to the use,
ownership or occupancy of the property or the operation of the business of
Sharps.
2.19 SURVIVAL OF REPRESENTATIONS, ETC. The representations, warranties
and agreements contained in this Article II (except as to Section 2.17) or in
any certificate or other instrument in writing delivered pursuant to this
Agreement or in connection herewith, shall be considered material and to have
been relied upon by Medical in performing its obligations hereunder,
irrespective of any investigation heretofore or hereafter made, and shall
survive the Closing Date in any case until the first anniversary of the
Closing Date and shall survive thereafter in cases of fraud, but with respect
to Section 2.17 shall survive as therein stated. No examination or
investigation by or on behalf of Medical shall have the effect of estopping
Medical from asserting breach or failure of any such representation or
warranty while the same survives, or constitute or operate as a waiver by
Medical of any such representation or warranty, in whole or in part. The
Founding Stockholders agree to indemnify Medical and will hold Medical
harmless from and against all damages, losses and out-of-pocket expenses
arising out of any such breach or failure.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
3.01 RIGHT TO CONVEY. The Stockholders are the absolute owners, both
record and beneficial, of all of the Sharps Stock and have the unrestricted
right to convey, assign, transfer and deliver the Sharps Stock to Medical,
vesting in Medical complete and unlimited title to and ownership of the
Sharps Stock.
3.02 ABSENCE OF LIENS. At the time of transfer thereof to Medical, all
of the Sharps Stock will be free of all liens, pledges, charges, encumbrances
and third-party interests whatsoever.
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3.03 NO BROKERS. No broker, agent or finder has been employed, and no
liability for any brokerage fees, commissions or finders' fees has been
incurred, in connection with the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MEDICAL
Medical represents and warrants to the Stockholders and Sharps that:
4.01 CAPITALIZATION. The authorized capital stock of Medical consists
of Twenty Million (20,000,000) shares of common stock, par value $0.01 per
share ("Medical Common Stock"), and One Million (1,000,000) shares of Medical
Stock. As of the date hereof, 2,938,823 shares of Medical Common Stock and no
shares of Medical Stock are issued and outstanding. All outstanding shares
of Medical Common Stock are validly issued and outstanding, fully paid and
nonassessable. In addition, Medical has outstanding options and warrants
exercisable for the purchase of 378,180 and 205,900 shares of Medical Common
Stock, respectively.
4.02 INCORPORATION AND STATUS. Medical is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Medical has corporate power to own its properties and carry on
its business in the manner in which such business is now being conducted.
Medical is duly qualified as a foreign corporation and is in good standing to
do business in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary.
4.03 AUTHORITY. The execution and delivery of this Agreement by
Medical and the delivery of the Medical Stock provided for herein by Medical
in accordance with the terms and conditions of this Agreement:
(a) Have been duly authorized by the Board of Directors of Medical;
(b) Need not be authorized by the stockholders of Medical; and
(c) Will not result in a breach of any of the terms, conditions or
provisions of, or constitute a default under, the Certificate of
Incorporation or Bylaws of Medical, and as of the Closing Date will not
constitute a default under any loan agreement, note, deed of trust or other
agreement or instrument to which Medical is a party.
4.04 DESIGNATION OF MEDICAL STOCK. The Certificate of Designation,
Powers, Preferences and Rights of the Series A 10% Voting Convertible
Preferred Stock of Medical, a copy of which is attached hereto as EXHIBIT
"C," has been filed, or will be filed prior to the Closing Date, with the
Office of the Secretary of State of the State of Delaware.
4.05 ABSENCE OF LITIGATION. Medical is not involved in any litigation
which would materially and adversely affect its financial condition,
properties, business operations or prospects,
10
<PAGE>
nor, to the knowledge of its officers, is any such litigation pending or
threatened. Medical has not been, nor is it now, under investigation with
respect to any charge concerning any material violation of any provision of
federal, state, local or administrative regulation with respect to its
business.
4.06 ABSENCE OF GOVERNMENTAL ACTION. Medical is not subject to any
currently existing action, order, claim, suit, proceeding, investigation,
inquiry, review or notice by any governmental body, and there is no action,
order, claim, suit, proceeding, investigation, inquiry, review or notice pending
or threatened against, relating to or affecting Medical, or any of its
properties or assets, at law or in equity, before any governmental body, nor to
the best knowledge of Medical is there any basis for asserting the foregoing.
Neither Medical nor any of its properties or assets is specifically by name
subject to any currently existing order, judgment, writ, decree or injunction.
4.07 FINANCIAL STATEMENTS. The audited financial statements for the
fiscal year ended June 30, 1997 and for the interim three-month period ended
September 30, 1997 of Medical, contained in EXHIBIT "D" attached hereto (the
"Medical Financial Statements"), present fairly the financial position of
Medical at said date and the results of operations of Medical for the fiscal
period then ended and the interim period covered thereby and were prepared in
conformity with generally accepted accounting principles. Medical at present
has no liability, absolute or contingent, of the type required to be reflected
on a balance sheet or notes thereto prepared in accordance with generally
accepted accounting principles which is not shown on the Medical Financial
Statements, other than current liabilities incurred in the ordinary course of
business since September 30, 1997.
4.08 TAX LIABILITY. (a) Medical has duly filed all federal, state and
other tax returns which are required to be filed by it and has paid or made
provision for the payment of all taxes which have or may become due pursuant to
said returns or pursuant to any assessment received by Medical.
(b) The Internal Revenue Service has not examined any federal income tax
returns of Medical filed by it through the taxable year ended December 31, 1996.
No waiver of statutes of limitations relating to taxes has been executed or
given by Medical, or if so, none of them are presently in force.
(c) The representations, warranties and agreements contained in this
Section 4.08 and in any certificate or other instrument in writing delivered
pursuant to this Agreement which relates to this Section 4.08 shall be
considered material and to have been relied upon by Sharps in performing its
obligations hereunder, irrespective of any investigation heretofore or hereafter
made, and shall survive until the statute of limitations (including any
extension thereof) for assessing any tax, interest or penalty which may be the
subject of such representations, warranties and agreements has expired.
4.09 INDEMNIFICATION BY MEDICAL. From and after consummation of the
transactions contemplated by this Agreement, Medical will, at any time and from
time to time upon the written
11
<PAGE>
request of the Stockholders, indemnify and hold harmless the Stockholders
against and from all loss, cost, damage, liability and expense incurred or
claimed in respect of:
(a) LIABILITIES. Any liability of Medical of any nature, whether
accrued, absolute, contingent or otherwise, existing as of the date of the
balance sheets contained in the Medical Financial Statements and which creates
or has created a material liability against the Stockholders prior to the
Closing Date, regardless of whether:
(i) Such material liability is of a type required to be reflected
on a balance sheet or in notes appended thereto, in accordance with
generally accepted accounting principles, and which is not so reflected or
reserved against in Medical's balance sheet or notes appended thereto
(including, but without limitation, any tax liability, whether accrued in
respect of or measured by the income of Medical for any period ending on or
prior to the Closing Date) or otherwise existing, to the extent not so
reflected or reserved against; or
(ii) Such liability is of a type which arises or has arisen under
such circumstances that Medical could not be deemed to have been aware
thereof, whether as to accrual of such liability or liquidation of the
amount thereof;
(b) BREACH OF WARRANTY. Any damage or deficiency resulting from any
misrepresentation, breach of warranty or nonfulfillment of any agreement on the
part of Medical under this Agreement, or from any misrepresentation in or
omission from any certificate or other instrument furnished or to be furnished
to the Stockholders or Sharps hereunder; and
(c) LITIGATION. All actions, suits, proceedings, demands, assessments,
judgments, costs and expenses incident to any of the foregoing. The
Stockholders agree that they will not settle or permit the settlement of any
matter as to which any of them or Medical is entitled to be indemnified and held
harmless hereunder without the prior written consent of Medical, and that the
Stockholders will give prompt written notice to Medical of any claim or action
as to which the Stockholders are entitled to be indemnified and held harmless
hereunder, will permit Medical to conduct at its expense the defense against any
such claim or action and will cooperate with Medical in such defense in such
manner as Medical may reasonably request.
(d) LIMITATION OF LIABILITY. Notwithstanding anything set forth in this
Section 4.09, the Stockholders will not be eligible to obtain any
indemnification of Medical under this Agreement unless and until the aggregate
amount of all losses, expenses, damages, deficiencies, liabilities and other
obligations arising hereunder exceeds $50,000 in the aggregate, and then only
for the amount of such excess.
4.10 COMMITMENTS. Except as set forth in EXHIBIT "E," Medical has no
contractual obligation to pay to any entity or individual an amount totaling
$50,000 or more, and Medical has in all material respects performed all material
contracts, agreements and commitments to which it is a party, and there is not
under any such contract, agreement or commitment any existing default or event
of default or event which with notice or lapse of time or both would constitute
a default.
12
<PAGE>
4.11 SECURITIES AND EXCHANGE COMMISSION COMPLIANCE. Medical has filed all
forms, reports and documents required to be filed with the Securities and
Exchange Commission (the "SEC") as of the Closing Date.
4.12 ENVIRONMENTAL MATTERS. Medical has duly complied with, and its
business operations, assets, equipment leaseholds and other facilities are in
compliance with, the provisions of all federal, state and local environmental,
health and safety laws, codes and ordinances and all rules and regulations
promulgated thereunder, governing (a) air emissions; (b) discharges to surface
water or ground water; (c) solid or liquid waste disposal; (d) the use, storage,
generation, handling, transport, discharge, release or disposal of toxic or
hazardous substances or wastes; or (e) other environmental, health or safety
matters. There is no proceeding pending or threatened against Medical relating
to the environment, nor is there a basis for the assertion against Medical of
any proceeding. Medical has not received notice of, and does not know of, any
past, present or future events, conditions, facts, circumstances, activities,
practices, incidents, actions or plans that may interfere with or prevent
compliance or continued compliance or that might constitute a violation of any
federal, state or local environmental, health or safety laws, codes or
ordinances, and any rules or regulations promulgated thereunder, which relate to
the use, ownership or occupancy of the property or the operation of the business
of Medical.
4.13 SURVIVAL OF REPRESENTATIONS, ETC. The representations, warranties
and agreements contained in this Article IV (except as to Section 4.08) or in
any certificate or other instrument in writing delivered pursuant to this
Agreement or in connection herewith, shall be considered material and to have
been relied upon by Sharps and the Stockholders in performing their respective
obligations hereunder, irrespective of any investigation heretofore or hereafter
made, and shall survive the Closing Date in any case until the first anniversary
of the Closing Date and shall survive thereafter in cases of fraud, but with
respect to Section 4.08 shall survive as therein stated. No examination or
investigation by or on behalf of Sharps or the Stockholders shall have the
effect of estopping Sharps or the Stockholders from asserting breach or failure
of any such representation or warranty while the same survives, or constitute or
operate as a waiver by Sharps or the Stockholders of any such representation or
warranty, in whole or in part. Medical agrees to indemnify Sharps and the
Stockholders and will hold them harmless from and against all damages, losses
and out-of-pocket expenses arising out of any such breach or failure.
ARTICLE V
INVESTMENT REPRESENTATIONS
5.01 BY THE STOCKHOLDERS. (a) The Stockholders represent that the Sharps
Stock has not and will not be registered by Sharps or the Stockholders pursuant
to the Securities Act of 1933, as amended (the "Securities Act"), or any state
securities law and that the Stockholders are relying in good faith upon the
appropriate sections of the Securities Act (and similar provisions of applicable
state securities law) applied in the context of, among other things, the
representations and warranties of Medical contained in Section 5.02(b) of this
Agreement to except the transfer of the Sharps Stock to Medical hereunder from
the registration and prospectus requirements of Section 5 of the Securities Act
(and similar provisions of applicable state securities law).
13
<PAGE>
(b) As a material inducement to Medical to enter into this Agreement with
the Stockholders and for Medical to transfer the Medical Stock to the
Stockholders, the Stockholders represent and warrant that they will acquire the
Medical Stock for their sole and exclusive account for investment and not with a
view to, or in connection with, any offering or distribution; will not acquire
the Medical Stock (i) for the benefit of any other person, firm or corporation;
(ii) with a view to holding any portion thereof for the benefit of any other
person, firm or corporation; or (iii) in any manner divide the Medical Stock
between any other person, firm or corporation; and do not have in mind acquiring
the Medical Stock for sale or other disposition after the expiration of any
specific period of time; and the Stockholders are not aware of any circumstance,
event or occurrence upon the happening of which they intend or would then intend
to sell or otherwise dispose of the Medical Stock. On or before the Closing
Date, each of the Founding Stockholders shall have entered into an investment
letter with Medical in the form attached hereto as EXHIBIT "F" and each of the
remaining Stockholders shall have entered into an investment letter with Medical
in the form attached hereto as EXHIBIT "G."
5.02 BY MEDICAL. (a) Medical represents that the Medical Stock is
"restricted stock" that has not and will not be registered by Medical pursuant
to the Securities Act or any state securities law and that Medical is relying in
good faith upon the appropriate sections of the Securities Act (and similar
provisions of applicable state securities law) applied in the context of, among
other things, the representations and warranties of the Stockholders contained
in Section 5.01(b) of this Agreement to except the transfer of the Medical Stock
to the Stockholders hereunder from the registration and prospectus requirements
of Section 5 of the Securities Act (and similar provisions of applicable state
securities law).
(b) As a material inducement to the Stockholders to enter into this
Agreement with Medical and for the Stockholders to transfer the Sharps Stock to
Medical, Medical represents and warrants that it will acquire the Sharps Stock
for its sole and exclusive account for investment and not with a view to, or in
connection with, any offering or distribution; will not acquire the Sharps Stock
(i) for the benefit of any other person, firm or corporation; (ii) with a view
to holding any portion thereof for the benefit of any other person, firm or
corporation; or (iii) in any manner divide the Sharps Stock between itself or
any other person, firm or corporation; and does not have in mind acquiring the
Sharps Stock for sale or other disposition after the expiration of any specific
period of time; and Medical is not aware of any circumstance, event or
occurrence upon the happening of which Medical intends or would then intend to
sell or otherwise dispose of the Sharps Stock.
ARTICLE VI
CONDITIONS OF OBLIGATIONS OF MEDICAL
The obligation of Medical to acquire the Sharps Stock is subject to the
accuracy as of the date hereof and as of the Closing Date, as if made on the
Closing Date, of the representations and warranties of Sharps and the
Stockholders herein set forth, to the fulfillment by Sharps and the Stockholders
of the covenants and agreements on their parts to be fulfilled prior to or
concurrent with the Closing and to all of the following further conditions:
14
<PAGE>
(a) CERTIFICATE AS TO REPRESENTATIONS AND WARRANTIES. There shall be
delivered to Medical a certificate, dated the Closing Date, signed by the
President and Secretary of Sharps and by Dr. Burt Kunik, as representative of
the Stockholders, certifying that the representations contained in this
Agreement are true on the Closing Date with the same force and effect as though
made at and as of the Closing Date, and to the effect that all obligations of
Sharps and the Stockholders hereunder to be performed prior to the Closing Date
have been performed.
(b) CONSENTS. Sharps and the Stockholders shall have obtained and
delivered to Medical the written consent of the other parties thereto to the
assignment to Medical of all right, title and interest of Sharps in and to all
of the contracts of Sharps, if such is necessary.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDERS
The obligation of the Stockholders hereunder to transfer the Sharps Stock
is subject to the accuracy as of the date hereof and as of the Closing Date, as
if made on the Closing Date, of the representations and warranties of Medical
herein set forth, to the fulfillment by Medical of the covenants and agreements
on its part to be fulfilled prior to or concurrent with the Closing, and to the
delivery to the Stockholders of a certificate, dated the Closing Date, signed by
the President and the Secretary of Medical, certifying that the representations
contained in this Agreement are true on the Closing Date with the same force and
effect as through made at and as of the Closing Date.
ARTICLE VIII
OTHER COVENANTS OF MEDICAL
8.01 MEDICAL COMMON STOCK. In the event Medical does not effect a
one-for-five or greater reverse stock split of the Medical Common Stock on or
before August 31, 1998, then in that event, Medical shall provide for a
special meeting of its stockholders to vote on a proposal to amend its
Certificate of Incorporation to increase the authorized but unissued capital
stock to no fewer than Fifty Million (50,000,000) shares of Medical Common
Stock outstanding in the aggregate on a pre-split basis.
8.02 CURRENT PUBLIC INFORMATION. At all times after the Closing, Medical
shall file all reports required to be filed by it under the Securities Act and
the Securities Exchange Act of 1934, as amended, and the rules and regulations
adopted by the SEC thereunder to the extent required to enable the Stockholders
to sell Medical Common Stock pursuant to Rule 144 adopted by the SEC under the
Securities Act (as such rule may be amended from time to time) or any similar
rule or regulation hereafter adopted by the SEC. Upon request, Medical shall
deliver to the Stockholders a written statement as to whether it has complied
with such requirements.
15
<PAGE>
ARTICLE IX
OTHER COVENANTS OF THE STOCKHOLDERS AND SHARPS
The Stockholders and Sharps also covenant and agree that:
9.01 INVESTIGATION. They will give Medical and its employees, counsel,
accountants, bankers, consultants or other agents full access during normal
business hours throughout the period prior to the Closing, to all the books,
contracts, commitments and records of Sharps, and they will furnish Medical
during such period with all such information concerning the affairs of Sharps as
Medical may reasonably request.
9.02 PRESERVATION OF BUSINESS. Except as otherwise required by Medical,
pending the Closing, Sharps will use reasonable efforts to preserve Sharps
intact, to keep available the services of the present officers and employees of
Sharps actively engaged in the operations of Sharps and to preserve for Medical
the business of Sharps, its suppliers, customers and others having business
relations with Sharps. Sharps will not change the rate of compensation of any
of its officers or key employees between the date of this Agreement and the
Closing.
9.03 CONDUCT OF BUSINESS PENDING CLOSING. Pending the Closing, the
business affairs of Sharps will be conducted only in the usual and customary
manner, and Sharps will refrain from entering into any transaction or from
making any commitment not in the ordinary course of business except as may
otherwise be expressly provided for to the contrary in this Agreement and will
use reasonable efforts to maintain the volume of the business of Sharps. Sharps
will not pay or declare any dividend or other distribution to its Stockholders,
purchase or acquire any of its capital stock or issue, sell or agree to issue or
sell any shares of its capital stock or other securities.
9.04 INSURANCE. Sharps will maintain in full force and effect those
insurance policies presently in force or binders replacing any such policies
which will have expired prior to the Closing Date.
9.05 WAIVER OF NOTICE. Each and every Stockholder, by his, her or its
signature below, acknowledges their written consent to waiver of conducting a
special meeting of Stockholders of Sharps to consider the transactions
contemplated by this Agreement, as specified under Section 5.03(d) of the
General Corporation Law of the State of Texas.
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ARTICLE X
EXPENSES, BROKERAGE, ETC.
10.01 EXPENSES. Each of the parties shall pay their own expenses and costs
incident to the preparation of this Agreement and to the consummation of the
transactions provided for by this Agreement, including any and all legal and
accounting fees.
10.02 BROKERAGE. The Stockholders agree to indemnify Medical against any
claims of third parties for brokerage commissions or finders' fees in connection
with the transactions contemplated hereby insofar as such claims are alleged to
be based on arrangements or agreements made by the Stockholders, and Medical
agrees to indemnify the Stockholders against any such claims insofar as they are
alleged to be based on arrangements or agreements made by Medical.
ARTICLE XI
MISCELLANEOUS
11.01 NOTICES. All notices and other communications given or made
hereunder shall be in writing and shall be deemed to have been duly given or
made if and when delivered personally or by overnight courier to the parties at
the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) If to Medical: U.S. Medical Systems, Inc.
7600 Burnet Road, Suite 350
Austin, Texas 78757
Telecopier No.: (512) 458-3343
Telephone No.: (512) 458-3335
Attention: C. Lee Cooke, Jr.
Chairman, CEO and President
With a copy to: W. Audie Long, Esq.
7411 John Smith Drive, Suite 200
San Antonio, Texas 78229
Telecopier No.: 210-949-7024
Telephone No.: 210-949-7022
(b) If to Sharps: Sharps Compliance, Inc.
8928 Kirby
Houston, Texas 77054
Telecopier No.: 713-772-9662
Telephone No.: 713-772-9660
Attention: Dr. Burt Kunik
President
17
<PAGE>
With a copy to: DiCecco, Fant & Burman, L.L.P.
1900 West Loop South, Suite 1100
Houston, Texas 77027
Telecopier No.: (713) 961-3938
Telephone No.: (713) 961-3366
Attention: Darryl M. Burman, Esq.
(c) If to the Stockholders: Dr. Burt Kunik
8928 Kirby
Houston, Texas 77054
Telecopier No.: 713-772-9662
Telephone No.: 713-772-9660
11.02 CONTROLLING LAW. This Agreement shall be governed by and shall be
construed and enforced in accordance with the laws of the State of Delaware.
11.03 PERFORMANCE. Time is of the essence in this Agreement.
11.04 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, but all of which taken
together shall constitute one and the same instrument.
11.05 ENTIRE AGREEMENT. This instrument contains the entire agreement
between the parties hereto with respect to the transactions contemplated herein.
No modification, alternation or amendment to this Agreement or any waiver of any
provision hereof shall be valid or effective unless in writing and executed by
all parties hereto.
EXECUTED as of the day and year hereinabove first written.
SHARPS COMPLIANCE, INC. U.S. MEDICAL SYSTEMS, INC.
By: /s/ Burt Kunik By: /s/ Lee Cooke
--------------------------- ------------------------------------
Name: Burt Kunik Name: Lee Cooke
------------------------- -------------------------------
Title: President Title: Chairman/President/CEO
------------------------ ---------------------------------
STOCKHOLDERS:
/s/ Burt Kunik /s/ John W. Dalton
--------------------------- ---------------------------------------
Dr. Burt Kunik John W. Dalton
18
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/s/ Parris H. Holmes, Jr. /s/ David Carl Angel
- ------------------------------ ------------------------------------
Parris H. Holmes, Jr. David Carl Angel
/s/ Jerry A. Argovitz /s/ Allen J. Becker
- ------------------------------ ------------------------------------
Dr. Jerry A. Argovitz Allen J. Becker
/s/ Gary Becker /s/ Susan Becker
- ------------------------------ ------------------------------------
Gary Becker Susan Becker
/s/ William D. Blake /s/ Michael R. Boilini
- ------------------------------ ------------------------------------
William D. Blake Michael R. Boilini
/s/ Shelton W. Boyce III /s/ Suzanne C. Cade
- ------------------------------ ------------------------------------
Shelton W. Boyce III Suzanne C. Cade
/s/ William S. Cannon /s/ Carlton L. Cooke, Jr.
- ------------------------------ ------------------------------------
William S. Cannon Carlton L. Cooke, Jr.
/s/ William L. Crothers, Jr. /s/ George W. Dorrance, Jr.
- ------------------------------ ------------------------------------
William L. Crothers, Jr. George W. Dorrance, Jr.
/s/ Sean Elliott /s/ Robert Wickliffe Fenet
- ------------------------------ ------------------------------------
Sean Elliott Robert Wickliffe Fenet
/s/ W. Stanley Foster /s/ Bruce Furr
- ------------------------------ ------------------------------------
W. Stanley Foster Bruce Furr
/s/ Ramsay H. Gillman /s/ Clark A. Gunderson
- ------------------------------ ------------------------------------
Ramsay H. Gillman Clark A. Gunderson, M.D.
/s/ Michael A. Harrelson /s/ W. James Harrison
- ------------------------------ ------------------------------------
Michael A. Harrelson W. James Harrison
19
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/s/ Tommy E. Ingram /s/ Larry M. James
- ------------------------------ ------------------------------------
Tommy E. Ingram Larry M. James
/s/ Cynthia A. Jergins /s/ Robert G. Jones
- ------------------------------ ------------------------------------
Cynthia A. Jergins Robert G. Jones
/s/ Richard Henry Lee /s/ Barry M. Lewis
- ------------------------------ ------------------------------------
Richard Henry Lee Barry M. Lewis
/s/ Thomas G. Loeffler /s/ Nancy B. Loeffler
- ------------------------------ ------------------------------------
Thomas G. Loeffler Nancy B. Loeffler
/s/ W. Audie Long /s/ Ronald H. McMillan
- ------------------------------ ------------------------------------
W. Audie Long Ronald H. McMillan
/s/ David M. Mitchell /s/ B. Jack Pogue
- ------------------------------ ------------------------------------
David M. Mitchell B. Jack Pogue
/s/ A. Mack Pogue /s/ Alan W. Saltzman
- ------------------------------ ------------------------------------
A. Mack Pogue Alan W. Saltzman
/s/ Richard R. Scott /s/ Rose M. Scott
- ------------------------------ ------------------------------------
Richard R. Scott Rose M. Scott
/s/ George M. Shanks, Jr. /s/ Peter S. Wardenburg
- ------------------------------ ------------------------------------
George M. Shanks, Jr. Peter S. Wardenburg
/s/ Jarrell H. Wilke /s/ Bruce Willis
- ------------------------------ ------------------------------------
Jarrell H. Wilke Bruce Willis
20
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C.A. CENTURY PARTNERSHIP INTERNATIONAL EUROPEAN REALTY
LIMITED
By: /s/ Charles E. Amato By: /s/ Hermann Josef-Hermanns
- ------------------------------ ------------------------------------
Name: Charles E. Amato Name: Hermann Josef-Hermanns
------------------------- ----------------------------------
Title: Title: Chairman
------------------------ ---------------------------------
SILVERBOND INVESTMENTS LIMITED
By: /s/ Arthur James Carran
---------------------------
Name: Arthur James Carran
-------------------------
Title: Director
------------------------
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EXHIBIT 4.1
CERTIFICATE OF DESIGNATION,
POWERS, PREFERENCES AND RIGHTS OF
THE SERIES OF THE PREFERRED STOCK OF
U.S. MEDICAL SYSTEMS, INC.
TO BE DESIGNATED
SERIES A 10% VOTING CONVERTIBLE PREFERRED STOCK
U.S. MEDICAL SYSTEMS, INC., a Delaware corporation (the "Corporation"),
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
certifies that the Board of Directors of the Corporation has duly adopted the
resolution attached hereto as APPENDIX 1, providing for the issuance of a series
of Preferred Stock to be designated Series A 10% Voting Convertible Preferred
Stock and to consist of 1,000,000 shares.
IN WITNESS WHEREOF, U.S. MEDICAL SYSTEMS, INC. has caused its corporate
seal to be hereunto fixed and this Certificate to be signed by C. Lee Cooke,
Jr., its Chairman of the Board, President and Chief Executive Officer, this 16th
day of February, 1998.
U.S. MEDICAL SYSTEMS, INC.
By: /s/ C. Lee Cooke
----------------------------------
C. Lee Cooke, Jr.
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
RESOLUTION
OF
U.S. MEDICAL SYSTEMS, INC.
RELATING TO THE ISSUANCE OF SERIES A
10% VOTING
CONVERTIBLE PREFERRED STOCK
WHEREAS, the Certificate of Incorporation of the Company provides that
the Company shall have authority to issue 1,000,000 shares of Preferred
Stock, par value $0.01 per share (the "Preferred Stock") and 20,000,000
shares of Common Stock, par value $0.01 per share (together with any other
class of Common Stock authorized by the stockholders of the Company after the
date hereof, the "Common Stock"); and
WHEREAS, the Certificate of Incorporation of the Company provides that
the Board of Directors is authorized to provide for the issue of the
Preferred Stock in one or more series and to fix for each such series such
voting powers, expanded, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof,
as shall be stated and expressed in the resolution or resolutions adopted by
the Board of Directors providing for the issue of such series;
BE IT RESOLVED, that a series of 1,000,000 shares of Preferred Stock,
par value $0.01 per share, of the Company be and the same is hereby
authorized to be known as Series A 10% Voting Convertible Preferred Stock
(such Preferred Stock hereinafter being referred to as the "Series A
Preferred Stock"). The designations, powers, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions thereof, with respect to the Series A Preferred
Stock are as set forth below. Unless otherwise defined herein or unless the
context otherwise requires, all terms used herein which are defined in the
Certificate of Incorporation of the Company shall have the same meanings as
specified in such Certificate of Incorporation and the term "Certificate of
Incorporation" of the Company, as used herein, means, as of any date, unless
the context otherwise requires, the Certificate of Incorporation of the
Company, as amended or as amended and restated as of such date:
SERIES A 10% VOTING CONVERTIBLE PREFERRED STOCK
A. DESIGNATION OF THE SERIES. There shall be a series of Preferred
Stock to be known as "Series A 10% Voting Convertible Preferred Stock"
consisting of 1,000,000 shares of Preferred Stock having a par value of $0.01
per share (the "Shares"). Such shares shall constitute the entire Series A
Preferred Stock, and no other shares of such Series shall be issued.
B. DIVIDENDS. The holders of shares of Series A Preferred Stock shall
be entitled to receive, if and when declared by the Board of Directors from
funds legally available therefor, cash
Appendix 1
<PAGE>
dividends at the rate of $0.05 per share per annum, payable quarterly on the
last day of the months April, July, October and January in each year. In the
event a dividend is declared, but unpaid, such dividend shall accrue and be
cumulative (whether or not in any quarterly dividends period there shall be
funds of the Company legally available for the payment of such dividend) from
the first day of July 1998 (unless such day is not a business day, in which
event on the next business day), and thereafter from the date of the last
quarterly dividend date to which dividends were declared and paid on the
Preferred Stock of the Company. Each such dividend shall be paid to the
holders of record of the shares of Preferred Stock as they appear on the
stock register of the Company on the last day of the month next preceding the
payment date thereof. Dividend on account of arrears for any past dividend
periods may be declared and paid at any time, without reference to any
regular dividend payment date, to holders of record on such date, not
exceeding forty-five (45) days preceding the payment date hereof, as may be
fixed by the Board of Directors, of the Company or by a committee of said
Board of Directors duly authorized to fix such date.
Dividends payable on the Preferred Stock for each full quarterly
dividends period shall be computed by dividing the annual rate by four (4).
Dividends payable on the Preferred Stock for any period less than a full
quarterly dividend period and, for the initial dividend period, shall be
computed on the basis of a 360-day year of four (4) 90-day quarters, and the
actual number of days elapsed on the period for which payable, including the
date of the payment.
C. CONVERSION. The Series A Preferred Stock shall automatically and
immediately be converted into fully paid and nonassessable shares of Common
Stock of the Company, without any action or election on the part of the
holder thereof, immediately after the Company has effected a one-for-five or
greater reverse stock split of its Common Stock ("Automatic Conversion
Date"). In addition, so long as the Company has sufficient authorized and
unissued shares of Common Stock, each share of Series A Preferred Stock shall
be convertible at the option of the holder thereof into the number of fully
paid and nonassessable shares of Common Stock provided below. The holders of
Series A Preferred Stock hereby acknowledge that as of the date hereof, the
Company does not have sufficient authorized and unused shares of Common Stock
to effect a conversion of the Series A Preferred Stock into Common Stock.
The term "Common Stock" shall refer to the Common Stock, $0.01 par value per
share of the Company, as constituted on January 30, 1998, and any stock into
which such Common Stock shall have been changed or any stock resulting from
any reclassification of such Common Stock.
1. CONVERSION RATE. At the Automatic Conversion Date, or upon
the exercise of the option to convert described above, each share of Series A
Preferred Stock shall be converted into seven (7) shares of Common Stock, as
adjusted and readjusted from time to time in accordance with the terms and
provisions hereof (the "Conversion Rate").
2. METHOD OF CONVERSION. As soon as feasible, but in no event
later than five (5) days, after the Automatic Conversion Date, the Company
shall mail a notice to each holder of record of the shares of the Series A
Preferred Stock on the Automatic Conversion Date
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of the occurrence thereof and informing each holder of the conversion and the
number of shares of Common Stock into which such holder's shares of the
Series A Preferred Stock shall have been converted. In the event the holder
desires to exercise the option to convert, the holder shall give written
notice to the Company at its principal corporate office of the election to
convert the same. The Company or its transfer agent shall also inform the
holder of the procedures for exchanging the certificate or certificates
representing shares of Series A Preferred Stock for certificates representing
the shares of Common Stock into which the Series A Preferred Stock shall have
been converted. Until surrendered to the Company, each outstanding
certificate which, prior to the conversion, represents shares of the Series A
Preferred Stock will, following such conversion, be deemed for all corporate
purposes of the Company to evidence ownership of the number of shares of
Common Stock into which the shares of the Series A Preferred Stock shall have
been converted. After the Automatic Conversion Date there shall be no
further registry of transfers on the records of the Company of the shares of
Series A Preferred Stock, and if a certificate representing such shares is
presented to the Company, it shall be canceled and exchanged for a
certificate representing the number of shares of Common Stock as herein
provided.
3. FRACTIONAL SHARES. No fractional shares shall be issued upon
the conversion of any shares, share or fractional share of Series A Preferred
Stock. All shares of Common Stock, including fractions thereof, issued upon
conversion of shares (or fractions thereof) of Series A Preferred Stock by
the holder thereof shall be aggregated for purposes of determining whether
the conversion would result in the issuance of fractional shares. If, after
the aforementioned aggregation, the conversion would result in the issuance
of a fractional share of Common Stock, the Company shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a
sum in cash equal to the Closing Bid Price of the Company's Common Stock on
the Nasdaq Bulletin Board on the Automatic Conversion Date multiplied by such
fraction.
D. VOTING. Prior to the Automatic Conversion Date, and except as
otherwise provided by law, the holders of the Series A Preferred Stock will
be entitled to 35.190319 votes per share of Series A Preferred Stock, subject
to adjustment in accordance with Subsection E below, on all matters subject
to a vote of stockholders of the Company, without any regard to
classification or series.
E. STOCK DISTRIBUTIONS, SPLITS AND COMBINATIONS; ADJUSTMENTS. In case
(i) the outstanding shares of Common Stock (or other securities) shall be
subdivided into a greater number of shares, (ii) a non-cash dividend in
Common Stock (or other securities) shall be paid in respect of Common Stock
(or other securities), or (iii) the outstanding shares of Common Stock (or
other securities) shall be combined into a smaller number of shares thereof,
the number of shares of Common Stock or other securities into which the
Preferred Stock (subsequent to such subdivision or combination or at the
record date of such dividend or distribution) shall (simultaneously with the
effectiveness of such subdivision or combination or immediately after the
record date of such dividend or distribution) be convertible into shall be
equal to the number of shares of Common Stock or other securities a holder
would have owned and had a right to
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receive as a result of such subdivision, combination, dividend or
distribution, if such holder had actually held of record (immediately prior
to the effectiveness of such subdivision or combination or immediately prior
to the record date of such dividend or distribution) the number of shares of
Common Stock or other securities that would have been subject to receipt by
the holders upon conversion of the Series A Preferred Stock immediately prior
to the effectiveness of such subdivision or combination or the record date of
such dividend or distribution.
F. LIQUIDATION RIGHTS. In the event of any liquidation or dissolution
or winding up of the Company, voluntary or involuntary, the holders of the
Series A Preferred Stock shall be entitled to receive, subject to the rights
of any other class of stock which makes senior to the Preferred Stock as to
distribution of assets on liquidation, but before any distribution is made on
any class of stock ranking junior to the Series A Preferred Stock as to the
payment of dividends or the distribution of assets, the sum of $4.00 per
share, plus any arrearages in dividends thereon.
6. REDEMPTION RIGHTS. There shall be no right of redemption by the
holders of the Preferred Stock, except as may be determined by the Board of
Directors and approved by a majority of the holders of the Preferred Stock.
Appendix 1
