<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
_______________________________
Commission file number 1-13294
_______________________________
STERILE CONCEPTS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1193603
(State or other jurisdiction of (I.R.S. employer or
incorporation or organization) identification no.)
5100 COMMERCE ROAD, RICHMOND, VIRGINIA 23234
(Address of principal executive offices) (Zip Code)
(804) 275-0200
(Registrant's telephone number, including area code)
____________
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes `X' No
As of May 1, 1996, 5,526,384 shares of Common Stock, no par value, of
the registrant were outstanding.
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of March 31, 1996 and
September 30, 1995
Condensed Consolidated Statements of Earnings for the Second Quarter
Ended March 31, 1996 and 1995
Condensed Consolidated Statements of Earnings for the Six Months
Ended March 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended March 31, 1996 and 1995
Notes to Condensed Consolidated Financial Statements
<PAGE> 3
STERILE CONCEPTS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
MARCH 31, SEPTEMBER 30,
1996 1995
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,399 $ 803
Receivables:
Trade, net of allowance for doubtful
accounts of $332 and $204 29,788 24,367
Other 602 602
-------- --------
Net receivables 30,390 24,969
Inventories 29,991 19,402
Prepaid expenses 2,279 1,205
Income taxes receivable 434 76
Deferred income taxes 427 611
-------- --------
Total current assets 65,920 47,066
-------- --------
Net property and equipment 3,463 2,498
Deferred income taxes 30 68
Excess of cost over fair value of net assets
acquired, less accumulated amortization 17,910 6,066
Other assets, less accumulated amortization 2,449 1,940
-------- --------
Total assets $ 89,772 $ 57,638
======== ========
(Continued)
<PAGE> 4
STERILE CONCEPTS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
MARCH 31, SEPTEMBER 30,
1996 1995
------------ ------------
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ - $ 340
Current installments of long-term notes
payable to officers 3,895 3,895
Accounts payable 11,549 7,735
Accrued expenses 4,794 5,871
-------- --------
Total current liabilities 20,238 17,841
-------- --------
Long-term debt, excluding current installments 32,793 5,558
Long-term notes payable to officers,
excluding current installments 167 167
Other liabilities 476 30
-------- --------
Total liabilities 53,674 23,626
-------- --------
Stockholders' equity:
Preferred stock, no par value - -
Common stock, no par value 1,472 1,472
Additional paid-in capital 7,947 7,947
Retained earnings 26,679 24,593
-------- --------
Total stockholders' equity 36,098 34,012
-------- --------
Total liabilities and stockholders' equity $ 89,772 $ 57,638
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 5
STERILE CONCEPTS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SECOND QUARTER ENDED MARCH 31,
(In thousands, except per share data)
(Unaudited)
1996 1995
------------ ------------
Net sales $ 50,901 $ 35,007
Cost of goods sold 41,458 27,553
-------- --------
Gross profit 9,443 7,454
Selling, general and administrative expenses 6,376 4,430
Amortization of intangibles 286 121
-------- --------
Operating income 2,781 2,903
Interest expense (517) (83)
Interest income 26 4
Other income 1 77
-------- --------
Earnings before income taxes 2,291 2,901
Income taxes 992 1,190
-------- --------
Net earnings $ 1,299 $ 1,711
======== ========
Earnings per share $ 0.24 $ 0.31
======== ========
Weighted average shares outstanding 5,526 5,526
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements
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STERILE CONCEPTS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED MARCH 31,
(In thousands, except per share data)
(Unaudited)
1996 1995
------------ ------------
Net sales $ 94,929 $ 70,981
Cost of goods sold 76,379 55,303
-------- --------
Gross profit 18,550 15,678
Selling, general and administrative expenses 12,318 8,753
Amortization of intangibles 885 242
-------- --------
Operating income 5,347 6,683
Interest expense (977) (181)
Interest income 50 10
Other income 18 162
-------- --------
Earnings before income taxes 4,438 6,674
Income taxes 1,911 2,598
-------- --------
Net earnings $ 2,527 $ 4,076
======== ========
Earnings per share $ 0.46 $ 0.74
======== ========
Weighted average shares outstanding 5,526 5,526
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 7
STERILE CONCEPTS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31,
(In thousands)
(Unaudited)
1996 1995
------------ ------------
Cash flows from operating activities:
Net earnings $ 2,527 $ 4,076
Adjustments to reconcile net earnings to
net cash used in operating activities:
Depreciation and amortization 1,569 845
Increase in allowance for doubtful
accounts receivable 100 -
Increase in allowance for obsolete
inventory 165 -
Decrease in allowance for doubtful
notes receivable (219) -
Provision for deferred income taxes 222 679
Provision for deferred compensation - (9,049)
Changes in assets and liabilities,
net of acquisition:
Receivables (2,082) 491
Inventories (5,743) 862
Prepaid expenses (940) (361)
Income taxes receivable (358) -
Other assets (494) 169
Accounts payable 1,660 725
Accrued expenses (1,670) (2,980)
Income taxes payable - 219
--------- ---------
Net cash used in operating activities (5,263) (4,324)
--------- ---------
(Continued)
<PAGE> 8
STERILE CONCEPTS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31,
(In thousands)
(Unaudited)
1996 1995
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (577) (842)
Adjustment to acquisition cost of Associated
Medical Products Co. (47) -
Acquisition of sterile procedure tray
business of Medical Design Concepts, Inc. (18,940) -
--------- ---------
Net cash used in investing activities (19,564) (842)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt 63,262 38,578
Payments on long-term debt (36,397) (36,224)
Payment of cash dividend (442) (221)
--------- ---------
Net cash provided by financing activities 26,423 2,133
--------- ---------
Net increase (decrease) in cash and cash
equivalents 1,596 (3,033)
Cash and cash equivalents at beginning
of period 803 3,235
--------- ---------
Cash and cash equivalents at end of period $ 2,399 $ 202
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 972 $ 577
Income taxes 2,342 1,706
========= =========
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 9
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The condensed consolidated balance sheet as of March 31, 1996
and the condensed consolidated statements of earnings and cash flows
for the second quarter and six months ended March 31, 1996 and 1995
are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments and the use of estimates) which are, in the
opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim periods.
The consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto,
together with management's discussion and analysis of financial
condition and results of operations, contained in the Sterile
Concepts Holdings, Inc. (the "Company") Annual Report to Shareholders
incorporated by reference in the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1995. The results of
operations for the second quarter and six months ended March 31,
1996, are not necessarily indicative of the results for the entire
fiscal year ending September 30, 1996.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
3. ACQUISITION
On October 1, 1995, the Company's wholly owned subsidiary
Sterile Concepts, Inc. ("SCI") acquired substantially all of the
assets and assumed certain liabilities of the custom procedure tray
business of Medical Design Concepts, Inc. ("MDC"), a privately held
company based in Temecula, California for approximately $18,940,000.
The purchase price could be reduced contingent upon the
the salability of certain inventory, and the maintenance of certain
gross profit contribution levels on sales in specified states over
the two year period following the acquisition date. MDC produces
custom sterile procedure trays for hospitals and surgical centers
in 21 states, primarily in the western United States, and had
revenues of approximately $26,100,000 for the nine months ended
September 30, 1995.
The acquisition was accounted for using the purchase method. This
treatment resulted in the recording of approximately $12,566,000 of
excess of cost over the fair value of the net assets acquired. The
excess cost, which will increase for any future contingent cash
payment, is being amortized on a straight-line basis over a period of
fifteen years.
(Continued)
<PAGE> 10
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A summary of the book value of the assets and liabilities assumed
follows: (in thousands)
Net receivables $ 3,440
Inventories 5,011
Prepaid expenses 184
Net property and equipment 934
Excess of cost over the fair value of the
net assets acquired 12,566
Accounts payable (2,154)
Accrued expenses and other liabilities (1,041)
----------
Cash paid $ 18,940
==========
4. Dividend
On December 22, 1995, the Company declared a cash dividend of
$0.04 per share payable to shareholders of record on December 29,
1995. The dividend was paid on January 10, 1996. On March 26, 1996,
the Company declared a cash dividend of $0.04 per share payable to
shareholders of record on April 4, 1996. The dividend is included in
accrued expenses on the condensed consolidated balance sheet as of
March 31, 1996 and was paid on April 17, 1996.
5. Inventories
Classification of inventories are as follows as of March 31, 1996
and September 30, 1995 (in thousands):
March 31, September 30,
1996 1995
---------- ------------
Finished goods $ 9,610 $ 9,946
Work in process 1,394 547
Raw materials and supplies 18,987 8,909
--------- ---------
$ 29,991 $ 19,402
========= =========
6. Long-Term Debt
The acquisition of the custom procedure tray business of MDC (see
note 3) was financed through the Company's $40,000,000 unsecured long-
term credit facility with a maturity date of October 31, 1998. The
credit facility accrues interest at a variable rate based on the
lender's prime rate, CD rate or the applicable LIBOR rate plus
40 to 70 basis points, depending upon the results of the calculation
of certain financial ratios. The interest rate was 6.10% on March
31, 1996. The Company must pay a commitment fee of .10% or .15%
annually on the unused portion of the commitment based upon the
results of the calculation of certain financial ratios.
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
NOTE: The business of Sterile Concepts Holdings, Inc. ("Holdings") is
holding all of the stock of its subsidiaries, Sterile Concepts, Inc.
("SCI") and Sterile Concepts Ltd. ("SCL") which, together with SCI's wholly
owned subsidiary, Associated Medical Products Company ("AMP"), conduct the
Sterile Concepts business. Unless the context requires otherwise, the term
"Company" when used in this Form 10-Q includes Holdings, SCI, SCL, and AMP.
RESULTS OF OPERATIONS
NET SALES. The Company's net sales for the second quarter of fiscal
1996 were $50.9 million, which is $15.9 million or 45.4 percent over net
sales for the second quarter of the prior fiscal year. This increase was
the result of sales from the two acquisitions made by the Company during
calendar year 1995 which were partially offset by a decline in sales at the
Company's Richmond facility. AMP, purchased in May, 1995, accounted for
$5.0 million of the sales increase. The custom procedure tray business of
Medical Design Concepts, Inc. ("MDC"), purchased in October, 1995,
accounted for an additional $12.1 million of the sales increase. Net sales
at the Company's Richmond facilities declined $1.3 million due to the
conclusion of the Medline contract, which contributed $2.0 million to net
sales during the second quarter of fiscal 1995.
Net sales for the six months ended March 31, 1996, were $94.9 million,
a 33.7 percent increase in net sales over the first six months of fiscal
1995. Excluding the acquired companies, net sales decreased 9.6 percent
reflecting the conclusion of the Medline contract, which had contributed
$4.3 million to net sales during the first six months of fiscal 1995, and
an estimated $3.0 million in reduced sales resulting from a production
backlog. The backlog was created when the Company experienced assembly
conversion problems during the implementation of a new barcoded inventory
management system in the first quarter of fiscal 1996. The Company's
efforts to work through this production backlog were hampered by lost
production time due to inclement weather during January and February 1996.
The backlog has been carried over into the third quarter of fiscal 1996 and
the Company expects these sales to be realized in future months.
Net sales represent gross sales reduced primarily for allowances to
distributors and marketing and administrative fees paid to national and
regional health care alliances and group purchasing organizations. These
allowances and fees for the second quarter and six months ended March 31,
1996, were consistent with those for the corresponding periods of the prior
fiscal year. Group fees are expected to increase in future quarters,
however, as sales volume generated under group purchasing contracts
increases.
There is a trend within the industry toward consolidation on the part
of health care alliances and group purchasing organizations and many of
these organizations are implementing steps to increase compliance among
their members with the purchasing agreements that they negotiate. This
consolidation and proposed increase in compliance has significantly
elevated the importance of purchasing agreements and the volume of sales
made under such contracts.
<PAGE> 12
The Company has substantial sales with organizations under existing
purchasing agreements as well as with organizations which are part of
voluntary alliances or groups with which the Company does not have such
agreements. The Company's sales under existing and future contracts could
increase as the groups increase pressure for compliance among their member
organizations. Conversely, sales could be decreased or lost should the
Company not win future purchasing contracts or should the organizations
with whom the Company does not have purchasing agreements no longer be
allowed to purchase from the Company. The Company believes that it is well
positioned to compete for these purchasing agreements by virtue of its
national service capabilities and reputation for quality. During the first
quarter, the Company entered into a four year purchasing agreement for
custom procedure trays with VHA, Inc. which became effective on January 1,
1996. In addition, the Company recently entered into an assignment
agreement with Premier, Inc. to extend its purchasing agreement with the
SunHealth Alliance, now part of Premier, through June 30, 1997, and renewed
its agreement with AmeriNet through April 30, 1999.
COST OF GOODS SOLD. Cost of goods sold as a percentage of net sales
increased to 81.4 percent in the second quarter of fiscal year 1996 from
78.7 percent in the second quarter of the prior fiscal year. Cost of goods
sold increased to 80.5 percent for the six months ended March 31, 1996,
from 77.9 percent for the same period of the prior fiscal year. These
increases were related to lower gross margins on MDC sales and higher labor
and overhead costs as a percent of net sales at SCI's Richmond facility due
to conversion problems associated with the Company's implementation of the
new barcoding inventory management system.
MDC's gross margins are lower than at SCI's Richmond facility due to
higher manufacturing costs and an aggressive pricing strategy adopted prior
to the acquisition in an effort to increase market share. The Company
believes it has an opportunity to improve the gross profit margins on MDC's
business through the consolidation of raw material purchasing, the
implementation of more efficient production processes, and a less
aggressive pricing strategy.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were 12.5 percent and 12.7 percent of net sales in
the second quarter of the current and prior fiscal years, respectively.
Selling, general and administrative expenses were 13.0 percent and 12.4
percent of net sales for the six months ended March 31, 1996 and 1995,
respectively. Selling, general and administrative expenses during the
second quarter and first half of fiscal 1996, when compared with the second
quarter and first half of fiscal 1995, reflect the higher rate of selling,
general, and administrative expenses incurred by AMP, which was acquired in
May, 1995; the lower rate of selling, general, and administrative expenses
incurred by MDC, which was acquired in October, 1995; a credit adjustment
to a retrospective workmen's compensation insurance received during the
second quarter of fiscal 1996; elevated freight expenses caused by the
increase in rush shipments needed to meet customer tray requirements as a
result of the barcoding implementation problems; and increased
administrative and selling costs associated with SCL's start-up operations
in Europe which commenced in late February 1995.
<PAGE> 13
AMORTIZATION OF INTANGIBLES. Amortization of intangibles as a percent
of net sales was 0.6 percent for the second quarter of fiscal year 1996
compared to 0.3 percent for the second quarter of the prior fiscal year,
while amortization of intangibles for the six months ended March 31, 1996
was 0.9 percent of net sales compared with 0.3 percent the same period of
the prior year. Amortization of intangibles totaled $0.3 million and $0.1
million for the second quarter of fiscal 1996 and 1995, respectively, and
$0.9 million and $0.2 million for the first half of the respective fiscal
years. These increases were primarily the result of the amortization of
the excess of cost over fair market value of the assets acquired, which was
generated by the purchases of AMP and MDC.
INTEREST EXPENSE, NET. Net interest expense includes interest expense
and interest income. Net interest expense increased to $0.5 million for
the second quarter of the current fiscal year from $0.1 million for the
second quarter of the prior fiscal year. For the six month periods ending
March 31, 1996 and 1995, interest expense increased to $0.9 million from
$0.2 million. These increases in net interest were due to additional
borrowings under the Company's long-term credit facility. The Company
borrowed approximately $9.0 million in May 1995 to fund the purchase of AMP
and to refinance $2.1 million of AMP debt assumed as part of the
acquisition. In October 1995, the Company borrowed $18.0 million to fund
the acquisition of the custom procedure tray business of MDC. During the
second quarter of fiscal 1996 an additional $7.5 million was borrowed to
fund inventories and receivables resulting from the SCI production backlog
and increased sales of MDC and AMP. The additional borrowings resulting
from the production backlog are expected to decrease as the backlog is
alleviated and inventory levels are reduced.
INCOME TAXES. The Company's effective income tax rate for the second
quarter of fiscal 1996 was 43.3 percent compared with 41.0 percent for the
second quarter of fiscal 1995. For the first six month's of fiscal 1996,
the effective tax rate was 43.1 percent, up from 38.9 percent the prior
year. The increases in the effective tax rate were due primarily to the
increase in nondeductible amortization of the excess of cost over fair
value of assets acquired which was generated by the purchase of AMP and to
the non-deductibility of SCL's European start-up losses during the second
quarter and first half of fiscal 1996. SCL's operations began late in the
second quarter of fiscal 1995. The Company anticipates that the effective
tax rate for fiscal 1996 will be less than 43 percent once the Company
requalifies for tax credits under the Virginia Enterprise Zone Act.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $5.3 million and $4.3
million for the six month periods ended March 31, 1996 and 1995,
respectively. Net cash used in operating activities during the first half
of fiscal 1996 was primarily the result of a $5.7 million increase in
inventories and a $2.1 million increase in accounts receivable during the
first half of fiscal 1996, partially offset by net earnings for the period.
The increase in inventory levels resulted from the production backlog
associated with the difficulties related to the start-up of the new
inventory management system. The increase in receivables resulted from
higher sales volume, particularly at MDC. The Company's net working
capital was $45.7 million at March 31, 1996, compared to $29.2 million at
September 30, 1995.
<PAGE> 14
The Company believes that internally generated cash flow, and if
necessary, borrowings under the Company's long-term credit facility, will
be sufficient to meet the Company's operating requirements and capital
expenditure plans for both the short and long- term.
EVALUATION OF STRATEGIC ALTERNATIVES
On February 14, 1996, the management and directors of the Company
received an unsolicited offer from Maxxim Medical, Inc. to buy all
outstanding shares of common stock of the Company for cash, stock, or a
combination of cash and stock at $16.00 per share. Subsequently, Maxxim
Medical twice raised its offer, first to $17.75 per share and then to
$19.00 per share.
On March 27, 1996, the Company announced that its Board of Directors
had hired Wheat First Butcher Singer, an investment banking firm, to help
the Company explore its strategic alternatives including a possible
combination of the Company with one of the parties that had expressed an
interest in discussing a strategic alliance. Management and the Board of
Directors of the Company believe that this process will serve the best
interests of the shareholders, customers, and employees of the Company.
<PAGE> 15
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
On March 6, 1996, the Board of Directors of Holdings declared a
dividend payable March 19, 1996 of one right (a "Right") for each
outstanding share of Common Stock of Holdings held of record at the close
of business on March 19, 1996, or issued thereafter and prior to the
Separation Time (as defined in the Rights Agreement hereinafter referenced)
and thereafter pursuant to options and convertible securities outstanding
at the Separation Time. The Rights were issued pursuant to a Shareholder
Protection Rights Agreement, dated as of March 6, 1996 (the "Rights
Agreement"), between the Company and First Union National Bank of North
Carolina, as Rights Agent. Each Right entitles its registered holder to
purchase from the Company, after the Separation Time, one one-hundredth of
a share of Participating Preferred Stock, no par value, for $60, subject to
adjustment. In connection with the foregoing, the Amended and Restated
Articles of Incorporation of Holdings were amended to designate the rights
and preferences of the Participating Preferred Stock.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Board of Directors of the Company.
Accordingly, the existence of the Rights may deter certain potential
acquirors from making takeover proposals or tender offers. However, the
Rights are not intended to prevent a takeover, but rather are designed to
enhance the ability of the Board of Directors to negotiate with an acquiror
on behalf of all of the shareholders. The Rights should not interfere with
any merger or other business combination approved by the Board of Directors
prior to the time that holders of the Rights become entitled to exercise
their Rights.
Additional information regarding the Rights and the Rights Agreement
is set forth in Holdings' Current Report on Form 8-K dated March 6, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
The Annual Meeting of Shareholders of Holdings was held on February
15, 1996. At the Annual Meeting, Nina Novak and Roy R. Martine were re-
elected as Directors of Holdings. The holders of 4,618,405 shares of
Holdings' Common Stock voted for Ms. Novak's re-election and the holders of
69,265 shares abstained from voting. The holders of 4,628,930 shares of
Holdings' Common Stock voted for Mr. Martine's re-election and the holders
of 58,740 shares abstained from voting. There were no broker non-votes.
Subsequent to the Annual Meeting, Thomas N. Allen, J. Hamilton Scherer,
Jr., and Paul J. Woo, Jr., continue to serve as Directors of Holdings.
ITEM 5. OTHER INFORMATION.
As noted in Item 2 of Part I of this report, on March 27, 1996,
Holdings' Board of Directors instructed its advisors to explore Holdings'
strategic alternatives. Management and the Board of Directors of Holdings
stated that consideration of all of Holdings' strategic alternatives would
best serve the interests of its shareholders, customers and employees.
This process is ongoing.
<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession
2.1 Agreement and Plan of Reorganization is incorporated
herein by reference to Exhibit 2.1 to the Annual Report
on Form 10-K for the fiscal year ended September 30, 1994
(the "Form 10-K") of Sterile Concepts Holdings, Inc.
("Holdings").
2.2 Stock Purchase Agreement among Sterile Concepts, Inc.,
Associated Medical Products Company, Inc. ("AMP") and the
Stockholders of AMP dated April 20, 1995 is incorporated
herein by reference to Exhibit 2.2 to Holdings' Current
Report on Form 8-K filed with the Securities and Exchange
Commission on May 8, 1995 (the "May 8-K").
2.3 Asset Purchase Agreement among SCI, Medical Design
Concepts, Inc. ("MDC") and John W. Hoffee, II ("Hoffee"),
the Sole Stockholder of MDC, dated October 2, 1995, is
incorporated herein by reference to Exhibit 2.3 to
Holdings' Current Report on Form 8-K filed with the
Securities and Exchange Commission dated October 2, 1995
(the "October 8-K").
(3) Articles of Incorporation and Bylaws
3.1 The Amended and Restated Articles of Incorporation of
Holdings are incorporated herein by reference to Exhibit
3.3 to Amendment No. 1 to Holdings Registration Statement
on Form S-1, Registration No. 33-80736, filed with the
Securities and Exchange Commission on August 9, 1994
("Amendment No. 1 to Form S-1").
3.1.1 Articles of Amendment amending the Amended and Restated
Articles of Incorporation of Holdings are incorporated
here in by reference to Exhibit 3.1.1 to Holdings'
Registration Statement on Form 8-A, filed with the
Securities and Exchange Commission on March 12, 1996.
3.2 The Amended and Restated Bylaws of Holdings are
incorporated herein by reference to Exhibit 3.4 to
Amendment No. 3 to Holdings Registration Statement on
Form S-1, Registration No. 33-8-0736, filed with the
Securities and Exchange Commission on September 21, 1994
("Amendment No. 3 to Form S-1").
(10) Material Contracts
10.1 The Sterile Concepts Holdings, Inc. Stock Incentive Plan
is incorporated herein by reference to Exhibit 10.1 to
Amendment No. 2 to Holdings' Registration Statement on
Form S-1, Registration No. 33-80736, filed with the
Securities and Exchange Commission on August 31, 1994
("Amendment No. 2 to Form S-1")
<PAGE> 17
10.2.1 First Amendment to Employment Agreement among Holdings,
SCI and Roy R. Martine is incorporated herein by
reference to Exhibit 10.2.1.1 to Holding's Current Report
on Form 8-K filed with the Securities and Exchange
Commission on June 20, 1995 (the "June 8-K").
10.2.2 Employment Agreement among Holdings, SCI and Paul J. Woo,
Jr. is incorporated herein by reference to Exhibit
10.2.2. to the Form 10-K.
10.2.3 Employment Agreement among Holdings, SCI and D. Randolph
Graham is incorporated herein by reference to Exhibit
10.2.3. to the Form 10-K.
10.2.4 Employment Agreement among Holdings, SCI and Jeffrey L.
Brugh is incorporated herein by reference to Exhibit
10.2.4. to the Form 10-K.
10.2.5 Employment Agreement among Holdings, SCI and Hubert A.
Davis, Jr. is incorporated herein by reference to Exhibit
10.2.5. to the Form 10-K.
10.2.6 Employment Agreement among Holdings, SCI and Henry C.
Holswade is incorporated herein by reference to Exhibit
10.2.6. to the Form 10-K.
10.2.7 Employment Agreement between SCI and Robert Thaemert is
incorporated herein by reference to Exhibit 10.2.9 to the
May 8-K.
10.2.8 Employment Agreement between SCI and David Thomson is
incorporated herein by reference to Exhibit 10.2.10 to
the May 8-K.
10.2.9 Employment Agreement between SCI and John H. Luttgens,
dated as of October 2, 1995 is incorporated herein by
reference to Exhibit 10.2.11 to the October 8-K.
10.3.1 Executive Severance Agreement among Holdings, SCI and
Paul J. Woo, Jr. dated March 5, 1996 is filed herewith as
Exhibit 10.3.1.
10.3.2 Executive Severance Agreement among Holdings, SCI and D.
Randolph Graham dated March 5, 1996 is filed herewith as
Exhibit 10.3.2.
10.4 Cross Indemnification Agreement dated as of September 26,
1994 among Holdings, SCI, Carilion Services, Inc.
("CSI"), CHS, Inc., Carilion Health System ("Carilion")
and certain other affiliates of Carilion is incorporated
herein by reference to Exhibit 10.4.2. to the Form 10-K.
10.5 Tax Matters Agreement dated as of September 26, 1994
among Holdings, SCI, CSI, CHS, Inc., Carilion and certain
other affiliates of Carilion is incorporated herein by
reference to Exhibit 10.5.2. to the Form 10-K.
<PAGE> 18
10.6 Contract Manufacturing Agreement dated as of April 1,
1994 between SCI and Medline Industries, Inc. is
incorporated herein by reference to Exhibit 10.6 to
Amendment No. 4 to Holdings' Registration Statement on
Form S-1, Registration No. 33-80736, filed with the
Securities and Exchange Commission on September 23,
1994.*
10.6.1 First Amendment to Contract Manufacturing Agreement dated
as of December 31, 1994 between SCI and Medline
Industries, Inc. is incorporated herein by reference to
Exhibit 10.6.1 to Holdings' Current Report on Form 8-K
filed with the Securities and Exchange Commission on
April 4, 1995.
10.7 Product Purchase and Supply Agreement dated as of
February 8, 1993 between SCI and White Knight Healthcare,
Inc. is incorporated herein by reference to Exhibit 10.7
to Amendment No. 3 to Form S-1.*
10.8 Agreement dated as of October 6, 1989 between SCI and
Sterilization Services of Virginia, Inc. is incorporated
herein by reference to Exhibit 10.8 to Amendment No. 3 to
Form S-1.*
10.9 Bank Loan Agreement dated as of September 29, 1995 among
Crestar Bank, SCI, Holdings and AMP is incorporated
herein by reference to Exhibit 10.9.3 to Holdings' Annual
Report on Form 10-K for the fiscal year ended September
30, 1995, filed with the Securities and Exchange
Commission on December 29, 1995.
10.10 Eastport II, Deed of Lease with CSX Realty, Inc. is
incorporated herein by reference to Exhibit 10.10 to
Amendment No. 2 to Form S-1.
10.11 Lease Agreement with Crow-Klein-MacFarlane for 5100
Commerce Road, and Amendments is incorporated herein by
reference to Exhibit 10.11 to Amendment No. 2 to Form S-
1.
10.12 Lease Agreement with Crow-Klein-MacFarlane for 5200
Commerce Road, and Amendments is incorporated herein by
reference to Exhibit 10.12 to Amendment No. 2 to Form S-
1.
10.13 Escrow Agreement among SCI, Robert Thaemert, David
Thomson and Park National Bank, as Escrow Agent, dated
May 1, 1995, is incorporated herein by reference to
Exhibit 10.13 to the May 8-K.
10.14 Promissory Note of SCI in the amount of $1,480,000
payable to Robert Thaemert is incorporated herein by
reference to Exhibit 10.14 to the May 8-K.
10.15 Promissory Note of SCI in the amount of $2,380,000
payable to David Thomson is incorporated herein by
reference to Exhibit 10.15 to the May 8-K.
<PAGE> 19
10.16 Promissory Note of SCI in the amount of $101,147.12
payable to Robert Thaemert is incorporated herein by
reference to Exhibit 10.16 to the May 8-K.
10.17 Promissory Note of SCI in the amount of $101,147.12
payable to David Thomson is incorporated herein by
reference to Exhibit 10.17 to the May 8-K.
10.18 Assignment and Indemnity Agreement among AMP, A-BIO-VAC,
INC., Robert Thaemert and David Thomson dated May 1, 1995
is incorporated herein by reference to as Exhibit 10.18
to the May 8-K.
10.19 Escrow Agreement among SCI, MDC, Hoffee and Crestar Bank,
as Escrow Agent, dated October 2, 1995, is incorporated
herein by reference to Exhibit 10.19 to the October 8-K.
10.20 Assignment and Assumption Agreement among Professional
Hospital Supply, Inc., a California corporation ("PHS"),
MDC, SCI and Hoffee, dated as of October 2, 1995, is
incorporated herein by reference to Exhibit 10.20 to the
October 8-K.
10.21 Sterilization Agreement between SCI and MDC, dated as of
October 2, 1995, is incorporated herein by reference to
Exhibit 10.21 to the October 8-K.
10.22 Distribution Agreement between SCI and PHS, dated as of
October 2, 1995, is incorporated herein by reference to
Exhibit 10.22 to the October 8-K.
10.23 Trademark License Agreement between SCI and MDC, dated as
of October 2, 1995, is incorporated herein by reference
to Exhibit 10.23 to the October 8-K.
10.24 Purchasing Agreement between SCI and VHA, Inc. is
incorporated herein by reference to Exhibit 10.24 to the
Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1995 of Holdings.*
________________________________________
* Confidential treatment has been granted for portions of this exhibit.
The confidential portions have been filed separately with the Securities
and Exchange Commission.
<PAGE> 20
b) Reports on Form 8-K.
Holdings filed the following reports on Form 8-K during the fiscal
quarter ended March 31, 1996:
1. Form 8-K dated January 26, 1996 regarding Holdings financial
results for the quarter ended December 31, 1995.
2. Form 8-K dated March 6, 1996 regarding the adoption of a
Shareholder Protection Rights Agreement and the distribution of
Rights to purchase shares of Participating Preferred Stock
pursuant thereto.
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
STERILE CONCEPTS HOLDINGS, INC.
By: /s/ D. RANDOLPH GRAHAM
-----------------------
D. Randolph Graham
Vice President - Administration and
Chief Financial Officer
(On behalf of the registrant and as
principal financial officer)
May 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial data extracted from the condensed
consolidated balance sheet as of March 31, 1996 and the condensed consolidated
statements of earnings and cash flows for the quarter and six months ended
March 31, 1996 which were included in the Form 10-Q for the quarter ended
March 31, 1996 and is qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,399
<SECURITIES> 0
<RECEIVABLES> 30,120
<ALLOWANCES> 332
<INVENTORY> 29,991
<CURRENT-ASSETS> 65,920
<PP&E> 7,657
<DEPRECIATION> 4,194
<TOTAL-ASSETS> 89,772
<CURRENT-LIABILITIES> 20,238
<BONDS> 0
0
0
<COMMON> 1,472
<OTHER-SE> 34,626
<TOTAL-LIABILITY-AND-EQUITY> 89,772
<SALES> 94,929
<TOTAL-REVENUES> 94,929
<CGS> 76,379
<TOTAL-COSTS> 89,582
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 46
<INTEREST-EXPENSE> 977
<INCOME-PRETAX> 4,438
<INCOME-TAX> 1,911
<INCOME-CONTINUING> 2,527
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,527
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
EXHIBIT 10.3.1
EXECUTIVE SEVERANCE AGREEMENT
This Agreement ("Agreement") is entered into as of March 5, 1996
between Sterile Concepts Holdings, Inc. a Virginia corporation (the
"Company"), and Paul J. Woo, Jr. (the "Executive") and is an amendment and
restatement of a prior agreement between the Company and the Executive
entered into October 4, 1994.
1. Purpose.
The Company considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best
interests of the Company and its shareholders. In this connection, the
Company recognizes that, as is the case with many publicly held
corporations, the possibility of a Change in Control (as defined herein)
may arise and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. Accordingly, the Board of Directors of the Company (the
"Board") has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of the
Company's management to their assigned duties without distraction in
circumstances arising from the possibility of a Change in Control of the
Company. In particular, the Board believes it important, should the
Company or its shareholders receive a proposal for transfer of control of
the Company, that the Executive be able to assess and advise the Board
whether such proposal would be in the best interests of the Company and its
shareholders and to take such other action regarding such proposal as the
Board might determine to be appropriate, without being influenced by the
uncertainties of the Executive's own situation. Nothing in this Agreement
shall be construed as creating an express or implied contract of employment
and, except as otherwise agreed in writing between the Executive and the
Company, the Executive shall not have any right to be retained in the
employ of the Company.
2. Coordination with Employment Agreement.
(a) The Company and the Executive have entered into an
Employment Agreement dated October 4, 1994 (the "Employment
Agreement"). Pursuant to such Employment Agreement, the Company
agreed to employ the Executive, and the Executive agreed to be
employed by the Company, as President and Chief Executive Officer
until the Expiration Date (as such term is defined in the
Employment Agreement.)
(b) Notwithstanding the terms of this Agreement, the
Employment Agreement shall continue in full force and effect. To
the extent that any provision of any other agreement between the
Company or any of its subsidiaries or affiliates and you,
(including, without limitation, the Employment Agreement), shall
limit, qualify or be inconsistent with any provision of this
Agreement, then for purposes of this Agreement, while the same
shall remain in force, the provision of such other agreement
shall be deemed to have been superseded, and to be of no force or
effect, as if such other agreement had been formally amended to
the extent necessary to accomplish such purpose. Without
limiting the generality of the foregoing, in the event the
Company shall pay to the Executive all amounts the Executive
shall be eligible to receive under Section 6 hereof, the Company
shall have no obligations to make payments to the Executive under
Section 6(e) of the Employment Agreement; provided, however, that
the Executive may, in his sole discretion, elect to forgo all
benefits due to him hereunder and receive, in lieu thereof, the
full benefits available to him under the Employment Agreement.
3. Term of Agreement.
This Agreement shall commence on the date hereof (the "Commencement
Date") and shall continue in effect until the third anniversary of the
Commencement Date; provided, however, that commencing on the third
anniversary of the Commencement Date and each anniversary of the
Commencement Date thereafter, the term of this Agreement shall
automatically be extended for one additional year unless at least 90 days
prior to such anniversary date, the Company or the Executive shall have
given notice that this Agreement shall not be extended; and provided,
further, that, notwithstanding the delivery of any such notice, this
Agreement shall continue in effect for a period of 36 months after a Change
in Control of the Company if such Change in Control shall have occurred
while this Agreement is in effect. Notwithstanding anything in this
Section 3 to the contrary, this Agreement shall terminate if the Executive
or the Company terminates the Executive's employment prior to a Change in
Control of the Company.
4. Change in Control.
For all purposes of this Agreement, a "Change in Control" shall mean:
(a) The acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) other than a trustee or other
fiduciary holding securities under an employee benefits plan of the Company
(a "Person"), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 15% or more of either the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities") and thereafter
individuals who were not directors of the Company prior to the date such
Person became a 15% beneficial owner are elected as directors pursuant to
an arrangement or understanding with, or upon the request of or nomination
by, such Person and constitute at least one-quarter (1/4) of the Company's
Board of Directors; or
(b) Any Person is or becomes the beneficial owner, directly or
indirectly, of 40% or more of the Outstanding Company Common Stock or the
Outstanding Company Voting Securities; or
(c) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least seventy-five
percent (75%) of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(d) There occurs any acquisition, merger or consolidation of the
Company, by, with or into any other corporation (other than a wholly owned
subsidiary of the Company) and individuals who are directors of the Company
immediately prior to the time the agreement of acquisition, merger or
consolidation is executed shall fail to constitute a majority of the board
of directors of the survivor or successor company at any time after
consummation of the transaction; or
(e) There occurs a sale or disposition by the Company of all or
substantially all of the Company's assets; or
(f) There occurs a change of control of the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Act, in a Form 8-K filed under the
Act or in any other filing by the Company with the Securities and Exchange
Commission.
(g) Notwithstanding anything in subsections (a) - (f) of this Section
4 to the contrary, no Change in Control shall be deemed to have occurred
for purposes of this Agreement by virtue of any transaction which results
in you, or a group of Persons which includes you, acquiring, directly or
indirectly, 15% or more of the Outstanding Company Common Stock or the
combined voting power of the Company's Voting Securities.
5. Termination Following Change in Control.
If any of the events described in Section 4 hereof constituting a
Change in Control of the Company shall have occurred, the Executive shall
be entitled to the benefits provided in Section 6 hereof upon the
termination of the Executive's employment with the Company within thirty-
six (36) months after such Change in Control, unless such termination is
(a) because of death of the Executive, (b) by the Company for Cause or
Disability or (c) by the Executive other than during the Window Period or
for Good Reason (as all such capitalized terms are hereinafter defined).
(a) Disability. Termination by the Company of the Executive's
employment based on "Disability" shall mean termination because of the
Executive's inability to perform his duties with the Company on a full time
basis for 180 consecutive days or a total of at least 240 days in any
calendar year as a result of the Executive's incapacity due to physical or
mental illness (as determined by an independent physician selected by the
Board of Directors of the Company).
(b) Cause. Termination by the Company of the Executive's
employment for "Cause" shall mean termination for:
(i) gross incompetence, gross negligence, willful misconduct in
office or breach of a material fiduciary duty owed to the Company or any
subsidiary or affiliate thereof;
(ii) conviction of a felony, a crime of moral turpitude or
commission of an act of embezzlement or fraud against the Company or any
subsidiary or affiliate thereof;
(iii) any material breach by the Executive of a material term
of this Agreement, including without limitation material failure to perform
a substantial portion of his duties and responsibilities hereunder; or
(iv) deliberate dishonesty of the Executive with respect to the
Company or any subsidiary or affiliate thereof.
(c) Good Reason. Termination by the Executive of his employment for
"Good Reason" shall mean termination based on:
(i) a determination by the Executive, in his reasonable
judgment, that there has been an adverse change in the
Executive's status or position(s) as an executive officer of the
Company as in effect immediately prior to the Change in Control,
including, without limitation, any adverse change in his status
or position as a result of a diminution in his duties or
responsibilities (other than, if applicable, any such change
directly attributable to the fact that the Company is no longer
publicly owned) or the assignment to the Executive of any duties
or responsibilities which are inconsistent with such status or
position(s), or any removal of the Executive from, or any failure
to reappoint or reelect the Executive to, such positions(s)
(except in connection with the termination of the Executive's
employment for Cause or Disability or as a result of the
Executive's death or by the Executive other than for Good
Reason);
(ii) a reduction by the Company in the Executive's base
salary as in effect immediately prior to the Change in Control;
(iii) the failure by the Company to continue in effect
any Plan (as hereinafter defined) in which the Executive is
participating at the time of the Change in Control of the Company
(or Plans providing the Executive with at least substantially
similar benefits) other than as a result of the normal expiration
of any such Plan in accordance with its terms as in effect at the
time of the Change in Control, or the taking of any action, or
the failure to act, by the Company which would adversely affect
the Executive's continued participation in any of such Plans on
at least as favorable a basis to the Executive as is the case on
the date of the Change in Control, or which would materially
reduce the Executive's benefits in the future under any of such
Plans or deprive the Executive of any material benefit enjoyed by
the Executive at the time of the Change in Control;
(iv) the failure by the Company to provide and credit the
Executive with the number of paid vacation days to which the Executive is
then entitled in accordance with Company's normal vacation policy as in
effect immediately prior to the Change in Control;
(v) the Company's requiring the Executive to be based at any
office that is greater than thirty (30) miles from where the Executive's
office is located immediately prior to the Change in Control, except for
required travel on the Company's business to an extent substantially
consistent with the business travel obligations which the Executive
undertook on behalf of the Company prior to the Change in Control;
(vi) the failure by the Company to obtain an agreement reasonably
satisfactory to the Executive from any Successor (as defined in Section
7(a) hereof) to assume and agree to perform this Agreement;
(vii) the failure by the Company to pay to the Executive any
portion of his compensation or to pay to the Executive any portion of an
installment of deferred compensation under any deferred compensation
program of the Company within 15 days of the date such compensation is due,
without prior written consent of the Executive; or
(viii) any refusal by the Company to continue to allow the
Executive to attend to matters or engage in activities not directly related
to the business of the Company which, prior to the Change in Control, the
Executive was permitted by the Board to attend to or engage in.
(ix) For purposes of this Agreement, "Plan" shall mean any
compensation plan or any employee benefit plan such as a thrift, pension,
profit sharing, medical, disability, accident, life insurance plan or a
relocation plan or policy or any other plan, program or policy of the
Company intended to benefit employees.
(d) Window Period. The term "Window Period" shall mean the 45 day
period immediately following the first anniversary of the date on which a
Change in Control occurred.
(e) Notice of Termination. Any purported termination by the Company
or by the Executive following a Change in Control shall be communicated by
written Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon.
6. Compensation Upon Termination.
(a) If, within 36 months after a Change in Control of the
Company has occurred, the Executive's employment by the Company
is terminated other than on account of the Executive's death and
is terminated (x) by the Company other than for Cause or
Disability or (y) by the Executive during the Window Period or
for Good Reason, then the Company shall pay to the Executive, no
later than the fifth day following the date of termination,
without regard to any contrary provisions of any Plan, the
following:
(i) the Executive's base salary through the date of termination
at the rate in effect just prior to the time a Notice of Termination is
given, plus any benefits or awards (including both the cash and stock
components) which pursuant to the terms of any Plans have been earned or
become payable, but which have not yet been paid to the Executive
(including amounts which previously had been deferred at the Executive's
request);
(ii) a lump sum payment in cash in an amount equal to 2.99 times
the Executive's Earnings (as defined below) provided, however, that if
there are fewer than 36 months remaining from the date of termination to
the first day of the month following the month in which the Executive
attains age 65 ("Normal Retirement Date"), the amount calculated pursuant
to this Section 6(a)(ii) shall be reduced by multiplying such amount by a
fraction, the numerator of which is the number of months (including any
fraction of a month) remaining to the Executive's Normal Retirement Date
and the denominator of which is 36.
For purposes of this Section 6(a)(ii), "Earnings" shall mean the average
annual compensation payable by the Company and includible in the gross
income of the Executive for the taxable years during the period consisting
of the most recent five taxable years ending before the date on which the
Change in Control occurs (or such portion of such period during which the
Executive performed personal services for the Company) including without
limitation all amounts paid to the Executive upon termination of certain
stock option and/or long term incentive plans maintained by the Company
prior to the Company's initial public offering.
(iii) In the event any payment or distribution by the Company
to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments
required under this Section 6(a)(iii)) (a "Payment") would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended, or any interest or penalties are incurred by the
Executive with respect to such excise tax (collectively, the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive
of all taxes (including any income taxes and interest or penalties imposed
with respect to such taxes) and the Excise Tax imposed on the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed on the Payments. All determinations required to be
made under this Section 6(a)(iii) shall be made by KPMG Peat Marwick or
such other accounting firm as may be mutually agreed to between the
Executive and the Company (the "Accounting Firm"). All fees and expenses
of the Accounting Firm shall be borne solely by the Company, and any
determination by the Accounting Firm shall be binding upon the Company and
the Executive. Any Gross Up Payment shall be paid to the Executive by the
Company within 10 days of the Company's receipt of the Accounting Firm's
determination.
(iv) a lump sum payment in cash in an amount equal to the present
value of the difference between (a) the benefit the Executive would have
been entitled to receive from the Retirement Plan of Sterile Concepts
Holdings, Inc., as amended (the "Pension Plan"), as it existed on December
31, 1995, and calculated without regard to the limit under Code Section
401(a)(17) as if, at the time of termination, the sum of the Executive's
age and years of Credited Service (as defined in the Pension Plan) were
determined as if he remained employed by the Company until October 1, 1999,
and (b) the benefit actually available to the Executive under the Pension
Plan at the time of his termination.
(b) If, within 36 months after a Change in Control of the
Company has occurred, the Executive's employment by the Company
is terminated other than on account of the Executive's death and
is terminated (x) by the Company other than for Cause or
Disability, or (y) by the Executive during the Window Period or
for Good Reason, then the Company shall maintain in full force
and effect, at the sole cost of the Company (except for the
regular contributions of the Executive as described below, if
any), for the continued benefit of the Executive and his
dependents for a period terminating on the earliest of (a) 12
months after the date of termination, or (b) the commencement
date of equivalent benefits from a new employer, all insured and
self-insured employee welfare benefit Plans in which the
Executive was entitled to participate immediately prior to the
date of termination, provided that the Executive's continued
participation is possible under the general terms and provisions
of such Plans (and any applicable funding media) and the
Executive continues to pay an amount equal to his regular
contribution under such Plans prior to the Change in Control for
such participation. In the event that the Executive's
participation in any such Plan is barred, the Company, at its
sole cost and expense, shall arrange to have issued for the
benefit of the Executive and his dependents individual policies
of insurance providing benefits substantially similar (on an
after-tax basis) to those which the Executive otherwise would
have been entitled to receive under such Plans pursuant to this
Section 6(b) or, if such insurance is not available at a
reasonable cost to the Company, the Company shall otherwise
provide the Executive and his dependents with equivalent benefits
(on an after-tax basis). The Executive shall not be required to
pay any premiums or other charges in an amount greater than that
which the Executive would have paid in order to participate in
such Plans.
(c) Except as specifically provided in paragraph (b) above,
the amount of any payment provided for in this Section 6 shall
not be reduced, offset or subject to recovery by the Company by
reason of any compensation earned by the Executive as the result
of employment by another employer after the date of termination,
or otherwise.
(d) Notwithstanding any other provision of this Agreement, upon
termination for any reason not subject to Section 6(a), the Executive shall
receive a lump sum payment in an amount equal to the amount described in
Section 6(a)(iv) above.
7. Successors; Binding Agreement.
(a) The Company will seek, by written request at least five business
days prior to the time a Person becomes a Successor (as hereinafter
defined), to have such Person, by agreement in form and substance
satisfactory to the Executive, assent to the fulfillment of the Company's
obligations under this Agreement. Failure of such Person to furnish such
assent by the later of (x) three business days prior to the time such
Person becomes a Successor or (y) two business days after such Person
receives a written request to so assent shall constitute Good Reason for
termination by the Executive of his employment if a Change in Control of
the Company occurs or has occurred. For purposes of this Agreement,
"Successor" shall mean any Person that succeeds to, or has the practical
ability to control (either immediately or with the passage of time), the
Company's business directly, by merger or consolidation, or indirectly, by
purchase of the Company's Voting Securities or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
the Executive should die while any amount would still be payable to him
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee or other designee or, if no
such designee exists, to his estate.
(c) For purposes of this Agreement, the term "Company" shall include
any subsidiaries of the Company and any corporation or other entity which
is the surviving or continuing entity in respect of any merger,
consolidation or form of business combination in which the Company ceases
to exist; provided, however, that for purposes of determining whether a
Change in Control has occurred herein, the term "Company" shall refer to
Sterile Concepts Holdings, Inc. or Sterile Concepts, Inc., or their
respective successors.
8. Fees and Expenses; Mitigation.
(a) The Company shall reimburse the Executive, on a current basis,
for all reasonable legal fees and related expenses which he shall incur in
connection with the Agreement following a Change in Control of the Company,
including without limitation, all such fees and expenses, if any, incurred
(i) in contesting or disputing any termination of the Executive's
employment or (ii) the Executive's seeking to obtain or enforce any right
or benefit provided by this Agreement, in each case, regardless of whether
or not the Executive's claim is upheld by a court of competent
jurisdiction; provided, however, the Executive shall be required to repay
any such amounts to the Company to the extent that a court issues a final
and non-appealable order setting forth the determination that the position
taken by the Executive was frivolous or advanced by him in bad faith.
(b) The Executive shall not be required to mitigate the amount of any
payment the Company becomes obligated to make to the Executive in
connection with this Agreement, by seeking other employment or otherwise.
9. Taxes.
All payments to be made to the Executive under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
10. Notice.
Any notices, requests, demands and other communications provided for
by this Agreement shall be sufficient if in writing and delivered in person
or sent by registered or certified mail, postage prepaid (in which case
notice shall be deemed to have been given on the third day after mailing),
or by overnight delivery by a reliable overnight courier service (in which
case notice shall be deemed to have been given on the day after delivery to
such courier service) to the Executive at the last address the Executive
has filed in writing with the Employer or, in the case of the Employer, at
its main offices, attention of the Board of Directors.
11. Miscellaneous.
No provision of this Agreement may be modified, waived or discharged
unless such modification, waiver or discharge is agreed to in a writing
signed by the Executive and the Chairman of the Board or President of the
Company. No waiver by either party hereto at any time of any breach by the
other party hereto of, or of compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement, and this Agreement supersedes in all respect the Executive
Severance Agreement between the Company and the Executive dated October 4,
1994.
12. Governing Law.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of Virginia.
13. Validity.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
14. Executive Commitment.
The Executive agrees that subsequent to his period of employment with
the Company, the Executive will not at any time communicate or disclose to
any unauthorized person, without the written consent of the Company, any
proprietary processes of the Company or other confidential information
concerning its business, affairs, products suppliers or customers which, if
disclosed, would have a material adverse effect upon the business or
operations of the Company taken as a whole; it being understood, however,
that the obligations under this Section 14 shall not apply to the extent
that the aforesaid matters (a) are disclosed in circumstances where the
Executive is legally required to do so or (b) become generally known to,
and available for use by, the public otherwise than by the Executive's
wrongful act or omission.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by Sterile Concepts Holdings, Inc., by its duly authorized
officer, and by the Executive, as of the date first above written.
STERILE CONCEPTS HOLDINGS, INC.
By:
Title:
Date:
Paul J. Woo, Jr.
Date:
Address: 5100 Commerce Road
Richmond, Virginia 23234
Exhibit 10.3.2
EXECUTIVE SEVERANCE AGREEMENT
This Agreement ("Agreement") is entered into as of March 5, 1996
between Sterile Concepts Holdings, Inc. a Virginia corporation (the
"Company"), and D. Randolph Graham (the "Executive") and is an amendment
and restatement of a prior agreement between the Company and the Executive
entered into October 4, 1994.
1. Purpose.
The Company considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best
interests of the Company and its shareholders. In this connection, the
Company recognizes that, as is the case with many publicly held
corporations, the possibility of a Change in Control (as defined herein)
may arise and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. Accordingly, the Board of Directors of the Company (the
"Board") has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of the
Company's management to their assigned duties without distraction in
circumstances arising from the possibility of a Change in Control of the
Company. In particular, the Board believes it important, should the
Company or its shareholders receive a proposal for transfer of control of
the Company, that the Executive be able to assess and advise the Board
whether such proposal would be in the best interests of the Company and its
shareholders and to take such other action regarding such proposal as the
Board might determine to be appropriate, without being influenced by the
uncertainties of the Executive's own situation. Nothing in this Agreement
shall be construed as creating an express or implied contract of employment
and, except as otherwise agreed in writing between the Executive and the
Company, the Executive shall not have any right to be retained in the
employ of the Company.
2. Coordination with Employment Agreement.
(a) The Company and the Executive have entered into an
Employment Agreement dated October 4, 1994 (the "Employment
Agreement"). Pursuant to such Employment Agreement, the Company
agreed to employ the Executive, and the Executive agreed to be
employed by the Company, as Vice President_Administration and
Chief Financial Officer until the Expiration Date (as such term
is defined in the Employment Agreement.)
(b) Notwithstanding the terms of this Agreement, the
Employment Agreement shall continue in full force and effect. To
the extent that any provision of any other agreement between the
Company or any of its subsidiaries or affiliates and you,
(including, without limitation, the Employment Agreement), shall
limit, qualify or be inconsistent with any provision of this
Agreement, then for purposes of this Agreement, while the same
shall remain in force, the provision of such other agreement
shall be deemed to have been superseded, and to be of no force or
effect, as if such other agreement had been formally amended to
the extent necessary to accomplish such purpose. Without
limiting the generality of the foregoing, in the event the
Company shall pay to the Executive all amounts the Executive
shall be eligible to receive under Section 6 hereof, the Company
shall have no obligations to make payments to the Executive under
Section 6(e) of the Employment Agreement; provided, however, that
the Executive may, in his sole discretion, elect to forgo all
benefits due to him hereunder and receive, in lieu thereof, the
full benefits available to him under the Employment Agreement.
3. Term of Agreement.
This Agreement shall commence on the date hereof (the "Commencement
Date") and shall continue in effect until the third anniversary of the
Commencement Date; provided, however, that commencing on the third
anniversary of the Commencement Date and each anniversary of the
Commencement Date thereafter, the term of this Agreement shall
automatically be extended for one additional year unless at least 90 days
prior to such anniversary date, the Company or the Executive shall have
given notice that this Agreement shall not be extended; and provided,
further, that, notwithstanding the delivery of any such notice, this
Agreement shall continue in effect for a period of 36 months after a Change
in Control of the Company if such Change in Control shall have occurred
while this Agreement is in effect. Notwithstanding anything in this
Section 3 to the contrary, this Agreement shall terminate if the Executive
or the Company terminates the Executive's employment prior to a Change in
Control of the Company.
4. Change in Control.
For all purposes of this Agreement, a "Change in Control" shall mean:
(a) The acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) other than a trustee or other
fiduciary holding securities under an employee benefits plan of the Company
(a "Person"), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 15% or more of either the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities") and thereafter
individuals who were not directors of the Company prior to the date such
Person became a 15% beneficial owner are elected as directors pursuant to
an arrangement or understanding with, or upon the request of or nomination
by, such Person and constitute at least one-quarter (1/4) of the Company's
Board of Directors; or
(b) Any Person is or becomes the beneficial owner, directly or
indirectly, of 40% or more of the Outstanding Company Common Stock or the
Outstanding Company Voting Securities; or
(c) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least seventy-five
percent (75%) of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(d) There occurs any acquisition, merger or consolidation of the
Company, by, with or into any other corporation (other than a wholly owned
subsidiary of the Company) and individuals who are directors of the Company
immediately prior to the time the agreement of acquisition, merger or
consolidation is executed shall fail to constitute a majority of the board
of directors of the survivor or successor company at any time after
consummation of the transaction; or
(e) There occurs a sale or disposition by the Company of all or
substantially all of the Company's assets; or
(f) There occurs a change of control of the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Act, in a Form 8-K filed under the
Act or in any other filing by the Company with the Securities and Exchange
Commission.
(g) Notwithstanding anything in subsections (a) - (f) of this Section
4 to the contrary, no Change in Control shall be deemed to have occurred
for purposes of this Agreement by virtue of any transaction which results
in you, or a group of Persons which includes you, acquiring, directly or
indirectly, 15% or more of the Outstanding Company Common Stock or the
combined voting power of the Company's Voting Securities.
5. Termination Following Change in Control.
If any of the events described in Section 4 hereof constituting a
Change in Control of the Company shall have occurred, the Executive shall
be entitled to the benefits provided in Section 6 hereof upon the
termination of the Executive's employment with the Company within thirty-
six (36) months after such Change in Control, unless such termination is
(a) because of death of the Executive, (b) by the Company for Cause or
Disability or (c) by the Executive other than during the Window Period or
for Good Reason (as all such capitalized terms are hereinafter defined).
(a) Disability. Termination by the Company of the Executive's
employment based on "Disability" shall mean termination because of the
Executive's inability to perform his duties with the Company on a full time
basis for 180 consecutive days or a total of at least 240 days in any
calendar year as a result of the Executive's incapacity due to physical or
mental illness (as determined by an independent physician selected by the
Board of Directors of the Company).
(b) Cause. Termination by the Company of the Executive's
employment for "Cause" shall mean termination for:
(i) gross incompetence, gross negligence, willful misconduct in
office or breach of a material fiduciary duty owed to the Company or any
subsidiary or affiliate thereof;
(ii) conviction of a felony, a crime of moral turpitude or
commission of an act of embezzlement or fraud against the Company or any
subsidiary or affiliate thereof;
(iii) any material breach by the Executive of a material term
of this Agreement, including without limitation material failure to perform
a substantial portion of his duties and responsibilities hereunder; or
(iv) deliberate dishonesty of the Executive with respect to the
Company or any subsidiary or affiliate thereof.
(c) Good Reason. Termination by the Executive of his employment for
"Good Reason" shall mean termination based on:
(i) a determination by the Executive, in his reasonable
judgment, that there has been an adverse change in the
Executive's status or position(s) as an executive officer of the
Company as in effect immediately prior to the Change in Control,
including, without limitation, any adverse change in his status
or position as a result of a diminution in his duties or
responsibilities (other than, if applicable, any such change
directly attributable to the fact that the Company is no longer
publicly owned) or the assignment to the Executive of any duties
or responsibilities which are inconsistent with such status or
position(s), or any removal of the Executive from, or any failure
to reappoint or reelect the Executive to, such positions(s)
(except in connection with the termination of the Executive's
employment for Cause or Disability or as a result of the
Executive's death or by the Executive other than for Good
Reason);
(ii) a reduction by the Company in the Executive's base
salary as in effect immediately prior to the Change in Control;
(iii) the failure by the Company to continue in effect
any Plan (as hereinafter defined) in which the Executive is
participating at the time of the Change in Control of the Company
(or Plans providing the Executive with at least substantially
similar benefits) other than as a result of the normal expiration
of any such Plan in accordance with its terms as in effect at the
time of the Change in Control, or the taking of any action, or
the failure to act, by the Company which would adversely affect
the Executive's continued participation in any of such Plans on
at least as favorable a basis to the Executive as is the case on
the date of the Change in Control, or which would materially
reduce the Executive's benefits in the future under any of such
Plans or deprive the Executive of any material benefit enjoyed by
the Executive at the time of the Change in Control;
(iv) the failure by the Company to provide and credit the
Executive with the number of paid vacation days to which the Executive is
then entitled in accordance with Company's normal vacation policy as in
effect immediately prior to the Change in Control;
(v) the Company's requiring the Executive to be based at any
office that is greater than thirty (30) miles from where the Executive's
office is located immediately prior to the Change in Control, except for
required travel on the Company's business to an extent substantially
consistent with the business travel obligations which the Executive
undertook on behalf of the Company prior to the Change in Control;
(vi) the failure by the Company to obtain an agreement reasonably
satisfactory to the Executive from any Successor (as defined in Section
7(a) hereof) to assume and agree to perform this Agreement;
(vii) the failure by the Company to pay to the Executive any
portion of his compensation or to pay to the Executive any portion of an
installment of deferred compensation under any deferred compensation
program of the Company within 15 days of the date such compensation is due,
without prior written consent of the Executive; or
(viii) any refusal by the Company to continue to allow the
Executive to attend to matters or engage in activities not directly related
to the business of the Company which, prior to the Change in Control, the
Executive was permitted by the Board to attend to or engage in.
(ix) For purposes of this Agreement, "Plan" shall mean any
compensation plan or any employee benefit plan such as a thrift, pension,
profit sharing, medical, disability, accident, life insurance plan or a
relocation plan or policy or any other plan, program or policy of the
Company intended to benefit employees.
(d) Window Period. The term "Window Period" shall mean the 45 day
period immediately following the first anniversary of the date on which a
change in control occurred.
(e) Notice of Termination. Any purported termination by the Company
or by the Executive following a Change in Control shall be communicated by
written Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon.
6. Compensation Upon Termination.
(a) If, within 36 months after a Change in Control of the
Company has occurred, the Executive's employment by the Company
is terminated other than on account of the Executive's death and
is terminated (x) by the Company other than for Cause or
Disability or (y) by the Executive during the Window Period or
for Good Reason, then the Company shall pay to the Executive, no
later than the fifth day following the date of termination,
without regard to any contrary provisions of any Plan, the
following:
(i) the Executive's base salary through the date of termination
at the rate in effect just prior to the time a Notice of Termination is
given, plus any benefits or awards (including both the cash and stock
components) which pursuant to the terms of any Plans have been earned or
become payable, but which have not yet been paid to the Executive
(including amounts which previously had been deferred at the Executive's
request);
(ii) a lump sum payment in cash in an amount equal to the greater
of (A) 2.99 times the Executive's Earnings (as defined below) or (B) 2.99
times the amount of compensation received by or imputed to the Executive
from the Company whether or not includible in the Executive's gross income
for federal tax purposes during the calendar year that ended immediately
prior to the year in which the change in control occurs; provided, however,
that if there are fewer than 36 months remaining from the date of
termination to the first day of the month following the month in which the
Executive attains age 65 ("Normal Retirement Date"), the amount calculated
pursuant to this Section 6(a)(ii) shall be reduced by multiplying such
amount by a fraction, the numerator of which is the number of months
(including any fraction of a month) remaining to the Executive's Normal
Retirement Date and the denominator of which is 36.
For purposes of this Section 6(a)(ii), "Earnings" shall mean the average
annual compensation payable by the Company and includible in the gross
income of the Executive for the taxable years during the period consisting
of the most recent five taxable years ending before the date on which the
Change in Control occurs (or such portion of such period during which the
Executive performed personal services for the Company), including without
limitation all amounts paid to the Executive upon termination of certain
stock option and/or long term incentive plans maintained by the Company
prior to the Company's initial public offering.
(iii) In the event any payment or distribution by the Company
to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments
required under this Section 6(a)(iii)) (a "Payment") would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended, or any interest or penalties are incurred by the
Executive with respect to such excise tax (collectively, the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive
of all taxes (including any income taxes and interest or penalties imposed
with respect to such taxes) and the Excise Tax imposed on the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed on the Payments. All determinations required to
be made under this Section 6(a)(iii) shall be made by KPMG Peat Marwick or
such other accounting firm as may be mutually agreed to between the
Executive and the Company (the "Accounting Firm"). All fees and expenses
of the Accounting Firm shall be borne solely by the Company, and any
determination by the Accounting Firm shall be binding upon the Company and
the Executive. Any Gross Up Payment shall be paid to the Executive by the
Company within 10 days of the Company's receipt of the Accounting Firm's
determination.
(b) If, within 36 months after a Change in Control of the
Company has occurred, the Executive's employment by the Company
is terminated other than on account of the Executive's death and
is terminated (x) by the Company other than for Cause or
Disability, or (y) by the Executive during the Window Period or
for Good Reason, then the Company shall maintain in full force
and effect, at the sole cost of the Company (except for the
regular contributions of the Executive as described below, if
any), for the continued benefit of the Executive and his
dependents for a period terminating on the earliest of (a) 12
months after the date of termination, or (b) the commencement
date of equivalent benefits from a new employer, all insured and
self-insured employee welfare benefit Plans in which the
Executive was entitled to participate immediately prior to the
date of termination, provided that the Executive's continued
participation is possible under the general terms and provisions
of such Plans (and any applicable funding media) and the
Executive continues to pay an amount equal to his regular
contribution under such Plans prior to the Change in Control for
such participation. In the event that the Executive's
participation in any such Plan is barred, the Company, at its
sole cost and expense, shall arrange to have issued for the
benefit of the Executive and his dependents individual policies
of insurance providing benefits substantially similar (on an
after-tax basis) to those which the Executive otherwise would
have been entitled to receive under such Plans pursuant to this
Section 6(b) or, if such insurance is not available at a
reasonable cost to the Company, the Company shall otherwise
provide the Executive and his dependents with equivalent benefits
(on an after-tax basis). The Executive shall not be required to
pay any premiums or other charges in an amount greater than that
which the Executive would have paid in order to participate in
such Plans.
(c) Except as specifically provided in paragraph (b) above,
the amount of any payment provided for in this Section 6 shall
not be reduced, offset or subject to recovery by the Company by
reason of any compensation earned by the Executive as the result
of employment by another employer after the date of termination,
or otherwise.
7. Successors; Binding Agreement.
(a) The Company will seek, by written request at least five business
days prior to the time a Person becomes a Successor (as hereinafter
defined), to have such Person, by agreement in form and substance
satisfactory to the Executive, assent to the fulfillment of the Company's
obligations under this Agreement. Failure of such Person to furnish such
assent by the later of (x) three business days prior to the time such
Person becomes a Successor or (y) two business days after such Person
receives a written request to so assent shall constitute Good Reason for
termination by the Executive of his employment if a Change in Control of
the Company occurs or has occurred. For purposes of this Agreement,
"Successor" shall mean any Person that succeeds to, or has the practical
ability to control (either immediately or with the passage of time), the
Company's business directly, by merger or consolidation, or indirectly, by
purchase of the Company's Voting Securities or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
the Executive should die while any amount would still be payable to him
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee or other designee or, if no
such designee exists, to his estate.
(c) For purposes of this Agreement, the term "Company" shall include
any subsidiaries of the Company and any corporation or other entity which
is the surviving or continuing entity in respect of any merger,
consolidation or form of business combination in which the Company ceases
to exist; provided, however, that for purposes of determining whether a
Change in Control has occurred herein, the term "Company" shall refer to
Sterile Concepts Holdings, Inc. or Sterile Concepts, Inc., or their
respective successors.
8. Fees and Expenses; Mitigation.
(a) The Company shall reimburse the Executive, on a current basis,
for all reasonable legal fees and related expenses which he shall incur in
connection with the Agreement following a Change in Control of the Company,
including without limitation, all such fees and expenses, if any, incurred
(i) in contesting or disputing any termination of the Executive's
employment or (ii) the Executive's seeking to obtain or enforce any right
or benefit provided by this Agreement, in each case, regardless of whether
or not the Executive's claim is upheld by a court of competent
jurisdiction; provided, however, the Executive shall be required to repay
any such amounts to the Company to the extent that a court issues a final
and non-appealable order setting forth the determination that the position
taken by the Executive was frivolous or advanced by him in bad faith.
(b) The Executive shall not be required to mitigate the amount of any
payment the Company becomes obligated to make to the Executive in
connection with this Agreement, by seeking other employment or otherwise.
9. Taxes.
All payments to be made to the Executive under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
10. Notice.
Any notices, requests, demands and other communications provided for
by this Agreement shall be sufficient if in writing and delivered in person
or sent by registered or certified mail, postage prepaid (in which case
notice shall be deemed to have been given on the third day after mailing),
or by overnight delivery by a reliable overnight courier service (in which
case notice shall be deemed to have been given on the day after delivery to
such courier service) to the Executive at the last address the Executive
has filed in writing with the Employer or, in the case of the Employer, at
its main offices, attention of the Board of Directors.
11. Miscellaneous.
No provision of this Agreement may be modified, waived or discharged
unless such modification, waiver or discharge is agreed to in a writing
signed by the Executive and the Chairman of the Board or President of the
Company. No waiver by either party hereto at any time of any breach by the
other party hereto of, or of compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement and this Agreement supersedes in all respects the Executive
Severance Agreement between the Company and the Executive dated October 4,
1994.
12. Governing Law.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of Virginia.
13. Validity.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
14. Executive Commitment.
The Executive agrees that subsequent to his period of employment with
the Company, the Executive will not at any time communicate or disclose to
any unauthorized person, without the written consent of the Company, any
proprietary processes of the Company or other confidential information
concerning its business, affairs, products suppliers or customers which, if
disclosed, would have a material adverse effect upon the business or
operations of the Company taken as a whole; it being understood, however,
that the obligations under this Section 14 shall not apply to the extent
that the aforesaid matters (a) are disclosed in circumstances where the
Executive is legally required to do so or (b) become generally known to,
and available for use by, the public otherwise than by the Executive's
wrongful act or omission.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by Sterile Concepts Holdings, Inc., by its duly authorized
officer, and by the Executive, as of the date first above written.
STERILE CONCEPTS HOLDINGS, INC.
By:
Title:
Date:
D. Randolph Graham
Date:
Address: 5100 Commerce Road
Richmond, Virginia 23234
