SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934
Sterile Concepts Holdings, Inc.
(Name of Subject Company)
Sterile Concepts Holdings, Inc.
(Name of Person Filing Statement)
Common Stock, no par value
(Title of Class of Securities)
85915P 10 9
(CUSIP Number of Class of Securities)
Paul J. Woo, Jr.
President and Chief Executive Officer
Sterile Concepts Holdings, Inc.
5100 Commerce Road
Richmond, Virginia 23234
(804) 275-0200
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of the Person(s) Filing
Statement)
Copy to:
Wellford L. Sanders, Jr., Esq.
McGuire, Woods, Battle & Boothe, L.L.P.
One James Center
901 East Cary Street
Richmond, Virginia 23219
(804) 775-1000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Sterile Concepts Holdings, Inc., a
Virginia corporation (the "Company"), and the address of the principal executive
offices of the Company is 5100 Commerce Road, Richmond, Virginia 23234. The
title of the class of equity securities to which this Statement relates is the
Common Stock, no par value (the "Common Stock"), of the Company (the "Shares").
Unless the context otherwise requires, as used herein the term "Shares" includes
Common Stock and the associated share purchase rights (the "Rights") issued
pursuant to the Shareholder Protection Rights Agreement dated as of March 6,
1996 (as amended, the "Rights Agreement"), between the Company and First Union
National Bank of North Carolina, as Rights Agent (the "Rights Agent").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer by Maxxim Acquisition Co., a
Virginia corporation (the "Purchaser") and a wholly owned subsidiary of Maxxim
Medical, Inc., a Delaware corporation ("Maxxim"), a wholly owned subsidiary of
Maxxim Medical, Inc., a Texas corporation, disclosed in a Tender Offer Statement
on Schedule 14D-1, dated June 14, 1996 (the "Schedule 14D-1"), to purchase all
of the outstanding Shares at a price of $20 per Share, net to the seller in cash
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Purchaser's Offer to Purchase dated June 14, 1996 (the "Offer to Purchase")
and the related Letter of Transmittal (which, together with the Offer to
Purchase, constitutes the "Offer"). The Offer is scheduled to expire at 12:00
midnight (New York City time) on July 26, 1996, unless extended in accordance
with applicable law and the terms of the Merger Agreement (as hereinafter
defined).
The Offer is made pursuant to an Agreement and Plan of Merger dated as of
June 10, 1996 (the "Merger Agreement") among Maxxim, the Purchaser and the
Company. The Merger Agreement provides, among other things, that as soon as
practicable after the consummation of the Offer and satisfaction or waiver of
all remaining conditions to the Merger, the Purchaser will be merged with and
into the Company, and the Company will continue as the surviving corporation.
As set forth in the Schedule 14D-1, each of the Purchaser and Maxxim has
its principal executive offices at 104 Industrial Boulevard, Sugar Land, Texas
77470.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
(b) Except as described or incorporated by reference herein, to the best
knowledge of the Company, as of the date hereof, there exists no material
contract, agreement, arrangement or understanding and no actual or potential
conflict of interest between the Company or its affiliates and (i) the Company's
executive officers, directors or affiliates or (ii) the Purchaser or its
executive officers, directors or affiliates.
Certain contracts, agreements, arrangements and understandings between the
Company and certain of its directors and executive officers are described in the
Company's Proxy Statement dated December 29, 1995 relating to its 1996 annual
meeting of shareholders (the "1996 Proxy Statement"). A copy of the 1996 Proxy
Statement is attached hereto as exhibit (a) and the portions thereof referred to
above are incorporated herein by reference. Reference is also made to Schedule I
of this Statement for additional information in response to this Item.
LIMITATION OF LIABILITY
The Company's Restated Articles of Incorporation (the "Articles") eliminate
all liability of the Company's directors and officers for monetary damages to
the Company or its stockholders except in the event of willful misconduct or a
knowing violation of the criminal law or any federal or state securities law.
Pursuant to such provisions, the Company's directors or officers will not be
liable for monetary damages to the Company or its stockholders even if they
should fail, through negligence or gross negligence, to satisfy their duty of
care to the Company or its stockholders.
The Articles require indemnification of any person against liability
incurred in connection with any proceeding to which that person is made a party
by reason of (i) his service to the Company as a director or officer or (ii) his
service as a director, officer, trustee, or partner to some other enterprise at
the request of the Company, except in the event of willful misconduct or a
knowing violation of the criminal law. The Articles also authorize the Company's
Board of Directors to contract in advance to indemnify any director or officer
by a majority vote of a quorum of disinterested directors. In addition, the
Articles authorize the Company's Board of Directors, by a majority vote of a
quorum of disinterested directors, to cause the Company
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to indemnify, or agree to indemnify in advance, to the same extent any person
who serves as an employee, agent or consultant of the Company or who serves at
the request of the Company in some other capacity.
MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement
and is qualified in its entirety by reference to the Merger Agreement, a copy of
which is filed herewith as exhibit (b).
THE OFFER. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, the Purchaser will purchase all Shares
validly tendered pursuant to the Offer. The Merger Agreement provides that the
Purchaser may modify the terms of the Offer, except that, without the consent of
the Company, the Purchaser will not reduce the Offer Price, reduce the number of
Shares sought in the Offer, waive the condition that there be validly tendered
and not properly withdrawn prior to expiration of the Offer a number of shares
equal to more than two-thirds of the outstanding Shares calculated on a fully
diluted basis (the "Minimum Condition"), change the form of consideration
payable in the Offer, or modify or add to the conditions of the Offer. In
addition, without the consent of the Company, the Offer may not be extended
beyond any scheduled expiration date except as required by law or if the
conditions to the Offer have not been satisfied by the scheduled expiration
date.
THE MERGER. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with the Virginia Stock Corporation Act
(the "Virginia Act"), the Purchaser shall be merged with and into the Company
(the "Merger"). As a result of the Merger, the separate corporate existence of
the Purchaser will cease and the Company will continue as the surviving
corporation (the "Surviving Corporation").
The Merger Agreement provides that at the effective time of the Merger (the
"Effective Time"), each issued and outstanding Share (other than Shares that are
owned directly or indirectly by Maxxim or any subsidiary of Maxxim) shall be
converted into the right to receive the Offer Price, without interest (the
"Merger Consideration").
Pursuant to the Merger Agreement, each issued and outstanding share of
common stock, no par value per share, of the Purchaser shall be converted into
one fully paid and non-assessable share of Common Stock of the Company.
THE COMPANY'S BOARD OF DIRECTORS. The Merger Agreement provides that,
promptly upon the acceptance for payment of, and payment by the Purchaser in
accordance with the Offer for, more than two-thirds of the outstanding Shares
(on a fully diluted basis), the Purchaser will be entitled to designate such
number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as is equal to the product of the total number of
directors on such Board of Directors (giving effect to the directors designated
pursuant to this sentence) multiplied by the percentage that the aggregate
number of Shares beneficially owned by the Purchaser or Maxxim bears to the
total number of Shares then outstanding and the Company and its Board of
Directors will, at such time, take any and all such action needed to cause the
Purchaser's designees to be appointed to the Company's Board of Directors
(including to cause directors to resign). Notwithstanding the foregoing, neither
the Company, Maxxim nor the Purchaser will take any action to remove or replace
any member of the Special Committee (as defined herein) during the period after
consummation of the Offer and prior to the Effective Time, and, if for any
reason during such period there are fewer than two members of the Special
Committee on the Company's Board of Directors, the Company, Maxxim and the
Purchaser will use their reasonable efforts to ensure that two members
("Continuing Directors") of the Company's Board of Directors are either members
of the Special Committee or persons who are neither officers nor employees of
the Company or associated or affiliated with, or designated by, Maxxim. In the
event that both Continuing Directors resign from the Special Committee, Maxxim,
the Purchaser and the Company shall permit the resigning Continuing Directors to
appoint their successors in their reasonable discretion. The Company's
obligation to appoint the Purchaser's designees to the Board of Directors is
subject to Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14f-1 promulgated thereunder. The Merger Agreement
also provides that following the election or appointment of Maxxim's designees
to the Company's Board of Directors and prior to the Effective Time, if
requested by the majority of the Continuing Directors, such designees will
abstain from acting upon, and the approval of the majority of the Continuing
Directors will be required to authorize, any termination of the Merger Agreement
by the Company, or any amendment of the Merger Agreement requiring action by the
Board of Directors, or any extension of time for performance of any obligations
or other acts of Maxxim or the Purchaser under the Merger Agreement or any
waiver of compliance with any other covenants, agreements or conditions under
the Merger Agreement for the benefit of the Company. In addition, the Company
will, if requested, use its reasonable efforts to cause persons designated by
the Purchaser to constitute the same percentage of each committee of the
Company's Board of Directors, each board of directors of the Company's
subsidiaries and of each committee of such subsidiary (in each case to the
extent of the Company's ability to elect such persons). In furtherance of the
foregoing, the Company has agreed to increase the size of the Company's Board of
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Directors, or use its reasonable efforts to secure resignations of directors, or
both, to permit the Purchaser's designees to be elected to the Company's Board.
For a period ending two days prior to the Effective Time (the "Option
Exercise Period"), the composition of the Executive Compensation Committee of
the Board of Directors of the Company shall remain the same as the Special
Committee of the Board of Directors and the Board of Directors shall not take
any action to limit or impair the authority of the Executive Compensation
Committee to administer the Stock Plan (as hereinafter defined); provided,
however, that the Executive Compensation Committee will not (i) make any
additional grants or awards of any type pursuant to the Stock Plan, (ii) amend
the terms and conditions of any award made pursuant to the Stock Plan prior to
the date of the Merger Agreement, or (iii) have any authority to act with
respect to any matters other than those related to Options (as hereinafter
defined) previously granted under the Stock Plan.
STOCKHOLDERS MEETING. Pursuant to the Merger Agreement, the Company,
through its Board of Directors, will, if required by applicable law in order to
consummate the Merger, duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Special Meeting") as soon as practicable
following the acceptance for payment and purchase of Shares by the Purchaser
pursuant to the Offer for the purpose of voting upon the Merger Agreement and
the Merger. The Merger Agreement provides that the Company will, if required by
applicable law in order to consummate the Merger, prepare and file with the
Securities and Exchange Commission (the "Commission") a preliminary proxy
statement relating to the Merger and the Merger Agreement and use its reasonable
efforts (i) to obtain and furnish the information required by the Commission to
be included in the Proxy Statement (as defined herein) and, after consultation
with Maxxim and the Purchaser, to respond promptly to any comments made by the
Commission with respect to the preliminary proxy or information statement and
cause a definitive proxy or information statement (the "Proxy Statement") to be
mailed to its stockholders and (ii) to obtain the necessary approvals of the
Merger and the Merger Agreement by its stockholders. If the Purchaser acquires
more than two-thirds of the outstanding Shares, the Purchaser will have
sufficient voting power to approve the Merger, even if no other stockholder
votes in favor of the Merger. The Company has agreed, subject to the limitations
described below under the heading "No Solicitation," to include in the Proxy
Statement the recommendation of the Board of Directors that stockholders of the
Company vote in favor of the approval of the Merger and the adoption of the
Merger Agreement.
INTERIM OPERATIONS. In the Merger Agreement, the Company has agreed that,
except as expressly contemplated by the Merger Agreement or agreed to by Maxxim
in writing, prior to the closing of the Merger, the business of the Company and
its subsidiaries shall be conducted only in the ordinary and usual course and,
to the extent consistent therewith, each of the Company and its subsidiaries
will use its reasonable efforts to preserve its business organization intact and
maintain satisfactory relations with licensors, customers, suppliers,
distributors, employees, creditors and others having business relationships with
it. In addition, each of the Company and its subsidiaries will not (i) issue or
sell any shares of its capital stock (other than in connection with the exercise
of options outstanding on the date of the Merger Agreement) or any of its other
securities, or issue any securities convertible into, or options, warrants or
rights to purchase or subscribe to, or enter into any arrangement or contract
with respect to the issuance or sale of, any shares of its capital stock or any
of its other securities or make any other changes in its capital structure; (ii)
sell or pledge or agree to sell or pledge any stock owned by it in any of its
subsidiaries; (iii) declare, pay, set aside or make any dividend or other
distribution or payment with respect to, or split, combine, redeem or
reclassify, any shares of its capital stock; (iv) enter into any contract or
commitment with respect to capital expenditures in excess of $150,000 or enter
into any other material contracts except contracts in the ordinary course of
business; (v) acquire a material amount of assets or securities or release or
relinquish any material contract rights; (vi) adopt or amend any Employee
Benefit Plan (as defined in the Merger Agreement) or non-employee benefit plan
or program, employment agreement, license agreement or retirement agreement, or,
except in the ordinary course of business consistent with past practice, pay any
bonus or contingent or other extraordinary compensation; (vii) other than in the
ordinary course of business consistent with past practice, transfer, lease,
license, guarantee, sell, mortgage, pledge, dispose of, encumber or subject to
any lien, any assets or incur or modify any indebtedness or other liability or
issue any debt securities or assume, guarantee or endorse or otherwise as an
accommodation become responsible for the obligations of any person; (viii) agree
to the settlement of any material claim or litigation; (ix) make any material
tax election or settle or compromise any material tax liability; (x) make any
material change in its method of accounting; (xi) make any change in or
amendment to its Articles or By-Laws (or comparable corporate documents:); or
(xii) agree, in writing or otherwise, to take any of the foregoing actions.
NO SOLICITATION. In the Merger Agreement, the Company has agreed that
neither the Company nor any of its subsidiaries or affiliates will, directly or
indirectly, take (and the Company will not authorize or permit its or its
subsidiaries' officers, directors, employees, representatives, consultants,
investment bankers, attorneys, accountants or other agents or affiliates, to so
take) any action to (i) solicit or initiate the submission of any proposed
merger, consolidation, share exchange or other business combination, sale or
other disposition of any material amount of assets, sale of shares of capital
stock, tender offer
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or exchange offer or similar transactions involving the Company or any of its
subsidiaries and a third party (an "Acquisition Proposal") or (ii) participate
in any way in discussions or negotiations with, or, furnish any information to,
any Person, as defined in the Merger Agreement, (other than Maxxim or the
Purchaser) in connection with, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal. The Merger Agreement provides
that the Company may participate in discussions or negotiations with or furnish
information to any third party which makes an unsolicited, bona fide
noncollusive proposal in writing with respect to a transaction which the Board
of Directors of the Company believes is likely to result in an Acquisition
Proposal, if the Board of Directors believes (and has been advised by counsel)
that failing to take such action would constitute a breach of its fiduciary
duties. In addition, neither the Board of Directors of the Company nor any
committee thereof will withdraw or modify in a manner adverse to Maxxim the
approval and recommendation of the Offer and the Merger Agreement or approve or
recommend any Acquisition Proposal, provided that the Company may recommend to
its stockholders an Acquisition Proposal and in connection therewith withdraw or
modify its approval or recommendation of the Offer and the Merger if (i) the
Board of Directors of the Company has determined that the Acquisition Proposal
is an unsolcited, bona fide and noncollusive Acquisition Proposal on terms which
a majority of the members of the Special Committee of the Board of Directors of
the Company determines in its good faith judgment (based on the advice of its
financial and legal advisors) to be more favorable to the Company and its
stockholders than the transactions contemplated by the Offer and Merger and (ii)
simultaneously with such withdrawal, modification or recommendation, the Merger
Agreement is properly terminated. The Company has agreed immediately to advise
Maxxim of any request for information or of any Acquisition Proposal, the
material terms and conditions of such request or Acquisition Proposal, and the
identity of the Person making any such Acquisition Proposal. The Company has
agreed promptly to inform Maxxim of the status and details both orally and in
writing (including amendments or proposed amendments) of any such request or
Acquisition Proposal or inquiry, and to provide Maxxim promptly with copies of
all such written requests, proposals and inquiries.
DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION. The Merger
Agreement provides that the Articles and By-laws of the Surviving Corporation
shall contain the provisions with respect to indemnification and exculpation
from liability set forth in the Company's Articles and By-laws on the date of
the Merger Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who on
or prior to the Effective Time were directors, officers, employees or agents of
the Company ("Indemnified Parties"), unless such modification is required by
law.
The Merger Agreement provides that Maxxim shall either (i) maintain the
Company's existing directors' and officers' liability insurance covering those
persons who were covered on the date of the Merger Agreement by the Company's
directors' and officers' liability insurance policy for a period of six years
after the Effective Time, except that Maxxim may substitute therefor policies of
substantially similar coverage and amounts containing terms no less advantageous
and provided that said substitution does not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time, provided
that in no event shall Maxxim be required to expend in any one year an amount in
excess of 150% of the annual premiums currently paid by the Company for such
insurance and that if the annual premiums of such insurance coverage exceed that
amount, Maxxim shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount or (ii) cause Maxxim's directors'
and officers' liability insurance then in effect to cover those persons who are
covered on the date of the Merger Agreement by the Company's directors' and
officers' liability insurance policy with respect to those matters covered by
the Company's directors' and officers' liability policy.
In the Merger Agreement, Maxxim has agreed, from and after the date of
purchase of Shares pursuant to the Offer, to indemnify all Indemnified Parties
to the fullest extent permitted by applicable law, including, subject to certain
limitations, indemnification for reasonable legal and other expenses, with
respect to all acts and omissions arising out of such individuals' services as
officers, directors, employees or agents of the Company or any of its
subsidiaries, occurring prior to the Effective Time including, without
limitation, the transactions contemplated by the Merger Agreement. If such
indemnity will not be available with respect to any Indemnified Party, then the
Company and the Indemnified Party shall contribute to the amount payable in such
proportion as is appropriate to reflect relative faults and benefits.
COMPENSATION AND BENEFITS. Pursuant to the Merger Agreement, Maxxim has
agreed that, during the period commencing at the Effective Time and ending on
the second anniversary thereof, the employees of the Company and its
subsidiaries will continue to be provided with employee benefit plans (other
than stock option, employee stock ownership or other plans involving the
potential issuance of securities of the Company or of Maxxim) which are in the
aggregate substantially comparable to those currently provided by the Company
and its subsidiaries to such employees. Maxxim will honor employee (or former
employee) benefit obligations and contractual rights existing as of the
Effective Time and all employment, incentive
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and deferred compensation or severance agreements, plans or policies adopted by
the Board of Directors of the Company (or any committee thereof) prior to the
date of the Merger Agreement in accordance with their terms.
OPTIONS. Pursuant to the Merger Agreement, prior to the Effective Time, the
Board of Directors of the Company (or, if appropriate, any committee thereof)
will adopt appropriate resolutions and take all other actions necessary to
provide for the cancellation, effective at the Effective Time of all the
outstanding stock options to purchase Common Stock (the "Options") heretofore
granted under the Stock Incentive Plan of the Company (the "Stock Plan").
Immediately prior to the Effective Time, (i) each Option, whether or not then
vested or exercisable, shall no longer be exercisable for the purchase of shares
of Common Stock but shall entitle each holder thereof, in cancellation and
settlement therefor, to payments in cash (subject to any applicable withholding
taxes and repayment of any outstanding Option Note (as hereinafter defined), the
"Cash Payment"), at the Effective Time, or as soon as practicable thereafter,
subject to certain considerations, equal to the product of (x) the total number
of shares of Common Stock subject to such Option, whether or not then vested or
exercisable, and (y) the excess of the Offer Price over the exercise price per
share of Common Stock subject to such Option, each such Cash Payment to be paid
to each holder of an outstanding Option at the Effective Time and (ii) each
share of Common Stock previously issued in the form of grants of restricted
stock or grants of contingent shares shall fully vest in accordance with their
respective terms. Any then outstanding stock appreciation rights or limited
stock appreciation rights shall be canceled as of immediately prior to the
Effective Time without any payment therefor. As provided herein, the Stock Plan
and any other plan, program or arrangement providing for the issuance or grant
of any other interest in respect of the capital stock of the Company or any
subsidiary shall terminate as of the Effective Time. The Company will take all
steps to ensure that neither the Company nor any of its subsidiaries is or will
be bound by any Options, other options, warrants, rights or agreements which
would entitle any Person, other than Maxxim or its affiliates, to own any
capital stock of the Company or any of its subsidiaries or to receive any
payment in respect thereof. The Company will use its best efforts to obtain all
necessary consents to ensure that after the Effective Time, the only rights of
the holders of Options to purchase shares of Common Stock in respect of such
Options will be to receive the Cash Payment in cancellation and settlement
thereof.
During the Option Exercise Period (which shall not be less than three
business days in duration), the Company shall permit holders of stock options
issued pursuant to the Company's Stock Plan which shall have become exercisable
to exercise such stock options in accordance with the provisions of such Stock
Plan, including without limitation those provisions relating to (i) the payment
of the exercise price of stock options by the execution of a recourse note (the
"Option Note") providing for the payment of all amounts due under such note (A)
through deductions from the Merger Consideration which shall become due to the
maker of such note at the Effective Time or (B) if the Effective Time shall not
occur within 120 days from the date of the Offer Closing (as defined in the
Merger Agreement), then on such 120th day and (ii) the payment of the exercise
price of stock options by the delivery of shares of Common Stock.
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, the Company has
made customary representations and warranties to Maxxim and the Purchaser with
respect to, among other things, its organization, capitalization, financial
statements, public filings, employee benefit plans, compliance with laws,
litigation, tax matters, action with respect to certain state takeover laws,
environmental matters, consents and approvals, material contracts, opinions of
financial advisors, undisclosed liabilities and the absence of certain changes
with respect to the Company since March 31, 1996.
CONFIDENTIALITY. The information obtained by Maxxim and the Purchaser
pursuant to the Merger Agreement will be subject to the Confidentiality
Agreement, dated April 3, 1996, between the Company and Maxxim (the
"Confidentiality Agreement") pursuant to which Maxxim has agreed, among other
things, to keep confidential certain non-public confidential or proprietary
information of the Company furnished to Maxxim by or on behalf of the Company.
The Confidentiality Agreement is filed herewith as exhibit (c) and is
incorporated herein by reference.
CONDITIONS TO THE MERGER. Pursuant to the Merger Agreement, the respective
obligations of each party to effect the Merger is subject to the satisfaction,
at or prior to the Effective Time, of the following conditions: (i) to the
extent required by applicable law, the Merger Agreement and the Merger shall
have been approved and adopted by holders of more than two-thirds of the Shares
in accordance with applicable law (if required by applicable law) and the
Company's Articles and By-Laws; (ii) any waiting period (and any extension
thereof) under the HSR Act applicable to the Merger shall have expired or been
terminated; (iii) no preliminary or permanent injunction or other order shall
have been issued by any court or by any governmental or regulatory agency, body
or authority which prohibits the consummation of the Offer or the Merger and the
transactions contemplated by the Merger Agreement and which is in effect at the
Effective Time, PROVIDED, HOWEVER, that, in the case of a decree, injunction or
other order, each of the parties shall have used reasonable efforts to prevent
the entry of any such decree, injunction or other order and to appeal as
promptly as possible any decree, injunction or other order that may be entered;
(iv) no statute, rule, regulation, executive order, decree or order of any kind
shall have been enacted, entered,
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promulgated or enforced by any court or governmental authority which prohibits
the consummation of the Offer or the Merger or has the effect of making the
purchase of the Shares illegal; and (v) the Purchaser shall have accepted for
payment and paid for the Shares tendered pursuant to the Offer. The obligation
of the Company to effect the Merger is subject to the satisfaction or waiver of
the condition that each of Maxxim and the Purchaser shall have performed in all
material respects all obligations and agreements relating to the composition of
the Board of Directors of the Company after the closing of the Offer as set
forth in the Merger Agreement and payment for the Shares in the Merger to be
performed or complied with by them prior to the Effective Time.
TERMINATION; FEES. The Merger Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval by the stockholders of
the Company, (a) by mutual consent of the Company, on the one hand, and of
Maxxim and the Purchaser, on the other hand; (b) by either Maxxim, on the one
hand, or the Company, on the other hand, if any governmental or regulatory
agency shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the acceptance for
payment of, or payment for, Shares pursuant to the Offer or the Merger and such
order, decree or ruling or other action shall have become final and
nonappealable; (c) by either Maxxim, on the one hand, or the Company, on the
other hand, if the Offer shall not have been consummated within six months after
commencement of the Offer unless the consummation of the Offer shall not have
occurred because of a material breach of any representation, warranty,
obligation, covenant, agreement or condition set forth in the Merger Agreement
on the part of the party seeking to terminate the Merger Agreement; (d) by
Maxxim if the Offer is terminated or expires in accordance with its terms
without Purchaser having purchased any Shares thereunder due to a failure to
satisfy any of the conditions of the Offer, unless such termination or
expiration has been caused by or results from the failure of Maxxim or the
Purchaser to perform in any material respect any of their respective covenants
or agreements contained in the Merger Agreement; (e) by either Maxxim, on the
one hand, or the Company, on the other hand, if the Board of Directors of the
Company determines that an Acquisition Proposal will result in a proposal that
is is more favorable to the Company and its stockholders than the Offer and the
Board of Directors believes (and has been advised in writing by counsel) that a
failure to terminate the Merger Agreement and enter into an agreement to effect
such other proposal would constitute a breach of its fiduciary duties; and (f)
prior to the consummation of the Offer, by the Company, if (i) any of the
representations and warranties of Maxxim or Purchaser contained in the Merger
Agreement were untrue or incorrect in any material respect when made, (ii)
Maxxim or Purchaser shall have breached or failed to comply in any material
respect with any of their respective obligations under the Merger Agreement to
be complied with at or prior to the consummation of the Offer, or (iii) Maxxim
or Purchaser shall have terminated the Offer prior to the consummation of the
Offer or the Offer is terminated or expires in accordance with its terms.
If this Agreement is terminated by Maxxim pursuant to clause (e) of the
preceding paragraph or if Maxxim terminates this Agreement by reason of (i) the
withdrawal, modification, or amendment of the recommendation of the Offer or the
Merger by the Company's Board of Directors, or its resolution to do so, in any
respect adverse to Maxxim or the Purchaser, or (ii) a breach by the Company of
any of its covenants or agreements in any material respect contained in the
Merger Agreement or if, prior to the Offer Closing, any material representation
or warranty made by the Company in the Merger Agreement shall prove to have been
untrue or incorrect in any material respect when made and as a result thereof
Maxxim terminates the Merger Agreement, the Company shall pay to Maxxim, within
one business day thereafter, the amount of $3,500,000.
NO DISSENTERS RIGHTS. Holders of Shares do not have appraisal or
dissenters' rights in connection with either the Offer or the Merger.
RIGHTS AGREEMENT
The Company has amended the Rights Agreement (the "Rights Amendment") to
provide that neither the (i) execution, delivery and performance of the Merger
Agreement, (ii) commencement of the Offer nor (iii) acceptance of and payment
for Shares by Maxxim or the Purchaser or any of its subsidiaries in accordance
with the terms of the Merger Agreement shall (A) trigger the exercisability of
the Rights (as defined in the Rights Agreement), (B) cause the separation of the
Rights from the certificates representing Shares to which they are attached, (C)
cause the occurrence of an Exchange Date (as defined in the Rights Agreement) or
a Stock Acquisition Date (as defined in the Rights Agreement) or (D) cause
Maxxim, the Purchaser or any of Maxxim's subsidiaries or affiliates to be deemed
an Acquiring Person (as defined in the Rights Agreement).
Copies of the Merger Agreement and the Rights Amendment are filed herewith
as exhibits (b) and (d), respectively, and are incorporated herein by reference,
and the foregoing summary is qualified in its entirety by reference thereto.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Company's Board of Directors unanimously has determined that the Offer
and the Merger are fair to and in the best interests of the stockholders of the
Company, has approved the Merger Agreement, the Offer and the Merger and
recommends that all stockholders of the Company accept the Offer and tender all
of their Shares pursuant to the Offer.
As set forth in the Purchaser's Offer to Purchase, the Purchaser will
purchase Shares tendered prior to the close of the Offer if the Minimum
Condition shall have been satisfied by that time and if all other conditions to
the Offer have been satisfied (or waived). Stockholders considering not
tendering their Shares in order to wait for the Merger should note that the
Purchaser is not obligated to purchase any Shares, and can terminate the Offer
and the Merger Agreement and not proceed with the Merger, if the Minimum
Condition is not satisfied or any of the other conditions to the Offer are not
satisfied. Under the Virginia Act, the approval of the Board and the affirmative
vote of the holders of more than two-thirds of the outstanding Shares are
required to approve and adopt the Merger. Accordingly, if the Minimum Condition
is satisfied, Purchaser will have sufficient voting power to cause the approval
and adoption of the Merger Agreement and the transactions contemplated thereby
without the affirmative vote of any other stockholder.
A copy of the press release issued jointly by the Parent and the Company
announcing the Offer and the Merger is filed as exhibit (e) to this Schedule
14D-9 and is incorporated herein by reference in its entirety.
(b) BACKGROUND OF THE OFFER; REASONS FOR THE RECOMMENDATION.
The Company became a publicly-held company on September 27, 1994 when an
affiliate of Carilion Health System ("Carilion"), the former parent of the
Company, sold all of the stock in the Company held by it in a public offering.
In July 1994, when Carilion was considering a private sale of the Company as an
alternative to a public offering, Maxxim had expressed interest in acquiring the
Company. These discussions were terminated by the parties without an agreement
of any kind being reached.
On February 2, 1996, Maxxim's financial advisor, Bear, Stearns & Co., Inc.,
attempted, without success, to contact the Company's financial advisor, Wheat,
First Securities, Inc. ("Wheat"), regarding Maxxim's interest in a business
combination with the Company. On February 5, 1996, Kenneth W. Davidson, Chief
Executive Officer of Maxxim ("Davidson"), telephoned Paul J. Woo, Jr., Chief
Executive Officer of the Company ("Woo"), to advise Woo of Maxxim's interest in
acquiring the Company and that Maxxim's financial advisor planned to contact
Wheat about such interest. Davidson and Woo met on February 12, 1996 and
Davidson confirmed Maxxim's interest in acquiring the Company. Woo indicated
that while he would advise the Board of Directors of the Company (the "Board")
of Maxxim's interest, it was the Company's intention to remain independent and
to pursue its long-term strategy for building shareholder value.
On February 14, 1996, Davidson sent to Woo an offer by Maxxim to purchase
all of the outstanding shares of Company Common Stock for a purchase price of
$16.00 per share, payable in cash and/or shares of Maxxim common stock. The
letter indicated that Maxxim was prepared to present a fully financed cash offer
and that the offer was contingent upon negotiation and approval of a definitive
merger agreement, satisfactory due diligence review and regulatory approvals.
Neither Maxxim nor the Company made this proposal public at the time. On
February 15, 1996, all directors of the Company were informed of the Maxxim
offer. On February 16, 1996, Woo sent a letter to Davidson indicating that the
Board would consider Maxxim's proposal.
On February 23, 1996, the Board met to commence its consideration of the
Maxxim offer. At this meeting, the Board appointed a special committee of
outside directors (the "Committee"), comprised of Ms. Nina Novak and Messrs.
Thomas A. Allen and J. Hamilton Scherer, for the purpose of evaluating and
making recommendations to the Board with respect to the Maxxim offer as well as
any other potential transactions which would result in a change in control of
the Company and making recommendations to the Board. Wheat presented information
regarding Maxxim and the terms of its offer, and Wheat and the Company's legal
counsel reviewed various considerations relevant to the Board's evaluation of
the Maxxim offer. This meeting was adjourned without the Board taking any action
on the Maxxim offer.
On February 26, 1996, without prior notice to the Company, Maxxim made a
public announcement of its offer. At a Board meeting held on February 27, 1996,
Company management presented information concerning the Company's strategic
plan. Following this presentation, the Board retained Wheat to act as financial
advisor to the Company in connection with a potential change in control of the
Company. The Board also considered adoption of a shareholder rights plan. At a
Board meeting on March 5, 1996, Wheat presented an analysis of the Maxxim offer
and advised the Board that the consideration
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specified, namely, $16.00 per share, was inadequate. The Board then rejected the
Maxxim offer of $16.00 per share, which the Board determined was not in the best
interests of the Company or its shareholders.
At the March 5 meeting, the Board gave further consideration to the
adoption of a shareholder rights plan. On March 6, 1996, the Board adopted a
shareholder rights plan (the "Rights Agreement"). The Rights Agreement provided
all Company shareholders (other than the person acquiring shares of Company
Common Stock as described below) the right to purchase additional shares of
common stock at a substantial discount to the existing market price in the event
that (i) any person (other than the Company and its subsidiaries and employee
benefit plans) became the beneficial owner of more than 15% of the outstanding
Common Stock or (ii) any person who was already a beneficial owner of more than
15% of the outstanding common stock increased its beneficial ownership by more
than an additional 2%, in each case without the prior approval of the Board, as
well as the right to acquire shares of preferred stock in certain circumstances.
On March 7, 1996, Woo sent a letter to Davidson to the effect that the Board was
not interested in pursuing Maxxim's $16.00 per share offer.
On March 11, 1996, Maxxim increased its offer to $17.75 per share, with all
other terms of the offer remaining the same as the February 14 offer. The Board
met on March 13, 1996 to consider this revised offer and, after receiving the
advice of Wheat that the offer was inadequate, rejected the offer as not being
in the best interests of the Company and its shareholders. On March 14, 1996,
Woo sent a letter to Davidson rejecting Maxxim's $17.75 per share offer.
On March 21, 1996, the chief executive officer of a company in the industry
(the "Other Company") delivered to Woo a letter of intent setting forth proposed
terms for an acquisition of all of the outstanding shares of Company Common
Stock at a price per share of $21.00, payable in shares of the Other Company's
common stock. The letter of intent placed "collars" on the market value of the
Other Company's stock of $14.50 and $18.50 per share (the Other Company's stock
was trading at $16-5/8 per share on the date of the letter) and was contingent
upon negotiation and approval of a definitive merger agreement, shareholder
approval, satisfactory due diligence review and regulatory approvals. The letter
of intent contained an exclusive dealing provision and provided for a "break up"
fee payable by the Company to the Other Company in the amount of $4 million in
the event of an acquisition of the Company by a third party. Immediately
following receipt of the Other Company's proposal, Woo called the chief
executive officer of the Other Company and indicated that he would apprise the
Board of the offer. Neither the Other Company nor the Company made this proposal
public at the time.
On March 25, 1996, Maxxim increased its offer to $19.00 per share, payable
in cash or Maxxim stock. The Board met on March 25, 1996 to review the Other
Company's offer and the revised Maxxim offer, and to consider the alternatives
available to the Board in light of the recent developments. The Board determined
that it would be in the best interests of the Company and its shareholders for
the Company to evaluate all of the strategic alternatives currently available to
the Company. The Board then directed Company management and the Board's advisors
to initiate a process which would afford all parties interested in pursuing a
potential change of control or strategic transaction with the Company an
opportunity to receive information concerning the Company and to make proposals
which would be in the best interests of the Company and its shareholders. The
Board announced its decision to consider strategic alternatives in a press
release on March 27, 1996.
After issuance of the press release, Wheat received a number of inquiries
regarding the Company and provided information packages to all qualified
parties. Qualified parties which continued to express interest in the Company
and which executed a confidentiality agreement were provided an opportunity to
review non-public due diligence materials and to meet with Company management.
These parties were requested to submit by May 17, 1996 written proposals setting
forth the definitive terms and conditions of an offer to acquire all of the
outstanding shares of Common Stock of the Company and comments on a proposed
form of acquisition agreement. During the weeks leading up to the May 17
deadline, Wheat discussed the terms of potential offers with representatives of
the qualified parties involved in the process, including management of and the
financial advisors to the Other Company. During such discussions,
representatives of the Other Company expressed a willingness to make a potential
offer of $23.00 to $25.00 per share, payable in the Other Company's stock.
Wheat, Company management and legal counsel conducted due diligence on and met
with management of the Other Company for purposes of evaluating such an offer.
On May 17, the dealine for submission of offers, Maxxim was the only party
to submit a definitive offer in accordance with the guidelines established by
Wheat. The letter submitted by Maxxim stated that it was prepared to purchase
all outstanding shares of Company Common Stock for $20.00 per share, payable in
cash (the "Offer"). The Offer also stated that it had been approved by the
Maxxim Board of Directors and was not subject to further due diligence. It was
accompanied by a letter from Maxxim's primary lender expressing confidence in
its ability to provide financing for the transaction. At that time,
representatives of the Other Company continued to express their interest in
acquiring the Company for between $23.00 and $25.00 per share payable in the
Other Company's stock, but indicated that due to another pending acquisition,
the Other Company could not make a definitive proposal.
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The Board met on May 22, 1996 to review the alternatives available to the
Company as a result of the auction process. Wheat advised the Board that all
qualified parties expressing an interest in acquiring the Company had been
afforded an equal opportunity to evaluate the Company and submit a proposal.
Wheat further advised the Board that the informal interest expressed by the
Other Company did not represent a viable alternative to the Maxxim offer due to
the fact that the Other Company did not submit a definitive proposal and the
numerous other contingencies involved, including without limitation, as well as
uncertainties relating to its pending acquisition, questions regarding the rate
of penetration of a significant new product in the marketplace, and a
substantial drop in the market price of its common stock, due to recent failures
to achieve earnings expectations highlighted in a recently released analyst
report. At the conclusion of the meeting, without taking any other action
related to the Offer, the Board authorized Woo to contact Davidson to indicate
that the Board would be willing to pursue a transaction with Maxxim at a price
of $23.00 per share.
Woo conveyed this message to Davidson in a telephone call on May 22. Over
the next several days, there were a number of contacts between Wheat and
Maxxim's financial advisor concerning the purchase price and other aspects of
the Offer. On May 28, 1996, Davidson advised Woo by telephone that Maxxim would
not increase its offer. The Board met with its advisors on May 29 and June 1 in
order to review the status of the negotiations with Maxxim. The Board also
considered uncertainties relating to the Company's ability to pursue its
independent strategic plan successfully in the current market environment and
the lack of another viable candidate to acquire the Company. The Board once
again was advised by Wheat that the Other Company was not in a position at that
time to submit a definitive proposal to acquire the Company. At the conclusion
of this meeting, the Board directed its advisors to pursue the Offer, and on May
29, 1996, Woo contacted Davidson and indicated the Board's willingness to
proceed with negotiations with Maxxim.
On June 8, 1996 Maxxim provided to the Company a copy of the financing
commitment letter which had been issued by Maxxim's primary lender.
The Board met again on June 8, 1996 and considered the Offer. At the
meeting representatives of Wheat reviewed the process and advised the Board,
based on various analyses, that the consideration proposed was fair to the
Company's shareholders from a financial point of view. Wheat subsequently
confirmed the opinion in writing on June 10, 1996. The Committee thereupon
determined by unanimous vote that the proposed acquisition of the Company by
Maxxim was fair to and in the best interests of the Company and its shareholders
and recommended that the full Board approve the Maxxim transaction. After
receiving the recommendation of the Committee, the Board, among other things,
(i) determined by unanimous vote that the proposed acquisition of the Company by
Maxxim was fair to and in the best interests of the Company and its
shareholders, (ii) authorized and approved the Merger Agreement, the Offer and
the Merger and (iii) recommended by unanimous vote that the shareholders of the
Company accept the Offer and tender their shares pursuant to the Offer.
On June 10, 1996, Maxxim and the Company executed the Merger Agreement.
In reaching its conclusions described in paragraph (a) above, the Board of
Directors of the Company considered a number of factors, including, without
limitation, the following:
(i) the unanimous determination of the Special Committee of the
Board that the Offer and the Merger are fair to and in the best
interests of the stockholders of the Company and the
recommendation of the Special Committee that the Board approve
the Merger Agreement, the Offer and the Merger;
(ii) the opinion of Wheat that as of the date of its opinion the
$20.00 per Share in cash to be received by the holders of the
Shares pursuant to the Offer and the Merger is fair to such
holders from a financial point of view. THE FULL TEXT OF THE
FAIRNESS OPINION RECEIVED BY THE COMPANY FROM WHEAT IS ATTACHED
HERETO AS EXHIBIT (E). STOCKHOLDERS ARE URGED TO READ SUCH
OPINION IN ITS ENTIRETY;
(iii) the presentation of Wheat in connection with such opinion, as
to various financial and other considerations deemed relevant
to the Board's evaluation of the Offer and the Merger
including: (A) a review of financial and other information that
was publicly available or furnished to Wheat by the Company's
management; (B) a review and analysis of the historical market
prices and trading activity of the Shares and for certain
publicly traded companies which Wheat deemed relevant; (C) a
comparison of the results of operations of the Company and with
those of certain publicly traded companies which Wheat deemed
relevant; (D) a comparison of the proposed financial terms of
the Offer and the Merger with those of certain other mergers
and acquisitions which Wheat deemed relevant; and (E) a
discounted cash flow analysis of the Company based upon
estimates of projected financial performance prepared by
management of the Company;
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(iv) the results of the auction process undertaken to solicit
proposals from third parties to acquire the Company, and the
fact that Maxxim was the only potential acquiror of the Company
that submitted a definitive proposal in accordance with the
procedures outlined in the auction process;
(v) the historical and recent market prices of the Shares and the
fact that the $20.00 per Share Offer Price represents a
substantial premium over the $13.00 per Share market price on
February 23, 1996 (the last trading day before the public
announcement of Maxxim's initial acquisition proposal) and a
substantial premium over the historical trading prices since the
Company's initial public offering on September 27, 1994;
(vi) information with respect to the financial condition, results of
operations and business of the Company, on both a historical
and prospective basis, and current industry, economic and
market conditions;
(vii) the potential impact of the Offer and the Merger and of
alternatives thereto on the Company's business and prospects;
(viii) the commitment letter received by Maxxim from its financing
source with respect to the financing of the Offer and the
Merger; and
(ix) the terms and conditions of the Offer and the Merger, including,
without limitation, the fact that, to the extent required by
fiduciary obligations of the Board of Directors of the Company
to the stockholders under the Virginia Act, the Company may
terminate the Merger Agreement in order to approve a tender
offer or exchange offer for the Shares by a third party, or
another type of business combination, on terms more favorable to
the Company's stockholders than the Offer and the Merger taken
together upon the payment of a $3.5 million termination fee; in
assessing the termination fee, the Board and the Special
Committee considered the likelihood of any third party making an
acquisition proposal for the Company and that the effect of the
termination fee would be to increase by the amount of such
termination fee the costs to a third party of acquiring the
Company.
The Board of Directors did not assign weights to the factors or determine
that any factor was of particular importance. Rather, the Board of Directors
viewed their position and recommendation as being based on the totality of the
information presented to and considered by them.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Wheat is acting as the Company's financial advisor in connection with the
Offer and the Merger. Pursuant to its agreement with the Company, Wheat is
entitled to a transaction fee of approximately $1.5 million in cash at the
closing (less $100,000 previously paid by the Company in connection with the
Company's retention of Wheat). In addition, whether or not the Offer or the
Merger is completed, the Company has agreed to reimburse Wheat periodically for
its reasonable out-of-pocket expenses, including the fees and disbursements of
its counsel, and to indemnify Wheat against certain expenses and liabilities
incurred in connection with its engagement, including liabilities under Federal
securities laws.
In the ordinary course of business, Wheat and its affiliates may trade the
equity securities of the Company for their own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. Wheat has in the past provided financial advisory and
investment banking services to the Company for which services they have received
customary fees.
Wheat is a nationally recognized investment banking firm engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated primary and secondary underwritings, private placements
and valuations for corporate and other purposes. The Company selected Wheat as
its financial advisor based upon its familiarity with the Company and the
industry in which the Company operates and its experience, ability and
reputation with respect to mergers and acquisitions.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or agreed to compensate any person to make
solicitations or recommendations to shareholders of the Company concerning the
Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, during the past sixty days no
transaction in the Shares has been effected by the Company or any subsidiary or,
to the best of the Company's knowledge, by any executive officer, director,
affiliate or subsidiary of the Company.
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(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by them (other than
Shares issuable upon exercise of Options and Shares, if any, which if tendered
could cause such persons to incur liability under the provisions of Section
16(b) of the Exchange Act).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as described under Item 3, no negotiation is being undertaken or
is under way by the Company in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company, (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of the
Company, (iii) a tender offer for or other acquisition of securities by or of
the Company or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described under Items 3 and 4, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer which relate to or would result in one or more of the matters referred
to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) CERTAIN CORPORATE GOVERNANCE PROVISIONS OF THE VIRGINIA ACT.
The Company is subject to the "affiliated transactions" provisions of the
Virginia Act which restrict certain transactions ("Affiliated Transactions")
between the Company and any person (an "Interested Shareholder") who
beneficially owns more than 10% of any class of the Company's voting securities.
These restrictions, which are described below, do not apply to an Affiliated
Transaction with an Interested Shareholder who has been such continuously since
the date the Company first had 300 shareholders of record or whose acquisition
of shares making such person an Interested Shareholder was previously approved
by a majority of the Company's Disinterested Directors. "Disinterested Director"
means, with respect to a particular Interested Shareholder, a member of the
Company's Board of Directors who was (i) a member on the date on which an
Interested Shareholder became an Interested Shareholder or (ii) recommended for
election by, or was elected to fill a vacancy and received the affirmative vote
of, a majority of the Disinterested Directors then on the Board of Directors.
Affiliated Transactions include mergers, share exchanges, material dispositions
of corporate assets not in the ordinary course of business, any dissolution of
the Company proposed by or on behalf of an Interested Shareholder, or any
reclassification, including reverse stock splits, recapitalization or merger of
the Company with its subsidiaries, which increases the percentage of voting
shares owned beneficially by an Interested Shareholder by more than five
percent.
The "affiliated transactions" statute prohibits the Company from engaging
in an Affiliated Transaction with an Interested Shareholder for a period of
three years after the Interested Shareholder became such unless the transaction
is approved by the affirmative vote of a majority of the Disinterested Directors
and by the affirmative vote of the holders of two-thirds of the voting shares
other than those shares beneficially owned by the Interested Shareholder.
Following the three-year period, in addition to any other vote required by law
or by the Company's Articles of Incorporation, an Affiliated Transaction must be
approved either by a majority of the Disinterested Directors or by the
shareholder vote described in the preceding sentence unless the transaction
satisfies the fair-price provisions of the statute. These fair price provisions
require, in general, that the consideration to be received by shareholders in
the Affiliated Transaction (i) be in cash or in the form of consideration used
by the Interested Shareholder to acquire the largest number of its shares and
(ii) not be less, on a per share basis, than an amount determined in the manner
specified in the statute by reference to the highest price paid by the
Interested Shareholder for shares it acquired and the fair market value of the
shares on specified dates.
The Company is also subject to the "control share acquisitions" provisions
of the Virginia Act, which provide that shares of the Company's voting
securities which are acquired in a "Control Share Acquisition" have no voting
rights unless such rights are granted by a shareholders' resolution approved by
the holders of a majority of the votes entitled to be case on the election of
directors by persons other than the acquiring person or any officer or
employee-director of the Company. A "Control Share Acquisition" is an
acquisition of voting shares which, when added to all other voting shares
beneficially owned by the acquiring person, would cause such person's voting
strength with respect to the election of directors to meet or exceed any of the
following thresholds: (i) one-fifth, (ii) one-third or (iii) a majority.
"Beneficial ownership" means the sole or shared power to dispose or direct the
disposition of shares, or the sole or shared power to vote or direct the voting
of shares, or the sole or shared power to acquire shares, including any such
power which is not immediately exercisable, whether such power is direct or
indirect or through any contract, arrangement, understanding, relationship or
otherwise. A person shall be deemed to be a beneficial owner of shares as to
which such person is entitled, before or after a Control Share
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Acquisition, to file a disclosure statement with the Company and demand a
special meeting of shareholders to be called for the purpose of considering
whether to grant voting rights for the shares acquired or proposed to be
acquired. The Company may, during specified periods, redeem the shares so
acquired if no disclosure statement is filed or if the shareholders have failed
to grant voting rights to such shares. In the event full voting rights are
granted to an acquiring person who then has majority voting power, those
shareholders who did not vote in favor of such grant are entitled to dissent and
demand payment of the fair value of their shares from the Company. The control
share acquisitions statute does not apply to an actual or proposed Control Share
Acquisition if the Company's Articles or Bylaws are amended, within the time
limits specified in the statute, to so provide, or the Acquisition is made
pursuant to a merger or tender offer under an agreement to which the Company is
a party.
The Board of Directors of the Company, by approving the Offer, the Merger,
the Merger Agreement and the transactions contemplated thereby, and the Company
by executing the Merger Agreement, have taken all action necessary to exempt the
Company from coverage under these statutes with respect to the Offer, the Merger
and the transactions related thereto.
(b) ANTITRUST.
Under the HSR Act, and the rules that have been promulgated thereunder by
the Federal Trade Commission (the "FTC"), certain acquisition transactions may
not be consummated unless certain information has been furnished to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by the Purchaser pursuant to the Offer is
subject to such requirements.
Pursuant to the requirements of the HSR Act, Maxxim and the Company intend
to file the required Notification and Report Forms (the "Forms") with the
Antitrust Division and the FTC as soon as practicable (and the Merger Agreement
requires that such filing be made within eight business days of the date of the
Merger Agreement). The statutory waiting period applicable to the purchase of
Shares pursuant to the Offer is to expire at 11:59 P.M., New York City time, on
the fifteenth day after the Purchaser has filed its Form. However, prior to such
date, the Antitrust Division or the FTC may extend the waiting periods by
requesting additional information or documentary material relevant to the
acquisition. If such a request is made, the waiting period will be extended
until 11:59 P.M., New York City time, on the tenth day after substantial
compliance by the Purchaser with such request. Thereafter, such waiting periods
can be extended only by court order. A request is being made pursuant to the HSR
Act for early termination of the applicable waiting period. There can be no
assurance, however, that the waiting period will be terminated early.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions. At any time before or after the consummation
of any such transactions, the Antitrust Division or the FTC could,
notwithstanding termination of the waiting period, take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to the Offer or
seeking divestiture of the Shares so acquired or divestiture of substantial
assets of the Purchaser or the Company. Private parties may also bring legal
actions under the antitrust laws. There can be no assurance that a challenge to
the Offer on antitrust grounds will not be made, or if such a challenge is made,
what the result will be.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
(a) The Company's Proxy Statement dated December 29, 1995
(b) Agreement and Plan of Merger dated as of June 10, 1996
(c) Confidentiality Agreement dated April 3, 1996
(d) Amendment to Rights Agreement dated as of June 10, 1996
(e) Press Release dated June 10, 1996, with respect to Merger Agreement
and Offer
(f) Opinion of Wheat First Butcher Singer dated June 10, 1996
(g) Letter dated June 14, 1996 from the Company's President and Chief
Executive Officer to the Company's stockholders
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
STERILE CONCEPTS HOLDINGS,
INC.
By: /s/ PAUL J. WOO, JR.
Name: Paul J. Woo, Jr.
Title: President and
Chief Executive Officer
Date: June 14, 1996
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SCHEDULE I
STERILE CONCEPTS HOLDINGS, INC.
5100 Commerce Road
Richmond, Virginia 23234
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about June 14, 1996 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to holders of the Common Stock, no par value ("Common Stock"),
of Sterile Concepts Holdings, Inc. (the "Company"). Capitalized terms used and
not otherwise defined herein shall have the meaning set forth in the Schedule
14D-9. You are receiving this Information Statement in connection with the
possible election of persons designated by Maxxim Acquisition Co. (the
"Purchaser"), a wholly owned subsidiary of Maxxim Medical, Inc. ("Maxxim"), to a
majority of the seats on the Board of Directors of the Company.
Pursuant to the Agreement and Plan of Merger, dated as of June 10, 1996,
among the Company, Maxxim and the Purchaser (the "Merger Agreement"), on June
14, 1996, the Purchaser commenced the Offer. The Offer is scheduled to expire at
12:00 midnight (New York City time) on June 26, 1996, unless extended in
accordance with applicable law and the provisions of the Merger Agreement.
The information contained in this Information Statement (including
information incorporated by reference) concerning Maxxim and the Purchaser and
the Maxxim Designees (as defined below) has been furnished to the Company or
Maxxim and the Purchaser and the Company assumes no responsibility for the
accuracy or completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
The Common Stock is the only class of voting securities of the Company
outstanding. Each share of Common Stock has one vote. As of June 10, 1996 there
were 5,526,384 shares of Common Stock outstanding and 549,616 shares of Common
Stock reserved for issuance upon the exercise of options outstanding. The Board
of Directors of the Company currently consists of five members and there are
currently no vacancies on the Board of Directors. The Board of Directors is
divided into three classes and each Director serves a term of three years and
until his or her successor is duly elected and qualified or until his or her
earlier death, resignation or removal.
MAXXIM DESIGNEES
The Merger Agreement provides that, promptly upon the acceptance for
payment, and payment by the Purchaser, in accordance with the Offer for more
than two-thirds of the outstanding shares of Common Stock (on a fully diluted
basis), the Purchaser will be entitled to designate such number of Directors
(the "Maxxim Designees") on the Board of Directors of the Company, rounded up to
the next whole number, as is equal to the product of the total number of
directors on such Board of Directors (giving effect to the directors designated
pursuant to this sentence) multiplied by the percentage that the aggregate
number of shares of Common Stock beneficially owned by the Purchaser or Maxxim
bears to the total number of Shares then outstanding and the Company and its
Board of Directors will, at such time, take any and all such action needed to
cause the Purchaser's designees to be appointed to the Company's Board of
Directors (including to cause Directors to resign). Notwithstanding the
foregoing, neither the Company, Maxxim nor the Purchaser will take any action to
remove or replace any member of the Special Committee of the Board of Directors
of the Company (the "Special Committee") during the period after consummation of
the Offer and prior to the effective time of the merger (the "Effective Time"),
and if for any reason during such period there are fewer than two members of the
Special Committee on the Company's Board of Directors, the Company, Maxxim and
the Purchaser will use their reasonable efforts to ensure that two members
("Continuing Directors") of the Company's Board of Directors are either members
of the Special Committee or persons who are neither officers nor employees of
the Company or associated or affiliated with, or designated by, Maxxim. In the
event that both Continuing Directors resign from the Special Committee, Maxxim,
the Purchaser and the Company shall permit the resigning Continuing Directors to
appoint their successors in their reasonable discretion. In furtherance of the
foregoing, the Company has agreed to increase the size of its Board of
Directors, or use its reasonable efforts to secure the resignation of Directors,
or both, as is necessary to permit the Maxxim Designees to be elected to
Company's Board of Directors.
<PAGE>
For a period ending two days prior to the Effective Time, the composition
of the Executive Compensation Committee of the Board of Directors of the Company
shall remain the same as the Special Committee of the Board of Directors and the
Board of Directors shall not take any action to limit or impair the authority of
the Executive Compensation Committee to administer the Company's Stock Incentive
Plan; provided, however, that the Executive Compensation Committee will not (i)
make any additional grants or awards of any type pursuant to the Stock Incentive
Plan, (ii) amend the terms and conditions of any award made pursuant to the
Stock Incentive Plan prior to the date of the Merger Agreement, or (iii) have
any authority to act with respect to any matters other than those related to
options previously granted under the Stock Incentive Plan.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. YOU ARE URGED TO READ THIS INFORMATION STATEMENT CAREFULLY. YOU ARE
NOT, HOWEVER, REQUIRED TO TAKE ANY ACTION.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 12, 1996, certain information
with respect to the beneficial ownership of Common Stock (the only class of the
Company's securities entitled to voting rights) by (i) each Director of the
Company, (ii) the five most highly compensated executive officers of the Company
for fiscal 1995, and (iii) the Company's Directors and executive officers as a
group. Unless otherwise indicated, all persons have sole voting and investment
power over all shares beneficially owned.
<TABLE>
<CAPTION>
SHARES OF PERCENT
NAME OF BENEFICIAL OWNER COMMON STOCK OF CLASS
<S> <C> <C>
Paul J. Woo, Jr.................................................... 79,870(1) 1.4%
Roy R. Martine..................................................... 69,839(1)(2) 1.3
D. Randolph Graham................................................. 36,484(1) *
Timothy J. Callahan................................................ 20,128(1) *
Hubert A. Davis, Jr................................................ 21,018(1)(3) *
Henry C. Holswade.................................................. 29,883(1)(3) *
Thomas N. Allen.................................................... 1,196 *
Nina Novak......................................................... 596 *
J. Hamilton Scherer, Jr............................................ 3,696 *
All Directors and Executive Officers as a group (13 persons)....... 336,650 6.1%
</TABLE>
* Less than 1%
(1) Includes shares that may be acquired upon the exercise of options granted
under the Company's Stock Incentive Plan that are exercisable within 60 days
of the date hereof in the following amounts: Mr. Martine -- 52,498 shares;
Mr. Woo -- 54,870 shares; Mr. Graham -- 23,025 shares; Mr.
Callahan -- 19,828 shares; Mr. Davis -- 18,063 shares; Mr.
Holswade -- 18,063 shares; Mr. Allen, Ms. Novak and Mr. Scherer -- 196
shares each; and all Directors and executive officers as a group -- 252,777
shares.
(2) Includes 2,955 shares owned by Mr. Martine's spouse, as to which she has
sole voting and investment power.
(3) Voting and investment power are shared with the executive officer's spouse.
2
<PAGE>
The following table sets forth as of June 12, 1996 the beneficial ownership
of Common Stock by all persons who beneficially own five percent or more of the
Common Stock, based upon filings with the Securities and Exchange Commission and
certain additional information available to the Company. Unless otherwise
indicated, all persons have sole voting and investment power over all shares
beneficially owned.
<TABLE>
<CAPTION>
NAME & ADDRESS SHARES OF PERCENT
OF BENEFICIAL OWNER COMMON STOCK OF CLASS
<S> <C> <C>
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109.................. 692,000 12.5%
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202.................... 499,000 9.0
Miller, Anderson & Sherrerd
One Tower Bridge
West Conshohocken, Pennsylvania 19248........ 393,300 7.1
Heartland Advisors
790 North Milwaukee Street
Milwaukee, Wisconsin 53202................... 300,000 5.4
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15219............... 282,000 5.1
</TABLE>
On June 12, 1996, there were 112 shareholders of record of the Company's
Common Stock.
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. The terms of office of J. Hamilton Scherer, Jr. and
Paul J. Woo, Jr. expire at the 1997 Annual Meeting, the term of office of Thomas
N. Allen expires at the 1998 Annual Meeting and the terms of office of Roy R.
Martine and Nina Novak expire at the 1999 Annual Meeting.
The following table lists the Directors and executive officers of the
Company and their ages and positions with the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Roy R. Martine........................... 66 Chairman and Director
Paul J. Woo, Jr.......................... 51 President, Chief Executive Officer, and Director
D. Randolph Graham....................... 46 Vice President -- Administration, Chief Financial Officer and
Treasurer
Jeffrey L. Brugh......................... 37 Vice President, Controller and Secretary
Timothy J. Callahan...................... 45 Vice President -- Sales
Hubert A. Davis, Jr...................... 60 Vice President -- Manufacturing
Henry C. Holswade........................ 50 Vice President -- Corporate Relations
John H. Luttgens......................... 33 Executive Vice President -- Western Region
David G. Thomson......................... 47 Vice President -- National Accounts
Robert C. Thaemert....................... 49 Vice President -- National Accounts
Thomas A. Allen.......................... 58 Director
Nina Novak............................... 47 Director
J. Hamilton Scherer...................... 54 Director
</TABLE>
Messrs. Martine, Woo, Graham, Davis, Brugh and Holswade assumed their
positions with the Company in September 1994. Messrs. Callahan, Thomson and
Thaemert assumed their positions with the Company in June 1995 and Mr. Luttgens
assumed his position with the Company in October 1995. Set forth below is
certain information regarding the Directors and executive officers of the
Company, including the positions they hold with the Company's wholly owned
subsidiary, Sterile Concepts, Inc. ("SCI").
ROY R. MARTINE became Chairman and a Director of the Company in September
1994 and Chairman of SCI in March 1994. He was Chief Executive Officer of the
Company from September 1994, and of SCI from 1984, until June 1995, and was
President of SCI from 1984 through March 1994. Mr. Martine retired as an
executive officer of the Company and SCI on September 30, 1995, but continues to
serve as Chairman and a Director of the Company and SCI and as a consultant to
SCI.
PAUL J. WOO, JR. became Chief Executive Officer of the Company and SCI in
June 1995. He has been a Director of the Company since September 1994 and a
Director of SCI since 1984. Mr. Woo became President of the Company in September
1994 and President of SCI in March 1994. He was Chief Operating Officer and
Secretary of the Company from September 1994, and of SCI from March 1994, until
June 1995. Mr. Woo was previously employed by Carilion Health System
("Carilion"), the parent of the Company prior to its initial public offering,
where he was Executive Vice President from 1988 through February 1994. His
responsibilities at Carilion included serving as Secretary -- Treasurer and a
Director of SCI and overseeing the operations of SCI since 1984. Carilion is one
of the largest operators of hospitals and affiliated outpatient treatment
centers in Virginia.
D. RANDOLPH GRAHAM became Vice President -- Administration and Chief
Financial Officer in June 1994. He was Vice President -- Administration and
Planning from June 1991 through May 1994, and Director of Administration and
Planning from February 1988 through May 1991.
JEFFREY L. BRUGH has been Vice President and Controller since June 1991 and
was Director of Accounting from November 1984 through May 1991. He became
Secretary in June 1995.
TIMOTHY J. CALLAHAN became Vice President -- Sales in June 1995 and had
previously served as Regional Sales Manager since January 1991. Prior to joining
SCI, he was Vice President -- Sales of Harbor Medical, Inc.
HUBERT A. DAVIS, JR. has been Vice President -- Manufacturing since June
1991 and was Vice President -- Operations from 1982 through May 1991.
4
<PAGE>
HENRY C. HOLSWADE became Vice President -- Corporate Relations in June 1995
and was Vice President -- Sales from May 1987 through May 1995.
JOHN H. LUTTGENS became Executive Vice President -- Western Region in
October 1995 and was President of Medical Design Concepts, Inc. from 1986 until
the acquisition of the assets of its customer procedure tray business by SCI in
October 1995.
ROBERT C. THAEMERT became Vice President in June 1995. Mr. Thaemert was a
founder of Associated Medical Products Company in 1977 and was President of such
company until its acquisition by SCI in May 1995.
DAVID G. THOMSON became Vice President in June 1995. Mr. Thompson was a
founder of Associated Medical Products Company in 1977 and was Treasurer of such
company until its acquisition by SCI in May 1995.
THOMAS N. ALLEN became a Director of the Company in September 1994. He has
been Chairman of Acme Markets of Virginia, Inc., a regional supermarket chain,
since 1987 and Chairman of East Coast Oil Corporation, an operator of service
stations and convenience stores, since 1978.
NINA NOVAK became a Director of the Company in September 1994 and has been
a Director of SCI since 1987. She has been an attorney in private practice since
1977.
J. HAMILTON SCHERER, JR. became a Director of the Company in September 1994
and has been a Director of SCI since 1987. Mr. Scherer, an investment banker,
has been Managing Director and Vice Chairman of Wheat First Butcher Singer since
1992. Previously, he was a Managing Director of NationsBanc Capital Markets,
Inc. from 1991 to 1992 and President and Chief Executive Officer of Sovran
Investment Corp. from 1988 to 1991.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During fiscal 1995, the Board of Directors met nine times. During such
period, all of the Directors attended at least 75% of all meetings held of the
Board of Directors and all committees on which they serve. The standing
committees of the Board of Directors are the Executive Committee, the Audit
Committee, the Executive Compensation Committee and the Nominating Committee.
EXECUTIVE COMMITTEE. Messrs. Martine, Scherer and Woo are members of the
Executive Committee. The Company's Bylaws empower the Executive Committee to
exercise the full authority of the Board of Directors when it is not in session,
except as otherwise provided in the Virginia Stock Corporation Act.
AUDIT COMMITTEE. Mr. Allen and Ms. Novak are members of the Audit
Committee. The Audit Committee reviews the internal controls and the financial
reporting process of the Company. The Audit Committee recommends to the Board of
Directors the annual appointment of auditors, with whom the Audit Committee will
review the scope of audit and non-audit assignments and related fees, accounting
principles used by the Company in financial reporting, internal auditing
procedures and the adequacy of the internal control procedures of the Company.
The Audit Committee met three times during fiscal 1995.
EXECUTIVE COMPENSATION COMMITTEE. Messrs. Allen and Scherer are members of
the Executive Compensation Committee. The Executive Compensation Committee
administers the Company's Stock Incentive Plan and makes recommendations to the
Board of Directors regarding compensation and benefits for the executive
officers. The Executive Compensation Committee also has oversight
responsibilities for all broad-based compensation and benefit programs. The
Executive Compensation Committee met three times during fiscal 1995.
NOMINATING COMMITTEE. Messrs. Allen, Scherer and Woo are members of the
Nominating Committee. The Nominating Committee recommends to the Board of
Directors candidates for election as Directors of the Company and makes
recommendations to the Board of Directors regarding Director compensation. The
Nominating Committee met once during fiscal 1995.
DIRECTOR COMPENSATION
Each nonemployee Director of the Company receives an annual retainer of
$6,000, board meeting attendance fees of $750 per meeting and committee meeting
attendance fees of $250 per meeting. All Directors are reimbursed for expenses
incurred in connection with attending board and committee meetings. In addition,
on the first day of each fiscal year, each nonemployee Director receives a
nonqualified stock option, awarded under the Company's Stock Incentive Plan, to
purchase such number of shares of Common Stock as shall be equal to 25% of the
annual retainer divided by the closing price of the
5
<PAGE>
Common Stock on the New York Stock Exchange on the preceding day on which the
Common Stock was traded (the "Closing Price"). Each such stock option has an
exercise price equal to the Closing Price defined above and will become fully
exercisable on the first anniversary of the date of grant. No such stock options
were granted in fiscal 1994. In fiscal 1995, each nonemployee Director received
a nonqualified option to purchase 88 shares of Company stock at an exercise
price of $17.00 per share. In fiscal 1996, each nonemployee Director received a
nonqualified option to purchase 108 shares of Company stock at an exercise price
of $13.88 per share.
COMPENSATION OF EXECUTIVE OFFICERS
The following information relates to all plan and non-plan compensation
awarded to, earned by, or paid to the Company's Chairman, its Chief Executive
Officer and its four other most highly compensated executive officers (the
"Named Executive Officers") during the fiscal year indicated.
The following information does not reflect any compensation awarded to,
earned by, or paid to the Named Executive Officers subsequent to September 30,
1995, except as may otherwise be indicated.
SUMMARY COMPENSATION TABLE
The following table reflects, for fiscal 1995, 1994 and 1993, the cash and
noncash compensation paid by the Company to the Named Executive Officers in all
capacities.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
SECURITIES
ANNUAL COMPENSATION UNDER- PAYOUTS
NAME AND PRINCIPAL FISCAL OTHER ANNUAL LYING LTIP ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION OPTIONS PAYOUTS COMPENSATION
<S> <C> <C> <C> <C> <C> <C> <C>
Roy R. Martine......................... 1995 $250,000 $45,000 (1) -- -- --
Chairman and Director 1994 173,250 60,395 (1) 52,390 $586,538(2) --
1993 165,000 8,165 (1) -- -- --
Paul J. Woo, Jr........................ 1995 200,000 36,000 (1) -- -- $5,393(3)
President and Chief 1994 142,000 49,501 (1) 41,370 -- 5,393(3)
Executive Officer 1993 137,500 20,000 (1) -- -- 5,393(3)
D. Randolph Graham..................... 1995 130,000 23,400 (1) -- -- --
Vice President 1994 100,400 29,056 (1) 14,325 -- --
Administration, Chief 1993 95,400 17,554 (1) -- -- --
Financial Officer and Treasurer
Timothy J. Callahan.................... 1995 154,134 3,426 (1) 11,063 -- --
Vice President -- 1994 111,571 -- (1) 1,765 -- --
Sales 1993 88,747 -- (1) -- -- --
Hubert A. Davis, Jr.................... 1995 105,420 13,705 $ 13,973(4) -- -- --
Vice President -- 1994 100,400 29,056 (1) 11,063 293,269(2) --
Manufacturing 1993 95,400 17,554 15,517(5) -- -- --
Henry C. Holswade...................... 1995 105,420 13,705 15,131(6) -- -- --
Vice President -- 1994 100,400 29,056 18,402(7) 11,063 293,269(2) --
Corporate Relations 1993 95,400 17,554 13,063(8) -- -- --
</TABLE>
(1) The named executive officer received certain perquisites and other personal
benefits, the amounts of which are not shown because the aggregate amount of
such compensation during the fiscal year did not exceed the lesser of
$50,000 or 10% of total salary and bonus reported for such executive
officer.
(2) Represents deferred payment of amounts earned under a long-term incentive
plan which was terminated effective October 1, 1990.
(3) Represents premiums for a split dollar insurance policy.
6
<PAGE>
(4) Includes $6,260 of health insurance premiums and a $3,600 auto allowance
paid by the Company.
(5) Includes $5,839 of health insurance premiums and $4,995 of supplemental
health and life insurance premiums paid by the Company.
(6) Includes $6,428 of health insurance premiums paid by the Company.
(7) Includes $5,926 of health insurance premiums and $7,326 of supplemental
health and life insurance premiums paid by the Company.
(8) Includes $5,839 of health insurance premiums and $4,995 of supplemental
health and life insurance premiums paid by the Company.
OPTION GRANTS IN FISCAL 1995
The following table represents stock options granted to the Named Executive
Officers in fiscal 1995 under the Company's Stock Incentive Plan, which provides
for the grant of stock options, stock appreciation rights and restricted shares
of stock. No stock appreciation rights or restricted shares of stock were
granted in fiscal 1995.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT
PERCENT OF ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE
UNDERLYING GRANTED EXERCISE APPRECIATION
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION FOR OPTION TERM
NAME GRANTED(1) FISCAL YEAR(2) PER SHARE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Timothy J. Callahan............................... 11,063 30.9% $ 11.75 6/8/2005 $81,894 $206,685
</TABLE>
(1) The stock options will become exercisable with respect to one-third of the
shares subject thereto on each of the first three anniversaries of June 9,
1995 and will become fully exercisable upon a Change of Control (as defined
in the Company's Stock Incentive Plan).
(2) Includes stock options granted to independent sales representatives who are
not employees of the Company.
FISCAL 1995 OPTION EXERCISES AND YEAR-END OPTION VALUES(1)
The following table sets forth information regarding unexercised options to
purchase Common Stock granted under the Company's Stock Incentive Plan held by
the Named Executed Officers at September 30, 1995.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS(2)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE
<S> <C> <C> <C>
Roy R. Martine......................................................... 17,463 34,927 0
Paul J. Woo, Jr........................................................ 13,790 27,580 0
D. Randolph Graham..................................................... 4,775 9,550 0
Timothy J. Callahan.................................................... 588 12,240 0
Hubert A. Davis, Jr.................................................... 3,688 7,375 0
Henry C. Holswade...................................................... 3,688 7,375 0
<CAPTION>
NAME UNEXERCISABLE
<S> <C>
Roy R. Martine......................................................... 0
Paul J. Woo, Jr........................................................ 0
D. Randolph Graham..................................................... 0
Timothy J. Callahan.................................................... $26,275
Hubert A. Davis, Jr.................................................... 0
Henry C. Holswade...................................................... 0
</TABLE>
(1) This table speaks as of September 30, 1995. All options became immediately
exercisable on the date the Board of Directors of the Company approved the
Merger.
(2) For purposes of calculating whether an option was "in-the-money," this chart
uses the closing price of the Common Stock on the New York Stock Exchange
for September 29, 1995 of $13.875.
Following the consummation of the Offer and immediately prior to the
Effective Time of the Merger, each outstanding option shall no longer be
exercisable but shall entitle each holder thereof, in cancellation and
settlement therefor, to payments in cash, at the effective time of the Merger,
equal to the product of (x) the total number of shares of Common Stock subject
to such option times (y) the excess of $20.00 over the exercise price per share
of Common Stock subject to such option.
EMPLOYMENT AGREEMENTS
In October 1994, the Company entered into employment agreements with
certain executive officers having the following terms: three years in the case
of Mr. Woo and Mr. Graham, two years in the case of Mr. Davis and Mr. Holswade,
and
7
<PAGE>
through September 30, 1995 in the case of Mr. Martine. In June 1995, the Company
entered into an employment agreement have a two-year term with Mr. Callahan.
Each employment agreement, other than that of Mr. Martine, will be extended for
successive one-year terms beginning on the first anniversary of its
commencement, unless either the executive officer or the Company gives notice to
the other of an election not to extend the term of the employment agreement. The
employment agreements provide for base salaries of $250,000 for Mr. Martine,
$200,000 for Mr. Woo, $130,000 for Mr. Graham, and $105,420 for Mr. Callahan.
Mr. Davis and Mr. Holswade, subject to adjustment by the Board of Directors, as
well as performance-based bonuses. Under each of the employment agreements, the
Company may terminate the executive officer's employment at any time for
"Cause," as defined in the employment agreement, without incurring any
continuing obligations to the executive officer. If the Company terminates an
executive officer's employment for any reason other than for "Cause" or if an
executive officer terminates his or her employment for "Good Reason," as defined
in the employment agreement, the Company will remain obligated to continue to
provide the compensation and benefits specified in the executive officer's
employment agreement for the duration of what otherwise would have been the term
of the employment agreement.
In June 1995, the Company and Mr. Martine entered into an amendment of his
agreement under which Mr. Martine resigned as chief executive officer and agreed
that, upon his retirement as an employee of the Company as of September 30,
1995, he would continue to serve as Chairman of the Board and would become a
consultant to the Company for a period of two years. The amended agreement
provides for an annual retainer fee of $80,000 and has termination provisions
similar to those outlined above.
CHANGE IN CONTROL PROTECTIONS
The Company has entered into a severance agreement with each of Mr. Woo and
Mr. Graham the terms of which automatically extend for successive one-year
periods unless terminated by either party. If the employment of the executive
officer is terminated by the Company or its successor (with certain exceptions)
for "Good Reason" (as defined in the severance agreement), within 36 months
following a "Change in Control" (as defined in the severance agreement) or if
the executive officer terminates his employment within a period of 45 days
following the first anniversary of the Change in Control, the executive officer
will be entitled to receive a cash payment equal to 2.99 times the average
annual compensation paid to the executive officer for the five most recent
taxable years of the Company ending prior to the Change in Control, as well as
the continuation of fringe benefits (including life insurance, disability,
medical, dental and hospitalization benefits) for a period of up to twelve
months. To the extent the aggregate benefits available to Mr. Woo or Mr. Graham,
whether under their respective severance agreements or otherwise, exceed the
limit of three times the executive's average base compensation provided in
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
resulting in the executive officer incurring an excise tax under Section 4999 of
the Code or any other taxes or penalties (other than ordinary income or capital
gains taxes), the severance agreements require the Company to pay the executive
officer an additional amount to cover any such excise taxes or penalties he
incurs. Upon a Change in Control (as defined in the severance agreement), all
outstanding stock options held by the executive officer will become fully vested
and immediately exercisable. In addition the Company's Stock Incentive Plan
provides for the acceleration of certain benefits in the event of a change in
control (as defined in the Stock Incentive Plan).
RETIREMENT BENEFITS
Estimated annual benefits under the Company's pension plan and any
supplemental retirement plan upon retirement at age 65, determined as of October
1, 1995 to a person with specified earnings and years of pension benefit
service, are set forth in the table below.
ESTIMATED BENEFITS PAYABLE AT RETIREMENT(1)
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS FOR REPRESENTATIVE
YEARS OF CREDITED SERVICE(2)
BENEFIT COMPENSATION (3) 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 50,000........................................................... $ 9,311 $12,415 $ 15,519 $ 18,623 $ 21,726
100,000........................................................... 21,311 28,415 35,519 42,623 49,726
150,000........................................................... 33,311 44,415 55,519 66,623 77,726
200,000........................................................... 45,311 60,415 75,519 90,623 105,726
250,000........................................................... 57,311 76,415 95,519 114,623 133,726
300,000........................................................... 69,311 92,415 115,519 138,623 161,726
</TABLE>
8
<PAGE>
(1) Assumes attainment of age 65 in fiscal 1996 and Social Security covered
compensation of $27,576.
(2) The projected years of pension benefit service at age 65 for each of the
named executive officers are: Roy R. Martine, 14; Paul J. Woo, Jr., 35; D.
Randolph Graham, 28; Timothy J. Callahan, 26; Hubert A. Davis, Jr., 18; and
Henry C. Holswade, 28.
(3) Benefit Compensation is the average of the highest five consecutive plan
year's W-2 earnings (including overtime, bonuses, and commissions preceding
the date of determination for benefits accrued through December 31, 1995)
and
W-2 earnings for benefits accrued after that date.
The estimated benefits assume retirement at age 65 and assume that payments
will be made for the lifetime of the participant, which is the normal form of
payment under the Company's retirement plan. The estimated retirement benefits
reflected above may, in some cases, be based on compensation that exceeds the
amount that may be recognized by the plan under the Internal Revenue Code or
otherwise exceed the maximum benefit limitations prescribed under the Internal
Revenue Code, in which event the excess amount cannot be paid from the Company's
retirement plan, but may be paid from the Company's supplemental retirement
plan. Such limitations may change from time to time before the individuals in
question actually retire.
The Company's supplemental retirement plan is designed to provide employees
with the difference between the benefits they actually accrue under the
Company's pension plan and the benefits they would have accrued but for the
maximum benefit and compensation limits imposed by law. The supplemental
retirement plan provides an additional benefit for certain executives that is
designed to provide them with the difference in what they would have received
under the pension plan had it not been amended effective January 1, 1996, and
what they will actually receive under the pension plan.
The Company also maintains a defined contribution plan providing for salary
deferral elections pursuant to Section 401(k) of the Code and offering eligible
employees the opportunity to invest plan contributions in shares of common stock
of the Company. Participants are permitted to make salary deferral elections
with respect to from 1% to 12% of their compensation. The Company provides a
matching contribution equal to 50% of the employees' salary deferral amounts up
to 6% of employee compensation. In addition, the Company may make additional
profit sharing contributions each year in an amount, if any, determined by the
Company from time to time. To date, the Company has not made any discretionary
profit sharing contributions.
EXECUTIVE COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Executive Compensation Committee (the "Committee") was established in
September 1994 and is composed of two non-employee Directors. Neither member of
the Committee serves on the board of the other committee member's company or
organization and none of the executive officers of the Company serves on the
board of any committee member's company or organization. The Committee has
access to outside consultants and counsel.
The Committee has furnished the following report on the Company's executive
compensation. This report is required by the rules of the Securities and
Exchange Commission. It is not to be deemed incorporated by reference by any
general statement which incorporates by reference this Information Statement
into any filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934, and it is not to be otherwise deemed filed under either such Act.
COMPENSATION OBJECTIVES. The objectives of the Company's executive
compensation program are: (i) to provide a balanced and competitive total
compensation package that will enable the Company to attract, motivate and
retain highly qualified executives; (ii) to provide executive officers
incentives to enhance the profitability of the Company and (iii) to align the
financial interests of the executive officers with those of the shareholders
through the use of equity-based compensation. The Committee endeavors to achieve
these objectives by basing a substantial portion of executive officer
compensation on the attainment of measurable financial performance goals,
including growth in revenue, earnings per share and return on equity, and by
making equity-based compensation an important component of total executive
officer compensation. The Committee has determined the amount of base salary and
stock incentives paid or allocated to executive officers primarily through
comparison to compensation paid by public companies having comparable revenues,
on the basis of information provided by a national compensation consulting firm.
The Committee has also considered individual performance and other factors.
COMPONENTS OF COMPENSATION. The Company's executive compensation program
consists of three components: base salary, annual bonus and grants under the
Company's Stock Incentive Plan, which provides for awards of stock options,
stock
9
<PAGE>
appreciation rights and restricted stock. The relative importance of each of
these components in an executive officer's total compensation will depend upon
his or her level of responsibility with the Company. While base salary is the
largest component of the compensation of all executive officers, it constitutes
a lesser percentage of the total compensation of the more highly compensated
executive officers.
BASE SALARY. The base salaries provided for in the Company's employment
agreements with its executive officers are intended to be slightly below the
median compensation paid by comparable companies, many of which are more mature
companies which place less emphasis on long-term growth oriented incentives than
the Company. Accordingly, as disclosed in the prospectus for the Company's
initial public offering, the base salaries for Mr. Martine, Mr. Woo and Mr.
Graham were increased by 44%, 41% and 29%, respectively, upon the completion of
the offering. The base salaries for vice presidents of the Company were
increased by five percent in fiscal 1995.
ANNUAL BONUS. The Committee has recommended, and the Board of Directors has
approved, bonus guidelines for executive officers which are intended to provide
incentive and awards to employees who contribute to the Company's attainment of
its financial goals. Under the guidelines, the Company can pay to its executive
officers annual bonuses of up to 50% of base salary for the chief executive
officer, 35% of base salary for the chief financial officer and 30% of base
salary for vice presidents, depending upon the extent to which the Company
attains its goals. These bonus ranges were determined by comparison to
comparable companies and are intended to make available to the executive
officers bonuses which are in the mid-range of the group. The Committee may also
award additional bonuses based on financial performance. In determining
recommended bonus amounts, the Committee also considers the individual
performance of the executive officers.
For purposes of determining fiscal 1995 bonus amounts for the executive
officers, including the chief executive officer, the factors that the Committee
considered were attainment of the Company's goals for revenues and earnings per
share, which were the most heavily weighted factors, and attainment of the
expense goals of the department for which each executive officer was
responsible. The Committee also considered attainment of certain discretionary,
nonfinancial goals relating to the completion of acquisitions and integration of
the acquired operations and a reallocation of responsibilities among executive
officers. The Committee determined that the goals for revenues and earnings per
share were not fully attained but that the expense goals and nonfinancial goals
were fully attained. Considering these factors together, the Committee approved
bonuses as percentages of base salary for the executive officers consistent with
the bonus guidelines described above.
STOCK INCENTIVE PLAN AWARDS. The Company's Stock Incentive Plan is intended
to assist the Company in attracting, motivating and retaining well-qualified
executive officers and to increase their identity of interest with the Company's
shareholders. In determining the amount of stock options granted to executive
officers in connection with the Company's initial public offering in September
1994, the Committee considered the levels of stock option grants typical among
the group of comparable companies. The Committee determined that stock option
grants to the Company's executive officers should be somewhat greater than the
median of this group due to the Company's growth orientation and because base
salaries for the Company's executive officers are generally below the median for
this group. Moreover, the options granted to executive officers at the time of
the initial public offering were to become exercisable over a three-year period.
In fiscal 1995, executive officers who were granted stock options in
connection with the initial public offering did not receive additional stock
options. Persons who became vice presidents of the Company in fiscal 1995 were
granted options to purchase the same number of shares as may be purchased under
the options previously granted to the other vice presidents of the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION. As discussed above, the base salaries
for Mr. Woo and Mr. Martine were increased in connection with the Company's
initial public offering. Consistent with the other executive officers who were
with the Company at the time of the Company's initial public offering, neither
Mr. Woo nor Mr. Martine received any additional stock option grants in fiscal
1995. The annual bonus payments to Mr. Woo and Mr. Martine were determined in
the manner described above, except that the attainment of expense goals were
tied to Company-wide expenses rather than departmental expenses. Under the bonus
guidelines, a higher percentage bonus was paid to Mr. Woo and Mr. Martine than
was paid to the Company's other executive officers, which is consistent with the
overall approach of the Company's executive compensation program of making a
greater percentage of the chief executive officer's total compensation dependent
upon Company performance.
December 19, 1995 EXECUTIVE COMPENSATION COMMITTEE
Thomas N. Allen
J. Hamilton Scherer, Jr.
10
<PAGE>
CERTAIN TRANSACTIONS
On May 1, 1995, the Company, through SCI, purchased all of the outstanding
shares of stock in Associated Medical Products Company ("AMP") for approximately
$6.9 million. The AMP stock was purchased from Robert C. Thaemert and David G.
Thomson, each of whom became a Vice President of the Company in connection with
the transaction.
On October 2, 1995, SCI purchased from Medical Design Concepts, Inc.
("MDC") substantially all of the assets used in its custom procedure tray
business, excluding all assets used in its sterilization business, for a
purchase price of approximately $18 million. In connection with the purchase of
the MDC assets, SCI entered into a Sterilization Agreement with MDC under which
MDC agreed to provide sterilization services to SCI. In February 1995, the
Company entered into a Distribution Agreement with Professional Hospital Supply,
Inc. ("PHS") under which PHS agreed to provide distribution services to the
Company, which agreement was amended in connection with the MDC acquisition.
Payments made by the Company to MDC under the Sterilization Agreement during the
period from October 2, 1995, through December 1, 1995, totaled $104,140.
Purchases by PHS from the Company under the Distribution Agreement during the
period from October 2, 1995, to December 1, 1995, were $4,257,972. John H.
Luttgens, who became Executive Vice President -- Western Region of the Company
upon completion of the MDC acquisition, was President of MDC prior to joining
the Company. Mr. Luttgens' spouse is President of PHS and Mr. Luttgens'
father-in-law is the sole shareholder of both MDC and PHS.
During fiscal 1995, the Company received investment banking advisory
services under an agreement with Wheat, First Securities, Inc.of which J.
Hamilton Scherer, Jr., a Director of the Company, is Managing Director and Vice
Chairman.
James C. Martine, who is the son of Roy R. Martine, Chairman and a Director
of the Company, is an independent sales representative of the Company. He is
compensated by the Company on the same terms and conditions as other independent
sales representatives of the Company. The Company pays gross commissions to
James C. Martine, out of which he pays all expenses associated with his sales
operations, including compensation paid to six sales representatives who work
for him. Total commissions paid to James C. Martine by the Company during fiscal
1995 were $893,431.
COMPLIANCE WITH EXCHANGE ACT FILING REQUIREMENTS
Under the securities laws of the United States, the Company's Directors,
executive officers and any persons holding 10% or more of the Common Stock are
required to report their ownership of the Company's securities and any changes
in that ownership to the Securities and Exchange Commission and the New York
Stock Exchange. Based solely on the Company's review of the copies of such
reports it has received and written representations from certain reporting
persons that they were not required to file a Form 5 for fiscal 1995, the
Company believes that all of these filing requirements were satisfied by such
persons, except that J. Hamilton Scherer, Jr. filed a Form 4 relating to his
purchase of Company securities late.
INFORMATION WITH RESPECT TO MAXXIM DESIGNEES
As of the date of this Information Statement, Maxxim has not determined who
will be Maxxim Designees. Maxxim Designees shall be selected from among the
following persons.
The following table sets forth the name, business address, present
principal occupation and material positions and occupations within the past five
years of the persons who may be Maxxim Designees. Unless otherwise specified,
each person listed below is a citizen of the United States and has his or her
principal address at the offices of Maxxim Medical, Inc., a Texas Corporation
("Parent"), Maxxim or the Purchaser, 104 Industrial Boulevard, Sugar Land, Texas
77478. None of the persons listed below owns any Common Stock; or rights to
acquire any Common Stock; is a director of or holds any position with the
Company; or has been involved in any transactions with the Company or any of its
directors or executive officers that are required to be disclosed pursuant to
the rules and regulations of the Securities Exchange Commission.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, MATERIAL POSITIONS
NAME AND BUSINESS ADDRESS AGE HELD DURING PAST FIVE YEARS, AND BUSINESS ADDRESS THEREOF
<S> <C> <C>
Kenneth W. Davidson........... 48 Chairman of the Board, President and Chief Executive Officer of
Parent
Peter M. Graham............... 49 Treasurer, Executive Vice President and Chief Operating Officer
of Parent
David L. Lamont............... 49 Vice President, Group Vice President of Parent
Alan S. Blazei................ 40 Vice President, Controller of Parent
Ernest J. Henley, Ph.D........ 69 Director of Parent
</TABLE>
11
<PAGE>
KENNETH W. DAVIDSON has served as a director since 1982 and as Chairman of
the Board of Directors, Chief Executive Officer and President of the Parent
since November 1986. Prior to that time, Mr. Davidson was the Corporate Director
of Business Development at Intermedics Incorporated, which is principally a
manufacturer of implantable medical devices such as pacemakers and is also a
principal shareholder of the Company.
PETER M. GRAHAM has served the Parent as Executive Vice President since
January 1986, Treasurer of the Parent since April 1987, and as Chief Operating
Officer since January 1987.
DAVID L. LAMONT has been Vice President of the Parent since March 1988 and
Group Vice President since July 1993. From January 1992 to July 1993 Mr. Lamont
was President, Argon Medical division of Maxxim.
ALAN S. BLAZEI was elected as an executive officer of the Company in
December 1990 with the title of Vice President, Controller. Prior to that time
and since March 1986, Mr. Blazei was Vice President-Finance and Controller of
NTRON Electronics, Inc., a manufacturer of nerve stimulation devices acquired by
Maxxim in 1989.
ERNEST J. HENLEY, PH.D., has been a director and a consultant to the Parent
since 1976. Dr. Henley's principal employment for more than the past five years
has been as a Professor of Chemical Engineering at the University of Houston.
12
EXHIBIT (a)
STERILE CONCEPTS HOLDINGS, INC.
5100 COMMERCE ROAD
RICHMOND, VIRGINIA 23234
Notice of Annual Meeting of Shareholders
NOTICE IS HEREBY GIVEN that the Annual Meeting of the holders of shares of
Common Stock, no par value, of Sterile Concepts Holdings, Inc. will be held on
Thursday, February 15, 1996, at 10:00 a.m., local time, at Crestar Bank,
Auditorium, 919 East Main Street, Richmond, Virginia for the following purposes:
1. To elect two Class II Directors, each to serve until the 1999
annual meeting of shareholders and until his or her successor is elected;
and
2. To transact such other business as may properly come before the
meeting.
Holders of shares of Common Stock of record at the close of business of the
New York Stock Exchange on December 15, 1995 are entitled to notice of and to
vote at the meeting.
Please complete, sign, date and return the enclosed proxy card promptly,
whether or not you expect to attend the meeting. A self - addressed, stamped
envelope is enclosed for your convenience.
If you are present at the meeting, you may vote in person even if you
already have returned your proxy card.
By Order of the Board of Directors
Paul J. Woo, Jr.,
President & Chief Executive Officer
Richmond, Virginia
December 29, 1995
Even if you plan to attend the meeting in person, please execute the
enclosed proxy card and mail it promptly. Should you attend the meeting you may
revoke your proxy and vote in person. For your convenience, enclosed is a return
envelope which requires no postage if mailed in the United States.
<PAGE>
STERILE CONCEPTS HOLDINGS, INC.
PROXY STATEMENT
for
ANNUAL MEETING OF SHAREHOLDERS
to be held February 15, 1996
This Proxy Statement is being furnished to shareholders of Sterile Concepts
Holdings, Inc., a Virginia corporation (together with its wholly owned
subsidiary Sterile Concepts, Inc., unless the context requires otherwise, the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company from holders of record of the Company's common stock,
no par value (the "Common Stock"), as of the close of business of the New York
Stock Exchange on December 15, 1995 (the "Record Date"), for use at the Annual
Meeting of Shareholders of the Company (the "Annual Meeting") to be held on
Thursday, February 15, 1996, at 10:00 a.m., local time, at Crestar Bank,
Auditorium, 919 East Main Street, Richmond, Virginia, and at any adjournment or
postponement thereof.
This Proxy Statement and the accompanying proxy card are first being mailed
to the holders of Common Stock of record on the Record Date on or about December
29, 1995. A copy of the Company's Annual Report to Shareholders for the fiscal
year ended September 30, 1995 accompanies the Proxy Statement. The Annual
Report, however, is not a part of the proxy solicitation material.
The Company owns all of the outstanding shares of capital stock of Sterile
Concepts, Inc. ("SCI"), which conducts the Sterile Concepts business. The term
"fiscal year" when used in this Proxy Statement shall mean the twelve - month
period ended September 30 of the calendar year indicated.
Purposes of the Annual Meeting
At the Annual Meeting, holders of shares of Common Stock entitled to vote
at the Annual Meeting will be asked to consider and vote upon the following
matters:
1. The election of two Class II Directors of the Company, each to hold
office until the 1999 annual meeting of shareholders and until his or
her successor is elected; and
2. The transaction of such other business as may properly come before the
meeting.
The Board of Directors unanimously recommends a vote FOR the election of
the Board of Directors' nominee for election as a Director of the Company. As of
the date of this Proxy Statement, the Board of Directors knows of no other
business to come before the Annual Meeting. In the event other business shall
properly come before the Annual Meeting, proxies will be voted in accordance
with the discretion of the proxy holders.
Voting Rights and Proxy Information
Only holders of record of shares of Common Stock as of the close of
business of the New York Stock Exchange on the Record Date will be entitled to
notice of, and to vote at, the Annual Meeting or any adjournment or postponement
thereof. Each share of Common Stock is entitled to one vote. As of the Record
Date, a total of 5,526,000 shares of Common Stock were issued and outstanding.
1
<PAGE>
The presence, either in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of Common Stock as of the Record
Date is necessary to constitute a quorum for the transaction of business at the
Annual Meeting. A quorum being present, the affirmative vote of a plurality of
the shares present and voting is necessary to elect a nominee as a Director of
the Company. Under the Virginia Stock Corporation Act, votes that are withheld
and broker "non - votes" are not included in the tabulation of the voting
results on the election of Directors and, therefore, do not have the effect of
votes in opposition. A broker "non - vote" occurs when a nominee holding shares
for a beneficial owner does not vote upon a particular proposal because the
nominee does not have discretionary voting power with respect to that proposal
and has not received instructions from the beneficial owner. Broker
"non - votes" and the shares as to which shareholders abstain or withhold their
votes are included for purposes of determining whether a quorum of shares is
present at a meeting.
All shares of Common Stock that are represented at the Annual Meeting by
properly executed proxies received by the Secretary of the Company prior to or
at the Annual Meeting and not revoked will be voted at the Annual Meeting in
accordance with the instructions indicated in such proxies. If no instructions
are indicated, such proxies will be voted FOR the election of each of the Board
of Directors' nominees for election as a Director of the Company.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. A proxy may be revoked by (i) filing
with the Company, at or before the Annual Meeting, a written notice of
revocation bearing a later date than the proxy, (ii) duly executing a subsequent
proxy relating to the same shares of Common Stock and delivering it to the
Company at or before the Annual Meeting or (iii) attending the Annual Meeting,
filing a written revocation of proxy and voting in person (attendance at the
Annual Meeting and voting will not in and of itself constitute a revocation of a
proxy.) Any written notice revoking a proxy or subsequent proxies should be
received by mail or hand delivered to Sterile Concepts Holdings, Inc.,
Attention: Mr. Jeffrey L. Brugh, 5100 Commerce Road, Richmond, Virginia 23234.
The Company will bear the cost of solicitation of proxies. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodian nominees and fiduciaries to supply proxy material to the beneficial
owners of Common Stock and will reimburse them for their expenses in so doing.
Certain Directors, officers and other employees of the Company, not specially
employed for this purpose, may solicit proxies, without additional remuneration
therefor, by personal interview, mail, telephone, facsimile or other electronic
means. In addition, the Company has engaged Corporate Investor Communications,
Inc. to assist in the solicitation of proxies from brokers, nominees,
fiduciaries and other custodians. The Company will pay that firm $3,000 for its
services, plus reimbursement of out - of - pocket expenses.
ELECTION OF CLASS II DIRECTORS
The Board of Directors consists of five Directors. The Company's Amended
and Restated Articles of Incorporation provide for a Board of Directors divided
into three classes (Class I, Class II and Class III) having staggered
three - year terms, with each class as nearly equal in size as possible. The
current terms of office of the Directors in Class II expire at the Annual
Meeting. The terms of office of Directors in Class III and Class I will expire
at the annual meetings of shareholders to be held in 1997 and 1998,
respectively. At each annual meeting of shareholders, a Director or Directors
will be elected to succeed those whose terms then expire, with each newly
elected Director to serve for a three - year term.
Roy R. Martine and Nina Novak have been nominated by the Board of Directors
for election as Class II Directors at the Annual Meeting, each to serve for a
term expiring at the 1999 annual meeting of shareholders. Both Mr. Martine and
Ms. Novak are currently Directors of the Company. It is intended that the
persons named
2
<PAGE>
in the accompanying proxy will vote shares represented by properly executed
proxies FOR the election of Mr. Martine and Ms. Novak as Directors unless
authority to vote is withheld. If either Mr. Martine or Ms. Novak should become
unavailable to serve on the Board of Directors, the persons named in the proxy
may act with discretionary authority to vote the proxy for such other person or
persons, if any, as may be designated by the Board of Directors. However, the
Board of Directors is not aware of any circumstances likely to render either of
the nominees unavailable to serve on the Board of Directors.
The Board of Directors of the Company recommends that the Company's
shareholders vote FOR the re - election of each nominee of the Board of
Directors as a Director of the Company.
The following sets forth certain information with respect to the business
experience of the nominees of the Board of Directors and the other current
members of the Board of Directors.
Class II Directors - Term Expiring 1996
Roy R. Martine, 66, became Chairman and a Director of the Company in
September 1994 and Chairman of SCI in March 1994. He was Chief Executive Officer
of the Company from September 1994, and of SCI from 1984, until June 1995, and
was President of SCI from 1984 through March 1994. Mr. Martine retired as an
executive officer of the Company and SCI on September 30, 1995, but continues to
serve as Chairman and a Director of the Company and SCI and as a consultant to
SCI.
Nina Novak, 42, became a Director of the Company in September 1994 and has
been a Director of SCI since 1987. She has been an attorney in private practice
since 1977.
Class III Directors - Term Expiring 1997
J. Hamilton Scherer, Jr., 54, became a Director of the Company in September
1994 and has been a Director of SCI since 1987. Mr. Scherer, an investment
banker, has been Managing Director and Vice Chairman of Wheat First Butcher
Singer since 1992. Previously, he was a Managing Director of NationsBanc Capital
Markets, Inc. from 1991 to 1992 and President and Chief Executive Officer of
Sovran Investment Corp. from 1988 to 1991.
Paul J. Woo, Jr., 51, became Chief Executive Officer of the Company and SCI
in June 1995. He has been a Director of the Company since September 1994 and a
Director of SCI since 1984. Mr. Woo became President of the Company in September
1994 and President of SCI in March 1994. He was Chief Operating Officer and
Secretary of the Company from September 1994, and of SCI from March 1994, until
June 1995. Mr. Woo was previously employed by Carilion Health System
("Carilion"), the parent of the Company prior to its initial public offering
(the "Offering"), where he was Executive Vice President from 1988 through
February 1994. His responsibilities at Carilion included serving as
Secretary - Treasurer and a Director of SCI and overseeing the operations of SCI
since 1984. Carilion is one of the largest operators of hospitals and affiliated
outpatient treatment centers in Virginia.
Class I Director - Term Expiring 1998
Thomas N. Allen, 57, became a Director of the Company in September 1994. He
has been Chairman of Acme Markets of Virginia, Inc., a regional supermarket
chain, since 1987 and Chairman of East Coast Oil Corporation, an operator of
service stations and convenience stores, since 1978.
3
<PAGE>
Organization of the Board of Directors and Committees
During fiscal 1995, the Board of Directors met nine times. During such
period, all of the Directors attended at least 75% of all meetings held of the
Board of Directors and all committees on which they serve. The standing
committees of the Board of Directors are the Executive Committee, the Audit
Committee, the Executive Compensation Committee and the Nominating Committee.
Executive Committee. Messrs. Martine, Scherer and Woo are members of the
Executive Committee. The Company's Bylaws empower the Executive Committee to
exercise the full authority of the Board of Directors when it is not in session,
except as otherwise provided in the Virginia Stock Corporation Act.
Audit Committee. Mr. Allen and Ms. Novak are members of the Audit
Committee. The Audit Committee reviews the internal controls and the financial
reporting process of the Company. The Audit Committee recommends to the Board of
Directors the annual appointment of auditors, with whom the Audit Committee will
review the scope of audit and non - audit assignments and related fees,
accounting principles used by the Company in financial reporting, internal
auditing procedures and the adequacy of the internal control procedures of the
Company. The Audit Committee met three times during fiscal 1995.
Executive Compensation Committee. Messrs. Allen and Scherer are members of
the Executive Compensation Committee. The Executive Compensation Committee
administers the Company's Stock Incentive Plan and makes recommendations to the
Board of Directors regarding compensation and benefits for the executive
officers. The Executive Compensation Committee also has oversight
responsibilities for all broad - based compensation and benefit programs. The
Executive Compensation Committee met three times during fiscal 1995.
Nominating Committee. Messrs. Allen, Scherer and Woo are members of the
Nominating Committee. The Nominating Committee recommends to the Board of
Directors candidates for election as Directors of the Company and makes
recommendations to the Board of Directors regarding Director compensation. The
Nominating Committee met once during fiscal 1995.
Director Compensation
Each nonemployee Director of the Company receives an annual retainer of
$6,000, board meeting attendance fees of $750 per meeting and committee meeting
attendance fees of $250 per meeting. All Directors will be reimbursed for
expenses incurred in connection with attending board and committee meetings. In
addition, on the first day of each fiscal year, each nonemployee Director
receives a nonqualified stock option, awarded under the Company's Stock
Incentive Plan, to purchase such number of shares of Common Stock as shall be
equal to 25% of the annual retainer divided by the closing price of the Common
Stock on the New York Stock Exchange on the preceding day on which the Common
Stock was traded (the "Closing Price"). Each such stock option will have an
exercise price equal to the Closing Price defined above and will become fully
exercisable on the first anniversary of the date of grant. No such stock options
were granted in fiscal 1994. In fiscal 1995, each nonemployee Director received
a nonqualified option to purchase 88 shares of Company stock at an exercise
price of $17.00 per share.
4
<PAGE>
OWNERSHIP OF COMPANY VOTING SECURITIES
The following table sets forth, as of the Record Date, certain information
with respect to the beneficial ownership of Common Stock (the only class of the
Company's securities entitled to voting rights) by (i) each Director of the
Company, (ii) the Chief Executive Officer and the other five most highly
compensated executive officers of the Company for fiscal 1995, and (iii) the
Company's Directors and executive officers as a group. Unless otherwise
indicated, all persons have sole voting and investment power over all shares
beneficially owned.
<TABLE>
<CAPTION>
Number Of Shares
Beneficially Percent
Name Owned Of Class
<S> <C> <C>
Roy R. Martine....................................................................... 83,749(1)(3) 1.4%
Paul J. Woo, Jr...................................................................... 38,790(3) *
D. Randolph Graham................................................................... 18,234(3) *
Timothy J. Callahan.................................................................. 888(3) *
Hubert A. Davis, Jr.................................................................. 6,643(2)(3) *
Henry C. Holswade.................................................................... 15,508(2)(3) *
Thomas N. Allen...................................................................... 1,088 *
Nina Novak........................................................................... 488 *
J. Hamilton Scherer, Jr.............................................................. 3,588 *
All Directors and executive
officers as a group
(13 persons)....................................................................... 180,013(3) 3.2%
</TABLE>
* Less than 1%.
(1) Includes 2,955 shares owned by Mr. Martine's spouse, as to which she has
sole voting and investment power.
(2) Voting and investment power are shared with the executive officer's spouse.
(3) Includes shares that may be acquired upon the exercise of options granted
under the Company's Stock Incentive Plan that are exercisable within 60 days
of the Record Date in the following amounts: Mr. Martine - 63,453 shares
(including 11,063 shares that may be acquired upon the exercise of options
held by Mr. Martine's spouse); Mr. Woo - 13,790 shares; Mr. Graham - 4,775
shares; Mr. Callahan - 588 shares; Mr. Davis - 3,688 shares; Mr. Holswade
- 3,688 shares; Mr. Allen, Ms. Novak and Mr. Scherer - 88 shares each; and
all Directors and executive officers as a group - 93,185 shares.
5
<PAGE>
The following table sets forth as of the Record Date the beneficial
ownership of Common Stock by all persons who beneficially own five percent or
more of the Common Stock, based upon filings with the Securities and Exchange
Commission and certain additional information available to the Company. Unless
otherwise indicated, all persons have sole voting and investment power over all
shares beneficially owned.
<TABLE>
<CAPTION>
Number of Shares
Name & Address of Beneficially Percent
Beneficial Owners Owned of Class
<S> <C> <C>
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, Wisconsin 53202 578,700 10.50%
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109 552,200 9.99
Miller, Anderson & Sherrerd
One Tower Bridge
West Conshohocken, Pennsylvania 19428 365,800 6.62
T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, Maryland 21202 300,000 5.40
</TABLE>
6
<PAGE>
EXECUTIVE COMPENSATION
Executive Officers
The following table lists the executive officers of the Company and their
ages and positions with the Company.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Roy R. Martine................................... 66 Chairman and Director
Paul J. Woo, Jr.................................. 51 President, Chief Executive Officer, and
Director
D. Randolph Graham............................... 45 Vice President - Administration, Chief
Financial Officer and Treasurer
Jeffrey L. Brugh................................. 37 Vice President, Controller and Secretary
Timothy J. Callahan.............................. 44 Vice President - Sales
Hubert A. Davis, Jr.............................. 59 Vice President - Manufacturing
Henry C. Holswade................................ 48 Vice President - Corporate Relations
John H. Luttgens................................. 32 Executive Vice President - Western Region
David G. Thomson................................. 46 Vice President - National Accounts
Robert C. Thaemert............................... 48 Vice President - National Accounts
</TABLE>
Messrs. Martine, Woo, Graham, Davis, Brugh and Holswade assumed their
positions with the Company in September 1994. Messrs. Callahan, Thomson and
Thaemert assumed their positions with the Company in June 1995 and Mr. Luttgens
assumed his position with the Company in October 1995. Set forth below is
certain information regarding the executive officers of the Company who are not
Directors, including the positions they hold with SCI. Information regarding
executive officers who are Directors is set forth under "Election of Class II
Directors."
D. Randolph Graham became Vice President - Administration and Chief
Financial Officer in June 1994. He was Vice President - Administration and
Planning from June 1991 through May 1994, and Director of Administration and
Planning from February 1988 through May 1991.
Jeffrey L. Brugh has been Vice President and Controller since June 1991 and
was Director of Accounting from November 1984 through May 1991. He became
Secretary in June 1995.
Timothy J. Callahan became Vice President - Sales in June 1995 and had
previously served as Regional Sales Manager since January 1991. Prior to joining
SCI, he was Vice President - Sales of Harbor Medical, Inc.
Hubert A. Davis, Jr. has been Vice President - Manufacturing since June
1991 and was Vice President - Operations from 1982 through May 1991.
Henry C. Holswade became Vice President - Corporate Relations in June 1995
and was Vice President - Sales from May 1987 through May 1995.
John H. Luttgens became Executive Vice President - Western Region in
October 1995 and was President of Medical Design Concepts, Inc. from 1986 until
the acquisition of the assets of its customer procedure tray business by SCI in
October 1995.
Robert C. Thaemert became Vice President and Central Region Manager in June
1995 and was President at the time of the acquisition; and a founder of
Associated Medical Products Company from 1977 until its acquisition by SCI in
May 1995.
7
<PAGE>
David G. Thomson became Vice President and National Accounts Manager in
June 1995 and was Treasurer at the time of the acquisition; and a founder of
Associated Medical Products Company from 1977 until its acquisition by SCI in
May 1995.
Compensation
Summary Compensation Table
The following table reflects, for fiscal 1995, fiscal 1994 and fiscal 1993,
the cash and noncash compensation paid by the Company to persons who served as
its Chief Executive Officer and the four other most highly compensated executive
officers of the Company whose salary and bonus exceeded $100,000 for services
rendered in all capacities.
<TABLE>
<CAPTION>
Long - Term
Compensation
Awards
Securities
Annual Compensation Under - Payouts
Fiscal Other Annual Lying LTIP All Other
Name and Principal Position Year Salary Bonus Compensation Options Payouts Compensation
<S> <C> <C> <C> <C> <C> <C> <C>
Roy R. Martine................. 1995 $250,000 $45,000 (1) - - -
Chairman and Director 1994 173,250 60,395 (1) 52,390 $586,538(2) -
1993 165,000 38,165 (1) - - -
Paul J. Woo, Jr................ 1995 200,000 36,000 (1) - - $5,393(3)
President and Chief 1994 142,000 49,501 (1) 41,370 - 5,393(3)
Executive Officer 1993 137,500 20,000 (1) - - 5,393(3)
D. Randolph Graham............. 1995 130,000 23,400 (1) - - -
Vice President -............. 1994 100,400 29,056 (1) 14,325 - -
Administration, Chief 1993 95,400 17,554 (1) - - -
Financial Officer and
Treasurer
Timothy J. Callahan............ 1995 154,134 3,426 (1) 11,063 - -
Vice President - 1994 111,571 - (1) 1,765 - -
Sales 1993 88,747 - (1) - - -
Hubert A. Davis, Jr............ 1995 105,420 13,705 $ 13,973(4) - - -
Vice President - 1994 100,400 29,056 (1) 11,063 293,269(2) -
Manufacturing 1993 95,400 17,554 15,517(5) - - -
Henry C. Holswade.............. 1995 105,420 13,705 15,131(6) - - -
Vice President -............. 1994 100,400 29,056 18,402(7) 11,063 293,269(2) -
Corporate Relations.......... 1993 95,400 17,554 13,063(8) - - -
</TABLE>
(1) The named executive officer received certain perquisites and other personal
benefits, the amounts of which are not shown because the aggregate amount of
such compensation during the fiscal year did not exceed the lesser of
$50,000 or 10% of total salary and bonus reported for such executive
officer.
(2) Represents deferred payment of amounts earned under a long - term incentive
plan which was terminated effective October 1, 1990.
(3) Represents premiums for a split dollar insurance policy.
(4) Includes $6,260 of health insurance premiums and a $3,600 auto allowance
paid by the Company.
(5) Includes $5,839 of health insurance premiums and $4,995 of supplemental
health and life insurance premiums paid by the Company.
(6) Includes $6,428 of health insurance premiums paid by the Company.
(7) Includes $5,926 of health insurance premiums and $7,326 of supplemental
health and life insurance premiums paid by the Company.
(8) Includes $5,839 of health insurance premiums and $4,995 of supplemental
health and life insurance premiums paid by the Company.
8
<PAGE>
Option Grants in Fiscal 1995
The following table represents stock options granted to the named executive
officers in fiscal 1995 under the Company's Stock Incentive Plan, which provides
for the grant of stock options, stock appreciation rights and restricted shares
of stock. No stock appreciation rights or restricted shares of stock were
granted in fiscal 1995.
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Assumed Annual
Individual Grants Rates of Stock
Percent of Total Price
Number of Securities Options Granted Appreciation
Underlying Options to Employees in Exercise Price For Option Term
Name Granted(1) Fiscal Year(2) per share Expiration Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Timothy J. Callahan..... 11,063 30.9% $11.75 6/8/2005 $81,894 $206,685
</TABLE>
(1) The stock options will become exercisable with respect to one - third of the
shares subject thereto on each of the first three anniversaries of June 9,
1995.
(2) Includes stock options granted to independent sales representatives who are
not employees of the Company.
Fiscal 1995 Option Exercises And Year - End Option Values
The following table sets forth information regarding unexercised options to
purchase Common Stock granted under the Company's Stock Incentive Plan held by
the named executive officers at September 30, 1995. There were no option
exercises in fiscal 1995.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options In - The - Money Options(1)
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Roy R. Martine............................................. 17,463 34,927 0 0
Paul J. Woo, Jr............................................ 13,790 27,580 0 0
D. Randolph Graham......................................... 4,775 9,550 0 0
Timothy J. Callahan........................................ 588 12,240 0 $26,275
Hubert A. Davis, Jr........................................ 3,688 7,375 0 0
Henry C. Holswade.......................................... 3,688 7,375 0 0
</TABLE>
(1) For purposes of calculating whether an option was "in - the - money," this
chart uses the closing price of the Common Stock on the New York Stock
Exchange for September 29, 1995 of $13.875.
Employment Agreements
In October 1994, the Company entered into employment agreements with
certain executive officers having the following terms: three years in the case
of Mr. Woo and Mr. Graham, two years in the case of Mr. Davis and Mr. Holswade,
and through September 30, 1995 in the case of Mr. Martine. In June 1995, the
Company entered into an employment agreement having a two - year term with Mr.
Callahan. Each employment agreement, other than that of Mr. Martine, will be
extended for successive one - year terms beginning on the first anniversary of
its commencement, unless either the executive officer or the Company shall have
given notice to the other of an election not to extend the term of the
employment agreement. The employment agreements provide for base salaries of
$250,000 for Mr. Martine, $200,000 for Mr. Woo, $130,000 for Mr. Graham, and
$105,420 for Mr. Callahan, Mr. Davis and Mr. Holswade, subject to adjustment by
the Board of Directors, as well as performance - based bonuses. Under each of
the employment agreements, the Company may terminate the
9
<PAGE>
executive officer's employment at any time for "Cause," as defined in the
employment agreement, without incurring any continuing obligations to the
executive officer. If the Company terminates an executive officer's employment
for any reason other than for "Cause" or if an executive officer terminates his
or her employment for "Good Reason," as defined in the employment agreement, the
Company will remain obligated to continue to provide the compensation and
benefits specified in the executive officer's employment agreement for the
duration of what otherwise would have been the term of the employment agreement.
In June 1995, the Company and Mr. Martine entered into an amendment of his
agreement under which Mr. Martine resigned as chief executive officer and agreed
that, upon his retirement as an employee of the Company on September 30, 1995,
he would continue to serve as Chairman of the Board and would become a
consultant to the Company for a period of two years. The amended agreement
provides for an annual retainer fee of $80,000 and has termination provisions
similar to those outlined above.
Change in Control Protections
In October 1994, the Company has entered into severance agreements with Mr.
Martine, Mr. Woo and Mr. Graham which have initial terms of three years and will
be automatically extended for successive one - year periods unless terminated by
either party. If the employment of any of these executive officers is terminated
(with certain exceptions) within 36 months following a "Change in Control," as
defined in the severance agreement, the executive officer will be entitled to
receive a cash payment equal to 2.99 times the average annual compensation paid
to the executive officer for the five most recent taxable years of the Company
ending prior to the Change in Control, as well as the continuation of fringe
benefits (including life insurance, disability, medical, dental and
hospitalization benefits) for a period of up to twelve months. All outstanding
stock options held by the executive officer will become fully vested and
immediately exercisable. In addition, the Company's Stock Incentive Plan
provides for the acceleration of certain benefits in the event of a change in
control.
Retirement Benefits
Estimated annual benefits under the Company's pension plan upon retirement
at age 65, determined as of October 1, 1995 to persons with specified earnings
and years of pension benefit service are set forth in the table below.
Estimated Benefits Payable At Retirement(1)
<TABLE>
<CAPTION>
Estimated Annual Benefits For Representative
Final Average Years of Credited Service(2)
Earnings(3) 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$50,000................................................ $ 9,473 $12,630 $ 15,788 $ 18,946 $ 22,103
100,000................................................ 21,473 28,630 35,788 42,946 50,103
150,000................................................ 33,473 44,630 55,788 66,946 78,103
200,000................................................ 45,473 60,630 75,788 90,946 106,103
250,000................................................ 57,473 76,630 95,788 114,946 134,103
300,000................................................ 69,473 92,630 115,788 138,946 162,103
</TABLE>
(1) Assumes attainment of age 65 in fiscal 1995 and Social Security covered
compensation of $25,920.
(2) The projected years of pension benefit service at age 65 for each of the
named executive officers are: Roy R. Martine, 14; Paul J. Woo, Jr., 35; D.
Randolph Graham, 28; Timothy J. Callahan, 26; Hubert A. Davis, Jr., 18; and
Henry C. Holswade, 28.
(3) Final Average Earnings is the average of the highest five consecutive plan
years earnings (W - 2 earnings including overtime, bonuses and commissions)
preceding the date of determination.
10
<PAGE>
The estimated benefits assume retirement at age 65 and assume that payments
will be made for the lifetime of the participant, which is the normal form of
payment under the Company's retirement plan. The estimated retirement benefits
reflected above may, in some cases, be based on compensation that exceeds the
amount that may be recognized by the plan under the Internal Revenue Code or
otherwise exceed the maximum benefit limitations prescribed under the Internal
Revenue Code, in which event the excess amount cannot be paid from the Company's
retirement plan. Such limitations may change from time to time before the
individuals in question actually retire.
Executive Compensation Committee Report on Executive Compensation
The Executive Compensation Committee (the "Committee") was established in
September 1994 and is composed of two non - employee Directors. Neither member
of the Committee serves on the board of the other committee member's company or
organization and none of the executive officers of the Company serves on the
board of any committee member's company or organization. The Committee has
access to outside consultants and counsel.
The Committee has furnished the following report on the Company's executive
compensation. This report is required by the rules of the Securities and
Exchange Commission. It is not to be deemed incorporated by reference by any
general statement which incorporates by reference this Proxy Statement into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,
and it is not to be otherwise deemed filed under either such Act.
Compensation Objectives. The objectives of the Company's executive
compensation program are: (i) to provide a balanced and competitive total
compensation package that will enable the Company to attract, motivate and
retain highly qualified executives; (ii) to provide executive officers
incentives to enhance the profitability of the Company; and (iii) to align the
financial interests of the executive officers with those of the shareholders
through the use of equity - based compensation. The Committee endeavors to
achieve these objectives by basing a substantial portion of executive officer
compensation on the attainment of measurable financial performance goals,
including growth in revenue, earnings per share and return on equity, and by
making equity - based compensation an important component of total executive
officer compensation. The Committee has determined the amount of base salary and
stock incentives paid or allocated to executive officers primarily through
comparison to compensation paid by public companies having comparable revenues,
on the basis of information provided by a national compensation consulting firm.
The Committee has also considered individual performance and other factors.
Components of Compensation. The Company's executive compensation program
consists of three components: base salary, annual bonus and grants under the
Company's Stock Incentive Plan, which provides for awards of stock options,
stock appreciation rights and restricted stock. The relative importance of each
of these components in an executive officer's total compensation will depend
upon his or her level of responsibility with the Company. While base salary is
the largest component of the compensation of all executive officers, it
constitutes a lesser percentage of the total compensation of the more highly
compensated executive officers.
Base Salary. The base salaries provided for in the Company's employment
agreements with its executive officers are intended to be slightly below the
median compensation paid by comparable companies, many of which are more mature
companies which place less emphasis on long - term growth oriented incentives
than the Company. Accordingly, as disclosed in the prospectus for the Company's
initial public offering, the base salaries for Mr. Martine, Mr. Woo and Mr.
Graham were increased by 44%, 41% and 29%, respectively, upon the completion of
the offering. The base salaries for vice presidents of the Company were
increased by five percent in fiscal 1995.
11
<PAGE>
Annual Bonus. The Committee has recommended, and the Board of Directors has
approved, bonus guidelines for executive officers which are intended to provide
incentive and awards to employees who contribute to the Company's attainment of
its financial goals. Under the guidelines, the Company can pay to its executive
officers annual bonuses of up to 50% of base salary for the chief executive
officer, 35% of base salary for the chief financial officer and 30% of base
salary for vice presidents, depending upon the extent to which the Company
attains its goals. These bonus ranges were determined by comparison to
comparable companies and are intended to make available to the executive
officers bonuses which are in the mid - range of the group. The Committee may
also award additional bonuses based on financial performance. In determining
recommended bonus amounts, the Committee also considers the individual
performance of the executive officers.
For purposes of determining fiscal 1995 bonus amounts for the executive
officers, including the chief executive officer, the factors that the Committee
considered were attainment of the Company's goals for revenues and earnings per
share, which were the most heavily weighted factors, and attainment of the
expense goals of the department for which each executive officer was
responsible. The Committee also considered attainment of certain discretionary,
nonfinancial goals relating to the completion of acquisitions and integration of
the acquired operations and a reallocation of responsibilities among executive
officers. The Committee determined that the goals for revenues and earnings per
share were not fully attained but that the expense goals and nonfinancial goals
were fully attained. Considering these factors together, the Committee approved
bonuses as percentages of base salary for the executive officers consistent with
the bonus guidelines described above.
Stock Incentive Plan Awards. The Company's Stock Incentive Plan is intended
to assist the Company in attracting, motivating and retaining well - qualified
executive officers and to increase their identity of interest with the Company's
shareholders. In determining the amount of stock options granted to executive
officers in connection with the Company's initial public offering in September
1994, the Committee considered the levels of stock option grants typical among
the group of comparable companies. The Committee determined that stock option
grants to the Company's executive officers should be somewhat greater than the
median of this group due to the Company's growth orientation and because base
salaries for the Company's executive officers are generally below the median for
this group. Moreover, the options granted to executive officers at the time of
the initial public offering become exercisable over a three - year period.
In fiscal 1995, executive officers who were granted stock options in
connection with the initial public offering did not receive additional stock
options. Persons who became vice presidents of the Company in fiscal 1995 were
granted options to purchase the same number of shares as may be purchased under
the options previously granted to the other vice presidents of the Company.
Chief Executive Officer Compensation. As discussed above, the base salaries
for Mr. Woo and Mr. Martine were increased in connection with the Company's
initial public offering. Consistent with the other executive officers who were
with the Company at the time of the Company's initial public offering, neither
Mr. Woo nor Mr. Martine received any additional stock option grants in fiscal
1995. The annual bonus payments to Mr. Woo and Mr. Martine were determined in
the manner described above, except that the attainment of expense goals was tied
to Company - wide expenses rather than departmental expenses. Under the bonus
guidelines, a higher percentage bonus was paid to Mr. Woo and Mr. Martine than
was paid to the Company's other executive officers, which is consistent with the
overall approach of the Company's executive compensation program of making a
greater percentage of the chief executive officer's total compensation dependent
upon Company performance.
December 19, 1995 EXECUTIVE COMPENSATION COMMITTEE
Thomas N. Allen
J. Hamilton Scherer, Jr.
12
<PAGE>
Performance Graph
The Company's initial public offering of Common Stock commenced on
September 27, 1994 and was completed on October 4, 1994. Prior to the offering,
there was no established market for the Common Stock.
The graph below compares the cumulative total shareholder return on the
Common Stock against the cumulative total return on the S&P Corporate - 500
Stock Index and the Dow Jones Medical Supplies Index, assuming $100 was invested
in Common Stock on September 27, 1994 and $100 was invested in the stock
comprising the S&P Corporate - 500 Stock Index and the Dow Jones Medical
Supplies Index on September 27, 1994, and also assuming the reinvestment of all
dividends. The historical stock price performance of the Common Stock shown on
the graph below is not necessarily indicative of future price performance.
The graph shall not be deemed incorporated by reference by any general
statement incorporating by reference the Proxy Statement into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934, except in the
event that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such acts.
[GRAPH]
13
<PAGE>
Section 16 Reporting
Under the securities laws of the United States, the Company's Directors,
executive officers and any persons holding 10% or more of the Common Stock are
required to report their ownership of the Company's securities and any changes
in that ownership to the Securities and Exchange Commission and the New York
Stock Exchange. Specific due dates for these reports have been established and
the Company is required to report in this Proxy Statement any such person's
failure to file by these dates during fiscal 1995. Based solely on the Company's
review of the copies of such reports it has received and written representations
from certain reporting persons that they were not required to file a Form 5 for
fiscal 1995, the Company believes that all of these filing requirements were
satisfied by such persons, except that J. Hamilton Scherer, Jr. filed a Form 4
relating to his purchase of Company securities late.
CERTAIN TRANSACTIONS
On May 1, 1995, SCI purchased all of the outstanding shares of stock in
Associated Medical Products Company ("AMP") for approximately $6.9 million. The
AMP stock was purchased from Robert C. Thaemert and David G. Thomson, each of
whom became a Vice President of the Company in connection with the transaction.
On October 2, 1995, SCI purchased from Medical Design Concepts, Inc.
("MDC") substantially all of the assets used in its custom procedure tray
business, excluding all assets used in its sterilization business, for a
purchase price of approximately $18 million. In connection with the purchase of
the MDC assets, SCI entered into a Sterilization Agreement with MDC under which
MDC agreed to provide sterilization services to SCI. In February 1995, the
Company entered into a Distribution Agreement with Professional Hospital Supply,
Inc. ("PHS") under which PHS agreed to provide distribution services to the
Company, which agreement was amended in connection with the MDC acquisition.
Payments made by the Company to MDC under the Sterilization Agreement during the
period from October 2, 1995, through December 1, 1995, totaled $104,140.
Purchases by PHS from the Company under the Distribution Agreement during the
period from October 2, 1995, to December 1, 1995, were $4,257,972. John H.
Luttgens, who became Executive Vice President - Western Region of the Company
upon completion of the MDC acquisition, was President of MDC prior to joining
the Company. Mr. Luttgens' spouse is President of PHS and Mr. Luttgens'
father - in - law is the sole shareholder of both MDC and PHS.
During fiscal 1995, the Company received investment banking advisory
services under an agreement with Wheat First Butcher Singer, of which J.
Hamilton Scherer, Jr., a Director of the Company, is Managing Director and Vice
Chairman.
James C. Martine, who is the son of Roy R. Martine, Chairman and a Director
of the Company, is an independent sales representative of the Company. He is
compensated by the Company on the same terms and conditions as other independent
sales representatives of the Company. The Company pays gross commissions to
James C. Martine, out of which he pays all expenses associated with his sales
operations, including compensation paid to six sales representatives who work
for him. Total commissions paid to James C. Martine by the Company during fiscal
1995 were $893,431.
14
<PAGE>
SHAREHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
Under regulations of the Securities and Exchange Commission, any
shareholder desiring to make a proposal to be acted upon at the 1997 annual
meeting of shareholders must present such proposal to the Company at its
principal office in Richmond, Virginia by August 31, 1996 for the proposal to be
considered for inclusion in the Company's proxy statement.
In addition to any other applicable requirements, for business to be
properly brought before the annual meeting by a shareholder, even if the
proposal is not to be included in the Company's proxy statement, the Company's
Bylaws provide that the shareholder must give timely notice in writing to the
Secretary of the Company not later than 90 days prior to the annual meeting. As
to each matter, the notice must contain (i) a brief description of the business
to be brought before the annual meeting (including the specific proposal to be
presented) and the reasons for addressing it at the annual meeting, (ii) the
name of, record address of and class and number of shares beneficially owned by
the shareholder proposing such business and (iii) any material interest of the
shareholder in such business. The 1997 annual meeting of shareholders of the
Company will be held on February 13, 1997.
The Company's Bylaws provide that a shareholder of the Company entitled to
vote for the election of Directors may nominate persons for election to the
Board of Directors by mailing written notice to the Secretary of the Company not
later than (i) with respect to an election to be held at an annual meeting of
shareholders, 90 days prior to such meeting, and (ii) with respect to an
election to be held at a special meeting of shareholders for the election of
Directors, the close of business on the seventh day following the date on which
notice of such meeting is given to shareholders. Any such shareholder's notice
shall include (a) the name and address of the shareholder and of each person to
be nominated, (b) a representation that the shareholder is a holder of record of
stock of the Company entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate each person specified, (c) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person (naming such person) pursuant to which the
nomination is to be made by the shareholder, (d) such other information
regarding each nominee as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission had
the nominee been nominated by the Board of Directors and (e) the consent of each
nominee to serve as a Director of the Company if so elected.
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP, certified public
accountants, as the Company's independent auditors for the fiscal year to end
September 30, 1996. This firm has audited the Company's financial statements
since the fiscal year ended September 30, 1986. Representatives of KPMG Peat
Marwick LLP are expected to be present at the Annual Meeting with an opportunity
to make a statement and respond to appropriate questions.
15
<PAGE>
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10 - K for the year ended
September 30, 1995, as filed with the Securities and Exchange Commission, will
be provided on written request without charge to any shareholder whose proxy is
being solicited by the Board of Directors. Written requests should be directed
to:
Mr. David L. Jordan
Director of Investor Relations
Sterile Concepts Holdings, Inc.
5100 Commerce Road
Richmond, Virginia 23234
OTHER MATTERS
The Board of Directors is not aware of any matters to be presented for
action at the Annual Meeting other than as set forth herein. However, if any
other matters properly come before the meeting, or any adjournment thereof, the
person or persons voting the proxies will vote them in accordance with their
best judgment.
By Order of the Board of Directors
Paul J. Woo, Jr.,
President and Chief Executive Officer
Richmond, Virginia
December 29, 1995
EXHIBIT (b)
-----------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MAXXIM MEDICAL, INC.
MAXXIM ACQUISITION CO.
AND
STERILE CONCEPTS HOLDINGS, INC.
Dated as of June 10, 1996
-----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE OFFER
1.1 The Offer.....................................................2
1.2 Company Actions...............................................3
1.3 Composition of the Board of Directors.........................5
1.4 Action By Directors...........................................8
ARTICLE II
THE MERGER AND RELATED MATTERS
2.1 The Merger....................................................9
2.2 Conversion of Stock..........................................10
2.3 Surrender of Certificates....................................11
2.4 Payment......................................................13
2.5 No Further Rights to Transfers...............................15
2.6 Stock Option and Other Plans.................................15
2.7 Articles of Incorporation of the Surviving
Corporation..............................................18
2.8 By-Laws of the Surviving Corporation.........................18
2.9 Directors and Officers of the Surviving
Corporation..............................................18
2.10 Closing......................................................19
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company................19
3.2 Representations and Warranties of Parent and Sub.............37
ARTICLE IV
TRANSACTIONS PRIOR TO AND AFTER THE CLOSING DATE
4.1 Access to Information Concerning Properties
and Records..............................................41
4.2 Confidentiality..........................................42
4.3 Conduct of the Business of the Company
Pending the Closing Date.................................42
4.4 Proxy Statement..........................................45
4.5 Stockholder Approval.....................................46
4.6 Reasonable Efforts.......................................46
4.7 No Solicitation of Other Offers..........................47
4.8 Notification of Certain Matters..........................50
4.9 HSR Act..................................................50
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<PAGE>
4.10 Employee Benefits...........................................50
4.11 Directors' and Officers' Insurance;
Indemnification.........................................51
4.12 Financing...................................................54
4.13 Additional Reports and Filings..............................54
ARTICLE V
CONDITIONS PRECEDENT TO MERGER
5.1 Conditions Precedent to Obligations of Parent,
Sub and the Company......................................55
5.2 Conditions Precedent to Obligations of the
Company..................................................56
ARTICLE VI
TERMINATION AND ABANDONMENT
6.1 Termination..................................................56
6.2 Effect of Termination........................................58
ARTICLE VII
MISCELLANEOUS
7.1 Fees and Expenses............................................59
7.2 Representations and Warranties...............................59
7.3 Extension; Waiver............................................60
7.4 Public Announcements.........................................60
7.5 Notices......................................................61
7.6 Entire Agreement.............................................62
7.7 Binding Effect; Benefit; Assignment..........................62
7.8 Applicable Law...............................................63
7.9 Severability.................................................63
7.10 "Person" Defined............................................63
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 10, 1996 (this
"Agreement"), by and among MAXXIM MEDICAL, INC., a Delaware corporation
("Parent"), MAXXIM ACQUISITION CO., a Virginia corporation and a wholly-owned
subsidiary of Parent ("Sub"), and STERILE CONCEPTS HOLDINGS, INC., a Virginia
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company (in the case of the Company, based upon the recommendation of a
special committee of independent directors (the "Special Committee")) have
approved the acquisition of the Company by Parent;
WHEREAS, in contemplation thereof it is proposed that Sub will
make a tender offer (the "Offer") to purchase all the issued and outstanding
shares of common stock, no par value, of the Company ("Common Stock"), subject
to the terms and conditions of this Agreement, at a price of $20.00 per share
net to the seller in cash (the "Offer Price");
WHEREAS, to complete such acquisition, the respective Boards
of Directors of Parent, Sub and the Company have approved the merger of Sub into
the Company (the "Merger"), pursuant to and subject to the terms and conditions
of this Agreement; and
WHEREAS, the directors of the Company have unanimously
determined that each of the Offer and the Merger are fair to, and in the best
interests of, the holders of Common Stock, approved the Offer and the Merger and
recommended the acceptance of the
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<PAGE>
Offer and approval and adoption of this Agreement by the stockholders of the
Company.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE OFFER
1.1 THE OFFER. Provided that this Agreement shall not have been
terminated in accordance with Article VI hereof and none of the events set forth
in Annex A hereto (the "Tender Offer Conditions") shall have occurred and be
existing, as promptly as practicable, but in no event later than the fifth
business day after the date of this Agreement, Sub shall commence the Offer in
compliance in all material respects with all applicable laws, rules and
regulations. The obligations of Sub to accept for payment and promptly to pay
for any shares of Common Stock tendered shall be subject only to the Tender
Offer Conditions, any of which may be waived; provided, however, that, without
the consent of the Company, Sub shall not waive the condition that there shall
have been validly tendered and not withdrawn prior to the expiration of the
Offer a number of shares of Common Stock which represent greater than two-thirds
of the total voting power of all shares of capital stock of the Company
outstanding on a fully diluted basis. The Tender Offer Conditions are for the
sole benefit of Parent and Sub and may be asserted by Parent and
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Sub regardless of the circumstances giving rise to any such Tender Offer
Conditions and, subject to the preceding sentence, may be waived by Parent and
Sub in whole or in part. Sub expressly reserves the right to modify the terms of
the Offer, except that, without the consent of the Company, Sub shall not (i)
reduce the number of shares of Common Stock to be purchased in the Offer, (ii)
reduce the Offer Price, (iii) modify or add to the Tender Offer Conditions, (iv)
extend the Offer beyond the scheduled expiration date (except that the Offer may
be extended to the extent required by law or in the event the Tender Offer
Conditions shall not have been satisfied by the scheduled expiration date) or
(v) change the form of consideration payable in the Offer.
1.2 COMPANY ACTIONS. The Company hereby consents to the Offer and the
Merger and represents that (a) its Board of Directors (at a meeting duly called
and held), based upon the recommendation of the Special Committee, has (i)
determined by the unanimous vote of the directors that each of the Offer and the
Merger is fair to, and in the best interests of, the holders of Common Stock,
(ii) approved the Offer and the Merger, (iii) recommended acceptance of the
Offer and approval and adoption of this Agreement by the stockholders of the
Company, (iv) taken all other action necessary to render the Shareholder
Protection Rights Agreement dated as of March 6, 1996 (the "Rights Agreement")
and Articles 14 and 14.1 of the Virginia Stock Corporation Act inapplicable to
the Offer and the Merger; and (b)
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Wheat First Butcher Singer has delivered to the Board of Directors of the
Company its opinion that the consideration to be received by the holders of
Common Stock pursuant to the Offer and the Merger is fair to the holders of
Common Stock from a financial point of view, subject to the assumptions and
qualifications contained in such opinion. The Company shall file with the
Securities and Exchange Commission (the "Commission"), as soon as practicable on
the date of the commencement of the Offer a Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") containing the
recommendations referred to in clause (a) of the preceding sentence; provided,
however, that such recommendations may be withdrawn, modified or amended at any
time or from time-to-time to the extent required for the Board of Directors of
the Company to comply with its fiduciary obligations under applicable law.
Parent and Sub and their counsel shall be given the opportunity to review the
Schedule 14D-9 prior to its filing with the Commission. The Company agrees to
provide Parent and its counsel with any comments the Company or its counsel may
receive from the SEC or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments and shall provide Parent and its counsel an
opportunity to participate, including by way of discussions with the SEC or its
staff, in the response of the Company to such comments. The Schedule 14D-9 will
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the Commission and on the date first
published, sent or given to
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the Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by Parent or Sub in
writing for inclusion in the Schedule 14D-9. The Company, Parent and Sub each
agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
Commission and disseminated to the stockholders, in each case as and to the
extent required by applicable federal securities laws. In connection with the
Offer, the Company will promptly furnish Sub with mailing labels, security
position listings and any available listings or computer lists containing the
names and addresses of the record holders of the Common Stock as of the most
recent practicable date and shall furnish Sub with such additional information
(including, but not limited to, updated lists of holders of Common Stock and
their addresses, mailing labels and lists of security positions) and such other
assistance as Sub or its agents may reasonably request in communicating the
Offer to the Company's stockholders.
1.3 COMPOSITION OF THE BOARD OF DIRECTORS. Promptly upon
the acceptance for payment of, and payment by Sub in accordance
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with the Offer for, greater than two-thirds of the outstanding shares of Common
Stock pursuant to the Offer (the "Offer Closing"), Sub shall be entitled to
designate such number of directors on the Board of Directors of the Company,
rounded up to the next whole number, as will give Sub, subject to compliance
with Section 14(f) of the Securities Exchange Act of 1934 (the "Exchange Act"),
representation on such Board of Directors equal to at least that number of
directors which equals the product of the total number of directors on the Board
of Directors (giving effect to the directors elected pursuant to this sentence)
multiplied by the percentage that such number of shares of Common Stock so
accepted for payment and paid for or otherwise acquired or owned by Sub or
Parent bears to the number of shares of Common Stock outstanding and the Company
and its Board of Directors shall, at such time, take any and all such action
needed to cause Sub's designees to be appointed to the Company's Board of
Directors (including to cause directors to resign). Notwithstanding the
foregoing, neither Parent, Sub nor the Company shall take any action to remove
or replace any member of the Special Committee after consummation of the Offer
and prior to the Effective Time (as hereinafter defined). If at any time prior
to the Effective Time there are less than two members of the Special Committee,
as constituted on the date hereof, on the Company's Board of Directors, Parent,
Sub and the Company shall use their reasonable efforts to ensure that two
members (the "Continuing Directors") of the Company's Board of Directors are
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either (a) members of the Special Committee (as constituted on the date hereof)
or (b) persons who are neither (i) officers or employees of the Company nor (ii)
associated with or affiliated with, or designated by, Parent. In the event that
both Continuing Directors resign from the Special Committee, Parent, Sub and the
Company shall permit the resigning Continuing Directors to appoint their
successors in their reasonable discretion. The Company shall take all action
requested by Parent which is reasonably necessary to effect any such election of
Parent's designees to the Board of Directors, including mailing to its
stockholders the Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the
Company agrees to make such mailing with the mailing of the Schedule 14D-9 so
long as Sub shall have provided to the Company on a timely basis all information
required to be included in the Information Statement with respect to Sub's
designees. The Company shall take all action required pursuant to such Section
and Rule to fulfill its obligations under this Section 1.3 and shall include in
the Schedule 14D-9 such information with respect to the Company and its officers
and directors as is required under such Section and Rule to fulfill its
obligations under this Section 1.3. Parent and Sub will supply to the Company in
writing and be responsible for any information with respect to Parent and Sub
and their respective nominees, officers, directors and affiliates required by
such Section and Rule. In furtherance thereof, the Company
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will increase the size of the Company's Board of Directors, or use its
reasonable efforts to secure the resignation of directors, or both, as is
necessary to permit Sub's designees to be elected to the Company's Board of
Directors. Immediately following the Offer Closing, the Company, if so
requested, will use its reasonable efforts to cause persons designated by Sub to
constitute the same percentage of each committee of such board, each board of
directors of each subsidiary of the Company and each committee of each such
board (in each case to the extent of the Company's ability to elect such
persons). At all times prior to the termination of the Option Exercise Period
(as defined in Section 2.6), the composition of the Executive Compensation
Committee of the Board of Directors of the Company shall remain the same as the
Special Committee and the Board of Directors of the Company shall not take any
action to limit or impair the authority of the Executive Compensation Committee
to administer the Plan (as defined in Section 2.6); provided, however, that the
Executive Compensation Committee shall not (i) make any additional grants or
awards of any type pursuant to the Plan, (ii) amend the terms and conditions of
any award made pursuant to the Plan prior to the date of this Agreement, except
as contemplated by this Agreement, or (iii) have any authority to act with
respect to any matters other than those relating to stock options previously
granted under the Plan.
1.4 ACTION BY DIRECTORS. Following the election or
appointment of Parent's designees pursuant to Section 1.3 and
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prior to the Effective Time, and, so long as there shall be at least one
Continuing Director, if requested by a majority of the Continuing Directors,
such designees shall abstain from acting upon, and the approval of a majority of
the Continuing Directors shall be required to authorize any termination of this
Agreement by the Company, any amendment of this Agreement requiring action by
the Board of Directors of the Company, any extension of time for the performance
of any of the obligations or other acts of Parent or Sub under this Agreement
and any waiver of compliance with any of the covenants, agreements or conditions
under this Agreement for the benefit of the Company.
ARTICLE II
THE MERGER AND RELATED MATTERS
2.1 THE MERGER. (a) Subject to the terms and conditions of this
Agreement, at the time of the Closing (as defined in Section 2.11 hereof),
Articles of Merger (the "Articles of Merger") shall be duly prepared, executed
and acknowledged by Sub and the Company in accordance with the Virginia Stock
Corporation Act and shall be filed on the Closing Date (as defined in Section
2.10 hereof). The Merger shall become effective upon the issuance by the State
Corporation Commission of the Commonwealth of Virginia of a certificate of
merger with respect to the Merger in accordance with the provisions and
requirements of the Virginia Stock Corporation Act. The date and time when the
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Merger shall become effective is hereinafter referred to as the
"Effective Time."
(b) At the Effective Time, Sub shall be merged with and into
the Company and the separate corporate existence of Sub shall cease, and the
Company shall continue as the surviving corporation under the laws of the
Commonwealth of Virginia under the name of "Sterile Concepts Holdings, Inc."
(the "Surviving Corporation").
(c) From and after the Effective Time, the Merger shall have
the effects set forth in Section 13.1-721 of the Virginia Stock Corporation Act.
2.2 CONVERSION OF STOCK. At the Effective Time:
(a) Each share of Common Stock then issued and
outstanding (other than any shares of Common Stock which are held by the Company
or any subsidiary of the Company, or which are held, directly or indirectly, by
Parent or any direct or indirect subsidiary of Parent (including Sub), all of
which shall be canceled and none of which shall receive any payment with respect
thereto) shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into and represent the right to receive an
amount in cash, without interest, equal to the price paid for each share of
Common Stock pursuant to the offer (the "Merger Consideration"); and
(b) Each share of common stock, no par value, of Sub then
issued and outstanding shall, by virtue of the Merger and without any action on
the part of the holder thereof, become one
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fully paid and nonassessable share of common stock, no par value,
of the Surviving Corporation.
2.3 SURRENDER OF CERTIFICATES. (a) Concurrently with or prior to the
Effective Time, Parent shall designate a bank or trust company located in the
United States to act as paying agent (the "Paying Agent") for purposes of making
the cash payments contemplated hereby. As soon as practicable after the
Effective Time, Parent shall cause the Paying Agent to mail or otherwise make
available to each holder of a certificate theretofore evidencing shares of
Common Stock (other than those which are held by any subsidiary of the Company
or which are held directly or indirectly by Parent or any direct or indirect
subsidiary of Parent (including Sub) a notice and letter of transmittal advising
such holder of the effectiveness of the Merger and the procedure for
surrendering to the Paying Agent such certificate or certificates which
immediately prior to the Effective Time represented outstanding Common Stock
(the "Certificates") in exchange for the Merger Consideration deliverable in
respect thereof pursuant to this Article II. Upon the surrender for cancellation
to the Paying Agent of such Certificates, together with a letter of transmittal,
duly executed and completed in accordance with the instructions thereon, and any
other items specified by the letter of transmittal, the Paying Agent shall
promptly pay to the Person (as defined in Section 7.10 hereof) entitled thereto
the Merger Consideration deliverable in respect thereof. Until so surrendered,
each Certificate shall be deemed,
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for all corporate purposes, to evidence only the right to receive upon such
surrender the Merger Consideration deliverable in respect thereof to which such
Person is entitled pursuant to this Article II. No interest shall be paid or
accrued in respect of such cash payments.
(b) If the Merger Consideration (or any portion thereof) is to
be delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to the Paying Agent any transfer or other
taxes payable by reason of the foregoing or establish to the satisfaction of the
Paying Agent that such taxes have been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed, the Paying Agent will
issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof as determined in accordance with
this Article II, provided that, the Person to whom the Merger Consideration is
paid shall, as a condition precedent to the payment thereof, give the Surviving
Corporation a bond in such
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sum as it may direct or otherwise indemnify the Surviving Corporation in a
manner satisfactory to it against any claim that may be made against the
Surviving Corporation with respect to the Certificate claimed to have been lost,
stolen or destroyed.
2.4 PAYMENT. Concurrently with or immediately prior to the Effective
Time, Parent or Sub shall deposit in trust with the Paying Agent cash in United
States dollars in an aggregate amount equal to the product of (i) the number of
shares of Common Stock outstanding immediately prior to the Effective Time
(other than shares of Common Stock which are held by any subsidiary of the
Company or which are held directly or indirectly by Parent or any direct or
indirect subsidiary of Parent (including Sub)) and (ii) the Merger Consideration
(such amount being hereinafter referred to as the "Payment Fund"). The Payment
Fund shall be invested by the Paying Agent as directed by Parent in direct
obligations of the United States; obligations for which the full faith and
credit of the United States is pledged to provide for the payment of principal
and interest; obligations of the Federal Intermediate Liquidity Banks, Federal
Home Loan Banks, National Bank for Cooperatives, Federal Land Banks, The
Government National Mortgage Association or The Federal National Mortgage
Association; commercial paper or finance company paper which is rated not less
than P-1, A-1 or F-1 by Moody's Investors Services, Inc., Standard & Poor's
Ratings Services or Fitch Investors Services, Inc., as the case may be;
certificates of deposit or bankers' acceptances of a bank or trust company
having
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at least $20,000,000 of combined capital and surplus; or repurchase agreements
secured by any one or more of the foregoing (collectively, "Permitted
Investments"); or in money market funds which are invested in Permitted
Investments, and any net earnings with respect thereto shall be paid to Parent
as and when requested by Parent. The Paying Agent shall, pursuant to irrevocable
instructions, make the payments referred to in Section 2.2(a) hereof out of the
Payment Fund. The Payment Fund shall not be used for any other purpose except as
otherwise agreed to by Parent. Promptly following the date which is three months
after the Effective Time, the Paying Agent shall return to Parent all cash,
certificates and other instruments in its possession that constitute any portion
of the Payment Fund (other than net earnings on the Payment Fund which shall be
paid to Parent), and the Paying Agent's duties shall terminate. Thereafter, each
holder of a Certificate may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in exchange therefor the Merger Consideration, without interest,
but shall have no greater rights against the Surviving Corporation or Parent
than may be accorded to general creditors of the Surviving Corporation or Parent
under applicable law. Notwithstanding the foregoing, neither the Paying Agent
nor any party hereto shall be liable to a holder of shares of Common Stock for
any Merger Consideration delivered to a public official
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pursuant to applicable abandoned property, escheat and similar
laws.
2.5 NO FURTHER RIGHTS TO TRANSFERS. At and after the Effective Time,
each holder of a Certificate shall cease to have any rights as a stockholder of
the Company, except for, in the case of a holder of a Certificate (other than
shares to be canceled pursuant to Section 2.2(a) hereof), the right to surrender
his or her Certificate in exchange for payment of the Merger Consideration, and
no transfer of shares of Common Stock shall be made on the stock transfer books
of the Surviving Corporation. Certificates presented to the Surviving
Corporation after the Effective Time shall be canceled and exchanged for cash as
provided in this Article II. At the close of business on the day of the
Effective Time the stock ledger of the Company with respect to Common Stock
shall be closed.
2.6 STOCK OPTION AND OTHER PLANS. During the period (the "Option
Exercise Period") commencing on the date of payment by Sub in accordance with
the Offer and ending on the date that is two business days prior to the
Effective Time (provided that the Option Exercise Period shall not be less than
three business days in duration), the Company shall permit holders of stock
options issued pursuant to the Company's Stock Incentive Plan (the "Plan") which
shall have become exercisable to exercise such stock options in accordance with
the provisions of the Plan, including without limitation those provisions
relating to (i) the payment of the exercise price of stock options by the
execution
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of a recourse note (an "Option Note") providing for the payment of all amounts
due under such note through deductions from the Merger Consideration which shall
become due to the maker of the note at the earlier of the Effective Time or the
day that is 120 days from the date of the Offer Closing and (ii) the payment of
the exercise price of stock options by the delivery of shares of Common Stock.
After the termination of the Option Exercise Period and prior to the Effective
Time, the Board of Directors of the Company (or, if appropriate, any Committee
thereof) shall adopt appropriate resolutions and take all other actions
necessary to provide for the cancellation, effective at the Effective Time, of
all the outstanding stock options to purchase Common Stock (the "Options")
heretofore granted under any stock option plan of the Company (the "Stock
Plans"). Immediately prior to the Effective Time, (i) each Option, whether or
not then vested or exercisable, shall no longer be exercisable for the purchase
of shares of Common Stock but shall entitle each holder thereof, in cancellation
and settlement therefor, to payments in cash (subject to any applicable
withholding taxes and repayment of any outstanding Option Note, the "Cash
Payment"), at the Effective Time, equal to the product of (x) the total number
of shares of Common Stock subject to such Option, whether or not then vested or
exercisable, and (y) the excess of the Merger Consideration over the exercise
price per share of Common Stock subject to such Option, if any, each such Cash
Payment to be paid to each holder of an outstanding Option at the Effective
Time;
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provided, however, that with respect to any person subject to Section 16 of the
Exchange Act, any such amount shall be paid as soon as practicable after the
first date payment can be made without liability to such person subject to
Section 16(b) of the Exchange Act, and (ii) each share of Common Stock
previously issued in the form of grants of restricted stock or grants of
contingent shares shall fully vest in accordance with their respective terms.
Any then outstanding stock appreciation rights or limited stock appreciation
rights shall be canceled as of immediately prior to the Effective Time without
any payment therefor. As provided herein, the Stock Plans and any other plan,
program or arrangement providing for the issuance or grant of any other interest
in respect of the capital stock of the Company or any subsidiary (collectively
with the Stock Plans, referred to as the "Stock Incentive Plans") shall
terminate as of the Effective Time. The Company will take all steps to ensure
that neither the Company nor any of its subsidiaries is or will be bound by any
Options, other options, warrants, rights or agreements which would entitle any
Person, other than Parent or its affiliates, to purchase or own any capital
stock of the Surviving Corporation or any of its subsidiaries or to receive any
payment in respect thereof. The Company will use its best efforts to obtain all
necessary consents to ensure that, after the Effective Time, the only rights of
the holders of Options to purchase shares of Common Stock in respect of such
Options will
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be to receive the Cash Payment in cancellation and settlement
thereof.
2.7 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION. The
Articles of Incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation and shall be amended so that Article III reads in its entirety as
follows: "The total number of shares of stock of all classes which the
Corporation has authority to issue is 1,000 shares of Common Stock, no par
value."
2.8 BY-LAWS OF THE SURVIVING CORPORATION. The By-Laws of Sub, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation.
2.9 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At the
Effective Time, the directors of Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation, each of such directors to
hold office, subject to the applicable provisions of the Articles of
Incorporation and By-Laws of the Surviving Corporation, until the next annual
stockholders' meeting of the Surviving Corporation and until their respective
successors shall be duly elected or appointed and qualified. At the Effective
Time, the officers of the Company immediately prior to the Effective Time shall,
subject to the applicable provisions of the Articles of Incorporation and
By-Laws of the Surviving Corporation, be the officers of the
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Surviving Corporation until their respective successors shall be duly elected or
appointed and qualified.
2.10 CLOSING. The closing of the Merger (the "Closing") shall take
place at the offices of McGuire, Woods, Battle & Boothe, L.L.P., Richmond,
Virginia, as soon as practicable after the last of the conditions set forth in
Article V hereof is fulfilled or waived (subject to applicable law) but in no
event later than the fifth business day thereafter, or at such other time and
place and on such other date as Parent and the Company shall mutually agree (the
"Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to Parent and Sub as
follows:
(a) Due Organization, Good Standing and Corporate Power. Each
of the Company and its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and each such corporation has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each of the Company and its subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business
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conducted by it makes such qualification necessary, except in such jurisdictions
where the failure to be so qualified or licensed and in good standing would not
have a material adverse effect on the business, properties, assets, liabilities,
operations, results of operations or condition (financial or otherwise) (the
"Condition") of the Company and its subsidiaries taken as a whole. The Company
has made available to Parent and Sub complete and correct copies of the Articles
of Incorporation and By-Laws of the Company and its subsidiaries, in each case
as amended to the date of this Agreement. The respective Articles of
Incorporation and By-laws or other organizational documents of the subsidiaries
of the Company do not contain any provision limiting or otherwise restricting
the ability of the Company to control such subsidiaries.
(b) Authorization and Validity of Agreement. The Company has
the corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company, and the consummation by it of the transactions contemplated
hereby, have been duly authorized and approved by its Board of Directors and no
other corporate action on the part of the Company is necessary to authorize the
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby (other than the approval of
this Agreement by the holders of more than two-thirds of the shares of Common
Stock). This Agreement has been duly executed and delivered by the Company and
is a valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except to the extent that its enforceability may
be subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles.
(c) Capitalization.
(i) The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock and 10,000,000 shares of
preferred stock, no par value (the "Preferred Stock"). As of the date
hereof, (1) 5,526,384 shares of Common Stock are issued and
outstanding, (2) 549,616 shares of Common Stock are reserved for
issuance pursuant to outstanding Options granted under the Stock
Incentive Plans, (3) no shares of Preferred Stock are issued and
outstanding and (4) no shares of Common Stock are held in the Company's
treasury. All issued and outstanding shares of Common Stock have been
validly issued and are fully paid and nonassessable, and are not
subject to, nor were they issued in violation of, any preemptive
rights. Except as set forth in this Section 3.1(c) or on Schedule
3.1(c) hereto, (i) there are no shares of capital stock of the Company
authorized, issued or outstanding, (ii)
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there are not as of the date hereof, and at the Effective Time there
will not be, any outstanding or authorized options, warrants, rights,
subscriptions, claims of any character, agreements, obligations,
convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to Common Stock or any other shares
of capital stock of the Company, pursuant to which the Company is or
may become obligated to issue shares of Common Stock, any other shares
of its capital stock or any securities convertible into, exchangeable
for, or evidencing the right to subscribe for, any shares of the
capital stock of the Company. The Company has no authorized or
outstanding bonds, debentures, notes or other indebtedness the holders
of which have the right to vote (or convertible or exchangeable into or
exercisable for securities having the right to vote) with the
stockholders of the Company or any of its subsidiaries on any matter
("Voting Debt"). After the Effective time, the Surviving Corporation
will have no obligation to issue, transfer or sell any Shares of common
stock of the Surviving Corporation pursuant to any Employee Plan (as
defined in Section 3.1(i)).
(ii) Schedule 3.1(c)(ii) hereto lists all of
the Company's subsidiaries. All of the outstanding
shares of capital stock of each of the Company's
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subsidiaries have been duly authorized and validly issued, are fully
paid and nonassessable, are not subject to, nor were they issued in
violation of, any preemptive rights, and are owned, of record and
beneficially, by the Company, free and clear of all liens,
encumbrances, options or claims whatsoever. Except as set forth on
Schedule 3.1(c)(ii) hereto, no shares of capital stock of any of the
Company's subsidiaries are reserved for issuance and there are no
outstanding or authorized options, warrants, rights, subscriptions,
claims of any character, agreements, obligations, convertible or
exchangeable securities, or other commitments, contingent or otherwise,
relating to the capital stock of any subsidiary of the Company,
pursuant to which such subsidiary is or may become obligated to issue
any shares of capital stock of such subsidiary or any securities
convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of such subsidiary. Except for the
subsidiaries listed on Schedule 3.1(c)(ii), the Company does not own,
directly or indirectly, any capital stock or other equity interest in
any Person or have any direct or indirect equity or ownership interest
in any Person and neither the Company nor any of its subsidiaries is
subject to any obligation or requirement to provide funds for or to
make any
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investment (in the form of a loan, capital contribution
or otherwise) to or in any Person. The Company's
subsidiaries have no Voting Debt.
(d) Consents and Approvals; No Violations. Assuming (i) the
filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), are made and the waiting period thereunder has been
terminated or has expired, (ii) the requirements of the Exchange Act relating to
the Proxy Statement and the Offer are met, (iii) the filing of the Articles of
Merger and other appropriate merger documents, if any, as required by the
Virginia Stock Corporation Act, is made and (iv) approval of the Merger by the
holders of more than two-thirds of the outstanding shares of Common Stock, if
required by the Virginia Stock Corporation Act, is obtained, the execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby will not: (1) violate any provision of the
Articles of Incorporation or By-Laws of the Company or of any of its
subsidiaries, each as amended; (2) violate any statute, ordinance, rule,
regulation, order or decree of any court or of any governmental or regulatory
body, agency or authority applicable to the Company or any of its subsidiaries
or by which any of their respective properties or assets may be bound; (3)
require any filing with, or the procurement of any permit, consent or approval
of, or the giving of any notice to, any governmental or regulatory body, agency
or authority or consent
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of any other Person; or (4) result in a violation or breach of, conflict with,
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, payment or acceleration)
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of its
subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, franchise, permit, agreement, lease,
franchise agreement or other instrument or obligation to which the Company or
any of its subsidiaries is a party, or by which it or any of their respective
properties or assets may be bound except, in the case of clauses (2), (3) and
(4) above, for such filing, permit, consent, approval or violation, which could
not reasonably be expected to have a material adverse effect on the Condition of
the Company and its subsidiaries, taken as a whole, or could be reasonably
likely to prevent or materially delay consummation of the transactions
contemplated by this Agreement.
(e) Company Reports and Financial Statements. The Company has,
prior to the date of this Agreement, made available to Parent true and complete
copies of all registration statements and periodic reports filed by the Company
with the Commission under the Securities Act of 1933, as amended, and the
Exchange Act since the date of filing with the SEC of Amendment No. 4 to the
Company's Registration Statement on Form S-1 (No. 33-80736) relating to the
initial public offering of shares of its Common
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Stock (such periodic reports and registration statements, together with any
exhibits, any amendments thereto and information incorporated by reference
therein, are sometimes collectively referred to as the "Commission Filings"). As
of their respective dates, the Commission Filings did not contain any untrue
statement of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the audited consolidated balance sheets of the
Company as of the end of the fiscal years ended September 30, 1995, 1994 and
1993 and the audited consolidated statements of earnings, audited consolidated
statements of changes in stockholders' equity and audited consolidated
statements of cash flows included in the Commission Filings, were prepared in
accordance with generally accepted accounting principles (as in effect from time
to time) applied on a consistent basis (except as may be indicated therein or in
the notes or schedules thereto) and fairly present the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the results of their operations and changes in financial position
for the periods then ended. In addition, the Company has previously furnished to
Parent a true and complete copy of the unaudited consolidated balance sheet as
of March 31, 1996 and the unaudited consolidated statements of earnings,
unaudited consolidated statements of changes in stockholders' equity and
unaudited consolidated statements of cash flows for the fiscal quarter
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ended March 31, 1996 (the "Interim Statements"), all of which were prepared in
accordance with generally accepted accounting principles (as in effect from time
to time) applied on a consistent basis (except as may be indicated therein or in
the notes or schedules thereto) and fairly present the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the results of their operations and changes in financial positions
for the periods then ended.
(f) Absence of Certain Changes. Except as set forth on
Schedule 3.1(f) hereto or as otherwise contemplated by this Agreement, since
March 31, 1996 (i) there has not been any material adverse change in the
Condition of the Company and its subsidiaries taken as a whole; (ii) the
businesses of the Company and each of its subsidiaries have been conducted only
in the ordinary course; (iii) neither the Company nor any of its subsidiaries
has incurred any material liabilities (direct, contingent or otherwise) or
engaged in any material transaction or entered into any material agreement
outside the ordinary course of business; (iv) there has been no declaration,
setting aside or payment of any dividend or other distribution with respect to
the capital stock of the Company except for the normal quarterly cash dividend
of $.04 per share paid within approximately 10 days after the end of the March
31, 1996 quarter; and (v) there has been no change by the Company in accounting
principles, practices or methods.
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(g) Compliance with Laws. Except as set forth on Schedule
3.1(g) hereto, the Company and its subsidiaries are in compliance with all
applicable laws, regulations, orders, judgments and decrees except where the
failure to so comply would not have a material adverse effect on the Condition
of the Company and its subsidiaries taken as a whole or could be reasonably
likely to prevent or materially delay consummation of the transactions
contemplated by this Agreement.
(h) Litigation. Except as disclosed in the Commission Filings
or as set forth on Schedule 3.1(h) hereto, there is no action, suit, proceeding
at law or in equity, or any arbitration or any administrative or other
proceeding by or before (or to the knowledge of the Company any investigation
by) any governmental or other instrumentality or agency, pending, or, to the
knowledge of the Company, threatened, against or affecting the Company or any of
its subsidiaries, or any of their properties or rights which could have a
material adverse effect on the Condition of the Company and its subsidiaries
taken as a whole. Except as disclosed in the Commission Filings or as set forth
on Schedule 3.1(h) hereto, neither the Company nor any of its subsidiaries is
subject to any judgment, order or decree entered in any lawsuit or proceeding
which could have a material adverse effect on the Condition of the Company and
its subsidiaries taken as a whole or on the ability of the Company or any
subsidiary to conduct its business as presently conducted.
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(i) Employee Benefit Plans.
(i) Schedule 3.1(i) hereto lists all
employee benefit plans and programs, including, without limitation, (w)
all retirement, savings and other pension plans; (x) all health,
severance, insurance, disability and other employee welfare plans; (y)
all incentive, vacation, bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, other
similar employee plans, programs or arrangements; and (z) all
employment, compensation or severance agreements, that are maintained
by the Company for the benefit of which, or relate to, current
employees and former employees of the Company and its subsidiaries
(collectively, the "Employee Plans").
(ii) None of the Employee Plans is a
"multiemployer plan" as defined in Section 3(37) of
ERISA.
(iii) Except as set forth on Schedule 3.1(i) hereto, all
Employee Plans are in compliance in all material respects with the
requirements prescribed by applicable statutes, orders or governmental
rules or regulations currently in effect with respect thereto, and the
Company has performed all material obligations required to be performed
by it under, and is not in any
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material respect in default under or in violation of,
any of the Employee Plans.
(iv) Except as set forth on Schedule 3.1(i) hereto, each
Employee Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code ("Code") has heretofore been determined by the
Internal Revenue Service to so qualify, and each trust created
thereunder has heretofore been determined by the Internal Revenue
Service to so qualify, and each trust created thereunder has heretofore
been determined by the Internal Revenue Service to be exempt from tax
under the provisions of Section 501(a) of the Code and, to the
knowledge of the Company, nothing has occurred since the date of the
most recent determination that would be reasonably likely to cause any
such Employee Plan or trust to fail to qualify under Section 401(a) or
501(a) of the Code.
(v) The Company has not incurred any material
liability to the Pension Benefit Guaranty Corporation ("PBGC") under
Section 4001 et seq. of ERISA, except for premiums required under
Section 4007 of ERISA which are not yet due, and no condition exists
that could reasonably be expected to result in the Company incurring
material liability under Title IV of ERISA, either singly or as a
member of any trade or business, whether or not incorporated, under
common
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control of or affiliated with the Company, within the meaning of
Section 414(b), (c), (m) or (o) of the Code. All premiums payable to
the PBGC have been paid when due.
(vi) The Company has made available to Parent copies of
all Employee Plans and, where applicable, summary plan descriptions,
the most recent Internal Revenue Service determination letters, if
applicable, and annual reports required to be filed within the last
year pursuant to ERISA or the Code with respect to the Employee Plans.
(vii) No prohibited transaction, as defined in Section 4975
of the Code, has occurred with respect to any Employee Plan that is a
pension plan as defined in Section 3(2) of ERISA.
(viii) Except as set forth on Schedule 3.1(i) hereto, the
Company does not maintain and has not at any time in the past
maintained any plan which constitutes a defined benefit pension plan
subject to Title IV of ERISA.
(ix) There are no actions, suits or claims pending,
threatened or anticipated (other than routine claims for benefits) with
respect to any Employee Plan.
(x) Except as set forth on Schedule 3.1(i)
hereto, no compensation or benefit that is or will be
payable in connection with the transactions
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contemplated by this Agreement will be characterized as an "excess
parachute payment" within the meaning of Section 280G of the Code.
(xi) The Company has not made any commitment to establish
any new Employee Plan, to modify any Employee Plan or to increase
benefits or compensation of employees or former employees of the
Company (except for normal increases in compensation consistent with
past practices or as disclosed in Schedule 3.1(i) hereto), nor has any
intention to do so been communicated to employees or former employees
of the Company.
(xii) All material employment or compensation
agreements contained within the Employee Plans are in full force and
effect, and neither the Company nor any subsidiary, nor, to the best of
the Company's knowledge, any other party, is in default under any of
them. There have been no claims of default and, to the best knowledge
of the Company and its subsidiaries, there are no facts or conditions
which if continued, or on notice, will result in a material default
under any of such employment or compensation agreements.
(xiii) Except for severance payment obligations
contained in those certain employment, severance or compensation
agreements specified on Schedule 3.1(i), neither the Company nor any of
its subsidiaries will owe a
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severance payment or similar obligation to any of their respective
employees, officers or directors as a result of the Offer or the Merger
or the other transactions contemplated by this Agreement.
(j) Liabilities. Except as set forth in the Commission
Filings, as set forth on Schedule 3.1(j) hereto or as otherwise contemplated by
this Agreement, neither the Company nor any of its subsidiaries has any material
outstanding claims, liabilities or indebtedness, whether accrued, absolute,
contingent or otherwise, other than liabilities incurred subsequent to March 31,
1996 in the ordinary course of business. Neither the Company nor any of its
subsidiaries is in default in respect of the material terms and conditions of
any indebtedness or other agreement, which default might reasonably be expected
to have a material adverse effect on the Condition of the Company and its
subsidiaries taken as a whole.
(k) Broker's Or Finder's Fees. Except for Wheat First Butcher
Singer (whose fees and expenses will be paid by the Company in accordance with
the Company's agreement with such firm, a true and correct copy of which has
been previously delivered to Parent by the Company), no agent, broker, Person or
firm acting on behalf of the Company is, or will be, entitled to any fee,
commission or broker's or finder's fees from any of the parties hereto, or from
any Person controlling, controlled by, or under common control with any of the
parties hereto, in
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connection with this Agreement or any of the transactions
contemplated hereby.
(l) Environmental Laws and Regulations. Except as disclosed in
the Commission Filings, or as set forth on Schedule 3.1(l) hereto or as would
not individually or in the aggregate have a material adverse affect on the
Condition of the Company or its subsidiaries taken as a whole; (i) the Company
and its subsidiaries are not in violation of any Environmental Law; (ii) no real
property currently or formerly owned, occupied or operated by the Company or any
Subsidiary is contaminated with any Hazardous Substances requiring remediation
under any Environmental Law; (iii) the Company and its subsidiaries are not
subject to liability for any off-site disposal or contamination; (iv) the
Company and its subsidiaries have not received any claims or notices alleging
liability under any Environmental Law; and (v) there are no circumstances
involving the Company or its subsidiaries that could reasonably be expected to
result in any claims, liabilities, costs or restrictions on the ownership, use,
or transfer of any property pursuant to any Environmental Law. "Environmental
Law" means any law, regulation, order, decree, opinion or agency requirement
relating to noise, odor, Hazardous Substance or the protection of the
environment or human health and safety. "Hazardous Substance" means any
substance that is listed, classified or regulated by any government authority or
any Environmental Law, in any concentration, including any petroleum products,
asbestos or polychlorinated biphenyls.
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(m) Rights Agreement; State Takeover Laws. (i) The Company and
the Board of Directors of the Company have taken all necessary action to (i)
render the Rights Agreement and Articles 14 and 14.1 of the Virginia Stock
Corporation Act as well as any other applicable affiliated transaction, control
share acquisition or similar state takeover laws inapplicable with respect to
the Offer, the Merger and the other transactions contemplated by this Agreement
and (ii) ensure that (y) neither Parent nor Sub nor any of their Affiliates (as
defined in the Rights Agreement) or Associates (as defined in the Rights
Agreement) is considered to be an Acquiring Person (as defined in the Rights
Agreement) and (z) the provisions of the Rights Agreement, including the
occurrence of a Separation Time (as defined in the Rights Agreement), are not
and shall not be triggered by reason of the announcement or consummation of the
Offer, the Merger or the consummation of any of the other transactions
contemplated by this Agreement. The Board of Directors of the Company, at a
meeting duly called and held, will take such actions, if any, that may be
necessary for the Rights to be redeemed immediately prior to the acceptance for
payment and purchase of any of the outstanding Shares pursuant to the Offer in
accordance with the terms of this Agreement provided that this Agreement shall
not have been terminated in accordance with its terms. The Company has delivered
to Parent a complete and correct copy of the Rights Agreement as amended and
supplemented to the date of this Agreement.
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(n) Opinion of Financial Advisor. The Company has received the
opinion of Wheat First Butcher Singer, to the effect that, as of the date of
this Agreement, the consideration to be received in the Offer and the Merger by
the Company's stockholders is fair to the Company's stockholders from a
financial point of view, and a complete and correct signed copy of such opinion
has been, or promptly upon receipt thereof will be, delivered to Parent.
(o) Tax Returns. Except as set forth on Schedule 3.1(o),
within the times and in the manner prescribed by law, the Company and each
subsidiary has filed all material foreign country, federal, state and local tax
returns required by law, and has paid all material taxes, assessments and
penalties due and payable. Except as set forth on Schedule 3.1(o), all such tax
returns, when filed, were correct and complete in all material respects. Except
as set forth on Schedule 3.1(o), each of the Company and its subsidiaries has
withheld and paid all material taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party. The provisions for taxes reflected
in the Interim Statements are adequate for any and all material foreign,
federal, state, county and local taxes for the period ending on March 31, 1996,
and for all prior periods, whether or not disputed. There are no present
disputes as to material taxes of any nature allegedly due or payable by the
Company or any of its subsidiaries.
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(p) Material Contracts. Except as set forth on Schedule
3.1(p), the Company has filed as exhibits to the Commission Filings all material
contracts and agreements required to be filed as exhibits to periodic reports
under the Exchange Act, including without limitation the Asset Purchase
Agreement dated October 2, 1995 by and among the Company, Medical Design
Concepts, Inc. and John W. Hoffee, II (collectively, the "Contracts"). To the
best knowledge of the Company, each of the Contracts is in full force and
effect. The Company has complied in all material respects with its obligations
under the Contracts and, except as set forth on Schedule 3.1(p), to the best
knowledge of the Company, there is no default or event which with notice or
lapse of time, or both, would constitute a default by any party to any of the
Contracts the cumulative effect of which might reasonably be expected to have a
material adverse effect on the Condition of the Company and its subsidiaries
taken as a whole. Neither the Company nor any of its subsidiaries has received
notice that any party to any of the Contracts intends to cancel or terminate any
of the Contracts or to exercise or not exercise any options under any of the
Contracts.
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Each
of Parent and Sub represents and warrants to the Company as
follows:
(a) Due Organization; Good Standing and Corporate
Power. Each of Parent and Sub is a corporation duly organized,
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validly existing and in good standing under the laws of the State of Delaware
and the Commonwealth of Virginia, respectively.
(b) Authorization and Validity of Agreement. Each of Parent
and Sub has the corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Parent and Sub, and the consummation by each of them of the
transactions contemplated hereby, have been duly authorized by the Boards of
Directors of Parent and Sub. No other corporate action on the part of either of
Parent or Sub is necessary to authorize the execution, delivery and performance
of this Agreement by each of Parent or Sub and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and Sub and is a valid and binding obligation of
each of Parent and Sub, enforceable against each of Parent and Sub in accordance
with its terms, except that such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles.
(c) Consents and Approvals; No Violations. Assuming (i) the
filings required under the HSR Act are made and the waiting period thereunder
has been terminated or has expired, (ii) the requirements of the Exchange Act
relating to the Proxy Statement and the Offer are met and (iii) the filing of
the Articles of Merger and other appropriate merger documents, if
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any, as required by the laws of the Commonwealth of Virginia is made, the
execution and delivery of this Agreement by Parent and Sub and the consummation
by Parent and Sub of the transactions contemplated hereby will not: (1) violate
any provision of the Articles of Incorporation or By-Laws of Parent or Sub; (2)
violate any statute, ordinance, rule, regulation, order or decree of any court
or of any governmental or regulatory body, agency or authority applicable to
Parent or Sub or by which either of their respective properties or assets may be
bound; (3) require any filing with, or permit, the procurement of any consent or
approval of, or the giving of any notice to any governmental or regulatory body,
agency or authority or any other Person; or (4) result in a violation or breach
of, conflict with, constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right or termination, cancellation or
acceleration) under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Parent, Sub or
any of their subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, franchise, permit, agreement,
lease or other instrument or obligation to which Parent or Sub or any of their
subsidiaries is a party, or by which they or their respective properties or
assets may be bound except, in the case of clauses (3) and (4) above for any
such filing, permit, consent, approval or violation, which could not reasonably
be expected to have a material adverse effect on the
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Condition of the Parent and Sub, taken as a whole, or could be reasonably likely
to prevent or materially delay consummation of the transactions contemplated by
this Agreement.
(d) Offer Documents, Schedule 14D-9 and Proxy Statement. The
documents pursuant to which the Offer will be made, including a Tender Offer
Statement on Schedule 14D-1 and Offer to Purchase and related letter of
transmittal (the "Offer Documents"), will comply in all material respects with
the Exchange Act and the rules and regulations thereunder and any other
applicable laws. If at any time prior to the expiration or termination of the
Offer any event occurs which should be described in an amendment or supplement
thereto, Sub will file and disseminate, as required, an amendment or supplement
which complies in all material respects with the Exchange Act and the rules and
regulations thereunder and any other applicable laws. Prior to the filing with
the Commission, the amendment or supplement shall be delivered to the Company
and its counsel. The written information supplied or to be supplied by Parent
and Sub for inclusion in the Proxy Statement and the Schedule 14D-9 of the
Company will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made, in light
of the circumstances under which they are made, not misleading. Notwithstanding
the foregoing, no representation or warranty is made with respect to any
information with respect to the Company or its officers, directors and
affiliates provided to Parent or Sub by the Company
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in writing for inclusion in the Offer Documents or amendments or
supplements thereto.
(e) Broker's or Finder's Fees. Except for Bear Stearns & Co.,
Inc. (whose fees and expenses as financial advisor to Parent and Sub will be
paid by Parent or Sub in accordance with Parent's agreement with such firm, a
true and correct copy of which has been previously delivered to the Company by
Parent), no agent, broker, Person or firm acting on behalf of Parent or Sub is,
or will be, entitled to any fee, commission or broker's or finder's fees from
any of the parties hereto, or from any Person controlling, controlled by or
under common control with any of the parties hereto, in connection with this
Agreement or any of the transactions contemplated hereby.
(f) Common Stock Ownership. As of the date hereof, none of
Parent, Sub or their affiliates beneficially owns (within the meaning of Rule
13d-3 under the Exchange Act) any shares of Common Stock.
ARTICLE IV
TRANSACTIONS PRIOR TO AND AFTER THE CLOSING DATE
4.1 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS. During the
period commencing on the date hereof and ending on the Closing Date, the Company
shall, and shall cause each of its subsidiaries to, upon reasonable notice,
afford Parent and Sub, and their respective counsel, accountants, consultants
and other authorized representatives, reasonable
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access during normal business hours to the officers, accountants, counsel,
consultants, employees, properties, books and records of the Company and its
subsidiaries in order that they may have the opportunity to make such
investigations as they shall desire of the affairs of the Company and its
subsidiaries. The Company shall furnish promptly to Parent and Sub (a) a copy of
each report, schedule, registration statement and other document filed by it or
its subsidiaries during such period pursuant to the requirements of federal or
state securities laws and (b) all other information concerning its or its
subsidiaries' business, properties and personnel as Parent and Sub may
reasonably request. The Company agrees to cause its officers and employees to
furnish such additional financial and operating data and other information and
respond to such inquiries as Parent and Sub shall from time to time reasonably
request.
4.2 CONFIDENTIALITY. Information obtained by Parent and Sub pursuant to
Section 4.1 hereof shall be subject to the provisions of the Confidentiality
Agreement between the Company and Parent dated March 28, 1996.
4.3 CONDUCT OF THE BUSINESS OF THE COMPANY PENDING THE CLOSING DATE.
The Company agrees that, except as permitted, required or specifically
contemplated by, or otherwise described in, this Agreement or otherwise
consented to or approved in writing by Parent, during the period commencing on
the date hereof and ending on the Closing Date:
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(a) The Company and each of its subsidiaries will conduct
their respective operations only according to their ordinary and usual course of
business consistent with past practice and will use their reasonable efforts to
preserve intact their respective business organizations, keep available the
services of their officers and employees and maintain satisfactory relationships
with licensors, suppliers, distributors, clients and others having business
relationships with them;
(b) Neither the Company nor any of its subsidiaries shall (i)
make any change in or amendment to its Articles of Incorporation or By-Laws (or
comparable governing documents), each as amended; (ii) issue or sell any shares
of its capital stock (other than in connection with the exercise of Options
outstanding on the date hereof in accordance with the terms and conditions in
effect on the date hereof) or any of its other securities, or issue any
securities convertible into, or options, warrants or rights to purchase or
subscribe to, or enter into any arrangement or contract with respect to the
issuance or sale of, any shares of its capital stock or any of its other
securities, or make any other changes in its capital structure; (iii) sell or
pledge or agree to sell or pledge any stock owned by it in any of its
subsidiaries; (iv) declare, pay, set aside or make any dividend or other
distribution or payment with respect to, or split, combine, redeem or
reclassify, any shares of its capital stock; (v) except as set forth on Schedule
4.3(b), enter into any
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contract or commitment with respect to capital expenditures in excess of
$150,000 or enter into any other material contract except contracts in the
ordinary course of business; (vi) acquire a material amount of assets or
securities or release or relinquish any material contract rights other than in
the ordinary course of business; (vii) adopt or amend any Employee Benefit Plan
or non-employee benefit plan or program, employment agreement, license agreement
or retirement agreement, or, except in the ordinary course of business and
consistent with past practice, pay any bonus or contingent or other
extraordinary compensation; (viii) other than in the ordinary course of business
transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of,
encumber or subject to any lien, any assets or incur or modify any indebtedness
or other liability or issue any debt securities or assume, guarantee or endorse
or otherwise as an accommodation become responsible for the obligations of any
person; (ix) agree to the settlement of any material claim or litigation; (x)
make any material tax election or settle or compromise any material tax
liability; (xi) make any material change in its method of accounting or (xii)
agree, in writing or otherwise, to take any of the foregoing actions; and
(c) Except as set forth on Schedule 4.3(c), the Company shall
not, and shall not permit any of its subsidiaries to, (i) take any action,
engage in any transaction or enter into any agreement which would cause any of
the representations or warranties set forth in Section 3.1 hereof to be untrue
as of the
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Closing Date, or (ii) purchase or acquire, or offer to purchase or acquire, any
shares of capital stock of the Company.
4.4 PROXY STATEMENT. If stockholder approval of the Merger is required
by law, as promptly as practicable, the Company will prepare and file a
preliminary Proxy Statement with the Commission and will use its reasonable
efforts to respond to the comments of the Commission in connection therewith and
to furnish all information required to prepare the definitive Proxy Statement
(including, without limitation, financial statements and supporting schedules
and certificates and reports of independent certified public accountants).
Promptly after the expiration or termination of the Offer, if required by the
Virginia Stock Corporation Act in order to consummate the Merger, the Company
will cause the definitive Proxy Statement to be mailed to the stockholders of
the Company and, if necessary, after the definitive Proxy Statement shall have
been so mailed, promptly circulate amended, supplemental or supplemented proxy
material and, if required in connection therewith, resolicit proxies. The
Company will not use any proxy material in connection with the meeting of its
stockholders without Parent's prior approval. Prior to filing the preliminary
Proxy Statement with the Commission and mailing the definitive Proxy Statement
to the stockholders of the Company, the Company shall forward copies of such
Proxy Statements to Parent for Parent's review and comment, and otherwise
cooperate with Parent in the preparation, filing and/or distribution of such
Proxy Statements.
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4.5 STOCKHOLDER APPROVAL. Promptly after the expiration or termination
of the Offer, if required by the Virginia Stock Corporation Act in order to
consummate the Merger, the Company, acting through its Board of Directors, shall
in accordance with applicable law, promptly call a special meeting of the
holders of Common Stock for the purpose of voting upon this Agreement and the
Merger and the Company agrees that this Agreement and the Merger shall be
submitted at such special meeting. The Company shall use its reasonable efforts
to solicit from its stockholders proxies, and shall take all other action
necessary and advisable, to secure the vote of stockholders required by
applicable law to obtain the approval for this Agreement. Subject to Section 4.7
of this Agreement, the Company agrees that it will include in the Proxy
Statement the recommendation of its Board of Directors that holders of Common
Stock approve and adopt this Agreement and approve the Merger. Parent will cause
all shares of Common Stock owned by Parent and its affiliates to be voted in
favor of the Merger.
4.6 REASONABLE EFFORTS. Subject to the terms and conditions provided
herein and to the fiduciary duties of the Board of Directors of the Company
under applicable law, each of the Company, Parent and Sub shall, and the Company
shall cause each of its subsidiaries to, cooperate and use reasonable efforts to
take, or cause to be taken, all appropriate action, and to make, or cause to be
made, all filings necessary, proper or advisable under applicable laws and
regulations to consummate and
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make effective the transactions contemplated by this Agreement, including,
without limitation, their respective reasonable efforts to obtain, prior to the
Closing Date, all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and its subsidiaries as are necessary for consummation of the
transactions contemplated by this Agreement and to fulfill the conditions to the
Offer and the Merger. The Company and Parent shall use their reasonable efforts
to consummate the Merger as promptly as practicable.
4.7 NO SOLICITATION OF OTHER OFFERS. (a) Neither the Company nor any of
its subsidiaries, shall, directly or indirectly, take (and the Company shall not
authorize or permit its or its subsidiaries officers, directors, employees,
representatives, consultants, investment bankers, attorneys, accountants or
other agents or affiliates, to so take) any action to (i) solicit, encourage,
facilitate or initiate the submission of any Acquisition Proposal or (ii)
participate in any way in discussions or negotiations with, or, furnish any
information to, any Person (other than Parent or Sub) in connection with, or
take any other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal, provided, however, that the Company may participate in discussions or
negotiations with or furnish information to any third party which makes an
unsolicited, bona fide noncollusive proposal in writing with respect to a
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transaction which the Board of Directors of the Company believes is likely to
result in an Acquisition Proposal if the Board of Directors believes (and has
been advised by counsel) that failing to take such action would constitute a
breach of its fiduciary duties. In addition, neither the Board of Directors of
the Company nor any Committee thereof shall withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent the approval and
recommendation of the Offer and this Agreement or approve or recommend any
Acquisition Proposal, provided that the Board of Directors (or a Committee
thereof) may recommend to the Company's stockholders an Acquisition Proposal and
in connection therewith withdraw or modify its approval or recommendation of the
Offer or the Merger if (i) the Board of Directors of the Company has determined
that the Acquisition Proposal is a Superior Proposal and (ii) simultaneously
with such withdrawal, modification or recommendation, this Agreement is
terminated in accordance with Section 6.1(e). Any actions permitted under, and
taken in compliance with, this Section 4.7 shall not be deemed a breach of any
other covenant or agreement of such party contained in this Agreement.
"Acquisition Proposal" shall mean any proposed merger, consolidation,
share exchange or other business combination, sale or other disposition of any
material amount of assets, sale or issuance of shares of capital stock, tender
offer or exchange offer or similar transaction involving the Company or any of
its subsidiaries and a third party. "Superior Proposal" shall mean
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an unsolicited, bona fide noncollusive Acquisition Proposal on terms which a
majority of the members of the Special Committee and Board of Directors of the
Company determines in its good faith judgment (based on the advice of
independent financial and legal advisors) to be more favorable to the Company
and its shareholders than the transactions contemplated hereby.
(b) In addition to the obligations of the Company set forth in
paragraph (a), the Company shall advise Parent immediately of any request for
information or of any Acquisition Proposal, or any proposal with respect to any
Acquisition Proposal, the material terms and conditions of such request or
Acquisition Proposal, and the identity of the person making any such Acquisition
Proposal or inquiry. The Company will promptly inform Parent of the status and
details both orally and in writing (including amendments or proposed amendments)
of any such request, takeover proposal or inquiry, and will promptly provide
Parent with copies of all such written requests, proposals and inquiries.
(c) Immediately following the purchase of Shares pursuant to
the Offer, the Company will request each person which has heretofore executed a
confidentiality agreement in connection with its consideration of acquiring the
Company or any portion thereof (the "Confidentiality Agreements") other than
Parent to return all confidential information heretofore furnished to such
person by or on behalf of the Company.
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4.8 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent of: (a) any notice of, or other communication relating to, a
material default or event that, with notice or lapse of time or both, might
reasonably be expected to become a material default, received by the Company or
any of its subsidiaries subsequent to the date of this Agreement and prior to
the Effective Time, under any material contract to which the Company or any of
its subsidiaries is a party or is subject; and (b) any material adverse change
in the Condition of the Company and its subsidiaries taken as a whole or the
occurrence of any event which is reasonably likely to result in any such change.
Each of the Company and Parent shall give prompt notice to the other party of
any notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated by this Agreement.
4.9 HSR ACT. The Company and Parent shall file, within eight business
days from the date of this Agreement, Notification and Report Forms under the
HSR Act with the Federal Trade Commission (the "FTC") and the Antitrust Division
of the Department of Justice (the "Antitrust Division") and shall use their
reasonable efforts to respond as promptly as practicable to all inquiries
received from the FTC or the Antitrust Division for additional information or
documentation.
4.10 EMPLOYEE BENEFITS. Parent agrees that, during the
period commencing at the Effective Time and ending on the second
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anniversary thereof, the employees of the Company and its subsidiaries will
continue to be provided with employee benefit plans (other than stock option or
other plans involving the potential issuance of securities of the Company or of
Parent) that are in the aggregate substantially comparable to those currently
provided by the Company and its subsidiaries to such employees. Parent will, and
will cause the Surviving Corporation to, honor employee (or former employee)
benefit obligations and contractual rights existing as of the Effective Time and
all employment or severance agreements, plans or policies adopted by the Board
of Directors of the Company (or any committee thereof) prior to the date hereof
and disclosed to Parent under this Agreement in accordance with their terms.
4.11 DIRECTORS' AND OFFICERS' INSURANCE; INDEMNIFICATION. (a) The
Articles of Incorporation and the By-laws of the Surviving Corporation shall
contain the provisions with respect to indemnification and exculpation from
liability set forth in the Company's Articles of Incorporation and By-laws on
the date of this Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who on
or prior to the Effective Time were directors, officers, employees or agents of
the Company ("Indemnified Parties"), unless such modification is required by
law.
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(b) (i) Parent agrees, from and after the purchase of shares
of Common Stock pursuant to the Offer, to indemnify all Indemnified Parties to
the fullest extent permitted by applicable law with respect to all acts and
omissions arising out of such individuals' services as officers, directors,
employees or agents of the Company or any of its subsidiaries or as trustees or
fiduciaries of any plan for the benefit of employees, or otherwise on behalf of,
the Company or any of its subsidiaries, occurring prior to the Effective Time
including, without limitation, the transactions contemplated by this Agreement.
Without limitation of the foregoing, in the event any such Indemnified Party is
or becomes involved in any capacity in any action, proceeding or investigation
in connection with any matter, including without limitation, the transactions
contemplated by this Agreement, occurring prior to, and including, the Effective
Time, Parent, from and after the purchase of shares of Common Stock pursuant to
the Offer, will pay as incurred such Indemnified Party's legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith. Parent shall pay all expenses, including attorneys' fees,
that may be incurred by any Indemnified Party in enforcing this Section 4.11 or
any action involving an Indemnified Party resulting from the transactions
contemplated by this Agreement. If for any reason the indemnification provided
for in this Section 4.11 is unavailable with respect to any Indemnified Party or
insufficient to hold him
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or her harmless with respect to any such loss, claim, damage or liability, then
Parent shall contribute to the amount paid or payable by such Indemnified Party
as a result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect (i) the relative economic interests of the Company and
its affiliates on the one hand and Parent on the other in connection with the
Offer and the Merger to which such loss, claim, damage or liability relates,
(ii) the relative fault of the Company and its affiliates on the one hand and
Parent on the other with respect to such loss, claim, damage or liability and
(iii) any other relevant equitable considerations.
(c) For six years from the Effective Time, Parent shall either
(x) maintain in effect the Company's current directors' and officers' liability
insurance covering those persons who are currently covered on the date of this
Agreement by the Company's directors' and officers' liability insurance policy
(a copy of which has been heretofore delivered to Parent); provided, however,
that in no event shall Parent be required to expend in any one year an amount in
excess of 150% of the annual premiums currently paid by the Company for such
insurance, which the Company represents to be $153,000 (exclusive of related
commissions) for the twelve month period ended September 30, 1996; and provided
further that if the annual premiums of such insurance coverage exceed such
amount, Parent shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount and to give prompt written notice
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of any reduction in the amount or scope of coverage resulting therefrom to the
directors and officers affected thereby; provided further that Parent may
substitute for such Company policies, policies with at least the same coverage
containing terms and conditions which are no less advantageous and provided that
said substitution does not result in any gaps or lapses in coverage with respect
to matters occurring prior to the Effective Time, or (y) cause the Parent's
directors' and officers' liability insurance then in effect to cover those
persons who are covered on the date of this Agreement by the Company's
directors' and officers' liability insurance policy with respect to those
matters covered by the Company's directors' and officers' liability policy.
4.12 FINANCING. On or before the day on which Sub accepts for payment
the shares of Common Stock pursuant to the Offer, Parent shall have the funds
necessary to consummate the Offer, the Merger and the transactions contemplated
hereby and shall promptly provide Sub with such funds at the times necessary to
discharge the obligations of Parent and Sub in accordance with the terms hereof.
4.13 ADDITIONAL REPORTS AND FILINGS. Prior to the Effective Time, the
Company shall promptly furnish to Parent a copy of any Form 10-Q or other
reports or other filings filed by the Company under the Exchange Act after the
date hereof.
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ARTICLE V
CONDITIONS PRECEDENT TO MERGER
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT, SUB AND THE COMPANY.
The respective obligations of Parent and Sub, on the one hand, and the Company,
on the other hand, to effect the Merger are subject to the satisfaction or
waiver (subject to applicable law) at or prior to the Effective Time of each of
the following conditions:
(a) Approval of Company's Stockholders. To the extent required
by applicable law, this Agreement and the Merger shall have been approved and
adopted by holders of more than two-thirds of the shares of Common Stock of the
Company in accordance with applicable law (if required by applicable law) and
the Company's Articles of Incorporation and By-Laws;
(b) HSR Act. Any waiting period (and any extension
thereof) under the HSR Act applicable to the Merger shall have
expired or been terminated;
(c) Injunction. No preliminary or permanent injunction or
other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of the
Offer or the Merger and the transactions contemplated by this Agreement and
which is in effect at the Effective Time, provided, however, that, in the case
of a decree, injunction or other order, each of the parties shall have used
reasonable efforts to prevent the entry of any such injunction or other order
and to appeal as promptly as
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possible any decree, injunction or other order that may be
entered;
(d) Payment for Common Stock. Sub shall have accepted
for payment and paid for the shares of Common Stock tendered
pursuant to the Offer; and
(e) Statutes. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which prohibits the consummation
of the Offer or the Merger or has the effect or making the purchase of the
Common Stock illegal.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. The obligation
of the Company to effect the Merger is also subject to the satisfaction or
waiver, at or prior to the Effective Time, of each of the following conditions:
(a) Performance by Parent and Sub. Each of Parent and Sub
shall have performed in all material respects all obligations and agreements
contained in Sections 1.3 and 2.4 of this Agreement to be performed or complied
with by it prior to the Closing Date.
ARTICLE VI
TERMINATION AND ABANDONMENT
6.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned, at any time
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prior to the Effective Time, whether before or after approval of the Merger by
the Company's stockholders:
(a) by mutual consent of the Company, on the one hand,
and of Parent and Sub, on the other hand;
(b) by either Parent, on the one hand, or the Company, on the
other hand, if any governmental or regulatory agency shall have issued an order,
decree or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the acceptance for payment of, or payment for, shares of
Common Stock pursuant to the Offer or the Merger and such order, decree or
ruling or other action shall have become final and nonappealable;
(c) by either Parent, on the one hand, or the Company, on the
other hand, if the Offer shall not have been consummated within six months after
commencement of the Offer unless the Offer Closing shall not have occurred
because of a material breach of any representation, warranty, obligation,
covenant, agreement or condition set forth in this Agreement on the part of the
party seeking to terminate this Agreement;
(d) by Parent, if the Offer is terminated or expires in
accordance with its terms without Sub having purchased any Common Stock
thereunder due to failure to satisfy any of the conditions set forth in Annex A
hereto, unless such termination or expiration has been caused by or results from
the failure of Parent or Sub to perform in any material respect any of their
respective covenants or agreements contained in this Agreement;
(e) by either Parent, on the one hand, or the Company,
on the other hand, if the Board of Directors of the Company
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determines that an Acquisition Proposal will result in a Superior Proposal and
the Board believes (and has been advised in writing by counsel) that a failure
to terminate this Agreement and enter into an agreement to effect the Superior
Proposal would constitute a breach of its fiduciary duties;
(f) by the Company, if Parent or Sub shall have failed to
comply in any material respect with any of the covenants or agreements contained
in this Agreement to be complied with or performed by Parent or Sub at or prior
to the Offer Closing or if Parent or Sub shall have failed to commence the Offer
within the time required by Section 1.1; or
(g) by the Company, if (i) prior to the Offer Closing, any of
the representations and warranties of Parent or Sub contained in this Agreement
were untrue or incorrect in any material respect when made or (ii) Parent or Sub
shall have terminated the Offer prior to the Offer Closing or the Offer is
terminated or expires in accordance with its terms.
6.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 6.1 hereof by Parent or Sub, on the one hand, or
the Company, on the other hand, written notice thereof shall forthwith be given
to the other party or parties specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall become void and have no
effect, and there shall be no liability hereunder on the part of Parent, Sub or
the Company, except that Sections 4.2, 7.1 and this Section 6.2 hereof shall
survive any termination of this
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Agreement. Nothing in this Section 6.2 shall relieve any party
to this Agreement of liability for breach of this Agreement.
ARTICLE VII
MISCELLANEOUS
7.1 FEES AND EXPENSES. (a) Except as provided in paragraph (b) below,
all costs and expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
(b) If this Agreement is terminated by Parent pursuant to
Section 6.1(e) hereof or pursuant to Section 6.1(d) hereof by reason of
paragraphs (d) or (f) of Annex A hereof or if, prior to the Offer Closing, any
material representation or warranty made by the Company herein shall prove to
have been untrue or incorrect in any material respect when made and as a result
thereof this Agreement is terminated by Parent pursuant to Section 6.1(d) hereof
by reason of paragraph (e) of Annex A hereof, the Company shall pay to Parent,
within one business day thereafter, the amount of $3,500,000.
7.2 REPRESENTATIONS AND WARRANTIES. The respective representations and
warranties of the Company, on the one hand, and Parent and Sub, on the other
hand, contained herein or in any certificates or other documents delivered prior
to or at the Closing shall not be deemed waived or otherwise affected by any
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investigation made by any party. Each and every such representation and warranty
shall expire with, and be terminated and extinguished by, the Closing and
thereafter none of the Company, Parent or Sub shall be under any liability
whatsoever with respect to any such representation or warranty. This Section 7.2
shall have no effect upon any other obligation of the parties hereto, whether to
be performed hereunder or after the Effective Time.
7.3 EXTENSION; WAIVER. Subject to the provisions of Section 1.1, at any
time prior to the Effective Time, the parties hereto, by action taken by or on
behalf of the respective Boards of Directors of the Company, Parent or Sub, may
(i) extend the time for the performance of any of the obligations or acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein by any other applicable party or in any documents,
certificate or writing delivered pursuant hereto by any other applicable party
or (iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of any party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
7.4 PUBLIC ANNOUNCEMENTS. The Company, on the one hand, and Parent and
Sub, on the other hand, agree to consult promptly with each other prior to
issuing any press release or otherwise making any public statement with respect
to the transactions contemplated hereby, and shall not issue any such press
release
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or make any such public statement prior to such consultation and review by the
other party of a copy of such release or statement, unless required by
applicable law.
7.5 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
(a) If to the Company, to it at:
Sterile Concepts Holdings, Inc.
5100 Commerce Road
Richmond, Virginia 23234
Attention: Paul J. Woo, Jr., President
and Chief Executive Officer
with copies to:
McGuire, Woods, Battle, & Boothe, L.L.P.
One James Center
901 East Cary Street
Richmond, Virginia 23219
Attention: Wellford L. Sanders, Jr., Esq.
and Joseph C. Carter, III, Esq.
LeClair Ryan
707 East Main Street
11th Floor
Richmond, Virginia 23219
Attention: J. Benjamin English, Esq.
(b) If to either Parent or Sub, to it at:
Maxxim Medical, Inc.
104 Industrial Boulevard
Sugar Land, Texas 77478
Attention: Kenneth W. Davidson, Chairman of
the Board, President and Chief
Executive Officer
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with a copy to:
Boyer, Ewing & Harris Incorporated
9 Greenway Plaza, Suite 3100
Houston, Texas 77046
Attention: John R. Boyer, Jr., Esq. and
J. Randolph Ewing, Esq.
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof, except for a notice of a change of address, which shall be
effective only upon receipt thereof.
7.6 ENTIRE AGREEMENT. This Agreement and the Annex, schedules and other
documents referred to herein or delivered pursuant hereto, collectively contain
the entire understanding of the parties hereto with respect to the subject
matter contained herein and supersede all prior agreements and understandings,
oral and written, with respect thereto.
7.7 BINDING EFFECT; BENEFIT; ASSIGNMENT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Nothing
in this Agreement, expressed or implied, is intended to confer on any Person
other than the parties hereto or their
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respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except for Section 4.10 and
4.11, which are intended to be for the benefit of the persons referred to
therein, and may be enforced by such persons.
7.8 APPLICABLE LAW. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the Commonwealth of Virginia, without regard to the conflict of laws rules
thereof.
7.9 SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
7.10 "PERSON" DEFINED. "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, a group and a government
or other department or agency thereof.
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IN WITNESS WHEREOF, each of Parent, Sub and the Company have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, all as of the date first above written.
MAXXIM MEDICAL, INC.
BY: /S/ KENNETH W. DAVIDSON
NAME: Kenneth W. Davidson
TITLE: Chairman President & CEO
MAXXIM ACQUISITION CO.
BY: /s/ KENNETH W. DAVIDSON
NAME: Kenneth W. Davidson
TITLE: President
STERILE CONCEPTS HOLDINGS, INC.
BY: /s/ PAUL J. WOO, JR.
NAME: Paul J. Woo, Jr.
TITLE: President and Chief
Executive Officer
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ANNEX A
TO
AGREEMENT AND PLAN OF MERGER
THE CAPITALIZED TERMS IN THIS ANNEX A SHALL HAVE THE MEANINGS SET FORTH
IN THE AGREEMENT TO WHICH IT IS ANNEXED, EXCEPT THAT THE TERM "MERGER AGREEMENT"
SHALL BE DEEMED TO REFER TO THE AGREEMENT TO WHICH THIS ANNEX A IS APPENDED AND
"PURCHASER" SHALL BE DEEMED TO REFER TO SUB.
Notwithstanding any other provision of the Offer, Purchaser shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1c under the Exchange Act, pay
for any shares of Common Stock tendered and may terminate or amend the Offer in
accordance with the Agreement and may postpone the acceptance of, and payment
for, shares of Common Stock, if (i) there shall not have been validly tendered
and not withdrawn prior to the expiration of the Offer a number of shares of
Common Stock which represent more than two-thirds of the total voting power of
all shares of capital stock of the Company outstanding on a fully diluted basis
(the "Minimum Condition"), (ii) any applicable waiting period under the HSR Act
shall not have expired or been terminated or (iii) at any time on or after the
date of the Merger Agreement and at or before the time of payment for any such
shares of Common Stock (whether or not any shares of Common Stock have
A-1
<PAGE>
theretofore been accepted for payment or paid for pursuant to the Offer) any of
the following shall occur:
(a) any court or domestic government or governmental
authority or agency shall have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order, decree or
injunction or other order which (i) makes illegal, materially delays or
otherwise directly or indirectly materially restrains or prohibits the
Offer or the Merger, (ii) prohibits or materially limits the ownership
or operation by Parent or Purchaser of all or any material portion of
the business or assets of the Company or compels Parent or Sub to
dispose of all or any material portion of the business or assets of
Parent or Purchaser or the Company, or imposes any limitations on the
ability of Parent or Purchaser to conduct its business or own such
assets, (iii) imposes limitations on the ability of Parent or Sub
effectively to exercise full rights of ownership of the shares of
Common Stock, including, without limitation, the right to vote any
shares of Common Stock acquired or owned by Purchaser or Parent on all
matters properly presented to the Company's stockholders, (iv) requires
divestiture by Parent or Purchaser of any shares of Common Stock, or
(v) otherwise materially adversely affects the
A-2
<PAGE>
Condition of the Company and its subsidiaries taken as
a whole;
(b) there shall have occurred (i) any general
suspension of trading in, or limitation on prices for, securities on
any national securities exchange or in the over-the-counter market,
(ii) any material change in United States or any other currency
exchange rates or a suspension of, or limitation on, the markets
therefor, (iii) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States, (iv) the
commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States
and having a material adverse effect on the Company or materially
adversely affecting (or materially delaying) the consummation of the
Offer, (v) from the date of the Merger Agreement through the date of
termination or expiration of the Offer, a decline of at least 25% in
the Standard & Poor's 500 Index or (vi) in the case of any of the
situations described in clauses (i) through (v) inclusive existing at
the date of commencement of the Offer, a material acceleration or
worsening thereof;
(c) all consents, registrations, approvals,
permits, authorizations, notices, reports or other
A-3
<PAGE>
filings required to be obtained or made by the Company, Parent or
Purchaser with or from any governmental or regulatory entity in
connection with the execution, delivery and performance of the Merger
Agreement, the Offer and the consummation of the transactions
contemplated by the Merger Agreement shall not have been made or
obtained and such failure could reasonably be expected to have a
material adverse effect on the Condition of the Company and its
subsidiaries taken as a whole or could be reasonably likely to prevent
or materially delay consummation of the transactions contemplated by
the Merger Agreement;
(d) the Company's Board of Directors shall have
withdrawn, modified or amended in any respect adverse to Parent or
Purchaser its recommendation of the Offer or the Merger or shall have
resolved to do so;
(e) any representation or warranty made by the
Company in the Merger Agreement shall be untrue or incorrect
in any material respect;
(f) there shall have been a breach by the
Company of any of its covenants or agreements in any material respect
contained in the Merger Agreement;
(g) it shall have been publicly disclosed that
any Person (which includes a "person" as such term is
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<PAGE>
defined in Section 13(d)(3) of the Exchange Act) other than Purchaser,
any of its affiliates, or any group in which any of them is a member
shall have acquired beneficial ownership of more than 30% of the
outstanding Common Stock or shall have entered into a definitive
agreement or an agreement in principle with the Company with respect to
a tender offer or exchange offer for any Common Stock or a merger,
consolidation or other business combination with or involving the
Company; or
(h) the Merger Agreement shall have been terminated in
accordance with its terms; which, in the reasonable judgment of
Purchaser, in any such case and regardless of the circumstances giving
rise to any such condition, makes it inadvisable to proceed with such
acceptance for payment.
The foregoing conditions are for the sole benefit of Parent or
Purchaser, and may be asserted by them or waived in whole or in part at any time
and from time to time in their sole discretion; provided, however, that, without
the consent of the Company, Parent and Sub shall not waive the Minimum
Condition.
A-5
EXHIBIT (c)
[Sterile Concepts Holdings, Inc. letterhead]
April 3, 1996
Maxxim Medical, Inc.
104 Industrial Boulevard
Sugar Land, TX 77478
Attention: Kenneth Davidson
Peter Graham
Ladies and Gentlemen:
You have requested information from us in connection with a possible negotiated
acquisition transaction between us or our shareholders and you. You will treat
confidentially any information we furnish to you (the "Evaluation Material");
provided, however, that the term "Evaluation Material" does not include
information (1) which was or becomes generally available on a non-confidential
basis other than as a result of a breach of this agreement by you; (2) which
becomes lawfully available to you on a non-confidential basis from a source
other than us provided that such source is not known by you to be subject to an
obligation of confidentiality to us; or (3) which was lawfully in your
possession prior to it being furnished to you by us.
You will use the Evaluation Material solely for the purpose of evaluating,
proposing, negotiating and consummating the possible transaction. You may
disclose any Evaluation Material to your directors, officers, employees or
agents who need to know such information for the purpose of evaluating such a
transaction (it being understood that they shall be informed by you of the
confidential nature of such information and that by receiving such information
they are agreeing to be bound by this agreement).
In the event that you are requested in any proceeding to disclose any Evaluation
Material, you will give us prompt notice of such request so that we may seek an
appropriate protective order. If in the absence of a protective order you are
nonetheless compelled to disclose Evaluation Material, you may disclose such
information without liability hereunder; provided, however, that you give us
written notice of the information to be disclosed as far in advance of its
disclosure as is practicable under the circumstances, and upon our request and
at our expense, use your reasonable best efforts to obtain assurances that
confidential treatment will be accorded to such information.
In consideration of the Evaluation Material being furnished to you, you agreed
that for a period of one year from the date hereof neither you nor any of your
affiliates (as defined in the next paragraph) will solicit
(x) to employ any of our current officers or employees, or
(y) to engage any of our independent sales representatives,
<PAGE>
April 3, 1996
Page 2
with whom you have had contact in connection with your investigation or with
respect to whom you have requested information, so long as they are employed or
engaged by us, without obtaining our prior written consent, which shall not be
unreasonably withheld.
For a period beginning on the date hereof and continuing until the earlier of
(1) the consummation of the acquisition of all of our outstanding common stock
or substantially all of our assets by a third party, (2) execution of a
definitive agreement by you and us providing for an acquisition transaction and,
if contemplated by the terms of such definitive agreement, the commencement by
you of a tender offer to acquire at least a majority of our outstanding common
stock, or (3) two years from the date hereof, you and your affiliates (as
defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") will not (and you and they will not assist or encourage others
to), directly or indirectly, unless specifically authorized in writing in
advance by our Board of Directors:
(i) acquire or agree, offer, seek or propose to acquire (or
request permission to do so) ownership (including, but not limited to,
beneficial ownership as defined in Rule 13d-3 under the Exchange Act)
of any of our assets or businesses or any securities issued by us, or
any rights or options to acquire such ownership (including from a third
party), or any rights or options to acquire such ownership (including
from a third party), or
(ii) seek or propose to influence or control our management or
our policies (or request permission to do so), or
(iii) enter into any discussions, negotiations, arrangements
or understanding with any third party with respect to any of the
foregoing.
The provisions of the immediately preceding paragraph (the "Standstill
Provisions") notwithstanding, to the extent that we, pursuant to another
confidentiality agreement (a "Confidentiality Agreement"), provide Evaluation
Material to any other person or entity in connection with a proposed acquisition
transaction between us and such person or entity, the Standstill Provisions
shall be deemed to be automatically modified to give you the benefit of any
terms contained in such Confidentiality Agreement that are more favorable to
such person or entity than the equivalent terms of this agreement (and we shall
promptly notify you of such terms). The provisions of this paragraph shall
terminate and not be applicable with respect to any Confidentiality Agreement
which is entered into on or after the date that is 30 days after either you or
we terminate negotiations with respect to a possible transaction.
Neither party shall make any public disclosure concerning the subject matter of
this letter, including that you are having or have had discussions with us;
provided that either party may make such disclosure if it has received the
written opinion of its outside counsel that such disclosure must be made in
order that such party not commit a violation of law.
<PAGE>
April 3, 1996
Page 3
Upon our request you will promptly redeliver to us all copies of the Evaluation
Material furnished by us to you and will destroy all memoranda, notes and other
documents prepared by you or your directors, officers, employees or agents based
on the Evaluation Material.
Each party agrees that money damages would not be a sufficient remedy for any
breach of this agreement, and that in addition to all other remedies the
non-breaching party shall be entitled to specific performance and injunctive or
other equitable relief as a remedy for any such breach.
This agreement shall be governed by and construed in accordance with the laws of
the Commonwealth of Virginia, without giving effect to its conflict of laws
principles or rules.
If you are in agreement with the foregoing, please so indicate by signing and
returning one copy of this agreement, which will constitute our agreement with
respect to the matters set forth herein.
Very truly yours,
/s/ ROBERT G. WILSON, III
Wheat First Butcher Singer, as financial advisor
to and on behalf of Sterile Concepts Holdings, Inc.
Confirmed and Agreed to:
/s/ KENNETH W. DAVIDSON
By: Kenneth W. Davidson
Title: President
EXHIBIT (d)
FIRST AMENDMENT TO SHAREHOLDER PROTECTION RIGHTS AGREEMENT
This AMENDMENT (this "Amendment"), dated as of June 10, 1996, between
Sterile Concepts Holdings, Inc., a Virginia corporation (the "Company"), and
First Union National Bank of North Carolina(the "Rights Agent").
RECITALS
A. The Company and the Rights Agent are parties to a Shareholder
Protection Rights Agreement (the "Rights Agreement") dated as of March 6, 1996.
B. The Company desires to enter into an Agreement and Plan of Merger
(the "Merger Agreement") by and among the Company, Maxxim Medical, Inc., a
Delaware corporation ("Maxxim"), and Maxxim Acquisition Co., a Virginia
corporation ("Sub"), pursuant to which Sub will be merged into the Company (the
"Merger") and the shares of outstanding common stock of the Company will be
converted into the right to receive $20 per share in cash.
C. Terms used herein and not otherwise defined shall have the meaning
given to them in the Rights Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
covenants set forth herein, the parties hereto agree as follows:
1. Exemption of Transactions. Neither the (i) execution, delivery and
performance of the Merger Agreement, (ii) commencement of the Offer (as defined
in the Merger Agreement) nor (iii) acceptance of and payment for Common Stock by
Maxxim or Sub in accordance with the terms of the Merger Agreement shall (A)
trigger the exercisability of the Rights, (B) cause the separation of the Rights
from the certificates representing Common Stock to which they are attached, (C)
cause the occurrence of an Exchange Date or a Stock Acquisition Date or (D)
cause Maxxim, Sub or any of Maxxim's subsidiaries or affiliates to be deemed an
Acquiring Person.
2. No Further Amendment. Except as hereby amended, the Rights Agreement
shall remain in full force and effect.
3. Counterparts. This Amendment may be executed in counterparts, each
of which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement.
1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
STERILE CONCEPTS HOLDINGS, INC.
By: /s/ PAUL J. WOO, JR.
Title: President and Chief Executive Officer
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: /s/ ELEANOR G. AUTRY
Title: Vice President
2
EXHIBIT (e)
FOR IMMEDIATE RELEASE
MAXXIM MEDICAL SIGNS MERGER AGREEMENT WITH STERILE CONCEPTS
SUGAR LAND, Texas, June 10, 1996 -- Maxxim Medical, Inc. (NYSE:MAM) and
Sterile Concepts Holdings, Inc. (NYSE:SYS) today jointly announced the signing
of an Agreement of Merger. Under this Agreement, Maxxim will commence a formal
tender offer to the shareholders of Sterile Concepts on or before June 14, 1996,
wherein Maxxim will offer to purchase all outstanding shares of common stock of
Sterile Concepts for $20 per share. The completion of the tender offer will be
contingent on, among other conditions, receipt of appropriate regulatory
approvals and the valid tender of more than two-thirds of the outstanding shares
of common stock. Following successful completion of the tender offer, Maxxim is
required, subject to certain conditions of the Merger Agreement, to merge
Sterile Concepts with a subsidiary of Maxxim, resulting in the payment of $20
per share for any remaining outstanding shares of Sterile Concepts stock.
"This merger will create a strong force in the medical supply market,"
commented Kenneth W. Davidson, Chairman, Chief Executive Officer and President
of Maxxim Medical. "With the increasing consolidation in the provider side of
the market and the formation of the new "super buying groups", it is extremely
important for a supplier to be in a position to provide nationwide support on a
large scale. The combination of Sterile Concepts with our Sterile Design custom
procedure packs, together with our fluid management systems and protection
products, would place Maxxim in just such a position."
Paul J. Woo, Jr., President and Chief Executive Officer of Sterile
Concepts, commented, "After thoroughly reviewing alternatives available to the
company, we have concluded that combining our operations with Maxxim Medical
would create an organization with the critical mass needed to effectively
compete in the consolidating healthcare marketplace. This merger provides
Sterile Concepts with the opportunity to join forces with a proven leader in the
medical supply market."
- more -
<PAGE>
Maxxim will finance the transaction through NationsBank. The
transaction cost is estimated to be approximately $147 million, including the
assumption of existing Sterile Concepts debt. Bear, Stearns & Co. advised Maxxim
Medical and Wheat First Butcher Singer advised Sterile Concepts Holdings, Inc.
Sterile Concepts is a leading provider of surgical and clinical custom
procedure trays to hospitals and surgery centers in the United States. The
Company is headquartered in Richmond, Virginia and has production facilities in
Richmond, Temecula, CA and Minnetonka, MN.
Maxxim Medical is a major, diversified medical products manufacturer
and supplier.
# # #
EXHIBIT (f)
[Wheat First Butcher Singer letterhead]
The Board of Directors
June 10, 1996
CONFIDENTIAL
Sterile Concepts Holdings, Inc.
5100 Commerce Road
Richmond, Virginia 23234
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of Common Stock, without par
value (the "Shares"), of Sterile Concepts Holdings, Inc. (the "Company") of the
cash consideration of $20.00 per Share to be received by such holders pursuant
to the Agreement and Plan of Merger dated as of June 10, 1996, among Maxxim
Medical, Inc. (the "Acquiror"), Maxxim Acquisition Co. and the Company (the
"Agreement").
Wheat, First Securities, Inc. ("Wheat"), as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. Wheat has provided investment banking services for the Company
in the past for which it has recieved customary compensation. In the ordinary
course of our business as a broker-dealer, we may, from time to time, have a
long or short position in, and buy or sell, debt or equity securities of the
Company or the Acquiror for our own account or for the accounts of our
customers. Wheat has acted as financial advisor to the Board of Directors of the
Company in connection with this transaction and will receive a fee for such
services. Wheat will also receive a fee from the Company for rendering this
opinion.
In arriving at our opinion, we have, among other things:
(1) reviewed the financial and other information contained in the Company's
Annual Reports to Shareholders and Annual Reports on Form 10-K for the
fiscal years ended September 30, 1995, September 30, 1994 and September 30,
1993, and certain interim reports to Shareholders and Quarterly Reports on
Form 10-Q;
(2) reviewed the financial and other information contained in the Acquiror's
Annual Reports to Shareholders and Annual Reports on Form 10-K for the
fiscal years ended October 29, 1995, October 30, 1994, and October 31,
1993, and certain interim reports to Shareholders and Quarterly Reports on
Form 10-Q;
(3) conducted discussions with members of senior management of the Company and
the Acquiror concerning their respective businesses and prospects;
(4) reviewed certain publicly available information with respect to historical
market prices and trading activity for the Company's Common Stock and for
certain publicly traded companies which we deemed relevant;
(5) compared the results of operations of the Company with those of certain
publicly traded companies which we deemed relevant;
(6) compared the proposed financial terms of the transaction with the financial
terms of certain other mergers and acquisitions which we deemed to be
relevant;
(7) performed a discounted cash flow analysis of the Company based upon
estimates of projected financial performance prepared by the management of
the Company;
(8) reviewed the Agreement (including the Exhibits thereto) dated June 10,
1996; and
(9) reviewed such other financial studies and analyses and performed such other
investigations and took into account such other matters as we deemed
necessary.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all information supplied or otherwise made available to us by
the Acquiror and the Company, and we have not assumed any responsibility for
independent verification of such information or any independent valuation or
appraisal of any of the assets of the Acquiror and the Company. We have relied
upon the management of the Acquiror and the Company as to the reasonableness and
achievability of their financial and operational forecasts and projections, and
the assumptions and bases therefor, provided to us, and we have assumed that
such forecasts and projections reflect the best currently available estimates
and judgments of such management and that such forecasts and projections will be
realized in the amounts and in the time periods currently estimated by such
management. Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated on the date hereof and the
information made available to us through the date hereof. Our opinion does not
address the relative merits of the transaction contemplated by the Agreement as
compared to any alternative business strategies that might exist for the
Company, nor does it address the effect of any other business combination in
which the Company might engage.
Our advisory services and the opinion expressed herein are provided solely for
the use of the Company's Board of Directors in evaluating the transaction
contemplated by the Agreement and are not on behalf of, and are not intended to
confer rights or remedies upon the Acquiror, any
<PAGE>
stockholder of the Acquiror or the Company, or any person other than the
Company's Board of Directors. This opinion may not be summarized, excerpted from
or otherwise publicly referred to without our prior written consent.
On the basis of, and subject to the foregoing, we are of the opinion that as of
the date hereof the cash consideration of $20.00 per Share to be received by the
holders of the Shares is fair, from a financial point of view, to such holders.
Very truly yours,
WHEAT, FIRST SECURITIES, INC.
By: /s/ ROBERT G. WILSON, III
Managing Director
EXHIBIT (g)
June 14, 1996
Dear Stockholder:
I am pleased to report that on June 10, 1996, Sterile Concepts
Holdings, Inc. entered into an agreement and plan of merger with Maxxim Medical,
Inc. and one of its subsidiaries that provides for the acquisition of Sterile
Concepts by Maxxim at a price of $20.00 per share in cash. Under the terms of
the proposed transaction, a Maxxim subsidiary is today commencing a tender offer
for all of the outstanding shares of Sterile Concepts common stock at $20.00 per
share.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MAXXIM OFFER
AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF STERILE CONCEPTS STOCKHOLDERS. ACCORDINGLY, THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT ALL STERILE CONCEPTS STOCKHOLDERS ACCEPT
THE MAXXIM OFFER AND TENDER THEIR SHARES TO MAXXIM.
Following the successful completion of the tender offer, upon
approval by the required stockholder vote, the Maxxim subsidiary will be merged
with Sterile Concepts and all shares not purchased in the tender offer will be
converted into the right to receive $20.00 per share in cash in the merger.
Accompanying this letter is a copy of the Company's Solicitation/
Recommendation Statement on Schedule 14D-9. Also enclosed is Maxxim's Offer to
Purchase and related materials, including a Letter of Transmittal for use in
tendering shares. We urge you to read the enclosed materials carefully. The
management and directors of Sterile Concepts thank you for the support you have
given the Company.
On behalf of the Board of Directors,
Sincerely,
/s/ PAUL J. WOO, JR.
Paul J. Woo, Jr.
President and
Chief Executive Officer
