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Delaware | 4953 | 36-3640402 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
(847) 367-5910
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
President and Chief Executive Officer
Stericycle, Inc.
28161 North Keith Drive, Lake Forest, Illinois 60045
(847) 367-5910
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Michael Bonn Craig P. Colmar Johnson and Colmar 300 South Wacker Drive, Suite 1000 Chicago, Illinois 60606 (312) 922-1980 | Steven R. Block Christopher M. McNeill Block & Garden, LLP 12750 Merit Drive Park Central VII, Suite 770 Dallas Texas 75251 (214) 866-0990 |
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3.5% Promissory Notes (Letter of Credit Supported) Due 2014
Matthew H. Fleeger
President and Chief Executive Officer
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28161 North Keith Drive
Lake Forest, Illinois 60045
Attention: Investor Relations
(847) 367-5910
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 31, 2007
Corporate Secretary
October 8, 2007
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Proxy Card for Special Meeting | ||||||||
Letter of Transmittal | ||||||||
Consent of Ernst & Young, LLP | ||||||||
Consent of Marcum & Kliegman, LLP | ||||||||
Consent of Van Armburgh Valuation Associates, Inc. |
Annex A | Agreement and Plan of Merger dated as of July 6, 2007, by and among Stericycle, Inc., TMW Acquisition Corporation, and MedSolutions, Inc. | |
Annex B | First Amendment to Agreement and Plan of Merger dated as of September 28, 2007, by and among Stericycle, Inc., TMW Acquisition Corporation and MedSolutions, Inc. | |
Annex C | Opinion of Van Amburgh Valuation Associates, Inc., dated June 30, 2007 | |
Annex D | Appraisal and Dissenters’ Rights under the Texas Business Corporation Act | |
Annex E | Indenture dated as of July 12, 2007 between Stericycle, Inc. and LaSalle Bank National Association as trustee in respect of Stericycle’s 4.5% Promissory Notes due 2014 | |
Annex F | Indenture dated as of July 12, 2007 between Stericycle, Inc. and LaSalle Bank National Association as trustee in respect of Stericycle’s 3.5% Promissory Notes (Letter of Credit Supported) due 2014 |
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• | Stericycle, Inc., a Delaware corporation, as “Stericycle”; | ||
• | MedSolutions, Inc., a Texas corporation, as “MedSolutions”; | ||
• | TMW Acquisition Corporation, a newly-formed Texas corporation and a wholly-owned subsidiary of Stericycle, as “Merger Sub”; | ||
• | the merger of MedSolutions with Merger Sub and the conversion of shares of MedSolutions common stock into the right to receive cash and promissory notes as the “merger”; | ||
• | the promissory notes to be issued by Stericycle to holders of MedSolutions common stock in connection with the merger as the “promissory notes”; | ||
• | the Agreement and Plan of Merger dated as of July 6, 2007 by and among Stericycle, Merger Sub and MedSolutions, as amended by a First Amendment to Agreement and Plan of Merger dated as of September 28, 2007, as the “merger agreement”; and | ||
• | the Texas Business Corporation Act as the “TBCA.” |
Q1: | What am I voting on? | |
A1: | Stericycle is proposing to acquire MedSolutions. You are being asked to vote to approve and adopt the merger agreement. In the merger, MedSolutions will merge with Merger Sub. MedSolutions would be the surviving corporation in the merger and would become a wholly-owned subsidiary of Stericycle. | |
MedSolutions is also seeking your approval of a proposal to adjourn or postpone the special meeting, if necessary, to solicit additional proxies in favor of approval and adoption of the merger agreement and any other matters that may come before the special meeting. | ||
Q2: | What will I receive in exchange for my MedSolutions shares? | |
A2: | Upon completion of the merger, you will receive a combination of $0.50 in cash, without interest, and a promissory note in the principal amount of $1.50 for each share of MedSolutions common stock that you own. We refer to the aggregate amount of the cash consideration and note consideration to be received by MedSolutions shareholders pursuant to the merger as the “merger |
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consideration.” The aggregate merger consideration is subject to adjustment after the closing of the merger in certain events. See “The Merger Agreement — Adjustments to Merger Consideration” beginning on page 59 of this proxy statement/prospectus. At the closing of the merger, $125,000 of the aggregate cash consideration will be placed into an escrow account for use by MedSolutions’ shareholder representative for the costs and expenses of fulfilling its duties under the merger agreement. See “The Merger Agreement — Shareholder Representative” beginning on page 62 of this proxy statement/prospectus. | ||
The promissory notes will be payable in seven installments of interest only due on each of the first seven anniversaries of the date on which the merger closes and one installment of principal due on the seventh anniversary of such closing date, and will bear interest, at the election of each holder of shares of MedSolutions common stock, at the annual rate of either 3.5% (if such shareholder elects to have such promissory note supported by a master letter of credit) or 4.5% (if such shareholder does not elect such support). See “Description of Promissory Notes” beginning on page 71 of this proxy statement/prospectus for a full description of the promissory notes. The promissory notes will be subject to offset or reduction in principal amount pursuant to the merger consideration principal adjustment, litigation payment principal reduction and indemnification provisions of the merger agreement or in the event that the expenses of the payment agent and the indenture trustee exceed $80,000. See “The Merger Agreement — Payment Procedures,” “The Merger Agreement — Representations and Warranties and Indemnification,” and “The Merger Agreement — Adjustments to Merger Consideration” beginning on pages 56, 57 and 59 of this proxy statement/prospectus, respectively. | ||
Q3: | Do I have the option to receive all cash consideration or all note consideration for my MedSolutions shares? | |
A3: | No. All MedSolutions shareholders will receive the fixed combination of the cash consideration and the note consideration for each share of MedSolutions common stock that they own. | |
Q4: | What are the tax consequences of the merger to me? | |
A4: | For a discussion of certain material United States federal income tax consequences of the merger, see “Material United States Federal Income Tax Consequences” beginning on page 51 of this proxy statement/prospectus. | |
Tax matters are very complicated and the consequences of the merger to any particular MedSolutions shareholder will depend on that shareholder’s particular facts and circumstances. You are urged to consult your own tax advisor to determine your own tax consequences from the merger. | ||
Q5: | What is the required vote to approve and adopt the merger agreement? | |
A5: | Holders representing a majority of the outstanding shares of MedSolutions common stock entitled to vote at the special meeting must vote to approve and adopt the merger agreement to complete the merger. No vote of Stericycle stockholders is required in connection with the merger. | |
Q6: | What happens if I do not vote? | |
A6: | Because the required vote of MedSolutions shareholders is based upon the number of outstanding shares of MedSolutions common stock entitled to vote rather than upon the number of shares actually voted, abstentions from voting and “broker non-votes” will have the same effect as a vote |
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AGAINST approval and adoption of the merger agreement. If you return a properly signed proxy card but do not indicate how you want to vote, your proxy will be counted as a vote FOR approval and adoption of the merger agreement and FOR approval of any proposal to adjourn or postpone the special meeting, if necessary, to solicit additional proxies in favor of approval and adoption of the merger agreement. | ||
Q7: | How does the MedSolutions Board of Directors recommend I vote? | |
A7: | The Board of Directors of MedSolutions unanimously recommends that MedSolutions’ shareholders vote FOR approval and adoption of the merger agreement. The MedSolutions Board of Directors believes the merger is advisable and in the best interests of MedSolutions and its shareholders. | |
Q8: | Do I have dissenters’ or appraisal rights with respect to the merger? | |
A8: | Yes. Under Texas law, you have the right to dissent from the merger and, in lieu of receiving the merger consideration, obtain payment in cash of the fair value of your shares of MedSolutions common stock as determined by a Texas state court. To exercise appraisal rights, you must strictly follow the procedures prescribed by Article 5.12 of the TBCA. See “The Merger — Appraisal and Dissenters’ Rights” beginning on page 45 of this proxy statement/prospectus. In addition, the full text of the applicable provisions of Texas law dealing with dissenters’ rights is included asAnnex D to this proxy statement/prospectus. | |
Q9: | Are there risks associated with the merger that I should consider in deciding how to vote? | |
A9: | Yes. There are risks associated with all business combinations, including the merger of our two companies. There are a number of risks that are discussed in this document and in other documents incorporated by reference into this document. Please read with particular care the more detailed description of the risks associated with the merger discussed under “Risk Factors” beginning on page 16 of this proxy statement/prospectus. | |
Q10: | When do you expect the merger to be completed? | |
A10: | We are working on completing the merger as quickly as possible. To complete the merger, we must obtain the approval of the MedSolutions shareholders and satisfy or waive all other closing conditions under the merger agreement, which we currently expect should occur in the fourth quarter of 2007. However, we cannot assure you when or if the merger will occur. See “The Merger Agreement — Conditions Precedent” beginning on page 66 of this proxy statement/prospectus. If the merger occurs, we will promptly make a public announcement of this fact. | |
Q11: | What will happen to my MedSolutions shares after completion of the merger? | |
A11: | Upon completion of the merger, your shares of MedSolutions common stock will be canceled and will represent only the right to receive your portion of the merger consideration (or the fair value of your MedSolutions common stock if you seek appraisal rights). |
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Q12: | Who will represent the interests of MedSolutions shareholders under the merger agreement after the effective time of the merger? | |
A12: | Pursuant to the merger agreement, at the effective time of the merger Matthew H. Fleeger, MedSolutions’ President and Chief Executive Officer, and Winship B. Moody, Sr., MedSolutions’ Chairman of the Board, will be appointed as the joint agents and attorneys-in-fact, for the holders of shares of MedSolutions common stock who have duly surrendered or may duly surrender their stock certificates to the payment agent, to give and receive notices and communications and to take any and all action on behalf of such holders pursuant to the merger agreement and in connection with the promissory notes, including without limitation asserting, prosecuting, or settling any claim against the surviving corporation or Stericycle or defending or settling any claim asserted by the surviving corporation or Stericycle. In this capacity, Mr. Fleeger and Mr. Moody are collectively referred to as the “shareholder representative” in this proxy statement/prospectus. By voting to approve and adopt the merger agreement each holder of MedSolutions common stock agrees that the shareholder representative will not be liable to such holder or any other person for any action taken, or declined to be taken, in good faith and in the exercise of reasonable judgment. | |
At the closing of the merger, Stericycle will place $125,000 of the aggregate cash merger consideration into an escrow account with Park Cities Bank, Dallas, Texas, which amount will be made available for use by the shareholder representative for the costs and expenses incurred by the shareholder representative in fulfilling its duties under the merger agreement. Such costs and expenses will include $5,000 per year compensation paid to each of Messrs. Fleeger and Moody for their service as shareholder representative. The $125,000 will be deducted on a pro rata basis from the cash consideration distributable to the holders of shares of MedSolutions common stock and holders of options to purchase shares of MedSolutions common stock in connection with the merger. Any funds remaining in such escrow account on the date of the last payment payable under the promissory notes will be remitted to the surviving corporation to the merger to be applied towards the $250,000 payment due with respect to the litigation settlement described in “The Merger Agreement — Litigation Adjustment” on page 61 of this proxy statement/prospectus. | ||
See “The Merger Agreement — Shareholder Representative” beginning on page 62 of this proxy statement/prospectus. | ||
About the Special Meeting | ||
Q13: | When and where is the MedSolutions special shareholder meeting? | |
A13: | The MedSolutions special shareholder meeting will take place on October 31, 2007, at 10:00 a.m., Dallas, Texas time, at MedSolutions’ corporate headquarters located at 12750 Merit Drive, Park Central VII, Suite 770, Dallas, Texas 75251. | |
Q14: | What will happen at the special meeting? | |
A14: | At the MedSolutions special meeting, MedSolutions shareholders will vote on a proposal to adopt the merger agreement and on a proposal to approve adjournments or postponements of the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the merger proposal. We cannot complete the merger unless, among other things, MedSolutions’ shareholders vote to adopt the merger agreement. |
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Q15: | Who is entitled to vote at the special meeting? | |
A15: | Only holders of record of MedSolutions common stock at the close of business on October 8, 2007, which is the date MedSolutions’ Board of Directors has fixed as the record date for the special meeting, are entitled to receive notice of and vote at the special meeting. | |
Q16: | What is a quorum? | |
A16: | A quorum is the number of shares that must be present to hold the meeting. The quorum requirement for the MedSolutions special meeting is one-third of the issued and outstanding shares of MedSolutions common stock as of the record date, present in person or represented by proxy and entitled to vote at the special meeting. A proxy submitted by a shareholder may indicate that all or a portion of the shares represented by the proxy are not being voted with respect to a particular matter. Proxies that are marked “abstain” or for which votes have otherwise been withheld and proxies relating to “street name” shares that are returned to MedSolutions but not voted will be treated as shares present for purposes of determining the presence of a quorum on all matters. | |
Q17: | How many shares can vote? | |
A17: | On the record date, MedSolutions had outstanding 26,458,446 shares of common stock, which constitute MedSolutions’ only outstanding voting securities. Each MedSolutions shareholder is entitled to one vote on each proposal for each share of MedSolutions common stock held as of the record date. | |
Q18: | What vote is required? | |
A18: | The affirmative vote of the holders of a majority of the outstanding shares of MedSolutions common stock entitled to vote at the MedSolutions special meeting is required to adopt the merger agreement. The approval of a proposal to adjourn or postpone the special meeting, if necessary, to permit further solicitation of proxies, if there are not sufficient votes at the time of the special meeting to approve the merger agreement, requires the vote of a majority of shares present in person or by proxy at the special meeting and actually voted at that special meeting. | |
If a quorum is not present at the MedSolutions special meeting, the holders of a majority of the shares entitled to vote who are present in person or by proxy at the meeting may adjourn the meeting. | ||
In conjunction with the execution of the merger agreement, 50 MedSolutions shareholders entered into a voting agreement with Stericycle and Merger Sub which obligates them to vote their shares of common stock“FOR”the merger agreement. As of the record date, the shareholders subject to the voting agreement with Stericycle and Merger Sub were entitled to vote an aggregate of 15,102,594 shares of MedSolutions, which represented approximately 57.1% of the MedSolutions common stock outstanding and entitled to vote as of the record date. Accordingly, the shareholders party to the abovementioned voting agreement may approve the merger on their own vote irrespective of how any other shareholders may vote. | ||
Even if there are sufficient votes to approve the merger at the special meeting, we cannot assure you that the merger will be completed, because the completion of the merger is subject to the satisfaction or waiver of other conditions discussed in this proxy statement/prospectus. | ||
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Q19: | What do I need to do now? | |
A19: | After carefully reading and considering the information contained and referred to in this proxy statement/prospectus, including its annexes, please authorize your shares of MedSolutions common stock to be voted by returning your completed, dated and signed proxy card in the enclosed return envelope as soon as possible. To be sure that your vote is counted, please submit your proxy as instructed on your proxy card even if you plan to attend the special meeting in person. DO NOT enclose or return your stock certificate(s) with your proxy card. If you hold shares registered in the name of a broker, bank or other nominee, that broker, bank or other nominee will provide a voting instruction card for use in directing your broker, bank or other nominee how to vote those shares. | |
Q20: | May I vote in person? | |
A20: | Yes. You may attend the special meeting of MedSolutions’ shareholders and vote your shares in person rather than by signing and returning your proxy card. If you wish to vote in person and your shares are held by a broker, bank or other nominee, you need to obtain a proxy from the broker, bank or nominee authorizing you to vote your shares held in the broker’s, bank’s or nominee’s name. | |
Q21: | If my shares are held in “street name,” will my broker, bank or other nominee vote my shares for me? | |
A21: | Yes, but your broker, bank or other nominee may vote your shares of MedSolutions common stock only if you instruct your broker, bank or other nominee how to vote. If you do not provide your broker, bank or other nominee with instructions on how to vote your “street name” shares, your broker, bank or other nominee will not be permitted to vote them on the merger agreement. You should follow the directions your broker, bank or other nominee provides to ensure your shares are voted at the special meeting. | |
Q22: | May I change my vote? | |
A22: | Yes. You may change your vote at any time before your proxy is voted at the special meeting. If your shares of MedSolutions common stock are registered in your own name, you can do this in one of three ways: |
• | First, you can deliver to MedSolutions, prior to the special meeting, a written notice stating that you want to revoke your proxy. The notice should be sent to the attention of Ms. Beverly Fleeger, Corporate Secretary, MedSolutions, Inc., 12750 Merit Drive, Park Central VII, Suite 770, Dallas, Texas 75251, to arrive by the close of business on October 30, 2007. | ||
• | Second, prior to the special meeting, you can complete and deliver a new proxy card. The proxy card should be sent to Ms. Beverly Fleeger, Corporate Secretary, MedSolutions, Inc., 12750 Merit Drive, Park Central VII, Suite 770, Dallas, Texas 75251 to arrive by the close of business on October 30, 2007. The latest dated and signed proxy actually received by this addressee before the special meeting will be counted, and any earlier proxies will be considered revoked. | ||
• | Third, you can attend the MedSolutions special meeting and vote in person. Any earlier proxy will thereby be revoked automatically. Simply attending the special meeting, however, will not revoke your proxy, as you must vote at the special meeting to revoke a prior proxy. | ||
If you have instructed a broker to vote your shares, you must follow directions you receive from your broker to change or revoke your vote. |
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If you are a street-name shareholder and you vote by proxy, you may later revoke your proxy instructions by informing the holder of record in accordance with that entity’s procedures. | ||
Q23: | How will the proxies vote on any other business brought up at the special meetings? | |
A23: | By submitting your proxy, you authorize the persons named on the proxy card to use their judgment to determine how to vote on any other matter properly brought before the special meeting. The proxies will vote your shares in accordance with your instructions. If you sign, date and return your proxy without giving specific voting instructions, the proxies will vote your shares “FOR” approval and adoption of the merger agreement and FOR approval of any proposal to adjourn or postpone the special meeting, if necessary, to solicit additional proxies in favor of approval and adoption of the merger agreement. If you do not return your proxy, or if your shares are held in street name and you do not instruct your bank, broker or nominee on how to vote, your shares will not be voted at the special meeting. | |
The Board of Directors of MedSolutions does not intend to bring any other business before the meeting, and it is not aware that anyone else intends to do so. If any other business properly comes before the meeting, it is the intention of the persons named on the proxy cards to vote as proxies in accordance with their best judgment. | ||
Q24: | What is a broker non-vote? | |
A24: | A “broker non-vote” occurs when a bank, broker or other nominee submits a proxy that indicates that the broker does not vote for some or all of the proposals, because the broker has not received instructions from the beneficial owners on how to vote on these proposals and does not have discretionary authority to vote in the absence of instructions. | |
Q25: | Will broker non-votes or abstentions affect the results? | |
A25: | If you are a MedSolutions shareholder, broker non-votes and abstentions will have the same effect as a vote against the proposal to adopt the merger agreement, but will have no effect on the outcome of the proposal relating to adjournments or postponements of the special meeting, if necessary, to permit further solicitation of proxies. If your shares are held in street name, we urge you to instruct your bank, broker or nominee on how to vote your shares. | |
Q26: | What happens if I choose not to submit a proxy or to vote? | |
A26: | If a MedSolutions shareholder does not submit a proxy or vote at the MedSolutions special meeting, it will have the same effect as a vote against the proposal to adopt the merger agreement, but will have no effect on the outcome of a proposal to adjourn or postpone the special meeting, if necessary, to permit further solicitation of proxies. |
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Q27: | Why is it important for me to vote? | |
A27: | We cannot complete the merger without holders of a majority of the outstanding shares of MedSolutions common stock entitled to vote voting in favor of the approval and adoption of the merger agreement. | |
Q28: | What happens if I sell my shares of MedSolutions common stock before the special meeting? | |
A28: | The record date for the special meeting is October 8, 2007, which is earlier than the date of the special meeting. If you hold your shares of MedSolutions common stock on the record date you will retain your right to vote at the special meeting. If you transfer your shares of MedSolutions common stock after the record date but prior to the date on which the merger is completed, you will lose the right to receive the merger consideration for shares of MedSolutions common stock. The right to receive the merger consideration will pass to the person who owns your shares of MedSolutions common stock when the merger is completed. | |
General | ||
Q29: | Should I send in my MedSolutions stock certificates now? | |
A29: | No. PLEASE DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY CARD. After the merger is completed, you will receive written instructions informing you how to send in your stock certificates to receive the merger consideration. | |
Q30: | What does it mean if I get more than one proxy card? | |
A30: | Your shares are probably registered in more than one account. You should vote each proxy card you receive. | |
Q31: | Where can I find more information about the special meeting, the merger, MedSolutions or Stericycle? | |
A31: | You can find more information about MedSolutions or Stericycle in each of the companies’ respective filings with the Securities and Exchange Commission and, with respect to Stericycle, with the Nasdaq National Market. Information about Stericycle is also available on its website, www.stericycle.com, where many of its filings with the Securities and Exchange Commission can be viewed and downloaded. If you have any questions about the special meeting, the merger or how to submit your proxy, or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact MedSolutions at the address or phone number below. If your broker holds your shares, you can also call your broker for additional information. | |
MedSolutions, Inc. | ||
12750 Merit Drive | ||
Park Central VII, Suite 770 | ||
Dallas, Texas 75251 | ||
Attn: Ms. Beverly Fleeger | ||
(972) 931-2374 |
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28161 North Keith Drive
Lake Forest, Illinois 60045
(847) 367-5910
12750 Merit Drive
Park Central VII, Suite 770
Dallas, Texas 75251
(972) 931-2374
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• | adoption of the merger agreement by the holders of at least a majority of the outstanding MedSolutions shares entitled to vote at the MedSolutions special meeting; | ||
• | continued effectiveness of the registration statement of which this proxy statement/prospectus is a part, the absence of a stop order by the Securities and Exchange Commission suspending the effectiveness of the registration statement and the absence of any continuing action, suit, proceeding or investigation by the SEC to suspend such effectiveness; | ||
• | absence of any temporary restraining order, preliminary or permanent injunction or other order issued by a court or other governmental authority making the merger illegal or otherwise prohibiting the consummation of the merger; | ||
• | absence of MedSolutions shareholders exercising their appraisal and dissenters rights with respect to greater than 7.5% of the outstanding shares of MedSolutions common stock immediately prior to the effective time of the merger; | ||
• | entry by Stericycle into consulting agreements and/or noncompetition agreements with certain of the officers, directors, employees and shareholders of MedSolutions; | ||
• | accuracy as of the closing of the merger of the representations and warranties made by each of MedSolutions, Stericycle and Merger Sub to the extent specified in the merger agreement; and | ||
• | MedSolutions’, Stericycle’s and Merger Sub’s performance in all material respects of their respective obligations, agreements and conditions under the merger agreement. |
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• | by mutual written consent of Stericycle, Merger Sub and MedSolutions; | |
• | by either Stericycle or MedSolutions, if: |
• | adoption of the merger agreement and approval of the merger by the MedSolutions shareholders is not obtained; | ||
• | the parties fail to consummate the merger on or before November 30, 2007, unless the failure is the result of a breach of the merger agreement by the party seeking the termination; or | ||
• | any governmental authority has issued a final and nonappealable order, decree or ruling or has taken any other final and nonappealable action that restrains, enjoins or otherwise prohibits the merger, unless the party seeking the termination has not used its reasonable best efforts to oppose such order or decision or to have such order or decision vacated or made inapplicable to the merger; |
• | by Stericycle, if: |
• | MedSolutions materially breaches any of its representations, warranties, covenants or agreements set forth in the merger agreement, and MedSolutions has not cured such breach within 15 business days of receiving written notice from Stericycle of such breach; | ||
• | one or more of Stericycle’s conditions precedent to closing the merger are not satisfied or capable of being satisfied on or before November 30, 2007 as a result of MedSolutions’ failure to comply with its obligations under the merger agreement; | ||
• | MedSolutions’ Board of Directors withdraws or materially and adversely to Stericycle modifies its approval of the merger agreement and the merger, other than (i) as a result of a material breach by Stericycle or Merger Sub of a representation, warranty or covenant under the merger agreement which remains uncured for a period of two business days after receipt of notice from MedSolutions of such breach, or (ii) as a result of the failure of any of MedSolutions’ conditions precedent to closing the merger not being met; or | ||
• | MedSolutions enters into a definitive agreement (other than the merger agreement) to implement: |
• | an investment in MedSolutions representing (on a post-investment basis) more than 25% of MedSolutions’ capital stock or a purchase from MedSolutions of more than 25% of the shares of its capital stock or any debt securities convertible into or exchangeable for more than 25% of the shares of its capital stock; | ||
• | a merger, consolidation, share exchange, recapitalization, business combination or other similar transaction involving all of MedSolutions’ equity interests or all shares of the MedSolutions common stock; | ||
• | the sale, lease, exchange, mortgage, pledge, transfer or other disposition of all or substantially all of MedSolutions’ assets in a single transaction or a series of related transactions; | ||
• | a tender offer or exchange offer for 25% or more of the outstanding shares of MedSolutions’ capital stock or the filing of a registration statement under the Securities Act of 1933, as amended, in connection with such a tender offer or exchange offer; or | ||
• | any public announcement of a proposal, plan or intention to do so, or any agreement to engage in, any of the matters described immediately above; |
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• | adoption of the merger agreement and approval of the merger by the MedSolutions shareholders is not obtained by reason of the violation of the voting agreement by one or more of MedSolutions’ shareholders who are party to the voting agreement; |
• | by MedSolutions, if: |
• | either Stericycle or Merger Sub materially breaches any of its representations, warranties, covenants or agreements set forth in the merger agreement, and Stericycle or Merger Sub, as the case may be, has not cured such breach within 15 business days of receiving written notice from MedSolutions of such breach; | ||
• | one or more of MedSolutions’ conditions precedent to closing the merger are not satisfied or capable of being satisfied on or before November 30, 2007 as a result of either Stericycle’s or Merger Sub’s failure to comply with its obligations under the merger agreement; or | ||
• | MedSolutions enters into a definitive agreement providing for the implementation of a superior proposal, which is defined as the acquisition by a third party of more than 50% of the voting power of MedSolutions’ equity securities or more than 50% of MedSolutions’ assets, pursuant to a tender or exchange offer, merger, consolidation, liquidation or dissolution, recapitalization, sale of assets or otherwise, if MedSolutions’ Board of Directors has determined in its good faith judgment, after consultation with MedSolutions’ valuation advisor and after considering the likelihood and timing of the consummation of such third party transaction and any amendments or modifications to the merger agreement that Stericycle has offered or proposed within five days of learning of such proposed transaction, that such transaction is more favorable from a financial point of view to MedSolutions’ shareholders than the merger with Stericycle. |
• | if MedSolutions terminates the merger agreement because MedSolutions enters into a definitive agreement providing for the implementation of a superior proposal, which is defined as the acquisition by a third party of more than 50% of the voting power of MedSolutions’ equity securities or more than 50% of MedSolutions’ assets, pursuant to a tender or exchange offer, merger, consolidation, liquidation or dissolution, recapitalization, sale of assets or otherwise, if MedSolutions’ Board of Directors has determined in its good faith judgment, after consultation with MedSolutions’ valuation advisor and after considering the likelihood and timing of the consummation of such third party transaction and any amendments or modifications to the merger agreement that Stericycle has offered or proposed within five days of learning of such proposed transaction, that such transaction is more favorable from a financial point of view to MedSolutions’ shareholders than the merger with Stericycle; or | ||
• | if Stericycle terminates the merger agreement because: |
• | MedSolutions’ Board of Directors withdraws or materially and adversely to Stericycle modifies its approval of the merger agreement and the merger, other than (i) as a result of a material breach by Stericycle or Merger Sub of a representation, warranty or covenant under |
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the merger agreement which remains uncured for a period of two business days after receipt of notice from MedSolutions of such breach, or (ii) as a result of the failure of any of MedSolutions’ conditions precedent to closing the merger not being met; | |||
• | MedSolutions enters into a definitive agreement (other than the merger agreement) to implement: |
• | an investment in MedSolutions representing (on a post-investment basis) more than 25% of MedSolutions’ capital stock or a purchase from MedSolutions of more than 25% of the shares of its capital stock or any debt securities convertible into or exchangeable for more than 25% of the shares of its capital stock; | ||
• | a merger, consolidation, share exchange, recapitalization, business combination or other similar transaction involving all of MedSolutions’ equity interests or all shares of the MedSolutions common stock; | ||
• | the sale, lease, exchange, mortgage, pledge, transfer or other disposition of all or substantially all of MedSolutions’ assets in a single transaction or a series of related transactions; | ||
• | a tender offer or exchange offer for 25% or more of the outstanding shares of MedSolutions’ capital stock or the filing of a registration statement under the Securities Act of 1933, as amended, in connection with such a tender offer or exchange offer; or | ||
• | any public announcement of a proposal, plan or intention to do so, or any agreement to engage in, any of the matters described immediately above; or |
• | adoption of the merger agreement and approval of the merger by the MedSolutions shareholders is not obtained by reason of the violation of the voting agreement by one or more of MedSolutions’ shareholders who are party to the voting agreement. |
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• | One or more officers of MedSolutions will enter into consulting agreements with Stericycle upon effectiveness of the merger; | ||
• | pursuant to the merger agreement, all employment agreements entered into between MedSolutions and its officers will be terminated at or prior to closing, and such officers will be paid all severance benefits payable in connection with such terminations; | ||
• | the merger agreement provides for the cashless exercise of all MedSolutions stock options held by directors and officers as of the effective time of the merger; | ||
• | all debt owed by MedSolutions to its officers and directors will be paid in full within 30 days of the effective time of the merger; and | ||
• | certain officers and directors of MedSolutions will be indemnified by Stericycle as of the effective time of the merger and released from their personal guarantees of MedSolutions debt no later than 30 days after the effective time. |
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• | MedSolutions may be required to pay Stericycle $2.5 million if the merger agreement is terminated under certain circumstances and MedSolutions enters into or completes an alternative transaction; | ||
• | Certain costs relating to the merger (such as legal, accounting and valuation advisory fees) are payable by MedSolutions whether or not the merger is completed; | ||
• | There may be substantial disruption to the business of MedSolutions and a distraction of its management and employees from day-to-day operations, because matters related to the merger may require substantial commitments of time and resources, which could otherwise have been devoted to other opportunities that could have been beneficial to MedSolutions; | ||
• | MedSolutions’ business could be adversely affected if it is unable to retain key employees or attract qualified replacements; and | ||
• | MedSolutions would continue to face the risks that it currently faces, as described below in the section entitled “Information About MedSolutions” beginning on page 78 of this proxy statement/prospectus. |
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• | the interest rate on the promissory notes, which may be less than prevailing market rates; |
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• | the maturity date of the promissory notes, which is not for seven years after the closing of the merger; | ||
• | the potential reduction in the principal of the promissory notes, in one case retroactive to the date of issuance, by reason of a merger consideration principal reduction or litigation payment principal reduction; or | ||
• | the potential reduction in the interest payments on the promissory notes (and possibly even the principal of the promissory notes), by reason of an indemnification claim payment reduction. |
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• | truck accidents; | ||
• | damaged or leaking containers; | ||
• | improper storage of regulated waste by customers; | ||
• | improper placement by customers of materials into the waste stream that Stericycle is not authorized or able to process, such as certain body parts and tissues; or | ||
• | malfunctioning treatment plant equipment. |
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• | identify suitable businesses to buy; | ||
• | complete the purchase of those businesses on terms acceptable to Stericycle; | ||
• | improve the operations of the businesses that Stericycle does buy and successfully integrate their operations into Stericycle’s; or | ||
• | avoid or overcome any concerns expressed by regulators. |
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• | government controls; | ||
• | import and export license requirements; | ||
• | political or economic insecurity; | ||
• | trade restrictions; | ||
• | changes in tariffs and taxes; | ||
• | exchange rate fluctuations; | ||
• | Stericycle’s unfamiliarity with local laws, regulations, practices and customs; | ||
• | restrictions on repatriating foreign profits back to the United States; or | ||
• | difficulties in staffing and managing international operations. |
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• | the factors described under “Risk Factors” beginning on page 16 of this proxy statement/prospectus; | ||
• | the factors that generally affect Stericycle’s and MedSolutions’ businesses as further outlined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this proxy statement/prospectus with respect to MedSolutions and included in Stericycle’s 2006 Form 10-K and 2007 Second Quarter Form 10-Q in respect of Stericycle, including the performance of contracts by suppliers, customers and partners; employee management issues; and complexities of global political and economic developments; and | ||
• | the fact that, following the merger, the actual results of the combined company could differ materially from the expectations set forth in this proxy statement/prospectus and the documents incorporated by reference depending on additional factors such as: |
• | the combined company’s cost of capital; | ||
• | the ability of the combined company to identify and implement cost savings, synergies and efficiencies in the time frame needed to achieve these expectations; | ||
• | the combined company’s actual capital needs, the absence of any material incident of property damage or other hazard that could affect the need to effect capital expenditures and any currently unforeseen merger or acquisition opportunities that could affect capital needs; and | ||
• | the costs incurred in implementing synergies including, but not limited to, our ability to terminate, amend or renegotiate prior contractual commitments of MedSolutions. |
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Six Months Ended | ||||||||||||||||||||||||
Year Ended December 31, | June 30, | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | 2007 | |||||||||||||||||||
Ratio of earnings to fixed charges(1) | 6.57 | 8.40 | 10.64 | 8.60 | 4.33 | 6.81 |
(1) | For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of income before income taxes plus fixed charges. Fixed charges consist of (i) interest on all indebtedness (including capital leases) and amortization of debt discount and deferred financing fees, (ii) the interest factor attributable to rentals and (iii) interest on liabilities associated with Financial Accounting Standards Board Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes. |
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Six Months Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | June 30 | |||||||||||||||||||||||||||
2006(3) | 2005 | 2004 | 2003 | 2002 | 2007 | 2006 | ||||||||||||||||||||||
(In thousands except per share data) | Unaudited | |||||||||||||||||||||||||||
Statements of Income Data(1) | ||||||||||||||||||||||||||||
Revenues | $ | 789,637 | $ | 609,457 | $ | 516,228 | $ | 453,225 | $ | 401,519 | $ | 443,894 | $ | 377,673 | ||||||||||||||
Income from operations | 201,762 | 166,532 | 145,655 | 126,397 | 100,832 | 115,447 | 94,707 | |||||||||||||||||||||
Net income | 105,270 | 67,154 | 78,178 | 65,781 | 45,724 | 61,385 | 48,693 | |||||||||||||||||||||
Net income applicable to common stock | 105,270 | 67,154 | 78,178 | 65,781 | 45,037 | 61,385 | 48,693 | |||||||||||||||||||||
Diluted net income per share of common stock(2)(5) | 1.17 | 0.74 | 0.85 | 0.72 | 0.51 | 0.68 | 0.54 | |||||||||||||||||||||
Depreciation and amortization | 27,036 | 21,431 | 21,803 | 17,255 | 14,981 | 14,846 | 13,008 | |||||||||||||||||||||
Other Data | ||||||||||||||||||||||||||||
Cash provided by operating activities | $ | 160,162 | $ | 94,327 | $ | 114,611 | $ | 123,887 | $ | 98,731 | $ | 70,471 | $ | 64,349 | ||||||||||||||
Cash used in investing activities | (201,425 | ) | (156,001 | ) | (105,093 | ) | (57,635 | ) | (49,470 | ) | (46,035 | ) | (143,560 | ) | ||||||||||||||
Cash (used in) provided by financing activities | 52,547 | 59,500 | (6,941 | ) | (66,820 | ) | (53,705 | ) | (30,799 | ) | 77,691 | |||||||||||||||||
Balance Sheet Data(1)(4) | ||||||||||||||||||||||||||||
Cash, cash equivalents and short-term investments | $ | 16,040 | $ | 8,545 | $ | 7,949 | $ | 7,881 | $ | 8,887 | $ | 2,307 | $ | 7,292 | ||||||||||||||
Total assets | 1,327,906 | 1,047,660 | 834,141 | 707,462 | 667,095 | 1,415,180 | 1,235,405 | |||||||||||||||||||||
Long-term debt, net of current maturities | 443,115 | 348,841 | 190,431 | 163,016 | 224,124 | 508,746 | 456,825 | |||||||||||||||||||||
Convertible redeemable preferred stock | — | — | — | 20,944 | 28,049 | — | — | |||||||||||||||||||||
Shareholders’ equity | $ | 625,081 | $ | 521,634 | $ | 495,372 | $ | 407,820 | $ | 326,729 | $ | 649,274 | $ | 574,408 |
(1) | See Note 4 to Stericycle’s consolidated financial statements included in its 2006 Form 10-K for information concerning Stericycle’s acquisitions during the three years ended December 31, 2006. | |
(2) | See Note 10 to Stericycle’s consolidated financial statements included in its 2006 Form 10-K for information concerning the computation of net income per common share. In 2006, net income includes costs (net of tax) related to a fixed asset write-down of equipment of $0.2 million, a write-down of an investment in securities of $0.6 million and acquisition-related |
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costs of $2.1 million, partially offset by income recorded from insurance proceeds related to the settlement of the 3CI Complete Compliance Corporation class action litigation (“3CI litigation”) of $0.6 million, which negatively impacted earnings per share (“EPS”) by $0.09 per share. Of the total of $8.8 million of such items, $7.3 million were non-cash items. In 2005, net income includes costs (net of tax) related to the preliminary settlement of the 3CI litigation of $23.4 million, a write-down of a note receivable of $1.5 million, fixed asset impairments of $0.5 million, acquisition-related costs of $0.5 million, settlement of licensing litigation of $1.1 million and items related to debt restructuring of $0.3 million, which negatively impacted EPS by $0.30 per share. Of the total of $27.3 million of such items, $3.4 million were non-cash items. In 2004, net income includes acquisition-related costs of $0.5 million, fixed asset write-offs of $0.7 million and items related to debt restructuring and redemption of senior subordinated debt of $2.8 million, which negatively impacted EPS by $0.05 per share. Of the total of $4.0 million of such items, $1.4 million were non-cash items. In 2003, net income includes acquisition-related costs (net of tax) of $0.4 million and items related to debt restructuring and subordinated debt repurchases of $2.0 million, which negatively impacted EPS by $0.02 per share. Of the total of $2.4 million of such items, $0.5 million were non-cash items. In 2002, net income includes acquisition-related costs (net of tax) of $0.2 million, fixed asset write-offs of $1.8 million and items related to debt restructuring and subordinated debt repurchases of $1.4 million, which negatively impacted EPS by $0.04 per share. Of the total of $3.4 million of such items, $2.0 million were non-cash items. | ||
(3) | On January 1, 2006, Stericycle adopted the provisions of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (“SFAS No. 123R”) using the modified prospective method to account for stock compensation costs. SFAS No. 123R requires the measurement and recognition of compensation expense for all stock-based payment awards made to Stericycle’s employees and directors. During the year ended December 31, 2006, Stericycle recognized stock compensation expense of $6.5 million, net of tax. See Note 11 to Stericycle’s consolidated financial statements included in its 2006 Form 10-K for additional information related to its stock compensation expense. | |
(4) | Balance sheet data is as of December 31 of the year in question or as of June 30 for the six months ended June 30, 2007 and 2006. | |
(5) | Per share data adjusted to reflect a 2-for-1 stock split effective May 31, 2007. |
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Six Months Ended June 30, 2007 | Year Ended December 31, 2006 | |||||||||||||||||||||||||||||||||
(in thousands except share and per share data) | (in thousands except share and per share data) | |||||||||||||||||||||||||||||||||
Stericycle historical | MedSolutions historical | Pro Forma Adjustments | Pro Forma(4) | Stericycle historical | MedSolutions historical | Pro Forma Adjustments | Pro Forma | |||||||||||||||||||||||||||
Net Income | $ | 61,385 | $ | 191 | $ | 0 | $ | 61,576 | $ | 105,270 | $ | (807 | ) | $ | 36 | $ | 104,499 | (2) | ||||||||||||||||
Weighted Average Number of Common Shares Outstanding: (1) | ||||||||||||||||||||||||||||||||||
Basic | 87,957,649 | 24,943,950 | (24,943,950 | )(5) | 87,957,649 | 88,150,072 | 22,875,017 | (22,875,017 | )(5) | 88,150,072 | ||||||||||||||||||||||||
Diluted | 90,203,819 | 25,196,904 | (25,196,904 | )(5) | 90,203,819 | 90,213,080 | 22,875,017 | (22,875,017 | )(5) | 90,213,080 | ||||||||||||||||||||||||
Earning Per Common Share: | ||||||||||||||||||||||||||||||||||
Basic | $ | 0.70 | $ | 0.00 | $ | 0.70 | $ | 1.19 | $ | (0.04 | ) | $ | 1.19 | |||||||||||||||||||||
Diluted: | $ | 0.68 | $ | 0.00 | $ | 0.68 | $ | 1.17 | $ | (0.04 | ) | $ | 1.16 | |||||||||||||||||||||
Assets | $ | 1,415,180 | $ | 10,593 | $ | 36,005 | (6) | $ | 1,461,796 | $ | 1,327,906 | $ | 10,837 | $ | 36,005 | (6) | $ | 1,338,743 | ||||||||||||||||
Total Debt | 522,965 | 4,221 | 40,743 | (7) | 567,947 | 465,796 | 4,738 | 40,743 | (7) | 470,534 | ||||||||||||||||||||||||
Owner’s Equity — Book Value | 649,274 | $ | 4,738 | 654,012 | $ | 625,081 | 3,311 | 628,392 | ||||||||||||||||||||||||||
Book Value Per Common Share | $ | 7.42 | $ | 0.18 | $ | 7.47 | $ | 7.06 | $ | 0.14 | $ | 7.10 | ||||||||||||||||||||||
Common Stock cash dividends declared | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||
Preferred Stock cash dividend declared (3) | $ | — | $ | — | $ | — | $ | — | $ | 35.50 | (35.50 | )(3) | $ | — | ||||||||||||||||||||
Dividends declared per share | $ | — | $ | — | $ | — | $ | — | $ | 0.37 | $ | — | ||||||||||||||||||||||
Common Shares outstanding (1) | 87,534,190 | 26,164,715 | (26,164,715 | )(5) | 87,534,190 | 88,503,930 | 23,780,785 | (23,780,785 | )(5) | 88,503,930 | ||||||||||||||||||||||||
Preferred Shares outstanding (3) | 0 | 0 | 0 | 0 | 0 | 96,667 | (96,667 | )(3) | 0 |
Note (1): Shares adjusted to reflect a Stericycle 2-for-1 stock split effective May 31, 2007. | ||
Note (2): Net income less preferred stock dividends paid of $35,500 as those shares would be canceled. | ||
Note (3): Pro forma assumption that preferred stock would be canceled and no dividends would be declared consistent with Stericycle history. | ||
Note (4): Pro forma calculation includes consideration for MedSolutions in the form of cash and a promissory note of $0.50 and $1.50, respectively, per outstanding share, including in-the-money options and convertible debt. | ||
Note (5): Stericycle share data used. | ||
Note (6): Assets reduced by cash consideration of $(13.6) million and increased by intangible assets received of $49.6 million plus or minus any equally offsetting fair value adjustments made. | ||
Note (7): Debt increased by note consideration of $40.7 million. | ||
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• | to consider and vote upon a proposal to approve and adopt the merger agreement; | ||
• | to consider and vote upon a proposal to adjourn or postpone the special meeting, if necessary, to solicit additional proxies in favor of the approval and adoption of the merger agreement; and | ||
• | to consider and transact any other business as may properly be brought before the special meeting or any adjournments or postponements thereof. |
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• | completing, signing and timely submitting a new proxy to Ms. Beverly Fleeger, Corporate Secretary, at 12750 Merit Drive, Park Central VII, Suite 770, Dallas, Texas 75251 to arrive by the close of business on October 30, 2007; the latest dated and signed proxy actually received by such addressee before the special meeting will be counted, and any earlier proxies will be considered revoked; | ||
• | notifying MedSolutions’ Corporate Secretary, at 12750 Merit Drive, Park Central VII, Suite 770, Dallas, Texas 75251, in writing, by the close of business on October 30, 2007, that you have revoked your earlier proxy; or | ||
• | voting in person at the special meeting. |
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• | the financial presentation of Van Amburgh, including its opinion dated June 30, 2007, to the MedSolutions Board of Directors as to the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration, as more fully described below under “— Opinion of MedSolutions’ Valuation Advisor”; | ||
• | the MedSolutions Board of Directors’ familiarity with, and understanding of, MedSolutions’ business, financial condition, results of operations, current business strategy, earnings and prospects, and its understanding of Stericycle’s business, financial condition, results of operations, business strategy and earnings; | ||
• | the possible alternatives to the merger, including: |
• | other acquisition or combination possibilities for MedSolutions; and | ||
• | the possibility of continuing to operate as an independent regulated medical waste management company under its current model focused in the southern and northeastern United States; |
• | the range of possible benefits to MedSolutions’ shareholders of those alternatives and the timing and likelihood of accomplishing the goal of any of those alternatives, and the Board’s assessment that the merger with Stericycle presents an opportunity superior to those alternatives; | ||
• | the fact that MedSolutions shareholders will receive substantial and adequate total consideration for their shares; | ||
• | the MedSolutions Board of Directors’ understanding, following its review together with MedSolutions’ management and valuation advisors, of overall market conditions, and the Board’s determination that, in light of these factors, the timing of a potential transaction was favorable to MedSolutions and its shareholders; and | ||
• | the consideration by the MedSolutions Board of Directors, with the assistance of its advisors, of the general terms and conditions of the merger agreement, including the parties’ representations, warranties and covenants, the conditions to their respective obligations as well as the likelihood of consummation of the merger, the proposed transaction structure, the termination provisions of the agreement and the MedSolutions Board of Directors’ evaluation of the likely time period necessary to close the transaction. |
• | the risks of the type and nature described under “Risk Factors” beginning on page 16; |
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• | the risk, which is common in transactions of this type, that the terms of the merger agreement, including provisions relating to Stericycle’s right to obtain information with respect to any alternative proposals and to a five-day negotiating period after receipt by MedSolutions of a superior proposal and MedSolutions’ payment of a termination fee under specified circumstances, might discourage other parties that could otherwise have an interest in a business combination with, or an acquisition of, MedSolutions from proposing such a transaction; | ||
• | the interests of certain of MedSolutions’ executive officers and directors described under “Interests of MedSolutions Directors and Executive Officers in the Merger” beginning on page 49; | ||
• | the restrictions on the conduct of MedSolutions’ business prior to the consummation of the merger, requiring MedSolutions to conduct its business in the ordinary course consistent with past practices subject to specific limitations, which may delay or prevent MedSolutions from undertaking business opportunities that may arise pending completion of the merger; and | ||
• | the risks and contingencies related to the announcement and pendency of the merger, the possibility that the merger will not be consummated and the potential negative effect of public announcement of the merger on MedSolutions’ business and relations with customers and service providers, and operating results and MedSolutions’ ability to retain key management and personnel. |
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• | reviewed a draft of the merger agreement and discussed with the officers of MedSolutions the course of other negotiations with Stericycle; | ||
• | reviewed certain financial and other information about MedSolutions that was publicly available and that Van Amburgh deemed relevant; | ||
• | reviewed certain internal financial and operating information, including financial projections relating to MedSolutions that were provided to Van Amburgh by MedSolutions, taking into account (a) the growth prospects of MedSolutions, (b) MedSolutions’ historical and current fiscal year financial performance and track record of meeting its forecasts, and (c) MedSolutions’ forecasts going forward and its ability to meet them; | ||
• | met with MedSolutions’ management regarding the business prospects, financial outlook and operating plans of MedSolutions, and held discussions concerning the impact on MedSolutions and its prospects of the economy and the conditions in MedSolutions’ industry; | ||
• | compared the valuation in the public market of companies Van Amburgh deemed similar to that of MedSolutions in market, services offered, and size; | ||
• | reviewed public information concerning the financial terms of certain recent transactions that Van Amburgh deemed comparable to the merger; and | ||
• | performed a discounted cash flow analysis to analyze the present value of the future cash flow streams that MedSolutions has indicated it expects to generate. |
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• | they have not conducted a physical inspection of MedSolutions’ properties and facilities; | ||
• | they have not made nor obtained any evaluations or appraisals of the assets or liabilities (including without limitation any potential environmental liabilities) of MedSolutions; | ||
• | their opinion is based upon market, economic and other conditions as they exist on, and can be evaluated as of, the date of the opinion; | ||
• | they assumed that there were no significant events impacting MedSolutions’ historical profitability between March 31, 2007 and June 30, 2007; and | ||
• | their opinion does not address the relative merits of the merger as compared to other transactions or business strategies that might be available to MedSolutions, nor does it address MedSolutions’ underlying business decision to proceed with the merger. |
• | Discounted Cash Flow Analysis; | ||
• | Guideline Company Analysis; and | ||
• | Adjusted Book Value Analysis. |
Fair Market Value | ||||
Methodology | Estimate Range | |||
Discounted Debt-Free Net Cash Flow (Income) Approach to Value | $ | 37,100,000 to $45,400,000 | ||
Guideline Company (Market) Approach to Value | $ | 38,600,000 to $41,700,000 | ||
Adjusted Book Value (Cost) Approach to Value | N/A | |||
Total Range | $ | 37,100,000 to $45,400,000 |
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• | Donno Compant; | ||
• | SteriLogic Waste Systems, Inc.; | ||
• | Miners Group; | ||
• | A&J Cartage, Inc.; | ||
• | Waste Stream Environmental, Inc.; | ||
• | Romic Environmental Technologies Corporation; | ||
• | Bonham Management Group, Inc.; | ||
• | Liberty Disposal, Inc.; | ||
• | Incendere, Inc.; | ||
• | 7-7, Inc.; | ||
• | Stericycle, Inc.; | ||
• | American Ecology Corporation; | ||
• | Microtek Medical Holdings, Inc.; and | ||
• | Steris Corporation. |
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• | prior to the special meeting you must deliver to MedSolutions a written objection to the merger and your intention to exercise your right to dissent in the event that the merger is effected and setting forth the address at which notice shall be delivered in that event; | ||
• | this written objection must be in addition to and separate from any proxy or vote abstaining from or voting against the adoption of the merger agreement. Voting against or failing to vote for the adoption of the merger agreement by itself does not constitute a demand for appraisal within the meaning of Article 5.12; | ||
• | you must not vote in favor of the adoption of the merger agreement. A vote in favor of the adoption of the merger agreement, by proxy or in person, will constitute a waiver of your appraisal rights in respect of the shares so voted and will nullify any previously filed written demands for appraisal. Failing to vote against adoption of the merger agreement will not constitute a waiver of your appraisal rights; | ||
• | you must continuously hold your shares through the effective time of the merger. |
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Value of Stock | ||||||||
Number of | Options | |||||||
Stock | (At $2.00 per share | |||||||
Name and Principal Position | Options | net of exercise price) | ||||||
Matthew H. Fleeger, President, Chief Executive Officer & Director | 0 | $ | 0.00 | |||||
Winship B. Moody, Sr., Chairman of the Board of Directors | 0 | $ | 0.00 | |||||
Ajit S. Brar, Director | 93,208 | $ | 110,510.00 | |||||
David L. Mack, Director | 62,222 | $ | 77,777.50 | |||||
Steven R. Block, Director | 0 | $ | 0.00 | |||||
Lonnie P. Cole, Sr., Senior Vice President—Sales | 0 | $ | 0.00 | |||||
J. Steven Evans, Vice President—Finance | 145,665 | $ | 178,998.25 | |||||
Alan E. Larosee, Vice President—Operations | 221,666 | $ | 273,332.50 | |||||
James M. Treat, Vice President—Business Development | 173,333 | $ | 216,666.25 | |||||
Mark M. Altenau, Former Director in 2006 | 69,833 | $ | 77,166.25 |
Cash Severance | ||||
Executive Officer | Payments | |||
Matthew H. Fleeger | $ | 600,000.00 | ||
Lonnie P. Cole, Sr. | $ | 100,000.00 | ||
J. Steven Evans | $ | 109,000.00 | ||
Alan E. Larosee | $ | 109,537.50 | ||
James M. Treat | $ | 111,300.00 |
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• | an individual U.S. citizen or resident alien; | ||
• | a corporation, partnership or other entity created or organized under U.S. law (federal or state); | ||
• | an estate whose worldwide income is subject to U.S. federal income tax; or | ||
• | a trust if a court within the United States of America is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust. |
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• | the taxpayer identification number provided is correct or that the holder is awaiting a taxpayer identification number, and | ||
• | the holder is not subject to backup withholding because |
• | the holder is exempt from backup withholding, | ||
• | the holder has not been notified by the Internal Revenue Service that he is subject to backup withholding as a result of the failure to report all interest or dividends, or | ||
• | the Internal Revenue Service has notified the holder that he is no longer subject to backup withholding. |
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• | corporate organization, qualification and good standing; | ||
• | corporate power and authority to enter into the merger agreement, and due execution, delivery and enforceability of the merger agreement; | ||
• | the ownership of equity interests in other entities, including the ownership of the equity interests of MedSolutions’ subsidiaries; | ||
• | the absence of proxies or voting agreements with respect to the stock of our subsidiaries and the absence of any option, warrant or other commitment obligating MedSolutions or any of its subsidiaries to issue, sell, redeem or repurchase any equity interest in any of our subsidiaries; | ||
• | the participation by MedSolutions and its subsidiaries in joint ventures; | ||
• | absence of a breach of charter documents, bylaws, material agreements, instruments or obligations, or applicable law as a result of the merger; | ||
• | consents, approvals, orders, authorizations, registrations, declarations, filings and permits required to enter into the merger agreement or to complete the transactions contemplated by the merger agreement; | ||
• | timely and accurate filings with the Securities and Exchange Commission in compliance with applicable rules and regulations; | ||
• | financial statements; | ||
• | capital structure; | ||
• | list of MedSolutions’ equipment; | ||
• | MedSolutions’ real property and real property leases; | ||
• | absence of undisclosed liabilities; | ||
• | absence of specified adverse changes or events since January 1, 2007; | ||
• | material contracts; | ||
• | compliance with laws, material agreements and permits; | ||
• | governmental regulation; | ||
• | material litigation, material judgments or injunctions and absence of undisclosed investigations or litigation; | ||
• | absence of certain restrictive agreements or arrangements; | ||
• | tax matters; |
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• | the amount of MedSolutions’ net operating loss for federal tax purposes as of December 31, 2006; | ||
• | employee benefit plans and labor matters; | ||
• | employee contracts and benefits; | ||
• | insurance matters; | ||
• | intellectual property; | ||
• | title to assets; | ||
• | environmental matters; | ||
• | brokers and finders’ fees; | ||
• | required vote of MedSolutions shareholders to approve the merger; | ||
• | recommendation of MedSolutions’ Board of Directors; | ||
• | absence of preferential purchase or repurchase rights; | ||
• | inapplicability of Texas anti-takeover statute; | ||
• | accuracy of information provided for inclusion in this proxy statement/prospectus. |
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• | If there is an increase in the aggregate merger consideration due to the closing balance sheet adjustment and no adjustment pursuant to the revenue adjustment, Stericycle will, within three days of such determination, deposit cash equal to the increase in the aggregate merger consideration with the payment agent for distribution on a pro rata basis to holders of |
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MedSolutions common stock who have duly surrendered or may duly surrender their stock certificates for payment and holders of MedSolutions options; | |||
• | If there is an increase in the aggregate merger consideration due to the closing balance sheet adjustment and a reduction in the aggregate merger consideration pursuant to the revenue adjustment, the two amounts will be added together to determine the net adjustment to the aggregate merger consideration, and |
• | if the net adjustment is an increase in the aggregate merger consideration, Stericycle will, within three days of such determination, deposit cash equal to the increase in the aggregate merger consideration with the payment agent for distribution on a pro rata basis to holders of MedSolutions common stock who have duly surrendered or may duly surrender their stock certificates for payment and holders of MedSolutions option; or | ||
• | if the net adjustment is a reduction in the aggregate merger consideration, the principal amounts of the promissory notes will be reduced, retroactive to the closing date, on a pro rata basis in an aggregate amount equal to the reduction in the aggregate merger consideration; and |
• | If there is a reduction in the aggregate merger consideration due to both the closing balance sheet adjustment and the revenue adjustment, the two amounts shall be added together to determine the combined reduction in the aggregate merger consideration, and the principal amounts of the promissory notes will be reduced, retroactive to the closing date, on a pro rata basis in an aggregate amount equal to the reduction in the aggregate merger consideration. |
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• | sell, lease, transfer or dispose of any of its assets used, held for use or useful in conduct of MedSolutions’ medical waste business except in the ordinary course consistent with past practices; |
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• | enter into any contract, other than any contracts relating to the merger, relating to MedSolutions’ medical waste business except in the ordinary course consistent with past practices; | ||
• | terminate, accelerate or modify any material contract relating to MedSolutions’ medical waste business to which it is or was a party or by which it is or was bound, or agree to do so, except in the case of contracts that expire in accordance with their terms or that terminate in the ordinary course consistent with past practices; | ||
• | impose or permit any lien (other than liens permitted under the merger agreement) on any of its assets except in the ordinary course consistent with past practices; | ||
• | delay or postpone beyond its normal practice payment of its vendor accounts payable and other liabilities; | ||
• | cancel, compromise, waive or release any claim or right outside of the ordinary course consistent with past practices; | ||
• | experience any damage, destruction or loss to any material portion of its assets used, held for use or useful in conduct of MedSolutions’ medical waste business (whether or not covered by insurance); | ||
• | change the base compensation or other terms of employment of any of its employees except in the ordinary course consistent with past practices; | ||
• | pay a bonus to any employee; | ||
• | adopt a new employee benefit plan, terminate any existing plan or increase the benefits under or otherwise modify any existing plan except as contemplated by the merger agreement; | ||
• | amend its organizational documents; | ||
• | issue, sell, redeem or repurchase, or effect any split, combination or reclassification of, any shares of its capital stock or other securities or retire any indebtedness; | ||
• | grant any stock options; | ||
• | declare or pay any dividends or make any other distributions in respect of its capital stock; | ||
• | make, or guarantee, any loans or advances to another person, other than MedSolutions or one of its subsidiaries, or make any investment or commitment to invest in any person other than MedSolutions or one of its subsidiaries; | ||
• | make any capital expenditures in excess of $25,000 in the aggregate; | ||
• | make any change in its accounting principles or methods; or | ||
• | enter into any contract to do any of the matters described in the preceding clauses. |
• | solicit, initiate or knowingly encourage the submission of any acquisition proposal (as defined below); | ||
• | participate in any discussions or negotiations regarding, or furnish to any person any information in respect of, or take any other action to facilitate, any acquisition proposal or any inquiries or the |
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making of any proposal that constitutes, or reasonably would be expected to lead to, any acquisition proposal; | |||
• | approve or recommend to MedSolutions’ shareholders any acquisition proposal. |
• | an investment in MedSolutions representing (on a post-investment basis) more than 25% of MedSolutions’ capital stock or a purchase from MedSolutions of more than 25% of the shares of its capital stock or any debt securities convertible into or exchangeable for more than 25% of the shares of its capital stock; | ||
• | a merger, consolidation, share exchange, recapitalization, business combination or other similar transaction involving all of MedSolutions’ equity interests or all shares of the MedSolutions common stock; | ||
• | the sale, lease, exchange, mortgage, pledge, transfer or other disposition of all or substantially all of MedSolutions’ assets in a single transaction or a series of related transactions; | ||
• | a tender offer or exchange offer for 25% or more of the outstanding shares of MedSolutions’ capital stock or the filing of a registration statement under the Securities Act of 1933, as amended, in connection with such a tender offer or exchange offer; or | ||
• | any public announcement of a proposal, plan or intention to do so, or any agreement to engage in, any of the matters described immediately above. |
• | MedSolutions notifies Stericycle of the superior proposal; | ||
• | MedSolutions gives Stericycle at least five days to propose revisions to the terms of the merger agreement or to make another proposal in response to the competing proposal; and | ||
• | MedSolutions pays to Stericycle a termination fee of $2,500,000. |
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• | convening and holding the MedSolutions special meeting; | ||
• | preparing, filing and distributing this proxy statement/prospectus and filing the registration statement of which this proxy statement/prospectus is a part; | ||
• | providing access to information; | ||
• | using their reasonable best efforts to take all actions and to do all things necessary in order to consummate the merger, including the satisfaction of all closing conditions to the merger in such party’s control; | ||
• | providing notices, making filings and obtaining permits or consents required in connection with the merger; | ||
• | providing notice of (i) any representation or warranty in the merger agreement becoming untrue or inaccurate, (ii) the occurrence of any event or development that would cause any representation or warranty to be untrue or inaccurate at the time of the closing of the merger or (iii) the failure to materially comply with or satisfy any covenant, condition or agreement in the merger agreement; | ||
• | making public announcements; | ||
• | payment of fees and expenses in connection with the merger; | ||
• | the termination of all of MedSolutions’ existing employment agreements and accrual of all severance payments and other termination liabilities to its employees at or prior to closing; | ||
• | payment of certain MedSolutions liabilities within 30 days of closing; | ||
• | release of certain officers and directors of MedSolutions from their personal guarantees of MedSolutions debt at the effective time of the merger; and | ||
• | appointment, duties and replacement of MedSolutions’ shareholder representative after the closing. |
• | accuracy as of the closing of the merger of the representations and warranties made by MedSolutions to the extent specified in the merger agreement; | ||
• | MedSolutions’ performance in all material respects of its covenants and agreements under the merger agreement; | ||
• | holders of shares of MedSolutions common stock representing no more than 7.5% of the outstanding shares of MedSolutions common stock have exercised (and not withdrawn or otherwise forfeited) the rights of a dissenting owner under Section 5.11 of the TBCA with respect to their shares of MedSolutions common stock; | ||
• | the approval of the merger by MedSolutions’ shareholders has been obtained; |
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• | Stericycle has entered into consulting agreements and noncompetition agreements with certain officer, directors, employees and shareholders of MedSolutions; | ||
• | no temporary restraining order, preliminary or permanent injunction or other order issued by a court or governmental authority has been issued and is in effect making the merger illegal or otherwise prohibiting consummation of the merger; and | ||
• | the registration under the Securities Act of 1933, as amended, of the promissory notes to be issued by Stericycle to holders of MedSolutions common stock in connection with the merger has been declared effective by the SEC. |
• | accuracy as of the closing of the merger of the representations and warranties made by Stericycle and Merger Sub to the extent specified in the merger agreement; | ||
• | Stericycle’s and Merger Sub’s performance in all material respects of their respective covenants and agreements under the merger agreement; | ||
• | the approval of the merger by MedSolutions’ shareholders has been obtained; and | ||
• | no temporary restraining order, preliminary or permanent injunction or other order issued by a court or governmental authority has been issued and is in effect making the merger illegal or otherwise prohibiting consummation of the merger. |
• | by mutual written consent of Stericycle, Merger Sub and MedSolutions; | ||
• | by either Stericycle or MedSolutions, if: |
• | adoption of the merger agreement and approval of the merger by the MedSolutions shareholders is not obtained; | ||
• | the parties fail to consummate the merger on or before November 30, 2007, unless the failure is the result of a breach of the merger agreement by the party seeking the termination; or | ||
• | any governmental authority has issued a final and nonappealable order, decree or ruling or has taken any other final and nonappealable action that restrains, enjoins or otherwise prohibits the merger, unless the party seeking the termination has not used its reasonable best efforts to oppose such order or decision or to have such order or decision vacated or made inapplicable to the merger; |
• | by Stericycle, if: |
• | MedSolutions materially breaches any of its representations, warranties, covenants or agreements set forth in the merger agreement, and MedSolutions has not cured such breach within 15 business days of receiving written notice from Stericycle of such breach; |
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• | one or more of Stericycle’s conditions precedent to closing the merger are not satisfied or capable of being satisfied on or before November 30, 2007 as a result of MedSolutions’ failure to comply with its obligations under the merger agreement; | ||
• | MedSolutions’ Board of Directors withdraws or materially and adversely to Stericycle modifies its approval of the merger agreement and the merger, other than as a result of a material breach by Stericycle or Merger Sub of a representation, warranty or covenant under the merger agreement which remains uncured for a period of two business days after receipt of notice from MedSolutions of such breach, or as a result of the failure of any of MedSolutions’ conditions precedent to closing the merger not being met; or | ||
• | MedSolutions enters into a definitive agreement (other than the merger agreement) to implement: |
• | an investment in MedSolutions representing (on a post-investment basis) more than 25% of MedSolutions’ capital stock or a purchase from MedSolutions of more than 25% of the shares of its capital stock or any debt securities convertible into or exchangeable for more than 25% of the shares of its capital stock; | ||
• | a merger, consolidation, share exchange, recapitalization, business combination or other similar transaction involving all of MedSolutions’ equity interests or all shares of the MedSolutions common stock; | ||
• | the sale, lease, exchange, mortgage, pledge, transfer or other disposition of all or substantially all of MedSolutions’ assets in a single transaction or a series of related transactions; | ||
• | a tender offer or exchange offer for 25% or more of the outstanding shares of MedSolutions’ capital stock or the filing of a registration statement under the Securities Act of 1933, as amended, in connection with such a tender offer or exchange offer; or | ||
• | any public announcement of a proposal, plan or intention to do so, or any agreement to engage in, any of the matters described immediately above; |
• | adoption of the merger agreement and approval of the merger by the MedSolutions shareholders is not obtained by reason of the violation of the voting agreement by one or more MedSolutions shareholders who are party to the voting agreement. |
• | by MedSolutions, if: |
• | either Stericycle or Merger Sub materially breaches any of its representations, warranties, covenants or agreements set forth in the merger agreement, and Stericycle or Merger Sub, as the case may be, has not cured such breach within 15 business days of receiving written notice from MedSolutions of such breach; | ||
• | one or more of MedSolutions’ conditions precedent to closing the merger are not satisfied or capable of being satisfied on or before November 30, 2007 as a result of either Stericycle’s or Merger Sub’s failure to comply with its obligations under the merger agreement; or | ||
• | MedSolutions enters into a definitive agreement providing for the implementation of a superior proposal, which is defined as the acquisition by a third party of more than 50% of the voting power of MedSolutions’ equity securities or more than 50% of MedSolutions’ assets, pursuant to a tender or exchange offer, merger, consolidation, liquidation or dissolution, recapitalization, sale of assets or otherwise, if MedSolutions’ Board of Directors has determined in its good faith judgment, after consultation with MedSolutions’ valuation advisor and after considering the likelihood and timing of the consummation of such third |
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party transaction and any amendments or modifications to the merger agreement that Stericycle has offered or proposed within five days of learning of such proposed transaction, that such transaction is more favorable from a financial point of view to MedSolutions’ shareholders than the merger with Stericycle. |
• | if MedSolutions terminates the merger agreement because MedSolutions enters into a definitive agreement providing for the implementation of a superior proposal, which is defined as the acquisition by a third party of more than 50% of the voting power of MedSolutions’ equity securities or more than 50% of MedSolutions’ assets, pursuant to a tender or exchange offer, merger, consolidation, liquidation or dissolution, recapitalization, sale of assets or otherwise, if MedSolutions’ Board of Directors has determined in its good faith judgment, after consultation with MedSolutions’ valuation advisor and after considering the likelihood and timing of the consummation of such third party transaction and any amendments or modifications to the merger agreement that Stericycle has offered or proposed within five days of learning of such proposed transaction, that such transaction is more favorable from a financial point of view to MedSolutions’ shareholders than the merger with Stericycle; or | ||
• | if Stericycle terminates the merger agreement because: |
• | MedSolutions’ Board of Directors withdraws or materially and adversely to Stericycle modifies its approval of the merger agreement and the merger, other than as a result of a material breach by Stericycle or Merger Sub of a representation, warranty or covenant under the merger agreement which remains uncured for a period of two business days after receipt of notice from MedSolutions of such breach, or as a result of the failure of any of MedSolutions’ conditions precedent to closing the merger not being met; | ||
• | MedSolutions enters into a definitive agreement (other than the merger agreement) to implement: |
• | an investment in MedSolutions representing (on a post-investment basis) more than 25% of MedSolutions’ capital stock or a purchase from MedSolutions of more than 25% of the shares of its capital stock or any debt securities convertible into or exchangeable for more than 25% of the shares of its capital stock; | ||
• | a merger, consolidation, share exchange, recapitalization, business combination or other similar transaction involving all of MedSolutions’ equity interests or all shares of the MedSolutions common stock; | ||
• | the sale, lease, exchange, mortgage, pledge, transfer or other disposition of all or substantially all of MedSolutions’ assets in a single transaction or a series of related transactions; | ||
• | a tender offer or exchange offer for 25% or more of the outstanding shares of MedSolutions’ capital stock or the filing of a registration statement under the Securities Act of 1933, as amended, in connection with such a tender offer or exchange offer; or |
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• | any public announcement of a proposal, plan or intention to do so, or any agreement to engage in, any of the matters described immediately above; or |
• | adoption of the merger agreement and approval of the merger by the MedSolutions shareholders is not obtained by reason of the violation of the voting agreement by one or more of MedSolutions’ shareholders who are party to the voting agreement. |
• | extend the time for the performance of any of the obligations or the other acts of the other parties; | ||
• | waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant to the merger agreement; or | ||
• | waive compliance with any of the agreements or conditions contained in the merger agreement. | ||
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• | Stericycle fails to pay interest on any promissory note when it becomes due and payable and its failure continues for a period of 10 days; | ||
• | Stericycle fails to pay the principal of any promissory note when it becomes due and payable at maturity; | ||
• | Stericycle fails to comply with any of its other agreements in the promissory notes or the indenture and its failure continues for a period of 30 days after the indenture trustee or the shareholder representative gives Stericycle notice of the default; |
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• | an event of bankruptcy, insolvency or liquidation specified in the indenture has occurred; | ||
• | in the case of the 3.5% indenture, there is an event of default under the 4.5% indenture, and in the case of the 4.5% indenture, there is an event of default under the 3.5% indenture; or | ||
• | in the case of the 3.5% indenture, Stericycle fails to deliver a new letter of credit when required by the terms of the indenture. |
• | cure any ambiguity, defect or inconsistency; | ||
• | comply with provisions of the indenture relating to the circumstances in which Stericycle is permitted to merge with a third party; or | ||
• | make any change that does not adversely affect the rights of any noteholder. |
• | reduce the interest on or change the time for payment of interest on any promissory note, except in limited circumstances as expressly set forth in the merger agreement (see “The Merger Agreement—Adjustments to Merger Consideration” beginning on page 59 of this proxy statement/prospectus); |
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• | reduce the principal of or change the fixed maturity of any promissory note, except in limited circumstances as expressly set forth in the merger agreement (see “The Merger Agreement—Adjustments to Merger Consideration” beginning on page 59 of this proxy statement/prospectus); | ||
• | make any promissory note payable in money other than that stated in the promissory note; or | ||
• | make any change in the provisions of the indenture relating to waiver of past defaults, limitations on noteholders’ right to sue, or actions requiring the consent of the noteholders. |
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• | its institutional regulated waste management services | ||
• | its Bio Systems® management services to reduce the risk of needle sticks | ||
• | a variety of products and services for infection control | ||
• | its regulated returns management services for expired or recalled healthcare products |
• | its regulated waste management services | ||
• | its Steri-Safe® Occupational Safety and Health Act and Health Insurance Portability and Accountability Act (HIPAA) compliance programs | ||
• | a variety of products and services for infection control | ||
• | its regulated returns management services for expired or recalled healthcare products |
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Autoclaving | 75 | % | ||
Incineration | 15 | % | ||
Chemical Mobile | 10 | % |
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• | the financial impact of the proposed acquisition, including the effect on MedSolutions’ cash flow and earnings per share; | ||
• | the historical and projected financial results of the target company; | ||
• | the purchase price negotiated with the seller and MedSolutions’ expected internal rate of return; |
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• | the structure of the purchase with regard to offering one or the combination of the following: cash, notes and stock; | ||
• | the composition and size of the target company’s customer base and the opportunity value of integrating MedSolutions’ service, ancillary service and regulatory compliance programs into the target company’s market; | ||
• | the efficiencies that MedSolutions can achieve by integrating the target company with its existing operations; | ||
• | the potential for enhancing or expanding MedSolutions’ geographic service area and allowing MedSolutions to make other acquisitions in the same service area; | ||
• | the experience, reputation and personality of the target company’s management; | ||
• | the target company’s reputation for customer service and relationships with the communities that it serves; and | ||
• | whether the acquisition gives MedSolutions any strategic advantages over its competition. |
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• | to construct and operate treatment and transfer facilities; | ||
• | to transport medical waste within and between relevant jurisdictions; and | ||
• | to handle particular regulated substances. |
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• | exposure to blood borne pathogens and other potentially infectious materials; | ||
• | lock out/tag out procedures; | ||
• | medical surveillance requirements; | ||
• | use of respirators and personal protective equipment; | ||
• | emergency planning; | ||
• | hazard communication; | ||
• | noise; | ||
• | ergonomics; and | ||
• | forklift safety. |
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• | animal waste from animals intentionally exposed to pathogens; | ||
• | bulk human blood and blood products; | ||
• | pathological waste; | ||
• | microbiological waste; and | ||
• | sharps. |
• | steam disinfection; | ||
• | chlorine disinfection/maceration; | ||
• | chemical disinfection; | ||
• | moist disinfection; | ||
• | thermal inactivation; and |
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• | incineration. |
• | transport permits for solid waste, medical waste and hazardous substances; | ||
• | permits to construct and operate treatment facilities; | ||
• | permits to construct and operate transfer stations; | ||
• | permits governing discharge of sanitary water and registration of equipment under air regulations; | ||
• | approvals for the use of ETD and other technologies to treat medical waste; and | ||
• | various business operator’s licenses. |
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• | cleanup costs; | ||
• | personal injury; | ||
• | damage to the environment; | ||
• | employee matters; | ||
• | property damage; or | ||
• | alleged negligence or professional errors or omissions in the planning or performance of work. |
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Number of | ||||||||||||
securities | ||||||||||||
remaining | ||||||||||||
available for | ||||||||||||
Number of | future issuance | |||||||||||
securities to be | under equity | |||||||||||
issued upon | Weighted-average | compensation | ||||||||||
exercise of | exercise price of | plans (excluding | ||||||||||
outstanding | outstanding | securities | ||||||||||
options, warrants | options, warrants | reflected in | ||||||||||
and rights (a) | and rights (b) | column (a)) (c) | ||||||||||
Equity compensation plans approved by security holders | 1,328,796 | $ | 0.80 | 1,671,204 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 1,328,796 | $ | 0.80 | 1,671,204 |
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Number of Shares | ||||||||
Name and Address of Beneficial Owner | Beneficially Owned(1) | Percent of Class(2) | ||||||
Matthew H. Fleeger, President, CEO and Director 12750 Merit Drive –Park Central VII, Suite 770 Dallas, Texas 75251 | 1,170,416 | (3) | 4.4 | % | ||||
Winship B. Moody, Sr., Chairman of the Board of Directors 12750 Merit Drive –Park Central VII, Suite 770 Dallas, Texas 75251 | 836,485 | 3.2 | % | |||||
Ajit S. Brar, Director 12750 Merit Drive –Park Central VII, Suite 770 Dallas, Texas 75251 | 909,875 | (4) | 3.4 | % | ||||
David L. Mack, Director 12750 Merit Drive – Park Central VII, Suite 770 Dallas, Texas 75251 | 62,222 | (5) | 0.2 | % | ||||
Steven R. Block, Director 12750 Merit Drive – Park Central VII, Suite 770 Dallas, Texas 75251 | 50,000 | 0.2 | % | |||||
Lonnie P. Cole, Sr., Senior Vice President, Sales 12750 Merit Drive –Park Central VII, Suite 770 Dallas, Texas 75251 | 149,000 | (6) | 0.6 | % | ||||
Steve Evans, Vice President, Finance 12750 Merit Drive –Park Central VII, Suite 770 Dallas, Texas 75251 | 145,665 | (7) | 0.5 | % | ||||
Alan Larosee, Vice President, Operations 12750 Merit Drive –Park Central VII, Suite 770 Dallas, Texas 75251 | 221,666 | (8) | 0.8 | % | ||||
James M. Treat, Vice President, Business Development 12750 Merit Drive – Park Central VII, Suite 770 Dallas, Texas 75251 | 173,333 | (9) | 0.6 | % | ||||
All Directors and Executive Officers as a Group (9 persons) | 3,718,662 | 13.6 | %(10) | |||||
Tate Investments, LLC 12750 Merit Drive – Park Central VII, Suite 770 Dallas, Texas 75251 | 3,944,880 | 14.9 | % | |||||
Mark Altenau, M.D. 12750 Merit Drive – Park Central VII, Suite 770 Dallas, Texas 75251 | 2,153,292 | (11) | 8.1 | % |
(1) | Pursuant to Rule 13d-3 under the Exchange Act, a person has beneficial ownership of any securities as to which such person, directly or indirectly, through any contract, arrangement, undertaking, relationship |
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or otherwise, has or shares voting power and/or investment power as to which such person has the right to acquire such voting and/or investment power within 60 days. Percentage of beneficial ownership as to any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person by the sum of the number of shares outstanding as of such date and the number of unissued shares as to which such person has the right to acquire voting and/or investment control within 60 days. The number of shares shown includes outstanding shares owned as of October 8, 2007, by the person indicated and shares underlying warrants, options and/or convertible debt and accrued interest thereon owned by such person on October 8, 2007, that were exercisable within 60 days of that date. | ||
(2) | Applicable percentage ownership is based on 26,458,446 shares of MedSolutions common stock outstanding on October 8, 2007, and on shares issuable to such holder within 60 days of October 8, 2007. | |
(3) | Includes 670,790 shares owned by Preston Harris Interests, Inc., a Texas corporation, of which Mr. Fleeger is the president. | |
(4) | Includes 100,000 shares of MedSolutions common stock underlying convertible debt and accrued interest thereon and options for 93,208 shares of common stock. | |
(5) | Includes options for 62,222 shares of MedSolutions common stock. | |
(6) | Includes 149,000 shares owned by Med-Con Waste Solutions, Inc., a Texas corporation, of which Mr. Cole was the President and Chief Executive Officer. | |
(7) | Includes options for 145,665 shares of MedSolutions common stock. | |
(8) | Includes options for 221,666 shares of MedSolutions common stock. | |
(9) | Includes options for 173,333 shares of MedSolutions common stock. | |
(10) | Applicable percentage ownership is based on 26,458,446 shares of MedSolutions common stock issued and outstanding on October 8, 2007, and on shares issuable to such holders within 60 days of October 8, 2007. | |
(11) | Includes options for 69,833 shares of MedSolutions common stock, and 725,826 shares of MedSolutions common stock held in his individual retirement account. |
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SUPPLEMENTARY DATA
Page | ||||
2005-2006 Audited Financial Statements | ||||
113 | ||||
114 | ||||
115 | ||||
116 | ||||
118 | ||||
120 | ||||
2004-2005 Audited Financial Statements | ||||
153 | ||||
154 | ||||
155 | ||||
156 | ||||
158 | ||||
160 | ||||
Unaudited Interim Financial Statements | ||||
197 | ||||
198 | ||||
199 | ||||
200 | ||||
202 |
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March 10, 2007
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December 31, | ||||||||
2006 | 2005 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | — | $ | — | ||||
Accounts receivable — trade, net of allowance of $174,989 and $69,240 | 1,847,541 | 1,405,603 | ||||||
Prepaid expenses and other current assets | 366,141 | 258,523 | ||||||
Supplies | 26,109 | 14,106 | ||||||
Total Current Assets | 2,239,791 | 1,678,232 | ||||||
Property and equipment — at cost, net of accumulated depreciation of $2,805,851 and $1,836,756 | 3,586,766 | 3,150,504 | ||||||
Intangible assets – Customer list, net of accumulated amortization of $1,028,993 and $624,770 | 1,408,189 | 1,437,912 | ||||||
Intangible assets — Goodwill | 3,403,025 | 2,597,021 | ||||||
Intangible assets — permits | 152,749 | 65,007 | ||||||
Other assets | 46,943 | 102,126 | ||||||
Total Assets | $ | 10,837,463 | $ | 9,030,802 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Convertible debentures | $ | — | $ | 40,135 | ||||
Current maturities of long-term obligations | 372,552 | 145,628 | ||||||
Accounts payable | 1,507,220 | 1,130,155 | ||||||
Accrued liabilities | 1,281,443 | 962,327 | ||||||
Current maturities – notes payable to Tate Investments, LLC | — | 250,000 | ||||||
Current maturities – notes payable to Med-Con | 127,703 | 157,861 | ||||||
Current maturities – notes payable to On Call | 294,541 | 495,819 | ||||||
Current maturities – notes payable to Positive Impact | 97,705 | 360,669 | ||||||
Current maturities – notes payable to Abele-Kerr Investments, LLC | 38,948 | — | ||||||
Current maturities – notes payable stockholders | 419,600 | 487,891 | ||||||
Current maturities – litigation settlements | — | 26,735 | ||||||
Advances from stockholders | — | 19,004 | ||||||
Total Current Liabilities | 4,139,712 | 4,076,224 | ||||||
Long-term obligations, less current maturities | 1,003,174 | 806,952 | ||||||
Notes payable – Tate Investments, LLC, less current maturities, net of discount of $102,564 and $0 | 1,397,436 | 725,000 | ||||||
Notes payable – Med-Con, less current maturities | 147,047 | 274,749 | ||||||
Notes payable – On Call, less current maturities | — | 119,541 | ||||||
Notes payable – Positive Impact, less current maturities | 333,796 | 489,331 | ||||||
Notes payable – Abele-Kerr Investments, LLC, less current maturities | 211,052 | — | ||||||
Notes payable – stockholders, less current maturities | 294,267 | 359,131 | ||||||
Total Liabilities | 7,526,484 | 6,850,928 | ||||||
Commitments and Contingencies | ||||||||
Stockholders’ Equity: | ||||||||
Preferred stock (par value $.001) – 100,000,000 shares authorized at December 31, 2006 and December 31,2005,respectively, 96,667 shares issued and outstanding at December 31,2006 and 283,172 shares issued at December 31, 2005 (liquidation preference $145,001 – 2006; $424,758 – 2005) | 97 | 283 | ||||||
Common stock (par value $.001) - 100,000,000 shares authorized at December 31, 2006 and December 31,2005; 23,792,985 shares issued and 23,780,785 outstanding at December 31, 2006 and 22,228,980 shares issued and 22,216,780 outstanding at December 31, 2005 | 23,793 | 22,229 | ||||||
Additional paid-in capital | 26,558,608 | 24,657,770 | ||||||
Accumulated deficit | (23,253,519 | ) | (22,482,408 | ) | ||||
Treasury stock, at cost - 12,200 shares at December 31, 2006 and December 31, 2005 | (18,000 | ) | (18,000 | ) | ||||
Total Stockholders’ Equity | 3,310,979 | 2,179,874 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 10,837,463 | $ | 9,030,802 | ||||
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For the Years Ended | ||||||||
December 31, | ||||||||
2006 | 2005 | |||||||
Revenues | $ | 12,799,132 | $ | 9,415,558 | ||||
Cost of revenues * | 7,925,086 | 5,680,379 | ||||||
Gross profit | 4,874,046 | 3,735,179 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative expenses** | 3,829,489 | 2,449,460 | ||||||
Depreciation and amortization | 1,373,318 | 751,257 | ||||||
Total operating expenses | 5,202,807 | 3,200,717 | ||||||
Income (loss) from operations | (328,761 | ) | 534,462 | |||||
Other (income) expenses: | ||||||||
Interest expense | 482,485 | 374,260 | ||||||
ATE settlement | — | (650,468 | ) | |||||
Other income | (40,135 | ) | — | |||||
442,350 | (276,208 | ) | ||||||
Net income (loss) | $ | (771,111 | ) | $ | 810,670 | |||
Preferred stock dividend | (35,500 | ) | (40,875 | ) | ||||
Net income (loss) applicable to common stockholders | $ | (806,611 | ) | $ | 769,795 | |||
Basic net income (loss) per share attributable to common stockholders | $ | (0.04 | ) | $ | 0.04 | |||
Diluted net income (loss) per share attributable to common stockholders | $ | (0.04 | ) | $ | 0.04 | |||
Weighted average common shares used in basic income (loss) per share | 22,875,017 | 19,857,233 | ||||||
Weighted average common shares and dilutive securities used in diluted income (loss) per share | 22,875,017 | 20,691,501 | ||||||
* | Excludes depreciation of $969,095 and $501,865 for the years ended December 31, 2006 and 2005, respectively. | |
** | Includes stock compensation charge of $240,000 for the year ended December 31, 2006. |
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MSI Preferred Stock | ||||||||||||||||
Series A | MSI Common Stock | |||||||||||||||
Year Ended December 31, 2006 | Shares | Amount | Shares | Amount | ||||||||||||
Balance — December 31, 2005 | 283,172 | $ | 283 | 22,228,980 | $ | 22,229 | ||||||||||
MSI preferred stock converted into common stock | (186,505 | ) | (186 | ) | 186,505 | 186 | ||||||||||
MSI common stock sold for cash net of transaction costs of $106,132 | — | — | 429,500 | 430 | ||||||||||||
MSI common stock returned due to PIWS settlement | — | — | (52,000 | ) | (52 | ) | ||||||||||
MSI conversion price adjustment on convertible debt To Tate Investments, LLC | — | — | — | — | ||||||||||||
MSI common stock issued for acquisition | — | — | 1,000,000 | 1,000 | ||||||||||||
Preferred stock dividend | — | — | — | — | ||||||||||||
Net loss | — | — | — | — | ||||||||||||
Balance – December 31, 2006 | 96,667 | $ | 97 | 23,792,985 | $ | 23,793 | ||||||||||
Additional | ||||||||||||||||
Paid-in | Accumulated | Treasury | ||||||||||||||
Year Ended December 31, 2006 | Capital | Deficit | Stock | Total | ||||||||||||
Balance — December 31, 2005 | $ | 24,657,770 | $ | (22,482,408 | ) | $ | (18,000 | ) | $ | 2,179,874 | ||||||
MSI preferred stock converted into common stock | — | — | — | — | ||||||||||||
MSI common stock sold for cash net of transaction costs of $106,132 | 702,438 | — | — | 702,868 | ||||||||||||
MSI common stock returned due to PIWS settlement | (38,948 | ) | — | — | (39,000 | ) | ||||||||||
MSI conversion price adjustment on Convertible debt to Tate Investments, LLC | 153,848 | — | — | 153,848 | ||||||||||||
MSI common stock issued for acquisition | 879,000 | — | — | 880,000 | ||||||||||||
MSI stock compensation charge | 240,000 | 240,000 | ||||||||||||||
Preferred stock dividend | (35,500 | ) | — | — | (35,500 | ) | ||||||||||
Net loss | — | (771,111 | ) | — | (771,111 | ) | ||||||||||
Balance – December 31, 2006 | $ | 26,558,608 | $ | (23,253,519 | ) | $ | (18,000 | ) | $ | 3,310,979 | ||||||
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MSI Preferred Stock | ||||||||||||||||
Series A | MSI Common Stock | |||||||||||||||
Year Ended December 31, 2005 | Shares | Amount | Shares | Amount | ||||||||||||
Balance — December 31, 2004 | 143,333 | $ | 143 | 18,515,755 | $ | 18,516 | ||||||||||
MSI preferred stock sold for cash | 139,839 | 140 | — | — | ||||||||||||
MSI common stock sold for cash net of transaction costs of $50,443 | — | — | 1,667,672 | 1,668 | ||||||||||||
MSI common stock issued for ATE settlement | — | — | 60,746 | 61 | ||||||||||||
MSI common stock returned by directors | — | — | (20,000 | ) | (20 | ) | ||||||||||
MSI common stock issued for debt conversions | — | — | 1,468,140 | 1,468 | ||||||||||||
MSI common stock issued for acquisitions | — | — | 536,667 | 536 | ||||||||||||
Preferred stock dividend | — | — | — | — | ||||||||||||
Net income | — | — | — | — | ||||||||||||
Balance – December 31, 2005 | 283,172 | $ | 283 | 22,228,980 | $ | 22,229 | ||||||||||
Additional | ||||||||||||||||
Paid-in | Accumulated | Treasury | ||||||||||||||
Year Ended December 31, 2005 | Capital | Deficit | Stock | Total | ||||||||||||
Balance — December 31, 2004 | $ | 21,595,239 | $ | (23,293,078 | ) | $ | (18,000 | ) | $ | (1,697,180 | ) | |||||
MSI preferred stock sold for cash | 209,618 | — | — | 209,758 | ||||||||||||
MSI common stock sold for cash net of transaction costs of $50,443 | 1,077,099 | — | — | 1,078,767 | ||||||||||||
MSI common stock issued for ATE settlement | 83,006 | — | — | 83,067 | ||||||||||||
MSI common stock issued for director fees | 100,689 | — | — | 100,689 | ||||||||||||
MSI common stock returned by directors | (2 | ) | — | — | (22 | ) | ||||||||||
MSI common stock issued for debt conversions | 1,228,532 | — | — | 1,230,000 | ||||||||||||
MSI common stock issued for acquisitions | 404,464 | — | — | 405,000 | ||||||||||||
Preferred stock dividend | (40,875 | ) | — | — | (40,875 | ) | ||||||||||
Net income | — | 810,670 | — | 810,670 | ||||||||||||
Balance – December 31, 2005 | $ | 24,657,770 | $ | (22,482,408 | ) | $ | (18,000 | ) | $ | 2,179,874 | ||||||
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For the Years Ended | ||||||||
December 31, | ||||||||
2006 | 2005 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income (loss) | $ | (771,111 | ) | $ | 810,670 | |||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | 1,373,318 | 751,258 | ||||||
Provision for bad debts | 112,000 | 3,000 | ||||||
Gain on ATE settlement | — | (650,468 | ) | |||||
Litigation settlement | — | (53,023 | ) | |||||
Stock compensation | 240,000 | 100,667 | ||||||
Amortization of finance fees and debt discount | 29,527 | — | ||||||
Cancellation of convertible debentures, advances from stockholders and related accrued interest | (130,135 | ) | — | |||||
Changes in assets (increase) decrease: | ||||||||
Accounts receivable | (441,125 | ) | (375,950 | ) | ||||
Supplies | 12,247 | (2,195 | ) | |||||
Prepaid expenses and other current assets | 95,565 | 128,244 | ||||||
Other non-current assets | (108,851 | ) | (64,335 | ) | ||||
Changes in liabilities increase (decrease) | ||||||||
Accounts payable, accrued liabilities & litigation settlements | 186,294 | (959,282 | ) | |||||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | 597,729 | (311,414 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Additions to property and equipment | (596,760 | ) | (225,713 | ) | ||||
Asset acquisition of On Call Medical Waste, Ltd. | — | (375,000 | ) | |||||
Asset acquisition of Cooper Biomed, Ltd. | — | (40,000 | ) | |||||
Asset acquisition of Positive Impact Waste Solutions | — | (700,000 | ) | |||||
Asset acquisition of SteriLogic Waste Systems, Inc. | (24,283 | ) | — | |||||
NET CASH USED IN INVESTING ACTIVITIES | (621,043 | ) | (1,340,713 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from sale of preferred stock | — | 209,758 | ||||||
Proceeds from sale of common stock | 809,000 | 1,129,210 | ||||||
Proceeds from note payable – stockholders | 1,150,000 | 1,375,000 | ||||||
Cash paid for transaction costs associated with equity transactions | (106,132 | ) | (50,443 | ) | ||||
Dividend on preferred stock | (42,500 | ) | (37,250 | ) | ||||
Payments on long-term obligations to stockholders | (1,516,833 | ) | (521,053 | ) | ||||
(Repayments to) advances from stockholders | (19,005 | ) | (152,840 | ) | ||||
Payments on long-term obligations to others | (251,216 | ) | (300,255 | ) | ||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 23,314 | 1,652,127 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | — | — | ||||||
CASH AND CASH EQUIVALENTS — BEGINNING | — | — | ||||||
CASH AND CASH EQUIVALENTS — END | $ | — | $ | — | ||||
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For the Years Ended | ||||||||
December 31, | ||||||||
2006 | 2005 | |||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Interest paid | $ | 493,440 | $ | 430,803 | ||||
Income taxes paid | $ | — | $ | — | ||||
Issuance of notes payable for property & equipment | $ | 570,463 | $ | 601,518 | ||||
Common stock reclaimed in connection to clawback provision regarding the PIWS acquisition | 39,000 | — | ||||||
Reduction in notes payable from PIWS purchase price settlement | $ | 130,000 | — | |||||
Notes payable converted into MSI common stock | $ | — | $ | 775,843 | ||||
Accrued salaries and related interest converted into MSI common stock and stock options | $ | — | $ | 454,157 | ||||
Insurance premiums financed with debt | $ | 169,363 | $ | 163,804 | ||||
Director fees paid with non plan stock options | $ | — | $ | 100,667 | ||||
Net assets acquired and liabilities assumed (See Acquisitions Note 4) | ||||||||
Total purchase price | $ | 1,267,500 | $ | 3,150,900 | ||||
Less: cash consideration paid for acquisition | (24,284 | ) | (1,115,000 | ) | ||||
Less: cash acquired | (25,716 | ) | — | |||||
Non-cash consideration | $ | 1,217,500 | $ | 2,035,900 | ||||
Short term note | $ | — | $ | 740,000 | ||||
Long term note | 250,000 | 800,000 | ||||||
Common stock issued | 880,000 | 405,000 | ||||||
Acquisition costs | 87,500 | 90,900 | ||||||
Allocation of non-cash consideration | $ | 1,217,500 | $ | 2,035,900 | ||||
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Year Ended December 31, | Amount | |||
2007 | $ | 440,125 | ||
2008 | 413,374 | |||
2009 | 302,246 | |||
2010 | 197,244 | |||
2011 | 55,200 | |||
$ | 1,408,189 | |||
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Periods Ended December 31, 2005 (in thousands) | 2005 | |||
Net income (loss) applicable to common stockholders, Prior to stock-based employee compensation | $ | 770 | ||
Stock-based employee compensation cost | — | |||
Net income (loss) applicable to common stockholders, as reported | $ | 770 | ||
Stock-based employee compensation cost determined under fair value method, net of tax effects | (291 | ) | ||
Pro-forma net income (loss) under fair value method –Basic | $ | 479 | ||
Effect of dilutive securities | ||||
Preferred Stock | 41 | |||
Convertible notes payable and advances interest expense | 45 | |||
Pro-forma net income (loss) under fair value method –Dilutive | $ | 565 | ||
Net income (loss) per share applicable to common stockholders –Basic | $ | 0.04 | ||
Stock-based employee compensation cost determined under fair value method, net of tax effects | (0.01 | ) | ||
Pro-forma loss per share applicable to common stockholders-Basic | $ | 0.03 | ||
Net income (loss) per share applicable to common stockholders-Diluted | $ | 0.04 | ||
Stock-based employee compensation cost determined under fair value method, net of tax effects | (0.01 | ) | ||
Pro-forma net income (loss) per share attributable to common stockholder–Diluted | $ | 0.03 | ||
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YEAR | YEAR | |||||||
2006 GRANTS | 2005 GRANTS | |||||||
Dividend yield | — | — | ||||||
Weighted average expected life: | 5 years | 5 years | ||||||
Weighted average risk-free interest rate | 4.75 | % | 4.25 | % | ||||
Expected volatility | 101.00 | % | 92.00 | % |
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2006 | 2005 | |||||||
Numerator: | ||||||||
Net income (loss) | $ | (771,111 | ) | $ | 810,670 | |||
Convertible preferred stock dividends | (35,500 | ) | (40,875 | ) | ||||
Numerator for basic earnings per share – income available to common stockholders | $ | (806,611 | ) | $ | 769,795 | |||
Effect of dilutive securities: | ||||||||
Preferred stock dividends | — | 40,875 | ||||||
Convertible notes payable and advances interest expense | — | 44,987 | ||||||
$ | — | $ | 85,862 | |||||
Numerator for diluted earnings per share – income available to common stockholders after assumed conversions | $ | (806,611 | ) | $ | 855,657 | |||
Denominator: | ||||||||
Denominator for basic earnings per share – weighted average shares | 22,875,017 | 19,857,233 | ||||||
Effect of dilutive securities: | ||||||||
Convertible accrued salaries | — | 35,060 | ||||||
Preferred convertible stock | — | 250,528 | ||||||
Convertible debentures and unpaid interest | — | 58,334 | ||||||
Note payable to stockholders and accrued interest | — | 34,283 | ||||||
Note payable to Tate Investments, LLC | — | 407,070 | ||||||
Advances from stockholders | — | 48,992 | ||||||
Total potentially dilutive securities | — | 834,267 | ||||||
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversions | 22,875,017 | 20,691,500 | ||||||
Basic earnings per share | $ | (0.04 | ) | $ | 0.04 | |||
Diluted earnings per share | $ | (0.04 | ) | $ | 0.04 | |||
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Description | Amount | |||
Purchase price: | ||||
Cash paid | $ | 50,000 | ||
Promissory note | 250,000 | |||
MSI Common Stock issued, 1,000,000 shares | 880,000 | |||
Acquisition related costs | 87,500 | |||
Total purchase price | $ | 1,267,500 | ||
Assets acquired and liabilities assumed: | ||||
Cash | $ | 25,716 | ||
Accounts Receivable, Inventory, and other assets | 155,336 | |||
Equipment at Fair Value | 100,000 | |||
Liabilities assumed | (321,557 | ) | ||
Allocation to customer list, to be amortized over 5 years | 552,000 | |||
Allocation to goodwill | 756,005 | |||
Total assets acquired | $ | 1,267,500 | ||
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Pro forma Combined | Pro forma Combined | |||||||
For the year ended | for the year ended | |||||||
December 31, 2006 | December 31, 2005 | |||||||
Revenues: | ||||||||
Net Sales | $ | 13,381,088 | $ | 12,124,379 | ||||
Net income (loss) | $ | (670,674 | ) | $ | 157,744 | |||
Basic net income (loss) per common share | $ | (0.03 | ) | $ | 0.01 | |||
Diluted net income (loss) per common share | $ | (0.03 | ) | $ | 0.01 | |||
Weighted average common shares outstanding – basic | 23,499,674 | 21,296,703 | ||||||
Weight average common shares outstanding — diluted | 23,499,674 | 22,130,972 | ||||||
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At December 31, | ||||||||||||
2006 | 2005 | Useful Life | ||||||||||
Land | $ | 151,180 | $ | 151,180 | — | |||||||
Building | 1,124,276 | 1,050,711 | 20 years | |||||||||
Furniture and equipment | 5,117,161 | 3,785,369 | 3 to 5 years | |||||||||
6,392,617 | 4,987,260 | |||||||||||
Less: Accumulated depreciation | 2,805,851 | 1,836,756 | ||||||||||
Property and Equipment, Net | $ | 3,586,766 | $ | 3,150,504 | ||||||||
Years Ended | ||||||||
2006 | 2005 | |||||||
Statutory federal income tax rate | 34.0 | % | 34.0 | % | ||||
State income taxes, net of federal income tax benefit | 6.0 | % | 6.0 | % | ||||
Adjustment for change in valuation allowance | (40.0 | ) | (40.0 | %) | ||||
— | — | |||||||
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Year Ended | ||||||||
2006 | 2005 | |||||||
Deferred Tax Assets: | ||||||||
Operating loss carryforwards | $ | 8,000,000 | $ | 7,500,000 | ||||
Accounts receivable allowance | 70,000 | 28,000 | ||||||
Total Tax Assets | $ | 8,070,000 | $ | 7,528,000 | ||||
Deferred Tax Liabilities: | ||||||||
Fixed Assets | $ | 286,000 | $ | 238,000 | ||||
Goodwill and intangibles | 409,000 | 213,000 | ||||||
Total Tax Liabilities | 695,000 | 451,000 | ||||||
Less- Valuation Allowance | (7,375,000 | ) | (7,077,000 | ) | ||||
Net Deferred Tax Asset | $ | — | $ | — | ||||
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At December 31, | ||||||||
2006 | 2005 | |||||||
Salaries and other taxes | $ | 347,545 | $ | 244,268 | ||||
Accrued director fees | 269,891 | — | ||||||
Interest | 27,408 | 116,598 | ||||||
Insurance | 169,363 | 254,042 | ||||||
Other accrued liabilities | 467,236 | 347,419 | ||||||
$ | 1,281,443 | $ | 962,327 | |||||
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At December 31, | ||||||||
2006 | 2005 | |||||||
Bank notes — EMSI facilities | $ | 511,465 | $ | 505,216 | ||||
Installment notes – equipment | 864,261 | 447,364 | ||||||
Total indebtedness to bank and financial institutions | 1,375,726 | 952,580 | ||||||
Less: Current maturities | 372,552 | 145,628 | ||||||
Total Long-Term Obligations | $ | 1,003,174 | $ | 806,952 | ||||
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Year Ended December 31, | Amount | |||
2007 | $ | 1,351,050 | ||
2008 | 1,845,110 | |||
2009 | 1,047,873 | |||
2010 | 531,812 | |||
2011 and thereafter | 64,538 | |||
Total Annual Payments | $ | 4,840,383 | ||
Less: Debt Discount | 102,564 | |||
Total (Net of Discount) | $ | 4,737,819 | ||
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Weighted | ||||||||||||
Average | Aggregate | |||||||||||
Number of | Exercise | Intrinsic | ||||||||||
Options | Price | Value | ||||||||||
Balance outstanding at December 31, 2004 | 268,118 | $ | 1.00 | |||||||||
Granted | 674,336 | $ | 0.82 | |||||||||
Exercised | — | — | ||||||||||
Cancelled/Expired | 92,454 | $ | 1.00 | |||||||||
Balance outstanding at December 31, 2005 | 850,000 | $ | 0.82 | $ | 0 | |||||||
Granted | 478,796 | $ | 0.75 | |||||||||
Exercised | — | — | ||||||||||
Cancelled/Expired | — | — | ||||||||||
Balance outstanding at December 31, 2006 | 1,328,796 | $ | 0.80 | $ | 106,303 | |||||||
Number of options exercisable at December 31, 2006 | 1,328,796 | $ | 0.80 | $ | 106,303 | |||||||
WEIGHTED-AVERAGE | ||||||||||||
NUMBER OF | REMAINING | NUMBER OF OPTIONS | ||||||||||
EXERCISE PRICE | OPTIONS | CONTRACTUAL LIFE | CURRENTLY EXERCISABLE | |||||||||
$1.00 | 80,164 | 7.00 years | 80,164 | |||||||||
$1.00 | 95,500 | 8.00 years | 95,500 | |||||||||
$1.00 | 79,173 | 8.50 years | 79,173 | |||||||||
$0.75 | 289,736 | 8.51 years | 289,736 | |||||||||
$0.75 | 305,427 | 9.00 years | 305,427 | |||||||||
$0.75 | 478,796 | 9.80 years | 478,796 |
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Years Ended | ||||
December 31, | Amount | |||
2007 | $ | 97,547 | ||
2008 | 99,491 | |||
2009 | 99,491 | |||
2010 | 103,118 | |||
2011 | 104,384 | |||
Thereafter | 43,493 | |||
$ | 547,524 | |||
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Years Ended | ||||
December 31, | Amount | |||
2007 | $ | 213,378 | ||
2008 | 201,458 | |||
2009 | 121,255 | |||
2010 | 12,138 | |||
2011 & thereafter | — | |||
$ | 548,229 | |||
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Years Ended December 31, | ||||||||
2006 | 2005 | |||||||
Interest expense | $ | 183,082 | $ | 139,705 | ||||
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MedSolutions, Inc.
March 17, 2006
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December 31, | ||||||||
2005 | 2004 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | — | $ | — | ||||
Accounts receivable — trade, net of allowance of $69,240 and $88,835 | 1,405,603 | 979,080 | ||||||
Prepaid expenses and other current assets | 258,523 | 240,428 | ||||||
Supplies | 14,106 | 11,911 | ||||||
Total Current Assets | 1,678,232 | 1,231,419 | ||||||
Property and equipment — at cost, net of accumulated depreciation of $1,836,756 and $1,335,071 | 3,150,504 | 1,636,265 | ||||||
Intangible assets — Customer list, net of accumulated amortization of $624,770 and $235,858 | 1,437,912 | 897,980 | ||||||
Intangible assets — Goodwill | 2,597,021 | 1,495,173 | ||||||
Intangible assets — permits | 65,007 | 59,764 | ||||||
Other assets | 102,126 | 43,034 | ||||||
Total Assets | $ | 9,030,802 | $ | 5,363,635 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) | ||||||||
Current Liabilities: | ||||||||
Note payable to bank | $ | — | $ | 22,493 | ||||
Convertible debentures | 40,135 | 40,135 | ||||||
Current maturities of long-term obligations | 145,628 | 122,571 | ||||||
Accounts payable | 1,130,155 | 1,592,822 | ||||||
Accrued liabilities | 962,327 | 1,741,064 | ||||||
Note payable — AmeriTech Environmental, Inc. | — | 750,000 | ||||||
Current maturities — notes payable to Tate Investments, LLC | 250,000 | — | ||||||
Current maturities — notes payable to Med-Con | 157,861 | 467,820 | ||||||
Current maturities — notes payable to On Call | 495,819 | — | ||||||
Current maturities — notes payable to Positive Impact | 360,669 | — | ||||||
Current maturities — notes payable stockholders | 487,891 | 588,618 | ||||||
Current maturities — litigation settlements | 26,735 | 186,253 | ||||||
Advances from stockholders | 19,004 | 171,845 | ||||||
Total Current Liabilities | 4,076,224 | 5,683,621 | ||||||
Long-term obligations, less current maturities | 806,952 | 399,100 | ||||||
Notes payable — Tate Investments, LLC, less current maturities | 725,000 | — | ||||||
Notes payable — Med-Con, less current maturities | 274,749 | — | ||||||
Notes payable — On Call, less current maturities | 119,541 | — | ||||||
Notes payable — Positive Impact, less current maturities | 489,331 | — | ||||||
Notes payable – stockholders, less current maturities | 359,131 | 951,358 | ||||||
Litigation settlements, less current maturities | — | 26,736 | ||||||
Total Liabilities | 6,850,928 | 7,060,815 | ||||||
Commitments and Contingencies | ||||||||
Stockholders’ Equity (Deficiency): | ||||||||
Preferred stock (par value $.001) – 100,000,000 shares authorized at December 31, 2005 and December 31,2004,respectively, 283,172 shares issued and outstanding at December 31,2005 and 143,333 shares issued at December 31, 2004 (liquidation preference $424,758 – 2005; $215,000 – 2004) | 283 | 143 | ||||||
Common stock (par value $.001) - 100,000,000 shares authorized at December 31, 2005 and December 31,2004; 21,854,467 shares issued and 21,842,267 outstanding at December 31, 2005 and 18,141,242 shares issued and 18,129,042 outstanding at December 31, 2004 | 21,854 | 18,141 | ||||||
Additional paid-in capital | 24,658,145 | 21,595,614 | ||||||
Accumulated deficit | (22,482,408 | ) | (23,293,078 | ) | ||||
Treasury stock, at cost - 12,200 shares at December 31, 2005 and December 31, 2004 | (18,000 | ) | (18,000 | ) | ||||
Total Stockholders’ Equity (Deficiency) | 2,179,874 | (1,697,180 | ) | |||||
Total Liabilities and Stockholders’ Equity (Deficiency) | $ | 9,030,802 | $ | 5,363,635 | ||||
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For the Years Ended | ||||||||
December 31, | ||||||||
2005 | 2004 | |||||||
Revenues | $ | 9,415,558 | $ | 7,926,330 | ||||
Cost of revenues * | 5,680,379 | 5,692,801 | ||||||
Gross profit | 3,735,179 | 2,233,529 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative expenses | 2,449,460 | 2,202,697 | ||||||
Depreciation and amortization | 751,257 | 579,332 | ||||||
Impairment of customer list | — | 139,330 | ||||||
Total operating expenses | 3,200,717 | 2,921,359 | ||||||
Income (loss) from operations | 534,462 | (687,830 | ) | |||||
Other (income) expenses: | ||||||||
Interest expense | 374,260 | 317,854 | ||||||
ATE settlement | (650,468 | ) | — | |||||
Other income | — | (13,050 | ) | |||||
(276,208 | ) | 304,804 | ||||||
Net income (loss) | $ | 810,670 | $ | (992,634 | ) | |||
Preferred stock dividend | (40,875 | ) | (7,000 | ) | ||||
Net income (loss) applicable to common stockholders | $ | 769,795 | $ | (999,634 | ) | |||
Basic net income (loss) per share attributable to common stockholders | $ | 0.04 | $ | (0.06 | ) | |||
Diluted net income (loss) per share attributable to common stockholders | $ | 0.04 | $ | (0.06 | ) | |||
Weighted average common shares used in basic income (loss) per share | 19,482,720 | 18,113,411 | ||||||
Weighted average common shares and dilutive securities used in diluted income (loss) per share | 20,316,988 | 18,113,411 | ||||||
* | Excludes depreciation of $501,865 and $392,825 for the years ended December 31, 2005 and 2004, respectively. |
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MSI Preferred Stock | ||||||||||||||||
Series A | MSI Common Stock | |||||||||||||||
Year Ended December 31, 2005 | Shares | Amount | Shares | Amount | ||||||||||||
Balance — December 31, 2004 | 143,333 | $ | 143 | 18,141,242 | $ | 18,141 | ||||||||||
MSI preferred stock sold for cash | 139,839 | 140 | — | — | ||||||||||||
MSI common stock sold for cash net of transaction costs of $50,443 | — | — | 1,667,672 | 1,668 | ||||||||||||
MSI common stock issued for ATE settlement | — | — | 60,746 | 61 | ||||||||||||
MSI common stock returned by directors | — | — | (20,000 | ) | (20 | ) | ||||||||||
MSI common stock issued for debt conversions | — | — | 1,468,140 | 1,468 | ||||||||||||
MSI common stock issued for acquisitions | — | — | 536,667 | 536 | ||||||||||||
Preferred stock dividend | — | — | — | — | ||||||||||||
Net income | — | — | — | — | ||||||||||||
Balance – December 31, 2005 | 283,172 | $ | 283 | 21,854,467 | $ | 21,854 | ||||||||||
Additional | ||||||||||||||||
Paid-in | Accumulated | Treasury | ||||||||||||||
Year Ended December 31, 2005 | Capital | Deficit | Stock | Total | ||||||||||||
Balance — December 31, 2004 | $ | 21,595,614 | $ | (23,293,078 | ) | $ | (18,000 | ) | $ | (1,697,180 | ) | |||||
MSI preferred stock sold for cash | 209,618 | — | — | 209,758 | ||||||||||||
MSI common stock sold for cash net of transaction costs of $50,443 | 1,077,099 | — | — | 1,078,767 | ||||||||||||
MSI common stock issued for ATE settlement | 83,006 | — | — | 83,067 | ||||||||||||
MSI common stock issued for director fees | 100,689 | — | — | 100,689 | ||||||||||||
MSI common stock returned by directors | (2 | ) | — | — | (22 | ) | ||||||||||
MSI common stock issued for debt conversions | 1,228,532 | — | — | 1,230,000 | ||||||||||||
MSI common stock issued for acquisitions | 404,464 | — | — | 405,000 | ||||||||||||
Preferred stock dividend | (40,875 | ) | — | — | (40,875 | ) | ||||||||||
Net income | — | 810,670 | — | 810,670 | ||||||||||||
Balance – December 31, 2005 | $ | 24,658,145 | $ | (22,482,408 | ) | $ | (18,000 | ) | $ | 2,179,874 | ||||||
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MSI Preferred Stock | ||||||||||||||||
MSI Common Stock | Series A | |||||||||||||||
Year Ended December 31, 2004: | Shares | Amount | Shares | Amount | ||||||||||||
Balance – December 31, 2003 | 18,084,703 | $ | 18,084 | — | $ | — | ||||||||||
MSI common stock sold for cash | 100,000 | 100 | — | — | ||||||||||||
MSI preferred stock sold for cash | 143,333 | 143 | ||||||||||||||
MSI common stock issued for bonuses | 115,000 | 115 | ||||||||||||||
MSI common stock bonuses cancelled by the Company | — | — | — | — | ||||||||||||
MSI common stock issued in partial payment for assets of Bray | 29,867 | 30 | — | — | ||||||||||||
MSI common stock issued for consulting services | 8,500 | 9 | — | — | ||||||||||||
MSI common stock issued for director fees | 20,000 | 20 | — | — | ||||||||||||
MSI common stock reversal of shares issued due to clawback provision for AmeriTech acquisition | (365,828 | ) | (366 | ) | — | — | ||||||||||
MSI common stock issued in partial payment for assets of Med-Con | 149,000 | 149 | — | — | ||||||||||||
Net loss | — | — | — | — | ||||||||||||
Balance – December 31, 2004 | 18,141,242 | $ | 18,141 | 143,333 | $ | 143 | ||||||||||
Additional | ||||||||||||||||
Paid-in | Accumulated | Treasury | ||||||||||||||
Year Ended December 31, 2004: | Capital | Deficit | Stock | Total | ||||||||||||
Balance – December 31, 2003 | $ | 21,476,848 | $ | (22,300,444 | ) | $ | (18,000 | ) | $ | (823,512 | ) | |||||
MSI common stock sold for cash | 129,900 | — | — | 130,000 | ||||||||||||
MSI preferred stock sold for cash | 214,857 | — | — | 215,000 | ||||||||||||
MSI common stock issued for bonuses | (115 | ) | — | — | — | |||||||||||
MSI common stock bonuses cancelled by the Company | (144,500 | ) | — | — | (144,500 | ) | ||||||||||
MSI common stock issued in partial payment for assets of Bray | 22,369 | — | — | 22,399 | ||||||||||||
MSI common stock issued for consulting services | 8,491 | — | — | 8,500 | ||||||||||||
MSI common stock issued for director fees | (20 | ) | — | — | — | |||||||||||
MSI common stock reversal of shares issued due to clawback provision for AmeriTech acquisition | (254,067 | ) | — | — | (254,433 | ) | ||||||||||
MSI common stock issued in partial payment for assets of Med-Con | 148,851 | — | — | 149,000 | ||||||||||||
Preferred Stock Dividend | (7,000 | ) | — | — | (7,000 | ) | ||||||||||
Net loss | — | (992,634 | ) | — | $ | (992,634 | ) | |||||||||
Balance – December 31, 2004 | $ | 21,595,614 | $ | (23,293,078 | ) | $ | (18,000 | ) | $ | (1,697,180 | ) | |||||
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For the Years Ended | ||||||||
December 31, | ||||||||
2005 | 2004 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income (loss) | $ | 810,670 | $ | (992,634 | ) | |||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | 751,258 | 579,332 | ||||||
Gain on disposal of fixed asset | — | (11,194 | ) | |||||
Impairment of customer list | — | 139,330 | ||||||
Provision for bad debts | 3,000 | 59,000 | ||||||
Gain on ATE settlement | (650,468 | ) | — | |||||
Cancellation of accrued bonuses | — | (144,500 | ) | |||||
Litigation settlement | (53,023 | ) | — | |||||
Stock issued for other services | — | 8,500 | ||||||
Stock options issued for director fees | 100,667 | — | ||||||
Changes in assets (increase) decrease: | ||||||||
Accounts receivable | (375,950 | ) | 295,685 | |||||
Supplies | (2,195 | ) | 867 | |||||
Prepaid expenses and other current assets | 128,244 | 309,516 | ||||||
Other non-current assets | (64,335 | ) | (72,151 | ) | ||||
Changes in liabilities increase (decrease) | ||||||||
Accounts payable, accrued liabilities & litigation settlements | (959,282 | ) | 40,821 | |||||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | (311,414 | ) | 212,572 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Additions to property and equipment | (225,713 | ) | (350,104 | ) | ||||
Proceeds from disposal of fixed asset | — | 10,115 | ||||||
Asset acquisition of Bray Medical Waste Service | — | (11,200 | ) | |||||
Asset acquisition of Med-Con Waste Solutions, Inc. | — | (250,000 | ) | |||||
Asset acquisition of On Call Medical Waste, Ltd. | (375,000 | ) | — | |||||
Asset acquisition of Cooper Biomed, Ltd. | (40,000 | ) | — | |||||
Asset acquisition of Positive Impact Waste Solutions | (700,000 | ) | — | |||||
NET CASH USED IN INVESTING ACTIVITIES | (1,340,713 | ) | (601,189 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from sale of preferred stock | 209,758 | 215,000 | ||||||
Proceeds from sale of common stock | 1,129,210 | 130,000 | ||||||
Proceeds from note payable – stockholders | 1,375,000 | 1,150,000 | ||||||
Cash paid for transaction costs associated with equity transactions | (50,443 | ) | — | |||||
Dividend on preferred stock | (37,250 | ) | — | |||||
Payments on long-term obligations to stockholders | (521,053 | ) | (603,020 | ) | ||||
(Repayments to) advances from stockholders | (152,840 | ) | (186,550 | ) | ||||
Payments on long-term obligations to others | (300,255 | ) | (316,813 | ) | ||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 1,652,127 | 388,617 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | — | — | ||||||
CASH AND CASH EQUIVALENTS — BEGINNING | — | — | ||||||
CASH AND CASH EQUIVALENTS — END | $ | — | $ | — | ||||
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For the Years Ended | ||||||||
December 31, | ||||||||
2005 | 2004 | |||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Interest paid | $ | 430,803 | $ | 236,384 | ||||
Income taxes paid | $ | — | $ | — | ||||
Issuance of notes payable for property & equipment | $ | 601,518 | $ | 148,855 | ||||
Common stock reclaimed in connection to clawback provision regarding AmeriTech acquisition | — | $ | 254,433 | |||||
Notes payable converted into MSI common stock | $ | 775,843 | $ | — | ||||
Accrued salaries and related interest converted into MSI common stock and stock options | $ | 454,157 | $ | — | ||||
Insurance premiums financed with debt | $ | 163,804 | $ | 125,000 | ||||
Director fees paid with non plan stock options | $ | 100,667 | $ | 85,500 | ||||
Net assets acquired and liabilities assumed (See Acquisitions Note 4) | ||||||||
Total purchase price | $ | 3,150,900 | $ | 1,256,048 | ||||
Less: cash consideration paid | (1,115,000 | ) | (261,200 | ) | ||||
Non-cash consideration | $ | 2,035,900 | $ | 994,848 | ||||
Short term note | $ | 740,000 | $ | 750,000 | ||||
Long term note | 800,000 | — | ||||||
Common stock issued | 405,000 | 171,400 | ||||||
Liabilities assumed | — | 71,448 | ||||||
Acquisition costs | 90,900 | 2,000 | ||||||
Allocation of non-cash consideration | $ | 2,035,900 | $ | 994,848 | ||||
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Year Ended December 31, | Amount | |||
2006 | $ | 370,423 | ||
2007 | 370,423 | |||
2008 | 343,672 | |||
2009 | 232,543 | |||
2010 | 120,851 | |||
$ | 1,437,912 | |||
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2005 | 2004 | |||||||
Net income (loss) applicable to common stockholders, Prior to stock-based employee compensation | $ | 770 | $ | (1,000 | ) | |||
Stock-based employee compensation cost | — | — | ||||||
Net income (loss) applicable to common stockholders, as reported | $ | 770 | $ | (1,000 | ) | |||
Stock-based employee compensation cost determined under fair value method, net of tax effects | (291 | ) | (162 | ) | ||||
Pro-forma net income (loss) under fair value method –Basic | $ | 479 | $ | (1,162 | ) | |||
Effect of dilutive securities | ||||||||
Preferred Stock | 41 | — | ||||||
Convertible notes payable and advances interest expense | 45 | — | ||||||
Pro-forma net income (loss) under fair value method –Dilutive | $ | 565 | $ | (1,162 | ) | |||
Net income (loss) per share applicable to common stockholders –Basic | $ | 0.04 | $ | (0.06 | ) | |||
Stock-based employee compensation cost determined under fair value method, net of tax effects | (0.01 | ) | (0.01 | ) | ||||
Pro-forma loss per share applicable to common stockholders –Basic | $ | 0.03 | $ | (0.07 | ) | |||
Net income (loss) per share applicable to common stockholders –Diluted | $ | 0.04 | $ | (0.06 | ) | |||
Stock-based employee compensation cost determined under fair value method, net of tax effects | (0.01 | ) | (0.01 | ) | ||||
Pro-forma net income (loss) per share attributable to common stockholder–Diluted | $ | 0.03 | $ | (0.07 | ) | |||
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YEAR | YEAR | |||||||
GRANTS | 2005 GRANTS | 2004 | ||||||
Dividend yield | — | — | ||||||
Weighted average expected life: | 5 years | 5 years | ||||||
Weighted average risk-free interest rate | 4.25 | % | 3.27 | % | ||||
Expected volatility | 92.00 | % | 80.39 | % |
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2005 | 2004 | |||||||
Numerator: | ||||||||
Net income (loss) | $ | 810,670 | $ | (992,634 | ) | |||
Convertible preferred stock dividends | (40,875 | ) | (7,000 | ) | ||||
Numerator for basic earnings per share – income available to common stockholders | $ | 769,795 | $ | (999,634 | ) | |||
Effect of dilutive securities: | ||||||||
Preferred stock dividends | 40,875 | — | ||||||
Convertible notes payable and advances interest expense | 44,987 | — | ||||||
$ | 85,862 | $ | — | |||||
Numerator for diluted earnings per share – income available to common stockholders after assumed conversions | $ | 855,657 | $ | (999,634 | ) | |||
Denominator: | ||||||||
Denominator for basic earnings per share – weighted average shares | 19,482,170 | 18,113,411 | ||||||
Effect of dilutive securities: | ||||||||
Convertible accrued salaries | 35,060 | — | ||||||
Preferred convertible stock | 250,528 | — | ||||||
Convertible debentures and unpaid interest | 58,334 | — | ||||||
Note payable to stockholders and accrued interest | 441,353 | — | ||||||
Advances from stockholders | 48,992 | — | ||||||
Total potentially dilutive securities | 834,267 | — | ||||||
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversions | 20,316,437 | 18,113,411 | ||||||
Basic earnings per share | $ | 0.04 | $ | (0.06 | ) | |||
Diluted earnings per share | $ | 0.04 | $ | (0.06 | ) | |||
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Purchase price: | ||||
Cash paid | $ | 700,000 | ||
Promissory notes | 850,000 | |||
Common stock, 360,000 shares | 270,000 | |||
Acquisition related costs | 55,400 | |||
Total purchase price | $ | 1,875,400 | ||
Assets acquired: | ||||
Equipment | $ | 1,148,475 | ||
Allocation to customer list, to be amortized over 5 years | 279,000 | |||
Allocation to goodwill | 447,925 | |||
Total net assets acquired | $ | 1,875,400 | ||
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Purchase price: | ||||
Cash paid | $ | 375,000 | ||
Promissory notes | 625,000 | |||
Common stock, 166,667 shares | 125,000 | |||
Acquisition related costs | 30,500 | |||
Total purchase price | $ | 1,155,500 | ||
Assets acquired: | ||||
Accounts receivable, net | $ | 48,078 | ||
Vehicles | 57,500 | |||
Allocation to customer list, to be amortized over 5 years | 396,000 | |||
Allocation to goodwill | 653,922 | |||
Total net assets acquired | $ | 1,155,500 | ||
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Description | Amount | |||
Purchase price: | ||||
Cash paid | $ | 250,000 | ||
Promissory notes | 750,000 | |||
Common stock, 149,000 shares | 149,000 | |||
Liabilities assumed | 71,448 | |||
Acquisition related costs | 2,000 | |||
Total purchase price | $ | 1,222,448 | ||
Assets acquired: | ||||
Equipment | $ | 71,448 | ||
Allocation to customer list, to be amortized over five years | 574,500 | |||
Allocation to goodwill | 576,500 | |||
Total assets acquired | $ | 1,222,448 | ||
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Pro forma | Pro forma | |||||||
Combined | Combined | |||||||
At December | At December | |||||||
31, 2005 | 31, 2004 | |||||||
Revenues: | ||||||||
Net Sales | $ | 11,090,832 | $ | 9,059,435 | ||||
Net income (loss) | $ | 450,092 | $ | (1,295,005 | ) | |||
Basic net income (loss) per common share | $ | 0.02 | $ | (0.07 | ) | |||
Diluted net income (loss) per common share | $ | 0.02 | $ | (0.07 | ) | |||
Weighted average common shares outstanding — basic | 19,922,190 | 18,350,978 | ||||||
Weight average common shares outstanding — diluted | 20,756,459 | 18,350,978 | ||||||
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At December 31, | ||||||||||||
2005 | 2004 | Useful Life | ||||||||||
Land | $ | 151,180 | $ | 58,680 | — | |||||||
Building | 1,050,711 | 777,560 | 20 years | |||||||||
Furniture and equipment | 3,785,369 | 2,135,096 | 3 to 5 years | |||||||||
4,987,260 | 2,971,336 | |||||||||||
Less: Accumulated depreciation | 1,836,756 | 1,335,071 | ||||||||||
Property and Equipment, Net | $ | 3,150,504 | $ | 1,636,265 | ||||||||
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Years Ended | ||||||||
2005 | 2004 | |||||||
Statutory federal income tax rate | 34.0 | % | (34.0 | %) | ||||
State income taxes, net of federal income tax benefit | 6.0 | % | (6.0 | %) | ||||
Adjustment for change in valuation allowance | (40.0 | ) | 40.0 | % | ||||
— | — | |||||||
Year Ended | ||||||||
2005 | 2004 | |||||||
Deferred Tax Assets: | ||||||||
Operating loss carryforwards | $ | 7,500,000 | $ | 7,800,000 | ||||
Accounts receivable allowance | 28,000 | 36,000 | ||||||
Total Tax Assets | $ | 7,528,000 | $ | 7,836,000 | ||||
Deferred Tax Liabilities: | ||||||||
Fixed Assets | $ | 238,000 | $ | 353,000 | ||||
Goodwill and intangibles | 213,000 | 141,000 | ||||||
Total Tax Liabilities | 451,000 | 494,000 | ||||||
Less- Valuation Allowance | (7,077,000 | ) | (7,342,000 | ) | ||||
Net Deferred Tax Asset | $ | — | $ | — | ||||
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At December 31, | ||||||||
2005 | 2004 | |||||||
Salaries | $ | 118,664 | $ | 486,373 | ||||
Payroll and other taxes | 125,604 | 440,207 | ||||||
Royalty obligation | 5,000 | 5,000 | ||||||
Interest | 116,598 | 173,141 | ||||||
Processing expenses | 37,588 | 100,131 | ||||||
Insurance | 254,042 | 206,824 | ||||||
Other accrued liabilities | 304,831 | 329,388 | ||||||
$ | 962,327 | $ | 1,741,064 | |||||
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At December 31, | ||||||||
2005 | 2004 | |||||||
Bank note — EMSI facilities | $ | 505,216 | $ | 213,198 | ||||
Installment notes — equipment | 447,364 | 308,473 | ||||||
Total indebtedness to bank and financial institutions | 952,580 | 521,671 | ||||||
Less: Current maturities | 145,628 | 122,571 | ||||||
Total Long-Term Obligations | $ | 806,952 | $ | 399,100 | ||||
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Year Ended December 31, | Amount | |||
2006 | $ | 1,971,810 | ||
2007 | 851,080 | |||
2008 | 1,094,919 | |||
2009 | 308,725 | |||
2010 | 451,072 | |||
2011 and thereafter | 21,700 | |||
$ | 4,699,306 | |||
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Weighted Average | ||||||||
Number of Options | Exercise Price | |||||||
Balance outstanding at December 31, 2003 | 40,000 | $ | 1.00 | |||||
Granted | 228,118 | $ | 1.00 | |||||
Exercised | — | — | ||||||
Cancelled/Expired | — | — | ||||||
Balance outstanding at December 31, 2004 | 268,118 | $ | 1.00 | |||||
Granted | 957,076 | 0.92 | ||||||
Exercised | — | — | ||||||
Cancelled/Expired | 92,454 | 1.00 | ||||||
Balance outstanding at December 31, 2005 | 1,132,740 | $ | 0.94 | |||||
Number of options exercisable at December 31, 2005 | 1,132,740 | $ | 0.94 | |||||
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Fixed Facility | ||||||||||||
Maintenance | Capital | Variable | ||||||||||
Contract Years | and Use Fee | Renewal Fee | Usage Fee | |||||||||
(Based on waste | ||||||||||||
incinerated) | ||||||||||||
2004 | $ | 12,500 | $ | 30,290 | $.005 per lb. | |||||||
2005 | $ | 12,500 | $ | 31,366 | $.005 per lb. | |||||||
Thru June 8, 2006 | $ | 12,500 | $ | 5,000 | $.005 per lb. |
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Years Ended | ||||
December 31, | Amount | |||
2006 | $ | 83,106 | ||
2007 | 86,994 | |||
2008 | 88,938 | |||
2009 | 88,938 | |||
2010 | 92,219 | |||
Thereafter | 132,192 | |||
$ | 572,387 | |||
Years Ended | ||||
December 31, | Amount | |||
2006 | $ | 214,470 | ||
2007 | 213,378 | |||
2008 | 201,458 | |||
2009 | 124,478 | |||
2010 | 12,138 | |||
$ | 765,922 | |||
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Years Ended December 31, | ||||||||
2005 | 2004 | |||||||
Interest expense | $ | 139,705 | $ | 182,498 | ||||
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June 30, | December 31, | |||||||
2007 | 2006 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | — | $ | — | ||||
Accounts receivable — trade, net of allowance of $119,300 and $174,989 | 2,457,423 | 1,847,541 | ||||||
Prepaid expenses and other current assets | 136,677 | 366,141 | ||||||
Supplies | 67,448 | 26,109 | ||||||
Total Current Assets | 2,661,548 | 2,239,791 | ||||||
Property and equipment — at cost, net of accumulated depreciation of $3,348,863 and $2,805,851 | 3,319,745 | 3,586,766 | ||||||
Intangible assets — Customer list, net of accumulated amortization of $1,219,839 and $1,028,993 | 953,343 | 1,408,189 | ||||||
Intangible assets — Goodwill | 3,403,025 | 3,403,025 | ||||||
Intangible assets — Permits | 185,554 | 152,749 | ||||||
Other assets | 69,394 | 46,943 | ||||||
Total Assets | $ | 10,592,609 | $ | 10,837,463 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Current maturities of long-term obligations | $ | 1,464,788 | $ | 372,552 | ||||
Accounts payable | 1,011,581 | 1,507,220 | ||||||
Accrued liabilities | 621,473 | 1,281,443 | ||||||
Current maturities – notes payable to Tate Investments, LLC | 54,692 | — | ||||||
Current maturities – notes payable to Med-Con | 92,310 | 127,703 | ||||||
Current maturities – notes payable to On Call | 230,421 | 294,541 | ||||||
Current maturities – note payable to Positive Impact | 101,679 | 97,705 | ||||||
Current maturities – note payable to Abele-Kerr Investments, LLC | 99,346 | 38,948 | ||||||
Current maturities – notes payable stockholders | 512,317 | 419,600 | ||||||
Total Current Liabilities | 4,188,607 | 4,139,712 | ||||||
Long-term obligations, less current maturities | 810,907 | 1,003,174 | ||||||
Notes payable – Tate Investments, LLC, less current maturities, net of discount of $0 and $102,564 | 95,315 | 1,397,436 | ||||||
Notes payable – Med-Con, less current maturities | 99,972 | 147,047 | ||||||
Note payable – Positive Impact, less current maturities | 281,943 | 333,796 | ||||||
Note payable – Abele-Kerr Investments, LLC, less current maturities | 150,654 | 211,052 | ||||||
Notes payable – stockholders, less current maturities | 226,987 | 294,267 | ||||||
Total Liabilities | 5,854,385 | 7,526,484 | ||||||
Commitments and Contingencies (Note 1) | ||||||||
Stockholders’ Equity: | ||||||||
Preferred stock (par value $.001) – 100,000,000 shares authorized at June 30, 2007 and December 31,2006,respectively, 0 shares issued and outstanding at June 30, 2007 and 96,667 shares issued at December 31, 2006 (liquidation preference $0 – 2007; $145,001 – 2006) | — | 97 | ||||||
Common stock (par value $.001) - 100,000,000 shares authorized at June 30, 2007 and December 31,2006; 26,176,915 shares issued and 26,164,715 outstanding at June 30, 2007 and 23,792,985 shares issued and 23,780,785 outstanding at December 31, 2006 | 26,177 | 23,793 | ||||||
Additional paid-in capital | 27,792,321 | 26,558,608 | ||||||
Accumulated deficit | (23,062,274 | ) | (23,253,519 | ) | ||||
Treasury stock, at cost - 12,200 shares at June 30, 2007 and December 31, 2006 | (18,000 | ) | (18,000 | ) | ||||
Total Stockholders’ Equity | 4,738,224 | 3,310,979 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 10,592,609 | $ | 10,837,463 | ||||
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For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Revenues | $ | 3,863,897 | $ | 3,052,705 | $ | 7,626,227 | $ | 6,241,459 | ||||||||
Cost of revenues * | 2,379,916 | 1,749,261 | 4,575,324 | 3,508,820 | ||||||||||||
Gross profit | 1,483,981 | 1,303,444 | 3,050,903 | 2,732,639 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 826,011 | 826,063 | 1,696,049 | 1,641,237 | ||||||||||||
Depreciation and amortization | 368,589 | 322,678 | 733,858 | 629,121 | ||||||||||||
Total operating expenses | 1,194,600 | 1,148,741 | 2,429,907 | 2,270,358 | ||||||||||||
Income from operations | 289,381 | 154,703 | 620,996 | 462,281 | ||||||||||||
Other expense: | ||||||||||||||||
Interest expense | 157,717 | 136,108 | 429,751 | 233,286 | ||||||||||||
Net income | 131,664 | 18,595 | 191,245 | 228,995 | ||||||||||||
Preferred stock dividend | — | (10,625 | ) | — | (21,250 | ) | ||||||||||
Net income available to common stockholders | $ | 131,664 | $ | 7,970 | $ | 191,245 | $ | 207,745 | ||||||||
Basic net income per common share | $ | .00 | $ | .00 | $ | .00 | $ | .01 | ||||||||
Diluted net income per common share | $ | .00 | $ | .00 | $ | .00 | $ | .01 | ||||||||
Weighted average number of common shares outstanding used in computation of outstanding basic net income per share | 26,164,715 | 22,142,392 | 24,943,950 | 22,034,125 | ||||||||||||
Weighted average number of common shares used in computation of diluted net income common per share | 26,417,669 | 24,813,026 | 25,196,904 | 24,464,265 | ||||||||||||
* - | Excludes depreciation of $273,282 and $230,497 for the three months ended June 30, 2007 and 2006, respectively and depreciation of $543,011 and $445,459 for the six months ended June 30, 2007 and 2006, respectively. |
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(Unaudited)
MSI Preferred Stock | ||||||||||||||||
Series A | MSI Common Stock | |||||||||||||||
Six Months Ended June 30, 2007: (Unaudited) | Shares | Amount | Shares | Amount | ||||||||||||
Balance — December 31, 2006 | 96,667 | $ | 97 | 23,792,985 | $ | 23,793 | ||||||||||
Preferred stock converted into common stock | (96,667 | ) | (97 | ) | 96,667 | 97 | ||||||||||
Common stock returned due to SteriLogic settlement | — | — | (300,000 | ) | (300 | ) | ||||||||||
Convertible debt converted into common stock | — | — | 2,406,417 | 2,406 | ||||||||||||
Shares issued in exchange for shares of a predecessor entity | 180,846 | 181 | ||||||||||||||
Net income | — | — | — | — | ||||||||||||
Balance — June 30, 2007 | — | $ | — | 26,176,915 | $ | 26,177 | ||||||||||
Additional | ||||||||||||||||
Six Months Ended June 30, 2007: | Paid-in | Accumulated | Treasury | |||||||||||||
(Unaudited) | Capital | Deficit | Stock | Total | ||||||||||||
Balance — December 31, 2006 | $ | 26,558,608 | $ | (23,253,519 | ) | $ | (18,000 | ) | $ | 3,310,979 | ||||||
Preferred stock converted into common stock | — | — | — | — | ||||||||||||
Common stock returned due to SteriLogic settlement | (263,700 | ) | — | — | (264,000 | ) | ||||||||||
Convertible debt converted into common stock | 1,497,594 | — | — | 1,500,000 | ||||||||||||
Shares issued in exchange for shares of a predecessor entity | (181 | ) | — | — | — | |||||||||||
Net income | — | 191,245 | — | 191,245 | ||||||||||||
Balance — June 30, 2007 | $ | 27,792,321 | $ | (23,062,274 | ) | $ | (18,000 | ) | $ | 4,738,224 | ||||||
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For the Six Months Ended | ||||||||
June 30, | ||||||||
2007 | 2006 | |||||||
(Unaudited) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 191,245 | $ | 228,995 | ||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Depreciation and amortization | 733,858 | 629,121 | ||||||
Provision for bad debts | 60,000 | 6,000 | ||||||
Equity compensation for director fees | — | — | ||||||
Finance fees paid in common stock | — | — | ||||||
Amortization of finance fees and debt discount | 140,795 | 30,278 | ||||||
Changes in assets (increase) decrease: | ||||||||
Accounts receivable | (726,359 | ) | (413,726 | ) | ||||
Supplies | (41,339 | ) | (6,196 | ) | ||||
Prepaid expenses and other current assets | 257,137 | 92,068 | ||||||
Other non-current assets | (60,956 | ) | (39,677 | ) | ||||
Changes in liabilities increase (decrease) | ||||||||
Accounts payable and accrued liabilities | (821,007 | ) | (294,078 | ) | ||||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | (266,626 | ) | 232,785 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Additions to property and equipment | (270,291 | ) | (354,826 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES | (270,291 | ) | (354,826 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from sale of common stock | — | 709,000 | ||||||
Proceeds from note payable — stockholder | 175,000 | 600,000 | ||||||
Cash paid for transaction costs associated with equity transactions | — | (84,132 | ) | |||||
Dividend on preferred stock | (3,625 | ) | (21,250 | ) | ||||
Finance fees paid for new debt | (32,892 | ) | — | |||||
Payments on long-term obligations to stockholders | (501,535 | ) | (423,165 | ) | ||||
Payments on advances to stockholders | — | (19,005 | ) | |||||
Advances on long-term obligations to others | 1,439,558 | — | ||||||
Payments on long-term obligations to others | (539,589 | ) | (527,773 | ) | ||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 536,917 | 233,675 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | — | 111,634 | ||||||
CASH AND CASH EQUIVALENTS — BEGINNING | — | — | ||||||
CASH AND CASH EQUIVALENTS — END | $ | — | $ | 111,634 | ||||
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended | ||||||||
June 30, | ||||||||
2007 | 2006 | |||||||
(Unaudited) | ||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Interest paid | $ | 260,214 | $ | 218,378 | ||||
Income taxes paid | $ | — | $ | — | ||||
Issuance of notes payable for property and equipment | $ | — | $ | 358,693 | ||||
Common stock reclaimed in connection with clawback provision regarding PIWS acquisition | $ | — | $ | 39,000 | ||||
Common stock reclaimed in connection with clawback provision regarding SteriLogic acquisition | $ | 264,000 | $ | — | ||||
Reduction in notes payable from PIWS purchase price settlement | $ | — | $ | 130,000 | ||||
Notes payable converted into MSI common stock | $ | 1,500,000 | $ | — | ||||
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three Months | Three Months | Six Months | Six Months | |||||||||||||
Ended June | Ended June | Ended June | Ended June | |||||||||||||
30, 2007 | 30, 2006 | 30, 2007 | 30, 2006 | |||||||||||||
Numerator: | ||||||||||||||||
Net income | $ | 131,644 | $ | 18,595 | $ | 191,245 | $ | 228,995 | ||||||||
Convertible preferred stock dividends | — | (10,625 | ) | — | (21,250 | ) | ||||||||||
Numerator for net income per common share – net income available to common stockholders | 131,644 | 7,970 | 191,245 | 207,745 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Preferred stock dividends | — | 10,625 | — | 21,250 | ||||||||||||
Interest on convertible notes payable | 6,210 | 38,204 | 12,719 | 67,639 | ||||||||||||
6,210 | 48,829 | 12,719 | 88,889 | |||||||||||||
Numerator for diluted net income per common share – net income available to common stockholders after assumed conversions | $ | 137,854 | $ | 56,799 | $ | 203,964 | $ | 296,634 | ||||||||
Denominator: | ||||||||||||||||
Denominator for basic earnings per share – weighted average shares | 26,164,715 | 22,142,392 | 24,943,950 | 22,034,125 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Convertible accrued salaries | — | — | — | — | ||||||||||||
Stock options | 54,378 | 39,964 | 54,378 | 39,964 | ||||||||||||
Preferred convertible stock | — | 283,172 | — | 283,172 | ||||||||||||
Convertible debentures and unpaid interest | — | 59,374 | — | 59,374 | ||||||||||||
Note payable to stockholders and accrued interest | 198,576 | 2,288,124 | 198,576 | 2,047,630 | ||||||||||||
Advances from stockholders | — | — | — | — | ||||||||||||
Total potentially dilutive securities | 252,954 | 2,670,634 | 252,954 | 2,430,140 | ||||||||||||
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversions | 26,417,669 | 24,813,026 | 25,196,904 | 24,464,265 | ||||||||||||
Basic earnings per share | $ | .01 | $ | .00 | $ | .01 | $ | .01 | ||||||||
Diluted earnings per share | $ | .01 | $ | .00 | $ | .01 | $ | .01 | ||||||||
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
205
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
206
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Pro forma | Pro forma | |||||||
Combined for | Combined for | |||||||
the Three Months ended | the Six Months ended | |||||||
June 30, 2006 | June 30, 2006 | |||||||
Net Sales | $ | 3,343,683 | $ | 6,823,415 | ||||
Net income (loss) | $ | (37,986 | ) | $ | 115,832 | |||
Basic net income (loss) per common share | $ | (0.00 | ) | $ | 0.00 | |||
Diluted net income (loss) per common share | $ | (0.00 | ) | $ | 0.00 | |||
Weighted average common shares outstanding — basic | 22,842,392 | 22,734,125 | ||||||
Weighted average common shares outstanding — diluted | 25,513,026 | 25,164,265 | ||||||
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Year Ended December 31, | Amount | |||
2007 | $ | 190,612 | ||
2008 | 354,708 | |||
2009 | 243,579 | |||
2010 | 138,577 | |||
2011 | 25,867 | |||
$ | 953,343 | |||
June 30, | December 31, | |||||||
2007 | 2006 | |||||||
(Unaudited) | ||||||||
Salaries and payroll taxes | $ | 252,788 | $ | 347,545 | ||||
Accrued director fees | 116,000 | 269,891 | ||||||
Interest | 56,150 | 27,408 | ||||||
Insurance | — | 169,363 | ||||||
Other accrued liabilities | 196,535 | 467,236 | ||||||
$ | 621,473 | $ | 1,281,443 | |||||
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Weighted Average | Aggregate | |||||||||||
Number of Options | Exercise Price | Intrinsic Value | ||||||||||
Balance outstanding at December 31, 2006 | 1,328,796 | $ | 0.80 | $ | 139,615 | |||||||
Granted | — | — | ||||||||||
Exercised | — | — | ||||||||||
Cancelled/Expired | — | — | ||||||||||
Balance outstanding at June 30, 2007 | 1,328,796 | $ | 0.80 | $ | 42,958 | |||||||
Number of options exercisable at June 30, 2007 | 1,328,796 | $ | 0.80 | $ | 42,958 | |||||||
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
WEIGHTED-AVERAGE | ||||||||||||
NUMBER OF | REMAINING | NUMBER OF OPTIONS | ||||||||||
EXERCISE PRICE | OPTIONS | CONTRACTUAL LIFE | CURRENTLY EXERCISABLE | |||||||||
$1.00 | 80,164 | 6.50 years | 80,164 | |||||||||
$1.00 | 95,500 | 7.50 years | 95,500 | |||||||||
$1.00 | 79,173 | 8.00 years | 79,173 | |||||||||
$0.75 | 289,736 | 8.02 years | 289,736 | |||||||||
$0.75 | 305,427 | 8.50 years | 305,427 | |||||||||
$0.75 | 478,796 | 9.30 years | 478,796 |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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• | Annual report on Form 10-K for the year ended December 31, 2006 | ||
• | Quarterly reports on Form 10-Q for the quarters ended March 31 and June 30, 2007 | ||
• | Current reports on Form 8-K filed on May 17, August 28 and September 4, 2007 | ||
• | Proxy statement filed April 16, 2007 for 2007 Annual Meeting of Stockholders on May 16, 2007. |
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2
Table of Contents
Article 1 — Definitions | 1 | |||
Article 2 — The Merger | 1 | |||
2.1 Merger | 1 | |||
2.2 Closing | 1 | |||
2.3 Closing Events | 2 | |||
(a) Certificate of Merger | 2 | |||
(b) Deliveries by Company | 2 | |||
(c) Deliveries by Parent and MergerSub | 2 | |||
2.4 Effect of Merger | 2 | |||
(a) General | 2 | |||
(b) Articles of Incorporation | 2 | |||
(c) Bylaws | 2 | |||
(d) Directors and Officers | 3 | |||
(e) Conversion of Company Common Stock | 3 | |||
(f) Treasury Shares | 3 | |||
(g) Conversion of MergerSub’s Stock | 3 | |||
2.5 Exchange Fund and Procedures | 3 | |||
(a) Exchange Fund | 3 | |||
(b) Exchange Procedures | 4 | |||
(c) No Further Ownership Rights | 4 | |||
(d) Termination of Exchange Fund | 4 | |||
(e) Lost Certificates | 5 | |||
(f) Stock Transfer Books | 5 | |||
(g) Dissenters’ Rights | 5 | |||
(h) Stock Options | 5 | |||
Article 3 — Representations and Warranties of Company | 6 | |||
3.1 Organization | 6 | |||
3.2 Authority | 6 | |||
3.3 Enforceability | 6 | |||
3.4 Capital Stock | 7 | |||
3.5 No Violation | 8 | |||
3.6 No Consent Required | 8 | |||
3.7 SEC Reports and Financial Statements | 8 | |||
3.8 Equipment | 9 | |||
3.9 Contracts | 9 | |||
3.10 Real Property | 11 | |||
3.11 Permits | 11 | |||
3.12 Intellectual Property | 11 | |||
3.13 Undisclosed Liabilities | 12 | |||
3.14 Taxes | 12 | |||
3.15 No Material Adverse Change | 13 | |||
3.16 Employee Benefits | 13 | |||
3.17 Insurance | 14 | |||
3.18 Compliance | 14 |
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Table of Contents
3.19 Legal Proceedings | 14 | |||
3.20 Absence of Certain Events | 15 | |||
3.21 Environmental Matters | 16 | |||
3.22 Employees | 16 | |||
3.23 Labor Relations | 16 | |||
3.24 Broker’s Fee | 16 | |||
3.25 Takeover Statutes | 17 | |||
3.26 Joint Disclosure Document | 17 | |||
3.27 Vote Required | 17 | |||
Article 4 — Representations and Warranties of Parent and MergerSub | 17 | |||
4.1 Organization | 17 | |||
4.2 Authority | 17 | |||
4.3 Enforceability | 17 | |||
4.4 No Violation | 18 | |||
4.5 No Consent Required | 18 | |||
4.6 SEC Reports and Financial Statements | 18 | |||
4.7 Broker’s Fee | 19 | |||
4.8 MergerSub Formation | 19 | |||
4.9 Joint Disclosure Document | 19 | |||
4.10 Board Approval | 19 | |||
4.11 Vote Required | 19 | |||
Article 5 — Events Prior to Closing | 19 | |||
5.1 General | 19 | |||
5.2 Conduct of Business by Company | 19 | |||
5.3 SEC Filings | 20 | |||
5.4 Shareholders Meeting | 20 | |||
5.5 Other Filings by Company | 21 | |||
5.6 Access to Information | 21 | |||
5.7 Notice of Developments | 21 | |||
5.8 Acquisition Proposals | 21 | |||
5.9 Public Announcements | 22 | |||
5.10 Fees and Expenses | 22 | |||
5.11 Termination of Employment Agreements | 23 | |||
5.12 Notice of Redemption and Repayment | 23 | |||
Article 6 — Conditions to Closing | 23 | |||
6.1 Parent Closing Conditions | 23 | |||
6.2 Company Closing Conditions | 24 | |||
Article 7 — Events Following Closing | 24 | |||
7.1 Payment of Certain Liabilities | 24 | |||
7.2 Release of Guarantors | 24 | |||
7.3 Shareholder Representative | 25 | |||
7.4 Closing Date Adjustment | 25 | |||
7.5 Revenue Adjustment | 26 | |||
7.6 Adjustment to Merger Consideration | 27 | |||
7.7 Certain Litigation | 28 |
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Table of Contents
7.8 Post-Closing Tax Returns | 29 | |||
Article 8 — Survival of Representations and Warranties and Indemnification Claims | 30 | |||
8.1 Survival | 30 | |||
8.2 Indemnification Claim | 30 | |||
8.3 Procedures | 30 | |||
8.4 Reduction in Payments | 30 | |||
Article 9 — Termination, Amendment and Waiver | 31 | |||
9.1 Termination by Company or Parent | 31 | |||
9.2 Termination by Company | 31 | |||
9.3 Termination by Parent | 32 | |||
9.4 Effect of Termination | 32 | |||
9.5 Amendment | 33 | |||
9.6 Extension and Waiver | 33 | |||
Article 10 — Miscellaneous | 33 | |||
10.1 Confidentiality | 33 | |||
10.2 Notices | 33 | |||
10.3 Entire Agreement | 34 | |||
10.4 Assignment | 35 | |||
10.5 No Third Party Beneficiaries | 35 | |||
10.6 Severability | 35 | |||
10.7 Captions | 35 | |||
10.8 Construction | 35 | |||
10.9 Counterparts | 35 | |||
10.10 Governing Law | 35 | |||
10.11 Binding Effect | 35 | |||
Annex I — Definitions | 1 |
Form of 4.5% Indenture | A | |||
Form of 3.5% Indenture | B | |||
Liabilities To Be Paid Within 30 Days of Closing | C | |||
Guarantors To Be Indemnified and Released | D | |||
Schedule of Certain Contracts | E |
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Table of Contents
Definitions
The Merger
Table of Contents
A-2
Table of Contents
A-3
Table of Contents
A-4
Table of Contents
A-5
Table of Contents
Representations and Warranties
of Company
A-6
Table of Contents
A-7
Table of Contents
A-8
Table of Contents
A-9
Table of Contents
A-10
Table of Contents
A-11
Table of Contents
A-12
Table of Contents
A-13
Table of Contents
A-14
Table of Contents
A-15
Table of Contents
A-16
Table of Contents
Representations and Warranties of
Parent and MergerSub
A-17
Table of Contents
A-18
Table of Contents
Events Prior to Closing
A-19
Table of Contents
A-20
Table of Contents
A-21
Table of Contents
A-22
Table of Contents
Conditions to Closing
A-23
Table of Contents
Events Following Closing
A-24
Table of Contents
A-25
Table of Contents
A-26
Table of Contents
A-27
Table of Contents
A-28
Table of Contents
A-29
Table of Contents
Survival of Representations and Warranties
and Indemnification Claims
A-30
Table of Contents
Termination, Amendment and Waiver
A-31
Table of Contents
A-32
Table of Contents
Miscellaneous
A-33
Table of Contents
12750 Merit Drive
Park Central VII, Suite 770
Dallas, Texas 75251
Attention: Mr. Matthew H. Fleeger
President and Chief Executive Officer
Fax: (972) 776-8767
12750 Merit Drive
Park Central VII, Suite 770
Dallas Texas 75251
Attention: Mr. Steven R. Block
Fax: (214) 866-0991
21861 North Keith Drive
Lake Forest, Illinois 60045
Attention: Mr. Frank ten Brink
Executive Vice President
and Chief Financial Officer
Fax: (847) 367-9462
300 South Wacker Drive
Suite 1000
Chicago, Illinois 60606
Attention: Mr. Michael Bonn
Fax: (312) 922-9283
A-34
Table of Contents
A-35
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Stericycle, Inc. | ||||
By | /s/Frank J.M. ten Brink | |||
Frank J.M. ten Brink | ||||
Executive Vice President and Chief Financial Officer | ||||
TMW Acquisition Corporation | ||||
By | /s/Frank J.M. ten Brink | |||
Frank J.M. ten Brink | ||||
Vice President | ||||
MedSolutions, Inc. | ||||
By | /s/Matthew H. Fleeger | |||
Mathew H. Fleeger | ||||
President and Chief Executive Officer | ||||
A-36
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Definitions
A-1-1
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A-1-2
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A-1-3
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A-1-4
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A-1-5
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A-1-6
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A-1-7
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A-1-8
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A-1-9
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AGREEMENT AND PLAN OF MERGER
Table of Contents
Agreement and Plan of Merger
2
Table of Contents
3
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* | ||
* | ||
* | ||
* |
4
Table of Contents
Stericycle, Inc. | ||||
By | /s/Frank J.M. ten Brink | |||
Frank J.M. ten Brink | ||||
Executive Vice President and Chief Financial Officer | ||||
TMW Acquisition Corporation | ||||
By | /s/Frank J.M. ten Brink | |||
Frank J.M. ten Brink | ||||
Vice President | ||||
MedSolutions, Inc. | |||||
By | /s/Matthew H. Fleeger | ||||
Mathew H. Fleeger | |||||
President and Chief Executive Officer | |||||
5
Table of Contents
DATED JUNE 30, 2007
Table of Contents
P.O. Box 222097 | 972-723-9500 Phone | |||||
Dallas, Texas 75222-2097 | 972-723-9501 Fax |
c/o Mr. J. Steven Evans, CPA
MedSolutions, Inc.
12750 Merit Drive
Park Central VII
Suite 770
Dallas, Texas 75251
Table of Contents
June 30, 2007
Page 2
o | The nature of the business and the history of the enterprise from its inception; | ||
o | The economic outlook in general and the condition and outlook of the specific industry in particular; | ||
o | The book value of the stock and the financial condition of the business; | ||
o | The earning capacity of the company; | ||
o | The dividend-paying capacity of the company; | ||
o | Whether or not the enterprise has goodwill or other intangible value; | ||
o | Prior sales of the stock and the size of the block of stock to be valued; and | ||
o | The market price of stocks of corporations engaged in the same or a similar line of business having their stocks actively traded on an exchange or over-the-counter market. |
Table of Contents
June 30, 2007
Page 3
Table of Contents
June 30, 2007
Page 4
Table of Contents
June 30, 2007
Page 5
By: | /s/ Michael B. Van Amburgh | |
Michael B. Van Amburgh, ASA |
Table of Contents
UNDER THE TEXAS BUSINESS CORPORATION ACT
Table of Contents
D-2
Table of Contents
D-3
Table of Contents
Table of Contents
as Trustee
Table of Contents
Article 1 — Definitions and Rules of Construction; Applicability of the Trust Indenture Act | 1 | |||
Section 1.01 Definitions | 1 | |||
Section 1.02 Other Definitions | 3 | |||
Section 1.03 Rules of Construction | 3 | |||
Section 1.04 Trust Indenture Act | 3 | |||
Article 2 — The Notes | 3 | |||
Section 2.01 Form and Dating | 3 | |||
Section 2.02 Execution and Authentication | 4 | |||
Section 2.03 Agents | 4 | |||
Section 2.04 Paying Agent To Hold Money in Trust | 4 | |||
Section 2.05 Noteholder Lists | 5 | |||
Section 2.06 Transfer and Exchange | 5 | |||
Section 2.07 Replacement Notes | 5 | |||
Section 2.08 Outstanding Notes | 5 | |||
Section 2.09 Treasury Notes Disregarded for Certain Purposes | 5 | |||
Section 2.10 Temporary Notes | 6 | |||
Section 2.11 Cancellation | 6 | |||
Section 2.12 Principal Reduction | 6 | |||
Section 2.13 Payment Reduction | 6 | |||
Article 3 — Payments | 7 | |||
Section 3.01 Notice to Trustee | 7 | |||
Section 3.02 Pro Rata Prepayment | 7 | |||
Section 3.03 Notice of Payment | 7 | |||
Section 3.04 Effect of Notice of Payment | 7 | |||
Section 3.05 Deposit of Payment Amount | 8 | |||
Section 3.06 Notes Prepaid in Part | 8 | |||
Section 3.07 Repayment to Company | 8 | |||
Article 4 — Covenants | 8 | |||
Section 4.01 Payment of Notes | 8 | |||
Section 4.02 SEC Reports | 8 | |||
Section 4.03 Compliance Certificate | 9 | |||
Section 4.04 Notice of Certain Events | 9 | |||
Article 5 — Successors | 9 | |||
Section 5.01 When Company May Merge, etc. | 9 | |||
Section 5.02 Successor Corporation Substituted | 9 | |||
Article 6 — Defaults and Remedies | 10 | |||
Section 6.01 Events of Default | 10 | |||
Section 6.02 Acceleration | 11 | |||
Section 6.03 Other Remedies | 11 | |||
Section 6.04 Waiver of Past Defaults | 11 |
Table of Contents
Section 6.05 Control by Shareholder Representative | 11 | |||
Section 6.06 Limitation on Suits | 12 | |||
Section 6.07 Rights of Holders To Receive Payment | 12 | |||
Section 6.08 Priorities | 12 | |||
Section 6.09 Undertaking for Costs | 12 | |||
Section 6.10 Proof of Claim | 13 | |||
Section 6.11 Actions of a Holder | 13 | |||
Article 7 — Trustee | 13 | |||
Section 7.01 Duties of Trustee | 13 | |||
Section 7.02 Rights of Trustee | 14 | |||
Section 7.03 Individual Rights of Trustee; Disqualification | 14 | |||
Section 7.04 Trustee’s Disclaimer | 14 | |||
Section 7.05 Notice of Defaults | 14 | |||
Section 7.06 Reports by Trustee to Holders | 15 | |||
Section 7.07 Compensation and Indemnity | 15 | |||
Section 7.08 Replacement of Trustee | 15 | |||
Section 7.09 Successor Trustee by Merger, etc. | 16 | |||
Section 7.10 Eligibility | 16 | |||
Section 7.11 Preferential Collection of Claims Against Company | 16 | |||
Article 8 — Amendments | 16 | |||
Section 8.01 Without Consent of Holders | 16 | |||
Section 8.02 With Consent of Shareholder Representative or Holders | 17 | |||
Section 8.03 Compliance with Trust Indenture Act and Section 9.03 | 17 | |||
Section 8.04 Revocation and Effect of Consents and Waivers | 17 | |||
Section 8.05 Notice of Amendment; Notation on or Exchange of Notes | 18 | |||
Section 8.06 Trustee Protected | 18 | |||
Article 9 — Miscellaneous | 18 | |||
Section 9.01 Notices | 18 | |||
Section 9.02 Communication by Holders with Other Holders | 18 | |||
Section 9.03 Certificate and Opinion as to Conditions Precedent | 18 | |||
Section 9.04 Statements Required in Certificate or Opinion | 19 | |||
Section 9.05 Rules by Trustee and Agents | 19 | |||
Section 9.06 Legal Holidays | 19 | |||
Section 9.07 No Recourse Against Others | 19 | |||
Section 9.08 Duplicate Originals | 19 | |||
Section 9.09 Variable Provisions | 19 | |||
Section 9.10 Governing Law | 21 | |||
Exhibit A (Form of Note) | 1 |
E-ii
Table of Contents
TIA Section | Indenture Section | |||||
310 | (a)(1) | 7.10 | ||||
(a)(2) | 7.10 | |||||
(a)(3) | N/A | |||||
(a)(4) | N/A | |||||
(a)(5) | N/A | |||||
(b) | 7.08; 7.10 | |||||
(c) | N/A | |||||
311 | (a) | 7.11 | ||||
(b) | 7.11 | |||||
(c) | N/A | |||||
312 | (a) | 2.05 | ||||
(b) | 9.02 | |||||
(c) | 9.02 | |||||
313 | (a) | 7.06 | ||||
(b)(1) | N/A | |||||
(b)(2) | 7.06 | |||||
(c) | 7.06 | |||||
(d) | 7.06 | |||||
314 | (a)(1) | 4.02 | ||||
(a)(2) | 4.02; 9.01 | |||||
(a)(3) | 4.02 | |||||
(a)(4) | 4.03 | |||||
(b) | N/A | |||||
(c) | 2.02; 7.02(b); 8.01(3); 9.03; 9.04 | |||||
(d) | N/A | |||||
(e) | 9.04 | |||||
(f) | 4.03 | |||||
315 | (a)(1) | 7.01(b)(1) | ||||
(a)(2) | 7.01(b)(2) | |||||
(b) | 7.05; 9.01 | |||||
(c) | 7.01(a) | |||||
(d)(1) | 7.01(c)(1) | |||||
(d)(2) | 7.01(c)(2) | |||||
(d)(3) | 6.05; 7.01(c)(3) | |||||
(e) | 6.09 | |||||
316 | (a)(last sentence) | 2.09 | ||||
(a)(1)(A) | 6.05 | |||||
(a)(1)(B) | 6.04 | |||||
(a)(2) | N/A | |||||
(b) | 6.07 | |||||
(c) | 8.04 | |||||
317 | (a)(1) | 6.03 | ||||
(a)(2) | 6.10 | |||||
(b) | 2.04 | |||||
318 | (a) | 1.04 |
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of this Indenture.
E-iii
Table of Contents
Definitions and Rules of Construction;
Applicability of the Trust Indenture Act
Table of Contents
E-2
Table of Contents
Term | Defined in Section | |||
Bankruptcy Law | 6.01 | |||
Custodian | 6.01 | |||
Event of Default | 6.01 | |||
Legal Holiday | 9.06 | |||
Notice | 9.01 | |||
Officer | 9.09 | |||
Paying Agent | 2.03 | |||
Prepayment Date | 3.01 | |||
Proceeding | 1.01 | |||
Registrar | 2.03 |
The Notes
E-3
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E-4
Table of Contents
E-5
Table of Contents
E-6
Table of Contents
Payments
E-7
Table of Contents
Covenants
E-8
Table of Contents
Successors
E-9
Table of Contents
Defaults and Remedies
E-10
Table of Contents
E-11
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E-12
Table of Contents
Trustee
E-13
Table of Contents
E-14
Table of Contents
E-15
Table of Contents
Amendments
E-16
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E-17
Table of Contents
Miscellaneous
E-18
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E-19
Table of Contents
Stericycle, Inc. | ||||
28161 North Keith Drive | ||||
Lake Forest, Illinois 60045 | ||||
Facsimile No.: | (847) 367-9462 | |||
Attention: | Frank J.M. ten Brink | |||
Executive Vice President | ||||
and Chief Financial Officer |
LaSalle Bank National Association | ||||
135 South LaSalle Street | ||||
Suite 1560 | ||||
Chicago, Illinois 60603 | ||||
Facsimile No.: | (312) 904-2236 | |||
Telephone No. | (312) 904-5527 | |||
Attention: | Frank A. Pierson | |||
Global Securities & Trust Services — Stericycle, Inc. 4.5% Promissory Notes due 2014 |
Mr. Matthew H. Fleeger | ||||
Mr. Winship B. Moody, Sr. | ||||
12750 Merit Drive | ||||
Park Central VII, Suite 770 | ||||
Dallas, Texas 75251 | ||||
Facsimile No.: | (972) 776-8767 |
E-20
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E-21
Table of Contents
Dated: July 12, 2007 | Stericycle, Inc. | ||||||||
By | /s/ FRANK J.M. TEN BRINK | ||||||||
Name: | Frank J.M. ten Brink | ||||||||
Title: | Executive Vice President and Chief Financial Officer | ||||||||
Attest: | |||||||||
By | /s/ CRAIG P. COLMAR | ||||||||
Name: | Craig P. Colmar | ||||||||
Title: | Assistant Secretary | ||||||||
Dated: July 12, 2007 | LaSalle Bank National Association, as Trustee | ||||||||
By | /s/ ERIK R. BENSON | ||||||||
Name: | Erik R. Benson | ||||||||
Title: | First Vice President | ||||||||
Attest: | |||||||||
/s/ FRANK A. PIERSON | |||||||||
Name: | Frank A. Pierson | ||||||||
Title: | Trust Officer | ||||||||
E-22
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No. ___ | $ ___ |
Interest Payment Dates: | _______, 2008, 2009, 2010, 2011, 2012, 2013 and 2014 | |||
Record Dates: | _______, 2008, 2009, 2010, 2011, 2012, 2013 and 2014 |
Stericycle, Inc. | ||||||||
By | ||||||||
Name: | ||||||||
Title: | ||||||||
By | ||||||||
Name: | ||||||||
Title: | ||||||||
Authenticated: | ||||||||
LaSalle Bank National Association, as Trustee | ||||||||
By | ||||||||
Name: | ||||||||
Title: | ||||||||
E-A-1
Table of Contents
E-A-2
Table of Contents
E-A-3
Table of Contents
E-A-4
Table of Contents
Table of Contents
as Trustee
Table of Contents
Article 1 — Definitions and Rules of Construction; Applicability of the Trust Indenture Act | 1 | |||
Section 1.01 Definitions | 1 | |||
Section 1.02 Other Definitions | 3 | |||
Section 1.03 Rules of Construction | 3 | |||
Section 1.04 Trust Indenture Act | 3 | |||
Article 2 — The Notes | 4 | |||
Section 2.01 Form and Dating | 4 | |||
Section 2.02 Execution and Authentication | 4 | |||
Section 2.03 Agents | 4 | |||
Section 2.04 Paying Agent To Hold Money in Trust | 4 | |||
Section 2.05 Noteholder Lists | 5 | |||
Section 2.06 Transfer and Exchange | 5 | |||
Section 2.07 Replacement Notes | 5 | |||
Section 2.08 Outstanding Notes | 5 | |||
Section 2.09 Treasury Notes Disregarded for Certain Purposes | 6 | |||
Section 2.10 Temporary Notes | 6 | |||
Section 2.11 Cancellation | 6 | |||
Section 2.12 Principal Reduction | 6 | |||
Section 2.13 Payment Reduction | 6 | |||
Article 3 — Payments | 7 | |||
Section 3.01 Notice to Trustee | 7 | |||
Section 3.02 Pro Rata Prepayment | 7 | |||
Section 3.03 Notice of Payment | 7 | |||
Section 3.04 Effect of Notice of Payment | 8 | |||
Section 3.05 Deposit of Payment Amount | 8 | |||
Section 3.06 Notes Prepaid in Part | 8 | |||
Section 3.07 Repayment to Company | 8 | |||
Article 4 — Covenants | 8 | |||
Section 4.01 Payment of Notes | 8 | |||
Section 4.02 SEC Reports | 8 | |||
Section 4.03 Compliance Certificate | 9 | |||
Section 4.04 Notice of Certain Events | 9 | |||
Article 5 — Successors | 9 | |||
Section 5.01 When Company May Merge, etc. | 9 | |||
Section 5.02 Successor Corporation Substituted | 10 | |||
Article 6 — Defaults and Remedies | 10 | |||
Section 6.01 Events of Default | 10 | |||
Section 6.02 Acceleration | 11 | |||
Section 6.03 Other Remedies | 12 | |||
Section 6.04 Waiver of Past Defaults | 12 |
Table of Contents
Section 6.05 Control by Shareholder Representative | 12 | |||
Section 6.06 Limitation on Suits | 12 | |||
Section 6.07 Rights of Holders To Receive Payment | 12 | |||
Section 6.08 Priorities | 13 | |||
Section 6.09 Undertaking for Costs | 13 | |||
Section 6.10 Proof of Claim | 13 | |||
Section 6.11 Actions of a Holder | 13 | |||
Article 7 — Trustee | 14 | |||
Section 7.01 Duties of Trustee | 14 | |||
Section 7.02 Rights of Trustee | 14 | |||
Section 7.03 Individual Rights of Trustee; Disqualification | 15 | |||
Section 7.04 Trustee’s Disclaimer | 15 | |||
Section 7.05 Notice of Defaults | 15 | |||
Section 7.06 Reports by Trustee to Holders | 15 | |||
Section 7.07 Compensation and Indemnity | 15 | |||
Section 7.08 Replacement of Trustee | 16 | |||
Section 7.09 Successor Trustee by Merger, etc. | 17 | |||
Section 7.10 Eligibility | 17 | |||
Section 7.11 Preferential Collection of Claims Against Company | 17 | |||
Article 8 — Amendments | 17 | |||
Section 8.01 Without Consent of Holders | 17 | |||
Section 8.02 With Consent of Shareholder Representative or Holders | 17 | |||
Section 8.03 Compliance with Trust Indenture Act and Section 12.03 | 18 | |||
Section 8.04 Revocation and Effect of Consents and Waivers | 18 | |||
Section 8.05 Notice of Amendment; Notation on or Exchange of Notes | 18 | |||
Section 8.06 Trustee Protected | 19 | |||
Article 9 — Miscellaneous | 19 | |||
Section 9.01 Notices | 19 | |||
Section 9.02 Communication by Holders with Other Holders | 19 | |||
Section 9.03 Certificate and Opinion as to Conditions Precedent | 19 | |||
Section 9.04 Statements Required in Certificate or Opinion | 19 | |||
Section 9.05 Rules by Trustee and Agents | 20 | |||
Section 9.06 Legal Holidays | 20 | |||
Section 9.07 No Recourse Against Others | 20 | |||
Section 9.08 Duplicate Originals | 20 | |||
Section 9.09 Variable Provisions | 20 | |||
Section 9.10 Governing Law | 21 | |||
Exhibit A | 1 | |||
F-ii
Table of Contents
TIA Section | Indenture Section | |||||
310 | (a)(1) | 7.10 | ||||
(a)(2) | 7.10 | |||||
(a)(3) | N/A | |||||
(a)(4) | N/A | |||||
(a)(5) | N/A | |||||
(b) | 7.08; 7.10 | |||||
(c) | N/A | |||||
311 | (a) | 7.11 | ||||
(b) | 7.11 | |||||
(c) | N/A | |||||
312 | (a) | 2.05 | ||||
(b) | 9.02 | |||||
(c) | 9.02 | |||||
313 | (a) | 7.06 | ||||
(b)(1) | N/A | |||||
(b)(2) | 7.06 | |||||
(c) | 7.06 | |||||
(d) | 7.06 | |||||
314 | (a)(1) | 4.02 | ||||
(a)(2) | 4.02; 9.01 | |||||
(a)(3) | 4.02 | |||||
(a)(4) | 4.03 | |||||
(b) | N/A | |||||
(c) | 2.02; 7.02(b); 8.01(3); 9.03; 9.04 | |||||
(d) | N/A | |||||
(e) | 9.04 | |||||
(f) | 4.03 | |||||
315 | (a)(1) | 7.01(b)(1) | ||||
(a)(2) | 7.01(b)(2) | |||||
(b) | 7.05; 9.01 | |||||
(c) | 7.01(a) | |||||
(d)(1) | 7.01(c)(1) | |||||
(d)(2) | 7.01(c)(2) | |||||
(d)(3) | 6.05; 7.01(c)(3) | |||||
(e) | 6.09 | |||||
316 | (a)(last sentence) | 2.09 | ||||
(a)(1)(A) | 6.05 | |||||
(a)(1)(B) | 6.04 | |||||
(a)(2) | N/A | |||||
(b) | 6.07 | |||||
(c) | 8.04 | |||||
317 | (a)(1) | 6.03 | ||||
(a)(2) | 6.10 | |||||
(b) | 2.04 | |||||
318 | (a) | 1.04 |
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of this Indenture.
F-iii
Table of Contents
Definitions and Rules of Construction;
Table of Contents
F-2
Table of Contents
Term | Defined in Section | |||
Bankruptcy Law | 6.01 | |||
Credit Agreement | 4.05 | |||
Custodian | 6.01 | |||
Event of Default | 6.01 | |||
Legal Holiday | 9.06 | |||
Notice | 9.01 | |||
Officer | 9.09 | |||
Paying Agent | 2.03 | |||
Prepayment Date | 3.01 | |||
Proceeding | 1.01 | |||
Registrar | 2.03 |
F-3
Table of Contents
The Notes
F-4
Table of Contents
F-5
Table of Contents
F-6
Table of Contents
F-7
Table of Contents
F-8
Table of Contents
F-9
Table of Contents
F-10
Table of Contents
F-11
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F-12
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F-13
Table of Contents
F-14
Table of Contents
F-15
Table of Contents
F-16
Table of Contents
F-17
Table of Contents
F-18
Table of Contents
F-19
Table of Contents
F-20
Table of Contents
Stericycle, Inc. | ||||
28161 North Keith Drive | ||||
Lake Forest, Illinois 60045 | ||||
Facsimile No.: | (847) 367-9462 | |||
Attention: | Frank J.M. ten Brink | |||
Executive Vice President and Chief Financial Officer |
LaSalle Bank National Association | ||||
135 South LaSalle Street | ||||
Suite 1560 | ||||
Chicago, Illinois 60603 | ||||
Facsimile No.: | (312) 904-2236 | |||
Telephone No. | (312) 904-5527 | |||
Attention: | Frank A. Pierson Global Securities & Trust Services — Stericycle, Inc. 3.3% Promissory Notes due 2014 |
Mr. Matthew H. Fleeger | ||||
Mr. Winship B. Moody, Sr. | ||||
12750 Merit Drive | ||||
Park Central VII, Suite 770 | ||||
Dallas, Texas 75251 | ||||
Facsimile No.: | (972) 776-8767 |
F-21
Table of Contents
Dated: July 12, 2007 | Stericycle, Inc. | ||||||||
By | /s/ FRANK J.M. TEN BRINK | ||||||||
Name: | Frank J.M. ten Brink | ||||||||
Title: | Executive Vice President and Chief Financial Officer | ||||||||
Attest: | |||||||||
By | /s/ CRAIG P. COLMAR | ||||||||
Name: | Craig P. Colmar | ||||||||
Title: | Assistant Secretary | ||||||||
Dated: July 12, 2007 | LaSalle Bank National Association, as Trustee | ||||||||
By | /s/ ERIK R. BENSON | ||||||||
Name: | Erik R. Benson | ||||||||
Title: | First Vice President | ||||||||
Attest: | |||||||||
/s/ FRANK A. PIERSON | |||||||||
Name: | Frank A. Pierson | ||||||||
Title: | Trust Officer | ||||||||
F-22
Table of Contents
No. ___ | $ ___ |
Interest Payment Dates: | _______, 2008, 2009, 2010, 2011, 2012, 2013 and 2014 | |||
Record Dates: | _______, 2008, 2009, 2010, 2011, 2012, 2013 and 2014 |
Stericycle, Inc. | ||||||||
By | ||||||||
Name: | ||||||||
Title: | ||||||||
By | ||||||||
Name: | ||||||||
Title: | ||||||||
Authenticated: | ||||||||
LaSalle Bank National Association, as Trustee | ||||||||
By | ||||||||
Name: | ||||||||
Title: | ||||||||
F-A-1
Table of Contents
F-A-2
Table of Contents
F-A-3
Table of Contents
F-A-4
INFORMATION NOT REQUIRED IN PROSPECTUS
2.1 | Agreement and Plan of Merger dated July 6, 2007 entered into by Stericycle, Inc., TMW Acquisition Corporation and MedSolutions, Inc. (included as Annex A in the proxy statement/prospectus included | ||
II-1
Table of Contents
in this registration statement) |
2.2 | First Amendment to Agreement and Plan of Merger dated as of September 28, 2007 entered into by Stericycle, Inc., TMW Acquisition Corporation and MedSolutions, Inc. (included as Annex B in the proxy statement/prospectus included in this registration statement) | ||
2.3* | Voting Agreement dated July 6, 2007 entered into by Stericycle, Inc., TMW Acquisition Corporation and certain shareholders of MedSolutions, Inc. | ||
2.4 | Proxy card for special meeting of MedSolutions shareholders to be held on October 31, 2007 | ||
2.5 | Letter of transmittal to MedSolutions shareholders | ||
3.1 | Amended and restated certificate of incorporation (incorporated by reference to Exhibit 3.1 to our 1996 Form S-1) | ||
3.2 | First certificate of amendment to amended and restated certificate of incorporation (incorporated by reference to Exhibit 3.1 to our current report on Form 8-K filed November 29, 1999) | ||
3.3 | Second certificate of amendment to amended and restated certificate of incorporation (incorporated by reference to Exhibit 3.4 to our annual report on Form 10-K for 2002) | ||
3.4* | Third certificate of amendment to amended and restated certificate of incorporation | ||
3.5 | Amended and restated bylaws (incorporated by reference to Exhibit 3.4 to our annual report on Form 10-K for 2006) | ||
4.1 | Form of certificate for shares of our common stock, par value $.01 per share (incorporated by reference to Exhibit 4.1 to our 1996 Form S-1) | ||
4.2 | Indenture dated July 12, 2007 between Stericycle, Inc. and LaSalle Bank National Association as trustee in respect of our 4.5% Promissory Notes due 2014 (included as Annex E in the proxy statement/prospectus included in this registration statement) | ||
4.3 | Form of our 4.5% Promissory Notes due 2014 (included in Exhibit 4.2) | ||
4.4 | Indenture dated July 12, 2007 between Stericycle, Inc. and LaSalle Bank National Association as trustee in respect of our 3.5% Promissory Notes (Letter of Credit Supported) due 2014 (included as Annex F in the proxy statement/prospectus included in this registration statement) | ||
4.5 | Form of our 3.5% Promissory Notes (Letter of Credit Supported) due 2014 (included in Exhibit 4.4) | ||
5.1† | Opinion of Johnson and Colmar | ||
10.1 | Credit Agreement dated as of August 24, 2007 entered into by Stericycle, Inc. and certain of its subsidiaries as borrowers, Bank of America, N.A., as administrative agent, swing line lender, a lender and a letter of credit issuer, other lenders party to the Credit Agreement, JPMorgan Chase Bank, N.A., as syndication agent, and Citibank, N.A., Fortis Capital Corp. and The Royal Bank of Scotland plc, as co-documentation agents (incorporated by reference to our current report on Form 8-K filed August 28, 2007) | ||
10.2 | Directors Stock Option Plan (Amended and Restated) (“Directors Plan”) (incorporated by reference to Exhibit 4.1 to our registration statement on Form S-8 filed August 2, 2001 (Registration No. 333-66542)) | ||
10.3 | First amendment to Directors Plan (incorporated by reference to Exhibit 10.9 to our annual report on Form 10-K for 2001) | ||
10.4 | Form of stock option agreement for option grant under Directors Plan (incorporated by reference to Exhibit 10.1 to our quarterly report on Form 10-Q for the quarter ended September 30, 2004) | ||
10.5 | 1997 Stock Option Plan (“1997 Plan”) (incorporated by reference to Exhibit 10.3 to our annual report on Form 10-K for 1997) | ||
10.6 | First amendment to 1997 Plan (incorporated by reference to Exhibit 10.9 to our 1999 Form S-3) | ||
10.7 | Second amendment to 1997 Plan (incorporated by reference to Exhibit 10.12 to our annual report on Form 10-K for 2001) | ||
10.8 | Third amendment to 1997 Plan (incorporated by reference to Exhibit 10.16 to our annual report on Form 10-K for 2003) | ||
10.9 | 2000 Nonstatutory Stock Option Plan (“2000 Plan”) (incorporated by reference to Exhibit 10.13 to our annual report on Form 10-K for 2001) | ||
10.10 | First amendment to 2000 Plan (incorporated by reference to Exhibit 10.14 to our annual report on Form 10-K for 2001) |
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10.11 | Second amendment to 2000 Plan (incorporated by reference to Exhibit 10.15 to our annual report on Form 10-K for 2001) | ||
10.12 | Third amendment to 2000 Plan (incorporated by reference to Exhibit 4.2 to our registration statement on Form S-8 filed December 20, 2002 (Registration No. 333-102097)) | ||
10.13 | 2005 Incentive Stock Plan (“2005 Plan”) (incorporated by reference to Exhibit 4.1 to our registration statement on Form S-8 filed August 9, 2005 (Registration No. 333-127353) | ||
10.14 | Form of stock option agreement for option grant under 1997 Plan, 2000 Plan and 2005 Plan (incorporated by reference to Exhibit 10.5 to our annual report on Form 10-K for 2005) | ||
10.15 | Form of stock option agreement for bonus conversion option grant under 1997 Plan, 2000 Plan and 2005 Plan (incorporated by reference to Exhibit 10.5 to our annual report on Form 10-K for 2005) | ||
10.16 | Employee Stock Purchase Plan (“ESPP”) (incorporated by reference to Exhibit 4.1 to our registration statement on Form S-8 filed August 2, 2001 (Registration No. 333-66544) | ||
10.17 | First amendment to ESPP (incorporated by reference to Exhibit 10.21 to our annual report on Form 10-K for 2002) | ||
12* | Ratio of Earnings to Fixed Charges | ||
21 | Subsidiaries (incorporated by reference to Exhibit 21 to our annual report on Form 10-K for 2006) | ||
23.1 | Consent of Ernst & Young, LLP | ||
23.2 | Consent of Marcum & Kliegman, LLP | ||
23.3 | Consent of Van Amburgh Valuation Associates, Inc. | ||
23.4† | Consent of Johnson and Colmar (included in Exhibit 5.1) | ||
24.1* | Power of Attorney | ||
25.1* | Statement of Eligibility on Form T-1 of LaSalle Bank National Association as trustee under indenture in respect of our 4.5% Promissory Notes due 2014. | ||
25.2* | Statement of Eligibility on Form T-1 of LaSalle Bank National Association as trustee under indenture in respect of our 3.5% Promissory Notes (Letter of Credit Supported) due 2014. |
* | Previously filed. | |
† | To be filed by amendment. |
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Stericycle, Inc. | ||||
By: | /s/Mark C. Miller | |||
Mark C. Miller | ||||
President and Chief Executive Officer | ||||
Name | Title | Date | ||
* | Chairman of the Board of Directors | October 2, 2007 | ||
* | President, Chief Executive Officer and a Director (Principal Executive Officer) | October 2, 2007 | ||
/s/Frank J.M. ten Brink | Chief Financial Officer (Principal Finance and Accounting Officer) | October 2, 2007 | ||
* | Director | October 2, 2007 | ||
* | Director | October 2, 2007 | ||
* | Director | October 2, 2007 | ||
* | Director | October 2, 2007 | ||
* | Director | October 2, 2007 | ||
* | Director | October 2, 2007 |
By | /s/Frank J.M. ten Brink Attorney-in-fact | ||||
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Exhibit | ||||
No. | ||||
2.1 | Agreement and Plan of Merger dated July 6, 2007 entered into by Stericycle, Inc., TMW Acquisition Corporation and MedSolutions, Inc. (included as Annex A in the proxy statement/prospectus included in this registration statement) | |||
2.2 | First Amendment to Agreement and Plan of Merger dated as of September 28, 2007 entered into by Stericycle, Inc., TMW Acquisition Corporation and MedSolutions, Inc. (included as Annex B to the proxy statement/prospectus included in this registration statement) | |||
2.3* | Voting Agreement dated July 6, 2007 entered into by Stericycle, Inc., TMW Acquisition Corporation and certain shareholders of MedSolutions, Inc. | |||
2.4 | Proxy card for special meeting of Medsolutions shareholders to be held on October 31, 2007 | |||
2.5 | Letter of transmittal to MedSolutions shareholders | |||
3.1 | Amended and restated certificate of incorporation (incorporated by reference to Exhibit 3.1 to our 1996 Form S-1) | |||
3.2 | First certificate of amendment to amended and restated certificate of incorporation (incorporated by reference to Exhibit 3.1 to our current report on Form 8-K filed November 29, 1999) | |||
3.3 | Second certificate of amendment to amended and restated certificate of incorporation (incorporated by reference to Exhibit 3.4 to our annual report on Form 10-K for 2002) | |||
3.4* | Third certificate of amendment to amended and restated certificate of incorporation | |||
3.5 | Amended and restated bylaws (incorporated by reference to Exhibit 3.4 to our annual report on Form 10-K for 2006) | |||
4.1 | Form of certificate for shares of our common stock, par value $.01 per share (incorporated by reference to Exhibit 4.1 to our 1996 Form S-1) | |||
4.2 | Indenture dated July 12, 2007 between Stericycle, Inc. and LaSalle Bank National Association as trustee in respect of our 4.5% Promissory Notes due 2014 (included as Annex E in the proxy statement/prospectus included in this registration statement) | |||
4.3 | Form of our 4.5% Promissory Notes due 2014 (included in Exhibit 4.2) | |||
4.4 | Indenture dated July 12, 2007 between Stericycle, Inc. and LaSalle Bank National Association as trustee in respect of our 3.5% Promissory Notes (Letter of Credit Supported) due 2014 (included as Annex F in the proxy statement/prospectus included in this registration statement) | |||
4.5 | Form of our 3.5% Promissory Notes (Letter of Credit Supported) due 2014 (included in Exhibit 4.4) | |||
5.1† | Opinion of Johnson and Colmar | |||
10.1 | Credit Agreement dated as of July 31, 2006 entered into by Stericycle, Inc. and certain of its subsidiaries as borrowers, Bank of America, N.A., as administrative agent, swing line lender, a lender and letter of credit issuer, other lenders party to the Credit Agreement, JPMorgan Chase Bank, N.A., as syndication agent, and Citibank, N.A., Fortis Capital Corp. and The Royal Bank of Scotland plc, as co-documentation agents, with Banc of America Securities LLC, as sole lead arranger and sole book manager (incorporated by reference to our current report on Form 8-K filed August 4, 2006) | |||
10.2 | Directors Stock Option Plan (Amended and Restated) (“Directors Plan”) (incorporated by reference to Exhibit 4.1 to our registration statement on Form S-8 filed August 2, 2001 (Registration No. 333-66542)) | |||
10.3 | First amendment to Directors Plan (incorporated by reference to Exhibit 10.9 to our annual report on Form 10-K for 2001) | |||
10.4 | Form of stock option agreement for option grant under Directors Plan (incorporated by reference to Exhibit 10.1 to our quarterly report on Form 10-Q for the quarter ended September 30, 2004) | |||
10.5 | 1997 Stock Option Plan (“1997 Plan”) (incorporated by reference to Exhibit 10.3 to our annual report on Form 10-K for 1997) | |||
10.6 | First amendment to 1997 Plan (incorporated by reference to Exhibit 10.9 to our 1999 Form S-3) | |||
10.7 | Second amendment to 1997 Plan (incorporated by reference to Exhibit 10.12 to our annual report on Form 10-K for 2001) | |||
10.8 | Third amendment to 1997 Plan (incorporated by reference to Exhibit 10.16 to our annual report on |
Table of Contents
Exhibit | ||||
No. | ||||
Form 10-K for 2003) | ||||
10.9 | 2000 Nonstatutory Stock Option Plan (“2000 Plan”) (incorporated by reference to Exhibit 10.13 to our annual report on Form 10-K for 2001) | |||
10.10 | First amendment to 2000 Plan (incorporated by reference to Exhibit 10.14 to our annual report on Form 10-K for 2001) | |||
10.11 | Second amendment to 2000 Plan (incorporated by reference to Exhibit 10.15 to our annual report on Form 10-K for 2001) | |||
10.12 | Third amendment to 2000 Plan (incorporated by reference to Exhibit 4.2 to our registration statement on Form S-8 filed December 20, 2002 (Registration No. 333-102097)) | |||
10.13 | 2005 Incentive Stock Plan (“2005 Plan”) (incorporated by reference to Exhibit 4.1 to our registration statement on Form S-8 filed August 9, 2005 (Registration No. 333-127353) | |||
10.14 | Form of stock option agreement for option grant under 1997 Plan, 2000 Plan and 2005 Plan (incorporated by reference to Exhibit 10.5 to our annual report on Form 10-K for 2005) | |||
10.15 | Form of stock option agreement for bonus conversion option grant under 1997 Plan, 2000 Plan and 2005 Plan (incorporated by reference to Exhibit 10.5 to our annual report on Form 10-K for 2005) | |||
10.16 | Employee Stock Purchase Plan (“ESPP”) (incorporated by reference to Exhibit 4.1 to our registration statement on Form S-8 filed August 2, 2001 (Registration No. 333-66544) | |||
10.17 | First amendment to ESPP (incorporated by reference to Exhibit 10.21 to our annual report on Form 10-K for 2002) | |||
12* | Ratio of Earnings to Fixed Charges | |||
21 | Subsidiaries (incorporated by reference to Exhibit 21 to our annual report on Form 10-K for 2006) | |||
23.1 | Consent of Ernst & Young, LLP | |||
23.2 | Consent of Marcum & Kliegman, LLP | |||
23.3 | Consent of Van Amburgh Valuation Associates, Inc. | |||
23.4† | Consent of Johnson and Colmar (included in Exhibit 5.1) | |||
24.1* | Power of Attorney | |||
25.1* | Statement of Eligibility on Form T-1 of LaSalle Bank National Association as trustee under indenture in respect of our 4.5% Promissory Notes due 2014. | |||
25.2* | Statement of Eligibility on Form T-1 of LaSalle Bank National Association as trustee under indenture in respect of our 3.5% Promissory Notes (Letter of Credit Supported) due 2014. |
* | Previously filed. | |
† | To be filed by amendment. |