SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X]Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
SRI/Surgical Express, Inc.
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(Name of Registrant as Specified In Its Certificate)
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
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SRI/SURGICAL EXPRESS, INC.
_______________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On May 15, 2002
Dear Shareholder:
The Annual Meeting of Shareholders of SRI/Surgical Express, Inc. (the
"Company") will be held on Wednesday, May 15, 2002, at 10:00 a.m., local time,
at the Company's corporate headquarters located at 12425 Race Track Road, Tampa,
Florida 33626, for the following purposes:
1. To elect two directors to serve until the 2005 Annual Meeting of
Shareholders and to hold office until their successors are duly
elected and qualified.
2. To ratify the appointment of independent auditors.
3. To transact other business that properly comes before the meeting or
any adjournment of the meeting.
These items of business are more fully described in the Proxy Statement
accompanying this Notice.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual Meeting, you are
urged to sign and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the Annual Meeting may vote in person even if he or she has returned a proxy.
THE BOARD OF DIRECTORS
Tampa, Florida
April 9, 2002
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Important: Whether or not you plan to attend the meeting, you are requested
to complete and promptly return the enclosed proxy in the envelope
provided.
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1
SRI/SURGICAL EXPRESS, INC.
__________________
PROXY STATEMENT
FOR
2002 ANNUAL MEETING OF SHAREHOLDERS
__________________
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed proxy is solicited on behalf of SRI/Surgical Express, Inc.
(the "Company") from the Company's Shareholders for use at the Annual Meeting of
Shareholders to be held on Wednesday, May 15, 2002, at 10:00 a.m., local time,
and at any adjournment of the meeting, for the purposes set forth in this Proxy
Statement and in the accompanying Notice of Annual Meeting of Shareholders. The
Annual Meeting will be held at the Company's corporate and principal executive
offices located at 12425 Race Track Road, Tampa, Florida. The Company's
telephone number at that location is (813) 891-9550.
These proxy solicitation materials were mailed on or about April 9, 2002,
together with the Company's 2002 Annual Report to Shareholders, to all
shareholders entitled to vote at the meeting.
Voting and Solicitation
Only shareholders of record at the close of business on March 20, 2002 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. The
Company has one class of outstanding voting securities, its Common Stock. As of
the Record Date, 6,420,177 shares of the Company's Common Stock were
outstanding. For information regarding security ownership by management and by
the beneficial owners of 5% or more of the Company's Common Stock, see "Other
Information - Share Ownership by Principal Shareholders and Management."
Each shareholder is entitled to one vote for each share of Common Stock on
all matters presented at the Annual Meeting. The holders of Common Stock will
vote together as one group in the election of directors and other matters
presented at the annual meeting. Shareholders do not have the right to cumulate
their votes in the election of directors.
The cost of soliciting proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to such beneficial owners. Certain of the Company's directors,
officers, and regular employees, without additional compensation, may also
solicit proxies personally or by telephone, telegram, letter or facsimile.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person.
2
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock outstanding on the Record Date.
Shares that are voted "FOR," "AGAINST," or "WITHHELD" on a matter are treated as
being present at the meeting for purposes of establishing a quorum and are also
treated as votes eligible to be cast by the shareholders present in person or
represented by proxy at the Annual Meeting and entitled to vote on the subject
matter with respect to such matter. Abstentions are counted in determining
whether a quorum is present, but are not counted in determining the number of
shares voted for or against any nominee for director or any proposal. Broker
non-votes are not counted for purposes of determining whether a quorum is
present or the number of shares for or against any nominee for election as a
director or any proposal.
Deadline for Receipt of Shareholder Proposals
Shareholders desiring to have proposals considered for inclusion in the
proxy statement and form of proxy for the 2003 Annual Meeting of Shareholders
must furnish the proposals to the Company before December 2, 2002.
Fiscal Year End
The Company's fiscal year ends on the Sunday nearest December 31.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees for Election at the Annual Meeting
The Company's Board of Directors is divided into three classes of two
directors each, with the members of each class serving three-year terms expiring
at the third annual meeting of shareholders after their election. Two directors
are to be elected at the Annual Meeting, each to serve a term of three years.
Unless otherwise instructed, the proxy holders will vote the proxies received by
them for the Company's two nominees named below, both of whom are presently
directors of the Company. In the event that any nominee of the Company is unable
or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee who shall be designated by the current
Board of Directors to fill the vacancy. It is not expected that any nominee will
be unable or will decline to serve as a director. The term of office of each
person elected as a director will continue until a successor has been elected
and qualified.
The Board of Directors Unanimously Recommends a Vote "For" the Nominees Listed
Below:
New Term
Name Age Principal Occupation Expires
---- --- -------------------- -------
James M. Emanuel .......... 53 Consultant 2005
Richard T. Isel ........... 58 Chairman & Chief Executive Officer of 2005
the Company
James M. Emanuel has been a director of the Company since May 2, 1996.
Between January 1984 and June 1997, he served as the Chief Financial Officer of
Lincare, Inc., a national provider of respiratory therapy services for patients
with pulmonary disorders. He also served as the Chief Financial Officer of
Lincare Holdings, Inc. between November 1990 and June 1997. Mr. Emanuel also
served as a director of
3
Lincare, Inc. and Lincare Holdings, Inc. from November 1990 to June 1997. Mr.
Emanuel has engaged in private investment activities since his retirement from
Lincare Holdings, Inc. in June 1997.
Richard T. Isel has been the Company's Chairman and Chief Executive Officer
since January 1998 and a director since the Company's inception in 1994. Mr.
Isel also served as the Company's President from its inception through December
1997 and between January 2000 and May 2001. Mr. Isel in 1991 co-founded the
Company's predecessor, Amsco Sterile Recoveries, Inc., and served as its
President and a director until November 1993. Before starting Amsco Sterile
Recoveries, Mr. Isel was a founder and the Chief Executive Officer of Sterile
Design, Inc., a manufacturer of sterile custom procedure trays.
Directors Whose Terms Will Continue After the Annual Meeting
The following directors will continue to serve after the Annual Meeting for
terms that expire in 2003 or 2004 as specified:
Term
Name Age Principal Occupation Expires
---- --- -------------------- -------
James T. Boosales .......................... 58 Executive Vice President and Chief 2003
Financial Officer of the Company
Wayne R. Peterson .......................... 50 Executive Vice President and Chief 2004
Operating Officer of the Company
Lee R. Kemberling .......................... 76 Owner and President of Kemco Systems, Inc. 2003
President of Quantum Capital Partners, Inc.
N. John Simmons, Jr ........................ 46 2004
James T. Boosales has been the Company's Executive Vice President and Chief
Financial Officer and a director since the Company's inception in 1994. He
served as President, International, of Fisher-Price, Inc., a $200 million
division of this toy and juvenile products company, from 1990 through 1993.
Before joining Fisher-Price, Inc., Mr. Boosales served in several senior
executive capacities with General Mills, Inc., including President,
International, for Kenner Parker Toys, Inc./Tonka Corp. from 1985 to 1989,
during and after its spin-off as a public company, and President of Foot-Joy,
Inc. from 1982 to 1985.
Wayne R. Peterson has been the Company's Executive Vice President and a
director since the Company's inception and since May 2001, its Chief Operating
Officer. Mr. Peterson in 1991 co-founded the Company's predecessor, Amsco
Sterile Recoveries, Inc., and served as its Vice President until the Company
acquired it in 1994. Before joining Amsco Sterile Recoveries, Mr. Peterson was
President of Agora Development, Inc., a real estate development company that
from 1987 to 1991 developed projects totaling 2,000,000 square feet in four
states (California, Nevada, Arizona, and Illinois) for a total combined value of
$278 million. Mr. Peterson is the brother-in-law of Richard T. Isel, the
Company's Chairman and Chief Executive Officer.
Lee R. Kemberling, an initial investor in the Company, has been a director
of the Company since its inception. Mr. Kemberling is the founder, and since
1969 has been sole shareholder and President of Kemco Systems, Inc., a developer
and manufacturer of commercial and industrial wastewater heat recovery systems,
including systems used in the Company's operations.
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N. John Simmons, Jr. has been a director of the Company since February
2001. Since December 1998, Mr. Simmons has been President of Quantum Capital
Partners, a privately held venture capital firm. From 1995 to 1998, he was Vice
President and Controller for Eckerd Corporation. From 1993 to 1995, he served as
Chief Financial Officer of Checkers Drive-In Restaurants. Between 1976 and 1993,
Mr. Simmons was a partner with KPMG Peat Marwick, servicing a number of
privately and publicly held companies in the Tampa Bay area.
Required Vote
The two nominees receiving the highest number of affirmative votes of the
shares of Common Stock present or represented and entitled to be voted for them
shall be elected as directors. Votes withheld from any director are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but have no further legal effect under Florida law.
Board Meetings and Committees
The Board of Directors of the Company held a total of four meetings and
took action by written consent four times during the 2001 fiscal year. Each
director who served as such during the fiscal year ended December 31, 2001,
attended all of the meetings of the Board and the committees of the Board on
which he served during that year. The Board of Directors has a Compensation
Committee and an Audit Committee.
The Compensation Committee, which currently consists of Messrs. Kemberling,
Simmons and Emanuel, reviews specific compensation plans, salaries, bonuses, and
other benefits payable to the Company's executive officers and makes
recommendations to the Board of Directors with respect to those matters. During
2001, the Compensation Committee held one meeting.
The Audit Committee, which currently consists of Messrs. Emanuel,
Kemberling, and Simmons, reviews and evaluates the results and scope of the
audit and other services provided by the Company's independent auditors. Mr.
Emanuel and Mr. Simmons are "independent directors" of the Company, as the term
"independent director" is defined in National Association of Securities Dealers'
Rule 4200(a)(15). Mr. Kemberling in January 2002 made a short-term $3,000,000
loan to Richard Isel, the Company's Chief Executive Officer, to fund Mr. Isel's
investment in an unrelated company. The Company was not involved in this
transaction. The loan is secured by a pledge of 200,000 shares of the Company's
stock owned by Mr. Isel. While this loan remains outstanding, Mr. Kemberling
might not be an "independent director" under the NASD rule. As permitted by the
NASD rule, the Board of Directors determined that Mr. Kemberling's continued
service on the Audit Committee is required to serve the best interests of the
Company and its shareholders, based on Mr. Kemberling's service as a director
since the Company's inception, his thorough knowledge of the Company's
operations and financial affairs, his expectation that the loan will be
short-term, his ownership of shares of common stock of the Company that are
worth much more than the loan amount, and the Board's expectation that this loan
will not affect Mr. Kemberling's exercise of independent judgment.
The Board of Directors of the Company has adopted a revised and updated
written charter for the Audit Committee, a copy of which is attached as Appendix
A to this Proxy Statement, and reviews its charter annually and updates it as
appropriate. During 2001, the Audit Committee held four meetings.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process, including the system of
internal controls.
5
In this context, the Audit Committee has met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that the Company's financial statements were prepared in accordance
with generally accepted accounting principles, and the Audit Committee has
reviewed and discussed the financial statements with management and the
independent auditors. The Audit Committee discussed with the independent
auditors matters required to be discussed by Statement on Auditing Standards No.
61 (Communication With Audit Committees).
In addition, the Audit Committee received from the independent auditors the
written disclosures and the letter relating to the independent auditors'
independence, as required by the Independence Standards Board Standard No. 1
(Independence Discussions With Audit Committees), and the Audit Committee
discussed with the independent auditors the auditors' independence from the
Company and its management.
The Audit Committee discussed with the Company's independent auditors the
overall scope and plan for their audit. The Audit Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examinations, the evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2001, for filing with the
Securities and Exchange Commission. The Audit Committee and the Board also have
recommended, subject to shareholder approval, the selection of the Company's
independent auditors.
By the Audit Committee:
James M. Emanuel
Lee R. Kemberling
N. John Simmons, Jr.
Compensation of Directors
Directors who are not employees of the Company receive $1,000 per Board or
Committee meeting attended. In addition, for each year of any term to which he
is elected, each outside director receives options to purchase 4,000 shares of
Common Stock under the 1996 Non-Employee Director Stock Option Plan. All options
become exercisable ratably over the director's term and have an exercise price
equal to the fair market value of the Company's Common Stock on the date of
grant.
In December 2001, the Company granted 10,000 non-qualified stock options to
each of its three outside directors. The options vest ratably over three years
and have an exercise price of $15.37 per share.
Share Ownership by Principal Shareholders and Management
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of February 14, 2002, with respect to: (i) each of
the Company's directors and the executive officers named in the Summary
Compensation Table below, (ii) all directors and officers of the Company at 2001
fiscal year end as a group, and (iii) each person known by the Company to own
beneficially more than 5% of the Common Stock. Each of the shareholders listed
below has sole voting and investment power over the shares beneficially owned.
The number and percentage of shares beneficially owned is determined under rules
of the Securities and Exchange Commission ("SEC"), and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under
these rules, beneficial
6
ownership includes any shares for which the individual has sole or shared voting
power or investment power and also any shares as to which the individual has the
right to acquire within 60 days of February 14, 2002, through the exercise of
any stock option or other right. A total of 6,420,177 shares of the Company's
Common Stock were issued and outstanding as of February 14, 2002.
Shares Percentage
Beneficial Owner /(1)/ Class of Stock Beneficially Owned Beneficially Owned
-------------------- -------------- ------------------ ------------------
Richard T. Isel /(2)/ Common 910,829 14.2%
Wayne R. Peterson /(3)/ Common 887,200 13.8
James T. Boosales /(4)/ Common 812,500 12.7
Alexander H. Edwards III /(5)/ Common 46,284 *
Lee R. Kemberling /(6)/ Common 366,012 5.7
James M. Emanuel /(7)/ Common 37,500 *
N. John Simmons, Jr. /(8)/ Common 4,000 *
Gary L. Heiman /(9)/ and Common 361,667 5.6
Standard Textile Co., Inc. Common
American Century Investment Common 388,684 6.1
Management, Inc.
T. Rowe Price Associates, Inc. Common 354,600 5.5
F&C Management, Ltd. Common 320,000 5.0
All directors and officers
As a group (7 persons) /(10)/ Common 3,064,325 47.0%
* Less than 1%
_____________________
(1) The business address for Richard T. Isel, Wayne R. Peterson, and James T.
Boosales is 12425 Race Track Road, Tampa, Florida 33626. The business
address for Alexander H. Edwards III is 18145 Long Water Run Drive, Tampa,
Florida 33647. The business address for Lee R. Kemberling is 11500 47/th/
Street North, Clearwater, Florida 34622. The business address for James M.
Emanuel is 120 14/th/ Street, Belleair Beach, Florida 33786. The business
address for N. John Simmons, Jr. is 339 South Plant Avenue, Tampa, Florida
33606. The business address for Gary L. Heiman is One Knollcrest Drive,
Cincinnati, Ohio 45237. The business address for American Century
Investment Management, Inc. is 4500 Main Street, Kansas City, Missouri
64141. The business address for T. Rowe Price Associates, Inc. is 100 East
Pratt Street, Baltimore, Maryland 21202. The business address for F&C
Management, Ltd. is Exchange House, Primrose Street, London EC2A 2NY,
England.
(2) Includes 720,829 shares of Common Stock owned by the Isel Family Limited
Partnership, a Colorado limited partnership of which Isel Holdings, Inc., a
Colorado corporation, is the general partner. Mr. Isel and his wife, Marcy,
jointly own all of the issued and outstanding voting stock of Isel
Holdings, Inc.
(3) Includes 75,000 shares of Common Stock owned by the Wayne R. Peterson
Grantor Retained Annuity Trust, as to which Mr. Peterson has sole voting
and dispositive power as trustee, and 75,000 shares of Common Stock owned
by the Theresa A. Peterson Grantor Retained Annuity Trust, as to which Mrs.
Peterson, Mr. Peterson's wife, has sole voting and dispositive power as
trustee. Also includes 737,200 shares of Common Stock owned by the Peterson
Partners, Ltd., a Colorado limited partnership of which Peterson Holdings,
Inc., a Colorado corporation, is the general partner. Mr. and Mrs. Peterson
jointly own all of the issued and outstanding voting stock of Peterson
Holdings, Inc.
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(4) Includes 800,000 shares of Common Stock owned by the Boosales Family
Limited Partnership, a Colorado limited partnership of which Boosales
Holdings, Inc., a Colorado corporation, is the general partner. Mr.
Boosales and his wife, Bonny, jointly own all of the issued and outstanding
voting stock of Boosales Holdings, Inc.
(5) Includes 46,284 shares of Common Stock issuable on exercise of stock
options that are currently exercisable or will become exercisable within 60
days. Excludes 61,000 shares of Common Stock issuable on exercise of stock
options that are not exercisable within 60 days.
(6) Includes 20,000 shares of Common Stock issuable on exercise of stock
options that are currently exercisable or will become exercisable within 60
days. Excludes 18,000 shares of Common Stock issuable on exercise of stock
options that are not exercisable within 60 days.
(7) Includes 27,500 shares of Common Stock issuable pursuant to the exercise of
outstanding stock options that are currently exercisable or will become
exercisable within 60 days. Excludes 14,000 shares of Common Stock issuable
on exercise of stock options that are not exercisable within 60 days.
(8) Includes 4,000 shares of Common Stock issuable on exercise of stock options
that are currently exercisable or will become exercisable within 60 days.
Excludes 22,000 shares of Common Stock issuable on exercise of stock
options that are not exercisable within 60 days.
(9) Includes 12,000 shares of Common Stock issuable on exercise of stock
options that are currently exercisable or will become exercisable within 60
days.
10) Includes 27,500 shares of Common Stock issuable upon the exercise of
outstanding stock options held by James M. Emanuel; 20,000 shares of Common
Stock issuable on exercise of stock options held by Lee R. Kemberling; and
4,000 shares of Common Stock issuable on exercise of stock options held by
N. John Simmons, Jr.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act ("Section 16(a)") requires the
Company's officers and directors and persons who own ten percent or more of a
registered class of the Company's equity securities to file reports of ownership
on Form 3 and changes in ownership on Form 4 or Form 5 with the SEC and the
National Association of Securities Dealers, Inc. Such officers, directors and
ten percent or more shareholders are also required by SEC rules to furnish the
Company with copies of all such forms that they file.
Based solely on its review of the copies of such forms received by the
Company, or written representations from certain reporting persons that no Forms
5 were required for such persons, the Company believes that, during the period
from January 1, 2001 until December 31, 2001, all Section 16(a) filing
requirements applicable to its officers, directors, and ten-percent or more
shareholders were satisfied.
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee is composed of Messrs. Kemberling,
Simmons, and Emanuel. No member of the Compensation Committee is or was formerly
an officer or an employee of the Company. No interlocking relationship exists
between the Company's Board of Directors or Compensation Committee and the board
of directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.
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Lee R. Kemberling, a director of the Company, is also the director,
President, and sole shareholder of Kemco, Inc., a developer and manufacturer of
commercial and industrial waste water and heat recovery systems that originally
furnished the Company's predecessor with the water and heat reclamation
equipment installed at each of its facilities. The Company paid $187,000 to
Kemco in 2001 to design and supply new components for water reclamation systems.
The Company believes that the terms of its transactions with Kemco approximate
those that would be available from an independent third party.
Gary L. Heiman, a former director of the Company, is the President, Chief
Executive Officer, and a principal shareholder of Standard Textile Co., Inc., a
developer, manufacturer, and distributor of healthcare and medical textiles and
apparel. In 2001, the Company paid approximately $5.5 million to Standard
Textile for purchase of reusable textile products. The Company believes that the
terms of this agreement with Standard Textile approximate those that would be
available from an independent third party.
9
EXECUTIVE OFFICER COMPENSATION
Executive Compensation
The following table sets forth certain information concerning compensation
paid to or earned by the Company's Chairman and Chief Executive Officer and each
of the Company's other executive officers (the "Named Officers") for the years
ended December 31, 2001, 2000, and 1999:
Summary Compensation Table
Annual Compensation
-------------------
Other Annual
Name and Principal Positions Year Salary Bonus Compensation
---------------------------- ---- ------ ----- ------------
Richard Isel, Chairman and Chief Executive Officer .......... 2001 $220,000 ----- $16,107
2000 220,000 ----- 14,197
1999 220,000 ----- 12,294
Wayne R. Peterson, Executive Vice President ................. 2001 200,000 ----- ------
2000 200,000 ----- ------
1999 200,000 ----- ------
James T. Boosales, Executive Vice President ................. 2001 200,000 ----- ------
2000 200,000 ----- ------
1999 200,000 ----- ------
Alexander H. Edwards III, President* ........................ 2001 175,000 $40,000 ------
2000 140,192 ----- 65,000/(1)/
1999 122,115 15,600 1,645
________________
/(1)/ Commission compensation
*Mr. Edwards became President of the Company in May 2001. Mr. Edwards has served
in various positions with the Company since January 1997. Mr. Edwards resigned
from the Company in April 2002, but will maintain a relationship with the
Company as an independent sales consultant.
Employment Agreements
The Company has employment agreements with three of the Named Officers that
provide for annual salary as follows:
Name Salary
---- ------
Richard T. Isel ........................................ $220,000
Wayne R. Peterson ...................................... $200,000
James T. Boosales ...................................... $200,000
Either party may terminate these agreements without cause at any time, subject
to certain notice requirements. Each officer is prohibited from competing with
the Company during the three year period following termination of the officer's
employment. The Company also has severance agreements with these three executive
officers that provide for a severance compensation benefit equal to two times
the executive officer's annual cash compensation (payable in a lump sum) for an
involuntary or constructive termination of employment following a "change of
control."
10
Option Grants in Last Fiscal Year
No options were granted in 2001 to any Named Officer.
Fiscal Year End Option Values
The following table sets forth the aggregate value of exercised and
unexercised options at December 31, 2001, for each Named Officer.
Options Exercised Value of Unexercised
----------------- Number of Unexercised In-the-Money Options
Shares Value Options at Fiscal Year End at Fiscal Year End (1)
Acquired Realized -------------------------- ----------------------
Name on Exercise on Exercise Unexercisable Exercisable Unexercisable Exercisable
---- ----------- ----------- ------------- ----------- ------------- -----------
Richard T. Isel - - - - - -
Wayne R. Peterson - - - - - -
James T. Boosales - - - - - -
Alexander H. Edwards III 7,716 $233,390 61,000 46,284 $193,860 $91,060
(1) Amounts represent the $1,716,544 market value of the underlying securities
relating to "in-the-money" options at December 31, 2001, minus the exercise
price of such options.
CERTAIN TRANSACTIONS
The Company engaged in transactions in 2001 with Kemco, Inc., a company
owned by Lee R. Kemberling, and with Standard Textile Co., Inc., a company whose
President, Chief Executive Officer, and principal shareholder is Gary L. Heiman.
Mr. Kemberling is a director of the Company, and Mr. Heiman is a former director
of the Company. See - "Other Information - Compensation Committee Interlocks and
Insider Participation."
All transactions between the Company and its officers, directors, principal
shareholders, and their affiliates will continue to be approved by a majority of
the Board of Directors, including a majority of the independent and
disinterested outside directors on the Board of Directors, and will continue to
be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors (the "Committee") has
furnished the following report on the Company's executive compensation program.
The Committee, which consists of the three outside directors listed at the end
of this report, reviews and establishes specific compensation plans, salaries,
option grants, and other benefits payable to the Company's executive officers.
Following review and approval by the Committee, all issues pertaining to
executive compensation are submitted to the entire Board of Directors for its
review and approval.
The Committee's primary objective with respect to executive compensation is
to establish programs that attract and retain executive officers and align their
compensation with the Company's overall business strategies, values, and
performance. For executive officers and key managers other than Messrs. Isel,
Peterson, and Boosales, the Company's founders and largest shareholders, the
Company grants stock options as a component of total consideration to closely
align their interests with the shareholders' long-term interests. Further, in
evaluating annual compensation of executive officers (other than Messrs. Isel,
11
Peterson, and Boosales) and key managers, the Committee places a relatively
heavy emphasis on stock options as a percentage of total compensation,
consistent with its philosophy that stock incentives more closely align the
interests of company managers with the long-term interests of shareholders.
The two components of the Company's total compensation program for
executive officers have been:
1. Salary: Base salary paid to executives other than Messrs. Isel,
Peterson, and Boosales is intended to be competitive with that paid to
comparable executives and is also intended to reflect consideration of an
officer's experience, business judgment, and role in developing and implementing
overall business strategy for the Company. Base salaries are based on
qualitative and subjective factors, and no specific formula is applied to
determine the weight of each factor.
Messrs. Isel, Peterson, and Boosales have historically been paid salary at
a rate lower than that paid to comparable executives, have not historically
participated in the Company's incentive compensation program, and did not in
2001 receive any bonus in addition to base salary. The Committee believes that
the comparatively low salary and absence of incentive bonus has been more than
offset by the substantial incentives associated with the executive officers'
stock ownership.
2. Long-Term Stock Incentives: The Company's 1995 Stock Option Plan and
1998 Stock Option Plan provide for the grant to employees of incentive or
nonqualified stock options. Grants to executives are designed to align a
significant portion of the executive compensation package with the long-term
interests of the Company's shareholders by providing an incentive that focuses
attention on managing the Company from the perspective of an owner with an
equity stake in the business.
Grants of stock options generally are limited to officers (other than
Messrs. Isel, Peterson, and Boosales) and other key employees and managers of
the Company who are in a position to contribute substantially to the growth and
success of the Company. Incentive stock options and nonqualified stock options
are granted for terms up to ten years and are designed to reward exceptional
performance with a long-term benefit, facilitate stock ownership, and deter
recruitment of key Company personnel by competitors and others. Vesting
requirements encourage loyalty to the Company.
The Company has never granted stock options to Messrs. Isel, Peterson, and
Boosales because, as the Company's founders and largest shareholders, their
interests are already closely aligned with those of the Company's other
shareholders. The remaining executive officer, Mr. Edwards, was not granted
options to purchase shares of Common Stock in 2001, but beneficially owned or
had rights to acquire 107,284 shares on the Record Date. The Named Officers
appearing in the Summary Compensation Table held a total of 2,717,813 shares,
representing 41.6% of the Company's outstanding Common Stock on February 14,
2002, assuming exercise of all of Mr. Edwards' vested and unvested stock
options.
In conclusion, the Company's executive officers' stock ownership closely
aligns their interests with the Company's shareholders' long-term interests,
consistent with the compensation philosophies set forth above. This close
alignment has existed since the Company's inception and has contributed
significantly to the Company's growth and profitability.
By the Compensation Committee,
Lee R. Kemberling
James M. Emanuel
N. John Simmons, Jr.
12
COMPANY STOCK PRICE PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return for the Company, the Nasdaq Stock Market (U.S.) Index, and the Nasdaq
Health Index for the period since the Company's Common Stock began trading on
July 18, 1996. This graph assumes that $100 was invested on July 18, 1996, in
the Company's Common Stock and in the other indices. Note that historic stock
price performance is not necessarily indicative of future stock price
performance.
[GRAPH]
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7/18/96 12/31/96 6/30/97 12/31/97 6/30/98 12/31/98 6/30/99 12/31/99 6/30/00 12/31/00 6/30/01 12/31/01
------------------------------------------------------------------------------------------------------------------------------------
SRI/Surgical $100.00 $155.92 $186.84 $180.26 $178.95 $123.68 $122.37 $ 72.37 $ 81.58 $159.21 $320.11 $168.42
Express, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Nasdaq Stock Market $100.00 $116.21 $130.06 $142.60 $179.99 $200.32 $246.09 $372.79 $363.81 $224.35 $197.27 $177.91
(U.S. Index)
------------------------------------------------------------------------------------------------------------------------------------
Nasdaq Health Index $100.00 $ 97.58 $101.70 $ 99.45 $ 98.76 $ 84.99 $ 93.49 $ 68.01 $ 72.14 $ 93.24 $101.31 $ 99.29
------------------------------------------------------------------------------------------------------------------------------------
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company engaged Ernst & Young LLP to audit its financial statements for
the fiscal year ending December 31, 2001. Ernst & Young LLP has audited the
Company's financial statements since 1999. A representative of Ernst & Young LLP
is expected to be present at the meeting, will have the opportunity to make a
statement, and is expected to be available to respond to appropriate questions.
13
Fees Paid to Ernst & Young LLP
The following table shows fees paid or accrued by the company for the audit
and other services provided by Ernst & Young LLP for fiscal year 2001.
Audit Fees (1) $ 92,000
Financial Information Systems Design and
Implementation Fees 0
All Other Fees (2) 214,000
------------------ --------
Total $306,000
____________________
(1) Audit services of Ernst & Young LLP for 2001 consisted of the
examination of the financial statements of the Company and quarterly
review of its financial statements.
(2) "All Other Fees" includes all other fees incurred by the Company,
including fees for services in connection with the Company's
restatement announced in its 2001 fourth quarter and for tax services.
Required Vote; Recommendation of the Board of Directors
The Board of Directors has conditioned its appointment of the Company's
independent auditors upon the receipt of the affirmative vote of a majority of
the shares represented, in person or by proxy, and voting at the Annual Meeting,
which shares voting affirmatively also constitute at least a majority of the
required quorum. In the event that the shareholders do not approve the selection
of Ernst & Young LLP, the appointment of the independent auditors will be
reconsidered by the Board of Directors.
The Board of Directors Unanimously Recommends a Vote "For" This Proposal.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Company may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares that you hold. You are, therefore, urged to execute the
accompanying proxy card and return it in the enclosed envelope.
THE BOARD OF DIRECTORS
Tampa, Florida
April 9, 2002
14
Appendix A
----------
AUDIT COMMITTEE CHARTER
March 21, 2002
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of SRI/Surgical Express, Inc. (the "Company") has the oversight
responsibility, authority, and specific duties described in this Audit Committee
Charter (the "Charter").
Composition
-----------
The Committee will be comprised of three or more directors as determined by
the Board. Each of the members of the Committee will meet the independence and
experience requirements of the National Association of Securities Dealers
("NASD"), except to the extent permitted by NASD and authorized by the Board.
All Committee members must be financially literate, and one member shall have
accounting or related financial management expertise, both as provided in the
NASD rules. The members of the Committee will be elected annually at the
organizational meeting of the full Board held in May. The Board will elect one
of the members of the Committee to be the Committee Chair.
Responsibility
--------------
The Committee is a part of the Board. Its primary function is to assist the
Board in fulfilling its oversight responsibilities to the shareholders,
potential shareholders, the investment community, and others with respect to (i)
the annual financial information to be provided to shareholders and the
Securities and Exchange Commission (the "SEC"); (ii) the system of internal
controls that management has established; and (iii) the external audit process.
In addition, the Committee provides an avenue for communication between the
Board of Directors and the outside auditors and financial management. The
Committee should have a clear understanding with the outside auditors that they
must maintain an open and transparent relationship with the Committee, and that
they are ultimately accountable to the Board and the Committee. The Committee
will regularly report to the Board concerning its activities.
Although the Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Committee to plan or conduct audits, to
prepare financial statements, or to determine that the Company's financial
statements are complete and accurate and in accordance with generally accepted
accounting principles. This is the responsibility of management and the outside
auditors. Nor is it the duty of the Committee to conduct investigations, to
resolve disagreements, if any, between management and the outside auditors, or
to assure compliance with laws and regulations and the Company's business
conduct guidelines.
Authority
---------
Subject to the prior approval of the Board, the Committee is granted the
authority to conduct or authorize investigations into any matters within its
scope of responsibilities, including any matters involving financial accounting,
financial reporting, or internal controls of the Company. In that regard, the
Committee will have the authority to (1) retain or approve retention of such
outside counsel, experts, and other advisors as it determines appropriate to
assist in the full performance of its functions, including the conduct of any
investigation, (2) create subcommittees who shall report to the Committee, and
(3) access all books, records, facilities, and personnel of the Company. All
employees will be directed to cooperate with respect thereto as requested by
members of the Committee.
15
Meetings
--------
The Committee is to meet at least two (2) times annually and as many
additional times as the Committee deems necessary. The Committee Chair will
determine or approve the agenda for each meeting. The Committee is to meet in
separate executive sessions with the chief financial officer and the outside
auditors at least once each year and at other appropriate times. The Committee
shall report to the full Board with respect to its meetings. The majority of the
members of the Committee shall constitute a quorum.
Attendance
----------
Committee members will use diligent efforts to attend all meetings. As
necessary or desirable, the Committee Chair may request that members of
management and representatives of the outside auditors attend Committee
meetings.
Specific Duties
---------------
In carrying out its oversight responsibilities, the Committee will:
1. Review and reassess the appropriateness of this charter annually and
recommend any proposed changes to the Board for approval.
2. Review and discuss with the Company's management and outside auditors the
Company's accounting and financial reporting controls and internal audit
procedures and discuss annually with the outside auditors their assessment
as to the adequacy of those controls. The Committee will also review the
Company's Compliance Policy and, at the request of its compliance officer,
meet with the compliance officer to discuss any reported compliance issues.
3. Review and discuss annually with management the fee arrangement with the
outside auditors.
4. Review and discuss the written statement from the outside auditor
delineating all relationships between the outside auditor and the Company
or any other relationships that may adversely affect the independence of
the outside auditor, and based on the review, assess the outside auditor's
independence. If applicable, the Committee will consider whether the
outside auditor's performance of information technology consulting and any
other non-audit services is compatible with the outside auditor's
independence.
5. At the completion of the annual audit, review and discuss with management
and the outside auditors the following:
. The scope and general extent of the outside auditors' annual audit and any
accompanying management letters, including the outside auditors'
explanation of the factors that the outside auditors considered in
determining the audit scope and the major risk factors.
. Significant changes to the audit plan, if any, cooperation received by the
outside auditors during their audit, including access to all reequested
records, data and information, and any serious disputes or difficulties
with management encountered during the audit or any limitations placed on
the scope or nature of the audit procedures.
. Significant accounting and reporting principles, practices, and procedures
applied by the Company in preparing its financial statements and the
outside auditors' judgment about the quality of the
16
Company's accounting principles. If applicable, discuss changes during the
year in accounting principles and their application.
. The annual financial statements and related footnotes and financial
information to be included in the Company's Form 10-K.
. Results of the audit of the financial statements and the related report of
the outside auditors on the financial statements.
If the Committee deems it appropriate after review and discussion, the
Committee will recommend to the Board that the financial statements be
included in the Company's Form 10-K.
6. After preparation by management and review by the outside auditors, approve
the report required under SEC rules to be included in the Company's annual
proxy statement.
7. Require that the outside auditors review the Company's interim financial
statements prior to the quarterly filing of the Company's Form 10-Q in
accordance with the procedures set forth in SAS 71 and require that the
outside auditors discuss with the Committee or Committee chair and
management any significant matters identified in the quarterly review and
any other matters required to be communicated to the Committee by the
outside auditors under generally accepted auditing standards. The Committee
may, but is not required to, review these interim statements.
8. Discuss with the outside auditors the quality of the Company's financial
and accounting personnel. Elicit comments of management regarding the
responsiveness of the outside auditors to the Company's needs.
9. Meet with management and the outside auditors to discuss any relevant
significant recommendations of the outside auditors, particularly those
characterized as "material" or "reportable".
10. Recommend to the Board the selection, retention, or termination of the
Company's outside auditors.
11. As the Committee deems appropriate, obtain, weigh and consider expert
advice as to Audit Committee-related rules of the NASD, Statements on
Auditing Standards and other accounting, legal, and regulatory provisions.
17
SRI/SURGICAL EXPRESS, INC.
Annual Meeting of Shareholders
Wednesday, May 15, 2002
10:00 a.m.
(down triangle) FOLD AND DETACH HERE (down triangle)
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
2002 ANNUAL MEETING OF SHAREHOLDERS OF
SRI/SURGICAL EXPRESS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Wayne R. Peterson and James T. Boosales, and each of
them, as proxies, each with full power of substitution, to represent and to
vote all shares of voting Common Stock of SRI/SURGICAL EXPRESS, INC., a Florida
corporation (the "Company"), at the Annual Meeting of Shareholders of the
Company to be held on Wednesday, May 15, 2002, at 10:00 a.m., EST, and any
adjournment thereof:
1. Election of directors for terms expiring in 2005:
[_] FOR THE ELECTION OF JAMES M. EMANUEL [_] WITHHOLD AUTHORITY to vote for the nominees
AND RICHARD T. ISEL (the "Nominees")
for terms expiring in 2005
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list above.)
2. Appointment of Ernst & Young LLP as the Company's auditors.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(continued, and to be signed on reverse side)
(down triangle) FOLD AND DETACH HERE (down triangle)
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
(continued from other side)
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR the Nominees, and FOR the appointment of Ernst & Young LLP as the
Company's auditors.
DATED: __________________________________________________________, 2002
---------------------------------------
Signature of Shareholder
---------------------------------------
Signature of Shareholder if held jointly
---------------------------------------
Number of Shares held by Shareholder
Do you plan to attend
the Annual Meeting? [_] yes [_]no
Please sign exactly as your name appears on this proxy. If shares are
owned by more than one person, all owners should sign. Persons
signing as executors, administrators, trustees or in similar capacities
should so indicate. If a corporation, please sign full corporate name
by the president or other authorized officer. If a partnership, please
sign in partnership name by authorized person.
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PAID ENVELOPE.