TRIAD MEDICAL INC, S-1/A, 1997-10-29

TRIAD MEDICAL INC
S-1/A, 1997-10-29
MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1997
REGISTRATION NO. 333-35449

================================================================================

SECURITIES AND EXCHANGE COMMISSION
------------------------

AMENDMENT NO. 1
TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

TRIAD MEDICAL INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 5047
(STATE OR OTHER (PRIMARY STANDARD
JURISDICTION OF INDUSTRIAL 84-1408330
INCORPORATION OR CLASSIFICATION CODE (I.R.S. EMPLOYER
ORGANIZATION) NUMBER) IDENTIFICATION NUMBER)

23161 MILL CREEK DRIVE, SUITE 300
LAGUNA HILLS, CA 92653
PHONE: (714) 770-0292
FAX: (714) 770-0727
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

WILLIAM C. KLINTWORTH, JR.
CHIEF EXECUTIVE OFFICER
TRIAD MEDICAL, INC.
2078 PROSPECTOR AVENUE
PARK CITY, UTAH 84060
PHONE: (801) 645-7200
FAX: (801) 645-9893
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

------------------------

WITH COPIES TO:

ROBERT G. REEDY JAMES L. LEADER
PORTER & HEDGES, L.L.P. BAKER & BOTTS, L.L.P.
700 LOUISIANA, 35th FLOOR 3000 ONE SHELL PLAZA
HOUSTON, TEXAS 77002-2764 HOUSTON, TEXAS 77002-4995
PHONE: (713) 226-0600 PHONE: (713) 229-1234
FAX: (713) 226-0274 FAX: (713) 229-1522

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

================================================================================
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED OCTOBER 29, 1997

4,000,000 SHARES

TRIAD MEDICAL INC.

COMMON STOCK

ALL THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING OFFERED BY TRIAD
MEDICAL INC. ("TRIAD"). PRIOR TO THIS OFFERING (THIS "OFFERING"), THERE HAS
BEEN NO PUBLIC MARKET FOR THE COMMON STOCK. TRIAD AND THE REPRESENTATIVES OF THE
UNDERWRITERS CURRENTLY ESTIMATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE
BETWEEN $10.00 AND $12.00 PER SHARE. SEE "UNDERWRITING" FOR A DISCUSSION OF
THE FACTORS THEY WILL CONSIDER IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
THE COMMON STOCK HAS BEEN APPROVED FOR QUOTATION ON THE NASDAQ NATIONAL MARKET
UNDER THE SYMBOL "TRMD."

SEE "RISK FACTORS" COMMENCING ON PAGE 8 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>

- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
PER SHARE............................ $ $ $
TOTAL(3)............................. $ $ $
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) SEE "UNDERWRITING" FOR INFORMATION CONCERNING INDEMNIFICATION OF THE
UNDERWRITERS AND OTHER MATTERS.

(2) BEFORE DEDUCTING OFFERING EXPENSES PAYABLE BY TRIAD, ESTIMATED AT
$4,400,000.

(3) TRIAD HAS GRANTED THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP TO 600,000
ADDITIONAL SHARES OF COMMON STOCK SOLELY TO COVER OVER-ALLOTMENTS, IF ANY.
IF THE UNDERWRITERS EXERCISE THIS OPTION IN FULL, THE TOTAL PRICE TO PUBLIC,
UNDERWRITING DISCOUNT AND PROCEEDS TO COMPANY WILL BE $ ,
$ AND $ , RESPECTIVELY. SEE "UNDERWRITING."

THE SHARES OF COMMON STOCK ARE OFFERED BY THE SEVERAL UNDERWRITERS NAMED
HEREIN, SUBJECT TO RECEIPT AND ACCEPTANCE BY THEM AND SUBJECT TO THEIR RIGHT TO
REJECT ANY ORDER IN WHOLE OR IN PART. IT IS EXPECTED THAT DELIVERY OF THE
CERTIFICATES REPRESENTING SUCH SHARES WILL BE MADE AGAINST PAYMENT THEREFOR AT
THE OFFICES OF NATIONSBANC MONTGOMERY SECURITIES, INC. ON OR ABOUT
, 1997.

------------------------

NATIONSBANC MONTGOMERY SECURITIES, INC.
SMITH BARNEY INC.
WEDBUSH MORGAN SECURITIES

, 1997
<PAGE>
[Graphics to include photos of certain of the
Company's products and facilities.]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING THE
PRICING OF THIS OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK
OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

<PAGE>
PROSPECTUS SUMMARY

CONCURRENTLY WITH THE CLOSING OF THE OFFERING MADE HEREBY (THIS
"OFFERING"), TRIAD PLANS TO ACQUIRE, IN SEPARATE TRANSACTIONS (COLLECTIVELY,
THE "ACQUISITIONS"), IN EXCHANGE FOR CONSIDERATION INCLUDING SHARES OF ITS
COMMON STOCK, 11 CONTRACT SALES AND DISTRIBUTION COMPANIES (COLLECTIVELY, THE
"FOUNDING COMPANIES"). SEE "THE COMPANY." UNLESS OTHERWISE INDICATED BY THE
CONTEXT, REFERENCES HEREIN TO (i) "TRIAD" MEAN TRIAD MEDICAL INC., (ii) THE
"COMPANY" MEAN TRIAD AND THE FOUNDING COMPANIES, AFTER GIVING EFFECT TO THE
ACQUISITIONS, AND (iii) "FISCAL 1994," "FISCAL 1995" AND "FISCAL 1996"
MEAN, RESPECTIVELY, THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 WITH
RESPECT TO TRIAD AND SIX FOUNDING COMPANIES, THE FISCAL YEARS ENDED JUNE 30,
1994, 1995 AND 1996 WITH RESPECT TO TWO FOUNDING COMPANIES, THE FISCAL YEARS
ENDED MARCH 31, 1994, 1995 AND 1996, MAY 31, 1994, 1995 AND 1996 AND OCTOBER 31,
1994, 1995 AND 1996 WITH RESPECT TO THREE FOUNDING COMPANIES, RESPECTIVELY.

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN
THIS PROSPECTUS (i) GIVES EFFECT TO THE ACQUISITIONS, (ii) ASSUMES THE
UNDERWRITERS DO NOT EXERCISE THEIR OVER-ALLOTMENT OPTION AND (iii) GIVES EFFECT
TO A SPLIT OF THE COMMON STOCK IN CONNECTION WITH THIS OFFERING.

BUSINESS

The Company was formed to create a national leader in the contract sales
and distribution of specialty medical products designed for the hospital and
alternate-site health care markets (including sub-acute care facilities, home
care companies and specialty physician groups). The Company contracts with
specialty medical product manufacturers to provide outsourcing of the sales,
marketing, distribution and customer service functions for all or certain of
their product lines, thereby eliminating the manufacturers' need to develop and
maintain their own sales force or rely on a number of independent local and
regional distributors to achieve national coverage. The Company provides a broad
range of specialty medical products across the full continuum of patient care,
including products used in the surgical, anesthesiology / pain management,
critical care, cardiovascular / vascular and infusion therapy markets. It
represents over 180 manufacturers and sells products in all 50 states.

According to the Health Industry Distributor Association, the medical
instrument and supply industry (excluding pharmaceuticals) in the United States
represented an estimated annual market in excess of $30 billion in 1996, of
which the hospital and the alternate-site markets represented approximately $16
billion and $14 billion, respectively. The Company estimates that there are over
1,200 companies engaged in the contract sales and distribution of specialty
medical products in the United States, most of which are smaller companies
serving local or regional markets and providing representation for a limited
number of manufacturers and product lines. The Company believes that contract
sales and distribution companies provide manufacturers with the ability to
outsource certain sales and distribution functions and afford them access to an
experienced sales force with established sales channels. Despite the advantages
provided by contract sales and distribution companies, the fragmented network of
such companies is generally not capable of serving multiple manufacturers on a
national basis or satisfying the centralized buying needs of national group
purchasing organizations ("GPOs") and regional integrated delivery networks
("IDNs"). The Company believes that the emergence of a contract sales and
distribution company capable of selling, distributing and servicing a broad
array of specialty medical products nationwide would meet the evolving needs of
both manufacturers and health care providers.

The sale and distribution of specialty medical products require a focused
selling effort by representatives capable of marketing the products' clinical
features and benefits to physicians and other health care professionals and
demonstrating the economic benefits associated with these products to purchasing
departments and operating management of health care providers. To satisfy the
sales and related needs of its represented manufacturers, the Company has over
140 sales representatives, who average in excess of 15 years' medical product
sales experience. Through this sales staff and other support staff the Company
employs at its 20 sales and distribution facilities located throughout the
United States, the Company provides its represented manufacturers and customers
with a variety of value-added services designed to facilitate access to the
marketplace and product procurement on a time-efficient and cost-effective
basis.

3
<PAGE>
These services include product introduction and support, education and training,
equipment maintenance and repair, manufacturer warranty support and product
usage reporting.

The Company's objective is to become the leading national contract sales
and distribution organization focused on specialty medical products. To achieve
this objective, the Company intends to implement an aggressive acquisition
program targeting leading local and regional contract sales and distribution
companies in order to expand its product representation. The Company also will
seek to achieve certain operating efficiencies and cost savings by reducing
facilities, centralizing certain administrative functions and implementing a
"best practices" operating strategy throughout the Company. Centralizing these
functions will enable the local and regional offices to concentrate their
efforts on sales, customer service, inventory management and distribution. A key
component of the Company's business strategy is to accelerate internal growth in
its existing businesses and subsequently acquired businesses by (i) leveraging
its established manufacturer and customer bases, (ii) cross-selling products
between the alternate-site and the hospital markets, (iii) implementing a "best
practices" sales and marketing strategy, (iv) adding qualified sales
representatives and (v) generating ancillary service revenues.

THIS OFFERING

Common Stock offered by TRIAD......................... 4,000,000 shares
Common Stock to be outstanding after this
Offering(1)......................................... 9,094,973 shares
Use of Proceeds....................................... To pay the cash portion
of the purchase price for
the Founding Companies
and to repay indebtedness
of the Founding
Companies. See "Use of
Proceeds."
Nasdaq National Market symbol......................... TRMD

- ------------

(1) The number of shares estimated to be outstanding on completion of this
Offering consists of (i) 997,758 shares issued to the organizers and
management of TRIAD, (ii) 100,000 shares issued in a private placement that
closed on September 8, 1997 (the "Private Placement"), (iii) 3,997,215
shares to be issued as consideration in the Acquisitions and (iv) the
4,000,000 shares being offered hereby. Such share number does not include
(i) an aggregate of 972,987 shares subject to options granted (or to be
granted prior to the closing of this Offering) under TRIAD's 1997 Incentive
Plan (the "Incentive Plan"), 831,200 of which have an exercise price equal
to the initial public offering price per share and 141,787 of which will
have a weighted average exercise price per share of $5.85, (ii) a warrant to
purchase up to 100,000 shares (the "Equus Warrant") issued by TRIAD to
Equus II Incorporated ("Equus II") in connection with TRIAD's start-up
funding and (iii) a warrant to purchase up to 25,000 shares (the "PENMAN
Warrant") issued by TRIAD to PENMAN Private Equity and Mezzanine Fund, L.P.
("PENMAN") in connection with assisting TRIAD in the acquisition of one of
the Founding Companies. Each of the Equus Warrant and the PENMAN Warrant has
a purchase price per share equal to the initial public offering price. See
"Management -- Option Grants" and "Certain Transactions -- Organization
of TRIAD."

RISK FACTORS

The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."

4
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

TRIAD will acquire the Founding Companies concurrently with and as a
condition to the consummation of this Offering. For financial statement
presentation purposes, Triad Holdings, Inc. ("THI"), one of the Founding
Companies, has been identified as the accounting acquirer. The following summary
of unaudited pro forma financial data presents certain data for the Company, as
adjusted for (i) the effects of the Acquisitions on an historical basis, (ii)
the effects of certain pro forma adjustments to the historical financial
statements and (iii) the consummation of this Offering and the application of
the estimated net proceeds therefrom. See "Selected Historical and Pro Forma
Combined Financial Data" and the Unaudited Pro Forma Combined Financial
Statements and the notes thereto included elsewhere in this Prospectus.

NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, ---------------------
1996 1996 1997
------------ --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
STATEMENT OF OPERATIONS DATA (1):
Revenues................................ $128,495 $ 96,828 $ 101,113
------------ --------- ----------
Gross profit............................ 40,282 29,983 30,340
Selling expenses(2)..................... 15,986 11,210 11,903
General and administrative
expenses(2)(3)........................ 13,718 10,176 11,209
Depreciation and amortization(4)........ 2,012 1,469 1,981
------------ --------- ----------
Income from operations.................. 8,566 7,128 5,247
Interest income (expense), net(5)....... 106 54 117
Other income (expense), net............. 157 (178) 37
------------ --------- ----------
Income before provision for income
taxes................................. 8,829 7,004 5,401
Provision for income taxes.............. 3,843 3,080 2,355
------------ --------- ----------
Net income.............................. $ 4,986 $ 3,924 $ 3,046
------------ --------- ----------
Net income per share.................... $ 0.54 $ 0.43 $ 0.33
============ ========= ==========
Shares used in computing net income per
share(5).............................. 9,161 9,161 9,161
============ ========= ==========

SEPTEMBER 30, 1997
---------------------------
PRO FORMA
COMBINED AS ADJUSTED(6)
--------- --------------
(IN THOUSANDS)
BALANCE SHEET DATA (1):
Working capital......................... $15,657 $ 18,357
Total assets............................ 82,439 79,692
Total debt, including current portion... 15,539 1,040
Stockholders' equity.................... 17,830 53,937

- ------------

(1) The pro forma combined statement of operations data assume that the
following transactions and events -- (i) the organization of TRIAD and its
issuance of shares of Common Stock and preferred stock; (ii) a split of the
outstanding Common Stock; (iii) the conversion of outstanding TRIAD
preferred stock into Common Stock; (iv) the Acquisitions; and (v) the
closing of this Offering and the application of the estimated net proceeds
therefrom -- were closed on January 1, 1996, and are not necessarily
indicative of the results the Company would have attained had these events
and transactions actually occurred then or of the Company's future results.
The pro forma combined balance sheet data assume the Acquisitions and the
net incurrence of indebtedness by the Company since September 30, 1997
occurred on that date. The pro forma combined financial data (i) are based
on preliminary estimates, available information and certain assumptions that
management deems appropriate and

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

5
<PAGE>
(ii) should be read in conjunction with the other financial statements and
notes thereto included elsewhere in this Prospectus.

(2) Selling expenses and general and administrative expenses for the nine months
ended September 30, 1997 include costs incurred by THI to (i) increase its
sales force to expand certain marketing efforts and (ii) enhance its
administrative infrastructure to support its expansion efforts.

(3) The pro forma combined statement of operations data include the effect of:
(i) the following reductions in compensation and benefits prospectively
agreed to as part of the purchase agreements by the owners and certain key
employees of the Founding Companies: year ended December 31, 1996, $3.5
million; and the nine months ended September 30, 1996 and 1997, $2.5 million
and $1.5 million, respectively; (ii) the elimination of a $3.7 million
non-cash, non-recurring compensation charge by TRIAD for the nine months
ended September 30, 1997; and (iii) distributions by certain Founding
Companies of cash and other assets prior to the closing of the Acquisitions.

(4) Reflects amortization of the goodwill to be recorded as a result of the
Acquisitions over a 40-year period and computed on the basis described in
Note 5 of Notes to the Unaudited Pro Forma Combined Financial Statements.

(5) Computed on a basis described in Note 5 of Notes to the Unaudited Pro Forma
Combined Financial Statements.

(6) Reflects the closing of this Offering and TRIAD's application of its net
proceeds therefrom. See "Use of Proceeds."

6
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA FOR ACCOUNTING ACQUIRER

NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------- --------------------
1994 1995 1996 1996 1997
----------- --------- --------- --------- ---------
(UNAUDITED)

(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
THI STATEMENT OF OPERATIONS DATA:
Revenues................................ $22,667 $ 29,674 $ 36,258 $ 26,168 $ 36,387
----------- --------- --------- --------- ---------
Gross profit............................ 5,916 7,188 8,766 5,993 9,245
Selling expenses(1)..................... 2,391 2,940 3,396 2,398 3,477
General and administrative
expenses(1)........................... 1,813 2,146 3,017 1,898 3,543
Depreciation and amortization........... 531 561 763 502 1,054
----------- --------- --------- --------- ---------
Income from operations.................. 1,181 1,541 1,590 1,195 1,171
Interest income (expense), net.......... (468) (509) (305) (200) (398)
Other income (expense), net............. (22) 15 (114) (83) (51)
----------- --------- --------- --------- ---------
Income before provision for income
taxes................................. 691 1,047 1,171 912 722
Provision for income taxes.............. 103 420 465 358 276
----------- --------- --------- --------- ---------
Net income (loss)....................... $ 588 $ 627 $ 706 $ 554 $ 446
=========== ========= ========= ========= =========

AS OF DECEMBER 31, AS OF SEPTEMBER 30,
---------------------------------- --------------------
1994 1995 1996 1996 1997
----------- --------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
THI BALANCE SHEET DATA:
Working capital......................... $(1,557) $ (527) $ 5,904 $ 5,340 $ 4,272
Total assets............................ 9,432 10,753 18,062 13,417 23,786
Total debt, including current portion... 915 3,185 5,442 939 6,252
Stockholders' equity (deficit).......... (687) (69) 6,547 6,027 7,472
</TABLE>

(1) Selling expenses and general and administrative expenses for the nine months
ended September 30, 1997 include costs incurred by THI to (i) increase its
sales force to expand certain marketing efforts and (ii) enhance its
administrative infrastructure to support its expansion efforts.

<PAGE>
RISK FACTORS

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, AS
WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS
CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF
ANY NUMBER OF FACTORS, INCLUDING THE RISK FACTORS SET FORTH BELOW.

ABSENCE OF COMBINED OPERATING HISTORY; RISKS OF INTEGRATING FOUNDING COMPANIES
AND ACQUIRED BUSINESSES

TRIAD, incorporated in Delaware in April 1997, has conducted no operations
to date other than in connection with this Offering and its pending acquisitions
in separate transactions (the "Acquisitions") of the Founding Companies. See
"The Company." The Founding Companies have operated, and will continue to
operate prior to the closing of the Acquisitions, as separate, independent
businesses, and the Company will use the purchase method of accounting to record
the Acquisitions, except for the acquisition of THI, which will be treated as
the acquirer for accounting purposes. Consequently, the pro forma financial
information herein may not be indicative of the Company's future operating
results and financial condition. The Company will initially rely on the separate
systems of each of the Founding Companies, but the success of the Company will
depend, in part, on the extent to which the Company is able to centralize and
integrate necessary systems and functions, including accounting and financial
reporting systems, among the Founding Companies and such additional businesses
as the Company may acquire. The inability of the Company to successfully
centralize and integrate such systems and functions could have a material
adverse effect on the Company's business, financial condition and results of
operations and adversely effect the Company's implementation of its acquisition
and operating strategies. See "Business -- Operations."

DEPENDENCE ON ACQUISITIONS FOR GROWTH

The Company intends to grow primarily by acquiring contract sales and
distribution businesses that complement its existing operations. Its acquisition
strategy presents risks that, singly or in any combination, could materially
adversely affect the Company's business and financial performance. These risks
include those inherent in assessing the value, strengths, weaknesses, contingent
or other liabilities and potential profitability of the acquisition candidate,
the possibility of the adverse effect on existing operations of the Company from
the diversion of management attention and resources to acquisitions and the
possible loss of acquired customer and supplier bases and key personnel,
including sales representatives. The success of the Company's acquisition
strategy will depend on the extent to which acquisition candidates continue to
be available and whether the Company will be able to acquire, successfully
integrate and profitably manage additional businesses. The Company believes the
contract sales and distribution business for specialty medical products is
subject to rapid consolidation on both a national and regional scale, and
competition for acquisition candidates could materially increase the cost of
acquiring businesses. The Company has identified certain possible acquisition
candidates, but has no binding agreement or letter of intent in effect with
respect to any acquisition (other than the Acquisitions), and the timing, size
and success of the Company's acquisition efforts and the associated capital
commitments cannot be readily predicted. Accordingly, no assurance can be given
the Company's strategy will succeed. For at least the two-year period commencing
on the closing of this Offering, the Company will be required to account for any
acquisition it makes under the purchase method of accounting. Acquisitions
accounted for as purchases may result in substantial annual noncash amortization
charges for goodwill and other intangible assets in the Company's statements of
operations. See "Business -- Business Strategy."

HISTORY OF LOSS OF PRODUCT LINES

The Founding Companies have, from time to time, lost significant product
lines due to, among other factors, manufacturers' decisions to sell the product
lines directly to health care providers, acquisitions of the manufacturers or
their product lines by other entities with existing sales forces or failure of
the Founding Companies to satisfy sales volume or other performance
requirements. For information regarding lost product lines for certain of the
Founding Companies, see Notes (Significant Suppliers) to the financial
statements for the Founding Companies. The Company's sales and distribution
agreements and agency arrangements are generally for terms of one to three
years, and are terminable if

8
<PAGE>

the Company fails to meet negotiated sales volume or other performance
requirements or on prior notice ranging from 30 to 90 days. The loss of any
significant product line, for any reason, could have a material adverse effect
on the Company's business, financial condition and results of operations. There
can be no assurance the Company will not lose significant product lines in the
future.

NEED FOR ADDITIONAL FINANCING

Substantially all the net proceeds of this Offering will be used in
connection with the Acquisitions. See "Use of Proceeds." The Company's
acquisition strategy will require substantial additional capital. The Company
currently intends to use cash and shares of Common Stock in making future
acquisitions. Using internally generated cash or debt to complete acquisitions
could substantially limit the Company's operational and financial flexibility.
The extent to which the Company will be able or willing to use Common Stock for
this purpose will depend on its market value from time to time and the
willingness of potential sellers to accept it as full or partial payment. Using
Common Stock for this purpose may result in a significant dilution to then
existing stockholders. To the extent the Company is unable to use Common Stock
to make future acquisitions, its ability to grow may be limited by the extent to
which it is able to raise capital for this purpose, as well as to expand
existing operations, through debt or additional equity financings. No assurance
can be given the Company will be able to obtain the necessary capital to finance
a successful acquisition program and its other cash needs. If the Company is
unable to obtain additional capital on acceptable terms, it may be required to
reduce the scope of its presently anticipated expansion. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

The Company has recently received a commitment letter from First Chicago
Capital Markets, Inc. ("First Chicago") to provide the Company with a $40.0
million credit facility which will allow the Company to borrow for acquisitions,
working capital and other general corporate purposes. The Company expects that
such facility will require compliance with various affirmative and negative
covenants (including maintenance of certain financial ratios) which could limit
the Company's operational and financial flexibility. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Pro
Forma Combined -- Liquidity and Capital Resources."

RISKS RELATED TO INTERNAL GROWTH AND PROFITABILITY STRATEGY

Key elements of the Company's business strategy are to improve the
profitability and increase the revenues of the Founding Companies and
subsequently acquired businesses. The Company's ability to increase the revenues
of the Founding Companies and any subsequently acquired businesses will be
affected by various factors, including the demand for the Company's products and
the Company's ability to (i) add product lines and retain existing product
lines, (ii) increase its customer base and (iii) attract and retain qualified
management, sales representatives and service personnel. Many of these factors
are beyond the control of the Company, and there can be no assurance the
Company's internal growth and profitability strategy will be successful.

On a pro forma combined basis, the Company's inventories were recorded at
approximately $16.0 million at September 30, 1997. Because these inventories
include many high-value products, the Company's profitability depends in part on
the extent to which it is able to minimize the risks of product obsolescence and
price reductions through controlling its inventory levels, and no assurance can
be given the Company's inventory control efforts will be successful. See
"Business -- Operations."

COMPETITION

The Company competes with manufacturers that sell their medical products
directly to health care providers and, to a lesser extent, with national medical
products suppliers. Some of these manufacturers and national suppliers are
substantially larger and have substantially greater financial and other
resources than the Company to finance their marketing strategies and other
internal growth opportunities. The Company also faces competition from many
regional and local distributors in its niche markets, which are generally
relatively small local or regional owner-operated businesses. Barriers to entry
for distribution in the

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specialty medical products market are relatively low, and the risk of new
competitors entering the market, particularly in local and regional areas, is
high. In response to competitive pressures from any of its current or future
competitors, the Company may be required to lower selling prices in order to
maintain or increase market share, and such measures could adversely affect the
Company's operating results. See "Business -- Competition."

DEPENDENCE ON INDUSTRY SPENDING

The prospects of the Company depend on the level of expenditures for
specialty medical products by health care providers, particularly hospitals,
alternate-site facilities and other institutions. In recent years,
cost-containment and competitive pressures existing in the health care industry,
together with government-imposed limits on reimbursement of hospitals and other
health care providers, have significantly impacted spending budgets in certain
markets in the specialty medical products industry. Health care providers and
private third-party reimbursement plans are also exploring more cost-effective
methods of delivering health care and developing increasingly sophisticated
methods of controlling health care costs through redesign of benefits. Decreases
in industry spending for specialty medical products could adversely affect the
Company's future sales and operating results.

HEALTH CARE REFORM; MARKET CONDITIONS

Political, economic and regulatory influences are causing fundamental
changes in the health care industry in the United States. Changes in the law,
new interpretations of existing laws or changes in payment methodologies or
amounts may have a dramatic effect on the relative costs associated with
providing health care and the amount of reimbursement provided by government and
other third-party payors. Both the President and members of Congress have
expressed significant interest in controlling the escalation of health care
expenditures and using health care reimbursement policies to help control the
federal deficit. In recent years, there have been numerous federal and state
legislative initiatives for comprehensive reforms affecting the payment for and
availability of health care services. Due to the substantial uncertainties
regarding the ultimate features of reform initiatives and their adoption and
implementation, the Company cannot predict which, if any, reform proposals will
be adopted, when they may be adopted or what impact they may have on the Company
or its suppliers or customers. There can be no assurance the adoption of reform
proposals will not have a material adverse effect on the Company's business,
financial condition or operating results. In addition, the announcement of
reform proposals and the investment community's reaction to those proposals, as
well as announcements by competitors and third-party payors of their strategies
to respond to any such proposal, could produce volatility in the trading and
market price of the Common Stock.

The primary trend in the United States health care industry is toward cost
containment. In recent years, payors have been able to exercise greater
influence through managed treatment and hospitalization patterns, including a
shift from reimbursement on a cost basis to per capita limits for patient
treatment. Hospitals have been severely impacted by the resulting cost
restraints. The increasing use of managed care, centralized purchasing
decisions, consolidations among hospitals and hospital groups and integration of
health care providers are continuing to affect purchasing patterns in the health
care system. The purchasing functions of hospitals and other health care
providers are increasingly being consolidated into group purchasing
organizations, regional integrated delivery systems and similar organizations
and purchasing decisions are becoming more economically focused, with decision
makers taking into account whether a product reduces the cost of treatment
and/or attracts additional patients to a hospital. All these factors have
contributed to reductions in prices for specialty medical products, an overall
reduction in the volume of purchasing by health care providers and, in the near
term, greater emphasis on reducing costs associated with more advanced medical
products and procedures. There can be no assurance the Company will not be
adversely affected by cost containment measures.

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<PAGE>
DEPENDENCE ON KEY PERSONNEL

The Company's operations depend on the continuing efforts of its executive
officers and the senior management and sales representatives of the Founding
Companies, and the Company likely will depend on the senior management and sales
representatives of any significant businesses it acquires in the future. The
business or prospects of the Company could be affected adversely if any of these
persons does not continue his or her employment with the Company and the Company
is unable to attract and retain qualified replacements. The success of the
Company's growth strategy, as well as the Company's current operations, will
depend on the extent to which the Company is able to retain, recruit and train
qualified sales and service representatives who meet the Company's standards of
professionalism and service to its customers. See "Business -- Sales and
Marketing" and "-- Operations."

RELIANCE ON EFFICIENCY OF DISTRIBUTION AND THIRD PARTIES

The Company believes its financial performance depends in part on the
extent to which it is able to provide prompt, accurate and complete service to
its customers on a timely and competitive basis. Any failure of either its
computer operating system or its telephone system could adversely affect its
ability to receive and process customer orders and ship products on a timely
basis. Strikes or other service interruptions affecting Federal Express
Corporation, United Parcel Service of America, Inc. or other common carriers the
Company uses to ship its products also could impair the Company's ability to
deliver products on a timely and cost-effective basis. Any such disruption in
its day-to-day operations or material increases in its costs of procuring and
delivering products could materially adversely affect the Company's results of
operations from time to time. See "Business -- Operations."

CUSTOMER CREDIT RISKS

Under its sales and distribution agreements, the Company generally pays
manufacturers directly for the products it sells. The Company normally carries
its customers' accounts receivable and assumes the related risk of non-payment
associated with its sales. No assurance can be given that the controls the
Company has in place to avoid extensions of additional credit to delinquent
customers will be sufficient to prevent significant losses in the future as a
result of its customers' non-payment.

PROCEEDS OF OFFERING PAYABLE TO AFFILIATES AND ASSOCIATES

TRIAD will use its net proceeds from this Offering: (i) to pay the cash
portions of the purchase prices it will pay for the Founding Companies
(approximately $22.2 million); (ii) to repay outstanding indebtedness of the
Founding Companies (approximately $13.5 million); and (iii) for general
corporate purposes after this Offering closes (approximately $0.8 million). See
"Use of Proceeds." The cash payable to stockholders of the Founding Companies
will include approximately $14.6 million payable to individuals and an entity
who or which will become directors or executive officers of TRIAD or beneficial
owners of 5% or more of the outstanding Common Stock. This Offering will enable
TRIAD to repay Equus II $2.2 million Equus II has advanced to pay the expenses
of this Offering and will benefit the existing stockholders of TRIAD and the
Founding Companies by creating a public market for the Common Stock. For a more
detailed discussion of the use of proceeds of this Offering and the benefits to
be received by persons who are or will become directors or executive officers of
the Company or beneficial holders of 5% or more of the Common Stock on
consummation of this Offering and the Acquisitions, see "Use of Proceeds" and
"Certain Transactions -- Acquisitions Involving Certain Officers, Directors and
Stockholders," respectively.

GOVERNMENT REGULATION

The Company and its customers and suppliers are subject to extensive
federal and state regulation in the United States, and the Company cannot
predict the extent to which future legislative and regulatory developments
concerning their practices and products or the health care industry may affect
the Company. Federal and state laws and regulations govern or influence the
testing, manufacture, safety, labeling, storage, recordkeeping, marketing and
distributing of specialty medical products. In connection with its

11
<PAGE>

limited manufacturing operations, the Company is required to obtain the approval
of federal and state governmental agencies, including the Food and Drug
Administration, prior to manufacturing, marketing and distributing certain
products. Further, the Company's facilities and operations are subject to
reporting to, and review and inspection by, federal, state and local
governmental entities. See "Business -- Government Regulation."

POTENTIAL FOR PRODUCT LIABILITY CLAIMS AND INSURANCE

The manufacture, distribution, sale and repair of medical products involves
the risk of product liability claims and adverse publicity. The Company is
primarily a seller and distributor of products manufactured by third parties
from which it has certain rights to indemnification from product liability
claims, but does manufacture a limited number of product lines, provide repair
and maintenance services with respect to certain product lines and intends to
pursue ownership in additional product lines for which rights to indemnification
will be limited or not available. The Company will maintain product liability
insurance coverage in amounts it considers adequate. However, there can be no
assurance that claims outside of or exceeding its insurance coverage will not be
made, that the Company will be able to continue to obtain insurance coverage at
rates it considers reasonable or that the Company will be successful in
obtaining indemnification from its suppliers. See "Business -- Litigation and
Insurance."

SALES TAX CONSIDERATIONS

Various states are increasingly seeking to impose sales or use taxes on
interstate sales made into their state by out-of-state companies. Complex legal
issues arise in these areas, relating to, among other things, the required nexus
of a business with a particular state, which may permit the state to require a
business to collect such taxes. There can be no assurance that the Company's
financial condition or results of its operations will not be adversely effected
by actions taken by state tax authorities.

EXTENT OF PROTECTION OF PROPRIETARY RIGHTS

The Company relies in part on trademark, service mark, trade secret, unfair
competition and copyright laws to protect its intellectual property rights.
There can be no assurance that the actions that have been taken by the Company
will be adequate to protect its intellectual property rights from
misappropriation by others, that the Company's proprietary information will not
become known to competitors, that others will not independently develop
substantially equivalent or better intellectual properties that do not infringe
on the Company's intellectual property rights or that others will not assert
rights in, and ownership of, proprietary rights claimed by the Company.
Furthermore, the Company's rights to its "TRIAD" common law service mark may be
limited in market areas where a similar trademark or service mark may already be
in use.

CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS

On closing of the Acquisitions and this Offering, the former owners of the
Founding Companies, TRIAD's principal venture capital financing source (Equus
II) and the executive officers of TRIAD will beneficially own in the aggregate
approximately 56.0% of the outstanding Common Stock. If these persons were to
act in concert, they would be able to exercise control over the Company's
affairs, including the election of the entire Board of Directors and (subject to
Section 203 of the Delaware General Corporation Law (the "DGCL")) any matter
submitted to a vote of stockholders. See "Security Ownership of Certain
Beneficial Owners and Management."

POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK

On closing of the Acquisitions and this Offering, 9,094,973 shares of
Common Stock will be outstanding. The 4,000,000 shares sold in this Offering
(other than shares purchased by affiliates of the Company) will be freely
tradable. The remaining shares outstanding may be resold publicly only following
their effective registration under the Securities Act of 1933, as amended (the
"Securities Act"), or pursuant to an available exemption from the registration
requirements of that Act, such as provided by Securities Act Rule 144
promulgated by the Securities and Exchange Commission (the "SEC"). Under Rule
144, all those shares will be eligible for Rule 144 sales, subject to certain
volume limitations and other requirements, on

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<PAGE>
the day following the first anniversary of the date this Offering closes. The
holders of a substantial number of those remaining shares have certain
registration rights granted by TRIAD in connection with the Acquisitions,
subject to the lockup period described below.

On closing of this Offering, TRIAD will have options and warrants
outstanding to purchase up to a total of 1,097,987 shares of Common Stock, of
which options to purchase 41,639 shares and warrants to purchase 125,000 shares
will be exercisable immediately after the closing. TRIAD intends to register all
the shares subject to options granted under the Company's 1997 Incentive Plan
(the "Incentive Plan") under the Securities Act for public resale.

TRIAD and its directors, executive officers and current stockholders
(including Equus II) and all persons who acquire shares of Common Stock in
connection with the Acquisitions have agreed not to offer, sell or otherwise
dispose of any shares for a period of two years following the date of this
Prospectus without the prior written consent of NationsBanc Montgomery
Securities, Inc., except that TRIAD may issue, subject to certain conditions,
Common Stock in connection with acquisitions, pursuant to awards under the
Incentive Plan (see "Management -- Incentive Plan") and pursuant to the
exercise of warrants outstanding as of the closing of this Offering.

TRIAD may register additional shares of Common Stock under the Securities
Act in the future for its use in connection with future acquisitions. Pursuant
to Securities Act Rule 145, the volume limitations and certain other
requirements of Rule 144 would apply to resales of these shares by affiliates of
the businesses the Company acquires for a period of one year from the date of
their acquisition, but otherwise these shares would be freely tradable by
persons not affiliated with TRIAD unless TRIAD contractually restricts their
resale.

Availability for sale, or sale, of the shares of Common Stock eligible for
future sale could adversely affect the market price of the Common Stock
prevailing from time to time. See "Shares Eligible for Future Sale."

NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this Offering, no public market for the Common Stock has existed,
and the initial public offering price, which TRIAD and the representatives of
the Underwriters will negotiate, may not be indicative of the price at which the
Common Stock will trade after this Offering. See "Underwriting" for the
factors they will consider in determining the initial public offering price. The
Common Stock has been approved for quotation on the Nasdaq National Market, but
no assurance can be given an active trading market for the Common Stock will
develop or, if developed, will continue after this Offering. The market price of
the Common Stock after this Offering may be subject to significant fluctuations
from time to time in response to numerous factors, including variations in the
reported financial results of the Company and changing conditions in the economy
in general or in the Company's industry in particular. In addition, the stock
markets experience significant price and volume volatility from time to time
which may affect the market price of the Common Stock for reasons unrelated to
the Company's performance.

IMMEDIATE, SUBSTANTIAL DILUTION

Purchasers of Common Stock in this Offering (i) will experience immediate,
substantial dilution in the net tangible book value of their stock of $8.27 per
share and (ii) may experience further dilution in that value from issuances of
shares of Common Stock in the future. See "Dilution."

PREFERRED STOCK; POTENTIAL ANTI-TAKEOVER EFFECTS

TRIAD's Certificate of Incorporation, as amended (the "Charter"),
authorizes the issuance, without stockholder approval, of one or more series of
preferred stock having such preferences, powers and relative, participating,
optional and other rights (including preferences over the Common Stock
respecting dividends and distributions and voting rights) as the board of
directors of TRIAD (the "Board of Directors") may determine. See "Description
of Capital Stock -- Preferred Stock."

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<PAGE>
Certain provisions of the Charter, TRIAD's Bylaws and the DGCL may delay,
discourage, inhibit, prevent or render more difficult an attempt to obtain
control of the Company, whether by means of a tender offer, business
combination, proxy contest or otherwise. These provisions include the charter
authorization of "blank check" preferred stock, classification of the board of
directors, a limitation on the removal of directors only for cause, and then
only on approval of holders of two-thirds of the outstanding voting stock, a
restriction on the ability of stockholders to take actions by written consent
and a DGCL restriction on business combinations with certain interested parties.
See "Description of Capital Stock."

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THE COMPANY

TRIAD: TRIAD was founded in April 1997 to create a leading national
contract sales and distribution company providing specialty medical products to
the hospital and alternate-site health care markets (including sub-acute care
facilities, home care companies and specialty physician groups). Concurrently
with and as a condition to the closing of this Offering, TRIAD will acquire the
11 Founding Companies. For a description of the transactions pursuant to which
these businesses will be acquired and the consideration to be paid by TRIAD for
each of the Founding Companies, see "-- Summary of Terms of the Acquisitions"
and "Certain Transactions -- Organization of TRIAD," respectively.

FOUNDING COMPANIES: Each of the Founding Companies is engaged in the
contract sales and distribution of specialty medical products. The Founding
Companies are more fully described below.

THI: Triad Holdings, Inc. (together with its subsidiaries, "THI"), the
successor to a business founded in 1981, maintains its headquarters in Laguna
Hills, California. It represents over 100 manufacturers with product coverage
principally in the infusion therapy market. THI sells its products to
alternate-site health care providers throughout the United States from its nine
distribution centers located in Arizona, California, Florida, Georgia, Illinois,
Minnesota, New York and Texas. THI, through its predecessor, has sold products
to the alternate-site market since 1981. During fiscal 1996, THI had
consolidated revenues of approximately $36.3 million. On October 4, 1996, THI
acquired the assets and assumed certain liabilities of PCI Medical, Inc.
("PCI"). Combined pro forma revenues for THI and PCI for fiscal 1996 were
approximately $42.3 million.

HTD: Healthcare Technology Delivery, Inc. (together with its subsidiaries,
"HTD") is the successor to a business founded in 1977 and is headquartered in
Bessemer, Alabama. It represents over 10 manufacturers with product coverage in
the surgical, anesthesiology, critical care and cardiovascular/vascular markets.
HTD sells its products primarily to hospitals in the 10-state territory of
Alabama, Florida, Georgia, Louisiana, Mississippi, Oklahoma, North Carolina,
South Carolina, Tennessee and Texas. HTD, through its predecessor, has sold
products to the hospital market since 1977. Through its recent acquisition of
Medical Companies Alliance, Inc. ("Medical Alliance"), HTD also sells a
proprietary product line used in connection with the anastomosis of blood
vessels. For information concerning the formation of HTD, see "Certain
Transactions -- HTD." During fiscal 1996, HTD had consolidated revenues of
approximately $16.5 million.

SUN: Sun Medical, Inc. ("Sun") was founded in 1978 and maintains its
headquarters in Arlington, Texas. It represents over 17 manufacturers with
product coverage in the surgical, pain management, maternal child care, plastic
surgery, dermatology and hospital software information systems markets. Sun
sells its products primarily to hospitals in the five-state territory of
Arizona, Arkansas, New Mexico, Oklahoma and Texas. Sun also has a proprietary
product line of smoke evacuation systems used in minimally invasive surgical
procedures. During fiscal 1996, Sun had revenues of approximately $13.0 million.

CMS: Custom Medical Specialties, Inc. ("CMS") was founded in 1989 and
maintains its head-quarters in Indianapolis, Indiana. It represents over 10
manufacturers with product coverage in the surgical, anesthesiology, critical
care, laboratory, long-term care and infection control markets. CMS sells its
products principally to hospitals in the two-state territory of Indiana and
Kentucky. During fiscal 1996, CMS had revenues of approximately $9.6 million.

KENTEC: Kentec Medical, Inc. ("Kentec") was founded in 1970 and
maintains its headquarters in Irvine, California. It represents over 16
manufacturers with product coverage in the surgical, critical care, vascular and
respiratory markets. Kentec sells its products principally to hospitals in the
four-state territory of Arizona, California, Nevada and New Mexico. It also
distributes private label disposable perinatal products manufactured under the
Kentec name. During the fiscal year ended June 30, 1997, Kentec had revenues of
approximately $13.6 million.

PRODUCTS FOR SURGERY: Products for Surgery, Inc. (together with its
subsidiaries, "Products for Surgery") was founded in 1979 and maintains its
headquarters in Forest Hills, Texas. It represents over 10

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<PAGE>

manufacturers with product coverage in the general surgical, peripheral
endoscopy and cardiovascular markets. Products for Surgery sells its products
primarily to hospitals in the five-state territory of Arizona, Nevada, New
Mexico, Oklahoma and Texas. During the fiscal year ended June 30, 1997, Products
for Surgery had consolidated revenues of approximately $7.8 million.

MEGATECH: MegaTech Medical, Inc. ("MegaTech") was founded in 1976 and
maintains its headquarters in Baltimore, Maryland. It represents over 20
manufacturers with product coverage in the surgical and critical care markets.
MegaTech sells its products principally to hospitals in the 12-state territory
of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New
Jersey, New York (other than New York City), Pennsylvania, Rhode Island, Vermont
and Virginia and in Washington D.C. During fiscal 1996, MegaTech had revenues of
approximately $6.8 million.

OMNI MEDICAL: Omni Medical, Inc. ("Omni Medical") was founded in 1986
and maintains its headquarters in Redmond, Washington. It represents over eight
manufacturers with product coverage in the surgical, anesthesiology and critical
care markets. Omni Medical sells its products primarily to hospitals in the
eight-state territory of Alaska, California, Hawaii, Idaho, Montana, Nevada,
Oregon and Washington. During fiscal 1996, Omni Medical had revenues of
approximately $6.1 million.

NEW ENGLAND SPECIALTIES: New England Medical Specialties, Inc. ("New
England Specialties") was founded in 1983 and maintains its headquarters in
Guildford, Connecticut. It represents over nine manufacturers with product
coverage in the surgical, critical care and home care markets. New England
Specialties sells its products primarily to hospitals in the six-state territory
of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.
During fiscal 1996, it had revenues of approximately $4.9 million.

PROFESSIONAL EQUIPMENT: Professional Equipment Co., Inc. ("Professional
Equipment") was founded in 1979 and shares its headquarters with New England
Specialties in Guildford, Connecticut. It represents over 10 manufacturers with
product coverage in the medical imaging equipment and radiological supplies and
accessories markets. Professional Equipment sells its products principally to
hospitals in the three-state territory of Connecticut, Massachusetts and New
York. During fiscal 1996, Professional Equipment had revenues of approximately
$3.1 million.

WILSON: Wilson Medical Specialties, Inc. ("Wilson") was founded in 1986
and maintains its headquarters in Bellevue, Washington. It represents over 10
manufacturers with product coverage in the surgical and critical care markets.
Wilson sells its products principally to hospitals in the four-state territory
of Idaho, Montana, Oregon and Washington. During the fiscal year ended May 31,
1997, Wilson had revenues of approximately $3.1 million.

SUMMARY OF TERMS OF THE ACQUISITIONS: Subject to certain adjustments
described below, the aggregate consideration TRIAD will pay to acquire the
Founding Companies consists of (i) approximately $22.2 million in cash, (ii)
3,997,215 shares of Common Stock and (iii) options to purchase 141,787 shares of
Common Stock (to be issued in connection with the THI acquisition), which
options will be in the money at the closing of this Offering in the aggregate
amount of approximately $0.7 million.

The Company will also assume all the indebtedness of the Founding Companies
(estimated to be approximately $13.5 million as of closing of this Offering) and
then repay substantially all such indebtedness. TRIAD will also repay to Equus
II funds advanced to TRIAD to pay expenses of this Offering (estimated to be
approximately $2.2 million as of the closing of this Offering). Prior to the
closing of the Acquisitions, CMS and MegaTech, each of which is an S
corporation, are expected to distribute cash to their respective stockholders in
amounts equal to the balance of their respective accumulated adjustment accounts
("AAA accounts") prior to the closing of the Acquisitions (approximately $3.1
million as of September 30, 1997). An AAA account generally represents
undistributed earnings of an S corporation on which taxes have been or will be
paid by its stockholders, and the Company expects that CMS and MegaTech will
borrow approximately $1.8 million to fund their AAA account distributions. The
estimated $13.5 million of indebtedness of the Founding Companies which will be
repaid on the closing of this

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<PAGE>

Offering will include these borrowings. Prior to the closing of the
Acquisitions, certain Founding Companies will make other distributions to their
stockholders of certain assets and related liabilities with an aggregate net
book value of approximately $0.3 million.

The options to be issued in the THI acquisition will replace options to
purchase shares of THI common stock currently held by THI employees. The
aggregate purchase price for THI which would have otherwise been payable has
been reduced by $1.2 million as a result of the grant of these replacement
options.

Sun has identified potential violations of the Internal Revenue Code of
1986 and the Employee Retirement Income Security Act of 1974 ("ERISA") with
respect to Sun's Employee Stock Ownership Plan (the "Sun ESOP"), Sun's sole
stockholder. Sun has voluntarily notified the Internal Revenue Service ("IRS")
regarding these possible violations and will seek appropriate remedial action
under the oversight of the IRS and, if appropriate, other governmental entities.
TRIAD will deposit a portion of the purchase price payable for Sun ($1.5 million
in cash and 35,715 shares of Common Stock) in an escrow account pending
resolution of the Sun ESOP compliance issues, and the escrowed cash and shares
will be used to the extent necessary to pay any taxes, or other amounts and
professional fees resulting from or attributable to that resolution. The
remaining balance in the escrow account, if any, will be delivered to the Sun
ESOP.

The consideration being paid by TRIAD for each Founding Company other than
HTD was determined by arm's-length negotiations between TRIAD and a
representative of that Founding Company. The consideration being paid by TRIAD
for HTD was determined using generally the same valuation method TRIAD used to
negotiate the consideration being paid to the stockholders of the other Founding
Companies. See "Certain Transactions."

The closing of each Acquisition is subject to customary conditions. These
conditions include, among others: the accuracy on the closing date of the
Acquisitions of the representations and warranties made by the Founding
Companies, their principal stockholders and TRIAD; the performance of each of
their respective covenants included in the agreements relating to the
Acquisitions; and the nonexistence of a material adverse change in the results
of operations, financial condition or business of each Founding Company.

Any Founding Company's acquisition agreement may be terminated, under
certain circumstances, prior to the closing of this Offering: (i) by the mutual
consent of the boards of directors of TRIAD and the Founding Company; (ii) by
the Founding Company, its stockholders or TRIAD if this Offering and the
acquisition of that Founding Company are not closed by January 31, 1998; (iii)
by TRIAD if the schedules to the acquisition agreement are amended to reflect a
material adverse change in that Founding Company; or (iv) by the Founding
Company, its stockholders or TRIAD if a material breach or default under the
agreement by one party occurs and is not waived by the other party.

No assurance can be given the conditions to the closing of all the
Acquisitions will be satisfied or waived or that each of the Acquisitions will
close. For information regarding the employment agreements to be entered into by
certain key officers of the Founding Companies, see "Management -- Employment
Agreements."

TRIAD is a Delaware corporation. Its executive offices are located at 23161
Mill Creek Drive, Suite 300, Laguna Hills, California 92653, and its telephone
number at that address is (714) 770-0292.

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USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby, after deducting the underwriting discount and estimated offering
expenses payable by the Company (including the repayment of $2.2 million of
advances by Equus II to fund a portion of the offering expenses), are estimated
to be approximately $36.5 million (approximately $42.7 million if the
Underwriters exercise their over-allotment option in full), assuming an initial
public offering price of $11.00 per share (the midpoint of the estimated initial
public offering price range). Of those net proceeds, approximately $22.2 million
will be used to pay the cash portion of the purchase prices for the Acquisitions
and approximately $13.5 million will be used concurrently for the repayment of
certain outstanding indebtedness of the Founding Companies (estimated as of the
closing of this Offering and excluding the repayment of the $2.2 million of
advances by Equus II referred to above). The approximately $0.8 million of
remaining net proceeds, together with available cash balances, will be available
to meet the Company's cash requirements following closing of the Acquisitions
and this Offering. See "The Company -- Summary of Terms of the Acquisitions"
and "Certain Transactions -- Organization of TRIAD."

The Company has recently received a commitment from First Chicago to
provide the Company with a $40.0 million credit facility (the "New Credit
Facility") which may be used for acquisitions, working capital and other general
corporate purposes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Pro Forma Combined -- Liquidity and
Capital Resources."

The indebtedness to be repaid from the proceeds of this Offering (some of
which has been guaranteed by stockholders of the Founding Companies) bears
interest at rates ranging from 5.5% to 12.0% per annum. Such indebtedness would
otherwise mature at various dates through December 2001. For information as to
the amount of such indebtedness which is attributable to each of the Founding
Companies, see "Certain Transactions -- Organization of TRIAD."

DIVIDEND POLICY

It is the Company's current intention to retain earnings to finance the
expansion of its business. Any future dividends will be at the discretion of the
board of directors after taking into account various factors, including, among
others, the Company's financial condition, results of operations, cash flows
from operations, current and anticipated cash needs and expansion plans, the
income tax laws then in effect, the requirements of Delaware law, the
restrictions imposed by the New Credit Facility and any restrictions that may be
imposed by the Company's future credit facilities. The Company expects that the
New Credit Facility will require compliance with various loan covenants,
including restrictions on the payment of dividends. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Pro
Forma Combined -- Liquidity and Capital Resources."

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CAPITALIZATION

The following table sets forth the short-term debt and current maturities
of long-term obligations and capitalization as of September 30, 1997: (i) of the
Company on a pro forma combined basis to give effect to the Acquisitions, and
the net incurrence of indebtedness by the Company since September 30, 1997; and
(ii) of the Company, on a pro forma combined basis as adjusted to give effect to
the Offering and the application of the estimated net proceeds therefrom. See
"Use of Proceeds" and Unaudited Pro Forma Combined Financial Statements and
the related notes thereto included elsewhere in this Prospectus.

SEPTEMBER 30, 1997
--------------------------
PRO FORMA
COMBINED AS ADJUSTED
----------- -----------
(IN THOUSANDS)
Short-term debt and current maturities
of long-term obligations(1)........... $ 9,377 $ 560
=========== ===========
Long-term obligations, less current
maturities............................ $ 6,162 $ 481
----------- -----------
Stockholders' equity:
Common Stock: $.001 par value
20,000,000 shares authorized;
5,094,973 shares issued and
outstanding pro forma; and
9,094,973 shares issued and
outstanding, as adjusted(1)...... 5 9
Warrant to purchase common stock... 500 500
Additional paid-in capital......... 16,466 52,569
Retained earnings.................. 859 859
----------- -----------
Total stockholders' equity.... 17,830 53,937
----------- -----------
Total capitalization....... $23,992 $54,418
=========== ===========

- ------------

(1) The pro forma combined balance includes $22.2 million of consideration due
to former owners of the Founding Companies.

(2) Excludes: (i) an aggregate of 972,987 shares subject to options granted (or
to be granted prior to the closing of this Offering) pursuant to the
Incentive Plan, 831,200 of which have an exercise price equal to the initial
public offering price per share and 141,787 of which will have a weighted
average exercise price per share of $5.85; (ii) an aggregate of 100,000
shares issuable pursuant to the Equus Warrant; and (iii) an aggregate of
25,000 shares issuable pursuant to the PENMAN Warrant. See
"Management -- Incentive Plan" and "Certain Transactions -- Organization
of TRIAD."

19
<PAGE>
DILUTION

The deficit in pro forma combined net tangible book value of the Company as
of September 30, 1997 was approximately $11.3 million, or approximately $2.21
per share, after giving effect to the Acquisitions and the net incurrence of
indebtedness by the Company since September 30, 1997. The deficit in pro forma
net tangible book value per share represents the amount by which the Company's
pro forma total liabilities exceed the Company's pro forma net tangible assets
as of September 30, 1997, divided by the number of shares to be outstanding
after giving effect to the Acquisitions. After giving effect to the sale of the
4,000,000 shares offered hereby and deducting the estimated underwriting
discount and estimated offering expenses payable by TRIAD, the Company's pro
forma net tangible book value as of September 30, 1997 would have been
approximately $24.8 million, or approximately $2.73 per share, based on an
assumed initial public offering price of $11.00 per share (the midpoint of the
estimated initial public offering price range). This represents an immediate
increase in pro forma net tangible book value of approximately $4.94 per share
to existing stockholders and an immediate dilution of approximately $8.27 per
share to new investors purchasing shares in this Offering. The following table
illustrates this per share pro forma dilution:

Initial public offering price........... $ 11.00
Pro forma net tangible book value
before this Offering............. $ (2.21)
Increase in pro forma tangible
value attributable to new
investors........................ 4.94
---------
Pro forma net tangible book value after
this Offering......................... 2.73
---------
Dilution to new investors............... $ 8.27
=========

The following table sets forth, on a pro forma basis to give effect to the
Acquisitions and the closing of this Offering and the application of the
estimated net proceeds therefrom as of September 30, 1997, the number of shares
of Common Stock purchased from TRIAD, the total consideration paid to TRIAD and
the average price per share paid to TRIAD by existing stockholders (including
persons acquiring Common Stock in the Acquisitions) and the new investors
purchasing shares from TRIAD in this Offering (before deducting underwriting
discounts and commissions and estimated offering expenses):
<TABLE>
<CAPTION>

SHARES PURCHASED TOTAL CONSIDERATION(1) AVERAGE
---------------------- -------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- --------------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 5,094,973 56.0% $ (11,279,185) (34.5)% $ (2.21)
New investors................. 4,000,000 44.0 44,000,000 134.5 11.00
----------- ------- --------------- -------
Total.................... 9,094,973 100.0% $ 32,720,815 100.0%
=========== ======= =============== =======
</TABLE>

- ------------

(1) Total consideration paid by existing stockholders represents the pro forma
stockholders' equity of the Founding Companies before this Offering less pro
forma intangible assets.

20
<PAGE>
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

TRIAD will acquire the Founding Companies concurrently with and as a
condition to the consummation of this Offering. For financial statement
presentation purposes, THI has been identified as the accounting acquirer. The
following selected historical financial data of THI for the years ended December
31, 1994, 1995 and 1996 and as of December 31, 1995 and 1996, have been derived
from the audited consolidated financial statements of THI included elsewhere in
this Prospectus. The following selected historical financial data for THI as of
and for the years ended December 31, 1992 and 1993, for the nine months ended
September 30, 1996 and 1997 and as of December 31, 1994 have been derived from
unaudited consolidated financial statements of THI, which have been prepared on
the same basis as the audited financial statements and, in the opinion of THI,
reflect all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of such data. The following summary unaudited pro forma
combined financial data present certain data for the Company, as adjusted for
(i) the effects of the Acquisitions on an historical basis, (ii) the effects of
certain pro forma adjustments to the historical financial statements and (iii)
the consummation of this Offering and application of the estimated net proceeds
therefrom. See the Unaudited Pro Forma Combined Financial Statements and the
notes thereto included in this Prospectus.
<TABLE>
<CAPTION>

THI
---------------------------------------------------------------------------
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................ $ 13,715 $ 15,556 $ 22,667 $ 29,674 $ 36,258 $ 26,168 $ 36,387
--------- --------- --------- --------- --------- --------- ---------
Gross profit........................ 3,120 3,646 5,916 7,188 8,766 5,993 9,245
Selling expenses(1)................. 1,520 1,533 2,391 2,940 3,396 2,398 3,477
General and administrative
expenses(1)....................... 1,279 1,983 1,813 2,146 3,017 1,898 3,543
Depreciation and amortization....... 51 67 531 561 763 502 1,054
--------- --------- --------- --------- --------- --------- ---------
Income from operations.............. 270 63 1,181 1,541 1,590 1,195 1,171
Interest income (expense), net...... (357) (509) (468) (509) (305) (200) (398)
Other income (expense), net......... -- -- (22) 15 (114) (83) (51)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before provision for
income taxes...................... (87) (446) 691 1,047 1,171 912 722
Provision for income taxes.......... -- -- 103 420 465 358 276
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)................... $ (87) $ (446) $ 588 $ 627 $ 706 $ 554 $ 446
========= ========= ========= ========= ========= ========= =========
</TABLE>

THE COMPANY
----------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30,
YEAR ENDED --------------------
DECEMBER 31, 1996 1996 1997
----------------- --------- ---------
<S> <C> <C> <C>
PRO FORMA COMBINED STATEMENT OF
OPERATIONS DATA(2):
Revenues........................................................................ $ 128,495 $ 96,828 $ 101,113
----------------- --------- ---------
Gross profits................................................................... 40,282 29,983 30,340
Selling expenses(1)............................................................. 15,986 11,210 11,903
General and administrative expenses(1)(3)....................................... 13,718 10,176 11,209
Depreciation and amortization(4)................................................ 2,012 1,469 1,981
----------------- --------- ---------
Income from operations.......................................................... 8,566 7,128 5,247
Interest income (expense), net(5)............................................... 106 54 117
Other income (expense), net..................................................... 157 (178) 37
----------------- --------- ---------
Income before provision for income taxes........................................ 8,829 7,004 5,401
Provision for income taxes...................................................... 3,843 3,080 2,355
----------------- --------- ---------
Net income...................................................................... $ 4,986 $ 3,924 $ 3,046
================= ========= =========
Net income per share............................................................ $ 0.54 $ 0.43 $ 0.33
================= ========= =========
Shares used in computing pro forma net income per share(5)...................... 9,161 9,161 9,161
================= ========= =========
</TABLE>

21
<PAGE>

THI SEPTEMBER 30, 1997
----------------------------------------------------- (UNAUDITED)
YEAR ENDED DECEMBER 31, ----------------------
----------------------------------------------------- PRO FORMA
1992 1993 1994 1995 1996 ACTUAL COMBINED(2)
--------- --------- --------- --------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital..................... $ (850) $ (1,683) $ (1,557) $ (527) $ 5,904 $ 4,272 $15,657
Total assets........................ 6,282 7,095 9,432 10,753 18,062 23,786 82,439
Total debt, including current
portion........................... 4,998 2,019 915 3,185 5,442 6,252 15,539
Stockholders' equity (deficit)...... (918) (1,316) (687) (69) 6,547 7,472 17,830
</TABLE>
AS
ADJUSTED
-----------

BALANCE SHEET DATA:
Working capital..................... $18,357
Total assets........................ 79,692
Total debt, including current
portion........................... 1,040
Stockholders' equity (deficit)...... 53,937

- ------------

(2) The pro forma combined statement of operations data assume that the
following transactions and events -- (i) the organization of TRIAD and its
issuance of shares of Common Stock and preferred stock; (ii) a split of the
outstanding Common Stock; (iii) the conversion of outstanding TRIAD
preferred stock into Common Stock; (iv) the Acquisitions; and (v) the
closing of this Offering and the application of the estimated net proceeds
therefrom -- were closed on January 1, 1996, and are not necessarily
indicative of the results the Company would have attained had these events
and transactions actually occurred then or of the Company's future results.
The pro forma combined balance sheet data assume the Acquisitions and the
net incurrence of indebtedness by the Company since September 30, 1997
occurred on that date. The pro forma combined financial data (i) are based
on preliminary estimates, available information and certain assumptions that
management deems appropriate and (ii) should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this
Prospectus.

(3) The pro forma combined statement of operations data include the effect of:
(i) the following reductions in compensation and benefits prospectively
agreed to as part of the purchase agreements by the owners and certain key
employees of the Founding Companies: year ended December 31, 1996, $3.5
million; and the nine months ended September 30, 1996 and 1997, $2.5 million
and $1.5 million, respectively; (ii) the elimination of the $3.7 million
non-cash, non-recurring compensation charge by TRIAD for the nine months
ended September 30, 1997; and (iii) distributions by certain Founding
Companies of cash and other assets prior to the closing of the Acquisitions.

(5) Computed on a basis described in Note 5 of Notes to the Unaudited Pro Forma
Combined Financial Statements.

(6) Reflects the closing of this Offering and TRIAD's application of its net
proceeds therefrom. See "Use of Proceeds."

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the financial
statements and related notes thereto and "Selected Historical and Pro Forma
Combined Financial Data" appearing elsewhere in this Prospectus.

INTRODUCTION

The Company's revenues are primarily derived from sales of specialty
medical products under sales and distribution agreements and agency arrangements
with various manufacturers. Cost of revenues consists primarily of product
costs, net of rebates, and freight charges. Selling expenses consist primarily
of sales commissions, salaries, travel and entertainment expenses, trade show
expenses and automobile allowances. General and administrative expenses consist
primarily of executive compensation and related benefits, administrative
salaries and benefits, office supplies, rent, utilities, insurance and
professional fees.

The Founding Companies have been managed throughout the periods discussed
below as independent private companies, and their results of operations reflect
different tax structures (S corporations and C corporations), which have
influenced, among other things, their historical levels of owners' compensation.
The owners of the Founding Companies and certain key employees have
prospectively agreed to certain reductions in their compensation and benefits in
connection with the Acquisitions.

TRIAD, which has conducted no operations to date other than in connection
with this Offering and the Acquisitions, intends to integrate these businesses
and their operations and administrative functions. This integration process may
present opportunities to reduce costs through the elimination of duplicative
functions and through economies of scale, but will necessitate additional costs
and expenditures for corporate management and administration. The Company will
also incur corporate expenses related to being a public company, implementation
of an acquisition program and systems integration. These various costs and
possible cost-savings may make comparison of historical operating results not
comparable to, nor indicative of, future performance. No such cost savings were
reflected in the pro forma combined statement of operations data, except for the
compensation reductions provided for in the agreements entered into in
connection with certain of the Acquisitions and other known cost eliminations.

During April and May of 1997, TRIAD sold 548,545 shares of Common Stock to
its management. As a result, TRIAD recorded a non-recurring, non-cash
compensation charge of $3.9 million in the second quarter of 1997, representing
the difference between the amount paid for the shares and the value of the
shares on the date of sale as if the companies were combined, estimated based on
the midpoint of the estimated initial public offering price range for the shares
of Common Stock offered hereby. This compensation charge is not included in the
pro forma financial information.

In July 1996, the SEC issued Staff Accounting Bulletin No. 97 ("SAB 97")
relating to business combinations immediately prior to an initial public
offering. SAB 97 requires that these combinations be accounted for using the
purchase method of acquisition accounting. Under the purchase method, the
Founding Company whose owners receive the largest portion of voting rights in
the combined enterprise is presumed to be the accounting acquirer. Accordingly,
THI has been designated as the accounting acquirer. For the remaining Founding
Companies, $23.2 million, representing the excess of the fair value of the
merger consideration to be received over the fair value of the net assets to be
acquired, will be recorded as goodwill on the Company's balance sheet. This
goodwill will be amortized as a non-cash charge to the Company's statements of
operations over a 40-year period. The pro forma impact of this amortization
expense, which is non-deductible for federal income tax purposes, is $0.6
million per year on an after-tax basis.

23
<PAGE>

PRO FORMA COMBINED -- RESULTS OF OPERATIONS

TRIAD will acquire the Founding Companies concurrently with and as a
condition to the consummation of this Offering. For financial statement
presentation purposes, THI, one of the Founding Companies, has been identified
as the accounting acquirer. The following summary of unaudited pro forma
financial data presents certain data for the Company, as adjusted for (i) the
effects of the Acquisitions on an historical basis, (ii) the effects of certain
pro forma adjustments to the historical financial statements and (iii) the
consummation of this Offering and the application of the estimated net proceeds
therefrom. See "Selected Historical and Pro Forma Combined Financial Data" and
the Unaudited Pro Forma Combined Financial Statements and the notes thereto
included in this Prospectus (dollars in thousands).
<TABLE>
<CAPTION>

YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- ------------------------------------------
1996 1996 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................ $ 128,495 100.0% $ 96,828 100.0% $ 101,113 100.0%
Cost of revenues........................ 88,213 68.7 66,845 69.0 70,773 70.0
--------- --------- --------- --------- --------- ---------
Gross profits........................... 40,282 31.3 29,983 31.0 30,340 30.0
Selling expenses........................ 15,986 12.4 11,210 11.6 11,903 11.8
General and administrative expenses..... 13,718 10.7 10,176 10.5 11,209 11.1
Depreciation and amortization........... 2,012 1.5 1,469 1.5 1,981 1.9
--------- --------- --------- --------- --------- ---------
Income from operations.................. $ 8,566 6.7% $ 7,128 7.4% $ 5,247 5.2%
========= ========= ========= ========= ========= =========
</TABLE>

UNAUDITED INTERIM RESULTS

REVENUES -- Pro forma combined revenues increased $4.3 million from $96.8
million for the nine months ended September 30, 1996 to $101.1 million for the
nine months ended September 30, 1997. This increase was primarily due to (i) a
$4.2 million increase in pro forma combined revenues of THI and PCI primarily
due to an increased sales staff and additional distribution facilities and (ii)
a $2.3 million increase in HTD's revenues due to its acquisition of Medical
Alliance in March 1997 and its representation of a new product line. These
increases were partially offset by (i) a $1.3 million decrease in Kentec's
revenues due to the loss of certain distribution rights for Pall Biomedical,
Inc. blood filters, which Kentec previously sold to blood centers and (ii) a
$1.1 million decrease in Products for Surgery's revenues due to the loss of the
Meadox Medicals, Inc. ("Meadox") product line following a change in ownership
of Meadox.

COST OF REVENUES -- Pro forma combined cost of revenues increased $4.0
million from $66.8 million for the nine months ended September 30, 1996 to $70.8
million for the nine months ended September 30, 1997. This increase was
primarily due to (i) a $4.0 million increase in pro forma combined THI and PCI
cost of revenues consistent with the increase in revenues and (ii) a $1.6
million increase in HTD cost of revenues consistent with the increase in its
revenues. These increases were partially offset by a $1.0 million decrease at
Products for Surgery and a $1.0 million decrease at Kentec due primarily to the
decreases in their respective revenues. As a percentage of revenues, cost of
revenues were 69.0% and 70.0%, respectively.

SELLING EXPENSES -- Pro forma combined selling expenses increased $.7
million from $11.2 million, or 6.2%, for the nine months ended September 30,
1996 to $11.9 million for the nine months ended September 30, 1997. The increase
was primarily due to the addition of national sales management positions at THI.
As a percentage of revenues, selling expenses were 11.6% and 11.8%,
respectively.

GENERAL AND ADMINISTRATIVE EXPENSES -- Pro forma combined general and
administrative expenses increased $1.0 million, or 10.1%, from $10.2 million for
the nine months ended September 30, 1996 to $11.2 million for the nine months
ended September 30, 1997. As a percentage of revenues, general and
administrative expenses were 10.5% and 11.1%, respectively. The increase
primarily reflects (i) $.4 million administrative expenses in 1997 at TRIAD in
connection with the Acquisitions and this Offering, (ii) $.2 million increase at
Products for Surgery primarily due to administrative expenses relating to the
acquisition of Sierra Surgical Products, Inc. by Products for Surgery in October
1996, and (iii) $.3 million increase at Kentec.

24
<PAGE>

PRO FORMA COMBINED -- LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1997, on a pro forma combined basis, after giving effect
to (i) distributions by CMS and MegaTech from their AAA accounts (estimated at
approximately $3.1 million), (ii) the net incurrence of indebtedness by the
Company since September 30, 1997 (including approximately $1.8 million to fund
the AAA account distributions), (iii) the Acquisitions, (iv) the closing of this
Offering and TRIAD's application of its net proceeds therefrom to repay Founding
Company indebtedness (approximately $13.5 million) and (v) repayment by TRIAD of
advances (approximately $2.2 million) from Equus II which have been used to pay
a part of the expenses of this Offering, the Company would have had an aggregate
of $3.1 million of cash and short-term investments, $18.4 million of working
capital and $1.0 million of total debt (representing capital lease obligations).

The Company has recently received a commitment letter from First Chicago to
provide the New Credit Facility which would be available upon the closing of
this Offering. According to the proposed terms, the Company would have a line of
credit of up to $40.0 million, which may be used for general corporate purposes,
including acquisitions, capital expenditures and working capital. The New Credit
Facility will be secured by all accounts receivable, inventory, equipment, and
stock of subsidiaries of the Company. The Company expects the New Credit
Facility will require compliance with various affirmative and negative
covenants, including, but not limited to, (i) maintenance of certain financial
ratios, (ii) a restriction on additional indebtedness and (iii) restrictions on
liens, guarantees, advances, dividends and business activities unrelated to its
existing operations. Failure to comply with such covenants and restrictions
would constitute an event of default under the New Credit Facility.

The Company intends to pursue acquisition opportunities. The Company
expects to fund future acquisitions through the issuance of additional Common
Stock, borrowings, including amounts available under the New Credit Facility,
and cash flow from operations. To the extent the Company funds a significant
portion of the consideration for future acquisitions with cash, it may have to
increase the amount available under the New Credit Facility or obtain other
sources of financing. There can be no assurance such financing will be available
at terms acceptable to the Company. The Company expects that its cash flow from
operations will provide cash sufficient to meet the Company's normal working
capital needs, debt service requirements and planned capital expenditures for
property and equipment (exclusive of acquisitions of other businesses) for at
least the next several years. On a pro forma combined basis, the Company made
capital expenditures for property and equipment of $1.0 million and $1.7 million
in fiscal 1996 and the nine months ended September 30, 1997, respectively. The
Company has no current material commitments for capital expenditures.

Due to the relatively low levels of inflation experienced in fiscal 1994,
1995 and 1996, inflation did not have a significant effect on the pro forma
combined results of operations of the Company in those fiscal years.

SEASONALITY

The Founding Companies historically have experienced quarterly fluctuations
in revenues, operating income and cash flows. In recent years, the Company has
experienced greater revenue, operating income and cash flows in the fourth
calendar quarter as compared with the first three calendar quarters, primarily
as a result of (i) increased purchases by the Company's institutional customers
primarily due to available budgeted capital, which often must be used prior to
year end, and (ii) increased elective procedures requested by patients during
that quarter after annual insurance deductible levels have been reached and
favorable tax treatment is available.

25
<PAGE>
THI -- RESULTS OF OPERATIONS

The following table sets forth certain historical financial data of THI and
that data as a percentage of revenues for the periods indicated (dollars in
thousands):

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------------- --------------------
1994 1995 1996 1996
-------------------- -------------------- -------------------- --------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................................ $ 22,667 100.0% $ 29,674 100.0% $ 36,258 100.0% $ 26,168 100.0%
Cost of revenues........................ 16,751 73.9 22,486 75.8 27,492 75.8 20,175 77.1
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit............................ 5,916 26.1 7,188 24.2 8,766 24.2 5,993 22.9
Selling expenses........................ 2,391 10.5 2,940 9.9 3,396 9.4 2,398 9.2
General and administrative expenses..... 1,813 8.0 2,146 7.2 3,017 8.3 1,898 7.2
Depreciation and amortization........... 531 2.4 561 1.9 763 2.1 502 1.9
--------- --------- --------- --------- --------- --------- --------- ---------
Income from operations.................. $ 1,181 5.2% $ 1,541 5.2% $ 1,590 4.4% $ 1,195 4.6%
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>

NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1997
--------------------

Revenues................................ $ 36,387 100.0%
Cost of revenues........................ 27,142 74.6
--------- ---------
Gross profit............................ 9,245 25.4
Selling expenses........................ 3,477 9.6
General and administrative expenses..... 3,543 9.7
Depreciation and amortization........... 1,054 2.9
--------- ---------
Income from operations.................. $ 1,171 3.2%
========= =========

UNAUDITED INTERIM RESULTS

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1996

REVENUES. -- Revenues increased $10.2 million, or 39.1%, from $26.2 million
for the nine months ended September 30, 1996 to $36.4 million for the comparable
period in 1997. This increase was primarily due to (i) an increase in rental and
service revenue as a result of the acquisition of PCI in October 1996 and (ii)
an increase in distribution revenues as a result of an increased sales staff and
additional distribution facilities.

COST OF REVENUES -- Cost of revenues increased $7.0 million, or 34.5%, from
$20.2 million for the nine months ended September 30, 1996 to $27.1 million for
the comparable period in 1997. The overall increase was a result of the increase
in revenues, but cost of revenues did not increase consistent with the increase
in revenues margins associated with rental and service income which was
attributable primarily to the acquisition of PCI in October 1996.

SELLING EXPENSES -- Selling expenses increased $1.1 million, or 45.0%, from
$2.4 million for the nine months ended September 30, 1996 to $3.5 million for
the comparable period in 1997. The increase was primarily due to (i) an increase
in associated revenues of 39.1% and (ii) THI's addition in 1997 of a national
account sales director and a vice president of marketing.

GENERAL AND ADMINISTRATIVE EXPENSES -- General and administrative expenses
increased $1.6 million, or 86.7%, from $1.9 million for the nine months ended
September 30, 1996 to $3.5 million for the comparable period in 1997. The
increase was primarily due to THI's planned increase in expenditures on its
national infrastructure to accommodate expected future growth consisting
primarily of administrative salaries and facility expenses such as rent and
utilities on new space occupied.

1996 COMPARED TO 1995

REVENUES. -- Revenues increased $6.6 million, or 22.2%, from $29.7 million
for 1995 to $36.3 million for 1996. This increase was due primarily to an
increase in distribution and service revenues consistent with THI's growth
strategy and also to the acquisition of PCI in October 1996.

COST OF REVENUES -- Cost of revenues increased $5.0 million, or 22.3%, from
$22.5 million in 1995 to $27.5 million in 1996. This increase was consistent
with the increase in revenues.

SELLING EXPENSES -- Selling expenses increased $0.5 million, or 15.5%, from
$2.9 million for 1995 to $3.4 million for 1996. This increase was primarily due
to the increase in associated revenues.

GENERAL AND ADMINISTRATIVE -- General and administrative expenses increased
$.9 million, or 40.6%, from $2.1 million for 1995 to $3.0 million for 1996. This
increase resulted principally from increased expenditures on infrastructure for
the second half of 1996 pursuant to THI's plan to strengthen its national
infrastructure.

26
<PAGE>
1995 COMPARED TO 1994

REVENUES. -- Revenues increased $7.0 million, or 31.0%, from $22.7 million
for 1994 to $29.7 million for 1995. This increase was due primarily to an
increase in distribution revenues of $6.6 million resulting from strong market
performance enhanced by the opening of THI's Chicago, Illinois distribution
facility.

COST OF REVENUES -- Cost of revenues increased $5.7 million, or 34.2%, from
$16.8 million for 1994 to $22.5 million in 1995. This increase was consistent
with the increase in revenue for the same period, but increased as a percentage
of revenues because of a change in the mix of products sold.

SELLING EXPENSES -- Selling expenses increased $0.5 million, or 23.0%, from
$2.4 million for 1994 to $2.9 million for 1995. This increase reflected the
building of a national sales force.

GENERAL AND ADMINISTRATIVE -- General and administrative expenses increased
by $0.3 million, or 18.4%, from $1.8 million for 1994 to $2.1 million for 1995.
This increase was due to the addition of several administrative positions.

THI -- LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth selected information from THI's statements
of cash flows (in thousands):

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities............................ $ 662 $ 597 $ (1,071) $ (1,109) $ 2,392
Net cash used in investing activities... (91) (21) (4,202) (191) (3,214)
Net cash provided by (used in) financing
activities............................ (587) (570) 6,082 2,550 359
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents........................... $ (16) $ 6 $ 809 $ 1,250 $ (463)
========= ========= ========= ========= =========
</TABLE>

Net cash provided by operating activities in 1994, 1995, and the nine
months ended September 30, 1997 is the result of net income generated during the
period, plus depreciation and amortization adjusted for changes in working
capital. The decrease in cash provided by operating activities for 1996 and the
first nine months of 1996 was primarily due to the investment THI made in
working capital required to meet its growth objectives during the periods and to
reduce accounts payable.

Net cash used in investing activities is primarily amounts the Company used
to make acquisitions in the fourth quarter of 1996 and the first nine months of
1997 and to acquire additional rental equipment in the first nine months of
1997. Cash used in investing activities in 1994, 1995 and the first nine months
of 1996 reflects additions to property, plant and equipment, partly offset by
proceeds from the disposal of property.

Net cash provided by financing activities for 1996 and the nine months
ended September 30, 1996 reflects the sale of common stock and borrowings on
debt and capital leases offset by the paydowns on THI's line of credit and
repurchase of common stock. THI made additional borrowings in the first nine
months of 1997 to finance its expansion. Net cash used by financing activities
in 1994 and 1995 primarily reflects the payments as long-term debt partly offset
by additional borrowings for working capital purposes.

In September 1996, THI entered into a new credit agreement with a bank. The
agreement, which extends through May 31, 1998, provides a revolving line of
credit facility of up to $1.0 million. Borrowings under the credit agreement
bear interest at the bank's prime rate plus 0.25 percent or, at THI's option, a
LIBOR rate plus 3.25 percent. The credit agreement is collateralized by all of
THI's assets and includes certain restrictive covenants.

In October 1996, THI entered into an agreement with a bank for an
acquisition line of credit. The agreement extends through September 2001 and
provides a facility of up to $5.0 million. Borrowings under the agreement bear
interest at the bank's prime rate plus 0.625 percent. The agreement includes
certain restrictive covenants and provides that all borrowings thereunder are
collateralized by all THI's assets. The outstanding borrowings under the
agreement at September 30, 1997 were $4.5 million. In October, 1997, THI
converted this line of credit into an asset-based credit facility.

Management of THI believes that cash flows from operations, together with
the Company's unused borrowing capacity, will be sufficient to fund THI's
operating needs into the forseeable future. THI has no current material
commitments for capital expenditures.

27
<PAGE>
BUSINESS

GENERAL

The sale and distribution of specialty medical products require a focused
selling effort by representatives capable of marketing the products' clinical
features and benefits to physicians and other health care professionals and
demonstrating the economic benefits associated with these products to purchasing
departments and operating management of health care providers. To satisfy the
sales and related needs of its represented manufacturers, the Company maintains
a highly qualified and customer-oriented sales staff of over 140
representatives, who average in excess of 15 years' medical product sales
experience. Through this sales staff and other support staff the Company employs
at its 20 sales and distribution facilities located throughout the United
States, the Company provides its represented manufacturers and customers with a
variety of value-added services designed to facilitate access to the marketplace
and product procurement on a time-efficient and cost-effective basis. These
services include product introduction and support, education and training,
equipment maintenance and repair, manufacturer warranty support and product
usage reporting.

The Company believes significant external growth opportunities are
available through acquisitions of leading local and regional distributors of
complementary products due to fragmentation of the Company's industry. It also
believes internal growth opportunities can be realized by (i) achieving
operating efficiencies, (ii) adding product lines and territories through the
leveraging of its existing manufacturer and customer relationships, (iii)
cross-selling products between the alternate-site and hospital markets and (iv)
expanding its higher margin service, repair and rental business. In addition, by
establishing one of the first national contract sales and distribution
businesses of specialty medical products, the Company believes it can
aggressively pursue national consolidated supply arrangements with GPOs.

INDUSTRY OVERVIEW

Institutional health care providers in the hospital and alternate-site
markets served by the Company purchase medical products from one or more of
three distinct groups: (i) national medical product distributors, such as Owens
& Minor, Inc., Allegiance Corporation and General Medical, Inc., which typically
provide a broad range of high-volume, low-margin, low- and medium-technology
products; (ii) contract sales and distribution companies that focus on specialty
medical products not typically provided by the national medical distributors
because of the complexity of the products and the need for highly trained local
sales and service staffs; and (iii) manufacturers that sell and distribute their
own products directly.

The Company estimates there are over 1,200 companies engaged in the
contract sales and distribution of specialty medical products in the United
States, most of which are smaller companies serving local or regional markets
and providing representation for a limited number of manufacturers and product
lines. Several of the manufacturers represented by these sales and distribution
organizations have highly focused, limited product lines. Accordingly, these
manufacturers typically make large ongoing commitments to their product
development, market research and marketing efforts while relying on the
currently fragmented network of contract sales and distribution companies to
sell, distribute and service their products. The

28
<PAGE>
Company believes a national contract sales and distribution organization focused
on specialty medical products can provide the following advantages to
manufacturers and health care providers:

o PROVIDE MANUFACTURERS WITH BENEFITS OF ECONOMIES OF SCALE AND
ESTABLISHED SALES CHANNELS. By utilizing contract sales and
distribution companies, manufacturers of specialty medical products can
avoid the substantial up-front and ongoing expenses associated with
hiring, training and coordinating their own sales force and related
customer support staff. Contract sales and distribution companies
typically are more efficient because of their ability to spread sales,
distribution and other product-related costs across multiple
complementary product lines produced by different manufacturers. In
addition, because contract sales and distribution companies generally
employ sales representatives who have substantial experience in
individual medical sub-specialties and have developed long-term
relationships with physicians and other health care professionals in
those areas, they can provide manufacturers of new products with access
to established sales channels for those products.

o PROVIDE HEALTH CARE PROVIDERS WITH A CONSOLIDATED SUPPLY SOURCE. In an
effort to increase efficiency and reduce costs, health care providers
are increasingly seeking to reduce and consolidate their vendor
relationships. By consolidating their vendor bases, customers can
reduce the costs and administrative time associated with receiving
individual sales calls and individual product deliveries from a
multitude of manufacturers. The Company believes that contract sales
and distribution companies are attractive to providers because they
consolidate the purchasing and distribution functions.

Despite the advantages that contract sales and distribution companies
provide to both their manufacturers and customers, the fragmented network of
such companies is generally not capable of serving multiple manufacturers on a
national basis. Local or regional contract sales and distribution companies do
not have the distribution infrastructure necessary to efficiently deliver
product on a nationwide basis, nor do they have a product offering that is broad
enough to enable them to service customers across a variety of sub-specialty
markets.

To become more cost-effective, health care providers have created national
GPOs and regional IDNs which aggressively seek to lower product procurement
costs and reduce the number of vendors that service their organizations by
consolidating their purchase contracts. These trends have placed pressure on
manufacturers and contract sales and distribution companies to be more
efficient, provide value-added services and obtain sufficient breadth of product
offering and geographic coverage to warrant attention in this changed market
place. As a result, the Company believes that the emergence of a national
contract sales and distribution company capable of selling, distributing and
servicing a broad array of specialty medical products would meet the evolving
needs of both manufacturers and purchasers of specialty medical products. In
addition, the Company believes such a national company would (i) enhance the
manufacturers' access to the national market and reduce cost and administrative
time attributable to dealing with multiple local and regional companies and (ii)
have opportunities to negotiate national or regional contracts with selected
GPOs and IDNs.

BUSINESS STRATEGY

The Company's objective is to become the leading national contract sales
and distribution organization focused on specialty medical products. Due to the
fragmented state of the industry, the Company believes significant opportunities
are available to a contract sales and distribution company employing customer-
oriented sales and service personnel and providing a broad range of specialty
medical products and related services on a national basis. To achieve its
objective, the Company's strategy emphasizes the following elements:

GROWTH THROUGH ACQUISITIONS. The Company intends to implement an
aggressive acquisition program targeting leading contract sales and distribution
companies serving markets similar to those served by the Company. The Company
intends to pursue acquisitions to expand its product representation. In new and
certain existing markets, the Company will target one or more leading local or
regional contract sales and distribution businesses with sufficient critical
mass to permit the consolidation of other local or regional operations. The
Company will also pursue smaller acquisitions in its existing markets and those
gained

29
<PAGE>
through subsequent acquisitions with a view to increasing market share and
expanding the range of products and services offered within those markets
without increasing the Company's existing infrastructure.

PROFITABILITY IMPROVEMENTS. The Company believes it can achieve certain
operating efficiencies and cost savings by reducing facilities, centralizing
certain administrative functions and implementing a "best practices" operating
strategy throughout the Company. The Company intends to consolidate overlapping
warehouse and office facilities in the near term. However, additional facilities
may be acquired as the Company implements its acquisition strategy. The Company
believes that, as it increases its size and market share, it will achieve cost
savings from its plan to centralize certain functions, including acquisition
planning, marketing, national contracting, financing, accounting, investor
relations, legal and insurance. The Company also believes centralizing these
functions will enable the local and regional offices to concentrate their
efforts on sales, customer service, inventory management and distribution.

INTERNAL GROWTH. A key component of the Company's business strategy is to
accelerate internal growth in its existing businesses and subsequently acquired
businesses by leveraging its established manufacturer and customer bases,
cross-selling products between the alternate-site and hospital markets,
implementing a "best practices" sales and marketing strategy, adding qualified
sales representatives and generating ancillary service revenues. The Company
believes it will be able to leverage its existing manufacturer and customer
relationships to gain representation of additional territories and product lines
and expand its product offerings. It will (i) pursue cross-selling opportunities
between the alternate-site and hospital markets and (ii) review its sales and
marketing procedures at the local and regional levels to identify practices that
will be uniformly implemented throughout its operations to enhance its sales and
marketing programs in an effort to obtain new product lines, stimulate sales of
existing products and improve customer service. The Company also will seek to
(i) continue to attract high-quality sales representatives by offering them a
broader range of products concentrated in their area of specialization, with a
view to gaining and improving product representation in certain specialty areas
and achieving greater productivity from the Company's sales force and (ii)
attempt to expand its medical equipment repair and service operations.

STRATEGIC RELATIONSHIPS. As one of the first national contract sales and
distribution companies, the Company believes it is positioned to obtain expanded
relationships with manufacturers and customers and to selectively pursue limited
proprietary interests in certain product lines. The Company intends to pursue
arrangements with certain manufacturers on a national basis, negotiate to obtain
longer term contracts with manufacturers and seek to satisfy the demands of
GPOs, IDNs and other customers desiring to reduce their vendor base. The Company
also intends to selectively pursue ownership interests in, or otherwise obtain
long-term exclusive marketing rights to, noncompetitive domestic and
international emerging product technologies that compliment its existing product
lines. The Company also may pursue private label relationships with certain
manufacturers whereby a product line would be manufactured and marketed through
the Company's national sales and distribution network.

ACQUISITION STRATEGY

The Company intends to implement an aggressive acquisition program
targeting leading contract sales and distribution companies serving markets
similar to those served by the Company. Certain acquisitions will be large
enough to warrant their own operating and management structure while other
smaller acquisitions will be folded into an existing operation without
significantly increasing the Company's infrastructure. Of the over 1,200
contract sales and distribution companies estimated to be serving local and
regional markets in the United States, the Company believes there are numerous
candidates that meet the Company's acquisition criteria. These criteria include
profitability, potential for revenue growth, reputation, the size and other
characteristics of the customer base, the quality and experience levels of
operational management and sales personnel and the nature of the product mix.

The Company intends to use various combinations of its Common Stock, cash
and notes as consideration for future acquisitions. The consideration for each
future acquisition will vary on a case-by-case basis. The Company believes it
will be regarded as an attractive acquirer to owners of contract sales and
distribution companies because of: (i) the Company's potential access to large
national purchasing contracts; (ii) the Company's strategy for creating a large,
professionally managed company with national

30
<PAGE>
name recognition; (iii) management's industry experience; (iv) the Company's
increased visibility and access to financial resources as a public company; (v)
access to new products; and (vi) the ability of the acquired business to
participate in the Company's growth and expansion, while the owner realizes
improved liquidity.

The Company currently has no binding agreements or letters of intent
relating to any acquisition (other than the Acquisitions). The timing, size and
success of the Company's acquisition efforts and the associated potential
capital commitments cannot be readily predicted. See "Risk
Factors -- Dependence on Acquisitions for Growth" and "-- Need for Additional
Financing."

PRODUCTS AND SERVICES

The Company sells and distributes a broad array of specialty medical
products. These products require significant value-added support services, such
as product introduction and support, education and training, equipment
maintenance and repair, manufacturer warranty support and product usage
reporting. The following chart sets forth the five principal product categories
offered by the Company and the top selling products in fiscal 1996 in each
category:

SURGICAL PRODUCTS CARDIOVASCULAR/VASCULAR PRODUCTS
SURGICAL INSTRUMENTS HEPARIN MONITORING EQUIPMENT
BOVINE PERICARDIUM PATCHING PTFE VASCULAR GRAFTS
AESTHETIC AND SURGICAL LASERS VASCULAR ACCESS PRODUCTS
FIBER OPTIC LIGHT SOURCES BLOOD/IV FILTERS AND RELATED PRODUCTS
ENDOSCOPY INSTRUMENTATION BOVINE PERICARDIUM PATCHING
IMPLANTABLE PORTS AND CATHETERS SURGICAL INSTRUMENTS
CRITICAL CARE PRODUCTS IV THERAPY PRODUCTS
NEEDLELESS IV CONNECTORS PLASMA DERIVATIVES AND PHARMACEUTICALS
BLOOD/IV FILTERS AND RELATED PRODUCTS IV SOLUTION AND NUTRITIONAL SUPPORT
HEPARIN MONITORING EQUIPMENT PRODUCTS
CENTRAL VENOUS CATHETERS INFUSION DEVICES (INCLUDING IV
CARDIAC FUNCTION MONITORS INFUSION PUMPS AND PHARMACY PRODUCTS)
NON-INVASIVE BLOOD PRESSURE MONITORS PATIENT CARE PRODUCTS
ANESTHESIOLOGY/PAIN MANAGEMENT PRODUCTS INFECTION CONTROL PRODUCTS
BLOOD/IV FILTERS AND RELATED PRODUCTS VASCULAR ACCESS DEVICES
HEPARIN MONITORING EQUIPMENT
IMPLANTABLE SPINAL CORD STIMULATORS
HYPOTHERMIA PRODUCTS
DISPOSABLE PRESSURE TRANSDUCERS
NON-INVASIVE CARDIAC FUNCTION
MONITORS
</TABLE>

Blood/IV filters and related products, needleless IV connectors, heparin
monitoring equipment, implantable spinal cord stimulators and plasma derivatives
and pharmaceuticals were the Company's top five selling product lines in fiscal
1996. None of these product lines accounted for more than 10% of the Company's
fiscal 1996 pro forma combined revenues. While the Company generates its
revenues primarily by selling and distributing specialty medical products it
purchases under sales and distribution arrangements with manufacturers, it also
has agency relationships with certain manufacturers pursuant to which it earns a
commission on generated sales. See "-- Manufacturer Relationships."

The Company intends to continue to add additional product lines
complementary to its existing product lines as customer demand warrants. The
Company's Product Committee will supervise product selection and pricing
decisions primarily through periodic evaluations of sales data, customer
response to product offerings and the input of local and regional management.

The Company generates significant revenues from the service, repair, rental
and leasing of certain product lines, including infusion pumps, automated
pharmacy compounding equipment, dental implant products and surgical lasers.
Revenues from the Company's service, repair, rental and leasing activities
accounted for approximately 9.1% of the Company's fiscal 1996 pro forma combined
revenues.

31
<PAGE>
SALES AND MARKETING

At August 31, 1997, the Company employed a direct sales force of 140
representatives who have primary responsibility for maintaining relationships
with existing customers and identifying and soliciting new customers. The
Company's sales and marketing efforts emphasize development and maintenance of
close relationships with customers, regular presentation of products and
prototypes of new products and responsiveness to customer requirements. The
Company's sales representatives devote substantial time and attention to direct
dealings with customers, regularly visit hospitals and alternate-site facilities
and meet with the administrators and clinicians to assess customer needs,
provide product support and introduce new product lines. Due to the technical
nature of many of the Company's products, education and training is essential to
the sales and marketing of these products. The Company's sales representatives
regularly conduct educational seminars and make presentations to discuss product
usage and the positive patient and health care provider outcomes that may be
achieved. The sales representatives are regularly invited into the operating
rooms, emergency rooms, intensive care and other critical care units of
hospitals and other health care facilities to observe medical procedures
utilizing represented products and to provide advice as to proper product usage.
With respect to certain of the Company's lower technology products, the Company
maintains a limited inside sales staff to market these products by telephone. In
addition to the Company's sales staff, the Company has five product specialists
on staff to assist the customer in selecting the best product for the procedure
involved and to assist in quantity selection.

The Company's sales representatives average 15 years' medical product sales
experience. The future success of the Company will depend in part on its ability
to continue to attract, retain, motivate and train qualified sales
representatives. The Company has continuous national and regional training
programs in place for its sales representatives to enhance selling skills and
provide detailed product knowledge. Certain manufacturers also support the
training of the Company's sales and support personnel by providing, from time to
time, training and educational programs relating to product lines represented by
the Company.

CUSTOMERS

The Company's customers consist primarily of acute care hospitals and
alternate-site health care providers (including sub-acute care facilities, home
care companies and specialty physician groups). The Company also sells directly
to national medical supply distributors, such as Owens & Minor and Allegiance.
No single customer accounted for more than 5% of the Company's fiscal 1996 pro
forma combined revenues.

During recent years, as cost-containment pressures have resulted in
increased demand for lower product procurement costs and value-added services,
the customer base in the health care industry has consolidated to include GPOs,
IDNs and other large alliances formed by health care providers in an effort to
reduce costs and consolidate their vendor bases. The Company believes further
consolidation of its customer base will continue in the future. It intends to
target these purchasing organizations and believes it is well positioned to
satisfy their needs, given its strategy to provide a broad offering of specialty
medical products and related services through a national contract sales and
distribution organization. No assurance can be given the Company will be awarded
contracts by these groups and purchasing organizations.

MANUFACTURER RELATIONSHIPS

Currently, the Company has arrangements with over 180 manufacturers, 20 of
whose product lines accounted for approximately 49.9% of the Company's fiscal
1996 pro forma combined revenues. The manufacturers of the Company's top five
selling products for fiscal 1996 were Pall Biomedical, Inc., ICU Medical, Inc.,
International Technidyne Corporation, Advanced Neuromodulation Systems, Inc. and
Bayer Corporation.

The Company primarily enters into sales and distribution arrangements with
manufacturers pursuant to which it purchases products for resale. While the
terms of these arrangements vary, they generally describe the product line to be
represented, define the coverage territory of the representation, outline the
value-added services to be performed with respect to the represented product
line, quantify the minimum sales level requirements and provide termination
rights on prior notice typically ranging from 30 to 90 days. Many of these
manufacturing arrangements contain non-competition provisions that prohibit the
Company from selling competitive product lines in specified territories.
Manufacturers may impose additional

32
<PAGE>

requirements on the Company under these arrangements concerning such matters as
minimum size of purchase orders, maintenance of minimum inventory levels,
maintenance of facilities and equipment to perform specified services relating
to the product line and training of sales and service personnel. The Company's
representation of its manufacturers in the hospital market is typically on an
exclusive basis with a local or regional geographic coverage area, while
representation of its manufacturers in the alternate-site health care market is
generally on a non-exclusive basis with a national coverage area.

The Company also has agency relationships with certain manufacturers
pursuant to which it generates factory-direct sales to customers and does not
purchase products from the manufacturer for resale or maintain an inventory of
products. The Company earns a commission percentage on its agency sales ranging
between 10% and 30%. Agency relationships are typically terminable by either
party on prior notice ranging from 30 to 90 days.

The Company seeks to purchase the medical products it sells at the lowest
possible price through volume discounts, rebates and product line
consolidations. Individual orders will initially be placed by the Company's
purchasing agents, located at certain of the Company's facilities, who are
responsible for purchasing and maintaining the inventory. Medical products are
delivered directly to the distribution facilities.

The Founding Companies have, from time to time, lost significant product
lines due to, among other causes, manufacturers' decisions to sell the product
lines directly to health care providers, acquisitions of the manufacturers or
their product lines by other entities with existing sales forces or failure of a
Founding Company to satisfy sales volume or other performance requirements.
While the Company believes that, as a result of its larger size and national
presence following the Acquisitions, it will have greater bargaining power and
therefore be in a position to negotiate longer-term contracts with its
manufacturers, there can be no assurance the Company will not lose significant
product lines in the future. The loss of any significant product line, for any
reason, could have a material adverse effect on the Company's financial
condition and results of operations.

OPERATIONS

The Company is committed to providing accurate and complete order
fulfillment and reliable, consistent deliveries. The Company's order entry
process is designed to make ordering products convenient, easy and flexible for
its customers. Approximately 90% of customer orders are received by the
Company's toll-free telephone number, and the Company also is able to receive
orders electronically. The Company intends to expand the availability of
electronic order-entry ordering for customers and EDI transmission for both
vendors and customers. In addition, the Company is actively researching Internet
utilization for electronic catalogs, ordering, training and enhanced market
information. All orders are received by the customer service representatives at
the Company's distribution facilities located throughout the United States. The
customer service representatives utilize on-line computer terminals to enter
customer orders and to access information about products, product availability,
pricing, promotions and the customer's purchasing history. Following entry of an
order, a packing slip for the entire order is printed for order fulfillment. The
Company ships its ordered products primarily by Federal Express Corporation and
United Parcel Service of America, Inc. and, to a lesser extent, by various
common carriers. See "Risk Factors -- Reliance on Efficiency of Distribution
and Third Parties."

Since many of the Company's products are high value items, accurate
inventory control is critical to business profitability. The Company plans to
utilize its broad regional distribution network and information technology to
minimize inventory levels while continuing to maintain high levels of product
availability and rapid order fulfillment.

The Company intends to perform certain corporate activities from its
executive offices. These activities will include national marketing and sales
support, national vendor contracting, accounting, financing, management
information systems support, national customer contracting, contract
administration and human resources and administration. Certain operating
functions will be conducted at specific regional offices, including sales and
sales management, customer service, purchasing, inventory control, distribution,
regional marketing support and regional accounting. Day-to-day decision making
and operating control will remain at the regional operating locations whenever
possible and practical. Regional offices will be required

33
<PAGE>
to adhere to company-wide policies relating to training, accounting and internal
controls and customer satisfaction. The management information systems in place
will allow for information to be disseminated at the local and regional level,
which the Company believes will help to improve operating efficiencies and lower
operating costs.

The Company is committed to providing high levels of customer service and
support. The Company intends to integrate the existing centralized computer
operating system of THI with each of the primary facilities of the Company's
operations in the near term. The host computer system is located at the
Company's principal executive offices in Laguna Hills, California. This
operating system facilitates various functions, including accounts payable,
accounts receivable and general ledger, as well as functions critical to
customer service and support, such as order entry and tracking, purchasing and
inventory control and product pricing and selection. As of the date of this
Prospectus, seven of the Company's facilities located throughout the United
States are networked to this computer operating system by dedicated circuits.

COMPETITION

The Company competes with manufacturers that sell their medical products
directly to health care providers and, to a lesser extent, with national medical
product suppliers. Competition from national medical suppliers does not
generally occur until a product line has substantially matured, which usually
takes several years into its life cycle. Some of these manufacturers and
national suppliers are substantially larger and have substantially greater
financial and other resources than the Company. The Company also faces
competition from many regional and local distributors in its niche markets which
are generally relatively small local or regional owner-operated businesses.
Barriers to entry for distribution in the specialty medical product market are
relatively low, and the risk of new competitors entering the market,
particularly in local and regional areas, is high. In response to competitive
pressures from any of its current or future competitors, the Company may be
required to lower selling prices in order to maintain or increase market share,
and such measures could adversely affect the Company's operating results.

The Company believes the principal competitive factors in the contract
sales and distribution business are the experience, training and educational
support capabilities of the sales force, the quality and level of customer
support service, the breadth and quality of products offered, the information
systems and infrastructure available and the consistency and stability of
business relationships with customers and product pricing.

FACILITIES

The Company's facilities, all located in the United States, consist
principally of sales offices and warehouse facilities. The Company leases 20
warehouse and office facilities located throughout the continental United
States, which range in size from less than 1,000 square feet to approximately
37,000 square feet, for an aggregate of approximately 224,000 square feet. The
Company intends to reduce the number of its facilities in the near term.
However, additional facilities may be added as the Company implements its
acquisition strategy. Its current leases have remaining terms ranging from two
years to five years on rental and other terms the Company believes are
commercially reasonable. Some of these leases are with affiliates of the
Founding Companies or officers of the Company. See "Certain Transactions --
Real Estate and Other Transactions." The Company believes its facilities are
well-maintained and adequate for the Company's existing and planned operations
at each operating location.

EMPLOYEES

As of September 30, 1997, the Company had approximately 360 employees, of
which approximately 140 were sales representatives. The Company is not a party
to any collective bargaining agreements, has not experienced any strikes or work
stoppages and believes its relationship with its employees is good.

GOVERNMENT REGULATION

The Company and its customers and suppliers are subject to federal and
state regulation in the United States, and the Company cannot predict the extent
to which future legislative and regulatory developments concerning their
practices and products or the health care industry may affect the Company.
Federal and state laws and regulations govern or influence the testing,
manufacture, safety, labeling, storage,

34
<PAGE>

recordkeeping, marketing and distributing of specialty medical products. In
connection with its manufacturing operations, the Company is required to obtain
the approval of federal and state governmental agencies, including the Food and
Drug Administration, prior to manufacturing, marketing and distributing certain
of those products. Further, the Company's facilities and operations are subject
to reporting to, and review and inspection by, federal, state and local
governmental entities.

LITIGATION AND INSURANCE

From time to time, the Company is a party to litigation arising in the
normal course of its business. The Company is not currently involved in any
litigation the Company believes will have a material adverse effect on its
financial condition or results of operations.

The Company maintains insurance in such amounts and against such risks as
it deems prudent, including comprehensive, general property and product
liability insurance. It will attempt to obtain a product liability policy with
an insurance company having an A rating or better, with coverage limits of $3
million per each occurrence and $3 million in the aggregate. No assurance can be
given the Company's insurance will be sufficient under all circumstances to
protect the Company against significant claims for damages. The occurrence of a
significant event not fully insured against could materially and adversely
affect the Company's financial condition and results of operations. Moreover, no
assurance can be given the Company will be able to maintain adequate insurance
in the future at commercially reasonable rates or on acceptable terms.

<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information respecting the
individuals who will be TRIAD's directors, and executive officers when this
Offering closes (ages as of September 30, 1997):

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION CLASS
- ----------------------------------- --- ------------------------------------------ ---------
<S> <C>
William C. Klintworth, Jr.(1)(4)... 44 Chief Executive Officer, Chairman of the Class I
Board
R. Tucker Coop(1)(4)............... 51 President*, Director* Class III
Clyde A. Blankenship, Jr........... 53 Executive Vice President, Director Class III
Walter D. Wallach.................. 53 Senior Vice President,* Chief Financial
Officer* and Secretary*
Lance C. Ruud...................... 39 Senior Vice President-Corporate Finance
and Development*
Marvin L. Marks.................... 61 President of MegaTech, Director* Class I
Kent J. Wilken..................... 60 President of Kentec, Director* Class I
Greg H. Sellards(1)................ 49 President of Sun, Director* Class II
Michael W. Thomas.................. 42 President of CMS, Director* Class II
Nolan Lehmann(1)(2)(3)(4).......... 53 Director Class I
John B. Benear, II, MD(2)(3)....... 44 Director* Class II
Edward T. Kuklenski(2)(3).......... 39 Director* Class III
Kelvin J. Pennington(1)(2)(3)(4)... 39 Director* Class III
</TABLE>
- ------------

* Appointment will become effective on closing of this Offering.

(1) Member of the Board's Executive Committee.

(2) Member of the Board's Audit Committee.

(3) Member of the Board's Compensation Committee.

(4) Member of the Board's Nominating Committee.

William C. Klintworth, Jr. has been the president, chief executive officer
and a director of TRIAD since its formation in April 1997. Mr. Klintworth has
served as president and a director of HTD since April 1997, and from June 1994
to February 1997, he served as the president of Medical Alliance. He co-founded
both HTD and Medical Alliance. From November 1990 to May 1994, he served as the
president and a director of Alpha ProTech, Inc., a manufacturer and distributor
of medical products. Mr. Klintworth has approximately 23 years experience in the
health care industry, working in sales, distribution and manufacturing.

R. Tucker Coop will be appointed the president and a director of TRIAD on
closing of this Offering. He has been the president and chief executive officer
of THI since its formation in May 1996 and of its predecessor, Triad Medical
Inc., a California corporation ("TMI"), since its inception in 1981. Mr. Coop
has approximately 25 years experience in the health care field, working in both
the hospital and alternate-site markets. Before founding TMI, he was president
of Coop Medical Products and prior to that served in marketing and sales
positions with McGaw Laboratories, a division of American Hospital Supply
Corporation.

Clyde A. Blankenship, Jr. has been the executive vice president and a
director of TRIAD since its formation in April 1997. He has also served as
president of Futuretech, HTD's principal operating subsidiary, since he founded
it in 1977. Since April 1997, Mr Blankenship has served as executive vice
president and a director of HTD.

Walter D. Wallach will be appointed as a senior vice president and the
chief financial officer and secretary of TRIAD on closing of this Offering. He
has been the chief operating officer of THI since its formation in May 1996 and
of TMI since May 1993. From May 1991 to December 1992, Mr. Wallach

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<PAGE>

served as the executive vice president and chief financial officer of
International Medication Systems, a manufacturer of generic drugs. From January
1986 to April 1991, he served as the chief financial officer of McGaw Inc., a
manufacturer and distributor of intravenous solutions and sets. Prior to that
time, Mr. Wallach worked with The Kendall Company and Colgate-Palmolive Company
as a financial executive.

Lance C. Ruud has been the senior vice president and chief financial
officer, secretary and treasurer of TRIAD since its formation in April 1997.
From September 1993 to April 1997, Mr. Ruud served as the senior vice president
and chief financial officer of TransAmerican Waste Industries, Inc. From May
1990 to May 1993, he was employed by Republic Industries, Inc. last serving as
the vice president of finance beginning August 1991. Prior to that time, Mr.
Ruud was employed by Arthur Andersen LLP. Mr. Ruud is a certified public
accountant.

Marvin L. Marks will be appointed a director of TRIAD on the closing of
this Offering. Mr. Marks has been the president of MegaTech since he founded it
in 1976. He also serves as the president of JAJ Enterprises Ltd., a medical
products leasing and training company and is president-elect of the Independent
Medical Distributors Association, a trade association of companies that market
specialty medical products throughout the United States.

Kent J. Wilken will be appointed a director of TRIAD on the closing of this
Offering. Mr. Wilken has served as the president of Kentec since he founded it
in 1970.

Greg H. Sellards will be appointed a director of TRIAD on the closing of
this Offering. Mr. Sellards has served as the chief executive officer of Sun
since he founded it in 1978.

Michael W. Thomas will be appointed a director of TRIAD on the closing of
the Offering. Mr. Thomas has served as the president of CMS since he founded it
in 1989. He also serves as a director of Specialty Medical Marketing Alliance,
Inc., a trade association of companies that market specialty medical products
throughout the United States and Canada.

Nolan Lehmann has been a director of TRIAD since its formation in April
1997. He has also served as a director of HTD since April 1997. Since 1983, Mr.
Lehmann has served as the president and a director of Equus Capital Management
Corporation, a registered investment advisor. He also serves as the president
and a director of Equus II, a registered investment company. Mr. Lehmann also
serves as a director of Allied Waste Industries, Inc., a solid waste management
company, American Residential Services, Inc., a residential services company,
Brazos Sportswear, Inc., a casual sportswear company, Drypers Corporation, a
manufacturer of disposable diapers, and Garden Ridge Corporation, a specialty
retailer, all of which are public companies. He was appointed to the board of
directors pursuant to TRIAD's funding agreement with Equus II. See "Certain
Transactions."

John B. Benear, II, MD will be appointed a director of TRIAD on the closing
of this Offering. He has served as a medical oncologist for the Natalie Warran
Bryan Cancer Center of Saint Francis Hospital located in Tulsa, Oklahoma since
May 1989. Since 1995, he has served as the president of Cancer Care Associates,
a 22-physician oncology practice located throughout Oklahoma. He also serves as
the medical director of Practice Standards and of Clinical Information Systems
for American Oncology Resources, a public physician practice management company.
Dr. Benear serves on the boards of various professional associations.

Edward T. Kuklenski will be appointed a director of TRIAD on the closing of
this Offering. Since 1995, Mr. Kuklenski has served as the president and a
director of Alliance of Children's Hospitals, Inc., a product research and
testing company, and since 1989, as a senior vice president of Child Health
Corporation of America, a national alliance of 36 children's hospitals. Mr.
Kuklenski also serves as a director of the Anesthesia Patient Safety Foundation,
a non-profit consumer safety organization, and National Contracts, Inc., a
national account services company providing services to small and medium-sized
medical products manufacturers.

Kelvin J. Pennington will be appointed a director of TRIAD on the closing
of this Offering. Since January 1992, Mr. Pennington has served as managing
general partner of PENMAN Asset Management,

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<PAGE>
L.P. ("PENMAN Management"), the general partner of PENMAN. He also serves as a
director of AFC Enterprises, Inc., an owner and franchisor of restaurants.

BOARD OF DIRECTORS CLASSES; DIRECTOR COMPENSATION

The Board of Directors is divided into three classes, each of which,
following a transitional period, will serve for three years, with one class
being elected each year at the annual stockholders' meeting. During the
transitional period, the terms of the Class I directors will expire at the 1998
meeting, while the terms of the Class II directors and the Class III directors
will expire at the 1999 meeting and the 2000 meeting, respectively.
Classification of the Board could have the effect of lengthening the time
necessary to change the composition of a majority of the members comprising the
Board. In general, at least two annual meetings of stockholders will be
necessary for stockholders to effect a change in a majority of the members of
the Board.

Directors who are employees of the Company do not receive additional
compensation for serving as directors. Following the closing of this Offering,
each director who is not an employee of the Company (an "Outside Director")
initially will receive a fee of $2,000 for each board meeting attended and
$1,000 for each board committee meeting attended (or $500 if held on the same
day as a board meeting) and will periodically be granted options to purchase
Common Stock pursuant to the Incentive Plan. See " -- Incentive Plan." When
this Offering closes, each of TRIAD's four Outside Directors will be granted
options to purchase 10,000 shares of Common Stock at an exercise price per share
equal to the initial public offering price. TRIAD will reimburse directors for
out-of-pocket expenses they incur in attending board of directors or board
committee meetings in their capacity as directors.

EXECUTIVE COMPENSATION; EMPLOYMENT AGREEMENTS

On closing of this Offering, TRIAD will have employment agreements with
Messrs. Klintworth, Coop, Blankenship, Wallach and Ruud which provide for annual
base salaries of $150,000, $176,400, $150,000, $145,000 and $145,000,
respectively. As of the closing of the Acquisitions, the Company will enter into
employment agreements with a total of 23 key officers of the Founding Companies,
including Messrs. Marks, Wilken, Sellards and Thomas, each of whom is a director
nominee of TRIAD. The following summary of the employment agreements of these
executives and key officers does not purport to be complete and is qualified by
reference to them, a form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. Each of these
agreements entitles the employee to participate in all TRIAD employee benefit
plans in which other members of TRIAD management participate. Each of these
agreements also has a three-year term subject to the right of the Company to
terminate the employee's employment at any time after one year. If the
employee's employment is terminated by the Company within the first three years
without cause (as defined), the employee will be entitled to the payment of any
annual base salary and continuation of health insurance benefits for one year.
Each employment agreement contains a covenant limiting competition with the
Company following the termination of employment for a period of (i) the later of
12 months or the expiration of the remaining term of the employment agreement,
if the employment agreement is terminated by the Company without cause or on
account of disability or (ii) the fourth anniversary of the effective date of
the employment agreement, if employment is otherwise terminated within its
initial three-year term.

INCENTIVE PLAN

The description set forth below summarizes the principal terms and
conditions of the Incentive Plan, does not purport to be complete and is
qualified in its entirety by reference to the Incentive Plan, a copy of which
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part.

GENERAL. The objectives of the Incentive Plan, which was approved by
TRIAD's board of directors and stockholders, are to attract and retain selected
key employees, consultants and Outside Directors, and to encourage their
commitment, motivate their superior performance, facilitate their obtaining
ownership interests in the Company (aligning their personal interests to those
of the Company's stockholders) and enable them to share in the long-term growth
and success of the Company.

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SHARES SUBJECT TO INCENTIVE PLAN. Under the Incentive Plan, TRIAD may
issue Incentive Awards (as defined below) covering an aggregate of the greater
of (i) 1,130,000 shares of Common Stock and (ii) 12.5% of the number of shares
of Common Stock issued and outstanding on the last day of each calendar quarter.
No more than 1,130,000 shares of Common Stock will be available for ISOs (as
defined below). As of the closing of the Acquisitions, options covering 972,987
shares of Common Stock will be outstanding and, 157,013 shares of Common Stock
then will be available for subsequent Incentive Awards. The number of securities
available under the Incentive Plan and outstanding Incentive Awards are subject
to adjustments to prevent enlargement or dilution of rights resulting from stock
dividends, stock splits, recapitalizations or similar transactions or resulting
from a change in applicable laws or other circumstances.

ADMINISTRATION. The Incentive Plan will be administered by the
compensation committee of the Board of Directors (the "Committee"). Following
this Offering, the Committee will consist solely of directors each of whom is
(i) an "outside director" under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), and (ii) a "non-employee director" under Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Committee may delegate to the chief executive officer or other
senior officers of the Company its duties under the Incentive Plan, except with
respect to any authority to grant Incentive Awards or take other action with
respect to persons who are subject to Section 16 of the Exchange Act or Section
162(m) of the Code. In the case of an Incentive Award to an Outside Director,
the Board of Directors shall act as the Committee. Subject to the express
provisions of the Incentive Plan, the Committee is authorized to, among other
things, select grantees under the Incentive Plan and determine the size,
duration and type, as well as terms and conditions (which need not be
identical), of each Incentive Award. The Committee also construes and interprets
the Incentive Plan and any related agreements. All determinations and decisions
of the Committee are final, conclusive and binding on all parties. TRIAD will
indemnify members of the Committee against any damage, loss, liability, cost or
expenses arising in connection with any claim, action, suit or proceeding by
reason of any action taken or failure to act under the Incentive Plan, except
for any such act or omission constituting willful misconduct or gross
negligence.

ELIGIBILITY. Key employees, including officers (whether or not they are
directors), and consultants of the Company and Outside Directors are eligible to
participate in the Incentive Plan. A key employee generally is any employee of
the Company who, in the opinion of the Committee, is in a position to contribute
materially to the growth and development and to the financial success of the
Company.

TYPES OF INCENTIVE AWARDS. Under the Incentive Plan, the Committee may
grant (i) incentive stock options ("ISOs"), as defined in Section 422 of the
Code, (ii) "nonstatutory" stock options ("NSOs"), (iii) stock appreciation
rights ("SARs"), (iv) shares of restricted stock, (v) performance units and
performance shares, (vi) other stock-based awards, and (vii) supplemental
payments dedicated to the payment of income taxes (collectively, "Incentive
Awards"). ISOs and NSOs are sometimes referred to collectively herein as
"Options." The terms of each Incentive Award will be reflected in an agreement
(the "Incentive Agreement") between TRIAD and the participant.

INCENTIVE AND NONSTATUTORY STOCK OPTIONS. Generally, ISOs and NSOs must be
exercised within ten years of the grant date. ISOs may be granted only to
employees, and the exercise price of each ISO may not be less than 100% of the
fair market value of a share of Common Stock on the date of grant. The Committee
will have the discretion to determine the exercise price of each NSO granted
under the Incentive Plan. To the extent that the aggregate fair market value of
shares of Common Stock with respect to which ISOs are exercisable for the first
time by any employee during any calendar year exceeds $100,000, such options
must be treated as NSOs.

The exercise price of each Option is payable in cash or, in the discretion
of the Committee, by the delivery of shares of Common Stock owned by the
Optionee or the withholding of shares that would otherwise be acquired on the
exercise of the Option or by any combination of the foregoing.

An employee will not recognize any income for federal income tax purposes
at the time an ISO is granted, nor on the qualified exercise of an ISO, and will
recognize capital gain or loss (as applicable) upon the subsequent sale of
shares acquired in a qualified exercise. The exercise of an ISO is qualified if
a participant does not dispose of the shares acquired by such exercise within
two years after the ISO grant

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<PAGE>
date and one year after such exercise. TRIAD is not entitled to a tax deduction
as a result of the grant or qualified exercise of an ISO.

An optionee will not recognize any income for federal income tax purposes,
nor will TRIAD be entitled to a deduction, at the time an NSO is granted.
However, when a NSO is exercised, the optionee will recognize ordinary income in
an amount equal to the difference between the fair market value of the shares
received and the exercise price of the NSO, and TRIAD will generally recognize a
tax deduction in the same amount at the same time.

The foregoing federal income tax information is a summary only, does not
purport to be a complete statement of the relevant provisions of the Code and
does not address the effect of any state of local taxes.

SARS. Upon exercise of a SAR, the holder will receive cash, shares of
Common Stock, or a combination thereof, as specified in the related Incentive
Agreement, the aggregate value of which equals the amount by which the fair
market value per share of the Common Stock on the date of exercise exceeds the
exercise price of the SAR, multiplied by the number of shares underlying the
exercised portion of the SAR. A SAR may be granted in tandem with or granted
independently of a NSO. SARs will be subject to such terms and conditions and
will be exercisable at such times as determined by the Committee, provided, that
the exercise price per share must equal at least 100% of the fair market value
of a share of a Common Stock on the date of grant. The value of an SAR may be
paid in cash, in shares of Common Stock, or a combination thereof, as determined
by the Committee.

RESTRICTED STOCK. Restricted stock may be subject to substantial risk of
forfeiture, a restriction on transferability or rights of repurchase or first
refusal of the Company, as determined by the Committee. Unless otherwise
determined by the Committee, during the period of restriction, the grantee will
have all other rights of a stockholder, including the right to vote the shares
and receive the dividends paid thereon.

PERFORMANCE UNITS AND PERFORMANCE SHARES. Performance units and
performance shares may be granted only to employees and consultants. For each
performance period (to be determined by the Committee), the Committee will
establish specific financial or non-financial performance objectives, the number
of performance units or performance shares and their contingent values, which
values may vary depending on the degree to which such objectives are met.

OTHER STOCK-BASED AWARDS. Other stock-based awards are awards denominated
or payable in, valued in whole or in part by reference to or otherwise related
to shares of Common Stock. Subject to the terms of the Incentive Plan, the
Committee may determine any terms and conditions of other stock-based awards,
provided that, in general, the amount of consideration to be received by TRIAD
shall be either (i) no consideration other than services actually rendered or to
be rendered (in the case of the issuance of shares) or (ii) in the case of an
award in the nature of a purchase right, consideration (other than services
rendered) at least equal to 50% of the fair market value of the shares covered
by such grant on the date of grant. Payment or settlement of other stock-based
awards will be in shares of Common Stock or in other consideration related to
such shares.

SUPPLEMENTAL PAYMENTS FOR TAXES The Committee may grant, in connection
with an Incentive Award (except for ISOs), a supplemental payment, in an amount
not to exceed the amount necessary to pay the federal and state income taxes
payable by the grantee with respect to the Incentive Award and the receipt of
such supplemental payment.

OTHER TAX CONSIDERATIONS. Upon accelerated exercisability of Options and
accelerated lapsing of restrictions upon Restricted Stock or other Incentive
Awards in connection with a Change in Control, certain amounts associated with
such Incentive Awards could, depending upon the individual circumstances of the
participant, constitute "excess parachute payments" under the golden parachute
provisions of Section 280G of the Code. Pursuant to these provisions, a
participant will be subject to a 20% excise tax on any "excess parachute
payment" (as defined in Section 280G of the Code) and TRIAD will be denied any
deduction with respect to such excess parachute payment. The limit on the
deductibility of compensation under Section 162(m) of the Code is also reduced
by the amount of any excess parachute payments. Whether amounts constitute
excess parachute payments depends upon, among other things, the value of the
Incentive Awards accelerated and the past compensation of the participant.

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Taxable compensation earned by executive officers who are subject to
Section 162(m) of the Code in respect of Incentive Awards is subject to certain
limitations set forth in the Incentive Plan generally intended to satisfy the
requirements for "qualified performance-based compensation," but no assurance
can be given that TRIAD will be able to satisfy these requirements in all cases,
and TRIAD may, in its sole discretion, determine in one or more cases that it is
in its best interest not to satisfy these requirements even if it is able to do
so.

TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL. Except as otherwise
provided in the applicable Incentive Agreement if a participant's employment or
other service with the Company (or its subsidiaries) is terminated (i) other
than due to his death, Disability, Retirement or for Cause (each capitalized
term as defined in the Incentive Plan), his then exercisable Options will remain
exercisable for 60 days after such termination, (ii) by reason of Disability or
death, his then exercisable Options will remain exercisable for one year
following such termination (except for ISOs, which remain exercisable for three
months), (iii) due to his retirement, his then exercisable Options will remain
exercisable for six months (except for ISOs, which will remain exercisable for
three months), or (iv) for Cause, all his Options will expire at the
commencement of business on the date of such termination.

Upon a Change in Control of TRIAD as defined in the Incentive Plan (a
"Change in Control"), any restrictions on restricted stock and other stock-based
awards will be deemed satisfied, all outstanding Options and SARs will become
immediately exercisable and all the performance shares and units and any other
stock-based awards will be fully vested and deemed earned in full. These
provisions could in some circumstances have the effect of an "anti-takeover"
defense because, as a result of these provisions, a Change in Control of TRIAD
could be more difficult or costly.

INCENTIVE AWARDS NONTRANSFERABLE. No Incentive Award may be assigned, sold
or otherwise transferred by a participant, other than by will or by the laws of
descent and distribution, or be subject to any encumbrance, pledge, lien,
assignment or charge. An Incentive Award may be exercised during the
participant's lifetime only by the participant or the participant's legal
guardian.

AMENDMENT AND TERMINATION. TRIAD's board of directors may amend or
terminate the Incentive Plan at any time, except that the Incentive Plan may not
be modified or amended, without stockholder approval, if such amendment would
(i) increase the number of shares of Common Stock which may be issued
thereunder, except in connection with a recapitalization of the Common Stock,
(ii) amend the eligibility requirements for employees to purchase Common Stock
under the Incentive Plan, (iii) increase the maximum limits on Incentive Awards
that may be issued to executive officers who are subject to Section 162(m) of
the Code, (iv) extend the term of the Incentive Plan or (v) decrease the
authority granted to the Committee under the Incentive Plan in contravention of
Rule 16b-3 under the Exchange Act. No termination or amendment of the Incentive
Plan shall adversely affect in any material way any outstanding Incentive Award
previously granted to a participant without his consent.

On closing of this Offering, it is anticipated TRIAD will grant Options to
purchase a total of 972,987 shares of Common Stock. Of these options, 141,787
options represent replacement options for former THI options held by THI
employees (including 22,489 options to Mr. Wallach), and have a weighted average
exercise price per share of $5.85. TRIAD anticipates granting Options to
purchase a total of 205,000 shares of Common Stock to persons to serve as
executive officers of TRIAD, including 50,000 shares to each of Messrs.
Klintworth, Coop and Ruud, 40,000 shares to Mr. Wallach and 15,000 shares to Mr.
Thomas, and will grant Options to purchase a total of 626,200 shares of Common
Stock to other employees and Outside Directors. Each of these options (831,200)
will have an exercise price per share equal to the initial public offering price
and will become exercisable as to 25% of such shares six months after the date
of grant and as to 25% of such shares on each anniversary of the date of grant.

BONUS AWARDS; OTHER PLANS

The 1997 bonuses for officers and key employees of the Company, if any,
will be based upon the performance standards to be established by the
Compensation Committee. The Company expects the Compensation Committee to
establish such performance standards for the remainder of 1997 following the
closing of this Offering.

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The Company has adopted or intends to adopt deferred compensation,
supplemental disability, supplemental life and retirement or other benefit or
welfare plans in which executive officers of the Company will be eligible to
participate.

COMPANY POLICY

On the closing of this Offering, the Compensation Committee will be
established. In the past, matters with respect to the compensation of executive
officers of TRIAD were determined by its Board of Directors, including those
members who serve as executive officers.

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CERTAIN TRANSACTIONS

ORGANIZATION OF TRIAD

TRIAD was initially capitalized with (i) $41,000 provided by Messrs.
Klintworth, Blankenship and Ruud and an officer of HTD in exchange for 548,545
shares of Common Stock and (ii) $300,000 provided by Equus II in exchange for
300,000 shares of Series A Preferred Stock. Equus II subsequently converted the
Series A Preferred Stock, in accordance with its terms, into 449,213 shares of
Common Stock. Mr. Lehmann, who will become a director of TRIAD, is a director
and the president of Equus II. In September 1997, TRIAD issued a warrant to
purchase 25,000 shares of Common Stock at the initial public offering price per
share to PENMAN in connection with assisting TRIAD in the acquisition of one of
the Founding Companies. Mr. Pennington, who will become a director of TRIAD, is
managing general partner of the general partner of PENMAN.

In September 1997, TRIAD sold 100,000 shares of Common Stock for $5.00 per
share, as follows: (i) to Messrs. Benear and Sellards (8,000 shares each), Marks
(5,000 shares) and Thomas (1,000 shares), each of whom will become a director of
TRIAD; (ii) to a family trust of which Mr. Klintworth is an affiliate (7,000
shares); (iii) to Child Health Investment Corporation (30,000 shares), of which
Mr. Kuklenski (who will become a director of TRIAD) is an executive officer;
(iv) to affiliates or employees of certain Founding Companies (35,000 shares);
and (v) to an unrelated third party (6,000 shares).

Since April 1997, Equus II has advanced funds to TRIAD pursuant to a $2.2
million short-term promissory note (the "Equus Note") for use in connection
with TRIAD's efforts to create the Company and effect this Offering. In
connection therewith, TRIAD issued the Equus Warrant, which entitles its holder
to purchase 100,000 shares of Common Stock at the initial public offering price
per share. The Equus Note bears interest at a designated prime rate plus 1/2%.
At September 30, 1997, approximately $1.1 million was outstanding under the
Equus Note.

Concurrently with the closing of this Offering, TRIAD will close the
Acquisitions. The aggregate consideration it will pay consists of (i)
approximately $22.2 million in cash, (ii) 3,997,215 shares of Common Stock and
(iii) options to purchase up to an aggregate of 141,787 shares of Common Stock
at a weighted average exercise price of $5.85 per share. These options will
replace options to purchase THI common stock which were granted to employees of
THI. In addition, the Company will assume all the indebtedness of the Founding
Companies (estimated to be approximately $13.5 million when this Offering
closes) and repay substantially all such indebtedness with the proceeds of this
Offering.

Subject to certain adjustments described below, the following table sets
forth for each Founding Company the consideration TRIAD will pay to its
stockholders in the Acquisitions in cash and shares of Common Stock.

CASH SHARES OF
FOUNDING COMPANY CONSIDERATION COMMON STOCK
- ---------------------------------------- ------------- ------------
THI..................................... $ 8,696,559 1,451,322
HTD..................................... 2,475,000 530,357
Sun..................................... 2,050,000 571,429
CMS..................................... 1,600,000 350,000
Kentec.................................. 3,240,000 232,857
Products for Surgery.................... 2,250,000 203,571
MegaTech................................ -- 300,000
Omni Medical............................ 200,000 128,571
New England Specialties................. 553,500 88,750
Professional Equipment.................. 435,000 48,929
Wilson.................................. 720,000 91,429
------------- ------------
Totals............................. $ 22,220,059 3,997,215
============= ============

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In addition, TRIAD will issue options to purchase 141,787 shares of Common
Stock to replace outstanding options to purchase THI common stock in connection
with the THI acquisition. The Company will also repay an aggregate of $13.5
million of indebtedness of certain of the Founding Companies with the proceeds
of this Offering, as follows: THI -- $6.3 million; Sun Medical -- $0.9 million;
HTD -- $0.5 million; CMS -- $1.5 million; Products for Surgery -- $0.3 million;
MegaTech -- $1.4 million; Omni Medical -- $1.5 million; New England
Specialties -- $0.5 million; and Professional Equipment -- $0.6 million. The
indebtedness of CMS and MegaTech to be repaid consists of the estimated
additional amounts of $1.8 million these S corporations are expected to borrow
after September 30, 1997 in order to distribute their AAA account balances to
their stockholders prior to the closing of the Acquisitions. See "The
Company -- Summary of Terms of the Acquisitions."

Prior to the closing of the Acquisitions, certain Founding Companies may
make additional distributions to their stockholders of certain assets and
related liabilities with an aggregate net book value of approximately $0.3
million.

The purchase price TRIAD will pay for Sun includes $1.5 million in cash and
35,715 shares of Common Stock that will be placed in escrow pending resolution
of certain loss contingencies relating to the Sun ESOP, Sun's sole stockholder.
See "The Company -- Summary of Terms of the Acquisitions." No part of the
escrowed cash or shares will revert to TRIAD.

Pursuant to the Acquisition Agreements, certain stockholders of each of the
Founding Companies (other than Equus II, PENMAN and others who are not
restricted from competing with TRIAD under employment agreements) have agreed
not to compete with the Company for a period of three years commencing on the
date of closing of the Acquisitions.

In connection with the Acquisitions, TRIAD will grant certain registration
rights to former stockholders of the Founding Companies. See "Shares Eligible
for Future Sale."

ACQUISITIONS INVOLVING CERTAIN OFFICERS, DIRECTORS AND STOCKHOLDERS

Persons who are or will become directors, executive officers, or beneficial
owners of 5% or more of the Common Stock of TRIAD will receive the following
consideration in the Acquisitions for their equity interests in the Founding
Companies.

CASH SHARES OF
NAME CONSIDERATION COMMON STOCK
- ------------------------------------- ------------- ------------
William C. Klintworth, Jr.(1)........ $ 495,000 70,715
R. Tucker Coop(2).................... 1,224,132 204,289
Clyde A. Blankenship, Jr............. 990,000 212,496
Walter D. Wallach(3)................. 249,113 41,573
Marvin L. Marks(4)................... -- 268,736
Kent J. Wilken(5).................... 3,240,000 232,857
Michael W. Thomas(6)................. 1,600,000 350,000
PENMAN(7)............................ 4,739,650 790,974
Sun ESOP(8).......................... 2,050,000 571,429
Equus II(9).......................... -- 70,714

- ------------

(1) Represents 50% of the cash and shares payable to HTD Holdings, L.C., a
limited liability company ("HTD Holdings") in which Mr. Klintworth has a
50.0% ownership interest.

(2) Represents cash and shares payable to a family trust of which Mr. Coop and
his spouse are co-trustees.

(3) Excludes options to purchase 22,489 shares of Common Stock which are to be
granted on closing of this Offering in replacement of THI options at an
exercise prices per share of $6.13 (13,493 shares) and $8.06 (8,996 shares).

(4) Excludes a AAA account distribution in the amount of approximately $1.3
million to Mr. Marks preceding the closing of the Acquisitions. Any
indebtedness incurred to fund this distribution will be

(FOOTNOTES CONTINUED ON NEXT PAGE)

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repaid by TRIAD on closing of this Offering. Also excludes certain assets
valued at approximately $60,000 to be distributed to Mr. Marks prior to
closing of the Acquisitions.

(5) Represents cash and shares payable to a family trust of which Mr. Wilken and
his spouse are co-trustees. Excludes certain assets valued at approximately
$0.2 million to be distributed to Mr. Wilken prior to closing of the
Acquisitions.

(6) Excludes a AAA account distribution in the amount of approximately $1.7
million to Mr. Thomas preceding the closing of the Acquisitions. Any
indebtedness incurred to fund this distribution will be repaid by TRIAD on
closing of this Offering.

(7) Represents the cash and shares PENMAN will receive for its THI common stock
that it acquired from THI for approximately $7.5 million in May 1996.
Excludes shares issuable on exercise of the PENMAN Warrant.

(8) Includes $139,000 in cash to be paid to Mr. Sellards under Sun's
Supplemental Executive Retirement Plan, and 50,714 shares to be received by
Mr. Sellards in partial payment of a promissory note. Of the net $1.9
million in cash and 520,715 shares to be paid to the Sun ESOP, $1.5 million
in cash and 35,715 shares are to be deposited in escrow by TRIAD for
purposes of resolving Sun ESOP compliance issues. See "The
Company -- Summary of Terms of the Acquisitions."

(9) Excludes $2.2 million in repayment of the Equus Note, and $0.5 million paid
by HTD in redemption of HTD preferred stock held by Equus II.

HTD

Messrs. Blankenship, and Campbell, Equus II and HTD Holdings (of which Mr.
Klintworth is a 50% owner) currently own all the capital stock of HTD. For
information regarding the organization of HTD, the reorganization of Futuretech,
Inc. ("Futuretech") as a subsidiary of HTD, HTD's acquisition of Medical
Alliance (of which Mr. Klintworth is an executive officer and former owner) and
HTD's sales of its equity securities to Equus II, see Notes 1 and 13 to the
Consolidated Financial Statements of HTD included elsewhere herein.

HTD is being acquired by TRIAD for consideration of approximately $2.5
million in cash and 530,357 shares of Common Stock. In September 1997, HTD
redeemed for $450,000 the HTD preferred stock Equus II purchased from HTD in
April 1997. TRIAD valued HTD on a basis consistent with the other Acquisitions,
using generally the same multiple of cash flow adjusted for stockholders'
compensation and other non-recurring items.

TRIAD reimbursed Futuretech and Medical Alliance approximately $200,000 for
expenses relating to its formation.

REAL ESTATE AND OTHER TRANSACTIONS

HTD leases office space and warehouse facilities in Bessemer, Alabama from
a partnership owned 50% by Mr. Blankenship. TRIAD and the partnership have
agreed to extend the lease term until late 2002 at the present annual rental of
$154,800.

Kentec leases its two facilities from Mr. Wilken. TRIAD and Mr. Wilken have
agreed to extend the leases until late 1999 at the present aggregate annual
rental of $228,000.

Sun leases its offices from a partnership in which Mr. Sellards owns a 70%
general partnership interest. TRIAD and the partnership have agreed to extend
the lease, which provides for annual payments by Sun of approximately $240,000,
until late 2001.

Certain Founding Companies have also entered into financing agreements to
which certain of the principals of the Company are parties. Futuretech has a
$1.5 million revolving line of credit which Mr. Blankenship has personally
guaranteed. Mr. Blankenship has also loaned funds to Futuretech for working
capital purposes. This loan is evidenced by a promissory note payable to Mr.
Blankenship with a current outstanding balance of approximately $102,000 and
which bears interest at 8% per annum, due monthly.

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<PAGE>

In February 1997, Sun borrowed $325,000 from Cysco Enterprises, Inc., a
corporation wholly owned by Mr. Sellards. Under the terms of the note (the
"Cysco Note"), Sun is to repay Cysco principal and interest, at the rate of
prime plus 3%, in amounts equal to one half of collections by Sun of principal
and interest under a line of credit Sun extended to Rejuvena Corporation (the
"Rejuvena Note"). At June 30, 1997, $325,000 was outstanding under the Cysco
Note. Prior to or concurrent with this Offering, Mr. Sellards intends to repay
all amounts outstanding under the Cysco Note in exchange for which he will
receive the stock ownership, options and conversion rights in Rejuvena
Corporation which Sun received under the Rejuvena Note.

Sun loaned $225,000 to Mr. Sellards in January 1991. Mr. Sellards repaid
this loan in March 1996. In May 1995, Sun guaranteed a promissory note (the
"Sellards Note") payable by Mr. Sellards to an unrelated third party, which
note has a current outstanding balance of approximately $514,000. Sun also
guaranteed a loan (the "ESOP Loan") payable by the Sun ESOP to Mr. Sellards,
which loan has a current balance of approximately $2.0 million. In connection
with the closing of the Sun acquisition, TRIAD will repay the ESOP Loan in full
through the repayment of the Sellards Note, a cash payment of approximately $0.7
million and the issuance of 50,714 shares of Common Stock.

MegaTech provided certain services to JAJ Enterprises, Ltd., d/b/a S.O.S.
Technologies ("SOS"), a medical products leasing and training company wholly
owned beneficially by Mr. Marks, including office and warehouse space and
administrative services. SOS paid to MegaTech approximately $120,000, $120,000
and $135,000 in 1994, 1995 and 1996, respectively, for these services. The
relationship between MegaTech and SOS ended as of June 30, 1997.

The Company believes the consideration paid under each of the leases
described above is at fair market rates and the other agreements described above
are fair to the Company.

COMPANY POLICY

In the future, any transactions with directors, officers, employees or
affiliates of the Company are anticipated to be minimal and will, in any case,
be approved in advance by a majority of the board of directors, including a
majority of disinterested members of the board of directors.

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<PAGE>
PRINCIPAL STOCKHOLDERS

The following table shows, immediately after giving effect to the closing
of the Acquisitions and this Offering, the beneficial ownership of the Common
Stock of (i) each person who then will beneficially own more than five percent
of the outstanding shares of TRIAD Common Stock, (ii) each person who then will
be a director of TRIAD, (iii) each person who then will be an executive officer
of TRIAD, and (iv) all persons who then will be directors and executive officers
of TRIAD as a group. The table assumes no other person intends to acquire shares
directly from the Underwriters in connection with this Offering, other than as
set forth in the footnotes to the table.

SHARES BENEFICIALLY OWNED
AFTER OFFERING(2)
---------------------------
BENEFICIAL OWNER(1) NUMBER PERCENT
- ---------------------------------------- ----------- -------
PENMAN Private Equity and Mezzanine
Fund, L.P. (3)........................ 815,974 8.9%
333 West Wacker Drive, Suite 700
Chicago, Illinois 60606
Equus II Incorporated(4)................ 619,927 6.7%
2929 Allen Parkway, Suite 2500
Houston, Texas 77019
Sun Medical Employee Stock Ownership
Plan(5)............................... 485,000 5.3%
1179 Corporate Drive West, Suite 100
Arlington, Texas 76006
William C. Klintworth, Jr.(6)........... 411,036 4.5%
R. Tucker Coop(7)....................... 204,289 2.2%
Clyde A. Blankenship, Jr................ 334,799 3.7%
Walter D. Wallach(8).................... 46,071 *
Lance C. Ruud........................... 44,332 *
Michael W. Thomas....................... 351,000 3.9%
Marvin L. Marks......................... 273,736 3.0%
Greg H. Sellards(9)..................... 79,121 *
Kent J. Wilken(10)...................... 232,857 2.6%
Nolan Lehmann(4)(11).................... 619,927 6.7%
Kelvin J. Pennington(3)................. 815,974 8.9%
John B. Benear II, MD(12)............... 8,000 *
All directors and officers as a group
(12 persons)(6)-(11).................. 3,421,142 37.1%

- ------------

* Less than 1%.

(1) All persons listed have sole voting and investment power with respect to
their shares unless otherwise indicated.

(2) Shares shown do not include shares of Common Stock that could be acquired
on exercise of currently outstanding options which do not vest within 60
days hereof.

(3) Includes 25,000 shares of Common Stock issuable on exercise of the PENMAN
Warrant.

(4) Includes 100,000 shares of Common Stock issuable on exercise of the Equus
II Warrant.

(5) Excludes 35,715 shares to be deposited in escrow for purposes of resolving
Sun ESOP compliance issues and 50,714 shares payable to Mr. Sellards in
partial repayment of a promissory note. Consulting Fiduciaries, Inc., 2745
Riverwoods Road, Riverwoods, Illinois 60015, has been appointed independent
fiduciary of the Sun ESOP.

(6) Includes 141,429 shares of Common Stock issuable to HTD Holdings, in which
Mr. Klintworth has an approximately 50.0% ownership interest; Mr.
Klintworth disclaims beneficial ownership of 70,714 of those shares. See
"Certain Transactions -- Acquisitions Involving Certain Officers,
Directors and Stockholders."

(7) All these shares are owned by a family trust of which Mr. Coop and his
spouse are co-trustees.

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

47
<PAGE>
(8) Includes 4,498 shares of Common Stock issuable on exercise of stock
options.

(9) Includes 20,407 shares of Common Stock issuable to the Sun ESOP for Mr.
Sellards' account and 50,714 shares of Common Stock issuable in repayment
of the Sun ESOP indebtedness to Mr. Sellards.

(10) All these shares are owned by a family trust of which Mr. Wilken and his
spouse are co-trustees.

(11) All of these shares are beneficially owned by Equus II. Mr Lehmann, a
director of TRIAD, is the president and director of Equus II and thus may
be deemed to be the beneficial owner of shares held by Equus II. Mr.
Lehmann disclaims beneficial ownership of all those shares.

(12) All of these shares are beneficially owned by PENMAN. Mr. Pennington, a
director nominee of TRIAD, is the managing general partner of PENMAN
Management, the general partner of PENMAN, and thus may be deemed to be the
beneficial owner of shares held by PENMAN. Mr. Pennington disclaims
beneficial ownership of all those shares.

48
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

On closing of the Acquisitions and this Offering, 9,094,973 shares of
Common Stock will be outstanding. The shares sold in this Offering (other than
to affiliates of the Company) will be freely tradable by the public. The
remaining outstanding shares of Common Stock (collectively, the "Restricted
Shares") have not been registered under the Securities Act and may be resold
publicly only following their effective registration under the Securities Act or
pursuant to an available exemption from the registration requirements of the
Securities Act, such as Rule 144 thereunder ("Rule 144").

In general, under Rule 144 as currently in effect, if a minimum of one year
has elapsed since the later of the date of acquisition of the restricted
securities from the issuer or from an affiliate of the issuer, a person (or
persons whose shares of Common Stock are aggregated), including persons who may
be deemed "affiliates" of TRIAD, would be entitled to sell within any
three-month period a number of shares of Common Stock that does not exceed the
greater of (i) 1% of the then outstanding shares of Common Stock and (ii) the
average weekly trading volume during a preceding period of four calendar weeks.
Sales under Rule 144 are also subject to certain provisions as to the manner of
sale, notice requirements and the availability of current public information
about TRIAD. In addition, under Rule 144, if a period of at least two years has
elapsed since the later of the date restricted securities were acquired from
TRIAD or the date they were acquired from an affiliate of the Company, a
stockholder who is not an affiliate of TRIAD at the time of sale and has not
been an affiliate for at least three months prior to the sale would be entitled
to sell shares of Common Stock in the public market immediately without
compliance with the foregoing Rule 144 requirements. Rule 144 does not require
the same person to have held the securities for the applicable periods under
certain circumstances. The foregoing summary of Rule 144 is not intended to be a
complete description thereof. The SEC has proposed certain amendments to Rule
144 that would, among other things, eliminate the manner of sale requirements
and revise the notice provisions of that rule. The SEC has also solicited
comments on other possible changes to Rule 144, including possible revisions to
the one- and two-year holding periods and the volume limitations referred to
above.

TRIAD has agreed generally not to offer, sell or otherwise dispose of any
shares of Common Stock for a period of two years (the "lockup period")
following the date of this Prospectus without the prior written consent of
NationsBanc Montgomery Securities, Inc., except that the Company may issue
Common Stock in connection with acquisitions, pursuant to awards under the
Incentive Plan or pursuant to the exercise of warrants outstanding as of the
closing of this Offering. Further, all of TRIAD's officers, directors and
current stockholders (including Equus II and PENMAN) and all persons who acquire
shares in connection with the Acquisitions have agreed that they generally will
not offer, sell or otherwise dispose of any of their shares for two years
following the date of this Prospectus without the prior written consent of
NationsBanc Montgomery Securities, Inc.

TRIAD will enter into a registration rights agreement with the former
stockholders of the Founding Companies, Equus and PENMAN (the "RRA"), which will
provide certain registration rights with respect to the Common Stock issued to
such stockholders in the Acquisitions or issuable on the exercise of the Equus
Warrant or the PENMAN Warrant. The RRA will provide for a single demand
registration right, exercisable by the holders of at least 51.0% of the shares
of Common Stock initially subject to the RRA, pursuant to which TRIAD will file
a registration statement under the Securities Act to register the sale of not
less than 1,000,000 shares by those requesting stockholders and any other
holders of Common Stock subject to the agreement who desire to sell pursuant to
such registration statement. The demand request may not be made until November
__, 1999. The demand registration rights conferred by the RRA will terminate on
December 31, 2001. In addition, subject to certain conditions and limitations,
the RRA will provide the holders of Common Stock subject to the RRA with the
right to participate in registrations by TRIAD of its equity securities in
underwritten offerings commencing on November __, 1999,

The RRA requires TRIAD to pay the costs associated with an offering subject
thereto, other than underwriting discounts and commissions and transfer taxes
attributable to the shares sold on behalf of the selling stockholders. The RRA
provides that the number of shares of Common Stock that must be registered

49
<PAGE>

on behalf of selling stockholders is subject to limitation if the managing
underwriter determines that market conditions require such a limitation.
Pursuant to the RRA, TRIAD will indemnify the selling stockholders, and such
selling stockholders will indemnify TRIAD, against certain liabilities in
respect of any registration statement or offering covered by the RRA.

TRIAD may register additional shares of Common Stock under the Securities
Act in the future for its use in connection with future acquisitions. Pursuant
to Securities Act Rule 145, the volume limitations and certain other
requirements of Rule 144 will apply to resales of these shares by affiliates of
the businesses the Company acquires for a period of one year from the date of
their acquisition (or such shorter period as the SEC may prescribe). Otherwise
these shares generally will be freely tradable after their issuance by persons
not affiliated with TRIAD unless TRIAD contractually restricts their sale, and
sales of these shares during the lockup period would require the prior written
consent of NationsBanc Montgomery Securities, Inc.

TRIAD intends to file a registration statement on Form S-8 under the
Securities Act to register the shares of Common Stock reserved or to be
available for issuance pursuant to the Incentive Plan. Shares of Common Stock
issued pursuant to the Incentive Plan after the effective date of that
registration statement generally will be available for sale in the open market
by holders who are not affiliates of TRIAD and, subject to the volume and other
limitations of Rule 144, by holders who are affiliates of TRIAD.

DESCRIPTION OF CAPITAL STOCK

TRIAD's authorized capital stock consists of 20,000,000 shares of Common
Stock, and 1,000,000 shares of preferred stock, par value $.001 per share (the
"Preferred Stock"). At September 8, 1997, 1,097,758 shares of Common Stock and
no shares of Preferred Stock were issued and outstanding. On closing of the
Acquisitions and this Offering, 9,094,973 shares of Common Stock (9,694,973 if
the underwriters' over-allotment option is exercised in full) will be issued,
outstanding and nonassessable and 1,097,987 shares of Common Stock then will be
reserved for issuance pursuant to all then outstanding options, warrants and
other rights (consisting only of Incentive Plan options and the warrants issued
to Equus II and PENMAN). The following summary is qualified in its entirety by
reference to the Charter, which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part.

COMMON STOCK

The Common Stock possesses ordinary voting rights for the election of
directors and in respect of other corporate matters, and each share has one
vote. The Common Stock affords no cumulative voting rights, and the holders of a
majority of the shares voting for the election of directors can elect all the
directors if they choose to do so. The Common Stock carries no preemptive rights
and is not convertible, redeemable, assessable or entitled to the benefits of
any sinking fund. The holders of Common Stock are entitled to dividends in such
amounts and at such times as may be declared by the Board of Directors out of
funds legally available therefor, subject to the dividend preference of any
stock ranking senior to the Common Stock, including the Preferred Stock. See
"Dividend Policy" for information regarding the initial dividend policy of
TRIAD.

PREFERRED STOCK

The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the provisions
of the Charter and limitations prescribed by law, the board of directors is
expressly authorized to adopt resolutions to issue the shares, to fix the number
of shares and to change the number of shares constituting any series, and to
provide for the powers, designations, preferences and relative, participating,
optional or other rights, qualifications, limitations or restrictions thereof,
including without limitation, voting powers, dividend rights (including whether
dividends are cumulative), dividend rates, terms of redemption (including
sinking fund provisions), redemption prices, conversion rights and liquidation
preferences of the shares constituting any class or series of the Preferred
Stock, in each case without any further action or vote by the holders of Common
Stock. Although TRIAD has no present intention to issue shares of Preferred
Stock, the issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For example, the issuance of a series of Preferred Stock might impede
a business combination by including

50
<PAGE>
class voting rights that would enable the holders to block such a transaction;
or such issuance might facilitate a business combination by including voting
rights that would provide a required percentage vote of the stockholders. In
addition, under certain circumstances, the issuance of Preferred Stock could
adversely affect the voting power of the holders of the Common Stock. The Board
of Directors could act in a manner that would discourage an acquisition attempt
or other transaction that some or a majority of the stockholders might believe
to be in their best interests or in which stockholders might receive a premium
for their stock over the then market price of such stock. The Board of Directors
does not at present intend to seek stockholder approval prior to any issuance of
currently authorized stock, unless otherwise required by law or the rules of any
market on which TRIAD's securities are traded.

WARRANTS

TRIAD has issued warrants to purchase an aggregate of 125,000 shares of
Common Stock, exercisable at the initial public offering price per share, and of
which warrants to purchase 100,000 shares and 25,000 shares of Common Stock
expire in April 2002 and September 2002, respectively. The warrants were issued
to Equus II (100,000 shares) in connection with TRIAD's start-up funding and
PENMAN (25,000 shares) in connection with the organization of TRIAD. The
exercise price and the number of shares underlying these warrants are subject to
adjustment in certain events, including the declaration or payment of certain
dividends on the Common Stock or securities convertible into Common Stock
(subject to certain exceptions), stock splits, combinations, and
reclassification of shares. In addition, the exercise price is subject to
adjustment on the issuance of additional shares of Common Stock or rights
thereto, subject to certain exceptions, at certain price levels. In the case of
certain extraordinary transactions, including, without limitation, a merger or
consolidation or the sale of all or substantially all the assets of TRIAD, these
warrants become exercisable for the number of shares of stock, securities or
other property which the Common Stock issuable on exercise of these warrants
would have been entitled as a result of such transactions, together with any
necessary adjustments.

STATUTORY BUSINESS COMBINATION PROVISION

TRIAD is a Delaware corporation and is subject to Section 203 of the DGCL.
In general, Section 203 prevents an "interested stockholder" (defined
generally as a person owning 15% or more of a corporation's outstanding voting
stock) from engaging in a "business combination" (as defined) with a Delaware
corporation for three years following the date such person became an interested
stockholder unless: (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the rights to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer); or (iii) following the transaction in which such person became an
interested stockholder, the business combination was approved by the board of
directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote of the holders of 66 2/3% of the outstanding voting stock of
the corporation not owned by the interested stockholder. Under Section 203, the
restrictions described above also do not apply to certain business combinations
proposed by an interested stockholder following the announcement or notification
of one of certain extraordinary transactions involving the corporation and a
person who had not been an interested stockholder during the previous three
years or who became an interested stockholder with the approval of the majority
of the corporation's directors, if such extraordinary transaction is approved or
not opposed by a majority of the directors who were directors prior to any
person becoming an interested stockholder during the previous three years or
were recommended for election or elected to succeed such directors by a majority
of such directors.

OTHER MATTERS

Delaware law authorizes Delaware corporations to limit or eliminate the
personal liability of their directors to them and their stockholders for
monetary damages for breach of a director's fiduciary duty of

51
<PAGE>
care. The duty of care requires that, when acting on behalf of the corporation,
directors must exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations authorized by
Delaware law, directors are accountable to corporations and their stockholders
for monetary damages for conduct constituting gross negligence in the exercise
of their duty of care. Delaware law enables Delaware corporations to limit
available relief to equitable remedies such as injunction or rescission. The
Charter limits the liability of directors of TRIAD to the Company or its
stockholders to the fullest extent permitted by Delaware law. Specifically, no
member of the Board of Directors will be personally liable for monetary damages
for breach of a director's fiduciary duty as a director, except for liability
(i) for any breach of the member's duty of loyalty to TRIAD or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for unlawful payments of
dividends or unlawful stock repurchases or redemptions as provided in Section
174 of the DGCL or (iv) for any transaction from which the member derived an
improper personal benefit. This Charter provision may have the effect of
reducing the likelihood of derivative litigation against directors and may
discourage or deter stockholders or management from bringing a lawsuit against
directors for breach of their duty of care, even though such an action, if
successful, might otherwise have benefited TRIAD and its stockholders. The
Charter and Bylaws provide indemnification to TRIAD's officers and directors and
certain other persons with respect to certain matters, and TRIAD has entered
into agreements with each of its directors and executive officers providing for
indemnification with respect to certain matters.

The Charter provides that: (i) stockholders may act only at an annual or
special meeting of stockholders and may not act by written consent; and (ii)
special meetings of the stockholders can be called only by the chairman of the
board, the chief executive officer, the president or a majority of the Board of
Directors. The Charter also provides that the Board of Directors shall consist
of three classes of directors serving for staggered terms. As a result, it is
currently contemplated that approximately one-third of the Board of Directors
will be elected each year. The classified board provision could prevent a party
who acquires control of a majority of the outstanding voting stock of TRIAD from
obtaining control of the Board of Directors until the second annual
stockholders' meeting following the date the acquirer obtains the controlling
interest. See "Management -- Directors and Executive Officers." The Charter
provides that the number of directors shall be as determined by the Board of
Directors from time to time, but shall not be less than three. It also provides
that directors may be removed only for cause, and then only by the affirmative
vote of the holders of at least two-thirds of all outstanding voting stock. This
provision, in conjunction with the Charter provisions authorizing the board of
directors to fill vacant directorships, will prevent stockholders from removing
incumbent directors without cause and filling the resulting vacancies with their
own nominees.

STOCKHOLDER PROPOSALS

TRIAD's Bylaws contain provisions requiring that advance notice be
delivered to TRIAD of any business to be brought by a stockholder before an
annual meeting of stockholders and establishing certain procedures to be
followed by stockholders in nominating persons for election to the Board of
Directors. Generally, such advance notice provisions provide that written notice
must be given to the secretary of TRIAD by a stockholder (i) in the event of
business to be brought by a stockholder before an annual meeting and (ii) in the
event of nominations of persons for election to the Board of Directors by any
stockholder, not less than 60 nor more than 180 days prior to the anniversary
date of the immediately preceding annual meeting of stockholders (with certain
exceptions if the date of the annual meeting is different by more than specified
periods from the anniversary date). Such notice must set forth specific
information regarding such stockholder and such business or director nominee, as
described in TRIAD's Bylaws. The foregoing summary is qualified in its entirety
by reference to TRIAD's Bylaws, which are filed as an exhibit to the
Registration Statement of which this Prospectus is a part.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.

52
<PAGE>
UNDERWRITING

The Underwriters named below (the "Underwriters"), represented by
NationsBanc Montgomery Securities, Inc., Smith Barney Inc. and Wedbush Morgan
Securities (the "Representatives"), have severally agreed, subject to the
terms and conditions in the underwriting agreement (the "Underwriting
Agreement") by and between TRIAD and the Underwriters, to purchase from TRIAD
the aggregate number of shares of Common Stock indicated below, opposite their
respective names, at the initial public offering price less the underwriting
discount set forth on the cover page of this Prospectus. The Underwriting
Agreement provides that the obligations of the Underwriters are subject to
certain conditions precedent, and that the Underwriters are committed to
purchase all of the shares of Common Stock, if they purchase any.

NUMBER OF
UNDERWRITERS SHARES
- ---------------------------------------- ---------
NationsBanc Montgomery Securities,
Inc. .................................
Smith Barney Inc........................
Wedbush Morgan Securities...............

---------
Total.............................. 4,000,000
=========

The Representatives have advised TRIAD that the Underwriters propose
initially to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus. The Underwriters may allow selected dealers a
concession of not more than $ per share; and the Underwriters may allow, and
such dealers may reallow, a concession of not more than $ per share to
certain other dealers. After the initial public offering, the public offering
price and other selling terms may be changed by the Representatives. The Common
Stock is offered subject to receipt and acceptance by the Underwriters, and to
certain other conditions, including the right to reject orders in whole or in
part.

TRIAD has granted an option to the Underwriters, exercisable during the
30-day period after the date of this Prospectus, to purchase up to a maximum of
600,000 additional shares of Common Stock to cover over-allotments, if any, at
the same price per share as the initial 4,000,000 shares to be purchased by the
Underwriters. To the extent that the Underwriters exercise such over-allotment
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with this Offering.

The Underwriting Agreement provides that TRIAD will indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or will contribute to payments the Underwriters may be required
to make in respect thereof.

The individuals who will be officers or directors of TRIAD when this
Offering closes, TRIAD's current stockholders (including Equus II) and all
persons who acquire shares of Common Stock in the Acquisitions who, immediately
following this Offering, collectively will beneficially own an aggregate of at
least 5,241,540 shares of Common Stock (including shares issuable upon the
exercise of outstanding options and warrants exercisable within 60 days of the
closing of this Offering), have agreed that for a period of two years after the
date of this Prospectus they will not, without the prior written consent of
NationsBanc Montgomery Securities, Inc., directly or indirectly sell, offer,
contract or grant any option to sell, pledge, transfer, establish an open put
equivalent position or otherwise dispose of any shares of Common Stock, options
or warrants to acquire shares of Common Stock, or securities exchangeable or

53
<PAGE>

exercisable for or convertible into shares of Common Stock. TRIAD has also
agreed not to, directly or indirectly, sell, offer, contract or grant any option
to sell, pledge, transfer or establish an open put equivalent position or
otherwise dispose of or transfer, or announce the offering of, or file any
registration statement under the Securities Act in respect of, any shares of
Common Stock, options or warrants to acquire shares of the Common Stock or
securities exchangeable or exercisable for or convertible into shares of Common
Stock, for a period of two years after the date of this Prospectus without the
prior written consent of NationsBanc Montgomery Securities, Inc., except for
securities issued by TRIAD in connection with Acquisitions, awards under the
Incentive Plan or pursuant to the exercise of warrants outstanding as of the
closing of this Offering, subject in each case to any remaining portion of the
two year period applying to shares so issued. In evaluating any request for a
waiver of the two year lockup period, NationsBanc Montgomery Securities, Inc.
will consider, in accordance with its customary practice, all relevant facts and
circumstances at the time of the request, including, without limitation, the
recent trading market for the Common Stock, the size of the request and, with
respect to a request by TRIAD to issue additional equity securities, the purpose
of that issuance. See "Shares Eligible for Future Sale."

The Representatives have informed TRIAD that the Underwriters do not expect
to make sales of Common Stock offered by this Prospectus to accounts over which
they exercise discretionary authority in excess of 5% of the number of shares of
Common Stock offered hereby.

Prior to this Offering, there has been no public trading market for the
Common Stock. Consequently, the initial public offering price of the Common
Stock will be determined by negotiations between TRIAD and the Representatives.
Among the factors they will consider in such negotiations are the history of,
and the prospects for, the Company and the industry in which the Company
competes, an assessment of the Company's management, its financial condition,
its past and present earnings and the trend of such earnings, the prospects for
future earnings of the Company, the present state of the Company's development,
the general condition of the economy and the securities markets at the time of
this Offering and the market prices of and demand for publicly traded common
stock of comparable companies in recent periods.

Until the distribution of the Common Stock is completed, rules of the SEC
may limit the ability of the Underwriters and certain selling group members to
bid for and purchase the Common Stock. As an exception to these rules, the
Representatives are permitted to engage in certain transactions that stabilize
the price of the Common Stock. Such transactions consist of bids or purchases
for the purpose of pegging, fixing or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in connection
with this Offering, I.E., if they sell more shares of Common Stock than are set
forth on the cover page of this Prospectus, the Representatives may reduce that
short position by purchasing Common Stock in the open market. The
Representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described above. The Representatives may also
impose a penalty bid on certain Underwriters and selling group members. This
means that if the Representatives purchase shares of Common Stock in the open
market to reduce the Underwriters' short position or to stabilize the price of
the Common Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of this
Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security. Neither TRIAD nor any of the Underwriters
makes any representation or predictions as to the direction or magnitude of any
effect that the transactions described above may have on the price of the Common
Stock. In addition, neither TRIAD nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.

54
<PAGE>
LEGAL MATTERS

Certain legal matters in connection with the sale of the common stock
offered hereby are being passed upon for TRIAD by Porter & Hedges, L.L.P.,
Houston, Texas, and for the Underwriters by Baker & Botts, L.L.P., Houston,
Texas.

EXPERTS

The audited financial statements included in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.

ADDITIONAL INFORMATION

TRIAD has not previously been subject to the reporting requirements of the
Exchange Act. TRIAD has filed a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act with the SEC with respect
to this Offering. This Prospectus, filed as a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, or the exhibits thereto, in accordance with the rules and regulations
of the SEC, and reference is hereby made to such omitted information. The
statements made in this Prospectus concerning documents filed as exhibits to the
Registration Statement accurately describe the material provisions of such
documents and are qualified in their entirety by reference to such exhibits for
complete statements of their provisions. The Registration Statement and the
exhibits thereto may be inspected, without charge, at the public reference
facilities of the SEC at its principal office at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and its regional offices at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and at 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of all
or any portion of the Registration Statement can be obtained at prescribed rates
from the Public Reference Section of the SEC at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The
SEC maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the SEC. The address of that site is http://www.sec.gov.

55
<PAGE>
INDEX TO FINANCIAL STATEMENTS

PAGE
-----
TRIAD MEDICAL INC. AND FOUNDING COMPANIES
Unaudited Pro Forma Combined Financial Statements
Basis of Presentation ............................................ F-3
Unaudited Pro Forma Combined Balance Sheet ....................... F-4
Unaudited Pro Forma Combined Statements of Operations ............ F-5
Notes to Unaudited Pro Forma Combined Financial Statements ....... F-8
FOUNDING COMPANIES
Historical Financial Statements
TRIAD Medical Inc. ...............................................
Report of Independent Public Accountants .................... F-12
Balance Sheets .............................................. F-13
Statements of Operations .................................... F-14
Statements of Stockholders' Equity .......................... F-15
Statements of Cash Flows .................................... F-16
Notes to Financial Statements ............................... F-17
TRIAD Holdings, Inc. and Subsidiaries
Report of Independent Public Accountants .................... F-21
Consolidated Balance Sheets ................................. F-22
Consolidated Statements of Operations ....................... F-23
Consolidated Statements of Stockholders' Equity ............. F-24
Consolidated Statements of Cash Flows ....................... F-25
Notes to Consolidated Financial Statements .................. F-26
Healthcare Technology Delivery, Inc. and Subsidiaries
Report of Independent Public Accountants .................... F-36
Consolidated Balance Sheets ................................. F-37
Consolidated Statements of Operations ....................... F-38
Consolidated Statements of Stockholders' Equity ............. F-39
Consolidated Statements of Cash Flows ....................... F-40
Notes to Consolidated Financial Statements .................. F-41
Sun Medical, Inc. ................................................
Report of Independent Public Accountants .................... F-49
Balance Sheets .............................................. F-50
Statements of Operations .................................... F-51
Statements of Stockholder's Deficit ......................... F-52
Statements of Cash Flows .................................... F-53
Notes to Financial Statements ............................... F-54

F-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS -- (CONTINUED)

PAGE
-----
Custom Medical Specialties, Inc. ..................................
Report of Independent Public Accountants ..................... F-63
Balance Sheets ............................................... F-64
Statements of Operations ..................................... F-65
Statements of Stockholder's Equity ........................... F-66
Statements of Cash Flows ..................................... F-67
Notes to Financial Statements ................................ F-68
Kentec Medical, Inc. ..............................................
Report of Independent Public Accountants ..................... F-73
Balance Sheets ............................................... F-74
Statements of Operations ..................................... F-75
Statements of Stockholder's Equity ........................... F-76
Statements of Cash Flows ..................................... F-77
Notes to Financial Statements ................................ F-78
Products for Surgery, Inc. and
Subsidiaries
Report of Independent Public Accountants ..................... F-83
Consolidated Balance Sheets .................................. F-84
Consolidated Statements of Operations ........................ F-85
Consolidated Statements of Stockholders' Equity .............. F-86
Consolidated Statements of Cash Flows ........................ F-87
Notes to Consolidated Financial Statements ................... F-88
MegaTech Medical, Inc. ............................................
Report of Independent Public Accountants ..................... F-95
Balance Sheets ............................................... F-96
Statements of Operations ..................................... F-97
Statements of Stockholders' Equity ........................... F-98
Statements of Cash Flows ..................................... F-99
Notes to Financial Statements ................................ F-100
Omni Medical, Inc. ................................................
Report of Independent Public Accountants ..................... F-104
Balance Sheets ............................................... F-105
Statements of Operations ..................................... F-106
Statements of Stockholders' Equity (Deficit) ................. F-107
Statements of Cash Flows ..................................... F-108
Notes to Financial Statements ................................ F-109
PCI Medical, Inc. .................................................
Report of Independent Public Accountants ..................... F-114
Statement of Operations ...................................... F-115
Statement of Cash Flows ...................................... F-116
Notes to Financial Statements ................................ F-117

F-2
<PAGE>
TRIAD MEDICAL INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION

The following unaudited pro forma combined statements of operations give
effect to the following transactions and events (the Transactions) as if they
had occurred on January 1, 1996: (i) the organization of TRIAD Medical Inc.
(TRIAD) and the issuance of shares of its common stock (Common Stock) and
preferred stock; (ii) the conversion of outstanding TRIAD preferred stock into
Common Stock; (iii) a split of the outstanding Common Stock; (iv) the
acquisitions (the Acquisitions) by TRIAD of (a) Triad Holdings, Inc. (THI), (b)
Healthcare Technology Delivery, Inc. (HTD), (c) Sun Medical, Inc. (Sun), (d)
Custom Medical Specialties, Inc. (CMS), (e) Kentec Medical, Inc. (Kentec), (f)
Products for Surgery, Inc. (Products for Surgery), (g) MegaTech Medical, Inc.
(MegaTech), (h) Omni Medical, Inc. (Omni), (i) New England Medical Specialties
Inc. (New England Specialties), (j) Professional Equipment Co., Inc.
(Professional Equipment) and (k) Wilson Medical Specialties, Inc. (Wilson)
(together, the Founding Companies); and (v) the closing of TRIAD's initial
public offering of Common Stock (the Offering) and the application of the
estimated net proceeds therefrom. The following unaudited pro forma balance
sheet gives effect to the following as if they had occurred on September 30,
1997: (i) the Acquisitions; (ii) the net incurrence of indebtedness by TRIAD and
the Founding Companies since September 30, 1997; and (iii) the Offering and the
application of the estimated proceeds therefrom.

TRIAD and the Founding Companies are hereinafter collectively referred to
as the Company. New England Specialties, Wilson and Professional Equipment are
sometimes hereinafter collectively referred to as the Other Founding Companies.
The Acquisitions will become effective concurrently with the closing of the
Offering and TRIAD will account for the Acquisitions (except for the acquisition
of THI) using the purchase method of accounting. THI is presented as the
accounting acquirer.

These pro forma statements do not purport to represent what the Company's
financial position or results of operations actually would have been had the
Transactions in fact occurred when assumed or to project that financial position
or those results of operations for any future period.

TRIAD has preliminarily analyzed the savings it expects to realize from
reductions in compensation and benefits to the owners and certain key employees
of the Founding Companies to which they have contractually agreed and other
known cost eliminations, and the pro forma combined statements of operations
reflect these reductions. TRIAD cannot currently quantify other potential cost
savings it may achieve through combining and integrating the operations of the
Founding Companies and expects those savings will be offset by incremental costs
TRIAD expects to incur, but also cannot currently quantify, such as costs
associated with corporate management and being a public company. The pro forma
combined statements of operations reflect neither the unquantifiable savings nor
the unquantifiable incremental costs.

The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that management deems appropriate and may be
revised as additional information becomes available. However, management does
not expect the final purchase price allocation to be materially different from
the preliminary allocation nor does it expect there to be any material post
closing adjustments. The unaudited pro forma combined financial information
presented herein does not reflect pro forma adjustments giving effect to the
acquisitions of (i) Medical Companies Alliance, Inc. (MCA) by HTD in 1997, (ii)
three companies by THI in 1997 or (iii) one company by Products for Surgery in
1996 because the individual and combined effect of including such adjustments
would not be material. Because the Founding Companies have not been under common
control or management, their historical combined results may not be comparable
to, or indicative of, future performance. The unaudited pro forma combined
financial statements should be read in conjunction with the other financial
statements and notes thereto included elsewhere in this Prospectus. See "Risk
Factors."

The Company has recently received a commitment from First Chicago Capital
Markets, Inc. to provide the Company with a $40.0 million credit facility which
may be used for acquisitions, working capital and other general corporate
purposes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Pro Forma Combined -- Liquidity and Capital
Resources."

F-3
<PAGE>
TRIAD MEDICAL INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRODUCTS
FOR
TRIAD THI HTD SUN CMS KENTEC SURGERY
-------- ---------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........ $349,177 $ 353,338 $ 82,101 $ 608,211 $1,329,864 $ 618,464 $ 115,253
Short-term investments........... -- -- -- -- -- 112,481 --
Accounts receivable.............. -- 9,238,611 2,157,884 2,543,067 1,118,468 1,407,069 870,677
Notes receivable................. -- 56,649 -- -- -- -- 17,274
Inventories...................... -- 4,275,413 2,462,720 1,178,641 875,662 1,647,056 1,474,985
Prepaids......................... -- 429,644 11,965 62,633 62,723 -- 40,115
Deferred income taxes............ -- 345,000 36,306 126,941 -- 23,370 119,266
Other current assets............. -- 142,516 -- -- -- -- --
---------- ----------- ---------- ---------- ---------- ---------- ----------
TOTAL CURRENT ASSETS.............. 349,177 14,841,171 4,750,976 4,519,493 3,386,717 3,808,440 2,637,570
---------- ----------- ---------- ---------- ---------- ---------- ----------
PROPERTY AND EQUIPMENT, net....... 14,345 4,545,595 313,541 79,383 51,138 132,269 184,413
GOODWILL.......................... -- 4,175,202 1,665,592 -- -- -- 95,350
OTHER NON-CURRENT ASSETS.......... 3,587,441 224,434 35,669 719,899 3,685 217,955 345,222
---------- ----------- ---------- ---------- ---------- ---------- ----------
TOTAL ASSETS...................... $3,950,963 $23,786,402 $6,765,778 $5,318,775 $3,441,540 $4,158,664 $3,262,555
========== =========== ========== ========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Maturities of Long-Term
Debt............................ $ -- $ 1,335,308 $ 169,136 $ 450,000 $ -- $ -- $ --
Current obligations under capital
leases.......................... -- 527,301 32,403 -- -- -- --
Short-term debt.................. 1,059,586 100,000 703,396 -- 1,100,000 -- 292,473
Accounts payable and accrued
liabilities..................... 2,135,314 8,606,865 3,079,047 3,546,281 790,083 1,072,903 1,293,111
Pro forma cash considerations
due to Founding Companies....... -- -- -- -- -- -- --
---------- ----------- ---------- ---------- ---------- ---------- ----------
TOTAL CURRENT LIABILITIES......... 3,194,900 10,569,474 3,983,982 3,996,281 1,890,083 1,072,903 1,585,584
---------- ----------- ---------- ---------- ---------- ---------- ----------
OBLIGATIONS UNDER CAPITAL LEASES.. -- 416,932 63,670 -- -- -- --
LONG-TERM DEBT, net of current
maturities....................... -- 3,403,809 -- 400,000 -- -- 142,914
STOCKHOLDERS' NOTES............... -- 468,229 -- 1,500,000 9,500 -- --
DEFERRED INCOME TAX LIABILITIES... -- 322,000 10,824 6,959 -- -- 44,766
OTHER............................. -- 1,133,988 -- 259,983 -- -- 500,000
STOCKHOLDERS' EQUITY:
Common stock..................... 1,098 24,104 900 2,673,357 1,000 46,000 10,588
Warrants to purchase common stock 500,000 -- -- -- -- --
Additional paid-in capital....... 4,720,999 6,618,948 1,611,800 (222,789) -- -- 355,892
Retained earnings................ 4,466,034) 828,918 1,094,602 (3,295,016) 1,752,957 3,039,761 622,811
Treasury stock................... -- -- -- -- (212,000) -- --
---------- ----------- ---------- ---------- ---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY........ 756,063 7,471,970 2,707,302 (844,448) 1,541,957 3,085,761 989,291
---------- ----------- ---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY........................... $3,950,963 $23,786,402 $6,765,778 $5,318,775 $3,441,540 $4,158,664 $3,262,555
========== =========== ========== ========== ========== ========== ==========

OTHER
FOUNDING PRO FORMA POST MERGER AS
MEGATECH OMNI COMPANIES ADJUSTMENTS PRO FORMA ADJUSTMENTS ADJUSTED
---------- --------- --------- ----------- ---------- ----------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........... $ 67,143 $ 53,426 $ 23,849 $(1,300,000) $2,300,826 $ 840,487 $3,141,313
Short-term investments.............. -- -- -- -- 112,481 -- 112,481
Accounts receivable................. 988,334 762,954 1,420,736 -- 20,507,800 -- 20,507,800
Notes receivable.................... -- -- 6,249 -- 80,172 -- 80,172
Inventories......................... 683,347 1,977,070 1,393,583 -- 15,968,477 -- 15,968,477
Prepaids............................ 18,036 -- 55,651 -- 680,767 -- 680,767
Deferred income taxes............... -- -- 25,000 -- 675,883 -- 675,883
Other current assets................ 49 -- -- -- 142,565 -- 142,565
---------- ---------- ---------- ----------- ----------- ----------- -----------
TOTAL CURRENT ASSETS................. 1,756,909 2,793,450 2,925,068 (1,300,000) 40,468,971 840,487 41,309,458
---------- ---------- ---------- ----------- ----------- ----------- -----------
PROPERTY AND EQUIPMENT, net.......... 59,158 8,586 300,529 -- 5,688,957 -- 5,688,957
GOODWILL............................. -- -- -- 23,172,737 29,108,881 -- 29,108,881
OTHER NON-CURRENT ASSETS............. 37,925 113,750 208,941 1,676,968 7,171,889 (3,587,441) 3,584,448
---------- ---------- ---------- ----------- ----------- ----------- -----------
TOTAL ASSETS......................... $1,853,992 $2,915,786 $3,434,538 $23,549,705 $82,438,698 $(2,746,954) $79,691,744
========== ========== ========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Maturities of Long-Term
Debt............................... $ -- $ -- $297,613 $ -- $2,252,057 $(2,252,057) $ --
Current obligations under capital
leases............................. -- -- -- -- 559,704 -- 559,704
Short-term debt..................... 30,000 1,450,000 29,941 1,800,000 6,565,396 (6,565,396) --
Accounts payable and accrued
liabilities........................ 75,525 1,567,401 1,461,747 900,000 24,528,277 (2,135,314) 22,392,963
Pro forma cash considerations due to
Founding Companies................. -- -- -- 22,220,059 22,220,059 (22,220,059) --
---------- ---------- ---------- ----------- ----------- ----------- -----------
TOTAL CURRENT LIABILITIES............ 105,525 3,017,401 1,789,301 24,920,059 56,125,493 (33,172,826) 22,952,667
---------- ---------- ---------- ----------- ----------- ----------- -----------
OBLIGATIONS UNDER CAPITAL LEASES..... -- -- -- -- 480,602 -- 480,602
LONG-TERM DEBT, net of current
maturities.......................... -- -- 695,211 (1,035,000) 3,606,934 (3,606,934) --
STOCKHOLDERS' NOTES.................. -- -- 96,924 -- 2,074,653 (2,074,653) --
DEFERRED INCOME TAX LIABILITIES...... -- -- -- -- 384,549 -- 384,549
OTHER................................ 42,800 -- -- -- 1,936,771 -- 1,936,771
STOCKHOLDERS' EQUITY:
Common stock........................ 35,000 1,700 15,954 (2,804,606) 5,095 4,000 9,095
Warrants to purchase common stock... -- -- -- -- 500,000 -- 500,000
Additional paid-in capital.......... -- 83,300 30,000 3,267,927 16,466,077 36,103,459 52,569,536
Retained earnings................... 1,723,667 (186,615) 851,253 (1,107,780) 858,524 -- 858,524
Treasury stock...................... (53,000) -- (44,105) 309,105 -- -- --
---------- ---------- ---------- ----------- ----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY........... 1,705,667 (101,615) 853,102 (335,354) 17,829,696 36,107,459 53,937,155
---------- ---------- ---------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY.............................. $1,853,992 $2,915,786 $3,434,538 $23,549,705 $82,438,698 $(2,746,954) $79,691,744
========== ========== ========== =========== =========== =========== ===========
</TABLE>

F-4
<PAGE>
TRIAD MEDICAL INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
TRIAD THI HTD SUN CMS KENTEC
---------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES............................. $ -- $36,257,683 $16,475,288 $13,037,884 $9,599,162 $14,412,116
COST OF REVENUES..................... -- 27,492,002 11,042,497 8,595,560 7,022,412 10,060,368
---------- ---------- ---------- ---------- --------- ----------
Gross profit........................ -- 8,765,681 5,432,791 4,442,324 2,576,750 4,351,748

SELLING EXPENSES..................... -- 3,395,801 2,724,858 1,820,170 674,321 1,750,968
GENERAL & ADMINISTRATIVE EXPENSES.... -- 3,017,319 2,353,122 2,121,559 781,362 2,316,731
DEPRECIATION & AMORTIZATION.......... -- 763,071 120,445 60,544 20,933 100,715
---------- ---------- ---------- ---------- --------- ----------
INCOME FROM OPERATIONS............... -- 1,589,490 234,366 440,051 1,100,134 183,334

OTHER INCOME (EXPENSE)
Interest income..................... -- 64,588 11,525 48,308 35,010 28,750
Interest expense.................... -- (368,831) (44,425) (246,549) (950) --
Other............................... -- (113,990) (63,615) -- 7,025 (7,666)
---------- ---------- ---------- ---------- --------- ----------
INCOME BEFORE INCOME TAXES........... -- 1,171,257 137,851 241,810 1,141,219 204,418

PROVISION FOR INCOME TAXES........... -- 464,885 54,782 242,589 -- 50,496
---------- ---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS).................... $ -- $ 706,372 $ 83,069 $ (779) $1,141,219 $ 153,922
========== ========== ========== ========== ========== ==========
PRO FORMA NET INCOME PER SHARE.......
SHARES USED IN COMPUTING PRO FORMA
NET INCOME PER SHARE................

OTHER
PRODUCTS FOR FOUNDING PRO FORMA
SURGERY MEGATECH OMNI PCI COMPANIES ADJUSTMENTS
------------ --------- --------- ---------- ---------- -----------
REVENUES............................. $8,824,903 $6,820,737 $6,081,614 $6,049,214 $10,936,076 $ --
COST OF REVENUES..................... 5,407,012 4,214,729 4,266,448 2,967,047 7,144,545 --
------------ --------- --------- ---------- ---------- -----------
Gross profit........................ 3,417,891 2,606,008 1,815,166 3,082,167 3,791,531 --
SELLING EXPENSES..................... 1,151,109 1,327,796 617,375 724,656 1,798,981
GENERAL & ADMINISTRATIVE EXPENSES.... 1,909,709 932,104 827,166 1,558,923 1,686,396 (3,453,703)(h)
(332,865)(j)
DEPRECIATION & AMORTIZATION.......... 103,951 17,657 7,602 131,644 105,894 579,318(k)
------------ --------- --------- ---------- ---------- -----------
INCOME FROM OPERATIONS............... 253,122 328,451 363,023 666,944 200,260 3,207,250
OTHER INCOME (EXPENSE)
Interest income..................... 3,698 901 5,935 4,888 2,161
Interest expense.................... (107,623) (18,212) (489) (6,460) (126,177) 819,716(l)
Other............................... 304,925 135,000 -- 65,186 33,485 (203,549)(m)
------------ --------- --------- ---------- ---------- -----------
INCOME BEFORE INCOME TAXES........... 454,122 446,140 368,469 730,558 109,729 3,823,417
PROVISION FOR INCOME TAXES........... 91,600 -- -- -- 41,024 2,897,588(n)
------------ --------- --------- ---------- ---------- -----------
NET INCOME (LOSS).................... $ 362,522 $ 446,140 $ 368,469 $ 730,558 $ 68,705 $ 925,829
============ ========= ========= ========== ========== ===========
PRO FORMA NET INCOME PER SHARE.......

SHARES USED IN COMPUTING PRO FORMA
NET INCOME PER SHARE................
</TABLE>
AS
ADJUSTED
-----------
REVENUES............................. $128,494,677
COST OF REVENUES..................... 88,212,620
-----------
Gross profit........................ 40,282,057
SELLING EXPENSES..................... 15,986,035
GENERAL & ADMINISTRATIVE EXPENSES.... 13,717,823

DEPRECIATION & AMORTIZATION.......... 2,011,774
-----------
INCOME FROM OPERATIONS............... 8,566,425
OTHER INCOME (EXPENSE)
Interest income..................... 205,764
Interest expense.................... (100,000)
Other............................... 156,801
-----------
INCOME BEFORE INCOME TAXES........... 8,828,990
PROVISION FOR INCOME TAXES........... 3,842,964
-----------
NET INCOME (LOSS).................... $ 4,986,026
===========
PRO FORMA NET INCOME PER SHARE....... $ 0.54
===========
SHARES USED IN COMPUTING PRO FORMA
NET INCOME PER SHARE................ 9,161,355(o)
===========

F-5
<PAGE>
TRIAD MEDICAL INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRODUCTS FOR
TRIAD THI HTD SUN CMS KENTEC SURGERY
--------- ---------- ---------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES............................. $ $26,167,703 $12,202,645 $9,780,791 $7,029,495 $10,968,994 $6,850,075
COST OF SALES........................ 20,175,059 8,217,283 6,792,836 5,123,931 7,673,528 4,498,464
--------- ---------- ---------- --------- --------- ---------- ------------
Gross profit........................ 5,992,644 3,985,362 2,987,955 1,905,564 3,295,466 2,351,611

SELLING.............................. 2,397,533 1,986,077 941,440 527,849 1,360,928 813,484
GENERAL & ADMINISTRATIVE............. 1,898,138 1,787,624 1,378,739 590,468 1,687,306 1,346,747
DEPRECIATION & AMORTIZATION
EXPENSE............................. 502,095 89,159 45,000 16,177 91,990 58,264
--------- ---------- ---------- --------- --------- ---------- ------------
INCOME (LOSS) FROM OPERATIONS........ 1,194,878 122,502 622,776 771,070 155,242 133,116

OTHER INCOME (EXPENSE)
Interest income..................... 48,188 263 27,949 15,612 23,492 3,645
Interest expense.................... (248,140) (30,349) (176,195) (475) -- (87,688)
Other............................... (83,406) (908) -- (475) (7,851) 15,936
--------- ---------- ---------- --------- --------- ---------- ------------
INCOME BEFORE INCOME TAXES........... 911,520 91,508 474,530 785,732 170,883 65,009

PROVISION FOR INCOME TAXES........... 357,436 36,365 199,014 -- 40,965 16,295
--------- ---------- ---------- --------- --------- ---------- ------------
NET INCOME FROM OPERATIONS........... $ $ 554,084 $ 55,143 $ 275,516 $ 785,732 $ 129,918 $ 48,714
========= ========== ========== ========= ========= ========== ============
PRO FORMA INCOME PER SHARE...........
SHARES USED IN COMPUTING PRO FORMA
INCOME PER SHARE....................

OTHER
FOUNDING PRO FORMA AS
MEGATECH OMNI PCI COMPANIES ADJUSTMENTS ADJUSTED
--------- --------- --------- --------- ----------- ----------
REVENUES............................. $5,072,584 $4,702,781 $6,049,214 $8,003,432 $ -- $96,827,714
COST OF SALES........................ 2,815,612 3,255,092 2,967,047 5,325,962 -- 66,844,814
--------- --------- --------- --------- ----------- ----------
Gross profit........................ 2,256,972 1,447,689 3,082,167 2,677,470 -- 29,982,900
SELLING.............................. 876,883 389,479 724,656 1,191,260 -- 11,209,589
GENERAL & ADMINISTRATIVE............. 777,487 676,327 1,558,923 1,274,254 (2,466,642)(h) 10,176,506
(332,865)(k)
DEPRECIATION & AMORTIZATION
EXPENSE............................. 10,293 5,921 131,644 83,725 434,489(j) 1,468,757
--------- --------- --------- --------- ----------- ----------
INCOME (LOSS) FROM OPERATIONS........ 592,309 375,962 666,944 128,231 2,365,018 7,128,048
OTHER INCOME (EXPENSE)
Interest income..................... 62 3,682 4,888 1,621 129,402
Interest expense.................... -- (443) (6,460) (94,712) 569,462(l) (75,000)
Other............................... -- -- 65,186 2,614 (169,110)(m) (178,014)
--------- --------- --------- --------- ----------- ----------
INCOME BEFORE INCOME TAXES........... 592,371 379,201 730,558 37,754 2,765,370 7,004,436
PROVISION FOR INCOME TAXES........... -- -- -- 16,397 2,414,023(n) 3,080,495
--------- --------- --------- --------- ----------- ----------
NET INCOME FROM OPERATIONS........... $ 592,371 $ 379,201 $ 730,558 $ 21,357 $ 351,347 $3,923,941
========= ========= ========= ========= =========== ==========
PRO FORMA INCOME PER SHARE........... $ 0.43
==========
SHARES USED IN COMPUTING PRO FORMA
INCOME PER SHARE.................... 9,161,355(o)
==========
</TABLE>
F-6
<PAGE>
TRIAD MEDICAL INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
TRIAD THI HTD SUN CMS KENTEC
---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES............................. $ -- $36,387,356 $14,492,286 $10,613,669 $6,848,143 $9,650,138
COST OF SALES........................ -- 27,142,668 9,823,034 7,039,412 5,060,636 6,713,218
---------- ---------- ---------- ---------- ---------- ---------
Gross profit........................ -- 9,244,688 4,669,252 3,574,257 1,787,507 2,936,920

SELLING.............................. -- 3,476,813 2,278,747 1,226,358 487,855 1,102,924
GENERAL & ADMINISTRATIVE............. 4,092,883 3,543,152 1,562,044 1,024,132 596,930 1,917,316
DEPRECIATION & AMORTIZATION
EXPENSE............................. 1,600 1,053,849 166,344 45,000 19,710 63,161
---------- ---------- ---------- ---------- ---------- ---------
INCOME (LOSS) FROM OPERATIONS........ (4,094,483) 1,170,874 662,117 1,278,767 683,012 (146,481)

OTHER INCOME (EXPENSE)
Interest income..................... 1,557 30,950 7,068 84,771 10,752 28,560
Interest expense.................... (373,108) (428,107) (41,391) (176,778) (1,109) --
Other............................... -- (51,328) (18,193) -- 20,995 (9,091)
---------- ---------- ---------- ---------- ---------- ---------
INCOME (LOSS) BEFORE INCOME TAXES.... (4,466,034) 722,389 609,601 1,186,760 713,650 (127,012)

PROVISION FOR INCOME TAXES........... -- 276,552 240,330 448,968 -- (16,689)
---------- ---------- ---------- ---------- ---------- ---------
NET INCOME FROM OPERATIONS........... $(4,466,034) $ 445,837 $ 369,271 $ 737,792 $ 713,650 $(110,323)
========== ========== ========== ========== ========== =========
PRO FORMA INCOME PER SHARE...........
SHARES USED IN COMPUTING PRO FORMA
INCOME PER SHARE....................

OTHER
PRODUCTS FOR FOUNDING PRO FORMA AS
SURGERY MEGATECH OMNI COMPANIES ADJUSTMENTS ADJUSTED
------------ --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES............................. $5,764,410 $4,986,669 $4,759,774 $7,610,293 $ $101,112,738
COST OF SALES........................ 3,459,920 2,933,428 3,573,528 5,026,572 70,772,416
------------ --------- --------- --------- ----------- -----------
Gross profit........................ 2,304,490 2,053,241 1,186,246 2,583,721 -- 30,340,322
SELLING.............................. 911,262 828,569 437,129 1,153,112 11,902,769
GENERAL & ADMINISTRATIVE............. 1,582,354 688,404 567,818 1,145,239 (1,496,840)(h) 11,209,369
(3,697,097)(i)
(316,966)(j)
DEPRECIATION & AMORTIZATION
EXPENSE............................. 57,389 26,264 73,256 40,510 434,489(k) 1,981,572
------------ --------- --------- --------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS........ (246,515) 510,004 108,043 244,860 5,076,414 5,246,612
OTHER INCOME (EXPENSE)
Interest income..................... 25,909 -- 2,392 488 192,447
Interest expense.................... (27,480) (8,333) (5,775) (83,422) 1,070,503(l) (75,000)
Other............................... 408,743 60,000 181,986 34,590 (590,459)(m) 37,243
------------ --------- --------- --------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES.... 160,657 561,671 286,646 196,516 5,556,458 5,401,302
PROVISION FOR INCOME TAXES........... 129,527 -- -- 82,421 1,194,448(n) 2,355,557
------------ --------- --------- --------- ----------- -----------
NET INCOME FROM OPERATIONS........... $ 31,130 $ 561,671 $ 286,646 $114,095 $4,362,010 $ 3,045,745
============ ========= ========= ========= =========== ===========
PRO FORMA INCOME PER SHARE........... $ 0.33
===========
SHARES USED IN COMPUTING PRO FORMA
INCOME PER SHARE.................... 9,161,355(o)
===========
</TABLE>
F-7
<PAGE>
TRIAD MEDICAL INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)

1. TRIAD MEDICAL INC. BACKGROUND:

TRIAD was founded to create a national leader in the contract sale and
distribution of specialty medical products designed for the hospital and
alternate-site health care markets (including sub-acute facilities, home care
companies and specialty physician groups). TRIAD has conducted no operations to
date and will acquire the Founding Companies concurrently with the closing of
the Offering.

2. HISTORICAL FINANCIAL STATEMENTS:

The historical financial statements represent the financial position and
results of operations of the Founding Companies and were derived from the
respective Founding Companies' financial statements. All Founding Companies have
a December 31 year-end or have been converted to a December 31 year-end, except
for Professional Equipment, which has an October 31 year-end, and New England
Specialties, which has a March 31 year-end. The historical financial statements
included elsewhere in this Prospectus have been included in accordance with
Regulation S-X, Rule 3-05, promulgated by the Securities and Exchange
Commission.

3. ACQUISITION OF FOUNDING COMPANIES:

TRIAD will account for the Acquisitions using the purchase method of
accounting, with THI being treated as the acquirer for financial statement
presentation purposes.

The following table sets forth the consideration to be paid in (i) cash and
(ii) shares of TRIAD's Common Stock, par value $0.001 per share (Common Stock),
for the Founding Companies. For purposes of computing the estimated purchase
price for accounting purposes, the value of the Common Stock was determined
using an estimated fair value of $8.25 per share, which represents a discount of
25 percent from the assumed initial public offering price of $11.00 due to
restrictions on the sale and transferability of the shares issued. The estimated
purchase price for the Acquisitions is based on preliminary estimates and is
subject to certain purchase price adjustments at and following closing, however,
management does not expect the final purchase price allocation to be materially
different from the preliminary allocation nor does it expect there to be any
material post closing adjustments. The table does not reflect (i) distributions
totaling $3.1 million by Founding Companies that are S Corporations to their
stockholders which constitute undistributed earnings, which have been or will be
taxed to those shareholders ("S Corporation Distributions") or (ii)
distributions of the cash surrender value of certain insurance policies and
other personal assets of $0.3 million.

SHARES OF
CASH COMMON
CONSIDERATION STOCK
-------------- -----------
THI.................................. $ 8,696,559 1,451,322
HTD.................................. 2,475,000 530,357
Sun.................................. 2,050,000 571,429
CMS.................................. 1,600,000 350,000
Kentec............................... 3,240,000 232,857
Products for Surgery................. 2,250,000 203,571
MegaTech............................. -- 300,000
Omni................................. 200,000 128,571
New England Specialties.............. 553,500 88,750
Professional Equipment............... 435,000 48,929
Wilson............................... 720,000 91,429
-------------- -----------
Total...................... $ 22,220,059 3,997,215
============== ===========

F-8
<PAGE>
TRIAD MEDICAL INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Of the estimated total purchase price of $35.5 million (based on the fair
value of the shares to be issued in the Acquisitions and excluding THI, the
accounting acquirer), $12.3 million has been allocated to the assets acquired
and liabilities assumed. The remaining $23.2 million represents the purchase
price paid to holders of the common stock of the Founding Companies in excess of
the net assets acquired.

Management of TRIAD anticipates, based on its preliminary analysis, that
the historical carrying value of the Founding Companies' assets and liabilities
will approximate fair value. Accordingly, the amount allocated to goodwill is
$23.2 million. Management of TRIAD has not identified any other material
tangible or identifiable intangible assets of the Founding Companies to which a
portion of the purchase price should be allocated.

4. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:

(a) Records the distribution of the accumulated adjustment account of Founding
Companies which are S-Corporations.

(b) Records the distribution of cash surrender value of life insurance
policies and other personal assets to stockholders.

(c) Records the purchase of the Founding Companies, including receivables from
prior shareholders for any potential sales tax liability from prior
operations, elimination of other receivables and payables to prior
shareholders, and recording of additional acquisition costs.

(d) Records TRIAD's issuance of shares to THI and the accrued payable of $8.7
million to the former shareholders of Triad Holdings Inc., the acquiring
company.

(e) Reflects the net deferred income tax assets attributable to the temporary
differences between financial reporting and income tax bases of assets and
liabilities currently held in S Corporations.

(f) Records the estimated proceeds from the issuance of 4,000,000 shares of
Common Stock at an assumed offering price of $11 per share, net of
estimated underwriting discount and offering costs of $7.5 million ($2.1
million accrued to date), including repayment of advances received from
Equus II to fund offering costs. Offering costs primarily consist of
accounting fees, legal fees, regulatory filing fees and printing expenses.

(g) Records the payment to founders and the repayment of certain liabilities
and debt obligations with the net proceeds from the Offering including
$2.4 million of notes payable to stockholders or related parties of
certain Founding Companies of which $0.4 million was current at September
30, 1997.

F-9
<PAGE>
TRIAD MEDICAL INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PRO FORMA
(a) (b) (c) (d) (e) ADJUSTMENTS
--------- --------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash acquisitions........... (1,300,000) (1,300,000)
Goodwill............................. 23,172,737 23,172,737
Other noncurrent assets.............. (260,638) 1,908,000 29,606 1,676,968
Accounts payable and accrued
liabilities........................ (900,000) (900,000)
Pro forma cash consideration due to
Founding Companies................. 13,523,500) (8,696,559) (22,220,059)
Long-term debt, net of current
maturities......................... 1,035,000 1,035,000
Common stock......................... 2,781,953 22,653 2,804,606
Additional paid-in capital........... 3,100,000 260,638 (19,768,505) 13,139,940 (3,267,927)
Retained earnings.................... 5,603,420 (4,466,034) (29,606) 1,107,780
Treasury stock....................... (309,105) (309,105)
Short-term debt...................... (1,800,000) (1,800,000)
--------- --------- ---------- --------- --------- -----------
-- -- -- -- -- --
========= ========= ========== ========= ========= ===========

POST-
MERGER
(f) (g) ADJUSTMENTS
---------- ---------- -----------
Cash and cash equivalents............ 36,500,000 (35,659,513) 840,487
Other noncurrent assets.............. (3,587,441) (3,587,441)
Current maturities of long-term
debt............................... 2,252,057 2,252,057
Short-term debt...................... 1,059,586 5,505,810 6,565,396
Accounts payable and accrued
liabilities........................ 2,135,314 2,135,314
Pro forma cash consideration due to
Founding Companies................. 22,220,059 22,220,059
Long-term debt, net of current
maturities......................... 3,606,934 3,606,934
Notes payable to stockholders and
related parties, net of current
maturities......................... 2,074,653 2,074,653
Common stock......................... (4,000) (4,000)
Additional paid-in capital........... (36,103,459) (36,103,459)
---------- ---------- -----------
-- -- --
========== ========== ===========
</TABLE>
F-10
<PAGE>
TRIAD MEDICAL INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS:

(h) Reduce compensation expenses to the contractual levels the owners and key
employees of the Founding Companies have agreed to receive subsequent to
the Acquisitions.

(i) Reflects the reversal of the $3.9 million non-recurring non-cash
compensation charge by TRIAD related to the issuance of 548,545 shares of
common stock to management. The historical financial statements of TRIAD
include a compensation charge representing the difference between the
amounts paid for the shares issued to the Company's management and their
estimated value on the date of the sale as if the acquisition had
occurred. This reversal is offset by a $184,000 charge for recurring
contractual salary expenses of management.

(j) Eliminates one-time ESOP tax exposure recorded by one of the Founding
Companies.

(k) Records goodwill amortization expense using a 40-year estimated life.

(l) Reduce interest expense for repayment of certain debt obligations which
will be repaid from the net proceeds from the Offering.

(m) Eliminates one-time settlement received from vendors for early
extinguishment of supply contract obligations.

(n) Records the incremental provision for federal and state income taxes
relating to the compensation expenses, S Corporation income, other pro
forma adjustments and the inclusion of all Founding Companies in a
consolidated federal income tax return.

(o) The number of shares estimated to be outstanding on completion of the
Offering includes the following (reflects the September 5. 1997 stock
split):

Issued to management ............... 548,545
Issued to financial sponsor in
exchange for convertible preferred
stock ............................ 449,213
Sale to investors, including
management ....................... 100,000
Issued to acquire Founding
Companies ........................ 3,997,215
Issued in the Offering ............. 4,000,000
---------
Shares estimated to be
outstanding ...................... 9,094,973
---------
Net effect of TRIAD stock options
using the Treasury Stock method .. 66,382
---------
Shares used in computing pro forma
net income per share ............. 9,161,355
=========

Such share number does not include (i) an aggregate of 831,200 shares
subject to options granted under TRIAD's 1997 Incentive Plan which have an
exercise price equal to the offering price per share, and (ii) warrants to
purchase up to 100,000 and 25,000 shares of Common Stock, each at a
purchase price equal to the initial public offering price per share, issued
by TRIAD to Equus II Incorporated in connection with TRIAD's start-up
funding and PENMAN Private Equity and Mezzanine Fund, L.P. in connection
with assisting TRIAD in the acquisition of one of the Founding Companies,
respectively. See "Management -- Option Grants" and "Certain
Transactions -- Organization of TRIAD."

F-11

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To TRIAD Medical Inc.:

We have audited the accompanying balance sheet of TRIAD Medical Inc. (a
Delaware corporation) as of June 30, 1997, and the related statements of
operations, stockholders' equity and cash flows for the period from inception
(April 7, 1997) to June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TRIAD Medical Inc. as of
June 30, 1997 and the results of its operations and its cash flows for the
period from inception (April 7, 1997) to June 30, 1997 in conformity with
generally accepted accounting principles.

Arthur Andersen LLP

Houston, Texas
September 5, 1997

F-12
<PAGE>
TRIAD MEDICAL INC.
BALANCE SHEETS

SEPTEMBER
JUNE 30, 30,
1997 1997
-------------- ------------
(UNAUDITED)
ASSETS
CASH................................. $ 134,843 $ 349,177
DEFERRED OFFERING COSTS.............. 2,071,193 3,587,441
EQUIPMENT, net....................... 15,145 14,345
-------------- ------------
Total assets............... $ 2,221,181 $ 3,950,963
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE, net of discount of
$228,571 and $57,142,
respectively....................... $ 646,429 $ 1,059,586
ACCRUED ACCOUNTING, LEGAL AND
PROFESSIONAL FEES.................. 1,150,883 2,091,281
ACCRUED EXPENSES AND OTHER CURRENT
LIABILITIES........................ 15,825 44,033
-------------- ------------
Total liabilities.......... 1,813,137 3,194,900
-------------- ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par
value; 1,000,000 shares
authorized, 300,000 shares
(Series A Convertible) issued
and outstanding at June 30,
1997........................... 300 --
Common stock, $.001 par value;
20,000,000 shares authorized,
548,545 shares and 1,097,758
shares issued and outstanding
at June 30, 1997 and September
30, 1997, respectively......... 549 1,098
Warrant to purchase common
stock.......................... 400,000 500,000
Additional paid-in capital...... 4,221,248 4,720,999
Accumulated deficit............. (4,214,053) (4,466,034)
-------------- ------------
Total stockholders'
equity................... 408,044 756,063
-------------- ------------
Total liabilities and
stockholders' equity..... $ 2,221,181 $ 3,950,963
============== ============

The accompanying notes are an integral part of these financial statements.

F-13
<PAGE>
TRIAD MEDICAL INC.
STATEMENTS OF OPERATIONS

PERIOD
FROM INCEPTION THREE MONTHS
(APRIL 7, 1997) ENDED SEPBEMBER
TO JUNE 30, 1997 30, 1997
---------------- ----------------
(UNAUDITED)
OPERATING EXPENSES:
Compensation expense relating to
common stock issued to
management.................... $ 3,881,097 $ --
General and administrative...... 153,762 58,024
Depreciation.................... 800 800
---------------- ----------------
Total operating expenses... 4,035,659 58,824
---------------- ----------------
Loss from operations....... (4,035,659) (58,824)
---------------- ----------------
OTHER INCOME (EXPENSE):
Interest income................. 1,241 316
Interest expense................ (179,635) (193,473)
---------------- ----------------
NET LOSS............................. $ (4,214,053) $ (251,981)
================ ================

The accompanying notes are an integral part of these financial statements.

F-14
<PAGE>
TRIAD MEDICAL INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES A
PREFERRED STOCK COMMON STOCK WARRANT TO ADDITIONAL
------------------ ------------------- PURCHASE PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT COMMON STOCK CAPITAL DEFICIT
--------- ------ ---------- ------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at inception (April 7, 1997).... -- $ -- -- $ -- $ -- $ -- $ --
Issuance of preferred stock............. 300,000 300 -- -- -- 299,700 --
Issuance of common stock................ -- -- 548,545 549 -- 3,921,548 --
Issuance of warrant to purchase common
stock in connection with the issuance
of notes payable...................... -- -- -- -- 400,000 -- --
Net loss................................ -- -- -- -- -- -- (4,214,053)
--------- ------ ---------- ------ ------------ ---------- -----------
Balance at
June 30, 1997......................... 300,000 300 548,545 549 400,000 4,221,248 (4,214,053)
Conversion of preferred stock
(unaudited)........................... (300,000) (300) 449,213 449 -- (149) --
Issuance of common stock (unaudited).... -- -- 100,000 100 -- 499,900 --
Issuance of warrant to purchase common
stock (unaudited)..................... -- -- -- -- 100,000 -- --
Net loss (unaudited).................... -- -- -- -- -- -- (251,981)
--------- ------ ---------- ------ ------------ ---------- -----------
Balance at September 30, 1997
(unaudited)........................... -- $-- 1,097,758 $1,098 $500,000 $4,720,999 $(4,466,034)
========= ====== ========== ====== ============ ========== ===========
</TABLE>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
Balance at inception (April 7, 1997).... $ --
Issuance of preferred stock............. 300,000
Issuance of common stock................ 3,922,097
Issuance of warrant to purchase common
stock in connection with the issuance
of notes payable...................... 400,000
Net loss................................ (4,214,053)
-------------
Balance at
June 30, 1997......................... 408,044
Conversion of preferred stock
(unaudited)........................... --
Issuance of common stock (unaudited).... 500,000
Issuance of warrant to purchase common
stock (unaudited)..................... 100,000
Net loss (unaudited).................... (251,981)
-------------
Balance at September 30, 1997
(unaudited)........................... $ 756,063
=============

The accompanying notes are an integral part of these financial statements.

F-15
<PAGE>
TRIAD MEDICAL INC.
STATEMENTS OF CASH FLOWS

PERIOD
FROM INCEPTION THREE MONTHS
(APRIL 7, 1997) ENDED SEPTEMBER
TO JUNE 30, 1997 30, 1997
---------------- ----------------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................ $ (4,214,053) $ (251,981)
Adjustments to reconcile net loss
to net cash used in operating
activities --
Amortization of debt discount
and depreciation................ 172,229 172,229
Compensation expense relating to
common stock issued to
management.................... 3,881,097 --
Increase (decrease) in operating
cash flows resulting from:
Deferred offering costs....... (2,071,193) (1,416,246)
Accrued accounting, legal and
professional fees.......... 1,150,883 940,396
Accrued expenses and other
current liabilities........ 15,825 28,208
---------------- ----------------
Net cash used in operating
activities.............. (1,065,212) (527,394)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment........... (15,945) --
---------------- ----------------
Net cash used in investing
activities.............. (15,945) --
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes
payable and related common
stock warrant................. 875,000 241,728
Proceeds from issuance of series
A convertible preferred
stock......................... 300,000 --
Proceeds from issuance of common
stock......................... 41,000 500,000
---------------- ----------------
Net cash provided by
financing activities.... 1,216,000 741,728
---------------- ----------------
NET INCREASE IN CASH................. 134,843 214,334
CASH, beginning of period............ -- 134,843
---------------- ----------------
CASH, end of period.................. $ 134,843 $ 349,177
================ ================

The accompanying notes are an integral part of these financial statements.

F-16
<PAGE>
TRIAD MEDICAL INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

TRIAD Medical Inc., a Delaware corporation (the Company or TRIAD), was
founded in April 1997 to create a national leader in the contract sales and
distribution of specialty medical products designed for the hospital and
alternate-site health care markets (including sub-acute care facilities, home
care companies and specialty physician groups). The Company intends to (i) enter
into definitive merger agreements to acquire in separate transactions (the
Acquisitions) 11 other companies (the Founding Companies) for a total of
$22,220,000 in cash and 3,997,215 shares of the Company's common stock, $0.001
par value (Common Stock), and (ii) complete an initial public offering of
4,000,000 shares of the Common Stock (the Offering). Subsequent to the Offering,
the Company intends to continue to acquire, through merger or purchase, similar
businesses to expand its national operations.

The Company's primary assets at June 30, 1997 and September 30, 1997 are
cash and deferred offering costs. The Company has not conducted any operations,
and its activities to date have related to the Acquisitions and the Offering.
There is no assurance that the acquisitions of the Founding Companies will be
completed and that the Company will be able to generate future operating
revenues. Equus II Incorporated (Equus II) has committed to fund up to
$2,200,000 in pre-Offering costs. The Company is dependent on the Offering to
fund the amounts due to Equus II, the pending Acquisitions and related
transactions and future operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The financial statements presented have been prepared on the accrual basis
of accounting.

INTERIM FINANCIAL INFORMATION

The interim financial statements as of September 30, 1997, and for the
three months ended September 30, 1997 are unaudited, and certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist primarily of cash and notes
payable. The carrying amounts of those instruments reported in the balance sheet
are considered to be representative of their respective fair values, due to the
short-term nature of such financial instruments and the current interest rate
environment.

DEFERRED OFFERING COSTS

Deferred offering costs consist of accounting, legal and consulting fees.
These costs will be treated as a reduction of the Offering proceeds.

F-17
<PAGE>
TRIAD MEDICAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

EQUIPMENT

Equipment is stated at cost and depreciation is computed using the
straight-line method over a five year estimated useful life.

INCOME TAXES

The Company applies the liability method of accounting for income taxes.
Under this method, deferred income taxes are recorded based upon differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
underlying assets or liabilities are received or settled.

The Company has recorded a full valuation allowance against all deferred
income tax assets due to the uncertainty of ultimate realizability. Accordingly,
no income tax benefit has been recorded for the current period loss.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 129, "Disclosure of Information
About Capital Structure." SFAS No. 129 requires nonpublic entities to disclose
certain information about an entity's capital structure, including the pertinent
rights and privileges of the various securities outstanding. If the Company does
not complete the Offering in 1997, it will be required to adopt SFAS No. 129 in
1997. In the opinion of management, SFAS No. 129 will not significantly change
the Company's existing financial statement disclosures.

3. EQUIPMENT:

Equipment consists of the following:

JUNE 30, SEPTEMBER 30,
1997 1997
--------- -------------
(UNAUDITED)
Office equipment and fixtures........... $ 15,945 $15,945
Less -- accumulated depreciation........ (800) (1,600)
--------- -------------
Equipment, net.......................... $ 15,145 $14,345
========= =============

4. NOTES PAYABLE:

The Company has borrowings from Equus II under a $2,200,000 credit facility
totaling $875,000 and $1,116,728 at June 30, 1997 and September 30, 1997,
respectively. The borrowings are unsecured, bear interest at a bank's prime rate
plus 0.5 percent (9.0 percent at June 30, 1997), and mature at the earlier of
January 31, 1998 or the date the Offering closes. The credit facility contains
various restrictive covenants, including provisions relating to restrictions on
the issuance of additional shares of capital stock or convertible securities,
declaration of dividends and additional indebtedness. The Company was in
compliance with all its covenants at June 30, 1997 and September 30, 1997. In
addition, the credit facility requires Equus II to have a representative on the
Company's Board of Directors.

In connection with the credit facility, the Company issued a warrant to
Equus II to purchase up to 100,000 shares of Common Stock at a purchase price
equal to the initial public offering price per share in the Offering, subject to
adjustment in certain circumstances. The warrant may be exercised at any time or
from time to time until five years from the date the Offering closes. The
warrant was valued at $400,000, which resulted in an original issue discount on
the notes payable. The original issue discount is being amortized as additional
interest expense over the expected life of the notes payable. The unamortized
original issue discount at June 30, 1997 and September 30, 1997 was $228,571 and
$57,142, respectively.

F-18
<PAGE>
TRIAD MEDICAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. STOCKHOLDERS' EQUITY:

In connection with its organization and capitalization, the Company issued
and sold 548,545 shares of Common Stock at approximately $.08 per share to
certain officers of the Company for total proceeds of $41,000. The Company
recorded a non-recurring, non-cash compensation charge of $3,881,097,
representing the difference between the amount paid and the value of the shares
on the date of issuance estimated based on an assumed initial public offering
price of $11.00 per share.

In connection with the credit facility discussed in Note 4, the Company
issued 300,000 shares of its series A convertible preferred stock at $1.00 per
share to Equus II. Such shares are subject to certain voting restrictions and
are convertible into 449,213 shares of Common Stock one year after the date of
issuance. On September 5, 1997, the series A convertible preferred stock was
amended to remove the one-year holding restriction and was converted into
449,213 shares of Common Stock.

TRIAD's Certificate of Incorporation, as amended, authorizes the issuance,
without stockholder approval, of one or more series of preferred stock having
such preferences, powers and relative, participating, optional and other rights
(including preferences over the Common Stock respecting dividends and
distributions and voting rights) as TRIAD's board of directors may determine.

SFAS No. 123, "Accounting for Stock-Based Compensation," allows entities
to choose between a new fair value based method of accounting for employee stock
options or similar equity instruments and the current intrinsic, value-based
method of accounting prescribed by Accounting Principles Board Opinion No. 25
(APB No. 25). Entities electing to remain with the accounting in APB No. 25 must
make pro forma disclosures of net income and earnings per share as if the fair
value method of accounting had been applied. No awards were issued for which
such disclosure would be required. The Company will provide pro forma disclosure
of net income and earnings per share, as applicable, in the notes to its future
financial statements.

On September 5, 1997 the Company effected an approximately 1.34-for-one
stock split of the outstanding Common Stock for each share of Common Stock
outstanding. The effects of the stock split have been retroactively reflected in
the accompanying financial statements and in these notes.

6. INCOME TAXES:

There were no income taxes recorded for the periods ended June 30, 1997 and
September 30, 1997 due to the Company incurring a net operating loss for
financial reporting and income tax reporting purposes. Management has provided a
valuation allowance equal to the amount of the deferred income tax asset related
to the net operating loss carryforward.

As of June 30, 1997 and September 30, 1997, the Company has a net operating
loss carryforwards for income tax reporting purposes of approximately $333,000
and $586,000, respectively. These net operating loss carryforwards are scheduled
to expire in 2012.

7. RELATED PARTY TRANSACTIONS:

The Company leases its office space from a company owned in part by an
officer of the Company under a month-to-month lease. The total rent paid under
the lease was approximately $5,600 and $6,400 for the period from inception
(April 7, 1997) to June 30, 1997 and for the three months ended September 30,
1997, respectively.

8. COMMITMENTS AND CONTINGENCIES:

EMPLOYMENT CONTRACTS

The Company has entered into employment agreements with certain officers of
the Company. These officers cannot be terminated within one year. If an
officer's employment is terminated after the first year

F-19
<PAGE>
TRIAD MEDICAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

without cause, the officer would be entitled to one year's compensation from the
date of termination for the first three years of employment.

COMMON STOCK OPTIONS

The Company has committed to issue options to purchase 972,987 shares of
Common Stock, 831,200 of which will have an exercise price equal to the initial
public offering price per share and 141,787 of which will have a weighted
average exercise price of $5.85 per share. In general, the terms of the option
awards (including vesting schedules) will be established by the compensation
committee of the Company's board of directors.

9. SUBSEQUENT EVENTS (UNAUDITED):

On September 8, 1997, the Company and its stockholders approved the TRIAD
Medical Inc. 1997 Incentive Plan (the Plan), which provides for the granting or
awarding of stock options to employees, nonemployee directors and nonemployee
consultants who provide services to TRIAD. The number of shares authorized and
reserved for issuance under the Plan is limited to the greater of 1,130,000 or
12.5 percent of the number of shares of Common Stock outstanding on the last day
of the preceding calendar quarter. As discussed in Note 8, the Company has
previously committed to issue options to purchase 972,987 shares of Common
Stock.

On September 8, 1997, the Company issued and sold in a private placement
100,000 shares of Common Stock at a price of $5.00 per share to certain
directors, executive officers of the Founding Companies and certain other
investors.

On September 8, 1997, the Company issued a warrant to a shareholder of one
of the Founding Companies to purchase 25,000 shares of Common Stock at a price
equal to the initial public offering price per share issued in connection with
the acquisition of one of the Founding Companies.

On September 9, 1997, the Company entered into definitive merger agreements
with the Founding Companies, providing for the acquisition of the Founding
Companies by TRIAD.

On September 11, 1997, the Company filed a registration statement on Form
S-1 relating to the Offering. An investment in shares of Common Stock involves a
high degree of risk, including, among others, absence of a combined operating
history, dependence on acquisitions for growth, history of loss of product
lines, need for additional financing and dependence on key personnel. See "Risk
Factors."

F-20

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To TRIAD Holdings, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of TRIAD
Holdings, Inc. (a Delaware corporation) and subsidiaries, as of December 31,
1995 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
TRIAD Holdings, Inc. and subsidiaries, as of December 31, 1995 and 1996, and the
results of their consolidated operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.

Arthur Andersen LLP

Houston, Texas
August 1, 1997

F-21
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ SEPTEMBER 30,
1995 1996 1997
-------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 7,273 $ 816,560 $ 353,338
Accounts receivable, net of
allowance of $147,959, $193,863
and $95,721, respectively........ 4,579,763 5,915,999 9,238,611
Inventories, net................... 2,889,002 3,993,437 4,275,413
Prepaid expenses and other current
assets........................... 774,484 929,112 628,809
Deferred income taxes.............. 289,000 420,000 345,000
-------------- -------------- --------------
Total current assets..... 8,539,522 12,075,108 14,841,171
-------------- -------------- --------------
PROPERTY AND EQUIPMENT, net............. 251,981 626,409 644,749
RENTAL EQUIPMENT, net................... 1,844,053 2,465,225 3,900,846
INTANGIBLES............................. -- 2,812,436 4,352,262
OTHER NON-CURRENT ASSETS................ 117,388 83,301 47,374
-------------- -------------- --------------
Total assets............. $ 10,752,944 $ 18,062,479 $ 23,786,402
============== ============== ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit..................... $ -- $ -- $ 100,000
Current obligations under capital
leases........................... 321,865 564,093 527,301
Current maturities of long-term
debt............................. 2,490,664 778,000 1,101,194
Current maturities of notes payable
to stockholders.................. 27,094 234,114 234,114
Accounts payable and accrued
expenses......................... 6,227,034 4,594,473 8,606,865
-------------- -------------- --------------
Total current
liabilities........... 9,066,657 6,170,680 10,569,474
-------------- -------------- --------------
CAPITAL LEASE OBLIGATIONS, net of
current maturities.................... 274,884 479,878 416,932
LONG-TERM DEBT, net of current
maturities............................ -- 2,917,500 3,403,809
NOTES PAYABLE TO STOCKHOLDERS, net of
current maturities.................... 70,547 468,229 468,229
DEFERRED INCOME TAXES................... 267,000 307,000 322,000
OTHER LONG-TERM LIABILITIES............. 1,142,343 1,171,710 1,133,988
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Class A convertible common stock,
$.01 par value, 1,500,000 shares
authorized, 1,362,190 issued and
outstanding in 1996 and 1997..... -- 13,621 13,621
Class B common stock, $.01 par
value, 3,000,000 shares
authorized, 979,845 issued and
outstanding in 1996; 1,048,345
issued and outstanding in 1997... -- 9,798 10,483
Common stock, no par value,
10,000,000 shares authorized,
1,116,300 issued and outstanding
in 1995.......................... 254,804 -- --
Additional paid-in capital......... -- 6,140,982 6,618,948
Retained earnings (accumulated
deficit)......................... (323,291) 383,081 828,918
-------------- -------------- --------------
Total stockholders'
equity (deficit)...... (68,487) 6,547,482 7,471,970
-------------- -------------- --------------
Total liabilities and
stockholders' equity
(deficit)............. $ 10,752,944 $ 18,062,479 $ 23,786,402
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-22
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------------- ------------------------------
1994 1995 1996 1996 1997
-------------- -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................................ $ 22,667,209 $ 29,673,818 $ 36,257,683 $ 26,167,703 $ 36,387,356
COST OF REVENUES........................ 16,751,215 22,485,390 27,492,002 20,175,059 27,142,668
-------------- -------------- -------------- -------------- --------------
Gross profit.................. 5,915,994 7,188,428 8,765,681 5,992,644 9,244,688
SELLING EXPENSES........................ 2,391,062 2,939,858 3,395,801 2,397,533 3,476,813
GENERAL AND ADMINISTRATIVE EXPENSES..... 1,813,184 2,146,309 3,017,319 1,898,138 3,543,152
DEPRECIATION AND
AMORTIZATION.......................... 530,562 561,428 763,071 502,095 1,053,849
-------------- -------------- -------------- -------------- --------------
Total operating expenses........... 4,734,808 5,647,595 7,176,191 4,797,766 8,073,814
-------------- -------------- -------------- -------------- --------------
Income from operations.................. 1,181,186 1,540,833 1,589,490 1,194,878 1,170,874
OTHER INCOME (EXPENSE):
Interest income.................... 27,682 30,164 64,588 48,188 30,950
Interest expense................... (496,184) (538,915) (368,831) (248,140) (428,107)
Other income (expense), net........ (21,705) 15,476 (113,990) (83,406) (51,328)
-------------- -------------- -------------- -------------- --------------
INCOME BEFORE PROVISION FOR INCOME
TAXES................................. 690,979 1,047,558 1,171,257 911,520 722,389
PROVISION FOR INCOME TAXES.............. 102,700 420,600 464,885 357,436 276,552
-------------- -------------- -------------- -------------- --------------
NET INCOME.............................. $ 588,279 $ 626,958 $ 706,372 $ 554,084 $ 445,837
============== ============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-23
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
TRIAD HOLDINGS, INC. COMMON STOCK
-----------------------------------------
TRIAD MEDICAL, INC.
CLASS A CLASS B COMMON STOCK ADDITIONAL
------------------- ------------------- --------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- ------- --------- ------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993........... -- $ -- -- $ -- 1,094,500 $ 222,883 $ --
Common stock sold for cash....... -- -- -- -- 5,000 5,500 --
Common stock issued for
services....................... -- -- -- -- 2,500 8,661 --
Net income....................... -- -- -- -- -- -- --
--------- ------- --------- ------- --------- --------- ----------
BALANCE, December 31, 1994........... -- -- -- -- 1,102,000 237,044 --
Common stock sold for cash....... -- -- -- -- 14,300 17,760 --
Net income....................... -- -- -- -- -- -- --
--------- ------- --------- ------- --------- --------- ----------
BALANCE, December 31, 1995........... -- -- -- -- 1,116,300 254,804 --
Class A common stock sold for
cash........................... 1,362,190 13,621 -- -- -- -- 6,770,827
Repurchase and conversion of TMI
common stock to Class B common
stock.......................... -- -- 889,269 8,893 (1,116,300) (254,804) (1,004,089)
Stock options exercised.......... -- -- 30,576 305 -- -- 44,844
Issuance of common stock in
connection with acquisition of
PCI............................ -- -- 60,000 600 -- -- 329,400
Net income....................... -- -- -- -- -- -- --
--------- ------- --------- ------- --------- --------- ----------
BALANCE, December 31, 1996........... 1,362,190 13,621 979,845 9,798 -- -- 6,140,982
Issuance of common stock in
connection with acquisition of
Medrep Medical, Inc.
(unaudited).................... -- -- 22,000 220 -- -- 149,780
Issuance of common stock in
connection with acquisition of
Eclipse, Inc. (unaudited)...... -- -- 31,000 310 -- -- 224,690
Common stock sold for cash
(unaudited).................... -- -- 15,500 155 -- -- 103,496
Net income (unaudited)........... -- -- -- -- -- -- --
--------- ------- --------- ------- --------- --------- ----------
BALANCE, September 30, 1997
(unaudited)........................ 1,362,190 $13,621 1,048,345 $10,483 -- $ -- $6,618,948
========= ======= ========= ======= ========= ========= ==========
</TABLE>
RETAINED
EARNINGS TOTAL
(ACCUMULATED STOCKHOLDERS'
DEFICIT) EQUITY (DEFICIT)
------------- -----------------
BALANCE, December 31, 1993........... $(1,538,528) $(1,315,645)
Common stock sold for cash....... -- 5,500
Common stock issued for
services....................... -- 8,661
Net income....................... 588,279 588,279
------------- -----------------
BALANCE, December 31, 1994........... (950,249) (713,205)
Common stock sold for cash....... -- 17,760
Net income....................... 626,958 626,958
------------- -----------------
BALANCE, December 31, 1995........... (323,291) (68,487)
Class A common stock sold for
cash........................... -- 6,784,448
Repurchase and conversion of TMI
common stock to Class B common
stock.......................... -- (1,250,000)
Stock options exercised.......... -- 45,149
Issuance of common stock in
connection with acquisition of
PCI............................ -- 330,000
Net income....................... 706,372 706,372
------------- -----------------
BALANCE, December 31, 1996........... 383,081 6,547,482
Issuance of common stock in
connection with acquisition of
Medrep Medical, Inc.
(unaudited).................... -- 150,000
Issuance of common stock in
connection with acquisition of
Eclipse, Inc. (unaudited)...... -- 225,000
Common stock sold for cash
(unaudited).................... -- 103,651
Net income (unaudited)........... 445,837 445,837
------------- -----------------
BALANCE, September 30, 1997
(unaudited)........................ $ 828,918 $ 7,471,970
============= =================

The accompanying notes are an integral part of these consolidated financial
statements.

F-24
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------- --------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................ $ 588,279 $ 626,958 $ 706,372 $ 554,084 $ 445,837
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities --
Depreciation and amortization..... 530,562 561,428 763,071 502,095 1,053,849
(Gain) loss on disposal of fixed
assets......................... 7,256 (37,813) (8,001) (13,595) (54,193)
Provision for doubtful accounts... 129,610 164,900 48,041 56,400 --
Deferred rent..................... 17,831 4,609 12,117 16,778 (37,722)
Common stock issued for
services....................... 8,661 -- -- -- --
Deferred income tax provision
(benefit)...................... (47,300) 25,300 (91,000) (51,000) 90,000
Increase (decrease) in operating
cash flows resulting from --
Accounts receivable.......... (1,142,133) (1,106,238) (141,526) (1,565,706) (3,068,370)
Inventories.................. (1,095,248) (620,791) (360,786) 29,400 (163,511)
Prepaids and other current
assets..................... (356,973) 333,138 (115,765) 484,155 300,990
Other noncurrent assets...... 42,876 70,766 38,682 74,302 37,522
Accounts payable and accrued
expenses................... 1,978,329 575,027 (1,921,743) (1,195,533) 3,787,311
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
in) operating
activities............... 661,750 597,284 (1,070,538) (1,108,620) 2,391,713
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net of
cash acquired..................... -- -- (3,814,651) -- (1,963,794)
Additions to property and
equipment......................... (109,947) (155,456) (436,394) (245,899) (1,380,660)
Proceeds from disposals of property
and equipment..................... 19,285 134,453 49,457 54,749 130,626
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities............... (90,662) (21,003) (4,201,588) (191,150) (3,213,828)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt and
capital leases.................... -- -- 3,890,000 -- 1,400,000
Principal payments on long-term debt
and capital leases................ (993,697) (1,003,763) (799,879) (403,088) (1,244,758)
Line of credit, net................. 440,485 451,639 (2,490,664) (2,490,664) 100,000
Payments on notes payable to
stockholders...................... (39,352) (35,608) (97,641) (97,641) --
Proceeds from sale of common
stock............................. 5,500 17,760 6,829,597 6,791,160 103,651
Repurchase of common shares......... -- -- (1,250,000) (1,250,000) --
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
in) financing
activities............... (587,064) (569,972) 6,081,413 2,549,767 358,893
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... (15,976) 6,309 809,287 1,249,997 (463,222)
CASH AND CASH EQUIVALENTS, at beginning
of period............................. 16,940 964 7,273 7,273 816,560
------------ ------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, at end of
period................................ $ 964 $ 7,273 $ 816,560 $ 1,257,270 $ 353,338
============ ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest....................... $ 496,000 $ 360,000 $ 539,000 $ 200,000 $ 397,000
============ ============ ============ ============ ============
Income taxes................... $ 110,000 $ 829,000 $ 746,000 $ 603,000 $ 402,000
============ ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES:
Common stock and notes payable
issued for acquisitions........... $ -- $ -- $ 1,032,343 $ -- $ 375,000
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-25
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

TRIAD Holdings, Inc. (the Company), is primarily engaged in the contract
sale and distribution of medical supplies, devices, drugs and durable equipment
to home infusion health care providers throughout the United States.

The Company conducts business through its operating subsidiaries,
principally TRIAD Medical Inc. (TMI), which was incorporated in June 1980. On
April 22, 1996, the Company was incorporated and TMI became its wholly owned
subsidiary.

In October 1996, the Company acquired the assets and assumed certain
liabilities of PCI Medical, Inc. (PCI) for cash consideration of $3,814,651 (net
of cash acquired), notes payable of $702,343 and 60,000 Class B common shares of
the Company valued at $330,000. The acquisition was accounted for as a purchase
and, accordingly, the purchase price has been allocated to the assets purchased
and the liabilities assumed based upon the fair values at the date of
acquisition as follows:

Accounts receivable.................. $ 1,242,751
Inventory............................ 743,649
Prepaids............................. 38,863
Property and equipment............... 194,598
Rental equipment..................... 111,407
Goodwill............................. 2,829,938
Other assets......................... 4,595
Accounts payable and accrued
expenses............................. (306,432)
Capital leases....................... (12,375)
------------
$ 4,846,994
============

The excess purchase price over the fair values of the net assets acquired
has been recorded as goodwill to be amortized on a straight-line based over 40
years. Operating results of PCI from October 4, 1996, through December 31, 1996,
have been included in the accompanying consolidated financial statements. See
the financial statements of PCI included elsewhere herein.

The Company and its stockholders intend to enter into a definitive merger
agreement with TRIAD Medical Inc. (TRIAD) pursuant to which the Company will be
acquired by TRIAD for consideration consisting of $8,696,559 in cash and
1,451,322 shares of TRIAD common stock, concurrently with the closing of the
initial public offering by TRIAD of its common stock (the Offering).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

INTERIM FINANCIAL INFORMATION

The interim consolidated financial statements as of September 30, 1997, and
for the nine months ended September 30, 1996 and 1997, are unaudited, and
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary to fairly present the
consolidated financial position, results of operations and cash flows with
respect to the interim consolidated financial statements have been included. The
results of operations for the interim periods are not necessarily indicative of
the results for the entire fiscal year.

F-26
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Specifically, the Company has accrued an estimate for certain tax expenses,
which are under evaluation. Accordingly, such accrual may require revision.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist primarily of cash, cash
equivalents, trade receivables, trade payables and debt instruments. The
carrying amounts of those instruments reported in the balance sheets are
considered to estimate their respective fair values due to the short-term nature
of such financial instruments and the current interest rate environment. The
fair value of the Company's long-term debt and capital lease obligations was
determined using valuation techniques that considered cash flows discounted at
current market rates and management's best estimates for instruments without
quoted market prices. The carrying amounts of those long-term instruments
reported in the balance sheets are considered to approximate their respective
fair values as the Company's long-term debt and capital lease obligations
interest rates approximate market rates at December 31, 1996.

CASH AND CASH EQUIVALENTS

For the purposes of the balance sheets and statements of cash flows, the
Company considers all investments with original maturities of three months or
less to be cash equivalents.

CONCENTRATIONS OF CREDIT RISK

In the normal course of business, the Company extends credit to its
customers, which are primarily alternate-site health care providers. The Company
regularly reviews its accounts receivable and makes provision for potentially
uncollectible balances. At December 31, 1995 and 1996, and at September 30,
1997, management believes the Company had incurred no material impairments in
the carrying values of its accounts receivable other than uncollectible amounts
for which provision has been made.

INVENTORIES

Inventories consist primarily of medical supplies and equipment.
Inventories, net of allowances, are valued at the lower of cost or market. Cost
is determined using the first-in, first-out (FIFO) method. At December 31, 1996,
and at September 30, 1997, management believes the Company had incurred no
material impairments in the carrying values of its inventories, other than
impairments for which provision has been made.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the life
of the applicable lease or the estimated useful life of the applicable asset.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments that extend the useful
lives of existing equipment are capitalized and depreciated. On retirement or
disposition of property and equipment, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized in the statement of operations.

F-27
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INTANGIBLE ASSETS

The intangible assets recorded by the Company in connection with the
acquisition of PCI (see Note 1) are amortized on a straight-line basis. As of
September 30, 1997, accumulated amortization of intangibles amounted to
$173,178. The applicable intangible amortization periods are as follows:

Goodwill................................ 40 years
Patents................................. 17 years

DEFERRED RENT

Certain of the Company's facilities leases include scheduled rent increases
and free rent periods. For financial reporting purposes, rent expense is
recognized on a straight-line basis over the lease term. The difference between
rents paid pursuant to the lease agreements and rent expense for financial
reporting purposes has been reported as deferred rent.

REVENUES AND EXPENSES

The Company's revenues are primarily derived from sales of medical products
and supplies under distribution agreements with various manufacturers. Cost of
revenues consists primarily of product costs, net of rebates, and freight
charges. Selling expenses consist primarily of sales commissions, salaries of
sales managers, travel and entertainment expenses, trade show expenses and
automobile allowances. General and administrative expenses consist primarily of
executive compensation and related benefits, administrative salaries and
benefits, office rent and utilities, communication expenses and professional
fees.

REVENUE RECOGNITION

Revenues are recorded at the time of shipment of products or performance of
services. Revenues from the rental of infusion pumps and other equipment under
cancellable and noncancellable operating leases are recognized as earned.
Biomedical, commission and installation revenues are recognized as the services
are provided. The Company also provides financing for equipment sales under
sales-type lease arrangements.

INCOME TAXES

The Company applies the liability method of accounting for income taxes.
Under this method, deferred income taxes are recorded based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
underlying assets or liabilities are received or settled.

STOCK-BASED COMPENSATION

In 1996, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation." In accordance with
SFAS No. 123, the Company accounts for stock option grants in accordance with
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees," and has adopted the "disclosure only" alternative described in
SFAS No. 123.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued SFAS No.
129, "Disclosure of Information About Capital Structure." SFAS No. 129
requires nonpublic entities to disclose certain information about an entity's
capital structure, including the pertinent rights and privileges of the various
securities outstanding. The Company will be required to adopt SFAS No. 129 in
1997 and, in the opinion of management, SFAS No. 129 will not significantly
change the existing financial statement disclosures.

F-28
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. ACQUISITIONS (UNAUDITED):

On January 17, 1997, the Company purchased certain assets and assumed
certain liabilities of Medrep Medical, Inc. in exchange for 22,000 shares of its
Class B common stock valued at $150,000 and cash of $435,085. The purchase price
was allocated as follows:

Accounts receivable..................... $ 61,024
Rental equipment........................ 372,971
Goodwill................................ 352,102
Covenant not to compete................. 50,000
Other assets............................ 2,282
Accounts payable and accrued expenses... (154,672)
Capital leases.......................... (98,622)
----------
$ 585,085
==========

On May 1, 1997, the Company purchased certain assets and assumed certain
liabilities of Eclipse, Inc. in exchange for 31,000 shares of its Class B common
stock valued at $225,000 and cash of $1,528,709. The purchase price was
allocated as follows:

Accounts receivable..................... $ 193,218
Inventory............................... 118,465
Rental equipment........................ 514,732
Goodwill................................ 1,250,000
Accounts payable and accrued expenses... (70,409)
Capital leases.......................... (252,297)
------------
$ 1,753,709
============

On October 1, 1997 the Company purchased certain assets and assumed certain
liabilities of The Economic Alliance Corporation in exchange for approximately
$900,000. It is anticipated that the transaction will result in approximately
$700,000 in goodwill being recorded in the fourth quarter of 1997.

4. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES ------------------------ SEPTEMBER 30,
IN YEARS 1995 1996 1997
------------ ---------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Office equipment..................... 5 $ 179,121 $ 362,549 $ 487,552
Computers and software............... 5 141,603 193,146 207,818
Furniture and fixtures............... 5-7 98,502 139,398 156,711
Warehouse equipment.................. 5 91,773 146,299 178,887
Test equipment....................... 5 -- 116,594 161,960
Leasehold improvements............... 10 49,606 108,763 129,890
---------- ------------ -------------
560,605 1,066,749 1,322,818
Less -- Accumulated depreciation and
amortization....................... (308,624) (440,340) (678,069)
---------- ------------ -------------
Property and equipment, net.......... $ 251,981 $ 626,409 $ 644,749
========== ============ =============
</TABLE>
F-29
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Equipment financed under capital lease obligations amounted to $3,817,880
and $4,978,194 at December 31, 1995 and 1996, respectively, and $7,001,079 at
September 30, 1997. Related accumulated depreciation for those assets totaled
$1,973,827 and $2,512,969 at December 31, 1995 and 1996, respectively, and
$3,100,233 at September 30, 1997.

INTANGIBLE ASSETS

Intangible assets consist of the following:

DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
Goodwill................................ $2,812,577 $ 4,434,766
Covenant not to compete................. -- 50,000
Patents................................. 36,338 40,674
------------ -------------
2,848,915 4,525,440
Less -- Accumulated amortization........ (36,479) (173,178)
------------ -------------
$2,812,436 $ 4,352,262
============ =============

Amortization expense amounted to $17,502 in 1996 and is included in
depreciation and amortization.

5. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts payable and accrued expenses consist of the following:

DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
Accounts payable, trade............. $ 5,832,875 $ 4,307,181 $ 8,244,984
Accrued compensation and benefits... 32,942 134,718 153,945
Accrued commissions................. 71,671 11,147 114,768
Accrued income taxes................ 250,791 60,612 --
Other payable and accrued expenses.. 38,755 80,815 93,168
------------ ------------ -------------
$ 6,227,034 $ 4,594,473 $ 8,606,865
============ ============ =============

6. DEBT:

In May 1996, the Company used the proceeds from a sale of its common stock
to repay the outstanding borrowings under a line of credit and incurred a
related charge of $77,854, included in other income (expense), net in the
accompanying consolidated statements of operations (see Note 12).

In September 1996, TMI entered into a new credit agreement with a bank. The
agreement, which expires on May 31, 1998, provides a revolving line-of-credit
facility of up to $1,000,000. Borrowings under the credit agreement bear
interest at the bank's prime rate plus 0.25 percent or, at the Company's option,
a LIBOR rate plus 3.25 percent. The credit agreement is collateralized by all of
the Company's assets and includes certain restrictive covenants.

In October 1996, the Company entered into an agreement with a bank for an
acquisition line of credit. The agreement expires in September 2001 and provides
a facility of up to $5,000,000. Borrowings under the agreement bear interest at
the bank's prime rate plus 0.625 percent. The agreement includes certain
restrictive covenants. The Company was in compliance with respect to all its
covenants at December 31, 1996 and September 30, 1997. The agreement provides
that all borrowings thereunder are collateralized by

F-30
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

all the Company's assets. The outstanding borrowings under the agreement at
December 31, 1996 and September 30, 1997 were $3,695,500 and $4,505,003,
respectively.

The aggregate maturities of long-term debt and capital lease obligations as
of December 31, 1996, are as follows:

LONG-TERM CAPITAL
DEBT LEASES
------------ ------------
Year ending December 31 --
1997............................... $ 778,000 $ 656,013
1998............................... 778,000 431,370
1999............................... 778,000 84,321
2000............................... 778,000 --
2001............................... 583,500 --
------------ ------------
$ 3,695,500 1,171,704
============
Less: amount representing interest...... (127,733)
------------
$ 1,043,971
============

NOTES PAYABLE TO STOCKHOLDERS

Notes payable to stockholders consist of the following:

DECEMBER 31,
----------------------- SEPTEMBER 30,
1995 1996 1997
--------- ------------ -------------
(UNAUDITED)
Subordinated note payable to
stockholder, principal and interest of
$220,000 payable annually, maturing
October 1999, bearing interest at
6.53%................................. $ -- $ 582,343 $ 582,343
Notes payable to stockholders, due in
various amounts through October 1999,
interest at rates ranging from 10% to
12%................................... 97,641 120,000 120,000
--------- ------------ -------------
97,641 702,343 702,343
Less -- Current portion................. (27,094) (234,114) (234,114)
--------- ------------ -------------
$ 70,547 $ 468,229 $ 468,229
========= ============ =============

7. LEASES:

The Company leases space for its warehouses and corporate office from third
parties. Rent expense under these arrangements totaled approximately $390,000,
$309,000 and $371,000 for the years ended December 31, 1994, 1995 and 1996,
respectively, and was $264,000 and $610,000 for the nine months ended September
30, 1996 and 1997, respectively. The leases require the Company to pay taxes,
maintenance, insurance and certain other operating costs of the leased property.

The Company acquired rental equipment totaling $443,402 and $1,040,226
under capital lease obligations in 1995 and 1996, respectively.

F-31
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease payments required under noncancellable operating
leases that have initial or remaining noncancellable lease terms in excess of
one year at December 31, 1996, are as follows:

Year ending December 31 --
1997............................... $ 772,872
1998............................... 656,460
1999............................... 570,435
2000............................... 415,034
2001............................... 341,943
------------
$ 2,756,744
============

Total rent expense was $415,711 and $571,839 in 1995 and 1996,
respectively.

As discussed in Note 2, the Company rents certain equipment under
noncancellable operating leases. Aggregate future minimum rentals to be received
under noncancellable leases in effect at December 31, 1996, are as follows:

Year ending December 31 --
1997............................... $ 177,200
1998............................... 128,500
1999............................... 76,000
2000............................... 67,200
2001............................... 28,525
----------
$ 477,425
==========

8. INCOME TAXES:

The provision for federal and state income taxes follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal --
Current............................ $ 142,400 $ 306,000 $ 435,885 $ 344,111 $ 160,069
Deferred........................... (55,160) 31,300 (79,000) (40,000) 75,000
State --
Current............................ 25,200 89,300 120,000 64,325 26,483
Deferred........................... (9,740) (6,000) (12,000) (11,000) 15,000
---------- ---------- ---------- ---------- ----------
$ 102,700 $ 420,600 $ 464,885 $ 357,436 $ 276,552
========== ========== ========== ========== ==========
</TABLE>
F-32
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate tax rate of 34 percent to income
before income taxes as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ ----------------------
1994 1995 1996 1996 1997
------------ ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Provision at the statutory rate......... $ 234,933 $ 356,170 $ 398,227 $ 309,917 $ 245,612
Increase (decrease) resulting from --
State income tax, net of federal
benefit.......................... 34,549 52,378 58,563 45,576 36,119
Net operating loss carryforwards... (160,000) -- -- -- --
Meals and entertainment............ 5,587 7,312 12,236 9,177 11,568
Other.............................. (12,369) 4,740 (4,141) (7,234) (16,747)
------------ ---------- ---------- ---------- ----------
$ 102,700 $ 420,600 $ 464,885 $ 357,436 $ 276,552
============ ========== ========== ========== ==========
</TABLE>
The tax effects of temporary differences representing deferred tax assets and
liabilities result principally from the following:

DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
Depreciation and amortization........ $ (267,000) $ (307,000) $(322,000)
Accruals and reserves................ 289,000 420,000 345,000
------------ ------------ -------------
Net deferred income tax assets.. $ 22,000 $ 113,000 $ 23,000
============ ============ =============

9. COMMITMENTS AND CONTINGENCIES:

LITIGATION

The Company is a party to certain legal proceedings arising in the ordinary
course of business. Management believes the outcome of such legal proceedings
will not have a material adverse effect on the Company's consolidated financial
position or consolidated results of operations.

INSURANCE

The Company carries a broad range of insurance coverage, including general
and business auto liability, commercial property, workers' compensation and a
general umbrella policy. The Company has not incurred significant claims or
losses under any of its insurance policies.

The sale, distribution, rental and repair of medical products involve a
risk of product liability claims. The Company maintains product liability
insurance coverage in amounts that it considers adequate.

SALES TAX CONSIDERATIONS

Various states are increasingly seeking to impose sales or use taxes on
interstate sales made into their state by out-of-state companies. Complex legal
issues arise in these areas relating to, among other things, the required nexus
of a business with a particular state, which may permit the state to require a
business to collect such taxes. Although the Company believes that it has
adequately provided for sales taxes on its sales, there can be no assurance as
to the effect of actions state tax authorities may take on the Company's
financial condition or the results of its operations.

F-33
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. SIGNIFICANT SUPPLIERS:

Purchases from two vendors accounted for 34 percent and 25 percent of total
purchases in 1995 and 1996, respectively. Although there are a limited number of
suppliers, management believes that other suppliers could provide similar
products on comparable terms. A change in suppliers, however, could cause a
delay in product sales and a possible loss in revenues, which could affect
operating results adversely.

The Company's other significant agreements with its vendors are generally
for terms of one to three years but can be terminated if the Company fails to
meet certain negotiated sales volumes. The loss of one or more of the Company's
relationships with its significant vendors could have a material adverse effect
on the Company's consolidated financial condition and consolidated results of
operations.

11. STOCKHOLDERS' EQUITY:

In May 1996, the Company sold 1,362,190 shares of its Class A convertible
common stock (Class A Common Stock) for net cash consideration of $6,784,448
(net of offering costs of $715,552). Concurrently with that sale, the Company
repurchased 227,031 shares of TMI common stock for $1,250,000, and 889,269
shares of TMI common stock were converted into shares of the Company's Class B
common stock (Class B Common Stock) on a share-for-share basis.

Holders of shares of Class A Common Stock may convert their shares into
Class B Common Stock on a share-for-share basis at any time. The Class A Common
Stock will be automatically converted into shares of Class B Common Stock upon
the consummation of a qualified public offering that occurs before May 2000, or
after May 2000 but only if the current holder of shares of Class A Common Stock
shall have previously distributed its Class A Common Stock to certain third
parties. Should the Company meet certain profitability objectives or if the
Company's acquisition by TRIAD (referred to in Note 1) is completed, the holder
of shares of Class A Common Stock will be required to return 106,465 of the
previously issued shares back to the Company.

Holders of shares of Class A Common Stock vote as a class with the holders
of shares of Class B Common Stock on the basis of one vote per share. Holders of
shares of Class A Common Stock are entitled to dividends or other distributions
declared or paid on each share of Class A Common Stock when and in the same
amount as any dividend or other distribution is declared or paid on each share
of Class B Common Stock.

STOCKHOLDERS' AGREEMENT

Under an agreement between the Company and the holders of Class B Common
Stock, (i) the Company's prior written consent is required for certain transfers
and assignments of shares of Class B Common Stock, (ii) the Company has a right
of first refusal on any sales of Class B Common Stock and (iii) if a holder of
shares of Class B Common Stock dies, the Company is obligated to repurchase the
deceased holder's shares of Class B Common Stock for the greater of the
estimated fair value of the shares, as determined annually by the Company's
board of directors, or the insurance proceeds received by the Company on the
death of the holder. Based on the board of directors' determination of fair
value, the aggregate obligation would be $7,103,876 at December 31, 1996. The
Company maintains insurance on the lives of these stockholders, aggregating
$5,310,000 at December 31, 1995 and 1996, respectively. The agreement will be
terminated upon completion of the acquisition of the Company by TRIAD.

STOCK OPTIONS

A 1992 Company stock option plan (the Plan) provides for the grant of
options to purchase shares of the Company's common stock to employees, officers,
consultants and directors of the Company. The timing of exercise for individual
option grants is at the discretion of the Plan's administrator. Each option
expires no later than 10 years after the date the option is granted (five years
if the option is granted to a 10 percent

F-34
<PAGE>
TRIAD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

stockholder) and generally vest over a three-year period. An option granted to
an employee will expire (i) one year after the employee's employment by the
Company terminates because of death or a permanent disability or (ii) 90 days
after the employee's termination of employment for any other reason.

Stock option activity under the Plan is as follows:

WEIGHTED
SHARES AVERAGE
SUBJECT TO EXERCISE EXERCISE
OPTIONS PRICE PRICE
---------- ------------ ---------
Balance at December 31, 1994......... 62,500 $1.20-$1.80 $1.48
Exercised....................... (14,300) 1.30- 1.50 1.24
----------
Balance at December 31, 1995......... 48,200 1.30- 1.80 1.54
Granted......................... 87,500 4.68- 5.51 5.32
Exercised....................... (30,576) 1.30- 1.60 1.48
---------- ------------ ---------
Balance at December 31, 1996......... 105,124 $1.40-$5.51 $4.67
========== ============ =========

At December 31, 1996, options to purchase 17,624 shares of common stock at
a weighted average price of $1.47 per share were exercisable. The weighted
average remaining contractual life for all options outstanding at December 31,
1996, is 2.73 years.

The board of directors authorized the granting of options to purchase
30,000 shares of common stock, which have not been issued as of December 31,
1996.

As discussed in Note 2, the Company has elected to follow APB Opinion No.
25 in accounting for its employee stock options because the alternative fair
value accounting provided for under SFAS No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB Opinion No. 25, when the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized in the consolidated financial statements.

The impact of adopting SFAS No. 123 was not material to the accompanying
consolidated statements of operations.

12. SUBSEQUENT EVENT (UNAUDITED):

MERGER

On September 9, 1997, the Company and its stockholders entered into a
definitive merger agreement with TRIAD, providing for the acquisition of the
Company by TRIAD.

F-35

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Healthcare Technology Delivery, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Healthcare
Technology Delivery, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 1995 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Healthcare Technology Delivery, Inc. and subsidiaries as of
December 31, 1995 and 1996, and the results of their consolidated operations and
their consolidated cash flows for the years then ended, in conformity with
generally accepted accounting principles.

Arthur Andersen LLP

Houston, Texas
April 18, 1997

F-36
<PAGE>
HEALTHCARE TECHNOLOGY DELIVERY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 158 $ 1,810 $ 82,101
Accounts receivable, net of
allowance of $18,621, $27,715
and $57,367, respectively..... 1,909,862 1,618,990 2,157,884
Inventories, net................ 1,189,939 1,097,803 2,462,720
Prepaid expenses and other
current assets................ 31,399 28,740 11,965
Deferred income taxes........... 14,025 23,774 36,306
------------ ------------ -------------
Total current assets....... 3,145,383 2,771,117 4,750,976
PROPERTY AND EQUIPMENT, net.......... 165,045 190,346 313,541
INTANGIBLE ASSETS, net............... -- -- 1,665,592
OTHER NON-CURRENT ASSETS............. 164,791 234,205 35,669
------------ ------------ -------------
Total assets............... $ 3,475,219 $ 3,195,668 $ 6,765,778
============ ============ =============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current obligations under
capital leases................ $ 33,422 $ 23,575 $ 32,403
Notes payable to stockholders... -- -- 169,136
Short-term debt................. 466,532 745,632 703,396
Accounts payable and accrued
expenses....................... 1,929,008 1,498,411 3,079,047
------------ ------------ -------------
Total current
liabilities............... 2,428,962 2,267,618 3,983,982
------------ ------------ -------------
CAPITAL LEASE OBLIGATIONS, net of
current maturities................. 76,217 22,111 63,670
NOTES PAYABLE TO STOCKHOLDERS........ 315,005 169,136 --
DEFERRED INCOME TAXES................ 12,233 10,932 10,824
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value;
5,000 shares authorized, 1,000
shares issued and 751 shares
outstanding at December 31,
1995 and 1996; and $.01 par
value, 100,000 shares
authorized, and 90,000 shares
issued and outstanding at
September 30, 1997............ 1,000 1,000 900
Additional paid-in capital...... -- -- 1,611,800
Retained earnings............... 697,544 780,613 1,094,602
Treasury stock, 249 shares (at
cost) at December 31, 1995 and
1996; and no shares at
September 30, 1997............ (55,742) (55,742) --
------------ ------------ -------------
Total stockholders'
equity.................. 642,802 725,871 2,707,302
------------ ------------ -------------
Total liabilities and
stockholders' equity.... $ 3,475,219 $ 3,195,668 $ 6,765,778
============ ============ =============

The accompanying notes are an integral part of these consolidated financial
statements.

F-37
<PAGE>
HEALTHCARE TECHNOLOGY DELIVERY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ ------------------------------
1995 1996 1996 1997
-------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES............................. $ 17,148,917 $ 16,475,288 $ 12,202,645 $ 14,492,286
COST OF REVENUES..................... 11,522,891 11,042,497 8,217,283 9,823,034
-------------- -------------- -------------- --------------
Gross profit............... 5,626,026 5,432,791 3,985,362 4,669,252
-------------- -------------- -------------- --------------
SELLING EXPENSES..................... 2,808,499 2,724,858 1,986,077 2,278,747
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,121,913 2,353,122 1,787,624 1,562,044
DEPRECIATION AND AMORTIZATION........ 100,741 120,445 89,159 166,344
-------------- -------------- -------------- --------------
Total operating expenses........ 5,031,153 5,198,425 3,862,860 4,007,135
-------------- -------------- -------------- --------------
Income from operations..... 594,873 234,366 122,502 662,117

OTHER INCOME (EXPENSE):
Interest income................. 7,330 11,525 263 7,068
Interest expense................ (72,313) (44,425) (30,349) (41,391)
Other income (expense), net..... 1,575 (63,615) (908) (18,193)
-------------- -------------- -------------- --------------
INCOME BEFORE PROVISION FOR INCOME
TAXES.............................. 531,465 137,851 91,508 609,601
PROVISION FOR INCOME TAXES........... 211,923 54,782 36,365 240,330
-------------- -------------- -------------- --------------
NET INCOME........................... $ 319,542 $ 83,069 $ 55,143 $ 369,271
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-38
<PAGE>
HEALTHCARE TECHNOLOGY DELIVERY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK TOTAL
--------------- PAID-IN RETAINED ----------------- STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT EQUITY
------ ------ ---------- ---------- ------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1994................... 1,000 $1,000 $ -- $ 378,002 249 $(55,742) $ 323,260
Net income.......... -- -- -- 319,542 -- -- 319,542
------ ------ ---------- ---------- ------ -------- -------------
BALANCE, December 31,
1995................... 1,000 1,000 -- 697,544 249 (55,742) 642,802
Net income.......... -- -- -- 83,069 -- -- 83,069
------ ------ ---------- ---------- ------ -------- -------------
BALANCE, December 31,
1996................... 1,000 1,000 -- 780,613 249 (55,742) 725,871
Retirement of
treasury stock of
Futuretech
(unaudited)....... (249) (249) -- (55,493) (249) 55,742 --
Reorganization of
Futuretech
(unaudited):
Retirement of
Futuretech
common
stock....... (751) (751) -- 751 -- -- --
Issuance of HTD
common
stock....... 54,000 540 -- (540) -- -- --
Issuance of common
stock (unaudited):
Acquisition of
MCA......... 27,000 270 1,561,890 -- -- -- 1,562,160
Sale to related
party....... 9,000 90 49,910 -- -- -- 50,000
Net income
(unaudited)....... -- -- -- 369,271 -- -- 369,271
------ ------ ---------- ---------- ------ -------- -------------
BALANCE September 30,
1997 (unaudited)....... 90,000 $ 900 $1,611,800 $1,094,602 -- $ -- $ 2,707,302
====== ====== ========== ========== ====== ======== =============

The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
F-39
<PAGE>
HEALTHCARE TECHNOLOGY DELIVERY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- --------------------------
1995 1996 1996 1997
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 319,542 $ 83,069 $ 55,143 $ 369,271
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities --
Depreciation and amortization.... 100,741 120,445 89,159 166,344
Loss on disposal of fixed
assets........................ -- 62,342 -- --
Provision for doubtful
accounts...................... 18,621 23,576 12,468 29,652
Deferred income tax provision
(credit)...................... (2,840) (11,050) 15,301 (12,640)
Increase (decrease) in operating
cash flows resulting from
changes in:
Accounts receivable........... (84,111) 267,296 182,422 (418,390)
Inventories................... (92,726) 92,136 (117,833) (1,336,429)
Prepaid expenses and other
current assets............. (543) 2,659 12,002 22,405
Other noncurrent assets....... (46,764) (69,414) (7,854) 171,902
Accounts payable and accrued
expenses................... 178,641 (430,597) (495,015) 1,422,215
------------ ------------ ------------ ------------
Net cash provided by
(used in) operating
activities............ 390,561 140,462 (254,207) 414,330
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and
equipment........................ (148,341) (208,088) (81,306) (105,364)
Payment on capital leases.......... -- -- (45,438) (24,929)
------------ ------------ ------------ ------------
Net cash used in
investing activities.. (148,341) (208,088) (126,744) (130,293)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term
debt............................. 155,655 81,313 -- --
Principal payments on long-term
debt............................. (30,416) (291,135) -- --
Net borrowings on short-term
debt............................. (367,680) 279,100 335,472 (253,746)
Proceeds from issuance of preferred
stock............................ -- -- -- 450,000
Redemption of preferred stock...... -- -- -- (450,000)
Proceeds from issuance of common
stock............................ -- -- 47,681 50,000
------------ ------------ ------------ ------------
Net cash provided by
(used in) financing
activities............ (242,441) 69,278 383,153 (203,746)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... (221) 1,652 2,202 80,291
CASH AND CASH EQUIVALENTS, beginning of
period................................ 379 158 158 1,810
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of
period................................ $ 158 $ 1,810 $ 2,360 $ 82,101
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest...................... $ 75,008 $ 44,425 $ 15,543 $ 23,287
============ ============ ============ ============
Income taxes.................. $ 60,091 $ 182,295 $ 140,943 $ 177,152
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-40
<PAGE>
HEALTHCARE TECHNOLOGY DELIVERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Effective March 1, 1997, the stockholders of Futuretech, Inc. (Futuretech)
exchanged all their shares of Futuretech common stock for shares of common stock
of Healthcare Technology Delivery, Inc. (the Company or HTD), a company formed
in November 1996 by the stockholders of Futuretech. The exchange was accounted
for as a reorganization of Futuretech. Accordingly, no adjustments to the
recorded values of assets or liabilities were made. Also effective March 1,
1997, HTD acquired Medical Companies Alliance, Inc. (MCA) in a purchase
transaction in which all the shares of MCA stock were exchanged for shares of
HTD common stock (see Note 3).

HTD, a Delaware corporation, operates from its facilities in Park City,
Utah and Bessemer, Alabama. The Company primarily markets and sells specialty
medical products on a contract basis with manufacturers.

The Company and its stockholders intend to enter into a definitive merger
agreement with TRIAD Medical Inc. (TRIAD) pursuant to which the Company will be
acquired for consideration consisting of $2,475,000 in cash and 530,357 shares
of TRIAD common stock, concurrently with the closing of the initial public
offering by TRIAD of its common stock (the Offering).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared on
the accrual basis of accounting and include the accounts of the Company and its
subsidiaries. All significant intercompany amounts and transactions have been
eliminated in consolidation. In 1996, the Company changed its fiscal year end
from October 31 to December 31. Fiscal years presented and referred to in these
financial statements and notes thereto are on a December 31 fiscal-year basis.

INTERIM FINANCIAL INFORMATION

The interim consolidated financial statements as of September 30, 1997, and
for the nine months ended September 30, 1996 and 1997, are unaudited, and
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
consolidated financial statements, have been included. The results of operations
for the interim periods are not necessarily indicative of the results for the
entire fiscal year.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

F-41
<PAGE>
HEALTHCARE TECHNOLOGY DELIVERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

carrying amounts of those long-term instruments reported in the balance sheets
are considered to approximate their respective fair values as the Company's
long-term debt and capital lease obligations interest rates approximate market
rates at December 31, 1996.

CASH AND CASH EQUIVALENTS

For purposes of the consolidated balance sheets and consolidated statements
of cash flows, the Company considers all investments with original maturities of
three months or less to be cash equivalents.

CONCENTRATIONS OF CREDIT RISK

In the normal course of business, the Company extends credit to its
customers, which are primarily hospitals. The Company regularly reviews accounts
receivable and makes provision for potentially uncollectible balances. At
December 31, 1995 and 1996, and at September 30, 1997, management believes the
Company had incurred no material impairments in the carrying values of its
accounts receivable, other than uncollectible amounts for which provision has
been made.

INVENTORIES

Inventories consist primarily of medical supplies and equipment.
Inventories, net of allowances, are valued at the lower of cost or market with
cost being determined on the first-in, first-out (FIFO) method. Included in
inventories at December 31, 1995 and 1996, and at September 30, 1997, are
approximately $172,703, $192,594 and $178,326, respectively, in net book value
of demonstration equipment used by the Company's sales force.

PROPERTY AND EQUIPMENT

INTANGIBLE ASSETS

The intangible assets recorded by the Company in connection with the
acquisition of MCA (see Note 3) are amortized on a straight-line basis. As of
September 30, 1997, accumulated amortization of intangibles amounted to $36,533.
The applicable intangible amortization periods are as follows:

Goodwill............................. 40 years
Patents.............................. 12 years

COLLATERAL INTEREST IN INSURANCE POLICIES

The Company has entered into an agreement with certain of its stockholders
for the sole purpose of financing life insurance premiums on whole-life policies
covering key officers of the Company. The advances are collateralized by the
cash surrender value of and the death benefits payable under the policies. The
Company recorded the advances in other non-current assets in the accompanying
consolidated balance sheets totaling approximately $164,791 and $231,205 at
December 31, 1995 and 1996, respectively, and $30,365 at September 30, 1997.

F-42
<PAGE>
HEALTHCARE TECHNOLOGY DELIVERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUES AND EXPENSES

The Company's revenues are primarily derived from sales of specialty
medical products under agreements and arrangements with various manufacturers.
Cost of revenues consists primarily of product costs, net of rebates, and
freight charges. Selling expenses consist primarily of sales commissions,
salaries of sales managers, travel and entertainment expenses, trade show
expenses and automobile allowances. General and administrative expenses consist
primarily of executive compensation and related benefits, administrative
salaries and benefits, office rent and utilities, communication expenses and
professional fees.

REVENUE RECOGNITION

Revenues are recorded at the time of shipment of products or performance of
services. Revenues from commissions are recognized as the related products are
sold.

INCOME TAXES

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 129, "Disclosure of Information
About Capital Structure." SFAS No. 129 requires entities to disclose certain
information about their capital structure, including the pertinent rights and
privileges of the various securities outstanding. The Company will be required
to adopt SFAS No. 129 in 1997 and, in the opinion of management, SFAS No. 129
will not significantly change the existing financial statement disclosures.

3. ACQUISITION (UNAUDITED):

On March 1, 1997, HTD acquired all the outstanding stock of MCA in exchange
for 27,000 shares of HTD common stock. The acquisition was accounted for as a
purchase, and MCA's results of operation have been included in the accompanying
unaudited September 30, 1997 consolidated financial statements since the
acquisition date. MCA is also a contract seller of specialty medical products.

The purchase price was allocated as follows:

Current assets..................... $ 174,456
Property and equipment............. 165,610
Patent............................. 395,551
Goodwill........................... 1,186,655
Current liabilities................ (360,112)
------------
Purchase price..................... $ 1,562,160
============

F-43
<PAGE>
HEALTHCARE TECHNOLOGY DELIVERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL DECEMBER 31,
LIVES -------------------------- SEPTEMBER 30,
IN YEARS 1995 1996 1997
--------- ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Furniture and fixtures............... 5-7 $ 80,314 $ 80,314 $ 126,881
Machinery and equipment.............. 7 84,154 74,265 125,879
Office equipment..................... 5 209,360 200,302 227,210
Rental equipment..................... 5 -- -- 74,245
Leasehold improvements............... 10 23,275 -- --
------------ ------------ -------------
397,103 354,881 554,215
Less -- accumulated depreciation and
amortization....................... (232,058) (164,535) (240,674)
------------ ------------ -------------
Property and equipment, net.......... $ 165,045 $ 190,346 $ 313,541
============ ============ =============
</TABLE>
Equipment financed under capital lease obligations amounted to $144,133 and
$86,836 at December 31, 1995 and 1996, respectively, and $146,868 at September
30, 1997. Related accumulated depreciation for those assets totaled $45,524 and
$41,634, at December 31, 1995 and 1996, respectively, and $56,368 at September
30, 1997.

5. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts receivable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Trade receivables....................... $ 1,810,467 $ 1,486,413 $ 1,955,588
Commissions receivable.................. 100,586 98,491 139,878
Receivables from related party (Note
7).................................... 9,257 17,249 --
Receivables from employees.............. 6,623 27,887 28,260
Other................................... 1,550 16,665 91,525
------------ ------------ -------------
1,928,483 1,646,705 2,215,251
Less -- allowance for doubtful
accounts.............................. (18,621) (27,715) (57,367)
------------ ------------ -------------
$ 1,909,862 $ 1,618,990 $ 2,157,884
============ ============ =============
</TABLE>
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Accounts payable, trade................. $ 1,364,397 $ 1,079,398 $ 2,496,448
Accrued compensation and benefits....... 117,598 54,085 41,177
Accrued commissions..................... 226,605 178,689 235,134
Accrued income taxes.................... 198,095 79,431 155,249
Other payables and accrued expenses..... 22,313 106,808 151,039
------------ ------------ -------------
$ 1,929,008 $ 1,498,411 $ 3,079,047
============ ============ =============
</TABLE>
F-44
<PAGE>
HEALTHCARE TECHNOLOGY DELIVERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. DEBT:

Short-term debt consists of a $1,500,000 revolving credit line payable on
demand with interest due monthly at the bank's prime rate plus 0.75 percent (9
percent at December 31, 1996). This credit line is secured by accounts
receivable, inventories and personal guarantees of the Company's principal
stockholders and contains various restrictive covenants, including provisions
relating to the maintenance of working capital, net worth and current ratios.
The Company was not in compliance with its minimum working capital and current
ratio debt covenants at December 31, 1996. The line of credit issuer has waived
compliance with these requirements at December 31, 1996. The Company was in
compliance with respect to all of its covenants at September 30, 1997.

Stockholders' notes payable represent amounts advanced to the Company by
certain of its stockholders for working capital purposes. The notes are due
October 31, 1998 and bear interest at 8% payable upon maturity; however, the
Company repaid the notes during October 1997.

The aggregate maturities of long-term debt and capital lease obligations as
of December 31, 1996, are as follows:

Year ending December 31 --
1997....................... $ 23,575
1998....................... 176,355
1999....................... 7,940
2000....................... 3,631
2001....................... 3,321
----------
$ 214,822
==========

Capital lease obligations are shown net of interest and executory costs,
which total approximately $15,000 through 2001.

7. LEASES:

Prior to January, 1997, the Company leased its warehouse facilities from
Saralou Associates, a partnership owned by two of its stockholders
("Saralou"). Rent expense under this arrangement totaled approximately $84,000
and $77,400 for the years ended December 31, 1995 and 1996, respectively, and
was $63,000 and $0 for the nine months ended September 30, 1996 and 1997,
respectively. The Company also previously leased space for its corporate office
from a third party. Rent expense under this arrangement totaled approximately
$55,853 for each of the years ended December 31, 1995 and 1996, and $41,890 and
$6,982 for the nine months ended September 30, 1996 and 1997, respectively. The
leases required or require the Company to pay taxes, maintenance, insurance and
certain other operating costs of the leased property.

During December 1996, the Company relocated its corporate office and
warehouse into combined new facilities that are owned by Saralou. The Company
provided a guaranty of this related party's $1,500,000 loan on the new
facilities, and the Company advanced funds to Saralou for construction and other
purposes. The amount due relating to these advances totaled $9,257 and $17,249
for the years ending December 31, 1995 and 1996, respectively, and $0 at
September 30, 1997. In January 1997, the $1,500,000 loan was renegotiated
pursuant to which, among other things, Saralou granted a lien against the
facilities to collateralize its loan, and the Company was released from its
guaranty. Total rent expense under the lease for the new facilities amounted to
$116,100 for the nine months ended September 30, 1997.

In connection with the relocation, the Company recorded a $62,342 charge in
1996 associated with the termination of certain equipment leases, which is
reflected as other expense, net in the accompanying consolidated statement of
operations for the year ended December 31, 1996.

F-45
<PAGE>
HEALTHCARE TECHNOLOGY DELIVERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease payments (payable to related parties) required under
noncancellable operating leases that have initial or remaining noncancellable
lease terms in excess of one year at December 31, 1996 are as follows:

Year ending December 31 --
1997............................... $ 154,800
1998............................... 154,800
1999............................... 154,800
2000............................... 154,800
2001............................... 154,800
Thereafter......................... 774,000
------------
$ 1,548,000
============

8. INCOME TAXES:

The provision for federal and state income taxes follows:

YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------- ---------------------
1995 1996 1996 1997
---------- --------- --------- ----------
(UNAUDITED)
Federal --
Current................... $ 194,395 $ 58,276 $ 18,363 $ 220,538
Deferred.................. (2,476) (9,633) 13,340 (11,019)
State --
Current................... 20,368 7,556 2,701 32,432
Deferred.................. (364) (1,417) 1,961 (1,621)
---------- --------- --------- ----------
$ 211,923 $ 54,782 $ 36,365 $ 240,330
========== ========= ========= ==========

Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate tax rate of 34 percent to income
before income taxes as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, ---------------------
1995 1996 1996 1997
---------- --------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Provision at the statutory rate...... $ 180,698 $ 46,870 $ 31,112 $ 207,264
Increase (decrease) resulting from --
State income tax, net of federal
benefit....................... 13,203 4,052 2,690 7,276
Officers' life insurance
expense....................... 13,845 4,991 3,313 3,743
Meals and entertainment......... 9,913 11,513 7,644 8,635
Other........................... (5,736) (12,644) (8,394) 13,412
---------- --------- --------- ----------
$ 211,923 $ 54,782 $ 36,365 $ 240,330
========== ========= ========= ==========
</TABLE>
F-46
<PAGE>
HEALTHCARE TECHNOLOGY DELIVERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences representing deferred tax assets
and liabilities result principally from the following:

DECEMBER 31,
---------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- -------------
(UNAUDITED)
Depreciation and amortization........ $ (12,233) $ (10,932) $ (10,824)
Accruals and reserves................ 14,025 23,774 36,306
---------- ---------- -------------
Net deferred income tax assets....... $ 1,792 $ 12,842 $ 25,482
========== ========== =============

Certain fiscal years of the Company are currently under examination by the
Internal Revenue Service. While the outcome of the audit is not determinable at
this time, the Company does not expect the audit findings will have a material
adverse impact on the financial position of the Company.

9. COMMITMENTS AND CONTINGENCIES:

LITIGATION

INSURANCE

The sale and distribution of medical products involve a risk of product
liability claims. The Company maintains product liability insurance coverage in
amounts that it considers adequate.

10. SIGNIFICANT SUPPLIERS:

Sales of specialty medical products under distribution agreements and
agency arrangements with manufacturers represented approximately 89.2 percent
and 7.8 percent, respectively, of the Company's revenues in 1996. Sales of
products under arrangements with the Company's four largest suppliers accounted
for approximately 62.8 percent and 67.0 percent of sales revenues for 1995 and
1996, respectively.

The Company's significant distribution agreements and agency arrangements
are generally for terms of one to three years, but can be terminated if the
Company fails to meet certain negotiated sales volumes. The loss of one or more
of the Company's relationships with its significant manufacturers could have a
material adverse effect on the Company's consolidated financial condition and
consolidated results of operations.

11. EMPLOYEE BENEFIT PLAN:

The Company sponsors a defined contribution 401(k) profit-sharing plan for
employees meeting certain requirements. The Company's contributions during the
years ended December 31, 1995 and 1996, were $33,058 and $20,000, respectively,
and during the nine months ended September 30, 1996 and 1997, were $15,000 and
$0, respectively.

12. INCENTIVE BONUS PLAN:

The Company maintains operational-and profit-based bonus plans for certain
sales-related employees. The Company also may approve discretionary bonuses to
certain officers and employees. Amounts expensed under such incentive agreements
totaled $199,190 and $309,400 for the years ended

F-47
<PAGE>
HEALTHCARE TECHNOLOGY DELIVERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1995 and 1996, respectively, and $286,125 and $100,302 for the nine
months ended September 30, 1996 and 1997, respectively.

13. ISSUANCE OF PREFERRED AND COMMON STOCK (UNAUDITED):

In April 1997, HTD issued and sold 9,000 shares of its common stock and
4,500 shares of its Series A preferred stock (the "HTD Preferred Stock") to
Equus II Incorporated, an investor in TRIAD, for $50,000 and $450,000,
respectively. The HTD preferred stock bears cumulative, preferential dividends
at the rate of $10 per share per annum, payable quarterly, and is mandatorily
redeemable at $100 per share, plus accrued and unpaid dividends, on the
occurence of certain events, including a change of control. HTD redeemed the
preferred stock in September 1997. If TRIAD acquires HTD and consummates the
Offering, certain holders of HTD common stock have agreed not to exercise and
will terminate options to purchase an aggregate of 10,000 shares of HTD common
stock.

14. EMPLOYMENT AGREEMENTS:

On March 1, 1997 the Company entered into employment agreements with
certain key employees which provide for a three-year employment period at a base
salary plus various incentives.

15. SUPPLEMENTAL CASH FLOW INFORMATION:

During the nine months ended September 30, 1997 the Company had the
following non-cash financing and investing activities:

Acquisition of MCA:
Fair value of assets acquired... $ 1,922,272
Liabilities assumed............. (360,112)
------------
Fair value of stock issued...... $ 1,562,160
============
Treasury stock retired in
reorganization..................... $ 55,742
Common stock retired in
reorganization..................... $ 211
Capital lease transactions........... $ 84,237

16. SUBSEQUENT EVENTS (UNAUDITED):

MERGER

On September 9, 1997, the Company and its stockholders entered into a
definitive merger agreement with TRIAD, providing for the acquisition of the
Company by TRIAD.

Concurrently with the closing of the transactions under the merger
agreement, the Company will enter into agreements with a related party owned by
certain of its stockholders to lease land and buildings used in the Company's
operations for a negotiated amount and term.

F-48

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Sun Medical, Inc.:

We have audited the accompanying balance sheets of Sun Medical, Inc. (a
Texas corporation) as of December 31, 1995 and 1996, and the related statements
of operations, stockholder's equity and cash flows for each of the three years
in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sun Medical, Inc. as of
December 31, 1995 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.

Arthur Andersen LLP
Houston, Texas
April 18, 1997

F-49
<PAGE>
SUN MEDICAL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
------------------------------ 30,
1995 1996 1997
-------------- -------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 1,154,647 $ 803,458 $ 608,211
Accounts receivable, net of
allowance of $4,913, $0
and $0, respectively.......... 1,630,865 1,313,822 2,543,067
Notes receivable -- current
portion....................... 80,804 -- --
Inventories, net................ 1,635,144 1,544,614 1,178,641
Prepaid expenses and other
current assets................ 34,191 35,997 62,633
Deferred income taxes........... 64,015 128,122 126,941
-------------- -------------- -----------
Total current assets....... 4,599,666 3,826,013 4,519,493
PROPERTY AND EQUIPMENT, net.......... 176,925 123,834 79,383
OTHER NON-CURRENT ASSETS:
Notes receivable, net of current
portion....................... -- 440,000 690,000
Other........................... 29,099 29,899 29,899
-------------- -------------- -----------
Total assets............... $ 4,805,690 $ 4,419,746 $ 5,318,775
============== ============== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES:
Current maturities of long-term
debt and notes payable to
former stockholder............ $ 850,000 $ 450,000 $ 450,000
Accounts payable and accrued
expenses...................... 1,754,773 3,283,662 3,546,281
-------------- -------------- -----------
Total current
liabilities............... 2,604,773 3,733,662 3,996,281
LONG-TERM DEBT, net of current
maturities.......................... 200,000 150,000 400,000
NOTES PAYABLE TO FORMER STOCKHOLDER,
net of current maturities........... 1,900,000 1,500,000 1,500,000
DEFERRED INCOME TAXES................ 3,509 7,024 6,959
OTHER LONG-TERM LIABILITIES.......... 1,537,969 231,300 259,983
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S DEFICIT:
Common stock, no par value;
500,000 shares authorized,
166,887 shares issued and
outstanding..................... 2,673,357 2,673,357 2,673,357
Additional paid-in capital....... (144,728) (222,789) (222,789)
Unearned ESOP shares............. (4,097,046) (3,779,885) (4,159,885)
Retained earnings................ 127,856 127,077 864,869
-------------- -------------- -----------
Total stockholder's
deficit.............. (1,440,561) (1,202,240) (844,448)
-------------- -------------- -----------
Total liabilities and
stockholder's
deficit.............. $ 4,805,690 $ 4,419,746 $ 5,318,775
============== ============== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-50
<PAGE>
SUN MEDICAL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------------- ------------------------------
1994 1995 1996 1996 1997
-------------- -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 12,383,488 $ 13,917,975 $ 13,037,884 $ 9,780,791 $ 10,613,669
COST OF REVENUES..................... 8,438,440 9,341,268 8,595,560 6,792,836 7,039,412
-------------- -------------- -------------- -------------- --------------
Gross profit............... 3,945,048 4,576,707 4,442,324 2,987,955 3,574,257
-------------- -------------- -------------- -------------- --------------
SELLING EXPENSES..................... 1,770,087 1,877,520 1,820,170 941,440 1,226,358
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 1,876,597 2,064,811 2,121,559 1,378,739 1,024,132
DEPRECIATION AND
AMORTIZATION....................... 73,277 66,407 60,544 45,000 45,000
-------------- -------------- -------------- -------------- --------------
Total operating expenses........ 3,719,961 4,008,738 4,002,273 2,365,179 2,295,490
-------------- -------------- -------------- -------------- --------------
Income from operations..... 225,087 567,969 440,051 622,776 1,278,767
OTHER INCOME (EXPENSE):
Interest income................. 22,468 42,027 48,308 27,949 84,771
Interest expense................ (395,654) (356,033) (246,549) (176,195) (176,778)
-------------- -------------- -------------- -------------- --------------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES....................... (148,099) 253,963 241,810 474,530 1,186,760
PROVISION FOR INCOME TAXES........... 76,515 247,727 242,589 199,014 448,968
-------------- -------------- -------------- -------------- --------------
NET INCOME (LOSS).................... $ (224,614) $ 6,236 $ (779) $ 275,516 $ 737,792
============== ============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-51
<PAGE>
SUN MEDICAL, INC.
STATEMENTS OF STOCKHOLDER'S DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNEARNED TOTAL
--------------------- PAID-IN ESOP RETAINED STOCKHOLDER'S
SHARES AMOUNT CAPITAL SHARES EARNINGS DEFICIT
------- ---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993.............. 166,887 $2,673,357 $ (436) $(4,990,545) $ 346,234 $ (1,971,390)
8,622 shares released to ESOP
participants..................... -- -- (45,266) 426,789 -- 381,523
Shares purchased by ESOP from ESOP
participants..................... -- -- (50,000) -- (50,000)
Net loss........................... -- -- (224,614) (224,614)
------- ---------- ---------- ----------- ---------- -------------
BALANCE, December 31, 1994.............. 166,887 2,673,357 (45,702) (4,613,756) 121,620 (1,864,481)
10,479 shares released to ESOP
participants..................... -- -- (99,026) 518,710 -- 419,684
Shares purchased by ESOP from ESOP
participants..................... -- -- (2,000) -- (2,000)
Net income......................... -- -- 6,236 6,236
------- ---------- ---------- ----------- ---------- -------------
BALANCE, December 31, 1995.............. 166,887 2,673,357 (144,728) (4,097,046) 127,856 (1,440,561)
10,478 shares released to ESOP
participants..................... -- -- (78,061) 518,661 -- 440,600
Shares purchased by ESOP from ESOP
participants..................... -- -- (201,500) -- (201,500)
Net loss........................... -- -- (779) (779)
------- ---------- ---------- ----------- ---------- -------------
BALANCE, December 31, 1996.............. 166,887 2,673,357 (222,789) (3,779,885) 127,077 (1,202,240)
Shares purchased by ESOP from ESOP
participants (unaudited)......... -- -- -- (380,000) -- (380,000)
Net income (unaudited)............. -- -- 737,792 737,792
------- ---------- ---------- ----------- ---------- -------------
BALANCE, September 30, 1997
(unaudited)........................... 166,877 $2,673,357 $ (222,789) $(4,159,885) $ 864,869 $ (844,448)
======= ========== ========== =========== ========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-52
<PAGE>
SUN MEDICAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------- --------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................. $ (224,614) $ 6,236 $ (779) $ 275,516 $ 737,792
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities --
Depreciation and amortization.... 73,277 66,407 60,544 45,000 45,000
Provision for doubtful accounts
receivable.................... (145,680) (593) 4,913 4,913 --
Deferred income taxes, net....... (21,426) (20,358) (60,592) (59,765) 1,116
Shares released to the ESOP...... 381,523 419,684 440,600 124,884 --
Increase (decrease) in operating
cash flows resulting from:
Accounts receivable........... 273,718 (58,084) 392,934 557,669 (1,119,245)
Inventories................... 399,660 44,413 90,530 299,689 365,973
Prepaid expenses and other
current assets............. -- (9,191) (1,806) 20,172 (26,636)
Other noncurrent assets....... 14,913 58,062 (800) -- --
Accounts payable and accrued
expenses................... (201,213) 1,007,336 (1,504,314) (677,283) 152,619
Other long-term liabilities... -- 43,500 1,726,534 572,537 28,683
Loss on sale of property and
equipment.................. -- -- -- -- (6,600)
------------ ------------ ------------ ------------ ------------
Net cash provided by
operating activities.. 550,158 1,557,412 1,147,764 1,163,332 178,702
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to investees.............. -- -- (440,000) (40,000) (250,000)
Proceeds from sale of property and
equipment........................ 17,448 11,171 2,547 -- 6,600
Purchases of property and
equipment........................ (4,867) (153,581) (10,000) (2,060) (549)
------------ ------------ ------------ ------------ ------------
Net cash provided by
(used in) investing
activities............ 12,581 (142,410) (447,453) (42,060) (243,949)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
debt............................. (523,000) (352,000) (850,000) (450,000) (75,000)
Proceeds of long-term debt......... -- -- -- -- 325,000
Shares purchased from ESOP
Participants..................... (50,000) (2,000) (201,500) (201,500) (380,000)
------------ ------------ ------------ ------------ ------------
Net cash used in
financing activities.. (573,000) (354,000) (1,051,500) (651,500) (130,000)
------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... (10,261) 1,061,002 (351,189) 469,772 (195,247)
CASH AND CASH EQUIVALENTS, beginning of
period................................ 103,906 93,645 1,154,647 1,154,647 803,458
------------ ------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of
period................................ $ 93,645 $ 1,154,647 $ 803,458 $ 1,624,419 $ 608,211
============ ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
INFORMATION:
Cash paid for --
Interest...................... $ 352,000 $ 299,000 $ 247,000 $ 11,200 $ 30,500
============ ============ ============ ============ ============
Income taxes.................. $ 15,000 $ 12,000 $ 377,000 $ 132,000 $ 189,400
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-53
<PAGE>
SUN MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Sun Medical, Inc. (the Company or Sun) was founded in 1978 and maintains
its headquarters in Arlington, Texas. The Company is a contract seller and
distributor and limited manufacturer of specialty medical products and
represents over 15 manufacturers.

The Company intends to enter into a definitive merger agreement with TRIAD
Medical Inc. (TRIAD) pursuant to which the Company will be acquired by TRIAD for
consideration consisting of $2,050,000 in cash and 571,429 shares of TRIAD
common stock, concurrently with the closing of the initial public offering by
TRIAD of its common stock (the Offering).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The accompanying financial statements have been prepared on the accrual
basis of accounting.

INTERIM FINANCIAL INFORMATION

The interim financial statements as of September 30, 1997, and for the nine
months ended September 30, 1996 and 1997, are unaudited, and certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist primarily of cash, cash
equivalents, trade receivables, trade payables and debt instruments. The
carrying amounts of those instruments reported in the balance sheets are
considered to estimate their respective fair values due to the short-term nature
of such financial instruments and the current interest rate environment. The
fair value of the Company's long-term debt was determined using valuation
techniques that considered cash flows discounted at current market rates and
management's best estimates for instruments without quoted market prices. The
carrying amounts of long-term debt reported in the balance sheets are considered
to approximate the respective fair value as the Company's long-term debt
interest rates approximate market rates at December 31, 1996.

CASH AND CASH EQUIVALENTS

For purposes of the balance sheets and statements of cash flows, the
Company considers all investments with original maturities of three months or
less to be cash equivalents. At December 31, 1995 and 1996 and at September 30,
1997, the Company maintained cash balances in various financial institutions in
excess of federally insured limits.

F-54
<PAGE>
SUN MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

CONCENTRATIONS OF CREDIT RISK

INVENTORIES

Inventories consist primarily of medical products and supplies.
Inventories, net of allowances, are valued at the lower of cost or market. Cost
is determined on the average/first-in, first-out (FIFO) method. At December 31,
1995 and 1996, and at September 30, 1997, management believes the Company had
incurred no material impairments in the carrying values of its inventories,
other than impairments for which provision has been made.

PROPERTY AND EQUIPMENT

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments that extend the useful
lives of existing equipment are capitalized and depreciated. Upon retirement or
disposition of property and equipment, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized in the statements of operations.

REVENUES AND EXPENSES

The Company's revenues are primarily derived from sales of specialty
medical products under distribution agreements and agency arrangements with
various manufacturers. Cost of revenues consists primarily of product costs, net
of rebates, and freight charges. Selling expenses consist primarily of sales
commissions, salaries of sales managers, travel and entertainment expenses,
trade show expenses and automobile allowances. General and administrative
expenses consist primarily of executive compensation and related benefits,
administrative salaries and benefits, office rent and utilities, communication
expenses and professional fees.

REVENUE RECOGNITION

Revenues are recognized when services and rentals are provided and when
products and supplies are shipped.

INCOME TAXES

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

F-55
<PAGE>
SUN MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

No. 129 in 1997 and, in the opinion of management, SFAS No. 129 will not
significantly change the existing financial statement disclosures.

3. INVESTMENTS AND NOTES RECEIVABLE:

On October 26, 1996, the Company issued a $650,000 line of credit to a
developmental stage enterprise (Rejuvena). The credit line carries an interest
rate based on the prevailing prime rate plus 3 percent, with interest payable on
a quarterly basis until October 1999, when the principal balance, plus accrued
interest, is due. At December 31, 1996 and September 30, 1997, the principal
balance outstanding under the credit line was $400,000 and $650,000,
respectively, which is reflected as notes receivable in the accompanying balance
sheets. In exchange for the credit line, the Company received the right to
convert the principal balance of the line of credit to shares of common stock of
Rejuvena at a rate of one share for each $.21 of debt at any time after the
first anniversary date of the agreement. The Company also received two stock
options. In November 1996, the Company exercised the first option to purchase
500,000 shares of Rejuvena common stock at a cost of $.001 per share.
Subsequently, Rejuvena effected a reverse-split of its Common Stock on a
1-for-10 basis, resulting in the Company's owning 50,000 shares of Rejuvena
common stock, or 30.2 percent and 3 percent of all the outstanding equity
interests in Rejuvena at December 31, 1996 and September 30, 1997, respectively.
The second option, which the Company has not yet exercised, allows the Company
to purchase shares of Rejuvena at a cost of $2.10 per share determined by the
highest principal amount of the line of credit.

On February 15, 1997, the Company entered into a note agreement with Cysco
Enterprises, Inc. (Cysco), a company owned by the chief executive officer of the
Company. Cysco and the Company agreed to share equally the receivable
outstanding from Rejuvena. In conjunction with the agreement, Cysco loaned the
Company $325,000. The Company will repay Cysco principal and interest in amounts
equal to one-half of the Company's collections on the Rejuvena loan. In exchange
for the loan, the Company granted to Cysco options to purchase one-half of the
common stock of Rejuvena that the Company acquired in connection with the
Rejuvena loan. At September 30, 1997, the Company owed Cysco $325,000.

During 1996, the Company loaned a corporation (Foundation Surgery
Affiliates) $40,000. The note carries an interest rate based on the prevailing
prime rate plus one percent, with interest payable monthly until September 1997,
when principal payments began to amortize over a three year period. In exchange
for the loan, the Company received common stock in the corporation, which was
recorded as an investment under the cost method.

Concurrent with the Offering, the chief executive officer of the Company
intends to repay the then outstanding principal balances of the Rejuvena line of
credit and of the Foundation Surgery Affiliates note in exchange for the
Company's stock ownership, options and conversion rights in these companies.

The Company owns approximately 78 percent of the common stock of PreemiCare
Corporation (PreemiCare), a company which specialized in providing infant care
systems and baby warmers to premature babies. Two of the Company's officers
received management fees from PreemiCare of $6,000 in each of the three years
ended December 31, 1996, respectively. In 1992, PreemiCare sold all its assets
to an unrelated third party in exchange for an agreement to receive royalty
payments on related revenues. This investment was written off in 1993 and has
been recorded on the cost method since then. The Company has received no
dividends or other income from PreemiCare since 1993. At December 31, 1996, the
royalty agreement expired and PreemiCare had no operations.

F-56
<PAGE>
SUN MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES ------------------------------ SEPTEMBER 30,
IN YEARS 1995 1996 1997
------------ -------------- -------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Transportation equipment................ 5 $ 38,336 $ 38,336 $ 38,336
Furniture and fixtures.................. 5-7 196,589 196,589 197,139
Machinery and equipment................. 7 379,420 379,420 379,420
Rental equipment........................ 5-7 748,152 737,057 708,865
Leasehold improvements.................. 10 122,266 122,266 122,266
-------------- -------------- -------------
1,484,763 1,473,668 1,446,026
Less -- accumulated depreciation and
amortization.......................... (1,307,838) (1,349,834) (1,366,643)
-------------- -------------- -------------
Property and equipment, net............. $ 176,925 $ 123,834 $ 79,383
============== ============== =============
</TABLE>
5. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts receivable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Trade receivables....................... $ 1,643,772 $ 1,302,327 $ 2,536,618
Other................................... (7,994) 11,495 6,449
------------ ------------ -------------
1,635,778 1,313,822 2,543,067
Less -- allowance for doubtful
accounts.............................. (4,913) -- --
------------ ------------ -------------
$ 1,630,865 $ 1,313,822 $ 2,543,067
============ ============ =============
</TABLE>
Inventories are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Finished goods.......................... $ 1,479,888 $ 1,426,353 $ 1,017,156
Raw materials........................... 155,256 118,261 161,485
------------ ------------ -------------
$ 1,635,144 $ 1,544,614 $ 1,178,641
============ ============ =============
</TABLE>
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Accounts payable, trade................. $ 1,197,302 $ 1,035,952 $ 801,435
Accrued compensation and benefits....... 157,161 173,381 145,407
Accrued income taxes.................... 281,424 1,890,708 2,035,422
Refunds payable......................... 72,899 166,524 168,000
Other payables and accrued expenses..... 45,987 17,097 396,017
------------ ------------ -------------
$ 1,754,773 $ 3,283,662 $ 3,546,281
============ ============ =============
</TABLE>
F-57
<PAGE>
SUN MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. DEBT:

Long-term debt consists of the following:

DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
Notes payable to former stockholder,
payments due annually ending
December 31, 2001, bearing interest
at 10%............................. $ 2,750,000 $ 1,950,000 $ 1,950,000
Note payable to a bank, due
semi-annually ending July 1999,
bearing interest at the prevailing
prime interest rate (8.25% at
December 31, 1996)................. 200,000 150,000 75,000
Note payable to Cysco Enterprises,
due in October 1999 bearing
interest at the prevailing prime
interest rate plus 3% (11.25% at
December 31, 1996)................. -- -- 325,000
------------ ------------ -------------
2,950,000 2,100,000 2,350,000
Less: Amounts due within one
year.......................... (850,000) (450,000) (450,000)
------------ ------------ -------------
$ 2,100,000 $ 1,650,000 $ 1,900,000
============ ============ =============

The Company also has a line of credit from a bank with available borrowings
of $1,500,000 at December 31, 1995 and 1996. There were no amounts outstanding
under the line of credit at December 31, 1995 or 1996 or at September 30, 1997.

The aggregate maturities of long-term debt are as follows:

Year ending December 31 -
1997....................... $ 450,000
1998....................... 425,000
1999....................... 400,000
2000....................... 400,000
2001....................... 350,000
------------
Total................. $ 2,025,000
============

7. LEASES:

The Company leases its facilities from a partnership of which one of the
partners is the chief executive officer of the Company. Included in general and
administrative expenses for the years ended December 31, 1994, 1995 and 1996,
respectively, is approximately $242,805, $244,525 and $253,406 and for the nine
months ended September 30, 1997 and 1996 is $189,900 of rent paid to this
partnership under the facilities lease. The lease provides for the lessor to pay
taxes, maintenance and insurance for the leased property. The Company pays
certain operating costs of the leased property

The Company leases vehicles for certain key members of management. The
lease payments under those vehicle leases were approximately $15,770 in the
aggregate for the year ended December 31, 1996.

The Company believes the terms of the related-party leases are at least as
favorable as the terms that would have been obtained from an unaffiliated third
party in a similar transaction.

F-58
<PAGE>
SUN MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease payments required under noncancellable operating
leases that have initial or remaining noncancelable lease terms in excess of one
year at December 31, 1996 are as follows:

Year ending December 31 -
1997....................... $ 290,185
1998....................... 273,135
1999....................... 247,772
2000....................... 242,805
2001....................... 222,572
Thereafter................. --
------------
$ 1,276,469
============

8. INCOME TAXES:

Federal and state income taxes are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal --
Current......................... $ 26,961 $ 237,590 $ 252,941 $ 211,496 $ 373,638
Deferred........................ 33,053 (16,052) (50,552) (45,461) 931
State --
Current......................... 9,936 29,378 50,241 42,009 74,214
Deferred........................ 6,565 (3,189) (10,041) (9,030) 185
---------- ---------- ---------- ---------- ----------
$ 76,515 $ 247,727 $ 242,589 $ 199,014 $ 448,968
========== ========== ========== ========== ==========
</TABLE>
Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate tax rate of 35 percent to income
before provision for income taxes as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Provision (benefit) at the statutory
rate............................... $ (51,835) $ 88,887 $ 84,634 $ 166,086 $ 415,366
Increase (decrease) resulting from --
Nondeductible ESOP
expenses...................... 92,012 96,149 116,502 11,493 11,493
State income tax................ 10,726 17,023 26,130 21,435 22,109
Nondeductible expenses.......... 29,426 38,900 15,323 -- --
Other........................... (3,814) 6,768 -- -- --
---------- ---------- ---------- ---------- ----------
$ 76,515 $ 247,727 $ 242,589 $ 199,014 $ 448,968
========== ========== ========== ========== ==========
</TABLE>
F-59
<PAGE>
SUN MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences representing deferred
tax assets and liabilities result principally from the following:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------- --------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Inventory............................ $ -- $ -- $ 53,950 $ 53,950 $ 53,950
Loss on Investment................... 256,216 280,250 280,250 280,250 280,250
Other................................ 41,264 60,506 67,148 61,046 66,032
Valuation allowance.................. (256,216) (280,250) (280,250) (280,250) (280,250)
------------ ------------ ------------ ------------ ------------
Total deferred income tax assets..... $ 41,264 $ 60,506 $ 121,098 $ 114,996 $ 119,982
============ ============ ============ ============ ============
</TABLE>
9. RELATED-PARTY TRANSACTIONS:

At December 31, 1995, the Company had a note receivable from its chief
executive officer in the amount of $80,804. The note was secured and carried an
interest rate of 8% per annum. The note was paid in June 1996. Included in other
income for the years ended December 31, 1994, 1995 and 1996 is $11,690, $6,464
and $3,188, respectively, of interest income earned on this note. For a
discussion of certain loan transactions and lease arrangements involving related
parties, see Notes 3, 7 and 12.

At December 31, 1996 and September 30, 1997, the Company guaranteed a note
payable to a bank in the amount of $514,000, by the Company's chief executive
officer. Such note payable relates to a note payable of equal amount from the
Company's Employee Stock Ownership Plan to the chief executive officer, which is
recorded in the accompanying balance sheet, see Note 12. Accordingly, if
pursuant to its guarantee the Company were required to settle the note payable
to the bank, it would also be released from the liability recorded in the
accompanying balance sheet.

10. COMMITMENTS AND CONTINGENCIES:

LITIGATION

INSURANCE

The manufacture, sale, distribution and repair of medical products involve
a risk of product liability claims. The Company maintains product liability
insurance coverage in amounts that it considers adequate.

SALES TAX CONSIDERATIONS

F-60
<PAGE>
SUN MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

sales, there can be no assurance as to the effect of actions state tax
authorities may take on the Company's financial condition or the results of its
operations.

11. SIGNIFICANT SUPPLIERS:

The Company has three significant suppliers, together whose products
accounted for approximately 57 percent, 65 percent and 63 percent of the
Company's 1994, 1995 and 1996 revenues, respectively. The Company's arrangement
with Quest Medical, Inc., its largest supplier and whose products accounted for
approximately 18 percent, 31 percent and 28 percent of the Company's 1994, 1995
and 1996 revenues, respectively, is for a term of three years and terminates on
December 31, 1999. The Company's arrangement with Sharplan Lasers, Inc., whose
products (surgical lasers and ultrasonic aspirators and accessories) accounted
for approximately 18 percent, 19 percent and 22 percent of the Company's 1994,
1995 and 1996 revenues, respectively, is for a term of two years and terminates
on December 31, 1997. The Company's arrangement with Baxter Healthcare
Corporation, whose products (infusion pumps and associated disposals) accounted
for approximately 21 percent, 15 percent and 13 percent of the Company's 1994,
1995 and 1996 revenues, respectively, expired on March 31, 1997. The Company is
currently renegotiating this distribution agreement and expects this
relationship to continue in the foreseeable future. The Company's other material
distribution agreements and agency arrangements are generally for terms of one
to two years, and are terminable if the Company fails to meet certain negotiated
sales volumes or on prior notice ranging from 30 to 90 days. A loss of the
Company's distribution or agency relationships with one or more of its
significant manufacturers could have a material adverse effect on the Company's
financial condition and results of operation.

12. EMPLOYEE STOCK OWNERSHIP PLAN:

The Company has established an Employee Stock Ownership Plan ("ESOP")
that owns all the outstanding stock of the Company. The stock was purchased by
the ESOP from the former stockholders of the Company in 1992 for $49.50 per
share. The purchase price was paid in the form of notes payable, which were
collateralized by the common stock of the Company. The Company has contributed
funds to the ESOP to fund its debt service payments to the former stockholders
and the Company has paid the interest on the notes. The ESOP obligations were
recorded as a liability on the Company's balance sheet due to the ESOP's
inability to satisfy the debt from sources other than dividends on the Company's
common stock, contributions from the Company or the sale of the Company's
securities. A corresponding reduction in stockholder's equity for unearned ESOP
shares was also recorded. As the Company makes contributions to the ESOP to make
payments on the loans, shares are allocated to ESOP participants and both the
liability and unearned ESOP shares (reflected as a reduction of stockholder's
equity) are reduced. Any difference in the fair value of the allocated shares
compared to the original stock purchase price is recorded as an increase or
decrease in additional paid-in capital. At December 31, 1996 116,382 shares had
been allocated to the ESOP participants. Interest paid by the Company on behalf
of the ESOP was approximately $327,000, $282,000 and $235,000 for the years
ended December 31, 1994, 1995 and 1996, respectively. The plan provides for
contributions equal to 25% of the wages of eligible employees. Included in
general and administrative expenses for the years ended December 31, 1994, 1995
and 1996, respectively, is approximately $381,500, $419,700 and $440,600 of
contributions to the ESOP.

The Company has identified potential violations of the Internal Revenue
Code of 1986 and the Employee Retirement Income Security Act of 1974 with
respect to the ESOP. The potential violations primarily involve amounts
contributed to the ESOP which the Internal Revenue Service may attempt to
reclassify as excess contributions but which the Company considered to be loans
to the ESOP. These amounts enabled the ESOP to repurchase Company stock from the
ESOP accounts of former employees who elected cash distributions upon
termination of employment. The Company has since forgiven the

F-61
<PAGE>
SUN MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

amounts related to these loans. The Company has voluntarily notified the
Internal Revenue Service regarding these potential violations and will seek
appropriate remedial action. The Company has accrued approximately $1.7 million
and $2.0 million as of December 31, 1996 and September 30, 1997, respectively,
for any taxes or other amounts and professional fees incurred to address and
resolve these potential violations to the satisfaction of the appropriate
governmental entities. Although the Company believes that it has adequately
provided for such exposure, there can be no assurance as to the ultimate
resolution.

13. SUBSEQUENT EVENTS (UNAUDITED):

On September 9, 1997, the Company and the ESOP entered into a definitive
merger agreement with TRIAD, providing for the acquisition of the Company by
TRIAD. Among the conditions to TRIAD's obligation to acquire the Company are
that the Company shall have collected all amounts owed to it by Rejuvena in
exchange for its equity interests in Rejuvena and all amounts owed to it by
Foundation Surgery Affiliates and shall have also repaid all amounts owed by it
to Cysco.

If the acquisition of the Company by TRIAD is completed, the Company will
owe its CEO $139,000 under the provisions of a supplemental executive retirement
plan, which would be expensed at that date, and the Company concurrently will
enter into a new agreement with its existing lessor to lease the space used in
the Company's operations for a negotiated amount and term.

Also upon consummation of the Offering and TRIAD's acquisition of the
Company, all the outstanding long-term debt of the Company is expected to be
repaid.

F-62
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Custom Medical Specialties, Inc.:

We have audited the accompanying balance sheets of Custom Medical
Specialties, Inc. (an Indiana corporation) as of December 31, 1995 and 1996, and
the related statements of operations, stockholder's equity and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Custom Medical Specialties,
Inc. as of December 31, 1995 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.

Arthur Andersen LLP

Houston, Texas
April 18, 1997

F-63
<PAGE>
CUSTOM MEDICAL SPECIALTIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)

<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 1,471,219 $ 933,213 $ 1,329,864
Custodial cash..................... -- 225,431 --
Short-term investments............. 200,000 180,000 --
Accounts receivable, net of
allowance of $28,529............. 1,159,172 1,413,757 1,118,468
Inventories, net................... 960,401 866,489 875,662
Prepaid expenses and other
current assets................... 66,921 79,150 62,723
------------ ------------ -------------
Total current assets.......... 3,857,713 3,698,040 3,386,717
PROPERTY AND EQUIPMENT, net............. 40,281 21,921 51,138
OTHER NON-CURRENT ASSETS................ 4,187 3,986 3,685
------------ ------------ -------------
Total assets.................. $ 3,902,181 $ 3,723,947 $ 3,441,540
============ ============ =============

LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
expenses......................... $ 1,157,024 $ 1,538,800 $ 790,083
Short-term debt.................... -- -- 1,100,000
------------ ------------ -------------
Total current liabilities..... 1,157,024 1,538,800 1,890,083
------------ ------------ -------------
NOTE PAYABLE TO STOCKHOLDER............. 9,500 9,500 9,500
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, no par value; 1,000
shares authorized, 100 shares
issued and 75 shares
outstanding...................... 1,000 1,000 1,000
Treasury stock, 25 shares at
cost............................. (212,000) (212,000) (212,000)
Retained earnings.................. 2,946,657 2,386,647 1,752,957
------------ ------------ -------------
Total stockholder's equity.... 2,735,657 2,175,647 1,541,957
------------ ------------ -------------
Total liabilities and
stockholder's equity....... $ 3,902,181 $ 3,723,947 $ 3,441,540
============ ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-64
<PAGE>
CUSTOM MEDICAL SPECIALTIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------- --------------------------
1994 1995 1996 1996 1997
-------------- -------------- -------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 14,205,135 $ 10,767,804 $ 9,599,162 $ 7,029,495 $ 6,848,143
COST OF REVENUES..................... 10,501,998 7,771,724 7,022,412 5,123,931 5,060,636
-------------- -------------- -------------- ------------ ------------
Gross profit............... 3,703,137 2,996,080 2,576,750 1,905,564 1,787,507
-------------- -------------- -------------- ------------ ------------
SELLING EXPENSES..................... 1,021,352 832,346 674,321 527,849 487,855
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 811,535 784,680 781,362 590,468 596,930
DEPRECIATION AND
AMORTIZATION....................... 25,228 23,371 20,933 16,177 19,710
-------------- -------------- -------------- ------------ ------------
Total operating expenses........ 1,858,115 1,640,397 1,476,616 1,134,494 1,104,495
-------------- -------------- -------------- ------------ ------------
Income from operations..... 1,845,022 1,355,683 1,100,134 771,070 683,012
OTHER INCOME (EXPENSE):
Interest income................. 39,635 51,070 35,010 15,612 10,752
Interest expense................ (1,346) (955) (950) (475) (1,109)
Other income, net............... -- -- 7,025 (475) 20,995
-------------- -------------- -------------- ------------ ------------
NET INCOME........................... $ 1,883,311 $ 1,405,798 $ 1,141,219 $ 785,732 $ 713,650
============== ============== ============== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-65
<PAGE>
CUSTOM MEDICAL SPECIALTIES, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------ TREASURY RETAINED STOCKHOLDER'S
SHARES AMOUNT STOCK EARNINGS EQUITY
------- ------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993........... 75 $1,000 $(212,000) $ 2,589,900 $ 2,378,900
Net income...................... -- -- -- 1,883,311 1,883,311
Distributions................... -- -- -- (1,987,352) (1,987,352)
------- ------- --------- ----------- -------------
BALANCE, December 31, 1994........... 75 1,000 (212,000) 2,485,859 2,274,859
Net income...................... -- -- -- 1,405,798 1,405,798
Distributions................... -- -- -- (945,000) (945,000)
------- ------- --------- ----------- -------------
BALANCE, December 31, 1995........... 75 1,000 (212,000) 2,946,657 2,735,657
Net income...................... -- -- -- 1,141,219 1,141,219
Distributions................... -- -- -- (1,701,229) (1,701,229)
------- ------- --------- ----------- -------------
BALANCE, December 31, 1996........... 75 1,000 (212,000) 2,386,647 2,175,647
Net income (unaudited).......... -- -- -- 713,650 713,650
Distributions (unaudited)....... -- -- -- (1,347,340) (1,347,340)
------- ------- --------- ----------- -------------
BALANCE, September 30, 1997
(unaudited)........................ 75 $1,000 $(212,000) $ 1,752,957 $ 1,541,957
======= ======= ========= =========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-66
<PAGE>
CUSTOM MEDICAL SPECIALTIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------- ------------------------------
1994 1995 1996 1996 1997
-------------- ------------ -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 1,883,311 $ 1,405,798 $ 1,141,219 $ 785,732 $ 713,650
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities --
Depreciation and
amortization............... 25,228 23,371 20,933 16,177 19,710
Gain on sale of equipment..... -- -- (7,025) -- (12,299)
Increase (decrease) in operating
cash flows resulting from:
Receivables, net of servicing
activities................. 399,766 (68,042) (480,016) 226,363 91,170
Inventories................... 345,728 129,305 93,912 222,887 (9,173)
Prepaid expenses and other
current assets............. (6,373) (42,605) (12,229) (6,302) 16,427
Accounts payable, net of
servicing activities, and
accrued expenses........... (611,117) 182,543 381,776 (349,361) (345,053)
Other......................... 1,201 599 201 328 302
-------------- ------------ -------------- -------------- --------------
Net cash provided by operating
activities....................... 2,037,744 1,630,969 1,138,771 895,824 474,734
-------------- ------------ -------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds of sale of property and
equipment........................ -- -- 7,025 -- 12,299
Proceeds from short-term
investments...................... 100,000 -- 20,000 -- 180,000
Purchases of short-term
investments...................... -- (100,000) -- -- --
Purchases of property and
equipment........................ (33,993) (7,408) (2,573) (2,570) (48,928)
-------------- ------------ -------------- -------------- --------------
Net cash provided by (used in)
investing activities............. 66,007 (107,408) 24,452 (2,570) 143,371
-------------- ------------ -------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt...... -- -- -- -- 1,100,000
Proceeds from issuance of long-term
debt............................. -- -- -- -- 25,886
Distributions to stockholder....... (1,987,352) (945,000) (1,701,229) (1,386,229) (1,347,340)
-------------- ------------ -------------- -------------- --------------
Net cash used in financing
activities....................... (1,987,352) (945,000) (1,701,229) (1,386,229) (221,454)
-------------- ------------ -------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 116,399 578,561 (538,006) (492,975) 396,651
CASH AND CASH EQUIVALENTS, beginning of
period................................ 776,259 892,658 1,471,219 1,471,219 933,213
-------------- ------------ -------------- -------------- --------------
CASH AND CASH EQUIVALENTS, end of
period................................ $ 892,658 $ 1,471,219 $ 933,213 $ 978,244 $ 1,329,864
============== ============ ============== ============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest...................... $ 950 $ 950 $ 950 $ 950 $ 1,109
============== ============ ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-67
<PAGE>
CUSTOM MEDICAL SPECIALTIES, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Custom Medical Specialties, Inc., an Indiana corporation (the Company or
CMS), was founded in 1989 and maintains its headquarters in Indianapolis,
Indiana. The Company is a contract seller and distributor of specialty medical
products.

The Company and its stockholder intend to enter into a definitive merger
agreement with TRIAD Medical Inc. (TRIAD) pursuant to which the Company will be
acquired by TRIAD for consideration consisting of $1,600,000 in cash and 350,000
shares of TRIAD common stock, concurrently with the closing of the initial
public offering by TRIAD of its common stock (the Offering).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

These financial statements have been prepared on the accrual basis of
accounting.

INTERIM FINANCIAL INFORMATION

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist primarily of cash, cash
equivalents, trade receivables, trade payables and debt instruments. The
carrying amounts of those instruments reported in the balance sheets are
considered to estimate their respective fair values due to the short-term nature
of such financial instruments and the current interest rate environment.The fair
value of the Company's long-term debt was determined using valuation techniques
that considered cash flows discounted at current market rates and management's
best estimates for instruments without quoted market prices. The carrying
amounts of long-term debt reported in the balance sheets are considered to
approximate the respective fair value as the Company's long-term debt interest
rates approximate market rates as December 31, 1996.

CASH AND CASH EQUIVALENTS

For purposes of the balance sheets and statements of cash flows, the
Company considers all investments with original maturities of three months or
less to be cash equivalents. At September 30, 1997, the Company maintained cash
balances in various financial institutions in excess of federally insured
limits.

SHORT-TERM INVESTMENTS

Short-term investments are non-taxable fixed maturity securities which the
Company has the ability and intent to hold until maturity. Accordingly, such
securities are considered held-to-maturity and are carried at amortized cost.
(See Note 4).

F-68
<PAGE>
CUSTOM MEDICAL SPECIALTIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

CONCENTRATION OF CREDIT RISK

In the normal course of business, the Company extends credit to its
customers, which are primarily hospitals. The Company regularly reviews its
accounts receivable and makes provision for potentially uncollectible balances.
At December 31, 1995, 1996 and September 30, 1997, management believes the
Company had incurred no material impairments in the carrying values of its
accounts receivable, other than uncollectible amounts for which provision has
been made.

INVENTORIES

Inventories consist primarily of medical supplies and equipment.
Inventories, net of allowances, are valued at the lower of cost or market. Cost
is determined on the average cost method. At December 31, 1995 and 1996, and at
September 30, 1997, management believes the Company had incurred no material
impairments in the carrying values of its inventories, other than impairments
for which provision has been made.

PROPERTY AND EQUIPMENT

for additional shares which would trigger the piggyback rights.

REVENUES AND EXPENSES

The Company's revenues are primarily derived from sales of specialty
medical products under agreements with various manufacturers. Cost of revenues
consists primarily of product costs, net of rebates, and freight charges.
Selling expenses consist primarily of sales commissions, salaries of sales
managers, travel and entertainment expenses, trade show expenses and automobile
allowances. General and administrative expenses consist primarily of executive
compensation and related benefits, administrative salaries and benefits, office
rent and utilities, communication expenses and professional fees.

REVENUE RECOGNITION

Revenues are recognized when products and supplies are shipped.

INCOME TAXES

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 129, "Disclosure of Information
About Capital Structure." SFAS No. 129 requires nonpublic entities to disclose
certain information about an entity's capital structure including the pertinent
rights and privileges of the various securities outstanding. The Company will be
required to adopt SFAS No. 129 in 1997 and, in the opinion of management, SFAS
No. 129 will not significantly change the existing financial statement
disclosures.

F-69
<PAGE>
CUSTOM MEDICAL SPECIALTIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. SERVICING ACTIVITIES:

During 1996, the Company began serving as an agent for certain distributors
of specialty medical products. In this capacity, the Company processes orders
from the distributors' customers and places those orders with the distributors.
The distributor then ships the goods directly to the customer. Additionally, the
Company bills and collects payments from the distributors' customer and remits
such payments to the distributor. The Company generally charges a
per-transaction processing fee for this service. Included in "Revenues" in the
accompanying Statement of Operations for the year ended December 31, 1996 is
$64,465 of such fees earned during the year. During that year, the Company
collected $1,671,369 from the distributors' customers and remitted $1,445,938 to
the distributors under these agreements. Included in "Accounts payable" in the
accompanying financial statements at December 31, 1996 is $429,550 which the
Company owed to such distributors. "Custodial Cash" of $225,431 at December
31, 1996 represents cash collected by the Company under these arrangements, but
not yet remitted to the distributors. Additionally, included in "Accounts
receivable" at December 31, 1996 is $204,119 of amounts due from the
distributors' customers.

4. SHORT-TERM INVESTMENTS:

Information for held-to-maturity securities follows:

AMORTIZED UNREALIZED
SECURITY TYPE COST GAINS FAIR VALUE
- ---------------------------------------- --------- ---------- ----------
State and municipal bonds
At December 31, 1995............... $ 200,000 $7,310 $ 207,310
At December 31, 1996............... $ 180,000 $5,820 $ 185,820

Contractual maturities at December 31, 1996 were as follows:

AMORTIZED
MATURITY COST FAIR VALUE
- ---------------------------------------- -------------- ----------
Due within one year..................... $ 90,000 $ 90,630
Due within one to five years............ 15,000 15,000
Due within five to ten years............ 40,000 42,545
Due within ten years and after.......... 35,000 37,645
-------------- ----------
Totals.................................. $180,000 $ 185,820
============== ==========

5. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL DECEMBER 31,
LIVES -------------------------- SEPTEMBER 30
IN YEARS 1995 1996 1997
--------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Transportation equipment................ 5 $ 46,406 $ 32,556 $ 57,333
Machinery and equipment................. 7 34,373 33,995 24,598
Office equipment........................ 5 115,151 116,241 126,539
Leasehold improvements.................. 10 4,783 4,784 4,785
------------ ------------ ------------
200,713 187,576 213,255
Less -- accumulated depreciation and
amortization.......................... (160,432) (165,655) (162,117)
------------ ------------ ------------
Property and equipment, net............. $ 40,281 $ 21,921 $ 51,138
============ ============ ============
</TABLE>
F-70
<PAGE>
CUSTOM MEDICAL SPECIALTIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
Accounts payable, trade.............. $ 987,296 $ 926,511 $ 569,671
Payables from servicing activities
(see Note 3)....................... -- 429,550 --
Accrued compensation and benefits.... 98,037 76,254 82,109
Other................................ 71,691 106,485 138,303
------------ ------------ -------------
$ 1,157,024 $ 1,538,800 $ 790,083
============ ============ =============

7. NOTE PAYABLE TO STOCKHOLDER:

Long-term debt at December 31, 1995, 1996 and September 30, 1997 consists
of an unsecured note payable to the Company's sole stockholder with an interest
rate of 10 percent, with interest paid semi-annually. The original maturity date
of that note was April 1, 1991. However, the stockholder has informally extended
such note indefinitely. The stockholder has advised the Company that he has no
intention of requesting payment on the note during the next 12 months.

8. LEASES:

The Company leases building and warehouse space from a third party. The
rent expense under this lease was $58,764 for the year ended December 31, 1996.
The lease requires the Company to pay taxes, maintenance, insurance and certain
other operating costs of the leased property.

Future minimum lease payments required under noncancellable operating
leases that have initial or remaining noncancellable lease terms in excess of
one year at December 31, 1996 are as follows:

Year ending December 31 --
1997............................ $ 53,424
1998............................ 35,616
---------
$ 89,040
=========

9. COMMITMENTS AND CONTINGENCIES:

LITIGATION

F-71
<PAGE>
CUSTOM MEDICAL SPECIALTIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

INSURANCE

The sale and distribution of medical products involve a risk of product
liability claims. The Company maintains product liability insurance coverage in
amounts that it considers adequate.

10. SIGNIFICANT SUPPLIERS/CUSTOMERS:

A substantial portion of the Company's revenues is derived from sales of
Pall Biomedical, Inc. (Pall) products. For the years ended December 31, 1994,
1995 and 1996, Pall's products accounted for approximately 36 percent, 41
percent and 38 percent, respectively, of the Company's total revenues. The
agreement with Pall may be terminated with 30 days' notice by either the Company
or Pall. While management believes that, following the acquisition referred to
in Note 12, the Company will continue to represent Pall and other manufacturers
with which it has entered into similar arrangements, a loss of any of its
significant vendor relationships could have a material adverse effect on the
Company's financial condition and results of operations.

During 1994, the Company lost a significant customer, which accounted for
approximately $3.0 million, or approximately 21 percent, of fiscal 1994
revenues. For the year ended December 31, 1996, no individual customer accounted
for more than 10 percent of revenues.

11. EMPLOYEE BENEFIT PLAN:

In 1994, the Company established a defined contribution 401(k) plan for
employees who are at least 21 years old and have completed one year of service.
Contributions to the plan by the employer are made on a discretionary basis. No
employer contributions were made to the plan in 1994, 1995 or 1996.

12. SUBSEQUENT EVENTS (UNAUDITED):

On September 9, 1997, the Company and its sole shareholder entered into a
definitive merger agreement with TRIAD, providing for the acquisition of the
Company by TRIAD.

On September 11, 1997, the Company entered into a note agreement with a
bank which established a $1.5 million line of credit available to the Company
for the purpose of working capital and shareholder distributions. The note is
payable on demand and advances under the note are extended at the bank's
discretion in accordance with a borrowing base requirement. The borrowing base
is equal to the sum of 85% of the Company's eligible accounts receivable plus
45% of eligible inventory, plus cash assigned as collateral equal to any advance
in excess of the borrowing base. The note bears interest according to an
interest rate index which sets forth rates ranging from the LIBOR plus 2.25% to
bank's prime rate plus 1%, depending upon the stockholder's equity in the
Company, as adjusted per the terms of the note agreement. At September 30, 1997,
the interest rate was 8.2%. The note is secured by the assets of the Company. At
September 30, 1997, $1.1 million was outstanding on the note.

The Company will make a cash distribution of approximately $1.7 million
prior to the closing of the transactions under the merger agreement which
represents the Company's estimated S corporation accumulated adjustment account.
Had these transactions been recorded at September 30, 1997, the effect on the
accompanying balance sheet would have been a decrease in assets of $1.3 million,
an increase in liabilities of $0.4 million and a decrease in shareholders'
equity of $1.7 million

F-72

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Kentec Medical, Inc.:

We have audited the accompanying balance sheet of Kentec Medical, Inc. (a
California corporation) as of June 30, 1997, and the related statements of
operations, stockholder's equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Kentec Medical, Inc. as of
June 30, 1997, and the results of its operations and its cash flows for the year
then ended, in conformity with generally accepted accounting principles.

Arthur Andersen LLP
Houston, Texas
August 6, 1997

F-73
<PAGE>
KENTEC MEDICAL, INC.
BALANCE SHEETS

JUNE 30, SEPTEMBER 30,
1997 1997
------------ -------------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 719,508 $ 618,464
Short-term investments............. 111,331 112,481
Accounts receivable, net of
allowance of $77,039.............. 1,704,433 1,407,069
Inventories, net................... 1,857,915 1,647,056
Deferred income taxes.............. 24,590 23,370
------------ -------------
Total current assets..... 4,417,777 3,808,440
PROPERTY AND EQUIPMENT, net............. 152,359 132,269
OTHER NON-CURRENT ASSETS................ 235,575 217,955
------------ -------------
Total assets............. $ 4,805,711 $ 4,158,664
============ =============

LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable................... $ 1,344,957 $ 843,164
Accrued expenses and other current
liabilities....................... 354,683 229,739
------------ -------------
Total current
liabilities.......... 1,699,640 1,072,903
------------ -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, no par value; 75,000
shares authorized, 46,000 shares
issued and outstanding............ 46,000 46,000
Retained earnings.................. 3,060,071 3,039,761
------------ -------------
Total stockholder's
equity............... 3,106,071 3,085,761
------------ -------------
Total liabilities and
stockholder's
equity............... $ 4,805,711 $ 4,158,664
============ =============

The accompanying notes are an integral part of these financial statements.

F-74
<PAGE>
KENTEC MEDICAL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
JUNE 30, ------------------------------
1997 1996 1997
-------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES................................ $ 13,646,041 $ 3,558,198 $ 3,005,416
COST OF REVENUES........................ 9,440,908 2,457,797 2,107,897
-------------- -------------- --------------
Gross profit.................. 4,205,133 1,100,401 897,519
-------------- -------------- --------------
SELLING EXPENSES........................ 1,709,445 454,322 342,091
GENERAL AND ADMINISTRATIVE EXPENSES..... 2,446,230 569,548 565,808
DEPRECIATION AND AMORTIZATION........... 83,101 18,315 16,150
-------------- -------------- --------------
Total operating expenses........... 4,238,776 1,042,185 924,049
-------------- -------------- --------------
Income (loss) from
operations................. (33,643) 58,216 (26,530)
OTHER INCOME (EXPENSE):
Interest income.................... 32,065 6,847 8,600
Other expense, net................. (6,164) (3,276) (6,078)
-------------- -------------- --------------
INCOME (LOSS) BEFORE PROVISION (BENEFIT)
FOR INCOME TAXES...................... (7,742) 61,787 (24,008)
PROVISION (BENEFIT) FOR INCOME TAXES.... 12,396 15,717 (3,698)
-------------- -------------- --------------
NET INCOME (LOSS)....................... $ (20,138) $ 46,070 $ (20,310)
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-75
<PAGE>
KENTEC MEDICAL, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------ RETAINED STOCKHOLDER'S
SHARES AMOUNT EARNINGS EQUITY
------- ------- ---------- --------------
<S> <C> <C> <C> <C>
BALANCE, June 30, 1996............... 46,000 $46,000 $3,080,669 $3,126,669
Net loss........................ -- -- (20,138) (20,138)
Dividends....................... -- -- (460) (460)
------- ------- ---------- --------------
BALANCE, June 30, 1997............... 46,000 46,000 3,060,071 3,106,071
Net loss (unaudited)............ -- -- (20,310) (20,310)
------- ------- ---------- --------------
BALANCE, September 30, 1997
(unaudited).......................... 46,000 $46,000 $3,039,761 $3,085,761
======= ======= ========== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-76
<PAGE>
KENTEC MEDICAL, INC.
STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
JUNE 30, --------------------------
1997 1996 1997
------------ ------------ ------------
(UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)............... $ (20,138) $ 46,070 $ (20,310)
Adjustments to reconcile net
income (loss) to net cash used
in operating activities --
Depreciation and
amortization............ 83,101 18,315 16,150
Provision for doubtful
accounts
receivable.............. 7,788 -- --
Deferred income taxes,
net..................... 5,487 (248) 1,220
Loss on disposal of
property and
equipment............... 6,424 3,276 6,078
Increase (decrease) in
operating cash flows
resulting from:
Accounts receivable... 63,595 (83,772) 297,364
Inventories........... 87,300 68,157 208,721
Prepaid expenses and
other current
assets............. 7,102 7,102 --
Other non-current
assets............. (22,620) (16,010) 17,620
Accounts payable,
accrued expenses
and other current
liabilities........ (225,840) (618,357) (626,737)
------------ ------------ ------------
Net cash used in
operating
activities.... (7,801) (575,467) (99,894)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term
investments................... (219,632) -- (112,481)
Proceeds from short-term
investments................... 216,468 -- 111,331
Purchases of property and
equipment..................... (58,687) -- --
------------ ------------ ------------
Net cash used in
investing
activities.... (61,851) -- (1,150)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends....................... (460) (460) --
------------ ------------ ------------
Net cash used in
financing
activities.... (460) (460) --
------------ ------------ ------------
NET DECREASE IN CASH AND CASH
EQUIVALENTS........................ (70,112) (575,927) (101,044)
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 789,620 789,620 719,508
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 719,508 $ 213,693 $ 618,464
============ ============ ============

The accompanying notes are an integral part of these financial statements.

F-77
<PAGE>
KENTEC MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Kentec Medical, Inc., a California corporation (the Company or Kentec), was
founded in 1970 and maintains its headquarters in Irvine, California. The
Company is a contract seller and distributor and limited manufacturer of
specialty medical products.

The Company and its stockholder intend to enter into a definitive merger
agreement with TRIAD Medical Inc. (TRIAD) pursuant to which the Company will be
acquired for consideration consisting of $3,240,000 in cash and 232,857 shares
of TRIAD common stock, concurrently with the closing of the initial public
offering by TRIAD of its common stock.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

These financial statements have been prepared on the accrual basis of
accounting.

INTERIM FINANCIAL INFORMATION

The interim financial information as of September 30, 1997 and for the
three months ended September 30, 1996 and 1997, are unaudited and certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements, have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist primarily of cash, cash
equivalents, trade receivables and trade payables. The carrying amounts of those
instruments reported in the balance sheet are considered to estimate their
respective fair values due to the short-term nature of such financial
instruments and the current interest rate environment.

CASH AND CASH EQUIVALENTS

For purposes of the balance sheet and statement of cash flows, the Company
considers all investments with original maturities of three months or less to be
cash equivalents. As of June 30, 1997 and as of September 30, 1997 and at
various times during the periods then ended, the Company maintained cash
balances in various financial institutions in excess of federally insured
limits.

SHORT-TERM INVESTMENTS

The Company's short-term investments consist of certificates of deposit
that are all considered held-to-maturity securities. Held-to-maturity
securities, which are fixed maturity securities that the Company has the ability
and intent to hold until maturity, are carried at amortized cost.

CONCENTRATIONS OF CREDIT RISK

In the normal course of business, the Company extends credit to its
customers, which are primarily hospitals and medical centers. The Company
regularly reviews accounts receivable and makes provision for

F-78
<PAGE>
KENTEC MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

potentially uncollectible balances. At June 30, 1997 and September 30, 1997,
management believes the Company had incurred no material impairments in the
carrying values of its accounts receivable, other than uncollectible amounts for
which provision has been made.

INVENTORIES

Inventories consist of medical supplies and equipment. Inventories, net of
allowances, are valued at the lower of cost or market. Cost is determined on the
first-in, first-out (FIFO) method. At June 30, 1997 and September 30, 1997,
management believes the Company had incurred no material impairments in the
carrying values of its inventories, other than impairments for which provision
has been made.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and depreciation is computed
using an accelerated method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized using the straight-line
method over the lesser of the life of the applicable lease or the estimated
useful life of the applicable asset.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments that extend the useful
lives of existing equipment are capitalized and depreciated. On retirement or
disposition of property and equipment, the cost and related accumulated
depreciation or amortization are removed from the accounts and any resulting
gain or loss is recognized in the statement of operations.

COLLATERAL INTEREST IN INSURANCE AGREEMENT

The Company has entered into an agreement with its stockholder for the sole
purpose of financing life insurance premiums on a whole-life policy covering the
president of the Company. The advances are collateralized by the cash surrender
value of and the death benefit payable under the policy. The Company has
recorded the advances in other non-current assets in the accompanying balance
sheets totaling approximately $152,700 as of June 30, 1997 and September 30,
1997.

REVENUES AND EXPENSES

REVENUE RECOGNITION

Revenues are recognized when products and supplies are shipped.

INCOME TAXES

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

F-79
<PAGE>
KENTEC MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

rights and privileges of the various securities outstanding. The Company will be
required to adopt SFAS No. 129 in 1997 and, in the opinion of management, SFAS
No. 129 will not significantly change the existing financial statement
disclosures.

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

ESTIMATED
USEFUL
LIVES IN JUNE 30, SEPTEMBER 30,
YEARS 1997 1997
---------- ------------ -------------
(UNAUDITED)
Furniture and fixtures.......... 5-7 $ 412,745 $ 412,745
Rental equipment................ 5-7 150,978 130,437
Transportation equipment........ 5-7 119,753 119,753
Leasehold improvements.......... 7-15 88,227 88,227
Machinery and equipment......... 5-10 50,733 50,733
------------ -------------
822,436 801,895
Less -- accumulated depreciation
and amortization.............. (670,077) (669,626)
------------ -------------
Property and equipment, net..... $ 152,359 $ 132,269
============ =============

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts receivable consist of the following:

JUNE 30, SEPTEMBER 30,
1997 1997
------------ -------------
(UNAUDITED)
Trade receivables....................... $ 1,466,303 $ 1,247,911
Receivables from suppliers.............. 315,169 236,197
------------ -------------
1,781,472 1,484,108
Less -- allowance for doubtful
accounts.............................. (77,039) (77,039)
------------ -------------
$ 1,704,433 $ 1,407,069
============ =============

Accounts payable, accrued expenses and other current liabilities consist of
the following:

JUNE 30, SEPTEMBER 30,
1997 1997
---------- -------------
(UNAUDITED)
Accounts payable, trade.............. $1,344,957 $ 843,164
Accrued compensation and benefits.... 315,144 186,230
Other payables and accrued
expenses........................... 39,539 43,509
---------- -------------
$1,699,640 $ 1,072,903
========== =============

5. LEASES:

The Company leases its two operating facilities from a trustee of its
stockholder (a family trust) under two long-term noncancellable operating lease
agreements. The leases expire in 2009 and provide for rents increasing subject
to the Consumer Price Index. The total annual rent paid under these
related-party leases was approximately $229,600 for the year ended June 30, 1997
and was approximately $57,400 and $62,200 for the three months ended September
30, 1996 and 1997, respectively. The leases require the Company to pay taxes,
maintenance, insurance and certain other operating costs of the leased property.
The Company believes the terms of the related-party leases are at least as
favorable as the terms that could have been obtained from an unaffiliated third
party in similar transactions. The Company also leases certain office equipment
under long-term noncancellable operating lease agreements which expire in 1999
and 2000. The total rent paid under these leases was approximately $4,600 for
the year ended June 30, 1997 and was approximately $3,400 and $2,400 for the
three months ended September 30, 1996 and 1997, respectively.

F-80
<PAGE>
KENTEC MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease payments required under noncancellable operating
leases (including the related-party leases) that have initial or remaining
noncancellable lease terms in excess of one year at June 30, 1997 are as
follows:

Year ending June 30 --
1998............................... $ 234,183
1999............................... 234,183
2000............................... 232,887
2001............................... 230,773
2002............................... 229,572
Thereafter......................... 1,492,218
------------
$ 2,653,816
============

The Company has entered into an agreement to sublease its excess facilities
through March 1998. The future minimum sublease payments due to the Company
under this sublease as of June 30, 1997 are $60,281.

Rent income received for the year ended June 30, 1997 was approximately
$61,900 and was approximately $14,800 and $20,600 for the three months ended
September 30, 1996 and 1997, respectively.

6. INCOME TAXES:

Federal and state income taxes are as follows:

THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
JUNE 30, --------------------
1997 1996 1997
----------- --------- ---------
(UNAUDITED)
Federal --
Current............................ $ 3,611 $ 9,915 $ (2,606)
Deferred........................... 4,094 (159) 917
State --
Current............................ 3,298 6,050 (2,312)
Deferred........................... 1,393 (89) 303
----------- --------- ---------
$12,396 $ 15,717 $ (3,698)
=========== ========= =========

Actual income tax provision (benefit) differs from income tax provision
(benefit) computed by applying the U.S. federal statutory corporate tax rate of
15 percent to income before income taxes as follows:

THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
JUNE 30, --------------------
1997 1996 1997
---------- --------- ---------
(UNAUDITED)
Provision (benefit) at the statutory
rate.................................. $ (1,161) $ 9,268 $ (3,601)
State income taxes...................... 3,227 4,887 (1,899)
Non-deductible items.................... 10,330 1,562 1,802
---------- --------- ---------
$ 12,396 $ 15,717 $ (3,698)
========== ========= =========

Deferred income taxes result from temporary differences in the recognition
of income and expenses for financial reporting purposes and for tax reporting
purposes. The tax effects of these temporary differences representing current
deferred income tax assets of $24,590 and $23,370 at June 30, 1997 and September
30, 1997, respectively, result principally from accruals and reserves not
currently deductible for income tax reporting purposes.

F-81
<PAGE>
KENTEC MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. COMMITMENTS AND CONTINGENCIES:

LITIGATION

INSURANCE

The sale, manufacture and distribution of medical products involve a risk
of product liability claims. The Company maintains product liability insurance
coverage in amounts that it considers adequate.

8. SIGNIFICANT SUPPLIER:

During the year ended June 30, 1997 and during the three months ended
September 30, 1996 and 1997, the Company purchased approximately 62 percent, 69
percent, and 62 percent, respectively of its products from Pall Biomedical
Products Company (Pall). Revenues generated from the sales of these products
accounted for 56 percent, 60 percent, and 54 percent of the Company's
distribution revenues for the year ended June 30, 1997 and for the three months
ended September 30, 1996 and 1997, respectively. Under a distribution agreement
with Pall, the Company has agreed to keep a 30-day supply of inventory on hand.
The agreement may be terminated by either party, with or without cause, at any
time after giving not less than 30 days' notice. The loss of this supplier would
have a material adverse effect on the Company's business and operating results.

9. EMPLOYEE BENEFIT PLANS:

The Company has a money purchase pension plan, a profit sharing plan and a
401(k) plan for employees meeting certain requirements (substantially all
employees). The Company's contributions to these plans vest over a period of six
to seven years. The money purchase pension plan requires the Company to annually
contribute 5 percent of participating employees' salaries, subject to certain
limitations. The Company's contribution to the money purchase pension plan
during the year ended June 30, 1997 and for the three months ended September 30,
1996 and 1997, was approximately $97,800, $28,600 and $27,600, respectively.
Company contributions to the profit sharing plan and to the 401(k) plan may be
made at the discretion of the Company. No Company contributions were made to the
profit sharing plan or to the 401(k) plan for the year ended June 30, 1997 or
for the three months ended September 30, 1996 and 1997.

10. SUBSEQUENT EVENTS (UNAUDITED):

On September 9, 1997, the Company and its stockholder entered into a
definitive merger agreement with TRIAD, providing for the acquisition of the
Company by TRIAD.

Concurrently with the closing of the transactions under the merger
agreement, the Company will enter into agreements with a trustee of its
stockholder to lease certain office and warehouse space used in the Company's
operations for a negotiated amount and term.

F-82
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Products for Surgery, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheet of Products for
Surgery, Inc. (a Texas corporation) and subsidiaries as of June 30, 1997, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Products for Surgery, Inc. and subsidiaries as of June 30, 1997, and the results
of their consolidated operations and their consolidated cash flows for the year
then ended, in conformity with generally accepted accounting principles.

Arthur Andersen LLP
Houston, Texas
August 15, 1997

F-83
<PAGE>
PRODUCTS FOR SURGERY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

JUNE 30, SEPTEMBER 30,
1997 1997
------------ -------------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 42,994 $ 115,253
Accounts receivable, net of
allowance of $586................. 725,119 870,677
Notes receivable, current
portion........................... 17,274 17,274
Inventories, net................... 1,461,078 1,474,985
Prepaid expenses................... 45,712 40,115
Deferred income taxes.............. 124,668 119,266
------------ -------------
Total current assets..... 2,416,845 2,637,570
PROPERTY AND EQUIPMENT, net............. 191,233 184,413
OTHER NON-CURRENT ASSETS:
Cash surrender value of life
insurance policies................ 197,448 197,448
Notes receivable from
stockholders...................... 116,540 112,464
Intangible assets.................. 95,960 95,350
Other non-current assets........... 47,375 35,310
------------ -------------
Total assets............. $ 3,065,401 $ 3,262,555
============ =============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt.................... $ 195,722 $ 292,473
Accounts payable and accrued
expenses.......................... 1,200,167 1,293,111
------------ -------------
Total current
liabilities.......... 1,395,889 1,585,584
LONG-TERM DEBT.......................... 164,817 142,914
DEFERRED INCOME TAXES................... 45,164 44,766
OTHER LONG-TERM LIABILITIES............. 500,000 500,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value;
300,000 shares authorized, 105,880
shares issued and outstanding,
respectively...................... 10,588 10,588
Additional paid-in capital......... 355,892 355,892
Retained earnings.................. 593,051 622,811
------------ -------------
Total stockholders'
equity............... 959,531 989,291
------------ -------------
Total liabilities and
stockholders'
equity............... $ 3,065,401 $ 3,262,555
============ =============

The accompanying notes are an integral part of these consolidated financial
statements.

F-84
<PAGE>
PRODUCTS FOR SURGERY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
JUNE 30, --------------------------
1997 1996 1997
------------ ------------ ------------
(UNAUDITED)
REVENUES............................. $ 7,761,235 $ 1,880,663 $ 2,138,756
COST OF REVENUES..................... 4,447,229 1,070,718 1,276,998
------------ ------------ ------------
Gross profit............... 3,314,006 809,945 861,758
SELLING EXPENSES..................... 1,197,857 276,069 327,393
GENERAL AND ADMINISTRATIVE EXPENSES.. 2,101,413 429,557 456,046
DEPRECIATION AND AMORTIZATION........ 66,280 11,532 19,224
------------ ------------ ------------
Total operating expenses........ 3,365,550 717,158 802,663
------------ ------------ ------------
Income (loss) from
operations.............. (51,554) 92,787 59,095
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income................. 22,899 -- 3,063
Interest expense................ (58,983) (20,930) (9,363)
Other income, net............... 448,048 -- --
------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME
TAXES.............................. 360,420 71,857 52,795
PROVISION FOR INCOME TAXES........... 150,011 27,183 23,035
------------ ------------ ------------
NET INCOME........................... $ 210,409 $ 44,674 $ 29,760
============ ============ ============

The accompanying notes are an integral part of these consolidated financial
statements.

F-85
<PAGE>
PRODUCTS FOR SURGERY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------------- ADDITIONAL RETAINED STOCKHOLDERS'
SHARES AMOUNT PAID-IN CAPITAL EARNINGS EQUITY
--------- --------- --------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, June 30, 1996..... 90,000 $ 9,000 $ -- $ 382,642 $ 391,642
Issuance of common
stock............... 15,880 1,588 355,892 -- 357,480
Net income............ -- -- -- 210,409 210,409
--------- --------- --------------- ---------- -------------
BALANCE, June 30, 1997..... 105,880 10,588 355,892 593,051 959,531
Net income
(unaudited)......... -- -- -- 29,760 29,760
--------- --------- --------------- ---------- -------------
BALANCE, September 30, 1997
(unaudited).............. 105,880 $ 10,588 $ 355,892 $ 622,811 $ 989,291
========= ========= =============== ========== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-86
<PAGE>
PRODUCTS FOR SURGERY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
JUNE 30, --------------------------
1997 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 210,409 $ 44,674 $ 29,760
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities --
Depreciation and
amortization............... 66,280 11,532 19,224
Provision for doubtful
accounts receivable........ (5,014) (1,004) 1,357
Deferred income taxes, net.... 28,856 7,214 5,004
Increase (decrease) in operating
cash flows resulting from:
Accounts receivable........... 957,347 327,133 (146,915)
Inventories................... 256,454 597,148 (13,907)
Prepaid expenses and other
current assets............. 49,111 3,368 5,597
Other noncurrent assets....... (106,908) 5,335 16,141
Accounts payable and accrued
expenses................... (769,931) (778,216) 92,944
------------ ------------ ------------
Net cash provided by operating
activities....................... 686,604 217,184 9,205
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and
equipment........................ (82,248) (12,781) (11,794)
------------ ------------ ------------
Net cash used in investing
activities....................... (82,248) (12,781) (11,794)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term
debt............................. 17,740 40,215 --
Principal payments on long-term
debt............................. -- -- (21,903)
Borrowings (repayments) on
short-term debt, net............. (632,567) (171,289) 96,751
------------ ------------ ------------
Net cash provided by (used in)
financing activities............. (614,827) (131,074) 74,848
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... (10,471) 73,329 72,259
CASH AND CASH EQUIVALENTS, beginning of
period................................ 53,465 53,465 42,994
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of
period................................ $ 42,994 $ 126,794 $ 115,253
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest...................... $ 57,036 $ 20,930 $ 9,363
============ ============ ============
Income taxes.................. $ 124,380 $ 62,615 $ --
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-87
<PAGE>
PRODUCTS FOR SURGERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Products for Surgery, Inc., a Texas corporation (PSI), was founded in 1979.
PSI, together with its subsidiaries, PSI Service Corporation and Sierra Surgical
Products, Inc. (SSP) (collectively, the Company or Products for Surgery),
maintains its headquarters in Forest Hills, Texas. The Company is a contract
seller and distributor of specialty medical products.

The Company and its stockholders intend to enter into a definitive merger
agreement with TRIAD Medical Inc. (TRIAD) pursuant to which the Company will be
acquired by TRIAD for consideration consisting of $2,250,000 in cash and 203,571
shares of TRIAD common stock, concurrently with the closing of the initial
public offering by TRIAD of its common stock (the Offering).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

INTERIM FINANCIAL INFORMATION

The interim financial statements as of September 30, 1997 and for the three
months ended September 30, 1996 and 1997, are unaudited, and certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist primarily of cash, cash
equivalents, trade receivables, trade payables and debt instruments. The
carrying amounts of those instruments reported in the balance sheet are
considered to estimate their respective fair values due to the short-term nature
of such financial instruments and the current interest rate environment. The
fair value of the Company's long-term debt was determined using valuation
techniques that considered cash flows discounted at current market rates and
management's best estimates for instruments without quoted market prices. The
carrying amounts of long-term debt reported in the balance sheets are considered
to approximate the respective fair value as the Company's long-term debt
interest rates approximate market rates at December 31, 1996.

CASH AND CASH EQUIVALENTS

For purposes of the balance sheet and statement of cash flows, the Company
considers all investments with original maturities of three months or less to be
cash equivalents. At June 30, and September 30, 1997 the Company maintained cash
balances in various financial institutions in excess of federally insured
limits.

F-88
<PAGE>
PRODUCTS FOR SURGERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONCENTRATIONS OF CREDIT RISK

In the normal course of business, the Company extends credit to its
customers, which are primarily hospitals and surgical centers. The Company
regularly reviews accounts receivable and makes provision for potentially
uncollectible balances. At June 30, 1997 and September 30, 1997, management
believes the Company had incurred no impairments in the carrying values of its
accounts receivable, other than uncollectible amounts for which provision has
been made.

INVENTORIES

Inventories consist of medical supplies and equipment. Inventories are
valued at the lower of cost or market. Cost is determined on the first-in,
first-out (FIFO) method. At June 30, 1997 and September 30, 1997, management
believes the Company had incurred no material impairments in the carrying values
of its inventories, other than impairments for which provision has been made.

PROPERTY AND EQUIPMENT

INTANGIBLE ASSETS

The goodwill recorded by the Company in connection with the acquisition of
SSP (see Note 3) is amortized over 40 years on a straight line basis. As of June
30, 1997 and September 30, 1997, accumulated amortization of goodwill amounted
to $1,835 and $2,445, respectively.

REVENUES AND EXPENSES

REVENUE RECOGNITION

Revenues are recognized when products are shipped. Service contract
revenues are recorded over the term of the service contract, and the unearned
portion of the service contract is recorded as a liability.

INCOME TAXES

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

F-89
<PAGE>
PRODUCTS FOR SURGERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

nonpublic entities to disclose certain information about an entity's capital
structure, including the pertinent rights and privileges of the various
securities outstanding. The Company will be required to adopt SFAS No. 129 in
1997 and, in the opinion of management, SFAS No. 129 will not significantly
change the existing financial statement disclosures.

3. ACQUISITION:

On October 1, 1996, PSI acquired all the outstanding stock of SSP in
exchange for 15,880 shares of PSI common stock. The acquisition was accounted
for as a purchase, and SSP's results of operations have been included in the
accompanying consolidated financial statements since the acquisition date. SSP
is also a contract seller of specialty medical products.

The purchase price was allocated as follows:

Current assets....................... $ 705,621
Property and equipment............... 20,386
Goodwill............................. 97,795
Current liabilities.................. (466,322)
----------
Purchase price....................... $ 357,480
==========

4. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following:

ESTIMATED
USEFUL LIVES JUNE 30, SEPTEMBER 30,
IN YEARS 1997 1997
------------ --------- -------------
(UNAUDITED)
Office equipment........... 5 $ 377,099 $ 268,870
Machinery and equipment.... 7 15,624 15,624
Furniture and fixtures..... 5-7 58,817 13,614
Rental equipment........... 5 50,825 50,825
Leasehold improvements..... 10 37,693 37,693
Transportation equipment... 5 9,035 9,035
--------- -------------
549,093 395,661
Less -- accumulated
depreciation and
amortization............. (357,860) (211,248)
--------- -------------
Property and equipment,
net...................... $ 191,233 $ 184,413
========= =============

5. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts receivable consist of the following:

JUNE 30, SEPTEMBER 30,
1997 1997
--------- -------------
(UNAUDITED)
Trade receivables.................... $ 692,275 $ 863,436
Receivables from suppliers........... 10,955 --
Other receivables.................... 22,475 9,184
--------- -------------
725,705 872,620
Less -- allowance for doubtful
accounts........................... (586) (1,943)
--------- -------------
$ 725,119 $ 870,677
========= =============

F-90
<PAGE>
PRODUCTS FOR SURGERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Prepaid expenses consist of the following:

JUNE 30, SEPTEMBER 30,
1997 1997
--------- -------------
(UNAUDITED)
Prepaid insurance....................... $ 26,496 $ 9,025
Prepaid property taxes.................. 3,453 2,514
Prepaid advertising..................... 3,704 1,524
Prepaid sales meeting................... -- 21,322
Other prepaid expenses.................. 12,059 5,730
--------- -------------
$ 45,712 $ 40,115
========= =============

Accounts payable and accrued expenses consist of the following:

JUNE 30, SEPTEMBER 30,
1997 1997
---------- -------------
(UNAUDITED)
Accounts payable, trade................. $ 685,948 $ 826,330
Accrued compensation and benefits....... 70,941 8,391
Accrued income taxes.................... 232,114 324,583
Accrued commissions..................... 70,554 99,217
Other accrued expenses.................. 140,610 34,590
---------- -------------
$1,200,167 $ 1,293,111
========== =============

6. CASH SURRENDER VALUE OF OFFICERS' LIFE INSURANCE:

The Company maintains life insurance policies on its executive officers.
The company pays the premium and receives, on termination of the policy or death
of the insured, the cash surrender value of the policy and the balance of
benefits paid for the purposes of funding the buy-sell agreement described in
Note 15 and/or to provide key-man insurance.

7. SHORT-TERM DEBT:

The Company has a $500,000 credit line with a bank that expires October 31,
1997, with interest payable monthly at prime plus 0.75 percent. (9.25 percent at
June 30, 1997). Management intends to renew the credit line before it expires.
As of June 30, 1997 and September 30, 1997, $195,722 and $292,473 was
outstanding, respectively.

The Company also finances its insurance premiums. The amount outstanding as
of June 30, 1997 and September 30, 1997 was $6,400 and $2,500, respectively.

8. LONG-TERM DEBT:

The Company has policy loans outstanding taken against the cash surrender
value of life insurance. The loan agreements are dated April 22, 1996, with
interest due annually at rates ranging from 5 1/2 percent to 8 percent. No
principal payments are required and the loans are payable from policy proceeds.
The amount outstanding as of June 30, 1997 and September 30, 1997 was $164,817
and $142,914, respectively.

9. LEASES:

The Company leases its office facilities from a partnership comprised of
certain stockholders of the Company. The lease was renewed on September 1, 1996
and expires on August 31, 2003. Rent paid under this related-party lease was
approximately $129,200 for the year ended June 30, 1997 and $22,500 for the
three months ended September 30, 1997. The Company also leases furniture and
equipment from the same partnership. The leases are cancellable and expire at
various dates through 1998. The rents charged are

F-91
<PAGE>
PRODUCTS FOR SURGERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

based on the fair rental value of similar equipment. Total rent paid under this
lease for the year ended June 30, 1997 was $63,400 and $14,340 for the three
months ended September 30, 1997.

The Company believes the terms of the related-party leases are at least as
favorable as the terms that could have been obtained from an unaffiliated third
party in similar transactions.

Future minimum lease payments required under noncancellable operating
leases (including related party leases) with initial or remaining noncancellable
terms in excess of one year at June 30, 1997 are as follows:

Year ending June 30 -
1998....................... $ 223,173
1999....................... 168,372
2000....................... 147,300
2001....................... 147,300
2002....................... 147,300
Thereafter................. 173,850
------------
$ 1,007,295
============

10. INCOME TAXES:

Federal and state income taxes are as follows:

THREE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED --------------------
JUNE 30, 1997 1996 1997
------------- --------- ---------
(UNAUDITED)
Federal --
Current......................... $ 106,779 $ 17,600 $ 15,891
Deferred........................ 25,432 6,358 4,411
State --
Current......................... 14,376 2,369 2,139
Deferred........................ 3,424 856 594
------------- --------- ---------
$ 150,011 $ 27,183 $ 23,035
============= ========= =========

Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate tax rate of 35 percent to income
before income taxes as follows:

THREE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED --------------------
JUNE 30, 1997 1996 1997
------------- --------- ---------
(UNAUDITED)
Provision at the statutory rate...... $ 126,147 $ 22,013 $ 18,478
Increase resulting from --
State income tax, net of benefit
for federal deductions........ 11,570 2,096 1,777
Nondeductible expenses.......... 12,294 3,074 2,780
------------- --------- ---------
$ 150,011 27,183 23,035
============= ========= =========

F-92
<PAGE>
PRODUCTS FOR SURGERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

JUNE 30, SEPTEMBER 30,
1997 1997
---------- -------------
(UNAUDITED)
Depreciation and amortization........... $ (41,862) $ (41,672)
Inventory............................... 124,419 119,017
State income tax........................ (3,302) (3,094)
Cash to accrual adjustment.............. 249 249
---------- -------------
Net deferred income tax assets.......... $ 79,504 $ 74,500
========== =============

11. RELATED-PARTY TRANSACTIONS:

The Company has notes receivable from its stockholders in the amount
$133,814 and $129,738 as of June 30, 1997 and September 30, 1997, respectively.
The notes bear interest at 9.25 percent per annum. Unpaid principal and accrued
interest is payable monthly through September 18, 2003, at which time the
remaining unpaid principal and interest is due in full.

12. COMMITMENTS AND CONTINGENCIES:

LITIGATION

INSURANCE

The sale and distribution of medical products involve a risk of product
liability claims. The Company maintains product liability insurance coverage in
amounts that it considers adequate.

SALES TAX CONSIDERATIONS

Various states are increasingly seeking to impose sales or use taxes on
interstate sales made into their state by out-of-state companies. Complex legal
issues arise in these areas relating to, among other things, the required nexus
of a business with a particular state, which may permit the state to require a
business to collect such taxes. Although the Company believes that it has
adequately provided for sales taxes on its sales, there can be no assurance as
to the effect of actions state tax authorities may take on the Company's
consolidated financial condition or the consolidated results of its operations.

13. SIGNIFICANT SUPPLIERS:

The Company has four significant suppliers, whose products together
accounted for 75.7 percent of the Company's revenues during fiscal 1997. The
Company's agreement with Meadox Medical, Inc. (Meadox), terminated October 1,
1996, when Meadox began direct distribution of its product lines. Subsequent to
the termination of the agreement, the Company and Meadox entered into a
non-compete agreement pursuant to which Meadox agreed to make monetary
concessions to the Company. These payments totaled approximately $440,000 in
fiscal 1997. The Company's agreement with MedComp, Inc. (a manufacturer of
vascular access catheters), its largest supplier and whose products accounted
for approximately 16.2 percent of revenues during fiscal 1997, is for a term of
five years and expires in June 1999. The Company's arrangement with Scalan
International (a manufacturer of cardiovascular instruments), accounted for

F-93
<PAGE>
PRODUCTS FOR SURGERY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

approximately 14.3 percent of revenues during fiscal 1997, is for a term of one
year and expires in January 1998. The Company's arrangement with Luxtec
Corporation (a manufacturer of fiber-optic light sources and headlights), whose
products accounted for approximately 12.1 percent of revenues during fiscal
1997, is for a term of three years and expires October 31, 1998.

The Company's other distribution agreements and agency arrangements are
generally for terms of 2 to 3 years, and are terminable if the Company fails to
meet certain negotiated sales volumes or on prior notice ranging from 30 to 90
days. A loss of the Company's distribution or agency relationships with one or
more of its significant manufacturers could have a material adverse effect on
the Company's financial condition and results of operations.

14. EMPLOYEE BENEFIT PLAN:

The Company has a qualified 401(k) profit sharing plan available to
full-time employees who meet the plan's eligibility requirements. The plan also
contains a profit sharing component with contributions being made at the
Company's discretion. Under the 401(k) plan, the Company matches 50 percent of
the employees' contributions to the plan, up to six percent of their annual
salary. The 401(k) plan expense for fiscal 1997 was $34,852 and $8,036 for the
three months ended September 30, 1997.

15. BUY-SELL AGREEMENT:

The stockholders of the Company have entered into a buy-sell agreement
among themselves and the Company. Under that agreement: (i) if a stockholder
dies, the Company would have an option to purchase the shares owned by the
deceased stockholder; and (ii) if a stockholder desires to sell his interest in
the Company, then the Company and other stockholders would have a right of first
refusal under the agreement to purchase the shares owned by the selling
stockholder.

16. SUPPLEMENTAL CASH FLOW INFORMATION:

During the year ended June 30, 1997 the Company had the following non-cash
financing and investing activities:

Acquisition of SSP:
Fair value of assets acquired... $ 823,802
Liabilities assumed............. (466,322)
----------
Fair value of stock issued...... $ 357,480
==========

17. SUBSEQUENT EVENTS (UNAUDITED):

On September 9, 1997, the Company and its shareholders entered into a
definitive merger agreement with TRIAD, providing for the acquisition of the
Company by TRIAD.

In connection with the closing of the transactions under the merger
agreement, the Company will enter into agreements with certain shareholders to
lease land and buildings used in the Company's operations for a negotiated
amount and term.

F-94
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To MegaTech Medical, Inc.:

We have audited the accompanying balance sheet of MegaTech Medical, Inc. (a
Maryland corporation) as of December 31, 1996 and the related statements of
operations, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MegaTech Medical, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.

Arthur Andersen LLP

Houston, Texas
April 18, 1997

F-95
<PAGE>
MEGATECH MEDICAL, INC.
BALANCE SHEETS

DECEMBER 31, SEPTEMBER 30,
1996 1997
------------- --------------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ -- $ 67,143
Accounts receivable, net of
allowance of $0................... 927,893 988,334
Inventories, net................... 873,955 683,347
Prepaid expenses and other current
assets............................ 6,693 18,085
------------- --------------
Total current assets.......... 1,808,541 1,756,909
PROPERTY AND EQUIPMENT, net............. 84,221 59,158
OTHER NON-CURRENT ASSETS................ 45,951 37,925
------------- --------------
Total assets.................. $ 1,938,713 $1,853,992
============= ==============

LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Short-term debt.................... $ 250,000 $ 30,000
Accounts payable and accrued
expenses.......................... 175,215 75,525
------------- --------------
Total current liabilities..... 425,215 105,525
COMMITMENTS AND CONTINGENCIES........... 42,800 42,800
STOCKHOLDERS' EQUITY:
Class A common stock, $1 par value,
50,000 shares authorized, 2,000
issued and outstanding in 1996 and
1997.............................. 2,000 2,000
Class B common stock, $1 par value,
50,000 shares authorized, 2,000
issued in 1996 and 1997........... 2,000 2,000
Additional paid-in capital......... 31,000 31,000
Retained earnings.................. 1,435,698 1,723,667
Treasury stock, 200 shares of Class
B common stock at cost............ -- (53,000)
------------- --------------
Total stockholders' equity.... 1,470,698 1,705,667
------------- --------------
Total liabilities and
stockholders' equity...... $ 1,938,713 $1,853,992
============= ==============

The accompanying notes are an integral part of these financial statements.

F-96
<PAGE>
MEGATECH MEDICAL, INC.
STATEMENTS OF OPERATIONS

NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------------------
1996 1996 1997
------------ ------------ ------------
(UNAUDITED)
REVENUES............................. $6,820,737 $ 5,072,584 $ 4,986,669
COST OF REVENUES..................... 4,214,729 2,815,612 2,933,428
------------ ------------ ------------
Gross profit............... 2,606,008 2,256,972 2,053,241
------------ ------------ ------------
SELLING EXPENSES..................... 1,327,796 876,883 828,569
GENERAL AND ADMINISTRATIVE EXPENSES.. 932,104 777,487 688,404
DEPRECIATION AND AMORTIZATION........ 17,657 10,293 26,264
------------ ------------ ------------
Total operating expenses........ 2,277,557 1,664,663 1,543,237
------------ ------------ ------------
Income from operations..... 328,451 592,309 510,004
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income................. 901 62 --
Interest expense................ (18,212) -- (8,333)
Other income, net............... 135,000 -- 60,000
------------ ------------ ------------
NET INCOME........................... $ 446,140 $ 592,371 $ 561,671
============ ============ ============

The accompanying notes are an integral part of these financial statements.

F-97
<PAGE>
MEGATECH MEDICAL, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- ADDITIONAL RETAINED TREASURY STOCKHOLDERS'
SHARES AMOUNT PAID-IN CAPITAL EARNINGS STOCK EQUITY
------ ------ --------------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995.... 4,000 $4,000 $31,000 $ 1,109,696 $ -- $ 1,144,696
Net income............... -- -- -- 446,140 -- 446,140
Dividends................ -- -- -- (120,138) -- (120,138)
------ ------ --------------- ------------ -------- -------------
BALANCE, December 31, 1996.... 4,000 4,000 31,000 1,435,698 -- 1,470,698
------ ------ --------------- ------------ -------- -------------
Purchase of 200 shares of
Class B common stock
(unaudited)............ -- -- -- -- (53,000) (53,000)
Net income (unaudited)... 561,671 561,671
Dividends (unaudited).... (273,702) (273,702)
------ ------ --------------- ------------ -------- -------------
BALANCE, September 30, 1997
(unaudited)................. 4,000 $4,000 $31,000 $ 1,723,667 $(53,000) $ 1,705,667
====== ====== =============== ============ ======== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-98
<PAGE>
MEGATECH MEDICAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------------------
1996 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 446,140 $ 592,371 $ 561,671
Adjustments to reconcile net income
to net cash
(used in) operating activities --
Depreciation and amortization.... 17,657 10,293 26,264
Increase (decrease) in operating
cash flow resulting from:
Accounts receivable........... (141,595) (219,452) (60,441)
Inventories................... 19,714 38,095 190,608
Prepaid expenses and other
current assets............. (2,266) -- (11,392)
Other noncurrent assets....... (10,280) (4,659) 8,026
Accounts payable and accrued
expenses................... (242,854) (252,032) (99,690)
------------ ------------ ------------
Net cash provided by
operating
activities............ 86,516 164,616 615,046
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and
equipment........................ (21,378) (9,478) (1,201)
------------ ------------ ------------
Net cash used in
investing
activities............ (21,378) (9,478) (1,201)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid..................... (120,138) (120,138) (273,702)
Proceeds (reductions of) short-term
debt............................. 55,000 (35,000) (220,000)
Purchase of treasury stock......... -- -- (53,000)
------------ ------------ ------------
Net cash used in
financing
activities............ (65,138) (155,138) (546,702)
------------ ------------ ------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................... -- -- 67,143
CASH AND CASH EQUIVALENTS, beginning of
period................................ -- -- --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of
period................................ $ -- $ -- $ 67,143
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for --
Interest...................... $ 17,677 $ 16,776 $ 8,333
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-99
<PAGE>
MEGATECH MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

MegaTech Medical, Inc., a Maryland corporation (the Company or MegaTech)
was founded in 1976 and maintains its headquarters in Baltimore, Maryland. The
Company is a contract seller and distributor of specialty medical products.

The Company and its stockholders intend to enter into a definitive merger
agreement with TRIAD Medical Inc. (TRIAD), pursuant to which the Company will be
acquired by TRIAD for consideration consisting of 300,000 shares of TRIAD common
stock, concurrently with the closing of the initial public offering by TRIAD of
its common stock (the Offering).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

These financial statements have been prepared on the accrual basis of
accounting.

INTERIM FINANCIAL INFORMATION

The interim financial statements as of September 30, 1997, and for the nine
months ended September 30, 1996 and 1997, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

CASH AND CASH EQUIVALENTS

For purposes of the balance sheets and statements of cash flows, the
Company considers all investments with original maturities of three months or
less to be cash equivalents.

CONCENTRATIONS OF CREDIT RISKS

In the normal course of business, the Company extends credit to its
customers, which are primarily hospitals. The Company regularly reviews its
accounts receivable and makes provision for potentially uncollectible balances.
At December 31, 1996, and September 30, 1997, management believes the Company
had incurred no material impairments in the carrying values of its accounts
receivable.

INVENTORIES

Inventories consist primarily of medical supplies and equipment.
Inventories, net of allowances, are valued at the lower of cost or market. Cost
is determined using the average cost method. At December 31,

F-100
<PAGE>
MEGATECH MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

1996, and at September 30, 1997, management believes the Company has incurred no
material impairments in the carrying values of its inventories, other than
impairments for which provision has been made.

PROPERTY AND EQUIPMENT

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments that extend the useful
lives of existing equipment are capitalized and depreciated. Upon retirement or
disposition of property and equipment, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized in the statements of operations.

COLLATERAL INTEREST IN INSURANCE POLICY

The Company has entered into an agreement with its controlling stockholder
for the sole purpose of financing life insurance premiums on a whole-life policy
covering the president of the Company. The advances are collateralized by the
cash surrender value of and the death benefit payable under the policy. The
Company has recorded the advances in other non-current assets in the
accompanying balance sheets totaling approximately $45,951 and $37,925 at
December 31, 1996, and September 30, 1997, respectively.

REVENUES AND EXPENSES

The Company's revenues are primarily derived from sales of specialty
medical products under agreements and arrangements with various manufacturers.
Cost of revenues consists primarily of product costs, net of rebates, and
freight charges. Selling expenses consist primarily of sales commissions,
salaries of sales managers, travel and entertainment expenses, trade show
expenses, and automobile allowances. General and administrative expenses consist
primarily of executive compensation and related benefits, administrative
salaries and benefits, office rent and utilities, communication expenses and
professional fees.

REVENUE RECOGNITION

Revenues are recognized when products and supplies are shipped.

INCOME TAXES

The Company has elected S corporation status as defined by the Internal
Revenue Code, whereby the Company is not subject to taxation for federal
purposes. Under the Internal Revenue Code provisions applicable to S
corporations, the stockholders report the Company's taxable earnings or losses
in their personal federal income tax returns. Accordingly, no provision for
federal income taxes has been made in the accompanying financial statements.
Upon completion of the transaction with TRIAD, the Company will become a C
corporation and accrue a previously unrecognized deferred tax asset, which if
accrued on December 31, 1996 and September 30, 1997, would have been
approximately $12,200 and $12,200, respectively.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 129, "Disclosure of Information
About Capital Structure." SFAS No. 129 requires nonpublic entities to disclose
certain information about an entity's capital structure including the pertinent
rights and privileges of the various securities outstanding. The Company will be
required to adopt SFAS No. 129 in 1997 and, in the opinion of management, SFAS
No. 129 will not significantly change the existing financial statement
disclosures.

F-101
<PAGE>
MEGATECH MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:
<TABLE>
<CAPTION>
ESTIMATED SEPTEMBER
USEFUL LIVES DECEMBER 31, 30,
IN YEARS 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Transportation equipment................ 5 $ 75,572 $ 75,572
Machinery and equipment................. 7 15,128 15,128
Furniture and fixtures.................. 5-7 122,929 124,129
Leasehold improvements.................. 10 37,926 37,926
------------ ------------
251,555 252,755
Less -- accumulated depreciation and
amortization.......................... (167,334) (193,597)
------------ ------------
Property and equipment, net............. $ 84,221 $ 59,158
============ ============
</TABLE>
4. SHORT-TERM DEBT:

Short-term debt consisted of a demand line of credit obtained from a bank,
with interest due monthly at the bank's prime rate plus one percent (9.25
percent at December 31, 1996). This credit facility is secured by accounts
receivable and inventory. The amount outstanding under the credit facility as of
December 31, 1996 was $250,000. At September 30, 1997 there was a balance of
$30,000 outstanding.

Management estimates that the fair value of its debt obligations
approximates an aggregate carrying value of $250,000 at December 31, 1996.

5. LEASES:

The Company leases office and warehouse facilities from third parties. The
lease agreements extend through May 31, 1998. The rent paid under these leases
was approximately $38,000, $28,200 and $28,200 for the year ended December 31,
1996 and the nine months ended September 30, 1996 and September 30, 1997,
respectively. The Company is required to pay taxes, maintenance, insurance and
certain other operating costs of the leased property.

Future minimum lease payments required under noncancellable operating
leases that have initial or remaining noncancellable lease terms in excess of
one year at December 31, 1996 are as follows:

Year ending December 31 --
1997............................... $ 37,548
1998............................... 15,645
---------
$ 53,193
=========

6. RELATED PARTY TRANSACTIONS:

The controlling stockholder of the Company also owns another company, JAJ
Enterprises, Ltd., d/b/a S.O.S. Technologies (S.O.S.), which is engaged in
renting emergency oxygen units and organizing training for their usage. MegaTech
provides S.O.S. with office and warehouse space and administrative, accounting
and managerial services and personnel. S.O.S. reimburses MegaTech for these
services. Included in other income, net, is approximately $135,000, $75,000 and
$60,000 received from S.O.S. for the year ended December 31, 1996 and for the
nine months ended September 30, 1996 and 1997, respectively.

F-102
<PAGE>
MEGATECH MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. COMMITMENTS AND CONTINGENCIES:

LITIGATION

INSURANCE

The sale and distribution of medical products involve a risk of product
liability claims. The Company maintains product liability insurance coverage in
amounts that it considers adequate.

SALES TAX CONSIDERATIONS

Various states are increasingly seeking to impose sales or use taxes on
interstate sales made into their state by out-of-state companies. Complex legal
issues arise in these areas, relating to, among other things, the required nexus
of a business with a particular state, which may permit the state to require a
business to collect such taxes. Although the Company believes that each of the
Founding Companies has adequately provided for sales taxes on its sales, there
can be no assurance as to the effect of actions state tax authorities may take
on the Company's financial condition or the results of its operations.

8. SIGNIFICANT SUPPLIERS:

The Company has three significant suppliers, together whose products
collectively accounted for 61 percent and 38.4 percent of the Company's revenues
for the year ended December 31, 1996 and the nine months ended September 30,
1997, respectively. The Company has no arrangement with Smith & Nephew, its
largest supplier and whose products accounted for approximately 30 percent and
23 percent of the Company's revenues for the year ended December 31, 1996 and
the nine months ended September 30, 1997, respectively. The Company's
arrangement with Level One, whose products accounted for 16 percent of the
Company's revenues for the year ended December 31, 1996 expired March 31, 1997.
However, the Company partially offset such lost revenues by acquiring new
product lines and placing increased emphasis on new technology products. The
Company's material distribution agreements and agency arrangements are generally
for terms of 1 to 5 years and are terminable if the Company fails to meet
certain negotiated sales volumes or on prior notice ranging from 30 to 90 days.
A loss of the Company's distribution or agency relationships with one or more of
its significant manufacturers could have a material adverse effect on the
Company's financial condition and results of operations.

9. SUBSEQUENT EVENTS (UNAUDITED):

On September 9, 1997, the Company and its shareholders entered into a
definitive merger agreement with TRIAD, providing for the acquisition of the
Company by TRIAD.

In connection with the closing of the transactions under the merger
agreement, the Company will distribute certain assets to the shareholders,
consisting of cash surrender value of life insurance and automobiles, with a
total carrying value of $0.2 million as of December 31, 1996. In addition, the
Company will make a cash distribution of approximately $1.4 million prior to the
merger, which represents the Company's estimated S corporation accumulated
adjustment account. Had these transactions been recorded at September 30, 1997,
the effect on the accompanying balance sheet would have been an increase in
liabilities of $1.6 million and a decrease in stockholders' equity of $1.6
million.

F-103
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Omni Medical, Inc.:

We have audited the accompanying balance sheet of Omni Medical, Inc. (a
Washington corporation) as of December 31, 1996 and the related statements of
operations, stockholders' equity (deficit) and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Omni Medical, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.

Arthur Andersen LLP

Houston, Texas
September 30, 1997

F-104
<PAGE>
OMNI MEDICAL, INC.
BALANCE SHEETS

DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash............................... $ 399,286 $ 53,426
Accounts receivable................ 436,703 762,954
Inventories, net................... 529,253 1,977,070
------------ -------------
Total current assets.......... 1,365,242 2,793,450
PROPERTY AND EQUIPMENT, net............. 13,592 8,586
OTHER NON-CURRENT ASSETS................ -- 113,750
------------ -------------
Total assets.................. $1,378,834 $ 2,915,786
============ =============

LIABILITIES AND STOCKHOLDER'S EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Notes payable...................... $ -- $ 1,450,000
Accounts payable and accrued
expenses.......................... 359,095 1,567,401
------------ -------------
Total current liabilities..... 359,095 3,017,401
------------ -------------
COMMITMENTS AND CONTINGENCIES...........
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $1 par value, 50,000
shares authorized, 1,700 issued
and outstanding................... 1,700 1,700
Additional paid-in capital......... 83,300 83,300
Retained earnings (accumulated
deficit).......................... 934,739 (186,615)
------------ -------------
Total stockholders' equity
(deficit)................. 1,019,739 (101,615)
------------ -------------
Total liabilities and
stockholders' equity
(deficit)................. $1,378,834 $ 2,915,786
============ =============

The accompanying notes are an integral part of these financial statements.

F-105
<PAGE>
OMNI MEDICAL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------------------
1996 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES................................ $6,081,614 $ 4,702,781 $ 4,759,774
COST OF REVENUES........................ 4,266,448 3,255,092 3,573,528
------------ ------------ ------------
Gross profit.................. 1,815,166 1,447,689 1,186,246
------------ ------------ ------------
SELLING EXPENSES........................ 617,375 389,479 437,129
GENERAL AND ADMINISTRATIVE EXPENSES..... 827,166 676,327 567,818
DEPRECIATION AND AMORTIZATION........... 7,602 5,921 73,256
------------ ------------ ------------
Total operating expenses........... 1,452,143 1,071,727 1,078,203
------------ ------------ ------------
Income from operations........ 363,023 375,962 108,043
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income.................... 5,935 3,682 2,392
Interest expense................... (489) (443) (5,775)
Contract termination income........ -- -- 181,986
------------ ------------ ------------
NET INCOME.............................. $ 368,469 $ 379,201 $ 286,646
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-106
<PAGE>
OMNI MEDICAL, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK EARNINGS TOTAL
---------------- ADDITIONAL (ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT PAID-IN CAPITAL DEFICIT) EQUITY (DEFICIT)
------ ------ --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995.... 1,700 $1,700 $83,300 $ 733,070 $ 818,070
Net income............... -- -- -- 368,469 368,469
Distributions............ -- -- -- (166,800) (166,800)
------ ------ --------------- ------------- ----------------
BALANCE, December 31, 1996.... 1,700 1,700 83,300 934,739 1,019,739
------ ------ --------------- ------------- ----------------
Net income (unaudited)... -- -- -- 286,646 286,646
Distributions
(unaudited)............ -- -- -- (1,408,000) (1,408,000)
------ ------ --------------- ------------- ----------------
BALANCE, September 30, 1997
(unaudited)................. 1,700 $1,700 $83,300 $ (186,615) $ (101,615)
====== ====== =============== ============= ================
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-107
<PAGE>
OMNI MEDICAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------------------
1996 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 368,469 $ 379,201 $ 286,646
Adjustments to reconcile net income
to net cash
provided by (used in) operating
activities --
Depreciation and amortization.... 7,602 5,921 73,256
Increase (decrease) in operating
cash flow resulting from:
Accounts receivable........... 148,277 (78,865) (326,251)
Inventories................... 240,874 22,378 (1,447,817)
Other non-current assets...... -- -- (182,000)
Accounts payable and accrued
expenses................... (86,869) 93,064 1,208,306
------------ ------------ ------------
Net cash provided by
(used in) operating
activities............ 678,353 421,699 (387,860)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to
stockholders..................... (166,800) (163,200) (1,408,000)
Proceeds from issuance of notes
payable.......................... 909,000 879,000 1,465,000
Payments on notes payable.......... (1,059,000) (1,029,000) (15,000)
------------ ------------ ------------
Net cash provided by
(used in) financing
activities............ (316,800) (313,200) 42,000
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH......... 361,553 108,499 (345,860)
CASH, beginning of period............... 37,733 37,733 399,286
------------ ------------ ------------
CASH, end of period..................... $ 399,286 $ 146,232 $ 53,426
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for --
Interest...................... $ 489 $ 443 $ --
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-108
<PAGE>
OMNI MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Omni Medical, Inc., a Washington corporation (the Company or Omni), was
founded in 1986 and maintains its headquarters in Redmond, Washington. The
Company is a contract seller and distributor of specialty medical products.

On September 9, 1997 the Company and its stockholders entered into a
definitive merger agreement with TRIAD Medical Inc. (TRIAD), pursuant to which
the Company will be acquired by TRIAD for consideration consisting of $200,000
in cash and 128,517 shares of TRIAD common stock, concurrently with the closing
of the initial public offering by TRIAD of its common stock (the Offering).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

These financial statements have been prepared on the accrual basis of
accounting.

INTERIM FINANCIAL INFORMATION

The interim financial statements as of September 30, 1997, and for the nine
months ended September 30, 1996 and 1997, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist primarily of cash, trade
receivables, trade payables and debt instruments. The carrying amounts of those
instruments reported in the balance sheets are considered to estimate their
respective fair values due to the short-term nature of such financial
instruments and the current interest rate environment.

CONCENTRATIONS OF CREDIT RISKS

In the normal course of business, the Company extends credit to its
customers, which are primarily hospitals. The Company regularly reviews its
accounts receivable and makes provision for potentially uncollectible balances.
At December 31, 1996, and September 30, 1997, management believes the Company
had incurred no material impairments in the carrying values of its accounts
receivable.

INVENTORIES

Inventories consist primarily of medical supplies and equipment.
Inventories, net of allowances, are valued at the lower of cost or market. Cost
is determined using the first-in, first-out (FIFO) method. At December 31, 1996,
and at September 30, 1997, management believes the Company has incurred no
material impairment in the carrying values of its inventories, other than
impairments for which provision has been made.

F-109
<PAGE>
OMNI MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewal and betterments that extend the useful
lives of existing equipment are capitalized and depreciated. Upon retirement or
disposition of property and equipment, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized in the statements of operations.

OTHER NON-CURRENT ASSETS

Other non-current assets consist primarily of a non-compete agreement with
Online Medical. The amount paid for the agreement is being amortized on a
straight-line basis over the life of the agreement. As of September 30, 1997,
$68,250 had been amortized in connection with the contract.

REVENUES AND EXPENSES

The Company's revenues are primarily derived from sales and specialty
medical products under agreement and arrangements with various manufacturers.
Cost of revenues consists primarily of product costs, net of rebates, and
freight charges. Selling expenses consist primarily of sales commissions,
salaries of sales managers, travel and entertainment expenses, trade show
expenses, and automobile allowances. General and administrative expenses consist
primarily of executive compensation and related benefits, administrative
salaries and benefits, office rent and utilities, communication expenses and
professional fees.

REVENUE RECOGNITION

Revenues are recognized when products and supplies are shipped.

INCOME TAXES

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 129, "Disclosure of Information
About Capital Structure." SFAS No. 129 requires nonpublic entities to disclose
certain information about an entity's capital structure including the pertinent
rights and privileges of the various securities outstanding. The Company will be
required to adopt SFAS No. 129 in 1997 and, in the opinion of management, SFAS
No. 129 will not significantly change the existing financial statement
disclosures.

F-110
<PAGE>
OMNI MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:
<TABLE>
<CAPTION>
ESTIMATED SEPTEMBER
USEFUL LIVES DECEMBER 31, 30,
IN YEARS 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment................. 7 $ 39,202 $ 39,202
Furniture and fixtures.................. 5-7 40,324 40,324
------------ ------------
79,526 79,526
Less -- accumulated depreciation and
amortization.......................... (65,934) (70,940)
------------ ------------
Property and equipment, net............. $ 13,592 $ 8,586
============ ============
</TABLE>
4. NOTES PAYABLE:

The Company entered into a secured revolving credit line agreement in April
1996 with a bank. The agreement provides for a maximum commitment of $275,000 to
be used for working capital needs. Interest is due monthly at the bank's
reference rate plus one percent (9.25% at December 31, 1996). The commitment
expired in March 1997. Borrowings under the agreement were secured by
substantially all the assets of the Company and were guaranteed by the
stockholders. At December 31, 1996 there were no borrowings outstanding under
the agreement.

In August 1997, the Company entered into a $1,000,000 borrowing agreement
with a bank, bearing interest at the bank's reference rate plus two percent
(5.94% at September 30, 1997), with principal and interest due on February 19,
1998. The note is secured by certain assets owned by the stockholders. The
proceeds of this agreement were used to fund a $1,000,000 distribution to the
stockholders. This amount represented the Company's estimated S corporation
accumulated adjustment account.

In September 1997, the Company entered into a $450,000 borrowing agreement
with a bank, with interest due monthly at the bank's reference rate plus one
percent (9.5% at September 30, 1997). The borrowings under this facility are due
on January 1, 1998 and are secured by substantially all the assets of the
Company. The proceeds of this agreement were used to fund working capital.

F-111
<PAGE>
OMNI MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. LEASES:

The Company leases office and warehouse facilities from third parties. The
lease agreements extend through February 28, 2000. The rent paid under these
leases was approximately $59,400, $47,500 and $42,300 for the year ended
December 31, 1996 and the nine months ended September 30, 1996 and September 30,
1997, respectively. The Company is required to pay taxes, maintenance, insurance
and certain other operating costs of the leased property.

The Company leases automobiles from third parties. The lease agreements
extend through March 31, 1998. The rent paid under these leases was
approximately $13,100, $9,700 and $10,300 for the year ended December 31, 1996
and the nine months ended September 30, 1996 and September 30, 1997,
respectively.

Future minimum lease payments required under noncancellable operating
leases that have initial or remaining noncancellable lease terms in excess of
one year at December 31, 1996 are as follows:

Year ending December 31 --
1997............................ $ 43,372
1998............................ 30,470
1999............................ 27,158
2000............................ 4,584
----------
$ 105,584
==========

6. COMMITMENTS AND CONTINGENCIES:

LITIGATION

The Company is a party to certain legal proceeding arising in the ordinary
course of business. Management believes the outcome of such legal proceedings
will not have a material adverse effect on the Company's financial position or
results of operations.

INSURANCE

7. SIGNIFICANT SUPPLIERS:

The Company has four significant suppliers, whose products together
accounted for 72 percent of the Company's revenues during the year ended
December 31, 1996. Meadox Medical, Inc. products accounted for approximately 30
percent of the Company's revenues for the year ended December 31, 1996. The
Company's contract with Meadox Medical, Inc. terminated January 1, 1997 when
Meadox Medical, Inc. began direct distribution of its product lines. Concurrent
with the termination of the agreement, the Company and Meadox Medical, Inc.
entered into a one-year non-compete agreement pursuant to which Meadox Medical
agreed to pay approximately $182,000 to the Company. This amount is recorded as
other income in the nine month period ended September 30, 1997. Level One
products accounted for 18 percent of the Company's revenues for the year ended
December 31, 1996. Although the Company's distribution agreement with Level One
expired March 31, 1997, the Company is continuing to sell Level One products and
a new agreement is being negotiated. International Technidyne Corp. (ITC)
products accounted for 14 percent of the Company's revenues for the year ended
December 31, 1996. The Company's distribution contract with ITC requires minimum
purchase commitments. The contract expires on October 31, 1997. The Company's
contract with Biovascular, whose products accounted for 10 percent of the
Company's revenues

F-112
<PAGE>
OMNI MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

for the year ended December 31, 1997, has minimum purchase commitments and
expires on October 31, 1997.

8. BUY-SELL AGREEMENT:

As of December 31, 1996, the stockholders of the Company have entered into
a buy-sell agreement among themselves and the Company. Under the agreement: (i)
if a stockholder dies, the Company would have an option to purchase the shares
owned by the deceased stockholder; and (ii) if a stockholder desires to sell his
interest in the Company, then the Company and other stockholders would have a
right of first refusal under the agreement to purchase the shares owned by the
selling stockholder. This agreement was canceled on August 25, 1997.

9. EMPLOYEE BENEFIT PLAN:

The Company sponsors a defined contribution 401(k) profit-sharing plan for
employees meeting certain requirements. The Company's contributions during the
year ended December 31, 1996 and the nine months ended September 30, 1996 and
September 30, 1997 were $92,000, $80,000 and $0, respectively.

F-113
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of PCI Medical, Inc.:

We have audited the accompanying statements of operations and cash flows of
PCI Medical, Inc. (an Arizona corporation) for the period from January 1, 1996
to October 4, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statemens. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of PCI
Medical, Inc. for the period from January 1, 1996 to October 4, 1996, in
conformity with generally accepted accounting principles.

Arthur Andersen LLP

Houston, Texas
August 1, 1997

F-114
<PAGE>
PCI MEDICAL, INC.
STATEMENT OF OPERATIONS

PERIOD FROM
JANUARY 1, 1996
TO
OCTOBER 4, 1996
---------------
REVENUES................................ $ 6,049,214
COST OF REVENUES........................ 2,967,047
---------------
Gross profit....................... 3,082,167
SELLING EXPENSES........................ 724,656
GENERAL AND ADMINISTRATIVE EXPENSES..... 1,558,923
DEPRECIATION AND AMORTIZATION........... 131,644
---------------
Total operating expenses........... 2,415,223
---------------
Income from operations.................. 666,944
OTHER INCOME (EXPENSE)
Interest income.................... 4,888
Interest expense................... (6,460)
Other income, net.................. 65,186
---------------
NET INCOME.............................. $ 730,558
===============

The accompanying notes are an integral part of these financial statements.

F-115
<PAGE>
PCI MEDICAL, INC.
STATEMENT OF CASH FLOWS

PERIOD FROM
JANUARY 1, 1996
TO
OCTOBER 4, 1996
---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income......................... $ 730,558
Adjustment to reconcile net income
to net cash provided by operating
activities
Depreciation and
amortization................. 131,644
Gain on disposal.............. (52,670)
Increase (decrease) in
operating cash flows
resulting from:
Accounts receivable...... (110,237)
Inventories.............. 217,658
Prepaids and other
current assets.......... (38,264)
Other noncurrent
assets.................. (7,592)
Accounts payable and
accrued expenses........ (3,569)
---------------
Net cash provided
by operating
activities......... 867,528
---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and
equipment......................... (124,074)
Proceeds from disposals of property
and equipment..................... 74,790
---------------
Net cash used in
investing
activities......... (49,284)
---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on long-term debt....... 73,217
Principal payments on long-term
debt and capital leases........... (76,125)
Line of credit, net................ (395,000)
Distributions to stockholders...... (225,000)
---------------
Net cash used in
financing
activities......... (622,908)
---------------
INCREASE IN CASH AND CASH EQUIVALENTS... 195,336
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 30,319
---------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 225,655
===============

The accompanying notes are an integral part of these financial statements.

F-116
<PAGE>
PCI MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

PCI Medical, Inc. (the Company) is primarily engaged in the contract sale
and distribution of medical supplies and devices and the rental, service and
repair of infusion devices and equipment in the hospital and alternate-site
health care markets in the southwestern United States. The Company was
incorporated in 1986.

On October 4, 1996, TRIAD Holdings, Inc. (THI) acquired the assets and
assumed certain liabilities of the Company, for cash consideration of $3,814,651
(net of cash acquired), notes payable of $702,343 and 60,000 Class B common
shares of THI valued at $330,000. As a result, separate operations of the
Company ceased and the results of the Company's operations for subsequent
periods are included in the consolidated financial statements of THI.
Accordingly, only the results of operations and cash flows for the period ended
October 4, 1996 have been included in the accompanying financial statements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

These financial statements have been prepared on the accrual basis of
accounting.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted account principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all
investments with original maturities of three months or less to be cash
equivalents.

COST OF REVENUES

Cost of revenues is determined using the first-in, first-out (FIFO) method
of valuing inventories.

DEPRECIATION

Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are capitalized and amortized
over the lesser of the life of the applicable lease or the estimated useful life
of the applicable asset.

DEFERRED RENT

REVENUES AND EXPENSES

The Company's revenues are primarily derived from rentals and servicing
infusion devices and sales of durable medical equipment. Cost of revenues
consists primarily of product costs, net of rebates, service labor and freight
charges. Selling expenses consist primarily of sales commissions, salaries of
sales

F-117
<PAGE>
PCI MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

managers, travel and entertainment expenses, trade show expenses and automobile
allowances. General and administrative expenses consist primarily of executive
compensation and related benefits, administrative salaries and benefits, office
rent and utilities, communication expenses and professional fees.

REVENUE RECOGNITION

Revenues are recorded at the time of shipment of products or performance of
services. Revenues from the rental of infusion pumps and other under cancelable
and noncancelable operating leases are recognized on a straight-line basis over
the rental period. The Company also provides financing for equipment sales under
sales-type lease arrangements.

INCOME TAXES

The Company is a Subchapter S corporation for income tax purposes. As an S
corporation, the Company is not subject to federal income taxes and accordingly,
no such taxes have been provided in the accompanying financial statements.
Federal income taxes related to the earnings of the Company are obligations of
the shareholders of the Company. The Company is subject to an Arizona franchise
tax, which is not significant. This amount has been included in general and
administrative expenses in the accompanying statement of operations.

3. LEASES:

The Company leases its office and warehouse facilities from an entity
controlled by its shareholders. Rent expense under this arrangment totaled
approximately $242,193 for the period from January 1, 1996 to October 4, 1996.
The leases provide for the Company to pay taxes, maintenance, insurance and
certain other operating costs of the leased property.

4. COMMITMENTS AND CONTINGENCIES:

LITIGATION

The Company is a party to certain legal proceedings arising in the ordinary
course of business. Managment believes the outcome of such legal proceedings
will not have a material adverse effect on the Company's financial position or
results of operations.

INSURANCE

F-118
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SHARES OF COMMON STOCK TO WHICH IT RELATES, OR AN OFFER TO, OR A
SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.

-------------------------------
TABLE OF CONTENTS
-------------------------------

PAGE
----
PROSPECTUS SUMMARY................... 3
RISK FACTORS......................... 8
THE COMPANY.......................... 15
USE OF PROCEEDS...................... 18
DIVIDEND POLICY...................... 18
CAPITALIZATION....................... 19
DILUTION............................. 20
SELECTED HISTORICAL AND PRO FORMA
COMBINED FINANCIAL DATA............ 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS...................... 23
BUSINESS............................. 28
MANAGEMENT........................... 36
CERTAIN TRANSACTIONS................. 43
PRINCIPAL STOCKHOLDERS............... 47
SHARES ELIGIBLE FOR FUTURE SALE...... 49
DESCRIPTION OF CAPITAL STOCK......... 50
UNDERWRITING......................... 53
LEGAL MATTERS........................ 55
EXPERTS.............................. 55
ADDITIONAL INFORMATION............... 55
INDEX TO FINANCIAL STATEMENTS........ F-1

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

4,000,000 SHARES

TRIAD
MEDICAL INC.

COMMON STOCK

----------------------

PROSPECTUS
----------------------

NATIONSBANC MONTGOMERY SECURITIES, INC.
SMITH BARNEY INC.

WEDBUSH MORGAN SECURITIES

, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses (other than underwriting
discounts and commissions) in connection with the offering described in this
Registration Statement, all of which shall be paid by TRIAD. All of such amounts
(except the SEC Registration Fee, the NASD Filing Fee and the Nasdaq National
Market Listing Fee) are estimated.

SEC Registration Fee.................... $ 16,728
NASD Filing Fee......................... 6,020
Nasdaq National Market Listing Fee...... 40,237
Blue Sky Fees and Expenses.............. *
Printing and Engraving Costs............ *
Legal Fees and Expenses................. *
Accounting Fees and Expenses............ *
Transfer Agent and Registrar Fees and
Expenses.............................. *
Miscellaneous........................... *
------------
Total.............................. $ 4,400,000
============

- ------------

* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law permits a corporation
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action. In an action brought to obtain a judgment in the corporation's favor,
whether by the corporation itself or derivatively by a stockholder, the
corporation may only indemnify for expenses, including attorney's fees, actually
and reasonably incurred in connection with the defense or settlement of such
action, and the corporation may not indemnify for amounts paid in satisfaction
of a judgment or in settlement of the claim. In any such action, no
indemnification may be paid in respect of any claim, issue or matter as to which
such person shall have been adjudged liable to the corporation except as
otherwise approved by the Delaware Court of Chancery or the court in which the
claim was brought. In any other type of proceeding, the indemnification may
extend to judgments, fines and amounts paid in settlement, actually and
reasonably incurred in connection with such other proceeding, as well as to
expenses.

The statute does not permit indemnification unless the person seeking
indemnification has acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation and, in the
case of criminal actions or proceedings, the person had no reasonable cause to
believe his conduct was unlawful. The statute contains additional limitations
applicable to criminal actions and to actions brought by or in the name of the
corporation. The determination as to whether a person seeking indemnification
has met the required standard of conduct is to be made (1) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (3)
by the stockholders.

TRIAD's Certificate of Incorporation and Bylaws require TRIAD to indemnify
its directors to the fullest extent permitted under Delaware law. Pursuant to
employment agreements entered into by TRIAD

II-1
<PAGE>
with its executive officers and certain other key employees, TRIAD must
indemnify such officers and employees in the same manner and to the same extent
that TRIAD is required to indemnify its directors under TRIAD's Certificate of
Incorporation and Bylaws. TRIAD's Certificate of Incorporation limits the
personal liability of a director to the corporation or its stockholders to
damages for breach of the director's fiduciary duty.

TRIAD has not purchased insurance on behalf of its directors and officers
against certain liabilities that may be asserted against, or incurred by, such
persons in their capacities as directors or officers of the registrant, or that
may arise out of their status as directors or officers of the registrant,
including liabilities under the federal and state securities laws. TRIAD has
entered into indemnification agreements to indemnify its directors to the
maximum extent permitted under Delaware law.

The Underwriting Agreement provides for indemnification of the directors
and officers of the Company in certain circumstances.

II-2
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The following table reflects sales by TRIAD of unregistered securities
within the past three years. Share amounts have been adjusted for the
1.3379145-for-one stock split effected in September 1997. Except as otherwise
disclosed, the issuances by TRIAD of the securities sold in the transactions
referenced below were not registered under the Securities Act, pursuant to the
exemption contemplated in Section 4(2) thereof, for transactions not involving a
public offering. No underwriter was involved in the transactions and no
commissions were paid. The consideration for which the shares of Common Stock
were issued is indicated below:
<TABLE>
<CAPTION>

WARRANTS TO PURCHASE
NUMBER SHARES OF
DATE OF SHARES COMMON STOCK CONSIDERATION PURCHASER
- ------------------- --------- -------------------- ------------- -------------------------------------
<S> <C> <C>
April 11, 1997 260,893 $ 19,500 William C. Klintworth, Jr.
113,723 8,500 Clyde A. Blankenship
100,344 7,500 Michael K. Campbell
33,448 2,500 Lance C. Ruud
April 18, 1997 100,000 (1) Equus II Incorporated

May 12, 1997 20,069 $ 1,500 William C. Klintworth, Jr.
10,034 750 Clyde A. Blankenship
10,034 750 Michael K. Campbell

September 8, 1997 449,213(2) $ 300,000 Equus II Incorporated

September 8, 1997 25,000 Services PENMAN Private Equity and Mezzanine
Fund, L.P.

September 8, 1997 2,250 $ 11,250 James L. Stariha
1,250 6,250 Terry L. Harrell
1,250 6,250 Thomas H. Dean
1,250 6,250 Bruce R. Hoadley
1,000 5,000 David A. Meyer
1,000 5,000 James W. Eshcoff
2,000 10,000 Thomas M. Boucher
1,000 5,000 Michael W. Thomas
1,000 5,000 Paul C. Gries
5,000 25,000 Marvin L. Marks
5,000 25,000 Peter A. Miller
3,000 15,000 William Graue
3,000 15,000 Edward Berman
1,500 7,500 Harvey A. Lawhon
1,500 7,500 Robert L. and Chris Wahlenmaier
1,500 7,500 R. Bryan and Beverly Gregory
1,500 7,500 Thomas J. Madsen
8,000 40,000 Greg A. Sellards
30,000 150,000 Child Health Investment Corporation
1,000 5,000 Terry Family Trust
6,000 30,000 Bruce Baily
2,000 10,000 Stephen W. Walls
7,000 35,000 Klintworth Family Trust
8,000 40,000 John B. Benear, II
4,000 20,000 Jeff Haines
</TABLE>

(SEE NOTES ON FOLLOWING PAGE)

II-3
<PAGE>
- ------------

(1) TRIAD issued this Warrant to Equus II Incorporated ("Equus II") under a
Funding and Stock Purchase Agreement dated April 18, 1997, whereby Equus II
agreed to (i) purchase 300,000 shares of TRIAD's Series A Preferred Stock
for $300,000 and (ii) advance up to $2.2 million for purposes for funding
certain expenses relating to TRIAD's initial public offering of Common
Stock.

(2) 449,213 shares of Common Stock issued on conversion of the 300,000 shares of
TRIAD's Series A Preferred Stock issued on April 18, 1997 as set forth in
(1) above.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------------------------------
1.1 -- Form of Underwriting Agreement dated ,
1997 by and among TRIAD, Montgomery
Securities, Smith Barney Inc. and
Wedbush Morgan Securities.
*2.1 -- Uniform Provisions for the Acquisition
of the Founding Companies.
*2.2 -- Agreement and Plan of Reorganization
dated as of September 9, 1997 by and
among TRIAD, TRIAD Acquisition, Inc.,
THI and its stockholders.
*2.3 -- Agreement and Plan of Reorganization
dated as of September 9, 1997 by and
among TRIAD, HTD Acquisition, Inc., HTD
and its Stockholders.
*2.4 -- Agreement and Plan of Reorganization
dated as of September 9, 1997 by and
among TRIAD, Sun Acquisition, Inc., Sun
and its Stockholders.
*2.5 -- Agreement and Plan of Reorganization
dated as of September 9, 1997 by and
among TRIAD, Custom Acquisition, Inc.,
CMS and its Stockholders.
*2.6 -- Agreement and Plan of Reorganization
dated as of September 9, 1997 by and
among TRIAD, Kentec Acquisition, Inc.,
Kentec and its Stockholders.
*2.7 -- Agreement and Plan of Reorganization
dated as of September 9, 1997 by and
among TRIAD, PFS Acquisition, Inc.,
Products for Surgery and its
Stockholders.
*2.8 -- Agreement and Plan of Reorganization
dated as of September 9, 1997 by and
among TRIAD, MegaTech Acquisition, Inc.,
MegaTech and its Stockholders.
*2.9 -- Agreement and Plan of Reorganization
dated as of September 9, 1997 by and
among TRIAD, Omni Medical Acquisition,
Inc., Omni Medical and its Stockholders.
*2.10 -- Agreement and Plan of Reorganization
dated as of September 9, 1997 by and
among TRIAD, NEMS Acquisition, Inc., New
England Specialties and its
Stockholders.
*2.11 -- Agreement and Plan of Reorganization
dated as of September 9, 1997 by and
among TRIAD, Professional Equipment
Acquisition, Inc., Professional
Equipment and its Stockholders.
*2.12 -- Agreement and Plan of Reorganization
dated as of September 9, 1997 by and
among TRIAD, Wilson Acquisition, Inc.,
Wilson and its Stockholders.
**3.1 -- Certificate of Incorporation of TRIAD,
as amended.
**3.2 -- Bylaws of TRIAD, as amended.
**4.1 -- Form of Certificate representing Common
Stock.
*4.3 -- Form of Registration Rights Agreement
among TRIAD and the stockholders listed
on the signature pages thereto.
**5.1 -- Opinion of Porter & Hedges, L.L.P.
*10.1 -- 1997 Incentive Plan of TRIAD.
**10.2 -- Form of Indemnification Agreement
between TRIAD and each of its directors
and officers.
*10.3 -- Employment Agreement by and between
TRIAD and William C. Klintworth, Jr.
dated September 9, 1997.
*10.4 -- Employment Agreement by and between
TRIAD and Clyde A. Blankenship, Jr.
dated September 9, 1997.
*10.5 -- Employment Agreement by and between
TRIAD and Lance C. Ruud dated September
9, 1997.

II-4
<PAGE>

EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------------------------------
*10.5 -- Employment Agreement by and between
TRIAD and Lance C. Ruud dated September
9, 1997.
*10.6 -- Employment Agreement by and between R.
Tucker Coop and TRIAD dated September 9,
1997.
*10.7 -- Employment Agreement by and between
Walter D. Wallach and TRIAD dated
September 9, 1997.
*10.8 -- Employment Agreement by and between
TRIAD and Marvin L. Marks dated
September 9, 1997.
*10.9 -- Employment Agreement by and between
TRIAD and Kent J. Wilken dated September
9, 1997.
*10.10 -- Employment Agreement by and between
TRIAD and Greg H. Sellards dated
September 9, 1997.
*10.11 -- Employment Agreement by and between
TRIAD and Michael W. Thomas dated
September 9, 1997.
*10.12 -- Warrant to purchase 100,000 shares of
Common Stock of TRIAD dated as of April
18, 1997, as amended.
*10.13 -- Warrant to purchase 25,000 shares of
Common Stock of TRIAD dated as of
September 8, 1997.
*10.14 -- Funding and Stock Purchase Agreement
dated April 18, 1997 between TRIAD and
Equus II Incorporated, as amended.
**10.15 -- Employment Agreement by and between
TRIAD and Michael K. Campbell dated
September 9, 1997.
**10.16 -- Employment Agreement by and between
TRIAD and Steve Becsi dated September 9,
1997.
**10.17 -- Employment Agreement by and between
TRIAD and Doug Archer dated September 9,
1997.
**10.18 -- Employment Agreement by and between
TRIAD and Robert Zimardo dated September
9, 1997.
**10.19 -- Employment Agreement by and between
TRIAD and Jack Saladow dated September
9, 1997.
**21.1 -- Subsidiaries of TRIAD.
**23.1 -- Consent of Arthur Andersen LLP.
**23.2 -- Consent of Porter & Hedges, L.L.P.
(contained in Exhibit 5.1)
**23.3 -- Consent of R. Tucker Coop as nominee for
director.
**23.4 -- Consent of Kelvin J. Pennington as a
nominee for director.
**23.5 -- Consent of Marvin L. Marks as a nominee
for director.
**23.6 -- Consent of Gregory H. Sellards as a
nominee for director.
**23.7 -- Consent of Kent J. Wilken as a nominee
for director.
**23.8 -- Consent of Edward T. Kuklenski as a
nominee for director.
**23.9 -- Consent of Michael W. Thomas as a
nominee for director.
**23.10 -- Consent of John B. Benear, II as nominee
for director.
*24.1 -- Power of Attorney.
27.1 -- Financial Data Schedule.

- ------------

* Previously filed.

** Filed herewith.

To be filed by amendment.

(b) Financial Statement Schedules.

All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto.

II-5
<PAGE>
ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the
Underwriters, at the closing specified in the Underwriting Agreement,
certificates representing the shares of Common Stock offered hereby in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes that:

(1) For the purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as a part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-6
<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
HOUSTON, STATE OF TEXAS, ON OCTOBER 29, 1997.

TRIAD MEDICAL INC.
By: /s/WILLIAM C. KLINTWORTH, JR.
WILLIAM C. KLINTWORTH, JR.
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON OCTOBER 29, 1997.

SIGNATURE CAPACITY IN WHICH SIGNED
--------- ------------------------
/s/WILLIAM C. KLINTWORTH, JR. Chairman, President and Chief Executive
WILLIAM C. KLINTWORTH, JR. Officer, Director
(Principal Executive Officer)

/s/LANCE C. RUUD Senior Vice President and Chief
LANCE C. RUUD Financial Officer
(Principal Financial and Accounting
Officer)
*
CLYDE A. BLANKENSHIP, JR. Executive Vice President, Director

*
NOLAN LEHMANN Director

*By: /s/LANCE C. RUUD
LANCE C. RUUD
SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
AS ATTORNEY-IN-FACT

II-7

EXHIBIT 3.1

CERTIFICATE OF INCORPORATION
OF
HEALTHTECH DELIVERY, INC.

The undersigned, a natural person acting as incorporator of a
corporation under the General Corporation Law of the State of Delaware, as the
same exists or may hereafter from time to time be amended (the "DGCL"), hereby
makes this Certificate of Incorporation for such corporation.

ARTICLE I

NAME

The name of the corporation is Healthtech Delivery, Inc. (the
"Corporation").

ARTICLE II

REGISTERED OFFICE AND AGENT

The address of its registered office in the State of Delaware is The
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, New
Castle County. The name of its registered agent at such address is The
Corporation Trust Company.

ARTICLE III

PURPOSES

The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the DGCL.

ARTICLE IV

AUTHORIZED CAPITAL STOCK

The aggregate number of shares of all classes of stock which the
Corporation shall have authority to issue is 21,000,000 shares, consisting of:
(i) 20,000,000 shares of common stock, par value $.001 per share (the "Common
Stock"), and (ii) 1,000,000 shares of preferred stock, par value $.001 per share
(the "Preferred Stock"). Shares of any class of capital stock of the Corporation
may be issued for such consideration and for such corporate purposes as the
Board of Directors of the
<PAGE>
Corporation (the "Board of Directors") may from time to time determine. Each
share of Common Stock shall be entitled to one vote.

A. PREFERRED STOCK. The Preferred Stock may be divided into and issued
from time to time in one or more series as may be fixed and determined by the
Board of Directors. The relative rights and preferences of the Preferred Stock
of each series shall be such as shall be stated in any resolution or resolutions
adopted by the Board of Directors setting forth the designation of the series
and fixing and determining the relative rights and preferences thereof (a
"Directors' Resolution"). The Board of Directors is hereby authorized to fix and
determine the powers, designations, preferences, and relative, participating,
optional or other rights, including, without limitation, voting powers, full or
limited, preferential rights to receive dividends or assets upon liquidation,
rights of conversion or exchange into Common Stock, Preferred Stock of any
series or other securities, any right of the Corporation to exchange or convert
shares into Common Stock, Preferred Stock of any series or other securities, or
redemption provision or sinking fund provisions, as between series and as
between the Preferred Stock or any series thereof and the Common Stock, and the
qualifications, limitations or restrictions thereof, if any, all as shall be
stated in a Directors' Resolution, and the shares of Preferred Stock or any
series thereof may have full or limited voting powers, or be without voting
powers, all as shall be stated in a Directors' Resolution. Except where
otherwise set forth in the Directors' Resolution providing for the issuance of
any series of Preferred Stock, the number of shares comprising such series may
be increased or decreased (but not below the number of shares then outstanding)
from time to time by like action of the Board of Directors. The shares of
Preferred Stock of any one series shall be identical with the other shares in
the same series in all respects except as to the dates from and after which
dividends thereon shall cumulate, if cumulative.

B. REACQUIRED SHARES OF PREFERRED STOCK. Shares of any series of any
Preferred Stock that have been redeemed (whether through the operation of a
sinking fund or otherwise), purchased by the Corporation, or which, if
convertible or exchangeable, have been converted into, or exchanged for, shares
of stock of any other class or classes or any evidences of indebtedness shall
have the status of authorized and unissued shares of Preferred Stock and may be
reissued as a part of the series of which they were originally a part or may be
reclassified and reissued as part of a new series of Preferred Stock or as part
of any other series of Preferred Stock, all subject to the conditions or
restrictions on issuance set forth in the Directors' Resolution providing for
the issuance of any series of Preferred Stock and to any filing required by law.

C. INCREASE IN AUTHORIZED PREFERRED STOCK. The number of authorized
shares of Preferred Stock may be increased or decreased by the affirmative vote
of the holders of a majority of the stock of the Corporation entitled to vote
without the separate vote of holders of Preferred Stock as a class.

2
<PAGE>
ARTICLE V

EXISTENCE

The existence of the Corporation is to be perpetual.

ARTICLE VI

NO PREEMPTIVE RIGHTS

No stockholder shall be entitled, as a matter of right, to subscribe
for or acquire additional, unissued or treasury shares of any class of capital
stock of the Corporation whether now or hereafter authorized, or any bonds,
debentures or other securities convertible into, or carrying a right to
subscribe to or acquire such shares, but any shares or other securities
convertible into, or carrying a right to subscribe to or acquire such shares may
be issued or disposed of by the Board of Directors to such persons and on such
terms as in its discretion it shall deem advisable.

ARTICLE VII

NO CUMULATIVE VOTING

At each election of directors, every stockholder entitled to vote at
such election shall have the right to vote in person or by proxy the number of
shares owned by him for as many persons as there are directors to be elected and
for whose election he has a right to vote. No stockholder shall have the right
to cumulate his votes in any election of directors.

ARTICLE VIII

NO STOCKHOLDER ACTION WITHOUT A MEETING

Except as otherwise required by law, special meetings of the
stockholders of the Corporation may be called only by the Chairman of the Board,
the Chief Executive Officer, the President, the Board of Directors by the
written order of a majority of the entire Board of Directors, or by such other
persons as may be set forth in the Bylaws of the Corporation (the "Bylaws");
PROVIDED, HOWEVER that from and after the first date as of which the Corporation
has a class or series of capital stock registered under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), any action required or permitted
to be taken by the stockholders of the Corporation must be effected at an annual
or special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders, and a special meeting of
stockholders of the Corporation may be called only by the Chairman of the Board,
the Chief Executive Officer, the President or the

3
<PAGE>
Board of Directors by the written order of a majority of the entire Board of
Directors, and not by the stockholders except as otherwise provided by law or
the Bylaws.

ARTICLE IX

BOARD OF DIRECTORS

The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. In addition to the authority and
powers conferred upon the Board of Directors by the DGCL or by the other
provisions of this Certificate of Incorporation (this "Certificate of
Incorporation"), the Board of Directors is hereby authorized and empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject to the provisions of the DGCL, this Certificate
of Incorporation and the Bylaws; PROVIDED, HOWEVER, that no Bylaws hereafter
adopted by the stockholders of the Corporation, or any amendments thereto, shall
invalidate any prior act of the Board of Directors that would have been valid if
such Bylaws or amendment had not been adopted.

A. NUMBER, ELECTION AND TERMS OF DIRECTORS. The number of directors
which shall constitute the whole Board of Directors shall be fixed from time to
time by a majority of the directors then in office and shall be divided into
three classes: Class I, Class II and Class III; PROVIDED, HOWEVER, that from and
after the first date as of which the Corporation has a class or series of
capital stock registered under the Exchange Act, the number of directors which
shall constitute the whole Board of Directors shall be not less than three. Each
director shall serve for a term ending on the third annual meeting following the
annual meeting at which such director was elected; PROVIDED, HOWEVER, that the
directors first elected to Class I shall serve for a term expiring at the annual
meeting next following the end of the calendar year 1997, the directors first
elected to Class II shall serve for a term expiring at the annual meeting next
following the end of the calendar year 1998, and the directors first elected to
Class III shall serve for a term expiring at the annual meeting next following
the end of the calendar year 1999. Each director shall hold office until the
annual meeting at which such director's term expires and, the foregoing
notwithstanding, shall serve until his successor shall have been duly elected
and qualified or until his earlier death, resignation or removal.

At such annual election, the directors chosen to succeed those whose
terms then expire shall be of the same class as the directors they succeed,
unless, by reason of any intervening changes in the authorized number of
directors, the Board of Directors shall have designated one or more
directorships whose terms then expires as directorships of another class in
order to more nearly achieve equality of number of directors among the classes.

In the event of any changes in the authorized number of directors, each
director then continuing to serve shall nevertheless continue as a director of
the class of which he is a member until the expiration of his current term, or
his prior death, resignation or removal. The Board of Directors shall specify
the class to which a newly created directorship shall be allocated.

4
<PAGE>
Election of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.

B. REMOVAL OF DIRECTORS. No director of the Corporation shall be
removed from office as a director by vote or other action of the stockholders or
otherwise except for cause, and then only by the affirmative vote of the holders
of at least a majority of the voting power of all outstanding shares of capital
stock of the Corporation generally entitled to vote in the election of
directors, voting together as a single class. Except as may otherwise be
provided by law, cause of removal of a director shall be deemed to exist only
if: (i) the director whose removal is proposed has been convicted, or where a
director is granted immunity to testify where another has been convicted, of a
felony by a court of competent jurisdiction and such conviction is no longer
subject to direct appeal; (ii) such director has been found by the affirmative
vote of a majority of the entire Board of Directors at any regular or special
meeting of the Board of Directors called for that purpose or by a court of
competent jurisdiction to have been grossly negligent or guilty of misconduct in
the performance of his duties to the Corporation in a matter of substantial
importance to the Corporation; or (iii) such director has been adjudicated by a
court of competent jurisdiction to be mentally incompetent, which mental
incompetency directly affects his ability as a director of the Corporation.

C. VACANCIES. Newly created directorships resulting from any increase
in the number of directors and any vacancies on the Board of Directors resulting
from death, resignation, removal or other cause shall be filled by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified or until his earlier death, resignation or removal.
No decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.

ARTICLE X

INDEMNIFICATION

A. MANDATORY INDEMNIFICATION. Each person who at any time is or was a
director or officer of the Corporation, and is threatened to be or is made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative or investigative (a
"Proceeding"), by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, member,
employee, trustee, agent or similar functionary of another domestic or foreign
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other for-profit or non-profit enterprise, whether the basis of
a Proceeding is an alleged action in such person's official capacity or in
another capacity while holding such office, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the DGCL, or any
other applicable law as may from time to time be in effect (but, in the case of
any

5
<PAGE>
such amendment or enactment, only to the extent that such amendment or law
permits the Corporation to provide broader indemnification rights than such law
prior to such amendment or enactment permitted the Corporation to provide),
against all expense, liability and loss (including, without limitation, court
costs and attorneys' fees, judgments, fines, excise taxes or penalties, and
amounts paid or to be paid in settlement) actually and reasonably incurred or
suffered by such person in connection with a Proceeding, and such
indemnification shall continue as to a person who has ceased to be a director or
officer of the Corporation or a director, officer, partner, venturer,
proprietor, member, employee, trustee, agent or similar functionary of another
domestic or foreign corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other for-profit or non-profit
enterprise, and shall inure to the benefit of such person's heirs, executors and
administrators. The Corporation's obligations under this Section A include, but
are not limited to, the convening of any meeting, and the consideration of any
matter thereby, required by statute in order to determine the eligibility of any
person for indemnification.

B. PREPAYMENT OF EXPENSES. Expenses incurred by a director or officer
of the Corporation in defending a Proceeding shall be paid by the Corporation in
advance of the final disposition of such Proceeding to the fullest extent
permitted by, and only in compliance with, the DGCL or any other applicable laws
as may from time to time be in effect, including, without limitation, any
provision of the DGCL which requires, as a condition precedent to such expense
advancement, the delivery to the Corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under Section A of this Article X or otherwise. Repayments of all
amounts so advanced shall be upon such terms and conditions, if any, as the
Corporation's Board of Directors deems appropriate.

C. VESTING. The Corporation's obligation to indemnify and to prepay
expenses under Sections A and B of this Article X shall arise, and all rights
granted to the Corporation's directors and officers hereunder shall vest, at the
time of the occurrence of the transaction or event to which a Proceeding
relates, or at the time that the action or conduct to which such Proceeding
relates was first taken or engaged in (or omitted to be taken or engaged in),
regardless of when such Proceeding is first threatened, commenced or completed.
Notwithstanding any other provision of this Certificate of Incorporation or the
Bylaws of the Corporation, no action taken by the Corporation, either by
amendment of this Certificate of Incorporation or the Bylaws of the Corporation
or otherwise, shall diminish or adversely affect any rights to indemnification
or prepayment of expenses granted under Sections A and B of this Article X which
shall have become vested as aforesaid prior to the date that such amendment or
other corporate action is effective or taken, whichever is later.

D. ENFORCEMENT. If a claim under Section A or Section B or both
Sections A and B of this Article X is not paid in full by the Corporation within
thirty (30) days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring suit in a court of competent
jurisdiction against the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall also be entitled to
be paid the expense of prosecuting such claim. It shall be a defense to any such
suit (other than a suit brought to enforce a claim for expenses incurred in
defending any Proceeding in advance of its final disposition where

6
<PAGE>
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the DGCL or other applicable law to indemnify the claimant
for the amount claimed, but the burden of proving such defense shall be on the
Corporation. The failure of the Corporation (including its Board of Directors,
independent legal counsel, or stockholders) to have made a determination prior
to the commencement of such suit as to whether indemnification is proper in the
circumstances based upon the applicable standard of conduct set forth in the
DGCL or other applicable law shall neither be a defense to the action nor create
a presumption that the claimant has not met the applicable standard of conduct.
The termination of any Proceeding by judgment, order, settlement, conviction, or
upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal Proceeding, had reasonable cause
to believe that his conduct was unlawful.

E. NONEXCLUSIVE. The indemnification provided by this Article X shall
not be deemed exclusive of any other rights to which a person seeking
indemnification may be entitled under any statute, bylaw, other provisions of
this Certificate of Incorporation, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.

F. PERMISSIVE INDEMNIFICATION. The rights to indemnification and
prepayment of expenses which are conferred to the Corporation's directors and
officers by Sections A and B of this Article X may be conferred upon any
employee or agent of the Corporation if, and to the extent, authorized by the
Board of Directors.

G. INSURANCE. The Corporation shall have power to purchase and maintain
insurance, at its expense, on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, member, employee, trustee, agent or similar functionary of another
domestic or foreign corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other for-profit or non-profit
enterprise against any expense, liability or loss asserted against such person
and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the
provisions of this Article X, the Corporation's Bylaws, the DGCL or other
applicable law.

H. IMPLEMENTING ARRANGEMENTS. Without limiting the power of the
Corporation to procure or maintain insurance or other arrangement on behalf of
any of the persons as described in Section G of this Article X, the Corporation
may, for the benefit of persons eligible for indemnification by the Corporation,
(i) create a trust fund, (ii) establish any form of self-insurance, (iii) secure
its indemnity obligation by grant of a security interest or other lien on the
assets of the Corporation, or (iv) establish a letter of credit, guaranty or
surety arrangement.

7
<PAGE>
ARTICLE XI

LIMITED DIRECTOR LIABILITY

No director of the Corporation shall be personally liable to the
Corporation or to its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this Article XI shall not eliminate or limit
the liability of a director: (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, as it may hereafter be amended from
time to time, for any unlawful payment of a dividend or unlawful stock purchase
or redemption, or (iv) for any transaction from which the director derived an
improper personal benefit.

If the DGCL is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the DGCL, as so amended. No amendment to or repeal of this
Article XI will apply to, or have any effect on, the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of the director occurring prior to such amendment or repeal.

ARTICLE XII

BYLAWS

The Board of Directors is expressly authorized to adopt, amend or
repeal the Bylaws of the Corporation, or adopt new Bylaws, without any action on
the part of the stockholders, except as may be otherwise provided by applicable
law or the Bylaws of the Corporation.

ARTICLE XIII

ARRANGEMENTS WITH CREDITORS

Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for the Corporation under
Section 291 of Title 8 of the Delaware Code, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If the majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders, of the Corporation, as the case may

8
<PAGE>
be, agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.

ARTICLE XIV

INITIAL BOARD OF DIRECTORS

The name and mailing address of the sole initial member of the Board of
Directors is:

William C. Klintworth, Jr.
2078 Prospector Avenue
Park City, Utah 84060

ARTICLE XV

INCORPORATOR

The name and mailing address of the incorporator, the powers and
authority of whom shall cease upon the filing of this Certificate of
Incorporation, is:

Fred S. Stovall, Esq.
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002

I, the undersigned, being the incorporator, for the purpose of forming
a corporation pursuant to the DGCL, do make this Certificate of Incorporation,
hereby declaring under the penalties of perjury that this is my act and deed and
that the facts stated herein are true, and accordingly have executed this
Certificate of Incorporation on April 7, 1997.

/S/ FRED S. STOVALL
Fred S. Stovall, Esq.

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<PAGE>
CERTIFICATE OF AMENDMENT

CERTIFICATE OF INCORPORATION

HEALTHTECH DELIVERY, INC.

Healthtech Delivery, Inc., a Delaware corporation (the "Corporation"),
does hereby certify:

ARTICLE ONE

That resolutions, which set forth proposed amendments to the
Corporation's Certificate of Incorporation (the "Certificate") and declared such
amendments advisable and in the best interest of the Corporation were duly
adopted by the Corporation's Board of Directors, pursuant to Section 141 of the
Delaware General Corporation Law (the "DGCL"), and by all the stockholders of
the Corporation, pursuant to Section 228 of the DGCL. The resolutions regarding
the proposed amendments to the Certificate set forth below: (i) change the name
of the Corporation from "Healthtech Delivery, Inc." to "AVIAN Healthcare
Corporation;" (ii) increase the number of votes that must be cast to approve the
removal of a director for cause from a majority to two-thirds of the total
voting power of all shares of outstanding capital stock; and (iii) change the
initial Conversion Factor of the Series A Preferred Stock of the Corporation
from "1" to "0.9090909." The resolutions are as follows:

WHEREAS, the Board of Directors and the stockholders of the Corporation
deem it advisable and in the best interests of the Corporation to amend the
Certificate of Incorporation (the "Certificate") to: (i) change the name of the
Corporation from "Healthtech Delivery, Inc." to "AVIAN Healthcare Corporation;"
(ii) increase the number of votes that must be cast by the stockholders of the
Corporation to approve the removal of a director for cause from a majority to
two-thirds of the total voting power of all shares of outstanding capital stock;
and (iii) change the initial Conversion Factor of the Series A Preferred Stock
of the Corporation from "1" to "0.9090909."

NOW, THEREFORE, BE IT RESOLVED, that Article I of the Certificate is
hereby amended to read as follows in its entirety:

The name of the corporation is AVIAN Healthcare Corporation
(the "Corporation").

RESOLVED FURTHER, that the first sentence of Section IX.B is hereby
amended to read as follows in its entirety:
<PAGE>
No director of the Corporation shall be removed from office as a
director by vote or other action of the stockholders or otherwise
except for cause, and then only by the affirmative vote of the holders
of at least two-thirds of the voting power of all outstanding shares of
capital stock of the Corporation generally entitled to vote in the
election of directors, voting together as a single class.

RESOLVED FURTHER, that the last sentence of Subsection 3(b) of the
Certificate of Designation, Preferences, Rights and Limitations of the Series A
Preferred Stock of the Corporation is hereby amended to read as follows in its
entirety:

For the purposes of this Section 3, the term "Conversion Factor"
initially shall mean 0.9090909.

RESOLVED FURTHER, that any duly elected officer of the Corporation is
hereby authorized and directed to execute and file a Certificate of Amendment to
the Certificate with the Secretary of State of Delaware which amends the
Certificate as set forth in the foregoing resolutions.

ARTICLE TWO

That the capital of the Corporation shall not be reduced by reason of
the foregoing amendment.

IN WITNESS WHEREOF, the undersigned, being a duly elected officer of
the Corporation, hereby declares and certifies that the facts herein stated are
true and accordingly, executes this instrument as of May 15, 1997.

HEALTHTECH DELIVERY, INC.

By: /S/ WILLIAM C. KLINTWORTH
William C. Klintworth,
President and Chief Executive
Officer

2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AVIAN HEALTHCARE CORPORATION

AVIAN Healthcare Corporation, a Delaware corporation (the
"Corporation"), does hereby certify:

ARTICLE ONE

That resolutions which set forth proposed amendments to the
Corporation's Certificate of Incorporation, as heretofore amended (the
"Certificate"), and declared such amendments advisable and in the best interest
of the Corporation, were duly adopted by the Corporation's Board of Directors,
pursuant to Section 141 of the Delaware General Corporation Law (the "DGCL"),
and by all the stockholders of the Corporation, pursuant to Sections 228 and 242
of the DGCL. The resolutions regarding the proposed amendments to the
Certificate (i) change the name of the Corporation to TRIAD Medical Inc.; (ii)
provide for the split of each outstanding share of Common Stock, par value $.001
per share (the "Common Stock"), of the Corporation into 1.3379145 shares of the
Common Stock; (iii) delete the requirement that shares of Series A Preferred
Stock of the Corporation be held for one year prior to conversion into shares of
the Common Stock; (iv) change the initial Conversion Factor of the Series A
Preferred Stock of the Corporation from "0.9090909" to "0.667834635"; and (v)
amend the provision regarding adjustments to the conversion factor applicable to
the Series A Preferred Stock of the Corporation to exclude the stock split
contemplated by clause (ii) above, said resolutions reading as follows:

NOW, THEREFORE, BE IT RESOLVED, that Article I of the Certificate is
hereby amended to read as follows in its entirety:

"The name of the corporation is TRIAD Medical Inc. (the
"Corporation")."

RESOLVED, FURTHER, that Article IV of the Certificate is hereby amended
by the addition of a new second paragraph which will read in its entirety as
follows:

"Each of the shares of the Common Stock outstanding at 12:01
a.m., Houston, Texas time, on September 9, 1997 shall be split into
1.3379145 shares of the Common Stock without any further action by the
stockholders or board of directors of the Corporation. No fractional
shares shall be issued, and the number of shares to be issued to each
stockholder shall be rounded up or down to the nearest whole number."

RESOLVED, FURTHER, that Section 3(a) of the Certificate of Designation,
Preferences, Rights and Limitations of the Series A Preferred Stock of the
Corporation is hereby amended to read in its entirety as follows:
<PAGE>
"(a) OPTIONAL CONVERSION. Subject to and upon compliance with
the provisions of this Section 3, the holder of any shares of Series A
Preferred Stock shall have the right at any time at such holder's
option, without the payment of any additional consideration therefor,
to convert any shares of Series A Preferred Stock into fully paid and
nonassessable shares of Common Stock at the Conversion Ratio (as
defined in Section 3(b) below) in effect on any Conversion Date (as
defined in Section 3(c) below) upon the terms hereinafter set forth."

RESOLVED, FURTHER, that the last sentence of Subsection 3(b) of the
Certificate of Designation, Preferences, Rights and Limitations of the Series A
Preferred Stock of the Corporation is hereby amended to read in its entirety as
follows:

"For the purposes of this Section 3, the term 'Conversion Factor'
initially shall mean 0.667834635."

RESOLVED, FURTHER, that Section 3(e)(i) of the Certificate of
Designation, Preferences, Rights and Limitations of the Series A Preferred Stock
of the Corporation is hereby amended to read in its entirety as follows:

"(i) STOCK DIVIDENDS, SUBDIVISIONS, RECLASSIFICATIONS OR
COMBINATIONS. If the Corporation shall (x) declare a dividend or make a
distribution on its Common Stock in shares of its Common Stock, (y)
subdivide or reclassify the outstanding shares of Common Stock into a
greater number of shares of Common Stock or (z) combine or reclassify
the outstanding shares of Common Stock into a smaller number of shares
of Common Stock, the Conversion Factor in effect at the time of the
record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be adjusted to
that number determined by multiplying the Conversion Factor in effect
by a fraction (x) the numerator of which shall be the total number of
issued and outstanding shares of Common Stock immediately prior to such
dividend, distribution, subdivision, combination or reclassification
and (y) the denominator of which shall be the total number of issued
and outstanding shares of Common Stock immediately after such dividend,
distribution, subdivision, combination or reclassification; provided,
however, that no such adjustment shall be made pursuant to this Section
3(e)(i) with respect to the stock split contemplated by the second
paragraph of Article IV of the Certificate. Successive adjustments in
the Conversion Factor shall be made whenever any event specified above
shall occur."

RESOLVED, FURTHER, that any duly elected officer of the Corporation is
hereby authorized and directed to execute and file a Certificate of Amendment to
the Certificate with the Secretary of State of Delaware which amends the
Certificate as set forth in the foregoing resolutions.

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<PAGE>
ARTICLE TWO

That the capital of the Corporation shall not be reduced by reason of
the foregoing amendment.

AVIAN HEALTHCARE CORPORATION

By: /S/ WILLIAM C. KLINTWORTH
William C. Klintworth
President and Chief
Executive Officer

3
<PAGE>
CORRECTED
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TRIAD MEDICAL INC.

TRIAD Medical Inc., a Delaware corporation (the "Corporation"), does
hereby certify that a Certificate of Amendment to the Certificate of
Incorporation of the Corporation was filed with the Secretary of State of
Delaware on September 5, 1997 (the "Incorrect Certificate"), and that the
Incorrect Certificate requires correction as permitted by Section 103(f) of the
General Corporation Law of the State of Delaware.

The inaccuracy or defect of the Incorrect Certificate to be corrected
is the effective date and time (the "Effective Time") of a subdivision of the
outstanding shares of common stock of the Corporation, par value $0.001 per
share (the "Common Stock"), was set forth in the second paragraph of Article IV
of the Certificate of Incorporation, as heretofore amended (the "Certificate"),
as "12:01 a.m., Houston, Texas time, on September 9, 1997." The Effective Time
is hereby corrected to read "5:00 p.m., Houston, Texas time, on September 5,
1997."

The entire text of the Certificate of Amendment, as corrected, is set
forth below:

ARTICLE ONE

NOW, THEREFORE, BE IT RESOLVED, that Article I of the Certificate is
hereby amended to read as follows in its entirety:

"The name of the corporation is TRIAD Medical Inc. (the
"Corporation")."
<PAGE>
RESOLVED, FURTHER, that Article IV of the Certificate is hereby amended
by the addition of a new second paragraph which will read in its entirety as
follows:

"Each of the shares of the Common Stock outstanding at 5:00
p.m., Houston, Texas time, on September 5, 1997 shall be split into
1.3379145 shares of the Common Stock without any further action by the
stockholders or board of directors of the Corporation. No fractional
shares shall be issued, and the number of shares to be issued to each
stockholder shall be rounded up or down to the nearest whole number."

"(a) OPTIONAL CONVERSION. Subject to and upon compliance with
the provisions of this Section 3, the holder of any shares of Series A
Preferred Stock shall have the right at any time at such holder's
option, without the payment of any additional consideration therefor,
to convert any shares of Series A Preferred Stock into fully paid and
nonassessable shares of Common Stock at the Conversion Ratio (as
defined in Section 3(b) below) in effect on any Conversion Date (as
defined in Section 3(c) below) upon the terms hereinafter set forth."

"For the purposes of this Section 3, the term 'Conversion Factor'
initially shall mean 0.667834635."

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<PAGE>
combination or reclassification and (y) the denominator of which shall
be the total number of issued and outstanding shares of Common Stock
immediately after such dividend, distribution, subdivision, combination
or reclassification; provided, however, that no such adjustment shall
be made pursuant to this Section 3(e)(i) with respect to the stock
split contemplated by the second paragraph of Article IV of the
Certificate. Successive adjustments in the Conversion Factor shall be
made whenever any event specified above shall occur."

3
<PAGE>
ARTICLE TWO

That the capital of the Corporation shall not be reduced by reason of
the foregoing amendment.

AVIAN HEALTHCARE CORPORATION

By: /S/ WILLIAM C. KLINTWORTH
William C. Klintworth
President and Chief
Executive Officer

EXHIBIT 3.2

BYLAWS
OF
TRIAD MEDICAL INC.

ARTICLE I
OFFICES

Section 1. PRINCIPAL OFFICE. The principal office of TRIAD Medical Inc.
(the "Corporation") will be in Park City, Utah. The Board of Directors of the
Corporation (the "Board of Directors") may elect to relocate the principal
office of the Corporation from time to time as it shall deem necessary and
proper.

Section 2. OTHER OFFICES. The Corporation may also have offices at such
other places within or without the State of Delaware as the Board of Directors
may from time to time determine or the business of the Corporation may require.

ARTICLE II
MEETINGS OF STOCKHOLDERS

Section 1. PLACE OF MEETINGS. All meetings of the stockholders will be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as may be determined by the Board of Directors
and stated in the notice of the meeting or in a duly executed waiver of notice
thereof.

Section 2. ANNUAL MEETINGS. An annual meeting of Stockholders shall be
held for the election of directors at such date, time and place, either within
or without the State of Delaware, as may be designated by resolution of the
Board of Directors from time to time; provided that each successive annual
meeting shall be held on a date within 13 months after the date of the preceding
annual meeting. Only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting given by or at
the direction of the Board of Directors, (b) otherwise properly brought before
the meeting or at the direction of the Board of Directors, or (c) otherwise
properly brought before the meeting by a stockholder of the Corporation. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, no
less than 60 days nor more than 180 days prior to the anniversary date of the
immediately preceding annual meeting; PROVIDED, HOWEVER, that in the event that
the date of the annual meeting is changed by more than 30 days from such
anniversary date, notice by the stockholder to be timely must be received not
later than the close of business on the tenth day following the earlier of the
date on which a written statement setting forth the date of such meeting was
mailed to stockholders or the date on which it

1
<PAGE>
is first disclosed to the public. A stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the annual
meeting: (a) a brief description of the business desired to be brought before
the annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such proposal, (c) the class
and number of shares of the Corporation that are beneficially owned by the
stockholder, and (d) any material interest of the stockholder in such business.
In addition, if the stockholder's ownership of shares of the Corporation, as set
forth in the notice, is solely beneficial, documentary evidence of such
ownership must accompany the notice. Notwithstanding anything else in these
Bylaws to the contrary, no business shall be conducted at an annual meeting
except in accordance with the procedures set forth in this Section 2. The
presiding officer of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that any business that was not properly brought
before the meeting is out of order and shall not be transacted at the meeting.

Section 3. NOTICE OF ANNUAL MEETING. Written or printed notice of the
annual meeting, stating the place, day and hour thereof, will be served upon or
mailed to each stockholder entitled to vote thereat at such address as appears
on the books of the Corporation, not less than ten days nor more than sixty days
before the date of the meeting.

Section 4. SPECIAL MEETING. Except as otherwise required by law or the
Certificate of Incorporation, special meetings of the stockholders of the
Corporation may be called only by the Chairman of the Board of Directors (the
"Chairman of the Board"), the Chief Executive Officer, the President, the Board
of Directors by the written order of a majority of the entire Board of Directors
or upon the written request of stockholders owning not less than two-thirds of
the shares of capital stock of the Corporation issued, outstanding and entitled
to vote at such meeting delivered to the President or Secretary that states the
purpose or purposes of the proposed meeting.

Section 5. NOTICE OF SPECIAL MEETING. Written notice of a special
meeting of stockholders, stating the place, day and hour and purpose or purposes
thereof, will be served upon or mailed to each stockholder entitled to vote
thereat at such address as appears on the books of the Corporation, not less
than ten days nor more than sixty days before the date of the meeting.

Section 6. BUSINESS AT SPECIAL MEETING. Business transacted at all
special meetings will be confined to the purpose or purposes stated in the
notice.

Section 7. STOCKHOLDER LIST. At least ten days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, will be prepared by the
Secretary. Such list, for a period of ten days prior to such meeting, will be
kept on file at the registered office of the Corporation and will be subject to
inspection by any stockholder at any time during usual business hours. Such list
will also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any stockholder during the whole time of
the meeting.

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Section 8. QUORUM. The holders of at least one-half of the shares of
capital stock issued and outstanding and entitled to vote thereat, represented
in person or by proxy, will constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
law, the Certificate of Incorporation or these Bylaws. If, however, such quorum
is not present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, represented in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
any such adjourned meeting at which a quorum is represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.

Section 9. VOTING. Unless otherwise provided by law, the Certificate of
Incorporation or these Bylaws, each stockholder will have one vote for each
share of stock having voting power, registered in his name on the books of the
Corporation. When a quorum is present at any meeting, the vote of the holders of
a majority of the shares having voting power represented in person or by proxy
will decide any question brought before such meeting, unless the question is one
upon which, by express provision of law, the Certificate of Incorporation or
these Bylaws, a different vote is required, in which case such express provision
will govern and control the decision of such question. In the case of a matter
submitted for a vote of the stockholders as to which a stockholder approval
requirement is applicable under the stockholder approval policy of any stock
exchange or quotation system on which the capital stock of the Corporation is
traded or quoted, the requirements under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any provisions of the Internal Revenue Code, in
each case for which no higher voting requirement is specified by the DGCL, the
Certificate of Incorporation or these Bylaws, the vote required for approval
shall be the requisite vote specified in such stockholder approval policy, the
Exchange Act or Internal Revenue Code provision, as the case may be (or the
highest such requirement if more than one is applicable). Unless otherwise
provided in the Certificate of Incorporation or these Bylaws in accordance with
the DGCL, directors shall be elected by a plurality of the votes cast by the
holders of outstanding shares of capital stock of the Corporation entitled to
vote in the election of directors at a meeting of stockholders at which a quorum
is present.

Section 10. PROXIES. At any meeting of the stockholders every
stockholder having the right to vote will be entitled to vote in person, or by
proxy appointed by an instrument in writing subscribed by such stockholder or
his duly authorized attorney in fact and bearing a date not more than eleven
months prior to said meeting.

ARTICLE III
BOARD OF DIRECTORS

Section 1. POWERS. The business and affairs of the Corporation will be
managed by a Board of Directors. The Board of Directors may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
law, by the Certificate of Incorporation or these Bylaws directed or required to
be exercised or done by the stockholders.

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Section 2. NUMBER OF DIRECTORS. The number of directors which
constitute the whole Board of Directors will be no more than twelve, as such
number shall be determined by resolution of the Board of Directors from time to
time; PROVIDED, HOWEVER, that no decrease in the number of directors shall have
the effect of shortening the term of any incumbent director; PROVIDED FURTHER,
HOWEVER, that from and after the first date as of which the Corporation has a
class or series of capital stock registered under the Exchange Act, the number
of directors which shall constitute the whole Board of Directors shall be not
less than three.

Section 3. NOMINATION. Only persons who are nominated in accordance
with the procedures set forth in these Bylaws shall be eligible to serve as
directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders (a) by or at the direction
of the Board of Directors or (b) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in this
Section 3, who shall be entitled to vote for the election of directors at the
meeting and who complies with the notice procedures set forth in this Section 3.

Nominations by stockholders shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation (a) in the case of an annual meeting, not less than
60 days nor more than 180 days prior to the first anniversary of the preceding
year's annual meeting; PROVIDED, HOWEVER, that in the event that the date of the
annual meeting is changed by more than 30 days from such anniversary date,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the earlier of the date on which a
written statement setting forth the date of such meeting was mailed to
stockholders or the date on which it is first disclosed to the public, and (b)
in the case of a special meeting at which directors are to be elected, not later
than the close of business on the tenth day following the earlier of the date on
which a written statement setting forth the date of such meeting was mailed to
stockholders or the date on which it is first disclosed to the public. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) as to the stockholder giving the notice
(i) the name and address, as they appear on the Corporation's books, of such
stockholder and (ii) the class and number of shares of the Corporation which are
beneficially owned by such stockholder and which are owned of record by such
stockholder; and (c) as to the beneficial owner, if any, on whose behalf the
nomination is made, (i) the name and address of such person and (ii) the class
and number of shares of the Corporation which are beneficially owned by such
person. At the request of the Board of Directors, any person nominated by the
Board of Directors for election as a director shall furnish to the Secretary of
the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee.

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The presiding officer of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this Section 3 and he shall so
declare to the meeting, and the defective nomination shall be disregarded.

Section 4. ELECTION AND TERM. Subject to the requirements of the
Certificate of Incorporation, the directors of each class shall be elected at
the annual meeting of stockholders, except as provided in Section 5, and each
director elected shall hold office until the expiration of his term and until
his successor shall be elected and shall qualify. Directors need not be
residents of Delaware or stockholders of the Corporation.

Section 5. VACANCIES. If any vacancy occurs in the Board of Directors
caused by death, resignation, retirement, disqualification, or removal from
office of any director, or otherwise, or if any new directorship is created by
an increase in the authorized number of directors, a majority of the directors
then in office, though less than a quorum, or a sole remaining director, may
choose a successor or fill the newly created directorship; and a director so
chosen shall hold office until his term expires and until his successor shall be
duly elected and shall qualify, unless sooner displaced.

Section 6. RESIGNATION; REMOVAL. Any director may resign at any time.
Unless otherwise prescribed by law or the Certificate of Incorporation, a
director may be removed from office only for cause and then only by the
affirmative vote of the holders of at least a majority of the voting power of
all outstanding shares of capital stock of the Corporation generally entitled to
vote in the election of directors, voting together as a single class. Except as
may otherwise be provided by law, cause of removal of a director shall be deemed
to exist only if: (i) the director whose removal is proposed has been convicted,
or where a director is granted immunity to testify where another has been
convicted, of a felony by a court of competent jurisdiction and such conviction
is no longer subject to direct appeal; (ii) such director has been found by the
affirmative vote of a majority of the entire Board of Directors at any regular
or special meeting of the Board of Directors called for that purpose or by a
court of competent jurisdiction to have been grossly negligent or guilty of
misconduct in the performance of his duties to the Corporation in a matter of
substantial importance to the Corporation; or (iii) such director has been
adjudicated by a court of competent jurisdiction to be mentally incompetent,
which mental incompetency directly affects his ability as a director of the
Corporation.

ARTICLE IV
MEETINGS OF THE BOARD

Section 1. FIRST MEETING. The Board of Directors may hold its first
meeting for the purpose of organization and the transaction of business, if a
quorum is present, immediately after and at the same place as the annual meeting
of the stockholders, and no notice of such meeting shall be necessary; or the
Board of Directors may meet at such place and time as is fixed by the consent in
writing of all the directors.

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Section 2. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held at such time and place either within or without the State of
Delaware and with such notice or without notice as is determined from time to
time by the Board of Directors.

Section 3. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the President or the Chairman of the Board on one days notice
to each director, either personally or by mail or telegram. Special meetings
will be called by the President or the Chairman of the Board in like manner and
on like notice upon the written request of a majority of the Board of Directors.

Section 4. QUORUM AND VOTING. At all meetings of the Board of
Directors, a majority of the directors will be necessary and sufficient to
constitute a quorum for the transaction of business; and the act of a majority
of the directors present at any meeting at which there is a quorum will be the
act of the Board of Directors, except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these Bylaws. If a quorum is not
present at any meeting of directors, the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.

Section 5. TELEPHONE MEETINGS. The Board of Directors may hold meetings
in any manner permitted by law. Without limitation, at any meeting of the Board
of Directors, a director may attend by telephone, radio, television, interactive
media or similar means of communication by means of which all participants can
hear each other which permits him to participate in the meeting, and a director
so attending will be deemed present at the meeting for all purposes including
the determination of whether a quorum is present.

Section 6. ACTION BY WRITTEN CONSENT. Any action required or permitted
to be taken by the Board of Directors or any committee of the Board of Directors
under applicable statutory provisions, the Certificate of Incorporation, or
these Bylaws, may be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all the members of the Board of
Directors or such committee, as the case may be, and filed with the minutes of
the meetings of the Board of Directors or such committee, as the case may be.

ARTICLE V
COMMITTEES

Section 1. COMMITTEES OF DIRECTORS. The Board of Directors may
establish an Audit Committee and a Compensation Committee, and may establish an
Executive Committee and such other committees as may be established by
resolution of a majority of the whole Board of Directors. Each of such
committees shall consist of one or more members of the Board of Directors and
shall have a chairman that is selected by the Board of Directors. Members of
committees of the Board of Directors shall be elected annually by vote of a
majority of the Board of Directors. The Chief Executive Officer shall be an
ex-officio nonvoting member of each committee (except the Audit and Compensation
Committees) of which he is not an official voting member. With respect to any
committee (including the Audit and Compensation Committees) of which the Chief
Executive

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Officer is not an official voting member, the Chief Executive Officer shall be
given notice of all committee meetings at the same time notice is given to
committee members, and the Chief Executive Officer shall be afforded the
opportunity to speak at the committee meeting. Presence of a majority of the
committee members (not counting any ex-officio nonvoting members) shall
constitute a quorum. Committees may act by majority vote of the voting members
present at a meeting. Each of such committees shall have and may exercise such
of the powers of the Board of Directors in the management of the business and
affairs of the Corporation as may be provided in these Bylaws or by resolution
of the Board of Directors. Each of such committees may authorize the seal of the
Corporation to be affixed to any document or instrument. The Board of Directors
may designate one or more directors as alternate members of any such committee,
who may replace any absent or disqualified member at any meeting of such
committee. Meetings of committees may be called by the chairman of the committee
by written, telegraphic or telephonic notice to all members of the committee and
the Chief Executive Officer and shall be at such time and place as shall be
stated in the notice of such meeting. Any member of a committee may participate
in any meeting by means of conference telephone or similar communications
equipment. In the absence or disqualification of a member of any committee the
chairman of such committee may, if deemed advisable, appoint another member of
the Board of Directors to act at the meeting in the place of the disqualified or
absent member. The chairman of the committee may fix such other rules and
procedures governing conduct of meetings as he shall deem appropriate.

Section 2. EXECUTIVE COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the whole Board of Directors, may designate two or more
directors to constitute an Executive Committee, which committee, to the extent
provided in such resolution, will have and may exercise all of the authority of
the Board of Directors in the business and affairs of the Corporation, and may
have power to authorize the seal of the Corporation to be affixed to all papers
which may require it, except where action by the Board of Directors is specified
by law. The Executive Committee will keep regular minutes of its proceedings and
report the same to the Board of Directors when required.

Section 3. AUDIT COMMITTEE. The Audit Committee shall consist of not
less than two members of the Board of Directors. The Audit Committee shall be
responsible for recommending to the entire Board of Directors engagement and
discharge of independent auditors of the financial statements of the
Corporation, shall review the professional service provided by the independent
auditors, shall review the independence of independent auditors, shall review
with the auditors the plan and results of the auditing engagement, shall
consider the range of audit and non-audit fees, shall review the adequacy of the
Corporation's system of internal audit controls, shall review the results of
procedures for internal auditing and shall consult with the internal auditor of
the Corporation with respect to all aspects of the Corporation's internal
auditing program. In addition, the Audit Committee shall direct and supervise
special investigations as deemed necessary by the Audit Committee.

Section 4. COMPENSATION COMMITTEE. The Compensation Committee shall
consist of not less than two members of the Board of Directors. The Compensation
Committee shall recommend to the Board of Directors the compensation to be paid
to officers and key employees of the

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Corporation and the compensation of the Board of Directors. Except as otherwise
provided in any specific plan adopted by the Board of Directors, the
Compensation Committee shall be responsible for administration of executive
compensation plans, stock option plans and other forms of direct or indirect
compensation of officers and key employees, and each member of the Compensation
Committee shall have the power and authority to execute and bind the Corporation
to such documents, agreements and instruments related to such plans and
compensation as are approved by the Compensation Committee. In the alternative,
the Compensation Committee may authorize any officer of the Corporation to
execute such documents, agreements and instruments on behalf of the Corporation.
In addition, the Compensation Committee shall review levels of pension benefits
and insurance programs for officers and key employees.

Section 5. OTHER COMMITTEES. The Board of Directors may similarly
create other committees for such terms and with such powers and duties as the
Board of Directors deems appropriate except as provided to the contrary by law,
the Certificate of Incorporation, or these Bylaws.

Section 6. ADVISORY DIRECTORS. The Board of Directors may, by majority
vote, appoint one or more advisory directors. Advisory directors shall serve at
the Board of Directors' convenience solely to advise the Board of Directors, and
shall have no formal responsibilities. No advisory director shall be entitled to
vote at meetings of the Board of Directors, nor shall any advisory director be
counted when determining whether there is a quorum at meetings of the Board of
Directors. Advisory directors shall not be, by virtue of their position as
advisory directors, agents of the Corporation, and they shall not have the power
to bind the Corporation.

ARTICLE VI
COMPENSATION OF DIRECTORS

Directors, as such, shall receive such compensation for their services
and such reimbursement of expenses as shall be determined by the Board of
Directors.

ARTICLE VII
NOTICES

Section 1. METHODS OF NOTICE. Whenever any notice is required to be
given to any stockholder or director under the provisions of any law, the
Certificate of Incorporation or these Bylaws, it will not be construed to
require personal notice, but such notice may be given in writing by mail
addressed to such stockholder or director at such address as appears on the
books of the Corporation, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail with postage
thereon prepaid. Notice to directors may also be given by telegram, by
facsimile, by telephone or in person, and notice given by such means shall be
deemed given at the time it is delivered.

Section 2. WAIVER OF NOTICE. Whenever any notice is required to be
given to any stockholder or director under the provisions of any law, the
Certificate of Incorporation or these

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Bylaws, a waiver thereof in writing signed by the person or persons entitled to
said notice, whether before or after the time stated therein, will be deemed
equivalent to the giving of such notice. Attendance at any meeting will
constitute a waiver of notice thereof except as otherwise provided by law.

ARTICLE VIII
OFFICERS

Section 1. EXECUTIVE OFFICERS. The officers of the Corporation will
consist of President, Vice President, Treasurer, and Secretary, each of whom
shall be elected by the Board of Directors. The Board of Directors may also
elect a Chairman of the Board, a Chief Executive Officer, additional vice
presidents, and one or more assistant secretaries and assistant treasurers. Any
two or more offices may be held by the same person.

Section 2. ELECTION AND QUALIFICATION. The Board of Directors at its
first meeting after each annual meeting of stockholders will elect the
President, one or more Vice Presidents, a Secretary and a Treasurer, none of
whom need be a member of the Board of Directors.

Section 3. OTHER OFFICERS AND AGENTS. The Board of Directors may elect
or appoint such other officers, assistant officers and agents as it deems
necessary, who will hold their offices for such terms and shall exercise such
powers and perform such duties as determined from time to time by the Board of
Directors.

Section 4. SALARIES. The salaries of all officers of the Corporation
will be fixed by the Board of Directors except as otherwise directed by the
Board of Directors.

Section 5. TERM, REMOVAL AND VACANCIES. The officers of the Corporation
will hold office until their resignation or their successors are chosen and
qualify. Any officer, agent or member of the Executive Committee elected or
appointed by the Board of Directors may be removed at any time by the Board of
Directors; PROVIDED, HOWEVER, that such removal shall be without prejudice to
the contract rights, if any, of such removed party. If any such office becomes
vacant for any reason, the vacancy will be filled by the Board of Directors.

Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one is
elected, shall preside at meetings of the Board of Directors and stockholders
and shall have such other powers and duties as may from time to time be
prescribed by duly adopted resolutions of the Board of Directors.

Section 7. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, if one
is elected, shall preside at meetings of the Board of Directors and stockholders
if there is no Chairman of the Board, and shall supervise and have overall
responsibility for the business, administration and operations of the
Corporation. In general, he shall perform all duties as from time to time may be
assigned to him by the Board of Directors. He shall from time to time make such
reports of the affairs of the Corporation as the Board of Directors may require.

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Section 8. PRESIDENT. The President shall, subject to the Board of
Directors, have general executive charge, management and control of the
properties and operations of the Corporation in the ordinary course of its
business with all such powers with respect to such responsibilities including
the powers of general manager; and the president shall see that all orders and
resolutions of the Board of Directors are carried into effect. The president
shall have such other powers and duties as may from time to time be prescribed
by duly adopted resolution of the Board of Directors.

Section 9. VICE PRESIDENT. The Vice Presidents in the order determined
by the Board of Directors will, in the absence or disability of the President,
perform the duties and exercise the powers of the President, and will perform
such other duties as the Board of Directors and President may prescribe.

Section 10. SECRETARY. The Secretary will attend all meetings of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose and will
perform like duties for the standing committees when required. He will give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and will perform such other duties as may be
prescribed by the Board of Directors and President. He will keep in safe custody
the seal of the Corporation and, when authorized by the Board of Directors,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an assistant secretary.

Section 11. ASSISTANT SECRETARIES. The assistant secretaries in the
order determined by the Board of Directors will perform, in the absence or
disability of the Secretary, the duties and exercise the powers of the Secretary
and will perform such other duties as the Board of Directors and President may
prescribe.

Section 12. TREASURER. The Treasurer will have the custody of the
corporate funds and securities and will keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and will
deposit all monies and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He will disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and will
render to the Board of Directors and President, whenever they may require it, an
account of all of his transactions as Treasurer and of the financial condition
of the Corporation.

Section 13. ASSISTANT TREASURERS. The Assistant Treasurers in the order
determined by the Board of Directors, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer and will
perform such other duties as the Board of Directors and President may prescribe.

Section 14. OFFICER'S BOND. If required by the Board of Directors, any
officer will give the Corporation a bond (to be renewed as the Board of
Directors may require) in such sum and with such surety or sureties as is
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation,

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retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.

ARTICLE IX
SHARES AND STOCKHOLDERS

Section 1. CERTIFICATES REPRESENTING SHARES. The certificates
representing shares of capital stock of the Corporation will be numbered and
entered in the books of the Corporation as they are issued. They will exhibit
the holder's name and number of shares and will be signed by the Chief Executive
Officer, President or Vice-President and the Secretary or an Assistant
Secretary. The signature of any such officer may be facsimile if the certificate
is countersigned by a transfer agent or registered by a registrar, other than
the Corporation itself or an employee of the Corporation. In case any officer
who has signed or whose facsimile signature has been placed upon such
certificate has ceased to be such officer before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such officer
at the date of its issuance.

Section 2. TRANSFER OF SHARES. Upon surrender to the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it will be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books. Notwithstanding
the foregoing, no transfer will be recognized by the Corporation if such
transfer would violate federal or state securities laws, the Certificate of
Incorporation, or any stockholders' agreements which may be in effect at the
time of the purported transfer. The Corporation may, prior to any such transfer,
require an opinion of counsel to the effect that any such transfer does not
violate applicable securities laws requiring registration or an exemption from
registration prior to any such transfer.

Section 3. FIXING RECORD DATE. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of stockholders for any other proper purpose, the
Board of Directors may provide that the stock transfer books be closed for a
stated period but not to exceed, in any case, sixty days. If the stock transfer
books are closed for the purpose of determining stockholders entitled to notice
of or to vote at a meeting of stockholders, such books must be closed for at
least ten days immediately preceding such meeting. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date as the record
date for any such determination of stockholders, such date, in any case, to be
not more than sixty days and, in case of a meeting of stockholders, not less
than ten days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or stockholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, will be the record date
for such determination of stockholders. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as herein
provided, such determination will apply to any

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adjournment thereof except where the determination has been made through the
closing of stock transfer books and the stated period of closing has expired.

Section 4. REGISTERED STOCKHOLDERS. The Corporation is entitled to
recognize the exclusive right of a person registered on its books as the owner
of the share to receive dividends, and to vote as such owner, and for all other
purposes as such owner; and the Corporation is not bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it has express or other notice thereof, except
as otherwise provided by the laws of Delaware.

Section 5. LOST CERTIFICATE. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate to be lost or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such lost
or destroyed certificate or certificates, or his legal representatives, to
advertise the same in such manner as it shall require and/or give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.

ARTICLE X
GENERAL

Section 1. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation pay, dividends on its outstanding shares of capital
stock in cash, in property, or in its own shares, except when the declaration or
payment thereof would be contrary to law, the Certificate of Incorporation or
these Bylaws. Such dividends may be declared at any regular or special meeting
of the Board of Directors, and the declaration and payment will be subject to
all applicable provisions of law, the Certificate of Incorporation and these
Bylaws.

Section 2. RESERVES. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
deems proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board of Directors may determine to be in the
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.

Section 3. DIRECTORS' ANNUAL STATEMENT. The Board of Directors will
present at each annual meeting and when called for by vote of the stockholders
at any special meeting of the stockholders, a full and clear statement of the
business and condition of the Corporation.

12
<PAGE>
Section 4. CHECKS. All checks or demands for money and notes of the
Corporation will be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.

Section 5. CORPORATE RECORDS. The Corporation will keep at its
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its stockholders giving the names and
addresses of all stockholders and the number and class of shares held by each.
All other books and records of the Corporation may be kept at such place or
places within or without the State of Delaware as the Board of Directors may
from time to time determine.

Section 6. SEAL. The corporate seal will have inscribed thereon the
name of the Corporation. The seal may be used by causing it or a facsimile
thereof to be impressed, affixed or reproduced.

Section 7. AMENDMENT. The Board of Directors shall have the power to
make, alter, amend and repeal the Bylaws. Any Bylaws made by the Board of
Directors under the powers conferred hereby may be altered, amended or repealed
by the directors or by the stockholders; PROVIDED, HOWEVER, that the Bylaws
shall not be altered, amended or repealed and no provision inconsistent
therewith shall be adopted by stockholder action without the affirmative vote of
at least two-thirds of the voting power of the then outstanding shares entitled
to vote generally in the election of directors, voting together as a single
class.

Section 8. INDEMNIFICATION. Each director, officer and former director
or officer of the Corporation, and any person who may have served or who may
hereafter serve at the request of the Corporation as a director or officer of
another corporation in which it owns shares of capital stock or of which it is a
creditor, is hereby indemnified by the Corporation against expenses actually and
necessarily incurred by him in connection with the defense of any action, suit
or proceeding in which he is made a party by reason of being or having been such
director or officer, except in relation to matters as to which he shall be
adjudged in such action, suit or proceeding to be liable for negligence or
misconduct in the performance of duty. Such indemnification will not be deemed
exclusive of any other rights to which such director, officer or other person
may be entitled under any agreement, vote of stockholders, or otherwise. Without
limitation, nothing in this section shall limit any indemnification provisions
in the Certificate of Incorporation.

Adopted April 7, 1997.

EXHIBIT 4.1

COMMON STOCK COMMON STOCK

TRIAD MEDICAL INC.
National in Scope o Regionally Directed o Locally Focused(TM)

INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 89579E 10 3

THIS CERTIFIES THAT

TRIAD MEDICAL INC.

IS THE RECORD HOLDER OF

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF TRIAD
MEDICAL INC., $.001 PAR VALUE, transferable on the books of the Corporation by
the holder hereof in person or by duly authorized attorney upon surrender of
this certificate properly endorsed. This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.

Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.

Dated:

TRIAD MEDICAL INC.
DELAWARE CORPORATE SEAL

/S/ WALTER WALLACH /S/ R. TUCKER COOP
Secretary President
<PAGE>
The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. Such requests shall be made to the Corporation's Secretary at the
principal office of the Corporation.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws and regulations:

<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ________ Custodian _________
TEN ENT -as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of under Uniform Gifts to Minor
survivorship and not as tenants Act ________________________
in common (State)
UNIF TRF MIN ACT - ________ Custodian (until age ___)
(Cust)
__________ under Uniform Transfers
(Minor)
to Minors Act ____________________
(State)
</TABLE>

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, ________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
INCLUDING POSTAL ZIP CODE OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________________________________
____________________________________ Attorney to transfer the said stock on the
books of the within named Corporation with full power of substitution in the
premises.

Dated: _________________________

X __________________________________
X __________________________________

NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERNATION OR ENLARGEMENT OF ANY
CHANGE WHATEVER.

Signature(s) Guaranteed

By: ___________________________________

THE SIGNATURE SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.

EXHIBIT 5.1

October 29, 1997

TRIAD Medical Inc.
23161 Mill Creek Drive, Suite 300
Laguna Hills, CA 92653

Re: Opinion as to Legality of Common Stock of TRIAD Medical Inc.

Gentlemen:

We have examined the certificate of incorporation and bylaws, both as
amended to date, and the corporate proceedings of TRIAD Medical Inc., a Delaware
corporation ("Company"), relating to the registration under the Securities Act
of 1933, as amended, of 4,600,000 shares of Common Stock, $.001 par value, which
are being registered on behalf of the Company and have made such other
examinations as we deem necessary in the premises, and from such examinations we
are of the opinion that:

1. The Company is a validly organized and existing corporation under
the laws of the State of Delaware.

2. The certificates for the Common Stock of the Company are in due and
proper form; and the up to 4,600,000 shares (consisting of 4,000,000 firm shares
and up to 600,000 additional shares contingently issuable upon exercise of the
underwriters' over allotment option) of Common Stock to be sold by the Company
will, when issued, be validly issued, fully paid and non-assessable outstanding
securities of the Company.

We consent to the use of this opinion and the reference to our firm in
the Registration Statement and Prospectus.

Very truly yours,

/s/ Porter & Hedges, L.L.P.

PORTER & HEDGES, L.L.P.

EXHIBIT 10.2

INDEMNIFICATION AGREEMENT

This Indemnification Agreement is entered into and effective as of the
______ day of ____________________, 1997 ("Agreement"), by and between TRIAD
Medical Inc., a Delaware corporation ("Company"), and _________________
("Indemnitee"):

WHEREAS, highly competent persons have become more reluctant to serve
corporations as directors or in other capacities unless they are provided, with
adequate protection through insurance or adequate indemnification against
inordinate risks of claims and actions against them arising out of their service
to, and activities on behalf of, the corporation;

WHEREAS, the Board of Directors of the Company the "Board") has determined
that, in order to attract and retain qualified individuals, the Company will
attempt to maintain on an ongoing basis, at its sole expense, liability
insurance to protect persons' serving the Company and its subsidiaries from
certain liabilities. Although the furnishing of such insurance has been a
customary and widespread practice among United States-based corporations and
other business enterprises, the Company believes that, given current market
conditions and trends, such insurance may be available to it in the future only
at higher premiums and with more exclusions. At the same time, directors,
officers and other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming litigation
relating to, among other things, matters that traditionally would have been
brought only against the corporation or business enterprise itself;

WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and retaining such
persons;

WHEREAS, the Board has determined that the increased difficulty in
attracting and retaining such persons is detrimental to the best interests of
the Company's stockholders and that the Company should act to assure such
persons that there will be increased certainty of such protection in the future;

WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and

WHEREAS, indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified;

NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
<PAGE>
SECTION 1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve as a
director and officer of the Company and, as mutually agreed by Indemnitee and
the Company, as a director, officer, employee, agent or fiduciary of other
corporations, partnerships, joint ventures, trusts or other enterprises
(including, without limitation, employee benefit plans). Indemnitee may at any
time and for any reason resign from any such position (subject to any other
contractual obligation or any obligation imposed by operation of law), in which
event the Company shall have no obligation under this Agreement to continue
Indemnitee in that position. This Agreement shall not be deemed an employment
contract between the Company (or any of its subsidiaries) and Indemnitee.
Indemnitee specifically acknowledges that Indemnitee's employment with the
Company (or any of its subsidiaries), if any, is at will, and the Indemnitee may
be discharged at any time for any reason, with or without cause, except as may
be otherwise provided in any written employment contract between Indemnitee and
the Company (or any of its subsidiaries), other applicable formal severance
policies duly adopted by the Board or, with respect to service as a director of
the Company, by the Company's Certificate of incorporation, Bylaws and the
General Corporation Law of the State of Delaware. Notwithstanding, the
foregoing, this Agreement shall continue in force after Indemnitee has ceased to
serve as an officer or director of the Company and no longer serves at the
request of the Company as a director, officer, employee or agent of the Company
or any subsidiary of the Company.

SECTION 2. INDEMNIFICATION--GENERAL. The Company shall indemnify, and
advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this
Agreement and (b) subject to the provisions of this Agreement, to the fullest
extent permitted by applicable law in effect on the date hereof and as amended
from time to time. The rights of Indemnitee provided under the preceding
sentence shall include, but shall not be limited to, the rights set forth in the
other Sections of this Agreement.

SECTION 3. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE
COMPANY. Indemnitee shall be entitled to the rights of indemnification provided
in this Section 3 if, by reason of his Corporate Status (as hereinafter
defined), he is, or is threatened to be made, a party to or a participant in any
threatened, pending, or completed Proceeding (as hereinafter defined), other
than a Proceeding by or in the right of the Company. Pursuant to this Section 3,
the Company shall indemnify Indemnitee against, and shall hold Indemnitee
harmless from and in respect of, all Expenses, judgments, penalties, fines
(including excise taxes) and amounts paid in settlement (including all interest,
assessments and other charges paid or payable in connection with or in respect
of such Expenses, judgments, fines, penalties or amounts paid in settlement)
actually and reasonably incurred by him or on his behalf in connection with such
Proceeding or any claim, issue or matter therein, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Company and, with respect to any criminal Proceeding, had no reasonable
cause to believe his conduct was unlawful.

SECTION 4. PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. Indemnitee shall
be entitled to the rights of indemnification provided in this Section 4 if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
or a participant in any threatened, pending or completed

2
<PAGE>
Proceeding brought by or in the right of the Company to procure a judgment in
its favor. Pursuant to this Section 4, the Company shall indemnify Indemnitee
against, and shall hold Indemnitee harmless from and in respect of, all Expenses
actually and reasonably incurred by him or on his behalf in connection with such
Proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Company. Notwithstanding the
foregoing, no indemnification against such Expenses shall be made in respect of
any claim, issue or matter in such Proceeding as to which Indemnitee shall have
been adjudged to be liable to the Company if applicable law prohibits such
indemnification; PROVIDED, HOWEVER, if applicable law so permits,
indemnification against such Expenses shall nevertheless be made by the Company
in such event if and only to the extent that the Court of Chancery of the State
of Delaware, or the court in which such Proceeding shall have been brought or is
pending, shall determine.

SECTION 5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY
SUCCESSFUL. Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a party to (or a
participant in) and is successful, on the merits or otherwise, in defense of any
Proceeding, he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith. If Indemnitee is not
wholly successful in defense of such Proceeding but is successful, on the merits
or otherwise, as to one or more but less than all claims, issues or matters in
such Proceeding, the Company shall indemnify Indemnitee against all Expenses
actually and reasonably incurred by him or an his behalf in connection with each
successfully resolved claim, issue or matter. For purposes of this Section and
without limitation, the termination of any claim, issue or matter in such a
Proceeding by dismissal, with or without prejudice, shall be deemed to be a
successful result as to such claim, issue or matter.

SECTION 6. INDEMNIFICATION FOR EXPENSES AS A WITNESS. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of his Corporate Status, a witness in any Proceeding to which Indemnitee is not
a party, he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith.

SECTION 7. ADVANCEMENT OF EXPENSES. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding within ten (10) days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses advanced if it ultimately shall
be determined that Indemnitee is not entitled to be indemnified against such
Expenses.

SECTION 8. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.

(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what

3
<PAGE>
extent Indemnitee is entitled to indemnification. The Secretary of the Company
shall, promptly upon receipt of such a request for indemnification, advise the
Board in writing that Indemnitee has requested indemnification.

(b) On written request by Indemnitee for indemnification pursuant to the
first sentence of Section 8(a), a determination, if required by applicable law,
with respect to Indemnitee's entitlement thereto shall be made in the specific
case: (i) if a Change in Control (as hereinafter defined) shall have occurred
within two (2) years prior to the date of such written request, by Independent
Counsel (as hereinafter defined) in a written opinion to the Board, a copy of
which shall be delivered to Indemnitee; or (ii) if a Change of Control shall not
have occurred within two (2) years prior to the date of such written request,
(A) by a majority vote of the Disinterested Directors (as hereinafter defined),
even though less than a quorum of the Board, or (B) if there are no such
Disinterested Directors, or if such Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee; and, if it is so determined that Indemnitee is entitled
to indemnification, payment to Indemnitee shall be made within ten (10) days
after such determination. Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity on
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making such
determination shall be borne by the Company (irrespective of the determination
as to Indemnitee's entitlement to indemnification) and the Company hereby
indemnities and agrees to hold Indemnitee harmless therefrom.

(c) In the event the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 8(b), the Independent Counsel
shall be selected as provided in this Section 8(c). If a Change of Control shall
not have occurred within two (2) years prior to the date of Indemnitee's written
request for indemnification pursuant to Section 8(a), the Independent Counsel
shall be selected by the Board, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred within two (2) years prior to the
date of Indemnitee's written request for indemnification pursuant to Section
8(a), the Independent Counsel shall be selected by Indemnitee (unless Indemnitee
shall request that such selection be made by the Board, in which event the
preceding sentence shall apply), and Indemnitee shall give written notice to the
Company advising it of the identity of the Independent Counsel so selected in
either event, Indemnitee or the Company, as the case may be, may, within ten
(10) days after such written notice of selection shall have been given, deliver
to the Company or to Indemnitee, as the case may be, a written objection to such
selection. Such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in section 17, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
so made and substantiated, the Independent Counsel so selected way not serve as
Independent Counsel unless and until such objection is withdrawn or a court has
determined that

4
<PAGE>
such objection is without merit. If, within twenty (20) days after submission by
Indemnitee of a written request for indemnification pursuant to Section 8(a), no
Independent Counsel shall have been selected and not objected to, either the
Company or Indemnitee may petition the Court of Chancery or other court of
competent jurisdiction for resolution of any objection which shall have been
made by the Company or Indemnitee to the other's selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the petitioned court or by such other person as the petitioned court shall
designate, and the person with respect to whom all objections are so resolved or
the person so appointed shall act as Independent Counsel under Section 8(b). The
Company shall pay any and all reasonable fees and expenses of Independent
Counsel incurred by such Independent Counsel in connection with acting pursuant
to Section 8(b), and the Company shall pay all reasonable fees and expenses
incident to the procedures of this Section 8(c), regardless of the manner in
which such Independent Counsel was selected and appointed. If (i) Independent
Counsel does not make any determination respecting Indemnitee's entitlement to
indemnification hereunder within ninety (90) days after receipt by the Company
of a written request therefor and (ii) any judicial proceeding or arbitration
pursuant to Section 10(a)(iii) hereof is then commenced, Independent Counsel
shall be discharged and relieved of any further responsibility in such capacity
(subject to the applicable standards of professional conduct then prevailing).

SECTION 9. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.

(a) In making a determination with respect to entitlement to
indemnification hereunder, the Person, Persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under
this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 8(a), and the Company shall have the burden of proof to
overcome that presumption in connection with the making by any person, persons
or entity of any determination contrary to that presumption.

(b) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or on a plea of NOLO
CONTENDERE or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.

(c) Any action taken by Indemnitee in connection with any employee benefit
plan shall, if taken in good faith by Indemnitee and in a manner Indemnitee
reasonably believed to be in the interest of the participants in or
beneficiaries of that plan, be deemed to have been taken in a manner "not
opposed to the best interests of the Company" for all purposes of this
Agreement.

5
<PAGE>
SECTION 10. REMEDIES OF INDEMNITEE.

(a) In the event that (i) a determination is made pursuant to Section 8
that Indemnitee is not entitled to indemnification hereunder, (ii) advancement
of Expenses is not timely made pursuant to Section 7, (iii) Independent Counsel
is to determine Indemnitee's entitlement to indemnification hereunder, but does
not make that determination within ninety (90) days after receipt by the Company
of the request for that indemnification, (iv) payment of indemnification is not
made pursuant to section 5 or 6 within ten (10) days after receipt by the
Company of a written request therefor or (v) payment of indemnification is not
made within ten (10) days after a determination has been made that Indemnitee is
entitled to indemnification, Indemnitee shall be entitled to an adjudication
from the Court of Chancery of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator pursuant to the
Commercial Arbitration Rules of the American Arbitration Association. Indemnitee
shall commence such Proceeding seeking an adjudication or an award in
arbitration within one hundred eighty (180) days following the date on which
Indemnitee first has the right to commence such proceeding pursuant to this
Section 10(a); PROVIDED, HOWEVER, that the foregoing clause shall not apply in
respect of a proceeding brought by Indemnitee to enforce his rights under
Section 5.

(b) In the event that a determination shall have been made pursuant to
Section 8(b) that Indemnitee is not entitled to indemnification, any judicial
proceeding or arbitration commenced pursuant to this Section 10 shall be
conducted in all respects as a DE NOVO trial, or arbitration, on the merits and
Indemnitee shall not be prejudiced by reason of that adverse determination. In
any judicial proceeding or arbitration commenced pursuant to this section 10,
the Company shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.

(c) If a determination shall have been made pursuant to Section 8(b) that
Indemnitee is entitled to indemnification, the Company shall be bound by such
determination in any judicial proceeding or arbitration commenced pursuant to
this Section 10, absent (i) a misstatement by Indemnitee of a material fact, or
an omission by Indemnitee of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law.

(d) In the event that Indemnitee, pursuant to this Section 10, seeks a
judicial adjudication of or an award in arbitration to enforce his rights under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17) actually and reasonably incurred by him in such judicial
adjudication or arbitration, but only if he prevails therein. If it shall be
determined in said judicial adjudication or arbitration that Indemnitee is
entitled to receive part but not all of the indemnification or advancement of
expenses sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be appropriately prorated.

6
<PAGE>
SECTION 11. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.

(a) The rights of indemnification and to receive advancement of Expenses
as provided by this Agreement shall not be deemed exclusive of any other rights
to which Indemnitee may at any time be entitled under applicable law, the
Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders
or a resolution of directors, or otherwise. No amendment, alteration or repeal
of this Agreement or of any provision hereof shall limit or restrict any right
of Indemnitee under this Agreement in respect of any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal. To the extent that a change in Delaware law (whether by statute or
judicial decision) permits greater indemnification by agreement than would be
afforded currently under this Agreement, it is the intent of the parties hereto
that Indemnitee shall enjoy by this Agreement the greater benefits so afforded
by such change.

(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees, or
agents of the Company or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which such person serves at the
request of the Company, Indemnitee shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of the coverage
available for any such director, Officer, employee or agent under such policy or
policies.

(c) In the event of any payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.

(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.

(e) The Company's obligation to indemnify or advance Expenses hereunder to
Indemnitee with respect to Indemnitee's service at the request of the Company as
a director, officer, employee or agent of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise shall be reduced
by any amount Indemnitee has actually received as indemnification or advancement
of Expenses from such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.

SECTION 12. DURATION OF AGREEMENT. This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as a director or officer of the Company or of any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise which Indemnitee served on behalf of the Company; or (b) the
final termination of any Proceeding then pending in respect of which Indemnitee
is granted rights of indemnification or advancement of expenses hereunder and of
any Proceeding commenced by Indemnitee pursuant to Section 10 relating thereto.
This Agreement shall be binding upon the

7
<PAGE>
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and his spouse (if Indemnitee resides in Texas or another community
property state), heirs, executors and administrators.

SECTION 13. SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, each portion of any Section of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable which is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; (b) such provision or provisions
shall be deemed reformed to the extent necessary to conform to applicable law
and to give the maximum effect to the intent of the parties hereto; and (c) to
the fullest extent possible, the provisions of this Agreement (including.
without limitation, each portion of any Section of this Agreement containing any
such provision held to be invalid, illegal or unenforceable which is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested thereby.

SECTION 14. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF
EXPENSES. Notwithstanding any other provision hereof, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding brought by Indemnitee or any claim therein prior to a
Change in Control, unless the bringing of such Proceeding or making of such
claim shall have been approved by the Board of Directors.

SECTION 15. IDENTICAL COUNTERPARTS. This Agreement may be executed in one
or more counterparts by means of original or facsimile signatures, each of which
shall for all purposes be deemed to be an original but all of which together
shall constitute one and the same Agreement. Only one such counterpart signed by
the party against whom enforceability is sought needs to be produced to evidence
the existence of this Agreement.

SECTION 16. HEADINGS. The headings of the Sections hereof are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction thereof.

SECTION 17. DEFINITIONS. For purposes of this Agreement:

(a) "Acquiring Person" means any Person who or which, together with
all Affiliates and Associates of such Person, is or are the Beneficial
Owner of twenty-five percent (25%) or more of the shares of Common Stock
then outstanding, but does not include any Exempt Person; PROVIDED,
HOWEVER, that a Person shall not be or become an Acquiring Person if such
Person, together with its Affiliates and Associates, shall become the
Beneficial Owner of twenty-five percent (25%) or more of the shares of
Common Stock then outstanding solely as a result of a reduction in the
number of shares of Common Stock outstanding due to the repurchase of
Common Stock by the Company, unless and until such time as such Person or
any

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<PAGE>
Affiliate or Associate of such Person shall purchase or otherwise become
the Beneficial Owner of additional shares of Common Stock constituting one
percent (1%) or more of the then outstanding shares of Common Stock or any
other Person (or Persons) who is (or collectively are) the Beneficial
Owner of shares of Common Stock constituting one percent (1%) or more of
the then outstanding shares of Common Stock shall become an Affiliate or
Associate of such Person, unless, in either such case, such Person,
together with all Affiliates and Associates of such Person, is not then
the Beneficial Owner of twenty-five percent (25%) or more of the shares of
Common Stock then outstanding.

(b) "Affiliate" has the meaning ascribed to that term in Exchange
Act Rule 12b-2.

(c) "Associate" means, with reference to any Person, (i) any
corporation, firm, partnership, association, unincorporated organization
or other entity (other than the Company or a subsidiary of the Company) of
which that Person is an officer or general partner (or officer or general
partner of a general partner) or is, directly or indirectly, the
Beneficial owner of 10% or more of any class of its equity securities,
(ii) any trust or other estate in which that Person has a substantial
beneficial interest or for or of which that Person serves as trustee or in
a similar fiduciary capacity and (iii) any relative or spouse of that
Person, or any relative of that spouse, who has the same home as that
Person.

(d) A specified Person is deemed the "Beneficial Owner" of, and is
deemed to "beneficially own," any securities:

(i) of which that Person or any of that Person's Affiliates or
Associates, directly or indirectly, is the "beneficial owner" (as
determined pursuant to Exchange Act Rule 13d-3) or otherwise has the
right to vote or dispose of, including pursuant to any agreement,
arrangement or understanding (whether or not in writing); PROVIDED,
HOWEVER, that a Person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own," any security under this subparagraph
as a result of an agreement, arrangement or understanding to vote
that security if that agreement, arrangement or understanding: (A)
arises solely from a revocable proxy or consent given in response to
a public (that is, not including a solicitation exempted by Exchange
Act Rule 14a-2(b)(2)) proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the
Exchange Act; and (B) is not then reportable by such Person on
Exchange Act Schedule 13D (or any comparable or successor report);

(ii) which that Person or any of that Person's Affiliates or
Associates, directly or indirectly, has the right or obligation to
acquire

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<PAGE>
(whether that right or obligation is exercisable or effective
immediately or only after the passage of time or the occurrence of
an event) pursuant to any agreement, arrangement or understanding
(whether or not in writing) or on the exercise of conversion rights,
exchange rights, other rights, warrants or options, or otherwise;
PROVIDED, HOWEVER, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," securities tendered pursuant to
a tender or exchange offer made by that Person or any of that
Person's Affiliates or Associates until those tendered securities
are accepted for purchase or exchange; or

(iii) which are beneficially owned, directly or indirectly, by
(A) any other Person (or any Affiliate or Associate thereof) with
which the specified Person or any of the specified Person's
Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy or
consent as described in the proviso to subparagraph (i) of this
definition) or disposing of any voting securities of the Company or
(B) any group (as that term is used in Exchange Act Rule 13d-5(b))
of which that specified Person is a member;

PROVIDED, HOWEVER, that nothing in this definition shall cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner" of, or
to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty (40) days after the date of that acquisition. For purposes
of this Agreement, "voting" a security shall include voting, granting a proxy,
acting by consent, making a request or demand relating to corporate action
(including, without limitation, calling a stockholder meeting) or otherwise
giving an authorization (within the meaning of Section 14(a) of the Exchange
Act) in respect of such security.

(e) "Change of Control" means the occurrence of any of the following
events that occurs after the IPO Closing Date: (i) any Person becomes an
Acquiring Person; (ii) at any time the then Continuing Directors cease to
constitute a majority of the members of the Board; (iii) a merger of the
Company with or into, or a sale by the Company of its properties and
assets substantially as an entirety to, another Person occurs and,
immediately after that occurrence, any Person, other than an Exempt
Person, together with all Affiliates and Associates of such Person, shall
be the Beneficial Owner of twenty-five percent (25%) or more of the total
voting power of the then outstanding Voting Shares of the Person surviving
that transaction (in the case or a merger or consolidation) or the Person
acquiring those properties and assets substantially as an entirety.

(f) "Common Stock" means the common stock, par value $.001 per
share, of the Company.

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<PAGE>
(g) "Continuing Director" means at any time any individual who then
(i) is a member of the Board and was a member of the Board as of the IPO
Closing Date or whose nomination for his first election, or that first
election, to the Board following that date was recommended or approved by
a majority of the then Continuing Directors (acting separately or as a
part of any action taken by the Board or any committee thereof) and (ii)
is not an Acquiring Person, an Affiliate or Associate of an Acquiring
Person or a nominee or representative of an Acquiring Person or of any
such Affiliate or Associate.

(h) "Corporate Status" describes the status of a Person who is or
was a director, officer, employee or agent of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise which such person is or was serving at the request of the
Company. For purposes of this Agreement, "serving at the request of the
Company" includes any service by Indemnitee which imposes duties on, or
involves services by, Indemnitee with respect to any employee benefit plan
or its participants or beneficiaries.

(i) "Court of Chancery" means the Court of Chancery of the State of
Delaware.

(j) "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee hereunder.

(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

(l) "Exempt Person" means (i), (A) the Company, any subsidiary of
the Company, any employee benefit plan of the Company or of any subsidiary
of the Company and (B) any Person organized, appointed or established by
the Company for or pursuant to the terms of any such plan or for the
purpose of funding any such plan or funding other employee benefits for
employees of the Company or any subsidiary of the Company and (ii)
Indemnitee, any Affiliate or Associate of Indemnitee or any group (as that
term is used in Exchange Act Rule 13d-5(b)) of which Indemnitee or any
Affiliate or Associate of Indemnitee is a member.

(m) "Expenses" include all attorneys' fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, being or preparing to be a witness
in, or otherwise participating in, a Proceeding and all interest or
finance charges attributable to any thereof. Should any payments by the

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<PAGE>
Company under this Agreement be determined to be subject to any federal,
state or local income or excise tax, "Expenses" also shall include such
amounts as are necessary to place Indemnitee in the same after-tax
position (after giving effect to all applicable taxes) he would have been
in had no such tax been determined to apply to such payments.

(m) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five (5) years has been, retained to
represent: (i) the Company, its Affiliates or Indemnitee in any matter
material to either such party; or (ii) any other Party to the Proceeding
giving rise to a claim for indemnification hereunder. Notwithstanding the
foregoing. the term "Independent Counsel" shall not include any person
who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the
Company or Indemnitee in an action to determine Indemnitee's rights under
this Agreement.

(o) "IPO" means the first time a registration statement filed under
the Securities Act of 1933, as amended, and respecting an underwritten
primary offering by the Company of shares of Common Stock is declared
effective under that act and the shares registered by that registration
statement are issued and sold by the Company (otherwise than pursuant to
the exercise of any over-allotment option).

(p) "IPO Closing Date" means the date on which the Company first
receives payment for the shares of Common Stock it sells in the IPO.

(q) "Person" means any natural person, sole proprietorship,
corporation, partnership of any kind having a separate legal status,
limited liability company, business trust, unincorporated organization or
association, mutual company, joint stock company, joint venture, estate,
trust, union or employee organization or governmental authority.

(r) "Proceeding" includes any action, suit, alternate dispute
resolution mechanism, hearing or any other proceeding, whether civil,
criminal, administrative, arbitrative, investigative or mediative, any
appeal in any such action, suit, alternate dispute resolution mechanism,
hearing or other proceeding and any inquiry or investigation that could
lead to any such action, suit, alternate dispute resolution mechanism,
hearing or other proceeding, except one (i) initiated by an Indemnitee
pursuant to Section 10 to enforce his rights hereunder or (ii) pending on
or before the date of this Agreement.

(s) "Voting Shares" means: (i) in the case of any corporation, stock
of that corporation of the class or classes having general voting power
under ordinary circumstances to elect a majority of that corporation's
board of directors; and (ii) in

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the case of any other entity, equity interests of the class or classes
having general voting power under ordinary circumstances equivalent to the
Voting Shares of a corporation.

SECTION 18. MODIFICATION AND WAIVER. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.

SECTION 19. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder; PROVIDED, HOWEVER, failure to give such notice shall not
deprive Indemnitee of his rights to indemnification and advancement of Expenses
under this Agreement unless the Company is actually and materially prejudiced
thereby.

SECTION 20. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (a) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed or (b) mailed by
certified or registered mail with postage prepaid, on the third (3rd) business
day after the date on which it is so mailed:

(a) If to Indemnitee, to: _________________________
_________________________
_________________________

(b) If to the Company, to: TRIAD Medical Inc.
23161 Mill Creek Drive, Suite 300
Laguna Hills, CA 92653
Attention: Secretary

or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case way be.

SECTION 21. CONTRIBUTION. To the fullest extent permissible under
applicable law, if the indemnification provided for in this Agreement is
unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of
indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee,
whether for judgments, fines, penalties, excise taxes, amounts paid or to be
paid in settlement and/or for Expenses, in connection with any claim relating to
an indemnifiable event under this Agreement, in such proportion as is deemed
fair and reasonable in light of all the circumstances of such Proceeding in
order to reflect: (a) the relative benefits received by the Company and
Indemnitee as a result of the event(s) and/or transaction(s) giving cause to
such

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<PAGE>
Proceeding; and/or (b) the relative fault of the Company (and its directors,
officers, employees and agents) and Indemnitee in connection with such event(s)
and/or transaction(s).

SECTION 22. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and
the legal relations among the parties shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, without regard
to its conflict of laws rules. Except with respect to any arbitration commenced
by Indemnitee pursuant to Section 10(a), the Company and Indemnitee hereby
irrevocably and unconditionally (a) agree that any action or proceeding arising
out of or in connection with this Agreement shall be brought only in the Court
of Chancery and not in any other state or federal court in the United States of
America or any court in any other country, (b) consent to submit to the
exclusive jurisdiction of the Court of Chancery for purposes of any action or
proceeding arising out of or in connection with this Agreement, (c) waive any
objection to the laying of venue of any such action or proceeding in the Court
of Chancery, and (d) waive, and agree not to plead or to make, any claim that
any such action or proceeding brought in the Court of Chancery has been brought
in an improper or otherwise inconvenient forum.

SECTION 23. MISCELLANEOUS. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate. When used in this
Agreement, the words "herein," "hereof" and words of similar import shall refer
to this Agreement as a whole and not to any provision of this Agreement, and the
word "Section" refers to a Section of this Agreement, unless otherwise
specified.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.

TRIAD MEDICAL INC.

By: _____________________________
Name: __________________________
Title: _________________________

INDEMNITEE

_________________________________

Name: __________________________

EXHIBIT 10.15

EMPLOYMENT AGREEMENT
BY AND BETWEEN
TRIAD MEDICAL INC.
AND MICHAEL CAMPBELL
<PAGE>
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into on
September __, 1997, between TRIAD Medical Inc., a Delaware corporation (the
"Company"), and Michael Campbell, an individual (the "Executive").

RECITALS

WHEREAS, the Company has been formed to engage, and to acquire businesses
that are engaged, in the business of selling and distributing specialty medical
products and equipment to hospitals and alternative site healthcare service
companies and providers, such as but not limited to, sub-acute care facilities,
nursing facilities, home healthcare providers and physician groups (the
"Business");

WHEREAS, on the date of this Agreement, the Company, HTD Acquisition,
Inc., a wholly owned subsidiary of the Company (the "Merger Subsidiary"),
Healthcare Technology Delivery, Inc., a Delaware corporation (the "Acquired
Company"), and the stockholders of the Acquired Company, are entering into an
Agreement and Plan of Reorganization (the "Acquisition Agreement"), under which
the Acquired Company will merge with the Merger Subsidiary in a merger (the
"Merger") of which the Acquired Company will be the surviving corporation and as
a result of which the Acquired Company will become a wholly owned subsidiary of
the Company;

WHEREAS, the Executive is a stockholder and/or serves as a director,
officer and/or employee of the Acquired Company;

WHEREAS, the Company wishes to employ the Executive effective upon
consummation of the Merger, and the Executive is willing to accept such
employment, on the terms and conditions of this Agreement; and

WHEREAS, the respective agreements of the Company and the Executive set
forth herein are ancillary to the Company's acquisition of the Acquired Company,
and the Company, as a condition to its entering into the Acquisition Agreement
and consummating the Merger, is requiring that the Executive agree to the
provisions of this Agreement which restrict the Executive from competing with
the Company;

AGREEMENT

NOW, THEREFORE, in consideration of the Company agreeing to employ the
Executive and the mutual promises and covenants set forth herein, to induce the
Company to enter into the Acquisition Agreement and to consummate the Merger,
and for other good and valuable consideration, the receipt, adequacy and legal
sufficiency of which are hereby acknowledged, the Company and the Executive
agree as follows:
<PAGE>
1. EMPLOYMENT, DUTIES AND ACCEPTANCE.

1.1 EMPLOYMENT BY THE COMPANY. The Company agrees to employ the
Executive as Regional President Southeast of the Company for the duration of the
Employment Term (as hereinafter defined in Section 2 below), to render such
services and to perform such duties as are customarily attendant to such
position or management responsibility to which the Executive is assigned, as
well as such other duties, which are not inconsistent with such position or
management responsibility, as shall from time to time reasonably be requested by
the Board of Directors of the Company (the "Board of Directors") or the officers
of the Company senior to the Executive.

1.2 ACCEPTANCE OF EMPLOYMENT BY THE EXECUTIVE. The Executive hereby
accepts such employment for the Employment Term and agrees to render the
services required of him under Section 1.1. During the Employment Term, the
Executive shall devote his full business time, attention and energy to the
business of the Company and the performance of his duties under this Agreement.
The foregoing shall not, however, prohibit the Executive from making and
managing personal investments, or from engaging in civic or charitable
activities, that do not materially impair the performance of his duties under
this Agreement. If appointed or elected, as applicable, the Executive also shall
serve during all or any part of the Employment Term as any other officer and/or
as a director of the Company or any of its subsidiaries or affiliates, without
any additional compensation other than that specified in this Agreement.

1.3 PLACE OF PERFORMANCE. The Executive shall be based in the
Greater Birmingham Metrolpolitan Area, and nothing in this Agreement shall
require the Executive to relocate his base of employment or principal place of
residence from the Greater Birmingham Metrolpolitan Area.

1.4 TERMINATION OF EXISTING CONTRACTS. The Executive agrees that all
agreements and contracts, whether written or oral, relating to the employment of
the Executive by the Acquired Company, or any of its subsidiaries and
affiliates, shall be terminated effective as of the commencement of the
Employment Term. However, nothing in this Section 1.4 shall (i) affect accrued
vacation, holiday or sick pay accruals (but only to the extent such accruals
were reflected in the Acquired Company's financial statements), or (ii) require
the Acquired Company to cease to make available to the Executive, and, subject
to his meeting all applicable eligibility requirements, the Executive shall be
entitled to continue to be covered under, all group health, medical and dental
insurance policies, plans and programs maintained by the Acquired Company for
its employees generally, in each case until replacement coverage is provided by
the Company, or (iii) impair or adversely affect any indemnification rights that
Executive may have under statutes empowering corporations in the Acquired
Company's state of incorporation to indemnify their officers and directors, or
under the Acquired Company's bylaws or any written indemnification agreement
between the Executive and the Acquired Company implementing such statutory
indemnification rights, but only with respect to third party claims or
proceedings that relate to actions taken by Executive as an officer or director
of the Acquired Company prior to the date hereof and are disclosed in the
Disclosure Statement to the Acquisition Agreement or, if asserted or brought for
the

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<PAGE>
first time after the date hereof, would not constitute a breach of the
representations or warranties of the Acquired Company or its Stockholders under
the Acquisition Agreement.

2. EMPLOYMENT TERM. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on the date of consummation of
the Merger pursuant to the Acquisition Agreement (the "Commencement Date"), at
the Effective Time (as that term is defined in the Acquisition Agreement), and
shall continue through and expire on the third anniversary of the Commencement
Date (the "Expiration Date"), unless earlier terminated as herein provided.
However, if the Acquisition Agreement is terminated under the terms of its
Article XII, then this Agreement shall also terminate, automatically and without
the requirement of any action on the part of either of its parties.

3. COMPENSATION AND OTHER BENEFITS.

3.1 ANNUAL SALARY. As compensation for services to be rendered under
this Agreement, the Company shall pay the Executive a salary (the "Annual
Salary"), subject to such increases as the Board of Directors may, in its
discretion, approve, at a rate of $150,000 per annum. The Executive shall also
be eligible, during the Employment Term, to receive such other compensation,
whether in the form of cash bonuses, incentive compensation, stock options,
stock appreciation rights, restricted stock awards or otherwise (collectively,
the "Additional Compensation"), as the Board of Directors (or any committee of
the Board) may, in its discretion, approve and as are generally made available
to other members of the Company's Management holding comparable positions with
the Company. The Annual Salary and the Additional Compensation shall be payable
in accordance with the applicable payroll and/or other compensation policies and
plans of the Company as in effect from time to time, less such deductions as
shall be required to be withheld by applicable law and regulations.

3.2 PARTICIPATION IN EMPLOYEE BENEFIT PLANS. The Executive shall be
permitted, during the Employment Term, if and to the extent eligible, to
participate in any group life, hospitalization or disability insurance plan,
health program, pension plan, vacation programs, similar benefit plan or other
"fringe benefits" of the Company, which may be available to all other members of
the Company's management on generally the same terms.

3.3 EXECUTIVE SUPPORT. The Company shall provide to the Executive
office facilities, furniture, fixtures and equipment, secretarial and support
personnel and other management level support services as the Executive shall
reasonably request in connection with his performance of his obligations under
this Agreement.

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<PAGE>
the Company a record of and appropriate receipts for (A) the amount of the
expense, (B) the date, place and nature of the expense, (C) the business reason
for the expense and (D) the names, occupations and other data concerning
individuals entertained sufficient to establish their business relationship to
the Company. The Company shall have no obligation to reimburse the Executive for
expenses that are not incurred and substantiated as required by this Section
3.4.

3.5 AUTOMOBILE. The Company shall provide the Executive with the use
of a Company-owned or leased automobile for use by the Executive in connection
with the performance of his duties under this Agreement, and shall pay the
reasonable costs of insuring, operating and maintaining the automobile, or, in
lieu thereof the Company at is option may pay to the Executive an automobile
allowance to help defray the Executive's cost of owning and operating a personal
automobile for such purpose. Such Company furnished automobile or such allowance
shall be comparable to the automobile or allowance that was taken into account
in determining the Merger Consideration that is to be paid by the Company to the
Acquired Company's stockholders pursuant to the Acquisition Agreement.

4. NON-COMPETITION.

4.1 COVENANTS AGAINST COMPETITION. The Executive acknowledges that
(i) the Company, which for purposes of this Section 4 includes TRIAD Medical
Inc. and all of its present and future subsidiaries and affiliates, including
such subsidiaries and affiliates as may be formed or incorporated during the
Restricted Period (as defined in Section 4.1.1), is engaged in the business
described in the Recitals set forth on the first page of this Agreement (the
"Business"); (ii) the Executive is one of a limited number of persons who has
performed a significant role in developing the Business; (iii) the Business is
conducted throughout the United States; (iv) his work for the Acquired Company
has given him, and his work for the Company will continue to give him, trade
secrets of, and confidential information concerning, the Company; (v) the
agreements and covenants contained in this Section 4 (collectively, the
"Restrictive Covenants") are essential to protect the Business and the goodwill
of the Company; (vi) he has means to support himself and his dependents other
than by engaging in the Business in violation of the Restrictive Covenants and
(vii) the Restrictive Covenants will not impair such ability. Accordingly, the
Executive agrees as follows:

4.1.1 NON-COMPETE. During the Restricted Period, the Executive
shall not (A) engage, anywhere within the Territory (as hereinafter
defined), as an officer, director or in any other managerial capacity or
as an owner, co-owner or other investor or creditor in or of, or as an
employee, independent contractor, consultant or advisor, or as a sales or
manufacturer's representative or distributor of any kind, in any business
selling any products or providing any services which are sold or offered
by the Company, or have previously been sold or offered by the Company, or
any of its then current or prior vendors or suppliers, on the date the
Executive's employment is terminated, or (B) call on any person or entity,
whose offices are located within the Territory, that at the time is, or at
any time within one year prior to the date of termination of the
Executive's employment was, a customer of the Company, if the Executive
has knowledge of that customer relationship, PROVIDED, HOWEVER, that
nothing in this Section 4.1.1 shall prohibit the Executive from owning,
directly or

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<PAGE>
indirectly, solely as an investment, securities of any entity traded on
any national securities exchange or over-the-counter market if the
Executive is not a controlling person of, or a member of a group which
controls, such entity and does not, directly or indirectly, own five
percent or more of any class of securities of such entity. As used in this
Section 4, the term "Territory" shall mean a radius of 100 miles around
the principal office at which the Executive is employed on the
Commencement Date. As used in this Section 4, the term "Restricted Period"
means the period beginning on the Commencement Date and ending:

(i) if during the Employment Term the Executive's employment
terminates as a result of (a) a termination for Cause under Section
5.2 or (b) the Executive's voluntary resignation, the fourth
anniversary of the Commencement Date;

(ii) if during the Employment Term the Executive's employment
terminates as a result of (a) a termination without Cause under
Section 5.3 or (b) a termination for disability under Section 5.4,
the latest to occur of (a) expiration of the Severance Benefit
Period (as defined in Section 5.5) or (b) the third (3rd)
anniversary of the Commencement Date; or

(iii) if after the Employment Term the Executive's employment
terminates for any reason, the latest to occur of (a) the fourth
(4th) anniversary of the Commencement Date if he is not eligible for
severance benefits under Section 5.5 or (b) the expiration of the
Severance Benefit Period if the Executive is eligible for severance
benefits under Section 5.5.

4.1.2 CONFIDENTIAL INFORMATION; PERSONAL RELATIONSHIPS. During
the Restricted Period and thereafter, the Executive shall keep secret and
retain in strict confidence, and shall not use for the benefit of himself
or others, all confidential matters of the Company, including, without
limitation, "know-how," trade secrets, customer lists, details of client
or consultant contracts, pricing policies, operational methods, marketing
plans or strategies, product development techniques or plans, business
acquisition plans, new personnel acquisition plans, methods of production
and distribution, technical processes, designs and design projects,
inventions and research projects of the Company learned by the Executive
heretofore or during the Restricted Period.

4.1.3 PROPERTY OF THE COMPANY. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Executive, or made
available to the Executive relating to the Company, other than purely
personal matters, are and shall be the Company's property and shall be
delivered to the Company promptly upon the termination of the Executive's
employment (whether such termination is for Cause, as hereinafter defined,
or otherwise) or at any other time on request of the Company.

5
<PAGE>
4.1.4 EMPLOYEES OF THE COMPANY. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or
indirectly, hire or solicit any employee or independent sales agent of the
Company away from the Company or encourage any such employee or agent to
leave such employment.

4.1.5 CONSULTANTS OF THE COMPANY. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or
indirectly, hire or solicit any consultant then under contract with the
Company or encourage such consultant to terminate such relationship.

4.1.6 ACQUISITION CANDIDATES. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not call on any Acquisition
Candidate (as defined below in this Section 4.1.6), with the knowledge of
such Acquisition Candidate's status as such, for the purpose of acquiring,
or arranging the acquisition of, that Acquisition Candidate by any person
or entity other than the Company. In this Section 4.1.6 "Acquisition
Candidate" means any person or entity engaged in any of the businesses of
distributing medical or healthcare products to hospitals, clinics,
physicians, laboratories, pharmacies, alternate care sites or other
medical or healthcare facilities or conceiving, designing, developing or
testing technologically advanced medical or healthcare products, and (i)
which was called on by the Company, in connection with the possible
acquisition by the Company of that person or entity, or (ii) with respect
to which the Company has made an acquisition analysis.

4.2 RIGHTS AND REMEDIES UPON BREACH. If the Executive breaches the
Restrictive Covenants, the Company shall have the following rights and remedies,
each of which shall be independent of the others and severally enforceable, and
each of which is in addition to, and not in lieu of, any other rights and
remedies available to the Company under law or in equity:

4.2.1 SPECIFIC PERFORMANCE. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach of the Restrictive Covenants
would cause irreparable injury to the Company and that money damages would
not provide an adequate remedy to the Company.

4.2.2 ACCOUNTING. The right and remedy to require the
Executive to account for and pay over to the Company all compensation,
profits, monies, accruals, increments or other benefits derived or
received by the Executive as the result of any transaction constituting a
breach of the Restrictive Covenants.

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<PAGE>
or unenforceable, the remainder of the Restrictive Covenants shall not thereby
be affected and shall be given full effect, without regard to the invalid
portions.

4.4 REFORMATION. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.

4.5 ENFORCEABILITY IN JURISDICTIONS. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.

5. TERMINATION.

5.1 TERMINATION UPON DEATH. If the Executive dies during the
Employment Term, this Agreement shall terminate, except that the Executive's
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation and other accrued benefits, if
any, earned up to the date of the Executive's death; PROVIDED, HOWEVER, if any
Additional Compensation or other benefits are governed by the provisions of any
written employee benefit plan or policy of the Company, any written agreement
contemplated thereunder or any other separate written agreement entered into
between the Executive and the Company, the terms and conditions of such plan,
policy or agreement shall control in the event of any discrepancy or conflict
with the provisions of this Agreement regarding such Additional Compensation or
other benefit upon the death, termination or disability of the Executive.

7
<PAGE>
policies and directives established by the Board of Directors or executive
officers of the Company senior to the Executive; (iii) the Executive has
wrongfully misappropriated money or other assets or properties of the Company or
any subsidiary or affiliate of the Company, or has committed fraud; (iv) the
Executive has been convicted of or plead "nolo contendere" to any felony; or (v)
the Executive's alcoholism or drug addiction, unless Executive agrees to seek
treatment from a treatment program approved by the Company and promptly
commences and completes the program. The determination on behalf of the Company
as to whether "cause" exists shall be made by a majority vote of the Company's
Board of Directors.

5.3 TERMINATION WITHOUT CAUSE. At any time during the period
beginning on the first anniversary of the Commencement Date and continuing
through the end of the Employment Term, the Company, upon a determination that
is made by: (i) R. Tucker Coop, in his capacity as president of the Company, or
(ii) the officer of the Company to whom the Executive directly reports, PROVIDED
THAT if such officer is not R. Tucker Coop, in his capacity as President of the
Company, then such termination shall require the concurrence of either: (a) R.
Tucker Coop, as president of the Company, or, (b) if R. Tucker Coop is no longer
the President of the Company, the Board of Directors, shall have the right,
exercisable by serving notice effective in accordance with its terms, to
terminate the Executive's employment under this Agreement and discharge the
Executive without Cause. If such right is exercised, the Company's sole
obligation to the Executive, subject to applicable law, shall be as set forth in
Section 5.5 below.

5.4 TERMINATION UPON DISABILITY. If during the Employment Term the
Executive becomes physically or mentally disabled, whether totally or partially,
as evidenced by the written statement of a competent physician licensed to
practice medicine in the United States, so that the Executive is unable to
substantially perform his services hereunder for (i) a period of six consecutive
months, or (ii) for shorter periods aggregating six months during any period of
twelve consecutive months, subject to applicable law, the Company may at any
time after the last day of the six consecutive months of disability or the day
on which the shorter periods of disability equal an aggregate of six months with
a period of twelve consecutive months, by written notice to the Executive,
terminate the Executive's employment hereunder. If such right is exercised, the
Company's obligation to the Executive shall be as set forth in Section 5.5
below.

5.5 SEVERANCE BENEFIT. If at any time during or after the Employment
Term, the Executive's employment by the Company is terminated for any reason
other than (i) a termination for Cause under Section 5.2, (ii) his voluntary
resignation, or (iii) his death, then for a period of one year following the
date of termination of the Executive's employment (the "Severance Benefit
Period"), the Company's sole obligation (subject to applicable law) to Executive
shall be to continue to (a) pay to the Executive the amount of Annual Salary in
effect at the date of termination of his employment in installments, in
accordance with the Company's customary payroll and tax withholding policies and
procedures, over the twelve months immediately following such termination of
employment, and (ii) at the Company's expense, continue to include the Executive
and his eligible dependents under the coverage of all group health, medical and
dental insurance policies, plans and programs maintained by the Company during
Severance Benefit Period for the Company's employees, or management employees,
generally.

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<PAGE>
5.6 CONTINUATION OF HEALTH COVERAGE. If at any time during or after
the Employment Term, the Executive's employment by the Company is terminated for
any reason other than (i) a termination for Cause under Section 5.2, or (ii) his
death, then for the period beginning on the date of expiration of the Severance
Benefit Period and continuing until the earlier to occur of (a) the Executive's
obtaining other employment through which health, medical and dental insurance
coverage are available to him and (b) the Executive reaching age 65, the Company
will use all commercially reasonable best efforts to make available, or to cause
to be made available, to the Executive and/or his dependents, at his expense,
health, medical and dental insurance coverage comparable to the coverage that is
generally available to management personnel from the Company. If at any time
during or after the Employment Term, the Executive's employment by the Company
is terminated by the Executive's death, the Company will use all commercially
reasonable best efforts to make available, or to cause to be made available, to
the Executive's dependents, at their expense, health, medical and dental
insurance coverage comparable to the coverage that is generally available to
management personnel from the Company.

6. INSURANCE. The Company may, from time to time, apply for and take out,
in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may change from time to time), policies for
health, accident, disability or other insurance upon the Executive or his life,
in any amount or amounts that it may deem necessary or appropriate to protect
its interest. The Executive agrees to aid the Company in procuring such
insurance by submitting to reasonable medical examinations and by filling out,
executing and delivering such applications and other instruments in writing as
may reasonably be required by an insurance company or companies to which any
application or applications for insurance may be made by or for the Company.

7. INDEMNIFICATION. The Executive shall be entitled to the benefit of the
indemnification obligations of the Company set forth in Article X of the
Company's Certificate of Incorporation, as amended through the date of this
Agreement and Section 8 of Article X of the Company's bylaws as in effect at the
date of this Agreement. The Company shall not cause or permit any rescission of,
or amendment to or modification of, Article X of its Certificate of
Incorporation or Section 8 of Article X of its bylaws after the date hereof to
materially reduce, limit or restrict the indemnification rights of the Executive
thereunder, except to the extent otherwise required by law.

8. OTHER PROVISIONS.

8.1 NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:

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<PAGE>
(i) if to the Company, to:

TRIAD Medical Inc.
23161 Mill Creek Drive
Suite 300
Laguna Hills, CA 92653
Telecopy No.: (714) 770-0727
Attn.: R. Tucker Coop, President

(ii) if to the Executive, to:

Michael Campbell
5911 Greenwood Parkway
Bessemer, AL 35022
Telecopy No.: (205) 481-8182

Either party may change its address for notice hereunder by notice to the
other party.

8.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements, written or oral, with respect thereto;
PROVIDED, HOWEVER, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.

8.3 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived,

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<PAGE>
only by a written instrument signed by the parties or, in the case of a waiver,
by the party waiving compliance. No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any right, power or privilege
hereunder, nor any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder.

8.4 GOVERNING LAW; VENUE. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of Alabama, without reference to principles governing choice
or conflicts of law.

8.5 ASSIGNMENT. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party, except that the Company may assign this Agreement to
any of its subsidiaries or affiliates without the Executive's consent provided
such assignment does not diminish any of the Executive's benefits, rights or
obligations hereunder.

8.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

8.7 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.

TRIAD MEDICAL INC.

By: /S/ WILLIAM C. KLINTWORTH
William C. Klintworth, CEO

EXECUTIVE:

/S/ MICHAEL CAMPBELL
Michael Campbell

EXHIBIT 10.16

EMPLOYMENT AGREEMENT
BY AND BETWEEN
TRIAD MEDICAL INC.
AND STEVE BECSI
<PAGE>
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into on
September __, 1997, between TRIAD Medical Inc., a Delaware corporation (the
"Company"), and Steve Becsi, an individual (the "Executive").

RECITALS

WHEREAS, on the date of this Agreement, the Company, Kentec Acquisition,
Inc., a wholly owned subsidiary of the Company (the "Merger Subsidiary"), Kentec
Medical, Inc., a California corporation (the "Acquired Company"), and the
stockholders of the Acquired Company, are entering into an Agreement and Plan of
Reorganization (the "Acquisition Agreement"), under which the Acquired Company
will merge with the Merger Subsidiary in a merger (the "Merger") of which the
Acquired Company will be the surviving corporation and as a result of which the
Acquired Company will become a wholly owned subsidiary of the Company;

WHEREAS, the Executive serves as a director, officer and/or employee of
the Acquired Company;

AGREEMENT

1.1 EMPLOYMENT BY THE COMPANY. The Company agrees to employ the
Executive as Regional President, West Region of the Company for the duration of
the Employment Term (as hereinafter defined in Section 2 below), to render such
services and to perform such duties as are customarily attendant to such
position or management responsibility to which the Executive is assigned, as
well as such other duties, which are not inconsistent with such position or
management responsibility, as shall from time to time reasonably be requested by
the Board of Directors of the Company (the "Board of Directors") or the officers
of the Company senior to the Executive.

1.3 PLACE OF PERFORMANCE. The Executive shall be based in the Orange
County, California Metropolitan Area, and nothing in this Agreement shall
require the Executive to relocate his base of employment or principal place of
residence from the Orange County, California Metropolitan Area.

2
<PAGE>
2. EMPLOYMENT TERM. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on the date of consummation of
the Merger pursuant to the Acquisition Agreement (the "Commencement Date"), at
the Effective Time (as that term is defined in the Acquisition Agreement), and
shall continue through and expire on the third anniversary of the Commencement
Date (the "Expiration Date"), unless earlier terminated as herein provided.
However, if the Acquisition Agreement is terminated under the terms of its
Article XII, then this Agreement shall also terminate, automatically and without
the requirement of any action on the part of either of its parties.

3. COMPENSATION AND OTHER BENEFITS.

3.1 ANNUAL SALARY. As compensation for services to be rendered under
this Agreement, the Company shall pay the Executive a salary (the "Annual
Salary"), subject to such increases as the Board of Directors may, in its
discretion, approve, at a rate of $150,000 per annum. The Executive shall also
be eligible, during the Employment Term, to receive such other compensation,
whether in the form of cash bonuses, incentive compensation, stock options,
stock appreciation rights, restricted stock awards or otherwise (collectively,
the "Additional Compensation"), as the Board of Directors (or any committee of
the Board) may, in its discretion, approve and as are generally made available
to other members of the Company's Management holding comparable positions with
the Company. PROVIDED HOWEVER, that in addition to the above-referenced
discretionary Additional Compensation, Executive shall receive a guaranteed
year-end bonus of $75,000 per year during the first two years of the Employment
Term (the "Guaranteed Additional Compensation"). The Annual Salary, the
Additional Compensation and the Guaranteed Additional Compensation, shall be
payable in accordance with the applicable payroll and/or other compensation
policies and plans of the Company as in effect from time to time, less such
deductions as shall be required to be withheld by applicable law and
regulations.

3.4 REIMBURSEMENT OF BUSINESS EXPENSES. The Executive may incur
reasonable, ordinary and necessary business expenses in the course of his
performance of his obligations under this Agreement, including expenses for
travel, food and entertainment. The Company shall reimburse the Executive for
all such business expenses if (i) such expenses are incurred by the Executive in
accordance with the Company's business expense reimbursement policy, if any, as
may be established and modified by the Company from time to time, and (ii) the
Executive provides to the Company a record of and appropriate receipts for (A)
the amount of the expense, (B) the date,

3
<PAGE>
place and nature of the expense, (C) the business reason for the expense and (D)
the names, occupations and other data concerning individuals entertained
sufficient to establish their business relationship to the Company. The Company
shall have no obligation to reimburse the Executive for expenses that are not
incurred and substantiated as required by this Section 3.4.

4. NON-COMPETITION.

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<PAGE>
member of a group which controls, such entity and does not, directly or
indirectly, own five percent or more of any class of securities of such
entity. As used in this Section 4, the term "Territory" shall mean a
radius of 100 miles around the principal office at which the Executive is
employed on the Commencement Date. As used in this Section 4, the term
"Restricted Period" means the period beginning on the Commencement Date
and ending:

5
<PAGE>
independent sales agent of the Company away from the Company or encourage
any such employee or agent to leave such employment.

4.3 SEVERABILITY OF COVENANTS. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.

4.4 REFORMATION. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such

6
<PAGE>
court shall have the power to reduce the duration or scope of such provision, as
the case may be, and, in its reduced form, such provision shall then be
enforceable.

5. TERMINATION.

5.2 TERMINATION FOR CAUSE. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause. If such right is exercised,
then, subject to applicable law, the Company's obligation to the Executive shall
be limited to the payment of any unpaid Annual Salary, Additional Compensation
and other benefits, if any, accrued up to the effective date specified in the
Company's notice of termination (which date shall not be retroactive). As used
in this Section 5.2 and elsewhere in this Agreement, the term "Cause" shall mean
that (i) there shall have been a material breach by Executive of the terms of
this Agreement which either is not susceptible of cure or which is not cured
within a period of ten (10) days after notice thereof, and which shall include,
without limitation, the willful and continued failure or refusal by Executive to
perform the material duties for which he is employed or which are assigned to
him hereunder or chronic absenteeism; (ii) the Executive has knowingly,
willfully and persistently failed or refused to follow the reasonable policies
and directives established by the Board of Directors or executive officers of
the Company senior to the Executive; (iii) the Executive has wrongfully
misappropriated money or other assets or properties of the Company or any
subsidiary or affiliate of the Company, or has committed fraud; (iv) the
Executive has been convicted of or plead "nolo contendere" to any felony; or (v)
the Executive's alcoholism or drug addiction, unless Executive agrees to seek
treatment from a treatment program approved by the Company and promptly
commences and completes the program. The

7
<PAGE>
determination on behalf of the Company as to whether "cause" exists shall be
made by a majority vote of the Company's Board of Directors.

5.5 SEVERANCE BENEFIT. If at any time during or after the Employment
Term, the Executive's employment by the Company is terminated for any reason
other than (i) a termination for Cause under Section 5.2, (ii) his voluntary
resignation, or (iii) his death, then for a period of one year following the
date of termination of the Executive's employment (the "Severance Benefit
Period"), the Company's sole obligation (subject to applicable law) to Executive
shall be to continue to (a) pay to the Executive the amount of Annual Salary and
Guaranteed Additional Compensation in effect at the date of termination of his
employment in installments, in accordance with the Company's customary payroll
and tax withholding policies and procedures, over the twelve months immediately
following such termination of employment, and (ii) at the Company's expense,
continue to include the Executive and his eligible dependents under the coverage
of all group health, medical and dental insurance policies, plans and programs
maintained by the Company during Severance Benefit Period for the Company's
employees, or management employees, generally.

8
<PAGE>
commercially reasonable best efforts to make available, or to cause to be made
available, to the Executive and/or his dependents, at his expense, health,
medical and dental insurance coverage comparable to the coverage that is
generally available to management personnel from the Company. If at any time
during or after the Employment Term, the Executive's employment by the Company
is terminated by the Executive's death, the Company will use all commercially
reasonable best efforts to make available, or to cause to be made available, to
the Executive's dependents, at their expense, health, medical and dental
insurance coverage comparable to the coverage that is generally available to
management personnel from the Company.

8. OTHER PROVISIONS.

(i) if to the Company, to:

TRIAD Medical Inc.
23161 Mill Creek Drive
Suite 300
Laguna Hills, CA 92653
Telecopy No.: (714) 770-0727
Attn.: R. Tucker Coop, President

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<PAGE>
(ii) if to the Executive, to:

Steve Besci
19241 Stonecrest
Yorba Linda, CA 92669
Telecopy No.: (714) 970-9447

Either party may change its address for notice hereunder by notice to the
other party.

8.3 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.

10
<PAGE>
8.4 GOVERNING LAW; VENUE. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of California, without reference to principles governing
choice or conflicts of law.

8.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

8.7 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.

TRIAD MEDICAL INC.

By: /S/ WILLIAM C. KLINTWORTH
William C. Klintworth, CEO

EXECUTIVE:

/S/ STEVE BECSI
Steve Becsi

EXHIBIT 10.17

EMPLOYMENT AGREEMENT
BY AND BETWEEN
TRIAD MEDICAL INC.
AND M. DOUGLAS ARCHER
<PAGE>
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into on
September __, 1997, between TRIAD Medical Inc., a Delaware corporation (the
"Company"), and M. Douglas Archer, an individual (the "Executive").

RECITALS

WHEREAS, on the date of this Agreement, the Company , Sun Acquisition,
Inc., a wholly owned subsidiary of the Company (the "Merger Subsidiary"), Sun
Medical, Inc., a Texas corporation (the "Acquired Company"), and the
stockholders of the Acquired Company, are entering into an Agreement and Plan of
Reorganization (the "Acquisition Agreement"), under which the Acquired Company
will merge with the Merger Subsidiary in a merger (the "Merger") of which the
Acquired Company will be the surviving corporation and as a result of which the
Acquired Company will become a wholly owned subsidiary of the Company;

WHEREAS, the Executive serves as a director, officer and/or employee of
the Acquired Company;

AGREEMENT

1.1 EMPLOYMENT BY THE COMPANY. The Company agrees to employ the
Executive as Regional President Southwest of the Company for the duration of the
Employment Term (as hereinafter defined in Section 2 below), to render such
services and to perform such duties as are customarily attendant to such
position or management responsibility to which the Executive is assigned, as
well as such other duties, which are not inconsistent with such position or
management responsibility, as shall from time to time reasonably be requested by
the Board of Directors of the Company (the "Board of Directors") or the officers
of the Company senior to the Executive.

1.3 PLACE OF PERFORMANCE. The Executive shall be based in the
Greater Arlington Metropolitan Area, and nothing in this Agreement shall require
the Executive to relocate his base of employment or principal place of residence
from the Greater Arlington Metropolitan Area.

3. COMPENSATION AND OTHER BENEFITS.

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<PAGE>
relationship to the Company. The Company shall have no obligation to reimburse
the Executive for expenses that are not incurred and substantiated as required
by this Section 3.4.

4. NON-COMPETITION.

4
<PAGE>
term "Territory" shall mean a radius of 100 miles around the principal
office at which the Executive is employed on the Commencement Date. As
used in this Section 4, the term "Restricted Period" means the period
beginning on the Commencement Date and ending:

4.1.4 EMPLOYEES OF THE COMPANY. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or
indirectly, hire or solicit any employee or independent sales agent of the
Company away from the Company or encourage any such employee or agent to
leave such employment.

5
<PAGE>
4.1.5 CONSULTANTS OF THE COMPANY. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or
indirectly, hire or solicit any consultant then under contract with the
Company or encourage such consultant to terminate such relationship.

6
<PAGE>
4.5 ENFORCEABILITY IN JURISDICTIONS. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.

5. TERMINATION.

5.2 TERMINATION FOR CAUSE. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause. If such right is exercised,
then, subject to the applicable law, the Company's obligation to the Executive
shall be limited to the payment of any unpaid Annual Salary, Additional
Compensation and other benefits, if any, accrued up to the effective date
specified in the Company's notice of termination (which date shall not be
retroactive). As used in this Section 5.2 and elsewhere in this Agreement, the
term "Cause" shall mean that (i) there shall have been a material breach by
Executive of the terms of this Agreement which either is not susceptible of cure
or which is not cured within a period of ten (10) days after notice thereof, and
which shall include, without limitation, the willful and continued failure or
refusal by Executive to perform the material duties for which he is employed or
which are assigned to him hereunder or chronic absenteeism; (ii) the Executive
has knowingly, willfully and persistently failed or refused to follow the
reasonable policies and directives established by the Board of Directors or
executive officers of the Company senior to the Executive; (iii) the Executive
has wrongfully misappropriated money or other assets or properties of the
Company or any subsidiary or affiliate of the Company, or has committed fraud;
(iv) the Executive has been convicted of or plead "nolo contendere" to any
felony; or (v) the Executive's alcoholism or drug addiction, unless Executive
agrees to seek treatment from a treatment program approved by the Company and
promptly commences and completes the program. The determination on behalf of the
Company as to whether "cause" exists shall be made by a majority vote of the
Company's Board of Directors.

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<PAGE>
5.3 TERMINATION WITHOUT CAUSE. At any time during the period
beginning on the first anniversary of the Commencement Date and continuing
through the end of the Employment Term, the Company, upon a determination that
is made by: (i) R. Tucker Coop, in his capacity as president of the Company, or
(ii) the officer of the Company to whom the Executive directly reports, PROVIDED
THAT if such officer is not R. Tucker Coop, in his capacity as President of the
Company, then such termination shall require the concurrence of either: (a) R.
Tucker Coop, as president of the Company, or, (b) if R. Tucker Coop is no longer
the President of the Company, the Board of Directors, shall have the right,
exercisable by serving notice effective in accordance with its terms, to
terminate the Executive's employment under this Agreement and discharge the
Executive without Cause. If such right is exercised, the Company's sole
obligation to the Executive, subject to applicable law, shall be as set forth in
Section 5.5 below.

5.6 CONTINUATION OF HEALTH COVERAGE. If at any time during or after
the Employment Term, the Executive's employment by the Company is terminated for
any reason other than (i) a termination for Cause under Section 5.2, or (ii) his
death, then for the period beginning on the date of expiration of the Severance
Benefit Period and continuing until the earlier to occur of (a) the Executive's
obtaining other employment through which health, medical and dental insurance
coverage are available to him and (b) the Executive reaching age 65, the Company
will use all commercially reasonable best efforts to make available, or to cause
to be made available, to the Executive and/or his dependents, at his expense,
health, medical and dental insurance coverage comparable to the coverage that is
generally available to management personnel from the Company.

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If at any time during or after the Employment Term, the Executive's employment
by the Company is terminated by the Executive's death, the Company will use all
commercially reasonable best efforts to make available, or to cause to be made
available, to the Executive's dependents, at their expense, health, medical and
dental insurance coverage comparable to the coverage that is generally available
to management personnel from the Company.

8. OTHER PROVISIONS.

(i) if to the Company, to:

TRIAD Medical Inc.
23161 Mill Creek Drive
Suite 300
Laguna Hills, CA 92653
Telecopy No.: (714) 770-0727
Attn.: R. Tucker Coop, President

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(ii) if to the Executive, to:

Doug Archer
3625 Interlaken Drive
Plano, TX 75075
Telecopy No.: (___) __________

Either party may change its address for notice hereunder by notice to the
other party.

8.4 GOVERNING LAW; VENUE. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of Texas, without reference to principles governing choice or
conflicts of law.

8.5 ASSIGNMENT. This Agreement, and any rights and obligations
hereunder,

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may not be assigned by any party hereto without the prior written consent of the
other party, except that the Company may assign this Agreement to any of its
subsidiaries or affiliates without the Executive's consent provided such
assignment does not diminish any of the Executive's benefits, rights or
obligations hereunder.

8.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

8.7 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.

TRIAD MEDICAL INC.

By: /S/ WILLIAM C. KLINTWORTH
William C. Klintworth, CEO

EXECUTIVE:

/S/ M. DOUGLAS ARCHER
M. Douglas Archer

EXHIBIT 10.18

EMPLOYMENT AGREEMENT
BY AND BETWEEN
TRIAD MEDICAL INC.
AND ROBERT ZIMARDO
<PAGE>
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into on
September __, 1997, between TRIAD Medical Inc., a Delaware corporation (the
"Company"), and Robert Zimardo, an individual (the "Executive").

RECITALS

WHEREAS, on the date of this Agreement, the Company, various acquisitions
subsidiaries which are wholly owned subsidiaries of the Company (the "Merger
Subsidiaries"), and various medical product and service companies (the "Acquired
Companies"), and the stockholders of the Acquired Companies, are entering into
Agreements and Plans of Reorganization (the "Acquisition Agreements"), under
which the Acquired Companies will merge with the Merger Subsidiaries in a merger
(the "Merger") of which the Acquired Companies will be the surviving
corporations and as a result of which the Acquired Companies will become wholly
owned subsidiaries of the Company;

WHEREAS, the Executive is a stockholder and/or serves as a director,
officer and/or employee of the Acquired Company;

AGREEMENT

1.1 EMPLOYMENT BY THE COMPANY. The Company agrees to employ the
Executive as Vice President, Alternate Site of the Company for the duration of
the Employment Term (as hereinafter defined in Section 2 below), to render such
services and to perform such duties as are customarily attendant to such
position or management responsibility to which the Executive is assigned, as
well as such other duties, which are not inconsistent with such position or
management responsibility, as shall from time to time reasonably be requested by
the Board of Directors of the Company (the "Board of Directors") or the officers
of the Company senior to the Executive.

1.3 PLACE OF PERFORMANCE. The Executive shall be based in the United
States, and nothing in this Agreement shall require the Executive to relocate
his base of employment or principal place of residence from the United States.

1.4 TERMINATION OF EXISTING CONTRACTS. The Executive agrees that all
prior agreements and contracts, whether written or oral, relating to the
employment of the Executive by the (i) Company, or any of its subsidiaries and
affiliates or (ii) any of the Acquired Companies, shall be terminated effective
as of the commencement of the Employment Term. However, nothing in this Section
1.4 shall (i) affect accrued vacation, holiday or sick pay accruals (but only to
the extent such accruals were reflected in the Company's or Acquired Companies
financial statements), or (ii) require the Company to cease to make available to
the Executive, and, subject to his meeting all applicable eligibility
requirements, the Executive shall be entitled to continue to be covered under,
all group health, medical and dental insurance policies, plans and programs
maintained by the Company for its employees generally, or (iii) impair or
adversely affect any indemnification rights that Executive may have under
statutes empowering corporations in the Company's or any Acquired Company's
state of incorporation to indemnify their officers and directors, or under the
Company's or any Acquired Company's bylaws or any written indemnification
agreement between the Executive and the Company or any Acquired Company
implementing such statutory indemnification rights, but only with respect to
third party claims or proceedings that relate to actions taken by Executive as
an officer or director of the Company or any Acquired Company prior to the date
hereof and are disclosed in the Disclosure Statement to the Acquisition
Agreement or, if asserted or brought for the first time after the date hereof,
would not constitute a breach of the representations or warranties of the
Company or its Stockholders under the Acquisition Agreement.

3. COMPENSATION AND OTHER BENEFITS.

3.1 ANNUAL SALARY. As compensation for services to be rendered under
this Agreement, the Company shall pay the Executive a salary (the "Annual
Salary"), subject to such increases as the Board of Directors may, in its
discretion, approve, at a rate of $144,000 per annum. The Executive shall also
be eligible, during the Employment Term, to receive such other compensation,
whether in the form of cash bonuses, incentive compensation, stock options,
stock appreciation rights, restricted stock awards or otherwise (collectively,
the "Additional Compensation"), as the Board of Directors (or any committee of
the Board) may, in its discretion, approve and as are generally made available
to other members of the Company's Management holding comparable positions with
the Company. The Annual Salary and the Additional Compensation shall be payable
in accordance with the applicable payroll and/or other compensation policies and
plans of the Company as in effect from time to time, less such deductions as
shall be required to be withheld by applicable law and regulations.

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<PAGE>
relationship to the Company. The Company shall have no obligation to reimburse
the Executive for expenses that are not incurred and substantiated as required
by this Section 3.4.

4. NON-COMPETITION.

5. TERMINATION.

8. OTHER PROVISIONS.

(i) if to the Company, to:

TRIAD Medical Inc.
23161 Mill Creek Drive
Suite 300
Laguna Hills, CA 92653
Telecopy No.: (714) 770-0727
Attn.: R. Tucker Coop, President

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<PAGE>
(ii) if to the Executive, to:
Robert Zimardo
151 11th Avenue
Huntington Station, NY 11746
Telecopy No.: (___)

Either party may change its address for notice hereunder by notice to the
other party.

8.4 GOVERNING LAW; VENUE. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without reference to principles governing choice
or conflicts of law.

8.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

8.7 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.

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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.

TRIAD MEDICAL INC.

By: /S/ WILLIAM C. KLINTWORTH
William C. Klintworth, CEO

EXECUTIVE:

/S/ ROBERT ZIMARDO
Robert Zimardo

EXHIBIT 10.19

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this 6th day of December 1996, by and between TRIAD MEDICAL, INC., a California
corporation (the "Company"), and JACK SALADOW, an individual (the "Executive").

WITNESSETH:

WHEREAS, the Company desires to employ Executive as the Company's Vice
President of Marketing and Technology and the Executive desires to accept such
employment and serve in such position with the Company.

NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the Company and the Executive,
intending to be legally bound, hereby agree as follows:

1. EMPLOYMENT. The Executive is hereby employed by the Company as Vice
President of Marketing and Technology of the Company, and Executive hereby
accepts such employment, on the terms and conditions set forth in this
Agreement, which shall become binding on the parties as of the date of its
execution. Notwithstanding the foregoing, however, Executive's employment by the
Company hereunder shall not become effective until January 6, 1997 (the
"Effective Date") and Executive shall have no obligation to perform any
employment services, and no compensation or benefits and no rights as an
employee under applicable laws shall accrue to Executive, under this Agreement
during the period from the date of this Agreement to the Effective Date,
provided that no further action on the part of the Company or the Executive
shall be required for Executive's employment hereunder to become effective on
January 6, 1997.

2. AT-WILL EMPLOYMENT. This Agreement and Executive's employment
hereunder shall continue indefinitely, but may be terminated at any time by the
Company or Executive as provided in Section 5 hereof. The parties acknowledge
that this Agreement creates an at-will employment relationship between the
parties.

3. POSITION AND DUTIES.

3.01 SERVICE WITH THE COMPANY. During the Executive's employment
hereunder, the Executive agrees to devote all of his skills and efforts
to the performance of, and to perform diligently and on a timely basis,
such duties as shall be assigned to him from time to time by the
Company's Chief Executive Officer (the "CEO") or by the Board of
Directors of the Company.

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<PAGE>
3.02 NO CONFLICTING DUTIES; CONTINUING CONSULTING ASSIGNMENTS.

(a) NO CONFLICTING DUTIES. During the Executive's
employment hereunder, the Executive shall not serve as an
officer, director, employee, consultant or advisor to any other
business or otherwise engage in any business activities;
PROVIDED, HOWEVER, that Executive may serve as a director of one
or more corporations so long as (i) such other corporation does
not compete, directly or indirectly, with the Company or any of
its Affiliates (as defined in Subsection 14.07 hereof), (ii)
such service as a director of such other corporations does not
adversely affect Executive's ability to perform his duties under
this Agreement, and (iii) such service as a director to another
corporation is first approved by the Board of Directors of the
Company.

(b) EXCEPTIONS FOR CONTINUING CONSULTING ASSIGNMENTS.
Notwithstanding the foregoing provisions of Paragraph (a) of this
Subsection 3.02, during the remainder of calendar year 1996, Executive
shall be permitted to complete certain consulting assignments and
responsibilities that he had previously undertaken with the companies
listed on Schedule A hereto (the "Continuing Consulting Assignments");
except that Executive may continue his Continuing Consulting Assignment
for Becton Dickenson until April 30, 1997, provided that, commencing
January 1, 1997 he shall perform such consulting services for Becton
Dickenson in his capacity as an employee and exclusively for the benefit
of the Company, he shall so notify Becton Dickenson in writing thereof
and shall use his best efforts to have Becton Dickenson consent to the
assignment of the consulting agreement Executive has with Becton
Dickenson to the Company and to pay all fees and any other compensation
earned from, and all reimbursements of expenses incurred in connection
with, such engagement after December 31, 1996 directly to the Company
and he shall not accept any prepayments from Becton Dickenson of fees or
other compensation or reimbursements that are attributable or relate to
services that will be performed or expenses to be incurred subsequent to
December 31, 1996. In the event that Becton Dickenson refuses to consent
to such assignment and to agree to make post-December 31, 1996
compensation and expense reimbursement payments to the Company,
Executive shall be entitled to continue to provide consulting services
to Becton Dickenson until April 30, 1997; provided that all fees and
other compensation received by Executive for such services rendered
after December 31, 1996 to Becton Dickenson shall be paid by Executive
to the Company. Executive further agrees that, except as otherwise
provided hereinabove with respect to the Becton Dickenson Continuing
Consulting Assignment, (x) he will complete his duties under the
Continuing Consulting Assignments by no later than December 31, 1996,
(y) in performing the Continuing Consulting Assignments he will not hold
himself out as an officer or employee of the Company, and (z) he will
not undertake any new or additional consulting assignments or
responsibilities with any third parties, including, without limitation,
any of the companies listed on Schedule A or Schedule B hereto, unless
he first submits a proposal to provide such consulting services, in his
capacity as an employee and solely for the benefit of the Company, to
the Company's CEO, the CEO approves, in writing, the acceptance of such

2
<PAGE>
proposal by the Company, which approval the CEO may withhold in his
absolute discretion, and the third party agrees that the Company will be
the provider of such consulting services to and shall be entitled to
receive all fees and other compensation for such services directly from,
such third party.

(c) NO INCONSISTENT AGREEMENTS. Executive represents and
warrants that, with the exception of the Continuing Consulting
Assignments, Executive is under no agreements or commitments (written or
oral) that are inconsistent with his obligations set forth in this
Agreement or which would be breached by his execution of this Agreement
or the performance of his obligations or duties hereunder. Executive has
disclosed to the Company that, prior to the date hereof, he entered into
confidentiality agreements with the companies identified on Schedule B
hereto, which consist of the companies for which he has Continuing
Consulting Assignments and former consulting clients of Executive (the
"Third-Party Confidentiality Agreements"). Executive represents and
warrants that, to the best of his knowledge, such Third-Party
Confidentiality Agreements do and will not conflict with or interfere
with the performance of his duties hereunder and he agrees that he will
not take any actions within the scope of his employment or when
performing his duties with the Company that would violate or constitute
a breach of any of the Third-Party Confidentiality Agreements. Based on
the foregoing representations and warranties and agreements of Executive
with respect to the Third-Party Confidentiality Agreements, the Company
acknowledges that Executive shall not be in breach of this Agreement as
a result of his being a party to such Third-Party Confidentiality
Agreements.

4. COMPENSATION.

4.01 BASE SALARY. As compensation for all services to be
rendered by the Executive to the Company or any of its Affiliates under
this Agreement, the Company shall pay to the Executive a base annual
salary of One Hundred Twenty-Five Thousand Dollars ($125,000) (the
"Annual Base Salary"). The Annual Base Salary shall be paid in
installments in accordance with the Company's normal payroll procedures
and policies, provided that such installments shall be paid no less
frequently than twice per month. The amount of the Executive's Annual
Base Salary shall be reviewed annually by the CEO of the Company and,
after giving due consideration to recommendation of the CEO, the
Company's Board of Directors or the Compensation Committee thereof shall
determine whether Executive's Annual Base Salary shall be increased,
such determination to be made on the basis of an evaluation of the
Executive's performance, the performance of the Company and such other
factors as the CEO or the Company's Board of Directors or its
Compensation Committee shall deem appropriate.

4.02 INCENTIVE COMPENSATION. Executive shall be considered for
discretionary bonus compensation once each year, commencing in 1997, by
the Company's Board of Directors or the Compensation Committee thereof.
The determination of whether or not any bonus compensation will be
awarded, the amount thereof, if any, and the terms and

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<PAGE>
conditions on which any bonus award will be made payable, shall be
determined in the sole and absolute discretion of the Board of Directors
of the Company or any Compensation Committee thereof authorized to make
such determinations, provided that the President of the Company shall
submit his views to the Board of Directors or any Compensation Committee
thereof (as the case may be) with respect to the awarding of bonus
compensation to Executive.

4.03 PARTICIPATION IN BENEFIT PLANS. The Executive shall be
entitled to participate in all employee benefit plans or programs
(including vacation time, sick leave and holidays) generally available
to other executives of the Company, to the extent that Executive's
position, title, tenure with the Company, salary, age, health and other
qualifications make him eligible to participate therein. Schedule C
hereto contains a list of the benefit plans and programs in effect on
the date hereof in which Executive shall be eligible to participate,
provided that nothing in this Agreement shall obligate the Company to
continue such plans or programs and the Company shall be entitled, in
its sole and absolute discretion, to terminate, modify or replace any or
all of such plans and programs at any time. The Executive's
participation in any such plans or programs shall be subject to the
provisions, rules and regulations thereof that are generally applicable
to all participants therein. Set forth in Schedule D hereto is the
amount of paid vacation to which Executive shall be entitled during his
employment with the Company. Executive agrees that he will schedule his
vacations at times reasonably acceptable to the Company's CEO.

4.04 EMPLOYEE STOCK OPTIONS. Concurrently herewith, Triad
Holdings, Inc., which is the owner of 100% of the outstanding shares of
common stock of the Company ("Triad Holdings"), and Executive are
entering into an Employee Stock Option Agreement in the form of Schedule
E hereto (the "Option Agreement"), which provides for the grant by Triad
Holdings to Executive, under Triad Holdings' 1992 Stock Option and
Restricted Stock Purchase Plan, as amended and restated effective May
14, 1996 (the "Option Plan"), of options which will entitle him to
purchase up to an aggregate of thirty thousand (30,000) shares of common
stock of Triad Holdings (the "Stock Options"), on the terms and subject
to the conditions contained in the Option Agreement and the Option Plan.
The Option Agreement and Option Plan, and not this Agreement, shall
govern all of the respective rights and obligations of Triad Holdings
and Executive with respect to the Options, including, without
limitation, the respective rights and obligations of Triad Holdings and
Executive with respect to the Options in the event of a termination of
Executive's employment with the Company.

4.05 EXPENSES. In accordance with the Company's policies
established from time to time, the Company will pay or reimburse the
Executive for all reasonable and necessary out-of-pocket expenses
incurred by him in the performance of his duties under this Agreement,
subject to the presentment of appropriate vouchers and expense reports
substantiating the amount thereof and the business purposes for which
such expenses were incurred. Such expense reimbursement shall include a
mileage allowance to reimburse

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<PAGE>
Executive for the expense incurred in utilizing his personal automobile
on Company business of $0.10 for each mile of such usage. In addition,
during his employment with the Company, Executive shall be entitled to
an automobile allowance in the amount of $650.00 per month, payable
monthly, commencing in January 1997.

5. TERMINATION OF THE EXECUTIVE'S EMPLOYMENT.

5.01 DISABILITY. In the event the Executive becomes totally
disabled, this Agreement and Executive's employment may be terminated by
the Company, in its sole discretion, effective on written notice thereof
to the Executive that shall specify that such termination is due to the
Executive's total disability (as hereinafter defined). For purposes of
this Agreement, the term "totally disabled" or "total disability" means
an inability of Executive, due to a physical or mental illness, injury
or impairment, to perform a substantial portion of his duties for a
period of 180 consecutive days, as determined by the Company's Board of
Directors. If there is a dispute between Executive and the Company as to
whether or not the Executive is totally disabled, the matter shall be
determined by a licensed physician who shall be selected by the Company
and approved by the Executive and whose determination as to whether or
not the Executive is totally disabled shall be final and binding on both
the Company and the Executive. Executive agrees that he will not
unreasonably withhold or delay his approval of the physician selected by
the Company and if he does unreasonably withhold or delay such approval,
or fails to cooperate fully with such physician, the determination of
the Board of Directors as to whether the Executive is totally disabled
shall be final and binding on the Executive. The fees and expenses of
the physician selected by the Company and approved by Executive, for
services rendered in determining whether or not Executive is totally
disabled, shall be borne by the Company. In the event of a termination
pursuant to this Subsection 5.01, the Company's sole liability to
Executive shall be (i) to pay Executive the installments of his then
Annual Base Salary accrued hereunder and unpaid for services rendered by
Executive up to the date of such termination, together with any accrued
but unused vacation, (ii) to pay the unpaid portion, if any, of any
bonus that was previously awarded to him but which is unpaid as of the
effective date of such termination of employment, provided the payment
of such bonus is not dependent on his continued employment with the
Company or the satisfaction of any other conditions that had not been
satisfied at the time of the termination of his employment, and (iii) to
provide for the continuation, for a period of one (1) year following the
termination of Executive's employment pursuant to this subsection 5.01,
of health and dental insurance for Executive and his dependents
comparable to the health and dental insurance coverage being provided by
the Company to Executive and his dependents on the day immediately prior
to the date of termination of his employment, at the sole expense of the
Company, or, to the extent such continuation is not permitted or
practicable under the Company's health and dental insurance plans,
reimbursement by the Company for such reasonable and comparable coverage
as Executive is able to obtain for such one (1) year period, provided
that such reimbursement shall not exceed the premiums which the Company
was paying for health and dental

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<PAGE>
coverage for Executive and his dependents on the day prior to such
termination of employment (hereinafter, the "Disability Health Insurance
Continuation Benefit").

5.02 DEATH OF EXECUTIVE. This Agreement and Executive's
employment shall terminate immediately, without notice, upon the death
of Executive. In such event, the Company's sole liability shall be (i)
to pay Executive's estate the installments of his Annual Base Salary
accrued hereunder and unpaid for services rendered by Executive up to
the date of such termination, together with any accrued but unused
vacation, (ii) to pay the unpaid portion, if any, of any bonus that was
previously awarded to him but which is unpaid as of the effective date
of such termination of employment, provided the payment of such bonus
was not dependent on his continued employment with the Company any or
any other conditions that had not been satisfied at the time of the
termination of his employment, and (iii) to provide for the
continuation, for a period of one (1) year following the termination of
Executive's employment pursuant to this Subsection 5.02, of health and
dental insurance for Executive's dependents comparable to the health and
dental insurance coverage being provided to them by the Company on the
day immediately prior to the date of such termination of employment, at
the sole expense of the Company, or, to the extent such continuation is
not permitted or practicable under the Company's health and dental
insurance plans, reimbursement by the Company for such reasonable and
comparable health and dental insurance coverage as Executive's
dependents are able to obtain, provided that such reimbursement shall
not exceed the amount which the Company was paying for health and dental
coverage for Executive's dependents on the day prior to such termination
of employment.

5.03 TERMINATION FOR JUST CAUSE. The Company may terminate this
Agreement and Executive's employment at any time for "Just Cause" (as
hereinafter defined) immediately upon written notice to Executive. As
used herein, the term "Just Cause" shall mean (i) habitual neglect or a
repeated failure of Executive to perform his duties under this
Agreement, provided that he had received at least one notice in writing
from the Company prior to such termination, concerning any neglect of or
failure to perform such duties under this Agreement; (ii) Executive's
willful misconduct in or in connection with the performance of his
duties to the Company, which would include, but would not be limited to,
engaging in discriminatory acts or practices or in acts constituting
sexual harassment; (iii) Executive's commission of any act of fraud or
embezzlement against the Company, Triad Holdings or any of their
respective subsidiaries or Affiliates or any conviction or admission of
a felony or other offense involving dishonesty or moral turpitude; (iv)
Executive's willful, knowing or reckless unauthorized dissemination of
Confidential Information concerning either of the Company, Triad
Holdings or any of their Affiliates; and (v) any willful or reckless
breach by Executive of Sections 6, 7, 8 or 9 of this Agreement or a
material breach of his duty of loyalty to the Company which applicable
corporate law imposes on executive officers of corporations. The notice
of termination to Executive shall specify that the termination is for
Just Cause and whether such termination is based on events or
circumstances falling under Clause (i), (ii), (iii), (iv) or (v) of the
immediately preceding sentence hereof. In the event

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of a termination hereunder for Just Cause, the Company's sole liability
to Executive shall be to pay Executive the installments of his then
Annual Base Salary accrued hereunder and unpaid for services rendered by
Executive up to the date of such termination, together with any accrued
but unused vacation.

5.04 TERMINATION WITHOUT JUST CAUSE: TERMINATION BY EXECUTIVE
FOR GOOD REASON.

(a) The Company may terminate this Agreement and Executive's
employment for any reason other than Executive's total disability or
death or an event or circumstance constituting Just Cause (as defined in
Subsection 5.03 above), or for no reason (a "Termination without Just
Cause"), at any time effective on thirty (30) days prior written notice
to Executive specifying that such termination is a "Termination without
Just Cause" and the effective date of such termination. The Executive
may terminate this Agreement for Good Reason in the manner and on the
terms and conditions set forth in Subsection 5.05 hereof. In the event
of any Termination without Just Cause by the Company pursuant to this
Section 5.04, or in the event of a Termination for Good Reason pursuant
to Subsection 5.05 hereof, the Company's sole liability to Executive
shall be (i) to pay to Executive the installments of his then Annual
Base Salary accrued hereunder but unpaid for services rendered by
Executive up to the effective date of such termination, together with
any accrued but unused vacation, (ii) subject to the terms and
conditions contained in Paragraph 5.04(b) hereof, to pay to Executive
the unpaid portion, if any, of any bonus that was previously awarded to
him and is unpaid at the effective date of such termination of
employment, (iii) to pay to Executive severance compensation in an
amount equal to one and one-half (1 1/2) years' of the Executive's
Annual Base Salary then in effect (the "Severance Compensation"), which
shall be paid in thirty-six (36) equal twice-monthly installments over
that one and one-half (1 1/2) year period (the "Severance Period"),
commencing not later than on the next succeeding date, following the
effective date of termination of Executive's employment pursuant to this
Subsection 5.04 or Subsection 5.05 (as the case may be), on which
Executive would otherwise have received his twice-monthly installment of
his Annual Base Salary had such termination not occurred, and (iv) the
continuation, for a period of one (1) year following the termination of
Executive's employment pursuant to this Subsection 5.04 or Subsection
5.05, as the case may be (the "Benefit Continuation Period"), of
disability insurance for Executive and health and dental insurance for
Executive and his dependents that are comparable to the disability
insurance being provided by the Company to Executive, and the health and
dental insurance that was being provided by the' Company to Executive
and his dependents, on the day immediately prior to the date of
termination of his employment either by the Company or Executive
pursuant to this Subsection 5.04 at the sole expense of the Company, or,
to the extent such continuation is not permitted or practicable under
the Company's disability or health and dental insurance plans,
reimbursement by the Company for such reasonable and comparable
insurance coverage as Executive is able to obtain for the one (1) year
Benefit Continuation Period, provided that such reimbursement shall not
exceed the amount which the Company was paying for such disability and
health and dental insurance coverages on the day prior to such
termination of employment. For

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ease of reference, the insurance benefits described above that Executive
becomes entitled to receive during the Benefit Continuation Period
pursuant to the provisions of this Subsection 5.04 or the provisions of
Subsection 5.05 shall sometimes be referred to as the "Post-Termination
Insurance Benefits."

(b) For purposes of this Subsection 5.04 and also Subsection
5.05 of this Agreement, a bonus shall be deemed awarded to Executive at
such time as the Board of Directors, or the Compensation Committee
thereof (if it has been delegated authority by the Board to make such
determinations) has determined that Executive has earned his bonus,
either in whole or in part, and determined the amount thereof that is
payable to him; and a bonus that has been awarded to Executive in the
manner herein provided, but which has not been paid in whole or in part
to him, prior to a termination of Executive's employment pursuant to
this Subsection 5.04 or Subsection 5.05 hereof, shall be payable to him
on the date or dates on which such awarded bonus would otherwise have
been paid to him but for such termination of employment, PROVIDED,
HOWEVER, that, notwithstanding the foregoing, no such bonus, or any
portion thereof, that has not been paid as of the date of any such
termination of Executive's employment, whether pursuant to this
Subsection 5.04 or Subsection 5.05 hereof, shall be payable to
Executive, if the plan or program, or terms and conditions, under or
pursuant to which such bonus is payable:

(i) Makes it a condition precedent to Executive's right
to receive payment of the awarded bonus (or portion thereof)
that (A) the Executive remain in the employ of the Company for a
period of more than six (6) months after the date on which the
bonus was awarded, or (B) the Company or the Executive, or both,
achieve specified performance goals or targets in any fiscal
period or year of the Company subsequent to the year or other
fiscal period for which the bonus was awarded, and either of
those conditions was not satisfied prior to the date of the
termination of his employment, or

(ii) Provides for a vesting schedule, pursuant to which
some or all of the bonus will become payable (either in whole or
in installments) and which requires the Executive to have
continued in the Company's employ throughout one or more of the
periods set forth in such vesting schedule (a "Vesting Period"
or "Vesting Periods") as a condition of receiving the unpaid
bonus, or any installment or installments thereof, and
Executive's termination of employment has occurred prior to the
expiration of such Vesting Period or Vesting Periods (as the
case may be), or

(iii) Requires the satisfaction of any other condition
precedent which was not satisfied prior to the date of
termination of Executive's employment, other than a condition
which requires no more than that Executive remain in the
Company's employ for a period of not more than six (6) months
following the date on which the bonus was awarded.

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5.05 EVENTS CONSTITUTING GOOD REASON.

(a) Unless initiated or concurred in by Executive, each of the
following events shall constitute an event of "GOOD REASON" the
occurrence of any of which, without the written consent of Executive,
shall entitle Executive to terminate his employment with the Company for
Good Reason: (i) a decrease in Executive's Annual Base salary, (ii) a
material reduction in Executive's duties or authority as Vice President
of Marketing, (iii) a change in the location at which Executive
customarily performs his duties as Vice President of Marketing of more
than fifty (50) miles from the present location in Laguna, Hills
California, or (iv) the acquisition of all or substantially all of the
Business of the Company (whether by sale of stock, sale of assets,
merger, or consolidation or otherwise) in connection with which the
purchaser(s) thereof do not either confirm, in writing, the continued
effectiveness of this Agreement or assume this Agreement, (v) the
material and disproportionate (as compared to other senior managers)
reduction by the Company of benefits available to Executive under
employee benefit plans or programs (other than stock option or purchase
plans or programs), that either are in effect on the date hereof or
which are hereafter adopted by the Company and in which Executive is
eligible to participate, it being understood that no such reduction
shall be deemed to have occurred if the Company adopts or implements a
substitute plan or program for Executive that provides substantially
comparable benefits at no materially greater cost to the participants,
(vi) a breach by the Company of any of its material obligations to
Executive under this Agreement which continues unremedied for thirty
(30) days following receipt of a written notice thereof from Executive
that specifies in detail the nature of such breach, or (vii) the
resignation or termination of employment by Executive, for any reason or
no reason, upon the occurrence of, or at any time within twelve (12)
months following, a Change in Control of the Company (as defined in
Paragraph 5.05(b) hereof).

(b) A termination of employment by Executive for Good Reason
shall become effective ten (10) business days following the delivery by
Executive to the Company of written notice ("Good Reason Notice")
stating that Executive is terminating his employment for Good Reason and
specifying the event or circumstance constituting the same, if the
Company does not, within such ten (10) business day period, inform
Executive of its intent to remedy or rescind the event or circumstance
giving rise to such notice of termination; or thirty (30) days following
delivery of the Good Reason Notice, if such notice of intent is given by
the Company, but the event or circumstance giving rise to the Good
Reason Notice is not remedied or rescinded within such thirty (30) day
period.

(c) In the event of the occurrence of, and the Company's failure
to remedy or rescind, an event or action by the Company that would
entitle Executive to terminate his Employment for Good Reason, the
Executive's sole right and remedy shall be to terminate his employment
with the Company, in the manner and within the time period as
hereinafter set forth and, in the event Executive so terminates his
employment, to receive, and the Company's sole liability to Executive,
in the event of such a termination of employment by Executive for Good
Reason, shall be limited to, the payment, on the terms and subject to
the

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conditions set forth in Subsection 5.04(a) and (b) hereof, of
Executive's remaining unpaid salary and unused vacation accrued to the
date of such termination of employment, any awarded but unpaid bonuses
and the Severance Compensation specified, respectively, in Clauses (i),
(ii) and (iii) of Subsection 5.04 hereof and the Post-Termination
Insurance Benefits that are set forth in Clause (iv) of Subsection 5.04
hereof, as if such termination of employment by Executive for Good
Reason had been a termination of his employment by the Company without
Just Cause.

(d) The Executive shall be deemed to have consented to an event
that would otherwise entitle him to terminate his Employment for Good
Reason, if he fails to exercise his termination right under this
Subsection 5.05 within thirty (30) days following the earlier of (i) his
receipt of written notice from the Company that it intends to proceed
with an action that constitutes an event of Good Reason (as hereinabove
defined) or (ii) the actual happening or occurrence of such event and,
in the event of such failure, any subsequent termination by Executive of
his employment hereunder shall constitute a termination of employment by
Executive without Good Reason pursuant to Subsection 5.06 below.

(e) For purposes hereof, a "CHANGE IN CONTROL OF THE COMPANY"
shall be deemed to have occurred upon (A) the sale or issuance of
capital stock of Triad Holdings or the Company (other than as a result
of a public offering of the securities of the Company or Triad
Holdings), or any merger, consolidation or combination to which Triad
Holdings or the Company is a party if, as a result thereof, the persons
or entities that were the holders of Triad Holdings' outstanding capital
stock or the person or persons who were the holders of the Company's
outstanding capital stock (as the case may be) immediately prior
thereto, or their Affiliates, do not possess voting power (under
ordinary circumstances) to elect a majority of the Triad Holdings Board
of Directors or the Company's Board of Directors (as the case may be)
after such transaction, or (B) the sale to any person or entity that is
not an Affiliate of Triad Holdings or the Company, of all or
substantially all of the assets of Triad Holdings, determined on a
consolidated basis.

5.06 TERMINATION BY EXECUTIVE WITHOUT GOOD REASON. Executive shall be
entitled to terminate his employment in the absence of an event constituting
Good Reason at any time, effective on thirty (30) days prior written notice to
the Company. In the event of any such termination of employment by Executive,
this Agreement also shall terminate and the Company's sole liability to
Executive shall be to pay Executive the installments of his then Annual Base
Salary accrued hereunder and unpaid for services rendered by Executive up to the
date of such termination, together with any accrued and unused vacation. In the
event Executive gives such written notice of such termination to the Company,
the Company shall be entitled to terminate Executive's employment and this
Agreement effective on the 10th day after the date of such notice rather than
having to wait for the expiration of the thirty (30) days following Executive's
notice of termination, provided that such earlier termination by the Company
shall not affect Executive's right to receive the remaining installments of his
then Annual Base Salary and unused vacation accrued to the thirtieth (30th) day
following notice by Executive of his termination of employment to the Company.
Notwithstanding

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anything to contrary contained in this Agreement, Executive's notice of
termination of employment given more than thirty (30) days following the
occurrence of an event that would constitute Good Reason, as defined in
Subsection 5.05 hereof, shall constitute a termination of employment by
Executive without Good Reason pursuant to this Subsection 5.06.

5.07 PROVISIONS GOVERNING PAYMENTS DUE ON TERMINATION OF EMPLOYMENT. Any
Severance Compensation to which Executive becomes entitled as a result of a
termination of Executive's employment pursuant to Subsection 5.04 or 5.05 hereof
shall not be reduced by any compensation he may receive during the Severance
Period from any alternative employment he obtains during the Severance Period.
If, at any time during the Benefit Continuation Period, Executive obtains
disability or health or dental insurance as a result of obtaining alternative
employment that provides disability, health or dental insurance benefits
comparable or superior to those being provided or otherwise paid by the Company
("Alternative Benefits"), then, the Company's obligation to provide continuation
of, or reimbursement for, whichever of the disability or health or dental
insurance benefits (as the case may be) to which he becomes entitled as a result
of his alternative employment shall terminate at such time as Executive or
Executive and his dependents (as the case may be) become eligible to receive
such Alternative Benefits. Executive shall promptly notify the Company if and
when, during the Benefit Continuation Period, that he obtains any Alternative
Benefits. In the event of any termination of Executive's employment by the
Company without Just Cause or by Executive for Good Reason, Executive shall be
entitled only to the payments and benefits described in Subsection 5.04 and to
any rights he may have under the Option Agreement and shall not be entitled to
receive or obtain from the Company or any Affiliate thereof, nor shall the
Company or any Affiliate thereof have any liability for, any other salary,
benefits or other payments, whether pursuant to this Agreement or otherwise.
Payments made to Executive on or after the effective date of termination of
Executive's employment pursuant to any of the Subsections of this Section 5
shall be subject to withholding as provided in Subsection 14.03 of this
Agreement.

6. CONFIDENTIAL INFORMATION.

6.01 USE AND DISCLOSURE RESTRICTIONS. Executive will hold in
strict confidence and not disclose to any person or entity, without the
express prior written authorization of the CEO or the Board of Directors
of the Company, any financial statements or other financial information
or data (historical or prospective) of or relating to the Company or any
Affiliate that has not been publicly disclosed by the Company, any
manufacturing or marketing data or any information relating to any
technique, process, formula, developmental or experimental work, work in
progress, business methods, trade secrets, any information relating to
customers or clients of the Company or any of its Affiliates (including,
without limitation, any customer or client list or lists of customer or
client sources), acquisition candidates or prospects, or any business or
marketing plans, or any other secret, proprietary or confidential
information of or relating to the Company or any of its Affiliates or
any of their products, services, customers, clients, sales or other
business activities or affairs, including without limitation, any
information relating to inquiries made by the Company or

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<PAGE>
any Affiliate or negotiations with respect to any Venture or Acquisition
(as such terms are defined in Section 8). Executive further agrees that
be will not make use of or disclose to any third party any of the above
at any time after termination of his employment. Upon termination of
employment, Executive shall deliver to the Company all documents,
records, notebooks, work papers and all similar repositories containing
any information concerning the Company or any Affiliate, whether
prepared by Executive, the Company or anyone else, together with any
other assets of the Company in his possession. The foregoing
restrictions shall not apply to (i) information which is or becomes,
other than as a result of a breach of this Agreement, generally
available to the public or (ii) the disclosure of information required
pursuant to a subpoena or other legal process; provided that the
Executive shall notify the Company, in writing, of the receipt of any
such subpoena or other legal process requiring such disclosure
immediately after receipt thereof and shall provide reasonable
cooperation with any efforts by the Company to quash such subpoena or
other legal process or to obtain a protective order with respect
thereto.

6.02 USE OF CONSULTING CLIENT IDENTIFICATION INFORMATION. The
restrictions contained in Subsection 6.01 that prohibit the use by
Executive of lists or identities of clients or customers of the Company
shall be subject to the limited exception set forth hereinafter in this
Subsection 6.02. In the event of any termination of Executive's
employment hereunder for any reason whatsoever, then, at any time after
the effective date of such termination, Executive, and any Controlled
Entity (as hereinafter defined), shall be permitted to use information,
consisting solely of the identities and addresses of Triad Consulting
Clients (as hereinafter defined) and the names of the contact persons at
the Triad Consulting Clients (hereinafter collectively "Client
Identification Information"), solely for the purpose of marketing and
offering to provide, and providing, either in his individual capacity or
as an employee or agent of any Controlled Entity, consulting services
with respect to the marketing of healthcare products and services of the
type and nature that Executive has provided, in his individual capacity
or as an employee or agent of any Controlled Entity, during the past
nine (9) years ("Healthcare Consulting Services"), without thereby
either breaching the provisions of this Subsection 6.01 above, which
would otherwise prohibit or restrict such use by Executive of Client
Identification Information, or affecting any rights Executive may have,
pursuant to Subsection 5.04 or Subsection 5.05 hereof, to receive any
Severance Compensation or Post-Termination Benefits following the
termination of his employment with the Company; PROVIDED, HOWEVER, that:

(a) If within five days (x) after the termination of Executive's
employment hereunder pursuant to Subsection 5.04 or Subsection 5.05
hereof, the Company confirms in writing that Executive is entitled to
receive, and that the Company or any Affiliate thereof will be paying to
him, under the applicable provisions of either such Subsection 5.04 or
Subsection 5.05, Severance Compensation and Post-Termination Benefits
(as defined in Subsection 5.04 above), or (y) after termination of
Executive's employment pursuant to Subsection 5.01, Subsection 5.03 or
Subsection 5.06 hereof, the Company notifies Executive in writing that,
despite the fact that he is not entitled to any Severance

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<PAGE>
Compensation or Post-Termination Benefits it intends to pay such
Severance Compensation and provide such Post-Termination Benefits to
Executive for a period of up to six (6) months, then Executive and any
Controlled Entity shall not make any use of any Client Identification
Information, including, without limitation, any uses that would
otherwise be permitted by the first paragraph of this Subsection 6.02
(the "Permitted Uses"), such as, but not limited to, any use by the
Executive or any Controlled Entity of any Client Identification
Information to seek part-time employment from, to make any offer to
provide any consulting services to, or to solicit or accept any
solicited or unsolicited offer of any part-time employment or any
engagement as a consultant or advisor from, any Triad Consulting
Customer (other than a Prior Consulting Client):

(i) during the six (6) months immediately following the
effective date of the termination of Executive's employment with
the Company pursuant to Subsection 5.04 or Subsection 5.05
hereof, or

(ii) for so long a period (not to exceed six months) as
the Company or any Affiliate is voluntarily paying Severance
Compensation and providing Post-Termination Benefits to
Executive following a termination of his employment pursuant to
Subsection 5.01, Subsection 5.03 or Subsection 5.06 hereof
(hereinafter the "Voluntary Severance Benefits"), which
Voluntary Severance Benefits the Company may terminate at any
time, effective on five (5) days' prior written notice to
Executive, provided that upon such a termination the Executive
and any Controlled Entity may make any Permitted Use of Client
Identification Information pursuant to the initial paragraph of
this Subsection 6.02 above, and provided, further, that if
Executive's termination was due to his total disability pursuant
to Subsection 5.01 of this Agreement, the termination of the
Voluntary Severance Benefits by the Company shall not affect
Executive's rights to the Disability Health Insurance
Continuation Benefit described in Subsection 5.01.

Any breach by Executive, either directly or indirectly through any
Controlled Entity, of any of the covenants of Executive contained in
this Subsection 6.02 shall constitute a breach of Executive's
confidentiality obligations to the Company under this Section 6.
Notwithstanding the foregoing, following any termination of Executive's
employment for any reason, Executive may seek full-time employment from
any Triad Consulting Client.

(b) Nothing in this Subsection 6.02 shall entitle, or be
construed to entitle, Executive to use any Confidential Information or
proprietary information belonging to the Company other than the Client
Identification Information, which Client Identification Information
Executive agrees that he and any Controlled Entity shall use only in
accordance with and subject to the terms and restrictions contained in
this Subsection 6.02 and in no event shall Executive or any Controlled
Entity disclose any such Client Identification Information to any third
party or permit any third party to make any use thereof. Accordingly, it
is hereby expressly agreed that, if Executive accepts employment, or

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<PAGE>
Executive or a Controlled Entity obtains a consulting or advisory
position, with any person or entity, whether with a Triad Consulting
Client as permitted hereunder or with any other person or entity,
including any Prior Consulting Client, following termination for any
reason of his employment with the Company, neither Executive nor any
Controlled Entity shall make any use of any Confidential Information of
the Company in rendering services to such person or entity at any time.

6.03 CERTAIN DEFINITIONS AND OTHER PROVISIONS. For purposes of
Subsection 6.02 above and this Subsection 6.03 (i) the term "Controlled Entity"
shall mean company, partnership, limited liability company or other business
entity of which Executive owns, directly or indirectly, a number of the
outstanding voting shares or a percentage of the general partnership or other
ownership interests that gives him control over the policies and management of
any such entity; and (ii) the term "Triad Consulting Clients" shall mean any
corporation or other business entity (such as, but not limited to a partnership,
limited liability company or sole proprietorship) or any person to which the
Company, or any Affiliate thereof, provides any consulting services during the
term of this Agreement, but shall not include any corporation or other business
entity or person to which the Company or any Affiliate thereof sells products or
renders non-consulting services, whether or not the Company or any Affiliate
thereof also provides consulting services to such corporation or other business
entity or person, unless the revenues of the Company and/or any Affiliate
thereof from the consulting services rendered to such corporation or other
business entity or person (as the case may be) during the term of this Agreement
represented more than 50% of the total revenues received from such corporation
or other business entity or person during the term of this Agreement. Executive
hereby represents that Schedule F hereto contains an accurate list of the
identities of each corporation or other business entity to which Executive or
any Controlled Entity rendered any Healthcare Consulting Services during the
past nine (9) years (the "Prior Consulting Clients"). Nothing herein or
elsewhere in this Agreement shall restrict or prohibit, or is intended to strict
or prohibit, Executive or any Controlled Entity from accepting employment with
or offering or providing any consulting services to, any Prior Consulting Client
at any time after the termination of Executive's employment hereunder, even if
that Prior Consulting Client becomes a Triad Consulting Client during or after
the term of this Agreement, so long as the Executive does not make use of any
Confidential Information of the Company or any of its Affiliates in connection
with or related to the rendering of services to such Prior Consulting Client.

7. COVENANTS AGAINST ACTIONS DAMAGING THE COMPANY. The Executive agrees
that, during the term of this Agreement or at any time thereafter, he will not
(i) make any claim that the Executive has any right, interest or title, of any
kind or nature whatsoever, in or to any products, methods, practices, processes,
discoveries, ideas, improvements, devices, creations, business plans or systems,
or, subject to applicable labor laws, inventions relating to the business of the
Company or any Affiliate, used, developed or discovered by the Company, any
Affiliate or by Executive at any time during his employment with the Company or
any Affiliate thereof, or (ii) disclose any of such matters to any third party.
Executive further agrees that during the term of this Agreement and for a period
of two (2) years following the termination (whether by the Company or the
Executive) of his employment with the Company, he shall not, whether for himself
or on behalf of or in

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<PAGE>
conjunction with any third party, hire any employee of the Company or any
Affiliate or induce or entice any employee of the Company or any Affiliate to
leave his employment with the Company or any Affiliate.

8. VENTURES AND ACQUISITIONS. If, during the Executive's employment
hereunder, Executive is engaged in or associated with the planning or
implementing of any project, program or venture involving the Company or any
Affiliate and a third party or parties (a "Venture"), or any discussions,
analyses or negotiations with respect to an investment in, merger, acquisition
or purchase, directly or indirectly, of the stock, assets or business of any
entity engaged in an the wholesale distribution of medical products or services
or any other business (an "Acquisition"), all rights in any such Venture or
Acquisition and any opportunity to make any investment in the entity to be so
acquired (the "Target") shall belong to the Company or such Affiliate and shall
constitute a corporate opportunity belonging exclusively to the Company or such
Affiliate. Except as approved in writing by the Board of Directors, the
Executive shall not be entitled to any interest in any such Venture or to invest
or solicit any third party to invest in the Target or consummate the
Acquisition, or to receive any commission, finder's fee or other compensation in
connection therewith.

9. NON-COMPETITION. Executive agrees that during his employment by the
Company (whether under this Agreement or otherwise), or by any Affiliate, he
will not engage or participate (whether as employee, employer, consultant,
agent, principal, partner, stockholder, lender, corporate officer, director or
other representative capacity) in, or otherwise render assistance to, any
business that competes with the business of the Company in any city or county
within the United States in which the Company is then engaging and continues to
engage in its business. In the event any court shall refuse to enforce any
portion of the covenant in this Section 9, then such unenforceable portion shall
be deemed eliminated and severed from said Covenant for the purpose of said
court's proceedings to the extent necessary to permit the remaining portions of
this covenant to be enforced. Notwithstanding the foregoing, Executive may own
up to 1% of the shares of any class of capital stock of any corporation that
engages in any business that is competitive with the Company, provided that such
class of capital stock is listed for trading on the New York Stock Exchange, the
American Stock Exchange or the NASDAQ National Market System and such shares are
held for investment only.

10. ASSIGNMENT. This Agreement shall not be assignable, in whole or in
part, by either party without the written consent of the other party, except
that the Company may, without the consent of the Executive, assign its rights
and obligations under this Agreement to an Affiliate; or to any unaffiliated
corporation, firm or other business entity (i) with or into which the Company
may merge or consolidate, or (ii) to which the Company may sell or transfer all
or substantially all of its assets. After any such assignment by the Company,
the Company shall be discharged from all further liability hereunder and such
assignee shall thereafter be deemed to be the Company for the purposes of all
provisions of this Agreement including this Section 10.

11. EQUITABLE RELIEF. The Executive agrees that it would be difficult to
compensate the Company fully for damages for any violation of the provisions of
this Agreement, including, without

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limitation, the provisions of Sections 6, 7, 8 and 9. Accordingly, the Executive
specifically agrees that the Company shall be entitled to temporary, preliminary
and permanent injunctive relief and to the remedy of specific performance to
enforce the provisions of this Agreement. This provision with respect to
injunctive relief and specific performance shall not, however, diminish the
right of the Company to claim and recover damages in addition to injunctive
relief and specific performance.

12. SURVIVAL. The provisions of Sections 5, 6, 7, 8, 11, 12 and 13 and
Subsections 14.01, 14.02, 14.03, 14.06, 14.07, 14.08 and 14.09 of this Agreement
shall survive termination of this Agreement for any reason whatsoever.

13. NOTICES. Any notice or other communication regarding this Agreement
required to be given pursuant to the terms hereof shall be in writing and shall
be deemed to be received by the party to whom it is addressed (i) on the actual
date of delivery if personally delivered to such party; (ii) on the first
business day after the notice or other communication is sent by facsimile
machine to the addressee at the facsimile phone number set forth below, provided
that (A) an original copy thereof is mailed on the same date by first class
mail, postage prepaid, and (B) in the case of a notice or communication to the
Company, the facsimile copy is addressed to the attention of Company's CEO; and
(iii) two business days following its deposit in the United States Mails, if
sent by postage prepaid certified mail, return receipt requested. For purposes
hereof, a notice personally delivered to the Company shall not be deemed
delivered unless it has been addressed to the attention of the CEO of the
Company. The addresses of the parties hereto for purposes of mailing notices
hereunder are as follows:

The Company: Triad Medical, Inc.
23161 Mill Creek Drive, Suite 300
Laguna Hills, CA 92653
Attention: Chief Executive Officer
Fax No.: (714) 770-0727

The Executive: Jack Saladow
6 Sea Street
Laguna Niguel , CA 92677
Fax No.: (714) 495-4224

Any party may change its mailing address or fax number for purposes of
this Section 13, effective five (5) business days after written notice of such
change has been given to the other party.

14. MISCELLANEOUS.

14.01 GOVERNING LAW. This Agreement is made under and shall be
governed by and construed in accordance with the laws of the State of
California.

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14.02 PRIOR AGREEMENTS. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and
supersedes all prior agreements and understanding (whether written or
oral) with respect to such subject matter (other than the Options, which
shall be governed by the Option Agreement), and the parties hereto have
made no agreements, representations or warranties relating to the
subject matter of this Agreement which are not set forth herein, except
that if there is or hereafter there arises any conflict between (i) any
of the provisions of that certain Shareholders' Agreement dated as of
May 17, 1996 among the Triad Holdings and all of its shareholders, as
such Agreement may be amended from time to time hereafter (the
"Shareholders' Agreement"), relating to any of the obligations of
Executive or any of the rights of Triad Holdings or its other
shareholders with respect to any shares of stock of Triad Holdings, or
any options or rights to purchase or otherwise acquire any shares of
Common Stock of Triad Holdings, which Executive may acquire or own,
whether under the Option Agreement or otherwise, including, without
limitation any of the terms and provisions governing the stock
repurchase rights of Triad Holdings or the stock purchase rights of the
shareholders thereof, and (ii) any provisions of this Agreement or the
Option Agreement, then, the terms and provisions of the Shareholders'
Agreement relating to such obligations of the Executive or rights of
Triad Holdings or the other shareholders thereof under such
Shareholders' Agreement shall be controlling and shall supersede the
conflicting provisions contained in this Agreement or in the Option
Agreement, unless the applicable provision of the Shareholders'
Agreement that is in conflict with this Agreement or the Option
Agreement (i) became applicable to Executive as a result of an amendment
to the Shareholders' Agreement that was adopted after the date hereof
and prior to Executive becoming a shareholder of the Company, and (ii)
such amendment materially reduced the benefits to Executive or
materially increased the obligations of Executive under the
Shareholders' Agreement in a manner that was not also made applicable to
other executives of the Company that, like Executive, are holders of
options to purchase shares of Common Stock of Triad Holdings, but are
not shareholders of Triad Holdings. Executive acknowledges that he has
been furnished with a copy of and has read the Shareholders Agreement
and that Executive understands and accepts the terms and provisions
thereof.

14.03 WITHHOLDING TAXES. The Company may withhold from any
salary and benefits payable under this Agreement, including, without
limitation, from any Severance Compensation and any Post-Termination
Benefits earned by Executive pursuant to any of Subsections 5.01, 5.04,
5.05 or 6.02 hereof, all federal, state, city or other taxes or amounts
as shall be required to be withheld pursuant to any law or governmental
regulation or ruling.

14.04 AMENDMENTS. No amendment or modification of this Agreement
shall be deemed effective unless made in writing signed by the parties
hereto.

14.05 NO WAIVER. No term or condition of this Agreement shall be
deemed to have been waived nor shall there be any estoppel to enforce
any provisions of this Agreement, except by a statement in writing
signed by the party against whom enforcement of the waiver

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<PAGE>
or estoppel is sought. Any written waiver shall not be deemed a
continuing waiver unless specifically stated, shall operate only as to
the specific term or condition waived and shall not constitute a waiver
of such term or condition for the future or as to any act other than
that specifically waived.

14.06 SEVERABILITY. To the extent any provision of this
Agreement shall be invalid or unenforceable, it shall be considered
deleted herefrom and the remainder of such provision and of this
Agreement shall be unaffected and shall continue in full force and
effect. In furtherance and not in limitation of the foregoing, should
the duration or geographical extent of, or business activities covered
by any provision of this Agreement be in excess of that which is valid
and enforceable under applicable law, then such provision shall be
construed to cover only the maximum duration, extent or activities which
may validly and enforceably covered under applicable law. The Executive
acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Agreement shall be given the construction which
renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable law.

14.07 DEFINITIONS: HEADINGS. As used in this Agreement, the term
"Affiliate" (when used with reference to Triad Holdings or the Company)
means any corporation, partnership, joint venture, association or other
business entity (any of the foregoing, an "entity") or any person that
controls, is controlled by, or is under common control with Triad
Holdings or the Company. A person or entity shall be deemed to control
another entity if such person or entity has the right or power, either
directly or indirectly through its control of any other person or
entity, either to select a majority of the directors, managers or
trustees, or to veto any major business decisions, of such other entity.
Section, Subsection and Paragraph headings in this Agreement are solely
for convenience of reference and shall not be considered, nor shall they
affect, the interpretation or application of any of the terms or
provisions of this Agreement.

14.08 ARBITRATION. Except as hereinafter set forth in this
Subsection 14.08, all claims, controversies, differences or disputes
between either of the parties hereto arising from or relating to this
Agreement shall be determined solely and exclusively by arbitration in
accordance with the rules of commercial arbitration then in effect of
the American Arbitration Association, or any successor thereto (the
"AAA"), in Orange County, California (or in the next nearest county in
California to Orange County if the AAA does not then conduct
arbitrations in Orange County). Discovery in any such arbitration
proceeding shall be conducted in accordance with the Civil Discovery Act
of 1986, the applicable provisions of which are set forth at Sections
2016 et seq. of the Code of Civil Procedure in effect in California and
which apply to civil actions brought in Superior Court in the county
where such arbitration is brought. In any such arbitration, the parties
shall jointly select an arbitrator. In the event the parties fail to
agree upon an arbitrator within twenty (20) days, then each party shall
select an arbitrator and such arbitrators shall then select a third
arbitrator to serve as the sole arbitrator, provided that if either
party, in such event, fails to

18
<PAGE>
select an arbitrator within seven (7) days, such arbitrator shall be
selected by the American Arbitration Association, or any successor
thereto, upon application of either party. Judgment upon the award of
the agreed upon arbitrator or the so chosen third arbitrator, as the
case may be, shall be binding and shall be entered into by a court of
competent jurisdiction. THE PARTIES AGREE TO ABIDE BY ANY DECISION
RENDERED IN ANY SUCH ARBITRATION AS FINAL AND BINDING AND WAIVE THE
RIGHT TO SUBMIT THE DISPUTE TO A PUBLIC TRIBUNAL FOR A JURY OR NON-JURY
TRIAL OR TO APPEAL THE DECISION OF THE ARBITRATOR. Notwithstanding the
foregoing, any party may bring an action seeking specific performance of
any of the obligations of the other party under this Agreement or
injunctive relief, whether temporary, preliminary or permanent, against
a breach or threatened breach of this Agreement by the other party, in
any court of competent jurisdiction as contemplated by Section 11 of
this Agreement.

14.09 ATTORNEYS FEES. In the event that any party hereto brings
an action in equity or initiates an arbitration proceeding pursuant to
Subsection 14.08 or, despite the provisions of Subsection 14.08, is
required to bring a legal action, to enforce such party's rights or
remedies, or the obligations of the other party, under this Agreement,
the prevailing party in such action or proceeding shall be entitled to
recover its reasonable legal fees and expenses, and court or arbitration
costs, incurred in connection therewith from the non-prevailing party,
including, without limitation, any expert witness fees to the extent
such do not exceed reasonable and customary fees generally charged for
such services.

14.10 COUNTERPART EXECUTION. This Agreement may be executed by
facsimile and in counterparts, each of which shall be deemed an original
and all of which when taken together shall constitute but one and the
same instrument.

14.11 SCHEDULES TO EMPLOYMENT AGREEMENT. Attached hereto are the
following Schedules to this Employment Agreement:

Schedule A: Continuing Consulting Assignments
Schedule B: Confidentiality Agreements to which Executive is Subject
Schedule C: List of Current Employee Benefit Plans or Programs
Schedule D: Vacation Benefits
Schedule E: Form of Employee Stock Option Agreement
Schedule F: List of Prior Consulting Clients of Executive

The aforementioned Schedules are an integral part of this Agreement and
terms in such Schedules with initial capital letters shall have the same
meanings given to them in this Agreement unless otherwise defined in
such Schedules or the context indicates otherwise. Subject to the
exception noted below with respect to Schedule E, if there is any
conflict between any provision of the Employment Agreement and any
provision of any of the Schedules, such provision of the Schedule, in
the instance only of such a conflict, shall

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<PAGE>
govern over the conflicting provision of this Employment Agreement. In
the case of the Employee Stock Option Agreement, the form of which is
set forth in Schedule E, the provisions of Subsection 14.02 of this
Employment Agreement shall supersede any conflicting provision of any
such Employee Stock Option Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year set forth above.

TRIAD MEDICAL, INC.,
a California corporation

By: /S/ R. TUCKER COOP
R. Tucker Coop, President and
Chief Executive Officer

"Executive"

/S/ JACK SALADOW
JACK SALADOW

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<PAGE>
SCHEDULE A

CONTINUING CONSULTING ASSIGNMENTS

Jack Saladow and/or Pacific Marketing Resources have continuing
consulting assignments on-going with the following companies, their affiliates,
divisions and/or subsidiaries:

Becton Dickinson and Company
Franklin Lakes, NJ

Luxar Corporation
Bothell, WA

National Home Infusion Association
Alexandria, VA

Quest Medical, Inc.
Allen, TX

TRIAD Medical, Inc.
Laguna Hills, CA

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<PAGE>
SCHEDULE B

CONFIDENTIALITY AGREEMENTS TO
WHICH EXECUTIVE IS SUBJECT

Consulting Services were provided to the client listed on Schedule F of
this Agreement subject to confidentiality agreements (either written or oral)
except those numbered below:

4, 5, 33, 35, 42, 45

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<PAGE>
SCHEDULE D

VACATION BENEFITS

During each successive period of 12 consecutive months of continuous
employment of Executive under the Employment Agreement, commencing from the
Effective Date (each, an "Employment Year"), Executive shall earn twenty (20)
days of paid vacation ("Vacation Days"), which shall accrue ratably based on the
number of days he is employed during each such Employment Year; PROVIDED,
HOWEVER, that accrual of unused Vacation Days shall cease at such time as is
specified in the Company's vacation policy as set forth in its employee handbook
or other written employment policies (as the case may be). Notwithstanding the
foregoing or anything to the contrary contained in the Employment Agreement or
the vacation accrual policy, upon a written request therefor from Executive (an
"Unearned Vacation Request") the Company's CEO may permit Executive to use, in
addition any to accrued but unused vacation days he may have, vacation days that
will accrue thereafter under the Company's vacation accrual policy ("Unearned
Vacation Days"), subject to the following terms and conditions:

(a) The Unearned Vacation Request shall set forth the number of
Unearned Vacation Days being requested and the dates during which he
proposes to such Unearned Vacation Days;

(b) Upon Executive's use of any Unearned Vacation Days, the
accrual of further vacation days shall cease until the number of
Unearned Vacation Days that were used by Executive equals the number of
days of vacation which, but for this provision, would have accrued
following the use of the Unearned Vacation Days (so that, for example,
if Executive uses ten Unearned Vacation Days, which is equal to the
number of vacation days that would accrue over a six month period, the
accrual of further vacation days for the account of Executive shall
cease during and (unless he were to use additional Unearned Vacation
Days prior thereto) shall resume after the end of, the six month period
following his use of those Unearned Vacation Days);

(c) The number of Unearned Vacation Days that Executive may use
at any one time shall be not be greater than the number by which twenty
(20) exceeds the lesser of (i) the number of vacation days that had been
earned by Executive, but are unused, as of the date he commences using
the Unearned Vacation Days approved by the CEO, or (ii) the number of
days of vacation (whether accrued or Unearned) that were used by
Executive in the twelve (12) months immediately preceding the Unearned
Vacation Request; provided that the Company's CEO shall be entitled to
limit the number of Unearned Vacation Days that Executive may use at any
time to a lesser number of days than he would otherwise be entitled
pursuant to this paragraph (c) or to refuse any request for use of any
Unearned Vacation Days, if the CEO believes, in good faith, that the use
of the number of Unearned

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<PAGE>
Vacation Days requested, or the use thereof at the time proposed by
Executive, would adversely affect the Company's operations or
Executive's performance of his duties for the Company.

In the event of a termination of Executive's employment by the Company
for any reason other than for Just Cause (as defined in Subsection 5.03 of the
Employment Agreement) or a termination by Executive of his employment for Good
Reason (as such term is defined in Subsection 5.05 of the Employment Agreement),
neither the Executive nor his estate (in the event the termination was due to
his death) shall be obligated to pay or reimburse the Company for any Unearned
Vacation Days that he had used prior to such termination.

D-2
<PAGE>
SCHEDULE E

TRIAD HOLDINGS, INC.

FORM OF

INCENTIVE STOCK OPTION AGREEMENT

(Granted under the 1992 Stock Option and Restricted Stock Purchase Plan,
as amended and restated effective May 14, 1996)

This Incentive Stock Option Agreement (the "Agreement") is entered into
as of January ___, 1997, by and between TRIAD HOLDINGS, INC., a Delaware
corporation (the "Company"), and JACK L. SALADOW (the "Optionee"), who is an
employee of Triad Medical, Inc. ("TMI"), which is a wholly-owned subsidiary of
the Company, with reference to the following facts:

R E C I T A L S

WHEREAS, Optionee is employed by TMI as its Vice President of Marketing
pursuant to an Employment Agreement dated as of December ___, 1996 (the
"Optionee Employment Agreement") and Optionee is a valued and key employee of
the TMI; and

WHEREAS, the Company desires, by affording the Optionee an opportunity
to purchase shares of Class B Common Stock of the Company (the "Shares"), as
hereinafter provided, to carry out the purpose of the "Triad Holdings, Inc.,
1992 Stock Option and Restricted Stock Purchase Plan, as amended and restated
(the "Plan");

NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, and for good and valuable consideration, the parties hereto have agreed,
and do hereby agree, as follows:

A G R E E M E N T

1. GRANT OF OPTION. The Company irrevocably hereby grants to Optionee an
option (the "Option") to purchase all or any portion of a total of Thirty
Thousand (30,000) Shares at a purchase price of Five Dollars Fifty-one Cents
($5.51) per share (the "Exercise Price"), subject to the terms and conditions
set forth herein. This Option is intended to qualify as an "incentive stock
option" as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").

2. VESTING OF OPTION. The right to exercise this Option shall vest in
installments, and this Option shall be exercisable from time to time in whole or
in part as to any installment that has become vested, as follows:

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THIS OPTION SHALL
ON OR AFTER: BE EXERCISABLE AS TO:
----------- --------------------
(a) ______, 1997: 10,000 shares;

(b) ______, 1998: 10,000 additional shares; and

Subject to the exception set forth hereinafter in this Section 2, no additional
Shares shall become exercisable or vest after the date of termination of
Optionee's "Continuous Employment" (as defied in Section 3 below), but this
Option shall continue to be exercisable in accordance with Section 3 below with
respect to that number of Shares that have become vested as of or prior to the
date of termination of Optionee's Continuous Employment. Notwithstanding the
foregoing, however, if, Optionee's Continuous Employment with TMI is terminated
by TMI without Just Cause pursuant to Section 5.04 of the Optionee Employment
Agreement or by the Optionee for Good Reason (as Good Reason is defined in
Section 5.05 of that Employment Agreement), on a date prior to the vesting of
all of the Options granted hereunder, then, in such event, all unvested Options
hereunder shall automatically be vested effective as of the day prior to such
termination of Optionee's employment with TMI.

3. TERM OF OPTION. Optionee's right to exercise this Option shall
terminate upon the earliest of:

(a) the expiration of ten (10) years from the date of this
Agreement;

(b) the expiration of one (1) year from the date Optionee's
"Continuous Employment" (as defined below) is terminated by reason of
the permanent disability of Optionee (as defined in Section 22(e)(3) of
the Code);

(c) the expiration of one (1) year from the date Optionee's
Continuous Employment is terminated by reason of Optionee's death; or

(d) the expiration of three (3) months from the date optionee's
Continuous Employment is terminated for any reason other than permanent
disability or death.

Except as otherwise provided in the last sentence of Section 2 above, on
the earliest date as of which the Optionee's Continuous Employment is
terminated, whether due to the Optionee's death or permanent disability, or for
any other reason, installments of this Option which have not yet become
exercisable shall automatically terminate.

As used in this Agreement, the term "Continuous Employment" means
employment by the Company or any subsidiary or parent of the Company which is
uninterrupted except for vacations,

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<PAGE>
illness (except for permanent disability, as defined in Section 22(e)(3) of the
Code), or leaves of absence which are approved in writing by the Company or a
subsidiary or parent of the Company, if applicable. A transfer of employment of
Optionee from the Company to any parent or subsidiary corporation, or from any
parent or subsidiary corporation of the Company to the Company, or between
subsidiary corporations of either the Company or any parent, without an
intervening period during which Optionee is not employed by any of the
foregoing, shall not constitute a cessation of Continuous Employment. In
addition, if the Optionee is an employee of the Company or any parent or
subsidiary thereof and such employment ceases, but he is serving, or within
thirty (30) days after the cessation of employment he is appointed, as a
director of the Company or any parent corporation thereof, such cessation of
employment shall not constitute a termination of Continuous Employment.

4. EXERCISE OF OPTION. Subject to Section 3 above, the portion of this
Option which has vested may be exercised in whole or in part by the Optionee
(or, after his or her death, by the person designated in Section 5 below), by
delivery of the following to the Company at its principal executive offices:

(a) A written notice of exercise which identifies this Agreement
and states the number of whole Shares then being purchased;

(b) Payment of the Exercise Price (i) in cash, (ii) by check,
(iii) if approved by the Board or any committee of the Board of
Directors established to administer the Plan (the "Committee"), a
promissory note of the Optionee having such terms as may be approved by
the Board or Committee, (iv) other shares of Class B Common Stock of the
Company owned by the Optionee having a fair market value on the date of
exercise equal to the aggregate exercise price of the shares as to which
such Option is exercised, PROVIDED, HOWEVER, the prior approval of the
Board or Committee shall be required therefor if no public market for
the shares of Class B Common Stock exists at the time of exercise of the
Option, (v) cancellation of indebtedness of the Company, if any, to the
Optionee, (vi) provided that a public market for the Company's Class B
Common Stock exists, through a "same day sale" commitment from the
Optionee and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD Dealer") whereby the
Optionee irrevocably elects to exercise the Option and to sell a portion
of the shares so purchased to pay for the exercise price and whereby the
NASD Dealer irrevocably commits upon receipt of such shares to forward
the exercise price directly to the Company, (vii) provided that a public
market for the Company's Class B Common Stock exists, through a "margin"
commitment room the optionee and an NASD Dealer whereby the optionee
irrevocably elects to exercise the Option and to pledge the shares so
purchased to the NASD Dealer in a margin account as security for a loan
from the NASD Dealer in the amount of the exercise price, and whereby
the NASD Dealer irrevocably commits upon receipt of such shares to
forward the exercise price directly to the Company, or (viii) any
combination of the foregoing methods of payment and/or any other
consideration or method of payment as shall be permitted by applicable
corporate law and approved by the Board or the Committee;

E-3
<PAGE>
(c) A check or cash, or such other lawful consideration as the
Board of Directors or Committee may approve with a fair market value, in
the amount reasonably requested by the Company to satisfy the Company's
withholding obligations under federal, state or other applicable tax
laws with respect to the taxable income, if any, recognized by the
Optionee in connection with the exercise, in whole or in part, of the
Option (unless the Company and Optionee shall have made other
arrangements for deductions or withholding from Optionee's wages, bonus
or other income paid to Optionee by the Company or any subsidiary or
parent of the Company, provided such arrangements satisfy the
requirements of applicable tax laws); and

(d) A counterpart of and such amendments to the Shareholders'
Agreement referenced in Section 9 hereinbelow, duly executed by
Optionee, as may be required by the Company or the other shareholders of
the Company.

5. DEATH OF OPTIONEE: NO ASSIGNMENT. The rights of the Optionee under
this Agreement may not be assigned or transferred except by will or by the laws
of descent and distribution, and may be exercised during the lifetime of the
Optionee only by such Optionee. Any attempt to sell, pledge, assign,
hypothecate, transfer or dispose of this Option in contravention of this
Agreement or the Plan shall be void and shall have no effect. If the Optionee
should die prior to the termination of this Option, and provided Optionee's
right to purchase any of the Shares subject to the Option shall have vested
pursuant to Section 2 hereof as of the date of death, Optionee's legal
representative, his or her legatee, or the person who acquired the right to
exercise this Option by reason of the death of the Optionee (individually, a
"Successor") shall succeed to the Optionee's rights and obligations under this
Agreement. After the death of the Optionee, only a Successor may exercise this
Option.

6. REPRESENTATIONS AND WARRANTIES OF OPTIONEE.

(a) Optionee represents and warrants that this Option is being
acquired by Optionee for his or her personal account, for investment
purposes only, and not with a view to the distribution, resale or other
disposition thereof.

(b) Optionee acknowledges that the Company may issue Shares upon
the exercise of this Option without registering such Common Stock under
the Securities Act of 1933, as amended (the "Act"), on the basis of
certain exemptions from such registration requirement. Accordingly,
Optionee agrees that his or her exercise of the Option may be expressly
conditioned upon his or her delivery to the Company of an investment
certificate or investment agreement including such representations and
undertakings as the Company may reasonably require in order to assure
the availability of such exemptions, including a representation that
Optionee is acquiring the Shares for investment and not with a present
intention of selling or otherwise disposing such Shares and an agreement
by Optionee that the certificates evidencing the Shares may bear a
legend indicating such non-registration under the Act and the resulting
restrictions on transfer. Optionee acknowledges that, because Shares
received upon exercise of an Option may be unregistered, Optionee may be
required

E-4
<PAGE>
to hold the Shares indefinitely unless they are subsequently registered
for resale under the Act or an exemption from such registration is
available and that the Company shall have no obligation to register any
resales, except as may otherwise be specifically provided to the
contrary in the Shareholders' Agreement (as hereinafter defined), nor
shall the Company have any obligation to satisfy any conditions to the
availability of any registration exemption. Optionee further
acknowledges that federal securities laws and the securities laws of the
state in which he or she resides may require the placement of certain
restrictive legends upon the Shares issued upon exercise of this Option,
and Optionee hereby consents to the placing of any such legends upon
certificates evidencing the Shares as the Company, or its counsel, may
deem necessary.

7. LIMITATION OF COMPANY'S LIABILITY FOR NONISSUANCE. During the term of
the Plan, the Company agrees at all times to reserve and keep available, and to
use its reasonable best efforts to obtain from any regulatory body having
jurisdiction any requisite authority in order to issue and sell, such number of
shares of its Common Stock as shall be sufficient to satisfy its obligations
hereunder and the requirements of the Plan. Inability of the Company to obtain,
from any regulatory body having jurisdiction, authority deemed by the Company's
counsel to be necessary for the lawful issuance and sale of any shares of its
Common Stock hereunder and under the Plan shall relieve the Company of any
liability in respect of the nonissuance or sale of such shares as to which such
requisite authority shall not have been obtained.

8. ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE, MERGER, ETC.

(a) In the event of any changes in the outstanding shares of
Common Stock of the Company resulting from a stock split, reverse stock
split, stock dividend, reclassification or similar change in the capital
structure of the Company, appropriate adjustments shall be made to the
number and kind of Shares subject to this Option and to the Exercise
Price per share, in accordance with the provisions of Section 10 of the
Plan.

(b) In the event of a merger, consolidation or other
reorganization in which the Company is not the surviving corporation, or
in which the Company is the surviving corporation, but it becomes a
subsidiary of another Corporation and its shares are converted into
cash, securities or other property, this Option shall terminate upon the
effective date of such transaction unless a successor corporation, or
the new parent of the Company, assumes this Option, provides
substantially similar consideration to Optionee as was provided to the
shareholders of the Company, or substitutes substantially equivalent
options covering shares of the successor corporation, in accordance with
the provisions of Section 10(b) of the Plan. If no provision is made for
the assumption of or substitution for this Option, or for the payment of
substantially equivalent consideration to Optionee, then the vesting of
this Option shall be accelerated (subject to completion of the proposed
transaction) and shall be exercisable in accordance with the provisions
of Section 10(b) of the Plan.

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<PAGE>
9. SHAREHOLDERS' AGREEMENT. In the event Optionee exercises the Option.
or any portion thereof, the Shares acquired by Optionee pursuant to such
exercise shall be subject to the terms and provisions of that certain
Shareholders' Agreement dated as of May 17, 1996 among the Company and all of
its shareholders, as such Agreement may be amended from time to time hereafter
(the "Shareholders' Agreement"). Optionee acknowledges that he has been
furnished with a copy of the Shareholders Agreement and Optionee understands
that such Agreement will, under certain circumstances as set forth therein, (i)
impose restrictions on the transferability of Shares acquired on exercise of the
Option granted hereby, and (ii) require the undersigned Optionee to sell the
Shares either to the Company or to other shareholders of the Company, or to
third parties, on the terms and conditions set forth in the Shareholders
Agreement, including any Shares the Optionee or his Successor may acquire
hereunder following a termination of Optionee's Continuous Employment. Optionee
further agrees that (x) he shall comply with all of the terms and conditions of
the Shareholders' Agreement to the extent that such terms and conditions apply
to him, as a holder of the Options, or to the Options, themselves, (y) it shall
be a condition precedent to Optionee's right to have issued any Shares on
exercise of this Option that, upon request of the Company at any time while any
of the Options are outstanding and, in any event, upon any exercise thereof,
Optionee shall execute and deliver a counterpart of the Shareholders' Agreement
and any amendment to the Shareholders' Agreement which the Company or the other
shareholders of the Company deem necessary or advisable to make the Options or
such Shares and Optionee subject to the Shareholders' Agreement on substantially
the same terms as shares owned by other employees of the Company and (z) if
there is any conflict between any provision of the Shareholders' Agreement and
this Agreement, the provision of the Shareholders Agreement shall govern over
the conflicting provision of this Option Agreement.

10. NO EMPLOYMENT CONTRACT CREATED. Nothing in this Agreement shall be
construed to constitute or be evidence of any right with respect to continuance
of employment with the Company or any subsidiary or parent of the Company, or to
limit in any way the right of the Company or any subsidiary or parent of the
Company to terminate Optionee's employment at any time, with or without cause.

11. RIGHTS AS SHAREHOLDER. The Optionee (or a Successor pursuant to
Section 5 hereof) shall have no rights as a shareholder with respect to any
Shares covered by this Option until the date of the issuance of a stock
certificate or certificates to him or her for such Shares, notwithstanding the
exercise of this Option.

12. INTERPRETATION. This Option is granted pursuant to the terms of the
Triad Holdings, Inc., 1992 Stock Option and Restricted Stock Purchase Plan, as
amended and restated, and shall in all respects be interpreted in accordance
with such Plan, the provisions of which shall supersede any conflicting
provision contained in this Agreement.

13. NOTICES. Any notice, demand or request required or permitted to be
given under this Agreement shall be in writing and shall be deemed given when
delivered personally or three (3) days after being deposited in the United
States mail, as certified or registered mail, with postage prepaid.

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SCHEDULE F

PRIOR CONSULTING CLIENTS OF EXECUTIVE

Jack Saladow and/or Pacific Marketing Resources have provided consulting
services to the following companies, their affiliates, divisions and/or their
subsidiaries prior to January 1, 1997:

1. Abbott Laboratories
Abbott Park, IL

2. Adaniya, George (an individual)
Wellesley, MA

3. Advanced Aesthetics, Inc.
Spanish Fork, UT

4. American Society of Health-System Pharmacists
Bethesda, MD

5. American Society of Parenteral and Enteral Nutrition
Silver Spring, MD

6. Becton Dickinson and Company
Franklin Lakes, NJ

7. Block Medical, Inc.
Carlsbad, CA

8. Bronson, Bronson, McKinnon
San Francisco, CA

9. Chicago City Capital Group, Inc.
Chicago, IL

10. CompuMed, Inc.
Manhattan Beach, CA

11. Davstar Industries Ltd. (now known as Urohealth, Inc.)

12. Devon Industries
Chatsworth, CA

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13. Disposal Sciences, Inc.
Englewood, CO

14. Elkopast, H.S.
Milan, Italy

15. Fish and Neave
Palo Alto, CA

16. Fresenius AG
Frankfurt, Germany

17. Fresenius, USA, Inc.
Walnut Creek, CA

18. Grasby Medical, Inc.
Arden Hills, MN

19. HealthWatch, Inc.
Vista, CA

20. I-Flow Corporation
Irvine, CA

21. IMS, Inc,
El Monte, CA

22. ITW/Minigrip
San Antonio, TX

23. IMED Corporation
San Diego, CA

24. Implantable Devices, Inc.
Minneapolis, MN

25. Infustek International Ltd.
Bristol, CT

26. InterCare, Inc.
Irvine, CA

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27. IVAC Corporation
San Diego, CA

28. Keller Medical, Inc.
Redlands, CA

29. Luxar Corporation
Bothell, WA

30. Management by Information
Little Rock, AR

31. Medical Product Specialists
Brea, CA

32. McGaw, Inc.
Irvine, CA

33. Medical Data International
Irvine, CA

34. MicroJect
Salt Lake City, UT

35. National Home Infusion Association
Alexandria, VA

36. OmniCare
Cincinnati, OH

37. Quest Medical, Inc.
Allen, TX

38. Safety 1st Medical Incorporated
Laguna Niguel, CA

39. Sigma International
Medina, NY

40. Stedim, USA
Pleasant Hill, CA

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41. The Monitor Company
Cambridge, MA

42. The Remington Report
Laguna Niguel, CA

43. TRIAD Medical, Inc.
Laguna Hills, CA

44. US Medical, Inc.
San Diego, CA

45. Vital Care, Inc.
Livingston, AL

46. Winfield Industries
San Diego, CA

47. Zevex, Inc.
Salt Lake City, UT

and addressed, if to the Company, at its principal place of business, Attention:
the Chief Financial Officer, and if to the Optionee, at his or her most recent
address as shown in the employment or stock records of the Company.

14. GOVERNING LAW. The validity, construction, interpretation, and
effect of this Option shall be governed by and determined in accordance with the
laws of the State of Delaware.

15. SEVERABILITy Should any provision or portion of this Agreement be
held to be unenforceable or invalid for any reason, the remaining provisions and
portions of this Agreement shall be unaffected by such holding.

16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be deemed one instrument

17. ENTIRE AGREEMENT. This Agreement, together with the Plan,
constitutes the entire agreement between the parties pertaining to, and
supersedes all prior written or oral agreements and understandings (express or
implied) of the parties with respect to, the subject matter of this Agreement,
except for the Shareholders' Agreement referenced in Section 9 hereof.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

THE COMPANY: TRIAD HOLDINGS, INC.

By:
Title:

The Optionee hereby accepts this Option subject to all the terms and
provisions hereof. The Optionee hereby acknowledges receipt of a copy of the
Plan and the Shareholders' Agreement referred to in Section 9 of this Agreement.
The Optionee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board of Directors of the Company (or the
Committee thereof administering the Plan) regarding any questions arising under
the Plan or this Agreement. The Optionee authorizes the Company to withhold in
accordance with applicable law from any compensation payable to him or her any
taxes required to be withheld by federal, state or local law as a result of the
exercise of this Option.

OPTIONEE: JACK L. SALADOW

________________
(Signature)

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EXHIBIT 21.1

Subsidiaries of TRIAD(1)

SUBSIDIARY STATE OF ORGANIZATION
- ---------- ---------------------

Triad Holdings, Inc. (2) Delaware

Triad Medical Inc. (3), (4) California

Triad Infusion Products, Inc. (3) California

The Economic Alliance Corporation (3) Georgia

Healthcare Technology Delivery, Inc. (2) Delaware

Futuretech, Inc. (3) Alabama

Medical Companies Alliance, Inc. (3) Utah

Sun Medical, Inc. (2) Texas

Custom Medical, Inc. (2) Indiana

Kentec Medical, Inc. (2) California

Products for Surgery, Inc. (2) Texas

PSI Service Corporation (3) Texas

Sierra Surgical Products, Inc. (3) Texas

MegaTech Medical, Inc. (2) Maryland

Omni Medical, Inc. (2) Washington

New England Medical Specialties, Inc. (2) Connecticut

Professional Equipment Co., Inc. (2) Connecticut

Wilson Medical Specialties, Inc. (2) Washington

- ----------
(1) List of subsidiaries as of the closing of the Offering and the
Acquisitions.

(2) Represents a first-tier subsidiary.

(3) Represents a second-tier subsidiary.

(4) Name to be changed to TMI, Inc. as soon as practicable after closing of
the Acquisitions.

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our ten
reports and all refer-
ences to our Firm included in this registration statement on Form S-1 (No.
333-35449) filed by TRIAD Medical Inc.

Arthur Andersen LLP

Houston, Texas
October 28, 1997

EXHIBIT 23.3

CONSENT

The undersigned consents to being named in this Registration Statement on
Form S-1 as a person who is about to become a director of TRIAD.

October 8, 1997

/S/ R. TUCKER COOP
R. Tucker Coop

EXHIBIT 23.4

CONSENT

The undersigned consents to being named in this Registration Statement on
Form S-1 as a person who is about to become a director of TRIAD.

October 8, 1997

/S/ KELVIN J. PENNINGTON
Kelvin J. Pennington

EXHIBIT 23.5

CONSENT

The undersigned consents to being named in this Registration Statement on
Form S-1 as a person who is about to become a director of TRIAD.

October 7, 1997

/S/ MARVIN L. MARKS
Marvin L. Marks

EXHIBIT 23.6

CONSENT

The undersigned consents to being named in this Registration Statement on
Form S-1 as a person who is about to become a director of TRIAD.

October 8, 1997

/S/ GREGORY H. SELLARDS
Gregory H. Sellards

EXHIBIT 23.7

CONSENT

The undersigned consents to being named in this Registration Statement on
Form S-1 as a person who is about to become a director of TRIAD.

October 8, 1997

/S/ KENT J. WILKEN
Kent J. Wilken

EXHIBIT 23.8

CONSENT

The undersigned consents to being named in this Registration Statement on
Form S-1 as a person who is about to become a director of TRIAD.

October 8, 1997

/S/ EDWARD T. KUKLENSKI
Edward T. Kuklenski

EXHIBIT 23.9

CONSENT

The undersigned consents to being named in this Registration Statement on
Form S-1 as a person who is about to become a director of TRIAD.

October 8, 1997

/S/ MICHAEL W. THOMAS
Michael W. Thomas

EXHIBIT 23.10

CONSENT

The undersigned consents to being named in this Registration Statement on
Form S-1 as a person who is about to become a director of TRIAD.

October 8, 1997

/S/ JOHN B. BENEAR, II
John B. Benear, II