SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
SURGICAL SAFETY PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
New York 65-1565144
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2018 Oak Terrace
Sarasota, Florida 34231
(941) 927-7874
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(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Dr. G. Michael Swor, President and Chief Executive Officer
2018 Oak Terrace
Sarasota, Florida 34231
(941) 927-7874
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of all communications to:
Mercedes Travis, Esq.
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, Florida 33480
Tel: (561) 832-5696 - Fax: (561) 659-5371
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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If this Form is filed to register additional securities for an
offering pursuant to Rule 462(a) 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. [ ]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C> <C> <C>
Proposed Proposed
Maximum Maximum
Title of Shares Amount to be Aggregate Price Aggregate Amount of
to be Registered registered per Share Offering Price Registration Fee
(1) (2) (3)
------------------ --------------- ---------------- --------------- -----------------
Common Stock, 20,038,097 $1.468 $29,415,926 $8,178
$.001 par value
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(1) Common Stock issuable upon conversion of the Issuer's notes held by
Selling Shareholders and upon exercise of Issuer's Warrants held by
Selling Shareholders.
(2) The number of shares initially to be registered for resale by the
Selling Shareholders is contained in a registration rights
agreements covering the notes issued and warrants granted to the
Selling Shareholders.
(3) Estimated solely for the purpose of calculating the registration fee
in accordance with Rule 457(c), based on the average of the bid and
asked price quoted on the OTC BB for the Company's Common Stock
under the symbol "SURG" as of February 28, 2000, which is within
five (5) days prior to the date of filing of this registration
statement.
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.
The information in the preliminary prospectus in Part I hereof is
not complete and may be changed. The Selling Shareholders may not sell these
securities until the registration statement filed with the Securities and
Exchange Commission is effective. This preliminary prospectus is not an
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offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to completion. Dated March 1, 2000.
<PAGE>
PART I
PROSPECTUS
20,038,097 Shares
SURGICAL SAFETY PRODUCTS, INC.
Common Stock
The 20,038,097 shares of Surgical Safety Products, Inc. ("Surgical"
or the "Company") Common Stock covered by this prospectus are all being offered
for the account of the Selling Shareholders listed on page 18. Surgical will not
receive any of the proceeds from any sales of these securities.
Each of the Selling Shareholders may offer and sell from time to
time shares of Surgical's Common Stock directly or through broker-dealers or
underwriters who may act solely as agents, or who may acquire shares as
principals. The price to the public and the net proceeds to the Selling
Shareholders from the sale of the shares will depend on the nature and timing of
the sales and therefore will not be known until the sales are actually made.
Surgical's Common Stock is quoted on the OTC BB under the symbol
"SURG". On February 28, 2000, the closing price for Surgical's Common Stock as
quoted on the OTC BB was $1.468 per share.
See "Risk Factors" on page 8 to read about factors you should
consider before buying shares of the Company's Common Stock.
The Company's principal executive offices are located at 2018 Oak
Terrace, Sarasota, Florida 34231, its telephone is (941) 927-7874 and its
facsimile number is (941) 925-0515.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is dated March 1, 2000.
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PROSPECTUS SUMMARY
This summary highlights information incorporated by reference or
contained elsewhere in this prospectus. It is not complete and may not contain
all of the information that you should consider before investing in our
securities. You should read the entire prospectus carefully, including the "Risk
Factors" section, and you must consult the more detailed financial statements,
and notes to the financial statements, incorporated by reference to this
prospectus.
This prospectus and the documents incorporated by reference contain
certain forward-looking statements. These statements can be identified by the
use of forward-looking terminology such as "may", "will", "could", "expect",
"anticipate", "estimate", "continue", "plan" or other similar words. These
statements discuss future expectations, contain projections of results of
operations or of financial condition or state other forward-looking information.
Examples of forward-looking statements can be found in the discussion set forth
under "Management Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998, incorporated in this prospectus by reference. Such statements
are based on current expectations that involve a number of uncertainties
including those set forth in the risk factors below. When considering
forward-looking statements, you should keep in mind that the risk factors noted
below and other factors noted throughout this prospectus or incorporated by
reference could cause our actual results to differ significantly from those
contained in any forward- looking statement.
The Company
Surgical Safety Products, Inc. (the "Company" or "Surgical") is
incorporated in the State of New York and qualified to do business as a foreign
corporation in the State of Florida. Surgical Safety Products, Inc. originally
was incorporated under the laws of the State of Florida on May 15, 1992. On
November 28, 1994 the Company merged into Sheffeld Acres Inc., a New York shell
corporation which had approximately 1,100 shareholders, but had never commenced
operations. Although Sheffeld Acres, Inc. was technically the surviving entity,
the Company changed its name after the merger to Surgical Safety Products, Inc.
Articles of Merger were filed with the State of Florida on October 12, 1994 and
a Certificate of Merger was filed with the State of New York on February 8,
1995. The Company filed to do business as a foreign corporation on April 11,
1995 in the State of Florida. The Company's Common Stock is quoted on the OTC
Bulletin Board under the symbol "SURG". The Company's executive offices are
presently located at 2018 Oak Terrace, Sarasota, Florida 34231, its telephone
number is (941) 927-7874 and its facsimile number is (941) 925-0515.
The Company was formed for the initial purpose of combating the
potential spread of blood borne pathogen infections, such as HIV and hepatitis.
The founding philosophy arose from a concern regarding the occupational risks of
healthcare workers in the operating room. Since inception, the Company has
broadened its mission to include the research, development and production of
innovative products and services which create and maintain a safe surgical
environment for medical and hospital staff, healthcare workers and patients, as
well as enhance the level of surgical care available to patients.
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The Company is engaged in product development, sales and services
for the medical industry. The Company is currently engaged in one line of
business which is divided into three (3) divisions each of which is involved
with specialty medical product research and development: (1) a division which
develops various medical-related services to be marketed to healthcare
facilities, including an entire family of computer software applications
designed to evaluate, track, organize and manage infection control data for
healthcare facilities and to provide multi-media information centers for a
facility's healthcare workers ("Data Systems Division"); (2) a division which
researches and develops medical products for sale in the marketplace ("Medical
Products Division"); and (3) a division which provides confidential consultation
services to third party developers of medical products, usually physicians and
healthcare technicians ("Medical Products Consultation Division"). The common
thread interwoven into each area requires medical research, education and a
commitment to safety issues. It is the Company's intention to gradually make the
transition from a research and development-oriented medical device company into
a multi-product device manufacturer and distributor.
The Company was formed in 1992, and until 1996, was primarily
engaged in women's healthcare, medical research and product development with a
focus on safety-related products geared to the reduction of occupational risks
to healthcare workers. To date, the Company has received four (4) patents on two
(2) products, is seeking patent protection on other products and is in the
process of developing or acquiring the rights to approximately nine (9)
additional medical products intended to be marketed to the healthcare community.
The concepts and designs of the additional medical products are at various
stages of development or negotiation. The Company has an exclusive five (5) year
manufacturing and supply agreement for a line of protective prescription
eyeglasses; however, it has decided to discontinue marketing efforts for this
line due to poor sales. The Company markets its product lines under the
trademark, Compliance Plus.
The Company's premiere product in the Compliance Plus line, marketed
under the trade name, SutureMate(R), is a disposable Food and Drug
Administration ("FDA") approved, multi- function, suturing safety device for
surgery. Three (3) of the patents apply to this product. The original instrument
and its developmental variations facilitate advanced surgical techniques, which
increase surgical efficiency and reduce the occupational risk of exposure to
blood borne pathogens such as HIV and hepatitis. The original product is
currently being re-released. The product has been re-engineered and updated
after feedback from over 4,000 surgeons and surgical technologists. New clinical
advantages and significantly lower manufacturing costs create potential for this
patented, disposable surgical assist device which was originally designed to
facilitate the preferred one-handed suturing technique.
The Company intends to market under the trade name, Prostasert(R), a
FDA listed product which was developed to improve the preparation of pregnant
patients for labor by providing a mechanism for applying and maintaining a
pharmaceutical gel to the cervix and vagina. One (1) of the patents applies to
this product.
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In addition, the Company intends to market an infection control
equipment kit for healthcare workers under the trademark, IcePak(TM).
The Company has two (2) additional products in the development
stage: Prepwiz(TM), which is a revolutionary surgical prep and drape system and
FingerSafe(TM), which is a multi-featured surgical thimble.
The Company aggressively protects its intellectual properties
through patents, trademarks and copyrights, as well as by proprietary software
designs (flow charts, algorithms, reports and databases). In addition to the
utility and design patents already issued to the Company, the Company has a
number of other products in various stages of development which have patent
potential.
In 1997, the Company focused on the creation and establishment of an
information system for multiple applications within healthcare. Formerly named
Surgical Safety Network, this information system is now marketed under the name
OASiS which is the acronym for Occupational Automated Services Information
System. In April 1998, the Company filed for two (2) patents on this system, one
related to this touch-access information system and the other related to a
technology transfer application. This touch access system has developed into a
platform for initially managing three areas of need: (1) exposure (to blood
borne pathogen) management; (2)healthcare training; and (3) healthcare risk
management.
In February 1998, the Company executed a letter of intent to joint
venture with U.S. Surgical Corporation ("U S Surgical"), a major manufacturer of
surgical products which distributes its products worldwide, for the marketing of
the OASiS system. The parties executed a final agreement dated October 28, 1998
(the "Short Term Agreement"). On October 1, 1998, Tyco Healthcare Group LP
("Tyco") consummated a merger with US Surgical. On July 30, 1999 Surgical
entered into a private partner network agreement with US Surgical. Under the
July agreement, Surgical is to supply up to four hundred (400) OASiS systems to
US Surgical under licenses calling for installation in nominated hospitals (the
"Long Term Agreement").
The Company's other products and concepts in development generally
fall into the categories of occupational safety, infection control, obstetrics
and gynecology, and new "minimally invasive" surgery devices and techniques.
Most of these development projects originated from within the Company, although
several are being co-developed with outside third party inventors who are mainly
physicians and medical technicians for whom the Company provides consulting
services in new product development.
The FDA lists Surgical as a medical device specifier. Under FDA
Registration No. 1056687, as a medical device specifier, Surgical is permitted
to control the specifications of its products. The Company spent its formative
years in research and development and in obtaining patent protection on its core
products and services. Tangential to its core competency, the Company had found
it necessary to diversify its offerings, but has, over the past fiscal year
focused a majority of its efforts towards the commercialization of its
touch-access information system, OASiS.
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Surgical is attempting to secure a research-backed, OSHA mandate
status for its OASiS information system which would make the availability of
Compliance Plus required in hospitals and other medical facilities. The
Company's plan is to accumulate enough research on product lines to demonstrate
statistically their significant safety advantages to support such products
inclusion in OSHA requirements for workplace safety compliance. There can be no
assurance that such statistics will demonstrate such facts, or even if
demonstrated, that such products will be included in OSHA requirements.
Twenty (20) OASiS unit are now installed in eight (8). Lease
payments from OASiS currently are made directly to Surgical from the customer
hospital but may be made, in the future, through a third party leasing
intermediary. In the case of the third party intermediary, Surgical is paid a
lump sum at the front end of the lease and the hospital then makes its payments
to the leasing company. Selection of the leasing arrangements is made based upon
Surgical's current financial status and based upon the financial strength of the
hospital involved.
SutureMate(R) was originally sold in limited quantities and had
limited success due to the high manufacturers suggested retail price. New
manufacturing arrangements will allow sales in the $5 to $6 range, more in
keeping with disposable products. Due to limited sales, the Company is dropping
the MediSpecs Rx(TM) product line. Consulting fees are derived from the Medical
Consultation Division on an as needed basis.
The Company now is positioned to commercialize Compliance Plus
product lines and its proprietary OASiS system through its alliance with US
Surgical and their full size international sales force. The Company is preparing
other alliances with one or more established industry leaders in healthcare. The
Company believes that recurring multiple revenue streams and a "cookie cutter"
program and network will allow for potentially rapid growth in the number of
OASiS system installations. When the OASiS system reaches the appropriate size,
the Company may consider the spin-off of a separate subsidiary for managing this
Internet-based healthcare information network and subsequently an initial public
offering related to the spun off subsidiary. If the Company grows and attains
its projected earnings, it intends to apply for listing on the NASDAQ Quotation
System where it believes the market would apply an appropriate multiple to the
earnings per share. At such time, the Company may position itself as an
acquisition target for major medical or information system entities, although it
has no such plans at this time.
The Company has been seeking debt or equity financing in the amount
of between $2,000,000 and $5,000,000. In December 1999, the Company executed a
Loan Agreement with Thomson Kernaghan & Co., Ltd. ("TK"), as Agent and Lender,
whereby TK agreed to make loans to the Company of up to $5,000,000 in
installments during the period commencing with the date of the agreement and
ending on November 30, 2002 (the "TK Loan Commitment"). Under the terms of the
TK Loan Commitment, each installment is supported by a convertible note and
security agreement and the Agent and Lender are granted warrants to purchase
shares of the Company's Common Stock. Further, 2,700,000 shares are held by TK
in escrow for the potential conversion of the notes or exercise of the warrants.
Under the terms of the TK Loan Commitment, an initial loan of $650,000 was made
on December 30, 1999, the Lender was granted a warrant to purchase 3,428,571
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shares and the Agent was granted a warrant to purchase 1,142,857 shares. The
Company granted TK registration rights and is obligated to file a Form S-3
within sixty (60) days of the agreement covering initially 20,038,097 shares of
its Common Stock. The issuance of the securities was made pursuant to Regulation
S of the Act. The Company thus far has borrowed $650,000 as the first
installment under which the note could be convertible into a maximum of
1,7333,333 shares of the Company's Common Stock at the lowest possible
conversion price and has issued warrants to purchase 3,428,571 and 1,142,857
shares of the Company's Common Stock. However due to the formula nature of the
conversion price, the Company is unable to project the exact number of
additional shares, if any, of its Common Stock which will be required to be
issued if all of the debt is converted or all of the warrants are exercised. As
of December 31, 1999, the Company had short term debt of $100,000 as a result of
draw downs under its revolving loan agreement with South Trust Bank and long
term debt of $650,000 as a result of the initial loan under the TK Loan
Commitment. The TK Loan Commitment, once interest payments begin to accrue, will
increase both the short or long term debt of the Company. The Company has
entered into consulting agreements with several other potential funding sources;
however, to date, has not concluded terms for any financing which it feels
appropriately meets the requirements of the Company under such agreements. With
the TK Loan Commitment and in the event additional debt is raised, it will incur
future interest expenses. The TK Loan Commitment, if fully converted and all
warrants are exercised, will dilute the interest of existing shareholders and in
the event additional equity is raised, management may be required to dilute the
interest of existing shareholders further or forgo a substantial interest in
revenues, if any. In the event that the Company is successful in securing
additional debt financing, the amount of such financing, depending upon its
terms, would increase either the short or long term debt of the Company or both.
The Company entered into an agreement with IBM Global Services
effective January 3, 2000 which includes an IBM Customer Agreement and a
Statement of Work (the "IBM Global Agreement"). Under the terms of the IBM
Global Agreement IBM will provide complete implementation and support service
solutions for 1,200 OASiS terminals in an estimated 400 end user locations
during the 12 month period commencing December 1, 1999. On February 3, 2000, IBM
Global Services and the Company finalized the Statement of Work. The services to
be provided under the agreement include project planning, site surveys, product
acquisition, network design, web-site hosting services, premises wiring, OASiS
TouchPort Implementation, help desk support and consulting services. The
estimated cost for performing the work is approximately $10 million. In
addition, IBM Global Services will bill the Company a monthly service charge for
pre and post installation support services, including 24-7 support, and for
labor, travel and out of pocket expenses. The Company will provide technical
resources and oversee the IBM Global's activities. The Company believes that
this agreement will expedite the deployment of its OASiS systems under the terms
of its Long Term Agreement with US Surgical.
The TK Loan Commitment will be used by the Company to fund a portion
of the commitment under the IBM Global Agreement, the balance of which will be
funded from increased revenues as installations are completed and from the sale
of some of those leases to third party leasing companies. The Company's ability
to rapidly deploy its OASiS units through the IBM Global Agreement will cover
its obligations under the Long Term Agreement with US Surgical and for general
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operating expenses. With the additional installments under the TK Loan
Commitment, or subject to the availability of additional financing, of which
there can be no assurance, with such additional financing, the Company plans (1)
to facilitate implementation of its sales strategies, (2) to apply additional
funding to existing new technology; and (3) to apply additional funding to
complimentary products and services through corporate acquisition and exclusive
licensing.
The Company currently employs, under the agreement with Staff and on
a full-time basis, seven (7) people, including its President and Vice President.
Total employee salaries for the year ending December 31, 1999 were $363,418 of
which $216,221 was paid as Executive Compensation, including salaries and the
value of Common Stock and Options issued and granted to such executives. The
Company's executive officers and directors devote such time and effort as are
necessary to participate in the day-to-day management of the Company. During the
fourth quarter of 1999, the Company did not employed any additional staff.
Subject to the availability of additional funding, of which there can be no
assurance, the Company plans to add personnel as needed to implement the Long
Term Agreement with US Surgical and other growth plans.
The Company is dependent upon the services of two of its officers
and directors. Dr. G. Michael Swor, the founder and Chairman of the Board and
Chief Executive Officer, is responsible for inventing all four (4) of the
patents, which patents were assigned to the Company in exchange for stock. Dr.
Swor is responsible for the overall corporate policy and the financing
activities of the Company. The Company is the beneficiary of a "key-man"
insurance policy currently owned by Dr. Swor. In addition to his duties with the
Company, Dr. Swor is a board certified, practicing physician with a specialty in
Obstetrics and Gynecology. Donald K. Lawrence, a Director, President and Chief
Operating Officer, is responsible for operations, sales management, market
planning and advertising for the Company. Mr. Lawrence in addition to nearly ten
(10) years in medical device sales, has extensive experience in computer
graphics, multi-media and computer equipment leasing programs. The Company plans
to continue to use to its advantage the reputations and skills of these two
officers in the medical industry. Nevertheless, while these officers have been
successful in the past, there can be no assurance that they will be successful
in the continued development of the Company which is needed for a successful
operation of the Company. The Company has employment agreements with each of
these individuals.
RISK FACTORS
Before you decide to invest, you should consider carefully the risks
described below, together with the information provided in other parts of this
prospectus. Any and all of these factors or others not mentioned below could
affect our prospects as a whole.
Our Company Has a History of Losses
Although Surgical has been in business since May 15, 1992 it was in
the development stage until July 7, 1993 when it began commercial shipments of
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its first product. As of December 31, 1997, the Company had total assets of
$445,235, a net loss of $148,422 on revenues of $255,386 and stockholders
deficit of $59,043. As of December 31, 1998, the Company had total assets of
$373,514, a net loss of $797,662 on revenues of $42,393 and stockholders equity
of $318,183. Due to the Company's operating history and limited resources, among
other factors, there can be no assurance that profitability or significant
revenue will occur in the future. Moreover, the Company expects to continue to
incur operating losses through at least the first half of 2000, and there can be
no assurance that losses will not continue thereafter. The ability of the
Company to establish itself as a going concern is dependent upon the receipt of
additional funds from operations or other sources to continue those activities.
The Company is subject to all of the risks inherent in the operation of a
development stage business and there can be no assurance that the Company will
be able to successfully address these risks.
Our Company Has Minimal Assets, Working Capital and Net Worth
As of December 31, 1998, the Company's total assets in the amount of
$373,514, consisted , principally, of the sum of $41,191 in cash, $58,700 in
deposits and $26,898 in inventory. As a result of its minimal assets and a net
loss from operations, in the amount of $797,662, as of December 31, 1998, the
Company had a net worth of $318,183. Further, there can be no assurance that the
Company's financial condition will improve. Even though management believes,
without assurance, that it will obtain sufficient capital with which to
implement its expansion plan, the Company is not expected to proceed with its
expansion without an infusion of capital. Under the TK Loan Commitment, the
Company is required to issue shares on conversion of the note or exercise of the
warrants which will dilute the interest of existing shareholders. In the event
the Company obtains additional debt or equity financing, management may be
required to dilute the interest of existing shareholders or forego a substantial
interest of its revenues, if any.
Our Company Needs Additional Capital
Without an infusion of capital or profits from operations, the
Company is not expected to proceed with its expansion as planned. Under the TK
Loan Commitment, the Company has the ability to secure a total of $5 million in
financing, subject to certain terms and conditions. The Company is not expected
to overcome its history of losses unless this line can be drawn upon as and when
needed or the Company secures additional equity and/or debt financing. The
Company does not anticipate the receipt of increased operating revenues until
management successfully implements its expansion plan, which is not assured.
Further, Surgical may incur significant unanticipated expenditures which deplete
its capital at a more rapid rate because of among other things, the stage of its
business, its limited personnel and other resources and its lack of a widespread
client base and market recognition. Because of these and other factors,
management is presently unable to predict what additional costs might be
incurred by the Company beyond those currently contemplated to achieve market
penetration on a commercial scale in its expanded line of business, i.e. medical
device supplier and risk exposure systems developer. Other than TK, Surgical has
no identified alternative sources of funds, and there can be no assurance that
resources will be available to the Company when needed.
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Our Company Is Dependent On Its Current Management
The possible success of the Company is expected to be largely
dependent on the continued services of its Founder, Chairman and Chief Executive
Office, Dr. G. Michael Swor, and its President and Chief Operating Officer,
Donald K. Lawrence. Virtually all decisions concerning the marketing,
distribution and sales of the Company's products and services will be made or
significantly influenced by the Company's officers. These officers are expected
to devote only such time and effort to the business and affairs of the Company
as may be necessary to perform their responsibilities as executive officers and
directors of Surgical. The loss of the services of any of these officers, but
particularly Dr. Swor, would adversely affect the conduct of the Company's
business and its prospects for the future. The Company presently has employment
agreements with Dr. Swor and Mr. Lawrence and holds no key-man life insurance on
the lives of, and has no other agreement with any of these officers, except that
the Company is the named beneficiary of a key- man life insurance policy
currently owned by Dr. Swor.
Our Company Has Limited Distribution Capability
The Company's success depends in large part upon its ability to
distribute its products and services. As compared to Surgical, which lacks the
financial, personnel and other resources required to compete with its larger,
better-financed competitors, virtually all of the Company's competitors have
much larger budgets for securing customers. Although the Company has entered
into several distribution agreements for its medical products, none are
producing significant revenues at this time. Further, the OASiS system currently
is in a few locations. Depending upon the level of funding which the Company can
draw down under the TK Loan Commitment, management believes, without assurance,
that it will be possible for Surgical to attract additional customers for its
products and services. However, in the event that the Company is limited in the
amount it can take down under the commitment, the Company anticipates that its
limited finances and other resources may be a determinative factor in the
decision to go forward with planned expansion. Until such time, as the Company
draws down sufficient advances under the commitment, it intends to continue
marketing its products through its current distribution arrangements. However,
the fact that these arrangement have not thus far produced significant revenue
may adversely impact the Company's chances for success.
There Are Risks and Possible Unforseen Costs Which May Be Associated with our
Entry into the Medical Device and Exposure Reporting Information Industries
There can be no assurance that the costs for the establishment of a
client base for its products and services will not be significantly greater than
those estimated by Company management. Therefore, the Company may expend
significant unanticipated funds or significant funds may be expended by Surgical
without development of a commercially viable medical device or exposure
reporting information business. There can be no assurance that cost overruns
will not occur or that such cost overruns will not adversely affect the Company.
Further, unfavorable general economic conditions and/or a downturn in customer
confidence could have an adverse effect on the Company's business. Additionally,
competitive pressures and changes in customer mix, among other things, which
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management expects the Company to experience in the uncertain event that it
achieves commercial viability, could reduce the Company's gross profit margin
from time to time. Accordingly, there can be no assurance that Surgical will be
capable of establishing itself in a commercially viable position in local,
state, nationwide and international medical device and exposure reporting
information markets.
Our Company Is Dependent On Securing a Suitable Strategic Partner
The Company's ability to establish a sufficient customer base at a
level sufficient to meet the larger competition depends in part upon the ability
of the Company to capitalize on its joint venture with US Surgical with regard
to OASiS and to finalize a joint venture agreement with a suitable partner for
its disposable medical devices. The Company has no tentative agreements with any
strategic partner for expansion of its medical device business. There can be no
assurance that a qualified strategic arrangement will be found at the levels
which management believes are possible. Further, even if the Company receives
sufficient proceeds from the TK Loan Commitment, thus enabling it to go forward
with its planned expansion of its business, it will nevertheless be dependent
upon the availability of a qualified strategic partner to progress at the levels
which the Company believes are necessary. OASiS has only been in the marketplace
for the past year and appears to be meeting expectations; however, its market
acceptance has not yet been determined. SutureMate(R) had limited acceptance as
originally marketed, which limited acceptance the Company believes was due to
the manufacturers suggested retail price. SutureMate(R) has been redesigned and
will be re- released at a price more in keeping with disposal devices. MediSpecs
RX(TM) has had limited acceptance to date and due to poor sales, will be dropped
by the Company. Initially, the proceeds of the TK Loan Commitment are
anticipated to be sufficient to meet the needs to expand OASiS and the Company
has elected to concentrate on development of markets for OASiS rather than
focusing on the expansion of the markets for its two other products and will
rely on its existing markets for these products. Although management believes
that the acceptance of its products and services will continue to find the
market acceptance which has occurred in the past, there can be no assurance that
this will be so.
Our Company Currently Has Significant Customer and Product Concentration
To date, a limited number of customers and distributors have
accounted for substantially all of the Company's revenues with respect to
product sales. The Company anticipates that the main focus of its selling
efforts will be to continue to sell its products to a relatively small group of
medical products distributors with the objective of having its products
distributed on a large national and international scale. Although the company
entered into agreements with US Surgical, had an exclusive distributorship
agreement with Hospital News and believes it can reactivate its distributorship
agreements with Johnson & Johnson Medical Pty Ltd. to sell its SutureMate(R)
product (in the territories of Australia, New Zealand, Papua, New Guinea and
Fiji), with the two other distributors to sell such product in Saudi Arabia and
the Netherlands and that Noesis will generate sales, there is no assurance that
the Company will be able to obtain adequate distribution of its products to the
intended end user. Most medical product distributors carry an extensive line of
products (some of which they manufacture themselves) which they make available
to end users
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(hospitals, surgeons, healthcare workers) and various of these products may
compete with each other as to function, price or other factors. In addition,
numerous medical product distributors are not themselves well capitalized and
their financial condition may impact their ability to properly distribute the
Company's products. The Company's ability to achieve revenues in the future will
depend in significant part upon its ability to obtain orders from, maintain
relationships with and provide support to, existing and new distributors, as
well as the condition of its distributors. As a result, any cancellation,
reduction or delay in orders by or shipments to any customer or the inability of
any customer to finance its purchases of the Company's products may materially
adversely affect the Company's business, financial condition and results of
operations. There can be no assurance that the Company's revenues will increase
in the future or that the Company will be able to support or attract customers.
Our Company Has Experienced Fluctuations in Results of Operations
The Company has experienced and may in the future experience
significant fluctuations in revenues, gross margins and operating results. On
the medical products development side of its business, the introduction of new
products and the manufacture and marketing of most of the Company's products is
a lengthy (ranging from a minimum of six weeks to an estimated maximum of
eighteen (18) months from order to delivery) process and the timing and amount
of product sales is difficult to predict reliably. In addition, a single
customer's order scheduled for shipment in a fiscal quarter can represent a
significant portion of the Company's potential sales for such quarter. As with
many developing businesses, the Company expects to fail to receive expected
orders, and delivery schedules may have to be deferred as a result of changes in
customer requirements, among other factors. As a result, the Company's operating
results for a particular period have, to date, been and may in the future be
materially adversely affected by a delay, rescheduling or cancellation of even
one purchase order. Moreover, purchase orders are often received and accepted
substantially in advance of shipment, and the failure to reduce actual costs to
the extent anticipated or an increase in anticipated costs before shipment could
materially, adversely affect the gross margins for such order, and as a result,
the Company's results of operations. Moreover, a majority of the Company's
anticipated orders could be canceled since orders are expected to be made
substantially in advance of shipment, and even though the Company's contracts do
not typically provide that orders may be canceled, if an important distributor
wishes to cancel an order, the Company may be compelled, due to competitive
conditions, to accede to such request. As a result, backlog, if any, will not
necessarily be indicative of future sales for any particular period.
Furthermore, a substantial portion of net sales may be realized near the end of
each quarter. A delay in a shipment near the end of a particular quarter, due,
for example, to an unanticipated shipment rescheduling, to cancellations or
deferrals by customers or to unexpected manufacturing difficulties experienced
by the Company, may cause net revenues in a particular quarter to fall
significantly below the company's expectations and may materially adversely
affect the Company's operating results for such quarter.
A large portion of the Company's expenses are fixed and difficult to
reduce should revenues not meet the Company's expectations, thus magnifying the
material adverse effect of any revenue shortfall. Furthermore, announcements by
the Company or its competitors of new products and technologies could cause
customers to defer purchases of the Company's products or a reevaluation of
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products under development, which would materially adversely affect the
Company's business, financial condition and results of operations. Additional
factors that may cause the Company's revenues, gross margins and results of
operations to vary significantly from period to period include: product
development, patent processing, FDA processing, clinical trials, mix of products
sold; manufacturing efficiencies, costs and capacity; price discounts; market
acceptance and the timing of availability of new products by the Company or its
customers, usage of different distribution and sales channels; warranty and
customer support expenses; customization of systems; and general economic and
political conditions. In addition, the Company's results of operations are
influenced by competitive factors, including the pricing and availability of and
demand for, competitive products. All of the above factors are difficult for the
Company to forecast, and these or other factors could materially adversely
affect the Company's business, financial condition and results of operations. As
a result, the Company believes that period-to-period comparisons are not
necessarily meaningful and should not be relied upon as indications of future
performance.
Our Company Can Be Affected By Unfavorable Interpretation of Government
Regulation
As a medical device specifier, the Company is subject to all
federal, state and local statutes and regulations governing its products, to the
extent applicable. The Company will not be subject to additional regulation
unless it elects to produce products which require it to conduct extensive
clinical trials for FDA clearance which are not required for the Company's
products at this time. In such event the Company shall have all of the
uncertainties such clinical trials present including the risk of loss of
substantial capital in the event a product never receives the required
approvals.
Medical products are subject to extensive regulation by the United
States (U.S. Food and Drug Administration ("FDA") and U.S. Patent Office),
state, local and foreign laws and international treaties. The Company's products
must conform to a variety of domestic and international requirements. In order
for the Company to sell its products in a foreign jurisdiction, it must obtain
regulatory approval and comply with different regulations in each jurisdiction.
The delays inherent in this governmental approval process may cause the
cancellation, postponement or rescheduling of the purchase by the Company's
customers, which in turn may have a material adverse effect on the sale of such
products by the Company to such foreign customers. The failure to comply with
current or future domestic and foreign regulations or changes in the
interpretation of existing regulations could result in the suspension or
cessation of product sales. Such regulations or such changes in interpretation
could require the Company to modify its products and incur substantial costs to
comply with such time-consuming regulations and changes.
The regulatory environment in which the Company operates is subject
to change. Regulatory changes, which are affected by political, economic and
technical factors, could significantly impact the Company's operations by
restricting development efforts by the Company and its customers, making current
products obsolete or increasing the opportunity for additional competition. Any
such regulatory changes could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company might deem
it necessary or advisable to alter or modify its products to operate in
compliance with such regulations. Such modifications could be extremely
expensive and, especially if subject to regulatory review and approval,
time-consuming.
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Our Company's Proprietary Rights Are Important To Its Continued Growth
The Company attempts to protect its intellectual property rights
through patents, trademarks, secrecy agreements, trade secrets and a variety of
other measures. However, there can be no assurance that such measures will
provide adequate protection for the Company's trade secrets or other proprietary
information, that disputes with respect to the ownership of its intellectual
property rights will not arise, that the Company's trade secrets or proprietary
technology will not otherwise become known or be independently developed by
competitors or that the Company can otherwise meaningfully protect its
intellectual property rights. There can be no assurance that any patent owned by
the Company will not be invalidated, circumvented or challenged, that the rights
granted thereunder will provide competitive advantages to the Company or that
any of the Company's pending or future patent applications will be issued with
the scope of the claims sought by the Company, if at all. Furthermore, there can
be no assurance that others will not develop similar products, duplicate the
Company's products or design around the patents owned by the Company or that
third parties will not assert intellectual property infringement claims against
the Company. In addition, there can be no assurance that foreign intellectual
property laws will adequately protect the Company's intellectual property rights
abroad. The failure of the Company to protect its proprietary rights could have
a material adverse effect on its business, financial condition and results of
operations.
Litigation may be necessary to protect the Company's intellectual
property rights and trade secrets, to determine the validity of and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
infringement, invalidity, right to use or ownership claims by third parties or
claims for indemnification resulting from infringement claims will not be
asserted in the future. If any claims or actions are asserted against the
Company, the Company may seek to obtain a license under a third party's
intellectual property rights. There can be no assurance, however, that a license
will be available under reasonable terms or at all. In addition, should the
Company decide to litigate such claims, such litigation could be extremely
expensive and time consuming and could materially adversely affect the Company's
business, financial condition and results of operations, regardless of the
outcome of the litigation.
Our Company May Not Be Able To Manage Growth
The Company expects to grow through its alliance with US Surgical,
one or more strategic alliances, acquisitions, internal growth and by granting
licenses for products which are not within the focuses defined by management.
There can be no assurance that the Company will be able to create a greater
market presence, or if such market is created, to expand its market presence or
successfully enter other markets. The ability of the Company to grow will depend
on a number of factors, including the availability of working capital to support
such growth, existing and emerging competition, one or more additional qualified
strategic alliances and the Company's ability to maintain sufficient profit
margins in the face of pricing pressures. The Company also must manage costs in
a changing regulatory environment, adapt its infrastructure and systems to
accommodate growth within the niche market which it has created.
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The Company also plans to expand its business, in part, through
acquisitions. Although the Company will continuously review potential
acquisition candidates, it has not entered into any agreement, understanding or
commitment with respect to any additional acquisitions at this time. There can
be no assurance that the Company will be able to successfully identify suitable
acquisition candidates, complete acquisitions on favorable terms, or at all, or
integrate acquired businesses into its operations. Moreover, there can be no
assurance that acquisitions will not have a material adverse effect on the
Company's operating results, particularly in the fiscal quarters immediately
following the consummation of such transactions, while the operations of the
acquired business are being integrated into the Company's operations. Once
integrated, acquisitions may not achieve comparable levels of revenues,
profitability or productivity as at then existing Company-owned locations or
otherwise perform as expected. The Company is unable to predict whether or when
any prospective acquisition candidate will become available or the likelihood
that any acquisitions will be completed. The Company will be competing for
acquisition and expansion opportunities with entities that have substantially
greater resources than the Company. In addition, acquisitions involve a number
of special risks, such as diversion of management's attention, difficulties in
the integration of acquired operations and retention of personnel, unanticipated
problems or legal liabilities, and tax and accounting issues, some of all of
which could have a material adverse effect on the Company's results of
operations and financial condition.
As a Device Specifier, Our Company May Be Subject To Potential Legal Liability
Providers of medical devices may be subject to claims relating to
their product. In addition, under the terms of an agreement with Sarasota
Medical Hospital ("SMH"), the Company is required to indemnify and hold harmless
SMH and the Lessee against any and all claims regarding the use of the OASiS
system. Management has adopted and implemented policies and guidelines to reduce
its exposure to these risks; principally in the area of its initial product
research and development. However, the failure of any product to meet such
policies and guidelines may result in governmental intervention, negative
publicity, injunctive relief and the payment by the Company of money damages or
fines. There can be no assurance that the Company will not experience such
problems.
At such time as the Company enters into licensing agreements for
certain products which it feels are not a proper mix but deserve exploitation,
the Company may be subject to claims asserting that it is vicariously liable for
the damages allegedly caused by the products produced by the licensees.
Generally, liability for the acts or inactions of its licensees are based on
agency and products liability concepts. The Company intends for its license
agreements to state that the parties are not agents, that the licensees control
the manufacturer and production of the product, and that any modifications are
the sole responsibility of the licensee. Despite these efforts to minimize the
risk of liability, there can be no assurance that a claim will not be made
against the Company.
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Our Company Operated In a Highly Competitive Market
The medical products and devices industry is highly competitive, with
several major companies involved. The exposure reporting information industry
has only one (1) known competitor at this time. The Company will be competing
with larger competitors in international, national, regional and local markets.
In addition, the Company may encounter substantial competition from new market
entrants. Many of the Company's competitors have significantly greater name
recognition and have greater marketing, financial and other resources than the
Company. There can be no assurance that the Company will be able to compete
effectively against such competitors in the future.
Our Company Operates In an Area of Rapid Technological Change
The market for surgical safety products and services is subject to
rapid technological change, frequent new product introductions and enhancements,
product obsolescence and changes in end- user requirements. The Company's
ability to be competitive in this market will depend in significant part upon
its ability to successfully develop, introduce and sell new innovative
proprietary products, services and enhancements thereof on a timely and
cost-effective basis that respond to changing customer requirements. Any success
of the Company in developing new and enhanced products and services will depend
upon a variety of factors, including new product selection, timely and efficient
compliance with and completion of the regulatory process (FDA and the U.S.
Patent and Trademark Office), timely and efficient completion of design, timely
and efficient implementation of manufacturing and assembly process, its cost
reduction program and the development, completion, performance, quality and
reliability and development of competitive products and services by competitors.
The Company may experience delays from time to time in completing development
and introduction of new products and services. Moreover, there can be no
assurance that the Company will be successful in selecting, developing,
manufacturing and marketing new products and services. There can be no assurance
that defects will not be found in the Company's products and services after
commencement of commercial shipments, which could result in the loss of or delay
in market acceptance. The inability of the Company to introduce in a timely
manner new products and services that contribute to revenues could have a
material adverse effect on the Company's business, financial condition and
results of operations.
There Is an Uncertainty As To The Market Acceptance of Our Products
The future operating results of the Company depend to a significant
extent upon the continued development of products and services deemed necessary,
useful, convenient, affordable and competitive by medical professionals and
their patients. There can be no assurance that the Company has the ability to
continuously introduce propriety products and services into the marketplace
which will achieve the market penetration and acceptance necessary for the
Company to grow and become profitable on a sustained basis, especially given the
fierce competition that exists from companies more established and well financed
than the Company.
To date, substantially all of the Company's product sales have been
to customers within the United States with a small portion of such sales
generated internationally. The Company's future results of operations will be
dependent in significant part on its ability to penetrate markets in the United
States and foreign countries in which the Company has not yet established a
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meaningful presence. There can be no assurance that the Company will be
successful in penetrating these additional markets.
Our Company Has Never Declared a Dividend
While payments of dividends on the Common Stock rests with the
discretion of the Board of Directors, there can be no assurance that dividends
can or will ever be paid. Payment of dividends is contingent upon, among other
things, future earnings, if any, and the financial condition of the Company,
capital requirements, general business conditions and other factors which cannot
now be predicted. It is highly unlikely that cash dividends on the Common Stock
will be paid by the Company in the foreseeable future.
Our Charter Does Not Permit Cumulative Voting
The election of directors and other questions will be decided by a
majority vote. Since cumulative voting is not permitted and one-third of the
Company's outstanding Common Stock constitute a quorum, investors who purchase
shares of the Company's Common Stock may not have the power to elect even a
single director and, as a practical matter, the current management will continue
to effectively control the Company.
There Could Be Potential Anti-Takeover and Other Effects of Issuance of
Preferred Stock Which May Be Detrimental to Common Shareholders
Potential anti-takeover and other effects of issuance the of
preferred stock may be detrimental to Common Shareholders. The Company is
authorized to issue shares of preferred stock. ("Preferred Stock"); none of
which has been issued to date. The issuance of Preferred Stock does not require
approval by the shareholders of the Company's Common Stock. The Board of
Directors, in its sole discretion, has the power to issue shares of Preferred
Stock in one or more series and to establish the dividend rates and preferences,
liquidation preferences, voting rights, redemption and conversion terms and
conditions and any other relative rights and preferences with respect to any
series of Preferred Stock. Holders of Preferred Stock may have the right to
receive dividends, certain preferences in liquidation and conversion and other
rights; any of which rights and preferences may operate to the detriment of the
shareholders of the Company's Common Stock. Further, the issuance of any shares
of Preferred Stock having rights superior to those of the Company's Common Stock
may result in a decrease in the value of market price of the Common Stock
provided a market exists, and additionally, could be used by the Board of
Directors as an anti-takeover measure or device to prevent a change in control
of the Company.
Secondary Trading of Our Shares May Not Be Possible in Some States
Secondary trading in the Common Stock will not be possible in each
state until the shares of Common Stock are qualified for sale under the
applicable securities laws of the state or the Company verifies that an
exemption, such as listing in certain recognized securities manuals, is
available for secondary trading in the state. There can be no assurance that the
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Company will be successful in registering or qualifying the Common Stock for
secondary trading, or availing itself of an exemption for secondary trading in
the Common Stock, in any state. If the Company fails to register or qualify, or
obtain or verify an exemption for the secondary trading of, the Common Stock in
any particular state, the shares of Common Stock could not be offered or sold
to, or purchased by, a resident of that state. In the event that a significant
number of states refuse to permit secondary trading in the Company's Common
Stock, a public market for the Common Stock will fail to develop and the shares
could be deprived of any value. The Company was listed in Moody's OTC Industrial
on April 28, 1998 and has been published in Standard & Poor's Daily News since
January 27, 2000. The Company will be published in the Standard & Poor's Manual
sometime in March, 2000. This listing should qualify the Company in those states
that recognize such listing as an exemption.
Penny Stock Regulations Could Adversely Effect Trading of Our Common Stock in
the Secondary Market
Although trading volume indicates that a secondary trading market
has developed to a certain extent for the shares of Common Stock of the Company,
the Common Stock is expected to come within the meaning of the term "penny
stock" under 17 CAR 240.3a51-1 because such shares are issued by a small
company; are low-priced (under five dollars); and are not traded on NASDAQ or on
a national stock exchange. The SEC has established risk disclosure requirements
for broker- dealers participating in penny stock transactions as part of a
system of disclosure and regulatory oversight for the operation of the penny
stock market. Rule 15g-9 under the Securities Exchange Act of 1934, as amended,
obligates a broker-dealer to satisfy special sales practice requirements,
including a requirement that it make an individualized written suitability
determination of the purchaser and receive the purchaser's written consent prior
to the transaction. Further, the Securities Enforcement Remedies and Penny Stock
Reform Act of 1990 require a broker-dealer, prior to a transaction in a penny
stock, to deliver a standardized risk disclosure instrument that provides
information about penny stocks and the risks in the penny stock market.
Additionally, the customer must be provided by the broker-dealer with current
bid and offer quotations for the penny stock, the compensation of the
broker-dealer and the salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. For so long as the Company's Common Stock is considered penny stock,
the penny stock regulations can be expected to have an adverse effect on the
liquidity of the Common Stock in the secondary market, if any, which develops.
USE OF PROCEEDS
All of the shares of Surgical's Common Stock covered by this
prospectus are being offered for the account of the Selling Shareholders listed
herein. We will not receive any proceeds from this offering.
SELLING SHAREHOLDERS
All of the 20,038,097 shares of Surgical's Common Stock covered by
this prospectus are being offered for the account of Thomas Kernaghan & Co.,
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Ltd. ("TK") as Agent and Lender (the "Selling Shareholders") under a Loan
Agreement dated December 20, 1999 and the related Registration Rights Agreement
dated December 30, 1999, as amended.
Under the terms of the Registration Rights Agreement, we have agree,
among other things, to file a registration statement of which this prospectus is
a part with the Securities and Exchange Commission to register all of the shares
which potentially could be issued if TK makes a loan in the total aggregate
amount of $5 million, sufficient to cover the conversion of all of the notes
issued under such loan and the exercise of all of the warrants granted under
such loan. Further, under such agreement, we are to pay all of the registration
expenses incurred in connection with this registration and the reasonable fees
and expenses of one (1) counsel for the Selling Shareholders, except that TK is
to pay all selling commissions, underwriting discounts and disbursements,
transfer taxes and fees and expenses of separate counsel applicable to their
sale of Surgical's Common Stock to be issued pursuant to the agreements
underlying the TK Loan Commitment. The agreements provides that we must keep
current and effective the registration statement covering these shares for the
greater of (i) a period of at least three (3) years from the closing date and
(ii) a period of at least ninety (90) days after all of the notes have been
converted or paid and all the warrants have been exercised or have expired.
Prior to the TK Loan Commitment, neither TK nor any of its officers,
directors or principal shareholders have held any position or office nor have
any of them had a material relationship with Surgical or any of its affiliates
within the past three (3) years.
As of December 31, 1999, the Company had 14,515,373 shares
outstanding, of which 2,700,000 relate to the escrow required under the TK Loan
Commitment and are covered by this prospectus.
Assuming that all the other shares registered hereby are issued, the
total outstanding, with no other shares issued, would be 31,853,470. In such
event, TK's ownership of 20,038,097 shares would represent 62.91% of the total
voting shares of the Company and a controlling interest in it.
PLAN OF DISTRIBUTION
The Selling Shareholders may effect the distribution of the shares
in one or more transactions that may take place through block trades or ordinary
broker's transactions, or through privately negotiated transactions, an
underwritten offering, or a combination of any such methods of sale. Sales of
shares will be made at market prices prevailing at the time of sale or at
negotiated prices. Selling Shareholders may pay usual and customary or
specifically negotiated brokerage fees or commissions in connection such sales.
We have agreed to pay registration expenses incurred in connection with this
registration of approximately $36,228.
The aggregate proceeds to the Selling Shareholders from the sale of
the shares will be the purchase price of the Surgical Common Stock sold less the
aggregate agents' commissions and underwriters' discounts, if any. The Selling
Shareholders and any dealers or agents that participate in the distribution of
the shares may be deemed to be "underwriters" within the meaning of the
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Securities Act of 1933 (the "Act"), and any profit from the sale of shares by
them and any commissions received by any such dealers or agents might be deemed
to be underwriting discounts and commissions under the Act..
In order to comply with the securities laws of certain states, if
applicable, the securities may be sold only through registered or licenses
brokers or dealers. In addition, in certain states, the securities may not be
sold unless they have been registered or qualified for sale in such state or any
exemption from such registration or qualification requirement is available and
the sale is made in compliance with the requirements.
We have agreed to indemnify the Selling Shareholders in certain
circumstances, against certain liabilities arising under the Act. The Selling
Shareholders have agreed to indemnify us and our directors and officers who sign
the registration statement against certain liabilities, including liabilities
arising under the Act.
DESCRIPTION OF SECURITIES
The securities offered by this prospectus are shares of our Common
Stock which are registered pursuant to Section 12 of the Securities and Exchange
Act of 1934 (the "Exchange Act").
At the annual shareholder meeting held on February 29, 2000, by a
majority vote, the Company was authorized it file a Certificate of Amendment to
its Certificate of Incorporation, increasing the number of authorized shares of
Common Stock from 20,000,000 to 100,000,000. The Certificate of Amendment was
sent to the New York Department of State for filing.
The transaction under which these shares are to be issued arose in
December 1999, when the Company executed the TK Loan Commitment with TK, as
Agent and Lender, whereby TK agreed to make loans to the Company of up to
$5,000,000 in installments during the period commencing with the date of the
agreement and ending on November 30, 2002. The TK Loan Commitment permits
instalments aggregating $500,000 in any 90-day period. The proceeds of the loan
are to pay agent fees and for working capital purposes. The TK Loan Commitment
provides that the offering has been conducted under Regulation S of the Act.
Under the terms of the TK Loan Commitment, each installment is supported by a
convertible note and security agreement and the Agent and Lender are granted
warrants to purchase shares of the Company's Common Stock. Prior to each
instalment, the Company is obligated to escrow shares under the terms of an
escrow agreement. The convertible note bears interest at 8% per annum and may be
prepaid at any time. The note issued for the first installment is convertible at
any time at the option of TK at the higher of (i) $.375 or (ii) the lower of
$.8203 or 75% of the closing bid price of the Company's Common Stock on the
conversion date. The security agreement grants TK a security interest in all of
the Company's equipment, inventory, accounts, contract rights, chattel paper and
instruments, and the proceeds of any of the collateral. Both the Lender's and
the Agent's warrants granted with the first installment are exercisable at
$1.09375 per share, subject to defined adjustments. The warrants are exercisable
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20% immediately and at the rate of an additional 1% for each $25,000 of
principal borrowed. The Company was obligated to issue 2,700,000 shares of its
Common Stock to be held in escrow for the potential conversion of the notes or
exercise of the warrants. TK acts as escrow agent for the shares and is
authorized to release such shares upon receipt of a notice of note conversion or
warrant exercise. The Company granted TK registration rights and is obligated to
file a Form S-3 within sixty (60) days of the agreement. This prospectus is part
of the registration statement required and under the terms of the agreement
covers initially 20,038,097 shares. In the event the Company's registration
statement is not declared effective within one hundred twenty (120) days of a
specified deadline, the Company is required to pay a penalty equal to $13,000
per month, to be adjusted pro rata for less periods. Under the terms of the TK
Loan Commitment, an initial loan of $650,000 was made on December 30, 1999, the
Lender was granted a warrant to purchase 3,428,571 shares and the Agent was
granted a warrant to purchase 1,142,857 shares. The issuance of the securities
was made pursuant to Regulation S of the Act.
LEGAL OPINIONS
Mintmire & Associates will provide Surgical with an opinion that the
shares being offered in this prospectus are legally and validly issued. Donald
F. Mintmire, the principal of the firm, owns as of February 28, 2000 less than
60,000 shares of Surgical's Common Stock.
EXPERTS
The financial statements of Surgical as of December 31, 1998
included and incorporated by reference in this prospectus and elsewhere in this
registration statement, have been audited by Kerkering, Barbario &Co., P.A.,
independent public accounts, as indicated in their report with respect thereto
and are included and incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information
with the Securities and Exchange Commission (the "SEC"). You may read and copy
any documents we file with the SEC at their public reference facilities in Room
1024 at 450 Fifth Street N.W., Washington, DC 20549 or at regional offices
located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and
7 World Trade Center, 13th Floor, New York, New York 10048. Please call the SEC
at 1-800- SEC-0330 for further information on the public reference rooms. Our
SEC filings also are available to the public on the SEC Internet site at
http://www.sec.gov.
We filed with the SEC a registration statement on Form S-3 under the
Act which registered the shares covered by this prospectus for resale by the
Selling Shareholders. This prospectus is only part of the registration
statement. It does not contain all of the information shown in the registration
statement because the SEC rules and regulations allow us to include certain
information in the filing, but permit us to omit certain information from the
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prospectus. Statements contained in this prospectus as to any contract or other
documents' contents are not necessarily complete. In each instance, if the
contract or document is filed as an exhibit to the registration statement, the
affected statement is qualified, in all aspects by reference to the applicable
exhibit to the registration statement. For further information about us and our
shares, we refer you to the registration statement and the exhibits that you may
obtain from the SEC at its principal office after you pay the SEC prescribed
fee, or you can obtain it through the Internet site listed above.
The SEC allows us to "incorporate by reference" the information we
file with them. This means that we can disclose important information to you by
referring you to these documents. The information we incorporate by reference is
an important part of this prospectus, and information that we file later with
the SEC will update or supercede automatically this information. We incorporate
by reference the following documents, which we have filed already with the SEC,
and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act until the termination of the offering under this
prospectus.
(1) Our Annual Report on Form 10KSB for the year ended
December 31, 1998, as amended on December 29, 1999.
(2) Our Quarterly Reports on Form 10QSB for the quarters
ended March 31, 1999, June 30, 1999, as amended October
15, 1999 and September 30, 1999, as amended December 29,
1999.
(3) The Company has not filed any current reports on Form 8K
(4) The description of the Company's Common Stock, par value
$.001 per share is contained in its Registration
Statement filed under the Exchange Act on Form 10SB
(File No. 0-24921), as amended on October 15, 1999.
You should rely only on the information we include or incorporate by
reference in this prospectus and any applicable prospectus supplement. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The information contained in this prospectus or
the applicable prospectus supplement is accurate only as of the date on the
front of those documents, regardless of the time of delivery of this prospectus
or the applicable prospectus supplement or of any sale of our securities.
Any statement contained in this prospectus or in a document
incorporated or deemed to be incorporated by reference in this prospectus is
deemed to be modified or superseded for purposes of this prospectus to the
extent that any of the following modifies or superseded a statement in this
prospectus or incorporated by reference in this prospectus:
o in the case of a statement in a previously filed
document incorporated by reference or deemed to be
incorporated by reference in this prospectus, a
statement contained in this prospectus;
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<PAGE>
o a statement contained in any accompanying prospectus
supplement relating to a specific offering of shares; or
o a statement contained in any other subsequently filed
document that modifies or supersedes a statement in this
prospectus.
Any modified or superseded statement will not be deemed to
constitute a part of this prospectus or any accompanying prospectus supplement,
except as modified or superseded. Except as provided by the above mentioned
exceptions, all information appearing in this prospectus and each accompanying
prospectus supplement is qualified in its entirety by the information appearing
in the documents incorporated by reference.
We will provide, without charge to each person to whom a copy of
this prospectus is delivered, after their written or oral request, a copy of any
or all of the documents incorporated by reference into this prospectus, other
than exhibits to the documents, unless the exhibits are incorporated
specifically by reference in the documents. Requests may be made by writing or
telephoning the following person:
Stacy Quaid
Investor Relations
2018 Oak Terrace
Sarasota, Florida 34231
(941) 927-7874
-22-
<PAGE>
No person is authorized in connection with any offering of the
shares to give any information or to give any representation not contained in
this prospectus, and you should not rely on any such information or
representation as having been authorized by Surgical or any Selling Shareholder.
Neither the delivery of this prospectus nor any sale made hereunder shall under
any circumstances create any implication that the information contained in this
prospectus is correct as of any time subsequent to the date of this prospectus.
Until the later of December 31, 2002 or ninety (90) days after all
notes have been converted or paid and all warrants have been exercised or
expired, all dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealer's obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page No.
Prospectus Summary 1
Risk Factors 8
Use of Proceeds 18
Selling Shareholders 18
Plan of Distribution 19
Description of Securities 20
Legal Opinions 21
Experts 21
Where You Can Find More Information 21
</TABLE>
PROSPECTUS
20,038,097 Shares
SURGICAL SAFETY PRODUCTS, INC.
Common Stock
This Prospectus is dated March 1, 2000.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be paid
solely by Surgical in connection with the distribution of the securities being
registered:
<TABLE>
<S> <C>
Securities and Exchange Registration Fee $ 8,178
Blue Sky Fees and Expenses $ 0
Printing Expenses $ 1,000
Accounting Fees and Expenses 800
Legal Fees and Expenses $ 25,000
Miscellaneous Expenses $ 1,250
TOTAL $ 36,228
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Surgical is organized under the laws of the State of New York.
Section 722 of the Business Corporation Law permits a New York corporation to
indemnify any person is made, or threatened to be made, a party to an action or
proceeding ( other than one by or in the right of the corporation to procure a
judgment in its favor), whether civil or criminal, including an action by or in
the right of any other corporation of any type or kind, domestic or foreign, or
any partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the corporation served in any
capacity at the request of the corporation, by reason of the fact that he, his
testator or intestate, was a director or officer of the corporation, or served
such other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise in any capacity, against judgments, fines, and amounts paid
in settlement, and reasonable expenses, including attorneys` fees actually and
necessarily incurred as a result of such action or proceeding, or any appeal
therein, if such director or officer acted, in good faith, for a purpose which
he reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the corporation and, in
criminal actions or proceedings, in addition, had no reasonable cause to believe
that his conduct was unlawful.
However, under certain circumstances a director remains liable for
his actions. Section 719 excludes any limitation of liability of directors in
the following cases:
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<PAGE>
(a) Directors of a corporation who vote for or concur in any of the
following corporate actions shall be jointly and severally liable to the
corporation for the benefit of its creditors or shareholders, to the extent of
any injury suffered by such persons, respectively, as a result of such action:
(1) The declaration of any dividend or other distribution
to the extent that it is contrary to the provisions of paragraphs (a) and (b) of
section 510 (Dividends or other distributions in cash or property).
(2) The purchase of the shares of the corporation to the
extent that it is contrary to the provisions of section 513 (Purchase or
redemption by a corporation of its own shares).
(3) The distribution of assets to shareholders after
dissolution of the corporation without paying or adequately providing for all
known liabilities of the corporation, excluding any claims not filed by
creditors within the time limit set in a notice given to creditors under
articles 10 (Non-judicial dissolution) or 11 (Judicial dissolution).
(4) The making of any loan contrary to section 714 (Loans to
directors).
(b) A director who is present at a meeting of the board, or any
committee thereof, when action specified in paragraph (a) is taken shall be
presumed to have concurred in the action unless his dissent thereto shall be
entered in the minutes of the meeting, or unless he shall submit his written
dissent to the person acting as the secretary of the meeting before the
adjournment thereof, or shall deliver or send by registered mail such dissent to
the secretary of the corporation promptly after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action. A director who is absent from a meeting of the board, or any committee
thereof, when such action is taken shall be presumed to have concurred in the
action unless he shall deliver or send by registered mail his dissent thereto to
the secretary of the corporation or shall cause such dissent to be filed with
the minutes of the proceedings of the board or committee within a reasonable
time after learning of such action.
(c) Any director against whom a claim is successfully asserted under
this section shall be entitled to contribution from the other directors who
voted for or concurred in the action upon which the claim is asserted.
(d) Directors against whom a claim is successfully asserted under
this section shall be entitled, to the extent of the amounts paid by them to the
corporation as a result of such claims:
(1) Upon payment to the corporation of any amount of
an improper dividend or distribution, to be subrogated to the rights of the
corporation against shareholders who received such dividend or distribution with
knowledge of facts indicating that it was not authorized by section 510, in
proportion to the amounts received by them respectively.
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<PAGE>
(2) Upon payment to the corporation of any amount of the
purchase price of an improper purchase of shares, to have the corporation
rescind such purchase of shares and recover for their benefit, but at their
expense, the amount of such purchase price from any seller who sold such shares
with knowledge of facts indicating that such purchase of shares by the
corporation was not authorized by section 513.
(3) Upon payment to the corporation of the claim of any
creditor by reason of a violation of subparagraph (a) (3), to be subrogated to
the rights of the corporation against shareholders who received an improper
distribution of assets.
(4) Upon payment to the corporation of the amount of any
loan made contrary to section 714, to be subrogated to the rights of the
corporation against a director who received the improper loan.
(e) A director shall not be liable under this section if, in the
circumstances, he performed his duty to the corporation under paragraph (a) of
section 717.
(f) This section shall not affect any liability otherwise imposed by
law upon any director.
Article VI of the Company's Articles of Incorporation contains
provisions providing for the indemnification of directors of the Company as
follows:
"The personal liability of directors to the corporation or its
shareholders for damages for any breach of duty in such capacity is
hereby eliminated except that such personal liability shall not be
eliminated if a judgment or other final adjudication adverse to such
director establishes that his acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law or
that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled or that his acts
violated Section 719 of the Business Corporation Law."
Article VI of the Company's By-Laws contains provisions providing
for the indemnification of directors and officers of the Company as follows:
"Each director and officer of this corporation shall be indemnified
by the corporation against all costs and expenses actually and
necessarily incurred by him or her in connection with the defense of
any action, suit or proceeding in which he or she may be involved or
to which he or she may be made a party by reason of his or her being
or having been such director or officer, except in relation to
matters as to which he or she shall be finally adjudged in such
action, suit or proceeding to be liable for negligence or misconduct
in the performance of duty."
The Company has no other agreements with any of its directors or
executive offices providing for indemnification of any such persons with respect
to liability arising out of their capacity or status as officers and directors.
-26-
<PAGE>
At present, there is no pending litigation or proceeding involving a
director or officer of the Company as to which indemnification is being sought.
Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
ITEM 16. EXHIBITS
Exhibit No. Description of Exhibit
3.(I).10 * Certificate of Amendment filed February 29, 2000
5.1 * Opinion of Mintmire & Associates as to the legality of the
Securities to be issued.
10.38 * Effective December 30, 1999, Loan Agreement, Note,
Security Agreement, Lender's Warrant, Agent's Warrant,
Registration Rights Agreement and Escrow Agreement
relative to the December 1999 transaction with Thomson
Kernaghan & Co., Inc. under which the securities offered herein
arise and Amendment thereto.
10.39 * Effective January 3, 2000 IBM Customer Agreement and
Statement of Work.
23.1 * Consent of Kerkering, Barbario & Co., P.A.,
Independent Public Accounts.
23.2 * Consent of Mintmire & Associates is contained in the
Opinion as to legality of Securities filed as Exhibit 5
27.1 * Financial Data Schedule
* Filed Herewith
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a) of the Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental
-27-
<PAGE>
change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the
low and high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change in such information in the registration statement.
Provided, however, that paragraph (1)(i) and (1) (ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3 and
the information required [or] to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the registrant pursuant to section 13 or section 15(d) of the
Exchange Act that are incorporated by reference in the registration
statement.
(2) That, for purposes of determining any liability under the Act, each such
post- effective amendment 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.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Act, each filing
of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Exchange Act) that is incorporated by reference in the registration
statement 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.
-28-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sarasota, State of Florida, on February 29, 2000.
SURGICAL SAFETY PRODUCTS INC.
By: /S/ G. Michael Swor
------------------------
Dr. G. Michael Swor, Chairman of
the Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons, who represent a
majority of the Board of Directors, in the capacities and on the dated indicated
<TABLE>
<S> <C> <C>
Signature Capacity Date
- - --------- ----- ----
/s/ G. Michael Swor Chairman of the Board February 29, 2000
- - --------------------------- and Chief Executive
G. Michael Swor Officer
/s/ David Collins Acting Chief Financial Officer, February 29, 2000
- - --------------------------- Secretary, Treasurer and
David Collins Director (principal financial
or accounting officer)
/s/ Donald K. Lawrence President, Chief Operating February 29, 2000
- - --------------------------- Officer and Director
Donald K. Lawrence
/s/ Frank Clark Director February 29, 2000
- -----------------------------
Frank Clark
/s/ James D. Stuart Director February 29, 2000
- - ---------------------------
James D. Stuart
</TABLE>
-29-
<PAGE>
<TABLE>
<S> <C> <C>
Signature Capacity Date
- - --------- ----- ----
/s/ Sam Norton Director February 29, 2000
- ------------------------------
Sam Norton
/s/ David Swor Director February 29, 2000
- ------------------------------
David Swor
/s/ William B. Saye Director February 29, 2000
- ------------------------------
William B. Saye
</TABLE>
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<PAGE>
SURGICAL SAFETY PRODUCTS INC.
INDEX TO EXHIBITS FILE WITH
FORM S-3 REGISTRATION STATEMENT
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- --------
<S> <C> <C> <C>
3.(I).10 * Certificate of Amendment filed February 29, 2000 33
5.1 * Opinion of Mintmire & Associates as to the legality
of the Securities to be issued. 35
10.38 * Effective December 30, 1999, Loan Agreement, Note,
Security Agreement, Lender's Warrant, Agent's Warrant,
Registration Rights Agreement and Escrow Agreement
relative to the December 1999 transaction with Thomson
Kernaghan & Co., Inc. under which the securities offered
herein arise and Amendment thereto. 37
10.39 * Effective January 3, 2000 IBM Customer Agreement and
Statement of Work. 120
23.1 * Consent of Kerkering, Barbario & Co., P.A.,
Independent Public Accounts. 177
23.2 * Consent of Mintmire & Associates is contained
in the Opinion as to legality of Securities filed as Exhibit 5
27.1 * Financial Data Schedule
</TABLE>
-31-
EXHIBIT 3.(I).10
Certificate of Amendment of the Certificate of Incorporation of
Surgical Safety Products, Inc., f/k/a Sheffeld Acres Inc
Under Section 805 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
(1) The name of the corporation is
Surgical Safety Products, Inc., f/k/a Sheffeld Acres Inc.
(2) The certificate of incorporation was filed by the department of state on
the 7th day of May 1993.
(3) The certificate of incorporation of this corporation is hereby amended to
effect the following change
The Certificate of Incorporation is amended to increase
the number of shares that the cororation shall have the
authority to isssue.
Article IV of the Certificate of Incorporation is amended to read as
follows:
ARTICLE IV - Number of Shares
The aggregate number of share of Common Stock that the corporation
shall have the authority to issue is One Hundred Million,
(100,000,000), all of which shall have a par value of One Mil ($
.0001).
The Board of Directors, as it shall determine (1) shall have authority
to issue other classes of shares and the authority to establish the
class, the aggregate number of shares in such class, whether the class
is with or without par value and the relative rights, preferences and
limitations of the class and (2) shall have the authority to issue any
and all series of any classes of preferred shares and any and all of
the designations of the series, the aggregate number of such series,
whether the series is with or without par value, relative rights,
preferences and limitations of any and all such series.
(4) The amendment to the certificate of incorporation was authorized:
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<PAGE>
* first, by vote of the board of directors.
* and then at a meeting of shareholders by vote of a majority of
all the outstanding shares entitled to vote thereon.
IN WITNESS WHEREOF, this certificate has been subscribed this day of
April 1998 by the undersigned who affirm(s) that the statements made herein are
true under the penalties of perjury.
Type name Capacity in which signed Signature
- ----------------- ------------------------------- ---------------------
G. Michael Swor, M.D. CEO /s/G M Swor
- --------------------- ------------------------------- ---------------------
Donald K. Lawrence President/COO /s/Donald K. Lawrence
- --------------------- -------------------------------- ---------------------
David Collins Acting CFO/Treasurer & Secretary /s/David Collins
- --------------------- -------------------------------- ---------------------
------------------------------------------------------
Certificate of Amendment of the Certificate of Incorporation of
Surgical Safety Products, Inc. f/k/a Sheffeld Acres Inc.
under Section 805 of the Business Corporate Law
------------------------------------------------------------
Filed by:
Address:
-33-
EXHIBITS 5.1 and 23.2
[LETTERHEAD OF MINTMIRE & ASSOCIATES]
February 29,2000
Surgical Safety Products Inc.
2018 Oak Terrace
Sarasota, FL 34231
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Surgical Safety Products Inc., a New
York corporation (the "Company"), in connection with the preparation and filing
of a registration statement on Form S-3 (Registration Number _______) (the
"Registration Statement"), under the Securities Act of 1933, as amended (the
"Act"), registering initially an aggregate of 20,038,097 shares of the Company's
Common Stock, par value $.001, 2,700,000 shares of which are currently issued
and outstanding (the "Outstanding Shares") and held in escrow against conversion
of all or part of the initial note payable to Thomson Kernaghan & Co., Ltd.
("TK") in the principal amount of $650,000, or against exercise of the initial
warrants which are exercisable into 4,571,428 shares (the "Warrant Shares") and
the balance of which are to be issued at such time as additional loans up to an
aggregate of Five Million Dollars ($5,000,000) are made by TK to the Company,
some of which shares are to be held in escrow against conversion of additional
notes and against exercise of additional warrants (collectively the "Additional
Offered Shares"), all of which are for resale by the Selling Shareholders (as
defined in the Registration Statement).
For purposes of this opinion, we have examined the originals or
copies, certified or otherwise identified to our satisfaction, of the Company's
Articles of Incorporation and Bylaws, each as amended to date, resolutions
adopted by the Company's Board of Directors and other agreements, instruments,
documents and records relating to the Company and the issuance of the
Outstanding Shares, Warrants Shares and Additional Offered Shares as we deemed
appropriate. In all examinations, we have assumed the legal capacity of each
natural person signing any of the documents and corporate records relating to
the Company, the genuineness of signatures, the authenticity of the documents
submitted to us as originals, the conformity to authentic original documents of
documents submitted to us as copies and the accuracy and completeness of all
records and other information made available to us by the Company. As to various
questions of fact material to our opinion, we have relied on representations of
officers of the Company.
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<PAGE>
We express no opinion concerning the laws of any jurisdictions other
than the Business Corporation Laws of the State of New York and the Florida
Business Corporation Act.
On the basis of the foregoing, we are of the opinion that the
Outstanding Shares have been validly issued and when released from escrow will
be fully paid and non-assessable by the Company, the Warrant Shares, upon
exercise of the warrants and payment thereof in accordance with the terms
thereof, will be validly issued, fully paid and non-assessable by the Company
and the Offered Shares when issued in accordance with the TK Loan Commitment (as
defined in the Registration Statement), will be validly issued, and fully paid
and non-assessable by the Company when released from escrow whether as a result
of conversion of all or part of any outstanding note or upon exercise of the
warrants and payment thereof in accordance with the terms thereof.
We hereby consent to the reference of our firm under the caption
"Legal Opinion" in the Prospectus and to the filing of this opinion as an
exhibit to the Registration Statement. In giving this consent, we do not admit
that we come within the categories of persons whose consent is required under
Section 7 of the Act.
Very truly yours,
/s/ Mintmire & Associates
Mintmire & Associates
-35-
EXHIBIT 10.38
LOAN AGREEMENT
ss.1. Parties
1.1. This Agreement is made and entered into as of December 20, 1999 (the
"Effective Date"), by and between Surgical Safety Products, Inc., and Thomson
Kernaghan & Co. Ltd.
ss.2. Definition and Accounting Terms
2.1. Definitions. As used in this Agreement:
(a) "Affiliate" means any Person (i) that directly or indirectly
controls, or is controlled by, or is under common control with the
Borrower or a Subsidiary; or (ii) that directly or indirectly
beneficially owns or holds five percent (5%) or more of any class of
voting stock of the Borrower or any Subsidiary; or (iii) five percent
(5%) or more of the voting stock of which is directly or indirectly
beneficially owned or held by the Borrower or a Subsidiary.
(b) "Agent" means Thomson Kernaghan & Col. Ltd., a corporation
incorporated under the laws of Ontario, for itself and as agent for
the Lenders.
(c) "Agent's Fee" shall have the meaning ascribed in paragraph 10.12
of this Agreement.
(d) "Agent's Principal Office" means the Agent's principal office at
365 Bay Street, Toronto, Ontario M5H 2V2.
(e) "Agent's Warrant" shall have the meaning ascribed in paragraph
6.2(a) of this Agreement.
(f) "Agreement" means this Loan Agreement, as amended, supplemented or
modified from time to time.
(g) "Borrower" means Surgical Safety Products, Inc., a corporation
incorporated under the laws of the U.S. state of New York.
(h) "Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in Toronto are authorized or
required to close under the laws of the province of Ontario.
(i) "Capital Lease" means all leases that have been or should be
capitalized on the books of the lessee in accordance with GAAP.
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<PAGE>
(j) "Closing Date" means December 22, 1999, or such other date as the
Agent, the Borrower and the Parent may agree in writing to be the
Closing Date.
(k) Code" means the US Internal Revenue Code of 1986, as amended from
time to time, and the regulations and published interpretations
thereof.
(l) "Collateral" means all property that is subject to the Lien
granted by the Security Agreement;
(m) "Commitment" means the Agent's obligation to make Loans to the
Borrower pursuant to Section 2.01 in the amounts referred to therein.
(n) "Common Stock" means the Borrower's common stock, US$.001 par
value.
(o) "Commonly Controlled Entity" means an entity, whether or not
incorporated, that is under common control with the Borrower, within
the meaning of Section 414(b) or 414(c) of the Code.
(p) "Control" (whether or not capitalized) means the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
(q) "Conversion Shares" means the shares of Common Stock into which
the Notes are convertible.
(r) "Debt" means (i) indebtedness or liability for borrowed money;
(ii) obligations evidenced by bonds, debentures, notes or other
similar instruments; (iii) obligations for the deferred purchase price
of property or services (including trade obligations); (iv)
obligations under Capital Leases; (v) obligations under letters of
credit; (vi) obligations under acceptance facilities; (vii) all
guaranties, endorsements (other than for collection or deposit in the
ordinary course of business), and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in
any Person or entity, or otherwise to assure a creditor against loss;
and (viii) all obligations secured by any Liens, whether or not the
obligations have been assumed.
(s) "Default" means any of the events specified in paragraph 9.1,
whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition has been satisfied.
-37-
<PAGE>
(t) "Effective Date" means the date set forth in paragraph 1.1 of this
Agreement.
(u) "Escrow Agreement" shall have the meaning ascribed in paragraph
6.2(d) of this Agreement.
(v) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations and published
interpretations thereof.
(w) "Event of Default" means any of the events specified in Section
9.01, provided that any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied.
(x) "Exchange Act" means the United States of America. Securities
Exchange Act of 1934, as amended.
(y) "GAAP" means generally accepted accounting principles in the U.S.
(z) "Lenders" means Thomson Kernaghan & Co., Ltd., and Persons that
purchase participations in the Loans from Thomson Kernaghan & Co. Ltd.
(aa) "Lenders' Warrant" shall have the meaning ascribed in paragraph
6.2(a) of this Agreement.
(bb) "Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), or preference, priority, or other security
agreement or preferential arrangement, charge or encumbrance of any
kind or nature whatsoever (including without limitation any
conditional sale or other title retention agreement, any financing
lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement, charge or
similar notice under the law of any jurisdiction to evidence any of
the foregoing.
(cc) "Loan" shall have the meaning ascribed in paragraph 3.1 of this
Agreement.
(dd) "Loan Documents" means this Agreement, the Notes, the Security
Agreement, the Lenders' Warrant, the Agent's Warrant, the Registration
Rights Agreement, and the Escrow Agreement.
(ee) Multiemployer Plan" means a Plan described in Section 4001(a)(3)
of ERISA.
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<PAGE>
(ff) "Notes" shall have the meaning ascribed in paragraph 3.4 of this
Agreement.
(gg) "PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
(hh) "Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority, or other entity of whatever nature.
(ii) "Plan" means any pension plan which is covered by Title IV of
ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is an "employer" as defined in Section 3(5) of ERISA.
(jj) "Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
(kk) "Registration Rights Agreement" shall have the meaning ascribed
in paragraph 6.2(b) of this Agreement.
(ll) "Reportable Event" means any of the events set forth in Section
4043 of ERISA.
(mm) "SEC" means the Securities and Exchange Commission of the United
States of America.
(nn) "Securities Act" means the United States of America Securities
Act of 1933, as amended.
(oo) "Security Agreement" means a Security Agreement in substantially
the form of Exhibit B to be delivered by the Borrowerunder the terms
of this Agreement.
(pp) "Subsidiary" means a corporation of which shares of stock having
ordinary voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of that corporation are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
the Borrower.
(qq) "Termination Date" means November 30, 2002.
(rr) "U.S." means the United States of America.
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(ss) "Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
(tt) "Warrants" means the Lenders' Warrant and the Agent's Warrant.
2.2. Singular and Plural Terms. As used in this Agreement, terms defined in
the singular have the same meaning when used in the plural, and terms defined in
the plural have the same meaning when used in the singular.
2.3. Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with GAAP. All financial data
submitted pursuant to this Agreement shall be prepared in accordance with GAAP.
2.4. Currency. All currency described or otherwise referred to in the Loan
Documents is the currency of the United States of America.
ss.3. Amount and Terms of the Loans
3.1. The Loans. The Agent agrees on the terms and conditions set forth in
this Agreement to make loans (each a "Loan" and collectively the "Loans") to the
Borrower from time to time during the period from the date of this Agreement up
to but not including the Termination Date, up to a maximum principal amount of
Five Million Dollars in the currency of the United States of America (US$
5,000,000). The initial Loan shall be in the principal amount of $650,000.
Unless the Agent otherwise agrees, the aggregate amount of Loans made in any
90-day period shall not exceed $500,000.
3.2. Notice and Manner of Borrowing. The Borrower shall give the Agent at
least five (5) Business Days' notice of any Loans under this Agreement,
specifying the date and amount thereof. Not later than 2:00 P.M. Toronto time,
on the date of such Loan and upon fulfillment of the applicable conditions set
forth in Section 4, the Agent will make such Loan available to the Borrower in
immediately available funds by wire transfer to the Borrower's account at a
commercial bank. The Borrower shall give the Agent written wiring instructions
for such transfer, specifying the name, address and ABA routing number for the
Bank, and the Borrower's account number to be credited with the Loan proceeds.
3.3. Interest. The Borrower shall pay interest to the Agent on the
outstanding and unpaid principal amount of the Loan at the rate of eight percent
(8%) per year, calculated on the basis of a year of 360 days comprised of twelve
30-day months. Interest shall be payable upon any prepayment of principal and at
maturity, at the Agent's Principal Office.
3.4. The Notes. The Borrower's obligation to repay each Loan shall be
evidenced by its promissory note (each a "Note" and collectively the "Notes") in
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substantially the form of Exhibit A attached to this Agreement with blanks
appropriately filled in and payable to the order of the Agent. Each Note shall
be dated the date on which the Agent advances the Loan proceeds to the Borrower,
and each of the Notes shall be due and payable on the Termination Date. At any
time prior to their respective payment in full, all or any part of the principal
and interest of the Notes may, at the option of the Agent or other holder, be
converted into Common Stock, at a price per share equal to the lower of (i)
$0.8203125 or (ii) 75% of the closing bid price on Conversion Date, as defined
in the Note; provided however, that the conversion price per share shall in no
event be less than $0.375 per share.
3.5. Collateral. The Notes, together with all of the Borrower's other
obligations under this Agreement, shall be secured by a Security Agreement in
the form of Exhibit B hereto executed by the Borrower.
3.6. Prepayments. The Borrower may prepay the Notes, in whole or in part,
at any time with the Agent's consent. The Borrower may prepay the Notes in
whole, or in part in increments of $500,000 or less with accrued interest to the
date of such prepayment on the amount prepaid, without the Agent's consent,
provided that: (i) the Borrower gives the Agent not less than 10 Business Days'
prior written notice of its intention to do so, which notice shall specify the
amount being prepaid and the prepayment date; (ii) a registration statement
under the Securities Act shall be in effect registering the issuance and resale
of the Conversion Shares and the Warrant Shares; (iii) the average closing bid
price of the Common Stock for the 20 trading days preceding the notice shall be
in excess of $1.00; and the average daily trading volume for the Common Stock
for the 20 trading days preceding the notice shall be in excess of 20,000. The
Agent may convert all or any part of the Notes being prepaid at any time prior
to receipt of the prepayment.
3.7. Method of Payment. The Borrower shall make each payment under this
Agreement and under the Notes at the Agent's Principal Office not later than
2:00 P.M., Toronto time on the date when due in lawful currency of the United
States of America and in immediately available funds. Whenever any payment to be
made under this Agreement or under the Notes shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest due on the Loan.
3.8. Use of Proceeds. The Borrower shall use the proceeds of the Loan
solely for the following purposes: (a) to pay the Agent's Fee; (b) to pay the
fees and expenses of the Agent's counsel in the negotiation and preparation of
this Agreement; (c) to repay the Borrower's promissory note dated November 30,
1999, in the principal amount of $50,000, plus interest, payable to the order of
Thomson Kernaghan & Co. Limited, and (d) for the Borrower's working capital
purposes. The Borrower hereby authorizes the Agent to withhold the amounts
necessary to repay that note, the Agent's Fee and such fees and expenses of its
counsel from the proceeds of the Loans.
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ss.4. Conditions Precedent.
4.1. Condition Precedent to Initial Loan. The obligation of the Agent to
make the initial Loan to the Borrower is subject to the condition precedent that
the Agent shall have received on or before the day of the Loan each of the
following, in form and substance satisfactory to the Agent and its counsel:
(a) Note. A Note for the principal amount of the initial Loan duly executed
by the Borrower;
(b) Security Agreement. A Security Agreement duly executed by the Borrower;
together with an undertaking by the Borrower to (i) file within the time
proscribed by law for perfecting the Agent's security interest in the
Collateral, and deliver to the Agent acknowledgment copies of the Financing
Statements (UCC-1) duly filed under the Uniform Commercial Code of all
jurisdictions necessary or, in the opinion of the Agent, desirable to
perfect the security interest created by the Security Agreement, and (ii)
certified copies of Request for Copies or Information (Form UCC-11)
identifying all of the financing statements on file with respect to the
Borrower in all jurisdictions referred to under (i), including the
Financing Statement filed by the Agent against the Borrower, indicating
that no party claims an interest in any of the Collateral except as set
forth on Schedule 5.1(o);
(c) Evidence of all corporate action by the Borrower. Certified (as of the
Effective Date) copies of all corporate action taken by the Borrower,
including resolutions of its Board of Directors, authorizing the execution,
delivery, and performance of the Loan Documents and each other document to
be delivered pursuant to this Agreement;
(d) Incumbency and signature certificate of the Borrower. A certificate
(dated as of the Effective Date) of the Secretary of the Borrower
certifying the names and true signatures of the officers of the Borrower
authorized to sign the Loan Documents and any other documents to be
delivered by the Borrower under this Agreement;
(e) Lenders' Warrant. The Lenders' Warrant;
(f) Agent's Warrant. The Agent's Warrant;
(g) Registration Rights Agreement. The Registration Rights Agreement;
(h) Escrow Agreement. The Escrow Agreement; and
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(i) Opinion of counsel for the Borrower. A favorable opinion of counsel for
the Borrower, in substantially the form of Exhibit C hereto, and as to such
other matters as the Agent may reasonably request.
4.2. Conditions Precedent to All Loans. The obligation of the Agent to make
each Loan (including the initial Loan) shall be subject to the further
conditions precedent that on the date of such Loan:
(a) The following statements shall be true and the Agent shall have
received a certificate signed by a duly authorized officer of the Borrower,
dated the date of such Loan, stating that (i) the representations and
warranties contained in Section 5.1 of this Agreement, and in Section 4.01
of the Security Agreement are correct on and as of the date of such Loan as
though made on and as of such date; and (ii) no Default or Event of Default
has occurred and is continuing, or would result from such Loan;
(b) The Agent shall have received a detailed statement of the use of
proceeds from the Loan, reasonably satisfactory to the Agent, certified by
the Borrower's chief financial officer and chief executive officer;
(c) The Agent shall have received such other approvals, opinions, or
documents as the Agent may reasonably request;
(d) The closing bid price of the Common Stock for the 20 trading days
preceding the date of the Loan shall have been above $1.00; and
(e) The average daily trading volume for the 20 trading days preceding the
date of the Loan shall have been in excess of 20,000.
ss.5. Representations and Warranties.
5.1. Borrower's Representations and Warranties. The Borrower represents and
warrants to the Lenders that:
(a) Incorporation, Good Standing, and Due Qualification. The Borrower is a
corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation; has the corporate power
and authority to own its assets and to transact the business in which it is
now engaged and proposes to be engaged in; and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required. The Borrower has no
Subsidiaries.
(b) Corporate Power and Authority. The execution, delivery and performance
by the Borrower of the Loan Documents have been duly authorized by all
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necessary corporate action and do not and will not (i) require any consent
or approval of the shareholders of such corporation; (ii) contravene such
corporation's charter or bylaws; (iii) violate any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree, determination
or award presently in effect having applicability to such corporation; (iv)
result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which
such corporation is a party or by which it or its properties may be bound
or affected; (v) result in or require the creation or imposition of any
Lien upon or with respect to any to the properties now owned or hereafter
acquired by such corporation; and (vi) cause such corporation to be in
default under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award, or any such indenture,
agreement, lease or instrument.
(c) Legally Enforceable Agreement. This Agreement is, and each of the other
Loan Documents when delivered under this Agreement will be, legal, valid
and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally.
(d) Financial Statements. Borrower's Financial Statements. The balance
sheet of the Borrower as at December 31, 1998 and 1997, and, and the
related statements of income, retained earnings and cash flows of the
Borrower for the fiscal years then ended, and the accompanying footnotes,
together with the opinion thereon of Kerkering, Barberio & Co., independent
certified public accountants, and the interim consolidated and
consolidating balance sheet of the Borrower as at September 30, 1999, and
the related statements of income, retained earnings and cash flows of the
Borrower for the nine (9) month period then ended, copies of which have
been included by the Borrower in its reports filed with the SEC on Forms
10-K and 10-Q, respectively, are complete and correct and fairly present
the financial condition of the Borrower as at such dates and the results of
the operations of the Borrower for the periods covered by such statements,
all in accordance with GAAP consistently applied (subject to year-end
adjustments in the case of the interim financial statements), and since
September 30, 1999, there has been no material adverse change in the
condition (financial or otherwise), business, or operations of the Borrower
or any Subsidiary. There are no liabilities of the Borrower or any
Subsidiary, fixed or contingent, which are material but are not reflected
in the financial statements or in the notes thereto, other than liabilities
arising in the ordinary course of business since September 30, 1999.
(e) Full Disclosure. No information, exhibit or report furnished by the
Borrower, to the Agent in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state a material
fact or any fact necessary to make the statement contained therein not
materially misleading.
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(f) Labor Disputes and Acts of God. Neither the business nor the properties
of the Borrower or any Subsidiary are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy, or other casualty
(whether or not covered by insurance) materially and adversely affecting
such business properties or the operation of the Borrower or such
Subsidiary.
(g) Other Agreements. Except as set forth on Schedule 5.1 (g) the Borrower
is not a party to any indenture, loan, or credit agreement, or to any lease
or other agreement or instrument, or subject to any charter or corporate
restriction which could have a material adverse effect on the business,
properties, assets, operations, or conditions, financial or otherwise, of
the Borrower to carry out its obligations under the Loan Documents. The
Borrower is not in default in any respect in the performance, observance,
or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which
it is a party.
(h) Litigation. There is no pending or threatened action or proceeding
against or affecting the Borrower before any court, governmental agency, or
arbitrator which may, in any one case or in the aggregate, materially
adversely affect the financial condition, operations, properties, or
business of the Borrower or the ability of the Borrower to perform its
obligations under the Loan Documents.
(i) No Defaults on Outstanding Judgments or Orders. The Borrower has
satisfied all judgments (if any), and is not in default with respect to any
judgment, writ, injunction, decree, rule, or regulation of any court,
arbitrator, or federal, state, municipal, or other governmental authority,
commission, board, bureau, agency or instrumentality, domestic or foreign.
(j) Ownership and Liens. The Borrower has title to, or valid leasehold
interests in, all of its properties and assets, real and personal,
including the properties and assets and leasehold interest reflected in the
financial statements referred to in paragraph 5.1(d) of this Agreement
(other than any properties or assets disposed of in the ordinary course of
business), and none of the properties and assets owned by the Borrower and
none of its leasehold interests is subject to any Lien, except such as may
be permitted pursuant to paragraph 7.1(a) of this Agreement.
(k) ERISA. The Borrower is in compliance in all material respects with all
applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited
Transaction has occurred and is continuing with respect to any Plan; no
notice of intent to terminate a Plan has been filed, nor has any Plan been
terminated; no circumstances exist which constitute grounds entitling the
PBGC to institute proceedings to terminate, or appoint a trustee to
administer, a Plan, nor has the PBGC instituted any such proceedings;
neither the Borrower nor any Commonly Controlled
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Entity has completely or partially withdrawn from a Multiemployer Plan; the
Borrower and each Commonly Controlled Entity have met their minimum funding
requirements under ERISA with respect to all of their Plans, and the
present value of all vested benefits under each Plan does not exceed the
fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance
with the provisions of ERISA; and neither the Borrower nor the Parent nor
any Commonly Controlled Entity has incurred any liability to the PBGC under
ERISA.
(l) Operation of Business. The Borrower possesses all licenses, permits,
franchises, patents, copyrights, trademarks, and trade names, or rights
thereto, to conduct their respective businesses substantially as now
conducted and as presently proposed to be conducted, and the Borrower is
not in violation of any valid rights of others with respect to any of the
foregoing.
(n) Taxes. The Borrower has filed all tax returns (federal, state, and
local) required to be filed and have paid all taxes, assessments, and
governmental charges and levies thereon to be due, including any interest
and penalties.
(o) Debt. Schedule 5.1(o) is a complete and correct list of all credit
agreements, indentures, purchase agreements, guaranties, Capital Leases,
and other investments, agreements, and arrangements presently in effect
providing for or relating to extensions of credit (including agreements and
arrangements for the issuance of letters of credit or for acceptance
financing) in respect of which the Borrower is in any manner directly or
contingently obligated; and the maximum principal or face amounts of the
credit in question, which are outstanding and which can be outstanding, are
correctly stated, and all Liens of any nature given or agreed to be given
as security therefor are correctly described or indicated in Schedule
5.1(o).
(p) Environment. The Borrower has duly complied with, and its businesses,
operations, assets, equipment, property, leaseholds, or other facilities
are in compliance with, the provisions of all federal, state, and local
environmental, health, and safety laws, codes and ordinances, and all rules
and regulations promulgated thereunder. The Borrower has been issued and
will maintain all required federal, state, and local permits, licenses,
certificates, and approvals relating to (1) air emissions; (2) discharges
to surface water or groundwater; (3) noise emissions; (4) solid or liquid
waste disposal; (5) the use, generation, storage, transportation, or
disposal of toxic or hazardous substances or wastes (intended hereby and
hereafter to include any and all such materials listed in any federal,
state, or local law, code or ordinance and all rules and regulations
promulgated thereunder as hazardous or potentially hazardous); or (6) other
environmental, health, or safety matters. A true, accurate, and complete
list of all such permits, licenses, certificates, and approvals is attached
hereto as Schedule 5.1(p). The Borrower has not received notice of, nor
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knows of, or suspects facts which might constitute any violations of any
federal, state, or local environmental, health, or safety laws, codes or
ordinances, and any rules or regulations promulgated thereunder with
respect to its businesses, operations, assets, equipment, property,
leaseholds, or other facilities. Except in accordance with a valid
governmental permit, license, certificate, or approval listed in Schedule
5.1(p), there has been no emission, spill, release, or discharge into or
upon (1) the air; (2) soils; or any improvements located thereon; (3)
surface water or groundwater; or (4) the sewer, septic system or waste
treatment, storage or disposal system servicing the premises of any toxic
or hazardous substances or wastes at or from the premises; and accordingly
the premises of the Borrower and its Subsidiaries are free of all such
toxic or hazardous substances or wastes. There has been no complaint,
order, directive, claim, citation, or notice by any governmental authority
or any person or entity with respect to (1) air emissions; (2) spills,
releases or discharges to soils or improvements located thereon, surface
water, groundwater or the sewer, septic system or waste treatment, storage
or disposal systems servicing the premises; (3) noise emissions; (4) solid
or liquid waste disposal; (5) the use, generation, storage, transportation,
or disposal of toxic or hazardous substances or waste; or (6) other
environmental, health, or safety matters affecting the Borrower or its
business, operations, assets, equipment, property, leaseholds, or other
facilities. Neither the Borrower nor its Subsidiaries have any
indebtedness, obligation, or liability, absolute or contingent, matured or
not matured, with respect to the storage, treatment, cleanup, or disposal
of any solid wastes, hazardous wastes or other toxic or hazardous
substances (including without limitation any such indebtedness, obligation,
or liability with respect to any current regulation, law, or statute
regarding such storage, treatment, cleanup, or disposal) which is not shown
on Schedule 5.1(p). Set forth in Schedule 5.1(p) is a list of all real
property owned or leased by the Borrower and its Subsidiaries, and a brief
description of the business conducted at such location.
(p) Registration and Listing of Common Stock. The Borrower is a reporting
company (although its Form 10-SB has yet to clear the SEC), and has
continuously been a reporting company for more than the 11 calendar months
preceding the Closing Date, and the Common Stock is registered under the
Exchange Act and listed on the OTC Bulletin Board. The Borrower has filed
all reports and other documents required of it by the Exchange Act, the
rules and regulations of the SEC, and the rules and regulations of the OTC
Bulletin Board.
(q) No U.S. Offering. The Borrower has not offered any of the Notes, the
Conversion Shares, the Warrants or the Warrant Shares to a U.S. Person (as
defined in SEC Rule 902(k)) or to a person in the United States.
(r) Offshore Transaction. The negotiations for and the issuance of the
Notes and the Warrants to the Agent has been made in an offshore
transaction as defined in SEC Rule 902(h).
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(s) No Directed Selling Efforts. The Company has not engaged in any
directed selling efforts, as defined in SEC Rule 902(c), with respect to
the Notes and the Warrants.
(t) Category 3 Securities. The Company has complied with all of the
conditions required of it under SEC Rule 903(b)(3) with respect to the
issuance of the Notes and Warrants.
(u) Exemption of Notes and Warrants from Registration. The Borrower's
issuance of the Notes and the Warrants is exempt from the registration
requirements of Section 5 of the Securities Act pursuant to the provisions
of SEC Regulation S.
5.2. Agent's Representations and Warranties. The Agent represents and
warrants to the Borrower that:
(a) Accredited Investor. Each of the Agent and the other Lenders is an
accredited investor as that term is defined in Rule 501(a)(3) of Regulation
D of the SEC.
(b) U. S. Persons. Neither the Agent nor any Lender is a U.S. Person as
defined in SEC Rule 902(k).
(c) The Agent has complied with all of the conditions required of it by SEC
Rule 903(b)(3) to be complied with by it in connection with the
transactions contemplated by this Agreement.
ss.6. Affirmative Covenants.
6.1. Financial and Operational. So long as any of the Notes shall remain
unpaid, the Borrower will:
(a) Maintenance of Existence. Preserve and maintain its corporate existence
and good standing in the jurisdiction of its incorporation, and qualify and
remain qualified as a foreign corporation in each jurisdiction in which
such qualification is required.
(b) Maintenance of Records. Keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all material financial transactions of the Borrower.
(c) Maintenance of Properties. Maintain, keep and preserve all of its
properties (tangible and intangible) necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear
and tear excepted.
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(d) Conduct of Business. Continue to engage in an efficient and economical
manner in a business of the same general type as conducted by it on the
date of this Agreement.
(e) Maintenance of Insurance. Maintain insurance with financially sound and
reputable insurance companies or associations in such amounts and covering
such risks as are usually carried by companies engaged in the same or a
similar business and similarly situated, which insurance may provide for
reasonable deductibility from its coverage.
(f) Compliance With Laws. Comply with all applicable laws, codes,
regulations, rules, ordinances and orders, including without limitation
paying before the same become delinquent all taxes, assessments and
governmental charges imposed upon it or upon its property.
(g) Right of Inspection. At any reasonable time and from time to time,
permit the Agent or any of its agents or representatives to examine and
make copies of and abstracts from the records and books of account of, and
visit the properties of, the Borrower, and to discuss its affairs, finances
and accounts with any of its officers, directors and independent
accountants.
(h) Reporting Requirements. Furnish to the Agent:
(i) Quarterly Financial Statements. The Borrower's reports on Form
10-Q or 10-QSB contemporaneously with their filing with the SEC.
(ii) Annual Financial Statements. The Borrower's annual reports on
Form 10-K or 10-KSB contemporaneously with their filing with the SEC.
(iii) Management Letters. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower or any Subsidiary by independent
accountants in connection with their examination of the financial
statements of the Borrower.
(iv) Certificate of No Default. Within twenty-five (25) days after the
end of each month a certificate of the Borrower's chief financial
officer certifying that to the best of his or her knowledge no Default
or Event of Default has occurred and is continuing or, if a Default or
Event of Default has occurred and is continuing, a statement as to the
nature thereof and the action that is proposed to be taken with
respect thereto.
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(v) Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency, or
instrumentality (domestic or foreign) or arbitrator, affecting the
Borrower, which, if determined adversely to the Borrower, could have a
material adverse effect on the financial condition, properties or
operations of the Borrower.
(vi) Notice of Defaults and Events of Default. As soon as possible and
in any event within ten (10) days after the occurrence of each
material Default or material Event of Default, a written notice
setting forth the details of such Default or Event of Default and the
action that is proposed to be taken by the Borrower with respect
thereto.
(vii) ERISA reports. As soon as possible, and in any event within
thirty (30) days after the Borrower knows or has reason to know that
any circumstances exist that constitute grounds entitling the PBGC to
institute proceedings to terminate a Plan subject to ERISA with
respect to the Borrower or any Commonly Controlled Entity, and
promptly but in any event within two (2) Business Days of receipt by
the Borrower or any Commonly Controlled Entity of notice that the PBGC
intends to terminate a Plan or appoint a trustee to administer the
same, and promptly but in any event within five (5) Business Days of
the receipt of notice concerning the imposition of withdrawal
liability with respect to the Borrower or any Commonly Controlled
Entity, the Borrower will deliver to the Agent a certificate of the
chief financial officer of the Borrower setting forth all relevant
details and the action which the Borrower proposes to take with
respect thereto.
(vii) Reports to Other Creditors. Promptly after the furnishing
thereof, copies of any statement or report furnished by the Borrower
or any Subsidiary to any other party pursuant to the terms of any
indenture, loan, credit or similar agreement and not otherwise
required to be furnished to the Agent pursuant to any other clause of
this Agreement.
(viii) Other Regulatory Reports and Filings. Promptly after the
sending or filing thereof, copies of all proxy statements, financial
statements and reports that the Borrower or any Subsidiary sends to
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its shareholders, and copies of all regular, periodic and special
reports, and all registration statements that the Borrower files with
the securities regulatory authorities of any country, province or
state, or with any securities exchange.
(ix) General Information. Such other information respecting the
condition or operations, financial or otherwise, of the Borrower as
the Agent may from time to time reasonably request.
(i) Environment, Health and Safety. Be and remain in compliance with
the provisions of all federal, state, and local environmental, health,
and safety laws, codes and ordinances, and all rules and regulations
issued thereunder; notify the Agent immediately of any notice of a
hazardous discharge or environmental complaint received from any
governmental agency or any other party; notify the Agent immediately
of any hazardous discharge from or affecting its premises; immediately
contain and remove the same, in compliance with all applicable laws;
promptly pay any fine or penalty assessed in connection therewith;
permit the Agent to inspect the premises, to conduct tests thereon,
and to inspect all books, correspondence, and records pertaining
thereto; and at the Agent's request, and at the Borrower's expense,
provide a report of a qualified environmental engineer, satisfactory
in scope, form, and content to the Agent, and such other and further
assurances reasonably satisfactory to the Agent that the condition has
been corrected.
6.2. The Borrower hereby further covenants and agrees with the Agent that:
(a) Warrants. Contemporaneously with the execution of this Agreement, the
Borrower shall issue and deliver to the Agent (i) a warrant in the form of
Exhibit D hereto to purchase up to 3,428,571 shares of Common Stock (the
"Lenders' Warrant"), and (ii) a warrant in the form of Exhibit E hereto to
purchase up to 1,142,857shares of Common Stock (the "Agent's Warrant"),
each at a price per share of $1.09375, and each vesting as provided
therein. The Lenders' Warrant and the Agent's Warrant each shall be
exercisable from time to time, pro rata, as follows: (i) the Warrants shall
be immediately exercisable for 20% of the number of Warrant Shares; and,
(ii) the Warrants shall be exercisable for an additional1% of the number of
Warrant Shares for each $25,000 of principal of Loans made under this
Agreement.
(b) Registration of Common Stock Underlying Notes and Warrants.
Contemporaneously with the execution of this Agreement, the Borrower shall
execute and deliver to the Agent a registration rights agreement in the
form of Exhibit F hereto. (the "Registration Rights Agreement").The
Borrower shall register the issuance and sale of the Conversion Stock and
the Warrant Stock in accordance with the provisions of the Registration
Rights Agreement.
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(d) Escrow. Contemporaneously with the execution of this Agreement, the
Borrower shall executed an escrow agreement with the Agent as escrow holder
(the "Escrow Agreement") in the form of Exhibit G to this Agreement.
Contemporaneously with the execution of this Agreement, the Borrower shall
execute and deliver to the Escrow Holder a certificate for 2,700,000 shares
of Common Stock as a portion of the number of Conversion Shares (based upon
a conversion price of $0.375 per share) underlying the principal amount of
the Note evidencing the initial Loan and the number of Warrant Shares for
which the Warrants shall be exercisable upon funding the initial Loan.
Prior to each additional Loan, the Borrower shall execute and deliver to
the Escrow Holder a certificate for 200% of the number of additional
Conversion Shares (based upon a conversion price of $0.375 per share)
underlying the principal amount of the Note evidencing that Loan and 200%
the number of additional Warrant Shares for which the Warrants shall be
exercisable upon funding that Loan, until all of the Conversion Shares and
Warrant Shares have been delivered to the Escrow Holder.. All certificates
for Conversion Shares and Warrant Shares delivered to the Escrow Holder
shall be registered in the name of Thomson Kernaghan & Co. Limited. Until
such time as the registration statement covering the Conversion Shares and
the Warrant shares is effective, the certificates shall bear a legend
indicating that they have been issued in a transaction that is exempt from
the registration requirements of the Securities Act, and may not be
transferred except pursuant to registration under the Securities Act or an
exemption from such registration. Except for such legend, the Common Stock
underlying the Lenders' Warrant and the Agent's Warrant shall be free and
clear of any legends, liens, claims, stop orders or other restrictions. Not
later than the third Business Day following the effective date of the
Registration Statement, the Borrower shall cause the Common Stock
underlying the Lenders' Warrant and the Agent's Warrant to be registered in
Agent's street name, in DTC form, free and clear of any legends, liens,
claims, stop orders or other restrictions.
ss.7. Negative Covenants.
7.1. So long as any of the Notes remains unpaid, or the Agent shall be
obligated to make Loans under this Agreement, the Borrower will not:
(a) Liens. Create, incur, assume, or suffer to exist, or permit any
Subsidiary to create, incur, assume, or suffer to exist, any Lien upon or
with respect to any of its properties, now owned or hereafter acquired,
except:
(1) Liens in favor of the Agent;
(2) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or, if due and payable, if they are
being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
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(3) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar
Liens, securing obligations incurred in the ordinary course of
business which are not past due for more than thirty (30) days or
which are being contested in good faith by appropriate proceedings and
for which appropriate reserves have been established;
(4) Liens under workers' compensation, unemployment insurance, Social
Security, or similar legislation;
(5) Liens, deposits, or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money),
leases (permitted under the terms of this Agreement), public or
statutory obligations, surety, stay, appeal, indemnity, performance,
or other similar bonds, or other similar obligations arising in the
ordinary course of business;
(6) Liens disclosed on Schedule 5.1(o);
(7) Judgment and other similar Liens arising in connection with court
proceedings, provided the execution or other enforcement of such Liens
is effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings;
(8) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with
the occupation, use, and enjoyment by the Borrower or any Subsidiary
of the property or assets encumbered thereby in the normal course of
its business or materially impair the value of the property subject
thereto; and
(9) Liens securing obligations of a Subsidiary to the Borrower or
another Subsidiary
(b) Debt. Create, incur, assume, or suffer to exist, or permit any
Subsidiary to create, incur, assume, or suffer to exist, any Debt, except:
(1) Debt of the Borrower under this Agreement or the Note;
(2) Debt described in Schedule 5.1(o) but no voluntary prepayments,
renewals, extensions, refinancings, or increases in he amounts
thereof;
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(3) Debt of the Borrower subordinated on terms satisfactory to the
Agent to the Borrower's obligation under this Agreement and the Note;
(4) Debt of the Borrower to any Subsidiary or of any Subsidiary to the
Borrower or another Subsidiary; and
(5) Accounts payable to trade creditors for goods or services which
are not aged more than sixty (60) days from the billing date and
current operating liabilities (other than for borrowed money) which
are not more than ten (10) days past due, in each case incurred in the
ordinary course of business, as presently conducted, and paid within
the specified time, unless contested in good faith and by appropriate
proceedings.
(c) Mergers, Etc. Wind up, liquidate or dissolve itself, reorganize, merge
or consolidate with or into, or convey, sell, assign, transfer, lease, or
otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person, or acquire all or substantially all of
the assets or the business of any Person, and the Borrower shall not permit
any Subsidiary to do so, except that (1) any Subsidiary may merge into or
transfer assets to the Borrower, and (2) any Subsidiary may merge into or
consolidate with or transfer assets to any other Subsidiary.
(d) Leases. Create, incur, assume, or suffer to exist, or permit any
Subsidiary to create, incur, assume, or suffer to exist, any material
obligation as lessee for the rental or hire of any real or personal
property, except: (i) Capital Leases created pursuant to existing lease
financing agreements disclosed on Schedule 5.1(o); (ii) leases existing on
the date of this Agreement and any extensions or renewals thereof; and
(iii) leases between the Borrower and any Subsidiary or between any
Subsidiaries.
(e) Sale and Leaseback. Sell, transfer, or otherwise dispose of, or permit
any Subsidiary to sell, transfer, or otherwise dispose of, any real or
personal property to any Person and thereafter directly or indirectly lease
back the same or similar property.
(f) Dividends. Declare or pay any dividends; or purchase, redeem, retire,
or otherwise acquire for value any of its capital stock now or hereafter
outstanding; or make any distribution of assets to its stockholders as such
whether in cash, assets, or obligations of the Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution
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on, or for the purchase, redemption, or retirement of any shares of its
capital stock; or make any other distribution by reduction of capital or
otherwise in respect of any shares of its capital stock; or permit any of
its Subsidiaries to do any of the foregoing or to purchase or otherwise
acquire for value any stock of the Borrower or another Subsidiary.
(g) Sale of Assets. Sell, lease, assign, transfer, or otherwise dispose of,
or permit any Subsidiary to sell, lease, assign, transfer, or otherwise
dispose of, any of its now owned or hereafter acquired assets (including,
without limitation, shares of stock and indebtedness of Subsidiaries,
receivables, and leasehold interests), except: (1) inventory disposed of in
the ordinary course of business; (2) the sale or other disposition of
assets no longer used or useful in the conduct of its business; and (3)
that any Subsidiary may sell, lease, assign, or otherwise transfer its
assets to the Borrower.
(h) Investments. (i) Make, or permit any Subsidiary to make, any loan or
advance to any Person, or (ii) purchase or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any capital stock, assets,
obligations, or other securities of, make any capital contribution to, or
otherwise invest in or acquire any interest in any Person, or participate
as a partner or joint venturer with any other Person, except: (1) direct
obligations of the U.S. or any agency thereof with maturities of one year
or less from the date of acquisition; (2) commercial paper of a domestic
issuer rated at least "A-1" by Standard & Poor's Corporation or "P-1" by
Moody's Investors Service, Inc.; (3) certificates of deposit with
maturities of one year or less from the date of acquisition issued by any
commercial bank having capital and surplus in excess of One Hundred Million
U.S. Dollars (US$100,000,000); and (4) stock, obligations, or securities
received in settlement of debts (created in the ordinary course of
business) owing to the Borrower or any Subsidiary.
(i) Guaranties, Etc. Assume, guaranty, endorse, or otherwise be or become
directly or contingently responsible or liable, or permit any Subsidiary to
assume, guaranty, endorse, or otherwise be or become directly or
contingently responsible or liable (including, but not limited to, an
agreement to purchase any obligation, stock, assets, goods, or services, or
to supply or advance any funds, assets, goods, or services, or an agreement
to maintain or cause such Person to maintain a minimum working capital or
net worth, or otherwise to assure the creditors of any Person against
loss), for obligations of any Person, except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business.
(j) Transactions With Affiliates. Enter into any transaction, including,
without limitation, the purchase, sale, or exchange of property or the
rendering of any service, with any Affiliate, or permit any Subsidiary to
enter into any transaction, including, without limitation, the purchase,
sale, or exchange of property or the rendering of any service, with any
Affiliate, except in the ordinary course of and pursuant to the reasonable
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requirements of the Borrower's or such Subsidiary's business and upon fair
and reasonable terms no less favorable to the Borrower or such Subsidiary
than would obtain in a comparable arm's-length transaction with a Person
not an Affiliate.
(k) Capital Expenditures. Purchase or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any material capital assets,
without the Agent's prior written consent.
ss.8. Financial Covenants
8.1. So long as the Note shall remain unpaid or the Agent shall have any
Commitment under this Agreement, the Borrower shall not, nor shall it permit any
Subsidiary to, increase the amount of any borrowings, or obtain any additional
advances on any existing lines of credit in excess of their currently contracted
limits, except for Loans under this Agreement, without the Agent's prior written
consent.
ss.9. Events of Default
9.1. Events of Default. If any of the following events shall occur:
(a) The Borrower should fail to pay the principal of or interest on any
Note as and when due and payable, or any amount of any other fee by or
within 10 days after the date that it is due and payable;
(b) Any representation or warranty made or deemed made by the Borrower in
this Agreement or any other Loan Document, or which is contained in any
certificate, document, opinion, or financial or other statement furnished
at any time under or in connection with any Loan Document, shall prove to
have been incorrect, incomplete, or misleading in any material respect on
or as of the date made or deemed made;
(c) The Borrower shall fail to perform or observe any term, covenant, or
agreement contained in this Agreement to be performed or observed by it ;
(d) The Borrower or any Subsidiary shall (i) fail to pay any indebtedness
for borrowed money (other than the Note) of the Borrower or such
Subsidiary, as the case may be, or any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise), or (ii) fail to perform or observe any material
term, covenant, or condition on its part to be performed or observed under
any agreement or instrument relating to any such indebtedness, when
required to be performed or observed, if the effect of such failure to
perform or observe is to accelerate, or to permit the acceleration of,
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after the giving of notice or passage of time, or both, the maturity of
such indebtedness, whether or not such failure to perform or observe shall
be waived by the holder of such indebtedness; or any such indebtedness
shall be declared to be due and payable, or required to be prepaid (other
than by a regularly scheduled required prepayment), prior to the stated
maturity thereof;
(e) The Borrower or any Subsidiary (i) shall generally not pay, or shall be
unable to pay, or shall admit in writing its inability to pay its debts as
such debts become due; or (ii) shall make an assignment for the benefit of
creditors, or petition or apply to any tribunal for the appointment of a
custodian, receiver, or trustee for it or a substantial part of its assets;
or (iii) shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution, or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (iv) shall have had any such petition or application filed or
any such proceeding commenced against it in which an order for relief is
entered or an adjudication or appointment is made, and which remains
undismissed for a period of thirty (30) days or more; or (v) shall take any
corporate action indicating its consent to, approval of, or acquiescence in
any such petition, application, proceeding, or order for relief or the
appointment of a custodian, receiver, or trustee for all or any substantial
part of its properties; or (vi) shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged for a period of
thirty (30) days or more;
(f) One or more judgments, decrees, or orders for the payment of money
shall be rendered against the Borrower or any Subsidiary and such
judgments, decrees, or orders shall continue unsatisfied and in effect for
a period of thirty (30) consecutive days without being vacated, discharged,
satisfied, or stayed or bonded pending appeal;
(g) The Security Agreement shall at any time after its execution and
delivery and for any reason cease (a) to create a valid and perfected
security interest in and to the property purported to be subject to such
Security Agreement, and in the priority disclosed on Schedule 5.1(o); or
(b) to be in full force and effect or shall be declared null and void, or
the validity or enforceability thereof shall be contested by the Borrower,
or the Borrower shall deny it has any further liability or obligation under
the Security Agreement, or the Borrower shall fail to perform any of its
material obligations under the Security Agreement;
(h) Any of the following events shall occur or exist with respect to the
Borrower or any Commonly Controlled Entity under ERISA: any Reportable
Event shall occur; complete or partial withdrawal from any Multiemployer
Plan shall take place; any Prohibited Transaction shall occur; a notice of
intent to terminate a Plan shall be filed, or a Plan shall be terminated;
or circumstances shall exist which constitute grounds entitling the PBGC to
institute proceedings to terminate a Plan,
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or the PBGC shall institute such proceedings; and in each case above, such
event or condition, together with all other events or conditions, if any,
could subject the Borrower to any tax, penalty, or other liability which in
the aggregate may exceed Ten Thousand Dollars ($10,000); or
(i) If the Agent receives its first notice of a hazardous discharge or an
environmental complaint regarding the Borrower or a Subsidiary from a
source other than the Borrower, and the Agent does not receive notice
(which may be given in oral form, provided same is followed with all due
dispatch by written notice given by Certified Mail, Return Receipt
Requested) of such hazardous discharge or environmental complaint from the
Borrower within twenty-four (24) hours of the time the Agent first receives
said notice from a source other than the Borrower; or if any federal,
state, or local agency asserts or creates a Lien upon any or all of the
assets, equipment, property, leaseholds, or other facilities of the
Borrower or a Subsidiary by reason of the occurrence of a hazardous
discharge or an environmental complaint; or if any federal, state, or local
agency asserts a claim against the Borrower, a Subsidiary, or its
respective assets, equipment, property, leaseholds, or other facilities for
damages or cleanup costs relating to a hazardous discharge or an
environmental complaint; provided, however, that such claim shall not
constitute a default if, within five (5) Business Days of the occurrence
giving rise to the claim, (i) the Borrower can prove to the Agent's
satisfaction that the Borrower has commenced and is diligently pursuing
either: (a) a cure or correction of the event which constitutes the basis
for the claim, and continues diligently to pursue such cure or correction
to completion or (b) proceedings for an injunction, a restraining order, or
other appropriate emergent relief preventing such agency or agencies from
asserting such claim, which relief is granted within ten (10) Business Days
of the occurrence giving rise to the claim and the injunction, order, or
emergent relief is not thereafter resolved or reversed on appeal; and (ii)
in either of the foregoing events, the Borrower has posted a bond, letter
of credit, or other security satisfactory in form, substance, and amount to
both the Agent and the agency or entity asserting the claim to secure the
proper and complete cure or correction of the event which constitutes the
basis for the claim;
(j) A change of Control of the Borrower or any Subsidiary occurs, including
without limitation any Person shall acquire securities representing 25% or
more of the voting securities of the Borrower;
then, and in any such event, the Agent may, by notice to the Borrower, (i)
declare its obligation to make Loans to be terminated, whereupon the same shall
forthwith terminate, and (ii) declare the Notes, all interest thereon, and all
other amounts payable under this Agreement to be forthwith due and payable,
whereupon the Notes, all such interest, and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest, or further
notice of any kind, all of which are hereby expressly waived by the Parent and
the Borrower.
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9.2. Agent's Right to Setoff. Upon the occurrence and during the
continuance of any Event of Default, the Agent is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set off and apply any and all funds,
deposits and accounts at any time held and other indebtedness at any time owing
by the Agent to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement or the Note or any other Loan Document, irrespective of whether or not
the Agent shall have made any demand under this Agreement or the Note or such
other Loan Document and although such obligations may be unmatured. The Agent
agrees promptly to notify the Borrower after any such setoff and application,
provided that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Agent under this Section 9.2 are
in addition to other rights and remedies (including, without limitation, other
rights of setoff) which the Agent may have.
ss.10. Miscellaneous.
10.1. Amendments, Etc. No amendment, modification, termination, or waiver
of any provision of any Loan Document to which the Borrower is a party, nor
consent to any departure by the Borrower from any Loan Document to which it is a
party, shall in any event be effective unless the same shall be in writing and
signed by the Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
10.2. Notices, Etc. All notices given under this Agreement and under the
other Loan Documents shall be in writing, addressed to the parties as set forth
below, and shall be effective on the earliest of (i) the date received, or (ii)
if given by facsimile transmittal on the date given if transmitted before 5:00
p.m. the recipient's time, otherwise it is effective the next day, or (iii) on
the second business day after delivery to a major international air delivery or
air courier service (such as Federal Express or Network Couriers):
If to the Agent:
Thomson Kernaghan & Co. Ltd.
365 Bay Street
Toronto, Ontario M5H 2V2
Attention: Mark E. Valentine, Chairman
Facsimile No. (416) 367-8055
With a copy (that does not constitute notice) to:
John M. Mann
Attorney at Law
1330 Post Oak Boulevard, Suite 2800
Houston, Texas 77056-3060
Facsimile No. (713) 622-7185
If to the Borrower:
Surgical Safety Products, Inc.
2018 Oak Terrace
Sarasota, Florida 34231
Attention: Frank M. Clark, President
Facsimile No. (941) 925-0510
With a copy (that does not constitute notice) to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Attn: Donald F. Mintmire, Esq.
Facsimile No. (561) 659-5371
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10.3. No Waiver. No failure or delay on the part of the Agent in exercising
any right, power, or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power, or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power, or remedy hereunder. The rights and remedies provided herein are
cumulative, and are not exclusive of any other rights, powers, privileges, or
remedies, now or hereafter existing, at law or in equity or otherwise.
10.4. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Agent, and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights under any Loan Document to which the Borrower is a party without
the prior written consent of the Agent.
10.5 Costs, Expenses, and Taxes. The Borrower agrees to pay on demand all
costs and expenses incurred by the Agent in connection with the preparation,
execution, delivery, filing, and administration of the Loan Documents, and of
any amendment, modification, or supplement to the Loan Documents, including,
without limitation, the fees and out-of-pocket expenses of counsel for the Agent
incurred in connection with advising the Agent as to its rights and
responsibilities hereunder. The Borrower also agrees to pay all such costs and
expenses, including court costs, incurred in connection with enforcement of the
Loan Documents, or any amendment, modification, or supplement thereto, whether
by negotiation, legal proceedings, or otherwise. In addition, the Borrower shall
pay any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing, and recording of any
of the Loan Documents and the other documents to be delivered under any such
Loan Documents, and agree to hold the Agent harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees. This provision shall survive termination of
this Agreement.
10.6. Integration. This Agreement and the Loan Documents contain the entire
agreement between the parties relating to the subject matter hereof and
supersede all oral statements and prior writings with respect thereto.
10.7. Indemnity. The Borrower shall defend, protect, indemnify, and hold
harmless the Agent and each Lender, and all of their respective officers,
directors, employees, and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities, and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Borrower in this Agreement or any
other Loan Document, or any other certificate, instrument, or document
contemplated hereby or thereby; or (b) any breach of any covenant, agreement, or
obligation of the Borrower contained in this Agreement or any other Loan
Document; or (c) the activities of the Borrower or any Subsidiary, each of their
respective predecessors in interest or third parties with whom they or any of
them have or had a contractual relationship, or arising directly or indirectly
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from the violation of any environmental protection, health, or safety law,
whether such claims are asserted by any governmental agency or any other person;
or (d) any cause of action, suit, or claim brought or made against such
Indemnitee and arising out of or resulting from the execution, delivery,
performance, or enforcement of this Agreement or any Loan Document, or any other
instrument, document, or agreement executed pursuant hereto or thereto by any of
the Indemnities, any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the Loans or from the exercise of
the Warrants, or the status of the Agent or any Lender or holder of any of the
Notes, Warrants, Conversion Shares or Warrant Shares, or as a stockholder in the
Borrower. To the extent that the foregoing undertaking by the Borrower may be
unenforceable for any reason, the Borrower shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. This indemnity shall survive termination of
this Agreement.
10.8. Governing Law. This Agreement and the Note shall be governed by, and
construed in accordance with, the laws of the Province of Ontario, Canada;
provided, however, if any provision of this Agreement is unenforceable under
Ontario law, but is enforceable under the laws of the U.S. State of Florida,
then Florida law shall govern the construction and enforcement of that
provision.
10.9. Severability of Provisions. Any provision of any Loan Document which
is prohibited or unenforceable in any jurisdiction (after applying the
provisions of paragraph 10.8 of this Agreement to that provision) shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
10.10 Headings. Section and paragraph headings in the Loan Documents are
included for the convenience of reference only and shall not constitute a part
of the applicable Loan Documents for any other purpose.
10.11. Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement (whether in contract or tort, or both, or at law or
in equity) shall be determined by binding arbitration at Toronto, Canada, in
accordance with the commercial arbitration rules of the International Chamber of
Commerce. The prevailing party in any arbitration proceeding shall be awarded
reasonable attorneys fees and costs of the proceeding. The arbitration award
shall be final, and may be entered in any court having jurisdiction. Nothing in
this paragraph shall preclude either party from applying to a court for
temporary equitable relief, when appropriate, pending and subject to such
temporary orders and permanent award as the arbitrator or arbitrators may make.
The parties agree that the courts of the Province of Ontario, Canada, shall have
exclusive jurisdiction and venue for the adjudication of any civil action
between them arising out of relating to this Agreement, and hereby irrevocably
consent to such jurisdiction and venue.
10.12. Agent's Fee. The Borrower shall pay Thomson Kernaghan & Co. Ltd. a
fee for their services as Agent (the "Agent's Fee") in an amount equal to ten
percent (10%) of the aggregate principal amount of all Loans, payable pro rata
upon the disbursement of each Loan.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the
Effective Date.
The Agent:
THOMSON KERNAGHAN & CO. LTD.
By _________________________________
Name _______________________________
Title ________________________________
Date signed __________________________
The Borrower:
SURGICAL SAFETY PRODUCTS, INC.
By _________________________________
Name _______________________________
Title ________________________________
Date signed __________________________
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NOTE
US$............[amount of Loan] Toronto, Ontario ........ ...., .......
FOR VALUE RECEIVED, on demand, and if no demand then on November 30, 2002, the
undersigned, SURGICAL SAFETY PRODUCTS, INC., (the "Borrower"), a New York (USA)
corporation, whose address is 2018 Oak Terrace, Sarasota, Florida 34231, USA,
hereby promises to pay to the order of THOMSON KERNAGHAN & CO. LTD., (the
"Agent"), at the Agent's office at 365 Bay Street, Toronto, Ontario M5H 2V2,
Canada, in lawful currency of the United States of America and in immediately
available funds, the principal sum of ................. DOLLARS AND NO CENTS
(US$...............) together with interest on the unpaid principal amount of
this Note at the rate of EIGHT PERCENT (8%) per year, from the date of this Note
until paid.
This Note is one of the Notes referred to in, and is entitled to the benefits
of, the Loan Agreement, dated as of December 20, 1999, between the Borrower and
the Agent (the "Loan Agreement"). Terms used herein which are defined in the
Loan Agreement shall have their defined meanings when used herein. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity of this Note upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity of this Note
upon the terms and conditions specified in the Loan Agreement. This Note is
secured by a Security Agreement referred to in the Loan Agreement, executed by
the Borrower, reference to which is hereby made for a description of the
collateral provided for under the Security Agreement, and the rights of the
parties with respect thereto.
This Note shall be governed by the laws of the Province of Ontario, Canada;
provided, however, if any provision of this Agreement is unenforceable under
Ontario law, but is enforceable under the laws of the U.S. State of Florida,
then Florida shall govern the construction and enforcement of that provision.
The Agent or other holder of this Note is entitled, at its option, to convert at
any time and from time to time, all or any part of the principal amount of the
Note, plus accrued interest, into shares (the "Conversion Shares") of the
Borrower's common stock, $0.001 par value ("Common Stock"). No fraction of
shares or scrip representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded to the nearest whole share.
To convert this Note, this Note must be surrendered at the principal executive
office of the Escrow Agent pursuant to an Escrow Agreement between the Company
and Thomson Kernaghan & Co. Ltd., dated December 20, 1999, accompanied by
written notice of conversion substantially in the form of Exhibit A to this
Note, with appropriate insertions. The date upon which the conversion shall be
effective (the "Conversion Date") shall be deemed to be the date on which the
Agent or other holder has delivered this Note, with the conversion notice duly
executed to Escrow Holder, or if earlier, the date set forth in such notice of
conversion if the Note and such conversion notice is received by the Escrow
Holder within three (3) business days therefrom. The Escrow Holder will deliver
certificates representing the Conversion Shares within three (3) business days
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following receipt of the Note and conversion notice. The price per share of
Common Stock into which this Note is convertible (the "Conversion Price") shall
be the higher of (i) US$0.375, or (ii) the lower of (x) $0.8203125 or (y) 75% of
the closing bid price of the Borrower's Common Stock quoted on the OTC Bulletin
Board on the Conversion Date; i.e., in no event shall the Conversion Price be
less that US$0.375 per share of Common Stock.
The Borrower is obligated to register the issuance and resale of the Conversion
Shares under the Securities Act of 1933, as amended, pursuant to the terms of
the Registration Rights Agreement between the Borrower and the Agent referred to
in the Loan Agreement.
Any controversy or claim arising out of or relating to this Note (whether in
contract or tort, or both, or at law or in equity) shall be determined by
binding arbitration at Toronto, Canada, in accordance with the commercial
arbitration rules of the International Chamber of Commerce. The prevailing party
in any arbitration proceeding shall be awarded reasonable attorneys fees and
costs of the proceeding. The arbitration award shall be final, and may be
entered in any court having jurisdiction. Nothing in this paragraph shall
preclude either party from applying to a court for temporary equitable relief,
when appropriate, pending and subject to such temporary orders and permanent
award as the arbitrator or arbitrators may make. The parties hereby consent to
the exclusive jurisdiction of the courts of the Province of Ontario for that
purpose.
SURGICAL SAFETY PRODUCTS, INC.
By _________________________________
Name _______________________________
Title ________________________________
Date signed __________________________
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EXHIBIT "A"
NOTICE OF CONVERSION
(To be executed by the Holder in order to Convert the Note)
TO SURGICAL SAFETY PRODUCTS, INC.
C/O THOMSON KERNAGHAN & CO. LIMITED
The undersigned hereby irrevocably elects to convert $________________ of
the principal amount of the above Note into Shares of Common Stock of Surgical
Safety Products, Inc. according to the conditions stated therein, as of the
Conversion Date written below.
Conversion Date
Applicable Conversion Price
Signature
Name __________________________________________________________
Address:
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SECURITY AGREEMENT
This SECURITY AGREEMENT, PLEDGE AND ASSIGNMENT (this ASecurity Agreement@)
dated and effective as of December 9, 1998, is made by Surgical Safety Products,
Inc. (the ABorrower@), a New York corporation, as the debtor, to Thomson
Kernaghan & Co. Ltd. (the AAgent@), as the secured party, in connection with the
Loan Agreement (as hereinafter defined).
PRELIMINARY STATEMENTS:
(1) The Borrower and the Agent have made and entered into a Loan
Agreement (as it now exists or subsequently may be modified, the ALoan
Agreement@) effective as of December __, 1999. The Borrower will derive
substantial direct and indirect benefit from the transactions contemplated by
the Loan Agreement.
(2) It is a condition precedent to the making of Loans by the Agent
under the Loan Agreement that the Borrower shall have made the pledge and
granted the assignment and security interest contemplated by this Security
Agreement.
(3) All capitalized terms used but not defined in this Security
Agreement shall have the meanings ascribed to them in the Loan Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Agent to make Loans under the Loan Agreement, the Borrower hereby
agrees with the Agent as follows:
Section 1.01. Pledge, Assignment and Grant of Security. The Borrower
hereby assigns and pledges to the Agent, and hereby grants to the Agent a
security interest in all of the Borrower=s right, title and interest in and to
the following, whether now owned or hereafter acquired (the ACollateral@):
(1) All equipment in all its forms, wherever located, now or
hereafter existing, all fixtures and all parts thereof and all accessions
thereto (any and all such equipment, fixtures, parts, and accessions being the
AEquipment@);
(2) All inventory in all of its forms, wherever located, now or
hereafter existing and raw materials and work in process therefor, finished
goods thereof, and materials used or consumed in the manufacture or production
thereof; (b) goods in which the Borrower has an interest in mass or a joint or
other interest or right of any kind (including, without limitation, goods in
which the Borrower has an interest or right as consignee); and (c) goods which
are returned to or repossessed by the Borrower), and all accessions thereto and
products thereof and documents therefor (any and all such inventory, accessions,
products, and documents being the AInventory@); and
(3) All accounts, contract rights, chattel paper and instruments,
now or hereafter existing, whether or not arising out of or in connection with
the sale or lease of goods or the rendering of sevices, and all rights now or
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hereafter existing in and to all security agreements, leases, and other
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper and instruments (any and all such accounts, contract rights,
chattel paper and instruments, being the AReceivables,@ and any and all such
leases, security agreements, and other contracts being the ARelated Contracts@);
(4) All proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds which constitute property of the types
described in clauses (1) through (4) of this Section 1.01), and, to the extent
not otherwise included, all (a) payments under insurance (whether or not the
Agent is the loss payee thereof), or any indemnity, warranty, or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral, and (b) cash.
Section 2.01. Security for Obligations. This Security Agreement
secures the payment for all obligations of the Borrower now or hereafter
existing under the Loan Agreement, the Notes and the Registration Rights
Agreement, whether for principal, interest, fees, expenses, or otherwise, and
all obligations of the Borrower now or hereafter existing under this Security
Agreement (collectively, the AObligations@). Without limiting the generality of
the foregoing, this Security Agreement secures the payment of all amounts which
constitute part of the Obligations and would be owed by the Borrower to the
Agent under any of the Loan Documents but for the fact that they are
unenforceable or not allowable owing to the existence of bankruptcy,
reorganization, or similar proceedings involving the Borrower.
Section 3.01. Borrower Remains Liable. Anything herein to the
contrary notwithstanding, (1) the Borrower shall remain liable under the
contracts and agreements included in the collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Security Agreement had not been excluded; (2) the exercise by
the Agent of any rights hereunder shall not release the Borrower from any of its
duties or obligations under the contracts and agreements included in the
Collateral; and (3) the Agent shall not have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Security Agreement, nor shall the Agent be obligated to perform any of the
obligations or duties of the Borrower thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
Section 4.01. Representations and Warranties. The Borrower represents
and warrants as follows:
(1) All of the Equipment and Inventory are located at the places
specified in Schedule I hereto. The chief place of business and chief executive
office of the Borrower and the office where the Borrower keeps its records
concerning the Receivables, and the originals of all chattel paper that evidence
Receivables, and the original copies of the Assigned Agreements, are located at
its address specified in Section 17.01. None of the Receivables is evidenced by
a promissory note or other instrument.
(2) The Borrower is the legal and beneficial owner of the Collateral
free and clear of any Lien except for (i) the security interest created by this
Security Agreement, and (ii) the security interests described in Schedule II. No
effective financing statement or other document similar in effect covering all
or any part of the Collateral is on file in any recording office, except (i)
such as may have been filed in favor of the Agent relating to this Security
Agreement, and (ii) the financing statements described in Schedule II. The
Borrower has no trade names except as set forth on Schedule III.
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(3) Except as provided on Schedule I, the Borrower has exclusive
possession and control of the Equipment and Inventory.
(4) Except as set forth on Schedule I, this Security Agreement
creates a valid and perfected first priority security interest in the
Collateral, securing the payment of the Obligations, and all filings and other
actions necessary or desirable to perfect and protect such security interest
have been duly taken.
(5) The Borrower is a corporation duly incorporated, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation; has the corporate power and authority to own its assets and to
transact its business, and is duly qualified and in good standing under the laws
of each jurisdiction in which qualification is required.
(6) The execution and performance by the Borrower of this Security
Agreement have been duly authorized by all necessary corporate action and do not
and will not (a) require any consent or approval of the Borrower=s stockholders;
(b) contravene the Borrower=s charter or bylaws; (c) violate any provision of
any law, rule, or regulation; or (d) result in a breach of or constitute a
default under any indenture or loan or Loan Agreement or any other agreement,
lease, or instrument to which the Borrower is a party or by which it or its
properties may be bound or affected.
(7) This Security Agreement is the legal, valid, and binding
obligation of the Borrower, enforceable in accordance with its respective terms,
except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency, and other similar laws affecting creditors= rights
generally.
(8) No consent of any other person or entity and no authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required (a) for the pledge by the Borrower of
the Security Collateral pursuant to this Security Agreement, for the grant by
the Borrower of the assignment and security interest granted hereby or for the
execution, delivery, or performance of this Security Agreement by the Borrower;
(b) for the perfection or maintenance of the pledge, assignment, and security
interest created hereby (including the first priority nature of such pledge,
assignment, and security interest); or (c) for the exercise by the Agent of the
voting or other rights provided for in this Security Agreement or the remedies
in respect of the Collateral pursuant to this Security Agreement (except as may
be required in connection with the disposition of any portion of the Security
Collateral by laws affecting the offering and sale of securities generally).
(9) The Inventory has been produced by the Borrower in compliance
with all requirements of the Fair Labor Standards Act.
(10) There are no conditions precedent to the effectiveness of this
Security Agreement that have not been satisfied or waived.
(11) The Borrower has, independently and without reliance upon the
Agent and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Security Agreement.
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Section 5.01. Further Assurances.
(1) The Borrower agrees that from time to time, at the expense of
the Borrower, the Borrower will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Agent may reasonably request, in order to perfect and
protect any pledge, assignment or security interest granted or purported to be
granted hereby or to enable the Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Borrower will execute and file such financing
or continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Agent may request, in order
to perfect and preserve the pledge, assignment, and security interest granted or
purported to be granted hereby.
(2) The Borrower hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of the Borrower where permitted
by law. A photocopy or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(3) The Borrower will furnish to the Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Agent may reasonably
request, all in reasonable detail.
Section 6.01. As to Equipment and Inventory.
(1) The Borrower shall keep the Equipment and Inventory (other than
Inventory sold in the ordinary course of business) at the places therefor
specified in Section 4.01(1) or, upon 10 days= prior written notice to the
Agent, at such other places in a jurisdiction where all action required by
Section 5.01 shall have been taken with respect to the Equipment and Inventory.
(2) The Borrower shall cause the Equipment to be maintained and
preserved in the same condition, repair, and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer=s manual, and
shall forthwith, or in the case of any loss or damage to any of the Equipment as
quickly as practicable after the occurrence thereof, make or cause to be made
all repairs, replacements, and other improvements in connection therewith which
are necessary or desirable to such end. The Borrower shall promptly furnish to
the Agent a statement respecting any loss or damage to any of the Equipment.
(3) The Borrower shall pay promptly when due all property and other
taxes, assessments, and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials, and supplies) against, the
Equipment and Inventory. In producing the Inventory, the Borrower shall comply
with all requirements of the Fair Labor Standards Act.
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Section 7.01. Insurance.
(1) the Borrower shall, at its own expense, maintain insurance with
respect to the Equipment and Inventory in such amounts, against such risks, in
such form and with such insurers, as shall be satisfactory to the Agent from
time to time. The Borrower's current insurers are satisfactory to the Agent.
Each policy for liability insurance shall provide for all losses to be paid on
behalf of the Agent and the Borrower as their respective interests may appear
and each policy for property damage insurance shall provide for all losses
(except for losses of less than $10,000 per occurrence) to be paid directly to
the Agent. Each such policy shall in addition (a) name the Borrower and the
Agent as insured parties thereunder (without any representation or warranty by
or obligation upon the Agent) as their interests may appear; (b) contain the
agreement by the insurer that any loss thereunder shall be payable to the Agent
notwithstanding any action, inaction, or breach of representation or warranty by
the Borrower; (c) provide that there shall be no recourse against the Agent for
payment of premiums or other amounts with respect thereto; and (d) provide that
at least ten days= prior written notice of cancellation or of lapse shall be
given to the Agent by the insurer. The Borrower shall, if so requested by the
Agent, deliver to the Agent original or duplicate policies of such insurance
and, as often as the Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. Further, the Borrower shall, at
the request of the Agent, duly execute and deliver instruments of assignment of
such insurance policies to comply with the requirements of Section 6.01 and
cause the insurers to acknowledge notice of such assignment.
(2) Reimbursement under any liability insurance maintained by the
Borrower pursuant to this Section 7.01 may be paid directly to the person who
shall have incurred liability covered by such insurance. In case of any loss
involving damage to Equipment or Inventory when subsection (3) of this Section
7.01 is not applicable, the Borrower shall make or cause to be made the
necessary repairs to or replacements of such Equipment or Inventory, and any
proceeds of insurance maintained by the Borrower pursuant to this Section 7.01
shall be paid to the Borrower as reimbursement for the costs of such repairs or
replacements.
(3) Upon (a) the occurrence and during the continuance of any Event
of Default, or (b) the actual or constructive total loss (in excess of US$10,000
per occurrence) of any Equipment or Inventory, all insurance payments in respect
of such Equipment or Inventory shall be paid to and applied by the Agent as
specified in Section 13.01(2).
Section 8.01. Place of Perfection; Records, Collection of Receivables.
(1) The Borrower shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Receivables, and the original copies of the Assigned Agreements and the
originals of all chattel paper that evidence Receivables, at the location
therefor specified in Section 4.01(1) or, upon 30 days= prior written notice to
the Agent, at any other locations in a jurisdiction where all actions required
by Section 6.01 shall have been taken with respect to the Receivables. The
Borrower will hold and preserve such records, Assigned Agreements and chattel
paper and will permit representatives of the Agent at any time during normal
business hours to inspect and make abstracts from such records and chattel
paper.
(2) Except as otherwise provided in this subsection (2), the
Borrower shall continue to collect, at its own expense, all amounts due or to
become due the Borrower under the Receivables. In connection with such
collections, the Borrower may take (and, at the Agent=s direction, shall take)
such action as the Borrower or the Agent may deem necessary or advisable to
enforce collection of the Receivables: provided, however, that the Agent shall
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have the right upon the occurrence and during the continuance of an Event of
Default or an event which, with the giving of notice or the lapse of time, or
both, would become an Event of Default and upon written notice to the Borrower
of its intention to do so, to notify the account debtors or obligors under any
Receivables of the assignment of such Receivables to the Agent and subject to
any priority interests of other secured creditors to direct such account debtors
or obligors to make payment of all amounts due or to become due to the Borrower
thereunder directly to the Agent and upon such notification and at the expense
of the Borrower, to enforce collection of any such Receivables, and to adjust,
settle, or compromise the amount or payment thereof, in the same manner and to
the same extent as the Borrower might have done. After receipt by the Borrower
of the notice from the Agent referred to in the proviso to the preceding
sentence, (a) all amounts and proceeds (including instruments) received by the
Borrower in respect of the Receivables shall be received in trust for the
benefit of the Agent hereunder, shall be segregated from other funds of the
Borrower, and shall be forthwith paid over to the Agent in the same form as so
received (with any necessary endorsement) to be held as cash collateral and
either (i) released to the Borrower so long as no Event of Default shall have
occurred and be continuing or (ii) if any Event of Default shall have occurred
and be continuing, applied as provided by Section 13.01(2), and (b) the Borrower
shall not adjust, settle, or compromise the amount or payment of any Receivable,
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
Section 9.01. Transfers and Other Liens; Additional Shares.
(1) The Borrower shall not (a) sell, assign (by operation of law or
otherwise), or otherwise dispose of, or grant any option with respect to, any of
the Collateral, except Inventory in the ordinary course of business, or (b)
create or permit to exist any Lien upon or with respect to any of the
Collateral, except for the security interest under this Security Agreement.
Section 10.01. Agent Appointed Attorney-In-Fact. The Borrower hereby
irrevocably appoints the Agent the Borrower=s attorney-in-fact, with full
authority in the place and stead of the Borrower and in the name of the Borrower
or otherwise, from time to time in the Agent=s discretion, to take any action
and to execute any instrument which the Agent may deem necessary or advisable to
accomplish the purposed of this Security Agreement (subject to the rights of the
Borrower under Section 8.01), including, without limitation, upon five days=
notice to the Borrower:
(1) To obtain and adjust insurance required to be paid to the Agent
pursuant to Section 8.01;
(2) To ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under
or in connection with the Collateral;
(3) To receive, endorse, and collect any drafts or other instruments,
documents, and chattel paper, in connection therewith; and
(4) To file any claims or take any action or institute any proceedings
which the Agent may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of the Agent
with respect to any of the Collateral.
Section 11.01. Agent May Perform. If the Borrower fails to perform
any agreement contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Agent incurred in
connection therewith shall be payable by the Borrower under Section 14.01 (2). 5
days after notice and failure
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Section 12.01. The Agent=s Duties. The powers conferred on the Agent
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Agent shall have no duty as to any Collateral, as
to ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders, or other matters relative to any Security Collateral,
whether or not the Agent has or is deemed to have knowledge of such matters, or
as to the taking of any necessary steps to preserve rights against prior parties
or any other rights pertaining to any Collateral. The Agent shall be deemed to
have exercised reasonable care in the custody and preservation of any Collateral
in its possession if such Collateral is accorded treatment substantially equal
to that which it accords its own property.
Section 13.01 Remedies. If any Event of Default shall have occurred
and be continuing:
(1) The Agent may exercise in respect of the collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code in effect in the State of Delaware at that time (the ACode@)
(whether or not the Code applies to the affected Collateral), and also may (a)
require the Borrower to, and the Borrower hereby agrees that it will at its
expense and upon request of the Agent forthwith, assemble all of part of the
Collateral as directed by the Agent and make it available to the Agent at a
place to be designated by the Agent which is reasonably convenient to both
parties and (b) upon five days= notice to the Borrower (except as specified
below), sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Agent=s offices or elsewhere, for cash, on credit
or for future delivery, and upon such other terms as the Agent may deem
commercially reasonable. The Borrower agrees that, to the extent notice of sale
shall be required by law, at least ten days= notice to the Borrower of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. the Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
The Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(2) Any cash held by the Agent as Collateral and all cash proceeds
received by the Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in the discretion of the
Agent, be held by the Agent as Collateral for, and/or then or any time
thereafter be applied (after payment of any amounts payable to the Agent
pursuant to Section 19.01) in whole or in part by the Agent against, all or any
part of the Obligations in such order as the Agent shall elect. Any surplus of
such cash or cash proceeds held by the Agent and remaining after payment in full
of all the Obligations shall be paid over to the Borrower or to whomsoever may
be lawfully entitled to receive such surplus.
(3) The Agent may exercise any and all rights and remedies of the
Borrower under or in connection with the Assigned Agreements or otherwise in
respect of the Collateral, including, without limitation, any and all rights of
the Borrower to demand or otherwise require payment of any amount under, or
performance of any provision of, any Assigned Agreement.
(4) All payments received by the Borrower under or in connection
with any Assigned Agreement or otherwise in respect of the Collateral shall be
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received in trust for the benefit of the Agent, shall be segregated from other
funds of the Borrower and shall be forthwith paid over to the Agent in the same
form as so received (with any necessary endorsement).
Section 14.01. Indemnity and Expenses.
(1) The Borrower agrees to indemnify the Agent from and against any
and all claims, losses, and liabilities (including reasonable attorney fees)
growing out of or resulting from this Security Agreement (including, without
limitation, enforcement of this Security Agreement), except claims, losses, or
liabilities resulting from the Agent=s gross negligence or willful misconduct.
(2) The Borrower will upon demand pay to the Agent the amount of any
and all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which the Agent may incur in connection
with (a) the administration of this Security Agreement; (b) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral; (c) the exercise or enforcement of any
of the rights of the Agent hereunder; or (d) the failure by the Borrower to
perform or observe any of the provisions hereof.
Section 15.01. Security Interest Absolute. All rights of the Agent
and the pledge, assignment, and security interest hereunder, and all obligations
of the Borrower hereunder, shall be absolute and unconditional, irrespective of:
(1) Any lack of validity, regularity, or enforceability of the Loan
Agreement, the Notes or any other agreement or instrument relating thereto;
(2) Any change in the time, manner, or place of payment of, or in
any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Loan Agreement or the Notes,
including, without limitation, any increase in Obligations resulting from the
extension of additional credit to the Borrower or any of its Subsidiaries or
otherwise.
(3) Any taking, exchange, release, or nonperfection of any other
collateral, or any taking, release, or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Obligations;
(4) Any manner of application of Collateral, or proceeds thereof, to
all or any of the Obligations, or any manner of sale or other disposition of any
Collateral for all or any of the Obligations or any other assets of the Borrower
or any of its subsidiaries;
(5) Any change, restructuring, or termination of the corporate
structure or existence of the Borrower or any of its subsidiaries; or
(6) Any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Borrower.
Section 16.01. Amendments; Etc. No amendment, modification,
termination, or waiver of any provision of this Security Agreement, and no
consent to any departure by the Borrower herefrom, shall in any event be
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effective unless the same shall be in writing and signed by the Agent, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
Section 17.01. Addresses for Notices. All notices given under this
Security Agreement shall be in writing, addressed to the parties as set forth
below, and shall be effective on the earliest of (i) the date received, or (ii)
if given by facsimile transmittal on the date given if transmitted before 5:00
p.m. the recipient=s time, otherwise it is effective the next day, or (iii) on
the second business day after delivery to a major international air delivery or
air courier service (such as Federal Express or Network Couriers):
If to the Agent: If to the Borrower:
Thomson Kernaghan & Co. Ltd. Surgical Safety Products, Inc.
365 Bay Street 2018 Oak Terrace
Toronto, Ontario M5H 2V2 Sarasota, Florida 34231
Attention: Robert F. Wilson Attention: Frank M. Clark, President
Executive Vice President Facsimile No. (941) 925-0510
Facsimile No. (416) 367-8055
With a copy (that does not constitute
With a copy (that does not constitute notice) to:
notice) to: Mintmire & Associates
John M. Mann 265 Sunrise Avenue, Suite 204
Attorney at Law Palm Beach, FL 33480
1330 Post Oak Boulevard, Suite 2800 Attn: Donald F. Mintmire, Esq.
Houston, Texas 77056-3060 Facsimile No. (561) 659-5371
Facsimile No. (713) 622-7185
Section 18.01. Continuing Security Interest; Assignments Under Loan
Agreement. This Security Agreement shall create a continuing security interest
in the Collateral and shall (1) remain in full force and effect until (a) the
payment in full of the Obligations and all other amounts payable under this
Security Agreement, and (b) the expiration or termination of any obligation of
the Agent to make Loans; (2) be binding upon the Borrower, its successors and
assigns; and (3) inure to the benefit of, and be enforceable by, the Agent and
its successors, transferees, and assigns. Without limiting the generality of the
foregoing clause (3), the Agent may assign or otherwise transfer all or any
portion of its rights and obligations under the Loan Agreement (including,
without limitation, all or any portion of any Notes held by it) to any other
person or entity, and such other person or entity shall thereupon become vested
with all the benefits in respect thereof granted to the Agent herein or
otherwise. Upon the later of the payment in full of the Obligations and all
other amounts payable under this Security Agreement and the expiration or
termination of any obligation of the Agent to make Loans, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the Borrower. Upon any such termination, the Agent will, at the Borrower=s
expense, execute and deliver to the Borrower such documents as the Borrower
shall reasonably request to evidence such termination.
Section 19.01. Governing Law; Terms. This Security Agreement shall
be governed by and construed in accordance with the laws of the Province of
Ontario, except: (a) if any provision of this Security Agreement is
unenforceable under Ontario law but is enforceable under the laws of the U.S.
State of Florida, then Florida law shall govern the construction and enforcement
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of that provision; and (b) the validity or perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular Collateral shall
be governed by the Uniform Commercial Code as adopted in Florida. Unless
otherwise defined in this Security Agreement or in the Loan Agreement, terms
used in Article 9 of the UCC are used herein as therein defined.
Section 20.01. Dispute Resolution. Any controversy or claim arising
out of or relating to this Agreement (whether in contract or tort, or both, or
at law or in equity) shall be determined by binding arbitration at Toronto,
Canada, in accordance with the commercial arbitration rules of the International
Chamber of Commerce. The prevailing party in any arbitration proceeding shall be
awarded reasonable attorneys fees and costs of the proceeding. The arbitration
award shall be final, and may be entered in any court having jurisdiction.
Nothing in this paragraph shall preclude either party from applying to a court
for temporary equitable relief, when appropriate, pending and subject to such
temporary orders and permanent award as the arbitrator or arbitrators may make.
The parties hereby consent to the exclusive jurisdiction of the courts of the
Province of Ontario for that purpose.
IN WITNESS WHEREOF, the parties have caused this Security Agreement
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
The Agent: The Borrower:
THOMSON KERNAGHAN & CO. LTD. SURGICAL SAFETY PRODUCTS, INC.
By _________________________________ By _________________________________
Name _______________________________ Name _______________________________
Title ______________________________ Title ______________________________
Date signed ________________________ Date signed ________________________
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SCHEDULE I
Part 1
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Schedule II
Locations of Equipment and Inventory
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SCHEDULE II
Description of Other Liens, Security Interests and Financing Statements
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SCHEDULE III
Description of Borrower=s Trade Names
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LENDERS' WARRANT
Warrant No. _____
Void after 5:00 p.m. Toronto, Ontario time, on November 30, 2002, 2002
Warrant to Purchase Shares of Common Stock
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES
ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER
THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO
REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE SELLER WILL BE PROVIDED WITH OPINION OF COUNSEL
OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
-------------------------------------------------------------
WARRANT TO PURCHASE 3,428,571 SHARES OF COMMON STOCK
OF
SURGICAL SAFETY PRODUCTS, INC..
----------------------------------------------------------------
This it to certify that, FOR VALUE RECEIVED, Thomson Kernaghan & Co.
Limited as Agent or assigns ("Holder") is entitled to purchase, subject to the
provisions of this Warrant, from SURGICAL SAFETY PRODUCTS, INC., a New York
corporation (the "Company"), the fully paid, validly issued and non-assessable
shares of Common Stock, $0.001 par value, of the Company ("Common Stock") at any
time or from time to time during the period from the date hereof, through and
including November 30, 2002, but not later than 5:00 p.m. Toronto, Ontario time,
on November 30, 2002 (the "Exercise Period") at the price of US$1.09375 per
share (the "Exercise Price"). The total number of shares of Common Stock to be
issued upon exercise of this Warrant shall be 3,428,571 shares. The price to be
paid for each share of Common Stock may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the respective exercise price of a share of Common
Stock in effect at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price."
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This Warrant is being issued pursuant to the Loan Agreement, dated
as of December 20, 1999, between the Company and the Holder. This Warrant shall
be exercisable from time to time as follows: (i) this Warrant shall be
immediately exercisable for 20% of the number of Warrant Shares; and, (ii) the
Warrants shall be exercisable for an additional1% of the number of Warrant
Shares for each $25,000 of principal of Loans made under the Loan Agreement.
The Company has agreed to register the issuance and resale of the
Common Stock issuable upon exercise of this Warrant under the U.S. Securities
Act of 1933, as amended, pursuant to a Registration Rights Agreement between the
Company and the Holder of even date herewith.
A. EXERCISE OF WARRANT
This Warrant may be exercised in whole or in part at any time or
from time to time during the Exercise Period; provided, however, that (i) if the
last day of the Exercise Period is a day on which banking institutions in the
City of Toronto are authorized by law to close, then the Exercise Period shall
terminate on the next succeeding day that shall not be such a day, and during
such period the Holder shall have the right to exercise this Warrant into the
kind and amount of shares of stock and other securities and property (including
cash) receivable by a holder of the number of shares of Common Stock into which
this Warrant might have been exercisable immediately prior thereto. This Warrant
may be exercised by presentation and surrender hereof to Thomson Kernaghan & Co.
Limited as Escrow Holder at the Escrow Holder's principal office, 365 Bay
Street, Tenth Floor, Toronto, Ontario M5H 2V2, Canada, with the Exercise Form
annexed hereto duly executed and accompanied by payment of the Exercise Price
for the number of Warrant Shares specified in such form. As soon as practicable
after each such exercise of the Warrants, but not later than seven (7) days from
the date of such exercise, the Escrow Holder shall, to the extent that the
Company has deposited shares of Common Stock with the Escrow Holder for that
purpose, issue and deliver to the Holder a certificate or certificates for the
designee. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
Warrant Shares purchasable thereunder. Upon receipt by the Company of this
Warrant at its principal office, or by the stock transfer agent of the Company
at its office, in proper form for exercise, the Holder shall be deemed to be
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be physically delivered to the Holder.
THIS WARRANT MAY BE EXERCISED ONLY (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE ACT), (ii) IF NOT EXERCISED ON
BEHALF OF A U.S. PERSON, (iii) IF NO U.S. PERSON HAS ANY INTEREST IN THE
WARRANTS BEING EXERCISED OR THE UNDERLYING SECURITIES TO BE ISSUED UPON
EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND THE WARRANT SHARES UNDERLYING
THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE UNITED STATES. IF THE ABOVE CANNOT
BE COMPLIED WITH, THEN THE WARRANT CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF
COUNSEL, THE FORM AND SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS
DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF THE WARRANTS BEING EXERCISED THAT
REGISTRATION IS NOT REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON
EXERCISE HAVE BEEN REGISTERED UNDER THE ACT.
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B. RESERVATION OF SHARES AND COVENANTS OF THE COMPANY
The Company shall at all times have allotted and reserved for
issuance, and deposited with the Escrow Holder for delivery upon exercise of
this Warrant such number of shares of its Common Stock as shall be required for
issuance and delivery upon exercise of the Warrant.
The Company covenants with the Holder that so long as any Warrants
remain outstanding and may be exercised:
1. it will cause the shares of Common Stock and the certificates
representing the Common Stock subscribed and paid for pursuant to the
exercise of the Warrants to be duly issued and deposited with the
Escrow Holder for delivery in accordance herewith and the terms
hereof;
2. all shares of Common Stock that shall be issued upon exercise of the
right to purchase provided for herein, upon payment of the prevailing
Exercise Price herein provided, shall be fully paid and
non-assessable;
3. it will use its best efforts to maintain its corporate existence; and
4. generally, it will well and truly perform and carry out all of the
acts or things to be done by it as provided herein.
C. FRACTIONAL SHARES
No fractional shares or script representing fractional shares shall
be issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of a share, determined as follows:
1. If the Common Stock is listed on a National Securities Exchange or
admitted to unlisted trading privileges on such exchange or listed for
trading on the NASDAQ system, the current market value shall be the
last reported sale price of the Common Stock on such exchange or
system on the last business day prior to the date of exercise of this
Warrant or, if no such sale is made (or reported) on such day, the
average closing bid and asked prices for such day on such exchange or
system; or
2. If the Common Stock is not so listed or admitted to unlisted trading
privileges, the current market value shall be the mean to the last
reported bid and ask prices reported by the Electronic Bulletin Board
or National Quotation Bureau, Inc. on the last business day prior to
the date of the exercise of this Warrant; or
3. If the Common Stock is not so listed or admitted to unlisted trading
privileges and bid and ask prices are not so reported, the current
market value shall be an amount, not less than book value thereof as
at the end of the most recent fiscal year of the Company ending prior
to the date of the exercise of the Warrant, determined in such
reasonable manner as may be prescribed by the Board of Directors of
the Company.
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D. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT
This Warrant is exchangeable, without expense, at the option of the
Holder, upon presentation and surrender hereof to the Company for other warrants
of different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Common Stock purchasable hereunder. Upon
surrender of this Warrant to the Company at its principal office, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
applicable transfer tax, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such Assignment Form and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other warrants that carry the same rights upon presentation hereof at the
principal office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged. Upon receipt of the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
This Warrant and the Common Stock issuable upon exercise of this
Warrant were issued under Regulation S under the Act and may be transferred only
in accordance therewith and as provided in the legends set forth in this
Warrant.
E. RIGHTS OF THE HOLDER
The Holder shall not, by virtue hereof, be entitled to any rights of
a shareholder in the Company, either at law or equity, and the rights of the
Holder are limited to those expressed in the Warrant and are not enforceable
against the Company except to the extent set forth herein.
F. ANTI-DILUTION PROVISIONS
The respective Exercise Price in effect at any time and the number
and kind of securities purchasable upon the exercise of the Warrant shall be
subject to adjustment from time to time upon the happening of certain events are
follows:
1. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or
reclassify its outstanding shares of Common Stock into a smaller
number of shares, the respective Exercise Price in effect at the time
of the record date for such dividend or distribution or of the
effective date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined by
multiplying the respective Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the numerator of
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which shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
2. Whenever the respective Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsection (1) above, the number of
Shares purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the respective number of Shares initially
issuable upon exercise of this Warrant by a fraction, the denominator
of which shall be the Exercise Price after giving effect to such
action and the numerator of which shall be the Exercise Price in
effect immediately prior to such action.
3. No adjustment in the respective Exercise Price shall be required
unless such adjustment would require an increase or decrease of at
least one cent ($0.01) in such price; provided, however, that any
adjustment that by reason of this Subsection (3) is not required to be
made shall be carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations under this
Section (F) shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this Section
(F) to the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the respective
Exercise Price, in addition to those required by this Section (F), as
it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any federal income
tax liability to the holders of Common Stock or securities convertible
into Common Stock (including the Warrants).
4. In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company,
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common
Stock contained in Subsections (1) to (3) inclusive above.
5. Irrespective of any adjustments in the respective Exercise Price or
the related number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in
the similar Warrants initially issuable pursuant to this Warrant.
G. OFFICER'S CERTIFICATE
Whenever the respective Exercise Price shall be adjusted as required
by the provisions of the foregoing Section (F), the Company shall forthwith file
in the custody of its Secretary or an Assistant Secretary at its principal
office, an officer's certificate showing the adjusted Exercise Price determined
as herein provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of related additional shares of
Common Stock, if any, and such other facts as shall be necessary to show the
reason for and the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for inspection by
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the holder or any holder of a Warrant executed and delivered pursuant to Section
(A) and the Company shall, forthwith after each such adjustment, mail a copy by
certified mail of such certificate to the Holder or any such holder.
H. NOTICES TO WARRANT HOLDERS
So long as this Warrant shall be outstanding, (i) if the Company
shall pay any dividend or make any distribution upon the Common Stock or (ii) if
the Company shall offer to the holders of Common Stock for subscription or
purchase by them any share of any class or any other rights, options or warrants
(other than this Warrant) or (iii) if a capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen (15) days prior
to the date specified, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which a record date
is to be determined for the purpose of such dividend, distribution or issue of
rights, options, or warrants or such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up. The failure to give such
notice shall not otherwise affect the action take by the Company.
I. RECLASSIFICATION, REORGANIZATION OR MERGER
In case of any reclassification, capital reorganization or other
change of outstanding shares Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and that does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale, lease or
conveyance to another corporation of the property of the Company as an entirety,
the Company shall, as a condition precedent to such transaction, cause effective
provisions to be made so that the Holder shall have the right thereafter, by
exercising this Warrant at any time prior to the expiration of the Warrant, to
purchase the kind and amount of shares of stock an other securities and property
receivable upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of such number of shares
of Common Stock that might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Section (I) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for a security of the Company
other than Common Stock, any such issue shall be treated as an issue of Common
Stock covered by the provisions of Subsection (1) of Section (F) hereof.
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J. WARRANTS TO RANK PARI PASSU
All Warrants shall rank pari passu, whatever may be the actual date
of issue of the same.
K. GOVERNING LAW; JURISDICTION AND VENUE
This Warrant shall be governed by and interpreted in accordance with
the laws of the State of Florida; provided, however, that if any provision of
this Agreement is unenforceable under the laws of the State of Florida, but is
enforceable under the laws of the Province of Ontario, Canada, then such
provision shall be governed by and interpreted in accordance with the laws of
the Province of Ontario.
Any controversy or claim arising out of or relating to this
Agreement (whether in contract or tort, or both, or at law or in equity) shall
be determined by binding arbitration at Toronto, Canada, in accordance with the
commercial arbitration rules of the International Chamber of Commerce. The
prevailing party in any arbitration proceeding shall be awarded reasonable
attorneys fees and costs of the proceeding. The arbitration award shall be
final, and may be entered in any court having jurisdiction. Nothing in this
paragraph shall preclude either party from applying to a court for temporary
equitable relief, when appropriate, pending and subject to such temporary orders
and permanent award as the arbitrator or arbitrators may make.
The parties agree that the courts of the Province of Ontario,
Canada, shall have exclusive jurisdiction and venue for the adjudication of any
civil action between them arising out of relating to this Agreement, and hereby
irrevocably consent to such jurisdiction and venue.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the undersigned, each being duly authorized, as of the date
below.
SURGICAL SAFETY PRODUCTS, INC..
By:_____________________________
Its:_____________________________
DATED: December __, 1999
ATTEST:
=======================
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FORM OF NOTICE OF EXERCISE
THIS WARRANT MAY BE EXERCISED ONLY (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE
UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE
EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF
THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE
UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing __________ shares of Common Stock at the
Exercise Price of US$1.09375 per share, for a total of US$ _________________.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name_________________________________________
(Please typewrite or print in block letters)
Address________________________________________
=========================================
The undersigned represents and warrants to U.S. Surgical Products, Inc. that the
conditions for exercise of the within Warrant set forth in the first sentence of
the first paragraph above have been fully complied with and no U.S. Person has
any interest in the Warrant or the Warrant Shares.
Signature____________________________________________________
(Sign exactly as your name appears on the first page of this Warrant)
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ASSIGNMENT FORM
FOR VALUE RECEIVED,
- -------------------------------------------------------
hereby sells, assigns and transfers unto
Name
- ----------------------------------------------------------
(Please typewrite or print in block letters)
Address
- ----------------------------------------------------------
- ----------------------------------------------------------
the right to purchase shares of Common Stock of Surgical Safety Products, Inc.,
represented by this Warrant as to which such right is exercisable and does
hereby irrevocably constitute and appoint __________________________
________________ Attorney, to transfer the same on the books of Surgical Safety
Products, Inc., with full power of substitution in the premises.
Date: __________________________
Signature: ____________________________________
(sign exactly as your name appears on the first page of this Warrant)
Note: The Warrant and the Common Stock issuable upon exercise of the Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only in accordance therewith and as provided in the legends
set forth in the Warrant.
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AGENTS' WARRANT
Warrant No. _____
Void after 5:00 p.m. Toronto, Ontario time, on November 30, 2002
Warrant to Purchase Shares of Common Stock
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES
ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER
THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO
REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE SELLER WILL BE PROVIDED WITH OPINION OF COUNSEL
OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
-------------------------------------------------------------
WARRANT TO PURCHASE 1,142,857 SHARES OF COMMON STOCK
OF
SURGICAL SAFETY PRODUCTS, INC..
----------------------------------------------------------------
This it to certify that, FOR VALUE RECEIVED, Thomson Kernaghan & Co.
Limited or assigns ("Holder") is entitled to purchase, subject to the provisions
of this Warrant, from SURGICAL SAFETY PRODUCTS, INC., a New York corporation
(the "Company"), the fully paid, validly issued and non-assessable shares of
Common Stock, $0.001 par value, of the Company ("Common Stock") at any time or
from time to time during the period from the date hereof, through and including
November 30, 2002, but not later than 5:00 p.m. Toronto, Ontario time, on
November 30, 2002 (the "Exercise Period") at the price of US$1.09375 per share
(the "Exercise Price"). The total number of shares of Common Stock to be issued
upon exercise of this Warrant shall be 1,142,857 shares. The price to be paid
for each share of Common Stock may be adjusted from time to time as hereinafter
set forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Shares" and the respective exercise price of a share of Common Stock in effect
at any time and as adjusted from time to time is hereinafter sometimes referred
to as the "Exercise Price."
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This Warrant is being issued pursuant to the Loan Agreement, dated
as of December 20, 1999, between the Company and the Holder. This Warrant shall
be exercisable from time to time as follows: (i) this Warrant shall be
immediately exercisable for 20% of the number of Warrant Shares; and, (ii) the
Warrants shall be exercisable for an additional1% of the number of Warrant
Shares for each $25,000 of principal of Loans made under the Loan Agreement.
The Company has agreed to register the issuance and resale of the
Common Stock issuable upon exercise of this Warrant under the U.S. Securities
Act of 1933, as amended, pursuant to a Registration Rights Agreement between the
Company and the Holder of even date herewith.
A. EXERCISE OF WARRANT
This Warrant may be exercised in whole or in part at any time or
from time to time during the Exercise Period; provided, however, that (i) if the
last day of the Exercise Period is a day on which banking institutions in the
City of Toronto are authorized by law to close, then the Exercise Period shall
terminate on the next succeeding day that shall not be such a day, and during
such period the Holder shall have the right to exercise this Warrant into the
kind and amount of shares of stock and other securities and property (including
cash) receivable by a holder of the number of shares of Common Stock into which
this Warrant might have been exercisable immediately prior thereto. This Warrant
may be exercised by presentation and surrender hereof to Thomson Kernaghan & Co.
Limited as Escrow Holder at the Escrow Holder's principal office, 365 Bay
Street, Tenth Floor, Toronto, Ontario M5H 2V2, Canada, with the Exercise Form
annexed hereto duly executed and accompanied by payment of the Exercise Price
for the number of Warrant Shares specified in such form. As soon as practicable
after each such exercise of the Warrants, but not later than seven (7) days from
the date of such exercise, the Escrow Holder shall, to the extent that the
Company has deposited shares of Common Stock with the Escrow Holder for that
purpose, issue and deliver to the Holder a certificate or certificates for the
designee. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
Warrant Shares purchasable thereunder. Upon receipt by the Company of this
Warrant at its principal office, or by the stock transfer agent of the Company
at its office, in proper form for exercise, the Holder shall be deemed to be
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be physically delivered to the Holder.
THIS WARRANT MAY BE EXERCISED ONLY (i) BY A PERSON WHO IS NOT A U.S.
PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT), (ii) IF NOT
EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S. PERSON HAS ANY INTEREST
IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING SECURITIES TO BE ISSUED UPON
EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND THE WARRANT SHARES UNDERLYING
THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE UNITED STATES. IF THE ABOVE CANNOT
BE COMPLIED WITH, THEN THE WARRANT CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF
COUNSEL, THE FORM AND SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS
DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF THE WARRANTS BEING EXERCISED THAT
REGISTRATION IS NOT REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON
EXERCISE HAVE BEEN REGISTERED UNDER THE ACT.
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B. RESERVATION OF SHARES AND COVENANTS OF THE COMPANY
The Company shall at all times have allotted and reserved for
issuance, and deposited with the Escrow Holder for delivery upon exercise of
this Warrant such number of shares of its Common Stock as shall be required for
issuance and delivery upon exercise of the Warrant.
The Company covenants with the Holder that so long as any Warrants
remain outstanding and may be exercised:
1. it will cause the shares of Common Stock and the certificates
representing the Common Stock subscribed and paid for pursuant to the
exercise of the Warrants to be duly issued and deposited with the
Escrow Holder for delivery in accordance herewith and the terms
hereof;
2. all shares of Common Stock that shall be issued upon exercise of the
right to purchase provided for herein, upon payment of the prevailing
Exercise Price herein provided, shall be fully paid and
non-assessable;
3. it will use its best efforts to maintain its corporate existence; and
4. generally, it will well and truly perform and carry out all of the
acts or things to be done by it as provided herein.
C. FRACTIONAL SHARES
No fractional shares or script representing fractional shares shall
be issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of a share, determined as follows:
1. If the Common Stock is listed on a National Securities Exchange or
admitted to unlisted trading privileges on such exchange or listed for
trading on the NASDAQ system, the current market value shall be the
last reported sale price of the Common Stock on such exchange or
system on the last business day prior to the date of exercise of this
Warrant or, if no such sale is made (or reported) on such day, the
average closing bid and asked prices for such day on such exchange or
system; or
2. If the Common Stock is not so listed or admitted to unlisted trading
privileges, the current market value shall be the mean to the last
reported bid and ask prices reported by the Electronic Bulletin Board
or National Quotation Bureau, Inc. on the last business day prior to
the date of the exercise of this Warrant; or
3. If the Common Stock is not so listed or admitted to unlisted trading
privileges and bid and ask prices are not so reported, the current
market value shall be an amount, not less than book value thereof as
at the end of the most recent fiscal year of the Company ending prior
to the date of the exercise of the Warrant, determined in such
reasonable manner as may be prescribed by the Board of Directors of
the Company.
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D. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT
This Warrant is exchangeable, without expense, at the option of the
Holder, upon presentation and surrender hereof to the Company for other warrants
of different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Common Stock purchasable hereunder. Upon
surrender of this Warrant to the Company at its principal office, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
applicable transfer tax, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such Assignment Form and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other warrants that carry the same rights upon presentation hereof at the
principal office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged. Upon receipt of the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
This Warrant and the Common Stock issuable upon exercise of this
Warrant were issued under Regulation S under the Act and may be transferred only
in accordance therewith and as provided in the legends set forth in this
Warrant.
E. RIGHTS OF THE HOLDER
The Holder shall not, by virtue hereof, be entitled to any rights of
a shareholder in the Company, either at law or equity, and the rights of the
Holder are limited to those expressed in the Warrant and are not enforceable
against the Company except to the extent set forth herein.
F. ANTI-DILUTION PROVISIONS
The respective Exercise Price in effect at any time and the number
and kind of securities purchasable upon the exercise of the Warrant shall be
subject to adjustment from time to time upon the happening of certain events are
follows:
1. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or
reclassify its outstanding shares of Common Stock into a smaller
number of shares, the respective Exercise Price in effect at the time
of the record date for such dividend or distribution or of the
effective date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined by
multiplying the respective Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the numerator of
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which shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
2. Whenever the respective Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsection (1) above, the number of
Shares purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the respective number of Shares initially
issuable upon exercise of this Warrant by a fraction, the denominator
of which shall be the Exercise Price after giving effect to such
action and the numerator of which shall be the Exercise Price in
effect immediately prior to such action.
3. No adjustment in the respective Exercise Price shall be required
unless such adjustment would require an increase or decrease of at
least one cent ($0.01) in such price; provided, however, that any
adjustment that by reason of this Subsection (3) is not required to be
made shall be carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations under this
Section (F) shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this Section
(F) to the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the respective
Exercise Price, in addition to those required by this Section (F), as
it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any federal income
tax liability to the holders of Common Stock or securities convertible
into Common Stock (including the Warrants).
4. In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company,
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common
Stock contained in Subsections (1) to (3) inclusive above.
5. Irrespective of any adjustments in the respective Exercise Price or
the related number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in
the similar Warrants initially issuable pursuant to this Warrant.
G. OFFICER'S CERTIFICATE
Whenever the respective Exercise Price shall be adjusted as required
by the provisions of the foregoing Section (F), the Company shall forthwith file
in the custody of its Secretary or an Assistant Secretary at its principal
office, an officer's certificate showing the adjusted Exercise Price determined
as herein provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of related additional shares of
Common Stock, if any, and such other facts as shall be necessary to show the
reason for and the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for inspection by
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the holder or any holder of a Warrant executed and delivered pursuant to Section
(A) and the Company shall, forthwith after each such adjustment, mail a copy by
certified mail of such certificate to the Holder or any such holder.
H. NOTICES TO WARRANT HOLDERS
So long as this Warrant shall be outstanding, (i) if the Company
shall pay any dividend or make any distribution upon the Common Stock or (ii) if
the Company shall offer to the holders of Common Stock for subscription or
purchase by them any share of any class or any other rights, options or warrants
(other than this Warrant) or (iii) if a capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen (15) days prior
to the date specified, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which a record date
is to be determined for the purpose of such dividend, distribution or issue of
rights, options, or warrants or such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up. The failure to give such
notice shall not otherwise affect the action take by the Company.
I. RECLASSIFICATION, REORGANIZATION OR MERGER
In case of any reclassification, capital reorganization or other
change of outstanding shares Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and that does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale, lease or
conveyance to another corporation of the property of the Company as an entirety,
the Company shall, as a condition precedent to such transaction, cause effective
provisions to be made so that the Holder shall have the right thereafter, by
exercising this Warrant at any time prior to the expiration of the Warrant, to
purchase the kind and amount of shares of stock an other securities and property
receivable upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of such number of shares
of Common Stock that might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Section (I) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for a security of the Company
other than Common Stock, any such issue shall be treated as an issue of Common
Stock covered by the provisions of Subsection (1) of Section (F) hereof.
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J. WARRANTS TO RANK PARI PASSU
All Warrants shall rank pari passu, whatever may be the actual date
of issue of the same.
K. GOVERNING LAW; JURISDICTION AND VENUE
This Warrant shall be governed by and interpreted in accordance with
the laws of the State of Florida; provided, however, that if any provision of
this Agreement is unenforceable under the laws of the State of Florida, but is
enforceable under the laws of the Province of Ontario, Canada, then such
provision shall be governed by and interpreted in accordance with the laws of
the Province of Ontario.
Any controversy or claim arising out of or relating to this
Agreement (whether in contract or tort, or both, or at law or in equity) shall
be determined by binding arbitration at Toronto, Canada, in accordance with the
commercial arbitration rules of the International Chamber of Commerce. The
prevailing party in any arbitration proceeding shall be awarded reasonable
attorneys fees and costs of the proceeding. The arbitration award shall be
final, and may be entered in any court having jurisdiction. Nothing in this
paragraph shall preclude either party from applying to a court for temporary
equitable relief, when appropriate, pending and subject to such temporary orders
and permanent award as the arbitrator or arbitrators may make.
The parties agree that the courts of the Province of Ontario,
Canada, shall have exclusive jurisdiction and venue for the adjudication of any
civil action between them arising out of relating to this Agreement, and hereby
irrevocably consent to such jurisdiction and venue.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the undersigned, each being duly authorized, as of the date
below.
SURGICAL SAFETY PRODUCTS, INC..
By:_____________________________
Its:_____________________________
DATED: December __, 1999
ATTEST:
=======================
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FORM OF NOTICE OF EXERCISE
THIS WARRANT MAY BE EXERCISED ONLY (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE
UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE
EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF
THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE
UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing __________ shares of Common Stock at the
Exercise Price of US$1.09375 per share, for a total of US$ _________________.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name_________________________________________
(Please typewrite or print in block letters)
Address________________________________________
=========================================
The undersigned represents and warrants to U.S. Surgical Products, Inc. that the
conditions for exercise of the within Warrant set forth in the first sentence of
the first paragraph above have been fully complied with and no U.S. Person has
any interest in the Warrant or the Warrant Shares.
Signature____________________________________________________
(Sign exactly as your name appears on the first page of this Warrant)
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ASSIGNMENT FORM
FOR VALUE RECEIVED,
- -------------------------------------------------------
hereby sells, assigns and transfers unto
Name
- --------------------------------------------------------
(Please typewrite or print in block letters)
Address
- --------------------------------------------------------
- --------------------------------------------------------
the right to purchase shares of Common Stock of Surgical Safety Products, Inc.,
represented by this Warrant as to which such right is exercisable and does
hereby irrevocably constitute and appoint _________________________
________________ Attorney, to transfer the same on the books of Surgical Safety
Products, Inc., with full power of substitution in the premises.
Date: __________________________
Signature: _____________________________________________________________
(sign exactly as your name appears on the first page of this Warrant)
Note: The Warrant and the Common Stock issuable upon exercise of the Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only in accordance therewith and as provided in the legends
set forth in the Warrant.
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of December 20, 1999, by and between Surgical Safety Products,
Inc., a New York corporation (the "Company"), and Thomson Kernaghan & Co.
Limited (the "Agent"), for itself and certain lenders (the "Lenders") described
in the Loan Agreement defined below..
Preliminary Statements
In connection with the consummation of the transactions contemplated
by that certain Loan Agreement (including all exhibits thereto, the "Loan
Agreement") of even date herewith by and between the Company and the Agent, the
Company has agreed, upon the terms and subject to the conditions of the Loan
Agreement, at the option of the Agent or other holders of the Notes (as defined
in the Loan Agreement), to convert the Notes into shares of the Company's Common
Stock (the "Conversion Shares").
The Company has also agreed, upon the terms and subject to the
conditions of the Loan Agreement, to issue to the Agent a Warrant (the "Lender's
Warrant") to purchase up to 3,428,571 shares of the Company's Common Stock (the
"Lender's Warrant Shares") and to issue to the Agent a Warrant (the "Agent's
Warrant") to purchase up to1,142,857 shares of the Company's Common Stock (the
"Agent's Warrant Shares").
The Lender's Warrant Shares and the Agent's Warrant Shares are
collectively referred to as the Warrant Shares. The Conversion Shares and the
Warrant Shares are hereinafter collectively referred to as the "Registrable
Securities." The Registrable Securities are issuable pursuant and subject to the
provisions of the Loan Agreement.
To induce the Agent to execute and deliver the Loan Agreement and to
make Loans thereunder, the Company has agreed, pursuant to the terms and
conditions of this Agreement, to provide certain registration rights with
respect to the Registrable Securities.
Agreement
In consideration of the foregoing, the mutual covenants and
conditions set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to become legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
following respective meanings:
"Agent" shall mean Thomson Kernaghan & Co. Limited.
"Agent's Warrant" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
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"Agent's Warrant Shares" shall have the meaning ascribed to such term
in the Preliminary Statements to this Agreement.
"Agreement" shall mean this Registration Rights Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Conversion Shares" shall have the meaning ascribed to such term in
the Preliminary Statements to this Agreement.
"Company" shall mean Surgical Safety Products, Inc., a New York
company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as in effect from time to time.
"Filing Deadline" shall have the meaning ascribed to such term in
Section 2.1 of this Agreement.
"Holder" or "Holders" shall mean (a) the Agent, to the extent that the
Agent holds Registrable Securities, and (b) any Person holding Registrable
Securities as a transferee of the Agent (directly or indirectly, including
subsequent transfers).
"Lender's Warrant" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
"Lender's Warrant Shares" shall have the meaning ascribed to such term
in the Preliminary Statements to this Agreement.
"Loan Agreement" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing with the Commission one or
more registration statements covering Registrable Securities in compliance
with the Registrable Securities Act that is declared or ordered effective
by the Commission.
"Registrable Securities" shall mean the Conversion Shares, the
Lender's Warrant Shares and the Agent's Warrant Shares, and any shares of
capital stock issued or issuable with respect to the Conversion Shares, the
Lender's Warrant Shares or the Agent's Warrant Shares as a result of any
stock split, stock dividend, recapitalization, exchange or similar event;
provided, however, that such Registrable Securities shall cease to be
Registrable Securities when (a) a registration statement with respect to
such Registrable Securities shall have been declared effective under the
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Registrable Securities Act and such Registrable Securities shall have been
disposed of pursuant to the registration statement, (b) such Registrable
Securities are distributed to the public pursuant to Rule 144(k) (or any
successor provisions) promulgated under the Securities Act or (c) such
Registrable Securities shall have ceased to be outstanding.
"Registration Deadline" shall have the meaning ascribed to such term
in Section 2.1 of this Agreement.
"Registration Expenses" shall mean all expenses incurred in order to
comply with Article II hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements of one (1)
counsel for the Holders, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration, but
excluding the compensation of regular employees of the Company (which shall
be paid in any event by the Company) and excluding Selling Expenses.
"Restricted Registrable Securities" shall mean Registrable Securities
that are "restricted Registrable Securities" as defined in Rule 144 under
the Securities Act.
"Registrable Securities" shall have the meaning ascribed to such term
in the Preliminary Statements to this Agreement.
"Securities Act" shall mean the Registrable Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as in effect from time to time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions incurred in connection with the sale of Registrable Securities
pursuant to a registration effected hereunder.
"Warrant Shares" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the respective meanings ascribed to such terms in the
Loan Agreement.
ARTICLE II
REGISTRATION RIGHTS
Section 2.1 Mandatory Registration.
(a) The Company shall prepare and file with the Commission within sixty (60)
days from the date of this Agreement (the "Filing Deadline") a registration
statement or registration statements (as is necessary) on Form S-3 covering
the issuance and the resale of all of the Registrable Securities. Such
registration statement shall initially register for resale at least
21,750,000 Conversion Shares, and 100% of the Warrant Shares. The Company
shall use its best efforts to have the registration statement declared
effective by the Commission within one hundred and twenty (120) days after
the Filing Deadline (the "Registration Deadline"). The Company shall permit
the registration statement to become effective within five (5) business
days after receipt of a "no review" notice from the Commission. Such
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registration statement shall be kept current and effective for the greater
of (i) a period of at least three (3) years from the Closing Date and (ii)
a period of at least ninety (90) days after (x) all of the Notes shall have
been converted into Conversion Shares or paid in full, and (y) the Agent's
Warrant and the Agent's Warrant shall have been fully exercised or expired.
If a registration statement with respect to the Registrable Securities is
not effective on the Registration Deadline date, the Company agrees to and
shall pay the Agent liquidated damages of US$13,000 per month, pro-rated
for partial months, until the registration statement is effective.
Section 2.2 Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 2.1 shall be borne by the Company; and all Selling Expenses
in connection with such registration, qualification or compliance shall be borne
by the holders of the Registrable Securities so registered pro rata on the basis
of the number of shares so registered.
Section 2.3 Registration Procedures. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Article II, the Company will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense, the Company will:
(a) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Registrable Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement;
(b) furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirement of the
Registrable Securities Act, and such other documents as they may reasonably
request (including a conformed copy of the registration statement filed with the
Commission and any amendments thereto and an original executed underwriting
agreement entered into in connection with such registration) in order to
facilitate the disposition of Registrable Registrable Securities owned by them;
(c) use reasonable efforts to register and qualify the Registrable
Securities covered by such registration statement under such other Registrable
Securities or blue sky laws of one (1) jurisdiction (in addition to those
jurisdictions in which the Company has otherwise agreed to so register and
qualify such Registrable Securities) as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions;
(d) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement with the managing
underwriter(s) of such offering; each Holder participating in such underwriting
shall also enter into and perform its obligations under such underwriting
agreement;
(e) notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
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of any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing; and
(f) furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Article II, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with registration pursuant to this Article II, if such Registrable Securities
are being sold through underwriters, or on the date that the registration
statement with respect to such Registrable Securities becomes effective, if such
Registrable Securities are not being sold through underwriters, (i) a copy of
any opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, addressed to the underwriters of the Company, and
(ii) a copy of any letter, dated such date, from the independent accountants of
the Company, addressed to the underwriters of the Company.
Each Holder of Registrable Securities agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (f) of this Section 2.3, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of a supplemented or amended prospectus and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense), all copies, other
than permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities that was in effect prior to such amendment
or supplement. In the event the Company shall give any such notice, the period
set forth in clause (a) of this Section 2.3 shall be extended by the number of
days during the period from and including the date of the giving of such notice
pursuant to clause (e) of this Section 2.3 to and including the date when each
seller of Registrable Securities covered by such registration statement shall
have received the copies of a supplemented or amended prospectus.
Section 2.4 Indemnification.
(a) The Company will indemnify each Holder, each Holder's officers,
directors and partners, and each Person controlling such Holder (collectively,
"Holder's Parties"), participating in any registration, qualification, or
compliance effected pursuant to this Article II with respect to Registrable
Securities held by such Holder and each underwriter, if any, and each Person who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, to which they may become
subject under the Registrable Securities Act, the Exchange Act or other federal
or state law, arising out of or based on (i) any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other similar document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (ii) any violation by the Company of
any federal, state or common law rule or regulation applicable to the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Holder's Parties each such underwriter, and each Person who
controls any such underwriter, for any legal and any other expenses reasonably
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incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, as incurred, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission, made in reliance on and in conformity with written information
furnished to the Company by such Holder's Parties or underwriter or Person
controlling such underwriter specifically for use in the preparation thereof.
(b) Each Holder will, if Registrable Securities held by such Holder are included
in the Registrable Securities as to which such registration, qualification or
compliance is being effected, severally and not jointly, indemnify the Company,
each of its directors and officers, each underwriter, if any, of the Company
Registrable Securities covered by such a registration statement, and each Person
who controls the Company or such underwriter within the meaning of the
Registrable Securities Act, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on (i) any untrue
statement (or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other similar document,
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company, such directors, officers, Persons, underwriters
or control Persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, as incurred, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with the written
information furnished to the Company by such Holder specifically for use in the
preparation thereof, or (ii) any violation by any such Holder of any federal,
state or common law rule or regulation applicable to such Holder in connection
with the distribution of Registrable Securities pursuant to a registration
statement, and will reimburse the Company, such Holders, such directors,
officers, Persons, underwriters or control Persons for any legal any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action, as incurred; provided, however,
that the obligations of each such Holder hereunder shall be limited to an amount
equal to the aggregate proceeds received by such Holder in such offering.
(c) Each party entitled to indemnification under this Section 2.4 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has received written notice of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld). The Indemnified Party may participate in such defense
at such party's expense; provided, however, that the Indemnifying Party shall
bear the expense of such defense of one counsel representing the Indemnified
Party if representation of both parties by the same counsel would be
inappropriate due to actual or potential conflicts of interest. The failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.4, except to the
extent such failure to give notice shall materially and adversely prejudice the
Indemnifying Party in the defense of any such claim or any such litigation. No
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Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(d)
(i) If the indemnification provided for in this Section 2.4 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the Indemnifying Party hereunder shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
liability, claim, damage or expense, in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand and
the Indemnified Party on the other hand in connection with the statements
or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or
by the Indemnified Party and the parties' relevant intent, knowledge,
access to information and opportunities to correct or prevent such
statement or omission.
(ii) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 2.4 were determined by pro rata
allocation or by any other method of allocation that does not take account
of the equitable considerations referred to above. The amount paid or
payable by an Indemnified Party as a result of the claims, losses, damages
and liabilities referred to above shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or
defending any such action or claim.
(iii) No Holder that is a seller of Registrable Securities covered by
such registration statement or Person controlling such seller other than
the Company shall be obligated to make contribution hereunder that in the
aggregate exceeds the total public offering price of the Registrable
Securities sold by such Holder, less the aggregate amount of any damages
that such Holder and its controlling Persons have otherwise been required
to pay pursuant to this Section 2.4. The obligations of such Holders to
contribute are several in proportion to their respective ownership of the
Registrable Securities covered by such registration statement and not
joint.
(iv) The indemnity and contribution provided herein shall be in
addition to, and not in lieu of, any other liability that one party may
have to another.
Section 2.5 Information by Holder. Each Holder of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this Article
II.
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Section 2.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission that may at any time
permit the sale of the Restricted Registrable Securities to the public without
registration, the Company agrees to:
(a) use its best efforts to facilitate the sale of the Restricted
Registrable Securities to the public without registration under the Registrable
Securities Act, pursuant to Rule 144 under the Registrable Securities Act;
(b) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Registrable Securities Act, at all
times after the effective date of the first registration statement filed by the
Company for an offering of its Registrable Securities to the general public;
(c) file with the Commission in a timely manner all reports and other
documents required of the Company under the Registrable Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(d) so long as a Holder owns any Restricted Registrable Securities to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the public information requirements of said Rule 144,
and the reporting requirements of the Registrable Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as a
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing a Holder to sell any such Registrable Securities without
registration.
Section 2.7 Transfer of Registration Rights. The rights granted
under this Article II may be assigned or otherwise conveyed by any Holder of
Registrable Securities to any transferee, subject to compliance with all
applicable Registrable Securities laws and regulations.
Section 2.8 Certain Limitations in Connection with Future Grants
of Registration Rights.
From and after the date of this Agreement, without the prior written
consent of the Holders of a majority of the Registrable Securities, the Company
shall not enter into any agreement with any holder or prospective holder of any
Registrable Securities of the Company providing for the granting to such holder
of registration rights that would be superior to those granted to Holders
pursuant to Section 2.1.
Section 2.9 Restrictions on Market Manipulation. In the event any
shares of Common Stock are offered or sold by any Holder in a registration, each
such Holder will:
(a) advise the Company in writing of any offer, sale or other disposition
by it of any Common Stock in any manner other than as set forth in the
registration statement or any prospectus included therein on or for the 30-day
period prior to the filing of such registration statement until the distribution
under the registration statement has been completed;
(b) not effect any stabilization activity in connection with the Company's
Common Stock;
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(c) not bid or purchase, for any account in which it has a beneficial
interest, any Common Stock except as may be permitted pursuant to Rule 10b-6
under the Exchange Act (if applicable);
(d) not until it has sold all of such shares of Common Stock, attempt to
induce any Person to purchase any Common Stock except as may be permitted
pursuant to Rule 10b-6; and
(e) not until it has sold all such shares of Common Stock, pay any
compensation for soliciting another to purchase any Registrable Securities of
the Company, except as may be permitted pursuant to Rule 10b-6.
ARTICLE III
MISCELLANEOUS
Section 3.1 Governing Law; Jurisdiction and Venue. This Agreement
shall be governed by and interpreted in accordance with the laws of the State of
Florida; provided, however, that if any provision of this Agreement is
unenforceable under the laws of the State of Florida, but is enforceable under
the laws of the Province of Ontario, Canada, then such provision shall be
governed by and interpreted in accordance with the laws of the Province of
Ontario. Any controversy or claim arising out of or relating to this Agreement
(whether in contract or tort, or both, or at law or in equity) shall be
determined by binding arbitration at Toronto, Canada, in accordance with the
commercial arbitration rules of the International Chamber of Commerce. The
prevailing party in any arbitration proceeding shall be awarded reasonable
attorneys fees and costs of the proceeding. The arbitration award shall be
final, and may be entered in any court having jurisdiction. Nothing in this
paragraph shall preclude either party from applying to a court for temporary
equitable relief, when appropriate, pending and subject to such temporary orders
and permanent award as the arbitrator or arbitrators may make. The parties agree
that the courts of the Province of Ontario, Canada, shall have exclusive
jurisdiction and venue for the adjudication of any civil action between them
arising out of relating to this Agreement, and hereby irrevocably consent to
such jurisdiction and venue.
Section 3.2 Successors and Assignees. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assignees, heirs, executors and administrators (as the
case may be) of the parties hereto.
Section 3.3 Entire Agreement. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subject matter hereof.
Section 3.4 Notices, etc. All notices given under this Agreement and
under the other Loan Documents shall be in writing, addressed to the parties as
set forth below, and shall be effective on the earliest of (i) the date
received, or (ii) if given by facsimile transmittal on the date given if
transmitted before 5:00 p.m. the recipient's time, otherwise it is effective the
next day, or (iii) on the second business day after delivery to a major
international air delivery or air courier service (such as Federal Express or
Network Couriers):
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If to the Agent:
Thomson Kernaghan & Co. Ltd.
365 Bay Street
Toronto, Ontario M5H 2V2
Attention: Mark E. Valentine,
Chairman
Facsimile No. (416) 367-8055
With a copy (that does not constitute notice) to:
John M. Mann
Attorney at Law
1330 Post Oak Boulevard
Suite 2800
Houston, Texas 77056-3060
Facsimile No. (713) 622-7185
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If to the Borrower:
Surgical Safety Products, Inc.
2018 Oak Terrace
Sarasota, Florida 34231
Attention: Frank M. Clark, President
Facsimile No. (941) 925-0510
With a copy (that does not constitute notice) to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Attn: Donald F. Mintmire, Esq.
Facsimile No. (561) 659-5371
Section 3.5 Delays or Omissions. No delay or omission to exercise
any right, power or remedy accruing to any Holder of any Registrable Securities,
upon any breach or default of the Company under this Agreement, shall impair any
such right, power or remedy of such Holder nor shall it be construed to be a
waiver of any such breach or default or an acquiescence therein or of or in any
similar breach or default thereunder occurring nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any Holder of any breach or default under
this Agreement or any waiver on the part of any Holder of any provisions or
conditions of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any Holder shall be cumulative
and not alternative.
Section 3.6 Counterparts. This Agreement may be executed in any
number of counterparts, each of which may be executed by less than all of the
parties hereto, each of which shall be enforceable against the parties actually
executing such counterparts and all of which together shall constitute one
instrument.
Section 3.7 Severability. In the event any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 3.8 Amendments. The provisions of this Agreement may be
amended at any time and from time to time, and particular provisions of this
Agreement may be waived, with and only with, an agreement or consent in writing
signed by the Company and by the Holders of a majority of the Registrable
Securities voting as a single class.
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The parties have executed this Registration Rights Agreement as of
the date first written above.
The Agent:
THOMSON KERNAGHAN & CO. LTD.
By ________________________________
Name ______________________________
Title _____________________________
Date signed _______________________
The Company:
SURGICAL SAFETY PRODUCTS, INC.
By ________________________________
Name ______________________________
Title _____________________________
Date signed________________________
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SURGICAL SAFETY PRODUCTS, INC.,
AND
THOMSON KERNAGHAN & CO. LTD
ESCROW AGREEMENT
1. Parties
1.1. This Escrow Agreement (this AAgreement@) is made and entered
into effective December 20, 1999 (the AEffective Date@), by and between Surgical
Safety Products, Inc. (the ACompany@) and Thomson Kernaghan & Co. Limited (the
AEscrow Holder@).
2. Recitals.
2.1. This Agreement is made with reference to the following facts and
circumstances:
(a) The Company and Thomson Kernaghan & Co. Limited, as Agent, are entering
into a Loan Agreement dated December 20, 1999 (the ALoan Agreement@), pursuant
to which the Company will issue to the Agent up to an aggregate of US$5,000,000
of notes (the ANotes@). The Notes are convertible, at the option of the holder
or holders thereof, into shares of the Company=s common stock, $0.001 par value
(ACommon Stock@). Under the terms of the Loan Agreement, the Company has agreed
to issue and deliver to the Agent (i) a warrant to purchase up to an aggregate
of up to 3,428,571shares of the Company=s Common Stock.(the ALenders= Warrant@),
and (ii) a warrant to purchase up to an aggregate of up to 1,142,857 shares of
the Company=s Common Stock (the AAgent=s Warrant@). The Lenders= Warrant and the
Agent=s Warrant are referred to each as a AWarrant@ and collectively as the
AWarrants.@ The Common Stock into which the Notes are convertible are referred
to as the Conversion Shares. The Common Stock to which the Warrants are subject
are referred to as the AWarrant Shares.@ The Conversion Shares and the Warrant
Shares are issuable in such amounts and upon the terms set forth in the Loan
Agreement.
(b) The conversion price of the Conversion Shares is the higher of (i)
US$0.375, or (ii) the lower of (x) $0.8203125 or (y) 75% of the closing bid
price of the Borrower=s Common Stock quoted on the OTC Bulletin Board on the
Conversion Date; i.e., in no event shall the Conversion Price be less that
US$0.375 per share of Common Stock.
(c) The exercise price for the Warrant Shares is US$1.09375 per share.
(d) The Notes mature, unless sooner paid or converted, on November 30, 2002
(e) The Warrants, unless sooner exercised or redeemed, expire on November
30, 2002.
(f) Under the terms of a Registration Rights Agreement between the Company
and the Agent, the Company has agreed to file a registration statement (the
ARegistration Statement@) under the United States Securities Act of 1933 as
Amended (the ASecurities Act@), for the purpose of registering the issuance and
resale of the Conversion Shares and the Warrant Shares.
(g) Under the terms of the Loan Agreement, the Company has agreed to
execute this Agreement with the Escrow Holder, to issue certificates for the
Conversion Shares (the AConversion Shares Certificates@) and the Warrant Shares
(the AWarrant Shares
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Certificates@), registered in the name of the Escrow Holder, and to deliver
those certificates to the Escrow Holder pursuant to the terms of this Agreement.
(h) In accordance with the terms of the Loan Agreement, the Company is
issuing a Note for US$650,000 upon the execution of this Agreement (the AInitial
Note@).
2.1. In consideration of the premises, and in order to establish the escrow
for the Conversion Shares and the Warrant Shares required by the Loan Agreement,
the Company is entering into this Agreement with the Escrow Holder.
3. Escrow
3.1. Contemporaneously with the execution of this Agreement, the Borrower
shall execute and deliver to the Escrow Holder a certificate for the number of
Conversion Shares underlying the Note evidencing the initial Loan and the number
of Warrant Shares for which the Warrants shall be exercisable upon funding the
initial Loan. Prior to each additional Loan, the Borrower shall execute and
deliver to the Escrow Holder a certificate for the number of additional
Conversion Shares underlying the Note evidencing that Loan and the number of
additional Warrant Shares for which the Warrants shall be exercisable upon
funding that Loan.
3.2. All certificates for Conversion Shares and Warrant Shares delivered to
the Escrow Holder shall be registered in the name of Thomson Kernaghan & Co.
Ltd.. Until such time as the registration statement covering the Conversion
Shares and the Warrant shares is effective, the certificates shall bear a legend
indicating that they have been issued in a transaction that is exempt from the
registration requirements of the Securities Act, and may not be transferred
except pursuant to registration under the Securities Act or an exemption from
such registration. Except for such legend, the Common Stock underlying the
Lenders= Warrant and the Agent=s Warrant shall be free and clear of any legends,
liens, claims, stop orders or other restrictions.
3.3. Not later than the third Business Day following the effective date of
the Registration Statement, the Borrower shall cause the Common Stock underlying
the Lenders= Warrant and the Agent=s Warrant to be registered in Agent=s street
name, in DTC form, free and clear of any legends, liens, claims, stop orders or
other restrictions.
3.4. All Conversion Shares and Warrant Shares deposited by the Company
after the effective date of the Registration Statement shall be registered in
the street name of Thomson Kernaghan & Co. Ltd., in DTC form, free and clear of
any legends, liens, claims, stop orders or other restrictions.
4. Release of Conversion Shares and Warrant Shares
4.1. Upon receipt of a Conversion Notice, the Escrow Holder shall promptly
(and in any event within three business days) release the number of Conversion
Shares specified in the Conversion Notice to the person specified therein. If
all of the unpaid principal of and interest on the Note is being converted; then
the Escrow Holder shall endorse the Note as paid in full, and transmit the Note,
so endorsed, and the Conversion Notice, to the Company. If the conversion is for
less than all of the unpaid principal of and interest on the Note, the Escrow
Holder shall endorse upon the Note the amount of principal thereof and interest
thereon that is being converted, and transmit a copy of the Note, so endorsed,
and the Conversion Notice, to the Company.
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4.2. Upon receipt of a Warrant, together with an executed Purchase Form and
the Exercise Price for the number of Warrant Shares specified therein, the
Escrow Holder shall promptly (and in any event within three business days (i)
release the number of Warrant Shares specified in the Purchase Form to the
person specified therein; (ii) transmit a copy of the Warrant and Purchase Form
to the Company; and (ii) disburse the Exercise Price for such Warrant Shares to
the Company, either by check or wire transfer as the Company shall specify by
written instructions to the Escrow Holder. Promptly upon the written request of
the Escrow Holder, the Company shall issue replacement Warrants and deliver them
to the Escrow Holder, upon any partial exercise of a Warrant ,or upon the
transfer of a Warrant or any interest therein.
5. Termination and Resignation
5.1. This Agreement, unless sooner terminated, shall terminate on the date
on which all of the Notes have been redeemed or converted, and all of the
Warrants have been exercised or expired.
5.2. The Escrow Holder may resign as such at any time, without liability
therefor, by giving the Company and the Agent not less than 10 days prior
written notice of its election to do so. In the event of the Escrow Holder=s
resignation, the Company shall promptly appoint a successor Escrow Holder
acceptable to the Agent.
6. Limitation on the Escrow Holder=s Liability; Indemnification.
6.1. The Escrow Holder shall not be liable to the Company, to any Note
holder, to any Warrant holder, or to any other person or entity for any action
taken or omitted by it, except for the Escrow Holder=s own gross negligence or
wilful misconduct. Without limiting the generality of the foregoing:
(a) The Escrow Holder may rely upon, and shall be protected in acting or
refraining from acting in reliance upon, any notice, certificate, instrument,
request, paper or other document believed by it to be genuine and made, sent,
signed or presented by the Company, any Note holder, any Warrant holder, or any
other person or entity.
(b) The Escrow Holder shall not be responsible or liable for the
genuineness, validity or sufficiency of any Note, Warrant, stock certificate,
notice or other instrument delivered to it, including without limitation the
genuineness of any signature thereon, or of the identity or authority of any
person executing or delivering the same.
6.2. The Escrow Holder shall not be obligated to take any action to defend
or enforce this Agreement, or to appear in, prosecute or defend any action or
legal proceeding, or to file any income or other tax return that, in the Escrow
Holder=s opinion, would or might involve any cost, expense, loss or liability,
unless, and as often as required by it, the Company shall furnish it with
security and indemnity satisfactory to it against all such cost, expense, loss
and liability.
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6.3. The Escrow Holder shall not be responsible for the validity or
enforceability of any provision of this Agreement, or for the execution thereof
by the Company, or for the truth or accuracy of any recitals or other statements
of fact contained in this Agreement.
6.4. The Escrow Holder is not, and shall not be deemed for any purpose to
be, a fiduciary under this Agreement or otherwise, for the Company, for any Note
holder, for any Warrant holder, or for any other person or entity.
6.5. Except for matters for which the Escrow Holder is liable to the
Company under paragraph 6.1 of this Agreement, the Company hereby agrees to
defend and indemnify the Escrow Holder and its shareholders, directors,
officers, employees and agents, and to hold each of them harmless from and
against any and all judgments, awards, orders, damages, claims, demands,
liability, penalties, costs, and expenses (including attorney fees and court or
arbitration costs) of any nature whatsoever, directly or indirectly arising out
of or relating to this Agreement, or any act or omission of the Escrow Holder
hereunder. This indemnity shall survive termination of this Agreement.
7. Miscellaneous Provisions.
7.1. No amendment, modification, termination, or waiver of any provision of
this Agreement, nor consent to any departure by the Company from any of its
provisions, shall in any event be effective unless the same shall be in writing
and signed by the Escrow Holder, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
7.2. All notices given under this Agreement shall be in writing, addressed
to the parties as set forth below, and shall be effective on the earliest of (i)
the date received, or (ii) if given by facsimile transmittal on the date given
if transmitted before 5:00 p.m. the recipient=s time, otherwise it is effective
the next day, or (iii) on the second business day after delivery to a major
international air delivery or air courier service (such as Federal Express or
Network Couriers):
If to the Escrow Holder: If to the Company:
Thomson Kernaghan & Co. Ltd. Surgical Safety Products, Inc.
365 Bay Street 2018 Oak Terrace
Toronto, Ontario M5H 2V2 Sarasota, Florida 34231
Attention: Mark E. Valentine, Chairman Attention: Frank M. Clark, President
Facsimile No. (416) 860-6140 Facsimile No. (941) 925-0510
With a copy (that does not With a copy (that does not constitute
constitute notice) to: notice) to:
John M. Mann Mintmire & Associates
Attorney at Law 265 Sunrise Avenue, Suite 204
1330 Post Oak Boulevard, Suite 2800 Palm Beach, FL 33480
Houston, Texas 77056-3060 Attn: Donald F. Mintmire, Esq.
Facsimile No. (713) 622-7185 Facsimile No. (561) 659-5371
7.3. No failure or delay on the part of the Escrow Holder in exercising any
right, power, or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right, power, or remedy preclude any
other or further exercise thereof or the exercise of any other right, power, or
remedy hereunder. The rights and remedies provided herein are cumulative, and
are not exclusive of any other rights, powers, privileges, or remedies, now or
hereafter existing, at law or in equity or otherwise.
7.4. This Agreement shall be binding upon and inure to the benefit of the
Company and the Escrow Holder, and their respective successors and assigns,
except that the Company may not assign or transfer any of its r rights under
this Agreement without the prior written consent of the Escrow Holder.
7.5 The Company agrees to pay on demand all costs and expenses incurred by
the Escrow Holder in connection with the preparation, execution, delivery,
filing, and administration of this Agreement, and of any amendment,
modification, or supplement hereto, including, without limitation, the fees and
out-of-pocket expenses of counsel for the Escrow Holder incurred in connection
with advising the Escrow Holder as to its rights and responsibilities hereunder.
The Company also agrees to pay all such costs and expenses, including court
costs, incurred in connection with enforcement of this Agreement, or any
amendment, modification, or supplement thereto, whether by negotiation, legal
proceedings, or otherwise. In addition, the Company shall pay any and all stamp
and other taxes and fees payable or determined to be payable in connection with
the issuance, transfer and deliver of any Warrant or Warrant Shares, and agrees
to hold the Escrow Holder harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees. This provision shall survive termination of this Agreement.
7.6. This Agreement shall be governed by, and construed in accordance with,
the laws of the Province of Ontario, Canada; provided, however, if any provision
of this Agreement is unenforceable under Ontario law, but is enforceable under
the laws of the U.S. State of Florida, then Florida law shall govern the
construction and enforcement of that provision.
7.7. Any controversy or claim arising out of or relating to this Agreement
(whether in contract or tort, or both, or at law or in equity) shall be
determined by binding arbitration at Toronto, Canada, in accordance with the
commercial arbitration rules of the International Chamber of Commerce. The
prevailing party in any arbitration proceeding shall be awarded reasonable
attorneys fees and costs of the proceeding. The arbitration award shall be
final, and may be entered in any court having jurisdiction. Nothing in this
paragraph shall preclude either party from applying to a court for temporary
equitable relief, when appropriate, pending and subject to such temporary orders
and permanent award as the arbitrator or arbitrators may make. The parties
hereby consent to the exclusive jurisdiction of the courts of the Province of
Ontario for that purpose.
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IN WITNESS WHEREOF, the Company and the Escrow Holder have executed this
Agreement as of the Effective Date.
The Escrow Holder: The Company:
THOMSON KERNAGHAN & CO. LIMITED SURGICAL SAFETY PRODUCTS, INC..
By _________________________________ By ________________________________
Name _______________________________ Name ______________________________
Title ______________________________ Title _____________________________
Date signed ________________________ Date signed _______________________
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<PAGE>
AMENDMENT NO. 1 TO THE
(1) LOAN AGREEMENT WITH THE EFFECTIVE DATE DECEMBER 20, 1999;
(2) SECURITY AGREEMENT, PLEDGE AND ASSIGNMENT EFFECTIVE
DECEMBER 9, 1999;
(3) REGISTRATION RIGHTS AGREEMENT EXECUTED THE 22ND DAY OF
DECEMBER 1999; AND
(4) THE ESCROW AGREEMENT EFFECTIVE DECEMBER 20, 1999
EACH OF WHICH IS BY AND BETWEEN SURGICAL SAFETY PRODUCTS,
INC. (the "Company" and "Borrower") AND THOMSON KERNAGHAN & CO.
(the "Agent" and "Escrow Holder")
and
(5) THE NOTE DATED DECEMBER 30, 1999 IN THE AMOUNT OF $650,000
PAYABLE TO THOMSON KERNAGHAN & CO. LTD;
(6) THE LENDER'S WARRANT GRANTED TO THOMSON KERNAGHAN & CO.
LTD. FOR THE PURCHASE OF 3,428,571 SHARES; and
(7) THE AGENT'S WARRANT GRANTED TO THOMSON KERNAGHAN & CO.
LTD. FOR THE PURCHASE OF 1,142,857 SHARES
THIS AMENDMENT effective the 30th day of December 1999 is by and
between the Company/Borrower and Agent/Escrow Holder as noted in the heading.
1. The defined terms set forth herein shall have the same meaning as set forth
in the (1) Loan Agreement with the Effective Date December 20, 1999 (the "Loan
Agreement"); (2) Security Agreement, Pledge and Assignment Effective December 9,
1999 (the "Security Agreement"); (3) Registration Rights Agreement Executed the
22nd Day of December 1999 (the "RR Agreement"); and (4) the Escrow Agreement
Effective December 20, 1999 (the "Escrow Agreement") each of which is by and
between Surgical Safety Products, Inc. (the "Company" and "Borrower") and
Thomson Kernaghan & Co. (the "Agent" and "Escrow Holder") and (5) the Note dated
December 30, 1999 in the amount of $650,000 payable to Thomson Kernaghan & Co.
Ltd (the "Note"); (6) the Lender's Warrant granted to Thomson Kernaghan & Co for
the purchase of 3,428,571 Shares (the "Lender's Warrant"); and (7) the Agent's
Warrant granted to Thomson Kernaghan & Co for the purchase of 1,142,857 Shares
(the "Agent's Warrant").
2. This Amendment amends, modifies and revokes the following and replaces each
of them as set out herein.
o The Loan Agreement "Effective Date" and "Closing Date" are amended and
modified to December 30, 1999.
o The effective date of the Security Agreement is amended and modified
to December 30, 1999 and paragraph 1 of the Preliminary Statement is
amended and modified to reflect the effective date of the Loan
Agreement as December 30, 1999.
o The effective date of the RR Agreement is made December 30, 1999 and
Article II, Section 2.1(a) in the RR Agreement is amended and modified
and replaced with the following:
"Section 2.1 Mandatory Registration.
o The Company shall prepare and file with the Commission within sixty
(60) days from the date of this Agreement (the "Filing Deadline") a
<PAGE>
registration statement or registration statements (as is necessary) on
Form S-3 covering the issuance and the resale of all of the
Registrable Securities. Such registration statement shall initially
register for resale 20,038,097 shares. The Company shall use its best
efforts to have the registration statement declared effective by the
Commission within one hundred and twenty (120) days after the Filing
Deadline (the "Registration Deadline"). The Company shall permit the
registration statement to become effective within five (5) business
days after receipt of a "no review" notice from the Commission. Such
registration statement shall be kept current and effective for the
greater of (i) a period of at least three (3) years from the Closing
Date and (ii) a period of at least ninety (90) days after (x) all of
the Notes shall have been converted into Conversion Shares or paid in
full, and (y) the Lender's Warrant and the Agent's Warrant shall have
been fully exercised or expired. If a registration statement with
respect to the Registrable Securities is not effective on the
Registration Deadline date, the Company agrees to and shall pay the
Agent liquidated damages of US$13,000 per month, pro-rated for partial
months, until the registration statement is effective."
o The Escrow Agreement "Effective Date" is amended and modified to
December 30, 1999.
o Paragraph 2 of the Note is amended and modified to reflect the date of
the Loan Agreement as December 30, 1999 and Paragraph 4 of the Note is
amended and modified to reflect the date of the Escrow Agreement as
December 30, 1999.
o Page 2, first full paragraph of the Lender's Warrant and the Agent's
Warrant are each amended and modified to reflect the date of the Loan
Agreement as December 30, 1999.
IN WITNESS WHEREOF, the parties have set their hand and seal
effective on the date first above written.
SURGICAL SAFETY PRODUCTS, INC. THOMSON KERNAGHAN & CO., LTD.
BY:____________________________ BY:_____________________________
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EXHIBIT 10.39
Customer Agreement
Thank you for doing business with us. We strive to provide you with high quality
Products and Services. If, at any time, you have any questions or problems, or
are not completely satisfied, please let us know. Our goal is to do our best for
you.
This IBM Customer Agreement (called the "Agreement") covers business
transactions you may do with us to purchase Machines, license Programs, and
acquire Services.
This Agreement and its applicable Attachments and Transaction Documents are the
complete agreement regarding these transactions, and replace any prior oral or
written communications between us.
By signing below for our respective Enterprises, both of us agrees to the terms
of this Agreement. Once signed, 1) any reproduction of this Agreement, an
Attachment, or Transaction Document made by reliable means (for example,
photocopy or facsimile) is considered an original and 2) all Products and
Services you order under this Agreement are subject to it.
Agreed to: (Enterprise name) Agreed to:
International Business Machines Corporation
By_____________________________ By______________________________________
Authorized Signature Authorized Signature
Name (type or print): Name (type or print):
Date: Date:
Enterprise Number: Agreement Number:
Enterprise Address: IBM address:
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Customer Agreement
Table of Contents
<TABLE>
<CAPTION>
Section Title Page Section Title Page
- ------------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C>
Part 1 - General 3 Part 4 - Programs 13
1.1 Definitions 3 4.1 License 13
1.2 Agreement Structure 4 4.2 License Details 13
4 4.3 Program Components Not
1.3 Delivery Used on the Designated 13
Machines
5 4.4 Distributed System License
1.4 Charges and Payment Option 13
1.5 Changes to the Agreement 5 4.5 Program Testing 14
Terms
1.6 IBM Business Partners 6 4.7 Packaged Programs 14
1.7 Mutual Responsibilities 6 4.8 Program Services 14
1.8 Your Other Responsibilities 6 4.9 License Termination 14
1.9 Patents and Copyrights 7
1.10 Limitation of Liability 7
1.11 Agreement Termination 8
1.12 Geographic Scope 8 Part 5 - Services 15
1.13 Governing Law 8
5.1 IBM Services 15
Part 2 - Warranties 9 5.2 Personnel 15
5.3 Materials Ownership and 15
License
2.1 The IBM Warranties 9 5.4 Changes to Service Terms 15
2.2 Extent of Warranty 9 5.5 Renewal 16
2.3 Items Not Covered By 10 5.6 Termination and Withdrawal
Warranty 16
5.7 Service for Machines (during
and after warranty) 16
5.8 Maintenance Coverage 17
Part 3 - Machines 11
3.1 Title and Risk of Loss 11
3.2 Production Status 11
3.3 Installation 11
3.4 Licensed Internal Code 11
3.5 Machine Code 12
</TABLE>
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Customer Agreement
Part 1 - General
1.1 Definitions
Customer-set-up Machine is an IBM Machine that you install according
to our instructions. Date of Installation is the following:
1. for an IBM Machine we are responsible for installing, the business day
after the day we install it or, if you defer installation, make it
available to you for subsequent installation by us;
2. for a Customer-set-up Machine and a non-IBM Machine, the second
business day after the Machine's standard transit allowance period;
and
3. for a Program, the latest of -
a. the day after its testing period ends,
b. the second business day after the Program's standard transit
allowance period, or
c. the date, specified in a Transaction Document, on which we
authorize you to make a copy of the Program, or
d. the date you distribute a copy of a chargeable component in
support of your authorized use of the Program.
Designated Machine is either 1) the machine on which you will use a
Program for processing and which we require you to identify to us by
type/model and serial number, or 2) any machine on which you use the
Program if we do not require you to provide this identification to
us.
Enterprise is any legal entity (such as a corporation) and the subsidiaries
it owns by more than 50 percent. The term "Enterprise" applies only to the
portion of the enterprise located in the United States or Puerto Rico.
Machine is a machine, its features, conversions, upgrades, elements, or
accessories, or any combination of them. The term "Machine" includes an IBM
Machine and any non-IBM Machine (including other equipment) that we may
provide to you.
Materials are literary works or other works of authorship (such as
programs, program listings, programming tools, documentation, reports,
drawings and similar works) that we may deliver to you as part of a
Service. The term "Materials" does not include Programs or Licensed
Internal Code.
Product is a Machine or a Program.
Program is the following, including the original and all whole or partial
copies:
1. machine-readable instructions and data;
2. components;
3. audio-visual content (such as images, text, recordings, or pictures);
and
4. related licensed materials.
The term "Program" includes an IBM Program and any non-IBM Program that we
may provide to you. The term does not include Licensed Internal Code or
Materials.
Service is performance of a task, provision of advice and counsel,
assistance, or access to a resource (such as access to an information
database) we make available to you.
Specifications is a document that provides information specific to a
Product. For an IBM Machine, we call the document "Official Published
Specifications." For an IBM Program, we call it "Licensed Program
Specifications," or "License Information."
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Specified Operating Environment is the Machines and Programs with which a
Program is designed to operate, as described in the Program's
Specifications.
1.2 Agreement Structure
Attachments
Some Products and Services have terms in addition to those we specify in
this Agreement. We provide the additional terms in documents called
"Attachments," which are also part of this Agreement. Attachments will be
signed by both of us if requested by either of us.
Transaction Documents
For each business transaction, we will provide you with the appropriate
"Transaction Documents" that confirm the specific details of the
transaction. Transaction Documents will be signed by both of us if
requested by either of us. The following are examples of Transaction
Documents with examples of the information they may contain:
1. addenda (contract-period duration, start date, and total quantity);
2. exhibits (eligible Products by category);
3. invoices (item, quantity, and amount due);
4. statements of work (scope of Services, responsibilities, deliverables,
completion criteria, estimated schedule or contract period, and
charges); and
5. supplements (Machine quantity and type ordered, price, estimated
shipment date, and warranty period).
Conflicting Terms
If there is a conflict among the terms in the various documents, those of
an Attachment prevail over those of this Agreement. The terms of a
Transaction Document prevail over those of both of these documents.
Our Acceptance of Your Order
A Product or Service becomes subject to this Agreement when we accept your
order by doing any of the following:
1. sending you a Transaction Document;
2. shipping the Machine or making the Program available to you; or
3. providing the Service.
Your Acceptance of Additional Terms
You accept the additional terms in an Attachment or Transaction Document by
doing any of the following:
1. signing the Attachment or Transaction Document;
2. using the Product or Service, or allowing others to do so; or
3. making any payment for the Product or Service.
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1.3 Delivery
We will try to meet your delivery requirements for Products and
Services you order, and will inform you of their status.
Transportation charges, if applicable, will be specified in a
Transaction Document.
1.4 Charges and Payment
The amount payable for a Product or Service will be based on one or
more of the following types of charges:
1. one-time (for example, the price of a Machine);
2. recurring (for example, a periodic charge for Programs or measured use
of Services);
3. time and materials (for example, charges for hourly Services); or
4. fixed price (for example, a specific amount agreed to between
us for a custom Service).
Depending on the particular Product, Service, or circumstance, additional
charges may apply (such as special handling or travel related expenses). We
will inform you in advance whenever additional charges apply.
Recurring charges for a Product begin on its Date of Installation. Charges
for Services are billed as we specify which may be in advance, periodically
during the performance of the Service, or after the Service is completed.
Amounts are due upon receipt of invoice and payable as we specify in a
Transaction Document. You agree to pay accordingly, including any late
payment fee.
If any authority imposes a duty, tax, levy, or fee, excluding those based
on our net income, upon any transaction under this Agreement, then you
agree to pay that amount as specified in the invoice or supply exemption
documentation. You are responsible for personal property taxes for each
Product from the date we ship it to you.
One-time and recurring charges may be based on measurements of actual or
authorized use (for example, number of users or processor size for
Programs, meter readings for maintenance Services, or connect time for
network Services). You agree to provide actual usage data if we specify. If
you make changes to your environment that impact use charges (for example,
change processor size or configuration for Programs), you agree to promptly
notify us and pay any applicable charges. Recurring charges will be
adjusted accordingly. Unless we agree otherwise, we do not give credits or
refunds for charges already due or paid. In the event that we change the
basis of measurement, our terms for changing charges will apply.
We may increase recurring charges for Products and Services, as well as
labor rates and minimums for Services provided under this Agreement, by
giving you three months' written notice. An increase applies on the first
day of the invoice or charging period on or after the effective date we
specify in the notice.
We may increase one-time charges without notice. However, an increase to
one-time charges does not apply to you if 1) we receive your order before
the announcement date of the increase and 2) one of the following occurs
within three months after our receipt of your order:
1. we ship you the Machine or make the Program available to you;
2. you make an authorized copy of a Program or distribute a chargeable
component of a Program to another Machine; or
3. a Program's increased use charge becomes due. You receive the benefit
of a decrease in charges for amounts which become due on or after the
effective date of the decrease. Services for which you prepay must be
used within the applicable contract period. Unless we specify
otherwise, we do not give credits or refunds for unused prepaid
Services.
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1.5 Changes to the Agreement Terms
In order to maintain flexibility in our business relationship, we may
change the terms of this Agreement by giving you three months'
written notice. However, these changes are not retroactive. They
apply, as of the effective date we specify in the notice, only to new
orders and on-going transactions (such as licenses, except that
changes to license termination terms are effective only for new
orders). Part 5 of this Agreement contains additional provisions for
changes to the terms of individual Service transactions.
Otherwise, for a change to be valid, both of us must sign it.
Additional or different terms in any written communication from you
(such as an order) are void.
1.6 IBM Business Partners
We have signed agreements with certain organizations (called "IBM
Business Partners") to promote, market, and support certain Products
and Services. When you order our Products or Services (marketed to
you by IBM Business Partners) under this Agreement, we confirm that
we are responsible for providing the Products or Services to you
under the warranties and other terms of this Agreement. We are not
responsible for 1) the actions of IBM Business Partners, 2) any
additional obligations they have to you, or 3) any products or
services that they supply to you under their agreements.
1.7 Mutual Responsibilities
Both of us agree that under this Agreement:
1. neither of us grants the other the right to use its trademarks, trade
names, or other designations in any promotion or publication without
prior written consent;
2. all information exchanged is nonconfidential. If either of us requires
the exchange of confidential information, it will be made under a
signed confidentiality agreement;
3. each is free to enter into similar agreements with others;
4. each grants the other only the licenses and rights specified. No other
licenses or rights (including licenses or rights under patents) are
granted;
5. each may communicate with the other by electronic means and such
communication is acceptable as a signed writing. An identification
code (called a "user ID") contained in an electronic document is
legally sufficient to verify the sender's identity and the document's
authenticity;
6. each will allow the other reasonable opportunity to comply before it
claims that the other has not met its obligations;
7. neither of us will bring a legal action more than two years after the
cause of action arose; and
8. neither of us is responsible for failure to fulfill any obligations
due to causes beyond its control.
1.8 Your Other Responsibilities
You agree:
1. not to assign, or otherwise transfer, this Agreement or your rights
under this Agreement, delegate your obligations, or resell any
Service, without our prior written consent. Any attempt to do so is
void;
2. to acquire Machines with the intent to use them within your Enterprise
and not for reselling, leasing, or transferring to a third party,
unless either of the following applies:
a. you are arranging lease-back financing for the Machines, or
b. you purchase them without any discount or allowance, and do not
remarket them in competition with our authorized remarketers;
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3. to allow us to install mandatory engineering changes (such as those
required for safety) on a Machine. Any parts we remove become our
property. You represent that you have the permission from the owner
and any lien holders to transfer ownership and possession of removed
parts to us;
4. that you are responsible for the results obtained from the use of the
Products and Services;
5. to provide us with sufficient, free, and safe access to your
facilities for us to fulfill our obligations; and
6. to comply with all applicable export and import laws and regulations.
1.9 Patents and Copyrights
For purposes of this Section, the term "Product" includes Materials
(alone or in combination with Products we provide to you as a system)
and Licensed Internal Code.
If a third party claims that a Product we provide to you infringes that
party's patent or copyright, we will defend you against that claim at our
expense and pay all costs, damages, and attorney's fees that a court
finally awards, provided that you:
1. promptly notify us in writing of the claim; and
2. allow us to control, and cooperate with us in, the defense and any
related settlement negotiations.
If such a claim is made or appears likely to be made, you agree to permit
us to enable you to continue to use the Product, or to modify it, or
replace it with one that is at least functionally equivalent. If we
determine that none of these alternatives is reasonably available, you
agree to return the Product to us on our written request. We will then give
you a credit equal to:
1. for a Machine, your net book value provided you have followed
generally-accepted accounting
principles;
2. for a Program, the amount paid by you or 12 months' charges (whichever
is less); and
3. for Materials, the amount you paid us for the Materials. This is our
entire obligation to you regarding any claim of infringement.
Claims for Which We are Not Responsible
We have no obligation regarding any claim based on any of the following:
1. anything you provide which is incorporated into a Product;
2. your modification of a Product, or a Program's use in other than its
Specified Operating Environment;
3. the combination, operation, or use of a Product with other Products
not provided by us as a system, or the combination, operation, or use
of a Product with any product, data, or apparatus that we did not
provide; or
4. infringement by a non-IBM Product alone, as opposed to its combination
with Products we provide to you as a system.
1.10 Limitation of Liability
Circumstances may arise where, because of a default on our part or
other liability, you are entitled to recover damages from us. In each
such instance, regardless of the basis on which you are entitled to
claim damages from us (including fundamental breach, negligence,
misrepresentation, or other contract or tort claim), we are liable
for no more than:
1. payments referred to in our patents and copyrights terms described
above;
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2. damages for bodily injury (including death) and damage to real
property and tangible personal property; and
3. the amount of any other actual direct damages, up to the greater of
$100,000 or the charges (if recurring, 12 months' charges apply) for
the Product or Service that is the subject of the claim. For purposes
of this item, the term "Product" includes Materials and Licensed
Internal Code. This limit also applies to any of our subcontractors
and Program developers. It is the maximum for which we and our
subcontractors and Program developers are collectively responsible.
Items for Which We are Not Liable
Under no circumstances are we, our subcontractors, or Program
developers liable for any of the following:
1. third-party claims against you for damages (other than those under the
first two items listed above);
2. loss of, or damage to, your records or data; or
3. special, incidental, or indirect damages or for any economic
consequential damages (including lost profits or savings), even if we
are informed of their possibility.
1.11 Agreement Termination
You may terminate this Agreement on written notice to us following
the expiration or termination of your obligations.
Either of us may terminate this Agreement if the other does not
comply with any of its terms, provided the one who is not complying
is given written notice and reasonable time to comply. Any terms of
this Agreement which by their nature extend beyond the Agreement
termination remain in effect until fulfilled, and apply to both of
our respective successors and assignees.
1.12 Geographic Scope
All your rights, all our obligations, and all licenses (except for
Licensed Internal Code and as specifically granted) are valid only in
the United States and Puerto Rico.
1.13 Governing Law
The laws of the State of New York govern this Agreement.
Nothing in this Agreement affects any statutory rights of consumers
that cannot be waived or limited by contract.
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Customer Agreement
Part 2 - Warranties
2.1 The IBM Warranties
Warranty for IBM Machines For each IBM Machine, we warrant that it:
1. is free from defects in materials and workmanship; and
2. conforms to its Specifications.
The warranty period for a Machine is a specified, fixed period
commencing on its Date of Installation. During the warranty period,
we provide repair and exchange Service for the Machine, without
charge, under the type of Service we designate for the Machine.
If a Machine does not function as warranted during the warranty
period and we are unable to either 1) make it do so, or 2) replace it
with one that is at least functionally equivalent, you may return it
to us and we will refund your money.
Additional terms regarding Service for Machines during and after the
warranty period are contained in Part 5.
Warranty for IBM Programs
For each warranted IBM Program, we warrant that when it is used in
the Specified Operating Environment, it will conform to its
Specifications. The warranty period for a Program expires when its
Program Services are no longer available. During the warranty period,
we provide defect-related Program Services without charge. Program
Services are available for a warranted Program for at least one year
following its general availability.
If a Program does not function as warranted during the first year
after you obtain your license and we are unable to make it do so, you
may return the Program to us and we will refund your money. To be
eligible, you must have obtained your license while Program Services
(regardless of the remaining duration) were available for it.
Additional terms regarding Program Services are contained in Part 4.
Warranty for IBM Services
For each IBM Service, we warrant that we perform it:
1. using reasonable care and skill; and
2. according to its current description ( including any
completion criteria) contained in this Agreement, an Attachment,
or a Transaction Document.
Warranty for Systems
Where we provide Products to you as a system, we warrant that they
are compatible and will operate with one another. This warranty is in
addition to our other applicable warranties.
2.2 Extent of Warranty
If a Machine is subject to federal or state consumer warranty laws,
our statement of limited warranty included with the Machine applies
in place of these Machine warranties.
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The warranties will be voided by misuse, accident, modification,
unsuitable physical or operating environment, operation in other than
the Specified Operating Environment, improper maintenance by you,
removal or alteration of Product or parts identification labels, or
failure caused by a product for which we are not responsible.
THESE WARRANTIES ARE YOUR EXCLUSIVE WARRANTIES AND REPLACE ALL OTHER
WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE.
2.3 Items Not Covered by Warranty
We do not warrant uninterrupted or error-free operation of a Product
or Service or that we will correct all defects. We will identify IBM
Products that we do not warrant.
Unless we specify otherwise, we provide Materials, non-IBM Products,
and non-IBM Services WITHOUT WARRANTIES OF ANY KIND. However, non-IBM
manufacturers, suppliers, or publishers may provide their own
warranties to you.
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Customer Agreement
Part 3 - Machines
3.1 Title and Risk of Loss
When we accept your order, we agree to sell you the Machine described
in a Transaction Document. We transfer title to you or, if you
choose, your lessor when we ship the Machine. However, we reserve a
purchase money security interest in the Machine until we receive the
amounts due. For a feature, conversion, or upgrade involving the
removal of parts which become our property, we reserve the security
interest until we receive the amounts due and the removed parts. You
agree to sign an appropriate document to permit us to perfect our
purchase money security interest. We bear the risk of loss for the
Machine up to and including its Date of Installation. Thereafter, you
assume the risk.
3.2 Production Status
Each IBM Machine is manufactured from new parts, or new and used
parts. In some cases, a Machine may not be new and may have been
previously installed. Regardless of a Machine's production status,
our appropriate warranty terms apply.
3.3 Installation
For the Machine to function properly, it must be installed in a
suitable physical environment. You agree to provide an environment
meeting the specified requirements for the Machine. We have standard
installation procedures. We will successfully complete these
procedures before we consider an IBM Machine (other than a Machine
for which you defer installation or a Customer- set-up Machine)
installed.
You are responsible for installing a Customer-set-up Machine (we
provide instructions to enable you to do so) and a non-IBM Machine.
Machine Features, Conversions, and Upgrades
We sell features, conversions, and upgrades for installation on
Machines, and, in certain instances, only for installation on a
designated, serial-numbered Machine. Many of these transactions
involve the removal of parts and their return to us. As applicable,
you represent that you have the permission from the owner and any
lien holders to 1) install features, conversions, and upgrades and 2)
transfer ownership and possession of removed parts (which become our
property) to us. You further represent that all removed parts are
genuine and unaltered, and in good working order. A part that
replaces a removed part will assume the warranty or maintenance
Service status of the replaced part. You agree to allow us to install
the feature, conversion, or upgrade within 30 days of its delivery.
Otherwise, we may terminate the transaction and you must return the
feature, conversion, or upgrade to us at your expense.
3.4 Licensed Internal Code
Certain Machines we specify (called "Specific Machines") use Licensed
Internal Code (called "Code"). We own copyrights in Code or have the
right to license Code. We or a third party own all copies of Code,
including all copies made from them.
We will identify each Specific Machine in a Transaction Document. If
you are the rightful possessor of a Specific Machine, we grant you a
license to use the Code (or any replacement we provide) on, or in
conjunction with, only the Specific Machine, designated by serial
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number, for which the Code is provided. We license the Code to only
one rightful possessor at a time.
Under each license, we authorize you to do only the following:
1. execute the Code to enable the Specific Machine to function
according to its Specifications;
2. make a backup or archival copy of the Code (unless we make one
available for your use), provided you reproduce the copyright
notice and any other legend of ownership on the copy. You may use
the copy only to replace the original, when necessary; and
3. execute and display the Code as necessary to maintain the
Specific Machine. You agree to acquire any replacement for, or
additional copy of, Code directly from us in accordance with our
standard policies and practices. You also agree to use that Code
under these terms. You may transfer possession of the Code to
another party only with the transfer of the Specific Machine. If
you do so, you must 1) destroy all your copies of the Code that
were not provided by us, 2) either give the other party all your
IBM-provided copies of the Code or destroy them, and 3) notify
the other party of these terms. We license the other party when
it accepts these terms by initial use of the Code. These terms
apply to all Code you acquire from any source. Your license
terminates when you no longer rightfully possess the Specific
Machine.
Actions You May Not Take
You agree to use the Code only as authorized above. You may not do,
for example, any of the following:
1. otherwise copy, display, transfer, adapt, modify, or distribute
the Code (electronically or otherwise), except as we may
authorize in the Specific Machine's Specifications or in writing
to you;
2. reverse assemble, reverse compile, or otherwise translate the
Code unless expressly permitted by applicable law without the
possibility of contractual waiver;
3. sublicense or assign the license for the Code; or
4. lease the Code or any copy of it.
3.5 Machine Code
For certain Machines we may provide basic input/output system code,
utilities, diagnostics, device drivers, or microcode (collectively
called "Machine Code"). This Machine Code is licensed under the terms
of the agreement provided with it.
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Customer Agreement
Part 4 - Programs
4.1 License
When we accept your order, we grant you a non-exclusive,
nontransferable license to use the Program. Programs are owned by
International Business Machines Corporation or one of its
subsidiaries ("IBM") or an IBM supplier and are copyrighted and
licensed (not sold).
4.2 License Details
Under each license, we authorize you to:
1. use the Program's machine-readable portion on only the Designated
Machine. If the Designated Machine is inoperable, you may use
another Machine temporarily. If the Designated Machine cannot
assemble or compile the Program, you may assemble or compile the
Program on another Machine.
If you change a Designated Machine previously identified to us,
you agree to notify us of the change and its effective date;
2. use the Program to the extent of authorizations you have
acquired;
3. make and install copies of the Program, to support the level of
use authorized, provided you reproduce the copyright notices and
any other legends of ownership on each copy or partial copy; and
4. use any portion of the Program we 1) provide in source form, or
2) mark restricted (for example, "Restricted Materials of IBM")
only to -
a. resolve problems related to the use of the Program, and
b. modify the Program so that it will work together with other
products. You agree to comply with any additional terms we
may place on a Program. We identify these in the Program's
Specifications or in a Transaction Document.
Actions You May Not Take
You agree not to:
1. reverse assemble, reverse compile, or otherwise translate the
Program; or
2. sublicense, rent or lease the Program.
4.3 Program Components Not Used on the Designated Machine
Some Programs have components that are designed for use on machines
other than the Designated Machine on which the Program is used. You
may make copies of a component and its documentation in support of
your authorized use of the Program provided you notify us of the
component's actual date of distribution.
4.4 Distributed System License Option
For some Programs, you may make a copy under a Distributed System
License Option (called a "DSLO" copy). We charge less for a DSLO copy
than we do for the original license (called the "Basic" license). In
return for the lesser charge, you agree to do the following while
licensed under a DSLO:
1. have a Basic license for the Program;
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2. provide problem documentation and receive Program Services (if
any) only through the location of the Basic license; and
3. distribute to, and install on, the DSLO's Designated Machine, any
release, correction, or bypass that we provide for the Basic
license.
4.5 Program Testing
We provide a testing period for certain Programs to help you evaluate
if they meet your needs. If we offer a testing period, it will start
1) the second business day after the Program's standard transit
allowance period, or 2) on another date specified in a Transaction
Document. We will inform you of the duration of the Program's testing
period.
We do not provide testing periods for DSLO copies.
4.6 Packaged Programs
We provide certain Programs together with their own license
agreements. These Programs are licensed under the terms of the
agreements provided with them.
4.7 Program Protection
For each Program, you agree to:
1. ensure that anyone who uses it (accessed either locally or
remotely) does so only for your authorized use and complies with
our terms regarding Programs; and
2. maintain a record of all copies and provide it to us at our
request.
4.8 Program Services
We provide Program Services for warranted Programs and for selected
other Programs. If we can reproduce your reported problem in the
Specified Operating Environment, we will issue defect correction
information, a restriction, or a bypass. We provide Program Services
for only the unmodified portion of a current release of a Program.
We provide Program Services 1) on an on-going basis (with at least
six months' written notice before we terminate Program Services), 2)
until the date we specify, or 3) for a period we specify.
4.9 License Termination
You may terminate the license for a Program on one month's written
notice or at any time during the Program's testing period. Licenses
for certain replacement Programs may be acquired for an upgrade
charge. When you acquire these replacement Programs, you agree to
terminate the license of the replaced Programs when charges become
due, unless we specify otherwise.
We may terminate your license if you fail to comply with its terms.
If we do so, your authorization to use the Program is also
terminated.
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Customer Agreement
Part 5 - Services
5.1 IBM Services
Services may be either standard offerings or customized to your
specific requirements. Each service transaction may include one or
more Services that:
1. expire at task completion or an agreed upon date;
2. automatically renew as another transaction with a specified
contract period. Renewals will continue until either of us
terminates the Service; or
3. do not expire and are available for your use until either of us
terminates the Service.
5.2 Personnel
Each of us is responsible for the supervision, direction, and control
of our respective personnel. We reserve the right to determine the
assignment of our personnel. We may subcontract a Service, or any
part of it, to subcontractors selected by us.
5.3 Materials Ownership and License
We will specify Materials to be delivered to you. We will identify
them as being "Type I Materials," "Type II Materials," or otherwise
as we both agree. If not specified, Materials will be considered Type
II Materials.
Type I Materials are those, created during the Service performance
period, in which you will have all right, title, and interest
(including ownership of copyright). We will retain one copy of the
Materials. You grant us 1) an irrevocable, nonexclusive, worldwide,
paid-up license to use, execute, reproduce, display, perform,
distribute (internally and externally) copies of, and prepare
derivative works based on Type I Materials and 2) the right to
authorize others to do any of the former. Type II Materials are
those, created during the Service performance period or otherwise
(such as those that preexist the Service), in which we or third
parties have all right, title, and interest (including ownership of
copyright). We will deliver one copy of the specified Materials to
you. We grant you an irrevocable, nonexclusive, worldwide, paid-up
license to use, execute, reproduce, display, perform, and distribute,
within your Enterprise only, copies of Type II Materials. Each of us
agrees to reproduce the copyright notice and any other legend of
ownership on any copies made under the licenses granted in this
Section.
Any idea, concept, know-how, or technique which relates to the
subject matter of a Service and is developed or provided by either of
us, or jointly by both of us, in the performance of a Service may
(subject to applicable patents an copyrights) be freely used by
either of us.
5.4 Changes to Service Terms
We may change the terms of Services that are renewable or
non-expiring by giving you three months' written notice. However,
these changes are not retroactive. They apply immediately to renewal
transactions and as of the effective date we specify in the notice to
all existing transactions. If we make a change to the terms of a
renewable Service that 1) affects your current contract period and 2)
you consider unfavorable, on your request, we will defer it until the
end of that contract period.
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When both of us agree to change any Services statement of work other
than as described above, we will prepare a written description of the
agreed change (called a "Change Authorization"), which both of us
must sign. The terms of a Change Authorization prevail over those of
the statement of work and any previous Change Authorizations.
5.5 Renewal
Renewable Services renew automatically for a same length contract
period unless either of us provides written notification (at least
one month prior to the end of the current contract period) to the
other of their decision not to renew.
5.6 Termination and Withdrawal
Either of us may terminate a Service if the other does not meet its
obligations concerning the Service. You may terminate a non-expiring
Service, without adjustment charge, on one month's written notice to
us provided you have met all minimum requirements specified in the
applicable Attachments and Transaction Documents.
You may terminate a renewable Service or a non-expiring maintenance
Service, without adjustment charge, on notice to us provided you have
met all minimum requirements specified in the applicable Attachments
and Transaction Documents and any of the following circumstances
occur:
1. you permanently remove the eligible Product, for which the
Service is provided, from productive use within your Enterprise;
2. the eligible location, for which Service is provided, is no
longer controlled by you (for example, because of sale or closing
of the facility);
3. an increase in the Service charges, either alone or in
combination with prior increases over the previous twelve months,
is more than the maximum specified in the applicable Service
Transaction Document. If no maximum is specified, then this
circumstance does not apply; or
4. the Machine has been under maintenance Services for at least six
months and you give us one month's written notice prior to
terminating the maintenance Service.
For all other circumstances, you may terminate an expiring or
renewable Service on one month's written notice to us but such
termination will result in adjustment charges equal to the lesser of:
1. the charges remaining to complete the contract period; or
2. one of the following if specified in the Transaction Document --
a. the charges remaining to complete the contract period
multiplied by the adjustment factor specified, or
b. the amount specified.
You agree to pay us for all Services we provide and any Products and
Materials we deliver through Service termination and any charges we
incur in terminating subcontractors. We may withdraw a renewable or
non-expiring Service or support for an eligible Product on three
months' written notice to you. If we withdraw a Service for which you
have prepaid and we have not yet fully provided it to you, we will
give you a prorated refund. Any terms which by their nature extend
beyond termination or withdrawal remain in effect until fulfilled and
apply to respective successors and assignees.
5.7 Services for Machines (during and after warranty)
We provide certain types of repair and exchange Service either at
your location or at a service center to keep Machines in, or restore
them to conformance with their Specifications. We will inform you of
the available types of Service for a Machine. We may repair the
failing Machine or exchange it at our discretion.
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When the type of Service requires that you deliver the failing
Machine to us, you agree to ship it suitably packaged (prepaid unless
we specify otherwise) to a location we designate. After we have
repaired or exchanged the Machine, we will return it to you at our
expense unless we specify otherwise. We are responsible for loss of,
or damage to, your Machine while it is 1) in our possession or 2) in
transit in those cases where we are responsible for the
transportation charges. You agree to:
1. obtain authorization from the owner to have us service a Machine
that you do not own; and
2. where applicable, before we provide Service --
a. follow the problem determination, problem analysis, and
service request procedures that we provide,
b. secure all programs, data, and funds contained in a Machine,
and
c. inform us of changes in a Machine's location.
When Service involves the exchange of a Machine or part, the item we
replace becomes our property and the replacement becomes yours. You
represent that all removed items are genuine and unaltered. The
replacement may not be new, but it will be in good working order and
at least functionally equivalent to the item replaced. The
replacement assumes the warranty or maintenance Service status of the
replaced item. Before we exchange a Machine or part, you agree to
remove all features, parts, options, alterations, and attachments not
under our service. You also agree to ensure that the item is free of
any legal obligations or restrictions that prevent its exchange. Any
feature, conversion, or upgrade we service must be installed on a
Machine which is 1) for certain Machines, the designated,
serial-numbered Machine and 2) at an engineering-change level
compatible with the feature, conversion, or upgrade.
Repair and exchange Services do not cover:
1. accessories, supply items, and certain parts, such as batteries,
frames, and covers;
2. Machines damaged by misuse, accident, modification, unsuitable
physical or operating environment, improper maintenance by you;
3. Machines with removed or altered Machine or parts identification
labels;
4. failures caused by a product for which we are not responsible; or
5. service of Machine alterations.
We manage and install engineering changes that apply to IBM Machines
and may also perform preventative maintenance. We provide maintenance
Services for selected non-IBM Machines.
5.8 Maintenance Coverage
When you order Machine maintenance Services under this Agreement, we
will inform you of the date on which maintenance Services will begin.
We may inspect the Machine within one month following that date. If
the Machine is not in an acceptable condition for service, you may
have us restore it for a charge. Alternatively, you may withdraw your
request for maintenance Service. However, you will be charged for any
maintenance Services which we performed at your request.
After signing, please return a copy of this Agreement to the local "IBM
address" shown above.
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<TABLE>
<CAPTION>
STATEMENT OF WORK
Table of Contents
<S> <C> <C>
1.0 Executive Summary 1
1.1 Background 3
1.2 Approach 3
1.3 Staffing 4
2.0 Statement of Work 5
2.1 Project Scope 5
2.2 Key Assumptions 6
2.3 IBM Responsibilities 11
2.3.1 Perform Project Management 11
2.3.2 Orient Project Team 12
2.3.3 Project Office Services 12
2.3.4 Site Survey 13
2.3.5 Network Design Services 13
2.3.6 Data Cabling Services 14
2.3.7 TouchPort Implementation Services 16
2.3.8 TouchPort Support Services 16
2.3.9 TouchPort Warranty and Maintenance Services 17
2.3.10 TouchPort Web Site Hosting Services 18
2.4 SSP/OASiS Responsibilities 19
2.4.1 SSP/OASiS Project Manager 19
2.4.2 Other Responsibilities 20
2.4.3 Laws, Regulations, and Statutes 21
2.4.4 Space and Facilities 21
2.4.5 Security 21
2.5 Deliverable Materials 22
2.6 Completion Criteria 23
2.7 Year 2000 24
2.8 Termination 25
2.9 Estimated Schedule 27
2.10 Charges 28
2.10 Definition of Terms 30
Appendix A Deliverable Guidelines 30
A.1 Monthly Status Report 31
</TABLE>
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<TABLE>
<S> <C> <C>
A.2 Design and Implementation Reports 31
A.3 End User Support: Monthly Usage Reports 31
Appendix B Project Change Control Procedure 34
Appendix C Hardware/Software 34
Appendix D Signature Document 35
Appendix E Review and Approval Procedure 36
</TABLE>
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1.0 Executive Summary
There exists an agreement between Surgical Safety Products (SSP/OASiS) and
International Business Machines (IBM) for the Oasis TouchPort 2K Project
consisting of a Statement of Work (SOW) under the terms of the IBM Customer
Agreement (ICA) # AVWJ907. Full Acceptance of this Agreement shall be known as
the date of final SSP/OASiS Board of Directors approval. Board of Director's
Approval was granted on January 3rd, 2000. IBM has begun work per the Statement
of Work under the terms of the IBM Customer Agreement. The intent of the parties
is that IBM would be providing a complete implementation and support services
solution for 1,200 Oasis TouchPort terminals (kiosks) at an estimated 400
SSP/OASiS end user locations during the 12 month period that started November
29th, 1999. Based on a recent meeting between SSP and IBM and considering the 19
terms and conditions issues in Mr. Sam Norton's memo, a Project Change Request
(PCR or Amendment) is appropriate to the original SOW to more clearly define the
intent of the parties.
A copy of the SSP/OASiS executed IBM Customer Agreement (ICA) was faxed to Mr.
Sam Norton, council for SSP/OASiS, on December 16th, 1999.
A Project Change Request (PCR #1) is entered into this 3rd day of February, 2000
by and between International Business Machines Corporation ("IBM") and Surgical
Safety Products, Inc. ("SSP" or "SSP/OASiS") to modify the original IBM
Statement of Work (SOW).
All aspects of this agreement, including all services to be performed and fees
for same are subject to the mutual agreement between IBM and SSP which shall be
memorialized in writing prior to the undertaking of any tasks, incurring of any
fees, or expenditure of any monies. Nothing contained herein shall be construed
as creating an exclusive arrangement for IBM to provide the services and
equipment contemplated hereunder. Any tasks or services to be performed shall be
initiated by a written "SSP Work Authorization" to be signed by IBM and
SSP/OASiS prior to undertaking any such services or tasks. The "Work
Authorization" form (see attached) will disclose any travel and living expenses
that may be billed to SSP/OASiS.
Agreement/Proposal. This Agreement/Proposal is made and entered into by and
between INTERNATIONAL BUSINESS MACHINES CORPORATION (hereinafter sometimes
referred to as "IBM" or "IBM Global Services") and SURGICAL SAFETY PRODUCTS,
INC. (hereinafter sometimes referred to as "SSP" or "SSP/OASIS"). Appendix D
sets forth the signatures of the parties to this Agreement.
SSP/OASiS and International Business Machines Corporation are finalizing
and will continue to refine a business relationship to deploy the OASiS
TouchPort systems to SSP/OASiS end-customers throughout the United States.
The intent of this Statement of Work is to define the initial stages of
this relationship and to leverage the capabilities of each of our
respective organizations to provide a high quality solution that is
seamless to a wide variety of health care organizations.
IBM Global Services proposes to provide a methodology based upon Project
Management Institute (PMI) principles to SSP/OASiS for the management of
the projects within the United States. This Project Management function
will provide a base Project Office to be located at the Sarasota SSP/OASiS
facility. The function proposed by IBM is to staff a core group of project
management and network professionals that understand the SSP/OASiS product
set and will engage IBM resources for each end client installation. It is
understood
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that each of these installations will be customized and the IBM team will
work with SSP/OASiS to determine the necessary requirements for each. The
IBM solution is to develop a Project Office based on SSP/OASiS requirements
that will ensure each project installation has the following:
Project Planning Premises Wiring
Site Surveys TouchPort Implementations
Product Acquisition Help Desk Support
Network Design Consulting Services
Web Site Hosting Services
The IBM Project Office will identify and engage the necessary engineering
resources for each location to develop the plan for primary and secondary
TouchPort implementations. These tasks will be jointly coordinated with
SSP/OASiS as each opportunity is identified and developed. IBM will provide
the resources to provide a seamless solution to each health care facility.
IBM will coordinate all activities related to deployment and installation.
This approach is predicated on the execution of at least eight pilot
TouchPort installations. The Implementation and Support Project Plan will
be refined and modified as required to drive efficiency and reduce cost.
IBM has the experience, technical resources, processes, and tools to mange
the day to day implementation and operational tasks and issues involved in
a technology rollout of this nature. This approach will free up valuable
SSP/OASiS resources to focus on the tasks of TouchPort placements,
establishing additional content agreements, and market development.
The ultimate goal of the IBM Project Office is to provide a Central Point
of Contact for SSP/OASiS for deployment and support requirements for each
location and to deploy the required resources as defined by the Project,
all under a pre-defined methodology for each installation. IBM proposes
this functional staffing and organization for a 3 to 6 month period and
adjust resources and costs based upon past project experiences and business
forecasts. The Project Change Request process will be utilized to make all
necessary adjustments as mutually agreed upon by both of us.
1.1 Background
SSP/OASiS requires assistance in the design, deployment and support of their
OASiS TouchPort 2K system. IBM Global Services has the geographic
scope and personnel to provide this critical assistance to
SSP/OASiS. IBM Global Services can provide the IT infrastructure
necessary for SSP/OASiS to go to market with their products and
solutions for the health industry.
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1.2 Approach
Effective Project Management is crucial to the success of Surgical Safety's
OASiS TouchPort 2K Infrastructure. For many years IBM has been successful
in complex system integration projects because we apply three essential
skills:
Ability to effectively and professionally manage people and the overall
project
Ability to match technical skills to specific work tasks
Ability to plan and integrate hardware and software to provide sound
solutions
To help SSP/OASiS successfully implement the OASiS TouchPort, IBM
will utilize:
Proven project management techniques
Proven change control procedures
A disciplined approach and detailed project plan
IBM professionals trained in IBM's methodologies for project management
Subject Matter Experts to provide the required technical know-how to
accomplish project tasks.
The successful completion of any project depends on the careful execution
of a well structured and detailed plan. The project installation plan must
be developed based on agreed to objectives and well defined goals. The
project plan will be developed jointly by IBM and SSP/OASiS, including
schedules, processes, and dependencies. This plan will be used to control
the project, monitor all activities, track progress, and manage change
control. The success of the project will be measured against the defined
objectives and the successful implementation of the project plan. By having
a detailed plan, problems or changes can be promptly identified and
resolved.
Serving as a focal point, IBM will assign a lead Project Executive to be
responsible for the overall success of the project. In addition to the PE,
IBM will assign a Project Manager who will manage communications with
SSP/OASiS's Project Manger, and coordinate the activities of IBM,
subcontractors, and suppliers. The IBM Project Manager will work closely
with the Surgical Safety's Project Manager to develop a project plan that
satisfies the goals and objectives of SSP/OASiS. The IBM Project manager
will provide reports and updates on the IBM and subcontractor activities
related to the project.
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Recognizing that the scope of the project may require changes, IBM employs
a formal change control procedure. This proven approach will allow
SSP/OASiS to make cost and benefit tradeoffs based on an analysis of
requested changes. Project Change Requests (PCR) will be the vehicle for
communicating change. PCRs describe the requested change, the rational for
change, and the effect the change will have on the project. Appendix B
describes the PCR process to be used in conjunction with this Statement of
Work.
1.3 Staffing
IBM will provide a Project Office team to assist SSP/OASiS with the
management of the OASiS TouchPort 2K. The Project Office team members will
fluctuate based on the project schedule. It is anticipated that the IBM
Project Office team will nominally consist of six (6) members in the
following roles:
Project Executive (1)
Project Manager (1)
Project Support Coordinator (1)
Project Support Administrator (1)
Network Subject Matter Experts (1-2)
These roles will be staffed based on the requirements of the project
schedule. Additional project office personnel may be added to address
additional project requirements. 2.0 Statement of Work This Statement of
Work defines the scope of work to be accomplished by IBM under the terms
and conditions of the IBM Customer Agreement (Agreement). The tasks to be
performed by IBM are defined and an estimated schedule is provided. In
addition, the responsibilities of SSP/OASiS are listed.
Changes to this Statement of Work will be processed in accordance with the
procedure described in "Appendix B. "Project Change Control Procedure". The
investigation and the implementation of changes may result in modifications
to the Estimated Schedule, Charges, and/or other terms of the Agreement.
The following are incorporated in and made part of this Statement of Work:
Appendix A "Deliverable Guidelines"
Appendix B "Project Change Control Procedure"
Appendix C "Hardware/Software"
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Appendix D "Signature Document"
Appendix E. "Review and Approval Procedure"
2.1 Project Scope
SSP/OASiS has requested IBM to provide Project Management services to
assist with their OASiS TouchPort 2K Implementation Project. IBM will
provide Roll-Out Services for 1,200 SSP/OASiS Touchports, beginning
December 1, 1999 and ending on November 30, 2000 at an estimated 400
SSP/OASiS end customer locations. The Services specified below are to be
provided by IBM and authorized by SSP/OASiS.
IBM will assemble a team to establish a Project Office with adequate
resources to provide the following services:
Product Procurement Services
Site Surveys
Network Design Services
Site Preparation Services
TouchPort Implementation Services
TouchPort Support Services
2.2 Key Assumptions
This Statement of Work, and IBM's estimates to perform the Statement of
Work, are based on the following key assumptions. Deviations that arise
during the proposed project will be managed through the procedure described
in "Appendix B. Project Change Control Procedure".
IBM will provide and staff an IBM Project Office for SSP/OASiS, which may be
remote to SSP/OASiS and the TouchPort "installed at" locations. The IBM Project
Office will manage pre- and post-implementation issues including after
installation end user support (help desk) problem escalations concerning the
availability (uptime) of each TouchPort.
IBM will provide Level 1 & 2 End User Support Services (help desk), 24hr x7 day
coverage, via IBM provided toll free call-in number. End User Support staffing
will be matched to call volumes. All Level 3 problems will be escalated to the
SSP/OASiS support staff in Sarasota, FL.
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IBM will provide "hot swap" depot hardware replacement and repair services after
installation, at any TouchPort "installed at" location covered by this agreement
and serviced next day by UPS, Federal Express or Airborne with coverage to be
next business day. IBM will provide an on-site technician to perform the swap
out. "Installed at" locations not serviced by these express delivery service
providers will be serviced by IBM on a best efforts basis. IBM's target
objective, for covered devices, for repair or replacement of a failed TouchPort,
TouchPort peripheral, data network cabling, or network related hardware is 72
hrs or less.
IBM will bill SSP/OASiS a monthly service charge (MSC) for the above described
support services according to Scenarios "A", "B", and "C" schedule of charges
included and made part of this Statement of Work.
Funding and Invoicing:
1. Prior to IBM issuing purchase orders to non-IBM suppliers for any items
required to deliver the scope of the work SSP/OASiS and IBM will:
a. mutually agree on a comprehensive IBM invoicing plan to SSP/OASiS in
line with the business objectives of SSP/OASiS,
b. mutually agree on a SSP/OASiS plan for the payment of all IBM invoices
generated as a result of IBM's execution of the deliverable elements
described in this Statement of Work and,
c. additionally SSP/OASiS must identify any sources of working capital
that may be obtained to satisfy IBM
d. SSP/Oasis must first issue to IBM an "SSP Work Authorization", in writing,
prior to any costs being incurred.
e. The "Work Authorization" form (see attached) will disclose any travel and
living expenses that may be billed to SSP/OASiS.
1. We have assumed for planning purposes a straight-line time frame
implementation; 1,200 Kiosk installed during 12 months in 400 locations.
(100% Desktop units, 0% floor standing units).
2. The success of this project will require the active participation of both
SSP/OASiS and IBM personnel. The appropriate SSP/OASiS personnel will be
available for consultation (i.e. interviews, workshops, review sessions,
etc.) throughout the duration of this project. IBM will attempt to schedule
this time so as to minimize the impact on the day-to-day responsibilities
of Surgical Safety's staff.
3. Written and/or electronic documentation exists and will be provided as it
pertains to the objectives and scope of this project. SSP/OASiS will
provide access to any available information required by the IBM project
team to complete their tasks.
4. SSP/OASiS will obtain and provide information, data, decisions, and
approvals, within three working days of IBM's request unless SSP/OASiS and
IBM agree to an extended response time.
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5. Site survey activities will take place an estimated three (3) to six (6)
weeks prior to the installation activities.
Hardware and Software Environment:
1. IBM will provide the hardware and software described in Appendix C.
2. IBM will not be responsible for detection or removal of asbestos, hazardous
waste or other pollutants. It is specifically understood by SSP/OASiS,
their end- customers, and IBM that all matters relating to detection and/or
abatement or removal of asbestos, hazardous waste or other pollutants are
beyond the scope of this contract and that IBM shall not be liable for any
delay or additional cost incurred as a result of such detection and/or
abatement.
3. IBM will not be responsible under this Statement of Work for the
identification or correction of any safety and/or code violations, whether
federal, state or local, including but not limited to fire and electrical
codes. If IBM should discover any safety and/or code violations during the
course of this project, IBM will notify SSP/OASiS and their end-customer of
the problem. IBM will not be required to proceed with this work under this
Statement of Work until SSP/OASiS and their end-customer remedies such
violation, nor will IBM be responsible for delays to the work caused by
such violation.
4. SSP/OASiS is responsible for shipping charges.
5. IBM will follow the SSP/OASiS provided test script prior to certify
installation of the Touchports.
6. SSP/OASiS will provide to IBM prior to the rollout of any pilots, "gold
disks". These disks will contain all software SSP/OASiS requires to be
loaded on to the TouchPorts. IBM will then use these disks in their
redistribution efforts. SSP/OASiS will provide a mutually agreed to number
of disks to be used by IBM.
7. Desktop TouchPort does not exceed 60 lbs. actual weight or Din weight of
120 lbs./in..
8. Floorstanding TouchPort does not exceed 150 lbs. actual weight or Din
weight of 250 lbs./in..
9. No final, production-level, certified product will be delivered until the
TouchPort 2 K system product passes UL, FCC and IBM's Product Safety Review
Board. If the DFI product fails to meet these requirements, IBM reserves
the right to substitute another product, and the charges may be adjusted as
the result.
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SSP/OASiS Personnel:
1. SSP/OASiS personnel who will be assigned to this project will have the
technical skills necessary to participate in the SSP/OASiS TouchPort work
effort.
IBM Personnel:
2. Work under this Statement of Work will be performed at SSP/OASiS location
in Sarasota, FL. and IBM locations in Orlando, FL.
3. SSP/OASiS will be charged for travel time that exceeds one hour round trip
from the point of departure.
. All travel time, per IBM resource, for the duration of this project, will be
billed to SSP/OASiS at the rate of $225/person/hr. and must be prior approved as
per the "Work Authorization" process. Resource travel time will be billed to
SSP/OASiS for travel one-way to any necessary work location. Travel for IBM
Project Office personnel, while performing Project Office Duties, is not
billable when traveling within the State of FL to and from the SSP Corporate
Center.
3. Some IBM internal activities on this project may be performed on IBM
premises. IBM will provide the IBM consultant with access to IBM tie lines,
networks, and databases. The time spent on these contract-related IBM
internal activities will be billable to SSP/OASiS.
4. IBM will provide services under this Statement of Work during normal
business hours, 8:00 am to 5:00 pm Monday through Friday, except national
holidays.
TouchPort Support Services:
1. We have provided for an initial block of 2,500 calls, which may be extended
with additional blocks of varying sizes throughout the year.
2. Work under this Statement of Work will be performed remotely at an IBM
location.
3. IBM may use subcontractors to perform some of the proposed work.
4. IBM estimated time frames subjected to delays caused by SSP/OASiS in
delivering requested or required information may result in changes to the
project schedule and/or additional charges. IBM will inform SSP/OASiS as
soon as is practical in this event and the change will be processed in
accordance with the procedure described in Appendix B, "Project Change
Control Procedure."
5. Estimated call length of 10 minutes.
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6. IBM will provide hot spares/depot repair services for the desktop
Touchports and on-site repairs of floor standing Touchports. SSP/OASiS will
be responsible for providing a consignment of hot spares for the desktop
units.
Other:
7. Verio ISP monthly connection fees for end-customers are NOT included in
this statement of work.
8. If IBM is delayed in the progress of the project by SSP/OASiS or their end-
customers by acts or neglect, or the acts or neglect of your employees or
separate contractors employed by you, by changes ordered in the project not
caused by the fault of IBM or other causes beyond IBM's control, the
contract time shall be reasonably extended and/or charges adjusted.
9. Prior to the creation of deliverables, IBM and SSP/OASiS will agree on a
format, which will become the basis and standard for acceptance of the
deliverable.
10. Any order received 3 business days or less from the on-site due date may
incur a labor impact charge of $ 115 per shipment in addition to the
applicable expedited transportation costs.
In the case of an already existing SSP/OASiS hospital/customer requiring an
additional TouchPort installation in 3 days or less, a labor impact charge
(expedite fee) of $115 may be incurred by SSP/OASiS in addition to any
applicable expedited transportation costs. This charge will appear on the "SSP
Work Authorization Form".
11. Any order received for the next day or same day shipment will be considered
an Emergency order. Emergency orders will incur expedited labor charges of
$ 240, and expedited transportation charges.
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2.3 IBM Responsibilities
2.3.1 Perform Project Management
Task Description: IBM will provide project management for the IBM
responsibilities in this Statement of Work. The objective of this
task is to establish a framework for project communications,
reporting, procedural and contractual activity. The IBM Project
Manager will be responsible for this task. The following subtasks
will be performed:
1.Project Planning
Review the Statement of Work and the contractual responsibilities
of both parties with the SSP/OASiS Project Manager.
Prepare a detailed project plan that identifies and assigns
tasks, major milestones for the efforts of the project team, the
estimated dates on which they occur and indications of critical
path.
Develop and revise a Roll-Out schedule with the agreement of the
SSP/OASiS Project Manager.
Coordinate the establishment of the project environment.
Prepare for the SSP/OASiS TouchPort project team orientation.
2.Project Tracking and Reporting
Measure, track and evaluate progress against the project plan.
Resolve deviations from the project plan with the SSP/OASiS
Project Manager.
Review project tasks, schedules, and resources and make changes
or additions, as appropriate.
Conduct regularly scheduled meetings with the SSP/OASiS TouchPort
project team to review project status.
Review the project progress with the SSP/OASiS Project Manager
during the regularly scheduled status meetings.
Prepare Monthly Status Reports.
Administer the project change control procedure.
Review and analyze project change requests.
Review the work products being produced by the SSP/OASiS
TouchPort project team.
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Completion Criteria: This task will be complete when the project
ends.
Deliverables: The following items will be delivered to SSP/OASiS
as a result of this task:
A Monthly Status Report
2.3.2 Orient Project Team
Task Description: The objective of this task is to orient the IBM
and SSP/OASiS project participants to SSP/OASiS goals and
environment and to the SSP/OASiS TouchPort project management
methodology. The orientation consists of the following subtasks:
1. Orient the project team to the project objectives and
approach.
2. Review the Statement of Work and provide clarification, as
required.
3. Review the project plan, estimated schedule, IBM's and
Surgical Safety's contractual responsibilities.
4. Review the project change control procedure.
5. Orient the team to project management methodology.
Completion Criteria: This task will be complete when the 1-day
orientation session has been held.
Deliverables: None.
2.3.3 Project Office Services
Task Description: The subtasks are:
1. Serve as a single point of contact for all IBM related
activities for SSP/OASiS.
2. Provide project status reports for Safety Surgical TouchPort
implementations.
3. Serve as an information repository for SSP/OASiS
engagements.
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4. Define clear, concise, repeatable, specific process for the
implementation of SSP/OASiS TouchPort solutions.
a. Develop site survey scripts
b. Develop installation scripts
c. Develop customer acceptance and sign-off forms
5. Prepare a site installation plan to cover the service
activities at each SSP/OASiS end-customer location. The plan
should include the activities, schedules, and
responsibilities for each party; SSP/OASiS, their
end-customer, and IBM.
6. Coordinate necessary partner/vendors/sub-contractors and IBM
perform resources ( cabling, ISP, installation, etc.).
7. Order and schedule for delivery appropriate components
(Kiosk and HW equipment).
8. Prior to the start of this Statement of Work, IBM will
designate a person, known as the EUS Customer Care Advocate,
to whom SSP/OASiS will address all EUS related project
communications. EUS Customer Care services will be provided
during normal IBM business hours, 8:30 a.m. to 5:00 p.m.,
Monday through Friday excluding IBM holidays.
Completion Criteria: This task will be complete when the project ends.
Deliverables: The following item will be delivered to SSP/OASiS and
their end- customer as a result of this task:
Site Installation Plans & Schedules
2.3.4 Site Survey
Task Description: The objective of this task is to determine the
networking and cabling requirements for the installation of the
OASiS TouchPort 2K systems. IBM will perform a site survey at each
identified SSP/OASiS end-customer location approximately three weeks
prior to installation. The sub tasks are:
1. Determine Hospital LAN gateway or ISP connection
requirements;
2. Identify best available LAN or demarc location;
3. Determine location, placement, and environmental
conditions for the TouthPort 2K system;
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4. Identify CAT 5 cabling requirements;
5. Obtain sign-off from end-customer to utilize their
Gateway, if utilized;
6. Document electrical/cabling requirements, readiness,
and locations for cable drops.
Completion Criteria: This task will be complete when IBM has completed
at the SSP/OASiS identified sites, up to 400 sites.
Deliverables: The following items will be delivered to SSP/OASiS as a
result of this task:
4. One (1) copy of the site survey document
2.3.5 Network Design Services
Task Description: The objective of this task is to provide network
expertise for the design of the network connection for the system and
support of installation projects. The activities to be performed are:
1. Review the site surveys to assess the physical and
logical networking environment.
2. Determine the additional required hardware / software
components necessary to connect the system into one of
the five following connection scenarios:
a. DSL
b. Frame Relay
c. Fractional T-1
d. T-1
e. ISDN
3. Provide product specifications and configuration
instructions for the recommended components to
facilitate the connection of a TouchPort to the
customer's premise network or Internet Service
Provider's network.
4. Develop Network diagrams, based on input from the Site
Surveys and implementation teams, for each individual
project.
5. Provide telephone support for installation and survey
activities.
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Completion Criteria: This task will be complete when the project ends.
Deliverables: None
2.3.6 Data Cabling Services
Cabling Activities: IBM will furnish and install one cable drop per
TouchPort at the designated SSP/OASiS end-customer facilities across
the US. The Category 5 plenum 300 foot maximum cable run will
terminate at an RJ45 surface mount box and face plate at one end and a
RJ45 surface mount box and face plate of patch panel at the other end.
Up to 15 feet of wire mold could be included at the TouchPort end of
the run for aesthetic purposes. IBM has assumed a normal Hospital
environment will prevail (drop ceilings, fish able walls, no
asbestos).
Cabling Installation Methods
IBM will follow all required EIA/TIA installation methods.
Specifically, the following installation practices will be adhered to:
1. The design and installation will be established using cable
highways. Hallways will be followed whenever possible. All
turns will be 90 degrees observing the manufacturer's
specified bend radius, but in no case less than 10 times the
cable OD.
2. Cable support will be provided on a minimum of 10' centers
or to local code, whichever is more stringent. IBM will
follow all facility support requirements. All cable will run
as high as is practical above the level of the suspended
ceiling.
3. Cable will not be laid upon ceiling tiles.
4. Cable will not be routed within 12" parallel to electrical
circuits. Where data cable must intersect electrical cable,
the crossing shall be made at a 90- degree angle.
5. No jacks will be installed adjacent to electrical outlets.
6. In no case will the twisted pair be untwisted more than the
specified .5". Sheath removal will be kept to a minimum.
7. Cable will be installed in such a manner so as not to kink
any wire. Any cable kinked during installation will be
replaced at IBM expense. When using cable tie-wraps, they
will not be tightened in any manner that would damage or
kink the cable.
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8. All cables will be neatly dressed and bundled.
9. No twisted pair splicing will be allowed.
10. Any fire wall penetrations made by IBM will be metal sleeved
and will be sealed in an appropriate manner using a fire
rated sealant to maintain the fire rating of the wall in
accordance with NEC.
11. All work to be provided by IBM will comply to national,
state, and local code
12. All work areas will be kept clean by the work crews.
Cabling Assumptions:
1. Provision for and the installation of optical fiber or riser
cable is NOT included in this statement of work.
2. Access between the floors exists and is free of
obstructions. IBM assumes that core drilling will not be
required. Ceilings are standard drop tile and walls are of
construction that are fish able. IBM also assumes all floor
ducts and conduit will be free and clear of any obstructions
and are fish able.
3. IBM assumes no expedited freight charges.
4. IBM assumes that jobs will be started and completed without
interruption. Re- mobilization efforts will be billed
accordingly, over and above the contracted pricing. Access
to all necessary areas is required throughout the
installation. Downtime due to limited access will be
addressed in a change order.
5. No allowances have been made to supply conduit, surface
raceway, or cable tray. If these types of services are
deemed necessary during the survey or installation, will be
addressed in the appropriate manner (quote adjustment or
change order).
6. Permits (if required) are the responsibility of the
end-customer.
7. Electrical wiring is outside the scope of the statement of
work.
Completion Criteria: This task will be complete when the project ends.
Deliverables: None
2.3.7 TouchPort Implementation Services
Task Description: The objective of this task is to coordinate the
resources and activities required for the installation of SSP/OASiS
OASiS TouchPort 2K solution. The subtasks are:
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1. Install necessary network electronics for the network
connection;
2. Install the OASiS TouchPort 2K Kiosk;
3. Install IBM provided UPS;
4. Establish network connections between the TouchPort and ISP.
5. Verify operations by executing SSP/OASiS provided
installation verification procedures;
6. Complete the Customer Acceptance process.
Completion Criteria: This task will be complete when the project ends.
Deliverables: The following item will be delivered to SSP/OASiS as a
result of this task for each implementation:
1. Customer Acceptance and Sign-off Forms
2.3.8 TouchPort Support Services
IBM will provide Single Point of Contact (SPOC) Level 1 & Level 2
telephone assistance for SSP/OASiS Products' clients called End Users.
End User Support (EUS) will provide break-fix support for hardware,
including assisting on-site vendor technicians and application usage
"how-to" on the OASiS TouchPort unit. EUS services will routing sales
and vendor related questions to SSP/OASiS. EUS will escalate Level 3
problems to SSP/OASiS for resolution. IBM will provide assistance to
SSP/OASiS for a predetermined number of problems (called "Block of
Problems").
Task Description: IBM will provide EUS transition setup in preparation
for providing EUS Services to SSP/OASiS. The sub tasks are:
1. Work with SSP/OASiS to set up a customer profile in the call
management system.
2. Work with SSP/OASiS to create a customized greeting and
processes and procedures for remote operations and support
and escalation and referral procedures of the SSP/OASiS
personnel. Up to 40 hours has been allotted for this task.
In the event that additional hours are required, they will
be billed on a time and materials basis.
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3. Set up a dedicated toll-free telephone line, to be used
exclusively by SSP/OASiS when calling the End User Support
Center.
4. Provide a call center trainer; the trainer will provide
training to call center personnel on the call-handling
processes and procedures, escalation and referral procedures
developed jointly with IBM and SSP/OASiS.
IBM will perform End User Support Services for SSP/OASiS personnel.
The sub tasks are:
2. Provide extended coverage, 24 X 7 including holidays.
3. Provide hardware and software support on the OSASiS
TouchPort System
4. Provide status updates, at your request, during the
resolution of a problem.
5. Provide SSP/OASiS with access to the end user call activity
report data.
Completion Criteria: This task will be considered complete when the
contract end date has been reached, or the Block of Problems has
utilized, whichever first occurs.
Deliverable: Access to the end user call activity report data.
2.3.9 TouchPort Warranty and Maintenance Services
IBM will provide in warranty and out of warranty break fix support for
the SSP/OASiS Products' TouchPort 2K Touchports. These devices will be
serviced on a hot spare depot/repair basis utilizing consigned spares
provided by SSP/OASiS. This is the most economically viable service
solution and due to the conditions of the manufacturer's warranty and
the nature of the device, allowing for minimum impact on end user
operations.
The warranties for IBM products and services are referenced in Part 2
(Warranties) of the ICA. IBM will "pass-thru" other equipment manufacturers
(OEM) warranties pertaining to their respective products. IBM does not warrant
non-IBM products and services (also stated in the Warranties section of the
ICA). The warranty for DFI's kiosks is 1 Year return to depot parts and labor
included.
Task Description: The sub tasks are:
6. On-site response time is next business day (depending on city) with
immediate next day whole unit replacement (Desktop) or component parts
shipped from our Orlando Service Center (Floorstanding). Service
requests will be handled by the dedicated toll-free telephone number
provided by EUS.
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7. Consigned spares will be shipped from our Orlando Center to minimize
SSP/OASiS turn around time.
8. Provide hot spares shipping support 8:00AM to 5:00PM M- F Orlando
time.
9. Provide status updates, at your request, during the resolution of a
problem.
Completion Criteria: This task will be considered complete when the
contract end date has been reached.
Deliverable: None.
2.3.10 TouchPort Web Site Hosting Services
IBM will provide Internet hosting services for the OASiS TouchPort
application. These services will consist of a dedicated Microsoft NT
4.0 server, Internet connections, maintenance and systems
administration.
Task Description: IBM will provide a managed host environment
consisting of:
10. Dual PIII 550 MHz processor, with 256K RAM, 4 GB SCSI DASD
11. Monitoring of server 24 X 7, 365 days / year.
12. All server hardware and maintenance
13. Uninterruptible Power Supply, with Generator backup
14. Multiple connections to Internet backbone
15. 50 GB of data transfer per month.
16. System Administration:
a. Operating System Upgrades
b. Supported software upgrades
c. Mail Server ( adding/deleting users, mail forwards etc)
d. Web Server ( adding domains, password protection, server
module support)
e. FTP Server ( restricting access, setting up new users
f. Operating System troubleshooting
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g. Provide status updates, at your request, during the
resolution of a problem.
Completion Criteria: This task will be considered complete when the
contract end date has been reached.
Deliverable: None.
2.4 SSP/OASiS Responsibilities
The responsibilities listed in this section are in addition to those
responsibilities specified in the Agreement and are to be provided at
no charge to IBM. IBM's performance is predicated upon the following
responsibilities being fulfilled by SSP/OASiS.
2.4.1 SSP/OASiS Project Manager
Prior to the start of this Statement of Work under the Agreement,
SSP/OASiS will designate a person, called the SSP/OASiS Project
Manager, to whom all IBM communications will be addressed and who has
the authority to act for SSP/OASiS in all aspects of the contract. The
responsibilities of the SSP/OASiS Project Manager include:
1. Serve as the interface between the IBM project team and all
SSP/OASiS departments participating in this project.
2. With the IBM Project Manager, administer Project Change Control
in accordance with "Appendix B. Project Change Control
Procedure".
3. Attend project status meetings.
4. Obtain and provide information, data, decisions and approvals,
within three working days of IBM's request unless SSP/OASiS and
IBM agree to an extended response time.
5. Resolve deviations from project plans that may be caused by
SSP/OASiS.
6. Help resolve project issues and escalate issues within the
SSP/OASiS organization, as necessary.
7. Work with IBM to set up a customer profiles in the call
management system.
8. Work with IBM to create a customized greeting and processes and
procedures for remote operations and support and escalation and
referral procedures of the SSP/OASiS personnel.
9. Be responsible for distribution and implementation of
corrections.
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10. Track the usage of SSP/OASiS current Block of Problems.
2.4.2 Other Responsibilities
Prior to the start of this Statement of Work under the Agreement,
SSP/OASiS will designate technical resources to provide the following
support to the IBM/SSP/OASiS project team. Their responsibilities
include:
1. SSP/OASiS personnel assigned to this project will have the
technical skills necessary to participate in this effort.
2. SSP/OASiS will assign subject matter experts to assist the IBM
EUS Center with their data collection/due diligence effort
throughout the transition period.
3. SSP/OASiS will provide necessary hardware and software licenses
required for support.
4. SSP/OASiS will work with IBM EUS in creating customized processes
and procedures for remote operations and support and escalation
and referral procedures.
5. Provide Level 3 support for the OASiS Application;
6. Provide 90 a day rolling commit forecast of product and
installation requirements. SSP/OASiS will be required to purchase
and maintain a 60 day rolling inventory of product.
7. Provide an interface to Surgical Safety's end customers for the
IBM Project Team members and Vendors during each project's
planning and implementation phases.
8. Provide installation and verification test scripts for installed
equipment and software.
9. Provide gold disks for all software that will need to be loaded
to Kiosk. These gold disks will be used by IBM at the
redistribution center to load all Touchports. SSP/OASiS will
prepare these gold disks prior to IBM installing any locations.
The gold disks will include the following software:
a. Microsoft Windows 98 operating system
a. OASiS TouchPort 2K application code
b. Verio ISP application and communications
10. Provide documentation showing purchase date (copies of invoices),
or other documents, as per the requirements of the manufacturers
during the warranty period.
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11. Supply sufficient quantities of consigned inventory, for all hot
spare devices to be included in this Maintenance Agreement.
2.4.3 Laws, Regulations, and Statutes
SSP/OASiS is responsible for the identification and interpretation of
any applicable laws, regulations, and statutes that affect SSP/OASiS
that IBM will have access to during this project.
SSP/OASiS will pay taxes and fees imposed by governmental agencies in
the USA or elsewhere as they are assessed on products or services
required by or in support of Project implementations.
Governing Laws and applicable court costs, if any, for this Agreement are
addressed in the IBM Customer Agreement in Section 1.13.
2.4.4 Space and Facilities
SSP/OASiS will provide suitable office space,
at SSP's home officein Sarasota, Florida including
supplies, furniture, and other facilities with telephone access for up
to 2 IBM personnel while working on the SSP/OASiS OASiS TouchPort 2K.
It is assumed that the project team will be located in a contiguous
area and all necessary security badges and clearance will be provided
for access to this area. A lockable four or five drawer cabinet will
be provided to IBM personnel in accordance with SSP/OASiS security
procedures. Required parking spaces will also be provided.
2.4.5 Security
SSP/OASiS is responsible for the actual content of any data file,
selection and implementation of controls on its access and use, and
security of the stored
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2.5 Deliverable Materials
The following deliverables are classified as Type II Materials, as
defined in the IBM Customer Agreement, and will be delivered to
SSP/OASiS under this Statement of Work.
Monthly Project Status Report
Design and Implementation Reports
Site survey document
Site Installation Plans & Schedules
Customer Acceptance and Sign-off Forms
Access to End User Support: Monthly Usage Reports
Hardcopy, Softcopy or both will be provided for each SSP/OASiS end
customer
2.6 Completion Criteria
IBM shall have fulfilled its obligations under this Statement of Work
when any one of the following first occurs:
IBM accomplishes the IBM tasks described in "IBM
Responsibilities", including delivery to SSP/OASiS of the
materials listed in "Deliverable Materials".
SSP/OASiS or IBM terminates the Project in accordance with the
provisions of the Agreement.
When the contract end date is reached
2.7 Year 2000
IBM is not providing any Year 2000 services under this Statement of
Work. IBM Product Specification specify the Year 2000 readiness of the
IBM Products. IBM does not make any representations regarding the Year
2000 readiness of non-IBM Products. Under the terms of the Statement
of Work, IBM is not responsible for:
17. SSP/OASiS products,
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18. a third party's products (including products SSP/OASiS license
from IBM's suppliers) or
19. IBM's previously installed Products ("Other Products") to
correctly process or properly exchange accurate date data with
the Products or deliverables IBM provides.
IBM will be relieved of its obligations under this Statement of Work
due to the inability of such Other Products to correctly process or
properly exchange accurate date data with the Products or deliverables
IBM provides to SSP/OASiS. SSP/OASiS, acknowledges that it is Surgical
Safety's responsibility to assess its current systems and take
appropriate action to migrate to Year 2000 ready systems.
The Deliverable Materials (Materials) that we provide will be Year
2000 ready. "Year 2000 ready" means that the Materials, when used in
accordance with their associated documentation, are capable of
correctly processing, providing and/or receiving date data within the
twentieth and the twenty-first centuries, provided that all products
(for example, hardware, software and firmware) used with the Materials
properly exchange date data with it.
IBM assumes no responsibilities or obligations to cause products or
deliverables provided by IBM to accurately exchange date data with
such Other Products or to cause such Other Products to accurately
exchange date data with products or deliverables provided by IBM
2.8 Termination
You may terminate this Statement of Work for convenience upon 60 days
prior written notice and satisfaction of any payments due to IBM
produced from services performed under this statement of work
including reasonable expenses caused by the early termination (for
example: cancellation fees of vendor contracts, prepaid expenses,
additional staff required to transfer services).
The following termination charges will apply in the event termination
occurs due to change of ownership of SSP/OASiS:
Within first 3 months of contract acceptance: $ 390,000
Within first 6 months of contract acceptance: $ 260,000
Within first 9 months of contract acceptance: $ 130,000
A. Either IBM or SSP/OASiS may terminate this Agreement for convenience upon at
least 60 days prior written notice to the other party. If IBM terminates this
Agreement for convenience then any outstanding charges shall be paid to IBM. If
SSP/OASiS terminates for convenience or for refusal to pay additional
prepayments of future invoices requested by IBM, then the following will apply:
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(a) outstanding invoices issued for work performed, or pending invoicing in
process but not issued until completion of SSP/OASiS authorized work will be
payable to IBM,
(b) any sub-contractor or vendor cancellation fees or charges for work
performed by them as retained by IBM in accordance with this Statement of Work,
(c) The cost of any IBM procured items, including, but not limited to, hardware
and software held in IBM inventory for scheduled and future installations, and
said purchase approved by SSP/OASiS, in accordance with this Statement of Work,
(d) design, tooling, or start-up fees, previously paid by IBM, and approved by
SSP, associated with the costs of customized hardware manufacture of OASiS
TouchPorts, and
(e) any unreimbursed travel completed and non-refundable air fare tickets
purchased for future travel, including any reservation cancellation fees or any
other travel costs not described in a "Work Authorization Form" approved, or
pending approval by SSP/OASiS.
Written evidence of each of the above will be supplied to SSP/OASiS upon written
request.
B. Either party may terminate this Agreement if the other party breaches the
terms of the Agreement, provided the breaching party has not cured such breach
within 15 days after receiving written notice of such breach. Any terms of this
Agreement, which by their nature extend beyond its termination, remain in effect
until fulfilled or accepted by the respective successors of the undersigned. An
early termination fee will apply to any other future Assignor or Assignee who
may terminate this agreement within the specified time periods.
In the event SSP/OASiS, exercises its right to terminate this Agreement, (other
than a termination resulting from a breach by IBM), and such termination occurs
as a result of a sale or assignment by SSP/OASiS or the acquisition of
substantially all of its assets to or by a third party purchaser, then, and in
that event, SSP/OASiS shall pay to IBM the following early termination fee:
(a) In the event the termination is effective within the first three months
following the date of full acceptance of this agreement, SSP/OASiS shall pay to
IBM the sum of $390,000.00. (b) In the event the termination is effective
following three months from the date of full acceptance of this agreement but
within six months from the date of full acceptance of this agreement, SSP/OASiS
shall pay to IBM the sum of $260,000.00.
(c) In the event the termination is effective following six months from the date
of full acceptance of this agreement but within nine months from the date of
full acceptance of this agreement, SSP/OASiS shall pay to IBM the sum of
$130,000.00.
NOTE:
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(1) The aforesaid early termination fee shall not apply in the case where
SSP/OASiS sells all or substantially all of its assets, or assigns this
Agreement, and the Purchaser or Assignee accepts the Assignment.
(2) The aforesaid early termination shall apply to any future purchaser,
assignor or assignee.
(3) The governing laws are covered in section 1.13 of the ICA. (State of New
York).
(4) IBM will not accept any "TIME IS OF THE ESSENCE" clauses.
(5) IBM will not accept the "In the event of breach..." sentence. Each party
will be liable for its own court costs if such situations occur.
Either of us may terminate this Statement of Work if the other does
not comply with any of its terms, provided the one who is not
complying is given written notice and 2 weeks time to comply.
Any terms of this Statement of Work which by their nature extend
beyond its termination remain in effect until fulfilled, and apply
to respective successors and assignees.
Notices. All written notices required or permitted hereunder shall be deemed
effective and duly ------- given:
(i) when personally delivered;
(ii) when sent by telephone facsimile (the sender shall also send a "hard copy"
following the facsimile, however the notice shall be effective upon the
transmission of the facsimile if confirmed by Sender with words "Confirming
delivery of notice from ________________");
(iii) one day after depositing in the custody of a nationally recognized
receipted overnight delivery service; or
(iv) at least three (3) days after posting in the United States first class,
registered or certified mail; and,
in the case of iii or iv above with postage prepaid and addressed to the
recipient at its address as set forth as follows:
TO IBM:
Cheryl Young IBM Project Manager
IBM Project Office
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315 E. Robinson Street
Orlando, FL 32801
Fax Number: (770) 659-3407
TO SSP/OASiS:
Surgical Safety Products, Inc.
Attn.: ___________________________________
2018 Oak Terrace, Suite 400
Sarasota, FL 34231
Fax Number: (941) 927-7874
Either party may change its address by giving notice of such change in the
manner prescribed above.
2.9 Estimated Schedule
The services will be performed during the period 12-01-99 through
11-30-2000
2.10 Charges
The estimated price for performing the IBM tasks defined in the Statement
of Work will be $10,961,600. plus applicable taxes if any. Based on 400
sites with an average of 3 TouchPorts per site. This price is based upon an
attached Schedule " PRICING SCENARIO "A" ". PRICING SCENARIO'S "B" and "C"
are also attached and are made a part of this Statement of Work as pricing
alternatives in certain deployment situations which may require less
networking and/or connectivity services. Any single site installation
charge and associated product costs will not exceed Schedule "A" estimate
per Key Assumptions as stated. SSP/OASiS will be billed for actual work
performed including hardware, cabling services, help desk, and break-fix
support. Any out of scope charges to be prior approved by SSP/OASiS
management. The charges and invoicing are as follows:
Initial Payment:
Prepayment of Product and Services :
$100,000 upon contract acceptance to be applied immediately to
any IBM invoices due.
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Additional prepayments may be requested upon exhaustion of
initial prepayment.
Additional terms may be requested upon exhaustion of initial prepayment if any
outstanding IBM invoice to SSP/OASiS becomes more than 30 days past due.
Per Problem Pricing: End User Support
Included in the Per site and Per TouchPort charges. The contract period is
the lesser of one year or until all problems have been used.
Extended
BLOCK SIZE 24 x 7
Including Holidays
- ------------------------- ----------------------
2,500 included $29 each for add'l
- ------------------------- ----------------------
500 Routed Calls included $10 each for add'l
- ------------------------- ----------------------
We will notify your designated contact when the 250 calls remain from a
purchased Block of Problems. If an End User should call for support after
all calls have been used , it will be considered as authorization for us to
deliver service beyond the current Problem Block limit
unless SSP/OASiS notifies the IBM Project Manger or Project Executive in writing
not to accept any further calls.
Service will continue for thirty (30) days after our notification to your
designated contact. If you purchase an additional Block(s) of Problems and
renew the contract period, the problems used during the 30-day extension
will be deducted from the new Block. If you do not purchase an additional
Block of Problems, you will be invoiced for Services provided during the
30-day extension at the per Problem rate of the last Block purchased.
In addition, SSP/OASiS will reimburse IBM for:
the actual travel and living expenses, upon prior approval by
SSP/OASiS, incurred in providing these services.
actual shipping from the integration facility in Orlando, FL to
the installation site
shipping to and from the Orlando, FL depot repair facility from
either of 1) an installed location and/or 2) from any retained
kiosk manufacturer to Orlando, FL or an installed site location.
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2.11 Definition of Terms
This section provides definitions of the terms as used in this Statement of
Work: End-Customer - SSP/OASiS Product's customer, the Hospital or Medical
establishment which is the user of the OASIS TouchPort 2K system.
Site - The end-customer location which contains the point of demarcation,
network router and data cable termination.
Level 1 Support - The 'level one' (L1) service is to answer 'how to' questions.
The scope of this activity is rooted in the notion that all answers to such
inquiries can be found within the documentation supplied to the end user as an
integral component of the product.
Level 2 Support -The 'level two' (L2) service is to augment level one service
with a supplementary skill base that reflects experience in supporting operating
system(s) and similar product(s) when feasible. Its scope is limited to
providing solutions that are published to the public domain and in general
acceptance, or to provide solutions that have been proscribed by a L3 entity for
particular problems or for technical scenarios they describe.
Level 3 Support - The 'level 3' (L3) service is 'ownership' by the help desk of
all problems that cannot be resolved at L2 that have been appropriately
escalated. This support includes but is not limited to, product defect support.
Vendor - A provider of certain services to a customer.
Deliverable - Materials delivered to a customer to support the services being
delivered.
End Users - We will consider end users to be only the personnel you authorize to
use contracted EUS services.
In Scope - Items included within or covered by the scope of this document.
Problem - A singular request for assistance on a specific product. Requests for
assistance on different problems with the same product will be considered to be
multiple problems. Closure of a problem occurs when we provide an answer to the
end user, which may include referring the end user to the appropriate source for
resolution. If such answer does not solve the problem, subsequent calls may be
placed under the original problem number. A problem may involve multiple
conversations (calls) or actions such as (1) the initial end user request, (2)
off-line research, (3) a callback from us to the end user and (4) closure of the
problem.
Call - An end user's contact with the EUS Center. There may be one or more calls
from the same end user on the same problem.
Call Management System (CMS) - The software used by IBM's EUS personnel to log
and track reported problems
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Appendix A Deliverable Guidelines
A.1 Monthly Status Report
Purpose: IBM will provide Monthly Status Reports advising the
SSP/OASiS Project Manager of the progress and status of the IBM
activities. The report will outline the IBM activities and describe
the status of tasks worked on during that period. Significant
accomplishments, milestones, and problems will be identified.
Content: The report will consist of the following, as appropriate:
Activities performed during the during the reporting period
Activities planned for the next reporting period
Project change control summary
Problems, concerns, and recommendations
Other items of importance
Delivery: IBM will deliver one copy of this document in reproducible
format.
A.2 Design and Implementation Reports
Purpose: These are work products that will be utilized by the IBM /
SSP/OASiS team in the implementation of IBM / SSP/OASiS solutions.
Content: These reports are and will consist of:
Site survey document
Site Installation Plans & Schedules
Customer Acceptance and Sign-off Forms
Delivery: IBM will deliver one copy of these documents in
reproducible format for each SSP/OASiS end customer project.
A.3 End User Support: Monthly Usage Reports
(Access to) The Summary of End User Call Activity Report
Purpose: The Summary of End User Call Activity Report will allow SSP/OASiS
to review such items as:
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1. If problem was regarding hardware or software;
2. Type of problem being reported;
3. Which SSP/OASiS end user was placing the call;
4. Number of calls placed;
5. Length of problem;
6. Overall usage of the service.
Content: The Summary of End User Call Activity Report will consist of
SSP/OASiS call activity data.
Delivery: Electronic access to the Report will be provided to the SSP/OASiS
Primary Contact
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Appendix B Project Change Control Procedure
The following provides a detailed process to follow if a change to this
Statement of Work (SOW) is required.
A Project Change Request (PCR) will be the vehicle for communicating
change. The PCR must describe the change, the rationale for the change
and the effect the change will have on the project.
The designated Project Manager of the requesting party will review the
proposed change and determine whether to submit the request to the
other party.
Both Project Managers will review the proposed change and approve it
for further investigation or reject it. IBM will specify any charges
for such investigation.
IBM will specify any applicable charges for such investigation prior
to the investigation being performed.
If the investigation is authorized, the Project Managers will sign the
PCR which will constitute approval for the investigation charges. IBM
will invoice SSP/OASiS for any such charges. The investigation will
determine the effect that the implementation of the PCR will have on
price, schedule and other terms and conditions of the Agreement.
A written Change Authorization and/or Project Change Request (PCR)
must be signed by both parties to authorize implementation of the
investigated changes.
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Appendix C Hardware/Software
The following list contains the specific IBM/OEM part #'s, options,
and quantities of equipment and software being proposed to SSP/OASiS.
IBM shall provide SSP with a copy of all product warranties issued by
the manufacturer.
1,200 OASiS TouchPort 2K Systems per the following configuration:
Mfg. Description Quantity
- ------- -------------- -------
DFI TouchPort 2K Desktop Kiosk 1,200
15" Display
APC BK 200 UPS 1,200
CICSO Router 675 < 400
Router 804 < 400
Router 1604 < 400
Router 1720 < 400
Hub 1538 < 400
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Appendix D Signature Document
Statement of Work for Project Support Services
Custom Services
Scope of Services, Completion Criteria, charges, and other applicable terms:
Both of us agree that, 1) this Statement of Work defines the scope of work to be
accomplished by IBM under the terms and 2) the conditions of the IBM Customer
Agreement (Agreement).
Project Scope: See Statement of Work for: OASiS TouchPort 2K Project
Estimated Charges: $ 10,961,600.
See Charges Section on the attached Statement of Work.
- -----------------------------------------------------------------------------
This document is a Statement of Work to the IBM Customer Agreement - Project
Support Services. Each of us agrees the complete agreement between us about
these Services consists of 1) this Statement of Work and 2) the IBM Customer
Agreement or IBM Customer Agreement - Project Support Services, as applicable (
or any equivalent agreement signed by both of us).
Agreed to (IBM Customer Name): Agreed to:
SSP/OASiS International Business Machines
Corporation
By ____________________________________ By ___________________________
Authorized Signature Authorized Signature
Name (type or print) Name (type or print)
Date: Date:
Customer Number: 8666266 Reference Agreement Number: HQ12291
Customer Address: SSP/OASiS Statement of Work number : 7K30814
2018 Oak Terrace IBM Office number: 442
Sarasota, FL 34231
Estimated Start Date: December 1, 1999 IBM Office Address:
Estimated End Date: November 30, 2000
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Appendix E Review and Approval
Procedure
Each deliverable document, as defined by the Deliverables under IBM
Responsibilities, will be approved in accordance with the following
procedure:
7. One (1) printed draft of the deliverable document will be
submitted to the SSP/OASiS Project Manager. It is the SSP/OASiS
Project Manager's responsibility to make and distribute
additional copies to other reviewers.
8. Within five (5) days the SSP/OASiS Project Manager will either
approve the deliverables or provide the IBM Project manager a
list of requested changes. If no response is received from the
SSP/OASiS Project manager within five (5) days, the deliverable
will be deemed approved.
The IBM Project Manager will submit the updated final version to the
SSP/OASiS Project Manager for approval. The SSP/OASiS will confirm
that the requested changes were made and give final approval within
three (3) days, the deliverables will be deemed approved.
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
in the Registration Statement on Form S-3 (Registration Number _________) and
related Prospectus of Surgical Safety Products Inc. for the registration of
initially 20,038,097 shares of its common stock and to the incorporation by
reference therein of our report dated March 12, 1999 relating to the financial
statements which appear in the Annual Report on Form 10K for the year ended
December 31, 1998.
/s/ Kerkering, Barbario & Co., P.A.
------------------------------------
Kerkering, Barbario & Co., P.A.,
Independent Public Accountants.
Sarasota, Florida
February 29, 2000
-171-
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