<PAGE> 1
As filed with the Securities and Exchange Commission
on December 11, 1995.
Registration Statement No. 33-80247
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM S-1 REGISTRATION STATEMENT
Under the Securities Act of 1933
_______________
Specialized Health Products International, Inc.
(formerly Russco, Inc.)
(Exact Name of Registrant as specified in its charter)
Delaware 3841 93-0945003
(State or other (Primary Standard (I.R.S. Employer's
jurisdiction Industrial Identification Number)
of incorporation or Classification Code)
organization)
_______________
Specialized Health Products International, Inc.
655 East Medical Drive
Bountiful, UT 84010 (801) 298-3360
(Address, including zip code and telephone number, including area
code, of Registrant's principal executive office)
_________________
David A. Robinson
Specialized Health Products International, Inc.
655 East Medical Drive
Bountiful, UT 84010 (801) 298-3360
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
_______________
Copies to:
Eric L. Robinson
Paul J. Graf
Blackburn & Stoll, LC
77 West Second South, Suite 400
Salt Lake City, UT 84101 (801) 521-7900
_______________
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Amount Maximum Maximum Amount of
Each Class to be Offering Aggregate Registration
of Registered Price Offering Fee
Securities Per Share(1) Price(1)
to be
Registered
<S> <C> <C> <C> <C>
Common 4,376,250 $8.50(3) $37,198,125 $12,826.93
Stock(2)
Common 4,401,250 $8.50(3) $37,410,625 $12,900.21
Stock(4)
Total $25,727.14
</TABLE>
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 become effective on such
date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE> 2
(Footnotes continued from previous page)
(1) Estimated solely for the purpose of determining the registration
fee.
(2) Outstanding shares of Common Stock offered for sale from time to
time by Selling Security holders.
(3) Represents the average of the bid and asked prices of the Common
Stock on the NASDAQ Small Cap Market on December 4, 1995. Fees were
calculated under Rule 457(c) under the Securities Act of 1933.
(4) Issuable by the Registrant from time to time upon the exercise of
outstanding warrants.
<PAGE> 3
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
CROSS-REFERENCE SHEET
Item Number of Caption Location or Heading in Prospectus
1.Forepart of Registration
Statement and Outside Front Outside Front Page of Registration
Cover of Prospectus Statement and Outside Front Cover Page
of Prospectus
2.Inside Front and Outside
Back Cover Pages of Inside Front and Outside Back Cover
Prospectus Page of Prospectus
3.Summary Information, Risk
Factors and Ratio of Prospectus Summary, Risk Factors,
Earnings to Fixed Charges Summary Selected Financial Information
and Selected Financial Data
4.Determination of Offering Outside Front Cover Page and Plan of
Price Distribution
5.Selling Security Holders Principal and Selling Securityholders;
Management
6.Plan of Distribution Outside Front Cover Page of
Prospectus; Prospectus Summary and
Description of Securities
7.Description of Securities to
be Registered Outside Front Cover Page of
Prospectus, Prospectus Summary and
Description of Securities
8.Interest of Named Experts Not Applicable
and Counsel
9.Information With Respect
to the Registrant Prospectus Summary, Risk Factors,
Capitalization, Dividend Policy,
Selected Financial Data, Share Price
History, Management's Discussion and
Analysis of Financial Condition and
Results of Operations, Business,
Management, Principal and Selling
Securityholders, Certain Relationships
and Transactions, Description of
Securities and Financial Statements
10. Disclosure of Commission
Position on
Indemnification for
Securities Act
Liabilities Management
<PAGE> 2
Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may not
be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or an offer to buy nor shall there be any
sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any State.
SUBJECT TO COMPLETION, DATED DECEMBER 11, 1995.
PRELIMINARY PROSPECTUS
8,777,500 Shares of Common Stock
Specialized Health Products International, Inc.
This prospectus relates to (1) the offer and sale from time to
time of up to 4,376,250 shares of common stock, $.02 par value
("Common Stock"), of Specialized Health Products International,
Inc. (the "Company") by certain stockholders of the Company named
herein (the "Selling Stockholders"); and (2) the offer and sale
from time to time by the warrantholders named herein of up to
4,401,250 shares of Common Stock issuable to such warrantholders
upon exercise of the Series A Warrants and Series B Warrants
(collectively, the "Warrants"). The Selling stockholders named
herein are referred to collectively as the "Selling
Securityholders." See "Description of Securities" and "Principal
and Selling Securityholders."
The Common Stock is quoted on the NASD Automated Quotation
("NASDAQ") Small-Cap Market under the trading symbol "SHPI." On
December 4, 1995, the closing price of the Common Stock, as
reported by NASDAQ was $8.50 per share. See "Share Price
History."
_______________
The shares offered hereby involve a high degree of risk. See
"Risk Factors" on page 1 of the Prospectus.
_______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________
The Common Stock offered hereby may be sold from time to time
on NASDAQ through brokers, dealers, underwriters or agents, and
also in privately-negotiated sales by Selling Securityholders, on
terms to be determined at the times of such sales. The Company
is registering the Securities pursuant to the Company's
obligations under certain registration rights agreements and
pursuant to requests by certain Selling Securityholders, but the
registration of the Common Stock does not necessarily mean that
any of the Common Stock will be offered or sold by the Selling
Securityholders hereunder. To the extent required, the specific
shares of Common Stock to be sold, the names of the Selling
Securityholders, the respective purchase prices and public
offering prices, the names of any broker, dealer, underwriter or
agent, and any applicable commissions or discounts with respect
to a particular offer will be set forth in an accompanying
Prospectus Supplement or, if appropriate, a post-effective
amendment to the Registration Statement to which this Prospectus
is a part. See "Plan of Distribution."
The Selling Securityholders and any dealers or agents that
participate in the distribution of the Common Stock offered
hereby may be deemed to be "underwriters" as defined in the
Securities Act of 1933, as amended (the "Securities Act") and any
profit on the sale of such Common Stock offered hereby by them
and any discounts, commissions or concessions received by any
such dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act.
The Company will receive no proceeds from the sale of shares of
Common Stock by the Selling Securityholders hereunder, but the
Company has agreed to bear certain expenses of registration of
such Common Stock under federal and state securities laws.
_______________
The date of this Prospectus is December , 1995
<PAGE> 3
TABLE OF CONTENTS
Prospectus Summary 4
Risk Factors 7
Dividend Policy 14
Share Price History 14
Capitalization 15
Selected Financial Data 16
Management's Discussion and Analysis
of Financial Condition and Results of Operations 17
Business 20
Management 32
Certain Relationships and Related Transactions 36
Description of Securities 37
Securities Eligible for Future Sale 39
Principal and Selling Securityholders 40
Plan of Distribution 46
Experts 47
Additional Information 47
Index to Financial Statements F-1
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information included elsewhere in this Prospectus. Unless
the context otherwise requires, all references in this Prospectus to
the "Company" shall mean Specialized Health Products International,
Inc., and its subsidiaries on a consolidated basis and, where the
context so requires, shall include its predecessors.
The Company
The Company primarily develops health care products that limit or
prevent the risk of accidental needle sticks which may cause the
spread of blood-borne diseases such as HIV and Hepatitis B, as well as
other products for use in the health care industry.
The Company has created a portfolio of proprietary health care
products that are in various stages of production, pre-production,
development and research. In December 1994, the Company introduced
the first in its line of newly developed containers for the disposal
of contaminated "sharps" (i.e., needles, syringes, blood collection
systems, intravenous catheters, surgical blades, lancets, etc.), and
additional sizes and versions of its Safety Cradler(R)
sharps containers were released in the third and forth quarters of 1995.
The Company is developing a safety lancet (the "SafetyLance(TM)"),
a small hand-held device for penetrating the skin to obtain
blood for analysis. Commercial production of the SafetyLance(TM)
is anticipated to commence in 1996. The Company is also developing
a line of products using the Company's ExtreSafe(TM)
medical needle technology, which incorporates a
system to allow a contaminated needle to be automatically retracted
directly from a patient and immediately encapsulated without exposure
to the health care worker. Products under development that
incorporate the ExtreSafe(TM) medical needle technology include the
ExtreSafe(TM) blood draw system, ExtreSafe(TM) catheter and ExtreSafe(TM)
syringe. The Company expects to introduce additional products using
this technology. Prototypes of the first product using the ExtreSafe(TM)
medical needle technology were completed in April 1995 and commercial
production is anticipated to commence in 1996. Prototypes of the
ExtreSafe(TM) catheter and ExtreSafe(TM) syringe were completed
in the second half of 1995. The Company's concepts for a safety intravenous
flow gauge and, blood collection needle are in the research stage.
The Company has also entered into a joint venture to design and
produce an improved filmless digitized imaging technology which is in
the research stage. See "Business" for a more detailed description of
the business of the Company.
Company Background
The Company was incorporated in 1986 as Santian Ventures, Inc., a
Utah corporation. In 1989, the Company changed its name to
Ware/Hadley Ventures, Inc. Subsequently, the Company's corporate
domicile was changed to the State of Delaware, and its name was
changed to Russco, Inc., effective December 20, 1990, by merger into a
newly created Delaware corporation. The Company had no operations
until July 28, 1995. On that date, the Company acquired Specialized
Health Products, Inc., a Utah corporation, through a merger with a
subsidiary of the Company (the "Acquisition"), and the Company changed
its name to "Specialized Health Products International, Inc."
Specialized Health Products, Inc., was incorporated in November 1993.
The Board of Directors and management of Specialized Health Products,
Inc. were elected and appointed to corresponding positions with the
Company on July 28, 1995. See "Business-Company Background and 1995
Reorganization." In connection with the Acquisition, the Company
raised gross proceeds of $8,602,500 (net proceeds of $7,883,061)
through the sale of 4,376,250 shares of Common Stock, 3,110,875 Series
A Warrants and 1,290,375 Series B Warrants to accredited investors in
the United States and overseas in a private placement.
Specialized Health Products International, Inc., is a Delaware
corporation with its principal executive offices at 655 East Medical
Drive, Bountiful, UT 84010. Its telephone number is (801) 298-3360.
Risk Factors
An investment in the Common Stock of the Company involves various
risks, and prospective investors should carefully consider the matters
discussed under "Risk Factors" prior to any investment in the Company.
See "Risk Factors."
<PAGE> 5
The Offering
The principal terms of the Common Stock offered hereunder are
summarized below. For a more complete description, see "Description
of Securities." The Selling Securityholders will receive all the
proceeds from the sale of the Common Stock.
Securities Offered 8,777,500 shares of Common Stock,
including 4,376,250 shares of outstanding
Common Stock which may be sold by Selling
Securityholders and up to 4,401,250
shares of Common Stock which may be sold
by the holders of outstanding Warrants
following exercise of such Warrants.
Rights of Common Stock The shares of Common Stock
share equally in all rights of the Common
including, without limitation dividend
and voting rights.
Quotation The Common Stock is quoted on the NASDAQ
Small-Cap Market.
Trading Symbol "SHPI"
Summary Selected Financial Information
The following table sets forth selected consolidated historical
operating and balance sheet information for the Company. The
following information should be read in conjunction with the
Consolidated Financial Statements of the Company and the Notes thereto
included elsewhere herein.
<TABLE>
<CAPTION>
Fiscal Year 9 Months Ended
Ended (1) (unaudited)
Nov. 19 Dec. 31 Sept. 30 Sept. 30
1993 1994 1994 1995
(inception)
to Dec. 31, 1993
<S> <C> <C> <C> <C>
Statement of Operations Data:
Sales $ _ 33,256 24,154 442,341
Cost of sales _ 21,669 14,974 252,801
--------- -------- -------- ---------
Gross profit _ 11,587 9,180 189,540
Expenses:
Research and development expense _ 290,950 156,931 532,537
General and administrative 3,450 620,022 306,678 972,911
expense ---------- --------- --------- ----------
Total expenses 3,450 910,972 463,609 1,505,448
---------- --------- --------- ----------
Operating loss (3,450) (899,385) (454,429) (1,315,908)
Net interest income (expense) _ (7,563) (363) 15,774
----------- --------- --------- ----------
Net loss $ (3,450) (906,948) (454,792) (1,300,134)
Dividends on preference stock _ (16,780) (11,262) (11,389)
----------- --------- --------- ----------
Net loss attributable to common (3,450) (923,728) (466,054) (1,311,523)
stockholders =========== ========= ========= ==========
Net loss per common share (.003) (.75) (.40) (.46)
=========== ========= ========= ==========
Weighted average number of shares
used for net loss per share 1,170,000 1,224,074 1,177,088 2,820,883
computation (2) ========== ========= ========= ==========
<PAGE> 6
Balance Sheet Data
(at period end):
Working capital $ (12,150) (287,723) 5,590,653
Total assets 16,550 656,865 7,064,614
Long-term debt, less current _ 458,333 _
maturities
Total stockholders equity (2,150) (355,878) 6,889,160
(deficit)
__________________________________________________________
</TABLE>
Notes:
<F1>
(1) Excludes Specialized Health Products International, Inc.
(formerly, Russco, Inc.) which had no operations prior to the
Acquisition on July 28, 1995, and is immaterial.
<F2>
(2) Net loss per common share is based on the weighted average number
of common shares outstanding. Stock options and warrants, and
preferred shares prior to conversion, are not included in the
calculation because this inclusion would be anti-dilutive and
reduce the net loss per share amount.
<PAGE> 7
RISK FACTORS
An investment in the Common Stock of the Company is speculative in
nature, involves a high degree of risk and should only be made by an
investor who can afford the loss of his entire investment. In
addition to the other information in this Prospectus, the following
factors should be considered carefully by potential purchasers in
evaluating an investment in the Common Stock of the Company offered
hereby.
History of Losses/Uncertain Profitability. The Company's products
are in various stages of production, pre-production, development and
research. The Company has only limited sales of its first product,
its SafetyCradle sharps containers, and has few customers. No
assurance can be given that the Company will ever have sufficient
sales or a sufficient customer base to become profitable. At
September 30, 1995, the Company had an accumulated deficit of
approximately $2,238,701. No assurance can be given that the Company
will be able to compete with other manufacturers of similar products,
many of whom have substantially greater financial resources than the
Company. In addition, the business prospects of the Company will be
affected by expenses, operational difficulties and other factors
frequently encountered in the development of a business enterprise in
a competitive environment, many of which may be unforeseen and beyond
the Company's control.
Dependence on Single Manufacturer. Large and expensive molds are
used to produce the Company's Safety Cradler sharps containers. The
Company owns the molds that its manufacturer uses to manufacture the
Company's Safety Cradler sharps containers. It is expensive for the
Company to pay to construct multiple product molds so that its
products can be produced by multiple manufacturers. The Company plans
to build additional molds as product demand increases. The Company
expects to place such molds with additional manufacturers to reduce
transportation costs and the risks associated with dependence on a
single manufacturer. The Company does not have any present intent of
engaging in the manufacturing business. The Company has a
satisfactory working relationship with its present manufacturer. If
the Company's manufacturer fails to perform its obligations in a
timely and satisfactory manner or if there is a change in the
Company's manufacturer/supplier, it could have a material adverse
effect on the Company. See "Risk Factors _ Litigation." There can be
no assurance that the Company would be successful in replacing its
current manufacturer on terms favorable to the Company. Likewise,
there can be no assurance that the Company will be successful in
finding additional manufacturers to manufacture its products on terms
favorable to it, should product demand increase.
The Company intends to use outside companies to produce each of its
product lines. Presently, prototypes of the Company's SafetyLance
safety lancet and ExtreSafe needle retraction system are being
developed by independent companies. In addition, alternative
manufacturing sources have been identified, but no contracts have been
entered into. The Company may not be able to enter into manufacturing
agreements on terms favorable to it for the manufacture of such
products.
Dependence On Third Party Relationships. The Company is dependent
on third parties for the production and distribution of its Safety
Cradler sharps containers and for the production and distribution of
its follow-on products. There can be no assurance that the Company
will be successful in maintaining such relationships with
manufacturers and distributors on terms favorable to the Company.
Pricing. Manufacturing costs and pricing for the Company's products
may be higher than for their conventional counterparts which are not
designed to provide the protection afforded by the Company's products.
Continuing pressure from Medicare, Medicaid and other payors to reduce
costs in the health care industry as well as increasing competition
from other protective products could affect the Company's ability to
sell its products at premium prices. Reductions in selling prices
could adversely affect operating margins if the Company cannot achieve
corresponding reductions in manufacturing costs.
Availability of Resins. The Company uses polypropylene and other
resins in the manufacture of its products. While these resins are
generally widely available, prices are subject to fluctuations caused
in part by changes in supply and demand. Significant increases in the
prices of these resins could have a material adverse effect on the
financial condition of the Company.
Rapidly Changing Technology. The Company is presently in various
stages of production, pre-production, development and research with
respect to its Safety Cradler sharps containers, SafetyLanceO safety
lancet, ExtreSafeO medical needle retraction technology, intravenous
flow gauge system, blood collection needle, filmless digitized imaging
technology and other products. The Company's focus on these
particular product lines and technologies makes the Company vulnerable
<PAGE> 8
to the development of superior competing products and changes in
technology that could eliminate the need for the Company's products.
There can be no assurance that the introduction of competing products
will not adversely affect the Company's attempts to develop and market
its products successfully.
Lack of Market Acceptance. The use of safety medical products,
including the Company's products, is relatively new. Although the
potential market for these products is large, actual sales of the
Company's products may be much less than the market's potential.
Market acceptance of the Company's products will depend in large part
upon the Company's ability to demonstrate the operational advantages,
safety, efficacy, and cost-effectiveness of its products compared to
competing products. There can be no assurance that the Company's
products will achieve market acceptance.
Dependence on Continued Research and Development. The ExtreSafe(TM)
medical needle technology, SafetyLance(TM), intravenous flow gauge
system, blood collection needle and filmless digitized imaging
technology are still in various stages of development. The Company is
also exploring additional applications for all of its products. The
continued development of its products and development of additional
applications therefore is important to the long-term success of the
Company. There can be no assurance that any of such applications or
products will be developed or, if developed, that they will be
successful.
Joint Venture Risks. The Company has entered into an agreement
(Agreement) with a third party (Zerbec, Inc.) to form a Joint Venture
(the "Venture") to develop, make and distribute an improved filmless
digitized imaging system. The Venture is seeking funding to provide
an alpha test system in 1996, beta test systems in 1997 and production
deliveries in 1998. For a 50% interest in the Venture (before
dilution by financing investors), the Company is providing up to
$360,000 to support the operations of the Venture over a 12-month
period. For the Venture to be successful, the Company estimates that
between $3,000,000 and $6,000,000 will have to be raised through
financing channels which do not impact the success of the Company. It
is anticipated that at least one-third of the outstanding shares of
the Venture will be sold to fund development through initial
production of related filmless digitized imaging systems. While a
prototype filmless digitized imaging system has been built and
demonstrated and patents have been allowed in support of the filmless
digitized imaging technology, no assurance can be given that the
system will find profitable acceptance in the marketplace.
Dependence on Patents and Proprietary Rights. The Company's future
success depends in part on its ability to protect its intellectual
property and maintain the proprietary nature of its technology through
a combination of patents and other intellectual property arrangements.
The Company owns three United States patents and has patent
applications pending in the United States and in other countries that
are directly applicable to the Company's Safety Cradle(R) sharps
container products. The Company also owns one United States patent
relating to its SafetyLance(TM), one United States patent and three
additional recently allowed United States Patent applications relating
to its ExtreSafe(TM) medical needle technology. The Company has
additional United States patent applications pending relating to its
ExtreSafeO medical needle technology and SafetyLance(TM). An affiliate
of the Company, the Venture, owns three United States patents and
three Canadian patents that are directly applicable to the filmless
digitized imaging technology. The Company plans to timely file
foreign patent applications where it deems the same to be appropriate.
There can be no assurance, however, that the protection provided by
such patents and patent applications, if issued, will be broad enough
to prevent competitors from introducing similar products or that such
patents, if challenged, will be upheld by the courts of any
jurisdiction. Patent infringement litigation, either to enforce the
Company's patents or defend the Company from infringement suits, would
be expensive and, if it occurs, could divert Company resources from
other planned uses. Any adverse outcome in such litigation could have
a material adverse effect on the Company. Patent applications filed
in foreign countries and patents in such countries are subject to laws
and procedures that differ from those in the United States. Patent
protection in such countries may be different from patent protection
under U.S. laws and may not be as favorable to the Company. The
Company also attempts to protect its proprietary information through
the use of confidentiality agreements and by limiting access to its
facilities. There can be no assurance that the Company's program of
patents, confidentiality agreements and restricted access to its
facilities will be sufficient to protect the Company's proprietary
technology from competitors.
Ability to Manage Growth. The Company intends to pursue a strategy
of rapid growth. The Company plans to significantly expand its
product lines and to devote substantial resources to operations and
research and development support areas, including marketing and
administrative services. There can be no assurance that the Company
will obtain sufficient manufacturing capacity on favorable terms,
attract qualified personnel or successfully manage such expanded
operations. While the Company is not presently in need of additional
manufacturing capacity or management personnel, the failure to
properly manage growth could have a material adverse effect on the
Company.
<PAGE> 9
Competition. The Company is engaged in a highly competitive
business and will compete directly with firms that have much longer
operating histories, substantially greater financial resources and
experience, greater size, more substantial marketing organizations and
established distribution channels and that are better situated in the
market than the Company. Such competitors may use their economic
strength to influence the market to continue to buy their existing
products. The Company does not have an established customer base and
is likely to encounter a high-degree of competition in developing a
customer base. One or more of these competitors could use such
resources to improve their current products or develop new products
that may compete more effectively with the Company's products. New
competitors may arise and may develop products which compete with the
Company's products. In addition, new technologies may arise which
could lower or eliminate the demand for the Company's products.
Recognizing these factors, the Company intends to form marketing and
distribution alliances with established marketing and distribution
firms for the Company's products. No assurance can be given that such
relationships can be established or maintained. See "Business _
Competition".
Need for Additional Funds. As currently projected, the Company
believes that its current cash reserves, together with operating
revenues and existing financing commitments, will be sufficient to
support its operations for the next 12 months. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations." The Company's need for capital during the next year or
more will vary based upon a number of factors, including the rate at
which demand for products expands, the level of sales and marketing
activities for the Safety Cradle(R) sharps container products, and the
level of effort needed to develop and commercialize the Safety
Cradle(R), SafetyLance(TM), and ExtreSafe(R) medical needle technology,
intravenous flow gauge and blood collection needle. In addition, the
Company's business plans may change or unforeseen events may occur
which require the Company to raise additional funds. Additional funds
may not be available on terms acceptable to the Company when the
Company needs such funds. The lack of additional funds when needed
could have a material adverse effect on the Company.
Product Liability. The sale of medical devices entails an inherent
risk of liability in the event of product failure or claim of harm
caused by product operation. The Company is not aware of any claim
against it based upon the use or the failure of its products. The
Company maintains product liability insurance against any such claims
in amounts it believes to be adequate. There can be no assurance that
the Company will not be subject to such claims, that any claim will be
successfully defended or if the Company is found liable, that the
claim will not exceed the limits of the Company's insurance. There is
also no assurance that the Company will obtain product liability
insurance on acceptable terms. Product liability claims could have a
material adverse effect on the Company.
Litigation. During 1994, Specialized Health Products, Inc. ("SHP"),
a wholly owned subsidiary of the Company, entered into various
agreements with Mold Threads, Inc., a Connecticut corporation ("MT"),
whereby MT agreed to construct various molds and to manufacture sharps
container products for SHP. SHP alleges that MT did not fulfill its
contractual obligations in a timely or satisfactory manner. When SHP
attempted to move the mold work and production to another mold
maker/manufacturer, MT refused to release SHP's molds. In January
1995, SHP filed a lawsuit in the United States District Court for the
District of Utah against MT alleging breach of contract, conversion,
and intentional interference with business relations. Thereafter, MT
agreed to release SHP's molds. The time for answering SHP's complaint
has not yet run. SHP's claims are in excess of $50,000, exclusive of
attorney's fees and costs. SHP anticipates that MT will counterclaim
for $22,328, exclusive of attorney's fees and costs, representing
amounts MT alleges are owed by SHP. SHP believes that MT has waived
the right to assert any additional counterclaims. The litigation is
in the early stages, is subject to all of the risks and uncertainties
of litigation, and the outcome cannot presently be predicted.
Specifically, there is no assurance that SHP will be successful in
this lawsuit, that the lawsuit will be resolved on acceptable terms,
or that SHP and the Company will not incur significant costs in
asserting its claims and defending its position.
Government Regulation. Government regulation is a significant
factor in the development and marketing of the Company's products and
in the Company's ongoing manufacturing and research and development
activities.
The Company's Safety Cradle(R) sharps container products are Class II
devices under the regulatory structure of the Federal Food, Drug, and
Cosmetic Act (the "FD&C Act") which is administered by the United
States Food and Drug Administration ("FDA"). The Company has
previously acquired FDA approval of a 510(k) pre-market clearance
submission on its Safety Cradle(R) sharps container which supports its
marketing and selling of its Safety Cradle(R) sharps container products
subject to ongoing regulatory controls by the FDA. Among other
things, the FDA requires adherence to certain "Good Manufacturing
Practices" ("GMP") regulations that include validation testing,
quality assurance, quality control and documentation procedures. In
addition, performance standards could be promulgated by the FDA that
the Company's Safety Cradle(R) sharps containers would be required to
meet. Failure to meet those standards would require the Company to
discontinue the marketing of the product. In addition, future
<PAGE> 10
regulations may be imposed which might have a material adverse effect
on the Company and/or one or more of its products. Furthermore, since
the FDA continually regulates and inspects medical devices and their
manufacture, any actual or potential product failure could result in
the imposition of administrative and/or judicial sanctions, including
product recall, which might have a material adverse effect on the
Company.
In addition to the foregoing, the Occupational Safety and Health
Administration ("OSHA") requires, in part, that sharps containers be
closeable, disposable, puncture-resistant, leak proof on the sides and
bottom, and appropriately labeled. The Company believes that its
sharps containers are in compliance with present OSHA regulations.
Future regulations, however, may be imposed which might have a
material adverse effect on the Company and/or one or more of its
products.
The Company's follow-on products (the SafetyLance(TM) and the
ExtreSafe(TM) medical needle technology, intravenous flow gauge and blood
collection needle) are still in the development stage. The Company
expects the SafetyLance(TM) to be a Class I device and be subject to the
same types of limitations and controls as imposed on its sharps
containers. The Company expects its other follow-on products to be
Class II devices. The Company expects that its follow-on products
will not require pre-market approval applications but will be eligible
for pre-market clearance through the 510(k) notification procedure
based upon their substantial equivalence to previously marketed
devices. Although the 510(k) pre-market clearance process is
ordinarily simpler and faster than the pre-market approval process,
there can be no assurance that the Company will obtain 510(k) pre-
market clearance to market its follow-on products, or that the
Company's follow-on products will be classified as described above, or
that, in order to obtain 510(k) pre-market clearance, the Company will
not be required to submit additional data or meet additional FDA
requirements that may substantially delay the 510(k) process and add
to the Company's expenses. Moreover, such 510(k) pre-market
clearance, if obtained, may be subject to conditions on the marketing
or manufacturing of the corresponding products that may impede the
Company's ability to market and/or manufacture such products.
If any of the Company's follow-on products do not qualify for the
510(k) procedure (either because it is not substantially equivalent to
a legally marketed device or because it is a Class III device), the
FDA must approve a pre-market approval ("PMA") application before
marketing can begin. PMA applications must demonstrate, among other
matters, that the medical device is safe and effective. A PMA
application is typically a complex submission, usually including the
results of clinical studies, and preparing an application is a
detailed and time-consuming process. Once a PMA application has been
submitted, the FDA's review may be lengthy and may include requests
for additional data. By statute and regulation, the FDA may take 180
days to review a PMA application although such time may be extended.
Furthermore, there can be no assurance that a PMA application will be
reviewed within 180 days or that a PMA application will be approved by
the FDA.
In March 1995, the FDA issued a draft guidance document on 510(k)
notifications for medical devices with sharps injury prevention
features, a category that would cover the Company's follow-on
products. The draft guidance provisionally placed this category of
products into Tier 3 for purposes of 510(k) review, meaning that such
products will be subject to the FDA's most comprehensive and rigorous
review for 510(k) products. However, review under this classification
is expedited. The draft guidance also states that in most cases, FDA
will accept, in support of a 510(k) notification, data from tests
involving simulated use of such a product by health care
professionals, although in some cases that agency might require actual
clinical data.
The process of obtaining required regulatory clearances or approvals
can be time-consuming and expensive, and compliance with the FDA's GMP
regulation and other regulatory requirements can be burdensome.
Moreover, there can be no assurance that the required regulatory
clearances will be obtained, and such clearances, if obtained, may
include significant limitations on the uses of the follow-on products
in question. In addition, changes in existing regulations or
guidelines or the adoption of new regulations or guidelines could make
regulatory compliance by the Company more difficult in the future.
The Venture must also meet FDA requirements before marketing the
filmless digitized imaging technology. The failure to comply with
applicable regulations could result in fines, delays or suspensions of
clearances, seizures or recalls of products, operating restrictions
and criminal prosecutions, and would have a material adverse effect on
the Company. See "Business _ Government Regulation."
Distribution of the Company's products in countries other than the
United States may be subject to regulation in those countries. There
can be no assurance that the Company will obtain the approvals
necessary to market any of its products outside the United States.
Uncertainty in the Health Care Industry. The health care industry
is subject to changing political, economic and regulatory influences
that may affect the procurement practices and operations of health
<PAGE> 11
care facilities. During the past several years, the health care
industry has been subject to increased government regulation of
reimbursement rates and capital expenditures. Among other things,
third party payors are increasingly attempting to contain health care
costs by limiting both coverage and reimbursement levels for health
care products and procedures. Because the price of the Company's
products may exceed the price of conventional products the cost
control policies of third party payors, including government agencies,
may adversely affect use of the Company's products.
There are numerous proposals to reform the U.S. health care system
and health care systems of various states. Many of these proposals
seek to increase government involvement in health care, lower
reimbursement rates, contain costs and otherwise change the operating
environment for the Company's customers. Health care providers may
react to these proposals and the uncertainty surrounding such
proposals by curtailing or deferring investments in new technology,
including the Company's products. The Company cannot predict what
impact, if any, such proposals or health care reforms might have on
the Company's financial condition and results of its operations.
Dependence on Key Personnel. The success of the Company depends
upon the skills, experience and efforts of its management. Should the
services of one or more members of its present management become
unavailable to the Company for any reason, the business of the Company
could be adversely affected. The Company does not have noncompetition
agreements in place with its key personnel.
Market Volatility. Market prices of securities of medical
technology companies are highly volatile from time to time. The
market price of the Company's securities may be significantly affected
by factors such as the announcement of new product or technical
innovations by the Company or its competitors, changes in the
regulatory environment, or by other factors that may or may not relate
directly to the Company.
Shares Eligible for Future Sale. No prediction can be made as to
the effect, if any, that future sales of shares, or the availability
of shares for future sales, will have on the market price of the
Common Stock prevailing from time to time following this offering (the
"Offering"). Sales of substantial amounts of Common Stock (including
shares which may be issued upon exercise of Warrants and/or stock
options), or the perception that such sales may occur, could adversely
affect prevailing market prices for the Common Stock. See "Securities
Eligible for Future Sale."
The securities of the Company that are not registered hereby may
become eligible for offer and sale without registration under the
Securities Act. In general, under Rule 144, as currently in effect,
if two years have elapsed since the later of the date of acquisition
of the securities from the Company or the date of acquisition of
securities from any affiliate of the Company, the acquirer or
subsequent holder is also entitled to sell within any three-month
period a number of shares of Common Stock that does not exceed the
greater of 1% of the then-outstanding shares of Common Stock or the
average weekly trading volume of Common Stock on all exchanges and
reported through the automated quotation system of a registered
securities association during the four calendar weeks preceding the
date on which notice of the sale is filed with the SEC. Certain
securityholders acquired shares of Common Stock during 1993 and 1994
and may be eligible for this exemption from registration.
Within three months following the effective date of this offering,
the Company expects to register for sale under the Securities Act up
to 5,328,401 shares of Common Stock, including 3,890,403 shares of
outstanding Common Stock which may be sold by certain shareholders of
the Company and up to 1,437,998 shares of Common Stock which may be
issued by the Company to certain existing shareholders upon the
exercise of certain stock options. Sales of these shares of Common
Stock by the holders thereof, or the perception that such sales may
occur, could adversely affect prevailing market prices for the Common
Stock.
Effect of Failure to Comply with Securities Law. In the event that
it is later determined that any previous offering by the Company was
not exempt from registration under federal and any applicable state
securities laws, it is possible that an investor may have the right to
rescind his or her purchase of the securities. If a number of
purchasers were to successfully seek rescission, the Company could
face severe financial demands that could adversely affect the Company
and, therefore, the price of the Common Stock.
No Dividends. The Company has not paid dividends since its
inception and does not intend to pay any dividends in the foreseeable
future. No assurance can be given that it will pay dividends at any
time. The Company presently intends to retain future earnings, if
any, for financing the growth and expansion of the Company.
<PAGE> 12
Limitations on Director Liability. The Company's Certificate of
Incorporation provides, as permitted by governing Delaware law, that a
director of the Company shall not be personally liable to the Company
or its stockholders for monetary damages for any action or failure to
take any action, with certain exceptions. These provisions may
discourage stockholders from bringing suit against a director for
breach of duty and may reduce the likelihood of derivative litigation
brought by stockholders on behalf of the Company against a director.
In addition, the Company has agreed and its Certificate of
Incorporation and Bylaws provide, for mandatory indemnification of
directors and officers to the fullest extent permitted by Delaware law
and has entered into contracts with its directors and officers
providing for such indemnification.
Possible Delisting of Securities from NASDAQ System. Trading of
300,000 shares of the Company's Common Stock is currently conducted on
the NASDAQ Small-Cap Market System. In order to continue to qualify
its Common Stock for quotation on the NASDAQ Small-Cap Market, a
company must have, among other things, at least $2,000,000 in total
assets, $1,000,000 in capital and surplus and a minimum bid price for
its common shares of $1.00 per share. The Company may be unable to
satisfy the continued listing criteria under the rules, inasmuch as it
might have less than $2,000,000 in total assets or $1,000,000 in
capital and surplus, or the minimum bid price for its common stock
might be less than $1.00 at some time in the future, in which event
any listed security of the Company will be subject to delisting.
In the event of such delisting, trading, if any, in the Company's
securities would be expected to be conducted on the over-the-counter
market in what is commonly referred to as the "pink sheets" or the
"Electronic Bulletin Board." As a result, an investor may find it
more difficult to dispose of, or to obtain accurate quotations as to
the price of, the Company's securities. The loss of continued
quotation on the NASDAQ System may also cause a decline in share
price, loss of news coverage of the Company and difficulty in
obtaining subsequent financing.
No Control Over Market Making. No person is under any obligation to
make a market in the Company's Common Stock and any person making a
market in the Common Stock may discontinue market making activities at
any time without notice. There can be no assurance that an active
public market for the Common Stock will develop or, if such a market
develops, that it will continue.
Placement Agent Warrants; Risk of Further Dilution. The Company has
provided U.S. Sachem Financial Consultants, LP ("Sachem"), placement
agent of a prior private placement, and various sub-placement agents,
with Series A Warrants to purchase shares of Common Stock at the price
of $3.00 per share and Series B Warrants to purchase shares of Common
Stock at the price of $2.00 per share. For the life of these
Warrants, the holders thereof are given the opportunity to profit from
the difference, if any, between the exercise price of these Warrants
and the value of or market price, if any, of the Common Stock with a
resulting dilution in the interest of existing stockholders. The
terms on which the Company could obtain additional capital during the
exercise period of the Warrants may be adversely affected by these
Warrants.
Barriers to Takeover. The Company has an authorized class of
5,000,000 shares of preferred stock which may be issued by its Board
of Directors on such terms and with such rights, preferences and
designations as the board may determine. Issuance of such preferred
stock, depending upon the rights, preferences and designations
thereof, may have the effect of delaying, deterring or preventing a
change in control of the Company. In addition, certain "anti-
takeover" provisions of the Delaware General Corporation Law, among
other things, may restrict the ability of stockholders to effect a
merger or business combination or obtain control of the Company and
may be considered disadvantageous by a stockholder. See "Description
of Securities _ Anti-Takeover Provisions" and "Description of
Securities _ Certain Certificate and Bylaw Provisions." Management of
the Company presently intends to issue shares of preferred stock to
certain members of management in the near future, which shares might
have substantially more than one vote per share or other provisions
designed to deter a change in control of the Company. The issuance of
such shares to a limited group of management shareholders may vest in
such persons absolute voting control of the company, including, among
other things, the ability to elect all of the directors, and to
control certain matters submitted to a vote of shareholders and to
prevent any change in management despite performance. Also, the
shares of preferred stock may have the right to vote upon certain
matters as a separate class.
Market Overhang. At commencement of this Offering, there will be
(a) 8,566,653 shares of Common Stock outstanding, of which 4,376,250
shares of Common Stock are being registered hereby and 300,000 shares
of Common Stock have been previously registered, and (b) warrants and
stock options exercisable for 5,726,060 shares of Common Stock. Of
the shares of Common Stock underlying these warrants and options,
4,401,250 shares of Common Stock are being registered hereby. Thus,
upon completion of this Offering, assuming that all of the Warrants
are exercised, there will be 12,967,903 shares of Common Stock
outstanding, of which 9,077,500 shares will be registered. In
addition, within three months following the effective date of this
offering, the Company expects to register for sale under the
<PAGE> 13
Securities Act up to 5,328,401 shares of outstanding Common Stock,
including 3,890,403 shares of outstanding Common Stock which may be
sold by certain shareholders of the Company and up to 1,437,998 shares
of Common Stock which may be issued to certain existing shareholders
by the Company upon the exercise of certain stock options. The sale of
a substantial part of these securities could adversely affect the
market price of the Common Stock, which may hinder any future efforts
of the Company to raise capital. See "Securities Available for Future
Sale" and "Principal and Selling Securityholders."
<PAGE> 14
DIVIDEND POLICY
To date, the Company has not paid dividends on its respective common
stock. The payment of dividends, if any, in the future is within the
discretion of the Board of Directors and will depend upon the
Company's earnings, its capital requirements and financial condition,
and other relevant factors. The Board of Directors does not intend to
declare any dividends in the foreseeable future, but instead intends
to retain all earnings, if any, for use in the Company's operations.
SHARE PRICE HISTORY
The Common Stock has been quoted on NASDAQ Small-Cap Market since
October 1995 under the trading symbol "SHPI." From July 1995 through
October 1995 the Common Stock was quoted on the NASD Over-the-Counter
market under the symbol "SPZH." Prior to July 1995, 300,000 shares of
Common Stock had been issued and registered pursuant to a registration
statement under the Securities Act and were eligible for resale
without restriction, although no active trading market existed for the
Company's Common Stock. On December 4, 1995, the reported high bid
and low ask prices of the Common Stock were $10.50 and $8.50,
respectively. The following table sets forth the high and low bid
information of the Common Stock for the periods indicated. It should
be understood that only 300,000 shares have been available for trading
to date, and that such over the counter market quotations reflect
inter-dealer prices without retail markup, markdown or commission, and
the quotations may not reflect any actual market transactions in the
Common Stock.
<TABLE>
<CAPTION>
Quarter Ended High Low
1995
<S> <C> <C>
September 30 $5.25 $2.50
December 31 $ $
</TABLE>
<PAGE> 15
CAPITALIZATION
The following table sets forth actual capitalization of the Company
at September 30, 1995, and as adjusted to reflect the effect that
would take place if all the Warrants were exercised and converted.
There can be no assurance that all or any Warrants will be exercised.
<TABLE>
<CAPTION>
September 30, 1995
Actual As Adjusted
<S> <C> <C>
Long-term debt $ 0 $ 0
Stockholders' Equity:
Preferred Stock, $.001 par value - 5,000,000 0 0
shares authorized;
no shares outstanding
Common Stock, $.02 par value - 50,000,000 shares 171,333 259,358
authorized, 8,566,653 (12,967,903, as adjusted)
outstanding (1)
Common stock subscription receivable (349,500) (349,500)
Additional Paid-in Capital 9,316,028 21,141,378
Accumulated Deficit (2,238,701) (2,238,701)
----------- -----------
Total Stockholders' Equity 6,899,160 18,812,535
----------- -----------
Total Capitalization $ 6,899,160 $18,812,535
</TABLE>
_______________
<F1>
(1) Adjusted to give effect to the issuance of 3,110,875 shares of
Common Stock issuable upon the exercise of the Series A Warrants
and 1,290,375 shares of Common Stock issuable upon the exercise of
the Series B Warrants. The Warrants are callable by the Company
under certain conditions. See "Description of Securities." Does
not include up to 2,000,000 shares of Common Stock (the "Earn-Out
Shares") that may be issued pursuant to certain agreements with
members of management, 1,284,998 shares of Common Stock that may be
granted under the Company's non-qualified stock option plan,
including 1,171,810 shares subject to options now outstanding,
108,000 shares of Common Stock issuable upon the exercise of
options now outstanding issued under SHP's non-qualified stock
option plan which was assumed by the Company in connection with the
Company's acquisition of SHP, or 45,000 shares of Common Stock
issuable upon the exercise of certain warrants issued to a single
investor by SHP which were assumed by the Company in connection
with the Company's acquisition of SHP. See "Description of
Securities"
<PAGE> 16
SELECTED FINANCIAL DATA
The following table presents summary financial data with respect to
the Company, (a) for its fiscal years ended December 31, 1994 and
1993, which information is derived from the financial statements of
the Company which have been audited by KPMG Peat Marwick LLP, and (b)
for the nine-month periods ended September 30, 1994 and 1995, which
information is derived from the unaudited financial statements of the
Company. The unaudited summary financial data for the nine-month
periods ended September 30 reflect, in the opinion of management, all
adjustments, consisting only of normal, recurring adjustments,
necessary for a fair presentation of the financial information for
such periods and at such dates. The information set forth below
should be read in conjunction with the consolidated financial
statements and the notes thereto and other financial information
included elsewhere in this Prospectus. The results of operations for
the nine months ended September 30, 1995, are not necessarily
indicative of results for the fiscal year ending December 31, 1995, or
any other period.
<TABLE>
<CAPTION>
Fiscal Year 9 Months Ended
Ended (1) (unaudited)
Nov. 19,1993 Dec. 31 Sept. 30 Sept. 30
(inception) 1994 1994 1995
to Dec. 31,1993
<S> <C> <C> <C> <C>
Statement of Operations Data:
Sales $ _ 33,256 24,154 442,341
Cost of sales _ 21,669 14,974 252,801
------------ ---------- -------- ----------
Gross profit _ 11,587 9,180 189,540
Expenses:
Research and development expense _ 290,950 156,931 532,537
General and administrative 3,450 620,022 306,678 972,911
------------- ----------- -------- ------------
Total expenses 3,450 910,972 463,609 1,505,448
------------- ----------- --------- ------------
Operating loss (3,450) (899,385) (454,429) (1,315,908)
Net interest income (expense) _ (7,563) (363) 15,774
------------- ----------- ---------- -----------
Net loss $ (3,450) (906,948) (454,792) (1,300,134)
Dividends on preference stock _ (16,780) (11,262) (11,389)
------------- ----------- ---------- -----------
Net loss attributable to common (3,450) (923,728) (466,054) (1,311,523)
stockholders ============= =========== ========== ===========
Net loss per common share (.003) (.75) (.40) (.46)
============= =========== ========== ============
Weighted average number of shares
used for net loss per share 1,170,000 1,224,074 1,177,088 2,820,883)
computation (2) ============= =========== ========== ============
Balance Sheet Data (at period end):
Working capital $ (12,150) (287,723) 5,590,653
Total assets 16,550 656,865 7,064,614
Long-term debt, less current
Maturities _ 458,333 _
Total stockholders equity
(deficit) (2,150) (355,878) 6,889,160
__________________________________________________________
<F1>
(1) Excludes Specialized Health Products International, Inc.
(formerly, Russco, Inc.) which had no operations prior to the
Acquisition on July 28, 1995, and is immaterial.
<F2>
(2) Net loss per common share is based on the weighted average number
of common shares outstanding. Stock options and warrants, and
preferred shares prior to conversion, are not included in the
calculation because this inclusion would be anti-dilutive and
reduce the net loss per share amount.
</TABLE>
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of
the Company's consolidated results of operations and financial
condition. The discussion should be read in conjunction with the
consolidated financial statements and notes thereto. Wherever in this
discussion the term "Company" is used, it should be understood to
refer to the Company and SHP, on a consolidated basis, except where
the context clearly indicates to the contrary. Prior to the
Acquisition wherein the Company acquired SHP (See note 1 to the
consolidated financial statements) the Company had no operations.
Overview
From its inception, the Company has incurred losses from operations.
As of September 30, 1995, the Company had cumulative net losses
totaling $2,238,701. To date, the Company's principal focus has been
the design, development, testing, and evaluation of its Safety Cradle(R)
sharps containers, SafetyLance(TM), ExtreSafe(TM) medical needle technology,
intravenous flow gauge system, blood collection needle, and other
products, and the design and development of its molds and production
processes relating to its Safety Cradle(R) sharps containers.
In 1994, the Company had limited sales of its sharps containers due,
in part, to the fact the molds used to produce the sharps containers
had not been completed and come on line. Certain of the Company's
Safety Cradle(R) sharps container molds were completed in the first half
of 1995, and the remaining Safety Cradle(R) sharps container molds are
expected to be completed in the second half of 1995. As molds were
completed, the Company's sales increased from $33,256 for 1994 to
$442,341 in the nine months ended September 30, 1995.
The Company anticipates that commercial production of its
SafetyLance(TM), ExtreSafe(TM) catheter and ExtreSafe(TM) blood collection
needle will commence in 1996 and the ExtreSafe(TM) syringe in 1997. The
Company's other ExtreSafe(TM) medical needle technology products,
intravenous flow gauge and blood collection needle are conceptual
ideas in the research stage. No assurance can be given, however, that
the Company will be able to adhere to these time frames or that such
products will ever go to market.
Nine Months Ended September 30, 1995 and 1994
The Company had sales of $442,341 for the nine months ended
September 30, 1995, and sales of $24,154 for the nine months ended
September 30, 1994. These revenues were derived largely from the sale
of sharps containers that were produced on a limited basis during
1994. Commercial manufacture and sale of additional sizes and
versions of the Company's sharps containers were introduced in the
third and fourth quarters of 1995.
Research and development expenses were $532,537 for the nine months
ended September 30, 1995, compared with $156,931 for the nine months
ended September 30, 1994. The Company's efforts in the nine months
ended September 30, 1995, were focused on refining the design and
producing molds for its Safety Cradle(R) sharps container products, and
upon the design and development of its SafetyLance(TM) and ExtreSafe(TM)
medical needle technology, intravenous flow gauge system, and blood
collection needle. The Company's efforts in the nine months ended
September 30, 1994, were focused on refining the design and producing
molds for its Safety Cradle(R) sharps container products.
General and administrative expenses were $1,006,290 for the nine
months ended September 30, 1995, compared to $306,678 for the nine
months ended September 30, 1994. The increase in costs resulted
primarily from the hiring of additional product development, sales and
marketing personnel to support sale and commercialization of the
Company's products.
Net interest income was $15,774 for the nine months ended September
30, 1995, compared with net interest expense of $363 for the nine
months ended September 30, 1994. The interest income for the nine
months ended September 30, 1995, relates to interest earned on funds
derived from the sale of the Company's equity securities which closed
in August 1995.
<PAGE> 18
Year Ended December 31, 1994
The Company had sales of $33,256 for the year ended December 31,
1994. These revenues were derived largely from the sale of sharps
containers that were produced on a limited basis during 1994.
Research and development expenses were $290,950 for the year ended
December 31, 1994. The SHP's efforts in 1994 were focused on refining
the design and producing molds for its Safety Cradle(R) sharps container
products, and upon the acquisition, design and development of its
SafetyLance(TM) and ExtreSafe(TM) medical needle technology, intravenous
flow gauge system and blood collection needle.
General and administrative expenses were $620,022 for the year ended
December 31, 1994. The Company's operating costs resulted primarily
from the employment of product development, sales and marketing
personnel to support sales and commercialization of the Company's
products.
Net interest expense was $7,563 for the year ended December 31,
1994. The interest expense relates to the accrued interest on certain
notes payable and the interest on the Company's line of credit.
Year Ended December 31, 1993
SHP was formed in November of 1993. SHP had no revenues from
inception to December 31, 1993. The principal activity of SHP during
this period was negotiation and acquisition of the certain
intellectual property relating to the sharps containers. SHP had no
research and development or financing expenses. The general and
administrative expenses of SHP totaled $3,450, which were devoted
largely to activities relating to the acquisition of the Sharp-Trap(R)
patents, (See "Business") patent applications and related intellectual
property.
During the period prior to November 1993, the Company (not including
SHP) had no operations and its financial results were immaterial
Year Ended December 31, 1992
During this period the Company (not including SHP) had no
operations and its financial results were immaterial.
Liquidity and Capital Resources
The Company's need for funds has increased from period to period as
it has increased its research and development activities, expanded
staff, and commenced the purchase and construction of molds and
production equipment. To date the Company has financed its operations
principally through borrowings and private placements of equity
securities and debt. For the nine months ended September 30, 1995,
the Company had received net proceeds of approximately $7,883,061
through the sale of equity securities and had $349,500 in
subscriptions receivable relating to equity securities. In addition,
$190,000 was received from prior subscriptions receivable. As of that
date, the Company's liabilities totaled $165,454. All of these
liabilities are current liabilities. The Company had working capital
at the nine months ended September 30, 1995, of $5,590,653 .
During the nine-month period ended September 30, 1995, the Company
spent $1,628,878 on operating activities. The Company's working
capital and other capital requirements during the next year or more
will vary based upon a number of factors, including the cost to
complete development and bring the SafetyLance(TM) and ExtreSafe(TM) medical
needle technology, intravenous flow gauge system, blood collection
needle and other products, to commercial viability, the cost and
effort needed to complete production of the Sharp-Trap(R) molds, the
level of sales and marketing for the Safety Cradle(R) sharps containers,
and the resources that are expended in SHP's lawsuit against Mold
Threads, Inc. See "Risk Factors _ Litigation." The Company believes
that the funds described above and funds generated from the sale of
its Safety Cradle(R) sharps container products, will be sufficient to
support the Company's operations and planned capital expenditures at
least through fiscal 1996. The Company's failure either to produce or
sell sufficient quantities of Safety Cradle(R) sharps container products
could materially and adversely affect the Company's cash flows. In
addition, the Company's business plans may change or unforeseen events
may occur which require the Company to raise additional funds.
<PAGE> 19
Inflation
The Company does not expect the impact of inflation on operations to
be significant.
<PAGE> 20
BUSINESS
General
The Company primarily develops health care products that limit or
prevent the risk of accidental needle sticks which may cause the
spread of blood-borne diseases such as HIV and Hepatitis B, as well as
other products for use in the health care industry.
The Company has created a portfolio of proprietary health care
products which are in various stages of production, pre-production,
development and research. In December 1994 the Company introduced the
first in its line of newly developed containers for the disposal of
contaminated "sharps" (e.g., needles, syringes, blood collection
systems, intravenous catheters, surgical blades, lancets, etc.). The
Company is introducing additional sizes and versions of its Safety
Cradler sharps containers in 1995. The Company is currently
developing a SafetyLance(TM) lancet, a small hand-held device for
penetrating the skin to obtain blood for analysis. Prototypes of the
Company's SafetyLance(TM) lancet and ExtreSafe(TM) syringe were completed
in the fourth quarter of 1995, and commercial production will commence
in 1996. The Company is also developing a line of products using the
Company's ExtreSafe(TM) medical needle technology, which incorporates a
system to allow a contaminated needle to be automatically retracted
directly from a patient and immediately encapsulated without exposure
to the health care worker. A prototype of the first product using the
safe-needle retraction technology was completed in April 1995, and
commercial production is anticipated to commence in 1996. Prototypes
of the Company's ExtreSafe(TM) catheter and ExtreSafe(TM) syringe were
completed in the second half of 1995. The Company's concepts for a
safety intravenous flow gauge, blood collection needle and filmless
digitized imaging technology are in the research stage.
Company Background and 1995 Reorganization
The Company was incorporated in 1986 as Santian Ventures, Inc. as a
Utah corporation. In 1989 the Company changed its name to Ware/Hadley
Ventures, Inc. Subsequently, the Company's corporate domicile was
changed to the State of Delaware, and its name was changed to Russco,
Inc., effective December 20, 1990, by merger into a newly created
Delaware corporation. The Company had no operations until July 28,
1995. On that date, the Company acquired Specialized Health Products,
Inc., a Utah corporation, through a merger with a subsidiary of the
Company, and the Company changed its name to "Specialized Health
Products International, Inc." Pursuant to an Agreement and Plan of
Merger dated June 23, 1995, among the Company, SHP and a shareholder
of the Company (the "Merger Agreement"), all persons serving as
officers and directors of the Company resigned upon consummation of
the acquisition and SHP became a wholly owned subsidiary of the
Company. The persons serving as officers and directors of SHP
immediately prior to the consummation of the Acquisition were elected
to the same offices with the Company and retained their positions as
directors and officers of SHP. Prior to the Acquisition, neither SHP
nor any affiliate of SHP had an interest in Russco, Inc.
Products
Sharps Containers
In January 1994, SHP acquired the Sharp-Trap(R) name and all technology
developed by Sharp-Trap, Inc., a Michigan corporation,
relating to a patented container entry system that is designed to
reduce the risk of accidental needle sticks and exposure to
contaminated instruments when disposing of contaminated instruments.
At the time of SHP's purchase of the Sharp-Trap(R)
technology, Sharp-Trap, Inc. was already manufacturing two sharps
container product configurations, a 0.5 quart and a 1.5 quart
(the "Sharp-Trap(R)"containers).
Following extensive research and discussions with medical product
distributors and end users, SHP designed an improved line of Safety
Cradle(R) sharps containers (the "Safety Cradle(R)") which retained a
basic container closure technology and incorporated improvements to
make them safer, higher quality, easier to use and less costly to
manufacture than the Sharp-Trap(R) containers. Unlike traditional
sharps containers, self-closing Safety Cradle(R) containers allow for
disposal of sharps in a container that incorporates a self closing
sharps containment flap and an open/close/lock mechanism. The open
position allows the Safety Cradle(R) to be used for disposal of sharps
into the container. In the close position, the Safety Cradle(R) cannot
open and the container can be safely moved to another site if
necessary. In the lock position, a filled container is permanently
<PAGE> 21
locked up, ready for recycling or biohazard disposal. For disposal,
each sharp is placed on the Safety Cradle(R) section which has raised,
protecting barriers which help prevent the user's fingers from
slipping into the container and becoming exposed to sharps. A lid
section of the top of the container releases the Safety Cradle(R) "trap
door," dumping the whole syringe, blade or other sharp object into the
safe holding compartment. The self-closing Safety Cradle then
automatically returns to a closed position. These containers are made
of environmentally safe polypropylene material.
SHP has developed three sizes of the Safety Cradle(R) containers.
Each container size uses the same top, but the bottom section varies
in size to allow different volumes to be accommodated (i.e., a 3 inch
- - 2.5 quart, a 5 inch - 4.0 quart and a 9 inch - 6.5 quart). By
manufacturing the top separately, savings in manufacturing cost are
achieved. Also, the containers may be used not only as Safety Cradle(R)
sharps containers but also as transporters and recyclers.
The Safety Cradle(R) products can be used for a variety of purposes,
including:
Safety Cradle(R) Sharps Container - all three sizes will be used as
Safety Cradle(R) sharps containers to contain and dispose of
contaminated sharps. Sale of the 3 inch and the 5 inch sizes began in
March 1995.
Transporter - all three sizes are designed to house medical kits and
new syringes for shipping to the customer. Upon arrival at a customer
site, each Safety Cradle(R) sharps container can be utilized as a sharps
disposal container. The first sales of Safety Cradle(R) products as
transporter/sharps containers are anticipated to take place in the
first quarter of 1996.
Recycler - all three sizes are designed for use by medical product
manufacturers as a secured container, so that discarded sharps may be
shipped back to the manufacturer or to a sharps disposer for
recycling. The first sales of SafetyCradle(R) products as recyclers are
anticipated to take place in the fourth quarter of 1996.
Closed lid design - a new closed lid design was completed in March
1995, and the molds were completed in October 1995 for all three
sizes. The Safety Cradle(R) is located under the lid which closes over
the Safety Cradle(R) to drop the sharps into the safe holding
compartment. This model is designed for use in the home and home
health care markets due to the need to have a sharps container with a
lid covering and locking over the entry area for the sharps. The
first sales took place in the fourth quarter of 1995.
Products Under Development
The SafetyLance(TM) Lancet
Lancets are small devices used to penetrate the skin, usually a
finger, to obtain a few drops of blood for analysis. Lancets are used
by health care workers and are self-administered by individuals,
especially insulin users. The same safety concerns exist with the
handling of lancets as with needles, because lancets become
contaminated after they come into contact with blood.
There are a number of lancets on the market today, the most common
of which is a small "nail" type instrument which is pressed against
the finger, and the "nail" is then triggered to penetrate the skin by
hand pressure. Some lancets penetrate the skin with a blade, which is
commonly considered to be less painful to the patient than the "nail"
and generally is more successful in blood production. The nail type
lancet is often inserted into a spring loaded hand held device, about
the size of a large pen. The device is pressed against the skin of
the patient's finger which is penetrated when the spring is triggered.
After triggering, the lancet handle must be emptied and then reloaded
with another single lancet for use on the next patient. The Company
is unaware of any lancets on the market today that provide absolute
protection against being used more than once on different patients.
Furthermore, existing lancet handle parts may become contaminated by
blood splattering when the finger is pierced. To help prevent
contamination, contaminated lancets parts should be sterilized or
disposed of after each use. In practice, however, sterilization
usually does not take place on all such parts after each use and some
lancet parts are commonly used more than once.
The Company's SafetyLance(TM) lancets will be easy-to-use and provide
protection against being used more than once. SafetyLance(TM) lancets
will be provided in cartridge strip housings of six lancets per strip,
a configuration that is patent protected. Lancets are used one at a
time, by breaking off and discarding lancets immediately after use. A
<PAGE> 22
strip housing is loaded into a convenient low-cost hand held carrier
which also provides a means for safely and convenient by triggering
each lancet. After penetrating the skin, the SafetyLance(TM)
automatically returns inside its housing and cannot be refired for
further use. The used lancet, encased by its protective housing, is
then broken off from the cartridge strip and appropriately discarded.
Reloading the handle with another cartridge is a simple process. Use
of the Company's SafetyLance(TM) will be easier and faster than use of
existing lancets. Testing has shown the Company's SafetyLance(TM) to be
less painful to the patient than traditional lancets because of the
revolutionary design of the blade and its rotary spring motion which
drives the blade both outward to lance and inward for retraction. It
is also noteworthy that part of the lancet in contact with the
patient's skin prior to lancing is sterile until contaminated by use.
A prototype of the SafetyLance(TM) lancet was completed earlier this year
and the Company anticipates that commercial production will begin in
1996.
ExtreSafe(TM) Blood Collection Needle
For certain blood tests it is necessary to draw blood from the
patient for analysis. The present method for obtaining a draw of
blood involves the insertion of a needle into a blood vessel and the
drawing of blood by way of vacuum pressure most often into a small
tube-like container commonly known as a Vacutainer(R). After the blood
draw, the needle is manually removed from the patient and, while
continuing to attend to the patient, the Vacutainer(R) and needle are
often placed on a tray or set aside. Afterward, the needle is usually
unscrewed and discarded into a sharps container. The Company's
ExtreSafe(TM) blood collection needle provides a safer method. The
device retracts the inserted needle directly from the patient into a
safe housing quickly and automatically, minimizing the chance of an
inadvertent stick by a "dirty" needle. Retraction is initiated by a
simple depression of a selected distortable portion of the housing
assuring that there is no action directed toward or away from the
patient which might affect the depth of needle penetration. The
Company's ExtreSafe(TM) medical needle technology acquired for the needle
withdrawal system has a number of other applications, including the
ExtreSafe(TM) catheter and ExtreSafe(TM) syringe described hereafter.
Prototypes of the ExtreSafe(TM) blood collection needle were completed
earlier this year and the Company anticipates that commercial
production will begin in 1996.
ExtreSafe(TM) Catheter
Contemporary catheter use has problems similar to those faced in
blood draw. Inserting a catheter involves a percutaneous needle stick
followed by threading the catheter over the needle into a patient's
vein or artery. This method is unsafe in two respects. First, when
the needle is pulled out of the catheter there is a discharge of blood
which could contaminate the health care worker. Second, needle sticks
occur when the needle is withdrawn from the catheter because, in some
instances, the needle is temporarily left exposed while the patient is
being attended to by the health care worker. Like the ExtreSafe(TM)
blood collection needle, the Company's ExtreSafe(TM) catheter is a needle
extractor which extracts a contaminated needle from a patient and
encloses the needle in a safe housing by squeezing a portion of the
housing when the needle is ready to be extracted from the patient and
catheter. Further, in one version of the ExtreSafe(TM) catheter, a
manually closeable portion of the catheter stem permits the catheter
channel to be held closed until a connection is made to a medical line
thereby restricting blood loss. Prototypes of one version of the
ExtreSafe catheter were completed earlier this year and the Company
anticipates that commercial production will begin in 1996.
ExtreSafe(TM) Syringe
Another area where there is significant risk of needle sticks is
in syringe use. Contemporarily there are many different aspects of
syringe use which range from integral units which combine a filled
syringe and attached needle for unit dose applications to syringe
needles which are attached to separate syringes by leur-lock
connectors. Generally, access to the needle for a medical procedure
involves removing a protective needle cover just prior to performing
the procedure. In the past, needle protection was attempted by
replacing the needle cover after the procedure, but the volume of
accidental needle sticks related to needle replacement resulted in the
banning of such needle cover replacement. Two attempts to supplant
cover replacement have been carrying the needles to sharps containers
(normally found within each patient care room) and providing
needle/syringe apparatus having a shroud which can be extended over
the exposed needle after the procedure. Neither have adequately
reduced syringe based needle sticks. The ExtreSafe(TM) syringe provides
an extendible needle which is retractable into a safe housing in a
manner similar to the retraction of the ExtreSafe(TM) blood draw and
catheter systems described above. Prototypes of the ExtreSafe(TM)
syringe were completed in 1995. Production is forecast for 1997.
<PAGE> 23
Filmless Digitized Imaging Technology
The procedure for taking a large area x-ray image and presenting the
x-ray to the attending physician for interpretation, has changed
little over the past forty years. The most common x-ray image today
is taken by way of a film which requires development in a dark room.
The physician personally handles the x-ray, which is generally
imprinted on a 14" x 17" film sheet. For record keeping purposes,
hospitals usually maintain an inventory of x-rays for a least six
years. X-ray storage and retrieval is a costly problem for many
medical facilities.
In October 1995, the Company entered into a joint venture with
Zerbec, Inc., a Texas corporation, to develop, manufacture, distribute
and market products and technologies using a patented solid state
filmless digitized imaging technology through Quantum Imaging
Corporation, a newly formed Utah corporation. The filmless digitized
imaging technology involves a method of directly producing an
electrical signal from an image recorded on an x-ray plate. The
signal is instantly digitized and stored on a CD-ROM and the same x-
ray plate is then available for a later procedure. The filmless
digitized imaging technology will eliminate film as the x-ray image
recording form and will also enable x-ray films to be translated to a
CD-ROM format to simplify their storage, retrieval and handling. The
Company believes the filmless digitized imaging technology will
provide a unique method for revolutionizing the way in which x-ray
images are taken, interpreted and stored, while also providing clearer
images that are more easily interpreted than x-ray films.
Furthermore, the technology will provide a breakthrough for the use of
x-ray facilities in mobile medical emergency units which has not been
achieved to date because of the necessity for local chemical handling
equipment associated with film processing.
Under the terms of the joint venture agreement, Zerbec, Inc., and
the Company formed Quantum Imaging Corporation, a Utah corporation, to
finish the development and commercialize the filmless digitized
imaging technology. A research prototype of the filmless digitized
imaging technology has been demonstrated. A new prototype which is
being produced to demonstrate picture resolution compatible with
breast cancer diagnosis is being fabricated for demonstration in the
first quarter of 1996. An alpha test system is scheduled for
completion in 1996. A beta test system is scheduled for completion in
1997 and production is scheduled for 1998.
At present, the Company and Zerbec, Inc. are the sole and equal
owners of Quantum Imaging Corporation Pursuant to the terms of the
joint venture agreement, Zerbec, Inc. will assign the patented
filmless digitized imaging technology to Quantum Imaging Corporation,
and will provide ongoing support in the development and
commercialization of the technology. The joint venture agreement also
provides that the Company will support the development and
commercialization of the technology, in part, by contributing up to
$30,000 per month for a twelve month period to Quantum Imaging
Corporation, which funds shall be used to support the company's
operations. For Quantum Imaging Corporation to be successful, the
Company estimates that between $3,000,000 and $6,000,000 will have to
be raised through financing channels which do not impact the success
of the Company. It is anticipate that at least one-third of the
outstanding shares of Quantum Imaging Corporation will be sold to fund
development through initial production of related filmless digitized
imaging systems. The Company and Zerbec, Inc., are seeking to bring
in additional venturers to provide funding, depending on financing
needs.
Company Strategy
The Company's primary objective is to establish itself as a leading
provider of safety medical products and devices. The manufacture of
these products will be subcontracted to reputable manufacturers. To
achieve this objective, the Company's growth strategy is focused on
the following four principal elements.
- Capturing significant market share of the sharps container,
lancet, blood draw , IV catheter and syringe markets.
- Broadening the Company's existing products lines and developing
product lines to increase penetration into closely related
markets.
- Seeking additional market opportunities based on the Company's
proprietary technology.
- Developing agreements with large medical product marketing and
distributing organizations.
<PAGE> 24
Sharps Containers
The Company was only able to produce sharps containers on a limited
basis in 1994 because the related molds had not been completed. Full
scale production of the Company's Safety Cradle(R) sharps containers is
currently beginning and the Company anticipates significantly
expanding its production of Safety Cradle(R) sharps container products
in 1996. The Company believes the manufacture and sale of its Safety
Cradle products should find a significant niche in home sharps
container and combined new instrument transport/sharps container
applications.
The Company also intends to develop license/joint venture agreements
in international markets. Entrance into such markets is not
anticipated until after the Company's Safety Cradle(R) sharps container
products are being successfully marketed in the United States.
Products in Development
The Company's SafetyLance(TM), ExtreSafe(TM) blood collection system,
ExtreSafe(TM) catheter, ExtreSafe(TM) syringe, intravenous flow gauge,
blood collection needle, other ExtreSafe(TM) medical needle technology
products and the filmless digitized imaging technology are in various
stages of research and/or development. The Company plans to continue
development of each of these products/systems. The necessary
production equipment and testing, however, must be completed before
such products are brought to market.
The Company intends to minimize the cost and time necessary to bring
these products to market by using the information and experience
gained in the design, development and assembly of its Safety Cradle(R)
sharps containers. In addition, the Company plans to use large
medical product marketing, sales and distribution companies to sell
its Safety Cradle(R) sharps container products and these follow-on
products. The Company believes that it can to gain significant market
share in these segments after development is completed and adequate
production capacity is achieved.
Future Market Opportunities
The Company will seek to enter additional markets in situations
where it believes that it can gain significant market share based on
patent protected intellectual properties or by capitalizing on its
sales channels for complementary products. There are a number of
possible future applications for the Company's technology, but there
can be no assurance that the Company will commence development of any
such products.
Marketing and Sales
The Company currently intends to market and sell its products in the
United States and possibly in select foreign countries. The Company's
plan for the distribution and sales of its products will target major
segments of the respective markets for those products, including,
major hospital and institutional buying groups, pharmaceutical
companies, distributors and wholesalers, and government and military
agencies. The Company intends to market and distribute its products
through one or more companies that have a major presence in these
markets.
The Company may not to sell its ExtreSafe(TM) medical needle technology
for commercial use in the United States until, and only if, such
products are cleared for marketing by the FDA. See "Business _
Government Regulation." The Company must also comply with the laws and
regulations of the various foreign countries in which the Company
plans to sell its products prior to selling such products in such
foreign countries. Certain foreign countries may only require the
Company to submit evidence of the FDA's pre-market clearance of the
relevant products prior to selling in such countries. However, some
foreign countries may have more stringent requirements and require
additional testing and approvals. See "Business _ Government
Regulation."
The Company currently plans to hire a limited number of sales and
marketing personnel; however, the number will vary depending on the
extent to which the Company contracts with third parties or forms
strategic alliances with other parties to market and sell its
products. The Company may seek third parties to market and distribute
its products in select foreign countries. The Company will seek third
parties to market and distribute its products in the United States.
<PAGE> 25
The Company may enter into contracts, licensing agreements and joint
ventures with such third parties whereby the Company would receive a
licensing fee and/or royalty payments based on the licensee's
revenues. The Company would likely enter into such licensing
arrangements with several companies, possibly by country, geographical
regions and/or product types but may enter into an exclusive
arrangement with a single company having a major presence in all
markets the Company seeks to penetrate. The Company has not entered
into any such licensing arrangements and there can be no assurance
that the Company will be able to enter into such licensing
arrangements on acceptable terms.
The Company intends to market its products by, among other things,
attending trade shows and advertising in industry publications. The
Company intends to distribute samples of some or all of its products
free of charge to various health care institutions and professionals
in the United States and in selected foreign countries to introduce
and create a demand for the products in the marketplace.
Industry
Market
Health care is one of the largest industries in the world and
continues to grow. There is increasing demand in the health care
market for products that are safer, more efficacious and cost-
effective. The Company's products target segments of this market.
While traditional, non-safety, products in the market segments which
the Company seeks to address compete primarily on the basis of price,
the Company expects to compete on the basis of healthcare worker
safety, ease of use, reduced cost of disposal, patient comfort and
compliance with OSHA regulations, but not on the basis of purchase
price. However, the Company believes that when all indirect costs
(disposal of needles, and testing , treatment and workers compensation
expense related to needle stick injuries) are considered, the
Company's products will compete effectively both with "traditional"
products and the safety products of the Company's competitors. The
Company estimates the relevant market segments to be as follows:
Sharps Containers. Based upon the limited data available, the
Company estimates that the U.S. market for sharps containers was is in
excess of $150 million in 1994, and that the growth trend has averaged
more than 10% per year for the past three years. Because of the
variety of types and sizes of sharps containers, the Company is unable
to estimate the unit volume that this market size implies. The
Company estimates the world-wide market for sharps containers to be
approximately $300 million, or two times the size of the U.S. domestic
market.
Lancets. Based upon the limited data available, the Company
estimates that the annual market in the United States for lancets was
approximately two billion units in 1994. Standard lancets sell for
approximatley 12 cents per device. The Company believes that the U.S.
market for lancets is in excess of $200 million annually. The Company
has not yet determined the selling price of its safety lancets;
however it expects that this product will be priced competitively with
the safety lancets sold by competitors. The company believes that the
size of the world-wide market for lancets to be twice the size of the
U.S. domestic market, or approximately four billion million units.
Blood Collection Needle. The Company estimates that the U.S.
market for blood collection needles used by hospitals is approximately
400 million units annually, as of 1994. According to the U.S. Chamber
of Commerce, hospitals purchase approximately 50% of the total medical
instruments and supplies sold in the United States, which the Company
believes is representative of the market for blood collection needles.
This ratio implies a total domestic blood collection needle market of
approximately 800 million units annually. Standard blood collection
needles sell for approximately 7 cents to 9 cents per needle. Safety needle
products competitive with those of the Company currently sell for
approximately 50 cents per unit, and assuming a total domestic blood
collection needle market of 800 million units, the potential dollar
size of the domestic blood collection needle market is approximately
$400 million. The Company estimates the world-wide market for blood
collection needles to be approximately two times the size of the
domestic market, or approximately 1.6 billion units.
Intravenous Catheter. The U.S. market for intravenous catheters
was approximately 200 million units in 1994. Standard intravenous
catheters sell for approximately $1.20 per device. The Company has
not yet determined the price of its safety intravenous catheter.
Safety catheters competitive with those of the Company currently sell
for approximately $1.50 per unit Safety catheters competitive with
those of the Company currently sell for approximately $1.50 per unit,
and assuming a total domestic market of 200 million units, the
<PAGE> 26
potential dollar size of the domestic safety catheter market is
approximately $300 million. The Company estimates that the world-wide
market for safety catheters to be approximately two times the size of
the domestic market or 400 million units.
Safety Syringe. The Company estimates that the U.S. market for
disposable syringes was approximately 4.8 billion units, as of 1994.
Traditional disposable syringes are priced between 7 cents and 12 cents per
unit, and manufacturers generally compete on price. Manufacturers of
safety syringes typically compete on the basis of features, quality
and price. Safety syringes are generally priced at approximately 50 cents
to $1.00 per unit. Assuming a total domestic disposable syringe
market of 4.8 billion units, the potential annual size of the U.S.
domestic market for disposable safety syringes is approximately $2.4
billion. The Company believes that the size of the world-wide market
for disposable syringes is approximately twice times the size of the
U.S. domestic market, or 9.6 billion units.
Accidental Needle Sticks
Needles for hypodermic syringes, phlebotomy sets and
intravenous catheters are used for introducing drugs and other fluids
into the body and drawing out blood and other bodily fluids. Among
the applications for needles are the injection of drugs (hypodermic
needles), the drawing of blood (phlebotomy sets) and the infusion of
drugs and nutrients (catheters). There is an increasing awareness of
the potential danger of infections and illness that result from
accidental needle sticks and of the need for safer needle devices
which reduce the number of accidental needle sticks that occur each
year.
Infections contracted as a result of accidental needle sticks are
a major concern to health care institutions, health care workers,
sanitation and environmental services workers and the regulatory
agencies charged with the task of making their working environment
safe. Accidental needle sticks may result in the spread of infectious
diseases such as Hepatitis B, HIV, which may lead to AIDS, diphtheria,
gonorrhea, typhus, herpes, malaria, rocky mountain spotted fever,
syphilis and tuberculosis. According to The American Hospital
Association's (the "AHA") report dated December 1992, an estimated
800,000 occupational needle sticks occur nationwide each year. The
number of reported needle sticks, however, is believed to be only a
portion of the actual number of occurrences. The AHA report estimates
that the direct costs (excluding costs such as time lost from work and
other administrative activities) for medical evaluation and follow-up
treatment after a single needle stick injury range from $200 to
$1,200. While it is difficult to estimate the total costs associated
with treating accidental needle stick injuries with any degree of
confidence, Theta Corporation, in its Report No. 346 on Medical
Needles and Syringes dated January 1994, estimates that the total cost
associated with treating accidental needle sticks in the United States
averages $3 billion each year. The AHA and other authorities have also
stated that the benefits resulting from the prevention of accidental
needle sticks (and the resulting incidence of infection, illness, time
lost from work and death) cannot be measured solely by savings in the
costs of medical treatment. Although the Company cannot predict with
certainty the prices of its products, currently available safety
needle devices are priced at approximately two to three times that of
standard devices. Notwithstanding the price differential, the Company
believes that, based upon the estimated costs associated with
accidental needle sticks, its products should be considered cost-
effective by the marketplace.
The possibility of health care workers becoming infected from
contaminated needles has caused and continues to cause a great deal of
concern in the health care field and the agencies regulating that
area. OSHA has adopted regulations requiring employers to institute
universal precautions to prevent contact with blood and other
potentially infectious materials. OSHA's regulations also require
employers to establish engineering controls (e.g., sharps disposal
containers and self-sheathing needles) and safe work practices to
insure compliance with these universal precautions. OSHA does not
mandate specific technologies; rather, employers are permitted to
choose the most appropriate and effective safety control devices to
meet their specific institutional needs. According to OSHA
guidelines, while employers do not have to institute the most
sophisticated engineering controls, it is the employer's
responsibility to evaluate the effectiveness of existing controls and
the evaluate the feasibility of instituting more advanced engineering
controls. OSHA specifically prohibits the recapping, bending or
removal of needles, unless there is no feasible alternative or if
required for a specific medical procedure. If recapping, bending or
removal is necessary, workers must use either a mechanical device or a
one-handed technique.
In April 1992, the FDA issued a safety alert to hospitals warning
of the risks of needle stick injuries from the use of hypodermic
needles with intravenous equipment. Among other things, the safety
alert stated that although the FDA could not recommend specific
products, it urged the use of needleless systems or recessed needle
system devices with a fixed safety feature. According to the alert,
<PAGE> 27
(1) a fixed safety feature should provide a barrier between the hands
and needle after use; (2) the safety feature should allow or require
the worker's hand to remain behind the needle at all times; (3) the
safety feature should be an integral part of the device, and not an
accessory; (4) the safety feature should be in effect before
disassembly and remain in effect after disposal to protect the users
and trash haulers and for environmental safety; and (5) the safety
feature should be as simple as possible, and require little or no
training to use effectively.
In addition, the Centers for Disease Control and the National
Institutes of Health have published guidelines that specify that
needles should not be re-sheathed, bent, broken, removed from
disposable syringes or otherwise manipulated by hand because of the
potential for needle stick injury, with the associated risk of blood-
related infection.
The majority of health care workers' adverse exposures to blood are
either product-mediated (e.g., needle sticks) or could be prevented by
the use of appropriate products (e.g., sharps containers). Increasing
pressure is mounting from the government and private sectors for the
health care industry to develop medical devices that will provide a
safer working environment for health care workers and their patients.
The Company's products attempt to address the growing demand for
medical devices that reduce the risk of accidental exposure to blood-
borne diseases.
Disposal of Sharps
There is extensive everyday use of "sharps" (i.e., needles,
syringes, blood collection systems, intravenous catheters, surgical
blades, lancets, etc.) by doctors, nurses and other health care
workers who are in danger of accidental exposure to transmittable
blood-borne diseases such as AIDS and Hepatitis B. The most
extensively used sharp is the medical needle. About six billion
needles a year are used in U.S. hospitals. Needle stick injuries are
the most common cause of disease transmission in the health care
industry and every thirty seconds, about one million times a year, a
health care worker is accidentally injured by a potentially
contaminated needle. Every year as many as 18,000 workers become
infected by accidental exposure to Hepatitis B, which is more
contagious than AIDS.
For many years OSHA and the CDC have mandated the use of special
containers for sharps disposal purposes to reduce the incidence of
accidental transmission of blood-borne diseases. These regulatory
bodies require that the design of sharps containers meet certain
minimum standards of safety. They also make recommendations with
respect to the safe handling of needles. One of the most common causes
of accidental needle sticks occurs when a worker tries to recap a
needle. The most recent OSHA regulations require that needles shall
not be recapped or purposely bent or broken. After they are used,
disposable syringes, needles, and other sharp items must be placed in
closeable, disposable, puncture-resistant containers that are leak
proof on the sides and bottom and labeled according to OSHA
guidelines.
Facilities now being affected by current state and federal
legislation regarding the disposal of biohazardous items include
hospitals, laboratories, clinics, nursing homes, blood banks,
physicians' offices and mortuaries. Stricter legislation may be
introduced that relates to all environments where sharps can be found
(e.g., homes, public facilities, etc.). In addition, some states have
passed/are considering legislation relating to the disposal of sharps.
Patents and Proprietary Rights
The Company owns four United States patents and has other patent
applications pending in the United States and in other countries which
are directly applicable to the Company's Safety Cradle(R) sharps
container products. The Company also owns one United States patent
relating to its SafetyLance(TM), and one United States patent and three
United State allowed patent applications relating to its ExtreSafe(TM)
medical needle technology. The Company has two additional United
States patent application pending relating to its safe-needle
retraction technology, and one additional patent application pending
for novel features of its SafetyLance(TM). An affiliate of the Company
owns three United States patents and has three Canadian patents
relating to the filmless digitized imaging technology.
The future success of the Company may depend upon the strength of
its intellectual property. The Company believes that the scope of its
patents/patent applications is sufficiently broad to prevent
competitors from introducing devices of similar novelty and design to
compete with its current products and that such patents and patent
applications are or will be valid and enforceable. This belief,
however, may prove to be incorrect if such patents are challenged. In
addition, patent applications filed in foreign countries and patents
granted in such countries are subject to laws, rules and procedures
which differ from those in the United States. Patent protection in
such countries may be different from patent protection provided by
<PAGE> 28
U.S. laws and may not be as favorable to the Company. The Company
plans to timely file international patents in all countries in which
the Company is seeking market share. See "Risk Factors _ Dependence
on Patents and Proprietary Rights."
The Company is not aware of any patent infringement claims against
the Company. Litigation to enforce patents issued to the Company, to
protect proprietary information owned by the Company, or to defend the
Company against claimed infringement of the rights of others, may
occur. Such litigation would be costly and could divert the resources
of the Company from other planned activities. There can be no
assurance that the Company would be successful in any such litigation.
The Company's policy is to seek patent protection for all
developments, inventions and improvements that are patentable and
which have potential value to the business of the Company and to
protect as trade secrets other confidential and proprietary
information. The Company intends to vigorously defend its
intellectual property rights.
Manufacturing
The Company has designed and paid for the construction of various
molds and machinery used to manufacture its Safety Cradle(R) sharps
containers. The Company owns all molds used to manufacture its Safety
Cradle(R) sharps containers. The Company contracts for the manufacture
of its Safety Cradle(R) sharps containers from outside sources.
Presently a single corporation is manufacturing the Company's Safety
Cradle(R) sharps container products. In the past, polypropylene resin,
the major plastic material used in the Company's Safety Cradle(R) sharps
containers, has been in short supply for limited periods of time.
While alternative manufacturers exist, changes in the Company's
manufacturer or an unforeseen short supply of polypropylene could
disrupt production schedules and could materially and adversely affect
the Company. See "Risk Factors _ Dependence on Single Manufacturer"
and "Risk Factors _ Availability of Resins."
Final arrangements have not been made for the manufacture of the
SafetyLance(TM), ExtreSafe(TM) blood collection needle protection system,
ExtreSafe(TM) catheter, ExtreSafe(TM) syringe, intravenous flow gauge,
blood collection needle, other ExtreSafe(TM) medical needle technology
products or filmless digitized imaging technology although one molding
company has been selected to build pre-production molds for the
ExtreSafe(TM) blood collection needle. A company has also been selected
to produce molds and pre-production parts for the SafetyLance(TM).
Effective May 1995, prototype drawings for lancet molds were approved.
The company chosen to produce molds for the ExtreSafe(TM) blood collection
needle is targeting completion of preproduction prototypes for the
ExtreSafe(TM) blood collection needle for December 1995. The materials
that the Company plans to use to produce these products are generally
widely available. The Company does not anticipate difficulty in
obtaining such materials. At present, there are a number of
manufacturers that could produce lancet and needle retraction products
and a number of suppliers could supply necessary parts. Any
difficulties that may arise, however, with respect to the availability
of manufacturers and/or suppliers could disrupt the planned production
of each such product and could materially and adversely affect the
Company.
Competition
The leading manufacturers in the sharps container market are Sage
Products, Inc., Devon Industries, Inc., Becton Dickinson and Company,
and Baxter International, Inc. There are also numerous smaller
manufacturers. A variety of sharps disposal products have been
introduced into the marketplace. Some of these disposal containers
accommodate only the needle while others accommodate the needle,
syringe and limited surgical instruments. The majority of the sharps
containers on the market, however, allow contaminated instruments to
fall out when inverted. Many of the products are unstable if not
supported by wall supports or other apparatus. Access to many sharps
containers are to accessible The Company believes its products are
more stable, safer and more effective than competitively priced
products on the market. In addition, there are no sharps disposable
transporters or recycler/transporter type products on the market
today.
The leading manufacturers in the lancet market are Becton Dickinson
and Company, Surgicutt, Inc., Miles, Inc., Diagnostic Corporation,
Boehringer Mannheim, Inc., and Sherwood Medical Company, a subsidiary
of American Home Products Corporation. There are also numerous
smaller manufacturers. To the best of the Company's knowledge, there
are no safety lancets on the market today that operate in a manner
similar to the Company's SafetyLance(TM) lancet.
<PAGE> 29
The leading manufacturers of standard needles are Becton Dickinson
and Company, Sherwood Medical Company, Inc. and Terumo Medical
Corporation of Japan. The Company is aware of no products on the
market today that are comparable to the ExtreSafe(TM) blood collection
needle (i.e., that is transversely activated to automatically extract
a contaminated needle from a patient and immediately retracts the
needle into a safe housing). Applications for the Company's needle
retraction technologies may also be found in blood acquisition,
percutaneous catheter insertion, syringes, and other medical needle
devices.
While traditional, non-safety, products in the market segments which
the Company seeks to address compete primarily on the basis of price,
the Company expects to compete on the basis of healthcare worker
safety, ease of use, reduced cost of disposal, patient comfort and
compliance with OSHA regulations, but not on the basis of purchase
price. However, the Company believes that when all indirect costs
(disposal of needles, and testing , treatment and workers compensation
expense related to needle stick injuries) are considered, the
Company's products will compete effectively both with "traditional"
products and the safety products of the Company's competitors.
It should be noted, however, that the health care products market is
highly competitive. Many of the Company's competitors have longer
operating histories and are substantially larger, better financed and
better situated in the market than the Company. See "Risk Factors _
Competition."
Acquisition of Technology/Research and Development
The Company has devoted substantially all of its efforts since the
formation of SHP to acquiring its health care products and research
and development relating thereto. Research and development costs were
$290,950 for the year ended December 31, 1994. The Company plans to
acquire additional technologies that it determines are advantageous to
acquire. In addition, the Company plans to continue research and
development on its current products.
Government Regulation
The Company and its products are regulated by the FDA, pursuant to
various statutes, including the FD&C Act, as amended and supplemented
by the Medical Device Amendments of 1976 (the "1976 Amendments") and
the Safe Medical Devices Act of 1990. Pursuant to the 1976
Amendments, the FDA classifies medical devices intended for human use
into three classes, Class I, Class II and Class III. The controls
applied to the different classifications are those the FDA believes
are necessary to provide reasonable assurance that a device is safe
and effective. Class I devices are products not requiring pre-market
notification, which can be adequately regulated by the same types of
controls the FDA has used on devices since the passage of the FD&C Act
in 1938. These "general controls" include provisions related to
labeling, producer registration, defect notification, records and
reports and good manufacturing practices ("GMPs"). GMPs include
implementation of quality assurance programs, written manufacturing
specifications and processing procedures, written distribution
procedures and record keeping requirements. Class II devices are
products for which the general controls of Class I devices are deemed
not sufficient to assure the safety and effectiveness of the device
and require special controls. Special controls for Class II devices
include performance standards, post-market surveillance, patient
registries and the use of FDA guidelines. Standards may include both
design and performance requirements. Class III devices have the most
restrictive controls and require pre-market approval by the FDA.
Generally, Class III devices are limited to life-sustaining, life-
supporting or implantable devices.
Section 510(k) of the FD&C Act requires individuals or companies
manufacturing medical devices intended for human use to file a notice
with the FDA at least ninety (90) days before introducing the product
into the marketplace. The notice (a "510(k) Notification") must state
the class in which the device is classified and the actions taken to
comply with performance standards or pre-market approval which may be
needed if the device is a Class II or Class III device, respectively.
If the registrant states the device is unclassified, it must explain
the basis for that determination.
In some cases obtaining pre-market approval can take several years.
Clearance pursuant to a 510(k) Notification can be obtained in much
less time. In general, clearance of a 510(k) Notification for a
Class II device may be obtained if the registrant can establish that
the new device is "substantially equivalent" to another device of such
Class that is already on the market. This requires the new device to
have the same intended use as a legally marketed predicate device and
have the same technological characteristics as the predicate device.
<PAGE> 30
If the technological characteristics are different, the new device can
still be found to be "substantially equivalent" if information
submitted by the applicant (including clinical data if requested)
supports a finding that the new device is as safe and effective as a
legally marketed device and does not raise questions of safety and
efficacy that are different from the predicate device.
The Company has a notification from the FDA that its Safety Cradle(R)
sharps containers are substantially equivalent to legally marketed
predicate devices. The Company's Safety Cradler sharps containers are
subject to the general controls of the FD&C Act and the additional
controls applicable to Class II devices.
The Occupational Safety and Health Administration ("OSHA") also
insists, in part, that sharps containers are closeable, disposable,
puncture-resistant, leak proof on the sides and bottom and
appropriately labeled. The Company's Safety Cradler sharps containers
are in compliance with present OSHA regulations. Future regulations,
however, may be imposed which might have a material adverse effect on
the Company and/or one or more of its products.
The Company's follow-on products (i.e., the SafetyLance(TM), ExtreSafe(TM)
medical needle technology, intravenous flow gauge and blood collection
needle) are still in the development stage. The Company expects the
SafetyLance(TM) to be a Class I device and to be subject to lower level
controls than are imposed on its Safety Cradle(R) sharps containers.
In March 1995, the FDA issued a draft guidance document on 510(k)
Notifications for medical devices with sharps injury prevention
features, a category that would cover most of the Company's follow-on
products. The draft guidance provisionally placed this category of
products into Class II Tier 3 for purposes of 510(k) review, meaning
that such products will be subject to the FDA's most comprehensive and
rigorous review for 510(k) products. However, review under this
classification is expedited. The draft guidance also states that in
most cases, FDA will accept, in support of a 510(k) notification, data
from tests involving simulated use of such a product by health care
professionals, although in some cases the agency might require actual
clinical data.
The Company expects its other follow-on products to be Class II
devices. The Company also expects that its follow-on products will
not require pre-market approval applications but will be eligible for
marketing clearance through the 510(k) notifications procedure based
upon its substantial equivalence to a previously marketed device or
devices. Although the 510(k) pre-market clearance process is
ordinarily simpler and faster that the pre-market approval application
process, there can be no assurance that the Company will obtain 510(k)
pre-market clearance to market its follow-on products, or that the
Company's follow-on products will be classified as set forth above, or
that, in order to obtain 510(k) clearance, the Company will not be
required to submit additional data or meet additional FDA requirements
that may substantially delay the 510(k) process and add to the
Company's expenses. Moreover, such 510(k) pre-market clearance, if
obtained, may be subject to conditions on the marketing or
manufacturing of the corresponding follow-on products that may impede
the Company's ability to market and/or manufacture such products.
In addition to the requirements described above, the FD&C Act
requires that all medical device manufacturers and distributors
register with the FDA annually and provide the FDA with a list of
those medical devices which they distribute commercially. The FD&C
Act also requires that all manufacturers of medical devices comply
with labeling requirements and manufacture devices in accordance with
GMPs, which require that companies manufacture their products and
maintain their documents in a prescribed manner with respect to
manufacturing, testing, and quality control activities. The FDA's
Medical Device Reporting regulation requires that companies provide
information to the FDA on death or serious injuries alleged to have
been associated with the use of their products, as well as product
malfunctions that would likely cause or contribute to death or serious
injury if the malfunction were to recur. The FDA further requires
that certain medical devices not cleared for marketing in the United
States have FDA approval before they are exported.
The FDA inspects medical device manufacturers and distributors, and
has broad authority to order recalls of medical devices, to seize
noncomplying medical devices, to enjoin and/or to impose civil
penalties on manufacturers and distributions marketing non-complying
medical devices, and to criminally prosecute violators.
In addition to laws and regulations enforced by the FDA and OSHA,
the Company is subject to government regulations applicable to all
businesses, including, among others, regulations related to
occupational health and safety, workers' benefits and environmental
protection.
<PAGE> 30
Distribution of the Company's products in countries other than the
United States may be subject to regulations in those countries. There
can be no assurance that the Company will be able to obtain the
approvals necessary to market its blood collection needle or any other
product outside the United States.
Facilities
The Company's offices are located at 655 East Medical Drive,
Bountiful, Utah, under terms of a lease with an unaffiliated lessor
which expires in June 1998, with an annual rent of approximately
$72,000. The lease covers approximately 4,400 square feet of space.
Employees
As of November 30, 1995, the Company employed ten people, including
five research and development employees, two sales and marketing
employees and three administrative employees. By December 31, 1995,
the Company expects to add to the number of employees, principally in
the areas of sales and marketing. The planned increase in personnel
is based primarily on expected increases in production and sales. The
Company's employees are not represented by a labor union, and the
Company believes its employee relations are good.
Legal Proceedings
During 1994, SHP entered into various agreements with Mold Threads,
Inc., a Connecticut corporation ("MT"), whereby MT would construct
various molds and manufacture sharps containers for SHP. SHP alleges
that MT did not complete its obligations in a timely or satisfactory
manner. When SHP attempted to move the mold work and production to
another mold maker/manufacturer MT refused to release SHP's molds. In
January 1995, SHP filed suit in the United States District Court for
the District of Utah against MT alleging breach of contract,
conversion, and intentional interference with business relations.
Thereafter, MT agreed to released SHP's molds. The time for MT to
answer SHP's complaint has not run. SHP anticipates that MT will
counterclaim in the amount of $22,328, exclusive of attorney's fees
and costs, for funds it alleges are owed on a purchase order. SHP
believes that MT waived its right to assert any additional
counterclaims. The litigation is in the early stages, is subject to
all of the risks and uncertainties of litigation and the outcome
cannot presently be predicted. Specifically, there is no assurance
that SHP will be successful in this lawsuit or that the lawsuit will
be resolved on acceptable terms, and SHP may incur significant costs
in asserting its claims.
Environmental Matters
The Company believes its operations are currently in compliance in
all material respects with applicable Federal, state, and local laws,
rules, regulations and ordinances regarding the discharge of materials
into the environment. Such compliance has no material impact upon the
Company's capital expenditures, earnings or competitive position, and
no capital expenditures for environmental control facilities are
planned.
<PAGE> 32
MANAGEMENT
Executive Officers and Directors
In connection with the Acquisition on July 28, 1995, all persons
serving as directors and officers of the Company at the effective date
resigned on July 28, 1995. The persons serving as directors and
officers of SHP immediately prior to that date were elected to the
same offices with of the Company and retained their positions as
directors and officers of SHP. In addition, Stanley Hollander and J.
Clark Robinson were subsequently elected to the Company's 'Board of
Directors.
Set forth below is certain information concerning each of the
directors and executive officers of the Company as of November 15,
1995:
<TABLE>
<CAPTION>
With
Company
Name Age Position Since
<S> <C> <S> <C>
John T. Clarke(1)(2) 49 Chairman of the Board, Director 1993
David A. Robinson(1) 52 President, Chief Executive Officer 1993
and Director
Bradley C. Robinson(1) 26 Vice President, Operations, 1993
and Director
Dr. Gale H. Thorne 63 Vice President, Product Development 1994
and Director
J. Clark Robinson 53 Vice President, Chief Financial 1995
Officer, Secretary and Director
Gary W. Farnes(2) 53 Director 1995
Robert R. Walker 65 Director 1994
Stanley Hollander 58 Director 1995
_______________
<F1>
(1) Member of Executive Committee.
<F2>
(2) Member of Compensation Committee.
</TABLE>
John T. Clarke. Mr. Clarke is Chairman of the Board of the
Company. He has been a Director since November 1993. Since 1994, Mr.
Clarke has been Corporate Finance Executive of Fountain Oil, Inc., an
oil and gas exploration company, where he is responsible for corporate
financial activities. From 1986 to 1993, Mr. Clarke was Director of
American Gold Resources, Inc., a Houston, Texas, company engaged in
the business of gold mining and exploration. Mr. Clarke was also
Finance Director or The Robertson Group, PLC, from 1984 to 1991, and
has been Director of Chesham Consultants, Ltd., located in London,
U.K., since 1970. Mr. Clarke has also been Deputy Chairman of the
Family Assurance Society, a charitable organization in the United
Kingdom.
David A. Robinson. Mr. Robinson is the President and Chief
Executive Officer of the Company. He has been a Director since
November 1993. From November 1992 to November 1993, Mr. Robinson was
President of EPC Products, Inc., a packaging company based in
Bountiful, Utah. From 1981 to 1992, Mr. Robinson was President of
Royce Photo/Graphics Supply, Inc., a distributor of photographic and
graphic arts equipment and supplies and parts based in Glendale,
California. He holds a Masters degree in Business Administration and a
Masters degree in Management Science from the University of Southern
California. Mr. Robinson is the brother of J. Clark Robinson, Vice
President, Chief Financial Officer, Secretary and a Director of the
Company, and an uncle of Bradley C. Robinson, Vice President,
Operations, and a Director of the Company.
Bradley C. Robinson. Mr. Robinson is the Vice President,
Operations, of the Company. He has been a Director since November
1993. From November 1992 to November 1993, Mr. Robinson was President
of EPC Products, Inc., a packaging company based in Bountiful, Utah.
From 1990 to 1992, Mr. Robinson was employed by Cargo Link, a Salt
Lake City, Utah, import-export broker, located in Salt Lake City,
<PAGE> 33
Utah. Mr. Robinson is the son of J. Clark Robinson, Vice President,
Chief Financial Officer, Secretary and a Director of the Company, a
nephew of David A. Robinson, President, Chief Executive Officer, and a
Director of the Company, and a son-in-law of Gary W. Farnes, a
Director of the Company.
Gale H. Thorne. Dr. Thorne is the Vice President, Product
Development, for the Company. He has been a Director since January
1995 and has held his present position as Vice President, Product
Development, since October 1994. From 1993 to 1994, Dr. Thorne was a
Vice President, Engineering, of Eneco, Inc., a Salt Lake City, Utah,
corporation engaged in the business of developing cold-fusion
products. From 1989 to 1993, Dr. Thorne was employed as a patent
consultant and patent agent with Foster & Foster, a Salt Lake City
intellectual property law firm. . Dr. Thorne holds eighteen patents
and has published numerous technical publications. He has been a
technical consultant and a member of Board of the Small Business
Innovation Program of the State of Utah. Dr. Thorne manages all the
patent and product development work for the Company. He holds a Ph.D.
in Biophysics from the University of Utah.
J. Clark Robinson. Mr. Robinson is a Vice President, Chief
Financial Officer, Secretary and Director of the Company. Since 1974,
Mr. Robinson has been General Manager of Lagoon Corporation, which
operates an amusement park in the Salt Lake City, Utah, area. Mr.
Robinson has also been President of the International Association of
Amusement Parks and Attractions, an international industry trade
group. He holds a Masters degree in Business Administration from the
University of Utah. Mr. Robinson is the brother of David A. Robinson,
President, Chief Executive Officer and a Director of the Company, and
the father of Bradley C. Robinson, Vice President, Operations, and a
Director of the Company.
Gary W. Farnes. Mr. Farnes is a Director of the Company. He has
been a Director since 1995 and is currently the Senior Executive Vice
President of Holy Cross Health System, a multi-hospital health care
system headquartered in South Bend, Indiana. From 1977 to 1995, Mr.
Farnes was employed by Intermountain Health Care, a regional hospital
company. At the time that Mr. Farnes left Intermountain Health Care,
he held the position of Vice President, Hospital Division. He holds a
Bachelors degree in Business and Psychology from Brigham Young
University and a Masters degree in Business Administration from George
Washington University. Mr. Farnes is the father-in-law of Bradley C.
Robinson, Vice President, Operations, of the Company.
Robert R. Walker. Mr. Walker is a Director of the Company. Mr.
Walker has been a Director since March 1994. He is currently self-
employed as a consultant in the health care industry primarily in the
area of start-up medical device companies. From 1976 to 1992, Mr.
Walker was employed by IHC Affiliated Services Division of
Intermountain Health Care, a regional hospital company, from which he
retired as President of IHC Affiliated Services. He recently retired
as the Chairman of the Board of AmeriNet, Inc., which is a national
group purchasing organization for hospitals, clinics, detox/drug
centers, emergency, nursing homes, private laboratories, psychiatric
centers, rehabilitation facilities, surgical centers and institutions
such as schools and prisons. Mr. Walker is a member of the American
Hospital Association and the Hospital Financial Management
Association. He holds a Bachelor of Science degree in Business
Administration.
Stanley Hollander. Mr. Hollander has been an officer and director
of the corporate general partner of U.S. Sachem Financial Consultants,
L.P. ("Sachem") since 1993. From 1989 to 1993, Mr. Hollander was
Managing Director of Gruntal & Co., Inc., an investment banking firm,
in Beverly Hills, California. Mr. Hollander is a director of THQ,
Inc., and Reddi Brake Supply Corp. Mr. Hollander was nominated to
serve on the Board of Directors in August 1995, pursuant to an
agreement between the Company and Sachem, as placement agent for
certain securities of the Company. The agreement requires that Mr.
Hollander, or another person nominated by Sachem, be elected for at
least three one-year terms.
Other than as described above, there are no family relationships
among any of the executive officers or directors of the Company.
Executive officers of the Company are elected by the Board of
Directors on an annual basis and serve at the discretion of the Board.
The Company's Board of Directors is divided into three classes.
Beginning with the annual meeting of shareholders in 1996, one class
of directors will be elected at each annual meeting of shareholders
for a three-year term. Each year a different class of directors will
be elected on a rotating basis. The terms of David A. Robinson and
Bradley C. Robinson will expire in 1996. The terms of John T. Clarke,
Gail H. Thorne and Stanley Hollander will expire in 1997 and the terms
of J. Clark Robinson, Gary W. Farnes and Robert R. Walker will expire
in 1998.
<PAGE> 34
The Board of Directors has an Executive Committee and Compensation
Committee. The Executive Committee has the authority to act on
various matters requiring Board of Directors action. The Compensation
Committee makes decisions regarding salaries and other compensation.
As part of its responsibilities, the Compensation Committee
administers the Company's Stock Option Plan.
Executive Compensation
Included below are tables which set forth certain information
concerning compensation paid by the Company to its Chief Executive
Officer and all other executive officers with annual compensation in
excess of $100,000 (determined as of December 31, 1994) (the "Named
Executive Officers"). The tables include columns related to stock
options. None of the options have been exercised.
Summary Compensation Table. The following table provides certain
summary information regarding compensation paid by the Company to the
Named Executive Officers. The amounts set forth were paid by SHP for
services rendered to SHP. The Company had no operations and paid no
compensation to management prior to July 28, 1995, when the Company
acquired SHP. On that date, the previous management of the company
resigned and the current management, as described herein, assumed
their present positions.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
Shares
Name and Principal Position(1) Year Salary ($) Bonus ($) Underlying Options (#)
<S> <C> <C> <C> <C>
David A. Robinson, President 1993 _ _ _
Chief Executive Officer and 1994 120,000 _ 90,000(2)
Director
_______________
<F1>
(1) No other executive officers had salary and bonus compensation
greater than $100,000 in fiscal 1994 or 1993.
<F2>
(2) These options were issued pursuant to SHP's non-qualified stock
option plan. See "Description of Securities _ Outstanding Options."
These option were exercised on September 1, 1995.
Option Grants in Fiscal Year 1994. The following table sets forth
certain information with respect to stock option grants during the
year ended December 31, 1994 to Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
(Adjusted to Reflect a Recapitalization of the Company's Common Stock
See "Description of Securities")
</TABLE>
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------ Potential
Number Percent Realizable
of of Total Value at Assumed
Shares Options Exercise Annual Rate of Stock
Underlying Granted to or base Price Appreciation for
Options Employees in Price Expiration Option Term
Name Granted(#) Fiscal Year ($/Sh) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
David A. Robinson 45,000(1) 17% $0.39 4/8/99 $ 4,849 $10,714
45,000(1) 17% $1.11 9/21/99 $13,800 $30,495
_______________
<F1>
(1) Options were exercisable on the date of grant.
</TABLE>
Option Exercises and Year-End Holdings. The following table sets
forth certain information with respect to stock option exercises
during the year ended December 31, 1994, and the number of shares
covered by both exercisable and unexercisable stock options held by
each of the Named Executive Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-money
Options at Options at
Shares Fiscal Year-End Fiscal Year-End
Acquired on Value Exercisable Exercisable/
Name Exercised(#) Realized($) Unexercisable Unexercisable
David A. Robinson 0 0 45,000(1) $32,400
David A. Robinson 0 0 45,000(2) 0
_______________
<F1>
(1) Options exercisable at $.39 per share.
<F2>
(2) Options exercisable at $1.11 per share.
Employment and Indemnity Agreements
The Company has entered into employment agreements with each of Mr.
David A. Robinson, Mr. Bradley C. Robinson and Dr. Gale H. Thorne
(collectively, the "Senior Executives"). The terms of these
employment agreements provide that (i) Mr. David Robinson receive a
salary of $240,000 per year, Dr. Gale Thorne receive a salary of
$150,000 per year and Mr. Bradley Robinson receive a salary of
$160,000 per year; (ii) the Senior Executives' employment agreements
are for terms of three years, expiring on September 1, 1998; (iii) the
Senior Executives are entitled to a car allowance; (iv) if the Senior
Executives are terminated by reason of disability or for other than
cause, the salary of such Senior Executives will continue for the full
term of the agreement; (v) if a Senior Executive is terminated for
cause, the salary of such Senior Executive cease as of the date of
termination; (vi) the Company will provide the Senior Executives with
$1,000,000 of term life insurance while employed by the Company; and
(vii) the Senior Executives shall keep all proprietary information
relating to the business confidential both during and after the term
of the agreements.
The Company does not currently have employment agreements or
confidentiality agreements with any of its other executive officers or
key employees. The Company has entered into Indemnity Agreements with
each of its executive officers and directors pursuant to which the
Company agrees to indemnify the officers and directors to the full
extent permitted by law for any event or occurrence related to the
service of the indemnitee as an officer or director of the Company
that takes place prior to or after the execution of the agreement.
The Indemnity Agreements obligate the Company to reimburse or advance
expenses relating to any proceeding arising out of an indemnifiable
event. Under these agreements, the officers and directors of the
Company are presumed to have met the relevant standards of conduct
required by Delaware law for indemnification. In the absence of the
Indemnity Agreements, indemnification of these officers and directors
may be discretionary in certain cases.
Indemnification for Securities Act Liabilities
The Delaware General Corporation Law authorizes, and the Company's
Bylaws and Indemnity Agreements provide for, indemnification of the
company's directors and officers against claims, liabilities, amounts
paid in settlement and expenses in a variety of circumstances.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
<PAGE> 36
persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Compensation of Directors
During 1994, the non-employee members of the Board of Directors
received a total of 9,000 shares of common stock as compensation for
serving as directors of SHP. For 1995, the Company granted stock
options to purchase 20,000 shares of common stock for $2.00 per share
to the non-executive members of the Board of Directors. The Company
has made no other agreements regarding the compensation of non-
executive members of the Board of Directors. Directors of the Company
who are also officers of the Company receive no additional
compensation for their service as directors. All directors are
entitled to reimbursement for reasonable expenses incurred in the
performance of their duties as Board members.
Stock Options and Warrants
During 1994 the Board of Directors of SHP approved a non-qualified
stock option plan for its officers, directors and key employees. The
exercise price of the options is equivalent to the estimated fair
market value of the stock as determined by the Board of Directors at
the date of grant. The number of shares, terms and exercise period
are determined by the Board of Directors on an option-by-option basis.
As of November 15, 1995, options to acquire an aggregate of 108,000
shares of Common Stock at $.39 per share were outstanding. Also, in
1995 a nonaffiliated shareholder of the Company was issued a warrant
to purchase 45,000 shares of Common Stock at $1.67 per share. All
such options expire in 1999 and the warrant expires in 1996.
On September 1, 1995, the Company adopted a non-qualified stock
option plan for its officers, directors and key employees. The
exercise price of the options is equivalent to the estimated fair
market value of the stock as determined by the Board of Directors at
the date of grant. The number of shares, terms and exercise period
are determined by the Board of Directors on an option-by-option basis.
As of November 30, 1995, options to acquire an aggregate of 1,171,810
shares of Common Stock at $2.00 per share had been granted and are
presently outstanding, including the options granted to David A.
Robinson.
Compensation Committee Interlocks and Insider Participation
No executive officers of the Company serve on the Compensation
Committee (or in a like capacity) for the Company or any other entity.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1994 and the first quarter of 1995, certain existing
shareholders made direct loans to SHP in the amount of approximately
$385,000 under a bridge loan agreement. Subscriptions under the
bridge loan were offered proportionately to shareholders based on the
number of shares held. The subscribers to the bridge loan were issued
warrants permitting them to acquire up to an aggregate of 346,500
shares of common stock at $1.11 per share on or before December 31,
1995. These warrants were exercised in July, 1995 in consideration
for the conversion of this loan.
Stanley Hollander, a director of the Company, is a officer and
director of the corporate general partner of Sachem, which holds
75,000 shares of Common Stock 530,125 Series A Warrants, 1,290,375
Series B Warrants and options to purchase 20,000 shares of the
Company's common stock. Sachem received the common stock, Series A
Warrants and Series B Warrants, together with a gross fee of $860,251,
as consideration for placement agent services rendered on behalf of
the Company during 1995. Sachem has a continuing relationship with
the Company pursuant to which Sachem will provide financial advisory
and investment banking services to the Company through July 1997. The
Company will pay Sachem $4,000 per month for such services. Sachem
has a right of first refusal to undertake any financings of the
Company during this period. The terms of this relationship are
comparable to terms that would have been obtainable from unaffiliated
sources.
<PAGE> 37
DESCRIPTION OF SECURITIES
The Company's authorized capital stock currently consists of
50,000,000 shares of Common Stock, $0.02 par value per share and
5,000,000 shares of Preferred Stock, $0.001 par value per share.
Common Stock
Holders of the Company's Common Stock are entitled to one vote per
share for each share held of record on all matters submitted to a vote
of shareholders. Subject to preferential dividend rights with respect
to any outstanding Preferred Stock, holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors out of funds legally available therefor.
Upon liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in the assets of the
Company legally available, subject to any prior rights of any
outstanding Preferred Stock. Holders of Common Stock have no
cumulative voting rights, no preemptive, subscription, redemption or
conversion rights. All outstanding shares of Common Stock are validly
issued, fully paid and non-assessable. The rights, preferences and
privileges of holders of Common Stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any
series of Preferred Stock which the Company may designate and issue in
the future.
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred
stock, par value $.001 per share. The Company does not have any
shares of preferred stock issued. The Board of Directors of the
Company is empowered, without further action by the shareholders, to
issue from time to time one or more series of preferred stock, with
such designations, rights, preferences and limitations as the Board of
Directors may determine by resolution. The rights, preferences and
limitations of separate series of preferred stock may differ with
respect to such matters as may be determined by the Board of
Directors, including, without limitation, the rate of dividends,
method and nature of payment of dividends, terms of redemption,
amounts payable on liquidation, sinking fund provisions (if any),
conversion rights (if any) and voting rights. The potential exists,
therefore, that preferred stock may be issued which would grant
dividend preferences and liquidation preferences to preferred
stockholders. The issuance of the preferred stock may also have the
effect of delaying or preventing a change in control of the Company.
Management of the Company presently intends to issue shares of
preferred stock to certain members of management in the near future,
which shares might have substantially more than one vote per share or
other provisions designed to deter a change in control of the Company.
The issuance of such shares to a limited group of management
shareholders may vest in such persons absolute voting control of the
company, including, among other things, the ability to elect all of
the directors, and to control certain matters submitted to a vote of
shareholders and to prevent any change in management despite
performance. Also, the shares of preferred stock may have the right
to vote upon certain matters as a separate class.
Warrants
The Series A Warrants and Series B Warrants are exercisable for
shares of Common Stock of the Company at a price of $3.00 per share in
the case of Series A Warrants and $2.00 per share in the case of
Series B Warrants, and expire on the earlier of (a) two years from the
date of effectiveness of a registration statement under the Securities
Act covering the issuance of the shares of Common Stock underlying
such Warrants upon issuance by the Company or for resale of such
shares by the holder, which period shall be extended day-for-day for
any time that a prospectus meeting the requirements of the Securities
Act is not available, or (b) the date specified in a notice of
redemption from the Company (subject to the prior right of the holder
to exercise the Warrants for at least 20 days following the date of
such notice) in the event that the closing price of the Common Stock
for any ten consecutive trading days preceding such notice exceeds
$6.00 per share and subject to the availability of a current
prospectus covering the underlying shares. Thus, the Company may
accelerate the expiration of the Warrants in the event that the
average market price of the Common Stock exceeds $6.00 per share, in
which event the holders of the Warrants would be permitted to exercise
the Warrants during a period of not less than 20 days following notice
of such an event. The Company presently intends to accelerate the
expiration of the Warrants when and if such conditions are met. All
of the Warrants are currently outstanding.
<PAGE> 38
Also, in 1995 a nonaffiliated shareholder of the Company was issued
a warrant to purchase 45,000 shares of Common Stock at $1.67 per
share. This warrant expires in 1996.
Outstanding Options
On September 1, 1995, the Company adopted a non-qualified stock
option plan wherein the Company is authorized to grant options to
purchase up to 1,284,998 shares of Common Stock of the Company.
Pursuant to the Company's stock option plan, in September 1995, the
Company granted Stock Options to purchase 1,151,810 shares of Common
Stock, and in November , the Company issued Stock Options to purchase
20,000 shares of Common Stock. All of these stock options are
immediately exercisable. These options expire in 2000.
Prior to the adoption of the Company's stock option plan, the
Company had options outstanding options to purchase 108,000 shares of
Common Stock at $0.39 per share, issued certain historical shareholder
of SHP, which the Company adopted pursuant to the Merger. These
options expire in 2004.
Earn-Out Shares
John T. Clarke, David A. Robinson and Bradley C. Robinson, who are
respectively a Director; the President, Chief Executive Officer and a
Director; and a Vice President and Director of the Company, have the
opportunity to receive up to an aggregate of 2,000,000 additional
shares of Common Stock (the "Earn-Out Shares"). Any issuance of Earn-
Out Shares would be based upon the level of pre-tax consolidated net
income, adjusted to exclude any expense arising from the obligation to
issue or the issuance of the Earn-Out Shares and any income or expense
associated with non-recurring or extraordinary items as determined in
accordance with generally accepted accounting principles ("Adjusted
PTNI").
If Adjusted PTNI for 1996, 1997 or 1998 equals or exceeds
$1,500,000, then an aggregate of 350,000 Earn-Out Share will be
issued, but only one issuance of 350,000 Earn-Out Shares will be made
based on the $1,500,000 level of Adjusted PTNI.
If Adjusted PTNI for 1996, 1997 or 1998 equals or exceeds $5,000,000
then there will be issued that aggregate number of Earn-Out Shares
calculated by subtracting the number of Earn-Out Shares previously
issued or issuable based on the attainment of a lesser included
Adjusted PTNI in the same year (if any) from 1,100,000, provided that
only one issuance of Earn-Out Shares will be made based on the
$5,000,000 level of Adjusted PTNI.
If Adjusted PTNI for 1996, 1997 and 1998 equals or exceeds
$8,000,000, then there will be issued that aggregate number of Earn-
Out Shares calculated by subtracting the number of Earn-Out Shares
previously issued or issuable based on the attainment of a lesser
included Adjusted PTNI in the same year (if any) from 2,000,000,
provided that in no event will an aggregate of more than 2,000,000
Earn-Out Shares be issued.
The Company expects that the issuance of Earn-Out Shares will be
deemed to be the payment of compensation to the recipients and will
result in a charge to the earnings of the company in the year or years
the Earn-Out Shares are earned, in an amount equal to the fair market
value of the Earn-Out Shares. This charge to earnings could have a
substantial negative impact on the earnings of the Company in the year
or years in which the compensation expense is recognized.
The effect of the charge to earnings associated with the issuance of
Earn-Out Shares could place the Company in a net loss position for the
relevant year, even though the Adjusted PTNI was at a level requiring
the issuance of Earn-Out Shares. Because Earn-Out Shares are issuable
based on the results of a single year, the Adjusted PTNI in a
particular year could require the issuance of Earn-Out Shares even
thought he cumulative Adjusted PTNI for the three years 1996, 1997 and
1998, or any combination of those years, could reflect a lower amount
of Adjusted PTNI that would not require the Company to issue such Earn-
Out Shares or even a loss at the Adjusted PTNI line. There is no
assurance that years subsequent to the year or years in which Earn-Out
Shares are issued will produce the same level of Adjusted PTNI or will
be profitable. The management of the Company may have the discretion
to accelerate or defer certain transactions that could shift revenue
or expense between years or otherwise affect the Adjusted PTNI in any
year or years.
<PAGE> 39
The Company has agreed to file a registration statement under the
Securities Act with respect to the Earn-Out Shares, when issued.
Anti-Takeover Provisions
The Company is governed by the provisions of Section 203 of the
Delaware General Corporation Law, an anti-takeover law enacted in
1988. In general, the law prohibits a public Delaware corporation
from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder,
unless the business combination is approved in a prescribed manner.
"Business Combination" is defined to include mergers, asset sales and
certain other transactions resulting in financial benefit to the
stockholders. An "interested stockholder" is defined as a person who,
together with affiliates and associates, owns (or, within the prior
three years, did own) 15% or more of a corporation's voting stock. As
a result of the application of Section 203, potential acquirers of the
Company may be discourage from attempting to effect an acquisition
transaction with the Company, thereby possibly depriving holders of
the Company's securities of certain opportunities to sell or otherwise
dispose of such securities at above market prices pursuant to such
transactions.
Limitation on Liability of Directors
The Company's Certificate of Incorporation provides that a director
of the company will not be personally liable to the company or its
stockholders for monetary damages for the breach of his or her
fiduciary duty of care as a director. In accordance with the Delaware
General Corporation Law, however, this provision does not eliminate or
limit the liability of a director of the company (i) for breach of the
director's duty of loyalty to the company or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for willful or
negligent conduct in paying dividends or repurchasing stock out of
other than lawfully available funds, or (iv) for any transaction from
which the director derived an improper personal benefit.
Certain Certificate and Bylaw Provisions
The Certificate of Incorporation of the Company provides for
dividing the Board of Directors into three classes. Beginning in
1996, one class of directors will be elected at each annual meeting
for a three-year term. Amendments to this provision must be approved
by a two-thirds vote of all the outstanding shares entitled to vote,
and the number of directors may be changed by a majority of the entire
Board of Directors or by a two-thirds vote of the outstanding shares
entitled to vote. Meetings of the shareholders may be called only by
the Board of Directors, the Chief Executive Officer or the President,
and shareholder action may not be taken by written consent.
Shareholder proposals, including director nominations, may be
considered at a meeting only if written notice of the proposal is
delivered to the Company from 50 to 75 days in advance of the meeting,
or within 10 days after notice of the meeting is given to shareholders
if the meeting was not publicly disclosed at least 60 days prior to
the meeting. These provisions could have the effect of discouraging
takeover attempts or delaying or preventing a change of control of the
Company.
Transfer Agent and Registrar
The stock transfer agent, registrar and warrant agent for the
Company's Common Stock is Colonial Stock Transfer, Inc., Salt Lake
City, Utah.
SECURITIES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, assuming (a) the exercise of all
of the Warrants, (b) the exercise of all options and warrants
currently outstanding (other than the Warrants), and (c) issuance of
the Earn-Out Shares, the Company will have outstanding 16,292,713
shares of Common Stock.
Not all of the Company's outstanding securities are being registered
hereby. Of the 16,292,713 shares of Common Stock outstanding upon
completion of this Offering, (assuming the exercise of all of the
Warrants, the exercise of all other outstanding options and warrants,
and the issuance of the Earn-Out Shares), 8,777,500 outstanding shares
<PAGE> 40
of Common Stock are being registered hereby and 7,515,213 outstanding
shares of Common Stock are not being registered hereby. Of the
7,515,213 outstanding shares of Common Stock not registered hereby,
300,000 have already been registered for resale pursuant to a previous
registration statement. All 4,401,250 of the shares issuable upon the
exercise of the Series A and Series B Warrants are being registered
hereby.
The securities of the Company that are not registered hereby may
become eligible for offer and sale without registration under the
Securities Act. In general, under Rule 144, as currently in effect,
if two years have elapsed since the later of the date of acquisition
of the securities from the Company or the date of acquisition of
securities from any affiliate of the Company, the acquirer or
subsequent holder is also entitled to sell within any three-month
period a number of shares of Common Stock that does not exceed the
greater of 1% of the then-outstanding shares of Common Stock or the
average weekly trading volume of Common Stock on all exchanges and
reported through the automated quotation system of a registered
securities association during the four calendar weeks preceding the
date on which notice of the sale is filed with the SEC. Certain
securityholders acquired shares of Common Stock during 1993 and 1994
and may be eligible for this exemption from registration.
At or before three months following the effective date of this
offering, the Company expects to register for sale under the
Securities Act up to 5,328,401 shares of Common Stock, including
3,890,403 shares of outstanding Common Stock which may be sold by
certain shareholders of the Company and up to 1,437,998 shares of
Common Stock which may be issued by the Company upon the exercise of
certain stock options and a warrant. Sales of these shares of Common
Stock by the holders thereof, or the perception that such sales may
occur, could adversely affect prevailing market prices for the Common
Stock.
No prediction can be made as to the effect, if any, that future
sales of shares, or the availability of shares for future sales, will
have on the market price of the Common Stock prevailing from time to
time. Should a market in the Company's securities develop, sales of
substantial amounts of Common Stock (including shares which may be
issued upon exercise of Warrants), or the perception that such sales
may occur, could adversely affect prevailing market prices for the
Common Stock in the event a market does develop.
PRINCIPAL AND SELLING SECURITY HOLDERS
Principal Securityholders
The following table sets forth certain information with respect to
the beneficial ownership of the common stock of the Registrant as of
November 15, 1995, for: (i) each person who is known by the Registrant
to beneficially own more than 5 percent of the Registrant's common
stock, (ii) each of the Registrant's directors, (iii) each of the
Registrant's executive officers, and (iv) all directors and executive
officer as a group.
<TABLE>
<CAPTION>
Name and Shares Percentage of
Address Beneficially Shares Position
of Beneficial Owned(2) Beneficially
Owner(1) Owned
- --------------------------------------------------------------------
<S> <C> <C> <S>
John T. Clarke(3) 647,465 7% Director
David A. Robinson(4) 630,219 7% President, Chief Executive Officer
and Director
Bradley C. Robinson(4) 630,219 7% Vice President, Operations and
Director
Gale H. Thorne(5) 149,700 2% Vice President, Product Development
and Director
J. Clark Robinson(6) 245,000 3% Vice President, Chief Financial
Officer, Treasurer, Secretary and
Director
Gary W. Farnes(7) 86,000 1% Director
<PAGE> 41
Robert R. Walker(8) 83,000 1% Director
Stanley Hollander(9) 1,939,500 19% Director
Officers and
Directors as a
Group(9 persons) 4,371,000 38%
Persons)
U.S. Sachem Financial
Consultants,L.P. (10)
11601 Wilshire Blvd.
Suite 500
Los Angeles, CA 90025 1,915,500 18%
__________________________
* Less than 1%
<F1>
(1) Except where otherwise indicated, the address of the beneficial
owner is deemed to be the same address as the Registrant.
<F2>
(2) Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission and generally includes
voting and investment power with respect to the securities. Shares
of common stock subject to options or warrants currently
exercisable, or exercisable within sixty (60) days, are deemed
outstanding for computing the percentage of the person holding such
options but are not deemed outstanding for computing the percentage
of any other person.
<F3>
(3) Includes 231,362 shares, stock option to purchase 300,000 shares
and Series A Warrants to purchase 21,000 shares. Also includes
18,000 shares that Mr. Clarke is deemed to beneficially own as a
result of their being owned by a controlled entity, 59,103 shares
owned by his spouse, and 18,000 shares owned by a minor child,
which he is deemed to beneficially own.
<F4>
(4) Includes 330,219 shares and stock options to purchase 300,000
shares for each of these two persons.
<F5>
(5) Includes 63,000 shares, stock options to purchase 57,000 shares
and Series A Warrants to purchase 27,000 shares. Also includes
2,700 shares that Mr. Thorne is deemed to beneficially own as a
result of their being owned in joint tenancy with his spouse. Does
not include stock options to purchase 18,000 shares that become
exercisable in July, 1996.
<F6>
(6) Includes 90,000 shares and stock options to purchase 75,000
shares. Also includes 50,000 shares and Series A Warrants to
purchase 30,000 shares that Mr. Robinson is deemed to beneficially
own as a result of their being owned by a controlled entity.
<F7>
(7) Includes 61,500 shares, stock options to purchase 20,000 shares
and Series A Warrants to purchase 4,500 shares.
<F8>
(8) Includes stock options to purchase 20,000 shares. Also includes
63,000 shares of which Mr. Walker is deemed to be the beneficial
owner as a result of their ownership by a trust of which he is a
trustor.
<F9>
(9) Includes 15,000 shares and Series A Warrants to purchase 9,000
shares owned by Mr. Hollander's individual retirement account.
Also includes securities of the Registrant owned by U.S. Sachem
Financial Consultants, L.P. ("Sachem"), a limited partnership with
respect to which Mr. Hollander is an officer and director of the
corporate general partner. Sachem holds 75,000 shares, stock
options to purchase 20,000 shares, Series A Warrants to purchase
530,125 shares and Series B Warrants to purchase 1,290,375 shares,
of which 430,125 Series A Warrants are to be transferred to
distributors that assisted Sachem in the private placement
completed on August 18, 1995, and as to which Sachem disclaims
beneficial ownership.
<PAGE> 42
<F10>
(10) Includes 75,000 shares, stock options to purchase 20,000 shares,
Series A Warrants to purchase 530,125 shares and Series B Warrants
to purchase 1,290,375, of which 430,125 Series A Warrants are to be
transferred to distributors that assisted Sachem in the private
placement completed on August 18, 1995, and as to which Sachem
disclaims beneficial ownership. These securities are also reported
as beneficially owed by Mr. Hollander who is an officer and
director of Sachem's corporate general partner.
</TABLE>
The Registrant is not aware of any arrangements, the operation of
which may at a subsequent date result in a change in control of the
Registrant.
Selling Securityholders
The following table provides the names of and number of shares of
Common Stock offered for sale by each Selling Securityholder. Since
the Selling Securityholders may sell all, some or none of their shares
of Common Stock, no estimate can be made of the number of shares of
Common Stock that are to be offered hereby or the number or percentage
of shares of Common Stock that each Selling Securityholder will own
upon the completion of the Offering to which this Prospectus relates.
The shares of Common Stock offered by this Prospectus may be offered
from time to time by the Selling Securityholders named below. Unless
otherwise noted, no Selling Securityholder is an executive officer of
the Company.
<TABLE>
<CAPTION>
Shares Percentage
Shares Offered of Class
Owned Shares Hereby Owned
as of Offered Underlying After
Nov. 30, Hereby Warrants Completion
Name 1995 of
Offering
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A/S Kapitalutvikling 10,000 10,000 6,000 *
Magne F. Aaby 50,000 50,000 30,000 *
AHM Eiendoms AS 10,000 10,000 6,000 *
Celia Allsop 5,000 5,000 3,000 *
John G. Argitis 10,000 10,000 6,000 *
Arimo Corporation 5,000 5,000 3,000 *
Dennis & Marilyn
Astrella 5,000 5,000 3,000 *
Banca Del Gottardo 245,000 245,000 147,000 4%
Einar H. Bandlien 203,000 50,000 30,000 3%
Beatrice Barnett 5,000 5,000 3,000 *
Gary Barnett 10,000 10,000 6,000 *
Josef A. Bauer 50,000 50,000 30,000 *
Dennis Malcolm
Baylin 12,500 12,500 7,500 *
Stewart & Debbie
Blake 15,000 15,000 9,000 *
BO Shipping AS 182,500 182,500 109,500 3%
Bostar A.S. 50,000 50,000 30,000 *
Harvey R. Brice BSCC
M/P Plan
A/C #13-3604093 15,000 15,000 9,000 *
Butler Investments
Ltd. 110,000 110,000 66,000 2%
Cameo Trust Corp.
Limited 120,000 120,000 72,000 2%
Gregory W. Carlisle 5,000 5,000 3,000 *
M.J. Carter 10,000 10,000 6,000 *
Castle Rock Land &
Livestock, L.C. 5,000 5,000 3,000
Central Investments
Limited 50,000 50,000 30,000 *
Charles Chamberlain 5,000 5,000 3,000 *
Louise Chamberlain 5,000 5,000 3,000 *
John T. Clarke (2) 231,362 35,000 21,000 3%
Michelle M.G. Clarke 12,500 12,500 7,500 *
Robert E. Colby, Jr. 38,000 20,000 12,000 *
Corner Bank Ltd. 85,000 85,000 51,000 2%
<PAGE> 43
Credit Suisse
(Guernsey) Limited 65,000 65,000 39,000 1%
Demachy Worms & Co.
International Ltd. 125,000 125,000 75,000 2%
John Dillaway 5,000 5,000 3,000 *
Anders Farestveity 300,000 300,000 180,000 5%
Gary Wm. Farnes (2) 61,500 7,500 4,500 *
Michael William
Farrell 32,000 5,000 3,000 *
Alan Sidney Field 25,000 25,000 15,000 *
Fred C. Follmer 10,000 10,000 6,000 *
Freed Investment
Company 10,000 10,000 6,000 *
David L. Freed
Family Trust 5,000 5,000 3,000 *
David W. Freed 10,000 10,000 6,000 *
John & Karen Freed 10,000 10,000 6,000 *
Robert E. Freed
Family Trust 10,000 10,000 6,000 *
Paul L. Freed 5,000 5,000 3,000 *
Peter Q. Freed 10,000 10,000 6,000 *
Jack Freidman 25,000 25,000 15,000 *
G-Men, Inc. 20,000 20,000 12,000 *
Genevalor
Trusteeship &
Management Corp. 190,214 50,000 30,000 3%
Jeremy A. Gilbert 5,000 5,000 3,000 *
Paul W. & Susan V.
Glass, Co-Trustees 7,500 7,500 4,500 *
John J. Gottsman 25,000 25,000 15,000 *
Gillian Margaret
Gray 25,000 25,000 15,000 *
Michael John Gray 25,000 25,000 15,000 *
Susan Greenberg 10,000 10,000 6,000 *
Gruntal & Co., Inc.,
Custodian for
Stanely Hollander
IRA 15,000 15,000 9,000 *
Turid Nordal Haavik 15,000 15,000 9,000 *
John & Lenore
Hechler 5,000 5,000 3,000 *
Arne Hellesto 50,000 50,000 30,000 *
Tom Henriksen 5,000 5,000 3,000 *
Heptagon Investments
Ltd. 25,000 25,000 15,000 *
Daniel M. Herscher,
Trustee,
Daniel M. Herscher,
Esq., Retirement
Plan Trust 5,000 5,000 3,000 *
Hollis Holding A/S 10,000 10,000 6,000 *
Nils Otto Holmen 25,000 25,000 15,000 *
Simen Horne 10,000 10,000 6,000 *
Charlotte Horowitz 15,000 15,000 9,000 *
Svein Huse 50,000 50,000 30,000 *
Michael S. Jacobs 15,000 15,000 9,000 *
Allan D. Jacobson
IRA 12,500 12,500 7,500 *
Lenard E.
Jacobson, M.D. 15,000 15,000 9,000 *
Jennings Asset
Group III 12,500 12,500 7,500 *
Svein E. Johansen 109,000 10,000 6,000 1%
Ted Kaminer &
Hillary Kahn JTNROS 5,000 5,000 3,000 *
<PAGE> 43
Kaufman & Leinberger
Investments, Inc. 5000 5000 3000 *
Vance Kirby 15,000 15,000 9,000 *
Ronald B. Koenig 27,500 27,500 16,500 *
Pierre &
Francoise Lambert 10,000 10,000 6,000 *
Andrew Paul Lampert 10,000 10,000 6,000 *
Charles J. Lasky &
Charlayne E.
Lasky III 10,000 10,000 6,000 *
Legal and Equitable
Pension Fund 15,000 15,000 9,000 *
Claus Lian 25,000 25,000 15,000 *
Rabbe E. Lund 50,000 50,000 30,000 *
Mamimultd 12,500 12,500 7,500 *
Joseph & Lillian
Matulich 5,000 5,000 3,000 *
Metropolitan Finance
Limited 115,003 25,000 15,000 2%
Eugene J. Meyers 12,500 12,500 7,500 *
Neil P.
Micklethwaire 15,000 15,000 9,000 *
George H. Miller 32,000 5,000 3,000 *
Peter Mills 15,000 15,000 9,000 *
Wenche Moe 15,000 15,000 9,000 *
Marie-Pascale Molema 25,000 25,000 15,000 *
Frank & Tracy Moss 20,000 20,000 12,000 *
Joe & Sandra Motzkin 12,500 12,500 7,500 *
Napier Brown
Holdings Ltd. 75,000 75,000 45,000 1%
Anne & Harry
Newman, Jr. 10,000 10,000 6,000 *
Norman Assuranse AS 182,500 182,500 109,500 3%
Harald Norman 180,000 180,000 108,000 3%
Patricia & Oistein
Nyberg 15,000 15,000 9,000 *
Sigurd Olsvold 5,000 5,000 3,000 *
Clive Overlander 16,700 5,000 3,000 *
Raymond H. Owen 10,000 10,000 6,000 *
Morten Poulsson 25,000 25,000 15,000 *
PQF Investments 5,000 5,000 3,000 *
Prime Grieb & Co.,
Limited 5,000 5,000 3,000 *
Elizabeth Diane
Pummell 2,500 2,500 1,500 *
Martyn James Pummell 25,000 25,000 15,000 *
David A. Rees 25,000 25,000 15,000 *
John E. Reihl 5,000 5,000 3,000 *
Republic National
Bank of New York
(France) Monaco 5,000 5,000 3,000 *
The First National
Bank of Chicago 45,000 45,000 27,000 *
John Laurence
Richardson 5,000 5,000 3,000 *
Patrick George
Ridgwell 50,000 50,000 30,000 *
Andrew Kent
Robertson 50,000 50,000 30,000 *
J. Clark Robinson(2) 90,000 50,000 30,000 1%
Stephen L. Robinson 12,500 12,500 7,500 *
Charles & Marilyn
Roellig 5,000 5,000 3,000 *
Josephine F. Rose
Family Trust 5,000 5,000 3,000 *
Gerald Rosen 7,500 7,500 4,500 *
Brian Stuart Roth-
Special Account 1 5,000 5,000 3,000 *
Brian Stuart Roth-
Special Account 2 2,500 2,500 1,500 *
<PAGE> 45
Suzan Irene Roth 6,250 6,250 3,750 *
Michel Roy 5,000 5,000 3,000 *
Cheryl Lynn Rubin 32,000 5,000 3,000 *
Allan Rudnick IRA
Rollover 10,000 10,000 6,000 *
S.P. Angel Nominees 12,500 12,500 7,500 *
Saracen Int. Inc. 25,000 25,000 15,000 *
Skull Valley 10,000 10,000 6,000 *
Company, Ltd.
Karen Elizabeth
Smith 119,500 25,000 15,000 2%
Fred Snitzer 15,000 15,000 9,000 *
Snowboard Stiftung 50,000 50,000 30,000 *
Robert & Claudia
Sorrentino 25,000 25,000 15,000 *
Spellord, Inc. 25,000 25,000 15,000 *
Svien Erik Stiansen 25,000 25,000 15,000 *
Stolzoff Family
Trust 50,000 50,000 30,000 *
Gary Stolzoff 12,500 12,500 7,500 *
Karl Sivert Sunde 10,000 10,000 6,000 *
Gale H. Thorne (2) 63,000 45,000 27,000 *
EEG-Henriksen AS 70,000 70,000 *
Olaf N. Lofstad AS 25,000 25,000 *
Tinden Forvalthing
AS 90,000 1%
Tinden (Indre
(Selskap) 55,000 55,000 *
Edgeport Nominees
Limited 65,000 65,000 39,000 1%
Nils Trulsvik 7,500 7,500 4,500 *
Nils N. Trulsvik 142,500 7,500 4,500 2%
U.B.S. Nominees 7,500 7,500 4,500 *
U.S. Sachem
Financial
Consultants, LP 75,000 75,000 1,820,500 18%
Vital Milj AS 75,000 75,000 45,000 1%
Steve Wallitt 5,000 5,000 3,000 *
Kilian R. Walsh 10,000 10,000 6,000 *
Allan Weissglass 25,000 25,000 15,000 *
Joel S. Weissglass 20,000 20,000 12,000 *
David John Wenham 23,000 5,000 3,000 *
Valerie Ann Wenham 23,000 5,000 3,000 *
Lago Wernstedt 20,000 20,000 12,000 *
Joseph A.
Wilkinson(2) 19,000 10,000 6,000 *
David & Susan
Wilstein,
Trustees of
Century Trust 25,000 25,000 15,000 *
Winston
Navigation S.A. 50,000 50,000 30,000 *
Malcolm Seaton Wood 7,500 7,500 4,500 *
Roy Vincent Wright 15,000 15,000 9,000 *
---------- --------- -----------
TOTALS 5,552,029 4,376,250 4,401,250
_______________
<F1>
(1) For purposes of this table, ownership with respect to a
Securityholder dies not include shares of Common Stock beneficially
owned but held by other persons shown in this table. For such
information relating to directors and officers of the Company, see
"Principal and Selling Securityholders _ Principal
Securityholders."
<F2>
(2) Indicates employee or director of the Company or of SHP during
the past three years. See "Principal and Selling Securityholders _
Principal Securityholders."
</TABLE>
<PAGE> 45
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby may be sold from time to
time by the Selling Securityholders on the Over-the-Counter market or
on NASDAQ on terms to be determined at the time of such sales. The
Selling Securityholders may also make private sales directly or
through a broker or brokers. Alternatively, the Selling
Securityholders may from time to time offer shares of Common Stock
offered hereby to or through underwriters, dealers or agent, who may
receive consideration in the form of discounts and commissions; such
compensation, which may be in excess of normal brokerage commissions,
may be paid by the Selling Securityholders and/or purchasers of the
shares of Common Stock offered hereby for whom such underwriters,
dealers or agents may act. The Selling Securityholders and any dealers
or agents that participate in the distribution of the shares of Common
Stock offered hereby may be deemed to be "underwriters" as defined in
the Securities Act and any profit on the sale of such shares of Common
Stock offered hereunder by them and any discounts, commissions or
concessions received by any such dealers or agents might be deemed to
be underwriting discounts and commissions under the Securities Act.
The aggregate proceeds to the Selling Securityholders from sales of
the Common Stock offered by the Selling Securityholders hereby will be
the purchase price of such Common Stock less any broker's commissions.
The Common Stock issuable upon exercise of the Warrants and offered
hereby will be issued by the Company to holders of Warrants from time
to time pursuant to exercise of such Warrants in accordance with the
terms thereof.
To the extent required, the specific shares of Common Stock to be
sold, the names of the Selling Securityholders, the respective
purchase prices and public offering prices, the names of any such
agent, dealer or underwriter, and any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement or, if appropriate, a post-
effective amendment to the Registration Statement of which this
Prospectus is a part.
The shares of Common Stock offered hereby may be sold from time to
time in one or more transactions at a fixed price, which may be
changed, or at varying prices determined at the time of such sale or
at negotiated prices.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers.
In addition, in certain states shares of Common Stock may not be sold
unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), any person engaged in
the distribution of the Common Stock offered hereby may not
simultaneously engage in market making activities with respect to the
Common Stock for a period of two business days prior to the
commencement of such distribution. In addition, without limiting the
foregoing, the Selling Securityholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Rules 10b-2, 10b-6 and 10b-
7, which provisions may limit the timing of purchases and sales of
Common Stock by Selling Securityholders.
The Company will pay substantially all the expenses incurred by the
Selling Securityholders and the Company incident to the Offering and
sale of shares of Common Stock offered hereby to the public, but
excluding any underwriting discounts, commissions or transfer taxes.
The expenses are estimated to be approximately $196,000.
The Company has agreed to indemnify certain Selling Securityholders
against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by
Blackburn & Stoll, LC, Salt Lake City, Utah.
<PAGE> 46
EXPERTS
The consolidated financial statements of Specialized Health Products
International, Inc. (formerly Russco, Inc.), as of December 31, 1994
and 1993, and for the period from November 19, 1993 (date of
inception) through December 31, 1994, have been included herein and in
the Registration Statement in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the U.S. Securities and Exchange
Commission (the "SEC") a Registration Statement on Form S-1 under the
Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which constitutes part of the Registration Statement, does
not contain all of the information contained in the Registration
Statement and exhibits thereto on file with the SEC pursuant to the
Securities Act and the rules and regulations of the SEC thereunder.
For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement
and such exhibits. Statements contained in this Prospectus as to the
content of any contract or other document referred to are not
necessarily complete, and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all
respects by reference to the full text of contract or document.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), and in
accordance therewith files reports and proxy statements and other
information with the SEC. Such reports, proxy statements and other
information and the Registration Statement, including exhibits and
schedules thereto, may be inspected without charge at the public
reference facilities maintained by the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the SEC. Copies of such materials may be obtained
from the SEC at such offices upon payment of prescribed rates.
<PAGE> F-1
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Report F-2
Balance Sheets as of December 31, 1994 and 1993, and the Nine Month
Period Ended September 30, 1995 F-3
Statements of Operations for the None Months Ended September 30, 1995
(unaudited), Year Ended December 31, 1994, and for the Period from
November 19,1993 (date of inception) to December 31, 1993 F-4
Statements of Stockholders' Equity (Deficit) for the None Months Ended
September 30, 1995 (unaudited), Year Ended December 31, 1994, and for
the Period from November 19, 1993 (date of inception) to
December 31, 1993 F-5
Statements of Cash Flows for the None Months Ended September 30, 1995
(unaudited), Year Ended December 31, 1994, and for the Period from
November 19,1993 (date of inception) to December 31, 1993 F-6
Notes to Financial Statements F-7 to F-12
<PAGE> F-2
Independent Auditor's Report
The Board of Directors and Stockholders
Specialized Health Products International, Inc.:
We have audited the accompanying balance sheets of Specialized Health
Products International, Inc. as of December 31, 1994 and 1993, and the
related statements of operations, stockholders' deficit, and cash
flows for the year ended December 31, 1994 and for the period from
November 19, 1993 (date of inception) through December 31, 1993.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Specialized Health Products International, Inc. as of December 31,
1994 and 1993, and the results of its operations and its cash flows
for the year ended December 31, 1994 and for the period from
November 19, 1993 (date of inception) through December 31, 1993 in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Salt Lake City, Utah
April 28, 1995
<PAGE> F-3
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.,
<TABLE>
<CAPTION>
Balance Sheets
Assets December December September 30,
31, 1993 31, 1994 1995 (unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 300 - 5,278,973
Accounts receivable - 4,471 350,546
Related party receivable (note 9) - - 38,793
Inventories 6,104 - 32,862
Prepaid expenses and other 146 5,436 54,933
--------------------------------------
Total current assets 6,550 9,907 5,756,107
--------------------------------------
Equipment and furnishings, net of
accumulated depreciation
of $9,614 in 1995, $1,753 in
1994, and $-0- in 1993 - 285,770 937,706
Other assets, net of accumulated
amortization of $76,687 in
1995, $27,564 in 1994, and $-0-
in 1993 10,000 361,188 370,801
--------------------------------------
$ 16,550 656,865 7,064,614
======================================
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Bank overdraft $ - 10,675 -
Accounts payable - 84,655 165,454
Accrued expenses - 7,800 -
Due to stockholders (note 9) 18,700 194,500 -
Total current liabilities 18,700 297,630 165,454
---------------------------------------
Stockholder loans (note 2) - 358,333 -
Due to stockholders - long-term - 100,000 -
(note 9)
---------------------------------------
Total liabilities 18,700 755,963 165,454
---------------------------------------
9% cumulative redeemable
preference stock, $1.50 par
value. Authorized 250,000
shares; 160,000 shares
issued and outstanding in 1994
(liquidation value $256,780)
(note 6) - 256,780 -
Stockholders' equity
(deficit) (notes 4 and 5):
Preferred stock, $.001 par value
in 1995 and $.389 par value
in 1994. Authorized 5,000,000
shares; no shares issued in 1995
and 1,440,000 shares issued and
outstanding in 1994 (liquidation
value $560,000) - 560,000 -
Common stock, $.02 par value in
1995 and no par value in 1994.
Authorized 50,000,000 shares;
issued and outstanding 8,566,653
shares in 1995 and 1,363,500
shares in 1994 1,300 209,800 171,333
Common stock subscriptions
receivable - (198,500) (349,500)
Additional paid-in capital - - 9,316,028
Accumulated deficit (3,450) (927,178) (2,238,701)
-----------------------------------
Net stockholders' equity (2,150) (355,878) 6,899,160)
Commitments and contingencies
(notes 3, 5, 8, and 10)
------------------------------------
$ 16,550 656,865 7,064,614
====================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> F-4
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
Statements of Operations for the
Nine months ended September 30, 1995 (unaudited),
year ended December 31, 1994,
and for the period from November 19, 1993
(date of inception) to December 31, 1993
<TABLE>
<CAPTION>
1995
1993 1994 (unaudited)
-----------------------------------
<S> <C> <C> <C>
Sales $ - 33,256 442,341
Cost of sales - 21,669 252,801
------------------------------------
Gross profit - 11,587 189,540
Expenses:
Research and development - 290,950 532,537
General and administrative 3,450 620,022 972,911
------------------------------------
Total expenses 3,450 910,972 1,505,448
------------------------------------
Operating loss (3,450) (899,385) (1,315,908)
Interest income - 237 44,133
Interest expense - (7,800) (28,359)
------------------------------------
Net loss (3,450) (906,948) (1,300,134)
Dividends on preference stock - (16,780) (11,389)
------------------------------------
Net loss attributable to
common stockholders $ (3,450) (923,728) (1,311,523)
====================================
Net loss per common share (.003) (.75) (.46)
====================================
Weighted average number of shares
used for net loss per share
computation 1,170,000 1,224,074 2,820,883
</TABLE>
See accompanying notes to financial statements.
<PAGE> F-5
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
Statements of Stockholders' Equity (Deficit)
Nine months ended September 30, 1995 (unaudited),
year ended December 31, 1994,
and for the period from November 19, 1993
(date of inception) to December 31, 1993
<TABLE>
<CAPTION>
Common Net stock-
stock Additional Accumu- holders'
Preferred Stock Common Stock subscription paid-in lated equity
Shares Amount Shares Amount receivable capital deficit (deficit)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock for cash - $ - 1,170,000 $ 1,300 - - - 1,300
Net loss - - - - - - (3,450) (3,450)
------------------------------------------------------------------------------------
Balances at
December 31, 1993 - - 1,170,000 1,300 - - (3,450) (2,150)
Issuance of preferred
stock for cash 1,440,000 560,000 - - - - - 560,000
Issuance of
common stock for
services and
subscription
stock receivable - - 193,500 208,500 (198,500) - - 10,000
Unpaid dividends on
preference stock - - - - - - (16,780) (16,780)
Net loss - - - - - - (906,948) (906,948)
----------------------------------------------------------------------------------------
Balances at
December 31,1994 1,440,000 560,000 1,363,500 209,800 (198,500) - (927,178) (355,878)
Issuance of preferred
stock for cash 362,403 604,001 - - - - - 604,001
Cash received for
stock subscriptions
receivables - - - - 190,000 - - 190,000
Services provided for
stock subscriptions
receivables - - - - 8,500 - - 8,500
Unpaid dividends on
preference stock - - - - - - (11,389) (11,389)
Conversion of debt
for common stock
(note 2) - - 346,500 385,000 - - - 385,000
Issuance of additional
common shares to
stockholders - - 90,000 180,000 - (180,000) - -
Business combination
(note 1) (1,802,403)(1,164,001) 2,102,403 (696,752) - 1,860,753 - -
Issuance of common
stock for cash,
net of expenses
(note 5) - - 4,256,250 85,125 - 7,193,395 - 7,279,060
Conversion of
debt for common
stock (note 5) - - 50,000 1,000 - 99,000 - 100,000
Issuance of common
stock for stock
subscription
receivable (note 5) - - 70,000 1,400 (140,000) 138,600 - -
Exercise of stock
options for common
stock subscription
receivable - - 288,000 5,760 (209,500) 203,740 - -
Net loss - - - - - - (1,300,134) (1,300,134)
-------------------------------------------------------------------------------------
Balances at
September 30, 1995
(unaudited) - $ - 8,566,653 171,333 (349,500) 9,316,028 (2,238,701) 6,899,160
</TABLE>
See accompanying notes to financial statements
<PAGE> F-6
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
Statements of Cash Flows
Nine months ended September 30, 1995 (unaudited),
year ended December 31, 1994,
and for the period from November 19, 1993
(date of inception) to December 31, 1993
<TABLE>
<CAPTION>
1995
1993 1994 (unaudited)
----------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,450) (906,948) (1,300,134)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization - 29,317 56,984
Common stock issued for services - 10,000 8,500
Changes in operating assets and
liabilities:
Increase in accounts receivable - (4,471) (346,075)
Increase in prepaid expenses and
other assets (146) (5,290) (49,497)
Decrease (increase) in inventory (6,104) 6,104 (32,862
Increase in related party receivable - - (38,793)
Increase in accounts payable and
accrued liabilites - 92,455 72,999
----------------------------------------
Net cash used in operating (9,700) (778,833) (1,628,878)
Cash flows from investing activities:
Capital expenditures - (287,523) (659,797)
Acquisition of patents and technology (10,000) (278,752) (58,736)
----------------------------------------
Net cash used in investing (10,000) (566,275) (718,533)
Cash flows from financing activities:
Borrowings on due to stockholders - 194,500 -
Payments on due to stockholders - - (194,500)
Proceeds from stockholder loans 18,700 339,633 44,167
Payments on stockholders loans - - (17,500)
Proceeds from issuance of common stock 1,300 - 7,279,060
Proceeds from issuance of preferred stock - 560,000 604,001
Proceeds from issuance of redeemable
preference stock - 240,000 -
Payments on redeemable preference stock
and dividends - - (268,169)
Proceeds from stock subscriptions
receivable - - 190,000
---------------------------------------
Net cash provided by financing
activities 20,000 1,334,133 7,637,059
---------------------------------------
Net increase (decrease) in cash 300 (10,975) 5,289,648
Cash (bank overdraft) at beginning of year - 300 (10,675)
---------------------------------------
Cash (bank overdraft) at end of year $ 300 (10,675) 5,278,973
=======================================
Supplemental Disclosures of Noncash
Investing and Financing Activities
Dividends on redeemable preference stock $ - 16,780 11,389
Common stock issued for subscription
receivable - 198,500 349,500
Conversion of notes payable and due to
stockholders to common stock - - 485,000
Acquisition of purchased technology and
and patents for stockholder payable - 100,000 -
See accompanying notes to financial statements.
</TABLE>
<PAGE> F-7
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
Notes to Financial Statements
Nine months ended September 30, 1995 (unaudited),
year ended December 31, 1994,
and for the period from November 19, 1993
(date of inception) to December 31, 1993
(1) Summary of Significant Accounting Policies
(a) Organization and Business Description
Specialized Health Products, Inc. (Specialized Health) was organized
November 19, 1993, with a commercial objective to develop,
manufacture, and market safe, easy-to-use and cost-effective products
for the health care industry. Initial development has focused on
products that limit or prevent the spread of blood-borne diseases.
Specialized Health's activities since inception have principally
consisted of obtaining financing, recruiting personnel, conducting
research and development, acquiring products, and manufacturing
preparation.
Specialized Health entered into a business combination in July 1995
with Russco, Inc. (Russco) wherein Specialized Health became a wholly-
owned subsidiary of Russco and Russco's name was changed to
Specialized Health Products International, Inc. (the Company). Russco
was organized in February 1986 as a public blind pool company to
evaluate, structure, and complete a merger with, or acquisition of,
any privately held business seeking to obtain the perceived advantages
of being a publicly owned Company. Russco has had no significant
operations and minimal capital with which to conduct its operations.
At the closing of the business combination, (a) the 300,000 shares
of Russco's common stock previously outstanding (as adjusted for a
reverse stock split) remained outstanding as common stock of the
Company and (b) Russco issued 3,602,403 shares of its common stock for
all of the issued and outstanding shares of Specialized Health's
common stock and preferred stock. The business combination is treated
for accounting purposes as a "reverse merger" wherein Specialized
Health has been shown as the acquiring company even though Russco
issued its common shares to acquire Specialized Health because the
stockholders of Specialized Health received the significant majority
of the outstanding common stock of the Company and management of
Specialized Health became the management of the Company. Because
Russco had limited operations, the business combination has been
accounted for as a purchase transaction with the net assets of Russco
(which were insignificant) being recorded at their fair value at the
date of closing and operating results of Russco prior to the business
combination not being included with the historical operating results
of Specialized Health.
Contemporaneously with the business combination, Specialized Health
engaged in a private placement of securities wherein 4,376,250 shares
of the Company's common stock were issued, net of offering costs, for
consideration of $7,519,060, as more fully discussed in note 5.
The accompanying financial statements subsequent to the business
combination include the accounts of the Company and its wholly-owned
subsidiary Specialized Health. All intercompany accounts and
transactions have been eliminated in consolidation. Prior to the
business combination Specialized Health had no subsidiary.
In the opinion of management, the unaudited financial statements as
of and for the nine months ended September 30, 1995, reflect all
adjustments that include only normal and recurring adjustments
necessary to present fairly the financial position and results of
operations for such periods. Results of operations for interim
periods are not necessarily indicative of results that might be
achieved for the entire year.
(b) Cash and Cash Equivalents
Cash and cash equivalents are comprised of a checking and money
market account. The Company considers all investments with original
maturities of three months or less to be cash equivalents.
<PAGE> F-8
(c) Inventories
Inventories which consist primarily of finished goods are stated
at the lower of cost or market. Cost is determined using the first-in
first-out method.
(d) Other Assets
The Company has included in other assets at December 31, 1993,
December 31, 1994, and September 30, 1995, the cost of purchased
technology and patents, and related patent costs amounting to $10,000,
$388,752, and $449,488, respectively, which is being amortized using
the straight-line method over seven years. Management evaluates the
recoverability of these costs on a periodic basis based on historical
experience and estimates of future sales.
(e) Equipment and Furnishings
Equipment and furnishings are stated at cost and consist primarily
of manufacturing molds. Depreciation is computed using the straight-
line method based on the estimated useful lives of the related assets
with the exception of manufacturing equipment which is depreciated on
the units-of-production method.
(f) Revenue Recognition
Revenues are recognized upon shipment of products. Sales
recorded in the year ended December 31, 1994 relate primarily to
products received on acquisition of technology and patents.
(g) Research and Development Costs
Research and development costs are expensed as incurred.
(h) Income Taxes
Income taxes are recorded using the asset and liability method for
all periods presented in accordance with the provisions of Statement
of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(i) Net Loss Per Common Share
Net loss per common share is based on the weighted average number of
common shares outstanding. Stock options, warrants, and preferred
shares prior to conversion are not included in the calculation because
their inclusion would be antidilutive and reduce the net loss per
share amount.
(j) Reclassification
Certain amounts in 1994 have been reclassified to conform to 1995
classifications.
<PAGE> F-8
(2) Stockholders' Loans
During 1995 and 1994, prior to the business combination certain
existing stockholders made direct loans to Specialized Health
aggregating $385,000 and bearing interest at ten percent under a
bridge loan agreement. Subscriptions under the bridge loan agreement
were offered proportionately to stockholders based on the number of
shares held. The subscribers to the bridge loan agreement were issued
a total of 346,500 warrants permitting them to acquire an equal number
of shares of common stock at $1.11 per share on or before December 31,
1996. No value was ascribed to the warrants. In connection with the
business combination discussed in note 1, the 346,500 warrants were
exercised through conversion of the outstanding loans.
(3) Leases
The Company leases office space, equipment, and vehicles under
noncancelable operating leases. Future minimum lease payments under
these leases are as follows:
<TABLE>
<CAPTION>
Fiscal year ending December 31:
<S> <C>
1995 (remaining three months) $ 30,042
1996 94,040
1997 82,338
1998 36,000
---------
$242,420
=========
</TABLE>
Rent expense was $50,360 for the nine months in 1995, $52,051 in
1994, and $1,881 for the period from November 19, 1993 (date of
inception) through December 31, 1993.
(4) Stock Options
On September 1, 1995, the Company adopted a nonqualified stock
option plan whereby it has reserved 1,284,998 shares of its common
stock for issuance to officers, directors, and employees. At the time
of adoption, the Company granted options to acquire 1,151,810 shares
of common stock at $2.00 per share of which 1,060,000 vest immediately
and 34,810 vest at various times over the next three years. The
options expire five years from date of grant. In November 1995,
options to purchase an additional 20,000 shares of common stock at
$2.00 per share were granted to an employee of the Company.
During 1994, the Board of Directors of Specialized Health approved a
nonqualified stock option plan for its officers, directors, and
employees and reserved 396,000 shares of common stock for issuance
upon the exercise of options granted under this plan. The exercise
price of the options is equivalent to the estimated fair market value
of the stock as determined by the Board of Directors at the date of
grant. The number of shares, terms, and exercise period are
determined by the Board of Directors on an option-by-option basis.
During 1994, options to acquire 396,000 common shares were granted at
a price range of $.39 to $1.11 per share. No options were exercised
or lapsed during 1994. On September 1, 1995, options to acquire
288,000 shares were exercised from which the Company received $209,500
in a common stock subscription receivable. The remaining 108,000
shares will become exercisable over the next eighteen months, have an
option price of $.39 per share, and expire in 2004.
(5) Preferred and Common Stock
The Company has authorized 50,000,000 shares of common stock with
$.02 par value and 5,000,000 shares of preferred stock with a par
value of $.001 per share.
In connection with the business combination discussed in note 1,
Specialized Health completed a 9 for 1 forward stock split of both its
common and preferred stock. The number of common and preferred shares
and per share amounts presented in the accompanying financial
statements have been restated for the effect of this split.
<PAGE>F-9
(5) Preferred and Common Stock (continued)
Specialized Health and the Company engaged in a private placement of
securities in July 1995 wherein 860.25 units were sold for $10,000 per
unit for total consideration, net of expenses of $7,519,060. This
consideration was comprised of $7,279,060 of cash, $100,000 of debt
converted to common stock, and a common stock subscription receivable
of $140,000. The private placement was completed contemporaneously
with the business combination. Each unit consisted of 5,000 shares of
the Company's $.02 par value common stock and Series A warrants to
purchase an aggregate of 2,580,750 shares of the Company's common
stock at a price of $3.00 per share, exercisable for a period of two
years from the date of effectiveness of a registration statement
covering the issuance of the shares of common stock underlying the
Series A warrants.
For services provided in connection with the private placement of
securities, the underwriter received a commission of $860,251 in cash,
75,000 shares of common stock, Series A warrants to purchase 530,125
shares of common stock for $3.00 per share, and Series B warrants to
purchase 1,290,375 shares of common stock for $2.00 per share. The
warrants expire on the earlier of (a) two years from the effective
date of a registration statement under the Securities Act covering the
issuance of the shares of common stock underlying such warrants or (b)
the date specified in a notice of redemption from the Company in the
event that the closing price of the common stock for any ten
consecutive trading days preceding such notice exceeds $6.00 per share
and subject to the availability of a current prospectus covering the
underlying shares. The Company may redeem all or a portion of the
warrants, in each case at $.001 per warrant upon at least 20 days
prior written notice to the warrant holders. The warrants may only be
redeemed if a current prospectus is available with respect to the
issuance of shares of common stock upon the exercise thereof.
The underwriter has a continuing relationship with the Company
pursuant to which the underwriter will provide financial advisory and
investment banking services to the Company through July 1997. The
Company will pay the underwriter $4,000 per month for such services.
Additionally, the underwriter has the right of first refusal to
undertake any financings of the Company during this period.
Also, during 1995 the Company issued a warrant to a nonaffiliated
stockholder of the Company to purchase 45,000 shares of common stock
at $1.67 per share. This warrant expires in 1996.
Each preferred and common share of Specialized Health was converted
into one common share of the Company in connection with the business
combination.
The Company has granted to a director and certain officers the right
to receive up to an aggregate of 2,000,000 additional shares of common
stock based upon the level of pre-tax consolidated net income (PTNI)
for 1996, 1997, or 1998. If PTNI equals of exceeds $1,500,000,
$5,000,000, or $8,000,000 in any of these years these individuals will
receive an aggregate of 350,000, 1,100,000, or 2,000,000 common
shares, respectively, less shares previously received but no more than
an aggregate of 2,000,000 shares.
The Company expects that the issuance of such shares will be deemed
to be the payment of compensation to the recipients and will result in
a charge to the earnings of the Company in the year or years the
shares are earned, in an amount equal to the fair market value of the
shares. This charge to earnings could have a substantial negative
impact on the earnings of the Company in the year or years in which
the compensation expense is recognized.
The effect of the charge to earnings associated with the issuance of
the shares could place the Company in a net loss position for the
relevant year, even though the PTNI was at a level requiring the
issuance of the shares. Because the shares are issuable based on the
results of a single year, the PTNI in a particular year could require
the issuance of shares even though the cumulative PTNI for the three
years 1996, 1997, and 1998, or any combination of those years, could
reflect a lower amount of PTNI that would not require the Company to
issue such shares or even a pre-tax net loss.
<PAGE> F-10
(6) Preference Stock
Specialized Health had authorized 250,000 shares of redeemable
preference stock with a par value of $1.50 per share, of which 160,000
shares were issued and outstanding at December 31, 1994. Each
redeemable preference share was entitled to a cumulative annual
dividend of nine percent of the par value from the date of original
issue. Dividends were payable when and as declared by the Board of
Directors. The preference stock and related dividends were paid in
cash at the time of the business combination.
(7) Income Taxes
There was no income tax expense in 1993, 1994, and 1995, due to net
operating losses. The difference between the expected tax benefit and
the actual tax benefit is primarily attributable to the effect of
start-up costs and net operating losses being offset by an increase in
the Company's valuation allowance. The tax effects of temporary
differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities at December 31, 1993, December 31,
1994, and September 30, 1995, are presented below:
1993 1994 1995
Deferred tax assets:
Organization costs $ - 5,138 4,300
Start-up costs 1,287 1,030 780
Net operating loss
carryforwards - 275,843 735,000
Accrued compensation - 57,629 9,500
----------------------------------
Total gross deferred tax assets 1,287 339,640 749,580
Less valuation allowance (1,287) (339,579) (748,580)
----------------------------------
Net deferred tax assets - 61 1,000
Deferred tax liability
-equipment, principally due
to differences in depreciation - 61 1,000
-----------------------------------
Total gross deferred tax
liability - 61 1,000
-----------------------------------
Net deferred tax liability $ - - -
===================================
The net change in the total valuation allowance for the nine months
ended November 19, 1993 (date of inception) to December 31, 1993, year
ended December 31, 1994, and for the period from September 30, 1995,
was an increase of $1,287, $338,292, and $409,001, respectively.
Subsequently recognized tax benefits relating to the valuation
allowance for deferred tax assets will be recognized as an income tax
benefit to be reported in the statement of operations.
At September 30, 1995, the Company had total tax net operating
losses of approximately $1,934,000, which can be carried forward to
reduce federal income taxes. If not utilized, the tax loss
carryforwards expire beginning in 2009.
Under the rules of the Tax Reform Act of 1986, the Company has
undergone a greater than 50 percent change of ownership.
Consequently, a certain amount of the Company's net operating loss
carryforward available to offset future taxable income in any one year
may be limited. The maximum amount of carryforward available in a
given year is limited to the product of the Company's value on the
date of ownership change and the federal long-term tax-exempt rate,
plus any limited carryforward not utilized in prior years.
(8) Commitments and Contingencies
The Company is party to litigation and claims arising in the normal
course of business. Management, after consultation with legal
counsel, believes that such matters will not have a material impact on
the Company's financial position or results of operations.
<PAGE> F-11
(9) Related Party Receivable and Due to Stockholders
Related party receivables at September 30, 1995 represent advances
to certain related parties.
Amounts due to stockholders in 1994 consisted of unpaid consulting
expenses of $154,500 and a $40,000 note payable. The note payable was
replaced subsequent to year-end with a line of credit from a
commercial bank in the amount of $100,000 due November 1995 bearing
interest at prime plus two percent. Long-term amounts due to a
stockholder related to the acquisition of purchased technology, and
are noninterest bearing. These amounts were repaid in 1995.
(10) Subsequent Event
In October 1995 the Company entered into an agreement with a third
party to form a Joint Venture (Venture) to develop, make, and
distribute an improved filmless X-Ray system. For a fifty percent
interest in the Venture (before dilution by financing investors), the
Company is providing up to $360,000 ($30,000 per month for twelve
months) research and development support. For the Venture to be
successful, at least $3,000,000 and preferably $6,000,000 will have to
be raised through financing channels which do not impact the success
of the Company. While a prototype X-Ray system has been built and
demonstrated and patents have been allowed in support of the X-Ray
technology, no absolute assurance can be given that the system will
find profitable acceptance in the marketplace.
(11) Accounting Standards Issued Not Yet Adopted
In December of 1991, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 107, Disclosures about
Fair Value of Financial Statements. The Company is required to adopt
the provisions of this statement for the years ended December 31,
1995. This statement requires all entities to disclose the fair value
of financial statement, both assets and liabilities recognized and not
recognized in the statement of financial position, for which it is
practicable to estimate fair value. If estimating fair value is not
practicable, this statement requires disclosure of descriptive
information pertinent to estimating the value of the financial
instrument. The impact of Statement 107 is not expected to have a
material affect on the Company.
In October of 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for
Stock Based Compensation (FASB 123). The Company is required to adopt
the provisions of this statement for years beginning after December
15, 1995. This statement encourages all entities to adopt a fair
value based method of accounting for employee stock options or similar
equity instruments. However, it also allows an entity to continue to
measure compensation cost for those plans using the intrinsic-value
method of accounting prescribed by APB opinion No. 25, Accounting for
Stock Issued to Employees (APB 25). Entities electing to remain with
the accounting in APB 25 must make pro forma disclosures of net income
and earnings per share as if the fair value based method of accounting
defined in this statement had been applied. It is currently
anticipated that the Company will continue to measure compensation
costs in accordance with APB 25 and provide the disclosures required
by FASB 123.
No dealer, sales
representative, or any other
person has been authorized to
give any information or to make
any representations in
connection with this offering
other than those contained in 8,777,500 Shares of Common
this Prospectus, and if given Stock
or made, such information or
representation must not be
relied upon as having been
authorized by the Company or
any of the Selling
Securityholders. This Specialized Health Products
Prospectus does not constitute International, Inc.
an offer to sell or a
solicitation of an offer to buy
any securities other than the
securities to which it relates
or an offer to, or a
solicitation would be unlawful.
Neither the delivery of this _____________
Prospectus nor any sale made
hereunder shall, under any PROSPECTUS
circumstances, create an ____________
implication that there has been
no change in the affairs of the
Company or that information
contained herein is correct as
of any time subsequent to the
date hereof.
______________________
TABLE OF CONTENTS
Page
Prospectus Summary 4
Risk Factors 7
Dividend Policy 14
Share Price History 14
Capitalization 15
Selected Financial Data 16
Management's Discussion and ____________________________
Analysis
of Financial Condition and __________ , 19__
Results of Operations 17
Business 20
Management 32
Certain Relationships and
Related Transactions 36
Description of Securities 37
Securities Eligible for Future
Sale 39
Principal and Selling
Securityholders 40
Plan of Distribution 46
Experts 47
Additional Information 47
Index to Financial Statements F-1
______________________
Until __________ , 19__
(25 days after the commencement
of the Offering), all dealers
effecting transactions in the
Common Stock, whether or not
participating in this
distribution, may be required
to deliver a Prospectus. This
delivery requirement is in addi
tion to the obligation of
dealers to deliver a Prospectus
when acting as Underwriters and
with respect to their unsold
allotments or subscriptions.
<PAGE> II-1
Part II
Item 13. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the fees and expenses payable
by the Company in connection with the issuance and distribution of the
shares of Common Stock:
Securities and Exchange Commission registration fee $27,727.14
NASDAQ listing fee *
Blue Sky fees and expenses *
Printing expenses *
Legal fees and expenses *
Accounting fees and expenses *
Transfer Agent fees *
Miscellaneous *
------------
Total *
_______________ ============
* To be completed by amendment.
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL")
permits the Company to indemnify its directors, officers, employees
and agents, subject to certain conditions and limitations. Article
Ninth of the Company's Restated Certificate of Incorporation, a copy
of which is filed as Exhibit 3.1 to this Registration Statement,
states:
To the fullest extent permitted by the laws of the State of
Delaware now or hereafter in force, no director of this
corporation shall be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty
as a director. Any repeal or modification of the foregoing
provisions of this Article NINTH shall not adversely affect any
right or protection hereunder of any person in respect of any
act or omission occurring prior to the time of such repeal or
modification. The provisions of this Article NINTH shall not be
deemed to limit or preclude indemnification of a director by the
corporation for any liability of a director which has not been
eliminated by the provisions of this Article NINTH.
Article VII of the Company's Bylaws, a copy of which is filed as
Exhibit 3.2 to this Registration Statement, requires the Company to
indemnify officers, employees and agents (collectively "Agents") to
the full extent permitted by the DGCL. The Company has also entered
into Indemnity Agreements with its officers pursuant to which the
Company has agreed to indemnify them. (The form of the Indemnity
Agreement with officers of the Company is filed as Exhibit 10.4 to
this Registration Statement.) The Indemnity Agreements require
payment of any amount which an indemnitee is legally obligated to pay
because of claims relating to his or her service as an officer,
although in many circumstances such indemnification would be
discretionary. The Indemnity Agreements also provide that the Company
will have the burden of proving that the applicable standard of
conduct has not been met. However, Company is not obligated to make
any payment prohibited by law or to pay where payment is made to an
indemnitee under an insurance policy or otherwise.
Company's Bylaws, together with the Indemnity Agreements, expand
the Company's indemnity obligations to the full extent permitted by
law. While Delaware law contemplates some expansion of
indemnification beyond what is specifically authorized by the DGCL,
the courts have not yet established the boundaries of permissible
indemnification.
The Company and its directors and officers currently have no
liability insurance. As of the date hereof, the Company is making
inquiries concerning the terms of such insurance.
Item 15. Recent Sales of Unregistered Securities.
In the three years preceding the filing of this Registration
Statement, the Company has issued the following securities:
The Company sold 51,282 shares of its common stock in December
1993 for $5,000 and 71,795 shares for $7,000 in December 1994. Said
sales were to a single accredited investor. The Company relied on
Section 4(2) of, and/or Regulation D under, the Securities Act of
1933, as amended, in effecting aforementioned transactions. The
Company has reason to believe that the investor was familiar with or
had access to information concerning the operations and financial
condition of the Company, and that the investor acquired his shares
for investment and not with a view to the distribution thereof. At
the time of issuance, all of the foregoing shares of common stock of
the Company were deemed to be restricted securities for purposes of
the Securities Act and the certificates representing such securities
bore legends to that effect.
In September 1994, certain existing shareholders of SHP (and not
the registrant) made direct loans to SHP in the amount of
approximately $385,000 under a bridge loan agreement. Subscriptions
under the bridge loan were offered proportionately to shareholders of
SHP based on the number of shares held. The subscribers to the bridge
loan were issued warrants permitting them to acquire up to an
aggregate of 346,500 shares of SHP common stock at $1.11 per share on
or before December 31, 1995. These warrants were exercised in July,
1995, prior to the Acquisition whereby SHP became a wholey owned
subsidiary of the Company, in consideration for the conversion of this
loan. SHP relied on Section 4(2) of, and/or Regulation D and
Regulation S under, the Securities Act of 1933, as amended, in
effecting aforementioned transactions. The Company has reason to
believe that the investor was familiar with or had access to
information concerning the operations and financial condition of the
Company, and that the investor acquired his shares for investment and
not with a view to the distribution thereof. At the time of issuance,
all of the foregoing shares of common stock of the Company were deemed
to be restricted securities for purposes of the Securities Act and the
certificates representing such securities bore legends to that effect.
<PAGE> II-2
On July 28, 1995, the Company acquired all of the outstanding
capital stock of Specialized Health Products, Inc., ("SHP") through
the merger of a wholly-owned subsidiary of the Company with and into
SHP (the "Acquisition"). As part of the Acquisition, the Company
issued 3,602,403 shares of its common stock, no par value (the "Common
Stock"), to the former shareholders of SHP in exchange for their
common stock.
Upon the consummation of the Acquisition, each former shareholder
of SHP received one share of Common Stock of the Company in exchange
for each share of common stock of SHP (including shares of preferred
stock of SHP that had been converted to common stock immediately prior
to the Acquisition) held by each shareholder. In addition, all
outstanding warrants and options to purchase common stock of SHP were
converted pursuant to the terms thereof into warrants or options of
the Company to purchase an equal number of shares of Common Stock of
the Company on equivalent terms.
In connection with the Acquisition, the Company issued 4,376,250
shares of Common Stock and Series A Warrants to purchase 3,110,875
shares of common stock of the Company to accredited investors in the
United States and foreign countries, and to several foreign
institutions that purchased shares for the account of non-U.S. persons
as that term is defined in Rule 902 of the Securities Act of 1933, in
a private placement wherein the Company retained Capital Growth
International, formerly U.S. Sachem Financial Consultants, L.P.
("Capital Growth"), a broker-dealer registered with the National
Association of Securities Dealers, Inc. "NASD", as its exclusive
financial adviser and placement agent. In connection with such
private placement, the Company also issued Series A Warrants to
purchase 530,125 shares of Common Stock, Series B Warrants to purchase
1,290,375 shares of Common Stock and 75,000 shares of Common Stock to
Capital Growth. The Series A Warrants and the Series B Warrants are
hereinafter referred to as the "Warrants."
The Company relied on Section 4(2) of, and/or Regulation D and/or
Regulation S under, the Securities Act of 1933, as amended, in
effecting the foregoing transactions of the Company that occurred in
1995. The Company has reason to believe that all of the foregoing
investors were familiar with or had access to information concerning
the operations and financial condition of the company, and all of
those investors acquired their shares for investment and not with a
view to the distribution thereof. At the time of issuance, all of the
foregoing shares of Common Stock and Warrants of the Company were
deemed to be restricted securities for purposes of the Securities Act
and the certificates representing such securities bore legends to that
effect.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
The following is a complete list of Exhibits filed or
incorporated by reference as part of this Registration Statement.
Exhibit No. Description Page**
3(i).1 Restated Certificate of Incorporation of the
Company
3(i).2 Articles of Incorporation of SHP
3(i).3 Articles of Amendment of SHP
3(i).4 Plan and Articles of Merger of Russco
Resources, Inc., into SHP (Incorporated by
reference to Exhibit 3(i).1 to the Company's
Current Report on Form 8-K dated July 28, 1995)
3(ii).1 Bylaws of the Company
3(ii).2 Bylaws of SHP
4.1 Form of Series A Warrant
4.2 Form of Series B Warrant
5.1* Opinion of Blackburn & Stoll, LC
<PAGE> II-3
10.1 Agreement and Plan of Reorganization dated as
of June 23, 1995, among the Company, Russco Resources, Inc.,
Scott R. Jensen and Specialized Health Products, Inc.
(Incorporated by reference to Exhibit 2.1 of the Company's
Current Report on Form 8-K, dated July 28, 1995.
10.2 Placement Agreement between the Company, SHP and
U.S. Sachem Financial Consultants, L.P.,
dated June 23, 1995
10.3 Form of Employment Agreement with Executive Officers
10.4 Form of Indemnity Agreement with Executive Officers and Directors
10.5 Form of Confidentiality Agreement
10.6 Joint Venture Agreement between SHP and
Zerbec, Inc., dated as of October 30, 1995
21.1 Schedule of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP,
Independent Certified Public Accountants
23.2* Consent of Blackburn & Stoll, LC
(included in Exhibit 5.1 hereto)
24.1 Powers of Attorney (included in Part II
of this Registration Statement)
_______________
* To be filed by amendment.
** Refers to sequentially numbered copy.
(b) Financial Statement Schedules.
None.
Item 17. Undertakings.
(a) The undersigned Company 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)(3) of the Securities Act of 1933;
(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 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 or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this
section do not apply if the registration statement is on Form S-3,
Form S-8 or Form F-3, and the information required to be included
in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(2) That, for the purpose of
determining any liability under the Securities Act of 1933, 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) If the registrant is a foreign private issuer, to
file a post-effective amendment to the registration statement to
include any financial statements required by 210.3-19 of this
chapter at the start of any delayed offering or throughout a
continuous offering. Financial statements and information
otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided that the registrant includes in the
prospectus, by means of a post-effective amendment, financial
statements required pursuant to this paragraph (a)(4) and other
information necessary to ensure that all other information in the
prospectus is at least as current as the date of those financial
statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3 (239.33 of this chapter), a
post-effective amendment need not be filed to include financial
statements and information required by Section 10(a)(3) of the
Act or 210.3-19 of this chapter if such financial statements and
information are contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the Form F-3.
(b) The undersigned registrant hereby
undertakes that, for purposes of determining any liability under
the Securities Act of 1933, each filing of the registrant's annual
report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of
the Securities Exchange Act of 1934) 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.
(c) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Company has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the city
of Bountiful, State of Utah, on December 8, 1995.
SPECIALIZED HEALTH PRODUCTS
INTERNATIONAL, INC.:
By /s/ David A. Robinson
-------------------------
David A. Robinson, President, Chief
Executive Officer and Director
We the undersigned, directors and officers of Specialized Health
Products International, Inc. (the "Company"), do hereby severally
constitute and appoint David A. Robinson and Bradley C. Robinson, and
each of them, our true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign and all
amendments or post-effective amendments to this Registration
Statement, and to file the same with all exhibits thereto, and all
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents, and each
or any of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to
all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that the said attorneys-in-fact and
agents, and each of them, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons
on behalf of the registrant in the capacities and on the dates
indicated.
Signature Title Date
/s/ Bradley C. Robinson Director and Vice President April __, 1996
- -----------------------
Bradley C. Robinson
/s/ J. Clark Robinson Director, Vice President, Chief April __, 1996
- --------------------- Financial Officer and Secretary
J. Clark Robinson (Principal Financial and
Accounting Officer)
/s/ Gail H. Thorne Director and Vice President April __, 1996
- ---------------------
Gail H. Thorne
/s/ Gary W. Farnes Director April __, 1996
- ---------------------
Gary W. Farnes
/s/ Robert W. Walker Director April __, 1996
- ---------------------
Robert W. Walker
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
EXHIBITS
to
FORM S-1 REGISTRATION STATEMENT
Under the Securities Act of 1933
_______________
Specialized Health Products International, Inc.
(formerly Russco, Inc.)
Exhibits.
Exhibit No. Description Page**
3(i).1 Restated Certificate of Incorporation of the Company
3(i).2 Articles of Incorporation of SHP
3(i).3 Articles of Amendment of SHP
3(i).4 Plan and Articles of Merger of Russco
Resources, Inc., into SHP (Incorporated by reference
to Exhibit 3(i).1 to the Company's Current Report on Form
8-K dated July 28, 1995)
3(ii).1 Bylaws of the Company
3(ii).2 Bylaws of SHP
4.1 Form of Series A Warrant
4.2 Form of Series B Warrant
5.1* Opinion of Blackburn & Stoll, LC
10.1 Agreement and Plan of Reorganization dated as
of June 23, 1995, among the Company, Russco Resources, Inc.,
Scott R. Jensen and Specialized Health Products, Inc.
(Incorporated by reference to Exhibit 2.1 of the Company's
Current Report on Form 8-K, dated July 28, 1995.
10.2 Placement Agreement between the Company, SHP and
U.S. Sachem Financial Consultants, L.P., dated June 23, 1995
10.3 Form of Employment Agreement with Executive
Officers
10.4 Form of Indemnity Agreement with Executive
Officers and Directors
10.5 Form of Confidentiality Agreement
10.6 Joint Venture Agreement between SHP and
Zerbec, Inc., dated as of October 30, 1995
21.1 Schedule of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP,
Independent Certified Public Accountants
23.2* Consent of Blackburn & Stoll, LC
(included in Exhibit 5.1 hereto)
24.1 Powers of Attorney (included in Part II
of this Registration Statement)
_______________
* To be filed by amendment.
** Refers to sequentially numbered copy.
EXHIBIT 3(i).1
Restated Certificate of Incorporation of the Company
RESTATED CERTIFICATE OF INCORPORATION
Russco, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as
follows:
1. The name of the corporation is Russco, Inc.
Russco, Inc., was originally incorporated under the same
name and the original Certificate of Incorporation of the
corporation was filed with the Secretary of State of
Delaware on Nobember 27, 1990.
2. Pursuant to Section 242 and 245 of the General
Corporation Law of the State of Delaware, this Restated
Certificate of Incorporation restates and integrates and
further amends the provisions of the Certificate of
Incorporation of this corporation.
3. This restated Certificate of Incorporation
supersedes the Original Certificate of Incorporation and all
amendments thereto and the Certificate of Incorporation is
hereby amended to read in its entirety as follows:
ARTICLE FIRST
Name: The name of this corporation is
Specialized Health Products International, Inc.
ARTICLE SECOND
Duration: This corporation shall exist
perpetually unless sooner dissolved by law.
ARTICLE THIRD
Purposes: The purpose for which this
corporation is organized is to engage in any
lawful act or activity for which corporations
may be organized under the Delaware General
Corporation Law.
ARTICLE FOURTH
Stock: The total number of authorized
shares of stock which this corporation shall be
authorized to issue is:
Fifty-Five Million (55,000,000) shares
divided into Fifty Million (50,000,000) Common
shares with a par value of Two Cents ($0.02) per
share and Five Million (5,000,000) Preferred
shares with a par value of One-tenth Cent
($0.001) per share.
The Board of Directors is authorized,
subject to limitations prescribed by law and the
provisions of this Article, to provide for the
issuance of the shares of preferred stock in
series, and by filing a certificate pursuant to
the applicable law of the State of Delaware, to
establish from time to time the number of shares
to be included in each such series, and to fix
the designations, powers, preferences and rights
of the shares of each such series and the
qualifications, limitations or restrictions
thereof.
ARTICLE FIFTH
Pre-emptive Rights: The stockholders shall
have no pre-emptive rights to acquire additional
shares of the corporation.
ARTICLE SIXTH
Management of the Corporation's Affairs.
The business and affairs of the corporation
shall be managed under the direction of the
Board of Directors. The exact number of
directors shall be fixed from time to time by,
or in the manner provided in, the Bylaws of the
corporation and may be increased or decreased as
therein provided. Directors of the corporation
need not be elected by ballot unless required by
the Bylaws.
The directors shall be divided into three
classes. Each such class shall consist, as
nearly as may be possible, of one-third of the
total number of directors, and any remaining
directors shall be included within such group or
groups as the Board of Directors shall
designate. A class of directors shall be
elected for a one-year term, a class of direc
tors for a two-year term and a class of
directors for a three-year term. At each
succeeding annual meeting of stockholders,
successors to the class of directors whose term
expires at that annual meeting shall be elected
for a three-year term. If the number of
directors is changed, any increase or decrease
shall be apportioned among the classes so as to
maintain the number of directors in each class
as nearly equal an possible, but in no case
shall a decrease in the number of directors
shorten the term or any incumbent director. A
director may be removed from office for cause
only and, subject to such removal, death,
resignation, retirement or disqualification,
shall hold office until the annual meeting for
the year in which his term expires and until his
successor shall be elected and qualified. No
alteration, amendment or repeal of this Article
SIXTH or the Bylaws of the corporation shall be
effective to shorten the term of any director
holding office at the time of such alteration,
amendment or repeal, to permit any such director
to be removed without cause, or to increase the
number of directors in any class or in the
aggregate from that existing at the time of such
alteration, amendment or repeal, until the
expiration of the terms of office of all
directors then holding office, unless (1) in the
case of this Article SIXTH, such alteration,
amendment or repeal has been approved by the
affirmative vote of two-thirds of the shares of
stock of the corporation outstanding and
entitled to vote thereon, or (ii) in the case of
the Bylaws, such alteration amendment or repeal
has been approved by either the affirmative vote
of two-thirds the holders of all shares of stock
of the corporation outstanding and entitled to
vote thereon or by a vote of a majority of the
entire Board of Directors.
To the extent that any holders of any class
or series of stock other than Common Stock
issued by the corporation shall have the
separate right, voting as a class or series, to
elect directors, the directors elected by such
class or series shall be deemed to constitute an
additional class of directors and shall have a
term of office for one year or such other period
as may be designated by the provisions of such
class or series providing such separate voting
right to the holders of such class or series of
stock, and any such class of directors shall be
in addition to the classes designated above.
Any such directors so elected shall be subject
to removal in such manner as may be provided by
law.
ARTICLE SEVENTH
Action by Stockholders. Action shall be
taken by stockholders of the corporation only at
annual or special meetings of stockholders, and
stockholders may not act by written consent.
Special meetings of the stockholders of the
corporation for any purpose or purposes may be
called at any time by the Board of Directors,
the Chairman of the Board, the Chief Executive
Officer or the President of the corporation, but
such special meetings may not be called by any
other person or persons.
ARTICLE EIGHTH
Amendment: Except as otherwise provided in
this Certificate of Incorporation, the
provisions of this Certificate of Incorporation
may be amended by the affirmative vote of a
majority of the shares entitled to vote on each
such amendment.
ARTICLE NINTH
Limitation of Directors' Liability: To the
fullest extent permitted by the laws of the
State of Delaware now or hereafter in force, no
director of this corporation shall be personally
liable to the corporation or its stockholders
for monetary damages for breach of fiduciary
duty as a director. Any repeal or modification
of the foregoing provisions of this Article
NINTH shall not adversely affect any right or
protection hereunder of any person in respect of
any act or omission occurring prior to the time
of such repeal or modification. The provisions
of this Article NINTH shall not be deemed to
limit or preclude indemnification of a director
by the corporation for any liability of a
director which has not been eliminated by the
provisions of this Article NINTH.
ARTICLE TENTH
REGISTERED AGENT: The registered office in
the State of Delaware is located at 1013 Centre
Road, in the City of Wilmington, County of New
Castle and its registered agent at such address
is Corporation Service Company.
IN WITNESS WHEREOF, the undersigned sign and execute
this Restated Certificate of Incorporation and certify to
the truth of the facts herein stated and that this Restated
Certificate of Incorporation was duly adopted in accordance
with the provisions of the Delaware General Corporation Law,
this 25th day of July, 1995.
RUSSCO, INC.
By _/s/ Scott R. Jensen__________________
Scott R. Jensen
President/Secretary
EXHIBIT 3(i).2
Articles of Incorporation of SHP
ARTICLES OF INCORPORATION
OF
SPECIALIZED HEALTH PROUDUCTS, INC.
The undersigned, natural persons eighteen (18) years of age
or older, acting under the Utah Revised Business Corporation Act,
hereby adopt the following Articles of Incorporation for such
corporation:
ARTICLE FIRST
Name: The name of this corporation is SPECIALIZED HEALTH
PRODUCTS, INC.
ARTICLE SECOND
Duration: This corporation shall exist perpetually unless
sooner dissolved by law.
ARTICLE THIRD
Purposes: The purpose or purposes for which this
corporation is organized are:
a. To engage in any lawful act or activity for which
corporations may be organized under the Utah Revised
Business Corporations Act.
b. To acquire by purchase, exchange, gift, bequest,
subscription or otherwise, and to hold, own, mortgage,
pledge, hypothecate, sell, assign, transfer, exchange
or otherwise dispose of or deal in or with its own
corporate securities or stock or other securities,
including without limitations, any shares of stock,
bonds, debentures, notes, mortgages, or other
obligations, and any certificates, receipts or other
instruments representing rights or interests therein or
any property or assets created or issued by any person,
firm, association, or corporation, or any government or
subdivisions, agencies or instrumentalities thereof; to
make payment therefor in any lawful manner or to issue
in exchange therefor its own securities or to purchase
its own shares; and to exercise as owner or holder of
any securities, any and all rights, powers and
privileges in respect thereof; to make payment therefor
in any lawful manner or to issue in exchange therefor
its own securities or to purchase its own shares; and
to exercise as owner or holder of any securities, any
and all rights, power and privileges in respect
thereof.
c. To become a partner (either general or limited or both)
and to enter into agreements of partnership with one or
more other persons or corporations for the purpose of
carrying on any business whatsoever which this corpora
tion may deem proper or convenient in connection with
any of the purposes herein set forth or otherwise, or
which may be calculated, directly or indirectly, to
promote the interests of this corporation or to enhance
the value of its property or business.
d. To do each and every thing necessary, suitable or
proper for the accomplishment of any of the purposes or
the attainment of any one or more of the subjects
herein enumerated, or which may at any time appear
conducive to or expedient for the protection or benefit
of this corporation, and to do said acts as fully and
to the same extent as natural persons might, or could
do, in any part of the world as principals, agents,
partners, trustees or otherwise, either alone or in
conjunction with any other person, association or
corporation.
e. The foregoing clauses shall be construed both as
purposes and powers and shall not be held to limit or
restrict in any manner the general powers of the
corporation, and the enjoyment and exercise thereof, as
conferred by the laws of the State of Utah; and it is
the intention that the purposes and powers specified in
each of the paragraphs of this Article Third shall be
regarded as independent purposes and powers.]
ARTICLE FOURTH
Stock: The total number of authorized shares of this
corporation shall be one hundred thousand (100,000) common voting
shares with no par value. All of the shares of this corporation
shall have the same rights and preferences. The shareholders of
said stock shall have unlimited voting rights and a right to the
net assets of the corporation upon dissolution.
Any unissued shares of this corporation may be used,
allotted and sold from time to time in such amounts and for such
consideration as may be lawfully determined by the board of
directors subject to the pre-emptive rights of the shareholders.
ARTICLE FIFTH
Pre-emptive Rights: The shareholders shall have pre-emptive
rights to acquire additional shares of the corporation.
ARTICLE SIXTH
Directors' Contracts: No contract or other transaction
between this corporation and one or more of its directors or any
other person, partnership, corporation, firm, association or
entity in which one or more of this corporation's directors are
directors or officers or are financially interested, shall be
either void or voidable because of such relationship or interest,
or because such director or directors are present at the meeting
of the board of directors, or a committee thereof which
authorizes, approves or ratifies such contract or transaction,
and each such director of this corporation is hereby released
from liability which might otherwise exist from such contract if:
(a) such relationship or interest is disclosed or known to the
board of directors or committee which authorizes, approves or
ratifies the contract or transaction and a majority of non-
interested directors, or all non-interested directors in the case
of a committee, vote to approve or ratify the contract or
transaction; (b) such relationship or interest is disclosed or
known to the shareholders entitled to vote and they authorize,
approve or ratify such contract or transaction by vote or written
consent; or (c) the contract or transaction is fair and
reasonable to the corporation.
ARTICLE SEVENTH
Cumulative Voting: At each election of directors, every
shareholder entitled to vote at such election shall have the
right to accumulate their votes by giving one candidate as many
votes as the number of such directors to be elected multiplied by
the number of their shares, or by distributing such votes on the
same principle among any number of such candidates.
ARTICLE EIGHTH
Amendment: These Articles of Incorporation may be amended
by the affirmative vote of a majority of the shares entitled to
vote on each such amendment.
ARTICLE NINTH
Initial Registered Office and Agent: The street address of
this corporation's initial registered agent office is 420 West
1500 south, Bountiful, Utah 84010. The name of the initial
registered agent at such address is Brad C. Robinson.
ARTICLE TENTH
Directors: The maximum number of directors constituting the
initial board of directors of this corporation is seven. The
minimum number of directors constituting the board of directors
of this corporation is five.
ARTICLE ELEVENTH
Incorporators: The name and address of each Incorporator
is:
David A. Robinson
420 West 1500 South
Bountiful, Utah 84010
Brad C. Robinson
420 West 1500 South
Bountiful, Utah 84010
ARTICLE TWELFTH
Limitation of Directors' Liability: Pursuant to Section 16-
10a-841 of the Utah Code Annotated, as amended, the directors
shall have no personal liability for monetary damages for any
action or failure to take any action; provided, however, that
notwithstanding the foregoing, directors may be personally liable
for monetary damages for: (1) the amount of financial benefit
received by a director to which the director is not entitled; (2)
an intentional infliction of harm on the corporation or the
shareholders; (3) voting for an unlawful distribution as defined
by Section 16-10a-640 of the Utah Code, and laws amendatory
thereto; or (4) an intentional violation of criminal law.
ARTICLE THIRTEENTH
Indemnification: The corporation may indemnify an
individual against liability incurred in a proceeding where the
individual was made a party to a proceeding because the person is
or was a director or officer and if: (1) the individual's conduct
was in good faith; (2) the individual reasonably believed that
the conduct was in, or not opposed to, the corporation's best
interests; and (3) in the case of any criminal proceeding, the
individual had no reasonable cause to believe the individual's
conduct was unlawful.
The corporation will indemnify a director or officer who was
successful, on the merits or otherwise, in defense of any
proceeding, or in defense of any claim, issue, or matter in the
proceeding, to which the individual was a party because the
person is or was a director or officer of the corporation,
against reasonable expenses incurred by the individual in
connection with the proceeding or claim with respect to which the
individual has been successful.
The corporation may not indemnify a director or officer in
connection with: (1) a proceeding by or in the right of the
corporation in which the individual was adjudged liable to the
corporation; or (2) any other proceeding charging that the
individual derived an improper personal benefit, whether or not
involving action in the individual's official capacity, in which
proceeding the individual was adjudged liable on the basis that
the individual derived an improper personal benefit.
IN WITNESS WHEREOF, the undersigned, being the incorporators
of the Corporation, execute these Articles of Incorporation and
certify to the truth of the facts herein stated, this 17th day of
November, 1993.
/s/ David A. Robinson
David Robinson, Incorporator
/s/ Brad Robinson
Brad Robinson, Incorporator
The appointment of the undersigned as the initial registered
agent of the Corporation is hereby accepted.
/s/ Brad Robinson
Brad Robinson, Registered Agent
EXHIBIT 3(i).3
Articles of Amendment of SHP
ARTICLES OF AMENDMENT OF
SPECIALIZED HEALTH PRODUCTS, INC.
The undersigned, being the duly elected President of
Specialized Health Products, Inc., a Utah corporation (the
"Corporation"), pursuant to Section 16-10a-1001 et seq. of the
Utah Revised Business Corporation Act, executes the following
Articles of Amendment (the "Articles of Amendment") to the
Articles of Incorporation for the Corporation as filed with the
Division of Corporations and Commercial Code of Utah on the 19th
day of November, 1993 (the "Articles of Incorporation").
ARTICLE FIRST
Amendment: Without altering or amending any other provision
of the Articles of Incorporation, Article Forth of the Articles
of Incorporation is hereby amended to read in its entirety as
follows:
Stock: The total number of authorized shares of the
Corporation shall be 1,500,000, which shall be divided into three
classes designated as follows: 1,000,000 of Common Stock having
no par value; 250,000 shares of Preferred Stock having a par
value of $3.50 per share; and 250,000 shares of Preference Stock
having a par value of $1.50 per share. Any unissued shares of
the Corporation may be used, allotted and sold from time to time
in such amounts and for such consideration as may be lawfully
determined by the board of directors.
Voting Rights and Limitations: Except as otherwise required
by statute, all voting rights of the Corporation shall be vested
in and exercised exclusively by the holders of the Common and
Preferred Stock, as a single voting group, with each share of
Common Stock being entitled to one vote and each share of
Preferred Stock being entitled to one vote. The holders of the
Preference Stock shall not be entitled to vote upon the election
of directors or upon any other matters affecting the management
or affairs of the Corporation, except: (1) such matters as to
which they shall at the time be indefeasibly vested by statute
with such right to vote, (2) upon the failure of the Corporation
to pay the required dividend (discussed infra), or (3) upon the
failure of the Corporation to redeem the Preference Stock prior
to the Redemption Date (defined infra). If the holders of the
Preference Shares are entitled to vote each Preference Share
shall be entitled to one vote, and the classes of stock shall
vote as a single voting group.
Preferences and Relative Rights of Shares: The holders of
the Preference Stock shall be entitled to receive, out of any
funds of the Corporation at the time legally available for the
declaration of dividends, dividends at the rate of 9% per annum
of the par value of such Preference Stock, payable in cash
annually, or at such intervals as the board of directors may from
time to time determine, when and as declared by the board of
directors. Dividends on the Preference Stock shall accrue from
the date of issuance of such shares and shall accrue from day to
day, whether or not earned or declared. Such dividends shall be
payable before any dividends shall be declared or paid upon or
set apart from the other classes of outstanding stock and shall
be cumulative, such that if in any year or years dividends upon
the outstanding Preference Stock at the rate of 9% per annum of
the par value thereof shall not have been paid thereon or
declared or set apart therefor in full, the amount of the
deficiency shall be fully paid or declared and set apart for
payment (but without interest) before any distribution, whether
by way of dividend or otherwise, shall be declared or paid upon,
or set apart for, the other classes of stock.
In the event of a voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation, the holders of the
Preference Stock and Preferred Stock shall be entitled to receive
out of the net assets of the Corporation (whether such assets are
capital or surplus of any nature) an amount equal to the par
value of such Preference Stock and Preferred Stock (the "Par
Value Payment"). If the assets thus distributed among the
holders of the Preference Stock and Preferred Stock shall be
insufficient to permit the payment of the full preferential
amounts to all holders of the Preference Stock and Preferred
Stock, then the entire assets of the Corporation available for
distribution shall be distributed ratably among the Preference
and Preferred Shareholders.
If upon any such liquidation, dissolution, or winding up of
the Corporation there are assets remaining after the Par Value
Payment, the Preference Shareholders shall receive an additional
amount equal to the dividends unpaid and accumulated thereon as
provided in this Article to the date of such distribution,
whether or not earned or declared (the "Dividend Payment"),
before any additional amounts or assets are distributed to the
shareholders.
If upon any such liquidation, dissolution, or winding up of
the Corporation there are assets remaining in the Corporation
after the Par Value Payment and Dividend Payment, then the
holders of any shares of any class of stock shall receive,
ratably, all of the remaining assets of the Corporation.
A consolidation or merger of the Corporation with or into
another Corporation or Corporations shall not be deemed to be a
liquidation, dissolution, or winding up of the Corporation for
purposes of this Article.
Redemption Rights: The Corporation, no later than December
31, 1995 (the "Redemption Date"), applicable law permitting,
shall redeem the issued and outstanding shares of Preference
Stock by paying in cash therefor, an amount equal to the par
value of such shares to be redeemed plus an additional amount
equal to the dividends unpaid and accumulated thereon as provided
in this Article to the date fixed for redemption, whether or not
earned or declared and no more. In case of the redemption of
only a part of the issued and outstanding shares of Preference
Stock prior to the Redemption Date, the Corporation shall
designate by lot, in such manner as the board of directors may
determine, the shares to be redeemed, or shall effect such
redemption pro rata. Unless such partial redemption is pro rata,
less than all of the Preference Stock at any time outstanding may
not be redeemed until (1) all outstanding shares have been paid
for all past dividend periods, and (2) full dividends for the
then current dividend period on all Preference Stock (other than
shares to be redeemed) shall have been paid or declared and the
full amount thereof set apart for payment.
Public Offering: If the Corporation makes a public offering
of stock, or becomes a publicly quoted company, the Preferred
Stock will convert into Common Stock, each share of outstanding
Preferred Stock being converted into one share of Common Stock.
ARTICLE SECOND
Amendment: Without altering or amending any other provision
of the Articles of Incorporation, Article Fifth of the Articles
of Incorporation is hereby amended to read in its entirety as
follows:
Pre-emptive Rights: The shareholders shall have no pre-
emptive rights to acquire additional shares of the Corporation.
ARTICLE THIRD
Amendment: Without altering or amending any other provision
of the Articles of Incorporation, Article Tenth of the Articles
of Incorporation is hereby amended to read in its entirety as
follows:
Directors: The maximum number of directors constituting the
board of directors of the Corporation is eight. The minimum
number of directors constituting the board of directors of the
Corporation is three.
ARTICLE FOURTH
Date of the Adoption of the Amendment: The Articles of
Amendment were adopted by a majority of the shareholders of the
Corporation in conformity with the procedures of the Utah Revised
Business Corporation Act by written consent of the shareholders
dated April 8, 1994.
ARTICLE FIFTH
Vote: Three shares of capital stock of the Corporation were
issued and outstanding as of the date of adoption of the Articles
of Amendment. All shares of capital stock were entitled to vote
as a single class on the Adoption of the Articles of Amendment.
The Articles of Amendment were approved and adopted by the
shareholders of the Corporation by written consent as follows:
For Against
3 shares 0 shares
In WITNESS WHEREOF, the undersigned executes these Articles
of Amendment and certifies to the truth of the facts herein
stated this 8th day of April, 1994.
/s/ David A. Robinson _
David A. Robinson, President
EXHIBIT 3(i).4
Plan and Articles of Merger of Russco Resources, Inc., into SHP
(Incorporated by reference to Exhibit 3(i).1 to the Company's
Current Report on Form 8-K
dated July 28, 1995)
EXHIBIT 3(ii).1
Bylaws of the Company
BY-LAWS
OF
RUSSCO, INC.
ARTICLE I - OFFICES
Section 1. The registered office of the corporation in the
State of Delaware shall be at 1013 Centre Road, Wilmington,
Delaware 19805-1297.
The registered agent in charge thereof shall be CSC Networks.
Section 2. The corporation may also have offices at such
other places as the Board of Directors may from time to time
appoint or the business of the corporation may require.
ARTICLE II - SEAL
Section 1. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization and the
words "Corporate Seal, Delaware".
ARTICLE III - STOCKHOLDERS' MEETINGS
Section 1. Meetings of stockholders shall be held at the
registered office of the corporation in this state or at such
place, either within or without this state, as may be selected
from time to time by the Board of Directors.
Section 2. ANNUAL MEETINGS: The annual meeting of the
stockholders shall be held on such date as is determined by the
Board of Directors for the purpose of electing directors and for
the transaction of such other business as may properly be brought
before the meeting.
Section 3. ELECTION OF DIRECTORS: Elections of the
directors of the corporation shall be by written ballot.
Section 4. SPECIAL MEETINGS: Special meetings of the
stockholders may be called at any time by the President, or the
Board of Directors, or stockholders entitled to cast at least one-
fifth of the votes which all stockholders are entitled to cast at
the particular meeting. At any time, upon written request of any
person or persons who have duly called a special meeting, it
shall be the duty of the Secretary to fix the date of the
meeting, to be held not more than sixty days after receipt of the
request, and to give due notice thereof. If the Secretary shall
neglect or refuse to fix the date of the meeting and give notice
thereof, the person or persons calling the meeting may do so.
Business transacted at all special meetings shall be
confined to the objects stated in the call and matters germane
thereto, unless all stockholders entitled to vote are present and
consent.
Written notice of a special meeting of stockholders stating
the time and place and object thereof, shall be given to each
stockholder entitled to vote thereat at least ten days before
such meeting, unless a greater period of notice is required by
statute in a particular case.
Section 5. QUORUM: A majority of the outstanding shares of
the corporation entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of stockholders.
If less than a majority of the outstanding shares entitled to
vote is represented at a meeting, a vote of one-third of the
shares so represented may adjourn the meeting from time to time
without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as
originally noticed. The stockholders present at a duly organized
meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.
Section 6. PROXIES: Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to
corporate action in writing without a meeting may authorize
another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that
it is irrevocable and if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A
proxy may be made irrevocable regardless of whether the interest
with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. All proxies shall be
filed with the Secretary of the meeting before being voted upon.
Section 7. NOTICE OF MEETINGS: Whenever stockholders are
required or permitted to take any action at a meeting, a written
notice of the meeting shall be given which shall state the place,
date and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by law, written notice of any
meeting shall be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to
vote at such meeting.
Section 8. CONSENT IN LIEU OF MEETINGS: Any action
required to be taken at any annual or special meeting of
stockholders of a corporation, or any action which may be taken
at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote,
if a consent in writing, setting forth the action so taken, shall
be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Section 9. LIST OF STOCKHOLDERS: The officer who has
charge of the stock ledger of the corporation shall prepare and
make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the
name of each stockholder. No share of stock upon which any
installment is due and unpaid shall be voted at any meeting. The
list shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours,
for a period of at least ten days prior to the meeting, either at
a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The
list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by
any stockholder who is present.
ARTICLE IV - DIRECTORS
Section 1. The business and affairs of this corporation
shall be managed by its Board of Directors, no less than one in
number or such other minimum number as is required by law.
The directors need not be residents of this state or stockholders
in the corporation. They shall be elected by the stockholders of
the corporation or in the case of a vacancy by remaining
directors, and each director shall be elected for the term of one
year, and until his successor shall be elected and shall qualify
or until his earlier resignation or removal.
Section 2. REGULAR MEETINGS: Regular meetings of the Board
shall be held without notice other than this by-law immediately
after, and at the same place as, the annual meeting of
stockholders. The directors may provide, by resolution, the time
and place for the holding of additional regular meetings without
other notice than such resolution.
Section 3. SPECIAL MEETINGS: Special Meetings of the Board
may be called by the President or any director upon two day
notice. The person or persons authorized to call special
meetings of the directors may fix the place for holding any
special meeting of the directors called by them.
Section 4. QUORUM: A majority of the total number of
directors shall constitute a quorum for the transaction of
business.
Section 5. CONSENT IN LIEU OF MEETING: Any action required
or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a
meeting if all members of the Board or committee, as the case may
be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board or committee.
The Board of Directors may hold its meetings, and have an office
or offices, outside of this state.
Section 6. CONFERENCE TELEPHONE: One or more directors may
participate in a meeting of the Board, of a committee of the
Board or of the stockholders, by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other; participation
in this manner shall constitute presence in person at such
meeting.
Section 7. COMPENSATION: Directors as such, shall not
receive any stated salary for their services, but by resolution
of the Board, a fixed sum and expenses of attendance, if any, may
be allowed for attendance at each regular or special meeting of
the Board PROVIDED, that nothing herein contained shall be
construed to preclude any director from serving the corporation
in any other capacity and receiving compensation therefor.
Section 8. REMOVAL: Any director or the entire Board of
Directors may be removed, with or without cause, by the holders
of a majority of the shares then entitled to vote at an election
of directors, except that when cumulative voting is permitted, if
less than the entire Board is to be removed, no director may be
removed without cause if the votes cast against his removal would
be sufficient to elect him if then cumulatively voted at an
election of the entire Board of Directors, or, if there be
classes of directors, at an election of the class of directors of
which he is a part.
ARTICLE V - OFFICERS
Section 1. The executive officers of the corporation shall
be chosen by the directors and shall be a President, Secretary
and Treasurer. The Board of Directors may also choose a
Chairman, one or more Vice Presidents and such other officers as
it shall deem necessary. Any number of offices may be held by
the same person.
Section 2. SALARIES: Salaries of all officers and agents
of the corporation shall be fixed by the Board of Directors.
Section 3. TERM OF OFFICE: The officers of the corporation
shall hold office for one year and until their successors are
chosen and have qualified. Any officer or agent elected or
appointed by the Board may be removed by the Board of Directors
whenever in its judgment the best interest of the corporation
will be served thereby.
Section 4. PRESIDENT: The President shall be the chief
executive officer of the corporation; he shall preside at all
meetings of the stockholders and directors; he shall have general
and active management of the business of the corporation, shall
see that all orders and resolutions of the Board are carried into
effect, subject, however, to the right of the directors to
delegate any specific powers, except such as may be by statute
exclusively conferred on the President, to any other officer or
officers of the corporation. He shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the
corporation. He shall be EX-OFFICIO a member of all committees,
and shall have the general power and duties of supervision and
management usually vested in the office of President of a
corporation.
Section 5. SECRETARY: The Secretary shall attend all
sessions of the Board and all meetings of the stockholders and
act as clerk thereof, and record all the votes of the corporation
and the minutes of all its transactions in a book to be kept for
that purpose, and shall perform like duties for all committees of
the Board of Directors when required. He shall give, or cause to
be given, notice of all meetings of the stockholders and of the
Board of Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or President, and under
whose supervision he shall be. He shall keep in safe custody the
corporate seal of the corporation, and when authorized by the
Board, affix the same to any instrument requiring it.
Section 6. TREASURER: The Treasurer shall have custody of
the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books
belonging to the corporation, and shall keep the moneys of the
corporation in a separate account to the credit of the
corporation. He shall disburse the funds of the corporation as
may be ordered by the Board, taking proper vouchers for such
disbursements, and shall render to the President and directors,
at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and
of the financial condition of the corporation.
ARTICLE VI - VACANCIES
Section 1. Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise, shall be
filled by the Board of Directors. Vacancies and newly created
directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole
remaining director. If at any time, by reason of death or
resignation or other cause, the corporation should have no
directors in office, then any officer or any stockholder or an
executor, administrator, trustee or guardian of a stockholder, or
other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of
stockholders in accordance with the provisions of these By-Laws.
Section 2. RESIGNATIONS EFFECTIVE AT FUTURE DATE: When one
or more directors shall resign from the Board, effective at a
future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill
such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective.
ARTICLE VII - CORPORATE RECORDS
Section 1. Any stockholder of record, in person or by
attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual
hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its
other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean a purpose reasonably
related to such person's interest as a stockholder. In every
instance where an attorney or other agent shall be the person who
seeks the right to inspection, the demand under oath shall be
accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the
corporation at its registered office in this state or at its
principal place of business.
ARTICLE VIII - STOCK CERTIFICATES, DIVIDENDS, ETC.
Section 1. The stock certificates of the corporation shall
be numbered and registered in the share ledger and transfer books
of the corporation as they are issued. They shall bear the
corporate seal and shall be signed by the
Section 2. TRANSFERS: Transfers of shares shall be made on
the books of the corporation upon surrender of the certificates
therefor, endorsed by the person named in the certificate or by
attorney, lawfully constituted in writing. No transfer shall be
made which is inconsistent with law.
Section 3. LOST CERTIFICATE: The corporation may issue a
new certificate of stock in the place of any certificate
theretofore signed by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative to
give the corporation a bond sufficient to indemnify it against
any claim that may be made against it on account of the alleged
loss, theft or destruction of any such certificate or the
issuance of such new certificate.
Section 4. RECORD DATE: In order that the corporation may
determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be
more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. If
no record date is fixed:
(a) The record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the
meeting is held.
(b) The record date for determining stockholders
entitled to express consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors
is necessary, shall be the day on which the first written consent
is expressed.
(c) The record date for determining stockholders for
any other purpose shall be at the close of business on the day on
which the Board of Directors adopts the resolution relating
thereto.
(d) A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the
Board of Directors may fix a new record date for the adjourned
meeting.
Section 5. DIVIDENDS: The Board of Directors may declare
and pay dividends upon the outstanding shares of the corporation,
from time to time and to such extent as they deem advisable, in
the manner and upon the terms and conditions provided by statute
and the Certificate of Incorporation.
Section 6. RESERVES: Before payment of any dividend there
may be set aside out of the net profits of the corporation such
sum or sums as the directors, f rom time to time, in their
absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or f or such other
purpose as the directors shall think conducive to the interests
of the corporation, and the directors may abolish any such
reserve in the manner in which it was created.
ARTICLE IX - MISCELLANEOUS PROVISIONS
Section 1. CHECKS: All checks or demands for money and
notes of the corporation shall be signed by such officer or
officers as the Board of Directors may from time to time
designate.
Section 2. FISCAL YEAR: The fiscal year shall begin on the
first day of January.
Section 3. NOTICE: Whenever written notice is required to
be given to any person, it may be given to such person, either
personally or by sending a copy thereof through the mail, or by
telegram, charges prepaid, to his address appearing on the books
of the corporation, or supplied by him to the corporation for the
purpose of notice. If the notice is sent by mail or by
telegraph, it shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or with
a telegraph office for transmission to such person. Such notice
shall specify the place, day and hour of the meeting and, in the
case of a special meeting of stockholders, the general nature of
the business to be transacted.
Section 4. WAIVER OF NOTICE: Whenever any written notice
is required by statute, or by the Certificate or the By-Laws of
this corporation a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or
after the time stated therein, shall be deemed equivalent to the
giving of such notice. Except in the case of a special meeting
of stockholders, neither the business to be transacted at nor the
purpose of the meeting need be specified in the waiver of notice
of such meeting. Attendance of a person either in person or by
proxy, at any meeting shall constitute a waiver of notice of such
meeting, except where a person attends a meeting for the express
purpose of objecting to the transaction of any business because
the meeting was not lawfully called or convened.
Section 5. DISALLOWED COMPENSATION: Any payments made to
an officer or employee of the corporation such as a salary,
commission, bonus, interest, rent, travel or entertainment
expense incurred by him, which shall be disallowed in whole or in
part as a deductible expense by the Internal Revenue Service,
shall be reimbursed by such officer or employee to the
corporation to the full extent of such disallowance. It shall be
the duty of the directors, as a Board, to enforce payment of each
such amount disallowed. In lieu of payment by the officer or
employee, subject to the determination of the directors,
proportionate amounts may be withheld from his future
compensation payments until the amount owed to the corporation
has been recovered.
Section 6. RESIGNATIONS: Any director or other officer may
resign at any time, such resignation to be in writing and to take
effect from the time of its receipt by the corporation, unless
some time be fixed in the resignation and then from that date.
The acceptance of a resignation shall not be required to make it
effective.
ARTICLE X - ANNUAL STATEMENT
Section 1. The President and the Board of Directors shall
present at each annual meeting a full and complete statement of
the business and affairs of the corporation for the preceding
year. Such statement shall be prepared and presented in whatever
manner the Board of Directors shall deem advisable and need not
be verified by a Certified Public Accountant.
ARTICLE XI - INDEMNIFICATION AND INSURANCE:
Section 1. (a) RIGHT TO INDEMNIFICATION. Each person who
was or is made a party or is threatened to be made a party or is
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding") , by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a
director or officer, of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee
or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such
amendment) , against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in
paragraph (b) hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding
(or part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. The right to indemnification
conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition: provided, however, that, if the Delaware General
Corporation Law requires, the payment of such expenses incurred
by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made
only upon delivery to the corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified under this Section
or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(b) RIGHT OF CLAIMANT TO BRING SUIT:
If a claim under paragraph (a) of this Section is not paid
in full by the Corporation within thirty days after a written
claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover
the unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled to be paid also the expense
of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the claimant
has not met the standards of conduct which make it permissible
under the Delaware General Corporation law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that
the claimant has not met such applicable standard or conduct,
shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard or conduct.
(c) Notwithstanding any limitation to the contrary contained in
sub-paragraphs (a) and 8 (b) of this section, the corporation
shall, to the fullest extent permitted by Section 145 of the
General Corporation Law of the State of Delaware, as the same may
be amended and supplemented, indemnify any and all persons whom
it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters
referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive
of any other rights to which those indemnified may be entitled
under any By-law, agreement, vote of stockholders or
disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has
ceased to be director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such
a person.
(d) INSURANCE:
The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or
loss under the Del General Corporation Law.
ARTICLE XII - AMENDMENTS
Section 1. These By-Laws may be amended or repealed by the
vote of directors.
/s/ Scott R. Jensen
Scott R. Jensen, President and
Secretary
December 19, 1990
EXHIBIT 3(ii).2
Bylaws of SHP
BYLAWS
OF
SPECIALIZED HEALTH PRODUCTS, INC.
TABLE OF CONTENTS
Page
I. OFFICES
Section 1.01. Principal Office 1
Section 1.02. Other Offices 1
II. MEETINGS OF SHAREHOLDERS
Section 2.01. Place of Meetings 1
Section 2.02. Annual Meetings 1
Section 2.03. Special Meetings 2
Section 2.04. Adjourned Meetings and Notice Thereof 2
Section 2.05. Voting 3
Section 2.06. Quorum 3
Section 2.07. Consent of Absentees 3
Section 2.08. Action Without Meeting 4
Section 2.09. Proxies 4
Section 2.10. Meetings by Telecommunication 4
III. DIRECTORS
Section 3.01. Powers 4
Section 3.02. Number and Qualification of Directors 5
Section 3.03. Election and Term of Office 5
Section 3.04. Vacancies 6
Section 3.05. Place of Meeting 6
Section 3.06. Organization Meeting 6
Section 3.07. Other Regular Meetings 6
Section 3.08. Special Meetings 6
Section 3.09. Notice of Adjournment 7
Section 3.10. Waiver of Notice 7
Section 3.11. Quorum 7
Section 3.12. Adjournment 8
Section 3.13. Fees and Compensation 8
Section 3.14. Action Without Meeting 8
Section 3.15. Meeting by Telecommunication 8
Section 3.16. Loans to Directors 8
IV. OFFICERS
Section 4.01. Officers 9
Section 4.02. Election 9
Section 4.03. Subordinate Officers, Etc. 9
Section 4.04. Removal and Resignation 9
Section 4.05. Vacancies 9
Section 4.06. Chairperson of the Board 10
Section 4.07. President 10
Section 4.08. Vice-President 10
Section 4.09. Secretary 10
V. MISCELLANEOUS
Section 5.01. Record Date and Closing Stock Books 11
Section 5.02. Inspection of Corporate Records 11
Section 5.03. Checks, Drafts, Etc. 12
Section 5.04. Contract, Etc., How Executed 12
Section 5.05. Certificate of Stock 12
Section 5.06. Representation of Shares of Other
Corporations 12
Section 5.07. Loans and Encumbrances 13
VI. AMENDMENTS
Section 6.01. Power of Shareholders 13
Section 6.02. Power of Directors 13
<PAGE> 1
BYLAWS
OF
SPECIALIZED HEALTH PRODUCTS, INC.
ARTICLE I
OFFICES
Section 1.01. Principal Office. The principal office for
the transaction of the business of the corporation shall be
located in Bountiful, County of Davis, Utah. The board of
directors is hereby granted full power and authority to change,
from time to time, said principal office from one location to
another in said county.
Section 1.02. Other Offices. Branch or subordinate offices
may at any time be established by the board of directors at any
place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01. Place of Meetings. All meetings of share
holders shall be held either at the principal office of the
corporation or at any other place within or without the State of
Utah which may be designated either by the board of directors
pursuant to authority hereinafter granted to said Board, or by
the written consent of all shareholders entitled to vote thereat,
given either before or after the meeting and filed with the
secretary of the corporation.
Section 2.02. Annual Meetings. The annual meetings of
shareholders shall be held on the third Wednesday of April of
each year at 12:00 o'clock p.m., except as otherwise may be
annually determined by the board of directors, provided, however,
that should said day fall upon a legal holiday, then any such
annual meeting shall be held on the next succeeding business day.
At such meetings directors shall be elected, reports of the
affairs of the corporation shall be considered, and any other
business may be transacted which is within the powers of the
shareholders.
Written notice of each annual meeting shall be given to each
shareholder entitled to vote, either personally or by mail or
other means of written communication, charges prepaid, addressed
<PAGE> 2
to such shareholder at shareholder's address appearing on the
books of the corporation or given by shareholder to the
corporation for the purpose of notice. Notice is excused and
need not be given to any shareholder to whom: (1) a notice of
two consecutive annual meetings, and all notices of meetings or
the taking of actions by written consent without a meeting during
the period between the two consecutive annual meetings, have been
mailed to the shareholder's address as shown on the records of
the corporation, and have been returned undeliverable; or (2) at
least two payments, if sent by first class mail, of dividends or
interest on securities during a twelve month period, have been
mailed, addressed to the shareholder at the address of the
shareholder on the corporate records, and have been returned as
undeliverable. If a shareholder to whom notice is excused
delivers to the corporation a written notice setting forth the
shareholder's current address, or if another address for the
shareholder is otherwise made known to the corporation, the
requirement that notice be given to the shareholder is
reinstated. All such notices shall be sent to each shareholder
entitled thereto not less than ten (10) nor more than sixty (60)
days before each annual meeting, and shall specify the place, the
day and the hour of such meeting, and shall state such other
matters, if any, as may be expressly required by statute.
Section 2.03. Special Meetings. Special meetings of the
shareholders, for any purpose or purposes whatsoever, may be
called at any time by the president, the vice-president, the
board of directors, or if the holders of shares representing at
least ten percent of all the votes entitled to be cast on any
issue proposed to be considered at the proposed special meeting
make a written demand for the meeting to the corporation's
secretary. Except in special cases where other express provision
is made by statute, notice of such special meetings shall be
given in the same manner as for annual meetings of shareholders.
Notices of any special meeting shall specify, in addition to the
place, day and hour of such meeting, a description of the purpose
or purposes of the meeting.
Section 2.04. Adjourned Meetings and Notice Thereof. Any
shareholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of a
majority of the shares represented at the meeting, the holders of
which are either present in person or represented by proxy
thereat, but in the absence of a quorum no other business may be
transacted at such meeting.
If an annual or special shareholders meeting is adjourned
to a different date, time, or place, notice need not be given if
the new date, time, or place is announced at the meeting before
adjournment. However, notice must be given in the manner
provided in Section 2.02 of these Bylaws if the adjournment is
for more than 30 days or a new record date for the adjourned
meeting is or must be fixed.
<PAGE> 3
Section 2.05. Voting. Unless a record date for voting
purposes be fixed as provided in Section 5.01 of these Bylaws
then, but subject to the provisions of Section 16-10a-707 of the
Utah Code, only persons in whose names shares entitled to vote
standing on the stock records of the corporation on the day
thirty (30) days prior to any meeting of shareholders shall be
entitled to vote at such meeting. Such vote may be viva voce or
by ballot; provided, however, that all elections for directors
must be by ballot upon demand made by a shareholder at any
election and before the voting begins. Each outstanding share
entitled to vote shall be entitled to one vote upon each matter
submitted to a vote at a meeting of shareholders, unless
otherwise specifically required by law or the Articles of
Incorporation or the Bylaws of this corporation, and if a quorum
exists at the meeting, action on any matter, other than election
of directors, is approved if the votes cast in favor of the
matter exceed votes cast against the matter.
Every shareholder entitled to vote at any election for
directors shall have the right to cumulate such shareholder's
votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of
votes to which such shareholder's shares are entitled, or to
distribute such shareholder's votes on the same principle among
as many candidates as shareholder shall think fit. The
candidates receiving the highest number of votes, up to the
number of directors to be elected, shall be elected.
[Note: There will be no cumulative voting unless the
Articles so provide.]
Section 2.06. Quorum. The presence in person or by proxy
of persons entitled to vote a majority of the voting shares at
any meeting shall constitute a quorum for the transaction of
business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 2.07. Consent of Absentees. The transactions of
any meeting of shareholders, either annual or special, however
called and noticed, shall be as valid as though had at a meeting
duly held after regular call and notice, if a quorum be present
either in person or by proxy, and if, either before or after the
meeting, each of the shareholders entitled to vote, not present
in person or by proxy, signs a written waiver of notice, or a
consent to the holding of such meeting, or an approval of the
minutes thereof. All such waivers, consents or approvals shall
be filed with the corporate records or made a part of the minutes
of the meeting.
<PAGE> 4
Section 2.08. Action Without Meeting. Any action which
under any provision of the Utah Revised Business Corporation Act
may be taken at a meeting of the shareholders, may be taken
without a meeting if authorized by a writing filed with the
secretary of the corporation signed by the number of shareholders
that would be necessary to authorize or to take action at such a
meeting. However, directors cannot be elected in an action
without a meeting unless shareholder consent for such a meeting
is unanimous.
Section 2.09. Proxies. A shareholder may vote in person or
by proxy. A proxy may be appointed by: (1) signing an
appointment form either personally or by the shareholder's
attorney-in-fact; or (2) transmitting a written statement of
appointment to the proxy, the proxy's agent, or to the
corporation, provided the transmission contains written evidence
that shows the shareholder authorized the transmission of the
appointment.
Section 2.10. Meetings by Telecommunication. Any annual or
special meeting of the shareholders may be conducted through the
use of any means of communication that allows persons participat
ing in the meeting to hear one another.
ARTICLE III
DIRECTORS
Section 3.01. Powers. Subject to limitation of the
Articles of Incorporation, of the Bylaws, and of the Utah Revised
Business Corporation Act as to action which shall be authorized
or approved by the shareholders, and subject to the duties of
directors as prescribed by the Bylaws, all corporate powers shall
be exercised by or under the authority of, and the business and
affairs of the corporation shall be managed under the direction
of the board of directors. Without prejudice to such general
powers, but subject to the same limitations, it is hereby
expressly declared that the directors shall have the following
powers, to wit:
(a) To select and remove all the other officers,
agents and employees of the corporation, prescribe such powers
and duties for them as may not be inconsistent with law, or with
the Articles of Incorporation or the Bylaws, fix their compen
sation, and require from them security for faithful service.
<PAGE> 5
(b) To conduct, manage and control the affairs and
business of the corporation, and to make such rules and regula
tions therefor not inconsistent with law, or with the Articles of
Incorporation or the Bylaws, as they may deem best.
(c) To change from time to time the principal office
for the transaction of the business of the corporation from one
location to another within the same county as provided in Section
1.01 hereof; to fix and locate from time to time one or more
subsidiary offices of the corporation within or without the State
of Utah as provided in Section 1.02 hereof; to designate any
place within or without the State of Utah for the holding of any
shareholders' meeting or meetings and to adopt, make and use a
corporate seal, and to prescribe the forms of certificates of
stock, and to alter the form of such seal and of such certifi
cates from time to time, as in their judgment they may deem best,
provided such seal and such certificates shall at all times
comply with the provisions of law.
(d) To authorize the issuance of shares of stock of
the corporation from time to time, upon such terms as may be
lawful, in consideration of money paid, labor done or services
actually rendered, debts or securities cancelled, or tangible or
intangible property actually received, or in the case of shares
issued as a dividend, against amounts transferred from surplus to
stated capital.
(e) To borrow money and incur indebtedness for the
purposes of the corporation, and to cause to be executed and
delivered therefor, in the corporation name, promissory notes,
bonds, debentures, deeds of trust, mortgages, pledges, hypothe
cations or other evidence of debt and securities therefor.
(f) To appoint an executive committee and other com
mittees, and to delegate to the executive committee any of the
powers and authority of the board in the management of the busi
ness and affairs of the corporation, except the power to declare
dividends and to adopt, amend or repeal bylaws. The executive
committee shall be composed of two or more directors.
Section 3.02. Number and Qualification of Directors. The
authorized maximum number of directors of the corporation shall
be seven and the minimum number of directors of the corporation
shall be five until changed by amendment of the Articles of
Incorporation duly adopted by the shareholders or by a Bylaw
amending this Section 3.02.
[Note: The number of directors can be a range of
numbers. Before shares are issued there need be only
one director. After shares are issued the number of
directors must be at least equal to the lesser of three
directors or the number of shareholders.]
Section 3.03. Election and Term of Office. The directors
shall be elected at each annual meeting of shareholders, but if
any such annual meeting is not held, or the directors are not
elected thereat, the directors may be elected at any special
meeting of shareholders held for that purpose. All directors
shall hold office until their respective successors are elected.
<PAGE> 6
Section 3.04. Vacancies. Vacancies in the board of
directors may be filled by a majority of the remaining directors,
though less than a quorum, by a sole remaining director, or by
the shareholders, and each director so elected shall hold office
until the director's successor is elected at an annual or a
special meeting of the shareholders.
A vacancy or vacancies in the board of directors shall be
deemed to exist in case of the death, resignation or removal of
any director, or if the authorized number of directors be
increased, or if the shareholders fail at any annual or special
meeting of shareholders at which any director or directors are
elected to elect the full authorized number of directors to be
voted for at that meeting.
The shareholders may elect a director or directors at any
time to fill any vacancy or vacancies not filled by the direc
tors. If the board of directors accepts the resignation of a
director tendered to take effect at a future time, the board or
the shareholders shall have power to elect a successor to take
office when the resignation is to become effective.
No reduction of the authorized number of directors shall
have the effect of removing any director prior to the expiration
of the director's term of office.
Section 3.05. Place of Meeting. Meetings of the board of
directors shall be held at any place within or without the State
of Utah which has been designated from time to time by resolution
of the Board or by written consent of all members of the Board.
In the absence of such designation, meetings shall be held at the
principal office of the corporation.
Section 3.06. Organization Meeting. Immediately following
each annual meeting of shareholders, the board of directors shall
hold a regular meeting for the purpose of organization, election
of officers, and the transaction of other business. Notice of
such meeting is hereby dispensed with.
Section 3.07. Other Regular Meetings. Other regular meet
ings of the board of directors are hereby dispensed with and all
business conducted by the board of directors shall be conducted
at special meetings.
Section 3.08. Special Meetings. Special meetings of the
board of directors for any purpose or purposes shall be called at
any time by the president or, if he is absent or unable or
refuses to act, by any vice-president or by any two directors.
<PAGE> 7
Notice of the time and place of special meetings may be
accomplished by any of the following methods: (a) written notice
delivered personally to each director; (b) written notice sent to
each director by mail or by other form of written communication,
charges prepaid, addressed to director at director's address as
it is shown upon the records of the corporation, or if it is not
so shown on such records or is not readily ascertainable at the
place in which the meetings of directors are regularly held; or
(c) verbal notice by telephone or in-person communication. In
case notice is mailed or telegraphed, it shall be deposited in
the United States mail or delivered to the telegraph company in
the place in which the principal office of the corporation is
located at least forty-eight (48) hours prior to the time of the
holding of the meeting. In the case of written or verbal notice
delivered personally or by telephone as above provided, it shall
be so delivered or communicated at least twenty-four (24) hours
prior to the time of the holding of the meeting. Such mailing,
telegraphing, communicating or delivering as above provided shall
be due, legal and personal notice to such director.
Section 3.09. Notice of Adjournment. Notice of the time
and place of holding an adjourned meeting need not be given to
absent directors if the time and place be fixed at the meeting
adjourned.
Section 3.10. Waiver of Notice. A director's attendance at
or participation in a meeting waives any required notice to the
director of the meeting unless the director at the beginning of
the meeting, or promptly upon the director's arrival, objects to
holding the meeting or transacting business at the meeting
because of lack of notice or defective notice, and does not
thereafter vote for or assent to action taken at the meeting.
The transactions of any meeting of the board of directors,
however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice,
if a quorum be present, and if, either before or after the
meeting, each of the directors not present signs a written waiver
of notice, or a consent to holding such meeting, or an approval
of the minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 3.11. Quorum. A majority of the authorized number
of directors shall be necessary to constitute a quorum for the
transaction of business, except to adjourn as hereinafter pro
vided. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the board of directors,
unless a greater number be required by law or by the Articles of
Incorporation.
<PAGE> 8
Section 3.12. Adjournment. A quorum of the directors may
adjourn any directors' meeting to meet again at a stated day and
hour; provided, however, that in the absence of a quorum, a
majority of the directors present at any directors' meeting,
either regular or special, may adjourn from time to time until
the time fixed for the next regular or special meeting of the
board.
Section 3.13. Fees and Compensation. Directors shall not
receive any stated salary for their services as directors, but,
by resolution of the board, a fixed fee, with or without expenses
of attendance, may be allowed for attendance at each meeting.
Nothing herein contained shall be construed to preclude any direc
tor from serving the corporation in any other capacity as an
officer, agent, employee, or otherwise, and receiving compensa
tion therefor.
Section 3.14. Action Without Meeting. Any action required
or permitted to be taken by the board of directors under any
provision of the Utah Revised Business Corporation Act and under
these Bylaws may be taken without a meeting if all of the
directors of the corporation shall individually or collectively
consent in writing to such action. Such written consent or
consents shall be filed with the Minutes of the proceedings of
the board of directors. Such action by written consent shall
have the same force and effect as the unanimous vote of such
directors.
Section 3.15. Meeting by Telecommunication. Members of the
board of directors, or any committee designated by the board of
directors, may participate in a meeting of the Board or committee
by any means of communication by which all persons participating
in the meeting can hear each other during the meeting, and
participation in a meeting under this Section shall constitute
presence in person at the meeting.
Section 3.16. Loans to Directors. The corporation shall
not make loans to a director or directors unless the transaction
is: (1) approved by the majority of non-interested directors
after the required disclosure has been made; (2) approved by the
majority of shareholders where a quorum is present and after the
required disclosure has been made; or (3) the terms of the loan,
at the time of commitment, are fair and reasonable to the
corporation.
<PAGE> 9
ARTICLE IV
OFFICERS
Section 4.01. Officers. The officers of the corporation
shall be a president, vice-president and a secretary. The
corporation may also have, at the discretion of the board of
directors, a chairperson of the board, one or more vice-
presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed
in accordance with the provisions of Section 4.03. Any person
may hold any or all offices.
Section 4.02. Election. The officers of the corporation,
except such officers as may be appointed in accordance with the
provisions of Section 4.03 or Section 4.05, shall be chosen
annually by the board of directors, and each shall hold office
until the officer shall die, resign or be removed or otherwise
disqualified to serve, or officer's successor shall be elected
and qualified.
Section 4.03. Subordinate Officers, Etc. The board of
directors may appoint such other officers as the business of the
corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are
provided in the Bylaws or as the board of directors may from time
to time determine.
Section 4.04. Removal and Resignation. Any officer may be
removed, either with or without cause, by a majority of the direc
tors at the time in office, at any regular or special meeting of
the board, or, except in case of an officer chosen by the board
of directors, by an officer upon whom such power of removal may
be conferred by the board of directors.
Any officer may resign at any time by giving written notice
to the board of directors or to the president, or to the secre
tary of the corporation. Any such resignation shall take effect
at the date of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective.
Section 4.05. Vacancies. A vacancy in any office because
of death, resignation, removal, disqualification or any other
cause shall be filled in the manner prescribed in the Bylaws for
regular appointments to such office.
<PAGE> 10
Section 4.06. Chairperson of the Board. The chairperson of
the board, if there shall be such an officer, shall, if present,
preside at all meetings of the board of directors, and exercise
and perform such other powers and duties as may be from time to
time assigned to the chairperson by the board of directors or
prescribed by the Bylaws.
Section 4.07. President. Subject to such supervisory
powers, if any, as may be given by the board of directors to the
chairman of the board, if there be such an officer, the president
shall be the chief executive officer of the corporation and
shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and
officers of the corporation. The president shall preside at all
meetings of the shareholders and in the absence of the chairman
of the board, or if there be none, at all meetings of the board
of directors. The president shall be ex officio a member of all
the standing committees, including the executive committee, if
any, and shall have the general powers and duties of management
usually vested in the office of the president of a corporation,
and shall have such other powers and duties as may be prescribed
by the board of directors or the Bylaws. Specifically, the
president shall have full corporate power and authority to
negotiate and enter into an agreement to purchase intellectual
property from Sharp-Trap, Inc., a Michigan corporation, and/or
Rick Sawaya, M.D.
Section 4.08. Vice-President. In the absence or disability
of the president, the vice-presidents in order of their rank as
fixed by the board of directors, or if not ranked, the vice-
president designated by the board of directors, shall perform all
the duties of the president, and when so acting shall have all
the powers of, and be subject to all the restrictions upon, the
president. The vice-presidents shall have such other powers and
perform such other duties as from time to time may be prescribed
for them respectively by the board of directors or the Bylaws.
Specifically, the vice-president shall have full corporate power
and authority to negotiate and enter into an agreement to
purchase intellectual property from Sharp-Trap, Inc., a Michigan
corporation, and/or Rick Sawaya, M.D.
Section 4.09. Secretary. The secretary shall keep, or
cause to be kept, a book of minutes at the principal office or
such other place as the board of directors may order, of all
meetings of directors and shareholders, with the time and place
of holding, whether regular or special, and if special, how
authorized, the notice thereof given, the names of those present
at directors' meetings, the number of shares present or repre
sented at shareholders' meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the princi
pal office or at the office of the corporation's transfer agent,
a share register, or a duplicate share register, showing the
names of the shareholders and their addresses, the number and
classes of shares held by each, the number and date of certifi
cates issued for the same, and the number and date of cancella
tion of every certificate surrendered for cancellation.
<PAGE> 11
The secretary shall give, or cause to be given, notice of
all of the meetings of the shareholders and of the board of
directors required by the Bylaws or by law to be given (provided,
however, that in the event of the absence or disability of the
secretary, such notice may be given by any other officer of the
corporation), and the secretary shall keep the seal of the
corporation in safe custody, and shall have such other powers and
perform such other duties as may be prescribed by the board of
directors or the Bylaws.
ARTICLE V
MISCELLANEOUS
Section 5.01. Record Date and Closing Stock Books. The
board of directors may fix a time in the future as a record date
for the determination of the shareholders entitled to notice of
and to vote at any meeting of shareholders or entitled to receive
any dividend or distribution, or any allotment of rights, or to
exercise rights in respect to any change, conversion or exchange
of shares. The record date so fixed shall be no more than fifty
(50) days prior to the date of the meeting or event for the pur
poses of which it is fixed. When a record date is so fixed, only
shareholders of record of that date are entitled to notice of and
to vote at the meeting or to receive the dividend, distribution,
or allotment of rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the
record date.
The board of directors may close the books of the corpora
tion against transfers of shares during the whole or any part of
a period not more than fifty (50) days prior to the date of a
shareholders' meeting, the date when the right to any dividend,
distribution, or allotment of rights vest, or the effective date
of any change, conversion or exchange of shares.
[Note: The record date is set by the board and can be
more than 50 days.]
Section 5.02. Inspection of Corporate Records. The share
register or duplicate share register, the books of account, the
bylaws, and minutes of proceedings of the shareholders and the
board of directors and of executive committees of directors shall
be open to inspection upon at least five days written notice by
any shareholder or the holder of a voting trust certificate, at
any reasonable time, and for a purpose reasonably related to the
shareholder's interests as a shareholder, or as the holder of
such voting trust certificate, and shall be exhibited at any time
when required by the demand at any shareholders' meeting of ten
percent (10%) of the shares represented at the meeting. Such
inspection may be made in person or by agent or attorney, and
shall include the right to make extracts. Demand of inspection
other than at a shareholders' meeting shall be made in writing
upon the president, secretary, assistant secretary or general
manager of the corporation.
<PAGE> 12
Section 5.03. Checks, Drafts, Etc. All checks, drafts or
other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of or payable to the corpora
tion, shall be signed or endorsed by the treasurer and/or by such
person or persons and in such manner as, from time to time, shall
be determined by resolution of the board of directors.
Section 5.04. Contract, Etc., How Executed. The board of
directors, except as otherwise provided in the Bylaws, may
authorize any officer or officers, agent or agents, to enter into
any contract or execute any instrument in the name of and on
behalf of the corporation, and such authority may be general or
confined to specific instances; and unless so authorized by the
board of directors, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or
engagement or to pledge its credit to render it liable for any
purpose or to any amount.
Section 5.05. Certificate of Stock. A certificate or
certificates for shares of the capital stock of the corporation
shall be issued to each shareholder when any such shares are
fully paid up. All such certificates shall be signed by the
president or a vice-president and the secretary or an assistant
secretary, or be authenticated by facsimiles of the signatures of
the president and secretary, or by a facsimile of the signature
of the president and the written signatures of the secretary or
an assistant secretary. Every certificate authenticated by a
facsimile of a signature must be countersigned by a transfer
agent or transfer clerk, and be registered by an incorporated
bank or trust company, either domestic or foreign, as registrar
of transfers, before issuance.
Certificates for shares may be issued prior to full payments
under such restrictions and for such purposes as the board of
directors or the Bylaws may provide; provided, however, that any
such certificate so issued prior to full payment shall state the
amount remaining unpaid and the terms of payment thereof.
Section 5.06. Representation of Shares of Other Corpora
tions. The president or any vice-president and the secretary or
assistant secretary of this corporation are authorized to vote,
represent and exercise on behalf of this corporation all rights
incident to any and all shares of any other corporation or
corporations standing in the name of this corporation. The
authority herein granted to said officers to vote or represent on
behalf of this corporation any and all shares held by this corpo
ration in any other corporation or corporations may be exercised
either by such officers in person or by any person authorized so
to do by proxy or power of attorney duly executed by said
officers.
<PAGE> 13
Section 5.07. Loans and Encumbrances. No loan or advance
shall be contracted on behalf of the corporation, and no property
of the corporation shall be mortgaged, pledged, hypothecated,
transferred or conveyed as security for the payment of any loan,
advance, indebtedness or liability, unless and except as author
ized by the board of directors. Any such authorization may be
general or confined to specific instances.
ARTICLE VI
AMENDMENTS
Section 6.01. Power of Shareholders. New Bylaws may be
adopted or these Bylaws may be amended or repealed by the vote of
shareholders entitled to exercise a majority of the voting power
of the corporation or by the written assent of such shareholders,
except as otherwise provided by law or by the Articles of
Incorporation.
Section 6.02. Power of Directors. Subject to the right of
shareholders as provided in Section 6.01 to adopt, amend or
repeal Bylaws, Bylaws other than a Bylaw or amendment thereof
changing the authorized number of directors may be adopted,
amended or repealed by the board of directors.
CERTIFICATE OF SECRETARY
<PAGE> 14
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Secretary of
Specialized Health Products, Inc., a Utah corporation; and
2. That the foregoing Bylaws, comprising thirteen (13)
pages, constitute the original Bylaws of said corporation as duly
adopted at the Organizational Meeting of the incorporators, duly
held on November 19, 1993.
/s/ Secretary
EXHIBIT 4.1
Form of Series A Warrant
SERIES "A" WARRANTS
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THE WARRANTS HAVE NOT BEEN REGISTERED
OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
OR BLUE SKY LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF
REGISTERED AND QUALIFIED PURSUANT TO RELEVANT PROVISIONS OF
FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR IF AN EXEMPTION
FROM SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE.
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
Incorporated Under the Laws of the State of Delaware
No. A - Series A Common Stock
Purchase Warrants
CERTIFICATE FOR SERIES "A" COMMON STOCK
PURCHASE WARRANTS
1. Warrant. This Warrant Certificate certifies that
, or
registered assigns (the "Registered Holder"), is the registered
owner of the above indicated number of Warrants expiring on the
Expiration Date, as hereinafter defined. One (1) Warrant
entitles the Registered Holder to purchase one (1) share of the
common stock, $.02 par value (a "Share"), of Specialized Health
Products International, Inc., a Delaware corporation (the
"Company"), from the Company at a purchase price of Three Dollars
and no/100 ($3.00) (the "Exercise Price") at any time during the
Exercise Period, as hereinafter defined, upon surrender of this
Warrant Certificate with the exercise form hereon duly completed
and executed and accompanied by payment of the Exercise Price at
the principal office of the Company.
Upon due presentment for transfer or exchange of this
Warrant Certificate at the principal office of the Company, a new
Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be
issued in exchange for this Warrant Certificate, subject to the
limitations provided herein, upon payment of any tax or
governmental charge imposed in connection with such transfer.
Subject to the terms hereof, the Company shall deliver Warrant
Certificates in required whole number denominations to Registered
Holders in connection with any transfer or exchange permitted
hereunder.
2. Restrictive Legend. Each Warrant Certificate and each
certificate representing Shares issued upon exercise of a
Warrant, unless such Shares are then registered under the
Securities Act of 1933, as amended (the "Act"), shall bear a
legend in substantially the following form:
<PAGE> 1
"THE [SECURITIES] REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES OR BLUE SKY LAWS OF ANY
STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED
AND QUALIFIED PURSUANT TO RELEVANT PROVISIONS OF
FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR IF AN
EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS
APPLICABLE."
3. Exercise. Subject to the terms hereof, the Warrants,
evidenced by this Warrant Certificate, may be exercised at the
Exercise Price in whole or in part at any time during the period
(the "Exercise Period") commencing on the date hereof and
terminating at the close of business on that day (the "Expiration
Date") which is the second anniversary of the date on which a
registration statement filed pursuant to the Act and covering the
Shares to be issued upon exercise of this Warrant is declared
effective, provided that the Exercise Period shall be extended
and the Expiration Date delayed by one business day for each
business day subsequent to such effectiveness on which a
prospectus meeting the prospectus delivery requirements of the
Act and covering the issuance of such Shares to and, if
appropriate, the resale of such Shares by the Registered Holder
hereof or the successors in interest to such Registered Holder is
not available. The Exercise Period may also be extended by the
Company's Board of Directors.
A Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date (the "Exercise Date")
of the surrender to the Company at its principal offices of this
Warrant Certificate with the exercise form attached hereto
executed by the Registered Holder and accompanied by payment to
the Company, in cash, wire transfer, or by official bank or
certified check, of an amount equal to the aggregate Exercise
Price, in lawful money of the United States of America.
The person entitled to receive the Shares issuable upon
exercise of a Warrant or Warrants ("Warrant Shares") shall be
treated for all purposes as the holder of such Warrant Shares as
of the close of business on the Exercise Date. The Company shall
not be obligated to issue any fractional share interests in
Warrant Shares issuable or deliverable on the exercise of any
Warrant or scrip or cash with respect thereto, and such right to
a fractional share shall be of no value whatsoever. If more than
one Warrant shall be exercised at one time by the same Registered
Holder, the number of full Shares which shall be issuable on
exercise thereof shall be computed on the basis of the aggregate
number of full shares issuable on such exercise.
Promptly, and in any event within ten business days after
the Exercise Date, the Company shall cause to be issued and
delivered to the person or persons entitled to receive the same,
<PAGE> 3
a certificate or certificates for the number of Warrant Shares
deliverable on such exercise.
The Company may deem and treat the Registered Holder of the
Warrants at any time as the absolute owner thereof for all
purposes, and the Company shall not be affected by any notice to
the contrary. The Warrants shall not entitle the Registered
Holder thereof to any of the rights of shareholders or to any
dividend declared on the Shares unless the Registered Holder
shall have exercised the Warrants and thereby purchased the
Warrant Shares prior to the record date for the determination of
holders of Shares entitled to such dividend or other right.
4. Reservation of Shares and Payment of Taxes. The
Company covenants that it will at all times reserve and have
available from its authorized Common Stock such number of shares
as shall then be issuable on the exercise of outstanding
Warrants. The Company covenants that all Warrant Shares which
shall be so issuable shall be duly and validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges
with respect to the issue thereof.
The Registered Holder shall pay all documentary, stamp or
similar taxes and other government charges that may be imposed
with respect to the issuance, transfer or delivery of any Warrant
Shares on exercise of the Warrants. In the event the Warrant
Shares are to be delivered in a name other than the name of the
Registered Holder of the Warrant Certificate, no such delivery
shall be made unless the person requesting the same has paid the
amount of any such taxes or charges incident thereto.
5. Registration of Transfer. The Warrant Certificates
may be transferred in whole or in part, provided any such
transfer complies with all applicable federal and state
securities laws and, if requested by the Company, the Registered
Holder delivers to the Company an opinion of counsel to that
effect, in form and substance reasonably acceptable to the
Company. Warrant Certificates to be transferred shall be
surrendered to the Company at its principal office. The Company
shall execute, issue and deliver in exchange therefor the Warrant
Certificate or Certificates which the Registered Holder making
the transfer shall be entitled to receive.
The Company shall keep transfer books at its principal
office or at the office of its warrant agent which shall register
Warrant Certificates and the transfer thereof. On due
presentment of any Warrant Certificate for registration of
transfer at such office, the Company shall execute, issue and
deliver to the transferee or transferees a new Warrant
Certificate or Certificates representing an equal aggregate
number of Warrants. All Warrant Certificates presented for
registration of transfer or exercise shall be duly endorsed or be
accompanied by a written instrument or instruments of transfer in
form satisfactory to the Company. The Company may require
payment of a sum sufficient to cover any tax or other government
charge that may be imposed in connection therewith.
<PAGE> 4
All Warrant Certificates so surrendered, or surrendered for
exercise, or for exchange in case of mutilated Warrant
Certificates, shall be promptly canceled by the Company and
thereafter retained by the Company until the Expiration Date.
Prior to due presentment for registration of transfer thereof,
the Company may treat the Registered Holder of any Warrant
Certificate as the absolute owner thereof (notwithstanding any
notations of ownership or writing thereon made by anyone other
than the Company), and the Company shall not be affected by any
notice to the contrary.
6. Loss or Mutilation. On receipt by the Company of
evidence satisfactory as to the ownership of and the loss, theft,
destruction or mutilation of this Warrant Certificate, the
Company shall execute and deliver, in lieu thereof, a new Warrant
Certificate representing an equal aggregate number of Warrants.
In the case of loss, theft or destruction of any Warrant
Certificate, the individual requesting issuance of a new Warrant
Certificate shall be required to indemnify the Company in an
amount satisfactory to the Company. In the event a Warrant
Certificate is mutilated, such Certificate shall be surrendered
and canceled by the Company prior to delivery of a new Warrant
Certificate. Applicants for a new Warrant Certificate shall also
comply with such other regulations and pay such other reasonable
charges as the Company may prescribe.
7. Call Option. So long as the closing bid price or last
trade in the principal market in which, or on the principal
exchange on which, the Shares trade exceeds Six Dollars ($6.00)
for the ten (10) consecutive trading days preceding but not
including the date of such call, the Company shall have the right
and option, upon no less than twenty (20) trading days' written
notice to the Registered Holder, to call, and thereafter to
redeem and acquire all of the Warrants remaining outstanding and
unexercised at the date fixed for such redemption in such notice
(the "Redemption Date"), which Redemption Date shall be at least
20 trading days after the date of such notice, for an amount
equal to One-Tenth of One Cent ($.001) per Warrant; provided,
however, that the Registered Holder shall have the right during
the period between the date of such notice and the Redemption
Date to exercise the Warrants in accordance with the provisions
of Section 3 hereof and provided further that a prospectus
<PAGE> 5
meeting the prospectus delivery requirements of the Act and
covering the issuance of such Shares to and, if appropriate, the
resale of such Shares by the Registered Holder hereof or the
successors in interest to such Registered Holder is available
during the entire period between such notice and the Redemption
Date. Said notice of redemption shall require the Registered
Holder to surrender to the Company, on the Redemption Date, at
the principal executive offices of the Company, his certificate
or certificates representing the Warrants to be redeemed.
Notwithstanding the fact that any Warrants called for redemption
have not been surrendered for redemption and cancellation on the
Redemption Date, after the Redemption Date such Warrants shall be
deemed to be expired and all rights of the Registered Holder of
such unsurrendered Warrants shall cease and terminate, other than
the right to receive the redemption price of $.001 per Warrant
for such Warrants, without interest.
In connection with any call hereunder, the Company shall
have no obligation to call any other stock purchase warrant or
warrants, whether or not having similar terms, and no call made
pursuant to any other stock purchase warrant shall obligate the
Company to exercise its right and option to make a call
hereunder.
8. Adjustment of Shares. The number and kind of
securities issuable upon exercise of a Warrant shall be subject
to adjustment from time to time upon the happening of certain
events, as follows:
(a) Stock Splits, Stock Combinations and Certain Stock
Dividends. If the Company shall at any time subdivide or
combine its outstanding Shares, or declare a dividend in
Shares or other securities of the Company convertible into
or exchangeable for Shares, a Warrant shall, after such
subdivision or combination or after the record date for such
dividend, be exercisable for that number of Shares and other
securities of the Company that the Registered Holder would
have owned immediately after such event with respect to the
Shares and other securities for which a Warrant may have
been exercised immediately before such event had the Warrant
been exercised immediately before such event. Any
adjustment under this Section 8 (a) shall become effective
at the close of business on the date the subdivision,
combination or dividend becomes effective.
(b) Adjustment for Reorganization, Consolidation,
Merger. In case of any reorganization of the Company (or
any other corporation the stock or other securities of which
are at the time receivable upon exercise of a Warrant) or in
case the Company (or any such other corporation) shall merge
into or with or consolidate with another corporation or
convey all or substantially all of its assets to another
corporation or enter into a business combination of any form
as a result of which the Shares or other securities
receivable upon exercise of a Warrant are converted into
other stock or securities of the same or another
corporation, then and in each such case, the Registered
Holder of a Warrant, upon exercise of the purchase right at
any time after the consummation of such reorganization,
consolidation, merger, conveyance or combination, shall be
entitled to receive, in lieu of the Shares or other
securities to which such Registered Holder would have been
entitled had he exercised the purchase right immediately
prior thereto, such stock and securities which such
Registered Holder would have owned immediately after such
event with respect to the Shares and other securities for
which a Warrant may have been exercised immediately before
such event had the Warrant been exercised immediately prior
to such event.
<PAGE> 6
In each case of an adjustment in the Shares or other
securities receivable upon the exercise of a Warrant, the Company
shall promptly notify the Registered Holder of such adjustment.
Such notice shall set forth the facts upon which such adjustment
is based.
9. Reduction in Exercise Price at Company's Option. The
Company's Board of Directors may, at its sole discretion, reduce
the Exercise Price of the Warrants in effect at any time either
for the life of the Warrants or any shorter period of time
determined by the Company's Board of Directors. The Company
shall promptly notify the Registered Holders of any such
reduction in the Exercise Price.
10. Registration Rights.
(a) Certain Definitions. As used in this Section 10, the
following definitions shall apply:
"Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Act.
"Holder" means any holder of a Warrant or outstanding
Registerable Securities.
"Registerable Securities" means the Warrant Shares issued or
issuable upon the exercise of a Warrant, provided, however, that
Registerable Securities shall not include any Shares and other
securities which have previously been registered and sold to the
public.
"Registration Expenses" means all expenses incurred by the
Company in complying with Section 10(b) including, without
limitation, all registration, qualification and filing fees,
printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any
special audits incident to or required in connection with any
such registration. Registration Expenses shall not include
selling commissions, discounts or other compensation paid to
underwriters or other agents or brokers to effect the sale.
<PAGE> 7
The terms "register", "registered" and "registration" refer
to a registration effected by preparing and filing a registration
statement in compliance with the Act (and any post-effective
amendments filed in connection therewith), and the declaration of
the effectiveness of such registration statement.
(b) Registration. The Company shall:
(i) Following the original issuance of the Warrants
represented by this Warrant Certificate at such time as the
Company first prepares and files with the Commission a
registration statement on an appropriate form that would
permit inclusion of the Registrable Securities in such
registration statement or a pre-effective amendment to such
a registration statement, include the Registrable Securities
among the securities being registered pursuant to such
registration statement. The Company shall diligently
prosecute such registration statement to effectiveness.
Such registration statement shall cover both the issuance of
Warrant Shares upon exercise of this Warrant and, to the
extent appropriate, the resale of such Warrant Shares by the
Holder. The Company will promptly notify the Holder
regarding (i) the filing of such registration statement and
all amendments thereto, (ii) the effectiveness of such
registration statement and any post-effective amendments
thereto, (iii) the occurrence of any event or condition that
causes the prospectus that is part of such registration
statement no longer to comply with the requirements of the
Act, and (iv) any request by the Commission for any
amendment or supplement to such registration statement or
any prospectus relating thereto;
(ii) Prepare and file with the Commission such
amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and
current and to comply with the provisions of the Act with
respect to the issuance, sale or resale of the Registerable
Securities, including such amendments and supplements as may
be necessary to reflect the intended method of disposition
of the Holder, but for no longer than one hundred eighty
(180) days subsequent to the Expiration Date or the
Redemption Date;
(iii) Furnish to each Holder such number of copies of
a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such other
documents as such Holder may reasonably request in order to
facilitate the public sale or other disposition of the
Registerable Securities by such Holder;
<PAGE> 8
(iv) Use its best efforts to register or qualify the
Registrable Securities under such securities or blue sky
laws of any state as a Holder may reasonably request, and do
any and all other acts which may be reasonably necessary or
advisable to enable such Holder to dispose of Registrable
Securities in such jurisdictions;
(v) Use its best efforts to comply with all applicable
rules and regulations of the Commission, including without
limitation the rules and regulations relating to the
periodic reporting requirements under the Securities
Exchange Act of 1934, as amended; and
(vi) Make available for inspection by the Holder or by
any underwriter, attorney, accountant or other agent acting
for such Holder in connection with the disposition of
Registrable Securities, in each case upon receipt of an
appropriate confidentiality agreement, all corporate
records, documents and properties as may be reasonably
requested.
(c) Expenses of Registration. All Registration Expenses
incurred in connection with the registration, qualification or
compliance pursuant to Section 10(b) hereof shall be borne by the
Company.
(d) Indemnification. In the event any of the Registerable
Securities are included in a registration statement under this
Section 10:
(i) The Company will indemnify each Holder, each of
its officers and directors and partners and each person
controlling such Holder within the meaning of Section 15 of
the Act, and each underwriter, if any, and each person who
controls any underwriter within the meaning of Section 15 of
the Act, against all expenses, claims, losses, damages or
liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any
untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, or
other document, or any amendment or supplement thereto,
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, in
light of the circumstances in which they were made, not
misleading, or any violation by the Company of any rule or
regulation promulgated under the Act applicable to the
Company in connection with any such registration,
qualification or compliance, and the Company will reimburse
the Holder, each of its officers and directors and partners
<PAGE> 9
and each person controlling such Holder, each such
underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, 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 or alleged untrue statement or omission, made in
reliance upon and in conformity with written information
furnished to the Company by such Holder or underwriter for
use therein.
(ii) In order to include Registerable Securities in a
registration statement under this Section 10, a Holder will
be required to indemnify the Company, each of its directors
and officers, its legal counsel and independent accountants,
each underwriter, if any, of the Company's securities
covered by such registration statement, each person who
controls the Company or such underwriter within the meaning
of Section 15 of the Act, and each other selling
shareholder, each of its officers and directors and partners
and each person controlling such selling shareholder within
the meaning of Section 15 of the Act, against all claims,
losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering
circular or other 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 holders,
such directors, officers, counsel, accountants, 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, 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
written information furnished to the Company by the Holder
for use therein.
(iii) Each party entitled to indemnification under
this Section (the "Indemnified Party") shall give notice to
the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party
has actual knowledge 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 (which approval
shall not unreasonably be withheld), and the Indemnified
<PAGE> 10
Party may participate in such defense at such Indemnified
Party's expense. No 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 which 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.
(iv) If the indemnification provided for in this
Section 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, in lieu of indemnifying
the Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party with respect to such
loss, liability, claim, damage or expense in the proportion
that is appropriate to reflect the relative fault of the
Indemnifying Party and the Indemnified Party in connection
with the statements or omissions that 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 the Indemnified Party shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of 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' relative intent, knowledge, access
to information and opportunity to correct or prevent such
statement or omission.
(e) Information by Holder. Each Holder of Registerable
Securities included in any registration shall furnish to the
Company such information regarding such Holder, such securities
and the distribution proposed by such Holder as the Company may
request in writing.
11. Notices. All notices, demands, elections, or requests
(however characterized or described) required or authorized
hereunder shall be deemed given sufficiently if in writing and
sent by registered or certified mail, return receipt requested
and postage prepaid, or by facsimile or telegram to the Company,
at its principal executive office, and of the Registered Holder,
at the address of such holder as set forth on the books
maintained by the Company.
12. General Provisions. This Warrant Certificate shall be
construed and enforced in accordance with, and governed by, the
laws of the State of Delaware. Except as otherwise expressly
stated herein, time is of the essence in performing hereunder.
The headings of this Warrant Certificate are for convenience in
reference only and shall not limit or otherwise affect the
meaning hereof.
<apge> 11
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed as of the day of
, 199 .
SPECIALIZED HEALTH PRODUCTS
INTERNATIONAL, INC.
____________________ ____________________
By: J. Clark Robinson David A. Robinson, President
Secretary
<PAGE> 12
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they
were written out in full according to applicable laws or
regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the entireties Custodian
JR TEN - as joint tenants with right (Cust) (Minor)
of survivorship and not as under Uniform Gifts
tenants in common to Minors Act _____
(State)
Additional abbreviations may also be used though not in the above
list.
FORM OF ASSIGNMENT
(To be Executed by the Registered Holder if He or She
Desires to Assign Warrants Evidenced by the
Within Warrant Certificate)
FOR VALUE RECEIVED ___________________________ hereby
sells, assigns and transfers unto _____________________________
_____________________ (_______) Warrants, evidenced by the within
Warrant Certificate, and does hereby irrevocably constitute and
appoint _____________________ __________________ Attorney to
transfer the said Warrants evidenced by the within Warrant
Certificates on the books of the Company, with full power of
substitution.
Dated:____________________ _____________________________
Signature
Notice: The above signature must correspond with the name as
written upon the face of the Warrant Certificate in
every particular, without alteration or enlargement or
any change whatsoever.
Signature Guaranteed: __________________________________________
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM
OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK
EXCHANGE, PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE,
OR MIDWEST STOCK EXCHANGE.
<PAGE> 13
FORM OF ELECTION TO PURCHASE
(To be Executed by the Holder if he Desires to Exercise
Warrants Evidenced by the Warrant Certificate)
To Specialized Health Products International, Inc.
The undersigned hereby irrevocably elects to exercise
_______ ____________________ (______)Warrants, evidenced by the
within Warrant Certificate for, and to purchase thereunder,
_____________ _______________ (______) full shares of Common
Stock issuable upon exercise of said Warrants and delivery of
$_________ and any applicable taxes.
The undersigned requests that certificates for such shares
be issued in the name of:
PLEASE INSERT SOCIAL SECURITY
OR TAX IDENTIFICATION NUMBER
________________________________ ________________________________
(Please print name and address)
_________________________________________________________________
_________________________________________________________________
If said number of Warrants shall not be all the Warrants
evidenced by the within Warrant Certificate, the undersigned
requests that a new Warrant Certificate evidencing the Warrants
not so exercised by issued in the name of and delivered to:
_________________________________________________________________
(Please print name and address)
_________________________________________________________________
_________________________________________________________________
<PAGE> 14
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
Dated: _____________________ Signature:__________________________
NOTICE: The above signature must correspond with the name as
written upon the face of the within Warrant Certificate
in every particular, without alteration or enlargement
or any change whatsoever, or if signed by any other
person the Form of Assignment hereon must be duly
executed and if the certificate representing the shares
or any Warrant Certificate representing Warrants not
exercised is to be registered in a name other than that
in which the within Warrant Certificate is registered,
the signature of the holder hereof must be guaranteed.
Signature Guaranteed: ___________________________________________
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM
OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK
EXCHANGE, PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE,
OR MIDWEST STOCK EXCHANGE.
<PAGE> 1
EXHIBIT 4.2
Form of Series B Warrant
SERIES "B" WARRANTS
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THE WARRANTS HAVE NOT BEEN REGISTERED
OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
OR BLUE SKY LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF
REGISTERED AND QUALIFIED PURSUANT TO RELEVANT PROVISIONS OF
FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR IF AN EXEMPTION
FROM SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE.
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
Incorporated Under the Laws of the State of Delaware
No. B - ________ ___________ Series B Common Stock
Purchase Warrants
CERTIFICATE FOR SERIES "B" COMMON STOCK
PURCHASE WARRANTS
1. Warrant. This Warrant Certificate certifies that
________________________________________________________________,
or registered assigns (the "Registered Holder"), is the
registered owner of the above indicated number of Warrants
expiring on the Expiration Date, as hereinafter defined. One (1)
Warrant entitles the Registered Holder to purchase one (1) share
of the common stock, $.02 par value (a "Share"), of Specialized
Health Products International, Inc., a Delaware corporation (the
"Company"), from the Company at a purchase price of Two Dollars
and no/100 ($2.00) (the "Exercise Price") at any time during the
Exercise Period, as hereinafter defined, upon surrender of this
Warrant Certificate with the exercise form hereon duly completed
and executed and accompanied by payment of the Exercise Price at
the principal office of the Company.
Upon due presentment for transfer or exchange of this
Warrant Certificate at the principal office of the Company, a new
Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be
issued in exchange for this Warrant Certificate, subject to the
limitations provided herein, upon payment of any tax or
governmental charge imposed in connection with such transfer.
Subject to the terms hereof, the Company shall deliver Warrant
Certificates in required whole number denominations to Registered
Holders in connection with any transfer or exchange permitted
hereunder.
2. Restrictive Legend. Each Warrant Certificate and each
certificate representing Shares issued upon exercise of a
Warrant, unless such Shares are then registered under the
Securities Act of 1933, as amended (the "Act"), shall bear a
legend in substantially the following form:
<PAGE> 2
"THE [SECURITIES] REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES OR BLUE SKY LAWS OF ANY
STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED
AND QUALIFIED PURSUANT TO RELEVANT PROVISIONS OF
FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR IF AN
EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS
APPLICABLE."
3. Exercise. Subject to the terms hereof, the Warrants,
evidenced by this Warrant Certificate, may be exercised at the
Exercise Price in whole or in part at any time during the period
(the "Exercise Period") commencing on the date hereof and
terminating at the close of business on that day (the "Expiration
Date") which is the second anniversary of the date on which a
registration statement filed pursuant to the Act and covering the
Shares to be issued upon exercise of this Warrant is declared
effective, provided that the Exercise Period shall be extended
and the Expiration Date delayed by one business day for each
business day subsequent to such effectiveness on which a
prospectus meeting the prospectus delivery requirements of the
Act and covering the issuance of such Shares to and, if
appropriate, the resale of such Shares by the Registered Holder
hereof or the successors in interest to such Registered Holder is
not available. The Exercise Period may also be extended by the
Company's Board of Directors.
A Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date (the "Exercise Date")
of the surrender to the Company at its principal offices of this
Warrant Certificate with the exercise form attached hereto
executed by the Registered Holder and accompanied by payment to
the Company, in cash, wire transfer, or by official bank or
certified check, of an amount equal to the aggregate Exercise
Price, in lawful money of the United States of America.
The person entitled to receive the Shares issuable upon
exercise of a Warrant or Warrants ("Warrant Shares") shall be
treated for all purposes as the holder of such Warrant Shares as
of the close of business on the Exercise Date. The Company shall
not be obligated to issue any fractional share interests in
Warrant Shares issuable or deliverable on the exercise of any
Warrant or scrip or cash with respect thereto, and such right to
a fractional share shall be of no value whatsoever. If more than
one Warrant shall be exercised at one time by the same Registered
Holder, the number of full Shares which shall be issuable on
exercise thereof shall be computed on the basis of the aggregate
number of full shares issuable on such exercise.
Promptly, and in any event within ten business days after
the Exercise Date, the Company shall cause to be issued and
delivered to the person or persons entitled to receive the same,
a certificate or certificates for the number of Warrant Shares
deliverable on such exercise.
<PAGE> 3
The Company may deem and treat the Registered Holder of the
Warrants at any time as the absolute owner thereof for all
purposes, and the Company shall not be affected by any notice to
the contrary. The Warrants shall not entitle the Registered
Holder thereof to any of the rights of shareholders or to any
dividend declared on the Shares unless the Registered Holder
shall have exercised the Warrants and thereby purchased the
Warrant Shares prior to the record date for the determination of
holders of Shares entitled to such dividend or other right.
4. Reservation of Shares and Payment of Taxes. The
Company covenants that it will at all times reserve and have
available from its authorized Common Stock such number of shares
as shall then be issuable on the exercise of outstanding
Warrants. The Company covenants that all Warrant Shares which
shall be so issuable shall be duly and validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges
with respect to the issue thereof.
The Registered Holder shall pay all documentary, stamp or
similar taxes and other government charges that may be imposed
with respect to the issuance, transfer or delivery of any Warrant
Shares on exercise of the Warrants. In the event the Warrant
Shares are to be delivered in a name other than the name of the
Registered Holder of the Warrant Certificate, no such delivery
shall be made unless the person requesting the same has paid the
amount of any such taxes or charges incident thereto.
5. Registration of Transfer. The Warrant Certificates
may be transferred in whole or in part, provided any such
transfer complies with all applicable federal and state
securities laws and, if requested by the Company, the Registered
Holder delivers to the Company an opinion of counsel to that
effect, in form and substance reasonably acceptable to the
Company. Warrant Certificates to be transferred shall be
surrendered to the Company at its principal office. The Company
shall execute, issue and deliver in exchange therefor the Warrant
Certificate or Certificates which the Registered Holder making
the transfer shall be entitled to receive.
The Company shall keep transfer books at its principal
office or at the office of its warrant agent which shall register
Warrant Certificates and the transfer thereof. On due
presentment of any Warrant Certificate for registration of
transfer at such office, the Company shall execute, issue and
deliver to the transferee or transferees a new Warrant
Certificate or Certificates representing an equal aggregate
number of Warrants. All Warrant Certificates presented for
registration of transfer or exercise shall be duly endorsed or be
<PAGE> 4
accompanied by a written instrument or instruments of transfer in
form satisfactory to the Company. The Company may require
payment of a sum sufficient to cover any tax or other government
charge that may be imposed in connection therewith.
All Warrant Certificates so surrendered, or surrendered for
exercise, or for exchange in case of mutilated Warrant
Certificates, shall be promptly canceled by the Company and
thereafter retained by the Company until the Expiration Date.
Prior to due presentment for registration of transfer thereof,
the Company may treat the Registered Holder of any Warrant
Certificate as the absolute owner thereof (notwithstanding any
notations of ownership or writing thereon made by anyone other
than the Company), and the Company shall not be affected by any
notice to the contrary.
6. Loss or Mutilation. On receipt by the Company of
evidence satisfactory as to the ownership of and the loss, theft,
destruction or mutilation of this Warrant Certificate, the
Company shall execute and deliver, in lieu thereof, a new Warrant
Certificate representing an equal aggregate number of Warrants.
In the case of loss, theft or destruction of any Warrant
Certificate, the individual requesting issuance of a new Warrant
Certificate shall be required to indemnify the Company in an
amount satisfactory to the Company. In the event a Warrant
Certificate is mutilated, such Certificate shall be surrendered
and canceled by the Company prior to delivery of a new Warrant
Certificate. Applicants for a new Warrant Certificate shall also
comply with such other regulations and pay such other reasonable
charges as the Company may prescribe.
7. Call Option. So long as the closing bid price or last
trade in the principal market in which, or on the principal
exchange on which, the Shares trade exceeds Six Dollars ($6.00)
for the ten (10) consecutive trading days preceding but not
including the date of such call, the Company shall have the right
and option, upon no less than twenty (20) trading days' written
notice to the Registered Holder, to call, and thereafter to
redeem and acquire all of the Warrants remaining outstanding and
unexercised at the date fixed for such redemption in such notice
(the "Redemption Date"), which Redemption Date shall be at least
20 trading days after the date of such notice, for an amount
equal to One-Tenth of One Cent ($.001) per Warrant; provided,
however, that the Registered Holder shall have the right during
the period between the date of such notice and the Redemption
Date to exercise the Warrants in accordance with the provisions
of Section 3 hereof and provided further that a prospectus
meeting the prospectus delivery requirements of the Act and
covering the issuance of such Shares to and, if appropriate, the
resale of such Shares by the Registered Holder hereof or the
successors in interest to such Registered Holder is available
during the entire period between such notice and the Redemption
Date. Said notice of redemption shall require the Registered
<PAGE> 5
Holder to surrender to the Company, on the Redemption Date, at
the principal executive offices of the Company, his certificate
or certificates representing the Warrants to be redeemed.
Notwithstanding the fact that any Warrants called for redemption
have not been surrendered for redemption and cancellation on the
Redemption Date, after the Redemption Date such Warrants shall be
deemed to be expired and all rights of the Registered Holder of
such unsurrendered Warrants shall cease and terminate, other than
the right to receive the redemption price of $.001 per Warrant
for such Warrants, without interest.
In connection with any call hereunder, the Company shall
have no obligation to call any other stock purchase warrant or
warrants, whether or not having similar terms, and no call made
pursuant to any other stock purchase warrant shall obligate the
Company to exercise its right and option to make a call
hereunder.
8. Adjustment of Shares. The number and kind of
securities issuable upon exercise of a Warrant shall be subject
to adjustment from time to time upon the happening of certain
events, as follows:
(a) Stock Splits, Stock Combinations and Certain Stock
Dividends. If the Company shall at any time subdivide or
combine its outstanding Shares, or declare a dividend in
Shares or other securities of the Company convertible into
or exchangeable for Shares, a Warrant shall, after such
subdivision or combination or after the record date for such
dividend, be exercisable for that number of Shares and other
securities of the Company that the Registered Holder would
have owned immediately after such event with respect to the
Shares and other securities for which a Warrant may have
been exercised immediately before such event had the Warrant
been exercised immediately before such event. Any
adjustment under this Section 8 (a) shall become effective
at the close of business on the date the subdivision,
combination or dividend becomes effective.
(b) Adjustment for Reorganization, Consolidation,
Merger. In case of any reorganization of the Company (or
any other corporation the stock or other securities of which
are at the time receivable upon exercise of a Warrant) or in
case the Company (or any such other corporation) shall merge
into or with or consolidate with another corporation or
convey all or substantially all of its assets to another
corporation or enter into a business combination of any form
as a result of which the Shares or other securities
receivable upon exercise of a Warrant are converted into
other stock or securities of the same or another
corporation, then and in each such case, the Registered
Holder of a Warrant, upon exercise of the purchase right at
any time after the consummation of such reorganization,
consolidation, merger, conveyance or combination, shall be
<PAGE> 6
entitled to receive, in lieu of the Shares or other
securities to which such Registered Holder would have been
entitled had he exercised the purchase right immediately
prior thereto, such stock and securities which such
Registered Holder would have owned immediately after such
event with respect to the Shares and other securities for
which a Warrant may have been exercised immediately before
such event had the Warrant been exercised immediately prior
to such event.
In each case of an adjustment in the Shares or other
securities receivable upon the exercise of a Warrant, the Company
shall promptly notify the Registered Holder of such adjustment.
Such notice shall set forth the facts upon which such adjustment
is based.
9. Reduction in Exercise Price at Company's Option. The
Company's Board of Directors may, at its sole discretion, reduce
the Exercise Price of the Warrants in effect at any time either
for the life of the Warrants or any shorter period of time
determined by the Company's Board of Directors. The Company
shall promptly notify the Registered Holders of any such
reduction in the Exercise Price.
10. Registration Rights.
(a) Certain Definitions. As used in this Section 10, the
following definitions shall apply:
"Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Act.
"Holder" means any holder of a Warrant or outstanding
Registerable Securities.
"Registerable Securities" means the Warrant Shares issued or
issuable upon the exercise of a Warrant, provided, however, that
Registerable Securities shall not include any Shares and other
securities which have previously been registered and sold to the
public.
"Registration Expenses" means all expenses incurred by the
Company in complying with Section 10(b) including, without
limitation, all registration, qualification and filing fees,
printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any
special audits incident to or required in connection with any
such registration. Registration Expenses shall not include
selling commissions, discounts or other compensation paid to
underwriters or other agents or brokers to effect the sale.
<PAGE> 7
The terms "register", "registered" and "registration" refer
to a registration effected by preparing and filing a registration
statement in compliance with the Act (and any post-effective
amendments filed in connection therewith), and the declaration of
the effectiveness of such registration statement.
(b) Registration. The Company shall:
(i) Following the original issuance of the Warrants
represented by this Warrant Certificate at such time as the
Company first prepares and files with the Commission a
registration statement on an appropriate form that would
permit inclusion of the Registrable Securities in such
registration statement or a pre-effective amendment to such
a registration statement, include the Registrable Securities
among the securities being registered pursuant to such
registration statement. The Company shall diligently
prosecute such registration statement to effectiveness.
Such registration statement shall cover both the issuance of
Warrant Shares upon exercise of this Warrant and, to the
extent appropriate, the resale of such Warrant Shares by the
Holder. The Company will promptly notify the Holder
regarding (i) the filing of such registration statement and
all amendments thereto, (ii) the effectiveness of such
registration statement and any post-effective amendments
thereto, (iii) the occurrence of any event or condition that
causes the prospectus that is part of such registration
statement no longer to comply with the requirements of the
Act, and (iv) any request by the Commission for any
amendment or supplement to such registration statement or
any prospectus relating thereto;
(ii) Prepare and file with the Commission such
amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and
current and to comply with the provisions of the Act with
respect to the issuance, sale or resale of the Registerable
Securities, including such amendments and supplements as may
be necessary to reflect the intended method of disposition
of the Holder, but for no longer than one hundred eighty
(180) days subsequent to the Expiration Date or the
Redemption Date;
(iii) Furnish to each Holder such number of copies of
a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such other
documents as such Holder may reasonably request in order to
facilitate the public sale or other disposition of the
Registerable Securities by such Holder;
<PAGE> 8
(iv) Use its best efforts to register or qualify the
Registrable Securities under such securities or blue sky
laws of any state as a Holder may reasonably request, and do
any and all other acts which may be reasonably necessary or
advisable to enable such Holder to dispose of Registrable
Securities in such jurisdictions;
(v) Use its best efforts to comply with all applicable
rules and regulations of the Commission, including without
limitation the rules and regulations relating to the
periodic reporting requirements under the Securities
Exchange Act of 1934, as amended; and
(vi) Make available for inspection by the Holder or by
any underwriter, attorney, accountant or other agent acting
for such Holder in connection with the disposition of
Registrable Securities, in each case upon receipt of an
appropriate confidentiality agreement, all corporate
records, documents and properties as may be reasonably
requested.
(c) Expenses of Registration. All Registration Expenses
incurred in connection with the registration, qualification or
compliance pursuant to Section 10(b) hereof shall be borne by the
Company.
(d) Indemnification. In the event any of the Registerable
Securities are included in a registration statement under this
Section 10:
(i) The Company will indemnify each Holder, each of
its officers and directors and partners and each person
controlling such Holder within the meaning of Section 15 of
the Act, and each underwriter, if any, and each person who
controls any underwriter within the meaning of Section 15 of
the Act, against all expenses, claims, losses, damages or
liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any
untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, or
other document, or any amendment or supplement thereto,
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, in
light of the circumstances in which they were made, not
misleading, or any violation by the Company of any rule or
regulation promulgated under the Act applicable to the
Company in connection with any such registration,
qualification or compliance, and the Company will reimburse
the Holder, each of its officers and directors and partners
and each person controlling such Holder, each such
<PAGE> 9
underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, 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 or alleged untrue statement or omission, made in
reliance upon and in conformity with written information
furnished to the Company by such Holder or underwriter for
use therein.
(ii) In order to include Registerable Securities in a
registration statement under this Section 10, a Holder will
be required to indemnify the Company, each of its directors
and officers, its legal counsel and independent accountants,
each underwriter, if any, of the Company's securities
covered by such registration statement, each person who
controls the Company or such underwriter within the meaning
of Section 15 of the Act, and each other selling
shareholder, each of its officers and directors and partners
and each person controlling such selling shareholder within
the meaning of Section 15 of the Act, against all claims,
losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering
circular or other 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 holders,
such directors, officers, counsel, accountants, 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, 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
written information furnished to the Company by the Holder
for use therein.
(iii) Each party entitled to indemnification under
this Section (the "Indemnified Party") shall give notice to
the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party
has actual knowledge 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 (which approval
<PAGE> 10
shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such Indemnified
Party's expense. No 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 which 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.
(iv) If the indemnification provided for in this
Section 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, in lieu of indemnifying
the Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party with respect to such
loss, liability, claim, damage or expense in the proportion
that is appropriate to reflect the relative fault of the
Indemnifying Party and the Indemnified Party in connection
with the statements or omissions that 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 the Indemnified Party shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of 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' relative intent, knowledge, access
to information and opportunity to correct or prevent such
statement or omission.
(e) Information by Holder. Each Holder of Registerable
Securities included in any registration shall furnish to the
Company such information regarding such Holder, such securities
and the distribution proposed by such Holder as the Company may
request in writing.
11. Notices. All notices, demands, elections, or requests
(however characterized or described) required or authorized
hereunder shall be deemed given sufficiently if in writing and
sent by registered or certified mail, return receipt requested
and postage prepaid, or by facsimile or telegram to the Company,
at its principal executive office, and of the Registered Holder,
at the address of such holder as set forth on the books
maintained by the Company.
12. General Provisions. This Warrant Certificate shall be
construed and enforced in accordance with, and governed by, the
laws of the State of Delaware. Except as otherwise expressly
stated herein, time is of the essence in performing hereunder.
The headings of this Warrant Certificate are for convenience in
<PAGE> 11
reference only and shall not limit or otherwise affect the
meaning hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed as of the_____day of_______,
199___.
SPECIALIZED HEALTH PRODUCTS
INTERNATIONAL, INC.
____________________ ____________________
By: J. Clark Robinson, David A. Robinson, President
Secretary
<PAGE> 12
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they
were written out in full according to applicable laws or
regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the entireties Custodian
JR TEN - as joint tenants with right (Cust) (Minor)
of survivorship and not as under Uniform Gifts
tenants in common to Minors Act _____
(State)
Additional abbreviations may also be used though not in the above
list.
FORM OF ASSIGNMENT
(To be Executed by the Registered Holder if He or She
Desires to Assign Warrants Evidenced by the
Within Warrant Certificate)
FOR VALUE RECEIVED ___________________________ hereby
sells, assigns and transfers unto _____________________________
_____________________ (_______) Warrants, evidenced by the within
Warrant Certificate, and does hereby irrevocably constitute and
appoint _____________________ __________________ Attorney to
transfer the said Warrants evidenced by the within Warrant
Certificates on the books of the Company, with full power of
substitution.
Dated:____________________ _____________________________
Signature
Notice: The above signature must correspond with the name as
written upon the face of the Warrant Certificate in
every particular, without alteration or enlargement or
any change whatsoever.
Signature Guaranteed: __________________________________________
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM
OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK
EXCHANGE, PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE,
OR MIDWEST STOCK EXCHANGE.
<PAGE> 13
FORM OF ELECTION TO PURCHASE
(To be Executed by the Holder if he Desires to Exercise
Warrants Evidenced by the Warrant Certificate)
To Specialized Health Products International, Inc.
The undersigned hereby irrevocably elects to exercise
_______ ____________________ (______)Warrants, evidenced by the
within Warrant Certificate for, and to purchase thereunder,
_____________ _______________ (______) full shares of Common
Stock issuable upon exercise of said Warrants and delivery of
$_________ and any applicable taxes.
The undersigned requests that certificates for such shares
be issued in the name of:
PLEASE INSERT SOCIAL SECURITY
OR TAX IDENTIFICATION NUMBER
________________________________ ________________________________
(Please print name and address
_________________________________________________________________
_________________________________________________________________
If said number of Warrants shall not be all the Warrants
evidenced by the within Warrant Certificate, the undersigned
requests that a new Warrant Certificate evidencing the Warrants
not so exercised by issued in the name of and delivered to:
_________________________________________________________________
(Please print name and address)
_________________________________________________________________
_________________________________________________________________
<PAGE> 14
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
Dated: _____________________ Signature:__________________________
NOTICE: The above signature must correspond with the name as
written upon the face of the within Warrant Certificate
in every particular, without alteration or enlargement
or any change whatsoever, or if signed by any other
person the Form of Assignment hereon must be duly
executed and if the certificate representing the shares
or any Warrant Certificate representing Warrants not
exercised is to be registered in a name other than that
in which the within Warrant Certificate is registered,
the signature of the holder hereof must be guaranteed.
Signature Guaranteed: ___________________________________________
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM
OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK
EXCHANGE, PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE,
OR MIDWEST STOCK EXCHANGE.
Exhibit 5.1
Opinion of Blackburn & Stoll, LC
(to be filed by amendment)
EXHIBIT 10.1
Agreement and Plan of Reorganization dated as of June 23, 1995,
among the Company, Russco Resources, Inc., Scott R. Jensen and
Specialized Health Products, Inc.
(Incorporated by reference to Exhibit 2.1 of the Company's
current Report of Form 8-K, dated July 28, 1995)
<PAGE> i
EXHIBIT 10.2
Placement Agreement between the Company, SHP and U.S. Sachem
Financial
Consultants, L.P.
SPECIALIZED HEALTH PRODUCTS, INC.
RUSSCO, INC.
650 UNITS
Each Consisting Of
5,000 Shares of Common Stock
and
3,000 Common Stock Purchase Warrants
PLACEMENT AGREEMENT
June 23, 1995
<PAGE> 1
SPECIALIZED HEALTH PRODUCTS, INC.
RUSSCO, INC.
PLACEMENT AGREEMENT
650 Units
Each Consisting of
5,000 Shares of Common Stock
and
3,000 Common Stock Purchase Warrants
This Placement Agreement is made and entered into
effective as of the 23rd day of June, 1995 by and among
Specialized Health Products, Inc., a Utah corporation (the
"Company"), Russco, Inc., a Delaware corporation ("Russco"),
and U.S. Sachem Financial Consultants, L.P., a Connecticut
limited partnership ("Sachem"), as follows:
1. Authorization and Issuance of Securities. The
Company has authorized the issuance and sale of up to
4,075,000 shares of the Company's Common Stock ("Company
Common Stock"), Series A Warrants to purchase up to 2,900,000
shares of Company Common Stock at an exercise price of $3.00
per share (the "Company A Warrants"), and Series B Warrants to
purchase up to 1,200,000 shares of Company Common Stock at an
exercise price of $2.00 per share (the "Company B Warrants"
and, collectively with Company Common Stock and Company A
Warrants, the "Company Securities"), as contemplated by this
Agreement. The Company A Warrants shall be substantially as
described in the Offering Memorandum (as hereinafter defined),
and the Company B Warrants shall be substantially identical to
the Company A Warrants except for the exercise price. The
Company has also authorized the issuance and sale of up to
4,100,000 shares of Company Common Stock upon exercise of the
Company A Warrants and Company B Warrants.
Russco has authorized the issuance and sale of up to
2,750,000 shares of Russco's Common Stock ("Russco Common
Stock"), Series A Warrants to purchase up to 1,925,000 shares
of Russco Common Stock at an exercise price of $3.00 per share
(the "Russco A Warrants") and Series B Warrants to purchase up
to 825,000 shares of Russco Common Stock at an exercise price
of $2.00 per share (the "Russco B Warrants" and, collectively
with Russco Common Stock and Russco A Warrants, the "Russco
Securities"). The Russco A Warrants and Russco B Warrants
shall be substantially identical to the Company A Warrants and
Company B Warrants, respectively. (The Company Common Stock
and Russco Common Stock are sometimes hereinafter referred to
collectively as the "Common Stock"; the Company A Warrants and
Russco A Warrants are sometimes hereinafter referred to
collectively as the "A Warrants"; the Company B Warrants and
the Russco B Warrants are sometimes hereinafter referred to
collectively as the "B Warrants"; the A Warrants and the B
<PAGE> 2
Warrants are sometimes hereinafter referred to as the
"Warrants"; and the Common Stock and the Warrants are
sometimes hereinafter referred to collectively as the
"Securities".)
The Company and Russco propose to issue and sell to
purchasers designated by Sachem (collectively, the
"Purchasers") an aggregate of up to 3,250,000 shares of Common
Stock and 1,950,000 A Warrants in Units (the "Units")
consisting of 5,000 shares of Company Common Stock and 3,000 A
Warrants each. The Securities will be offered and sold to the
Purchasers, each of whom shall be an "accredited investor", as
that term in defined in Regulation D promulgated under the
Securities Act of 1933, as amended (the "Act"). In addition,
the Company and Russco are prepared to issue and sell to
Purchasers up to an aggregate additional 150 Units in the
event of an oversubscription for the Units to be offered (the
"Overallotment Units"), which Overallotment Units shall be
issued and sold upon the written request of Sachem and the
concurrence of the Company and Russco, which concurrence shall
not be unreasonably withheld.
The Company has prepared a Private Placement
Memorandum, dated June 23, 1995 (the "Offering Memorandum"),
relating to the Company, Russco and the Securities.
Contemporaneously with the initial issuance and sale of
Securities hereunder, the Company proposes to merge with a
wholly-owned subsidiary of, or otherwise enter into a business
combination with Russco (the "Merger") pursuant to that
certain Agreement and Plan of Reorganization (the "Plan") of
even date herewith by and among the Company, Russco and a
subsidiary of Russco. Immediately prior to the Merger, Russco
shall have outstanding no more than 300,000 shares of its
Common Stock, and those shares shall be the only equity
securities of Russco then issued and outstanding or which
Russco is obligated under any conditions to issue other than
pursuant to the Plan or this Agreement. In connection with
the Merger, each of the outstanding equity securities of the
Company will be converted into the same number of
substantially similar equity securities of Russco, and Russco
will change its name to Specialized Health Products
International, Inc. or some other name approved by the
Company. Prior to the Merger, all Securities to be issued and
sold hereunder will be issued and sold by the Company, and
after the Merger, all Securities to be issued and sold
hereunder shall be issued and sold by Russco.
<PAGE> 3
2. Agreements to Sell and Purchase; Delivery and
Payment; Placement Agency and Fees. On the basis of the
representations and warranties contained in this Placement
Agreement (this "Agreement"), and subject to its terms and
conditions, the Company and Russco agree to issue and sell
Securities to Purchasers at a price (the "Purchase Price") of
Ten Thousand Dollars per Unit.
The initial delivery of and payment for Securities
shall be made at such place as shall be reasonably proposed by
Sachem, at 10:00 a.m. on the third business day following the
date on which Sachem notifies the Company that Purchasers are
ready to purchase at least 250 Units pursuant hereto but not
later than October 21 1995, unless that date is extended by
the Company for a period not to exceed sixty days (the "First
Closing Date"). The time and date of the First Closing Date
may be varied by mutual agreement between Sachem and the
Company. The Company shall have no obligation to issue and
sell any of the Securities unless it shall have Purchasers for
at least two hundred fifty (250) Units. Included among the
Units considered to constitute said minimum of 250 Units and
to have been sold hereunder on the First Closing Date shall be
up to forty-five (45) Units (the "Early Units") issued and
sold by the Company prior to the First Closing Date, including
any Units sold prior to the date of this Agreement.
If fewer than 650 Units are issued and sold by the
Company to Purchasers on the First Closing Date, Russco shall,
in the place of the Company, continue the offering of the
Securities until 650 Units are issued and sold hereunder but
not later than October 21, 1995, unless that date is extended
by Russco for a period not to exceed sixty (60) days.
Following the First Closing Date, Russco shall be substituted
for the Company hereunder, and all acts to be performed by the
Company shall be performed by Russco with the same force and
effect as if performed by the Company. In the event Russco so
continues the offering, delivery of and payment for the
Securities to be issued and sold hereunder subsequent to the
First Closing Date shall be made at the place of the closing
held on the First Closing Date on the third business day
following the date or dates on which Sachem notifies Russco
that Purchasers are ready to purchase additional Units being
offered hereunder (the "Additional Closing Date" or
"Additional Closing Dates" and, collectively with the First
Closing Date, the "Closing Dates"). Any Additional Closing
Date may be varied by mutual agreement between Sachem and
Russco.
<PAGE> 4
At least two business days before each of the First
Closing Date and each Additional Closing Date, Sachem shall
provide to the Company or Russco, as the issuer may be, the
names and addresses of the Purchasers and the amount of the
Securities to be purchased by each Purchaser at such closing,
respectively.
The Company or Russco shall deliver the Securities
purchased by each Purchaser to or for the account of such
Purchaser on the First Closing Date and each Additional
Closing Date, respectively, with transfer taxes thereon, if
any, duly paid by the Company or Russco, against payment of
the Purchase Price therefor.
Sachem shall act as the exclusive placement agent
for the Company and Russco in connection with the issuance and
sale of the Securities. In connection therewith, Sachem shall
use its best efforts to identify and introduce to the Company
and Russco accredited investors who are ready, willing and
able to purchase the Securities.
On the First Closing Date and each Additional Closing
Date, the Company or Russco, as the case may be, shall (i) pay
to Sachem in cash an amount equal to eight percent (8%) of the
aggregate Purchase Price received on such date by the Company
or Russco from the Purchasers of the Securities (including on
the First Closing Date the amount received from the purchasers
of the Early Units) and (ii) shall issue and deliver to Sachem
or to Sachem's designee or designees, as specified by Sachem
in writing at least two business days before each such Closing
Date, (a) five hundred (500) A Warrants and (b) one thousand
five hundred (1,500) B Warrants.
On the First Closing Date, the Company shall also issue
and deliver to Sachem 75,000 shares of Company Common Stock
and 100,000 Company A Warrants.
3. Agreements of the Company. The Company agrees
with Sachem, and Russco agrees to assume and perform the
obligations of the Company subsequent to the Merger, as
follows:
(a) To provide Sachem with as many copies of
the Offering Memorandum as it may reasonably request; to
make no amendment or supplement to the Offering
Memorandum except as permitted herein; to provide Sachem
with as many copies of any such amendment or supplement
as it may reasonably request; to advise Sachem promptly
if it receives notice of the issuance by any regulatory
authority having jurisdiction over the Company, Russco,
the Purchasers or the transactions contemplated hereby of
any stop order or order preventing or suspending the use
<PAGE> 5
of the Offering Memorandum, of the suspension of any
qualification of the Securities for offering or sale in
any jurisdiction, of the initiation or threatening of any
proceeding for any such purpose, or of any request by any
regulatory authority for the amending or supplementing of
the Offering Memorandum or for additional information;
and, in the event of the issuance of any stop order or of
any order preventing or suspending the use of the
Offering Memorandum or suspending any such qualification,
or exemption from qualification, to use promptly its best
efforts to obtain the withdrawal of such stop order or
order.
(b) To advise Sachem promptly, in writing, of
the happening of any event or the existence of any state
of facts of which it becomes aware, prior to completion
of the issuance and sale of the Securities contemplated,
that makes any statement of a material fact made in the
Offering Memorandum untrue or that requires the making of
any additions to or changes in the Offering Memorandum in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) If any event shall occur prior to
completion of the issuance and sale of the Securities
contemplated hereby or any state of facts shall exist as
a result of which, in the opinion of Sachem, the Company
or Russco, it becomes necessary to amend or supplement
the Offering Memorandum in order to make the statements
therein, in the light of the circumstances when the
Offering Memorandum is delivered, not misleading, or if
it is necessary to amend or supplement the Offering
Memorandum to comply with any law, to forthwith prepare
an appropriate amendment or supplement to the Offering
Memorandum so that the statements in the Offering
Memorandum as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be
misleading, or so that the Offering Memorandum will
comply with applicable law.
(d) Not to make any amendment or supplement to
the Offering Memorandum, of which Sachem shall not
previously have been advised or to which Sachem shall,
after being so advised, reasonably object in writing.
(e) During the three years after the date of
this Agreement, to furnish without charge to Sachem, as
soon as generally available, a copy of each report of the
Company or Russco, notice or other communication that the
Company or Russco shall mail or otherwise make available
to holders of Company Common Stock or shall file with the
Securities and Exchange Commission (the "Commission").
<PAGE> 6
(f) Whether or not the transactions
contemplated by this Agreement are consummated, to pay
all costs, expenses and fees incident to or in connection
with: (i) the preparation, reproduction, and
distribution of the Offering Memorandum (including,
without limitation, financial statements and exhibits)
and all amendments and supplements thereto; (ii) the
preparation, reproduction, issuance and delivery of this
Agreement, the Common Stock, the Warrants, any "blue sky"
memoranda and all other agreements, memoranda,
correspondence and other documents prepared and delivered
in connection herewith; and (iii) the reasonable legal
fees and expenses of Sachem's counsel in connection with
this Agreement, the issuance and delivery of the
Securities and all other matters contemplated hereby or
associated therewith, which payment obligation shall not
exceed $30,000 for fees (billed at hourly rates not to
exceed $300 per hour) and $5,000 for expenses. The
Company and Russco shall also be responsible, in such
manner as they may determine between themselves, for all
costs, expenses and fees incident to or in connection
with (a) the performance by the Company and Russco of
their respective other obligations under this Agreement,
and (b) the services of counsel and accountants for the
Company and Russco, and (c) travel costs and expenses of
the Company and Russco. On the First Closing Date and
each Additional Closing Date, the Company or Russco, as
the case may be, shall pay to Sachem in cash an amount
equal to two percent (2%) of the aggregate Purchase Price
received on such date by the Company or Russco from the
Purchasers for the Securities (including on the First
Closing Date amounts received with respect to the Early
Units) as a nonaccountable expense allowance for Sachem.
The Company has previously paid $15,000 to Sachem as a
non-refundable advance against such expense allowance,
and it shall be credited against the nonaccountable
expense allowance payable to Sachem on the First Closing
Date.
(g) To apply the net proceeds from the sale of
the Securities substantially in accordance with the
description set forth in the Offering Memorandum under
the caption "Use of Proceeds."
(h) To use commercially reasonable efforts to
do and perform all things required or necessary to be
done and performed by the Company and Russco,
<PAGE> 7
respectively, under this Agreement and under the Plan to
permit consummation of the transactions contemplated by
this Agreement and the Plan.
(i) Not to sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any
security (as defined in the Act) that would be integrated
with the sale of the Securities in a manner that would
require the registration of the Securities under the Act
in connection with the sale to the Purchasers.
4. Representations and Warranties of the Company
and Russco. The Company, with respect to matters relating to
the Company, and Russco, with respect to matters relating to
Russco, severally and not jointly represent and warrant to
Sachem that:
(a) The Offering Memorandum, including any
amendments and supplements thereto, does not and will not
contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided that no representation or warranty is made as to
information relating to Sachem contained in or omitted
from the Offering Memorandum in reliance upon and in
conformity with written information furnished to the
Company by Sachem specifically for inclusion therein.
(b) This Agreement has been duly authorized
and validly executed and delivered by the Company and
Russco.
(c) The authorized, issued and outstanding
Common Stock and other securities of the Company and of
Russco conform in all material respects to the
descriptions thereof in the Offering Memorandum. The
shares of outstanding Common Stock of the Company and
Russco have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive or
similar rights.
(d) The Securities to be issued by the Company
and Russco pursuant hereto have been duly authorized and,
when issued and delivered for consideration in accordance
with the terms of this Agreement, will be validly issued
and outstanding, fully paid and nonassessable, and free
from preemptive or similar rights. The Common Stock and
Warrants conform in all material respects to the
descriptions thereof contained in the Offering
Memorandum.
(e) Neither the Company nor Russco has any
subsidiaries, except that Russco will form a subsidiary
to participate in the Merger which subsidiary will be
inactive prior to the Merger.
(f) All tax returns required to be filed by
the Company and by Russco in all jurisdictions have been
so filed. All taxes, including withholding taxes,
penalties and interest, assessments, fees and other
charges due or claimed to be due from such entities or
that are due and payable have been paid, other than those
being contested in good faith and for which adequate
reserves have been provided or those currently payable
without penalty or interest. The Company and Russco do
not know of any material proposed additional tax
assessment against the Company or Russco.
(g) The Company and Russco have been duly
incorporated and are validly existing as corporations in
good standing under the laws of the States of Utah and
Delaware, respectively. The Company and Russco each has
the corporate power and authority necessary to own, lease
and operate its properties and to conduct business as
currently conducted and as described in the Offering
Memorandum. The Company and Russco each has the
corporate power and authority necessary to enter into and
perform its obligations under this Agreement and to
issue, sell and deliver the Securities to be issued, sold
and delivered by it pursuant hereto. The Company and
Russco are duly registered or qualified as foreign
corporations to conduct their respective businesses, and
are in good standing, in each jurisdiction where such
qualification is required and in which the failure to be
so qualified could have a material adverse effect on the
Company or Russco. The Company and Russco are in
compliance with all local, state and federal laws,
ordinances and regulations (including environmental laws)
applicable to their properties (whether owned or leased)
and their businesses, with the exception of violations of
such laws, ordinances and regulations which would not
individually or in the aggregate have a material adverse
effect on the Company or Russco.
(h) Except as set forth in the Offering
Memorandum, the Company has good and marketable title,
free and clear of all liens, charges and encumbrances
except such as would not, in the aggregate, have a
material adverse effect on the Company to all of the
properties and assets described in the Offering
Memorandum as owned by the Company. The properties of
<PAGE> 9
the Company are in good repair (reasonable wear and tear
excepted), are insured in accordance with the industry
practice and are suitable for their uses. The real
property referred to in the Offering Memorandum as held
under lease by the Company is held by it under a valid
and enforceable lease, except (A) as limited by the
effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights and remedies
of creditors and (B) as limited by the effect of general
principles of equity, including the possible
unavailability of specific performance or the
enforceability of waivers of certain rights or defenses,
whether enforcement is considered in a proceeding in
equity or at law, and the discretion of the court before
which any proceeding therefor may be brought (items (A)
and (B) are sometimes collectively referred to hereafter
as the "Exceptions"), and no defaults are existing under
such lease which defaults would, singly or in the
aggregate, have a material adverse effect on the Company.
(i) There is no action, suit or proceeding
before or by any court, arbitrator or governmental
agency, body or official, domestic or foreign, which has
been served on the Company or Russco and is now pending
or which, to the knowledge of the Company or Russco, is
threatened against or affects the Company or Russco or
the assets of the Company or Russco which is not
disclosed in the Offering Memorandum. No Federal or
state statute, rule, regulation or order has been
enacted, adopted or issued by any such governmental
agency or, to the knowledge of the Company, has been
proposed by any such governmental body that is not
disclosed in the Offering Memorandum and could reasonably
be expected to have a material adverse effect on the
Company or Russco, the issuance of the Securities or the
consummation of any of the transactions contemplated by
this Agreement. There are not pending any governmental
proceedings to which the Company or Russco is a party or
to which any of their property is subject, except as set
forth in the Offering Memorandum. No injunction,
restraining order or order of any nature by a federal or
state court of competent jurisdiction has been issued and
remains in effect that would prevent the issuance of the
Securities.
(j) The Company and Russco possess such
certificates, authorities, licenses or permits issued by
the appropriate local, state, federal or foreign
regulatory agencies or bodies as are material to, or
legally required for, the operation of their respective
businesses, except for those certificates, authorities,
licenses or permits which if not possessed by the Company
and Russco would not singly, or in the aggregate, have a
<PAGE> 10
material adverse effect on the Company or Russco.
Neither the Company nor Russco has received any notice of
proceedings relating to, or has reason to believe that
any governmental body or agency is considering, limiting,
suspending, modifying or revoking, any such certificate,
authority, license or permit which, singly or in the
aggregate, if the subject of an unfavorable opinion,
ruling or finding, would have a material adverse effect
on the Company or Russco. Any descriptions in the
Offering Memorandum of local, state, federal or foreign
statutes, laws, ordinances and regulations governing the
Company and Russco in their respective businesses,
including any proposed amendments or additions to any
such statues, laws, ordinances or regulations, are
accurate and fairly present the information shown.
(k) Neither the Company nor Russco is in
violation of its charter or bylaws or is in default in
any respect in the performance of any obligation,
agreement or condition contained in any bond, debenture,
note or other evidence of indebtedness or in any
indenture, mortgage, deed of trust or other material
agreement or instrument to which the Company or Russco is
a party or to which either of them or their respective
properties or assets is subject, except such violations
or defaults which, singly or in the aggregate, would not
have a material adverse effect on the Company or Russco.
To the knowledge of the Company and Russco, there exists
no condition that, with notice, the passage of time or
otherwise, would constitute a material default under any
such document, instrument or agreement.
(l) The execution, delivery and performance
of, and the consummation of the transactions contemplated
by, this Agreement will not conflict with or constitute a
breach of any of the terms or provisions of, or
constitute a default (with notice, the passage of time or
otherwise) under, or result in the imposition of a lien
or encumbrance on any properties of the Company or Russco
or an acceleration of the maturity of any indebtedness
under (i) the charter or bylaws of the Company or Russco,
(ii) any bond, debenture, note or other evidence of
indebtedness or any indenture, mortgage, deed of trust or
other material agreement or instrument to which the
Company or Russco is a party or to which either of them
or their respective properties or assets are subject or
(iii) any law, regulation or order of any court or
governmental agency or authority applicable to the
Company or Russco or any of their respective properties
or assets.
(m) No consent, approval, authorization,
license or other order of any regulatory body,
administrative agency, or other governmental body having
<PAGE> 11
jurisdiction over the Company or Russco or any of their
respective properties or assets is legally required for
the valid issuance and sale of the Securities and the
consummation of the transactions contemplated by this
Agreement, other than such approvals and authorizations
as have been obtained. No consents or waivers from any
person are required to consummate the transactions
contemplated by this Agreement, other than such consents
and waivers as have been obtained.
(n) The accountants who have certified the
financial statements of the Company and the financial
statements of Russco included or referred to in the
Offering Memorandum are independent accountants with
respect to the Company and Russco, respectively, within
the meaning of the Act.
(o) The historical financial statements of the
Company and the related notes and schedules included in
the Offering Memorandum present fairly the financial
position of the Company as of the dates indicated and the
results of its operations and the changes in financial
position for the periods therein specified. The
historical financial statements of Russco and the related
notes and schedules included in the Offering Memorandum
present fairly the financial position of Russco as of the
dates indicated and the results of their operations and
the changes in financial position for the periods therein
specified. All such financial statements (including the
related notes and schedules) have been prepared in
accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods
specified, subject in the case of interim statements to
normal year-end audit adjustments.
(p) Subsequent to the dates as of which
information is given in the Offering Memorandum, except
as disclosed therein: (i) neither the Company nor Russco
has incurred any liabilities or obligations, direct or
contingent, or entered into any transactions, not in the
ordinary course of business, that are material,
individually or in the aggregate, to the business of the
Company or Russco, except for short term borrowings in
amounts not exceeding $220,000 in the aggregate;
(ii) there has not been any material decrease in the
capital stock of the Company or Russco or any increase in
long-term indebtedness or any material increase in
short-term indebtedness of the Company or Russco not
described above or any payment of or declaration to pay
any dividends or any other distribution with respect to
the capital stock of the Company or Russco and
(iii) there has not been any material adverse change in
the condition (financial or other), business, properties,
<PAGE> 12
net worth or results of operations of the Company or
Russco.
(q) Neither the Company nor Russco is involved
in any material labor dispute nor, to the knowledge of
the Company and Russco, is any such dispute threatened.
(r) Neither the Company nor Russco has
incurred any casualty losses, whether insured or
uninsured, that are material, individually or in the
aggregate, to the business of the Company or Russco.
(s) Except as contemplated by this Agreement
or disclosed in the Offering Memorandum, no person or
entity is entitled, through contract or otherwise,
directly or indirectly to acquire any shares of the
capital stock of the Company or Russco from the Company
or Russco.
(t) The Company and Russco each maintains a
system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are
executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial
statements in conformity with generally accepted
accounting principles and to maintain accountability for
assets and (iii) the recorded accountability for assets
is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to
any differences.
(u) Except as contemplated herein or disclosed
in the Offering Memorandum, there are no contracts,
agreements or understandings between either the Company
or Russco and any other person that would give rise to a
valid claim against the Company, Russco, Sachem or the
Purchasers for a brokerage commission, finder's fee or
like payment in respect of the transactions contemplated
herein.
(v) Neither the Company nor Russco is an
"investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(w) The offer and sale of the Securities
pursuant hereto are exempt from the registration
requirements of the Act. No form of general solicitation
or general advertising was used by the Company or any of
its representatives (other than Sachem, as to whom the
Company and Russco make no representation) in connection
with the offer and sale of the Securities, including, but
not limited to, articles, notices or other communications
<PAGE> 13
published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general
solicitation or general advertising.
5. Indemnification
(a) The Company (as the "Indemnifying Party")
agrees to indemnify and hold harmless Sachem and each
person that controls Sachem within the meaning of
Section 15 of the Act or Section 20 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),
and the respective agents, employees, attorneys, officers
and directors of each of the foregoing (individually, an
"Indemnified Party" and collectively, the "Indemnified
Parties") from and against any and all losses, claims,
damages, judgments, liabilities and expenses (including
the reasonable fees and expenses of counsel and other
expenses in connection with investigating, defending,
preparing to defend or testify with respect to or
settling any such action or claim) as they are incurred
arising out of or based upon any untrue statement or
alleged untrue statement of a material fact relating to
the Company contained in the Offering Memorandum or
arising out of or based upon any omission or alleged
omission to state therein a material fact relating to the
Company required to be stated therein or necessary to
make the statements therein not misleading or otherwise
arising out of or based upon the transactions
contemplated hereby, except the Indemnifying Party shall
not be liable to an Indemnified Party under the indemnity
agreement in this Section 5(a) with respect to any such
loss, claim, damage, judgment, liability or expense to
the extent either (i) it results from or is attributable
to the misconduct or negligence of Sachem or (ii) the
business combination of the Company and Russco does not
occur on or about the First Closing Date and it results
from an untrue statement, omission or alleged untrue
statement or omission described in Section 5(b).
(b) Russco (as the "Indemnifying Party")
agrees to indemnify and hold harmless Sachem and each
person that controls Sachem within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act
and the respective agents, employees, attorneys, officers
and directors of each of the foregoing (individually, an
"Indemnified Party" and collectively, the "Indemnified
Parties") from and against any and all losses, claims,
damages, judgments, liabilities and expenses (including
the reasonable fees and expenses of counsel and other
expenses in connection with investigating, defending,
preparing to defend or testify with respect to or
settling any such action or claim) as they are incurred
arising out of or based upon any untrue statement or
<PAGE> 14
alleged untrue statement of a material fact relating to
Russco contained in the Offering Memorandum or arising
out of or based upon any omission or alleged omission to
state therein a material fact relating to Russco required
to be stated therein or necessary to make the statements
therein not misleading, except the Indemnifying Party
shall not be liable to an Indemnified Party under the
indemnity agreement in this Section 5(b) with respect to
any such loss, claim, damage, judgment, liability or
expense to the extent it results from or is attributable
to the misconduct or negligence of Sachem.
(c) Sachem (as the "Indemnifying Party")
agrees to indemnify and hold harmless the Company and
Russco and each person that controls the Company or
Russco within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and the respective agents,
employees, attorneys, officers and directors of each of
the foregoing (individually, an "Indemnified Party" and
collectively, the "Indemnified Parties") from and against
any and all losses, claims, damages, judgments,
liabilities and expenses (including the reasonable fees
and expenses of counsel and other expenses in connection
with investigating, defending, preparing to defend or
testify with respect to or settling any such action or
claim) as they are incurred to the extent they arise out
of or are based upon the misconduct or negligence of
Sachem.
(d) If any action or proceeding (including any
governmental or regulatory investigation or proceeding)
shall be brought or asserted against or shall relate to
any Indemnified Party with respect to which indemnity may
be sought against the Indemnifying Party pursuant to this
Section 5, such Indemnified Party shall promptly notify
the Indemnifying Party in writing and the Indemnifying
Party shall have the right to assume the defense thereof,
including the employment of counsel reasonably
satisfactory to such Indemnified Party and payment of all
fees and expenses; provided that the omission so to
notify the Indemnifying Party shall not relieve the
Indemnifying Party from any liability that it may have to
any Indemnified Party (except to the extent that the
Indemnifying Party is actually prejudiced or otherwise
forfeits substantive rights or defenses by reason of such
failure). An Indemnified Party shall have the right to
employ separate counsel in any such action or proceeding
and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the employment of such
counsel has been specifically authorized in writing by
the Indemnifying Party, which authorization shall not be
unreasonably withheld, (ii) the Indemnifying Party has
failed promptly to assume the defense and employ counsel
<PAGE> 15
reasonably satisfactory to the Indemnified Party or
(iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the
Indemnified Party and the Indemnifying Party and such
Indemnified Party shall have been advised in writing by
counsel that there may be one or more legal defenses
available to it that are different from or additional to
those available to the Indemnifying Party (in which case
the Indemnifying Party shall not have the right to assume
the defense of such action on behalf of such Indemnified
Party). It is understood that the Indemnifying Party
shall not, in connection with any one such action or
separate but substantially similar or related actions in
the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for such
Indemnified Parties, which firm shall be designated in
writing by Sachem, and that all such fees and expenses
shall be reimbursed as they are incurred. The
Indemnifying Party shall not be liable for any settlement
of any such action effected without the written consent
of the Indemnifying Party, but if settled with the
written consent of the Indemnifying Party, or if there is
a final judgment with respect thereto, the Indemnifying
Party agrees to indemnify and hold harmless each
Indemnified Party from and against any loss or liability
by reason of such settlement or judgment. The
Indemnifying Party shall not, without the prior written
consent of each Indemnified Party affected thereby,
effect any settlement of any pending or threatened
proceeding in which such Indemnified Party has sought
indemnity hereunder, unless such settlement includes an
unconditional release of such Indemnified Party from all
liability arising out of such action, claim, litigation
or proceeding.
(e) If the indemnification provided for in
Section 5 is unavailable to any party entitled to
indemnification pursuant to Section 5(a), (b) or (c),
then each indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of
such losses, claims, damages, judgments, liabilities and
expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company,
Russco and Sachem from the offering of the Securities or
(ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative
fault of the Company, Russco and Sachem in connection
with the statements or omissions which resulted in such
losses, claims, damages, judgments, liabilities or
<PAGE> 16
expenses, as well as any other relevant equitable
considerations. The relative benefits received by the
Company and Russco on the one hand and Sachem on the
other hand shall be deemed to be in the same proportion
as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the
total compensation received by Sachem. The relative
fault of the Company and Russco on the one hand and
Sachem on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged
omission to state a material fact relates to information
supplied by the Company or Russco on the one hand or by
Sachem on the other and the parties' relative intent,
knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(f) The Company and Sachem agree that it would
not be just and equitable if contribution pursuant to
Section 5(e) were determined by pro rata allocation or by
any other method of allocation that does not take account
of the equitable considerations referred to in Section
5(e). The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, liabilities
or expenses referred to in Section 5(e) 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. No person found
guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
(g) The indemnity and contribution agreements
contained in this Section 5 are in addition to any
liability that any indemnifying party may otherwise have
to any indemnified party, including inter alia those
arising under a letter agreement between the Company and
Sachem dated June 2, 1995, as amended.
6. Conditions of the Purchasers' Obligations. The
obligations of the Purchasers to purchase the Securities and
the Company and Russco to issue and sell the Securities under
this Agreement on a Closing Date are subject to the
satisfaction of the each of following conditions as of each
such Closing Date:
(a) All of the representations and warranties
of the Company and Russco contained in this Agreement
shall be true and correct on such Closing Date with the
same force and effect as if made on and as of such
Closing Date. The Company and Russco shall, in all
material respects, have performed or complied with the
<PAGE> 17
agreements and satisfied all conditions on their
respective parts to be performed, complied with or
satisfied at or prior to such Closing Date.
(b) On such Closing Date, no stop order or
other similar decree preventing the use of the Offering
Memorandum or any amendment or supplement thereto, or any
order asserting that the transactions contemplated by
this Agreement are subject to the registration
requirements of the Act shall have been issued and remain
in effect and no proceedings for that purpose shall have
been commenced or shall be pending or, to the knowledge
of the Company, be contemplated. No stop order
suspending the sale of the Securities in any jurisdiction
shall have been issued and remain in effect, and no
proceeding for that purpose shall have been commenced or
shall be pending or, to the knowledge of the Company,
shall be contemplated.
(c) No action shall have been taken and no
statute, rule, regulation or order shall have been
enacted, adopted or issued by any governmental agency and
remain in effect as of such Closing Date that would
prevent the issuance of the Securities. No injunction,
restraining order or order of any nature by a federal or
state court of competent jurisdiction shall have been
issued and remain in effect as of such Closing Date that
would prevent the issuance of the Securities.
(d) On such Closing Date, no action, suit or
proceeding shall be pending against or affecting or, to
the knowledge of the Company, threatened against, the
Company or Russco before any court, arbitrator or
governmental body, agency or official that would
interfere with or adversely affect the issuance of the
Securities or consummation of the transactions
contemplated by the Plan or would, except as disclosed in
the Offering Memorandum, individually or in the
aggregate, have a material adverse effect on the Company
or Russco or in any manner draw into question the
validity of this Agreement, the Plan or the Securities.
(e) Since the date of the latest balance sheet
included in the Offering Memorandum for the Company and
Russco, respectively, and except as disclosed therein,
(i) neither the Company nor Russco shall have incurred
any liabilities or obligations, direct or contingent
(other than short term borrowings in an aggregate amount
not to exceed $220,000), or entered into any
transactions, not in the ordinary course of business,
that are material, individually or in the aggregate, to
the business of the Company or Russco, (ii) there shall
not have been any material change in the capital stock or
debt of the Company or Russco from that set forth or
<PAGE> 18
contemplated in the Offering Memorandum, other than an
increase in the authorized number of shares of capital
stock of the Company and (iii) there shall not have been
any material adverse change, or any development involving
a prospective material adverse change, in the condition
(financial or other), business, properties, net worth or
results of operations of the Company or Russco.
(f) The transactions contemplated by the Plan
shall have been consummated substantially as contemplated
in said Plan and as described in the Offering Memorandum.
(g) On the Closing Date, Sachem shall have
received (i) a certificate dated such Closing Date,
signed by an executive officer of the Company, confirming
the matters set forth in Section 6(a)-(f) above insofar
as they relate to the Company and the issuance of the
Securities by the Company and (ii) a certificate dated
such Closing Date, signed by an executive officer of
Russco, confirming the matters set forth in Section 6(a)-
(f) above insofar as they relate to Russco and the
issuance of Securities by Russco.
(h) On the Closing Date, Sachem shall have
received an opinion (satisfactory to Sachem and its
counsel), dated as of the Closing Date, of Blackburn &
Stoll, LC, counsel for the Company and after the First
Closing Date counsel for Russco, to the effect that:
(i) The Company (and on any Additional
Closing Date Russco) has been duly incorporated and
is validly existing as a corporation in good
standing under the laws of its jurisdiction of
incorporation, with full corporate power and
corporate authority to own, lease and operate its
properties and to conduct its business as now
conducted and as proposed to be conducted as
described in the Offering Memorandum.
(ii) The Company (and on any Additional
Closing Date Russco) is duly qualified or licensed
to conduct business and is in good standing in each
jurisdiction in which it owns or leases property or
conducts business, except where the failure so to
qualify or be licensed would not have a material
adverse effect on the business or financial
condition of such corporation.
(iii) The Company's (and on each Additional
Closing Date Russco's) authorized equity
capitalization is as set forth in the Offering
Memorandum, with such changes specified in the
opinion that are acceptable to Sachem; the
outstanding shares of capital stock of such
<PAGE> 19
corporation have been duly and validly authorized
and issued, are fully paid and nonassessable, and
the holders of outstanding shares of capital stock
of such corporation are not entitled to preemptive
or other rights to subscribe for such capital stock;
to the knowledge of such counsel, except as
otherwise set forth in the Offering Memorandum,
there are no outstanding subscriptions, warrants,
options, calls or commitments of any character
related to or entitling any person to purchase or
otherwise acquire any shares of such corporation's
capital stock or any securities convertible into or
exercisable for the purchase of such capital stock
or any commitments of any character relating to or
entitling any person to purchase or otherwise
acquire any such obligations or securities; and on
each Additional Closing Date, all of the outstanding
shares of capital stock of the Company are owned by
Russco, and, to the knowledge of such counsel, no
other person has any rights to acquire any shares of
the Company's common stock.
(iv) Except as set forth in the Offering
Memorandum, to the knowledge of such counsel, there
is no pending or threatened action, suit or
proceeding before any Federal, state or foreign
court or governmental agency, authority or body or
any arbitrator against or involving the Company (and
on each Additional Closing Date Russco) which, if
adversely determined, individually or in the
aggregate with all such other actions, suits and
proceedings, would have a material adverse effect on
the business or financial condition of such
corporation.
(v) Except as set forth in the Offering
Memorandum, no consent, approval, authorization or
order of, or registration or filing with, any
Federal, state or foreign court or governmental
agency or body is required in connection with the
execution, delivery and performance by the Company
(and on each Additional Closing Date Russco) of this
Agreement or the Plan.
(vi) To the knowledge of such counsel, the
Company (and on each Additional Closing Date Russco)
is not involved in any material labor dispute nor is
any such dispute threatened.
(vii) The Company (and on each Additional
Closing Date Russco) is not in violation of its
Articles of Incorporation or bylaws or, to the
knowledge of such counsel and except as set forth in
the Offering Memorandum, is in default (including
<PAGE> 20
any condition that, with notice, the passage of time
or otherwise, would constitute a default) in the
performance of any obligation, agreement or
condition contained in any bond, debenture, note or
any other evidence of indebtedness or in any
indenture, mortgage, deed of trust or other material
agreement or instrument of such corporation, where
such default would have a material adverse effect on
the business or financial condition of such
corporation; except as set forth in the Offering
Memorandum, the execution, delivery and performance
of this Agreement and the Securities, the
fulfillment of the terms therein set forth and the
consummation of the transactions therein
contemplated, including the offer, issuance, and
sale of the Securities, will not violate, or
conflict with or result in a breach of any of the
terms or provisions of, or constitute a default
(including any condition that, with notice, the
passage of time or otherwise, would constitute a
default) under (A) the Articles of Incorporation or
by-laws of such corporation, (B) the terms of any
indenture, mortgage, deed of trust or other material
agreement or instrument known to such counsel,
including without limitation any of the documents
referred to above in this subparagraph (vii) and to
which such corporation is a party or to which it or
its properties or assets is subject, or (C) any
decree or order known to such counsel to be
applicable to such corporation of any court,
regulatory body, administrative agency, governmental
body or arbitrator having jurisdiction over such
corporation or any law or regulation applicable to
such corporation which defaults, in the cases of
clauses (B) and (C), would individually or in the
aggregate have a material adverse effect on the
business or financial condition of such corporation.
(viii) To the best knowledge of such
counsel, based solely on consultation with the
Company's consultants, the statements in the
Offering Memorandum under the captions "Risk Factors-
Government Regulation" and "Business-Patents and
Proprietary Rights", insofar as such statements
constitute a summary of the documents and laws
referred to therein, fairly present in all material
respects the information described therein with
respect to such documents and laws.
(i) On the Initial Closing Date, Sachem
shall have received an opinion (satisfactory to Sachem and its
counsel), dated as of the Closing Date, of Thomas G. Kimble &
Associates, counsel for Russco, to the effect that:
<PAGE> 21
(i) Russco has been duly incorporated and
is validly existing as a corporation in good
standing under the laws of its jurisdiction of
incorporation, with full corporate power and
corporate authority to own, lease and operate
properties and to conduct business as now conducted
and as proposed to be conducted after consummation
of the transactions contemplated by the Plan as
described in the Offering Memorandum.
(ii) Russco's authorized equity
capitalization is as set forth in the Offering
Memorandum; the outstanding shares of capital stock
of Russco, including the shares issued on the
Initial Closing Date, have been duly and validly
authorized and issued, are fully paid and
nonassessable, and the holders of outstanding shares
of capital stock of Russco are not entitled to
preemptive or other rights to subscribe for such
capital stock; to the knowledge of such counsel,
except as otherwise set forth in the Offering
Memorandum, there are no outstanding subscriptions,
warrants, options, calls or commitments of any
character related to or entitling any person to
purchase or otherwise acquire any shares of Russco's
capital stock or any securities convertible into or
exercisable for the purchase of such capital stock
or any commitments of any character relating to or
entitling any person to purchase or otherwise
acquire any such obligations or securities;
(iii) To the knowledge of such counsel,
there is no pending or threatened action, suit or
proceeding before any Federal, state or foreign
court or governmental agency, authority or body or
any arbitrator against or involving Russco which, if
adversely determined, individually or in the
aggregate with all such other actions, suits and
proceedings, would have a material adverse effect on
the business or financial condition of Russco.
(iv) Russco is not in violation of its
Articles of Incorporation or bylaws or, to the
knowledge of such counsel and except as set forth in
the Offering Memorandum, is not in default
(including any condition that, with notice, the
passage of time or otherwise, would constitute a
default) in the performance of any obligation,
agreement or condition contained in any material
agreement or instrument of Russco, where such
default would have a material adverse effect on the
business or financial condition of Russco; except as
set forth in the Offering Memorandum, the execution,
delivery and performance of this Agreement and the
<PAGE> 22
Securities, the fulfillment of the terms therein set
forth and the consummation of the transactions
therein contemplated, including the offer, issuance,
and sale of the Securities, will not violate, or
conflict with or result in a breach of any of the
terms or provisions of, or constitute a default
(including any condition that, with notice, the
passage of time or otherwise, would constitute a
default) under (A) the Articles of Incorporation or
by-laws of the Russco, (B) the terms of any material
agreement or instrument known to such counsel to
which Russco is a party or to which it or its
properties or assets is subject, or (C) any decree
or order known to such counsel to be applicable to
Russco of any court, regulatory body, administrative
agency, governmental body or arbitrator having
jurisdiction over Russco or any law or regulation
applicable to Russco which defaults, in the cases of
clauses (B) and (C), would individually or in the
aggregate have a material adverse effect on the
business or financial condition of Russco.
(v) Russco has full corporate power and
authority (A) to execute, deliver and perform its
obligations under this Agreement and the Plan and
(B) to offer, issue and sell the Securities to be
offered, issued and sold by Russco. This Agreement
and such Securities have been duly authorized,
executed and delivered by Russco; this Agreement
constitutes a legal, valid and binding obligation of
Russco, enforceable against Russco in accordance
with its terms, except as set forth in the Offering
Memorandum, and subject to the Exceptions, as to
which such counsel need not express any opinion.
In their opinions referred to in subsections (h) and
(i) above, such counsel shall state that, although with the
concurrence of Sachem they have assumed no obligation of
inquiry and have not verified and are not passing upon and do
not assume responsibility for the accuracy, completeness or
fairness of the statements contained in the Offering
Memorandum, no facts have come to such counsel's attention
which have caused such counsel to believe that, at the time
the Offering Memorandum was distributed, the Offering
Memorandum contained any untrue statement of material fact or
omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading, or, as of the date of such opinion, the Offering
Memorandum contained any untrue statement of a material fact
or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein
not misleading (except, in each case, for the financial
statements, together with the related schedules and notes, and
<PAGE> 23
other financial and statistical data contained in or omitted
from the Offering Memorandum, as to which such counsel need
not express any opinion).
In rendering such opinions, such counsel may rely
(A) as to matters involving the application of laws of states
other than the states in which they are licensed to practice
and of foreign countries, to the extent deemed appropriate by
such counsel and indicated in such opinion, upon the opinions
of other counsel of good standing in such jurisdictions, whom
they believe to be reliable and who are reasonably
satisfactory to counsel for Sachem and (B) as to matters of
fact to the extent they deem proper, on certificates of
responsible officers of the corporations involved and public
officials.
All opinions, certificates, letters and other
documents required by this Section 6 to be delivered to Sachem
will be in compliance with the provisions hereof only if they
are reasonably satisfactory in form and substance to Sachem
and its counsel. The Company and Russco will furnish to
Sachem, without charge, such conformed copies of such
opinions, certificates, letters and other documents as Sachem
shall reasonably request.
7. Termination.
This Agreement may be terminated at any time prior
to the Initial Closing Date by written notice from Sachem to
the Company and Russco if any of the following has occurred:
(i) after the respective dates as of which information is
given in the Offering Memorandum, any material adverse change
or development involving a prospective material adverse change
in or affecting the business, affairs, condition (financial or
otherwise) or prospects of the Company or Russco, whether or
not arising in the ordinary course of business, that would, in
Sachem's reasonable judgment, make the offering, sale or the
delivery of the Securities impracticable; (ii) any outbreak or
escalation of hostilities or other national or international
calamity or crises if the effect of such outbreak, escalation,
calamity or crises would, in Sachem's reasonable judgment,
make the offering, sale or delivery of the Securities
impracticable; (iii) any decrease in NASDAQ Composite Index
measured from the date hereof which exceeds ten percent (10%)
in the aggregate; (iv) any suspension of trading in securities
generally on the New York Stock Exchange or the NASDAQ Stock
Market or limitation on prices for securities generally on any
such exchange or market; or (v) any declaration of a banking
moratorium by federal or New York authorities.
<PAGE> 24
8. Miscellaneous. Notices given pursuant to any
provision of this Agreement shall be addressed as follows:
(i) if to the Russco, to:
Russco, Inc.
2525 East 3300 South - Suite 2
Salt Lake City, Utah 84111
Attention: Scott R. Jensen, President
with a copy to:
Thomas G. Kimble, Esq.
311 South State Street - Suite 440
Salt Lake City, Utah 84111
(ii) if to the Company, to:
Specialized Health Products, Inc.
655 East Medical Drive
Bountiful, Utah 84010
Attention: David A. Robinson, President
with a copy to:
Eric L. Robinson, Esq.
Blackburn & Stoll, LC
77 West 200 South - Suite 400
Salt Lake City, Utah 84101-1609
(iii) if to Sachem, to:
U.S. Sachem Financial Consultants, L.P.
11601 Wilshire Boulevard - Suite 500
Los Angeles, California 90025
Attention: Stanley Hollander
with a copy to:
Alan D. Jacobson, Esq.
2029 Century Park East - Suite 2600
Los Angeles, California 90067
or in any case to such other address as the person to be
notified may have requested in writing.
The indemnity and contribution agreements and the
representations, warranties and other statements of the
Company, Russco and Sachem set forth or made pursuant to this
Agreement (i) shall remain operative and in full force and
effect regardless of (a) any termination of this Agreement,
(b) any investigation, or statement as to the results thereof,
made by or on behalf of Sachem, the Company, Russco, or any
Indemnified Party and (c) delivery of the Securities and
<PAGE> 25
payment of consideration therefor and (ii) shall be binding
upon and inure to the benefit of the successors, assigns,
heirs and personal representatives of Sachem, each Indemnified
Party, the Company and Russco.
Except as otherwise provided, this Agreement has been
and is made solely for the benefit of and shall be binding upon
the Company, Russco, Sachem, any controlling persons and other
Indemnified Parties referred to herein, and their respective
successors and assigns, all as and to the extent provided in this
Agreement, and no other persons shall acquire or have any right
under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Securities
merely because of such purchase. The Purchasers, however, shall
be third party beneficiaries of the provisions of Sections 3, 4
and 6 hereof.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA
WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
This Agreement may be signed in various counterparts,
which together shall constitute one and the same instrument.
In Witness Whereof, the undersigned have executed this
Placement Agreement effective as of the 23rd day of June, 1995.
Specialized Health Products, Inc.
By: /s/ David A. Robinson
President
Russco, Inc.
By: /s/ Scott R. Jensen
President
U.S. Sachem Financial Consultants, L.P.
By: Sachem Financial Consultants, Ltd.
General Partner
By: /s/ Stanley Hollander
Title: President
<PAGE> 1
EXHIBIT 10.3
Form of Employment Agreement with Executive Officers
EMPLOYMENT AGREEMENT
This employment agreement ("Agreement") is made and entered
into this ___ day of _____________, 19___, by and between
SPECIALIZED HEALTH PRODUCTS, INC., a Utah corporation
("Corporation"), and ____________________ ("Employee").
WHEREAS, Corporation and Employee desire that the term of
this Agreement begin on _________________ ("Effective Date").
WHEREAS, Corporation desires to employ Employee as its
______________ and Employee is willing to accept such employment
by Corporation, on the terms and subject to the conditions set
forth in this Agreement.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Duties. During the term of this Agreement,
Employee agrees to be employed by and to serve Corporation as its
_______________, and Corporation agrees to employ and retain
Employee in such capacities. Employee shall devote a substantial
portion of his business time, energy, and skill to the affairs of
the Corporation as Employee shall report to the Corporation's
Board of Directors and at all times during the term of this
Agreement shall have powers and duties at least commensurate with
his position as _________________.
Section 2. Term of Employment.
2.1 Definitions. For the purposes of this Agreement the
following terms shall have the following meanings:
2.1.1 "Termination For Cause" shall mean termination
by Corporation of Employee's employment by Corporation by reason
of Employee's willful dishonesty towards, fraud upon, or
deliberate injury or attempted injury to, Corporation or by
reason of Employee's willful material breach of this Agreement
which has resulted in material injury to Corporation.
2.1.2 "Termination Other Than For Cause" shall mean
termination by Corporation of Employee's employment by
Corporation (other than in a Termination for Cause) and shall
include constructive termination of Employee's employment by
reason of material breach of this Agreement by Corporation, such
constructive termination to be effective upon notice from
Employee to Corporation of such constructive termination.
2.1.3 "Voluntary Termination" shall mean termination
by Employee of Employee's employment by Corporation other than
(i) Termination Other Than For Cause, and (ii) termination by
reason of Employee's death or disability as described in
Sections 2.5 and 2.6.
<PAGE> 2
2.2 Initial Term. The term of employment of Employee by
Corporation shall be for a period of _____________ years
beginning with Effective Date ("Initial Term"), unless terminated
earlier pursuant to this Section. At any time prior to the
expiration of the Initial Term, Corporation and Employee may by
mutual written agreement extend Employee's employment under the
terms of this Agreement for such additional periods as they may
agree.
2.3 Termination For Cause. Termination For Cause may be
effected by Corporation at any time during the term of this
Agreement and shall be effected by written notification to
Employee. Upon Termination For Cause, Employee shall promptly be
paid all accrued salary, bonus compensation to the extent earned,
vested deferred compensation (other than pension plan, profit
sharing plan and stock option plan benefits which will be paid in
accordance with the applicable plan), any benefits under any
plans of the Corporation in which Employee is a participant to
the full extent of Employee's rights under such plans, accrued
vacation pay and any appropriate business expenses incurred by
Employee in connection with his duties hereunder, all to the date
of termination, but Employee shall not be paid any other
compensation or reimbursement of any kind, including without
limitation, severance compensation.
2.4 Termination Other Than For Cause. Notwithstanding
anything else in this Agreement, Corporation may effect a
Termination Other Than For Cause at any time upon giving written
notice to Employee of such termination. Upon any Termination
Other Than For Cause, Employee shall promptly be paid all accrued
salary, bonus compensation to the extent earned, vested deferred
compensation (other than pension plan, profit sharing plan and
stock option plan benefits which will be paid in accordance with
the applicable plan), any benefits under any plans of the
Corporation in which Employee is a participant to the full extent
of Employee's rights under such plans (other than pension plan,
profit sharing plan and stock option plan benefits which will be
paid in accordance with the applicable plan), accrued vacation
pay and any appropriate business expenses incurred by Employee in
connection with his duties hereunder, all to the date of
termination, with the exception of salary and medical benefits
which shall continue through the expiration of this Agreement.
2.5 Termination by Reason of Disability. If, during the
term of this Agreement, Employee, in the reasonable judgment of
the Board of Directors of Corporation, has failed to perform his
duties under this Agreement on account of illness or physical or
mental incapacity, and such illness or incapacity continues for a
period of more than twelve (12) consecutive months, Corporation
shall have the right to terminate Employee's employment hereunder
by written notification to Employee and payment to Employee of
all accrued salary, bonus compensation to the extent earned,
vested deferred compensation (other than pension plan, profit
sharing plan and stock option plan benefits which will be paid in
accordance with the applicable plan), any benefits under any
plans of the Corporation in which Employee is a participant to
the full extent of Employee's rights under such plans, accrued
vacation pay and any appropriate business expenses incurred by
Employee in connection with his duties hereunder, all to the date
of termination, with the exception of salary and medical benefits
which shall continue through the expiration of this Agreement.
<PAGE> 3
2.6 Death. In the event of Employee's death during the
term of this Agreement, Employee's employment shall be deemed to
have terminated as of the last day of the month during which his
death occurs and Corporation shall promptly pay to his estate or
such beneficiaries as Employee may from time to time designate
all accrued salary, bonus compensation to the extent earned,
vested deferred compensation (other than pension plan, profit
sharing plan and stock option plan benefits which will be paid in
accordance with the applicable plan), any benefits under any
plans of the Corporation in which Employee is a participant to
the full extent of Employee's rights under such plans, accrued
vacation pay and any appropriate business expenses incurred by
Employee in connection with his duties hereunder, all to the date
of termination, but Employee's estate shall not be paid any other
compensation or reimbursement of any kind, including without
limitation, severance compensation.
2.7 Voluntary Termination. In the event of a Voluntary
Termination, Corporation shall promptly pay all accrued salary,
bonus compensation to the extent earned, vested deferred
compensation (other than pension plan, profit sharing plan and
stock option plan benefits which will be paid in accordance with
the applicable plan), any benefits under any plans of the
Corporation in which Employee is a participant to the full extent
of Employee's rights under such plans, accrued vacation pay and
any appropriate business expenses incurred by Employee in
connection with his duties hereunder, all to the date of
termination, but no other compensation or reimbursement of any
kind.
2.8 Notice of Termination. Corporation may effect a
termination of this Agreement pursuant to the provisions of this
Section upon giving thirty (30) days' written notice to Employee
of such termination. Employee may effect a termination of this
Agreement pursuant to the provisions of this Section upon giving
thirty (30) days' written notice to Corporation of such
termination.
Section 3. Salary, Benefits and Bonus Compensation.
3.1 Base Salary. As payment for the services to be
rendered by Employee as provided in Section 1 and subject to the
terms and conditions of Section 2, Corporation agrees to pay to
Employee a "Base Salary" for the twelve (12) calendar months
beginning the Effective Date at the rate of $__________ per annum
payable in no fewer than 12 equal monthly installments of $_____.
Employee's Base Salary shall be reviewed annually by the
Compensation Committee of the Board of Directors ("Compensation
Committee"), and the Base Salary for each year (or portion
thereof) shall be determined by the Compensation Committee which
shall authorize an increase in Employee's Base Salary for such
year in an amount which, at a minimum, shall be equal to the
cumulative cost-of-living as determined by the Corporation's
board of directors.
<PAGE> 4
3.2 Bonuses. Employee shall be eligible to receive a
discretionary bonus for each year (or portion thereof) during the
term of this Agreement and any extensions thereof, with the
actual amount of any such bonus to be determined in the sole
discretion of the Board of Directors based upon its evaluation of
Employee's performance during such year. All such bonuses shall
be reviewed annually by the Compensation Committee.
3.3 Additional Benefits. During the term of this
Agreement, Employee shall be entitled to the following fringe
benefits:
3.3.1 Employee Benefits. Employee shall be eligible
to participate in such of Corporation's benefits and deferred
compensation plans as are now generally available or later made
generally available to executive officers of the Corporation.
For purposes of establishing the length of service under any
benefit plans or programs of Corporation.
3.3.2 Vacation. Employee shall be entitled to ___
(__) weeks of vacation during each year during the term of this
Agreement and any extensions thereof, prorated for partial years.
Vacation time may be accrued.
3.3.3 Life Insurance. For the term of this Agreement
and any extensions thereof, Corporation shall at its expense
procure and keep in effect term life insurance on the life of
Employee payable to Corporation in the aggregate amount of
$_______ and payable to the employee's spouse in the amount of
$_________.
3.3.4 Automobile Allowance. For the term of this
agreement and any extensions thereof the corporation shall
provide officer with an automobile allowance.
3.3.5 Reimbursement for Expenses. During the term of
this Agreement, Corporation shall reimburse Employee for
reasonable and properly documented out-of-pocket business and/or
entertainment expenses incurred by Employee in connection with
his duties under this Agreement.
Section 4. Payment Obligations. Corporation's obligation to
pay Employee the compensation and to make the arrangements
provided herein shall be unconditional, and Employee shall have
no obligation whatsoever to mitigate damages hereunder.
Section 5. Confidentiality. Employee agrees that all
confidential and proprietary information relating to the business
of Corporation shall be kept and treated as confidential both
during and after the term of this Agreement, except as may be
permitted in writing by Corporation's Board of Directors or as
such information is within the public domain or comes within the
public domain without any breach of this Agreement.
<PAGE> 5
Section 6. Withholdings. All compensation and benefits to
Employee hereunder shall be reduced by all federal, state, local
and other withholdings and similar taxes and payments required by
applicable law.
Section 7. Indemnification. In addition to any rights to
indemnification to which Employee is entitled to under the
Corporation's Articles of Incorporation and Bylaws, Corporation
shall indemnify Employee at all times during and after the term
of this Agreement to the maximum extent permitted under Utah
Revised Business Corporation Act or any successor provision
thereof and any other applicable state law, and shall pay
Employee's expenses in defending any civil or criminal action,
suit, or proceeding in advance of the final disposition of such
action, suit or proceeding, to the maximum extent permitted under
such applicable state laws.
Section 8. Notices. Any notices permitted or required under
this Agreement shall be deemed given upon the date of personal
delivery or forty-eight (48) hours after deposit in the United
States mail, postage fully prepaid, return receipt requested,
addressed to the Corporation at:
655 E. Medical Drive
Bountiful, Utah 84010
addressed to the Employee at:
2453 S. Wood Hollow Way
Bountiful, Utah 84010
or at any other address as any party may, from time to time,
designate by notice given in compliance with this Section.
Section 9. Law Governing. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Utah.
Section 10. Titles and Captions. All section titles or
captions contained in this Agreement are for convenience only and
shall not be deemed part of the context nor effect the
interpretation of this Agreement.
Section 11. Entire Agreement. This Agreement contains the
entire understanding between and among the parties and supersedes
any prior understandings and agreements among them respecting the
subject matter of this Agreement.
Section 12. Agreement Binding. This Agreement shall be
binding upon the heirs, executors, administrators, successors and
assigns of the parties hereto.
<PAGE> 6
Section 13. Attorney Fees. In the event an arbitration, suit
or action is brought by any party under this Agreement to enforce
any of its terms, or in any appeal therefrom, it is agreed that
the prevailing party shall be entitled to reasonable attorneys
fees to be fixed by the arbitrator, trial court, and/or appellate
court.
Section 14. Computation of Time. In computing any period of
time pursuant to this Agreement, the day of the act, event or
default from which the designated period of time begins to run
shall be included, unless it is a Saturday, Sunday, or a legal
holiday, in which event the period shall begin to run on the next
day which is not a Saturday, Sunday, or legal holiday, in which
event the period shall run until the end of the next day
thereafter which is not a Saturday, Sunday, or legal holiday.
Section 15. Pronouns and Plurals. All pronouns and any
variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular, or plural as the identity of the
person or persons may require.
Section 16. Presumption. This Agreement or any section
thereof shall not be construed against any party due to the fact
that said Agreement or any section thereof was drafted by said
party.
Section 17. Further Action. The parties hereto shall execute
and deliver all documents, provide all information and take or
forbear from all such action as may be necessary or appropriate
to achieve the purposes of the Agreement.
Section 18. Parties in Interest. Nothing herein shall be
construed to be to the benefit of any third party, nor is it
intended that any provision shall be for the benefit of any third
party.
Section 19. Savings Clause. If any provision of this
Agreement, or the application of such provision to any person or
circumstance, shall be held invalid, the remainder of this
Agreement, or the application of such provision to persons or
circumstances other than those as to which it is held invalid,
shall not be affected thereby.
<PAGE> 7
IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be duly executed.
SPECIALIZED HEALTH PRODUCTS, INC.: EMPLOYEE:
By:____________________________ _______________________________
Its:
<PAGE> 1
EXHIBIT 10.4
Form of Indemnity Agreement with Executive Officers and Directors
INDEMNITY AGREEMENT
This Indemnity Agreement (the "Agreement") is made as of
_______________, 1995, by and between Specialized Health Products
International, Inc., a Delaware corporation (the "Company"), and
person whose signature appears at the end of this Agreement (the
"Indemnitee"), an officer and/or director of the Company.
RECITALS
A. The Indemnitee is currently serving as an officer
and/or director of the Company and in such capacity renders
valuable services to the Company.
B. Both the Company and the Indemnitee recognize the
substantial risk of litigation against officers and directors of
corporations, and the Indemnitee has indicated that he or she
does not regard the indemnification available under the Company's
Bylaws as adequate to protect against legal risks associated with
service to the Company and may be unwilling to continue in office
in the absence of greater protection and indemnification.
C. The Board of Directors of the Company has determined
that it is in the best interests of the Company and its
stockholders to induce the Indemnitee to continue to serve as an
officer and/or director and retain the benefits of his or her
experience and skill by entering into this Agreement to provide
protection from potential liabilities which might arise by reason
of the fact that he or she is an officer and/or director of the
Company beyond the protection afforded by Delaware law and the
Company's Bylaws.
AGREEMENT
In consideration of the continued services of the Indemnitee
and as an inducement to the Indemnitee to continue to serve as an
officer and/or director, the Company and the Indemnitee do hereby
agree as follows:
Definitions. As used in this Agreement:
(a) The term "Company' shall include Specialized
Health Products International, Inc., a Delaware corporation and
any wholly-owned subsidiary.
(b) The term "Expenses" includes, without limitation,
attorneys' fees, disbursements and retainers, accounting and
witness fees, travel and deposition costs, any interest,
assessment or other charges, any federal, state, local or foreign
taxes imposed as a result of the actual or deemed receipt of any
payments under this Agreement, any other expense, liability or
loss, any amounts paid or to be paid in settlement by or on
behalf of Indemnitee, and any expenses of establishing a right to
indemnification (pursuant to this Agreement or otherwise), paid
or incurred in connection with investigating, defending, being a
<PAGE> 2
witness in, or participating in, or preparing for any of the
foregoing in, any Proceeding relating to an Indemnifiable Event,
including reasonable compensation for time spent by the
Indemnitee in connection with the investigation, defense or
appeal of a Proceeding or of an action for indemnification for
which he or she is not otherwise compensated by the Company or
any third party. The Indemnitee shall be deemed to be
compensated by the Company or a third party for time spent in
connection with the investigation, defense or appeal of a
Proceeding or an action for Indemnification if, among other
things, he or she is a salaried employee of the Company or such
third party and his or her salary is not reduced In proportion to
the time spent in connection with the Proceeding or action for
Indemnification. The term "Expenses" does not include the amount
of judgments, fines, penalties or ERISA excise taxes actually
levied against the Indemnitee.
(c) The term "Indemnifiable Event" shall include any event
or occurrence that takes place either prior to or after the
execution of this Agreement, related to the service of Indemnitee
as an officer and/or director of the Company, or his or her
service at the request of the Company as a director, officer,
employee, trustee, agent, or fiduciary of another foreign or
domestic corporation, partnership, joint venture, employee
benefit plan, trust, or other enterprise. or related to anything
done or not done by Indemnitee in any such capacity, whether or
not the basis of a Proceeding arising in whole or in part from
such Indemnifiable Event is alleged action in an official
capacity as a director, officer, employee, or agent or in any
other capacity while serving as a director, officer, employee, or
agent of the Company or at the request of the Company, as
described above, and whether or not he or she is serving in such
capacity at the time any liability or Expenses are incurred for
which indemnification or reimbursement is to be provided under
this Agreement.
(d) The term "Proceeding" shall include (i) any threatened,
pending or completed action, suit or proceeding, whether brought
in the name of the Company or otherwise and whether of a civil,
criminal, administrative, investigative or other nature; and (ii)
any inquiry, hearing or investigation, whether or not conducted
by the Company, that Indemnitee in good faith believes might lead
to the institution of any such action. suit or proceeding.
2. Agreement to Serve. The Indemnitee agrees to continue
to serve as an officer and/or director of the Company at the will
of the Company for so long as Indemnitee is duly elected or
appointed or until such time as Indemnitee tenders a resignation
in writing; provided, however, that nothing in this Agreement
shall be construed as providing the Indemnitee any right to
continued employment.
3. Indemnification in Third Party Actions. In connection
with any Proceeding arising in whole or in part from an
Indemnifiable Event (other than a Proceeding by or in the name of
the Company to procure a judgment in its favor), the Company
shall indemnify the Indemnitee against all Expenses and all
judgments, fines, penalties and ERISA excise taxes actually and
reasonably incurred by the Indemnitee in connection with such
Proceeding, to the fullest extent permitted by Delaware law. The
Company shall also cooperate fully with Indemnitee and render
such assistance as Indemnitee may reasonably require in the
defense of any Proceeding in which Indemnitee was or is a party
or is threatened to be made a party, and shall make available to
Indemnitee and his or her counsel all information and documents
reasonably available to it which relate to the subject of any
such Proceeding.
<PAGE> 3
4. Indemnification in Proceedings by or in the Name of the
Company. In any Proceeding by or in the name of the Company to
procure a judgment in its favor arising in whole or in part from
an Indemnifiable Event, the Company shall indemnify the
Indemnitee against all Expenses actually and reasonably incurred
by Indemnitee in connection with such Proceeding, to the fullest
extent permitted by Delaware law.
5. Conclusive Presumption Regarding Standard of Conduct.
The Indemnitee shall be conclusively presumed to have met the
relevant standards of conduct as defined by Delaware law for
indemnification pursuant to this Agreement, unless a
determination is made that the Indemnitee has not met such
standards by (i) the Board of Directors of the Company by a
majority vote of a quorum thereof consisting of directors who
were not parties to such Proceeding, (ii) the stockholders of the
Company by majority vote, or (iii) in a written opinion by
independent legal counsel, selection of whom has been approved by
the Indemnitee in writing.
6. Indemnification of Expenses of Successful Party.
Notwithstanding any other provisions of this Agreement, to the
extent that the Indemnitee has been successful in defense of any
Proceeding or in defense of any claim, issue or matter therein,
on the merits or otherwise, including the dismissal of a
Proceeding without prejudice. the Indemnitee shall be indemnified
against all Expenses incurred in connection therewith to the
fullest extent permitted by Delaware law.
7. Advances of Expenses. The Expenses incurred by the
Indemnitee in any Proceeding shall be paid promptly by the
Company in advance of the final disposition of the Proceeding at
the written request of the Indemnitee to the fullest extent
permitted by Delaware law; provided that if Delaware law in
effect at the time so requires, the Indemnitee shall undertake in
writing to repay such amount to the extent that it is ultimately
determined that the Indemnitee is not entitled to
indemnification.
8. Partial Indemnification. If the Indemnitee is entitled
under any provision of this Agreement to indemnification by the
Company for some or a portion of the Expenses, judgments, fines,
penalties or ERISA excise taxes actually and reasonably incurred
by Indemnitee in the investigation, defense, appeal or settlement
of any Proceeding but not, however. for the total amount thereof,
the Company shall nevertheless indemnify the Indemnitee for the
portion of such Expenses, judgments, fines, penalties or ERISA
excise taxes to which the Indemnitee is entitled.
9. Indemnification Procedure; Determination of Right to
Indemnification.
(a) Promptly after receipt by the Indemnitee of notice of
the commencement of any Proceeding, the Indemnitee will, If a
claim in respect thereof is to be made against the Company under
this Agreement, notify the Company of the commencement thereof.
(b) If a claim under this Agreement is not paid by the
Company within 30 days of receipt of written notice, the right to
indemnification as provided by this Agreement shall be
enforceable by the Indemnitee in any court of competent
jurisdiction. it shall be a defense to any such action (other
than an action brought to enforce a claim for Expenses incurred
in defending any Proceeding in advance of its final disposition
where the required undertaking, if any is required, has been
tendered to the Company) that the Indemnitee has failed to meet a
standard of conduct which makes it permissible under Delaware law
<PAGE> 4
for the Company to indemnity the Indemnitee for the amount
claimed. The burden of proving by clear and convincing evidence
that indemnification or advances are not appropriate shall be on
the Company. Neither the failure of the directors or
stockholders of the Company or independent legal counsel to have
made a determination prior to the commencement of such action
that indemnification or advances are proper in the circumstances
because the Indemnitee has met the applicable standard of
conduct, nor an actual determination by the directors or
stockholders of the Company or independent legal counsel that the
Indemnitee has not met such applicable standard of conduct, shall
be a defense to the action or create a presumption that the
Indemnitee has not met the applicable standard of conduct.
(c) The Indemnitee's Expenses incurred in connection with
any Proceeding concerning Indemnitee's right to indemnification
or advances in whole or in part pursuant to this Agreement shall
also be indemnified by the Company regardless of the outcome of
such Proceeding, unless a court of competent jurisdiction
determines that each of the material assertions made by the
Indemnitee in such Proceeding was not made in good faith or was
frivolous.
(d) With respect to any Proceeding for which
indemnification is requested, the Company will be entitled to
participate therein at its own expense and, except as otherwise
provided below, to the extent that it may wish, the Company may
assume the defense thereof, with counsel satisfactory to the
Indemnitee. After notice from the Company to the Indemnitee of
its election to assume the defense of a Proceeding, the Company
will not be liable to the Indemnitee under this Agreement for any
legal or other expenses subsequently incurred by the Indemnitee
in connection with the defense thereof, other than reasonable
costs of investigation or as otherwise provided below. The
Indemnitee shall cooperate fully with the Company and render such
assistance as the Company may reasonably require in the Company's
participation in any such Proceeding and shall make available to
the Company and its counsel all information and documents
reasonably available to Indemnitee which relate to the subject of
such Proceeding. The Company shall not be liable to indemnify
the Indemnitee under this Agreement with regard to any judicial
award if the Company was not given a reasonable and timely
opportunity, at its expense. to participate in the defense of
such action; the Company's liability hereunder shall not be
excused if participation in the Proceeding by the Company was
barred. The Company shall not settle any Proceeding in any
manner which would impose any penalty or limitation on the
Indemnitee without the Indemnitee's prior written consent. The
Indemnitee shall have the right to employ counsel in any
Proceeding, but the fees and expenses of such counsel incurred
after notice from the Company of its assumption of the defense
thereof shall be at the expense of the Indemnitee, unless (i) the
employment of counsel by the Indemnitee has been authorized by
the Company, (ii) the Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and
the Indemnitee in the conduct of the defense of a Proceeding, or
(iii) the Company shall not in fact have employed counsel to
assume the defense of a Proceeding, in each of which cases the
fees and expenses of the Indemnitee's counsel shall be at the
expense of the Company. The Company shall not be entitled to
assume the defense of any Proceeding brought by or on behalf of
the Company or as to which the Indemnitee has made the conclusion
that there may be a conflict of interest between the Company and
the Indemnitee.
10. Limitations on Indemnification. No payments pursuant
to this Agreement shall be made by the Company:
<PAGE> 5
(a) To indemnify or advance Expenses to the Indemnitee with
respect to Proceedings initiated or brought voluntarily by the
Indemnitee and not by way of defense, except with respect to
Proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other Statute or law
or otherwise as required under Delaware law, but such
Indemnification or advancement of Expenses may be provided by the
Company in specific cases if a majority of the Board of Directors
finds it to be appropriate;
(b) To indemnify the Indemnitee for any Expenses,
judgments, fines, penalties or ERISA excise taxes for which the
Indemnitee is indemnified by the Company otherwise than pursuant
to this Agreement;
(c) To indemnify the Indemnitee under this Agreement for
any amounts paid in settlement of any Proceeding effected without
the Company's written consent; however, the Company will not
unreasonably withhold its consent to any proposed settlement;
(d) To indemnify the Indemnitee for any Expenses,
judgments, fines, penalties or ERISA excise taxes for which
payment is actually made to the Indemnitee under a valid and
collectible insurance policy, except in respect of any excess
beyond the amount of payment under such insurance;
(e) To indemnify the Indemnitee for any Expenses,
judgments, fines or penalties sustained in any Proceeding for an
accounting of profits made from the purchase or sale by
Indemnitee of securities of the Company pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of
1934, the rules and regulations promulgated thereunder and
amendments thereto or similar provisions of any federal, state or
local statutory law;
(f) To indemnify the Indemnitee against any Expenses,
judgments, fines, penalties or ERISA excise taxes based upon or
attributable to the Indemnitee having been finally adjudged to
have gained any personal profit or advantage to which he or she
was not legally entitled;
(g) To indemnify the Indemnitee for any Expenses.
judgments, fines, penalties or ERISA excise taxes resulting from
Indemnitee's conduct which is finally adjudged to have been
willful misconduct, knowingly fraudulent. deliberately dishonest
or in violation of Indemnitee's duty of loyalty to the Company;
or
(h) If a court of competent jurisdiction shall finally
determine that any indemnification hereunder is unlawful.
11. Maintenance of Liability Insurance.
(a) The Company hereby covenants and agrees that, as long as
the Indemnitee shall continue to serve as an officer and/or
director of the Company and thereafter so long as the Indemnitee
shall be subject to any possible Proceeding, the Company, subject
to subsection (c), shall promptly obtain and maintain in full
force and effect directors' and officers' liability insurance
("D&O Insurance") in reasonable amounts from established and
reputable insurers.
<PAGE> 6
(b) In all D&O Insurance policies, the Indemnitee shall be
named as an insured in such a manner as to provide the Indemnitee
the same rights and benefits as are accorded to the most
favorably insured of the Company's officers or directors.
(c) Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain D&O Insurance if the Company
determines in good faith that such insurance is not reasonably
available. The premium costs for such insurance are
disproportionate to the amount of coverage provided, or the
coverage provided by such insurance is so limited by exclusions
that it provides an insufficient benefit.
12. Indemnification Hereunder Not Exclusive. The
indemnification provided by this Agreement shall not be deemed to
limit or preclude any other rights to which the Indemnitee may be
entitled under the Certificate of Incorporation, the Bylaws, any
agreement, any vote of stockholders or disinterested directors,
Delaware law, or otherwise, both as to action In Indemnitee's
official capacity and as to action in another capacity on behalf
of the Company while holding such office.
13. Successors and Assigns. This Agreement shall be
binding upon, and shall inure to the benefit of, the Indemnitee
and Indemnitee's heirs, personal representatives and assigns, and
the Company and its successors and assigns.
14. Separability. Each provision of this Agreement is a
separate and distinct agreement and Independent of the others, so
that if any provision hereof shall be held to be invalid or
unenforceable for any reason, such invalidity or unenforceability
shall not affect the validity or enforceability of the other
provisions hereof. To the extent required. any provision of this
Agreement may be modified by a court of competent jurisdiction to
preserve Its validity and to provide the Indemnitee with the
broadest possible indemnification permitted under Delaware law.
15. Savings Clause. If this Agreement or any portion
thereof be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify
Indemnitee as to Expenses, judgments, fines, penalties or ERISA
excise taxes with respect to any Proceeding to the full extent
permitted by any applicable portion of this Agreement that shall
not have been invalidated or by any applicable provision of the
law of Delaware or the law of any other jurisdiction.
16. Interpretation; Governing Law. This Agreement shall be
construed as a whole and in accordance with its fair meaning.
Headings are for convenience only and shall not be used in
construing meaning. This Agreement shall be governed and
interpreted In accordance with the laws of the State of Delaware.
17. Amendments. No amendment, waiver, modification,
termination or cancellation of this Agreement shall be effective
unless in writing signed by the party against whom enforcement is
sought. The Indemnification rights afforded to the Indemnitee
hereby are contract rights and may not be diminished, eliminated
or otherwise affected by amendments to the Company's Certificate
of Incorporation, Bylaws or agreements including D&O Insurance
policies.
<PAGE> 7
18. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the
same agreement and shall become effective when one or more
counterparts have been signed by each party and delivered to the
other.
19. Notices. Any notice required to be given under this
Agreement shall be directed to the Company at 655 East Medical
Drive, Bountiful, Utah 84010 and to Indemnitee at the address
specified below or to such other address as either shall
designate in writing.
20. Subject Matter. The intended purpose of this Agreement
is to provide for Indemnification, and this Agreement is not
intended to affect any other aspect of any relationship between
the Indemnitee and the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.-
SPECIALIZED HEALTH PRODUCTS INDEMNITEE
INTERNATIONAL, INC.
By. ________________________________ ________________________________
Its ________________________________
________________________________
Street Address
________________________________
City, State, Zip Code
EXHIBIT 10.5
Form of Confidentiality Agreement
CONFIDENTIALITY AGREEMENT
This Agreement ("Agreement") is entered into this date by and
between SPECIALIZED HEALTH PRODUCTS, INC., a Utah corporation
("Corporation"), and the party named at the end of this Agreement
("Consultant/Employee").
WHEREAS, the Corporation is engaged in the business of research,
development and manufacturing of health care products ; and
WHEREAS, the Corporation desires to retain the services of the
Consultant/Employee as an independent consultant or as an
employee, as the case may be.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
1. Confidential/Proprietary Information. The
Consultant/Employee agrees that he or she will not disclose and
will hold in confidence any and all proprietary information, and
other matters owned by the Corporation brought to the
Consultant/Employee's attention (collectively the "Information")
by Corporation during the course of this Agreement, whether in
written or oral form. Without the prior written consent of the
Corporation, the Consultant/Employee agrees not to use the
Information for any purpose other than the performance of the
services performed for Corporation. However, the
Consultant/Employee shall not be so restricted where (i) the
Information is now or becomes public through no fault of the
Consultant/Employee, or (ii) the Consultant/Employee already had
the Information in his/her possession from his/her own work prior
to the date of this Agreement, or (iii) the Consultant/Employee
received the Information from a third party on a non-confidential
basis and not derived from Corporation, or (iv) the
Consultant/Employee receives permission in writing from the
Corporation to disclose the Information. Upon termination of
this Agreement, the Consultant/Employee agrees to promptly return
to the Corporation all of the Information, in whatever form, that
the Consultant/Employee may then have in his/her possession or
control.
2. Remedies. The parties acknowledge that any disclosure of
the Information will cause irreparable harm to the Corporation.
As a consequence, the parties agree that if the
Consultant/Employee fails to abide by the terms of this
Agreement, the Corporation will be entitled to specific
performance, including immediate issuance of a temporary
restraining order or preliminary injunction enforcing this
Agreement, and to judgment for damages caused by such breach, and
to any other remedies provided by applicable law.
3. Notices. All notices and other communications required or
permitted under this Agreement shall be validly given, made, or
served if in writing and delivered personally or sent by
registered mail, to the Consultant/Employee at the following
address.
_______________________________
_______________________________
_______________________________
All notices and other communications required or permitted
under this Agreement shall be validly given, made, or served
if in writing and delivered personally or sent by registered
mail, addressed to the Corporation at:
655 East Medical Drive
Bountiful, Utah 84010
Attn: Chief Executive Officer
<PAGE> 2
or at any other address as any party may, from time to time,
designate by notice given in compliance with this section.
4. Attorney Fees. In the event of any litigation between the
parties to declare or enforce any provision of this Agreement,
the prevailing party or parties shall be entitled to recover from
the losing party or parties, in addition to any other recovery
and costs, reasonable attorney fees incurred in such litigation,
in both the trial and in all appellate courts.
5. Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah.
6. Entire Agreement. This Agreement contains the entire
understanding between and among the parties and supersedes any
prior understandings and agreements among them respecting the
subject matter of this Agreement; provided, however, that if the
Consultant/Employee is also a party to a separate written
employment agreement with the Corporation which contains
restrictions on the disclosure of confidential or proprietary
Information, then the provisions of such employment agreement
shall take precedence over the provisions of this Agreement.
7. Agreement Binding. This Agreement shall be binding upon
the heirs, executors, administrators, successors and assigns of
the parties hereto.
8. Further Action. The parties hereto shall execute and
deliver all documents, provide all information and take or
forbear from all such action as may be necessary or appropriate
to achieve the purposes of the Agreement.
9. Counterparts. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement,
binding on all the parties hereto even though all the parties are
not signatories to the original or the same counterpart.
10. Parties in Interest. Nothing herein shall be construed
to be to the benefit of any third party, nor is it intended that
any provision shall be for the benefit of any third party.
11. Presumption. This Agreement or any section thereof
shall not be construed against any party due to the fact that
said Agreement or any section thereof was drafted by said party.
12. Savings Clause. If any provision of this Agreement, or
the application of such provision to any person or circumstance,
shall be held invalid, the remainder of this Agreement, or the
application of such provision to persons or circumstances other
than those as to which it is held invalid, shall not be affected
thereby.
Date: _____________________________
SPECIALIZED HEALTH PRODUCTS, CONSULTANT/EMPLOYEE
INC., a Utah corporation
By_____________________________ _______________________________
Its____________________________ Name___________________________
EXHIBIT 10.6
Joint Venture Agreement
JOINT VENTURE AGREEMENT
This Joint Venture Agreement (the "Agreement") is made as of
this 30th day of October, 1995, by and between Specialized
Health Products, Inc., a Utah corporation ("SHP"), Zerbec, Inc.,
a Texas corporation ("Zerbec").
RECITALS
A. WHEREAS the Venturers reached an earlier agreement
memorialized in a Letter of Intent, dated January 7, 1995, which
is attached hereto as Appendix A. In those areas where there are
differences between this Agreement and the Letter of Intent, this
Agreement takes precedence.
B. WHEREAS SHP and Zerbec (collectively the "Venturers")
shall cause a corporation to be formed under the laws of the
State of Utah ("NewCo");
C. WHEREAS Zerbec has skills, proprietary technologies and
know-how in diagnostic imaging areas, which can be used to
develop novel and cost-competitive products and processes using
solid state filmless X-Ray and other photon based detector
technologies;
D. WHEREAS SHP has skills and know-how in diagnostic
imaging, instrumentation development and manufacturing, funding
acquisition, and regulatory experience;
and
E. WHEREAS the Venturers desire to create a joint venture
to timely develop, manufacture, distribute and market products
and technologies using solid state X-Ray or other photon-based
detector technologies.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and in
consideration of the mutual promises set forth herein and
intending to be legally bound, the parties hereto do hereby agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Affiliate. The term "Affiliate" means a Person who
directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the
Person specified.
<PAGE> 2
1.2 Assigned Technology. The term "Assigned Technology,"
as used herein shall mean the following listed patents, patent
applications, patents to be issued pursuant thereto, and all
divisions, continuations, continuations-in-part, reissues,
reexamines, substitutes, and extensions thereof, as well as all
related subject matter and improvements and modifications
thereto, the basis for which is found therein:
COUNTRY PATENT NUMBER STATUS
U.S.A. 4,763,002 Expires 2005
U.S.A. 4,446,365 Expires 2001
U.S.A. 4,539,591 Expires 2002
U.S.A. 4,085,324 Expired 1995
Canada 1,156,772 Expires 2000
Canada 1,159,507 Expires 2000
Canada 1,162,332 Expires 2001
1.3 Improvement or Improvements. The term "Improvement" or
"Improvements" as used herein, shall mean any modification of a
device, method, or product described in the Assigned Technology
provided that such a modification would infringe one or more
claims of the issued patents listed under section 1.2. Also,
the term "Improvement" or "Improvements" shall include
subsequent derivative improvements which are based upon
Improvements or Technical Information received from or developed
by NewCo or a Venturer including any expansion, enhancement,
revision, modification, or any other form of development in which
Improvements or modifications of the Improvements or Technical
Information are recast, transformed, improved or adapted, except
those things that are in the public domain.
1.4 Person. The term "Person" as used herein shall mean an
individual, a partnership, a joint venture, a corporation, a
trust, an estate, an unincorporated organization or a government
or any department or agency thereof.
1.5 Technical Information. The term "Technical Information"
as used herein shall mean all general and specific knowledge,
experience and information, including without limitation all
inventions, trade secrets, know-how and Improvements thereof and
all patent and proprietary rights now owned or possessed by
either Venturer or hereafter developed or acquired by or on
behalf of NewCo or the Venturers, relating to the development,
design, manufacture, assembly, operation, marketing, servicing or
testing of the Assigned Technology and/or Improvements (including
without limitation all continuations, continuations-in-part,
divisions and reissues of patents), all apparatus, prototypes,
equipment and parts embodying any of the above and all documents
and copies thereof constituting, describing or relating to the
above, including memoranda, descriptions, specifications,
drawings, schematics, software, notebooks, parts lists, patents
and patent applications invention records and disclosures.
<PAGE> 3
ARTICLE II
ORGANIZATION AND MANAGEMENT
OF NEWCO
2.1 Corporate Formation. The Venturers shall form and
organize NewCo, a joint venture in the form of a corporation
which joint venture shall be incorporated in the State of Utah
under the Utah Revised Business Corporation Act.
2.2 Organizational Documents. The Articles of
Incorporation shall be reviewed by both Venturers before
finalization and shall be in a form reasonably acceptable to the
Ventures. The Bylaws and other organizational documents of NewCo
shall be established under the direction of NewCo's board of
directors (the "Board"). It is hereby agreed that the
organization of NewCo will be in accordance with the guidelines
provided in Appendix B.
2.3 Changes in Board Organization. Until persons who are
not the nominees of the Venturers are appointed to the Board, the
Venturers agree that:
(i) Each Venturer shall vote its shares so that each
Venturer maintains Board representation equal to the other
Venturer;
(ii) At its discretion, each Venturer shall vote
its shares so that each Venturer may remove and replace one or
more of its appointees from the Board.
(iii) Each Venturer agrees to be present in person
or by proxy at each annual meeting of shareholders of NewCo and
at each special meeting of shareholders called for the purpose of
removal of any Board member or for the purpose of filling any
vacancy or any newly created directorships in the Board of NewCo
and will cause all stock of NewCo owned by it to be counted for
quorum purposes at such meeting.
2.4 Objectives of NewCo. SHP and Zerbec will concentrate
their respective expertise and resources to create wealth for
NewCo and its shareholders. It is the intention of SHP and
Zerbec to achieve marketability for their interests in NewCo at
the earliest opportunity and before December 31, 1997. Such
marketability may be achieved by means of a public stock listing,
a sale or a merger of NewCo.
2.5 Business of NewCo. The purpose or purposes for which
NewCo will be organized is to timely develop, manufacture,
distribute and market products and technologies using the
Assigned Technology and Improvements. In furtherance of said
business, NewCo shall have and may exercise all the powers now or
hereafter conferred by the laws of the State of Utah on
corporations formed under the laws of this state, and shall do
any and all things related or incidental to its business as fully
as natural persons might or could do under the laws of said
state.
<PAGE> 4
2.6 Purposes Limited. The business of NewCo shall be
limited to those activities and purposes specified in Section
2.5.
2.7 Title to Property. All property, whether real or
personal, tangible or intangible, owned by NewCo shall be owned
by NewCo as an entity and, insofar as permitted by applicable
law, no Venturer shall have any ownership interest in such
property in its individual name or right and each Venturer's
interest in NewCo shall be personal property for all purposes.
2.8 Statutory Compliance. NewCo shall exist under and be
governed by the applicable laws of the State of Utah. The
Venturers shall make all filings and disclosures required by, and
shall otherwise comply with, all such laws.
2.9 Duty of Care. The organizational documents of NewCo
shall provide that the Board shall not be liable to NewCo or its
shareholders to the maximum extent allowed by Utah law and that
the members of the Board shall be indemnified for liability
resulting from serving on the Board to the maximum extent allowed
by Utah law.
2.10 Management Decisions. NewCo will be a separate
company. All management decisions relating to the business of
NewCo shall be made by NewCo under the direction of the Board.
The Venturers will contract with NewCo to provide the Venturers
with compensation for services provided to NewCo after its
formation as provided herein. Compensation for services provided
by the Venturers to NewCo shall be paid at commercially
reasonable rates. The Venturers shall absorb their own costs
incurred in connection herewith prior to the formation of NewCo.
2.11 Liability of Venturers: Indemnification. The bylaws
of NewCo shall indemnify each Venturer for any act performed by
it within the scope of the authority conferred upon it by this
Agreement; provided, however, that such indemnity shall be
payable only if such Venturer (a) acted in good faith and in a
manner it reasonably believed to be in, or not opposed to, the
best interests of NewCo, and (b) had no reasonable grounds to
believe that its conduct was negligent, unlawful or constituted
willful misconduct, and provided further that no indemnification
may be made in respect of any claim, issue or matter as to which
any Venturer shall have been adjudged to be liable for negligence
or misconduct in the performance of its duty to NewCo unless, and
only to the extent that, the court in which such action or suit
is brought determines that in view of all the circumstances of
the case, despite the adjudication of liability for negligence or
misconduct, such Venturer is fairly and reasonably entitled to
indemnity for those expenses which the court deems proper. Any
such indemnification shall be paid from, and only to the extent
of, NewCo assets, and no Venturer shall have any personal
liability on account thereof.
<PAGE> 5
2.12 Debt. NewCo shall not create, incur, assume, or suffer
to exist any obligation for borrowed money other than current
accounts payable and similar current liabilities incurred in the
ordinary course of business until completion of the first level
of the Second Phase Financing (defined below). In no event,
however, shall such debt exceed $10,000 until completion of the
first level of the Second Phase Financing.
ARTICLE III
ASSIGNMENT AND FUNDING
3.1 Assigned Technology. Within 45 days after the
formation of NewCo, Zerbec shall assign to NewCo Zerbec's entire
right, title and interest in the above identified Assigned
Technology and Improvements and any related logos, trademarks or
copyrights. Once the Assigned Technology has been assigned to
NewCo it cannot be reassigned to another entity without unanimous
consent of all parties hereto.
3.2 SHP Funding to NewCo for Services to be Provided by
Zerbec. SHP hereby agrees to provide NewCo with $15,000 per
month for up to a consecutive twelve month period beginning the
month during which this Agreement is executed for use by NewCo to
pay Zerbec for services to be provided by Zerbec.
3.3 SHP Termination of Funding to NewCo for Services to be
Provided by Zerbec. SHP may terminate the funding referenced in
Section 3.2 if, in the judgment of SHP, Zerbec fails to provide
reasonable support for acquisition of Second Phase Financing as
evidenced by failure to meet the milestone objectives set forth
in Appendix D. A written notice of such termination shall be
given to Zerbec at least thirty (30) days before termination of
the funding reference in Section 3.2. Said funding will
continue, however, if the cause of the termination notice is
reconciled within said thirty (30) day period.
3.4 SHP Funding to NewCo for Internal Operations. SHP
hereby agrees to provide NewCo with up to $15,000 per month for
up to a consecutive twelve month period beginning the month
during which NewCo is incorporated in order to fund NewCo's
internal operations. The funding referenced in this Section 3.4
and in Section 3.2 are hereinafter referred to as the "Interim
Funding."
3.5 Second Phase Financing. SHP shall use reasonable
efforts to assist NewCo in locating and securing funding of not
less than $3,000,000 with a target of $6,000,000 (the "Second
<PAGE> 6
Phase Financing"). The first level of Second Phase Financing is
a minimum of $3,000,000. The second level of Second Phase
Financing is an additional $3,000,000.
(i) The first level of Second Phase Financing is to be
raised within 12 months of the signing of this Agreement as
stated in the milestones of Appendix C.
(ii) At the successful securing of at least the first
level of the Second Phase Financing, SHP will terminate the
Interim Funding.
(iii) At the successful securing of the second
level of the Second Phase Financing, NewCo will repay SHP an
amount equal to the total amount of Interim Funding paid by SHP
to NewCo.
3.6 Failure to Meet First Level of Second Phase Financing.
If the first level of the Second Phase Financing is not met
within 12 months from the date hereof, then Zerbec shall have the
right to acquire two thirds of SHP's NewCo stock for $1.00 upon
thirty (30) days written notice to SHP.
ARTICLE IV
THE VENTURERS
4.1 Services to be Provided by SHP Before the First Level
of the Second Phase Financing. SHP shall provide the following
services to NewCo at NewCo's expense before the first level of
the Second Financing is secured.
4.1.1 Selection of Full Time Employee. Mr. Jim
Yardley or some other person selected by SHP shall become a full
time employee of NewCo and will be responsible to coordinate the
operations and business of NewCo. Said employee's salary shall
be paid by SHP until the formation of NewCo. Thereafter, NewCo
will pay said salary.
4.1.2 Facilities. SHP shall make available to
NewCo reasonable facilities from which NewCo may conduct its
business, including utilities, office furniture, telephone
service, office supplies and equipment. Such facilities shall be
located in Bountiful, Utah, or such other location(s) as SHP
shall determine.
4.1.3 Patent Procurement. SHP shall provide NewCo
with reasonable assistance in filing and prosecuting all current
and new patent applications relating to the Assigned Technology.
<PAGE> 7
4.1.4 Human Resources. SHP shall provide NewCo:
with reasonable assistance in the following areas: accounting,
human resources, payroll, employee fringe benefits and other
services as related to the support of Mr. Jim Yardley or some
other person selected by SHP under constraints of a budget
approved by SHP.
4.1.5 Business Plan. SHP shall provide NewCo with
assistance, to the degree reasonably requested by NewCo, in the
preparation of a detailed five (5) year business plan. The
business plan shall include projections on costs to commercialize
the Assigned Technology, a marketing plan and projected financial
statements. Such plan shall indicate the resources required to
achieve commercialization of the Assigned Technology.
4.2 Services to be Provided by Zerbec Before the First
Level of the Second Phase Financing. Zerbec shall provide the
following services to NewCo before the first level of the Second
Phase Financing is secured.
4.2.1 Small Plate Demonstration System. Zerbec
shall develop a small plate selenium detector demonstration unit
for NewCo that can be used to validate the technology. This
demonstration system will be capable of a resolution of at least
10 1p/mm with the goal of 20 1p/mm.
4.2.2 Patent Procurement. Zerbec shall provide
reasonable assistance to NewCo in filing and prosecuting of all
current and new patent applications relating to the Assigned
Technology and Improvements.
4.2.3 Presentations. Zerbec shall provide
reasonable technical support in making presentations to
prospective investors, including demonstration of the new
demonstration unit and/or the original experimental development
system.
4.2.4 Introductions. Zerbec shall provide business
contact with appropriate hospital, clinic, and research resources
which will facilitate obtaining information in order to
strategically help NewCo.
4.2.5 Facilities. Beginning on the date hereof,
Zerbec shall make available to NewCo reasonable research
facilities for the development of the small plate demonstration
unit, including utilities, computers, and communications
equipment and connections. Such facilities shall be in such
location(s) as Zerbec shall determine.
<PAGE> 8
4.2.6 Research. Zerbec shall research potential
sources of amorphous selenium, low noise amplifiers, scanning
systems and other technologies that will be beneficial for the
updating/upgrading of the Assigned Technology.
4.2.7 Business Plan. Zerbec shall provide NewCo
with assistance, to the degree reasonably requested by NewCo, in
the preparation of a detailed five (5) year business plan. The
business plan shall include projections on costs to commercialize
the Assigned Technology, a marketing plan and projected financial
statements. Said plan shall indicate the resources required to
achieve commercialization of the Assigned Technology.
4.3 Services to be Provided by SHP After the First Level of
the Second Phase Financing. SHP shall provide the following
services to NewCo after the first level of the Second Phase
Financing is secured.
4.3.1 NewCo Technical Employees. SHP shall
provide, under the direction of Dr. Gale H. Thorne, resources to
aid NewCo in assembling a group of seasoned imaging system
development engineers. Dr. Gale H. Thorne will be made available
to serve on the Board and will provide professional services
reasonably requested by the Board.
4.3.2 Facilities and Services. SHP will contract
with NewCo to provide, at NewCo's expense, reasonable facilities
and services to NewCo until NewCo is reasonably able to provide
these facilities and services for itself. Such facilities
include offices from which NewCo may conduct its business,
including utilities, office furniture, telephone service, office
supplies and equipment. Such services include patent
procurement, accounting, human resources, payroll, employee
fringe benefits, and other related services and issues.
4.3.3 Contact Network. SHP will use its expertise
to help NewCo establish a contact network used initially to
provide system development inputs, a set of alpha test sites and
beta test sites.
4.4 Services to be Provided by Zerbec After First Level of
the Second Phase Financing. Zerbec shall provide the following
services to NewCo after the first level of the Second Phase
Financing is secured.
4.4.1 Patent Procurement. Zerbec shall provide
reasonable assistance to NewCo in filing and prosecuting all
current and new patent applications relating to the Assigned
Technology and Improvements. NewCo shall bear all expenses
relating to such patent procurement.
4.4.2 Introductions. Zerbec shall provide business
contact with appropriate hospital, clinic, and research resources
which will facilitate obtaining information in order to
strategically help NewCo.
<PAGE> 9
4.4.3 Research Team. Zerbec shall assemble and
manage a research team that will oversee early proprietary
property specifications and development of the Assigned
Technology.
4.4.4 X-Ray Cassette System. Zerbec will contract
with NewCo to provide support in the development of the selenium
plate technology so that within one year after the Second Phase
Financing has been secured, NewCo may be able to build an alpha
test Mammography Imaging Instrument system as specified in
Appendix E. These services will be provided at a cost of not
more than $800,000 to NewCo. This system will be capable of
capturing, processing and displaying an X-Ray image using a
cassette that is 24mm X 30 mm. The cost will cover:
(i) Resources. Time and materials for the principal
inventor, four associate inventors, administrator, three research
assistants, three consultants and an administrative assistant;
(ii) Facilities. Office and laboratory facilities,
furniture and equipment, office supplies, utilities,
communications and computer equipment, research equipment and
supplies; and
(iii) Other. Accounting, employee fringe benefits and
travel expenses.
Zerbec will also contract with NewCo to provide research support
to enable NewCo to build an alpha test system for X-Ray, as
specified in Appendix F, which will be completed within 6 months
after completion of the alpha test Mammography Imaging
Instrument. The cost for this system has not been determined.
4.4.5 Ongoing Research & Development. Zerbec will
continue to support NewCo in selenium plate technology and the
related Improvements. SHP anticipates that when the second level
of the Second Phase Financing is secured, R&D development funding
to Zerbec as requested by NewCo, may be in the amounts suggested
below:
Year 2 up to $600,000
Year 3 up to $400,000
Year 4 up to $400,000
Year 5 up to $400,000
The intent of said funding is to utilize the expert
resources available to Zerbec. SHP anticipates that this funding
may continue indefinitely, but it depends upon Zerbec's ability
<PAGE> 10
to perform such services. It is Zerbec's intent to provide such
research and development services to NewCo, and Zerbec
anticipates that the specific objectives and deliverables of each
year's funding will be determined through collaborations between
Zerbec and NewCo and will be based, in part, on the strategic
intent and plans of NewCo.
4.5 Restrictions on Transfer. No Venturer may, without the
consent of the other Venturer, sell, convey, transfer, assign,
mortgage, pledge, hypothecate, encumber or otherwise dispose in
any way all or any portion of its interest in NewCo for two years
after completion of the Second Phase Financing.
4.6 Liability of Ventures; Indemnification. No Venturer
shall be liable, responsible or accountable in damages or
otherwise to NewCo or the other Venturer for any act or omission
performed or omitted by it in good faith on behalf of NewCo and
in a manner reasonably believed by it to be within the interests
of NewCo if it shall not have been guilty of negligence or
willful misconduct with respect to such acts or omissions.
4.7 No Further Contributions. The Venturers shall not be
required to contribute additional capital, loan any funds or
provide services to NewCo, except as expressly set forth herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Zerbec's Representations and Warranties. As of the
date hereof, each of the statements in this Section 5.1 shall be
a true, accurate and a full disclosure of all facts relevant to
the matters contained therein, and such warranties and
representations shall survive the execution of this Agreement.
Zerbec hereby represents and warrants to SHP as follows:
5.1.1 Organization. That Zerbec is duly organized
under the laws of the State of Texas and has the requisite power
and authority to enter into and carry out the terms of this
Agreement.
5.1.2 Consents. The required approvals, consents
and other required corporate action have been obtained/taken by
Zerbec in connection with the execution and performance of the
transactions contemplated herein. No further approval of any
board, court, or other body is necessary in order to permit
Zerbec to consummate this Agreement.
5.1.3 Authority. The person(s) negotiating this
Agreement on behalf of Zerbec have full power and authority to do
so.
<PAGE> 11
5.1.4 Ownership. Zerbec agrees that the assignment
referenced in Section 3.1, will provide NewCo, with ownership of
the entire right, title and interest in and to the Assigned
Technology and Improvements free and clear of all liens and
encumbrances, except for royalties due from Zerbec to M.D.
Anderson and/or the University of Texas (hereinafter individually
and collectively "MD Anderson"), such royalties to be fully met
by compensation provided to M.D. Anderson as follows:
(i) NewCo shall pay to Zerbec for subsequent payment to MD
Anderson an amount not to exceed10% of all profits that Zerbec
receives from NewCo after such profits accruing to Zerbec exceed
$50,000; or
(ii) M.D. Anderson shall be awarded 5% ownership of NewCo in
lieu of all royalties and other financial commitments related to
the Assigned Technology;
5.1.5 Intellectual Property Rights. To the best of
Zerbec's knowledge the Assigned Technology does not violate any
intellectual property right, including but not limited to,
patent, copyright, trademark, trade dress, trade name, trade
secret, right to privacy or right of publicity, or contain
libelous matter, and NewCo's proposed use of the Assigned
Technology will not violate any intellectual property right, as
well as any statute, ordinance or governmental rule or regulation
of the United States or Canada.
5.1.6 Patent Procurement. The Assigned Technology
was not fraudulently procured from the U.S. Patent Office, and
Zerbec has no knowledge of any circumstances which would render
the patents references herein invalid.
5.1.7 Registration Documentation. Zerbec has or
will within forty-five (45) days from the date hereof, provide
NewCo with all existing registration documentation in its
possession relating to all of its intellectual property rights in
the Assigned Technology.
5.1.8 Lawsuits. There is no lawsuit, proceeding or
claim pending or, to the best of Zerbec's knowledge, asserted or
unasserted claims relating to the Assigned Technology,
Improvements or Technical Information.
5.1.9 Contracts. There are no contracts or
obligations relating to the Assigned Technology, Improvements
and/or Technical Information or to which Zerbec is a party that
would interfere with the execution or performance of the
transaction contemplated herein.
5.1.10 Other Agreements. The transaction
contemplated herein does not violate or shall not violate any
contract, document, understanding, agreement or instrument to
which Zerbec is a party or by which Zerbec may be bound, or any
contract, document, understanding, agreement or instrument
affecting the Assigned Technology, Improvements or Technical
Information.
5.1.11 Adverse Change. No representation, warranty
or covenant of Zerbec in this Agreement contains or will contain
any untrue statement of material fact or omit to state material
facts necessary to make the statements or facts contained herein
not misleading. Zerbec shall inform SHP and NewCo of any
material adverse change in the foregoing representations and
warranties occurring at any time after the execution hereof.
5.2 SHP's Representations and Warranties. As of the date
hereof, each of the statements in this Section 5.2 shall be a
true, accurate and a full disclosure of all facts relevant to the
matters contained therein, and such warranties and
representations shall survive the execution of this Agreement.
SHP hereby represents and warrants to NewCo and Zerbec as
follows:
5.2.1 Organization. That SHP is duly organized
under the laws of the State of Utah and has the requisite power
and authority to enter into and carry out the terms of this
Agreement.
5.2.2 Consents. The required approvals, consents
and other required corporate action have been obtained/taken by
SHP in connection with the execution and performance of the
transactions contemplated herein. No further approval of any
Board, court, or other body is necessary in order to permit SHP
to consummate this Agreement.
5.2.3 Authority. The person(s) negotiating the
transaction contemplated herein have full power and authority to
act on behalf of SHP.
5.2.4 Contracts. SHP is not a party to any
contracts or obligations which would interfere with the execution
or performance of the transaction contemplated herein.
5.2.5 Adverse Change. No representation, warranty
or covenant of SHP in this Agreement contains or will contain any
untrue statement of material fact or omit to state material facts
necessary to make the statements or facts contained herein not
misleading. SHP shall inform Zerbec and NewCo of any material
adverse change in the foregoing representations and warranties
occurring at any time after the execution hereof.
<PAGE> 12
ARTICLE VI
CONFIDENTIALITY; COMPETITION
6.1 Confidentiality. Except as otherwise provided for
herein, each of the Venturers (including their Affiliates) agree
to retain in strict confidence any proprietary confidential
information and trade secrets of NewCo, whether disclosed prior
to or after the date hereof, and not to use or disclose to third
parties, and to use its best efforts to cause its employees,
agents and consultants not to use or disclose to third parties,
such proprietary confidential information and trade secrets to or
for any third party without the prior approval in writing of a
duly authorized officer or directorof NewCo; unless it can be
established by the disclosing party that such information:
(i) was at the time of disclosure a part of the public
knowledge or literature and readily accessible to such third
party;
(ii) was at the time of disclosure already known by the
receiving party otherwise then under an obligation of
confidentiality; or
(iii) was required by law to be disclosed.
6.2 Competition. No Venturer nor any Affiliates of the
Venturers (either individually, collectively or with others)
shall, without the prior written consent of the other Venturer
and NewCo, conduct or invest in any business which competes with
NewCo's business. If the Venturer obtains the written consent of
the other Venturer and NewCo to conduct or invest in a business
which competes with NewCo, no Venturer who competes with NewCo
will enter into any contract with NewCo that has the effect of
restricting, controlling, or reducing the competition between
NewCo and the competing Venturer.
6.3 Ownership of Technical Information. The Venturers
agree to assign to NewCo upon its formation and thereafter any
and all of their right, title and interest in and to any and all
Technical Information made, generated or conceived by it before
and/or during the period of NewCo's corporate existence, and the
Ventures agree to disclose all such Technical Information to
NewCo in writing.
ARTICLE VII
MISCELLANEOUS
7.1 No Liabilities Assumed. Unless and except as expressly
set forth herein, none of the parties hereto assume any
liability, nor bear any responsibility or liability for the
payment of any debts, obligations, liabilities or claims of NewCo
or any other party hereto.
<PAGE> 14
7.2 Assignments. This Agreement shall not be assignable by
any party hereto, nor shall the performance of any of the duties
hereunder be delegable by any party hereto, without the written
consent of all the other parties hereto. This Agreement shall
not be assignable by operation of law.
7.3 Assistance. Each of the parties covenants and agrees
that it will assist NewCo in the sale, distribution and marketing
of the Assigned Technology, and will provide its expertise in
this regard when reasonably requested by NewCo.
7.4 Duty to Inform. Each Venturer shall keep the other
Venturer and NewCo informed of its activities to raise capital,
develop, distribute, market or otherwise assist NewCo.
7.5 Interim Use of Patent and Technical Information. From
the date of execution of this Agreement and continuing until the
termination of the Agreement, neither Zerbec nor SHP shall
market, advertise for sale, transfer, sell, hypothecate, mortgage
or otherwise deal with the Assigned Technology in a manner that
is inconsistent with the terms of this Agreement.
7.6 Notices. Any such notice required or permitted to be
given by one party to the other may be given by personal service,
telegram, or mailing. If any notice is sent by certified mail or
deposited into the custody of Federal Express, United Parcel
Service or another overnight courier service, for overnight
delivery, postage prepaid and addressed to such party at the
address hereinafter specified, such notice shall be effective
upon its deposit into the custody of such couriers. All other
notices shall be effective upon receipt. The addresses of the
parties for all purposes under this Agreement shall be:
SHP:
Dr. Gale H. Thorne
Specialized Health Products International, Inc.
655 East Medical Drive
Bountiful, Utah 84010
With copies to:
Eric L. Robinson
Blackburn & Stoll, LC
77 West 200 South, Suite 400
Salt Lake City, Utah 84101
<PAGE> 15
Zerbec:
Charles D. Becker
Zerbec, Inc.
8415 Datapoint
San Antonio, Texas 78229
With copies to:
Alfonso Zermeno
6334 Community
Houston, Texas 77005
Either party may change the address at which it desires to
receive notice upon written notice of such change to the other
party.
7.7 Attorneys' Fees. In the event a party hereto brings
suit to enforce or interpret this Agreement or for damages on
account of the breach of a covenant, representation or warranty
contained herein, the prevailing party shall be entitled to
recover its reasonable attorneys' fees and costs incurred in any
such action, in addition to other relief to which the prevailing
party is entitled.
7.8 Severability. Whenever possible, each provision of
this Agreement and every related document shall be interpreted in
such manner as to be valid under applicable law; but, if any
provision of any of the foregoing shall be invalid or prohibited
under applicable law, such provision shall be ineffective to the
extent of such invalidity or prohibition without invalidating the
remainder of such provision or the remaining provisions of this
document.
7.9 Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Utah.
7.10 Counterparts. This Agreement may be signed in one
or more counterparts, any one of which shall be deemed to be an
original. The signature in counterpart on a facsimile
transmission copy of this Agreement shall be valid and binding.
7.11 Further Actions. Each of the parties to this Agreement
shall promptly execute and deliver such documents and take such
action as may be reasonably requested by another party to this
Agreement in order to carry out the intentions and purposes of
this Agreement.
7.12 Non-Waiver. The failure of any party to enforce any of
the provisions of this Agreement or any rights with respect
thereto or to exercise any election provided for therein, shall
in no way be considered a waiver of such provisions, rights, or
elections or in any way to affect the validity of this Agreement.
No term or provisions hereof shall be deemed waived and no breach
excused, unless such waiver or consent shall be in writing and
<PAGE> 16
signed by the party claimed to have waived or consented. The
failure by a party hereto to enforce any of said provisions,
rights, or elections shall not preclude or prejudice that party
from later enforcing or exercising the same or in any other
provisions, rights, or elections which it may have under this
Agreement. Any consent by any party to, or waiver of, a breach
by the other, whether express or implied, shall not constitute a
consent or waiver of, or excuse for any other, different or
subsequent breach. All remedies herein conferred upon any party
shall be cumulative and no one shall be exclusive of any other
remedy conferred herein by law of equity.
7.13 No Third Party Beneficiary. It is the intention of the
parties hereto that no Person shall be deemed to be a third party
beneficiary of this Agreement.
7.14 Entire Agreement. This Agreement constitutes the
entire agreement of the parties.
7.15 Transfers. This Agreement shall be binding not only
upon the parties hereto, but also upon, without limitation
thereof, their successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date set forth above.
ZERBEC, INC.: SPECIALIZED HEALTH PRODUCTS,
INC.:
By /s/ Charles D.
Becker_______________ By /s/ David A. Robinson
Charles D. Becker ______________
Its president David A. Robinson
Its president
<PAGE> 17
SUMMARY OF APPENDICES
APPENDIX "A" - Letter of Intent
"B" - Organizational Guidelines
"C" - Milestones for SHP
"D" - Milestones for Zerbec
"E" - Alpha Test Mammography Imaging Instrument
"F" - Alpha Test 14" x 17" Cassette Imaging Instrument
<PAGE> 1
Appendix A
Letter of Intent
Dated: January 7, 1995
January 7, 1995
Mr. Charles Becker
President
ZERBEC, INC.
8415 Datapoint Drive, Suite 1000
San Antonio, Texas 78229
Re: Letter of Intent
Dear Charles:
With reference to recent discussions we hereby confirm our
intent to join with ZERBEC, INC. ("ZERBEC") in a joint venture to
develop, manufacture, distribute and market products protected by
the intellectual property assigned to ZERBEC by Alfonso Zermeno,
Ph.D. who received assignment from the University of Texas System
(the "Patents") in accordance with the following basic terms and
conditions:
1. Corporate Formation. SPECIALIZED HEALTH PRODUCTS, INC.
("SHP") and ZERBEC shall cause a joint venture to be formed under
the laws of the State of Utah (the "Joint Venture").
2. Objective of the Joint Venture. The principal activities of
the Joint Venture will be to timely develop, manufacture,
distribute and market products protected by the Patents (the
"Technology"). The Joint Venture may itself enter into
arrangements with third parties for the efficient performance of
any of these activities.
3. Objective(s) of the Joint Venturers SHP and ZERBEC will
concentrate their respective expertise and resources to create
wealth for the Joint Venture and the Joint Venturers. It is the
intention of SHP and ZERBEC to achieve marketability for their
interests in the Joint Venture at the earliest opportunity and
before 31st December, 1997. Such marketability may be achieved by
means of a public stock listing, a sale or merger of the Joint
Venture.
<PAGE> 2
4. Initial Organization.
a. Assistance by SHP.
i. Business Plan. SHP shall be responsible for the
preparation of a detailed five (5) year business plan.
ZERBEC shall be fully involved in the preparation of the
said plan and shall provide to SHP its knowledge and
expertise. The business plan shall include projections on
costs to commercialize the Technology, a marketing plan and
projected financial statements. Such plan shall indicate
the resources required to achieve commercialization of the
Technology. The preparation of such plan shall commence
immediately following the execution of this Letter of
Intent.
ii. Funding. SHP shall use its best efforts to assist
the Joint Venture in locating and securing a third party
funding source that will provide the financial resources
required to commercialize the Technology which shall in any
event be not less than SIX MILLION DOLLARS ($6,000,000). It
is the intention that in return for such funding the funding
party shall receive not more than a one third equity
interest in the Joint Venture upon terms and conditions to
be negotiated or upon such other terms as may be agreed to
by the management of the Joint Venture (the "Funding"). In
the absence of securing a third party funding source the
Funding may be provided by SHP or ZERBEC.
iii. Development Group. SHP shall provide
resources to the Joint Venture to enable it to assemble a
group of seasoned imaging system development engineers.
Such efforts shall be spearheaded by Dr. Gale H. Thorne
(subject to the approval of the Joint Venture).
iv. Contact Network. SHP will use its expertise to
help the Joint Venture establish a contact network used
initially to provide system development inputs, a set of
alpha test sites and beta test sites.
v. Patent Procurement. SHP shall use its expertise
to assist the Joint Venture in filing and prosecuting
patents relating to the Technology.
vi. Management. SHP shall provide resources to the
Joint Venture to enable it to locate development and fiscal
management. SHP may provide personnel for such positions.
b. Assistance by ZERBEC.
i. Patents. ZERBEC shall grant an exclusive, world-
wide license (the License) for the Joint Venture to make,
use and sell the Patents including, but not limited to, all
extensions of the original intellectual property owned by
<PAGE> 3
ZERBEC. Any intellectual property developed after the
formation of the Joint Venture will be owned by the Joint
Venture.
ii. Technical Information. ZERBEC shall license and
deliver to the Joint Venture all published and unpublished
research and development information, unpatented inventions,
know-how, trade secrets and technical data in the possession
of ZERBEC, under the conditions of 4.b.i (above), which are
needed to fully exploit the Technology (the "Technical
Information").
iii. Research Team. ZERBEC shall assist the Joint
Venture in developing a research team that will oversee
critical early proprietary property specifications and
development of the initial products of the Joint Venture.
iv. R&D Objectives. ZERBEC shall assist the Joint
Venture in establishing R&D objectives for the research team
members.
v. Operating Budgets. ZERBEC shall assist the Joint
Venture in developing agreements (including all rights to
intellectual property) and operating budgets for the
research team.
vi. Business Plan. ZERBEC shall provide it knowledge
and expertise in the preparation of the business plan as
provided in Section 4.a.i.
5. Organization of the Joint Venture.
a. Ownership. Initially both SHP and ZERBEC shall have
equal (fifty percent) ownership interests (the Initial Interests)
in the Joint Venture. Upon allocation of an ownership interest
to the funding party in accordance with Section 4.a.ii., the
Initial Interests of SHP and ZERBEC shall be reduced equally.
b. Election of Board. The initial board of directors
shall be elected by cumulative voting and shall consist of five
(5) directors. ZERBEC and SHP shall each have the right to
appoint two (2) directors and it is intended that the funding
party shall have the right to appoint one (1) director.
c. Research Team. All initial research will be contracted
to ZERBEC at reasonable costs to the Joint Venture. As found
necessary, later research may be performed by the Joint Venture,
assisted by ZERBEC.
d. Other Teams. The Joint Venture will have development,
manufacturing, quality control, financial management, sales and
marketing teams. SHP shall provide resources on an arm's length
basis at reasonable costs to the Joint Venture to enable such
teams to operate.
<PAGE> 4
e. Budgets. The Joint Venture will develop budgets and
budgetary control systems for the financial management and
control of its operations. No budgets will be set up nor funds
expended, for purposes outside of the development, manufacture
and operations associated with products relating to the Patent
without the prior approval of SHP and ZERBEC.
f. Reversion of the Intellectual Property. The Agreement
(defined below) shall provide, upon terms to be negotiated by the
parties, that the all rights to and in the intellectual property
ZERBEC assignees or transfers to the Joint Venture shall revert
to ZERBEC in the event that the Joint Venture terminates through
lack of funding and is unable to pursue its objectives.
g. Incentive Plans. The Joint Venture shall introduce
incentive ownership plans to provide incentives to key personnel
and organizations, inside and outside the Joint Venture, who make
contributions to the Joint Venture.
6. Formal Agreements.
a. Joint Venture Agreement. It is understood that this
Letter of Intent, after execution by the parties, is intended to
be binding. It represents the general conditions to which the
parties have agreed, and will be the basis of a more
comprehensive agreement(s) to follow (the "Agreement"). Both
parties shall use their best efforts to negotiate and execute
these documents in a timely manner.
b. Protection of Minority Interests. The organizational
document and/or other agreements shall provide for protection of
minority interests in the following ways:
i. The Joint Venture will distribute net cash from
operations not required for future operations or reserves.
ii. There shall be restrictions on the ability of
management or related parties to take non arms-length
payments for services.
iii. No joint venturer or group of joint venturers may
sell an aggregate interest in the Joint Venture exceeding
10% of the Joint Venture, without providing all joint
venturers with an opportunity to participate in such sale.
iv. All joint venturers shall be able to sell their
interests to a third party after having first offered such
interest to fellow interest owners on no less favorable
terms.
v. Subject to Section 4.a.ii., the Joint Venture shall
not sell a share in the Joint Venture to third parties
without first offering such share to existing Joint
Venturers.
<PAGE> 5
c. Compensation. SHP and ZERBEC shall enter into
arrangements with the Joint Venture for compensation for services
provided to the Joint Venture after its formation. It is
understood that no compensation shall be paid for such services
in the event that the Funding is not obtained. Each Party to the
Joint Venture shall absorb its own costs incurred prior to
formation of the Joint Venture.
7. ZERBEC's Representations and Warranties. ZERBEC shall
furnish SHP and the Joint Venture with representations and
warranties, including, but not limited to, the following:
a. Organization. That ZERBEC has been duly organized
under the laws of the State of Texas.
b. Consents. The required approvals or consents have been
obtained by ZERBEC in connection with the execution and
performance of the transactions contemplated herein. ZERBEC will
provide a complete disclosure regarding ongoing relationship with
MD Anderson and the original inventors.
c. Authority. The person(s) negotiating the transaction
contemplated herein have full power and authority to act on
behalf of ZERBEC.
d. Ownership. The entire right title and interest in and
to the Patents and Technical Information are owned by ZERBEC free
and clear of all liens and encumbrances except for (1) the right
of the University of Texas to use the Patents, Technical
Information and/or Technology in its own facilities, and (2) the
obligation of ZERBEC to pay the University of Texas a 10% of any
combined royalties and other net income exceeding $50,000 that
ZERBEC receives from commercialization of the Technology.
e. Lawsuits. There is no lawsuit, proceeding or claim
pending or, to the best of ZERBEC's knowledge, asserted or
unasserted claims relating to the Patent and/or Technical
Information.
f. Contracts. There are no contracts or obligations
relating to the Patent or Technical Information which would
interfere with the execution or performance of the transaction
contemplated herein.
g. Other Agreements. The transaction contemplated herein
does not violate or shall not violate any contract, document,
understanding, agreement or instrument to which ZERBEC is a party
or by which ZERBEC may be bound, or any contract, document,
understanding, agreement or instrument affecting the Patent or
Technical Information.
h. Adverse Change. ZERBEC shall inform SHP and the Joint
Venture of any material adverse change in the foregoing
representations and warranties occurring at any time after the
execution hereof.
<PAGE> 6
8. SHP's Representations and Warranties. SHP shall furnish
ZERBEC and the Joint Venture with representations and warranties,
including, but not limited to, the following:
a. Organization. That SHP has been duly organized under
the laws of the State of Utah.
b. Consents. The required approvals or consents have been
obtained by SHP in connection with the execution and performance
of the transactions contemplated herein.
c. Authority. The person(s) negotiating the transaction
contemplated herein have full power and authority to act on
behalf of SHP.
d. Contracts. There are no contracts or obligations which
would interfere with the execution or performance of the
transaction contemplated herein.
e. Adverse Change. SHP shall inform ZERBEC and the Joint
Venture of any material adverse change in the foregoing
representations and warranties occurring at any time after the
execution hereof.
9. Breach of Misrepresentation or Warranty. If either party
hereto breaches a representation or warranty then the other party
shall have the right to terminate this Letter of Intent and all
obligations hereunder shall cease.
10. No Liabilities Assumed. Except as otherwise provided in
Section 11., the Joint Venture will not assume, nor bear any
responsibility or liability for the payment of any debts,
obligations, liabilities or claims related to the Technology
which accrue, arise out of or in connection with any ownership of
the Technology prior to the licensing of the Technology to the
Joint Venture.
11. University of Texas Obligation. SHP has been provided with
certain documents revealing an obligation on the part of ZERBEC
to pay certain sums to the University of Texas in connection with
the commercialization of the Technology. The parties hereto
agree that any such obligations will be assumed by the Joint
Venture.
12. Confidentiality. The parties acknowledge and agree that
their relationship with the Joint Venture, including their
officers, directors and/or employees, will necessarily involve
their access to certain trade secrets and confidential
information pertaining to the business of the Joint Venture.
Accordingly, each of the parties agrees that during the term of
this Letter of Intent and the Agreement and at all times
thereafter it will not disclose, and will use its best efforts to
prevent any of its employees from disclosing, to any unauthorized
third party any of the trade secrets or confidential information
pertaining to the business of the Joint Venture.
<PAGE> 7
13. Duty to Inform. Each Joint Venturer shall keep the other
Joint Venturer and the Joint Venture informed of its activities
to develop, distribute, market or otherwise assist the Joint
Venture.
14. Termination. In the event that the Joint Venture has not
secured the Funding either party hereto may, at its option,
terminate the Agreement by giving the other party and the Joint
Venture not less than sixty (60) days written notice, to expire
not earlier than June 30, 1995. The Agreement shall not
terminate, however, if the Funding is secured prior to the
expiration of said sixty (60) day period. In the event the
Agreement is terminated, the License shall also be terminated.
15. Interim Use of Patent and Technical Information. From the
date of execution of this Letter of Intent and continuing until
the termination of the Agreement, neither ZERBEC or SHP shall
market, advertise for sale, transfer, sell, hypothecate, mortgage
or otherwise deal with the Patent or Technical Information in a
manner that is inconsistent with the terms of this Letter of
Intent.
16. Assignments. This Letter of Intent shall not be assignable
by any party hereto, nor shall the performance of any of the
duties hereunder be delegable by any party hereto, without the
written consent of all the other parties. This Agreement shall
not be assignable by operation of law.
17. Assignment of Patents and Technical Information. Upon
receipt by the Joint Venture of the funding referred to in
Section 4.a.ii. and the execution of an agreement with the
University of Texas clarifying its rights arising out of its
assignment of the Patents, then, at the option of the Joint
Venture, all of ZERBEC's right, title and interest in the Patents
and Technical Information will be assigned to the joint Venture
in substitution for the License.
18. Assistance. Each of the parties covenants and agrees that
upon execution of an Agreement, and so long as it is a Joint
Venturer, it will assist the Joint Venture in the sale,
distribution and marketing of the Technology, and will assist
provide its expertise in this regard when reasonably requested by
the Joint Venturer. Payment for services provided to the Joint
Venture that are provided by nonemployees of the Joint Venture
will be paid at commercially reasonable rates.
19. Attorneys' Fees. In the event either party brings suit to
enforce or interpret this Letter of Intent or for damages on
account of the breach of a covenant, representation or warranty
contained herein, the prevailing party shall be entitled to
recover from the other party its reasonable attorneys' fees and
costs incurred in any such action, in addition to other relief to
which the prevailing party is entitled.
20. Severability. Whenever possible, each provision of this
Letter of Intent and every related document shall be interpreted
in such manner as to be valid under applicable law; but, if any
provision of any of the foregoing shall be invalid or prohibited
under applicable law, such provision shall be ineffective to the
extent of such invalidity or prohibition without invalidating the
remainder of such provision or the remaining provisions of this
document.
<PAGE> 8
21. Governing Law. This Letter of Intent shall be construed and
interpreted in accordance with the laws of the State of Utah.
22. Counterparts. This Letter of Intent may be signed in one or
more counterparts, any one of which shall be deemed to be an
original.
Very truly yours,
SPECIALIZED HEALTH PRODUCTS, INC.:
By /s/ David A.
Robinson____________
David A. Robinson
Its president
Dated: January 7, 1995.
The foregoing Letter of Intent is hereby accepted in
accordance with the terms and conditions contained therein.
Dated this 10th day of January, 1995.
ZERBEC, INC.:
By /s/ Charles Becker
Charles Becker
Its president
<PAGE> 18
Appendix B
Guidelines for the Organization of NewCo
1. Name. The name of the corporation shall be such name
as the Venturers shall reasonably agree upon. All business of
NewCo shall be conducted solely in such name.
2. Place of Business. The initial principal office of
NewCo shall be located in Utah.
3. Capital Structure. NewCo shall have 1,000,000 shares
of authorized capital stock, of which, 90,000 shares shall be
initially distributed as described hereafter. Upon the
completion of the organization of NewCo, the Ventures shall
receive capital stock of NewCo in the following amounts and
proportions:
Venturer Initial Ownership Percentage
SHP 45,000 50%
Zerbec 45,000 50%
In addition, 5,000 shares of capital stock shall be
reserved for MD Anderson, to be issued at the direction of Zerbec
upon completion of Zerbec's negotiations with MD Anderson
concerning its rights in and to the Assigned Technology. In
addition, it is the intention of the Venturers that the Board
issue the remaining 5,000 shares of capital stock in a manner
that will incentivize key employees of NewCo.
4. Issuance of Additional Shares. Issuance of shares
beyond the initial shares as described in Section 3. above shall
be at the discretion of the Board.
5. Board of Directors. The Board shall initially consist
of an equal number of nominees from both Zerbec and SHP, and
shall consist of not less than four members
(i) A shareholders' meeting shall be held annually and
the directors shall be elected through cumulative voting; and
(ii) The Board may be expanded to a number as allowed
by the bylaws of NewCo by a majority vote of the Board.
6. Protection of Minority Interests. Minority interests
will be protected by:
(i) NewCo will declare distributions to shareholders,
on a pro rata basis, net cash from operations not required for
future operations or reserves.
(ii) There shall be restrictions on the ability of
management or related parties to take non arms-length payments
for services which restrictions shall be determined by the Board.
(iii) The Venturers shall enter into a restrictive
ownership agreement in a form reasonably acceptable to both
Venturers whereby neither Venturer may sell, assign, transfer,
mortgage, pledge, encumber or grant a security interest in any or
all its interest in NewCo without first offering to sell such
interest to the other Venturer upon the same terms and
conditions.
(iv) The NewCo shareholders shall have preemptive
rights to acquire additional shares of NewCo.
<PAGE> 21
Appendix C
Milestones for NewCo
All dates represent time periods following date of this Agreement
Last Acceptable
Milestone Milestone Date Milestone Date
1. Form NewCo 1 Month 2 Months
2. First Version of 1 Month 2 Months
Business Plan
3. First Contact with 2 Months 3 Months
Financial Group
4. First Demonstration Unit 6 Months 8 Months
Presentation
5. Financing Source 7 Months 10 Months
Selection
6. New Patent Application 7 Months 10 Months
Filing
7. Complete at Least 9 Months 12 Months
First Level of Second
Phase Financing
<PAGE> 22
Appendix D
Milestones for ZERBEC
All dates represent time periods following date of this Agreement
Last Acceptable
Milestone Milestone Date Milestone Date
1. New MD Anderson 2 Months 5 Months
Agreement
2. Demonstration Unit (10 4 Months 7 Months
lp/mm)
3. New Patent Application 6 Months 8 Months
Disclosure
4. Develop Method for 8 Months 11 Months
Large Scanner
(24mm x 30 mm Plate)
<PAGE> 23
Appendix E
Alpha Test Mammography Imaging Instrument Preliminary
Specifications
The preliminary specifications for the alpha test Mammography
Imaging Selenium Plate X-Ray detector instrument contains the
general requirements for the system. More specific requirements
will be determined as part of a product specification which will
be developed through customer interviews, specifications for
competitive systems, and technological advancements.
Product Description
The product will comprise a selenium plate cassette, cassette
reader system, and a display monitor. The selenium plate
cassette will be inserted into the X-Ray system in place of the
film cassette. After exposure to the radiation, the cassette
will be removed and placed into the cassette reader system. The
image on the selenium plate will be converted to an electrical
signal, digitized, interpreted by the reader system, and
displayed on the monitor. The digital image can be stored on CD-
ROM and transferred over communications networks.
Product Specifications
Cassette Size The size of the cassette will be such that
the resultant image will be 24mm x 30mm.
Image Resolution The image spacial resolution will be 10lp/mm.
Processing Time The image processing time from when the
cassette is inserted in the reader to when the
image is displayed will be less than one minute.
<PAGE> 24
Appendix F
Alpha Test 14" X 17" Cassette Imaging Instrument Preliminary
Specifications
The preliminary specifications for the alpha test Selenium Plate
X-Ray detector instrument contains the general requirements for
the system. More specific requirements will be determined as
part of a product specification which will be developed through
customer interviews, specifications for competitive systems, and
technological advancements..
Product Description
The product will comprise a selenium plate cassette, cassette
reader system, and a display monitor. The selenium plate
cassette will be inserted into the X-Ray system in place of the
film cassette. After exposure to the radiation, the cassette is
removed and placed into the cassette reader system. The image on
the selenium plate will be converted to an electrical signal,
digitized, interpreted by the reader system and displayed on the
monitor. The digital image can be stored on CD-ROM and
transferred over communications networks.
Product Specifications
Cassette Size The size of the cassette will be such that
the resultant image will be 14" X 17".
Image Resolution The image spacial resolution will be 2 lp/mm.
Processing Time The image processing time from when the
cassette is inserted in the reader to when the
image is displayed will be less than one minute.
EXHIBIT 16.1
Letter re change in certifying accountant
Nielsen, Grimmett & Company
Certified Public Accountants
175 East 400 South
Suite 600 Member American Institute of
Salt Lake City, Utah 84111 Certified Public Accountants
Telephone (801) 364-4600 SEC Practice Section
Fax (801) 364-2466
November 22, 1995
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
We were previously the principal accountants
for Specialized Health Products International, Inc. ("SHPI"),
formerly Russco, Inc. On November 10, 1995, we were dismissed as
the principal accountants of SHPI. We have read SHPI's
statements included under Item 5 of its Form 10-Q for the
quarterly period ended September 30, 1995, and we agree with such
statements.
Very truly yours,
/s/ Nielsen, Grimmett & Company
Nielsen, Grimmett & Company
EXHIBIT 21.1
Schedule of Subsidiaries
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
LIST OF SUBSIDIARIES OF THE REGISTRANT
1. Specialized Health Products, Inc. (incorporated in Utah).
2. Quantum Imaging Corporation (incorporated in Utah), a
subsidiary of Specialized Health Products, Inc.
EXHIBIT 23.1
Consent of KPMG Peat Marwick LLP,
Independent Certified Public Accountants
Consent of Independent Auditors
The Board of Directors and Stockholders
Specialized Health Products International, Inc.
We consent to the use of our report dated April 28, 1995, on
the consolidated financial statements of Specialized Health
Products International, Inc. and subsidiary included herein and
to the reference to our Firm under the headings "Selected
Financial Data: and "Experts" in the Prospectus.
/s/ KPMG Peat Marwick, LLP
Salt Lake City, Utah
December 5, 1995
EXHIBIT 23.2
Consent of Blackburn & Stoll, LC
(included in Exhibit 5.1 hereto)
EXHBIT 24.2
Powers of Attorney
(included in Part II of Registration Statement dated December 11, 1995)
