As filed with the Securities and Exchange
Commission on April 25, 1996.
Registration Statement No. 33-80247
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
AMENDMENT NO. 1
to
FORM S-1 REGISTRATION STATEMENT
Under the Securities Act of 1933
_______________
Specialized Health Products International,
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. [x]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
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
Stock(2) 4,376,250 $8.50(3) $37,198,125 $12,826.93
Common
Stock(4) 4,401,250 $8.50(3) $37,410,625 $12,900.21
Total $25,727.14(5)
Common
Stock(2) 3,912,903 $8.875(6) $34,727,014 $11,974.83
Common
Stock(4) 1,279,810 $8.875(6) $11,358,314 $3,917.66
Series B
Warrants 918,040 --(7) --(7) --(7)
Total $15,892.49
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.
(Footnotes continued from previous page)
<F1>
(1) Estimated solely for the purpose of
determining the registration fee.
<F2>
(2) Outstanding shares of Common Stock
offered for sale from time to time by Selling
Security holders.
<F3>
(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.
<F4>
(4) Issuable by the Registrant from time
to time upon the exercise of outstanding
warrants and stock options.
<F5>
(5) Previously paid on December 11, 1995.
<F6>
(6) Represents the average of the bid and
asked prices of the Common Stock on the
NASDAQ Small Cap Market on April 18, 1996.
Fees were calculated under Rule 457(c) under
the Securities Act of 1933.
<F7>
(7) Pursuant to Rule 457(g) under the
Securities Act of 1933, no separate
registration fee is required.
</TABLE>
<TABLE>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL,
INC.
CROSS-REFERENCE SHEET
<CAPTION>
Item Number of Caption Location or Heading in Prospectus
<S> <S>
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 Outside Front Cover Page and Plan of
Offering 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 Outside Front Cover Page of
Registered Prospectus, Prospectus Summary and
Description of Securities
8. Interest of Named Not Applicable
Experts and Counsel
9. Information With Respect
to the Prospectus Summary, Risk Factors,
Registrant 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 Management
Securities Act
Liabilities
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 APRIL 25, 1996.
PRELIMINARY PROSPECTUS
13,970,213 Shares of Common Stock
918,040 Series B Warrants
Specialized Health Products International,
Inc.
This prospectus relates to (1) the offer
and sale from time to time of up to 8,289,153
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"); (2) the
offer and sale from time to time by the
warrantholders named herein of up to
4,446,250 shares of Common Stock (the
"Secondary Warrant Stock") issuable to such
warrantholders upon exercise of the Series A
Warrants, Series B Warrants and other
warrants (collectively, the"Warrants") during
the term of the Warrants; (3) the offer and
sale from time to time of up to 918,040
Series B Warrants of the Company by a
warrantholder of the Company named herein
(the "Selling Warrantholder"); (4) the offer
and sale from time to time by the stock
option holders named herein (the "Selling
Option Holders") of up to 1,234,810 shares of
Common Stock (the "Option Stock") issuable to
such stock option holders upon exercise of
the stock options. The Common Stock,
Warrants, Secondary Warrant Stock and Option
Stock are referred to collectively as the
"Securities." The Selling Stockholders,
Selling Warrantholder, selling Secondary
Warrant Stockholders and Selling Option
Holders named herein are referred to
collectively as the "Selling
Securityholders." See "Description of
Securities" and "Principal and Selling
Securityholders."
At commencement of this Offering, there
will be (a) 8,589,153 shares of Common Stock
outstanding, of which 8,289,153 shares of
Common Stock are being registered hereby and
294,872 shares of Common Stock are
effectively free trading, and (b) Warrants
and Option Stock exercisable for 5,681,060
shares of Common Stock. All of the shares of
Common Stock underlying these Warrants and
Option Stock, are being registered hereby.
In addition, 918,040 of the 1,290,375
outstanding Series B Warrants are being
registered hereby. Thus, upon completion of
this Offering, assuming that all of the
Warrants and Option Stock are exercised,
there will be 14,270,213 shares of Common
Stock outstanding, of which 14,265,085 shares
will be registered or effectively free
trading. 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."
The Common Stock is quoted on the NASD
Automated Quotation ("Nasdaq") Small-Cap
Market under the trading symbol "SHPI." On
April 15, 1996, the closing price of the
Common Stock, as reported by Nasdaq was $9.00
per share. See "Share Price History."
_______________
The Securities 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 the
Selling Securityholders named herein, on
terms to be determined at the times of such
sales. See "Principal and Selling
Securityholders." There is no market for the
Warrants nor does the Company expect an
active trading market to develop. See "Plan
of Distribution." The Series B Warrants
offered hereby are being offered by the
Selling Warrantholder to forty-nine persons
named herein on a basis described herein.
See "Principal and Selling Securityholders."
The Company is registering the Common Stock
pursuant to the Company's obligations under
certain registration rights agreements and is
registering the Series B Warrants pursuant to
a request by a Selling Warrantholder, but the
registration of the Securities does not
necessarily mean that any of the Securities
will be offered or sold by the Selling
Securityholders hereunder. To the extent
required, the specific Securities 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 Securities 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 the Securities 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 the Securities by the
Selling Securityholders hereunder, but the
Company has agreed to bear certain expenses
of registration of such Securities under
federal and state securities laws. The
Company will receive proceeds when and if the
Warrants and Option Stock are exercised.
_______________
The date of this Prospectus is April 25,
1996
TABLE OF CONTENTS
Prospectus Summary
Risk Factors
Dividend Policy
Share Price History
Capitalization
Selected Financial Data
Management's Discussion and Analysis
of Financial Condition and Results of
Operations
Business
Management
Certain Relationships and Related
Transactions
Description of Securities
Securities Eligible for Sale
Principal and Selling Securityholders
Plan of Distribution
Experts
Additional Information
Index to Financial Statements
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, and secondarily develops
other products for use in the health care
industry. The Company intends to principally
use third parties to manufacture, market and
distribute its products.
The Company has created a portfolio of
proprietary, safety health care products that
are in various stages of production, pre-
production, development and research. The
Company is presently developing a line of
products using the Company's ExtreSafe(TM)
medical needle technology (the "ExtreSafe(TM)
Products"), which incorporates a system to
allow a contaminated needle to be
automatically retracted and immediately
encapsulated without exposure to the health
care worker. The technology retracts the
inserted needle 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 designated 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) Products are
aimed at addressing the growing concerns of
health care institutions and workers
concerning the spread of infectious diseases
caused by the estimated 800,000 accidental
needle sticks that occur each year. Products
under development that incorporate the
ExtreSafe(TM) medical needle technology
include the ExtreSafe(TM) phlebotomy device,
ExtreSafe(TM) catheter and several different
ExtreSafe(TM) syringe applications. 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 1997, provided the
necessary FDA approvals are obtained, of
which there is no assurance. 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
device are in the research stage.
The Company is developing a safety
lancet (the "SafetyStrip(TM)"), a small hand-
held device for penetrating the skin to
obtain blood for analysis. The Company's
SafetyStrip(TM) lancet is designed to provide
protection from accidental exposure to
infectious blood borne diseases. The
SafetyStripO lancets will be provided in
cartridge strip housings of six lancets per
strip, a configuration that is patent
protected. The strip housing is loaded into
a convenient low-cost hand held carrier which
also provides a means for safely and
conveniently triggering each lancet. After
penetrating the skin, the SafetyStripO blade
automatically returns inside its housing and
cannot be reused. The used blade, encased by
its protective housing, is then broken off
from the cartridge strip and appropriately
discarded. A prototype of the SafetyStripO
lancet was completed in 1996 and the Company
anticipates that commercial production will
begin in 1996.
The Company's earliest safety product
line is its Safety Cradle(R) sharps container
products designed to reduce the risk of
accidental needle sticks and exposure to
contaminated instruments when disposing of
contaminated "sharps" (i.e., needles,
syringes, blood collection systems,
intravenous catheters, surgical blades,
lancets, etc.). The Safety Cradle(R)
products allow for disposal of sharps in a
container that incorporates a self closing
sharps containment flap, open/close/lock
mechanism. The Safety Cradle(R) sharps
containers are specifically designed for
alternate site use and to provide convenience
and safety for portable applications. In
December 1994, the Company introduced the
first in its line of Safety Cradle(R) sharps
containers and additional sizes and versions
of the containers were released in the third
and fourth quarters of 1995.
At commencement of this Offering, there
will be outstanding (a) 8,589,153 shares of
Common Stock, of which 8,289,153 shares of
Common Stock are being registered hereby and
294,872 shares of Common Stock are
effectively free trading, and (b) Warrants
and Option Stock exercisable for 5,681,060
shares of Common Stock. All of the shares of
Common Stock underlying these Warrants and
Option Stock, are being registered hereby.
In addition, 918,040 of the 1,290,375
outstanding Series B Warrants are being
registered hereby. Thus, upon completion of
this Offering, assuming that all of the
Warrants and Option Stock are exercised,
there will be 14,270,213 shares of Common
Stock outstanding, of which 14,265,085 shares
will be registered or effectively free
trading. 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."
The Company 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 Securities of the
Company involves various risks, including but
not limited to risks that: the Company will
be unable to profitably sell its products;
the Company may be unable to effectively
compete with manufacturers of similar
products; the Company may find itself unable
to compete with other manufacturers as a
result of changes or improvements in
technology which have the effect of making
the Company's products obsolete; the possible
lack of availability of patent and other
intellectual property protection for some of
the Company's products, the Company's
possible inability to raise additional funds
if need develops for such funding; the
Company's possible inability to obtain
approval of the United States Food and Drug
Administration ("FDA") for some or all of its
products which require such approval; the
value of the Company's stock will decrease as
a result of the registration and sale of
additional outstanding shares of the
Company's Common Stock. In addition, an
investment in the Securities offered hereby
involves risks that: certain provisions of
applicable law, and certain contractual,
charter and bylaw provisions of the Company,
will have the effect of limiting officer and
director liability and will have the effect
of restricting the ability of stockholders to
effect a merger or business combination or
obtain control of the Company; and risks
associated with investments in small
companies in volatile industries, such as the
Company. Prospective investors should
carefully read and consider the matters
discussed under "Risk Factors" prior to any
investment in the Company. See "Risk
Factors."
The Offering
The principal terms of the Securities
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. The Company will
receive the proceeds from the exercise of the
Series B Warrants when and if the Series B
Warrants are exercised.
Common Stock:
Securities Offered 13,970,213 shares of Common Stock,
including 8,289,153 shares of outstanding
Common Stock which may be sold by Selling
Securityholders, up to 4,446,250 shares
of Common Stock which may be sold by the
holders of outstanding Warrants following
exercise of such Warrants, and up to
1,234,810 shares of Common Stock which
may be sold by the holder of the
outstanding stock options following the
exercise of such stock options.
Rights of Common Stock The shares of Common Stock share equally
The shares of Common in all rights of the Common Stock,
Stock share equally in including, without limitation dividend
all rights of the Common and voting rights.
Quotation The Common Stock is quoted on the Nasdaq
Small-Cap Market.
Trading Symbol "SHPI"
Series B Warrants:
Securities Offered 918,040 Series B Warrants, each entitling
the holder to purchase one share of
Common Stock at an exercise price of
$2.00 per share.
Series B Warrants 1,290,375
Outstanding
Term The Series B Warrants are currently
exercisable and expire two years after
the effective date of the Registration
Statement of which this Prospectus is a
part. Such term is subject to
acceleration or extension under certain
circumstances. See "Description of
Securities."
Call Provision The Company may accelerate the expiration
of the Series B Warrants in the event
that the average market price of the
Common Stock for 10 consecutive trading
days exceeds $6.00 per share. In the
event that the Company accelerates the
expiration of the Series B Warrants, the
holders of such warrants would be
permitted to exercise the Warrants during
a period of not less than 20 days
following notice of such event.
Voting Rights The Series B Warrants carry no voting
rights.
Quotation No active trading market exists for the
Series B Warrants nor does the Company
expect an active trading market to
develop. See "Plan of Distribution."
Summary Selected Financial Information
The following data have been derived
from the Company's consolidated financial
statements that have been audited by KPMG
Peat Marwick LLP, independent auditors. The
information set forth below is not
necessarily indicative of the results of
future operations and should be read in
conjunction with the Financial Statements and
related Notes appearing elsewhere herein:
</TABLE>
<TABLE>
<CAPTION>
Period Ended (1)
Nov.
19, Dec. Dec.
1993 31, 31,
(incept 1994 1995
ion) to
Dec. 31
, 1993
<S> <C> <C> <C>
Statement of Operations Data:
Sales $ -- 33,256 447,844
Cost of sales -- 21,669 294,171
---------------------------------
Gross profit -- 11,587 153,673
Expenses:
Research and development -- 290,950 804,639
Selling, general and 3,450 620,022 2,133,021
administrative
Write off of operating assets -- -- 255,072
-----------------------------------
Total expenses 3,450 910,972 3,192,732
-----------------------------------
Operating loss (3,450) (899,385)(3,039,059)
Net other income (expense) -- (7,563) 119,570
------------------------------------
Net loss (3,450) (906,948)(2,919,489)
Dividends on preference stock -- (16,780) (11,389)
-----------------------------------
Net loss attributable to common $ (3,450) (923,728)(2,930,878)
stockholders
===================================
Net loss per common share $ -- (.75) (.69)
===================================
Weighted average number of shares
used for net loss per share 1,170,000 1,224,074 4,269,131
computation (2)
===================================
Balance Sheet Data (at period end):
Working capital $ (12,150) (287,723) 4,194,568
Total assets 16,550 656,865 5,950,728
Long-term debt, less current -- 458,333 --
maturities
Total stockholders equity (2,150) (355,878) 5,369,805
(deficit)
__________________________________________________________
Notes:
<F1>
(1) Excludes Specialized Health Products
International, Inc. (formerly, Russco,
Inc.) which had no operations prior to the
acquisition on July 28, 1995 wherein the
Company acquired Specialized Health
Products, Inc. (the "Acquisition"), 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>
RISK FACTORS
An investment in the Securities 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. 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. At December 31, 1995, the
Company had an accumulated deficit of
approximately $3,858,056. The Company has
only limited sales of its only commercialized
product, its SafetyCradle sharps containers.
The Company's products are in various stages
of production, pre-production, development
and research. There is no assurance the
products will ever be commercially viable and
no assurance can be given that the Company
will ever have sufficient sales or a
sufficient customer base to become
profitable. 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.
Market Overhang. At commencement of
this Offering, there will be (a) 8,589,153
shares of Common Stock outstanding, of which
8,289,153 shares of Common Stock are being
registered hereby and 294,872 shares of
Common Stock are effectively free trading,
and (b) Warrants and Option Stock exercisable
for 5,681,060 shares of Common Stock. All of
the shares of Common Stock underlying these
Warrants and Option Stock, are being
registered hereby. In addition, 918,040
Series B Warrants are being registered
hereby. Thus, upon completion of this
Offering, assuming that all of the Warrants
and Option Stock are exercised, there will be
14,270,213 shares of Common Stock
outstanding, of which 14,265,085 shares will
be registered or effectively free trading.
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."
Dependence on Single Product and Single
Manufacturer. The Company's SafetyCradle
sharps containers is the only current product
the Company is selling. It is produced by a
single 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, it could have a material
adverse effect on the Company. See "Risk
Factors -- Pending 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.
Dependence On Third Party Relationships.
The Company is dependent on third parties for
the production and distribution of its Safety
Cradle(R) sharps containers and anticipates
that it will be dependent on third parties
for the production and distribution of its
follow-on products. The Company has no
distribution agreements. There can be no
assurance that the Company will be successful
in obtaining or maintaining such
relationships with manufacturers and
distributors on terms favorable to the
Company.
Pricing of Products. 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 third party 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.
Price Fluctuations of Resins. The
Company uses polypropylene and other resins
in the manufacture of its products. 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 Cradle(R)
sharps containers, SafetyStripO safety
lancet, ExtreSafeO medical needle retraction
technology, intravenous flow gauge system,
blood collection needle, filmless digitized
imaging technology and other products. There
is no assurance that development of superior
competing products and changes in technology
will not eliminate the need for the Company's
products. The introduction of competing
products could 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. The
Company's products may not be accepted by the
market. 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 and its ability to
distribute through major medical
distributors. There can be no assurance that
the Company's products will achieve market
acceptance or that major medical distributors
will sell the Company's products.
Dependence on Continued Research and
Development. The ExtreSafeO medical needle
technology, SafetyStripO, intravenous flow
gauge system, phlebotomy device 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.
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. There can
be no assurance that the protection provided
by 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. See "Risk
Factors -- Dependence on Third Party
Relationships." 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 Expanding Operations.
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. The failure to
properly manage growth could have a material
adverse effect on the Company.
Potential Inability of the Company to
Compete. 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 research and
development and 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. No assurance can be given
that the Company will be successful in
competing in its business.. See "Business --
Competition".
Need for Additional Funds. 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), SafetyStripO, and
ExtreSafeO medical needle technology,
intravenous flow gauge and phlebotomy device.
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, if at all. 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. 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. The
Company does not currently maintain product
liability insurance. There is no assurance
that the Company will obtain product
liability insurance on acceptable terms in
the future. Product liability claims could
have a material adverse effect on the
Company.
Pending 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. SHP's claims are in excess of
$50,000, exclusive of attorney's fees and
costs. In January 1996, MT counterclaimed
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.
Regulation. 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 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. Future
regulations 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
SafetyStripO and the ExtreSafeO medical
needle technology, intravenous flow gauge and
phlebotomy device) are still in the
development stage. The Company expects the
SafetyStripO 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 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 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. The
availability of 13,970,213 shares of Common
Stock for sale under this Prospectus, which
represents a significant increase in the
public float prior to this offering, may be
expected to negatively impact the market
value.
Potential Negative Impact of Shares
Eligible for Sale. No prediction can be made
as to the effect, if any, that sales of
stock, the availability of stock 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 stock 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."
Potential Negative Impact of Earn-Out
Shares. John T. Clarke, David A. Robinson
and Bradley C. Robinson, who are respectively
a former Director; the President, Chief
Executive Officer, Chairman of the Board 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"). See
"Description of Securities -- Earn-Out
Shares."
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 though the
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. 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.
The Company has agreed to file a
registration statement under the Securities
Act with respect to the Earn-Out Shares, when
issued. The issuance of the Earn-Out Shares,
or the perception that the issuance of such
stock may occur, could adversely affect
prevailing market prices for 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.
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 294,872 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 stock 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 continue.
Placement Agent Warrants; Risk of
Further Dilution. The Company has provided
Capital Growth International L.L.C. formerly
U.S. Sachem Financial Consultants, LP
("Capital Growth"), the Company's placement
agent in a 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. Except for the exercise
price, the terms of the Series B Warrants are
the same as the Series A Warrants. See
"Description of Securities." 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.
Anti-Takeover Provisions of Certificate
and Bylaws. The Certificate of Incorporation
of the Company provides for division of the
Board of Directors into three substantially
equal 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 stock
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 stock entitled to vote.
Meetings of the stockholders may be called
only by the Board of Directors, the Chief
Executive Officer or the President, and
stockholder action may not be taken by
written consent. Stockholder 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 stockholders 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.
Anti-Takeover Effect of the Issuance of
Preferred Stock. 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 does not intend to issue any shares
of preferred stock. The preferred stock may,
however, be issued at some future date which
stock 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 stock to a limited group
of management Stockholders 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 Stockholders 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.
Joint Venture Risks. In October,
1995, the Company entered into an agreement
with a third party to form a joint venture
(the "Venture"), in the form of a corporation
(Quantum Imaging Corporation) to develop an
improved filmless digitized imaging system.
For a fifty percent interest in the Venture
(before dilution by financing investors), the
Company is obligated to pay the Venture
$15,000 per month for a twelve month period.
The Company contributed total capital of
$83,624 to the Venture during 1995. The
Company's obligations to the Venture are
cancelable upon thirty (30) days written
notice or failure of the other Venture
partner to meet requirements as specified in
the Venture agreement. In the opinion of
Company management, in order to be successful
the Venture must raise between $3,000,000 and
$6,000,000. The Company contributed total
capital of $83,624 to the Venture during
1995. 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. No
assurance can be given that research and
development will be successful or that the
system will find profitable acceptance in the
marketplace.
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 Company's common stock (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. Prior to
July 1995, 294,872 shares of Common Stock
were effectively free trading, although no
active trading market existed for the
Company's Common Stock. On April 15, 1996,
the reported high ask and low bid price of
the Common Stock was $9.125 and $9.00,
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 294,872 shares
of Common Stock 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.
Quarter Ended High Low
------------- -------- ------
1995
----
September 30 $5.25 $2.50
December 31 $8.625 $8.25
1996
-----
March 31 $12.25 $10.75
June 30 (through April $ 9.125 $ 9.00
15)
Holders of Record
At April 15, 1996 there were 340 holders
of record of the Company's Common Stock.
CAPITALIZATION
<TABLE>
The following table sets forth actual
capitalization of the Company at December 31,
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.
<CAPTION>
December 31, 1995
Actual As Adjusted
<S> <C> <C>
Long-term debt $ - $ -
Stockholders' Equity:
Preferred Stock, $.001 par value - 5,000,000 -- --
shares authorized; no shares outstanding
Common Stock, $.02 par value -
50,000,000 shares authorized, 171,333 259,358
8,566,653 (12,967,903, as adjusted)
outstanding(1)
Common Stock Subscriptions Receivable (259,500) (259,500)
Additional Paid-in Capital 9,316,028 21,141,378
Accumulated Deficit (3,858,056) (3,858,056)
------------------------------
Total Stockholders' Equity 5,369,805 17,283,180
------------------------------
Total Capitalization $5,369,805 $17,283,180
==============================
_______________
<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 at $3.00 per share and
1,290,375 shares of Common Stock issuable
upon the exercise of the Series B Warrants
at $2.00 per share. 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 of stock
subject to options now outstanding, 63,000
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."
</TABLE>
<TABLE>
SELECTED FINANCIAL DATA
The following data have been derived
from the Company's consolidated financial
statements that have been audited by KPMG
Peat Marwick LLP, independent auditors. The
information set forth below is not
necessarily indicative of the results of
future operations and should be read in
conjunction with the Financial Statements and
related Notes appearing elsewhere herein:
<CAPTION>
Period Ended (1)
Nov.
19, Dec. Dec.
1993 31, 31,
(incept 1994 1995
ion) to
Dec. 31
, 1993
<S> <C> <C> <C>
Statement of Operations Data:
Sales $ -- 33,256 447,844
Cost of sales -- 21,669 294,171
Gross profit -- 11,587 153,673
---------------------------------
Expenses:
Research and development -- 290,950 804,639
Selling, general and 3,450 620,022 2,133,021
administrative
Write off of operating assets -- -- 255,072
---------------------------------
Total expenses 3,450 910,972 3,192,732
---------------------------------
Operating loss (3,450) (899,385)(3,039,059)
Net other income (expense) -- (7,563) 119,570
---------------------------------
Net loss (3,450) (906,948)(2,919,489)
Dividends on preference stock -- (16,780) (11,389)
----------------------------------
Net loss attributable to common $ (3,450) (923,728)(2,930,878)
stockholders
==================================
Net loss per common share $ -- (.75) (.69)
==================================
Weighted average number of shares
used for net loss per share 1,170,000 1,224,074 4,269,131
computation (2)
===================================
Balance Sheet Data (at period
end):
Working capital $ (12,150) (287,723) 4,194,568
Total assets 16,550 656,865 5,950,728
Long-term debt, less current -- 458,333 --
maturities
Total stockholders equity (2,150) (355,878) 5,369,805)
(deficit)
_________________________________________________________
<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>
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
December 31, 1995, the Company had cumulative
net losses totaling $3,858,056. To date, the
Company's principal focus has been the
design, development, testing, and evaluation
of its Safety Cradle(R) sharps containers,
SafetyStripO lancet, ExtreSafeO medical
needle technology, intravenous flow gauge
system, blood collection device, 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
additional Safety Cradle(R) sharps container
molds were completed in the second half of
1995. As molds were completed, the Company's
sales increased from $33,256 for 1994 to
$447,844 for 1995. During the fourth quarter
of 1995 the Company had sales of $5,503. The
decrease in sales during the fourth quarter
of 1995 was related to the Company's
inability to use the molds during a good part
of the fourth quarter of 1995 due to
improvements that were being made to the
molds. Said improvements were completed in
the first quarter of 1996 and will affect
sales during the first quarter of 1996.
During the fourth quarter of 1995, the
aggregate effect of year end adjustments,
which relate to prior quarters, increased the
net loss by approximately $457,000. These
adjustments were primarily the result of a
write off of operating assets and amounts
capitalized as research and development and
adjustments to consulting and expense
reimbursement.
The Company anticipates that commercial
production of its SafetyStripO lancet, will
commence in 1996. Provided the necessary FDA
approvals are obtained, of which there is no
assurance, the Company anticipates commercial
production of the ExtreSafeO catheter,
ExtreSafeO phlebotomy device and ExtreSafeO
syringe will commence in 1997. The
Company's other ExtreSafeO medical needle
technology products, intravenous flow gauge
and blood collection device 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.
Years Ended December 31, 1995 and December
31, 1994
The Company had sales of $447,844 for
the year ended December 31, 1995, and 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.
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. At present, the
only product the Company is selling is its
Safety Cradle(R) sharps container products.
Moreover, during 1995 $418,509 or ninety-
three percent of the Company's sales were
through Moore Medical Corp., a non-exclusive
distributor for the Safety Cradle(R) sharps
container products. The Company does not
have and has not had a distribution agreement
with Moore Medical Corp. requiring Moore
Medical Corp. to buy or sell any of the
Company's products.
The Company's trade accounts receivable
were $350,718 at December 31, 1995, compared
with $4,471 at December 31, 1994. Of the
$350,718 amount, $348,266 was owed to the
Company by a single distributor of the
Company's sharps container products. The
$348,266 was collected in full from the
distributor on March 15, 1996. The Company
believes the remaining trade accounts
receivable owing as of December 31, 1995 are
collectible.
Research and development expenses were
$804,639 for the year ended December 31,
1995, compared with $290,950 for the year
ended December 31, 1994. The Company's
efforts in the year ended December 31, 1995,
were focused on refining the design and molds
for its Safety Cradle(R) sharps container
products, and upon the design and development
of its SafetyStripO and ExtreSafeO medical
needle technology, intravenous flow gauge
system, and blood collection device. The
Company's efforts in the year ended December
31, 1994, were focused on refining the design
and producing molds for its Safety Cradle(R)
sharps container products.
General and administrative expenses were
$2,133,021 for the year ended December 31,
1995, compared to $620,022 for the year ended
December 31, 1994. The increased costs
resulted largely from the following increases
in expenditures. First, selling costs
increased from $4,563 for the year ended
December 31, 1994 to $360,694 for the year
ended December 31, 1995. The increase in
selling costs were primarily a result of an
increase in the expenditures made by the
Company to market and sell its Safety
Cradle(R) sharps container products. Next,
salaries and benefits increased from $201,328
for the year ended December 31, 1994 to
$592,642 for the year ended December 31,
1995. The increase resulted primarily from
the hiring of additional product development,
sales and marketing personnel to support
sales and commercialization of the Company's
products as well as pay increases granted to
certain of the Company's employees. Next,
legal, accounting and other professional and
consulting fees increased from $179,674 for
the year ended December 31, 1994 to $548,034
for the year ended December 31, 1995. The
increase in costs was primarily from
accounting and legal expenses associated with
the Acquisition, the filing of a Form S-1
registration statement, increased financing
activities and expenses associated with
litigation. Finally, travel and
entertainment costs increased from $56,812
for the year ended December 31, 1994 to
$182,989 for the year ended December 31,
1995. The increase resulted primarily from
increased costs associated with financing,
manufacturing, selling and marketing
activities.
Net other income was $119,570 for the
year ended December 31, 1995, compared with
net other expense of $7,563 for the year
ended December 31, 1994. The other income
for year ended December 31, 1995, relates
primarily to interest earned on funds derived
from the sale of the Company's equity
securities in a private placement which
closed in August 1995 wherein the Company
raised gross proceeds of $8,602,500 (net
proceeds of $7,519,060). Net other expense
was $7,563 for the year ended December 31,
1994. The other 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 periods prior to November
1993, 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. Through December
31, 1995, the Company had received net cash
from financing activities approximately
$9,100,000 through financing activities. The
bulk of the proceeds from the Company's
financing activities resulted from the sale
of equity securities. As of December 31,
1995, the Company's liabilities totaled
$580,923. All of these liabilities are
current liabilities. The Company had working
capital at the year ended December 31, 1995
of $4,194,568 and the Company used net cash
in operating activities of $2,605,616 in
1995.
The Company has 3,110,875 Series A
Warrants and 1,290,375 Series B Warrants
outstanding which 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 Common
Stock underlying such Warrants, 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 stock. 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 exercise of all
the Series A and Series B Warrants would
result in a gross cash inflow to the Company
of $11,913,375. 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.
There can be no assurance, however, that any
of the Warrants will be exercised.
Prior to the Acquisitions, SHP issued to
a nonaffiliated shareholder a warrant to
purchase 45,000 shares of Common Stock at
$1.67 per share. Said warrant was issued by
SHP in exchange for cash. This warrant
expires in 1996 and became an outstanding
obligation of the Company, rather than of
SHP, on July 28, 1995 (the date of the
Acquisition).
On September 1, 1995, the Company
adopted a Company's non-qualified stock
option plan ("NQSOP") 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 NQSOP, 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.
In addition to the options outstanding
under the NQSOP, the Company also has 108,000
options outstanding that were issued under
the SHP NQSOP and that became obligations of
the Company pursuant to the terms of the
Acquisition. The SHP NQSOP options allows
the holders thereof to purchase 108,000
shares of the Company's common stock at $0.39
per share. In April 1996, 22,500 of options
issued under the SHP NQSOP expired and 22,500
such options were exercised. The remaining
63,000 outstanding SHP NQSOP options expire
in 2004.
The Company also gave certain officers and
directors of the Company the opportunity to
receive up to an aggregate of 2,000,000
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"). See "Description of Securities -
Earn-Out Shares."
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. 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.
The Company has agreed to file a
registration statement under the Securities
Act with respect to the Earn-Out Shares, when
issued. The issuance of the Earn-Out Shares,
or the perception that the issuance of such
stock may occur, could adversely affect
prevailing market prices for the Common
Stock.
In October, 1995, the Company entered
into an agreement with a third party to form
a joint venture (the "Venture"), in the form
of a corporation (Quantum Imaging
Corporation) to develop an improved filmless
digitized imaging system. For a fifty
percent interest in the Venture (before
dilution by financing investors), the Company
is obligated to pay the Venture $15,000 per
month for a twelve month period. The Company
contributed total capital of $83,624 to the
Venture during 1995. The Company's
obligations to the Venture are cancelable
upon thirty (30) days written notice or
failure of the other Venture partner to meet
requirements as specified in the Venture
agreement. In the opinion of Company
management, in order to be successful the
Venture must raise between $3,000,000 and
$6,000,000. The Company contributed total
capital of $83,624 to the Venture during
1995. 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. No
assurance can be given that the system will
find profitable acceptance in the
marketplace. See "Business -- Products Under
Development."
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 SafetyStripO and
ExtreSafeO medical needle technology,
intravenous flow gauge system, phlebotomy
device 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 will be expended in SHP's
lawsuit against Mold Threads, Inc. See "Risk
Factors -- Litigation." At present, the
Company has committed to spend $103,805
during fiscal 1996 on projects relating to
the development and manufacture of its
products. 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.
Inflation
The Company does not expect the impact
of inflation on operations to be significant.
Backlog
There are no material backlog of
unfilled orders of the Company's products.
Future Results
This document contains both historical
facts and forward-looking statements. Any
forward-looking statements involves risks and
uncertainties, including but not limited to
risk of product demand, market acceptance,
economic conditions, competitive products and
pricing, difficulties in product development,
commercialization, and technology, and other
risks. As a result, the Company's actual
future operations could differ significantly
from those discussed in the forward-looking
statements.
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, and secondarily develops
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. The Company's
products include those being currently
commercialized, those utilizing the
ExtreSafe(TM) medical needle technology and
those relating to certain filmless digitized
imaging technology. 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.). Additional sizes and
versions of its Safety Cradle(R) sharps
containers were released in the third and
fourth quarters of 1995. The Company is
developing a safety lancet (the
"SafetyStrip(TM)"), a small hand-held device
for penetrating the skin to obtain blood for
analysis. Commercial production of the
SafetyStrip(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 (the "ExtreSafe(TM)
Products"), which incorporates a system to
allow a contaminated needle to be
automatically retracted 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)
phlebotomy devise, ExtreSafe(TM) catheter and
several different ExtreSafe(TM) syringe
applications. 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 1997, provided the necessary FDA
approvals are obtained, of which there is no
assurance. 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 are in the
research stage.
The Company has also entered into a
joint venture to design and produce an
improved filmless digitized imaging
technology to be used in the medical field
(the "Imaging Products") which is in the
research stage.
Company Background and 1995 Reorganization
The Company was incorporated in 1986 as
Santian Ventures, Inc. as a Utah corporation.
Santian Ventures, Inc. was organized to
engage in the business of acquiring assets
and properties of any kind without regard to
any specific type of business or industry.
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
and pursuant to the terms of a Placement
Agreement, the terms of which were proposed
by Capital Growth, 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 Scott R.
Jensen, the sole officer and director of the
Company prior to the Acquisition (the "Merger
Agreement"), Scott R. Jensen resigned as the
sole officer and director of the Company
effective upon consummation of the
Acquisition wherein 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. In
addition, the outstanding securities of SHP
became outstanding securities of the Company.
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 additional 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 the 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. The self-closing Safety
Cradle(R) containers allow for disposal of
sharps in a container that incorporates a
self-closing sharps containment flap, and
open/close/lock mechanism. Especially
adapted for alternate site use, SHP's new
line of Safety Cradle(R) sharps containers
provide convenience and safety for portable
applications. In addition, each of SHP's
sharps containers is designed to be used as a
self-contained shipping container, used in
the transport of unused medical products, and
readily converted at a user's site for use as
a safe and efficacious sharps container. The
Safety Cradle(R) sharps container's novel,
single-molded-part lid fits three sizes of
container wells to fill a broad spectrum of
sharps containment applications, especially
alternate site use which includes emergency
vehicle, in-home and insurance testing. As
each Safety Cradle(R) sharps container is
formed from only two molded parts, unit
manufacturing cost places SHP's sharps
containers in a competitive position, while
the special design for transportability
permits the Safety Cradle(R) container to
fill a unique market niche. These containers
are made of environmentally safe
polypropylene material.
SHP has developed three sizes of the
Safety Cradle(R) container wells. Each
container well uses the same top, but the
bottom section varies in size to allow
different volumes to be accommodated (i.e., a
3 inch, a 5 inch and a 9 inch ). 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 and transporters,
but also as 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 with
earlier models. Sales of the latest models
began in December of 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 this year.
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 Company
anticipates that it will be prepared to
execute orders for its SafetyCradle(R)
products used as recyclers by this year.
Products Under Development
The SafetyStripO 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
can be 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 lancet 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 SafetyStripO lancets will
be easy-to-use and provide protection against
being used more than once. SafetyStripO
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 strip housing is loaded into a
convenient low-cost hand held carrier which
also provides a means for safely and
conveniently triggering each lancet. After
penetrating the skin, the blade
automatically returns inside its housing and
cannot be reused.. The used blade, 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 SafetyStripO will be easier and
faster than use of existing lancets. Testing
performed and funded by an entity owned in
part by Dr. Gale H. Thorne (an officer and
director of the Company) has shown the
Company's SafetyStripO 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
SafetyStripO lancet was completed earlier
this year and the Company anticipates that
commercial production will begin in 1996.
ExtreSafeO Phlebotomy Device
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 evacuated tube-like container commonly
known as a Vacutainer(R) (the Vacutainer(R)
is not a trademark of the Company). 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 ExtreSafeO
phlebotomy device provides a safer method.
The device retracts the inserted needle 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 designated
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
ExtreSafeO technology has a number of other
applications, including an ExtreSafeO
catheter and ExtreSafeO syringe described
hereafter. Prototypes of the ExtreSafeO
phlebotomy device needle were completed in
1995 and the Company anticipates that
commercial production will begin in 1997
provided the necessary FDA approvals are
obtained, of which there is no assurance.
ExtreSafeO 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 ExtreSafeO phlebotomy device , the
Company's ExtreSafeO catheter retracts a
contaminated needle from a patient and
encloses the needle in a safe housing when a
health care worker depresses a portion of the
housing at the time the needle is to be
extracted from the patient and catheter.
Further, in one version of the ExtreSafeO
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 1997
provided the necessary FDA approvals are
obtained, of which there is no assurance.
ExtreSafe 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,
medical personnel attempted needle protection
by replacing the needle cover after
performing the procedure, but the volume of
accidental needle sticks related to needle
replacement resulted in the banning of such
needle cover replacement. Medical personnel
then began disposing of needles by carrying
the exposed needles to sharps containers
(normally found within each patient care
room) and by providing needle/syringe
apparatus having a shroud which can be
extended over the exposed needle after the
procedure. 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 provided the
necessary FDA approvals are obtained, of
which there is no assurance.
Filmless Digitized Imaging Technology
The procedure for taking a large area x-
ray image having generally acceptable
resolution 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
darkroom. 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. While some
filmless x-ray systems have recently been
introduced, none fulfill desired and
necessary resolution requirements of commonly
performed x-ray procedures.
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 eliminates film
as the x-ray image recording form and enables
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 having high resolution 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 1996, provided timely
funding is obtained. 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.
assigned 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 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
available financing channels, if any. It is
anticipated 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. As a
result, the Company's ownership interest may
decrease, but its financial and other
obligations to support the development and
commercialization of the technology may not
decrease.
Company Strategy
The Company's primary objective is to
establish itself as a leading developer of
safety medical products. 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,
phlebotomy device, 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.
Sharps Containers
The Company was only able to produce
sharps containers on a limited basis in 1995
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(R) products should find a
significant niche in home health care and
alternate site use 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 SafetyStripO, ExtreSafeO
phlebotomy device , ExtreSafeO catheter,
ExtreSafeO syringe, intravenous flow gauge,
blood collection device, other ExtreSafeO
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 is
seeking alliances with large medical product
marketing, sales and distribution companies
to sell its Safety Cradle(R) sharps container
products and these follow-on products. There
can be no assurance, however, that the
Company will be able to form an alliance and
that the Company will be able to complete
development of these products.
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
through third party manufacturers and
distributors. 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 will not sell its ExtreSafe(TM)
medical needle technology for commercial use
in the United States until proper regulatory
approval is obtained. See "Business --
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 --
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. 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 except to the extent it will
be competitive with other safety devices.
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.
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. Currently available safety needle
devices are priced at approximately two to
twelve 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.
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, (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.
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 12,000 workers become
infected by accidental exposure to hepatitis
B, which is more contagious than AIDS.
OSHA mandates the use of special
containers for sharps disposal purposes to
reduce the incidence of accidental
transmission of blood-borne diseases. OSHA
requires that the design of sharps containers
meet certain minimum standards of safety. It
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 not be recapped or purposely bent or
broken. After they are used, disposable
syringes, needles, and other sharp items
should 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 legislation and others 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
two United States patent relating to its
SafetyStripO, and four United States patent
and allowed patent applications relating to
its ExtreSafeO medical needle technology.
The Company has three additional United
States patent applications pending relating
to its safe-needle retraction technology.
None of the above referenced patents expire
before April 1, 2006.
Quantum Imaging Corporation, an
affiliate of the Company, owns three United
States patents and has three Canadian patents
relating to the filmless digitized imaging
technology. These patents expire in May
2001, September 2002 and September 2005. The
Company expects that additional patents will
be applied for relating to the technology
owned by Quantum Imaging Corporation.
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 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 SafetyStrip(TM),
ExtreSafe(TM) phlebotomy device , ExtreSafe(TM)
catheter, ExtreSafe(TM) syringe, intravenous
flow gauge, blood collection device, other
ExtreSafeO medical needle technology products
or filmless digitized imaging technology
although one molding company has been
preliminarily selected to build pre-
production molds for the ExtreSafe(TM)
phlebotomy device. A company has also been
selected to produce molds and pre-production
parts for the SafetyStrip(TM) lancet. Effective
May 1995, prototype drawings for lancet molds
were approved. The company chosen to produce
molds for the ExtreSafe phlebotomy device is
targeting completion of preproduction
prototypes for the ExtreSafe(TM) phlebotomy
device for 1996. 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. 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 SafetyStripO lancet.
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 ExtreSafeO phlebotomy
device (i.e., that is transversely activated
to automatically extract a contaminated
needle and immediately retracts the needle
into a safe housing). Applications for the
Company's needle retraction technologies may
also be found in 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 health care worker
safety, ease of use, reduced cost of
disposal, patient comfort and compliance with
OSHA regulations, but not on the basis of
purchase price except with respect to
comparable safety products. 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 and
$804,639. The Company plans to acquire
additional technologies that it determines
are appropriate 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. 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 Sharp Trap(R) sharps containers
are substantially equivalent to legally
marketed predicate devices. The Company's
Safety Cradle(R) sharps containers are
subject to the general controls of the FD&C
Act and the additional controls applicable to
Class II devices. The Company believes that
its Safety Cradle(R) sharps container is
sufficiently similar to the Sharp Trap(R)
container to preclude necessity for another
FDA submittal.
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 Cradle(R) 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 SafetyStripO, ExtreSafeO medical needle
technology, intravenous flow gauge and blood
collection device) are still in the
development stage. The Company expects the
SafetyStripO 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 ExtreSafeO technology 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 than
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.
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 phlebotomy devise 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.
Seasonality of Business
The Company products sales are not
subject to seasonal variations.
Backlog
There are no material backlog of
unfilled orders of the Company's products.
Employees
As of April 8, 1996, the Company
employed twelve people, including five
research and development employees, two sales
and marketing employees and five
administrative employees. 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
release SHP's molds. In January 1996, MT
counterclaimed 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.
MANAGEMENT
Executive Officers and Directors
In connection with the Acquisition, the
individual serving as the sole director and
officer 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 appointed to fill vacancies on
the Company's Board of Directors. Mr.
Hollander then resigned from the Board of
Directors in March 1996 for personal reasons.
<TABLE>
Set forth below is certain information
concerning each of the directors and
executive officers of the Company as of April
15, 1996:
<CAPTION>
With
SHP and
Name Age Position Company
Since
<S> <C> <S> <C>
David A. 52 President, Chairman of the 1993
Robinson (1) Board, Chief Executive
Officer and Director
Bradley C. 27 Vice President, Operations 1993
Robinson (1) and Investor Relations, and
Director
Dr. Gale H. 63 Vice President, Product 1994
Thorne Development and Director
J. Clark 54 Vice President, Chief 1995
Robinson Financial Officer, Secretary
and Director
Gary W. Farnes 54 Director 1995
(2)
Robert R. 65 Director 1994
Walker
_______________
<F1>
(1) Member of Executive Committee.
<F2>
(2) Member of Compensation Committee.
</TABLE>
David A. Robinson. Mr. Robinson is the
President, Chief Executive Officer and
Chairman of the Board of the Company. He has
been a Director and officer of the Company
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 Investor Relations and a
Director of the Company.
Bradley C. Robinson. Mr. Robinson is
the Vice President, Operations and Investor
Relations, of the Company. He has been a
Director and officer of the Company since
November 1993. From November 1992 to November
1993, Mr. Robinson was Vice 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. 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, Chairman of the Board 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.
During Dr. Thorne's tenure at Eneco, Inc. the
company was engaged primarily in the business
of prosecuting patent applications relating
to the cold-fusion technology. 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 became
a Vice President, Chief Financial Officer,
Secretary and Director of the Company in
September 1995. From 1974 to the present,
Mr. Robinson has been General Manager of
Lagoon Corporation, which operates an
amusement park in the Salt Lake City, Utah,
area. At present, Mr. Robinson spends
approximately one-half of his time working
for the Company and one-half of his time
working for Lagoon Corporation. 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,
Chairman of the Board and a Director of the
Company, and the father of Bradley C.
Robinson, Vice President Operations and
Investor Relations, 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 and Investor Relations, and a
Director 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.
Mr. Hollander was nominated to serve as
a Director of the Company in August 1995,
pursuant to an agreement between the Company
and Capital Growth, as placement agent for
certain securities of the Company. The
agreement provided that Mr. Hollander, or
another person nominated by Capital Growth,
be elected for at least three one-year terms.
Mr. Hollander resigned from the Board of
Directors for personal reasons in March 1996.
In addition, Mr. John T. Clark, who was a
Director of the Company since November 1993,
also resigned from the Board of Directors for
personal reasons on March 5, 1996. The
Company's Board is currently reviewing
independent persons to fill the two vacancies
existing on the Board. 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 stockholders in
1996, one class of directors will be elected
at each annual meeting of stockholders for a
three-year term. Each year a different class
of directors will be elected on a rotating
basis. The terms of Gary W. Farnes and
Robert R. Walker will expire in 1996. The
terms of Gale H. Thorne and Brad C. Robinson
will expire in 1997 and the term of David A.
Robinson and J. Clark Robinson will expire in
1998.
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 non-qualified stock
option plan ("NQSOP").
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 $100,000 (determined as of December 31,
1995) (the "Named Executive Officers"). The
tables include columns related to stock
options.
Summary Compensation Table. The
following table provides certain summary
information regarding compensation paid by
the Company to the Named Executive Officers.
The amounts set forth were paid by SHP for
services rendered to SHP. The Company had no
operations and paid no compensation to
management prior to July 28, 1995, when the
Company acquired SHP. On that date, the
previous management of the company resigned
and the current management, as described
herein, assumed their present positions.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
Awards
Restr Stock All
Name and Other icted Optio LTIP Other
Principal Salary Bonus Annual Stock ns/ Payou Compen
Position Year ($)(1) ($)(2) Compens Awards SAR(#) ts($) nsation($)
ation ($)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David A.
Robinson, 1993 --- --- --- --- --- --- ---
President, 1994 120,000 --- --- --- 90,000(4) --- ---
CEO, Chairman 1995 193,590 25,000 --- 666,666(3) 300,000(5) --- 1,876
of the Board
and Director
Bradley C. 1993 --- --- --- --- --- --- ---
Robinson, VP, 1994 89,128 --- --- --- 90,000(4) --- ---
Operations 1995 148,590 25,000 --- 666,666(3) 300,000(5) --- 625
and Investor
Relations and
Director
Dr. Gale H. 1993 --- --- --- --- --- --- ---
Throne, VP 1994 16,598 --- --- --- 36,000(6) --- ---
Product 1995 128,333 25,000 --- --- 57,000(5) --- 2,758
Development
and Director
__________________
<F1>
(1) All amounts paid to as salary were paid
pursuant to the Company's obligations under
employment contracts with the above
referenced individuals. Said employment
contracts were amended from time to time
during the periods set forth above. The
annual salaries of the Named Executive
Officers for 1996, as set forth in their
employment contracts, are $240,000 for Mr.
David A. Robinson, $160,000 for Mr. Brad C.
Robinson and $150,000 for Dr. Gale H. Thorne.
<F2>
(2) The cash bonuses were awarded by the
Company in recognition of the recipients'
contributions toward the successful
Acquisition and the private placement which
closed on August 18, 1995.
<F3>
(3) These are Earn-Out shares. See
"Description of Securities - Earn-Out
Shares." David A. Robinson, Bradley C.
Robinson and John T. Clarke, who are
respectively the President, Chief Executive
Officer, Chairman of the Board and a
Director; a Vice President and Director; and
a former Director of the Company have the
opportunity to receive up to an aggregate of
2,000,000 additional shares of common stock.
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"). At the date the Earn-Out Shares
agreement was adopted the value of the Common
Stock was $2.00 per share. At December 31,
1995, the Company's common stock was trading
at $8.63.
The Earn-Out Shares have not vested.
No dividends will be paid on the Earn-Out
Shares unless and until they vest. The
Earn-Out Shares will vest as follows. 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 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 $8,000,000, then
there will be issued that aggregate number
of Earn-Out Shares calculated by
subtracting the number of Earn-Out Shares
previously issued or issuable based on the
attainment of a lesser Adjusted PTNI in
the same year (if any) from 2,000,000,
provided that in no event will an
aggregate of more than 2,000,000 Earn-Out
Shares be issued.
<F4>
(4) These options were exercised on
September 1, 1995 and were issued under the
SHP NQSOP.
<F5>
(5) These options were issued pursuant to
the NQSOP. See "Description of Securities --
Outstanding Options."
<F6>
(6) Options to purchase 18,000 shares of the
Company's Common Stock were exercised on
September 1, 1995 and options to purchase
18,000 shares of the Company's Common Stock
become exercisable in July 1996. Said
options were issued under the SHP NQSOP.
<F7>
(7) These amounts represent the amounts paid
by the Company for term life insurance for
the benefit of the Named Executive Officer.
The related insurance policies have no cash
surrender values.
</TABLE>
Option Grants in Fiscal Year 1995. The
following table sets forth certain
information with respect to stock option
grants during the year ended December 31,
1995 to Named Executive Officers.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
(Adjusted to Reflect a Recapitalization of
the Company's Common Stock
See "Description of Securities")
<CAPTION>
Individual Grants
Potential
Number Percent Realizable
of of Total Exerc Value at
Shares Options ise Assumed Annual
Underlyi Granted or Rate of Stock
ng to Base Price
Options Employees Price Appreciation
in Expira for Option
tion Term
Name Granted Fiscal Date 5% 10%
(#) Year ($/Sh)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David A. 300,000 25.6% 2.00 9/1/2000 $165,769 $366,306
Robinson
Bradley C. 300,000 25.6% 2.00 9/1/2000 $165,769 $366,306
Robinson
Dr. Gale H. 57,000 4.9% 2.00 9/1/2000 $ 31,496 $ 69,598
Thorne
_______________
<F1>
(1) These options were issued pursuant to
the NQSOP and were exercisable on the date of
grant. See "Description of Securities --
Outstanding Options."
</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,
1995, and the number of shares of stock
covered by both exercisable and unexercisable
stock options held by each of the Named
Executive Officers.
<TABLE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL
YEAR AND
FISCAL YEAR END OPTION VALUES
<CAPTION>
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs
Shares Options/SARs at Fiscal
Acquire Value at Fiscal Year-End($)
Name d On Realize Year-End($)
Exercis d ($) Exercisable/
e (#) Exercisable/ Unexercisable
Unexercisable (3)
------------------------------------------------------------
<S> <C> <C> <C> <C>
David A. 90,000 180,000 300,000(1) $2,700,000
Robinson
Bradley C. 90,000 180,000 300,000(1) $2,700,000
Robinson
Gale H. 18,000 36,000 57,000(1)/18,000(2) $675,000
Thorne
_______________
<F1>
(1) Options exercisable at $2.00 per share.
<F2>
(2) Options become exercisable in July, 1996
at an exercise price of $.39 per share.
<F3>
(3) The trading price of the Company's
common stock on December 31, 1995 was $9.00
per share.
</TABLE>
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 under the
NQSOP 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.
Employment and Indemnity Agreements
On September 1, 1995, the Company
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
reasonable 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 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 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.
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 ("SHP NQSOP"). 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 63,000 shares of Common Stock
at $.39 per share were outstanding under the
SHP NQSOP. Also, in February 1995 (prior to
the Acquisition) SHP issued to Max Lewinsohn,
a nonaffiliated shareholder of the Company, a
warrant to purchase 45,000 shares of Common
Stock at $1.67 per share. Said warrant were
issued to Mr. Lewinsohn in consideration for
funds paid to SHP. The options issued under
the SHP NQSOP expire in 1999 and the warrant
issued to Mr. Lewinsohn expires in 1996.
On September 1, 1995, the Company
adopted the NQSOP. In addition, on the date
of the Acquisition, all of the options issued
under SHP's NQSOP become outstanding
obligations of the Company and the SHP NQSOP
was terminated. As of April 15, 1996,
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, Bradley C. Robinson and Gale H.
Thorne.
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
In September 1994 (prior to the
Acquisition), certain shareholders of SHP
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 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 former director of
the Company, is an officer and director of
the corporate managing member of Capital
Growth, 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.
Capital Growth 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.
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 stockholders. 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
stockholders, 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 has no present
intent of issuing any of the preferred stock.
If and when the stock is issued it might have
substantially more than one vote per share or
other provisions designed to deter a change
in control of the Company. If such stock is
issued to a limited group of management such
persons may gain 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 stockholders 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
stock 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 stock. 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.
The Series A Warrants were sold to
accredited investors in the Company's private
placement that closed on August 18, 1995. As
part of Capital Growth's fee for acting a
placement agent in said private placement,
the Company issued to Capital Growth
1,290,375 Series B Warrants which warrants
comprise all of the Company's outstanding
Series B Warrants.
Prior to the Acquisition, SHP issued to
a nonaffiliated shareholder a warrant to
purchase 45,000 shares of Common Stock at
$1.67 per share. Said warrant was issued by
SHP in exchange for cash. This warrant
expires in 1996 and became an outstanding
obligation of the Company, rather than of
SHP, on July 28, 1995 (the date of the
Acquisition).
Outstanding Options
On September 1, 1995, the Company
adopted the NQSOP 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 NQSOP, 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.
In addition to the options outstanding
under the NQSOP, the Company also has 63,000
options outstanding that were issued under
the SHP NQSOP and that became obligations of
the Company pursuant to the terms of the
Acquisition. The SHP NQSOP options allows
the holders thereof to purchase 63,000 shares
of the Company's common stock at $0.39 per
share. The SHP NQSOP options expire in
2004.
Earn-Out Shares
John T. Clarke, David A. Robinson and
Bradley C. Robinson, who are respectively a
former 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
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
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.
If Adjusted PTNI amounts set forth above
are never reached, then the Earn-Out Shares
will not vest and no person shall have a
right to receive any of the Earn-Out Shares.
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. 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.
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 discouraged 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
stock 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 stock entitled to
vote. Meetings of the stockholders 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 stockholders 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 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
16,270,213 shares of Common Stock.
Not all of the Company's outstanding
securities are being registered hereby. Of
the 16,270,213 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), 13,970,213
outstanding shares of Common Stock are being
registered hereby and 300,000 outstanding
shares of Common Stock are not being
registered hereby. Of the 300,000
outstanding shares of Common Stock not
registered hereby, 294,872 are effectively
free trading. All 5,681,060 shares issuable
upon the exercise of the Warrants and Option
Stock are being registered hereby.
No prediction can be made as to the
effect, if any, that future sales of stock,
or the availability of stock for future
sales, will have on the market price of the
Common Stock prevailing from time to time.
Sales of substantial amounts of Common Stock
(including stock which may be issued upon
exercise of Warrants or Stock Option), or the
perception that such sales may occur, could
adversely affect prevailing market prices for
the Common Stock.
PRINCIPAL AND SELLING SECURITYHOLDERS
Principal Securityholders
The following table sets forth certain
information with respect to the beneficial
ownership of the common stock of the
Registrant as of April 15, 1996, 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 Named Executive Officers, and
(iv) all directors and Named Executive
Officers as a group. As of April 15, 1996
the Company had 8,589,153 shares of common
stock outstanding.
<TABLE>
<CAPTION>
Name and Shares Percentage of
Address Beneficially Shares Position
of Beneficial Owned(2) Beneficially
Owner(1) Owned
- -------------------------------------------------------------------
<S> <C> <C> <C>
David A. 630,219 7% President, Chief
Robinson(3) Executive Officer
Chairman of the
Board and Director
Bradley C. 630,219 7% Vice President
Robinson(3) Operations and
Investor Relations
and Director
Gale H. 149,700 2% Vice President,
Thorne(4) Product Development
and Director
J. Clark 245,000 3% Vice President ,
Robinson(5) Chief Financial
Officer, Treasurer,
Secretary and
Director
Gary W. 86,000 1% Director
Farnes(6)
Robert R. 83,000 1% Director
Walker(7)
Named Executive 1,824,138 20%
Officers and
Directors as a
Group (6
Persons)
John T. 647,465 7%
Clarke(8)
Capital Growth
International(9)
11601 Wilshire
Boulevard, 1,915,500 18%
Suite 500
Los Angeles, CA
90025
__________________________
<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 330,219 shares and stock
options to purchase 300,000 shares for
each of these two persons. Does not
include 666,666 Earn-Out Shares for each
of these two persons which shares have not
vested.
<F4>
(4) 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.
<F5>
(5) 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.
<F6>
(6) Includes 61,500 shares, stock options
to purchase 20,000 shares and Series A
Warrants to purchase 4,500 shares.
<F7>
(7) 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.
<F8>
(8) 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.
Does not include 666,666 Earn-Out Shares
which shares have not vested.
<F9>
(9) 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 Capital Growth in the private
placement completed on August 18, 1995,
and as to which Capital Growth disclaims
beneficial ownership.
</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. The Selling Securityholders
may sell all, some or none of their shares of
Common Stock. The following entries to the
table represent, respectively, the total
number of shares which each stockholder may
sell pursuant to the registration statement.
Assuming that all of the stock offered hereby
is sold, no Selling Securityholder would own
more than 1% of the outstanding common stock
of the Company. See also "Principal
Securityholders."
The shares of Common Stock and Series B
Warrants 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>
Percentage Stock
of Common Underlying
Stock Stock Stock Warrants
Name(1) Owned as Owned Offered and Stock
of April Before Hereby Options
22, 1996 Offering Offered
Hereby
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
A/S Kapitalutvikling 10,000 * 10,000 6,000
Magne F. Aaby 50,000 1% 50,000 30,000
AHM Eiendoms AS 10,000 * 10,000 6,000
Celia Allsop 5,000 * 5,000 3,000
Nadine Amon * 8,334
Emanuel Arbib * 16,667
John G. Argitis 10,000 * 10,000 6,000
Arimo Corporation 5,000 * 5,000 3,000
Dennis & Marilyn 5,000 * 5,000 3,000
Astrella
Caroline Bandlien 38,250 * 38,250
Charlotte Bandlien 38,250 * 38,250
Einar H. Bandlien 203,000 3% 203,000 30,000
Gunn Bandlien * 6,667
Karl Bandlien 9,000 * 9,000
Banisa Corp. Pension * 25,000
Plan Trust
Beatrice Barnett 5,000 * 5,000 3,000
Gary Barnett 10,000 * 10,000 6,000
Josef A. Bauer 50,000 1% 50,000 30,000
Dennis Malcolm Baylin 12,500 * 12,500 7,500
Michael Roy Bichan 34,497 * 34,497
Susie Elizabeth 9,000 * 9,000
Bichan
Stewart & Debbie 0 * 0 9,000
Blake
BO Shipping AS 182,500 3% 182,500 109,500
Bostar A.S. 50,000 1% 50,000 30,000
Boyd Financial Corp. 71,186 1% 71,186
Harvey R. Brice BSCC 15,000 * 15,000 9,000
M/P Plan A/C #13-
3604093
Harvey R. Brice BSSC * 16,667
Master Defined
Contribution
Money/Purchase
Pension Plan
Butler Investments 125,000 2% 125,000 66,000
Ltd.
Cameo Trust Corp. 103,200 2% 103,200 63,720
Limited
Capital Growth 75,000 8% 75,000 666,621
International
Gregory W. Carlisle 5,000 * 5,000 3,000
M.J. Carter 10,000 * 10,000 6,000
Castle Rock Land & 5,000 * 5,000 3,000
Livestock, L.C.
Central Investments 50,000 1% 50,000 30,000
Limited
Charles Chamberlain 5,000 * 5,000 3,000
Louise Chamberlain 5,000 * 5,000 3,000
Chesham Consultants 18,000 * 18,000
Ltd
Cristofer Clarke 18,000 * 18,000
John T. Clarke (2) 231,362 6% 231,362 321,000
Michelle M.G. Clarke 44,000 1% 44,000 7,500
Thomas & Edna Clarke 70,803 1% 70,803
Willaim F. Coffin 8,800 * 8,800 5,280
Robert E. Colby Jr. 38,000 1% 38,000 57,000
Corner Bank Ltd. 85,000 2% 85,000 51,000
Martin & Susan Cox 2,600 * 2,600
Credit Suisse 65,000 1% 65,000 39,000
(Guernesy) Limited
Demachy Worms & Co. 125,000 2% 125,000 75,000
International Ltd.
John Dillaway 5,000 * 5,000 3,000
DWR Custodian for * 12,500
Gary Barnett IRA STD
Rollover 4/6/83
Edgeport Nominees 65,000 1% 65,000 43,550
Limited
Egger & Co. 2% 147,000
Moises Egozi * 10,000
Mark Emelfarb * 16,667
Eurocapital Ltd * 23,100
Failor Family Trust 45,000 1% 45,000
Anders Farestveit 300,000 5% 300,000 180,000
Walter Smith Farms, * 16,667
LTD
Farnes, Gary c/f 1000 * 1000
Trent Farnes
Gary Farnes c/f 1000 * 1000
Trevor Farnes
Gary Wm. Farnes (2) 50,000 1% 50,000 24,500
Tami Farnes 1000 * 1000
Tara Farnes 1000 * 1000
Timothy L. Farnes 6,100 * 6,100 10,000
Tyler Farnes 2500 * 2500
M, Farrel 32,000 * 32,000 3,000
Alan Field 25,000 * 25,000 15,000
Alan & Susan Field 22,500 * 22,500
Burton C. Firtel 27,000 * 27,000
Fred C. Follmer 10,000 * 10,000 6,000
Foster, Elaine 22,500 * 22,500
Nigel Foster 135,000 2% 135,000
Deborah May Fowler 2,250 * 2,250
Richard Fowler 2,250 * 2,250
Freed Investment 10,000 * 10,000 6,000
Company
David L. Freed Family 5,000 * 5,000 3,000
Trust
David W. Freed 10,000 * 10,000 6,000
John & Karen Freed 10,000 * 10,000 6,000
Paul L. Freed 5,000 * 5,000 3,000
Peter Q. Freed 10,000 * 10,000 6,000
Robert E. Freed 10,000 * 10,000 6,000
Family Trust
Jack Freidman 25,000 * 25,000 15,000
G-Men, Inc. 20,000 * 20,000 12,000
Galway Capital 180,000 2% 180,000
Limited
Genevalor Trusteeship 190,214 3% 190,214 30,000
& Management Corp.
Jeremy A. Gilbert 5,000 * 5,000 3,000
Glass & Rosen Profit * 10,000
Sharing Plan FBO Paul
Glass
Paul W. & Susan V. 7,500 * 7,500 4,500
Glass, Co-Trustees
Bernard Goldfinger * 3,334
and Muriel Goldfinger
Jtnros
Judy Goodstein 14,400 * 14,400
John J. Gottsman 25,000 * 25,000 15,000
Graco Holdings, Inc., * 16,667
Stacie Greene,
President
Gillian Margaret Gray 25,000 * 25,000 15,000
Michael John Gray 25,000 * 25,000 15,000
David Greenberg and * 8,334
Susan Greenberg
Jtnros
David Greenberg IRA * 8,333
Susan Greenberg 10,000 * 10,000 6,000
Greenburg & Parish * 8,334
Defined Benefit Plan
Gruntal & Co., Inc., 15,000 * 15,000 9,000
Custodian for Stanely
Hollander IRA
Tad Gygi 9,000 * 9,000
Arnfin Haavik 123,000 1% 123,000
Turid Nordal Haavik 18,000 * 18,000 9,000
Arnfin Harvik * 10,000
Stephen S. Haas and * 8,334
Barbara B. Hass
Jtnros
Gail Healey 55,103 1% 55,103
John & Lenore Heckler 5,000 * 5,000 3,000
Helix Investments 1% 90,738
Limited
Arne Hellesto 50,000 1% 50,000 30,000
Tom Henriksen 5,000 * 5,000 3,000
Heptagon Investments 25,000 * 25,000 15,000
Ltd.
Daniel M. Herscher, 5,000 * 5,000 3,000
Trustee, Daniel M.
Herscher, Esq.,
Retirement Plan Trust
Hill Oldridge Ltd. 8,500 * 8,500
Pension Fund
Julian Hill 3,600 * 3,600
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 14,000
Svein Huse 50,000 1% 50,000 30,000
Hutton International 50,000 1% 50,000
SA
Intl. Asso. of 45,000 1% 45,000
Christian Prof.
Isenberg 1989 Trust, * 10,000
Gerald I.Isenberg
and Carole Issenberg,
Trustees
George Anthony 22,500 * 22,500
Jackson
Mary Jackson 22,500 * 22,500
Michael S. Jacobs 15,000 * 15,000 12,334
Allan D. Jacobson IRA 12,500 * 12,500 24,167
Lenard E. Jacobson, 15,000 * 15,000 9,000
M.D.
Jennings Asset Group 12,500 * 12,500 7,500
III
Jennings Asset Group 1% 75,000
III c/o Christopher
D. Jennings
Steinar Schei 13,500 * 13,500
Johansen
Svein E. Johansen 109,000 1% 109,000 6,000
Svin Egil Johansen * 10,000
and Turid Schei
Johansen Jtnros
Torgeir Schei 13,500 * 13,500
Johansen
Anne Johnston 144,000 2% 144,000
Alfred Joseph 6,300 * 6,300
Margaret Joseph 6,300 * 6,300
Ted Kaminer & Hillary 5,000 * 5,000 3,000
Kahn Jtnros
Ted I. Kaminer and * 5,000
Hillary M. Kahn, as
Joint Tenants
Mark E. Karp 9,000 * 9,000
Kaufman & Leinberger 5,000 * 5,000 3,000
Investments, Inc.
Inga Jane Kempton 9,000 * 9,000
John W. Kennedy * 25,000
Vance Kirby 15,000 * 15,000 9,000
Ronald B. Koenig 27,500 1% 27,500 16,500
Howard Kozinn * 8,500
Pierre & Francoise 10,000 * 10,000 6,000
Lambert
Andrew Paul Lampert 10,000 * 10,000 6,000
Barbara C. Langham 3,000 * 3,000
Charles J. Charlayne 10,000 * 10,000 6,000
E. Lasky
Legal and Equitable 15,000 * 15,000 9,000
Pension Fund
J. Matt Lepo 5,000 * 5,000 3,000
Dr. J. K. Lewinsohn 43,143 1% 43,143
M.R. Lewinsohn 75,500 2% 75,500 65,000
Claus Lian 25,000 * 25,000 15,000
Richard B. Liroff * 16,667
Lloyds Bank Geneva * 15,000
c/o Brown Brothers
Harriman
Rabbe E. Lund 50,000 1% 50,000 30,000
Mamimu Ltd. 12,500 * 12,500 7,500
K Mason 8,000 * 8,000
Joseph & Lillian 5,000 * 5,000 3,000
Matulich
Metropolitan Finance 53,000 1% 53,000 15,000
Limited
Eugene J. Meyers 12,500 * 12,500 7,500
Neil P. Micklethwaire 15,000 * 15,000 19,000
Miller Investment * 16,500
Company, Inc.
George H. Miller 32,000 * 32,000 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
Michael & Nancy * 1,563
Morris
Frank & Tracy Moss 24,000 * 24,000 12,000
Joe & Sandra Motzkin 12,500 * 12,500 7,500
Nap Enterprises 32,357 * 32,357
Limited
Napier Brown Holdings 75,000 1% 75,000 45,000
Ltd.
Nancy and Clyde 2,500 * 2,500
Needham
Anne & Harry Newman 10,000 * 10,000 6,000
Norman Assuranse AS 182,500 3% 182,500 109,500
Harald Norman 180,000 3% 180,000 108,000
Patricia & Oistein 15,000 * 15,000 9,000
Nyberg
Joan O'Gorman 13,500 * 13,500
Sigurd Olsvold 5,000 * 5,000 3,000
Oral & Maxillofacial 96,333 1% 96,333
Surgical Association
Bonita Michelle 11,700 * 11,700
Overlander
Clive Overlander 16,700 * 16,700 3,000
Carolyn Owen 2,500 * 2,500 1,500
Owen, Charles V. 2,500 * 2,500 1,500
Raymond H. Owen 5,000 * 5,000 3,000
Asher Plaut and * 3,334
Evelyn Plaut Jtnros
Morten Poulsson 25,000 * 25,000 15,000
PQF Investments 5,000 * 5,000 3,000
Prime Grieb & Co., 5,000 * 5,000 5,100
Limited
Prodeco Capital 150,000 3% 150,000 90,000
Corporation
Elizabeth Diane 2,500 * 2,500 1,500
Pummell
Martyn James Pummell 25,000 * 25,000 15,000
Derek Reddin-Clancy 7,200 * 7,200
Mary-Pat Reddin- 10,800 * 10,800
Clancy
David A. Rees 25,000 * 25,000 15,000
John E. Reihl 5,000 * 5,000 3,000
Republic National 5,000 * 5,000 3,000
Bank of New York
(France) Monaco
Republic National 1% 75,000
Bank of New York
(Luxenbourg) SA
John Laurence 5,000 * 5,000 3,000
Richardson
Patrick George 50,000 2% 50,000 92,500
Ridgwell
Andrew Kent Robertson 50,000 1% 50,000 30,000
Brad Robinson(2) 330,219 7% 330,219 300,000
David Robinson(2) 330,219 7% 330,219 300,000
J. Clark Robinson(2) 90,000 2% 90,000 75,000
J. Clark Robinson, 50,000 1% 50,000 30,000
Trustee Robinson
Family Trust(2)
Steffanie Robinson * 5,000
Stephen L. Robinson 12,500 * 12,500 7,500
Charles & Marilyn 5,000 * 5,000 3,000
Roellig
Josephine F. Rose 5,000 * 5,000 3,000
Family Trust
Ruth W. Rose 900 * 900
Gerald Rosen 7,500 * 7,500 12,500
Brian Roth and Susan * 6,667
Roth Jtnros
Brian Stuart Roth- 5,000 * 5,000 6,333
Special Account 1
Brian Stuart Roth- 2,500 * 2,500 4,000
Special Account 2
Brian Stuart Roth 42,300 * 42,300
Laura Jane Roth 6,750 * 6,750
Lucie Claire Roth 6,750 * 6,750
Nicholas Leigh Roth 9,000 * 9,000
Nigel James Roth 9,000 * 9,000
Suzan Irene Roth 48,550 1% 48,550 3,750
Michel Roy 5,000 * 5,000 3,000
Cheryl Lynn Rubin 32,000 * 32,000 3,000
Rudman, Pierre * 3,063
Allan Rudnick * 10,000
Allan Rudnick IRA 10,000 * 10,000 6,000
Rollover
Rush & Co. c/o Swiss 1% 102,000
American Securities,
Inc.
S.P. Angel Nominees 12,500 * 12,500 7,500
Saracen Int. Inc. 25,000 * 25,000 15,000
Barry A. Saunders 27,000 * 27,000
Martin Singer * 1,700
Skull Valley Company, 10,000 * 10,000 6,000
Ltd.
Karen Elizabeth Smith 119,500 2% 119,500 20,000
Phillip Smith 9,000 * 9,000
Fred Snitzer 15,000 * 15,000 9,000
Snowboard Stiftung 50,000 1% 50,000 30,000
Robert & Claudia 43,667 1% 43,667 15,000
Sorrentino
Spellord, Inc. 25,000 1% 25,000 73,334
Standard Acre SA * 3,125
Svien Erik Stiansen 25,000 * 25,000 15,000
Torill Stiansen 9,000 * 9,000
Stolzoff Family Trust 50,000 1% 50,000 30,000
Gary Stolzoff 12,500 * 12,500 7,500
Martin S. Stolzoff * 13,500
and Barbara R.
Stolzoff Jtnros
Karl Sivert Sunde 10,000 * 10,000 6,000
Swiss American Sec., 45,000 1% 45,000
Ltd
The Chase Manhattan 252,500 3% 252,500
Bank NA
The First National 45,000 1% 45,000 27,000
Bank of Chicago
The Joseph 9,000 * 9,000
Accumulation &
Maintenance
Settlement
Theta K. Partners * 28,334
L.P. c/o Alan D.
Jacobson, General
Partner
Bruce W. Thorne 900 * 900
Craig N. Thorne 900 * 900
David L. Thorne 5,900 * 5,900 19,810
Gale H. Sr. & Donna 2,700 * 2,700
L. Thorne, with full
rights of
survivorship(2)
Gale H. Throne, 25,000 * 25,000
Trustee of Gale H.
Throne Trust(2)
Gale H. Thorne (2) 18,000 1% 18,000 102,000
Gale H. Thorne, Jr. 5,900 * 5,900 20,000
Kendall P. Thorne 900 * 900
Michael L. Thorne 900 * 900
Steven D. Thorne 900 * 900
Leslie Thorne 10,000 * 10,000
Olve Torvanger 126,000 2% 126,000 10,000
Townsley & Company 1% 57,831
Richard Trew 11,800 * 11,800
Nils N. Trulsvik 142,500 2% 142,500 21,000
U.B.S. Nominees * 4,500
Vital Milj AS 75,000 3% 75,000 172,600
Robert R. Walker(2) * 20,000
Robert R. Walker, 63,000 1% 63,000
Gen. Partner of
Robert R. Walker
Investment LTD
Partnership(2)
Sidsel O.Walker 16,500 * 16,500
Steve Wallitt 5,000 * 5,000 3,000
David J. Walsh * 8,334
Kilian R. Walsh 10,000 * 10,000 6,000
George Weisenfeld and * 10,000
Myrna Weisenfeld
Jtnros
Allan Weissglass 25,000 1% 25,000 32,500
Joel S. Weissglass 20,000 * 20,000 12,000
Anthony Neal Wenham 4,500 * 4,500
David John Wenham 23,000 * 23,000 3,000
James Robert Wenham 4,500 * 4,500
Valerie Ann Wenham 23,000 * 23,000 3,000
Lago Wernstedt 20,000 * 20,000 12,000
Ann Marie Whiting 5,400 * 5,400
Audrey Doreen Whiting 5,400 * 5,400
John Wilkinson 31,500 * 31,500
Joseph A. Wilkinson 10,000 * 10,000 6,000
Kathryn Wilson 4,500 * 4,500
David & Susan 25,000 * 25,000 15,000
Wilstein, Trustees of
Century Trust
Winston Navigation * 30,000
S.A.
Malcolm Seaton Wood * 4,500
Roy Vincent Wright 15,000 * 15,000 9,000
Jim Yardley 4000 * 4000
Seymour Zwickler IRA * 8,000
- ------------------------------------------------------------------------
Totals 8,289,153 8,289,153 5,681,060
* Less than 1%
_______________
<F1>
(1) For purposes of this table, ownership
with respect to a Securityholder does 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."
<F3>
(3) Not included in the above table are
the 1,290,375 outstanding Series B
Warrants, all of which are owned by
Capital Growth. Of said Series B
Warrants, 918,040 or seventy-one percent
(71%) of the Series B Warrants are hereby
being offered for resale. If all of the
Series B Warrants offered hereby are sold,
Capital Growth would own 29% of the
outstanding Series B Warrants.
</TABLE>
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 agents, 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 Securities
offered by the Selling Securityholders hereby
will be the purchase price of the Securities
less any broker's commissions.
The Common Stock issuable upon exercise
of the Warrants and Option Stock and offered
hereby will be issued by the Company to
holders of Warrants and Option Stock from
time to time pursuant to exercise of such
Warrants and Option Stock in accordance with
the terms thereof.
Capital Growth owns all 918,040 Series B
Warrants being registered for resale hereby.
Such Series B Warrants are being registered
at the request of Capital Growth with a view
towards the distribution of such Series B
Warrants by Capital Growth to forty-nine
clients of Capital Growth (the "Capital
Growth Clients"), who were selected by
Capital Growth for reasons wholly unrelated
to whether the Capital Growth Clients are or
were stockholders of the Company or have or
had any other relationship with the Company.
Capital Growth expects to distribute the
Series B Warrants to the Capital Growth
Clients without requesting or receiving any
specific consideration in exchange therefor.
Capital Growth recognizes, however, that it
may receive some indirect benefit from such
distribution, such as the good will of the
Capital Growth Clients. The Capital Growth
Clients are listed as Selling Securityholders
herein with respect to the shares of Common
Stock they may acquire through exercise of
the Series B Warrants, even though Capital
Growth does not propose to transfer the
Series B Warrants to the Capital Growth
Clients prior to the effective date of this
Registration Statement.
The Company anticipates keeping this
Registration Statement current until all of
the Securities are sold or effectively become
freely tradable. The Company may from time
to time notify the Selling Security holders
that the Registration Statement is not
current and that as sales of the Securities
may not occur until the Prospectus is
supplanted or amended appropriately.
To the extent required, the specific
Securities to be sold, the names of the
Selling Securityholders, the respective
purchase prices and public offering prices,
the names of any 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 Securities 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
Securities offered hereby will be sold in
such jurisdictions only through registered or
licensed brokers or dealers. In addition, in
certain Securities 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 Securities 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 Securities 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 Securities offered
hereby to the public, but excluding any
underwriting discounts, commissions or
transfer taxes. The expenses are estimated
to be approximately $192,119.63.
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.
CHANGE IN INDEPENDENT AUDITORS
On November 10, 1995 the Company's Board
of Directors elected to retain KPMG Peat
Marwick, LLP ("KPMG") as its independent
auditor. Prior to that time Nielson,
Grimmett & Company ("NGC") had acted as the
Company's independent auditor. The decision
to change auditors was recommended by the
Company's Board of Directors, in part,
because KPMG had acted as SHP's independent
auditor prior to the Acquisition.
The reports of NGC on the financial
statements of the Company for each of the two
fiscal years in the period ended December 31,
1994, did not contain any adverse opinion or
disclaimer of opinion and were not qualified
or modified as to uncertainty, audit scope or
accounting principles.
During the Company's two most recent
fiscal years and all subsequent interim
periods preceding such change in auditors,
there were no disagreements with NGC on any
matter of accounting principles or practices,
financial statement disclosure, or auditing
scope or procedure, which disagreements(s),
if not resolved to the satisfaction of the
former accountant, would have caused it to
make a reference to the subject matter of the
disagreements(s) in connection with its
report; nor has NGC ever presented a written
report, or otherwise communicated in writing
to the Company or its Board of Directors the
existence of any "disagreement" or
"reportable event" within the meaning of Item
304 of Regulation S-K.
The Company authorized NGC to respond
fully to the inquiries of the Company's
successor accountant and NGC provided the
Company with a letter addressed to the SEC,
as required by Item 304(a)(3) of Regulations
S-K, which letter has been filed with the
SEC.
EXPERTS
The consolidated financial statements of
the Company for the period from November 19,
1993 (date of inception) to December 31,
1993, and for the years ended December 31,
1994 and 1995, have been included herein and
in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP,
independent auditors, 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. All material elements
of the subject documents or descriptions are,
however, set forth in the disclosure
contained herein.
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.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report F-2
Consolidated Balance Sheets as of
December 31, 1994, and 1995 F-3
Consolidated Statements of Operations
for the period from November 19, 1993
(date of inception) to December 31,
1993, and for the years ended December
31, 1994 and 1995 F-4
Consolidated Statements of Stockholders'
Equity (Deficit) for the period from
November 19, 1993 (date of inception)
to December 31, 1993, and for the
years ended December 31, 1994 and 1995 F-5
Consolidated Statements of Cash for the
period from November 19, 1993 (date of
inception) to December 31, 1993, and for
the years ended December 31, 1994 and
1995 F-6
Notes to Consolidated Financial
Statements F-8
<PAGE> F-2
Independent Auditors' Report
The Board of Directors and Stockholders
Specialized Health Products International,
Inc.:
We have audited the accompanying consolidated
balance sheets of Specialized Health Products
International, Inc. and subsidiary as of
DecemberE31, 1994 and 1995, and the related
consolidated statements of operations,
stockholders' equity (deficit), and cash
flows for the years then ended and for the
period from November 19, 1993 (date of
inception) to DecemberE31, 1993. These
consolidated financial statements are the
responsibility of the Company's management.
Our responsibility is to express an opinion
on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform
the audit to obtain reasonable assurance
about whether the financial statements are
free of material misstatement. An audit
includes examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements. An audit also includes
assessing the accounting principles used and
significant estimates made by management, as
well as evaluating the overall financial
statement presentation. We believe that our
audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial
statements referred to above present fairly,
in all material respects, the financial
position of Specialized Health Products
International, Inc. and subsidiary as of
December 31, 1994 and 1995, and the results
of their operations and their cash flows for
the years then ended and for the period from
November 19, 1993 (date of inception) to
December 31, 1993, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Salt Lake City, Utah
February 2, 1996
<PAGE> F-3
<TABLE>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL,
INC.
Consolidated Balance Sheets
December 31, 1994 and 1995
<CAPTION>
Assets 1994 1995
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ - 4,251,584
Trade Accounts receivable 4,471 350,718
Related party receivable (note 11) - 122,850
Inventories - 16,322
Prepaid expenses and other 5,436 34,017
----------- -----------
Total current assets 9,907 4,775,491
----------- -----------
Equipment and furnishings, net of accumulated
depreciation 285,770 812,049
of $1,753 in 1994 and $8,196 in 1995
(note 3)
Other assets, net of accumulated amortization of
$27,564 in 361,188 363,188
1994 and $90,314 in 1995 --------- ---------
$656,865 5,950,728
========= =========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Bank overdraft $ 10,675 -
Accounts payable 84,655 134,449
Accrued expenses 7,800 446,474
Due to stockholders (note 11) 194,500 -
Total current liabilities 297,630 580,923
Stockholder loans (note 4) 358,333 -
Due to stockholders - long-term (note 11) 100,000 -
--------- ---------
Total liabilities 755,963 580,923
9% cumulative redeemable preference stock, $1.50
par value. Authorized 250,000 shares;160,000 256,780 -
shares issued and outstanding in 1994
(liquidation value $256,780) (note 8)
Stockholders' equity (deficit) (notes 6 and 7):
Preferred stock, $.389 par value in 1994 and
$.001 par value in 1995. Authorized
5,000,000 shares; 1,440,000 560,000 -
shares issued and outstanding in 1994
(liquidation value $560,000) and no shares
issued and outstanding as of December 31, 1995
Common stock, no par value in 1994 and $.02
par value in 1995. Authorized 50,000,000
shares; issued and 209,800 171,333
outstanding 1,363,500 shares in 1994
and 8,566,653 shares in 1995
Common stock subscriptions receivable (note 6) (198,500) (259,500)
Additional paid-in capital - 9,316,028
Accumulated deficit (927,178) (3,858,056)
---------------------
Total stockholders' equity (deficit) (355,878) 5,369,805
Commitments and contingencies
(notes 2, 5, 7, 10, and 12) $656,865 5,950,728
See accompanying notes to consolidated
financial statements
</TABLE>
<TABLE>
SPECIALIZED HEALTH PRODUCTS
INTERNATIONAL, INC.
Consolidated Statements of Operations
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994
and 1995
<CAPTION>
1993 1994 1995
---------- -------- ----------
<S> <C> <C> <C>
Sales $ - 33,256 447,844
Cost of sales - 21,669 294,171
Gross profit - 11,587 153,673
Expenses:
Research and development - 290,950 804,639
Selling, general and administrative 3,450 620,022 2,133,021
Write off of operating assets - - 255,072
----------------------------------
Total expenses 3,450 910,972 3,192,732
Operating loss (3,450) (899,385) (3,039,059)
Other Income (expense):
Interest income - 237 135,428
Interest expense - (7,800) (15,858)
-----------------------------------
Total other income (expense) - (7,563) 119,570
----------------------------------
Net loss (3,450) (906,948) (2,919,489)
----------------------------------
Dividends on preference stock - (16,780) (11,389)
----------------------------------
Net loss attributable to common $ (3,450) (923,728) (2,930,878)
stockholders
Net loss per common share $ - (.75) (.69)
Weighted average number of shares used
for net loss per share 1,170,000 1,224,074 4,269,121
computation
</TABLE>
See accompanying notes to consolidated
financial statements.
<PAGE> F-5
<TABLE>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL,
INC.
Consolidated Statements of Stockholders'
Equity (Deficit)
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994
and 1995
<CAPTION>
Net
Common Addit Accu stock
stock ional mu holde
subsc paid- late rs'
Preferred Common ripti in d equit
stock stock on y
Shares Amount Shares Amount recei capit defic (defi
vable al it cit)
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of
common stock - - 1,170,000 1,300 - - - 1,300
for cash at
inception
Net Loss - - - - - - (3,450) (3,450)
-----------------------------------------------------------------
Balances at - $ - 1,170,000 $ 1,300 - - (3,450) (2,150)
December 31,
1993
Issuance of
preferred 1,440,000 560,000 - - - - - 560,000
stock for
cash
Issuance of
common stock
for services - - 193,500 208,500 (198,500) - - 10,000
and stock
subscription
receivable
Unpaid - - - - - -(16,780)(16,780)
dividends on
preference
stock
Net loss - - - - - -(906,948)(906,948)
-------------------------------------------------------------------
Balances at 1,440,000 560,000 1,363,500 209,800 (198,500) -(927,178)(355,878)
December 31,
1994
Issuance of
preferred 362,403 604,001 - - - - - 604,001
stock for
cash
Cash received
for stock - - - - 190,000 - - 190,000
subscriptions
receivable
Services
provided for - - - - 8,500 - - 8,500
stock
subscriptions
receivable
Unpaid dividends
on preference - - - - - - (11,389)(11,389)
stock
Conversion of
debt for common - - 346,500 385,000 - - - 385,000
stock (note 4)
Issuance of
additional
common shares - - 90,000 180,000 -(180,000) - -
to stockholders
under
antidilution
provisions
Business (1,802,403)(1,164,001)2,102,403(696,752) -1,860,753 - -
combination
(note 1)
Issuance of
common stock - -4,256,250 85,125 -7,193,935 - 7,279,060
for cash net of
expenses (note
7)
Conversion of
debt for common - - 50,000 1,000 - 99,000 - 100,000
stock (note 7)
Issuance of
common stock
for stock - - 70,000 1,400(140,000)138,600 - -
subscription
receivable
(note 7)
Cash received
for stock - - - - 90,000 - - 90,000
subscription
receivable
Exercise of
stock options
for common - - 288,000 5,760 (209,500)203,740 - -
stock
subscription
receivable
Net loss - - - - - -(2,919,489)(2,919,489)
- --------------------------------------------------------------------------------------------
Balances at - $ -8,566,653 $171,333 (259,500)9,316,028(3,858,056)5,369,805
December 31,
1995
See accompanying notes to consolidated
financial statements.
</TABLE>
<PAGE> F-5
<TABLE>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL,
INC.
Statements of Cash Flows
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994
and 1995
<CAPTION>
1993 1994 1995
------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,450) (906,948) (2,919,489)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization - 29,317 74,542
Common stock issued for services - 10,000 8,500
Loss on sale of equipment - - 1,291
Write off of operating assets - - 255,072
Changes in operating assets and
liabilities:
Increase in trade accounts receivable - (4,471) (346,247)
Increase in prepaid expenses
and other assets (146) (5,290) (28,581)
Decrease (increase) in inventories (6,104) 6,104 (16,322)
Increase in related party receivable - - (122,850)
Increase in accounts payable
and accrued expenses - 92,455 488,468
----------------------------------
Net cash used in operating activities (9,700) (778,833) (2,605,616)
----------------------------------
Cash flows from investing activities:
Proceeds from the sale of equipment - - 2,943
Capital expenditures - (287,523) (797,377)
Payments to acquire patents
and technology (10,000) (278,752) (64,750)
Net cash used in investing activities (10,000) (566,275) (859,184)
Cash flows from financing activities:
Borrowings on due to stockholders - 194,500 -
Payments on due to stockholders - - (194,500)
Proceeds from issuance of stockholder
loans 18,700 339,633 44,167
Payments on stockholder 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 - 240,000 -
preference stock
Payments on redeemable preference stock - - (268,169)
and dividends
Proceeds (payments) on bank overdraft - 10,675 (10,675)
Proceeds from stock subscriptions - - 280,000
receivable
---------------------------------
Net cash provided by financing activities 20,000 1,344,808 7,716,384
---------------------------------
Net increase (decrease) in cash 300 (300) 4,251,584
Cash at beginning of year - 300 -
----------------------------------
Cash at end of year $ 300 - 4,251,584
</TABLE>
<PAGE> F-7
<TABLE>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL,
INC.
Consolidated Statements of Cash Flows
(continued)
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994
and 1995
<CAPTION>
1993 1994 1995
---------------------------------
<S> <C> <C> <C>
Supplemental Disclosure of Cash Flow
Information
Cash paid during the year for interest $ - - 15,858
Supplemental Disclosures of Noncash
Investing and Financing Activities
Dividends on redeemable preference stock $ - 16,780 11,389
Common stock issued for subscription - 198,500 349,500
receivable
Conversion of stockholder loans and due to - - 485,000
stockholders to common stock
Acquisition of purchased technology and
patents for stockholder payable - 100,000 -
See accompanying notes to consolidated
financial statements.
</TABLE>
<PAGE> F-8
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL,
INC.
Notes to Consolidated Financial Statements
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994 and
1995
(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. The Company has several
products currently in the production
or development stage. The sharps
container is the only product which
is currently in the production stage.
This device is designed to provide
means for disposing of sharps in
order to reduce the potential for
accidental needle sticks. The other
two major product lines are the
lancet and the needle withdrawal
technology; both are in the
development stage. The lancet device
is designed to provide a nonreusable,
safer, and less painful way of
obtaining small blood samples from
patients. The needle withdrawal
technology is designed to
automatically retract needles while
providing permanent and safe
containment of the needle.
Specialized Health's activities since
inception have principally consisted
of obtaining financing, recruiting
personnel, conducting research and
development, developing products, and
identifying and contracting with
manufacturers. The Company conducts
its operations primarily in the
Continental United States.
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 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 has been 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 7.
<PAGE> F-8
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL INC.
Notes to Consolidated Financial Statements
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994 and
1995
(a) Organization and Business
Description (continued)
The accompanying consolidated 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.
(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.
(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, 1994 and 1995,
the cost of purchased technology and
patents, and related patent costs
amounting to $388,752 and $453,502,
respectively, which is being
amortized using the straight-line
method over seven years. These assets
include the following technologies:
acquisitions from third parties
include a catheter closure patent;
lancet patent; the sharps container
technology acquired from Sharp-Trap,
Inc.; and an Automatic Needle
Withdrawing and Securing System
purchased from Gale H. Thorne, a
director and employee. Management
evaluates the recoverability of these
costs on a periodic basis, based on
sales of the product related to the
technology, revenue trends, and
projected cash flows based on
estimates of future sales.
(e) Equipment and Furnishings
Equipment and furnishings are stated at
cost and consist primarily of
manufacturing molds and equipment,
and office furniture and fixtures.
Depreciation is computed using the
straight-line method based on the
estimated useful lives of the related
assets which is 5 years with the
exception of manufacturing equipment
which is depreciated on the straight-
line method over 7 years or the units-
of-production method whichever is
greater.
(f) Revenue Recognition
Revenues are recognized upon
shipment of products. Sales recorded
in the year ended DecemberE31, 1994,
relate primarily to products received
upon acquisition of technology and
patents.
<PAGE> F-10
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL,
INC.
Notes to Consolidated Financial Statements
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994 and
1995
(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 basis, 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 with 1995
classifications.
(k) Fair Value Disclosure
At December 31, 1995, the book value of
the CompanyOs financial instruments
approximates fair value.
(l) Use of Estimates
The preparation of financial statements
in conformity with generally accepted
accounting principles requires
management to make estimates and
assumptions that effect the reported
amounts of assets and liabilities and
disclosure of contingent assets and
liabilities at the date of the
consolidated financial statements and
the reported amounts of revenues and
expenses during the reporting period.
Actual results could differ from
those estimates.
<PAGE> F-11
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL,
INC.
Notes to Consolidated Financial Statements
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994 and
1995
(2) Investments
In October 1995, the Company entered
into an agreement with a third party to
form a joint venture Quantum Imaging
Corporation (Venture) to develop an
improved filmless X-Ray system. For a
fiftyEpercent interest in the Venture
(before dilution by financing investors),
the Company is obligated to pay to the
Venture $15,000 a month, which is paid to
the other Venture partner to perform
research and development on the VentureOs
behalf. Additionally, the Company is
obligated to pay the general and
administrative expenses of the Venture up
to $15,000 per month. These obligations
continue through September of 1996, and
are cancelable only upon 30 days written
notice and failure of the other Venture
partner to meet requirements as specified
in the Venture agreement. Unless this
agreement is terminated, the Company is
obligated at December 31, 1995 for a
minimum of $135,000 and up to an
additional $135,000 as general and
administrative expenses are incurred by
the Venture. In managementOs opinion,
for the Venture to be successful, it must
raise between $3,000,000 and $6,000,000.
The Company contributed total capital of
$83,624 to the joint venture during 1995,
all of which the Company expensed and the
Venture used to fund research and
development and administrative expenses.
Assets and liabilities as of December 31,
1995 were immaterial.
(3) Equipment and Furnishings
<TABLE>
Equipment and furnishings consist of the
following:
<CAPTION>
1994 1995
<S> <C> <C>
Assembly and manufacturing equipment $ 750 33,605
Manufacturing molds 276,370 245,753
Office furnishings and fixtures 10,403 144,992
Construction-in-progress - 395,895
--------- --------
287,523 820,245
Less accumulated depreciation (1,753) (8,196)
---------- --------
285,770 812,049
========== ========
During 1995, operating assets comprised
primarily of manufacturing molds totaling
$255,072 were written off. The molds
became obsolete due to design changes in
the sharp container technology.
<PAGE> F-12
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994 and
1995
(4) Stockholders' Loans
During 1994 and 1995, 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
$1.11Eper share on or before DecemberE31,
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.
(5) Leases
The Company leases office space,
equipment, and vehicles under
noncancelable operating leases. Future
minimum lease payments under these leases
are as follows:
Fiscal year ending December 31:
1996 $ 107,972
1997 93,132
1998 38,718
----------
$ 239,822
==========
Rent expense was $1,881 for the period
from November 19, 1993 (date of
inception) to December 31, 1993, $52,051
in 1994, and $67,091 in 1995.
(6) Stock Options
In 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 1,171,810 shares of common stock
at $2.00 per share of which 1,117,000
vested immediately, and 54,810 vest at
various times over the next three years.
The options expire five years from date
of grant.
During 1994, the Board of Directors of
Specialized Health approved a
nonqualified stock option plan for its
officers, directors, and employees and
authorized 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
SeptemberE1, 1995, options to acquire
288,000 shares were exercised from which
the Company received $209,500 in a common
stock subscription receivable. All
common stock subscription receivables are
due within one year. 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.
<PAGE> F-13
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL,
INC.
Notes to Consolidated Financial Statements
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994 and
1995
(7) 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
consolidated financial statements have
been restated for the effect of this
split. In addition, the Company issued
90,000 shares of common stock to non-
affiliated shareholders existing at the
time of the private placement under
antidilutive provisions.
Specialized Health and the Company
engaged in a private placement of
securities in JulyE1995, 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. In the private
placement, the Company sold an aggregate
of 4,301,250 shares of the Company's
$.02Epar 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. At December 31, 1995 the
Company has a common stock subscription
receivable amounting to $50,000 from the
underwriter.
The underwriter had a continuing
relationship with the Company pursuant to
which the underwriter was to provide
financial advisory and investment banking
services to the Company through July
1997. The Company was to pay the
underwriter $4,000 per month for such
services. Additionally, the underwriter
had the right of first refusal to
undertake any financings of the Company
during this period. Subsequent to year
end, the Company amended their agreement
with the underwriter canceling the
monthly service fees and the underwriters
right of first refusal. The Company
signed a new agreement with PaineWebber
to act as its exclusive financial advisor
and to assist in the development of
strategic alliances.
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.
<PAGE> F-14
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994 and
1995
(7) Preferred and Common Stock (continued)
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.
(8) Redeemable 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 DecemberE31,
1994. Each redeemable preference share
was entitled to a cumulative annual
dividend of nineEpercent 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.
<PAGE> F-15
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL,
INC.
Notes to Consolidated Financial Statements
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994 and
1995
(9) 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 DecemberE31,
1994 and December 31, 1995, are presented
below:
</TABLE>
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Deferred tax assets:
Organization costs $ 5,138 3,854
Start-up costs 1,030 720
Patent costs - 19,244
Net operating loss carryforwards 275,843 1,374,198
43 198
Accrued compensation 57,629 -
Accrued vacation - 19,894
--------- -----------
Total gross deferred tax assets 339,640 1,417,910
Less valuation allowance (339,579) (1,417,910)
--------- ----------
Net deferred tax assets 61 -
Deferred tax liability - equipment,
principally due to differences in 61 -
depreciation
---------------------
Total gross deferred tax 61 -
liability
Net deferred tax liability $ - -
</TABLE>
The net change in the total valuation
allowance for the years ended December
31, 1994 and 1995, was an increase of
$338,292 and $1,078,331, 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 December 31, 1995, the Company had
total tax net operating losses of
approximately $3,684,177, that 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 carryforwards 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
carryforwards not utilized in prior
years.
<PAGE> F-16
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL,
INC.
Notes to Consolidated Financial Statements
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994 and
1995
(10) 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.
As a result of the acquisition of
certain product rights and related
patents the Company is required to pay a
specified royalty on future sales of
products related to these rights and
patents.
(11) Related Party Transactions
Related party receivables at December
31, 1995 represent advances to certain
related parties. During 1995 the Company
paid to an entity, owned in part by a
shareholder of the Company, $231,475 as
reimbursement for expenses it expended on
behalf of the Company and as consulting
fees.
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 non-interest bearing. These
amounts were repaid in 1995, and as of
December 31, 1995 there were no remaining
amounts due.
(12) Business and Credit Concentrations
During 1995, the CompanyOs revenues were
solely from the sale of the sharps
container of which $418,509 represented
sales to a single distributor. At
December 31, 1995, the Company had
$348,266 of trade accounts receivable due
from this customer for which payment was
received subsequent to year-end.
The Company currently buys all of its
sharp containers, the CompanyOs only
device in production, from one supplier.
Although there are a limited number of
manufacturers who could manufacture this
device, management believes that other
suppliers could provide similar services
on comparable terms. A change in
suppliers, however, could cause a delay
in manufacturing and a possible loss of
sales.
Additionally, the Company has a limited
direct sales force and no third party
agreements to distribute its products
which may result in limited sales of the
CompanyOs products.
(13) Fourth Quarter Results
During the fourth quarter, the aggregate
effect of year end adjustments, which
related to prior quarters, increased the
net loss approximately $457,000.
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL,
INC.
Notes to Consolidated Financial Statements
For the period from November 19, 1993 (date
of inception) to December 31, 1993,
and for the years ended December 31, 1994 and
1995
(14) Accounting Standards Issued Not Yet
Adopted
In March of 1995, the Financial
Accounting Standards Board issued
Statement of Financial Accounting
Standards No. 121 Accounting for the
Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed of (FASB
121). The Company is required to adopt
the provisions of this statement for
years beginning after December 15, 1995.
This statement requires that long-lived
assets and certain identifiable
intangibles to be disposed of be reported
at the lower of carrying amount or fair
value less cost to sell. The impact of
FASB 121 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 account for employee
stock options or similar equity
instruments 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 13,970,213 Shares of Common
this Prospectus, and if given Stock
or made, such information or 918,040 Series B Warrants
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
Risk Factors
Dividend Policy
Share Price History
Capitalization
Selected Financial Data
Management's Discussion and ____________________________
Analysis
of Financial Condition and __________ , 19__
Results of Operations
Business Management
Certain Relationships and
Related Transactions
Description of Securities
Securities Eligible for Sale
Principal and Selling
Securityholders
Plan of Distribution
Experts
Additional Information
Index to Financial Statements
______________________
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.
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 $41,619.63
NASDAQ listing fee 0
Blue Sky fees and expenses 2,500*
Printing expenses 5,000*
Legal fees and expenses 100,000*
Accounting fees and expenses 35,000*
Transfer Agent fees 5,000*
Miscellaneous 3,000*
------------
Total $192,119.63*
_______________ ============
* Estimated
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, sixteen existing
shareholders of SHP made direct loans to SHP in
the amount of approximately $385,000 under a
bridge loan agreement. 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 wholly owned subsidiary of the
Company (the "Acquisition"), in consideration for
the cancellation 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
investors acquired the securities for investment
and not with a view to the distribution thereof.
Prior to the cancellation of the loan notes and
exercise of the warrants none of the loan notes
and warrants were assigned and/or transferred by
any the holders thereof. At the time of issuance
and at all times during which said securities were
outstanding, all of the foregoing securities
deemed to be restricted securities for purposes of
the Securities Act and the certificates
representing such securities bore legends to that
effect.
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 . 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 an aggregate of 4,376,250 shares of
Common Stock, 3,110,875 Series A Warrants and
1,290,375 Series B Warrants (the Common Stock and
Series A and B Warrants are collectively referred
to as the "Securities") to one hundred fifty six
accredited investors in the United States and
overseas between July 28, 1995 and August 18, 1995
in a private placement (the "Private Placement").
The Securities were sold as Units. Each Unit was
comprised of 5,000 shares of Common Stock and
Series A Warrants to purchase 3,000 shares of the
Company's common stock at $3.00 per share. Each
Unit was sold for $10,000. In addition, Capital
Growth received 75,000 shares of Common Stock,
530,125 Series A Warrants and 1,290,375 Series B
Warrants.
The sale of the Securities, which was
completed in three separate closings, was part of
a single plan of financing, which raised
$8,602,500 in gross proceeds to the Company. The
financing was completed in three closings due to
delays in the receipt of committed funds. There
was no public market for the Company's securities
on the date the Private Placement commenced.
The purpose of selling to foreign accredited
investors was to raise funds, which funds the
Company did not seek to exclusively raise in the
United States. The Company's exclusive placement
agent was Capital Growth International, L.L.C.
formerly U.S. Sachem Financial Consultants, L.P.
("Capital Growth"), a broker-dealer registered
with the National Association of Securities
Dealers, Inc. "NASD."
All offers and sales of the Securities were
made pursuant to Regulation D, specifically Rule
506, under the Securities Act of 1933, as amended
(the "Act") and a Form D was filed. The Company
did not rely specifically on Regulation S in
connection with the sale of the Securities nor did
the Company attempt to comply with the provisions
of Regulation S.
The Company believes that the Private
Placement complied with the requirements of
Regulation D under the Act. All of the purchasers
of the Securities provided written representations
that they are "accredited investors" as defined by
Rule 501 under the Act. All certificates
evidencing the Securities purchased bore
restrictive legends stating that the Securities
could not be resold without registration under the
Act or an exemption therefrom. The Company's
stock transfer agent has assured the Company that
none of the restrictive legends on the Securities
have been removed and the overseas shareholders
have not resold Securities into the United States.
The Company's placement agent has given the
Company assurances that the manner of the offering
did not use any form of general solicitation or
general advertising. All purchasers of the
Securities gave written representations that they
were purchasing for investment and not with a view
to a distribution, and agreed based on written
disclosure in the Confidential Offering Memorandum
that the Securities would be subject to
limitations on resale.
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. 1 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
16.1 Letter re change in certifying accountants
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)
99.1 Consent of Theta Corporation
_______________
* Previously filed.
** 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
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
* Director and Vice President April 22, 1996
___________________
Bradley C. Robinson
* Director, Vice President, Chief April 22, 1996
_________________ Financial Officer and Secretary
J. Clark Robinson (Principal Financial and
Accounting Officer)
* Director and Vice President April 22, 1996
______________
Gail H. Thorne
* Director April 22, 1996
________________
Gary W. Farnes
* Director April 22, 1996
________________
Robert W. Walker
*By /s/ David A. Robinson
____________________________
David A. Robinson
Attorney-In-Fact
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.
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
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
16.1 Letter re change in certifying accountants
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)
99.1 Consent of Theta Corporation
_______________
* Previously filed.
** 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)
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 23.1
Consent of KPMG Peat Marwick LLP
Independent Certified Public Accountants
KPMG Peat Marwick LLP
60 East South Temple
Suite 900
Salt Lake City, UT 84111
Consent of Independent Auditors
The Board of Directors and Shareholders
of Specialized Health Products International, Inc.
We consent to the use of our report dated
February 2, 1996, 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.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
Salt Lake City, Utah
April 23, 1996
EXHIBIT 99.1
Consent of Theta Corporation
January 25, 1996
To: Phillis Klaben, President
Theta Corporation
From: Gale H. Thorne, Jr.
Sales Manager
Dear Ms. Klaben,
Thank you for returning my call this morning.
All of us at Specialized Health Products (SHP)
appreciate the product information we purchased
from Theta Corporation.
As we discussed, SHP would like to quote a
few of our purchased Theta statistics and market
projections in several of our public documents.
Theses include our annual report, stock
registration statement, and prospectus.
The select forecasts and market sizes we
would like to quote include those for evacuated
blood collection tubes, syringe needle, hypodermic
syringe market, the safety syringe market and the
safety hypodermic syringes market.
If you would, please signify your permission
to quote the above referenced Theta Corporation
statistics in our documents by signing below.
Best regards,
Accepted By:
/s/ Gale Thorne, Jr.
Gale Thorne, Jr.
/s/Phylis Klaben, 1/25/96
Phylis Klaben
President
