PROXY STATEMENT
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SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
655 East Medical Drive
Bountiful, Utah 84010
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ANNUAL MEETING OF STOCKHOLDERS
To Be Held December 4, 1996
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INTRODUCTION
This Proxy Statement is being furnished to holders of the Specialized
Health Products International, Inc. (the "Company") common stock, par value
$0.02 per share ("Common Stock"), in connection with the solicitation of proxies
by the Company for use at the Annual Meeting of Common Stockholders of the
Company (the "Annual Meeting") to be held at Little America Hotel and Towers,
500 South Main Street, Salt Lake City, Utah 84101, at 9:00 a.m. (local time) on
December 4, 1996, and at any adjournment(s) or postponement(s) thereof. This
Proxy Statement, the enclosed Notice and the enclosed form of proxy are being
first mailed to stockholders of the Company on or about November 9, 1996.
VOTING AT THE ANNUAL MEETING
The Board of Directors of the Company (the "Board") has fixed the close
of business on November 8, 1996, as the record date (the "Record Date") for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting. As of the Record Date, there were outstanding ___________ shares of the
Company's Common Stock held by approximately _____ holders of record. On the
Record Date there were no shares of the Company's Common Stock held as treasury
stock by the Company. Holders of record of the Company's Common Stock on the
Record Date are entitled to cast one vote per share, exercisable in person or by
properly executed proxy, with respect to each matter to be considered by them at
the Annual Meeting. The presence, in person or by properly executed proxy, of
the holders of a majority of the outstanding shares of the Company's Common
Stock is necessary to constitute a quorum at the Annual Meeting.
Common Stock will be voted in accordance with the instructions
indicated in a properly executed proxy. If no instructions are indicated, such
stock will be voted as recommended by the Board. If any other matters are
properly presented to the Annual Meeting for action, the person(s) named in the
enclosed form(s) of proxy and acting thereunder will have discretion to vote on
such matters in accordance with their best judgment. Broker non-votes and
abstentions are not treated as votes cast for purposes of any of the matters to
be voted on at the meeting. A stockholder who has given a proxy may revoke it by
voting in person at the meeting, or by giving written notice of revocation or a
later-dated proxy to the Secretary of the Company at any time before the closing
of the polls at the meeting. Any written notice revoking a proxy should be sent
to Specialized Health Products, Inc., 655 East Medical Drive, Bountiful, Utah
84010, Attention: Mr. J. Clark Robinson, Secretary.
The Company's Bylaws require the affirmative vote of a plurality of the
votes cast at the meeting for the election of directors, the affirmative vote of
a majority of the votes cast at the meeting for the approval of the independent
auditors, and the affirmative vote of a majority of the outstanding stock is
required for approval of the amendments to the Company's Certificate of
Incorporation. The Board recommends that holders of the Company's
<PAGE>
Common Stock vote FOR the approval of election of the directors proposed by the
Board, FOR the approval of the independent auditors and FOR the approval of the
amendments to the Company's Certificate of Incorporation.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
Election of Directors
Board of Directors
The Company's Board is divided into three classes. One class of
directors is 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 expire in 1996. The
terms of Gale H. Thorne and Bradley C. Robinson will expire in 1997 and the term
of David A. Robinson and J. Clark Robinson will expire in 1998.
At this meeting two directors have been nominated by the Board for
election to the class whose terms expire at the 1999 annual meeting. The persons
nominated are Gary W. Farnes and Robert R. Walker, both of whom are currently
directors of the Company.
Unless otherwise specified, proxy votes will be cast for the election
of all of the nominees as directors. If any such person should be unavailable
for election, the Board may either reduce the number of directors accordingly or
designate a substitute nominee. In the latter event, it is intended that proxy
votes will be cast for the election of such substitute nominee. Stockholder
nominations of persons for election as directors are subject to the notice
requirements described under the caption "Other Matters" appearing later in this
proxy statement. Election of the nominee directors requires the affirmative vote
of a majority of the shares voted.
The following pages contain information concerning the nominees and the
directors whose terms of office will continue after the meeting. Unless the
context otherwise requires, all references in this Proxy 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 BOARD RECOMMENDS A VOTE FOR THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED
HEREIN.
Directors and Executive Officers of the Company.
With SHP
and Company
Name Age Position Since
David A. Robinson (1) 53 President, Chairman of the Board, 1993
Chief Executive Officer
and Director
Bradley C. Robinson (1) 27 Vice President, Operations 1993
and Investor Relations,
and Director
Dr. Gale H. Thorne 64 Vice President, Product 1994
Development and Director
<PAGE>
J. Clark Robinson 54 Vice President, Chief Financial 1995
Officer, Secretary and Director
Gary W. Farnes (2) 56 Director 1995
Robert R. Walker(2) 67 Director 1994
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(1) Member of Executive Committee.
(2) Member of Compensation Committee.
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 distribution 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 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., distribution 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.
<PAGE>
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 Systems, 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. Mr. Hollander resigned
from the Board for personal reasons in March 1996. In addition, Mr. John T.
Clarke, who was a director of the Company since November 1993, also resigned
from the Board 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 on an annual
basis and serve at the discretion of the Board.
Board Committees
The Board has a Compensation Committee and an Executive Committee.
The Compensation Committee took action by unanimous consent on three
occasion during the fiscal year ending December 31, 1995. As part of its
responsibilities, the Compensation Committee administers the Company's
Non-qualified Stock Option Plan ("NQSOP"), establishes general compensation
policy and, except as prohibited by applicable law, may take any and all action
that the Board could take relating to the compensation of employees, directors
and other parties. The committee also evaluates the performance of and makes
compensation recommendations for senior management, including the Chief
Executive Officer. In March 1996, Mr. John T. Clarke resigned from the Board for
personal reasons leaving Mr. Gary Farnes as the only member of the Committee.
Thereafter, the Board appointed Mr. Robert R. Walker as a member of the
Committee.
The Executive Committee met eight times during the fiscal year ended
December 31, 1995. The committee has most of the power of the Board and can act
when the Board is not in session. Members of this committee are Mr.
David A. Robinson and Mr. Bradley C. Robinson.
Board Meetings and Directors' Attendance
The current Board was appointed in July 1995 at the same time
Specialized Health Products, Inc. ("SHP") became a wholly owned subsidiary of
the Company. The current Board held two Board meetings and took action by
<PAGE>
unanimous consent on two occasions during the fiscal year ending December 31,
1995. The previous Board took action by unanimous consent on one occasion during
the fiscal year ending December 31, 1995. No incumbent director attended fewer
than 75 percent of the Board meetings held during said year or fewer than 75
percent of the committee meetings held by committees on which an incumbent
director served.
Certain Relationships And Related Transactions
In September 1994, prior to the acquisition wherein SHP became a wholly
owned subsidiary of the Company, 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 on October
23, 1996 owned 918,040 Series B Warrants and stock options to purchase 20,000
shares of Common Stock. Capital Growth received the 75,000 shares of Common
Stock, 530,125 Series A Warrants and 1,290,375 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.
Security Ownership of Management and Certain Beneficial Owners
The following table sets forth certain information with respect to the
beneficial ownership of the common stock of the Registrant as of October 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
(defined below), and (iv) all directors and executive officers as a group. As of
October 15, 1996 the Company had 8,589,153 shares of common stock outstanding.
Name and Address Shares Beneficially Percentage of Shares
of Beneficial Owner(1) Owned(2) Beneficially Owned Position
David A. Robinson(3) 630,219 7% President, Chief
Executive Officer
Chairman of the
Board and Director
Bradley C. Robinson(3) 630,219 7% Vice President
Operations and
Investor Relations
and Director
Gale H. Thorne(4) 167,700 2% Vice President,
Product Development
and Director
J. Clark Robinson(5) 232,000 3% Vice President,
Chief Financial
Officer, Treasurer,
Secretary and
Director
Gary W. Farnes(6) 70,000 1% Director
Robert R. Walker(7) 83,000 1% Director
<PAGE>
Executive Officers and 1,813,138 20%
Directors as a Group (6
Persons)
John T. Clarke(8) 665,306 8%
Thatchetts
Camp Road
Gerrards Cross
Buckinghamshire, England
Capital Growth 938,040 11%
International(9)
11601 Wilshire Boulevard,
Suite 500
Los Angeles, CA 90025
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(1) Except where otherwise indicated, the address of the beneficial owner is
deemed to be the same address as the Registrant.
(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.
(3) Includes 330,219 shares and stock options to purchase 300,000 shares for
each of these two persons. Does not include the Earn-Out Shares. See Long-
Term Incentives and Executive Compensation.
(4) Includes 63,000 shares, stock options to purchase 75,000 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.
(5) Includes 90,000 shares and stock options to purchase 75,000 shares. Also
includes 40,000 shares and Series A Warrants to purchase 27,000 shares that
Mr. Robinson is deemed to beneficially own as a result of their being owned
by a controlled entity.
(6) Includes 50,000 shares and stock options to purchase 20,000 shares.
(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.
(8) Includes 163,000 shares, stock option to purchase 300,000 shares and Series
A Warrants to purchase 3,000 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, 123,465 shares, 18,000 Series A Warrants and 21,841
Series B Warrants owned by his spouse, and 18,000 shares owned by a minor
child, which he is deemed to beneficially own. Does not include the
Earn-Out Shares. See Long-Term Incentives and Executive Compensation.
(9) Includes 918,040 Series B Warrants and stock options to purchase 20,000
shares of Common Stock.
<PAGE>
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.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
The members of the Board, the executive officers of the Company and
persons who hold more than 10 percent of the Company's Common Stock are subject
to reporting requirements of Section 16(a) of the Securities Exchange Act of
1934, which require them to file reports with respect to their ownership of and
transaction in the Company's securities, and furnish the Company copies of all
such reports they file. Based upon the copies of those reports furnished to the
Company, and written representations that no other reports were required to be
filed, the Company believes that all reporting requirements under Section 16(a)
for the fiscal year ended December 31, 1995, were met in a timely manner by its
executive officers, Board members and greater than 10 percent stockholders.
Report of the Board on Executive Compensation.
In March 1996, Mr. John T. Clarke resigned from the Board for personal
reasons leaving only one member of the Compensation Committee (the "Committee").
The Board subsequently appointed Mr. Robert R. Walker to replace Mr. Clarke as a
member of the Committee. The Committee's responsibilities include, administering
the Company's NQSOP, establishing general compensation policy and, except as
prohibited by applicable law, taking any and all action that the Board could
take relating to the compensation of employees, directors and other parties. The
Committee also evaluates the performance of and makes compensation
recommendations for senior management, including the Chief Executive Officer.
Executive Compensation Philosophy
The Company attempts to design executive compensation to achieve two
principal objectives. First, the program is intended to be fully competitive so
that the Company may attract, motivate and retain talented executives. Second,
the program is intended to create an alignment of interest between the Company's
executives and stockholders such that a significant portion of each executive's
compensation varies with business performance.
The Committee's philosophy is to pay competitive annual salaries,
coupled with a leveraged incentive system that pays more than competitive total
compensation for performance exceeding financial goals and Company objectives.
The leveraged incentive system consists of annual compensation, bonuses and
stock compensation consisting primarily of stock options and Earn-Out stock
(discussed below).
Based on assessment by the Board and the Committee, the Committee
believes that the Company's compensation program for the Named Executive
Officers has the following characteristics that serve to align executive
interest with long-term stockholder value creation:
a. Emphasized "at risk" pay such as bonuses, options and long-term
incentives.
b. Emphasized long-term compensation such as options and Earn-Out
stock.
c. Rewards financial results and promotion of Company objectives
rather than individual performance against individual objectives.
The Omnibus Reconciliation Act of 1993 (OBRA) established certain
requirements in order for compensation exceeding $1 million earned by certain
senior executives to be deductible. The Company's executive compensation
programs have been structured to comply with OBRA. The actions of the Committee
regarding the compensation paid, or to be paid, to executive management, have
also complied with OBRA. However, the Committee reserves the right to forego
deductibility if in its discretion it believes a particular compensation program
or payment is consistent with the overall best interests of the Company and its
stockholders. In addition, the compensation received by certain individuals
<PAGE>
under the Company's NQSOP and/or Earn-Out program may fall outside the
deductibility limitations of OBRA if the Company is highly successful as
reflected in the Company's stock price and/or income.
Annual Salaries
Salary ranges and increases are governing executives including the CEO
and the other Named Executive Officers are established annually based on the
competitive data. Within those ranges, individual salaries vary based upon the
individual's work experience, performance, level of responsibility, impact on
the business, tenure and potential for advancement within the organization.
Annual salaries for newly-hired executives are determined at time of hire taking
into account the above factors other than tenure.
Short-Term Incentives
The Company provides short-term incentives in the form of discretionary
cash bonuses based on financial performance and promotion of the Company's
objectives. Bonuses are awarded to management and others on the basis of
individual's work experience, performance, level of responsibility, impact on
the business, tenure and potential for advancement within the organization.
Long-Term Incentives
In September 1995, the Company adopted the non-qualified stock option
plan ("NQSOP") wherein the Company is authorized to grant options to purchase up
to 1,284,998 shares of the Company's Common Stock. 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.
The grant of options to key employees encourages equity ownership and
closely aligns management interest with the interest of stockholders.
Additionally, because options are subject to forfeiture if the employee leaves
the Company, options provide an incentive to remain with the Company long term.
At least annually the Committee reviews advisability of granting
options to members of management having strategic impact on product, staffing,
technology, pricing, investment or policy matters. The aggregate number of
options granted to management is based on the value of each individual's actual
and potential contributions to the Company as well as competitive norms.
In conjunction with the 1995 acquisition wherein SHP became a wholly
owned subsidiary of the Company, David A. Robinson, Bradley C. Robinson and John
T. Clarke (collectively the "Founders"), who are the founders of the Company
and, respectively, the President, Chief Executive Officer 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 (the "Earn-Out Shares"). The Founders have the right to divide the
Earn-Out Shares among themselves or their assigns, if earned, based on
performance, contributions to the Company and/or other factors relating to the
business success of the Company. 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 October 23, 1996, the
Company's common stock was trading at $2.75.
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,
<PAGE>
then an aggregate of 350,000 Earn-Out Share will be issued, but only one
issuance of 350,000 Earn-Out Shares will be made based on the $1,500,000 level
of Adjusted PTNI.
If Adjusted PTNI for 1996, 1997 or 1998 equals or exceeds $5,000,000
then there will be issued that aggregate number of Earn-Out Shares calculated by
subtracting the number of Earn-Out Shares previously issued or issuable based on
the attainment of a lesser included Adjusted PTNI in the same year (if any) from
1,100,000, provided that only one issuance of Earn-Out Shares will be made based
on the $5,000,000 level of Adjusted PTNI.
If Adjusted PTNI for 1996, 1997 and 1998 equals or exceeds $8,000,000,
then there will be issued that aggregate number of Earn-Out Shares calculated by
subtracting the number of Earn-Out Shares previously issued or issuable based on
the attainment of a lesser included Adjusted PTNI in the same year (if any) from
2,000,000, provided that in no event will an aggregate of more than 2,000,000
Earn-Out Shares be issued.
Corporation Performance & CEO Pay
To date, the Company's principal focus has been the design, development,
testing, and evaluation of its Safety Cradle(Registered) sharps containers,
SafetyStrip Lancet(Trademarked), ExtreSafe(Trademarked) 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(Registered) sharps containers. At present, the
only product the Company is selling is its Safety Cradle(Registered) sharps
container products. The Company's other products are in various stages of
pre-production, development and research.
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(Registered)
sharps container molds were completed in the first half of 1995, and additional
Safety Cradle(Registered) 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. New and improved designs to the Safety
Cradle(Registered) sharps container molds were completed in the first quarter of
1996 and an Agreement was entered into by the Company with Becton Dickinson and
Company ("BD") on March 11, 1996 to evaluate the SHP sharps container for a
possible exclusive marketing and distribution agreement. This Agreement
prevented the Company from signing distributor agreement with other companies
which therefore limited sales of the sharps container in the second and third
quarter of 1996.
On or about August 26, 1996, the Company entered into an exclusive
distribution agreement with BD relating to the Company's Safety
Cradle(Registered) sharps container products. The distribution agreement grants
BD an exclusive world-wide right to market and distribute the said products for
an initial term of three years, which term may be extended by BD annually
thereafter. The first sales pursuant to the distribution agreement are expected
to occur in the fourth quarter of 1996, after the Company has made modifications
to the said products, which modifications are required by the Agreement. The
Company does not expect substantial sales of the Safety Cradle(Registered)
sharps container products until the first quarter of 1997.
The Company anticipates that commercial production of its SafetyStrip
Lancet(Trademarked), will commence before year end. Provided the necessary FDA
approvals are obtained, of which there is no assurance, the Company anticipates
commercial production of the ExtreSafe(Trademarked) phlebotomy device and
ExtreSafe(Trademarked) catheter will commence in 1997. Commercial production of
the ExtreSafe(Trademarked) syringes is expected to commence in 1998. The
Company's other ExtreSafe(Trademarked) safety 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.
<PAGE>
While most of the Company's products are not yet in the production stage of
development, during 1995 the Company made significant strides toward bringing
its products to market. One of the most pressing needs of the Company during
1995 was the need for additional funding. Management was able to obtain such
funding through the a successful private placement of securities wherein the
Company raised gross proceeds of $8,602,500 (net proceeds of $7,519,060) through
the sale of 4,376,250 shares of Common Stock, 3,110,875 Series A Warrants and
1,290,375 Series B Warrants.
During 1995 the Company also: (1) introduced a revision of the Safety
Cradle(Registered) line of sharps containers, (2) developed prototype models of
the SafetyStrip Lancet(Trademarked) and carrier and completed the blade and
spring design, (3) developed working prototypes of an ExtreSafe(Trademarked)
phlebotomy device, (4) developed two working models of a safety syringe, (5)
developed a model of a safety catheter, (6) initiated trading in the Company's
common stock on the NASDAQ small capitalization market under the symbol SHPI,
(7) received two issued patents, (8) received notice of allowance on four
patents, (9) filed applications for three additional patents, (10) entered into
a joint venture to design and produce an improved filmless, digitized, x-ray
technology using a patented process, and (11) had sales of $447,844.
Based on the above results and in an effort to keep Mr. David A.
Robinson's incentives aligned with those of the stockholders, Mr. Robinson was
granted 300,000 stock options under the Company's NQSOP, received an increase in
annual salary from $120,000 to $240,000, received a $25,000 bonus, received the
right to acquire Earn-Out shares (described hereafter) and received other
compensation of $1,876.
Members of the Compensation Committee are Board Gary W. Farnes and
Robert R. Walker.
Performance Graph
The following performance graph compares the performance of the
Company's Common Stock to the NASDAQ Composite Index ("NCI") and to the S&P
Health Care Index ("HCI"). The graph assumes that the value of the investment in
the Company's Common Stock and each index was $100 at October 31, 1995, the
month during which the Company first had securities registered under section 12
of the Securities Exchange Act of 1934, and that all dividends were reinvested.
As a designer of safety medical products the Company is not easily categorized
with other more specific industry indices.
Cumulative Total Stockholder Return
October 1995 through September 1996
[GRAPHIC OMITTED]
200.00
180.00
160.00
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
10/31 11/30 12/29 1/31 2/29 3/29 4/30 5/31 6/28 7/31 8/30 9/30
95 95 95 96 96 96 96 96 96 96 96 96
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/31/95 11/30/95 12/29/95 1/31/96 2/29/96 3/29/96 4/30/96 5/31/96 6/28/96 7/31/96 8/30/96 9/30/96
- ------ --------------------------------------------------------------------------------------------------------------------------
SHPI $100.00 $170.21 $146.89 $153.19 $134.04 $195.74 $161.70 $140.43 $72.34 $46.81 $46.81 $53.19
NCI $100.00 $102.23 $101.50 $102.24 $106.16 $106.25 $114.85 $119.95 $114.32 $104.24 $104.24 $110.12
HCI $100.00 $104.74 $110.12 $116.17 $114.11 $113.89 $111.54 $115.88 $118.27 $111.83 $111.83 $115.84
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 $100,000
(determined as of December 31, 1995) (the "Named Executive Officers"). The
tables include columns related to stock options.
Summary Compensation Table. The following table provides certain
summary information regarding compensation paid by the Company to the Named
Executive Officers. The amounts set forth were paid by Specialized Health
Products, Inc., and wholly owned subsidiary of the Company ("SHP", for services
rendered to SHP. The Company had no operations and paid no compensation to
management prior to July 28, 1995, when the Company acquired SHP. On that date,
the previous management of the company resigned and the current management, as
described herein, assumed their present positions.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation Awards
Other Restricted
Annual Stock Stock All Other
Name and Salary Bonus Compen- Awards Options/ LTIP Compen-
Principal Position Year ($)(1) ($)(2) sation($) ($) SAR(#) Payouts($) sation($)
------------------ --------- -------- --------- ------ ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David A. Robinson, 1993 --- --- --- --- --- --- ---
President, CEO, Chairman 1994 120,000 --- --- --- 90,000(4) --- ---
of the Board and Director 1995 193,590 25,000 --- (3) 300,000(5) --- 1,876
Bradley C. Robinson, VP, 1993 --- --- --- --- --- --- ---
Operations and Investor 1994 89,128 --- --- --- 90,000(4) --- ---
Relations and Director 1995 148,590 25,000 --- (3) 300,000(5) --- 625
Dr. Gale H. Thorne, VP 1993 --- --- --- --- --- --- ---
Product Development and 1994 16,958 --- --- --- 36,000(6) --- ---
Director 1995 128,333 25,000 --- --- 57,000(5) --- 2,758
</TABLE>
- -------------------
(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.
(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.
(3) David A. Robinson, Bradley C. Robinson and John T. Clarke, the Founders,
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 (the "Earn-Out Shares". The
Founders have the right to divide the Earn-Out Shares among themselves or
their assigns, if earned, based on performance, contributions to the
Company and/or other factors relating to the business success of the
Company. 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
<PAGE>
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 $8,000,000,
then there will be issued that aggregate number of Earn-Out Shares
calculated by subtracting the number of Earn-Out Shares previously issued
or issuable based on the attainment of a lesser Adjusted PTNI in the same
year (if any) from 2,000,000, provided that in no event will an aggregate
of more than 2,000,000 Earn-Out Shares be issued.
(4) These options were exercised on September 1, 1995 and were issued under the
SHP NQSOP.
(5) These options were issued pursuant to the NQSOP. See "Description of
Securities - Outstanding Options."
(6) Options to purchase 18,000 shares of the Company's Common Stock were
exercised on September 1, 1995 and options to purchase 18,000 shares of the
Company's Common Stock become exercisable in July 1996. Said options were
issued under the SHP NQSOP.
(7) These amounts represent the amounts paid by the Company for term life
insurance for the benefit of the Named Executive Officer. The related
insurance policies have no cash surrender values.
Option Grants in Fiscal Year 1995. The following table sets forth
certain information with respect to stock option grants during the year ended
December 31, 1995 to Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR (Adjusted
to Reflect a Recapitalization of the Company's Common Stock
See "Description of Securities")
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------
Potential Realizable
Number of Percent of Value at Assumed
Shares Total Options Exercise Annual Rate of Stock
Underlying Granted to or Base Price Appreciation for
Options Employees in Price Expiration Option Term
Name Granted (#) Fiscal Year ($/Sh) Date 5% 10%
- ---- ---------- ----------- ------- --------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
David A. Robinson 300,000 25.6% 2.00 9/1/2000 $165,769 $366,306
Bradley C. Robinson 300,000 25.6% 2.00 9/1/2000 $165,769 $366,306
Dr. Gale H. Thorne 57,000 4.9% 2.00 9/1/2000 $31,496 $69,598
</TABLE>
- ---------------
<PAGE>
(1) These options were issued pursuant to the NQSOP and were exercisable on
the date of grant.See "Description of Securities-Outstanding Options."
Option Exercises and Year-End Holdings. The following table sets forth
certain information with respect to stock option exercises during the year ended
December 31, 1995, and the number of shares of stock covered by both exercisable
and unexercisable stock options held by each of the Named Executive Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Fiscal Options/SARs at Fiscal
Year-End($) Year-End($)
Shares
Acquired On Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable(3)
<S> <C> <C> <C> <C>
David A. Robinson 90,000 180,000 300,000(1) $2,700,000
Bradley C. Robinson 90,000 180,000 300,000(1) $2,700,000
Gale H. Thorne 18,000 36,000 57,000(1)/18,000(2) $675,000
</TABLE>
- ---------------
(1) Options exercisable at $2.00 per share.
(2) Options become exercisable in July, 1996 at an exercise price of $.39 per
share.
(3) The trading price of the Company's common stock on December 31, 1995 was
$9.00 per share.
Compensation of Directors
During 1994, the non-employee members of the Board 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. The Company has made no other agreements regarding the compensation of
non-executive members of the Board. 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)
<PAGE>
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 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 at the date of grant. The number of shares, terms and
exercise period are determined by the Board 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 a nonaffiliated stockholder of the
Company, warrants to purchase 45,000 shares of Common Stock at $1.67 per share.
Said warrants were issued to said stockholder in consideration for funds paid to
SHP. The options issued under the SHP NQSOP expire in 1999 and the warrant
issued to the nonaffiliated stockholder 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.
<PAGE>
2. Proposal to Ratify the Appointment of Independent Auditors
On October 14, 1996 the Board elected to retain Arthur Andersen LLP ("AA")
as its independent auditor. From November 10, 1995 to October 14, 1996 KPMG Peat
Marwick LLP ("KPMG") had acted as the Company's independent auditor and Nielson,
Grimmett & Company ("NGC") had acted as the Company's independent auditor prior
thereto. The Company does not expect representatives of either AA or KPMG to be
present at the Company's 1996 Annual Meeting of Stockholders. The Company's
decisions to change auditors was recommended by the Board in each instance.
The report of NGC on the financial statements of the Company for the
fiscal year in the period ended December 31, 1994 and the report of KPMG on the
financial statements of the Company for the two fiscal years ended December 31,
1995, 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 changes in auditors, there were no disagreements
with NGC or KPMG 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 or KPMG ever presented a written report, or
otherwise communicated in writing to the Company or the Board 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 KPMG
and the Company has authorized KPMG to respond fully to the inquiries of AA.
Both NGC and KPMG have provided the Company with letters addressed to the SEC,
as required by Item 304(a)(3) of Regulations S-K, which letters have been filed
with the SEC.
Approval of the proposal requires the affirmative vote of a majority of
the shares voted.
THE BOARD RECOMMENDS APPROVAL OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT AUDITOR.
3. Amendment of Certificate of Incorporation
At a meeting held on October 12, the Board adopted a resolution to
amend, subject to stockholder approval, the Certificate of Incorporation to
authorize the Board to make, alter and repeal the Bylaws of the Company, subject
to the power of the stockholders of the Company to alter or repeal any Bylaw
whether adopted by them or otherwise. Bylaws presently provide that they may be
altered or repealed by the Board, whereas the Certificate of Incorporation is
presently silent on the issue. The purpose of the proposed amendment is to
memorialize the above referenced proposal in both the Bylaws and Certificate of
Incorporation.
If the Certificate of Incorporation is amended to authorize the Board
to amend the Bylaws, the Board will consider the following amendments to the
Bylaws.
Special Meetings and Removal of Directors
The Board will consider amending Article III Section 4 to provide that
special meetings of the stockholders may be called at any time by the Board, the
Chairman of the Board, the Chief Executive Officer or the President of the
Company, but such special meetings may not be called by any other person or
persons. The proposed revisions to Article III Section 4 and Article IV Section
8 will not materially effect on the governance of the Company or the rights of
the stockholders because substantially similar provisions already exist in the
<PAGE>
Company's Certificate of Incorporation. The purpose of the proposed amendments
to Article III Section 4 and Article IV Section 3 is to make the Company's
Bylaws consistent with its Certificate of Incorporation.
Number of Directors
Article IV Section 1 of the Bylaws currently states that the number of
directors shall be no less than one in number or such other minimum number as is
required by law. At the Company's last stockholder meeting, six directors were
elected by the stockholders and the Company's Certificate of Incorporation was
amended to divide the Board into three classes. Each such class to consist, as
nearly as may be possible, of one-third of the total number of directors. The
Bylaws, however, were never formally amended to reflect an increased number of
authorized directors or division of the Board into three classes.
The Board will consider increasing the number of authorized Board
members in the Bylaws to nine. This will leave three directorships vacant. The
newly created directorships may be filled by a vote of the majority of the
directors or by a vote of the stockholders unless the vacancy has been
previously filled by the Board. The purpose and intent of the Board in
recommending nine directorships is to allow the Company, if and when
opportunities are presented, to offer directorships to highly qualified people
that may assist the Company in its financing, operations and other activities.
Disallowed Compensation
Article IX Section 5 of the Bylaws currently provides that if any
salary, commission, bonus, interest, rent, travel or entertainment expense is
disallowed in whole or in part as a deductible expense by the Internal Revenue
Service, then the employee recipient shall reimburse the Company to the full
extent of the disallowance. In the ordinary course of business companies will
often incur expenses that are not deductible in whole or in part. The Board will
consider eliminating Article IX Section 5 from the Bylaws. The Board believes
that any decision to do otherwise will likely have a chilling effect on the
Company's ability to attract and keep skilled officers, employees and directors.
THE BOARD RECOMMENDS APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF
INCORPORATION.
5. Other Matters
Discretionary Authority
At the time of mailing of this proxy statement, the Board was not aware
of any other matters which might be presented at the meeting. If any matter not
described in this Proxy Statement should properly be presented, the persons
named in the accompanying proxy form will vote such proxy in accordance with
their judgment.
Notice Requirements
Any stockholder who desires to have a proposal included in the
Company's proxy soliciting material relating to the Company's 1997 annual
meeting of stockholders should send to the Secretary of the Company a signed
notice of intent. This notice, including the text of the proposal, must be
received no later than February 15, 1997.
Annual Report
This Proxy Statement has been preceded or accompanied by an Annual
Report for the fiscal year ended December 31, 1995. Stockholders are referred to
such report for financial and other information about the activities of the
Company, but such report is not to be deemed a part of the proxy soliciting
material.
<PAGE>
Expenses and Methods of Solicitation
The expenses of soliciting proxies will be paid by the Company. In
addition to the use of the mails, proxies may be solicited personally, or by
telephone or other means of communications, by directors, officers and employees
of the Company and its subsidiaries, who will not receive additional
compensation therefor. Arrangements will also be made with brokerage firms and
other custodians, nominees and fiduciaries for the forwarding of proxy
solicitation material to certain beneficial owners of the Company's common
stock, and the Company will reimburse such forwarding parties for reasonable
expenses incurred by them.
By order of the Board of Directors,
By
J. Clark Robinson, Secretary
<PAGE>
PROXY CARD
for
ANNUAL MEETING OF STOCKHOLDERS
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
---------------
(Date)
This Proxy is Solicited on Behalf of the Board of Directors. The undersigned
hereby appoints David A. Robinson as Proxy, with the power to appoint his
substitute and hereby authorize them to represent and to vote, as disignated
below, all the shares of common stock of Specialized Health Products
International, Inc. held on record by the undersigned on November 8, 1996 at the
annual meeting of stockholders to be held on December 4, 1996 or any adjournment
thereof.
1. Election of Nominee Directors
[ ] FOR Gary W. Farnes [ ] WITHHOLD AUTHORITY to vote for Gary W. Farnes
[ ] FOR Robert R. Walker [ ] WITHHOLD AUTHORITY to vote for Robert R. Walker
2. Proposal to approve the appointment of Arthur Andersen LLP as the independent
public accounts of the corporation.
[ ] For [ ] Against [ ] Abstain
3. Proposal to amend of Company's Certificate of Incorporation.
[ ] For [ ] Against [ ] Abstain
4. In their discretion, the Proxy is authorized to vote upon such other business
as may property come before the meeting.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder(s). If no directions
are made, this proxy will be voted for the above Proposals.
Please sign below. When shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporation name
by President or other authorized officer. If a partnership, please sign
in partnership name by authorized person.
Dated: _______________________, 1996 ____________________________
(signature)
_____________________________
(signature if held jointly)
_____________________________
(print name of stockholder(s)
Please mark, sign, date and return the
proxy card promptly using the enclosed
envelope.
