FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
Quarterly Report Pursuant Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarterly Period Ended March 31, 1996
Commission File Number 0-26694
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 93-0945003
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)
655 East Medical Drive, Bountiful, Utah 84010
(Address of principal executive offices)
(Zip Code)
(801) 298-3360
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes ___ No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding as of May 14, 1996
Common Stock, $.02 par value 8,589,153
<PAGE> 2
PART I _ FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.,
Consolidated Balance Sheets
<CAPTION>
March 31, December 31,
Assets 1996 1995
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,551,243 4,251,584
Accounts receivable 12,717 350,718
Related party receivable 107,418 122,850
Finished goods inventory 19,187 16,322
Prepaid expenses and other 115,071 34,017
----------------------------------
Total current assets 3,805,636 4,775,491
----------------------------------
Property, plant, and equipment, 1,057,835 820,245
at cost
Less accumulated depreciation 14,201 8,196
and amortization ----------------------------------
Net property, plant, and 1,043,634 812,049
equipment
Other assets, at cost 456,146 453,502
Less accumulated amortization 106,911 90,314
----------------------------------
Net other assets 349,235 363,188
Total assets $ 5,198,505 5,950,728
==================================
Liabilities and Stockholders'
Equity (Deficit)
Current liabilities:
Accounts payable 87,665 134,449
Accrued expenses 402,245 446,474
-----------------------------------
Total current liabilities 489,910 580,923
-----------------------------------
Stockholders' equity:
Preferred stock, $.001 par value
in 1995 and $.389 par value in
1994. Authorized 5,000,000 - -
shares; no shares issued in
1995 and 1,440,000 shares
issued and outstanding in 1994
Common stock, $.02 par value in
1995 and no par value in 1994.
Authorized 50,000,000 shares; 171,333 171,333
issued and outstanding
8,566,653 shares in 1995 and
1,363,500 shares in 1994
Common stock subscription (209,200) (259,500)
receivable
Additional paid-in capital 9,316,028 9,316,028
Accumulated deficit (4,569,566) (3,858,056)
------------------------------------
Net stockholders' equity 4,708,595 5,369,805
------------------------------------
Total liabilities and $ 5,198,505 5,950,728
stockholders' equity ======================================
</TABLE>
<PAGE> 3
<TABLE>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
Consolidated Statements of Operations
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
--------------------------------
<S> <C> <C>
Sales $ 16,621 82,612
Cost of sales 19,756 36,848
--------------------------------
Gross profit (loss) (3,135) 45,764
Expenses:
General and administrative 463,749 308,261
expense
Research and development expense 319,883 101,079
--------------------------------
Total expenses 783,632 409,340
Operating loss (786,767) (363,576)
Interest income (expense) 50,257 (9,026)
Other Income 25,000 -
Net loss $ (711,510) (372,602)
=================================
Net loss per common share $ (.08) (.27)
Weighted average number of shares
used for net loss per share 8,566,653 1,363,500
computation
</TABLE>
<PAGE> 4
<TABLE>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
Three months ended
March 31, March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (711,510) (372,602)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization 22,602 16,495
Common stock issued for services - 5,000
Changes in operating assets and
liabilities:
Decrease (increase) in accounts 338,001 (74,822)
receivable
Increase in prepaid expenses and (81,054) (16,892)
other assets
Increase in inventory (2,865) (23,010)
Decrease in related party 15,432
receivable
Decrease in accounts payable and (91,013) (649)
accrued liabilities -------------------------------
Net cash used in operating (510,407) (466,480)
activities -------------------------------
Cash flows from investing activities:
Capital expenditures (237,590) (112,952)
Acquisition of patents and (2,644) (25,654)
technology -------------------------------
Net cash used in investing (240,234) (138,606)
activities -------------------------------
Cash flows from financing activities:
Payments on line of credit - (40,000)
Loans from stockholders - 49,000
Proceeds from issuance of common - 190,000
stock
Proceeds from issuance of preferred - 604,001
stock
Proceeds from stock subscriptions 50,300 -
receivable -------------------------------
Payments on bank overdraft - (10,675)
-------------------------------
Net cash provided by financing 50,300 792,326
activities -------------------------------
Net increase (decrease) in cash (700,341) 187,240
Cash at beginning of period 4,251,584 (10,675)
-------------------------------
Cash at end of period $ 3,551,243 187,240
===============================
Supplemental Disclosures of Noncash
Investing and Financing
Activities:
Dividends on redeemable preference $ - 5,400
stock
</TABLE>
<PAGE> 5
SPECIALIZED HEALTH PRODUCT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Financial Statements
The accompanying financial statements have been prepared by the
Company without an audit. In the opinion of management, all
adjustments necessary to present fairly the financial position,
results of operation and cash flows at March 31, 1996, and for
all periods presented have been made.
It is suggested that these condensed financial statements be
read in conjunction with the financial statements and notes
thereto included in the Company's December 31, 1995 audited
financial statements. The results of operations for the periods
ended March 31, 1996 and 1995 are not necessarily indicative of
the operating results for the full fiscal year. The accounting
policies followed by the Company are set forth in Note 1 to the
Company's financial statements in its 1995 Form 10-K.
Item 2. 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 Specialized
Health Products, Inc. (a wholly owned subsidiary), on a
consolidated basis, except where the context clearly indicates to
the contrary
Overview
From its inception, the Company has incurred losses from
operations. As of March 31, 1996, the Company had cumulative net
losses totaling $4,569,566. During the three months ended March
31, 1996, the Company's principal focus has been the design,
development, testing, and evaluation of its Safety Cradler sharps
containers, SafetyStrip(tm) lancet, ExtreSafe(tm) medical needle
technology, intravenous flow gauge system, blood collection
device, and other products, and the improvement of its molds and
production processes relating to its Safety Cradle(R) sharps
containers.
Financial Position
The Company had $3,551,243 (cash and cash equivalents) in
cash as of March 31, 1996. This represented a decrease of
$700,341 over the fiscal year end December 31, 1995. Working
capital as of March 31, 1996 also decreased to $3,315,726 as
compared to $4,194,568 for the fiscal year ended December 31,
1995. These decreases were largely due to the to the Company's
$711,510 net loss for the three months ended March 31, 1996 and
$237,590 in capital expenditures during the three months ended
March 31, 1996.
Results of Operations
During the three months ended March 31, 1996 the Company had
sales of $16,621 compared with sales of $82,612 during the three
months ended March 31, 1995. All of said sales relate to the
Company's sharps container products which is the only product the
Company is currently selling. Sales during the three months
ended March 31, 1996 were hampered due to improvements that were
being made to the molds used to produce the Company's sharps
container products which improvements have been completed.
The Company's trade accounts receivable were $12,717 at March
31, 1996, compared with $350,718 at December 31, 1995. 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.
Research and development expenses were $319,883 for the three
months ended March 31, 1996, compared with $101,079 for the three
months ended March 31, 1995. The Company's efforts in the three
months ended March 31, 1996, were focused on refining the design
and molds for its Safety Cradle(R) sharps container products, and
upon the design and development of its SafetyStrip(TM) and
ExtreSafe(TM) medical needle technology, intravenous flow gauge
system, and blood collection device. The Company's efforts in
the three months ended March 31, 1995, were focused on refining
the design and producing molds for its Safety Cradle(R) sharps
container products.
General and administrative expenses were $463,749 for the three
months ended March 31, 1996, compared to $308,261 for the three
months ended March 31, 1995. The increased costs resulted
largely from the increases in expenditures in two principle
areas. First, salaries and benefits increased from $84,454 for
the three months ended March 31, 1995 to $165,672 for the three
months ended March 31, 1996. 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, including executive officers. Next,
legal, accounting, financial advisory and other professional and
consulting fees increased from $47,452 for the three months ended
March 31, 1995 to $92,982 for the three months ended March 31,
1996. The increase in costs was primarily from accounting and
legal expenses associated with the filing of an amended Form S-1
registration statement and Form 10-K, the hiring and payment of
the Company's exclusive financial advisor, and expenses
associated with litigation.
Net interest income was $50,257 for the three months ended
March 31, 1996 compared with net other expense of $9,026 for the
three months ended March 31, 1995. The other income for the
three months ended March 31, 1996 is comprised primarily of
interest earned on cash and cash equivalents. The other expense
relates primarily to the accrued interest on certain notes
payable and the interest on the Company's line of credit.
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 March 31, 1995, the Company had received net cash from
financing activities approximately $9,100,000 through financing
activities.
The Company's working capital and other capital requirements
during the next year or more will vary based upon a number of
factors, including the cost to complete development and bring the
SafetyStrip(TM) and ExtreSafe(TM) 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. At March 31, 1996, the Company had committed to
spend $103,805 during fiscal 1996 on projects relating to the
development and manufacture of its products. At said date, the
Company had also prepaid $115,071 in expenses which primarily
relate to prepaid financial advisory fees. The Company believes
that the funds described above and funds generated from the sale
of its Safety Cradler 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
Cradler 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.
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.
Furthermore, manufacturing delays may result from additional mold
redesigns or delays may result from the failure to timely obtain
FDA approval to sell future products. As a result, the Company's
actual future operations could differ significantly from those
discussed in the forward-looking statements.
PART II _ OTHER INFORMATION
Item 1. 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.
The Registrant is not involved in any other legal
proceedings.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Securityholders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a)
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT
NO.
3(i).1 Restated Certificate of Incorporation of the
Company. (Incorporated by reference
to Exhibit 3(i).1 of the Company's Current Report on
Form 8-K,
dated July 28, 1995.)
3(i).2 Articles of Incorporation of Specialized Health
Products, Inc. ("SHP")
3(i).3 Articles of Amendment of SHP
3(ii).1 Bylaws of the Company
3(ii).2 Bylaws of SHP
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
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
In a report filed on Form 8-K, dated March 5,
1996, to report the resignation of two members of the Company's
Board of Directors. Said resignation were due to personal
reasons and Item 6 disclosure was not required.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
SPECIALIZED HEALTH PRODUCTS
INTERNATIONAL, INC.:
Date: May 13, 1996 By /s/ David A. Robinson
-----------------------------
David A. Robinson
President, Chief Executive
Officer, Director
Date: May 13, 1996 By /s/ J. Clark Robinson
---------------------------------
J. Clark Robinson
Chief Financial Officer,
Director
EXHIBIT 3(i).1
Restated Certificate of Incorporation of the Company
(Incorporated by reference to Exhibit 3(i).1 of the Company's
Current Report of
Form 8-K, dated July 28, 1995.)
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(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
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 shareholders
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
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.
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.
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 compensation,
and require from them security for faithful service.
(b) To conduct, manage and control the affairs and business
of the corporation, and to make such rules and regulations
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, hypothecations or
other evidence of debt and securities therefor.
(f) To appoint an executive committee and other committees,
and to delegate to the executive committee any of the powers and
authority of the board in the management of the business 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.
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 directors. 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 meetings
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.
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.
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.
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 secretary
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.
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 principal
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 certificates
issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
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 corporation
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.
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 Corporations.
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.
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
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 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)
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
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
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.
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.
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
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").
(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, 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 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 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 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, 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 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 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 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 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 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 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
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 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:
(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
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
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.
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 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
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.
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.
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.
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.
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.
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.
IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be duly executed.
SPECIALIZED HEALTH PRODUCTS, EMPLOYEE:
INC:
By:____________________________
_______________________________
Its:
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
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.
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
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:
(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.
(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.
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
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.
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.
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.
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.
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
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.
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.
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.
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
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.
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.
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.
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
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
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
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
Appendix A
Letter of Intent
Dated: January 7, 1995
January 7, 1994
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.
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
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.
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.
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.
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.
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.
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, 1994.
The foregoing Letter of Intent is hereby accepted in
accordance with the terms and conditions contained therein.
Dated this10th day of January, 1994.
ZERBEC, INC.:
By /s/ Charles
Becker_________________ Charles Becker
Its president
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.
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
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)
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 10
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.
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.
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (711,510)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
