SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as
[ ] Definitive Additional Materials permitted by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
(Name of Registrant as Specified In Its Charter)
---------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
585 West 500 South
Bountiful, Utah 84010
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
October 22, 1998
NOTICE is hereby given that the Annual Meeting of Stockholders of
Specialized Health Products International, Inc. (the "Company") will be held at
Little America Hotel and Towers, 500 South Main Street, Salt Lake City, Utah
84101, at 10:00 a.m. (local time) on October 22, 1998, for the following
purposes:
1. To elect one member of the Board of Directors for the term expiring at
the 2001 annual meeting of stockholders.
2. To consider approving the Specialized Health Products International,
Inc. 1998 Stock Option Plan.
3. To transact such other business as may properly come before such
meeting or any adjournments thereof.
The record date for the meeting is the close of business on August 27,
1998 and only the holders of Common Stock of the Company on that date will be
entitled to vote at such meeting or any adjournment thereof.
By order of the Board of Directors
/s/ Charles D. Roe
----------------------------------
Secretary
August 31, 1998
Please Return Your Signed Proxy
PLEASE COMPLETE AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. THIS
WILL NOT PREVENT YOU FROM VOTING IN PERSON AT THE MEETING. IT WILL, HOWEVER,
HELP ASSURE A QUORUM AND AVOID ADDED PROXY SOLICITATION COSTS.
<PAGE>
PROXY STATEMENT
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
585 West 500 South
Bountiful, Utah 84010
ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 22, 1998
INTRODUCTION
This Proxy Statement is being furnished to holders of Specialized
Health Products International, Inc. (the "Company") common stock, par value
$0.02 per share ("Common Stock"), in connection with the solicitation of proxies
by the Company for use at the Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held at Little America Hotel and Towers, 500 South Main
Street, Salt Lake City, Utah 84101, at 10:00 a.m. (local time) on October 22,
1998, and at any adjournment(s) or postponement(s) thereof. This Proxy
Statement, the enclosed Notice and the enclosed form of proxy are being first
mailed to stockholders of the Company on or about August 31, 1998.
VOTING AT THE ANNUAL MEETING
The Board of Directors of the Company (the "Board") has fixed the close
of business on August 27, 1998, as the record date (the "Record Date") for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting. As of the Record Date, there were outstanding 12,356,440 shares of the
Company's Common Stock held by approximately 329 holders of record. On the
Record Date there were no shares of the Company's Common Stock held as treasury
stock by the Company. Holders of record of the Company's Common Stock on the
Record Date are entitled to cast one vote per share, exercisable in person or by
properly executed proxy, with respect to each matter to be considered by them at
the Annual Meeting. The presence, in person or by properly executed proxy, of
the holders of a majority of the outstanding shares of the Company's Common
Stock is necessary to constitute a quorum at the Annual Meeting.
Common Stock will be voted in accordance with the instructions
indicated in a properly executed proxy. If no instructions are indicated, such
stock will be voted as recommended by the Board. If any other matters are
properly presented to the Annual Meeting for action, the person(s) named in the
enclosed form(s) of proxy and acting thereunder will have discretion to vote on
such matters in accordance with their best judgment. Broker non-votes and
abstentions are not treated as votes cast for purposes of any of the matters to
be voted on at the meeting. A stockholder who has given a proxy may revoke it by
voting in person at the meeting, or by giving written notice of revocation or a
later-dated proxy to the Secretary of the Company at any time before the closing
of the polls at the meeting. Any written notice revoking a proxy should be sent
to Specialized Health Products International, Inc., 585 West 500 South,
Bountiful, Utah 84010, Attention: Mr. Charles D. Roe, Secretary.
The Company's Bylaws require the affirmative vote of a plurality of the
votes cast at the meeting for the election of directors and the affirmative vote
of a majority of the votes cast at the meeting for the approval of the
Specialized Health Products International, Inc. 1998 Stock Option Plan. The
Board recommends that holders of the Company's Common Stock vote FOR the
approval of election of the directors proposed by the Board and FOR the approval
of the Specialized Health Products International, Inc. 1998 Stock Option Plan.
<PAGE>
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
1. Election of Directors
Board of Directors
The Company's Board is divided into three classes. One class of
directors is elected at each annual meeting of stockholders for a three-year
term. Each year a different class of directors will be elected on a rotating
basis. The term of David A. Robinson expires in 1998. The terms of David T.
Rovee and Robert R. Walker will expire in 1999 and the terms of Dr. Gale H.
Thorne and Bradley C. Robinson will expire in 2000.
At this meeting one director has been nominated by the Board for
election to the class whose term expires at the 2001 annual meeting. The person
nominated is David A. Robinson, who is currently a director of the Company.
Unless otherwise specified, proxy votes will be cast for the election
of the nominee as director. If any such person should be unavailable for
election, the Board may designate a substitute nominee. It is intended that
proxy votes will be cast for the election of such substitute nominee.
Stockholder nominations of persons for election as directors are subject to the
notice requirements described under the caption "Other Matters" appearing later
in this proxy statement. Election of the nominee director requires the
affirmative vote of a plurality of the votes cast at the meeting for the
election of directors.
The following pages contain information concerning the nominees and the
directors whose terms of office will continue after the meeting. Unless the
context otherwise requires, all references in this Proxy to the "Company" shall
mean Specialized Health Products International, Inc. ("SHPI") and its
subsidiaries, Specialized Health Products, Inc. ("SHP"), Specialized Cooperative
Corporation and Iontophoretics Corporation, on a consolidated basis and, where
the context so requires, shall include its predecessors.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION AS A DIRECTOR OF THE NOMINEE NAMED
HEREIN.
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Set forth below is certain information concerning each of the directors
and executive officers of the Company as of August 20, 1998.
<TABLE>
<CAPTION>
With the
Name Age Position Company Since
---- --- -------- -------------
<S> <C> <C> <C>
David A. Robinson (1) 55 President, Chairman of the Board, Chief 1993
Executive Officer and Director
Bradley C. Robinson (1) 29 Vice President - Business Development and 1993
Director
Dr. Gale H. Thorne(1) 66 Vice President - Product Development and 1994
Director
Charles D. Roe 47 Vice President - Finance and Investor 1997
Relations, Chief Financial Officer,
Secretary and Treasurer
Dr. David T. Rovee(2) 59 Director 1998
Robert R. Walker(2) 68 Director 1994
- ---------------
</TABLE>
(1) Member of Executive Committee.
(2) Member of Audit and Compensation Committees.
David A. Robinson. Mr. Robinson is the President, Chief Executive
Officer and Chairman of the Board of the Company. He has been a director and
officer of the Company since November 1993. From November 1992 to November 1993,
Mr. Robinson was President of EPC Products, Inc., a distribution company based
in Bountiful, Utah. From 1981 to 1992, Mr. Robinson was President of Royce
Photo/Graphics Supply, Inc., a distributor of photographic and graphic arts
equipment and supplies based in Glendale, California. He holds a Masters degree
in Business Administration and a Masters degree in Management Science from the
University of Southern California. Mr. Robinson is an uncle of Bradley C.
Robinson, Vice President - Business Development and a director of the Company.
Bradley C. Robinson. Mr. Robinson is the Vice President - Business
Development of the Company. He has been a director and officer of the Company
since November 1993. From November 1992 to November 1993, Mr. Robinson was Vice
President of EPC Products, Inc., a distribution company based in Bountiful,
Utah. Mr. Robinson is a nephew of David A. Robinson, President, Chief Executive
Officer, Chairman of the Board and a director of the Company.
Dr. Gale H. Thorne. Dr. Thorne is the Vice President - Product
Development, for the Company. He has been a director since January 1995, and has
held his present position as Vice President - Product Development, since October
1994. From 1993 to 1994, Dr. Thorne was a Vice President - Engineering, of
Eneco, Inc., a Utah company. During Dr. Thorne's tenure at Eneco, Inc., the
company was engaged primarily in the business of prosecuting patent applications
relating to the cold-fusion technology. From 1989 to 1993, Dr. Thorne was
employed as a patent consultant and patent agent with Foster & Foster, a Salt
Lake City intellectual property law firm. Dr. Thorne holds twenty-seven patents
and has published numerous technical publications. He has been a technical
consultant and a member of the Board of the Small Business Innovation Program of
the State of Utah. Dr. Thorne manages all the patent and product development
work for the Company and is a patent agent. He holds a Ph.D. in Biophysics from
the University of Utah. He is a past president of Thorne, Smith, Astill, Inc.,
an engineering director for Becton, Dickinson and Company Immunochemistry
Division and a vice president and division manager for Varian and Diasonics
Ultrasound.
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Charles D. Roe. Mr. Roe is the Chief Financial Officer, Vice President
- - Finance and Investor Relations, Secretary and Treasurer of the Company. He was
appointed to his position as Chief Financial Officer and Vice-President in
November 1997, he was appointed as Secretary and Treasurer in December 1997 and
he has been with the Company since October 1997. Mr. Roe is a certified public
accountant licensed in the State of Utah and has principally been engaged in the
practice of public accounting since 1976, including four years with Arthur
Andersen LLP. From June 1995 through October 1997, Mr. Roe worked in association
with Jones, Jensen & Co., a certified public accounting firm which is a member
of the McGladrey Network of accounting firms, specializing in audits of public
companies. Mr. Roe was employed by Wellshire Services, Inc. from June 1993 to
June 1995 providing various services to numerous public and private companies in
the United States and Europe. From 1987 to October 1997, Mr. Roe has owned
operated a public accounting practice focusing on financial audits, individual
and corporate income tax consultation and preparation and other advisory
services. Since 1987, Mr. Roe has served on the board of directors and as
secretary of Covington Capital Corporation, a privately owned financing
business. From June 1995 through November 1996, Mr. Roe was employed by that
company providing management services to various companies financed by Covington
Capital Corporation. Mr. Roe graduated from the University of Utah with a
Bachelors of Arts degree in Accounting.
Dr. David T. Rovee. Dr. Rovee has been a director of the Company since
April 1998. He is currently President and Chief Operating Officer of
Organogenesis, Inc., a publicly traded biotechnology company. Dr. Rovee has been
employed full time with Organogenesis, Inc. since 1991. Prior to his employment
with Organogenesis, Inc., Dr. Rovee was employed for a twenty-five year period
by Johnson & Johnson in various capacities including Vice President and director
of research and development for Johnson & Johnson Patient Care, Inc. Dr. Rovee
has a bachelors degree in biology from Memphis State University, a masters
degree in zoology from Louisiana State University and a Ph.D. in development
biology from Brown University.
Robert R. Walker. Mr. Walker is a director of the Company and has been
since March 1994. He is currently self-employed as a consultant in the health
care industry primarily in the area of start-up medical device companies. From
1976 to 1992, Mr. Walker was employed by IHC Affiliated Services Division of
Intermountain Health Care, a regional hospital company, from which he retired as
President of IHC Affiliated Services. He is also a former Chairman of the Board
of AmeriNet, Inc., which is a national group purchasing organization for
hospitals, clinics, detox/drug centers, emergency, nursing homes, private
laboratories, psychiatric centers, rehabilitation facilities, surgical centers
and institutions such as schools and prisons. Mr. Walker is a member of the
American Hospital Association and the Hospital Financial Management Association.
He holds a Bachelor of Science degree in Business Administration.
Executive officers of the Company are elected by the Board on an annual
basis and serve at the discretion of the Board.
Board Committees
The Board has an Executive Committee, Audit Committee and Compensation
Committee. The Board does not have a nominating committee.
The Executive Committee held thirteen meetings during the fiscal year
ended December 31, 1997. The Executive Committee has most of the power of the
Board and can act when the Board is not in session. Members of this Executive
Committee are Mr. David A. Robinson, Mr. Bradley C. Robinson and Dr. Gale H.
Thorne.
The Company's Audit Committee was organized in April 1998 and, hence,
did not meet in 1997. The function of the Audit Committee is (a) to review the
professional services and independence of the Company's independent auditors and
the scope of the annual external audit as recommended by the independent
auditors, (b) to ensure that the scope of the annual external audit is
sufficiently comprehensive, (c) to review, in consultation with the independent
auditors, the plan and results of the annual external audit and the adequacy of
the Company's internal control systems, (d) to review, with management and the
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<PAGE>
independent auditors, the Company's annual financial statements, financial
reporting practices and the results of each external audit, and (e) to undertake
reasonably related activities to those set forth in clauses (a) through (d)
above.
The Company's Compensation Committee was organized in April 1998 and,
hence, did not meet in 1997. The Compensation Committee administers the
Company's stock option plan, establishes a general compensation policy for the
Company and, except as prohibited by applicable law, may take any and all
actions that the Board could take relating to the compensation of employees,
directors and other parties.
Board Meetings and Directors' Attendance
The Board held six meetings and took action by unanimous consent on
eight occasions during the fiscal year ended December 31, 1997. To date during
1998, the Board has held five meetings and took action by unanimous consent six
occasions. No incumbent director attended fewer than 75 percent of the Board
meetings held or fewer than 75 percent of the committee meetings held by
committees on which an incumbent director served during the fiscal year ended
December 31, 1997 or to date during 1998.
Certain Relationships And Related Transactions
Dr. Gale H. Thorne, a director and officer of the Company, was entitled
to a royalty of two and one-half percent on the Company's gross revenues
received from the sale of products utilizing the ExtreSafe(R) medical needle,
blood collection device and intravenous flow gauge technologies (collectively,
the "Thorne Products"). These royalties were agreed to in 1994 in exchange for
Dr. Thorne's assignment to the Company of intellectual property rights he owned
prior to his involvement with the Company, which intellectual property rights
relate to the Thorne Products. In addition, the Company was required under the
agreement to pay Dr. Thorne minimum royalty payments of not less than $435,000
over a six year period beginning in 1998. Minimum royalty payments in 1998 and
1999 would have totaled in the aggregate $195,000. In January 1998, Dr. Thorne
released the Company from all royalty obligations relating to Thorne Products in
exchange for the issuance to Dr. Thorne and his assigns warrants to purchase
750,000 shares of the Company's Common Stock.
The law firm of Blackburn & Stoll, LC provides legal services to the
Company. Eric L. Robinson, a member of that firm, is the brother of Bradley C.
Robinson.
In January 1997, David A. Robinson, a director and officer of the
Company exercised options to purchase 87,500 shares of the Company's Common
Stock in order to provide needed working capital for the Company. Mr. Robinson
obtained the funds to exercise the options by margining shares of the Company's
stock that he owned with all of the proceeds from the margin transaction going
to the Company. In August 1997, his margin was called and Mr. Robinson borrowed
$182,577 from the Company to pay the margin call. In December 1997, Mr. Robinson
repaid in full the $182,577 principal amount plus interest thereon at eight
percent per annum.
In December 1997, the Company entered into a development and license
agreement (the "J&J Agreement") with Johnson & Johnson Medical, Inc. to
commercialize two applications of the ExtreSafe(R) safety needle technology. The
J&J Agreement provides for monthly development payments by J&J, sharing of
international field related patent costs, payments for initial periods of low
volume manufacturing, an ongoing royalty stream and a J&J investment in molds,
assembly equipment and other capital costs related to commercialization of each
product. The J&J Agreement also provides for an ongoing joint cooperative
program between the Company and J&J which derives future funding directly from
sales of Company created products, low volume manufacturing revenue for the
Company and an ongoing royalty stream for additional safety products which are
jointly approved for development. In 1998, two additional products were approved
for development under the joint cooperative program. Accordingly, a total of
four products are being developed and commercialized currently in conjunction
with the J&J Agreement. In connection with the J&J Agreement, Johnson & Johnson
Development Corporation purchased $2,000,000 of Company securities in a private
placement that closed in January 1998.
5
<PAGE>
Security Ownership of Management and Certain Beneficial Owners
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company as of August 20, 1998,
for: (i) each person who is known by the Company to beneficially own more than 5
percent of the Company's Common Stock, (ii) each of the Company's directors,
(iii) each of the Company's Named Executive Officers (defined below), and (iv)
all directors and executive officers as a group. As of August 20, 1998, the
Company had 12,356,440 shares of Common Stock outstanding.
<TABLE>
<CAPTION>
Name and Address Shares Beneficially
of Beneficial Owner(1) Owned(2) Percentage of Total(2) Position
- ---------------------- -------- ---------------------- --------
<S> <C> <C> <C>
David A. Robinson(3) 652,619 5% President, CEO, Chairman of
the Board and Director
Bradley C. Robinson(4) 645,150 5% Vice President - Business
Development and Director
Dr. Gale H. Thorne(5) 386,657 3% Vice President - Product
Development and Director
Dr. David T. Rovee(6) -- -- Director
Robert R. Walker(7) 113,000 1% Director
Executive Officers and 1,797,426 14%
Directors as a Group (five
persons)
Johnson & Johnson 2,000,000 15%
Development Corporation(8)
One Johnson & Johnson
Plaza, New Brunswick, NJ
08933
Asdale Ltd (9) 1,500,000 11%
44 Lowndes Street
London, England
- --------------
</TABLE>
(1) Except where otherwise indicated, the address of the beneficial owner is
deemed to be the same address as the Company.
(2) Beneficial ownership is determined in accordance with SEC rules and
generally includes holding voting and investment power with respect to the
securities. Shares of Common Stock subject to options or warrants currently
exercisable, or exercisable within 60 days, are deemed outstanding for
computing the percentage of the total number of shares beneficially owned
by the designated person, but are not deemed outstanding for computing the
percentage for any other person. Also note that the Series A and Series B
Warrants referenced in the footnotes below expired in July 1998.
(3) Includes 417,719 shares and stock options to purchase 212,500 shares. Also
includes 22,400 shares purchased through the Company's 401(k) plan. Does
not include the earn-out shares. See "--Long-Term Incentives and Executive
Compensation."
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<PAGE>
(4) Includes 330,219 shares and stock options to purchase 300,000 shares. Also
includes 14,931 shares purchased through the Company's 401(k) plan. Does
not include the earn-out shares. See "--Long-Term Incentives and Executive
Compensation."
(5) Includes 18,000 shares, stock options to purchase 115,000 shares, Series A
Warrants to purchase 15,000 shares and other warrants to purchase 200,000
shares. Also includes 25,000 shares that Dr. Thorne is deemed to
beneficially own through a trust and 13,657 shares purchased through the
Company's 401(k) plan. See "Certain Relationships and Related
Transactions."
(6) Does not include stock options to purchase 5,000 shares that vest in
December 1998.
(7) Includes stock options to purchase 50,000 shares. Also includes 63,000
shares that Mr. Walker is deemed to beneficially own through a trust. Does
not include stock options to purchase 5,000 shares that vest in December
1998.
(8) Includes 1,000,000 shares and 1,000,000 Series D Warrants that become
exercisable on October 1, 1998.
(9) Includes 750,000 shares and 750,000 Series D Warrants that become
exercisable on October 1, 1998.
The Company is not aware of any arrangements, the operation of which
may, at a subsequent date, result in a change in control of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
The members of the Board, the executive officers of the Company and
persons who hold more than ten percent of the Company's Common Stock are subject
to reporting requirements of Section 16(a) of the Securities Exchange Act of
1934, which require them to file reports with respect to their ownership of and
transaction in the Company's securities, and furnish the Company copies of all
such reports they file. Based upon the copies of those reports furnished to the
Company, and written representations that no other reports were required to be
filed, the Company believes that all reporting requirements under Section 16(a)
for the fiscal year ended December 31, 1997, were met in a timely manner by its
executive officers, Board members and greater than ten percent stockholders.
Report of the Compensation Committee on Executive Compensation
The Company's Compensation Committee was formed in April 1998 and is
presently comprised of two members of the Company's Board. During the year ended
December 31, 1997, the Company did not have an acting Compensation Committee and
the Board undertook responsibility for the activities normally assumed by a
Compensation Committee. As a result, the following report was prepared by the
Board.
Executive Compensation Philosophy
The Company attempts to design executive compensation to achieve two
principal objectives. First, the program is intended to be fully competitive so
that the Company may attract, motivate and retain talented executives. Second,
the program is intended to create an alignment of interests between the
Company's executives and stockholders such that a significant portion of each
executive's compensation varies with business performance.
The Committee's philosophy is to pay competitive annual salaries,
coupled with a leveraged incentive system that pays more than competitive total
compensation for performance exceeding financial goals and Company objectives.
The leveraged incentive system consists of annual compensation, bonuses and
stock compensation consisting primarily of stock options.
Based on assessments by the Board, the Board believes that the
Company's compensation program for the Named Executive Officers has the
following characteristics that serve to align executive interests with long-term
stockholder interests:
a. Emphasizes "at risk" pay such as bonuses, options and long-term
incentives.
b. Emphasizes long-term compensation such as options.
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c. Rewards financial results and promotion of Company objectives
rather than individual performance against individual objectives.
The Omnibus Reconciliation Act of 1993 (OBRA) established certain
requirements in order for compensation exceeding $1 million earned by certain
senior executives to be deductible. The Company's executive compensation
programs have been structured to comply with OBRA. The actions of the Committee
regarding the compensation paid, or to be paid, to executive management, have
also complied with OBRA. However, the Board and the Compensation Committee
reserve the right to forego deductibility if in its discretion it believes a
particular compensation program or payment is consistent with the overall best
interests of the Company and its stockholders. In addition, the compensation
received by certain individuals under the Company's non-qualified stock option
plan ("NQSOP") may fall outside the deductibility limitations of OBRA if the
Company is highly successful as reflected in the Company's stock price and/or
income.
Annual Salaries
Salary ranges and increases for executives, including the CEO and the
other Named Executive Officers, are established annually based on competitive
data. Within those ranges, individual salaries vary based upon the individual's
work experience, performance, level of responsibility, impact on the business,
tenure and potential for advancement within the organization. Annual salaries
for newly-hired executives are determined at time of hire taking into account
the above factors other than tenure.
Short-Term Incentives
The Company provides short-term incentives in the form of discretionary
cash bonuses based on financial performance, promotion of the Company's
objectives and the Company's cash position. Bonuses are awarded to management
and others on the basis of the individual's work experience, performance, level
of responsibility, impact on the business, tenure and potential for advancement
within the organization.
Long-Term Incentives
In September 1995, the Company adopted its NQSOP wherein the Company is
authorized to grant options to purchase up to 1,500,000 shares of the Company's
Common Stock. Pursuant to the NQSOP, the Company has granted Stock Options to
purchase 1,488,500 shares of Common Stock. Of these Stock Options, approximately
1,227,405 are currently exercisable and 261,095 vest over time. All of the Stock
Options expire five years after the date of grant.
The grant of options to key employees encourages equity ownership and
closely aligns management interests with the interests of stockholders.
Additionally, because options are subject to forfeiture if the employee leaves
the Company, options provide an incentive to remain with the Company long term.
At least annually, the Board (or Compensation Committee as the case may
be) reviews the advisability of granting options to members of management having
strategic impact on product, staffing, technology, pricing, investment or policy
matters. The aggregate number of options granted to management is based on the
value of each individual's actual and potential contributions to the Company as
well as competitive norms.
In conjunction with the 1995 acquisition (the "Acquisition") wherein
SHP became a wholly owned subsidiary of SHPI, David A. Robinson, Bradley C.
Robinson and John T. Clarke (collectively the "Founders"), who are the founders
of the Company and, respectively, the President, Chief Executive Officer,
Chairman of the Board and a director; a Vice President and director; and a
former director of the Company, have the opportunity to receive up to an
aggregate of 2,000,000 additional shares of Common Stock (the "Earn-Out
Shares"). The Founders have the right to divide the Earn-Out Shares among
themselves or their assigns, if earned. Any issuance of Earn-Out Shares is based
upon the level of pre-tax consolidated net income, adjusted to exclude any
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expense arising from the obligation to issue or the issuance of the Earn-Out
Shares and any income or expense associated with non-recurring or extraordinary
items as determined in accordance with generally accepted accounting principles.
The opportunity to acquire Earn-Out Shares expires in December 1998 and it is
not expected that any of the Earn-Out Shares will be earned.
Corporation Performance and CEO Pay
The Company is engaged principally in the development of
cost-effective, disposable, proprietary health care products designed to reduce
the incidence of accidental injury in the health care industry, and thus reduce
the spread of disease. The Company has created a portfolio of proprietary health
care products that are in various stages of production, pre-production,
development and research. At present, the Company is focusing its resources and
activities principally on marketing products currently available for sale,
preparing products nearing completion for manufacturing and marketing,
developing new products designed to reduce the risk of acquiring HIV/AIDS,
hepatitis B and other blood-borne diseases through accidental needlesticks, and
the development of other medical products. Certain significant events that
relate to corporation performance and CEO pay for 1997 are discussed below.
In August 1996, the Company entered into a distribution agreement (the
"BDSDS Distribution Agreement") with Becton Dickinson and Company Sharps
Disposal Systems ("BDSDS") whereby BDSDS is marketing and distributing the
Company's Safety Cradle(R) sharps containers. BDSDS began selling the Safety
Cradle(R) sharps containers under the BDSDS Distribution Agreement in the first
quarter of 1997. During 1997, however, BDSDS did not order the minimum required
amount of product under the terms of the BDSDS Distribution Agreement and,
therefore, BDSDS' exclusive distribution rights became nonexclusive. In
addition, the Company gave notice of termination of the BDSDS Distribution
Agreement, as it is authorized to do in the case of BDSDS' failure to purchase
the minimum amount of product required by the BDSDS Distribution Agreement. The
parties subsequently agreed to extend the termination date and exclusivity
provision of the BDSDS Distribution Agreement until May 26, 1998 to give BDSDS
the opportunity to purchase the minimum products specified in the BDSDS
Distribution Agreement. BDSDS did not meet the terms of the extension of the
agreement. As a result, the BDSDS Distribution Agreement was terminated and the
Company is pursuing various alternatives with BDSDS and others with respect to
the use and distribution of the Company's Safety Cradle(R) sharps containers.
The Company received approval to use the name ExtreSafe(R) as a
registered trademark in 1997. It plans to use this trademark in safety needle
and lance products.
In May 1997, the Company entered into an agreement (the "License
Agreement") with Becton Dickinson and Company Infusion Therapy division ("BDIT")
relating to a single application (the "Technology") of the Company's
ExtreSafe(R) safety needle technology. Pursuant to the terms of the License
Agreement, BDIT made payments of $1,750,000 and $250,000 to the Company in June
and September 1997, respectively, and made an additional payment of $2,000,000
in April 1998. Of these total payments, $3,750,000 million represents advanced
royalties for sales occurring before the year 2002 and the $250,000 represents a
product development fee. BDIT is also required to pay ongoing royalties to the
Company based on sales of products utilizing the Technology. In addition,
beginning in BDIT's fiscal year 2002, BDIT is required to pay minimum royalties
in order to maintain exclusive rights under the License Agreement.
In December 1997, the Company entered into the J&J Agreement with J&J
to commercialize two applications of the ExtreSafe(R) safety needle technology
(the "J&J Products"). The J&J Agreement provides for monthly development
payments by J&J, sharing of international field related patent costs, payments
for initial periods of low volume manufacturing, an ongoing royalty stream and a
J&J investment in molds, assembly equipment and other capital costs related to
commercialization of each product. The J&J Agreement also provides for an
ongoing joint cooperative program between the Company and J&J which derives
future funding directly from sales of Company created products, payments for
initial periods of low volume manufacturing and an ongoing royalty stream for
additional safety products which are jointly approved for development. In 1998,
9
<PAGE>
two additional products were approved for development under the joint
cooperative program. Accordingly, a total of four products are being developed
and commercialized currently in conjunction with the J&J Agreement. In
connection with the J&J Agreement, Johnson & Johnson Development Corporation
also purchased $2,000,000 of Company securities in a private placement that
closed in January 1998. In addition, beginning in the later of J&J's fiscal year
2000 or twelve months following FDA approval for sale of the J&J Products, J&J
is required to pay minimum royalties. Sales are expected to begin under the J&J
Agreement in the first half of 1999.
The Company has an ongoing program for developing products using its
ExtreSafe(R) medical needle technology. This technology allows a contaminated
needle to be protected without exposure of the health care worker to the
contaminated needle. Products under development that incorporate the
ExtreSafe(R) medical needle technology include ExtreSafe(R) phlebotomy devices,
ExtreSafe(R) catheters and several different ExtreSafe(R) syringe applications.
Prototypes of the ExtreSafe(R) phlebotomy device, ExtreSafe(R) catheters and
ExtreSafe(R) syringes have been completed. The FDA has granted one 510(k)
clearance to market relating to the ExtreSafe(R) medical needle technology and a
second 510(k) application with the FDA relating to an additional application of
the ExtreSafe(R) medical needle technology has been filed. The Company is
conducting research on several other medical safety devices.
While most of the Company's products are not yet in the production
stage, during 1997, the Company made significant strides toward bringing its
products to market. During 1997 the Company: (1) entered into the License
Agreement with BDIT relating to a single application of the Company's
ExtreSafe(R) safety needle withdrawal technology; (2) received $2 million in
payments relating to the License Agreement; (3) completed automated assembly
equipment for the ExtreSafe(R) Lancet Strip; (4) received approval to use the
name ExtreSafe(R) as a registered trademark; (5) received a second 510(k)
Notification on an additional Safety Cradle(R) device; (6) filed applications
for three patents; (7) received notice of allowance for three patents (including
the seventh needle patent); (8) completed implementation of the Quality
Assurance Program; (9) raised approximately $1.5 million through the sale of
equity and equity related securities; (10) completed five additional Safety
Cradle(R) molds for three different sizes of sharps containers, one additional
phlebotomy prototype model mold, two new stereolithography prototype phlebotomy
models and two stereolithography syringe models; and (11) entered into the J&J
Agreement with J&J to commercialize two ExtreSafe(R) products.
To date during 1998 the Company has (1) filed applications for three
patents; (2) received notice of allowance for four patents; (3) raised
approximately $5.2 million through the sale of equity and equity related
securities; and (4) has reached agreement to develop two additional products
utilizing the ExtreSafe(R) safety needle technology under the joint cooperative
program with J&J.
The Board believes that Mr. David A. Robinson's compensation package
aligns his interests with those of the stockholders. Since September 1995, Mr.
Robinson's $240,000 salary has not been increased. Mr. Robinson received $8,900
in other compensation and no bonuses or stock options were granted. See Summary
Compensation Table for description of other compensation amounts. In addition,
the Earn-Out program will be expiring in 1998 and it is not anticipated that any
Earn-Out Shares will be issued. The Board and/or Compensation Committee will
likely revisit the management incentive programs at a future date.
Members of the Board are David A. Robinson, Bradley C. Robinson, Dr.
Gale H. Thorne, Dr. David T. Rovee and Robert R. Walker.
Performance Graph
The following performance graph compares the performance of the
Company's Common Stock to the NASDAQ Composite Index ("NCI") and to the S&P
Health Care Index ("HCI"). The graph assumes that the value of the investment in
the Company's Common Stock and each index was $100 at October 25, 1995, the
approximate date upon which the Company first had securities registered under
10
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Section 12 of the Securities Exchange Act of 1934, and that all dividends were
reinvested. As a designer of safety medical products, the Company is not easily
categorized with other more specific industry indices.
Cumulative Total Stockholder Return
October 1995 through December 31, 1997
[OBJECT OMITTED]
10/25/95 12/29/95 12/31/96 12/31/97
SHPI (diamond) 100.00 160.47 66.28 30.23
NCI (square) 100.00 102.50 125.80 152.99
HCI (triangle) 100.00 107.45 127.31 180.33
Executive Compensation
The tables below set forth certain information concerning compensation
paid by the Company to its Chief Executive Officer and all other executive
officers with annual compensation in excess of $100,000 (determined for the year
ended December 31, 1997) (the "Named Executive Officers"). The tables also
include information related to stock options granted to the Named Executive
Officers.
Summary Compensation Table. The following table provides certain
information regarding compensation paid by the Company to the Named Executive
Officers.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation Awards
------------------- -----------------------------
Restricted Stock All Other
Name and Salary Bonus Other Annual Stock Options/ LTIP Compensation
Principal Position Year ($)(1) ($)(2) Compensation($)(3) Awards ($) SAR(#) Payouts($) ($)(4)
------------------ ---- ------ ------ ------------------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David A. Robinson, 1995 193,590 25,000 --- 666,666(5) 300,000(6) --- 1,192
President, CEO, Chairman 1996 240,000 --- 8,000 --- --- --- 2,777
of the Board and 1997 240,000 --- 4,750 --- --- --- 4,150
Director
Bradley C. Robinson, VP, 1995 148,590 25,000 --- 666,666(5) 300,000(7) --- 374
Business Development and 1996 160,000 --- 5,333 --- --- --- 898
Director 1997 160,000 --- 4,750 --- --- --- 1,952
Dr. Gale H. Throne, VP 1995 128,333 25,000 --- --- --- ---
57,000(7)
Product Development and 1996 150,000 --- 4,640 --- --- 72
40,000(7)
Director 1997 150,000 --- 4,750 --- --- --- 429
- ---------------
</TABLE>
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(1) All amounts paid as salary were paid pursuant to the Company's obligations
under employment contracts with the above individuals. These employment
contracts have been amended from time to time during the periods set forth
above. The annual salaries of the Named Executive Officers, as set forth in
their employment contracts, are $240,000 for Mr. David A. Robinson,
$160,000 for Mr. Bradley C. Robinson and $150,000 for Dr.
Gale H. Thorne.
(2) The cash bonuses were awarded by the Company in recognition of the
recipients' contributions toward completion of the Acquisition.
(3) These amounts represent payments by the Company into its 401(k) retirement
plan for the benefit of the Named Executive Officer.
(4) These amounts represent the amounts paid by the Company for term life
insurance on the lives of the Named Executive Officer with insurance
proceeds payable to the beneficiary designated by the Named Executive
Officer. These insurance policies have no cash surrender values.
(5) These are Earn-Out Shares which are expected to expire this year without
vesting.
(6) Options issued pursuant to the NQSOP; options to purchase 87,500 shares
were exercised on January 10, 1997.
(7) Options issued pursuant to the NQSOP.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Fiscal Options/SARs at Fiscal
Shares Year-End Year-End($)
Acquired On Value (Exercisable/ (Exercisable/
Name Exercise (#) Realized ($) Unexercisable) Unexercisable)(1)
---- ------------ ------------ ------------------------ -----------------
<S> <C> <C> <C> <C>
David A. Robinson 87,500 $92,969(2) 212,500(3)/0 ---
Bradley C. Robinson --- --- 300,000(3)/0 ---
Dr. Gale H. Thorne --- --- 115,000(4)/0 $22,230/---
- ---------------
</TABLE>
(1) The closing price of the Company's Common Stock on December 31, 1997, was
$1.625 per share.
(2) Options exercisable for 87,500 shares of the Company's Common Stock at $2.00
per share were exercised on January 10, 1997, on which date the closing
price of the Common Stock was $3.0625 per share.
(3) Options exercisable at $2.00 per share.
(4) Represents 18,000 options currently exercisable at an exercise price of $.39
per share; 57,000 options currently exercisable at $2.00 per share; and
40,000 options currently exercisable at $2.625 per share. Does not include
SHPI Warrants to purchase 200,000 shares of Common Stock that were issued to
Dr. Thorne in January 1998. See "Certain Relationships and Related
Transactions."
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Compensation of Directors
No cash fees or other consideration was paid to non-employee directors
of the Company by the Company for service on the Board during 1997. During 1994,
the non-employee members of the Board received shares of Common Stock as
compensation for serving on the Board of SHP. In 1995 and 1996, the Company
granted to non-employee directors under the NQSOP stock options to purchase
shares of Common Stock. For 1998, the Company has agreed to compensate
non-employee directors at a rate of $10,000 per year payable in equal quarterly
installments along with options to purchase 10,000 shares of the Company's
common stock that will be granted in equal quarterly installments and
exercisable at an exercise price equal to the market price of the underlying
common stock on the date of grant. The Company has made no other agreements
regarding compensation of non-employee directors. Directors of the Company who
are also officers of the Company receive no additional compensation for their
service as directors. All directors are entitled to reimbursement for reasonable
expenses incurred in the performance of their duties as Board members.
Employment and Indemnity Agreements
The Company has entered into employment agreements with each of Mr.
David A. Robinson, Mr. Bradley C. Robinson and Dr. Gale H. Thorne (collectively,
the "Senior Executives"). These employment agreements, which have been amended
from time to time, provide that (i) Mr. David A. Robinson receive a salary of
$240,000 per year, Mr. Bradley C. Robinson receive a salary of $160,000 per
year, and Dr. Gale H. Thorne receive a salary of $150,000 per year; (ii) the
Senior Executives' employment agreements are for terms of three years, expiring
on November 3, 2000; (iii) the Senior Executives are entitled to a reasonable
car allowance; (iv) if the employment of a Senior Executive is terminated by
reason of disability or other than for cause, the salary of such Senior
Executive will continue for the full term of the agreement; (v) if a Senior
Executive is terminated for cause, the salary of such Senior Executive ceases as
of the date of termination; (vi) the Company will provide each Senior Executive
with up to $1,000,000 of term life insurance while the Senior Executive is
employed by the Company; and (vii) the Senior Executives shall keep all
proprietary information relating to the business of the Company confidential
both during and after the term of the agreements. With one exception, the
Company does not have employment agreements with any of its other executive
officers or key employees.
The Company has entered into indemnity agreements (the "Indemnity
Agreements") with each of its executive officers and directors pursuant to which
the Company has agreed to indemnify the officers and directors to the fullest
extent permitted by law for any event or occurrence related to the service of
the indemnitee as an officer or director of the Company that takes place prior
to or after the execution of the Indemnity Agreement. The Indemnity Agreements
obligate the Company to reimburse or advance expenses relating to any proceeding
arising out of an indemnifiable event. Under the Indemnity Agreements, the
officers and directors of the Company are presumed to have met the relevant
standards of conduct required by Delaware law for indemnification. Should the
Indemnity Agreements be held to be unenforceable, indemnification of these
officers and directors may be provided by the Company in certain cases at its
discretion.
401(k) Retirement Plan
Effective in 1996, the Company adopted a 401(k) retirement plan whereby
participating employees may contribute up to five percent of payroll
compensation to the plan which the Company matches on a dollar for dollar basis
up to the maximum contribution allowed by applicable tax law. The Named
Executive Officers have invested all of the funds in their 401(k) accounts in
Common Stock of the Company.
Indemnification for Securities Act Liabilities
Delaware law authorizes, and the Company's Bylaws and Indemnity
Agreements provide for, indemnification of the Company's directors and officers
against claims, liabilities, amounts paid in settlement and expenses in a
13
<PAGE>
variety of circumstances. Indemnification for liabilities arising under the Act
may be permitted for directors, officers and controlling persons of the Company
pursuant to the foregoing or otherwise. However, the Company has been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
Stock Options and Warrants
During 1994, the Board of SHP approved the SHP Non-Qualified Stock
Option Plan (the "SHP NQSOP"). Options granted under the SHP NQSOP were required
to have exercise prices not less than the fair market value of the underlying
stock at the date of grant as determined by SHP's Board of Directors. The number
of shares, terms and exercise period of options granted under the SHP NQSOP were
determined by the SHP Board of Directors on an option-by-option basis. On the
date of the Acquisition, all options issued under the SHP NQSOP became
obligations of the Company and the SHP NQSOP was terminated. As of August 20,
1998, options to acquire an aggregate of 18,000 shares of Common Stock were
outstanding in connection with the SHP NQSOP. Options issued under the SHP NQSOP
expire in 1999.
On September 1, 1995, the Company adopted the NQSOP and has reserved
1,500,000 shares of Common Stock for the possible exercise of options under the
plan. The exercise price of options granted under the NQSOP must be not less
than the fair market value of the underlying stock at the date of grant as
determined by the Board. Options granted under the NQSOP expire five years from
the date of grant. As of August 20, 1998, options to acquire an aggregate of
1,478,500 shares of Common Stock at exercise prices ranging from $1.8125 to
$2.625 per share had been granted and are presently outstanding (not including
options granted under the SHP NQSOP).
Compensation Committee Interlocks and Insider Participation
The Board undertook the functions normally conducted by a Compensation
Committee during 1997. David A. Robinson, Bradley C. Robinson and Dr. Gale H.
Thorne were employed by the Company during 1997 and served as members of the
Board during 1997. During 1997, no member of the Board served on the
Compensation Committee (or in a like capacity) for any other entity.
2. Approval of the Specialized Health Products International, Inc. 1998 Stock
Option Plan
At the Annual Meeting, stockholders will be asked to approve the
Specialized Health Products International, Inc. 1998 Stock Option Plan (the
"Option Plan"). A copy of the Option Plan is attached to this Proxy Statement as
Appendix A and is incorporated herein by reference. The description below of the
Option Plan is qualified in its entirety by reference to the complete text of
the Option Plan. Terms not defined herein shall have the meanings set forth in
the Option Plan.
Description of Principal Features of the Option Plan
The Option Plan, if approved, will supersede the NQSOP under which
there are only options to acquire 39,500 shares of Common Stock available for
issuance and no further options will be granted under the NQSOP. The Option Plan
is intended to afford an incentive to employees, Board members and consultants
of the Company and its subsidiaries to acquire or increase a proprietary
interest in the Company, to become or continue as employees, Board members or
consultants, to devote their best efforts on behalf of the Company and to align
the interests of such persons with the Company's stockholders to promote the
success of the Company's business.
The Option Plan will permit the Company to grant "non-qualified stock
options" and/or "incentive stock options" to acquire the Company's Common Stock.
The total number of shares authorized for the Option Plan may be allocated by
14
<PAGE>
the Board between the non-qualified stock options and the incentive stock
options from time to time, subject to certain requirements of the Internal
Revenue Code of 1986, as amended (the "Code").
The principal objectives of the Option Plan are (i) to broaden the
share ownership of the staff of the Company and (ii) to create in effect a bonus
program for management which compensates designated individuals with shares of
the Company.
A total of 4,000,000 shares will be allocated to the Option Plan which
options are anticipated to be sufficient for the foreseeable future. In
addition, the Board does not intend to have options exercisable for more than
4,000,000 shares of the Company's common stock under the Option Plan, NQSOP and
SHP NQSOP outstanding at any given time. It is intended that all of such shares
will be drawn from the authorized stock. It is not anticipated that any of such
shares will be purchased on the open market or allocated from treasury shares,
if any.
Award Plan
The grant of options or awards will be dictated by the achievement of a
mixture of individual and corporate performance goals determined by the Board
or, at the Board's election, the Compensation Committee (the body administering
the Option Plan is hereinafter referred to as either the Board or the
Compensation Committee). Awards under the Option Plan will be focused on Company
employees, Board members and consultants whose contribution and achievement can
make a difference to Company financial performance and hence, indirectly,
stockholder value creation. As of August 20, 1998, the Company had 24 employees
and Board members.
Awards under the Option Plan may begin in 1998, although the
Compensation Committee has made no determination with respect thereto. The
specific structure of the Option Plan for this and subsequent years will be
determined by the Compensation Committee.
The Option Plan authorizes the Compensation Committee to grant
"incentive stock options," ("ISO's") within the meaning of Section 422 of the
Internal Revenue Code (the "Code"), and nonqualified stock options ("NQSO's"),
pursuant to the applicable terms and conditions of the Option Plan and of the
agreement evidencing such grant. The aggregate fair market value of the ISO's
granted to any one optionee under the Option Plan, or any similar plan, that
first become exercisable in any calendar year may not exceed $100,000.
The option exercise price per share may not be less than the fair
market value of a share of Common Stock on the date on which the option is
granted unless, in the case of NQSO's, the Compensation Committee determines
otherwise. Each option agreement shall provide the exercise schedule for the
option as determined by the Compensation Committee (which may include a
requirement for achieving performance goals), provided, that the Compensation
Committee shall have the authority to accelerate the exercisability of any
outstanding option at such time and under such circumstances as it, in its sole
discretion, deems appropriate. The exercise period shall be ten years from the
date of the grant of the option unless otherwise determined by the Compensation
Committee, provided, however, that in the case of an ISO, such exercise period
shall not exceed ten years from the date of grant of such option. The exercise
period shall be subject to early termination and accelerated vesting as provided
in the Option Plan. Generally, it is anticipated that options granted under the
Option Plan will vest in two equal installments on the second and third
anniversaries of the date of grant.
Options granted under the Option Plan will not be transferable other
than by will or by the laws of descent and distribution or to a beneficiary upon
the death of a grantee, and such options that may be exercisable shall be
exercised during the lifetime of the grantee only by the grantee or his or her
guardian or legal representative; except as otherwise provided in the Option
Plan.
15
<PAGE>
General
The Option Plan is intended to satisfy the requirements of Rule 16b-3
promulgated under Section 16 of the Exchange Act ("Rule 16b-3") and, with
respect to ISO's, to generally serve as a qualified performance-based
compensation program under OBRA. However, the compensation received by certain
individuals under the Company's Option Plan may fall outside the deductibility
limitations of OBRA if the Company is successful as reflected in the Company's
stock price and/or income.
The Option Plan will be administered by the Compensation Committee of
the Board. The Compensation Committee determines (i) which employees/independent
contractors of the Company and its subsidiaries shall be granted an option to
acquire of stock; (ii) the number of shares into which the option is
exercisable; (iii) the amount to be paid by a grantee upon exercise of an option
or award; (iv) the time or times and the conditions subject to which options or
awards may be made and become exercisable; and (v) the form of consideration
that may be used to pay for shares issued upon exercise thereof. The
Compensation Committee is also responsible for other questions involving the
administration and interpretation of the Option Plan.
The Board may from time to time suspend, terminate, modify or amend the
Option Plan, but may not, without the approval of the Company's stockholders,
increase the aggregate number of shares of Common Stock subject to the Option
Plan (except for increases due to certain adjustments), decrease the minimum
exercise price specified by the Option Plan in respect of ISO's or change the
class of persons eligible to receive options or awards under the Option Plan or
adopt any amendment for which stockholder approval is required under applicable
Delaware law.
The Board may terminate the Option Plan at any time. The termination of
the Option Plan will not alter or impair any rights or obligations under any
option or award previously granted under the Option Plan.
The selection of the eligible individuals who will receive options
under the Option Plan, upon approval of the Option Plan by stockholders, and the
size and type of options is generally to be determined by the Compensation
Committee in its discretion. No options or awards have been made or granted
under the Option Plan, nor are any such options or awards now determinable.
Thus, it is not possible to predict the benefits or amounts that will be
received by or allocated to particular individuals or groups of employees.
Certain Federal Tax Consequences
The following is a brief summary of the principal federal income tax
consequences under current federal income tax laws relating to options granted
under the Option Plan. This summary is not intended to be exhaustive and, among
other things, does not describe state, local or foreign income tax consequences.
Incentive Stock Options
The Company understands the federal income tax consequences of ISO's to
be generally as follows: an employee receiving an ISO will not be in receipt of
taxable income upon the grant of the ISO or upon its timely excise. Exercise of
an ISO will be timely if made during its term and if the optionee remains an
employee of the Company or its subsidiaries at all times during the period
beginning on the date of the grant of the ISO and ending on the date three
months before the date of exercise (or one year before the date of exercise in
the case of a disabled optionee). Exercise of an ISO will also be timely if made
at any time (provided it is exercisable by its terms) by the legal
representative of an optionee who dies (i) while in the employ of the Company or
its subsidiaries or (ii) within three months after termination of employment.
The Option Plan, however, limits the right of the legal representative of any
optionee who has died within one month of his or her termination of employment.
Upon ultimate sale of the stock received upon such exercise, except as noted
below, the optionee will recognize capital gain or loss (if the stock is a
capital asset of the optionee) equal to the difference between the amount
realized upon such sale and the option exercise price. The Company, under these
circumstances, will not be entitled to any federal income tax deduction in
connection with either the exercise of the ISO or the sale of such stock by the
optionee.
16
<PAGE>
If, however, the stock acquired pursuant to such exercise of an ISO is
disposed of by the optionee prior to the expiration of two years from the date
of grant of the option or one year from the date that such stock is transferred
to the optionee upon exercise (a "disqualifying disposition"), any gain realized
by the optionee generally will be taxable at the time of such disqualifying
disposition as follows: (i) as ordinary income to the extent of the difference
between the option exercise price and the lesser of the fair market value of the
stock on the date the ISO is exercised and the amount realized on such
disqualifying disposition and (ii) if the stock is a capital asset of the
optionee, as capital gain to the extent of any excess of the amount realized on
such disqualifying disposition over the fair market value of the stock on the
date that governs the determination of his or her ordinary income. In such case,
the Company may claim a federal income tax deduction at the time of such
disqualifying disposition for the amount taxable to the optionee as ordinary
income, provided the Company satisfies certain tax information reporting
requirements.
The amount by which the fair market value of the stock on the exercise
date of an ISO exceeds the option exercise price will constitute an item of tax
preference for purposes of the "alternative minimum tax" set forth in the Code.
Nonqualified Stock Options
In the case of NQSO's, the Company understands that the optionee will
not generally be taxed upon grant of any such option. Rather, at the time of
exercise of an NQSO, the optionee will, except as noted below, realize ordinary
income for federal tax purposes in an amount equal to the excess of the fair
market value of the shares purchased over the option exercise price. The Company
will generally be entitled to a tax deduction at such time and in the same
amount that the optionee realizes ordinary income, provided the Company
satisfies certain tax information reporting requirements. If stock so acquired
is later sold or exchanged, then the difference between the sales price and the
fair market value of such stock on the date of exercise of the option is
generally taxable as long-term capital gain or loss if such stock is held for a
sufficient period of time.
THE BOARD HAS UNANIMOUSLY APPROVED AND RECOMMENDS A VOTE "FOR" APPROVAL
OF THE OPTION PLAN.
3. Other Matters
Discretionary Authority
At the time of mailing of this proxy statement, the Board was not aware
of any other matters which might be presented at the meeting. If any matter not
described in this Proxy Statement should properly be presented, the persons
named in the accompanying proxy form will vote such proxy in accordance with
their judgment.
Independent Public Accountants
On October 14, 1996, the Board elected to retain Arthur Andersen LLP
("AA") as its independent auditor. From November 10, 1995 to October 14, 1996,
KPMG Peat Marwick LLP ("KPMG") had acted as the Company's independent auditor
and Nielson, Grimmett & Company ("NGC") had acted as the Company's independent
auditor prior thereto. The Company's decisions to change auditors was
recommended by the Board in each instance and the retention of AA as the
Company's independent auditor was ratified by the Company's stockholders at the
1996 annual meeting of stockholders.
The report of NGC on the financial statements of the Company for the
fiscal year ended December 31, 1994 and the report of KPMG on the financial
statements of the Company for the two fiscal years ended December 31, 1995, did
not contain any adverse opinion or disclaimer of opinion and were not qualified
or modified as to uncertainty, audit scope or accounting principles.
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<PAGE>
During the Company's two most recent fiscal years and all subsequent
interim periods preceding such changes in auditors, there were no disagreements
with NGC or KPMG on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements(s), if
not resolved to the satisfaction of the former accountant, would have caused it
to make a reference to the subject matter of the disagreements(s) in connection
with its report; nor has NGC or KPMG ever presented a written report, or
otherwise communicated in writing to the Company or the Board the existence of
any "disagreement" or "reportable event" within the meaning of Item 304 of
Regulation S-K.
The Company authorized NGC to respond fully to the inquiries of KPMG
and the Company authorized KPMG to respond fully to the inquiries of AA. Both
NGC and KPMG have provided the Company with letters addressed to the SEC, as
required by Item 304(a)(3) of Regulations S-K, which letters have been filed
with the SEC.
The Company retained AA as its independent auditor for the current year
and expects representatives of AA to be present at the Company's 1998 Annual
Meeting of Stockholders. AA will have the opportunity to make a statement at the
annual meeting if it desires to do so and it is expected that representatives of
AA will be available to respond to appropriate questions if called upon to do
so.
Notice Requirements
Any stockholder who desires to have a proposal included in the
Company's proxy soliciting material relating to the Company's 1999 annual
meeting of stockholders should send to the Secretary of the Company a signed
notice of intent. This notice, including the text of the proposal, must be
received no later than February 1, 1998.
Annual Report
This Proxy Statement has been preceded or accompanied by an Annual
Report for the fiscal year ended December 31, 1997. Stockholders are referred to
such report for financial and other information about the activities of the
Company, but such report is not to be deemed a part of the proxy soliciting
material.
Expenses and Methods of Solicitation
The expenses of soliciting proxies will be paid by the Company. In
addition to the use of the mails, proxies may be solicited personally, or by
telephone or other means of communications, by directors, officers and employees
of the Company and its subsidiaries, who will not receive additional
compensation therefor. Arrangements will also be made with brokerage firms and
other custodians, nominees and fiduciaries for the forwarding of proxy
solicitation material to certain beneficial owners of the Company's Common
Stock, and the Company will reimburse such forwarding parties for reasonable
expenses incurred by them.
By order of the Board of Directors,
By /s/ Charles D. Roe
---------------------------------
Charles D. Roe, Secretary
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APPENDIX A
Specialized Health Products International, Inc.
1998 Stock Option Plan
1. Purpose; Effectiveness of the Plan.
(a) The purpose of this Plan is to advance the interests of
the Company and its stockholders by helping the Company obtain
and retain the services of employees, officers, consultants,
and directors, upon whose judgment, initiative and efforts the
Company is substantially dependent, and to provide those
persons with further incentives to advance the interests of
the Company.
(b) This Plan will become effective on the date of its
adoption by the Board, provided the Plan is approved by the
stockholders of the Company (excluding holders of shares of
Stock issued by the Company pursuant to the exercise of
options granted under this Plan) within twelve months before
or after that date. If the Plan is not so approved by the
stockholders of the Company, any options granted under this
Plan will be rescinded and will be void. This Plan will remain
in effect until it is terminated by the Board or the Committee
(as defined hereafter) under Section 9 hereof, except that no
ISO (as defined herein) will be granted after the tenth
anniversary of the date of this Plan's adoption by the Board.
This Plan will be governed by, and construed in accordance
with, the laws of the State of Delaware.
2. Certain Definitions. Unless the context otherwise requires, the following
defined terms (together with other capitalized terms defined elsewhere in this
Plan) will govern the construction of this Plan, and of any stock option
agreements entered into pursuant to this Plan:
(a) "10% Stockholder" means a person who owns, either directly or
indirectly by virtue of the ownership attribution provisions
set forth in Section 424(d) of the Code at the time he or she
is granted an Option, stock possessing more than ten percent
(10%) of the total combined voting power or value of all
classes of stock of the Company and/or of its subsidiaries;
(b) "1933 Act" means the federal Securities Act of 1933, as
amended;
(c) "Board" means the Board of Directors of the Company;
(d) "Code" means the Internal Revenue Code of 1986, as amended
(references herein to Sections of the Code are intended to
refer to Sections of the Code as enacted at the time of this
Plan's adoption by the Board and as subsequently amended, or
to any substantially similar successor provisions of the Code
resulting from recodification, renumbering or otherwise);
(e) "Committee" means a committee of two or more Non-Employee
Directors, appointed by the Board, to administer and interpret
this Plan; provided that the term "Committee" will refer to
the Board during such times as no Committee is appointed by
the Board;
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(f) "Company" means Specialized Health Products International,
Inc., a Delaware corporation;
(g) "Disability" has the same meaning as "permanent and total
disability," as defined in Section 22(e)(3) of the Code;
(h) "Eligible Participants" means persons who, at a particular
time, are employees, officers, consultants, or directors of
the Company or its subsidiaries;
(i) "Fair Market Value" means, with respect to the Stock and as of
the date an ISO or a Formula Option is granted hereunder, the
market price per share of such Stock determined by the
Committee in good faith on such basis as it deems appropriate.
(j) "ISO" has the same meaning as "incentive stock option," as
defined in Section 422 of the Code;
(k) "Just Cause Termination" means a termination by the Company of
an Optionee's employment by and/or service to the Company (or
if the Optionee is a director, removal of the Optionee from
the Board by action of the stockholders or, if permitted by
applicable law and the by-laws of the Company, the other
directors), in connection with the good faith determination of
the Company's board of directors (or of the Company's
stockholders if the Optionee is a director and the removal of
the Optionee from the Board is by action of the stockholders,
but in either case excluding the vote of the Optionee if he or
she is a director or a stockholder) that the Optionee has
engaged in any acts involving dishonesty or moral turpitude or
in any acts that materially and adversely affect the business,
affairs or reputation of the Company or its subsidiaries;
(l) "Non-Employee Director" has the same meaning as
"Non-Employee-Director," as defined in Rule 16b-3 as
promulgated under the Securities Exchange Act of 1934).;
(m) "NSO" means any option granted under this Plan whether
designated by the Committee as a "non-qualified stock option,"
a "non-statutory stock option" or otherwise, other than an
option designated by the Committee as an ISO, or any option so
designated but which, for any reason, fails to qualify as an
ISO pursuant to Section 422 of the Code and the rules and
regulations thereunder;
(n) "Option" means an option granted pursuant to this Plan
entitling the option holder to acquire shares of Stock issued
by the Company pursuant to the valid exercise of the option;
(o) "Option Agreement" means an agreement between the Company and
an Optionee, in form and substance satisfactory to the
Committee in its sole discretion, consistent with this Plan;
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(p) "Option Price" with respect to any particular Option means the
exercise price at which the Optionee may acquire each share of
the Option Stock called for under such Option;
(q) "Option Stock" means Stock issued or issuable by the Company
pursuant to the valid exercise of an Option;
(r) "Optionee" means an Eligible Participant to whom Options are
granted hereunder, and any transferee thereof pursuant to a
Transfer authorized under this Plan;
(s) "Plan" means this Specialized Health Products International,
Inc. 1998 Stock Option Plan of the Company;
(t) "QDRO" has the same meaning as "qualified domestic relations
order" as defined in Section 414(p) of the Code;
(u) "Stock" means shares of the Company's Common Stock, $.02 par
value;
(v) "Transfer," with respect to Option Stock, includes, without
limitation, a voluntary or involuntary sale, assignment,
transfer, conveyance, pledge, hypothecation, encumbrance,
disposal, loan, gift, attachment or levy of such Option Stock,
including without limitation an assignment for the benefit of
creditors of the Optionee, a transfer by operation of law,
such as a transfer by will or under the laws of descent and
distribution, an execution of judgment against the Option
Stock or the acquisition of record or beneficial ownership
thereof by a lender or creditor, a transfer pursuant to a
QDRO, or to any decree of divorce, dissolution or separate
maintenance, any property settlement, any separation agreement
or any other agreement with a spouse (except for estate
planning purposes) under which a part or all of the shares of
Option Stock are transferred or awarded to the spouse of the
Optionee or are required to be sold; or a transfer resulting
from the filing by the Optionee of a petition for relief, or
the filing of an involuntary petition against such Optionee,
under the bankruptcy laws of the United States or of any other
nation.
3. Eligibility. The Company may grant Options under this Plan only to persons
who are Eligible Participants as of the time of such grant. Subject to the
provisions of Sections 4(d), 5 and 6 hereof, there is no limitation on the
number of Options that may be granted to an Eligible Participant.
4. Administration.
(a) Committee. The Committee, if appointed by the Board, will
administer this Plan. If the Board, in its discretion, does
not appoint such a Committee, the Board itself will administer
this Plan and take such other actions as the Committee is
authorized to take hereunder; provided that the Board may take
such actions hereunder in the same manner as the Board may
take other actions under the Company's Certificate of
Incorporation and By-laws generally.
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(b) Authority and Discretion of Committee. The Committee will have
full and final authority in its discretion, at any time and
from time to time, subject only to the express terms,
conditions and other provisions of the Company's Certificate
of Incorporation, By-laws and this Plan, and the specific
limitations on such discretion set forth herein:
(i) to select and approve the persons who will be granted
Options under this Plan from among the Eligible
Participants, and to grant to any person so selected
one or more Options to purchase such number of shares
of Option Stock as the Committee may determine;
(ii) to determine the period or periods of time during
which Options may be exercised, the Option Price and
the duration of such Options, and other matters to be
determined by the Committee in connection with
specific Option grants and Options Agreements as
specified under this Plan;
(iii) to interpret this Plan, to prescribe, amend and
rescind rules and regulations relating to this Plan,
and to make all other determinations necessary or
advisable for the operation and administration of
this Plan; and
(iv) to delegate all or a portion of its a uthority under
subsections (i) and (ii) of this Section 4(b) to one
or more directors of the Company who are executive
officers of the Company, but only in connection with
Options granted to Eligible Participants who are not
subject to the reporting and liability provisions of
Section 16 of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder,
and subject to such restrictions and limitations
(such as the aggregate number of shares of Option
Stock called for by such Options that may be granted)
as the Committee may decide to impose on such
delegate directors.
(c) Limitation on Authority. Notwithstanding the foregoing, or any
other provision of this Plan, the Committee will have no
authority to grant Options to any of its members, unless
approved by the Board.
(d) Designation of Options. Except as otherwise provided herein,
the Committee will designate any Option granted hereunder
either as an ISO or as an NSO. To the extent that the Fair
Market Value (determined at the time the Option is granted) of
Stock with respect to which all ISOs are exercisable for the
first time by any individual during any calendar year
(pursuant to this Plan and all other plans of the Company
and/or its subsidiaries) exceeds $100,000, such option will be
treated as an NSO. Notwithstanding the general eligibility
provisions of Section 3 hereof, the Committee may grant ISOs
only to persons who are employees of the Company and/or its
subsidiaries.
(e) Option Agreements. Options will be deemed granted hereunder
only upon the execution and delivery of an Option Agreement by
the Optionee and a duly authorized officer of the Company.
Options will not be deemed granted hereunder merely upon the
authorization of such grant by the Committee.
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5. Shares Reserved for Options.
(a) Option Pool. The aggregate number of shares of Option
Stock that may be issued pursuant to the exercise of Options
granted under this Plan will not exceed four million
(4,000,000) (the "Option Pool"), provided that such number
will be increased by the number of shares of Option Stock that
the Company subsequently may reacquire through repurchase or
otherwise. Shares of Option Stock that would have been
issuable pursuant to Options, but that are no longer issuable
because all or part of those Options have terminated or
expired, will be deemed not to have been issued for purposes
of computing the number of shares of Option Stock remaining in
the Option Pool and available for issuance. Notwithstanding
the foregoing, the Company will not grant Options under the
this Plan and the Company's previously adopted non-qualified
stock option plans to acquire in aggregate more than four
million (4,000,000) shares of Stock.
(b) Adjustments Upon Changes in Stock. In the event of any
change in the outstanding Stock of the Company as a result of
a stock split, reverse stock split, stock dividend,
recapitalization, combination or reclassification, appropriate
proportionate adjustments will be made in: (i) the aggregate
number of shares of Option Stock in the Option Pool that may
be issued pursuant to the exercise of Options granted
hereunder; (ii) the Option Price and the number of shares of
Option Stock called for in each outstanding Option granted
hereunder; and (iii) other rights and matters determined on a
per share basis under this Plan or any Option Agreement
hereunder. Any such adjustments will be made only by the
Board, and when so made will be effective, conclusive and
binding for all purposes with respect to this Plan and all
Options then outstanding. No such adjustments will be required
by reason of the issuance or sale by the Company for cash or
other consideration of additional shares of its Stock or
securities convertible into or exchangeable for shares of its
Stock.
6. Terms of Stock Option Agreements. Each Option granted pursuant to this Plan
will be evidenced by an agreement (an "Option Agreement") between the Company
and the person to whom such Option is granted, in form and substance
satisfactory to the Committee in its sole discretion, consistent with this Plan.
Without limiting the foregoing, each Option Agreement (unless otherwise stated
therein) will be deemed to include the following terms and conditions:
(a) Covenants of Optionee. At the discretion of the Committee, the
person to whom an Option is granted hereunder, as a condition
to the granting of the Option, must execute and deliver to the
Company a confidential information agreement approved by the
Committee. Nothing contained in this Plan, any Option
Agreement or in any other agreement executed in connection
with the granting of an Option under this Plan will confer
upon any Optionee any right with respect to the continuation
of his or her status as an employee of, consultant or
independent contractor to, or director of, the Company or its
subsidiaries.
(b) Vesting Periods. Except as otherwise provided herein, each
Option Agreement may specify the period or periods of time
within which each Option or portion thereof will first become
exercisable (the "Vesting Period") with respect to the total
number of shares of Option Stock called for thereunder (the
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"Total Award Option Stock"). Such Vesting Periods will be
fixed by the Committee in its discretion, and may be
accelerated or shortened by the Committee in its discretion.
(c) Exercise of the Option.
(i) Mechanics and Notice. An Option may be exercised to
the extent exercisable (1) by giving written notice
of exercise to the Company, specifying the number of
full shares of Option Stock to be purchased and
accompanied by full payment of the Option Price
thereof and the amount of withholding taxes pursuant
to subsection 6(c)(ii) below; and (2) by giving
assurances satisfactory to the Company that the
shares of Option Stock to be purchased upon such
exercise are being purchased for investment and not
with a view to resale in connection with any
distribution of such shares in violation of the 1933
Act; provided, however, that in the event the Option
Stock called for under the Option is registered under
the 1933 Act, or in the event resale of such Option
Stock without such registration would otherwise be
permissible, this second condition will be
inoperative if, in the opinion of counsel for the
Company, such condition is not required under the
1933 Act, or any other applicable law, regulation or
rule of any governmental agency.
(ii) Withholding Taxes. As a condition to the issuance of
the shares of Option Stock upon full or partial
exercise of an NSO granted under this Plan, the
Optionee will pay to the Company in cash, or in such
other form as the Committee may determine in its
discretion, the amount of the Company's tax
withholding liability required in connection with
such exercise. For purposes of this subsection
6(c)(ii), "tax withholding liability" will mean all
federal and state income taxes, social security tax,
and any other taxes applicable to the compensation
income arising from the transaction required by
applicable law to be withheld by the Company.
(d) Payment of Option Price. Each Option Agreement will specify
the Option Price with respect to the exercise of Option Stock
thereunder, to be fixed by the Committee in its discretion,
but in no event will the Option Price for an ISO granted
hereunder be less than the Fair Market Value (or, in case the
Optionee is a 10% Stockholder, one hundred ten percent (110%)
of such Fair Market Value) of the Option Stock at the time
such ISO is granted. The Option Price will be payable to the
Company in United States dollars in cash or by check or, such
other legal consideration as may be approved by the Committee,
in its discretion.
(e) Termination of the Option. Except as otherwise provided
herein, each Option Agreement will specify the period of time,
to be fixed by the Committee in its discretion, during which
the Option granted therein will be exercisable, not to exceed
ten years from the date of grant in the case of an ISO (the
"Option Period"); provided that the Option Period will not
exceed five years from the date of grant in the case of an ISO
granted to a 10% Stockholder. To the extent not previously
exercised, each Option will terminate upon the expiration of
the Option Period specified in the Option Agreement; provided,
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however, that each such Option will terminate, if earlier: (i)
ninety days after the date that the Optionee ceases to be an
Eligible Participant for any reason, other than by reason of
death or disability; (ii) twelve months after the date that
the Optionee ceases to be an Eligible Participant by reason of
such person's death or disability; or (iii) immediately as of
the date that the Optionee ceases to be an Eligible
Participant by reason of a Just Cause Termination. In the
event of a sale or all or substantially all of the assets of
the Company, or a merger or consolidation or other
reorganization in which the Company is not the surviving
corporation, or in which the Company becomes a subsidiary of
another corporation (any of the foregoing events, a "Corporate
Transaction"), then notwithstanding anything else herein, the
right to exercise all then outstanding Options will vest
immediately prior to such Corporate Transaction and will
terminate immediately after such Corporate Transaction;
provided, however, that if the Board, in its sole discretion,
determines that such immediate vesting of the right to
exercise outstanding Options is not in the best interests of
the Company, then the successor corporation must agree to
assume the outstanding Options or substitute therefor
comparable options of such successor corporation or a parent
or subsidiary of such successor corporation.
(f) Options Nontransferable. No Option will be transferable by the
Optionee otherwise than by will or the laws of descent and
distribution. During the lifetime of the Optionee, the Option
will be exercisable only by him or her.
(g) Qualification of Stock. The right to exercise an Option will
be further subject to the requirement that if at any time the
Board determines, in its discretion, that the listing,
registration or qualification of the shares of Option Stock
called for thereunder upon any securities exchange or under
any state or federal law, or the consent or approval of any
governmental regulatory authority, is necessary or desirable
as a condition of or in connection with the granting of such
Option or the purchase of shares of Option Stock thereunder,
the Option may not be exercised, in whole or in part, unless
and until such listing, registration, qualification, consent
or approval is effected or obtained free of any conditions not
acceptable to the Board, in its discretion.
(h) Additional Restrictions on Transfer. By accepting Options
and/or Option Stock under this Plan, the Optionee will be
deemed to represent, warrant and agree as follows:
(i) Securities Act of 1933. The Optionee understands that
the shares of Option Stock have not been registered
under the 1933 Act, and that such shares are not
freely tradeable and must be held indefinitely unless
such shares are either registered under the 1933 Act
or an exemption from such registration is available.
The Optione understands that the Company is under no
obligation to register the shares of Option Stock.
(ii) Other Applicable Laws. The Optionee further
understands that Transfer of the Option Stock
requires full compliance with the provisions of all
applicable laws.
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(iii) Investment Intent. Unless a registration statement is
in effect with respect to the sale of Option Stock
obtained through exercise of Options granted
hereunder: (1) Upon exercise of any Option, the
Optionee will purchase the Option Stock for his or
her own account and not with a view to distribution
within the meaning of the 1933 Act, other than as may
be effected in compliance with the 1933 Act and the
rules and regulations promulgated thereunder; (2) no
one else will have any beneficial interest in the
Option Stock; and (3) he or she has no present
intention of disposing of the Option Stock at any
particular time.
(i) Compliance with Law. Notwithstanding any other provision of
this Plan, Options may be granted pursuant to this Plan, and
Option Stock may be issued pursuant to the exercise thereof by
an Optionee, only after there has been compliance with all
applicable federal and state securities laws, and all of the
same will be subject to this overriding condition. The Company
will not be required to register or qualify Option Stock with
the Securities and Exchange Commission or any State agency.
(j) Stock Certificates. Certificates representing the Option Stock
issued pursuant to the exercise of Options will bear all
legends required by law and necessary to effectuate this
Plan's provisions. The Company may place a "stop transfer"
order against shares of the Option Stock until all
restrictions and conditions set forth in this Plan and in the
legends referred to in this Section 6(j) have been complied
with.
(k) Notices. Any notice to be given to the Company under the terms
of an Option Agreement will be addressed to the Company at its
principal executive office, Attention: Corporate Secretary, or
at such other address as the Company may designate in writing.
Any notice to be given to an Optionee will be addressed to the
Optionee at the address provided to the Company by the
Optionee. Any such notice will be deemed to have been duly
given if and when enclosed in a properly sealed envelope,
addressed as aforesaid, registered and deposited, postage and
registry fee prepaid, in a post office or branch post office
regularly maintained by the United States Government.
(l) Other Provisions. The Option Agreement may contain such other
terms, provisions and conditions, including such special
forfeiture conditions, rights of repurchase, rights of first
refusal and other restrictions on Transfer of Option Stock
issued upon exercise of any Options granted hereunder, not
inconsistent with this Plan, as may be determined by the
Committee in its sole discretion.
(m) Right to Terminate Employment. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon
any participant the right to continue in the employment of the
Company or effect any right which the Company may have to
terminate the employment of such participant.
(n) Non-Uniform Determinations. The Board's determinations under
the Plan (including without limitation determinations of the
persons to receive awards, the form, amount and timing of such
awards, the terms and provisions of such awards and the
agreements evidencing same) need not be uniform and may be
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made by it selectively among persons who receive, or are
eligible to receive, awards under the Plan, whether or not
such persons are similarly situated.
(o) Rights as a Shareholder. The recipient of any award under the
Plan shall have no rights as a shareholder with respect
thereto unless and until certificates for shares of Common
Stock are issued to such participant.
(p) Other Employee Benefits. Except as to plans which by their
terms include such amounts as compensation, the amount of any
compensation deemed to be received by an employee as a result
of the exercise of an Option or the sale of Option Stock will
not constitute compensation with respect to which any other
employee benefits of such employee are determined, including,
without limitation, benefits under any bonus, pension,
profit-sharing, life insurance or salary continuation plan,
except as otherwise specifically determined by the Board.
7. Proceeds from Sale of Stock. Cash proceeds from the sale of shares of Option
Stock issued from time to time upon the exercise of Options granted pursuant to
this Plan will be added to the general funds of the Company and as such will be
used from time to time for general corporate purposes.
8. Modification, Extension and Renewal of Options. Subject to the terms and
conditions and within the limitations of this Plan, the Committee may modify,
extend or renew outstanding Options granted under this Plan, or accept the
surrender of outstanding Options (to the extent not theretofore exercised) and
authorize the granting of new Options in substitution therefor (to the extent
not theretofore exercised). Notwithstanding the foregoing, however, no
modification of any Option will, without the consent of the holder of the
Option, alter or impair any rights or obligations under any Option theretofore
granted under this Plan.
9. Amendment and Discontinuance. The Board may amend, suspend or discontinue
this Plan at any time or from time to time; provided that no action of the Board
will cause ISOs granted under this Plan not to comply with Section 422 of the
Code unless the Board specifically declares such action to be made for that
purpose. Moreover, no such action may alter or impair any Option previously
granted under this Plan without the consent of the holder of such Option.
10. Plan Compliance with Rule 16b-3. With respect to persons subject to Section
16 of the Securities Exchange Act of 1934, transactions under this plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the 1934 Act. To the extent any provision of the plan or action
by the plan administrators fails so to comply, it shall be deemed null and void,
to the extent permitted by law and deemed advisable by the plan administrators.
11. Copies of Plan. A copy of this Plan will be delivered to each Optionee at or
before the time he or she executes an Option Agreement.
Date Plan Adopted by Board of Directors: August 6, 1998
Date Plan Approved by Stockholders: ________, 1998
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APPENDIX B
PROXY CARD
for
ANNUAL MEETING OF STOCKHOLDERS
of
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC
This Proxy is Solicited on Behalf of the Board Of Directors. The undersigned
hereby appoints David A. Robinson as Proxy, with the power to appoint his
substitute and hereby authorize them to represent and to vote, as designated
below, all the shares of common stock of Specialized Health Products
International, Inc. held on record by the undersigned on August 27, 1998 at the
annual meeting of stockholders to be held on October 22, 1998, or any
adjournment thereof.
1. Election of Nominee Directors
[ ] FOR David A. Robinson [ ] WITHHOLD AUTHORITY to vote for David A. Robinson
2. Proposal to approve the Specialized Health Products International, Inc.
1998 Stock Option Plan.
[ ] For [ ] Against [ ] Abstain
3. In their discretion, the Proxy is authorized to vote upon such other business
as may property come before the meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder(s). If no directions are made,
this proxy will be voted for the above Proposals.
Please sign below. When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full
corporation name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Dated: ___________, 1998 ____________________________________
(signature)
------------------------------------
(signature if held jointly)
------------------------------------
(print name of stockholder(s))
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope or proxy cards may be sent by facsimile to Colonial Stock at (801)
355-6505.
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