<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _______)*
U.S. MEDICAL SYSTEMS, INC.
(Name of Issuer)
10% VOTING CONVERTIBLE PREFERRED STOCK, $.01 PAR VALUE PER SHARE
(Title of Class of Securities)
902958107
(CUSIP Number)
DARRYL M. BURMAN, 1900 W. LOOP SOUTH, STE. 1100, HOUSTON, TEXAS 77027
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications.
FEBRUARY 27, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE> 2
Page 2 of 5
CUSIP No. 902958107
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
Burton J. Kunik, Social Security Number: ###-##-####
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: (a) [ ] (b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY:
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
United States
- --------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 15,081,442
8. SHARED VOTING POWER:
9. SOLE DISPOSITIVE POWER: 428,571.43
10. SHARED DISPOSITIVE POWER:
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
428,571.43 Preferred Stock
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
42.9% of Preferred Stock
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON:
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
2
<PAGE> 3
Page 3 of 5
SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER.
10% Voting Preferred Stock, $.01 par value per share, of U.S.
Medical Systems, Inc. the President of which is Carlton L. Cooke,
Jr., 7600 Burnett Road, Suite 350, Austin, Texas 78734.
ITEM 2. IDENTITY AND BACKGROUND.
(a) Burton J. Kunik
(b) 8929 Kirby Drive, Houston, Texas 77054
(c) President, Sharps Compliance, Inc.
(d) Not Applicable
(e) Not Applicable
(f) United States
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The reporting person owned 3,000,000 shares of Sharps
Compliance, Inc. prior to completion of a $4,000,000 private
placement on February 18, 1998. On or about February 27, 1998,
all of the stockholders of Sharps Compliance, Inc. exchanged
their shares of common stock for shares of preferred stock of
the Issuer, and Sharps Compliance, Inc. became a wholly owned
subsidiary of the Issuer (the "Reorganization"). Upon
consummation of the Reorganization, the reporting person owned
428,571.43 shares of preferred stock, equaling approximately
42.9% of the total class of preferred stock. The reporting
person currently has no plans to acquire any additional
securities of the Issuer. As discussed in item 3 above, the
Issuer recently consummated the Reorganization, which is the
basis for this filing. The reporting person anticipates that
there will be a change in the present Board of Directors of
the Issuer, but should not include changing the number or term
of Directors. The Issuer intends to have its annual
shareholders meeting on or about May 27, 1998, and will at
that time elect two (2) new Board Members, amend the Company's
Certificate of Incorporation to change its name to Sharps
Compliance Corp., amend the Certificate to eliminate Article
10 relating to stockholder rights, effect a 1-for-5.032715
reverse stock split of the Issuer's common stock, and approve
an amendment to the Company's 1993 Stock Plan to increase the
number of shares
3
<PAGE> 4
Page 4 of 5
of common stock subject to issuance under the plan from 59,609
shares of common stock to 1,000,000 shares (after giving
effect to the reverse stock split described above).
ITEM 4. PURPOSE OF TRANSACTION.
The reporting person has no plans or proposals, other than
those described in Item 3 above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) In the aggregate, the reporting person beneficially
owns 428,571.43 shares of preferred stock, equaling
approximately 42.9%.
(b) The reporting person has the sole power to 15,081,442
votes (after giving effect to the right of all
preferred shareholders to 35.190319 votes for each
share preferred stock). The reporting person
exchanged 3,000,000 shares of common stock of Sharps
Compliance, Inc. for 428,571.43 shares of preferred
stock of the Issuer. Additionally, on or about
February 27, 1998, the Issuer acquired all of the
outstanding shares of Sharps Compliance, Inc., which
then became a wholly owned subsidiary of the Issuer.
(c) Not Applicable.
(d) Not Applicable
(e) Not Applicable
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
On or about January 29, 1998, the reporting person entered into
an Employment Agreement with Sharps Compliance, Inc., and
entered into a subsequent Amendment on or about April 13, 1998.
On or about October 6, 1997, the reporting person entered into a
letter agreement with Sharps Compliance, Inc., Parris H. Holmes,
Jr. and John W. Dalton concerning certain financial advisory
services rendered and to be rendered by Messrs. Holmes and
Dalton on behalf of Sharps Compliance, Inc. Such Agreement
provides for certain lending accommodations by Mr. Holmes and
places certain restrictions on the transferability of the shares
of Sharps Compliance, Inc. owned by the reporting person.
4
<PAGE> 5
Page 5 of 5
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
(a) Employment Agreement
(b) First Amendment to Employment Agreement
(c) Letter Agreement with Sharps Compliance, Inc.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
May 7, 1998 /s/ Burton J. Kunik
- ----------------- --------------------------------------
Date Name: Burton J. Kunik
5
<PAGE> 6
EXHIBIT INDEX
(a) Employment Agreement
(b) First Amendment to Employment Agreement
(c) Letter Agreement with Sharps Compliance, Inc.
<PAGE> 1
EXHIBIT 99(a)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made effective the 1st day of January, 1998, by
and between Sharps Compliance, Inc., a Texas corporation, with principal offices
located at 8928 Kirby Drive, Houston, Texas 77054 (hereinafter referred to as
"Employer"), and Dr. Burt Kunik, a resident of Harris County, Texas hereinafter
referred to as "Employee").
WITNESSETH:
WHEREAS, the Company desires to employ Employee as its Chairman of the
Board, President and Chief Executive Officer, and Employee is desirous of
undertaking such responsibilities;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DUTIES
1.1 DUTIES. During the term of this Agreement, the Company agrees to employ
Employee as the Company's Chairman of the Board, President and Chief Executive
Officer, and Employee agrees to serve the Company in such capacities or in such
other capacities (subject to Employee's termination rights under section 4.2) as
the Board of Directors of the Company may direct, all upon the terms and subject
to the conditions set forth in this Agreement.
1.2 EXTENT OF DUTIES. Employee shall devote substantially all of his
business time, energy and skill to the affairs of The Company as the Company,
acting through its Board of directors, shall reasonably deem necessary to
discharge Employee's duties in such capacities. Employee shall not engage in any
other business activity during the term of this Agreement without prior written
consent of the Company, other than the passive management of Employee's personal
investment or activities which would not materially detract from Employee's
ability to perform his duties under this Agreement (such as Employee's current
positions with other companies and other future positions of a similar nature.)
ARTICLE II
TERM OF EMPLOYMENT
The term of this AGREEMENT shall commence on the effective date and continue
for a period of three (3) years and for additional five year extensions
thereafter, except if terminated as provided herein. This Agreement is subject
to earlier termination as hereinafter provided.
1
<PAGE> 2
ARTICLE III
COMPENSATION
3.1 ANNUAL BASE COMPENSATION. As compensation for services rendered under
this Agreement, Employee shall be entitled to receive from Company an annual
base salary (before standard deductions) of $180,000 during the term of this
Agreement. Employees' annual base salary shall be subject to review and
adjustment by the Compensation Committee of the Company at the time of this
Agreement (the "Compensation Committee") and on an annual basis, provided that
any downward adjustment shall be to an amount no less than $180,000 during the
term of this Agreement. Employees' annual base salary shall be payable at
regular intervals in accordance with the prevailing practice and policy of the
Company. Any unpaid base salary shall accrue
3.2 INCENTIVE BONUS. As additional compensation for services rendered
under this Agreement, the Compensation Committee may, in its sole discretion and
without any obligation to do so, declare that Employee shall be entitled to an
annual incentive bonus (whether payable in cash, stock, stock rights or other
property) as the Compensation Committee shall determine. If any such bonus is
declared, the bonus shall be payable in accordance with the terms prescribed by
the Compensation Committee. Should the Company change control, the Compensation
Committee may consider a bonus to the Employee as part of a severance package
3.3 EMPLOYEE LOAN REPAYMENT. In connection with that certain loan in the
principal amount of $400,000 owed by Employee to the Company, the Company shall
be obligated to pay to Employee, each year, during the term of this Agreement an
annual cash bonus equal to (i) one-fifth (1/5) of the total outstanding
principal and interest owed by Employee to the Company for years one and two and
(ii) three-fifths (3/5) of the total outstanding principal and all accrued
interest owed by Employee to the Company in year three. The bonus required under
this Section 3.3 shall be paid no later than December 31, of each year beginning
in 1998 with the last year's bonus issued no later than December 31, 2000.
Additionally, the Company agrees that in the event the Company shall increase
its gross sales in any year by at least thirty percent (30%) over the gross
sales in the prior year, or if the Company's EBIDTA shall be at least __________
in any year, the Company shall cause Employee to receive a cash bonus necessary
to cover all tax liability, at the maximum tax rate applicable, attributable to
the Employee Loan Repayment, and the bonus provided hereby (the "Gross-up"). Any
Gross-Up Amount owed hereunder shall also be paid prior to December 31 of each
year, where applicable.
3.4 OTHER BENEFITS. Employee shall, in addition to the compensation
provided for in Sections 3.1 and 3.2 above, be entitled to the following
additional benefits:
A) MEDICAL, HEALTH AND DISABILITY BENEFITS. Employee shall be
entitled to receive all of the medical, health and
disability benefits that may, from time to time, be
provided by the Company.
2
<PAGE> 3
B) OTHER BENEFITS. Employee shall be entitled to receive
payment by the Company a retirement benefit into his
Individual Retirement (SEP) account beginning in
calendar year 1998 to the maximum allowed by law.
C) VACATION PAY. Employee shall be entitled to an
annual vacation as determined in accordance with the
prevailing practice and policy of the Company but in
no event less than two (2) weeks per calendar year.
D) HOLIDAYS. Employee shall be entitled to holidays in
accordance with the prevailing practice and policy of
the Company.
E) REIMBURSEMENT OF EXPENSES. The Company shall
reimburse Employee for all expenses reasonably
incurred by Employee on behalf of the Company in
accordance with the prevailing practice and policy of
the Company.
F) CLUB MEMBERSHIP. Payment in full of monthly dues at
the Doctor's Club in Houston, Texas with payment of
reimbursement of all charges incurred at such club
relating to entertainment of business guest. Upon
termination of the Agreement under Section 4.1,4.2 or
4.6 hereof, such club membership shall again transfer
to Employee without further consideration.
G) CAR ALLOWANCE. The Company shall be requested to
provide to Employee, during the term of this
Agreement, at the sole cost of the Company, a
automotive vehicle for Employees use, that is
acceptable to Employee and reasonable to the Company
along with insurance to cover such vehicle at limits
and deductions mutually acceptable to Employee and
the Company.
ARTICLE IV
TERMINATION
4.1 TERMINATION BY THE COMPANY WITHOUT CAUSE. Subject to the provisions
of this Section 4.1, this Agreement may be terminated by the Company without
cause upon 30 days prior written notice thereof given to Employee. In the event
of termination pursuant to this Section 4.1, (a) the Company shall at the
election of Employee either (x) continue to pay Employee his then effective base
salary under Section 3.1 hereof and all benefits under Sections 3.3 and 3.4
hereof through the expiration of the three-year term then in effect (without
giving effect to any further extensions thereof under Article II hereof) or (y)
pay Employee, within 15 days of such termination, a lump sum payment equal to
(without discounting present value) his then aggregate effective base salary
owed under Section 3.1 hereof through the expiration of the three-year term then
in effect (without giving effect to any further extensions thereof under Article
II hereof), and (b) any outstanding stock options held by Employee shall become
fully vested and exercisable pursuant to an Agreement Regarding Vesting of Stock
Options the form which is attached hereto as Exhibit A. Employee must make
election under clause (a) above by giving the Company written notice thereof
3
<PAGE> 4
within 90 days after notice of termination is given pursuant to this section
4.1. If Employee does not make such an election within the 90-day period, he
will be deemed to have elected to receive the lump sum payment described in
clause (a)(y) above. Payment or performance by the Company in accordance with
this Section shall constitute Employee's full severance pay and the Company
shall have no further obligation to Employee arising out of such termination.
4.2 VOLUNTARY TERMINATION BY EMPLOYEE FOR GOOD REASON. Employee may at
any time voluntarily terminate his employment for "good reason" (as defined
below) upon 30 days prior written notice thereof to the Company. In the event of
such voluntary termination for "good reason", (a) the Company shall at the
election of Employee either (x) continue to pay Employee his then effective base
salary under Section 3.1 hereof and all benefits under Section 3.3 and 3.4
hereof through the expiration of the three-year term then in effect (without
giving effect to any further extensions thereof under Article II hereof) or pay
Employee, within 15 days of such termination, a lump sum payment equal to
(without discounting to present value) his then effective base salary under
Section 3.1 hereof through the expiration of the three-year term then in effect
(without giving effect to any further extensions thereof under Article II
hereof), and (b) any outstanding stock options held by Employee shall become
fully vested and exercisable pursuant to the Agreement Regarding Vesting of
Stock Options, the form of which is attached hereto as Exhibit A. Regardless of
which election is made by Employee, the Company shall also pay the Employee the
aggregate of all remaining Employee Loan Repayment, if any, previously paid to
Employee.
Employee must make his election under clause (a) above by giving the
Company written notice thereof with 30 days after notice of termination is given
pursuant to this Section 4.1. If Employee does not make such an election within
the 30-day period, he will be deemed to have elected to receive the lump sum
payment described in clause (a)(y) above.
For purposes of this Agreement, "good reason" shall mean the occurrence
of any of the following events:
a) Removal from the offices Employee holds on the date
of this Agreement or a material reduction in
Employee's authority or responsibility, including,
without limitation, involuntary removal from the
Board of Directors, but not including termination of
Employee for "cause", as defined below; or
b) Relocation of the Company's headquarters from its
current location without the approval of Employee; or
c) An involuntary reduction in the Employee's
compensation; or
d) The Company otherwise commits a material breach of
this Agreement.
4.3 TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate this
Agreement at any time if such termination is for "cause" (as defined below), by
delivering to
4
<PAGE> 5
Employee written notice describing the cause of termination 30 days before the
effective date of such termination and by granting Employee at least 30 days to
cure the cause. In the event the employment of Employee is terminated for
"cause", Employee shall be entitled only to the base salary earned pro rata to
the date of such termination with no entitlement to any base salary
continuation payments or benefits continuation (except as specifically
provided by the terms of an employee benefit plan of the Company) and all
amounts still owing under Section 3.3 above in regards to the Employee Loan
Repayment. Except as otherwise provided is this Agreement, the determination of
whether Employee shall be terminated for "cause" shall be made by the Board of
Directors of the Company, in reasonable exercise of its business judgment, and
shall be limited to the occurrence of the following events:
a) Conviction of or a plea of nolo contendere to the
charge of a felony (which, through lapse of time or
otherwise, is not subject to appeal);
b) Willful refusal without proper legal cause to
perform, or gross negligence in performing,
Employee's duties and responsibilities;
c) Material breach of fiduciary duty to the Company
misappropriation of Company funds or property; or
d) The unauthorized absence of Employee from work (other
than for sick leave or disability) for a period of 30
working days or more during any period of 45 working
days during the term of this Agreement.
4.4 TERMINATION UPON DEATH OR PERMANENT DISABILITY. In the event that
Employee dies, this Agreement shall terminate upon the Employee's death.
Likewise, if the Employee becomes unable to perform the essential functions of
the position, with or without reasonable accommodation, on account of illness,
disability, or other reason whatsoever for a period of more than six consecutive
or nonconsecutive months in any twelve month period, this Agreement shall
terminate effective upon such incapacity, and Employee (or his legal
representatives/trust) shall be entitled only to the base salary earned pro rata
to the date of such termination with no entitlement to any base salary
continuation payments or benefits continuation (except as specifically provided
by the terms of (i) an employee benefit plan of the Company, (ii) Section 3.3
regarding the Employee Loan Repayment, or (iii) in connection with any stock
options which may be exercised by Employee for 90 days.)
4.5 VOLUNTARY TERMINATION BY EMPLOYEE. Employee may terminate this
Agreement at any time upon delivering 30 days written notice of resignation to
the Company. In the event of such voluntary termination other than for "good
reason" (as defined above), Employee shall be entitled to his base salary earned
pro rata to the date of his resignation, but no base salary continuation
payments or benefits continuation (except as specifically provided by the terms
of (i) an employee benefit plan of the Company, (ii) Section 3.3 regarding the
Employee Loan Repayment, or (iii) in connection with any stock options which may
be exercised by Employee for 90 days thereafter.) On or after the date the
Company receives notice of Employee's resignation, the
5
<PAGE> 6
Company may, at its option, pay Employee his base salary through the effective
date of his resignation and terminate his employment immediately.
4.6 TERMINATION FOLLOWING CHANGE OF CONTROL.
A) Notwithstanding anything to the contrary herein,
should Employee at any time within 12 months of the
occurrence of a "change of control" (as defined
below) cease to be an employee of the Company (or its
successor), by reason of (i) termination by the
Company (or its successor) other than for "cause'
(following a change of control, "cause shall be
limited to the conviction of or a plea of nolo
contendere to the charge of a felony (which, through
lapse of time or otherwise, is not subject to
appeal), or a material breach of fiduciary duty to
the Company through the misappropriation of Company
funds or property, or (ii) voluntary termination by
Employee for "good reason upon change of control" (as
defined below), then in any such event,
(1) If the Company is merged or acquires a
company in a field outside of the current
product alignment, the Company and Employee
could consider the assignment of existing
product lines and technology to Employee or
Employee's assignee as part of or in lieu of
the value of the settlement severance pay
highlighted above.
(2) The Company shall at the election of
Employee either continue to pay Employee his
then effective base salary under Section 3.1
hereof and all benefits under Sections 3.3
and 3.4 hereof through the expiration of the
term described then in effect (without
giving effect to any further extensions
thereof under Article II hereof) or (y) pay
Employee, within 45 days of the severance of
employment described in this Section 4.6, a
lump sum payment equal to (without
discounting present value) his then
effective base salary under Section 3.1 and
3.3 hereof and all benefits under Section
3.4 hereof through the expiration of the
three-year term then in effect (without
giving effect to any further extensions
thereof under Article II hereof).
(3) the Company shall provide the continued
benefit coverage described in Section 4.1 in
the event of the Employee's termination by
the Company without cause, and
(4) Certain outstanding stock options held by
Employee, if any, shall become fully vested
and exercisable pursuant to the Agreement
Regarding Vesting of Stock Options, the form
of which is attached hereto as Exhibit A.
6
<PAGE> 7
b) If, an election is made by Employee under paragraph (a) above,
Employee shall be entitled to an additional payment, to the extent all
payments to Employee (whether pursuant to the Agreement or any other
agreement whatsoever) in connection with a change of control as defined in
the Section 4.6 exceed in the aggregate, the maximum amount that could be
paid to Employee, triggering an excess parachute payment under Section
280(b) of the Internal Revenue Code of 1986, as amended (the "Code"), to
cover Employee owing any excise tax under Section 4999 of the Code,
(referred to herein as the "maximum payment amount") equal to an amount to
cover all excise tax liability which may accrue to Employee, including any
tax liability which may accrue to Employee in connection with the Company's
payment of the excise tax. If such a payment is required under this
paragraph (b) in addition to the amounts set forth in paragraph (a) above,
it shall be paid at the time and in the manner elected by the Employee
under paragraph (a)(1). Employee must make his election under paragraph
(a)(1) by giving the Company written notice thereof within 30 days after
the severance of employment described in this Section 4.6. If Employee does
not make such an election within the 30-day period, he will be deemed to
have elected to receive the lump sum payment described in paragraph
(a)(l)(y) above.
c) In determining the amount to be paid to Employee under this Section
4.6, as well as the limitation determined under Section 280G of the Code
(i) no portion of the total payments which Employee has waived in writing
prior to the date of the payment of benefits under this Agreement will be
taken into account, (ii) no portion of the total payments which nationally
recognized tax counsel (whether through consultation or retention of any
actuary consultant or other expert), selected by the Company's independent
auditors and acceptable to Employee, (referred to herein as "Tax Counsel")
determines not to constitute a "parachute payment", (iii) no portion of the
total payments which Tax Counsel determines to be reasonable compensation
for services rendered within the meaning of Section 280G(b)(4) of the Code
will be taken into account, and (iv) the value of any non-cash benefit or
any deferred payment or benefit included in the total payments will be
determined by the Company's independent auditors in accordance with
Sections 280G(d)(3) and (iv) of the Code.
d) As used in this Section, voluntary termination by Employee "for good
reason upon change of control" shall mean (i) removal of Employee from the
offices Employee holds on the date of this Agreement, (ii) a material
reduction in Employee's authority or responsibility, including, without
limitation, involuntary removal from the Board of Directors, (iii)
relocation of the Company's headquarters from its then current location,
(iv) a involuntary
7
<PAGE> 8
reduction in Employee compensation without the approval of Employee, or (v)
the Company otherwise commits a breach of this Agreement.
e) As used in this Agreement, a "change of control" shall be deemed to
have occurred if (i) any "Person" (as such term is used in Sections 12(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is or becomes a "beneficial owner" (as defined in Rule 12d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing more than 30% of the combined voting power of the Company's
then outstanding securities, or (ii) at any time during the 24 month period
after a tender offer, merger, consolidation, sale of assets or contested
election, or any combination of such transactions, at least a majority of
the Company's Board of Directors shall cease to consist of "continuing
directors" (meaning directors of the Company who either were directors
prior to such transaction or who subsequently became directors and whose
election, or nomination for election by the Company's stockholders, was
approved by a vote of a least two-thirds of the directors then still in
office who were directors prior to such transaction), or (iii) the
stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation
that would result in. the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 60% of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (iv) the stockholders of the Company
approve a plan for complete liquidation of the Company or an agreement of
sale or disposition by the Company of all or substantially all of the
Company's assets.
4.7 EXCLUSIVITY OF TERMINATION PROVISIONS. The termination provisions of
this Agreement regarding the parties' respective obligations in the event
Employee's employment is terminated, are intended to be exclusive and in lieu of
any other rights or remedies to which Employee or the Company may otherwise be
entitle by law, in equity,or otherwise. It is also agreed that, although the
personnel policies and fringe benefit programs of the Company may be
unilaterally modified from time to time, the termination provisions of the
Agreement are not subject to modification, whether orally, implied or in
writing, unless any such modification is mutually agreed upon and signed by the
parties.
ARTICLE V
CONFIDENTIAL INFORMATION AND NONCOMPETITION
5.1 Nondisclosure. During the term of Agreement and thereafter, Employee
shall not, without the prior written consent of the Board of Directors, disclose
or use for any purpose (except
8
<PAGE> 9
in the course of his employment under this Agreement and in furtherance of the
business of the Company) confidential information or proprietary data of the
Company (or any of its subsidiaries), except as required by applicable law or
legal process, provided, however, that confidential information shall not
include any information known generally to the public or ascertainable from
public or published information (other than as a result of unauthorized
disclosure by Employee) or any information of a type not otherwise considered
confidential by persons engaged in the same business or a business similar to
that conducted by the Company (or any of its subsidiaries).
5.2 NONCOMPETITION. The Company and Employee agree that the services
rendered by Employee hereunder are unique and irreplaceable. Employee hereby
agrees that, during the term of this Agreement and for a period of six months
thereafter, he shall not (except in the course of his employment under this
Agreement and in furtherance of the business of the Company or any of its
subsidiaries), (I) engage in as principal, consultant or employee in any segment
of a business of a company, partnership or firm ("Business Segment") that is
directly competitive with any significant business of the Company in one of its
major commercial or geographic markets or (ii) hold an interest (except as a
holder of less than 5% interest in a publicly traded firm or mutual funds, or as
a minority stockholder or unitholder in a form not publicly traded) in a
company, partnership or firm with a Business Segment that is directly
competitive, without the prior written consent of the Company.
5.3 VALIDITY OF NONCOMPETITION. The foregoing provisions of Section 5.2
shall not be held invalid because of the scope of the territory covered, the
actions restricted thereby, or the period of time such covenant is operative.
Any judgment of a court of competent jurisdiction may define the maximum
territory, the actions subject to and restricted by Section 5.2 and the period
of time during which such agreement is enforceable.
5.4 NONCOMPETITION COVENANTS INDEPENDENT. The covenants of the Employee
contained in Section 5.2 will be construed as independent of any other provision
in this Agreement; and the existence of any claim or cause of action by the
Employee against the Company will not constitute a defense to the enforcement by
the Company of said covenants. The Employee understands that the covenants
contained in Section 5.2 are essential elements of the transaction contemplated
by this Agreement and, but for the agreement for the Employee to Section 5.2,
the Company would not have agreed to enter into such transaction. The Employee
has been advised to consult with counsel in order to be informed in all respects
concerning the reasonableness and propriety of Section 5.2 and its provisions
with specific regard to the nature of the business conducted by the Company and
the Employee acknowledges that Section 5.2 and its provisions are reasonable in
all respects.
5.5 CONFIDENTIAL AND PROPRIETARY INFORMATION. This shall include, without
limitation, matters of a technical nature, such a know-how, formula, computer
programs, software and documentation, secret processes or machines, inventions.
Research projects, plans for further development and matters of a business
nature, such as information about costs, profits, markets, sales lists of
customers, and business data regarding customers, salaries, and other personnel
data, and any
9
<PAGE> 10
other information of a similar nature to the extent not available to the
public.
The Employee shall promptly disclose to the Employer or its designee any
and all ideas, inventions, improvements, discoveries, developments, innovations,
or works of authorship (hereinafter referred to as the "Inventions"), whether
patentable or unpatentable, copyrightable or uncopyrightable, made, created,
developed, discovered, worked on or conceived by the Employee, either solely or
jointly with others, whether or not reduced to drawings, written description,
documentation, models or other intangible form, during the Employment Period and
for a period of six (6) months thereafter that relate to, or arise out of, any
developments, services research or products of, or pertain to the business of,
the Employer.
5.6 REMEDIES. In the event of a breach or threatened breach by the
Employee of Section 5.2 or its provisions, the Company shall be entitled to a
temporary restraining order and an injunction restraining the Employee from the
commission of such breach. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of money damages.
ARTICLE VI
ARBITRATION
Any controversy of any nature whatsoever, including but not limited to tort
claims or contract disputes, between the parties to this Agreement or between
the Employee, his heirs, executors, administrators, legal representatives,
successors, and assigns and the Company and its affiliates, arising out of or
related to the Employee's employment with the Company; any resignation from or
termination of such employment and/or the terms and conditions of this
Agreement, including the implementation, applicability and interpretation
thereof, shall, upon the written request of one party served upon the other, be
submitted to and settled by arbitration in accordance with the provision of the
Federal Arbitration Act, 9 U.S.C. Sections l-15, as amended. Each of the parties
to this Agreement shall appoint one person as an arbitrator to hear and
determine such disputes, and if they should be unable to agree, then the two
arbitrators shall chose a third arbitrator from a panel made up of experienced
arbitrators selected pursuant to the procedures of the American Arbitration
Association (the "AAA") and, once chosen, the third arbitrator's decision shall
be final, binding and conclusive upon the parties to this Agreement. Each party
shall be responsible fQr the fees and expenses of its arbitrator and the fees
and expenses of the third arbitrator shall be shared equally by the parties. The
terms or the Commercial arbitration rules of AAA shall apply except to the
extent they conflict with the provisions of this paragraph. It is further agreed
than any of the parties hereto may petition the United States District Court for
the Southern District of Texas, Houston Division, for a judgment to be entered
upon any award entered through such arbitration proceedings.
ARTICLE VII
MISCELLANEOUS
7.1 COMPLETE AGREEMENT. THIS Agreement constitutes the entire agreement
between the
10
<PAGE> 11
parties and cancels and supersedes all other agreements between the parties,
which may have related to the subject matter contained in this Agreement.
7.2 MODIFICATION; AMENDMENT; WAIVER. No modification, amendment or waiver
of any provisions of this Agreement shall be effective unless approved in
writing by both parties. The failure at any time to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of either party thereafter to enforce
each and every provision hereof in accordance with its terms.
7.3 GOVERNING LAW; JURISDICTION. This Agreement and performance under it,
and all proceedings that may ensue from its breach, shall be construed in
accordance with and under the laws of the State of Texas.
7.4 EMPLOYEE'S REPRESENTATION. Employee represents and warrants that he is
free to enter into this Agreement and to perform each of the terms and covenants
of it. Employee represents and warrants that he is not restricted or prohibited,
contractually or otherwise, from entering into and performing this Agreement,
and that his execution and performance of this Agreement is not a violation or
breach on any other agreement between Employee and any other person or entity.
7.5 COMPANY'S REPRESENTATION. Company represents and warrants that it is
free to enter into this Agreement and to perform each of the terms and covenants
of it. Company represents and warrants that it is not restricted or prohibited,
contractually or otherwise, from entering into and performing this Agreement,
and that its execution and performance of this Agreement is not a violation or
breach on any other agreement between Employee and any other person or entity.
The Company represents and warrants that this Agreement is a legal, valid and
binding agreement of the Company, enforceable in accordance with its terms.
7.6 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
7.7 ASSIGNMENT. The rights and obligations of the parties under this
Agreement shall be binding upon and inure to the benefit of their respective
successors, assigns, executors, administrators and heirs, provided, however,
that neither the Company nor Employee assign any duties under this Agreement
without the prior written consent of the other.
7.8 LIMITATION. This Agreement shall not confer any right or impose any
obligation on the Company to continue the Employment of Employee in any
Capacity, or limit the right of the Company or Employee to terminate Employee's
employment as provided herein.
11
<PAGE> 12
7.9 ATTORNEY'S FEE AND COSTS. If any action at law or in equity is
brought to enforce or interpret the terms of this Agreement or any obligation
owing thereunder, venue will be in Travis County, Texas and the prevailing
party shall be entitled to reasonable attorney's fees and all costs and
expenses of the suit, including, without limitation, expert and accountant
fees, and such other relief which a court of competent jurisdiction may deem
appropriate.
7.10 NOTICES. All notices and other communications under this Agreement
shall be in writing and shall be given in person or by either personal
delivery, overnight delivery, or first class mail, certified or registered with
return receipt requested, with postal or delivery charges prepaid, and shall be
deemed to have been duly given when delivery personally, or three days after
mailing first class, certified or registered with return receipt requested, to
the respective persons named below:
If to the Company: Corporate Secretary
Sharps Compliance, Inc.
8928 Kirby Drive
Houston, Texas 77054
If to the Employee: Dr. Burt Kunik
7655 S. Braeswood, No. 17
Houston, Texas 77071
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day and year indicated above.
APPROVED:
COMPANY: SHARPS COMPLIANCE, INC.
By: /s/ JOHN W. DALTON
-----------------------------
Printed Name: John W. Dalton
-------------------
Title: Board of Director
EMPLOYEE:
/s/ BURT KUNIK
-------------------------------------
Dr. Burt Kunik
12
<PAGE> 1
EXHIBIT 99(b)
FIRST AMENDMENT
TO
EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (the "Amendment") dated April
_____, 1998 by and among Sharps Compliance, Inc., a Texas corporation, with its
principle offices located at 8928 Kirby Drive, Houston, Texas 77054
(hereinafter referred to as "Employer"), and Dr. Burt Kunik, a resident of
Harris County, Texas (hereinafter referred to as "Employee"), and hereby
amends that certain Employment Agreement entered into effective the 1st day of
January, 1998 by and between Employer and Employee (the "Agreement").
W I T N E S S E T H
WHEREAS, Employer and Employee have previously entered into that certain
Agreement;
WHEREAS, Employer and Employee hereby desire to amend the Agreement in
accordance with those terms and conditions provided herein by entering into
this Amendment.
THEREFORE, in consideration of the covenants mutual benefits contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intend to be legally
bound, hereby agree as follows:
1. Amendment to Article 2 of the Agreement. Article II TERMS OF
EMPLOYMENT is hereby amended to read in its entirety as follows:
"Article II
TERMS OF EMPLOYMENT
The term of AGREEMENT, shall commence on the effective date
and continue for a period of three (3) years thereafter, except if
terminated as provided herein. This Agreement is subject to earlier
termination as hereinafter provided."
2. Amendment to Section 3.3 of the Agreement. Section 3.3 of the
Agreement is hereby amended to read in its entirety as follows:
"3.3 EMPLOYEE LOAN REPAYMENT. In connection with that certain
loan in the principal amount of $400,000.00 owed by Employee to the
Company, the Company shall be obligated to pay to Employee, each year,
during the term of this Agreement an annual cash bonus or agree to
forgive an amount equal to (i) one-fifth (1/5) of the total and
outstanding principal and interest owed by Employee to the Company
1
<PAGE> 2
for years one (1) and two (2) and (ii) three-fifths (3/5) of the total and
outstanding principal and all accrued interest owed by Employee to the
Company in year three (3). The bonus or forgiveness required under this
Section 3.3 shall be paid or acknowledged no later than December 31, of
each year, beginning in 1998 with the last year's bonus issued no later
than December 31, 2000."
3. Amendment to Article 4 of the Agreement. Article 4 of the Agreement is
hereby amended to delete all references to any extensions beyond the initial
three year term. Therefore all words relating to "... then in effect (without
giving effect to any further extensions thereof under Article 2 hereof) ..."
are deleted in Sections 4.1, 4.2, 4.6(a)(2), and any other place it may be
found, and no longer considered in the interpretation of any provision of
Article 4.
4. Counterpart Execution. This Amendment may be executed by the parties
hereto in multiple counterparts. It shall not be necessary that the signatures
of the parties appear on the same counterparts.
5. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Texas.
6. Enforceability of Remaining Provision. All other provisions of the
Agreement shall remain in full force and effect and any inconsistencies between
this Amendment and the Agreement shall be construed in favor of this Amendment.
Executed as of the date first written above.
COMPANY: SHARPS COMPLIANCE, INC.
By: /s/ JOHN DALTON
-----------------------------------
Printed Name: John Dalton
-------------------------
Title: Board of Director
--------------------------------
EMPLOYEE: DR. BURT KUNIK
/s/ Dr. Burt Kunik
--------------------------------------
Dr. Burt Kunik
2
<PAGE> 1
EXHIBIT 99(c)
SHARPS COMPLIANCE, INC.
P.O. BOX 34595
HOUSTON, TEXAS 77235
October 3, 1997
Mr. John W. Dalton
1330 Post Oak Boulevard
Suite 2300
Houston, Texas 77056
Mr. Parris H. Holmes, Jr.
7411 John Smith Drive
Suite 1500
San Antonio, Texas 78229
Dr. Burt Kunik
Sharps Compliance, Inc.
P. O. Box 35495
Houston, Texas 77235
Gentlemen:
This letter, when accepted by each of you in the manner as hereinafter
set forth, will evidence an agreement by and between John W. Dalton
("Dalton"), Parris H. Holmes, Jr. ("Holmes"), Dr. Burt Kunik, ("Kunik") and
Sharps Compliances, Inc., ("SCI"), in regards to the following terms and
conditions:
1. Issuance of SCI stock to Dalton and Holmes. - Immediately upon execution of
this letter, SCI shall increase its authorized capital stock from 1,000,000
to 10,000,000 and cause to be issued to Dalton, 1,250,000 shares of common
stock of SCI in consideration of services rendered to SCI ("Dalton Stock"),
750,000 shares of common stock of SCI to be issued to Holmes in
consideration of certain financial consulting services ("Holmes Stock"),
and Kunik shall forward split his 1,000 shares into 3,000,000 shares of
outstanding common stock of SCI. Dalton and Holmes agree to execute
appropriate subscription documents evidencing certain representations in
regards to the issuance of the shares described in this Section 1.
2. Loan by Holmes. - Within thirty (30) days from the date of this letter,
Holmes agrees to loan (the "Loan") to SCI an amount equal to $400,000.00 to
be evidenced by a Promissory Note bearing interest at 8% and, to be payable
upon the sooner of (i) the subsequent completion of a Business Transaction
(as defined in Section 6 below) in which the use of proceeds shall
<PAGE> 2
October 3, 1997
Page 2
provide for such repayment, or (ii) six (6) months from the date Kunik
shall exercise his option as provided in Section 6 below.
3. Merger of SCI into U.S. Medical Systems, Inc. ("US Medical"). - Immediately
upon execution of this Agreement, SCI agrees to begin negotiations to enter
into a merger agreement with US Medical (the "Merger Agreement") on terms
and conditions which shall be acceptable to SCI and its legal counsel. As a
result of the merger of SCI into U.S. Medical (the "Merger"), all board
members of U.S. Medical shall resign and be replaced with the board of
directors of SCI (which board shall include Kunik, Holmes and Dalton). Such
Merger Agreement shall be executed no later than November 15, 1997. The
Merger Agreement shall also provide that as a result of such Merger, Kunik,
Dalton and Holmes shall own no less than the following percentages of total
issued and outstanding common stock of SCI/US Medical, 52.6%, 21.9%, and
13.24%, respectively. Additionally, the Merger Agreement shall provide that
Kunik, Holmes and Dalton agree to enter into a Lockup Agreement whereby
each of them agree that 90% of their total issued and outstanding shares of
common stock of SCI/US Medical after consummation of the Merger shall not
be sold for eighteen (18) months from the date of effectiveness of a public
offering. There shall be no prohibitions on the remaining ten percent
(10%,) except those which may be imposed by applicable state and federal
securities laws. Such Merger Agreement shall also require Burt Kunik to
enter into an Employment Agreement on terms and conditions mutually
agreeable to the Board of Directors of U.S. Medical/SCI, Kunik and his
counsel.
4. Private Equity Funding. - Holmes agrees to assist SCI/US Medical in raising
a minimum of $2,000,000 of additional equity. Such offering shall be made
only to "accredited investors," as that term is defined by Item 501 of
Regulation D of the Securities and Exchange Commission. As a result of
such equity offering, Kunik shall not own less than 44.8% of the total
issued and outstanding stock of SCI/US Medical.
5. U.S. Medical Annual Meeting. - Holmes agrees to cause U.S. Medical to
complete and file its 10K and Proxy Statement with the Securities and
Exchange Commission no later than November 30, 1997, with the intent that
the annual meeting of U.S. Medical shall be held prior to December 31,
1997. All parties agree that the Merger Agreement shall become effective on
the same day as the annual meeting, and that the private equity funding
provided by Holmes shall also be completed upon consummation of the Merger
at the annual meeting.
6. Failure to Consummate Merger. - In the event the Merger is not consummated
by December 31, 1997, all parties agree that Holmes and Dalton shall be
provided an additional three months until March 15, 1998 to complete either
the Merger, or a "business transaction." For purposes of this Agreement,
the term "business transaction" shall mean any sale, merger, acquisition or
series or combinations of transactions, other than in the ordinary course
of trade or business, whereby, directly or indirectly, control of a
material interest in SCI or any of its business or a substantial portion of
its or their respective assets, is transferred for consideration,
including, without limitation, a sale or exchange of capital stock or
assets, a lease of assets with or without a purchase option, a leverage buy
out, the formation of a joint venture, a public offering or any similar
transaction. In the event a "business transaction"
<PAGE> 3
October 3, 1997
Page 3
has not taken place by March 15, 1998, Kunik shall have the option of (i)
agreeing to repay the Loan within six (6) months from the date of his
election in equal principal and interest payments, at a rate of 8% per
annum, and repurchase Dalton's Stock for $1,250 and repurchase Holmes Stock
for $750.00 or (ii) repurchase only 500,000 shares of stock held by Dalton
for the sum of $500.00 Holmes shall agree to forgive repayment of the Loan
and as a result thereof, Dalton and Holmes would each own 750,000 shares of
common stock of SCI. In the event Kunik repurchases all of the Dalton Stock
and Holmes Stock and the Loan is to be repaid as provided above, Kunik
shall agree that in the event SCI shall enter into a commitment to
consummate any "business transaction" within six (6) months from the date
thereof, Kunik shall offer Dalton and Holmes the right to acquire 16 1/2%
each of the outstanding capital stock of SCI immediately prior to the
effectiveness of any such "business transaction" for the aggregate purchase
price of 400,000. Furthermore, the parties agree that if, on March 15, 1998
SCI shall (i) be a party to any "business transaction" which has not been
consummated as of that date, or (ii) have filed with the Securities and
Exchange Commission a registration statement for the registration of shares
of SCI, all parties agree that Kunick may delay the option discussed
hereinabove for an additional sixty (60) day period, it being the intent of
all parties that any pending transaction must be completed within such time
frame. Failure to complete such transaction by May 15, 1998 shall entitle
Kunik to exercise one of the above options discussed herein.
While it is not the intention of the parties to discuss all terms and
conditions of the transactions contemplated herein, it is the intent to reach
an understanding of the form by which the parties will go forward to consummate
a transaction. Therefore, if you are in agreement with the terms and conditions
contained herein, please execute in the spaces provided below.
Very truly yours,
SHARPS COMPLIANCE INC.
By: /s/ BURTON KUNIK
----------------------------
Dr. Burton Kunik, President
<PAGE> 4
October 3, 1997
Page 4
Accepted and Agreed to this
______day of __________, 1997.
- -------------------------------------
John W. Dalton
PARRIS H. HOLMES, JR.
- -------------------------------------
Parris H. Holmes, Jr.
- -------------------------------------
Dr. Burt Kunik
<PAGE> 5
October 3, 1997
Page 4
Accepted and Agreed to this
6 day of October , 1997.
JOHN W. DALTON
- ------------------------------------
John W. Dalton
- ------------------------------------
Parris H. Holmes, Jr.
DR. BURT KUNIK
- ------------------------------------
Dr. Burt Kunik
