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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).
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CUSIP No. 902958107
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1. NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
John W. Dalton, Social Security Number: ###-##-####
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: (a) [ ] (b) [ ]
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3. SEC USE ONLY:
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4. SOURCE OF FUNDS*
PF
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION:
United States
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NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 6,304,885.6 (includes 20,900 shares
of common stock)
8. SHARED VOTING POWER:
9. SOLE DISPOSITIVE POWER: 6,304,885.6
10. SHARED DISPOSITIVE POWER:
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
31,350 Common Stock 178,571.43 Preferred Stock
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
1.1% of Common Stock 17.9% of Preferred Stock
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14. TYPE OF REPORTING PERSON:
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
2
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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) John W. Dalton
(b) 11325 Somerland Way, Houston, Texas 77024
(c) Investments, First Vice President Dain Rauscher
(d) Not Applicable
(e) Not Applicable
(f) United States
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On or about October 1, 1997, the reporting person initially
acquired 25% of the total issued and outstanding common stock
of Sharps Compliance, Inc., a privately held Texas
corporation, in consideration for certain business and
financial services. Upon consummation of a $4,000,000 private
offering in February of 1998, the reporting person owned
approximately 11% of the total issued and outstanding shares
of common stock of Sharps Compliance, Inc. 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 beneficially owned 31,350
shares of common stock, equaling approximately 1.1% of the
total class of common stock, and beneficially owned 178,571.43
shares of preferred stock equaling approximately 17.9% 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 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
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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 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 acquired the securities in the Issuer for
investment purposes only, and 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 31,350 shares of common stock, equaling
approximately 1.1%, and owns 178,571.43 shares of
preferred stock, equaling approximately 17.9%.
(b) The reporting person has the sole power to
6,304,885.6 (after giving effect to the right of all
preferred shareholders to 35.190 319 votes for each
share of preferred stock). The reporting person
exchanged 1,250,000 shares of common stock of Sharps
Compliance, Inc. for 178,571.428 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 December 6, 1996, the reporting person entered into
that certain Subscription Agreement to acquire 20,900 units at a
price of $0.50 per unit which entitled the reporting person to
receive 20,900 shares of common stock of the Issuer at a price
of $0.50 per share and additionally, the reporting person received
10,450 warrants to acquire 10,450 shares of common stock of the
Issuer at various exercise prices until January 3, 1999 before
taking into account any stock splits, reorganizations or
recapitalizations. On or about October 6, 1997, the reporting
person entered into a letter agreement with Sharps Compliance,
Inc., Parris H.
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Holmes, Jr. and Dr. Burt Kunik concerning certain financial
advisory services rendered and to be rendered on behalf of Sharps
Compliance, Inc. In return, the reporting person received
approximately 25% of the issued and outstanding shares of Sharps
Compliance, Inc. Such Agreement provides for certain lending
accommodations by Mr. Holmes and places certain restrictions the
transferability of the shares of Sharps Compliance, Inc. owned by
the reporting person.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
(a) Subscription Agreement
(b) 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/ John W. Dalton
- ----------------- ----------------------------------
Date Name: John W. Dalton
5
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EXHIBIT INDEX
(a) Subscription Agreement
(b) Letter Agreement with Sharps Compliance, Inc.
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EXHIBIT 99(A)
SUBSCRIPTION AGREEMENT
MEDICAL POLYMERS TECHNOLOGIES, INC.
550,000 UNITS
550,000 SHARES OF COMMON STOCK
WITH
STOCK PURCHASE WARRANTS TO PURCHASE 275,000 SHARES OF COMMON STOCK
------------------------
Medical Polymers Technologies, Inc.
7600 Burnet Road, Suite 350
Austin, TX. 78757-1267
Gentlemen:
The undersigned subscriber has been informed that Medical Polymers
Technologies, Inc., a Delaware corporation (the "Company"), is currently in the
process of obtaining capital through the private offer and sale of a minimum of
400,000 units and up to a maximum of 550,000 units at $0.50 (US) consisting of
one share of Common Stock and one non-transferable share purchase warrant, two
of such warrants entitling the holder to acquire one additional share of Common
Stock at a price of $0.75 (US) per share in year one and at a price of $1.00
(US) in year two. Such Units are being offered to accredited investors (as
defined under the Securities act of 1933, as amended (the "Act")). The
undersigned acknowledges receipt of the Subscription Agreement, 10-KSB/A1 and
10-QSB of September 30, 1996 and the opportunity to obtain additional
information from the Company on the basis of which the undersigned submits this
offer.
The undersigned hereby acknowledges that he has had full and complete
access to all information regarding the Company and its current operations,
financial position and prospects, and has had the opportunity to review
documents in the possession of the Company regarding the proposed financing, the
reorganization approved November 19, 1996 by the Stockholders and other
corporate matters. The undersigned also has had the opportunity to ask questions
of the Company's officers or directors and to receive information satisfactory
to the undersigned in response to such questions and inquiries.
1. Subscription. The undersigned hereby irrevocably tenders this
subscription (the "Subscription") for Units as indicated on the signature page
hereto and cash or a cashier's check in payment therefor.
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Subject to the terms of the Subscription Agreement, the Investor hereby
irrevocably subscribes for and agrees to purchase the number of Units indicated
on the signature page hereto at a purchase price of $.050 (US) per Unit (the
"Subscription"). Simultaneously with the delivery of the combined signature
page (the "Signature Page") to this Subscription Agreement, the Questionnaire
referred to below, and the Warrant Agreement referred to below, the Investor
shall deliver to the Company the appropriate completed questionnaire (the
"Questionnaire"), a completed and signed Vancouver Stock Exchange Form 11-1A -
Private Placement Questionnaire and Undertaking ("VSE Form 11-1A"), a completed
Internal Revenue Service Form W-9 (IRS Form W-9"), a completed British Columbia
Securities Commission Form 20, and payment in the amount set forth on the
Signature Page below (the "Payment"), in the form of a check payable to
"Medical Polymers Technologies, Inc." or any bank wire transfer to the account
of the Agent referred to below at:
NationsBank of Texas
Dallas, Texas
ABA No. 111000025
For future credit to:
Account No. 2140449207
The Investor understands that the Payment will be held in escrow for his or
its benefit by NationsBank, N.A. (the "Agent") in Austin, Texas. The Payment
will be promptly returned to the Investor, without interest, in the event that
for any reason the purchase and sale of all of the Unit has not been consummated
by January 15, 1997 (the "Closing Date"). It is excepted, however, that the
Closing Date will occur on or about December 16, 1996.
It is understood and agreed that the Company shall have the right, in its
sole and absolute discretion, to accept or reject this Subscription, in whole
or in part, and that this Subscription shall be deemed to be accepted by the
Company only when it is signed by the Company. The undersigned understands that
this Subscription constitutes an absolute obligation for him, that it is
independent of any of subscription by any other party, and that only the
Company may accept this Subscription.
2. Representations and Warranties of the Undersigned. The undersigned
hereby represents and warrants to the Company as follows:
(a) THE INVESTOR RECOGNIZES THAT AN INVESTMENT IN THE COMPANY INVOLVES
SUBSTANTIAL RISK. THE INVESTOR UNDERSTANDS ALL OF THE RISK FACTORS RELATING TO
THE PURCHASE OF UNITS.
(b) he has not retained or consulted with a Purchaser Representative;
(c) he had such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of an investment
in the Company and the suitability of the units subscribed for an investment
for him;
(d) he has a net worth in excess of five times the amount of the purchase
price tendered herein.
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(e) the Units for which her hereby subscribes will be acquired for his
own account for investment and not with the view toward resale or
redistribution; also, the undersigned is not buying Units as a nominee for any
other person, and he does not presently have any reason to anticipate any
change in his circumstances or other particular occasion or event which would
cause hi to sell his Units;
(f) he has received no representations or warranties from the Company or
the officers, directors, employees, or agents of the Company other than those
set forth in the 10-KSB/A-1 and 10-QSB;
(g) he is able to bear the economic risk of the investment in the Units
subscribed for and he has sufficient net worth to sustain a loss of his entire
investment in the Company without material economic hardship if such a loss
should occur;
(h) he has received and read and is familiar with the 10-KSB/A1,
including all exhibits annexed thereto and the Company's 10-QSB for September
30, 1996, and he confirms that all documents, records, and books pertaining to
his proposed investment in the Company have been made available to him;
(i) he has had an opportunity to ask questions of and receive
satisfactory answers from the Company or any person or persons acting on the
Company's behalf, concerning the terms and conditions of this investment, and
all such questions have been answered to the full satisfaction of the
undersigned;
(j) he represents that (I) it has been called to his attention by those
individuals with whom he has dealt in connection with his investment in the
Company, that his investment in the Company is speculative and involves a high
degree of risk of loss by him and his entire investment in the Company and that
he must bear economic risk of such investment for an indefinite period of time
because the Units have not been registered under the Act or applicable state
securities laws and therefore cannot be sold unless subsequently registered
under the /act and such state laws or unless an exemptions form such
registration is available, (ii) no assurances are or have been made regarding
any economic advantages (including tax) which may inure to the benefit of the
undersigned, (iii) no assurances have been made concerning return on
investments, and (iv) he is aware that this Subscription constitutes an
absolute obligation for him and is independent of any other subscription for
Units;
(k) he acknowledges and is aware that it never has been represented,
guaranteed, or warranted to him by the Company, its officers, directors, agents
or employees, or any other person, expressly or by implication, as to any of
the following: (I) the approximate or exact length of time that he will be
required to remain as owner of his Units; (ii) the percentage of profit and/or
amount of or type of consideration, profit or loss to be realized, if any, as a
result of this investment; or (iii) that the past performance or experience on
the part of the Company, or any future projections will in any way indicate the
predictable results of the ownership of Units or of the overall financial
performance of the Company;
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(l) he has made other risk capital investments or other investments of a
speculative nature and, by reason of his business and financial experience or
the business and financial experience of those persons he has retained to
advise him with respect to his investment in the Company, has acquired the
capacity to protect his own interest in investments of this nature;
(m) he acknowledges that all information made available to him and/or his
personal advisor(s) in connection with his investment in the Units, including
the information contained in the Memorandum and exhibits thereto, is and shall
remain confidential in all respects and may not be reproduced, distributed or
used for any other purpose without prior written consent of the Company;
(n) the undersigned, if an individual, represents he is a bona fide
resident and domiciliary, not a transient or temporary resident, of the state
and country shown below. If the undersigned is a corporation, trust or other
entity, it represents that it was incorporated or organized and is existing
under the laws of the state shown below; if the undersigned is a partnership,
it represents that all of its general partners are bona fide residents and
domiciliaries, not transient or temporary residents, of Texas; and if the
undersigned is a corporation, trust, partnership or other entity, it represents
it was not organized for the specific purpose of acquiring the Units;
(o) he has received, complete and returned to the Company the
Confidential Purchaser Questionnaire accompanying this Subscription and
relating to his general ability to bear the risks of an investment in the
Company and his suitability as an investor in the private offering, and the
undersigned hereby affirms the correctness of his answers to such questionnaire;
(p) by executing in the space provided below, the undersigned accepts the
terms of, and agrees to abide by, the Warrant Agreement, and at the request of
the Company, he agrees to complete and return to the Company an investment
letter, upon the exercise of the Warrants for the Common Stock, containing
representations in support of a private placement exemption under applicable
federal and state securities law; and
(q) he acknowledges and agrees that he is not entitled to cancel,
terminate, or revoke this Subscription or any agreements of the undersigned
hereunder, once accepted by the Company, and that such Subscription and
agreements shall survive changes in the transactions, documents and instruments
described in the Memorandum which, in the aggregate, are not material or which
are contemplated by the Memorandum.
(r) The Investor is aware that the Units will be distributed pursuant to
certain exemptions under the Securities Act (British Columbia) and its
regulations and the Investor is not acquiring these securities as a result of
any information about the materials affairs of the Company that is not
generally known to the public save the knowledge of his particular transaction.
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(s) This subscription for the Units has not been induced by any
representations or warranties by any person whatsoever with regard to the
future value of the Company's securities.
(t) The Investor is acquiring the Units as principal for the Investor's
own benefit.
(u) Pursuant to the Securities Act (British Columbia) and its
regulations, the Investor will hold the Common Stock and any shares acquired
upon the exercise of the Warrant and such shares will be non-transferable in
British Columbia for a period of one year from the date of the Subscription
Agreement, and thereafter such shares may be subject to restrictions or notice
or requirements under such Act upon disposition.
(v) The Units were not advertised in printed media and general and
regular paid circulation, radio or television.
(w) No person has made to the Investor any written or oral
representations: (i) that any person will resell or repurchase the Common Stock
and/or the Warrant; (ii) that any person will refund the purchase price of the
Common Stock and/or the exercise price of the shares comprising the Warrant;
(iii) as to the future price or value of the Common Stock and/or the shares
issuable upon the exercise of the Warrant; or (iv) that the Common Stock and/or
the shares issuable upon the exercise of the Warrant will be listed and posted
for trading on a stock exchange or that application has been made to list and
post the shares and/or the shares issuable upon the exercise of the Warrant for
trading on a stock exchange other than Vancouver Stock Exchange.
3. Indemnification. The undersigned acknowledges that the
representations and warranties in paragraph 2 are being relied upon by the
Company and individuals to whom such representations and warranties are made,
and he hereby agrees to indemnify and hold harmless to Company, and its
officers, directors, attorneys and agents from and against any and all loss,
damage or liability due to, or arising out of, a breach of any such
representations or warranties. Notwithstanding the foregoing, however, no
representation, warranty, acknowledgment, or agreement made herein by the
undersigned shall in any manner be deemed to constitute a waiver of any rights
granted to him under federal or state securities laws.
4. Limitation on Transfer of Units. The undersigned acknowledges that he
is aware that there are substantial restrictions on the transferability of the
Units. Since the securities will not be, and the undersigned has no right to
require that they be registered under the Act or any applicable state or
provincial securities laws, the securities may not be, and the undersigned
agrees that they shall not be, sold unless such sale is exempt from such
registration under said Act and such laws. The undersigned also acknowledges
that he shall be responsible for compliance with all conditions on transfer
imposed by any blue sky or securities law administrator and for any expenses
incurred by the Company for legal or accounting services in connection with
reviewing such proposed transfer.
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5. Restrictions and Limitations. The undersigned understands and agrees
that the following restrictions and limitations are applicable to his purchase
and his resale, pledge, hypothecation, or other transfer of the Units
subscribed:
(a) the undersigned agrees that the securities shall not be sold,
pledged, hypothecated, or otherwise transferred unless either (i) the
securities are registered under the Act and applicable state or provincial
securities laws, or (ii) the sale, pledge, hypothecation, or transfer of the
securities is exempt therefrom;
(b) resale or transfer of Units may be permissible only if such
transferee meets the applicable standard for initial investment; and
(c) if a transfer agent for the Company is utilized, stop transfer
instructions to such transfer agent of the Company will be placed with respect
to the securities so as to restrict the resale, pledge, hypothecation, or other
transfer thereof.
6. Miscellaneous.
(a) All notices or other communications give or made hereunder shall
be in writing and shall be delivered or mailed by registered or certified mail,
return receipt requested, postage prepaid, if to the undersigned, at his
address set forth below and if to the Company, at 7600 Burnett Road, Suite 350,
Austin, Texas 78757-1267.
(b) This Subscription shall be construed in accordance with and
governed by the laws of the State of Texas, excluding choice of law and
conflicts of law principles.
(c) This Subscription constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and may be amended
only by a writing executed by all parties.
(d) This Subscription and the representations and warranties
contained herein shall be binding upon the heirs, executors, legal
representatives, administrators, successors, and assigns of the undersigned.
(e) The recitals are incorporated in and made a part of this
Subscription. Title of articles, paragraphs and all subparagraphs are used for
convenience only and are not a part of the text. All terms used in any one
number or gender shall be construed to include any other number or gender as
the context may require and the terms "he" and "him" shall mean and include
"it", "she", "they" or "them" if the context requires.
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IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement as of the 16th day of December, 1996.
Dollar Amount of Unit Subscribed For: $10,450.00
/s/ JOHN W. DALTON
--------------------------------
Signature of Subscriber
John W. Dalton
--------------------------------
(Type or Print Name)
/s/ RAUSCHER PIERCE REFSNES, INC. ###-##-####
- ------------------------------------ --------------------------------
Name of Business Social Security or Tax ID Number
1330 Post Oak Blvd., Suite 2300 11325 Somerland Way
- ------------------------------------ --------------------------------
Business Address City, State, ZIP Code
(713) 623-9216 (713) 464-6057
- ------------------------------------ --------------------------------
Business Telephone Number Residence Telephone Number
All correspondence addressed to the above named person should be sent by
the Company to his [ ] business [X] home address (check one).
Capacity of Subscriber (check one)
Individual [X] Corporation [ ] Company [ ] Other [ ] ________ (please specify)
- -------------------
7
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Accepted:
Medical Polymers Technologies, Inc.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Date: Time:
------------------ --------------
8
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9
Agreement, together with the forms of instruments annexed hereto as Exhibit A,
constitutes the full and complete agreement of the parties hereto with respect
to the subject matter hereof.
THIS WARRANT AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
WITH RESPECT TO THE WARRANT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NOT
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed as of the 6th day of December, 1996, by its proper corporate
officers, thereunto duly authorized.
MEDICAL POLYMERS TECHNOLOGIES, INC.
By:
/s/ LEE COOKE
-----------------------------------
LEE COOKE,
Chairman
CONFIRMED:
/s/ JOHN W. DALTON
-----------------------------------
SIGNATURE
Printed Name: JOHN W. DALTON
Title (if
applicable):
---------------------
(Each co-owner or joint owner must sign.)
<PAGE> 1
EXHIBIT 99(b)
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
