-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CbbngDMK0QPryaTKQNGMriJYVQfqPGF5J0REg+bviCRxsNQMr5Ah0b94fBGIWE7a uyjA0DscPwwQS89681/iIA== 0000950129-98-001941.txt : 19980511 0000950129-98-001941.hdr.sgml : 19980511 ACCESSION NUMBER: 0000950129-98-001941 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19980508 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: US MEDICAL SYSTEMS INC CENTRAL INDEX KEY: 0000898770 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 680206382 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-53975 FILM NUMBER: 98613112 BUSINESS ADDRESS: STREET 1: 7600 BURNET RD STREET 2: STE 350 CITY: AUSTIN STATE: TX ZIP: 78757 BUSINESS PHONE: 5124583335 MAIL ADDRESS: STREET 1: 7600 BURNET RD STREET 2: STE 350 CITY: AUSTIN STATE: TX ZIP: 78757 FORMER COMPANY: FORMER CONFORMED NAME: MEDICAL POLYMERS TECHNOLOGIES INC DATE OF NAME CHANGE: 19930916 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HOLMES PARRIS H JR CENTRAL INDEX KEY: 0001034135 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 9311 SAN PEDRO STREET 2: SUITE 400 CITY: SAN ANTONIO STATE: TX ZIP: 78216 BUSINESS PHONE: 2105256200 MAIL ADDRESS: STREET 1: 9311 SAN PEDRO SUITE 400 CITY: SAN ANTONIO STATE: TX ZIP: 78216 SC 13D 1 PARRIS H. HOLMES, JR. FOR U.S. MEDICAL SYSTEMS INC 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). 2 Page 2 of 6 CUSIP No. 902958107 - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: Parris H. Holmes, Jr., Social Security Number: ###-##-#### - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: (a) [ ] (b) [ ] In addition to individually owning shares of common and preferred stock of the Issuer, the reporting person is the trustee for The Courtney Ann Holmes Meier Trust, The Darren Shelton Holmes Trust, The Staci Nicole Holmes Trust, and The Chance Ashley Steven Holmes Trust which each own preferred stock in the Issuer. - -------------------------------------------------------------------------------- 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: 4,566,855 (includes 369,153 shares of common stock) 8. SHARED VOTING POWER: 9. SOLE DISPOSITIVE POWER: 4,197,702 10. SHARED DISPOSITIVE POWER: - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 369,153 Common Stock 119,285.717 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): 12.3% of Common Stock 11.9% of Preferred Stock - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 2 3 Page 3 of 6 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) Parris H. Holmes, Jr. (b) 7411 John Smith Drive, Suite 200, San Antonio, Texas 78229 (c) Investments; Chairman and CEO of Billing Concepts Corp. (d) Not Applicable (e) Not Applicable (f) United States ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. On or about October 5, 1997, the reporting person initially acquired 15% 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. On or about February 18, 1998, the reporting person invested an additional $50,000 to acquire 25,000 shares in Sharps Compliance, Inc., in conjunction with a private placement that was made by Sharps Compliance, Inc. in which it raised $4,000,000. Upon consummation of the private offering, 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 owns 369,153 shares of common stock, equaling approximately 12.3% of the total class of common stock, and beneficially owns 119,285.717 shares of preferred stock, equaling approximately 11.9% 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, 3 4 Page 4 of 6 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 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 369,153 shares of common stock, equaling approximately 12.3%, and owns 119,285.717 shares of preferred stock, equaling approximately 11.9%. (b) The reporting person has the sole power to 4,566,855 votes (after giving effect to the right of all preferred shareholders to 35.190319 votes for each share of preferred stock). As described in item 3 above, the reporting person acquired an additional 50,000 shares of common stock in Sharps Compliance, Inc., a subsidiary of the Issuer, on or about February 18, 1998 for the purchase price of $2.00 per share in connection with a private offering of Sharps Compliance, Inc. Additionally, the reporting person exchanged 750,000 shares of common stock of Sharps Compliance, Inc. for 107,142.8601 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) On or about December 6, 1997, the reporting person exercised the right to purchase 35,000 shares of common stock of the Issuer, $0.01 par value, at a purchase price of $0.50 per share. This purchase was in connection with that certain Stock Purchase Warrant entered into between the Issuer and the reporting person on or about December 6, 1996. Additionally, the reporting 4 5 Page 5 of 6 person had entered into that certain Consulting Agreement dated January 7, 1997 with the Issuer to render certain services in connection with financial and investment consulting matters. The reporting person received options to acquire 50,000 shares of common stock of the Issuer at a purchase price of $0.60 per share. As of the date hereof, the reporting person has not exercised any options in connection with the Consulting Agreement. A copy of the Consulting Agreement is attached hereto. (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 exercised 70,000 warrants to acquire 35,000 shares of common stock of the Issuer at a price of $0.75 per share. The reporting person owns options to acquire 75,000 shares of common stock of the Issuer which became vested upon the Reorganization, and has until January 21, 2002, to exercise the options at a price of $60.00 per share before any splits, reorganizations or recapitalizations. On or about October 6, 1997, the reporting person entered into a letter agreement with Sharps Compliance, Inc., John W. Dalton 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 15% of the issued and outstanding shares of Sharps Compliance, Inc. Such Agreement also 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. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. (a) Consulting Agreement (b) Stock Purchase Warrant (c) Letter Agreement with Sharps Compliance, Inc. 5 6 Page 6 of 6 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/ Parris H. Holmes, Jr. - ----------------- -------------------------------------- Date Name: Parris H. Holmes, Jr. 6 7 EXHIBIT INDEX (a) Consulting Agreement (b) Stock Purchase Warrant (c) Letter Agreement with Sharps Compliance, Inc. EX-99.A 2 CONSULTING AGREEMENT 1 EXHIBIT 99(a) CONSULTING AGREEMENT THIS AGREEMENT is made as of the 7th day of January, l997. BETWEEN U.S. Medical Systems, Inc., 7600 Burnet Road, Suite 350 Austin, Texas 78757 (hereinafter referred to as the "Company") AND Parris H. Holmes, Jr. 9311 San Pedro, Suite 200 San Antonio, Texas 78216 (hereinafter referred to as the "Consultant") WHEREAS: A. The Consultant has been providing and continues to provide the Company with significant financial advice and services; and B. The Company wishes to compensate the Consultant for advice and services previously provided; and C. The Company wished to contract for the future services of the Consultant as financial and investment management consultant and general management advisor; and D. The Consultant has agreed to accept such contract for services upon the terms and conditions as hereinafter set forth. NOW, THEREFORE, THIS AGREEMENT WITNESSES THAT in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. ENGAGEMENT 1.1 Appointment: The Company hereby contracts for the services of the Consultant, and the Consultant hereby agrees to perform the services for the Company, in accordance with the terms and conditions of this Agreement. The Consultant shall report to the Chairman of the Board of the Company. 1.2 Past Services: the Consultant has previously provided the following services: (a) advised the Company concerning strategic financial planning; 1 2 (b) assisted with the due diligence review of the Company and analyzed the Company's capital needs: (c) advised the Company concerning various financing alternatives and analyzed such alternatives: (d) assisted the Company with introduction to, meetings with, and appointment of investment bankers, facturing representatives etc.; (e) assisted in the preparation of a business plan and private placement memorandum(s); (f) assisted with the due diligence review of possible acquisitions for the Company; and (g) assisted with the analysis of possible new products for the Company, (h) assisted in the sale to third parties if existing products of the Company. 1.3 Scope of Duties: The Consultant shall have the following ongoing responsibilities and duties: (a) advise the Company with regard to possible reverse take over of a private or public company, of such candidates and assist with negotiation with such candidates, and (b) analyze and advise the Company with respect to the various merger strategies alternatives available to the Company, especially in the January to September 1997, time frame (c) provide analysis and make recommendations with respect to the Company's existing and potential capital needs; (d) provide assistance in the strategy to dispose of any or all current operational assets should these medical assets be at odds with the merger/ reverse take over of a company in a completely different field. 1.4 Best Efforts: The Consultant shall at all times use his best efforts to advance the interest of the Company and shall faithfully, industriously and to the best of his abilities perform the responsibilities and duties described above. 1.5 Reports: The Consultant shall deliver to the President on a monthly basis a report detailing all activities and services provided to the Company for that period. 1.6 BOD APPROVAL: PERFORMANCE BY THE COMPANY OF ITS DUTIES PURSUANT TO THIS AGREEMENT. INCLUDING PAYMENT OF ANY REMUNERATION PURSUANT TO PARAGRAPH 3 HEREOF, IS SUBJECT IN ALL 2 3 RESPECTS TO APPROVAL BY THE BOARD OF DIRECTORS OF THE COMPANY. IF SUCH APPROVAL IS NOT OBTAINED, THIS AGREEMENT SHALL BE NULL AND VOID AND OF NO FORCE AND EFFECT. 2. TERM Initial Term: This Agreement shall continue until December 31, 1997, subject to earlier termination as hereinafter provided. 3. REMUNERATION 3.1 Remuneration: The Company shall compensate the Consultant for services already rendered and for services to be rendered as follows: (a) 50,000 options for conversion to shares of the Company's common stock, $.60(US) value. These shares will not be registered pursuant to state or federal securities laws and will be subject to substantial restriction for resale. The Company will not be obligated to register the shares. $20,000 will also be paid in October 1997. 3.2 Payment: The remuneration set forth in Paragraph 3.1 shall be paid as follows: (a) The Company shall deliver to the Consultant the options described in Paragraph 3.1(b); at the rate of 50,000 options for assistance in a merger or reverse take over, effective February 3, 1997. 3.3 Expenses: The parties agree that the fee provided for in Paragraph 3.1(a) hereof is intended to include reimbursement for all expenses incurred by the Consultant in connection with his duties hereunder, and the Consultant shall bear the cost of his own expenses over such amount. 4. CONFIDENTIALITY The Consultant shall not, either during the course of his engagement hereunder or at any time thereafter, disclose to any person, other than the directors of the Company or the Company's professional advisors, any confidential information concerning the business or affairs of the Company, or its subsidiaries, which the Consultant may have acquired in the course of or incidental to his appointment hereunder or otherwise, and the Consultant shall not directly or indirectly use (whether for his own benefit or the detriment or intended detriment of the Company) any confidential information he may acquire with respect to the business and affairs of the Company, or its subsidiaries. 3 4 5. NON-COMPETITION be engaged in or concerned with or interested in or advise, lend money to, guarantee the debts or obligation of or permit his name to be used or employed by any other person or persons, including, without limitation, any individual, firm, association, syndicate, company, corporation or other business enterprise, engaged in or concerned with or interested in an operation or undertaking which is in any way competitive with the business of the Company, without having obtained the express written consent of the Company. 6. TERMINATION 6.1 Termination by the Company for Cause: The Company may terminate this Agreement at any time for just cause by providing the Consultant with thirty (30) days notice in writing. 6.2 Termination by the Company without Cause: The Company may terminate this Agreement at any time for just cause by providing the Consultant with thirty (30) days notice in writing. 7. OTHER PROVISIONS 7.1 Governing Law: This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. Notwithstanding the foregoing, it is agreed that the Consultant may commence an action in respect of the enforcement of his rights hereunder in any jurisdiction in which the Company carries on business, has an office or has assets. 7.2 Notice: Any notice required or permitted to be given under this Agreement shall be in writing, and may be delivered personally or by telex or telecopier or by prepaid registered post addressed to the parties at the above-mentioned addressed or at such other address of which notice may be given by either of such parties. Any notice shall be deemed to have been received, if personally delivered or by telecopier, on the date of delivery and, if mailed as aforesaid. then on the seventh business day after and excluding the day of mailing. 7. 3 Personal Nature: This Agreement is a contract for services and may not be assigned in whole or in part by the Consultant. 7.4 Indemnity: The Consultant shall indemnify the Company and save harmless from and against any and all claims, actions, damages, liabilities and expenses arising out of or in connection with a breach of any kind by the Consultant of any provisions, covenants, conditions and warranties contained in this Agreement, or any other matter arising whatsoever out of this Agreement. 7.5 Prior Agreements: This Agreement supersedes any previous agreement, arrangement or understanding, whether written or oral, between the parties hereto. 7.6 Time of the Essence: Time is of the essence of this Agreement. 4 5 7.7 Independent Contractor: The Consultant is an independent contractor, and the Company shall not exercise any control or direction over the methods by which the Consultant shall perform his services pursuant to this Agreement. Notwithstanding anything contained herein to the contrary, this Agreement does not create and is not intended to create a relation of master-servant or employer-employee between the parties hereto. 7.8 Amendment: No amendment, alteration, or waiver of any of the terms of this Agreement shall be binding upon either party to this Agreement unless it is in writing and executed by such party. IN WITNESS WHEREOF, the parties have executed this Agreement as of the seventh day of January, 1997. COMPANY: U.S. Medical Systems, Inc. By: /s/ LEE COOKE ------------------------------------ Lee Cooke, Chairman of the Board and President CONSULTANT: /s/ PARRIS H. HOLMES, JR. ------------------------------------ Parris H. Holmes, Jr. 5 EX-99.B 3 STOCK PURCHASE WARRANT 1 SCHEDULE "A" NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE PURCHASED PURSUANT TO THIS WARRANT HAVE BEEN REGISTERED WITH OR APPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE. THIS WARRANT AND THE SECURITIES THAT MAY BE PURCHASED PURSUANT TO THIS WARRANT ARE BEING OFFERED AND SOLD IN RELIANCE UPON CERTAIN EXEMPTIONS AFFORDED BY SUCH ACTS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN ELECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. 70,000 Share Purchase Warrants Warrant No. 2 MEDICAL POLYMERS TECHNOLOGIES, INC. STOCK PURCHASE WARRANT THIS IS TO CERTIFY THAT PARRIS H. HOLMES, JR. is entitled to purchase at any time or from time to time after the date hereof 35,000 post-consolidated shares of common stock with a $0.01 par value at a Purchase Price of $0.50 (U.S.) per share if purchased prior to 5:00 p.m., Austin Time, on December 6, 1997 and at a price of $1.00 (U.S.) per share if purchased after 5:00 p.m. Austin Time on December 6, 1997 and prior to 5:00 p.m. Austin Time on December 6, 1998. On the date hereof, each two warrants represented herein are equal to one share post-consolidated of the common stock with a $0.01 par value, of Medical Polymers Technologies, Inc., a Delaware corporation (the "Company"), subject to adjustment pursuant to Section 6 of the Warrant Agreement (defined below). This Warrant is issued pursuant to a Warrant Agreement dated as of December 6, 1996 (the "Warrant Agreement"), between the Company and certain subscribers, and all rights of the holder of this Warrant are subject to the terms and provisions of the Warrant Agreement, copies of which are available to inspection at the offices of the Company. TRANSFER OF THIS WARRANT IS RESTRICTED AS PROVIDED IN THE WARRANT AGREEMENT. THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE AND ANY SHARES ACQUIRED UPON THE EXERCISE THEREOF ARE SUBJECT TO A 2 2 HOLD PERIOD AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL THE EXPIRY OF THE HOLD PERIOD EXCEPT AS PERMITTED BY THE SECURITIES ACT (BRITISH COLUMBIA) AND REGULATIONS MADE UNDER THE ACT. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and its corporate seal to be hereunto affixed in Austin, Texas by its proper corporate officers thereunto duly authorized as of this 6th day of December, 1996. MEDICAL POLYMERS TECHNOLOGIES, INC. By: /s/ LEE COOKE ------------------------------- Lee Cooke, Chairman PACIFIC CORPORATE TRUST COMPANY By: /s/ SIGNED PCTC ----------------------------------- Authorized Signatory 3 FORM OF SUBSCRIPTION (To be signed only upon exercise of Warrant) TO U.S. MEDICAL SYSTEMS, INC. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, 35,000 Units to purchase Underlying Securities of U.S. Medical Systems, Inc. and herewith makes payment of $ 26,250 therefor, and requests that the certificate or certificates for such shares be issued in the name of and delivered to the undersigned. Dated: January 29, 1998 /s/ PARRIS H. HOLMES, JR. - ----------------------------------- Parris H. Holmes, Jr. 7411 John Smith Drive. Ste 200 - ----------------------------------- San Antonio, Texas 78229 - ----------------------------------- (Address) - ------------------- *Insert here the number of Units called for on the face of the Warrant, without making any adjustment for additional Common Stock, Preferred Stock or any other stock or other securities or property or cash which, pursuant to the adjustment provisions of the Warrant Agreement pursuant to which the Warrant was granted, may be deliverable upon exercise. EX-99.C 4 LETTER AGREEMENT WITH SHARPS COMPLIANCE, INC. 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 the 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 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" 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 4 October 3, 1997 Page 4 Accepted and Agreed to this ______day of __________, 1997. - ------------------------------------- John W. Dalton /s/ PARRIS H. HOLMES, JR. - ------------------------------------- Parris H. Holmes, Jr. - ------------------------------------- Dr. Burt Kunik 5 October 3, 1997 Page 4 Accepted and Agreed to this 6 day of October , 1997. /s/ JOHN W. DALTON - ------------------------------------ John W. Dalton - ------------------------------------ Parris H. Holmes, Jr. /s/ DR. BURT KUNIK - ------------------------------------ Dr. Burt Kunik -----END PRIVACY-ENHANCED MESSAGE-----