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Exhibit 10.4
 

 
ZYNEX, INC. AND ITS SUBSIDIARIES
 

 
CODE OF BUSINESS CONDUCT AND ETHICS
 

 
(October 2008)
 
Introduction
 
This Code of Business Conduct and Ethics covers a wide range of business
practices and procedures.  It does not cover every issue that may arise, but it
sets out basic principles to guide all employees of Zynex, Inc. and its
subsidiaries (called the “Company”).  All of our employees must conduct
themselves accordingly and seek to avoid even the appearance of improper
behavior.  The Code should also be provided to and followed by the Company’s
agents and representatives, including consultants.
 
If a law conflicts with a policy in this Code, you must comply with the law;
however, if a local custom or policy conflicts with this Code, you must comply
with the Code.  If you have any questions about these conflicts, you should ask
your supervisor how to handle the situation.
 
Those who violate the standards in this Code will be subject to disciplinary
action.  If you are in a situation which you believe may violate or lead to a
violation of this Code, follow the guidelines described in Section 14 of this
Code.
 
1. Compliance with Laws, Rules and Regulations
 
Obeying the law, both in letter and in spirit, is the foundation on which this
Company’s ethical standards are built.  All employees must respect and obey the
laws of the cities, states and countries in which we operate.  Although not all
employees are expected to know the details of these laws, it is important to
know enough to determine when to seek advice from supervisors, managers or other
appropriate personnel.
 
2. Conflicts of Interest
 
A “conflict of interest” exists when a person’s private interest interferes in
any way with the interests of the Company.  A conflict situation can arise when
an employee, officer or director takes actions or has interests that may make it
difficult to perform his or her Company work objectively and
effectively.  Conflicts of interest may also arise when an employee, officer or
director, or members of his or her family, receives improper personal benefits
as a result of his or her position in the Company.  Loans to, or guarantees of
obligations of, employees and their family members may create conflicts of
interest.
 

 
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It is almost always a conflict of interest for a Company employee to work
simultaneously for a competitor, customer or supplier.  You are not allowed to
work for a competitor as a consultant or board member.  The best policy is to
avoid any direct or indirect business connection with our customers, suppliers
or competitors, except on our behalf. 
 
Conflicts of interest are prohibited as a matter of Company policy, except under
guidelines approved by the Board of Directors.  Conflicts of interest may not
always be clear-cut, so if you have a question, you should consult with Chief
Financial Officer.  Any employee, officer or director who becomes aware of a
conflict or potential conflict should bring it to the attention of Chief
Financial Officer or consult the procedures described in Section 14 of this
Code.
 
3. Insider Trading
 
Employees, officers and directors who are aware of confidential information (a)
are not permitted to trade directly or indirectly in stock of the Company or any
interest in that stock if the information may be considered material and (b) are
not permitted to use or share that information for any other purpose except the
conduct of our business.  All non-public information about the Company should be
considered confidential information.  To use non-public information for personal
financial benefit or to “tip” others who might make an investment decision on
the basis of this information is not only unethical but also illegal.  If you
have any questions, please consult Chief Financial Officer.
 
4. Corporate Opportunities
 
Employees, officers and directors are prohibited from taking for themselves
personally opportunities that are discovered through the use of corporate
property, information or position without the consent of the Board of
Directors.  No employee may use corporate property, information, or position for
improper personal gain, and no employee may compete with the Company directly or
indirectly.  Employees, officers and directors owe a duty to the Company to
advance its legitimate interests when the opportunity to do so arises.
 
5. Competition and Fair Dealing
 
We seek to compete fairly and honestly.  We seek competitive advantages through
superior performance, never through unethical or illegal business
practices.  Stealing proprietary information, possessing trade secret
information that was obtained without the owner’s consent, or inducing such
disclosures by past or present employees of other companies is prohibited.  Each
employee should endeavor to respect the rights of and deal fairly with the
Company’s customers, suppliers, competitors and employees.  No employee should
take unfair advantage of anyone through manipulation, concealment, abuse of
privileged information, misrepresentation of material facts, or any other
intentional unfair-dealing practice.
 

 
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To maintain the Company’s valuable reputation, compliance with our quality
processes and safety requirements is essential.  In the context of ethics,
quality requires that our products and services be designed and manufactured to
meet our obligations to customers.  All inspection and testing documents must be
handled in accordance with all applicable regulations.
 
The purpose of business entertainment and gifts in a commercial setting is to
create good will and sound working relationships, not to gain unfair advantage
with customers.  No gift or entertainment should ever be offered, given,
provided or accepted by any Company employee, family member of an employee or
agent unless it:  (1) is not a cash gift, (2) is consistent with customary
business practices, (3) is not excessive in value, (4) cannot be construed as a
bribe or payoff and (5) does not violate any laws or regulations.  Please
discuss with Chief Financial Officer any gifts or proposed gifts which you are
not certain are appropriate.
 
6. Discrimination and Harassment
 
The diversity of the Company’s employees is an asset.  We are firmly committed
to providing equal opportunity in all aspects of employment and will not
tolerate any illegal discrimination or harassment or any kind.  Examples include
derogatory comments based on racial or ethnic characteristics and unwelcome
sexual advances.
 
7. Health and Safety
 
The Company strives to provide each employee with a safe and healthful work
environment.  Each employee has responsibility for maintaining a safe and
healthy workplace for all employees by following safety and health rules and
practices and reporting accidents, injuries and unsafe equipment, practices or
conditions.
 
Violence and threatening behavior are not permitted.  Employees should report to
work in condition to perform their duties, free from the influence of illegal
drugs or alcohol.  The use of illegal drugs in the workplace will not be
tolerated.
 
8. Record-Keeping
 
The Company requires honest and accurate recording and reporting of information
in order to make responsible business decisions.  For example, only the true and
actual number of hours worked should be reported.
 
Some employees use business expense accounts, which must be documented and
recorded accurately.  If you are not sure whether a certain expense is
legitimate, ask your supervisor or Chief Financial Officer.  Rules and
guidelines are available from the Accounting Department.
 

 
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All of the Company’s books, records, accounts and financial statements must be
maintained in reasonable detail, must appropriately reflect the Company’s
transactions and must conform both to applicable legal requirements and to the
Company’s system of internal controls.  Unrecorded or “off the books” funds or
assets should not be maintained unless permitted by applicable law or
regulation.
 
Business records and communications often become public, and we should avoid
exaggeration, derogatory remarks, guesswork, or inappropriate characterizations
of people and companies that can be misunderstood.  This applies equally to
e-mail, internal memos, and formal reports.  Records should always be retained
or destroyed according to the Company’s record retention policies. In accordance
with those policies, in the event of litigation or governmental investigation
please consult Chief Financial Officer.
 
9. Confidentiality
 
Employees must maintain the confidentiality of confidential information
entrusted to them by the Company or its customers, except when disclosure is
authorized by Chief Financial Officer or required by laws or
regulations.  Confidential information includes all non-public information that
might be of use to competitors, or harmful to the Company or its customers, if
disclosed. It also includes information that suppliers and customers have
entrusted to us.  The obligation to preserve confidential information continues
even after employment ends.
 
10. Protection and Proper Use of Company Assets
 
All employees should endeavor to protect the Company’s assets and ensure their
efficient use.  Theft, carelessness, and waste have a direct impact on the
Company’s profitability.  Any suspected incident of fraud or theft should be
immediately reported for investigation.  Company equipment should not be used
for non-Company business, though incidental personal use may be permitted.
 
The obligation of employees to protect the Company’s assets includes its
proprietary information.  Proprietary information includes intellectual property
such as trade secrets, patents, trademarks, and copyrights, as well as business,
marketing and service plans, engineering and manufacturing ideas, designs,
databases, records, salary information and any unpublished financial data and
reports.  Unauthorized use or distribution of this information would violate
Company policy.  It could also be illegal and result in civil or even criminal
penalties.
 
11. Payments to Government Personnel
 
The U.S. Foreign Corrupt Practices Act prohibits giving anything of value,
directly or indirectly, to officials of foreign governments or foreign political
candidates in order to obtain or retain business.  It is strictly prohibited to
make illegal payments to government officials of any country.
 

 
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In addition, the U.S. government has a number of laws and regulations regarding
business gratuities which may be accepted by U.S. government personnel.  The
promise, offer or delivery to an official or employee of the U.S. government of
a gift, favor or other gratuity in violation of these rules would not only
violate Company policy but could also be a criminal offense. State and local
governments, as well as foreign governments, may have similar rules.  The
Company’s Chief Financial Officer can provide guidance to you in this area.
 
12. Reporting any Illegal or Unethical Behavior
 
Employees are encouraged to talk to supervisors or any of the Company’s
executive officers about observed illegal or unethical behavior and when in
doubt about the best course of action in a particular situation.  It is the
policy of the Company not to allow retaliation for reports of misconduct by
others made in good faith by employees.  Employees are expected to cooperate in
internal investigations of misconduct.
 
13. Waiver
 
Any waiver of this Code for executive officers or directors may be made only by
the Board or a Board committee and may be promptly disclosed as required by law
or trading market regulation.
 
14. Compliance Procedures
 
We must all work to ensure prompt and consistent action against violations of
this Code.  However, in some situations it is difficult to know right from
wrong.  Since we cannot anticipate every situation that will arise, it is
important that we have a way to approach a new question or problem.  These are
the steps to keep in mind:
 
·  
Make sure you have all the facts.  In order to reach the right solutions, we
must be as fully informed as possible.

 
·  
Ask yourself:  What specifically am I being asked to do?  Does it seem unethical
or improper?  This will enable you to focus on the specific question you are
faced with, and the alternatives you have.  Use your judgment and common sense;
if something seems unethical or improper, it probably is.

 
·  
Clarify your responsibility and role.  In most situations, there is shared
responsibility.  Are your colleagues informed?  It may help to get others
involved and discuss the problem.

 
·  
Discuss the problem with your supervisor or an executive officer.  This is the
basic guidance for all situations.  In many cases, your supervisor or the
executive officer will be more knowledgeable about the question, and will
appreciate being brought into the decision-making process.  Remember that it is
your supervisor’s or an executive officer’s responsibility to help solve
problems.

 

 
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·  
Seek help from Company resources.  In the rare case where it may not be
appropriate to discuss an issue with your supervisor, or where you do not feel
comfortable approaching your supervisor with your question, discuss it with
Chief Financial Officer.  If that also is not appropriate, contact the Chairman
of the audit committee of the Company’s Board of Directors.  If you prefer to
write, address your concerns to: Chairman of Audit Committee, Confidential,
Zynex, Inc., 8022 Southpark Circle, Suite 100, Littleton, Colorado 80120.

 
·  
You may report ethical violations in confidence and without fear of
retaliation.  If your situation requires that your identity be kept secret, your
anonymity will be protected.  The Company does not permit retaliation of any
kind against employees for good faith reports of ethical violations.

 
If you are unsure of what to do in any situation, seek guidance before you act.
 
 
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