Document:

6/30/01 Form 10Q-Exh 10.1

Exhibit 10.1

[PNC Bank Letterhead]

 

inTEST Corporation et al.

7 Esterbrook Lane

Cherry Hill, NJ 08003

Attention: Hugh T. Regan, Jr.

Re:Extension of Expiration Date for Committed Line of Credit

Dear Mr. Regan:

We are writing to inform you that your committed line of credit has been temporarily extended pending further credit review and approval. The Expiration Date, as set forth in that certain Letter Agreement dated November 16, 2000, and in the Second Amended and Restated Committed Line of Credit Note executed and delivered pursuant to that Letter Agreement, has been extended from June 30, 2001 to September 30, 2001, effective on July 1, 2001. All other terms and conditions of the Second Amended and Restated Committed Line of Credit Note and the Letter Agreement remain in full force and effect.

It has been a pleasure working with you and I look forward to a continued successful relationship. Thank you again for your business.

Very truly yours,

PNC BANK, NATIONAL ASSOCIATION

By: /s/ Denise Viola Monahan

       Denise Viola Monahan

       Vice PresidentEXHIBIT 10.13
(Term Sheet with Galen Partners III, L.P.)

                                 PROPOSED TERMS
              FOR SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
                       SERIES A PREFERRED STOCK FINANCING

TYPE OF SECURITY:         Series A Preferred Stock

OFFERING SIZE:                      $10.0 million.

First Tranche:                 -    $5.0 million on Closing Date.

Second Tranche:                -    $5.0 million to be invested at any time
                                    within 12 months of the Closing Date at the
                                    sole discretion of each member of the
                                    investor group (the "Investor Group") and at
                                    the same terms as discussed in this Term
                                    Sheet. Once more than two-thirds of the
                                    Second Tranche has been invested, remaining
                                    members of the Investor Group shall have 30
                                    days to fund the remaining portion of the
                                    Second Tranche, after which the
                                    participating members of the Investor Group
                                    may elect to invest the remaining equity on
                                    a pro rata basis.

SHARES OFFERED:                     A number equal to the total amount of the
                                    offering divided by the Purchase Price (as
                                    defined below)

PURCHASE PRICE:                     $0.4356 per share

SERIES A PREFERRED STOCK
DIVIDEND:                           The Series A Preferred Stock will receive an
                                    eight percent (8%) annual cash dividend
                                    payable semi-annually, if and when declared,
                                    but such dividend shall be non-cumulative.

<PAGE>

INVESTOR GROUP:

FIRST TRANCHE:

Investor Name                                $ Amount               Shares
Galen Partners III, L.P.                   $3,197,478.50           7,340,401
Galen Partners International III, L.P.        289,426.50             664,432
Galen Employee Fund III, L.P.                  13,095.00              30,062
Bridge Investors\Others                     1,500,000.00           3,443,526
                                            ------------          ----------
                                            5,000,000.00          11,478,421

SECOND TRANCHE:

Investor Name                                $ Amount               Shares
Galen Partners III, L.P.                   $3,197,478.50           7,340,401
Galen Partners International III, L.P.        289,426.50             664,432
Galen Employee Fund III, L.P.                  13,095.00              30,062
Bridge Investors\Others                     1,500,000.00           3,443,526
                                            ------------          ----------
                                            5,000,000.00          11,478,421

PRO-FORMA CAPITALIZATION:
<TABLE>
<CAPTION>
                                                                                      Warrants
                                                      Mgmt.     -----------------------------------------------------
                         Preferred       Common      Options     C    D     E    Thorne         G         H Units
----------------------- ------------- ------------- ----------- ---- ----- ---- ---------- ------------ -------------
<S>                      <C>           <C>          <C>          <C>  <C>   <C>  <C>       <C>          <C>
Existing                     0         16,178,841   2,500,000    0    0     0    750,000    3,645,204    14,083,000
Change                   22,956,841     3,355,602   3,000,000    0    0     0       0      -3,645,204   -14,083,000
----------------------- ------------- ------------- ----------- ---- ----- ---- ---------- ------------ -------------
Pro-Forma                22,956,841    19,534,443   5,500,000    0    0     0    750,000        0            0
Fully Diluted Equity     48,741,284
</TABLE>

Note: See Appendix A

Note:
The chart above lists the capitalization of the Company following the issuance
of both tranches of Series A Preferred Stock. As the chart demonstrates, Galen's
investment is contingent upon the termination of both the G Warrants and the
rights to Subsequent Units (H Units) as defined in the Company's April Private
Placement Memorandum.

RIGHTS, PREFERENCES, AND
PRIVILEGES OF SERIES A
PREFERRED STOCK:

(1) Voluntary Conversion.           The holders of shares of Series A Preferred
                                    Stock shall have the right to convert such
                                    shares, at the option of the holder, at any
                                    time into shares of Common Stock of the
                                    Company on a one-for-one basis (subject to
                                    anti-dilution adjustments as provided in (3)
                                    below). If at any time less than 35% of the
                                    original Series A Preferred Stock remains
                                    outstanding the Company has the right to
                                    force a conversion of the remaining Series A
                                    Preferred Stock.

(2) Automatic Conversion.           Eighteen months after the Closing Date or
                                    any time thereafter, should the Company's
                                    average closing share price (trading on the
                                    NASDAQ or the OTC Bulletin Board) for at
                                    least twenty (20) consecutive trading days
                                    exceed three (3) times the Purchase Price
                                    per share of Common Stock on an as converted
                                    basis (subject to anti-dilution adjustments
                                    as provided in (3) below), then each share
                                    of Series A Preferred Stock will
                                    automatically be converted into Common
                                    Stock, at its then applicable conversion
                                    rate.

                                       2
<PAGE>

(3) Anti-dilution Provisions.       The conversion rate of the Series A
                                    Preferred Stock shall be subject to
                                    proportional adjustment in the event of any
                                    subdivision or combination of the Company's
                                    outstanding Common Stock or any payment by
                                    the Company of a stock dividend to holders
                                    of the Company's Common Stock.

                                    The conversion rate of Series A Preferred
                                    Stock shall be subject to adjustment, during
                                    the first eighteen (18) months following the
                                    closing of this transaction on a full-
                                    rachet basis and during all subsequent
                                    periods on a weighted average rachet basis,
                                    due to any issuance of Common Stock or
                                    options, warrants, securities, convertible
                                    into Common Stock, or rights to purchase
                                    Common Stock of the Company at a price per
                                    share below the respective as converted to
                                    Common Stock per share cost of the Series A
                                    Preferred Stock, other than (i) shares of
                                    Common Stock issuable to employees,
                                    consultants, or directors directly or
                                    pursuant to a stock option plan or a
                                    restricted stock plan either in place as of
                                    the closing date of this transaction or
                                    approved by the Board of Directors after
                                    this closing (not to exceed 300,000 shares,
                                    adjusted for stock splits), and (ii)
                                    securities issuable in connection with lease
                                    lines, bank or other commercial financings
                                    and other similar transactions approved by
                                    the Board of Directors.

(4) Voting Rights                   The holders of each share of Series A
    (Protective Provisions).        Preferred Stock shall vote together with the
                                    Common Stock as though part of that class
                                    and shall have the right to that number of
                                    votes equal to the number of shares of
                                    Common Stock issuable upon conversion of
                                    such shares. The holders of two-thirds of
                                    the outstanding Series A Preferred Stock
                                    will also be required, voting as a separate
                                    class to approve: (i) any amendment to the
                                    Company's certificate of incorporation or
                                    by-laws that would have any adverse change
                                    in the rights, preferences or privileges of
                                    the Series A Preferred Stock (no
                                    impairment), including increasing the size
                                    of the Board; (ii) any increase in the
                                    number of authorized shares of the Series A
                                    Preferred Stock; (iii) the creation of any
                                    new class or series of capital stock, or the
                                    reclassification of any existing class or
                                    series of capital stock, having a preference
                                    over, or on a parity with, the Series A
                                    Preferred Stock with respect to voting
                                    rights or representation, dividends,
                                    redemptions, or upon liquidation; (iv) the
                                    redemption or repurchase of shares of the
                                    Company's capital stock other than shares
                                    repurchased at cost from employees or
                                    officers; and (v) mergers, consolidations,
                                    sale of more than 50% of the assets,
                                    business combinations or similar
                                    transactions. The holders of Series A
                                    Preferred Stock will not be entitled to vote
                                    as a separate class on a merger,
                                    consolidation, sale of assets, business
                                    combination or similar transaction by the
                                    Company in which the holders of Series A
                                    Preferred Stock receive not less than three
                                    times the original cost of the Series A
                                    Preferred Stock (adjusted as per paragraph
                                    3), on an as-converted basis.

                                       3
<PAGE>

(5) Dividend Provisions.            Holders of Series A Preferred Stock shall
                                    receive a cash dividend of 8% semi-annually
                                    on the designated date on all shares of
                                    Series A Preferred Stock outstanding, if and
                                    when declared by the Board of Directors. No
                                    dividends shall be declared or paid on the
                                    Common Stock unless the holders of the
                                    Series A Preferred Stock are also receiving
                                    a dividend. Furthermore, the rate of
                                    dividends on the Common Stock shall not be
                                    greater than the rate of dividends on the
                                    Series A Preferred Stock.

(6) Liquidation Preference.         In the event of any liquidation or winding
                                    up of the Company, the holders of the Series
                                    A Preferred Stock shall be entitled to
                                    receive in preference to the holders of
                                    Common Stock an amount per share equal to
                                    the cost of the Series A Preferred Stock
                                    plus an eight percent (8%) annual compounded
                                    return on the Series A Preferred Stock from
                                    the time of closing less any dividends
                                    previously paid. Next, provided funds
                                    remain, the Common Stock and Series A
                                    Preferred Stock will share any remaining
                                    assets based on the number of shares Common
                                    Stock held by each, determined on an
                                    as-converted basis. A sale of all or
                                    substantially all of the Company's assets or
                                    a merger in which fifty percent (50%) or
                                    more of the Company's voting power (on an as
                                    converted basis) is transferred will be
                                    treated as a liquidation. The liquidation
                                    preference of the Series A Preferred Stock
                                    will cease to be applicable in any
                                    transaction in which the holders of Series A
                                    Preferred Stock receive at least three (3)
                                    times cost (adjusted as per paragraph 3) on
                                    an as-converted basis.

REGISTRATION RIGHTS:

(1) Demand Rights.                  If at any time following one year after the
                                    Closing Date, members of the Investor Group
                                    holding at least a majority of the Series A
                                    Preferred Stock request that the Company
                                    file a registration statement for Common
                                    Stock, the Company will use its best efforts
                                    to cause such shares once converted to
                                    Common Stock to be registered. The holders
                                    of Series A Preferred Stock, at the request
                                    of underwriters, agree to enter into a
                                    customary "lock-up" agreement not to exceed
                                    180 days on a successful offering provided
                                    that all other management, directors, and
                                    "material" investors also enter into such an
                                    agreement. The holders of Series A Preferred
                                    Stock will have two (2) demand registration
                                    rights. At the request of the purchasers of
                                    Series A Preferred Stock, one demand right
                                    may be in the form of a shelf registration.

(2) Company Registrations.          The holders of Series A Preferred Stock
                                    shall be entitled to an unlimited number of
                                    "piggy-back" registration rights on
                                    registration of the Company's securities,
                                    subject to the right, however, of the
                                    Company and its underwriters to reduce the
                                    number of shares proposed to be registered
                                    in view of market conditions.

(3) S-3 Registrations.              The holders of at least ten percent (10%) of
                                    the Company's Series A Preferred Stock shall
                                    be entitled to request an unlimited number
                                    of registrations of their shares on Form S-3
                                    (or any successor form to Form S-3),
                                    provided that the minimum size of any S-3
                                    offering must be at least $1,000,000.

                                       4
<PAGE>

(4) Expenses.                       The registration expenses (exclusive of
                                    underwriting discounts and commissions) of
                                    the demand registrations, the piggy-back
                                    registrations and the S-3 registrations
                                    shall be borne by the Company.

(5) Transfer of Rights.             Transfer of rights will be limited to
                                    partners and affiliates of the holders of
                                    the Series A Preferred Stock.

OTHER CLOSING CONDITIONS:

INFORMATION RIGHTS:                 Each investor who holds in the aggregate at
                                    least twenty percent (20%) of the shares of
                                    Series A Preferred Stock shall receive
                                    monthly and quarterly financial reports, and
                                    an annual audited financial report and an
                                    annual budget on a timely basis.

THE PURCHASE AGREEMENT:             The investment shall be made pursuant to a
                                    Series A Preferred Stock Purchase Agreement
                                    (the "Purchase Agreement"), which Purchase
                                    Agreement will contain, among other things,
                                    customary representations, warranties,
                                    closing conditions and covenants by the
                                    Company and an opinion of Company counsel as
                                    to capitalization and other customary
                                    matters.

BOARD OF DIRECTORS:                 As of the date of the closing of this
                                    transaction, the holders of the Series A
                                    Preferred Stock shall have the right to
                                    appoint two (2) members of the Board of
                                    Directors, initially David Jahns and Steve
                                    Shapiro. The Board of Directors will be
                                    comprised of seven (7) members in total. The
                                    Company's Compensation Committee and Audit
                                    Committee shall at all times consist of a
                                    majority of outside directors and the
                                    holders of the Series A Preferred Stock
                                    shall have the right to appoint one member
                                    to such committees.

LOCK-UP AGREEMENT:                  The Investor Group and each officer and
                                    director of the Company will agree not to
                                    sell or otherwise transfer any common stock
                                    or securities convertible into common stock
                                    for a period of one year from the closing of
                                    the transaction. Any such sales following
                                    the lock-up period will be made in
                                    accordance with an insider trading policy to
                                    be established by the Company.

EMPLOYMENT CONTRACTS:               The Company will secure an approved form of
                                    non-compete, non-solicitation and
                                    confidentiality agreement which is
                                    acceptable to the Investor Group from its
                                    key management personnel prior to the
                                    closing date of this transaction.

MANAGEMENT INCENTIVE                The Company shall be required to reserve an
AND COMPENSATION PACKAGES:          additional 3,000,000 of options for issuance
                                    to management under the Company's stock
                                    option incentive plan. This would bring the
                                    total number of options to 5,500,000, or
                                    approximately 15% of the pro-forma shares
                                    outstanding. The Board of Directors will
                                    propose a management incentive plan for
                                    grants of new options to key management and
                                    a reserve for proposed new hires. This plan,
                                    and all option grants, will be approved by
                                    the Investor Group.

                                       5
<PAGE>

INDEPENDENT ACCOUNTANTS:            The Company will retain independent public
                                    accountants of recognized national standing
                                    who shall certify the Company's financial
                                    statements at the end of each fiscal year.

EXTRAORDINARY REMUNERATION TO       Prior to the closing date of this
MANAGEMENT:                         transaction, the Board of Directors may not
                                    approve any new plan or action to grant
                                    extraordinary remuneration to management
                                    upon the sale of the Company, or its
                                    subsidiaries, or the termination of
                                    employment or otherwise.

USE OF PROCEEDS:                    To provide the Company with the working
                                    capital necessary to execute its business
                                    plan.

EXPENSES:                           Irrespective of whether the transaction
                                    closes, the reasonable investor expenses
                                    relating to this closing (including legal
                                    and due diligence related expenses) will be
                                    reimbursed by the Company, such expenses not
                                    to exceed $150,000.

CEO SEARCH:                         The Board of Directors agrees that it is in
                                    the Company's best interest to recruit a new
                                    CEO. The Board of Directors will retain an
                                    executive search firm selected by the
                                    Investor Group to identify potential
                                    candidates. The CEO candidate must be
                                    approved by the Investor Group. The Board of
                                    Directors also agrees to provide for
                                    reasonable market compensation for the new
                                    CEO.

CLOSING CONDITIONS:                 The transaction is subject to, among other
                                    things, (i) completion of business and legal
                                    due diligence review and satisfaction with
                                    the results thereof, (ii) the negotiation,
                                    execution and delivery of definite
                                    documentation, (iii) final approvals of the
                                    Boards of Directors of the Company and the
                                    Investor Group, and (iv) approval by the
                                    stockholders of the Company of the
                                    transactions contemplated by the Purchase
                                    Agreement, including the issuance of the
                                    Series A Preferred Stock. All rights and
                                    warrants associated with the "April 2001"
                                    PPM shall be terminated and all of the
                                    Bridge Notes will be converted into Series A
                                    Preferred Stock, as shown in paragraph
                                    entitled "PRO-FORMA CAPITAL-IZATION".

ROYALTY AGREEMENTS:                 The Company must secure a definitive Huber
                                    needle supply and distribution agreement
                                    with Bard, and a definitive Blood Collection
                                    royalty/license agreement with Tyco or other
                                    parties acceptable to the Investor Group, on
                                    terms satisfactory to the Investor Group.

OPTION/BREAK-UP FEE:                In the event that this transaction does not
                                    close for any reason, the Company will issue
                                    to the Investor Group 3-year warrants to
                                    purchase 1,000,000 shares of Common Stock at
                                    an exercise price of $0.50 per share.
                                    However, these warrants shall not be issued
                                    if the Investor Group elects not to close
                                    for any reason, with the exception for
                                    material misrep-resentations, material
                                    adverse change or bad faith conduct by the
                                    Company.

NO SHOP CLAUSE:                     The Company agrees that, from the date of
                                    execution of this Term Sheet, neither it nor
                                    any of its representatives will: (i) solicit
                                    or encourage any offers or proposals in
                                    connection therewith except for discussions
                                    with Medisys PLC and Surgical Innovations,

                                       6
<PAGE>

                                    or (ii) enter into negotiations or
                                    discussions with any other party for
                                    purposes of offering, selling or disposing
                                    of all or any part of the assets or business
                                    of the Company, or any capital stock
                                    (including convertible securities) of the
                                    Company except for discussions with Medisys
                                    PLC and Surgical Innovations. With regard to
                                    the exceptions above (namely Medisys PLC and
                                    Surgical Innovations), the Company agrees to
                                    promptly advise the Investor Group of any
                                    and all discussions held with said parties.
                                    Further, if the Company receives an
                                    unsolicited proposal during the exclusivity
                                    period, the Company will provide Galen with
                                    a copy of any such proposal, including the
                                    identity of the party making such proposal.
                                    Unless otherwise mutually agreed to by the
                                    Company and Galen Associates, this provision
                                    shall expire at the close of the Company's
                                    business on the Closing Date.

COMMITMENT & CLOSING:               Subject to the satisfaction of all the
                                    conditions contained in this Term Sheet,
                                    including an affirmative vote of
                                    stockholders, the closing of this
                                    transaction shall occur no later than
                                    September 20, 2001, unless extended by
                                    mutual agreement of the parties.

                                       7
<PAGE>

                            ACCEPTANCE OF TERM SHEET

By signing below accepting the terms of this Term Sheet, the CEO of the Company
acknowledges that the Board of Directors of the Company has reviewed the general
terms of this Term Sheet at a duly called Board meeting and has empowered the
CEO to execute this Term Sheet on behalf of the Company. Each party understands
that no contract or agreement providing for any transaction of the type
contemplated by this Term Sheet shall be deemed to exist between the parties
unless and until a definitive agreement has been executed and delivered, except
with respect to the paragraphs above entitled "EXPENSES", "OPTION/BREAK-UP FEE"
(with respect to the payment of a commitment fee) and "NO SHOP CLAUSE", which
are intended to be legally binding on the parties hereto. Each party also agrees
that unless and until a definitive agreement regarding a transaction between the
parties has been executed and delivered, neither party will be under any
obligation of any kind whatsoever with respect to such a transaction by virtue
of this Term Sheet except for the matters specifically referred to in the
previous sentence.

Specialized Health Products              Galen Partners III, L.P.
International, Inc.                      By: Claudius, LLC

By: ________________________             By: ________________________
Name: ______________________             Name: ______________________
Title ______________________             Title ______________________
Date: ______________________             Date: ______________________

                                         Galen Partners International III, L.P.
                                         By: Claudius, LLC

                                         By: ________________________
                                         Name: ______________________
                                         Title ______________________
                                         Date: ______________________

                                         Galen Employee Fund III, L.P.
                                         By: Wesson Enterprises, Inc.

                                         By: ________________________
                                         Name: ______________________
                                         Title ______________________
                                         Date: ______________________

                                        8

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