Document:

zynex8kx104_10608.htm

     

    
      

      

    

     

    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.

     

     

    - 6
-zynex8kx105_10608.htm

     

    
      

      

    

     

     

    Exhibit
10.5

    

     

    Zynex,
Inc.

     

    Audit
Committee Charter

     

    (October
2008)

     

    Organization

     

    This
charter governs the operation of the Audit Committee (the “Committee’“) of the
Board of Directors of Zynex, Inc. (the “Company”).  The Committee
shall review and reassess the adequacy of the charter at least annually and
obtain the approval of the Board of Directors for any proposed changes to the
charter.  The Committee shall be appointed by the Board and shall make
regular reports to the Board.  The Committee shall be comprised of at
least two directors, each of whom shall meet the applicable independence and
experience requirements of the American Stock Exchange and the Securities and
Exchange Commission.

     

    Responsibilities
and Processes

     

    The
primary responsibility of the Committee is to oversee the Company’s financial
reporting processes on behalf of the Board and report the results of its
activities to the Board.  Management is responsible for preparing the
Company’s financial statements, and the independent auditors are responsible for
auditing those financial statements.  The Committee, in carrying out
its oversight responsibilities, will assess the Company’s systems of internal
accounting and financial controls, any internal audit process, the independence,
qualifications and performance of the Company’s independent auditor, and the
overall integrity of the Company’s financial statements and information
systems.  The Committee is empowered to investigate any matter brought
to its attention with full access to all books, records, facilities, and
personnel of the Company.  In addition, the Committee will have the
power to review and approve “related party transactions”, in accordance with the
requirements of the American Stock Exchange and any regulatory
agencies.  The Committee may also have such other duties as may, from
time to time, be assigned to it by the Board.

     

    The
Committee shall have the authority, to the extent it deems necessary or
appropriate to carry out its duties, to retain special legal, accounting or
other consultants to advise the Committee.  The Company must provide
appropriate funding, as determined by the Committee, for payment for the
services of such advisors, as well as for the ordinary administrative expenses
of the Committee that are necessary or appropriate in carrying out its
duties.  The Committee may also form and delegate authority to
subcommittees to undertake its responsibilities, under its
supervision.

     

    The
Committee shall meet as often as it determines, but not less frequently than
quarterly.  The Committee shall meet with the independent auditor in
separate executive sessions at least quarterly.

     

    The
following shall be the principal recurring processes of the Committee in
carrying out its oversight responsibilities.  The processes are set
forth as a guide with the understanding that the Committee may modify them, as
it deems appropriate.

     

    

    
      
        
           

        

        
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    Financial
Statement and Disclosure Matters

     

    
      	
              ·  

            	
              Review
      with management and the independent auditor the annual audited financial
      statements to be included in the Company’s Annual Report on Form 10-K.
      Based on these reviews, the Committee shall report to the Board whether
      the Committee recommends inclusion of the annual audited financial
      statements in the Company’s Form
10-K.

            

    

     

    
      	
              ·  

            	
              Review
      with management and the independent auditor the interim financial
      statements to be included in the Company’s Quarterly Report on Form
      10-Q.  The Committee shall discuss with the independent auditor
      the results of its review of each interim financial statement for a
      quarter.

            

    

     

    
      	
              ·  

            	
              Discuss
      with management and the independent auditor significant financial
      reporting issues and judgments made in connection with the preparation of
      the Company’s financial statements, including the effect of alternative
      acceptable accounting policies on the Company’s financial
      statements.

            

    

     

    
      	
              ·  

            	
              Prepare
      the report required by the rules of the Securities and Exchange Commission
      to be included in the Company’s proxy statement for any annual
      meeting.

            

    

     

    
      	
              ·  

            	
              Discuss
      with management and the independent auditor the effect of regulatory and
      accounting initiatives as well as off-balance sheet structures on the
      Company’s financial statements.

            

    

     

    
      	
              ·  

            	
              Discuss
      with management the Company’s major financial risk exposures and the steps
      management has taken to monitor and control such exposures, including the
      Company’s risk assessment and risk management
  policies.

            

    

     

    Oversight
of the Company’s Relationship with the Independent Auditor

     

    
      	
              ·  

            	
              Be
      directly responsible for the appointment, compensation, retention,
      termination and oversight of the work of the independent auditor engaged
      for the purpose of preparing or issuing an audit report or performing
      other audit, review or attest services for the Company (including the
      resolution of disagreements between management and the independent auditor
      regarding financial reporting).  The independent auditor must
      report directly to the Committee.

            

    

     

    

    
      
        
           

        

        
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              ·  

            	
              Obtain
      and review a report from the independent auditor at least annually
      regarding (a) the auditor’s internal quality-control procedures, (b) any
      material issues raised by the most recent quality-control review of the
      firm, or by any inquiry or investigation by governmental or professional
      authorities within the preceding five years respecting one or more
      independent audits carried out by the firm, (c) any steps taken to deal
      with any such issues, and (d) all relationships between the independent
      auditor and the Company, including those consistent with Independence
      Standards Board Standard 1.  The Committee shall evaluate the
      experience, qualifications, performance and independence of the
      independent auditor, including considering whether the provision of
      non-audit services is compatible with maintaining the auditor’s
      independence, and taking into account the opinions of
      management.  The Committee shall present its conclusions to the
      Board and, if so determined by the Committee, recommend that the Board
      take additional action to satisfy itself of the qualifications,
      performance and independence of the auditor.  As part of these
      matters, the Committee shall be responsible for actively engaging in a
      dialogue with the auditor with respect to any disclosed relationships or
      services that may impact the objectivity and independence of the auditor
      and for taking, or recommending that the full Board take, appropriate
      action to oversee the independence of the independent
    auditor.

            

    

     

    
      	
              ·  

            	
              Discuss
      with the independent auditors the overall scope and plans for its
      audit.  Also, discuss with management and the independent
      auditors the adequacy and effectiveness of the Company’s accounting and
      financial controls.  Meet separately with the independent
      auditors, with and without management present, to discuss the results of
      the audit and any other
examinations.

            

    

     

    
      	
              ·  

            	
              Discuss
      the matters required to be communicated to the Committee by the
      independent auditors under generally accepted auditing
      standards.

            

    

     

    
      	
              ·  

            	
              Review
      and pre-approve all audit engagement fees and terms and all non-audit
      services with the independent auditor.  The Committee shall
      consult with management but shall not delegate these responsibilities to
      management.

            

    

     

    
      	
              ·  

            	
              Review
      any proposed employment offer by the Company to an employee or former
      employee of the independent auditor and discuss with the management the
      actions intended to be taken by management and the independent auditor to
      ensure that the auditor maintains
independence.

            

    

     

    Compliance
Oversight Responsibilities

     

    
      	
              ·  

            	
              Obtain
      from the independent auditor assurance that Section 10A of the Securities
      Exchange Act of 1934, in regard to the occurrence of illegal acts, has not
      been implicated.

            

    

     

    

    
      
        
           

        

        
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              ·  

            	
              Discuss
      with management and the independent auditor any correspondence with
      regulators or governmental agencies and any employee complaints or
      published reports which raise material issues regarding the Company’s
      financial statements or accounting
policies.

            

    

     

    
      	
              ·  

            	
              Discuss
      with the Company’s general counsel legal matters that may have a material
      impact on the financial statements or the Company’s compliance
      policies.

            

    

     

    
      	
              ·  

            	
              Approve
      or reject all “related party” transactions. Review reports and disclosures
      of related party transactions prepared by
  management.

            

    

     

    Oversight
of the Company’s Internal Audit Function

     

    
      	
              ·  

            	
              Discuss
      with management and the independent auditors the quality and adequacy of
      the Company’s internal controls and any internal audit functions’
      organization, responsibilities, plans, results, budget and staffing, as
      well as providing oversight to internal audit activities, including review
      of significant reports prepared by the employees performing internal audit
      functions and management’s
responses.

            

    

     

    Whistleblower
Policy

     

    
      	
              ·  

            	
              Establish
      and oversee the Company’s anonymous complaint policy contained within the
      Company’s Code of Business Conduct and Ethics regarding the confidential,
      anonymous submission by employees of reports regarding questionable
      accounting practices, internal accounting controls or auditing matters and
      the investigation, disposition and retention of such
    reports.

            

    

     

    Limitation
of Audit Committee’s Role

     

    
      	
              ·  

            	
              While
      the Committee has the responsibilities and powers set forth in this
      Charter, it is not the duty of the Committee to plan or conduct audits or
      to determine that the Company’s financial statements and disclosures are
      complete and accurate and are in accordance with generally accepted
      accounting principles and applicable rules and
      regulations.  These are the responsibilities of management and
      the independent auditor.  It is not the duty of the Committee to
      conduct investigations or to assure Company’s compliance with laws and
      regulations.

            

    

     

     

    - 4 -

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