Exhibit 1
AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT is made and entered into as of the 8th day of June, 1999
(the "Agreement"), by and among SPARTA XXXXX ELECTROSURGICAL, INC., a Delaware
corporation ("Sparta Xxxxx"), on the one hand, and XXXXX ELECTRO-SURGICAL
INSTRUMENTS, INC., a California corporation, d/b/a Xxxxx Electrosurgical, Inc.
("Xxxxx Electrosurgical"), and Xxxxx X. Xxxxxxx and the Xxxxxx X. Xxxxx Trust,
(the "Xxxxx Electrosurgical Shareholders"), on the other hand. Sparta Xxxxx,
Xxxxx Electrosurgical and the Xxxxx Electrosurgical Shareholders shall
hereinafter be referred to each individually as a "Party" and collectively as
the "Parties".
RECITALS
WHEREAS, the Xxxxx Electrosurgical Shareholders, the Board of Directors of
Xxxxx Electrosurgical and the Board of Directors of Sparta Xxxxx desire that
Xxxxx Electrosurgical be merged into Sparta Xxxxx (the "Merger") upon the terms
and conditions hereinafter set forth, and in consideration for such merger each
of the Xxxxx Electrosurgical Shareholders shall receive a pro rata share of the
consideration referenced hereafter in proportion to their holdings of the
capital stock of Xxxxx Electrosurgical;
WHEREAS, for federal income tax purposes it is intended that the Merger
shall qualify as a tax-free reorganization within the meaning of Section 368 (a)
of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Parties desire to make certain representations, warranties,
covenants and agreements to and with one another in connection with the Merger
and also to prescribe various conditions to the Merger;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
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1.1. Definitions. As used in this Agreement, the terms set forth below shall
have the following meanings:
(a) "Accredited Investor" shall have the meaning set forth in Rule 501 as
promulgated under the Securities Act of 1933.
(b) "Business Day" shall mean any day, other than Saturday or Sunday or any
other day on which commercial banks in the State of California are authorized or
required by law to be closed.
(c) "Financial Statements" shall mean the financial statements of Xxxxx
Electrosurgical attached as Schedule 3.1(h) hereto.
(d) "Governmental Agency" shall mean any court, administrative agency or
commission, or other governmental authority or instrumentality, domestic or
foreign, including, but not limited to, the United States Securities and
Exchange Commission, the State of California Environmental Protection Agency,
the United States Environmental Protection Agency, and United States Food and
Drug Administration.
(e) "Xxxxx Electrosurgical Shares" shall mean the shares of the common
stock, $1.00 par value of Xxxxx Electrosurgical.
(f) "Lien" shall mean any mortgage, lien, pledge, charge, assignment for
security purposes, security interest, or encumbrance of any kind with respect to
an asset, including any conditional sale agreement or capital lease or other
title retention agreement relating to such asset.
(g) "Material Adverse Effect" shall mean a material adverse effect
(required to be accrued or disclosed under SFAS No. 5) on the financial
condition, assets, businesses or results of operations.
(h) "Person" or "person" shall mean any individual, corporation,
association, partnership, group (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended), limited liability company, joint
venture, trust or unincorporated organization, or a government or any other
department, agency or political subdivision thereof.
(i) "Sparta Shares" shall mean shares of the common stock, $0.002 par value
of Sparta Surgical Corporation, a Delaware corporation ("Sparta"), the parent
company of Sparta Xxxxx.
ARTICLE II
MERGER OF THE COMPANY INTO SPARTA XXXXX
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2.1 Merger. Effective as of the Effective Date, as hereinafter defined, Xxxxx
Electrosurgical shall be merged into Sparta Xxxxx, the separate existence of
Xxxxx Electrosurgical shall cease and Sparta Xxxxx shall continue in existence
under the laws of the State of Delaware, and, without other transfer or
assumption, succeed to and possess all the estate, properties, rights,
privileges and powers, and assume and be subject to all the liabilities,
obligations, debts, restrictions, disabilities and duties of Xxxxx
Electrosurgical, all without further act or deed as provided in Section 251 of
the General Corporation Law of the State of Delaware. Sparta Surgical
Corporation, a Delaware corporation ("Sparta") shall continue to own all of the
outstanding capital stock of Sparta Xxxxx on the Effective Date.
If at any time Sparta Xxxxx shall consider or be advised that any further
assignments, conveyances, assurances in law or other instruments are necessary
or desirable to carry out the provisions hereof, the proper officers and
directors of Xxxxx Electrosurgical as of the Effective Date shall execute and
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deliver any and all proper deeds, assignments, assurances in law and other
instruments, and do all things necessary or proper to carry out the provisions
hereof.
2.2. Shareholder Approval; Effective Date. Each party acknowledges that this
Agreement has been duly approved and adopted by the requisite action of the
shareholders of Sparta Xxxxx and the Xxxxx Electrosurgical Shareholders. Upon
its execution a copy of the Articles of Merger as defined in Section 5 of this
Agreement shall be executed, filed and recorded in accordance with the laws of
the State of Delaware as soon as practicable after such approvals. The Merger
shall become effective as of the close of business on the day on which the
filing of the Articles of Merger and, if deemed necessary by Sparta Xxxxx'x
legal counsel, of this Agreement in the State of Delaware or, in lieu thereof,
the filing of such other documents as provided by the laws of the State of
Delaware have been completed, such time being hereinafter referred to as the
"Effective Date".
2.3. Conversion of Xxxxx Electrosurgical Shares. Subject to the conditions and
limitations set forth in this Agreement, each of the Xxxxx Electrosurgical
Shares owned by the Xxxxx Electrosurgical Shareholders outstanding immediately
prior to the Effective Date shall, by virtue of the Merger and as of the
Effective Date, be converted into a pro rata (determined by taking the number of
Xxxxx Electrosurgical Shares held by each of the individual Xxxxx
Electrosurgical Shareholders and dividing such amount into the total number of
the Xxxxx Electrosurgical Shares outstanding) portion of the consideration
listed in Section 2.4 (the "Merger Consideration").
2.4 Payment of Merger Consideration. At the Closing, Sparta shall tender the
Merger Consideration to the Xxxxx Electrosurgical Shareholders, which shall be
made in the following form:
(i) Four Hundred Thousand (400,000) Sparta Shares (the "Purchase
Shares"), of which 200,000 shares shall be issued to the Xxxxxx X. Xxxxx Trust
and 200,000 shares shall be issued to Xxxxx X. Xxxxxxx, which Purchase Shares
shall be issued pursuant to the terms of and subject to an irrevocable voting
trust agreement appointing Xxxxxx X. Xxxxxx as Trustee with full voting rights
over such shares in the form attached as Exhibit A hereto.
(ii) As soon as practicable after the Effective Date, each of the
Xxxxx Electrosurgical Shareholders who shall have delivered his or her
certificate representing such shares to Sparta Xxxxx, shall receive a
certificate for the appropriate number of shares of Sparta Common Stock.
(iii) Neither certificates nor scrip for fractional shares of Sparta
Common Stock will be issued, but in lieu thereof each of the Xxxxx
Electrosurgical Shareholders who would otherwise have been entitled to a
fraction of a share of Sparta Common Stock pursuant to this Agreement will be
paid the cash value of such fraction based upon the market price per whole share
of Sparta Common Stock on the Business Day prior to the Closing Date.
2.5 Closing. The closing of the Merger (the "Closing") shall take place
simultaneously with the execution of this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
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3.1. Representations and Warranties of the Xxxxx Electrosurgical Shareholders.
The Xxxxx Electrosurgical Shareholders and Xxxxx Electrosurgical jointly and
severally represent and warrant to Sparta Xxxxx and Sparta as follows:
(a) Corporate Organization and Authority. Xxxxx Electrosurgical is a
corporation duly organized, validly existing and in good standing under the laws
of California, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being conducted
and as it has been conducted during the past twelve months, and is duly
qualified and in good standing to do business in each jurisdiction in which the
failure to be so qualified would have a Material Adverse Effect.
(b) Capital Structure of Xxxxx Electrosurgical.
(i) The authorized capital stock of Xxxxx Electrosurgical consists of
One Hundred Thousand (100,000) shares of common stock, $1.00 par value (the
"Shares") There are Five Thousand (5,000) Shares issued and outstanding all of
which are owned by the Xxxxx Electrosurgical Shareholders. All of the Shares
have been duly authorized and validly issued and are fully paid and
non-assessable. All of the Shares are owned by the Xxxxx Electrosurgical
Shareholders free and clear of any Liens, options, trusts, or claims of any
kind, and Xxxxx Electrosurgical Shareholders hold marketable title thereto.
Xxxxx Electrosurgical holds no Shares in its treasury. All of the Shares were
issued and sold to the Xxxxx Electrosurgical Shareholders in compliance in all
material respects with all applicable federal and state laws. Except as set
forth above, at the date hereof, no Shares or other voting securities of Xxxxx
Electrosurgical were issued, reserved for issuance or outstanding. No stock
options, stock appreciation rights, restrictive stock grants or any other such
right to acquire any Shares or any other equity securities of Xxxxx
Electrosurgical are outstanding.
(ii) No bonds, debentures, notes or other indebtedness having the
right to vote (or convertible into or exchangeable for securities having the
right to vote) on any matters on which stockholders may vote ("Voting Debt") of
Xxxxx Electrosurgical are issued or outstanding.
(iii) None of the Shares are subject to preemptive rights.
(iv) Except for this Agreement, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which either of the Xxxxx Electrosurgical
Shareholders or Xxxxx Electrosurgical is a party or by which any of them are
bound obligating Xxxxx Electrosurgical to issue, deliver or sell, or cause to be
issued, delivered or sold, additional Shares or any Voting Debt of any of them
or obligating any of them to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking.
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(v) There are no outstanding contractual obligations of the Xxxxx
Electrosurgical Shareholders or Xxxxx Electrosurgical (A) to repurchase, redeem
or otherwise acquire any Shares, or (B) to vote or to dispose of or encumber any
Shares.
(c) Authorization. Xxxxx Electrosurgical and the Xxxxx Electrosurgical
Shareholders have full capacity, power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby, including
selling, assigning, transferring, conveying and delivering all of the Shares as
contemplated by this Agreement, and no consent or approval of any other person
is necessary for them to do so. This Agreement and all other agreements,
documents and instruments executed pursuant hereto are valid and binding
obligations of Xxxxx Electrosurgical Shareholders and Xxxxx Electrosurgical,
enforceable in accordance with their terms except that any enforcement may be
subject to (i) bankruptcy insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditor's rights generally
and (ii) general equitable principles. The execution, delivery and performance
of this Agreement, and such other agreements, documents and instruments and the
transactions contemplated hereunder, have been duly and validly authorized.
(d) No Violations. The execution and delivery of this Agreement and the
documents contemplated hereby , if any, by the Xxxxx Electrosurgical
Shareholders and Xxxxx Electrosurgical do not, and the consummation of the
transactions contemplated hereby and thereby by Xxxxx Electrosurgical and the
Xxxxx Electrosurgical Shareholders do not, and compliance by Xxxxx
Electrosurgical and the Xxxxx Electrosurgical Shareholders with any of the
provisions hereof or thereof do not, (i) conflict with, or result in any breach
or violation of, or default (with or without notice or lapse of time or both)
under, or result in the termination of, or accelerate the performance required
by, or give rise to a right of termination, cancellation or acceleration of any
obligation or the loss of a material benefit under, or the creation of a Lien
(any such conflict, breach, violation, default, termination, acceleration, right
of termination, cancellation or acceleration, loss or creation, a "Violation")
pursuant to, any provision of the articles of incorporation or by-laws of Xxxxx
Electrosurgical; (ii) result in any Violation (other than with respect to any
Violation that is not reasonably likely to result in a Material Adverse Effect)
of any loan or credit agreement, note, mortgage, indenture, lease, Benefit Plan
or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, injunction, order, decree, statute, law, ordinance, rule or
regulation applicable to the Xxxxx Electrosurgical Shareholders or to Xxxxx
Electrosurgical or their respective properties or assets; (iii) result in the
loss of any material license, franchise, permit, legal privilege or legal right
enjoyed or possessed by Xxxxx Electrosurgical except to the extent that any such
loss is not reasonably likely to have a Material Adverse Effect; or (iv) give a
right of termination to any party to any agreement or instrument to which Xxxxx
Electrosurgical is a party and which is material to the operation of Xxxxx
Electrosurgical's business, unless, in any such case, a consent or waiver with
respect thereto is obtained by Xxxxx Electrosurgical prior to the occurrence of
any such event. In particular, and without limitation as to the foregoing, Xxxxx
Electrosurgical has obtained a written consent from its primary secured lender,
other secured or unsecured lenders (whether suppliers, customers, or otherwise)
and other parties as to which has any significant obligations as to the ability
to maintain such obligations with Sparta Xxxxx following the Closing.
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(e) Consents. No consent, approval, order or authorization of, or
registration, declaration or filing (collectively, a "Consent") with, any
Governmental Agency, is required by or with respect to the Xxxxx Electrosurgical
Shareholders or Xxxxx Electrosurgical in connection with the execution and
delivery of this Agreement and the documents contemplated hereby by the Xxxxx
Electrosurgical Shareholders or Xxxxx Electrosurgical or the consummation by the
Xxxxx Electrosurgical Shareholders or Xxxxx Electrosurgical of the transactions
contemplated hereby or thereby, or the performance by Xxxxx Electrosurgical
Shareholders or Xxxxx Electrosurgical of their obligations hereunder and
thereunder, except to the extent the failure to make or obtain such Consent is
not reasonably likely to have a Material Adverse Effect. In particular, and
without limiting the foregoing, no assignment or obtaining of any consent,
license, permit, approval of the Food and Drug Administration, Medicare or
Medicaid provider number, Passport number, or any other license or form of
permission, whether state, federal or local, shall be required for Sparta Xxxxx
to carry on the business of Xxxxx Electrosurgical following the Closing.
(f) No Subsidiaries. Xxxxx Electrosurgical has no subsidiaries and does not
own of record or beneficially, directly or indirectly, any capital stock or
equity interest or investment in any other corporation, partnership, joint
venture, association or other business entity.
(g) Financial Statements. The audited financial statements of Xxxxx
Electrosurgical for the year ended December 31, 1998 and unaudited financial
statements for the four (4) month period ended April 30, 1999, and any other
financial statements of Xxxxx Electrosurgical which have heretofore have been
delivered by the Xxxxx Electrosurgical Shareholders to Sparta Xxxxx (whether or
not attached hereto as Schedule 3.1(g)), fairly present in all material respects
the financial position of Xxxxx Electrosurgical as at the dates thereof and the
results of its operations for the periods then ended and have been prepared on a
basis consistent with generally accepted accounting principals consistently
applied.
(h) Undisclosed Liabilities. Except as set forth in the Financial
Statements, Xxxxx Electrosurgical is not subject to any liabilities of any
nature other than in the ordinary course of business (to the extent such
liabilities are required to be accrued or disclosed under SFAS No. 5) which have
had or can reasonably be expected to have an aggregate adverse financial effect
exceeding $25,000.
(i) Absence of Certain Changes or Events. Xxxxx Electrosurgical has not
incurred any material liability, except in the ordinary course of its business
consistent with its past practices, nor has there been any change, or any event
involving a prospective change, in the condition of Xxxxx Electrosurgical which
has had, or is reasonably likely to have, a Material Adverse Effect on Xxxxx
Electrosurgical. Without limiting the generality of the foregoing, Xxxxx
Electrosurgical has not:
(i) incurred any material obligations or liabilities (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
except in the ordinary course of business and consistent with past practice,
nor, without limiting the generality of the foregoing, guaranteed, endorsed or
assumed responsibility for any material debts or obligations of any person or
entity;
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(ii) paid, discharged or satisfied any material claim, Lien,
encumbrance or liability (whether absolute, accrued, contingent or otherwise and
whether due or to become due), except claims, Liens, encumbrances or liabilities
which were incurred and paid, discharged or satisfied in the ordinary course of
business or consistent with past practice;
(iii) except for the sale of inventory in the ordinary course of
business or consistent with past practice, sold, leased or otherwise disposed of
a material portion of its property or assets, real, personal or mixed, tangible
or intangible, nor entered into any agreement or commitment to do so, nor
permitted, caused, nor allowed a material portion of such properties or assets,
to be mortgaged, pledged or subjected to any Lien or encumbrance;
(iv) disposed of, or permitted to lapse, any patent, trademark,
service xxxx or copyright or any patent, trademark, service xxxx or copyright
application or license which is part of the property of Xxxxx Electrosurgical;
(v) except for customary increases in employees' compensation
consistent with past practice and market conditions, granted, promised or
offered any general increase in the compensation of employees (including,
without limitation, any increase pursuant to any bonus, pension, profit-sharing
or other plan or commitment of Xxxxx Electrosurgical), or any increase in any
compensation or fringe benefit to or for the benefit of any officer or employee,
or entered into any new employment agreement or bonus arrangement or Benefit
Plan (as defined in Section 3.1(s));
(vi) except in the ordinary course of business, made any material
capital expenditures or commitments for additions to property, plant or
equipment;
(vii) made any material change in any method of accounting or
accounting practice;
(viii) incurred any material change in any of the licenses, permits or
franchises of Xxxxx Electrosurgical; or
(ix) except in the ordinary course of business, amended, modified,
terminated or entered into any new or existing, contract, agreement, plan,
lease, license, permit or franchise that is material to the operation of Xxxxx
Electrosurgical's business.
(j) Title to Assets. Xxxxx Electrosurgical owns, as of the date hereof,
(with good, clear, record and marketable title in the case of Real Property,
subject only to the matters permitted herein) all of the properties and assets,
tangible and intangible, which are material to its businesses, free and clear of
all Liens except (a) Liens set forth as permitted liens on Schedule 3.1 (j)
("Permitted Liens"); (b) statutory Liens securing payments not yet due or
delinquent; (c) Liens, the validity of which are being contested or litigated in
good faith by appropriate proceedings which have been disclosed in writing to
Sparta Xxxxx and for which Xxxxx Electrosurgical has set aside on its books any
reserves deemed by it to be adequate with respect thereto; (d) mortgages or
security interests shown on the Financial Statements or the accounting records
of Xxxxx Electrosurgical as of the Closing as securing specified liabilities or
obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists; (e) Liens for current
taxes not yet due; and (f) with respect to Real Property, (A) minor
imperfections of title, if any, none of which is substantial in amount,
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materially detracts from the value or impairs the use of the property subject
thereto, and (B) zoning laws and other land use restrictions that do not impair
the present or anticipated use of the property subject thereto.
(k) Real Property. Schedule 3.1 (k) identifies all real property owned,
leased or occupied by Xxxxx Electrosurgical, along with the buildings thereon
and the fixtures thereto (the "Real Property"), together in the case of owned
property, with a legal description thereof. Except as set forth on any
applicable title insurance policy:
(i) the Real Property is in material compliance with all applicable
zoning laws and restrictive regulations;
(ii) no material charges or violations have been filed or made against
the Real Property as a result of any violation or alleged violation of any
applicable zoning laws and restrictive regulations;
(iii) with respect to any lease of Real Property by Xxxxx
Electrosurgical that (A) such lease is legal, binding, enforceable, and in full
force and effect, (B) such lease will continue to be legal, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions under this Agreement, (C) Xxxxx
Electrosurgical, and the lessor, are not in breach or default, and no event has
occurred which, with notice of lapse of time, would constitute a breach or
default of permit termination, modification or acceleration thereunder, (D)
Xxxxx Electrosurgical has not repudiated any provision thereunder, (E) Xxxxx
Electrosurgical enjoys peaceful and undisturbed possession under all such leases
and (F) there are no disputes, oral agreements, or forbearance programs in
effect as to such lease;
(iv) Xxxxx Electrosurgical has no right or obligation to acquire any
interest in any other real property;
(v) there exist no material changes or events affecting the Real
Property, which would likely curtail the use of the Real Property for the
purposes for which it is now used by Xxxxx Electrosurgical;
(vi) all water, sewer, gas, electric, telephone, drainage and other
utility equipment required by law or now utilized for the operation of the Real
Property as presently used by Xxxxx Electrosurgical are installed and connected
pursuant to valid permits, and are reasonably adequate for their present use. No
material condition exists which would result in the termination of the
furnishing of service to the Real Property of water, sewer, gas, electric,
telephone or drainage services;
(vii) neither the Xxxxx Electrosurgical Shareholders nor Xxxxx
Electrosurgical has received any notice from any municipal, state, federal or
other governmental authority that any zoning, building, fire, water, health
environmental or other statute, ordinance or regulatory violation have issued in
respect of the Real Property, and no such violations exist.
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(l) Intellectual Property.
(i) Xxxxx Electrosurgical owns or has the right to use pursuant to
license, sublicense, agreement or permission all patents, trademarks, service
marks, trade secrets or copyrighted materials hereto (the "Intellectual
Property") for the operation of its business as presently conducted. Schedule
3.1 (l) lists all trademarks, service marks, trade names, copyrights, patents
and applications for any of the foregoing owned by or registered in the name of
Xxxxx Electrosurgical. Each item of Intellectual Property owned or used by Xxxxx
Electrosurgical immediately prior to the Closing under this Agreement will be
owned or available for use by Sparta Xxxxx on identical terms and conditions
immediately subsequent to the Closing. Xxxxx Electrosurgical has taken all
necessary action to maintain and protect each item of Intellectual Property that
it owns or uses (including the registrations and applications for registrations
thereof).
(ii) Xxxxx Electrosurgical has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any intellectual property
rights of third parties, and neither the Xxxxx Electrosurgical Shareholders nor
Xxxxx Electrosurgical has ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation or
violation. No third party has interfered with, infringed upon, misappropriated,
or otherwise come into conflict with the ownership of or rights in the
Intellectual Property of Xxxxx Electrosurgical.
(m) Material Contracts. Schedule 3.1 (m) contains a description of all
contracts, agreements, equipment leases, loan transactions, and commitments,
either oral or in writing relating to Xxxxx Electrosurgical and which are
material to the operation of Xxxxx Electrosurgical's business, extending beyond
the date hereof to which Xxxxx Electrosurgical is a party or which affect the
business or property of Xxxxx Electrosurgical (collectively the "Contracts").
Xxxxx Electrosurgical is not in default nor alleged to be in default in any
respect under any Contracts. All Contracts are valid and in full force and
effect, and there exists no event, condition or occurrence which, after notice
or lapse of time, or both, would constitute such a default by Xxxxx
Electrosurgical of any Contracts. Complete copies of all Contracts have been or
shall be made available to Sparta Xxxxx.
(n) Inventory. The inventory of Xxxxx Electrosurgical shown on the
Financial Statements or the accounting records of Xxxxx Electrosurgical as of
the Closing (i) is accurately stated therein, (ii) consists of a quality and
quantity that is good and saleable in the ordinary course of Xxxxx
Electrosurgical's business and (iii) is carried at cost valuations consistent
with Xxxxx Electrosurgical's past practice.
(o) Accounts Receivable. The accounts receivable of Xxxxx Electrosurgical
reflected on the accounting records of Xxxxx Electrosurgical as of the Closing
represent valid obligations that have arisen out of transactions in the ordinary
course of Xxxxx Electrosurgical's business. There are no claims to return
merchandise of Xxxxx Electrosurgical by reason of alleged over shipments,
defective merchandise or otherwise, or merchandise in the hands of customers
under an understanding that such merchandise is returnable. An aging of Xxxxx
Electrosurgical's accounts receivable as of April 30, 1999 has been provided to
Sparta Xxxxx, and such aging is accurate and complete in all material respects.
There are no conditions precedent remaining unsatisfied or in default, or any
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other restrictions upon or limitation to, the prompt collection of such accounts
receivable remaining outstanding as of the date hereof.
(p) Non-governmental Licenses. Schedule 3.1 (p) contains a list of all
material non-governmental licenses hereto held by Xxxxx Electrosurgical. All
such licenses remain in full force and effect and Xxxxx Electrosurgical is not
in default under the terms thereof.
(q) Customers. Neither the execution of this Agreement nor the consummation
of the transactions contemplated hereby are likely to result in any material
cancellations or withdrawals of accepted and unfilled purchase orders. No notice
has been given respecting any cancellation of any order by any of Xxxxx
Electrosurgical's customers has any such cancellation been threatened.
(r) Employee Plans and Contracts. Schedule 3.1 (r) is a true and complete
list of all bonus, pension, stock option, stock ownership, stock purchase,
phantom stock, benefit, welfare, profit sharing, retirement, disability, death
benefit, vacation, severance, hospitalization, medical, insurance, incentive,
deferred compensation and other similar fringe or employee benefit plans, funds,
programs, arrangements, or understandings (whether or not legally binding), and
all employment contracts, executive compensation, consulting, termination, or
indemnification agreements, written or oral, in each of the foregoing cases
which cover or are maintained for the benefit of any current or former employee,
officer or director of Xxxxx Electrosurgical that have existing, current,
continuing or potential future obligations with respect thereto (the "Employee
Plans"). Except as set forth on Schedule 3.1 (r), there has not been any
adoption or amendment (not already embodied in the documents provided to Sparta
Xxxxx), comprising any such Employee Plans. Without limiting the generality of
the foregoing, there are no salary and termination benefits payable to any
officers and employees of Xxxxx Electrosurgical under existing employment
agreements. True and correct copies (in all material respects) of all items
referred to in this Section 3.1(r) have been heretofore delivered by the Xxxxx
Electrosurgical Shareholders to Sparta Xxxxx.
(s) ERISA Compliance. Each of the Employee Plans is in compliance with the
requirements provided by all statutes and regulations applicable under the laws
of the United States, including without limitation the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). All contributions required
under applicable law or the terms of any Employee Plans due to date have been
made and all amounts properly accrued to date as liabilities of Xxxxx
Electrosurgical under or with respect to any Employee Plans for the current year
have been recorded on Xxxxx Electrosurgical's books. Without limiting the
generality of the foregoing:
(i) Schedule 3.1 (s) contains a list and brief description of each
"employee pension benefit plan" (as defined in Section 3(2) of ERISA (sometimes
referred to herein as a "Pension Plan"), each "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA) and each stock option, stock purchase,
deferred compensation plan or arrangement and each other employee fringe benefit
plan or arrangement maintained, contributed to or required to be maintained or
contributed to by Xxxxx Electrosurgical or any other person or entity that,
together with Xxxxx Electrosurgical, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code (each, a "Commonly Controlled
Entity"), for the benefit of any current or former employees, officers, agents,
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directors or independent contractors of Xxxxx Electrosurgical (collectively,
"Benefit Plans"). The Xxxxx Electrosurgical Shareholders have delivered or made
available to Sparta Xxxxx true, complete and correct copies of (A) each Benefit
Plan (or, in the case of any unwritten Benefit Plans, descriptions thereof), (B)
the most recent annual report on Form 5500 filed with the IRS with respect to
each Benefit Plan (if any such report was required), and (C) the most recent
summary plan description (or similar document) for each Benefit Plan for which
such summary plan description is required or was provided to plan participants
or beneficiaries.
(ii) Each Benefit Plan has been administered in all material respects
in accordance with its terms. Xxxxx Electrosurgical and each Commonly Controlled
Entity and all the Benefit Plans are in compliance in all material respects with
the applicable provisions of ERISA and the Code. There are no investigations,
proceedings or other claims involving any Benefit Plan that could give rise to
any material liability other than routine claims for benefits.
(iii) All Pension Plans intended to be qualified under Section 401(a)
of the Code have been the subject of current, valid determination letters from
the IRS to the effect that such Pension Plans are qualified and exempt from
Federal income taxes under Sections 401(a) and, with respect to each trust
created thereunder, 501(a), respectively, of the Code, and nothing has occurred
since the date of any such letter that would adversely affect the qualified
status of the applicable Pension Plan.
(iv) No Pension Plan is or was subject to Title IV of ERISA. No
Pension Plan is subject to Part III of subtitle B of Title I of ERISA or Section
412 of the Code.
(v) Neither Xxxxx Electrosurgical nor any other "disqualified person"
(as such term is defined in Section 4975 of the Code) or "party in interest" (as
such term is defined in Section 3(14) of ERISA) under Xxxxx Electrosurgical
control has engaged in a non-exempt "prohibited transactions" (as such term is
defined in Section 406 of ERISA or Section 4975 of the Code) or any other breach
of fiduciary responsibility with respect to the Benefit Plans that could subject
Xxxxx Electrosurgical, any Commonly Controlled Entity or any officer of Xxxxx
Electrosurgical or any Commonly Controlled Entity to any tax, penalty or other
liability under ERISA, the Code or other applicable law.
(vi) Neither Xxxxx Electrosurgical nor any Commonly Controlled Entity
(A) maintains or contributes to a Multi employer Pension Plan or has maintained,
contributed to or had an obligation to maintain or contribute to such a plan
within the five full plan years of any such plan immediately prior to the date
hereof, or (B) has incurred any liability upon the termination of or withdrawal
from such Multi employer Pension Plan, which liability remains unpaid as of the
date hereof.
(vii) With respect to any Benefit Plan that is an employee welfare
benefit plan, (A) no such Benefit Plan is funded through a "welfare benefit
fund", as such term is defined in Section 419(e) of the Code, (B) each such
Benefit Plan that is a "group health plan", as such term is defined in Section
5000(b)(1) of the Code, complies in all material respects with the applicable
requirements of Section 4980B(f) of the Code and each such Benefit Plan
(including any such Benefit Plan covering retirees or other former employees)
may be amended or terminated without material liability to Xxxxx Electrosurgical
or any Commonly Controlled Entity on or at any time after the consummation of
the Merger.
11
(viii) No employee of Xxxxx Electrosurgical or any Commonly Controlled
Entity will be entitled to any additional benefits or any acceleration of the
time of payment or vesting of any benefits under any Benefit Plan as a result of
the transactions contemplated by this Agreement.
(t) Labor and Employee Matters. Xxxxx Electrosurgical is not a party to any
collective bargaining agreements or any other agreements with any labor
organization (a "Labor Agreement"). Xxxxx Electrosurgical is in compliance in
all material respects with all applicable laws of Governmental Entities
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, the Immigration
Reform and Control Act ("IRCA"), the Worker Adjustment and Retraining
Notification Act ("WARN"), any such laws respecting employment discrimination,
disability rights or benefits, equal opportunity, plant closure issues,
affirmative action, workers' compensation, employee benefits, severance
payments, labor relations, employee leave issues, wage and hour standards,
occupational safety and health requirements and unemployment insurance and
related matters (collectively, "Employment Laws"), and is not engaged in and has
not engaged in any unfair labor practice. No investigation or review by or
before any Governmental Entity concerning any possible conflicts with or
violations of any such applicable laws is pending, nor is any such investigation
threatened, nor has any such investigation occurred during the last three years,
and no Governmental Entity has provided any notice to Xxxxx Electrosurgical or
otherwise asserted an intention to conduct any such investigation or review, nor
is there any basis for any such investigation or review. There is no labor
strike, dispute, slowdown or stoppage actually pending or threatened against or
directly affecting Xxxxx Electrosurgical. No union representation question or
union organizational activity exists respecting the employees of Xxxxx
Electrosurgical. Xxxxx Electrosurgical has not experienced any material work
stoppage or other material labor difficulty. Xxxxx Electrosurgical is not
delinquent in payments to any of its officers, directors, employees or agents
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed by them or amounts required to be reimbursed to such
officers, directors, employees or agent. In the event of termination of the
employment of any of said officers, directors, employees or agents for any
reason, Xxxxx Electrosurgical and Sparta Xxxxx will not, pursuant to any
agreement or by reason of anything done prior to the Closing by Xxxxx
Electrosurgical, be liable to any of said officers, directors, employees or
agents for so-called "severance pay" or any other similar payments or benefits,
including, without limitation, post-employment health care (other than pursuant
to COBRA) or insurance benefits. There are no benefits payable to current,
terminated or retired employees, including, without limitation, post-employment
health care or insurance benefits. Within the three-year period prior to the
date hereof there has not been any termination of employment of any officer,
director, employee or agent of Xxxxx Electrosurgical who receives salary or
compensation in excess of $25,000 per annum or any termination of any officer,
director, employee or agent of Xxxxx Electrosurgical that could result in an
aggregate liability to Xxxxx Electrosurgical in excess of $25,000; and (x) all
employees of Xxxxx Electrosurgical are employed at will. There are no pending
or, threatened suits, claims, actions, charges, investigations or proceedings of
any nature respecting employment and employment practices, terms and conditions
12
of employment and wages and hours, including without limitation (A) under or
alleging violation of any applicable Employment Law or (B) relating to alleged
unfair labor practices (or the equivalent thereof under any applicable law).
(u) Employee Information. Schedule 3.1 (u) sets forth a complete and
accurate list of all employees of Xxxxx Electrosurgical as of the Closing, with
each employee's annual salary or wage rates, as the case may be, date of hire,
positions held and titles.
(v) Insurance. Xxxxx Electrosurgical is presently insured, and during each
of the last three years has been insured, for reasonable amounts against such
risks as companies engaged in similar businesses would, in accordance with good
business practice, customarily be insured. Schedule 3.1 (v) sets forth a true
and complete list and brief description of all insurance policies (and fidelity
or similar bonds) currently in force and maintained by or for the benefit of
Xxxxx Electrosurgical and its directors, officers, employees or agents. Neither
the Xxxxx Electrosurgical Shareholders nor Xxxxx Electrosurgical has received
any notice of cancellation or non-renewal of any such policy.
(w) Motor Vehicles. Xxxxx Electrosurgical does not own or lease any motor
vehicles.
(x) Compliance with Applicable Laws.
(i) Xxxxx Electrosurgical holds all permits, licenses, variances,
exemptions, authorizations, orders and approvals of all Governmental Agencies
(the "Permits") that are required for it to own, lease or operate its properties
and assets and to carry on its business as presently conducted except to the
extent that the failure to hold any such Permit is not reasonably likely to have
a Material Adverse Effect. There is presently no default under any such Permit.
Xxxxx Electrosurgical is in compliance in all material respects with (A) all
applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity, and (B) their own respective internal policies and
procedures.
(ii) Xxxxx Electrosurgical has not received any notification or
communication from any Governmental Agency which has not been fully and finally
resolved (A) asserting that Xxxxx Electrosurgical is not in substantial
compliance with any of the statutes, regulations, ordinances or guidelines which
such Governmental Agency enforces or administers, or with the internal policies
and procedures of Xxxxx Electrosurgical, (B) threatening to revoke any material
Permit, (C) requiring or threatening to require Xxxxx Electrosurgical, or
indicating that it may be required, to enter into a cease and desist order,
agreement or memorandum of understanding or any other agreement, or (D)
directing, restricting or limiting, or purporting to direct, restrict or limit,
in any manner the operations of Xxxxx Electrosurgical. Xxxxx Electrosurgical has
not received, consented to or entered into, or is subject to, any agreement with
a Governmental Agency, nor has it been advised by any Governmental Agency that
such Governmental Agency is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such agreement.
(y) Litigation. There are, no claims, suits, actions or legal,
administrative, arbitration or other proceedings of any nature pending against
Xxxxx Electrosurgical or its property or threatened against or affecting Xxxxx
Electrosurgical or its properties or assets, which involves the possibility of
any judgment or liability in excess of $25,000 or which might result in any
13
Material Adverse Effect; nor is there any judgment, decree, injunction, rule or
order of any Governmental Agency or arbitrator outstanding against Xxxxx
Electrosurgical.
(z) Taxes.
(i) Xxxxx Electrosurgical has timely and accurately prepared and filed
(on or before the due date thereof) or will timely and accurately prepare and
file (on or before the due date thereof) all federal, state and local returns,
declarations and reports, information returns and statements ("Tax Returns") for
Taxes required to be filed by or with respect to Xxxxx Electrosurgical before
the Closing, and has paid or caused to be paid, or has made adequate provision
or set up an adequate accrual or reserve for the payment of, all Taxes required
to be paid in respect of the periods for which Tax Returns are due on or prior
to the Closing. Xxxxx Electrosurgical is not delinquent in the payment of any
Tax, and no deficiencies for any Tax, assessment or governmental charge have
been threatened, claimed, proposed or assessed, in each case in writing. No
waiver or extension of time to assess any Taxes has been given or requested. No
written claim, or any other claim, by any taxing authority in any jurisdiction
where Xxxxx Electrosurgical does not file Tax returns is pending pursuant to
which Xxxxx Electrosurgical is or may be subject to taxation by that
jurisdiction. Xxxxx Electrosurgical's Tax Returns were last audited by the
Internal Revenue Service or comparable state, local or foreign agencies on
[____].
(ii) For the purpose of this Agreement, the term "Tax" (including,
with correlative meaning, the terms "taxes" and "taxable") shall include, except
where the context otherwise requires, all Federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise, occupancy and other taxes, duties or assessments
of any nature whatsoever, together with all interest, penalties and additions
imposed with respect to such amounts.
(aa) Hazardous Substances.
(i) Xxxxx Electrosurgical is in compliance with all applicable
Environmental Laws (as defined below), except for possible noncompliance which
individually or in the aggregate would not have a Material Adverse Effect on
Xxxxx Electrosurgical. The term "Environmental Laws" means any Federal, state or
local statute, ordinance, rule, regulation, policy, permit, consent, approval,
license, judgment, order, decree, injunction or other authorization relating to:
(A) releases (as defined in 42 U.S.C. Section 9601(22)) ("Releases") or
threatened Releases of Hazardous Material (as defined below) into the
environment; or (B) the generation, treatment, storage, disposal, use, handling,
manufacturing, transportation or shipment of any Hazardous Material. The term
"Hazardous Material" means (1) hazardous substances (as defined in 42 U.S.C.
Section 9601(14)), (2) petroleum, including crude oil and any fractions thereof,
(3) natural gas, synthetic gas and any mixtures thereof, (4) asbestos and/or
asbestos-containing material and (5) polychlorinated biphenyls ("PCBs"), or
materials containing PCBs in excess of 50 ppm.
(ii) During the period of occupation by Xxxxx Electrosurgical of any
of its respective current or previously leased properties, there have been no
Releases of Hazardous Material in, on, under or affecting such properties, and
Xxxxx Electrosurgical has not disposed of any Hazardous Material in a manner
that has led, or could reasonably be anticipated to lead, to a Release.
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(iii) Xxxxx Electrosurgical is not subject to any judgment, decree or
order relating to compliance with any Environmental Law or to investigation or
cleanup under any Environmental Law (collectively, "Environmental Enforcement
Actions"). Xxxxx Electrosurgical has no contingent liabilities in connection
with any Hazardous Materials, including claims of liability for having
generated, used, stored, transported, disposed of, or failed to cleanup
Hazardous Materials related to Xxxxx Electrosurgical.
(bb) Accounts. Schedule 3.1 (bb) correctly identifies each bank,
securities, brokerage or similar account and safe deposit box or other
depository maintained by or on behalf of Xxxxx Electrosurgical, and the name of
each person with any power or authority to act with respect thereto.
(cc) Agreements with Former Officers and Directors. Xxxxx Electrosurgical
is not a party to any agreements with any former officers or directors pursuant
to which Xxxxx Electrosurgical has any obligations to such persons either
financial or otherwise.
(dd) Contingent Obligations, Guaranties and Powers of Attorney. Xxxxx
Electrosurgical is not a party to or otherwise obligated under any contingent
obligations, guaranties, indemnities, powers of attorney or similar arrangements
to any other person or entity.
(ee) Related Party Transactions. No executive officer or director of Xxxxx
Electrosurgical (including the Xxxxx Electrosurgical Shareholders) or any
"associate" (as such term is defined in Rule 14a-1 under the Securities Exchange
Act of 1934, as amended) of any such executive officer or director has any
material interest in any material contract or property, real or personal,
tangible or intangible, that is used in or pertains to the business of Xxxxx
Electrosurgical; nor is Xxxxx Electrosurgical involved in any business
arrangement or relationship with any officer or director of Xxxxx
Electrosurgical (including the Xxxxx Electrosurgical Shareholders).
(ff) Partnerships and Joint Ventures. Xxxxx Electrosurgical is not a
partner, member or otherwise a participant in, any partnership, joint venture or
otherwise involved in any business or enterprise.
(gg) Investment. The Xxxxx Electrosurgical Shareholders understand that the
issuance and sale of the Sparta Shares have not been, and will not be,
registered under the Securities Act of 1933, or under any state securities laws,
and are being offered or sold in reliance upon federal and state exemptions for
transactions not involving any public offering. The Xxxxx Electrosurgical
Shareholders further understand that the Sparta Shares will be subject to
certain restrictions on transfer which prohibit their sale or transfer for a
period of one year. The certificates being issued to the Xxxxx Electrosurgical
Shareholders representing their ownership of the Sparta Shares shall contain
restrictive legends setting forth such restrictions on transfer and alienation.
These restrictions shall affect Xxxxx Electrosurgical Shareholders' rights only
as to the transfer of such shares and shall not restrict the payment to Xxxxx
Electrosurgical Shareholders of any dividends or other distributions made by
15
Sparta Xxxxx. The Xxxxx Electrosurgical Shareholders hereby represent that they
each are acquiring the Sparta Shares solely for their own respective accounts
for investment purposes, and not with a view to the distribution thereof, are
each a sophisticated investor with knowledge and experience in business and
financial matters, are able to bear the economic risk and lack of liquidity
inherent in holding the Sparta Shares, and each is an Accredited Investor. The
Xxxxx Electrosurgical Shareholders will each execute and deliver to Sparta Xxxxx
at the Closing an Investment Letter in form and substance reasonably acceptable
to Sparta Xxxxx'x legal counsel.
(hh) Health Care Regulatory Compliance. Xxxxx Electrosurgical is in
compliance in all material respects with all applicable rules and regulations of
any state or federal regulatory agency (together being the "Regulatory
Agencies") rules, regulations, policies and standards (including "Good
Manufacturing Practices" as promulgated by the United States Food and Drug
Administration. There are no claims of violations of any rules, regulations,
policies or standards of the Regulatory Agencies pending or threatened against
Xxxxx Electrosurgical. None of the Regulatory Agencies have mandated or
requested that Xxxxx Electrosurgical recall any product of its business and
Xxxxx Electrosurgical has no reason to believe that any products of Xxxxx
Electrosurgical's business will be subject to a recall mandated by any
Regulatory Agency. Xxxxx Electrosurgical has never been required to pay any
penalty to any Regulatory Agency or any other government agency as a result of
any alleged violations of the rules and regulations promulgated by it and Xxxxx
Electrosurgical has not been required to pay any damages to any person or entity
as a result of any allegation that the products of its business did not comply
with any rules, regulations or standards of any Regulatory Agency.
(ii) Accuracy of Information. None of the representations or warranties
made by Xxxxx Electrosurgical and the Xxxxx Electrosurgical Shareholders in this
Agreement or any other schedules hereto, or in any other agreement, instrument
or document executed or delivered by or on behalf of Xxxxx Electrosurgical
Shareholders or Xxxxx Electrosurgical in connection with the transactions
contemplated hereby or thereby, contains or will contain any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements contained therein, in light of the circumstances under which such
statements are or will be made, not misleading.
3.2. Sparta Xxxxx represents and warrants to the Xxxxx Electrosurgical
Shareholders and Xxxxx Electrosurgical as follows:
(a) Corporate Organization. Sparta Xxxxx is a corporation duly organized,
validly existing and in good standing under the laws of Delaware and has all
requisite power and authority to conduct its business as now being conducted and
perform the transactions contemplated hereby.
(b) Authority. Sparta Xxxxx has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby and no consent or approval of any other person is necessary with respect
hereto or thereto. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Sparta Xxxxx. This
Agreement and such other agreements, documents and instruments executed pursuant
hereto have been duly executed and delivered by Sparta Xxxxx and constitute the
valid and binding obligations of Sparta Xxxxx, enforceable against Sparta Xxxxx
in accordance with their respective terms.
16
(c) No Violation. The execution and delivery of this Agreement and such
other agreements, documents and instruments executed pursuant hereto do not, and
the consummation of the transactions contemplated hereby or thereby will not,
and compliance by Sparta Xxxxx with any of the provisions hereof or thereof will
not:
(i) result in any Violation of the certificate of incorporation or
by-laws of Sparta Xxxxx; or
(ii) result in any Violation of any loan or credit agreement, note,
mortgage indenture, lease, Benefit Plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, injunction, order,
decree, statute, law, ordinance, rule or regulation applicable to Sparta Xxxxx
or its properties or assets.
(d) Litigation. There is no suit, action or legal, administrative,
arbitration or other proceedings of any nature pending or, threatened against or
affecting Sparta Xxxxx that individually or in the aggregate could reasonably be
expected to (i) impair the ability of Sparta Xxxxx to perform its obligations
under this Agreement or (ii) threaten, impede or delay the consummation of the
Merger.
(e) Accuracy of Information. None of the representations or warranties made
by Sparta Xxxxx in this Agreement, nor any written statement or certificate
furnished, or to be furnished by Sparta Xxxxx pursuant to this Agreement, or in
connection with the actions contemplated hereby, contains or shall contain any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained therein, in light of the circumstances under
which such statements are or will be made, not misleading.
ARTICLE IV
ADDITIONAL AGREEMENTS
---------------------
4.1. Further Assurances. Subject to the terms and conditions herein provided,
each of the Parties agrees to use all reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper,
or advisable under applicable laws and regulations to consummate and make
effective the Merger in accordance with the terms of this Agreement. In case at
any time any further action is necessary or desirable to carry out the purposes
of this Agreement, the proper officers and directors of each Party to this
Agreement and the Xxxxx Electrosurgical shareholders are hereby directed and
authorized to use their reasonable efforts to effectuate all appropriate action.
4.2. Xxxxx Electrosurgical Shareholders' Covenants; Other Actions. The Xxxxx
Electrosurgical Shareholders shall not permit Xxxxx Electrosurgical to take any
action that would, or reasonably could be expected to, result in any of its
representations and warranties set forth in this Agreement being or becoming
untrue, any of such representations and warranties that are not so qualified
being or becoming untrue in any material respect, or any of the deliverables
under this Agreement as set forth in Article V not being delivered (unless such
action is required by law).
17
4.3. Sparta Xxxxx Covenants; Other Actions. Sparta Xxxxx shall not take any
action that would, or reasonably could be expected to, result in any of its
representations and warranties set forth in this Agreement that are qualified as
to materiality being or becoming untrue, any of such representations and
warranties that are not so qualified being or becoming untrue in any material
respect, or any of the deliverables under this Agreement as set forth in Article
V not being delivered (unless such action is required by law).
4.4. Preservation of Books and Records. For a period of two (2) years after
the date hereof, Sparta Xxxxx will preserve the books and records of Xxxxx
Electrosurgical delivered to it; and Xxxxx Electrosurgical Shareholders shall
similarly make available to Sparta Xxxxx any records which Sparta Xxxxx permits
Xxxxx Electrosurgical Shareholders to retain; each Party will make such books
and records available to the other Party at all reasonable times and permit the
other Party to make extracts from or copies of all such records. Notwithstanding
the foregoing, in connection with any tax audit of the Xxxxx Electrosurgical
Shareholders, or the preparation of any tax return of the Xxxxx Electrosurgical
Shareholders, or the defense of any claim brought against the Xxxxx
Electrosurgical Shareholders, or any other proper purpose, Sparta Xxxxx will
cause Xxxxx Electrosurgical to make available to Xxxxx Electrosurgical
Shareholders, at Xxxxx Electrosurgical Shareholders' request and expense from
time to time, all books and records of Xxxxx Electrosurgical either existing on
or relating to any transaction on or prior to the date hereof for inspection or
copying by Xxxxx Electrosurgical Shareholders at any reasonable time for a six
(6) year period after the date hereof, and to offer same to Xxxxx
Electrosurgical Shareholders, from time to time.
ARTICLE V
DELIVERABLES
------------
5.1. Closing Deliverables: Xxxxx Electrosurgical and Xxxxx Electrosurgical
Shareholders, as appropriate, shall have delivered to Sparta Xxxxx at or prior
to the Closing, unless such deliveries are waived by Sparta Xxxxx, the
following:
(a) Tax Lien Waiver. A copy of Xxxxx Electrosurgical's notification of tax
returns filed with the appropriate government tax agency in Xxxxx
Electrosurgical's state of incorporation and such other states as are required,
or a waiver of any Lien as mentioned in Section 3.1(j) above;
(b) Evidence of Action. Duly executed and delivered xxxx of sale, UCC
termination statements, and other good and sufficient instruments of transfer as
shall be effective to complete the Merger;
18
(c) Opinion of Counsel. Unless waived by Sparta Xxxxx, a duly executed
opinion of counsel in a form acceptable to counsel for Sparta Xxxxx addressed to
Sparta Xxxxx and Sparta, dated as of the Closing;
(d) Employment, Consulting and Non-Competition Agreements. Executed
Employment Agreement with Xxxxxxx Xxxxx and Xxxxx X. Xxxxxxx, and a Consulting
Agreements with Xxxxxx X. Xxxxx and Xxxxx X. Xxxxxxx, in the forms attached
hereto as Exhibit B, including non-competition covenants with each of them which
prohibit each of them from competing with Sparta Xxxxx during their employment
and for a period two (2) years in the case of Xxxxx and of five (5) years in the
cases of Xxxxx and Mursell, respectively, thereafter, and with other of the
Xxxxx Electrosurgical employees as specified by Sparta Xxxxx;
(e) Voting Trust Agreement. An irrevocable voting trust agreement
appointing Xxxxxx X. Xxxxxx as Trustee with full voting rights over the Purchase
Shares. Such voting trust agreement shall be substantially in the form of
Exhibit A hereto and shall be in full force and effect as of the Closing;
(f) Stock Certificates. Certificates representing all (and not less than
all) of the Shares of Xxxxx Electrosurgical, duly endorsed in blank or
accompanied by appropriate stock powers, and otherwise in form satisfactory to
Sparta Xxxxx; and such other instrument or instruments of transfer, in such form
as shall be necessary or appropriate to vest in Sparta Xxxxx marketable title to
the Shares;
(h) Stock Ledgers. All stock certificate and stock register books of Xxxxx
Electrosurgical;
(i) Corporate Records. All minute books of Xxxxx Electrosurgical;
(j) Corporate Seals. The corporate seals of Xxxxx Electrosurgical;
(k) Resolutions. A copy of directors' and Shareholders resolutions for
Xxxxx Electrosurgical, all certified as of the date hereof by its duly
authorized Clerk and/or Secretary as having been duly and validly adopted and as
being in full force and effect as of the date hereof, authorizing the execution
and delivery by Xxxxx Electrosurgical Shareholders and Xxxxx Electrosurgical of
this Agreement, the other agreements and instruments executed and delivered by
Xxxxx Electrosurgical as provided herein, and the performance by Xxxxx
Electrosurgical of the transactions contemplated hereby and thereby;
(l) Charter Documents. The Articles of Incorporation of Xxxxx
Electrosurgical, certified by the Secretary of State of the State of California,
and the By-laws of Xxxxx Electrosurgical, certified by the Secretary of Xxxxx
Electrosurgical;
(m) Good Standing Certificates. Certificates issued by appropriate
governmental authorities evidencing the good standing of Xxxxx Electrosurgical
as a corporation in the State of California, and in each state where Xxxxx
Electrosurgical is doing business, as of a date not more than seven days prior
to the Closing;
(n) Resignations. Letters of resignation, effective as of the Closing, from
each of the officers and directors of Xxxxx Electrosurgical as desired by Sparta
Xxxxx; and
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(o) Lease. Landlord consents or lease assignments with respect to the
assignment or assumption by Sparta Xxxxx of any leasehold interest in any Real
Property of Xxxxx Electrosurgical from the landlord of such facility and as may
be required by Sparta Xxxxx'x lender (including but not limited to, leasehold
mortgages, landlord's waivers and consent and estoppel letters).
5.2. Closing Deliverables of Sparta Xxxxx. Sparta Xxxxx shall have delivered to
Xxxxx Electrosurgical at or prior to the Closing, unless such deliveries are
waived by Xxxxx Electrosurgical Shareholders, the following:
(a) Purchase Shares. Stock certificates representing the ownership of each
of the Xxxxx Electrosurgical Shareholders in the number of Purchase Shares being
issued to each of them;
(b) Good Standing. (a) a certified copy of Sparta Xxxxx'x Certificate of
Incorporation, By-laws and all amendments thereto; and (b) a Certificate of
Valid Existence and Good Standing with respect to Sparta Xxxxx; and
(c) Corporate Resolutions. Resolutions for Sparta Xxxxx all certified as of
the date hereof by its duly authorized executive officers or directors as having
been duly and validly adopted and as being in full force and effect as of the
date hereof, authorizing the execution and delivery by Sparta Xxxxx of this
Agreement, the other agreements and instruments executed and delivered by Sparta
Xxxxx as provided herein, and the performance by Sparta Xxxxx of the
transactions contemplated hereby and thereby.
ARTICLE VI
GENERAL PROVISIONS
------------------
6.1. Survival of Representations and Warranties. The representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Closing for a period of one year from the Closing.
6.2 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally, faxed (with confirmation) or
three (3) days after deposit in the United States mail, if mailed by registered
or certified mail (return receipt requested) to the Parties at the following
addresses (or at such other address for a Party as shall be specified by like
notice):
(a) if to Sparta Xxxxx, to:
Xx. Xxxxxx X. Xxxxxx
Sparta Xxxxx Electrosurgical Corporation
President, CEO and Chairman of the Board
0000 Xxxx Xxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
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with a copy to:
Xxxx X. Xxxxxxxxxxx, Esq.
Pepe & Hazard, LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
(b) if to the Xxxxx Electrosurgical Shareholders or Xxxxx Electrosurgical,
to:
Xxxxx X. Xxxxxxx
-------------------------
-------------------------
-------------------------
with a copy to:
-------------------------
-------------------------
-------------------------
Xxxxxx X. Xxxxx
-------------------------
-------------------------
-------------------------
with a copy to:
-------------------------
-------------------------
-------------------------
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6.3. Interpretation.
(a) As used in this Agreement, any reference to any event, change or effect
being "material" with respect to any entity means an event, change or effect
which is material in relation to the businesses, assets, properties,
liabilities, results of operations, financial condition or prospects of such
entity, taken as a whole.
(b) When a reference is made in this Agreement to an Article, Section,
Exhibit or Schedule, such reference shall be to an Article, Section of, or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof'," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined herein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
6.4 Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the Parties
and delivered to the other Parties.
6.5. Entire Agreement; No Third-Party Beneficiaries. This Agreement (including
the documents and the instruments referred to herein), and any other agreement
and understanding among the Parties entered into contemporaneously herewith,
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the Parties with respect to the
subject matter hereof. If any provisions of this Agreement shall be invalid or
unenforceable to any extent or in any application, then the remainder of this
Agreement and such term and condition, except to such extent or in such
application, shall not be affected thereby, and each and every term and
condition of this Agreement shall be valid and enforced to the fullest extent
and in the broadest application permitted by law.
6.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to any
applicable principles of conflicts of law. All Parties agree that any disputes
hereunder shall be resolved and determined by the courts of the State of
California, and hereby submit to the jurisdiction thereof for any dispute
arising hereunder or for the enforcement of any provision hereof.
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6.7. Limitations on Remedies. Each Party agrees that, should any court or other
competent authority hold any provision of this Agreement or part hereof or
thereof to be null, void or unenforceable, or order any Party to take any action
inconsistent herewith or not to take any action required herein, the other Party
shall not be entitled to specific performance of such provision or part hereof
or thereof or to any other remedy, including money damages, for breach hereof or
thereof or of any other provision of this Agreement or part hereof or thereof as
a result of such holding or order. This provision is not intended to render null
or unenforceable any obligation hereunder that would be valid and enforceable if
this provision were not in this Agreement.
6.8 Indemnification.
(a) Indemnification by Xxxxx Electrosurgical Shareholders. From and after
the Closing the Xxxxx Electrosurgical Shareholders and Xxxxx Electrosurgical (if
it is still in existence) jointly and severally agree to indemnify and hold
harmless Sparta Xxxxx, Sparta, and the respective officers, directors, and
shareholders of each, against any and all loss, cost, liability, claim, damage,
deficiency, and expense whatsoever, including without limitation legal fees and
disbursements, ("Damage") arising out of or resulting from:
(i) any misrepresentation, omission, breach of a representation or
warranty, or non-fulfillment of any covenant on the part of Xxxxx
Electrosurgical Shareholders or Xxxxx Electrosurgical under this Agreement or in
any schedule, certificate or other instrument furnished to Sparta Xxxxx
hereunder or any other agreement entered into in connection with Xxxxx
Electrosurgical Shareholders' and Xxxxx Electrosurgical's consummating the
transactions contemplated by this Agreement;
(ii) any liabilities arising from events occurring prior to the
Closing which have not been disclosed to Sparta Xxxxx and which have not arisen
as the result of any act or omission attributable to Sparta Xxxxx, including but
not limited to any tax assessments, uninsured liabilities or breach of contract;
and
(iii) any brokers' or finders' fees.
(b) Sparta Xxxxx'x Procedure.
(i) Should any claim be made against a Party for which indemnification
is provided for in Section 6.8 (a) by a person not a party to this Agreement
with respect to any matter to which the indemnity under Section 6.8 (a) relates,
Sparta Xxxxx shall promptly give the Xxxxx Electrosurgical Shareholders and
Xxxxx Electrosurgical (if it is still in existence) written notice of any such
claim, and the Xxxxx Electrosurgical Shareholders and/or Xxxxx Electrosurgical
shall thereafter defend or settle any such claim, at their sole expense, on
their own behalf and with counsel of their own choosing. In such defense or
settlement of any claim, Sparta Xxxxx shall cooperate with and assist the Xxxxx
Electrosurgical Shareholders and Xxxxx Electrosurgical (if it is still in
existence) to the maximum extent reasonably possible and may participate therein
with its own counsel. Anything herein to the contrary notwithstanding, in no
event shall Sparta Xxxxx be required to consent to a non-monetary term or
condition to such settlement as a condition to indemnification hereunder. Any
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payment resulting from such defense or settlement, together with the total
expense thereof, shall be binding on the Xxxxx Electrosurgical Shareholders and
Xxxxx Electrosurgical (if it is still in existence). Failure to give notice
within a reasonable period of time shall not constitute a defense, in whole or
in part, to any claim for indemnification by Sparta Xxxxx, except and only to
the extent that such failure by Sparta Xxxxx or shall result in a material
prejudice to the Xxxxx Electrosurgical Shareholders and Xxxxx Electrosurgical
(if it is still in existence). Notwithstanding the foregoing, Sparta Xxxxx may,
after not less than thirty (30) days written notice to the Xxxxx Electrosurgical
Shareholders, make settlement of such claim, and such settlement shall be
binding on all such parties for purposes of this Section 6.8 (b); however, if
within said thirty (30) day period the Xxxxx Electrosurgical Shareholders shall
have requested Sparta Xxxxx not to settle such claim and to deny such claim at
the expense of the Xxxxx Electrosurgical Shareholders, Sparta Xxxxx shall comply
with such request provided that (i) the Xxxxx Electrosurgical Shareholders shall
diligently defend such claim as provided above and (ii) in Sparta Xxxxx'x
reasonable judgment failure to settle the same will not have a material or
adverse affect on the conduct of the business of Sparta Xxxxx in the normal
course. Any payment resulting from such defense, together with the total expense
thereof, shall be binding on all parties, for the purposes of this Section 6.8
(b). Failure to give notice within a reasonable period of time shall not
constitute a defense, in whole or in part, to any claim for indemnification by
Sparta Xxxxx, except only to the extent that such failure by Sparta Xxxxx shall
result in a material prejudice to the Xxxxx Electrosurgical Shareholders.
In the event any payment is required to be made by Xxxxx Electrosurgical
Shareholders resulting from any Damage pursuant to Section 6.8(a), Sparta shall,
in addition to any other remedies, have the right to offset the amount of any
such Damages against any amount which may be owing to either of the Xxxxx
Electrosurgical Shareholders under any agreement entered into pursuant to this
Agreement or otherwise.
(c) Remedies Cumulative. Except as herein expressly provided, the remedies
provided herein shall be cumulative and shall not preclude the assertion by one
Party of any other rights or the seeking of any other remedies against the other
Party.
(d) Indemnification by Sparta Xxxxx. Sparta Xxxxx shall indemnify the Xxxxx
Electrosurgical Shareholders and hold the Xxxxx Electrosurgical Shareholders
harmless at all times after the Closing against and in respect of any of the
following:
(i) any and all liabilities and obligations of Sparta Xxxxx arising
after the Closing except to the extent that the same may have been caused by
circumstances existing prior to the Closing;
(ii) any and all Damages resulting from any misrepresentation,
omission, breach of representation or warranty, or non-fulfillment of any
covenant on the part of Sparta Xxxxx under this Agreement or any schedule to
this Agreement or in any certificate or other instrument furnished to the Xxxxx
Electrosurgical Shareholders hereunder or any other agreement entered into in
connection with Sparta Xxxxx consummating the transactions contemplated by this
Agreement;
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(iii) any and all Damages to the extent arising after the Closing as a
result of any change in product line, the carrying on of Xxxxx Electrosurgical's
business by Sparta Xxxxx, or the termination, modification or alteration of any
relationship with any employees, distributors, agents or other independent
contractors formerly of Xxxxx Electrosurgical; and
(iv) all demands, assessments, judgments, costs and legal and other
expenses arising from or in connection with any action, suit, proceeding or
claim incident to any of the foregoing.
(e) Xxxxx Electrosurgical's Procedures. Should any claim be made against a
Party for which indemnification is provided for in Section 6.8 (d) by a person
not a party to this Agreement with respect to any matter to which the indemnity
under Section 6.8 (d) relates, the Xxxxx Electrosurgical Shareholders shall
promptly give Sparta Xxxxx written notice of any such claim, and Sparta Xxxxx
shall thereafter defend or settle any such claim, at its sole expense, on its
own behalf and with counsel of its own choosing. In such defense or settlement,
the Xxxxx Electrosurgical Shareholders shall cooperate with and assist Sparta
Xxxxx and the Xxxxx Electrosurgical Shareholders may participate therein to the
maximum extent reasonably possible with its own counsel. Any payment resulting
from such defense or settlement, together with the total expense thereof, shall
be binding on Sparta Xxxxx. Failure to give notice shall not constitute a
defense in whole or in part, to any claim by the Xxxxx Electrosurgical
Shareholders except and only to the extent that such failure by the Xxxxx
Electrosurgical shall result in prejudice to Sparta Xxxxx.
6.9. Publicity. Except as otherwise required by law, so long as this Agreement
is in effect, neither the Xxxxx Electrosurgical Shareholders, Xxxxx
Electrosurgical, nor Sparta Xxxxx shall, issue or cause the publication of any
press release or other public announcement with respect to this Agreement or the
transactions contemplated hereby without the consent of the other Parties, which
consent shall not be unreasonably withheld, except where such release or
announcement is required by applicable law, provided that the other Party is
notified as to the content of such release or announcement as far in advance of
the publication thereof as is reasonably possible. Xxxxx Electrosurgical and the
Xxxxx Electrosurgical Shareholders acknowledge that as a public company Sparta
has certain disclosure obligations and hereby consent to the issuance of such
press releases or other disclosure as Sparta deems necessary.
6.10. No Trading in Securities. Except as contemplated by this Agreement, the
Xxxxx Electrosurgical Shareholders shall not purchase or sell, or otherwise
trade or refrain from trading, securities of Sparta so long as this Agreement
and the Merger remain non-public information (or otherwise act as a tippee of
such information to a person or chain of persons who subsequently purchase or
sell, or otherwise trade or refrain from trading Sparta's securities).
6.11. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned, in whole or in part, by either the
Xxxxx Electrosurgical Shareholders or Xxxxx Electrosurgical, on the one hand, or
by Sparta Xxxxx, on the other hand (whether by operation of law or otherwise)
without the prior written consent of the Xxxxx Electrosurgical Shareholders in
the case of such action by Sparta Xxxxx or by Sparta Xxxxx in the case of such
action by either the Xxxxx Electrosurgical Shareholders or Xxxxx
Electrosurgical, and any such assignment that is not so consented to shall be
null and void. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the Parties and their
respective successors and assigns.
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6.12. Exclusive Dealing. Neither Xxxxx Electrosurgical nor any officer,
director, employee or agent of Xxxxx Electrosurgical shall negotiate with or
entertain any other bid, proposal or offer from any other party for the sale of
the assets or stock of Xxxxx Electrosurgical or the merger of Xxxxx
Electrosurgical into any other entity between the date of this Agreement and the
Closing.
6.13. Brokerage Fees. Xxxxx Electrosurgical and the Xxxxx Electrosurgical
Shareholders will indemnify and hold Sparta Xxxxx harmless against any claims
for brokers' or finders' fees or compensation in connection with the transaction
herein provided for by any person, firm or corporation claiming a right to same
because of having been (or claiming to have been) engaged by or having served
the Xxxxx Electrosurgical Shareholders, Xxxxx Electrosurgical or Sparta Xxxxx.
Without limiting the foregoing, the Xxxxx Electrosurgical Shareholders shall be
responsible for all fees owing to their broker (including brokerage fees) and
neither Sparta nor Sparta Xxxxx shall assume responsibility for any such
payments.
6.14. Tax Reporting. The Parties hereto agree and acknowledge that the
determination of the price for each of the shares being sold by The Xxxxx
Electrosurgical Shareholders to Sparta Xxxxx, and for the Sparta Shares and the
Notes being transferred from Sparta Xxxxx to The Xxxxx Electrosurgical
Shareholders as set forth in this Agreement, is the result of arms-length
negotiations between the Parties. The Parties further agree that each Party
shall be responsible for the payment of its own taxes (whether local, regional,
or country), if any, resulting from the purchase and sale of the Shares
hereunder.
6.15. Expenses. Except as otherwise provided in this Agreement, the Xxxxx
Electrosurgical Shareholders shall bear all expenses incurred on their behalf or
on behalf of Xxxxx Electrosurgical in connection with the preparation,
execution, filing and performance of this Agreement and the transactions
contemplated hereby, including all fees and expenses of their agents,
representatives, counsel and accountants; and Sparta Xxxxx shall bear all
expenses of such nature incurred in its own behalf.
6.16. Further Assurances. The Xxxxx Electrosurgical Shareholders and Xxxxx
Electrosurgical agree that they will, without further consideration, from time
to time hereafter, and at their own expense, execute and deliver such other
documents, and take such other action, as may reasonably be requested in order
to more effectively consummate the transactions contemplated hereby, and confirm
and assure to Sparta Xxxxx title to the Xxxxx Electrosurgical Shares being
transferred hereunder.
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IN WITNESS WHEREOF, the respective Parties have executed this Agreement all
as of the date first above written.
XXXXX ELECTRO-SURGICAL SPARTA XXXXX ELECTROSURGICAL, INC.
INSTRUMENTS, INC. D/B/A
XXXXX ELECTROSURGICAL, INC.
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxx
------------------------------- -------------------------------
Xxxxx X. Xxxxxxx, President and CEO Xxxxxx X. Xxxxxx, President and CEO
XXXXX ELECTROSURGICAL SHAREHOLDERS:
XXXXXX X. XXXXX TRUST
/s/ Xxxxxx X. Xxxxx /s/ Xxxxx X. Xxxxxxx
---------------------------------- -----------------------------------
Xxxxxx X. Xxxxx, Settlor Xxxxx X. Xxxxxxx, Individually
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