SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
Pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 7, 1995
SPARTA SURGICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-11047 22-2870438
(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) ID. Number)
Bernal Corporate Park
7068 Koll Center Parkway, Pleasanton, CA 94566
(Address of principal executive offices)
Registrant's telephone number, including area code (510)417-8812
not applicable
(Former name or former address, if changed since last report)
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ITEM 2. DISPOSITION OF ASSETS
On December 7, 1995, the Registrant sold its impregnated wound care gauze
dressings product line to Tecnol Medical Products, Inc., a medical products
manufacturer headquartered in Fort Worth, Texas (the "Tecnol Sale"). The
purchase price was $5,675,000, of which approximately $5,000,000 was paid in
cash, with the balance being paid primarily in the form of a promissory note
bearing interest at the prime rate and due in September 1997 upon certain
conditions being met. In addition to wound care inventory, equipment and other
assets, the Registrant's operations in Hammonton, New Jersey were included in
the sale.
ITEM 5. OTHER EVENTS
The Registrant has used or will use the cash proceeds of the Tecnol Sale to
repay most of its outstanding debt including (i) $2,282,505 owed to Congress
Financial Corporation under a revolving credit facility; (ii) $111,602 owed for
the purchase of certain manufacturing equipment which was subject to a lease;
(iii) $469,710 owed to Asset Factoring, Inc., consisting of the principal due on
certain promissory note plus accrued interest; (iv) $600,000 owed to Storz
Instrument Company relating to a $1,050,000 note payable in connection with the
Registrant's acquisition of certain assets of Storz' Oral Maxillofacial product
line; and (v) $1,000,000 owed to Arbora, A.G. ("Arbora") as principal
consideration to redeem 4,761,842 shares of the Registrant's common stock, which
were issued to Arbora on December 4, 1995 as a result of the conversion of a
$1,000,000 note into equity pursuant to an agreement reached between it and the
Registrant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information.
It is impracticable to provide the required financial statements at
the time this report is filed, the required financial statements will
be filed by February 19, 1996.
(c) Exhibits:
10.75 Asset Purchase Agreement dated December 7, 1995 between the
Registrant and Tecnol Medical Products, Inc.
10.76 Restructuring of Loan and Warrants Agreement dated December 1,
1995 between the Registrant and Arbora A.G.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPARTA SURGICAL CORPORATION
(Registrant)
By: /s/ Thomas F. Reiner
Thomas F. Reiner, Chairman of
the Board, President & CEO
Dated: December 21, 1995
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SECURITIES AND EXCHANGE COMMISSION
EXHIBITS
TO
FORM 8-K
DATED DECEMBER 7, 1995
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EXHIBIT 10.75
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ASSET PURCHASE AGREEMENT
BETWEEN
TECNOL NEW JERSEY WOUND CARE, INC.
AND
SPARTA SURGICAL CORPORATION
DATED
December 7, 1995
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TABLE OF CONTENTS
ARTICLE 1 - SALE OF ASSETS................................................... 1
1.1 Sale of Assets............................................. 1
1.2 Consideration and Payment for Assets....................... 5
1.3 Inventory.................................................. 9
1.4 Allocation of Consideration................................ 10
1.5 Seller's Liabilities....................................... 10
1.6 Closing.................................................... 11
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF SELLER......................... 12
2.1 Organization, Standing, etc. of Seller..................... 12
2.2 Authority, Binding Effect.................................. 12
2.3 Compliance with Other Instruments and Laws, etc............ 12
2.4 Legal Proceedings.......................................... 13
2.5 Title to and Condition and Location of Assets.............. 13
2.6 Insurance.................................................. 14
2.7 Intellectual Property...................................... 14
2.8 Conflicting Purchase Agreements............................ 14
2.9 Taxes...................................................... 14
2.10 Inventory.................................................. 15
2.11 Contracts, Leases and Commitments.......................... 15
2.12 Seller's Brokers, Finders.................................. 18
2.13 Product Warranties and Returns............................. 18
2.14 Prepayments and Deposits................................... 18
2.15 Operating and Financial Information........................ 19
2.16 Books and Records.......................................... 19
2.17 Accounts Receivable........................................ 20
2.18 Employee Relations......................................... 20
2.19 Environmental Compliance................................... 20
2.20 Disclosure................................................. 22
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF BUYER.......................... 22
3.1 Organization, Standing, etc. of Buyer...................... 22
3.2 Authority, Binding Effect.................................. 23
3.3 Compliance with Other Instruments and Laws, etc............ 23
3.4 Legal Proceedings.......................................... 23
3.5 Buyer's Brokers, Finders................................... 23
3.6 Disclosure................................................. 24
ARTICLE 4 - COVENANTS AND AGREEMENTS......................................... 24
4.1 Corporate Approval......................................... 24
4.2 Further Assurances......................................... 24
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4.3 Press Releases............................................. 24
4.4 Conflicting Agreements..................................... 24
4.5 Employee Matters........................................... 24
4.6 Wilshire Account Receivable................................ 25
4.7 Transition Period.......................................... 25
4.8 Transitional Manufacturing................................. 26
4.9 Returns and Rebates........................................ 27
4.10 Environmental Matters...................................... 28
ARTICLE 5 - CLOSING DELIVERIES OF SELLER..................................... 30
5.1 Closing Deliveries......................................... 30
ARTICLE 6 - CLOSING DELIVERIES OF BUYER...................................... 31
6.1 Closing Deliveries......................................... 31
ARTICLE 7 - INDEMNIFICATION.................................................. 31
7.1 Indemnification............................................ 31
7.2 Defense of Claims.......................................... 33
7.3 Cooperation and Assistance................................. 33
7.4 Arbitration................................................ 33
........................................................... 35
ARTICLE 8 - RESTRICTIVE COVENANTS............................................ 35
8.1 Noncompetition Covenants................................... 35
8.2 Nonsolicitation and Confidentiality Covenants.............. 35
8.3 Injunctive Relief.......................................... 35
8.4 Violations................................................. 36
8.5 Interpretation............................................. 36
ARTICLE 9 - MISCELLANEOUS.................................................... 36
9.1 Waiver..................................................... 36
9.2 Amendment.................................................. 37
9.3 No Third Party Beneficiaries............................... 37
9.4 Reasonable Efforts......................................... 37
9.5 Expenses................................................... 37
9.6 Notices.................................................... 37
9.7 Successors; Survival....................................... 37
9.8 Counterparts............................................... 38
9.9 Governing Law.............................................. 38
9.10 Headings................................................... 38
9.11 Entire Agreement........................................... 38
9.12 Misdirected Communications and Payments.................... 38
9.13 Schedules.................................................. 38
9.14 Confidentiality of Non-Business Information................ 38
ii
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SCHEDULES AND EXHIBITS
Schedules:
1.1(a) Excluded Assets
1.1(a)(i) Equipment
1.1(a)(xiv) Chemicals to be purchased
1.1(c)1 Purchase Orders
1.1(c)2 Certain Assumed Contracts
1.1(c)3 Kendall Products
1.3(a) Cost Sheets
1.3(b) Unusable and not readily useable inventories
1.3(c) Slow moving inventories
1.4 Allocation of consideration
2.3(a) Consents
2.3(b) Compliance with laws, etc.
2.4 Legal Proceedings
2.6 Insurance
2.7 Intellectual Property
2.8 Conflicting Purchase Agreements
2.10 Inventory manufactured by third parties
2.11 Contracts, leases and commitments
2.13 Product Warranties and Returns
2.14 Prepayments and Deposits
2.15 Operating and Financial Information
2.18 Employee Claims
2.19 Permits, Licenses and Other Environmental Authorizations
4.8 Transitional Manufacturing Products
iii
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Exhibits:
Exhibit A - Purchase Order
Exhibit B - Seller's Form of Legal Opinion
Exhibit C - Affidavits of Reiner, Veazey and Barbrie
Exhibit D - Transfer Documents
Exhibit E - Real Property Sublease
Exhibit F - Noncompetition Agreement - Thomas Reiner
Exhibit G - Noncompetition Agreement - Joseph Barbrie
Exhibit H - Noncompetition Agreement - Samuel Veazey
Exhibit I - Kramer Letter
Exhibit J - Remediation Agreement
Exhibit K - Assignment and Assumption Agreement
Exhibit L - Buyer's Form of Legal Opinion
iv
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made effective as of the
7th day of December, 1995 by and between Tecnol New Jersey Wound Care, Inc., a
New Jersey Corporation ("Buyer"), and Sparta Surgical Corporation ("Seller").
The following recitals are true and constitute the basis of this
Agreement:
A. Seller is engaged in the business of manufacturing, marketing, and
selling impregnated gauze wound care dressings such as non-adherent dressings,
wet dressings and nasal and sinus packing strips and hydrogel dressings under
private labels to OEM customers and to independent distributors under the trade
name "Sparta," among others (such operations and activities of Seller called the
"Business" and such products as are manufactured and/or marketed and sold by
Seller in the Business collectively called the "Products");
B. Buyer desires to acquire the Business and all of the operating
assets used or held for use by Seller in conducting the Business;
C. Seller desires that Seller sell such Business and operating assets
to Buyer upon the terms and conditions of this Agreement;
D. Thomas Reiner is the Chairman, President, co-founder and a
significant shareholder of the Seller and has been, and continues to be, key to
the development and success of the Business. Samuel Veazey and Joseph Barbrie,
both executive officers of the Seller, are also security holders of the Seller
and are integrally involved in executive management and operation of the
Business.
NOW, THEREFORE, for and in consideration of the terms and conditions
set forth herein, the parties agree as follows:
ARTICLE 1
SALE OF ASSETS.
1.1 Sale of Assets.
(a) Seller agrees that, except: (i) for the assets described on
Schedule 1.1(a) hereto and (ii) the assets located in Pleasanton, California
which are not predominantly used or held for use in the Business (such assets in
clauses (i) and (ii) above called the "Excluded Assets"), Seller shall sell,
transfer, assign, convey and deliver to Buyer, forthe consideration and upon the
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other terms and conditions herein provided, all of the assets (including
leasehold and other interests in assets) used or held for use in the Business
operated as a going concern (the "Assets"), including without limitation, the
following (except to the extent that they constitute Excluded Assets):
(i) all manufacturing, product assembly, and other equipment
listed on Schedule 1.1(a)(i) (the "Equipment");
(ii) all of the raw materials, work-in-process, and finished
goods inventory and all stocks of packaging materials, preprinted
labels, instruction sheets and warranty cards, that are held for sale
or used in the manufacture, distribution or sale of Products or in
operation of the Business (the "Inventory");
(iii) all customer lists and customer records and all lead and
prospect lead lists and related customer information used in
connection with the Business;
(iv) (a) all trademarks, trademark rights and licenses, trade
names, tradedress, service marks, service names and copyrights and all
registrations thereof and pending applications for registration
thereof in the United States, any state and any foreign country
exclusively used or held for use in the Business (other than those
described in Section 1.1(d)), and the rights granted pursuant to the
license granted in Section 1.1(d), and (b) all products, concepts,
inventions, patents, and applications for patents filed or owned by
Seller, potential product licenses, confidential technical and
business information (including without limitation any rights of
Seller in, or rights to purchase, the blueprints for the pleater
machine, which blueprints Seller presently does not possess, designs,
plans, operating manuals, specifications, formulas, processes,
methods, shop rights and know-how) and all other intellectual
property, in each case to the extent used or held for use by Seller in
the Business (collectively called the "Intellectual Property");
(v) all of Seller's rights under all licenses, permits and
certifications and all of Seller's rights under any non-disclosure,
confidentiality and/or non-competition agreements in favor of Seller;
(vi) all goodwill of Seller;
(vii) all records (including electronically stored records)
directly relating to the Business including, without limitation, the
records described in Section 2.16, all Product research and
effectiveness testing results, market and products, studies and
records, purchasing information, production reports, waste reports,
bills of materials, cost sheets, product specifications, environmental
assessments, investigations and studies respecting Seller's business
premises in Hammonton, New Jersey, and manufacturing processes, U.S.
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Food and Drug Administration files and required forms and records,
device history records, internal audit results, raw material
specifications, and financial and accounting records, provided that
Seller shall be entitled to retain copies of all such records in an
electronic media and paper format;
(viii) all claims, causes of action, demands, judgments, and
rights of Seller against third parties relating to title to, or
representations, warranties or contracts rights relating specifically
to any of the Assets (and not to Seller generally);
(ix) all promotional, advertising, and marketing materials,
brochures, catalogs, Products and Products-related literature,
original art work and photographs, separations, and other materials
used in the manufacture, distribution or sale of the Products;
(x) all prepaid convention booth space and related convention
airfare and hotel expenses for exhibition of the Products at
convention(s);
(xi) all of Seller's right, title and interest, if any, in and to
the following telephone and telecopy numbers: 609-567-0712
(telephone); 609-567-1541 (telecopy);
(xii) all spare parts, templates, patterns, shop supplies, dies,
molds, trade fixtures and tools;
(xiii) all prepaid deposits; and
(xiv) all chemicals identified on Schedule 1.1(a)(xiv).
(b) The Assets shall be transferred to Buyer free and clear of all
title defects, liens, security interests, charges, encumbrances, and conditional
sale and title retention agreements (except for liens relating to the executory
portion of the Assumed Contracts, the Purchase Orders, and the Sales Orders,
each as defined below, and for the lien for property taxes on the tangible
Assets which are not yet due and payable) by appropriate instruments of
conveyance in form consistent with the representations and warranties contained
in this Agreement and otherwise reasonably satisfactory to Buyer.
(c) Seller shall assign to Buyer at Closing (as defined below) all of
Seller's rights, and Buyer shall assume all of Seller's obligations, arising
from and after the Closing Date, under all of the sales and customer orders for
the purchase of Products that are outstanding and unfilled as of the Closing
Date except as provided below (the "Sales Orders"), any orders to purchase
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supplies or raw materials used in manufacturing the Products that are
outstanding as of the Closing Date and are reflected on Schedule 1.1(c)1 hereto
(the "Purchase Orders"), and all computer, telecommunication and equipment
leases), and distributorship, pricing, OEM, royalty and licensing, and joint
product development agreements to the extent reasonably relating to the
Business, and/or any other agreements not referenced hereinabove in this
subsection predominantly relating to the Business listed on Schedule 1.1(c)2
hereto that Buyer elects to assume in a writing delivered to Seller at Closing
(the "Assumed Contracts"). The parties acknowledge that Seller is not assigning
to Buyer at Closing Seller's rights under, nor is Buyer assuming Seller's
obligations under, that certain Exclusive Private Labeling Agreement between
Seller and Kendall Healthcare Products Company, a division of The Kendall
Company ("Kendall") dated January 1, 1995 (the "Kendall Contract"). However,
Seller agrees that if so requested in writing by Buyer at any time after
Closing, Seller will immediately assign the Kendall Contract (without liability
for the effectiveness of such purported assignment) to Buyer by written
assignment in form reasonably satisfactory to Buyer provided Buyer
simultaneously assumes in writing the obligations of Seller arising under the
Kendall Contract from and after the date of the assignment, the form of such
assumption to be reasonably satisfactory to Seller. Unless otherwise mutually
agreed by Buyer and Seller in writing, whether or not the Kendall Contract is
assigned to or assumed by Buyer, Seller shall remain solely responsible for the
performance of its obligations under the Kendall Contract and liable for any
defaults thereunder except to the extent of any obligations Buyer expressly
assumes in writing in connection with an assignment of the Kendall Contract
after Closing. Buyer agrees that, as an accommodation to Seller in order to
mitigate damages Seller might owe for defaulting under the Kendall Contract,
Buyer will offer to sell to Kendall the products identified on Schedule 1.1(c)3
hereto (the "Kendall Products") at any time between Closing and the earlier of
(a) June 30, 2000, and (b) the date of termination of the Kendall Contract (the
"Kendall Contract Term"), to Kendall at prices no higher than prices permitted
for such Kendall Products under the Kendall Contract. The current prices for the
Kendall Products, which prices are subject to adjustment under the Kendall
Contract, are reflected on Schedule 1.1(c)3 hereto. To the extent Kendall
declines to purchase any Kendall Products from Buyer as contemplated by the
preceding sentence, and Kendall instead demands of Seller performance by Seller
under the Kendall Contract, then Buyer shall sell such Kendall Products to
Seller and Seller shall resell to Kendall, in both cases at the price specified
in the Kendall Contract so that Seller can comply with the Kendall Contract. The
parties agree that unless Kendall objects, Buyer will sell to Kendall all
Products ordered by Kendall from Seller prior to Closing but not shipped by
Seller as of Closing at the same price reflected in Seller's customer purchase
orders for such Products and Seller agrees it will not fulfill such customer
purchase orders.
(d) Notwithstanding Section 1.1(a)(iv), for a period of two (2) years
following the Closing Date, Seller hereby grants to Buyer a limited,
non-exclusive, non-transferable license and right to use the names "Sparta",
(and, to the extent necessary for the use of existing packaging, promotional and
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marketing supplies only, the names "Sparta Surgical", and "Sparta Surgical
Corporation") and Seller's tradedress and logos in connection with Buyer's sale
of wound care products. Buyer shall also have the right during such period to
use the packaging layout, format and style currently used by Seller in marketing
the Products. Seller agrees that for seven (7) years from and after Closing it
will neither use nor authorize any person other than Buyer to use the name
"Sparta" as a trademark for impregnated gauze wound care dressings; but this
shall not imply any obligation or duty of Seller to prosecute third party users
or infringers of such name.
1.2 Consideration and Payment for Assets.
(a) As consideration for the Assets and the noncompetition covenants of
Seller and Thomas Reiner, Samuel Veazey and Joseph Barbrie under this Agreement,
Buyer shall pay the Seller $5,675,000, subject to agreed-upon adjustments,
holdbacks and credits of $3,808.64, payable as follows:
(i) Cash in the amount of $4,902,206.87 payable to Seller at
Closing;
(ii) Cash in the amount of $111,601.77 to be paid to Tetra Laval
Credit, Inc. to discharge that certain Tetra Alfa Credit, Inc. Lease
Agreement No. 1048-92 dated June 20, 1992, amended November 16, 1992,
and to acquire the equipment subject thereto; and
(iii) The amount due and payable under a Promissory Note (herein
so called) in the principal amount of $665,000.00 less adjustments
provided for therein, payable by Buyer to Seller, dated as of the date
hereof, and incorporated herein by reference.
(b) Certain Note Provisions. The following provisions relate to the
Promissory Note:
(i) The parties recognize that one of the aspects of Buyer's
acquisition of the Business that is most important to Buyer is the
prospect of furthering and enhancing Buyer's business relationship
with Kendall and providing Buyer with an opportunity to sell the
Kendall Products to Kendall. The parties recognize that there are no
assurances these goals will be achieved and that, accordingly, the
consideration Buyer is willing to pay to Seller for the Assets and
non-competition covenants provided for hereunder is dependent in part
on the success of these goals measured solely as hereinbelow provided.
Accordingly, Buyer and Seller agree that the "Kendall Discount Amount"
shall be the following:
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(A) If the dollar amount payable by Kendall under all
Kendall Purchase Orders (as defined below) equals or exceeds $3.4
million, then the Kendall Discount Amount shall be zero.
(B) If the dollar amount payable by Kendall under all
Kendall Purchase Orders is $3 million or less then the Kendall
Discount Amount will be equal to the original face amount of the
Promissory Note. Accordingly, in such event, no payment of
principal or interest shall be required under the Promissory
Note; but Seller in no event shall be liable for any payment to
Buyer on account of the Kendall Discount Amount, regardless of
whether any portion of the Promissory Note then remains
outstanding, and regardless of any offsets, adjustments, or other
reductions of the Promissory Note. Buyer shall look solely and
exclusively to the Promissory Note, if any, to the extent it then
exists, for compensation for the Kendall Discount Amount, and in
no event shall look to Seller for any sum with respect thereto.
(C) If the dollar amount payable by Kendall under all
Kendall Purchase Orders is greater than $3 million but less than
$3.4 million, then the Kendall Discount Amount shall equal the
"Applicable Percentage" as defined below, multiplied by the
original face amount of the Promissory Note.
The "Applicable Percentage" is the percentage that equals 60%
minus 1% for each increment of $6,666.67 that is payable by Kendall
under all Kendall Purchase Orders combined in excess of the first $3
million of Kendall Purchase Orders up to a maximum of $3.4 million of
Kendall Purchase Orders, such that the Applicable Percentage is 60% if
the Kendall Purchase Orders total $3 million and the Applicable
Percentage is reduced to 0% if the Kendall Purchase Orders is $3.4
million or more.
The term "Kendall Purchase Orders" means and is limited to only
(1) those binding and noncancellable purchase orders for Kendall
Products (and no other Products) that specify delivery on or prior to
September 30, 1997 that are submitted by Kendall to Seller prior to
Closing, and which are outstanding and unshipped as of the date of
Closing and which Kendall permits Buyer to fulfill or which Seller
fulfills through purchases from Buyer pursuant to the provisions of
Section 1.1(c) hereof; plus (2) those binding and noncancellable
orders for Kendall Products (and no other Products) that specify
delivery on or prior to September 30, 1997 that are submitted by
Kendall to Buyer after Closing but prior to July 1, 1997. Amounts
payable by Kendall under the Kendall Purchase Orders for purposes of
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this Agreement and the Promissory Note include and are limited solely
to the price payable by Kendall for Kendall Products under Kendall
Purchase Orders, net of use and sales taxes, freight, and handling
charges.
Beginning with the Buyer's fiscal quarter ending about February
28, 1996, Buyer agrees to provide Seller with a quarterly report for
each quarter during the Kendall Contract Term through May 31, 1997 (or
the date of the Final Report, as defined below, if earlier),
indicating the amount of Kendall Purchase Orders outstanding at the
end of the subject quarter and a cumulative total of Kendall Purchase
Orders, together with a copy of the Kendall Purchase Orders submitted
to Buyer during such quarter. Such quarterly report shall be submitted
within thirty (30) days after the end of the quarter to which the
report relates. Buyer shall deliver to Seller a report similar to a
quarterly report covering the month of June, 1997, on or before July
31, 1997. Such report or any early quarterly report that reflects that
the total of all Kendall Purchase Orders exceeds $3.4 million is
referred to herein as the Final Report. The Final Report shall be
accompanied by a statement by Buyer as to the amount, if any, of the
Kendall Discount Amount, and, if and to the extent the Promissory Note
is then due and payable and unpaid, a check in payment of such
Promissory Note in the amount due thereunder. Unless Seller gives
Buyer written notice that Seller disputes Buyer's determination and/or
demand as reflected in the Final Report or desires to inspect Buyer's
relevant records as hereinbelow permitted (such a notice called a
"Dispute Notice"), Buyer's determination and demand as reflected in
the Final Report shall be final, binding and conclusive and in such
event the date of the Final Report shall be deemed to be the
"Determination Date". If Buyer gives Seller a Dispute Notice then the
final determination of the Kendall Discount Amount shall be made
either by the mutual written agreement of Buyer and Seller (in which
case the date of such agreement shall be the "Determination Date") or
pursuant to a final award or judgment of an arbitration board or court
of competent jurisdiction after expiration of all rights of appeal (in
which case the date that is ten (10) business days after the date of
such award or judgment shall be the "Determination Date"). After
Closing until the Determination Date, Seller shall have the right,
exercisable where Buyer's financial and customer order records are
regularly maintained during Buyer's normal business hours, to inspect
and copy, at Seller's expense, the original copies of such Kendall
Purchase Orders and any relevant correspondence or other business or
financial records of Buyer pertaining to Buyer's sale of Kendall
Products during the Kendall Contract Term.
The Kendall Discount Amount is intended to operate independently
of, and shall not affect or diminish Seller's liability for breach of
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any representation, warranty or covenant under this Agreement,
including, without limitation, Section 2.11(e) hereof or the affiants'
respective liability under the three affidavits annexed as Exhibit C
hereto, for misrepresentation thereof except to the extent that the
application of the Kendall Discount Amount may mitigate damages with
respect thereto.
(ii) Notwithstanding any provision to the contrary in the
Promissory Note or any other document or instrument between the
parties, the Buyer shall have the right in its discretion, by written
notice to offset the following amounts from and against, and to reduce
any and all amounts it owes or may owe under the Promissory Note, and
thereby reduce the amount of principal and interest it may owe under
the Promissory Note, to be applied first to any outstanding interest
accrued thereon, and then to the principal amount thereof:
(A) Any amounts that the Seller is obligated to pay to the
Buyer and its assigns pursuant to the terms of the
indemnification provisions contained in Article 7 of this
Agreement, but only if either (i) Buyer and Seller mutually agree
or (ii) an order, award or judgment of an arbitration board or
court of competent jurisdiction then has been issued adjudicating
Buyer's right to such indemnification. If any such order, award
or judgment has not yet become final and non-appealable then
Buyer may claim an offset in the amount thereof, but if, on
appeal, and following the expiration of any further rights of
appeal, Buyer is determined not to be entitled to all or the full
amount claimed as an offset, Buyer shall remain liable on the
Promissory Note (including all interest thereon through the date
of payment, notwithstanding any earlier due date of the
Promissory Note) for the disallowed portion of the claimed offset
to the extent Buyer would otherwise be liable on the Promissory
Note if the claimed offset had not been made; and
(B) If an "Environmental Claim," as defined below, is or has
been asserted by Buyer against Seller prior to or as of the date
on which the Promissory Note becomes due and payable, and remains
unpaid by Seller as of such date, then Buyer may make a
reasonable estimation of the out-of-pocket "Losses" as defined in
Section 7.1 hereof it has incurred and expects to incur in the
future in connection with the subject matter that forms the basis
of such "Environmental Claim" and Buyer may claim an offset in
the amount of such Losses against the Promissory Note. If the
actual amount of all Losses incurred by Buyer in connection with
such Environmental Claim is ultimately determined through mutual
agreement by Buyer and Seller in writing or by a final award or
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judgment as to which all rights of appeal have expired, issued by
an arbitration board or court of competent jurisdiction
adjudicating the amount as a result of indemnification, if any,
which Seller is obligated to pay to Buyer in connection with such
Environmental Claim under this Agreement to be less than the
offset claimed by Buyer under the Promissory Note on account of
such Environmental Claim then Buyer shall remain liable on the
Promissory Note for the portion of the claimed offset to the
extent Buyer would otherwise be liable on the Promissory Note if
the claimed offset had not been made; and
(C) Any amounts that are due and payable, and unpaid, by
Seller to Buyer under that certain Wound Care Promissory Note of
even date herewith in the principal amount of $100,000.
An "Environmental Claim" is a claim for indemnification in a
known or unknown amount asserted by Buyer pursuant to the
indemnification provisions contained in Article 7 of this Agreement on
account of the breach, or alleged breach, by Seller of the covenants
contained in Section 4.10 of this Agreement or on account of the
breach, or alleged breach, of any representation or warranty contained
in Section 2.19 of this Agreement which involves or is based on or
arises in connection with a demand made of or requirement imposed on
Buyer by a third-party or a governmental entity or which is based on
an environmental condition or suspected condition reflected in the
written findings, opinions or judgment of a licensed environmental
engineer. For purposes of the Promissory Note only, and without
prejudice to any broader rights of Buyer under this Agreement, Buyer's
estimate of out-of-pocket Losses it has incurred and may incur in
connection with an Environmental Claim shall be supported as to amount
by reference to an invoice, third party demand or cost estimate or
other third party documentation, law, rule or regulation.
1.3 Inventory. A physical count of the Inventory was conducted by
Seller, and by Buyer on December 2, 1995. The value of the Inventory determined
in the manner provided in this Section 1.3 is herein referred to as the
"Inventory Value." Buyer has prepared a report of the physical count of the
Inventory and determined the aggregate value of such Inventory by extending the
physical count based on the cost sheets attached hereto in Schedule 1.3(a) and
deducting the value (calculated in the foregoing manner) of any Inventory
shipped or otherwise disposed of by Seller after the physical count of such
Inventory was made. Seller has approved such schedule and it forms the basis for
calculation of the Inventory Value. The parties agree that the Inventory Value
is $545,642.32. Such value has been calculated by ascribing no value or portion
of the Inventory Value to the following: (a) the catalog items specified on
Schedule 1.3(b) because such items are obsolete or not readily useable by Buyer,
(b) damaged inventories and inventory that do not conform to Seller's current
product or process specifications or were not manufactured in compliance with
applicable rules and regulations promulgated by the U.S. Food and Drug
Administration as specified on Schedule 1.3(b), and (c) the catalog items
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specified in Schedule 1.3(c) hereto in excess of the quantities indicated on
such schedule (the "Excess Inventories") because such indicated quantities
constitute the limit of slow moving items to be purchased. The Inventory Value
as of December 2, 1995 was agreed by the parties to be $525,000.00 and it was
adjusted as of the Closing Date to reflect shipments of $6,912.78 after December
2, 1995, and the receipt of raw material inventories of $25,460.32 after
December 2, 1995, and the shipment of $2,094.79 in finished goods inventory from
Seller's California warehouse to its Hammonton, New Jersey facility. The parties
agree that for purposes of this Agreement, inventory in transit from a supplier
or subject to an outstanding but unfulfilled Purchase Order issued by Seller to
a supplier as of the time of Closing is not included within the meaning of
"Inventory" or in the Inventory Value. However, all of Seller's rights in
inventory in transit and/or otherwise subject to such a Purchase Order (and not
included with in the meaning of "Inventory") shall be transferred and assigned
to, and the outstanding and unfulfilled obligations of Seller relating thereto
assumed by, Buyer at Closing.
1.4 Allocation of Consideration. Buyer and Seller have agreed that the
consideration for the Assets will be allocated in accordance with Schedule 1.4
attached hereto. Buyer and Seller agree to use such allocation in reporting the
terms of the transaction contemplated by this Agreement to the United States
Internal Revenue Service and any other relevant taxing authorities.
1.5 Seller's Liabilities.
(a) At the effective time of Closing, Buyer shall assume responsibility
for discharging all of the obligations and liabilities of Seller outstanding in
connection with the Sales Orders subject to Section 1.1(c), Assumed Contracts
and Purchase Orders, in each case solely to the extent of unperformed
obligations of Seller not required to be performed prior to Closing or
unperformed pursuant to the written agreement of Buyer and Seller (collectively
the "Assumed Liabilities"). Except for the foregoing liabilities, Buyer is not
assuming and shall not be liable or responsible for any of the obligations,
debts, commitments, or liabilities of any nature whatsoever of the Seller, or
arising or based on occurrences before the effective time of Closing relating to
the Assets, Products, or Business or operation of Seller such as, without
limitation:
(i) liabilities or obligations of Seller arising out of any
claim, demand, cause of action, lawsuit or other proceeding that has
been made prior to the Closing Date, or that is pending as of the
Closing Date, or that arises exclusively out of Seller's operation of
the Business prior to the Closing Date and is not in any respect based
on Buyer's operation of the Business after the Closing regardless when
such claim is or may be asserted;
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(ii) any liability of Seller for federal, state or local taxes
arising in connection with the sale of the Assets and any liability of
Seller for income, sales, use, excise, FICA, and other employment
taxes arising on or prior to the Closing Date with the exception of
any and all sales, use or excise taxes arising in connection with this
transaction, which liability, if any, shall be discharged by Buyer.
(iii) any and all liabilities for product liability or other tort
claims relating to any goods sold or distributed by Seller prior to
Closing regardless of the time such claim is asserted and any and all
liabilities for product liability or other tort claims relating to any
goods manufactured by Seller and sold by Buyer within 120 days after
the Closing Date;
(iv) any warranty claims respecting any Products sold by Seller
prior to Closing regardless of the time such warranty claim is
asserted;
(v) any and all liabilities for any default by Seller in the
performance of, or breach by Seller, of any agreement, contract,
commitment or obligation of Seller required to be performed prior to
the Closing Date except for those unperformed obligations the
performance of which was delayed by written agreement of Buyer and
Seller;
(vi) any obligation or liability of Seller to any customer to pay
a volume discount for purchases made by any purchaser of goods sold by
Seller before the Closing Date;
(vii) any salary, benefits, commissions or any other obligation
or liability of Seller to any employee, agent or independent sales
representative engaged or employed by Seller at any time prior to
Closing or with respect to any employee benefit plan; and
(viii) any claim, demand, cause of action, lawsuit or other
proceeding arising solely out of Seller's operations prior to the
Closing Date concerning the handling, management, storage, disposal,
or treatment of hazardous or solid waste on or outside of the Seller's
business premises, regardless of the time such proceedings are
asserted.
(b) Seller shall pay and discharge all of Seller's debts, obligations,
and liabilities respecting the Business (other than the Assumed Liabilities) and
liabilities which are required to be discharged at or prior to Closing to enable
Seller to convey free and clear title to the Assets to Buyer.
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1.6 Closing. The closing of the transactions contemplated in this
Agreement (the "Closing") shall take place on or about December 7, 1995 at the
offices of Carrington, Coleman, Sloman & Blumenthal, L.L.P., 200 Crescent Court,
Suite 1500, Dallas, Texas 75201 (the date on which Closing occurs hereinafter
called the "Closing Date"). All funds, documents, instruments, and other
agreements to be delivered, and acts to be taken, at Closing shall be deemed to
be delivered simultaneously effective as of the start of business on the Closing
Date, notwithstanding that certain deliveries required to be made on the Closing
Date are not actually delivered until December 8, 1995.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF SELLER
Seller represents and warrants to Buyer as of the date hereof and as of
the Closing Date:
2.1 Organization, Standing, etc. of Seller. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, is duly licensed or qualified to do business in, and is in
good standing in, all jurisdictions in which the character of property or Assets
now owned or leased by it or the activities of the Business conducted by it
requires it to be so licensed or qualified, except where the failure to be so
licensed or qualified and in good standing would not have a material adverse
effect upon the Business. Seller has all requisite corporate power and authority
to own the Assets and to conduct the Business in the manner heretofore
conducted.
2.2 Authority, Binding Effect. Seller has all requisite corporate power
and authority to execute and deliver this Agreement and the other agreements,
certificates and instruments contemplated hereby and to carry out the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and such other agreements, certificates and instruments as are
contemplated herein or executed pursuant hereto and the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action of the board of directors of Seller; and this Agreement and such other
agreements, certificates and instruments have been duly executed and delivered
by duly authorized officers of Seller, and constitute, or when executed and
delivered will constitute, the valid, legal and binding obligation of Seller,
enforceable against Seller, in accordance with their terms. Seller is not a
party to any proceedings in any court under the United States Bankruptcy Code or
any other insolvency or debtor's relief law, whether state or federal, or
involving the appointment of a trustee, receiver, liquidator or assignee for
Seller or any of its properties. The execution and delivery of this Agreement
and the transactions contemplated hereby have been duly authorized by the
written consent of the holders of at least 51% of the common stock of Seller. No
further consent, authorization or approval of the shareholders is required to
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authorize the execution and delivery of this Agreement or the transaction
contemplated hereby under applicable law, Seller's governing corporate
documents, agreements to which Seller is a party or otherwise. On the date
hereof and at the time of Closing, a total of 8,745,867 shares of common stock
are, and will be, issued and outstanding.
2.3 Compliance with Other Instruments and Laws, etc. The execution and
delivery of this Agreement and the other agreements, certificates and
instruments contemplated hereby and the consummation of the transactions
contemplated hereby and thereby will not result in any violation of, be in
conflict with, constitute a default under, or create any lien or other charge or
encumbrance on any Asset, any provision of the Certificate of Incorporation or
By-Laws of Seller, or any contract, security agreement, instrument, judgment,
decree, order, statute, rule of governmental regulation applicable to Seller or
any of the Assets. No consent, approval or authorization of, or declaration or
filing with, any governmental or regulatory authority or agency, whether
federal, state or local, is required of Seller under existing law in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby. Except for consents that have been obtained
and are reflected on Schedule 2.3(a) hereto, no consent of any other entity, or
person is required in connection with the execution, delivery or performance by
Seller of this Agreement or the consummation by Seller of any of the
transactions contemplated hereby, including, without limitation, consents from
parties to loans, contracts, leases or other agreements to which Seller is a
party, except to the extent the failure to obtain such consent would not have a
material adverse effect on the Business or Seller. Except to the extent set
forth on Schedule 2.3(b) hereto, Seller is in compliance, in all material
respects, with all federal, state, local and foreign laws, ordinances, codes,
regulations, orders, requirements, standards or procedures which are applicable
in any material respect (taken individually or in the aggregate) to the Assets
or the Business including those promulgated by the United States Food and Drug
Administration ("FDA"), except to the extent that non-compliance does not have a
material adverse effect on the Business, the Assets, or Seller. The premises
subject to the Real Property Lease have been duly registered with the FDA and
any other governmental authorities as may be required under the applicable law.
2.4 Legal Proceedings. Except as set forth on Schedule 2.4 hereof,
Seller is not a party to any pending or, to the best knowledge of Seller,
threatened action, suit, proceeding or investigation at law or in equity or
otherwise in, for or by any court or governmental board, commission, agency,
department, arbitrator, or officer which is reasonably likely to materially and
adversely affect the ownership of the Assets or which questions the validity of
this Agreement or any of the actions to be taken pursuant hereto. Seller is not
subject to any order, arbitration award, judgment, decree or governmental
restriction which would prevent the transactions contemplated by this Agreement.
There are no outstanding orders, arbitration awards, writs, injunctions or
decrees of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency, arbitration panel or
instrumentality which could adversely affect the ownership of the Assets.
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2.5 Title to and Condition and Location of Assets. When transferred as
provided herein, Buyer will receive good title to all of the Assets, free and
clear of all title defects, liens, security interests, charges, encumbrances,
and conditional sale and title retention agreements except the lien for property
taxes on the tangible Assets which are not yet due and payable. The Assets
constitute all of the assets now used, held for use or reasonably required by
Seller in its operation of the Business. On the date hereof all of the Equipment
is, and on the Closing Date all of the Equipment will be, functioning in a
normal manner and all major items of Equipment have been periodically
maintained. All of the tangible Assets are located at the locations set forth on
Schedule 1.1(a)(i).
2.6 Insurance. Attached as Schedule 2.6 is a correct and complete copy
of the declaration page of all product liability insurance policies currently
insuring the Assets or Business and all applications and binders for such
policies of which Seller is (or will be on issuance of any applied for policy)
the beneficiary (collectively, the "Insurance Policies"). A correct and complete
copy of the Insurance Policies and a list of all claims made under the Insurance
Policies since January 1, 1993, has been furnished to Buyer. Except as noted on
Schedule 2.6 the Insurance Policies are in full force and effect, all premiums
due on the Insurance Policies or renewals thereof have been paid, and Seller is
not in default under any of the Insurance Policies. Seller has not received,
since September 9, 1995, any notice or other communication from the issuer of
any of the Insurance Policies canceling or materially, adversely amending any of
the Insurance Policies, materially increasing the deductibles thereunder, or
materially increasing the premiums payable therefor, and, to the best of
Seller's knowledge, no such cancellation, amendment or increase in deductibles
or premiums is threatened.
2.7 Intellectual Property. A list and brief description of all of
Seller's trademarks, trade names, logos, service marks, registered copyrights,
patents and applications for any of the foregoing which are used by Seller in
the Business, including any used pursuant to a license agreement, is set forth
on Schedule 2.7 hereto. Except as set forth on Schedule 2.7 hereto, Seller owns
the entire right, title and interest to all Intellectual Property, and no rights
or licenses have been granted to others with respect to any such Intellectual
Property. A copy of all trademark and service mark registrations, licenses,
patents and other written documents or agreements relating to or granting Seller
the right to use any of the Intellectual Property have been provided to Buyer by
Seller. Except as set forth in Schedule 2.7, no proceedings are pending or have
been threatened, which challenge Seller's ownership or use of any Intellectual
Property and Seller has no notice or information that anyone is challenging or
calling into question Seller's ownership of or right to use the Intellectual
Property. Seller does not know of any infringement of any of the Intellectual
Property, by any person or entity.
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2.8 Conflicting Purchase Agreements. Except as reflected on Schedule
2.8, Seller is not a party to any presently binding letter of intent or other
writing contemplating a commitment, nor does Seller have any commitment or legal
obligation to any other person or entity to merge or consolidate Seller, or
sell, assign or transfer the Assets or the Business.
2.9 Taxes. Seller does not owe any sales or use tax to the state of New
Jersey or any agency or department thereof arising as a result of operation of
the Business. To the best of Seller's knowledge, without independent inquiry of
any taxing authority, no taxing authority is presently asserting any claim for
the assessment of any additional tax liability affecting the Assets, except for
items being contested in good faith by Seller which will not result in the
imposition of any lien or charge on Buyer or on any of the Assets and Seller.
All monies required to be withheld by Seller from employees of the Business for
income taxes, social security and unemployment insurance taxes have been
collected or withheld, and either paid to the respective governmental agencies
or set aside in accounts for such purpose.
2.10 Inventory. The cost sheets included on Schedule 1.3 accurately
state the Seller's standard cost of manufacturing the finished goods portion of
the Inventory. Except for any items excluded in the physical inventory described
in Section 1.3 hereof, the finished goods Inventory is in good condition and is
saleable in the ordinary course of Seller's business. The work in process and
raw materials Inventory is capable of being processed at ordinary costs and by
ordinary procedures (i.e. consistent with Seller's historic practices) into
finished goods. Except as reflected on Schedule 2.10, all of the Products sold
by Seller are manufactured by Seller. Except as reflected on Schedule 2.15
hereto, Seller is not obligated to pay any refund or rebate to customers for
Products sold to such customers pursuant to any rebate or discount program
offered by Seller. The above representations and warranties do not apply to the
Inventory described on Schedule 1.3(b) and, as to the Excess Inventory only,
Schedule 1.3(c), which Inventory is being sold "as is" with no representations
or warranties whatsoever, express or implied.
2.11 Contracts, Leases and Commitments.
(a) Except as set forth on Schedule 2.11 Seller is not a party
(through any written agreement) to, or subject to:
(i) Any agreement (other than this Agreement) restricting
competition or the use of confidential information or trade secrets
directly or indirectly relating to the Business or the Assets, or in
any way restricting Seller's right to manufacture or sell Products,
executed by Seller or any employee, stockholder or agent of either of
them;
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(ii) Any contract or arrangement not made in the ordinary course
of business for the sale or use of Products;
(iii) Any contract or arrangement granting to any person the
license or right to use any of the Assets;
(iv) Any contract, note, letter of credit or commitment of Seller
evidencing or relating to indebtedness for borrowed money, or any
guarantee thereof that is secured by the Assets or any of them;
(v) Any distribution agreement, customer discount or pricing
agreement, customer rebate or allowance agreement, private label
("OEM") agreement, material supply or customer agreement, material
sales order, group buying agreement, or manufacturing agreement, in
each case with respect to the Business or Assets;
(vi) Any other unexpired contract, offer or commitment that is
out of the ordinary course of business directly relating to and that
is material to, the manufacturing, marketing, promotion, distribution,
or sale of Products or the Business or the Assets;
(vii) Any lease of real estate in New Jersey to which Seller is a
party; or
(viii) Any lease of tangible personal property which constitutes
an Asset to which Seller is a party.
(b) As to the leases and other contracts listed on Schedule 2.11,
other than contracts with customers and suppliers, and except as otherwise
disclosed on Schedule 2.11:
(i) Each lease and other contract is a valid and binding
agreement of Seller and Seller has no reason to believe that any such
lease or contract is not a valid and binding agreement of the other
parties thereto;
(ii) Seller has fulfilled all material obligations required
pursuant to the leases and contracts to have been performed by it
prior to the date hereof;
(iii) Seller is not in material breach of or in material default
under any lease or contract, and no event has occurred which with the
passage of time or giving of notice or both would constitute such a
default or result in a loss of material rights thereunder;
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(iv) To the best of Seller's knowledge, there is no existing
material breach or default by any party to any lease or contract, and
no event has occurred which with the passage of time or giving of
notice, or both, would constitute such a default by such other party
or result in a loss of material rights thereunder or pursuant thereto;
(v) No renewal option under any lease has been exercised, none of
the leases imposes any restriction that would materially interfere
with the continued operation of the Business and there is no pending
or, to the best knowledge of Seller, threatened eminent domain, taking
or condemnation that will or may affect any of the properties that are
the subject of any of the leases; and
(vi) No such written contract or lease, by its terms will
terminate or be terminable, or will be subject to invalidation by the
other party thereto, by virtue of the transactions contemplated in
this Agreement.
(c) As to the contracts with customers or suppliers listed on
Schedule 2.11, and except as otherwise disclosed on Schedule 2.11:
(i) Each such contract between Seller and its customer or
supplier is a valid and binding agreement of Seller, and Seller has
not received any written notice that any such contract will be
rescinded or prematurely terminated;
(ii) Thomas F. Reiner, Joseph Barbrie and W. Samuel Veazey, all
of whom are officers of Seller, have executed affidavits annexed
hereto as part of Schedule 2.11, indicating their state of knowledge
regarding certain specific customers and suppliers, and their absence
of knowledge of any impending or threatened termination of any written
or oral contract, agreement or relationship between Seller and a
supplier or customer of Seller. Seller hereby represents and warrants
that the content of each such affidavit, insofar as it asserts the
knowledge or lack of knowledge of the affiant (as opposed to the
empirical truth of the matters asserted), is true and accurate. It is
understood, however, that many of the relationships with customers and
suppliers are oral, and that it is not possible comprehensively and
exhaustively to identify every instance and event which constitutes,
or in retrospect may be deemed to constitute, a breach of any such
oral or written contract. Rather, these affidavits, and this
representation and warranty, are intended to document those breaches,
potential or actual, which are readily apparent to such individuals,
without any assurance that the list is comprehensive or exhaustive;
and
(iii) The parties acknowledge and agree that the relationships
between Seller and its various customers and suppliers have elements
of personal relationships involved, as well as a history of a course
of dealing; that Seller in most instances has committed actions and/or
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omissions that may constitute a default therein; and that Seller can
supply no assurances whatsoever that such relationships will continue
between any such customer or supplier and Buyer after the consummation
of the transactions herein contemplated. Rather, by means of the
individual affidavits described in clause (ii) above, Seller has
provided information to Buyer that, whatever the faults, breaches and
problems inherent in such relationships, such individual affiants are
unaware of any expressed intent by any such customer or supplier to
respond or react to such faults, breaches and problems by termination
of the relationship.
(d) Correct and complete copies of all written leases and other
written contracts listed on Schedule 2.11, and all amendments thereto, have been
delivered to Buyer. Seller has not assigned or conveyed any interest in any such
contract or lease.
(e) A true and correct copy of the Kendall Contract, and all
amendments and modifications thereto, is attached hereto as part of Schedule
2.11 and there are no side agreements or verbal understandings with respect
thereto. Seller represents that neither party thereto is in material breach of
its obligations under the Kendall Contract or has given or received written
notice of such breach except as disclosed on Schedule 2.11 hereof. No Products
are covered under or subject to the Kendall Contract except those explicitly
described in writing in the Kendall Contract. Seller's sole, uncured defaults
under the Kendall Contract consist of matters disclosed on Schedule 2.11 hereto.
(f) A true and correct copy of that certain promissory note on the
original principal sum of $378,770.36, payable by Seller to Gerald S. Kramer,
and all amendments and modifications thereto, and all financing statements and
security agreements and other documents creating or evidencing any lien or
purported lien on any of the Assets respecting such indebtedness is attached
hereto as part of Schedule 2.11 and there are no side agreements or verbal
understandings with respect to the foregoing other than as disclosed in Note 12
of Seller's financial statements dated February 28, 1995. To the knowledge of
Seller, Gerald S. Kramer is the holder of such note and the purported liens
relating thereto. All financing statements filed of record that secure or
purportedly secure said note are described on Schedule 2.11 hereto. The
outstanding balance, taking into account offsets claimed by Seller in the amount
of $360,482.00, is $18,288.36. Mr. Kramer has agreed to forego all interest on
such note plus accrued and unpaid interest under such note as of the date of
Closing.
2.12 Seller's Brokers, Finders. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried out by
Seller directly with Buyer in such manner as not to give rise to any valid claim
against Buyer for a brokerage commission, finder's fee or any like payment.
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2.13 Product Warranties and Returns. Schedule 2.13 attached hereto and
made a part hereof sets forth a list and brief description of or (with respect
to (i) below) copies of (i) any written warranties or guaranties generally made
by Seller in the ordinary course of operating the Business as of the Closing
Date relating to any of the Products (and Seller has provided Buyer with copies
of Seller's standard forms of sales contracts for sale of the Products), (ii)
any holdbacks, retentions or contingent payouts under any Sales Orders, and
(iii) any claims asserted by customers under or in respect of any Sales Orders.
2.14 Prepayments and Deposits. Except as set forth on Schedule 2.14
hereto, Seller does not have any prepayments or deposits from customers for
Products to be shipped or services to be performed by Seller in the future or
prepaid inventory purchase orders.
2.15 Operating and Financial Information.
(a) The general payment terms and conditions on which the Products
are sold by Seller to Seller's customers are set forth on Schedule 2.15 hereto.
The following financial and operational information has been provided by Seller
to Buyer (and signed by Buyer and Seller) and accurately and fairly reflects the
financial condition and operations of Seller relating to the Business:
(i) A list setting forth the names and addresses of all currently
authorized distributors and all current customers who purchase the
Products and the current prices at which such Products are sold to
each and the terms of such agreements; and
(ii) Schedules setting forth the total amount of all net sales
for each Product, listed by product code, sold by Seller by month for
the months of March, 1995 through November, 1995, and the gross profit
for such Products during such period.
(b) The cost sheets attached in Schedule 1.3 hereto: (a) have been
prepared in accordance with the books and records of Seller's wound care product
line maintained in the ordinary course of its business; (b) have been prepared
in accordance with standard cost accounting principles consistently applied; (c)
present fairly the information contained therein as of the dates indicated; and
(d) are true, complete and correct.
(c) Except for the Abco Agreement, there are no volume discount
agreements between Seller and any customer or distributor. Seller represents to
Buyer that Seller's customers with whom it has rebate agreements normally sell
substantially all inventory they purchase from Seller to end users within a
month after purchase from Seller. Copies of all of the rebate agreements have
been provided by Seller to Buyer and initialled by the parties.
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(d) Attached as part of Schedule 1.1(c)1 hereto are written
confirmations of the scheduled delivery dates of certain of the supplies and raw
materials subject to the Purchase Orders, referenced by purchase order invoice,
from certain vendors of such supplies and raw materials.
2.16 Books and Records. The lists of customers, distributors, customer
credit applications, suppliers, the payment and credit history of such customers
and distributors, all Product, business and marketing records, all customer
product complaints, all records required to be maintained by and filings made
with the U.S. Food and Drug Administration, Seller's employee manual, and any
descriptions, summaries or copies of employee benefit plans relating to
employees at Seller's Hammonton, New Jersey plant, and all other files, business
records and books and ledgers of Seller relating to the Business are true and
accurate in all material respects to the best of Seller's knowledge.
2.17 Accounts Receivable. A true and correct copy of Seller's accounts
receivable aging report dated October 31, 1995 for the Business has been
provided by Seller to Buyer.
2.18 Employee Relations. With respect only to Seller's New Jersey
employees:
(a) Seller is in material compliance with all federal, state,
local and foreign laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours, and is not engaged in any unfair
labor practice, and there are no arrearages in the payment of wages or taxes or
workers' compensation assessments or penalties.
(b) None of Seller's employees are represented by any labor union
or covered by a collective bargaining agreement; there is no unfair labor
practice complaint against Seller pending before the National Labor Relations
Board of any state, foreign or local agency; there is no pending labor strike or
other material labor trouble or grievance affecting Seller (including but not
limited to any organizational campaign); and except as set forth on Schedule
2.18 hereto, there is no pending litigation or other proceeding or, to the best
of Seller's actual knowledge based on inquiry of Seller's New Jersey plant
manager, Buck Kimber (who shall not be required to make any inquiry), any basis
for any unasserted claim against Seller by any person or entity relating to
employment, including but not limited to claims for contract, tort,
discrimination, employee benefits, wrongful termination and any and all common
law or statutory claims.
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2.19 Environmental Compliance.
(a) Seller has obtained all permits, licenses, and other
authorizations required under Environmental Laws (as defined below), except as
set forth in Schedule 2.19 hereto. Schedule 2.19 hereto sets forth a correct and
complete list of all such permits, licenses, and other authorizations obtained
by Seller, copies of which have been delivered to Buyer. Seller is in full
compliance with all terms and conditions of such permits, licenses, and other
authorizations.
(b) Except as indicated on Schedule 2.19, none of Seller or any of
its employees, or to the best of Seller's knowledge any of its other agents, or
contractors or subcontractors have used, generated, processed, stored,
transported, recycled, Released (as hereinafter defined) or otherwise handled
any Hazardous Materials (as defined below) at or from the real property leased
by it in Hammonton, New Jersey, except as permitted by law. Except as set forth
on Schedule 2.19 Seller is and has been in compliance with all Environmental
Laws with respect to its use of property leased in Hammonton, New Jersey. Seller
has not received any written notice from any governmental authority or any other
person related to any actual, threatened, or potential Release or presence of
any Hazardous Materials or any non-compliance with any Environmental Laws at or
from the real property leased by it in Hammonton, New Jersey.
(c) As used herein "Hazardous Materials" include any (i)
"Hazardous Waste" as defined by The Resource Conservation and Recovery Act of
1976 (42 U.S.C. Section 6901 et. seq.), as amended from time to time ("RCRA"),
and regulations promulgated thereunder; and "Hazardous Substance" as defined by
The Comprehensive Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C. Section 9601 et. seq.), as amended from time to time ("CERCLA"); and
"Hazardous Substance" as defined by the New Jersey Spill Compensation and
Control Act, N.J.S.A., 58:10- 23.11b.; and regulations promulgated thereunder;
(ii) asbestos; (iii) polychlorinated biphenyls; (iv) any substance, the presence
of which on the premises of Seller's business, is prohibited by applicable law;
(v) oil, petroleum or any petroleum products or by-products; (vi) any other
substance which, according to applicable law, requires special handling or
notification of any Federal, state or local governmental entity in its
collection, processing, handling, storage, transport, treatment or disposal or
exposure thereto; (vii) any substance, which if not properly disposed, may
pollute, contaminate, harm or have any detrimental effect on the environment;
(viii) underground storage tanks, whether empty, filled or partially filled with
any substance; and (ix) any other pollutant, toxic substance, hazardous
substance, hazardous waste, hazardous material or hazardous substance as
regulated by or defined in or pursuant to any Environmental Law, whether
existing as of the date hereof, previously enforced, or subsequently enacted.
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(d) As used herein, "Release" shall mean any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing.
(e) As used herein, "Environmental Laws" shall mean any
environmental or health and/or safety-related law, regulation, rule, ordinance,
or order at the Federal, state, or local level, whether existing as of the date
hereof, previously enforced, or subsequently enacted, including but not limited
to: (i) CERCLA, as amended by the Superfund Amendments and Reauthorization Act
of 1986, 42 USCA 9601 et seq.; (ii) Solid Waste Disposal Act, as amended by
RCRA, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 USCA
6901 et seq.; (iii) Federal Water Pollution Control Act of 1972 as amended by
the Clean Water Act of 1977, as amended, 33 USCA 1251 et seq.; (iv) Toxic
Substances Control Act of 1976, as amended, 15 USCA 2601 et seq.; (v) Emergency
Planning and Community Right-to-Know Act of 1986, 42 USCA 11001 et seq.; (vi)
Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42
USCA 7401 et seq.; (vii) National Environmental Policy Act of 1970, as amended,
42 USCA 4321 et seq.; (viii) Rivers and Harbors act of 1970, as amended, 33 USCA
401 et seq.; (ix) Endangered Species Act of 1973, as amended, 16 USCA 1531, et
seq.; (x) Occupational Safety and Health Act of 1970, as amended, 29 USCA 651 et
seq.; (xi) Safe Drinking Water Act of 1974, as amended, 42 USCA 300 (f) et seq.;
(xii) the New Jersey Industrial Site Recovery Act, formerly known as the
Environmental Cleanup Responsibility Act, as amended, N.J.S.A., 12:1K-6 et seq.
("ISRA"); (xiii) the New Jersey Spill Compensation and Control Act, as amended,
N.J.S.A., 58:10-23.11b et seq.; (xiv) the New Jersey Underground Storage of
Hazardous Substances Act, as amended, N.J.S.A. 58:10A-21 et seq.; (xv) the New
Jersey Solid Waste Management Act, as amended, N.J.S.A. 13:1E-1 et seq.; (xvi)
the New Jersey Water Pollution Control Act, as amended, N.J.S.A. 58:10A-1 et
seq.; and (xvii) any and all laws, regulations, and executive orders, federal,
state and local, pertaining to environmental matters, as the same may be amended
or supplemented from time to time, and any other federal, state, or local law,
regulation, rule, ordinance or order, whether currently in existence or
hereafter enacted which governs:
(i) the existence, cleanup and/or remediation of toxic or
Hazardous Materials;
(ii) the Release, emission, discharge or presence of Hazardous
Materials into or in the environment;
(iii) the control of Hazardous Materials; or
(iv) the use, generation, transport, treatment, storage,
disposal, removal or recovery of Hazardous Materials.
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2.20 Disclosure. Seller has disclosed to Buyer all facts material to
the transactions described in this Agreement. No representation or warranty by
Seller contained in this Agreement and no statement contained in any
certificate, exhibit, schedule, list or other document furnished to Buyer
contains any untrue statement of a material fact.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof and as of
the Closing Date the following:
3.1 Organization, Standing, etc. of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. Buyer has all requisite corporate power and authority to acquire the
Assets and conduct the Business to be transferred hereunder.
3.2 Authority, Binding Effect. Buyer has all requisite corporate power
and authority to execute and deliver this Agreement and the other agreements,
certificates and instruments contemplated hereby and to carry out the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Buyer, and this Agreement and such
other agreements, certificates, and instruments have been duly executed and
delivered by duly authorized officers of Buyer and constitute or when executed
and delivered will constitute, the valid, legal and binding obligation of Buyer,
enforceable against Buyer, in accordance with their terms. Buyer is not a party
to any proceedings in any court under the United States Bankruptcy Code or any
other insolvency or debtor's relief law, whether state or federal, or involving
the appointment of a trustee, receiver, liquidator or assignee for Buyer or any
of its property.
3.3 Compliance with Other Instruments and Laws, etc. The execution and
delivery of this Agreement and the other agreements, certificates and
instruments contemplated hereby and the consummation of the transactions
contemplated hereby and thereby will not result in any violation of, be in
conflict with, or constitute a default under, any provision of the Certificate
of Incorporation or By-laws of Buyer, or any contract, security agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to Buyer. No consent, approval or authorization of, or declaration or
filing with, any governmental authority or agency, whether federal, state or
local, is required of Buyer under existing law in connection with the execution
or delivery of this Agreement or the consummation of the transactions
contemplated hereby. Except for consents that have already been obtained or that
will be obtained at Closing, no consent of any other entity, or person is
required in connection with the execution, delivery or performance by Buyer of
this Agreement or the consummation by Buyer of any of the transactions
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contemplated hereby, including without limitation, consents from parties to
loans, contracts, leases or other agreements to which Buyer is a party, except
to the extent the failure to obtain such consent would not have a material
adverse effect on Buyer.
3.4 Legal Proceedings. Buyer is not a party to any pending, or to the
best knowledge of Buyer, threatened action, suit, proceeding or investigation at
law or in equity or otherwise in, for or by any court or governmental board,
commission, agency, department, arbitrator, or officer which questions the
validity of this Agreement or any of the actions to be taken pursuant hereto.
Buyer is not subject to any order, arbitration award, judgment, decree or
governmental restriction which would prevent the transactions contemplated by
this Agreement.
3.5 Buyer's Brokers, Finders. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried out by
Buyer directly with Seller in such manner as not to give rise to any valid claim
against Seller for a brokerage commission, finder's fee or any like payment.
ARTICLE 4
COVENANTS AND AGREEMENTS
4.2 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties agrees to use its best efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary
consistent with applicable laws and regulations to consummate the transactions
contemplated under this Agreement.
4.3 Press Releases. Buyer and Seller will cooperate in the issuance of
any press releases or otherwise in making any public statements with respect to
the acquisition herein contemplated. Except as otherwise required by applicable
law, upon advice of counsel disclosed in advance to the other party, neither
party shall issue any public statement or press release relating to the
acquisition without providing the other party with 24 hours prior notice and an
opportunity to comment upon such press release or public statement.
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4.4 Conflicting Agreements. Seller will not directly or indirectly
solicit or encourage or initiate or authorize or knowingly permit any employee,
officer, director, or other person to solicit, initiate, or encourage any
inquiry, proposal or offer from any person to acquire the Business or any of the
Assets directly or indirectly. The Seller shall promptly advise Buyer of the
terms of any communications it may receive relating to any of the foregoing.
Seller has taken appropriate steps to terminate all prior negotiations
respecting the possible sale of the Assets or Business or Seller to any third
party.
4.5 Employee Matters.
(a) Buyer is not assuming, and Seller shall retain, the
obligations and liabilities of Seller of every nature whatsoever arising out of
or in any way relating to Seller's employees arising prior to the Closing Date
(regardless of when the Closing is deemed to be effective for accounting
purposes) such as, without limitation, liabilities in connection with any
employee benefit plan, compensation to any employee and vacation pay. Seller
shall be responsible for discharging all obligations and liabilities to persons
employed by Seller prior to the Closing Date, including, without limitation
COBRA obligations. Seller agrees to pay all compensation owed to employees of
Seller and related payroll taxes for all periods ending immediately prior to the
Closing Date as of the Closing Date.
(b) Buyer shall not be under any obligation to offer employment to
any employees of Seller although it may do so in its own discretion. To the
extent that Buyer in its sole discretion determines to offer employment to any
employee employed by Seller as of the Closing Date, then Buyer shall be
responsible for all salary and benefits of such employees from and after the
date they become employees of Buyer, such salary and benefits to be determined
by Buyer in Buyer's sole discretion.
(c) Notwithstanding the provisions of Subsection 4.5(b) above,
Buyer covenants and agrees that it will hire a sufficient number of employees
(excluding part-time employees) of Seller effective as of the Closing Date, and
take such other action as may be necessary or appropriate, so as to avoid any
liability or potential liability on the part of Seller under the Worker
Adjustment and Retraining Notification Act on account of termination of the
employment of Seller's employees of the Business on the Closing Date without the
prior notice to its employees and/or government authorities required by such
act.
4.6 Wilshire Account Receivable. The parties acknowledge that Seller is
owed an account receivable from Wilshire Medical Products, a division of
Wilshire Technologies, Inc. ("Wilshire") in the approximate outstanding amount
of $60,000 which Wilshire has agreed to pay in installments on each occasion
that Wilshire places an order for Seller's Products. The installments are to
equal 25% of the price of the order being made. In order to assist Seller in
collecting such account receivable, Buyer agrees that until such time as such
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account receivable has been paid in full, Buyer will not sell any Products to
Wilshire unless Wilshire pays cash in advance for such Products to Buyer and
simultaneously pays (by a separate check payable to Seller or a wire to Seller's
account of immediately available funds) the required installment due on the
account receivable owed to Seller. Seller agrees to advise Buyer immediately in
writing of each installment on such account receivable that Seller receives.
4.7 Transition Period. Seller agrees to cooperate fully with Buyer in
the efficient transition of ownership of the Assets and the Business in such
manner as will preserve the Business as a going concern from and after the date
of this Agreement and continuing for 45 days after the Closing (the "Transition
Period"). In connection with such transition:
(a) From and after the Closing Date, Seller will refer all
inquiries and purchase orders it receives regarding the Assets or Products to
Buyer promptly in such manner as Buyer may reasonably instruct from time to
time.
(b) Seller will reasonably cooperate with Buyer to copy the
following data pertaining to the Products from Seller's MIS System to Buyer's
MIS System:
(i) Customer lists and data;
(ii) Contract lists and information; and
(iii) Inventory and collection data.
In case any such data has been copied by Buyer, and Closing does not occur,
Buyer will destroy all copies of such data.
(c) Seller shall instruct its employees Thomas Reiner, Samuel
Veazey and Joseph Barbrie to provide such services to Buyer in connection with
the transaction contemplated herein, as are specified in their respective
Noncompetition and Services Agreements attached hereto as Exhibits H, I and J,
such duties to be performed as part of such employees' duties to Seller, and for
compensation to be paid by Seller.
(d) Seller shall use its best efforts to locate, obtain and
deliver to Buyer as promptly as possible after the Closing the blueprints for
the pleater machine at Buyer's cost.
(e) The parties acknowledge that Seller has placed a $12,000
deposit on the purchase of a new pleater machine. Unless Buyer gives Seller
written notice within sixty (60) days after the Closing Date that Buyer does not
want to purchase such machine, Buyer shall pay Seller the amount of such deposit
and Seller shall assign and transfer to Buyer in writing all of Seller's rights
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in and to such deposit on the earlier of written notice from Buyer to Seller
requesting assignment of such rights or sixty days after the Closing Date. Buyer
will be deemed to have elected to purchase such machine if it fails to give
Seller written notice within sixty (60) days after the Closing Date that Buyer
does not want to purchase such machine.
4.8 Transitional Manufacturing. At Closing, Seller shall submit to
Buyer a Purchase Order providing for payment net thirty (30) days in the form
attached hereto as Exhibit A for the products specified in such Purchase Order
at the prices specified in such Purchase Order. Seller represents to Buyer that
the quantities of products covered by such Purchase Order could be made by
Seller in the ordinary course of operation of its business, as conducted in the
past, within a thirty (30) day period without increasing the amount of labor
normally employed by Seller in manufacturing such products. Seller represents to
Buyer that such prices are equal to Seller's standard cost for manufacturing
such products as of the time of execution of this Agreement, a copy of which is
attached hereto as Schedule 4.8 and that such standard cost has not changed
since March 1, 1995. Buyer agrees to accept such Purchase Order effective at the
time of Closing and to manufacture the products covered by such Purchase Order
in Buyer's ordinary course of conducting business at the Hammonton, New Jersey
facility following the Closing. Such inventory shall be sold to Seller FOB the
Buyer's Hammonton, New Jersey facility. Seller shall bear the risk of loss for
all such inventory as of the time shipment is commenced to Seller. Seller shall
adequately insure such inventory against normal risks. Such products will be
manufactured and sold to Buyer without any warranty of merchantability or
fitness for any particular use or any other warranty, express or implied, of any
kind; however, Buyer shall manufacture such products in accordance with Seller's
good manufacturing practices as implemented by Seller prior to Closing. Seller
agrees to indemnify Buyer from and against any and all costs, expenses,
liabilities, damages, and expenses (including reasonable attorney's fees and
court costs) incurred by Buyer in connection with the marketing and sale or
disposition of such products. Seller and Buyer each agree to maintain products
liability insurance covering such products at levels customary for such products
and to name each other as an additional named insured under such insurance
policy. Seller agrees that at the time of Closing, Seller will provide and
deliver to Buyer all raw materials necessary for the manufacture of such
products at the cost of such raw materials as are included in Seller's standard
cost for such raw materials.
4.9 Returns and Rebates.
(a) Seller accepts the financial responsibility for all product
returns associated with sales of Products prior to the Closing Date; provided,
however, that Buyer hereby agrees to purchase from Seller any returned Products
(except for Products that have been returned for quality reasons) which are
resalable in the ordinary course of business at the same prices at which other
similar Inventory items (by catalog number) are sold to Buyer under this
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Agreement provided that the value of the Products so returned, determined by
reference to the cost sheets and price lists set forth on Schedule 1.3 hereto,
does not exceed $25,000. If the value of such Products exceeds $25,000, Buyer
will reasonably cooperate with Seller to devise a means to enable Seller to
resell such Products.
(b) Seller shall retain all obligations in respect of rebates
Seller has agreed to grant to distributors and customers for all Products sold
to end users on or before the 30th day after the Closing Date (determined by
reference to the invoice dates of sale), and Buyer shall have all responsibility
for such rebate expense for Product sales to end users after such date. Seller
agrees to promptly reimburse Buyer for any such amounts relating to an end user
invoice dated on or before the 30th day after the Closing after the rebate is
processed and paid by Buyer, upon submission to Seller of reasonable
documentation and verification of such payment by Buyer. Buyer agrees to
promptly reimburse Seller for any such amounts relating to an end user invoice
dated after the 30th day after the Closing, after it is processed and paid by
Seller, upon submission to Buyer of reasonable documentation and verification of
such payment by Seller.
4.10 Environmental Matters.
(a) Seller has entered into that certain Remediation Agreement
dated December 7, 1995, ISRA Case # 95384 between Seller and the New Jersey
Department of Environmental Protection. The Seller hereby assumes responsibility
for and shall comply with its obligations under such agreement and with the
requirements of ISRA, including, but not limited Seller's obligation to disclose
all areas of environmental concern to the State of New Jersey and any other
parties required to be notified by state, federal or local law. Such disclosure
obligation shall extend to, but shall not be limited to, disclosure to the New
Jersey Department of Environmental Protection ("NJDEP") of the presence of two
(2) former underground storage tanks on the Premises, the above-ground heating
oil storage tank on the Premises, the concrete pad used for drum storage on the
Premises, the sanitary sewer on the Premises, and any asbestos containing
material on the Premises. Seller shall promptly furnish to Buyer true, accurate
and complete copies of any and all submissions made to NJDEP or any other entity
and any and all documents, orders, directives, findings, correspondence, and
other materials received from NJDEP, pertinent to the aforementioned compliance
with ISRA as they are issued or received by the Seller. Seller shall also
promptly furnish to Buyer true, accurate and complete copies of all sampling and
test results submitted to NJDEP in connection with any ISRA filings.
(b) Seller shall, at Seller's own expense, promptly comply with
ISRA and all orders and directions of NJDEP and shall promptly implement and
complete all required investigation and remedial activities to the satisfaction
of NJDEP, which shall be evidenced by a "No Further Action Letter" from NJDEP,
provided that Seller and Seller's agents and representatives shall cooperate
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with Buyer to minimize, to the extent practicable, the impact of ISRA compliance
upon the ongoing operations of Buyer. Any required remedial action or cleanup
shall meet the "residential" standards imposed now or as amended by NJDEP,
unless NJDEP and the property owner agree to "non-residential standards".
(c) Promptly upon execution of this Agreement, and subsequently
promptly upon receipt by Seller or Seller's representatives, Seller shall
deliver to Buyer: (i) all Environmental Documents (as defined below) concerning
or generated by or on behalf of predecessors in title or former occupants of the
premises subject to the Real Property Lease (the "Property"); (ii) all
Environmental Documents concerning or generated by or on behalf of Seller
respecting the Property, whether currently or hereafter existing; (iii) all
Environmental Documents concerning or generated by or on behalf of current or
future occupants of the Property, whether currently or hereafter existing; and
(iv) a description of all known operations, past and present, undertaken at the
Property, and existing maps, diagrams and other Environmental Documents
designating the location of past and present operations at the Property and past
and present storage of hazardous or toxic substances, pollutants or wastes, or
fill materials, above or below ground, in, on, under or about the Property or
its environs. For purposes of this paragraph, the term "Environmental Documents"
shall mean all environmental documentation in the possession or under the
control of Seller concerning the Property or its environs, including without
limitation all sampling plans, environmental audits, Phase 1 reports, Phase 2
reports and reports supplemental thereto, cleanup plans, sampling results,
sampling result reports, data diagrams, charts, maps, analyses, conclusions,
quality assurance/quality control documentation, correspondence to or from NJDEP
or any other municipal, county, state or federal governmental authority,
submissions to NJDEP or any other municipal, county, state or federal
governmental authority and directives, orders, approvals and disapprovals issued
by NJDEP or any other municipal, county, state or federal governmental
authority. Seller shall notify Buyer of any dangerous conditions on the
Property, including without limitation conditions which due to the nature of any
inspection or testing to be performed by or on behalf of Buyer may pose a
dangerous condition to Buyer or Buyer's agents or representatives.
(d) Environmental Matters That May be Completed Post-Closing.
Seller shall, at Seller's own expense, complete the following items identified
in this subsection to the satisfaction of Buyer promptly after the Closing Date.
(i) Seller shall complete a thorough review of records held by
the Hammonton Town Engineer, the Atlantic County Health and
Environment Department, and the New Jersey Department of Environmental
Protection, that are related to Seller's operations and activities in
Hammonton, New Jersey, specifically including, but not limited to,
those records related to the compliance and enforcement history of
Seller. Seller shall promptly provide Buyer with the results of such
record reviews and authorize Buyer to rely on same.
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(ii) Seller shall provide Buyer with copies of the certificate of
completion and final report from the licensed asbestos abatement
contractor who undertook and completed asbestos encapsulation work at
Seller's business premises in Hammonton, New Jersey during 1995, as
well as copies of air testing results from before and after abatement
activities, if any.
(iii) Seller shall make arrangements with a properly licensed
hazardous waste disposal company to dispose of certain chemicals
identified on Schedule 1.1(a) and any other chemicals identified by
Buyer within two weeks of the Closing Date defined in this Agreement.
Seller shall provide to Buyer copies of all records of such disposal.
(iv) Seller shall perform maintenance on the grease trap located
in the cleaning room at Seller's business premises in Hammonton, New
Jersey to assure that it is free of any obstructions and flows
properly.
(v) Buyer acknowledges that to the extent Seller is obligated to
comply with ISRA as described in subparagraphs 4.10(a) and (b) of this
Agreement, such ISRA compliance activities may be completed after the
closing date.
ARTICLE 5
CLOSING DELIVERIES OF SELLER
5.1 Closing Deliveries. At Closing Seller shall deliver, among other
things, the following:
(a) Certified copies of resolutions of the Board of Directors of
Seller and written consent of shareholders of Seller authorizing the execution,
delivery and fulfillment of this Agreement and all related agreements;
(b) An opinion of Shafner, Gilleran & Mortensen, P.C., counsel to
Seller substantially in the form attached hereto as Exhibit B;
(c) The affidavits contemplated pursuant to Section 2.11 hereof;
(d) Incumbency and officer certificate of Thomas Reiner and W.
Samuel Veazey in the form attached as Exhibit C hereto;
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(e) Transfer documents (e.g. a Bill of Sale, Assignment of
Patents, Assignment of Trademarks, etc.) in the form of Exhibit D hereto
conveying the Assets to Buyer;
(f) A Sublease with Seller in the form of Exhibit E attached
hereto covering the real property leased by Seller in Hammonton, New Jersey, at
which the sole facilities of the Business are located, together with the written
consent to such Sublease of the landlord under such Lease;
(g) A three-year Noncompetition and Services Agreement between
Thomas Reiner and Buyer in the form of Exhibit F attached hereto and
incorporated herein by reference and Noncompetition and Services Agreements
between each of Samuel Veazey and Joseph Barbrie in the forms of Exhibits G and
H;
(h) A copy of a letter to Gerald S. Kramer in the form of Exhibit
I hereto and a check for the amount specified therein tendering payment to Mr.
Kramer of the sum of $18,288.36 arguably owed by Sparta to him together with the
funds contemplated thereby;
(i) A Remediation Agreement with respect to the real property
leased by Seller in Hammonton, New Jersey in the form attached hereto as Exhibit
J; and
(j) The product Purchase Order described in Section 4.8 in the
form of Exhibit A attached hereto;
(k) Various UCC termination statements releasing security
interests on the Assets;
(l) An Assignment and Assumption Agreement between Buyer and
Seller in the form of Exhibit K hereto.
ARTICLE 6
CLOSING DELIVERIES OF BUYER
6.1 Closing Deliveries. At Closing Buyer shall deliver, among other
things, the following:
(a) Certified copies of resolutions of the Board of Directors of
Buyer authorizing the execution, delivery and fulfillment of this Agreement and
all related agreements;
(b) An opinion of Carrington, Coleman, Sloman & Blumenthal,
L.L.P., counsel to Buyer substantially in the form attached hereto as Exhibit L;
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(c) A Sublease with Seller in the form of Exhibit E attached
hereto covering the real property leased by Seller in Hammonton, New Jersey, at
which the sole facilities of the Business are located, together with the written
consent to such Sublease of the landlord under such Lease, and a check in the
amount of the security deposit and prepaid December rent as provided in such
Sublease;
(d) An Assignment and Assumption Agreement between Buyer and
Seller in the form of Exhibit K hereto; and
(e) One or more checks in the aggregate amount of the cash
consideration less amounts required to be withheld hereunder.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification.
(a) By Seller. Subject to the other provisions of this Article 7,
Seller will indemnify and hold harmless Buyer and its affiliates, and its
officers and directors from and against any and all losses, liabilities, costs,
damages, expenses and demands, including reasonable attorneys' fees, of any
nature whatsoever ("Losses") at any time resulting from or arising out of: (i)
any liability, obligation or commitment of Seller that Buyer does not expressly
assume in this Agreement, (ii) Seller's breach of any of its representations, or
warranties contained in this Agreement, (iii) Seller's failure to perform any
obligation imposed on it under this Agreement or the Lien Discharge Agreement
(including, without limitation Seller's failure to pay Buyer the amount of any
Approved Payment, as defined in said Lien Discharge Agreement), (iv) Seller's
noncompliance with any bulk sales or similar laws applicable to selling or
transferring the Assets, (v) Seller's: (A) use of any Assets prior to Closing,
(B) marketing, promotion or sale of any Products prior to Closing, (C)
manufacture of Products to the extent sold by Seller prior to, or by Buyer
within 120 days after, Closing and (D) operation of the Business prior to
Closing.
(b) By Buyer. Subject to the other provisions of this Article 7,
Buyer will indemnify and hold harmless Seller and its affiliates, and its
officers and directors harmless from any Losses at any time resulting from or
arising out of: (i) Buyer's failure to discharge any liability, obligation or
commitment of Seller arising after the Closing Date under any of the Assumed
Liabilities, (ii) Buyer's breach of any of its representations or warranties
contained in this Agreement, (iii) Buyer's failure to perform any obligation
imposed on it under this Agreement and (iv) Buyer's: (A) use of any Assets after
the Closing, (B) manufacture of Products after the Closing, (C) marketing,
promotion or sale after the Closing of any Products manufactured by Buyer or
manufactured by Seller and sold by Buyer within 120 days after the Closing, or
(D) operation of the Business, after the Closing.
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(c) Effect of Investigations. The fact that any party conducts any
investigation at or before the Closing or closes the transaction contemplated
hereby despite the existence of a breach of any representation, warranty, or
covenant by the other party will not relieve any party of liability under this
Section 7.1 or constitute a waiver of such breach.
(d) Limit on Loss. Neither party shall be obligated to indemnify
the other party for any Loss arising from any breach of any representation or
warranty hereunder made by the indemnifying party unless and until, and only to
the extent that, all such Losses incurred by the party seeking indemnification,
exceed $50,000. Further, neither party shall be obligated to indemnify the other
against Losses pursuant to this Article 7 arising out of the breach of any
representation or warranty for more than the purchase price payable by Buyer to
Seller hereunder.
(e) Interest. Any party obligated to indemnify any other party
shall pay interest on the amount required to be indemnified from and after the
date notice requesting indemnification and specifying the amount to be
indemnified is given (or if later the date of accrual of damages being so
indemnified) at the base commercial rate of interest publicly announced from
time to time by Nationsbank in Dallas, Texas, as its prime rate for short term
unsecured loans to substantial and responsible commercial borrowers, each change
in rate to become effective without notice on the effective date of such change.
7.2 Defense of Claims. Each party entitled to indemnification under
this Agreement (the "Indemnitee") must notify the party required to provide
indemnification (the "Indemnitor") of any claim for indemnification (each a
"Claim" and collectively "Claims") for which the Indemnitee may seek
indemnification. If the Indemnitee has received written notice from a third
party giving the Indemnitee notice of the matter giving rise to the Claim, such
notice shall be given to the Indemnitor by the Indemnitee within thirty (30)
days after the Indemnitee receives such written notice from such third party. If
the Indemnitee has not received such written notice from a third party, then the
Indemnitee shall give the Indemnitor notice of the claim within sixty (60) days
after an executive officer of the Indemnitee has actual knowledge of the Claim.
The Indemnitee shall permit the Indemnitor to assume at the Indemnitor's expense
the defense of any Claim or any litigation resulting from a Claim. However,
counsel for the Indemnitor in connection with Claims or litigation by a third
party who will conduct the defense of the Claim or litigation must be reasonably
satisfactory to the Indemnitee (except that the Indemnitor's own regular
litigation counsel shall conclusively be deemed satisfactory for purposes hereof
unless such counsel is legally or ethically prohibited from representing the
Indemnitor and, further, the Indemnitor shall not be required to employ counsel
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whose regular rates are higher than those of its own regular litigation counsel)
and the Indemnitee may participate in the defense at the Indemnitee's expense.
If the Indemnitor consents to any judgment or entry of any settlement that lacks
the claimant's or plaintiff's unconditional release of the Indemnitee with
respect to the Claim or litigation effective to bar claims after the settlement
agreement is performed in accordance with its terms then the Indemnitor shall
remain liable to indemnify the Indemnitee hereunder for the unreleased portion
of any such claims but no judgment or settlement which includes any executory
performance or liability obligation on the Indemnitee or its assets may be made
without the Indemnitee's consent.
7.3 Cooperation and Assistance. Each party will cooperate fully with
the other and make available to the other as reasonably requested employees,
officers, files and records relating to the Business for use solely by the
requesting party and its representatives in connection with investigating and
defending against the claims of third parties described in this Article 7.
7.4 Arbitration.
(a) Any controversy or claim arising out of or relating to this
Agreement, or any instruments executed pursuant to this Agreement or any
transactions herein contemplated, including a claim for breach, other than an
Excluded Claim, as defined below, shall be settled by arbitration administered
by the American Arbitration Association in accordance with its Commercial
Arbitration Rules and, with respect to any individual dispute or matter
involving more than $100,000 (exclusive of claims for punitive damages,
statutory damages, legal fees, costs, interest and expenses), its Supplementary
Procedures for Large, Complex Disputes, modified as herein provided. Judgment
upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Excluded Claims are: (1) claims for enforcement of the
covenants of non-disclosure and non-competition contained in this Agreement and
those contained in any agreement executed pursuant to this Agreement (but in no
event to include any claims for money damages even if pendant or ancillary
thereto, other than claims for attorneys fees and costs); (2) claims or
proceedings seeking declaratory judgment as the sole or principal remedy (but in
no event to include any claims for money damages even if pendant or ancillary
thereto, other than claims for attorneys fees and costs); and (3) claims or
proceedings seeking injunctive relief (including, without limitation, specific
performance of the obligation to consummate the transactions contemplated in
this Agreement) as the sole or principal remedy (but in no event to include any
claims for money damages even if pendant or ancillary thereto, other than claims
for attorneys fees and costs). Neither party will have the right to assert any
defense to any claim on the basis of laches, limitations or a like defense so
long as an arbitration proceeding to resolve such claim has been commenced by
either party within the time period within which such a claim would be required
to be asserted in a legal proceeding before a court to avoid being subject to
such a defense.
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(b) Either party may submit to arbitration a matter subject to
arbitration under this Agreement. One arbitrator shall decide any matter
submitted to arbitration hereunder unless the amount in controversy, exclusive
of legal fees, costs, interest and expenses, exceeds $100,000 in which case
three (3) arbitrators shall decide such matter, at least one of whom shall be an
attorney familiar with business acquisitions. If more than one matter is
submitted to arbitration under this Agreement, the location of such arbitrations
shall alternate between San Francisco, California and Dallas, Texas. The first
arbitration conducted under this Agreement shall take place in San Francisco.
(c) Each party to any arbitration conducted under this Agreement
shall have the right to conduct and compel the following discovery unless
otherwise agreed in writing by the parties, and subject to any expansion of or
reduction in such discovery rights as may be mandated by the arbitrator (if
there is only one) or chairman of the arbitrators (if there are three) upon a
showing of good cause: (i) production of documents; (ii) responses to written
interrogatories; (iii) requests for written admissions; and (iv) eight (8)
depositions plus the deposition of any witness that will not be available to
attend the arbitration hearing in person or by telephone. Each of the parties
agrees to use reasonable efforts to cause to be available any witness that any
other party requests to be available at an arbitration hearing, to testify in
person or, if that is not possible, then by telephone. The parties agree that a
preliminary hearing in the manner contemplated by the Supplementary Procedures
described above shall be conducted in any arbitration at the request of any
party.
(d) The arbitration provisions contained in this Section 7.4 shall
be governed by the Federal Arbitration Act.
(e) The arbitrator (if there is only one) or chairman of the
arbitrators (if there are three) shall have the exclusive power and authority to
resolve, and shall resolve: (i) all questions as to applicability of the
arbitration procedures contained in this Section 7.4 to any dispute, and (ii)
any discovery disputes between the parties and to compel discovery as provided
in subsection (c) of this Section 7.4.
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ARTICLE 8
RESTRICTIVE COVENANTS
8.1 Noncompetition Covenants. Seller acknowledges that in consideration
of the payment of the consideration set forth in Section 1.2 hereof, Seller is
acquiring the goodwill of the Business including substantially all of the Assets
of the Business. Seller agrees with Buyer that for a period of five (5) years
after the Closing Date, Seller will not, alone or together or with others,
anywhere in the world where Seller sells the Products as of the Closing Date,
directly or indirectly through an entity that is owned and/or controlled by, or
that owns or controls, or that is owned or controlled in common, or
substantially in common, with Seller or otherwise own, control or otherwise
participate in a business that manufactures or sells Products, or any of them,
or any other products that are substantially similar thereto in competition with
the Business. The foregoing shall not be deemed to prohibit Seller from owning
less than two percent (2%) of the outstanding voting securities of any entity
whose business includes the manufacture and/or sale of impregnated gauze wound
care products that are the same as or substantially similar to the Products and
whose voting securities are publicly traded on a national or international
securities exchange or on the over-the-counter market.
8.2 Nonsolicitation and Confidentiality Covenants. In addition to the
restrictions set forth in Section 8.1 above, Seller shall not recruit or hire or
attempt to recruit or hire, directly or indirectly, by assisting others, anyone
who is an employee, consultant or independent contractor of the Business as of
the date of Closing for a period of three (3) years after Closing or a period of
twelve (12) months after such an employee's, consultant's, or independent
contractor's services to or employment with Buyer ends, whichever is earlier.
Seller further agrees that it shall not use or disclose to anyone any of the
confidential or proprietary information or trade secrets relating to the
Business transferred by Seller to Buyer pursuant to this Agreement.
8.3 Injunctive Relief. Seller acknowledges that the Buyer would be
irreparably injured by the breach of the provisions contained in Section 8.1.
Accordingly, in the event of any breach or violation or threat of future
violation of any provision of this Article 8, Buyer in addition to all other
remedies that might be available to it shall be entitled as a matter of right to
equitable relief in any court of competent jurisdiction, including the right to
obtain both temporary and permanent injunctive relief and specific performance.
8.4 Violations. If Seller violates any covenant contained in this
Article 8 and the Buyer brings legal action for injunctive or other relief, the
Buyer shall not, as a result of the time involved in obtaining the relief, be
deprived of the benefit of the full period of any covenant contained herein.
Accordingly, the covenants of Seller contained in this Article 8 shall be
extended for an amount of time that the Seller is in breach hereof, except to
the extent that the Buyer has received damages for injury incurred during any
portion of the period of breach.
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8.5 Interpretation. The parties acknowledge and agree that the time,
scope, and other provisions of this Article 8 have been specifically negotiated
by sophisticated and commercially knowledgeable parties and specifically hereby
agree that such time, scope and other provisions are reasonable under the
circumstances. The parties further agree that if at any time despite the express
agreement of the parties hereto, a court of competent jurisdiction holds that
any portion of this Article 8 is unenforceable by reason of its being too
extensive in any respect, then it shall be interpreted to extend only over the
maximum period of time for which it may be enforceable and over the maximum
geographical area as to which it may be enforceable and to the maximum extent in
all other respects as to which it may be enforceable, all as determined by the
court in any such action. The representations and covenants contained in this
Article 8 and the promises of Seller will be construed as ancillary to and
independent of any other provision of this Agreement, and the existence of any
claim or cause of action of Seller against the Buyer or any officer, director or
shareholder of the Buyer whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Buyer of the covenants
of the Seller contained in this Article 8.
ARTICLE 9
MISCELLANEOUS
9.1 Waiver. No waiver by any party of any default or breach by any
party of any representation, warranty or covenant or condition contained in this
Agreement, any exhibit or any document, instrument or certificate contemplated
hereby shall be deemed to be a waiver of any subsequent default or breach by
such party of the same or any other representation, warranty, covenant or
condition. Except as otherwise provided herein, no act, delay, omission or
course of dealing on the part of any party in exercising any right, power, or
remedy under this Agreement at law or in equity shall operate as a waiver
thereof or otherwise prejudice any of such party's rights, powers, and remedies.
9.2 Amendment. At any time prior to the Closing, the parties may amend
or modify this Agreement only by an instrument executed by all parties hereto.
9.3 No Third Party Beneficiaries. This Agreement shall not inure to the
benefit of any third party other than Buyer, Seller or the guarantor hereof (or
a successor or assign thereof).
9.4 Reasonable Efforts. Each of the parties shall use its reasonable
efforts to fulfill, as soon as practicable after the date hereof, the conditions
specified in Articles 5 and 6 hereof applicable to such party which are
dependent upon such party's action or forbearance.
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9.5 Expenses. Each party hereto shall assume and bear all expenses,
costs and fees incurred or assumed by such party in the preparation and
execution of this Agreement and compliance herewith, whether or not the
transactions contemplated hereby shall be consummated. Seller shall pay all
sales, transfer, documentary and similar taxes or fees, if any, payable in
connection with the sale, transfers, assignments and conveyances to be made to
Buyer under this Agreement.
9.6 Notices. Any notice to a party hereto pursuant to this Agreement
shall be given by personal delivery or telecopy or overnight courier or mailed
via certified or registered mail addressed, if to Seller at Sparta Surgical
Corporation, 7068 Koll Center Parkway, Suite 401, Pleasanton, California 94566,
telecopy number 510/736-5243 with a copy to Samuel M. Shafner, Shafner, Gilleran
& Mortensen, P.C., 150 Federal Street, 28th Floor, Boston, Massachusetts 02110,
telecopy number 617/695-9255, or if to Buyer, at 7201 Industrial Park Blvd.,
Fort Worth, Texas 76180, Attn: President, telecopy number 817/577-6599 with a
copy to Robin Gillespie, Carrington, Coleman, Sloman & Blumenthal, L.L.P., 200
Crescent Court, Suite 1500, Dallas, Texas 75201, telecopy number 214/855-1333,
and shall be deemed delivered when actually received if personally delivered or
sent by telecopy or five days after having been placed in the mails so addressed
with postage prepaid or two days after delivery to such overnight courier. The
parties shall hereafter notify the other in accordance herewith of any change of
address or telecopy number to which notice is required to be mailed or sent.
9.7 Successors; Survival. This Agreement shall inure to the benefit of,
and be binding on and enforceable against, the successors and assigns of the
respective parties hereto. It is expressly recognized and agreed that Buyer may
assign, before or after Closing, all or any of its rights and obligations
hereunder to one or more of its affiliates but in the case of the assignment of
such obligations Buyer shall not be relieved of its liabilities hereunder. The
representations and warranties made by the parties in Articles 2 and 3 hereof
shall survive the Closing for a period of eighteen (18) months after Closing,
and the covenants contained in this Agreement shall survive the Closing in
accordance with their terms.
9.8 Counterparts. This Agreement may be executed by hard copy or
telecopy in any number of counterparts which together shall constitute one and
the same document.
9.9 Governing Law. This Agreement is being delivered in the State of
Texas and shall be construed and enforced in accordance with and governed by the
substantive laws of Texas.
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9.10 Headings. The headings contained in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of the Agreement.
9.11 Entire Agreement. This Agreement, the Promissory Note and all of
the other instruments and agreements executed pursuant to this Agreement or the
Promissory Note express the entire agreement between the parties concerning the
subject matter covered, and all agreements, covenants, representations and
warranties, express or implied, oral or written, of the parties with regard to
the subject matter hereof are contained in such agreements and documents. All of
such documents are part of a single transaction and shall be construed together.
9.12 Misdirected Communications and Payments. If any party receives any
payment of an account receivable for Products owned by another party or a
customer order or other communication intended for another of the parties
hereto, the party receiving such payment, order or communication shall promptly
forward it to the party entitled to it or for whom it was intended.
9.13 Schedules. Each of the representations and warranties of the
parties set forth herein is qualified by all of the disclosures reflected on the
schedules hereto (including schedules other than those referenced in the
specific section in which such representation or warranty is set forth).
9.14 Confidentiality of Non-Business Information. The Buyer and Seller
each agree to retain in confidence all information of a confidential or
proprietary nature they may learn about one another that is not related to the
Business, not otherwise known to such party and not publicly known except as
otherwise provided under applicable law.
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Tecnol New Jersey Wound Care, Inc.,
a New Jersey Corporation
By: /s/ David Radunsky
Its: Chief Operating officer
Sparta Surgical Corporation
By: /s/ Thomas F. Reiner
Its: Chairman, President & CEO
Tecnol, Inc. hereby
guarantees the obligations of Buyer
under this Agreement and the
transactions contemplated hereby.
TECNOL, INC.
By: /s/ David Radunsky
Its: Chief Operating Officer
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EXHIBIT 10.76
<PAGE>
SPARTA SURGICAL CORPORATION
BERNAL CORPORATE PARK
7068 KOLL CENTER PARKWAY, SUITE 401
PLEASANTON, CA 94566
(510) 417-8812
December 22, 1995
Arbora, A.G.
Gartenstrasse 38
CH-8002 Zurich, Switzerland
Attn: Ulrich W. Rud, Partner
Rudolph O. Hugi, Partner
Re: Sparta Surgical Corporation - Arbora, A.G. Restructuring of Loan
Warrants
Dear Ulrich and Rudi:
This letter shall, when executed by each of us, memorialize the final
agreement between Sparta Surgical Corporation, a Delaware corporation ("Sparta")
and Arbora, A.G. ("Arbora") to restructure the present loan transaction between
the parties. The presently existing agreement between Sparta and Arbora is
evidenced primarily by the (i) Bridge Loan Term Sheet [Letter of Intent] dated
November 10, 1994; (ii) outstanding convertible promissory notes (the "Notes")
dated November 15, 1994 in the aggregate principal amount of US$1,000,000 owing
from Sparta to Arbora, which notes are convertible under certain conditions into
a specific number of shares of Sparta's common stock, $0.002 par value (the
"Common Stock"); (iii) warrants (the "Warrants") dated November 15, 1994 to
purchase an aggregate of 1,000,000 shares of Common Stock on or before 5:00 p.m.
United States Eastern Standard Time on November 15, 1997 at a price of US $1.40
per share; and (iv) a Registration Rights Agreement dated November 15, 1994 by
and between Sparta and Arbora respecting the shares issuable upon the exercise
of the Warrants. In addition to these agreements, there exist a number of
related agreements and/or understandings between Sparta and Arbora respecting
such loan which served to extend the due date for its repayment and/or to modify
its terms. All of these agreements and understandings shall be hereinafter
referred to as the "Loan Agreement" and upon the execution of this agreement
shall be null and void except as otherwise specifically stated herein.
Sparta and Arbora hereby agree that upon the completion of the conditions
specified herein, the Loan Agreement be canceled and superseded by this
agreement in accordance with the terms described hereinbelow:
1. Restructuring of Loan Agreement
Arbora and Sparta agree that Sparta shall, in exchange for the cancellation
of the Notes and Warrants, issue to Arbora Four Million Seven Hundred Sixty One
Thousand Eight Hundred Forty Two (4,761,842) shares of Common Stock (the
"Shares") and Five Hundred Thousand (500,000) new warrants (the "New Warrants"),
each providing the holder or holders thereof the right to purchase one share of
Common Stock at a price of $0.47 per share, exercisable over the three year
period commencing on November 8,1995. In consideration for Sparta's issuance of
the Shares and New Warrants, Arbora agrees that the amount of principal owing
under the Notes shall be forgiven and that the Warrants and other documents
<PAGE>
Ulrich W. Rud, Partner
Rudolph O. Hugi, Partner
December 22, 1995
Page 2 of 4
comprising the Loan Agreement shall be canceled and Sparta shall pay to Arbora
any accrued interest owing at this time. As additional consideration, Arbora is
delivering to Sparta, simultaneously with the issuance of the Shares and New
Warrants, the promissory note of its affiliate Oasis Investments Inc. Panama in
the principal amount of Eight Hundred and Nine Thousand Five Hundred Dollars
($809,500.00) (the "Oasis Note") payable on November 8,1997 and bearing interest
at a rate of five percent (5%) per annum. All of the Shares and any shares of
Common Stock hereinafter issued upon the exercise of the New Warrants shall be
provided with the same registration rights as are presently provided in the
Registration Rights Agreement. Thomas F. Reiner, Sparta's President and Chief
Executive Officer is hereby provided with full voting rights respecting such
shares (which specifically include the shares issued upon the exercise of the
New Warrants) and Arbora shall enter into a perpetual voting trust agreement
which ratifies such agreement. The certificates evidencing any shares of Common
Stock issued to Arbora shall bear legends which reference this voting trust
agreement.
2. Rights and Obligations Regarding or Arising out of the Sale of Sparta's
Wound Care Division.
This agreement shall become effective only upon the issuance of the Shares
to Arbora. All ancillary documents referenced herein or required hereby,
including, but not limited to, the New Warrants, Oasis Note, Voting Trust
Agreement, Registration Rights Agreement shall become effective on such date. In
the event Sparta consummates the sale of its wound care products line (the
"Wound Care Products Line Sale"), Sparta shall, within thirty days following the
date of the closing of such transaction, redeem all of the Shares (which
constitute 4,761,842 shares of Common Stock) at a price of $0.38 per share or an
aggregate of One Million Eight Hundred and Nine Thousand Five Hundred Dollars
(US$1,809,500.00). Sparta shall place the amount of One Million Dollars
(US$1,000,000.00) from the proceeds paid to it at the closing of the Wound Care
Product Line Sale into escrow with Arbora's attorney Dr. Simon V. Haberman, 251
Central Park West - 85th Street, New York, New York, 10024.
In consideration of Arbora's delivering to Sparta the Shares, Sparta shall
pay to Arbora the amount of One Million Dollars (US$1,000,000) being held in
escrow and shall return to Arbora the Oasis Note which shall eliminate all
obligations owing from Arbora to Sparta thereunder.
3. Put/Call Rights.
Arbora shall have the right at any time on or before November 8, 1996, in
its sole discretion to repay all or a portion of the Oasis Note by delivering to
Sparta such quantity of shares of Common Stock as is determined by dividing the
amount of principal and accrued interest then outstanding under the Oasis Note
by $0.38. Sparta shall, at any time on or after March 1,1996, have the absolute
right to redeem all or a portion of the Shares at a price of $0.38 per share.
Any payment made in respect to such redemption shall first be applied by Sparta
against the amounts owing under the Oasis Note, with the balance being paid to
Arbora.
4. Regulation S Representations.
The Shares, the New Warrants and all shares being issued to the holders of
the New Warrants upon their exercise are being issued pursuant to an exemption
set forth at Regulation S as promulgated under the United States Securities Act
of 1933. In connection with its being issued the Shares, Arbora represents and
warrants as follows:
<PAGE>
Ulrich W. Rud, Partner
Rudolph O. Hugi, Partner
December 22, 1995
Page 3 of 4
(i) Arbora is being issued the Shares and the Warrants for the investment
of itself and its principals only, and not with a view to the further resale or
distribution thereof. Arbora represents that it is a corporation incorporated
outside of, and without offices in, the United States and that each and every
one of its principals to which the Shares may be assigned are not citizens or
residents of the United States.
(ii) Arbora has had adequate opportunity to investigate Sparta, and to meet
with its principals and ascertain the nature and value of its business, purposes
and prospects.
(iii) Arbora agrees that it may not transfer, assign or otherwise dispose,
directly or indirectly, the Shares or the New Warrants except to its principals
who are not residents or citizens of the United States or, upon the prior
written consent of Sparta, to persons who are not residents or citizens of the
United States in the absence of there being a registration statement in effect
with respect to the Shares or New Warrants under the United States Securities
Act of 1933, as amended, or applicable state law. Any purported transfer,
assignment or other purported disposition in contravention of this agreement
shall be void and of no effect. The certificate for the Shares shall bear a
legend setting forth such restrictions on transfer.
5. Confidentiality.
The parties agree to keep confidential and not disclose any information
regarding this transaction and any information obtained int he process of due
diligence relative thereto, except as is necessary for Sparta to disclose to any
purchaser of the Wound Care Products Line, except to the extent required by
securities laws or other binding laws or regulations, and except to the extent
required by legal process or in response to inquiries by governmental officials
or agencies; provided, however, the parties may share such information with
financial and legal advisers, accountants, consultants, agents and employees.
6. Binding Nature of Agreement.
This Agreement is bing executed as of its date so as to reflect the binding
agreement between Arbora and Sparta on such date, and supersedes any and all
prior agreements or proposals between the parties hereto (including, without
limitation, the agreements and instruments set forth in the first paragraph
hereof). This agreement is being executed by the parties to clarify the terms
and conditions of certain prior agreements between them, including a letter
agreement between the parties as amended by several subsequent letters and to
set forth the terms of their final agreement with respect to the matters
discussed herein. This agreement may be signed in one or more counterparts each
<PAGE>
Ulrich W. Rud, Partner
Rudolph O. Hugi, Partner
December 22, 1995
Page 4 of 4
of which shall be deemed an original and which together shall serve as the
entire agreement. By their signatures hereto and their execution of the
ancillary agreements referenced herein both Sparta and Arbora intend to be bound
by the provisions hereof.
Sincerely,
SPARTA SURGICAL CORPORATION
By:___________________________
Thomas F. Reiner, President
and Chief Executive Officer
Accepted and agreed to in accordance with the terms hereof.
ARBORA A.G.
By:____________________________ By:________________________
Ulrich W. Rud, Partner Rudolph O. Hugi, Partner
