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EXHIBIT 2.1
PLAN OF MERGER AND ACQUISITION AGREEMENT
among
LIFEQUEST MEDICAL, INC.
a Delaware corporation
▇▇▇▇▇ MEDICAL ACQUISITION CO.,
a Nevada corporation
and
▇▇▇▇▇ MEDICAL, INC.
a Texas corporation
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
an individual
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THIS PLAN OF MERGER AND ACQUISITION AGREEMENT ("Agreement") executed
this 27th day of November, 1996, by and among ▇▇▇▇▇ MEDICAL, INC., a Texas
corporation ("▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual, as sole shareholder of
▇▇▇▇▇ (referred to as the "Shareholder"), LIFEQUEST MEDICAL, INC., a Delaware
corporation ("LifeQuest"), and ▇▇▇▇▇ MEDICAL ACQUISITION CO., a Nevada
corporation ("Purchaser," and together with LifeQuest, the "LifeQuest
Parties").
W I T N E S S E T H:
WHEREAS, LifeQuest is primarily in the business of developing and
commercializing minimally invasive surgery devices; and
WHEREAS, in connection with the transactions contemplated by this
Agreement, LifeQuest previously caused Purchaser to be organized and to issue
to LifeQuest all of the issued and outstanding stock of Purchaser; and
WHEREAS, ▇▇▇▇▇ is in the business of distributing minimally invasive
surgical products in Texas, New Mexico and Tennessee.
WHEREAS, the Shareholder is an individual constituting the sole
shareholder of ▇▇▇▇▇; holding 100% of the issued and outstanding stock of
▇▇▇▇▇; and
WHEREAS, the respective boards of directors of Purchaser and ▇▇▇▇▇
have approved the merger of ▇▇▇▇▇ with and into Purchaser (the "Merger")
pursuant to the terms and subject to the conditions of this Agreement; and
WHEREAS, this Agreement is intended to qualify under Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree that ▇▇▇▇▇ shall be merged with and into
Purchaser and that the terms and conditions of the Merger, the method of
carrying the Merger into effect and certain other provisions relating thereto
shall be as hereinafter set forth and as set forth:
ARTICLE 1
DEFINITIONS
Defined Terms. As used herein, the terms below shall have the
following meanings herein specified applicable to both the singular and plural
forms of any of the terms.
1.1 "Affiliate" shall mean, with respect to a Person, any Person
that, directly or indirectly, controls or is controlled by or is under common
control with the Person.
1.2 "Assets" shall mean the assets, properties and rights of ▇▇▇▇▇
of every nature, kind and description, wherever located, tangible and
intangible, real, personal and mixed, whether or not reflected in the books and
records of Seller necessary or
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desirable to permit the business of ▇▇▇▇▇ to be carried on in the manner as is
presently conducted.
1.3 "Financial Statements" shall mean the balance sheets and
statements of income for the years or periods ended September 30, 1996,
December 31, 1995 and December 31, 1994.
1.4 "Benefit Plans" shall mean bonus, deferred compensation,
severance, pension, profit sharing, retirement, stock purchase, stock option,
medical, hospitalization, accident insurance or any other employee benefit
plans, arrangements or practices, whether written or unwritten, which cover
employees of ▇▇▇▇▇.
1.5 "Certificate" shall mean each stock certificate representing
shares of ▇▇▇▇▇ Stock.
1.6 "Closing" shall mean the meeting held on the Closing Date.
1.7 "Closing Date" shall have the meaning assigned to it in
Article 7.
1.8 "Conversion Ratio" shall mean the fraction resulting from one
divided by the total number of shares of ▇▇▇▇▇ Stock issued and outstanding.
1.9 "Effective Time" shall mean the time at which a properly
executed certificate of merger in substantially the form attached to this
agreement as Exhibit A (together with other documents required by law to effect
the Merger) shall have been filed with the Secretary of State of Nevada, and in
any other jurisdiction where such a certificate of merger is required.
1.10 "Environmental Conditions" shall mean material conditions with
respect to soil, surface waters, ground waters, stream sediments, underground
tanks, asbestos and similar conditions on-site and off-site of properties
owned, occupied or used by ▇▇▇▇▇, as the case may be, related to the presence
or Release of Hazardous Substances, which conditions could require remedial
action or may result in claims, demands and liabilities against, upon or,
respectively, by third parties, including without limitation, governmental
entities, adjacent property owners and any individuals suffering property
damage or personal injury.
1.11 "Environmental Laws" shall mean all federal, state and local
laws, rules, regulations, codes, judgments and decrees concerning pollution or
protection of the environment.
1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
1.13 "Former ▇▇▇▇▇ Shareholder" shall mean each Person who was,
immediately before the Effective Time, a holder of issued and outstanding
shares of ▇▇▇▇▇ Stock.
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1.14 "Hazardous Substances" shall include any dangerous substances,
toxic substances, hazardous materials or hazardous substances as defined in or
pursuant to the Resource Conservation and Recovery Act (42 U.S.C. Section 6901,
et seq.), as amended, the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. Section 9601, et seq.) ("CERCLA"), as amended, or
any other Environmental Law.
1.15 "Intellectual Property" shall have the meaning assigned to it
in Section 3.8.
1.16 "IRS" shall mean the Internal Revenue Service.
1.17 "LifeQuest SEC Documents" shall mean each report, schedule,
registration statement and definitive proxy statement filed by LifeQuest with
the SEC since January 1, 1995.
1.18 "LifeQuest Stock" shall mean the common stock, $.001 par value
of LifeQuest.
1.19 "Losses" shall mean all damages, losses, obligations,
liabilities, claims, encumbrances, deficiencies, costs and expenses including,
without limitation, reasonable attorneys' fees and other costs and expenses
incident to any suit, action, investigation, claim or proceeding.
1.20 "Merger Consideration" shall have the meaning assigned to it
in Section 2.6.
1.21 "Notice" shall mean any summons, citation, directive, order,
claim, litigation, proceeding, judgment, letter or other communication, written
or oral, actual or threatened, from the United States Environmental Protection
Agency or other federal, state or local agency or authority or any other entity
or any individual concerning any intentional or unintentional act or omission
which has resulted or may result in the Release of Hazardous Substances into
waters, or into the "environment" as such term is defined in CERCLA, from or on
property owned, occupied or used by ▇▇▇▇▇, and shall include the imposition of
any lien on property occupied or used by ▇▇▇▇▇, pursuant to any violation of
any Environmental Law, or any knowledge, after due inquiry and investigation,
of any acts that could give rise to any of the above.
1.22 "Person" shall mean an individual, corporation, partnership,
joint venture, trust or unincorporated organization, or a government or any
agency or political subdivision thereof.
1.23 "Purchaser Stock" shall mean the common stock, $.01 par value
of Purchaser.
1.24 "Release" shall mean releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping.
1.25 "SEC" shall mean the United States Securities and Exchange
Commission.
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1.26 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.27 "▇▇▇▇▇ Stock" shall mean the common stock, par value $1.00 of
▇▇▇▇▇.
1.28 "▇▇▇▇▇'▇ Contracts" shall mean (a) the contracts described on
Schedule 3.12, (b) purchase orders from customers accepted in the ordinary
course of business, and (c) employment contracts terminable on not more than 30
days' notice.
1.29 "Subsidiary" shall mean, with respect to any Person (the
"parent"), (i) any corporation, association, joint venture, partnership or
other business entity of which securities or other ownership interests
representing more than 50% of the ordinary voting power or beneficial interest
are, at the time as of which any determination is being made, owned or
controlled by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent and (ii) any joint venture or
partnership of which the parent or any Subsidiary of the parent is a general
partner or has responsibility for its management (provided, however, that the
term "Subsidiary" shall not include joint operating agreements).
1.30 "Surviving Corporation" shall mean the corporation existing at
and after the Effective Time as a result of the Merger.
ARTICLE 2
MERGER
2.1 The Merger. Subject to the terms and conditions of this
agreement, ▇▇▇▇▇ shall be merged with and into Purchaser in accordance with all
applicable laws, with Purchaser being the Surviving Corporation. Purchaser and
▇▇▇▇▇ shall cause a certificate of merger to be filed with the Secretary of
State of Nevada, and in any other jurisdiction where such a certificate of
merger is required, within two business days after the Closing Date, unless
legally prohibited from doing so. The Merger shall be effective at the
Effective Time.
2.2 Surviving Corporation. From and after the Effective Time, the
Surviving Corporation shall have the name "▇▇▇▇▇ Medical, Inc." and shall
possess all assets and property of every description, and every interest in the
assets and property, wherever located, and the rights, privileges, immunities,
powers, franchises and authority, of a public as well as of a private nature,
of each of ▇▇▇▇▇ and Purchaser, and all debts and all other things in action or
belonging or due to each of ▇▇▇▇▇ and Purchaser, all of which shall be vested
in the Surviving Corporation without further act or deed, and title to any real
estate or any interest in the real estate vested in either ▇▇▇▇▇ or Purchaser
shall not revert or in any way be impaired.
2.3 Liabilities. The Surviving Corporation shall be liable for
all the debts, liabilities and duties of each of ▇▇▇▇▇ and Purchaser; any
action or proceeding pending, by or against either ▇▇▇▇▇ or Purchaser, may be
prosecuted to judgment, with right of appeal, as if the Merger had not taken
place, or the Surviving Corporation may be substituted in its place, and all
the rights of creditors of each of ▇▇▇▇▇ and Purchaser shall be preserved
unimpaired, and all liens upon the property of each of ▇▇▇▇▇ ▇▇▇
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▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ preserved unimpaired, on only the property affected by the
liens immediately prior to the Effective Time.
2.4 Certificate of Incorporation and Bylaws. The certificate of
incorporation and bylaws of Purchaser in effect immediately prior to the
Effective Time shall be the certificate of incorporation and bylaws of the
Surviving Corporation following the Merger until otherwise amended or repealed.
2.5 Directors and Officers. The directors and officers of
Purchaser immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation until their successors are duly elected
or appointed and qualified in the manner provided in the bylaws of the
Surviving Corporation, or as otherwise provided by law.
2.6 Conversion or Cancellation of Stock Upon Merger. In
consideration for the Merger and the non- competition agreement in Section 12
hereof, as of the Effective Time, by virtue of the Merger and without any
action on the part of the holders of any shares of ▇▇▇▇▇ Stock, or the holder
of the shares of Purchaser Stock, (a) each share of ▇▇▇▇▇ Stock outstanding
immediately before the Effective Time shall be converted into the right to
receive, subject to Section 2.7, a number of shares of LifeQuest Stock, equal
to the product of (i) the Conversion Ratio and (ii) 600,000 (the "Merger
Consideration") and (b) each share of Purchaser Stock outstanding immediately
before the Effective Time shall be converted into one share of common stock of
the Surviving Corporation.
2.7 Fractional Shares. Notwithstanding Section 2.6, no
certificates or scrip representing fractional shares of LifeQuest Stock shall
be issued upon the surrender for exchange of certificates that prior to the
Effective Time represented shares of ▇▇▇▇▇ Stock, no dividend or distribution
of LifeQuest shall relate to any fractional share interest and no fractional
share interest shall entitle the owner thereof to vote or to exercise any
rights of a shareholder of LifeQuest. In the event that any Former ▇▇▇▇▇
Shareholder shall be entitled to any fractional share interest then any
fractional amount shall be rounded up to the nearest whole share.
2.8 Exchange Requirements. After the Effective Time, (a) each
outstanding Certificate shall, until duly surrendered to Purchaser, be deemed
to represent only the right to receive the Merger Consideration, (b) there
shall be no further transfer on the records of ▇▇▇▇▇ of Certificates, and (c)
each share of ▇▇▇▇▇ Stock presented or surrendered to Purchaser shall be
canceled in exchange for the Merger Consideration as contemplated by Section
2.6. In no event shall Purchaser be obligated to deliver Merger Consideration
to any holder of a Certificate until such holder surrenders such Certificate as
provided herein.
2.9 Interim Dividends. No dividends or other distributions
declared after the Effective Time on LifeQuest Stock issuable pursuant to the
Merger and payable to any Former ▇▇▇▇▇ Shareholder after the Effective Time
shall be paid to the holder of any unsurrendered certificates formerly
representing shares of ▇▇▇▇▇ Stock until the certificates shall be surrendered
as provided herein, provided, however, that (a) upon surrender there shall be
paid to the shareholder in whose name the certificates representing the shares
of LifeQuest Stock shall be issued the amount of unpaid
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dividends with respect to the holder's shares of LifeQuest Stock and (b) at the
appropriate payment date, or as soon as practicable thereafter, there shall be
paid to the shareholder the amount of dividends declared with respect to whole
shares of LifeQuest Stock with a record date on or after the Effective Time but
before surrender and a payment date subsequent to surrender, subject in any
case to any applicable escheat laws. No interest shall be payable with respect
to the payment of dividends or other distributions on surrender of outstanding
certificates.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder represents and warrants to the LifeQuest Parties as
follows:
3.1 Corporate Organization. ▇▇▇▇▇ is a corporation duly
organized, validly existing and in good standing under the laws of Texas, and
has full power and authority to own its properties and to carry on its business
as and in the places where such properties are now owned or such business is
now being conducted except to the extent the failure to have any such power or
authority would not have a material adverse effect on the business, prospects
or condition, financial or otherwise, of ▇▇▇▇▇. Complete and correct copies of
the Articles of Incorporation of ▇▇▇▇▇ and all amendments thereto, certified in
each case by the Secretary of State of the State of Texas, and of the Bylaws of
▇▇▇▇▇ and all amendments thereto, certified by the Secretary of ▇▇▇▇▇,
heretofore have been delivered to Purchaser. ▇▇▇▇▇ is duly qualified to do
business and is in good standing in all jurisdictions (each such jurisdiction
is set forth on Schedule 3.1 attached hereto and made a part hereof) in which
such qualification is necessary because of the character of the properties
owned, leased or operated by it or the nature of its activities, except to the
extent the failure to be so qualified or in good standing would not have a
material adverse effect on the business, prospects or condition, financial or
otherwise, of ▇▇▇▇▇. ▇▇▇▇▇ has not knowingly taken any action, or failed to
take any action which action or failure will preclude or prevent ▇▇▇▇▇'▇
business from being conducted in substantially the same manner in which ▇▇▇▇▇
has heretofore conducted the same.
3.2 Subsidiaries. ▇▇▇▇▇ has no subsidiaries.
3.3 Capitalization. ▇▇▇▇▇'▇ authorized capital stock consists of
1,000,000 shares of ▇▇▇▇▇ Stock, of which 1,000 shares are issued and
outstanding and are owned of record and beneficially by the Shareholder free
and clear of all liens, encumbrances or other obligations and issued without
violation of the preemptive, subscriptive or other similar rights of any person
or entity. As of the Closing Date there will be no outstanding subscriptions,
options, warrants, rights or other agreements obligating ▇▇▇▇▇ to issue any
additional shares of ▇▇▇▇▇ Stock, except as set forth on Schedule 3.3 attached
hereto and made a part hereof.
3.4 Authorization. ▇▇▇▇▇ has full power and authority, corporate
and otherwise, to enter into this Agreement and to assume and perform its
obligations hereunder. The execution and delivery of this Agreement and the
performance by ▇▇▇▇▇ of its obligations hereunder have been duly authorized by
the Board of Directors and the shareholders of ▇▇▇▇▇ and no further action or
approval, corporate or otherwise, by
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▇▇▇▇▇ is required in order to constitute this Agreement as a binding and
enforceable obligation of ▇▇▇▇▇. The execution and delivery of this Agreement
and the performance by ▇▇▇▇▇ of its obligations hereunder do not and will not
violate any provisions of the Articles of Incorporation or Bylaws of ▇▇▇▇▇ and
do not and will not conflict with or result in any breach of any condition or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the Assets by reason
of the terms of any contract, mortgage, lien, lease, agreement, indenture,
instrument or judgment to which ▇▇▇▇▇ is a party, or which is or purports to be
binding upon ▇▇▇▇▇ or which affects or purports to affect any of the Assets.
3.5 Approvals and Consents. No action, approval, consent or
authorization, including, but not limited to, any action, approval, consent or
authorization by any governmental or quasi-governmental agency, commission,
board, bureau, or instrumentality is necessary as to ▇▇▇▇▇ or the Shareholder
in order to constitute this Agreement as a valid, binding and enforceable
obligation of ▇▇▇▇▇ and the Shareholder in accordance with its terms.
3.6 Permits, Licenses, Etc. ▇▇▇▇▇ has all permits, licenses,
orders and approvals, exclusive of those required under Environmental Laws, of
all federal, state, or local governmental or regulatory bodies required for it
to conduct its business as presently conducted. All such permits, licenses,
orders and approvals are in full force and effect and no suspension or
cancellation of any of them is threatened. Except as set forth on Schedule 3.6
attached hereto and made a part hereof, ▇▇▇▇▇ is operating in compliance with
all such permits, licenses, orders and approvals, and none of such permits,
licenses, orders or approvals will be adversely affected by the consummation of
the transactions contemplated by this Agreement. ▇▇▇▇▇ is in compliance in all
material respects with each law, rule and regulation other than Environmental
Laws applicable to its business including, without limitation, laws, rules and
regulations respecting occupational safety and employment practices. The
conduct of the business of ▇▇▇▇▇ and all assets and properties utilized by
▇▇▇▇▇ therein are in conformance in all material respects with the requirements
and regulations of the Occupational Safety and Health Administration ("OSHA").
3.7 Environmental Laws. ▇▇▇▇▇ has all permits, licenses, orders
and approvals of, and has made all required filings with, all federal, state or
local governmental or regulatory bodies relating to, arising under or required
by the Environmental Laws. All such permits, licenses, orders and approvals
are in full force and effect and no suspension or cancellation of any of them
is pending or threatened. None of such permits, licenses, orders or approvals
will be adversely affected by the consummation of the transactions contemplated
by this Agreement. ▇▇▇▇▇ is in compliance with all such permits, licenses,
orders and approvals and with all limitations, conditions, standards and
requirements contained in Environmental Laws applicable to it and the business
conducted by it. Schedule 3.7 attached hereto and made a part hereof contains
a description of each summons, citation, order, letter or other written
communication received by ▇▇▇▇▇ from any federal, state or local governmental
or regulatory body under any of the Environmental Laws during the five-year
period ending on the date hereof.
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Except as disclosed on Schedule 3.7, there are no currently existing
Environmental Conditions with respect to properties owned, occupied or used by
▇▇▇▇▇. ▇▇▇▇▇ has received no Notice with respect to any Environmental
Condition at any time prior to the date hereof.
3.8 Intellectual Property and Other Intangible Assets. Schedule
3.8 sets forth a description of all intellectual property owned, licensed or
claimed by ▇▇▇▇▇. ▇▇▇▇▇ (a) owns or has the right to use all inventions,
discoveries, patents, copyrights, trademarks, trade names, service marks,
corporate names, licenses, trade secrets and know how and all other
intellectual property rights with respect to the foregoing, used in or
necessary for the conduct of its business as now conducted without infringing
upon or otherwise acting adversely to the right or claimed right of any Person
under or with respect to any of the foregoing (such inventions, discoveries,
patents, copyrights, trademarks, trade names, service marks, corporate names,
licenses, trade secrets and know how and all other intellectual property rights
with respect thereto being herein referred to as the "Intellectual Property")
and (b) is not obligated or under any liability or claim whatsoever to make any
payments by way of royalties, fees or otherwise to any owner or licensee of, or
other claimant to, any inventions, discoveries, patents, copyrights,
trademarks, trade names, service marks, corporate names, licenses, trade
secrets and know how and all other intellectual property rights, with respect
to the use thereof or in connection with the conduct of its business or
otherwise. A list of all such Intellectual Property and a statement whether
such Intellectual Property is owned or licensed is set forth in Schedule 3.8
hereto. Except as specifically set forth in Schedule 3.8 hereto, the
Intellectual Property has been duly registered or patented or sought to be
registered or patented with appropriate state, federal and foreign
jurisdictions and ▇▇▇▇▇ is the sole and exclusive owner or has the sole and
exclusive right to use the Intellectual Property.
3.9 Financial Statements. Attached hereto as Schedule 3.9 and
made a part hereof are the Financial Statements, prepared in accordance with
U.S. generally accepted accounting principles consistently applied throughout
the periods indicated. The Financial Statements (a) are true, correct and
complete, (b) fairly, completely and accurately present the financial position
of ▇▇▇▇▇ at the dates specified and the results of its operations for the
period covered, and (c) reflect expenses and liabilities of ▇▇▇▇▇ in a
consistent manner throughout the periods to which the Financial Statements
relate. At the date of the Financial Statements, ▇▇▇▇▇ had no liabilities or
obligations of any kind or nature, fixed or contingent, matured or unmatured or
otherwise, which are not fully reflected or reserved against on the Financial
Statements; nor does ▇▇▇▇▇ have any liability or obligation of any kind or
nature arising since that date other than those incurred in the ordinary course
of business consistent with past practices, none of which are material. ▇▇▇▇▇
owns outright and has good and indefeasible title to all of the Assets,
including without limitation, all of the assets and properties reflected on the
Financial Statements or acquired thereafter, free and clear of any mortgage,
lien, pledge, charge, claim, conditional sales or other agreement, lease, right
or encumbrance of any sort except: (x) to the extent stated or reserved against
on the Financial Statements and for changes occurring in the ordinary course of
business after the date thereof, none of which changes is adverse, and (y) as
set forth on Schedule 3.9A attached hereto and made a part hereof. Each such
asset and item has been fully operational in the ordinary course of business
for at least the six months immediately
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preceding the date hereof. ▇▇▇▇▇ has complete and unrestricted power and the
unqualified right to transfer, convey and assign the Assets.
3.10 Material Adverse Changes Since the Date of the Financial
Statements. Except as described in Schedule 3.17, since September 30, 1996,
there have been no material adverse change in the financial condition, assets,
liabilities, properties, or business of ▇▇▇▇▇. Since September 30, 1996, ▇▇▇▇▇
has not:
(a) issued or sold any stock, notes, bonds or other
securities, or any option to purchase the same, or entered into any agreement
with respect thereto;
(b) declared, set aside or made any dividend or other
distribution on its capital stock or redeemed, purchased or acquired any shares
thereof or entered into any agreement in respect of the foregoing;
(c) incurred any damage, destruction or similar loss, whether
or not covered by insurance, materially affecting its business or properties;
(d) other than in the ordinary course of business, sold,
assigned or transferred any of its tangible assets or any trade name,
franchise, design, or other intangible assets or property;
(e) other than in the ordinary course of business, mortgaged,
pledged or granted or suffered to exist any lien or other encumbrance or charge
on any of its assets or properties, tangible or intangible;
(f) other than in the ordinary course of business, waived any
rights of material value or canceled or modified any material debts or claims;
(g) incurred any liability or obligation for borrowed money
to any shareholder of ▇▇▇▇▇ or any Affiliate of ▇▇▇▇▇;
(h) incurred any obligation or liability (absolute or
contingent) except current liabilities and obligations incurred in the ordinary
course of its business or paid any liability or obligation (absolute or
contingent) other than current liabilities and obligations incurred in the
ordinary course of business, none of which were material;
(i) entered into any transaction other than in the ordinary
course of business;
(j) became obligated to make any payment to any shareholder
or any Affiliate of ▇▇▇▇▇ in any capacity, or entered into any transaction of
any nature with any shareholder or any Affiliate of ▇▇▇▇▇ in any capacity,
except in respect of the foregoing for compensation to shareholders or
Affiliates who are employees of ▇▇▇▇▇ in their capacity as such and in respect
to payment by ▇▇▇▇▇ to the Shareholder of not more than $100,000.00;
(k) except for increases in the ordinary course and customary
in the business of ▇▇▇▇▇, which increases did not inure to officers, directors
or shareholders
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of ▇▇▇▇▇ or to consultants to ▇▇▇▇▇, increased the compensation payable to any
employee of ▇▇▇▇▇ or became obligated to increase any such compensation, or
their capacities as such; or
(l) entered into any transaction with any Affiliate of ▇▇▇▇▇,
except in respect of the foregoing for compensation to Affiliates who are
employees of ▇▇▇▇▇ in their capacity as such.
3.11 Tax Returns. ▇▇▇▇▇ has duly filed all federal, state, county
and local income, excise, sales and other tax returns and reports required to
have been filed by it to the date hereof, after giving effect to any extensions
of time to file duly obtained by ▇▇▇▇▇. Each such return and report is true
and correct and ▇▇▇▇▇ has paid all taxes, interest and penalties shown on such
returns or reports to be due or claimed to be due prior to the date hereof to
any federal, state, county, local or other taxing authority. ▇▇▇▇▇ has no
liability for any taxes, assessments, amounts, interest or penalties of any
nature whatsoever other than as shown on the Financial Statements and there is
no basis for any additional claim or assessment. The IRS has not examined the
Federal income tax returns of ▇▇▇▇▇. No waiver of the statute of limitations
has been given with respect to any taxable year of ▇▇▇▇▇. No government or
governmental authority is now asserting or threatening to assert any deficiency
or assessment for additional taxes or any interest, penalties or fines with
respect to ▇▇▇▇▇. Complete and correct copies of the federal income tax return
of ▇▇▇▇▇ for the fiscal year ended December 31, 1995, as well as any other tax
returns requested by LifeQuest, have been heretofore delivered to LifeQuest.
3.12 Contracts. ▇▇▇▇▇ is not a party to nor has any material
contract or commitment of any kind or nature whatsoever, written or oral,
including, without limitation, any lease, license, franchise, employment,
consultant or commission agreement, pension, profit sharing, bonus, stock
purchase, retirement, hospitalization, insurance or other plan or arrangement
involving employee benefits, contract with any labor union or contract for
services, materials, supplies or equipment or for the sale or purchase of any
of its products or assets, except in respect of all of the foregoing for
▇▇▇▇▇'▇ Contracts. Except as set forth therein, each of the ▇▇▇▇▇'▇ Contracts
referred to on Schedule 3.12 is valid and existing, in full force and effect
and enforceable in accordance with its terms and no party thereto is in default
and no claim of default by any party has been made or is now pending and there
does not exist any event that with notice or the passing of time or both would
constitute a default or would excuse performance by any party thereto. None of
▇▇▇▇▇'▇ Contracts, except as expressly set forth therein, requires any consents
or approvals by any party to such contract to prevent a breach or to protect
and preserve the rights of the Surviving Corporation thereunder subsequent to
the consummation of the Merger. ▇▇▇▇▇ has heretofore delivered to LifeQuest
complete and correct copies of each of ▇▇▇▇▇'▇ Contracts.
3.13 Tangible Personal Property. Schedule 3.13 attached hereto and
made a part hereof is a true and complete list of all tangible personal
property owned by ▇▇▇▇▇ having a book value at the date of the Financial
Statements. ▇▇▇▇▇ owns and has good and indefeasible title in fee to all of
its assets and properties, free and clear of any mortgage, lien, pledge,
charge, claim, conditional sales or other agreement, lease, right or
encumbrance except (a) to the extent stated or reserved against in the
Financial
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Statements, (b) vendors' or other statutory liens which may have resulted in
the ordinary course of business, (c) minor imperfections of title, liens and
encumbrances which do not materially detract from the value or the utility of
the property subject thereto or materially impair the operations of the owner
thereof, and (d) as set forth in Schedule 3.13 attached hereto and made a part
hereof.
3.14 Real Property. ▇▇▇▇▇ owns no real property. Except as set
forth on Schedule 3.14, ▇▇▇▇▇ leases no real property. All leases of property
under which ▇▇▇▇▇ purports to be a lessee are valid, binding and in full force
and effect, and ▇▇▇▇▇ is not in default thereunder and there is no event or
fact which upon the passage of time or the giving of notice, or both, could
constitute a default by ▇▇▇▇▇ under such lease.
3.15 Insurance. Schedule 3.15 attached hereto and made a part
hereof, is a true and complete list and brief description of all policies of
fire, liability and other forms of insurance owned or held by ▇▇▇▇▇. All of
such policies are valid and binding and in full force and effect as of the date
hereof and are in such amounts and cover such risks as are customarily carried
by other businesses similar to those conducted by ▇▇▇▇▇.
3.16 Banking. Schedule 3.16 attached hereto and made a part hereof
is a true and complete list setting forth the names and locations of all banks
at which ▇▇▇▇▇ has an account or safe deposit box, the numbers of the accounts
and the names of all persons authorized to draw thereon.
3.17 Litigation. Except as described on Schedule 3.17 attached
hereto and made a part hereof, there are no actions, suits, proceedings or
investigations pending or threatened against or affecting the assets or the
business, operations or financial condition of ▇▇▇▇▇, at law or in equity, in
any court or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, nor is there
any basis for any such action, suit, proceeding or investigation. There are no
judgments outstanding against ▇▇▇▇▇ and ▇▇▇▇▇ is not in default in respect of
any judgment, order, writ, injunction, or decree of any court or any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality.
3.18 Labor. There are no threats of strikes, work stoppages or
demands for collective bargaining by any union or labor organization against or
including ▇▇▇▇▇, no grievances, disputes or controversies with any union or any
other organization of the employees of ▇▇▇▇▇, and no pending or threatened
arbitration proceedings involving an employment grievance, dispute or
controversy.
3.19 Employee Benefit Plans. Except as set forth on Schedule 3.19
attached hereto and made a part hereof, ▇▇▇▇▇ has no Benefit Plans, including,
without limitation, any "employee pension benefit plan" or "employee welfare
benefit plan" within the meaning of the Employee Retirement Income Security Act
of 1974, as amended (29 U.S.C. Section 1001, et seq.) ("ERISA"), and the final
regulations thereunder. True and complete copies of each written Benefit Plan
sponsored by ▇▇▇▇▇ have heretofore been delivered to LifeQuest. ▇▇▇▇▇ has no
commitment, written or oral, and whether legally binding or not, to create any
Benefit Plans in addition to those shown
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on Schedule 3.19. ▇▇▇▇▇ has no benefit plan that is a defined benefit plan
within the meaning of ERISA Section 3(35) maintained or contributed to by ▇▇▇▇▇
and that covers employees of ▇▇▇▇▇. ▇▇▇▇▇ has no liability on account of any
Benefit Plans, including but not limited to liability for (a) additional
contributions accruing under such Benefit Plans with respect to periods
commencing on or prior to the Closing Date; (b) fiduciary breaches by ▇▇▇▇▇,
the trustees under the trust created under any of such plans, or any other
persons under ERISA, or any other applicable statute, regulation or rule; or
(c) income taxes by reason of non-qualification of such Benefit Plans. There
are no pending claims against any Benefit Plan (other than for benefits in
accordance with its terms), nor has any claim been threatened in writing by any
participant thereof or beneficiary thereunder. Without limiting the generality
of the foregoing, all Benefit Plans are in full compliance with all applicable
reporting, disclosure, filing and other administrative requirements pertaining
to employee benefit plans set forth in the Code and ERISA and rules and
regulations promulgated under either.
3.20 Inventory. Inventory reflected on the Financial Statements as
of the date thereof was determined in accordance with generally accepted
accounting principles consistently applied, stated, on an aggregate basis, at
the lower of cost (based on the first-in, first-out method) or market value and
consists solely of merchandise usable or saleable in the ordinary course of
business at not less than gross cost. The inventory conforms to customary
trade standards for marketable goods. Since the date of the Financial
Statements, there have been no changes in the inventory reflected on the
Financial Statements except in the ordinary course of business, none of which
have been material.
3.21 Accounts Receivable. Each account receivable reflected on the
Financial Statements constitutes a bona fide receivable resulting from a bona
fide sale to a customer in the ordinary course of business, the amount of which
was actually due on the date thereof and has been or will be collected in the
ordinary course of business, net of the allowance for doubtful accounts
reflected on the Financial Statements. There are no defenses, claims of
disabilities, counterclaims, offsets, refusals to pay or other rights of
set-off against any accounts receivable and there is no threatened, intended or
proposed defense, claim of disability, counterclaim, offset, refusal to pay or
other right of set-off with respect thereto. Each account receivable, each
document and instrument and each transaction underlying or relating thereto
conforms, including, without limitation, in respect of interest rates charged,
notices given and disclosures made, to the requirements and provisions of each
applicable law, rule, regulation or other relating to credit, consumer credit,
credit practices, credit advertising, credit reporting, retail installment
sales, credit cards, collections, usury, interest rates and truth-in-lending,
including, without limitation, the Federal Truth in Lending Act, as amended,
and Regulation Z issued by the Board of Governors of the Federal Reserve System
thereunder. Except to the extent of appropriate reserves and allowances that
▇▇▇▇▇ has established specifically for doubtful accounts (which reserves and
allowances are reflected on the Financial Statements, each account receivable
existing on the Closing Date will be paid in full by not later than the 120th
day after the closing. Such reserves and allowances have been established on
the basis of historical experience in accordance with U.S. generally accepted
accounting principles consistently applied.
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3.22 Employee and Other Compensation. Schedule 3.22 attached
hereto and made a part hereof is a complete and correct list of the names and
current annual salary, bonus, commission and perquisite arrangements, written
or unwritten, for each director, officer and employee of ▇▇▇▇▇, including those
whose compensation was paid in whole or in part by persons or entities other
than ▇▇▇▇▇. No current or former shareholder, director, officer, employee or
Affiliate of ▇▇▇▇▇ or any relative, associate or agent of such shareholder,
director, officer, employee or Affiliate has any interest in any property of
▇▇▇▇▇ except as a shareholder. To the best knowledge of ▇▇▇▇▇ and the
Shareholder, no employee listed thereon intends to terminate his employment
relationship with ▇▇▇▇▇ and ▇▇▇▇▇ has no contract for the future employment of
any officer or employee not listed on Schedule 3.22.
3.23 Customers and Suppliers. Schedule 3.23 attached hereto and
made a part hereof is a complete and correct list of the names and addresses of
the 10 largest customers and suppliers, respectively, of ▇▇▇▇▇ during the last
fiscal year, and the total sales to or purchases from such customers and
suppliers made by ▇▇▇▇▇ during the last fiscal year. Except as described in
Schedule 3.17, no supplier or customer of ▇▇▇▇▇ representing in excess of 5% of
▇▇▇▇▇'▇ purchases or sales during the last fiscal year has advised ▇▇▇▇▇,
formally or informally, that it intends to terminate, discontinue or
substantially reduce its business with ▇▇▇▇▇ by reason of the transactions
contemplated by this Agreement or otherwise.
3.24 No Omission of Material Fact. No representation or warranty
by the Shareholder in this Agreement or under any documents, instruments,
certificates or schedules furnished pursuant hereto or in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements or
facts contained herein or therein not misleading.
3.25 Closing Date Effect. All of the representations and
warranties of the Shareholder are true and correct as of the date hereof and
shall be true and correct on and as of the Closing Date, with the same force
and effect as if such representations and warranties were made by the
Shareholder to the LifeQuest Parties on the Closing Date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE LIFEQUEST PARTIES
The LifeQuest Parties jointly and severally represent and warrant to
the Shareholder as follows:
4.1 LifeQuest Corporate Organization. LifeQuest is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full power and authority to own its properties and to
carry on its business as and in the places where such properties are now owned
or such businesses are now being conducted.
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4.2 Purchaser Corporate Organization. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has full power and authority to own its properties and to
carry on its business as and in the places where such properties are now owned
or such businesses are now being conducted.
4.3 Authorization. The LifeQuest Parties have full power and
authority, corporate and otherwise, to enter into this Agreement and to assume
and perform their respective obligations hereunder. The execution and delivery
of this Agreement and the performance by the LifeQuest Parties of their
respective obligations hereunder have been or will be duly authorized by the
Boards of Directors of the LifeQuest Parties and no further action or approval,
corporate or otherwise, by the LifeQuest Parties is or will be required in
order to constitute this Agreement as a binding and enforceable obligation of
the LifeQuest Parties.
4.4 Stock Options. On the Closing Date, LifeQuest will grant
options to purchase 10,000 shares of LifeQuest Stock, vested at the rate of
2,500 shares per year beginning on the first anniversary of the Closing Date,
at an option price equal to the market price of the LifeQuest Stock on the
Closing Date, to each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇.
ARTICLE 5
LIFEQUEST STOCK AND LIFEQUEST SEC DOCUMENTS
5.1 LifeQuest SEC Documents. LifeQuest has furnished the
Shareholder with a true and complete copy of the LifeQuest SEC Documents. As
of its filing date (and, with respect to any registration statement, the date
on which it was declared effective), each LifeQuest SEC Document was in
compliance, in all material respects, with the requirements of its form,
contained no untrue statement of a material fact and did not omit any statement
of a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of LifeQuest included in the
LifeQuest SEC Documents complied, at the time of filing with the SEC (and, with
respect to any registration statement, the date on which it was declared
effective), as to form, in all material respects, with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (subject,
in the case of unaudited statements, to the omission of certain footnotes) and
fairly present, in all material respects (subject, in the case of the unaudited
statements, to normal, recurring year-end audit adjustments) the consolidated
financial position of LifeQuest as at the dates thereof and the consolidated
results of their operations and changes in financial position for the periods
then ended. The consolidated financial statements of LifeQuest as of September
30, 1996, included in the LifeQuest SEC Documents disclose all liabilities of
LifeQuest required to be disclosed therein and contained adequate reserves for
taxes and all other material accrued liabilities. Since September 30, 1996,
there has not been any change in the business, assets, properties, condition
(financial or otherwise), results of operations or prospects of LifeQuest, and
no condition exists, which in any case would have or be a material adverse
effect on, or with respect to, LifeQuest.
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5.2 No Omission of Material Fact. No representation or warranty
by the LifeQuest Parties in this Agreement or under any documents, instruments,
certificates or schedules furnished pursuant hereto or in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements or
facts contained herein or therein not misleading.
5.3 Closing Date Effect. All of the representations and
warranties of the LifeQuest Parties are true and correct as of the date hereof
and shall be true and correct on and as of the Closing Date with the same force
and effect as if such representations and warranties were made by the LifeQuest
Parties to ▇▇▇▇▇ on the Closing Date.
ARTICLE 6
AGREEMENT AND PLAN OF REORGANIZATION
6.1 Tax Treatment. ▇▇▇▇▇ and the Shareholder, LifeQuest and
Purchaser intend that the transactions contemplated hereunder constitute a
tax-free reorganization (a "Reorganization") under Section 368 of the Code, and
agree to treat and report the transactions hereunder as a Reorganization. This
Agreement shall be construed in a manner to result in treatment of the
transactions hereunder as a Reorganization.
ARTICLE 7
CLOSING
7.1 The closing of the transactions contemplated hereby shall take
place on the Closing Date, November 27, 1996, at the offices of LifeQuest
Medical, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
or at such other place and on such other date as the parties shall agree. The
date of closing so determined is herein sometimes called the "closing" or the
"Closing Date."
ARTICLE 8
CONDITIONS OF CLOSING
8.1 LifeQuest Parties. The obligation of the LifeQuest Parties to
close hereunder shall be subject to the satisfaction of the following
conditions or the written waiver thereof by the LifeQuest Parties:
(a) Each of the agreements and covenants of ▇▇▇▇▇ and the
Shareholder to be performed under this Agreement at or prior to the Closing
shall have been duly performed in all material respects, and the LifeQuest
Parties shall have received a certificate to that effect dated the Closing Date
and executed by the Chief Executive Officer of ▇▇▇▇▇ and the Shareholder.
(b) The representations and warranties of ▇▇▇▇▇ and the
Shareholder in this Agreement shall be true and correct in all material
respects on and as of the Closing Date, and the LifeQuest Parties shall have
received a certificate to that effect
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dated the Closing Date and executed by the Chief Executive Officer of ▇▇▇▇▇ and
the Shareholder.
(c) No injunction or restraining order shall be in effect to
forbid or enjoin the consummation of the transactions contemplated by this
Agreement and no Federal, state, local or foreign statute, rule or regulation
shall have been enacted which prohibits, restricts or delays the consummation
hereof.
(d) All consents, authorizations, orders or approvals of, and
filings or negotiations with, any Federal, state, local or foreign governmental
agency, commission, board or other regulatory body which are required for or in
connection with the execution, delivery and performance of this Agreement by
▇▇▇▇▇ and the Shareholder and the consummation of the transactions contemplated
hereby, and in order to permit or enable the Surviving Corporation, after the
closing to operate a business substantially similar to ▇▇▇▇▇'▇ business as
conducted by ▇▇▇▇▇ as of the date hereof, shall have been duly obtained or
made, including, but not limited to, any approvals required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act.
(e) LifeQuest shall have received a certified copy of
resolutions duly adopted by the Board of Directors and shareholders of ▇▇▇▇▇
authorizing and approving the execution and delivery of this Agreement and
performance by ▇▇▇▇▇ of its obligations hereunder.
(f) ▇▇▇▇ ▇▇▇▇▇ shall have executed and delivered to the
Company an Employment Agreement and a Non- Qualified Stock Option Agreement in
the forms attached hereto as Exhibit B and Exhibit C, respectively.
(g) LifeQuest shall have received such further certificates
and documents as shall have been reasonably requested by the LifeQuest Parties,
including consents of all requisite third parties.
(h) The Shareholder shall have executed and delivered a Right
of First Refusal Agreement in form and substance satisfactory to the LifeQuest
Parties.
(i) The LifeQuest Parties shall have completed their
diligence activities to their satisfaction.
8.2 The Shareholder and ▇▇▇▇▇. The obligation of the Shareholder
and ▇▇▇▇▇ to close hereunder shall be subject to the satisfaction of the
following conditions or the written waiver thereof by the Shareholder and
▇▇▇▇▇:
(a) Each of the agreements and covenants of the LifeQuest
Parties to be performed under this Agreement at or prior to the Closing shall
have been duly performed in all material respects and the Shareholder shall
have received a certificate to that effect dated the Closing Date and executed
by the President and Chief Executive Officer of each of the LifeQuest Parties.
(b) The representations and warranties of the LifeQuest
Parties in this Agreement shall be true and correct in all material respects on
and as of the Closing
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Date and the Shareholder shall have received a certificate to that effect dated
the Closing Date and executed by the President and Chief Executive Officer of
each of the LifeQuest Parties.
(c) No injunction or restraining order shall be in effect to
forbid or enjoin the consummation of the transactions contemplated by this
Agreement and no Federal, state, local or foreign statute, rule or regulation
shall have been enacted which prohibits, restricts or delays the consummation
hereof.
(d) The Board of Directors of LifeQuest shall include one
member designated by the Shareholder with the approval of the Board of
Directors of LifeQuest. Following the Closing Date, so long as the Shareholder
is the beneficial owner of at least 5% of the outstanding shares of LifeQuest
Stock, Purchaser shall use its best efforts to cause the Board of Directors to
nominate one person designated by the Shareholder for election to the Board of
Directors of LifeQuest.
(e) The Shareholder shall have received the Merger
Consideration.
(f) The Shareholder shall have received such further
certificates and documents as he shall have reasonably requested.
ARTICLE 9
REMEDIES FOR BREACH
9.1 Arbitration. The LifeQuest Parties and the Shareholder agree
that any dispute or controversy arising out of or in connection with this
Agreement or any alleged breach hereof shall be settled by arbitration in San
Antonio, Texas pursuant to the rules of the American Arbitration Association.
If the two parties cannot jointly select a single arbitrator to determine the
matter, one arbitrator shall be chosen by each party (or, if a party fails to
make a choice, by the American Arbitration Association on behalf of such party)
and the two arbitrators so chosen will select a third. The decisions of the
single arbitrator jointly selected by the parties, or, if three arbitrators are
selected, the decision of any two of them, will be final and binding upon the
parties and the judgment of a court of competent jurisdiction may be entered
thereon. Fees of the arbitrators and costs of arbitration shall be borne by
the parties in such manner as shall be determined by the arbitrator or
arbitrators.
9.2 Survival of Representations, Warranties and Agreements. All
of the representations, warranties, covenants and agreements made by the
parties to this Agreement shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereunder until
11:59 p.m., Central Time, on the day before the fourth anniversary of the
Closing Date.
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification. The Shareholder shall defend and indemnify
the LifeQuest Parties and save and hold them harmless from, against, for and in
respect of, and pay any and all Losses suffered, sustained, incurred or
required to be paid by
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the LifeQuest Parties by reason of (a) any breach or failure of observance or
performance of any representation, warranty, covenant, agreement or commitment
made by ▇▇▇▇▇ or the Shareholder hereunder or relating to or as a result of any
such representation, warranty, covenant, agreement or commitment being untrue
or incorrect; or (b) as to products currently manufactured or sold by ▇▇▇▇▇,
any action for infringement upon or use adverse to the right or claimed right
of any Person to use all inventions, discoveries, patents, copyrights,
trademarks, trade names, service marks, corporate names, licenses, trade
secrets and know how and all other intellectual property rights with respect to
the foregoing.
10.2 Procedure for Indemnification. In the event that the
Shareholder shall be obligated to the LifeQuest Parties pursuant to this
Article, or in the event that a suit, action, investigation, claim or
proceeding is begun, made or instituted as a result of which the Shareholder
may become obligated to the LifeQuest Parties hereunder, the LifeQuest Parties
shall give prompt written notice to the Shareholder of the occurrence of such
event. The Shareholder agrees to defend, contest or otherwise protect against
any such suit, action, investigation, claim or proceeding at the Shareholder's
own cost and expense. The LifeQuest Parties shall have the right, but not the
obligation, to participate, at its own expense, in the defense thereof by
counsel of its own choice. In the event that the Shareholder fails timely to
defend, contest or otherwise protect against any such suit, action,
investigation, claim or proceeding, the LifeQuest Parties shall have the right
to defend, contest or otherwise protect against the same, and, upon 10 days'
written notice to the Shareholder, make any compromise or settlement thereof
and recover the entire cost thereof from the Shareholder, including, without
limitation, reasonable attorneys' fees, disbursements and all amounts paid as a
result of such suit, action, investigation, claim or proceeding or compromise
or settlement thereof.
ARTICLE 11
REQUIREMENTS OF SECURITIES LAWS
11.1 Accredited Investors. The Shareholder recognizes that the
Merger Consideration is not being registered under the Securities Act in
reliance upon an exemption from the Securities Act which is predicated, in
part, on the representations and agreements of the Shareholder set forth in
this Agreement. The Shareholder represents and warrants to the LifeQuest
Parties that he is an "accredited investor" as that term is defined in Rule
501(a) of the Securities Act and that the Merger Consideration is being
acquired solely for his own account for investment and not with a view to, or
for offer or resale in connection with, a distribution thereof within the
meaning of the Securities Act. The Shareholder understands that the effect of
such representation and warranty is that the Merger Consideration must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available at the time for any proposed sale
or other transfer thereof. The Shareholder also understands that LifeQuest is
under no obligation to file a registration statement under the Securities Act
covering the Merger Consideration, other than as set forth in Section 11.4, or
to take any other action to enable the Shareholder to transfer or otherwise
dispose of the Merger Consideration. The Shareholder represents that he has
consulted with his counsel in regard to the Securities Act and that he is fully
familiar with the circumstances under which he is required to hold the Merger
Consideration and the limitations upon the transfer or
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other disposition thereof. The Shareholder acknowledges that the LifeQuest
Parties are relying upon the truth and accuracy of the foregoing
representations and warranties in issuing the Merger Consideration under the
Securities Act. The Shareholder agrees to indemnify and hold the LifeQuest
Parties harmless against all liabilities, costs and expenses, including
reasonable attorneys' fees, incurred by the LifeQuest Parties as a result of
any sale, transfer or other disposition by the Shareholder of all or any part
of the Merger Consideration in violation of the Securities Act.
11.2 Legend. The Merger Consideration shall bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT."
11.3 SEC Documents. The Shareholder acknowledges that he has been
furnished by the LifeQuest Parties with (a) a copy of the Annual Report on Form
10-K of LifeQuest for the fiscal year ended December 31, 1995, in the form
filed with the SEC, and (b) copies of all filings since December 31, 1995, by
LifeQuest with the SEC in compliance with Section 13 or 14 of the Exchange Act.
The Shareholder represents that he has reviewed the foregoing documents and
acknowledges that he has been afforded the opportunity to obtain any additional
information necessary to verify the accuracy of the information contained in
the foregoing documents, including the opportunity to ask questions of, and
receive answers from, officers and representatives of LifeQuest concerning the
LifeQuest Parties and the terms and conditions of the transactions contemplated
by this Agreement. The Shareholder acknowledges that Vail & ▇▇▇▇▇▇▇▇▇, P.C.,
attorneys at law, have advised him during the course of the negotiation of this
Agreement, and that it has consulted Vail & ▇▇▇▇▇▇▇▇▇, P.C., attorneys at law,
with respect to the transactions contemplated by this Agreement.
11.4 Incidental Registration. If, at any time between December
31, 1997 and December 31, 1999, LifeQuest proposes to register any of the
LifeQuest Stock (whether unissued, yet to be authorized or held by any person)
under the Securities Act, or if, at any time between the Closing Date and
December 31, 1997, LifeQuest proposes to register any of the LifeQuest Stock on
behalf of any selling shareholder under the Securities Act, LifeQuest shall, at
least 30 days prior to the filing under the Securities Act of the registration
statement relating thereto, give written notice to the Shareholder of its
intention to do so, and, upon the written request of the Shareholder given
within 10 days after the giving of any such notice (which request shall state
the proposed method of distribution), LifeQuest shall include or cause to be
included in any such registration statement the Merger Consideration (but not
more than 100,000 shares of LifeQuest Stock prior to December 31, 1997);
provided, however, that LifeQuest may at any time withdraw or cease proceeding
with any such registration if it shall at the time withdraw or cease proceeding
with the registration of such LifeQuest Stock originally proposed to be
registered; and provided further, that if the
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registration proposed by LifeQuest relates to an underwritten offering, the
Shareholder shall not have any right to sell the Merger Consideration in any
manner or through any underwriter other than in the manner and through the
managing underwriter or underwriters being used by LifeQuest.
(a) Notwithstanding any other provision of this Section
11.4, if a registration pursuant to this Section 11.4 involves a firm
commitment, underwritten offering of the securities so being registered and if
the managing underwriter of such offering informs LifeQuest and the Shareholder
by letter of its belief that marketing factors require a limitation of the
number of shares to be underwritten, LifeQuest may limit the amount of Merger
Consideration to be included in the registration and underwriting; provided
that no such reduction shall reduce the securities being offered by LifeQuest
for its own account; and provided that those shares which are excluded from the
underwritten offering shall be withheld from the market by the holders thereof
for a period, not to exceed 180 days, which the managing underwriter reasonably
determines as necessary in order to effect the underwritten offering.
(b) Registration Procedures and Expenses. If and
whenever LifeQuest is required to include the Merger Consideration in a
registration statement under the Securities Act, as provided in Section 11.4
hereof, LifeQuest shall, as expeditiously as is reasonably practicable, do each
of the following:
(i) prepare and file with the SEC a registration
statement with respect to the Merger Consideration and, subject to the
limitations under Section 11.4 hereof, use its best efforts to cause
such registration statement to become effective;
(ii) cooperate with the Shareholder and any underwriter
who shall sell the Merger Consideration in connection with their
review of LifeQuest made in connection with such registration;
(iii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for 120 days from the date of its effectiveness,
and to comply with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all the Merger
Consideration covered by such registration statement for such period;
(iv) furnish to the Shareholder such number of copies of
the prospectus forming a part of such registration statement
(including each preliminary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as the
Shareholder may reasonably request in order to facilitate the
disposition of the Merger Consideration; and
(v) LifeQuest shall (a) notify the Shareholder at any time
when a prospectus relating to the Merger Consideration is required to
be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus forming a part of such
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material
20
22
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing, and (b) at the request of the Shareholder, prepare and
furnish to the Shareholder a reasonable number of copies of any
supplement to or any amendment of such prospectus that may be
necessary so that, as thereafter delivered to the purchasers of the
Merger Consideration, such prospectus shall not include any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(c) Agreement by the Shareholder. In the event that the
Shareholder participates, pursuant to this Section 11.4, in the offering of the
Merger Consideration, the Shareholder shall;
(i) furnish LifeQuest all material information reasonably
requested by LifeQuest concerning the Shareholder and the proposed
method of sale or other disposition of the Merger Consideration and
such other information and undertakings as shall be reasonably
required in connection with the preparation and filing of the
registration statement covering the Merger Consideration in order to
ensure full compliance with the Securities Act and the rules and
regulations of the SEC thereunder;
(ii) cooperate in good faith with LifeQuest and its
underwriters, if any, in connection with such registration, including
placing the Merger Consideration in escrow or custody to facilitate
the sale and distribution thereof provided that such escrow or custody
arrangement shall be no more restrictive upon the Shareholder than
upon any other holder of LifeQuest Stock for the benefit of whom such
registration is undertaken; and
(iii) make no further sales or other dispositions, or offers
therefor, of the Merger Consideration under such registration
statement if, during the effectiveness of such registration statement,
an intervening event should occur which, in the opinion of counsel to
LifeQuest, makes the prospectus included in such registration
statement no longer comply with the Securities Act, so long as written
notice containing the facts and legal conclusions relied upon by
LifeQuest in this regard has been received by the Shareholder from
LifeQuest, until such time as the Shareholder has received from
LifeQuest copies of a new, amended or supplemented prospectus
complying with the Securities Act, which prospectus shall be delivered
to the Shareholder by LifeQuest as soon as practicable after such
notice.
(d) Allocation of Expenses. If and whenever LifeQuest is
required by the provisions of this Section 11.4 to use its best efforts to
effect the registration of the Merger Consideration under the Securities Act,
LifeQuest shall pay the costs and expenses in connection therewith; provided,
however, that the Shareholder shall pay, in all events, all underwriting
discounts, selling commissions and stock transfer taxes attributable to the
Merger Consideration under such registration statement.
21
23
(e) Indemnification. In the event of any registration of
any of the Merger Consideration under the Securities Act pursuant to this
Section 11.4, the Shareholder shall indemnify and hold harmless, LifeQuest,
each director of LifeQuest, each officer of LifeQuest who shall sign such
registration statement, each underwriter and any person who controls LifeQuest
or such underwriter within the meaning of the Securities Act, with respect to
any statement in or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, if such statement or omission was made in reliance upon and
in conformity with written information furnished to LifeQuest or its
underwriter through an instrument duly executed by the Shareholder specifically
for use in the preparation of such registration statement, preliminary
prospectus, final prospectus or amendment or supplement.
11.5 Other Restrictions. Notwithstanding anything herein to the
contrary, ▇▇▇▇▇ and the Shareholder shall not sell or transfer or otherwise
dispose of any of the Merger Consideration until the expiration of a period of
one year from the Closing Date except for sales under an effective registration
statement of LifeQuest pursuant to Section 11.4 and transfers of up to an
aggregate of 17,250 shares of LifeQuest stock to ▇▇▇▇▇▇ ▇▇▇▇▇▇ (the "Broker"),
subject to verification by LifeQuest that the Broker is an "accredited
investor" and that such transfer is otherwise in compliance with federal and
state securities laws.
ARTICLE 12
NON-COMPETITION AGREEMENT
12.1 As a material inducement to the LifeQuest Parties to enter
into this Agreement and pay the Merger Consideration, the Shareholder hereby
covenants and agrees that, commencing on the Closing Date and ending on the
first anniversary of the Closing Date, the Shareholder shall not, directly or
indirectly, as proprietor, partner, shareholder, director, officer, employee,
consultant, joint venturer, investor or in any other capacity, engage in, or
own, manage, operate or control, or participate in the ownership, management,
operation or control, of any entity which engages anywhere in the United States
or Canada in the design, manufacturing, marketing, sale or distribution of
minimally invasive surgery products; provided, however, the foregoing shall not
prohibit the Shareholder from purchasing and holding as an investment not more
than 5% of any class of publicly traded securities, or 10% of any class of
other securities, of any entity which is engaged in the design, manufacturing,
marketing, sale or distribution of minimally invasive surgery products, so long
as the Shareholder does not participate in any way in the management, operation
or control of such entity and provided, further, that the foregoing shall not
prohibit the Shareholder from manufacturing, marketing, selling or distributing
the product which is covered by Exhibit D.
12.2 Judicial Reformation. The Shareholder acknowledges that,
given the nature of the LifeQuest Parties' business, the covenants contained in
Section 12.1 establish reasonable limitations as to time, geographic area and
scope of activity to be restrained and do not impose a greater restraint than
is reasonably necessary to protect and preserve the goodwill of the LifeQuest
Parties' business and to protect their
22
24
legitimate business interests. If, however, Section 12.1 is determined by any
court of competent jurisdiction to be unenforceable by reason of its extending
for too long a period of time or over too large a geographic area or by reason
of it being too extensive in any other respect or for any other reason, it will
be interpreted to extend only over the longest period of time for which it may
be enforceable and/or over the largest geographic area as to which it may be
enforceable and/or to the maximum extent in all other aspects as to which it
may be enforceable, all as determined by such court.
12.3 Customer Lists; Non-Solicitation. The Shareholder hereby
further covenants and agrees that, commencing on the Closing Date and ending on
the second anniversary of the Closing Date, the Shareholder shall not, directly
or indirectly, in connection with the design, manufacture, marketing, sale or
distribution of minimally invasive surgery products, (a) use or make known to
any person or entity the names or addresses of any clients or customers of
▇▇▇▇▇ or the LifeQuest Parties or any other information pertaining to them, (b)
call on, solicit, take away or attempt to call on, solicit or take away any
clients or customers of ▇▇▇▇▇ or the LifeQuest Parties, nor (c) recruit, hire
or attempt to recruit or hire any employees of ▇▇▇▇▇ or the LifeQuest Parties;
provided that the Shareholder shall not be prohibited from engaging in the
activities described in (a) and (b) above in connection with the manufacture,
marketing, sale or distribution of the product which is covered by Exhibit D in
the event that LifeQuest does not exercise its right of first refusal
thereunder.
12.4 Covenants Independent. The covenants of the Shareholder
contained in Sections 12.1, 12.2 and 12.3 of this Agreement will be construed
as independent of any other provision in this Agreement; and the existence of
any claim or cause of action by the Shareholder against the LifeQuest Parties
will not constitute a defense to the enforcement by the LifeQuest Parties of
said provisions. The Shareholder understands that the provisions contained in
Sections 12.1, 12.2 and 12.3 are essential elements of the transactions
contemplated by this Agreement and, but for the agreement of the Shareholder to
Sections 12.1, 12.2 and 12.3, the LifeQuest Parties would not have agreed to
enter into this Agreement and the transactions contemplated herein. The
Shareholder has been advised to consult with counsel in order to be informed in
all respects concerning the reasonableness and propriety of Sections 12.1, 12.2
and 12.3 with specific regard to the nature of the business conducted by ▇▇▇▇▇
and the LifeQuest Parties and the Shareholder acknowledges that Sections 12.1,
12.2 and 12.3 are reasonable in all respects.
12.5 Remedies. In the event of a breach or a threatened breach by
the Shareholder of any of the provisions contained in Sections 12.1, 12.2 or
12.3 of this Agreement, the Shareholder acknowledges that the LifeQuest Parties
may suffer irreparable injury not fully compensable by money damages and, in
such event, will not have an adequate remedy available at law. Accordingly,
the LifeQuest Parties shall be entitled to obtain such injunctive relief or
other equitable remedy from any court of competent jurisdiction as may be
necessary or appropriate to prevent or curtail any such breach, threatened or
actual. The foregoing shall be in addition to and without prejudice to any
other rights that the LifeQuest Parties may have under this Agreement, at law
or in equity, including, without limitation, the right to ▇▇▇ for damages.
23
25
ARTICLE 13
CONFIDENTIALITY
13.1 Nondisclosure. The Shareholder shall not, without the prior
written consent of the Board of Directors of LifeQuest, disclose or use for any
purpose confidential information or proprietary data of ▇▇▇▇▇, Purchaser or
LifeQuest (or any of their respective subsidiaries), except as required by
applicable law or legal process; provided, however, that confidential
information shall not include any information known generally to the public or
ascertainable from public or published information (other than as a result of
unauthorized disclosure by such Shareholder) or any information of a type not
otherwise considered confidential by persons engaged in the same business or a
business similar to that conducted by ▇▇▇▇▇ or LifeQuest (or any of their
respective subsidiaries).
ARTICLE 14
GENERAL PROVISIONS
14.1 Expenses. Each of the parties hereto shall pay all expenses
incurred by it incident to preparing for, entering into and carrying into
effect this Agreement. Purchaser acknowledges that the reasonable fees and
disbursements of Vail & ▇▇▇▇▇▇▇▇▇, P.C., attorneys at Law, shall be paid by
▇▇▇▇▇.
14.2 Notices. Any notice, report, demand or payment required,
permitted or desired to be given pursuant to any of the provisions of this
Agreement shall be deemed to have been sufficiently given or served for all
purposes if hand delivered or delivered by responsible overnight courier or
sent by certified or registered air mail, return receipt requested, and postage
prepaid as follows:
If to the LifeQuest Parties:
LifeQuest Medical, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with a copy to: Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
If to the Shareholder: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
1206 Safari
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
24
26
with a copy to: Vail & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇ ▇. ▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Any of the foregoing parties may at any time and from time to time
change the address to which notice shall be sent hereunder, by notice to the
other parties given under this subsection. The date of the giving of such
notice delivered by hand or by responsible overnight courier shall be the date
of its delivery, and the date of the giving of such notice by certified or
registered mail shall be the date three days after the posting of the mail.
14.3 Finders. Each of the parties covenants and represents to the
other that there are no claims for brokerage commissions or finder's fees in
connection with the negotiation of this Agreement and the performance of the
transactions contemplated hereunder resulting from any action taken by it other
than 34,500 shares of LifeQuest Stock to be paid to the Broker, 17,250 shares
of which shall be paid by the Shareholder and 17,250 shares of which shall be
issued by LifeQuest, subject to verification by LifeQuest that the Broker is an
"accredited investor" and that such issuance is otherwise in compliance with
federal and state securities laws. Each of the parties agrees to indemnify and
hold harmless the other in respect of any and all Losses sustained by the other
as a result of any other liability to any broker or finder on the basis of any
arrangement, agreement or acts made by or on behalf of such party with any
other person or persons whatsoever.
14.4 Complete Agreement. The representations, warranties,
covenants and agreements set forth in this Agreement and in any financial
statement, schedule or exhibit delivered pursuant hereto, constitute all of the
representations, warranties, covenants and agreements among the parties hereto
and upon which the parties have relied, and, except as may be specifically
provided herein, no change, modification, addition or termination of the
Agreement or any part thereof shall be valid unless in writing and signed by or
on behalf of the party to be charged therewith.
14.5 Prior Agreements. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes prior agreements relating thereto.
14.6 No Waiver. No waiver of the provisions hereof shall be
effective unless in writing and signed by the party to be charged with such
waiver. No waiver shall be deemed a continuing waiver or waiver in respect of
any subsequent breach or default, either of similar or different nature unless
expressly so stated in writing.
14.7 Headings. The headings or captions under Sections of this
Agreement are for convenience and reference only, and do not form a part
hereof, and do not in any way modify, interpret or construe the intent of the
parties or affect any of the provisions of this Agreement.
25
27
14.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
14.9 Assignment. Neither this Agreement nor the rights of the
parties hereto shall not be assignable, unless otherwise specifically provided.
14.10 Severability. If any term or provision of this Agreement
shall be held to be invalid or unenforceable for any reason, such term or
provision shall be ineffective to the extent of such invalidity or
unenforceability without invalidating the remaining terms and provisions
hereof, and this Agreement shall be construed as if such invalid or
unenforceable term or provision had not been contained herein. Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
26
28
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger
and Acquisition Agreement to be signed on the date and year first above
written.
LIFEQUEST MEDICAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
President and Chief Executive Officer
▇▇▇▇▇ MEDICAL ACQUISITION CO.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
President and Chief Executive Officer
▇▇▇▇▇ MEDICAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
SHAREHOLDER
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇
▇▇
ADDENDUM TO
PLAN TO MERGER AND ACQUISITION AGREEMENT
among
LIFEQUEST MEDICAL, INC.
a Delaware corporation
▇▇▇▇▇ MEDICAL ACQUISITION CO.,
a Nevada corporation,
and
▇▇▇▇▇ MEDICAL, INC.
a Texas corporation
The parties further agree:
1. The Shareholder has heretofore commenced and currently operates a
business under the name "Tentex Companies" ("Tentex"), separate and apart from
the business of ▇▇▇▇▇. None of the assets of Tentex, which consist principally
of components potentially useable in connection with repair of products such
as those currently distributed and/or serviced by ▇▇▇▇▇, is or has ever been
reflected on the books and records or financial statements of ▇▇▇▇▇. It had
been and remains the intent of the Shareholder to operate Tentex as a supplier
of such components to ▇▇▇▇▇ and third parties for use in repair of such
products.
The LifeQuest Parties consent to the operation of Tentex by Shareholder
in accordance with the foregoing and agree that (a) such continued operation
shall not be deemed to constitute a breach of any obligation on the part of
Shareholder and/or ▇▇▇▇▇ on his, its or their parts to be performed and/or
observed pursuant to this to this Agreement or any other agreement between or
among any of them, including the Employment Agreement to be entered
simultaneously herewith between Purchaser and Shareholder and that (b) there
shall not be deemed to exist any conflict or other breach of obligation as a
result of the sale by Tentex to ▇▇▇▇▇ of any such components so long as the
price therefor shall be not more than the price at which such components are
available from any independent third party regularly engaged in the sale os
such components are available from any independently third party regularly
engaged in the sale of such components in the ordinary course of such third
party's business.
2. The parties acknowledge that the "Right of First Refusal Agreement"
referred to in this Agreement (a copy of which is to be annexed as Exhibit D)
has not been completed at the date hereof. Such document will be completed in
form so as to provide the following first refusal rights to LifeQuest:
A. The right to provide the funds required pursuant to Sections
5.1 and 5.2 of a certain "Distribution Agreement" between Apollo Camera, L.L.C.
and Lapro Vision, Inc., aggregating $500,000, in consideration for the
agreement that LifeQuest will receive the first $500,000 of distributable
profits and 20% of any and all additional profits of Lapro Vision pursuant to
such Distributorship Agreement; and
30
B. The right to serve as a sub-distributor of the products
covered by such Distributorship Agreement in any territory in which LifeQuest
(and/or any subsidiary) then currently operates on a regular and substantial
basis, on terms not less favorable than available to any other entity to whom
such sub-distribution rights are offered.
3. Certain Schedules to this Agreement have not been completed at the
date hereof. Such Schedules will be completed and delivered hereafter and will
thereupon be deemed annexed as of the Closing date for all purposes.
4. The parties agree to use their best efforts in good faith to
complete the matters referred to at paragraphs 2 and 3 above as soon hereafter
as possible. Any dispute with respect to any such matter shall be resolved by
arbitration in accordance with the terms of the Agreement.
LIFEQUEST MEDICAL, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ MEDICAL ACQUISITION CO.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ MEDICAL, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Shareholder:
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ 3.1 Corporate Organization
----------------------
Schedule 3.3 Capitalization/List of Shareholder
----------------------------------
Schedule 3.6 Permits, Licenses, etc.
-----------------------
Schedule 3.7 Environmental
-------------
Schedule 3.8 Intellectual Property and Other Tangible Assets
-----------------------------------------------
Schedule 3.9 Financial Statements
--------------------
Schedule 3.9A Exceptions to Financial Statements
----------------------------------
Schedule 3.11 Tax Returns
-----------
Schedule 3.12 Contracts
---------
Schedule 3.13 Tangible Personal Property
--------------------------
Schedule 3.14 Real Property
-------------
Schedule 3.15 Insurance
---------
Schedule 3.16 Banking
-------
Schedule 3.17 Litigation
----------
Schedule 3.19 Employee Benefit Plans
----------------------
Schedule 3.22 Employee and Other Compensation
-------------------------------
Schedule 3.23 Customers and Suppliers
-----------------------
32
LIST OF EXHIBITS
Exhibit A - Certificate of Merger
Exhibit B - Employment Agreement of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
33
EXHIBIT A
ARTICLES OF MERGER
OF
▇▇▇▇▇ MEDICAL, INC.
INTO
▇▇▇▇▇ MEDICAL ACQUISITION CO.
FIRST: The name of the surviving entity is ▇▇▇▇▇ Medical Acquisition
Co., and the place of its organization is the jurisdiction of the State of
Nevada. The name and place of organization of the entity being merged into the
surviving entity is ▇▇▇▇▇ Medical, Inc., organized in the jurisdiction of the
State of Texas, the laws of which permit this merger.
SECOND: A plan of merger was adopted by each entity that is a party
to this merger.
THIRD: The plan of merger was adopted by the owners of ▇▇▇▇▇ Medical
Acquisition Co. by unanimous consent.
FOURTH: The First Article of the Articles of Incorporation of ▇▇▇▇▇
Medical Acquisition Co. is deleted in its entirety and replaced by the
following: "FIRST: The Name of the Corporation is ▇▇▇▇▇ Medical, Inc." The
Articles of Incorporation as so amended shall be the Articles of Incorporation
of the surviving entity.
FIFTH: The complete executed plan of merger is on file at the place
of business of ▇▇▇▇▇ Medical Acquisition Co. (to be known as ▇▇▇▇▇ Medical,
Inc.) located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
and a copy of the plan will be furnished by ▇▇▇▇▇ Medical Acquisition Co. (to
be known as ▇▇▇▇▇ Medical, Inc.) on request and without cost to any owner of
any entity which is a party to this merger.
SIXTH: All entities party to this merger have complied with laws of
their respective jurisdiction of organization concerning this merger.
SEVENTH: This merger shall be effective on November 27, 1996.
[signatures on next page]
34
▇▇▇▇▇ MEDICAL ACQUISITION CO.
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Secretary
State of Texas
County of Bexar
On _________________, 1996, personally appeared before me, a Notary
Public, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, who acknowledged that they
executed the above instrument.
---------------------------------------
Signature of Notary Public
-2-
35
EXHIBIT B
EMPLOYMENT AGREEMENT
This Agreement is made by and between ▇▇▇▇▇ Medical
Acquisition Co., a Nevada corporation (the "Company"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
("Employee").
ARTICLE 1
COMPENSATION AND TERM
1.01 Basic Compensation. As compensation for the services
to be rendered hereunder, the Company shall pay Employee a salary of $125,000
per year, which shall be payable in at least monthly installments during the
term of this Agreement. In addition, LifeQuest Medical, Inc. and the Employee
have entered into a Non-Qualified Stock Option Agreement of even date herewith
pursuant to which LifeQuest Medical, Inc. has granted to Employee non-qualified
stock options to receive up to 60,000 shares of Common Stock, $.001 par value,
of LifeQuest Medical, Inc. upon the terms and conditions set forth in such
agreement.
1.02 Additional Compensation. As additional compensation,
the Company shall pay to Employee, within 90 days following the end of each
calendar year during the term of this Agreement after January 1, 1997, cash in
an amount equal to (i) 1% of Net Sales, as hereinafter defined, up to
$2,500,000, (ii) 2% of Net Sales from $2,500,001 up to $5,000,000, and (iii) 3%
of Net Sales in excess of $5,000,000 during each such calendar year. "Net
Sales" shall be defined as (i) gross sales of the products marketed by the
Company, as reflected in the Company's financial statements prepared in
accordance with generally acceptable accounting principles consistently
applied, plus, (ii) to the extent not included in such gross sales, sales of
the products marketed by the Company as to which the Company is entitled to
commission income (net of such commission income); less sales returns,
discounts, taxes and bad debts written off.
1.03 Term. Subject to earlier termination pursuant to
Article V hereof, this Agreement shall have a term commencing as of the
execution date of this Agreement and ending on December 31, 1999.
ARTICLE 2
DUTIES OF EMPLOYEE
2.01 Duties. The Company hereby employs Employee to serve
as President of ▇▇▇▇▇ Medical Acquisition Co. or in such other capacities as
the respective Boards of such companies may direct from time to time, and
Employee agrees to perform the duties of such offices as set forth in the
bylaws of the Company and LifeQuest Medical, Inc. or as the respective Boards
of such companies may direct from time to time.
36
2.02 Other Activities. During the term of this Agreement
Employee shall devote his full-time efforts to his duties hereunder, provided,
however, that the foregoing shall not prohibit Employee from manufacturing,
marketing, selling or distributing the product which is covered by the Right of
First Refusal Agreement dated November 25, 1996 (the "First Refusal
Agreement"), between Employee and LifeQuest Medical, Inc. ("LifeQuest").
ARTICLE 3
EMPLOYEE BENEFITS
3.01 Medical and Dental Benefits. The Company agrees to
include Employee in any life, hospital, surgical, medical, disability and
dental benefit plan(s) that it or LifeQuest may adopt for their respective
employees.
3.02 Other Benefits. Employee shall be entitled to
reasonable and customary holidays and other benefits that are available to
senior management or key employees.
ARTICLE 4
OBLIGATIONS OF THE COMPANY
4.01 Office and Support Staff. The Company shall provide
Employee with such support services as are reasonable to Employee's position
and reasonably required for the performance of his duties and to achieve the
annual milestones described in Section 3(b) of the Non-Qualified Stock Option
Agreement dated November 25, 1996, between LifeQuest and Employee.
ARTICLE 5
TERMINATION OF EMPLOYMENT
5.01 Termination by the Company for Cause. The Company
may at its option terminate this Agreement for "Cause" (as hereinafter defined)
by giving ten (10) days written notice of termination to Employee.
The term "Cause" shall be limited to the occurrence of the following
events: (i) Employee breaches any of the terms of this Agreement, and fails to
cure such breach within 20 days after written notice by the Company to Employee
of such breach; (ii) Employee is convicted of a felony; (iii) Employee fails,
after at least one warning, to perform duties assigned under this Agreement
(other than a failure due to death or physical or mental disability), and fails
to cure such breach within 20 days after written notice by the Company to
Employee of such breach; (iv) Employee intentionally engages in conduct which
is demonstrably and materially injurious to the Company, and fails to cure such
breach within 20 days after written notice by the Company to Employee of such
breach; (v) Employee commits fraud or theft of personal or Company property
from Company premises; (vi) Employee falsifies Company documents or records;
(vii) Employee engages in acts of gross carelessness or willful negligence to
endanger life or property on Company premises; (viii) Employee engages in
sexual
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harassment; (ix) Employee uses, distributes, possesses or is under the
influence of illegal drugs, alcohol or any other intoxicant on Company
premises; or (x) Employee intentionally violates state, federal or local laws
and regulations.
5.02 Termination on Grounds Other Than for Cause. This
Agreement shall terminate immediately on the occurrence of any one of the
following events:
(a) The occurrence of circumstances that make it
impossible or impracticable for the business of the
Company to be continued.
(b) The death of Employee.
(c) Insolvency of the Company.
5.03 Option to Terminate if Employee Permanently Disabled.
If Employee becomes permanently disabled because of sickness, physical or
mental disability, or any other reason, so that it reasonably appears that
Employee will be unable to perform the essential aspects of his duties under
this Agreement, the Company shall have the option to terminate this Agreement
immediately by giving written notice of termination to Employee.
5.04 Effect of Termination on Compensation. In the event
of the termination of this Agreement prior to the completion of the term of
employment specified in it, pursuant to Section 5.01, 5.02 or 5.03, Employee
shall be entitled to the basic compensation earned by Employee under Section
1.01 to the date of termination as provided in the Agreement, computed pro rata
up to and including that date, and Employee shall be entitled to no further
compensation, including any compensation under Section 1.02, after the date of
such termination.
ARTICLE 6
PROPRIETARY PROPERTY; CONFIDENTIAL
INFORMATION; NON-COMPETITION
6.01 Duties. Employee understands and agrees that during
the term of this Agreement Employee's duties will include the conception of
improvements and inventions (whether or not ultimately issuing as Letters
Patent in any country), the creation of confidential information protected by
the Company as trade secrets and the authoring of "works" as defined under the
copyright laws of the United ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code
in connection with minimally invasive surgery products. Such information is
collectively referred to in this Agreement as "Proprietary Information".
6.02 Ownership. Employee understands and agrees that for
all Proprietary Information created within the scope of Employee's employment,
the Company shall own all right, title and interest thereto. In the case of
works authored or created by Employee, such works are considered a "work made
for hire" under ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code Section 101 - the copyright laws. All
Proprietary Information, if any, created by Employee prior to his employment
with
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38
the Company, and in which Employee claims ownership, is shown in Schedule 6.2
attached hereto.
6.03 Notice and Assistance. Employee shall give adequate
written notice to the Company as soon as practicable of all Proprietary
Information created by Employee during Employee's employment with the Company,
assist the Company in evaluating the Proprietary Information for patent, trade
secret and copyright protection and sign all documents and do all things
necessary at the expense of the Company to assist the Company in the
protection, development, marketing or transfer of such Proprietary Information.
6.04 Assignment. Employee hereby assigns and agrees to
assign all right, title and interest into such Proprietary Information to the
Company or its nominee. At the request of the Company, whether during or after
the termination of Employee's employment, Employee shall timely execute or join
in executing all papers or documents required for the filing of patent
applications and copyright registrations in the United States of America and
such foreign countries as the Company may in its sole discretion select, and
shall assign all such patent applications and copyrights to the Company or its
nominee, and shall provide the Company or its agent or attorneys with all
reasonable assistance in the preparation and prosecution of patent application
and copyright registrations, including drawings, specifications, and the like,
all at the expense of the Company, and shall do all that may be necessary to
establish, protect or maintain the rights of the Company or its nominee in the
inventions, patent applications, Letters Patent and copyrights in accordance
with the spirit of this Agreement.
6.05 Confidential Information. The Employee shall not,
without the prior written consent of the Board of Directors of the Company,
disclose or use for any purpose confidential information or proprietary data of
the Company or LifeQuest (or any of their respective subsidiaries), except as
required by applicable law or legal process; provided, however, that
confidential information shall not include any information known generally to
the public or ascertainable from public or published information (other than as
a result of unauthorized disclosure by such Employee) or any information of a
type not otherwise considered confidential by persons engaged in the same
business or a business similar to that conducted by the Company or LifeQuest
(or any of their respective subsidiaries).
6.06 Publicity. During the term of this Agreement and for
a period of one year thereafter, Employee shall not, directly or indirectly,
originate or participate in the origination of any publicity, news release or
other public announcements, written or oral, whether to the public press or
otherwise, relating to this Agreement, to any amendment hereto, to Employee's
employment hereunder or to the Company, without the prior written approval of
the Company.
6.07 Fiduciary Relationship. Employee, by virtue of his
high position of trust and reliance on him by the Company, understands that
Employee enjoys a fiduciary relationship with the Company in carrying out his
obligations under this Section 6. Accordingly, Employee agrees to honor his
obligations under this Agreement by conducting himself with the highest degree
fairness and trust toward the Company.
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39
6.08 Non-Competition. In consideration of the benefits of
this Agreement, including Employee's access to and limited use of proprietary
and confidential information of the Company, as well as training, education and
experience provided to Employee by the Company directly and/or as a result of
work projects assigned by the Company with respect thereto, Employee hereby
covenants and agrees that, commencing on the date of this Agreement and ending
on the first anniversary of the date of this Agreement, Employee shall not,
directly or indirectly, as proprietor, partner, shareholder, director, officer,
employee, consultant, joint venturer, investor or in any other capacity, engage
in, or own, manage, operate or control, or participate in the ownership,
management, operation or control, of any entity which engages anywhere in the
United States or Canada in the design, manufacturing, marketing, sale or
distribution of minimally invasive surgery products; provided, however, the
foregoing shall not prohibit Employee from purchasing and holding as an
investment not more than 5% of any class of publicly traded securities, or 10%
of any class of other securities, of any entity which is engaged in the design,
manufacturing, marketing, sale or distribution of minimally invasive surgery
products, so long as Employee does not participate in any way in the
management, operation or control of such entity and provided, further, that the
foregoing shall not prohibit Employee from manufacturing, marketing, selling or
distributing the product which is covered by the First Refusal Agreement.
6.09 Judicial Reformation. Employee acknowledges that,
given the nature of the Company's business, the covenants contained in Section
6.08 establish reasonable limitations as to time, geographic area and scope of
activity to be restrained and do not impose a greater restraint than is
reasonably necessary to protect and preserve the goodwill of the Company's
business and to protect their legitimate business interests. If, however,
Section 6.08 is determined by any court of competent jurisdiction to be
unenforceable by reason of its extending for too long a period of time or over
too large a geographic area or by reason of it being too extensive in any other
respect or for any other reason, it will be interpreted to extend only over the
longest period of time for which it may be enforceable and/or over the largest
geographic area as to which it may be enforceable and/or to the maximum extent
in all other aspects as to which it may be enforceable, all as determined by
such court.
6.10 Customer Lists; Non-Solicitation. Employee hereby
further covenants and agrees that, commencing on the date of this Agreement and
ending on the second anniversary of the date of this Agreement, Employee shall
not, directly or indirectly, in connection with the design, manufacture,
marketing, sale or distribution of minimally invasive surgery products, (a) use
or make known to any person or entity the names or addresses of any clients or
customers of the Company or LifeQuest (or any of their respective subsidiaries)
or any other information pertaining to them, (b) call on, solicit, take away or
attempt to call on, solicit or take away any clients or customers of the
Company or LifeQuest (or any of their respective subsidiaries), nor (c)
recruit, hire or attempt to recruit or hire any employees the Company or
LifeQuest (or any of their respective subsidiaries).
6.11 Covenants Independent. The covenants contained in
Sections 6.08, 6.09 and 6.10 of this Agreement will be construed as independent
of any other provision in this Agreement; and the existence of any claim or
cause of action by Employee against the Company will not constitute a defense
to the enforcement by the Company of said provisions. Employee
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40
understands that the provisions contained in Sections 6.08, 6.09 and 6.10 are
essential elements of the employment of Employee, but for the agreement of
Employee to Sections 6.08, 6.09 and 6.10, the Company would not have agreed to
enter into this Agreement. Employee has been advised to consult with counsel
in order to be informed in all respects concerning the reasonableness and
propriety of Sections 6.08, 6.09 and 6.10 with specific regard to the nature of
the business conducted by the Company and Employee acknowledges that Sections
6.08, 6.09 and 6.10 are reasonable in all respects.
6.12 Remedies. In the event of a breach or a threatened
breach by Employee of any of the provisions contained in Sections 6.08, 6.09 or
6.10 of this Agreement, Employee acknowledges that the Company may suffer
irreparable injury not fully compensable by money damages and, in such event,
will not have an adequate remedy available at law. Accordingly, the Company
shall be entitled to obtain such injunctive relief or other equitable remedy
from any court of competent jurisdiction as may be necessary or appropriate to
prevent or curtail any such breach, threatened or actual. The foregoing shall
be in addition to and without prejudice to any other rights that the Company
may have under this Agreement, at law or in equity, including, without
limitation, the right to ▇▇▇ for damages.
ARTICLE 7
GENERAL PROVISIONS
7.01 Notices. Any notice, report, demand or payment
required, permitted or desired to be given pursuant to any of the provisions of
this Agreement shall be deemed to have been sufficiently given or served for
all purposes if hand delivered or delivered by responsible overnight courier or
sent by certified or registered air mail, return receipt requested, and postage
prepaid as follows:
If to the Company:
▇▇▇▇▇ Medical Acquisition Co.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with a copy to: Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
If to Employee: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
1206 Safari
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
-6-
41
with a copy to: Vail & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇ ▇. ▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
7.02 Arbitration. The Company and Employee agree that any
dispute or controversy arising out of or in connection with this Agreement or
any alleged breach hereof shall be settled by arbitration in San Antonio, Texas
pursuant to the rules of the American Arbitration Association. If the two
parties cannot jointly select a single arbitrator to determine the matter, one
arbitrator shall be chosen by each party (or, if a party fails to make a
choice, by the American Arbitration Association on behalf of such party) and
the two arbitrators so chosen will select a third. The decisions of the single
arbitrator jointly selected by the parties, or, if three arbitrators are
selected, the decision of any two of them, will be final and binding upon the
parties and the judgment of a court of competent jurisdiction may be entered
thereon. Fees of the arbitrators and costs of arbitration shall be borne by
the parties in such manner as shall be determined by the arbitrator or
arbitrators.
7.03 Entirety of Agreement. This Agreement supersedes all
other agreements, either oral or in writing, between the parties to this
Agreement, with respect to the employment of the Employee by the Company. This
Agreement contains the entire understanding of the parties and all of the
covenants and agreements between the parties with respect to such employment.
7.04 Governing Law. This Agreement shall be governed by
the laws of the State of Texas and deemed performable in Bexar County, Texas.
EXECUTED effective the _____ day of ______________, 1996.
▇▇▇▇▇ MEDICAL ACQUISITION CO.
By:
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
President and Chief Executive Officer
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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42
The undersigned hereby guarantees the obligation of the Company under the above
Employment Agreement.
LIFEQUEST MEDICAL, INC.
By:
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
President and Chief Executive Officer
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SCHEDULE 6.2
PROPRIETARY PROPERTY CLAIMED BY EMPLOYEE
Proprietary Property Claimed:*
--------------------------------------------------
1. Drug impregnated trocar device to prevent cancer growth.
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* None, if left blank