PURCHASE AND SALE AGREEMENT
AGREEMENT, made as of the 16th day of November 1998, by and among Xxxxxxxx
Medical Company, Inc. (hereinafter referred to as "Xxxxxxxx"), a corporation
organized and existing under the laws of the State of New York, having an office
at 777 South Flagler Drive, Xxxx Xxxxx, Xxxxx 0000, Xxxx Xxxx Xxxxx, Xxxxxxx
00000, Chattem, Inc. (hereinafter referred to as "Chattem"), a corporation
organized and existing under the laws of the State of Tennessee, having an
office at 0000 Xxxx 00xx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, and Signal
Investment & Management Co. (hereinafter referred to as "Signal"), a corporation
organized and existing under the laws of the State of Delaware, having an office
at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxx, Xxxxxxxx 00000 (Chattem and
Signal are referred to hereinafter together as the "Purchasers" or singly as the
"Purchaser").
W I T N E S S E T H :
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WHEREAS, Xxxxxxxx is engaged, among other things, in the business of
developing, manufacturing (exclusively through third party manufacturers),
selling, promoting and marketing certain over-the-counter pharmaceutical
products under the trademarks listed on Schedule I hereto (such products, which
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also are listed on Schedule I hereto, hereinafter are referred to as the
"Products") (the "Business"); and
WHEREAS, Xxxxxxxx wishes to sell to Purchasers and Purchasers wish to
purchase from Xxxxxxxx the trademarks and formula specifications (subject to the
exceptions herein set forth) used in connection with the Products and certain
other specified assets, on the terms and subject to the conditions set forth
herein, including the assumption of certain specified liabilities;
NOW, THEREFORE, in consideration of the mutual promises and covenants
provided herein, the parties hereto hereby agree as follows:
I. SALE AND PURCHASE OF ASSETS
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A. Sale and Transfer of Assets. Upon the terms and subject to the
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conditions set forth in this Agreement, at the closing provided for in Article V
hereof (the "Closing"), Xxxxxxxx shall sell, assign, transfer, convey and
deliver to Purchasers, and Purchasers shall purchase, acquire and accept from
Xxxxxxxx all of Xxxxxxxx'x right, title and interest in and to the following
assets (hereinafter collectively referred to as the "Assets"):
(1) All of the trademarks, trade names and service marks,
including registrations and applications, listed on Schedule I attached hereto
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and made a part hereof (hereinafter collectively referred to as the
"Trademarks"), together with the goodwill associated therewith;
(2) All formulae, manufacturing instructions, batch formulations,
technologies, analytical methods, trade secrets, know-how, active raw material
specifications for Xxxxxxxx sourced ingredients, and product specifications
pertaining to the Products (hereinafter collectively referred to as the
"Technical Information") and all notebooks, records, reports, databases
(regarding stability results, release results and assay results) and other
written documentation which contain or embody the Technical Information;
(3) The manufacturing equipment and packaging assets owned by
Xxxxxxxx that are used in the manufacture of the Products and set forth on
Schedule II (collectively, the "Equipment"), located at the contract
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manufacturing facilities identified on such Schedule, and any
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associated warranty rights applicable to such manufacturing equipment, to the
extent that Xxxxxxxx is permitted to transfer such rights;
(4) All items of inventory as of the Closing relating to the
Business or the Products, including work in progress, finished product or raw
materials, and packaging supplies, promotional display racks and other sales
aids, wherever located (the "Inventory"), and all of Xxxxxxxx'x artwork,
advertising copy and promotional materials used in the Business or the sale of
the Products;
(5) All customer and vendor lists relating to the Business or the
Products;
(6) All of Xxxxxxxx'x files, documents, books, records and other
data (including, without limitation, marketing information and market research
studies) relating to the Business or the Products and any extensions thereof or
to any discontinued versions of the Products;
(7) All rights of Xxxxxxxx under or pursuant to all warranties,
representations and guarantees or otherwise from or against manufacturers to the
extent relating to the Business or the Products or affecting the Assets; and
(8) The agreements and purchase orders listed on Schedule III
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hereto and all additional purchase orders from Xxxxxxxx to third-party
manufacturers relating to the Products entered into in the ordinary course of
business after the date hereof and prior to the Closing (collectively, the
"Contracts").
Notwithstanding the foregoing, the Assets referred to in clauses (2),
(4) and (6) above shall not include any Technical Information, artwork or other
information or documentation relating exclusively to bar or other food products.
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B. Instruments of Conveyance. In order to effectuate the sale,
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assignment, transfer, conveyance and delivery of the Assets contemplated by this
Article I, Xxxxxxxx shall execute and deliver at the Closing, dated the date of
the Closing (the "Closing Date"), a xxxx of sale and other documents or
instruments of assignment, transfer and conveyance necessary or appropriate to
vest in or confirm to Purchasers all of Xxxxxxxx'x right, title and interest in
and to the Assets, free and clear of all mortgages, liens, pledges, security
interests, charges, claims, restrictions and encumbrances of any nature, except
Permitted Liens (as defined in Section IV.A.2 hereof), as follows:
(1) The Trademarks and the Technical Information, by Assignments
in form and substance reasonably satisfactory to Purchasers;
(2) The Equipment and Inventory, by a Xxxx of Sale in form and
substance reasonably satisfactory to Purchasers; and
(3) The Contracts, by an Assignment in form and substance
reasonably satisfactory to Purchasers.
C. Assignments of Trademarks. Xxxxxxxx shall be responsible for the
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delivery of all documents of transfer or assignment with respect to the
Trademarks, which documents or assignments shall be in recordable form.
Purchasers shall be responsible, if required, for the recording of such
documents and assignments with appropriate national authorities and the payment
of all recording fees, transfer taxes and other expenses, if any, associated
therewith. The respective responsibilities of Xxxxxxxx and Purchasers in this
regard shall continue after the Closing Date to the extent necessary to fully
effect the transfer of ownership of the Trademarks as contemplated herein.
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II. PURCHASE PRICE, PAYMENT AND INVENTORY ADJUSTMENT; REGISTRATION OF
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CHATTEM STOCK
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A. Purchase Price. The aggregate purchase price to be paid by
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Purchasers for the Assets shall be Ninety-Five Million Dollars (U.S.
$95,000,000) (the "Closing Payment"), subject to adjustment as provided in
paragraph C below (as adjusted, the "Purchase Price"). The Closing Payment
shall be subject to partial payment in shares of voting common stock, no par
value, of Chattem ("Chattem Stock"), as provided in Section II.B. below.
B. Method of Payment. The Closing Payment shall be paid by Purchasers
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to Xxxxxxxx at the Closing in United States dollars by wire transfer of
immediately available funds to an account designated by Xxxxxxxx. At the
election of the Purchasers exercised by giving written notice to Xxxxxxxx at
least ten (10) trading days prior to the Closing Date, Purchasers may pay
$5,000,000 of the Closing Payment in the form of Chattem Stock. If Purchasers
exercise such election, the number of shares of Chattem Stock to be issued to
Xxxxxxxx at the Closing shall be determined by dividing $5,263,157.90 by the
average of the closing prices of the Chattem Stock as reported in The Wall
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Street Journal for the twenty (20) trading days immediately preceding the
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Closing Date (the "Closing Date Average Price"). The number of shares of
Chattem Stock to be issued to Xxxxxxxx shall be subject to adjustment as
provided in paragraph E below.
C. Inventory Adjustment. On or prior to the Closing Date, Xxxxxxxx and
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the Purchasers shall jointly conduct a physical count of the Inventory as of the
Closing Date and the Purchasers shall make or cause to be made a calculation of
the Inventory value as of the Closing Date in accordance with Xxxxxxxx'x actual
cost paid to third party vendors, including all component parts as specified in
Xxxxxxxx'x xxxx of materials for each item determined on a FIFO basis (the
"Calculation"). For purposes of the Calculation, inventory acquired by Xxxxxxxx
from
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Stella Pharmaceutical Canada (1994) Inc. pursuant to Section VI.E. shall be
included in the Calculation on the basis of Xxxxxxxx'x cost thereof. Any
Inventory that is obsolete (including discontinued) or that is not of a good and
merchantable quality shall not be included in the Calculation. For purposes of
the Calculation, (I) all "twin-pack" or similarly packaged items shall be
treated as separate stock items and (II) all finished goods Inventory which has
a shelf-life expiration date of less than twelve months from the Closing Date,
exceeds a 12-month supply, other than in the case of Dexatrim Gelcaps (as
measured on the basis of sales for the 12-month period preceding the Closing
Date) or otherwise fails to satisfy the representations and warranties with
respect to Inventory in Section IV.A.10 shall, to the extent of such excess or
failure, be excluded from the Calculation. The Purchasers shall also provide
Xxxxxxxx with copies of the Calculation and all work papers associated therewith
within 15 days after the Closing Date. The Purchasers may not assert a claim
for indemnification with respect to any Inventory that is not included in the
Calculation.
Xxxxxxxx shall have a period of 20 days in which to review the Calculation
and the work papers associated therewith provided by the Purchasers. If
Xxxxxxxx disagrees with all or any part of the Calculation, Xxxxxxxx shall have
the right to notify the Purchasers in writing of such disagreement and its
reasons for so disagreeing, in which case Xxxxxxxx and the Purchasers shall
attempt to resolve the disagreement. If within 15 days after delivery of such
notice by Xxxxxxxx, Xxxxxxxx and the Purchasers are unable to resolve the
differences, if any, arising as a result of the Calculation, they or either of
them shall submit a statement of all unresolved differences together with copies
of the Calculation to Xxxxxx Xxxxxxxx LLP or such other independent accounting
firm as shall be mutually agreed (the "Accountants") for a binding and
nonappealable determination to
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be rendered within 30 days after such submission. All fees and expenses of the
Accountants incurred in this capacity shall be billed to and shared by Xxxxxxxx
and the Purchasers equally.
If the Calculation reflects an Inventory value that is either less than or
greater than $3,875,000, the Purchase Price will be reduced or increased dollar-
for-dollar, as the case may be, by the amount of such difference, and the
Purchasers will pay the amount of any such increase to Xxxxxxxx or Xxxxxxxx will
pay the amount of any such decrease to the Purchasers, in immediately available
funds, within five business days after the final determination of the Inventory
value.
D. Allocation of Purchase Price. The Purchase Price shall be allocated
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as set forth in Schedule IV hereto. Xxxxxxxx and Purchasers agree not to take a
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position on any income tax return, before any governmental agency or in any
judicial proceeding that is inconsistent with such allocation.
E. Registration of Chattem Stock. Chattem, at its sole cost and
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expense, shall register the Chattem Stock for sale on behalf of Xxxxxxxx by
preparing and filing a registration statement on Form S-3 with the Securities
and Exchange Commission ("SEC") not later than ten business days following the
Closing Date. Chattem shall use commercially reasonable efforts to cause such
registration statement to become effective as promptly as practicable and in any
event within 45 days following the Closing Date (or 75 days in the event the SEC
issues comments on the registration statement); provided that such periods shall
be extended by the amount of any delays caused by Xxxxxxxx'x failure to furnish
required information to Chattem. Not later than three (3) days prior to the
filing of the registration statement, Purchasers shall furnish to Xxxxxxxx
copies of the registration statement which Chattem proposes to file with the SEC
and Xxxxxxxx shall
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furnish the Purchasers with all information required to be included in the
registration statement with respect to Xxxxxxxx. Chattem shall also furnish
Xxxxxxxx with copies of all filings with the SEC relating to such registration
statement.
If, for any reason, the registration statement is not declared effective by
the SEC within 45 days after the Closing Date (or 75 days in the event the SEC
issues comments on the registration statement), the Purchasers shall pay to
Xxxxxxxx within three (3) business days after demand from Xxxxxxxx, an amount
equal to the product of (I) the number of shares of Chattem Stock issued to
Xxxxxxxx on the Closing Date, multiplied by (II)(A)the Closing Date Average
Price minus (B) the average of the closing prices of the Chattem Stock as
reported in The Wall Street Journal for the five (5) trading days immediately
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preceding the effective date of the registration statement. At the election of
the Purchasers, Purchasers may pay such amount in additional shares of Chattem
Stock valued on the basis of clause (II)(B) above, provided that such shares are
included in the registration statement. If, for any reason, the registration
statement is not declared effective by the SEC within 120 days after the Closing
Date or if the registration statement ceases to be effective for a period in
excess of thirty (30) days within any six-month period during the period that
the registration statement is required to remain effective, Xxxxxxxx shall have
the option to put any shares of Chattem Stock covered by the registration
statement to Purchasers at a price per share equal to the higher of the Closing
Date Average Price and the average of the closing prices of the Chattem Stock as
reported in The Wall Street Journal for the five (5) trading days immediately
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preceding the date Xxxxxxxx exercises such put right. Purchasers shall be
obligated to make payment for any such shares so put within three (3) business
days following
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written notice of the exercise of Xxxxxxxx'x put in immediately available funds
to an account designated by Xxxxxxxx.
Chattem further covenants to keep the registration statement continuously
effective under the Securities Act of 1933, as amended (the "Securities Act")
until the date that is two years after the date that such registration statement
is declared effective by the SEC or such earlier date as the Chattem Stock
covered by the registration statement has been sold. Chattem shall indemnify
and hold harmless Xxxxxxxx, its officers, directors, affiliates, agents, brokers
and employees of each of the foregoing and each person or entity who controls
Xxxxxxxx (within the meaning of Section 15 of the Securities Act or Section 20
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) and the
officers, directors, employees and agents of each such controlling person or
entity, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses, as incurred,
arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in the registration statement, any prospectus included
therein or any form of prospectus or in any amendment or supplement thereto or
in any preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which they
were made) not misleading, except to the extent, but only to the extent, that
such untrue statements or omissions are based solely upon information regarding
Xxxxxxxx furnished in writing to Chattem by or on behalf of Xxxxxxxx expressly
for use therein, which information was reasonably relied on by Chattem for use
therein. The parties acknowledge and agree that the only
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information to be provided by Xxxxxxxx shall be included in the selling security
holder and plan of distribution sections of the registration statement.
Xxxxxxxx shall indemnify and hold harmless Chattem, its officers,
directors, affiliates, agents, brokers and employees of each of the foregoing
and each person or entity who controls Chattem (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, employees and agents of each such controlling person or entity, to
the same extent and on the same basis as Chattem is required to indemnify
Xxxxxxxx and such persons as provided above but only with respect to the
information regarding Xxxxxxxx furnished in writing to Chattem by or on behalf
of Xxxxxxxx expressly for use in the registration statement.
III. LIABILITIES; RETURNS
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A. Liabilities Not Assumed. Xxxxxxxx acknowledges and agrees that the
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Purchasers are assuming no liabilities or obligations of Xxxxxxxx whatsoever
associated with its ownership of the Assets, manufacture and sale of the
Products or conduct of the Business, except as expressly provided in this
Article III and Section VI.E. Except as expressly provided in this Article III
and Section VI.E., Xxxxxxxx shall be solely and exclusively liable with respect
to all liabilities and obligations arising as a result of Xxxxxxxx'x ownership,
use or operation of the Assets or the Business or the sale, promotion or
marketing of the Products prior to the Closing Date. Without limiting the
foregoing, except as expressly provided in this Article III and Section VI.E.,
in no event shall the Purchasers assume or incur any liability or obligation in
respect of any of the following:
(1) payables and liabilities for materials and services owed by
Xxxxxxxx, with respect to the manufacture of Products prior to the Closing;
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(2) any federal, state or local income or other tax payable with
respect to any business, assets, properties or operation of Xxxxxxxx or any
member of any affiliated group of which Xxxxxxxx is a member for any period
prior to the Closing;
(3) any liability or obligation with respect to periods prior to the
Closing under any law, ordinance or governmental or regulatory rule or
regulation, whether federal, state or local, to which Xxxxxxxx'x business
operations, assets or properties is subject, including without limitation any
environmental laws or regulations; or
(4) any liability or obligation with respect to periods prior to, or
as a result of, the Closing to any employees, agents or independent contractors
of Xxxxxxxx, whether or not employed by the Purchasers after the Closing, or
under any benefit arrangement of Xxxxxxxx with respect thereto.
B. Assumed Contracts; Assumed Liabilities.
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(1) At the Closing, on the terms and subject to the conditions set
forth in this Agreement, Xxxxxxxx shall assign to the Purchasers all of its
rights and obligations under the Contracts and the Purchasers shall jointly and
severally assume all of Xxxxxxxx'x rights and obligations thereunder (except
that the Purchasers shall have no obligation in respect of goods supplied or
services rendered prior to the Closing Date except as otherwise provided in this
Agreement and Purchasers do not assume or agree to pay, discharge or perform any
liabilities or obligations arising out of any breach or failure to perform by
Xxxxxxxx of any provision of the Contracts); provided, however, that Xxxxxxxx
shall assign such rights and obligations only to the extent that such rights and
obligations are assignable under the Contracts and applicable law, and
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no action hereunder shall constitute an assignment thereof except to such extent
and provided, further, that to the extent consent of a third party to the
assignment of any Contract by Xxxxxxxx to the Purchasers is required pursuant to
the terms of such Contract or applicable law, no assignment or attempted
assignment will be deemed to have been effected by the provisions of this
Agreement without such consent. Xxxxxxxx shall use all reasonable efforts to
obtain the consent of such third party to the assignment or transfer thereof to
Purchasers in all cases in which such consent is required for assignment or
transfer. If such consent cannot be obtained, Xxxxxxxx and the Purchasers will
use their reasonable efforts to enter into arrangements sufficient to provide
equivalent benefits and burdens to the Purchasers. At the Closing, Purchasers
shall reimburse Xxxxxxxx dollar for dollar with respect to those items set forth
on Schedule V hereto to the extent such items relate to goods or services to be
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furnished on or after Closing upon presentation of appropriate evidence of prior
payment by Xxxxxxxx. The Purchasers further agree to pay directly to any broker
identified on Schedule III-2 all brokers' commissions due with respect to
Products sold after the Closing, in accordance with the terms of the applicable
broker agreement and Xxxxxxxx'x commission processing procedures in respect of
the 30-day period following Closing. Promptly following the Closing, Xxxxxxxx
will notify the brokers identified on Schedule III-2 that on and after the
thirtieth day following the Closing, they will no longer be entitled to sell any
of the Products pursuant to their broker agreements. The Purchasers shall not
be responsible for any special incentive or other payments to any broker outside
of the brokers' normal commissions.
(2) At the Closing, on the terms and subject to the conditions set
forth in this Agreement, the Purchasers shall jointly and severally assume all
advertising and promotional liabilities existing as of the Closing Date,
including without limitation, coupon redemptions,
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consumer money-back guarantees, trade promotions, co-op advertising, and
promotional allowances, incurred or committed by Xxxxxxxx with respect to the
Products as set forth on Schedule VI hereto with only such additions as may
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occur in the ordinary course of business after the date hereof and on or prior
to the Closing Date (collectively, the "Promotional Liabilities").
Notwithstanding the foregoing, all Promotional Liabilities that are attributable
to items that run or are performed prior to the Closing Date shall be the sole
and exclusive responsibility of Xxxxxxxx; provided that in the event the Closing
Date is later than December 21, 1998 as a result of Purchasers' failure to
satisfy the conditions to Closing set forth in Section V.D., Purchasers shall be
solely and exclusively responsible for all Promotional Liabilities that are
attributable to items that run or are performed during the period from the
seventh day prior to the Closing Date and through the Closing Date (and in the
event that Xxxxxxxx is required to make any payments in respect of such items
prior to Closing, the Purchasers shall reimburse Xxxxxxxx for any such payments
at Closing upon presentation of appropriate evidence thereof); provided further
that Purchasers in all cases shall be responsible for the following items: (i)
consumer money-back guarantees, (ii) in-pack coupons, (iii) military coupons,
and (iv) consumer coupons; provided further, that Xxxxxxxx shall reimburse
Purchasers if the aggregate expenditures arising out of (i) through (iv) during
the three-month period following the Closing Date exceed $20,000 to the extent
of such excess. If, following the Closing, Xxxxxxxx receives any of such items,
Xxxxxxxx shall promptly forward such items to Purchasers for processing. With
respect to talent commitments identified on Schedule VI-1, at the time of
Closing Purchasers shall reimburse Xxxxxxxx for payments made by Xxxxxxxx prior
to Closing to the extent that such payments are allocable to advertisements to
be aired on or after Closing.
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(3) The Purchasers hereby agree to reimburse Xxxxxxxx, dollar for
dollar, in the event that any of Xxxxxxxx'x customers or other third parties
offset the cost of Product returns or Promotional Liabilities attributable to
such customer or third party against accounts payable by such customer or third
party to Xxxxxxxx to the extent that such Product return or Promotional
Liability would otherwise be the responsibility of the Purchasers. Xxxxxxxx
shall provide written notice to the Purchasers of any such offset for which
Xxxxxxxx is entitled to reimbursement pursuant hereto. The Purchasers shall pay
Xxxxxxxx promptly following receipt of notice of any such offset (together with
supporting documentation). Xxxxxxxx hereby agrees to reimburse Purchasers,
dollar for dollar, in the event that any of Purchasers' customers or other third
parties offset the cost of Product returns or Promotional Liabilities
attributable to such customer or third party against accounts payable by such
customer or third party to Purchasers to the extent that such Product return to
Promotional Liability would otherwise be the responsibility of Xxxxxxxx.
Purchasers shall provide written notice to Xxxxxxxx of any such offset for which
Purchasers are entitled to reimbursement pursuant hereto. Xxxxxxxx shall pay
Purchasers promptly following receipt of notice of any such offset (together
with supporting documentation). Xxxxxxxx and the Purchasers shall cooperate to
ensure that the customer or third party does not offset such Product return or
Promotional Liability against both Xxxxxxxx and the Purchasers.
C. Product Liabilities. The Purchasers shall be jointly and severally
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responsible for, perform and discharge all liabilities and obligations arising
in any manner whatsoever from any claims, lawsuits or proceedings made or
brought after the Closing Date that relate to or arise from personal injury or
property damage caused by or allegedly caused by Products sold by or on behalf
of the Purchasers on or after the Closing Date. Xxxxxxxx shall be responsible
for, perform and
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discharge all liabilities and obligations arising in any manner whatsoever from
any claims, lawsuits or proceedings made or brought after the Closing Date that
relate to or arise from personal injury or property damage caused by or
allegedly caused by Products sold by or on behalf of Xxxxxxxx prior to the
Closing Date.
D. Returns. The Purchasers shall be responsible for all product
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returns made during the first three months after the Closing Date relating to
sales of Products prior to the Closing up to $750,000, inclusive of the costs of
returns (the "Returns Limit") and all product returns made following the three
month anniversary of the Closing Date relating to the Products. With respect to
returns of Products of merchantable quality (which satisfy the representation in
Section IV.A.10. hereof) during the first three months after the Closing Date
relating to sales made prior to the Closing Date in excess of the Returns Limit
(the "Excess Returns"), Xxxxxxxx shall be responsible for and shall indemnify
and hold harmless Purchasers from and against (on a dollar for dollar basis) the
Margin and costs of returns associated with such Excess Returns. For purposes
hereof, "Margin" shall mean the excess of the sales revenue received with
respect to such Excess Returns over Xxxxxxxx'x cost of goods sold of such Excess
Returns. From time to time during the three month period following the Closing
Date, and in any event at the end of the first and second month following the
Closing Date, the Purchasers shall advise Xxxxxxxx as to the amount of product
returns for Products sold prior to the Closing Date received or claimed since
the Closing Date. Any product returns of Products manufactured prior to the
Closing Date caused by the failure to manufacture such Products in compliance
with applicable good manufacturing practices under the FDA Act shall be the
responsibility of Xxxxxxxx. Xxxxxxxx and Purchasers covenant not to take any
action which would encourage product returns relating to sales of
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Products prior to the Closing. Payments under this Section III.D. shall be made
promptly following notice and provision of supporting documentation.
E. Liabilities and Obligations of the Purchasers Following the Closing.
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Following the Closing, except as otherwise specifically provided herein, the
Purchasers shall be solely and exclusively liable with respect to all
liabilities and obligations arising as a result of the Purchasers' ownership,
use or operation of the Assets or the Business or the sale, promotion or
marketing of the Products. The Purchasers also shall be solely and exclusively
liable for all ongoing obligations required by good manufacturing practices and
the Food and Drug Administration for Products manufactured and/or distributed by
Xxxxxxxx in connection with the Business prior to the Closing.
F. Purchaser Assumed Liabilities and Retained Liabilities. The
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obligations and liabilities referred to in this Article III for which Purchasers
have responsibility hereinafter are referred to as the "Purchaser Assumed
Liabilities" and for which Xxxxxxxx has responsibility hereinafter are referred
to as the "Retained Liabilities."
IV. REPRESENTATIONS AND WARRANTIES
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A. Representations and Warranties by Xxxxxxxx. In this Agreement, any
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reference to Xxxxxxxx'x knowledge shall mean the actual knowledge of Xxxxxxxx'x
executive officers, including its Vice President of Sales, after reasonable
inquiry and diligence (but without inquiry of customers, brokers or other third
parties). Xxxxxxxx represents and warrants to Purchasers that:
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(1) Xxxxxxxx is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York, with full right, power
and authority to enter into and perform this Agreement and to grant all of the
rights, powers and authorities herein granted.
(2) Xxxxxxxx is and shall be at the Closing the sole and exclusive
owner of the Assets with good and valid title thereto, all of which are and
shall be at the Closing unencumbered by any liens, security interests,
encumbrances, pledges, charges, claims, restrictions, defects of title of any
nature or other rights or claims of any third party, other than Permitted Liens
and except that (i) with respect to the Technical Information relating to the
Products, Xxxxxxxx does not make any representation that its rights therein are
exclusive of rights of its third party manufacturers (but Xxxxxxxx does
represent that its third party manufacturers do not have any exclusive rights in
the Technical Information or any rights which would restrict or interfere with
Purchasers' right to use the Technical Information other than that relating to
such manufacturers' manufacturing expertise); (ii) with respect to the Technical
Information, Xxxxxxxx'x rights are subject to the exceptions set forth on
Schedule VII; and (iii) Xxxxxxxx'x rights in the Trademarks are subject to
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Section IV.A.3. Upon consummation of the transactions contemplated hereby,
Purchasers will have acquired good and valid title in and to the Assets, free
and clear of all liens, security interests, encumbrances, charges, claims,
restrictions, defects of title of any nature or other rights or claims by any
third party, except as set forth herein. For purposes of this Agreement,
Permitted Liens shall mean, collectively, (a) liens for taxes or assessments
which are not delinquent; (b) mechanics', warehousemen's, materialmen's,
contractors', workmen's, repairmen's and carriers' liens, and other similar
liens arising in the ordinary course for obligations which are not delinquent;
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(c) the rights, if any, of third-party suppliers or other vendors having
possession of manufacturing equipment; and (d) liens which do not impair the
current or intended use or value of the assets subject to such liens.
(3) Schedule I lists all of the trademark registrations and
trademark applications by Xxxxxxxx that are used in connection with the Business
or the sale of the Products. Xxxxxxxx is the owner of the trademark
registrations and trademark applications set forth on Schedule I together with
the goodwill of the business symbolized thereby. The trademark registrations
and applications therefor set forth on such Schedule I are valid and in good
standing. To Xxxxxxxx'x knowledge, no other firm, corporation, association, or
person has a right to use any of the trademarks reflected on Schedule I, other
than pursuant to (i) the License Agreement between Xxxxxxxx and Xxxxxx
Pharmaceutical Canada (1994) Inc., which shall be amended to terminate the
license with respect to the Products pursuant to Section VI.E. herein, (ii) the
Distribution Agreement between Xxxxxxxx and Roche Pharma (Schweiz) A.G. (the
"Roche Distribution Agreement") and (iii) the License Agreement between Xxxxxxxx
and Laboratoires Xxxxxx X.X., which shall be terminated prior to Closing. No
notice has been received by Xxxxxxxx claiming that any trademark identified on
Schedule I is invalid or infringes upon the rights of any other persons and
Xxxxxxxx has no knowledge of any basis for any such claim. Except as set forth
above, none of the Trademarks set forth on Schedule I are currently licensed to
or by Xxxxxxxx.
(4) The execution, delivery and performance of this Agreement do
not and will not conflict with, violate or breach any agreement, instrument,
document or understanding to which Xxxxxxxx is a party or by which the Assets
may be bound or affected, Xxxxxxxx'x articles of incorporation or by-laws, or
any order or law, rule or regulation binding on Xxxxxxxx.
(5) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary corporate action on the part of Xxxxxxxx.
This Agreement and the other agreements, documents and instruments required to
be delivered by Xxxxxxxx have been or
-18-
will have been on the Closing Date duly executed and delivered by Xxxxxxxx and
(assuming the due authorization, execution and delivery hereof by the
Purchasers), will constitute legal, valid and binding obligations of Xxxxxxxx,
enforceable against it in accordance with their terms.
(6) Other than (i) filings with the U.S. Department of Justice and
the Federal Trade Commission under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 0000 (xxx "XXX Xxx") and (ii) those consents which have been obtained and
which are in full force and effect, the execution, delivery and performance of
this Agreement by Xxxxxxxx and the consummation of the transactions contemplated
by this Agreement do not require the consent, waiver, approval, license or
authorization of or any filing with any person or any governmental authority.
(7) Xxxxxxxx has delivered to the Purchasers (a) the audited
consolidated financial statements of Xxxxxxxx as of and for the fiscal years
ended November 30, 1997 and 1996 (the "Audited Statements") and (ii) the
unaudited pro forma combined statement of operations for the Products for the 10
months ended September 30, 1998 (the "Pro Forma Statement" and together with the
Audited Statements, the "Financial Statements"). The Audited Statements have
been prepared in accordance with Xxxxxxxx'x accounting policies applied on a
consistent basis, which are in accordance with U.S. generally accepted
accounting principles and fairly present, in all material respects, as of the
dates thereof and for the periods then ended, the financial results included
therein. The Pro Forma Statement has been prepared in accordance with
Xxxxxxxx'x accounting policies applied on a consistent basis and fairly
presents, in all material respects, the financial results included therein.
(8) The Business and the manufacture and sale of the Products as
carried out by Xxxxxxxx is conducted in compliance with all permits, orders,
injunctions and decrees and
-19-
applicable laws, including the Food, Drug and Cosmetics Act of 1938, as amended
(the "FDA Act"), and the rules and regulations of any governmental entity having
jurisdiction over the manufacture and sale of the Products. Xxxxxxxx owns,
holds, possesses and lawfully uses in the operation of the Business all
necessary franchises, licenses, permits, rights, applications, filings,
registrations and other authorizations. No proceeding is pending or, to the
knowledge of Xxxxxxxx, threatened to revoke or limit any such authorization to
conduct the Business.
(9) Except as set forth on Schedule VIII, there are no complaints
-------------
(other than routine customer complaints), investigations, lawsuits or
proceedings pending or, to the knowledge of Xxxxxxxx, threatened against
Xxxxxxxx, involving any Product, the Business or the transactions contemplated
by this Agreement.
(10) The finished goods Inventory held for sale in the United
States or Canada has been manufactured in accordance with applicable good
manufacturing practices, as defined by the FDA Act or under the corresponding
laws of Canada. None of the Inventory is adulterated or misbranded within the
meaning of the FDA Act or under the corresponding laws of Canada, or the rules
and regulations promulgated thereunder. The Inventory consists of items which
are of a quality and quantity usable or salable in the ordinary course of the
business. The Inventory (including, without limitation, all documentation
furnished in connection therewith) is free from any defects in workmanship and
materials, and conforms in all material respects with all regulatory, customary
and reasonable standards for products of such type. Neither the United States
Food and Drug Administration nor any other governmental authority regulating the
marketing, sale, testing or advertising of any of the products currently
manufactured, sold, distributed or used in connection with the Business has
requested that any such product be
-20-
removed from the market, that substantial new product testing be undertaken as a
condition to the continued manufacturing, selling, distribution or use of any
such product, or that such product be modified in any way.
(11) Each Contract is in full force and effect (except that no
product is currently being distributed under the Roche Distribution Agreement
and, subject to necessary regulatory approvals, the Company and Roche are
seeking a replacement supplier of the Dexatrim capsule product covered by the
Roche Distribution Agreement) and there exists no event of default thereunder on
the part of Xxxxxxxx and, to Xxxxxxxx'x knowledge, the other party or parties to
any Contract. Xxxxxxxx has not violated any of the terms and conditions of any
Contract and, to the knowledge of Xxxxxxxx, all of the covenants to be performed
by the other party thereto have been fully performed.
(12) Except as otherwise contemplated by this Agreement, since
September 30, 1998, the Business has been operated in the ordinary course and
consistent with past practices and there have not been:
(a) any material adverse changes in the results of operations,
financial condition, assets, liabilities, business or prospects of the Business;
(b) any damage, destruction or loss (whether or not covered by
insurance) affecting any tangible asset or property used or useful in the
Business (normal wear and tear excepted);
(c) any obligations or liabilities (whether absolute, accrued,
contingent or otherwise and whether due or to become due) created or incurred or
entered into, or any transactions, contracts or commitments entered into, by
Xxxxxxxx relating exclusively to the
-21-
Business, other than such items created or incurred in the ordinary course of
the Business and consistent with past practices, except for this Agreement or as
contemplated by this Agreement;
(d) any material change in the manner in which Xxxxxxxx extends
discounts or credits to customers or otherwise deals with customers of the
Business;
(e) any forward purchase commitments of the Business in excess of
normal operating inventories or at prices higher than current market prices;
(f) any forward sales commitments of the Business other than in the
ordinary course of business;
(g) any other material transactions relating to the Business other
than in the ordinary course of the Business and consistent with past practice;
or
(h) any agreements or understandings, whether in writing or otherwise,
for Xxxxxxxx to take any of the actions specified in items (a) through (g)
above.
(13) Xxxxxxxx has furnished the Purchasers with information
concerning the customers of the Business by gross sales for each such customer
for the fiscal years ended November 30, 1996 and 1997 and for the eleven months
ended October 31, 1998. To the knowledge of Xxxxxxxx, except as otherwise
described on Schedule IX hereto, no current customer of the Business that was
among its largest 25 customers as measured by sales during the eleven months
ended October 31, 1998 intends to purchase products of the Business in amounts
or on terms materially less favorable than those currently in effect.
(14) Xxxxxxxx has made available to Purchasers pricing
information, including product, customer and quantity for the Products included
in the Business for the period from January 1, 1998 through September 30, 1998.
Other than as included in such information,
-22-
Xxxxxxxx has not offered or sold any such Products at prices different than the
prices included in such information.
(15) Except for the representations and warranties contained in
this Article IV, neither Xxxxxxxx nor any other person makes any other express
or implied representation or warranty. Without limiting the generality of the
foregoing, Xxxxxxxx makes no representation or warranty with respect to data
compatibility in computer systems that are year 2000 compliant.
B. Representations and Warranties by Purchasers. Purchasers jointly
--------------------------------------------
and severally represent and warrant to Xxxxxxxx that:
(1) Each of the Purchasers is a corporation duly organized,
validly existing and in good standing under the laws of the State of its
jurisdiction of incorporation, with full right, power and authority to enter
into and perform this Agreement.
(2) The execution, delivery and performance of this Agreement do
not and will not conflict with, violate or breach any agreement, instrument,
document or understanding to which either of the Purchasers is a party, either
Purchaser's certificate of incorporation or bylaws, or any order or law, rule or
regulation binding on either Purchaser.
(3) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary corporate action on the part of each of
the Purchasers. This Agreement and the other agreements, documents and
instruments required to be delivered by Purchasers have been or will have been
on the Closing Date duly executed and delivered by each of the Purchasers and
(assuming the due authorization, execution and delivery hereof by Xxxxxxxx),
will constitute legal, valid and binding obligations of each of the Purchasers,
enforceable against each of the Purchasers in accordance with their terms.
-23-
(4) Other than (i) filings with the U.S. Department of Justice and
Federal Trade Commission under the HSR Act and (ii) those consents which have
been obtained and which are in full force and effect, the execution, delivery
and performance of this Agreement by each of the Purchasers and the consummation
of the transactions contemplated by this Agreement do not require the consent,
waiver, approval, license or authorization of or any filing with any person or
any governmental authority.
(5) Purchasers have conducted their own independent review and
analysis of the Assets, the Business, the Products and the Purchaser Assumed
Liabilities and acknowledge that they have been provided access to the
personnel, properties, premises and records of Xxxxxxxx relating to the Assets,
the Business, the Products and the Purchaser Assumed Liabilities for such
purpose. In entering into this Agreement, the Purchasers have relied solely
upon the representations, warranties and covenants of Xxxxxxxx set forth in this
Agreement and their own investigation and analysis, and the Purchasers
acknowledge that none of Xxxxxxxx or any of its affiliates or any of their
respective directors, officers, employees, shareholders, affiliates, agents,
advisors or representatives makes any representation or warranty, either express
or implied, as to the accuracy or completeness of any of the information
provided or made available to the Purchasers or their agents or representatives,
except that the foregoing limitations shall not apply with respect to the
specific representations and warranties set forth in Article IV of this
Agreement, but always subject to the limitations and restrictions contained
herein.
(6) There are no Proceedings, pending or, to the knowledge of the
Purchasers, threatened against or related to either of the Purchasers which
could affect the Purchasers' ability to consummate the transactions contemplated
by this Agreement.
-24-
(7) The Purchasers have (through commitments for credit
arrangements or otherwise) as of the date hereof, and will have at the Closing,
sufficient funds to pay the Purchase Price and all other amounts payable by the
Purchasers at the Closing and to perform their obligations hereunder following
the Closing.
V. CLOSING AND CONDITIONS TO CLOSING
---------------------------------
A. Closing. The Closing of the purchase and sale of the Assets shall
-------
be held at the offices of Xxxxxx, Xxxxxx-Xxxxxxx, Colt & Mosle, 000 Xxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, XX 00000, at 10:00 A.M., local time, on December 21, 1998
(or, if later, the second business day following the satisfaction of the
conditions precedent set forth in Section V.B.1.), or at such other place or
such other time and date as may be agreed upon by the parties.
B. Conditions to the Obligations of Purchasers and Xxxxxxxx. The
--------------------------------------------------------
obligations of the parties hereto to effect the Closing are subject to the
satisfaction (or waiver where permissible) prior to the Closing of the following
conditions:
(1) HSR Act. Any waiting periods under the HSR Act shall have
-------
expired or shall have been earlier terminated and no investigation by a
governmental authority relating to the transactions contemplated hereby shall be
pending which, in the written opinion of counsel to the Purchasers or Xxxxxxxx,
xx the case may be, would be reasonably likely to result in an action seeking to
enjoin the transactions contemplated hereby.
(2) No Injunctions; Actions. There shall not (i) be in effect
------------------------
any statute, regulation, order, decree or judgment which makes illegal or
enjoins or prevents in any respect the consummation of the transactions
contemplated by this Agreement, (ii) have been commenced, and shall be
continuing, or threatened any action or proceeding by any governmental authority
-25-
which seeks to prevent or enjoin in any respect the transactions contemplated by
this Agreement which the Purchasers or Xxxxxxxx, xx the case may be, in good
faith believes to be material, or (iii) have been commenced, and shall be
continuing, an action or proceeding by any other person which seeks to prevent
or enjoin in any material respect the transactions contemplated by this
Agreement and which in the written opinion of counsel to the Purchasers or
Xxxxxxxx, xx the case may be, is reasonably likely to result in the issuance of
such an injunction.
C. Purchasers' Conditions to Closing. Purchasers' obligation to effect
---------------------------------
the Closing is subject to the following additional conditions precedent, any or
all of which may be waived in writing by the Purchasers at their sole
discretion, and which Xxxxxxxx hereby agrees to use its best efforts to satisfy
at or prior to Closing:
(1) Xxxxxxxx'x representations and warranties contained in Article
IV above shall be true and correct in all material respects at and as of the
Closing Date with the same effect as though such representations and warranties
were made at and as of the Closing Date and Xxxxxxxx shall have complied in all
material respects with its obligations hereunder to be performed prior to
Closing;
(2) Purchasers shall have received from Xxxxxxxx a certificate,
dated the Closing Date, duly executed by an officer of Xxxxxxxx reasonably
satisfactory in form to Purchasers, to the effect of (1) above;
(3) Purchasers shall have received copies of the resolutions
adopted by the Board of Directors of Xxxxxxxx, certified by the Secretary or an
Assistant Secretary of Xxxxxxxx, with respect to the authorization of the
execution and delivery of this Agreement by Xxxxxxxx, the performance by
Xxxxxxxx of its covenants and agreements hereunder and the
-26-
consummation of the transactions contemplated hereby, which resolutions shall
not have been amended or modified, shall be in full force and effect and shall
be in form and substance reasonably satisfactory to the Purchasers and their
counsel;
(4) Purchasers shall have received a written opinion from
Xxxxxxxx'x counsel as to the matters set forth in paragraphs A.(1), A.(4), A.(5)
and A.(6) of Article IV hereof; and
(5) Purchasers shall have received such other certificates,
instruments and other documents, in form and substance reasonably satisfactory
to Purchasers and their counsel, as Purchasers shall have reasonably requested
in connection with the consummation of the transactions contemplated hereby.
X. Xxxxxxxx'x Conditions to Closing. Xxxxxxxx'x obligation to effect
--------------------------------
the Closing is subject to the following additional conditions precedent, any or
all of which may be waived in writing by Xxxxxxxx at its sole discretion, and
each of which the Purchasers hereby agree to use their best efforts to satisfy
at or prior to Closing:
(1) The representations and warranties of each of the Purchasers
contained in Article IV shall be true and correct in all material respects at
and as of the Closing Date with the same effect as though such representations
and warranties were made at and as of the Closing Date and each of the
Purchasers shall have complied in all material respects with its obligations
hereunder to be performed prior to Closing;
(2) Xxxxxxxx shall have received from each of the Purchasers a
certificate, dated the Closing Date, duly executed by an officer of each
Purchaser reasonably satisfactory in form to Xxxxxxxx, to the effect of (1)
above;
-27-
(3) Xxxxxxxx shall have received copies of the resolutions adopted
by the Board of Directors of each of the Purchasers, certified by the Secretary
or Assistant Secretary of each Purchaser, with respect to the authorization of
the execution and delivery of this Agreement by each Purchaser, the performance
by each Purchaser of its covenants and agreements hereunder and the consummation
of the transactions contemplated hereby, which resolutions shall not have been
amended or modified, shall be in full force and effect and shall be in form and
substance reasonably satisfactory to Xxxxxxxx and its counsel;
(4) Xxxxxxxx shall have received a written opinion from
Purchasers' counsel as to the matters set forth in paragraphs B.(1)-(4) of
Article IV hereof.
VI. COVENANTS
---------
A. Conduct of Business. Xxxxxxxx agrees that during the period from
-------------------
the date hereof to the Closing, it will conduct the Business in the ordinary and
usual course consistent with past practice, including, without limitation, with
respect to advertising and promotional matters and shall use its reasonable best
efforts to preserve intact the Assets and the Business. In furtherance of the
foregoing, Xxxxxxxx agrees that, except as otherwise contemplated by this
Agreement, it will (i) not make any sales of the Products with any allowance
greater than allowances ordinarily given in the ordinary course of business
consistent with past practice and will otherwise transact business with respect
to the Products with the trade in accordance with past practice and will not
institute any new methods of purchase, sale or operation nor institute any
changes in the product pricing or in promotional allowances or accept orders for
Products other than on a basis consistent with past practice, (ii) take all
reasonable actions necessary to ensure that the Inventory to be transferred to
Purchasers hereunder shall be in amounts sufficient for Purchasers to conduct
-28-
business following the Closing in an orderly manner consistent with Xxxxxxxx'x
past practice (except with respect to Capzasin-P and Capzasin-HP lotions and the
parties agree that Xxxxxxxx may liquidate short-dated Inventory of such Products
through close-out sales), (iii) not transfer any assets that would at the
Closing be included in the Assets except Inventory in the ordinary course of
business (subject to the foregoing provision with respect to Capzasin-P and
Capzasin-HP lotions), (iv) not enter into any agreement as it relates to the
Products or the Business outside of the ordinary course of business, including,
without limitation, any transfer to any third party of any material rights under
any licenses, sublicenses or other agreements with respect to any Trademarks or
other intellectual property, (v) use its best efforts to maintain its business
relations with its suppliers, business customers and others with whom it has
business relations relating to the Products or the Business, (vi) refrain from
all attempts to encourage returns of the Products following the date hereof and
(vii) not ship Dexatrim Gelcaps prior to January 1, 1999.
B. Access. Prior to the Closing, Xxxxxxxx shall permit the Purchasers
------
and their representatives to have reasonable access, during regular business
hours and upon reasonable advance notice, to the books and records and personnel
of Xxxxxxxx relating to the Assets, the Products and the Business, and Xxxxxxxx
shall furnish promptly to the Purchasers all such information concerning the
Assets, the Products and the Business as the Purchasers may reasonably request.
Xxxxxxxx shall use its best efforts to provide access to the books, records and
appropriate personnel at its contract manufacturers and also use its best
efforts to make available to the Purchasers all such information related thereto
as Purchasers may reasonably request. The information disclosed pursuant to
this paragraph shall be subject to the confidentiality agreement between
Xxxxxxxx and Chattem, dated as of June 12, 1998 (the "Confidentiality
Agreement"),
-29-
which shall continue in effect. Notwithstanding the foregoing, Xxxxxxxx need not
disclose to the Purchasers any information which would violate applicable law or
regulation, provided that Xxxxxxxx identifies in writing the reason for such
non-disclosure.
From and following the Closing, Xxxxxxxx and its affiliates shall
treat and hold, and cause their counsel, accountants and advisers to treat and
hold, as such all Confidential Information (as defined below), and refrain from
using any of the Confidential Information except in connection with this
Agreement (including claims thereunder or the enforcement thereof) or except for
internal purposes or as may be necessary or appropriate for the completion of
income tax returns or in compliance with other applicable laws, regulations, and
orders of courts or regulatory authorities in connection with any litigation,
investigation or proceeding or in connection with defending any litigation,
investigation or proceeding. The foregoing provisions shall not apply to any
Confidential Information which is generally available to the public immediately
prior to the time of disclosure. For purposes of the foregoing paragraph,
"Confidential Information" means financial and business information relating
exclusively to the Assets, the Products or the Business which is non-public and
confidential or proprietary in nature.
Following the Closing, for so long as such information is retained
(which shall be a period of at least eight years), the Purchasers shall permit
Xxxxxxxx and its representatives and agents to have reasonable access during
normal business hours to the books and records relating to the Products, the
Assets and the Business to the extent that such access may be reasonably
required (i) in connection with the preparation of Xxxxxxxx'x or its
shareholders' accounting records, (ii) in connection with the preparation of any
tax returns or with any tax audits, (iii) in
-30-
connection with any litigation, investigation or proceeding relating to the
Products, the Assets or the Business, or (iv) for any other proper business
purpose of Xxxxxxxx or its shareholders.
C. Best Efforts; Further Assurances. Upon the terms and subject to the
--------------------------------
conditions of this Agreement, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement as
promptly as practicable including, but not limited to: (i) the preparation and
filing of all forms, registrations and notices required to be filed by such
party in order to consummate the transactions contemplated by this Agreement and
(ii) the taking of such actions as are necessary to obtain any approvals,
consents, orders, exemptions or waivers of governmental entities required to be
obtained by such party in order to consummate the transactions contemplated by
this Agreement.
At any time and from time to time after the Closing Date and without any
further consideration, the parties agree to cooperate with each other to
prepare, execute and deliver such other documents, instruments of transfer or
assignment, files, books and records and do all such further acts and things as
may be reasonably required to carry out the transactions contemplated hereby.
D. Non-Competition. For five years from and after the Closing Date,
---------------
neither Xxxxxxxx nor any of its shareholders, subsidiaries or affiliates shall,
directly or indirectly, own, manage, or operate, or join, control or participate
in the ownership, management, operation or control of, any business whether in
corporate, proprietorship or partnership form or otherwise, which engages in the
development, manufacture, sale, promotion, or marketing of any products
-31-
which are competitive with the Products of the Business; provided, however,
nothing herein shall prevent Xxxxxxxx or its shareholders, subsidiaries or
affiliates from doing either of the following: (i) owning up to five percent
(5%) of any class of securities of any entity whose securities are publicly
traded on a national securities exchange or in the over-the-counter market; or
(ii) directly or indirectly, owning, managing, or operating, or joining,
controlling or participating in the ownership, management, operation or control
of, any business whether in corporate, proprietorship or partnership form or
otherwise, which engages in the development, manufacture, sale, promotion, or
marketing of (A) any nutritional meal replacement, nutritional supplement, snack
or other food products, dietary supplements or vitamins that are not marketed as
appetite suppressants or (B) any products (or line extensions of such products)
marketed under any of the following brand names or derivations thereof: Fat
Inhibitor Plan, Ultra Burn Plan, Bran-Slim and Slim-Mint; provided that Xxxxxxxx
may not increase its current levels of advertising and promotional support for
Fat Inhibitor Plan and Ultra Burn Plan, and Xxxxxxxx shall give Purchasers a
right of first refusal prior to selling the Fat Inhibitor Plan and Ultra Burn
Plan brands (pursuant to which Xxxxxxxx may notify Purchasers of its intention
to sell such brands at a certain price to a third party, following which
Purchasers shall have the right to exercise the right of first refusal by
entering into a binding agreement to purchase such brands on the offered terms
within 10 days from the time of Xxxxxxxx'x notice to Purchasers, and if
Purchasers do not exercise such right of first refusal within such time period,
Xxxxxxxx shall have the right to sell such brands to the third party on terms
not materially more favorable to such third party for a period of three months).
-32-
For five years from and after the Closing Date, neither of the Purchasers
nor any of their subsidiaries or affiliates shall, directly or indirectly, own,
manage, or operate, or join, control or participate in the ownership,
management, operation or control of, any business whether in corporate,
proprietorship or partnership form or otherwise, which engages in the
development, manufacture, sale, promotion, or marketing of any nutritional meal
replacement, nutritional supplement, snack or other food products under or in
connection with (i) the name or xxxx "Dexatrim" or any variant thereof, or (ii)
any name or xxxx which includes the word "Slim" therein; provided, however,
nothing herein shall prevent Purchasers from doing the following: owning up to
five percent (5%) of any class of securities of any entity whose securities are
publicly traded on a national securities exchange or in the over-the-counter
market.
The parties hereto specifically acknowledge and agree that the remedy at
law for any breach of the foregoing will be inadequate and that the Purchasers
or Xxxxxxxx (and Xxxxxxxx'x shareholders, subsidiaries and affiliates, who shall
be third party beneficiaries of Purchasers' non-competition covenant), as the
case may be, in addition to any other relief available to it, shall be entitled
to temporary and permanent injunctive relief without the necessity of proving
actual damage. In the event that the provisions of this Section VI. D. should
ever be deemed to exceed the limitation provided by applicable law, then the
parties hereto agree that such provisions shall be reformed to set forth the
maximum limitations permitted. If any of the provisions contained in this
Section VI. D. shall for any reason be held to be excessively broad as to time,
duration, geographical scope, activity or subject, it shall be construed, by
limiting and reducing it, so as to be enforceable to the extent compatible with
the applicable law as it shall then appear.
-00-
X. Xxxxxxxxxxx of License Agreement in Canada. Effective upon the
------------------------------------------
Closing, Xxxxxxxx shall cause the License Agreement between Xxxxxxxx and Xxxxxx
Pharmaceutical Canada (1994) Inc. ("Stella") to be amended to terminate the
license with respect to the Products. In connection with the termination of
such license, Xxxxxxxx shall (i) pay to Stella the termination payment required
pursuant to Section 10.5 of said License Agreement and (ii) purchase Stella's
inventory of Products at Stella's net cost therefor, which Inventory shall then
be included in the Inventory to be purchased by Purchasers from Xxxxxxxx and
shall be subject to Xxxxxxxx'x representations in Article IV. Effective upon
the Closing, Purchasers shall assume from Stella advertising and promotional
liabilities and purchase orders that are attributable to items that will run or
be performed on or after the Closing; provided that such items are consistent
with the past practice of Stella and are not materially different (on a
proportionate basis) to Xxxxxxxx'x advertising and promotional liabilities and
purchase orders. Xxxxxxxx shall furnish details concerning Stella's advertising
and promotional liabilities and purchase orders as soon as practicable following
the date hereof.
F. HSR Act. As soon as practicable following the execution and
-------
delivery of this Agreement, the Purchasers, and Xxxxxxxx shall file the required
notification with the Federal Trade Commission (the "FTC") and the Antitrust
Department of the Department of Justice (the "DOJ") pursuant to and in
compliance with the HSR Act. The Purchasers and Xxxxxxxx shall comply fully
with all applicable notification, reporting and other requirements of the HSR
Act, shall not intentionally or negligently delay submission of information
requested by the FTC or by the DOJ thereunder, and shall use their best
reasonable efforts to supply such information accurately and promptly.
-34-
G. Purchaser Use of the "Xxxxxxxx" Name. The Purchasers shall have the
------------------------------------
right to use and sell all of the Inventory and all packaging materials existing
as of the Closing Date using Xxxxxxxx'x name or UPC codes until all such
Inventory shall have been disposed of by the Purchasers. Notwithstanding the
foregoing, Purchasers shall use their reasonable best efforts to cause all such
Inventory and packaging materials to be disposed of within twelve (12) months
following the Closing Date and in all cases within fifteen (15) months following
the Closing Date. For a period of sixty (60) days following the Closing,
Purchasers shall have the right to purchase additional packaging materials with
the "Xxxxxxxx" name and UPC codes solely to adjust for inventory imbalances as
of the Closing, provided that Xxxxxxxx shall be notified in writing in advance
of any such purchases, and provided further that Purchasers shall use their
reasonable best efforts to cause all such materials to be disposed of within
twelve (12) months following the Closing Date and in all cases within fifteen
(15) months following the Closing Date.
H. Transfer Taxes. The Purchasers shall be jointly and severally
--------------
responsible for any transfer or similar taxes if any, arising from the sale of
the Assets hereunder. Xxxxxxxx shall cooperate with the Purchasers to the
extent necessary for the Purchasers to secure any exception from or
reimbursement of any such tax.
I. Employees. The Purchasers shall assume no liability for any
---------
agreements, arrangements, commitments, policies or understandings of any kind
relating to employment, compensation or benefits for the present or former
employees of Xxxxxxxx for all employment prior to and through the Closing.
J. Accounts Receivable. In the event that either party shall receive
-------------------
any instrument or other payment in respect of any account receivable belonging
to the other party, such party shall
-35-
forthwith deliver the same to Xxxxxxxx if the accounts receivable arose prior to
the Closing Date, or to the Purchasers if it arose on or after the Closing Date,
endorsed where necessary, without recourse, in favor of the other party. Each
party agrees to exercise good faith and to cooperate in resolution and
documentation of any such accounts receivable.
K. Exclusive Dealing. From the date of this Agreement until the
-----------------
Closing Date or the earlier termination hereof, Xxxxxxxx shall not take any
action to encourage, initiate or engage in discussions or negotiations with, or
provide information to, anyone other than the Purchasers concerning any purchase
of the Business or any sale of the Assets or similar transaction impacting the
Products.
L. Discharge of Business Obligations. From and after the Closing Date,
---------------------------------
Xxxxxxxx shall pay and discharge, in accordance with their agreed-to terms, all
obligations and liabilities incurred prior to the Closing Date in respect of the
Assets, the Products or the Business (except for those expressly assumed by
Purchasers hereunder), including without limitations any liabilities or
obligations to employees, trade creditors and clients of the Business.
M. Financial Statements. Xxxxxxxx shall fully cooperate with
---------------------
Purchasers and use commercially reasonable efforts, at Purchasers' sole cost and
expense, to enable Purchasers to prepare financial statements relating to the
Business as may be required by Rule 3-05 of Regulation S-X promulgated under the
Securities Act, including enabling Purchasers to obtain unqualified opinions
thereon of independent public accountants and consents thereof as required by
the Securities Act or the rules and regulations thereunder.
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VII. PUBLICITY
---------
A. Publicity. The parties agree to issue the press release attached
---------
hereto as Exhibit I on the date of this Agreement. The parties agree that no
further publicity, release or announcement concerning any of the provisions of
this Agreement or the transactions contemplated hereby shall be issued without
the advance written approval of the form and content of same by both Xxxxxxxx
and the Purchasers, provided that if any party fails to approve the form and
content of a release within three (3) days following submission to it, the other
party may nevertheless issue the release if required to do so by law or
applicable Nasdaq Stock Market requirements.
VIII. BROKERAGE FEES; EXPENSES OF THE PARTIES
---------------------------------------
A. Brokers. The parties acknowledge that Xxxxxxxx has retained a
-------
financial advisor in connection with the transactions contemplated by this
Agreement. Each of the parties agrees to indemnify the other party, and to
hold the other party harmless from any claim or demand for any commission,
compensation or other payment by any broker, finder or similar agent or
financial advisor claiming to have been or that was in fact employed by or on
behalf of it.
B. Expenses. Regardless of whether or not the transactions
--------
contemplated hereby are consummated, each party shall pay its own respective
expenses (including, without limitation, the fees, disbursements and expenses of
its attorneys, accountants and financial advisors) in connection with the
negotiation, preparation and execution of this Agreement and the transactions
contemplated hereby, except as otherwise provided in this Agreement.
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IX. INDEMNIFICATION AND RELATED MATTERS
-----------------------------------
A. Indemnification.
---------------
(1) Xxxxxxxx agrees to defend, indemnify and hold the Purchasers
harmless from and against any and all liabilities, obligations, damages, losses,
deficiencies, costs, penalties, interest and expenses, including, without
limitation, reasonable attorneys fees (collectively, "Losses"), arising out of,
based upon, attributable to or resulting from:
(i) any misrepresentation or breach of warranty made by
Xxxxxxxx in this Agreement;
(ii) the failure of Xxxxxxxx to comply with any of the
covenants contained in this Agreement which are required to be performed by
Xxxxxxxx;
(iii) any and all of the Retained Liabilities; and
(iv) all actions, suits, proceedings, demands, assessments,
judgments, costs, penalties and expenses, including reasonable attorneys' fees,
incident to the foregoing.
(2) Notwithstanding the provisions of paragraph A(1) above,
Xxxxxxxx shall not be liable to the Purchasers for any Losses except to the
extent that the aggregate Losses exceed $750,000 in which event Xxxxxxxx shall
be liable for any Losses in excess of such amount up to a maximum aggregate
amount equal to $25,000,000 (except to the extent such Losses relate to a
misrepresentation or breach of the representations and warranties of Xxxxxxxx
set forth in Section IV.A.(2) and (3), as to which there shall be no limitation
and provided that Losses related to the Retained Liabilities shall not be
subject to the limitations on liability in this paragraph (2). Without
otherwise limiting Xxxxxxxx'x obligations hereunder, for a period of eighteen
(18)
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months, Xxxxxxxx agrees that it will not take any actions which would prevent it
from discharging its indemnity obligations hereunder.
(3) The Purchasers jointly and severally agree to defend,
indemnify and hold Xxxxxxxx harmless from and against any and all Losses arising
out of, based upon, attributable to or resulting from:
(i) any misrepresentation or breach of warranty made by
either of the Purchasers in this Agreement;
(ii) the failure by the Purchasers to comply with any of
the covenants contained in this Agreement which are required to be performed by
the Purchasers;
(iii) any and all of the Purchaser Assumed Liabilities; and
(iv) all actions, suits, proceedings, demands, assessments,
judgments, costs, penalties and expenses, including reasonable attorneys' fees,
incident to the foregoing.
(4) Notwithstanding the provisions of paragraph A(3) above,
Purchasers shall not be liable to Xxxxxxxx for any Losses except to the extent
that the aggregate Losses exceed $750,000 in which event Purchasers shall be
liable for any Losses in excess of such amount up to a maximum of $25,000,000
(except to the extent such Losses relate to a misrepresentation or breach of the
representations and warranties of Purchasers set forth in Section IV.B.(7), as
to which there shall be no limitation and provided that Losses related to
Purchaser Assumed Liabilities shall not be subject to the limitations on
liability in this paragraph (4).
B. Survival of Representations and Warranties. The parties hereto
------------------------------------------
agree that the representations and warranties made in Article IV of this
Agreement ashall survive for a period of eighteen (18) months after the Closing
Date. The parties agree that no claim or causes of action
-39-
may be brought against any party based upon, directly or indirectly, any of the
representations or warranties contained in this Agreement after such period
provided that the representations and warranties of Xxxxxxxx in Section
IV.A.(1), (2) and (3) and of Purchasers in Section IV.B.(1) shall survive
indefinitely.
C. Notice of Indemnification. In the event any legal proceeding shall
-------------------------
be threatened or instituted or any claim or demand shall be asserted by any
person in respect of which payment may be sought by one party hereto from the
other party under the provisions of this Article IX, the party seeking
indemnification (the "Indemnitee") shall promptly cause written notice of the
assertion of any such claim of which it has knowledge which is covered by this
indemnity to be forwarded to the other party (the "Indemnitor"); provided,
--------
however, that the failure to give such notice shall not affect the Indemnitee's
-------
rights hereunder except to the extent the Indemnitor is materially prejudiced by
such failure. Notwithstanding the foregoing, no claim for indemnification
hereunder pursuant to paragraphs A.(1)(i) or A.(3)(i) above may be made
following the expiration of the period set forth in paragraph B above. Any
notice of a claim by reason of any of the representations, warranties or
covenants contained in this Agreement shall state specifically the
representation, warranty or covenant with respect to which the claim is made,
the facts giving rise to an alleged basis for the claim, and the amount of the
liability asserted against the Indemnitor by reason of the claim.
D. Indemnification Procedure for Third-Party Claims; Direct Claims.
---------------------------------------------------------------
(i) Except as otherwise provided herein, in the event of the initiation of any
legal proceeding against an Indemnitee by a third party, the Indemnitor shall
have the absolute right after the receipt of notice, at its option and at its
own expense, to be represented by counsel of its choice, and to defend
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against, negotiate, settle or otherwise deal with any proceeding, claim, or
demand which relates to any loss, liability or damage indemnified against
hereunder; provided, however, that the Indemnitee may participate in any such
-------- -------
proceeding with counsel of its choice and at its expense and the Indemnitor
shall not settle any such proceeding, claim or demand unless the Indemnitee is
fully released without any admission of liability. The parties hereto agree to
cooperate fully with each other in connection with the defense, negotiation or
settlement of any such legal proceeding, claim or demand. If the Indemnitor does
not, within 15 days after receipt of notice from the Indemnitee, give notice of
its election to defend the claim and proceed diligently to defend the claim,
then the Indemnitee shall have the right, but not the obligation, to undertake
the defense of such claim for the account and at the risk of the Indemnitor and
the Indemnitor shall be bound by any defense or settlement that the Indemnitee
may make as to such claim, subject in all cases to the limitations on liability
contained herein.
(ii) Any claim for indemnification made directly by a party and which does
not result from a third party claim or action, shall be asserted by written
notice. The other party shall have a period of 30 days within which to respond
thereto. If the other party does not respond within such 30-day period, such
party shall be deemed to have accepted responsibility to make payment and shall
have no further right to contest the validity of such claim.
E. Calculation of Losses. In calculating amounts payable to an
---------------------
Indemnitee, the amount of the indemnified Losses shall not be duplicative of any
other Loss for which an indemnification claim has been made and shall be
computed net of (i) payments that the Indemnitee has received under any
insurance policy with respect to such Losses, and (ii) any prior or subsequent
recovery by the Indemnitee from any person with respect to such Losses.
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F. Exclusive Remedy. The indemnification provisions of this Article IX
----------------
shall be the sole and exclusive remedy of the parties for any breach of any
covenants, representations or warranties made by the other party in this
Agreement, and each party hereby waives all statutory, common law and other
claims with respect thereto, other than claims for indemnification pursuant to
this Article IX. Notwithstanding the immediately preceding sentence, nothing
set forth in this Agreement shall be deemed to prohibit or limit any party's
right at any time before, on or after the Closing Date, to seek injunctive or
other equitable relief for the failure of the other party to perform any
covenant or agreement contained herein.
G. Exclusion of Certain Damages. Indemnification hereunder (subject to
----------------------------
the limitations herein) shall include liability for any special, incidental,
punitive or consequential damages to the extent the Indemnitee is required to
pay such amount to a third party.
H. Subrogation. Upon making any payment to an Indemnitee for any
-----------
indemnification claim pursuant to this Article IX, the Indemnitor shall be
subrogated, to the extent of such payment, to any rights which the Indemnitee or
its affiliates may have against any other person with respect to the subject
matter underlying such claim for indemnification and the Indemnitee shall take
such actions as the Indemnitor may reasonably require to perfect such
subrogation or to pursue such rights such other persons as the Indemnitor or its
affiliate may have.
X. TERMINATION
-----------
A. Termination. This Agreement may be terminated:
-----------
(1) by the written agreement of the Purchasers and Xxxxxxxx;
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(2) by either the Purchasers or Xxxxxxxx if there shall be in
effect a non-appealable order of a court of competent jurisdiction permanently
prohibiting the consummation of the transactions contemplated hereby; or
(3) by either the Purchasers or Xxxxxxxx in writing (provided
that such terminating party is not otherwise in default or in breach of this
Agreement) if the Closing shall not have occurred on or before April 15, 1999,
provided that both parties shall take all reasonable actions as may be necessary
to effect the Closing prior to such date.
B. Liabilities After Termination. Upon any termination of this
-----------------------------
Agreement pursuant to this Article X, no party hereto shall thereafter have any
further liability or obligation hereunder other than as set forth in Articles
VII and VIII, but no such termination shall relieve either party hereto of any
liability to the other party hereto for any breach of this Agreement prior to
the date of such termination.
XI. MISCELLANEOUS
-------------
A. Entire Agreement. This Agreement, the exhibits and schedules
----------------
attached hereto, and the Confidentiality Agreement set forth the entire
agreement and understanding between the parties and supersedes all previous
agreements, promises, representations, understandings and negotiations, whether
written or oral, between the parties with respect to the subject matter hereof;
none of the terms of this Agreement shall be amended or modified except in
writing signed by the parties hereto.
B. Assignment; Consent to Collateral Assignment. Neither party may
--------------------------------------------
assign any right or obligation hereunder without the written consent of the
other party, except if such assignment arises under a transaction in which the
assigning party is selling its entire business or a
-43-
line of business to which this Agreement relates or that party is being acquired
or merging with a third party. This Agreement shall be binding upon and inure to
the benefit of the parties' respective successors and assigns. Any attempted
assignment in violation of this provision shall be void and of no effect.
Xxxxxxxx hereby acknowledges that pursuant to the Security Agreement
by and among Chattem, the domestic subsidiaries of Chattem and Bank of America,
N.A., in its capacity as agent (together with its successors and assigns, the
"Agent") (the "Security Agreement"), or any successor Security Agreement with
the Purchasers' current or future lender(s), Chattem has assigned or may assign
its right, title and interest under this Agreement as security for the financing
provided to Chattem by the Agent and the Lenders (as hereinafter defined)
pursuant to the terms of two separate Credit Agreements by and among Chattem,
Chattem's domestic subsidiaries, as guarantors, the Agent and the other lenders
referred to therein (the "Lenders") (the "Credit Agreements"). Notwithstanding
any other provisions contained in this Agreement, Xxxxxxxx consents to the
collateral assignment of this Agreement to the Agent, for the benefit of the
Lenders. Unless and until the Agent gives notice to the undersigned of the
Agent's intention to succeed to the rights of Chattem under the Agreement, the
Agent shall not be obligated to perform any of the obligations of Chattem under
the Agreement.
C. Severability. If and solely to the extent that any provision of
------------
this Agreement shall be invalid or unenforceable, or shall render this entire
Agreement to be unenforceable or invalid, such offending provision shall be of
no effect and shall not affect the validity of the remainder of this Agreement
or any of its provisions; provided, however, the parties shall use their
respective
-44-
reasonable efforts to renegotiate the offending provisions to best accomplish
the original intentions of the parties.
D. Waivers. A waiver by either party of any term or condition of this
-------
Agreement in any one instance shall not be deemed or construed to be a waiver of
such term or condition for any similar instance in the future or of any
subsequent breach hereof. All rights, remedies, undertakings, obligations and
agreements contained in this Agreement shall be cumulative and none of them
shall be a limitation of any other remedy, right, undertaking, obligation or
agreement.
E. Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
F. Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of Delaware, without regard to any
applicable principles of conflicts of law. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of Delaware and of the United States of America in
each case located in the County of New Castle for any litigation arising out of
or relating to this Agreement and the transactions contemplated hereby (and
agrees not to commence any litigation relating thereto except in such courts),
and further agrees that service of any process, summons, notice or document by
U.S. registered mail to its respective address set forth in Section XI.I. shall
be effective service of process for any litigation brought against it in any
such court. Each of the parties hereto hereby irrevocably and unconditionally
waives any objection to the laying of venue of any litigation arising out of
this Agreement or the transactions contemplated hereby in the courts of the
State of Delaware or of the United States of America in each case located in the
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County of New Castle and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such litigation
brought in any such court has been brought in an inconvenient forum.
G. Specific Performance. The parties hereto agree that, if any of the
--------------------
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
H. Interpretation. In the event of an ambiguity or question of intent
--------------
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.
I. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given upon receipt if delivered personally, or when
sent if mailed by registered or certified mail (return receipt requested) or
transmitted by facsimile (with confirmation of transmittal) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
If to the Purchasers:
Chattem, Inc.
Signal Investment & Management Co.
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxxxx, XX 00000
ATTENTION: A. Xxxxxxxxx Xxxxxx, XX
Facsimile: (000) 000-0000
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with a copy to:
Xxxx X. Xxxxxxx, Esq.
Xxxxxx & Xxxxxx LLP
0000 Xxxxxxxxx Xxxxxxxx
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
If to Xxxxxxxx:
Xxxxxxxx Medical Company, Inc.
000 Xxxxx Xxxxxxx Xxxxx
West Tower, Suite 0000
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
ATTENTION: President
Facsimile: (000) 000-0000
With a copy to:
Xxxxx Xxxxx, Esq.
Xxxxxx, Xxxxxx-Xxxxxxx, Colt & Mosle
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
J. No Third Party Rights. Except as provided in Section VI.D., nothing
---------------------
in this Agreement shall be construed to give to any person other than the
parties hereto any legal or equitable right, remedy or claim under this
Agreement.
K. Headings. Headings in this Agreement are included for ease of
--------
reference only and shall have no legal effect.
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IN WITNESS WHEREOF, parties hereto have caused this Agreement to be executed as
of the date first written above by their duly authorized officers.
XXXXXXXX MEDICAL COMPANY, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and CEO
CHATTEM, INC.
By: /s/ A. Xxxxxxxxx Xxxxxx XX
---------------------------------
Name: A. Xxxxxxxxx Xxxxxx XX
Title: President
SIGNAL INVESTMENT & MANAGEMENT CO.
By: /s/ A. Xxxxxxxxx Xxxxxx XX
---------------------------------
Name: A. Xxxxxxxxx Xxxxxx XX
Title: President
48
