Exhibit 2.1
Asset Sale Agreement dated as of August 24, 2000 by and among The Xxxxxx
Xxxxxxx Company, Chattem, Inc. and Signal Investment & Management Co.
EXECUTION
COPY
ASSET SALE AGREEMENT
between
CHATTEM, INC.
SIGNAL INVESTMENT & MANAGEMENT CO.
and
THE XXXXXX XXXXXXX COMPANY
Dated as of August 24, 2000
This ASSET SALE AGREEMENT, dated as of August 24, 2000 (the "Agreement"),
is by and between CHATTEM, INC., a Tennessee corporation ("Chattem"), SIGNAL
INVESTMENT & MANAGEMENT CO., a Delaware corporation and a wholly owned
subsidiary of Chattem ("Signal" and, together with Chattem, "SELLER") and THE
XXXXXX XXXXXXX COMPANY, a Delaware corporation ("BUYER").
SELLER is engaged in the business of manufacturing, marketing and selling
anti-perspirant and deodorant products (other than in Japan) under the
Trademarks (as defined below). SELLER now desires to sell certain assets of such
business to BUYER, and BUYER agrees to purchase same, and to assume certain
liabilities in connection therewith, all upon the terms and conditions set forth
herein.
NOW THEREFORE, in consideration of the premises and of the mutual covenants
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS, ASSUMPTION OF LIABILITIES
1.1 CERTAIN DEFINITIONS. For all purposes of this Agreement
except as expressly provided or unless the context otherwise requires the
following definitions shall apply:
"Accountants" shall have the meaning assigned thereto in
Section 2.2(b).
"Affiliate" means, with respect to any Person (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person (ii) any officer, director, general partner, manager, member or
trustee of such Person or (iii) any Person who is an officer, director, general
manager, member or trustee of any Person described in clauses (i) or (ii) of
this sentence. For purposes of this definition, the terms "controlling,"
"controlled by" or "under common control with" shall mean the possession, direct
or indirect, of the power to direct or cause the direction of the management and
policies of a Person or entity, whether through the ownership of voting
securities, by contract or otherwise, or the power to elect at least 50% of the
directors, managers, general partners, or persons exercising similar authority
with respect to such Person or entities.
"Annual Statement" shall have the meaning assigned thereto in
Section 2.3(a).
"Assets" shall have the meaning assigned thereto in Section
1.4.
"Assignment and Assumption of the Manufacturing Agreement"
means the Assignment and Assumption of the Manufacturing Agreement substantially
in the form of Exhibit I.
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"Assignment of Patent License Agreement" shall mean the
Assignment of Patent License Agreement between SELLER and BUYER in substantially
the form attached hereto as Exhibit A.
"Assignment of Patents" shall mean the Assignment of Patents
between SELLER and BUYER in substantially the form attached hereto as Exhibit B.
"Assignment of Technology License Agreement" shall mean the
Assignment of Technology License Agreement between SELLER and BUYER in
substantially the form attached hereto as Exhibit C.
"Assumed Liabilities" shall have the meaning assigned thereto
in Section 1.6.
"Xxxx of Sale and Assignment" shall mean the Xxxx of Sale and
Assignment in substantially the form attached hereto as Exhibit D.
"BMS" shall mean Xxxxxxx-Xxxxx Squibb Company.
"Brand" means the Trademarks under which the Products are
manufactured, marketed or sold.
"Business" shall mean the business conducted by the SELLER or
its Affiliates relating to the manufacture, marketing and/or sale of the
Products.
"BUYER'S Closing Documents" shall have the meaning assigned
thereto in Section 2.1(a).
"Closing" shall have the meaning assigned thereto in Section
2.1.
"Confidentiality Agreement" shall have the meaning assigned
thereto in Section 6.1.
"Consent to Use and Register Agreement" shall mean the Consent
to Use and Register Agreement dated as of March 24, 1998 by and between BMS and
Signal.
"Contracts" shall have the meaning assigned thereto in Section
1.4(c).
"Disclosure Schedules" or "Schedules" shall mean the Schedules
of SELLER attached hereto and made a part of this Agreement.
"DOJ" shall have the meaning assigned thereto in Section 7.3.
"Earn-out Payment" shall have the meaning assigned thereto in
Section 2.3.
"Equipment" shall have the meaning assigned thereto in Section
1.4(b).
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"Excluded Assets" shall have the meaning assigned thereto in
Section 1.5.
"Excluded Liabilities" shall have the meaning assigned thereto
in Section 1.7.
"Financial Statements" shall have the meaning assigned thereto
in Section 3.2.
"Formulations" shall mean the formulations for each Product
currently sold, manufactured or in development.
"FTC" shall have the meaning assigned thereto in Section 7.3.
"GAAP" shall mean United States generally accepted accounting
principles and practices, consistently applied.
"HSR Act" shall have the meaning assigned thereto in Section
2.4(d).
"Information" shall have the meaning assigned thereto in
Section 5.3.
"Instrument of Assignment and Assumption" shall mean the
Instrument of Assignment and Assumption in substantially the form attached
hereto as Exhibit E.
"Instrument of Assumption" shall mean the Instrument of
Assumption in substantially the form attached hereto as Exhibit F.
"Kao" shall mean Kao Kabushiki Kaisha, also trading as Kao
Corporation, a Japanese corporation.
"LEK" shall mean Les Emballages Xxxxxxxx, Inc.
"Marketing and Sales Information" shall have the meaning
assigned thereto in Section 1.4(h).
"Net Sales" shall mean gross sales of Products for the
relevant period, less any discounts, rebates and returns (but not including
promotional payments or advertising expenditures) given or made in connection
with sales made during such period.
"Patents" shall have the meaning assigned thereto in Section
1.4(f).
"Person" means any person or entity, including any
corporation, limited liability company, partnership (limited or general) or
unincorporated association.
"Processing Instructions" shall mean the processing
instructions for each Product currently manufactured or in development.
"Products" shall mean the anti-perspirant and deodorant
products bearing the Brand produced or sold by SELLER or its predecessors.
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"Purchase Orders" shall have the meaning assigned thereto in
Section 1.4(d).
"Purchase Price" shall have the meaning assigned thereto in
Section 1.2.
"SELLER'S Closing Documents" shall have the meaning assigned
thereto in Section 2.1(b).
"Specifications" shall mean the raw materials, manufacturing,
packaging, labeling and quality assurance specifications for each Product
currently sold, manufactured or in development.
"Taxes" shall mean any tax imposed by any governmental
authority or instrumentality regarding the Assets, including any applicable
sales, use, property, intangibles, or similar taxes.
"Tax Returns" shall mean any return required to be filed by
any governmental authority or instrumentality relating to Taxes.
"Technical Information" shall have the meaning assigned
thereto in Section 1.4(g).
"Third Party Claim" shall have the meaning assigned thereto in
Section 8.6.
"Trademarks" shall have the meaning assigned thereto in
Section 1.4(e).
"Trademark Purchase Agreement" shall mean the Trademark
Purchase Agreement between SELLER and Kao, substantially in the form attached
hereto as Exhibit G. It is the parties' intention and their agreement that their
rights and liabilities relating to the purchase by BUYER or Kao, as designee, of
the Trademarks not change, enlarge or diminish any obligations or liabilities of
either party (or Kao) under, or create any such liabilities or obligations
different from those contained in, this Agreement, except for the addition of
Kao as a named party with rights and obligations under the Trademark Purchase
Agreement. If there is any conflict between the Trademark Purchase Agreement and
this Agreement, the terms of this Agreement shall prevail.
"Transition Services Agreement" shall mean the Transition
Services Agreement between SELLER and BUYER in substantially the form attached
hereto as Exhibit H.
1.2 PURCHASE AND SALE OF ASSETS. Upon the terms, and subject
to the conditions of this Agreement, on the Closing Date, SELLER will sell,
convey, transfer and assign, or cause to be sold, conveyed, transferred and
assigned to BUYER (or to one or more Affiliates designated by BUYER including,
in the case of the Trademarks, Kao (collectively "BUYER's designee" or "BUYER's
designees") free and clear of all liens and encumbrances, and BUYER and/or
BUYER's designee will purchase, the Assets for an aggregate cash purchase price
of Xxx Xxxxxxx xxx Xxxxx Xxxxxxx xxx 00/000 Xxxxxx Xxxxxx Dollars ($160,000,000)
(the
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"Purchase Price"), payable as set forth in Article 2. The Purchase Price shall
be subject to post-closing adjustment as provided in Section 2.2 and Section 2.3
below.
1.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Assets in the manner and with the percentages identified on
SCHEDULE 1.3 hereto. BUYER and SELLER shall allocate the Purchase Price with
respect to the Trademarks, as they shall mutually agree. Neither BUYER nor
SELLER, nor any of their respective Affiliates, shall take any position on any
tax return or tax filing inconsistent with such allocation of the Purchase Price
unless required to do so by applicable law and on prior notice to the other
party.
1.4 ASSETS. The term "Assets" shall mean the following
enumerated assets:
(a) all right, title and interest in all
inventories of raw materials, packaging materials, supplies, labels, work in
process, consigned goods and finished goods (including warehoused inventories,
inventories covered by Purchase Orders and sample and promotional goods),
wherever located, that are used exclusively in connection with the conduct of
the Business as of the Closing Date (the "Inventory");
(b) all right, title and interest in all
equipment, tooling and other assets listed or described on SCHEDULE 1.4(b)
together with any other manufacturing equipment and packaging assets owned by
SELLER used exclusively in connection with the manufacture or sale of Products
(collectively, and together with any of the foregoing subject to a lease, the
"Equipment"), together with any associated warranty rights applicable to the
Equipment, to the extent SELLER is permitted to transfer said rights;
(c) all of SELLER'S right, title and interest
in all contracts, agreements, leases and other legally binding arrangements,
whether oral or written, that are listed or described on SCHEDULE 1.4(c), or are
otherwise used exclusively in the conduct of the Business (collectively, the
"Contracts") to the extent that such Contracts are assignable; AND PROVIDED,
FURTHER, that to the extent consent of a third party to the assignment of any
Contract by SELLER to BUYER 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. To the
extent that SELLER cannot assign any contracts or agreements that would
otherwise constitute material Contracts, SELLER and BUYER will use their
reasonable efforts to enter into arrangements sufficient to provide equivalent
benefits and burdens to BUYER; provided that in all events SELLER shall assign
to BUYER the Contracts noted with an asterisk on SCHEDULE 1.4(c) and shall
obtain any consents required to effect such assignment;
(d) all of SELLER'S right, title and interest in
all warranties, guarantees, and service agreements, and all commitments and
orders for (i) the purchase of goods to be delivered to SELLER after the Closing
Date, (ii) the sale of goods to the extent that delivery thereof will be made
after the Closing Date (including Inventory and supplies) and (iii) services to
be provided after the Closing Date (including advertising, maintenance and other
incidental services to be provided after the Closing Date) relating exclusively
to the Business and entered into in the ordinary course of business
(collectively, the "Purchase Orders"), but expressly excluding all accounts
receivable arising in the Business prior to or as of the Closing
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Date and any Purchase Orders constituting promotional liabilities not assumed by
BUYER pursuant to Section 1.6(d);
(e) all of SELLER'S right, title and interest in
the Trademarks. The term "Trademarks" means the trademarks, service marks,
logos, product names and licenses and registrations thereof and applications
therefor, used exclusively in the Business, including but not limited to those
set forth on SCHEDULE 1.4(e) hereto, and trade dress associated therewith;
(f) all of SELLER'S right, title and interest in
the Patents. The term "Patents" means the patents, patent licenses and patent
applications (including disclosures, reissues, divisions, continuations and
extensions) used exclusively in the Business, including but not limited to those
set forth on SCHEDULE 1.4(f) hereto, and related know-how, and patentable items;
(g) all of SELLER'S right, title and interest in
all other trade secrets, technology, inventions, quality control procedures and
protocols, quality and process standards, packaging and shipping standards,
portions of laboratory and research and development notebooks, formulations,
copyrights, works containing copyrightable subject matter (except to the extent
of the use in such copyrights and copyrightable material of the name "Chattem,
Inc." or any other trademark or trade name belonging to SELLER which is not
being transferred hereunder), Specifications, Processing Instructions and
processes relating exclusively to the Products (collectively, the "Technical
Information"), said copyrights and works containing copyrightable subject matter
being referred to herein as the "Copyrights";
(h) all of SELLER'S right, title and interest in
all product literature, advertising materials, marketing and promotion plans,
promotional materials, customer lists, supplier lists, historical sales
information for customers, and other books, files and records (except originals
of SELLER'S corporate resolutions or minutes) that are exclusively used in or
exclusively related to the Business, wherever located, except to the extent
SELLER is required by law to retain the original of same, in which event BUYER
shall have the right to review and copy the retained records (collectively, the
"Marketing and Sales Information");
(i) all of SELLER'S right, title and interest in
any transferable permits or licenses issued by any governmental agency that are
used exclusively in the Business;
(j) all of SELLER'S right, title and interest in
all data, information, data bases and similar items stored in computer memory,
on media or otherwise, relating exclusively to the Business;
(k) all of SELLER'S right, title and interest in
and to the litigation bond in the amount of $50,000 posted by BMS and
transferred to SELLER in connection with the litigation in Brazil described in
Section 3.7(b);
(l) notwithstanding the foregoing, if any of the
assets described above (disregarding any reference to "exclusively") are used
primarily, but not exclusively, in the conduct of the Business and are necessary
for BUYER, without incurring expense of more than a
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DE MINIMIS nature, to conduct the Business in the same manner as presently
conducted by SELLER, then such assets shall be included in the Assets and in the
Trademarks, Patents, Purchase Orders, Technical Information, Copyrights, and
Marketing and Sales Information, as the case may be; provided that in all events
the items listed in Schedules 1.4(b) through 1.4(f) shall be included in the
Assets and in said subcategories of Assets; and
(m) to the extent any intellectual property
right described in Section 1.4(e), (f), (g) or (h) without reference to the term
"exclusively" or "primarily" is used in the Business but is not used exclusively
or primarily, as the case may be, in the Business, and assuming such right is
not otherwise identified as an Excluded Asset, as defined herein, SELLER shall
grant to BUYER a nonexclusive, worldwide, fully paid-up and transferable license
to use, and to permit its Affiliates and designees to use, such right everywhere
to the extent used by SELLER to operate the Business (including in any territory
where SELLER does not now use such right, to the extent (but only to the extent)
of SELLER'S right, title and interest in such right in such territory) until a
similar or substitute right can be reasonably developed or obtained by BUYER
without significant expense, subject to confidentiality only as to matters not
involving the Brand, as provided in Section 6.1 hereof.
1.5 EXCLUDED ASSETS. The Assets shall not include any assets
other than the assets specifically listed or the assets described in Section
1.4, and, without limiting the generality of the foregoing, shall expressly
exclude the name "Chattem, Inc." and any other trademark belonging to or
licensed by SELLER other than the Trademarks (collectively, the "Excluded
Assets").
Specifically, BUYER acknowledges that it is not
purchasing cash, real estate or accounts receivable, or any other assets of the
SELLER other than the Assets, and that the Assets do not include or confer any
rights to manufacture, sell or market Brand products in Japan. BUYER
acknowledges and agrees that, while SELLER is conveying to BUYER its right to
conduct the Business anywhere in the world (except Japan), SELLER currently
conducts the Business only in certain jurisdictions and not on a comprehensive
worldwide basis.
1.6 ASSUMPTION OF LIABILITIES. BUYER shall assume on the
Closing Date and shall pay, perform and discharge when due the following
obligations and liabilities of whatever kind and nature, primary or secondary,
direct or indirect, absolute or contingent, known or unknown, whether or not
accrued, of SELLER relating exclusively to the Business (collectively the
"Assumed Liabilities"):
(a) all obligations and liabilities of SELLER
under the Contracts to the extent relating solely to performance thereunder due
by SELLER after the Closing Date and to the extent that such Contracts are in
writing and specifically described in SCHEDULE 1.4(c) and are validly assigned
to BUYER and relate to the Business; PROVIDED, that to the extent services are
provided by SELLER under the Transition Services Agreement, BUYER'S obligation
to assume the foregoing with respect to such services shall not commence until
the end of the Transition Period as defined in the Transition Services
Agreement;
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(b) all obligations, liabilities, commitments
and similar claims in respect of any and all Products sold at any time after the
Closing Date or any of the Assets or the Business relating to events occurring
after the Closing Date (except those obligations, liabilities and commitments
described in Section 1.7 hereof);
(c) all obligations and liabilities of SELLER
under Purchase Orders that are outstanding as of the Closing Date but only to
the extent that the goods and services that are the subject thereof relate to
services to be performed or goods to be delivered after the Closing Date;
(d) those commitments for promoting and
advertising the Brand specifically identified in SCHEDULE 1.6(d) and any others
that BUYER, in its sole discretion, agrees in writing to assume prior to or at
Closing (the "Promotional Liabilities");
(e) subject to the provisions of Section 7.10,
all liabilities associated with the return of Products after the Closing Date
other than returns of defective Products or Products that fail to meet
manufacturing specifications or legal requirements;
(f) in accordance with Section 6.4 of this
Agreement, the capital expenditures of SELLER specifically described on SCHEDULE
6.4 hereof; and
(g) any expenses arising after the Closing Date
in connection with the conduct of the litigation in Brazil described in Section
3.7(b) (but excluding any liability for adverse judgments in such litigation, to
the extent relating to the period prior to the Closing).
1.7 EXCLUDED LIABILITIES. BUYER shall not assume or in any way
become liable for any of SELLER'S debts, liabilities or obligations of any
nature whatsoever, other than the Assumed Liabilities (such non-assumed
liabilities being hereinafter referred to as the "Excluded Liabilities"),
including, without limitation:
(a) Any of SELLER'S liabilities or obligations
under this Agreement;
(b) Any of SELLER'S liabilities or obligations
for expenses or fees incident to or arising out of the negotiation, preparation,
approval or authorization of this Agreement or the consummation (or preparation
for the consummation) of the transactions contemplated hereby (including all
attorneys' and accountants' fees, and brokerage fees);
(c) Any of SELLER'S liabilities or obligations
in respect of income or other taxes or any fines, penalties or costs arising
therefrom (except as otherwise expressly provided in Section 7.4);
(d) Any of SELLER'S accounts payable, accrued
expenses or other current liabilities (except to the extent expressly provided
in Section 1.6 );
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(e) Any of SELLER'S liabilities or obligations
for indebtedness for borrowed money or indebtedness secured by liens on its
assets or guarantees of any of the foregoing;
(f) Any wages, salaries, severance payments,
or other compensation with respect to employees, agents or contractors of
SELLER;
(g) Any unused vacation benefits with respect
to employees, agents or contractors of SELLER;
(h) Any retirement benefits or post-retirement
healthcare liabilities with respect to employees, agents or contractors of
SELLER;
(i) Any liabilities, obligations or expenses
arising from or relating to any benefit plan with respect to employees, agents
or contractors of SELLER;
(j) Any liabilities or obligations with respect
to any Products manufactured by SELLER prior to the Closing except to the extent
caused by acts or omissions by BUYER (other than the act solely of selling or
delivering the Products) and except for such liabilities or obligations relating
to complaints by retail customers concerning the Products not involving personal
injuries and arising in the ordinary course of business that are resolved by
BUYER in the ordinary course of business;
(k) Except as expressly assumed by BUYER
pursuant to Section 1.6(a), Section 1.6(d) or Section 1.6(e) hereof, any
obligations and liabilities for refunds, advertising, coupons, freestanding
inserts, adjustments, allowances, repairs, exchanges and returns relating
exclusively to any Product to the extent such obligations and liabilities relate
to offers issued or commitments made on or before the Closing Date;
(l) Any liabilities or obligations relating to
any legal action, suit, arbitration, charge, investigation, proceeding or claim
arising out of or in connection with SELLER'S conduct of the Business or any
other act or omission of SELLER or SELLER'S officers, directors, employees,
consultants, agents or advisors;
(m) Any liabilities or obligations arising out
of or in connection with any act, omission or circumstance comprising a breach
of the Contracts occurring prior to the Closing regardless of when any such
liability or obligation is asserted;
(n) Any liabilities or obligations (i) arising
by reason of any violation or alleged violation of any federal, state, local or
foreign law, rule, ordinance or regulation or any other requirement of any
governmental authority, including, without limitation, any failure to obtain any
relevant governmental permit, license, consent or other authorization, (ii)
except as specifically provided in Section 1.6, arising by reason of any breach
or alleged breach by SELLER of any agreement, contract, lease, license,
commitment, instrument, judgment, order or decree, or (iii) relating to the
environment or any hazardous, toxic or chemical substances, including but not
limited to those defined as "toxic" or "hazardous" under any environmental
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law, with respect to events, acts, omissions or circumstances existing or
occurring prior to Closing;
(o) Any liabilities or obligations relating to
the Business or to acts, circumstances or omissions existing or occurring prior
to the Closing, except to the extent specifically described in and expressly
assumed by BUYER in Section 1.6(c), (d), (e) and (f); and
(p) Any other liabilities or obligations not
expressly assumed by BUYER pursuant to Section 1.6 above.
For purposes of this Section 1.7, "SELLER" shall be deemed to
include all Affiliates of SELLER. SELLER hereby acknowledges and agrees that it
is retaining the Excluded Liabilities and SELLER shall pay, discharge and
perform all such liabilities and obligations.
ARTICLE 2
CLOSING
2.1 CLOSING. The closing (the "Closing") of the purchase and
sale of the Assets and of the transactions contemplated by this Agreement shall
be held at the offices of Potter Xxxxxxxx & Xxxxxxx LLP, Hercules Plaza, 0000 X.
Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000. The parties agree to use their
reasonable best efforts to cause a pre-closing to occur on September 13, 2000
and to cause the Closing to occur at 10:00 a.m. on September 15, 2000, following
satisfaction or waiver of the conditions to Closing set forth in Sections 2.4
and 2.5 hereof, or on such other date as the parties may agree. The parties
agree to use their reasonable best efforts to cause the Closing on or before
September 30, 2000. The date on which the Closing shall occur is hereinafter
referred to as the "Closing Date."
(a) At the Closing, BUYER or Kao shall deliver
to SELLER (i) by wire transfer to SELLER'S bank account, per SELLER'S wire
transfer instructions, to be provided to BUYER no later than two (2) business
days prior to the Closing Date, immediately available funds in an amount equal
to the Purchase Price and (ii) the following documents (collectively, "BUYER'S
Closing Documents):
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(i) the Instrument of Assignment and Assumption;
(ii) the Assignment of Patent License Agreement;
(iii) the Assignment of Technology License Agreement;
(iv) the Assignment of Patents;
(v) the Assignment and Assumption of the Manufacturing
Agreement;
(vi) the Transition Services Agreement;
(vii) the Instrument of Assumption;
(viii) the Trademark Purchase Agreement; and
(ix) such other instruments of assumption in form and
substance reasonably satisfactory to SELLER and its
counsel evidencing and effecting the assumption by
BUYER of the Assumed Liabilities as SELLER may
reasonably request.
(b) At the Closing, SELLER shall deliver or cause to be delivered to
BUYER or to BUYER's designee or designees, as BUYER may request, the following
documents (collectively, "SELLER'S Closing Documents"):
(i) the Instrument of Assignment and Assumption;
(ii) the Assignment of Patent License Agreement;
(iii) the Assignment of Technology License Agreement;
(iv) the Assignment of Patents;
(v) the Assignment and Assumption of the Manufacturing
Agreement;
(vi) the Transition Services Agreement;
(vii) the Xxxx of Sale and Assignment;
(viii) the Trademark Purchase Agreement; and
(ix) such other appropriately executed instruments of
sale, assignment, transfer and conveyance in form and
substance reasonably satisfactory to BUYER and its
counsel evidencing and effecting the sale and
transfer to BUYER or its designee or designees of the
Assets as BUYER may reasonably request.
(c) The payment to SELLER by Kao of funds equal to the purchase price
for the Trademarks under the Trademark Purchase Agreement (the "Trademark
Purchase Price") shall satisfy BUYER'S obligation under Section 2.1(a) above to
pay the Purchase Price to SELLER to the extent of the Trademark Purchase Price,
and Kao's obligation to pay the Trademark Purchase Price under the Trademark
Purchase Agreement shall not constitute an additional obligation of Kao or
BUYER.
2.2 INVENTORY ADJUSTMENT.
(a) On or prior to the Closing Date, the SELLER and the BUYER shall
jointly conduct a physical count of the Inventory as of the Closing Date and the
BUYER shall make or cause to be made a calculation of the Inventory value as of
the Closing Date (the
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"Calculation") in accordance with the accounting policies attached hereto as
SCHEDULE 2.2, which policies shall be consistent with the policies utilized by
SELLER for determining the value of Inventory reported in SELLER'S May 31, 2000
financial statements provided to BUYER. Notwithstanding such consistency, to the
extent that the Calculation reflects any values for the following items, such
values shall be excluded or reduced as follows: (i) the Calculation shall be
reduced by the value of (a) Inventory that is adulterated or is otherwise not of
good and merchantable quality, and (b) all finished goods Inventory that has a
shelf-life expiration date of less than twelve (12) months (or, in the case of
BAN clear roll-on, six (6) months) from the Closing Date, in each case net of
any reserves for such items included in the Calculation; and (ii) the
Calculation shall be reduced by 50% of the value of any Inventory that exceeds a
twelve (12) month supply (as measured on the basis of sales for the six (6)
month period preceding the Closing Date, other than BAN Naturals, which shall be
measured on the basis of projected sales for the period June 1, 2000 through
November 30, 2000 as set forth on Schedule 2.2), to the extent of such excess,
but in no event shall the Calculation include an amount greater than 50% of the
standard cost for such excess items. For purposes of the Calculation, all
"twin-pack" or similarly packaged items shall be treated as separate stock
items. The BUYER shall also provide SELLER with copies of the Calculation and
all work papers associated therewith within fifteen (15) days after the Closing
Date.
(b) SELLER shall have a period of thirty (30) days in which to review
the Calculation and the work papers associated therewith provided by the BUYER.
If the SELLER disagrees with all or any part of the Calculation, the SELLER
shall have the right to notify BUYER in writing of such disagreement and
SELLER'S reasons for so disagreeing, in which case the SELLER and the BUYER
shall attempt to resolve the disagreement. If within fifteen (15) days after
receipt by BUYER of such notice, the SELLER and the BUYER 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 Ernst & Young LLP or such other independent
accounting firm as shall be mutually agreed (the "Accountants") for a binding
and nonappealable determination to be rendered within thirty (30) days after
such submission. All fees and expenses of the Accountants incurred in this
capacity shall be billed to and shared equally by the SELLER and the BUYER.
(c) If the Calculation reflects an Inventory value that is either less
than or in excess of $5,507,252, the Purchase Price will be reduced or increased
dollar-for-dollar, as the case may be, by the amount of such difference, and the
BUYER will pay the amount of any such increase to the SELLER or the SELLER will
pay the amount of any such decrease to the BUYER, in immediately available
funds, within five business days after the final determination of the Inventory
value.
2.3 EARN OUT. In addition to the Purchase Price paid at Closing and any
Inventory Adjustment, SELLER shall also be entitled to receive from BUYER an
additional payment (the "Earn-Out Payment") on the following terms and
conditions:
(a) If the Net Sales by BUYER and any of its Affiliates of the
Products in the countries in which the Products are sold as of the Closing Date,
or in which the Products have been presented for possible sale and which are
listed on SCHEDULE 2.3(a), as determined by
13
BUYER in accordance with its standard accounting procedures, which are described
on SCHEDULE 2.3(b), exceeds any of the levels set forth on SCHEDULE 2.3(b) (the
"Sales Levels") for each of the calendar years ended December 31, 2001 and 2002
(the "Earn-Out Periods"), BUYER will make an Earn-Out Payment for the respective
year based upon the Sales Level achieved in that year calculated as provided in
SCHEDULE 2.3(b). BUYER shall prepare or cause its regular outside accountants to
prepare a statement of Net Sales for each such calendar year (the "Annual
Statement") together with a calculation of the Earn-Out Payment for such year,
which statement and calculation shall be delivered to SELLER within forty-five
(45) days following the end of each applicable calendar year. In addition to the
foregoing, BUYER shall provide to SELLER, within forty-five (45) days following
the end of each quarterly period during the Earn-Out Periods (excluding, however
the last quarter of such calendar year), a statement of Net Sales for such
quarterly period prepared from BUYER'S books and records in its customary
manner. Such quarterly statements shall be provided for SELLER'S information
only, and shall not bind BUYER or its accountants in their preparation of the
Annual Statements and their calculation of the Earn-Out Payment. SELLER or its
representatives shall have the right to inspect the books and records of BUYER,
at BUYER'S principal office, upon reasonable notice and at a mutually convenient
time, as SELLER may reasonably require in order to verify the accuracy of any
such statements delivered by BUYER.
(b) SELLER shall have thirty (30) days to review the Annual Statement
(as well as the accountants' work papers related thereto) and calculation and to
object thereto in writing; provided, however, that such objection may only go to
whether the calculation was carried out in conformity with BUYER'S standard
procedures, and may not go to the validity of such procedures. If the parties
are unable to resolve SELLER'S objections to the Annual Statement and
calculation within fifteen (15) days after SELLER submits such objections to
BUYER, they or either of them shall submit a statement of unresolved differences
together with a proposed calculation of the Earn-Out Payments to the Accountants
for a binding and nonappealable determination to be rendered within thirty (30)
days after such submission. All fees and expenses of the Accountants incurred in
such capacity shall be billed to and shared equally by the SELLER and the BUYER.
(c) In no event shall the Earn-Out Payment exceed (i) $4,000,000 for
any calendar year, or (ii) $6,500,000 in total.
2.4 BUYER'S CONDITIONS TO CLOSING. The obligation of BUYER to purchase and
pay for the Assets and to assume the Assumed Liabilities is subject to the
satisfaction (or waiver by BUYER) as of the Closing of the following conditions:
(a) (i) The representations and warranties of SELLER made in Article 3
of this Agreement shall be true and correct in all material respects on and as
of the Closing Date, as though made on and as of the Closing Date, except for
representations that are themselves qualified by a materiality standard, which
shall be true and correct in all respects; (ii) SELLER shall have performed or
complied in all material respects with all obligations and covenants required by
this Agreement to be performed or complied with by SELLER by the time of the
Closing; and (iii) SELLER shall have delivered to BUYER a certificate dated the
Closing Date and signed by an authorized officer of SELLER confirming the
foregoing.
14
(b) No suit, action or other proceeding, or injunction, order, decree
or judgment relating thereto shall be threatened or pending before any court or
government or regulatory official, body or authority in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with the
transactions contemplated hereby, or that would reasonably be expected to have a
material adverse effect on the business, financial condition, operating results,
assets or operation of the Business taken as a whole.
(c) SELLER shall have, with respect to the Contracts identified by an
asterisk in SCHEDULE 1.4(c), obtained and delivered to SELLER all third party
consents and approvals that are required to effect a valid assignment thereof to
BUYER without causing a breach of or default under, a termination or
modification of, or acceleration of any of the terms of such Contracts.
(d) The required waiting period under the Xxxx-Xxxxx Xxxxxx Antitrust
Improvements Act of 0000 (xxx "XXX Xxx") or any foreign laws relating to
competition shall have expired or been terminated.
(e) SELLER shall have executed and delivered to BUYER SELLER'S Closing
Documents.
(f) (i) BMS shall have consented in writing to the assignment of all
of Chattem's rights under the Manufacturing Agreement dated as of March 24, 1998
by and between BMS and Chattem, as amended (the "Manufacturing Agreement"), in
accordance with the terms of the Assignment and Assumption of the Manufacturing
Agreement.
(ii) SELLER shall have executed and delivered to BUYER an
assignment of the Manufacturing and Supply Agreement dated as of August 23, 2000
between SELLER and LEK (the "LEK Agreement") and LEK shall have consented to
such assignment in writing.
(g) The security interest in any of the Assets held by Bank of
America, or any other party shall be released effective as of the Closing.
2.5 SELLER'S CONDITIONS TO CLOSING. The obligation of SELLER to sell and
deliver or cause to be sold and delivered the Assets to BUYER is subject to the
satisfaction (or waiver by SELLER) as of the Closing of the following
conditions:
(a) (i) The representations and warranties of BUYER made in Article 4
of this Agreement shall be true and correct in all material respects, on and as
of the Closing, as though made on and as of the Closing Date, except for
representations that are themselves qualified by a materiality standard which
shall be true and correct in all respects; (ii) BUYER shall have performed or
complied in all material respects with the obligations and covenants required by
this Agreement to be performed or complied with by BUYER by the time of the
Closing; and (iii) BUYER shall have delivered to SELLER a certificate dated the
Closing Date and signed by a duly authorized officer of BUYER confirming the
foregoing.
15
(b) No suit, action or other proceeding, or injunction, order, decree
or judgment relating thereto shall be threatened or pending before any court or
government or regulatory official, body or authority in which it is sought to
restrain or prohibit or to obtain material damages or other material relief in
connection with the transactions contemplated hereby, or that would reasonably
be expected to have a material adverse effect on the business, financial
condition, operating results, assets or operation of the Business taken as a
whole.
(c) The required waiting period under the HSR Act or any foreign laws
relating to competition shall have expired or been terminated.
(d) BUYER shall have executed and delivered to SELLER BUYER'S Closing
Documents.
(e) BUYER shall have assumed the obligations of SELLER under the LEK
Agreement to the extent relating solely to performance thereunder due by SELLER
after the Closing Date.
(f) Kao shall have delivered to SELLER the Letter Agreement in the
form attached hereto as Exhibit J.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Chattem and Signal hereby jointly and severally represent and warrant to
BUYER as follows:
3.1 SELLER'S AUTHORITY: NO CONFLICTS.
(a) Chattem is a corporation duly organized, validly existing and in
good standing under the laws of the State of Tennessee. Signal is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each of Chattem and Signal has all requisite corporate power
and authority to enter into this Agreement and each of SELLER'S Closing
Documents and to consummate the transactions contemplated hereby and thereby.
All corporate acts and other proceedings required to be taken by each of Chattem
and Signal to authorize the execution, delivery and performance of this
Agreement and each of SELLER'S Closing Documents and the consummation of the
transactions contemplated hereby and thereby have been duly and properly taken.
This Agreement has been, and each of SELLER'S Closing Documents will be, duly
executed and delivered by each of Chattem and Signal and constitutes or will
constitute, as the case may be, the valid and binding obligation of each of
them, enforceable against each of Chattem and Signal in accordance with their
respective terms, except as enforcement hereof or thereof may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditors'
rights generally and by general equitable principles.
16
(b) The execution and delivery of this Agreement and each of SELLER'S
Closing Documents and the consummation of the transactions contemplated hereby
and thereby will not result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under, or
require any authorization or approval under (i) the Certificate of Incorporation
or Bylaws of either SELLER, (ii) any material note, bond, mortgage, indenture,
deed of trust, license, lease, contract, commitment, agreement or arrangement to
which SELLER is a party or by which any of its properties or assets are bound or
(iii) any judgment, order or decree or any statute, either law, ordinance, rule
or regulation applicable to the Business or the Assets, other than (A),
compliance with and filings under the HSR Act and if required, any applicable
foreign laws, (B) those that may be required solely by reason of BUYER's (as
opposed to any other party's) participation in the transactions contemplated
hereby and (C) those that require the consent of another party, to the extent
such consent has not been obtained. Without limiting the generality of the
foregoing, except for BUYER's rights hereunder, there are no agreements,
options, commitments or rights with, of, or to any person or entity to purchase
or otherwise acquire the Assets or any interest therein, except for those
agreements for sale by SELLER of Inventory or other goods entered into in the
ordinary course of business consistent with past practice.
(c) There are no (i) outstanding judgments, orders, writs, injunctions
or decrees of any court, governmental agency or arbitration tribunal against
SELLER that would or could prevent, or otherwise materially adversely affect the
ability of SELLER to consummate, the transactions contemplated hereby and to
perform its obligations hereunder or (ii) actions, suits, claims or legal,
administrative or arbitration proceedings or investigations pending or, to the
best knowledge of SELLER, threatened against SELLER, that would or could
prevent, or otherwise materially adversely affect the ability of SELLER to
consummate, the transactions contemplated hereby and to perform its obligations
hereunder.
3.2 FINANCIAL STATEMENTS.
(a) SCHEDULE 3.2(a) hereto contains the Statement of Net Sales and
Product Contribution of the Business for the fiscal years ended November 30,
1998 and November 30, 1999, and for the periods December 1, 1998 through May 31,
1999 and December 1, 1999 through May 31, 2000 (the "Financial Statements"). The
Financial Statements have been prepared in accordance with SELLER'S accounting
policies applied on a consistent basis, are in accordance with GAAP and fairly
present, in all material respects, the Net Sales and Product Contribution of the
Business for the periods covered thereby; PROVIDED, HOWEVER, that the Financial
Statements lack footnotes and other presentation items which would otherwise be
required by GAAP and the Financial Statements relating to periods other than the
fiscal years ended November 30, 1998 and November 30, 1999 are subject to normal
year-end adjustments. The Financial Statements set forth only the net sales and
operating expenses attributable to the Products and do not purport to represent
all the costs and expenses relating to internal allocations, fixed costs and
financing associated with a stand-alone, separate company.
17
(b) SCHEDULE 3.2(b) hereto contains the Statement of Net Sales and
Product Contribution of the United States operations of the Business for the
fiscal years ended November 30, 1998 and November 30, 1999, and for the periods
December 1, 1998 through May 31, 1999 and December 1, 1999 through May 31, 2000
(the "U.S. Financial Statements"). The U.S. Financial Statements have been
prepared in accordance with SELLER'S accounting policies applied on a consistent
basis, are in accordance with GAAP and fairly present, in all material respects,
the Net Sales and Product Contribution of the United States operations of the
Business for the periods covered thereby; PROVIDED, HOWEVER, that the U.S.
Financial Statements lack footnotes and other presentation items which would
otherwise be required by GAAP and the U.S. Financial Statements relating to
periods other than the fiscal years ended November 30, 1998 and November 30,
1999 are subject to normal year-end adjustments. The U.S. Financial Statements
set forth only the net sales and operating expenses attributable to the Products
and do not purport to represent all the costs and expenses relating to internal
allocations, fixed costs and financing associated with a stand-alone, separate
company.
3.3 TITLE TO TANGIBLE ASSETS.
(a) The Equipment listing on SCHEDULE 1.4(b) has been derived from and
is consistent with the SELLER'S most recent fixed asset registers, which have
been properly maintained in the ordinary course of business, and constitutes all
of SELLER'S equipment utilized to manufacture the Products manufactured by BMS
pursuant to the Manufacturing Agreement. The preceding sentence is not intended
to limit in any way the representation set forth in Section 3.12, and SELLER has
disclosed to BUYER all information concerning the additional equipment that is
used by BMS to manufacture Products but is not owned by SELLER. SELLER has good
and marketable title to the Equipment and to the Inventory ("Tangible Assets")
included in the Assets, free and clear of all liens and encumbrances.
(b) The Equipment is in good operating condition and repair (ordinary
wear and tear excepted) and the Tangible Assets are usable in the ordinary
course of the Business consistent with past practice.
3.4 TRADEMARKS.
(a) Except as disclosed on SCHEDULE 3.4 (a) hereto, SELLER owns and
has the unencumbered and unrestricted exclusive right to use, free of all liens,
security interests, encumbrances and contractual restrictions, without payment
to any other party, the Trademarks (including the goodwill associated
therewith).
(b) SCHEDULE 1.4(e) hereto sets forth a complete and accurate list of
trademarks and trademark applications which are used or held for use in the
Business and indicating where such trademarks are registered or are pending
registration. Such registrations, trademarks and pending trademark applications
are in SELLER'S name or are in the process of being recorded in SELLER'S name
or, as indicated on SCHEDULE 1.4(e), SELLER has a valid and subsisting royalty
free license under the Consent to Use and Register Agreement with respect
thereto. The registrations, trademarks and pending trademark applications in the
countries listed on SCHEDULE 3.4(b) are currently in use and are in full force
and effect. None of the Trademarks
18
has, to SELLER'S knowledge, been challenged on the grounds of non-use or
otherwise. Except as set forth on SCHEDULE 3.4(b), the scope and class of goods
covered by the Trademarks as set forth on SCHEDULE 1.4(e) includes
anti-perspirants and deodorants.
(c) (i) To SELLER'S knowledge, the Trademarks as currently used in the
Business do not infringe on the trademark rights of any third party; (ii)
equitable and legal title to the Trademarks and such registrations and pending
applications are in the name of SELLER or are being recorded in the name of the
SELLER; and (iii) to SELLER'S knowledge, except as set forth in SCHEDULE 3.4(c),
the transfer of the Trademarks and such registrations and pending applications
to BUYER does not violate the rights of any third party.
(d) No third party has any right to receive from SELLER any royalty,
nor are there any other licenses to which SELLER is a party, either
royalty-bearing or royalty-free, with respect to the Trademarks, except as
contemplated in the Consent to Use and Register Agreement.
(e) Except as set forth on SCHEDULE 3.4(e), SELLER is not a party to
any agreement with any third party limiting or restricting SELLER'S right to use
or register the Trademarks, except for the Consent to Use and Register
Agreement.
(f) Except as set forth in SCHEDULE 3.4(f), there are no claims,
government investigations, litigation or similar proceedings (other than current
prosecution proceedings for any trademark application) pending, asserted or to
SELLER'S knowledge threatened against SELLER or any licensee of SELLER with
respect to the Trademarks, including, without limitation, any proceedings to
cancel any Trademarks or to challenge the validity of any Trademarks.
(g) Except as set forth in SCHEDULE 3.4(g), the transactions
contemplated in this Agreement will have no material adverse effect on the
right, title and interest in and to the Trademarks to be transferred to BUYER.
(h) SELLER has disclosed to BUYER all of its material records with
respect to the Trademarks relating to the Products.
(i) SELLER has not taken any steps to limit the scope of any Trademark
registration or Trademark application, or offered any disclaimer or restriction
in regard thereto, and SELLER agrees not to take any of the foregoing actions
between the date of this Agreement and the Closing Date.
3.5 PATENTS AND TECHNICAL INFORMATION .
(a) Except as set forth on SCHEDULE 3.5(a), SELLER owns or (where
indicated on SCHEDULE 1.4(f)) has a valid and subsisting royalty free license
under the patent registrations and patent applications listed on SCHEDULE 1.4(f)
hereto free and clear of all liens, licenses, security interests, encumbrances
and other restrictions. There are no claims, government investigations,
litigation or similar proceedings pending, asserted or to SELLER'S
19
knowledge, threatened against SELLER with respect to the validity,
enforceability, use or ownership of the Patents. To SELLER'S knowledge, there is
no infringement or misappropriation by, or conflict with any third party with
respect to, the Patents (including, without limitation, any demand or request
that SELLER license any rights from a third party).
(b) The Patents include all of the rights or licenses with respect to
patents that are used in connection with the Products. The issued patents listed
on SCHEDULE 1.4(f) together with the claims presented in the pending patent
application identified on SCHEDULE 1.4(f), if issued as currently pending, are
SELLER'S only patents and patent applications that embrace the Products.
(c) To SELLER'S knowledge, making, using or selling Products in the
conduct of the Business does not infringe any patent or right owned by a third
party.
(d) To the SELLER'S knowledge, use of the Technical Information in
connection with the Business does not infringe the patent rights or other rights
of any third party, except for the liens of Bank of America that will be
released on or prior to Closing, and SELLER has the unencumbered right to use
the Technical Information and to transfer same to BUYER.
(e) The transactions contemplated by this Agreement will have no
material adverse effect on the right, title and interest in and to the Patents
and the Technical Information to be transferred to BUYER.
3.6 CONTRACTS.
(a) Except as disclosed on SCHEDULE 3.6 hereto, each Contract is a
valid and binding obligation of SELLER and is in full force and effect. Except
as disclosed on SCHEDULE 3.6 hereto, SELLER has performed all obligations
required to be performed by it to date under the Contracts and is not (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any respect thereunder. Except as disclosed on SCHEDULE 3.6, to the knowledge
of SELLER, each other party to each of the Contracts is in compliance with such
Contracts. The Contracts and the Purchase Orders constitute all of the contracts
that relate exclusively or primarily to the Business.
(b) Without limiting the generality or effect of the foregoing,
SCHEDULE 1.4 (c) lists each contract to which SELLER is a party in connection
with the Business or by which any of the Assets are bound that is of a type
described below:
(i) Any contract granting to any person a first-refusal, first-
offer or other right to purchase or acquire any of the Assets;
(ii) Any license or royalty contract, or other contract with
respect to the Trademarks, the Technical Information and the Copyrights, which
pursuant to the terms thereof requires future payments to or by SELLER;
20
(iii) Any contract with any manufacturer's representative or
other sales agent or relating to distribution or commission arrangements which
is not terminable without penalty on thirty (30) days' or less prior notice;
(iv) Any contract with respect to a joint venture or partnership
arrangement;
(v) Any contract granting a power of attorney other than powers
of attorney granted pursuant to customs forms executed by SELLER in the ordinary
course of the conduct of the Business;
(vi) Any contract with respect to letters of credit, surety or
other bonds or pursuant to which any assets or properties of SELLER are, or are
to be, subjected to a lien;
(vii) Any confidentiality contract or contract limiting or
restricting the ability of SELLER to enter into or engage in any market or line
of business in or related to the Business;
(viii) Any contract that (1) involves aggregate future payment by
or to SELLER in excess of $10,000, other than a purchase or sales order or other
contract entered into in the ordinary course of the conduct of the Business and
not exceeding in each case $100,000, (2) is reasonably likely to result in a
material adverse effect on the Business or the Assets, (3) is entered into with
any affiliate of SELLER, (4) is outside the ordinary course of the Business
consistent with past practice, or (5) is otherwise material to the extent
relating to the conduct of any of the Business or the operation or use of the
Assets.
3.7 LITIGATION: PROCEEDINGS.
(a) SCHEDULE 3.7 hereto sets forth a list, as of the date of this
Agreement, of all pending or, to SELLER'S knowledge, threatened judicial,
regulatory or administrative proceedings outstanding against or relating to the
Business or the use or ownership of the Assets and which (i) involve a claim or
claims against either entity comprising SELLER of, or that involve an
unspecified amount which could reasonably be expected to result collectively in
liability or loss of, more than $10,000 individually, or $100,000 in the
aggregate, or (ii) seek any material injunctive relief that could reasonably be
expected to have an adverse effect on the ability of either entity comprising
SELLER to consummate the transactions hereby. SELLER is not in default with
respect to any judicial, regulatory or administrative order to the extent
applicable to the Business or the ownership or use of the Assets.
(b) SELLER has disclosed to BUYER all material information concerning
the action instituted by BMS and succeeded to by SELLER seeking to annul certain
trademark registrations secured by Brasden Industrio E Comercio DeEscova LTDA
(the "Brazil Litigation"). Until the Closing, SELLER agrees to diligently defend
the appeal thereof, at SELLER'S sole expense, and agrees not to settle or
compromise such claim without obtaining BUYER'S prior written consent, which
will not be unreasonably withheld or delayed. Until the Closing, SELLER will
keep BUYER informed on a timely basis of the progress of such appeal,
21
and will at all times act pursuant to, and under BUYER's direction in connection
with such appeal, and any proceedings in relation thereto.
(c) SELLER has disclosed to BUYER all material information in SELLER'S
possession relating to the disputes between BMS and a German cosmetic firm
relating to the use by BMS of the "BAN" Trademark in certain jurisdictions in
view of such firm's "BAC' xxxx. The foregoing disputes have not resulted in any
contractual limitations on SELLER'S right to use any of the Trademarks in any
jurisdiction.
3.8 ABSENCE OF CHANGES OR EVENTS. Except as set forth on SCHEDULE 3.8,
since May 31, 2000, there has not been any change in the Business that has had a
material adverse effect on the Business or the Assets. To SELLER'S knowledge,
except as set forth on SCHEDULE 3.8, there are no facts or circumstances that
will or would result in such a material adverse effect. Except as contemplated
by this Agreement, since May 31, 2000, SELLER has caused the Business to be
conducted in the ordinary course consistent with past practice.
3.9 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth on SCHEDULE 3.9
hereto, the Business has been conducted in compliance with all applicable
statutes, laws, ordinances, rules, orders and regulations of any governmental
authority or instrumentality, to the extent applicable to the Business or the
ownership or use of the Assets. SELLER holds and is in compliance in all
material respects with all permits, licenses, certificates, accreditations,
product registrations and other authorizations of foreign, federal, state and
local governmental agencies required for the conduct of the Business that are
material to the conduct of the Business or the ownership or use of the Assets.
3.10 BROKERS. There is no broker or other person who would have any valid
claim against BUYER for a fee, commission or brokerage in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement,
understanding or action by SELLER. SELLER shall be solely responsible for all
fees and expenses of any broker, finder or other person engaged by or on behalf
of it or otherwise claiming through it in connection with the transactions
contemplated by this Agreement; provided that each party shall be responsible
for payment of any fees and expenses due to Xxxxxx Brothers by virtue of any
agreement such party has with Xxxxxx Brothers.
3.11 INVENTORY. The Inventory is of a quantity and quality usable and
saleable in the ordinary course of business consistent with past practice, is
not obsolete or damaged and is merchantable and fit for its intended purpose;
provided that BUYER shall not have any claim against SELLER for breach of the
representations and warranties contained in this sentence to the extent that any
such Inventory is excluded from or deducted from the Calculation. Such Inventory
is being actively marketed in normal commercial channels and in normal
commercial quantities consistent with SELLER'S past practice. There have been no
product recalls, withdrawals or seizures with respect to the Products. The
finished goods Inventory held for sale in the United States has been
manufactured in accordance with applicable good manufacturing practices as
defined by the United States Federal Food, Drug and Cosmetic Act, as amended
(the "FDA Act"). None of the Inventory is adulterated or misbranded within the
meaning of the FDA Act, or the rules and regulations promulgated thereunder.
22
3.12 COMPLETENESS OF ASSETS. The Assets include all of the equipment,
intellectual property, and other assets, either tangible or intangible,
necessary for BUYER to conduct the Business, in the same manner as presently
conducted by SELLER.
3.13 ENVIRONMENTAL MATTERS. In connection with the ownership and operation
of the Business and the Assets, there are no pending, nor has SELLER received
any written notice of, claims, investigations, suits or proceedings arising out
of or related to (a) property damage, natural resource damage, response costs
imposed under the Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA") (42 U.S.C. 9601 et seq., as amended) or analogous laws,
or personal injury as a result of any environmental pollution, or (b) any
non-compliance with any of the foregoing, any administrative or judicial
judgment or orders, or any federal, foreign, state or local laws, statutes or
regulations related to air quality, water quality, solid waste management
including solid waste disposal, hazardous or toxic substances or protection of
health or the environment including but not limited to CERCLA, the Clean Air Act
(42 U.S.C. 7401 et seq., as amended), the Toxic Substances Control Act (1 5
U.S.C. 2601 et seq., as amended), and any similar state, foreign, or local rules
and regulations (collectively, "Environmental Laws"). To SELLER'S knowledge,
BMS, LEK and any other third-party manufacturers of Products, have complied with
all applicable Environmental Laws in connection with their handling of Inventory
and production of Products.
3.14 TAXES. All Tax Returns that are required to be filed on or before the
Closing Date by SELLER or any other corporation, partnership or other legal
entity controlled by, or controlling, directly or indirectly, SELLER (the "Other
SELLER Entities") relating to Taxes on the Business or the Assets that could
become the responsibility of BUYER or that could result in any lien or claim
against the Business or the Assets ("Business Taxes") have been or will be duly
filed on a timely basis under the laws of each applicable jurisdiction. All such
Tax Returns were or will be when filed complete and accurate in all material
respects. All Business Taxes owed by SELLER or any Other SELLER Entity have been
timely paid, whether or not such Business Taxes are disputed. All Business Taxes
not due by the Closing Date but properly accruable on or before the Closing Date
or allocable to a period ending on or before the Closing Date or to a portion of
a period beginning before and ending after the Closing Date will be paid by
SELLER on a timely basis.
3.15 CUSTOMERS AND SUPPLIERS. Except as described on SCHEDULE 3.15, since
January 27, 2000, to SELLER'S knowledge there has not been any material adverse
change in the business relationship of the SELLER with any of the 15 largest
customers of the Business based on sales volume for the last two years or with
any of the 15 largest suppliers of the Business based on purchases for the last
two years. SELLER has previously furnished to the BUYER true and correct copies
of the forms of contracts used by the SELLER in connection with the sale of
Products. Except pursuant to promotional activities in the ordinary course of
business, SELLER has not sold any such product pursuant to any other form of
contract, or under any material amendment or modification to any such form,
since January 27, 2000.
3.16 PRODUCTS. Except as described on SCHEDULE 3.16, with respect to each
of the Products, there is not and has not been since May 31, 2000 (a) any defect
in any
23
manufacturing process used in connection with the manufacturing thereof, (b) any
breach by the SELLER of express or implied warranties of merchantability or
fitness for any purpose or use, or (c) any failure by the SELLER to comply with
any applicable law relating to product specifications, or any product
specification provided to or requested or required by any customer of the
Business, except any of the foregoing which have been cured and with respect to
which the BUYER will not have any liability.
3.17 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations
and warranties contained in this Agreement and the certificate to be delivered
pursuant to Section 2.4(a), neither SELLER nor any of its agents, Affiliates or
representatives, nor any other person, makes or shall be deemed to make any
representation or warranty to BUYER, express or implied.
3.18 NO OWNERSHIP. SELLER owns no real estate or any stock or equity
interest in any Person in each case related exclusively or primarily to the
Business or the Assets.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
BUYER hereby represents and warrants to SELLER as follows:
4.1 AUTHORITY: NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) BUYER is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. BUYER has all requisite
corporate power and authority to enter into this Agreement and each of the
BUYER'S Closing Documents and to consummate the transactions contemplated hereby
and thereby. All corporate acts and other proceedings required to be taken by
BUYER to authorize the execution, delivery and performance of this Agreement and
each of the BUYER'S Closing Documents and the consummation of the transactions
contemplated hereby and thereby have been duly and properly taken. This
Agreement has been, and each of the BUYER'S Closing Documents will be, duly
executed and delivered by BUYER and constitutes, or will constitute, as the case
may be, the valid and binding obligation of BUYER, enforceable against BUYER in
accordance with its terms, except as enforcement hereof or thereof may be
limited by applicable bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and by general equitable principles.
(b) The execution and delivery of this Agreement and each of the
BUYER'S Closing Documents, and the consummation of the transactions contemplated
hereby and thereby, will not result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, (i) the Certificate of Incorporation or By-laws of
BUYER, (ii) any note, bond, mortgage, indenture, deed of trust, license, lease,
contract, commitment, agreement or arrangement to which BUYER is a party or by
which any of its properties or assets are bound, or (iii) any judgment, order,
or decree, or any statute, law, ordinance, rule or
24
regulation applicable to BUYER or its property or assets, except for violations,
terminations, cancellations, accelerations, authorizations or approvals as are
not reasonably expected to impact the BUYER's ability to consummate the
transactions hereunder. No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, is required to be obtained or made by or
with respect to BUYER or its Affiliates in connection with the execution and
delivery of this Agreement and each of the BUYER's Closing Documents or the
consummation by BUYER of the transactions contemplated hereby and thereby other
than (A) compliance with and filings under the HSR Act and, if applicable, any
comparable foreign laws and (B) those that may be required solely by reason of
SELLER'S (as opposed to any other party's) participation in the transactions
contemplated hereby and thereby.
4.2 ACTIONS AND PROCEEDINGS. ETC. There are no (a) outstanding judgments,
orders, writs, injunctions or decrees of any court, governmental agency or
arbitration tribunal against BUYER that would or could prevent, or otherwise
materially adversely affect the ability of BUYER to consummate, the transactions
contemplated hereby and to perform its obligations hereunder or (b) actions,
suits, claims or legal, administrative or arbitration proceedings or
investigations pending or, to the best knowledge of BUYER, threatened against
BUYER, that would or could prevent, or otherwise materially adversely affect the
ability of BUYER to consummate, the transactions contemplated hereby and to
perform its obligations hereunder.
4.3 AVAILABILITY OF FUNDS. BUYER and its Affiliate have available cash or
existing borrowing facilities that together are sufficient to enable it to
consummate the transactions contemplated by this Agreement.
4.4 BROKERS. There is no broker or other person who would have any valid
claim against SELLER for a fee, commission or brokerage in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement,
understanding or action by BUYER. BUYER shall be solely responsible for all fees
and expenses of any broker, finder or other person engaged by or on behalf of it
or otherwise claiming through it in connection with the transactions
contemplated by this Agreement; provided that each party shall be responsible
for payment of any fees and expenses due to Xxxxxx Brothers by virtue of any
agreement such party has with Xxxxxx Brothers..
4.5 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations
and warranties contained in this Agreement and the certificate to be delivered
pursuant to Section 2.5(a), neither BUYER nor any of its agents, Affiliates or
representatives, nor any other person, makes or shall be deemed to make any
representation or warranty to SELLER, express or implied.
ARTICLE 5
COVENANTS OF SELLER
SELLER covenants and agrees as follows:
25
5.1 ACCESS. Prior to the Closing, SELLER will grant to BUYER or cause to be
granted to BUYER and its representatives, employees, counsel and accountants
reasonable access, during normal business hours and upon reasonable notice, to
the personnel, properties, books and records of SELLER relating exclusively or
primarily to the Business; PROVIDED, that such access does not unreasonably
interfere with the normal operations of SELLER or the Business.
5.2 ORDINARY CONDUCT OF THE BUSINESS. Except as expressly permitted by the
terms of this Agreement, from the date hereof to the Closing, SELLER will cause
the Business to be conducted in the ordinary course consistent with past
practice. Without limiting the foregoing, except as expressly provided in this
Agreement, SELLER shall not, without the prior written consent of BUYER:
(a) Sell or otherwise dispose of or abandon any of the Assets except
for sales of Inventory in the ordinary course of the Business and consistent
with past practice and except for sales or dispositions of equipment, supplies
and fixed assets having a fair market value not in excess of $10,000
individually or $100,000 in the aggregate that do not materially affect the
conduct of or ability to conduct the Business;
(b) Amend or terminate any Contract or take any other action that
would permit the termination thereof or the loss of benefits to the Business
therefrom, except in the ordinary course of the Business consistent with past
practice, and subject to the approval of BUYER, which approval shall not be
unreasonably withheld or delayed;
(c) Mortgage, pledge or grant any security interest in any of the
Assets in connection with the borrowing of money or for the deferred purchase of
any property; or otherwise permit the imposition of a lien on any of the Assets;
(d) Make any written change to the terms upon which the Business
extends credit to customers, discounts prices or offers other terms or sales
incentives or coupons or free-standing inserts other than changes occurring in
the ordinary course of the Business consistent with past practice, and subject
to the approval of BUYER, which approval shall not be unreasonably withheld or
delayed;
(e) Terminate or modify any governmental license, permit or other
authorization relating to the Business, other than in the ordinary course of the
Business consistent with past practice;
(f) Engage in any promotional sale or discount or other activity with
customers that is not consistent in nature and timing with past practices as
contemplated in the promotional activity calendar for the Products set forth as
SCHEDULE 5.2 hereto, which has or would reasonably be expected to have the
effect of changing the period in which sales would otherwise be expected to
occur;
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(g) Enter into or become subject to any new material contract,
agreement or commitment relating to the Business;
(h) Take steps to limit any claim in any pending application listed on
SCHEDULE 1.4(f), or reissue, reexamine, abandon or fail to maintain any patent
listed on SCHEDULE 1.4(f) or disclaim any claim of any patent or application
listed on SCHEDULE 1.4(f);
(i) enter into any new or amended agreement with any third party
manufacturer for the manufacture of Products, or with SELLER'S container
supplier for any supply agreement inconsistent with SELLER'S present arrangement
with such supplier, it being understood that BUYER will have the opportunity to
participate in any negotiations, and the right to approve contracts, between
SELLER and such third party manufacturers or between SELLER and its container
supplier; or
(j) Agree, whether in writing or otherwise, to do any of the
foregoing.
5.3 CONFIDENTIALITY. SELLER agrees that, after the Closing Date, SELLER
shall, and shall cause its directors, officers, employees, advisors and
Affiliates to, keep the Information (as defined below) confidential for a period
of ten (10) years from the Closing Date, except that any Information required by
law or legal or administrative process to be disclosed may be disclosed
consistent with the provisions of this Section 5.3. For purposes hereof, the
term "Information" means all proprietary information relating exclusively or
primarily to the Business, the Assets and the Assumed Liabilities, other than
any such information that is available to the public on the Closing Date, or
thereafter becomes available to the public other than as a result of a breach of
this Section 5.3, or is developed after the Closing Date independently by SELLER
or is obtained from third parties without breach by such third parties of any
confidentiality obligation. The foregoing covenant shall not prevent SELLER from
disclosing information as required by law or in response to the order of a court
or other governmental authority, provided that SELLER promptly notifies BUYER
prior to such disclosure in a manner that permits BUYER to timely challenge such
order or obtain a protective order.
5.4 DELIVERY. Notwithstanding anything contained in this Agreement to the
contrary, at the Closing SELLER shall make available to BUYER the formulations,
specifications and processing instructions and other Technical Information
corresponding to each Product.
5.5 COVENANT NOT TO COMPETE.
(a) For a period of five (5) years after the Closing Date, SELLER
shall not, and shall cause its Affiliates not to directly or indirectly engage
in the manufacturing, sale, distribution or marketing of deodorants or
anti-perspirant products intended for retail distribution channels (the
"Restricted Activities") worldwide.
(b) Notwithstanding the foregoing, SELLER shall not be prohibited
from:
27
(i) owning in the aggregate and solely for investment purposes
not in excess of five percent (5%) of the publicly traded stock of a corporation
trading on a national securities exchange or in the national over-the-counter
market;
(ii) consummating the transactions contemplated by this
Agreement;
(iii) acquiring any Person, venture or business which, in the
last completed fiscal year of such Person prior to such acquisition, generated
less than thirty percent (30%) of its gross revenues from the Restricted
Activities, so long as SELLER divests the assets engaged in the Restricted
Activities or otherwise ceases the engagement of such assets in the Restricted
Activities within 18 months after the consummation of such acquisition; or
(iv) developing, marketing and selling feminine hygiene products
under the GOLD BOND-TM- trademark, provided that such products are not under-arm
deodorant or anti-perspirant products.
(c) BUYER and SELLER acknowledge and agree that the restrictions
contained in this Section 5.5 are fair and reasonable and necessary to
accomplish the full transfer of the technology and the intangible assets
contemplated hereby. If, at the time of enforcement of any provision of this
Section 5.5. a court or other tribunal shall hold that the restrictions therein
are unreasonable or unenforceable under circumstances then existing, BUYER and
SELLER agree that the maximum period, scope or geographical area reasonable
under such circumstances shall be substituted for the stated period, scope or
area.
(d) BUYER and SELLER agree that in the event of any breach of the
provisions of this Section 5.5, money damages would be inadequate and the
non-breaching party would have no adequate remedy at law. Accordingly,
notwithstanding anything to the contrary contained in this Agreement, BUYER and
SELLER agree that the non-breaching party shall have the right, in addition to
any other rights, and the obligations under this Section 5.5, to an adequate
remedy for such breach not only by an action for damages but also by an action
or actions for specific performance, injunction and/or other equitable relief in
order to enforce or prevent any violations of the provisions of this Section
5.5.
5.6 FORWARDING RECEIPTS. The SELLER shall promptly forward or cause to be
forwarded to BUYER any and all proceeds from accounts receivable relating to the
Business that are received by SELLER after the Closing Date with respect to
receivables that arose from sales made after the Closing Date. The SELLER agrees
to exercise good faith and to cooperate in the resolution and documentation of
any such accounts receivable.
5.7 OTHER PRE-CLOSING ACTIONS. The SELLER agrees that, during the period
from the date hereof to the Closing, it will:
(a) Maintain, or cause to be maintained, the Equipment in good
operating condition and repair, ordinary wear and tear excepted; and
28
(b) Take all reasonable actions necessary to register and record the
assignment of the Trademarks (including the Trademarks subject to the Consent to
Use and Register Agreement) from BMS in all jurisdictions in which SELLER
acquired rights to such Trademarks from BMS, and will use its reasonable best
efforts to cause BMS to execute documents necessary to evidence the transfer to
SELLER (or to the BUYER or its designee) any Trademarks which have not been
recorded in the name of SELLER. SELLER agrees to continue such efforts after the
Closing if BMS has not completed all such assignments prior to Closing. SELLER
further agrees that, specifically, in relation to the registrations for BANN
which subsist in the United Kingdom, it will use its reasonable best efforts on
a continuing basis, to ensure that these are transferred to BUYER or its
designee.
5.8 INDIAN TRADEMARK. SELLER agrees to use its reasonable best efforts
following the Closing to obtain BMS's cooperation in maintaining its application
for any of the Trademarks pending in India in a manner and until such time that
BUYER or BUYER'S designee is permitted to register such Trademarks without there
being an interval of time in which neither BMS nor BUYER or BUYER'S designee has
any application for registration for those Trademarks in effect.
ARTICLE 6
COVENANTS OF BUYER
6.1 CONFIDENTIALITY. BUYER acknowledges that all information provided to it
by SELLER and its affiliates, agents and representatives is subject to the terms
of a confidentiality agreement between BUYER and SELLER dated as of June 16,
2000 (the "Confidentiality Agreement"), the terms of which are incorporated
herein by reference. Effective upon, and only upon, the Closing, the
Confidentiality Agreement will terminate only with respect to information
provided to BUYER or its Affiliates that relates exclusively to the Business,
the Assets and the Assumed Liabilities; and BUYER acknowledges that any and all
information provided to it by SELLER concerning SELLER (other than information
relating solely to the Business, the Assets and the Assumed Liabilities) shall
remain subject to the terms and conditions of the Confidentiality Agreement for
a period of five (5) years after the date of the Closing.
6.2 ACCOUNTS RECEIVABLE. BUYER shall promptly forward or cause to be
forwarded to SELLER any and all proceeds from accounts receivable relating to
the Business that are received by BUYER after the Closing Date and that were
outstanding as of the Closing Date. BUYER agrees to exercise good faith and to
cooperate in the resolution and documentation of any such accounts receivable.
6.3 PROMOTIONAL EXPENDITURES. BUYER agrees that, after the Closing, BUYER
will maintain expenditures for promoting and advertising the Products in the
United States for each of the calendar years ending December 31, 2001 and
December 31, 2002 at a level not less than twenty-nine percent (29%) of Net
Sales of Products for those calendar years, respectively. BUYER shall provide
information verifying the level of expenditures for
29
promoting and advertising the Products in the United States together with the
Annual Statement provided under Section 2.3(a).
6.4 CAPITAL EXPENDITURES. BUYER agrees to assume, pay and discharge the
budgeted expenditures, or reimburse SELLER for the capital expenditures
previously made, as described on SCHEDULE 6.4, within thirty (30) days after
receipt of an invoice and supporting documentation from SELLER.
ARTICLE 7
MUTUAL COVENANTS OF THE PARTIES
Each of SELLER and BUYER covenants and agrees as follows:
7.1 COOPERATION. In addition to the specific obligations created by the
Transition Services Agreement contemplated by Section 7.6 hereof, BUYER and
SELLER shall cooperate with each other and shall cause their officers,
employees, agents and representatives to cooperate with each other after the
Closing to ensure the orderly transition of the Assets and the Assumed
Liabilities to BUYER and to minimize the disruption to the respective businesses
of the parties hereto resulting from the transactions contemplated hereby. No
party shall be required by this Section 7.1 to take any action that would
unreasonably interfere with the conduct of its business.
7.2 PUBLICITY. SELLER and BUYER agree that, from the date hereof through
the Closing Date, no public release or announcement concerning the transactions
contemplated hereby shall be issued by a party without the prior consent of the
other party (which consent shall not be unreasonably withheld or delayed),
except as such release or announcement may be required by law or the rules or
regulations of any United States or foreign securities exchange; provided,
however, that the parties acknowledge that each of Chattem and Kao may issue a
press release upon execution of this Agreement, drafts of which will be provided
to the other party in advance for review and comment. Each party hereby agrees
to consider in good faith the comments made with regard to such drafts.
7.3 ANTITRUST NOTIFICATION, Etc. SELLER and BUYER have filed with the
United States Federal Trade Commission (the "FTC") and the United States
Department of Justice (the "DOJ"), in materially accurate and complete form, the
notification and report form required for the transactions contemplated hereby
and any supplemental information requested in connection therewith pursuant to
the HSR Act. Each of SELLER and BUYER shall furnish to the other such necessary
information and reasonable assistance as the other may request in connection
with its preparation of any subsequent filing or submission that is necessary
under the HSR Act. SELLER and BUYER shall keep each other apprised of the status
of any communications with, and inquiries or requests for additional information
from, the FTC and the DOJ and shall comply promptly with any such inquiry or
request. Each of SELLER and BUYER will use its reasonable good faith efforts to
obtain as promptly as possible any clearance required under the HSR Act for the
purchase and sale of the Assets. The BUYER shall not be required to undertake
any divestitures of assets of the BUYER or of the Assets acquired hereunder or
both to
30
eliminate any legal impediment arising from the antitrust laws of the United
States or of any other jurisdiction in order to obtain consent or non-opposition
to the transaction from the United States and other relevant jurisdictions.
7.4 SALES OR TRANSFER TAXES. BUYER and SELLER shall share equally in all
sales, use, value-added, business or goods and services, taxes (collectively,
"Sales Taxes") and SELLER shall pay all transfer, recording, documentary,
registration, conveyancing or similar taxes or expenses that may be imposed as a
result of the sale and transfer of the Assets (including, without limitation,
any stamp duty or other tax chargeable in respect of any instrument transferring
property, any taxes, filing fees or expenses payable in connection with the sale
and transfer of the Trademarks, Patents and Copyrights from BMS to SELLER or
BUYER, and the registration thereof, but excluding any taxes, filing fees or
expenses payable in connection with the sale and transfer from SELLER to BUYER
or BUYER's designee of the Trademarks, Patents and Copyrights, and the
registration thereof, which shall be paid by BUYER), together with any and all
penalties, interest and additions to tax with respect thereto, and SELLER and
BUYER shall cooperate in timely making all filings, returns, reports and forms
as may be required to comply with the provisions of such tax laws. To the extent
practicable and except as otherwise provided in this Agreement, BUYER will make
the payment of any Sales Taxes and SELLER, upon receipt from BUYER of reasonable
documentation concerning the nature and amount of any Sales Taxes, shall
promptly reimburse BUYER for one-half (1/2) of the amount. Each party shall be
responsible for its own income taxes, gross receipts taxes, or other taxes based
upon income, receipts or revenues.
7.5 ACCESS TO INFORMATION. After the Closing, upon reasonable notice, BUYER
and SELLER agree to furnish or cause to be furnished to each other and to their
representatives, employees, counsel and accountants access, during normal
business hours, such information (including records pertinent to the Business)
and assistance relating to the Business as is reasonably necessary for financial
reporting and accounting matters, the preparation and filing of any tax returns,
reports or forms or the defense of any tax claim or assessment; PROVIDED,
however, that such access does not unreasonably disrupt the normal operations of
BUYER or SELLER; PROVIDED FURTHER, however, that the party requesting
cooperation shall pay the reasonable out-of-pocket costs incurred by the party
furnishing cooperation.
7.6 TRANSITION SERVICES AGREEMENT.
(a) From and after the Closing, BUYER and SELLER shall provide for the
transition of selling, packaging, advertising and marketing of the Products in
accordance with the Transition Services Agreement.
(b) Within fifteen (15) days following the execution by the parties of
this Agreement, BUYER'S and SELLER'S transition teams will meet at a location of
SELLER'S choosing reasonably acceptable to BUYER for the purpose of discussing
matters relating to the transition of the Business from SELLER to BUYER.
7.7 BULK SALES WAIVER. BUYER and SELLER hereby waive compliance with the
terms and conditions of any applicable bulk sales or transfer law or similar
laws that may be
31
applicable to the sale or transfer of the Assets. SELLER shall indemnify BUYER
for any loss arising from failure to comply with applicable bulk sale or
transfer or similar laws.
7.8 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby will be paid by the party
incurring such costs and expenses, whether or not the transactions contemplated
hereby are consummated, except as otherwise expressly provided herein.
7.9 SUPPLEMENTAL DISCLOSURES. SELLER shall have the right from time to time
prior to the fifth business day preceding the Closing to supplement or amend the
Disclosure Schedules attached hereto with respect to any matter hereafter
arising or discovered which if existing or known at the date of this Agreement
would have been required to be set forth or described in any such Schedule. Any
such supplemental or amended disclosure shall not be taken into account in
determining whether or not the conditions set forth in Section 2.4 have been
satisfied, but solely for purposes of Article 8 hereof will be deemed to have
cured any breach of representation or warranty made in this Agreement and to
have been disclosed as of the date of this Agreement.
7.10 RESPONSIBILITY FOR PROMOTIONAL LIABILITIES AND PRODUCT RETURNS.
(a) BUYER shall be responsible for and shall pay, indemnify and hold
SELLER harmless from and against any Promotional Liabilities.
(b) BUYER shall be responsible for and shall indemnify and hold
harmless SELLER from and against (i) all returns made during the first three
months after Closing relating to sales of the Products prior to the Closing up
to $625,000 (the "Returns Limit"), and (ii) all returns made following the three
month period after the Closing relating to sales of the Products.
(c) SELLER shall be responsible for and shall pay, indemnify and hold
BUYER harmless from and against all returns of Products made during the first
three months after the Closing Date in excess of the Returns Limit.
(d) BUYER hereby agrees to reimburse SELLER, dollar for dollar, in the
event that any of SELLER'S customers offset the cost of Products returned by
such customer against accounts payable by such customer to SELLER to the extent
that such Product returns would be the responsibility of BUYER pursuant to this
Section 7.10. SELLER agrees to provide notice to BUYER of any offset for which
SELLER is entitled to be reimbursed by BUYER pursuant to this Section 7.10(d).
BUYER shall pay SELLER promptly following receipt of notice of any such offset
(together with supporting documentation reasonably acceptable to BUYER) by a
customer. SELLER and BUYER shall cooperate to ensure that the customer does not
offset such Product returns against both SELLER and BUYER.
(e) For a period of three months after the Closing Date, BUYER will
not initiate or encourage customers of the Business to return Products, except
as BUYER deems prudent or necessary due to quality, health or safety reasons or
as required by law.
32
(f) During the three month period following the Closing Date, BUYER
shall advise SELLER in writing on a monthly basis (or weekly basis if returns
have exceeded the Returns Limit) of the amount of Product returns received or
claimed since the Closing Date.
7.11 DISPOSITION OF STABILITY SAMPLES. At BUYER'S request, SELLER shall
transfer any stability samples of the Products and stability methods to BUYER or
Kao, as determined by BUYER. SELLER will permit BUYER access to such samples in
order to permit BUYER to determine which samples it will request SELLER to
transfer. SELLER may destroy any such samples not transferred to BUYER within
six (6) months following the Closing Date. BUYER shall be responsible for the
continued maintenance of any transferred samples in accordance with its normal
business practices (including its practices with respect to destruction of
samples) [which are consistent with BUYER'S good faith interpretation of the
requirements of applicable law. BUYER shall afford SELLER reasonable access,
during normal business hours, upon prior notice, to the transferred samples
maintained by BUYER in connection with any claim relating to the transferred
samples for which SELLER may have responsibility].
7.12 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each of the parties hereto will take, or cause to be taken, all
action, and do, or cause to be done, all things necessary under applicable laws
and regulations to consummate the transactions contemplated by this Agreement
including the expending of any amounts required in order to effectuate the same.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLER. SELLER, jointly and severally, shall
indemnify BUYER, and its Affiliates, and each of their respective officers,
directors, employees and agents and hold them harmless from any loss, liability,
claim, damage or expense (including reasonable legal fees and expenses) suffered
or incurred by any such indemnified party ("BUYER's Losses") to the extent
arising from:
(a) any breach of any representation or warranty of SELLER contained
in this Agreement or in any certificate, instrument or other document delivered
pursuant hereto that survives the Closing;
(b) any failure of SELLER to deliver good, marketable title to the
Assets free and clear of all liens and encumbrances other than liens or
encumbrances securing obligations which are Assumed Liabilities, satisfaction of
which will remove such liens and encumbrances;
(c) any breach of any of the covenants or agreements of SELLER
contained in this Agreement; or
33
(d) the Excluded Liabilities and the Excluded Assets.
8.2 INDEMNIFICATION BY BUYER. BUYER shall indemnify SELLER and its
Affiliates and their respective officers, directors, employees and agents
against and hold them harmless from any loss, liability, claim, damage or
expense (including reasonable legal fees and expenses) suffered or incurred by
any such indemnified party ("SELLER'S Losses") to the extent arising from:
(a) any breach of any representation or warranty of BUYER contained in
this Agreement that survives the Closing or in any certificate, instrument or
other document delivered pursuant hereto or in connection herewith that survives
the Closing,
34
(b) any breach of any of the covenants or agreements of BUYER
contained in this Agreement; or
(c) the Assumed Liabilities.
8.3 EFFECT OF INVESTIGATION. The obligation of BUYER to indemnify SELLER
pursuant to Section 8.2, and the obligation of SELLER to indemnify BUYER
pursuant to Section 8.1, shall be unaffected by the scope of, and knowledge
obtained from, any investigation, inquiry or examination made for or on behalf
of SELLER or BUYER, as the case may be.
8.4 SURVIVAL. The representations and warranties of the parties hereto
shall survive the execution and delivery hereof and the delivery of all of the
documents executed in connection herewith and shall continue in full force and
effect after the date hereof and after the Closing Date for a period of eighteen
(18) months, except for (a) the representations and warranties in Sections
3.4(b), (c), (f), (g), (h) and (i), which will continue for a period of
twenty-four (24) months following the Closing Date, and (b) the representations
and warranties in Sections 3.1, 3.3, 3.4(a), (d) and (e), 3.10, 3.13, 3.14, 4.1
and 4.4, which will continue without limitation. The covenants and agreements of
the parties hereto shall survive the execution and delivery hereof and the
delivery of all of the documents executed in connection herewith, and shall
survive the Closing in accordance with their terms without limitation.
8.5 CERTAIN LIMITATIONS ON SELLER'S INDEMNIFICATION OBLIGATIONS.
Notwithstanding anything in this Agreement to the contrary:
(a) SELLER shall not have any obligation to indemnify the BUYER in
respect of any claim for breach under Section 8.1(a) hereof unless and until the
BUYER's Losses under all such breaches exceed $1,000,000 in the aggregate (the
"Threshold Amount"), in which event this limitation will no longer apply and the
BUYER will be entitled to indemnification regardless of the Threshold Amount.
(b) In no event shall SELLER'S obligation to indemnify BUYER in
respect of claims under Sections 8.1(a), (b) or (c) hereof require SELLER to
indemnify BUYER for BUYER's Losses exceeding (i) $40,000,000 in the case of any
such Losses other than those described in the next clause (ii); or (ii)
$120,000,000 less the amount of any Losses described in the preceding clause
(i), in the case of breaches of SELLER'S agreement under Section 1.2 with
respect to Trademarks only (subject to the exceptions contained in Schedules
3.4(a) (other than Item 1), 3.4(b), 3.4(e), 3.4(f) and 3.4(g)) and breaches of
SELLER'S representations and warranties under Section 3.4(a), (b), (c), (d) and
(e).
(c) Solely for purposes of construing this Section 8.5, all references
in this Agreement to materiality or to minimum amounts shall be disregarded.
(d) In calculating amounts payable to an indemnified party, the
indemnified loss 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 indemnified party has received under any insurance policy with respect
to such Losses (net of the present value of any premium increases directly
attributable to such payments), or (ii) any prior or subsequent actual recovery
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by the indemnified party from any Person (other than the indemnified party's
insurers) with respect to such losses, in either case less any fees and expenses
incurred by the indemnified party in achieving such recovery.
(e) The foregoing limitations and the limitations on the survival of
representations and warranties in Section 8.4 shall not apply to any claims of
BUYER to the extent such claims arise from or relate to intentional
misrepresentations made by SELLER with the intent to deceive BUYER or fraud by
SELLER.
8.6 PROCEDURES RELATING TO INDEMNIFICATION.
(a) In order for an indemnified party to be entitled to any
indemnification provided for under this Article 8 in respect of, arising out of
or involving a claim or demand made by any person, firm, governmental authority
or corporation against the indemnified party (a "Third Party Claim"), such
indemnified party must notify the indemnifying party in writing, and in
reasonable detail, of the Third Party Claim as promptly as reasonably
practicable after receipt by such indemnified party of written notice of the
Third Party Claim; PROVIDED, however, that failure to give such notification
shall not affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure. The indemnified party shall thereafter deliver to the indemnifying
party, within five business days after the indemnified party's receipt thereof,
copies of all notices and documents (including court papers) received by the
indemnified party relating to the Third Party Claim.
(b) If a Third Party Claim is made against an indemnified party, the
indemnifying party will be entitled to participate in the defense thereof and,
if it so chooses and acknowledges its obligation to indemnify the indemnified
party therefor, to assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party. Should
the indemnifying party so elect to assume the defense of a Third Party Claim,
the indemnifying party will not be liable to the indemnified party for legal
expenses subsequently incurred by the indemnified party in connection with the
defense thereof consistent with the terms hereto. If the indemnifying party
assumes such defense, the indemnified party shall have the right to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the indemnifying party, it being understood that the
indemnifying party shall control such defense. The indemnifying party shall be
liable for the fees and expenses of counsel employed by the indemnified party
for any period during which the indemnifying party has not assumed the defense
thereof. If the indemnifying party chooses to defend any Third Party Claim, all
the parties hereto shall cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the indemnifying party's
request) the provision to the indemnifying party of records and information that
are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the indemnifying
party shall have assumed the defense of a Third Party Claim, the indemnified
party shall not admit any liability with respect to, or settle, compromise or
discharge,
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such Third Party Claim without the indemnifying party's prior written consent
(which consent shall not be unreasonably withheld or delayed).
ARTICLE 9
TERMINATION
9.1 TERMINATION. Anything contained herein to the contrary notwithstanding,
this Agreement may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Closing Date:
(a) by mutual written consent of SELLER and BUYER;
(b) by BUYER if any of the conditions set forth in Section 2.4 shall
have become incapable of fulfillment, and shall not have been waived by BUYER;
(c) by SELLER if any of the conditions set forth in Section 2.5 shall
have become incapable of fulfillment, and shall not have been waived by SELLER;
(d) by SELLER or BUYER if the Closing does not occur on or prior to
December 31, 2000;
PROVIDED, HOWEVER, that the party seeking termination pursuant to
clause (b), (c), or (d) is not in breach to any material extent of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
9.2 NOTIFICATION OF TERMINATION. In the event of termination by SELLER or
BUYER pursuant to this Article 9, written notice thereof shall forthwith be
given to the other party and the transactions contemplated by this Agreement
shall be terminated, without further action by any party.
9.3 EFFECT OF TERMINATION. If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in this Article 9,
this Agreement shall become void and of no further force and effect, except for
the provisions of (a) Section 6.1 relating to the obligation of BUYER to keep
confidential certain information and data obtained by it, (b) Section 7.8
relating to expenses, (c) Section 7.2 relating to publicity, (d) Sections 3.10
and 4.4 relating to finders' fees and brokers' fees, (e) this Section 9.3, and
(f) Article 10 relating to general provisions. Nothing in this Article 9 shall
be deemed to release any party from any liability for any breach by such party
of the terms and provisions of this Agreement or to impair the right of any
party to compel specific performance by another party of its obligations under
this Agreement.
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ARTICLE 10
GENERAL PROVISIONS
10.1 ASSIGNMENT. Except as set forth below, this Agreement and the rights
and obligations hereunder shall not be assignable or transferable by BUYER or
SELLER (including by operation of law in connection with a merger, or sale of
substantially all the assets, of BUYER or SELLER) without the prior written
consent of each of the other parties hereto. Without the consent of any party
hereto BUYER may assign its right to purchase any of the Assets hereunder to one
or more Affiliates of BUYER, PROVIDED, however, that no assignment shall limit
or affect the assignor's obligations hereunder.
10.2 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole benefit
of the parties hereto, and nothing herein expressed or implied shall give or be
construed to give to any person or entity, other than the parties hereto and
their permitted assigns, any legal or equitable rights hereunder; provided,
however, that any third party that is an assignee under Section 10. 1 hereof or
is a designee of BUYER under Section 1.2 hereof, shall be deemed to have relied
on and shall have the benefit as a third party beneficiary of all of SELLER'S
representations, warranties, covenants and indemnities set forth herein.
10.3. AMENDMENTS: WAIVER. No amendment to this Agreement shall be effective
unless it shall be in writing and signed by each party hereto.
10.4 WAIVER OF COMPLIANCE. Except as otherwise provided in this Agreement,
any failure of any of the parties to comply with any obligation, covenant,
agreement or condition herein may be waived by the party entitled to the
benefits thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
10.5 NOTICES. All notices or other communications required or permitted to
be given hereunder shall be in writing and shall be delivered by hand or sent by
prepaid telex, cable or telecopy, or sent, postage prepaid, by registered,
certified or express mail, or reputable overnight courier service and shall be
deemed given when delivered by hand, telexed, cabled or telecopied, or if
mailed, three days after mailing (one business day in the case of express mail
or overnight courier service), as follows:
(i) if to SELLER,
Chattem, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: A. Xxxxxxxxx Xxxxxx, XX
Fax No. (000) 000-0000
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with copies to:
Xxxxxx & Xxxxxx LLP
Suite 1000, Volunteer Building
000 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, Esquire
Fax No. (000) 000-0000
(ii) if to BUYER,
The Xxxxxx Xxxxxxx Company
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
Fax No. (000) 000-0000
with copies to:
Potter Xxxxxxxx & Xxxxxxx XXX
Xxxxxxxx Xxxxx, 0xx Xxxxx
0000 X. Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esquire
Fax No. (000) 000-0000
10.6 INTERPRETATION. The headings contained in this Agreement, in any
Exhibit or Schedule hereto and in the table of contents to this Agreement, are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 KNOWLEDGE. For purposes of this Agreement, "knowledge" of SELLER or
SELLER'S "knowledge" shall mean the actual knowledge of the representatives of
SELLER set forth on SCHEDULE 10.7 hereto, following reasonable inquiry on the
part of such representatives.
10.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
10.9 SEVERABILITY. If any provision of this Agreement shall be held
invalid, illegal or unenforceable in any respect for any reason, by a court of
competent jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision hereof.
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10.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State, without regard to the conflicts
of law principles of such State.
10.11 ACTIONS AND PROCEEDINGS. BUYER and SELLER hereby irrevocably consent
to the nonexclusive jurisdiction and venue of the Courts of the State of
Delaware and of any Federal Court located in Wilmington, Delaware in connection
with any action or proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby. SELLER hereby irrevocably appoints the
Secretary of State of the State of Delaware, as its authorized agent upon whom
process may be served in any such action or proceeding instituted in any such
court and waives any objections to personal jurisdiction with respect thereto.
BUYER or SELLER, as the case may be, shall mail a copy of any process served
under this Section 10.11 to the other party in accordance with the terms of this
Agreement.
10.12 EXHIBITS AND SCHEDULES. All Exhibits and Schedules annexed hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein.
10.13 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules hereto) contains the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and, except to the
extent specifically set forth herein, supersedes all prior agreements and
understandings relating to such subject matter.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
CHATTEM, INC.
By:_____________________________________
A. Xxxxxxxxx Xxxxxx, XX
President and Chief Operating Officer
SIGNAL INVESTMENT & MANAGEMENT CO.
By:_____________________________________
A. Xxxxxxxxx Xxxxxx, XX
President
THE XXXXXX XXXXXXX COMPANY
By:_____________________________________
Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
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