Exhibit 28.1
Asset Purchase and Sale Agreement dated May 23, 1997 by and among
Chattem, Inc., Signal Investment & Management Co. and
Sunsource International, Inc. and Mindbody, Inc.
ASSET PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made this 23rd day of May, 1997 by and among SUNSOURCE
INTERNATIONAL, INC., a Hawaii corporation ("Sunsource"), MINDBODY, INC., a
Florida corporation ("Mindbody" and, collectively with Sunsource, the
"Sellers"), CHATTEM, INC., a Tennessee corporation ("Chattem"), and SIGNAL
INVESTMENT & MANAGEMENT CO., a Delaware corporation and wholly-owned subsidiary
of Chattem ("Signal") (Chattem and Signal being referred to herein together as
the "Purchasers"), under the following circumstances:
Mindbody owns and/or utilizes the trademarks SUNSOURCE, REJUVEX, MELATONEX,
ECHINEX, PROPALMEX, GARLIQUE and BACKJOY (the "Trademarks") and certain raw
materials used in the production of products bearing the Trademarks, has a
homeopathic line of products and certain other products in various stages of
development. Sunsource owns certain finished goods and markets and sells certain
dietary supplements under the Trademarks (the business of Mindbody and Sunsource
being referred to collectively as the "Business"). Sellers desire to sell, and
Purchasers desire to purchase, all of Sellers' right, title and interest in and
to the Business and the Trademarks, subject to and in accordance with the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
and agreements contained in this Agreement, the parties agree:
ARTICLE I
PURCHASE AND SALE
1.1 AGREEMENT TO SELL. At the Closing, which shall occur on the Closing
Date (both terms as defined in Section 7.1 hereof), and in accordance with the
terms and conditions of this Agreement, the Sellers shall sell, convey, assign
and deliver to the Purchasers, all right, title and interest of the Sellers in
and to the Business and the Trademarks (the "Acquired Assets"), free and clear
of all mortgages, liens, pledges, security interests, charges, claims,
restrictions and encumbrances of any nature whatsoever, except Permitted Liens
(as defined in Section 2.5 hereof) and, with respect to BACKJOY, as described in
Section 2.5.
1.2 ACQUIRED ASSETS. The Acquired Assets shall include without limitation
the following assets, properties and rights of the Sellers, except as otherwise
expressly set forth in this Article I:
(a) all inventories relating to the Business, including raw materials, goods
in process, finished goods, packaging, supplies and labels (the "Inventory");
(b) all accounts and accounts receivables related to the Business but not
more than $2,200,000 in value;
(c) all market research, customer information telephone numbers (to the
extent transferable), promotional data, and advertising and display materials,
including a trade show booth, related to the Business;
(d) all technologies, analytical methods, product formulations, data bases,
operating manuals, trade secrets, know-how, raw material specifications, product
specifications and other intellectual property related to the Business;
(e) all information, files, records, data, plans, contracts and recorded
information, including customer and supplier lists related to the Business,
Acquired Assets or Trademarks;
(f) to the extent transferable, all rights under any written or oral
contract, agreement, plan, instrument, registration, license or other permit or
approval of any nature associated with the Business; and
(g) all rights of the Sellers to the Trademarks and the goodwill associated
with the Trademarks.
Any property or asset of the Sellers otherwise constituting an Acquired
Asset and any contract, lease or other instrument, document or agreement to be
assigned or otherwise transferred to the Purchasers hereunder, the assignment or
other transfer, or the attempted assignment or other transfer of which would be
invalid or ineffective or would constitute a breach or default of an agreement
or commitment to which either of the Sellers is a party or is bound, unless the
consent or approval of another person or entity to such assignment or other
transfer shall have first been obtained, shall not be assigned or otherwise
transferred under this Agreement, and the provisions of this Agreement shall not
constitute an attempt to assign or transfer, unless and until such consents
shall have been obtained, provided that until such approvals or consents have
been obtained, such property, asset, contract, lease or other instrument,
document or agreement, or the net proceeds thereof, shall be held and/or
received by the Sellers for the benefit and account of the Purchasers.
Notwithstanding the failure of Purchasers to assume the Sellers' liabilities and
obligations under such circumstances, the Purchasers shall, on behalf of the
Sellers, make payments to the other parties to any such agreement, lease, order
or commitment pursuant to the terms thereof to the extent the Purchasers enjoy
2
the benefits (including the benefits of possession or use) provided thereunder.
1.3 EXCLUDED ASSETS. Notwithstanding the foregoing, the Acquired Assets
shall not include any of the following (the "Excluded Assets"):
(a) cash on hand or in bank accounts and all cash equivalents;
(b) the rights to any of the Sellers' claims for any federal, state, local
or foreign tax refunds;
(c) all insurance policies of the Sellers pertaining to the Business and all
rights of the Sellers under or arising out of such insurance policies;
(d) the rights of the Sellers under this Agreement or any instruments
delivered to the Sellers by the Purchasers pursuant to this Agreement; or
(e) any and all other assets, properties or rights of the Sellers other than
the Acquired Assets, including without limitation stock records, corporate
documents and minutes, and Equigin and "stress" products.
1.4 AGREEMENT TO PURCHASE. At the Closing, in accordance with the terms
and conditions of this Agreement, Purchasers shall purchase the Acquired Assets
from Sellers for the Purchase Price (as defined in Section 1.5 hereof).
1.5 PURCHASE PRICE.
(a) At the Closing, the Purchasers shall pay or deliver to the Sellers or
their designees ("Closing Payment"); (i) $25,900,000, less the amount of the
down payment held pursuant to Section 1.5(i) hereof, in immediately available
funds, subject to adjustment on the basis of the calculation of inventory value
as of the Closing Date in accordance with Section 1.6 hereof;
(ii) an amount not to exceed $2,200,000, payable in immediately available
funds, equal to the accounts and accounts receivable of the Business as of the
Closing Date, which amount shall be set forth in a schedule furnished to the
Purchasers at the Closing together with the aging of such accounts; and
(iii) 300,000 shares of the voting common stock of Chattem ("Chattem
Shares").
3
(b) If Net Sales (as defined below) of the Business are within any of the
levels set forth on Schedule 1.5(b) (the "Sales Levels") (as such levels shall
be adjusted pursuant to Section 1.5(f)) during any of the first six consecutive
12 month periods beginning on the first day of the month following the Closing
Date and ending on the last day of the immediately preceding month of the next
year (each an "Annual Period"), then the Purchasers shall make the additional
payments ("Additional Payments") to Mindbody or its designees set forth on
Schedule 1.5(b). Notwithstanding anything herein or on Schedule 1.5(b) to the
contrary, there may be only one Additional Payment for any Annual Period and,
except as provided in the following sentence, the total amount of Additional
Payments that may be paid to Mindbody or its designees for all six Annual
Periods shall not exceed $12,600,000 in the aggregate. If, during the first four
Annual Periods, Mindbody or its designees have received $9,450,000 or more in
Additional Payments, then Mindbody or its designees may receive in the aggregate
a total of $15,750,000 for all six Annual Periods.
(c) The Closing Payment together with any Additional Payments hereunder
shall be referred to as the "Purchase Price." All payments of the Purchase Price
(other than the Chattem Shares) shall be paid to Sunsource and/or Mindbody, as
the case may be, by the Purchasers by wire transfer of immediately available
funds to such bank account as the Sellers may designate.
(d) The Purchasers shall keep true and accurate records of their Net Sales
for the Annual Periods for which Additional Payments may become due to Mindbody
pursuant to Section 1.5(b) hereof. Within 60 days after the end of each Annual
Period, the Purchasers shall deliver a statement setting forth a calculation of
the amount of Net Sales for the Annual Period and whether an Additional Payment
is due to Mindbody with respect to the Annual Period, certified as true and
correct by the Chief Financial Officer of Chattem (the "Annual Statement"). If
such Annual Statement indicates that an Additional Payment is due, then such
Annual Statement shall be accompanied or preceded by the Additional Payment. The
Sellers or their representatives shall have the right to inspect such books and
records of the Purchasers, at Purchasers' principal office, upon reasonable
notice and at a mutually convenient time, as the Sellers may reasonably require
in order to verify the accuracy of any such Annual Statement. In addition to the
foregoing, Purchasers shall submit to Mindbody, within 60 days following the end
of each consecutive period of 90 days during each Annual Period (excluding,
however, the last consecutive period of 90 days during each Annual Period) an
interim statement (the "Interim Statement") setting forth a calculation of the
amount of Net Sales for such period of 90 days (or the then Annual Period to
date, whichever is greater) and which annualizes such Net Sales for the entire
Annual Period by dividing the Net Sales for the Annual Period to date by the
number of days elapsed
4
and multiplying the result of 365) (the "Annualized Net Sales"). The Interim
Statement shall be certified as true and correct by the Chief Financial
Officer of Chattem. If the Interim Statement reflects Annualized Net Sales at
a Sales Level that would require the Purchasers to make an Additional Payment
in accordance with Section 1.5 hereof and Schedule 1.5(b) attached hereto (as
may be adjusted pursuant to Section 1.5(f) hereof), then such Interim
Statement shall be accompanied by an Additional Payment of $525,000 (the
"Interim Payment"). The Interim Payment shall be placed in an interest
bearing escrow account at a financial institution mutually agreeable to the
Sellers and the Purchasers and shall be applied to the Additional Payment
which becomes due at the end of the Annual Period. If Net Sales reflected on
one or more Interim Statements exceed the Sales Level for which an Additional
Payment is required pursuant to Section 1.5(b) hereof and Schedule 1.5(b) (as
adjusted pursuant to Section 1.5(f)), then the escrow agent shall release the
Interim Payments to Mindbody in full or partial payment of the Additional
Payment for such Annual Period or, if no Additional Payment is due for such
Annual Period, the Interim Payment shall be delivered to the Purchasers.
(e) For purposes of this Agreement, "Net Sales" shall mean gross sales of
the Purchasers and all of their affiliates from the Business based on net
invoice prices, less any and all product returns, credits and cash discounts,
but not including any promotional payments, including, without limitation, coop
advertising, coupons and slotting allowances. Net Sales shall include all sales
of Garlique, Rejuvex, Melatonex, Echinex, Propalmex, all homeopathic tablets and
cremes and Backjoy (the foregoing being called "Original Products"), and any
other dietary supplement or homeopathic products sold by Chattem or any of its
affiliates whether or not sold under the "Sunsource" trademark (excluding any
product already developed and sold in the marketplace by a third party,
unaffiliated with Chattem or its affiliates, which is purchased by Chattem or
any of its affiliates after the Closing Date, but only if such product is not
sold under the "Sunsource" trademark.)
(f) In the event that the Purchasers shall, prior to the expiration of
six Annual Periods or the payment of Additional Payments equal to $12,600,000
in the aggregate (or $15,750,000 in the aggregate, if applicable in
accordance with the terms of the last sentence of Section 1.5(b)), sell any
product (including the Original Products or any dietary supplement or
homeopathic product developed and publicly launched after the Closing Date
(the "Products")) to a third party, or shall discontinue the sale of any
Product (discontinuance to mean the cessation of sales of the Product not due
to regulatory or governmental mandated reasons (unless such mandate is caused
by a claim made by the Purchasers that is beyond the claims made by the
Sellers with regard to such Products) (a "Product Discontinuance")), then the
Sales Levels referred to in Section
5
1.5(b) hereof and Schedule 1.5(b) (i.e., $25,000,000 through $40,000,000 and
above) shall be permanently reduced for the Annual Period in which the sale
or Product Discontinuance occurs (and the Net Sales of the Product sold or
discontinued in the year in which such sale or Product Discontinuance takes
place shall be excluded from the calculation of Net Sales) and for all
subsequent Annual Periods to reflect the sale of such Product or the Product
Discontinuance by multiplying the Sales Levels by a fraction, the numerator
of which shall be the Net Sales of the Product sold or discontinued for the
period of 12 months prior to such sale or Product Discontinuance and the
denominator of which shall be the Net Sales of all Products during the
preceding 12 months (including the Product sold or discontinued). The amount
of the Additional Payment shall not be similarly reduced. By way of example,
if a Product with Net Sales of $6,000,000 during the 12 months preceding the
sale or Product Discontinuance (and $2,000,000 of Net Sales through March 31
of the current year) were sold, and Net Sales during such time period were
$32,000,000 for all Products, then the Sales Levels would be reduced by a
percentage obtained by multiplying each Sales Level by a fraction of
$6,000,000 over $32,000,000 or 18.75%, and the Net Sales for the current year
would be reduced by $2,000,000. Thus, the $35,000,000 Sales Level would be
reduced from $35,000,000 by $6,562,500 to $28,437,500, the $30,000,000 Sales
Level from $30,000,000 by $5,625,000 to $24,375,000, etc., and the Net Sales
would be reduced from $32,000,000 to $30,000,000. By way of further example,
if the Net Sales, as adjusted, for the Annual Period in which the Product was
sold or discontinued were $28,000,000 and no other Products were sold or
discontinued, the Additional Payment for such Annual Period would be
$3,150,000.
(g) In the event that, prior to the earlier of the expiration of six Annual
Periods or the payment of Additional Payments equal to $12,600,000 in the
aggregate (or $15,750,000 in the aggregate, if applicable in accordance with the
terms of the last sentence of Section 1.5(b)), Purchasers shall decide to sell
any Product, the Purchasers shall first give written notice thereof to the
Sellers and obtain the consent of the Sellers to such sale, which consent shall
not be unreasonably withheld and shall be based on the creditworthiness and
business reputation of the buyer, and the
6
buyer shall expressly agree to provide the Purchasers with timely information
regarding Net Sales for the Product sold to the buyer. If such sale is
consented to by the Sellers, then, notwithstanding the sale of such Product,
the Purchasers shall continue to include Net Sales of such Product in the
calculation of Net Sales, the determination of the appropriate Sales Level
and the payment of Additional Payments for purposes of this Section 1.5. If
the Purchasers shall decide to sell the entire Business, then the Purchasers
shall first give written notice thereof to the Sellers and obtain the consent
of the Sellers to such sale, which consent shall not be unreasonably withheld
and shall be based on the creditworthiness and business reputation of the
buyer, and the buyer shall expressly assume the obligation to pay the
Additional Payments on the same terms and conditions as set forth herein and,
if the Sellers consent to such sale, the Purchasers shall be relieved from
any and all such liability with respect to future payments of the Additional
Payment. If the Sellers shall have consented to the sale of a Product or the
entire Business as provided in this Section 1.5(g), then there shall be no
reduction in the Sales Level as provided by Section 1.5(f) above.
(h) Chattem shall register the Chattem Shares for sale on behalf of
Mindbody or its designees by preparing and filing a registration statement on
Form S-3 with the Securities and Exchange Commission ("SEC") not later than
ten business days following the Closing Date. Chattem shall use commercially
reasonable efforts to cause such registration statement to become effective
as promptly as practicable and to continue the effectiveness of such
registration statement for 24 months after the Closing Date. Not later than
three (3) days prior to the Closing Date, Purchasers shall furnish to Sellers
copies of the Registration Statement which Chattem proposes to file with the
SEC and Mindbody or its designees shall furnish the Purchasers with all
information required by the holders of the Chattem Shares to be included in
the Registration Statement. Chattem shall also furnish Mindbody with copies
of all filings with the SEC relating to such Registration Statement. If, for
any reason, Chattem is unable to register the Chattem Shares within 90 days
after the Closing Date, the Purchasers shall pay to Mindbody or its designees
within three (3) business days after demand from Mindbody and its designees,
an amount equal to the difference in the value of the Chattem Shares at the
90th day following the Closing Date and the highest value at any date between
such 90th day after the Closing Date and the date the Chattem Shares are
registered with the SEC. For purposes of this Section, the value of the
Chattem Shares shall be the average of the closing price as reported in The
Wall Street Journal of the Chattem stock on the five business days preceding
the date of such valuation. At the option of Purchasers, they may elect to
compensate Mindbody or its designees under this Section 1.5(h) in the form of
additional Chattem stock.
(i) Simultaneously with the execution hereof, Purchasers shall deposit with
the Sellers' counsel, Xxxxxx, Xxxxxx & Xxxxxx (the "Escrow Agent") the sum of
$1,000,000, which shall constitute a downpayment by the Purchasers against the
Purchase Price payable by the Purchasers at the Closing. The downpayment shall
be held in an escrow account and disbursed pursuant to the terms of the Escrow
Agreement annexed hereto as Exhibit A.
1.6 INVENTORY ADJUSTMENT.
(a) On or prior to the Closing Date, the Sellers and the Purchasers shall
jointly conduct a physical count of the Inventory as of the Closing Date and the
Purchasers shall make or
7
cause to be made a calculation of the Inventory value as of the Closing Date
on a basis consistent with generally accepted accounting principles in
accordance with the Sellers' historical costs as set forth on Schedule 1.6
attached hereto (the "Calculation"). Any Inventory that exceeds a 12 month
supply (as measured on the basis of sales for the 12 month period preceding
the Closing Date), to the extent of such excess, or otherwise fails to
satisfy the representations of Section 2.6 with respect to Inventory shall
not be included in the Calculation. The Purchasers shall also provide Sellers
with copies of the Calculation and all work papers associated therewith at or
prior to the Closing Date. The Purchasers may not assert a claim for a breach
of the representations and warranties of Section 2.6 hereof with respect to
any Inventory that is not included in the Calculation.
(b) If the Calculation reflects an Inventory value that is either less than
or in excess of $4,300,000 (plus or minus $50,000), the Purchase Price will be
reduced or increased dollar-for-dollar, as the case may be, by the amount of
such difference, and the Purchasers will pay the amount of any such increase to
the Sellers or the Sellers will pay the amount of any such decrease to the
Purchasers, in immediately available funds, within five business days after the
final determination of the Inventory value.
1.7 DISPUTE RESOLUTION. If the Sellers disagree with all or any part of
the Calculation or any Interim Statement or the Annual Statement, the Sellers
shall have the right to notify Purchasers in writing of such disagreement and
their reasons for so disagreeing, in which case the Sellers and the Purchasers
shall attempt to resolve the disagreement. If within 30 days after the delivery
of the Calculation, the Interim Statement or the Annual Statement and all work
papers associated therewith to the Sellers, the Sellers and the Purchasers are
unable to resolve the differences, if any, arising as a result of the
Calculation, the Interim Statement or Annual Statement, they or either of them
shall submit a statement of all unresolved differences together with copies of
the Calculation, the Interim Statement or the Annual Statement to a mutually
agreed upon independent "Big Six" accounting firm (the "Accountants") for a
binding and nonappealable determination to be rendered within 30 days after such
submission. All fees and expenses of the Accountants incurred in this capacity
shall be billed to and shared by the Sellers and the Purchasers equally.
1.8 ASSUMED LIABILITIES. At the Closing, the Purchasers shall assume
and agree to pay, discharge or perform, as appropriate, all liabilities and
obligations of the Sellers specifically identified on Schedule 1.8 attached
hereto. Notwithstanding the foregoing, the Purchasers do not assume or agree
to pay, discharge or perform any liabilities or obligations arising out of
any breach of the Sellers of any provision of any
8
such agreement, contract, commitment or lease referred to in this Section 1.8.
1.9 LIABILITIES NOT ASSUMED. Except as expressly provided in Section 1.8
or Schedule 1.8 attached hereto, it is understood and agreed that the Purchasers
do not assume or agree hereunder to pay, perform or discharge, and the Sellers
shall pay, discharge and hold the Purchasers harmless from, any debt,
obligation, tax or liability, known or unknown, contingent or otherwise, of the
Sellers of any kind or nature whatsoever. Without limiting the foregoing, except
as expressly provided in Section 1.8 or Schedule 1.8, in no event shall the
Purchasers assume or incur any liability or obligation in respect of any of the
following:
(a) payables and liabilities for materials and services owed by the Sellers
with respect to the Business arising on or prior to the Closing Date;
(b) product returns, except as provided in Section 4.7 hereof;
(c) liabilities for shortages or damages in product shipped to third parties
on or prior to the Closing Date;
(d) any product liability, breach of warranty, or similar claim for injury
to person or property regardless of when asserted, which resulted from the use
of product inventory manufactured by or on behalf of the Sellers and shipped to
a third party on or prior to the Closing Date;
(e) any federal, state or local income or other tax payable with respect to
any business, assets, properties or operation of the Sellers or any member of
any affiliated group of which the Sellers are a member for any period prior to
the Closing Date, or incident to or arising as a consequence of the negotiations
or consummation by the Sellers of this Agreement and the transactions
contemplated hereby;
(f) any liability or obligation with respect to periods prior to the Closing
Date under any law, ordinance or governmental or regulatory rule or regulation,
whether federal, state or local, to which the Sellers' business operations,
assets or properties is subject, including any environmental laws or
regulations; or
(g) any liability or obligation with respect to periods prior to, or as a
result of, the Closing to any employees, agents or independent contractors of
the Sellers, whether or not employed by the Purchasers after the Closing, or
under benefit arrangement of the Sellers with respect thereto.
9
1.10 ALLOCATION OF PURCHASE PRICE. The Sellers and the Purchasers agree
that the Purchase Price shall be allocated as set forth on Schedule 1.10
attached hereto. The parties agree to report this transaction and the
allocations for income tax purposes in a manner consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers represent and warrant to the Purchasers as follows:
2.1 CORPORATE EXISTENCE. Each Seller is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted.
2.2 AUTHORITY. Each Seller has full corporate power and authority to enter
into this Agreement and to consummate the transactions provided for herein. All
actions on the part of the Sellers necessary to approve the transactions
contemplated by this Agreement have been duly taken as required by applicable
law.
2.3 ENFORCEABLE OBLIGATION. This Agreement has been, and the other
agreements, documents and instruments required to be delivered by the Sellers
in accordance with the provisions hereof will have been by the Closing Date,
duly executed and delivered by the Sellers and constitute the valid and
binding agreements of each Seller enforceable in accordance with their
respective terms, except that (i) enforcement may be subject to bankruptcy,
insolvency, moratorium or other similar laws relating to creditors rights
generally and (ii) the remedy of specific performance and injunctive relief
and other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding may be brought.
2.4 ABSENCE OF VIOLATION OR CONFLICTS. Except as set forth on Schedule
2.4, the execution, delivery and performance of the transactions contemplated by
this Agreement by the Sellers does not and will not violate, conflict with or
result in the breach of any term, condition or provision of (a) any existing
law, ordinance, or governmental rule or regulation to which the Sellers or the
Business is subject, (b) any judgment, order, writ, injunction, decree or award
of any court, arbitrator or governmental or regulatory official, body or
authority which is applicable to the Sellers or the Business, (c) the
certificate of incorporation or by-laws of the Sellers or (d) any mortgage,
indenture, or other instrument, document or understanding, oral or written, to
which either Seller is a party, by which any of the
10
Acquired Assets may be bound or affected, and which would create a lien,
claim or encumbrance on the Acquired Assets as a result thereof. Except as
set forth on Schedule 2.4, no authorization, approval or consent of, and no
registration or filing with, any governmental or regulatory official, body or
authority or third party is required in connection with the execution,
delivery or performance of this Agreement by the Sellers, except such
authorization, approval or consent that will be obtained prior to the Closing
Date or where the failure to do so would not have a material adverse effect
on the Business.
2.5 TITLE TO ACQUIRED ASSETS. The Sellers have good, valid and marketable
title to the Acquired Assets or in the case of BACKJOY, a license to utilize
such product, free and clear of all mortgages, liens, pledges, security
interests, charges, claims, restrictions and other encumbrances and defects of
title of any nature whatsoever, except for existing liens and encumbrances
disclosed in Schedule 2.5 attached hereto which will be satisfied at or prior to
Closing ("Permitted Liens") or, with respect to BACKJOY, rights retained by the
licensor thereof described on Schedule 2.9.
2.6 INVENTORY. Except as set forth in Schedule 2.6, the Inventory consists
of items which are of a quality and quantity usable or salable in the ordinary
course of the Business. To the best of the Sellers' knowledge, the Inventory has
been manufactured in accordance with good manufacturing practices, as defined by
the United States Federal Food, Drug and Cosmetic Act, as amended (the "FDA
Act"). The Inventory and the advertising claims with respect thereto comply in
all material respects with all of the regulations of the Dietary Supplement,
Health and Education Act ("DSHEA"). To the best of the Sellers' knowledge, none
of the finished goods Inventory is adulterated or misbranded within the meaning
of the FDA Act, or the rules and regulations promulgated thereunder.
2.7 FINANCIAL STATEMENTS. The Sellers have furnished to the Purchasers a
combined audited financial statement for the 1995 fiscal year and unaudited
combined financial statements, including a balance sheet, statements of income
and retained earnings, for the 1996 fiscal year and unaudited Statements of
Sales, Gross Profit and Advertising Cost Analysis for the last three complete
fiscal years ended December 31, 1996 and interim financial statements for the
period ended March 31, 1997 and the comparable period of the prior year, a copy
of which is attached hereto as Schedule 2.7 ("Financial Statements"). The
Financial Statements are true and correct, fairly present the financial
condition, assets and liabilities and results of operations of the Sellers for
the fiscal periods reflected thereon in conformity with generally accepted
accounting principles applied on a consistent basis. The books, records and
accounts of the Sellers maintained with respect to the Business accurately and
fairly reflect the transactions and the assets and liabilities with respect to
the Business and are in
11
accordance with generally accepted accounting principles consistently applied
with prior periods.
2.8 TRADEMARKS. Schedule 2.8 lists all of the Trademark registrations
and Trademark applications by the Sellers that are used, directly or
indirectly, in connection with the Business. There are no Trademark
registrations, Trademark applications or common law trademark rights which
are used in the Business that are not set forth on Schedule 2.8. Mindbody is
the owner of the Trademark registrations and Trademark applications set forth
on Schedule 2.8 together with the goodwill of the Business symbolized
thereby; the Trademark registrations and applications therefor set forth on
such Schedule 2.8 are valid and in good standing; the Sellers have not
granted to any other firm, corporation, association or person the right to
use any of the Trademarks reflected on Schedule 2.8 and, to the Sellers'
knowledge, no other firm, corporation, association, or person has a right to
use any of the Trademarks reflected on Schedule 2.8; no notice has been
received by the Sellers claiming that any Trademark identified on Schedule
2.8 is invalid or infringes upon the rights of any other persons, and the
Sellers have no knowledge of the basis for any such claim with respect to any
registered or common law trademarks; and, except as set forth on Schedule
2.8, none of the Trademarks identified on Schedule 2.8 is currently licensed
to or by the Sellers.
2.9 INTELLECTUAL PROPERTY. Except as provided on Schedule 2.9, all of the
technology, inventions, processes, know-how, formulae, trade secrets, patents
and copyrights (collectively, the "Intellectual Property"), which are used by
the Sellers in the operation of the Business are owned by Mindbody or (other
than patents, trade secrets and copyrights) are part of the public domain.
Except as provided on Schedule 2.9, none of the Intellectual Property is subject
to any license, royalty or other contractual obligation restricting the Sellers'
use thereof or entitling others to use of the same or in any way obligating the
Sellers to make payments to others. To the best of the Sellers' knowledge, the
Sellers' use of the Intellectual Property does not infringe upon or conflict
with any patent, copyright or trade secret of any third party. Except as
provided on Schedule 2.9, no present or former employee of the Sellers and no
other person owns or has any proprietary, financial or other interest, direct or
indirect, in the Intellectual Property. With respect to certain formulae used in
the Business, the Sellers and the Purchasers acknowledge that the Sellers do not
have ownership or proprietary rights in such formulae, but that the combination
of active ingredients in such formulae were created and are owned by the
Sellers. The Sellers currently utilize and, after the Closing, the Purchasers
will be able to utilize the combination of active ingredients in the production
of the products used in the Business either at the current contract
manufacturers or at other contract manufacturers. The Purchasers shall have no
liability, and the
12
Sellers will defend, indemnify and hold harmless the Purchasers from and
against any claim by a contract manufacturer or other party seeking to
restrict or limit the Purchasers' use of the combination of active
ingredients in the production of products used in the Business.
2.10 ACCOUNTS RECEIVABLE. The accounts receivable of the Sellers as of
March 31, 1997 and aging with respect to such receivables are set forth on
Schedule 2.10 attached hereto. The Sellers shall deliver to the Purchasers at
the Closing an updated Schedule 2.10, which shall set forth the accounts
receivable as of the Closing Date and aging with respect thereto. All such
accounts receivable are valid and genuine; have arisen solely out of bona fide
sales and deliveries of goods and other business transactions in the ordinary
course of business consistent with past practices; are not subject to valid
defenses, set-offs or counterclaims; and are collectible within 90 days after
billing at the full amount reflected on Schedule 2.10.
2.11 LITIGATION. Except as set forth on Schedule 2.11, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority, is
pending or, to the best knowledge of the Sellers, threatened against the Sellers
or in respect of any of the transactions contemplated hereby or which relates in
any way to the Acquired Assets, the Trademarks or the Business. The Sellers have
not had any material product liability claims at any time during the past three
years.
2.12 COMPLIANCE WITH LAW; AUTHORIZATIONS. The Sellers are in compliance
with and are not in violation of any law, ordinance, or governmental or
regulatory rule or regulation, whether federal, state, local or foreign, to
which the Business is subject, the violation of which could have a material,
adverse effect on the Business. The Sellers own, hold, possess or lawfully
use in the operation of the Acquired Assets and the Business all franchises,
licenses, permits, rights, applications, filings, registrations and other
authorizations ("Authorizations") which are in any manner necessary for it to
conduct the Business, the failure of the Sellers to so own, hold, possess or
use could have a material, adverse effect on the Business. No proceeding is
pending or, to the knowledge of Sellers, threatened to revoke or limit any
such Authorization. The Sellers are not in default, nor has either received
any notice of any claim of default, with respect to any such Authorization.
Except as set forth on Schedule 2.12, all such Authorizations are renewable
by their terms or in the ordinary course of business without the need to
comply with any special qualification procedures or to pay any amounts other
than routine filing fees. None of such Authorizations will be adversely
affected by consummation of the transactions contemplated hereby. No
shareholder, director, officer, employee or former employee of Sellers or any
affiliates of the Sellers, or any other person, firm
13
or corporation owns or has any proprietary, financial or other interest
(direct or indirect) in any Authorization which the Sellers own, possess or
use in the operation of the Business as now or previously conducted.
2.13 MATERIAL CONTRACTS. All of the contracts, commitments or other
binding obligations of the Sellers that are material to the Business are
described on Schedule 2.13 attached hereto, including all contracts relating to
the purchase, sale and marketing of products of the Business. Each such contract
is in full force and effect and there exists no event of default thereunder on
the part of the Sellers and, to the Sellers' knowledge, the other party or
parties to any such contract. The Sellers have not violated any of the terms and
conditions of any such contract and, to the knowledge of the Sellers, all of the
covenants to be performed by the other party thereto have been fully performed.
The sales agency agreements identified on Schedule 2.13 are terminable by the
Sellers and after the Closing will be terminable by the Purchasers without
penalty or liability for terminating such agreements upon 30 days written notice
to the agent. Based on the foregoing sentence, the Purchasers agree to pay
commissions in accordance with such sales agency agreements for all sales
arising after the Closing Date.
2.14 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule 2.14,
no shareholder, director, officer or employee of the Sellers, or any member of
his or her immediate family or any other of its, his or her affiliates, owns or
has a 5% or more ownership interest in any corporation or other entity that is
or was during the last three years a party to, or in any property which is or
was during each of the last three years the subject of, any material contract,
agreement or understanding, business arrangement or relationship with the
Sellers.
2.15 CUSTOMERS. Schedule 2.15 identifies the top 50 customers of the
Business by gross sales for each such customer for each of the past two years.
Except as set forth on such Schedule 2.15, the Sellers have not been informed by
or become aware that any current customer of the Business that was among its
largest 25 customers as measured by sales during the past three calendar years
intends to purchase products of the Business on terms materially less favorable
than those currently in effect.
2.16 PRODUCT PRICING. Schedule 2.16 sets forth the price matrix by
product, customer and quantity for the products included in the Business as in
effect since January 1, 1996. Except as set forth on Schedules 1.8 and 2.16, the
Sellers have not offered or sold any such products at prices different than the
prices in effect as of the date specified above. Except as set forth on Schedule
2.16, the Sellers have no special agreements or understandings regarding the
Business with respect to promotional payments for services, cooperative
advertising or other promotional
14
discounts, free goods, extended dating, warehouse allowance or product
returns.
2.17 CONDITIONS AFFECTING THE SELLERS. There is no fact, development or,
to the Sellers' knowledge, threatened development with respect to the products,
customers, facilities, vendors, suppliers, operations or assets of the Business
which are known to the Sellers which would materially adversely affect the
business, operations or prospects of the Sellers considered as a whole, other
than such conditions as may affect as a whole the economy generally. This
representation and warranty shall be made only as of the date of this Agreement
and is not subject to the provisions of Section 7.2(a).
2.18 INVESTMENT. The Sellers and their designees are acquiring the
Chattem Shares for their own account for investment, without a view to, or
for resale in connection with, the distribution thereof in violation of
federal and state securities laws. The Sellers will distribute and resell the
Chattem Shares only in compliance with an effective Form S-3 registration
statement or otherwise in compliance with other federal and state securities
laws.
2.19 COMPLETENESS OF DISCLOSURE. No representation or warranty by the
Sellers in this Agreement nor any certificate, schedule, statement, document or
instrument furnished or to be furnished to the Purchasers pursuant hereto, or in
connection with the negotiation, execution or performance of this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated herein or therein or
necessary to make any statement herein or therein not misleading.
ARTICLE III
PURCHASERS' REPRESENTATIONS AND WARRANTIES
The Purchasers hereby represent and warrant to the Sellers as follows:
3.1 ORGANIZATION. Each of the Purchasers is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has all requisite corporate power and authority to own its
properties and carry on its business as presently being conducted and as
contemplated by this Agreement.
3.2 AUTHORITY. The Purchasers have full corporate power and authority to
enter into this Agreement and to consummate the transactions provided for
herein. All actions on the part of the Purchasers necessary to approve the
transactions contemplated by
15
this Agreement have been duly taken as required by applicable law. This
Agreement has been, and the other agreements, documents and instruments,
required to be delivered by the Purchasers in accordance with the provisions
hereof will have been by the Closing Date, duly executed by the Purchasers
and constitute the valid and binding agreement of the Purchasers, enforceable
in accordance with their respective terms, except that (i) enforcement may be
subject to bankruptcy, insolvency, moratorium or other similar laws relating
to creditors rights generally and (ii) the remedy of specific performance and
injunctive relief and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding may be brought.
3.3 ABSENCE OF VIOLATION OR CONFLICTS. Except as set forth on Schedule
3.3, the execution, delivery and performance of the transactions contemplated by
this Agreement by the Purchasers does not and will not (a) violate, conflict
with or result in the breach of any term, condition or provision of (i) any
existing law, ordinance or governmental rule or regulation to which the
Purchasers are subject, (ii) any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental or regulatory official, body or
authority which is applicable to the Purchasers (ii) the certificate of
incorporation or by-laws of the Purchasers or (iv) any mortgage, indenture, or
other instrument, document or understanding, oral or written, to which the
Purchasers are a party, or (b) create, or cause the acceleration of the maturity
of, any debt, obligation or liability of the Purchasers. Except as set forth on
such Schedule 3.3, no authorization, approval or consent of, and no registration
or filing with, any governmental or regulatory official, body or authority is
required in connection with the execution, delivery or performance of this
Agreement by the Purchasers, except as have been made or obtained, or where the
failure to be so made or obtained would not have a material adverse effect on
the operation of the Business by the Purchasers after the Closing Date.
3.4 LITIGATION. No litigation, including any arbitration, investigation
or other proceeding of or before any court, arbitrator or governmental or
regulatory official, body or authority, is pending or, to the best knowledge
of Purchasers, threatened against Purchasers or the transactions contemplated
by this Agreement, nor do Purchasers know of any reasonably likely basis for
any such litigation, arbitration, investigation or proceeding, the result of
which could adversely affect the Purchasers or the transactions contemplated
hereby.
3.5 CHATTEM SHARES. The Chattem Shares, when issued, shall be duly
authorized and validly issued and fully paid and nonassessable.
3.6 FINANCIAL ABILITY TO PERFORM. The Purchasers have sufficient funds and
credit arrangements available as of the date
16
hereof, and will be so available at the Closing, to pay the Purchase Price
and all other amounts payable by them and the Chattem Shares issuable by
Chattem hereunder at the Closing and thereafter.
3.7 Registration on Form S-3. On the date hereof, Chattem meets, and on
the Closing Date will meet, all requirements necessary for Chattem to file a
Registration Statement on Form S-3 with the SEC in order to register the
Chattem Shares to be sold by the holders of the Chattem Shares.
ARTICLE IV
OTHER AGREEMENTS
4.1 ADVERTISING SUPPORT. The Purchasers will provide advertising support
for the Business, including all New Products (as defined in Section 4.3), during
the four year period following the Closing Date based on media as measured by
LNA Arbitron reporting service ("Measured Media") at least equal to the amount
of the Sellers' Measured Media in 1996 of $13,151,400. In the event that
regulatory restrictions are placed on the claims that are currently made with
respect to one or more of the products within the Business, then the Purchasers'
obligation to provide advertising support shall be reduced proportionately based
on sales of such product or products to sales of all of the Business.
4.2 CONSULTING AND NON-COMPETITION AGREEMENT. The Purchasers and Xxxx
Xxxx, a principal of the Sellers, shall enter into a Consulting and
Non-Competition Agreement in the form attached hereto as Exhibit C
("Non-Competition Agreement"). The Non-Competition Agreement shall provide,
among other things, for Xx. Xxxx to perform certain consulting services to the
Purchasers and prohibit competing activities for a period of five years, and the
payment to Xx. Xxxx of $100,000 payable in immediately available funds at the
Closing.
4.3 ROYALTIES ON NEW PRODUCTS.
(a) Mindbody has certain dietary supplement products that are subject to
DSHEA that are in various stages of development and have not been introduced to
the market. The Purchasers may develop these products or other dietary
supplement products subject to DSHEA regulations for introduction to the market
("New Products"). In the event that the Purchasers plan a public launch of a New
Product during the first three years following the Closing Date, then as to such
first New Product and all such other New Products launched within 39 months
after the Closing Date, the Purchasers shall notify Mindbody of such planned
launch not later than 60 days before the public launch and provide Mindbody and
its designees with reasonable detail with regard to
17
such New Product, including, without limitation, the Purchaser's strategic
plan, which shall include sales, marketing, advertising and production
strategies. Mindbody shall have the right to exclude any New Products
introduced within such three year period following the public launch of the
first New Product, including the first New Product, from the definition of
New Products subject to the royalty described below (all New Products which
have not been excluded are called the "Royalty Products"). To exclude a New
Product from the Royalty Products, Mindbody must confirm the same in writing
to the Purchasers within 30 days of the date that the Purchasers notified
Mindbody of the planned launch. For all Royalty Products, the Purchasers
shall pay to Mindbody or its designees a royalty equal to 14% of the average
of Net Sales attributable to all such Royalty Products for a period of seven
years beginning on the date of the public launch of the first non-excluded
Royalty Product and, if there is only one Royalty Product, then the royalty
shall be 7% of the Net Sales of such Royalty Product. The Purchasers shall
keep true and accurate records of their Net Sales of the Royalty Products
during the royalty period. Within 60 days after each anniversary date of the
public launch of the first such Royalty Product, the Purchasers shall deliver
a statement setting forth a calculation of the amount of Net Sales for such
year, the amount of the royalty and payment of such royalty amount. The
statement shall be certified as true and correct by the Chief Financial
Officer of Chattem. Mindbody or its representatives shall have the right to
inspect such books and records of the Purchasers, at Purchasers' principal
office, upon reasonable notice and at a mutually convenient time, as Mindbody
may reasonably require in order to verify the accuracy of such statement. Any
dispute with respect to such statements shall be resolved in accordance with
the provisions of Section 1.7 hereof.
(b) In the event that, during the time period that Mindbody is entitled to
receive the royalty, the Purchasers shall decide to sell any New Product, then
the Purchasers shall first give written notice thereof to the Sellers and obtain
the consent of the Sellers to such sale, which consent shall not be unreasonably
withheld and shall be based on the creditworthiness and business reputation of
the buyer, and the buyer shall expressly agree to provide the Purchasers with
timely information regarding Net Sales for the New Product sold to such buyer.
The Purchasers shall continue to include Net Sales of such Product in the
determination of and the payment of the royalty provided for in this Section
4.3.
4.4 EMPLOYMENT AGREEMENTS. At the Closing, Chattem and each of Xxxxx
Xxxxxxxxx and Xxxxx Xxxxxxxxx, employees of the Sellers, shall enter into an
employment agreement (the "Employment Agreement") in the form attached hereto as
Exhibit D.
4.5 INFORMATION RIGHTS. Chattem shall deliver to the Sellers and initial
designees (not to exceed five) for a period of
18
five years after the Closing Date copies of all proxy statements, annual
reports, quarterly reports and current reports filed with the SEC and any
other general written communications which Chattem sends to its shareholders
and copies of all registration statements which it files with the SEC, and
copies of all press releases and other statements made generally by Chattem
to the public concerning material developments in Chattem's business.
4.6 PACKAGING OF PRODUCTS. For a period of 90 days following the Closing
Date, the Sellers and their affiliates will continue to package for the
Purchasers the products included in the Business in accordance with the terms
set forth on Schedule 4.6. The Purchasers shall have the option, exercisable on
or before the Closing Date, to purchase the assets of the Sellers used in
packaging the products used in the Business at a price to be agreed to by the
Purchasers and Sellers.
4.7 PRODUCT RETURNS; COUPONS.
(a) Except as provided below with respect to returns of BACKJOY inventory
sold to GNC, the Purchasers shall be responsible for and shall pay, indemnify
and hold Sellers harmless from all returns of products up to $240,000, exclusive
of returns of BACKJOY (the "Purchasers Returns Limit"). The Sellers shall be
responsible for and shall pay, indemnify and hold the Purchasers harmless from
all returns of products in excess of the Purchasers Returns Limit. The Sellers
shall be responsible for and shall indemnify and hold harmless the Purchasers
from all returns of BACKJOY sold to GNC prior to the Closing Date. For product
returns in excess of the Purchasers Returns Limit or of BACKJOY inventory sold
to GNC, the Purchasers shall accept and process such returns in a manner
consistent with the Purchasers' prior practice and pay the Sellers at the
Sellers' cost determined in accordance with Schedule 1.6 for such returned
products, provided that such returned products are merchantable and saleable in
the ordinary course of business by the Purchasers in accordance with their usual
practices. The Purchasers shall keep the Sellers informed with reasonable
promptness as returns are accepted and processed and shall make all required
payments not later than 60 days following the returns.
(b) The Sellers' outstanding coupon obligations are described on Schedule
4.7. All coupons relating to the Business presented within 30 days following
the Closing Date shall be the responsibility of the Sellers and all such
coupons presented after such date shall be the responsibility of the
Purchasers. The Sellers shall either pay or reimburse the Purchasers for the
cost of such coupons upon presentation by the Purchasers of a statement that
describes the coupons presented during such 30 day period following the
Closing Date.
19
4.8 HSR ACT COMPLIANCE. Promptly after the date hereof, the Purchasers
and the Sellers shall file any notification required to be filed under the
Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of 1976, as amended ("HSR Act"),
to consummate the transactions contemplated hereby. The Purchasers and the
Sellers shall use all reasonable efforts to comply as promptly as practicable
with any request made pursuant to the HSR Act for additional information. The
Purchasers and the Sellers shall cooperate with each other in such
compliance, and the Purchasers shall pay the statutory filing fees required
by the HSR Act. The Purchasers shall advise the Sellers promptly in respect
of any understandings, undertakings or agreements (oral or written) that the
Purchasers propose to make or enter into with the Federal Trade Commission,
the Department of Justice or any other governmental authority. The Purchasers
and Sellers shall exercise commercially reasonable efforts to seek early
termination of the HSR Act waiting period.
4.9 PAYMENT OF ACCOUNTS RECEIVABLE. In the event that the Sellers shall
receive any instrument or other payment in respect of any account receivable
belonging to the Purchasers, the Sellers shall forthwith deliver the same to
the Purchasers, endorsed where necessary, without recourse, in favor of the
Purchasers. The Sellers agree to give the Purchasers such assistance as the
Purchasers may reasonably request in collecting pre-Closing Date receivables.
Any accounts receivable that are uncollectible in full within 90 days after
billing, and for which the Sellers have indemnified the Purchasers in
accordance with Section 5.2 hereof, shall be assigned to the Sellers without
recourse.
4.10 INVENTORY AND PACKAGING.
(a) The Purchasers shall have the right to use and sell all of the finished
goods Inventory and all packaging materials using the Sellers' name or UPC codes
until all such Inventory shall have been disposed of by the Purchasers and,
unless the Sellers shall have breached the representations and warranties of
Section 2.6, shall indemnify, defend and hold harmless the Sellers from any
claim that arises with respect to the use of such packaging with the Sellers'
UPC codes.
(b) It is acknowledged that the Sellers have an amount of inventory of
Equigin and stress products that does not exceed $150,000 in value and that such
inventory includes the SUNSOURCE trademark in its labeling. The Sellers have
also committed to run certain promotions and advertisements through August 1997
that identify such products with the SUNSOURCE trademark. The Purchasers, to the
extent of such inventory and such promotions and advertising commitments,
license the Sellers to use the SUNSOURCE trademark in the sale of such existing
inventory and utilize such promotions and advertising for the shorter of six
months or until all such inventory is sold or such promotions are
20
completed, but only if the Sellers exercise their best efforts to keep such
products and promotions from being diverted to the dietary supplement
business. The Sellers shall indemnify, defend and hold harmless the
Purchasers from any claims with respect to such inventory and promotions and
advertising.
(c) The Sellers shall, until receipt of shipping instructions from the
Purchasers, warehouse all Inventory at no additional charge to the
Purchasers. The Purchasers shall issue shipping instructions as reasonably
necessary to service the Business and the Sellers' obligation to provide such
warehousing shall terminate when the Sellers' manufacturing obligation
pursuant to Section 4.6 terminates. All risk of loss with respect to such
Inventory shall pass to Purchasers on the Closing Date. The Sellers shall
have no obligation to insure such Inventory, any such insurance to be the
sole responsibility and at the sole cost and expense of Purchasers. All
shipping of finished goods inventory shall be at the sole cost and risk of
Purchasers on carriers selected by Purchasers and Sellers shall have no
liability or obligation with respect thereto.
4.11 EXCLUSIVE DEALING. From the date of this Agreement until the
Closing Date or the earlier termination hereof, the Sellers shall not take
any action to encourage, initiate or engage in discussions or negotiations
with, or provide information to, anyone other than the Purchasers concerning
any purchase of the Business or any merger, sale of substantial assets or
similar transaction involving the Sellers; provided, however, that the
provisions of this Section 4.11 shall not apply after June 15, 1997 if the
Closing shall not have occurred by such date.
4.12 CONFIDENTIALITY. From and following the Closing Date, the Sellers
and their designees shall treat and hold, and cause its counsel, accountants
and advisers to treat and hold, as such all Confidential Information (as
defined below), refrain from using any of the Confidential Information except
in connection with this Agreement or except as may be necessary for the
completion of income tax returns or in compliance with other applicable laws,
regulations, and orders of courts or regulatory authorities. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure. For
purposes of the foregoing paragraph, "Confidential Information" means
financial and business information relating exclusively to the Business which
is non-public, confidential or proprietary in nature, including, without
limitation, information disclosed to the Sellers pursuant to Section 4.3
hereof.
4.13 NON-COMPETITION. For five years from and after the Closing Date,
neither the Sellers nor any of their subsidiaries or affiliates shall,
directly or indirectly, own, manage, operate, join, control or participate in
the ownership, management,
21
operation or control of, any business whether in corporate, proprietorship or
partnership form or otherwise, which is competitive with the Business;
provided, however, that the foregoing restriction shall not apply to the
Sellers' Equigin, stress products or pet products business. The parties
hereto specifically acknowledge and agree that the remedy at law for any
breach of the foregoing will be inadequate and that the Purchasers, in
addition to any other relief available to it, shall be entitled to temporary
and permanent injunctive relief without the necessity of proving actual
damage. In the event that the provisions of this Section 4.13 should ever be
deemed to exceed the limitation provided by applicable law, then the parties
hereto agree that such provisions shall be reformed to set forth the maximum
limitations permitted. If any of the provisions contained in this Section
4.13 shall for any reason be held to be excessively broad as to time,
duration, geographical scope, activity or subject, it shall be construed, by
limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear. If, moreover, any one or
more of the provisions contained in this Agreement shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal
or unenforceable provision had never been contained therein. If the
Purchasers are in material default of any of their agreements or covenants
under this Agreement, then the non-competition agreement of the Sellers shall
be null and of no legal effect until such default shall be cured.
4.14 FINANCIAL STATEMENTS. The Sellers, at Purchasers' expense, shall
provide Purchasers, within 30 days after Purchasers' written request
therefor, with such financial statements relating to the Business as may be
required by Rule 3-05 or Article 11 of Regulation S-X promulgated under the
Securities Act of 1933, as amended (the "1933 Act"), and the Securities
Exchange Act of 1934, as amended (the "1934 Act") in connection with the
preparation and filing of any registration statement or periodic report by
Purchasers pursuant to the 1933 Act or the 1934 Act, including with
limitation unqualified opinions thereon of independent public accountants and
consents thereof as required by the 1933 Act or the 1934 Act or the rules and
regulations thereunder.
4.15 CONTINUING OPERATIONS OF THE BUSINESS. The Sellers covenant and
agree that on and after the date of this Agreement and until the Closing each
will: operate the Business only in the ordinary and regular course of
business; operate the Business in the same manner as heretofore conducted;
not institute any new methods of purchase, sale or operation; or not
institute any changes in the product pricing from that set forth in Schedule
2.15 hereof or in promotional allowances. The Sellers and the Purchasers
shall cooperate with each other and exercise best efforts to maintain at
least three months supply of Inventory (as
22
measured on the basis of forecasted sales levels for the next six month
period) at all such times up to and including the Closing Date and supply the
Purchasers on a weekly basis with written Inventory reports tracking such
levels.
4.16 DISCHARGE OF BUSINESS OBLIGATIONS. From and after the Closing
Date, the Sellers shall pay and discharge, in accordance with past practice
but not less than on a timely basis, all obligations and liabilities incurred
prior to the Closing Date in respect of the Business, its operations or the
assets and properties used therein (except for those expressly assumed by
Purchasers hereunder), including without limitations any liabilities or
obligations to employees, trade creditors and clients of the Business;
provided, however, that Sellers shall retain the right to contest any such
obligations and liabilities in good faith on a basis consistent with past
practices.
4.17 MAINTENANCE OF BOOKS AND RECORDS. Each of the Sellers and the
Purchasers shall preserve until the sixth anniversary of the Closing Date all
records possessed or to be possessed by such party relating to any of the
assets, liabilities or business of the Business prior to the Closing Date.
After the Closing Date, where there is a legitimate purpose, such party shall
provide the other parties with access, upon prior reasonable written request
specifying the need therefor, during regular business hours, to (i) the
officers and employees of such party and (ii) the books of account and
records of such party, but, in each case, only to the extent relating to the
assets, liabilities or business of the Business prior to the Closing Date,
and the other parties and their representatives shall have the right to make
copies of such books and records; provided, however, that the foregoing right
of access shall not be exercisable in such a manner as to interfere
unreasonably with the normal operations and business of such party.
4.18 PUBLIC ANNOUNCEMENTS. The Sellers and the Purchasers will consult
with each other before issuing any press releases or otherwise making any
public statements or statements to the trade with respect to this Agreement
and the transactions contemplated hereby and neither of them shall issue any
such press release or make any such public or trade statement prior to such
consultations, except as may be required by law or by obligations pursuant to
any listing agreement with any national securities exchange.
4.19 INSPECTION. Except as prohibited or limited by law or regulation,
the Sellers shall allow the Purchasers and its authorized representatives or
designees access after the date hereof with reasonable prior notification
during normal business hours, in such a manner as not to unduly disrupt
normal business activities, to the Acquired Assets and the Business and
furnish the
23
Purchasers and its representatives with all such information as may be
reasonably requested concerning the affairs of the Business.
4.20 EMPLOYEES. The Purchasers shall assume no liability for any
agreements, arrangements, commitments, policies or understandings of any kind
relating to employment, compensation or benefits for the present or former
employees of the Sellers for all employment prior to and through the Closing
Date.
4.21 EXPENSES. Except as otherwise provided herein, each party hereto
shall pay its own expenses and costs incurred in connection with the
negotiation and consummation of this Agreement and the transactions
contemplated hereby.
4.22 BROKERS. Each of the parties represents and warrants that it has
dealt with no broker or finder in connection with any of the transactions
contemplated by this Agreement, and insofar as it knows, no broker or other
person is entitled to any commission or finder's fee in connection with any
of these transactions, except on the part of the Sellers, PacRim Management
Group, the fees of which will be paid or provided for by the Sellers at
Closing and for which the Sellers shall indemnify and hold harmless the
Purchasers. The Sellers and Purchasers each agree to indemnify and hold
harmless one another against any loss, liability, damage, cost, claim, or
expense, incurred by reason of any brokerage, commission, or finder's fee
alleged to be payable because of any act, omission, or statement of the
indemnifying party.
4.23 BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use its best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this
Agreement. In case at any time after the Closing Date any further action is
reasonably necessary or desirable to carry out the purposes of this
Agreement, including action to fully vest in the Purchasers its rights in the
Business, the proper officers of the Sellers and the Purchasers shall on the
written request of either of them take all such reasonably necessary
desirable action.
4.24 PAYMENT TO PURCHASERS. To induce the Purchasers to assist in the
management of the Business prior to the Closing Date, the Sellers shall pay
to the Purchasers at the Closing the sum of $75,000; provided, however, it is
understood and agreed that the Purchasers shall have no liability for
management of the Business.
24
ARTICLE V
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
INDEMNIFICATION
5.1 SURVIVAL. The parties agree that the representations and warranties
contained in this Agreement shall survive the Closing and continue to be
binding for a period of 18 months.
5.2 INDEMNIFICATION BY THE SELLERS. The Sellers shall indemnify, hold
harmless and defend Purchasers after the Closing Date against and in respect
of:
(a) Any and all damages, losses, expenses, liabilities or deficiencies
resulting from any breach of the agreements, covenants, warranties and
representations of the Sellers contained herein;
(b) [Intentionally deleted];
(c) Any and all liabilities, damages, losses or expenses incurred or paid
by the Purchasers as a result of the nonpayment or assessment of taxes with
respect to the Acquired Assets or the Business attributable to the period
before the Closing Date;
(d) Any and all damages, losses, expenses, liabilities or deficiencies
incurred or paid by the Purchasers as a result of a claim of any kind arising
from the operation, business or ownership of the Acquired Assets or the
Business by the Sellers prior to the Closing Date (except for those
obligations and liabilities of the Sellers that are expressly assumed by the
Purchasers pursuant to Section 1.8 hereof); and
(e) All demands, assessments, judgments, costs (including reasonable
legal and other expenses, both at the trial and appellate level) arising from
or in connection with any action, suit, proceeding or claim incident to any
of the foregoing.
Notwithstanding the foregoing, the Purchasers shall not be entitled to
recover any amount from Sellers pursuant to Section 5.2 above unless and
until the aggregate amount which the Purchasers are entitled to recover
thereunder exceeds Two Hundred Fifty Thousand Dollars ($250,000), in which
event the Purchasers shall be entitled to recover the amount of damages,
losses, expenses, liabilities or deficiencies which it has suffered as a
result of any such breaches by the Sellers that is in excess of Two Hundred
Fifty Thousand Dollars ($250,000). In no event shall, in the absence of fraud
or a breach of Section 2.8 relating to ownership of Trademarks, the
Purchasers be entitled to recover in excess of $8,000,000 pursuant to this
Section 5.2. Notwithstanding
25
the foregoing limitations, the Sellers shall indemnify, defend and hold
harmless the Purchasers beginning with the first dollar for all indemnifiable
claims relating to (i) the last sentence of Section 2.9 hereof, (ii) Section
5.2(d) hereof, (iii) a breach of Section 2.10 relating to uncollectible
accounts receivable, (iv) the Xxxxxx and Healthcare Bionatural Products Co.
matters disclosed on Schedule 2.11 hereof, (v) product returns in excess of
the Purchasers Returns Limit in accordance with Section 4.7 hereof and (vi)
the obligations of the Sellers under Section 4.10(b) hereof.
5.3 INDEMNIFICATION BY PURCHASERS. The Purchasers shall indemnify, hold
harmless and defend the Sellers after the Closing Date against and in respect
of:
(a) Any and all damages, losses, expenses or deficiencies resulting from
any breach of the agreements, covenants, warranties and representations of
the Purchasers contained herein;
(b) [Intentionally deleted];
(c) Any and all damages, losses, expenses, liabilities or deficiencies
incurred or paid by the Sellers as a result of a claim of any kind arising
from the operation, business or ownership of the Acquired Assets or the
Business by the Purchasers after the Closing Date;
(d) Any and all damages, losses, expenses, liabilities or deficiencies
incurred or paid by the Sellers as a result of a claim of any kind relating
to the liabilities assumed by the Purchasers pursuant to Section 1.8 hereof
or the Purchasers Return Limit; and
(e) All demands, assessments, judgments, costs (including legal and other
expenses, both at the trial and appellate level) arising from or in
connection with any action, suit, proceeding or claim incident to any of the
foregoing.
Notwithstanding the foregoing, the Sellers shall not be entitled to
recover any amount from Purchasers pursuant to Section 5.3 above unless and
until the aggregate amount which Sellers are entitled to recover thereunder
exceeds Two Hundred Fifty Thousand Dollars ($250,000), in which event Seller
shall be entitled to recover the amount of damages, losses, expenses,
liabilities or deficiencies which it has suffered as a result of any such
breaches by Purchasers that is in excess of Two Hundred Fifty Thousand
Dollars ($250,000). In no event shall the Sellers be entitled to recover in
excess of $8,000,000 pursuant to this Section 5.3, except with respect to
claims for the Additional Payments and royalties on New Products and payments
under the Non-Competition Agreement. Notwithstanding the foregoing
limitations, the Purchasers shall indemnify, defend and hold harmless the
Sellers
26
beginning with the first dollar for all indemnifiable claims relating to (i)
Section 5.3(d) hereof, (ii) the obligations of the Purchasers under Section
4.7 hereof and (iii) the obligations of the Purchasers under Section 4.10(a)
hereof.
5.4 RESOLUTION OF CLAIMS.
(a) Upon obtaining knowledge thereof, the Sellers or the Purchasers, as
the case may be ("Indemnified Party"), shall notify the other party (the
"Indemnifying Party") in writing of any damage, claim, loss, liability or
expense which the Indemnified Party has determined has given or could give
rise to a claim under this Article (such written notice being hereinafter
referred to as a "Notice of Claim"). A Notice of Claim shall contain a brief
description of the nature and estimated amount of any such claim giving rise
to a right of indemnification. If the Indemnifying Party desires to dispute
such claim, it shall, within sixty (60) days after receipt of the Notice of
Claim, give counternotice, setting forth the basis for disputing such claim,
to the Indemnified Party. If no such counternotice is given within such
sixty-day period or if the Indemnifying Party acknowledges liability for
indemnification, then such claim shall be promptly satisfied.
(b) With respect to any claim or demand set forth in a Notice of Claim
relating to a third party claim ("Third Party Claim"), the Indemnifying Party
may defend, in good faith and at its expense, any such claim or demand, and
the Indemnified Party, at its expense, shall have the right to participate
in, but not control, the defense of any such Third Party Claim. So long as
the Indemnifying Party is defending in good faith any such Third Party Claim,
the Indemnified Party shall not settle or compromise such Third Party Claim.
The Indemnifying Party may, in its discretion, settle any Third Party Claim
which it is defending, provided that the Indemnifying Party may not enter
into any such settlement which involves equitable relief against the
Indemnified Party unless the Indemnified Party consents in writing thereto,
which consent will not be unreasonably withheld. If requested by the
Indemnifying Party, the Indemnified Party agrees, at the cost and expense of
the Indemnifying Party (excluding costs and expenses not owed to third
parties by the Indemnified Party), to cooperate with the Indemnifying Party
and its counsel in contesting any Third Party Claim which the Indemnifying
Party elects to contest, including, without limitation, the making of any
related counter-claim against the person asserting the Third Party Claim or
any cross-complaint against any person. If the Indemnifying Party fails to
notify the Indemnified Party within thirty (30) days after receipt of a
Notice of Claim with respect to a Third party Claim that the Indemnifying
Party elects to defend the Indemnified Party pursuant to this Section, or if
the Indemnifying Party elects to defend the Indemnified Party but fails to
prosecute or settle the Third Party Claim diligently and promptly, then the
Indemnified Party shall
27
have the right to defend, at the sole cost and expense of the Indemnifying
Party, the Third Party claim by all appropriate proceedings.
5.5 COMPLIANCE WITH BULK SALES LAWS. The Purchasers and the Sellers
hereby waive compliance by the Purchasers and the Sellers with the bulk sales
law and any other similar laws in any applicable jurisdiction in respect of
the transactions contemplated by this Agreement. The Sellers shall indemnify
the Purchasers from, and hold them harmless against, any liabilities,
damages, costs and expenses resulting from or arising out of (i) the parties'
failure to comply with any of such laws in respect of the transactions
contemplated by this Agreement, or (ii) any action brought or levy made as a
result thereof, other than those liabilities which have been expressly
assumed, on such terms as expressly assumed, by Purchasers pursuant to this
Agreement.
5.6 OTHER RIGHTS AND REMEDIES NOT AFFECTED. Subject to the limitations
set forth in the last paragraphs of Sections 5.2 and 5.3 hereof, the
indemnification rights of the parties under this Article V are independent of
and in addition to such rights and remedies as the parties may have at law or
in equity or otherwise for any misrepresentation, breach of warranty or
failure to fulfill any agreement or covenant hereunder on the part of any
party hereto, including without limitation the right to seek specific
performance, rescission or restitution, none of which rights or remedies
shall be affected or diminished hereby.
5.7 SATISFACTION OF CLAIMS. Subject to the procedures set forth in
Section 5.4 of this Agreement, the Purchasers may satisfy claims for
indemnification under this Article V by (i) offsetting the amount of the
claim against the Additional Payments or the Royalty Payments by placing the
amount thereof in an escrow account at a financial institution mutually
acceptable to the Purchasers and the Sellers pending receipt of a final,
nonappealable judgment or a final decision by arbitration pursuant to Section
8.9 hereof, at which time the escrow agent shall deliver the escrowed amount
to the Purchasers or the Sellers as directed by the court or arbitration
proceeding, or (ii) by pursuing any and all other remedies available to the
Purchasers. The Sellers may at their option satisfy any of their
indemnification obligations under this Article V by delivery to the
Purchasers of unrestricted and unencumbered ownership of the Chattem Shares,
or a portion thereof endorsed in blank or with a blank stock power, the value
thereof to be determined by the average closing price as reported in The Wall
Street Journal on the five business days prior to the date of such payment.
28
ARTICLE VI
TERMINATION AND ABANDONMENT
6.1 TERMINATION AND ABANDONMENT. This Agreement may be terminated and
the purchase and sale of the Acquired Assets abandoned at any time prior to
the Closing:
(a) by mutual agreement of the Sellers and the Purchasers;
(b) by the Purchasers if the conditions set forth in Section 7.2 and the
deliveries required by Section 7.4 shall not have been complied with and
performed in any material respect and such noncompliance or nonperformance shall
not have been cured or eliminated (or by its nature cannot be cured or
eliminated) on or before the Closing Date;
(c) by the Sellers, if the conditions set forth in Section 7.3 and the
deliveries required by Section 7.5 shall not have been complied with and
performed in any material respect and such noncompliance or nonperformance shall
not have been cured or eliminated (or by its nature cannot be cured or
eliminated) on or before the Closing Date; or
(d) if on June 30, 1997 all conditions to the Closing have been satisfied
but the Purchasers fail to close, then the Sellers shall have the option
exercisable by advance written notice thereof to the Purchasers to extend the
period of time for the Closing until July 31, 1997. As consideration for the
extension of time for Closing, the Purchasers shall pay to the Sellers at the
Closing (should it occur) an amount equal to interest on $25,900,000 less the
$1,000,000 down payment at 9% per annum from June 30, 1997 until the Closing
Date. Furthermore, if the Closing shall not have occurred on or before July 31,
1997 for any reason whatsoever, other than such party's breach of or failure to
perform or comply with any agreement herein or provision hereof to be performed
or complied with by such party on or prior to the Closing Date, then either the
Purchasers or Sellers may terminate this Agreement.
6.2 RIGHTS AND OBLIGATIONS ON TERMINATION. If this Agreement is terminated
and abandoned as provided in this Article (except for a termination or
abandonment pursuant to the mutual written agreement of the parties), the
continuing liability of the parties to this Agreement with respect to any breach
of any representation, warranty, covenant or agreement contained in this
Agreement shall not be affected by such termination or abandonment.
29
ARTICLE VII
THE CLOSING
7.1 Time, Date and Place of Closing. Subject to the provisions hereof,
the deliveries contemplated by this Agreement to be made at the Closing shall
be made at the offices of Xxxxxx & Xxxxxx, 0000 Xxxxxxxxx Xxxxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000, at 10:00 A.M., local time, on or before
Thursday, June 5, 1997, or at such later date as requested by either party
upon three business days' notice to the other parties (but not later than
June 30, 1997 or July 31, 1997, if the Sellers have extended the period of
time within which to close pursuant to Section 6.1(d) hereof). The date on
which the last of such deliveries occurs is hereinafter referred to as the
"Closing Date", and the events comprising such deliveries are hereinafter
referred to as the "Closing".
7.2 CONDITIONS TO OBLIGATIONS OF PURCHASERS. All of the obligations of
the Purchasers under this Agreement are subject to the fulfillment prior to
or at the Closing Date of each of the following conditions, any one or more
of which may be waived by the Purchasers:
(a) Except as otherwise permitted or contemplated by this Agreement and
except for representations and warranties that by their terms speak only as
of a specified date, each of the representations and warranties of the
Sellers contained herein shall be true in all material respects as of the
date when made, shall be deemed to be made again at and as of the Closing
Date and shall be true in all material respects at and as of the Closing Date;
(b) The Sellers shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by Sellers prior to or at the Closing Date; and
(c) No federal, state or local governmental unit, agency, body or
authority with competent jurisdiction over the subject matter shall have
given official written notice of its intention to institute proceedings to
prohibit the transactions contemplated by this Agreement, or which would
interfere with the use of the Acquired Assets or the operation of the
Business. If the HSR Act is applicable to the transactions contemplated by
this Agreement, all applicable waiting periods thereunder shall have expired
or been terminated.
7.3 CONDITIONS TO OBLIGATIONS OF SELLERS. All of the obligations of the
Sellers under this Agreement are subject to the fulfillment prior to or at
the Closing Date of each of the following conditions, any one or more of
which may be waived by the Sellers:
30
(a) Except as otherwise permitted or contemplated by this Agreement and
except for representations and warranties that by their terms speak only as
of a specified date, each of the representations and warranties of the
Purchasers contained herein shall be true as of the date when made, shall be
deemed to be made again at and as of the Closing Date and shall be true in
all material respects at and as of the Closing Date;
(b) The Purchasers shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by Purchasers prior to or at the Closing Date;
(c) No federal, state or local governmental unit, agency, body or
authority with competent jurisdiction over the subject matter shall have
given official written notice of its intention to institute proceedings to
prohibit the transactions contemplated by this Agreement. If the HSR Act is
applicable to the transactions contemplated by this Agreement, all applicable
waiting periods thereunder shall have expired or been terminated; and
(d) Sellers shall have obtained all third-party consents required by the
Purchasers for consummation by it of the transactions contemplated by this
Agreement.
7.4 DELIVERIES BY SELLERS AT THE CLOSING. Delivery by the Sellers of
the following at the Closing shall be a condition to the obligation of the
Purchasers under this Agreement:
(a) Evidence that all remaining liens or encumbrances, except for Permitted
Liens, of any kind on the Acquired Assets shall have been released and/or a
termination statement shall have been delivered or filed as of the Closing Date;
(b) Counsel for the Sellers shall have delivered to the Purchasers a written
opinion, dated the Closing Date, as to the matters set forth in Sections 2.2,
2.3 and 2.4(a), (b) and (c) of this Agreement, in a form reasonably satisfactory
to the Purchasers and their counsel;
(c) The Escrow Agreement, in substantially the form attached hereto as
Exhibit A;
(d) The Trademark Assignment Agreement, in substantially the form attached
hereto as Exhibit B, conveying the Trademark;
(e) The Sellers' bills of sale, in substantially the form of Exhibit C and
C-1, conveying all tangible property included in the Acquired Assets;
31
(f) The Non-Competition Agreement, in substantially the form attached
hereto as Exhibit D, duly executed by Xx. Xxxx;
(g) The Employment Agreements, in substantially the form attached hereto
as Exhibits E and E-1, duly executed by Xx. Xxxxxxxxx and Xx. Xxxxxxxxx; and
(h) The Sellers' assignment of all of its right, title and interest in
and to the other agreements, contracts and leases set forth in Schedule 1.8
pursuant to the Assignment and Assumption Agreement in the form attached
hereto as Exhibit F.
7.5 DELIVERIES BY PURCHASERS AT THE CLOSING. Delivery by Purchasers of
the following at the Closing shall be a condition to the obligation of the
Sellers under this Agreement:
(a) A wire transfer of immediately available federal funds, in the amount
of the Closing Payment to an account or accounts designated by Sellers and
the payment required under the Non-Competition Agreement to an account
designated by Xxx. Xxxx;
(b) Counsel for the Purchasers shall have delivered to the Sellers a
written opinion, dated the Closing Date, as to the matters set forth in
Sections 3.2 and 3.3(a)(i), (ii) or (iii), in a form reasonably satisfactory
to the Sellers and their counsel;
(c) The Escrow Agreement, in substantially the form attached hereto as
Exhibit A;
(d) A certificate or certificates representing the Chattem Shares;
(e) The Non-Competition Agreement, in substantially the form attached
hereto as Exhibit D, duly executed by Chattem;
(f) The Employment Agreements, in substantially the form attached hereto
as Exhibits E and E-1, duly executed by Chattem; and
(g) The Assignment and Assumption Agreement relating to the assumed
liabilities set forth in Section 1.8 hereof and Schedule 1.8, in
substantially the form attached hereto as Exhibit F.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 GOOD FAITH; FURTHER ASSURANCES; FURTHER COOPERATION. The parties to
this Agreement shall in good faith undertake to
32
perform their obligations under this Agreement, to satisfy all conditions and
to cause the transactions contemplated by this Agreement to be carried out
promptly in accordance with the terms of this Agreement. Upon the execution
of this Agreement and thereafter, each party shall do such things as may be
reasonably requested by another party hereto in order more effectively to
consummate or document the transaction contemplated by this Agreement. Any
transfer tax or sales tax resulting from the purchase of the Acquired Assets
by the Purchasers from the Sellers shall be paid by the Purchasers.
8.2 NOTICES. All notices, communications and deliveries under this
Agreement shall be made in writing, signed by the party making the same,
shall specify the Section of this Agreement pursuant to which it is given,
and shall be deemed given on the date delivered if delivered in person or on
the third (3rd) business day after mailed if mailed certified mail (with
postage prepaid), return receipt requested, as follows:
To Purchasers:
Signal Investment & Management Co.
Chattem, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
With a copy to:
Xxxxxx & Xxxxxx
1000 Volunteer Building
000 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: A. Xxxxxxxxx Xxxxxx, XX, Esq.
To Sellers:
Sunsource International, Inc./Mindbody, Inc.
000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxx, Xxxx, Xxxxxx
Attention: Xxx. Xxxx Xxxx, President
With a copy to:
Xxxxxx Xxxxxx & Xxxxxx
XXX Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxx Xxxxxxxx, Esq.
or to such other representative or to such other address as the parties
hereto may furnish to the other parties in writing. If notice is given
pursuant to this section of a permitted successor
33
or assign of a party of this Agreement, then notice shall be given as set
forth above to such successor or assign of such party.
8.3 SUCCESSORS; ASSIGNMENT. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, except with the prior
written consent of the other parties hereto, which consent will not be
unreasonably withheld. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto, and their respective successors and
permitted assigns.
8.4 CAPTIONS; DEFINITIONS. The titles or captions of articles, sections
and subsections contained in this Agreement are inserted only as a matter of
convenience and for reference and in no way define, limit, extend or describe
the scope of this Agreement or the intent of any provision hereof. The
parties agree to all definitions in the statement of parties to this
Agreement and in the other introductory language to this Agreement.
8.5 CONTROLLING LAW; AMENDMENT; WAIVER.
(a) This Agreement shall be construed and enforced in accordance with the
laws of the State of Tennessee.
(b) This Agreement may not be altered or amended except in writing signed
by the Purchasers and the Sellers.
(c) The failure of any party hereto at any time to require performance of
any provisions hereof shall in no manner affect the right to enforce the
same. No waiver by any party hereto of any condition, or of the breach of any
term, provision, warranty, representation, agreement or covenant contained in
this Agreement, whether by conduct or otherwise, in any one or more instances
shall be deemed or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition or of the breach of
any other terms, provision, warranty, representation, agreement or covenant
herein contained.
8.6 ENTIRE AGREEMENT. This Agreement and the attached schedules and
exhibits constitute the entire agreement among the parties hereto with
respect to the transactions contemplated and supersedes all prior agreements,
understandings, and negotiations, both written and oral, among the parties
with respect thereto.
8.7 NO PRESUMPTION. Neither this Agreement nor any other agreement
between the parties nor any uncertainty or ambiguity herein or therein shall
be construed or resolved using any presumption against any party hereto or
thereto, whether under any rule of construction or otherwise. On the
contrary, this Agreement and the other agreements between the parties have
been reviewed by the parties and their counsel and, in the case of any
ambiguity or uncertainty, shall be construed according to the
34
ordinary meaning of the words used so as to fairly accomplish the purposes
and intentions of all parties hereto.
8.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or the terms of this Agreement to
produce or account for more than one of such counterparts.
8.9 ARBITRATION.
(a) Each and every controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration in accordance with the rules
of the American Arbitration Association, Atlanta, Georgia and judgment upon
the award rendered in such arbitration shall be final and binding upon the
parties and may be entered in any court having jurisdiction thereof. Notice
of the demand for arbitration shall be filed in writing with the other party
to this Agreement, which such demand shall set forth in the same degree of
particularity as required for complaints under the Federal Rules of Civil
Procedure the claims to be submitted to arbitration. Additionally, the demand
for arbitration shall include appropriate copies of all documents on which
the claims are based and a list of all persons who the party seeking
arbitration will call as witnesses with respect to such claims. In no event
shall the demand for arbitration be made after the date when institution of
legal or equitable proceedings based on such claim, dispute or other matter
in question would be barred by this Agreement or the applicable statutes of
limitations. This Agreement to arbitrate may be specifically enforced by a
court of competent jurisdiction under the applicable law of the State of
Georgia pertaining to arbitrations. The arbitration shall be conducted by a
panel of three arbitrators at the Atlanta, Georgia office of the American
Arbitration Association. The rules of the American Arbitration Association
concerning commercial disputes shall be applicable to any such arbitration
proceeding except as they may be modified by the terms of this Agreement.
(b) The Purchasers and the Sellers shall each select one arbitrator, and
the two arbitrators so selected shall select a third arbitrator. If a party
fails to select an arbitrator, then the party who has selected an arbitrator
shall select a second arbitrator and the two arbitrators so selected shall
act. If the two arbitrators selected by the parties cannot agree on a third
arbitrator, the third arbitrator shall be chosen by the president of the
American Arbitration Association, or his or her delegate.
(c) The award of the arbitrators shall be in writing and it shall specify
in detail the issues submitted to arbitration and the award of the
arbitrators with respect to each
35
of the issues so submitted. The fees of the arbitrators shall be borne
one-half by the Purchasers and one-half by the Sellers.
(d) The provisions of the Federal Rules of Civil Procedure relating to
the right of discovery in civil actions shall be applicable to such
arbitration proceedings except as modified by the terms of this Agreement.
Within thirty (30) days after the commencement of any arbitration proceeding
under this Agreement, each party shall file with the arbitrators its
contemplated discovery plan outlining the desired documents to be produced,
the depositions to be taken and any other discovery action sought in the
arbitration proceedings. After a hearing, the arbitrators in an interim award
shall fix the scope and content of each party's discovery plan as the
arbitrators deem appropriate. The arbitrators shall have the authority to
modify, amend or change such interim award fixing the discovery plans of the
parties upon application by either party, if good cause appears for doing so.
(e) Counsel to the Purchasers and the Sellers and in connection with the
negotiation of and consummation of the transactions under this Agreement
shall be entitled to represent their respective party in any and all
proceedings under this Section or in any other proceeding (collectively,
"Proceedings"). The Purchasers and the Sellers, respectively, waive the right
and agree they shall not seek to disqualify any such counsel in any such
Proceedings for any reason, including but not limited to the fact that such
counsel or any member thereof may be a witness in any such Proceedings or
possess or have learned of information of a confidential or financial nature
of the party whose interests are adverse to the party represented by such
counsel in any such Proceedings.
8.10 CONSENT TO COLLATERAL ASSIGNMENT. The Sellers hereby acknowledge
that pursuant to the Security Agreement dated as of April 29, 1996 by and
among Chattem, the domestic subsidiaries of Chattem and NationsBank, N.A., in
its capacity as agent (together with its successors and assigns, the "Agent")
(the "Security Agreement"), or any successor Security Agreement with the
Purchasers' current or future lender(s), Chattem has assigned or may assign
its right, title and interest under this Agreement as security for the
financing provided to Chattem by the Agent and the Lenders (as hereinafter
defined) pursuant to the terms of two separate Credit Agreements by and among
Chattem, Chattem's domestic subsidiaries, as guarantors, the Agent and the
other lenders referred to therein (the "Lenders") (the "Credit Agreements").
Notwithstanding any other provisions contained in this Agreement, the Sellers
consent to the collateral assignment of this Agreement to the Agent, for the
benefit of the Lenders. Unless and until the Agent gives notice to the
undersigned of the Agent's intention to succeed to the rights of Chattem
under the Agreement, the Agent shall not be obligated to perform any of the
obligations of Chattem under the Agreement.
36
DULY EXECUTED by the parties hereto as of the date and year first above
written.
PURCHASERS:
CHATTEM, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------
Title: Executive Vice President-CFO
-----------------------------
SIGNAL INVESTMENT & MANAGEMENT CO.
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------
Title: President
---------
SELLERS:
SUNSOURCE INTERNATIONAL, INC.
By: /s/ Xxxx Xxxx
--------------------------
Title: President
---------
MINDBODY, INC.
By: /s/ Xxxx Xxxx
--------------------------
Title: President
----------
37
