<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
_______________________
Date of Report (Date of earliest event reported): APRIL 11, 1995
CHATTEM, INC.
____________________________________________________
(Exact name of registrant as specified in its charter)
TENNESSEE 0-5905 62-0156300
_______________ ____________________ _____________
(State of (Commission File No.) (IRS Employer
incorporation) Identification No.)
1715 WEST 38TH STREET, CHATTANOOGA, TENNESSEE 37409
___________________________________________________
(Address of principal executive offices, including zip code)
(615) 821-4571
___________________________________________________
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS.
On April 11, 1995, Chattem, Inc. (the "Company") entered into an
Agreement of Purchase and Sale (the "Agreement") with Chattem Chemicals, Inc.
(the "Buyer") and Elcat, Inc. (the "Parent") to sell the Company's specialty
chemicals division to the Buyer. Under the terms of the Agreement, the
Company will be paid $25,000,000 for the specialty chemicals division,
consisting of $20,000,000 in cash and $5,000,000 of 13.125% convertible
preferred stock of the Parent. The cash proceeds will be used to reduce
indebtedness.
The Agreement is subject to the satisfaction of certain
conditions prior to closing, including regulatory and financing approvals and
completion of due diligence. It is presently anticipated that the transaction
will close by May 15, 1995.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
(c) Exhibits
28.1 Agreement of Purchase and Sale dated April 11, 1995 by and
among Chattem, Inc., Chattem Chemicals, Inc. and Elcat,
Inc. (without schedules and exhibits).
28.2 Press Release dated April 12, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
April 28, 1995 CHATTEM, INC.
By: /s/ ROBERT E. BOSWORTH
------------------------------
Robert E. Bosworth,
Executive Vice President
and Chief Financial Officer
<PAGE>
Exhibit 28.1
Agreement of Purchase and Sale dated April 11, 1995 by and among
Chattem, Inc., Chattem Chemicals, Inc. and Elcat, Inc.
<PAGE>
AGREEMENT OF PURCHASE AND SALE
By and Among
CHATTEM CHEMICALS, INC., as Buyer,
ELCAT, INC., as Parent
and
CHATTEM, INC., as Seller
<PAGE>
TABLE OF CONTENTS
1. Purchase and Sale of Assets........................................... 2
2. Assumption of Certain Liabilities; Excluded Obligations............... 6
3. Purchase Price; Allocation; Adjustments............................... 8
(a) Purchase Price............................................... 8
(b) Adjustments to Purchase Price................................ 8
(c) Allocation................................................... 10
(d) Escrow....................................................... 11
4. Closing Date.......................................................... 11
5. Delivery and Payment; Further Assurances.............................. 11
(a) Mutual Deliveries............................................ 11
(b) Seller at Closing............................................ 12
(c) Buyer and Parent at Closing.................................. 13
(d) Further Assurances........................................... 14
6. Representations and Warranties by Seller.............................. 15
(a) Organization, Standing and Qualification..................... 15
(b) Authority and Binding Effect................................. 16
(c) Approvals, etc. ............................................. 16
(d) No Conflict.................................................. 17
(e) Financial Information........................................ 18
(f) Title to Properties; Location of Assets, etc. ............... 19
(g) Labor Matters; Employee Benefit Matters...................... 20
(h) Claims and Litigation........................................ 21
(i) Licenses..................................................... 22
(j) Compliance with Laws and Other Requirements.................. 23
(k) Environmental Matters........................................ 24
(l) OSHA......................................................... 26
(m) Backlog...................................................... 26
(n) Contracts.................................................... 26
(o) Intellectual Property........................................ 28
(p) Insurance.................................................... 28
(q) Accounts Receivable.......................................... 29
(r) Taxes........................................................ 29
(s) No Adverse Change............................................ 30
(t) Transactions with Affiliates................................. 30
(u) Brokers...................................................... 30
(v) Relationship with Vendors and Customers...................... 31
(w) Disclosures.................................................. 31
-i-
<PAGE>
7. Representations and Warranties by Buyer and Parent.................... 31
(a) Organization, Standing and Qualification..................... 31
(b) Authority and Binding Effect................................. 32
(c) Approvals, etc. ............................................. 32
(d) No Conflict.................................................. 32
(e) Claims and Litigation........................................ 33
(f) Financing.................................................... 33
(g) Brokers...................................................... 34
(h) Full Disclosure.............................................. 34
8. Pre-Closing Covenants and Agreements.................................. 34
(a) Conduct of Business Prior to Closing......................... 34
(b) Continued Information........................................ 36
(c) Access....................................................... 37
(d) No Inconsistent Activities................................... 37
(e) Confidentiality.............................................. 37
9. Conditions Precedent to Buyer's and Parent's Obligations.............. 38
10. Conditions Precedent to Seller's Obligations.......................... 41
11. Indemnification....................................................... 43
(a) Indemnity from Seller........................................ 43
(b) Indemnity from Buyer......................................... 44
(c) Notice and Opportunity to Defend............................. 45
(d) Limitation on Liability...................................... 47
(e) Adjustments.................................................. 48
12. Miscellaneous Covenants and Agreements................................ 48
(a) Bulk Sales Compliance........................................ 48
(b) Consents to Assignment....................................... 49
(c) Confidentiality.............................................. 49
(d) Release of Information....................................... 51
(e) Finders...................................................... 51
(f) Access to Customers and Suppliers............................ 51
(g) Reimbursement of Separation Expenses......................... 52
(h) Reimbursement of Environmental Expenses...................... 52
(i) Reimbursement Account........................................ 52
(j) Reimbursement of TBHQ Expenses............................... 54
(k) Accounts Receivable Matters.................................. 55
(l) Survival..................................................... 55
(m) Approvals; HSR Indemnity..................................... 55
(n) Financial Review............................................. 55
13. Termination........................................................... 56
(a) Termination Generally........................................ 56
-ii-
<PAGE>
(b) Asset Casualty............................................... 57
(c) Effect of Termination........................................ 58
14. Notices............................................................... 58
15. Miscellaneous......................................................... 60
(a) Entire Agreement............................................. 60
(b) No Waiver; Remedies.......................................... 60
(c) Specific Performance......................................... 61
(d) Assignment; Benefits......................................... 61
(e) Headings; References......................................... 61
(f) Cooperation.................................................. 62
(g) Transaction Expenses......................................... 62
(h) Counterparts................................................. 62
(i) Severability................................................. 62
(j) Governing Law; Jurisdiction.................................. 64
-iii-
<PAGE>
INDEX OF EXHIBITS, SCHEDULES AND APPENDICES
Exhibit A Real Property
Exhibit B Form of License Agreement
Exhibit C Allocation of Purchase Price
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Escrow Agreement
Exhibit F Form of Shareholders Agreement
Exhibit G Form of Bill of Sale and Assumption Agreement
Exhibit H Form of Transition Period Agreement
Exhibit I Form of Real Property Purchase Agreement
Exhibit J Form of Non-Competition Agreement
Exhibit K Form of Requirements Agreement
Exhibit L Certificate of Amendment
Schedule 1(b) Equipment
Schedule 1(c) Inventory
Schedule 1(d) Serviced Accounts
Schedule 1(i) Accounts Receivable
Schedule 1(j) Intellectual Property
Schedule 6(a) Locations of Business and Acquired Assets
Schedule 6(d) Conflicts
Schedule 6(f) Encumbrances and Liens
Schedule 6(h) Labor Matters
Schedule 6(i) Claims and Litigation
Schedule 6(l) Environmental Matters
Schedule 6(m) OSHA
Schedule 6(q) Insurance
Schedule 6(r) Accounts Receivable
Schedule 6(s) Taxes
Schedule 6(u) Transactions with Affiliates
Schedule 6(w) Relationship with Vendors and Customers
Schedule 12(j) TBHQ Expenses
Appendix I Customer Contracts
Appendix II Leases
Appendix III Vendor Contracts
Appendix IV Licenses
Appendix V Financial Statements and Accounts Payable
-iv-
<PAGE>
AGREEMENT OF PURCHASE AND SALE
______________________________
THIS AGREEMENT OF PURCHASE AND SALE (together with all Exhibits,
Schedules and Appendices attached hereto and incorporated herein by reference,
the "Agreement"), dated as of April 11, 1995, is among CHATTEM, INC., a
Tennessee corporation having its principal place of business and chief
executive office located at 1715 West 38th Street, Chattanooga, Tennessee
37409 ("Seller"), CHATTEM CHEMICALS, INC., a Delaware corporation having its
principal place of business and chief executive office located at 163
Washington Valley Road, Warren, New Jersey 07059 ("Buyer"), and ELCAT, INC.,
a Delaware corporation having its principal place of business and chief
executive office located at 163 Washington Valley Road, Warren, New Jersey
07059 and the parent corporation of Buyer ("Parent").
WHEREAS, Seller, through its chemical division, engages in the
business of developing, producing, manufacturing and selling custom and fine
chemical products (the "Business"), with its principal products including
aluminum hydroxides, glycine and specialty aluminum derivatives (together
with all other products of the Business, the "Products"); and
WHEREAS, Seller wishes to well to Buyer, and Buyer is willing to
purchase from Seller, certain assets relating to the Products and the
Business (as hereinafter further defined, the "Acquired Assets");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and intending to
<PAGE>
be legally bound hereby, the parties to this Agreement agree as follows:
1. PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions
of this Agreement, Seller shall sell, transfer and deliver to Buyer, and
Buyer shall purchase and acquire from Seller, at the Closing (as hereinafter
defined), the Acquired Assets as hereinafter specified, and Buyer shall
assume the Assumed Liabilities (as hereinafter defined). Seller agrees that
the Acquired Assets shall be conveyed free and clear of all liabilities
(other than the Assumed Liabilities), obligations, liens, claims and
encumbrances of any kind, except Permitted Liens (as hereinafter defined).
The Acquired Assets shall consist of:
(a) all fixed assets used in or necessary for the conduct of the
Business, including the real property described on EXHIBIT A and the
buildings, improvements and other assets affixed thereto (the "Real
Property");
(b) all machinery, equipment (including laboratory equipment),
tools, furniture, fixtures, supplies (including laboratory, office, packaging
and shop supplies), and other personal property used in or necessary for the
conduct of the Business or the manufacture of the Products, including without
limitation all of those items listed or described on SCHEDULE 1(B) (the
"Equipment"), PROVIDED that shared laboratory equipment used by Seller in
connection with the Business and with any other business of Seller shall not
be included in the Acquired Assets unless specifically listed on SCHEDULE
1(B);
-2-
<PAGE>
(c) all inventories (including raw materials, work-in-process,
finished parts and finished goods) used in or necessary for the conduct of
the Business or the manufacture of the Products, including without limitation
all of those items listed or described on SCHEDULE 1(C) (the "Inventory");
(d) all customer accounts arising from or serviced by the
Business, a complete and current listing of which is attached hereto as
SCHEDULE 1(D) (the "Serviced Accounts");
(e) Seller's rights under all contracts, purchase orders,
commitments, and arrangements in respect of the Serviced Accounts attached
hereto as APPENDIX I (the "Customer Contracts");
(f) Seller's rights under all contracts, purchase orders,
commitments and arrangements in respect of leased machinery or equipment,
including without limitation machinery or equipment of the type described in
SECTION 1(B) hereof, used in or necessary for the conduct of the Business and
attached hereto as APPENDIX II (the "Leases");
(g) Seller's rights under all contracts, purchase orders,
commitments and arrangements with vendors for supplies, requirements or
services relating to the Business or the Products attached hereto as APPENDIX
III (the "Vendor Contracts");
(h) all records, files, vendor lists, customer documentation,
order, sales and receivables histories, operation sheets, routing sheets,
notebooks, research reports, quality control records, inventory records,
books of account, accounting records, data bases, computer software, programs
and related
-3-
<PAGE>
computer materials (including tapes, discs and punch cards), and records,
books and other documents relating to the Business, the Products and the
Serviced Accounts;
(i) all accounts receivable attributable to the Business, a
complete and current listing and aging of which is attached hereto as
SCHEDULE 1(I) (the "Accounts Receivable");
(j) all of the Seller's proprietary rights in respect of the
Acquired Assets and the Business, including without limitation all worldwide
rights, title and interests in and to patents, trademarks (registered or
unregistered), trade names, service marks, assumed names, copyrights, all
applications for any of the foregoing, formulae, trade secrets, processes,
know-how, confidential information, research, inventions, inventors' notes,
laboratory reports, drawings, designs, customer lists, vendor lists, all
information similar to any of the foregoing, goodwill relating to the
Business and the Acquired Assets, and marketing rights in connection with all
of the foregoing, including without limitation all of those items listed or
described on SCHEDULE 1(J) (the "Intellectual Property"); PROVIDED, HOWEVER,
that the Acquired Assets shall not include the right to use the name
"Chattem" except to the extent provided in a license agreement to be
executed at the Closing in substantially the form of EXHIBIT B (the "License
Agreement:);
(k) all records (including without limitation compensation
information and job descriptions) relating to managers and employees of the
Business;
-4-
<PAGE>
(l) all licenses, consents, permits, variances, certifications,
and approvals of government agencies held by Seller relating solely to the
Business or the Acquired Assets, to the extent transferable under applicable
law, attached hereto as APPENDIX IV (the "Licenses");
(m) all warranties, claims and causes of action (and the benefit
of any and all collateral or security given in connection therewith) inuring
to the benefit of Seller relating to the Business or any of the Acquired
Assets; and
(n) all other assets used in or necessary for the conduct of the
Business not otherwise described in this Agreement of any character
whatsoever, whether personal, tangible or intangible, and wherever located,
owned by Seller except as specifically excluded herein.
Buyer and Seller expressly agree that Seller is not making any
representations in this Agreement that the Acquired Assets are all those that
are or will be necessary for the conduct of the Business by Buyer on or after
the Closing Date (as hereinafter defined). Buyer and Seller further expressly
agree that the Acquired Assets shall not include (i) cash on hand or
deposited in banks as of the Closing Date, (ii) the rights to any of Seller's
claim for any federal, state, local or foreign tax refund, (iii) policies of
insurance acquired by Seller in connection with the Acquired Assets, (iv) any
assets, properties or rights of Seller not used in or necessary for the
conduct of the Business, or (v) tax returns, books of account or other records
-5-
<PAGE>
having to do with the corporate organization of Seller (the "Excluded
Assets").
2. ASSUMPTION OF CERTAIN LIABILITIES; EXCLUDED OBLIGATIONS.
(a) At the closing, Buyer shall assume, subject to the
limitations set forth in this Agreement, (i) those obligations of Seller
which are expressly set forth in and by the terms of the particular Customer
Contracts, Leases, and Vendor Contracts attached as APPENDICES I, II, and
III, respectively, as updated as of the Closing Date, (ii) the Accounts
Payable (as hereinafter defined) detailed in APPENDIX V, as updated as of the
Closing Date, and (iii) all obligations, responsibilities and liabilities of
the Business or relating to the Acquired Assets arising after the Closing
Date; PROVIDED, that Buyer shall not be deemed to have assumed any
obligations under this SECTION 2 or otherwise to the extent that such
obligations were due to be performed prior to the Closing Date and are in
default as of the Closing Date (the "Assumed Liabilities").
(b) Notwithstanding anything to the contrary in this Agreement,
except only as expressly set forth in SECTION 2(A), Buyer shall not assume or
be liable for any or all of Seller's debts, liabilities or obligations,
including without limitation, any debts, liabilities or obligations arising
out of the following (the "Excluded Obligations"):
(i) Seller's operation of any of the Acquired Assets or
the Business prior to the Closing Date;
-6-
<PAGE>
(ii) any violation of any of the representations,
warranties, covenants or agreements of Seller contained in this
Agreement;
(iii) Federal, state, county, local, foreign or other
income, sales, use, real estate, excise, employee payroll or
other taxes or assessments (including interest and penalties
thereon) of any kind whatsoever payable in or attributable to
any period prior to the Closing Date;
(iv) any claims for personal injury, property damage,
product liability or strict liability, incurred or relating to
any period prior to the Closing Date (whether or not then
asserted), including workers' compensation;
(v) any claims alleging damage to the environment under
any existing law or similar claims with respect to the operation
of any of the Acquired Assets or the Business prior to the
Closing Date (notwithstanding any disclosure in Schedule 6(l) of
this Agreement of any matters, conditions or facts which might
give rise to any such claims, which matters, conditions or facts
shall be and continue to be Excluded Obligations under this
Agreement);
(vi) any claim of violation or infringement of any
copyright, patents, trademark or trade name right or other
intellectual property right of any person or entity occurring
prior to the Closing Date;
(vii) any claim of civil or criminal liabilities or
penalties (including interest) imposed on account of any act or
omission of Seller or its officers, directors, employees or
agents, occurring, arising or existing prior to the Closing
Date;
(viii) contingent liabilities of Seller of any kind
incurred, arising, accruing, or existing prior to the Closing
Date;
(ix) any pension, profit sharing, savings, retirement,
health, medical, life, disability, dental, deferred
compensation, stock option, bonus, incentive, severance pay,
group insurance or other employee plans or arrangements, or any
policies, handbooks, or custom or practice, or any employment
agreements, whether express or implied, applicable to any of
Seller's employees at any time prior to the Closing Date; and
-7-
<PAGE>
(x) liabilities resulting from the failure to comply
with statutory provisions relating to bulk sales and transfers,
if applicable.
3. PURCHASE PRICE; ALLOCATION; ADJUSTMENTS.
(a) PURCHASE PRICE. In consideration of the sale and delivery of
the Acquired Assets by Seller to Buyer, and in reliance upon the
representations and warranties made by Seller in this Agreement, Buyer shall
pay to Seller Twenty-Five Million Dollars ($25,000,000.00) (the "Purchase
Price"), such Purchase Price to be payable as follows: (i) Twenty Million
Dollars ($20,000,000.00) cash payable at Closing (the "Cash Portion"),
subject to adjustment as described in SECTION 3(B) hereof, and (ii) one or
more stock certificates representing Five Million ($5,000,000.00) face amount
of the 13.125% Cumulative Convertible Preferred Stock (the "PIK Stock") of
Parent, to be delivered at Closing (the "Stock Payment"), subject to
adjustment as described in SECTION 3(B) hereof.
(b) ADJUSTMENTS TO PURCHASE PRICE.
(i) The Cash Portion and the Stock Payment will be
adjusted upwards or downwards, dollar-for-dollar in the aggregate, to reflect
any variation in Net Working Capital of the Business (as hereinafter defined)
as of the close of business on the Closing Date from Two Million Seven
Hundred Fifty Thousand Dollars ($2,750,000.00). Any adjustment pursuant to
this SECTION 3(B) shall be allocated 80% to (or from) the Cash Portion and
20% to (or from) the Stock Payment.
-8-
<PAGE>
(ii) As soon as practicable, but in no event later than
sixty (60) days after the Closing Date, Buyer shall deliver to Seller a
statement (the "Statement") setting forth the Net Working Capital of the
Business as of the close of business on the Closing Date and setting forth in
detail the basis for the calculation thereof. Seller and its independent
auditors shall have the right to monitor the preparation of the Statement,
and Buyer shall give Seller and its independent auditors reasonable access to
the books and records of the Business for such purpose and for purposes of
verifying the Statement when received. If Buyer shall fail to deliver the
statement within such sixty (60) day period, then there shall be no
adjustment to decrease the Purchase Price in accordance with this Section
3(b), unless Buyer's failure to deliver the Statement within such sixty (60)
day period is as a result of any act or omission of Seller.
(iii) If Seller fails to notify Buyer in accordance with the
terms of this clause (iii) of any dispute respecting any item contained in the
Statement within thirty (30) days of Seller's receipt of the Statement, the
Statement shall be the "Final Statement". If Seller timely notifies Buyer of
any such dispute (in a writing setting forth in sufficient detail the basis
of such dispute), and Seller and Buyer cannot resolve such dispute within
fifteen (15) days after receipt by Buyer of such notice, such dispute shall
be resolved by Ernst & Young ("E&Y"), or if E&Y is unable to so act, by
another independent accounting firm selected by E&Y (E&Y or such other
accounting firm so engaged shall
-9-
<PAGE>
hereinafter be referred to as the "Independent Accounting Firm"). The
determination of the Independent Account Firm as to Net Working Capital shall
be made as promptly as practicable, shall be final and binding on both Buyer
and Seller, and shall constitute the Final Statement. Any expenses relating
to engagement of the Independent Accounting Firm shall be shared equally by
Buyer and Seller.
(iv) Any adjustment to the Stock Payment required by this
SECTION 3 (B) shall be reflected in the face amount of one or more
replacement certificates for the PIK Stock to be issued by Buyer within ten
(10) business days after receipt by the parties of the Final Statement.
Subject to Section 3(d) hereof, Buyer or Seller, as appropriate, shall make
any payment required as a result of an adjustment to the Cash Portion in
cash or by certified funds or wire transfer of immediately available funds
within ten (10) business days after receipt by the parties of the Final
Statement.
(v) As used in this Agreement, the term "Net Working
Capital" shall mean the sum of the following as of the close of business on
the Closing Date: (A) accounts receivable of the Business and (B) inventory
of the Business, valued at the lesser of Seller's historical cost or the then
current market price, less (C) accounts payable of Seller relating to the
Business.
(c) ALLOCATION. The allocation of the Purchase Price among the
Acquired Assets shall be as set forth on EXHIBIT C.
-10-
<PAGE>
Buyer and Seller hereby covenant and agree that neither will take a position
on any income tax return or with any governmental agency charged with the
collection of any income tax or in any judicial proceeding that is in any way
inconsistent with such allocation or the characterization of any other
payments described in this Agreement.
(d) ESCROW. In order to secure its obligations under SECTION
3(A) above, Seller shall deliver to an escrow agent, mutually acceptable to
Buyer and Seller, an amount in cash or certified funds or by wire transfer of
immediately available funds equal to $500,000.00 to be held in escrow until
release in accordance with the terms of the Escrow Agreement in substantially
the form of EXHIBIT E (the "Escrow Agreement") upon delivery of the Final
Statement in accordance with the provisions of this Section 3.
4. CLOSING DATE. Subject to the terms of this Agreement, the
closing of the purchase of the Acquired Assets (the "Closing") shall take
place at 10:00 a.m., on May 15, 1995, at the offices of Miller & Martin, 1000
Volunteer Building, Chattanooga, Tennessee 37402, or at such later time or
date or other location as mutually agreed upon in writing by the parties
hereto, but in no event later than July 1, 1995. The term "Closing Date"
means the date on which the Closing occurs.
-11-
<PAGE>
5. DELIVERY AND PAYMENT; FURTHER ASSURANCES.
(a) MUTUAL DELIVERIES. At the Closing and subject to the terms
of this Agreement, the following documents shall be duly executed and
delivered by each of the parties thereto:
(i) a Registration Rights Agreement between Parent and
Seller, in substantially the form of EXHIBIT D;
(ii) the Escrow Agreement among Buyer, Seller, and an
escrow agent mutually acceptable to Buyer and Seller;
(iii) the License Agreement between Seller and Buyer with
respect to Buyer's continued use of the name "Chattem";
(iv) a Shareholders Agreement between Parent and Seller,
with respect to ownership of the capital stock of Parent, in
substantially the form of EXHIBIT F;
(v) a Bill of Sale and Assumption Agreement between Buyer
and Seller with respect to the Acquired Assets and the Assumed
Liabilities, in substantially the form of EXHIBIT G;
(vi) a Transition Period Agreement between Buyer and
Seller with respect to the provision by Seller of certain
services to Buyer, in substantially the form of EXHIBIT H;
(vii) a Real Property Purchase and Sale Agreement between
Buyer and Seller, in substantially the form of EXHIBIT I;
(viii) a Non-Competition Agreement between Buyer and Seller,
in substantially the form of EXHIBIT J, and a Consulting,
Confidentiality and Non-Competition Agreement between Buyer and
Robert M. Boyd, Jr., in substantially the form of EXHIBIT K; and
(ix) a Requirements Agreement between Buyer and Seller
with respect to the manufacture by Buyer of certain products for
Seller, in substantially the form of EXHIBIT L.
-12-
<PAGE>
(b) SELLER AT CLOSING. At the Closing and subject to the terms
of this Agreement, Seller shall deliver or cause to be delivered to Buyer:
(i) full and actual possession of all of the Acquired
Assets;
(ii) a release of each lien, security interest, judgment,
claim or other encumbrance to which any of the Acquired Assets
may be subject other than the Permitted Liens, in form and
substance reasonably satisfactory to Buyer;
(iii) an opinion of Seller's counsel in form and substance
reasonably satisfactory to Buyer;
(iv) all documents and other information required to make
each Schedule and Appendix hereto, and in particular SCHEDULES
1(D) and 1(I), APPENDICES I, II, III, and IV hereof, and the
Accounts Payable portion of APPENDIX V hereof, complete and
current;
(v) a certificate of the Secretary of Seller respecting
(i) Seller's Charter and By-Laws, (ii) resolutions of Seller's
Board of Directors, and (iii) the incumbency of Seller's
officers;
(vi) the Officer's Certificate described in SECTION 9(H)
hereof;
(vii) Seller's Charter, certified as of a recent date by
the Secretary of State of Tennessee;
(viii) certificates as to Seller's qualification and
status, dated no more than ten (10) days prior to the Closing
Date, issued by the Secretary of State of Tennessee and of each
other jurisdiction in which Seller is qualified to do business;
and
(ix) all other documents, agreements, certificates,
consents and assignments, including without limitation
assignments in the form required by the United States Patent
and Trademark Office, required to be delivered to Buyer under
the provisions of this Agreement or reasonably requested by
Buyer to effect the transfer of the Acquired
-13-
<PAGE>
Assets to Buyer and the other transactions contemplated by this
Agreement.
(c) BUYER AND PARENT AT CLOSING. At the Closing and subject to
the terms of this Agreement, Buyer and/or Parent shall deliver or cause to be
delivered to Seller:
(i) a cashiers or certified check (or, at Buyer's option,
a wire transfer of immediately available funds), in the amount
of the Cash Portion;
(ii) the Stock Payment;
(iii) an opinion of Buyer's counsel, in form and substance
reasonably satisfactory to Seller;
(iv) a certificate of the Secretary of Buyer respecting
(i) Buyer's Certificate of Incorporation and By-Laws, (ii)
resolutions of Buyer's Board of Directors; and (iii) the
incumbency of Buyer's officers;
(v) a certificate of the Secretary of Parent respecting
(i) Parent's Certificate of Incorporation and By-Laws, (ii)
resolutions of Parent's Board of Directors, and (iii) the
incumbency of Parent's officers;
(vi) the Officers' Certificates described in SECTION 10(E)
hereof;
(vii) Buyer's Certificate of Incorporation, certified as of
a recent date by the Secretary of State of Delaware;
(viii) certificates as to Buyer's qualification and status,
dated no more than ten (10) days prior to the Closing Date,
issued by the Secretary of State of each of Delaware and
Tennessee;
(ix) Parent's Certificate of Incorporation, certified as
of a recent date by the Secretary of State of Delaware;
(x) a certificate as to Parent's qualification and
status, dated no more than ten (10) days
-14-
<PAGE>
prior to the Closing Date, issued by the Secretary of State of
Delaware; and
(xi) all other documents, agreements and certificates
required to be delivered to Seller under the provisions of this
Agreement or reasonably requested by Seller to effect the
transactions contemplated by this Agreement.
(d) FURTHER ASSURANCES. From time to time after the Closing, at
Buyer's request and without further consideration, Seller shall execute and
deliver bills of sale and assignments of the Acquired Assets and such other
instruments of sale, transfer conveyance, and confirmation and take such
other action as Buyer may reasonably deem necessary in order to transfer to
Buyer and confirm Buyer's title to the Acquired Assets, free and clear of any
and all liabilities (other than the Assumed Liabilities and the Permitted
Liens) and to put Buyer in actual possession and operating control thereof.
6. REPRESENTATIONS AND WARRANTIES BY SELLER. Seller represents and
warrants to Buyer as follows:
(a) ORGANIZATION, STANDING AND QUALIFICATION. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Tennessee, and is duly qualified to do business and in
good standing under the laws of each other jurisdiction where the character
of the properties owned or leased by it or the nature of the business
transacted by it requires it to be so qualified, except where the lack of
qualification would not have a material adverse effect on the Acquired
Assets, the Products, or the operations, properties,
-15-
<PAGE>
prospects or financial condition of the Business. Seller has all requisite
corporate power and authority and is entitled to carry on its business as it
is now being conducted, and to own, lease or operate its properties as and in
the places where such business is now conducted and where such properties are
now owned, leased or operated. Seller's principal place of business and chief
executive office is and as of the Closing Date will be located at 1715 West
38th Street, Chattanooga, Tennessee 37409. Set forth on SCHEDULE 6(A) is a
list of all other locations where Seller has conducted the Business or has
held or operated any of the Acquired Assets within the last ten (10) years.
(b) AUTHORITY AND BINDING EFFECT. Seller has full power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby and all corporate and other proceedings required to be
taken by Seller to authorize the execution, delivery and performance of this
Agreement and the agreements, instruments and other documents relating hereto
have been properly taken and have been approved by Seller's Board of
Directors. This Agreement has been duly executed and delivered by a duly
authorized officer of Seller, and constitutes, and will constitute on the
Closing Date, the valid and binding obligation of Seller, enforceable in
accordance with its terms.
(c) APPROVALS, ETC.
(i) No approval, consent, withholding of objection or other
authorization is required from, and no filing or registration is required to
be made with, any court, administrative agency or governmental authority in
connection with this Agreement
-16-
<PAGE>
or the transactions contemplated hereby, other than (i) compliance with and
filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), if applicable, (ii) compliance with and filings
under Section 13(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (iii) compliance with and filings under state environmental
statutes, if applicable, and (iv) approvals, consents, withholdings of
objection or other authorizations, filings and registrations where the
failure to obtain the same would not have a material adverse effect on the
Acquired Assets, the Products, or the operations, properties, prospects or
financial condition of the Business.
(ii) Seller has no reason to believe that it will be unable
to obtain the third party approvals described in SECTION 10(I) hereof.
(d) NO CONFLICT. Except as set forth on SCHEDULE 6(D), neither
execution and delivery nor performance by Seller of this Agreement or of the
transactions contemplated hereby will, with or without giving of notice or
passage of time or both, conflict with, result in a default, right to
accelerate or loss of rights under, or result in the creation of any lien,
charge or encumbrance on any of the Acquired Assets pursuant to, (i) any
provision of Seller's Charter or By-Laws, (ii) the terms of any equity
securities or debt instruments issued by Seller, (iii) any (A) franchise,
mortgage, deed of trust, lease, license, loan agreement or other agreement or
understanding, (B) law, ordinance, rule or regulation, or (C) order,
judgment, award, decree, permit, license or registration, to which Seller is
a party or by which
-17-
<PAGE>
Seller or any of the Acquired Assets may be bound or affected, or (iv) any
license, permit, approval, or registration issued by any governmental
authority or other organization and held by Seller, except where the
conflict, default, right to accelerate, loss of rights, lien, charge or
encumbrance would have have a material adverse effect on the Acquired
Assets, the Products, or the operations, properties, prospects or financial
condition of the Business; nor will such execution, delivery or performance
by Seller give any party with rights under any equity security, debt
instrument, franchise, mortgage, deed of trust, lease, license, loan
agreement or other material agreement or understanding the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of Seller thereunder, except for such rights as to which
requisite waivers or consents have been obtained.
(e) FINANCIAL INFORMATION.
(i) Seller has delivered to Buyer a listing of fixed
assets and summaries of accounts receivable, accounts payable and inventory
and the income statement of the Business as of November 30, 1994 (the
"Financial Statements"), a copy of which is annexed hereto as APPENDIX V.
Except as provided in Section 12(n) of this Agreement, the Financial
Statements are in the aggregate and all material respects accurate, complete
and in accordance with the books and records of the Business and present
fairly the information disclosed thereon as of their respective dates and the
results of operations of the Business for the periods then ended, in
conformity with generally accepted accounting
-18-
<PAGE>
principles applied on a consistent basis ("GAAP"), PROVIDED that all of the
footnotes required by GAAP for complete financial statements are not
included. The books of account of the Business reflect in all material
respects all of its items of income and expense, and all of its assets,
liabilities and accruals required to be reflected herein in accordance with
GAAP.
(ii) Seller has delivered to Buyer a complete listing of
all accounts payable and accrued expenses for the Business as of February 28,
1995 (the "Accounts Payable"), a copy of which is annexed hereto as APPENDIX
V. APPENDIX V specifies for each Account Payable the payee, the face amount
of each payable, the age of each payable, and any defenses, set-offs or
counterclaims that may exist with respect thereto. All of the Accounts
Payable have arisen in the ordinary course of business consistent with past
practice. None of the Accounts Payable are more than thirty (30) days overdue
or otherwise subject to any penalty, finance charge or surcharge. None of the
Accounts Payable represent cash overdrafts, intercompany payables, or
indebtedness or other accounts between Seller and the Business.
(f) TITLE TO PROPERTIES; LOCATION OF ASSETS, ETC. Seller
currently has (except only as set forth on SCHEDULE 6(F), and as of the
Closing (except for sales of Inventory between the date hereof and the
Closing in the ordinary course of business) Seller will have and convey to
Buyer without exception, good and marketable title to all of the Acquired
Assets, free and clear of all liens, leases, encumbrances, taxes (except such
sales taxes, excise taxes and other taxes required under law to be paid by
Buyer
-19-
<PAGE>
under this Agreement), claims, liabilities, equities, security interests,
charges and restrictions of any kind or nature whatsoever, except for liens
for current real or personal property taxes not yet due and payable, liens
disclosed on SCHEDULE 6(F), worker's, carriers and materialmen's liens, and
liens that would not have a material adverse effect on the Acquired Assets,
the Products, or the operations, properties, prospects or financial condition
of the Business, and which will not detract from the value of the properties
or interfere with the present use of the properties they affect and which in
the aggregate do not result in Buyer incurring an expense or cost in excess of
$25,000.00 ("Permitted Liens"). The Acquired Assets currently are and as of
the Closing will be (i) owned or leased by Seller, (ii) except as set forth
on SCHEDULE 6(F), in good operating condition and repair, free from any
material defect, except for normal wear and tear, (iii) all those necessary
for or used in the conduct of the Business as it is presently operated, and
(iv) in conformity with all applicable laws, ordinances, codes, rules and
regulations relating to their construction, use, operation and maintenance,
except where the nonconformity would not have a material adverse effect on the
Acquired Assets, the Products, or the operations, properties, prospects or
financial condition of the Business. All of the Acquired Assets are, and as
of the Closing Date will be, located at the address for Seller set forth in
the preamble to this Agreement. No person or entity other than Seller owns
any vehicles, equipment or other tangible assets or properties situated on
the Real Property or necessary to the operation of the Business,
-20-
<PAGE>
except for leased items disclosed on SCHEDULE 6(F), items of immaterial
value, and the Excluded Assets.
(g) INVENTORY. The Inventory was acquired and has been
maintained in accordance with Seller's regular business practices, consists
of items of a quality and quantity useable or saleable in the ordinary course
of business of the Business consistent with past practice, is valued at the
lower of Seller's cost and market value on the Financial Statements, and with
respect to Inventory intended for sale, is saleable at prices at least equal
to the value thereof on the books of the Business.
(h) LABOR MATTERS.
(i) Except as set forth on SCHEDULE 6(H), (a) Seller is not a
party to or bound by any written or oral agreement, contract, commitment or
arrangement with (A) any present or former shareholder, director, officer,
employee or consultant or for the employment of any person, including any
consultant, in connection with the Business, or (B) any labor union or other
representative of employees associated with the Business, (b) Seller has
operated the Business, and the Business is, in compliance in all material
respects with all applicable laws respecting employment and employment
practices, (c) there is no unfair labor practice charge or complaint against
Seller or the Business pending or to the knowledge of Seller threatened
before the National Labor Relations Board nor is there any grievance or any
arbitration proceeding arising out of or under collective bargaining
agreements pending or to the knowledge of Seller threatened with respect to
the Business, (d) there is no labor strike, slow-down or work stoppage
pending or
-21-
<PAGE>
to the knowledge of Seller threatened against Seller or the Business, (e)
there is no charge or complaint pending or to the knowledge of Seller
threatened against Seller or the Business before the Equal Employment
Opportunity Commission or any state, local or foreign agency responsible for
the prevention of unlawful employment practices, and (f) Seller has no
knowledge that any federal, state or local agency responsible for the
enforcement of labor or employment laws intends to conduct an investigation
of or relating to Seller or the Business, and no such investigation of which
Seller is aware is in progress.
(ii)
(i) CLAIMS AND LITIGATION. Except as set forth on SCHEDULE
6(I):
(i) there is no claim, legal action, suit, arbitration,
governmental investigation or other legal, regulatory or administrative
proceeding, or any order, judgment, decree or award pending or to the best
of Seller's knowledge threatened, against or affecting any of the
transactions contemplated by this Agreement, the Business or any of the
Acquired Assets, and Seller knows of no basis for the same;
(ii) there is no litigation, arbitration, investigation
or other proceeding of or before any court, arbitrator or governmental,
regulatory or administrative official, body or authority pending or to the
knowledge of Seller threatened against or affecting Seller, any of its assets
(including without limitation the Acquired Assets), properties (including
without limitation the Real Property), or business (including without
-22-
<PAGE>
limitation the Business), or any of its directors, officers or employees with
respect to their activities as such directors, officers or employees, nor is
there any basis for any such litigation, arbitration, investigation or
proceeding; and
(iii) Within the ten (10) years immediately preceding
the date of this Agreement, Seller has not been a defendant in any product
liability litigation in respect of the Products, nor to Seller's knowledge
has any such litigation been threatened against Seller during such period.
(j) LICENSES. APPENDIX IV contains copies of all Licenses.
All Licenses and all other instruments, documents and agreements pursuant to
which Seller has obtained the right to use any real or personal property
included in the Acquired Assets are in good standing, valid and effective in
accordance with their respective terms, and there is not under any License
any existing default or event which, with notice or lapse of time, or both,
would constitute a default which would have a material adverse effect on the
Acquired Assets, the Products, or the operations, properties, prospects or
financial condition of the Business. The Licenses are all those used in or
necessary for the lawful conduct of the Business as presently operated.
(k) COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS. Seller has
not received notice of noncompliance with, and has complied in all material
respects with, all laws, rules, regulations, ordinances, orders, judgments,
and awards applicable to the Acquired Assets, the Products, the Business, and
the Real Property or to which any of the Acquired Assets, the Products, the
Business,
-23-
<PAGE>
and the Real Property is subject. Seller has not failed to obtain or to
adhere to the requirements of any license, permit or authorization (including
without limitation the Licenses) necessary to the ownership of the Acquired
Assets, the Products, or the Real Property, or to the conduct of the
Business. Neither Seller nor any director, officer, employee or agent of the
Business or Seller has unlawfully offered, paid or agreed to pay, directly or
indirectly, any money or anything of value to, or for the benefit of, any
individual who is or was a candidate for public office (other than lawful
campaign contributions), or an official or employee of any governmental,
regulatory or administrative body or authority or an officer or employee of
any client, customer or supplier of the Business.
(l) ENVIRONMENTAL MATTERS.
(i) Except as set forth on SCHEDULE 6(L), Seller has
obtained all permits, licenses and other authorizations which are required
under "Environmental Laws" for the use and operation of the Acquired Assets
and the conduct of the Business. As used in this Agreement, "Environmental
Laws" shall include, without limitation, any and all federal, state, local and
foreign laws and requirements relating to health and safety and pollution or
protection of the environment currently in effect, including laws and
requirements relating to emissions, discharge, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes into the environment (including without
limitation ambient are, surface water, groundwater or land), or otherwise
relating to the manufac-
-24-
<PAGE>
ture, processing, distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes. As used herein, "hazardous substances or
wastes" shall include, without limitation, (A) gasoline, petroleum products,
explosives, radioactive materials, polychlorinated biphenyls, alcohols,
chemical solvents or related or similar materials, (B) any substance or
material defined as a hazardous, extremely hazardous or toxic substance,
material or waste or as a pollutant or contaminant under any Environmental
Law, and (C) any asbestos or asbestos-containing substance.
(ii) Except as set forth on SCHEDULE 6(L), Seller is in
full compliance with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained
in any and all Environmental Laws or contained in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder by any federal, state or local court or
other governmental authority, agency or instrumentality an applicable to the
use or operation of the Acquired Assets, the Products or the conduct of the
Business.
(iii) Except as set forth on SCHEDULE 6(L), Seller is not
aware of, nor has Seller received notice of, any past, present or future
events, conditions, circumstances, activities, practices, incidents, actions
or plans which may interfere with or prevent compliance or continued
compliance by the Business as it is presently conducted with Environmental
Laws or
-25-
<PAGE>
any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder by any
federal, state or local court or other governmental authority, agency or
instrumentality or which may give rise to any common law or legal liability
or otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, study or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant, chemical, or industrial, toxic or
hazardous substance or waste.
(iv) Except as set forth on SCHEDULE 6(L), there is no
civil, criminal or administrative action, suit, demand, claim, hearing,
notice or demand letter, notice of violation, investigation, or proceeding
pending or to Seller's knowledge threatened against Seller in respect of the
Business, the Acquired Assets or the Products and relating in any way to any
Environmental Law or any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, and Seller knows of no basis for the same.
(m) OSHA. Except as set forth on SCHEDULE 6(M), Seller has
not violated, or received a notice or charge asserting any violation of, the
Occupational Safety and Health Act of 1970 or any other federal, state, local
or foreign law (including rules and regulations thereunder) regulating or
otherwise affecting the health and safety of employees associated with the
Business.
-26-
<PAGE>
(n) BACKLOG. The value of all outstanding Customer
Contracts, exclusive of any amounts which have been paid to Seller on account
thereof or which in accordance with GAAP are or should be classified as
accounts receivable on the books of the Business, is greater than $10,000.00.
Seller knows of no reason why the products and services represented by such
Customer Contracts cannot be supplied or performed, as the case may be, at
Seller's normal profit margins for such products and services.
(o) CONTRACTS.
(i) The Customer Contracts, the Vendor Contracts and
the Leases are valid, binding and enforceable in accordance with their
respective terms. The parties to the Customer Contracts, the Vendor Contracts
and the Leases are in compliance in all material respects with the provisions
thereof; no party is in default in the performance, observance or fulfillment
of any obligation, covenant or condition contained in any Customer Contract,
Vendor Contract or Lease; and no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a default under
any thereof which default would have a material adverse effect on the
Acquired Assets, the Products, or the operations, properties, prospects or
financial condition of the Business.
(ii) APPENDIX I contains true and complete copies (or,
to the extent oral, descriptions) of all contracts, purchase orders,
commitments, undertakings and contractual arrangements with customers in
respect of the Serviced Accounts, the Business or the Products. APPENDIX II
contains true and
-27-
<PAGE>
complete copies (or, to the extent oral, descriptions) of all contracts,
purchase orders, commitments, undertakings and contractual arrangements with
vendors and suppliers in respect of the Serviced Accounts, the Business or
the Products. APPENDIX III contains true and complete copies (or, to the
extent oral, descriptions) of all leases, commitments, undertakings and
contractual arrangements with vendors and suppliers in respect of leased
Equipment.
(iii) No Customer Contract, Vendor Contract or Lease, in
the reasonable opinion of Seller, contains any contractual requirement with
which there is a reasonable likelihood that the Business or to Seller's
knowledge any other party thereto will be unable to comply.
(p) INTELLECTUAL PROPERTY. The Business does not utilize any
patent, trademark, trade name, service mark, copyright, trade secret or
proprietary rights other than the Intellectual Property, and to the knowledge
of Seller after diligent investigation, the use of the Intellectual Property
does not conflict with, or infringe upon, any patent, trademark, trade name,
service mark, copyright, trade secret or other proprietary rights owned or
claimed by another. Seller owns free and clear of all liens, encumbrances and
similar rights all proprietary rights (including without limitation all
patents, trademarks, trade names, service marks, copyrights and trade
secrets) that are necessary for or used in the conduct of the Business as now
conducted. Seller has not granted, conveyed, assigned, licensed, leased or
otherwise transferred to any other person or entity any proprietary,
-28-
<PAGE>
financial or other interest, direct or indirect, in any unpatented design or
device which Seller is using or the use of which is necessary in the
operation of the Business as it is now, or within the past five (5) years
has been, conducted.
(q) INSURANCE. The Acquired Assets are covered under the
general liability, products liability and other forms of insurance described
on SCHEDULE 6(Q) hereto (collectively, the "Insurance Policies"). Seller has
not failed to give any notice or present any claim with respect to any
Acquired Asset or the Real Property under any Insurance Policy in a timely
fashion or in the manner or detail required by such Insurance Policy, and all
unsatisfied notices and claims with respect to any Acquired Asset and the
Real Property are listed on SCHEDULE 6(Q). Seller has not received any notice
of cancellation or nonrenewal with respect to, or disallowance of any claim
under, any Insurance Policy, and is not aware of any state of facts or event
which might prevent Buyer from securing insurance in respect of the Acquired
Assets.
(r) ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE
6(R), all of the Accounts Receivable have been acquired or have arisen only
in the ordinary course of business consistent with past practice and are not
subject to any defenses, set-offs or counterclaims.
(s) TAXES. Seller has filed all federal, state, local and
foreign tax returns and material information returns (collectively, the
"Returns") required to be filed by it (taking into account any extensions of
time to file granted to Seller as fully described in SCHEDULE 6(S) hereof and
all such Returns being
-29-
<PAGE>
accurate and complete in all material respects) and Seller has paid all
taxes, penalties and interest related thereto, and other charges of a
comparable nature irrespective of how designated, which have been incurred or
are shown to be due on the Returns or are otherwise due or claimed to be due
from Seller or imposed on Seller or Seller's properties, assets, income,
payroll, franchises, licenses, sales or use by any federal, state, local or
foreign taxing authorities (collectively, "Taxes") with respect to periods
ending on or prior to the date hereof. There are no material claims asserted
for non-payment of Taxes upon Seller. All amounts required to be paid by
Seller with respect to, and to be withheld from employees of the Business
for, income taxes, social security, unemployment insurance, workers'
compensation, or other taxes have been withheld, collected and paid, when and
as due, to the appropriate governmental authority.
(t) NO ADVERSE CHANGE. Since the date of the Financial
Statements, there has not occurred any material adverse change in the
Acquired Assets or the Business.
(u) TRANSACTIONS WITH AFFILIATES. Except as described on
SCHEDULE 6(U) hereto, none of Seller's directors or officers owns or has
owned, directly or indirectly, or has or has had an interest in excess of
five percent (5%) of the voting control, either of record, beneficially or
equitably, in any business, corporate or otherwise, which (i) owns or owned,
within the past five (5) years, any asset or property which is or was the
subject of any material contract, agreement, business arrangement,
relationship or course of dealing with the Business, or (ii) was,
-30-
<PAGE>
within the past five (5) years, a party to any such contract, agreement,
business arrangement, relationship or course of dealing, or (iii) conducts,
or has within the past five (5) years conducted, the same business as, or a
similar business to, that conducted by the Business unless such director(s)
or officer(s) do(es) not participate, directly or indirectly, in the
management thereof.
(v) BROKERS. Except for Wertheim Schroder, Inc., no broker,
finder or financial advisor or other person is entitled to any brokerage
fees, commissions, finders' fees or financial advisory fees in connection
with the transactions contemplated hereby by reason of any action taken by
Seller or any of its directors, officers, employees, representatives or
agents.
(w) RELATIONSHIP WITH VENDORS AND CUSTOMERS. Except as
described on SCHEDULE 6(W), Seller is not aware of any facts or information
upon which Seller concludes in its reasonable opinion that any customer
(whether under a Serviced Account, Customer Contract or otherwise) or vendor
(whether under a Vendor Contract or otherwise) intends to cease doing any
material amount of business with the Business.
(x) DISCLOSURE. No representation or warranty by Seller in this
Agreement or in any Exhibits, Schedules or Appendices or agreements referred
to herein (the "Ancillary Agreements") contains or will contain any untrue
statement of a material fact or omits to state a material fact required to
make the statements made not misleading and Seller has disclosed to Buyer any
facts which could be expected to materially and adversely
-31-
<PAGE>
affect the Acquired Assets, the Products, the Business, or the transactions
contemplated by this Agreement.
7. REPRESENTATIONS AND WARRANTIES BY BUYER AND PARENT. Buyer and
Parent represent and warrant to Seller as follows:
(a) ORGANIZATION, STANDING, QUALIFICATION. Each of Buyer and
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Buyer is duly qualified to do
business and in good standing under the laws of the State of Tennessee and in
each other jurisdiction where the character of the properties owned or leased
by it or the nature of the business transacted by it requires it to be so
qualified. Each of Buyer and Parent has all requisite corporate power and
authority and is entitled to carry on its business as it is now being
conducted, and to own, lease or operate its properties as and in the places
where such business is now conducted and where such properties are now owned,
leased or operated.
(b) AUTHORITY AND BINDING EFFECT. Each of Buyer and Parent has
full power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby and all corporate and other proceedings
required to be taken by Buyer and Parent to authorize the execution, delivery
and performance of this Agreement and the agreements, instruments and other
documents relating hereto have been properly taken and have been approved by
Buyer's and Parent's respective Boards of Directors. This Agreement has been
duly executed and delivered by a duly authorized officer of Buyer and of
Parent, and constitutes, and will
-32-
<PAGE>
constitute on the Closing Date, the valid and binding obligation of Buyer and
Parent enforceable in accordance with its terms.
(c) APPROVALS, ETC. No approval, consent, withholding of
objection or other authorization is required from, and no filing or
registration is required to be made with, any court, administrative agency or
governmental authority in connection with this Agreement or the transactions
contemplated hereby, other than (i) compliance with and filings under the
HSR Act, if applicable, (ii) compliance with and filings under the Exchange
Act, if applicable, and (iii) compliance with and filings under state
environmental statutes, if applicable.
(d) NO CONFLICT. Neither execution and delivery nor performance
by Buyer or Parent of this Agreement or of the transactions contemplated
hereby will, with or without the giving of notice or passage of time or both,
conflict with or result in a default, right to accelerate or loss of rights
under, (i) any provision of Buyer's or Parent's respective Certificates of
Incorporation or By-Laws, (ii) the terms of any equity securities or debt
instruments issued by Buyer or Parent, (iii) any (A) franchise, mortgage,
deed of trust, lease, license, loan agreement, or any other agreement or
understanding, (B) law, ordinance, rule or regulation, or (C) order,
judgment, award, decree, permit, license or registration to which Buyer or
Parent is a party or by which either Buyer or Parent or their respective
assets (excluding the Acquired Assets) may be bound or affected, or (iv) any
license, permit, approval or registration issued by any governmental
authority or other organization and held by Buyer or Parent, except
-33-
<PAGE>
where the conflict, default, right to accelerate or loss of rights under the
same would not have a material adverse effect on the operations, properties,
prospects or financial condition of Buyer or Parent.
(e) CLAIMS AND LITIGATION. There is no claim, legal action,
suit, arbitration, governmental investigation or other legal, regulatory or
administrative proceeding, or any order, judgment, decree or award pending or
to the best of Buyer's or Parent's knowledge threatened, against or relating
to the assets (excluding the Acquired Assets) or current business of Buyer or
Parent and neither Buyer nor Parent knows of any basis for the same.
(f) FINANCING. Parent will exercise commercially reasonable
efforts to enable Buyer to make timely payment of the Cash Portion at the
Closing, and Parent has no reason to believe that it cannot obtain the funds
to satisfy the obligations of Parent and Buyer set forth herein.
(g) BROKERS. No broker, finder or financial advisor or other
person is entitled to any brokerage fees, commissions, finders' fees or
financial advisory fees in connection with the transactions contemplated
hereby by reason of any action taken by Buyer or Parent or any of their
respective directors, officers, employees, representatives or agents.
(h) FULL DISCLOSURE. No representation or warranty by Buyer or
Parent in this Agreement or in any Ancillary Agreement contains or will
contain any untrue statement of a material fact or
-34-
<PAGE>
omits to state a material fact required to make the statements made not
misleading.
8. PRE-CLOSING COVENANTS AND AGREEMENTS.
(a) CONDUCT OF BUSINESS PRIOR TO CLOSING. From the date hereof
until the Closing Date, Seller will use the Acquired Assets only in the
ordinary course, will maintain and preserve the Acquired Assets in their
current condition (except for changes in the ordinary course of business),
will take all steps necessary to keep the operations of the Business
functioning properly, and will maintain the Insurance Policies. Seller shall
not, without the prior written consent of Buyer, engage in any transaction
related to the Acquired Assets or the Business not in the ordinary course or
engage in any activity which could have a material and substantial adverse
effect thereon. Seller shall use diligent efforts to preserve the Acquired
Assets (except sales of Inventory in the ordinary course of business) and the
Business, to keep available the services of the employees, agents and
consultants associated with the Business, and to maintain the goodwill of the
suppliers to and the customers of the Business. Without limiting the
generality of the foregoing, Seller shall not, between the date of this
Agreement and the Closing Date, without the prior written consent of Buyer:
(i) enter into any agreement, contract, commitment or
arrangement (A) with any present or former shareholder, director, officer,
employee or consultant or for the employment of any person, including any
consultant, in connection with the Business, (B) with any labor union or
other representative
-35-
<PAGE>
of employees, (C) for the future lease or purchase of, or payment for,
supplies, products, machinery or equipment, or for the performance of
services by a third party, involving in any one case $25,000.00 or more,
other than Inventory purchases in the ordinary course of business consistent
with Seller's levels of prior Inventory purchases, (D) to sell or supply
products or to perform services, involving in any one case $25,000.00 or
more, (E) with any representative, sales agency, dealer or distributor, (F)
limiting or restraining the Business from engaging or competing in any lines
of business with any person, or (G) any other agreement, contract, commitment
or arrangement exceeding $25,000.00 in value;
(ii) grant rights under any license, franchise, or
distributorship agreement in respect of the Business or the Products;
(iii) modify, amend, terminate, assign, waive, release or
relinquish any rights or claims pursuant to any Customer Contract, Vendor
Contract or Lease;
(iv) grant any increase in the salary or other compensation
of, or grant any bonus to, the managers or other employees associated with
the Business, or make any loan to or enter into any material transaction of
any other nature with such managers or employees;
(v) take any action to institute any new severance or
termination pay practices with respect to any managers or other employees
associated with the Business or to increase the benefits payable under
existing severance or termination pay policies; or
-36-
<PAGE>
(vi) adopt or amend, in any respect, except as may be
required by applicable law or regulation, any bonus, profit sharing,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust,
fund, plan or arrangement for the benefit or welfare of any managers or other
employees associated with the Business.
(b) CONTINUED INFORMATION. Between the date of this Agreement
and the Closing Date, Seller shall (i) advise Buyer of each significant
business decision made by the senior management of the Business before each
such decision is implemented or announced, and (ii) give Buyer prompt written
notice of any material change in any of the information contained in Seller's
representations and warranties set forth herein.
(c) ACCESS. At all reasonable times during normal business hours
prior to the Closing, Seller shall give Buyer and its representatives access to
(i) the Acquired Assets (and Seller's documentation related thereto) in order
to verify the existence and condition thereof, (ii) Seller's sales records
relating to the Products, the Business and the Serviced Accounts, and (iii)
Seller's employees involved in the Business in order to review and discuss
transition matters. Access to Seller's employees shall be subject to Seller's
approval (which shall not be unreasonably withheld), at Seller's option shall
be made in the presence of Seller or Seller's designee, and shall not disrupt
or interfere with Seller's business operations.
-37-
<PAGE>
(d) NO INCONSISTENT ACTIVITIES. Neither Seller nor any of its
officers, shareholders and other representatives will, directly or
indirectly, from the date hereof to and including the Closing Date or the
earlier termination of this Agreement, initiate, solicit, or participate in
any way in proposals, discussions or negotiations with, or provide any
information or assistance to, any third party concerning any acquisition of
all or any part of the Acquired Assets or the Business (whether by merger,
purchase of assets, tender offer or otherwise).
(e) CONFIDENTIALITY. From and after the date hereof until the
Closing Date, and thereafter if the transactions contemplated hereby are not
consummated, (i) Buyer and Parent shall keep confidential all information
relating to the Acquired Assets, the Products, the Business and Seller and
shall not use any such information or disclose any such information to any
third parties, and (ii) Seller shall keep confidential all information
relating to Buyer, Parent and Electrocatalytic, Inc., a Delaware corporation
and wholly-owned subsidiary of Parent, and shall not use any such information
or disclose any such information to any third parties (in each case, other
than (A) to professional advisors who have agreed to maintain such
information in confidence, or (B) as shall be required in testimony pursuant
to a subpoena issued by a court of competent jurisdiction, after first having
given sufficient written notice thereof to the affected part so that such
party has an opportunity to contest same). Information generally known to the
public and to the industry, other than as a result of a party's breach of
this SECTION 8(E), shall not be deemed confidential and
-38-
<PAGE>
is not subject to the terms and conditions of this SECTION 8 (E). If a breach
of such obligation occurs or is threatened, in addition to any other rights
and remedies provided in this Agreement or in law or at equity (each of which
shall be independent and severally enforceable), the parties hereto shall
have the right and remedy to have this SECTION 8(E) specifically enforced by
any court having jurisdiction, it being agreed that such breach or threatened
breach will cause irreparable injury to the affected party and that money
damages alone will not provide an adequate remedy. The prevailing party shall
be entitled to recover from the losing party reasonable attorneys' fees and
expenses and other costs of any such legal action.
9. CONDITIONS PRECEDENT TO BUYER'S AND PARENT'S OBLIGATIONS. The
obligations of Buyer and Parent under this Agreement are subject, at the
option of Buyer and Parent, to fulfillment or waiver of each of the following
conditions at or prior to the Closing, and Seller shall exert all reasonable
efforts to cause each such condition to be so fulfilled:
(a) All representations and warranties of Seller contained
herein, or in any document delivered in connection with this Agreement, shall
be correct and complete in all material respects when made and shall be
deemed to have been made again at and as of the Closing.
(b) All agreements and obligations required by this Agreement to
be performed by Seller at or before the Closing shall have been duly
performed.
-39-
<PAGE>
(c) Since the date of this Agreement, there shall not have
occurred any material adverse change, or the discovery of a condition or the
occurrence of any event which would result in a material adverse change in
the Acquired Assets or the Business.
(d) All documents and agreements required to be delivered to
Buyer at or prior to the Closing shall have been so delivered and Seller
shall be able to deliver and convey full, actual an unimpeded possession of,
and unencumbered title (except for the Permitted Liens or relating to the
Assumed Obligations) to, all of the Acquired Assets.
(e) No governmental agency (federal, state, or local) or any
other person or entity shall have: (i) objected to or sought to prevent or
limit (by notice, legal process or otherwise) the consummation of any of the
transfers, payments or other transactions contemplated hereby, (ii) indicated
an intention to attempt to set aside any of such transfers, payments or other
transactions, whether before or after its consummation, or to cause Buyer to
withhold any payment to Seller or to divest itself of any of the property
acquired, or (iii) asserted that any of such transfers, payments or other
transactions are not in compliance with law.
(f) No limitation or restriction shall exist as to the transfer
of the Acquired Assets by Seller to Buyer or as to the payment of the Cash
Portion by Buyer to Seller, and all other legal requirements applicable to
the transfer of the Acquired Assets by Seller to Buyer and of the Cash
Portion by Buyer to Seller shall have been satisfied.
-40-
<PAGE>
(g) The contract respecting the specialty TBHQ opportunity shall
have been executed and shall be in full force and effect, a true and complete
copy of such contract shall have been delivered to Buyer, and Eastman
Chemicals shall have consented to the assignment of such contract to Buyer.
(h) There shall be delivered to Buyer a certificate executed by
the President or a Vice President of Seller, dated as of the Closing Date,
certifying that the conditions set forth in paragraphs (a) through (g),
inclusive, of this SECTION 9 have been fulfilled.
(i) Buyer shall have obtained financing for the Cash Portion and
capitalization of the Business upon commercially reasonable terms or on terms
otherwise satisfactory to Buyer.
(j) The waiting period under the HSR Act shall have expired
without any adverse determination having been made thereunder.
(k) The results of Buyer's due diligence of Seller, the Business
and the Acquired Assets, including litigation and environmental compliance,
shall not have disclosed a condition or occurrence which would result in a
material adverse change in the Acquired Assets, the Products or the
operations, properties, prospects or financial condition of the Business.
(l) The Reimbursement Account (as defined in SECTION 12(H)
hereof) shall have been established and funded by Seller with at least
$100,000.00.
10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. The obligations of
Seller at the Closing shall be subject, at the
-41-
<PAGE>
option of Seller, to fulfillment or waiver of each of the following
conditions at or prior to the Closing, and Buyer and Parent shall exert all
reasonable efforts to cause each such condition to be so fulfilled:
(a) All representations and warranties of Buyer and Parent
contained herein, or in any document delivered in connection with this
Agreement, shall be correct and complete in all material respects when made
and shall be deemed to have been made again at and as of the Closing.
(b) All agreements and obligations required by this Agreement to
be performed by Buyer and Parent at or before the Closing shall have been
duly performed.
(c) All documents and agreements required to be delivered to
Seller at or prior to the Closing shall have been so delivered.
(d) No governmental agency (federal, state, or local) or any
other person or entity shall have: (i) objected to or sought to prevent or
limit (by notice, legal process or otherwise) the consummation of any of the
transfers, payments or other transactions contemplated hereby, (ii) indicated
an intention to attempt to set aside any of such transfers, payments or other
transactions, whether before or after its consummation, or to cause Buyer to
withhold any payment to Seller or to divest itself of any of the property
acquired, or (iii) asserted that any of such transfers, payments or other
transactions are not in compliance with law.
-42-
<PAGE>
(e) There shall be delivered to Seller certificates executed by
the President or Vice President of Buyer and of Parent, dated as of the
Closing Date, certifying that the conditions set forth in paragraphs (a)
through (d), inclusive, of this SECTION 10 have been fulfilled.
(f) Parent shall have amended its Certificate of Incorporation
to create the PIK Stock with the designations and preferences described on
EXHIBIT M.
(g) The waiting period under the HSR Act shall have expired
without any adverse determination having been made thereunder.
(h) The results of Seller's due diligence of Parent and its
business and operations, including litigation and environmental compliance,
shall not have disclosed a condition or occurrence which would result in a
material adverse change in Parent's business, assets or operations.
(i) Seller shall have received the consent from The First
National Bank of Chicago, as agent under Seller's senior secured credit
facility outstanding as of the date of this Agreement, to consummate the
transactions contemplated by this Agreement.
(j) Seller shall have received the consent of a majority in
interest of the holders of its 12.75% Series B Senior Subordinated Notes due
2004 to amend the Indenture dated August 4, 1994 by and among Seller, Signal
Investment & Management Co. as guarantor and SouthTrust Bank of Alabama, N.A.
as trustee (the "Indenture") in order to permit the Seller to receive and
hold the
-43-
<PAGE>
PIK Stock as a permitted investment under the terms of the Indenture.
11. INDEMNIFICATION.
(a) INDEMNITY FROM SELLER. Subject to the limitations set forth
in SECTION 11(D) and SECTION 12(K), Seller hereby agrees to indemnify, defend
and hold harmless from and after the Closing Buyer and Parent and their
respective officers, directors, shareholders, subsidiaries, affiliated
companies, successors and assigns from and against all losses, judgments,
settlements, claims, fines, penalties, liabilities, damages, costs or
expenses (including without limitation attorneys' fees) (collectively,
"Losses") asserted against or incurred or sustained by Buyer or Parent or
such other persons or entities to the extent of the Losses arising out of or
resulting, in whole or in part, from:
(i) any breach of any warranty or any misrepresentation by
Seller, or the non-performance of any covenant, agreement or
obligation to be performed on the part of Seller under this
Agreement or any of the Ancillary Agreements;
(ii) any claim, liability or obligation arising out of or
relating to any Excluded Obligation;
(iii) any claims or actions by third parties (including,
without limitation, employees, former employees, and
governmental entities) relating to any of the Acquired Assets,
the Products, or the Business, and accruing on or before the
Closing Date, or any acts or omissions of Seller with respect
to third parties, whether or not disclosed to Buyer, and whether
accrued or occurring before or at the Closing that do not relate
to the Assumed Obligations;
(iv) any claim or allegation that any of the Intellectual
Property or the ownership, marketing, licensing, sale or use
thereof or of any of the other Acquired Assets or the Products
infringes any
-44-
<PAGE>
patent, copyright, trademark, or other proprietary third party
right;
(v) any and all other debts, obligations or liabilities of
Seller at any time or any third party claims or claims from
Seller's creditors attributable thereto (except to the extent
that any such debt, obligation or liability is expressly assumed
by Buyer pursuant to SECTION 2 hereof); and
(vi) all reasonable costs, fees and expenses (including
attorneys' fees) incident to any of the foregoing or incurred
in enforcing this indemnity.
(b) INDEMNITY FROM BUYER AND PARENT. Buyer and Parent hereby
agree to indemnify, defend and hold harmless Seller and its officers,
directors, shareholders, subsidiaries, affiliated companies, successors and
assigns from and against and to the extent of all Losses asserted against or
incurred or sustained by Seller or such other persons or entities arising out
of or resulting from in whole or in part:
(i) any breach of any warranty or any misrepresentation by
Buyer or Parent, or the non-performance of any covenant,
agreement or obligation to be performed by Buyer or Parent
under this Agreement of any of the Ancillary Agreements;
(ii) any claims, liability or obligation arising out of or
relating to any Assumed Obligation;
(iii) any claims or actions by third parties (including
without limitation, employees, and governmental entities)
relating to any of the Acquired Assets, the Products or the
Business, and accruing after the Closing Date;
(iv) all reasonable costs, fees and expenses (including
attorneys' fees) incident to any of the foregoing or incurred
in enforcing this indemnity.
-45-
<PAGE>
(c) NOTICE AND OPPORTUNITY TO DEFEND.
(i) Promptly after the receipt by any person or entity
entitled to indemnification hereunder (the "Indemnified Party") of notice of
any claim or the commencement of any action or proceeding by a third party
covered by the above indemnity, the Indemnified Party will, if a claim with
respect thereto is to be made against another party hereto (the "Indemnifying
Person") pursuant to SECTION 11(A) or 11(B), as the case may be, give such
Indemnifying Person written notice of such claim or the commencement of such
action or proceeding, provided that failure of the Indemnified Party to give
reasonably prompt notice of any claim or claims shall not release, waive or
otherwise affect the obligations under this SECTION 11 of the Indemnifying
Person with respect thereto except to the extent that such Indemnifying
Person can demonstrate actual loss or prejudice as a result of such failure.
(ii) Unless the Indemnified Party reasonably believes that
the Indemnifying Person will be unable or not required to fully indemnify the
Indemnified Party for any such claim, action or proceeding, the Indemnifying
Person may elect to defend against such claim or defend such action or
proceeding, at its sole cost and expense, and in such event the Indemnified
Party shall, at its sole expense, have the right to participate in (but not
control) the defense through counsel chosen by the Indemnified Party. So long
as the Indemnifying Person (A) is in good faith so defending, and complying
with each of its obligations under this SECTION 11 or (B) is not given the
opportunity to so defend pursuant to the preceding sentence, as the case may
be, the Indemni-
-46-
<PAGE>
fied Party shall not compromise or settle any such claim without the prior
written consent of the Indemnifying Person, which consent shall not be
unreasonably withheld or delayed. In no event shall Seller, if it is the
Indemnifying Person in respect of any claim described in SECTION 11(A)(IV)
hereof, be entitled to settle any such claim without Buyer's written consent,
PROVIDED that if Buyer refuses to accept a settlement offer for which Seller
is prepared to provide complete indemnification in accordance with Seller's
obligations under this SECTION 11, Buyer thereafter shall be responsible for
paying Buyer's attorneys' fees and expenses arising from continued
litigation, but Seller shall remain responsible for payment of the ultimate
judgment, if any, to the extent of Seller's obligations under this SECTION 11.
(iii) If the Indemnifying Person cannot or does not elect to
defend a claim against the Indemnified Party or does not so defend and
continue to so defend in compliance with all of the terms of this SECTION 11,
the Indemnified Party may defend such claim, action or proceeding in such
manner as the Indemnified Party may deem appropriate, including, but not
limited to, settling such claim, action or proceeding (but after giving
notice of the same to the Indemnifying Person) on such terms as the
Indemnified Party may deem appropriate, and the Indemnifying Person will
promptly indemnify the Indemnified Party in accordance with the provisions of
SECTION 11(A) or 11(B), as the case may be.
(d) LIMITATION ON LIABILITY. Seller shall not have any
obligation to indemnify Buyer or Parent under this SECTION 11 until Buyer and
Parent have suffered Losses that, in the aggregate,
-47-
<PAGE>
equal or exceed $100,000.00, PROVIDED that Losses arising out of or resulting
from a breach of any representation, warranty, indemnity, covenant or
agreement contained in Section 6(s) hereof (collectively, "Tax Losses") shall
not be included in such calculation, and Seller shall be obligated to
indemnify Buyer or Parent for all such Tax Losses in accordance with Section
11(a) above. Seller shall be obligated to indemnify Buyer and Parent from and
against any Loss(es) after such time as such Loss(es) (other than Tax Losses)
equal or exceed $100,000.00. In no event shall Seller be obligated to
indemnify Buyer or Parent from and against any Losses after such time, if
ever, as Seller has paid an aggregate of the Purchase Price, as adjusted,
to Buyer or Parent pursuant to this SECTION 11, PROVIDED that there shall be
no limit on Seller's obligation to indemnify Buyer and Parent for Losses
arising out of or resulting from a breach of any representation, warranty,
indemnity, covenant or agreement contained in SECTION 6(L) or Tax Losses
hereof, and PROVIDED FURTHER that any Loss arising from a breach of SECTION
6(L) or Tax Losses shall not be counted in the calculation of the cap on
indemnity described in this SECTION 11(D). In the event that on the sixth
anniversary of the Closing Date (A) Buyer and/or Parent have sustained
unreimbursed Losses arising out of or resulting from a breach of any
representation, warranty, indemnity, covenant or agreement contained in
SECTION 6(L) hereof, and (B) Seller owns all or any portion of the PIK Stock,
Seller may elect to indemnify Buyer and Parent for up to $500,000.00 of such
Losses by (x) waiving Seller's right to a dividend in respect of the PIK
Stock, on a dollar for
-48-
<PAGE>
dollar basis, in such amount, (y) paying such Loss in cash, or (z) electing
to reduce the conversion privileges of the PIK Stock so that all of the PIK
Stock could be converted into 20% of the shares of the common stock of Parent
outstanding on the date of this Agreement rather than 21% as currently
provided in the description of the PIK Stock set forth on EXHIBIT L hereto.
To the extent that Buyer would have suffered a Loss but for the adjustment in
the Purchase Price in accordance with SECTION 3(B) hereof on the basis of Net
Working Capital as of the Closing Date or the reimbursement of environmental
remediation expenses through the Reimbursement Account (as hereinafter
defined), then such amounts shall not be deemed a Loss for purposes of this
SECTION 11.
(e) ADJUSTMENTS. Buyer and Seller shall make appropriate
adjustments for the receipt by the Indemnified Party of tax benefits and
insurance proceeds, if any, in determining the amount of the Loss for
purposes of this SECTION 11.
12. MISCELLANEOUS COVENANTS AND AGREEMENTS.
(a) BULK SALES COMPLIANCE. Buyer and Seller hereby waive
compliance with the provisions of any applicable bulk sales law of the
Uniform Commercial Code of any state including Tennessee ("Bulk Sales Laws")
to the extent applicable to any of the transactions contemplated by this
Agreement. Notwithstanding the foregoing, Seller hereby agrees to continue
to operate its business (other than the Business) after the Closing, which
Seller warrants constitutes more then 60% of its current gross sales, and
will discharge when due all claims of creditors or other persons, entities or
governmental agencies which could be asserted against
-49-
<PAGE>
Buyer, whether by reason of any noncompliance with any Bulk Sales Laws or
other tax provisions or otherwise, without recourse or liability of Buyer.
Seller hereby agrees to indemnify, defend and hold harmless Buyer, its
affiliates, successors and assigns from and against (and shall, on demand,
reimburse Buyer for) any Losses suffered or incurred by Buyer or its
affiliates, successors or assigns in connection with any failure to comply
with the provisions of any Bulk Sales Law or any tax laws or provisions or
any failure of Seller timely to discharge any such claims relating thereto.
(b) CONSENTS TO ASSIGNMENT. To the extent that any of the
Customer Contracts, Vendor Contracts, Licenses or Leases are not assignable
without the consent of a third party and such consent is not obtained,
neither this Agreement nor any related document shall constitute an
assignment or an attempted assignment thereof if such assignment or attempted
assignment would constitute a breach thereof. From and after the execution
hereof, Seller agrees to use all reasonable efforts to obtain the consent of
the other party to each Customer Contract, Vendor Contract and Lease and the
issuer of each License to the assignment thereof to Buyer. If such consent is
not obtained, each of the parties agrees to cooperate with the other in any
reasonable alternative arrangement to provide Buyer the benefits of the
Customer Contracts, Vendor Contracts, Leases and Licenses.
(c) CONFIDENTIALITY. Subject to SECTION 12(D) hereof with
respect to information concerning the terms of this Agreement, from and after
the Closing Seller, with respect to
-50-
<PAGE>
information relating to the Acquired Assets, the Products and the Business,
and Buyer and Parent, with respect to any other information disclosed by
Seller to Buyer which is confidential and proprietary to Seller, shall keep
confidential all such information and shall not use any such information or
disclose any such information to any third parties (other than (i) to
professional advisors who have agreed to maintain such information in
confidence, (ii) as shall be required in testimony pursuant to a subpoena
issued by a court of competent jurisdiction, after first having given
sufficient written notice thereof to the other party or parties, as the case
may be, so that the other party or parties have an opportunity to contest
same, (iii) as shall be required by the rules and regulations of the
Securities and Exchange Commission, or (iv) as shall be required for the
completion of tax returns). Information generally known to the public and to
the industry, other than as a result of a breach of this SECTION 12(C) by the
party charged with disclosure in violation of this SECTION 12(C), shall not
be deemed confidential and is not subject to the terms and conditions of this
SECTION 12(C). If a breach of such obligation occurs or is threatened, in
addition to any other rights and remedies provided in this Agreement or in
law or at equity (each of which shall be independent and severally
enforceable), the aggrieved party shall have the right and remedy to have
this SECTION 12(C) specifically enforced by any court having jurisdiction, it
being agreed that such breach or threatened breach will cause irreparable
injury to such aggrieved party and that money damages alone will not provide
an adequate remedy. The prevailing
-51-
<PAGE>
party shall be entitled to recover from the losing party reasonable
attorneys' fees and expenses and other costs of any such legal action.
(d) RELEASE OF INFORMATION. The parties hereto agree to
cooperate in releasing information concerning this Agreement and the
transactions contemplated herein. Until after the Closing, each of the
parties hereto shall furnish to the other party drafts of all releases prior
to publication thereof, all filings to be made with governmental authorities
prior to the filing thereof, and all notices to customers and vendors of the
Business prior to the distribution thereof, to the extent such releases,
filings or notices relate to this Agreement or the transactions contemplated
hereby. Nothing contained herein shall prevent any party at any time from (i)
furnishing any information to any governmental agency or (ii) disclosing any
information if required by law.
(e) FINDERS. With respect to all Losses, if any, arising from
the employment or other engagement by either party hereto of, or from
services rendered to such party by, any finder, broker, agent or other
intermediary in connection with the introduction or bringing together of the
parties hereto, or the negotiation or consummation of this Agreement or any
related agreement referred to herein (or any allegation having a reasonable
basis as to any such employment or other engagement or services), such party
shall indemnify, defend and hold the other party and the affiliates,
successors and assigns of such other party harmless against such Losses.
-52-
<PAGE>
(f) ACCESS TO CUSTOMERS AND SUPPLIERS. At the election of Buyer
from time to time prior to or within 120 days subsequent to the Closing Date,
Seller shall provide reasonable access and introductions to the customers of
and suppliers to the Business.
(g) REIMBURSEMENT OF SEPARATION EXPENSES. Seller agrees that
subsequent to the Closing it will reimburse Buyer up to an aggregate of Three
Hundred Thousand Dollars ($300,000.00) incurred by Buyer in connection with
the separation of the Business from Seller's plant facilities. The amounts
described in this SECTION 12(G) will be paid within ten (10) business days of
submission to Seller of invoices specifying the services rendered or the
products purchased.
(h) REIMBURSEMENT OF ENVIRONMENTAL EXPENSES. Seller agrees that
subsequent to the Closing it will reimburse Buyer up to an aggregate of Four
Hundred Thousand Dollars ($400,000.00) incurred by Buyer in connection with
tank farm remediation, underground tank removal and related improvements, and
air and water remediation, but not for production assets.
(i) REIMBURSEMENT ACCOUNT. The amounts described in SECTIONS
12(I) and 12(H) hereof will be paid from an account to be established by
Seller at a financial institution satisfactory to Buyer and funded entirely
by Seller to the extent of $700,000.00 (the "Reimbursement Account"). The
Reimbursement Account shall be funded initially by Seller with a deposit of
$100,000.00. The Reimbursement Account shall at all times contain at least
$100,000.00, until such time as at least $600,000.000 of expenses
-53-
<PAGE>
have been paid through the Reimbursement Account, after which time the
Reimbursement Account shall contain the difference between the amounts so
paid and $700,000.00, except in the ten (10) business day period immediately
following any draw from the Reimbursement Account for purposes of reimbursing
Buyer for a covered expense. Seller shall authorize withdrawals to reimburse
Buyer from the Reimbursement Account no later than ten (10) business days
following receipt by Seller of detailed invoices specifying the services
rendered or the products purchased, unless Seller has theretofore provided
Buyer with a written explanation of the basis for Seller's objection to
providing reimbursement for any item described on such invoice. If Seller
delivers such a written objection in a timely manner, and Buyer and Seller
are unable, within fifteen (15) days of Buyer's receipt of such objection, to
resolve their dispute respecting any item or items for which Buyer has
requested and Seller has refused reimbursement, such dispute shall be
resolved as follows:
(i) all disputes with respect to any item or items for
which Buyer has requested reimbursement under SECTION 12(G) above shall be
resolved on the basis of whether the expense was incurred by Buyer in
connection with the separation of the Business from Seller's plant facilities
by an independent certified public accountant selected by Buyer and Seller;
(ii) all disputes with respect to any item or items for
which Buyer has requested reimbursement under SECTION 12(H) above shall be
resolved on the basis of whether the expense was incurred in connection with
any activity relating to tank farm
-54-
<PAGE>
remediation, underground tank removal or air and water remediation (each
a"Permitted Environmental Reimbursement") by an independent environmental
consultant selected by Buyer and Seller; and
(iii) if Buyer and Seller are unable to agree upon either of
the consultants referred to in subsections (i) and (ii) of this SECTION
12(I), Buyer and Seller each shall select an independent certified public
accountant with respect to a dispute under SECTION 12(G) above or an
environmental consultant with respect to a dispute arising under SECTION
12(H) above and the two consultants so selected shall select a third
consultant in their respective fields, and such dispute shall be resolved by
the third consultant so selected. The determination of the consultants
described in this SECTION 12(I) shall be final and binding on both Buyer and
Seller. Any expenses relating to the engagement of said consultants for
purposes of resolving a dispute under this SECTION 12(I) shall be shared
equally by Buyer and Seller, and shall not be counted toward the aggregate
$665,000.000 limit on Seller's obligations described in SECTIONS 12(G) and
12(h) above.
(j) REIMBURSEMENT OF TBHQ EXPENSES. Seller agrees to reimburse
Buyer any and all costs associated with the purchase and installation of
equipment for the specialty TBHQ opportunity, as more fully described on
SCHEDULE 12(J) hereto. The amounts described in this SECTION 12(J) will be
paid to Buyer within ten (10) business days of receipt by Seller of invoices
specifying the services rendered or the products purchased, or, alternatively,
Seller shall have the right to pay the applicable vendors, suppliers and
contractors directly.
-55-
<PAGE>
(k) ACCOUNTS RECEIVABLE MATTERS. After the Closing Date, Seller
shall cooperate with Buyer regarding the collection of Accounts Receivable.
Seller agrees to promptly transfer or deliver to Buyer any cash or other
property received, directly or indirectly, by Seller in respect of any
Account Receivable, with all such endorsements as are necessary for transfer.
(l) SURVIVAL. Each representation, warranty, indemnity, covenant
and agreement made by Seller or Buyer in this Agreement or in any Ancillary
Agreement shall survive the Closing through but not beyond the third
anniversary of the Closing Date except that (i) each representation,
warranty, indemnity, covenant and agreement contained in SECTION 6(P) shall
survive through but not beyond the fifth anniversary of the Closing Date, and
(ii) each representation, warranty, indemnity, covenant and agreement
contained in SECTIONS 6(L), 6(S), 11 (only to the extent related to
representations and warranties contained in SECTION 6(L) or SECTION 6(S)),
12(C), 12(G), 12(H), 12(J) and 12(K) of this Agreement shall survive the
Closing Date indefinitely, and any claims relating to a breach of such
designated representations, warranties, covenants or agreement or claims to
recover under such indemnities shall not be subject to any defense based upon
non-survival of such representations, warranties, indemnities, covenants and
agreements.
(m) APPROVALS; HSR INDEMNITY. Seller shall use its best efforts
to obtain the third party approvals described in SECTION 10(I) hereof. In the
event that Seller is unable to obtain such approvals prior to April 28, 1995,
Seller shall reimburse
-56-
<PAGE>
Buyer any and all filing fees associated with filings made by Buyer pursuant
to the HSR Act.
(n) FINANCIAL REVIEW. The parties acknowledge that Financial
Statements have been examined by Buyer's independent public accountants and,
on the basis thereof, Buyer and Seller have agreed to make certain
adjustments in the Financial Statements and in the consideration to be paid
to Seller under this Agreement. Notwithstanding the generality of the
foregoing sentence, nothing contained in this Section 12(n) shall constitute
a release or waiver by Buyer of any of its rights or remedies (including,
without limitation, Buyer's rights under Section 11) under this Agreement or
at law with respect to any change in the Financial Statements, as adjusted,
or with respect to any other facts, conditions or events which may come to
the attention of Buyer after the date of this Agreement or shall otherwise
affect Buyer's right to conduct due diligence of Seller or its business after
the date of this Agreement.
13. TERMINATION.
(a) TERMINATION GENERALLY. This Agreement may be terminated at
any time prior to the Closing by any one of the following methods:
(i) MUTUAL CONSENT. By Buyer and Seller mutually agreeing
in writing to terminate this Agreement; or
(ii) BY BUYER. By Buyer in writing if any of the conditions
provided in SECTION 9 hereof has not been fulfilled, and has not
been waived by Buyer in writing, on or before April 28, 1995; or
in accordance with SECTION 13(B) hereof; or if any
-57-
<PAGE>
of the following has occurred: appointment of a receiver or
liquidator for Seller or any of its properties or the filing of
any petition by or against Seller seeking adjudication of Seller
as a bankrupt or insolvent or the making of any assignment for
the benefit of creditors of Seller or admission by Seller in
writing of its inability to pay its debts as they mature or the
institution of any proceeding for the purpose of effecting an
arrangement or composition with creditors or any reorganization
of Seller under any federal or state law relating to bankruptcy
or the relief of debtors; or
(iii) BY SELLER. By Seller in writing if any of the
conditions provided in SECTION 10 hereof has not been fulfilled,
and has not been waived by Seller in writing, on or before April
28, 1995; or if any of the following has occurred: appointment
of a receiver or liquidator for Buyer or any of its properties
or the filing of any petition by or against Buyer seeking
adjudication of Buyer as a bankrupt or insolvent or the making
of any assignment for the benefit of creditors of Buyer or
admission by Buyer in writing of its inability to pay its debts
as they mature or the institution of any proceeding for the
purpose of effecting an arrangement or composition with
creditors or any reorganization of Buyer under any federal or
state law relating to bankruptcy or the relief of debtors.
In the event this Agreement is terminated in accordance with this SECTION
13(A) or in accordance with SECTION 13(B), no party to this Agreement shall
have any obligation or liability of any nature whatsoever (including without
limitation any right to specific performance) to any other party hereto
except as specifically set forth in this Agreement and in any confidentiality
agreement between Buyer and Seller.
(b) ASSET CASUALTY. In the event more than ten percent (10%) in
the aggregate of the Real Property, Equipment and Inventory is damaged,
condemned or otherwise rendered unusable (an "Asset Casualty") between the
date hereof and the Closing Date,
-58-
<PAGE>
Seller shall have sixty (60) days from the occurrence of such Asset Casualty
to correct such damage or restore the usability of the applicable assets. The
Closing Date shall be extended until (but not beyond, except at Buyer's
option) the earlier of (i) the end of such sixty (60) day period, or (ii) the
date that Seller has corrected such Asset Casualty or restored the usability
of the affected assets. Notwithstanding the foregoing, Buyer shall have the
right to terminate this Agreement and refuse to close on such delayed Closing
Date if such Asset Casualty has resulted in (x) the loss or cancellation of
any contracts or purchase orders for any one or more of the twenty-five (25)
customers of Seller having the largest sales (by dollar volume), (y) a
material loss or cancellation of any other Customer Contracts or Serviced
Accounts, or (z) a substantial reduction in orders for Products (compared
with a comparable period prior to the occurrence of such Asset Casualty), and
Seller has been unable to recover such business (or equivalent business) on
or before such delayed Closing Date.
(c) EFFECT OF TERMINATION. In the event that any termination of
this Agreement pursuant to this SECTION 13 is due to (i) the intentional
non-fulfillment of any covenant or agreement by any party hereto or (ii) the
misrepresentation or breach of warranty on the part of any party hereto and
such party had actual knowledge of such misrepresentation or breach of
warranty or had actual knowledge of facts creating a substantial risk of such
misrepresentation or breach, the party in breach or default shall be liable
to the other parties to the extent of the expenses (including without
limitation reasonable legal, accounting and
-59-
<PAGE>
consulting fees and expenses) incurred by such other parties in connection
with this Agreement and for damages. Buyer, Seller and Parent agree that the
obligations set forth in this SECTION 13(C) are intended to survive any
termination of this Agreement.
14. NOTICES. All notices or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (i) when personally delivered, (ii) when
delivered via telecopier (and immediately confirmed by mail), or (iii) three
(3) business days after having been mailed by first class registered or
certified mail, return receipt requested, postage prepaid, to the party to
receive notice at the address set forth below or to such other or additional
address as either party shall have specified by notice to the other party in
accordance with this SECTION 14.
If to Seller, at:
Chattem, Inc.
1715 West 38th Street
Chattanooga, Tennessee 37409
Attention: President
Facsimile: (615) 821-0395
with a copy to:
Miller & Martin
Suite 1000 Volunteer Building
832 Georgia Avenue
Chattanooga, Tennessee 37402-2289
Attention: A. Alexander Taylor, II, Esq.
Facsimile: (615) 785-8426
If to Buyer, at:
Chattem Chemicals, Inc.
163 Washington Valley Road
Warren, New Jersey 07059
Attention: President
Facsimile: (908) 627-9496
-60-
<PAGE>
with a copy to:
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attention: Lori J. Braender, Esq.
Facsimile: (201) 966-1550
If to Parent, at:
Elcat, Inc.
163 Washington Valley Road
Warren, New Jersey 07059
Attention: President
Facsimile: (908) 627-9496
with a copy to:
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attention: Lori J. Braender, Esq.
Facsimile: (201) 966-1550
15. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the Schedules, Exhibits
and Appendices hereto constitutes the entire agreement and sets forth the
entire understanding of the parties with respect to the subject matter
hereof, supersedes all prior agreements, covenants, arrangements, letters,
communications, representations or warranties, whether oral or written, by
any officer, employee or representative of any party (including without
limitation that certain Confidentiality Letter dated October 25, 1994 from
Buyer to Seller, care of Wertheim Schroder, Inc.), and may not be modified,
amended or terminated except by mutual consent of Buyer, Seller and Parent by
a written agreement specifically referring to this Agreement and signed by
Buyer, Seller and Parent.
-61-
<PAGE>
(b) NO WAIVER; REMEDIES. No waiver of any breach or default
hereunder shall be considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature. No failure on the
part of any party to exercise, and no delay in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver hereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege, and no waiver whatever shall be valid
unless in writing signed by the party or parties to be charged and then only
to the extent specifically set forth in such writing. All remedies, rights,
powers and privileges afforded the parties to this Agreement shall be
cumulative and shall to be exclusive of any remedies, rights, powers and
privileges provided by law. Each party hereto may exercise all such remedies
afforded to it in any order of priority.
(c) SPECIFIC PERFORMANCE. The parties hereto acknowledge that
prior to the Closing the legal remedy for breach by any of them of their
respective obligations hereunder will be inadequate and, therefore, in the
event of any actual or threatened breach of any such obligation prior to the
Closing (and provided this Agreement has not been terminated in accordance
with SECTION 13 hereof), Buyer, Seller and Parent agree that, in addition to
any other available remedy, such obligation may be specifically enforced
against any of them through injunctive or other equitable relief obtained
from a court with appropriate jurisdiction. The
-62-
<PAGE>
prevailing party shall be entitled to recover from the losing party
attorneys' fees and expenses and other costs of any such legal action.
(d) ASSIGNMENT; BENEFITS. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of the
parties hereto; PROVIDED that no party may transfer or assign its rights or
delegate its performance hereunder without the prior written consent of the
other parties. This Agreement shall be for the sole benefit of Seller, Buyer
and Parent and their respective successors and assigns, and shall not be
construed to provide any benefits to any third parties.
(e) HEADINGS; REFERENCES. The Table of Contents, the Index of
Schedules, Exhibits and Appendices and the Section and paragraph headings
contained herein are for the purposes of convenience only and are not
intended to define or limit the contents of any Schedule, Exhibit, Appendix,
Section or paragraph. Unless otherwise expressly stated herein, references to
Exhibits, Schedules, Appendices, Sections and clauses shall refer to
Exhibits, Schedules, Appendices, Sections and clauses of this Agreement.
(f) COOPERATION. Each party hereto shall cooperate and shall
take such further action and shall execute and deliver such further documents
as may reasonably be requested by the other parties in order to carry out the
provisions and purposes of this Agreement.
(g) TRANSACTION EXPENSES. Whether or not the transactions
contemplated hereby are consummated, all legal and other costs and expenses
incurred in connection with this Agreement
-63-
<PAGE>
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, except as otherwise specifically provided herein.
(h) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
(i) SEVERABILITY. Should any provision of this Agreement for any
reason be declared invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity or enforceability of any of the
other provisions of this Agreement, which other provisions shall remain in
full force and effect; and the application of any such invalid or
unenforceable provision to persons or circumstances other than those as to
which it is held invalid or unenforceable shall be valid and be enforced to
the fullest extent permitted by law.
(j) GOVERNING LAW; JURISDICTION. This Agreement and all
amendments hereto shall be governed by and construed in accordance with the
internal laws of the State of Tennessee applicable to contracts made and to
be performed therein. Each party submits to the jurisdiction of any state
court sitting in Chattanooga, Tennessee or federal court for the Eastern
District of Tennessee in any action or proceeding arising out of or relating
to this Agreement, agrees that all claims in respect of the action or
-64-
<PAGE>
proceeding may be heard and determined in any such court, and agrees not to
bring any such action or proceeding in any other court.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
SELLER:
CHATTEM, INC.
By: /s/ ROBERT E. BOSWORTH
-------------------------------
Name: Robert E. Bosworth
Title: Executive Vice President
BUYER:
CHATTEM CHEMICALS, INC.
By: /s/ JOHN M. SCANSAROLI
-------------------------------
Name: John M. Scansaroli
Title: President
PARENT:
ELCAT, INC.
By: /s/ JOHN M. SCANSAROLI
-------------------------------
Name: John M. Scansaroli
Title: President
-65-
<PAGE>
Exhibit 28.2
Press Release Dated April 12, 1995
<PAGE>
CHATTEM ANNOUNCES AGREEMENT
---------------------------
TO SELL CHEMICALS
-----------------
DIVISION TO ELECTROCATALYTIC, INC.
----------------------------------
CHATTANOOGA, TENNESSEE (APRIL 12, 1995) - CHATTEM, INC. (NASDAQ NMS CHTT)
announced today that it has entered into an agreement to sell it's Specialty
Chemicals division to Elcat, Inc., a privately held company based in Warren,
New Jersey. Under the terms of the agreement, Chattem will be paid $25
million consisting of $20 million in cash and $5 million of 13.125%
convertible preferred stock. The cash proceeds will be used to reduce
indebtedness.
As a part of the purchase, Elcat will maintain the operations of the acquired
business in Chattanooga, without any disruptions in the work force,
curtailment of any lines of business or loss of Chattem's quality and
technical service to its served markets and loyal customer base. Elcat's
initial activities will involve investment in corporate R&D facilities and in
new process technology at the existing site to support the anticipated growth
in new products and markets.
The agreement is subject to the satisfaction of certain conditions prior to
closing, including regulatory and financing approvals and due diligence. It
is presently anticipated that the transaction will close by May 15, 1995.
In commenting on the agreement, Chattem Chairman and President Zan Guerry
said, "We are very pleased with the terms of the agreement we have reached
with Elcat for the sale of the Chattem Chemicals division. This agreement
allows us to reduce indebtedness and focus our efforts on our expanding
consumer products business, while at the same time selling our Chemicals
division to a growing company with unique technology, and a global presence
through it's wholly owned subsidiary, Electrocatalytic, Inc. The importance
of maintaining the Chemical business in Chattanooga was recognized by both
parties. Financially, by receiving the Elcat convertible preferred stock we
can share in the exciting upside that we expect Elcat to experience. The
combination of earnings from the preferred stock and lower interest expense
associated with the repayment of debt should offset to a large degree the
loss of income from the Specialty Chemicals division."
Chattem, Inc. is a manufacturer of nationally branded health and beauty aids.
Elcat, through Electrocatalytic Inc., provides electrochemical process
technology and custom designed systems throughout the world.
