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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): APRIL 29, 1996
CHATTEM, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TENNESSEE 0-5905 62-0156300
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(STATE OF (COMMISSION FILE NO.) (IRS EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
1715 WEST 38TH STREET, CHATTANOOGA, TENNESSEE 37409
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(615) 821-4571
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Page 1 of 3 Pages
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 24, 1996, Chattem, Inc. (the "Company") completed the sale of
the trademarks BLIS-TO-SOL-Registered Trademark- and SOLSTICE-Registered
Trademark-, including existing inventory of the two brands, to The Woolfoam
Corporation. The purchase price for the trademarks was $1.2 million,
consisting of $1.0 million in cash and $0.2 million in an unsecured note with
the existing inventory to be purchased at cost.
On April 29, 1996, the Company acquired the medicated skin care product
line sold under the GOLD BOND-Registered Trademark- trademark from Martin
Himmel Inc. (the "Seller"). For the purchase of the Seller's trademark and
inventory, the Company paid $39 million in cash and $1 million of the
Company's common stock, consisting of 155,729 shares at a price per share of
$6.4188. The price per share of the Company's common stock issued to the
Seller was valued at the average closing price on the ten consecutive
business days preceding the date of closing.
In connection with the acquisition of GOLD BOND, the Company entered
into a new $61.5 million credit facility with NationsBank, N.A. as agent for
a syndicate of lenders, consisting of a $55 million credit facility and a
separate $6.5 million working capital credit facility (the "Credit
Agreement"). The proceeds of the Credit Agreement will be used to repay the
Company's existing bank indebtedness and fund a portion of the purchase price
for GOLD BOND.
The purchase price for GOLD BOND was also funded in part by the private
issuance of $5.5 million of the Company's common stock to certain affiliates
and other investors, at a price per share of $5.00. The purchase price for
the shares sold in the private issuance was based on the higher of the
average closing price on the 30 business days preceding the date of the
Company's approval of the purchase of GOLD BOND, which was March 27, 1996, or
$5.00. The Company received an opinion from an independent investment banking
firm that the terms of sale of the common stock were fair to the Company's
shareholders from a financial point of view. The net cash proceeds of the
sale of BLIS-TO-SOL and SOLSTICE were also used to fund a portion of the
purchase price for GOLD BOND.
As of February 29, 1996, on a pro forma basis after giving effect to the
acquisition of GOLD BOND, the divestiture of BLIS-TO-SOL and SOLSTICE,
borrowings under the Credit Agreement, repayment of the Company's existing
bank indebtedness, and the equity issuance of $6.5 million, the Company's
total assets would have been $120,401,000, including inventories of
$12,204,000, debt issuance costs of $4,069,000, and patents, trademarks and
other purchased product rights of $68,620,000. The Company's long-term debt
would have been $114,886,000 (including $2,006,000 in current maturities) and
the Company's total shareholders' deficit would have been $11,098,000.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information
See discussion in Item 2.
(c) Exhibits
28.1 Asset Purchase Agreement dated April 10, 1996 by and
among Chattem, Inc., Signal Investment & Management Co.
and Martin Himmel Inc. (without schedules and exhibits).
28.2 Press Release dated April 30, 1996.
Page 2 of 3 Pages
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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 30, 1996 CHATTEM, INC.
By: /s/ Robert E. Bosworth
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Robert E. Bosworth,
Executive Vice President
and Chief Financial Officer
Page 3 of 3 Pages
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EXHIBIT 28.1
Asset Purchase Agreement dated April 10, 1996 by and among
Chattem, Inc., Signal Investment & Management Co. and Martin Himmel Inc.
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT dated as of April 10, 1996 by and among
SIGNAL INVESTMENT & MANAGEMENT CO. ("Signal"), a Delaware corporation with
offices at 1105 North Market Street, Suite 1300, Wilmington, Delaware 19890,
CHATTEM, INC., a Tennessee corporation with offices at 1715 West 38th Street,
Chattanooga, TN 37409 ("Chattem" and collectively with Signal referred to
herein as "Purchaser"), MARTIN HIMMEL INC., a Delaware corporation with
offices at 450 Park Avenue, Suite 501, New York, New York 10022 ("Seller")
and JEFFREY S. HIMMEL, the principal stockholder of Seller, having an address
c/o Martin Himmel Inc., 450 Park Avenue, Suite 501, New York, New York 10022
("Stockholder").
W I T N E S S E T H :
In consideration of the premises, and of the representations, warranties,
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
Section 1. PURCHASE AND SALE.
1.1. ASSETS TO BE ACQUIRED. Subject to the terms and conditions of
this Agreement, Seller hereby agrees to sell, assign, transfer, convey and
deliver to Purchaser, and Purchaser hereby agrees to purchase and accept from
Seller, on the Closing Date, as hereinafter defined, those certain assets,
tangible and intangible (the "Assets") relating to the marketing,
distribution and sale of the medicated skin care products consisting of Gold
Bond Medicated Powder, Baby Gold Bond Medicated Powder, Extra Strength Gold
Bond Medicated Powder, Gold Bond Medicated Anti-Itch Cream and line
extensions thereof relating to moisturizer, lotion and foot powder products
(collectively, the "Products") which Seller advertises, sells and distributes
(hereinafter referred to collectively as the "Business") as follows:
(a) All inventories as set forth on Schedule 1(a) attached
hereto owned by Seller including raw materials, goods-in-process, finished
goods, packaging, supplies and labels (the "Inventory");
(b) All right, title and interest of Seller in and to the
Products and in all trademarks, copyrights, trade names and trademark
applications
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related to the Products, including all goodwill associated therewith, all as
more specifically described on Schedule 1(b) attached hereto;
(c) All market research data, promotional and advertising
materials in Seller's or any of its agencies' possession, including but not
limited to, television and radio spots and catalog sheets of Seller related
exclusively to the Products excluding those Assets referred to in Section
1.2(e); and
(d) All technology, know-how, production details, research
data, product development formulae, data, consumer complaint files,
regulatory files, formulas, customer lists and files, distributor lists and
files, vendor lists and files and goodwill of the Seller relating exclusively
to the Products.
It is hereby expressly understood and agreed that the foregoing Assets
are to be transferred and conveyed to Purchaser as above specified, by good
and sufficient bill of sale, and other documents of transfer, as provided in
Section 8 hereof, free and clear of all liens, charges, encumbrances, debts,
liabilities and obligations whatsoever, except as specifically described
herein.
1.2. ASSETS NOT BEING ACQUIRED. Excluded from the Assets to be
sold, conveyed, transferred and assigned by Seller, and purchased and
accepted by Purchaser under Section 1 hereof, are all assets of Seller other
than the Assets (collectively referred to herein as the "Excluded Assets")
including, without limitation:
(a) All cash and cash equivalents (such as certificates of
deposit, treasury bills and marketable securities) of Seller;
(b) All accounts or notes receivable of any type of Seller;
(c) All of Seller's rights to any Federal, state or local tax
refunds;
(d) All right, title and interest of Seller in the products
"Keep It In Your Sneaker" and "EZO";
(e) All of Seller's and its affiliates' know-how, confidential
information and expertise related to media buying and placement services,
creative advertising and production, including any and all documentation
related thereto;
(f) All of Seller's right, title and interest in and to all
distribution agreements, services agreements and other agreements between
Seller and affiliates of Seller as set forth on Schedule 4.4 attached hereto;
(g) All of Seller's claims, rights, causes of action, credits
and rights of set off related to the Excluded Assets or the Retained
Liabilities, including but not limited to all rights or claims of
subrogation; and
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(h) All of Seller's stock records, corporate documents,
minutes or any other records or documents which Seller is required by law or
governmental regulation to keep in its possession (subject to Section 6.4
hereof).
ARTICLE II
Section 2. OBLIGATION AND LIABILITIES OF SELLER AND STOCKHOLDER.
2.1. ASSUMPTION OF CERTAIN OBLIGATIONS AND LIABILITIES BY PURCHASER.
On the Closing Date Purchaser shall assume and be solely and exclusively
liable with respect to, and shall pay, perform or discharge in accordance
with their respective terms, all of those liabilities and obligations of
Seller and Stockholder specifically set forth on Schedules 2, 4.5 and 6.6
attached hereto and incorporated herein by reference, including but not
limited to (i) the purchase orders and other agreements listed on Schedule 2
and (ii) the Assumed Returns and Allowances more specifically described in
Section 6.6 hereof (collectively, the "Assumed Liabilities"), and Purchaser
shall defend, indemnify and hold harmless Seller and Stockholder from and
against any loss or liability arising from any Assumed Liabilities pursuant
to Section 11 hereof.
2.2. NON-ASSUMPTION OF OBLIGATIONS AND LIABILITIES BY PURCHASER.
Except for the Assumed Liabilities, Purchaser shall not assume, pay, perform
or discharge, or take subject to, any obligations or liabilities in respect
of any agreements and other binding arrangements related to the Assets or the
business of Seller, or with respect to claims, actual or contingent,
penalties and fines arising or based on occurrences or events existing on or
prior to the Closing Date, including but not limited to, claims for Federal,
state or local taxes, lawsuits (pending or threatened), or any claim of any
present or former employee of Seller, whether under any pension, profit
sharing or other benefit plan or otherwise and the Retained Returns and
Allowances more specifically described in Section 6.6 hereof (collectively,
the "Retained Liabilities"), and Seller and Stockholder shall defend,
indemnify and hold harmless Purchaser from and against any loss or liability
arising from any loss, obligations or liabilities of the Seller and
Stockholder other than the Assumed Liabilities pursuant to Section 11 hereof.
ARTICLE III
Section 3. PURCHASE PRICE.
3.1. PAYMENT TERMS.
(a) Subject to the terms and conditions of this Agreement,
Purchaser hereby agrees to purchase the Assets for a purchase price payable
as follows: (i) Thirty-Nine Million ($39,000,000) Dollars to be paid in cash
on the Closing Date in certified funds or by wire transfer (the "Cash
Consideration"); and
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(ii) such number of shares of the voting common stock of Chattem equivalent
in value to One Million ($1,000,000) Dollars, such number of shares to be
determined by dividing $1,000,000 by the average closing price for the ten
(10) consecutive business days immediately prior to the Closing Date as
reported on the NASDAQ over-the-counter system (the "Chattem Shares"); (the
Cash Consideration and the Chattem Shares being hereinafter collectively
referred to as the "Purchase Price"). The Purchase Price shall be subject to
adjustment for the value of the inventory purchased hereby as of the Closing
Date pursuant to Section 12 hereof.
(b) Purchaser shall register the Chattem Shares for sale by
preparing and filing a registration statement on Form S-3 with the Securities
and Exchange Commission ("SEC") not later than three (3) business days
following the Closing Date. Purchaser shall use its best efforts to cause
such registration statement (the "Registration Statement") to become
effective as promptly as practicable and to continue the effectiveness of
such Registration Statement for twenty-four (24) months after the Closing
Date. Purchaser shall furnish to Seller not later than five (5) days prior to
the Closing Date copies of the Registration Statement as it is proposed to be
filed by Purchaser with the SEC. Thereafter Purchaser shall furnish Seller
with copies of all filings with the SEC and all state securities commissions,
including copies of all correspondence with such agencies. If for any reason
Purchaser is unable to register the Chattem Shares within ninety (90) days
after the Closing Date, Purchaser shall pay Seller within two (2) business
days of the expiration of such 90 day period, the amount of $1,000,000 in
exchange for the Chattem Shares previously delivered to Seller.
3.2. DEPOSIT AND ESCROW.
(a) Simultaneously with the execution hereof, Purchaser shall
deliver to Tashlik, Kreutzer & Goldwyn P.C. ("TK&G") a cashier's check in the
amount of One Million ($1,000,000) Dollars payable to TK&G, receipt of which
by TK&G is acknowledged by Seller, and which shall constitute a deposit by
Purchaser against (and in reduction of) the Purchase Price payable by
Purchaser at the Closing. Such deposit shall be credited as part of the Nine
Million Five Hundred Twenty-Four Thousand Nine Hundred and Sixty ($9,524,960)
Dollars set aside in a separate account pursuant to Section 5.5 hereof. TK&G
shall act as the escrow agent of Seller and Purchaser (the "Escrow Agent")
hereunder. The Escrow Agent shall deposit said cashier's check into an
interest-bearing escrow account, and shall hold the proceeds of such check as
an escrow fund ("Escrow Fund") in accordance with the terms of this Section
3.3. The Escrow Agent shall safeguard the Escrow Fund and shall treat the
Escrow Fund as trust funds in accordance with the provisions hereof. Any
interest or other earnings received by the Escrow Agent in respect of the
principal of the Escrow Fund shall be deemed part of the Escrow Fund and
shall be paid to the party entitled to the Escrow Fund as hereinafter
provided.
(b) If the Closing shall occur, Seller shall be entitled to
the Escrow Fund absolutely and the Escrow Agent shall pay over the Escrow
Fund to Seller at the Closing as a credit against the Purchase Price.
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(c) Seller shall be entitled, in addition to all its remedies
at law or in equity, to be paid the Escrow Fund (x) if the Closing shall not
occur by June 30, 1996 as the result of (i) a material, uncured breach of
this Agreement by Purchaser or (ii) Purchaser's refusal to close after
fulfillment by Seller of all conditions precedent to Purchaser's obligations
under this Agreement; or (y) if Purchaser at any time notifies, or is
obligated to notify, Seller of the refusal by NationsBank (the "Bank") to
finance, in the amount of $29,500,000 (the "Bank Financing Amount"), the
transaction contemplated herein. In the event the Bank so refuses to finance
the Bank Financing Amount, Purchaser shall have five (5) business days, time
being of the essence, to provide in immediately available funds an amount
equal to the difference (the "Shortfall Amount") between (A) the amount the
Bank is willing to finance and (B) $29,500,000. Written notice of the
Purchaser's ability or inability to provide the Shortfall Amount shall be
given via facsimile not later than 5:00 P.M. on the fifth (5th) business day
after the Bank's refusal to finance the Bank Financing Amount.
Notwithstanding anything to the contrary contained herein, in the event the
Closing shall not have occurred because Purchaser has not actually received
the $29,500,000 financing by April 30, 1996 and all conditions precedent to
Purchaser's obligations under Section 7.1(a)-(f) inclusive of this Agreement
have been fulfilled, time being of the essence, Seller shall be entitled, in
addition to all its remedies at law or in equity, to terminate this Agreement
and be paid the Escrow Fund.
(d) If the Closing shall not occur by June 30, 1996, Purchaser
shall be entitled to be paid the Escrow Fund if the non-occurrence of the
Closing was the result of (i) the mutual agreement of Purchaser and Seller to
terminate this Agreement, (ii) a material, uncured breach of this Agreement
by Seller, (iii) Seller's refusal to close after fulfillment by Purchaser of
all conditions precedent to Seller's obligations under this Agreement, or (iv)
the conditions to Purchaser's obligations under Section 7.1 shall not have
been satisfied.
(e) The Escrow Agent shall pay over the Escrow Fund to Seller
or Purchaser, as the case may be, in accordance with the provisions of
subsections (c) and (d) of this Section 3.3, unless the other party, prior to
said date, shall have delivered to the Escrow Agent written objection to such
delivery of the Escrow Fund. If either party shall have delivered such
objection, the Escrow Agent shall continue to hold and safeguard the Escrow
Fund until the Escrow Agent shall receive either (a) the written agreement of
Seller and Purchaser as to the disposition of the Escrow Fund or (b) an
order, decree or judgment of a court of competent jurisdiction which has been
finally affirmed on appeal or which by lapse of time or otherwise is not
subject to appeal, and the Escrow Agent shall pay over the Escrow Fund
accordingly.
(f) Purchaser and Seller agree that the escrow provisions of
the escrow agreement ("Escrow Agreement") attached hereto as Exhibit A shall
apply and be binding upon them as if fully set forth herein and such Exhibit
shall be deemed an integral part of this Agreement. The Escrow Agent may in
addition elect, at its sole option, to commence an interpleader action or
seek other judicial relief or orders as it may deem necessary.
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3.3. ALLOCATION OF PURCHASE PRICE. The parties agree that the
Purchase Price shall be allocated as specified in Exhibit B annexed hereto
and made a part hereof. The parties agree to report this transaction and the
allocations for income tax purposes in a manner consistent with this
Agreement.
ARTICLE IV
Section 4. REPRESENTATIONS AND WARRANTIES BY SELLER AND STOCKHOLDER.
Seller and Stockholder jointly and severally represent and warrant to
Purchaser as set forth below:
4.1. ORGANIZATION, EXISTENCE AND AUTHORITY OF SELLER. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its operations as now being conducted and to execute,
deliver and perform this Agreement and the other agreements and instruments
to be executed and delivered by Seller pursuant hereto and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement by Seller does not, and the consummation of the transactions
contemplated hereby will not, violate any provisions of (a) Seller's
Certificate of Incorporation or By-Laws or (b) any law or regulation
applicable to Seller or Stockholder or the provisions of any agreement,
mortgage, lease, instrument, order, arbitration award, judgment or decree to
which Seller or Stockholder is a party or by which Seller or Stockholder is
bound.
4.2. POWER AND AUTHORITY. Seller has the corporate power and
corporate authority to execute, deliver and perform this Agreement and the
other agreements and instruments to be executed and delivered by Seller
pursuant hereto, and Seller has taken all action required by law or
otherwise, including but not limited to approval by its Board of Directors
and, if required by law, its stockholders, to authorize such execution,
delivery and performance. This Agreement has been duly executed and delivered
by Seller and Stockholder and constitutes, and such other agreements and
instruments when duly executed and delivered by Seller and Stockholder
will constitute, legal, valid and binding obligations enforceable in
accordance with their respective terms, except that (a) such enforcement may
be subject to any bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other laws, now or hereafter in effect, relating to or
limiting creditors' rights generally and (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The execution, delivery and performance
by Seller and Stockholder of this Agreement and such other agreements and
instruments and its consummation of the transactions contemplated hereby and
thereby will not violate, conflict with or result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or result in the creation of a lien or
encumbrance on the Assets under, any agreement by which any of the Assets may
be bound or affected.
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4.3. CONSENTS. Except as disclosed on Schedule 4.3 hereof and any
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), no consent, filing or approval of any
Federal, state or local government agency or department or any other person
not a party to this Agreement is required or necessary in connection with the
execution, delivery and performance of this Agreement or to consummate the
transactions contemplated hereby, excluding from the foregoing such consents,
filings or approvals which would not individually or in the aggregate have a
material adverse effect on the Business taken as a whole ("Material Adverse
Effect") and would not have a Material Adverse Effect on the ability of
Seller to consummate the transactions contemplated by this Agreement.
4.4. TITLE TO AND CONDITION OF ASSETS. Seller has good and
marketable title to the Assets. Except with respect to Seller's non-North
American trademarks, Seller is, and on the Closing Date will be, the owner of
the Assets free and clear of all liens, encumbrances, claims, security
interests and charges ("Liens") of any kind whatsoever, except for those Liens
disclosed on Schedule 4.4 attached hereto. To the best of its knowledge,
Seller is, and on the Closing Date will be, the owner of all right, title and
interest in and to its non-North American trademarks free and clear of all
Liens, except as disclosed on Schedule 4.4. Except with respect to Inventory,
Seller is conveying all of the tangible Assets on the Closing Date on an "as
is, where is" basis. The Inventory is of good and merchantable quality and is
of quality, quantity and condition that is usable or saleable in the ordinary
course of business.
4.5. COMPLIANCE WITH AGREEMENTS. Schedule 4.5 and 6.6 contain lists
of all written contracts and other agreements material to the Business. True
and complete copies of all such written contracts and other agreements to be
assigned by Seller and assumed by Purchaser have been initialed by
representatives of Purchaser and Seller, including but not limited to the
purchase orders and other agreements listed on Schedule 2 attached hereto,
and have been delivered to Purchaser prior to or concurrently with the
execution of this Agreement. Except as described in Schedules 4.5 and 6.6,
each of the foregoing contracts and other agreements is valid and enforceable
in accordance with its terms. Seller has complied in all material respects
with the provisions of such contracts and other agreements and is not, and at
the time of the Closing will not be, in default under any of them. To
Seller's knowledge, no other party to any of the foregoing contracts or
agreements is in default in the performance, observance or fulfillment of any
material obligation, covenant or condition contained therein and no event has
occurred which, with or without the giving of notice or lapse of time, or
both, would constitute a material default thereunder. Except as disclosed on
Schedule 4.5 such contracts and other agreements will be in full force and
effect at the time of Closing, unless by their terms they expire prior
thereto.
4.6. TAXES. Seller has filed or will file when due all Federal,
state and local tax returns required by law and shall pay and remit any and
all Federal, state and municipal income, manufacturer's excise, Federal and
state
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withholding, FICA, FUTA, state unemployment taxes, state and municipal sales
and use taxes, license fees and other taxes, fees or charges ("Taxes") levied
or imposed upon Seller as the result of its sale and marketing of the
Products that are payable or have accrued on or prior to the Closing Date,
other than liens for Taxes not yet due and payable or that are being
contested in good faith. Seller has not incurred any tax liability, including
interest, penalties or assessments, which may result in the imposition of any
lien, charge, security interest or any other encumbrance on the Assets.
4.7. LITIGATION OR DISPUTES. Except as disclosed in Schedule 4.7
attached hereto, there is no action at law or in equity, governmental
proceeding, arbitration, product liability suit, administrative hearing, or
other dispute, litigation, or proceeding pending, or to the best of Seller's
knowledge threatened, against Seller relating to the Business or which
challenges the validity of this Agreement. Seller is not in default with
respect to any judgment, order, writ, injunction or decree of any court or
administrative body or, to the best of Seller's knowledge, in violation of
any statute, ordinance or regulation relating to the Products or the Assets.
4.8. FINANCIAL INFORMATION. Seller has delivered to Purchaser
audited income statements of Seller for its fiscal years ended December 31,
1994 and 1995 (collectively, "Financial Data") and, within 45 days following
each month end unaudited monthly income statements for the periods after
December 31, 1995. The Financial Data has been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, is true and correct in all material respects and was
prepared from the books and records of Seller, and except as set forth on
Schedule 4.8 fairly presents in all material respects the sales, operating
income, cost of goods and advertising and promotion expense of the Business
for the periods indicated. Except as disclosed in the notes to the Financial
Data no material revenues or expenses of the Business are derived from or
funded by affiliates of Seller or Stockholder. Since December 31, 1995, no
customers of the Business which in the aggregate accounted for sales of
$1.5 million in fiscal 1995 have advised or threatened Seller that they will
discontinue or decrease materially their purchases of the Products.
4.9. TRADEMARKS, LICENSES, ETC. To the best of Seller's knowledge,
Seller has good and marketable title free and clear of any liens or
encumbrances or rights or claims of others the rights to use, transfer and
assign all non-North American trademarks and service marks and registrations
thereof and applications therefor. Seller has good and marketable title free
and clear of any liens or encumbrances or rights or claims of others, the
rights to use, transfer and assign all North American trademarks and service
marks and registrations thereof and applications therefor, trade names,
brands, copyrights, copyright applications and copyright registrations,
licenses, franchises, permits, processes, formulas, trade secrets, inventions
and royalties, and rights with respect thereto, and all technical know-how,
customer lists and non-competition covenants accruing to the benefit of
Seller (collectively, including non-North American rights, "Business Rights")
necessary for the conduct of the Business as now conducted for the Products,
without any conflict or infringement with the rights of others, including
officers, directors or
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shareholders of Seller, and Seller has not received notice of any claim or
assertion that any of the Assets, Products or Business Rights infringe or
conflict with the rights of others, and, to the best of Seller's knowledge,
there is no infringement or violation by any other person of the Business
Rights. Schedule 1(b) sets forth a complete and correct list of all trademark
registrations and applications and, to Seller's knowledge, each foreign
trademark registration included in the Business Rights is properly filed or
registered with all appropriate government offices and agencies for the goods
for which it is being used and, to Seller's knowledge, is valued and in full
force and effect.
4.10. NO MATERIAL ADVERSE CHANGE. Except as set forth in
Schedule 4.10, since December 31, 1995 there has been no change that has had
or is reasonably likely to have a Material Adverse Effect on the Business.
4.11. EMPLOYEES. Seller acknowledges that Purchaser will not be
employing any of Seller's employees after the Closing Date and that Seller
shall be responsible for the salaries, bonuses, severance and other
compensation and benefits of Seller's employees.
4.12. COMPLIANCE WITH LAW. Except as disclosed on Schedule 4.12,
Seller has, to the best of its knowledge, conducted its operations in
connection with the sale, packaging, advertising and marketing of the
Products in accordance with all material applicable Federal, state and local
laws, ordinances, regulations and requirements, including, but not limited
to, FDA (including current Good Manufacturing Practices) and FTC rules,
regulations and guidelines and possesses all approvals, consents, licenses
and permits required for the conduct of the Business, except where the
failure to so conduct its operations or to possess such approvals, consents,
licenses and permits, if any, would not have a Material Adverse Effect.
Except as disclosed on Schedules 4.10 and 4.12, the Inventory is not
misbranded, damaged or defective, and is usable and saleable. The Seller has
not received any notice relating to changes in the requirements for such
approvals, consents, licenses or permits which might be deemed to affect such
operations nor has Seller received notice of any challenge, investigation or
proceeding in connection with any applicable regulation, guidelines,
ordinance or other law, order, regulation or requirement relating to its
business and operations as they relate to the Products.
4.13. OBLIGATION TO UPDATE SCHEDULES. Seller shall promptly disclose
to Purchaser any information contained in its representations and warranties
or Schedules which, because of an event occurring after the date hereof, is
materially incomplete or is no longer materially correct as of all times
after the date hereof until the Closing Date or any material adverse
development affecting the results of operations of the Business; PROVIDED,
HOWEVER, that none of such disclosures shall be deemed to modify, amend or
supplement the representations and warranties of Seller or the Schedules
attached hereto unless Purchaser shall have consented thereto in writing.
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ARTICLE V
Section 5. REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser
represents and warrants to Seller and Stockholder as set forth below:
5.1. ORGANIZATION, EXISTENCE AND AUTHORITY OF PURCHASER. Signal and
Chattem are corporations duly organized, validly existing and in good
standing under the laws of the States of Delaware and Tennessee,
respectively, and each has all requisite corporate power and authority to
carry on its operations as now being conducted, and to execute, deliver and
perform this Agreement and the other agreements and instruments to be
executed and delivered by Purchaser pursuant hereto and to consummate the
transactions contemplated hereby and thereby, except where any such failure
would not individually or in the aggregate have a material adverse effect on
the business, operations or financial condition of Purchaser taken as a
whole. The execution and delivery of this Agreement by Purchaser does not,
and the consummation of the transactions contemplated hereby will not,
violate any provisions of (a) Purchaser's Certificate of Incorporation,
Charter or By-Laws or (b) any law or regulation applicable to Purchaser of
the provisions of any agreement, mortgage, lease, instrument, order,
arbitration award, judgment or decree to which Purchaser is a party or by
which Purchaser is bound.
5.2. POWER AND AUTHORITY. Purchaser has the corporate power and
corporate authority to execute, deliver and perform this Agreement and the
other agreements and instruments to be executed and delivered by Purchaser
pursuant hereto, and Purchaser has taken all action required by law or
otherwise, including but not limited to approval by its Board of Directors,
to authorize such execution, delivery and performance. This Agreement has
been duly executed and delivered by Purchaser and constitutes, and such other
agreements and instruments when duly executed and delivered by Purchaser will
constitute, legal, valid and binding obligations enforceable in accordance
with their respective terms, except that (a) such enforcement may be subject
to any bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or other laws, now or hereafter in effect, relating to or limiting creditors'
rights generally and (b) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may be
bought. The execution, delivery and performance by Purchaser of this
Agreement and such other agreements and instruments and its consummation of
the transactions contemplated hereby and thereby will not violate, conflict
with or result in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, any
agreement by which the Purchaser may be bound or affected.
5.3. CONSENTS. Except as disclosed on Schedule 5.3 hereof and any
applicable requirements of the HSR Act, no consent, filing, approval of any
Federal, state or local governmental agency or department or any other person
not a party to this Agreement is required or necessary in connection with the
execution, delivery and performance of this Agreement or to consummate the
transactions
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contemplated hereby, excluding from the foregoing such consents, filings or
approvals which would not have a Material Adverse Effect and would not have a
material adverse effect on the ability of Purchaser to consummate the
transactions contemplated by this Agreement.
5.4. LITIGATION. Except as disclosed in Schedule 5.4, there is no
action, claim or proceeding pending or, to the best knowledge of Purchaser,
threatened, against Purchaser which challenges the validity of this Agreement
by or before any court, governmental or regulatory authority or by any third
party.
5.5. SUFFICIENCY OF FUNDS. Purchaser has delivered to Seller a copy
of its commitment letter dated April 10, 1996 from the Bank evidencing the
Bank's commitment to lend not less than Twenty-Nine Million Five Hundred
Thousand ($29,500,000) Dollars to Purchaser (the "Bank Commitment Letter"),
and subject to the satisfaction of the conditions therein, Purchaser will
have at the Closing sufficient immediately available funds to pay the Cash
Consideration and to effect the transactions contemplated hereby. On the date
hereof, Purchaser has readily available funds to finance a portion of the
Cash Consideration of not less than Nine Million Five Hundred Twenty-Four
Thousand Nine Hundred and Sixty ($9,524,960) Dollars in cash set aside in a
separate account with Purchasers's counsel Miller & Martin as agent ("M&M"),
consisting of Purchaser's working capital and additional cash Purchaser has
received from affiliates and certain investors. Purchaser shall use its good
faith best efforts to complete the bank financing pursuant to the Bank
Commitment Letter by April 30, 1996. M & M has been authorized and instructed
by Purchaser to utilize such funds to pay a portion of the Cash Consideration
hereunder pursuant to the terms and conditions of this Agreement. Purchaser
has received a fairness opinion from an independent financial adviser as to
the price and terms of the purchase of shares of common stock of Chattem to
be issued to certain investors in connection with a private placement for
purposes of financing a portion of the Cash Consideration.
5.6. INVESTIGATION BY PURCHASER. Purchaser has conducted its own
independent review and analysis of the Business, operations, assets,
liabilities, results of operations, financial condition and prospects of the
Business and acknowledges that Seller has provided Purchaser with access to
the records of the Business for this purpose. In entering into this
Agreement, Purchaser has relied solely upon its own investigation and
analysis and the representations, warranties and agreements set forth in this
Agreement and the Schedules, exhibits and other documents delivered pursuant
hereto. Purchaser (a) acknowledges that neither Seller nor any of its
directors, officers, employees, affiliates, stockholders or representatives
(the "Representatives") has made any representation or warranty, either
express or implied, as to the accuracy or completeness of any of the
information provided or made available to Purchaser or its Representatives
and (b) in the absence of fraud agrees, to the fullest extent permitted by
law, that neither Seller nor any of its Representatives shall have any
liability or responsibility whatsoever to Purchaser or its Representatives on
any basis (including, without limitation, in contract or tort, under Federal
or state securities laws or otherwise) based upon any information provided or
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made available, or statements made, to Purchaser or any of its
Representatives (or any omissions therefrom), except that the foregoing shall
not limit or negate in any way the representations and warranties and other
agreements of Seller and Stockholder set forth in this Agreement and the
schedules, exhibits and other documents delivered pursuant hereto.
5.7. REQUIREMENTS FOR REGISTRATION ON FORM S-3. On the date hereof
Purchaser meets, and on the Closing Date will meet, all statutory and
regulatory requirements necessary for Purchaser to file the Registration
Statement on Form S-3 with the SEC registering shares to be sold by its then
existing shareholders.
5.8. NO MATERIAL ADVERSE CHANGE. To the best of Purchaser's
knowledge there has been no event that would have a material adverse effect
on the condition (financial or otherwise), assets, properties, business,
operations or prospects of Purchaser taken as a whole after giving effect to
the transactions contemplated hereby which could reasonably cause the Bank to
decline to provide or participate in the financing or suggest or give cause
to suggest alternative financing amounts or structures proposed in the Bank
Commitment Letter. Purchaser has shared with the Bank all of the information
regarding the Business and the Purchaser's business as has been requested by
the Bank. Purchaser shall immediately notify Seller in writing of any refusal
by the Bank, or any threat to refuse by the Bank, to finance the Bank
Financing Amount (the "Bank Refusal Notice"). The Bank shall deliver a
letter to Purchaser on the date hereof, a copy of which Purchaser shall
immediately furnish to Seller, to the effect that the Bank in its
investigation of the Purchaser and the Business has not become aware of facts
that would change its commitment as expressed in the Bank Commitment
Letter. As soon as available, the Purchaser shall also deliver to the Seller
a copy of the favorable trademark appraisal report upon which the Bank is
relying for purposes of financing the acquisition of the Business pursuant to
the Bank Commitment Letter.
ARTICLE VI
Section 6. ADDITIONAL COVENANTS AND AGREEMENTS.
6.1. BULK SALES LAW. Compliance with the laws of any jurisdiction
relating to the bulk sale of assets, if applicable, is waived and Seller and
Stockholder indemnify and hold Purchaser harmless from any liability or claim
arising from a failure to comply with such laws.
6.2. REASONABLE ACCESS BY PURCHASER PENDING CLOSING. Seller will
give to Purchaser, its counsel, accountants, financial advisers and lenders,
engineers and other representatives, after reasonable notice, reasonable
access, during normal business hours, throughout the period prior to the
Closing, to all of the properties, books, contracts, commitments and records
relating exclusively to the Business, and shall fully cooperate with
Purchaser and its accountants in connection with the preparation of timely
and complete audited financial statements relating to the
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financial disclosure of the acquisition of the Business in accordance with
the rules under Regulation S-X and Form 8-K promulgated under the Securities
Exchange Act of 1934, as amended, and applicable registration statement forms
under the Securities Act of 1933, as amended; PROVIDED, HOWEVER, that
Purchaser shall not have access to (i) Seller's records that do not relate
exclusively to the Business or (ii) Seller's records relating to media buying
and placement services. In accordance with the terms of that certain
confidentiality agreement dated as of November 27, 1995 by and between
Purchaser and Seller ("Confidentiality Agreement"), Purchaser agrees that any
information provided pursuant to this Section will not be used for any
purpose other than in connection with the transactions contemplated by this
Agreement, will not be revealed to third parties but will be kept strictly
confidential and will be returned, together with all copies of such
information, to Seller if, for any reason, the Closing does not take place.
Purchaser agrees not to contact, without the prior written consent of Seller
(which shall not be unreasonably withheld), any of Seller's customers,
suppliers, agents, brokers or third parties.
6.3. TAXES. The parties hereto will cooperate with each other in
connection with any audit by the Internal Revenue Service or any other tax
authority of any tax return to the extent relevant to the operations of the
Seller prior or subsequent to the Closing Date. The Seller shall have the
right to assume responsibility to conduct the defense to any such audit and
to file and prepare any amended tax return, claim for refund or tax court
petition.
6.4. BOOKS AND RECORDS. Until the expiration of the applicable
statutory period of limitations, or for such longer period if such statutory
period is extended, each of the parties hereto will to the extent necessary
in connection with any tax or other matters relating to the Seller and
relevant to the Business (i) retain and, as each may reasonably request,
permit the other and their agents to inspect and copy, all books and records
relating to the Business and provide such information from such books and
records as may be reasonably requested and (ii) furnish to the other party
the information necessary to file required returns with respect to Taxes.
6.5. CONDUCT OF BUSINESS PENDING THE CLOSING. Except as
specifically set forth in Schedule 6.6, from the date hereof until the
Closing Date, Seller shall conduct the Business only in the ordinary course
and consistent with past practice and will:
(a) preserve intact the Assets and its current business
operations and properties;
(b) take no action or fail to take such action the
consequence of which will cause a breach of or default in any material
respect in any contract, agreement, commitment or obligation to which it is a
party or by which it may be bound other than breaches and defaults, if any,
which would not individually or in the aggregate have a Material Adverse
Effect;
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(c) keep at all times full and complete books and records,
both consistently and in accordance with generally accepted accounting
principles;
(d) use its best efforts to preserve the form, structure and
goodwill of its business organization in tact and preserve its relationship
with suppliers, customers and others having business relations with it; and
(e) not make any sale or distribution of its assets except
for the sale of inventory in the ordinary course of business.
6.6. RESPONSIBILITY FOR PROMOTIONAL ALLOWANCES; RETURN OF PRODUCTS;
ADVERTISING.
(a) Set forth on Schedule 6.6 is a list of trade promotional
allowances, coupon redemptions, coop advertising in the form of off-invoice
allowances and bill back charges, allowances, promotions, new distribution,
and other consumer promotional liabilities and allowances. Seller has not
changed in any way its methods of Product distribution, returns policy, trade
promotion or trade practices since January 1, 1996 except as disclosed on
Schedule 6.6. All commitments to the trade that will continue or begin after
the Closing Date are separately identified on Schedule 6.6.
(b) Seller and Stockholder shall be responsible for and shall
pay, indemnify and hold Purchaser harmless from and against all liability for
those items set forth on Schedule 6.6, which consist of:
(i) coop advertising which is attributable to programs
that ran on or prior to the Closing Date regardless of when it is actually
claimed by the account, whether in the form of bill back or off invoice;
(ii) coupons actually redeemed on or prior to the Closing
Date and coupons delivered to Seller on or prior to the Closing Date but not
yet actually redeemed;
(iii) all trade promotional allowances and other
allowances which generated sales on or prior to the Closing Date; and
(iv) all returns of Products during the first four (4)
months after the Closing Date but not in excess of $60,000, except for
returns of Products that can be identified as part of a full lot of the
Inventory sold by Purchaser after the Closing Date, which shall be the
responsibility of Purchaser (the "Seller Returns Limit") ((i), (ii), (iii)
and (iv) immediately above shall be referred to collectively as the "Retained
Returns and Allowances"). Set forth on Schedule 6.6(b)(iv) is a description
of Seller's historical returns of Products experience since January 1, 1995.
The provisions of Section 11.5(b) hereof shall not be applicable to the
provisions of this subparagraph (iv) of this Section 6.6(b), and amounts paid
or assumed by Seller
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and Stockholder under this subparagraph (iv) shall not be applied towards the
Cushion Amount (as hereinafter defined).
(c) Purchaser shall be responsible for and shall pay,
indemnify and hold Seller and Stockholder harmless from and against all
liability for those items set forth on Schedule 6.6, which consist of:
(i) coop advertising which is attributable to programs
that run after the Closing Date whether in the form of bill back or off
invoice;
(ii) coupons actually redeemed after the Closing Date,
with the listing of coupons distributed in 1995 and expected to be
distributed in 1996 being set forth on Schedule 6.6(c)(ii) attached hereto;
(iii) all trade promotional allowances and other
allowances which generated sales after the Closing Date; and
(iv) all returns of Products which are sold after the
Closing Date or in excess of the Seller Returns Limit or which can be
identified as part of a full lot of the Inventory sold by Purchaser after the
Closing Date ((i), (ii), (iii) and (iv) immediately above shall be referred
to collectively as the "Assumed Returns and Allowances"). The provisions of
Section 11.5(b) hereof shall not be applicable to the provisions of this
subparagraph (iv) of this Section 6.6(c).
(d) Except as set forth in Section 6.6(b)(iv) and (c)(iv),
the indemnification obligation hereunder shall be governed by the provisions
of Section 11 hereof. Purchaser agrees that it shall not induce or encourage
the return of Products shipped by Seller on or prior to the Closing Date.
(e) Seller shall, on or prior to the Closing Date, send
termination notices to all of Seller's brokers and Seller shall be
responsible for the claims, liabilities, costs and expenses arising out of
such terminations. Seller shall execute any and all documents and take
whatever other action is necessary to cause Purchaser to receive without cost
to Purchaser all right, title and interest in and to all of Seller's
advertisements and master copies, free and clear of all liens, charges,
claims and encumbrances. Prior to the Closing Seller will exercise its best
efforts to facilitate the transition of the distribution of Products from the
Seller's brokers to Purchaser's sales personnel, including, without
limitation, taking action to prevent the brokers from distributing Products
to the trade (except for bona fide sales to retail customers) and arranging
for Purchaser's representatives to meet with the brokers.
6.7. ANTITRUST COMPLIANCE.
(a) The parties hereto shall cooperate and use their
respective best efforts to take, or cause to be taken, all action necessary,
proper or advisable under applicable laws and regulations with respect to
antitrust matters, including, without limitation, if applicable, making all
filings and submissions under the
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HSR Act not heretofore made as may be required in connection with this
Agreement and the transactions contemplated hereby. Purchaser shall be
responsible for payment of the filing fee for the HSR Act pre-merger
notification.
(b) Subject to the terms of the Confidentiality Agreement,
Seller and Purchaser shall seek early termination of any applicable waiting
periods under the HSR Act, and will coordinate and cooperate with each other
in exchanging such information and providing such assistance as the other may
reasonably request in connection with the foregoing, and in seeking early
termination of any applicable waiting periods under the HSR Act. Each of
Seller and Purchaser agrees to respond promptly to and fully comply with any
request for additional information or documents under the HSR Act. Subject to
the terms of the Confidentiality Agreement and applicable law, Seller will
provide Purchaser, and Purchaser will provide Seller, with copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between such party or any of its Representatives, on the
one hand, and any governmental agency or authority or members of their
respective staffs, on the other hand, with respect to this Agreement and the
transactions contemplated hereby.
6.8. REGULATORY COMPLIANCE. From the date of this Agreement until
the Closing Date, Seller shall take all action necessary to comply fully and
timely with the requirements of the Consumer Product Safety Commission
("CPSC") with regard to the packaging of its Product in child-resistant
packaging.
6.9. CONFIDENTIALITY. From and after the Closing Date, Seller and
Stockholder will treat and hold as confidential any information concerning
the business and affairs of the Products or the Business which is either
non-public, confidential or proprietary in nature, including analyses,
compilations, studies or other documents prepared by Seller, Stockholder and
their affiliates or any of their agents or employees ("Confidential
Information"), refrain form using any of the Confidential Information and
deliver promptly to Purchaser or destroy, at the request and option of
Purchaser, all tangible embodiments (and all copies) of Confidential
Information which are in their possession. In the event that Seller or
Stockholder is required by legal proceeding, interrogatory, subpoena, civil
investigative demand or similar process to disclose any Confidential
Information, Seller or Stockholder will notify Purchaser promptly of the
request so that Purchaser may at its expense seek an appropriate protective
order or waive compliance with the provisions hereof.
6.10. EXCLUSIVE DEALING. From the date of this Agreement until the
Closing Date, Seller shall not take any action to encourage, initiate or
engage in discussions or negotiations with, or provide information to, anyone
other than Purchaser concerning any purchase of the Business or the Products
or any similar transaction involving the Business or the Products so long as
there has been no disclosure or obligation to disclose by Purchaser of a Bank
Refusal Notice and no breach by Purchaser of the covenants set forth in
Sections 5.5 and/or 5.8 hereof.
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ARTICLE VII
Section 7. CONDITIONS TO CLOSING.
7.1. CONDITIONS TO PURCHASER'S OBLIGATIONS. All the obligations of
Purchaser under this Agreement are subject to the fulfillment, prior to or at
the Closing, of each of the following conditions, any or all of which (other
than the condition set forth in clause (d) below) Purchaser may waive in
writing:
(a) Seller shall have performed in all material respects all
of its obligations under this Agreement required to be performed at or before
the Closing, and there shall have been delivered to Purchaser a certificate
of an executive officer of Seller, dated the Closing Date, to such effect.
(b) The representations and warranties of Seller and
Stockholder contained in Section 4 of this Agreement shall be true and
correct in all material respects as of the date hereof and as of the Closing
Date with the same force and effect as though such representations and
warranties had been made as of the Closing Date, and there shall have been
delivered to Purchaser a certificate of an executive officer of Seller and
Stockholder, dated the Closing Date, to such effect.
(c) No action or proceeding to enjoin any transaction
contemplated by this Agreement shall have been instituted, and no injunction
or restraining order in any action or proceeding against any such transaction
shall then be in effect.
(d) All waiting periods pursuant to the HSR Act shall have
expired or been terminated and neither the Antitrust Division of the
Department of Justice nor the Federal Trade Commission shall have filed suit
or threatened to file suit to prevent any transaction contemplated by this
Agreement.
(e) No change that has had a Material Adverse Effect on the
Business shall have occurred and shall not be threatened in any way as a
result of any event or occurrence; PROVIDED, HOWEVER, that it shall not be
deemed to constitute a Material Adverse Effect on the Business if there is a
decline in the retail sales of the Products from all outlets of less than
twenty-five (25%) percent as measured by the five (5) week period ended March
23, 1996 for powder products and the four (4) week period ended March 16,
1996 for cream products, as compared to the corresponding periods of calendar
year 1995, as reported by A.C. Nielsen.
(f) Seller's contract manufacturers shall have manufactured for
Seller on or before April 10, 1996 not less than one million two hundred
thousand (1,200,000) units of the Gold Bond Medicated Anti-Itch Cream or
obtained an extension to complete the repackaging of Gold Bond Medicated
Anti-Itch Cream in accordance with CPSC rules.
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(g) The Bank shall have completed documentation in order to
immediately finance the Bank Financing Amount not later than April 30, 1996,
time being of the essence.
7.2. CONDITIONS TO SELLER'S OBLIGATIONS. All the obligations of
Seller under this Agreement are subject to the fulfillment, prior to or at
the Closing, of each of the following conditions, any or all of which (other
than the condition set forth in clause (d) below, Seller may waive in writing:
(a) Purchaser shall have performed in all material respects all
of its obligations under this Agreement required to be performed at or before
the Closing, and there shall have been delivered to Seller a certificate of
an executive officer of Purchaser, dated the Closing Date, to such effect.
(b) The representations and warranties of Purchaser contained
in Section 5 of this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Closing Date with the same
force and effect as though such representations and warranties had been made
as of the Closing Date, and there shall have been delivered to Seller a
certificate of an executive officer of Purchaser, dated the Closing Date, to
such effect.
(c) No action or proceeding to enjoin any transaction
contemplated by this Agreement shall have been instituted, and no injunction
or restraining order in any action or proceeding against any such transaction
shall then be in effect.
(d) All waiting periods pursuant to the HSR Act shall have
expired or been terminated, and neither the Antitrust Division of the
Department of Justice nor the Federal Trade Commission shall have filed suit
to prevent any transaction contemplated by this Agreement.
(e) Purchaser shall have delivered to Seller not later than
five (5) days prior to the Closing Date the Registration Statement as it is
proposed to be filed by Purchaser with the SEC, which Registration Statement
shall be in form and substance satisfactory to Seller and Seller's counsel.
(f) Purchaser shall have immediately available funds for the
payment in full of the Cash Consideration not later than April 30, 1996.
7.3. MATERIALITY OF CONDITIONS. Notwithstanding anything contained
herein, if any condition to closing in Section 7.1(a), (b) or (e) hereof is
not satisfied, but the event or occurrence that resulted in the failure to
satisfy the closing condition does not have or threaten in any way to have, in
the aggregate, a Material Adverse Effect on the Business, then Purchaser
shall nevertheless consummate the transaction contemplated by this Agreement.
Seller and Stockholder shall indemnify, defend and hold harmless Purchaser
from and against any loss or liability arising from the event or occurrence
that resulted in the failure to satisfy the closing condition
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pursuant to Section 11 hereof, except that the Cushion Amount set forth in
Section 11.5(b) hereof shall not apply.
ARTICLE VIII
Section 8. CLOSING DOCUMENTS. On the Closing Date and as a further
condition to the obligations of Purchaser and Seller to close hereunder:
8.1. DOCUMENTS TO BE DELIVERED BY SELLER AND STOCKHOLDER.
Seller and Stockholder shall deliver to Purchaser:
(a) A bill of sale in substantially the form of Exhibit C
hereto, conveying to Purchaser good and marketable title to all of the
tangible assets to be acquired by Purchaser hereunder;
(b) One or more assignments in substantially the form of
Exhibit D hereto, with all consents necessary for Purchaser's unencumbered
enjoyment of the Assets to be transferred hereunder, assigning to Purchaser
all of the leases, contracts and other agreements to be assigned to Purchaser
hereunder;
(c) An assignment in substantially the form of Exhibit E
hereto, assigning to Signal good and marketable title to all of Seller's
trademarks and Seller's other intangible assets related to the Products;
(d) The originals of the leases, contracts and other
agreements to be assigned to Purchaser hereunder;
(e) Certificates of the appropriate officers of the Seller,
dated as of the Closing Date, certifying as to the fulfillment of the
conditions set forth in Section 7.1; and
(f) Any other documents or instruments which may reasonably be
required to give the transactions contemplated herein full force and effect.
8.2. DOCUMENTS TO BE DELIVERED BY PURCHASER. Purchaser shall
deliver to Seller:
(a) The balance of the Purchase Price set forth in Section 3
hereof in certified funds or by means of wire transfer;
(b) One or more agreements of assumption whereby Purchaser
assumes all of Seller's and Stockholder's liabilities and obligations to be
assumed by Purchaser hereunder;
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(c) Certificates of the appropriate officers of the Purchaser,
dated as of the Closing Date, certifying as to the fulfillment of the
conditions set forth in Section 7.2; and
(d) Any other documents or instruments which may reasonably be
required to give the transactions contemplated herein full force and effect.
Unless otherwise provided in this Agreement, all documents and
instruments delivered hereunder shall be dated the Closing Date and shall be
reasonably satisfactory as to form and content to each party and its
respective counsel.
ARTICLE IX
Section 9. PRODUCT LIABILITY RESPONSIBILITY.
9.1. PRODUCTS SOLD BY SELLER. As between the Seller and the
Purchaser, Seller and Stockholder shall have sole responsibility and shall be
liable for any and all demands, actions, claims, losses, damages and costs
and expenses (including, without limitation, attorneys' fees) ("Liability
Claim") for personal injury, property damage or other events or circumstances
which arise from use of the Products and which occur prior to the Closing
Date, regardless of when such Liability Claim is brought.
9.2. PRODUCTS SOLD BY PURCHASER. Except as provided in Section
9.1, as between the Seller and the Purchaser, Purchaser shall have sole
responsibility and shall be liable for any and all demands, actions, claims,
losses, damages and costs and expenses (including, without limitation,
attorneys' fees) ("Liability Claim") for personal injury, property damage or
other events or circumstances which arise from use of the Products and which
occur on or after the Closing Date, regardless of when such Liability Claim
is brought.
9.3. INDEMNIFICATION BY SELLER AND STOCKHOLDER. Seller and
Stockholder, jointly and severally, shall indemnify Purchaser and hold it
harmless from all Indemnified Amounts, as hereinafter defined, incurred or
suffered by Purchaser arising out of any Liability Claim for which Seller and
Stockholder have liability pursuant to this Section 9. The indemnification
obligation hereunder shall be governed by the provisions of Section 11 hereof.
9.4. INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify
Seller and Stockholder and hold them harmless from all Indemnified Amounts
incurred or suffered by Seller and Stockholder arising out of any Liability
Claim for which
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Purchaser has liability pursuant to this Section 9. The indemnification
obligation hereunder shall be governed by the provisions of Section 11 hereof.
ARTICLE X
Section 10. TERMINATION
10.1. RIGHT OF TERMINATION. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned:
(a) at any time, by mutual written consent of Seller and
Purchaser; or
(b) by Seller without liability to Purchaser but subject to
the provisions of Section 3.3(c) hereof, if the Closing has not occurred by
April 30, 1996 due to Purchaser's inability to fund the Purchase Price; or
(c) by Seller or Purchaser without liability to the other
party (except as set forth in Section 10.2 hereof) if the Closing has not
occurred on or before June 30, 1996 due to failure by the other party to
satisfy the conditions to obligations of the terminating party set forth in
Article VII hereof; or
(d) at any time, by Seller and subject to the provisions of
Section 3.3(c) hereof, if Seller has received from Purchaser, or if Purchaser
is obligated to deliver to Seller, a Bank Refusal Notice and Purchaser has
not provided the Shortfall Amount as provided in Section 3.3(c) hereof.
10.2. LIABILITY FOR BREACH. Subject to the provisions of Section
3.3 hereof, there shall be no liability or obligation under this Article X on
the part of Seller or Purchaser, except that Seller or Purchaser, as the case
may be, may have liability to the other party if the basis of termination is
a willful, material breach by Seller or Purchaser, as the case may be, of one
or more of the provisions of this Agreement, and except that the obligation
to treat information in a confidential manner, as set forth in the
Confidentiality Agreement and Section 6.2 hereof and the obligations relating
to nondisclosure in Section 14.2, shall survive any such termination.
ARTICLE XI
Section 11. INDEMNIFICATION; SURVIVAL.
11.1. SURVIVAL; REMEDY FOR BREACH. The covenants, agreements,
representations and warranties of the parties hereto contained herein or in
any certificate, Schedule or other writing attached hereto, or required by
the terms hereof to be delivered (and so delivered), by the parties on the
Closing Date shall survive the Closing Date for a period equal to fifteen
(15) months ("Indemnity Period").
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Notwithstanding the preceding sentence, any representation, warranty,
covenant or agreement in respect of which indemnity may be sought under this
Article XI shall survive the time at which it would otherwise terminate if
notice of the inaccuracy or breach thereof, which shall include with
reasonable specificity the elements of such claim, shall have been given to
the party against whom such indemnity may be sought prior to such time.
11.2. INDEMNIFICATION BY SELLER AND STOCKHOLDER.
(a) Subject to the terms and conditions set forth herein,
Seller and Stockholder, jointly and severally, hereby indemnify Purchaser
against and agree to hold it harmless from any and all damage, loss,
liability, expense (including, without limitation, reasonable attorneys' fees
and expenses in connection with any action, suit or proceeding brought
against or involving Purchaser) and cost (collectively, "Purchaser
Indemnified Amounts") incurred or suffered by Purchaser arising out of (i)
any misrepresentation or breach of warranty, or breach of any covenant or
agreement to be performed by Seller and Stockholder pursuant to this
Agreement, (ii) all Taxes with respect to the Business and the Assets for all
periods up to and including the Closing Date; (iii) any product liability
claim for which Seller and Stockholder are liable pursuant to Section 9
hereof; and (iv) except for the Assumed Liabilities, any and all damages,
losses, expenses, obligations, liabilities or deficiencies incurred or paid
by Purchaser as a result of a claim of any kind arising from the operation,
business or ownership of the Assets or the Business on or prior to the
Closing Date. The agreements and indemnities of Seller and Stockholder
contained herein shall be cumulative, except that Purchaser shall not recover
more than once for the same Purchaser Indemnified Amount. Seller and
Stockholder shall not be liable for consequential or punitive damages.
(b) Purchaser agrees to give notice to Seller promptly after
learning of the assertion of any claim, or the commencement of any suit,
action or proceeding, in respect of which indemnity may be sought hereunder.
The failure of Purchaser to give such notice in sufficient time to prevent
Seller and Stockholder from being materially prejudiced in the defense of
such claim, suit, action or proceeding shall constitute a waiver of
Purchaser's rights hereunder in respect of the claim, suit, action or
proceeding with respect to which such notice was required to have been given
hereunder.
(c) Seller and Stockholder shall not be liable under this
Section 11.2 for any settlement of any claim, litigation or proceeding
effected without their consent in respect of which indemnity may be sought
hereunder.
(d) The amount required to be paid to Purchaser by Seller and
Stockholder for any Purchaser Indemnified Amounts hereunder shall be an
amount reduced by (i) the tax benefits available to Purchaser and (ii) any
amount received by Purchaser under any insurance coverage or from any other
party alleged to be responsible therefor. Such amounts shall be paid not
later than thirty (30) days after receipt by Seller and Stockholder of
written notice from Purchaser stating that
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such Purchaser Indemnified Amounts have been incurred (and, in the case of
claims of third parties, paid) and the amount thereof and of the related
indemnity payment; PROVIDED, HOWEVER, that any disputed amounts shall be due
and payable within thirty (30) days after such amounts are finally determined
to be owing by Seller and Stockholder to Purchaser.
11.3. INDEMNIFICATION BY PURCHASER.
(a) Subject to the terms and conditions set forth herein,
Purchaser hereby indemnifies Seller and Stockholder against and agrees to
hold them harmless from any and all damage, loss, liability, expense
(including, without limitation, reasonable attorneys' fees and expenses in
connection with any action, suit or proceeding brought against or involving
Seller and Stockholder) and cost (collectively, "Seller Indemnified Amounts"
and together with Purchaser Indemnified Amounts, the "Indemnified Amounts")
incurred or suffered by Seller and Stockholder arising out of (i) any
misrepresentation or breach of warranty, or breach of any covenant or
agreement to be performed by Purchaser pursuant to this Agreement; (ii) any
Assumed Liabilities; (iii) all Taxes with respect to the Business and the
Assets for all periods following the Closing Date; (iv) any product liability
claim for which Purchaser is liable pursuant to Section 9 hereof; and (v)
except as otherwise expressly provided in this Agreement, any and all
damages, losses, expenses, obligations, liabilities or deficiencies incurred
or paid by Seller and Stockholder as a result of a claim of any kind arising
from the operation, business or ownership of the Assets or the Business after
the Closing Date. The agreements and indemnities of Purchaser contained
herein shall be cumulative, except that Purchaser shall not recover more than
once for the same Seller Indemnified Amount. Purchaser shall not be liable
for consequential or punitive damages.
(b) Seller agrees to give notice to Purchaser promptly after
learning of the assertion of any claim, or the commencement of any suit,
action or proceeding, in respect of which indemnity may be sought hereunder.
The failure of Seller to give such notice in sufficient time to prevent
Purchaser from being materially prejudiced in the defense of such claim,
suit, action or proceeding shall constitute a waiver of Seller's and
Stockholder's rights hereunder in respect of the claim, suit, action or
proceeding with respect to which such notice was required to have been given
hereunder.
(c) Purchaser shall not be liable under this Section 11.3 for
any settlement of any claim, litigation or proceeding effected without its
consent in respect of which indemnity may be sought hereunder.
(d) The amount required to be paid to Seller and Stockholder
by Purchaser for any Seller Indemnified Amounts hereunder shall be an amount
reduced by (i) the tax benefits available to Seller and Stockholder and (ii)
any
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amount received by Seller under any insurance coverage or from any other
party alleged to be responsible therefor. Such amounts shall be paid not
later than thirty (30) days after receipt by Purchaser of written notice from
Seller stating that such Seller Indemnified Amounts have been incurred and
the amount thereof and of the related indemnity payment; PROVIDED, HOWEVER,
that any disputed amounts shall be due and payable within thirty (30) days
after such amounts are finally determined to be owing by Purchaser to Seller
and Stockholder.
11.4. CONDUCT OF LITIGATION. Each party indemnified under the
provisions of this Agreement, upon receipt of written notice of any claim or
the service of a summons or other initial legal process upon it in any action
instituted against it in respect of the agreements contained in this
Agreement, shall promptly give written notice of such claim, or the
commencement of such action, or threat thereof, to the party from whom
indemnity shall be sought hereunder. Each indemnifying party shall be
entitled at its own expense to participate in the defense of such claim or
action, or, if it shall elect, to assume such defense, in which event such
defense shall be conducted by counsel chosen by such indemnifying party, and
the indemnified party shall bear all fees and expenses of any additional
counsel retained by it. If the indemnifying party shall elect not to assume
the defense of such claim or action, such indemnifying party will reimburse
such indemnified party for the reasonable fees and expenses of any counsel
retained by such indemnified party, and shall be bound by the results
obtained by the indemnified party; PROVIDED, HOWEVER, that no such claim or
action shall be settled without the written consent of the indemnifying party.
11.5. LIMITATIONS ON INDEMNIFICATION.
(a) Notwithstanding anything to the contrary contained
herein, the Seller and Stockholder shall be obligated to indemnify the
Purchaser, and the Purchaser shall be obligated to indemnify the Seller and
Stockholder, for the applicable Indemnified Amounts hereunder only up to a
maximum aggregate amount not to exceed Ten Million ($10,000,000) Dollars.
(b) Notwithstanding anything to the contrary contained
herein, neither Seller and Stockholder nor Purchaser shall be entitled to any
recovery from the other with respect to any breach of warranty or
representation set forth herein or the indemnification provided for in
Sections 9 or 11 hereof unless and until the aggregate amount of the
applicable Indemnified Amounts suffered, sustained or incurred by the
asserting party, or to which such party becomes subject, sustained or
incurred by the asserting party, or to which such party becomes subject, by
reason of such breach or indemnity, shall exceed in the aggregate Five
Hundred Thousand ($500,000) Dollars (the "Cushion Amount"). In the event that
the sum of the applicable Indemnified Amounts for which no indemnification
has been made hereunder (the "Aggregate Indemnified Amount") shall exceed the
Cushion Amount, then subject to the terms and conditions hereof the
indemnifying party shall pay to the indemnified party the amount by which the
Aggregate Indemnified Amount exceeds the Cushion Amount. The provisions of
this Section 11.5(b) shall not be applicable to product liability of Seller
and Purchaser pursuant to Section 9 hereof, the Assumed
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Liabilities of Purchaser or the Retained Liabilities of Seller and
Stockholder, respectively, pursuant to Section 2 hereof or as provided in
Section 7.3.
11.6. INSURANCE. Each of the Purchaser and Seller shall use their
best efforts to collect the insurance proceeds pursuant to Subsections
11.2(d) and 11.3(d) hereof. If the Purchaser or Seller, as the case may be,
receives an amount under insurance coverage, an amount is paid on its behalf
under insurance coverage, or from any other party with respect to the
Indemnified Amounts at any time subsequent to any indemnification provided by
Seller and Stockholder or Purchaser pursuant to these Sections 11.2 and 11.3
hereof, then Purchaser or Seller and Stockholder, as the case may be, shall
promptly reimburse the other for any payment made or expense incurred by the
indemnifying party in connection with providing such indemnification up to
such amount received by the indemnified party.
ARTICLE XII
Section 12. INVENTORY VALUE.
(a) For purposes of this Agreement, the term "Inventory
Value" means the aggregate value of the Inventory calculated on a basis
consistent with Seller's accounting procedures and in accordance with
generally accepted accounting principles. Schedule 12 sets forth the cost per
unit of each of Seller's products.
(b) On the Closing Date, or as soon thereafter as
practicable, the parties shall jointly conduct a physical count of the
Inventory as of the Closing Date. Within thirty (30) days after the Closing
Date, Seller shall make or cause to be made a calculation of the Inventory
Value as of the Closing Date (the "Calculation"). The Calculation shall be
made by appropriate accounting personnel in accordance with generally
accepted accounting principles applied consistently with Seller's past
practices. Seller shall promptly provide Purchaser with a copy of the
Calculation and all work papers associated therewith.
(c) If Purchaser disagrees with all or any part of the
Calculation, Purchaser shall have the right to notify Seller of such
disagreement and its reasons for so disagreeing, in which case Seller and
Purchaser shall attempt to resolve the disagreement. If within ten (10) days
after the delivery of the Calculation and all work papers associated
therewith to Purchaser, Seller and Purchaser are unable to resolve the
differences, if any, arising as a result of the Calculation, they or either
of them shall submit a statement of all unresolved differences together with
copies of the Calculation to a mutually agreed-upon "Big Six" accounting firm
(the "Accountants") for a binding and nonappealable determination to be
rendered within thirty (30) days after such submission. All fees and expenses
of the Accountants incurred in this capacity shall be billed to and shared by
Seller and Purchaser equally.
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(d) If, upon completion of the Calculation and resolution of
any differences between the parties arising therefrom, the Calculation
reflects an Inventory Value that is either less than or in excess of Two
Million ($2,000,000) Dollars, the Purchase Price will be reduced or
increased, as the case may be, by the amount of such difference, and
Purchaser will pay the amount of any such increase to Seller or Seller will
pay the amount of any such decrease to Purchaser, in immediately available
funds, within five (5) business days after the final determination of the
Inventory Value pursuant to this Section 12.
(e) In the event that on or prior to the Closing Date the
retrospective validation currently being conducted by Old 97's independent
expert with respect to the Old 97 inventory (as more fully described in
Schedule 4.12 attached hereto), concludes that the Old 97 inventory is within
specification and Purchaser's own independent expert agrees with the
retrospective validation, then the Old 97 inventory shall be included in the
Inventory purchased by Purchaser hereunder, subject to such inventory meeting
the conditions of the last sentence of Section 4.4 hereof. In the event the
Old 97 inventory is considered by Purchaser's own independent expert to have
been adequately validated it shall be deemed to be Acquired Inventory, and if
this occurs prior to the Closing Date it will be included in the Calculation
of Inventory Value on the Closing Date, and if after the Closing Date,
Purchaser shall purchase it at the Inventory Value thereof. If a payment is
due to Seller from Purchaser after the Closing Date for such additional
Acquired Inventory, payment shall be made via wire transfer within five (5)
business days after such Old 97 inventory is determined by Purchaser's own
independent expert to have been adequately validated. Any Old 97 inventory
which is not considered by Purchaser's own independent expert to have been
adequately validated shall be referred to as "Excluded Inventory". Seller may
hold such Excluded Inventory until a final determination has been made with
respect to Seller's claims against Old 97 with respect to the Old 97
inventory. Promptly but in no event more than thirty (30) days after such
final determination, Seller shall cause the Excluded Inventory to be
destroyed at Seller's cost and expense and shall certify to Purchaser the
name and location of the contractor which destroyed such Excluded Inventory
and the date of destruction or, at the option of Purchaser, allow a
representative of Purchaser to observe the destruction of such Excluded
Inventory.
ARTICLE XIII
Section 13. CLOSING
13.1. CLOSING. Subject to Section 10 hereof, the term "Closing
Date" as used in this Agreement shall mean 10:00 A.M. on the second business
day following satisfaction or waiver of all conditions set forth in Article
VII hereof, time being of the essence. The Closing shall be held at the
offices of Seller's counsel or at such other location as shall be agreed to
be the parties.
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ARTICLE XIV
Section 14. MISCELLANEOUS.
14.1. NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if sent by registered or
certified mail or overnight special delivery, postage prepaid, addressed as
follows:
To Seller:
Martin Himmel Inc.
450 Park Avenue, Suite 501
New York, NY 10022
Attention: Mr. Jeffrey S. Himmel
To Stockholder:
Mr. Jeffrey S. Himmel
c/o Martin Himmel Inc.
450 Park Avenue, Suite 501
New York, NY 10022
Copy to:
Tashlik, Kreutzer & Goldwyn P.C.
833 Northern Boulevard
Great Neck, NY 11021
Attention: Martin M. Goldwyn, Esq.
To Purchaser:
Signal Investment & Management Co.
1105 North Market Street
Suite 1300
Wilmington, Delaware 19890
Attention: Robert E. Bosworth, President
Chattem, Inc.
1715 West 38th Street
Chattanooga, TN 37409
Attention: Robert E. Bosworth, Executive Vice President
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Copy to:
Miller & Martin
1000 Volunteer Building
832 Georgia Avenue
Chattanooga, TN 37402
Attention: A. Alexander Taylor II, Esq.
or such other addresses as shall be furnished by like notice by such party.
Any such notice or communication shall be effective two days after it is sent.
14.2. NONDISCLOSURE OF AGREEMENT. Purchaser and Seller shall make
no public disclosure regarding the negotiations between the parties, the
existence of this Agreement or the specific financial and other terms and
conditions of this Agreement, unless such disclosure is agreed upon by prior
written approval of the parties hereto or unless required by law (in which
case the disclosing party shall, if practicable, prior to disclosure, advise
and consult with the other party and its counsel concerning such disclosure),
except by Seller to its brokers, employees, suppliers, customers,
broadcasters and other third parties in the ordinary course to advise them of
the transaction. No press release regarding this Agreement shall be made by
either party until such press release is approved in writing by both parties.
14.3. BROKERS. Seller and Purchaser each represents to the other
that it has not dealt with any broker for this transaction other than TM
Capital Corp. (the "Broker") and has not employed any other investment
banker, broker, finder or intermediary in connection with the transactions
contemplated hereby who might be entitled to a fee or a commission upon the
consummation of the transactions contemplated hereby. Seller shall be
responsible for and shall pay all commissions, fees and expenses of the
Broker. Purchaser and Seller agree to indemnify and hold each other harmless
from and against any loss, damage, liability, cost or expense (including
reasonable attorneys' fees) suffered or incurred as a result of any breach of
the foregoing representations.
14.4. EXPENSES. All legal, accounting and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses. Purchaser shall be
responsible for and shall pay the costs of any transfer taxes as a result of
the transfer of the Assets.
14.5. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement may be assigned by either
party only with the prior written consent of the other party.
14.6. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the
Confidentiality Agreement embody the entire agreement of the parties hereto
with
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respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect thereto. This Agreement may be
amended, and any provision hereof waived, but only in a writing signed by
each of the parties hereto.
14.7. COUNTERPARTS. This Agreement may be executed in
counterparts, all of which shall together constitute one and the same
instrument.
14.8. AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS. Seller,
Stockholder and Purchaser each agree to use its best efforts to execute and
deliver such other documents, certificates, agreements and other writings and
to take such other actions as may be reasonably necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated
by this Agreement.
14.9. HEADINGS. The headings of Articles and Sections herein are
inserted for convenience of reference only and shall be ignored in the
construction or interpretation hereof.
14.10. GOVERNING LAW. This Agreement shall be governed by and
interpreted under the laws of the State of Delaware applicable to contracts
made and to be performed therein without giving effect to the principles of
conflict of laws thereof. Except in respect of any action commenced by a
third party in another jurisdiction, the parties hereto agree that any legal
suit, action or proceeding against them arising out of or relating to this
Agreement shall be brought exclusively either in (i) the United States
Federal Courts or New York Supreme Court, in the State of New York or (ii)
the United States Federal Courts or the Courts of Chancery or Superior Court
in the State of Delaware. The parties hereto hereby accept the jurisdictions
of such courts for the purpose of any such action or proceeding, and agree
that venue for any action or proceeding (i) brought in the State of New York
shall lie in the Southern District of New York or Supreme Court, New York
County, as the case may be and (ii) brought in the State of Delaware shall
lie in the Federal District of Delaware or the Courts of Chancery or Superior
Court, New Castle County, as the case may be. Each of the parties hereto
hereby irrevocably consents to the service of process in any action or
proceeding in such courts by the mailing thereof by United States registered
or certified mail postage prepaid to such party at its address set forth
herein.
14.11. CONSENTS. Seller and Purchaser shall, on and prior to the
Closing Date, use their best efforts to obtain from each person, firm,
association, corporation and governmental authority all consents and
approvals which are necessary to authorize and validate the sale, transfer
and assignment of the Assets to be assigned to Purchaser, and otherwise to
effectuate the purposes of this Agreement.
14.12. NO IMPLIED WAIVER. No failure or delay on the part of the
parties hereto to exercise any right, power or privilege hereunder or under
any
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instrument executed pursuant hereto shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. All rights and remedies granted herein shall be in
addition to other rights and remedies to which the parties may be entitled at
law or in equity.
14.13. COVENANT NOT TO COMPETE. Seller and Stockholder and each of
their affiliates agree that for a period of four (4) years after the Closing
Date, neither they nor any of their affiliates will, directly or indirectly,
in the Territory (as hereinafter defined), own, manage, operate, join,
control or participate in the ownership, management, operation or control of,
any business whether in corporate, proprietorship or partnership form or
otherwise in any business or organization any part of which engages in the
manufacture, advertising, marketing or sale of (i) medicated anti-itch adult
products in any form, including powders, lotions, or creams where there is an
anti-itch claim; (ii) any skin powder product; (iii) products in any form for
the treatment and prevention of diaper rash, and the chafing, minor skin
irritation and wetness associated with diaper rash; (iv) skin care products
in any form where there is a claim or benefit of itch or pain relief due to
cuts, burns, rashes, dry skin, scrapes, prickly heat, sunburn, insect bites
or poison ivy, oak or sumac so long as such product contains an anti-pruritic
active ingredient to relieve itch; or (v) products in any form for the
treatment and prevention of athlete's foot or jock itch; or (vi) any products
that utilize the claim itch relief on the front panel or carton, in
advertising or in promotional programs; PROVIDED that Seller and Stockholder
may own capital stock or other securities of any corporation which markets
one or more products which are described in clauses (i) through (vi) above,
the securities of which are publicly owned and regularly traded in the
over-the-counter market or on a national securities exchange, provided that
Seller and Stockholder do not acquire beneficial ownership (as determined
under Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of more
than five (5%) percent of the issuer's outstanding securities of that class
and Seller and Stockholder do not otherwise engage in any activity that is
restricted by the foregoing provisions of this paragraph. As used herein, the
term "Territory" shall mean any country in which Seller as of the Closing
Date has a trademark registration or trademark application for the Business.
The parties hereto specifically acknowledge and agree that the remedy at law
for any breach of the foregoing will be inadequate and that Purchaser, in
addition to any other relief available to it, shall be entitled to temporary
and permanent injunctive relief without the necessity of proving actual
damage. In the event that the provisions of this Section
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should ever be deemed to exceed the limitation provided by applicable law,
then the parties hereto agree that such provisions shall be reformed to set
forth the maximum limitations permitted.
IN WITNESS WHEREOF, this Agreement has been duly executed on behalf of
each of the parties hereto by their duly authorized officers as of the day
and year first above written.
CHATTEM, INC.
By: /s/ Robert E. Bosworth
-------------------------------
Robert E. Bosworth
Executive Vice President
SIGNAL INVESTMENT &
MANAGEMENT CO.
By: /s/ Robert E. Bosworth
-------------------------------
Robert E. Bosworth
President
MARTIN HIMMEL INC.
By: /s/ Jeffrey S. Himmel
-------------------------------
Jeffrey S. Himmel
Chairman, Chief Executive Officer
/s/ Jeffrey S. Himmel
----------------------------------
Jeffrey S. Himmel
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EXHIBIT 28.2
CHATTEM, INC.
April 29, 1996
FOR IMMEDIATE RELEASE
---------------------
CHATTEM, INC. (NASDAQ: CHTT), a Chattanooga, Tennessee, based
manufacturer of health and beauty aids, announced today that it had completed
the $40 million purchase of the worldwide rights of Martin Himmel Inc.'s
("MHI") Gold Bond line. The purchase price conisted of $39 million cash and
$1 million of CHTT's common stock. On April 10, 1996, CHTT announced the
signing of an agreement to purchase the Gold Bond line and the planned
financing.
Gold Bond is the leading brand of adult medicated powders and has a
significant position in the medicated baby powder and anti-itch cream
categories. Since MHI's acquisition of the brand in 1990, Gold Bond's sales
have grown rapidly to over $25.0 million in 1995.
The Company also announced that it will finance the purchase and repay
all of its existing bank indebtedness through a $61.5 million bank credit
facility provided by a banking syndicate led by NationsBank, N.A. and the
sale of 1.1 million shares of the Company's common stock, at $5 per share to
a group of investors, including certain insiders. The Company received an
opinion from an independent investment banking firm that the terms of this
stock sale are fair to the public shareholders from a financial point of
view. Also, 155,792 shares were issued to MHI at an average price of $6.42 as
part of the financing of the acquisition.
Chattem said that it plans to expand the well-known Gold Bond brands to
other skin care categories and to international markets, where it has a
limited market share.
#####
Company Contacts: Robert E. Bosworth Joey B. Hogan
Executive Vice President & Director of Finance
Chief Financial Officer 800/366-6077, Ext. 221
800/366-6077, Ext. 287 Chattem, Inc.
Chattem, Inc.
