<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
----------------------
Date of Report (Date of earliest event reported): March 24, 1998
CHATTEM, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 0-5905 62-0156300
- ------------- --------------------- -------------------
(State of (Commission File No.) (IRS Employer
incorporation) Identification No.)
1715 West 38th Street, Chattanooga, Tennessee 37409
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(423) 821-4571
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On March 24, 1998, Chattem, Inc. (the "Company") and Signal Investment
& Management Co. ("Signal"), a wholly-owned subsidiary of the Company, acquired
the BAN line of deodorant and anti-perspirant products for a purchase price of
$165.0 million (subject to an inventory adjustment), plus the assumption of up
to $5.0 million of liabilities. The Company acquired the BAN trademarks,
formulae, certain patents pertaining to anti-perspirant/deodorant technology,
technical information, inventory, manufacturing equipment and packaging related
assets used in the manufacture of BAN but not the right to sell BAN in Japan.
Also on March 24, 1998, the Company issued $200,000,000 of 8 7/8%
Senior Subordinated Notes due 2008 (the "Notes") to NationsBanc Montgomery
Securities LLC (the "Initial Purchaser") and entered into an amended and
restated senior secured bank credit agreement. The proceeds of the note
offering were used to fund the BAN purchase, repay revolving bank
indebtedness and will be used for working capital.
The Notes were issued by the Company to the Initial Purchaser in a
transaction not registered under the Securities Act of 1933 ("Securities Act")
in reliance upon the exemption provided in Section 4(2) of the Securities Act.
The Initial Purchaser subsequently placed the Notes with qualified institutional
buyers and certain accredited investors in reliance upon Rule 144A under the
Securities Act.
The bank credit agreements, of which NationsBank of Tennessee, N.A. is
agent, include term loans of $27.5 million and $34.8 million and a working
capital facility of $30 million (the "Credit Agreements"). The working capital
facility and the $27.5 million term loan mature on June 26, 2002 and the $34.8
million term loan matures on June 14, 2004. The Company may elect either the
greater of the prime rate or federal funds plus 1/2% or a floating rate or
Eurodollar interest rate option applicable to loans under the Credit Agreements.
The floating rate and Eurodollar interest rate options are based on a base rate
plus a floating rate margin that fluctuates on the basis of the Company's
leverage ratio. In addition to the foregoing, the Credit Agreements contain
covenants, representations and other agreements by the Company that are
customary in loan agreements and security instruments relating to financings of
this type.
The Notes mature on April 1, 2008 and interest is payable
semi-annually on April 1 and October 1 of each year, commencing October 1, 1998.
The Notes are senior subordinated obligations of the Company, and are
subordinated in right of payment to all existing and future senior debt of the
Company. The Notes are initially guaranteed by Signal. The Notes may not be
redeemed until April 1, 2003, after which they may be redeemed at the option of
the Company. Upon the occurrence of certain events constituting a change of
control, the holders of the Notes may require the Company to repurchase the
Notes at a purchase price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest.
2
<PAGE>
The Notes are issued under an indenture with SouthTrust Bank, National
Association, as indenture trustee, which restricts, among other things, the
ability of the Company and its subsidiaries to (i) incur additional indebtedness
and issue preferred stock, (ii) incur liens, (iii) pay dividends or make certain
other restricted payments, (iv) apply net proceeds from certain asset sales, (v)
enter into certain transactions with affiliates, (vi) merge or consolidate with
any other person, (vii) sell stock of its subsidiaries, or (viii) assign,
transfer, lease, convey or otherwise dispose of substantially all of the assets
of the Company.
Pursuant to a Registration Rights Agreement between the Company and
the Initial Purchaser, the Company has agreed to file with the Securities and
Exchange Commission (the "Commission") not later than May 24, 1998 and use its
reasonable efforts to have declared effective a registration statement with
respect to notes of the Company which will be identical in all material respects
to the Notes ("Series B Notes"). Upon such registration statement becoming
effective, the Company will offer the holders of the Notes the opportunity to
exchange their Notes for a like principal amount of Series B Notes.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(a) Financial Statements of Business Acquired
Report of Independent Public Accountants
Statement of BAN U.S. Assets and Liabilities as of December 31,
1997 and 1996
Statement of BAN U.S. Net Sales and Product Contribution for the
year ended December 31, 1997, 1996 and 1995
Notes to the Statement of BAN U.S. Assets and Liabilities and the
Statement of BAN U.S. Net Sales and Product Contribution
(b) Unaudited Pro Forma Financial Information
Unaudited Pro Forma Balance Sheet
Notes to Unaudited Pro Forma Consolidated Balance Sheet
Unaudited Pro Forma Consolidated Statement of Income
Notes to Unaudited Pro Forma Consolidated Statement of Income
3
<PAGE>
March 3, 1998
To the Board of Directors and Stockholders
of Bristol-Myers Squibb Company:
We have audited the accompanying statement of United States (U.S.) assets
and liabilities as of December 31, 1997 and 1996, and the statement of U.S. net
sales and product contribution for the years ended December 31, 1997, 1996 and
1995, of the Ban deodorant and antiperspirant product lines (the Product) of
Bristol-Myers Products (the Business), a division of Bristol-Myers Squibb
Company. These financial statements are the responsibility of the Business's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of U.S. assets and liabilities
and the statement of U.S. net sales and product contribution are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in these statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of these
statements. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying financial statements reflect the U.S. assets and
liabilities and the U.S. net sales and product contribution attributable to the
Product as described in Note 2 and are not intended to be a complete
presentation of the Product's assets, liabilities, revenues or expenses.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the U.S. assets and liabilities of the Product as
described in Note 2 as of December 31, 1997 and 1996 and the U.S. net sales and
product contribution of the Product as described in Note 2 for the years ended
December 31, 1997, 1996 and 1995, in conformity with generally accepted
accounting principles.
Price Waterhouse LLP
4
<PAGE>
U.S. BAN
STATEMENT OF U.S. ASSETS AND LIABILITIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Inventories, net:
Raw materials...................................................................... $ 1,089 $ 1,233
Packaging.......................................................................... 860 1,161
Work in process.................................................................... 19 342
Finished goods..................................................................... 6,284 7,497
------------ ------------
Total inventories, net........................................................... 8,252 10,233
------------ ------------
Property, plant and equipment, net:
Machinery and equipment............................................................ 21,897 21,799
Less: Accumulated depreciation..................................................... 12,963 10,946
------------ ------------
Total property, plant and equipment, net......................................... 8,934 10,853
------------ ------------
Total assets..................................................................... $ 17,186 $ 21,086
LIABILITIES
Accrued expenses
Advertising........................................................................ $ -- $ 722
Consumer promotion................................................................. 1,003 1,127
Trade promotion.................................................................... 3,676 2,140
------------ ------------
Total accrued expenses........................................................... $ 4,679 $ 3,989
------------ ------------
Assets less liabilities.......................................................... $ 12,507 $ 17,097
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
U.S. BAN
STATEMENT OF U.S. NET SALES AND PRODUCT CONTRIBUTION
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................................. $ 96,152 $ 97,547 $ 94,705
Cost of goods sold.................................................... 32,780 32,340 30,630
------------ ------------ ------------
Gross margin........................................................ 63,372 65,207 64,075
Distribution.......................................................... 6,594 7,131 6,169
Promotion............................................................. 25,018 21,952 18,908
Advertising and other marketing....................................... 7,019 9,251 10,691
------------ ------------ ------------
Product contribution................................................ $ 24,741 $ 26,873 $ 28,307
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
U.S. BAN
NOTES TO THE STATEMENT OF U.S. ASSETS AND LIABILITIES AND THE
STATEMENT OF U.S. NET SALES AND PRODUCT CONTRIBUTION
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS
The Business manufactures and markets topical deodorants and
antiperspirants. The products are sold through distributors and directly to end
users primarily in the retail markets in the United States (U.S.), Thailand,
Canada, Latin America and certain other Asian countries.
2. BASIS OF PRESENTATION
The accompanying financial statements present only the U.S. assets and
liabilities and the U.S. net sales and product contribution of the Product.
These financial statements include all adjustments necessary for a fair
presentation of the assets and liabilities at December 31, 1997 and 1996 and of
U.S. net sales and product contribution for the years ended December 31, 1997,
1996 and 1995. These financial statements have been prepared in accordance with
Bristol-Myers Squibb Company accounting principles which are in accordance with
generally accepted accounting principles.
These financial statements set forth only the U.S. net sales and operational
expenses attributable to the Product and do not purport to represent all the
costs and expenses associated with a stand alone, separate company. Accordingly,
not included in operating expenses are the expenses associated with product
management, legal, cash management/treasury functions, and various tax services
provided by BMS.
The statement of U.S. net sales and product contribution includes amounts
attributable to the manufacture, sale, promotion and advertisement of the
Product. Net sales include allowances for sales returns and cash discounts.
Product contribution represents net sales less cost of goods sold, distribution,
promotion, advertising and other marketing expenses attributable to the Product.
Included in product contribution is an allocation of certain expenses
attributable to the Product. These expenses have been allocated to the Product
by the Business based upon various factors which management believes are
reasonable.
Net sales by the Business to one customer comprised approximately 24%, 24%
and 23% of total net sales for the years ended December 31, 1997, 1996 and 1995,
respectively.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of management's estimates.
INVENTORIES, NET
Inventories, net of reserves for obsolescence, are valued at average costs,
not in excess of market.
PROPERTY, PLANT AND EQUIPMENT, NET
Expenditures for additions, renewals and betterments are capitalized at
cost. Depreciation is generally computed by the straight-line method based on
the estimated useful lives of the related assets ranging from 5 to 20 years.
7
<PAGE>
U.S. BAN
NOTES TO THE STATEMENT OF U.S. ASSETS AND LIABILITIES AND THE
STATEMENT OF U.S. NET SALES AND PRODUCT CONTRIBUTION (CONTINUED)
(IN THOUSANDS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The machinery and equipment is primarily located in Morrisville, North
Carolina, and at a third party manufacturer in Quebec, Canada.
4. COMMITMENTS AND CONTINGENCIES
Various lawsuits, claims and proceedings of a nature considered normal to
the Business are pending through BMS. Management believes that these lawsuits,
claims and proceedings are without merit or will not have a material adverse
effect on the Business's operating results, liquidity or financial position.
8
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following Unaudited Pro Forma Consolidated Balance Sheet was prepared as
if the Transaction and Offering had occurred on November 30, 1997. The following
Unaudited Pro Forma Consolidated Statement of Income gives effect to the
Transaction and Offering as if they had occurred on December 1, 1996. The
Unaudited Pro Forma Consolidated Statement of Income does not purport to
represent what the Company's results of operations actually would have been if
the Transaction and Offering had occurred as of such date or what such results
will be for any future periods.
The Unaudited Pro Forma Consolidated Balance Sheet reflects the preliminary
allocation of the purchase price for the Acquisition to the Company's tangible
and intangible assets and liabilities. The final allocation of such purchase
price, and the resulting depreciation and amortization expense in the
accompanying Unaudited Pro Forma Consolidated Statement of Income, will differ
from the preliminary estimates due to the final allocation being based on: (a)
actual closing date amounts of assets and liabilities, and (b) final appraised
values of property, plant and equipment and other assets.
The Unaudited Pro Forma Financial Data are based on the historical financial
statements of the Company and the assumptions and adjustments described in the
accompanying notes. The Company believes that such assumptions are reasonable.
The Unaudited Pro Forma Financial Data should be read in conjunction with the
Consolidated Financial Statements of the Company and those of BAN and the
respective accompanying notes thereto appearing elsewhere in this Offering
Memorandum.
9
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS
CHATTEM BAN ------------------------
AS OF AS OF ACQUISITION
NOVEMBER 30, DECEMBER 31, OFFERING OF BAN
1997 1997 ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 4,858 $ 189,600(a) $(178,350)(b) $ 16,108
Accounts receivable........................... 28,078 28,078
Inventories................................... 14,493 $ 8,252 22,745
Other current assets.......................... 2,543 2,543
------------ ------------ -----------
Total current assets........................ 49,972 8,252 69,474
------------ ------------ -----------
Property, plant and equipment, net.............. 10,988 8,934 19,922
------------ ------------ -----------
Other non-current assets:
Investment in Elcat, Inc...................... 6,640 6,640
Patents, trademarks and other purchased
product rights, net......................... 104,972 152,843(c) 257,815
Other non-current assets...................... 6,172 10,400(d) 16,572
------------ -----------
Total non-current assets.................... 117,784 281,027
------------ ------------ -----------
Total assets.............................. $ 178,744 $ 17,186 $ 370,423
------------ ------------ -----------
------------ ------------ -----------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.......... $ 8,919 $ 8,919
Accounts payable and other.................... 11,937 11,937
Accrued liabilities........................... 13,596 $ 4,679 18,275
------------ ------------ -----------
Total current liabilities................. 34,452 4,679 39,131
------------ ------------ -----------
Long-term debt.................................. 133,475 200,000(a) 320,475
(13,000) (b)
Other non-current liabilities................... 6,447 6,447
Shareholders' equity:
Net assets acquired........................... 12,507 (12,507)(e)
Common stock.................................. 1,945 1,945
Paid-in surplus............................... 63,975 63,975
Accumulated deficit........................... (60,229) (60,229)
Foreign currency translation.................. (1,321) (1,321)
------------ ------------ -----------
Total shareholders' equity.................. 4,370 12,507 4,370
------------ ------------ -----------
Total liabilities and
shareholders' equity $ 178,744 $ 17,186 $ 370,423
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
10
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
The Pro Forma Consolidated Balance Sheet reflects the Transaction and the
Offering as if they had occurred as of November 30, 1997 (actual amounts may
differ from amounts estimated below).
(a) Reflects the issuance of the Notes and the Secured Credit Facility
Amendment:
<TABLE>
<CAPTION>
<S> <C>
Issuance of the Notes.......................................... $ 200,000
Issuance-related fees and expenses............................. (10,400)
---------
$ 189,600
---------
---------
</TABLE>
(b) Represents the following cash payments related to the Acquisition:
<TABLE>
<CAPTION>
<S> <C>
Purchase price................................................. $(165,000)
Acquisition expenses........................................... (350)
Repayment of revolving credit indebtedness..................... (13,000)
---------
$(178,350)
---------
---------
</TABLE>
(c) The Acquisition will be accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations". The
purchase price is being allocated first to the tangible and identifiable
intangible assets and liabilities of BAN based upon preliminary estimates of
their fair market values, with the remainder allocated to "Patents,
trademarks, and other purchased products rights" as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchase price................................................. $ 165,000
Acquisition expenses........................................... 350
Book value of net assets acquired.............................. (12,507)
---------
Increase in intangible assets.................................. $ 152,843
---------
---------
</TABLE>
(d) Reflects the deferred financing costs related to the Offering and Secured
Credit Facility Amendment.
(e) Reflects the elimination of the BAN net asset balance.
11
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
CHATTEM FOR PRO FORMA
THE YEAR HISTORICAL BAN ADJUSTMENTS
ENDED FOR THE YEAR ------------------------
NOVEMBER 30, ENDED DECEMBER ACQUISITION OFFERING
1997 31, 1997 ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------ -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales................................... $ 143,235 $ 96,152 $ 239,387
Cost of sales............................... 39,253 32,780 $ (7,227)(a) 64,806
Advertising and promotion................... 56,176 32,037 3,821(b) 92,034
Selling, general and administrative......... 22,303 6,594 28,897
------------ -----------
Income from operations...................... 25,503 53,650
Interest expense............................ 15,934 $ 16,658(c) 33,708
1,116(d)
Other income, net........................... (1,679) (1,679)
------------ -----------
Income from continuing operations before
income taxes.............................. 11,248 21,621
Provision for income taxes.................. 3,993 8,907(e) 1,226(e) (6,399)(e) 7,727
------------ -----------
Income from continuing operations........... $ 7,255 $ 13,894
------------ -----------
------------ -----------
Other Financial Data:
EBITDA...................................... $ 31,208 $ 64,069
EBITDA Margin............................... 21.8% 26.8%
</TABLE>
12
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
(a) Reflects management's estimate of the cost savings that will be generated
following consummation of the acquisition of BAN. The Company expects to
realize significant cost savings through agreements with contract
manufacturers for the production of BAN products. Chattem has identified and
is negotiating with three contract manufacturers to produce BAN. The Company
anticipates entering into agreements prior to the closing of the Acquisition
and shifting production to one or more of these contract manufacturers
within approximately three months after the closing of the Acquisition.
(b) Represents additional amortization of trademarks.
(c) Reflects the increase in cash interest expense resulting from the incurrence
of indebtedness under the Notes offset by the interest savings resulting
from the repayment of the revolving credit indebtedness. A change of 1/4% in
the interest rate on the Notes and the Secured Credit Facility would have an
impact on pro forma interest expense of $649 for the year ended November 30,
1997.
(d) To record the increase in interest expense related to the amortization of
deferred financing costs.
(e) Represents income tax expense (benefit) at an effective tax rate of 36.0%.
13
<PAGE>
(c) Exhibits
2.1 Asset Purchase Agreement dated as of February 22, 1998
by and among Bristol-Myers Squibb Company, Signal
Investment & Management Co. and Chattem, Inc.
23.1 Consent of Price Waterhouse LLP
99.1 Press Release dated March 24, 1998.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
April 8, 1998 CHATTEM, INC.
By: /s/ A. Alexander Taylor II
---------------------------------------
A. Alexander Taylor II,
President and Chief Operating Officer
15
<PAGE>
ASSET PURCHASE AGREEMENT
by and among
BRISTOL-MYERS SQUIBB COMPANY
as the Seller,
and
SIGNAL INVESTMENT & MANAGEMENT CO.
and
CHATTEM, INC.
as the Purchasers
Dated as of February 22, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Definitions.............................................1
ARTICLE II
SALE AND PURCHASE OF ASSETS
Section 2.1 Transfer of Assets. ...................................7
Section 2.2 Assumed Contracts; Assumed Liabilities..................8
Section 2.3 Purchase Price.........................................10
Section 2.4 Closing................................................11
Section 2.5 Inventory Adjustment...................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Section 3.1 Organization...........................................12
Section 3.2 Authority Relative to this Agreement...................13
Section 3.3 Consents and Approvals; No Violations..................13
Section 3.4 Financial Statements...................................13
Section 3.5 Absence of Certain Changes.............................14
Section 3.6 Title to Assets........................................14
Section 3.7 Trademarks.............................................15
Section 3.8 Patents................................................15
Section 3.9 Other Intellectual Property............................16
Section 3.10 Material Contracts....................................16
Section 3.11 No Default............................................17
Section 3.12 Compliance with Law...................................17
Section 3.13 Litigation............................................17
Section 3.14 Product Liability Matters.............................17
Section 3.15 Customers.............................................17
Section 3.16 Brokers or Finders....................................18
Section 3.17 Inventory.............................................18
Section 3.18 No Other Representations or Warranties................18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Section 4.1 Organization...........................................18
Section 4.2 Authority Relative to this Agreement...................18
Section 4.3 Consents and Approvals; No Violations..................19
Section 4.4 Brokers or Finders.....................................19
Section 4.5 Investigation by Purchasers............................19
i
<PAGE>
Section 4.6 No Proceedings.........................................20
Section 4.7 Financing..............................................20
Section 4.8 No Other Representations or Warranties.................21
ARTICLE V
COVENANTS
Section 5.1 Conduct of the Business................................21
Section 5.2 Access to Information; Confidentiality.................21
Section 5.3 Best Efforts...........................................23
Section 5.4 Further Assurances.....................................23
Section 5.5 Property Transfer Taxes................................23
Section 5.6 Publicity..............................................24
Section 5.7 Lion Agreement.........................................24
Section 5.8 Supplemental Disclosure................................24
Section 5.9 Inventory and Packaging................................25
Section 5.10 Use of Seller's Name and Trademark After Closing......25
Section 5.11 Manufacturing Equipment Post Closing..................25
Section 5.12 Product Returns; Promotional Allowances...............26
Section 5.13 Non-Competition.......................................27
Section 5.14 Financial Statements..................................28
Section 5.15 Employees.............................................28
Section 5.16 Thailand..............................................28
Section 5.17. Certain Supply Arrangements..........................28
ii
<PAGE>
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligations.................29
Section 6.2 Conditions to Obligations of the Purchasers............29
Section 6.3 Conditions to Obligations of the Seller................30
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1 Termination............................................31
Section 7.2 Effect of Termination..................................31
Section 7.3 Amendment..............................................31
Section 7.4 Extension; Waiver......................................31
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
Section 8.1 Survival Period........................................32
Section 8.2 Indemnification........................................32
Section 8.3 Indemnification Procedures.............................33
Section 8.4 Limitation of Liability................................34
Section 8.5 Other Matters..........................................35
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices................................................36
Section 9.2 Descriptive Headings...................................37
Section 9.3 Counterparts...........................................37
Section 9.4 Entire Agreement.......................................37
Section 9.5 Fees and Expenses......................................37
Section 9.6 Governing Law..........................................37
Section 9.7 Specific Performance...................................38
Section 9.8 Assignment.............................................38
Section 9.9 Parties in Interest....................................38
Section 9.10 Knowledge.............................................38
Section 9.11 Interpretation........................................38
Section 9.12 Severability..........................................39
Section 9.13 Payments..............................................39
Section 9.14 Joint and Several Liability...........................39
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A - Form of Patent License Agreement
Exhibit B - Form of Technology License Agreement
iii
<PAGE>
Exhibit C - Form of Consent to Use and Register Agreement
Exhibit D - Form of Assignment of Patents
Exhibit E - Form of Assignment of Trademarks
Exhibit F - Form of Transitional Manufacturing Agreement
Exhibit G - Form of Instrument of Assignment and Assumption
Exhibit H - Form of Bill of Sale
Exhibit I - Form of Instrument of Assumption
</TABLE>
iv
<PAGE>
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of
the 22nd day of February, 1998, by and among Bristol-Myers Squibb Company, a
Delaware corporation (the "Seller"), and Chattem, Inc., a Tennessee corporation
("Chattem"), and Signal Investment & Management Co., a Delaware corporation and
wholly-owned subsidiary of Chattem ("Signal") (Chattem and Signal referred to
together as the "Purchasers").
W I T N E S S E T H
WHEREAS, the Seller is engaged in developing, manufacturing,
and marketing the Ban brand (the "Brand") of antiperspirant and deodorant
products;
WHEREAS, the Purchasers have agreed to acquire from the
Seller, and the Seller has agreed to sell to the Purchasers the Conveyed Assets
(as defined herein) on the terms and subject to the conditions set fort herein;
WHEREAS, the Purchasers have agreed to assume from the Seller
the Assumed Liabilities (as defined herein) and;
WHEREAS, the Purchasers have agreed to assume from the Seller,
and the Seller has agreed to assign to the Purchasers, the Seller's rights and
obligations under the Assumed Contracts (as defined herein).
NOW, THEREFORE, in consideration of the premises, covenants,
representations and warranties contained herein, and other good and valuable
consideration, the adequacy and receipt of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Accountants" shall have the meaning ascribed thereto in
Section 2.5(c).
<PAGE>
"Accounts Receivable" shall mean all accounts receivable,
notes receivable and other indebtedness due and owed by any third party to the
Seller or any of its Affiliates arising or held in connection with the Business.
"Affiliate" shall mean, with respect to any Person, any Person
which, directly or indirectly, controls, is controlled by, or is under common
control with, the specified Person. For purposes of this definition, the term
"control" as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management of
that Person, whether through ownership of voting securities or otherwise.
"Assignment of Patents" shall mean the Assignment of Patents
executed by the Seller and Signal in substantially the form of Exhibit D hereto.
"Assignment of Trademarks" shall mean the Assignment of
Trademarks executed by the Seller and Signal in substantially the form of
Exhibit E hereto.
"Assumed Contracts" shall have the meaning ascribed to it in
Section 2.2(a).
"Assumed Liabilities" shall have the meaning ascribed to it in
Section 2.2(b).
"Audited Statement" shall have the meaning ascribed to it in
Section 3.4.
"Authorizations" shall have the meaning ascribed to it in
Section 6.1(b).
"Brand" shall have the meaning ascribed to it in the recitals
to this Agreement.
"Brazil Litigation" shall mean the action instituted in Brazil
by the Seller to annul certain trademark registrations secured by Brasden,
Industria E Comercio De Escovas LTDA in Brazil.
"Business" shall mean the business of developing,
manufacturing and marketing the antiperspirant and deodorant products
constituting the Brand as such business is currently conducted by Seller except
in or with respect to Japan.
"Calculation" shall have the meaning ascribed to it in Section
2.5(a).
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"Claim" shall have the meaning ascribed to it in Section 8.3.
"Claim Notice" shall have the meaning ascribed to it in
Section 8.3.
"Closing" shall have the meaning ascribed to it in Section
2.4(a).
"Closing Date" shall have the meaning ascribed to it in
Section 2.4(a).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Competitive Business" shall have the meaning ascribed to it
in Section 5.13.
"Confidentiality Agreement" shall have the meaning ascribed to
it in Section 5.2(b).
"Confidential Information" shall have the meaning ascribed to
it in Section 5.2(e).
"Consent to Use and Register Agreement" shall mean the Consent
to Use and Register Agreement executed by the Seller and Signal in substantially
the form of Exhibit C hereto.
"Conveyed Assets" shall have the meaning ascribed to it in
Section 2.1.
"Excess Returns" shall have the meaning ascribed to it in
Section 5.12.
"Excluded Liabilities" shall have the meaning ascribed to it
in Section 2.2(c).
"FDA Act" shall have the meaning ascribed to it in Section
3.17.
"Financial Statements" shall have the meaning ascribed to it
in Section 3.4.
"Formulae" shall mean the percentages and specifications of
ingredients currently used in the antiperspirant and deodorant products
manufactured and sold by Seller under the Brand name in the Business, excluding
any such percentages and specifications of ingredients subject to the Technology
License Agreement.
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"GAAP" shall mean United States generally accepted accounting
principles as in effect on the date hereof.
"Governmental Entity" shall mean a court, legislature,
governmental agency, commission or regulatory authority or instrumentality.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnified Party" shall have the meaning ascribed to it in
Section 8.3.
"Indemnifying Party" shall have the meaning ascribed to it in
Section 8.3.
"Instrument of Assignment and Assumption" shall have the
meaning ascribed to it in Section 2.4(b).
"Instrument of Assumption" shall have the meaning ascribed to
it in Section 2.4(c).
"Intellectual Property" shall mean, collectively, Formulae,
Trademarks, Patents and any Other Intellectual Property not subject to the
Technology License Agreement.
"Inventory" shall have the meaning ascribed to it in Section
2.1(v).
"Lien" shall mean any lien, security interest, pledge,
mortgage or similar encumbrance.
"Lion" shall have the meaning ascribed to it in Section 5.7.
"Lion Agreement" shall have the meaning ascribed to it in
Section 5.7.
"Losses" shall have the meaning ascribed to it in Section
8.2(a).
"Margin" shall have the meaning ascribed to it in Section
5.12.
"Material Adverse Effect" shall have the meaning ascribed to
it in Section 3.3.
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"Notice Period" shall have the meaning ascribed to it in
Section 8.3.
"Other Intellectual Property" shall have the meaning ascribed
to it in Section 3.9.
"Patents" shall mean the patent registrations and patent
applications listed on Schedule 3.8(a) hereto.
"Patent License Agreement" shall mean the license agreement
between the Seller and Signal relating to certain Patents associated with the
Brand, in substantially the form of Exhibit A hereto.
"Permitted Liens" shall mean, collectively (i) Liens for taxes
or assessments which are not delinquent or are being contested in good faith by
appropriate proceedings; (ii) mechanics', warehousemens', materialmens',
contractors', workmens', repairmens' and carriers' liens, and other similar
Liens arising in the ordinary course for obligations which are not delinquent;
(iii) the rights, if any, of third-party suppliers or other vendors having
possession of manufacturing equipment of the Business; and (iv) Liens which do
not materially impair the current use or the value of the assets subject to such
Liens.
"Person" shall mean any individual, group, corporation,
partnership or other organization or entity (including without limitation any
Governmental Entity).
"Proceeding" shall have the meaning ascribed to it in Section
3.13(a).
"Promotional Liabilities" shall have the meaning ascribed to
it in Section 2.2(b).
"Purchase Price" shall have the meaning ascribed to it in
Section 2.3(a).
"Purchasers" shall have the meaning ascribed to it in the
preamble hereto.
"Purchasers' Liabilities" shall have the meaning ascribed to
it in Section 2.2(c).
"Purchasers' Officer's Certificate" shall have the meaning
ascribed to it in Section 6.3(c).
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"Related Instruments" shall mean the Instrument of Assignment
and Assumption, the Instrument of Assumption, the Transitional Services
Agreement, the Assignment of Patents, the Assignment of Trademarks, the Consent
to Use and Register Agreement, the Technology License Agreement and the Patent
License Agreement.
"Retained Information" shall mean any and all books and
records prepared and maintained by the Seller in connection with the Business,
including without limitation, laboratory books, batch records and stability
studies, that will be retained by the Seller, due to the fact that such
information does not relate exclusively to the Business or otherwise is
appropriately retained by the Seller, in connection with the Seller's conduct of
the Business prior to the Closing Date.
"Returns Limit" shall have the meaning ascribed to it in
Section 5.12.
"Schedule", unless otherwise indicated, shall mean a schedule
to the Disclosure Schedules, a copy of which has been delivered to the
Purchasers by the Seller on or before the date hereof.
"Seller" shall have the meaning ascribed to it in the preamble
hereto.
"Seller's Officer's Certificate" shall have the meaning
ascribed to it in Section 6.2(c).
"Survival Period" shall have the meaning ascribed to it in
Section 8.1.
"Taxes" shall mean any and all taxes, levies or other like
assessments, including, but not limited to, income, transfer, gains, gross
receipts, excise, inventory, property (real, personal or intangible), custom
duty, sales, use, license, withholding, payroll, employment, capital stock and
franchise taxes, imposed by the United States, or any state, local or foreign
government or subdivision or agency thereof.
"Tax Return" shall mean any report, return or other
information filed with any taxing authority with respect to Taxes imposed upon
or attributable to the operations of the Business.
"Technology License Agreement" shall mean the Technology
License Agreement executed by the Seller and Signal in substantially the form of
Exhibit B hereto.
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"Trademarks" shall mean the trademark registrations and
trademark applications listed on Schedule 3.7(a) hereto, together with the
goodwill associated therewith.
"Transitional Manufacturing Agreement" shall mean the
agreement between Signal and the Seller relating to the provision of certain
short-term manufacturing services in substantially the form of Exhibit F hereto.
"Unaudited Statement" shall have the meaning ascribed to it in
Section 3.4.
"VAT" shall have the meaning ascribed to it in Section 5.5.
ARTICLE II
SALE AND PURCHASE OF ASSETS
Section 2.1 Transfer of Assets. On the terms and subject to
the conditions set forth in this Agreement, at the Closing the Seller shall sell
and cause its Affiliates to sell to the Purchasers and the Purchasers shall
purchase from the Seller, all of Seller's and its Affiliates' rights, title and
interest in those certain assets set forth below (collectively, the "Conveyed
Assets"):
(i) the manufacturing equipment and packaging assets owned by
the Seller that are used primarily in the manufacture of the Brand product line
and set forth on Schedule 2.1(i), located at the Seller's Morrisville, North
Carolina manufacturing facility or at certain other contract manufacturing
locations identified on such Schedule, and any associated warranty rights
applicable to such manufacturing equipment, to the extent that the Seller is
permitted to transfer such rights;
(ii) the equipment owned by the Seller that is used primarily
in the Brand pilot production line and set forth on Schedule 2.1(ii), located at
the Seller's Hillside, New Jersey facility, and any associated warranty rights
applicable to such pilot production line equipment, to the extent that the
Seller is permitted to transfer such rights;
(iii) the Intellectual Property;
(iv) the rights to the product advertisements set forth on
Schedule 2.1(iv) and files located at the advertising agency of record, to the
extent that they are owned by the Seller and relate exclusively to Brand
products;
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(v) all inventories of the Business, including raw materials,
goods in process, finished goods, packaging, supplies and labels (the
"Inventory");
(vi) all market research, customer information, promotional
data, and advertising and display materials exclusively related to the Business,
in each case to the extent transferable in light of legal, contractual and
practical considerations; and
(vii) all records and recorded information, including customer
and supplier lists exclusively related to the Business, the Conveyed Assets or
the Brand, other than the Retained Information, in each case to the extent
transferable in light of legal, contractual and practical considerations.
The Purchasers acknowledge that they are not purchasing cash,
real estate or Accounts Receivable, or any other assets of the Seller other than
the Conveyed Assets, and that the Conveyed Assets do not include or confer any
rights to manufacture, sell or market Brand products in Japan. The Purchasers
acknowledge and agree that Seller conducts the Business only in certain
jurisdictions and not on a worldwide basis. The Purchasers further acknowledge
that the US$50,000 bond posted by the Seller in connection with the Seller's
prosecution of the Brazil Litigation is not being transferred to the Purchasers.
The Purchasers shall be entitled however, following the Closing Date, to
participate in Seller's prosecution of the Brazil Litigation, and upon notice
from the Seller that Seller will no longer prosecute the Brazil Litigation, be
entitled to an assignment, to the full extent permitted under the laws of
Brazil, of all of Seller's rights to prosecute the Brazil Litigation.
Section 2.2 Assumed Contracts; Assumed Liabilities. (a) On the
terms and subject to the conditions set forth in this Agreement, at the Closing
the Seller shall assign to the Purchasers all of its rights and obligations
under the contracts and agreements set forth in Schedule 2.2(a) (the "Assumed
Contracts") and the Purchasers shall assume all of the Seller's rights and
obligations thereunder; provided, however, that the Seller shall assign such
rights and obligations only to the extent that such rights and obligations are
assignable under such Assumed Contracts and applicable law, and no action
hereunder shall constitute an assignment thereof except to such extent and
provided, further, that to the extent consent of a third party to the assignment
of any Assumed Contract by the Seller to the Purchasers are required pursuant to
the terms of such Assumed Contract or applicable law, no assignment or attempted
assignment will be deemed to have been effected by the provisions of this
Agreement without such consent. To the extent that the Seller cannot assign any
contracts or agreements that would otherwise constitute material Assumed
Contracts, the Seller and the Purchasers will use their reasonable efforts to
enter into arrangements sufficient to provide equivalent benefits and burdens to
the Purchasers.
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<PAGE>
(b) In addition to the Seller's rights and obligations under
the Assumed Contracts, at the Closing the Purchasers shall assume (i) subject to
the provisions of Section 5.12(b) hereof all advertising and promotional
liabilities existing as of the Closing Date, including without limitation,
coupon redemptions, trade promotions, co-op advertising, and promotional
allowances, incurred by the Seller with respect to the Brand (collectively,
"Promotional Liabilities"), (ii) all product liability or similar claims made
with respect to the Brand products after the Closing Date except to the extent
set forth in Section 2.2(c) of this Agreement, (iii) subject to the provisions
of Section 5.12(a) hereof, all liabilities associated with the return of Brand
products, (iv) except as otherwise provided herein, all liabilities or
obligations associated with any Conveyed Asset arising after the Closing, (v)
all liabilities for raw materials, work in process and inventory at Les
Emballages Knowlton incurred in the ordinary course of business in connection
with purchase orders then in effect for the manufacture of Brand products, which
have not been invoiced to the Seller prior to the Closing Date and (vi) all
liabilities arising under the Assumed Contracts (collectively, the "Assumed
Liabilities"). The Purchasers hereby agree to reimburse the Seller, dollar for
dollar, in the event that any of the Seller's customers offset the cost of Brand
products returned by such customer or Promotional Liabilities attributable to
such customer against accounts payable by such customer to the Seller to the
extent that such product returns or Promotional Liability would be the
responsibility of the Purchasers pursuant to Section 5.12 hereof. Seller agrees
to provide notice to the Purchasers of any such offset for which Seller is
entitled to be reimbursed by the Purchasers pursuant to this Section 2.2(b). The
Purchasers shall pay Seller promptly following receipt of notice of any such
offset (together with supporting documentation reasonably acceptable to
Purchasers) by a customer. Seller and the Purchasers shall cooperate to ensure
that the customer does not offset such Promotional Liabilities or product
returns against both Seller and the Purchasers.
(c) Following the Closing, the Purchasers shall be solely and
exclusively liable with respect to the Assumed Liabilities and all liabilities
or obligations of the Purchasers arising as a result of the Purchasers'
purchase, ownership, use or operation of the Conveyed Assets or conduct of the
Business (collectively, the "Purchasers' Liabilities"). Other than the Assumed
Liabilities, the Purchasers shall not assume any liabilities of Seller arising
as a result of Seller's ownership, use, or operations of the Conveyed Assets or
conduct of the Business prior to Closing (the "Excluded Liabilities"). Except as
expressly provided in this Section 2.2, or elsewhere in this Agreement, it is
understood and agreed that the Purchasers do not assume or agree hereunder to
pay, perform or discharge, and the Seller shall pay, discharge and hold the
Purchasers harmless from, any debt, obligation, tax or liability,
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<PAGE>
known or unknown, contingent or otherwise, of the Seller of any kind or nature
whatsoever. Without limiting the foregoing, except as expressly provided in
Section 2.2(b), in no event shall the Purchasers assume or incur any liability
or obligation in respect of any of the following:
(i) payables and liabilities for materials and services owed
by the Seller, with respect to the manufacture of Brand products prior to the
Closing;
(ii) any product liability, breach of warranty, or similar
claim for injury to person or property regardless of when asserted, which
resulted from the use of product inventory manufactured by or on behalf of the
Seller and shipped to a third party prior to the Closing;
(iii) any federal, state or local income or other tax payable
with respect to any business, assets, properties or operation of the Seller or
any member of any affiliated group of which the Seller is a member for any
period prior to the Closing;
(iv) any liability or obligation with respect to periods prior
to the Closing under any law, ordinance or governmental or regulatory rule or
regulation, whether federal, state or local, to which the Seller's business
operations, assets or properties is subject, including any environmental laws or
regulations; or
(v) any liability or obligation with respect to periods prior
to, or as a result of, the Closing to any employees, agents or independent
contractors of the Seller, whether or not employed by the Purchasers after the
Closing, or under any benefit arrangement of the Seller with respect thereto.
Section 2.3 Purchase Price. (a) In consideration for the sale
of the Conveyed Assets and assignment of the Assumed Contracts, at the Closing
the Purchasers shall pay the Seller $165,000,000 in cash by wire transfer of
immediately available funds (the "Purchase Price"), which Purchase Price shall
be subject to adjustment on the basis of the calculation of the value of the
Inventory as of the Closing Date in accordance with Section 2.5 hereof.
(b) The Seller and the Purchasers shall negotiate in good
faith to allocate the Purchase Price among the U.S. and non-U.S. assets which
constitute the Conveyed Assets being purchased by the Purchasers pursuant to
this Agreement, and in accordance with applicable laws, including, without
limitation, Section 1060 of the Code. In the event that the Purchasers and the
Seller agree on an allocation of the Purchase Price prior to the Closing Date,
such allocation shall be set forth on Sched-
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ule 2.3(b). Neither the Seller nor the Purchasers shall file any tax return or
other document or otherwise take any position which is inconsistent with the
allocation agreed upon pursuant to this Section 2.3(b).
Section 2.4 Closing. (a) The consummation of the transactions
contemplated by this Agreement (the "Closing") will take place on the second
business day following the satisfaction or waiver of the conditions set forth in
Article VI hereof, at 10:00 a.m., at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, 919 Third Avenue, New York, New York, or at such other time
and place as shall be mutually agreed upon by the parties. The parties agree to
use their best efforts to cause the Closing to occur on or before March 31,
1998. The date on which the Closing occurs is referred to herein as the "Closing
Date."
(b) At the Closing, the Seller shall deliver or cause to be
delivered to the Purchasers, the following: (i) a duly executed instrument of
assignment and assumption of the Assumed Contracts substantially in the Form of
Exhibit G hereto (the "Instrument of Assignment and Assumption"); (ii) a duly
executed Patent License Agreement; (iii) a duly executed Technology License
Agreement; (iv) a duly executed Consent to Use and Register Agreement; (v) a
duly executed Assignment of Patents; (vi) a duly executed Assignment of
Trademarks; (vii) a duly executed Transitional Manufacturing Agreement; (viii) a
duly executed bill of sale and assign ment, in substantially the form of Exhibit
H hereto; and (ix) the Seller's Officer's Certificate.
(c) At the Closing, the Purchasers shall deliver to the
Seller, the following: (i) cash in the amount of the Purchase Price by wire
transfer of immediately available funds to an account designated by the Seller;
(ii) a duly executed Instrument of Assignment and Assump tion; (iii) a duly
executed Patent License Agreement; (iv) a duly executed Technology License
Agreement; (v) a duly executed Consent to Use and Register Agreement; (vi) a
duly executed Assignment of Patents; (vii) a duly executed Assignment of
Trademarks; (viii) a duly executed Transitional Manufacturing Agreement; (ix) a
duly executed instrument of assumption of the Assumed Liabilities substantially
in the Form of Exhibit I hereto (the "Instrument of Assump tion"); and (x) the
Purchasers' Officer's Certificate.
Section 2.5 Inventory Adjustment (a) On or prior to the
Closing Date, the Seller and the Purchasers shall jointly conduct a physical
count of the Inventory as of the Closing Date and the Purchasers shall make or
cause to be made a calculation of the Inventory value as of the Closing Date in
accordance with the Seller's accounting policies (as referred to in the last
sentence of Section 3.4) for determining standard costs (the "Calculation"). Any
Inventory that exceeds a 12
11
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month supply (as measured on the basis of sales for the 6 month period preceding
the Closing Date), to the extent of such excess, or Inventory that is not of a
good and merchantable quality, shall not be included in the Calculation. For
purposes of the Calculation, (I) all "twin-pack" or similarly packaged items
shall be treated as separate stock items and (II) all finished goods Inventory
which has a shelf-life expiration date of less than twelve months (or in the
case of Ban Clear Roll-on, six months) from the Closing Date shall be excluded
from the Calculation. The Purchasers shall also provide Seller with copies of
the Calculation and all work papers associated therewith within 15 days after
the Closing Date. The Purchasers may not assert a claim for indemnification with
respect to any Inventory that is not included in the Calculation.
(b) Seller shall have a period of 30 days in which to review
the Calcula tion and the work papers associated therewith provided by the
Purchasers. If the Seller disagrees with all or any part of the Calculation, the
Seller shall have the right to notify Purchasers in writing of such disagreement
and their reasons for so disagreeing, in which case the Seller and the
Purchasers shall attempt to resolve the disagreement. If within 15 days after
receipt of such notice by Seller, the Seller and the Purchasers are unable to
resolve the differences, if any, arising as a result of the Calculation, they or
either of them shall submit a statement of all unresolved differences together
with copies of the Calculation to Ernst & Young or such other independent
accounting firm as shall be mutually agreed (the "Accountants") for a binding
and nonappealable determination to be rendered within 30 days after such submis
sion. All fees and expenses of the Accountants incurred in this capacity shall
be billed to and shared by the Seller and the Purchasers equally.
(c) If the Calculation reflects an Inventory value that is
either less than $8,300,000 or in excess of $8,700,000, the Purchase Price will
be reduced or increased dollar-for-dollar, as the case may be, by the amount of
such difference, and the Purchasers will pay the amount of any such increase to
the Seller or the Seller will pay the amount of any such decrease to the
Purchasers, in immediately available funds, within five business days after the
final determination of the Inventory value.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchasers as
follows:
Section 3.1 Organization. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The
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Seller has all requisite corporate power and authority to own, lease and operate
the Conveyed Assets and to carry on the Business as it is presently conducted.
Section 3.2 Authority Relative to this Agreement. The Seller
has the requisite corporate power and authority to execute and deliver this
Agreement and the Related Instruments. The execution and delivery of this
Agreement and the Related Instruments and the performance by the Seller of its
obligations hereunder and thereunder have been authorized by all requisite
corporate action on the part of the Seller. This Agreement has been validly
executed and delivered by the Seller and, assuming that this Agreement has been
duly authorized, executed and delivered by the Purchasers, constitutes, and each
Related Instrument that is to be executed and delivered by the Seller will
constitute when executed and delivered by the Seller, a valid and binding
obligation of the Seller enforceable against the Seller in accordance with its
terms; except that such enforceability is subject to and limited by the effect
of bankruptcy, insol vency, reorganization, arrangement and moratorium laws,
laws relating to fraudulent transfers or conveyances and general principles of
equity (whether asserted in an action at law or in equity).
Section 3.3 Consents and Approvals; No Violations. (a) Except
as set forth in Schedule 3.3(a), neither the execution and delivery of this
Agreement or any Related Instrument by the Seller nor the performance by the
Seller of its obligations hereunder or thereunder will (i) violate the
certificate of incorporation or by-laws of the Seller, (ii) result in a
violation or breach of, or constitute a default under, any contract, agreement
or instrument to which the Seller is a party or by which the Conveyed Assets are
bound or (iii) violate any order or decree of any court applicable to Seller or
the Conveyed Assets, except in the case of clauses (ii) or (iii) for violations,
breaches or defaults which would not result in a material adverse effect on the
operations or the conduct of the Business, taken as a whole (a "Material Adverse
Effect"), or materially delay the consummation of the transactions contemplated
hereby.
(b) Except for the applicable requirements of the HSR Act and
except as set forth on Schedule 3.3(b), no filing with, and no permit,
authorization, consent or approval of, any Governmental Entity is necessary for
the consummation by the Seller of the transactions contemplated by this
Agreement, except for those filings, permits, authorizations, consents or
approvals the failure of which to be made or obtained would not result in a
Material Adverse Effect or materially delay the consummation of the transactions
contemplated hereby.
Section 3.4 Financial Statements. Schedule 3.4 (i) sets forth
the audited Statement of U.S. Net Sales and Product Contribution for the nine
months
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ended September 30, 1997 and 1996 and years ended December 31, 1996 and 1995,
together with the related notes thereto and the related opinions of the
independent accountants of the Seller (the "Audited Statement"), and Schedule
3.4 (ii) sets forth the unaudited Statement of U.S. Net Sales and Product
Contribution for the year ending December 31, 1997 (the "Unaudited Statement",
and together with the Audited Statement, the "Financial Statements"). Each of
the Financial Statements has been prepared in accordance with the Seller's
accounting policies applied on a consistent basis, which are in accordance with
GAAP and fairly present, in all material respects, as of the dates thereof and
for the periods then ended the U.S. Sales and Product Contribution of the
Business.
Section 3.5 Absence of Certain Changes. Since September 30,
1997 and through the date hereof, the Seller has conducted the Business
(including product pricing) in the ordinary course and in accordance with the
planned promotion calendars for the Brand products for 1997 and 1998 attached
hereto as Schedule 3.5 and the Seller has not (i) incurred any material Assumed
Liability except for liabilities incurred in the ordinary course of business;
(ii) mortgaged, pledged or subjected any Conveyed Assets to any Lien other than
Permitted Liens; (iii) except in the ordinary course of business, disposed of to
any third party any of the material assets of Seller necessary for the conduct
of the Business; (iv) except in the ordinary course of business, transferred to
any third party any material rights under any licenses, sublicenses or other
agreements with respect to any material Intellectual Property; (v) except in the
ordinary course of business, surrendered, revoked or otherwise terminated or had
terminated any material license, permit, registration or other approval,
authorization or consent from any Governmental Entity relating to the conduct of
the Business; or (vi) entered into any agreement or arrangement to take any
action described in clauses (i)-(v) of this Section 3.5.
Section 3.6 Title to Assets. (a) The Seller has, and at the
Closing the Seller will deliver to the Purchasers, good and valid title to all
of the Conveyed Assets, free and clear of all Liens, other than Permitted Liens.
(b) The manufacturing equipment and packaging assets set forth
on Schedules 2.1(i) and 2.1(ii) includes all of the material manufacturing
equipment and tangible packaging assets and all of the pilot production
equipment currently owned and used by the Seller primarily in the Business. All
such manufacturing and packaging equipment currently used in connection with
manufacturing Brand products has been maintained by the Seller in accordance
with standard maintenance practices applicable to such equipment and is in good
operating condition and repair, subject to normal wear and maintenance.
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Section 3.7 Trademarks. (a) Schedule 3.7(a) lists the
registrations and applications for trademarks used in the conduct of the
Business that are being assigned to Signal. Except as indicated on Schedule
3.7(a), the Seller is the owner of the trademark registrations and applications
set forth on Schedule 3.7(a) (including the goodwill associated therewith), the
United States trademark registrations and applications set forth on Schedule
3.7(a) are valid and in good standing, the trademark registrations and
applications set forth on Schedule 3.7(a) for jurisdictions outside of the
United States are, to the Seller's knowledge, valid and in good standing; to the
Seller's knowledge, no third party has a superior right to Seller to use any of
the trademarks as set forth on Schedule 3.7(a); except as indicated on Schedule
3.7(a), no notice has been received by the Seller claiming that any trademark
registra tion or application set forth on Schedule 3.7(a) infringes upon the
rights of any other persons, and the Seller has no knowledge of any basis for
any such claim; and, except as indicated on Schedule 3.7(a), none of the
trademarks set forth on Schedule 3.7(a) is currently licensed to or by the
Seller.
(b) Schedule 3.7(b) lists all of the trademark registrations
and applications used in the conduct of the Business and owned by the Seller
which shall be subject to the terms and conditions of the Consent to Use and
Register Agreement. Except as indicated on Schedule 3.7(b), the Seller is the
owner of the trademark registrations and applications (including the goodwill
associated therewith) set forth on Schedule 3.7(b), the United States trademark
registrations and applications set forth on Schedule 3.7(b) are valid and in
good standing, the trademark registrations and applications set forth on
Schedule 3.7(b) for jurisdictions outside the United States are, to the Seller's
knowledge, valid and in good standing; to the Seller's knowledge, no third party
has a superior right to Seller to use any of the trademarks as set forth on
Schedule 3.7(b); except as indicated on Schedule 3.7(b), no notice has been
received by the Seller claiming that any trademark registration or application
set forth on Schedule 3.7(b) infringes upon the rights of any other persons, and
the Seller has no knowledge of any basis for any such claim; and, except as
indicated on Schedule 3.7(b), none of the trademarks set forth on Schedule
3.7(b) is currently 1icensed to or by the Seller.
(c) Schedules 3.7(a) and 3.7(b) list all of the registrations
and applications for trademarks used by the Seller in the conduct of the
Business.
Section 3.8 Patents. (a) Schedule 3.8(a) lists the patent
registrations and patent applications in the United States and Canada used in
the conduct of the Business, except for those patents covered by the respective
agreements set forth on Schedule 3.10 to which General Electric Company ("GE")
and Henkel Kommaditgesellschaft ("Henkel") are party. Except as indicated on
Schedule 3.8(a),
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the Seller is the owner of the patent registrations and applica tions set forth
on Schedule 3.8(a), the patent registrations set forth on Schedule 3.8(a) are,
to the Seller's knowledge, valid; and, except as indicated on Schedule 3.8(a),
none of the patent registrations set forth on Schedule 3.8(a) is currently
licensed to or by the Seller.
(b) Subject to the terms and conditions of the Patent License
Agreement, Signal will be granted a royalty-free, non-exclusive license to use
the patent registrations and patent applications owned by the Seller that are
set forth on Schedule 3.8(b). Except as indicated on Schedule 3.8(b), the Seller
is the owner of the patent registrations and applications set forth on Schedule
3.8(b); to the Seller's knowledge the patent registrations set forth on Schedule
3.8(b) are valid and in good standing; and, except as indicated on Schedule
3.8(b), none of the patent registrations set forth on Schedule 3.8(b) is
currently licensed to or by the Seller.
Section 3.9 Other Intellectual Property. Except as provided on
Schedule 3.9, the Seller has the right to use and convey all of the technology,
inventions, processes, specifications, know-how, trade secrets, good will and
copyrights, which are currently owned by the Seller and used exclusively in the
conduct of the Business (collectively, the "Other Intellectual Property") and
are material to the conduct of the Business. Except as provided on Schedule 3.9,
to the knowledge of Seller (i) none of the Other Intellectual Property is
subject to any license, royalty or other contractual obligation restricting the
Seller's use thereof or entitling others to use the same or in any way
obligating the Seller to make payments to others, (ii) the Seller's use of the
Other Intellectual Property does not infringe upon any patent, copyright or
trade secret of any third party and (iii) no present or former employee of the
Seller and no other person owns or has any proprietary, financial or other
interest, direct or indirect, in the Other Intellectual Property. Seller has not
received written notice from any third party asserting ownership of or the
exclusive right to use any of the Formulae.
Section 3.10 Material Contracts. Schedule 3.10 (except as
noted thereon) sets forth a list of each of the following written contracts and
agreements as in effect on the date hereof: (i) each agreement to which the
Seller is a party that would be reasonably expected to materially limit the
freedom of the Purchasers to continue to conduct the Business in any
geographical area or otherwise to conduct the Business as currently conducted;
(ii) each contract or agreement with a party not an Affiliate of the Seller for
manufacturing, production, maintenance, consulting, engineering or other
services applicable primarily to the Business; (iii) each sales contract or
agreement primarily applicable to the Business having a term in excess of six
months or with a customer who is required to pay more than $50,000 to the Seller
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for products of the Business during the term of such contract or agreement; and
(iv) each raw material purchase order, contract or agreement primarily
applicable to the Business pursuant to which raw materials are purchased for use
in connection with the conduct of the Business.
Section 3.11 No Default. Except as set forth in Schedule 3.11,
to the knowledge of the Seller, the Seller is not in default or violation (and
no event has occurred which with notice or lapse of time would constitute a
default or violation) of any term, condition or provision of any material
Assumed Contract or any order, writ, judgment, injunction, decree or settlement
of any court applicable to the conduct of the Business or the Conveyed Assets.
Section 3.12 Compliance with Law. The Business is conducted in
compliance with all permits, orders, injunctions and decrees and applicable
laws, including the Food, Drug and Cosmetics Act of 1938, as amended from time
to time, and the rules and regulations of any Governmental Entity purporting to
have jurisdiction over the conduct of the Business, except to the extent such
noncompliance would not have a Material Adverse Effect.
Section 3.13 Litigation. (a) Except as set forth on Schedule
3.13 there is no claim, action, or proceeding (collectively, a "Proceeding"),
pending or, to the knowledge of the Seller, threatened against or related to the
Seller in respect of the Conveyed Assets, the conduct of the Business or the
transactions contemplated by this Agreement, in respect of which the Purchasers
would become liable as a result of the consummation of the transaction contem
plated hereby which would have a Material Adverse Effect.
(b) There are no outstanding orders, injunctions or, decrees
of any Governmen tal Entity that apply to the Conveyed Assets that restrict the
ownership, disposition or use of the Conveyed Assets or the conduct of the
Business in any material respect.
Section 3.14 Product Liability Matters. Except as set forth on
Schedule 3.14, as of the date hereof, there are no Proceedings pending or, to
the knowledge of the Seller, threatened against the Seller involving any product
of the Business which assert the existence of any hazard or defect in the
manufacture, design, materials or workmanship of such products.
Section 3.15 Customers. Schedule 3.15 lists the top 15
customers of the Business by net sales for each such customer for each of the
past two years ended December 31, 1996 and December 31, 1997. Except as set
forth on Schedule 3.15, as
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of the date hereof, the Seller has not been informed by any such customer of the
Business as of December 31, 1997 that it intends to purchase products of the
Business in amounts or on terms materially less favorable than those in effect
at December 31,1997.
Section 3.16 Brokers or Finders. Except for Goldman, Sachs &
Co., whose fee shall be the sole responsibility of the Seller, neither the
Seller nor any of its Affiliates has retained any agent, broker, investment
banker, financial advisor or other firm or person that is or will be entitled to
any brokers' or finder's fee or any other commission or similar fee in
connection with any of the transactions contemplated by this Agreement.
Section 3.17 Inventory. The finished goods Inventory held for
sale in the United States has been manufactured in accordance with applicable
good manufacturing practices, as defined by the United States Federal Food, Drug
and Cosmetic Act, as amended (the "FDA Act"). None of the Inventory is
adulterated or misbranded within the meaning of the FDA Act, or the rules and
regulations promulgated thereunder.
Section 3.18 No Other Representations or Warranties. Except
for the represen tations and warranties contained in this Article III, neither
the Seller nor any other Person makes any other express or implied
representation or warranty on behalf of the Seller or any of its Affiliates.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchasers represent and warrant to the Seller as follows:
Section 4.1 Organization. Each of the Purchasers is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorpora tion. The Purchasers have all requisite corporate
power and authority to own, lease and operate its properties and to conduct
their business as now being conducted.
Section 4.2 Authority Relative to this Agreement. The
Purchasers have the requisite corporate power and authority to execute and
deliver this Agreement and the Related Instruments. The execution and delivery
of this Agreement and the Related Instruments and the performance by the
Purchasers of their obligations hereunder and thereunder have been authorized by
all requisite corporate action on
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the part of the Purchasers. This Agreement has been validly executed and
delivered by the Purchasers and, assuming that this Agreement has been duly
authorized, executed and delivered by the Seller, constitutes, and each Related
Instrument that is to be executed and delivered by the Purchasers will
constitute when executed and delivered by the Purchasers, a valid and binding
obligation of the Purchasers, enforceable against the Purchasers in accordance
with its terms; except that such enforceability is subject to and limited by the
effect of bankruptcy, insolvency, reorganization, arrangement and moratorium
laws, laws relating to fraudulent transfers or conveyances and general
principles of equity (whether asserted in an action at law or in equity).
Section 4.3 Consents and Approvals; No Violations. (a) Neither
the execution and delivery of this Agreement or any Related Instrument by the
Purchasers nor the performance by the Purchasers of their obligations hereunder
or thereunder will (i) violate the certificate of incorporation or by-laws of
the Purchasers, (ii) result in a violation or breach of, or constitute a default
under, any contract, agreement or instrument to which either of the Purchasers
is a party or by which any of their properties or assets may be bound or (iii)
violate any order or decree, except in the case of clauses (ii) or (iii) for
violations, breaches or defaults which would not delay the consummation of the
transactions contemplated by this Agreement.
(b) Except for the applicable requirements of the HSR Act, no
filing with, and no permit, authorization, consent or approval of any
Governmental Entity is necessary for the consummation by the Purchasers of the
transactions contemplated by this Agreement, except for those filings, permits,
authorizations, consents or approvals the failure of which to be made or
obtained would not materially delay the consummation of the transactions
contemplated hereby.
Section 4.4 Brokers or Finders. Except for NationsBanc
Montgomery Securities LLC, whose fee shall be the sole responsibility of the
Purchasers, neither the Purchasers nor their Affiliates has retained any agent,
broker, investment banker, financial advisor or other firm or person that is or
will be entitled to any brokers' or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement.
Section 4.5 Investigation by Purchasers. The Purchasers have
conducted their own independent review and analysis of the Conveyed Assets, the
Assumed Liabilities and the Business and acknowledge that the Purchasers have
been provided access to the personnel, properties, premises and records of the
Seller relating to the Conveyed Assets and the Business for such purpose. In
entering into this Agreement, the Purchasers have relied solely upon the
representations, warranties
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and covenants of the Seller set forth in this Agreement and in the Related
Instruments and their own investigation and analysis, and the Purchasers:
(a) acknowledge that none of the Seller or any of its
Affiliates or any of their respective directors, officers, employees,
Affiliates, agents, advisors or representa tives makes any representation or
warranty, either express or implied, as to the accuracy of completeness of any
of the information provided or made available to the Purchasers or their agents
or representatives, except that the foregoing limitations shall not apply with
respect to Seller to the specific representations and warranties set forth in
Article III of this Agreement, but always subject to the limitations and
restrictions contained herein; and
(b) agree, to the fullest extent permitted by law, that none
of the Seller or any of its Affiliates or any of their respective directors,
officers, employees, sharehold ers, Affiliates, agents, advisors or
representatives shall have any liability or responsibility whatsoever to the
Purchasers on any basis based upon any information provided or made available,
or statements made, to the Purchasers or their agents or representatives, except
that the foregoing limitations shall not apply with respect to Seller to the
extent the Seller has liability for indemnification pursuant to the provisions
of Article VIII for the breach of the specific representations and warranties
set forth in Article III of this Agreement, but always subject to the
limitations and restrictions contained herein; and
(c) acknowledge that, except as expressly set forth in the
representations and warranties set forth in Article III of this Agreement and
the Related Instruments, there are no representations or warranties by the
Seller of any kind, express or implied, with respect to the Business, and that
the Purchasers are purchasing the Conveyed Assets "as is" and "with all faults".
Without limiting the generality of the foregoing, except as expressly set forth
in the representations and warranties set forth in Article III of this Agreement
and the Related Instruments, THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Section 4.6 No Proceedings. There are no Proceedings, pending
or, to the knowledge of the Purchasers, threatened against or related to either
of the Purchasers which could affect the Purchasers' ability to consummate the
transactions contemplated by this Agreement and each Related Instrument.
Section 4.7 Financing. The Purchasers have (through
commitments for credit arrangements or otherwise) as of the date hereof, and
will have at the Closing, sufficient funds to pay the Purchase Price and all
other amounts payable by
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the Purchasers at the Closing and to perform their obligations hereunder
following the Closing.
Section 4.8 No Other Representations or Warranties. Except for
the representa tions and warranties contained in this Article IV, neither the
Purchasers nor any other Person makes any other express or implied
representation or warranty on behalf of the Purchasers.
ARTICLE V
COVENANTS
Section 5.1 Conduct of the Business. During the period from
the date hereof to the Closing, the Seller shall, except as otherwise
contemplated by this Agreement, operate the Business only in the ordinary course
of business and shall use its reasonable efforts to preserve intact the Conveyed
Assets and the Business. Without limiting the generality of the foregoing, and
except as otherwise contemplated by this Agreement, from the date of this
Agreement to the Closing, without the prior written consent of the Purchasers
(which consent shall not be unreasonably withheld), the Seller: (i) shall not
mortgage, pledge or subject to any Lien other than Permitted Liens any of the
Conveyed Assets; (ii) shall maintain the Conveyed Assets in good condition and
normal working order, subject to ordinary wear and tear, and use its reasonable
efforts to maintain satisfactory relationships with suppliers and customers in
connection with the conduct of the Business; (iii) shall not transfer any of the
Conveyed Assets except for the transfer of obsolete equipment in the ordinary
course of business; (iv) shall not transfer to any third party any material
rights under any licenses, sublicenses or other agreements with respect to any
Intellectual Property; (v) shall conduct its promotional activities with respect
to Brand products substantially in accordance with Seller's 1998 planned
promotion calendar included in the Schedules hereto; and (vi) shall not
institute any new methods of purchase, sale or operation nor institute any
changes in the product pricing or in promotional allowances other than in
accordance with Seller's 1998 planned promotion calendar as set forth in
Schedule 3.5. The Seller shall use its best efforts to maintain the quantity and
quality of its Inventory in the ordinary course of business.
Section 5.2 Access to Information; Confidentiality. (a) After
the date hereof and prior to the Closing, the Seller shall permit the Purchasers
and their representatives and agents to have reasonable access during normal
business hours to Seller's books and records relating to the Conveyed Assets and
the Business, and the Seller shall furnish promptly to the Purchasers such
available information concerning the Conveyed Assets and the Business as the
Purchasers may reasonably request.
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Notwithstanding the foregoing, the Seller need not disclose to the Purchasers
any information which would violate applicable law or regulation.
(b) Information disclosed to the Purchasers pursuant to
Section 5.2(a) hereof shall be subject to the Confidentiality Agreement, dated
as of December 8, 1997, by and between the Seller and Chattem (the
"Confidentiality Agreement"), and Purchasers shall, in accordance therewith,
cause their directors, officers, employees, Affiliates, advisers,
representatives and agents to, treat as confidential all of the information
provided by the Seller pursuant to Section 5.2(a) hereof or otherwise and not to
use such information except in connection with the transactions contemplated
hereby and in accordance with the Confidentiality Agreement.
(c) Following the Closing, for so long as such information is
retained (which shall be a period of at least six years), the Purchasers shall
permit the Seller and its representatives and agents to have reasonable access
during normal business hours to the books and records relating to the Business
to the extent that such access may be reasonably required (i) in connection with
preparation of the Seller's accounting records, (ii) in connection with the
preparation of any Tax Returns or with any tax audits, (iii) in connection with
any Proceeding relating to the Business, or (iv) for any other proper business
purpose of the Seller.
(d) Following the Closing, for so long as such information is
retained (which shall be for a period consistent with Seller's document
retention policy), the Seller shall permit the Purchasers and their
representatives and agents to have reasonable access during normal business
hours to the Retained Information. In addition, (i) Seller shall cooperate with
the Purchasers in making Retained Information available, (ii) Seller shall
furnish copies (at Purchasers' cost) of such Retained Information, to the extent
practicable, at the request of Purchaser, and (iii) upon written notice from the
Purchasers of any request for Retained Information, Seller shall designate
appropriate contacts with respect thereto.
(e) From and following the Closing, the Seller and its
Affiliates shall treat and hold, and cause their counsel, accountants and
advisers to treat and hold, as such all Confidential Information (as defined
below), refrain from using any of the Confidential Information except in
connection with this Agreement or except for internal purposes or as may be
necessary or appropriate for the completion of income tax returns or in
compliance with other applicable laws, regulations, and orders of courts or
regulatory authorities in connection with any litigation. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure. For
purposes of the foregoing paragraph, "Confidential Information" means financial
and business
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information relating to the Business which is non-public and confidential or
proprietary in nature.
Section 5.3 Best Efforts. Upon the terms and subject to the
conditions of this Agreement, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement as
promptly as practicable including, but not limited to: (i) the filing on or
before February 27, 1998 of all notices (which will contain a request for early
termination of the applicable waiting period), and provision of necessary
information, under the HSR Act and (ii) the preparation and filing of all other
forms, registrations and notices required to be filed by such party in order to
consummate the transactions contemplated by this Agreement and the taking of
such actions as are necessary to obtain any approvals, consents, orders,
exemptions or waivers of Governmental Entities required to be obtained by such
party in order to consummate the transactions contemplated by this Agreement.
Notwithstanding the foregoing, this Section 5.3 shall not be deemed to require
any party hereto to (i) accept, as a condition to obtaining any consent, permit
or license, any limitation on its ability or the ability of its Affiliates to
own their respective assets or conduct their respective businesses as currently
conducted or proposed to be conducted or (ii) provide to any Governmental Entity
any information not reasonably relevant to the transactions contemplated by this
Agreement.
Section 5.4 Further Assurances. Each party shall from time to
time after the Closing, without additional consideration, execute and deliver
such further instruments and take such other action as may be reasonably
requested by the other party to make effective the transactions contemplated by
this Agreement.
Section 5.5 Property Transfer Taxes. Except as otherwise
provided herein, any fees, charges, Taxes or other payments required to be made
to any governmental authority in connection with the transfer of the Conveyed
Assets and the assignment and assumption of the Assumed Contracts and the
Assumed Liabilities pursuant to the terms of this Agreement shall be allocated
equally between the Seller and the Purchasers; provided, however, that
notwithstanding the foregoing, any value added or similar taxes ("VAT") incurred
in connection with the transactions contemplated hereby shall be borne solely by
the Purchasers. Each of the Seller and the Purchasers, respectively, will be
responsible for the preparation of any Tax Returns with respect to any Taxes
payable in connection with the transfer of the Conveyed Assets for which it is
primarily liable. Each of the Seller and the Purchasers shall provide the other
party with copies of such Tax Returns at least ten business days prior to the
due date of each such Tax Return. If the receiving party materially
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disagrees with such Tax Return as prepared, within three days after receiving
the copy of such Tax Return, the receiving party shall deliver to the preparing
party a written notice specifying the basis for such disagreement. The parties
shall then, in good faith, attempt to reach a mutual resolution prior to the
date upon which such Tax Return is due. If the parties are unable to reach a
mutual resolution, the preparing party shall timely file such Tax Return as
originally sent to the receiving party.
Section 5.6 Publicity. Except as otherwise required by law or
applicable stock exchange requirements, prior to the Closing neither the
Purchasers nor the Seller shall, and each of them shall cause their respective
Affiliates, representatives and agents not to, issue or cause the publication of
any press release or public announcement with respect to the transac tions
contemplated by this Agreement without the express prior approval of the other
party which approval shall not unreasonably be withheld. The content of the
initial press release announcing the execution of this Agreement shall be
mutually agreed to by the Purchasers and the Seller.
Section 5.7 Lion Agreement. The Purchasers and the Seller
agree that this Agreement shall not be deemed to constitute an assignment of the
Seller's rights and obligations under the License Agreement, effective January
1, 1984 (as the same may be amended from time to time, the "Lion Agreement"), by
and between the Seller and Lion Corporation ("Lion"), which grants to Lion,
among other things, the exclusive right to the Brand in Japan in connection with
the manufacture and sale of antiperspirant and deodorant products for underarm
use. The Purchasers agree not to, and agree to cause any purchaser or transferee
of the Business or the Conveyed Assets to agree, not to directly or indirectly,
manufacture, market or sell products bearing the Brand in Japan. Purchasers
shall have no liability to Seller pursuant to this Section 5.7 if, through no
fault or knowledge of Purchasers, a third party unaffiliated with Purchasers
sells any Ban products in the Japanese market; provided that if Purchasers learn
of such diversion of Ban products into the Japanese market by a third party,
Purchasers shall use their best efforts to cease selling Ban products to such
third party.
Section 5.8 Supplemental Disclosure. The Seller shall have the
right from time to time prior to the second business day preceding the Closing
to supplement or amend the Schedules attached hereto with respect to any matter
hereafter arising or discovered which if existing or known at the date of this
Agreement would have been required to be set forth or described in any such
Schedule. Any such supplemental or amended disclosure shall not be deemed to
have cured any breach of any representation or warranty made in this Agreement
for purposes of determining whether or not the conditions set forth in Article
VI have been satisfied, but will be
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deemed to have cured any such breach of representation or warranty made in this
Agreement and to have been disclosed as of the date of this Agreement for
purposes of Article VIII hereof.
Section 5.9 Inventory and Packaging. The Purchasers shall have
the right to use and sell all of the Inventory and all packaging materials
existing as of the Closing Date or manufactured by Seller pursuant to the
Transitional Manufacturing Agreement using the Seller's name or UPC codes until
all such Inventory shall have been disposed of by the Purchasers.
Notwithstanding the foregoing, Purchasers shall use their reasonable best
efforts to cause all such inventory to be disposed of within eighteen (18)
months following the Closing Date.
Section 5.10 Use of Seller's Name and Trademark After Closing.
(a) Except as provided in Section 5.9 with respect to the sale of the Inventory
and the packaging thereof, Purchasers shall have a period of one hundred eighty
(180) days following the Closing Date in which to have the art work and other
materials used to label Brand products modified such that neither the Seller's
name nor the name of any of its Affiliates' nor any trademarks owned by the
Seller or any of its Affiliates, or any derivative of each of the foregoing,
appear on Brand products, except in the case where the Purchasers have obtained
the prior written consent to such use from the Seller or such Affiliate.
Subsequent to such one hundred eighty (180) day period, the Purchasers shall
cause Brand products not to be manufactured bearing the name of the Seller or
any of its Affiliates' or trademarks owned by the Seller or any of its
Affiliates, or any derivative of either of the foregoing, without the prior
written consent of the Seller or such Affiliate. Notwithstanding the foregoing,
the Purchasers shall use their reasonable best efforts, as promptly as
practicable following the Closing, to convert labeling to reflect the
modifications described in the first sentence of this Section 5.10.
(b) Except as provided in Section 5.9 with respect to the sale
of the Inventory and the packaging thereof, subsequent to the first anniversary
of the Closing Date, the Purchasers shall not sell or distribute any products
bearing the name of the Seller or any of its Affiliates' or trademarks owned by
the Seller or any of its Affiliates, or any derivative of either of the
foregoing, without the prior written consent of the Seller or such Affiliate.
Section 5.11 Manufacturing Equipment Post Closing. On the
Closing Date, title to the manufacturing equipment and packaging assets set
forth on Schedules 2.1(i) and 2.1(ii) shall be transferred to the Purchasers and
the Purchasers shall thereafter bear all risk of loss associated with such
equipment and be solely responsible for procuring adequate insurance to protect
such equipment against any such loss.
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Purchasers shall cause the pilot plant equipment set forth on Schedule 2.1(ii)
to be removed from the Seller's Hillside, New Jersey facility within seventy
(70) days after the Closing Date. The Purchasers shall ensure that the removal
of the pilot plant equipment is conducted in a safe manner with the least amount
of disruption to the everyday manufacturing activities of the Seller conducted
at the facility and in a manner which preserves the integrity of the facility's
structure and fixtures. The Purchasers shall ensure that, subsequent to the
removal of the equipment, each location in the facility where equipment has been
removed shall be returned to the same condition it was in prior to such removal.
The Purchasers' removal of the manufacturing equipment and packaging assets set
forth on Schedule 2.1(i) shall be subject to the terms of the Transitional
Manufacturing Agreement.
Section 5.12 Product Returns; Promotional Allowances. (a) The
Purchasers shall be responsible for and shall indemnify and hold harmless Seller
from and against (i) all returns made during the first three months after
Closing relating to sales of the Brand's products prior to the Closing up to
$1,000,000 (the "Returns Limit") and (ii) all returns made following the three
month anniversary of the Closing relating to sales of the Brand's products. With
respect to the returns of products of merchantable quality during the first
three months after Closing relating to the sales made prior to the Closing in
excess of the Returns Limit (the "Excess Returns"), the Seller shall be
responsible for and shall indemnify and hold harmless Purchasers from and
against (on a dollar-for-dollar basis) the Margin (as defined below) associated
with such Excess Returns. For purposes hereof, "Margin" shall mean the excess of
the sales revenue received with respect to such Excess Returns over Seller's
cost of goods sold of such Excess Returns. From time to time during the three
month period following the Closing, and in any event at the end of the first and
second month following the Closing, the Purchasers shall advise Seller as to the
amount of product returns for products sold prior to the Closing received or
claimed since the Closing. Any product returns of products manufactured prior to
the Closing caused by the failure to manufacture such products in compliance
with applicable good manufactur ing practices under the FDA Act shall be the
responsibility of Seller.
(b) Seller will indemnify and hold harmless Purchasers from
and against any Promotional Liabilities existing as of the Closing Date in
excess of $5,000,000.
(c) Payments under this Section 5.12 shall be made promptly
following notice and provision of supporting documentation reasonably
satisfactorily to the paying party.
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Section 5.13 Non-Competition. Seller, for and on behalf of
itself and its controlled Affiliates, agrees that, for a period of three years
after the Closing Date, they shall not knowingly or intentionally own, manage,
operate, control or otherwise engage in the manufacture or sale of
antiperspirant or deodorant products in the United States and Canada (a
"Competitive Business"); provided, however, that nothing herein shall prevent or
be construed to prevent Seller or any of its controlled Affiliates from doing
any of the following: (A) acquiring any Person engaged in any Competitive
Business (other than any Person primarily engaged in a Competitive Business) or
any interest in any such Person and thereafter owning, managing, operating or
controlling such Person or otherwise engaging in any business engaged in by such
Person; (B) engaging in transactions pursuant to the Transitional Manufacturing
Agreement; (C) owning up to five percent (5%) of the voting equity securities or
any non-voting equity or debt securities of any Person primarily engaged in a
Competitive Business whose securities are publicly traded on a national
securities exchange or in the over-the-counter market; or (D) owning any equity
interest through any employee benefit plan or pension plan. Notwithstanding
anything to the contrary contained in this Section 5.13, Seller shall not be
liable to the Purchasers for sales in the United States and Canada of products
bearing the Mum trade name which have been manufactured or are in the process of
being manufactured as of the Closing Date. For a period of three years after the
Closing, Seller, for and on behalf of itself and its controlled Affiliates, will
not market any antiperspirant or deodorant product that bears a brand name which
is not then currently sold or marketed by Seller or any of its Affiliates;
provided that the exceptions set forth in clauses (A) through (D) above shall be
equally applicable for the foregoing restriction. The parties hereto
specifically acknowledge and agree that the remedy at law for any breach of the
foregoing will be inadequate and that the Purchasers, in addition to any other
relief available to them, 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 5.13 should ever be deemed to exceed the
limitation provided by applicable law, then the parties hereto agree that such
provisions shall be reformed to set forth the maximum limitations permitted that
are consistent with the intentions of the parties set forth in this Section
5.13. If any of the provisions contained in this Section 5.13 shall for any
reason be held to be excessively broad as to time, duration, geographical scope,
activity or subject, it shall be construed, by limiting and reducing it, so as
to be enforceable to the extent compatible with the applicable law as it shall
then appear. If, moreover, any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained therein.
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Section 5.14 Financial Statements. As soon as practicable
following the date hereof, but in no event later than March 15, 1998, the Seller
shall provide to the Purchasers audited statements of U.S. Assets to be Acquired
and Liabilities to be Assumed as of December 31, 1996 and 1997 and the related
statements of U.S. Net Sales and Product Contribution for each of the three
years ended December 31, 1995, 1996 and 1997. The Seller's auditors, upon
Purchasers' request, shall provide a customary comfort letter (using such
auditors own form of letter) with respect to the Brand's historical financial
statements in connection with Purchasers' financing of the transactions
contemplated hereby. Seller shall request its auditors to provide a customary
consent to the inclusion of its audit opinion in the registration statement
effecting the exchange of the debt securities to be issued to finance or
refinance the transaction contemplated hereby. Seller shall also use its best
efforts to cause its auditors to make available their work papers with respect
to the audit performed by them subject to execution by Purchasers and their
auditors of a customary access letter (using Seller's auditors own form of
letter).
Section 5.15 Employees. The Purchasers shall assume no
liability for any agreements, arrangements, commitments, policies or
understandings of any kind relating to employment, compensation or benefits for
the present or former employees of the Seller for all employment prior to and
through the Closing.
Section 5.16 Thailand. For a period not to exceed six months
(which may be extended by mutual agreement) following the Closing Date, Seller
shall provide, or cause a Subsidiary to provide, to Purchasers transitional
distribution services in Thailand with respect to Seller's existing customer
base in Thailand. The services to be provided shall consist of import
assistance, manufacturing oversight, warehousing (but not in excess of two
months of inventory), distribution and sales support (i.e., order taking,
limited trade management, billing, collections and administrative support); all
on such terms as may be mutually agreed by Seller and Purchasers. Purchasers
shall pay to Seller, on a monthly basis as invoiced, a fee (denominated in Thai
Baht) equal to 15% of monthly net sales.
Section 5.17. Certain Supply Arrangements. Seller shall use
its reasonable efforts to assist the Purchasers in obtaining, prior to the
Closing Date, arrangements with Henkel and GE substantially similar to the
arrangements currently utilized by Seller with respect to the Business.
ARTICLE VI
CONDITIONS
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Section 6.1 Conditions to Each Party's Obligations. The
respective obligation of each party to effect the transactions contemplated by
this Agreement shall be subject to the satisfaction (or waiver, if permissible)
at or prior to the Closing of the following conditions:
(a) The waiting period (including any extensions thereof)
applicable to the consummation of the transactions contemplated by this
Agreement required pursuant to the HSR Act shall have expired or been
terminated.
(b) All authorizations, consents, and approvals of
Governmental Entities set forth in Schedule 3.3(b) (collectively, the
"Authorizations") shall have been obtained and not rescinded, except for those
Authorizations the failure of which to be obtained would not result in a
Material Adverse Effect or result in criminal liability of any party.
(c) There shall not be in effect any statute, regulation,
order, decree or judgment of any Governmental Entity which makes illegal or
enjoins or prevents the consummation of the transactions contemplated by this
Agreement.
Section 6.2 Conditions to Obligations of the Purchasers. The
obligation of the Purchasers to effect the transactions contemplated by this
Agreement shall be further subject to the satisfaction (or waiver) at or prior
to the Closing of the following conditions:
(a) The representations and warranties of the Seller in this
Agreement shall be true and correct in all material respects as if made on the
Closing Date, other than representa tions and warranties that expressly speak as
of the date hereof or any other specific date (which need only be true and
correct in all material respects as of such date) except where the failure of
such representations and warranties to be so true and correct in all material
respects would not have a Material Adverse Effect.
(b) The Seller shall have performed in all material respects
all obligations required to be performed by it under this Agreement at or prior
to the Closing.
(c) The Purchasers shall have received from the Seller a
certificate, dated the Closing Date, duly executed by an officer of the Seller,
reasonably satisfactory in form to the Purchasers, to the effect of (a) and (b)
above (the "Seller's Officer's Certificate").
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(d) The Seller shall have delivered or caused to be delivered
to the Purchasers each of the documents specified in Section 2.4(b) hereof.
(e) There shall not have occurred since September 30, 1997 any
event or occurrence with respect to the Business or the Conveyed Assets that has
resulted in a Material Adverse Effect and Seller shall not have received written
notice of a threatened investigation, action or other proceeding that would
result in a Material Adverse Effect, provided that for purposes of this Section
6.2, the term "Material Adverse Effect" shall not include any adverse effect
resulting from changes to the economy or general economic conditions.
Section 6.3 Conditions to Obligations of the Seller. The
obligation of the Seller to effect the transactions contemplated by this
Agreement shall be further subject to the satisfaction (or waiver) at or prior
to the Closing of the following conditions:
(a) The representations and warranties of the Purchasers in
this Agreement shall be true and correct in all material respects as if made on
the Closing Date other than representations and warranties that speak as of the
date hereof or any other specific date (which need only be true and correct in
all material respects as of such date).
(b) The Purchasers shall have performed in all material
respects all obliga tions required to be performed by it under this Agreement at
or prior to the Closing.
(c) The Seller shall have received from the Purchasers a
certificate, dated the Closing Date, duly executed by an officer of the
Purchasers, reasonably satisfactory in form to the Seller, to the effect of (a)
and (b) above (the "Purchasers' Officer's Certificate").
(d) The Purchasers shall have delivered or caused to be
delivered to the Seller each of the documents specified in Section 2.4(c)
hereof.
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1 Termination. This Agreement may be terminated at
any time prior to the Closing by:
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(a) Mutual consent of the Seller and the Purchasers;
(b) Either the Seller or the Purchasers if the Closing shall
not have occurred on or before May 29, 1998 (unless the failure to consummate
the Closing by such date shall be due to the failure of the party seeking to
terminate this Agreement to have fulfilled any of its obligations under this
Agreement);
(c) Either the Seller or the Purchasers if a condition to its
obligation to perform becomes incapable of fulfillment; provided, that the
Seller or the Purchasers, as the case may be, may not seek termination pursuant
to this Section 7.1(c) if such condition is incapable of fulfillment due to the
failure of the Seller or the Purchasers, as the case may be, to perform the
agreements set forth herein required to be performed by such party, at or before
the Closing; or
(d) Either the Seller or the Purchasers if any court of
competent jurisdiction or other competent Governmental Entity shall have issued
a statute, rule, regulation, order, decree or injunction or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such statute, rule, regulation,
order, decree or injunction or other action shall have become final and
nonappealable.
Section 7.2 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 7.1 hereof, this Agreement
shall forthwith become null and void and have no effect, without any liability
on the part of any party hereto or its Affiliates, directors, officers or
stockholders, other than the provisions of Sections 5.2(b) and 9.5 hereof;
provided that nothing contained in this Section 7.2 shall relieve any party from
liability for any wilful breach of this Agreement.
Section 7.3 Amendment. This Agreement may be amended or
modified at any time by the Seller and the Purchasers, but only by an instrument
in writing signed on behalf of each of the Seller and the Purchasers.
Section 7.4 Extension; Waiver. At any time prior to the
Closing, each of the parties hereto may (i) extend the time for the performance
of any of the obligations or acts of any other party, (ii) waive any
inaccuracies in the representations and warranties of any other party contained
herein or in any document delivered pursuant hereto, (iii) waive compliance with
any of the agreements of any other party contained herein or (iv) waive any
condition to its obligations hereunder. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. Except as otherwise expressly
provided herein, no failure to exercise, delay in exercising, or
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single or partial exercise of any right, power or remedy by any party, and no
course of dealing between the parties, shall constitute a waiver of any such
right, power or remedy.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
Section 8.1 Survival Period. All representations and
warranties of the parties contained in this Agreement, or any certificate
delivered in connection herewith shall survive the Closing until the first
anniversary of the Closing Date (the "Survival Period"). The parties agree that
no claims or causes of action may be brought against the Seller or the
Purchasers based upon, directly or indirectly, any of the representations or
warranties of the parties contained in this Agreement after the Survival Period
or, except as provided in Section 7.2 hereof, any termination of this Agreement;
provided that the representations and warranties of the Seller in Sections 3.1,
3.2, 3.6, 3.15 and 3.16 and the Purchasers in Sections 4.1, 4.2, 4.4, 4.5, 4.7
and 4.8 shall survive indefinitely.
Section 8.2 Indemnification. Subject to the terms, conditions
and limitations set forth in this Article VIII, from and after the Closing:
(a) The Seller shall defend, indemnify and hold harmless the
Purchasers from and against any actual costs or expenses (including, without
limitation, reasonable attorneys' fees), judgments, fines, claims, damages and
assessments (collectively, "Losses") that are imposed on the Purchasers arising
out of (i) any breach of or inaccuracy in any representation or warranty set
forth in Article III hereof as of the Closing, (ii) the failure to perform any
covenant of the Seller set forth in this Agreement or any of the Related
Instruments and (iii) the Excluded Liabilities.
(b) The Purchasers shall defend, indemnify and hold harmless
the Seller and its Affiliates from and against any Losses that are imposed on
Seller arising out of (i) any breach of or inaccuracy in any representation or
warranty set forth in Article IV hereof as of the Closing, (ii) the failure to
perform any covenant of the Purchasers, set forth in this Agreement or any of
the Related Instruments and (iii) the Purchasers' Liabilities.
Section 8.3 Indemnification Procedures. All claims for
indemnification by any party entitled to indemnification under this Article VIII
(an "Indemnified Party") based on or arising from a third party claim shall be
asserted and resolved as set forth in this Section 8.3. In the event that any
claim or demand by a
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third party for which a party (the "Indemnifying Party") may
be required to indemnify the Indemnified Party hereunder (a "Claim") is asserted
against or sought to be collected from any Indemnified Party by a third party,
such Indemnified Party shall as promptly as practicable notify the Indemnifying
Party in writing of such Claim and the amount or the estimated amount thereof to
the extent then feasible as well as the basis, in reasonable detail, of why the
Indemnified Party believes that it is entitled to Indemnification hereunder (the
"Claim Notice"). The failure on the part of the Indemnified Party to give any
such Claim Notice in a reasonably prompt manner shall not relieve the
Indemnifying Party of any indemnification obligation hereunder except to the
extent that the Indemnifying Party is prejudiced thereby. The Indemnifying Party
shall have 30 days from delivery of the Claim Notice (the "Notice Period") to
notify the Indemnified Party whether or not the Indemnifying Party elects to
defend the Indemnified Party against such Claim; and prior to such time as it
has been notified by the Indemnifying Party as to its intention, the Indemnified
Party shall take all reasonable actions to preserve its defenses. Election of
the Indemnifying Party to defend a Claim shall not be construed to be an
admission as to liability for indemnification hereunder. All costs and expenses
incurred by the Indemnifying Party in defending such Claim shall be a liability
of, and shall be paid by, the Indemnifying Party; provided, however, that the
amount of such costs and expenses that shall be a liability of the Indemnifying
Party hereunder shall be subject to the limitations set forth in Section 8.4
hereof. In the event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that it desires to defend the Indemnified Party against
such Claim, the Indemnifying Party shall have the right to defend the
Indemnified Party by appropriate proceedings and shall have the sole power to
direct and control such defense. If any Indemnified Party desires to participate
in any such defense it may do so at its sole cost and expense. The Indemnified
Party shall not settle, admit or in any other way materially prejudice a Claim
for which it is indemnified by the Indemnifying Party without the written
consent of the Indemnifying Party unless the Indemnifying Party elects not to
defend the Indemnified Party against such Claim. The Indemnifying Party may,
with the consent of the Indemnified Party (which consent shall not be
unreasonably withheld), settle or compromise any action or consent to the entry
of any judgment. Notwithstanding the foregoing, the Indemnified Party shall have
the sole right to defend, settle or compromise any Claim with respect to which
it has agreed in writing to waive its right to indemnification pursuant to this
Agreement. If the Indemnifying Party elects not to defend the Indemnified Party
against such Claim, then the Indemnified Party shall defend such Claim by
appropriate proceedings and shall control the defense of such Claim, and in such
case may, with the consent of the Indemnifying Party (which consent shall not be
unreasonably withheld) settle or compromise such action or consent to the entry
of any judgment. The amount required to be paid in respect of any such Claim,
or, if the same be contested by the Indemnified Party, then that portion thereof
as to which
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such defense is unsuccessful (and the reasonable costs and expenses pertaining
to such defense) shall be the liability of the Indemnifying Party hereunder,
subject to the limitations set forth in Section 8.4. The Indemnified Party will
give the Indemnifying Party and its counsel reasonable access to the personnel,
business records and other documents within the possession of the Indemnified
Party or its Affiliates, and shall permit them to consult with the counsel and
other advisors of the Indemnified Party. The Indemnified Party, if requested by
the Indemnifying Party shall cooperate and assist in the defense of all such
Claims.
Section 8.4 Limitation of Liability. (a) Anything in this
Agreement to the contrary notwithstanding, the liability of the Indemnifying
Party to indemnify Indemnified Party against any Losses shall be limited to
claims for indemnification with respect to which the Indemnified Party has given
to the Indemnifying Party written notice thereof at or prior to the applicable
survival date as set forth in Section 8.1. The written notice referred to in the
previous sentence must state the basis of the claim for indemnification with
reasonable specificity, including the Section or Sections of this Agreement
alleged to have been breached.
(b) In no event shall the Seller, on the one hand, or the
Purchasers, on the other hand, be liable for indemnification pursuant to Section
8.2(a) (i) or (ii) or 8.2(b) (i) or (ii) unless and until the aggregate of all
Losses which are incurred or suffered by the Seller, on the one hand, or
Purchasers, on the other hand, exceeds $1,000,000, in which case Seller or the
Purchasers, as the case may be, shall only be entitled to indemnification for
such Losses in excess of $1,000,000; provided, however, that neither the Seller,
on the one hand, nor the Purchasers, on the other hand, shall be required to
make payments for indemnification pursuant to Section 8.2(a) (i) or (ii) or
Section 8.2(b) (i) or (ii) in an aggregate amount in excess of $30,000,000.
(c) Notwithstanding anything to the contrary in this
Agreement, no party to this Agreement shall be liable for any Losses to the
extent that the Losses suffered by the other party result from any improper or
tortious act or omission by the party suffering such Loss or its Affiliates,
officers, employees, agents or representatives or to the extent that the party
suffering such Loss or its Affiliates, officers, employees, agents or
representatives fail to take reasonable and prudent action to mitigate any
Losses.
(d) In calculating amounts payable to an Indemnified Party,
the amount of the indemnified Losses shall not be duplicative of any other Loss
for which on indemnification claim has been made and shall be computed net of
(i) payments that the Indemnified Party has received under any insurance policy
with respect to
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such Losses, (ii) any prior or subsequent recovery by the Indemnified Party from
any Person with respect to such Losses and (iii) any Tax benefit to the
Indemnified Party with respect to such Losses.
Section 8.5 Other Matters. (a) If the Closing shall occur, the
indemnifica tion provisions of this Article VIII shall be the sole and exclusive
remedy of the Seller and the Purchasers for any breach of any covenants,
representations or warranties made by the other party in this Agreement and each
party hereby waives all statutory, common law and other claims with respect
thereto, other than claims for indemnification pursuant to this Article VIII.
(b) Indemnification hereunder shall include liability for any
special, incidental, punitive or consequential damages to the extent the
Indemnified Party is required to pay such amount to a third party in respect of
a final, non-appealable judgment or order obtained by such third party. Except
as expressly provided in the preceding sentence, there shall be no
indemnification by the Seller or the Purchasers for any special, incidental,
punitive or consequential damages.
(c) Upon making any payment to an Indemnified Party for any
indemnification claim pursuant to this Article VIII, the Indemnifying Party
shall be subrogated, to the extent of such payment, to any rights which the
Indemnified Party or its Affiliates may have against any other Persons with
respect to the subject matter underlying such indemnification claim and the
Indemnified Party shall take such actions as the Indemnifying Party may
reasonably require to perfect such subrogation or to pursue such rights against
such other Persons as the Indemnified Party or its Affiliates may have.
(d) If and to the extent that prior to the Closing a party has
actual knowledge of the breach of or inaccuracy in or of facts that such party
should reasonably have known would constitute a breach of or inaccuracy in a
representation, warranty or covenant made by the other party, and the Closing
nonetheless occurs, then such party shall not have the right to assert a Claim
for indemnification in respect of such breach or inaccuracy, and the party
against whom such Claim could otherwise be asserted shall have no liability or
obligation in respect thereof.
(e) Any indemnification payment by the Seller pursuant to
Section 8.2(a)(i) or (ii) shall be treated as an adjustment to the Purchase
Price hereunder.
ARTICLE IX
MISCELLANEOUS
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Section 9.1 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given upon receipt if
delivered personally, or when sent if mailed by registered or certified mail
(return receipt requested) or transmitted by facsimile (with confirmation of
transmittal) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to the Seller, to:
Bristol-Myers Squibb Company
345 Park Avenue
New York, New York 10154-0037
Telephone: (212) 546-4397
Facsimile: (212) 546-9680
Attention: Robert E. Ewers, Jr., Esq.
Senior Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3542
Facsimile: (212) 735-2000
Attention: Stephen F. Arcano, Esq.
(b) if to the Purchasers, to:
Signal Investment & Management Co.
Chattem, Inc.
1715 West 38th Street
Chattanooga, Tennessee 37409
Telephone: (423) 821-4571
Facsimile: (423) 821-6423
Attention: A. Alexander Taylor II
President and Chief Operating Officer
with a copy to:
Miller & Martin LLP
1000 Volunteer Building
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Chattanooga, Tennessee 37402
Telephone: (423) 756-6600
Facsimile: (423) 785-8480
Attention: Hugh F. Sharber, Esq.
Section 9.2 Descriptive Headings. The descriptive headings
herein are inserted for convenience only and are not intended to be part of or
to affect the meaning or interpreta tion of this Agreement.
Section 9.3 Counterparts. This Agreement may be executed in
two counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
Section 9.4 Entire Agreement. This Agreement, the exhibits and
schedules hereto and the Related Instruments constitute the entire agreement,
and except with respect to the Confidentiality Agreement, supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
Section 9.5 Fees and Expenses. Regardless of whether or not
the transactions contemplated by this Agreement are consummated, each party
shall bear its own fees and expenses incurred in connection with the
transactions contemplated by this Agreement.
Section 9.6 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of New York, without
regard to any applicable principles of conflicts of law. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and of the United
States of America in each case located in the County of New York for any
litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any litigation relating thereto
except in such courts), and further agrees that service of any process, summons,
notice or document by U.S. registered mail to its respective address set forth
in Section 9.1 shall be effective service of process for any litigation brought
against it in any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any litigation
arising out of this Agreement or the transactions contemplated hereby in the
courts of the State of New York or of the United States of America in each case
located in the County of New York and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such litigation brought in any such court has been brought in an
inconvenient forum.
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Section 9.7 Specific Performance. The parties hereto agree
that if any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached, irreparable damage would
occur, no adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity.
Section 9.8 Assignment. This Agreement may not be assigned by
any party hereto without the written consent of the other party provided that
Signal shall be permitted to assign its rights and obligations in this Agreement
to Chattem.
Section 9.9 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto their
successors and permitted assigns, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person or persons any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 9.10 Knowledge. For purposes of this Agreement,
"knowledge" of the Seller shall mean the actual knowledge of the representatives
of the Seller set forth on Schedule 9.10 hereto, without any such representative
having made any special inquiry or investigation.
Section 9.11 Interpretation. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
Section 9.12 Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the parties shall negotiate in good faith with a view to the
substitution therefor of a suitable and equitable solution in order to carry
out, so far as may be valid and enforceable, the intent and purpose of such
invalid provision; provided, however, that the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
Section 9.13 Payments. Unless otherwise provided herein, all
payments required to be made pursuant to this Agreement shall be made in U.S.
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dollars in the form of cash or by wire transfer of immediately available funds
to an account designated by the party receiving such payment.
Section 9.14 Joint and Several Liability. The obligations of
the Purchasers, or either of them, under this Agreement shall be joint and
several.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
BRISTOL-MYERS SQUIBB COMPANY
By: /s/ Michael Borkowsky
----------------------------------
Name: Michael Borkowsky
Title: Vice President-Corporate Development
CHATTEM, INC.
By: /s/ A. Alexander Taylor II
----------------------------------
Name: A. Alexander Taylor II
Title: President
SIGNAL INVESTMENT & MANAGEMENT CO.
By: /s/ A. Alexander Taylor II
----------------------------------
Name: A. Alexander Taylor II
Title: President
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-35386, 33-78524, and 33-78522) of Chattem,
Inc. of our report dated March 3, 1998 relating to the financial statements
of the Ban deodorant and antiperspirant product lines of Bristol-Myers
Products, a division of Bristol-Myers Squibb Company, which appears on page 4
of Form 8-K of Chattem, Inc. dated March 24, 1998.
____________________________________
PRICE WATERHOUSE LLP
New York, New York
April 8, 1998
<PAGE>
Exhibit 99.1
Press Release Dated March 24, 1998
<PAGE>
CHATTEM COMPLETES ACQUISITION OF BAN DEODORANT;
ISSUES $200,000,000 SENIOR SUBORDINATED NOTES
FOR IMMEDIATE RELEASE
MARCH 24, 1998
CHATTEM, INC. (NASDAQ:CHTT), a Chattanooga, Tennessee based manufacturer
of health and beauty care products and the SUNSOURCE line of dietary
supplements, announced today the completion of the previously announced
acquisition of the BAN-Registered Trademark- line of
antiperspirant/deodorant products from Bristol-Myers Squibb Company for a
purchase price of $165.0 million (subject to an inventory adjustment),
plus the assumption of up to $5.0 million of liabilities. Chattem
acquired the BAN trademarks, formulae, certain patents pertaining to the
anti-perspirant/deodorant products technology, technical information,
inventory, manufacturing equipment and packaging related assets used in
the manufacture of BAN but not the right to sell BAN in Japan.
Concurrently with the closing of the acquisition, the Company issued
$200,000,000 of 8 7/8% Senior Subordinated Notes due 2008 and amended and
restated its existing senior secured credit facilities. The proceeds from
the Senior Subordinated Notes were used to fund the purchase of BAN and
repay certain bank indebtedness.
BAN is one of the most highly recognized brands in the
anti-perspirant/deodorant market, and the leader in the roll-on segment.
On a pro forma basis, including the acquisition of BAN, Chattem would have
generated revenues in fiscal 1997 of approximately $240 million.
The addition of the BAN product line to Chattem will further
diversify the Company's revenue base and enhance its market presence. The
BAN acquisition also allows Chattem to achieve its previously stated goal
of achieving $200 million in annual revenues, as the Company now focuses
on reaching $500 million in yearly sales.
<PAGE>
Chattem will seek to increase the BAN revenues and related
contribution by significantly augmenting the brand's current level of
advertising spending. Chattem also expects to realize significant cost
savings on a pro forma basis by utilizing contract manufacturers to
produce the BAN products.
The Senior Subordinated Notes, which were offered through
NationsBanc Montgomery Securities LLC, provide the Company with
significant long-term fixed rate capital at an attractive 8 7/8% rate of
interest. The Notes were rated B2 by Moody's Investor Service and B- with
a stable outlook by Standard & Poor's. Both ratings represented
improvements from the Company's earlier ratings with respect to its 1994
Senior Subordinated Notes.
The senior bank credit agreement, of which NationsBank of
Tennessee, N.A. is agent, includes term loans and a working capital
facility.
All forward looking statements are subject to the risks and
uncertainties described in the Company's filings with the Securities and
Exchange Commission.
Company contact:
A. Alexander Taylor II (x 281)
or
Stephen M. Powell
Chattem, Inc.
(423) 821-4571 (x 340)
