SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------------
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
August 19, 1999
Date of Report (Date of earliest event
reported)
HEALTH-CHEM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-6787 13-268201
(Commission File Number) (I.R.S. Employer Identification No.)
460 Park Avenue
Suite 1300
New York, NY 10022
(Address of Principal Executive Offices) (Zip Code)
(212)751-5600
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As of August 19, 1999, Aberdeen Road Company, a Pennsylvania corporation
("Aberdeen"), purchased substantially all of the assets (the "Assets") and
assumed substantially all of the liabilities consisting of trade payables (the
"Liabilities") of Herculite Products, Inc., a New York corporation and Hercon
Environmental Corporation, a Delaware corporation (collectively the "Sellers"),
which are second and third-tier subsidiaries, respectively, of Health-Chem
Corporation (the "Company"), pursuant to an Asset Purchase Agreement dated as of
July 20, 1999 (the "Agreement").
Under the terms of the Agreement, on the Closing Date Aberdeen (a) assumed
the Liabilities and (b) paid the purchase price (the "Purchase Price") of
$14,214,000 in cash on the Closing Date, of which $550,000 was placed in escrow
to secure the Sellers' and the Company's indemnification of Aberdeen as set
forth in the Agreement. The Purchase Price was determined as a result of
arm's-length negotiation between unrelated parties.
Proceeds from the sale were used: 1) to repay in full the outstanding
indebtedness of the Company and its subsidiaries to their senior secured lender,
IBJ Whitehall Business Credit Corporation; 2) to make a $2 million distribution
of principal to holders of the Company's 10.375% Convertible Subordinated
Debentures (the "Debentures"); and 3) for expenses of the sale of the Assets and
related expenses; and the balance is to be used for working capital purposes.
The Debentures, in the approximate principal amount of $8 million plus accrued
interest, became due at their maturity on April 15, 1999.
After the Closing, Paul R. Moeller and Steven Bernstein, two directors and
officers of the Company and certain of its subsidiaries, and Peter F. McKernan,
an officer of certain of the Company's subsidiaries, resigned all of their
positions with the Company and its subsidiaries and went into the full-time
employ of Aberdeen.
The terms of the sale are more fully described in the Asset Purchase
Agreement, a copy of which is filed herewith as Exhibit 2.1 hereto.
The sale of the Assets of the Sellers effects a divestiture of the
Company's synthetic fabrics and environmental products operations.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(b) Pro Forma Financial Information
It is impractical to provide the required pro forma financial
information at the time of the filing of this report. The required pro forma
financial information will be filed by amendment to this Form 8-K no later than
60 days after September 3, 1999.
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(c) Exhibits
2.1 Asset Purchase Agreement dated as of July 20, 1999 by and
among Herculite Products, Inc., Hercon Environmental Corporation and Aberdeen
Road Company.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEALTH-CHEM CORPORATION
Date: September 2, 1999 By: /s/ Marvin M. Speiser
-------------------------------
Marvin M. Speiser
President
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Exhibit 2.1
ASSET PURCHASE AGREEMENT
by and among
HERCULITE PRODUCTS, INC.,
HERCON ENVIRONMENTAL CORPORATION
and
ABERDEEN ROAD COMPANY
Dated July 20, 1999
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TABLE OF CONTENTS
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Page
ARTICLE I
PURCHASE AND SALE..............................................................1
ARTICLE II
DESCRIPTION OF ASSETS; EXCLUDED ASSETS.........................................1
Section 2.01 Purchased Assets...........................................1
Section 2.02 Excluded Assets............................................2
ARTICLE III
ASSUMPTION OF LIABILITIES......................................................3
Section 3.01 Assumed Liabilities........................................3
Section 3.02 Excluded Liabilities.......................................3
ARTICLE IV
INSTRUMENTS OF TRANSFER AND ASSUMPTION.........................................4
Section 4.01 Transfer Documents.........................................4
Section 4.02 Assumption Documents.......................................4
Section 4.03 Transfer Taxes.............................................4
ARTICLE V
PURCHASE PRICE; ALLOCATION; APPORTIONMENTS.....................................4
Section 5.01 Cash Purchase Price .......................................4
Section 5.02 Payment of Cash Purchase Price.............................4
Section 5.03 Allocation of Purchase Price...............................5
Section 5.04 Cash Purchase Price Adjustment.............................5
Section 5.05 Independent Accountants, Procedures........................6
Section 5.06 Indemnity and Older Inventory Escrow.......................7
Section 5.07 Real Property Apportionments...............................7
ARTICLE VI
CLOSING........................................................................8
ARTICLE VII
SELLERS' REPRESENTATIONS.......................................................8
Section 7.01 Organization, Qualification................................8
Section 7.02 Governmental Consents, Authorization of Agreement and Sale.8
Section 7.03 Subsidiaries...............................................9
Section 7.04 Purchased Assets...........................................9
Section 7.05 Material Contracts.........................................9
Section 7.06 No Violation of Existing Agreements........................9
Section 7.07 Litigation and Legal Proceedings..........................10
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Section 7.08 Employees.................................................10
Section 7.09 Employee Benefits.........................................10
Section 7.10 Financial Statements......................................10
Section 7.11 Broker's and Finder's Commissions.........................11
Section 7.12 Intellectual Property.....................................11
Section 7.13 Hazardous Substances......................................11
Section 7.14 Accounts Receivable and Bad Debts.........................12
Section 7.15 Transactions with Certain Persons.........................12
Section 7.16 No Adverse Change.........................................12
Section 7.17 Customers.................................................12
Section 7.18 Computer Programs and Software............................12
Section 7.19 Absence of Certain Acts or Events.........................13
Section 7.20 Books and Records.........................................14
Section 7.22 Product Warranty Claims...................................14
Section 7.23 Product Indemnity.........................................15
Section 7.24 Insurance.................................................15
Section 7.25 Intracompany Transactions.................................15
Section 7.26 WARN Compliance...........................................15
Section 7.27 Purchase from Pacific Combining Corporation...............15
Section 7.28 Condemnation..............................................15
Section 7.29 Zoning....................................................15
Section 7.30 Utilities.................................................15
Section 7.31 No Other Agreements.......................................16
Section 7.32 Permitted Lien Schedule...................................16
Section 7.33 Disclaimer of Other Representations and Warranties........16
ARTICLE VIII
BUYER'S REPRESENTATIONS.......................................................16
Section 8.01 Organization; Qualification...............................16
Section 8.02 Consents; Authorization; Execution and Delivery of
Agreement.................................................16
Section 8.03 Litigation and Legal Proceedings..........................16
Section 8.04 Broker's and Finder's Commissions.........................16
Section 8.05 Compliance with Laws......................................17
Section 8.06 Financial Ability to Close................................17
Section 8.07 Independent Decision......................................17
Section 8.08 Disclaimer of Other Representations and Warranties........17
ARTICLE IX
SELLERS'AND BUYER'S COVENANTS.................................................18
Section 9.01 Third Party Consents; Closing Conditions..................18
Section 9.02 Access....................................................18
Section 9.03 Conduct of Business.......................................18
Section 9.04 Employees.................................................19
Section 9.05 Supplemental Disclosure...................................21
Section 9.06 Older Inventory Repurchase................................21
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Section 9.07 Assistance................................................21
Section 9.08 Transfer of Health-Chem's and Transderm's Computer Files..21
Section 9.09 Accounts Receivable.......................................22
Section 9.10 Compliance with Bulk Sales Laws...........................22
Section 9.11 HSR Act Filings...........................................22
ARTICLE X
CONDITION OF TITLE TO REAL PROPERTY...........................................22
ARTICLE XI
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE...........................23
Section 11.01 Accuracy of Representations and Warranties, Performance
of this Agreement.........................................23
Section 11.02 Resolutions...............................................23
Section 11.03 Incumbency Certificate....................................23
Section 11.04 Consents..................................................24
Section 11.05 Deed; Assumption Agreement; Bill of Sale..................24
Section 11.06 Opinion of Counsel........................................24
Section 11.07 Execution of Escrow Agreements............................24
Section 11.08 Execution of Non-Compete..................................24
Section 11.09 Access Easement...........................................24
Section 11.10 Parking/Electricity/Water Agreement.......................24
Section 11.11 HSR Act Requirements......................................24
Section 11.12 Software..................................................24
Section 11.13 Physical Inventory........................................25
ARTICLE XII
CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE..........................25
Section 12.01 Accuracy of Representation and Warranties Performance of
this Agreement............................................25
Section 12.02 Directors' Resolutions....................................25
Section 12.03 Incumbency Certificate....................................25
Section 12.04 Consents..................................................25
Section 12.05 Assumption Agreement......................................25
Section 12.06 Parking/Electricity/Water Agreement.......................25
Section 12.10 Payment of Cash Purchase Price............................26
Section 12.11 Opinion of Counsel........................................26
Section 12.12 HSR Act Requirements......................................26
Section 12.13 Software License..........................................26
ARTICLE XIII
CASUALTY LOSSES; CONDEMNATION.................................................27
Section 13.01 Casualty..................................................27
Section 13.02 Condemnation..............................................27
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ARTICLE XIV
INDEMNIFICATION...............................................................27
Section 14.01 Survival..................................................27
Section 14.02 Indemnification by Sellers................................27
Section 14.03 Indemnification by Buyer..................................28
Section 14.04 Escrow....................................................28
Section 14.05 Notice of Claims; Defense of Third Party..................28
Section 14.06 Limitations...............................................29
ARTICLE XV
CONFIDENTIALITY AND PRESS RELEASES............................................30
Section 15.01 Confidentiality...........................................30
Section 15.02 Press Releases............................................31
Section 15.03 Certain Disclosures.......................................31
ARTICLE XVI
GUARANTY .....................................................................31
Section 16.01 Guaranty..................................................31
Section 16.02 Guarantor's Obligations Unconditional; Continuation.......32
Section 16.03 Waivers...................................................32
ARTICLE XVII
TERMINATION...................................................................32
Section 17.01 Events of Termination.....................................32
Section 17.02 Termination...............................................33
ARTICLE XVIII
BROKER'S FEES.................................................................33
ARTICLE XIX
DEFINITIONS AND CONSTRUCTION..................................................33
ARTICLE XX
MISCELLANEOUS.................................................................38
Section 20.01 Additional Instruments of Transfer........................38
Section 20.02 Entire Agreement..........................................39
Section 20.03 Headings..................................................39
Section 20.04 Severability..............................................39
Section 20.05 Notices...................................................39
Section 20.06 Consents..................................................40
Section 20.07 Transfer Taxes............................................40
Section 20.09 Collection Procedures.....................................41
Section 20.10 Waiver....................................................41
Section 20.11 Assignment................................................41
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Section 20.12 Successors and Assigns....................................41
Section 20.13 Governing Law.............................................41
Section 20.14 No Third Party Beneficiaries..............................42
Section 20.15 Construction..............................................42
Section 20.16 Time of the Essence.......................................42
Section 20.17 Amendments................................................42
Section 20.18 Counterparts..............................................42
Section 20.19 Facsimile Signatures......................................43
EXHIBITS
- --------
A- Description of Real Property
B- Form of Deed
C- Form of Bill of Sale
D- Form of Assumption Agreement
E- Form of Escrow Agreement No. 1
F- Form of Escrow Agreement No. 2
G- Form of Opinion of Sellers' Counsel
H- Form of Non-Compete Agreement
I- Form of Agreement re: Access Easement
J- Form of Agreement re: Parking/Electricity/Water
K- Form of Opinion of Buyer's Counsel
SCHEDULES
- ---------
2.01 - Purchased Assets
2.02 - Excluded Assets
3.02 - Excluded Liabilities
7.02 - Consents, Authorization; Execution and Delivery of Agreement
7.04 - Title to Purchased Assets
7.05 - Material Contracts
7.07 - Legal Proceedings
7.08 - Employees
7.09 - Employee Benefits
7.10(a) - Financial Statements - A
7.10(b) - Financial Statements - B
7.12 - Intellectual Property
7.13 - Hazardous Substances
7.14 - Accounts Receivable and Bad Debts
7.15 - Transactions with Certain Persons
7.17 - Customers
7.18 - Software
7.19 - Changes since April 30, 1999
7.21 - Inventory
7.22 - Product Warranty Claims
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7.23 - Product Liability
7.25 - Intracompany Transactions
9.03 - Worn/Obsolete Inventory and Equipment
Permitted Lien Schedule
vi
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ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made this 20th day of
July, 1999, by and among HERCULITE PRODUCTS, INC., a New York corporation
("Herculite"), HERCON ENVIRONMENTAL CORPORATION, a Delaware corporation
("Hercon") (each a "Seller" and together, the "Sellers") and ABERDEEN ROAD
COMPANY, a Pennsylvania corporation with offices at Aberdeen Road, Emigsville,
Pennsylvania (the "Buyer").
BACKGROUND
----------
Herculite is engaged in the business of manufacturing and marketing
multilayered synthetic fabrics. Hercon is engaged in the business of producing
various insect control and monitoring devices, in which synthetic fabrics are
impregnated with insect pheromones or insecticide (the businesses of Herculite
and Hercon together, the "Business"). Herculite is a second tier subsidiary of
Health-Chem Corporation ("Health-Chem") and Hercon is a subsidiary of Herculite.
Upon and subject to the terms and conditions hereinafter set forth, Buyer
desires to purchase from Sellers, and Sellers desire to sell to Buyer,
substantially all of the assets and rights of Sellers relating to the operation
of the Business; and Sellers desire to assign certain liabilities to Buyer, and
Buyer desires to assume such liabilities from Sellers. Certain terms used in
this Agreement are defined in Article XIX and other Articles hereof.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein set forth and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE
-----------------
Except as otherwise provided and subject to the terms and conditions set
forth in this Agreement, Sellers will sell, assign, transfer and deliver to
Buyer, and Buyer will purchase from Sellers at the Closing, all of Sellers'
right, title and interest in and to the Purchased Assets (as defined in Section
2.01 of this Agreement), free and clear of all Liens other than Permitted Liens.
ARTICLE II
DESCRIPTION OF ASSETS; EXCLUDED ASSETS
--------------------------------------
Section 2.01 Purchased Assets. The assets to be conveyed to Buyer shall
include all of the assets of Sellers relating to the Business, whether tangible
or intangible, which relate in any way to the operation of the Business, (except
the Excluded Assets as defined in Section 2.02 hereof), and including, without
limitation: (a) the real property located on Aberdeen Road in Emigsville,
Manchester Township, York County, Pennsylvania, as more particularly described
in Exhibit A hereto and made a part hereof, together with all improvements
thereon, and fixtures and appurtenances thereto (the "Real Property"), (b) those
assets of Sellers set forth on Schedule 2.01, (c) at Buyer's option, those
assets of Sellers not otherwise listed on Schedule 2.01 which are acquired by
Sellers after the date hereof and held by Sellers as of the Closing, (d) all
Intellectual
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Property of Sellers, including, but not limited to the "Herculite" and "Hercon"
trademarks and any variations thereof, the "Lure'n Kill" trademark and all brand
names or trade names now used by Sellers in connection with the sale of any of
their products, (e) all rights of Sellers under all Contracts listed on Schedule
2.01 and Contracts made in the ordinary course of business, involving the
Business to which either Seller is a party or by which either Seller has rights
(the "Purchased Contracts"), (f) all current and historical financial and
accounting records of the Business, and (g) all computer programs and software
used by Sellers in the Business (the "Software") (together, the "Purchased
Assets").
Notwithstanding the aforesaid, for a period of seven (7) years following
the Closing, Buyer shall permit Sellers and its authorized agents and
representatives to visit its offices at reasonable times, to examine and make
copies of the financial and accounting records of the Business which are
included as part of the Purchased Assets.
Additionally, on the Closing Date, Buyer shall grant a non-exclusive
royalty free license to (i) Herculite Products, Inc. solely to continue to use
the Herculite name in its corporate title (but not for any products) for a
period of ten (10) years, and (ii) to Hercon Laboratories Corporation and
Transderm Laboratories Corporation ("Transderm") to continue to use the Hercon
name in its corporate title and on its pharmaceutical, personal care and
cosmetic products. Notwithstanding the foregoing, in the case of Herculite the
license shall be nontransferable and in the case of Hercon an assignment of the
license shall be made only with Buyer's prior written approval, which approval
shall not be unreasonably withheld, provided, however, that such license may be
transferred as part of a sale of the business of Transderm and/or Hercon
Laboratories Corporation. Furthermore, on the Closing Date Buyer shall provide
Health-Chem and Transderm with a one year sub-license to use the Marcam
Software, provided, that (a) Buyer is permitted to do so under the terms of its
license for the Marcam Software, and (b) Health-Chem and Transderm bear any
incremental costs associated with the sub-license.
Section 2.02 Excluded Assets. Anything in this Agreement to the contrary
notwithstanding, the assets sold to Buyer pursuant to the terms of this
Agreement shall not include Herculite's lease for the premises located at 460
Park Avenue, New York, New York, the AS400 computer located in California which
is leased by IBM Credit Corporation to Herculite pursuant to that certain Quick
lease Agreement (No. QL0399505) dated November 12, 1997 (the "California
AS400"), or Sellers' cash, securities, including in the case of Herculite,
shares of Transderm (and shares of Transderm's subsidiary, Hercon Laboratories
Corporation), shares of Hercon and shares of its inactive subsidiary, Aberdeen
Research Corporation, bank deposits, cash equivalents, real property and
fixtures other than the Real Property, any rights under employment related
agreements, or any other assets listed on Schedule 2.02, at the time of the
Closing (the "Excluded Assets").
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ARTICLE III
ASSUMPTION OF LIABILITIES
-------------------------
Section 3.01 Assumed Liabilities. Buyer shall assume and agree to perform
and discharge as of the Closing the following to the extent not previously
performed or discharged and not an Excluded Liability set forth on Schedule
3.02:
(a) all obligations of Sellers which accrue and are to be performed
from and after the Closing under the Purchased Contracts, other than debts or
obligations owed by Sellers or either of them to Health-Chem or any of its
Affiliates;
(b) all other contractual obligations of Sellers incurred after April
30, 1999 in the ordinary course of business (other than debts or obligations
owed by Sellers or either of them to Health-Chem or any of its Affiliates) or
incurred with Buyer's written consent, and which are continuing at the time of
the Closing; and
(c) the obligations of Sellers to pay an aggregate of $300,000 of
"stay on" bonuses to Steven Bernstein, Peter F. McKernan and Paul R. Moeller;
(d) Sellers' obligations in the ordinary course of business to
manufacture and/or sell products to customers pursuant to unfilled orders;
(e) Sellers' obligations to purchase items in the ordinary course of
business from vendors; and
(f) to the extent not included in items (a) through (e), all "Current
Liabilities." For purposes of this Agreement, "Current Liabilities" means, at a
given time, all of Sellers' liabilities which are classified as current
liabilities on their financial statements in accordance with GAAP, such Current
Liabilities to be detailed in the Assumption Agreement or in a schedule thereto,
but excluding: (i) any bank debt and guarantees of bank debt; (ii) any debts or
obligations owed by Sellers or either of them to Health-Chem or any of its
Affiliates; (iii) any guarantees made by Sellers or either of them for the
benefit of Health-Chem or any of its Affiliates; (iv) any Excluded Liabilities;
and (v) any liability ultimately found owing on (or any negotiated settlement
of) the Hill Rom claim (sometimes known as the Hillenbrand claim).
Items (a) through (c) are collectively referred to herein as the "Assumed
Contracts". Items (a) through (f) are collectively referred to herein as the
"Assumed Liabilities".
Section 3.02 Excluded Liabilities. Buyer shall not be liable for any
obligations of Sellers of any nature whatsoever other than the Assumed
Liabilities. Without limitation, the Assumed Liabilities shall not include: (a)
any obligations under employment related agreements (other than the "stay on"
bonuses referred to in Section 3.01) or Herculite's lease for the premises
located at 460 Park Avenue, New York, New York, (b) bank debt and guarantees of
bank debt identified in Schedule 3.02; (c) any debts or obligations owed by
Sellers or either of them to Health-Chem or any of its Affiliates; (d) any
guarantees made by Sellers or either of them for the benefit of Health-Chem
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or any of its Affiliates; (e) deferred wage, salary and bonus obligations of
Herculite, Hercon and/or Health-Chem owed to employees of Sellers as a
consequence of voluntary wage, salary and bonus deferrals; (f) any accounts
payable or accrued liabilities (regardless of whether invoices for the same have
been issued) to all accountants, auditors, attorneys, engineers or other third
party advisors of Sellers, to the extent such liabilities relate to the
preparation for, negotiation of or consummation of the transactions contemplated
herein or an audit conducted for the benefit of Sellers or their Affiliates; (g)
all Sellers' broker fees incurred in connection with this transaction,
including, but not limited to, fees payable to Seneca Financial Group, Inc. and
Gordian Group, L.P. and a $50,000 fee payable to Coldwell Banker Commercial Rotz
Associates, Inc.; (h) all warranty or similar claims or suits now pending
against either Seller, including, but not limited to, the claim of Hill Rom
(sometimes known as Hillenbrand), (i) any obligation relating to the California
AS400; and (j) any other liability listed on Schedule 3.02 (the "Excluded
Liabilities").
ARTICLE IV
INSTRUMENTS OF TRANSFER AND ASSUMPTION
--------------------------------------
Section 4.01 Transfer Documents. At the Closing, Sellers will deliver to
Buyer (a) a deed conveying fee simple title to the Real Property in
substantially the form attached hereto as Exhibit B (the "Deed"), (b) one or
more Bills of Sale in substantially the form attached hereto as Exhibit C (a
"Bill of Sale"), and (c) all such other good and sufficient instruments of sale,
transfer and conveyance, in such form and including such matters as Buyer shall
reasonably request, as shall be effective to vest in Buyer all of Sellers'
right, title and interest in and to the Purchased Assets, free and clear of all
Liens other than Permitted Liens.
Section 4.02 Assumption Documents. At the Closing, Buyer will execute and
deliver an Assumption Agreement in substantially the form attached hereto as
Exhibit D (the "Assumption Agreement") in order to effect the assumption of the
Assumed Liabilities by Buyer.
Section 4.03 Transfer Taxes. The cost of all documentary stamps and
transfer taxes due in connection with the recordation of the Deed shall be paid
50% by Buyer and 50% by Herculite.
ARTICLE V
PURCHASE PRICE; ALLOCATION; APPORTIONMENTS
------------------------------------------
Section 5.01 Cash Purchase Price . The base cash purchase price for the
Purchased Assets shall be Fourteen Million Four Hundred Thousand Dollars
($14,400,000) (the "Base Price"), as adjusted in accordance with the provisions
of Section 5.04 hereof (as adjusted, the "Cash Purchase Price").
Section 5.02 Payment of Cash Purchase Price. The Cash Purchase Price as
adjusted pursuant to Section 5.04 and subject to funding the escrows described
in Sections 5.04 and 5.06 hereof, shall be payable by wire transfer made by
Buyer of immediately available funds to Sellers at Closing.
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Section 5.03 Allocation of Purchase Price. Sellers and Buyer agree that
of the total Purchase Price, (a) $5,000,000 shall be the amount paid for the
Real Property, (b) 90% of the remaining balance shall be the portion to be paid
for the Purchased Assets to be purchased from Herculite and (c) 10% of the
remaining balance shall be the portion to be paid for the Purchased Assets to be
purchased from Hercon. Buyer and Sellers each further agree to file their income
tax returns and their other tax returns and IRS Form 8594 reflecting the
allocations as determined in this Section 5.03.
Section 5.04 Cash Purchase Price Adjustment. (a) As used in this Section
5.04, the following capitalized terms have the meanings set forth next to their
names:
"Current Purchased Assets" means all of the Purchased Assets which would be
classified as current assets on Sellers' financial statements in accordance with
GAAP other than the Real Property.
"Current Liabilities" has the meaning set forth in Section 3.01.
"Net Operating Assets" means, at a given time, the difference calculated as
(i) Current Purchased Assets minus (ii) Current Liabilities other than
liabilities relating to the Real Property.
(b) Based on the information set forth in Sellers' April 30, 1999
balance sheet, the parties have negotiated the Cash Purchase Price, in part on
the basis that as of 12:01 a.m. of the Closing Date, Net Operating Assets of
Sellers will be $5,294,000.00 ("Projected Net Operating Assets"). If Net
Operating Assets, as of 12:01 a.m. of the Closing Date, are less or more than
Projected Net Operating Assets, the Base Price shall be adjusted downward or
upward, as applicable, on a dollar for dollar basis, by an amount equal to the
difference between Projected Net Operating Assets and Net Operating Assets of
Sellers at 12:01 a.m. of the Closing Date (the "Net Operating Assets
Adjustment").
(c) Additionally, the Cash Purchase Price shall be adjusted downward,
on the Closing Date, by an amount equal to the damage sustained by Buyer as a
consequence of any misrepresentation or breach of warranty made by Sellers
pursuant to this Agreement, but only to the extent that such damage exceeds
$250,000 (any such damage which does not exceed $250,000 shall, to the aggregate
extent thereof, be referred to herein as the "Non-Excess Damage"). There shall
be no further adjustment to the Cash Purchase Price in the event Buyer opts not
to purchase any or all assets classified under clause (c) in Section 2.01.
(d) Sellers shall prepare and submit to Buyer, not later than six (6)
Business Days prior to the Closing Date, a written good faith estimate of the
amount of the Net Operating Assets Adjustment in accordance with this Section
5.04 and Sellers' estimate of the Cash Purchase Price resulting from the Net
Operating Assets Adjustment ("Sellers' Estimate"). Sellers' Estimate shall be
accompanied by supporting documents, work papers, and other data supporting
Sellers' Estimate. The Sellers' Estimate shall be accompanied by a certificate
signed by an executive officer of Sellers certifying that the Sellers' Estimate
was calculated in good faith and in accordance with the provisions of this
Section 5.04. After the delivery of Sellers' Estimate and prior to the Closing,
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Buyer and Sellers shall attempt to resolve any disputes between Buyer and
Sellers with respect to Sellers' Estimate. In connection therewith, Buyer shall
have full access to all Sellers' records related to Sellers' Estimate. Two (2)
Business Days prior to Closing, Buyer shall advise Sellers in writing as to any
dispute Buyer has with Sellers' Estimate, and provide Sellers with Buyer's
calculation of the Net Operating Assets Adjustment and the Cash Purchase Price,
accompanied by a certificate signed by an executive officer of Buyer certifying
that Buyer's calculation was made in good faith and supporting documents and
information, to the extent the same is available to Buyer ("Buyer's Estimate").
In the event Buyer's Estimate of the Cash Purchase Price is within $30,000 of
Sellers' Estimate, the Closing shall proceed with the Cash Purchase Price based
upon Sellers' Estimate less fifty percent (50%) of the difference between
Buyer's Estimate and Sellers' Estimate. In the event Buyer's Estimate of the
Cash Purchase Price is less than Sellers' Estimate by an amount in excess of
$30,000, the Closing shall proceed with the Cash Purchase Price based upon the
Sellers' Estimate made in good faith except that the lower of (i) $500,000 and
(ii) the difference between Buyer's Estimate and Sellers' Estimate of the Cash
Purchase Price (the "Estimate Difference") shall be delivered out of the Cash
Purchase Price by Buyer to the Escrow Agent, and not to the Sellers, to be held,
invested and disbursed pursuant to the terms of Escrow Agreement No. 1
substantially in the form of Exhibit E attached hereto ("Escrow Agreement No.
1").
After the Closing, Buyer and Sellers shall use good faith efforts to
jointly resolve the Estimate Difference. If Buyer and Sellers cannot resolve the
Estimate Difference to their mutual satisfaction within five (5) Business Days
after Closing, then the matter shall be submitted to the Independent Accountants
(as defined in Section 5.05 below). The Independent Accountants shall resolve
the dispute substantially in accordance with the procedures set forth in Section
5.05 below and the decision of the Independent Accountants with respect to the
Net Operating Assets Adjustment shall be final and binding on the parties.
Within five (5) Business Days of receipt of the Independent Accountants'
decision with respect to such dispute, if Buyer is determined to owe an amount
to Sellers, the Escrow Agent shall pay such amount to Sellers from Escrow No. 1,
and if Sellers are determined to owe an amount to Buyer, the Escrow Agent shall
pay such amount to Buyer from Escrow No. 1, in each case with the excess, if
any, paid over to the other party by the Escrow Agent. All amounts owed by Buyer
or Sellers to the other in accordance with this Section 5.04 shall be paid by
wire transfer of immediately available funds with interest earned.
Section 5.05 Independent Accountants, Procedures. For the purposes of
this Agreement, the term "Independent Accountants" means the Montvale, New
Jersey office of KPMG LLP. The parties shall cooperate in making the fee
arrangement with that firm based on its estimate. In submitting a dispute to the
Independent Accountants, each of Sellers and Buyer shall furnish, at its own
expense, the Independent Accountants and the other party with such documents and
information as the Independent Accountants may reasonably request. Each party
may also furnish to the Independent Accountants such other information and
documents as it deems relevant with the appropriate copies and notification
being given to the other party. The Independent Accountants may conduct a
conference concerning the disagreements between Sellers and Buyer at which
conference each party shall have the right to present additional documents,
materials and other evidence and to have present its or their advisers,
accountants or counsel. The Independent
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Accountants shall promptly render a decision on the issues presented, and such
decision shall be final and binding on the parties, provided, that such decision
may not be more than Sellers' Estimate or less than Buyer's Estimate. Fees and
expenses of the Independent Accountants relating to the matters provided for in
this Agreement shall be shared equally be the parties, unless a party's estimate
varies by more than twelve and one-half percent (12.5%) from the decision
reached by the Independent Accountants, in which case the fees and expenses of
the Independent Accountants shall be paid by such party. Notwithstanding the
foregoing, if each party's estimate varies by more than twelve and one-half
percent (12.5%) from the decision, the fees shall be shared equally by the
parties.
Section 5.06 Indemnity and Older Inventory Escrow.
(a) At the Closing, Buyer and Sellers shall execute and deliver an
escrow agreement substantially in the form of Exhibit F hereto ("Escrow
Agreement No. 2"). Buyer shall deposit with the Escrow Agent $500,000 ("Escrow
Amount No. 2"), out of the Cash Purchase Price payable to the Sellers at the
Closing.
(b) Subject to the provisions of Escrow Agreement No. 2, Escrow
Amount No. 2 shall be available to satisfy (i) claims by Buyer for
indemnification under Section 14.02 and (ii)(A) performance of Sellers'
obligation to repurchase unsold Older Inventory and/or (B) payment to Buyer of
the difference between the Closing Date carrying value of the Older Inventory
and the actual price received by Buyer from sales of such Older Inventory, as
the case may be, in each case in accordance with Section 9.06. On the first
anniversary of the Closing Date, Escrow Amount No. 2 less all amounts required
for payment of claims made by Buyer pursuant to the terms of Escrow Agreement
No. 2, shall be paid to the Sellers, together with interest earned on the amount
to be released. Sellers are permitted to credit the amount of their repurchase
obligation under Section 9.06 against the portion of Escrow Amount No. 2 to be
released to Sellers. Notwithstanding the foregoing, if Sellers have not received
the tax clearance certificate described in Section 9.10 by the first anniversary
of the Closing Date, $100,000 of Escrow Amount No. 2 shall continue to be held
by the Escrow Agent until the tax clearance certificate is obtained. Upon
receipt of the tax clearance certificate, Buyer and Sellers shall direct the
Escrow Agent to release $100,000 to Sellers and/or to government agencies, if,
and to the extent required to be paid to a governmental agency in order to
obtain such tax clearance certificate.
Section 5.07 Real Property Apportionments. At Closing, all real property
taxes shall be apportioned on a calendar year or fiscal year basis, as
appropriate, and sewer, water and trash collection bills, as applicable, shall
be apportioned pro rata between Buyer and Sellers on a per diem basis as of the
Closing Date. Utility meter readings shall be taken as of the Closing Date.
Buyer shall be responsible for all utility costs incurred on or after the
Closing Date.
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ARTICLE VI
CLOSING
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Subject to the terms and conditions hereof, the Closing (the "Closing") of
the sale hereunder shall take place at the offices of Rhoads & Sinon LLP, One
South Market Square, Harrisburg, Pennsylvania, on the date (the "Closing Date")
which is the later of: (a) the sixth (6th) Business Day after the first day on
which all of the conditions precedent set forth in Articles XI and XII have been
satisfied or waived by Sellers or Buyer, as the case may be; (b) the forty-fifth
(45th) calendar day following the execution of this Agreement; or (c) such other
date as the parties mutually agree. Buyer shall give notice of the Closing Date
to Sellers. Either party, by notice to the other, may make the time of the
Closing of the essence of the sale hereunder.
ARTICLE VII
SELLERS' REPRESENTATIONS
------------------------
Sellers jointly and severally, hereby represent and warrant to Buyer that
the below noted statements are true and correct as of the date of this Agreement
and shall continue to be true and correct through the date of the Closing (it
being agreed by Buyer that disclosure of any information in any one of the
schedules shall be deemed to be disclosure in any other schedule); provided,
however, that the foregoing shall not be construed to entitle the Buyer not to
close pursuant hereto or to limit the Buyer's entitlement to the price
adjustment provided for by the first sentence of Section 5.04(c). Said
representations and warranties shall survive the Closing for a period of
eighteen (18) months, provided, however, if Buyer obtains actual knowledge that
any of such representations and warranties are inaccurate prior to Closing and
thereafter purchases the Purchased Assets, Buyer shall to the extent of Buyer's
actual knowledge of the inaccuracy be deemed to have waived such representation
or warranty and, to such extent, such representation or warranty shall not
survive the Closing.
Section 7.01 Organization, Qualification. Herculite is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, and has all necessary corporate power and authority to own and operate
its properties and to carry on its business as now being conducted. All of the
outstanding capital stock of all classes of Herculite is owned by HS Protective
Fabrics Corporation, a Delaware corporation. Hercon is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all necessary corporate power and authority to own and operate
its properties and to carry on its business as now being conducted. 98.5% of the
outstanding capital stock of all classes of Hercon is owned by Herculite.
Section 7.02 Governmental Consents, Authorization of Agreement and Sale.
Except for filings under the HSR Act and as set forth in Schedule 7.02, all
material governmental filings, consents and approvals required to effect the
sale, assignment and transfer of the Purchased Assets have been obtained by
Sellers. In accordance with Section 909 of the New York Business Corporation
Law, the board of directors and sole shareholder of Herculite have authorized
the execution, delivery and performance of this Agreement by Herculite and the
sale of the Purchased Assets to be sold by Herculite pursuant to this Agreement.
In accordance with Section 271 of the
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Delaware General Corporation Law, the board of directors of Hercon, and its
shareholder, Herculite, by written consent given as the owner of 98.5% of the
outstanding capital stock of Hercon, have authorized the execution, delivery and
performance of this Agreement by Hercon and the sale of the Purchased Assets to
be sold by Hercon pursuant to this Agreement.
Section 7.03 Subsidiaries. Except for Herculite's ownership of 98.5% of
the shares of Hercon, 90% of the shares of Transderm Laboratories Corporation
(which in turn owns 98.5% of the shares of Hercon Laboratories Corporation), and
100% of the shares of an inactive subsidiary, Aberdeen Research Corp., Sellers
do not have any subsidiaries.
Section 7.04 Purchased Assets. (a) Except as set forth on Schedule 7.04,
Herculite owns fee simple title in and to the Real Property, free and clear of
all Liens or other third party claims, other than Permitted Liens, and Sellers
have good and marketable title to, or in the case of Purchased Assets which are
leased, valid and subsisting leasehold interests in, the other Purchased Assets,
free and clear of all Liens or other third party claims, other than Permitted
Liens.
(b) All tangible personal property, fixtures, machinery and equipment
comprising the Purchased Assets are in a reasonable state of repair (ordinary
wear and tear excepted) and operating condition and are suitable for the
purposes for which they are currently being used.
Section 7.05 Material Contracts. Schedule 7.05 hereto sets forth all
subsisting material Contracts (the "Material Contracts") (other than Contracts
not being assumed hereunder and Contracts with annual payments of less than
$5,000, which latter category of Contracts in the aggregate have annual payments
of less than $20,000) to which either Seller is a party that: (a) involve the
future purchase and delivery of products or the rendition of services and
payments therefor which, when aggregated together with other Contracts with the
same Person, or with Affiliates of such Person, might exceed $15,000 in any
three month period; (b) relate to the employment of any officer or individual
employee, or obtaining consulting services from any other Person, or relate to
the termination of any such officer's, employee's or consultant's services; (c)
relate to any Liens set forth on Schedule 7.04; (d) involve the lease of any
property, whether, real, personal or mixed; (e) contain any provision or
covenant prohibiting or limiting the ability of Sellers or Buyer to operate the
Business, including a covenant not to compete and territorial restrictions; (f)
involve an obligation to indemnify, defend or hold harmless any other Person;
(g) are with any current officer, director, or Affiliate; (h) constitute
distribution, agency, sales representation consultation Contracts; (i)
constitute partnership, joint venture, profitsharing, or similar Contracts with
any Person; or (j) guarantee the performance, liabilities or obligations of any
other Person. Sellers have heretofore delivered to Buyer true and correct copies
of the Material Contracts, provided, that in the case of Material Contracts
which are evidenced by purchase orders, Sellers have delivered to Buyer a true
and correct computer generated list of such purchase orders. Except as disclosed
on Schedule 7.05, Sellers have no knowledge of any material breach by the other
parties to any Material contracts. The Material Contracts are in full force and
effect and Sellers are in material compliance with the terms of such Material
Contracts.
Section 7.06 No Violation of Existing Agreements. The execution, delivery
and performance of this Agreement by Sellers will not, to Sellers' knowledge,
violate any provisions of
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law and will not, with or without the giving of notice or the passage of time,
or both, conflict with or result in any breach of any of the terms or conditions
of, or constitute a default under any Material Contract. Subject to the consents
identified in Schedule 7.02, the execution, delivery and performance of this
Agreement by Sellers will not result in the creation of any Lien upon the
Purchased Assets or the Business other than Permitted Liens.
Section 7.07 Litigation and Legal Proceedings. Except as set forth on
Schedule 7.07, there is no outstanding judgment against either Seller affecting
the Business or the Purchased Assets which questions the validity of any action
taken or to be taken pursuant to or in connection with the provisions of this
Agreement and there is no litigation, proceeding or investigation pending, or,
to Sellers' knowledge, threatened, against either Seller affecting the Business
or the Purchased Assets or which questions the validity of any action taken or
to be taken pursuant to or in connection with the provisions of this Agreement.
Section 7.08 Employees. Schedule 7.08 sets forth a true and complete list
of the names and salaries of all employees of Sellers involved in the operation
of the Business as of the date hereof. Subject to subsection (g) of Section 9.04
and Schedule 7.19, the preceding sentence shall be true and correct as of the
Closing. Except as set forth on Schedule 7.08, there are no collective
bargaining agreements covering any of Sellers' employees. No consent of any
union (or similar group of organization) is required in connection with the
consummation of the transactions contemplated hereby. There are no pending, or,
to Sellers' knowledge, threatened (x) union representation petitions respecting
the employees of Sellers, (y) efforts being made to organize any of the
employees of Sellers, or (z) strikes, slow downs, work stoppages, or lockouts or
threats.
Section 7.09 Employee Benefits. Schedule 7.09 sets forth a true and
complete list of Employee Benefit Plans. A true and complete copy of each such
Employee Benefit Plan has been provided or made available to Buyer. Except as
otherwise provided on Schedule 7.09, the closing of the transactions
contemplated by this Agreement will not result in the Buyer's assumption of any
liabilities arising out of any Employee Benefit Plan or any employment contract
between any employee identified in Schedule 7.08 and either Seller or a
Controlled Group Member.
Section 7.10 Financial Statements.
(a) Buyer has heretofore been furnished with copies of the unaudited
balance sheets of Sellers as of December 31, 1995, December 31, 1996, December
31, 1997, December 31, 1998 and April 30, 1999 (an interim statement) (the April
30, 1999 interim statement being the "Financial Statement Date") and related
unaudited statements of income for the periods then ended, each of such balance
sheets and income statements being attached hereto at Schedule 7.10(a)
(collectively, the "Financial Statements"). The various amounts included in the
Financial Statements are not necessarily indicative of the results which may be
obtained by Buyer from and after the Closing in connection with its operations
of the Purchased Assets. The Financial Statements are unaudited and have been
prepared in accordance with GAAP other than with respect to liquidation
presentation rules and the cut-off of the period for determining liabilities as
of the Financial Statement Date. Subject to the foregoing, Sellers hereby
represent and warrant to Buyer that: (i) the Financial Statements have been
prepared in accordance with the accounting principles and practices
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used by Sellers in the preparation of its financial statements applied on a
consistent basis for the periods covered thereby; and (ii) each of the balance
sheets included in the Financial Statements fairly presents the financial
condition of Sellers, as of the close of business on the date thereof, and each
of the statements of income included in the Financial Statements fairly present
the results of operations of Sellers for the period then ended.
(b) Except as set forth in Schedule 7.10(b), since the Financial
Statement Date, Sellers have not: (i) sold, assigned or transferred any of their
tangible assets (except for the Excluded Assets, except pursuant to existing
Contracts, except for worn or obsolete equipment and except for inventory or
other current assets in Sellers' ordinary course of business consistent with
past practice); (ii) suffered any material damage, destruction or casualty loss
with respect to the Purchased Assets, whether or not covered by insurance, (iii)
made any distribution of any of the Purchased Assets to any shareholder of
Seller, or (iv) entered into any agreement or understanding to do any of the
foregoing.
Section 7.11 Broker's and Finder's Commissions. Sellers acknowledge that
they have dealt with Seneca Financial Group, Inc. and Gordian Group, L.P. (the
"Brokers") in connection with this transaction and have agreed to pay the
Brokers any brokerage commission fees that shall be due to them in connection
with this transaction. Sellers also acknowledge that they will pay Coldwell
Banker Commercial Rotz Associates, Inc. a fee of $50,000 in accordance with
their agreement with Coldwell Banker Commercial Rotz Associates, Inc. Sellers
represent that Sellers have not dealt with any other broker, agent or finder in
connection with this transaction other than the Brokers and Coldwell Banker
Commercial Rotz Associates, Inc. The engagement of Gordian Group, L.P. was
terminated as of April 13, 1999.
Section 7.12 Intellectual Property. Schedule 7.12 hereto contains a list
of the Intellectual Property owned by Sellers (the "Owned Intellectual
Property"). Schedule 7.12 also contains a true and complete list of the
Intellectual Property (the "Licensed Intellectual Property") possessed or used
by Sellers pursuant to any agreement with a third party (each, an "Intellectual
Property License"). The Owned Intellectual Property and Licensed Intellectual
Property together comprise all of the Intellectual Property necessary or
appropriate for the operation of the Business as it is now being conducted. To
Sellers' knowledge, no Person is infringing Sellers' rights in the Owned
Intellectual Property or Licensed Intellectual Property. Except as set forth in
Schedule 7.12, Sellers are not required to make any payments by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any Intellectual Property.
Section 7.13 Hazardous Substances. Except as disclosed in the Phase II
Environmental Site Assessment of the Health-Chem Corporation property located in
Emigsville, Pennsylvania prepared by Arecon Ltd. and except as set forth in
Schedule 7.13, (i) no written notice of violation with respect to any
environmental condition has been received by either Seller from any Governmental
Entity, (ii) to Sellers' knowledge, there does not presently exist any violation
of or failure to be in compliance with any Environment Laws involving Sellers,
any of the Purchased Assets or the Business, (iii) to Sellers' knowledge there
has not been any release, discharge, migration, spill or storage of Materials of
Environmental Concern or any other environmental conditions which could give
rise to liability of Sellers, (iv) to Sellers' knowledge, there are no pending
administrative,
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regulatory or judicial actions, suits or proceedings against Sellers or the Real
Property arising under or relating to any Environmental Laws, and (v) to
Sellers' knowledge, there are no Materials of Environmental Concern on, at or
under the Real Property other than those being used or stored in compliance with
Environmental Laws.
Section 7.14 Accounts Receivable and Bad Debts. To Sellers' knowledge,
except as set forth on Schedule 7.14, all of the existing accounts receivable of
Sellers reflected in the April 30, 1999 Interim Statement represent, and the
accounts receivable reflected on the books of Sellers on the date hereof
represent, valid obligations owing to Sellers and arising from sales actually
made, or services actually performed in the ordinary course of its business.
Unless paid prior to Closing or set forth on Schedule 7.14, the accounts
receivable are current (less than 120 days) and collectible, in full, net of the
respective reserves shown on the April 30, 1999 Interim Statement or on the
books of Sellers as of the date hereof. Such reserves are adequate and
calculated consistent with past practices. Notwithstanding the foregoing, the
representations made in this Section 7.14 are conditional upon Buyer applying
payments it collects on receivables of a customer (irrespective of whether such
receivables arose before or after the Closing) against the oldest outstanding
receivables of such customer, irrespective of whether the oldest receivables are
contested by such customer. To Sellers' knowledge, as of the date hereof, there
is no contest, claim or right of set-off, other than returns in the ordinary
course of business, with respect to any of the accounts receivable.
Section 7.15 Transactions with Certain Persons. Except as set forth in
Schedule 7.15 and as may be contemplated by the terms of this Agreement, Sellers
do not owe any amount to, or have any contract with or commitment to, any
shareholder, director, officer, employee or consultant of Sellers (other than
deferred salaries, wages and bonuses, compensation for current services not yet
due and payable, rent payable to an Affiliate, and reimbursement of expenses
arising in Sellers' ordinary course of business), and no such person owes any
amount of money to Sellers.
Section 7.16 No Adverse Change. Since the Interim Financial Statement of
April 30, 1999, neither Seller has suffered any material adverse change in its
business, financial condition, operations, prospects or assets, nor has any
event or condition occurred which, individually or in the aggregate, might be
expected to have a material adverse affect on the business, financial condition,
operations, prospects or assets of either Seller.
Section 7.17 Customers. All customers of Sellers whose annual purchases
represent more than $50,000 for the year ending December 31, 1998 are identified
(by name and sales amount) in Schedule 7.17 hereof. Except as set forth on
Schedule 7.17, neither Seller has received any notice, oral or written, or has
any knowledge or reason to believe, that any customers whose purchases represent
three percent (3%) or more, either individually or in the aggregate, of sales
made during the year ending December 31, 1998 intend to terminate or materially
reduce their relationship with either Seller within the twelve (12) calendar
month period immediately following the Closing.
Section 7.18 Computer Programs and Software. Sellers have no knowledge of
any infringing use of the Software or claim of infringing use. Schedule 7.18
sets forth a complete list of all agreements or arrangements relating to the use
of the Software and any assets of either Seller in connection therewith.
Consummation of the transactions contemplated hereby will not result in
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an impairment of the legal rights of Sellers with respect to the Software. The
Software constitutes all computer software necessary to conduct the Sellers'
Business.
Section 7.19 Absence of Certain Acts or Events. Except as disclosed on
Schedule 7.19, since the April 30, 1999 Interim Statement neither Seller has:
(a) Authorized or issued any capital stock or other securities;
(b) Purchased or redeemed any of its capital stock or other
securities;
(c) Paid any bonus to any employee or increased the rate of
compensation of any of its employees, other than the "stay on" bonuses referred
to in Section 3.01 or payment of deferred wages, salaries and bonuses;
(d) Sold or transferred any of its assets, other than in the ordinary
course of business;
(e) made any payment in respect of its liabilities outside the
ordinary course of business;
(f) incurred any obligations or liabilities (including any
indebtedness) or entered into any debt transactions, except for professional
fees, normal trade or business obligations incurred in the ordinary course of
business consistent with past practice or indebtedness under the existing
revolving line of credit with IBJ Whitehall Business Credit Corporation;
(g) suffered any theft, damage, destruction, loss or casualty loss of
any asset not covered by insurance;
(h) incurred or increased (including draws on existing lines of
credit or other debt facilities) any indebtedness for borrowed money other
than under the existing revolving line of credit with IBJ Whitehall Business
Credit Corporation or created any liens or encumbrances other than Permitted
Liens;
(i) made or adopted any change in its accounting practice or
policies;
(j) made any adjustment to its books and records other than in
respect of the conduct of its business activities in the ordinary course;
(k) made, or been denied any claim under any policy of insurance;
(l) become a party to any litigation, legal action or arbitration;
(m) made any loan or advance;
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(n) incurred or been threatened with any strike, lockout, labor
trouble, union organizing activities or other labor condition;
(o) made or authorized any capital expenditures;
(p) incurred or been threatened with any loss of any of its important
suppliers or customers or incurred or been threatened with any material
reduction in the amount of materials supplied by or product sold to important
suppliers or customers;
(q) disposed of or failed to keep in effect any trade names, assumed
names, service marks or trademarks, logos, patents, copyrights, brand names,
rights or applications therefor;
(r) amended or revised its Bylaws or Articles of Incorporation;
(s) canceled or waived claims with a value to it in excess of Three
Thousand Dollars ($3,000); or
(t) entered into any oral or written agreement to do any of the
above.
Section 7.20 Books and Records. To the best of Sellers knowledge, the
books of account, financial records, reports generated by Sellers' management
information system, inventories, sales data, customer information, documents
delivered by Sellers to Buyer during the due diligence period prior to and
subsequent to the date of this Agreement, minute books, stock certificate books
and stock transfer ledgers of Sellers are complete and correct in all material
respects.
Section 7.21 Inventory. Except as set forth in Schedule 7.21, the
inventory of Sellers is of good and merchantable quality, and is salable or
usable for the purpose for which it is intended and in the ordinary course of
business in accordance with Sellers' normal pricing and marketing practices,
without any material defects, meets all applicable specifications and standards
and is not damaged, obsolete (other than inventory which has no carrying value
on Sellers' April 30, 1999 Financial Statement) or slow moving (except to the
extent caused by seasonality of Hercon's business and Herculite's business
relating to poultry fabric). Except as set forth in Schedule 7.21, (i) the
quantities of the inventory held by Sellers are not materially in excess of
Sellers' normal business requirements and (ii) the quantities of raw materials,
packaging and finished goods transferred to Buyer at the Closing shall be
sufficient to operate the business of Sellers in the ordinary course and to
allow for replenishment of said inventory within the customary customer
order-to-deliver lead times without incurring unusual or special expense or
making unusual or special arrangements. Except as set forth on Schedule 7.21, no
inventory or raw material is held on consignment by or for Sellers' business or
is owned by a customer or any other third party.
Section 7.22 Product Warranty Claims. Except as set forth on Schedule
7.22, to Sellers' knowledge, each product manufactured, sold, leased or
delivered by Sellers has been in substantial conformity with all applicable
contractual commitments and all express and implied warranties, and Sellers have
no material liability (and there is no basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim or demand
against Sellers, or either of
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them, giving rise to any liability) for replacement or repair thereof or other
damages in connection therewith except for product liability suits or claims
disclosed in Schedule 7.22 that are covered by insurance. Except as set forth on
Schedule 7.22, to Sellers' knowledge, no product manufactured, sold or delivered
by Sellers, or either of them, is subject to any material guaranty, warranty or
other indemnity beyond the applicable standard terms and conditions of sale or
lease. To Sellers' knowledge, Schedule 7.22 sets forth records of material
product warranty claims brought or asserted against either Seller in the past
three (3) years.
Section 7.23 Product Indemnity. Except as set forth on Schedule 7.23, to
Sellers' knowledge, neither Seller has any liability (and, to Sellers'
knowledge, there is no basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against Sellers
giving rise to any liability) arising out of injury to individuals or property
as a result of the possession, consumption or use of any product manufactured,
sold or delivered by either Seller.
Section 7.24 Insurance. The tangible Purchased Assets used in the
Business are insured for the benefit of Sellers in such amounts and covering
such risks as are deemed reasonably necessary by Sellers consistent with their
customary practice.
Section 7.25 Intracompany Transactions. Schedule 7.25 sets forth all
sales from Sellers to Health-Chem or any of its Affiliates during the eighteen
(18) month period immediately preceding the Closing.
Section 7.26 WARN Compliance. The aggregate number of employees
permanently laid off or fired in the ninety (90) days immediately preceding the
date hereof is approximately ten (10) and the aggregate number of employees
temporarily laid off in the ninety (90) days immediately preceding the date
hereof is approximately ten (10).
Section 7.27 Purchase from Pacific Combining Corporation. To Sellers'
knowledge, neither Sellers nor their Affiliates nor any employees of either
Seller or their Affiliates purchased inventory or equipment from Pacific
Combining Corporation in connection with the liquidation of its business which
will be used to compete with the Business.
Section 7.28 Condemnation. Herculite has not received notice of
condemnation of, or eminent domain proceedings with respect to, all or any part
of the Real Property, notice of any assessment for public improvements, or
notices with respect to the violation of any zoning ordinance or other law,
order, regulation or requirement relating to the use or ownership of the Real
Property.
Section 7.29 Zoning. The Real Property is located in an area zoned IG,
Industrial General District. So far as is known to Sellers, the present use of
the Real Property is a conforming use and complies with and is permitted under
all applicable laws, including zoning laws.
Section 7.30 Utilities. The Real Property is served by public sewer and
water and there is sufficient capacity available to support the current use of
the Real Property.
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Section 7.31 No Other Agreements. There are no outstanding options to
purchase the Real Property, rights of first refusal, contracts to purchase or
occupy the Real Property or leases or other agreements affecting the use of or
title to the Real Property other than the Permitted Liens.
Section 7.32 Permitted Lien Schedule. Sellers are not aware of the
existence of any item specified in paragraph 9 of the Permitted Lien Schedule to
this Agreement.
Section 7.33 Disclaimer of Other Representations and Warranties. Except
as expressly set forth in this Article VII, Sellers make no representations or
warranty, express or implied, at law or in equity, including, without
limitation, with respect to merchantability of any product or of any of the
Purchased Assets or fitness for any particular purpose, and any such
representations or warranties are hereby expressly disclaimed. BUYER HEREBY
ACKNOWLEDGES AND AGREES THAT EXCEPT TO THE EXTENT SPECIFICALLY SET FORTH IN THIS
ARTICLE VII, THE BUYER IS PURCHASING THE PURCHASED ASSETS ON AN "AS IS, WHERE
IS" BASIS.
ARTICLE VIII
BUYER'S REPRESENTATIONS
-----------------------
Buyer hereby represents and warrants to Sellers that the below noted
statements are true and correct as of the date of this Agreement and, as a
condition to Sellers' obligation to close, shall continue to be true and correct
through the date of the Closing. Said representations and warranties shall
survive the Closing for a period of eighteen (18) months.
Section 8.01 Organization; Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Buyer has all power and authority to (i) own and
operate its properties, (ii) carry on its business as it is now being conducted,
and (iii) carry out the transactions contemplated by this Agreement and to own
and operate the Purchased Assets and the Business.
Section 8.02 Consents; Authorization; Execution and Delivery of
Agreement. Except for filings under the HSR Act, all necessary consents and
approvals have been obtained by Buyer for the execution and delivery of this
Agreement. The execution and delivery of this Agreement by Buyer has been
authorized by Buyer's board of directors.
Section 8.03 Litigation and Legal Proceedings. There is no outstanding
judgment against Buyer and there is no litigation, proceeding or investigation
pending, or, to Buyer's knowledge threatened, against Buyer or its assets which
individually or in the aggregate would, if adversely determined, result in an
adverse change in the business condition (financial or otherwise), properties,
prospects or assets of Buyer or which questions the validity of any action taken
or to be taken pursuant to or in connection with the provisions of this
Agreement or the consummation of the transactions contemplated hereby by the
Buyer.
Section 8.04 Broker's and Finder's Commissions. Buyer acknowledges that
it has dealt with Mellon Financial Markets, Inc. (the "Broker") in connection
with this transaction and has
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agreed to pay the Broker any brokerage commission fees that shall be due to it
in connection with this transaction. Buyer also acknowledges that Buyer will pay
the excess above $50,000 of the fee, if any, payable to Coldwell Banker
Commercial Rotz Associates, Inc. in connection with this transaction by reason
of arrangements, if any, made with that firm by Susquehanna Capital or any of
its Affiliates. Buyer represents that Buyer has not dealt with any other broker,
agent or finder in connection with this transaction other than through the
Broker and Coldwell Banker Commercial Rotz Associates, Inc.
Section 8.05 Compliance with Laws. Buyer is currently complying with, and
has so complied with, and, to the best of Buyer's knowledge, information and
belief, is not in default under or in violation of, and neither its businesses
nor any of its assets nor the operation or maintenance thereof contravenes in
any respect, any statute, law (including environmental or employment laws),
ordinance, decree, order, rule or regulation of any Governmental Entity.
Section 8.06 Financial Ability to Close. Buyer has and will at all times
relevant to consummating the transactions contemplated hereunder have the
financial ability to perform its obligations under this Agreement. In
particular, Buyer specifically represents that the obligation of Buyer to
consummate the transactions contemplated hereby is not subject to any financing
contingency.
Section 8.07 Independent Decision. The Buyer is aware of each of the
Sellers' business, affairs and financial condition and, subject to the
representations and warranties of Sellers herein contained, has acquired
sufficient information about each of the Sellers, including, without limitation,
their respective Businesses, assets, liabilities, employees, contracts,
agreements and arrangements, financial condition and current level of
operations, to reach an informed and knowledgeable decision to acquire the
Purchased Assets and assume the Assumed Liabilities hereunder. The Buyer
represents and warrants that, subject to the representations and warranties of
Sellers herein contained, it has made its own independent analysis and
evaluation of each of the Sellers, including, without limitation, their
respective business, assets and liabilities and the value of the Purchased
Assets and the Assumed Liabilities and has conducted such due diligence
investigation and review as the Buyer has determined to be necessary or
appropriate, and the Buyer has been given access to all documents and agreements
and financial information that it has requested of the Sellers. Buyer
acknowledges that it has not relied upon any representations or warranties of
any of the Sellers, their respective stockholders, directors, officers,
employees, or agents, as the case may be, whether written or oral, except for
those representations or warranties made by the Sellers which are set forth in
this Agreement.
Section 8.08 Disclaimer of Other Representations and Warranties. Except
as expressly set forth in this Article VIII, Buyer makes no representations or
warranty, express or implied, at law or in equity.
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ARTICLE IX
SELLERS'AND BUYER'S COVENANTS
-----------------------------
Section 9.01 Third Party Consents; Closing Conditions.
(a) Buyer and Sellers covenant and agree that each of them will
reasonably cooperate with each other, and Buyer will do all things reasonably
necessary to assist Sellers, to obtain all consents and approvals set forth in
Schedule 7.02, including the furnishing of financial and other information with
respect to Buyer, its Affiliates, or Sellers, as the case may be, reasonably
required by the Person whose consent or approval is being sought.
Notwithstanding the foregoing, to the extent that any Purchased Asset is not
capable of being sold, assigned, transferred or conveyed without the consent or
approval of any third Person, and such consent or approval has not been
obtained, this Agreement shall not constitute a sale, assignment, transfer or
conveyance thereof, or an attempted sale, assignment, transfer or conveyance
thereof, provided, however, Sellers shall use their commercially reasonable
efforts to provide Buyer the benefits of any such Purchased Asset as provided in
Section 20.01 and the Cash Purchase Price shall be reduced in an amount equal to
the fair market value of the Purchased Assets not transferred to Buyer.
(b) Buyer and Sellers hereby covenant and agree to use all
commercially reasonable efforts to satisfy, or assist the other party (or
parties, as the case may be) in satisfying the closing conditions applicable to
the Buyer in Article XI hereof and Sellers in Article XII hereof, and to
consummate the transactions contemplated hereby in the most expeditious manner
practicable.
Section 9.02 Access. Buyer shall have the right, itself or through its
representatives, during normal business hours, after reasonable notice to
Sellers, and without undue disruption to Sellers' normal business activities, to
inspect the Purchased Assets, to inspect and make abstracts of all books and
records of Sellers relating to Sellers' operation of the Business, and to make
such measurements, surveys, borings or tests on the Real Property as Buyer may
deem advisable. Sellers shall furnish Buyer with such information respecting the
Purchased Assets and Business and financial records as Buyer may, from time to
time, reasonably request. Buyer agrees to provide Sellers with prompt written
notice if Buyer determines that, based upon information provided to Buyer or
through its own investigation, Sellers are in breach of any representations,
warranty or covenant of Sellers set forth in this Agreement. Buyer hereby
indemnifies and holds harmless Sellers from any claims or liabilities, including
costs of defense and reasonable attorneys fees, arising out of the actions of
Buyer or its agents or invitees while upon the Real Property. Buyer further
agrees to restore the Real Property to its original condition after the
completion of any measurements, surveys, borings or tests conducted by or on
behalf of Buyer.
Section 9.03 Conduct of Business. From and after the date hereof and
except as otherwise approved by Buyer in writing, which approval shall not be
unreasonably withheld, Sellers shall:
(a) except as disclosed on Schedule 7.10(b), except pursuant to
existing Contracts, except for worn or obsolete inventory or equipment
identified in Schedule 9.03, and except for products or inventory sold in the
ordinary course of business, shall not make any sale, lease, transfer or other
disposition of any of the Purchased Assets;
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(b) not modify, amend or alter in any material respect, or terminate
any of the Material Contracts, and shall not waive or cancel any default or
breach or modify, alter or terminate any right or asset relating to or included
in the Purchased Assets;
(c) maintain their books and records in accordance with their prior
practice; maintain all of their property and assets in their present condition,
ordinary wear and tear excepted; and otherwise operate their business in the
ordinary course in accordance with past practice;
(d) not subject any of the Purchased Assets to any new Lien other
than Permitted Liens;
(e) except as contemplated by the terms and conditions of this
Agreement, shall not do, or omit to do, any act which will cause a breach of, or
default under, or termination of (except in accordance with its terms), any
Material Contract to which either Seller is a party or by which either Seller is
bound and which is to be assumed by Buyer hereunder;
(f) notify Buyer in writing promptly after learning of the
institution or threat of any litigation against either Seller;
(g) pay or cause to be paid or provide for all Taxes of or relating
to Sellers, the Purchased Assets and the employees of Sellers required to be
paid prior to the Closing Date, provided, that if Sellers dispute in good faith
any of such Taxes, then Sellers shall pay such Taxes upon resolution of such
dispute in favor of the opposing party;
(h) subject to the provisions of Section 9.04 of this Agreement,
cooperate with Buyer in connection with Buyer's efforts to identify the current
employees of Sellers that Buyer would like to hire following the Closing,
consistent with all applicable federal, state and/or local employment laws,
rules and regulations;
(i) notify Buyer in writing promptly after learning of any fact or
event which would cause any of Sellers' representations in Article VII to be
untrue or inaccurate; and
(j) not enter into any agreement or understanding inconsistent with
any of the foregoing.
Section 9.04 Employees.
(a) Subject to subsection (h) of this Section 9.04, Buyer may, but
shall have no obligation to, offer employment to any of the current employees of
the Sellers pursuant to this Section 9.04(a). Not less than fourteen (14) days
prior to the Closing Date, Buyer will notify Sellers in writing which employees
will be offered employment by Buyer and setting forth the costs of compensation
("Buyer's List"). On the Closing Date, Buyer shall offer employment to all
employees of Sellers on Buyer's List at such rates, provided, however, that
subject to applicable law, Buyer may terminate at any time after the Closing
Date the employment of any employee who
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accepts such offer. Any such offers shall be at such salary or wage and benefit
levels and on such other terms and conditions as Buyer shall in its sole
discretion deem appropriate. The employees who accept and report for work with
Buyer as contemplated hereby are hereinafter collectively referred to as the
"Transferred Employees."
(b) Sellers shall retain any obligations and liabilities under the
Employee Benefit Plans in respect of each employee or former employee (including
any beneficiary or dependent thereof) who is not a Transferred Employee.
(c) With respect to the Transferred Employees (including any
beneficiary or dependent thereof), Sellers shall retain (i) all liabilities and
obligations arising under any group life, accident, medical, dental or
disability plan or similar arrangement to the extent that such liability or
obligation relates to contributions or premiums accrued or to claims incurred on
or prior to the Closing Date, (ii) all liabilities and obligations arising under
any worker's compensation arrangement to the extent such liability or obligation
relates to the period prior to the Closing Date and (iii) all other liabilities
and obligations arising under the Employee Benefit Plans to the extent any such
liability or obligation relates to the period prior to the Closing Date. Buyer
shall assume all other obligation of Sellers to Transferred Employees.
(d) Sellers shall, to the date of Closing, fully pay and fund all
premiums owing for employee group life, accident, medical, dental or disability
plan or other similar arrangements, including severance or pension benefits
owing by either Seller under any union contract, workman's compensation
premiums, all FICA and FUTA taxes for all employees, all employee salary and
wage deferrals and all other employer obligations under Employee Benefit Plans
or any other contract or law to which Sellers are subject.
(e) Sellers shall be responsible, and Buyer shall have no
responsibility, for all severance obligations to all employees who do not become
Transferred Employees.
(f) No provision of this Section 9.04 shall create any third party
beneficiary or other rights in any employee or former employee (including any
beneficiary or dependent thereof) of Sellers or any of their Affiliates in
respect of continued employment (or resumed employment) with either Buyer,
Sellers or their respective Affiliates, and no provision of this Section 9.04
shall create any such rights in any such persons in respect of any benefits that
may be provided, directly or indirectly, under any Employee Benefit Plan or
other plan or arrangement or any plan or arrangement which may be established by
Buyer or any of its Affiliates.
(g) Sellers will not take any action to cause the aggregate number of
employees permanently laid off or fired in the ninety (90) days immediately
preceding the Closing to exceed fifteen (15) and the aggregate number of
employees temporarily laid off in the ninety (90) days immediately preceding the
Closing to exceed fifteen (15).
(h) Buyer shall hire within thirty (30) days after the Closing, at a
minimum, such number of individuals employed by Sellers immediately prior to the
Closing, in order to comply with WARN and to avoid, as a result of the Closing,
a mass layoff under WARN. Buyer waives
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compliance with WARN and agrees to indemnify, hold harmless and defend each
Seller from and against any and all claims, demands, suits, judgments, losses,
damages, costs and/or attorney's fees relating to the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. ss.ss. 2101-2109.
Section 9.05 Supplemental Disclosure. Sellers shall have the right from
time to time prior to the Closing Date to supplement in writing the disclosure
schedules hereto with respect to any matter hereafter arising that, if existing
or known as of the date of this Agreement, would have been required to be set
forth or described in the disclosure schedules hereto, provided, however, no
such supplemental disclosure shall be deemed to cure any breach of any
representation or warranty of Sellers made in this Agreement unless Buyer fails
to object in writing to Sellers to any such supplemental disclosure within ten
(10) Business Days after Buyer's receipt thereof. In the event of Buyer's
failure to object, any breach of any representation or warranty shall be deemed
to be cured by such supplemental disclosure. Notwithstanding the foregoing, in
the event that Buyer fails to notify Sellers in writing of any of Buyer's
objections to title to the Real Property within the time period set forth in
Article X hereof, then (a) the Permitted Lien Schedule (referred to in the
definition of Permitted Liens) shall be deemed automatically supplemented to
include all exceptions to title shown in Buyer's title commitment and/or survey
which were not so objected to, and (b) Buyer shall not have the right to object
to such deemed supplemental disclosures.
Section 9.06 Older Inventory Repurchase. On the Closing Date, Sellers
shall deliver to Buyer a schedule of all Older Inventory and its carrying value
on Sellers' balance sheet as of the Closing Date (for the purpose of this
Section 9.06, the "carrying value"). "Older Inventory" consists of all of the
inventory of Sellers which as of the Closing Date is one year old or more.
During the one year period following the Closing, Buyer shall use commercially
reasonable efforts to sell the Older Inventory at a price equal to the carrying
value, provided, however, Buyer is not obligated to obtain such price and may
accept the best available price for the Older Inventory. On the first
anniversary of the Closing Date: (i) Buyer shall be entitled to receive, from
Escrow No. 2, the difference between the carrying value and the actual price
received by Buyer from sales of Older Inventory, and (ii) Sellers shall
repurchase all of the Older Inventory that has not been sold by Buyer during
such one year period. The purchase price for the Older Inventory shall be the
carrying value.
Section 9.07 Assistance. Following the Closing, Buyer will permit Sellers
at reasonable times to access and copy records and consult with employees to the
extent necessary to comply with the Pennsylvania bulk sales laws as contemplated
by Section 9.10 hereof and to assist Sellers with respect to any claim made by a
third party or Buyer against Sellers which relates to the Business or Purchased
Assets. Sellers' shall pay all out-of-pocket expenses incurred by Buyer in
connection with the foregoing, and at any time when Sellers consult with an
employee in excess of seven (7) hours, Sellers shall further reimburse Buyer for
each hour in excess of seven (7) hours at such employee's hourly rate.
Section 9.08 Transfer of Health-Chem's and Transderm's Computer Files.
For an eight month period following the Closing, Buyer will permit employees of
Health-Chem and Transderm to access, at reasonable times, computer equipment and
Software which is part of the Purchased Assets for the purpose of transferring
such parties' files which are stored on such equipment.
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Section 9.09 Accounts Receivable. After the Closing, Buyer shall use
commercially reasonable efforts to collect any outstanding accounts receivable
included as part of the Purchased Assets and shall apply payments it collects on
receivables of a customer (irrespective of whether such receivables arose before
or after the Closing) against the oldest outstanding receivables of such
customer, irrespective of whether the oldest receivables are contested by such
customer. After the 180th day following the Closing Date, to the extent Buyer
has not collected (or credited pursuant to the foregoing sentence) accounts
receivable which were outstanding on Sellers' financials as of the Closing Date,
Buyer may elect to have Sellers purchase such accounts receivables at a price
equal to the amount at which they were carried on Sellers' financials as of the
Closing Date, net of any reserves reflected in such financials.
Section 9.10 Compliance with Bulk Sales Laws. Sellers and Buyer shall
comply with all applicable requirements of the Pennsylvania Fiscal Code, as
amended, relating to bulk transfers and shall comply with all applicable
requirements of the bulk sales provision of the Pennsylvania Tax Reform Code of
1971, as amended, in connection with the transactions contemplated by this
Agreement. Sellers shall indemnify Buyer from, and hold it harmless against, any
liabilities, damages, costs and expenses resulting from or arising out of (i)
Sellers' failure to comply with any of such laws with respect to the
transactions contemplated by this Agreement, including any untimely filing by
Sellers of a bulk sales notice as required by Pennsylvania law, or (ii) any
action brought or levy made as a result of the Sellers' failure to comply with
any of such laws, other than those liabilities which have been expressly
assumed, on such terms as expressly assumed, by the Buyer pursuant to this
Agreement. At the Closing each Seller shall deliver to the Buyer a request for a
tax clearance certificate, fully authorized and executed by the Seller and in
suitable form for purposes of filing with governmental authorities in accordance
with Pennsylvania law. Within five calendar days of receipt of a tax clearance
certificate in response to such request, a copy of the tax clearance certificate
received shall be delivered by Sellers to Buyer.
Section 9.11 HSR Act Filings. Buyer and Sellers shall use all reasonable
efforts to file, within five (5) Business Days after the date of this Agreement,
the filings required pursuant to the HSR Act. Sellers and Buyer shall coordinate
and cooperate with each other in exchanging such information and supplying such
reasonable assistance as may be reasonably requested by the other in connection
with the filings contemplated by this Section 9.11.
ARTICLE X
CONDITION OF TITLE TO REAL PROPERTY
-----------------------------------
Title to the Real Property shall be fee simple title, insurable at regular
rates by any reputable title company licensed to do business in the State of
Pennsylvania, and shall be conveyed by Herculite to Buyer free and clear of all
Liens, except the Permitted Liens. Buyer shall examine the title to the Real
Property, inspect the Real Property and take any other actions Buyer deems
reasonably necessary to determine the condition of title to the Real Property.
Within thirty (30) days after the date hereof, Buyer shall provide Sellers with
written notification of any objections to title, other than the Permitted Liens.
If Buyer does not notify Sellers of any objections to title within said thirty
(30) day period, Buyer shall be deemed to have waived its rights to object to
title defects or exceptions. If Buyer notifies Sellers of objections to title,
then Sellers shall have the right to cure
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such objections. If Sellers elect not to cure the objections, Buyer shall have
the option to elect to either (i) proceed with this Agreement, waive its
objection to the title defect and purchase the Purchased Assets without
abatement in the Cash Purchase Price, or (ii) terminate this Agreement. If
Sellers elect to attempt to cure the title objection and are unable to cure the
title objection within thirty (30) days after Buyer notifies Sellers of such
title defect, Buyer shall have the right to either (y) waive its objection to
the title defect and purchase the Purchased Assets without abatement in the Cash
Purchase Price or (z) terminate this Agreement. Sellers shall not be required to
bring any action or proceeding in order to cure any such objections and shall
not be required to expend any money to cure any such objections, but the
foregoing shall not permit Sellers to refuse to pay at the Closing, to the
extent of the monies payable at the Closing, mortgages, deeds of trust or deeds
to secure debt encumbering the Real Property of which Sellers have actual
knowledge at Closing. Acceptance by Buyer at Closing of the Deed shall be deemed
to fully discharge Sellers of their obligations as to the quality of title to
the Real Property, except as otherwise set forth herein. Any encumbrance or
other matter of record other than a lien shall be a Permitted Lien unless it
would interfere with a continuation of the present use of the building on the
Real Property.
ARTICLE XI
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
---------------------------------------------------
The obligations of Buyer under this Agreement with respect to the purchase
and sale of the Purchased Assets shall be subject to the fulfillment at or prior
to the Closing of each of the following conditions, any of which may be waived
in writing by Buyer (provided that if any condition shall not have been
satisfied due primarily to the actions or inaction of Buyer or any of its
Affiliates that constitutes a breach of this Agreement, such condition shall be
deemed to have been satisfied or waived by Buyer):
Section 11.01 Accuracy of Representations and Warranties, Performance of
this Agreement. All of the representations and warranties set forth in Sections
7.01, 7.02, 7.03, 7.04(a), 7.05, 7.06, 7.07, 7.08, 7.11 and 7.17 of this
Agreement (as supplemented pursuant to Section 9.05, to the extent such
supplemental disclosures have not been objected to by Buyer pursuant to Section
9.05) shall be true and correct on the Closing Date. Sellers shall have
materially complied with and performed all of the agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing. Buyer shall have been furnished with a certificate of an
executive officer of Sellers, dated as of the Closing, certifying to the
fulfillment of the foregoing conditions.
Section 11.02 Resolutions. Sellers shall have delivered to Buyer copies of
the resolutions of the Boards of Directors of Sellers authorizing the execution,
delivery and performance of this Agreement by Sellers and all instruments and
documents to be delivered in connection herewith and the transactions
contemplated hereby, duly certified by an officer of Sellers.
Section 11.03 Incumbency Certificate. Buyer shall have received a
certificate or certificates of any officer of Sellers, certifying as to the
genuineness of the signatures of executive officers of Sellers authorized to
take certain actions or execute any certificate, document, instrument or
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agreement to be delivered pursuant to this Agreement, which incumbency
certificate shall include the true signatures of such officers.
Section 11.04 Consents. Sellers shall have delivered to Buyer the consents
and approvals set forth on Schedule 7.02.
Section 11.05 Deed; Assumption Agreement; Bill of Sale. Sellers shall have
executed and delivered to Buyer the Deed, in substantially the form attached
hereto as Exhibit B, the Bill of Sale in substantially the form attached hereto
as Exhibit C and the Assumption Agreement in substantially the form attached
hereto as Exhibit D.
Section 11.06 Opinion of Counsel. Buyer shall have been furnished with an
opinion of counsel to Sellers, dated as of the date of Closing and addressed to
Buyer, in substantially the form of Exhibit G hereto.
Section 11.07 Execution of Escrow Agreements. Contemporaneous with the
Closing, Sellers and the Escrow Agent shall execute (i) to the extent required
by Section 5.04, Escrow Agreement No. 1 and (ii) Escrow Agreement No. 2.
Section 11.08 Execution of Non-Compete. Contemporaneous with the Closing,
Sellers and Health-Chem, on behalf of themselves and their Affiliates, and
Marvin M. Speiser and Robert D. Speiser, shall execute a Non-Compete Agreement
substantially in the form attached as Exhibit H covenanting that they will not,
within the United States and for a five (5) year period following the date of
Closing, directly or indirectly compete with the activities in which Herculite
or Hercon are now involved or in which they possess the ready capacity to be
involved, except that Marvin M. Speiser, Robert D. Speiser, Transderm and Hercon
Laboratories Corporation shall not be precluded from engaging in the
development, manufacturing and/or marketing of pharmaceutical, personal care and
cosmetic products.
Section 11.09 Access Easement. Transderm currently owns certain real
property (the "Transderm Property") adjacent to the Real Property. At Closing,
Sellers shall cause Transderm to execute and deliver to Buyer an agreement
substantially in the form of Exhibit I which provides an access easement with
respect to portions of the Real Property.
Section 11.10 Parking/Electricity/Water Agreement. At Closing, Sellers
shall cause Transderm to execute and deliver to Buyer an agreement substantially
in the form of Exhibit J.
Section 11.11 HSR Act Requirements. All notifications required pursuant to
the HSR Act, to carry out the transactions contemplated by this Agreement shall
have been made, and the applicable waiting period and any extensions thereof
shall have expired or been terminated, without the imposition of any material
burden or condition on any party hereto.
Section 11.12 Software. Buyer shall have obtained all licenses (by way of
assignment or new licenses) required to use the Software, upon substantially the
same terms and conditions as the licenses currently used by Sellers.
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Section 11.13 Physical Inventory. Sellers' shall have completed and
delivered to Buyer a physical inventory as of a date reasonably prior to
Closing, provided, that such date shall not be more than ten (10) days prior to
Closing.
ARTICLE XII
CONDITIONS PRECEDENT TO
SELLERS' OBLIGATION TO CLOSE
----------------------------
The obligations of Sellers under this Agreement with respect to the
purchase and sale of the Purchased Assets shall be subject to the fulfillment at
or prior to the Closing of each of the following conditions, any of which may be
waived in writing by Sellers (provided that if any condition shall not have been
satisfied due primarily to the actions or inaction of Sellers or any of their
Affiliates that constitutes a breach of this Agreement, such condition shall be
deemed to have been satisfied or waived by Sellers):
Section 12.01 Accuracy of Representation and Warranties Performance of
this Agreement. All of the representations and warranties by Buyer contained in
this agreement shall be true and correct at and as of the Closing. Buyer shall
have complied with and performed all of the agreements and covenants required by
this Agreement to be performed and complied with by it on or prior to the
Closing. Sellers shall have been furnished with a certificate of an executive
officer of Buyer, dated as of the Closing; certifying to the fulfillment of the
foregoing conditions.
Section 12.02 Directors' Resolutions. Buyer shall have delivered to
Sellers copies of the resolutions of its board of directors authorizing the
execution of this Agreement and all instruments and documents to be delivered in
connection herewith and the transactions contemplated hereby, duly certified by
an authorized officer of Buyer.
Section 12.03 Incumbency Certificate. Sellers shall have received a
certificate of a secretary of Buyer, certifying as to the genuineness of the
signatures of representatives of Buyer authorized to take certain actions or
execute any certificate, document, instrument or agreement to be delivered
pursuant to this Agreement, which incumbency certificate shall include the true
signatures of such representatives.
Section 12.04 Consents. Sellers shall have obtained the consents and
approvals set forth on Schedule 7.02.
Section 12.05 Assumption Agreement. Buyer shall have executed and
delivered to Sellers the Assumption Agreement in substantially the form attached
hereto as Exhibit D.
Section 12.06 Parking/Electricity/Water Agreement. Buyer shall execute and
deliver to Transderm an agreement substantially in the form of Exhibit J.
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Section 12.07 Access Easement. Buyer shall execute and deliver to
Transderm an agreement substantially in the form of Exhibit I which provides an
access easement with respect to portions of the Real Property.
Section 12.08 Execution of Escrow Agreements. Contemporaneous with the
Closing Buyer and the applicable Escrow Agent shall execute (i) to the extent
required by Section 5.04, Escrow Agreement No. 1 and (ii) Escrow Agreement No.
2.
Section 12.09 Supplemental Disclosure Objections. Sellers' shall not have
received any objections from Buyer pursuant to Section 9.05.
Section 12.10 Payment of Cash Purchase Price. Buyer shall have paid the
Cash Purchase Price to Sellers in accordance with the terms of this Agreement.
Section 12.11 Opinion of Counsel. Sellers shall have been furnished with
an opinion of counsel to Buyer, dated as of the date of Closing and addressed to
Sellers, in substantially the form of Exhibit K hereto.
Section 12.12 HSR Act Requirements. All notifications required pursuant to
the HSR Act, to carry out the transactions contemplated by this Agreement shall
have been made, and the applicable waiting period and any extensions thereof
shall have expired or been terminated, without the imposition of any material
burden or condition on any party hereto.
Section 12.13 Software License. Health-Chem and Transderm shall have
received a one (1) year license to use the Software (either through a
sub-license from Buyer or a new license from the owner of the Software).
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ARTICLE XIII
CASUALTY LOSSES; CONDEMNATION
-----------------------------
Section 13.01 Casualty. (a) In the event that there shall have been
suffered between the date hereof and the Closing, any casualty loss relating to
the Purchased Assets or the Business, Sellers will promptly notify Buyer of such
event. If such casualty does not result in an inability to continue the
operation of the Business with substantially the same productivity as prior to
the casualty, Buyer shall close this transaction in accordance with the terms of
this Agreement and Sellers' shall at Closing assign to Buyer the right to
receive all insurance proceeds payable as a result of such casualty. If the
consequence of such casualty is an inability to continue the operation of the
Business with substantially the same productivity as prior to the casualty, at
Buyer's option (i) the parties shall close this transaction in accordance with
the terms of this Agreement and Sellers shall assign to Buyer the right to
receive all insurance proceeds payable as a result of such casualty or (ii) the
parties shall terminate this Agreement and there shall be thereafter no further
liability between the parties with respect to the terms of this Agreement. To
the extent the amount of the insurance proceeds received by Buyer after its
exhaustion of all remedies under applicable insurance policies is insufficient
to cover the costs of restorations made in a reasonable manner, Sellers shall
pay for the amount of the restoration costs in excess of the amount of the
insurance proceeds.
Section 13.02 Condemnation. In the event of a partial taking of the Real
Property by condemnation or other exercise of the right of eminent domain before
Closing, Buyer shall purchase the Purchased Assets without abatement in the Cash
Purchase Price and Sellers shall assign to Buyer at Closing all of Sellers'
right, title and interest in and to all awards made in respect of such taking.
In the event of a total taking of the Real Property by condemnation or other
exercise of the right of eminent domain before Closing, this Agreement shall
automatically terminate and the parties hereto shall have no further rights or
obligations hereunder.
ARTICLE XIV
INDEMNIFICATION
---------------
Section 14.01 Survival. The representations, warranties, covenants, and
agreements made in this Agreement and in any agreement or instrument executed
and delivered in connection with this Agreement shall survive the Closing for a
period of eighteen (18) months, except as specifically provided to the contrary
in Article VII.
Section 14.02 Indemnification by Sellers. Sellers, jointly and severally,
agree to indemnify and to hold Buyer and its shareholders, officers, directors,
employees, representatives and agents harmless from and against and in respect
of any losses, damages, costs, expenses (including costs of investigations and
reasonable attorneys' fees), suits, demands and judgments (collectively,
"Losses") suffered or incurred by them arising from or related to:
(a) Any misrepresentation on the part of Sellers or either of them
set forth in this Agreement, the Deed, the Bill of Sale, the Assumption
Agreement or in any closing certificate
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delivered by Sellers to Buyer pursuant to Article XI hereof (except to the
extent that Buyer is covered by insurance with respect thereto); and
(b) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Buyer in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters Buyer
is indemnified against by Sellers in this Agreement.
Section 14.03 Indemnification by Buyer. Buyer agrees to indemnify and to
hold Sellers and their shareholders, officers, directors, employees,
representatives and agents harmless from and against and in respect of any
Losses suffered or incurred by them arising from or related to:
(a) All liabilities, including all claims and demands relating to or
arising from Buyer's ownership, operation or control of the Purchased Assets
after the Closing and Buyer's assumption of the Assumed Liabilities and
operation by Buyer of the Business;
(b) Any misrepresentation on the part of Buyer under this Agreement,
the Assumption Agreement or in any closing certificate delivered by Buyer to
Sellers pursuant to Article XII hereof (except to the extent that Sellers are
covered by insurance with respect thereto); and
(c) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Sellers in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters
Sellers are indemnified against by Buyer in this Agreement.
Section 14.04 Escrow. To partially secure the indemnification provisions
of Section 14.02, at Closing, Sellers shall execute Escrow Agreement No. 2, but
in no event shall Sellers be required by reason of this Section 14.04 to
increase Escrow Amount No. 2 required by Section 5.06(a).
Section 14.05 Notice of Claims; Defense of Third Party. A party claiming
indemnification under this Article XIV (the "Asserting Party") must promptly
notify (in writing and in reasonable detail) the party from which
indemnification is sought (the "Defending Party") of the nature and basis of
such claim for indemnification not later than eighteen (18) months after the
Closing Date (the "Termination Date") or such party shall lose its rights to
such indemnification. In the event that any legal proceedings, shall be
instituted or that any Third Party Claim (defined below) or demand shall be
asserted by any Person in respect of which indemnity may be sought under Section
14.02 or 14.03, the Asserting Party shall reasonably and promptly cause written
notice of the assertion of any Third Party Claim of which it has knowledge which
is subject to such indemnity to be forwarded to the Defending Party, provided,
however, that the failure to notify the Defending Party shall not affect the
Defending Party's obligation hereunder except to the extent of actual prejudice.
If such claim relates to a claim, suit, litigation or other action by a third
party against the Asserting Party or any fixed or contingent liability to a
third party (a "Third Party Claim"), the Defending Party may elect to assume and
control the defense of the Third Party Claim at its own expense with counsel
selected by the Defending Party from and after such time as the Defending Party
unconditionally agrees in writing to accept, as against the Asserting Party, all
liabilities on account of such Third Party Claim. Assumption of such liability,
as against the Asserting Party, shall not be deemed an
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admission of liability as against any such third party. Notwithstanding the
foregoing, the Defending Party may not assume or control the defense if the
named parties to the Third Party Claim (including any impleaded parties) include
both the Defending Party and the Asserting Party and representation of both
parties by the same counsel (in such counsel's reasonable determination) would
be inappropriate due to actual or potential differing interests between them, in
which case the Asserting Party shall have the right to defend the Third Party
Claim and to employ counsel reasonably approved by the Defending Party, and to
the extent the matter is determined to be subject to indemnification hereunder,
the Defending Party shall reimburse the Asserting Party for the reasonable costs
of its counsel. If the Defending Party assumes liability for the Third Party
Claim as against the Asserting Party and assumes the defense and control of the
Third Party Claim pursuant to this Section 14.05, the Defending Party shall not
be liable for any fees and expenses of counsel for the Asserting Party incurred
thereafter in connection with the Third Party Claim (except in the case of
actual or potential differing interests, as provided in the preceding sentence),
but shall not agree to any settlement of such Third Party Claim which does not
include an unconditioned release of the Asserting Party by the third party
claimant on account thereof, provided that such requirement shall be deemed
waived to the extent that the Asserting Party does not undertake to provide and
promptly execute and, concurrently with the delivery of any such release,
deliver a corresponding release of the third party claimant with respect to such
Third Party Claim. If the Defending Party does not assume liability for and the
defense of the Third Party claim pursuant to this Section 14.05, the Asserting
Party shall have the right (i) to control the defense thereof, and (ii) if the
Asserting Party shall have notified the Defending Party of the Asserting Party's
intention to negotiate a settlement of the Third Party Claim (at the Defending
Party's expense to the extent the matter is determined to be subject to
indemnification hereunder), which notice shall include the material terms of any
proposed settlement in reasonable detail, to settle the Third Party Claim (at
the Defending Party's expense to the extent the matter is determined to be
subject to indemnification hereunder) on terms not materially inconsistent with
those set forth in such notice, unless the Defending Party shall have notified
the Asserting Party in writing of the Defending Party's election to assume
liability for and the defense of the Third Party Claim pursuant to this Section
14.05 within ten (10) Business Days after receipt of such notice, and the
Defending Party promptly thereafter shall have taken appropriate action to
implement such defense. The Asserting Party shall not be entitled to settle any
such Third Party Claim pursuant to the preceding sentence unless such settlement
includes an unconditional release of the Defending Party by the third party
claimant on account thereof, provided that such requirements shall be deemed
waived to the extent that the Defending Party does not undertake to provide and
promptly execute and, concurrently with delivery of any such release, deliver a
corresponding release of the third party claimant with respect to such Third
Party Claim. The Asserting Party and the Defending Party shall use all
reasonable efforts to cooperate fully with respect to the defense and settlement
of any Third Party Claim covered by this Article XIV.
Section 14.06 Limitations. The obligations of Sellers to indemnify Buyer
pursuant to this Article XIV shall be subject to the following limitations:
(a) No indemnification shall be required to be made unless the
aggregate amount of Buyer's Losses exceeds Two Hundred Fifty Thousand Dollars
($250,000) minus the Non-Excess Damage (the "Deductible"), and then
indemnification shall only be required to be made to the extent of Buyer's
Losses that exceeds the Deductible.
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(b) No indemnification shall be required to be made for any Buyer's
Losses that exceed $5,000,000.
(c) No indemnification shall be required to be made under Section
14.02 of this Agreement to the extent Buyer (or any of Buyer's officers,
directors, or legal or financial advisors) had actual knowledge of any fact,
information, circumstance or event that would constitute or support a claim that
(i) Sellers misrepresented to Buyer any fact or information covered by any
representation contained in this Agreement, or any of the agreements, documents
or instruments contemplated by this Agreement, or (ii) Sellers breached or, with
the passage of time, would reasonably be expected to breach, any of their
warranties or failed or, with the passage of time, would reasonably be expected
to fail to fulfill any of their agreements or covenants contained in this
Agreement, or in any of the agreements, documents, or instruments contemplated
by this Agreement.
(d) The indemnification obligation of a Defending Party shall be
reduced so as to give effect to any net reduction in federal, state, local or
foreign income or franchise tax liability realized at any time by the Asserting
Party in connection with the satisfaction by the Defending Party of a claim with
respect to which indemnification is sought hereunder. The indemnification
obligation of a Defending Party shall also be reduced to the extent of any
available insurance proceeds received by the indemnified party, provided,
however that such reduction shall not be effective until the Asserting Party has
realized the benefit of any such tax reduction or has received any such
insurance proceeds. The Defending Party shall pay its indemnification
obligations as and when required by this Article XIV and the Asserting Party
shall refund to the Defending Party any such amounts determined to be in excess
of the Defending Party's obligations due to reductions pursuant to this Section
14.06(d). Additionally, the Asserting Party shall refund promptly to the
Defending Party any amount of the Asserting Party's Losses that are subsequently
recovered by the Asserting Party pursuant to a settlement or otherwise.
(e) No indemnification shall be required to be made for any
notification (in accordance with the first sentence of Section 14.05 hereof)
received after the Termination Date.
(f) From and after the Closing Date, the indemnification rights
contained in this Article XIV shall constitute the sole and exclusive remedies
of the parties hereunder and shall supersede and displace all other rights that
either party may have under statute or common law.
ARTICLE XV
CONFIDENTIALITY AND PRESS RELEASES
----------------------------------
Section 15.01 Confidentiality. Each party (in such capacity, a "Recipient
Party") shall hold in strict confidence all documents and information concerning
the other (in such capacity, a "Disclosing Party") and its business and
properties and, if the transaction contemplated hereby should not be
consummated, such confidence shall be maintained, and all such documents and
information shall immediately thereafter be returned to the Disclosing Party. In
furtherance of the foregoing, except with the express prior written consent of
the Disclosing Party, the Recipient Party shall not, directly or indirectly,
disclose, disseminate, publish, reproduce, retain, use (for its benefit
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or for the benefit of others) or otherwise make available in any manner
whatsoever, any such documents or obligation to anyone except as provided in
Section 15.03. If the Recipient Party breaches, or threatens to commit a breach
of, any of the provisions of this Article XV, the Disclosing Party shall have
the right (in addition to any other rights and remedies available at law or in
equity) to equitable relief (including injunctions) against such breach or
threatened breach, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable harm to the Disclosing Party and that
money damages would not be an adequate remedy.
Section 15.02 Press Releases. The Buyer, Sellers and Health-Chem shall be
permitted to issue one or more press releases with respect to the transactions
contemplated by this Agreement. Buyer and Sellers shall each furnish to the
other, one business day in advance, copies of any contemplated release which it
proposes to make public concerning this Agreement or the transactions
contemplated hereby and the date upon which Buyer or Sellers, as the case may
be, propose to make such press release. Sellers agree that Susquehanna Capital
will not be named in any press release.
Section 15.03 Certain Disclosures. Sellers, Buyer and their respective
Affiliates are permitted to disclose the terms of this transaction, including,
without limitation, the amount of the Base Price, subject to adjustment, payable
in cash, and the estimated date of Closing, a description of the conditions to
Closing and the name of Buyer and its Affiliates, as follows: (i) to the extent
required by law (including, without limitation, filing the Agreement if required
under securities laws); (ii) if, in the opinion of such party's counsel,
disclosure should be made, and (iii) to such party's investors, partners,
accountants, auditors, attorneys, institutional lenders, bondholders, creditors,
parent company and broker/dealers. Notwithstanding anything to the contrary set
forth herein, this Agreement may be filed by Sellers and/or Health-Chem with the
Securities and Exchange Commission and may be provided by Health-Chem to its
indenture trustee, debenture holders, its senior bank lenders and any
prospective lenders.
ARTICLE XVI
GUARANTY
--------
Section 16.01 Guaranty. Susquehanna Capital (the "Guarantor"), hereby
absolutely, unconditionally and irrevocably guarantees to Sellers and their
Affiliates, the due and punctual performance and observance by Buyer of each of
the terms, covenants and obligations to be performed or observed by Buyer under
this Agreement which are required to consummate the Closing on the Closing Date
including, without limitation, payment of the Cash Purchase Price (the
"Guaranteed Obligations"), and agrees that to the extent Buyer fails to perform
or observe such terms, covenants or obligations, it shall be liable for payment
and performance as if it were the direct and primary obligor. Additionally,
Guarantor agrees to pay on demand any and all expenses (including counsel fees
and expenses) which may be paid or incurred by Sellers in enforcing the
aforesaid obligations of Guarantor under this Article XVI. Notwithstanding
anything to the contrary set forth herein, upon the successful consummation of
the Closing by Buyer, Susquehanna Capital shall have no further obligation as
Guarantor.
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Section 16.02 Guarantor's Obligations Unconditional; Continuation.
(a) The obligations and liabilities of Guarantor hereunder shall be
absolute and unconditional irrespective of any change in the time, manner or
place of performance of all or any of the Guaranteed Obligations, or any other
amendment or waiver of or consent to any departure from this Agreement or any
other documents or instruments executed in connection herewith.
(b) Guarantor's obligations hereunder, shall continue to be effective
or shall be reinstated, as the case may be, if at any time any payment, or any
part thereof, in respect of any of the Guaranteed Obligations is rescinded or
must otherwise be returned by Sellers upon the insol vency, bankruptcy,
dissolution, liquidation or reorganization of Buyer or Guarantor or otherwise,
all as though such payment had not been made.
(c) The obligations and liabilities of Guarantor hereunder shall not
be conditioned or contingent upon the pursuit by Sellers of any right or remedy
against Buyer.
Section 16.03 Waivers. Guarantor hereby waives promptness, diligence and
any other notice with respect to any of the Guaranteed Obligations and
Guarantor's obligations under this Agreement, and any requirement that any
Seller exhaust any right or take any action against Buyer or any other Person.
ARTICLE XVII
TERMINATION
-----------
Section 17.01 Events of Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated by written notice of
termination at any time before the Closing Date only as follows:
(a) by mutual consent of Sellers and Buyer;
(b) by Buyer if customers whose purchases represent three percent
(3%) or more, either individually or in the aggregate, of annual sales for the
fiscal year ended December 31, 1998 have given written or oral notice of their
intention no longer to purchase Sellers' products;
(c) by Buyer if the condition precedent in the first sentence of
Section 11.01 is not satisfied with respect to the representations and
warranties set forth in Section 7.01, 7.02, 7.03, 7.04(a), 7.05, 7.06, 7.07,
7.08, 7.11 or 7.17;
(d) by Buyer if any condition precedent in Section 11.02 through
Section 11.13, both inclusive, is not satisfied;
(e) by Sellers if any condition precedent in Section 12.01 through
Section 12.12, both inclusive, is not satisfied;
(f) by Sellers if the Closing has not occurred by September 15, 1999;
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(g) by Buyer if Sellers are unable to deliver title to the Real
Property in accordance with the provisions of Article X; and
(h) in accordance with the provisions of Article XIII.
Section 17.02 Termination. In the event of the termination hereof pursuant
to the provisions of Section 17.01, this Agreement shall become void and have no
effect, without any liability on the part of any of the parties or their
shareholders, directors, officers, employees, representatives or agents in
respect of this Agreement.
ARTICLE XVIII
BROKER'S FEES
-------------
Each party represents and warrants to the other that it shall be solely
responsible for the payment of any fee or commission due to any investment
banker, agent, finder or broker it has engaged with respect to this transaction
and the other party hereto shall be indemnified for any liability with respect
thereto pursuant to Article XIV hereof, without regard to the provisions of
Section 14.05. To the extent there is a conflict between this Article XVIII and
Section 7.11 or Section 8.04, Sections 7.11 and 8.04 shall govern.
ARTICLE XIX
DEFINITIONS AND CONSTRUCTION
----------------------------
As used herein, the following capitalized terms have the meanings set forth
next to their names:
"Affiliate" of a Person means any other Person which, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such Person. The term "control" (including, with
correlative meaning, the terms "controlled by" and "under common control with"),
as used with respect to any Person, means the possession, directly or
indirectly, of the power to elect a majority of the board of directors or to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or other ownership interests,
by Contract, family relationship or otherwise and, in any event and without
limitation of the foregoing, any Person owning 10% or more of the voting
securities or other ownership interests of another Person shall be deemed to
control that Person.
"Agreement" means this Asset Purchase Agreement and all schedules and
exhibits hereto, as the same may be amended, modified, supplemented or restated
in accordance with the terms hereof from time to time.
"Asserting Party" has the meaning set forth in Section 14.05.
"Assumed Contracts" has the meaning set forth in Section 3.01.
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"Assumed Liabilities" has the meaning set forth in Section 3.01.
"Assumption Agreement" has the meaning set forth in Section 4.02.
"Base Price" has the meaning set forth in Section 5.01.
"Bill of Sale" has the meaning set forth in Section 4.01.
"Business Day" means any calendar day which is not a Saturday, Sunday
or public holiday under the laws of the Commonwealth of Pennsylvania.
"Buyer's Estimate" has the meaning set forth in Section 5.04(d).
"Buyer's List" has the meaning set forth in Section 9.05(a).
"Cash Purchase Price" has the meaning set forth in Section 5.01.
"Closing" has the meaning set forth in Article VI.
"Closing Date" has the meaning set forth in Article VI.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder or with respect thereto.
"Contract" means any written or oral contract, agreement, arrangement,
permit, authorization, license, lease, right of way, easement, or other
commitment that is binding on any Person or its property.
"Controlled Group Member" means any trade or business (whether or not
incorporated) which is aggregated with Sellers pursuant to sections 414(b), (c),
(in) or (o) of the Code.
"Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
"Current Liabilities" has the meaning set forth in Section 3.01.
"Current Purchased Assets" has the meaning set forth in Section
5.04(a).
"Deductible" has the meaning set forth in Section 14.06(a).
"Defending Party" has the meaning set forth in Section 14.05.
"Deed" has the meaning set forth in Section 4.01.
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"Disclosing Party" has the meaning set forth in Section 15.01.
"Employee Benefit Plan" means an "employee benefit plan" within the
meaning of section 3(3) of ERISA maintained by either Seller or a Controlled
Group Member in which the employees identified in Schedule 7.08 participate or
are eligible to participate.
"Environmental Laws" means all federal, state and local laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), 42 U.S.C.A. ss.ss. 9601 et seq., the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C.A. ss.ss. 6901 et seq., the Clean Water Act, 33
U.S.C.A. ss.ss. 1251 et seq., the Clean Air Act 42 U.S.C.A. ss.ss. 7401 et seq.,
the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., and laws and
regulations relating to emissions, spills, leaks, discharges, releases or
threatened releases of Materials of Environmental Concern, or otherwise relating
to the manufacture, possession, distribution, use, treatment, storage, disposal,
presence, transport or handling Materials of Environmental Concern.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Rhoads & Sinon LLP.
"Escrow Agreement No. 1" has the meaning specified in Section 5.04(d).
"Escrow Agreement No. 2" has the meaning set forth in Section 5.06.
"Escrow Amount No. 2" has the meaning set forth in Section 5.06.
"Estimate Difference" has the meaning set forth in Section 5.04(d).
"Excluded Assets" has the meaning set forth in Section 2.02.
"Excluded Liabilities" means those liabilities set forth on Schedule
3.02 hereto.
"Financial Statements" has the meaning set forth in Section 7.10(a).
"Financial Statement Date" has the meaning set forth in Section
7.10(a).
"GAAP" means generally accepted accounting principles consistently
applied, as applied in the United States of America.
"Governmental Entity" means any government, or political subdivision
thereof, court, arbitral tribunal, administrative agency, tribunal or commission
or any other governmental or regulatory body, instrumentality or authority,
whether domestic (federal, state or local) or foreign.
"Guaranteed Obligations" has the meaning set forth in Section 16.01.
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"Guarantor" has the meaning set forth in Section 16.01.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Independent Accountants" has the meaning set forth in Section 5.06.
"Intellectual Property" means collectively, (a) all inventions and
processes (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all Patents, (b) all Trademarks, logos,
trade names, fictitious names, brand names, brand marks and corporate names,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all Copyrights, and all applications, registrations, and renewals in
connection therewith, and (d) all intellectual property owned by Health-Chem or
its Affiliates and licensed to either of the Sellers.
"Intellectual Property License" has the meaning set forth in Section
7.12.
"Known" or "to the knowledge" or "to the best knowledge" or words of
similar import, unless preceded by the word "actual", mean, with respect to any
Person, the actual or "constructive knowledge" of such Person, and if
applicable, its executive officers and directors. "Constructive knowledge" means
knowledge that a reasonable person could acquire by an exercise of due inquiry.
"Licensed Intellectual Property" has the meaning set forth in Section
7.12.
"Lien" means any security interest, lien (including tax liens), pledge
or encumbrance of any kind.
"Losses" has the meaning set forth in Section 14.02.
"Material Contracts" has the meaning set forth in Section 7.05.
"Materials of Environmental Concern" means any toxic, reactive,
corrosive, carcinogenic, flammable or hazardous pollutant or other substance
that is the subject of regulation under Environmental Laws, including, but not
limited to, any "hazardous substance," or "hazardous waste," as defined in
Environmental Laws, petroleum and petroleum products, natural gas or synthetic
gas, material that is a source, special nuclear or by-product material, as
defined by the Atomic Energy Act of 1954, 42 U.S.C.A. ss. ss. 3011 et seq., and
the regulations promulgated thereto and "hazardous chemical," as defined in 29
C.F.R. Part 1910.
"Net Operating Assets" has the meaning set forth in Section 5.04(a).
"Net Operating Assets Adjustment" has the meaning set forth in Section
5.04(b).
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"Non-Excess Damage" has the meaning set forth in Section 5.04(c).
"Older Inventory" has the meaning set forth in Section 9.06.
"Owned Intellectual Property" has the meaning as set forth in Section
7.12.
"Patents" means all letters patent and pending applications for
patents of the United States and all countries foreign thereto, including
regional patents, certificates of invention and utility models, rights of
license or otherwise to or under letters patent, certificates of intention and
utility models which have been opened for public inspection and all reissues,
divisions, continuations and extensions thereof.
"Permitted Liens" means, except as otherwise specifically provided in
this Agreement, (i) any lien or other encumbrance for Sellers' taxes and
assessments, not yet past due or otherwise being contested in good faith and for
which appropriate reserves pursuant to GAAP have been established to the extent
taken into account in the Net Operating Assets Adjustment, (ii) any lien or
other encumbrance arising out of deposits made to secure leases or other
obligations of a like nature arising in the ordinary course of business, (iii)
any lien or other encumbrance provided for in any contract listed on the
disclosure schedules hereto and not related to any indebtedness for borrowed
money, (iv) any lien for the purchase or lease of Sellers' equipment in the
ordinary course of business, and (v) any lien or other encumbrance set forth on
the Permitted Lien Schedule hereto, and (vi) any other matter of record that
does not constitute a lien.
"Person" means any natural person, a sole proprietorship, a
corporation, a partnership, a joint venture, a limited liability company, a
limited liability partnership, an association, a trust, or any other entity or
organization, including a Governmental Entity.
"Projected Net Operating Assets" has the meaning set forth in Section
5.04(b).
"Purchased Assets" has the meaning set forth in Section 2.01.
"Purchased Contracts" has the meaning set forth in Section 2.01.
"Purchase Price" means the Cash Purchase Price plus the Assumed
Liabilities.
"Recipient Party" has the meaning set forth in Section 15.01.
"Real Property" has the meaning set forth in Section 2.01.
"Sellers' Estimate" has the meaning set forth in Section 5.05(c).
"Software" has the meaning set forth in Section 2.01.
"Taxes" means all taxes, charges, fees, levies or other assessments,
including but not limited to all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise,
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profits, withholding, payroll, employment, social security, unemployment,
excise, estimated, stamp, occupation, property or other taxes, customs, duties,
fees, assessments or charges of any kind whatsoever, including all interest and
penalties thereon, and additions to tax or additional amounts imposed by any
taxing authority, domestic or foreign upon a Person or any of its properties.
"Termination Date" has the meaning set forth in Section 14.05.
"Third Party Claim" has the meaning set forth in Section 14.05.
"Trademarks" means registered trademarks, registered service marks,
trademark and service mark applications and unregistered trademarks and service
marks.
"Transderm" has the meaning set forth in Section 2.01.
"Transferred Employees" has the meaning set forth in Section 9.05(a).
Unless the context of this Agreement otherwise requires, (i) words of any gender
include each other gender; (ii) words using the singular or plural number also
include the plural or singular number, respectively; (iii) the terms "hereof,"
"herein," "hereby," and derivative or similar words refer to this entire
Agreement; and (iv) the terms "Article," "Section" or "Schedule" refer to the
specified Article, Section or Schedule of this Agreement. Whenever this
Agreement refers to a number of days, such number shall refer to calendar days
unless Business Days are specified.
ARTICLE XX
MISCELLANEOUS
-------------
Section 20.01 Additional Instruments of Transfer.
(a) From time to time after the Closing, each party shall, if
requested by another party, make, execute and deliver such additional
assignments, bills of sale, and other instruments, as may be reasonably
necessary or proper to carry out the specific provisions of this Agreement,
including transfer to Buyer of all of Sellers' right, title and interest in and
to the Purchased Assets. Such efforts and assistance shall be at the cost of the
requesting party.
(b) Anything in this Agreement to the contrary notwithstanding,
Sellers are not obliged to sell, assign, transfer or convey to Buyer any
Purchased Asset without first obtaining all necessary material consents and
approvals. To the extent any of the approvals or consents listed on Schedule
7.02 have not been obtained by Sellers, as of the Closing Date and Buyer elects
to proceed with the Closing, Sellers shall use all commercially reasonable
efforts to (i) obtain the consent of any such third party; (ii) cooperate with
Buyer in any reasonable and lawful arrangements designed to provide the benefits
(including, without limitation, the payment to Buyer of any monies received by
Sellers in connection therewith) of such Purchased Asset to Buyer so long as
Buyer performs all obligations with respect to the Purchased Asset (including
the payment of all expenses in connection therewith); and (iii) enforce, at the
request of Buyer and at the expense and for the account of Buyer, any rights of
Sellers arising from such Purchased Asset, provided, however, that neither Buyer
nor
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Sellers shall be obligated to pay any consideration or other sums (except for
filing fees and other ordinary administrative charges and except as set forth
above) to the third party from whom such approval or consent is requested.
Section 20.02 Entire Agreement. This Agreement, together with any exhibits
and other collateral agreements and documents required to be executed and
delivered pursuant hereto, constitutes the entire understanding and agreement
among the parties with respect to the subject matter contained herein and
supersedes any prior understandings and agreements (whether written or oral)
among them respecting such subject matter. The exhibits and schedules identified
in this Agreement are incorporated herein by reference and made a part hereof.
Section 20.03 Headings. The headings in this Agreement (and the Table of
Contents) are for convenience of reference only and shall not affect its
interpretation.
Section 20.04 Severability. It is the desire and intent of the parties
that the provisions of this Agreement be enforced to the fullest extent
permissible. Accordingly, in the event that any provision of this Agreement is
held illegal, invalid, prohibited or unenforceable for any reason, such
illegality, invalidity, or unenforceability will not affect any other provision
hereof, and this Agreement shall be deemed modified to the extent necessary to
render enforceable the remaining provisions hereof. Notwithstanding the
foregoing, if such provision could be more narrowly interpreted so as not to be
illegal, invalid, prohibited or unenforceable, without invalidating the
remaining provisions of this Agreement, it shall be so narrowly interpreted.
Section 20.05 Notices. All notices, requests, demands, waivers, consents,
approvals or other communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given and received when (i)
delivered by hand, (ii) sent by facsimile transmission (provided, that a
confirmation copy is sent by Federal Express or another recognized overnight
courier service) or (iii) sent by Federal Express or another recognized
overnight courier service, to the respective parties addresses or facsimile
numbers set forth below (or at such other address for a party as shall be
specified in a notice given in accordance with this Section 20.05):
If to Buyer, to:
Aberdeen Road Company
c/o 3300 Board Road
York, PA 17402
Attention: Lucy E. Kniseley
Facsimile: (717) 764-2682
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with a copy to:
Rhoads & Sinon LLP
One South Market Square
Harrisburg, PA 17108
Attention: John P. Manbeck, Esquire
Facsimile: (717) 231-6694
If to Sellers, to:
Herculite Products, Inc.
Hercon Environmental Corporation
c/o Health-Chem Corporation
460 Park Avenue
New York, New York 10022
Attention: Mr. Marvin M. Speiser, President
Facsimile: (212) 751-5653
with a copy to:
Kronish Lieb Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036-7798
Attention: Richard Lieb, Esq.
or Andrea Bromfeld, Esq.
Facsimile: (212) 479-6275
with another copy to:
Bruce Schloss, Esq.
c/o Health-Chem Corporation
460 Park Avenue
New York, New York 10022
Facsimile: (212) 751-5653
Notice of any change in any such address shall also be given in the manner set
forth above. Whenever the giving of notice is required, the giving of such
notice may be waived by the party entitled to receive such notice.
Section 20.06 Consents. All consents required to be given pursuant to the
terms of this Agreement shall be written consents.
Section 20.07 Transfer Taxes. All use, sales and transfer taxes, if any,
imposed by any Governmental Entity in connection with the sale and delivery of
the Purchased Assets acquired by Buyer under this Agreement shall be paid 50% by
Buyer and 50% by Sellers.
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Section 20.08 HSR Act and other Governmental Filing Fees. The filing fees
required to be paid pursuant to the HSR Act and to other governmental agencies
in connection with the transfer of the Purchased Assets shall be paid 50% by
Buyer and 50% by Sellers.
Section 20.09 Collection Procedures. From and after the Closing, Buyer
shall have the right and authority, at its expense, to collect for its account
all items to which it is entitled as provided in this Agreement and to endorse
with the names of Sellers any checks or drafts received on account of any such
items except for those items which are Excluded Assets, which shall be delivered
forthwith to Sellers.
Section 20.10 Waiver. The failure of any party to insist upon strict
performance of any of the terms or conditions of this Agreement will not
constitute a waiver of any of its rights hereunder. No waiver by any party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
Section 20.11 Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties, provided, that
Buyer may assign its interest under this Agreement to an Affiliate of
Susquehanna Capital, but such assignment shall not limit the obligations of
Buyer or Susquehanna Capital under this Agreement. Furthermore, to the extent
amounts payable to Sellers pursuant hereto may be subject to a presently
existing security agreement, such assignment may continue.
Section 20.12 Successors and Assigns. This Agreement, together with any
exhibits and other collateral documents required to be executed and delivered
pursuant hereto, shall be binding upon and inure to the benefit of the parties
hereto, their successors and permitted assigns.
Section 20.13 Governing Law. Any and all issues arising out of or with
respect to Sections 7.01 and 7.02 of this Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any choice of law or conflicting provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the laws of any
jurisdiction other than the State of New York to be applied. With respect to all
other matters, this Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania, without giving effect to any
choice of law or conflicting provision or rule (whether of the Commonwealth of
Pennsylvania or any other jurisdiction) that would cause the laws of any
jurisdiction other than the Commonwealth of Pennsylvania to be applied. In
furtherance of the foregoing, the internal law of the Commonwealth of
Pennsylvania will control the interpretation and construction of this Agreement,
even if under such jurisdiction's choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily apply. Any legal
action or proceeding with respect to this Agreement should be brought
exclusively in the courts of the Commonwealth of Pennsylvania or of the United
States that are located in York County, Pennsylvania and, by execution and
delivery of this Agreement, each party hereto hereby irrevocably
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accepts for itself and in respect of its property and assets, generally and
unconditionally the jurisdiction of the aforesaid state and federal courts in
York County, Pennsylvania.
Section 20.14 No Third Party Beneficiaries. Except as specifically
provided in this Agreement, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns any rights or remedies under or by reason of
this Agreement.
Section 20.15 Construction. The language used in this Agreement has been
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party.
Section 20.16 Time of the Essence. Time is of the essence to this
Agreement.
Section 20.17 Amendments. This Agreement may be amended or supplemented
only by a written instrument duly executed by the party or parties to be charged
therewith.
Section 20.18 Counterparts. This Agreement may be executed in any number
of counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. The execution of this Agreement by any party hereto will not become
effective until counterparts hereof have been executed by all the parties
hereto. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
[Intentionally left blank.]
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Section 20.19 Facsimile Signatures. This Agreement may be executed by
facsimile signature which shall be deemed to be an original for all purposes.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
HERCULITE PRODUCTS, INC.
By:/s/ Marvin M. Speiser
-----------------------------------
Name: Marvin M. Speiser
Title: Chairman of the Board
HERCON ENVIRONMENTAL CORPORATION
By:/s/ Robert D. Speiser
-----------------------------------
Name: Robert D. Speiser
Title: Executive Vice President
ABERDEEN ROAD COMPANY
By:/s/ Lucy E. Kniseley
-----------------------------------
Name: Lucy E. Kniseley
Title: President
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Health-Chem Corporation and HS Protective Fabrics Corporation (the
"Guarantors") do hereby join in the foregoing Agreement for purposes of (a)
providing its absolute, joint and several, unconditional and irrevocable
indemnity to the extent of the indemnification by Sellers in Article XIV with
respect to Sellers' representations and warranties, as if Health-Chem
Corporation and HS Protective Fabrics Corporation had each made the
representations and warranties made by each Seller in the Agreement, and (b)
Sellers' obligation to repurchase the Older Inventory pursuant to Section 9.06,
and (c) Sellers' obligation to repurchase Accounts Receivable pursuant to
Section 9.09, provided, however, that the foregoing shall not obligate the
Guarantors to pay any amount that does not exceed the "Deductible" (as defined
in the foregoing Agreement).
HEALTH-CHEM CORPORATION
By:/s/ Marvin M. Speiser
-----------------------------------
Name: Marvin M. Speiser
Title: President
HS PROTECTIVE FABRICS CORPORATION
By:/s/ Marvin M. Speiser
-----------------------------------
Name: Marvin M. Speiser
Title: President
Susquehanna Capital does hereby join in the foregoing Agreement to make its
guaranty set forth in Article XVI.
SUSQUEHANNA CAPITAL
By:/s/ Lucy E. Kniseley
-----------------------------------
Name: Lucy E. Kniseley
Title: Executive Vice President
44
