-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MM2QjzqtcZ50OYTvtL7/r62p0yG6+0whefJNa9swcW6/uOf5NpaZVHWZ+VhsoSmI yUc269Vl4K9HT3VA1lDEOw== 0000927016-97-002559.txt : 19970929 0000927016-97-002559.hdr.sgml : 19970929 ACCESSION NUMBER: 0000927016-97-002559 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970911 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19970926 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NUTRAMAX PRODUCTS INC /DE/ CENTRAL INDEX KEY: 0000818467 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 061200464 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-18671 FILM NUMBER: 97686339 BUSINESS ADDRESS: STREET 1: 9 BLACKBURN DRIVE CITY: GLOUCESTER STATE: MA ZIP: 01930 BUSINESS PHONE: 5082831800 MAIL ADDRESS: STREET 1: 9 BLACKBURN DRIVE CITY: GLOUCESTER STATE: MA ZIP: 01930 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) SEPTEMBER 11, 1997 NUTRAMAX PRODUCTS, INC. ------------------------------ (Exact name of registrant as specified in charter) DELAWARE 000-18671 061200464 - -------------------- ------------------ ------------------ (State or other jurisdiction (Commission file number) (IRS employer of incorporation) identification no.) 9 BLACKBURN DRIVE, GLOUCESTER, MA 01930 --------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (508) 283-1800 -------------- The Exhibit Index is located on page 5. Item 2 - Acquisition or Disposition of Assets - --------------------------------------------- On September 11, 1997, NutraMax Products, Inc. (the "Registrant"), through three wholly-owned subsidiaries, acquired the first aid products business (the "Business") of American White Cross, Inc. ("AWC") and Weaver Manufacturing Corp. ("Weaver"), AWC's wholly-owned subsidiary. Pursuant to the terms of the definitive Asset Purchase Agreement, the Registrant purchased the Business for $37.5 million and assumed $3.5 million in post-petition liabilities, subject to post-closing adjustments for inventory, accounts receivable and assumed liabilities as of the closing date. The acquisition of the Business was approved by the United States Bankruptcy Court for the District of Delaware, in which the bankruptcy case of AWC and Weaver has been pending. Financing for the acquisition included approximately $11 million from the private placement of 846,154 shares of the Registrant's common stock to an institutional investor. Concurrently with the acquisition, the Registrant entered into an amendment to its senior secured credit facility with its banks which increased the aggregate principal amount under the credit facility from $60 million to $92.1 million. Of the increase amount, approximately $26 million was used for the acquisition and the remaining $6.1 million will be used to support working capital needs. Item 7 - Financial Statements, Pro Forma Financial Information and Exhibits - --------------------------------------------------------------------------- (a) and (b) Financial Statements of Properties Acquired and Pro Forma Financial Information. At the time of the filing of this Form 8-K, it is impracticable for the Registrant to provide (a) the required financial information concerning the Business and (b) the pro forma financial information relating to the acquisition of the Business. Such required financial information will be filed by amendment not later than November 25, 1997, in accordance with Item 7, paragraphs (a)(4) and (b)(2) of Form 8-K. (c) Exhibits. Exhibit Name - ------- ---- 2.1 Asset Purchase Agreement dated as of July 21, 1997 (the "Asset Purchase Agreement") by and among NutraMax Products, Inc., American White Cross, Inc. and Weaver Manufacturing Corp. (1) 2.2 Amendment No. 1 to Asset Purchase Agreement dated as of August 15, 1997, by and among NutraMax Products, Inc. American White Cross, Inc. and Weaver Manufacturing Corp. 2.3 Stock Purchase Agreement dated as of August 12, 1997 (the "Stock Purchase Agreement") by and between NutraMax Products, Inc. and Cape Ann Investors, L.L.C. (1) 2.4 Amendment No. 1 to Stock Purchase Agreement dated as of September 9, 1997 by and between NutraMax Products, Inc. and Cape Ann Investors, L.L.C. 2.5 Amendment No.1 dated as of September 11, 1997 to the Revolving Credit and Term Loan Agreement dated as of December 30, 1996 among NutraMax Products, Inc., the Banks (as defined therein) and BankBoston, N.A., as agent (1) - --------------------- (1) Schedules are omitted. The Registrant hereby agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NUTRAMAX PRODUCTS, INC. Date: September 26, 1997 By: /s/ Robert F. Burns ---------------------------------------- Robert F. Burns, Chief Financial Officer EXHIBIT INDEX ------------- Exhibit Name Page - ------- ---- ---- 2.1 Asset Purchase Agreement dated as of July 21, 1997 (the "Asset Purchase Agreement") by and among NutraMax Products, Inc., American White Cross, Inc. and Weaver Manufacturing Corp. (1) 2.2 Amendment No. 1 to Asset Purchase Agreement dated as of August 15, 1997, by and among NutraMax Products, Inc. American White Cross, Inc. and Weaver Manufacturing Corp. 2.3 Stock Purchase Agreement dated as of August 12, 1997 (the "Stock Purchase Agreement") by and between NutraMax Products, Inc. and Cape Ann Investors, L.L.C. (1) 2.4 Amendment No. 1 to Stock Purchase Agreement dated as of September 9, 1997 by and between NutraMax Products, Inc. and Cape Ann Investors, L.L.C. 2.5 Amendment No. 1 dated as of September 11, 1997 to the Revolving Credit and Term Loan Agreement dated as of December 30, 1996 among NutraMax Products, Inc., the Banks (a defined therein) and BankBoston, N.A., as agent (1) - ------------------------- (1) Schedules are omitted. The Registrant hereby agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request. EX-2.1 2 ASSET PURCHASE AGREEMENT DATED 7/21/97 Exhibit 2.1 ----------- UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE - ---------------------------------) In re: ) ) AMERICAN WHITE CROSS, INC., ) a Delaware corporation, ) Chapter 11 ACME/CHASTON PUERTO RICO, INC., ) Case No. 96-01109 (PJW) a Delaware corporation, and ) WEAVER MANUFACTURING ) CORPORATION, ) a New Jersey Corporation ) ) Debtors ) - ---------------------------------) ASSET PURCHASE AGREEMENT AMONG NUTRAMAX PRODUCTS, INC., AMERICAN WHITE CROSS, INC. AND WEAVER MANUFACTURING CORPORATION ASSET PURCHASE AGREEMENT AMONG NUTRAMAX PRODUCTS, INC., AS PURCHASER AND AMERICAN WHITE CROSS, INC. AND WEAVER MANUFACTURING CORPORATION, AS SELLERS DATED AS OF JULY 21, 1997 TABLE OF CONTENTS
Page CERTAIN DEFINITIONS................................................................... 2 ARTICLE I PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES.......................... 10 1.1 Acquired Assets......................................................... 10 1.2 Assignment of Contracts, Licenses and Lease............................. 13 1.3 Excluded Assets......................................................... 14 1.4 Assumed Obligations..................................................... 15 1.5 No Other Liabilities Assumed............................................ 16 ARTICLE II PURCHASE PRICE AND PAYMENT.................................................... 17 2.1 Purchase Price.......................................................... 17 2.2 Payment of Estimated Closing Purchase Price; Purchase Price Adjustments. 17 2.3 Allocation of Purchase Price............................................ 19 2.4 Further Assurances...................................................... 19 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS..................................... 20 3.1 Due Incorporation, etc.................................................. 20 3.2 Due Authorization....................................................... 20 3.3 Permits; Compliance with Law; Consent................................... 20 3.4 Financial Statements and Obligations.................................... 21 3.5 No Adverse Change....................................................... 21 3.6 Title to and Condition of Properties.................................... 22 3.7 Intellectual Property................................................... 23 3.8 Customer List........................................................... 24 3.9 Suppliers............................................................... 25 3.11 Employee Benefit Plan................................................... 25 3.12 No Defaults or Violations............................................... 25 3.13 Certain Environmental Matters........................................... 26 3.14 Litigation.............................................................. 27 3.15 Taxes................................................................... 27 3.16 Condition of Assets..................................................... 28 3.17 Brokers................................................................. 28 3.18 Insurance Policies...................................................... 28 3.19 Assets Sufficient for Conduct of Business............................... 28 3.20 Products Liability...................................................... 28
(i) 3.21 Labor Disputes; Compliance................................................ 29 3.22 Employees; Officers....................................................... 30 3.23 WARN Act.................................................................. 30 3.24 Collectibility of Accounts Receivable..................................... 30 3.26 FDA Matters............................................................... 30 3.27 Accuracy of Statements.................................................... 31 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER.................................... 31 4.1 Due Incorporation, etc.................................................... 31 4.2 Corporate Authority....................................................... 31 4.3 Consents.................................................................. 31 4.4 Financing................................................................. 32 4.5 Brokers................................................................... 32 ARTICLE V COVENANTS OF SELLERS........................................................... 32 5.1 Implementing Agreement.................................................... 32 5.2 Cooperation of Sellers; Access to Information............................. 32 5.3 Preservation of Business.................................................. 32 5.4 Conduct of the Business................................................... 32 5.5 Books and Records......................................................... 34 5.6 Compensation.............................................................. 34 5.7 Consents and Approvals.................................................... 34 5.8 No Default................................................................ 35 5.9 Compliance with Laws...................................................... 35 5.10 No Modifications.......................................................... 35 5.11 Bankruptcy Actions........................................................ 35 5.12 Approval of Certain Contracts............................................. 36 5.13 Referral of Business Opportunities........................................ 36 5.14 Public Announcements...................................................... 36 5.15 Interim Financial Information............................................. 37 5.16 No Solicitation or Negotiation............................................ 37 5.17 Notice of Developments.................................................... 38 5.18 Break-up Fee.............................................................. 38 5.19 Compliance with WARN Act.................................................. 38 5.20 Environmental Responses................................................... 38 5.21 Lease Amendment........................................................... 39 5.22 Time-Warner/United Features License Assignments........................... 39 5.23 Capitalized Lease Obligations............................................. 39 5.24 Slow Moving Inventory Matters............................................. 39 5.25 Exchange Act Filings...................................................... 39
(ii) ARTICLE VI COVENANTS OF PURCHASER.......................................................... 40 6.1 Implementing Agreement.................................................... 40 6.2 Consents and Approvals.................................................... 40 6.3 Access to Information..................................................... 40 6.4 Assumed Obligations....................................................... 40 6.5 Payment of Purchase Price................................................. 40 6.6 Silent Nite/Airmax Matters................................................ 40 6.7 Accounts Receivables...................................................... 41 6.8 Lease Amendment........................................................... 41 ARTICLE VII RIGHT OF FIRST REFUSAL.......................................................... 41 7.1 Overbid Procedures and Right of First Refusal............................. 41 7.2 Survival.................................................................. 43 ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER................................ 43 8.1 Warranties True as of Both Present Date and Closing Date.................. 43 8.2 Compliance with Agreement and Covenants; Certificates..................... 43 8.3 Bankruptcy Conditions..................................................... 43 8.4 [Intentionally Omitted]................................................... 44 8.5 No Material Adverse Change................................................ 44 8.6 Business and Legal Review................................................. 44 8.7 Actions or Proceedings.................................................... 44 8.8 Other Agreements.......................................................... 44 8.9 Physical Count............................................................ 44 8.10 Other Documents........................................................... 44 8.11 Equipment and Vehicles Title.............................................. 45 8.12 Bankruptcy Orders......................................................... 45 8.13 Consents and Approvals; Permits........................................... 45 8.14 Non-Compete and Confidentiality Obligations............................... 45 8.15 Lease Amendment........................................................... 45 8.16 Time-Warner/United Features License Assignments........................... 45 8.17 Financing................................................................. 46 8.18 Capitalized Lease Obligations............................................. 46 8.19 Weaver Environmental Matters.............................................. 46
(iii) ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS.................................. 46 9.1 Warranties True as of Both Present Date and Closing Date.................. 46 9.2 Compliance with Agreements and Covenants; Certificates.................... 46 9.3 Actions or Proceedings.................................................... 47 9.4 Bankruptcy Conditions..................................................... 47 9.5 Other Documents........................................................... 47 ARTICLE X CLOSING......................................................................... 47 10.1 Closing................................................................... 47 10.2 Deliveries by Sellers..................................................... 48 10.3 Deliveries by Purchaser................................................... 48 ARTICLE XI TERMINATION..................................................................... 48 11.1 Termination............................................................... 48 11.2 Break-up Fee.............................................................. 49 11.3 Effect of Termination..................................................... 50 11.4 Purchaser's Escrow Fund................................................... 50 ARTICLE XII SURVIVAL AND REMEDY; INDEMNIFICATION............................................ 50 12.1 Survival.................................................................. 50 12.2 Indemnification by Sellers................................................ 51 12.3 Indemnification by Purchaser.............................................. 51 12.4 Indemnity Limits.......................................................... 52 12.5 Third-Party Claims........................................................ 52 12.6 Determination of Indemnification Amount................................... 54 ARTICLE XIII INSURANCE AND OTHER MATTERS..................................................... 54 13.1 Certain Insurance Matters................................................. 54 13.2 Weaver Environmental Matters.............................................. 55 ARTICLE XIV NONCOMPETITION AND CONFIDENTIALITY.............................................. 56
(iv) ARTICLE XV MISCELLANEOUS..................................................................... 58 15.1 Expenses.................................................................. 58 15.2 Amendment; Supplemental Disclosure........................................ 58 15.3 Notices................................................................... 58 15.4 Waivers................................................................... 60 15.5 Counterparts.............................................................. 60 15.6 Headings.................................................................. 60 15.7 APPLICABLE LAW............................................................ 60 15.8 Binding Nature; Assignment................................................ 60 15.9 No Third Party Beneficiaries.............................................. 61 15.10 Tax Matters............................................................... 61 15.11 Other Instruments......................................................... 61 15.12 Construction.............................................................. 61 15.13 Entire Understanding...................................................... 62
(v) EXHIBITS - -------- EXHIBIT A Form of Sellers' Escrow Agreement EXHIBIT 5.11 Form of Sale Procedures Order EXHIBIT 7.1(a) Form of 363 Order and 365 Order SCHEDULES - --------- 1.1(g) Owned Real Property and Leased Real Property 1.1(n) Intellectual Property 1.1(o) Claims, Deposits, Leasehold Improvement, Prepaids, etc. 1.2(b) Open Purchase Orders and Contracts (at signing and closing) 1.2(c) Open Customer Orders and Customer Agreements (at signing and closing) 1.2(e) Assumed Contracts 1.3(a) Excluded Fixed Assets 1.3(b) Excluded Inventory 1.3(d) Certain Excluded Assets and Rights Not Relating to the Business 2.3 Allocation of Purchase Price 3.3 Permits and Required Consents 3.4(a) AWC Financial Statements 3.4(b) Business and Interim Financial Statements 3.5 Adverse Changes to Business 3.6 Title to and Condition of Properties 3.7 Encumbrances on the AWC Mark 3.8 Customer List and Lost Customers 3.9 Suppliers 3.10 Material Contracts 3.11 Benefit Plans 3.12 No Defaults or Violations 3.13 Environmental Breaches 3.14 Litigation 3.15 Taxes 3.16 Condition of Assets 3.18 Insurance Policies 3.20 Product Liability Claims 3.21 Labor Disputes; Compliance 3.22 Employees; Officers 3.25 Inventories 3.26 FDA Matters 5.23 Capitalized Lease Obligations 5.6 Changes in Compensation APPENDICES - ---------- Appendix A Exceptions to Slow Moving Inventory (vi) ASSET PURCHASE AGREEMENT ------------------------ THIS ASSET PURCHASE AGREEMENT is dated as of July 21, 1997, by and among NutraMax Products, Inc., a corporation organized under the laws of the State of Delaware ("Purchaser"), and American White Cross, Inc., a corporation organized --------- under the laws of the State of Delaware ("AWC"), and AWC's wholly owned --- subsidiary, Weaver Manufacturing Corporation, a corporation organized under the laws of the State of New Jersey ("Weaver" and, together with AWC, the "Sellers"). In consideration of the mutual covenants, agreements and warranties ------- herein contained, the parties hereto agree as follows: CERTAIN DEFINITIONS ------------------- Unless otherwise defined herein, terms used herein shall have the meanings set forth below: "Accounts Receivable" is defined in Section 1.1(f). ------------------- -------------- "Accounts Receivable Adjustment Value" is defined in Section 2.1(d). ------------------------------------ -------------- "Acquired Assets" is defined in Section 1.1. --------------- ----------- "Acquisition Proposal" is defined in Section 5.16. -------------------- ------------ "Active Account" means any account that would have purchased a product it -------------- carries from Sellers in the last 90 days, except for those accounts deemed to be lost accounts set forth on Schedule 3.8. ------------ "Affiliate Obligations" means Sellers' debt and other obligations and --------------------- liabilities to affiliates and stockholders of Sellers, and includes all interest, fees, costs and similar amounts payable by Sellers in respect thereof. "Agreement" means this Asset Purchase Agreement, including all Exhibits and --------- Schedules hereto, as it may be amended from time to time in accordance with its terms. "Alternative Transaction" means an Acquisition Proposal made by a Third ----------------------- Party, or a plan of reorganization of Sellers not involving Purchaser which the Bankruptcy Court approves, endorses or accepts instead of the transactions contemplated by this Agreement. "Article XIV Parties" means each of the Sellers, Mr. Howard Koenig and Mr. ------------------- Scott Vertrees. "Assumed Obligations" is defined in Section 1.4. ------------------- ----------- "Assumed Contracts" is defined in Section 1.2(e). ----------------- -------------- "Authority" is defined within the definition of "Environmental Lien." --------- "AWC Financial Statements" means the consolidated financial statements of ------------------------ AWC as of and for the years ended December 31, 1996 and 1995, the six month period ended June 30, 1997, consisting of the balance sheet at such dates and the related statements of operations and cash flows for the periods then ended, audited (in the case of the financial statements for the years ended December 31, 1996 and 1995) by Arthur Andersen LLP, certified public accountants, copies of which are attached hereto as Schedule 3.4(a). --------------- "AWCL" is defined in Section 1.1(o). ---- -------------- "AWCL Purchase Agreement" is defined in Section 1.1(o). ----------------------- -------------- "AWC Mark" means the name "American White Cross" and all of its -------- derivatives. "Bankruptcy Code" means title 11 of the United States Code, sections 101- --------------- 1330. "Bankruptcy Court" means the United States Bankruptcy Court for the ---------------- District of Delaware, having jurisdiction over Seller and its assets in the Chapter 11 Cases. "Break-up Fee" means an amount equal to $1,000,000. ------------ "Bulk Sales Laws" means the Uniform Commercial Code Bulk Transfer --------------- provisions of any jurisdiction relating to bulk sales which are applicable to the sale of the Acquired Assets by Sellers hereunder. "Business" means the business conducted utilizing those operating assets -------- and operations of Sellers for the manufacture, sale and distribution of disposable first aid products such as adhesive bandages, patented easy-opening bandages, sterile pads, medical tape, waterproof tape and other wound dressings, surgical sponges, eye pads, stockinette and esmark products, surgical cauteries and podiatry products, sold under Sellers' customers' private or store brand labels or under Sellers' own national brands labels, principally to the consumer and healthcare markets, and first aid kits and related first aid products marketed to various industrial safety suppliers and automotive manufacturers. "Business Financial Statements" means the internal, unaudited statements ----------------------------- for the Business reflecting sales and direct material costs on a product line basis and direct costs of labor and direct manufacturing overhead costs for the year ended December 31, 1996 and for the four months ended May 6, 1997, copies of which are attached as Schedule 3.4(b). --------------- "Cape Ann" means Cape Ann Investors, L.L.C. -------- "Cash" means all cash (including Restricted Cash), certificates of deposit, ---- bank deposits and other cash equivalents, together with all accrued but unpaid interest thereon. 2 "Chapter 11 Cases" means the cases commenced by Sellers and ACME/Chaston ---------------- Puerto Rico, Inc. pending in the Bankruptcy Court under docket Nos. 96-01109 (PJW) through 96-01111 (PJW) and jointly administered under chapter 11 of the Bankruptcy Code. "Chilmark" means Chilmark Fund II, L.P. -------- "Claim" means any claim, lawsuit, demand, suit, inquiry made, hearing, ----- investigation, notice of violation, litigation, proceeding, mediation, arbitration or other dispute, whether civil, criminal, administrative or otherwise. "Closing" means the consummation of the transactions contemplated herein in ------- accordance with Article X hereof. --------- "Closing Date" means the date on which the Closing occurs or is to occur. ------------ "Closing Date Balance Sheet" is defined in Section 2.2. -------------------------- ----------- "Code" means the United States Internal Revenue Code of 1986, as amended. ---- "Collections" is defined in Section 1.1(j). ----------- -------------- "Competitive Business" is defined in Article XIV. -------------------- ----------- "Confidential Information" is defined in Article XIV. ------------------------ ----------- "Contaminant" means any substance regulated under any Environmental Law, or ----------- any substance defined as or included in the statutory or regulatory definitions of pollutant, hazardous substances, hazardous or toxic wastes, hazardous materials, or "toxic substances" under any Environmental Law. "Contract" means any agreement, contract, commitment, capital lease, -------- operating lease or other binding arrangement or understanding, whether written or oral, including without limitation, any agreement, commitment, arrangement or understanding relating to promotions, marketing campaigns and the like. "Customer Orders" is defined in Section 1.2(c). --------------- -------------- "Disclosure Schedule" means the disclosure schedules hereto. ------------------- "Dollars" or "$" means dollars of the United States of America. ------- - "1129 Order" is defined in Section 5.11. ---------- ------------ 3 "Environmental Law" means any Regulation, federal, State or local, which ----------------- relates to or otherwise imposes liability or standards of conduct concerning discharges, releases or threatened releases of any Contaminants into ambient air, water or land, or otherwise relating to the manufacture, processing, generation, distribution, use, treatment, storage, disposal, cleanup, transport or handling of Contaminants. "Environmental Liabilities and Costs" means all Losses from any claim, by ----------------------------------- any Person, whether based on Contract, tort, implied or express warranty, strict liability, criminal or civil statute, including without limitation, under any Remedial Action, Environmental Law, Environmental Permit, Environmental Lien, Order or agreement with any Authority, arising from environmental, health or safety conditions, or the Release of a Contaminant into the environment. "Environmental Lien" means any Lien in favor of any governmental authority ------------------ (an "Authority") for Environmental Liabilities and Costs. "Environmental Permit" means any of the Permits required by or pursuant to -------------------- any applicable Environmental Law. "Equipment and Vehicles" is defined in Section 1.1(k). ---------------------- -------------- "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended. "Estimated Accounts Receivables Value" is defined in Section 2.2. ------------------------------------ ----------- "Estimated Closing Purchase Price" is defined in Section 2.2. -------------------------------- ----------- "Estimated Inventory Book Value" is defined in Section 2.2. ------------------------------ ----------- "Estimated Post-Petition Liabilities Value" is defined in Section 2.2. ----------------------------------------- ----------- "Excluded Assets" is defined in Section 1.3. --------------- ----------- "Expenses" is defined in Section 11.2. -------- ------------ "Federal Securities Laws" is defined in Section 5.25. ----------------------- ------------ "Financial Statements" means the AWC Financial Statements and the Business -------------------- Financial Statements. "GAAP" means the U.S. generally accepted accounting principles at the time ---- in effect, consistently applied. 4 "Guarantee" means any guarantee or other contingent liability (other than --------- any endorsement for collection or deposit in the ordinary course of business), direct or indirect, with respect to any Indebtedness or obligations of another Person, through a Contract or otherwise, including, without limitation, (a) any other endorsement or discount with recourse or undertaking substantially equivalent to, or having economic effect similar to, a guarantee in respect of any such obligation, or to assure the owner thereof against loss regardless of the delivery or nondelivery of the property, products, materials or supplies or transportation or services or (b) the obligation to make any loan, advance or capital contribution to, or other investment in, or to otherwise provide funds to or for, such other Person in respect of enabling such Person to satisfy an obligation (including any liability for a dividend, stock liquidation payment or expense), or to assure a minimum equity, working capital or other balance sheet condition in respect of any such obligation. "Indebtedness" with respect to any Person means any obligation of such ------------ Person for borrowed money, and in any event shall include (i) any obligation incurred for all or any part of the purchase price of property or other assets or for the cost of property or other assets constructed or of improvements thereto, other than accounts payable included in current liabilities and incurred in respect of property purchased in the ordinary course of business, (ii) the face amount of all letters of credit issued for the account of such Person, (iii) obligations (whether or not such Person has assumed or become liable for the payment of such obligation) secured by Liens on the assets of such Person, (iv) capitalized lease obligations, (v) all Guarantees of such Person, (vi) all accrued interest, fees and charges in respect of any indebtedness, and (vii) all prepayment premiums and penalties, and any other fees, expenses, indemnities and other amounts payable as a result of the prepayment and/or discharge of any Indebtedness. "Intellectual Property" is defined in Section 1.1(n). --------------------- -------------- "Interim Business Financial Statements" means (i) the unaudited monthly ------------------------------------- interim statements of assets and liabilities as of, and unaudited statements of income and cash flows for each month ended May, June and July 1997 (and the last day of each month thereafter if the Closing shall not have occurred in the first twenty-one days of the succeeding month) for AWC, copies of which are attached as Schedule 3.4(b), and in the case of any statement for any period not yet --------------- having occurred, copies of which will be attached to form a part of Schedule -------- 3.4(b). - ------ "Inventory" is defined in Section 1.1(l). --------- -------------- "Inventory Adjustment Value" is defined in Section 2.1. -------------------------- ----------- "Inventory Book Value" means all inventory which has been appropriately -------------------- valued on the basis of the lower of historical cost or market standards consistent with GAAP and determined in accordance with such procedures and assumptions to the reasonable satisfaction of Purchaser and Sellers. Notwithstanding anything in this Agreement to the contrary, the 5 term "Inventory," for purposes of determining the Inventory Book Value only, shall exclude all such items which are Slow Moving Inventory. "ISRA" is defined in Section 13.2. ---- "Lease" means the Lease Agreement by and between Bradford Realty, as ----- lessor, and Sellers, as lessees, relating to Seller's facility consisting of 253,000 square feet at 15200 I-45 North, Houston, Texas 77090, which expires on April 30, 2013, as amended to date and including all supplements, amendments and other documents relating thereto. "Lease Amendment" is defined in Section 5.21. --------------- ------------ "Lease Assignment Documents" means all contracts, agreements and other -------------------------- documents required to be entered into in order to assign all of AWC's or any of its affiliate's rights and interests in the Lease to Purchaser, together with all estoppel letters and non-disturbance agreements that relate to the Lease which Purchaser may request. "Leased Real Property" is defined in Section 3.6. -------------------- ----------- "Lien" means any security interest, lien, charge, mortgage, deed, ---- assignment, pledge, hypothecation, encumbrance, easement, restriction or interest of another Person of any kind or nature. "Losses"mean all liabilities of every kind, losses, costs, claims, ------ judgments, awards, damages (including punitive, consequential and treble damages), penalties or expenses (including, without limitation, reasonable attorneys' fees and expenses and costs of investigation and litigation), and also including any expenditures or expenses incurred to cover, remedy or rectify any such Losses. "Material Adverse Change" means any circumstances, developments, changes, ----------------------- occurrences, state of facts or matters which have, or would reasonably be expected to have, a Material Adverse Effect. "Material Adverse Effect" means a material adverse effect on the business, ----------------------- operations, properties, assets, condition (financial or otherwise), results or plans of the Business or, to the best knowledge of Sellers after due inquiry, the prospects of the Business. "Mortgages" is defined in Section 3.6. --------- ----------- "Names" is defined in Section 1.1. ----- ----------- "NJDEP" is defined in Section 13.2. ----- 6 "Occurrence" is defined in Section 3.20. ---------- ------------ "Order" means any decree, order, injunction, rule, judgment, consent of or ----- by an authority. "Outside Collection Date" is defined in Section 6.7. ----------------------- ----------- "Outside Date" is defined in Section 5.11. ------------ ------------ "Overbid Auction" is defined in Section 7.1. --------------- ----------- "Owned Real Property" is defined in Section 3.6. ------------------- ----------- "Past Property" is defined in Section 3.13. ------------- ------------ "Permits" means any licenses, permits, registrations, variances, interim ------- permits, permit applications, certificates, approvals or other authorizations under any Regulation applicable to the Business. "Person" means any corporation, partnership, joint venture, organization, ------ entity, authority or natural person. "Plant Closing Costs and Liabilities" means all Losses from any Claim, by ----------------------------------- any Person, whether based on Contract, tort, implied or express warranty, strict liability, criminal or civil statute, including under WARN or any state or local plant closing law, arising from the discharge by either of the Sellers of any or all of Sellers' employees and relocation of the Business. "Post-Petition Liabilities" means all of Sellers' post-petition liabilities ------------------------- incurred in the ordinary course of their respective businesses, including without limitation, accounts payable, accrued vacation pay, payroll, contribution obligations under Sellers' 401(k) plan, medical plan insurance premiums, taxes, commissions and rebates, allowances, deductions and/or price discrepancies relating in any manner to products sold in pursuit of the Business prior to the Closing Date, but excluding any and all Unassumed Liabilities, including without limitation, Indebtedness and costs, fees or expenses of professional advisors (legal, accounting, financial or otherwise) in connection with Sellers' reorganization efforts. "Post-Petition Liabilities Adjustment Value" is defined in Section 2.1. ------------------------------------------ ----------- "Post-Petition Liabilities Value" means the dollar amount of all Post- ------------------------------- Petition Liabilities. "Premises" is defined in Section 13.2. -------- 7 "Purchaser's Auditors" is defined in Section 2.2. -------------------- ----------- "Purchaser Escrow Agreement" means the Escrow Agreement dated as of the -------------------------- date of this Agreement, among Purchaser, Sellers and the Escrow Agent named therein. "Purchase Price" is defined in Section 2.1. -------------- ----------- "Recalls" is defined in Section 3.20. ------- ------------ "Regulation" means any law, statute, ordinance, regulation, ruling, rule, ---------- Order or Permit, of, administered or enforced by or on behalf of any Authority, and the certificate or articles of incorporation and by-laws of Sellers. "Release" means any release, spill, emission, leaking, pumping, disposal, ------- discharge, dispersal or migration into the indoor or outdoor environment or into or out of any property or assets (including the Acquired Assets) owned or leased by Sellers, including the movement of Contaminants through or in the air, soil, surface water, groundwater or property. "Remedial Action" means all actions required under any applicable --------------- Environmental Law to (1) clean up, remove, treat or in any other way address Contaminants in the indoor or outdoor environment; (2) prevent the Release or threat of Release or minimize the further Release of Contaminants so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; or (3) perform pre-remedial studies and investigations and post-remedial monitoring and care. "Reorganization Plan" is defined in Section 5.16. ------------------- ------------ "Restricted Cash" means any cash identified on the AWC Financial Statements --------------- as "restricted cash," including without limitation, any items on such statements entitled "accounts receivable escrow," together with all funds held in the Megas Escrow Account. "Sale Procedures Approval Date" is defined in Section 5.11. ----------------------------- ------------ "Sale Procedures Motion Date" is defined in Section 5.11. --------------------------- ------------ "Sale Procedures Order" is defined in Section 5.11. --------------------- ------------ "Section 5.16 Parties" means each of the Sellers, Electra Fleming, Inc. and -------------------- the Official Committee of Unsecured Creditors in the Chapter 11 Cases. "Sellers' D&O Policies" is defined in Section 1.3(k). --------------------- -------------- "Sellers' Escrow Agreement" means the Escrow Agreement, to be dated the ------------------------- Closing Date, among Purchaser, Sellers and the Escrow Agent named therein (the "Escrow Agent"), in - ------------- 8 substantially the form attached hereto as Exhibit A together with such changes --------- reasonably requested by the Escrow Agent consistent with the terms of this Agreement. "Sellers' Escrow Fund" means the sum of $3,500,000 and the aggregate amount -------------------- of all funds held in the Escrow Account established pursuant to the Escrow Agreement, dated as of April 22, 1997 (the "Megas Escrow Agreement"), by and ---------------------- among Megas Beauty Care, Inc. ("Megas"), AWC, ACME/Chaston Puerto Rico, Inc. ----- ("ACME/Chaston") and Republic National Bank of New York (the "Megas Escrow ------------ ------------ Account"). - ------- "Sellers' Purchase Orders" is defined in Section 1.2(b). ------------------------ -------------- "Slow Moving Inventory" means those items of Inventory which are either (a) --------------------- of an SKU or item where usage during the twelve full months immediately preceding the Closing Date is equal to or less than 20% of the on hand quantity of such SKU or item as of the Closing Date, as determined in accordance with Section 2.2 hereof, and for which customer purchase orders on hand at the - ----------- Closing Date do not exceed 20% of the on hand quantity of such SKU or item, or (b) inventory which is otherwise unusable or non-salable, irrespective of clause (a). Notwithstanding the foregoing, Slow Moving Inventory does not include new SKUs or items introduced to Active Accounts within nine months prior to the date hereof and set forth on Appendix A ("New SKUs/Items"), which shall be delivered ---------- -------------- by Sellers pursuant to Section 5.24. "Software" is defined in Section 1.1(e). -------- -------------- "Taxes" means all taxes, charges, fees, duties, levies or other ----- assessments, including, without limitation, income, gross receipts, net proceeds, ad valorem, turnover, real and personal property (tangible and intangible), sales, use, franchise, excise, value added, license, payroll, unemployment, environmental, customs duties, capital stock, disability, stamp, leasing, lease, user, transfer, fuel, excess profits, occupational and interest equalization, windfall profits, severance and employees' income withholding and Social Security taxes imposed by the United States or any other country or by any state, municipality, subdivision or instrumentality of the United States or of any other country or by any other tax authority (collectively, "Taxing Authorities" and each, a "Taxing Authority"), including all applicable penalties and interest, and such term shall include any interest, penalties or additions to tax attributable to such Taxes. "Tax Return" means any report, return or other information required to be ---------- supplied to a Taxing Authority in connection with Taxes. "Third Party" means any Person other than Sellers, Purchasers or any of ----------- their respective affiliates. "Time-Warner/United Feature Characters" means any rights, including without ------------------------------------- limitation, such rights as service names, service marks, tradenames and trademarks relating to 9 such characters as Bugs Bunny, Daffy Duck, the Tazmanian Devil, Batman(TM), Space Jam(TM) characters (including Michael Jordan), and the Peanuts(TM) characters Charlie Brown, Snoopy and Lucy, granted to Sellers by the Warner Bros. Division of Time-Warner Entertainment Co., L.P. or by United Features Syndicate, L.P., or any of the affiliates of either of them. "Time-Warner/United Features License Assignments" is defined in Section ----------------------------------------------- ------- 5.22. - ---- "Time-Warner/United Feature Licenses" means those licenses or any other ----------------------------------- Contracts under which the Sellers market or have marketed adhesive bandages with imprints of or bearing the likenesses of any image produced in connection with a Time-Warner/United Features Character. "363 Hearing" is defined in Section 7.1. ----------- ----------- "363 Order" means an order of the Bankruptcy Court, substantially in the --------- form set forth on Exhibit 7.1(a) hereto. "365 Order" means an order of the Bankruptcy Court, substantially in the --------- form set forth on Exhibit 7.1(a) hereto. "Topping Offer" is defined in Section 7.1. ------------- ----------- "Unassumed Liabilities" is defined in Section 1.5. --------------------- ----------- "WARN" means the Worker Adjustment and Retraining Notification Act of 1988, ---- as amended. "Waste or Contamination Site" means any site or location, wherever located --------------------------- (including, but not limited to, any well, pit, pond, lagoon, impoundment, ditch, trench, drain, landfill), where Contaminants used at or generated by the Business or Sellers relating to any of the Owned Real Property or Leased Real Property, or, to the best knowledge of Sellers, any current or previous owner, tenant, lessee, subtenant or sublessee of any of the Owned Real Property or the Leased Real Property or any portion thereof, or any predecessor of the Business or of Sellers, shall have been deposited, stored, treated, reclaimed, disposed of, placed or otherwise come to be located. ARTICLE I PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES 1.1 Acquired Assets. Subject to the terms and conditions set forth in --------------- this Agreement, including without limitation Section 1.3, at the Closing, Sellers shall sell, assign, transfer and deliver to Purchaser, and Purchaser (or a nominee thereof) shall purchase, acquire and take assignment and delivery of, the following assets owned by Sellers (wherever located) 10 related to, or used in conjunction with, the Business, and all of Sellers' right, title and interest therein and thereto, but not including those assets specifically excluded in Section 1.3 (all of the assets sold, assigned, transferred and delivered to Purchaser hereunder are referred to collectively herein as the "Acquired Assets"): --------------- (a) all supplier and vendor lists and all files, books and records, including all records, documents, written information, computer tapes, programs and files concerning past, present and future dealings and arrangements with suppliers and vendors relating to the Business; (b) all computer hardware, cabling and peripherals, tools and supplies relating to the Business to the extent of Sellers' interest therein; (c) all of Sellers' rights, interests and obligations under the contracts, agreements and powers of attorney relating to the Business including without limitation those referred to in this Section 1.1 and those referred to in Section 3.10 and the schedules thereto and all of Sellers' and ACME/Chaston's rights, interests and obligations under the Megas Escrow Agreement; (d) all Permits, privileges, grants, franchises, licenses and consents used in the Business, to the extent transferable; (e) all of Sellers' title and interest in and to any and all of the databases used in the Business and all software, source codes, object codes, documentation, technical data, manuals, comments and instructions, and computer processes used in the Business (collectively, the "Software"), whether owned or licensed; (f) all of Sellers' right, title and interest in accounts receivable and payments for services rendered prior to the Closing (collectively, the "Accounts Receivable"); (g) all of Sellers' right, title and interest in and to all real property and real property leases set forth on Schedule 1.1(g) together with all --------------- Sellers' right, title and interest to leasehold improvements, including without limitation, the Lease; (h) all of Sellers' right, title and interest to all leased personal property (including without limitation all right, title and interest under capital leases), including all options to purchase leased personal property, relating to the Business; (i) all goodwill related to the Business and all associated trade and fictitious names and all variations and derivatives thereof, together with all other names under which the Business has been carried on, in each case, whether or not registered or filed, and all symbols and logos utilized in connection with the Business or as all or part of a trade or corporate name relating to the Business (collectively the "Names") or otherwise, and any other intangible ----- assets including without limitation all prepaid expenses and any and all relationships with 11 brokers and representatives relating to the sales, marketing, distribution or promotion of products manufactured in the Business; (j) all Cash and cash equivalents relating to the Business held in accounts as of the Closing, including without limitation Restricted Cash, plus Cash in an amount equal to all payments received by Sellers relating to the Business on or after the Closing Date, excluding any payments from Purchaser to Sellers under this Agreement ("Collections"); (k) all of the machinery, equipment, installations, lift trucks, vehicles, patterns, dies, tools, maintenance equipment and production machinery and equipment of every kind and description which relate in any manner to the Business (collectively, the "Equipment and Vehicles"), and all manufacturers' ---------------------- and suppliers' warranties relating to any of the Acquired Assets; (l) all of the inventories existing on the Closing Date and used in connection with the Business, including all raw materials, packaging materials, work in process and finished goods inventories, wherever located, whether Slow Moving Inventory or not, and which relate in any manner to the Business, including without limitation, all such materials utilized or to be utilized in the Business whether or not containing the name "American White Cross" or any of its derivatives, or any of the first aid and safety kits (for use in automobiles or otherwise), or, subject to Section 5.12 and Section 8.16, any of the Time- Warner/United Features Characters (collectively, the "Inventory"); --------- (m) all spare parts and manufacturing and operating supplies, wherever located, which relate in any manner to the Business; (n) all (i) patents, patent applications, licenses, service names, service marks, trade names, trademarks, trade name and trademark registrations (and applications therefor), copyrights and copyright registrations (and applications therefor), inventions and designs therefor relating to the Business, including without limitation, those set forth on Schedule 1.1(n), (ii) --------------- the AWC Mark, (iii) all right, title and interest in and to the Time- Warner/United Feature Licenses, and (iv) goodwill, trade secrets, processes, know-how and formulae which relate in any manner to the Business (collectively, the "Intellectual Property"); --------------------- (o) subject to Section 1.3, any Claims, deposits, leasehold improvements, prepayments, refunds, causes of action, choses in action, rights of recovery, rights of set-off, and rights of recoupment which relate to the Business and are set forth on Schedule 1.1(o), including without limitation, (i) --------------- rights of indemnification in respect of environmental matters arising under that certain Stock Purchase Agreement (the "AWCL Purchase Agreement"), dated as of April 19, 1993, among AWC and the former stockholders of The American White Cross Laboratories, Inc. ("AWCL"), excluding claims made under the AWCL Purchase Agreement prior to the date of this Agreement, provided, however, that Sellers shall also have such rights of indemnification in respect of environmental matters arising under the AWCL 12 Purchase Agreement, and (ii) Claims or rights of recovery of Sellers and ACME/Chaston under the Megas Escrow Agreement; (p) copies of all production records, product files, technical information, designs, drawings, confidential information, price lists, marketing plans and strategies, sales records, product development techniques or plans, customer lists and files (including customer credit and collection information), details of client or consultant contracts, operational methods, historical, business, operational, personnel and financial books, records and files, forms, plans, systems, methods, designs, procedures and other proprietary information relating to the Business; (q) all of the assets and rights of the Sellers relating to the Business located at Sellers' Dayville, Connecticut facility not specifically set forth on Schedule 1.3(f); and --------------- (r) any and all other assets and rights that are not of the type or character referenced in Section 1.1(a) - (q) and which relate to, or are necessary for the continuation after the Closing Date of, the Business in at least the same manner and magnitude as of the date hereof. 1.2 Assignment of Contracts, Licenses and Lease. Subject to the terms and ------------------------------------------- conditions set forth in this Agreement, (i) Sellers will assign and transfer to Purchaser, effective as of the Closing Date, all of Sellers' right, title and interest in and to, and Purchaser will take assignment of, the following rights and interests that are exclusively used in connection with, or relate exclusively to, the Business, and (ii) solely with respect to Section 1.2(f), ACME/Chaston will assign and transfer to Purchaser, effective as of the Closing Date, all of ACME/Chaston's right, title and interest in and to, and Purchaser will take assignment of, ACME/Chaston's rights and interests in connection with and relating to the Megas Escrow Agreement (and all of the following contained in the foregoing clauses (i) and (ii) shall be deemed included in the term "Acquired Assets" as used herein): --------------- (a) The Lease; (b) All of the unfilled purchase orders, and executory contracts and agreements for the purchase of goods, materials and services and such other contracts (i) at the date of this Agreement and set forth in Schedule 1.2(b) or --------------- (ii) entered into after the date of this Agreement and on or prior to the Closing Date (x) that are on commercially reasonable terms and consistent with past practices and are individually (and not in the aggregate) for a consideration of less than $30,000, and (y) that are on commercial reasonable terms, consistent with past practices and on conditions reasonably satisfactory to Purchaser and are individually (and not in the aggregate) for a consideration of greater than $30,000; in each case, and subject to the foregoing, as set forth on Schedule 1.2(b) as supplemented in accordance with this Agreement prior --------------- to the Closing (collectively, the "Sellers' Purchase Orders"); ------------------------ 13 (c) All of the unfilled purchase orders, and executory contracts and agreements for the sale of goods and services and such other purchase orders, sales contracts and agreements with customers (i) at the date of this Agreement and set forth in Schedule 1.2(c) or (ii) entered into after the date of this --------------- Agreement and prior to the Closing Date (x) that are on commercially reasonable terms and consistent with past practices and are individually (and not in the aggregate) for a consideration of less than $30,000 and (y) that are on commercially reasonable terms, consistent with past practices and on conditions reasonably satisfactory to Purchaser and are individually (and not in the aggregate) for a consideration of greater than $30,000; in each case, and subject to the foregoing, as set forth on Schedule 1.2(c) as supplemented in --------------- accordance with this Agreement prior to the Closing (collectively, the "Customer -------- Orders"); - ------ (d) All Permits relating to the Business; (e) Those Contracts concerning rights and property used or useful in connection with the conduct of the Business ("Assumed Contracts"), that are set forth on Schedule 1.2(e) hereto; and --------------- (f) The Megas Escrow Agreement. 1.3 Excluded Assets. The following assets of Sellers, as well as any --------------- other assets not defined as Acquired Assets, shall be retained by Sellers and are not being sold or assigned to Purchaser hereunder (all of the following are referred to collectively as the "Excluded Assets"): --------------- (a) Those items of machinery, equipment, installations, lift trucks, vehicles, patterns, dies, tools, spare parts, maintenance equipment and production machinery and equipment set forth on Schedule 1.3(a); --------------- (b) Those items of raw materials, packaging materials, work in process and finished goods inventories, spare parts, manufacturing operating supplies set forth on Schedule 1.3(b); --------------- (c) Any of the rights of Sellers under this Agreement (or under any other agreement between either of the Sellers on the one hand and Purchaser on the other hand entered into on or after the date of this Agreement); (d) All assets and rights of the Sellers not relating to the Business including those listed on Schedule 1.3(d); --------------- (e) The corporate charter, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, minute books, stock transfer books, blank stock 14 certificates, and other documents relating to the organization, maintenance and existence of Sellers as corporations; (f) The assets and rights of the Sellers relating to the Dayville, Connecticut cotton products business sold to Megas Beauty Care, Inc. ("Megas") pursuant to that certain Asset Purchase Agreement, dated as of March 20, 1997, among Megas, AWC and ACME/Chaston Puerto Rico, Inc.; (g) Any and all causes of action or claims arising out of events, conditions or occurrences prior to the Closing Date, including without limitation, any claims against the former stockholders of AWCL arising under the AWCL Purchase Agreement; excepting therefrom however, the rights of indemnification as set forth in Section 1.1(o) above; (h) Any and all Tax refunds, including actual or deemed interest thereon, relating to Sellers' Form 1120X Tax returns for the Tax periods ending December 31, 1991, 1992 and 1993, and any Tax returns, Tax books and Tax records relating to income Taxes paid or owed by Sellers during any Tax periods; (i) Any and all prepaid costs and expenses relating to professional advisors (legal, financial, accounting or otherwise) incurred by Sellers in connection with the Reorganization Plan; (j) Any and all cash receivables arising after the Closing Date that result from Sellers' performance under the Manufacturing and Supply Agreement, dated as of April 22, 1997, between Megas Beauty Care, Inc. and AWC; and (k) Any and all rights, claims and obligations of Sellers under Sellers' insurance policies in effect as of the date of this Agreement, including without limitation, Sellers' directors' and officers' insurance policies, except with respect to any rights of Purchaser set forth in Section 13.1 hereof (the "Sellers' Insurance Policies"). --------------------------- 1.4 Assumed Obligations. At the Closing, except as provided in Section ------------------- 1.5, Purchaser shall assume, and agree to pay, perform, fulfill and discharge only those obligations which are required to be performed, and which accrue, after the Closing Date under the following Contracts: (A) Sellers' Purchase Orders; (B) the Customer Orders; (C) the Lease, as the same shall have been amended pursuant to the provisions of Section 5.22 and Section 8.17 hereof, (D) the Post-Petition Liabilities, (E) the Assumed Contracts, (F) any and all employee severance obligations resulting from the termination of any employee of the Business hired by Purchaser in connection with the transactions contemplated hereby and terminated by Purchaser subsequent to the Closing Date, and (G) any Claim that any of the products known as Silent Nite or Airmax or any other nasal dilating products manufactured, produced, marketed or sold in the Business prior to the Closing Date, or any process, method, part, design or material in any way related thereto, infringes any intellectual property of another Person, but only in the event that Purchaser, pursuant to Section 6.6, notifies Sellers of its 15 intent to manufacture, produce, market or sell any such products after the Closing Date and Purchaser so manufactures, produces, markets or sells any such products after the Closing Date (the "Assumed Obligations"); except in each case ------------------- where (i) such obligations are not disclosed in accordance with the Agreement or exist or are entered into or accepted in contravention of this Agreement, (ii) such obligations arise due to any breach of warranty, tort, infringement, or violation of a Regulation or any Claim, in each case, arising prior to the Closing Date, (iii) such obligations arise due to any breach of Contract prior to the Closing Date or violation of any Regulation prior to the Closing Date, or (iv) the consent of any third party is required for the assignment of such Contract and such consent has not been obtained. Notwithstanding the foregoing, Purchaser shall have the right in its sole discretion to revise the content of the Assumed Contracts or assume any of the Unassumed Obligations by written notice delivered to Seller on or prior to August 15, 1997. Seller shall cure any defaults under all executory contracts and unexpired leases to be assigned to Purchaser at the Closing, and shall be solely responsible to any party to such contracts or leases to be assigned to Purchaser at the Closing Date for any loss suffered or incurred, from any such default as provided in (S) 365 of the Bankruptcy Code. 1.5 No Other Liabilities Assumed. Sellers acknowledge and agree that ---------------------------- pursuant to the terms and provisions of this Agreement and under any Contract, Purchaser will not assume any Obligation of Sellers, other than the Assumed Obligations. In furtherance and not in limitation of the foregoing, neither Purchaser nor any of its affiliates shall assume, and shall not be deemed to have assumed, any debt, claim, obligation or other liability of Sellers or any of its affiliates whatsoever other than as specifically set forth in Section 1.4, including, but not limited to (i) any Environmental Costs and Liabilities for any act, omission, condition, event or circumstance to the extent occurring or existing prior to the Closing Date, including without limitation all Environmental Costs and Liabilities relating in any manner to Sellers' direct or indirect handling, transportation or disposal of any Contaminants, (ii) any of Sellers' liabilities in respect of Taxes, (iii) to the extent that under the applicable law of any authority any Tax or fee is payable exclusively by Sellers, any Taxes or any fees arising in connection with the consummation of the transactions contemplated hereby, including any Tax or liability of any stockholder of Sellers or their affiliates and any of Sellers' fees or expenses incurred in connection with the transfer of the Acquired Assets (other than as expressly provided in this Agreement), (iv) any brokers' or finders' fees, or other liability of Sellers for costs and expenses (including fees and expenses relating to professional advisors (legal, financial, accounting or otherwise)) incurred in connection with this Agreement (or under any other agreement between Sellers on the one hand and Purchaser on the other hand entered into on or after the date of this Agreement), (v) any liability or obligation of Sellers under this Agreement (or under any other agreement between Sellers on the one hand and Purchaser on the other hand entered into on or after the date of this Agreement), (vi) any Indebtedness, (vii) any liability related to retiree medical and other retiree benefits and obligations, (viii) any obligations or liabilities, including severance, pension plan benefits (including without limitation, any liabilities, withdrawal or otherwise, relating to any multi- employer plans subject to Title IV of ERISA) and compensation, for Sellers' employees, except in such circumstances where such obligations are expressly assumed hereunder by Purchaser, (ix) any 16 obligation or liability arising as a result of or whose existence is a breach of Sellers' representations, warranties, agreements or covenants, (x) any Excluded Assets, (xi) Affiliate Obligations, (xii) any Loss relating to any defective or allegedly defective product manufactured, sold or distributed by Sellers on or prior to the Closing Date or any other product liability Claim relating to any product manufactured, sold or distributed by Sellers on or prior to the Closing Date, (xiii) any Plant Closing Cost or Liability, (xiv) any costs of curing any breach of any and all Contracts and Leases occurring or accruing on or prior to the Closing Date, that are to be assumed by Seller and assigned to Purchaser pursuant to (S) 365 of the Bankruptcy Code, (xv) any Claim that any of the products known as Silent Nite or Airmax or any other nasal dilating products manufactured, produced, marketed or sold in the Business prior to the Closing Date, or any process, method, part, design or material in any way related thereto, infringes any intellectual property of another Person, but only in the event that Purchaser, pursuant to Section 6.6, notifies Sellers of its intent not to manufacture, produce, market or sell any such products after the Closing Date and Purchaser does not so manufacture, produce, market or sell any such products after the Closing Date, (xvi) any of Sellers' Liabilities set forth on the Closing Date Balance Sheet as "liabilities subject to compromise," and (xvii) any obligation or liability of Sellers in respect of the Sellers' Insurance Policies (collectively, "Unassumed Liabilities"). Disclosure of any --------------------- obligation or liability on any schedule to this Agreement shall not create an Assumed Obligation or other liability of the Purchaser, except where such disclosed obligation has been expressly assumed by Purchaser as an Assumed Obligation in accordance with the provisions of Section 1.4 hereof. ARTICLE II PURCHASE PRICE AND PAYMENT 2.1 Purchase Price. The aggregate purchase price for the Acquired Assets -------------- (the "Purchase Price") shall be payable in cash as follows: (a) $40,000,000 -------------- minus, on a dollar-for-dollar basis, the amount that the Inventory Book Value determined in accordance with Section 2.2 hereof is less than $12,250,000 on the Closing Date (the "Inventory Adjustment Value"), (b) minus, on a dollar-for- -------------------------- dollar basis, the amount that the Post-Petition Liabilities Value determined in accordance with Section 2.2 hereof is more than $3,600,000 on the Closing Date (the "Post-Petition Liabilities Adjustment Value"), and (c) minus, on a dollar- ------------------------------------------ for-dollar basis, the amount that the Accounts Receivables Value determined in accordance with Section 2.2 hereof is less than $6,000,000 on the Closing Date (the "Accounts Receivables Adjustment Value"). ------------------------------------- 2.2 Payment of Estimated Closing Purchase Price; Purchase Price ----------------------------------------------------------- Adjustments. On or promptly before the Closing Date, but in any event effective - ----------- as of the Closing Date, Sellers and Purchaser and/or their representatives shall perform to Purchaser's reasonable satisfaction a complete and accurate physical count and inspection of the Acquired Assets. Five (5) business days prior to the Closing Date, Sellers shall notify Purchaser in writing of their good faith estimate of (i) the Inventory Book Value as of the Closing Date (the "Estimated --------- Inventory - --------- 17 Book Value"), (ii) the Post-Petition Liabilities Value as of the Closing Date - ---------- (the "Estimated Post-Petition Liabilities Value"), and (iii) the Accounts ----------------------------------------- Receivables Value as of the Closing Date (the "Estimated Accounts Receivables ------------------------------ Value"). The estimated closing purchase price (the "Estimated Closing Purchase - ----- -------------------------- Price") shall be equal to (a) $40,000,000 minus, on a dollar-for-dollar basis, - ----- the amount that the Estimated Inventory Book Value is less than $12,250,000, (b) minus the Purchaser Escrow Fund, (c) minus, on a dollar-for-dollar basis, the amount that the Estimated Post-Petition Liabilities Value is more than $3,600,000, and (d) minus, on a dollar-for-dollar basis, the amount that the Estimated Accounts Receivables Value is less than $6,000,000. At the Closing, Purchaser shall pay to Sellers in cash payable by certified or official bank check or wire transfer in immediately available funds an amount equal to the Estimated Closing Purchase Price. Of the Estimated Closing Purchase Price, AWC shall deposit with the Escrow Agent the Sellers' Escrow Fund pursuant to the terms and provisions of the Sellers' Escrow Agreement. In addition, contemporaneously with the execution of this Agreement, Purchaser has deposited with the Escrow Agent $400,000 pursuant to the terms and provisions of the Purchaser Escrow Agreement (the "Purchaser's Escrow Fund"). Within 14 calendar days after the Closing Date, Sellers shall prepare and deliver to Purchaser, a balance sheet for the Business as of the Closing Date (the "Closing Date Balance Sheet"), together with a statement setting forth -------------------------- Sellers' determination of the Inventory Book Value, the Post-Petition Liabilities Value and the Accounts Receivables Value, in each case as of the Closing Date. Within 30 days after receipt of such items, Purchaser may deliver to Sellers a detailed written statement setting forth its objections, if any, to the Closing Date Balance Sheet and determination of the Inventory Book Value, the Post-Petition Liabilities Value and the Accounts Receivables Value. If Purchaser does not raise any objections within the 30-day period, the Closing Date Balance Sheet and Sellers' determination of the Inventory Book Value, the Post-Petition Liabilities Value and the Accounts Receivables Value, in each case as of the Closing Date, shall be conclusive and binding upon the parties, shall not be subject to dispute or review and shall be the final determination of such matters. Upon request by Purchaser at any time after receipt of the Closing Date Balance Sheet and statements, Sellers shall make available to Purchaser and Deloitte & Touche LLP or another accounting firm of national reputation designated by Purchaser (the "Purchaser's Auditors"), the work papers used in -------------------- preparing them together with such other documents as Purchaser may reasonably request in connection with its review thereof. If Purchaser raises any objections within the 30-day period in respect of the the Closing Date Balance Sheet and Sellers' determination of the Inventory Book Value, the Post-Petition Liabilities Value and the Accounts Receivables Value, Sellers and Purchaser shall use reasonable efforts to resolve any such objections. If a final resolution is not obtained within 10 days after Purchaser shall have submitted its objections to Sellers, any remaining disputes shall be resolved by an accounting firm mutually agreeable to Purchaser and Sellers. If Purchaser and Sellers are unable to mutually agree on such an accounting firm within 5 days after the expiration of said 10-day period, either Coopers & Lybrand LLP, Ernst & Young LLP, KPMG Peat Marwick LLP or Price Waterhouse LLC (excepting any of which are Purchaser's Auditors) shall be selected by lot after elimination of one firm by Purchaser and one firm by Sellers. The determination of the accounting firm so selected of Purchaser's and Sellers' dispute in respect of the Closing 18 Date Balance Sheet and the Inventory Book Value, the Post-Petition Liabilities Value and the Accounts Receivables Value shall be made no later than 30 days following selection of such firm by the parties and shall be set forth in writing and shall be conclusive and binding upon the parties, shall not be subject to dispute or review and shall be the final determination of such matters. The fees and expenses of such accounting firm shall be paid by the party whose last proposed offer for settlement of the Inventory Book Value, the Post-Petition Liabilities Value and the Accounts Receivables Value was farther from the determination of such accounting firm; provided, however, that in the -------- ------- event that Purchaser's and Sellers' determinations of the Inventory Book Value, the Post-Petition Liabilities Value and the Accounts Receivables Value were each within five percent (5%) of the determination of such amounts by such accounting firm then the fees and expenses of such accounting firm shall be equally split between Purchaser and Sellers. Following the final determination pursuant to the foregoing paragraph of the Inventory Book Value, the Post-Petition Liabilities Value and the Accounts Receivables Value, the Purchase Price shall be determined in accordance with Section 2.1 hereof and (i) in the event that the Purchase Price is less than the Estimated Closing Purchase Price, Sellers shall pay to Purchaser in cash (which obligation shall first be satisfied out of the Sellers' Escrow Fund pursuant to the terms of the Sellers' Escrow Agreement) payable by certified or official bank check or wire transfer in immediately available funds within two business days immediately following the date of such final determination an amount equal to the difference between the Estimated Closing Purchase Price and the Purchase Price, (ii) in the event that the Purchase Price is greater than the Estimated Closing Purchase Price, Purchaser shall pay to Sellers in cash payable by certified or official bank check or wire transfer, immediately available funds within two business days immediately following the date of such final determination an amount equal to the difference between the Purchase Price and the Estimated Closing Purchase Price, and (iii) in the event that the Purchase Price is equal to the Estimated Closing Purchase Price, neither Purchaser nor Sellers shall be obligated to make any further payments to the other pursuant to Section 2.1 or this Section 2.2. Notwithstanding anything contained in this Article II, in no event shall the Purchase Price payable by Purchaser to Sellers hereunder exceed $40,000,000. 2.3 Allocation of Purchase Price. For tax reporting purposes only, the ---------------------------- Purchase Price shall be allocated as described in Schedule 2.3 hereto to the ------------ satisfaction of Sellers and Purchaser. Sellers and Purchaser agree to file all income tax returns or reports, including, without limitation, IRS Form 8954, for their respective taxable years in which the Closing occurs and to reflect the allocation of the Purchase Price described in Schedule 2.3 hereto on any such ------------ return or report and agree not to take any position inconsistent therewith before any governmental agency charged with the collection of any Taxes or in any judicial proceeding relating solely to tax reporting. 2.4 Further Assurances. From time to time after the Closing at the ------------------ request of Purchaser and without further consideration, Sellers shall execute and deliver such further instruments of transfer and assignment and take such other action as Purchaser may reasonably 19 require to more effectively transfer and assign to, and vest in, Purchaser each of the Acquired Assets. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS Sellers represent and warrant to Purchaser as of the date of this Agreement and the Closing Date, as follows: 3.1 Due Incorporation, etc. Each of the Sellers is a corporation duly ---------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation with all requisite corporate and other power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of the Sellers is duly organized and in good standing as a foreign corporation authorized to do business in each jurisdiction where the failure to be qualified would, in the aggregate, have a Material Adverse Effect. 3.2 Due Authorization. ----------------- (a) The Board of Directors of each of the Sellers has approved the entry of each of the Sellers into this Agreement and the transactions contemplated hereby. Sellers have full power and authority to enter into this Agreement and to carry out the transactions contemplated herein, and this Agreement has been duly and validly executed and delivered by Sellers, to the extent a party thereto and constitute the legal, valid and binding obligations of Sellers, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws from time to time in effect that affect creditors' rights generally, and by legal and equitable limitations on the availability of specific remedies. (b) The execution, delivery and performance by each of the Sellers of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not (i) violate any provision of the certificate or articles of incorporation or by-laws of Sellers, (ii) with the passage of time, the giving of notice or otherwise, result in a violation or breach of, or conflict with or constitute a default or result in the termination or in a right of termination or cancellation of, or accelerate the performance required by, or require notice under, any written Contract or result in the creation of any Lien upon any of its properties, or (iii) violate any Regulation, which in the case of clause ------ (ii) or (iii) could have a Material Adverse Effect. - ---- ----- 3.3 Permits; Compliance with Law; Consent. Sellers hold all of the ------------------------------------- Permits listed on Schedule 3.3, and no other Permits are currently necessary in ------------ any way for the lawful operation by Sellers of the Business as currently conducted by Sellers, including without limitation, Permits issued or granted by the United States Food and Drug Administration (the "FDA"), except for those --- Permits the absence of which would not have a Material Adverse 20 Effect. Except as set forth on Schedule 3.3, Sellers have complied with each, ------------ and are not in violation of any Regulation to which the Acquired Assets or Assumed Obligations are subject, including export and import licensing and other laws. Except consents, approvals or authorizations of, or filings with, the Bankruptcy Court and those set forth on Schedule 3.3, no notice to, filing with, ------------ authorization of, exemption by, or consent of any Authority as required in order for Sellers to consummate the transaction contemplated hereby. 3.4 Financial Statements and Obligations. ------------------------------------ (a) The AWC Financial Statements present fairly the financial position of AWC as of and for the periods set forth therein in conformity with GAAP and the past accounting practices of AWC, and the AWC Financial Statements, including the notes thereto, make full and adequate disclosure of, and provision for, all material obligations and liabilities of AWC and the Business, as applicable, as of the date thereof, to the extent required by GAAP. (b) The Business Financial Statements are based on the books and records of the Sellers and fairly represent the results of the Business. (c) Each item of Inventory that is not Slow Moving Inventory is merchantable and usable in the ordinary operations of the Business, none of such items is obsolete and non-salable. The Inventory (other than Slow Moving Inventory) is fairly reflected in the inventory accounts on the balance sheet included in the Financial Statements and are valued at the lower of cost or market and determined in accordance with GAAP (it being understood, however, that each item of inventory will be independently valued and that the age of inventory will not be the exclusive determinant of value). 3.5 No Adverse Change. Except as listed on Schedule 3.5, since December ----------------- ------------ 31, 1996 there has not been (i) any Material Adverse Change, (ii) any material loss or damage (whether or not covered by insurance) to any of the Acquired Assets, which materially affects or impairs the ability of Sellers to conduct the business of the Business, or any other event or condition of any character which has materially and adversely affected the business or operation of the Business, (iii) any contract or other transaction entered into by Sellers relating to, or otherwise affecting in any way, the Business or the operation thereof, other than in the ordinary course of business, (iv) any sale or transfer of any of the Acquired Assets, except items of the Inventories which have been sold in the ordinary course of business, or any cancellation of any debts due to, or claims of, Sellers, except in the ordinary course of business, (v) any material changes in the terms of any instruments, accounts, notes, Contracts, or other instruments that are Assumed Obligations, except as consented to in writing by Purchaser, or (vi) consistent with being a debtor in possession under the Bankruptcy Code, failure to use reasonable best efforts to preserve for Sellers the goodwill of its suppliers, franchisees, customers and others having business relations with Sellers, in each case, which would have a Material Adverse Effect. Since December 31, 1996, the business of the Business has been conducted in all respects only in the ordinary course, and there has not been any 21 material change in the affairs of the Business which has not been fully disclosed in writing to Purchaser which would have a Material Adverse Effect. 3.6 Title to and Condition of Properties. ------------------------------------ (a) At and as of the Closing Date, and subject to Bankruptcy Court approval, Sellers will have good and marketable title to, and will have the right to sell, convey, transfer, assign and deliver the Acquired Assets free and clear of any Lien, Claim and right of first refusal other than Liens assumed or granted thereon in connection with the Purchaser's financing or business. At and as of the Closing Date, and subject to Bankruptcy Court approval, Sellers will convey the Acquired Assets to Purchaser by bills of sale, certificates of title and other instruments of assignment and transfer effective to vest in Purchaser, and Purchaser will have, good and valid record and marketable title to all of the Acquired Assets, free and clear of all Liens, Claims and rights of first refusal. (b) All of the Acquired Assets that consist of real property owned by Sellers is identified on Schedule 3.6 (collectively referred to herein as the ------------ "Owned Real Property"). Seller will have as of the Closing Date, and except as - -------------------- set forth on Schedule 3.6 has as of the date of this Agreement, good, clear, ------------ record and marketable fee simple title to the Owned Real Property, free and clear of all Liens, Claims, rights of first refusal, deeds of trust, ground leases, assessments, leases and tenancies, covenants, conditions, restrictions, easements or other encumbrances and free of encroachments onto or off of the Owned Real Property, except for (x) easements, covenants, restrictions and similar encumbrances that do not and could not reasonably be expected to materially interfere with the use of the Owned Real Property as currently used and improved, and (y) minor encroachments that do not and could not materially adversely affect the value or use of the Owned Real Property as currently used and improved and that could be removed without material cost, and except for matters set forth on Schedule 3.6. All of the mortgages, deeds of trust, ground ------------ leases, security interests or similar encumbrances on the Owned Real Property are set forth on Schedule 3.6 (collectively, the "Mortgages"). Except as set ------------ --------- forth on Schedule 3.6, Sellers have obtained the consent of the holder of any ------------ Mortgage if the transfer of the Owned Real Property to Purchaser would otherwise cause a default under the Mortgage, and such transfer will not give the holder of any Mortgage any remedy, or the right to charge any premium or penalty. All of the real property leased by Sellers as tenants or lessees, including, without limitation, the Lease, is identified on Schedule 3.6 (such premises are referred ------------ to herein as the "Leased Real Property"). The copies of the leases of the -------------------- Leased Real Property delivered by Sellers to Purchaser and the information with respect to each of such leases set forth in Schedule 3.6 is complete, accurate, ------------ true and correct. Such leases are in full force and effect and have not been modified, amended, or altered, in writing or otherwise, other than as contemplated by Section 5.22 and Section 8.17; all obligations of the landlords or lessors under such leases which have accrued and have not been performed are set forth on Schedule 3.6; all obligations of the tenant or lessee under such ------------ leases which have accrued and have not been performed are set forth on Schedule -------- 3.6 and all such obligations will be cured or performed on or prior to the - --- Closing Date, and Sellers, except as set forth on Schedule 3.6, are not in ------------ default under any of the leases of Leased Real 22 Property, and no circumstance presently exists which, with notice or the passage of time, or both, would give rise to a default by Sellers; and Sellers have obtained or will obtain on or prior to the Closing the consent of each landlord or lessor under any leases of the Leased Real Property whose consent is required to the transfer of the Leased Real Property to Purchaser, and such transfer will not give any landlord or lessor under any such leases any remedy, including, without limitation, any right to declare a default under such leases. Seller holds a good, clear, marketable, valid and enforceable leasehold interest in the Leased Real Property pursuant to such leases, subject only to the right of reversion of the landlord or lessor in the Leased Real Property, free and clear of all other prior or subordinate interests, including, without limitation, Liens, Claims, rights of first refusal, deeds of trust, ground leases, assessments, leases and tenancies, covenants, conditions, restrictions, easements or other encumbrances, and free of encroachments onto or off of the Leased Real Property, except for (x) easements, covenants, restrictions and similar encumbrances that do not and could not reasonably be expected to materially interfere with the use of the Leased Real Property as currently used and improved, and (y) minor encroachments that do not and could not reasonably be expected to materially adversely affect the value or use of the Leased Real Property as currently used and improved and that could be removed without material cost, and except for matters set forth on Schedule 3.6. Except as set ------------ forth on Schedule 3.6, there are no material defects in the physical condition ------------ of any improvements constituting a part of the Owned Real Property or Leased Real Property, including, without limitation, structural elements, mechanical systems, roofs or parking and loading areas, and all of such improvements are in good operating condition and repair, have been well maintained and are free from infestation by rodents or insects. Except as set forth on Schedule 3.6, none of ------------ the Owned Real Property or Leased Real Property is subject to special flood or mudslide hazards or within the 100 year flood plain. All water, sewer, gas, electric, telephone, drainage and other utilities required by law or necessary for the current or planned operation of the Owned Real Property or Leased Real Property have been installed and connected pursuant to valid permits, and are sufficient to service the Owned Real Property or Leased Real Property. Except as set forth on Schedule 3.6, Sellers have received no notice from any governmental ------------ authority of any violation of any law, ordinance, regulation, license, permit or authorization issued with respect to any of the Owned Real Property or Leased Real Property that has not been corrected heretofore, and no such violation exists which could have an adverse effect on the operation or value of any of the Owned Real Property or Leased Real Property. All improvements constituting part of the Owned Real Property or Leased Real Property have been completed and are now in compliance in all material respects with all applicable laws, ordinances, regulations, licenses, permits and authorizations, and there are presently in effect all licenses, permits and authorizations required by law, ordinance, or regulation. Except as set forth on Schedule 3.6, Sellers have ------------ received no notice of any pending or threatened real estate tax deficiency or reassessment or condemnation of all or any portion of any of the Owned Real Property or Leased Real Property. 23 3.7 Intellectual Property. --------------------- (a) Schedule 1.1(n) is an accurate and complete list of all of the --------------- Intellectual Property. All of such Intellectual Property will be owned by Sellers as of the Closing Date free and clear of all Liens, Claims and rights of first refusal or will be duly licensed for use by Sellers except as set forth in Schedule 1.1(n). Except as set forth on Schedule 1.1(n), at and as of the - --------------- --------------- Closing Date and subject to Bankruptcy Court approval, none of the Intellectual Property will be the subject of any pending adverse Claim, or to the knowledge of Sellers, any threatened or potential Claim or infringement. Except as set forth on Schedule 1.1(n), the products Sellers manufacture or which are produced --------------- by or in connection in any way with the operation of the Business, or which the Business sells, do not, and any process, method, part, design or material it employs, or the marketing and use by the Business of any such product or any service does not, infringe any intellectual property of another Person, and Sellers have not received any notice contesting their right to use any Intellectual Property now used by them in connection in any way with the Business or the operation thereof. Except as set forth on Schedule 3.7, Sellers ------------ have not granted any license in respect of any Intellectual Property. Sellers have taken all commercially reasonable actions necessary to maintain the Intellectual Property, including the use and practice thereof, and any and all registrations with respect to the Intellectual Property except where the failure to take any such action could not reasonably be expected to have a Material Adverse Effect. In the reasonable opinion of Sellers, they own or possess adequate rights in and to all Intellectual Property necessary to conduct the Business as presently conducted by Sellers. (b) Except as set forth on Schedule 3.7, Sellers own the AWC Mark as ------------ of the Closing Date free and clear of all encumbrances. At and as of the Closing Date and subject to Bankruptcy Court approval, the AWC Mark will not be the subject of any pending adverse Claim, or to the knowledge of Sellers, any threatened or potential Claim of infringement. The products Sellers manufacture, produce or sell using the AWC Mark do not, and any process, method, part, design or material they employ in connection with the use of the AWC Mark, or the marketing and use by them of any products or any services which contain the AWC Mark do not infringe any intellectual property of another Person, and Sellers have not received any notice contesting their right to use the AWC Mark in any way. Except as set forth on Schedule 3.7, prior to the Closing Date, ------------ Sellers have not granted any license in respect of the AWC Mark and have taken all commercially reasonable actions necessary to maintain the AWC Mark, including the use and practice thereof, and any and all registrations with respect to the AWC Mark. 3.8 Customer List. Schedule 3.8 contains a true and complete list of all ------------- ------------ customers and accounts of Sellers in respect of the Business which produced gross sales in excess of $25,000 during any of the fiscal years ended December 31, 1995 and 1996 and the six months ended June 30, 1997. Other than as set forth on Schedule 3.8, (i) to the best knowledge of Sellers after due inquiry, ------------ none of such customers has terminated, or materially reduced, and no such customer has given written notice that it will terminate or materially reduce its 24 relationship with Sellers prior to the Closing, and (ii) to the best knowledge of Sellers, such customers will continue equivalent relationships with Purchaser subsequent to the Closing. 3.9 Suppliers. Schedule 3.9 contains a true and complete list of all --------- ------------ suppliers of Sellers in respect of the Business which furnished products or supplies in excess of $25,000 to Sellers during any of the fiscal years ended December 31, 1995 and 1996 and the six months ended June 30, 1997. Other than as set forth on Schedule 3.9, (i) to the best knowledge of Sellers after due ------------ inquiry, none of such suppliers has terminated, or materially reduced, and no such supplier has given written notice that it will terminate or materially reduce its relationship with Sellers prior to the Closing. 3.10 Contracts. Schedule 3.10 is a true and complete list of all material --------- ------------- Contracts as of the date hereof relating to the Acquired Assets and/or the Assumed Obligations. Sellers have delivered to Purchaser true and correct copies of each listed document and a written description of each oral Contract so listed. Schedule 3.10 includes all the material Contracts to which Sellers ------------- are party, or to which any of the Acquired Assets or Assumed Obligations are subject. 3.11 Employee Benefit Plan. --------------------- (a) Except as set forth on Schedule 3.11, Sellers do not maintain or ------------- have any liability with respect to any "employee benefit plan" (as defined in Section 3(3) of ERISA) or any plan or fringe benefit arrangement or employment agreement for any employee, consultant or agent which does not constitute an employee benefit plan. (b) No circumstance exists and there have been no acts or omissions which have given rise or may give rise to any liability, fine, tax or other penalty with respect to the plans, arrangements and agreements listed on Schedule 3.11 (referred to hereinafter as "Employee Benefit Plans") for which - ------------- ---------------------- Purchaser could be liable, except to the extent expressly assumed hereunder by Purchaser. (c) Except as set forth on Schedule 3.11, there are no actions, suits ------------- or claims (other than routine claims for benefits) pending or threatened involving any Employee Benefit Plan or the assets thereof for which Purchaser could be liable and no facts exist which could give rise to any such actions, suits or claims. (d) Except as set forth on Schedule 3.11, Sellers do not have any ------------- liability for providing any post-retirement medical or life insurance benefits for any employee or eligible dependent that could become the liability of Purchaser. 3.12 No Defaults or Violations. Except (i) as set forth on Schedule 3.12 ------------------------- ------------- and (ii) as may occur or may have occurred as a consequence of Sellers' compliance with the Bankruptcy Code and applicable rules (a) Sellers have not materially breached any provision of, nor are they in material default under the terms of, any Contract described in Section 3.10, Permit or 25 Order to which they are a party or under which they have any rights or by which they are bound and which relates to the business or operation of the Business, the Acquired Assets and/or the Assumed Obligations (including, without limitation, the Lease, Sellers' Purchase Orders, or Customer Orders), nor has any event occurred nor does any condition exist which, with the giving of notice or the passage of time or both, could constitute any such material breach or material default, and to the knowledge of Sellers no other party to the Lease or any such contract, commitment or agreement is in default thereunder in any material respect and (b) Sellers are not in violation or default of, or with respect to, any Regulation that is applicable to the Acquired Assets or the Assumed Obligations, nor has any event occurred nor does any condition exist which, with the giving of notice or the passage of time or both, could constitute any such violation or breach, except for such violations or breaches which could not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. 3.13 Certain Environmental Matters. Except as disclosed on Schedule 3.13: ----------------------------- ------------- (a) neither the Business nor any of the Acquired Assets or Assumed Obligations violates any applicable Environmental Law in effect as of the date hereof in any material respect, and neither the Business nor any of the Acquired Assets or Assumed Obligations is subject to any material Environmental Liabilities and Costs; (b) Sellers have not stored or used any Contaminants at any of the Owned Real Property or Leased Real Property or, to Sellers' best knowledge, in any manner connected with its operation of the Business or the use of any of the Acquired Assets, except for inventories of chemicals and raw materials which are or were to be used in the ordinary course of business of Sellers (which inventories have been stored or used in accordance in all material respects with all applicable Environmental Permits and all Environmental Laws in effect as of the date hereof); (c) Sellers have not received any notice from any Authority or private entity advising it that any of the Owned Real Property or Leased Real Property or the operation thereof is in violation in any material respect of any Environmental Law in effect as of the date hereof or any applicable Environmental Permit, or that they are or were responsible (or potentially responsible) for the cleanup of any Contaminants at, on or beneath such properties or assets or at, on or beneath any land adjacent thereto or in connection with any Waste or Contamination Site, nor have Sellers filed any notice with respect of the Business, the Acquired Assets or the Assumed Obligations under any applicable Environmental Law in effect as of the date hereof reporting a Release of a Contaminant into the environment; (d) neither the Business, the Acquired Assets or the Assumed Obligations, nor the operation thereof, is the subject of foreign, Federal, State, local or private litigation or proceedings or judicial or administrative Claim involving a demand for damages or other potential liability with respect to violations of Environmental Laws in effect as of the date hereof; (e) neither Sellers, nor, to the best of Sellers' knowledge, any current or previous owner, tenant, lessee, subtenant or sublessee of any of the Owned Real Property or Leased Real Property or any portion thereof, or any predecessor of the Business or of Sellers, have buried, dumped, disposed of, spilled or released any Contaminants on, beneath or about its properties relating to the operation of the Business or the Acquired Assets or any property adjacent thereto that individually or in the aggregate could result in any Material Adverse Effect; (f) Sellers and all of their present property, assets and operations as well as their past property ("Past Property") ------------- (defined as real property, assets and operations of Sellers which 26 were owned or conducted, but are not owned or conducted as of the date hereof), in each case, relating to the Business, the Acquired Assets or the Assumed Obligations, are not subject to any outstanding Order from or Contract with any Authority respecting (i) any Environmental Law, (ii) any Remedial Action, or (iii) any Environmental Liabilities and Costs, whether arising from the Release of a Contaminant into the environment or otherwise; (g) Sellers have not been notified that any of Sellers' present property, assets or operations or Past Property, in each case, relating to the Business, the Acquired Assets or the Assumed Obligations, are the subject of any Claim by any Authority evaluating whether any Remedial Action is needed to respond to a Release or threatened Release of a Contaminant into the environment, which Claim is still pending as of the date of this Agreement; (h) Sellers have not filed any notice in respect of Sellers, or their properties, assets or operations, under any Environmental Law indicating treatment, storage or disposal of a hazardous waste in connection with their present property, assets and operations or their Past Property in each case, relating to the Business, the Acquired Assets or the Assumed Obligations; (i) no by-products of any manufacturing process or operation of the Business, Acquired Assets or Assumed Obligations, which may constitute Contaminants are currently stored or otherwise located at such properties or assets except in compliance in all material respects with all applicable Environmental Laws in effect as of the date hereof; (j) Sellers have obtained all Environmental Permits necessary for their operations, in each case, relating to the Business, the Acquired Assets or the Assumed Obligations, and all such Environmental Permits are in good standing, and Sellers are in compliance in all material respects with such Environmental Permits; and (k) Sellers have timely filed all reports required to be filed with respect to the Business, the Acquired Assets and the Assumed Obligations, and have generated and maintained all required data, documentation and records, in each case, under all applicable Environmental Laws in effect as of the date hereof with respect thereto. Solely for purposes of this Section 3.13, any representation or warranty contained in this Section 3.13 qualified by the words or phrases "material," "in any material respect," "in all material respects," or "Material Adverse Effect" shall mean that no act or omission by Sellers, or other state of facts, matters or circumstances exist or have occurred with respect to the subject matter of any such representation or warranty which individually or in the aggregate could result in Losses of $100,000 or more. 3.14 Litigation. Except as disclosed in Schedule 3.14 or released or ---------- ------------- otherwise terminated as a result of either the 363 Order and the 365 Order or in the alternative, the 1129 Order, there are no Claims pending or, to the knowledge of Sellers, threatened, against or affecting in any way Sellers, the Business, the Acquired Assets or the Assumed Obligations, or any officers, directors, employees or the stockholders thereof in their capacity as such, or any of the properties or business thereof, or relating to the transactions contemplated by this Agreement. Except as disclosed in Schedule 3.14, Sellers ------------- are not subject to any Order which has or may have a Material Adverse Effect. 3.15 Taxes. Except as set forth on Schedule 3.15, (i) all Taxes relating ----- ------------- to the Business have been properly determined in accordance with applicable rules and regulations and have been paid in full on time, (ii) Sellers have duly and timely filed all Tax Returns relating to the Business of every nature required to be filed by it, in every jurisdiction in which 27 the same may have been so required, and have paid all Taxes disclosed on such returns, (iii) all Taxes relating to the Business of which notice has been received or which shall accrue on or prior to the Closing Date have been paid or shall be paid by Sellers in due course and in a timely manner, (iv) all amounts required by law to be paid by Sellers with respect to employees' withholding taxes relating to the Business have been paid, (v) there are no tax liens on any Acquired Assets, except liens for Taxes not yet due, (vi) Sellers have not filed a consent under Section 341(f)(1) of the Code, relating to collapsible corporations, and none of the assets of Sellers is subject to such a consent; (vii) there are no Claims pending against Sellers for past due Taxes, and Sellers do not know of any such threatened claim or the basis for any such Claim relating to the Business, and (viii) there are not now any matters under discussion with any Authority with respect to any additional Taxes or assessments relating to Sellers. Except to the extent expressly assumed hereunder by Purchaser, Purchaser will not be liable for any of Sellers' Taxes as a result of the consummation of the transactions contemplated by this Agreement. None of the Acquired Assets is subject to a lease or other arrangement pursuant to which Sellers are not entitled to depreciation allowances under the Code and for which Sellers are taking a depreciation allowance. 3.16 Condition of Assets. Except as disclosed on Schedule 3.16, all of the ------------------- ------------- Acquired Assets which consist of personal, owned or leased property, other than Owned Real Property or Leased Real Property, (a) are in normal operating condition (ordinary wear and tear excepted), (b) have been maintained in a manner consistent with applicable law, industry standards and past practices, and (c) are free from defects other than such minor defects as do not interfere with the continued use thereof in the conduct of normal operations. 3.17 Brokers. Sellers have not paid or become obligated to pay any fee or ------- commission to any broker, finder, investment banker or other intermediary in connection with the transactions contemplated by this Agreement. 3.18 Insurance Policies. Sellers have been adequately insured with respect ------------------ to risks normally insured against, and in amounts normally carried by, companies similarly situated and engaged in similar businesses. Sellers are current on all insurance obligations, including, but not limited to, employee health and accident insurance, and environmental, property, general liability, product liability and worker's compensation insurance, as described on Schedule 3.18. ------------- Schedule 3.18 contains a list of each insurance policy currently providing - ------------- coverage for the assets of Sellers relating to the Business and the Acquired Assets and a copy of each such policy has been delivered to Purchaser. 3.19 Assets Sufficient for Conduct of Business. The Acquired Assets and ----------------------------------------- the Excluded Assets, taken together, include sufficient assets necessary for the conduct of the Business as presently conducted by Sellers. 3.20 Products Liability. Except as set forth on Schedule 3.20, in ------------------ ------------- connection with the Business, (i) there is no Claim by or before any court or Authority against or involving Sellers concerning any product designed, manufactured, shipped, sold or delivered by or on behalf of 28 Sellers which is pending or, to the best knowledge of Sellers, threatened, relating to or resulting from an alleged defect in design, manufacture, materials or workmanship of any such product, an alleged failure to warn as to the condition or use of any such product, or an alleged breach of implied warranties or representations made with respect to any such product, nor is there any valid basis for any such Claim, (ii) there has not been any Occurrence (as hereinafter defined) for the periods shown on Schedule 3.20 involving Claims ------------- or threatened Claims in writing in excess of $10,000 in the aggregate, (iii) there has not been any product recall, rework or post-sale warning or similar action (collectively "Recalls") conducted with respect to any products designed, ------- manufactured, shipped, sold or delivered by or on behalf of Sellers, or any investigation or consideration of or decision made by Sellers concerning whether to undertake or not undertake, any Recalls and (iv) there are no material defects in design, manufacturing and materials or workmanship, including, without limitation, any failure to warn, or any breach of express or implied warranties or representations, which involve any product designed manufactured, shipped, sold or delivered by or on behalf of Sellers. For the purposes of this Section 3.20, the term "Occurrence" means any accident, happening or event which occurs or has occurred or will have occurred at any time prior to the Closing Date which is caused or allegedly caused by hazard or defect in manufacture, design, materials or workmanship, including without limitation, any failure or alleged failure to warn or any breach or alleged breach of express or implied warranties or representations with respect to a product designed, manufactured, shipped, sold or delivered by or on behalf of Sellers, which results or is alleged to have resulted in injury or death to any person or damage to or destruction of property (including damage to or destruction of the product itself, except for products returned, repaired or replaced in the ordinary course of business), or for which any person seeks consequential damages. 3.21 Labor Disputes; Compliance. Except as set forth on Schedule 3.21, -------------------------- ------------- Sellers are not a party to or bound by any union or collective bargaining agreement for employees associated with the Business. In connection with the Business, Sellers have complied in all material respects with all laws relating to the employment and safety of labor, including provisions relating to wages, hours, benefits, collective bargaining, the occupational safety and health acts, laws and regulations. Sellers are not liable for any arrears in wages or any taxes or penalties for failure to comply with any of the foregoing. Except as set forth in Schedule 3.21, there are no charges of employment discrimination or ------------- unfair labor practices, nor are there any strikes, slowdowns, stoppages of work, or any other concerted interference with normal operations existing, pending or, to the knowledge of Sellers, threatened against or involving either of the Sellers. Except as set forth on Schedule 3.21, to the best knowledge of ------------- Sellers, no employees of the Business are represented by any labor organization and no labor organization or group of Sellers' employees has made a demand for recognition, filed a petition seeking a representation proceeding, or given Sellers notice of any intention to hold an election of a collective bargaining representative. To the knowledge of the of Sellers, except as set forth on Schedule 3.21, there are no grievances, complaints or charges that have been - ------------- filed against either of the Sellers under any dispute resolution procedure (including, but not limited to, any proceedings under any dispute resolution procedure under any collective bargaining 29 agreement) that might have a Material Adverse Effect. Except as set forth on Schedule 3.21, no arbitration or similar proceeding is pending and no claim the - ------------- has been asserted. 3.22 Employees; Officers. Schedule 3.22 hereto lists the name and address ------------------- ------------- of each officer and employee of Sellers and consultant exclusively associated with the Business not terminable at will by Sellers as of the date of this Agreement whose current annual salary or aggregate annual cash compensation from Sellers or one of their affiliates equals $50,000 or more, together with the current job title and the aggregate annual cash compensation paid to each such person, including a description of applicable bonus or benefit plans applicable to such persons. 3.23 WARN Act. No circumstance exists, and there have been no acts or -------- omissions which have given rise or may give rise to, any liability, fine, tax or other penalty under WARN for which Purchaser could be liable. 3.24 Collectibility of Accounts Receivable. All of the Accounts Receivable ------------------------------------- (less the reserve for bad debts set forth on the Financial Statements) are or will be at the Closing valid and enforceable claims, fully collectible and subject to no setoff or counterclaim. Except as set forth on Schedule 1.1(o), --------------- Sellers have no accounts or loans receivable from any person, firm or corporation which is affiliated with Sellers or from any director, officer or employee of Sellers. 3.25 Inventories. Except as disclosed in Schedule 3.25, all items in ----------- ------------- Sellers' Inventories are of a quality and quantity usable and/or saleable in the ordinary course of business at profit margins consistent with the Sellers' experience during the fiscal year ended December 31, 1996 and the six months ended June 30, 1997. The values of the inventories stated in the AWC Financial Statements and any subsequent financial statements of Sellers reflect the normal inventory valuation policies of Sellers and were determined at the lower of cost or market in accordance with generally accepted accounting principles, practices and methods consistently applied. Purchase commitments for raw materials and parts are not in excess of normal requirements and none are at prices materially in excess of current market prices. All inventory items are located on the Owned Real Property or the Leased Real Property, except as set forth on Schedule -------- 3.25. - ---- 3.26 FDA Matters. Sellers are registered with the FDA as manufacturers of ----------- Class I and Class II medical devices, including without limitation, wound- management devices. Sellers are in compliance with all Regulations promulgated or enforceable by the FDA, including the FDA's guidelines relating to the manufacture, storage, packaging and distribution of medical products, including without limitation, guidelines governing "good manufacturing practices," "good laboratory practices" and promotional claims regarding health and personal care products. Neither of the Sellers have received any notice, citation, inquiry, warning letter, "483" letter, request for information or other communication from the FDA in respect of any of the Acquired Assets or the Business (collectively, "FDA Inquiries"), other than ------------- 30 set forth on Schedule 3.26, and all such FDA Inquiries have been resolved by ------------- Sellers to the satisfaction of the FDA. 3.27 Accuracy of Statements. Neither this Agreement nor any statement, ---------------------- list, certificate or other information, taken as a whole, furnished or to be furnished by or on behalf of Sellers to Purchaser in connection with this Agreement or any of the transactions contemplated hereby contains or will contain any untrue statement of a material fact regarding Sellers, the Acquired Assets, the Assumed Obligations or the business or operation of the Business, or omits or will omit to state a material fact necessary to make the statements regarding Sellers, the Acquired Assets, the Assumed Obligations or the business or operation of the Business contained herein or therein, in light of the circumstances in which they are made, not misleading. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants to Sellers as follows: 4.1 Due Incorporation, etc. Purchaser is a corporation duly organized, ---------------------- validly existing and in good standing under the laws of Delaware, with all requisite corporate power and authority (including necessary authorization to do business as a foreign corporation where required) to own, lease and operate its properties and to carry on its business as now being conducted. 4.2 Corporate Authority. Purchaser has all requisite corporate and other ------------------- power and authority to enter into this Agreement and to carry out its obligations under this Agreement and the Contracts and transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Contracts and transactions contemplated hereby and thereby by Purchaser will, by the Closing Date, have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement and such Contracts have been duly executed and delivered by Purchaser, to the extent a party thereto, and constitute the legal, valid and binding obligations of Purchaser, enforceable in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws from time to time in effect that affect creditors' rights generally, and by legal and equitable limitations on the availability of specific remedies. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provisions of the certificate of incorporation or by-laws of Purchaser or violate any provision of any Contract, Permit or Order to which Purchaser is a party or by which it or any of its properties is bound. 31 4.3 Consents. Subject to the satisfaction of the condition set forth in -------- Section 8.17 hereof, no notice to, filing with, authorization of, exemption by, or consent of any authority is required in order for Purchaser to consummate the transactions contemplated hereby. 4.4 Financing. Subject to the satisfaction of the condition set forth in --------- Section 8.17 hereof, Purchaser will have, at the Closing Date, sufficient funds available to it to pay the Purchase Price. Purchaser is, and after giving effect to the transactions contemplated hereby will be, solvent. 4.5 Brokers. Purchaser has not paid or become obligated to pay any fee or ------- commission to any broker, finder, investment banker or other intermediary in connection with the transactions contemplated by this Agreement. ARTICLE V COVENANTS OF SELLERS 5.1 Implementing Agreement. Sellers agree that from the date hereof to ---------------------- the Closing Date, they will use their reasonable best efforts to fulfill their obligations under the terms of this Agreement. 5.2 Cooperation of Sellers; Access to Information. Sellers agree that --------------------------------------------- from the date hereof to the Closing Date, Sellers shall give Purchaser and Purchaser's officers, directors, employees, agents or advisors (including without limitation, attorneys, accountants, consultants, bankers and financial advisors) (collectively, "Representatives") access during normal business hours, --------------- without unreasonable interference with business operations, to all of the facilities, properties, books, Contracts and records of Sellers relating to the Business and shall make Sellers' Representatives available to Purchaser as Purchaser shall from time to time reasonably request (upon reasonable notice). Purchaser and its Representatives will be furnished all information concerning the Business which Purchaser reasonably requests. Sellers shall cooperate with all reasonable requests of Purchaser and Purchaser's Representatives in connection with the consummation of the transactions contemplated hereby. 5.3 Preservation of Business. Sellers agree that from the date hereof ------------------------ until the Closing Date, Sellers shall use reasonable best efforts to (subject to the requirement of the Bankruptcy Code and applicable rules thereunder) (i) preserve intact the present business organization and personnel of the Business and (ii) preserve the present goodwill and relationships of Sellers with respect to the Business. 5.4 Conduct of the Business. Between the date of this Agreement and the ----------------------- Closing Date, Sellers (other than in connection with the Reorganization Plan, or, prior to the effective date of the Reorganization Plan, in the ordinary course of business as debtors in possession) shall do the following, unless Purchaser shall otherwise consent in writing: 32 (a) conduct the Business only in the ordinary course consistent with past practices, refrain from changing or introducing any method of management or operations except in the ordinary course of business and in a manner consistent with past practices; (b) refrain from making any purchase, sale or disposition of any asset or property of the Business, including any of the Acquired Assets, other than in the ordinary course of business, from purchasing or selling any capital asset costing more than $10,000 and from mortgaging, pledging, subjecting to a lien or otherwise encumbering (other than to Congress Financial Corporation (New England) ("Congress")), any of the properties or assets of the Business, including any of the Acquired Assets; (c) refrain from incurring or modifying any contingent liability as a guarantor or otherwise with respect to the obligations of others relating to the Business or the Acquired Assets; (d) refrain from making any change in its incorporation documents, by- laws or authorized or issued capital stock or from acquiring any securities issued by any other business organization other than short-term investments in the ordinary course of business; (e) refrain from (i) declaring, setting aside or paying any dividend, making any other distribution in respect of its capital stock, (ii) making any direct or indirect redemption, purchase or other acquisition of its capital stock or options with respect thereto, (iii) issuing, granting, awarding, selling, pledging, disposing of or encumbering or authorizing the issuance, grant, award, sale, pledge, disposition or encumbrance of any shares of, or securities convertible or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of its capital stock of any class thereof or (iv) entering into any agreement or commitment with respect to any of the foregoing; (f) refrain from prepaying any loans, including without limitation loans from its stockholders, officers or directors (if any), making any change in the borrowing arrangements of the Business (other than any refinancing of Sellers' revolving or term loan under existing credit agreements between Sellers and Congress or Bank One of Texas, N.A.) or modifying, amending or terminating any material contracts of the Business except in the ordinary course of business, or waiving, releasing or assigning any material rights or claims relating to the Business; (g) use its best efforts to prevent any material change with respect to its management and supervisory personnel or banking arrangements of the Business; (h) pay all Post-Petition Liabilities in the ordinary course of business in a manner consistent with past practice unless they are being disputed in good faith, and otherwise refrain from paying, discharging or satisfying any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise) relating to the Business, other than the payment, discharge or satisfaction in the ordinary course of business and in a 33 manner consistent with past practices of liabilities reflected or reserved against in the Business Financial Statements or incurred since the date of the balance sheet contained in the Business Financial Statements in the ordinary course of business and in a manner consistent with past practices (provided that it shall in no event prepay any indebtedness for borrowed money); (i) use its best efforts to have in effect and maintain at all times all insurance of the kind, in the amount and with the insurers set forth in Schedule 3.18 or equivalent insurance with any substitute insurers approved by - ------------- Purchaser; (j) refrain from materially changing accounting policies or procedures (including, without limitation, procedures with respect to the payment of accounts payable and collection of Accounts Receivable) relating to the Business or from making any tax election or settling or compromising any federal, state, local or foreign income tax liability; (k) refrain from entering into any executory agreement, commitment or undertaking to do any of the activities prohibited by the foregoing provisions; and (l) maintain all Restricted Cash in a segregated account and refrain from distributing, disposing of, pledging or otherwise encumbering or making any payment from or of all or any portion of such Restricted Cash. 5.5 Books and Records. Sellers agree that from the date hereof to the ----------------- Closing Date, Sellers shall maintain their books, accounts and records relating to the Business in the usual, regular and ordinary manner, and on a basis consistent with the Financial Statements and past practices. 5.6 Compensation. Other than in the ordinary course of business or as set ------------ forth on Schedule 5.6, (a) no increase or other material change shall be made in ------------ the compensation arrangements for any officer, director, employee, stockholder, consultant or agent of Sellers employed at or in connection with the business or operation of the Business from that in effect as of the date hereof, (b) no pension or profit sharing plan, or any other employee benefit arrangement, shall be in effect, except as listed on Schedule 3.11, and (c) Sellers shall not enter ------------- into any agreement, arrangement or understanding relating to the employment of any officer, director, consultant or agent of Sellers in connection with the business or operation of the Business. 5.7 Consents and Approvals. Sellers shall use their reasonable best ---------------------- efforts to obtain all consents and approvals to the performance of their obligations under this Agreement and the transactions contemplated hereby from each party to any of the Assumed Obligations, together with any other necessary consents and approvals to the performance of Sellers' obligations. Sellers shall make all filings, applications, statements and reports to all authorities which are required to be made prior to the Closing Date by or on behalf of Sellers or any of its affiliates pursuant to any applicable Regulation in connection with this Agreement and the transactions contemplated hereby. Sellers shall use their reasonable best efforts to obtain all required 34 consents and approvals (if any) to assign and transfer the Permits to Purchaser at Closing and, to the extent that one or more of the Permits are not transferable, to obtain replacements therefor. In the event that certain Permits are not transferable or replacements therefor are not obtainable on or before the Closing, but such Permits are transferable or replacements therefor are obtainable after the Closing, Sellers shall continue to use such reasonable best efforts in cooperation with Purchaser after the Closing as may be required to obtain all required consents and approvals to transfer, or obtain replacements for, such Permits after Closing and shall do all things necessary to give Purchaser the benefits which would be obtained under such Permits. In the event that any asset included in the Acquired Assets cannot be transferred to Purchaser as a result of the inability of Sellers to obtain on or prior to the Closing Date any necessary governmental approvals or third party consents, Purchaser and Sellers shall enter into appropriate arrangements (to the extent practicable) to provide Purchaser with the right to operate such asset with as minimal disruption to the conduct of Purchaser's business as possible and an appropriate portion of the Estimated Closing Purchase Price representative of the value of such assets shall be escrowed pending receipt of such approvals. All costs and expenses in connection with Seller's obligations under this Section will be borne by Sellers. 5.8 No Default. Except to the extent as may occur or may have occurred ---------- as a consequence of Sellers' compliance with the Bankruptcy Code and the applicable rules, Sellers shall not do any act or omit to do any act, or permit any act or omission to act, which will cause a material breach of any of the Assumed Obligations or any other Contract relating to the Business, the breach of which would have a Material Adverse Effect. 5.9 Compliance with Laws. Sellers shall make all commercially -------------------- reasonable efforts to comply with all Regulations applicable to the Business or the Acquired Assets (including, without limitation, all Environmental Laws) or as may be required for the valid and effective transfer and assignment of the Acquired Assets and the Assumed Obligations. 5.10 No Modifications. Sellers shall not modify, amend or otherwise ---------------- alter or change any of the material terms or provisions of any of the Assumed Obligations except to the extent permitted by Section 5.12 of this Agreement. 5.11 Bankruptcy Actions. ------------------ (a) As promptly as practicable after the date hereof, but in no event later than July 21, 1997 (the "Sale Procedures Motion Date"), Sellers --------------------------- will file with the Bankruptcy Court a motion, supporting papers and, in the form attached hereto as Exhibit 5.11, a form of Order (the "Sale Procedures ------------ --------------- Order"), seeking the Bankruptcy Court's approval nine days after the Sale - ------ Procedures Motion Date, or the next available Bankruptcy Court date thereafter, than August 15, 1997 (the "Sale Procedures Approval Date") of the terms of ----------------------------- but in no event later Article VII and XI of this Agreement and both Sellers' ----------- -- and Purchaser's observance and performance of such terms during the pendency of the Chapter 11 Cases. The Proposed Order of the Bankruptcy Court approving the aforementioned items shall be substantially in the form attached hereto as Schedule 5.11, and shall schedule a hearing for approval of the 363 Order - ------------- 35 and the 365 Order or, as applicable, the 1129 Order for thirty (30) days after the Sale Procedures Approval Date, or the next available Bankruptcy Court date thereafter, but no later than September 22, 1997, or such later date as Purchaser and Seller mutually shall agree (the "Outside Date"). ------------ (b) As promptly as practicable after the date hereof, but in no event later than July 21, 1997, Sellers will file with a Bankruptcy Court moving papers including supporting papers and forms of proposed orders, in form and substance reasonably satisfactory to Purchaser's counsel, seeking the Bankruptcy Court's approval either (i) of the 363 Order and the 365 Order, as evidence of the Bankruptcy Court's approval of this Agreement, Sellers' performance under this Agreement and the assumption and assignment of the Contracts related to the Business, and/or (ii) at Sellers election, an order of the Bankruptcy Court under Section 1129 of the Bankruptcy Code providing rights and protections to Purchaser and Cape Ann, substantially identical to those provided for in the 363 Order and the 365 Order, upon the filing of and hearings on any amended plan and amended disclosure statement proposed by Sellers, and upon due notice pursuant to Rule 2002(b) of the Federal Rules of Bankruptcy Procedure (the "1129 Order"). ---------- (c) As promptly as practicable, Sellers will provide Purchaser with copies of all motions, applications, and supporting papers prepared by Sellers in connection with this Agreement (including forms of Orders and notices to interested parties) prior to the filing thereof in the Chapter 11 Cases. 5.12 Approval of Certain Contracts. Without the prior consent of ----------------------------- Purchaser, other than in the ordinary course of business consistent with past practices, Sellers shall not enter into any Contract relating to the Business which either (i) requires a payment in excess of, or a series of payments which in the aggregate exceed, $25,000 or (ii) has a term of, or requires the performance of any obligations by Sellers or their assignee over a period in excess of, one year, unless it its terminable by Sellers and their assignee without penalty or premium upon not more than 30 days' notice. 5.13 Referral of Business Opportunities. From and after the Closing ---------------------------------- Date, Sellers will refer to Purchaser all incoming business inquiries, customer orders and other matters related to the Business, the Acquired Assets and the Assumed Obligations including, without limitation, all customer orders received by Sellers via computer or other automated inventory control systems, and will timely deliver to Purchaser such customer orders in printed form for use by Purchaser. To the extent customer orders are delivered to third party electronic data interchange providers, such providers will be instructed to transmit such orders to Purchaser or Purchaser's providers. Electronic delivery, if used, shall be by such method as shall be mutually agreed. 5.14 Public Announcements. Prior to the Closing Date, without the prior -------------------- written approval of the Purchaser or the Sellers, as the case may be, which approval shall not be unreasonably withheld, no party hereto will issue, 36 or permit any agent or affiliate of it to issue, any press releases or otherwise make, or cause any agent or affiliate of it to make, any public statements with respect to this Agreement and the transactions contemplated hereby, except as contemplated by this Agreement or where such release or statement is required by law or under the rules and regulations of the Nasdaq Stock Market (or any national stock exchange on which the shares of such party are listed). In each case to which such exception applies, the releasing party will allow the other parties to review and comment on such release or statement prior to releasing or make the same. 5.15 Interim Financial Information. Sellers will supply Purchaser with ----------------------------- the Interim Business Financial Statements through the Closing Date as promptly as practicable following the close of the period to which they relate. 5.16 No Solicitation or Negotiation. Except as provided in Section 7.1, ------------------------------ each of the Section 5.16 Parties represents and warrants that it has terminated all discussions and negotiations relating to, or that may reasonably be expected to lead to, any Acquisition Proposal (as defined below). From and after the date hereof until the termination of this Agreement, none of the Section 5.16 Parties shall, nor shall any of them authorize or permit any of their respective officers, directors, employees, agents, advisors or representatives to, directly or indirectly, except in compliance with the Sale Procedures Order, (i) solicit, initiate or encourage the submission of, any inquiries, proposals or offers from any Person or entity relating to an Acquisition Proposal, (ii) enter into any Contract with respect to any Acquisition Proposal, (iii) enter into, engage in, or participate or continue in, any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could lead to, any Acquisition Proposal, provided, however, that Sellers may respond to inquiries from any person seeking to make an Acquisition Proposal pursuant to the Sale Procedures Order, or (iv) respond to any unsolicited inquiry or proposal made by any Person or entity that constitutes, or could lead to, any Acquisition Proposal, provided, however, that from and after the entry of the Sale Procedures Order, the Section 5.16 Parties may provide necessary information to any Person who has submitted any unsolicited inquiry or proposal that constitutes, or could lead to any Acquisition Proposal, and may provide such notices as the Bankruptcy Court may direct in connection with the actions contemplated by Sections 5.11, 7.1 and 11.2 hereof. In the event that any of the Section 5.16 Parties receives any inquiry, proposal or offer in any way relating to an Acquisition Proposal, such Section 5.16 Party shall promptly notify Purchaser thereof, the terms and conditions thereof and the identity of the Person or entity making such inquiry, proposal or offer. As used herein, the term "Acquisition Proposal" shall mean any proposed or -------------------- actual transaction or series of transactions of any of the types specified below between Sellers and one or more Third Parties (other than a stockholder or creditor of Sellers acting in its capacity as a stockholder or creditor, respectively, of Sellers pursuant to Sellers' reorganization plan to be filed with the Bankruptcy Court on July 21, 1997, as it may be amended from time to time to 37 provide for substantially similar treatment with respect to the Acquired Assets (the "Reorganization Plan"): (i) any merger, consolidation or similar ------------------- transaction involving all or substantially all of the Business or the Acquired Assets, (ii) any sale, lease or other disposition, directly or indirectly, by merger, consolidation, share exchange or otherwise, of all or substantially all of the Business or the Acquired Assets (except with respect to dispositions of Acquired Assets permitted by Section 5.4 hereof), (iii) any issue, sale or other disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing 5% or more of the votes attached to the outstanding securities of AWC or Weaver, (iv) any transaction in which any person shall acquire beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange Act), or the right to acquire beneficial ownership, or any "group" (as such term is defined under the Exchange Act) shall have been formed which beneficially owns or has the right to acquire beneficial ownership of, 5% or more of the outstanding shares of AWC, (v) any recapitalization, restructuring, liquidation, dissolution, or other similar type of transaction with respect to AWC or Weaver, or (vi) any transaction which is similar in form, substance or purpose to any of the foregoing transactions; provided, however, that the term "Acquisition Proposal" shall not include the transactions contemplated by this Agreement. 5.17 Notice of Developments. Sellers will give prompt written notice to ---------------------- Purchaser of any development that could reasonably be expected to have a Material Adverse Effect or that would affect the ability of Sellers to consummate the transactions contemplated by this Agreement. No disclosure by Sellers pursuant to this Section 5.17, however, shall be deemed to amend or supplement the Disclosure Schedule or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant. 5.18 Break-up Fee and Expenses. In connection with the bankruptcy ------------------------- actions required by Section 5.11 hereof, Sellers will advocate the approval of the Bankruptcy Court of the payment of the Break-up Fee and Expenses and the right of first refusal granted to Purchaser pursuant to the terms and provisions of Article VII hereof. ----------- 5.19 Compliance with WARN Act. Sellers will comply with all applicable ------------------------ provisions of the WARN Act and the regulations promulgated thereunder. Sellers expressly assume all obligations and liabilities under the WARN Act that may arise out of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, including, without limitation, Purchaser's obligation, if any, to deliver notices to third parties. Notwithstanding the foregoing, Sellers shall have no liability for actions or omissions made by Purchaser after the Closing Date. 5.20 Environmental Responses. From and after the Closing Date, Sellers ----------------------- will, at their sole cost and expense, respond to any and all inquiries and/or other correspondence from any governmental, regulatory or administrative body, agency, subdivision or authority, any court or judicial authority, any public, private or industry regulatory authority, whether Federal, state or local or otherwise, or any Person lawfully empowered by any of the foregoing 38 to enforce or seek compliance with any Regulation, including without limitation, the U.S. Environmental Protection Agency, which relate in any manner to Sellers' direct or indirect handling, transportation or disposal of any Contaminants at, inter alia, the Barceloneta Landfill located in Barceloneta, Puerto Rico, or - ----- ---- any of the Owned Real Property. 5.21 Lease Amendment. Sellers shall use their reasonable best efforts to --------------- assist Purchaser in its efforts to enter into an amendment to the Lease on or prior to August 1, 1997 on terms and conditions reasonably satisfactory to Purchaser (the "Lease Amendment"). 5.22 Time-Warner/United Features License Assignments. Sellers shall use ----------------------------------------------- their reasonable best efforts to effect the assignment of the Time-Warner/United Features Licenses to Purchaser on terms and conditions substantially similar to the terms and conditions currently existing under the Time-Warner/United Features Licenses (the "Time-Warner/United Features License Assignments") and ----------------------------------------------- shall use their reasonable best efforts to effect the sale, assignment, transfer and delivery to Purchaser of all of the assets described in Section 1.1(l) containing any of the Time-Warner/United Features Characters, such that Purchaser shall acquire all right, title and interest in and to such assets, free and clear of any Liens or other encumbrances, other than those which may arise under the Time-Warner/United Features Licenses and the Time-Warner/United Features License Assignments. 5.23 Capitalized Lease Obligations. Sellers shall pay off and discharge ----------------------------- in full all obligations under all capitalized leases set forth on Schedule 5.23. ------------- 5.24 Slow Moving Inventory Matters. Sellers shall prepare and deliver to ----------------------------- Purchaser upon Purchaser's reasonable request, and Purchaser shall cooperate with Sellers in that endeavor, Appendix A listing New SKUs/Items. ---------- 5.25 Exchange Act Filings. In connection with any filing to be made by -------------------- Purchaser under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (collectively, the "Federal Securities Laws"), ----------------------- before or after the Closing Date, Sellers shall (i) to the extent not already in Purchaser's possession, provide Purchaser such financial and other information and documents relating to the Business as may be reasonably available to Sellers as Purchaser may request, and (ii) generally cooperate with Purchaser and its Representatives in connection therewith; provided, however, that in the event that Purchaser determines, in its sole discretion after consulting with its Representatives and Sellers and their Representatives, that the provisions of the Federal Securities Laws require inclusion in any such filing audited financial information of the Business relating to the purchase of the Business by Purchaser hereunder that is not presently available to Sellers, Purchaser and Sellers shall mutually select a national accounting firm to assist Purchaser and Sellers in the preparation and filing of such audited financial information, and the fees and expenses of such firm shall be shared equally by Purchaser and Sellers, provided that in no event shall Sellers be obligated to pay more than $50,000 of such fees and expenses. 39 ARTICLE VI COVENANTS OF PURCHASER 6.1 Implementing Agreement. Purchaser agrees that from the date hereof to ---------------------- the Closing Date, it will use its reasonable efforts to secure the financing contemplated by Section 8.17 and fulfill its obligations under the terms of this Agreement. 6.2 Consents and Approvals. Purchaser shall use its reasonable best ---------------------- efforts to obtain all consents and approvals to the performance of its obligations under this Agreement and the transactions contemplated hereby. Purchaser shall make all filings, applications, statements and reports to all authorities which are required to be made prior to the Closing Date by or on behalf of Purchaser or any of its affiliates pursuant to any applicable Regulation in connection with this Agreement and the transactions contemplated hereby. 6.3 Access to Information. Purchaser agrees that from the Closing Date --------------------- until the period set forth below, Purchaser shall give Sellers and Sellers' representatives access during normal business hours, without unreasonable interference with business operations, to all of the books, records and personnel of Purchaser relating to the Business which were transferred to Purchaser pursuant to the terms of this Agreement for the purpose of winding up Sellers' business and affairs; provided, that prior to obtaining access to such books, records and personnel Sellers deliver to Purchaser a written statement to the effect that such information will only be used by Sellers and/or Sellers' representatives (i) to perform Sellers' obligations under Section 5.20, or (ii) to resolve any dispute Seller may have with a third party, including Purchaser, and Sellers agree to pay for all reasonable costs incurred by Purchaser in connection with its compliance with this Section 6.3. Purchaser shall permit Sellers and Sellers' representatives such access for a period of three (3) years after the Closing Date except for information with respect to (i) employee benefit matters, tax matters and product liability matters, for which access shall be permitted until the expiration of the applicable statute of limitations and (ii) environmental matters, for which access shall be permitted for a period of six (6) years after the Closing Date; provided each such period shall be extended for so long as any dispute subject to Article XII is unresolved. ----------- 6.4 Assumed Obligations. Subject to Section 1.4 hereof and the ------------------- consummation of the transactions contemplated by Article X hereof, Purchaser --------- agrees to assume and perform the Assumed Obligations. 6.5 Payment of Purchase Price. Subject to the consummation of the ------------------------- transactions contemplated by Article X hereof, Purchaser agrees to pay the --------- Estimated Closing Purchase Price on the Closing Date. 6.6 Silent Nite/Airmax Matters. Purchaser shall, on or prior to the -------------------------- Closing, provide written notice to Sellers as to whether Purchaser plans to manufacture, produce, market or sell any of the products known as Silent Nite or Airmax or any other nasal dilating 40 products of the same type as those manufactured, produced, marketed or sold in the Business by Sellers on or prior to the Closing. 6.7 Accounts Receivables. From and after the Closing Date until the date -------------------- which is 150 days after the Closing Date (the "Outside Collection Date"), ----------------------- Purchaser shall use reasonable efforts to pursue the collection of all Accounts Receivables, but shall in no event be required to resort to litigation with respect to such collection. Promptly following the Outside Collection Date, Purchaser shall execute and deliver to Sellers such documentation as is necessary to assign to Sellers any Accounts Receivables that remain uncollected as of the Outside Collection Date. From and after the Outside Collection Date, Purchaser shall have no obligation to pursue collection of Accounts Receivables. 6.8 Lease Amendment. Purchaser shall use its reasonable best efforts to --------------- enter into the Lease Amendment on or prior to August 1, 1997. ARTICLE VII RIGHT OF FIRST REFUSAL 7.1 Overbid Procedures and Right of First Refusal. A Third Party --------------------------------------------- interested in acquiring the assets of the Business may submit to Sellers an Acquisition Proposal in accordance with the provisions of the Sale Procedures Order and this Section 7.1. Such Acquisition Proposal must comply with the Sale Procedures Order, which shall provide, among other things, that parties intending to submit Acquisition Proposals must do so not less than five (5) days prior to the hearing to approve this Agreement, whether such hearing is held in connection with the confirmation hearing in the Chapter 11 Cases, or otherwise (the "363 Hearing"). A Third Party's failure to submit a qualified Acquisition ----------- Proposal shall disqualify that Third Party from bidding at any auction for the Acquired Assets and the Assumed Obligations or at the 363 Hearing. Upon receipt of an Acquisition Proposal, Sellers will promptly notify Purchaser and indicate in such notice the identity of the offeror and a complete and accurate description of the material terms thereof. Two (2) hours prior to the time of the 363 Hearing (or at 4:00 P.M., Eastern Time, on the day preceding the date of the 363 Hearing in the event that the 363 Hearing is scheduled for earlier than 11:00 A.M. Eastern Time), Purchaser and all Third Parties submitting Acquisition Proposals shall attend an overbid auction to be conducted by Sellers at the law offices of Young, Conaway, Stargatt & Taylor, 11th Floor, Rodney Square North, Wilmington, Delaware 19801 (the "Overbid Auction"). Notwithstanding the --------------- foregoing, no Overbid Auction shall take place if no Third Party has submitted timely an Acquisition Proposal which complies with the terms of this Agreement and which in Sellers' sole and absolute discretion (but not in any manner inconsistent with the Bankruptcy Court proceedings) is superior to the Purchaser's Acquisition Proposal. Only Third Parties that have made an Acquisition Proposal may attend the Overbid Auction for the purpose of improving upon their respective Acquisition Proposals. Purchaser also may attend the Overbid Auction at which it may, in its sole and absolute discretion, improve the terms of 41 this Agreement (a "Topping Offer"). Purchaser and any Third Party ------------- submitting an Acquisition Proposal may improve upon their respective offers to Sellers at any time prior to the conclusion of the Overbid Auction, in increments of at least $100,000 in consideration. The Overbid Auction shall be deemed concluded in Sellers' discretion, and in any event no later than the time scheduled for the commencement of the 363 Hearing. Neither Purchaser nor any Third Party shall be entitled to improve its Acquisition Proposal after the conclusion of the Overbid Auction without the Bankruptcy Court's express approval. If upon the conclusion of the Overbid Auction, Purchaser has failed to make a Topping Offer or a Topping Offer which Sellers determine in their sole and absolute discretion (but not in any manner inconsistent with the Bankruptcy Court proceedings) to have been equal to or better than any other Acquisition Proposal as may have been amended prior to the conclusion of the Overbid Auction (taking into account any Break-up Fee and reimbursement of Expenses), Sellers may enter into a definitive agreement with the successful overbidding Third Party, and Purchaser will be entitled to payment of the Break-up Fee, and the Expenses shall be promptly reimbursed subject to the terms and conditions set forth in Section 11.2 of this Agreement. In the event Sellers determine in their sole and absolute discretion (but not in any manner inconsistent with the Bankruptcy Court proceedings) that the last offer submitted by Purchaser is equal to or better than the last offer submitted by all Third Parties at the Overbid Auction (taking into account any Break-up Fee and Expenses), then within three (3) business days following the conclusion of the Overbid Auction, Purchaser and Sellers shall enter into an amendment to this Agreement to reflect Sellers' acceptance of Purchaser's Topping Offer. If necessary, Purchaser and Sellers shall consent to a brief continuance of the Outside Date and the 363 Hearing (without any further right to overbidding by any third party) in order to complete the documentation of a successful Topping Offer. Notwithstanding anything in this Agreement to the contrary, Sellers may only enter into an Alternative Transaction which (i) is in writing, (ii) provides for the acquisition of all or substantially all of the assets of the Business, but in no event less than the Acquired Assets, (iii) is for a consideration of at least $41,800,000, subject to adjustment as provided in Section 2.1 and Section 2.2, (iv) contains terms and conditions no less favorable to Sellers than the terms and conditions contained in this Agreement, and assumes at least the Assumed Obligations, (v) provides for a closing date no later than September 30, 1997, (vi) includes evidence satisfactory to Sellers in their sole and absolute discretion (but not in any manner inconsistent with the Bankruptcy Court proceedings) establishing that the Third Party is financially capable of timely performing in the event it is the successful bidder and (vii) includes a minimum cash deposit in an amount of at least $400,000 (an additional deposit may be requested by the Sellers in their sole discretion), which amount shall be forfeited if the Third Party both (x) is the successful overbidder at the 363 Hearing and (y) fails to consummate a transaction with the Sellers on or before September 30, 1997. In addition, prior to disclosing information not prohibited from being disclosed by Sellers pursuant to the terms and conditions of this Agreement or otherwise entering into any negotiations with a Third Party not prohibited pursuant to the terms and conditions of this Agreement, Sellers shall require such Third Party to execute a confidentiality agreement substantially similar to the one executed by Purchaser. 42 7.2 Survival. Following the execution of any amendments to this Agreement -------- pursuant to Section 7.1 above, unless specifically amended in such amendments, the provisions of this Article VII shall remain in effect and the receipt by ----------- Sellers of any other offers, proposals or inquiries relating to any Acquisition Proposal shall be subject to the provisions of this Article VII. ----------- ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER The obligations of Purchaser under this Agreement are, at the option of Purchaser, subject to satisfaction of the following conditions precedent on or before the Closing Date. 8.1 Warranties True as of Both Present Date and Closing Date. Each of the -------------------------------------------------------- representations and warranties of Sellers contained herein shall be true and correct on and as of the date of this Agreement, and shall also be true and correct in all material respects (except for such changes as are contemplated by the terms of this Agreement) on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date. 8.2 Compliance with Agreement and Covenants; Certificates. Sellers shall, ----------------------------------------------------- in all material respects, have performed all of their respective obligations and agreements and complied with all of their covenants contained in this Agreement to be performed and complied with by them on or prior to the Closing Date; and Sellers shall have delivered to Purchaser certificates of good standing for each of Sellers and a written statement, dated as of the Closing Date, from an authorized officer of each of AWC and Weaver as to compliance with Section 8.1 and this Section 8.2. 8.3 Bankruptcy Conditions. --------------------- (a) (i) The 363 Order and the 365 Order and/or (ii) an 1129 Order shall have been entered by the Bankruptcy Court in accordance with this Agreement. Any motion for rehearing or reconsideration or the 363 Order, the 365 Order or the 1129 Order shall have been denied or withdrawn. The time allowed for appeals of the 363 Order, the 365 Order or the 1129 Order shall have expired without any appeal having been taken or, if the 363 Order, the 365 Order or the 1129 Order shall have been appealed, no stay shall be in effect. (b) Nothing in this Section 8.3, or any other section of this Agreement, shall preclude Sellers and Purchaser from consummating the transactions contemplated herein if Purchaser, in its sole discretion, waives the requirement that the 363 Order, the 365 Order, the 1129 Order or any other order be final orders. No notice of such waiver of this or any other condition to Closing need to be given except to Sellers or Purchaser, as explicitly required in this Agreement, it being the intention of the parties hereto that Purchaser shall be entitled to, and is not waiving, the protection of Section 363(m), or as the case may be Section 1129 of the 43 Bankruptcy Code, the mootness doctrine and any similar statute or body of law if the closing occurs in the absence of final orders. 8.4 [Intentionally Omitted]. 8.5 No Material Adverse Change. There shall not have occurred a -------------------------- Material Adverse Change, and no event shall have occurred which, in the reasonable, good faith judgment of Purchaser may have a Material Adverse Effect. Sellers shall have delivered to Purchaser a written statement, dated as of the Closing Date, from an authorized officer of each of AWC and Weaver to the effect that, to the best knowledge of such officers after due inquiry, there has not occurred a Material Adverse Change, and no event has occurred which, in the reasonable, good faith judgment of Sellers may have a Material Adverse Effect. 8.6 Business and Legal Review. Purchaser shall have completed its own ------------------------- business, legal, financial and accounting review of Sellers and the Business, and their operations, finances, records and affairs, which review shall be satisfactory in all material respects to Purchaser in its sole discretion. Notwithstanding anything set forth in this Agreement to the contrary, Purchaser's rights under this Section 8.6 shall terminate on, and have no further force and effect subsequent to, August 15, 1997. Purchaser shall have the right to terminate this Agreement pursuant to this Section 8.6 by delivering written notice of such effect to AWC on or prior to August 15, 1997. 8.7 Actions or Proceedings. No action or proceeding shall have been ---------------------- instituted or threatened by or before any governmental or judicial authority which would enjoin, restrain or prohibit, or might result in substantial Losses in respect of, this Agreement or the complete consummation of the transactions as contemplated by this Agreement, including, among other things, the integration of the operation of the Business with those of Purchaser and its affiliates or which would, in the reasonable judgment of Purchaser, make it inadvisable to consummate such transactions, and no court order shall have been entered in any action or proceeding instituted by any party which enjoins, restrains or prohibits this Agreement or the complete consummation of the transactions as contemplated by this Agreement including, among other things, the integration of the operation of the Business with those of Purchaser and its affiliates. 8.8 Other Agreements. Each of the Sellers' Escrow Agreement and Lease ---------------- Assignment Documents shall have been fully executed and delivered by the parties and will be in full force and effect. 8.9 Physical Count. Sellers and Purchaser and/or their respective -------------- Representatives shall have completed to Purchaser's reasonable satisfaction a complete and accurate physical count and inspection of the Acquired Assets. 8.10 Other Documents. Sellers will furnish Purchaser with such other and --------------- further documents and certificates, including certificates of Sellers' officers and others, as Purchaser 44 shall reasonably request to evidence compliance with the conditions set forth in this Agreement. 8.11 Equipment and Vehicles Title. Sellers shall have discharged, ---------------------------- terminated or otherwise removed to the satisfaction of Purchaser all leases (other than those assumed by Purchaser), conditional sales contracts or any other type of rental arrangements relating in any manner to the Equipment and Vehicles. 8.12 Bankruptcy Orders. The Sale Procedures Order, the 363 Order, the ----------------- 365 Order and/or the provisions of the 1129 Order shall be substantially in the forms set forth in Exhibit 5.11 and Exhibit 7.1(a), respectively or otherwise ------------ -------------- reasonably acceptable to Purchaser. 8.13 Consents and Approvals; Permits. Sellers shall have delivered (a) ------------------------------- consents and approvals (which may be included in or covered by binding orders under the 365 Order and/or the 1129 Order) in form and substance to the reasonable satisfaction of Purchaser, from (i) each party to any of the Assumed Obligations, (ii) any Authority whose consent and approval is required for the consummation of the transactions contemplated hereby, including but not limited to, the transfer and assignment to Purchaser of the Permits, and (iii) any lenders, lessors, vendors, vendees or other persons or entities whose consent or approval is required for this transaction, and (b) certified resolutions of each Sellers' Board of Directors and the sole stockholder of Weaver. 8.14 Non-Compete and Confidentiality Obligations. On or prior to July ------------------------------------------- 30, 1997, the Article XIV Parties other than Sellers shall have executed this Agreement with respect to their rights and obligations under Article XIV only and shall have delivered this Agreement, as so executed, to Purchaser. 8.15 Lease Amendment. On or before August 1, 1997, Purchaser shall have --------------- entered into the Lease Amendment on terms and conditions reasonably satisfactory to Purchaser. Notwithstanding the foregoing, in the event that Purchaser has not entered into the Lease Amendment on terms and conditions reasonably satisfactory to Purchaser on or prior to August 1, 1997, this Agreement shall terminate pursuant to clause (ii) of the last sentence of Section 11.1, unless Purchaser determines to extend the period of time during which Purchaser shall have entered into the Lease Amendment. 8.16 Time-Warner/United Features License Assignments. Sellers shall have ----------------------------------------------- entered into the Time-Warner/United Features License Assignments to license on terms substantially similar to those terms currently existing under the Time- Warner/United Features Licenses and shall have effected the sale, assignment, transfer and delivery to Purchaser of all of the assets described in Section 1.1(l) containing any of the Time-Warner/United Features Characters, such that Purchaser shall acquire all right, title and interest in and to such assets, free and clear of any Liens or other encumbrances, other than those which may arise under the Time-Warner/United Features License and the Time-Warner/United Features License Assignments. 45 8.17 Financing. On or before August 1, 1997, Purchaser shall have --------- received a commitment letter of its lender or other bank or financial institution satisfactory to Purchaser to provide debt financing on terms and conditions satisfactory to Purchaser. Purchaser shall, on or before August 1, 1997, notify Sellers of the receipt thereof and whether any notice to, filing with, authorization of, exemption by, or consent of any authority is required in order for Purchaser to consummate the transactions contemplated hereby in connection with receipt of the financing commitment. Notwithstanding the foregoing, in the event that Purchaser has not received such a commitment on or before August 1, 1997, this Agreement shall terminate pursuant to clause (i) of the last sentence of Section 11.1, unless Purchaser and Sellers mutually agree in writing to extend the period of time during which Purchaser shall obtain such a commitment letter. 8.18 Capitalized Lease Obligations. Concurrently with the Closing, ----------------------------- Sellers shall have paid off and discharged in full all obligations under all capitalized leases set forth on Schedule 5.23. ------------- 8.19 Weaver Environmental Matters. Purchaser shall be reasonably ---------------------------- satisfied, as to Sellers' compliance with Sellers' obligations under Section 13.2 that are to be performed prior to the Closing, and any remediation agreement entered into or to be entered into by Sellers' or other approval obtained or to be obtained by Sellers in connection therewith shall be reasonably satisfactory to Purchaser. ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS The obligations of Sellers under this Agreement are, at the option of Sellers, subject to the satisfaction of the following conditions precedent on or before the Closing Date: 9.1 Warranties True as of Both Present Date and Closing Date. The -------------------------------------------------------- representations and warranties of Purchaser contained herein shall be true and correct on and as of the date of this Agreement, and shall also be true in all material respects (except for such changes as are contemplated by the terms of this Agreement) on and as of the Closing Date with the same force and effect as though made by Purchaser on and as of the Closing Date. 9.2 Compliance with Agreements and Covenants; Certificates. Purchaser ------------------------------------------------------ shall, in all material respects, have performed all obligations and agreements and complied with all covenants contained in this Agreement, to be performed and complied with by it on or prior to the Closing Date; and Purchaser shall have delivered to Sellers a written statement, dated as of the Closing Date, from an authorized officer of Purchaser as to compliance, to the best knowledge of such officer after due inquiry with Section 9.1 and this Section 9.2. 46 9.3 Actions or Proceedings. No action or proceeding by any authority ---------------------- shall have been instituted or threatened by or before any governmental or judicial authority which would enjoin, restrain or prohibit, or might result in substantial Losses in respect of, this Agreement or the complete consummation of the transactions as contemplated by this Agreement (including any failure to obtain any required approval from the NJDEP with respect to the matters addressed in Section 13.2 hereof), or which would, in the reasonable judgment of Sellers, make it inadvisable to consummate such transactions, and no court order shall have been entered in any action or proceeding instituted by any party which enjoins, restrains, or prohibits this Agreement or the complete consummation of the transactions as contemplated by this Agreement. 9.4 Bankruptcy Conditions. --------------------- (a) Either (i) the 363 Order and 365 Order and/or (ii) the 1129 Order shall have been entered by the Bankruptcy Court. Any motion for rehearing or reconsideration of the 363 Order, the 365 Order or the 1129 Order shall have been denied or withdrawn. The time allowed for appeals of the 363 Order, the 365 Order or the 1129 Order shall have expired without any appeal having been taken or, if the 363 Order, the 365 Order or the 1129 Order shall have been appealed, no stay shall be in effect. (b) Nothing in this Section 9.4, or any other section of this Agreement, shall preclude Sellers and Purchaser from consummating the transactions contemplated herein if Purchaser, in its sole discretion, waives the requirement that the 363 Order, the 365 Order, the 1129 Order or any other order be final orders. No notice of such waiver of this or any other condition to Closing need to be given except to Sellers or Purchaser, as explicitly required in this Agreement, it being the intention of the parties hereto that Purchaser shall be entitled to, and is not waiving, the protection of Section 363(m), or as the case may be Section 1129 of the Bankruptcy Code, the mootness doctrine and any similar statute or body of law if the closing occurs in the absence of final orders. 9.5 Other Documents. Purchaser will furnish Sellers with such other and --------------- further documents and certificates, including certificates of Purchaser's officers and others, as Sellers shall reasonably request to evidence compliance by Purchaser with its conditions set forth in this Agreement. ARTICLE X CLOSING 10.1 Closing. The Closing shall take place at the offices of Goodwin, ------- Procter & Hoar LLP, Exchange Place, Boston, Massachusetts at 10:00 A.M. Eastern Time on the fifth business day after the conditions set forth in Articles VIII ------------- and IX hereof have been satisfied or waived by the party entitled to do so, or -- such other place or date as mutually agreed by the parties. 47 10.2 Deliveries by Sellers. At the Closing, Sellers will deliver the --------------------- following to Purchaser: (a) such deeds, bills of sale, assignments, releases, consents to assignments and other instruments of sale, conveyance, assignment, assumption and transfer satisfactory in form and in substance to Purchaser and its counsel as may reasonably be required in order to convey to Purchaser all of Sellers' rights, title and interest in and to the Acquired Assets and to assign to Purchaser all of the Assumed Obligations in the manner provided for in this Agreement; (b) originals of, and duly executed assignments of, all of the following: (i) the Lease; (ii) the Sellers' Purchase Orders; and (iii) the Customer Orders; (c) copies (or if available, originals) of all of the Permits related to the Acquired Assets, the Assumed Obligations and the demised premises under the Lease, and reasonably necessary for the Business as conducted by Purchaser and Closing; (d) title for each of the Equipment and Vehicles, duly endorsed for transfer by sellers; (e) the written statements referred to in Section 8.2 and Section 8.5; (f) the opinion referred to in Section 8.4; (g) executed trademark assignments; (h) executed patent assignments; (i) originals of the Lease Assignment Documents and the Sellers' Escrow Agreement; (j) a receipt for the Estimated Closing Purchase Price paid to Sellers at the Closing; (k) all such documents as shall be required by the title insurance company selected by Purchaser with respect to the Owned Real Property; and (l) such other agreements, certificates and instruments as Purchaser shall reasonably request to consummate the transactions contemplated by this Agreement. 10.3 Deliveries by Purchaser. At the Closing, Purchaser will deliver the ----------------------- following to Sellers: (a) the Estimated Closing Purchase Price payable to Sellers at the closing pursuant to Section 2.1; (b) the statement referred to in Section 9.2; (c) the opinion referred to in Section 9.5; and (d) such other agreements, certificates and instruments as Sellers shall reasonably request to consummate the transactions contemplated by this Agreement. ARTICLE XI TERMINATION 11.1 Termination. This Agreement may be terminated at any time on or ----------- prior to the Closing Date: (a) by the written agreement of Purchaser and Sellers; (b) by Purchaser or Sellers if there shall be in effect a final nonappealable Order restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; (c) by either Purchaser or Sellers (provided that the terminating party is not then in material breach of any representation, warranty, covenants or other agreement contained herein) if there shall have been a material breach of any of the representations or warranties set forth in this Agreement on the part of the other party and such party has not waived such failure of satisfaction; (d) by either Purchaser or Sellers (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach of any of the covenants or agreements set forth in this Agreement on the part of the other party, which breach continues for more than 15 days after written notice by the terminating party, and such party has not waived such failure of satisfaction; (e) by Purchaser at any time during or after completion of its due diligence investigation, but in no 48 event subsequent to the date of August 15, 1997, in the event that it determines, in its sole discretion, that the transactions contemplated by this Agreement are inadvisable for any reason; (f) by Purchaser or Sellers, if the Bankruptcy Court has not entered the Sale Procedures Order by August 15, 1997; (g) by Purchaser or Sellers, if (i) the 363 Order and the 365 Order, or, in the alternative, (ii) the 1129 Order, has not been entered by September 30, 1997; (h) by Purchaser or Sellers, if the Closing Date shall not have occurred on or prior to October 10, 1997, or such later date as may be mutually agreed to in writing by Purchaser and Sellers; (i) by Purchaser or Sellers, if (A) a qualified Acquisition Proposal (as provided in the Sale Procedures Order) has been timely submitted, and (B) Purchaser (x) has not delivered a Topping Offer to Sellers at any time prior to the deadline set forth in the Sale Procedures Order or (y) has delivered a Topping Offer to Sellers at any time prior to the deadline set forth in the Sale Procedures Order which Sellers, in the case with respect to clause (y), have determined, in their sole and absolute discretion, not to be equal to or better than all Acquisition Proposals; (j) by Purchaser if the Bankruptcy Court fails to approve the Break-up Fee and Expenses as part of the Sale Procedures Order by August 15, 1997; or (k) by Purchaser or Sellers if it or they shall have reasonably determined that it has become apparent that one or more of the conditions set forth in Article VIII (other than Section 8.6, ------------ Section 8.15 and Section 8.17) or Article IX, respectively, cannot be fulfilled or satisfied on or prior to the date specified for fulfillment thereof. Notwithstanding the foregoing, this Agreement shall terminate if (i) Purchaser has failed to notify Sellers of the receipt by Purchaser of the commitment letter referred to in Section 8.17 within the time period specified in said section, or (ii) Purchaser has not entered into the Lease Amendment pursuant to Section 8.15 within the time period specified in said section. 11.2 Break-up Fee. In the event that this Agreement is terminated by ------------ Purchaser pursuant to Section 11.1(i), then Sellers shall pay to Purchaser promptly, but in no event more than 45 days following the date of the termination event, by wire transfer of immediately available funds, to such account as Purchaser shall designate, the Break-up Fee. In the event this Agreement is terminated pursuant to any of Section 11.1(a) through Section 11.1(d), Section 11.1(f) through Section 11.1(h) or Section 11.1(k) (other than as a result of a material breach by Purchaser of its obligations, representations, warranties or other agreements hereunder, which breach has continued for more than 15 days after written notice to Purchaser (provided such breach was not caused by or did not result from a breach of this Agreement by either of the Sellers), then Sellers shall pay to Purchaser, Chilmark and Cape Ann promptly, but in no event more than 15 days following the date of the termination event, by wire transfer of immediately available funds, to such account as Purchaser shall designate, all of Purchaser's, Chilmark's and Cape Ann's actual expenses based on reasonably detailed documentation up to an aggregate amount of $300,000 incurred by them in connection with the transactions contemplated by this Agreement ("Expenses"). If at any time after the date of any termination of this Agreement pursuant to Section 11.1 hereof (other than pursuant to Section 11.1(e) or the last sentence of Section 11.1 or as a result of a material breach of Purchaser's obligations, representations, warranties or other agreements hereunder, which breach has continued for more than 15 days after written notice to Purchaser (provided such breach was not caused by or did not result from a breach of this Agreement by either of the Sellers)), and 49 assuming Purchaser has not previously received the Break-up Fee, and Sellers endorse or accept an Alternative Transaction that is consummated within one year from the date of termination of this Agreement, then simultaneous with such consummation, Sellers shall pay the Break-up Fee and reimburse the Expenses. In any event, the total amount of fees and expenses paid pursuant to this Section 11.2 shall not exceed $1,300,000. Payment of any fees and expenses paid pursuant to Section 11.2 is conditioned on approval by the Bankruptcy Court as part of the Sale Procedures Order. 11.3 Effect of Termination. if this Agreement is terminated in --------------------- accordance with Section 11.1 hereof and the transactions contemplated hereby are not consummated, this Agreement shall become null and void and of no further force and effect, except for the provisions of Articles VII and XII, ------------ --- this Article XI, and Article XIV with respect to any reference therein to ---------- ----------- confidentiality obligations of the Purchaser, Chilmark and Cape Ann. 11.3 Purchaser's Escrow Fund. If the transactions contemplated hereby ----------------------- fail to close because of Purchaser's failure to satisfy a condition to Closing, the Purchaser's Escrow Fund shall be retained by the Sellers as liquidated damages and any damage claim against Purchaser shall be limited to the Purchaser's Escrow Fund. Such Purchaser's Escrow Fund shall be refunded to the Purchaser in the event Sellers are unable to obtain Bankruptcy Court approval of the transactions contemplated hereby, or if such transactions fail to close for any reason other than the Purchaser's failure to satisfy a condition to Closing. ARTICLE XII SURVIVAL AND REMEDY; INDEMNIFICATION 12.1 Survival. All of the terms and conditions of this Agreement and -------- any Contract including the parties of this Agreement contemplated hereby, together with the warranties, representations, agreements and covenants contained herein or therein or in any instrument or document delivered or to be delivered pursuant to this Agreement, and any Contract including the parties to this Agreement contemplated hereby, shall survive the execution of this Agreement and the Closing, notwithstanding any investigation heretofore or hereafter made by or on behalf of any party hereto; provided, however, that (a) the agreements and covenants (other than the indemnification provisions set forth in this Article XII, which will survive as provided below) set forth in ----------- this Agreement, the Sellers' Escrow Agreement, shall survive and continue until the later of (i) when all obligations set forth therein shall have been performed and satisfied and the applicable statute of limitations for breaches or defaults of such agreements and covenants has expired and (ii) the third anniversary of the Closing Date; and (b) all representations and warranties, and the agreements of Sellers and Purchaser to indemnify each other set forth in this Article XII, shall survive and continue for, and all indemnification claims ----------- with respect thereto shall be made prior to the end of three years from the Closing Date, except for (i) indemnification claims arising in connection with timely indemnification claims made by Megas under the Megas Escrow Agreement and the Megas 50 Escrow Account relating thereto, and (ii) representations, warranties and related indemnities for which an indemnification claim shall be pending as of the end of the applicable period referred to above, in which event such indemnities shall survive with respect to such indemnification claim until the final disposition thereof. 12.2 Indemnification by Sellers. Each of the Sellers jointly and -------------------------- severally agree to indemnify Purchaser and each of its affiliates, and their respective officers, directors, employees, stockholders, representatives and agents, against, and agrees to hold it and them harmless from, any and all Losses incurred or suffered by Purchaser or any of its affiliates (or any combination thereof) arising out of any of the following: (a) any material breach of or any inaccuracy in (or any alleged breach made by a person other than Purchaser of or inaccuracy in) any representations or warranty made by Sellers pursuant to this Agreement, any Contract including the parties to this Agreement contemplated hereby, any document relating hereto or thereto or contained in any Schedule or Exhibit to this Agreement, and any breach of or failure by Sellers to perform (or alleged breach of or failure by Sellers to perform) any covenant or obligation of Sellers set out in this Agreement, any Contract including the parties to this Agreement contemplated hereby, any document relating hereto or thereto or contained in any Exhibit to this Agreement; (b) any of the Excluded Assets; (c) any Unassumed Liabilities; (d) the Bulk Sales Laws of any jurisdiction in connection with transactions contemplated by this Agreement; (e) any Claims by or liabilities with respect to any employee of Sellers with respect to his or her employment or termination of employment by Sellers at or prior to the Closing Date, including, without limitation, any and all worker's compensation claims or liabilities to the extent arising out of any accidents, illness or other events which occurred on or prior to the Closing Date; (f) to the extent not included in clauses (a)-(e) --------------- above, irrespective of whether or not Sellers had knowledge of the matters referred to in this clause (f), and irrespective of whether or not the ---------- representations and warranties set forth in this Agreement were breached, including without limitation the items disclosed on Schedule 3.13, any and all ------------- Environmental Liabilities and Costs (including, without limitation, (i) the Release of any Contaminant on, upon or into any property and (ii) damage to real or personal property or natural resources and/or harm or injury to persons or entities alleged to have resulted from any such Release of Contaminants) arising out of or in connection with the present or past operations and facilities of Sellers as conducted prior to the Closing Date; (g) all demands, assessments, judgments, costs and reasonable legal and other expenses arising from, or in connection with, any investigation, action, suit, proceeding or other Claim incident to any of the foregoing; (h) any litigation to which Seller is a party relating to the foregoing; and (i) any use of the Acquired Assets by any person while such Acquired Assets are located in AWC's facilities or otherwise are in the possession of AWC. 12.3 Indemnification by Purchaser. Purchaser agrees to indemnify ---------------------------- Sellers and each of their affiliates, and their respective officers, directors, employees, stockholders, representatives and agents, against, and agrees to hold them harmless from, any and all Losses incurred or suffered by Sellers or any of its affiliates (or any combination thereof) arising out of any of the following: (a) any material breach of or any inaccuracy (or any alleged breach made by a person other than Purchaser of or inaccuracy in) any representations or warranty 51 made by Purchaser pursuant to this Agreement, any agreement, or instrument contemplated hereby, any document relating hereto or thereto or contained in any schedule or Exhibit to this Agreement, (b) breach of or failure by Purchaser to perform (or alleged breach of or failure by Purchaser to perform) any covenant or obligation of Purchaser set out in this Agreement, any Agreement, or instrument contemplated hereby, any document relating hereto or thereto or contained in any Schedule or Exhibit to this Agreement, including the failure to pay, perform or discharge when due any Assumed Obligations, (c) any Losses relating to the ownership of the Acquired Assets or the conduct of the Business after the Closing Date, and (d) any Losses or liabilities incurred by Sellers due to Purchaser's breach of the Assumed Obligations. 12.4 Indemnity Limits. ---------------- (a) Indemnification claims shall be reduced, by and to the extent, that an indemnitee shall actually receive proceeds under insurance policies, or similar arrangements specifically as a result of, and in compensation for, the subject matter of an indemnification claim by such indemnitee; provided, however, that such reduction shall only be to the extent that such proceeds are paid without recourse to the indemnitee by way of deductibles, re-insurance, retro-payments or other risk or loss sharing agreement. (b) Purchaser will not be entitled to indemnification pursuant to Section 12.2 and Sellers will not be entitled to indemnification pursuant to Section 12.3 with respect to any breach or misrepresentation of any representation or warranty until such time as its respective aggregate right to such indemnification exceeds $100,000 after which, Purchaser or Sellers will be entitled to such indemnification for all Losses, and provided that with regard to indemnification of Purchaser with respect to Environmental Liabilities and Costs (including those under Section 5.20) or Taxes, Purchaser will be entitled to indemnification without regard to the $100,000 threshold. The amount of indemnification to which Purchaser shall be entitled pursuant to this Article ------- XII shall be drawn solely from the amount then held in escrow under the Sellers' - --- Escrow Agreement which shall be Purchaser's sole and exclusive remedy therefor. 12.5 Third-Party Claims. Except as otherwise provided in this ------------------ Agreement, the following procedures shall be applicable with respect to indemnification pursuant to this Article XII relating to or arising out of ----------- Claims, actions or omissions by authorities, or other third parties. Promptly after receipt by the party seeking indemnification hereunder (hereinafter the "indemnitee") of notice of the commencement of any (a) tax audit or proceeding ---------- for the assessment of any Tax by any Taxing authority or any other proceeding likely to result in the imposition of a liability or obligation for Taxes or (b) any action or the assertion of any Claim, liability or obligation by an authority or a third party (whether by legal process or otherwise), against which Claim, liability or obligation of a party under Sections 11.2 and/or 11.3 (hereinafter the "indemnitor") is, or may be, required under this Agreement to ---------- indemnify such indemnitee, the indemnitee will, if a claim thereon is to be, or may be, made against the indemnitor pursuant to this Article XII, notify the ----------- indemnitor in writing of the commencement or assertion thereof and give the indemnitor a copy of such 52 claim, process and all legal pleadings and other written evidence thereof, but the failure to so notify indemnitor shall not relieve indemnitor from its obligations hereunder except to the extent that it is prejudiced by the failure or delay in giving such notice. The indemnitor shall have, in all instances the right to participate in the defense of such action unless such action (a) may result in Orders, injunctions or other equitable remedies in respect of the indemnitee or its business; or (b) may result in liabilities which, taken with other then existing claims under this Article XII, would not be fully ----------- indemnified hereunder. The indemnitor shall have 10 days, after receipt of notice of such claim, process, legal proceeding and other written notice, to assume defense thereof. If the indemnitor does assume such defense and so notifies the indemnitee, or if the indemnitor is barred from assuming such defense pursuant to this Section 12.5, then the indemnitee shall assume such defense, subject to the participation of the indemnitor, as provided in this Section 12.5, and the indemnitee's reasonable fees and expenses (including reasonable fees and expenses of counsel) in connection with such defense will be borne by the indemnitor. In any case, the indemnitor and indemnitee shall cooperate and assist each other in such defense, and shall make available to the other all records, documents and information (written or otherwise) relevant to such defense. If the indemnitee shall be required by judgment or a settlement Agreement to pay any amount in respect of any obligation or liability against which the indemnitor has agreed to indemnify the indemnitee under this Agreement, the indemnitor shall promptly reimburse the indemnitee in an amount equal to the amount of such payment plus all reasonable expenses (including reasonable legal fees and expenses) incurred by such indemnitee in connection with such obligation or liability, subject to this Article XII. Prior to paying ----------- any claim against which an indemnitor is, or may be, obligated under this Agreement to indemnify an indemnitee, the indemnitee must first supply the indemnitor with a copy of a final court judgment or decree, or evidence of assessment of Taxes or a similar final action by a Taxing authority, holding the indemnitee liable on such Claim or failing such judgment or decree, must first receive the written approval of the terms and conditions of such settlement from the indemnitor, which shall not be unreasonably withheld. An indemnitor or indemnitee shall have the authority to settle or compromise any Claim for which it has assumed or conducted the defense pursuant to this Section 12.5; provided that an indemnitor shall not settle or compromise any such Claim if such settlement or compromise would result in any Order, injunction or other equitable remedy in respect of the indemnitee or its business, or would result in liabilities which, taken together with other existing claims under this Article XII, would not be fully indemnified hereunder, in each case, without the - ----------- prior written consent of the indemnitee, which consent shall not be unreasonably withheld. An indemnitee shall have the right to employ its own counsel in any case, but the fees and expenses of such counsel shall be at the expense of the indemnitee, unless (x) the employment of such counsel shall have been authorized in writing by the indemnitor in connection with the defense of such action or claim or (y) the indemnitor shall not have assumed the defense, or shall be barred from assuming the defense, of such action or Claim pursuant to this Section 12.5, or (z) such indemnitee shall have reasonably concluded based upon the advice of counsel that there may be defenses available to it which are contrary to, or inconsistent with, those available to the indemnitor, in any of which events such fees and expenses of not more than one additional counsel for the indemnified parties shall borne by the indemnitor. 53 12.6 Determination of Indemnification Amount. In the event that any --------------------------------------- indemnitee believes that it is entitled to claim indemnification from an indemnitor under this Article XII, the indemnitee shall notify the indemnitor of ----------- such claim, the amount or estimated amount thereof and the basis of such claim (which will be described in reasonable detail). The indemnitor, on the one hand, and Purchaser or Sellers, as the case may be, which is not the indemnitor, on the other hand, will proceed, in good faith, and using reasonable efforts, to agree on the amount of such indemnification claim. If they are unable to agree on the amount of such indemnification claim within 30 days after notice, (a) if such indemnification claim arises out of a claim by an authority or third party of the type referred to in Section 12.5, then the amount of such indemnification claim will be determined pursuant to a final judgment or settlement or compromise pursuant to Section 12.5, or (b) if such indemnification claim does not arise out of such a third party claim, then the indemnification claim will be submitted to arbitration conducted pursuant to the rules and procedures of the American Arbitration Association. The determination of the amount of any indemnification claim pursuant to this Section 12.6 will be final, binding and conclusive, and the indemnitee, upon final determination of the amount of the indemnification claim, will be paid by the indemnitor, within 10 days of such final determination, the full amount, in cash, of such indemnification claim, as finally determined, and will be entitled to apply to any court or authority of competent jurisdiction to enforce such payment (the reasonable fees and expenses of such enforcement, if necessary, to be borne by the indemnitor). In addition, if the indemnitor does not pay in full the indemnification claim, within 10 days, as aforesaid, the amount of the indemnification claim, as finally determined, will be increased to include accrued interest thereon from the date payment is due until the date full payment is received equal to the "prime" rate announced from time to time by Citibank, N.A., plus 2%, until the date indemnitee receives the full indemnification amount. ARTICLE XIII INSURANCE AND OTHER MATTERS 13.1 Certain Insurance Matters. Purchaser shall be entitled to make ------------------------- claims against Sellers' insurance policies and coverage which are occurrence policies from and after the Closing Date for all matters, injuries and claims arising prior to the Closing Date relating in any way to the Acquired Assets or Assumed Liabilities in the same manner and subject to the same terms, conditions and limitations as Sellers prior to the Closing Date. Purchaser will have no obligations or liabilities under such insurance policies for additional premiums or similar payments after the Closing Date, either due to retroactive adjustments, audits, roll-backs or otherwise. Sellers will cooperate after the Closing Date with Purchasers and its insurance carriers and agents in connection with the foregoing and with Purchaser in establishing new insurance policies and coverage for Purchaser from and after the Closing Date. Notwithstanding the foregoing, Purchaser shall be entitled to make claims against Sellers' insurance policies and coverage only to the extent permitted by the carriers of such 54 insurance and Sellers shall be entitled to make claims against Sellers' insurance policies and coverage only to the extent permitted by such carriers, and Purchaser and Seller shall cooperate with each other in connection with any of the foregoing claims. 13.2 Weaver Environmental Matters. ---------------------------- (a) The Elmwood Park, New Jersey, facility (the "Premises") is an industrial establishment regulated by the Industrial Site Recovery Act, N.J.S.A., 13:1K-6 et seq., and the other statutes and regulations adopted thereunder or applicable thereto (including the Hazardous Discharge Site Remediation Site Act, N.J.S.A. 58:10B-1 et seq.) ("ISRA"). Sellers shall, at their sole cost and expense, initiate and diligently pursue to completion (whether before or after the Closing) compliance with all requirements of ISRA until they obtain a No Further Act Letter, as defined by ISRA, or equivalent approval, issued and approved by the New Jersey Department of Environmental Protection ("NJDEP") for the Premises. Subject to Section 8.19, the Closing may occur pursuant to the terms of a remediation agreement or other approval permitted by ISRA. (b) Purchaser shall cooperate and assist Sellers in obtaining the approval of NJDEP (and/or other governmental bodies) sought by Sellers, including to allow remediation to the cleanup levels applicable to the existing use of the Premises, such assistance to include consenting to and/or executing or recording engineering or institutional controls. Whenever Sellers make or intend to make any proposal permitted under this Section 13.2 to utilize less stringent cleanup standards or levels, or institutional and/or engineering controls, with respect to each such proposal, Purchaser shall have the right to reject such proposal if the implementation, operation and/or maintenance of the proposed standard, level, or institutional and/or engineering control would have an adverse impact on Purchaser's continuation of the exiting use of the Premises, and in all other instances Purchaser shall accept and comply with the terms of the proposal, standard, level and/or control. (c) Upon reasonable notice to Purchaser, the Sellers and their agents and representatives shall have the right to enter upon the Premises in order to perform any activities necessary or advisable, in Sellers' reasonable opinion, to comply diligently with ISRA obligations or other remedial obligations. The right of access set forth in this Section 13.2 is irrevocable for the duration of any and all remedial activities hereunder, including investigative activities, for which Sellers are responsible. (d) Sellers agree that, during the course of Sellers' performance of any ISRA obligations hereunder or other remedial obligations, Sellers shall take reasonable measures to avoid interference with the business operations of Purchaser at the Premises and, at the completion of Sellers' remedial activities, to restore the Premises, to the extent practicable, to substantially its pre-closing condition, in each case, after accounting for the nature and type of remediation approved by NJDEP. 55 (e) The obligations, rights and liabilities of Sellers and Purchasers as set forth in this Section 13.2 shall survive the Closing. ARTICLE XIV NONCOMPETITION AND CONFIDENTIALITY Each of the Article XIV Parties severally and only for itself acknowledges that it or he has a special knowledge of the Business and the proprietary and confidential information included in the Acquired Assets, and that Purchaser is making a considerable investment in the Acquired Assets from which investment the Article XIV Parties have benefited. In consideration of this Agreement and such investment and benefit, and as an inducement to Purchaser to enter into this Agreement and consummate the transactions contemplated herein, each of the Article XIV Parties severally and only for itself agrees that, for a period of five years after the Closing Date, (i) it or he will not, directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of, or be connected as an officer, employee, partner, director or that otherwise engages in the Business; or have any financial interest in, or aid or assist anyone else in the conduct of, any business that competes with the Business as conducted on the date hereof (a "Competitive Business"); provided, however, that a Article XIV Party may own - --------------------- -------- ------- less than 1% of any outstanding class of publicly traded securities of an issuer that is a Competitive Business, and (ii) it or he will not, directly or indirectly in one or a series of transactions, disclose to any person, or use or otherwise exploit for its own benefit or for the benefit of anyone other than Purchaser, Confidential Information (as defined below) and Sellers shall use their reasonable best efforts to cause all persons or entities to whom any Confidential Information has been disclosed without violation hereunder to observe the terms and conditions set forth herein as though each such person or entity was bound hereby. In consideration of this Agreement and the transactions contemplated hereby, and as an inducement to Sellers to enter into this Agreement, each of Purchaser, Chilmark and Cape Ann severally and only for itself agrees that, if but only if this Agreement is terminated and the Closing Date does not occur, for a period of five years after the Outside Date it will not, directly or indirectly in one or a series of transactions, disclose to any person, or use or otherwise exploit for its own benefit or for the benefit of anyone other than Sellers, Confidential Information and it shall use its reasonable best efforts to cause all persons or entities to whom any Confidential Information has been disclosed without violation hereunder to observe the terms and conditions set forth herein as though each such person or entity was bound hereby. "Confidential Information" means any trade secret, ------------------------ confidential study, data, calculations, software storage media or other compilation of information, patent, patent application, copyright, trademark, trade name, service mark, service name, "know-how", trade secrets, customer lists, details of client or consultant contracts, pricing policies, sales techniques, confidential information relating to suppliers, marketing plans or strategies, products and formulae, product development techniques or plans, business acquisition plans or any portion or phrase of any scientific or technical information, ideas, discoveries, designs, computer programs (including source of object codes), processes, procedures, research or technical data, improvements or other proprietary 56 or intellectual property of Sellers specifically relating to the Business, whether or not in written or tangible form, and whether or not registered, and including all files, records, manuals, books, catalogues, memoranda, notes, summaries, plans, reports, records, documents and other evidence thereof. The term "Confidential Information" does not include, and there shall be no ------------------------ obligation hereunder with respect to, information that is or becomes generally available to the public other than as a result of a disclosure by any of the Article XIV Parties. The Article XIV Parties (or Purchaser, Chilmark or Cape Ann, if applicable), shall have no obligation hereunder to keep confidential any Confidential Information if and to the extent disclosure of any therefor is specifically required by law; provided, however, that in the event disclosure is -------- ------- required by applicable law, the Article XIV Parties shall provide Purchaser (or Purchaser, Chilmark or Cape Ann, as the case may be, shall provide the Article XIV Parties, if applicable) with prompt notice of such requirement, prior to making any disclosure, so that Purchaser (or the Article XIV Parties, if applicable) may seek an appropriate protective order, and shall cooperate with Purchaser in connection therewith. For a period of five years following the Closing Date, each of the Article XIV Parties severally and only for itself agrees that it or he will not without the express prior written approval of the Board of Directors of Purchaser (A) directly or indirectly recruit, solicit or otherwise induce or influence any employee, sales agent, joint venturer, lessor, supplier, agent, representative or any other person that has or had during the one year period initially preceding the Closing Date a business relationship with Sellers relating to the Business, to discontinue, reduce or adversely modify such employment, agency or business relationship with Purchaser as it relates solely to the Business, or (B) only to the extent competitive with the Business as conducted on the Closing Date, employ or seek to employ or cause any Competitive Business to employ or seek to employ any person or agent who is employed or retained by Purchaser. Notwithstanding the foregoing, nothing herein shall prevent an officer of Sellers from providing a letter of recommendation to an employee with respect to a future employment opportunity. For a period of five years following the Closing Date, each of the Article XIV Parties severally and only for itself agrees that it or he will not without the express prior written approval of the Board of Directors of Purchaser, directly or indirectly, recruit, solicit or otherwise induce or influence any customer of Purchaser to discontinue, reduce or modify such business relationship with Purchaser to the extent such business relationship pertains to the Business. Each of the Article XIV Parties severally and only for itself agrees, and each of Purchaser, Chilmark and Cape Ann severally and only for itself agrees, that the violation or threatened violation of any of the provisions of this Article XIV by it or him shall cause immediate and irreparable harm to Purchaser (or an Article XIV Party, if applicable) and that the damage to Purchaser (or an Article XIV Party, if applicable) will be difficult or impossible to calculate with precision. Therefore, in the event that any of the Article XIV Parties (or Purchaser, Chilmark or Cape Ann, if applicable) violate this Article XIV, an injunction restraining such Article XIV Parties (or Purchaser, Chilmark or Cape Ann, if applicable) from such violation may be entered against the relevant Article XIV Party (or Purchaser, Chilmark 57 or Cape Ann, if applicable) in addition to any other relief available to Purchaser (or an Article XIV Party, if applicable). If, at the time of enforcement of any provision of this Article XIV, a court shall hold that the duration, scope or other restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or other restrictions reasonable under such circumstances shall be substituted for the stated duration, scope or other restrictions and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and other restrictions permitted by law. ARTICLE XV MISCELLANEOUS 15.1 Expenses. Subject to Section 11.2, each party hereto shall bear -------- its own expenses with respect to this transaction. Sellers agree to pay and be responsible for all sales, use, stamp, transfer, service, recording, real estate and like taxes or fees, if any, imposed by any authority, required to be paid by any party in connection with the transfer of the Acquired Assets. 15.2 Amendment; Supplemental Disclosure. This Agreement may be ---------------------------------- amended, modified or supplemented but only in writing signed by all of the parties hereto. Sellers shall have the right from time to time prior to August 1, 1997 to update or supplement the Disclosure Schedules with respect to any matter which, if existing or known as of the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedule. Notwithstanding the foregoing, Sellers shall have the right from time to time after the date of this Agreement to update or supplement the Disclosure Schedules with respect to any matter hereafter arising which was not in existence as of the date of this Agreement; provided, however, that (i) such updated or supplemental disclosure will not modify or otherwise affect the Assumed Obligations, except in accordance with this Agreement, and (ii) any such updated or supplemental disclosure will not be deemed to have been disclosed as of the date of this Agreement for any purposes of this Agreement (other than to provide such updated and supplemental disclosure to Purchaser), including without limitation, for purposes of determining whether or not the conditions set forth in Articles VIII and IX hereunder have been satisfied. Every disclosure and statement made in any Disclosure Schedule shall be deemed a disclosure and statement in all other applicable Disclosure Schedules. 15.3 Notices. Any notice, request, instruction or other document to ------- be given hereunder by a party hereto shall be in writing and shall be deemed to have been given, (i) when received if given in person, or (ii) on the date of transmission if sent by nationally recognized overnight courier, certified or registered mail, return receipt requested, or (iii) three days after being deposited in the U.S. mail, postage prepaid: 58 (A) If to Sellers, addressed as follows: American White Cross, Inc. 15200 I-45 North Houston, Texas 77090 Attention: President with copies to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Attention: Roger Andrus, Esq. and Creditors' Committee c/o Klehr, Harrison, Harvey et. al. 222 Delaware Avenue, Suite 1101 Wilmington, DE 19801-1621 Attention: Joanne Wills, Esq. (B) If to Purchaser, addressed as follows: NutraMax Products, Inc. 9 Blackburn Drive Gloucester, MA 01930 Attention: Robert F. Burns, Vice President and Chief Financial Officer with copies to: Eugene M. Schloss, Jr., Esq. 1700 Cary Road Huntingdon Valley, PA 19006-5002 and Goodwin, Procter & Hoar LLP Exchange Place 53 State Street Boston, MA 02109 Attention: Michael J. Pappone, P.C. and 59 Cape Ann Investors, L.L.C. c/o Chilmark Fund II, L.P. 875 N. Michigan Avenue Suite 2100 Chicago, IL 60611 Attention: David M. Schulte with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, NY 10006 Attention: James E. Millstein, Esq. or to such other individual or address as a party hereto may designate for itself by notice given as herein provided. 15.4 Waivers. The failure of a party hereto at any time or times to ------- require performance of any provision hereof shall in no manner affect its right at a later time to enforce the same. No waiver by a party of any condition or of any breach of any term, covenant, representation or warranty contained in this Agreement shall be effective unless in writing, and no waiver in any one or more instances shall be deemed to be a further or continuing waiver of any such condition or breach in other instances or a waiver of any other condition or breach of any other term, covenant, representation or warranty. 15.5 Counterparts. This Agreement may be executed simultaneously in ------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 15.6 Headings. The headings preceding the text of Articles and -------- Sections of this Agreement and the Schedules thereto are for convenience only and shall not be deemed part of this Agreement. 15.7 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND -------------- CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH JURISDICTION. 15.8 Binding Nature; Assignment. This Agreement shall be binding -------------------------- upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interest or obligations hereunder shall be assigned by any of the parties hereto without prior written consent of the other parties; except, that (i) Purchaser may assign any of its rights and obligations hereunder to any affiliate or wholly-owned subsidiary of Purchaser which shall assume, all obligations and liabilities hereunder, but such assignment shall not relieve Purchaser from any such obligations or liabilities, (ii) Purchaser may grant a security interest in its rights and interests hereunder to its lenders, and 60 (iii) as otherwise provided in this Agreement. Other than the provisions of Article XII, nothing contained herein, express or implied, is intended to confer on any Person other than the parties hereto or their successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. 15.9 No Third Party Beneficiaries. This Agreement is solely for the ---------------------------- benefit of the parties hereto and their respective affiliates and, except for the provisions of Article XII, no provision of this Agreement shall be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. 15.10 Tax Matters. ----------- (a) Purchaser and Sellers shall treat and report the transaction contemplated by this Agreement in all respects consistently for purposes of any federal, state or local tax, including, without limitation, the Purchase Price allocation made pursuant to Section 2.3 hereof. (b) Purchaser shall make available to Sellers, and Sellers shall make available to Purchaser, (i) such records as any such party may require for the preparation of any Tax Returns required to be filed by Sellers or Purchaser and (ii) such records as Sellers or Purchaser may require for the defense of any audit, examination, administrative appeal, or litigation of any Tax Return in which Sellers or Purchaser was included. 15.11 Other Instruments. Upon the reasonable request of Purchaser, ----------------- Sellers will on and after the Closing Date execute and deliver to Purchaser such other documents, releases, assignments and other instruments as may be required to effectuate completely the transfer and assignment to Purchaser of, and to vest fully in Purchaser title to, each of the Acquired Assets and Assumed Obligations. 15.12 Construction. The language used in this Agreement will be ------------ deemed to be the language chosen by the parties to this Agreement to express their mutual intent, and no rule of strict construction shall be applied against any party. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Nothing in the Disclosure Schedule will be deemed adequate to disclose an exception to a representation or warranty made herein unless the Disclosure Schedule identifies the exception with particularity and describes the relevant facts in detail of the exception. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other items itself). The parties hereto intend that each representation, warranty, and covenant contained herein shall have independent significance. If any party hereto has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of 61 the relative levels of specificity) which such party has not breached shall not detract from or mitigate the fact that the party is in breach of the first representation, warranty, or covenant. 15.13 Entire Understanding. This Agreement sets forth the entire -------------------- agreement and understanding of the parties hereto in respect to the transactions contemplated hereby and supersede all prior agreements, arrangements and understandings relating to the subject matter hereof and is not intended to confer upon any other person any rights or remedies hereunder. There have been no representations or statements, oral or written, that have been relied on by any party hereto, except those expressly set forth in this Agreement. 62 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered on the date first above written. PURCHASER: NUTRAMAX PRODUCTS, INC. /s/ Donald E. Lepone By:_______________________________________ Name: Donald E. Lepone Title: President and Chief Executive Officer SELLERS: AMERICAN WHITE CROSS, INC. /s/ Howard Koenig By:_______________________________________ Name: Howard Koenig Title: President WEAVER MANUFACTURING CORPORATION /s/ Howard Koenig By:_______________________________________ Name: Howard Koenig Title: President ONLY WITH RESPECT TO ARTICLE XIV HEREOF: /s/ Howard Koenig ___________________________ Name: Howard Koenig /s/ Scott Vertrees ___________________________ Name: Scott Vertrees 63 ONLY WITH RESPECT TO SECTION 5.16 HEREOF: ELECTRA FLEMING, INC. /s/ Diane M. Smith By:____________________________________ Name: Diane M. Smith Title: Principal THE UNOFFICIAL COMMITTEE OF UNSECURED CREDITORS /s/ Victor P. Zosda By:____________________________________ Name: Victor P. Zosda Title: Chairman 64 ONLY WITH RESPECT TO ARTICLE XIV HEREOF: CHILMARK FUND II, L.P. By: Chilmark II, L.L.C., its General Partner /s/ Joel S. Friedland By:____________________________________ Name: Joel S. Friedland Title: Vice President CAPE ANN INVESTORS, L.L.C. By: Chilmark Fund II, L.P., its Managing Member By: Chilmark II, L.L.C., its General Partner /s/ Joel S. Friedland By:____________________________________ Name: Joel S. Friedland Title: Vice President 65 ONLY WITH RESPECT TO SECTION 1.1(c), SECTION 1.1(o) AND SECTION 1.2 HEREOF: ACME/CHASTON PUERTO RICO, INC. /s/ Howard Koenig By:____________________________________ Name: Howard Koenig Title: President 66 EX-2.2 3 AMENDMENT #1 TO ASSET PURCHASE AGREEMENT Exhibit 2.2 ----------- AMENDMENT NO.1 -------------- TO -- ASSET PURCHASE AGREEMENT ------------------------ This Amendment No.1 to the Asset Purchase Agreement dated as of July 21, 1997 (the "Asset Purchase Agreement") by and among American White Cross, Inc., a corporation organized under the laws of the State of Delaware, and Weaver Manufacturing Corporation, a corporation organized under the laws of the State of New Jersey (collectively, the "Sellers"), and NutraMax Products, Inc., a corporation organized under the laws of the State of Delaware (the "Purchaser"), is entered into as of August 15, 1997 by and among the Sellers and the Purchaser. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to those terms in the Asset Purchase Agreement. W I T N E S S E T H - - - - - - - - - - WHEREAS, pursuant to the Asset Purchase Agreement, the Purchaser has agreed to purchase and the Sellers have agreed to sell substantially all of the assets of the first aid business to the Purchaser and the Purchaser has agreed to assume certain liabilities of the Sellers; and WHEREAS, the parties hereto wish to amend the Asset Purchase Agreement as set forth below. NOW, THEREFORE, in consideration of the premises and the representations and agreements herein contained, the parties mutually agree as follows: 1. Sections 2.1 and 2.2 of the Asset Purchase Agreement are hereby amended by replacing the references therein to $40,000,000 with $38,040,000. 2. Section 7.1 is amended by replacing the reference therein to $41,800,000 with $39,840,000. 3. All terms, provisions, covenants, representations, warranties, agreements and conditions contained in the Asset Purchase Agreement shall remain in full force and effect except as expressly contemplated herein and shall not otherwise be deemed waived, modified or amended hereby. -2- 4. This Amendment No.1 may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 5. This Amendment No.1 shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed wholly within such jurisdiction. IN WITNESS WHEREOF, each of the parties has caused this Amendment No.1 to duly executed all as of the date first written above. PURCHASER: NUTRAMAX PRODUCTS, INC. By: /s/ Donald E. Lepone -------------------------- Name: Donald E. Lepone Title: President / CEO SELLERS: AMERICAN WHITE CROSS, INC. By: /s/ Howard Koenig ---------------------------- Name: Howard Koenig Title: President WEAVER MANUFACTURING CORPORATION By: /s/ Howard Koenig ---------------------------- Name: Howard Koenig Title: President EX-2.3 4 STOCK PURCHASE AGREEMENT DATED 8/12/97 Exhibit 2.3 ----------- [Conformed Copy] STOCK PURCHASE AGREEMENT by and between NUTRAMAX PRODUCTS, INC., and CAPE ANN INVESTORS, L.L.C. Dated as of August 12, 1997 TABLE OF CONTENTS
Page I. PURCHASE AND SALE.............................................2 1.1. Purchase and Sale...............................2 1.2. Purchase Price..................................2 1.3. Closing.........................................2 II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................7 2.1. Due Organization, etc...........................7 2.2. Compliance with Law.............................8 2.3. Authorization; Execution and Delivery of Agreement....................................8 2.4. No Conflict; No Consent.........................9 2.5. Capital Stock..................................10 2.6. SEC Reports....................................11 2.7. Financial Statements...........................12 2.8. No Brokers.....................................13 2.9. Litigation and Claims..........................13 2.10. Use of Proceeds................................13 2.11. Hart-Scott-Rodino Matters......................13 III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............14 3.1. Due Organization, etc..........................14 3.2. Authorization; Execution and Delivery of Agreement...................................14 3.3. No Conflict; No Consent........................14 3.4. No Brokers.....................................15 3.5. Litigation and Claims..........................15 3.6. Investment Purposes............................15 3.7. Hart-Scott-Rodino Matters......................16 IV. COVENANTS OF THE COMPANY....................................17 4.1. Conduct of Business............................17 4.2. Exchange of Stock Certificates.................18 4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates.............................18 4.4. Course of Dealings with AWC....................18 4.5. Board Representation...........................18 4.6. Additional Financing Commitment................19 V. COVENANTS OF THE PURCHASER AND THE COMPANY...................19 5.1. Access; Confidentiality........................19
i 5.2. Hart-Scott-Rodino Act Filings................ 20 5.3. Public Disclosure and Confidentiality........ 21 5.4. Certain Notifications........................ 21 5.5. Efforts to Consummate; Further Actions....... 21 5.6. Standstill Obligations of the Purchaser...... 22 VI. REGISTRATION RIGHTS....................................... 28 6.1. "Piggyback" Registration..................... 28 6.2. Demand Registration.......................... 29 6.3. General Provisions........................... 31 6.4. Information, Documents, Etc.................. 33 6.5. Expenses..................................... 33 6.6. Cooperation.................................. 34 6.7. Action to Suspend Effectiveness; Supplement to Registration Statement.................... 35 6.8. Indemnification.............................. 37 VII. INDEMNIFICATION.......................................... 43 7.1. Indemnification by the Company............... 43 7.2. Indemnification by the Purchaser............. 44 VIII. TERMINATION............................................ 44 8.1 Termination.................................... 44 IX. GENERAL PROVISIONS........................................ 46 9.1. Survival of Representations, Warranties and Agreements............................... 46 9.2. Notices...................................... 46 9.3. General...................................... 47 9.4. Governing Law................................ 48 9.5. Severability of Provisions................... 48 9.6. Captions..................................... 49 9.7. Expenses..................................... 49 9.8. Equitable Relief............................. 50 9.9. Definitions.................................. 50
SCHEDULE 2.5(b) SCHEDULE 5.6 ii STOCK PURCHASE AGREEMENT (this "Agreement") dated as of August 12, 1997 by and between NUTRAMAX PRODUCTS, INC., a Delaware corporation (the "Company"), and CAPE ANN INVESTORS, L.L.C., a Delaware limited liability company (the "Purchaser"). WHEREAS, the Purchaser wishes to purchase from the Company, and the Company wishes to sell to the Purchaser, a number of shares (the "Shares") of the Company's Common Stock, par value $0.001 per share (the "Common Stock"), determined in accordance with the provisions hereof; WHEREAS, the Purchaser and the Company are entering into this Agreement to provide for such purchase and sale and to establish various rights and obligations in connection therewith; WHEREAS, the purchase of the Shares hereunder is being made in connection with, and as part of, the acquisition (the "Asset Acquisition") by the Company of certain of the assets of American White Cross, Inc., a Delaware corporation ("White Cross"), and its wholly-owned subsidiary Weaver Manufacturing Corporation, a New Jersey corporation ("Weaver" and, collectively with White Cross, "AWC"), debtors and debtors in possession in chapter 11 proceedings pending before the United States Bankruptcy Court for the District of Delaware, on terms and conditions set forth in that certain Asset Purchase Agreement (the "Asset Purchase Agreement"), dated as of July 21, 1997, among the Company, White Cross and Weaver and previously approved by the Purchaser; and WHEREAS, the proceeds from the sale of the Shares, together with such additional debt financing as the Company shall obtain, shall be used to fund the consideration paid for the Asset Acquisition by the Company; NOW THEREFORE, in consideration of these premises and other good and valuable consideration, the parties hereto hereby agree as follows: I.PURCHASE AND SALE 1.1. Purchase and Sale. Upon the terms and subject to the conditions set forth in this Agreement, the Company agrees to issue, sell and deliver to the Purchaser, and the Purchaser agrees to purchase from the Company, 1,405,000 Shares; provided, however, that, at the Company's option on notice to the Purchaser given no less than ten days before the Closing (as hereinafter defined), the number of Shares purchased and sold hereunder may be reduced, but not below 846,154 Shares. The Shares purchased and sold hereunder shall be free and clear of any liens, security interests, pledges, voting agreements, claims, options and encumbrances of every kind, character and description whatsoever ("Encumbrances"), except as contemplated by this Agreement. 1.2. Purchase Price. As consideration for the sale of the Shares, at the Closing the Purchaser shall pay the Company, in immediately available funds, a purchase price of $13.00 per share. 1.3. Closing. (a) The closing of the transactions provided for in this Agreement (the "Closing") shall take place simultaneously with the closing of the Asset Acquisition pursuant to the terms of the Asset Purchase Agreement at the offices of Goodwin, Procter & Hoar, LLP, Exchange Place, Boston, Massachusetts. (b) Conditions Precedent to the Purchaser's Obligations. The obligation of the Purchaser to consummate the transactions described in this Agreement shall be subject to the satisfaction of the following conditions on or prior to the Closing: (i) the representations and warranties of the Company contained in this Agreement shall have been true and correct when 2 made and shall be true and correct in all material respects on the date of Closing with the same effect as if they were made on such date; (ii) the Company shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the Company on or prior to the Closing; (iii) the Company shall have delivered to the Purchaser a certificate, dated the date of Closing and signed by a duly authorized officer of the Company, certifying as to the matters described in the foregoing clauses (i) and (ii); (iv) no action, suit, investigation or proceeding shall have been instituted before any court, administrative body or governmental agency (a "Governmental Entity") which seeks to restrain the consummation of, prohibit or declare illegal, or obtain a material amount of damages arising from the Asset Acquisition or the transactions contemplated by this Agreement and which is likely, in the Purchaser's reasonable judgment, to be successful on the merits, and no temporary restraining order or injunction shall have been issued by any Governmental Entity restraining or prohibiting, and no other Legal Requirement (as hereinafter defined) shall have come into effect making illegal, the performance of this Agreement or the consummation of any of the transactions contemplated hereby; (v) all consents, approvals, permits and authorizations required to be obtained from, and all filings required to be made with, any Authority (as hereinafter defined) in connection with the consummation of the transactions contemplated hereby shall have been obtained or made, and all waiting periods specified under applicable Legal Requirements (including any such waiting period applicable to the transactions contemplated hereby under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Hart-Scott-Rodino Act")), and all extensions thereof, the passing of which is required for such consummation, shall have passed, except as to such consents, approvals, 3 permits, authorizations or filings that, individually or in the aggregate, would not have a material adverse effect on the condition (financial or otherwise), business, operations, properties, assets or liabilities of the Company and its Subsidiaries (as hereinafter defined) taken as a whole (a "Material Adverse Effect"); (vi) from and after the date of this Agreement, there shall not have occurred any changes concerning the Company that, when combined, without duplication, with all other changes concerning the Company from and after the date of this Agreement, have had or would reasonably be expected to have a Material Adverse Effect; (vii) there shall not have occurred a material adverse change in the material terms of the final agreements entered into between the Company and its lenders relating to the debt financing to be raised by the Company in connection with the Asset Acquisition when compared to the material terms of such debt financing set forth in the letter dated August 6, 1997 from BankBoston, N.A. to the Company (the "August 6th Commitment Letter"), as such terms may be amended by the Additional Commitment Letter (as hereinafter defined) to be delivered to the Purchaser in accordance with Section 4.6 hereof; and (viii) all conditions precedent to consummation of the Asset Acquisition shall have been satisfied or waived by the appropriate party, and no amendment to the Asset Purchase Agreement shall have been executed or agreed to that increases the purchase price thereunder to more than $50,000,000.00 without the Purchaser's prior written consent. In the event any of the foregoing conditions to the Purchaser's obligation to close hereunder is not satisfied on or before the Closing, the Purchaser may waive such condition and proceed to Closing. As used herein, "Legal Requirements" shall include laws, regulations, ordinances, orders, decrees, permits, licenses, consents, approvals, registrations, authorizations and 4 qualifications required by or from any federal, state, local or foreign governmental or regulatory authority (each, an "Authority"). (c) Conditions Precedent to the Company's Obligations. The obligation of the Company to consummate the transactions described in this Agreement shall be subject to the satisfaction of the following conditions on or prior to the Closing: (i) the representations and warranties of the Purchaser contained in this Agreement shall have been true and correct when made and shall be true and correct in all material respects on the date of Closing with the same effect as if they were made on such date; (ii) the Purchaser shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the Purchaser on or prior to the Closing; (iii) the Purchaser shall have delivered to the Company a certificate, dated the date of Closing and signed by a duly authorized signatory of the Purchaser, certifying as to the matters described in the foregoing clauses (i) and (ii); (iv) no action, suit, investigation or proceeding shall have been instituted before any Governmental Entity which seeks to restrain the consummation of, prohibit or declare illegal, or obtain a material amount of damages arising from the Asset Acquisition or the transactions contemplated by this Agreement and which is likely, in the Company's reasonable judgment, to be successful on the merits and no temporary restraining order or injunction shall have been issued by any Governmental Entity restraining or prohibiting, and no other Legal Requirement shall have come into effect making illegal, the performance of this Agreement or the consummation of any of the transactions contemplated hereby; (v) all consents, approvals, permits and authorizations required to be obtained from, and all filings required to be made with, any Authority in connection with the consummation of the transactions contemplated hereby shall have been obtained or made, and all waiting periods specified under applicable Legal 5 Requirements (including any such waiting period applicable to the transactions contemplated hereby under the Hart-Scott-Rodino Act), and all extensions thereof, the passing of which is required for such consummation, shall have passed, except as to such consents, approvals, permits, authorizations or filings that, individually or in the aggregate would not have a Material Adverse Effect; (vi) from and after the date of this Agreement, there shall not have occurred any changes concerning the Purchaser that, when combined, without duplication, with all other changes concerning the Purchaser from and after the date of this Agreement, have had or would reasonably be expected to have a material adverse effect on the condition (financial or otherwise), business, operations, properties, assets or liabilities of the Purchaser (a "Purchaser Material Adverse Effect"); and (vii) all conditions precedent to consummation of the Asset Acquisition shall have been satisfied or waived by the appropriate party. In the event any of the foregoing conditions to the Company's obligation to close hereunder is not satisfied on or before the Closing, the Company may waive such condition and proceed to Closing. (d) Company Closing Deliveries. At the Closing, the Company will deliver to the Purchaser the following: (i) a stock certificate or certificates representing the Shares; and (ii) a certificate of the Secretary of the Company certifying as to the adoption and effect of resolutions of the Board of Directors of the Company (the "Board") authorizing the execution, delivery and performance of this Agreement. (e) Purchaser Closing Deliveries. At the Closing, the Purchaser will deliver to the Company the following: 6 (i) a certificate of the Managing Member of the Purchaser certifying as to the adoption and effect of resolutions of the Purchaser authorizing the execution, delivery and performance of this Agreement; and (ii) payment of the purchase price provided by Section 1.2. II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 2.1. Due Organization, etc. The Company and each of its Subsidiaries (as hereinafter defined) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and each has all requisite corporate power and authority to own, operate and lease its respective properties and assets and to conduct its respective businesses as now conducted and is qualified to do business in each state or other jurisdiction where the nature of its properties, assets or businesses requires such qualification other than where the failure to be so qualified would not, individually or in the aggregate have a Material Adverse Effect. All of the outstanding shares of capital stock of each Subsidiary of the Company are validly issued, fully paid and non-assessable, other than the shares of capital stock of foreign Subsidiaries which are not fully paid and which failure to be fully paid, individually or in the aggregate, does not have a Material Adverse Effect, and all of such outstanding shares are owned, directly or indirectly, by the Company free and clear of all Encumbrances, except for liens or security interests or pledge arrangements involving the capital stock of the Subsidiaries in favor of the Company's lenders. "Subsidiary" means a corporation or other business arrangement a majority of the outstanding voting securities or ownership interests of which is owned, directly or indirectly, by the Company, by one or more other Subsidiaries or by the Company and one or more other Subsidiaries. 7 2.2. Compliance with Law. The Company and each Subsidiary has obtained and maintains in full force and effect all permits, licenses, consents, approvals, registrations, memberships, authorizations and qualifications under all federal, state, local and foreign laws and regulations, and with all Authorities, required for the conduct by it of its businesses and the ownership or possession by it of its properties and assets other than where the failure to obtain or maintain such permits, licenses, consents, approvals, registrations, memberships, authorizations or qualifications would not, individually or in the aggregate, have a Material Adverse Effect. The Company and each Subsidiary are in compliance with all laws, regulations, ordinances, orders and decrees (including, without limitation, all environmental and occupational, health and safety laws) of any Authority applicable to the conduct by the Company and each Subsidiary of their respective businesses and to their ownership and possession of their respective properties and assets, other than where the failure so to comply would not, individually or in the aggregate, have a Material Adverse Effect. 2.3. Authorization; Execution and Delivery of Agreement. (a) Except to the extent that the By-laws of, or other rules or regulations promulgated by, the National Association of Securities Dealers ("NASD") applicable to Nasdaq SmallCap listed companies may require approval of the issuance of shares hereunder, the execution and delivery of this Agreement, the issuance and sale of the Shares to the Purchaser and the consummation of the transactions contemplated hereby (i) do not require the approval or consent of any stockholders of the Company and (ii) have been duly authorized by all necessary corporate action on the part of the Company for all purposes, including Section 203 of the Delaware General Corporation Law. Except to the extent that the By- laws of, or other rules or regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed companies may require approval of the issuance of shares 8 hereunder, this Agreement has been duly executed and delivered by the Company and this Agreement constitutes the legal, valid, binding and enforceable obligation of the Company, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. The Company has full corporate power and authority to enter into this Agreement and to perform its obligations hereunder. (b) Except to the extent that the By-laws of, or other rules or regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed companies may require approval of the issuance of shares hereunder, (i) the Shares have been duly authorized by all necessary corporate action on the part of the Company, and, when issued and delivered by the Company pursuant to this Agreement against payment of the consideration therefor set forth herein, the Shares will be validly issued, fully paid and non-assessable and (ii) the Purchaser will acquire valid and marketable title to the Shares, free and clear of any Encumbrances except as contemplated by this Agreement. 2.4. No Conflict; No Consent. Except to the extent that the By-laws of, or other rules or regulations promulgated by, the NASD applicable to Nasdaq SmallCap listed companies may require approval of the issuance of shares hereunder, the execution and delivery of this Agreement, the issuance and sale of the Shares to the Purchaser and the consummation of the transactions contemplated hereby do not, and will not, conflict with, or result in any violation of or default under, or permit the acceleration of any obligation under, or the creation or imposition of any Encumbrance on any of the properties or assets of the Company or any Subsidiary under, (i) any provision of the certificate of incorporation or by-laws or similar constituent documents of the Company or any Subsidiary, (ii) any indenture, lease, mortgage, deed of trust, loan agreement or other agreement or instrument, or any permit, license, 9 registration, membership, authorization or qualification from any Authority, of the Company or any Subsidiary or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation of any Authority to which the Company or any of its Subsidiaries is a party or by which any of them is bound, other than, in the case of clause (ii) above, where such conflict, violation, default, acceleration or Encumbrance would not, individually or in the aggregate, have a Material Adverse Effect. No consent, approval, order or authorization of, or registration, declaration, filing with or notice to, any Authority or third party is required to be made or obtained by the Company or any Subsidiary (including, without limitation, under any environmental or occupational, health and safety laws) in order to execute or deliver this Agreement, issue and sell the Shares or to consummate the transactions contemplated hereby, other than (A) as may be required by the Hart-Scott-Rodino Act, (B) as a result of the periodic reporting requirements under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (C) the listing requirements of the NASDAQ SmallCap Market, or except where the failure to make or obtain any such consent, approval, order, authorization, registration, declaration, filing or notice would not have a Material Adverse Effect. 2.5. Capital Stock. (a) The authorized capital stock of the Company consists of 20,000,000 shares of common stock, par value $0.001 per share (the "Common Stock"), of which, as of June 28, 1997, 4,763,014 shares were outstanding and 4,037,258 shares were held in treasury and 1,705,839 shares are reserved for future issuance pursuant to any option, warrant or other rights agreement, arrangement or other commitment. All of the issued and outstanding shares of Common Stock have been validly issued and are fully paid and non- assessable. (b) (i) Other than this Agreement and the Asset Purchase Agreement or as set forth on Schedule 2.5(b) hereto, there are not authorized or outstanding any subscriptions, 10 options, conversion rights, warrants or other agreements, securities or commitments of any nature whatsoever (whether oral or written and whether firm or conditional) obligating the Company or any Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, to any person any shares of Common Stock or any other shares of the capital stock of the Company or any shares of the capital stock of any Subsidiary, or any securities convertible into or exchangeable for any such shares, or obligating any such person to grant, extend or enter into any such agreement or commitment; and (ii) except as set forth on Schedule 2.5(b) hereto, there is no obligation, contingent or otherwise, of the Company to repurchase, redeem or otherwise acquire any share of capital stock or other equity interests of the Company or any Subsidiary. No class of capital stock of the Company is entitled to preemptive rights. 2.6. SEC Reports. The Company has filed with the Securities and Exchange Commission (the "Commission") all proxy statements, reports, forms and other documents required to be filed by it after January 1, 1995 under the Exchange Act (collectively, the "SEC Reports"). As of their respective dates, the SEC Reports (i) complied as to form in all material respects with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 2.7. Financial Statements. (a) The financial statements (including any related notes) included in the SEC Reports (the "Financial Statements") have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved (except as may be noted therein) and fairly present the consolidated financial condition, results of operations and cash flows of the Company and its consolidated Subsidiaries 11 as of the dates thereof and for the periods ended on such dates (in each case subject, as to interim statements, to changes resulting from year-end adjustments (none of which were or, except as otherwise disclosed to the Purchaser in writing, will be material in amount or effect) and except as permitted by Form 10-Q pursuant to Section 13 or 15(d) of the Exchange Act). (b) On the date hereof, except as disclosed in the SEC Reports, neither the Company nor any Subsidiary has any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due and whether or not required to be disclosed in the SEC Reports, other than liabilities that have been disclosed to the Purchaser in writing, have been incurred in the ordinary course of business or are not in the aggregate material to the Company and its Subsidiaries taken as a whole. Since September 28, 1996, the Company has not declared or paid any dividends to any of its stockholders. (c) Since September 28, 1996, the Company and each of its Subsidiaries have conducted their respective businesses only in the ordinary course in substantially the same manner as theretofore conducted and the Company and its Subsidiaries, taken as a whole, have not undergone or suffered any Material Adverse Effect, except as otherwise disclosed to the Purchaser in writing. 2.8. No Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Company. 2.9. Litigation and Claims. There is no claim, prosecution, suit, action, arbitration, proceeding, investigation or review pending or, to the knowledge of the Company, threatened against or affecting the Company, any of its Subsidiaries or any of their respective properties or assets (nor, to the knowledge of the Company, are there any facts or circumstances 12 providing a basis for any such claim, prosecution, suit, action, arbitration, proceeding, investigation or review) which, if adversely determined, would be reasonably likely to have a Material Adverse Effect or would prohibit or impose any limitations on the Purchaser's ownership of the Shares or would prohibit or make illegal the acceptance for payment, purchase of or payment for the Shares. Neither the Company nor any of its Subsidiaries is in default with respect to any judgment, decree, injunction, rule or order of any court, arbitrator or Authority outstanding against or binding upon the Company or any of its Subsidiaries, other than where any such defaults would not, individually or in the aggregate, have a Material Adverse Effect. 2.10. Use of Proceeds. The Company intends to use the proceeds from the sale of Shares solely for the Asset Acquisition. 2.11. Hart-Scott-Rodino Matters. The Company, taken together with the "ultimate parent entity" of the Company, if any, and all entities which the Company and such ultimate parent entity control directly or indirectly, is not a person which has total assets or annual net sales (as such terms are defined under the Hart-Scott-Rodino Act) of $100,000,000 or more for purposes of 15 U.S.C. ss.18a(a) of the Hart-Scott-Rodino Act. III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser represents and warrants to the Company that: 3.1. Due Organization, etc. The Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. The Purchaser has no direct or indirect subsidiaries. 3.2. Authorization; Execution and Delivery of Agreement. The Purchaser has all requisite power and authority to execute this Agreement, to perform its obligations hereunder 13 and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and this Agreement constitutes the legal, valid, binding and enforceable obligation of the Purchaser, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. 3.3. No Conflict; No Consent. The execution and delivery of this Agreement, the issuance and sale of the Shares to the Purchaser and the consummation of the transactions contemplated hereby do not, and will not, conflict with, or result in any violation of or default under, or permit the acceleration of any obligation under, or the creation or imposition of any Encumbrance on any of the properties or assets of the Purchaser under, (i) any provision of the certificate of organization and limited liability company agreement or similar constituent documents of the Purchaser, (ii) any indenture, lease, mortgage, deed of trust, loan agreement or other agreement or instrument, or any permit, license, registration, membership, authorization or qualification from any Authority, of the Purchaser or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation of any Authority to which the Purchaser is a party or by which it is bound, other than, in the case of clause (ii) above, where such conflict, violation, default, acceleration or Encumbrance would not, individually or in the aggregate, have a Purchaser Material Adverse Effect. Other than as required by the Hart-Scott-Rodino Act or as a result of the reporting requirements of the Exchange Act, no consent, approval, order or authorization of, or registration, declaration, filing with or notice to, any Authority is required to be made or obtained by the Purchaser in order to execute or deliver this Agreement or to consummate the transactions contemplated hereby. 14 3.4. No Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Purchaser. 3.5. Litigation and Claims. There is no claim, prosecution, suit, action, arbitration, proceeding, investigation or review pending or, to the knowledge of the Purchaser, threatened against or affecting the Purchaser, or any of its properties or assets which, if adversely determined, would prohibit or make illegal the purchase of or payment for the Shares. 3.6. Investment Purposes. (a) The Purchaser, by reason of its business and financial experience, has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of its investment in the Shares, and is purchasing the Shares hereunder for its own account, for investment only and not with a view to, or any present intention of, effecting a distribution of such securities or any part thereof. The Purchaser acknowledges that the Shares to be purchased hereunder have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state or other jurisdiction and cannot be disposed of unless they are subsequently registered under the Securities Act and any applicable state laws or exemption from such registration is available. (b) The Purchaser is an "accredited investor" as that term is defined in Rule 501 promulgated under the Securities Act. (c) The Purchaser has had the opportunity to ask questions and to receive answers concerning the financial condition, operations and prospects of the Company and the terms and conditions of the Purchaser's investment, as well as the opportunity to obtain any additional information necessary to verify the accuracy of information furnished in connection therewith that the Company possesses or can acquire without unreasonable effort or expense. 15 3.7. Hart-Scott-Rodino Matters. The Purchaser, taken together with the "ultimate parent entity" of the Purchaser, if any, and all entities which the Purchaser and such ultimate parent entity control directly or indirectly, is not a person which has total assets or annual net sales (as such terms are defined under the Hart-Scott-Rodino Act) of $100,000,000 or more for purposes of 15 U.S.C. ss.18a(a) of the Hart-Scott-Rodino Act. IV.COVENANTS OF THE COMPANY The Company covenants and agrees that: 4.1. Conduct of Business. Except as specifically consented to in writing by the Purchaser or expressly contemplated by this Agreement or by the Asset Purchase Agreement, with no amendment being made to the Asset Purchase Agreement that provides for a purchase price in excess of $50,000,000.00 or that provides for the issuance of any stock of any class other than pursuant to this Agreement, during the period from the date of this Agreement up to and including the date of the Closing, the Company shall, and shall cause each of its Subsidiaries to, (i) conduct its business in the usual and ordinary course consistent with past practice and use its reasonable best efforts to preserve its business organization intact, to keep available the services of its key employees, material independent contractors and material consultants currently employed, to preserve the present relationships with customers, suppliers and other Persons (as hereinafter defined) with whom it has significant business relations, to maintain books and records in the usual and ordinary manner, and to preserve the goodwill and ongoing business; and (ii) except pursuant to agreements or commitments entered into by the Company or its Subsidiaries prior to the date of this Agreement and listed on Schedule 2.5(b) hereto, not issue or sell (or agree to issue or sell) any stock of any class or any other securities, or any options, warrants, conversion or other rights to purchase any such securities, or grant, or agree to grant, 16 any such options or modify or alter the terms of any of the above. As used herein, "Person" means any individual, partnership, joint venture, firm, corporation, association, trust or other entity or any government or political subdivision or agency, department or instrumentality thereof. 4.2. Exchange of Stock Certificates. Promptly upon surrender of any certificates representing Shares at the office of the Company, the Company will, at its expense, execute and deliver to the Purchaser a new certificate or certificates in denominations specified by the Purchaser for an aggregate number of Shares equal to the number of Shares represented by the certificates surrendered. 4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any certificate for Shares and, in the case of loss, theft or destruction, upon delivery of an indemnity satisfactory to the Company (which, in the case of the Purchaser may be an undertaking by the Purchaser to so indemnify the Company), or, in the case of mutilation, upon surrender and cancellation thereof, the Company will issue a new certificate of like tenor for a number of Shares equal to the number of Shares represented by the certificate lost, stolen, destroyed or mutilated. 4.4. Course of Dealings with AWC. The Company shall keep the Purchaser apprised of all material developments in connection with the Asset Acquisition, including any amendment of the Asset Purchase Agreement or waiver of any terms or conditions thereof. 4.5. Board Representation. As promptly as practicable after the Closing, the Company shall take or cause to be taken all necessary actions to appoint or elect David M. Schulte to the Board, which is currently composed of four members. At each annual meeting of 17 the stockholders of the Company thereafter, so long as the Purchaser shall own Shares representing 5% or more of the total issued and outstanding shares of Common Stock as of the date which is thirty (30) days immediately preceding the record date of such meeting, the Company shall include in the slate of nominees for election as the Board at such meeting, one officer or individual member of the Purchaser designated by the Purchaser (which designee shall not include any individual whose membership on the Board would be a violation of law), provided that the Company has consented to such designee, which consent shall not be unreasonably withheld. 4.6. Additional Financing Commitment. The Company shall provide to the Purchaser, promptly after receipt thereof by the Company, a copy of the commitment letter (the "Additional Commitment Letter") relating to an increase in the aggregate principal amount of the debt financing commitment set forth in the August 6th Commitment Letter. On or prior to the third calendar day immediately following the Purchaser's receipt of such copy of the Additional Commitment Letter, the Purchaser shall notify the Company in writing if the terms of such Additional Commitment Letter are materially and adversely different from those contained in the August 6th Commitment Letter (other than with respect to the aggregate principal amount of the debt financing) and shall include in such notice whether it elects, as a consequence thereof, to terminate this Agreement pursuant to Section 8.1(v). V.COVENANTS OF THE PURCHASER AND THE COMPANY 5.1. Access; Confidentiality. (a) At the reasonable request of the Purchaser, the Company shall give the officers, attorneys, accountants and other authorized representatives of the Purchaser access, during normal business hours and upon reasonable notice, to all of the Company's, and the Subsidiaries' offices, facilities, properties and personnel. The Company will 18 furnish the representatives of the Purchaser with all such information concerning the Company and its Subsidiaries as such representatives may reasonably request and cause the employees, accountants, independent accountants and attorneys of the Company and its Subsidiaries to cooperate fully with such representatives in connection with such review and examination and to make full disclosure to the Purchaser of all material facts concerning the Company and its Subsidiaries; provided, however, that the Purchaser will hold in strict confidence and not use for its own benefit (other than in connection with the transactions contemplated by this Agreement), prior to the Closing, the documents and information (including all evaluation material relating to employees) furnished to the Purchaser concerning the Company and its Subsidiaries; and, if the transactions contemplated by this Agreement shall not be consummated, such confidence shall be maintained and all such documents and all copies thereof shall promptly thereafter be returned to the Company. The Purchaser further agrees that it shall be responsible for any breach of this Section 5.1 by any of its officers, attorneys, accountants and other authorized representatives. No investigation by the Purchaser or any of its representatives pursuant to this Section 5.1 shall affect any representation, warranty or closing condition of any party hereto. (b) Chilmark Fund II, L.P. ("Chilmark") agrees that it shall be bound by the obligations of the Purchaser set forth in Section 5.1(a) as if it were the Purchaser for purposes of said section. 5.2. Hart-Scott-Rodino Act Filings. Each party covenants and agrees to file, if required, on a date no later than ten days from the date hereof a notification and report form pursuant to the Hart-Scott-Rodino Act with respect to the purchase by the Purchaser of the Shares pursuant to this Agreement and will provide promptly any supplemental information that may be requested in connection therewith. Each party will comply with all reasonable requests of 19 the other party for information necessary in connection with the preparation by such other party of its notification and report form. 5.3. Public Disclosure and Confidentiality. Each party hereby agrees that, prior to the Closing, except as required by applicable law (or under the rules and regulations of the Nasdaq Stock Market (or any national securities exchange on which the Common Stock is listed)), no press release or public announcement or communication will be made or caused to be made concerning the execution or performance of this Agreement, the terms hereof or the transactions contemplated hereby unless specifically approved in advance by both parties. In the event that a party views disclosure as required by applicable law (or the rules and regulations of the Nasdaq Stock Market or any such national stock exchange) as contemplated by the previous sentence, such disclosing party shall provide a copy of such disclosure to the other party within a reasonable period of time prior to such disclosure. 5.4. Certain Notifications. At all times prior to the Closing, each party hereto shall promptly notify the other party in writing of the occurrence of any event which will or could reasonably result in the failure of any of the conditions contained in Article I hereof to be satisfied. Such notice shall be in additional to and not in lieu of the other notices and communications provided for herein. 5.5. Efforts to Consummate; Further Actions. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate the Asset Acquisition and the transactions contemplated by this Agreement. 20 5.6. Standstill Obligations of the Purchaser. (a) As of the date of this Agreement, none of the Purchaser, Chilmark or any Affiliate (as hereinafter defined) thereof beneficially owns any shares of Common Stock, except as set forth on Schedule 5.6. From and after the date of this Agreement until the Closing, none of the Purchaser or Chilmark (collectively, the "Stockholders") or any of their Affiliates will acquire any securities issued by the Company or convertible into or exchangeable for any equity securities of the Company (collectively referred to as "Stock"), except pursuant to the terms of this Agreement. For purposes of this Agreement, an "Affiliate" of any person, entity or corporation shall mean and include (i) any person, entity or corporation, now or hereafter, directly or indirectly through one or more intermediaries, controlling, controlled by or under common control with (through the ownership of voting securities or interests, by contract or otherwise) such person, entity or corporation, or (ii) any other person, entity or corporation acting in concert with such person, entity or corporation in connection with the Company with respect to any matter referred to in Section 5.6(d) of this Agreement or clauses (a)-(j) of Item 4 of Schedule 13D under the Exchange Act, or with respect to acquiring, holding, voting or disposing of any Stock. Each of the Stockholders acknowledges and agrees that a breach of any provision of this Agreement by any Stockholder or any Affiliate thereof shall constitute a breach by each Stockholder and that each Stockholder shall be fully liable for any breach of this Agreement by any other Stockholder or by any Affiliate of any Stockholder, it being understood that notwithstanding any other provision of this Agreement, any of the Stockholders and their Affiliates shall be entitled to act in concert with one another with respect to any action which a Stockholder or an Affiliate of a Stockholder would be permitted to take individually hereunder. For the purposes of this Agreement, 21 beneficial ownership shall be determined pursuant to Rule 13d-3 ("Rule 13d-3") promulgated by the Commission pursuant to the Exchange Act. (b) Each of the Stockholders hereby jointly and severally covenants and agrees that from and after the date hereof none of the Stockholders or their Affiliates will, without the prior written consent of the Company specifically expressed in a vote adopted after the Closing by the Board, directly or indirectly, purchase or cause to be purchased or otherwise acquire (other than pursuant to a stock split, stock dividend or similar transaction) or agree to acquire, or become or agree to become the beneficial owner of, any additional Stock, except that the Stockholders and their Affiliates may purchase from time to time, in the open market or in privately negotiated transactions, up to an aggregate number of shares of Common Stock which, when added to the shares of Common Stock then owned by the Stockholders and their Affiliates, would result in the Stockholders and their Affiliates owning no more than the percentage of voting securities of the Company held by the Stockholders and their Affiliates immediately following the Closing. Each of the Stockholders agrees that none of the Stockholders or their Affiliates will, without the prior written consent of the Board specifically expressed in a vote adopted by the Board, directly or indirectly, transfer any shares of Stock now owned or hereafter acquired by them, except for transfers made: (i) pursuant to the provisions of Section 5.6(c) below, (ii) pursuant to a publicly announced tender offer for any shares of Stock by any corporation, entity, person or group (other than any of the Stockholders or their Affiliates) which the Board has voted to recommend to holders of any shares of Stock, (iii) pursuant to the exercise of the registration rights provided in Article VI hereof, (iv) pursuant to open market sales made in accordance with Rule 144 under the Securities Act, including, if applicable, paragraph (k) thereof or (v) to the members or investors of the Purchaser, and to their members or investors, by 22 distribution, dissolution or otherwise; provided, however, that in no event shall any such member or investor who is an Affiliate of either of the Stockholders be permitted to, directly or indirectly, transfer any shares of Stock now owned or hereafter acquired, except in accordance with this Section 5.6(b). For purposes of this Agreement, "transfer" shall mean and include any sale, assignment, gift, pledge, the imposition of any other encumbrance or any other disposition or any agreement or obligation to do any of the foregoing. (c) If any Stockholder or any Affiliate thereof desires to sell any shares of Stock (a "Selling Stockholder") (other than pursuant to clause (ii), (iii), (iv) or (v) of Section 5.6(b) hereof), the following requirements shall be satisfied: (i) The Selling Stockholder shall notify the Company in writing of the proposed sale (the "Notice of Proposed Transfer"). The Notice of Proposed Transfer shall identify and provide reasonable information concerning the background, business experience and business affiliations of the proposed transferee (the "Transferee"), the purchase price or other consideration, if any, the number of shares and type of Stock to be transferred and the complete terms of the proposed transaction. (ii) For a period of ten (10) business days following the receipt of the Notice of Proposed Transfer, the Company and/or any substitute purchaser(s) as designated by the Company (the Company and/or such substituted purchaser is hereinafter sometimes called the "Buyer") shall have the option to purchase all, but not less than all, the Stock specified in the Notice of Proposed Transfer at the price and upon the terms set forthin the Notice of Proposed Transfer; provided, however, that if the type of consideration that was to be paid was non-cash consideration, then the amount payable by the Buyer for such Stock shall be determined in good faith by the Board, after consultation with the Company's investment banker. In the event that 23 Buyer elects to purchase all, but not less than all, of the Stock specified in the Notice of Proposed Transfer, it shall give written notice to the Selling Stockholder of its election, in which case settlement for said Stock shall be made and the Buyer shall purchase such Stock for such price, in cash within ten (10) business days after the date the Company receives the Notice of Proposed Transfer. In the event that Buyer elects not to purchase all of the Stock specified in the Notice of Proposed Transfer, the Selling Stockholder may consummate the proposed transfer of said Stock with the Transferee, provided, however, that such transfer shall not be consummated unless and until such Transferee agrees in writing to be bound by all of the terms of and to perform all of the obligations of the Stockholders contained in Section 5.6(b), this Section 5.6(c) and in Section 5.6(d) of this Agreement in the same manner as if such Transferee were a party to this Agreement. (d) Each of the Stockholders hereby agrees that, prior to the date on which the Stockholders beneficially own collectively less than 0.5% of the total issued and outstanding shares of Common Stock, none of the Stockholders or their Affiliates will, directly or indirectly, or will solicit, request, advise, assist or encourage others, directly or indirectly, to: (i) form, join in or in any other way participate in a "partnership, limited partnership, syndicate or other group" within the meaning of Section 13(d)(3) of the Exchange Act with respect to shares of Stock or deposit any Stock in a voting trust or similar arrangement or subject any Stock to any voting agreement or pooling arrangement, other than solely with one or more other Stockholders or Affiliates with respect to shares of Common Stock permitted to be owned hereunder; (ii) solicit proxies or written consents of shareholders with respect to Stock under any circumstances, or make, or in any way participate in, any "solicitation" of any 24 "proxy" to vote any shares of Stock, or become a "participant" in any election contest with respect to the Company (as such terms are defined or used in Rules 14a-1 and 14a-11 under the Exchange Act); (iii) seek to call, or to request the call of, a special meeting of the shareholders of the Company or seek to make, or make, a shareholder proposal, or seek to make or make, any nomination of any candidate as a director of the Company other than a designee of the Purchaser pursuant to Section 4.5 hereof or any candidate nominated by the Board, at any meeting of the shareholders of the Company; (iv) commence or announce any intention to commence any tender offer for any shares of Stock; (v) make a proposal or bid with respect to, announce any intention or desire to make, or discuss with any person, or publicly make or disclose, cause to be made or disclosed publicly, facilitate the making public or public disclosure of, any proposal or bid with respect to, the acquisition of any substantial portion of the assets of the Company or of the assets or stock of any of its Subsidiaries or of all or any portion of the outstanding Stock, or any merger, consolidation, other business combination, restructuring, recapitalization, liquidation or other extraordinary transaction involving the Company or any of its Subsidiaries; (vi) otherwise act alone or in concert with others to seek to control or influence in any manner the management or the Board (including the composition thereof) or the business, operations or affairs of the Company; provided, however, that this provision shall not prevent the Purchaser's designee on the Board from participating in, or otherwise seeking to affect the outcome of, discussions and votes of the Board with respect to matters coming before it; 25 (vii) arrange, or in any way participate in, any financing for any transaction referred to in clauses (i) through (vi) above inclusive; (viii) make public, or cause or facilitate the making public (including by disclosure to any journalist or other representative of the media) of, any request, or otherwise seek, to obtain any waiver or amendment of any provision of this Agreement, or to take any action restricted hereby. Notwithstanding the foregoing, (i) the Stockholders may make such filings with the Commission pursuant to Sections 13(d) and 16(a) of the Exchange Act to reflect changes in the beneficial ownership of any shares of Stock of any Stockholder (to the extent such changes reflect action taken by such Stockholder which is permitted by this Agreement) and (ii) the Purchaser may exercise its rights with respect to the election of a director to the Board pursuant to Section 4.5 of this Agreement. (e) So long as the Stockholders beneficially own collectively 5.0% or more of the total issued and outstanding shares of Common Stock or an individual designated by the Purchaser pursuant to Section 4.5 is a member of the Board, whenever there shall be submitted to the stockholders of the Company nominees for election to the Board, each of the Stockholders and any Affiliate of such Stockholder controlled directly or indirectly by such Stockholder hereby agrees to vote, or to cause to be voted, all Stock then held by such Stockholder, whether beneficially or of record, and entitled to vote on such matter, in favor of such nominees designated or nominated by the Board, and, unless otherwise requested by the Company, not in favor of any other nominee or nominees other than a designee of the Purchaser pursuant to Section 4.5. 26 (f) Each of the Stockholders hereby covenants and agrees that each Stockholder will promptly notify the Company when and if such Stockholder receives or learns of (A) any oral or written request to any of the Stockholders or any of their Affiliates to participate in any of the transactions or actions referred to in paragraphs (i) through (viii) of subsection (d) above inclusive or (B) any oral or written communication from or by any person or entity (other than the Company) with respect to any of the transactions or actions referred to in paragraphs (i) through (viii) of subsection (d) above inclusive, if such person or entity could reasonably be deemed to be capable of effecting, participating in or materially assisting in such an action or transaction (through one or more Affiliates or otherwise) and such oral or written communication was of a nature that could reasonably be deemed to indicate a serious interest in effecting, participating in or materially assisting in such an action or transaction. VI. REGISTRATION RIGHTS The Company covenants and agrees to provide the following registration rights: 6.1. "Piggyback" Registration. If, at any time while the Purchaser shall hold Shares, the Company proposes to file a registration statement relating to the offering of any of its capital stock under the Securities Act (other than (i) a registration statement required to be filed in respect of employee benefit plans of the Company on Form S-8 or any similar form from time to time in effect, (ii) any registration statement on Form S-4 or similar successor form, or (iii) a registration statement relating to a transaction pursuant to Rule 145 of the Securities Act), whether or not for sale for its own account, the Company shall, at least twenty-one days (or if such twenty-one day period is not practicable, then a reasonable shorter period which shall not be less than seven days) prior to such filing, give written notice of such proposed filing to the Purchaser. Upon receipt by the Company not more than seven days (unless the notice given to 27 the Purchaser pursuant to the previous sentence is less than ten days, in which case such seven-day period shall be shortened to five days) after such notice of a written request from the Purchaser for registration of Purchaser's Stock (as hereinafter defined), (i) the Company shall, subject to Section 6.3, include such Purchaser's Stock in such registration statement, and shall use all reasonable efforts to cause such registration statement to become effective with respect to such Purchaser's Stock, unless the managing underwriter therefor concludes in its reasonable judgment that the number of securities requested to be included in such registration exceeds the number which can reasonably be sold in (or during the time of) such offering, in which case the Company may (i) include all securities initially proposed by the Company to be sold for its own account and (ii) decrease the number of shares of Purchaser's Stock and any other securities (other than securities included by virtue of clause (i) above) proposed to be sold to the extent necessary to reduce the number of securities to be included in the registration to the level recommended by the managing underwriter; provided, however, that there shall be no such decrease in the number of shares of Purchaser's Stock unless the number of shares of Purchaser's Stock and such other securities (other than the securities included by virtue of clause (i) above) proposed to be sold has been decreased on a pro rata basis, calculated according to the number of shares of Purchaser's Stock and other securities requested to be included by the respective holders of each. "Purchaser's Stock" means any Shares for which the Purchaser requests registration pursuant to Section 6.1 or 6.2. 6.2. Demand Registration. If the Company shall receive at any time or from time to time a written request from the Purchaser requesting the Company to register any shares of Purchaser's Stock under the Securities Act on Form S-3 (or if the Company is not eligible to use Form S-3, then on Form S-1 or S-2), or any other similar form then in effect, the Company 28 agrees that it will use all reasonable efforts to cause the prompt registration of all shares of Purchaser's Stock as to which such request is made (or will amend or supplement an effective registration statement to include Purchaser's Stock). The Company may postpone for a limited time, which in no event shall be longer than 90 days, compliance with a request for registration pursuant to this Section 6.2 if (i) the Company shall have given notice to the Purchaser of the occurrence of a Suspension Event (as hereinafter defined) or (ii) the Company is conducting a public offering of capital stock and the managing underwriter concludes in its reasonable judgment that such compliance would materially adversely affect such offering. Notwithstanding anything in this Section 6.2 to the contrary, the Company shall not be required to: (a) comply with more than two (2) requests of the Purchaser pursuant to this Section 6.2 or (b) prepare or cause to be prepared audited financial statements of the Company other than those prepared in the normal course of the Company's business at its fiscal year end. Any underwriter selected by the Purchaser to act as such in connection with a registration pursuant to this Section 6.2 shall be reasonably acceptable to the Company. The Company shall not be required to file and effect a new registration pursuant to this Section 6.2(b) until a period of nine (9) months has elapsed from the termination of the registration statement with respect to Purchaser's Stock covered by a prior registration request. The Company agrees that in the event the Purchaser makes a request under this Section 6.2 to cause the Company to effect a demand registration and the Company is precluded from effecting such registration with respect to 25% or more of the shares of Purchaser's Stock subject to such request as a consequence of the terms of registration rights previously granted by the Company to any of the Other Holders, then, under such 29 circumstances, such request shall not be counted against the number of demand requests granted to Purchaser under this Section 6.2. 6.3. General Provisions. (a) The Company will use all reasonable efforts to cause any registration statement referred to in Sections 6.1 and 6.2 to become effective and to remain effective (with a prospectus at all times meeting the requirement of the 1933 Act) until the earlier of 180 days from the effective date of the registration statement and the date the Purchaser completes its distribution of Purchaser's Stock, subject, however, to the Company's suspension rights set forth in Section 6.7(b). The Company will use all reasonable efforts to effect such qualifications under applicable Blue Sky or other state securities laws as may be reasonably requested by the Purchaser (provided that the Company shall not be obligated to file a general consent to service of process or qualify to do business as a foreign corporation or otherwise subject itself to taxation in any jurisdiction solely for the purpose of any such qualification) to permit or facilitate such sale or other distribution. The Company will cause the Purchaser's Stock to be listed on the principal stock exchange on which the shares of Common Stock are listed. (b) The Purchaser acknowledges that the Company has previously granted registration rights to other holders of Common Stock and/or other securities issued by the Company that are convertible into or exercisable for shares of Common Stock (collectively, the "Other Holders"). The Purchaser further acknowledges that, notwithstanding anything to the contrary provided in this Agreement, the registration rights granted to the Purchaser under this Agreement shall, in every case, be subject to the rights of the Other Holders and, to the extent, if any, that any of the provisions of this Article VI conflict or are inconsistent with any of such 30 rights of the Other Holders, such rights of the Other Holders shall govern with respect to the subject matter of such conflict or inconsistency. (c) The Purchaser agrees, if requested by the managing underwriter or underwriters in an underwritten offering (an "Offering"), not to effect any public sale or distribution of any of the securities of the Company of any class included in such Offering, including a sale pursuant to Rule 144 or Rule 144A under the Securities Act (except as part of such Offering), during the 15-day period prior to, and during the 90-day period beginning on, the date of pricing of each Offering, to the extent timely notified in writing by the Company or the managing underwriters. Furthermore, notwithstanding anything to the contrary set forth in the Agreement, the Company's obligation under this Agreement to cause a registration statement and any filings with any state securities commission to be made or to become effective or to amend or supplement such registration statement shall be suspended in the event and during such period as the Company is proceeding with an Offering if the Company is advised by the underwriters that the sale of shares of Purchaser's Stock under such registration statement would have a material adverse effect on the Offering. (d) Following the effectiveness of a registration statement and the filings with any state securities commissions, the Purchaser agrees that it will not effect any sales of the Purchaser's Stock pursuant to such registration statement or any such filings at any time after it has received notice from the Company to suspend sales (i) as a result of the occurrence or existence of any Suspension Event, or (ii) so that the Company may amend or supplement such registration statement or such filing. The Purchaser may recommence effecting sales of the Purchaser's Stock pursuant to the registration statement or such filings following further notice to such effect from the Company, which notice shall be given by the Company not later than 31 three (3) business days after the conclusion of any such Suspension Event or amendment or supplement. 6.4. Information, Documents, Etc. Upon making a request for registration pursuant to Sections 6.1 or 6.2, the Purchaser shall furnish to the Company such information regarding its holdings and the proposed manner of distribution thereof as the Company may reasonably request and as shall be required in connection with any registration, qualification or compliance referred to in this Article VI. The Company agrees that it will furnish to the Purchaser the number of prospectuses, offering circulars or other documents, or any amendments or supplements thereto, incident to any registration, qualification or compliance referred to in this Article VI as the Purchaser from time to time may reasonably request. 6.5. Expenses. The Company will bear all expenses of registrations pursuant to Section 6.1 and one-half of all expenses of the first registration (and amendments and supplements related thereto) pursuant to Section 6.2 (in each case, other than underwriting discounts and commissions and brokerage commissions and fees, if any, payable with respect to shares of Purchaser's Stock sold by the Purchaser, and fees and expenses of any accountants, counsel or other parties retained or employed by holders of Purchaser's Stock) including, without limitation, registration fees, printing expenses, expenses of compliance with Blue Sky or other state securities laws, and legal and audit fees incurred by the Company in connection with such registration and amendments or supplements in connection therewith. The Purchaser will bear one-half of all expenses of the first registration (and amendments and supplements related thereto) and all expenses of the second registration (and amendments and supplements related thereto) pursuant to Section 6.2, including, without limitation, registration fees, printing expenses, expenses of compliance with Blue Sky or other state securities laws, and legal and 32 audit fees incurred by the Company and the Purchaser and the holders of Purchaser's Stock. Notwithstanding the foregoing, the Company agrees that in the event that subsequent to the date hereof the Company shall grant demand registration rights to a third party and shall agree in connection therewith to bear all or a greater portion of the expenses of such demand registrations than as set out above, then this Section 6.5 shall be deemed to have been amended to provide for the Company to bear, and the Company shall bear, the same portion of the expenses of any subsequent registration pursuant to Section 6.2 of this Agreement as the Company shall have agreed to bear for such third party. 6.6. Cooperation. In connection with any registration of Purchaser's Stock pursuant to this Article VI, the Company agrees to : (a) enter into such customary agreement (including an underwriting agreement containing such representations and warranties by the Company and such other terms and provisions, including indemnification provisions, as are customarily contained in underwriting agreements for comparable offerings and, if no underwriting agreement is entered into, an indemnification agreement on such terms as is customary in transactions of such nature) and take all such other actions as the Purchaser or the underwriters, if any, participating in such offering and sale may reasonably request in order to expedite or facilitate such offering and sale; (b) furnish, at the request of the Purchaser or any underwriters participating in such offering and sale, (i) a comfort letter or letters, dated the date of the final prospectus with respect to the Purchaser's Stock and/or the date of the closing for the sale of the Purchaser's Stock from the independent certified public accountants of the Company and addressed to the Purchaser and any underwriters participating in such offering and sale, which letter or letters shall state that such accountants are independent with respect to the Company within the 33 meaning of Rule 1.01 of the Code of Professional Ethics of the American Institute of Certified Public Accountants and shall be in form reasonably satisfactory to the managing underwriter (or, if none, to the Purchaser) and shall cover matters of the type customarily covered in "cold comfort" letters in connection with transactions of a similar nature for similar entities and (ii) an opinion, dated the date of the closing for the sale of the Purchaser's Stock, of the counsel representing the Company with respect to such offering and sale (which counsel may be the General Counsel of the Company or other counsel reasonably satisfactory to the Purchaser), addressed to the Purchaser and any such underwriters, which opinion shall be in form reasonably satisfactory to the managing underwriter (or, if none, to the Purchaser) and shall address such matters as are customary in transactions of a similar nature for similar entities; (c) make available for inspection by the Purchaser, the underwriters, if any, participating in such offering and sale (which inspecting underwriters shall, if reasonably possible, be limited to any manager or managers for such participating underwriters), the counsel for the Purchaser, one accountant or accounting firm retained by the Purchaser and any such underwriters, or any other agent retained by the Purchaser or such underwriters, all financial and other records, corporate documents and properties of the Company, and supply such additional information, as they shall reasonably request; provided that any such party shall keep the contents thereof confidential in the manner prescribed by Section 5.1. 6.7. Action to Suspend Effectiveness; Supplement to Registration Statement. (a) The Company will notify the Purchaser and its counsel promptly of (i) any action by the Commission to suspend the effectiveness of the registration statement covering the Purchaser's Stock or the institution or threatening of any proceeding for such purpose (a "stop order") or (ii) the receipt by the Company of any notification with respect to the suspension of the qualification 34 of the Purchaser's Stock for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. Immediately upon receipt of any such notice, the Purchaser shall cease to offer or sell any Purchaser's Stock pursuant to the registration statement in the jurisdiction to which such stop order or suspension relates. The Company will use all reasonable efforts to prevent the issuance of any such stop order or the suspension of any such qualification and, if any such stop order is issued or any such qualification is suspended, to obtain as soon as possible the withdrawal or revocation thereof, and will notify the Purchaser and its counsel at the earliest practicable date of the date on which the Purchaser may offer and sell Purchaser's Stock pursuant to the registration statement. (b) Notwithstanding anything to the contrary set forth in this Agreement, the Company's obligation under this Agreement to cause the registration of Purchaser's Stock and any filings with any state securities commission to be made or to become effective or to amend or supplement a registration statement shall be suspended in the event and during such period that there are pending negotiations relating to, or consummation of, a transaction or the occurrence of an event that would require additional disclosure of material information by the Company in such registration statement or such filing (such circumstances being hereinafter referred to as a "Suspension Event") that would make it impractical or inadvisable to cause such registration statement or such filings to be made or to become effective or to amend or supplement such registration statement, but such suspension shall continue only for so long as such event or its effect is continuing but in no event will that suspension exceed ninety (90) days. Immediately upon receipt by the Purchaser of notice of a Suspension Event, the Purchaser shall cease to offer or sell any Purchaser's Stock pursuant to such registration statement, cease to deliver or use such registration statement and, if so requested by the Company, return to the 35 Company, at its expense, all copies (other than permanent file copies) of such registration statement. (c) In the event the Company shall determine that it is necessary to amend or supplement any registration statement relating to Purchaser's Stock, the Company will furnish copies of such proposed amendment or supplement to the Purchaser and its counsel and will not file or distribute such amendment or supplement without the prior consent of the Purchaser, which consent shall not be unreasonably withheld. 6.8. Indemnification. In the event any Purchaser's Stock is included in a registration statement under this Article VI: (a) To the full extent permitted by law, the Company will indemnify and hold harmless the Purchaser and each subsequent holder of Purchaser's Stock as set forth in Section 9.3(d) hereof (each, a "Holder") and the affiliates of such Holder, and their respective directors, officers, employees, general and limited partners, members, agents and representatives (and the directors, officers, affiliates and controlling persons thereof), and each other person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act, from and against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus, any final prospectus contained therein or any amendments or supplements thereto, (ii) any omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not 36 misleading, or (iii) any violation or alleged violation by the Company in connection with the registration of Purchaser's Stock under the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Holder, affiliate or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, that the indemnity agreement contained in this Section 6.8(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable hereunder in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by the Purchaser or controlling person; and provided, further, that the Company shall not be liable hereunder in any such case to the extent it is determined that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made: (A) in any such preliminary prospectus, if (I) it was the responsibility of such Holder to provide the person asserting such loss, claim, damage, liability or expense with a current copy of the prospectus and such Holder failed to deliver or cause to be delivered a copy of the prospectus to such person after the Company had furnished such Holder with a sufficient number of copies of the same and (II) the prospectus corrected such untrue statement or omission; or 37 (B) in such prospectus, if such untrue statement or omission is corrected in an amendment or supplement to such prospectus and the Holder thereafter fails to deliver the prospectus as so amended or supplemented prior to or concurrently with the sale of Purchaser's Stock to the person asserting such loss, claim, damage, liability or expense after the Company had furnished such Holder with a sufficient number copies of the same. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or any such director, officer, employee, general or limited partner, member, agent, representative or controlling person and shall survive the transfer of such securities by such Holder. Each Holder shall furnish such information regarding itself or the claim in question as the Company may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom. (b) To the full extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon (i) any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for 38 use in connection with such registration or (ii) an untrue statement or alleged untrue statement or omission or alleged omission made in the circumstances described in clauses (A) or (B) of Section 6.8(a); and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 6.8(b), in connection with investigating or defending any such loss, claim, damage, liability or action; provided, that the indemnity agreement contained in this Section 6.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any indemnity under this Section 6.8(b) exceed the gross proceeds from the offering received by such Holder; and provided, further, that the obligation to provide indemnification pursuant to this Section 6.8(b) shall be several, and not joint and several, among such indemnifying parties. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer, representative or controlling person and shall survive the transfer of such securities by such prospective Seller. (c) Promptly after receipt by an indemnified party under this Section 6.8 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 6.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel selected by the indemnifying party or parties. The failure to deliver written notice to the indemnifying party within a reasonable time after the 39 commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 6.8 to the extent of such prejudice, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 6.8. The indemnified party shall have the right, but not the obligation, to participate in the defense of any action referred to above through counsel of its own choosing and shall have the right, but not the obligation, to assert any and all separate defenses, cross claims or counterclaims which it may have, and the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment of such counsel has been specifically authorized in advance by the indemnifying party, (ii) there is a conflict of interest that prevents counsel for the indemnifying party from adequately representing the interests of the indemnified party or there are defenses available to the indemnified party that are different from, or additional to, the defenses that are available to the indemnifying party, or (iii) the indemnifying party fails to assume the defense or does not reasonably contest such action in good faith, in which case, if the indemnified party notifies the indemnifying party that it elects to employ separate counsel, the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party and the reasonable fees and expenses of such separate counsel shall be borne by the indemnifying party; provided, however, that, the indemnifying party shall not, in connection with any proceeding or related proceedings, be liable for the reasonable fees and expenses of more than one separate firm (in addition to one firm acting as local counsel) for all indemnified parties. (d) Contribution. If for any reason (other than the reasons expressly specified in this Section 6.8) the foregoing indemnity and payment obligation is unavailable or is 40 insufficient to hold harmless an indemnified party under paragraphs (a) or (b) of this Section 6.8, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any loss, claim, damage or liability (or actions or proceedings in respect thereof), including, without limitation, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding, in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other. The relative fault shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been taken or made by, or relates to information supplied by, the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, untrue statement or omission. If, however, the allocation provided in the second preceding sentence is not permitted by applicable law, or if the allocation provided in the second preceding sentence provides a lesser sum to the indemnified party than the amount hereinafter calculated, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative fault but also the relative benefits to the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The parties agree that it would not be just and equitable if contributions pursuant to this Section 6.8(d) were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the preceding sentences of this Section 6.8(d). Notwithstanding anything in this Section 6.8(d) to the contrary, no indemnifying party 41 (other than the Company) shall be required pursuant to this Section 6.8(d) to contribute any amount in excess of the gross proceeds received by such indemnifying party from the sale of Purchaser's Stock in the offering to which the losses, claims, damages or liabilities of the indemnified parties relate. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The obligations of the Company and the Holders under this Section 6.8 shall survive the completion of any offering of Purchaser's Stock in a registration statement under this Article VI. (f) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement (if any) entered into in connection with any underwritten public offering of the Purchaser's Stock are in conflict with the foregoing provisions, the provisions in such underwriting agreement shall control. VII. INDEMNIFICATION 7.1. Indemnification by the Company. The Company shall indemnify and hold the Purchaser and each of its members, employees, officers and agents harmless from and against any and all losses, claims, damages or liabilities whatsoever (including legal fees and expenses) incurred by any of them based upon, resulting from or arising out of any material breach of any representation, warranty, covenant or agreement of the Company contained in this Agreement. 7.2. Indemnification by the Purchaser. The Purchaser (and with respect to Sections 5.1, 5.2 and 5.6, Chilmark) shall indemnify and hold the Company and each of its employees, directors, officers and agents harmless from and against any and all losses, claims, damages or liabilities whatsoever (including legal fees and expenses) incurred by any of them 42 (i) in the case of the Purchaser, resulting from or arising out of any material breach of any representation, warranty, covenant or agreement of the Purchaser contained in this Agreement and (ii) in the case of Chilmark, resulting from or arising out of any material breach of any covenant or agreement of Chilmark contained in Sections 5.1, 5.2 or 5.6 of this Agreement. VIII. TERMINATION 8.1 Termination. (a) This Agreement may be terminated and the transactions contemplated herein may be abandoned at any time prior to the Closing: (i) by the Company or the Purchaser, if the Closing has not occurred by December 31, 1997; (ii) by mutual written consent of the Company and the Purchaser; (iii) by the Company, if there has been a material misrepresentation or breach of warranty on the part of the Purchaser in the representations and warranties contained herein or a material breach of covenants on the part of the Purchaser and the same has not been cured within 30 days after notice thereof; (iv) by the Purchaser, if there has been a material misrepresentation or breach of warranty on the part of the Company in the representations and warranties contained herein or a material breach of covenants on the part of the Company and the same has not been cured within 30 days after notice thereof; (v) by the Purchaser, in accordance with Section 4.6, if the terms of the Additional Commitment Letter are materially and adversely different from those contained in the August 6th Commitment Letter; or (vi) by either the Purchaser or the Company, if any Governmental Entity shall have issued a final order, decree or ruling or taken any other action permanently enjoining, 43 restraining or otherwise prohibiting the Asset Acquisition or the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable, provided that the party seeking to terminate shall have used its best efforts to appeal such order, decree, ruling or other action. (b) Notwithstanding anything herein to the contrary, the right to terminate this Agreement under this Section 8.1 shall not be available to any party to the extent the failure of such party to fulfill any of its obligations under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date (as a result, for example, of an action or failure to act causing a failure of a condition precedent). (c) A party terminating this Agreement pursuant to this Section 8.1 shall give written notice thereof the other party hereto, whereupon this Agreement shall terminate and be of no further force and effect, the transactions contemplated hereby shall be abandoned without further action by any party and there shall be no liability on the part of the Company or the Purchaser, except as provided in Section 9.7 hereof and except for any liability for any willful breach hereof; provided however that the provisions of Sections 5.1, 7.1 and 7.2 shall survive any such termination. IX. GENERAL PROVISIONS 9.1. Survival of Representations, Warranties and Agreements. Notwithstanding any investigation conducted or notice or knowledge obtained by or on behalf of any party hereto, each representation and warranty in this Agreement and each agreement or covenant in this Agreement which does not by its own terms expire on or prior to the Closing shall survive the Closing without limitation as to time, except as specifically referred to herein. 44 9.2. Notices. Any notice, request, instruction or other document to be given hereunder by a party hereto shall be in writing and shall be deemed to have been given, (i) when received if given in person, or (ii) on the date of transmission if sent by nationally recognized overnight courier, certified or registered mail, return receipt requested or (iii) three days after being deposited in the U.S. mail, postage prepaid: (a) if to the Purchaser, addressed as follows: Cape Ann Investors, L.L.C. c/o Chilmark Fund II, L.P. 875 North Michigan Avenue Suite 2100 Chicago, Illinois 60611 Attention: Mr. David M. Schulte with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Attention: William A. Groll, Esq. (b) if to the Company, addressed as follows: NutraMax Products, Inc. 9 Blackburn Drive Gloucester, Massachusetts 01930 Attention: Robert F. Burns, Vice President and Chief Financial Officer with a copy to: Eugene M. Schloss, Jr., Esq. 1700 Cary Road Huntingdon Valley, Pennsylvania 19006-5002 and Goodwin, Procter & Hoar, LLP Exchange Place 53 State Street Boston, Massachusetts 02109 Attention: Joseph L. Johnson III, Esq. 45 or to such other individual or address as a party hereto my designate for itself by notice given as herein provided. 9.3. General. (a) This Agreement (including the documents and instruments referred to or incorporated herein) constitutes the entire agreement, and supersedes all of the prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. (b) This Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder other than as contemplated in Article VI, Article VII and Section 9.3(d) and shall not be assigned by any party by operation of law or otherwise. (c) This Agreement may be executed in two or more counterparts which together shall constitute a single agreement. (d) This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, heirs and permitted assigns. This Agreement is not assignable except by consent of each of the parties hereto or operation of law; provided that in the event Purchaser shall distribute the Shares to its investors (whether as a result of dissolution or otherwise), (i) the holders of such Shares shall succeed to the rights and obligations of the Purchaser contained in Article VI hereof and (ii) Chilmark Fund II, L.P. shall succeed to the rights and obligations of the Purchaser contained in Section 4.5 hereof so long as it shall hold any Shares. Any purported assignment of this Agreement in violation of this Section 9.3 shall be null and void. 9.4. Governing Law. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES CREATED HEREBY SHALL BE GOVERNED BY THE 46 INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (b) Each party agrees that any proceeding relating to this Agreement shall be brought in a state court of Delaware. Each party hereby consents to personal jurisdiction in any such action brought in any such Delaware court, consents to service of process by mail made upon such party and such party's agent and waives any objection to venue in any such Delaware court or to any claim that any such Delaware court is an inconvenient forum. 9.5. Severability of Provisions. If any provision or any portion of any provision of this Agreement or the application of any such provision or any portion thereof to any person or circumstance, shall be held invalid or unenforceable, to the extent permitted by law, the remaining portion of such provision and the remaining provisions of this Agreement, or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby. 9.6. Captions. All section titles or captions contained in this Agreement are for convenience only, shall not be deemed a part of this Agreement and shall not affect the meaning or interpretation of this Agreement. All references herein to Sections shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. 9.7. Expenses. Except as otherwise expressly provided in this Agreement, each party hereto shall pay its own expenses incidental to the preparation of this Agreement, the carrying out of the provisions hereof and the consummation of the transactions contemplated hereby. In the event that the Company shall become entitled to a break-up fee or reimbursement of expenses from AWC pursuant to the terms of the Asset Purchase Agreement, the Company 47 agrees that the aggregate amount of the break-up fee and expense reimbursement to which it is entitled shall be allocated, first, to reimburse the out-of- pocket costs and expenses incurred by each of the Company and the Purchaser in connection with the Asset Acquisition and the transactions contemplated by this Agreement (including, without limitation, the bank financing sought by the Company in connection with the Asset Acquisition) (provided that should the amount of such break-up fee and expense reimbursement be insufficient to reimburse the Company and the Purchaser in full, the Company and the Purchaser shall share such amount pro-rata in accordance with their respective out-of- pocket costs and expenses) and, second, the balance of such funds shall be allocated two-thirds to the Company and one-third to the Purchaser. Any payments to be made to the Purchaser under this Section 9.7 shall be made to the account of the general partner of the managing member of the Purchaser. 9.8. Equitable Relief. Each party acknowledges that, in the event of any breach of this Agreement by a party, the other party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that such other party, in addition to any other remedy to which it may be entitled, shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to compel specific performance of this Agreement. Any requirements for the securing or posting of any bond with respect to such remedy are hereby waived by each of the parties hereto. 9.9. Definitions. The following terms shall have the respective meanings specified in the indicated Sections of this Agreement:
Term Agreement Section - ---- ----------------- Additional Commitment Letter 4.6 Affiliate 5.6(a) Agreement Recitals
48 Asset Acquisition Recitals Asset Purchase Agreement Recitals August 6th Commitment Letter 1.3(b) Authority 1.3(b) Board 1.3(d)(ii) Buyer 5.6(c)(ii) Chilmark 5.1(b) Closing 1.3(a) Code 5.6 Commission 2.6 Common Stock 2.5(a) Company Recitals Encumbrances 1.1 Exchange Act 2.4 Financial Statements 2.7(a) Governmental Entity 1.3(b) Hart-Scott-Rodino Act 1.3(b) Holder 6.8(a) Legal Requirements 1.3(b) Material Adverse Effect 1.3(b) NASD 2.3(a) Notice of Proposed Transfer 5.6(c)(i) Offering 6.3(c) Other Holders 6.3(b) Person 4.1 Purchaser Recitals Purchaser Material Adverse Effect 1.3(c) Purchaser's Stock 6.1 Rule 13d-3 5.6(a) SEC Reports 2.6 Securities Act 3.6 Selling Stockholder 5.6(c) Shares Recitals Stock 5.6(a) Stockholders 5.6(a) Subsidiary 2.1 Suspension Event 6.7(b) Transferee 5.6(c)(i) Weaver Recitals White Cross Recitals
49 IN WITNESS WHEREOF, each of the parties hereto have duly executed and delivered this Agreement as of the date first above written. NUTRAMAX PRODUCTS, INC. By: /s/ Donald E. Lepone ------------------------ Name: Donald E. Lepone Title: President/CEO CAPE ANN INVESTORS, L.L.C. By: Chilmark Fund II, L.P., its Managing Member By: Chilmark II, L.L.C., its General Partner By: /s/ Joel S. Friedland ------------------------ Name: Joel S. Friedland Title: Vice President SOLELY FOR PURPOSES OF SECTIONS 5.1, 5.2, 5.6 AND 7.2: CHILMARK FUND II, L.P. By: Chilmark II, L.L.C., its General Partner By: /s/ Joel S. Friedland ------------------------- Name: Joel S. Friedland Title: Vice President EX-2.4 5 AMENDMENT TO STOCK PURCHASE AGREEMENT Exhibit 2.4 ----------- AMENDMENT NO. 1 (this "Amendment"), dated September 9, 1997, to the Stock Purchase Agreement (the "Agreement") dated as of August 12, 1997 by and between NutraMax Products, Inc., a Delaware corporation (the "Company"), and Cape Ann Investors, L.L.C., a Delaware limited liability company (the "Purchaser"). All capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings set forth in the Agreement. 1. The first sentence of Section 1.1 of the Agreement is hereby deleted in its entirety and replaced with the following sentence: "Upon the terms and subject to the conditions set forth in this Agreement, the Company agrees to issue, sell and deliver to the Purchaser, and the Purchaser agrees to purchase from the Company, 846,154 Shares." 2. Section 5.6(b) of the Agreement is hereby amended by (a) inserting a comma after the word "thereof" at the end of clause (iv), (b) deleting the word "or" immediately preceding clause (v), (c) inserting after the word "otherwise" at the end of clause (v) the following: "or (vi) to one or more members of the Advisory Board of Chilmark in an aggregate amount of up to 40,000 Shares and subject to Section 9.3(d) hereof" and (d) inserting after the word "investor" in the proviso the following: "referred to in clause (v) or (vi) hereof." 3. Section 9.3(d) of the Agreement is hereby amended by inserting after the word "Shares" at the end of the second sentence thereof the following: "; and provided further that in the event the Purchaser shall transfer Shares to one or more members of the Advisory Board of Chilmark in accordance with Section 5.6(b)(vi), such member or members shall succeed to the rights and obligations of the Purchaser with respect to such Shares contained in Section 5.6 and Article VI hereof, other than Section 6.2 hereof. No transfer of Shares to any member of the Advisory Board of Chilmark pursuant to the second proviso of the preceding sentence shall be effective unless and until such member (i) agrees in writing to be bound by all of the terms of and to perform all of the obligations of the Purchaser with respect to such Shares contained in Section 5.6 and Article VI hereof, other than Section 6.2 hereof, and (ii) makes a representation as to such member to the same effects set forth for the Purchaser in Section 3.6 hereof or otherwise provides written evidence, reasonably satisfactory to the Company, that such transfer may be effected in compliance with the federal securities laws and applicable state securities laws." 4. Except as expressly provided herein, the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties hereto has duly executed and delivered this Amendment as of the date first above written. NUTRAMAX PRODUCTS, INC. By: /s/ Donald E. Lepone --------------------------- Name: Donald E. Lepone Title: President/CEO CAPE ANN INVESTORS, L.L.C. By: Chilmark Fund II, L.P., its Managing Member By: Chilmark II, L.L.C., its General Partner By: /s/ Joel S. Friedland --------------------------- Name: Joel S. Friedland Title: Vice President 2 EX-2.5 6 AMENDMENT #1 TO REVOLVING CREDIT AGREEMENT Exhibit 2.5 ----------- NUTRAMAX PRODUCTS, INC. 9 Blackburn Drive Gloucester, MA 01930 Dated as of: September 11, 1997 BankBoston, N.A. Individually and as Agent 100 Federal Street Boston, Massachusetts 02110 Fleet National Bank One Federal Street Boston, MA 02109 National Bank of Canada One Federal Street, 27th Floor Boston, MA 02110 The Sumitomo Bank, Limited One Post Office Square Suite 3820 Boston, MA 02109 Senior Debt Portfolio c/o Eaton Vance Management 24 Federal Street Boston, MA 02110 Re: First Amendment to Revolving Credit and Term Loan Agreement ----------------------------------------------------------- Ladies and Gentlemen: -1- We refer to the Revolving Credit and Term Loan Agreement, dated as of December 30, 1996 (the "Loan Agreement"), among NutraMax Products, Inc. (the "Borrower"), the banking institutions referred to therein as Banks (the "Banks") and The First National Bank of Boston (now known as BankBoston, N.A.), as agent (the "Agent"). Upon the terms and subject to the conditions contained in the Loan Agreement, you agreed to make Revolving Loans and Term Loans to, and issue Letters of Credit for the account of, the Borrower. Terms used in this letter of agreement (the "First Amendment") which are not defined herein, but which are defined in the Loan Agreement, shall have the same respective meanings herein as therein. We have advised you of the acquisition (the "Acquisition") out of bankruptcy by the Borrower or its newly-established subsidiaries of substantially all of the assets of American White Cross, Inc. ("AWCI") and its affiliates (together with AWCI, the "Sellers") relating to the first aid business of the Sellers. The Acquisition is being made substantially on the terms set forth in the Asset Purchase Agreement dated as of July 21, 1997 among the Borrower, AWCI and certain other parties and the related documents (collectively, the "Acquisition Documents"). In connection with the Acquisition, we have requested you to increase the aggregate principal amount of the Loans and to make certain other modifications to the Loan Documents (collectively, the "Modifications"), and you have advised us that you are prepared and would be pleased to make the Modifications so requested by us on the condition that we join with you in this First Amendment and the various other instruments and documents (including the allonges to the Notes) contemplated hereby (collectively with the First Amendment, the "First Amendment Documents"). Accordingly, in consideration of these premises, the promises, mutual covenants and agreements contained in this First Amendment, and fully intending to be legally bound by this First Amendment and the other First Amendment Documents to which the undersigned is a party, we hereby agree with you as follows: -2- ARTICLE I --------- AMENDMENTS TO LOAN AGREEMENT ---------------------------- Effective as of September 11, 1997 (the "First Amendment Date"), the Loan Agreement is amended in each of the following respects: (a) The terms "Loan Documents" and "Security Documents" shall, wherever used in any of the Loan Documents or Security Documents, be deemed to also mean and include this First Amendment, the allonges to the Notes and each of the other First Amendment Documents. (b) Section 1.1, containing various definitions, is amended in each of the following respects: (i) the definition of "Ancillary Documents" is amended to read in its entirety as follows: Ancillary Documents. Collectively, (i) the Stock Purchase Documents, (ii) ------------------- the Bond Documents, (iii) the Subordinated Debt Documents, (iv) the Material Agreements and Contracts, (v) the Acquisition Documents, (vi) the Chilmark Documents and (vii) all other agreements, instruments and contracts which shall from time to time be identified by the Agent, the Banks and the Borrower as "Ancillary Documents" for purposes of this Agreement, as any of the foregoing may be amended from time to time in accordance with Section 6.17. (ii) the definition of "Base Inventory" is amended by adding in the first line after the words "solely of finished goods" the words "(provided that, as to the Acquiring Subsidiaries only, Base Inventory shall also include raw materials and work-in- process)". (iii) the definition of "Borrowing Base" is amended to read in its entirety as follows: Borrowing Base. In relation to the Borrower as at any particular date, an -------------- amount equal to the lesser of (i) the aggregate Revolving Credit Commitments as in effect on -3- such date, and (ii) the sum, as determined by the Agent in good faith as at such date, of: (A) with respect to the Borrower and the Subsidiaries other than the Acquiring Subsidiaries: (1) 50% of the Net Security Value of Base Inventory as at such date, and (2) 85% of the Net Outstanding Amount of Base Accounts as at such date; and (B) with respect to the Acquiring Subsidiaries: (1) 50% of the Net Security Value of Base Inventory as at such date other than items of Base Inventory described in item (2) immediately following, and (2) 25% of the Net Security Value of Base Inventory as at such date consisting of (a) finished goods that is adhesive bandages and (b) raw materials (other than raw materials consisting of adhesive bandages, adhesive substrates and medical supplies), and (3) 80% of the Net Outstanding Amount of Base Accounts as at such date; provided -------- that the Agent reserves the right, in its reasonable discretion, based upon a good faith determination that a material change in the Collateral has occurred, to decrease the foregoing percentages or to modify the eligibility requirements. Whenever the Borrowing Base is used as a measure of Revolving Loans, it shall be computed as of, and the Revolving Loans referred to shall be those reflected in the Loan Account at, the time in question. (iv) the definition of "Environmental Indemnity Agreement" is amended to read in its entirety as follows: Environmental Indemnity Agreement. Collectively, the Environmental --------------------------------- Indemnity Agreements executed and delivered by the Borrower and its Subsidiaries to the Agent, each for the ratable benefit of the Banks and the Agent, pursuant to which the Borrower and its Subsidiaries shall, among other things, indemnify the Banks from environmental liability on or affecting the Real Properties. (v) the definition of "Patent and Trademark Security Agreements" is amended to read in its entirety as follows: Patent and Trademark Security Agreements. Collectively, (i) the Borrower ---------------------------------------- Patent and Trademark Security Agreement, (ii) the Holdings Patent and Trademark Security Agreement, (iii) the Holdings II Patent and Trademark Security Agreement, (iv) the Optopics Patent and Trademark Security Agreement, (v) the Fairton Patent and Trademark Security Agreement, (vi) the Oral Patent and Security Agreement, (vii) the -4- Florence Patent and Security Agreement, (viii) the Powers Patent and Trademark Security Agreement, (ix) the Certified Patent and Trademark Security Agreement, (x) the Adhesive Patent and Trademark Security Agreement and (xi) the First Aid Patent and Trademark Security Agreement. (vi) the definition of "Real Property or Real Properties" is amended to read in its entirety as follows: Real Property or Real Properties. Collectively, the several parcels of -------------------------------- land together with the improvements now or hereafter located thereon, at: (i) 170 Oak Hill Way, Brockton, Massachusetts, 23 Spring Street, Florence, Massachusetts, 355 East 54th Street, Elmwood Park, New Jersey, 35 Main Street, Fairton, New Jersey, and 14 Blackburn Drive, Gloucester, Massachusetts; and (ii) 9 Blackburn Drive, Gloucester, Massachusetts, 83 Blackburn Drive, Gloucester, Massachusetts, 51 Blackburn Drive, Gloucester, Massachusetts, 15200 Interstate Highway, 45 North, Houston, Texas and Baltimore Avenue, Bridgeton, New Jersey, each of which is leased to the Borrower pursuant to a Lease, said Real Properties being described in detail in the Mortgages. (vii) the definition of "Revolving Credit Maturity Date" is amended to read in its entirety as follows: Revolving Credit Maturity Date. September 30, 2002. ------------------------------ (viii) the definition of "Revolving Loans" is amended to read in its entirety as follows: Revolving Loans. Collectively, the loans in the maximum aggregate --------------- principal amount of $25,000,000 made or to be made to the Borrower by the Banks pursuant to this Agreement (including Section 2.1(a) hereof) and subject to the limitations contained herein. (ix) the definition of "Security Agreements" is amended to read in its entirety as follows: -5- Security Agreements. Collectively, (i) the Borrower Security Agreement, ------------------- (ii) the Holdings Security Agreement, (iii) the Holdings II Security Agreement, (iv) the Optopics Security Agreement, (v) the Fairton Security Agreement, (vi) the Oral Security Agreement, (vii) the Florence Security Agreement, (viii) the Powers Security Agreement, (ix) the Certified Security Agreement, (x) the Adhesive Security Agreement, (xi) the Elmwood Security Agreement and (xii) the First Aid Security Agreement. (x) the first sentence of the definition of "Subordinated Debt Documents" is amended to read in its entirety as follows: Subordinated Debt Documents. Collectively, (i) the ING Subordinated ------------------------------ Agreement, (ii) the ING Subordinated Note, (iii) the ING Warrant Agreement and any and all Warrants issued hereunder (including, in any event, any so- called "put" or "call" rights contained therein, (iv) the ING Amendments and (v) each of any other agreements, contracts, and other instruments executed and delivered in connection with the foregoing or relating thereto, as the same may be amended or modified in accordance with Section 6.17 and Articles VIII and X of the ING Subordinated Agreement. (xi) the definition of "Subsidiary Guaranties" is amended to read in its entirety as follows: Subsidiary Guaranties. Collectively, (i) the Holdings Guaranty, (ii) the --------------------- Holdings II Guaranty, (iii) the Optopics Guaranty, (iv) the Fairton Guaranty, (v) the Oral Guaranty, (vi) the Florence Guaranty, (vii) the Powers Guaranty, (viii) the Certified Guaranty, (ix) the Adhesive Guaranty, (x) the Elmwood Guaranty and (xi) the First Aid Guaranty. (xii) the definition of "Term Loan A" is amended to read in its entirety as follows: Term Loan A. The term loan in the principal amount of up to $32,000,000 ----------- made or to be made to the Borrower between the Closing Date and the Stock Purchase LC -6- Expiry Date by the Banks having a Term Loan A Commitment pursuant to this Agreement (including Section 2.1(b) hereof), and subject to the limitations contained herein. (xiii) the definition of "Term Loan B" is amended to read in its entirety as follows: Term Loan B. The term loan in the principal amount of up to $27,000,000 ----------- made or to be made to the Borrower between the Closing Date and the Stock Purchase LC Expiry Date by the Banks having a Term Loan B Commitment pursuant to Section 2.1(c), and subject to the limitations contained herein. (xiv) the definition of "Term Loan A Maturity Date" is amended to read in its entirety as follows: Term Loan A Maturity Date. September 30, 2002. ------------------------- (xv) the definition of "Term Loan B Maturity Date " is amended to read in its entirety as follows: Term Loan B Maturity Date. September 30, 2004. ------------------------- (xvi) the definition of "Total Commitment" is amended to read in its entirety as follows: Total Commitment. As of any date, the sum of the then-current Commitments ---------------- of the Banks, provided that the Total Commitment shall not at any time -------- exceed $91,222,693. (xvii) the following new definitions are added to Section 1.1: Acquiring Subsidiaries. Adhesive and First Aid, being the Subsidiaries who ---------------------- are to hold title to the non-real estate assets being acquired from the Sellers in the Acquisition. -7- Acquisition. The acquisition out of bankruptcy by the Borrower and/or the ----------- Acquiring Subsidiaries of substantially all of the assets of American White Cross, Inc. ("AWCI") and its affiliates (together with AWCI, the "Sellers") relating to the first aid business of the Sellers. Acquisition Documents. Collectively, (i) the Asset Purchase Agreement --------------------- dated as of July 21, 1997 among the Borrower, AWCI and certain other parties, as amended by an Amendment No. 1 dated as of August 15, 1997, and (ii) each of any other agreements, contracts and instruments executed and delivered in connection with the foregoing or relating thereto, as the same may be amended or modified in accordance with Section 6.17. Adhesive. Adhesive Coatings, Inc., a New Jersey corporation. -------- Adhesive Guaranty. The Unlimited Guaranty dated as of the First Amendment ----------------- Date and executed and delivered by Adhesive to the Agent, for the ratable benefit of the Banks and the Agent. Adhesive Patent and Trademark Security Agreement. The Patent and Trademark ------------------------------------------------ Security Agreement dated as of the First Amendment Date and executed and delivered by Adhesive to the Agent, for the ratable benefit of the Banks and the Agent. Adhesive Security Agreement. The Security Agreement dated as of the First --------------------------- Amendment Date hereof and executed and delivered by Adhesive to the Agent, for the ratable benefit of the Banks and the Agent. Chilmark Documents. Collectively, (i) the Stock Purchase Agreement dated ------------------- as of August 12, 1997, as amended by an amendment dated as of September 9, 1997, between the Borrower and Cape Ann Investors, L.L.C., a Delaware limited liability company, and (ii) each of any other agreements, contracts and instruments executed and delivered in connection with the foregoing or relating thereto, as the same may be amended or modified in accordance with Section 6.17. Elmwood. Elmwood Park Realty, Inc., a New Jersey corporation. ------- -8- Elmwood Guaranty. The Unlimited Guaranty dated as of the First Amendment ---------------- Date and executed and delivered by Elmwood to the Agent, for the ratable benefit of the Banks and the Agent. Elmwood Security Agreement. The Security Agreement dated as of the First -------------------------- Amendment Date and executed and delivered by Elmwood to the Agent, for the ratable benefit of the Banks and the Agent. First Aid. First Aid Products, Inc., a Delaware corporation. --------- First Aid Guaranty. The Unlimited Guaranty dated as of the First Amendment ------------------ Date and executed and delivered by First Aid to the Agent, for the ratable benefit of the Banks and the Agent. First Aid Patent and Trademark Security Agreement. The Patent and ------------------------------------------------- Trademark Security Agreement dated as of the First Amendment Date and executed and delivered by First Aid to the Agent, for the ratable benefit of the Banks and the Agent. First Aid Security Agreement. The Security Agreement dated as of the First ---------------------------- Amendment Date and executed and delivered by First Aid to the Agent, for the ratable benefit of the Banks and the Agent. First Amendment. The First Amendment to Revolving Credit and Term Loan --------------- Agreement dated as of September 11, 1997, among the Borrower, the Banks and the Agent. First Amendment Date. September 11, 1997. -------------------- First Amendment Documents. The First Amendment together with the allonges ------------------------- to the Notes and all other agreements and other instruments contemplated thereby (other than the Ancillary Documents) and all schedules, exhibits and annexes thereto, as the same may from time to time be amended and in effect. ING Amendments. Collectively, (i) Amendment No. 1 to the ING Subordinated -------------- Agreement and (ii) Amendment No. 1 to the ING Warrant Agreement. -9- (c) The portion of Section 2.1(b) beginning in the seventh line with the words "solely for" and ending in the tenth line with the words "Stock Purchase Agreement" is amended to read in its entirety as follows: "solely for the purposes permitted by Section 5.10(a);" (d) The portion of Section 2.1(c) beginning in the fourth line with the words "solely for" and ending in the seventh line with the words "Stock Purchase Agreement" is amended to read in its entirety as follows: "solely for the purposes permitted by Section 5.10(b);" (e) Sections 2.13(b) and (c) are amended to read in their entirety as follows: (b) The entire principal of the Term Notes A shall be payable by the Borrower to the Banks in 20 consecutive quarter-annual installments of principal. Such quarter-annual installments of principal shall be payable on the installment payment dates, and shall be in the amounts, set forth below: -10-
Installment Aggregate Amount Payment Date of Payment ------------ ---------------- 12/31/97 $ 725,000 03/31/98 $ 725,000 06/30/98 $ 725,000 09/30/98 $ 725,000 12/31/98 $1,475,000 03/31/99 $1,475,000 06/30/99 $1,475,000 09/30/99 $1,475,000 12/31/99 $1,787,500 03/31/00 $1,787,500 06/30/00 $1,787,500 09/30/00 $1,787,500 12/31/00 $1,975,000 03/31/01 $1,975,000 06/30/01 $1,975,000 09/30/01 $1,975,000 12/31/01 $2,037,500 03/31/02 $2,037,500 06/31/02 $2,037,500 09/30/02 $2,037,500
Notwithstanding the foregoing, the last 4 quarter-annual installments set forth in the table above shall be reduced in the inverse order of maturity by the difference between (i) $32,000,000 and (ii) the aggregate amount borrowed under Term Loan A as of the Stock Purchase LC Expiry Date. All of the indebtedness evidenced by each Term Note A shall, if not sooner paid, be in any event absolutely and unconditionally due and payable in full by the Borrower to the Banks on the Term Loan A Maturity Date. (c) The entire principal of the Term Notes B shall be payable by the Borrower to the Banks having Term Loan B Commitments in 8 consecutive quarter- annual installments of principal during the last two years prior to the Term Loan B Maturity -11- Date. Such quarter-annual installments of principal shall be payable on the installment payment dates, and shall be in the amounts, set forth below:
Installment Aggregate Amount Payment Date of Payment ------------ ---------------- 12/31/2002 $3,375,000 03/31/2003 $3,375,000 06/30/2003 $3,375,000 09/30/2003 $3,375,000 12/31/2003 $3,375,000 03/31/2004 $3,375,000 06/30/2004 $3,375,000 09/30/2004 $3,375,000
Notwithstanding the foregoing, each of the quarter-annual installments set forth in the table above shall be proportionately reduced to the extent the actual outstanding principal balance of Term Loan B is less than $27,000,000 on the Stock Purchase LC Expiry Date. All of the indebtedness evidenced by each Term Note B shall, if not sooner paid, be in any event absolutely and unconditionally due and payable in full by the Borrower to such Banks on the Term Loan B Maturity Date. (f) Section 3.2(b) is amended by adding in the first line after the words "Section IV" the words "hereof and Article II of the First Amendment". (g) Section 5.8 is amended by adding at the end thereof the following: "On or prior to November 11, 1997, the Borrower shall obtain additional interest rate protection on a minimum notational amount of $8,000,000 for a three-year period at a rate reasonably satisfactory to the Agent." (h) Section 5.10 is amended to read in its entirety as follows: 5.10. Use of Proceeds. --------------- -12- (a) Term Loan A shall only be advanced (i) to fund drawings under the Stock Purchase Letter of Credit, (ii) to fund the Acquisition and (iii) to fund, on or before the Stock Purchase LC Expiry Date, the acquisition of the Borrower's common stock held by MEDIQ pursuant to the Stock Purchase Agreement. (b) The proceeds of Term Loan B shall only be advanced (i) to fund drawings under the Stock Purchase Letter of Credit, (ii) to fund the Acquisition and (iii) to fund, on or before the Stock Purchase LC Expiry Date, the acquisition of the Borrower's common stock held by MEDIQ pursuant to the Stock Purchase Agreement. (c) Each of the Revolving Loans shall be used (i) to fund the Acquisition, (ii) to provide working capital for the Borrower and (iii) to pay costs and expenses incurred or sustained by the Borrower in connection with the consummation of the transactions referred to herein or contemplated hereby. (d) No portion of any Loans shall be used for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations G, U or X of the Board of Governors of the Federal Reserve System. (i) Section 6.10 is amended by deleting the table set forth therein in its entirety and by inserting the following table in place hereof: -13-
Maximum Fiscal Year Capital Expenditures ----------- -------------------- 1997 $2,500,000 1998 $8,000,000 1999 $7,000,000 2000, and each $6,750,000 fiscal year thereafter
(j) Schedule 1 to the Loan Agreement is amended as set forth in Annex ----- 1 attached hereto. - - (k) Exhibits A-1, A-2 and A-3, respectively, to the Loan Agreement are amended by the addition of the allonges set forth in Annex 2 attached ------- hereto. (l) Exhibit D to the Loan Agreement is amended as set forth in Annex ----- 4 attached hereto. - - ARTICLE II ---------- REPRESENTATIONS, WARRANTIES AND COVENANTS ----------------------------------------- The Borrower hereby represents, warrants and covenants to you as follows: (a) Representations in Loan Agreement. Each of the representations and --------------------------------- warranties made by the Borrower to you in the Loan Agreement was true, correct and complete when made and is true, correct and complete in all material respects on and as of the date hereof with the same full force and effect as if each of such representations and warranties had been made by the Borrower on the date hereof and in this First Amendment. (b) No Defaults or Events of Default. No Default or Event of Default -------------------------------- exists on the date of this First Amendment (after giving effect to all of the arrangements and transactions contemplated by this First Amendment). -14- (c) Minimum Availability. The Borrower has a minimum availability under -------------------- the Borrowing Base categories relating to the acquired assets, after the funding of the Acquisition, of at least $1,500,000. (d) Minimum Net Worth. The Borrower has a minimum net worth upon the ----------------- closing of the Modifications of at least $25,000,000. (e) Financial Information. The financial information previously delivered --------------------- to the Banks and the Agent with respect to the Sellers and the Sellers' business (including, without limitation, the pro forma financial statements of the --- ----- Borrower prepared as if the Acquisition had been effected) fairly presents the financial position of the Borrower and each Subsidiary, as applicable, and the historic results and pro forma projections of operations for the periods covered --- ----- by such information, and that there has been no material adverse change in the business, operations, assets, financial condition of the respective businesses and assets owned and operated by the Sellers, the Borrower or any Subsidiary or, to its knowledge, the Sellers since the date of the most recent financial information delivered to the Banks and the Agent the effect of which has, individually or in the aggregate, to its knowledge been materially adverse to the Borrower or its Subsidiaries. (f) Regulatory Compliance. The Borrower, the Subsidiaries and, to its --------------------- knowledge, each other party to the Acquisition and the Modifications shall have received all necessary regulatory approvals, including, without limitation, evidence of compliance in all material respects with all state and federal laws applicable to any of the parties to such transactions. (g) Post-Closing Items. Promptly following the closing of the ------------------ Modifications, the Borrower and the Subsidiaries shall promptly execute and deliver such further documents and take such further actions, as the Agent may reasonably require, and in any event shall deliver those items set forth in the Post-Closing Section of the Closing Agenda attached hereto as Annex 3 (the ------- "Annex 3 Items"). The failure to deliver any of the Annex 3 Items (other than ------- Item No. 34) within the time period specified opposite each respective item shall constitute an Event of Default under the Loan Agreement. (h) Binding Effect of Documents. This First Amendment and each of the --------------------------- First Amendment Documents has been duly executed and delivered to you by the Borrower and the Subsidiaries (as the -15- case may be) and is in full force and effect as of the date hereof, and the agreements and obligations of the Borrower and the Subsidiaries (as the case may be) contained herein and therein constitute legal, valid and binding obligations of the Borrower and the Subsidiaries (as the case may be) enforceable against them in accordance with their respective terms. ARTICLE III ----------- PROVISIONS OF GENERAL APPLICATION --------------------------------- (a) No Other Changes. Except to the extent specifically amended and ---------------- supplemented hereby, all of the terms, conditions and the provisions of the Loan Agreement, the Notes and each of the other Loan Documents shall remain unmodified, and the Loan Agreement, the Notes and each of the other Loan Documents, as amended and supplemented by this First Amendment, are confirmed as being in full force and effect. (b) Governing Law. This First Amendment is intended to take effect as a ------------- sealed instrument and shall be deemed to be a contract under the laws of the Commonwealth of Massachusetts. This First Amendment and the rights and obligations of each of the parties hereto shall be governed by and interpreted and determined in accordance with the laws of the Commonwealth of Massachusetts. (c) Binding Effect; Assignment. This First Amendment shall be binding -------------------------- upon and inure to the benefit of each of the parties hereto and their respective successors in title and assigns. (d) Counterparts. This First Amendment may be executed in any number of ------------ counterparts, each of which when executed and delivered shall be deemed an original, but all of which together shall constitute one instrument. In making proof of this First Amendment, it shall not be necessary to produce or account for more than one counterpart hereof signed by each of the parties hereto. (e) Conflict with Loan Agreement. If any of the terms of this First ---------------------------- Amendment shall conflict in any respect with any of the terms of the Loan Agreement or any other Loan Document, the terms of this First Amendment shall be controlling. (f) Conditions Precedent. This First Amendment shall become and be -------------------- effective as of the First Amendment Date, but only if: -16- (i) the form of acceptance at the end of this First Amendment shall be signed by the Borrower, each Subsidiary and the Banks; (ii) the Agent shall have received: 1. originals of each of the First Amendment Documents, together with any and all schedules, exhibits, annexes, agreements and instruments required to be delivered in connection therewith, each duly executed and delivered by the parties thereto, and each in form and substance satisfactory to the Agent; 2. originals or copies of each of (i) the Acquisition Documents, (ii) the Chilmark Documents and (iii) the ING Amendments, each duly executed and delivered by the parties thereto, and each in form and substance satisfactory to the Agent; 3. each of the items set forth on Annex 3, each in form ------- and substance reasonably satisfactory to the Agent; (iii) all steps necessary to enable the Agent to perfect a legal, valid and enforceable security interest in the assets acquired in connection with the Acquisition by the Borrower or any affiliate of the Borrower in any new locations of Collateral shall have been taken to the satisfaction of the Agent; (iv) the Acquisition shall have been consummated on the terms set forth in the Acquisition Documents, as delivered to the Agent on or prior to the First Amendment Date, and each of the conditions precedent specified in any thereof shall have been duly satisfied and completed to the satisfaction of the Agent on or prior to the First Amendment Date, notwithstanding any waiver or modification thereof; (v) The Banks and the Agent shall be satisfied that the financial information previously delivered to them with respect to the Sellers and the Sellers' business (including, without limitation, the pro forma financial statements of the Borrower prepared as if the --- ----- Acquisition had been effected) fairly presents the business and financial condition of -17- the respective businesses and assets owned and operated by the Sellers and the Borrower and each Subsidiary, as applicable, and the historic results and pro forma projections of operations for the periods --- ----- covered by such information, and that there has been no material adverse change in the business, operations, assets, condition (financial or otherwise) of the respective businesses and assets owned and operated by the Sellers, the Borrower or any Subsidiary since the date of the most recent financial information delivered to the Banks and the Agent, and that in the judgment of the Banks and the Agent there has been no material adverse change in the Sellers' business or in the Borrower's or any Subsidiary's ability to perform its obligations under the Loan Agreement (as amended by the First Amendment); (vi) the Sellers, the Borrower, the Subsidiaries and each other party to the Acquisition and the Modifications shall have received all necessary regulatory approvals, including, without limitation, evidence of compliance in all material respects with all state and federal laws applicable to any of the parties to such transactions; (vii) the United States Bankruptcy Court for the District of Delaware (the "Court") shall have entered a final order (the "Confirmation Order") confirming the plan of reorganization of AWCI (the "Plan") under 11 U.S.C. (S)1129 (the "1129 Order"), or, alternatively, the Court shall enter orders under 11 U.S.C. (S)(S)363 and 365 (the "Sale Orders"). The Plan and the 1129 Order, or the Sale Orders, shall provide for the Acquisition by the Borrower, and any motion for rehearing or reconsideration of the 1129 Order or either or both of the Sale Orders shall have been denied or withdrawn, and the time allowed for appeals of the 1129 Order or either or both of the Sale Orders shall have become final without any appeal having been taken or, if an appeal or no appeal has been taken, no stay shall be in effect. The 1129 Order or the Sale Orders shall be in form and substance reasonably satisfactory to the Agent and its counsel and each shall contain the following findings and provisions: (i) that the Borrower is a good faith purchaser within the meaning of 11 U.S.C (S)363(m), and (ii) that the Acquisition by the Borrower shall be free and clear of any and all liens, claims and encumbrances; -18- (viii) the Banks and the Agent shall have received satisfactory evidence of appropriate corporate and, if necessary, shareholder approval of the proposed transactions (including both the Acquisition and the Modifications) as well as opinions of independent counsel to the Sellers (to the extent the Seller delivers an opinion to Borrower), the Borrower and the Subsidiaries, as applicable, reasonably satisfactory to the Banks and the Agent in form and substance as to, among other things, the due authorization, legality, validity and binding effect of all documents relating to the Acquisition and the Modifications, the perfection of the liens of the security documents and the absence of any violation of any federal, state or local law or regulation applicable to any of the parties to such transactions as a result of the Acquisition or Modifications; (ix) the Banks and the Agent shall have received satisfactory evidence that (i) the Borrower has successfully completed (or, upon funding up to (but not in excess of) $26,243,000 of the increases in the Loans described herein, will successfully complete) the Acquisition, such transaction to be in form and substance reasonably satisfactory to the Banks and the Agent, (ii) Internationale Nederlanden (U.S.) Capital Corporation ("ING") has provided any and all required consents to the Acquisition and the Modifications and has entered into modifications to the Subordinated Debt Documents reasonably satisfactory to the Banks and the Agent in connection therewith and (iii) the Borrower has received additional funding of at least $11,000,000 through the issuance of equity to Chilmark (or other satisfactory person) to pay the balance of the purchase price for the assets to be sold in the Acquisition, and the Agent and the Banks are satisfied in all respects (including prohibitions on dividends and the amounts and terms of such equity) with such transactions; (x) the Banks and the Agent shall be satisfied that, after funding the Acquisition, there shall be additional availability under Term Loan A and Term Loan B to fund all additional amounts to be funded under the Stock Purchase Letter of Credit; (xi) the Banks and the Agent shall be satisfied that no litigation or proceedings shall be pending or threatened which would adversely affect the financial condition or operations of the Borrower or any -19- Subsidiary, or which would otherwise materially adversely affect the Acquisition or the assets to be acquired thereby; (xii) the Acquisition Documents, the Chilmark Documents and the ING Amendments shall be satisfactory to the Agent and the Banks in all respects; (xiii) the Banks and the Agent shall have received and be satisfied in all respects with the Deloitte & Touche due diligence report; and (xiv) the Agent shall have received the amendment fee from the Borrower in the amount of $97,750. (g) Upon the fulfillment of the conditions set forth in clause (f) above, the Banks shall be deemed to have consented, pursuant to Section 6.6 of the Loan Agreement, to the Acquisition and to have waived any other provisions of the Loan Agreement and the LC Reimbursement Agreements that would prohibit the consummation of the Acquisition. -20- If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed counterpart of this First Amendment and return such counterpart to the undersigned, whereupon this First Amendment, as so accepted by you, shall become a binding agreement among you and the undersigned. Very truly yours, The Borrower: ------------- NUTRAMAX PRODUCTS, INC. /s/ Robert F. Burns By:_______________________________ Title: Chief Financial Officer (remainder of page intentionally left blank) -21- The foregoing First Amendment is hereby accepted by the undersigned as of September 11, 1997. The Agent: - --------- BANKBOSTON, N.A. (f/k/a The First National Bank of Boston), individually and as Agent /s/ Timothy G. Clifford By:_________________________________ Title: Vice President FLEET NATIONAL BANK /s/ Ann M. Dillion By:_________________________________ Title: Vice President NATIONAL BANK OF CANADA /s/ Edward T. Paslawski By:_________________________________ Title: Vice President /s/ Leonard J. Pellechia By:_________________________________ Title: Vice President THE SUMITOMO BANK, LIMITED /s/ Daniel G. Eastman By:_________________________________ Title: Vice President and Manager /s/ Alfred DeGemmis By:_________________________________ Title: Vice President -22- SENIOR DEBT PORTFOLIO /s/ Payson F. Swaffield By:_________________________________ Title: Vice President By:_________________________________ Title: -23- CONSENT OF GUARANTORS --------------------- Each of the undersigned has guaranteed the Obligations under (and as defined in) the Agreement by executing separate Guaranties, each dated as of December 30, 1996. By executing this letter, each of the Subsidiaries hereby absolutely and unconditionally reaffirms the Guaranty to which it is a party, and acknowledges and agrees to the terms and conditions of this letter agreement and the Loan Agreement and the other Loan Documents as amended hereby (including, without limitation, the making of the representations and warranties and the performance of the covenants applicable to it herein or therein). NUTRAMAX HOLDINGS, Guarantor /s/ Robert F. Burns By:__________________________ Title: Vice President NUTRAMAX HOLDINGS II, Guarantor /s/ Robert F. Burns By:__________________________ Title: Vice President OPTOPICS LABORATORIES, INC., Guarantor /s/ Robert F. Burns By:__________________________ Title: Vice President -24- FAIRTON REALTY, INC., Guarantor /s/ Robert F. Burns By:__________________________ Title: Vice President (signatures continued on next page) ORAL CARE, INC., Guarantor /s/ Robert F. Burns By:__________________________ Title: Vice President FLORENCE REALTY, INC., Guarantor /s/ Robert F. Burns By:__________________________ Title: Vice President POWERS PHARMACEUTICAL CORP., Guarantor /s/ Robert F. Burns By:__________________________ Title: Vice President -25- CERTIFIED CORP., Guarantor /s/ Robert F. Burns By:__________________________ Title: Vice President -26- -----END PRIVACY-ENHANCED MESSAGE-----