SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e) (2) )
IGI, INC.
(Name of Registrant as Specified In Its Charter)
_______________________________________________________________________________
Name of Person(s) Filing Proxy Statement, if other than the Registrant:
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.
_______________________________________________________________________________
1) Title of each class of securities to which transaction applies: n/a
_______________________________________________________________________________
2) Aggregate number of securities to which transaction applies: n/a
_______________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
$14,800,000 to be received upon closing of disposition of assets
("Sale") by IGI, Inc. ("Company"), as follows: (1) $12,500,000
cash payment upon closing of Sale, and (2) assumption of
approximately $2,300,000 of Company's liabilities at closing of
the sale.
_______________________________________________________________________________
4) Proposed maximum aggregate value of transaction: $14,800,000.00
_______________________________________________________________________________
5) Total fee paid: $2,960.00
_______________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
_______________________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
_______________________________________________________________________________
1) Amount Previously Paid:
_______________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
_______________________________________________________________________________
3) Filing party:
_______________________________________________________________________________
IGI, INC.
July __, 2000
Dear Stockholder,
You are invited to attend a Special Meeting of Stockholders of IGI,
Inc. (the "Company") to be held at, ______________________________ Boston,
Massachusetts on August 28, 2000, at 10:00 a.m., local time.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve the sale (the "Sale") to Lohmann Animal Health
International (the "Buyer") of certain of the assets associated with the
Company's poultry vaccine products line of business (the "Business")
currently operated by the Company's Vineland Laboratories division.
As described in the accompanying Proxy Statement, the Company is
seeking stockholder approval of the Sale. The Sale will be structured as a
sale of certain of the assets of the Company's Vineland Laboratories division
pursuant to the Asset Purchase Agreement dated as of June 19, 2000 (the
"Agreement") by and between the Company and the Buyer. The Company's
obligations under the Agreement are subject to, among other things, obtaining
the approval of a majority of the outstanding shares of the Company's Common
Stock, $0.01 par value per share (the "Common Stock").
THE BOARD OF DIRECTORS HAS APPROVED THE SALE AND THE AGREEMENT AND HAS
DETERMINED THAT THEY ARE IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS. AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THE SALE, AS DESCRIBED IN THE ACCOMPANYING PROXY
STATEMENT.
In the materials accompanying this letter, you will find a Notice of
Special Meeting of Stockholders, a Proxy Statement relating to the actions
to be taken by stockholders of the Company at the Special Meeting and a
proxy card. The Proxy Statement more fully describes the proposed Sale. The
Company urges you to read the Proxy Statement and Notice and consider the
information included therein carefully.
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE SPECIAL MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE
SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN THOUGH YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY. IT IS IMPORTANT THAT YOUR SHARES BE
REPRESENTED AND VOTED AT THE SPECIAL MEETING.
Sincerely,
/s/ Edward B. Hager, M.D.
Edward B. Hager, M.D.
Chairman of the Board of Directors
IGI, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 28, 2000
Buena, New Jersey
July __, 2000
To the Holders of Common Stock of IGI, Inc.
A Special Meeting of the Stockholders of IGI, Inc. (the "Company")
will be held at _______________________, Boston, Massachusetts, on Monday,
August 28, 2000, at 10:00 a.m., local time, to consider and act upon the
following matters:
* To approve the sale to Lohmann Animal Health International, a
general partnership, of certain of the assets associated with the
Company's poultry vaccine products line of business currently
operated by the Company's Vineland Laboratories division; and
* To consider and transact such other business as may properly be
brought before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on July 19,
2000 as the Record Date for determining the stockholders of the Company
having the right to notice of, and the right to vote at, the Special Meeting.
A list of the stockholders entitled to vote at the Special Meeting may be
examined at the offices of Hale & Dorr LLP, 60 State Street, Boston,
Massachusetts, during the ten-day period preceding the Special Meeting.
Please vote, date, sign and return the Proxy in the enclosed postage
prepaid envelope at your earliest convenience. If you return the Proxy, you
may nevertheless attend the Special Meeting and vote your shares in person.
By order of the Board of Directors,
Robert E. McDaniel, Secretary
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING, REGARDLESS
OF THE NUMBER OF SHARES YOU OWN. APPROVAL OF THE SALE REQUIRES THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK.
THEREFORE, A FAILURE TO VOTE, EITHER BY NOT COMPLETING AND RETURNING THE
ENCLOSED PROXY AND NOT ATTENDING THE SPECIAL MEETING OR BY CHECKING THE
"ABSTAIN" BOX ON THE ENCLOSED PROXY, WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE APPROVAL OF THE SALE.
IGI, INC.
Wheat Road & Lincoln Avenue
Buena, New Jersey 08310
____________________________
PROXY STATEMENT
____________________________
This Proxy Statement is furnished to holders of Common Stock of IGI,
Inc. The solicitation of proxies in the enclosed form is made on behalf of
the Board of Directors of the Company. This Proxy Statement, the attached
Notice of Special Meeting of Stockholders, and the form of proxy and other
documents enclosed herewith are first being mailed to stockholders on or
about July __, 2000.
The date of this Proxy Statement is July __, 2000.
TABLE OF CONTENTS
SUMMARY
The Special Meeting
The Sale
Parties to the Agreement
Fairness Opinion
Recommendation of the Board of Directors of the Company; Background
And Reasons for the Sale
Use of Proceeds
Conditions to the Sale
The Closing
Business Pending the Sale
Approvals; Other Agreements
Termination, Amendment and Waiver
Accounting and Tax Treatment of the Sale
No Dissenters' Rights
THE SPECIAL MEETING
Matter to be Considered
Shares Outstanding and Entitled to Vote; Record Date
Vote Required
Voting, Solicitation and Revocation of Proxies
ADDITIONAL INFORMATION
FORWARD LOOKING STATEMENTS - SAFE HARBOR
THE SALE PROPOSAL
General
Background and Reasons for the Proposed Sale
Terms of the Sale
Conditions to Completion of the Sale
Effect on Employees of the Company
Business Pending the Sale
Indemnification
Additional Agreements
Termination, Amendment and Waiver
Opinion of Financial Advisor
Use of Proceeds of the Sale; Expenses of Sale
Dissenters' Rights Not Available
Federal Income Tax Consequences; Accounting Treatment of the Sale
Pro Forma Financial Information
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
OTHER MATTERS
SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement and in the documents incorporated herein by
reference. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained elsewhere in this Proxy
Statement and in the Annexes attached hereto, including the Asset Purchase
Agreement attached hereto as Annex A, and the information incorporated in
this Proxy Statement by reference. Stockholders are urged to read carefully
all such information.
The Special Meeting
A special meeting of Stockholders (the "Special Meeting") of IGI, Inc.
(the "Company") will be held at __________________________________, Boston,
Massachusetts on Monday, August 28, 2000 at 10:00 a.m., local time, and at
any adjournments thereof. Only the holders of record of the outstanding
shares of Common Stock, $.01 par value, of the Company (the "Common Stock")
at the close of business on July 19, 2000 (the "Record Date") will be
entitled to notice of and to vote at the Special Meeting. At the Record
Date, there were _________ shares of Common Stock outstanding and entitled
to vote. Each share of Common Stock is entitled to one vote at the Special
Meeting on all matters properly presented thereat.
At the Special Meeting, stockholders of the Company will be asked to
consider and vote upon a proposal to approve the sale by the Company of
certain of the assets of the Company's Vineland Laboratories division (the
"Sale") pursuant to the Asset Purchase Agreement dated as of June 19, 2000
(the "Agreement") by and between the Company, as seller, and Vineland
International, a general partnership (not affiliated with the Company),
which has changed its name to Lohmann Animal Health International (the
"Buyer"), as buyer. Stockholders also will be asked to consider any other
business that may properly come before the Special Meeting; the Company is
not aware of any such other business.
As of the Record Date, the directors and officers of the Company
beneficially owned ________ shares, or ___% of the outstanding Common Stock,
excluding shares subject to stock options. Each of the directors and
executive officers of the Company intends to vote in favor of approval of
the Sale.
Every stockholder's vote is important regardless of the number of
shares owned by such stockholder. Approval of the Sale requires the
affirmative vote of a majority of the outstanding shares of Common Stock.
Therefore, a failure to vote, either by not returning the enclosed proxy or
by checking the "Abstain" box thereon, will have the same effect as a vote
against approval of the Sale.
The Sale
The Agreement sets forth the terms and conditions under which the
Company will sell to the Buyer certain of the assets associated with the
business (the "Business") of manufacturing, marketing, licensing and selling
poultry vaccines and related equipment (the "Products") conducted by the
Vineland Laboratories division of the Company. In exchange for receipt of
such assets, the Buyer will assume certain Company liabilities, in the
aggregate, equal to approximately $2,300,000 and will pay the Company cash
in the amount of $12,500,000. A portion of the cash purchase price equal to
$500,000 will be placed in an escrow fund to secure potential
indemnification obligations of the Company and potential liability for any
downward adjustments to the purchase price under the Agreement as a result
of a decrease in the net working capital of the Business between March 31,
2000 and the date of the closing of the consummation of the Sale (the
"Closing"). See "THE SALE PROPOSAL - Terms of the Sale."
Parties to the Agreement
The Company. The Company is a Delaware corporation with products in
three primary segments: consumer products, companion pet products and
poultry vaccine products. The Sale involves the Company's poultry vaccine
products line of business operated by the Company's Vineland Laboratories
division. At March 31, 2000 (unaudited), the Company had $36.1 million of
total assets, $31.3 million of total liabilities and $4.8 million of total
stockholders' equity. At December 31,1999, the Company had $33.9 million of
total assets, $28.3 million of total liabilities and $5.5 million of total
stockholders' equity. See "THE SALE PROPOSAL - Pro Forma Financial
Information." The Company's principal executive offices are located at
Wheat Road and Lincoln Avenue in Buena, New Jersey, and its telephone number
is (856) 697-1441.
The Buyer. The Buyer is a general partnership, the general
partners of which are Avian Health GmbH, a German limited liability company
with principal offices in Visbek-Recterfeld, Germany, and Vineland
Laboratories Inc., a Delaware corporation, which is a wholly-owned
subsidiary of Avian Health GmbH. Avian Health GmbH is an affiliate of
Lohmann & Co. AG, a German company with principal offices in Cuxhaven,
Germany. Avian Health GmbH and the other companies that are part of the
Lohmann Group are generally engaged in the production of avian vaccines and
in other avian and animal businesses.
Fairness Opinion
Seidman & Company, Inc. ("Seidman") has advised the Board of Directors
of the Company that in its opinion the consideration to be received by the
Company under the Agreement is fair to the Company and its stockholders from
a financial point of view. The full text of Seidman's opinion, dated July
11, 2000, which describes the procedures followed, assumptions made, matters
considered and limitations of the review undertaken in connection with
Seidman's providing such opinion, is attached as Annex B to this Proxy
Statement and should be read in its entirety by stockholders of the Company.
See "THE SALE PROPOSAL - Opinion of Financial Advisor."
Recommendation of the Board of Directors of the Company;
Background and Reasons for the Sale
The Board of Directors of the Company has unanimously approved the
Sale and the Agreement and believes that the Sale and the Agreement are in
the best interests of the Company and its stockholders. Accordingly, the
Board of Directors of the Company unanimously recommends that stockholders
vote FOR approval of the Sale.
In reaching its decision, the Board of Directors considered, among
other things, strategic value to the Company over the long term of the
Business and the limitations on the ability of the Company to expand the
Business and make it profitable. In addition, the Board of Directors relied
on the opinion of Seidman that the consideration to be received by the
Company under the Agreement is fair to the Company and its stockholders from
a financial point of view. See "THE SALE PROPOSAL - Background and Reasons
for the Sale."
Use of Proceeds
The Company intends to apply the proceeds of the Sale as follows:
<TABLE>
<S> <C>
Repayment of outstanding loans $10,500,000
Payment of certain outstanding accounts payable 1,000,000
Payment of closing costs and general corporate purposes (at Closing) 500,000
Payment of closing costs and general corporate purposes (post-Closing) 500,000 (or less)
-----------------------------------------------------------------------------------------------
TOTAL: $12,500,000
</TABLE>
Upon receipt of the Sale proceeds at Closing, the Company will apply
$500,000 toward the payment of Closing costs and general corporate purposes.
As described herein, $500,000 of the cash purchase price for the Business
will be deposited into an Escrow Fund at Closing. Upon release to the
Company of the moneys remaining in the Escrow Fund, the Company will apply
such funds toward general corporate purposes. See "THE SALE PROPOSAL - Use
of Proceeds of the Sale; Expenses of the Sale."
Conditions to the Sale
The Agreement provides that the consummation of the Sale is subject to
certain conditions precedent including, among others, the approval of the
Sale by a majority of the Company's stockholders, the absence of any temporary
restraining order, preliminary or permanent injunction or other legal
restraint of prohibition preventing the consummation of the Sale, the absence
of certain litigation, the absence of any development having a material
adverse effect on the Business or the real property to be transferred and the
receipt of required real estate documents (including title policies, surveys
and landlord consents and estoppel certificates). See "THE SALE PROPOSAL -
Conditions to Completion of the Sale."
The Closing
It is expected that the Closing of the Sale will occur promptly
following the requisite stockholder approval (if obtained) of the Sale, but
in any event not more than five (5) business days following the satisfaction
(or waiver) of all conditions precedent or such other date as the Company
and the Buyer may agree in writing. See "THE SALE PROPOSAL - The Closing."
Business Pending the Sale
The Agreement contains various covenants on the part of the Company
regarding the conduct of the Business between the date of the execution of
the Agreement and the closing of the Sale. Generally, the Company is
required to maintain the Business and the related operations and properties
in the usual, regular and ordinary course of business consistent with past
practice and is prohibited from taking certain actions without the prior
written consent of the Buyer. See "THE SALE PROPOSAL - Business Pending the
Sale."
Approvals; Other Agreements
The Agreement provides various additional rights and obligations of
the Company, including, the granting by the Company to the Buyer of access
to Company information, use of commercially reasonable efforts by the
Company to achieve the Closing of the Sale, the responsibility of each of
the Company and the Buyer for its own expenses, coordination by the Company
and the Buyer of public announcements of the Sale and the other transactions
contemplated by the Agreement, use by the Buyer of the Company's advertising
and promotional materials in connection with sales of products of the
Business after the Closing, the Company's obligations to seek stockholder
approval of the Sale, termination by the Company of certain affiliate
contracts, compliance by the Company with legal requirements relating to the
poultry vaccines products, disposal by the Company of unsaleable or unusable
inventory of the Business, offers of employment by the Buyer to certain
Company employees employed in connection with the Business, payment by the
Company of transfer taxes and fees, control by the Buyer over the filing and
recording of evidence of transfer of the intellectual property being
transferred in connection with the Sale, post-Closing collection by the
Company and the Buyer of accounts receivable relating to the Business,
confidentiality requirements and arrangements for transition services.
The Agreement also requires the Company to obtain consents from
certain lenders as well as evidence of compliance with the requirements of
the New Jersey Industrial Site Recovery Act ("ISRA") from the New Jersey
Department of Environmental Protection ("NJDEP").
See "THE SALE PROPOSAL - Conditions to Completion of the Sale."
Termination, Amendment and Waiver
The Agreement can be terminated at any time by the mutual written
agreement of the Company and the Buyer. The Agreement also may be terminated
by either the Company or the Buyer if (i) the closing of the Sale does not
occur on or before September 19, 2000 (unless the failure to close is due to
a material breach of the Agreement by the party seeking termination); (ii) a
court or other governmental entity issues an order, decree or ruling that
has become final and non-appealable which permanently enjoins, restrains or
otherwise prohibits the Sale or the other transactions contemplated by the
Agreement or the other agreements contemplated thereby; or (iii) the
requisite majority of the Company's stockholders fail to approve the Sale.
See "THE SALE PROPOSAL - Termination, Amendment and Waiver."
The Agreement provides for waivers by either the Company or the Buyer,
provided that any such waiver of provisions of the Agreement must be made in
writing by the party granting the waiver.
Indemnification
The Agreement provides that, subject to certain limitations as to time
and amount, the Company will indemnify the Buyer for any loss, liability,
claim, damage or other expense suffered or incurred by the Buyer or any of
its affiliates to the extent arising from breach by the Company of any of
its representations, warranties, covenants or agreements set forth in the
Agreement or any other agreement contemplated thereby, certain environmental
matters relating to the owned and leased real property being transferred or
assumed by the Buyer in connection with the Sale and certain regulatory and
legal matters relating to the conduct of the Business prior to the Closing
of the Sale. See "THE SALE PROPOSAL - Indemnification."
Accounting and Tax Treatment of the Sale
The Company will treat the Sale as a sale of the net assets and
liabilities of the Company's Vineland Laboratories division, which will be
accounted for as a discontinued operation. Consummation of the Sale will
result in a net gain after tax for the Company under both generally accepted
accounting purposes and applicable tax laws and rules. Consummation of the
Sale will not be a taxable event for the Company's stockholders. See "THE
SALE PROPOSAL - Accounting and Tax Treatment Of The Sale and Pro Forma
Financial Information."
No Dissenters' Rights
The Company's stockholders will have no right to dissent from the Sale
and obtain payment for their shares. See "THE SALE PROPOSAL - Dissenters'
Rights Not Available."
THE SPECIAL MEETING
The Special Meeting of Stockholders of the Company will be held at
__________________, Boston, Massachusetts on Monday, August 28, 2000 at
10:00 a.m., local time and at any adjournment thereof for the purposes set
forth in the Notice of Special Meeting of Stockholders.
Matter to Be Considered
At the Special Meeting, stockholders of the Company will be asked to
consider and vote upon (i) a proposal to approve the Sale and (ii) the
transaction of such other business as may properly come before the Special
Meeting and any adjournment thereof. The Company is not aware of any such
other business.
Shares Outstanding and Entitled to Vote; Record Date
The close of business on July 19, 2000 has been fixed by the Board of
Directors of the Company as the Record Date for the determination of holders
of Common Stock entitled to notice of and to vote at the Special Meeting and
any adjournments thereof. At the close of business on the Record Date, there
were ________ shares of Common Stock outstanding and entitled to vote. Each
share of Common Stock entitles the holder thereof to one vote on each matter
to be submitted to stockholders at the Special Meeting.
As of the Record Date, the following persons were known by the Company
to be the beneficial owners of 5% or more of the outstanding shares of
Common Stock:
<TABLE>
<CAPTION>
Percent of
Name of Beneficial Owner Number of Shares Class (1)
------------------------ ---------------- ----------
<S> <C> <C>
Stephen J. Morris (2)
66 Navesink Avenue
Rumson, New Jersey
American Capital Strategies Ltd. (3)
3 Bethesda Metro Center, Suite 860
Bethesda, Maryland 20814
Edward B. Hager, M.D. (4)
Pinnacle Mountain Farms
Lyndeboro, NH 03082
Jane E. Hager (5)
Pinnacle Mountain Farms
Lyndeboro, NH 03082
<FN>
<F1> Excludes shares of Common Stock underlying options or other rights.
<F2> Includes 816,300 shares which Mr. Morris owns jointly with his wife
and 200 shares owned directly by his wife. Also includes 154,460
shares which are held in an account on behalf of Mr. Morris' children,
over which Mr. Morris has voting and investment control, and 42,000
shares held in a building fund on behalf of St. George Greek Orthodox
Church of Asbury Park, New Jersey, over which Mr. Morris has voting
and investment control.
<F3> On February 11, 2000, American Capital Strategies Ltd. ("ACS") filed a
Schedule 13G with the Securities and Exchange Commission reporting
beneficial ownership of total of 1,907,543 shares of Common Stock, all
of which are issuable upon the exercise of warrants held by ACS. ACS
reported that it has sole voting and dispositive power over all
1,907,543 shares.
<F4> Includes 639,815 shares beneficially owned by Dr. and Mrs. Hager as
co-trustees of the Hager Family Trust, who share voting and investment
power.
</FN>
</TABLE>
Vote Required
A quorum, consisting of a majority of the issued and outstanding
Common Stock, must be present in person or by proxy before any action may be
taken at the Special Meeting. Under the applicable provisions of Delaware
law, approval of the Sale requires the affirmative vote of holders of a
majority of the outstanding shares of Common Stock.
Under the rules of the American Stock Exchange, the proposal to
approve the Sale is considered a non-discretionary matter as to which
brokerage firms may not vote in their discretion on behalf of their clients
if such clients have not furnished voting instructions. Abstentions and such
broker "non-votes" will be considered in determining the presence of a
quorum at the Special Meeting but will not be counted as a vote cast for the
Sale proposal. Because the proposal to approve the Sale is required to be
approved by the holders of at least a majority of the outstanding shares of
Common Stock, abstentions and broker "non-votes" will have the same effect
as votes against this proposal.
As of the Record Date, the directors and officers of the Company and
its subsidiaries and their affiliates in the aggregate beneficially owned
and are entitled to vote ______ shares, or ___%, of the outstanding Common
Stock. Each of the directors and officers has indicated his or her intention
to vote FOR approval of the Sale.
Voting, Solicitation and Revocation of Proxies
A proxy for use at the Special Meeting accompanies this Proxy
Statement and is solicited by the Board of Directors of the Company. Any
stockholder of the Company executing a proxy may revoke it at any time
before it is voted by filing with the Secretary of the Company (Robert E.
McDaniel, Secretary, IGI, Inc., Wheat Road and Lincoln Avenue, P.O. Box 687,
Buena, New Jersey 08310) written notice of such revocation; by executing and
returning a later-dated proxy; or by attending the Special Meeting and
giving notice of such revocation in person. Attendance at the Special
Meeting will not, in and of itself, constitute revocation of a proxy.
Each proxy returned to the Company (and not revoked) will be voted in
accordance with the instructions indicated thereon. If no instructions are
indicated, the proxy will be voted in favor of approval of the Sale. The
Company knows of no other matters to be presented at the Special Meeting;
however, if any other matter properly comes before the Special Meeting or
any adjournments thereof, all proxies returned to the Company will be voted
by the proxy holders on any such matter in accordance with the determination
of a majority of the Board of Directors of the Company.
The Company will bear the cost of printing and mailing this Proxy
Statement and the proxy, as well as all other costs incurred in connection
with the solicitation of proxies from stockholders of the Company on behalf
of the Board of Directors of the Company. The Company has retained Corporate
Investor Communication - ("CIC") to assist in the solicitation of proxies
for the Special Meeting. For proxy solicitation services, CIC will receive a
fee of $7,000 plus reimbursement for out-of-pocket expenses. Proxies will be
solicited by mail and may be further solicited, for no additional
compensation, by directors, officers, or employees of the Company by
telephone or by personal contact. Arrangements also will be made with
brokerage houses, voting trustees, associations and other custodians,
nominees and fiduciaries, who are record holders of Common Stock not
beneficially owned by them, for forwarding such materials to and obtaining
proxies from the beneficial owners of Common Stock entitled to vote at the
Special Meeting, and the Company will reimburse such persons for their
reasonable expenses incurred in so doing.
ADDITIONAL INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports and other information with the Securities
and Exchange Commission (the "Commission"). Such reports, proxy statements
and other information concerning the Company may be inspected and copies may
be obtained (at prescribed rates) at public reference facilities maintained
by the Commission at Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C.
20549 and at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and at Northwest Atrium
Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-2511. In
addition, electronically filed documents, including reports, proxy and
information statements and other information regarding the Company, can be
obtained from the Commission's Web site at http://www.sec.gov. The Common
Stock is listed on the American Stock Exchange, and reports, proxy
statements and other information concerning the Company can also be
inspected at the offices of the American Stock Exchange located at 86
Trinity Place, New York, New York 10006.
The following documents of the Company, which are on file with the
Commission, are incorporated in this Proxy Statement by reference and made a
part hereof:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
(b) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000.
(c) The Company's Current Report on Form 8-K dated June 19, 2000.
(d) The Company's Current Report on Form 8-K dated July 17, 2000.
(e) The Company's Current Report on Form 8-K dated July ___, 2000.
(f) The description of the Company's capital stock contained in its
Registration Statement on Form S-3, filed May 15, 1997.
The Company will provide without charge to each person to whom a copy
of this Proxy Statement is delivered a copy of any or all of the foregoing
documents (other than exhibits). Requests for such documents should be
directed to IGI, Inc., Wheat Road and Lincoln Avenue, P.O. Box 687, Buena,
New Jersey 08310, Attention: Robert E. McDaniel, Secretary.
All documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Proxy Statement and prior to
the Special Meeting also shall be deemed to be incorporated by reference in
this Proxy Statement and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for the purposes of this Proxy Statement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Proxy Statement.
FORWARD-LOOKING STATEMENTS - SAFE HARBOR
This Proxy Statement and the documents referred to above contain
certain "forward-looking" statements, including, among others, the
statements regarding the ability of the Company to consummate the Sale, the
potential value of any assets of the Company, the amount and nature of
liabilities of or that may be asserted against the Company and prospects and
the Company's future operating results. Without limiting the foregoing,
words such as "anticipates," "believes," "expects," "intends," "plans" and
similar expressions are intended to identify "forward-looking" statements.
All of these "forward-looking" statements are inherently uncertain,
and stockholders must recognize that actual events could cause actual
results to differ materially from management's expectations. A key risk
factor that could, in particular, have an adverse impact on the Company's
ability to effect the Sale on a timely basis is the inability to secure the
required approvals under ISRA on a timely basis.
THE SALE PROPOSAL
This section of the Proxy Statement describes material aspects of the
proposed Sale, including the Agreement, which is attached to this Proxy
Statement as Annex A and is incorporated into this Proxy Statement by
reference. While we believe that the description covers the material terms
of the Sale, the summary provided in this Proxy Statement may not contain
all of the information that is important to you. You should read this entire
Proxy Statement and other documents we refer to carefully for a complete
understanding of the Proposed Sale
General
The Agreement provides for the Company to sell to the Buyer certain of
the assets associated with the Business. The Company produces and markets
poultry vaccines manufactured by the chick embryo, tissue culture and
bacteriologic methods. The Company produces vaccines for the prevention of
various chicken and turkey diseases and has more than 60 vaccine licenses
granted by the United States Department of Agriculture ("USDA"). The Company
also produces and sells nutritional, anti-infective and sanitation products
used primarily by poultry producers. The Company sells these products in the
United States and in over 58 other countries under the Vineland Laboratories
trade name.
The Company manufactures poultry vaccines at its USDA-licensed
facility in Vineland, New Jersey and sells them, primarily through its own
sales force, directly to large poultry producers and distributors in the
United States and, through its export sales staff, to local distributors in
other countries. The sales force is supplemented and supported by technical
and customer service personnel. The Company's vaccine production in the
United States is regulated by the USDA. At March 31, 2000 (unaudited) and
December 31, 1999, the assets proposed to be sold by the Company to the
Buyer pursuant to the Agreement comprised approximately 37% and 39%
respectively, of the Company's total assets. Sales of poultry vaccines and
related products accounted for approximately 38% of the Company's revenues
for the three months ended March 31, 2000 (unaudited) and 41% of the
Company's revenues for the twelve months ended December 31, 1999. See "THE
SALE PROPOSAL - Pro Forma Financial Information."
In addition to the Business, the Company also engages in two other
primary lines of business. The Company's consumer products business is based
on the commercialization of micro-encapsulation technologies for skin care
application, including those utilizing Novasome(r) lipid vesicles. The Company
also engages in the business of selling its companion pet products to the
veterinary market under the EVSCO Pharmaceuticals trade name and to the
over-the-counter pet products market under the Tomlyn and Luv-em labels. The
assets associated with these lines of business are not included in the Sale.
For the three months ended March 31, 2000 (unaudited) and the twelve
months ended December 31, 1999, the Company's poultry vaccines business
incurred operating losses of approximately $381,000 and $1,041,000,
respectively.
Background and Reasons for the Proposed Sale
From mid-1997 through most of 1998, the Company was subject to intense
governmental and regulatory scrutiny relating to the Company's shipment of
some of its poultry vaccine products without complying with certain
applicable regulatory and record keeping requirements. As a result of
actions taken by the USDA, the Company was ordered in June 1997 to stop
shipment of certain of its poultry vaccine products. In July 1997, the
Company was advised that the USDA's Office of Inspector General had
commenced an investigation into possible violations by the Company of the
Virus Serum Toxin Act of 1914 and alleged false statements made by the
Company to the USDA's Animal and Plant Health Inspection Service. These
matters had a materially adverse effect on the financial condition and
results of operations of the Company in 1997, 1998 and the first quarter of
1999 and, in particular, on the Business. Ultimately, the Company entered
into a settlement agreement pursuant to which it pled guilty to a
misdemeanor and paid fines, penalties, and restitution.
Following the USDA regulatory action and the related cessation of
shipment of certain poultry vaccine products, the Company experienced a
decline in the production of certain poultry vaccine products. Although
demand for these products remained at satisfactory levels, decreases in
production had an adverse effect on the ability of the Company to meet
customer commitments. The Company added production staff to address the
shortfall in poultry vaccine production. However, the Company determined
that, to return to 1997 production levels, the Company would have to make
capital expenditures in excess of $1,000,000, funds for which were not
immediately available to the Company due to the Company's highly leveraged
financial condition. See "THE SALE PROPOSAL - Pro Forma Financial
Information."
In October, 1999, Lohmann & Co. AG of Cuxhaven, Germany ("Lohmann")
contacted the Company's Board of Directors concerning possible commerical
transactiona between the Company and Lohmann and Lohmann's possible
acquisition of the Business. Beginning in November, 1999, pursuant to mutual
confidentiality agreements, the Company and Lohmann participated in a series
of meetings to further explore and to define the terms and conditions of a
possible sale of the Business. During the spring of 2000, Lohmann and its
representatives conducted extensive due diligence on the Company and the
Business; and the parties exchanged a preliminary draft of the Agreement in
mid-March, 2000.
On June 1, 2000, the Company and Lohmann executed a binding letter of
intent with regard to the sale of the Business. On June 27, 2000, the
Company and the Buyer, which is an affiliate of Lohmann, executed the
Agreement.
The Board of Directors approved the Sale and the Agreement after
considering the performance of the Business, the level of capital
expenditures required to increase production levels and return the Business
to profitability, the operating losses of the Business, the strategic value
to the Company of the Business and the benefits to the Company of reducing
its level of indebtedness. See "THE SALE PROPOSAL - Pro Forma Financial
Information." In addition, The Board of Directors relied on the fairness
opinion of Seidman discussed below. See "THE SALE PROPOSAL - Opinion of
Financial Advisor."
Terms of the Sale
The Agreement provides for the sale by the Company to the Buyer of
certain of the assets associated with its Vineland Laboratories division.
Generally, the assets to be sold include inventories, master seed
and production seed inventories relating to the Vineland Laboratories
products, related machinery, equipment and usable spare parts, the Company's
rights to related technology, books, records, files and other data relating
to the Business, the Company's rights under specified contracts being
assumed by the Buyer as part of the Sale, governmental permits, sales and
promotional literature and materials, labels and logos and related assets,
intellectual property associated with the Business, owned or leased real
estate used primarily by the Business, certain accounts receivable and other
receivables associated with the Business and any and all insurance policies
and letters of credit relating to the payment thereof, prepaid items
associated with the Business, the Company's rights to leases, subleases,
licenses and agreements relating to the use or occupancy of real property,
goodwill and claims, causes of action, judgments, indemnity or other rights
relating to the assets being purchased or the conduct of the Business.
Certain assets of the Company are expressly excluded from the Sale.
The excluded assets include, but are not limited to, the Novasome(R)
technology (except to the extent incorporated into the poultry vaccine
products as of the date of the Closing), cash and cash equivalents,
machinery and equipment and other tangible property not related to the
Business, rights under contracts and instruments not assumed by the Buyer,
insurance polices (except to the extent otherwise provided in the
Agreement), books and records not relating to the poultry vaccine products
or to the Business, claims and legal rights relating to assets not sold and
liabilities retained, tax refunds, certain governmental permits, claims
arising out of or relating to former directors, officers, employees, agents,
consultants and other representatives of the Company, certain listed
accounts receivable and the Company's interest in the capital stock of IGI
do Brazil, Ltda., a Brazil corporation.
The purchase price for the assets being purchased in the Sale consists
of (i) $12,500,000 payable by the Buyer in immediately available funds at
the closing (of which $500,000 will be held in escrow) and (ii) the Buyer's
undertaking to assume certain liabilities of the Company associated with the
Business in the aggregate amount of approximately $2,300,000, including,
accounts payable and accrued expenses owed to any third party as of the
Closing, liabilities of the Company and any of its subsidiaries under
contracts, leases and permits being assumed by the Buyer to the extent
arising and relating to any period after the Closing and all liabilities and
obligations relating to the assets being purchased by the Buyer or the
Business arising out of or relating to any period after the Closing (except
to the extent specifically retained by the Company). The $500,000 escrow
amount will be held in an escrow fund (the "Escrow Fund") pursuant to the
terms of an escrow agreement among the Company, the Buyer and a financial
institution mutually acceptable to the Company and the Buyer, as escrow
agent, to secure potential indemnification obligations of the Company and
obligations of the Company with respect to any downward adjustments to the
purchase price required by the Agreement.
The purchase price under the Agreement is subject to adjustment for
changes in "net working capital" with respect to the Business occurring
between March 31, 2000 and the Closing date. "Net working capital" is
defined under the Agreement as current assets (inventory, net of reserves,
plus accounts receivable, net of allowances) minus current liabilities (the
aggregate of accounts payable, accrued commissions, accrued distributor
commissions, accrued freight, accrued payroll and accrued royalties). If the
net working capital of the Business as of March 31, 2000 exceeds the net
working capital of the Business as of the Closing by $100,000 or more, the
Company must pay such difference to the Buyer. The amount then in the Escrow
Fund will be applied to satisfy the Company's obligation in this regard,
with any shortfall being payable directly by the Company to the Buyer.
However, if the net working capital of the Business as of March 31, 2000 is
less than the net working capital as of the Closing by $100,000 or more, the
Buyer must pay such difference to the Company.
Any amount on deposit in the Escrow Fund will be released to the
Company upon the later to occur of the date that is four (4) months after
the date of Closing and the date on which any amount payable from the Escrow
Fund as a result of the purchase price adjustment has been paid. In the
event that the purchase price adjustment occurs prior to the expiration of
the four-month period following Closing and there remains a balance in the
Escrow Fund after the payment of the purchase price adjustment amount, such
balance will be subject to indemnification claims by the Buyer until the end
of such four month period and then released to the Company, subject to a
holdback for any claims by the Buyer for indemnification, which claims are
unresolved as of such time.
The Agreement specifies that the Buyer will not assume certain
liabilities, including liabilities for taxes relating to any pre-Closing tax
period, liabilities and obligations of the Company relating to assets which
are excluded from the Sale, liabilities of the Company for any violation of
law or request of any governmental entity prior to the Closing, claims of
Company employees, liabilities under assumed contracts, leases and permits
to the extent arising or relating to any period prior to the Closing, claims
relating to products manufactured or sold by the Company or any of its
subsidiaries prior to the Closing (including, but not limited to, product
liability claims, warranty claims and claims relating to the Company's
conduct of the Business or any of the Company's assets prior to the
Closing), liabilities of the Company or its subsidiaries for indebtedness
owed to third parties, liabilities under environmental laws with respect to
any period on or prior to the Closing, certain listed liabilities and
payables and any other liabilities and obligations not specifically assumed
under the Agreement.
Conditions to Completion of the Sale
The obligations of the parties to complete the Sale are subject to the
satisfaction or waiver of the following conditions precedent: (i) the
absence of any order of any court or governmental entity restraining or
prohibiting consummation of the transactions contemplated by the Agreement
or the other transaction agreements contemplated by the Agreement; (ii) all
of the agreements contemplated by the Agreement having been executed and
delivered by the respective parties thereto; (iii) no governmental entity
having jurisdiction over the Buyer, the Company or the Sale having objected
to the transactions contemplated by the Agreement or the agreements
contemplated thereby prior to the expiration of any applicable waiting
period or otherwise having approved such transactions; and (iv) approval of
the sale by a majority of the Company's stockholders.
The Buyer's obligations to consummate the sale are further subject to
the following conditions: (i) the accuracy in all material respects of the
Company's representations and warranties as of the date of the Agreement and
as of the date of the closing; (ii) the Company having performed all of the
obligations that it is required to perform under the Agreement on or prior
to the closing date; (iii) the absence of any events, change, effect or
development that, taken individually or in the aggregate, has had or could
reasonably be expected to have a material adverse effect on the Business or
the real property being sold to the Buyer pursuant to the Agreement; (iv)
all required consents and approvals of third parties and governmental
entities having been obtained; (v) the absence of any pending or threatened
litigation by any governmental entity or third party challenging the sale or
seeking to restrain or prohibit any of the transactions contemplated by the
Agreement or the agreements contemplated thereby or otherwise seeking
damages, seeking to prohibit or limit the Buyer's ownership or operation of
the Business or any portion of the assets being transferred in the Sale or
to compel the Buyer to dispose of any of those assets, seeking to prohibit
the Buyer from effectively controlling any of the assets being transferred
to the Buyer in the Sale or otherwise reasonably likely to have a material
adverse effect on the Business, the products produced by the Business or any
of the assets being transferred in the Sale; (vi) the Buyer's receipt of an
opinion of counsel to the Company; (vii) the Buyer's receipt of acceptable
title insurance and surveys on the real property to be sold or leased in the
Sale; and (viii) the Buyer's receipt of landlord consents and estoppel
certificates with respect to the real property to be leased by the Buyer.
The Company's obligation to complete the Sale is subject to the
following conditions: (i) accuracy of the Buyer's representations and
warranties in all material respects as of the date of the Agreement and as
of the date of the Closing; (ii) the Buyer's performance of all of its
material obligations; (iii) absence of pending or threatened litigation
challenging the Sale or seeking to restrain or prohibit the consummation of
the transactions contemplated by the Agreement or any of the other related
transaction agreements; (iv) the Company's receipt of an opinion of counsel
to the Buyer; and (v) the Company's receipt of the opinion by Seidman as to
the fairness of the Sale from a financial point of view.
In addition, the Agreement requires the Company to obtain evidence of
compliance with the requirements of ISRA (New Jersey Industrial Site
Recovery Act) from the NJDEP. The Company has engaged consultants to assist
the Company in complying with ISRA and obtaining approval from the NJDEP and
anticipates that all submissions required to obtain these approvals will be
made on a timely basis. However, the Company cannot predict when the
approval under ISRA will be obtained. Compliance with ISRA is a precondition
to the transfer of real property to the Buyer required by the Agreement.
The Company also must obtain the consent to the Sale from Fleet
Capital Corporation and American Capital Strategies, Ltd. If the Closing of
the Sale does not occur by September 26, 2000, and if certain other
covenants and conditions of the Company under the applicable loan agreements
are not then being met, Fleet Capital Corporation may exercise its right to
declare an event of default under the relevant loan documents and, among
other things, accelerate the obligations of the Company thereunder.
Effect on Employees of the Company
Under the Agreement, the Buyer will offer employment to certain
employees of the Company employed in connection with the Business at the
same base salaries or wages and with benefits no less favorable to the
employees than those in effect at the Company as of the Closing. The Buyer
will not assume responsibility for any severance pay or other liability with
respect to Company employees who are not offered employment by the Buyer or
who decline to accept the offer of employment by the Buyer.
Business Pending the Sale
The Company has agreed in the Agreement that, except for matters
permitted or contemplated by the Agreement, the Company will conduct its
business in the usual, regular and ordinary course substantially in the
manner previously conducted. The Company also has agreed to use commercially
reasonable efforts to keep available the services of the current officers
and employees employed in connection with the Business and keep their
relationships with customers, suppliers, licensors, licensees, distributors
and others in order to preserve the Business and its goodwill.
The Agreement also contains restrictions on the conduct of the Company
affecting the Business prior to the Sale. In particular, the Agreement
provides that, except with the prior written consent of the Buyer, the
Company will not: (a) acquire or agree to acquire any assets for use in
connection with the Business that are material, individually or in the
aggregate, except for inventory or other assets purchased in the ordinary
course of business consistent with past practice; (b)(i) grant to any of the
employees of the Business any material increase in compensation, except to
the extent required under written employment agreements delivered to the
Buyer or its representatives, (ii) grant to any such employee any material
increase in severance or termination pay, except to the extent required
under any agreement delivered to the Buyer or its representatives, (iii)
enter into any employment, consulting, indemnification, severance or
termination agreement with any such employee or (iv) substantially change or
alter the job title or duties and responsibilities of any officer or other
Business employee where such change would reasonably be expected to have an
adverse effect on the efforts or performance by such officer or other
employees of their duties and responsibilities as comprised as of the date
of the Agreement; (c) make any change in accounting methods, principles or
practices affecting the reported combined consolidated assets, liabilities
or results of operations of the Business (including the assets being sold to
the Buyer in the Sale); (d) sell, lease, license, pledge or otherwise
dispose of or subject to any lien or encumbrance any properties or assets of
the Business (including, without limitation, the assets to be sold in the
Sale, including the leased real property), except sales of inventory and
excess or obsolete assets in the ordinary course of business consistent with
past practice and except for terminating a specified warehouse lease in
Mississippi, or enter into a legally binding commitment to do any of the
foregoing; (e) make any change, revision, amendment or other modification to
any Product labeling; (f) make any change, revision or other modification to
the formulation of any Products; (g) make any change (or announce any
prospective change) in prices, sales discounts or allowances or any other
sales incentives in connection with the sale of any of the Products to
distributors or customers of the Business; (h)(i) waive any claims or rights
related to the Business and included in the assets being sold in the Sale or
(ii) waive the benefits, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Seller or any
of its Subsidiaries is a party and relating to the Business or any of the
Products or the assets being sold in the Sale; (i) sell or dispose of any
master seed to any third party; or (j) authorize any of, or commit or agree
to take any of, the foregoing actions.
Indemnification
The Agreement obligates the Company to indemnify the Buyer and
specified related parties for liabilities relating to: (i) any breach of any
representation or warranty of the Company in the Agreement or the other
transaction agreements which remains in effect after the Closing;
(ii) any breach by the Company of any covenant or agreement contained
in the Agreement or the transaction agreements contemplated thereby which is
to be performed by the Company after the Closing; (iii) the assets and
liabilities being retained by the Company; (iv) any remediation, clean-up or
removal of, or other remedial actions involving, hazardous materials
released, disposed of or discharged prior to or on the date of the Closing
either (a) on, beneath or adjacent to any property currently owned, operated
or leased by the Company (including the real estate being sold or leased to
the Buyer) or (b) at any other location if the hazardous materials were
generated, produced, used, stored, treated, recycled, transported,
discharged, emitted or released by or on behalf of the Company or any of its
subsidiaries or affiliates prior to or on the date of the Closing;
(v) penalties or other costs for violations of environmental laws by
the Company or its subsidiaries or affiliates prior to or on the date of the
Closing; (vi) the settlement effected by letter dated March 18, 1999
between the Company and the United States Department of Justice,
whereby the Company pled guilty to a misdemeanor charge and agreed to pay
the specified restitution, penalties and fines in connection with the
Company's violation of U.S. Department of Agriculture regulations applicable
to the manufacture and sale of poultry vaccine products; and (vii) the
ongoing investigation by the Securities and Exchange Commission of matters
with respect to the suspension of trading in the Company's securities by the
American Stock Exchange in March, 1998 and other matters. However, except
with regard to any fraud claims, the Company's obligation to indemnify the
Buyer does not arise until the aggregate of the foregoing liabilities
exceeds $150,000. If this amount is exceeded, the Company's indemnification
obligations extend to the full amount and are not limited to the amount over
$150,000. The Company's indemnification obligations are capped at the
Purchase Price.
The Buyer is obligated to indemnify the Company and specified related
parties for liabilities relating to: (i) any breach of any representation or
warranty of the Buyer in the Agreement or the other transaction agreements
contemplated thereby which remains in effect after the closing of the Sale;
(ii) any breach by the Buyer of any covenant or agreement contained in the
Agreement or the other transaction agreements which is to be performed after
the closing of the Sale; or (iii) the liabilities being assumed by the
Buyer. The Buyer's obligations to indemnify the Company are subject to the
same threshold and cap as the Company's indemnification obligations as set
forth above.
The indemnification obligations of the Company and the Buyer are net
of any available insurance and are subject to adjustment to eliminate the
effects of any tax costs or benefits.
Additional Agreements
The Agreement requires the Company and the Buyer to enter into a
transaction services agreement on mutually agreeable terms. The Buyer has
indicated that it likely will request transition services from the Company
and the general terms of a transition services agreement are being discussed.
However, the parties have not yet reached an agreement on the terms and
conditions of the transition services agreement.
As part of the Sale, the Company will lease to the Buyer certain
portions of the Company's corporate annex site at Lincoln Avenue and Wheat
Road in Buena, New Jersey, including Building 27 of that site.
In addition, at the Closing, the Company will execute and deliver a
Non-Competition Agreement whereby the Company will agree for itself, its
subsidiaries and its affiliates not to compete in the business of
manufacturing, packaging, distributing, licensing, marketing or selling
poultry vaccines or related products for a period of five (5) years from and
after the date of Closing.
The Closing
The Agreement provides that the consummation of the Sale (the
"Closing") will occur promptly following the requisite stockholder
approval of the Sale (if obtained), but in any event no later than
five (5) business days after satisfaction or waiver of the conditions to
Closing or on such other date as the Company and the Buyer may agree
in writing.
Termination, Amendment and Waiver
The Agreement may be terminated at any time by the mutual written
agreement of the Company and the Buyer. The Agreement may be terminated by
either the Company or the Buyer if (i) the Closing does not occur on or
before September 19, 2000 (unless the failure to close is due to
a material breach of the Agreement by the party seeking termination); (ii) a
court or other governmental entity issues an order, decree or ruling that
has become final and non-appealable which permanently enjoins, restrains or
otherwise prohibits the Sale or the other transactions contemplated by the
Agreement or the other agreements contemplated thereby; or (iii) the
requisite majority of the Company's stockholders fails to approve the Sale.
The Agreement provides for waivers by either the Company or the Buyer,
provided that any such waiver of provisions of the Agreement must be made in
writing by the party granting the waiver.
Opinion of Financial Advisor
Seidman & Co., Inc. ("Seidman") has acted as financial advisor to the
Company in connection with the Sale. Seidman, established in 1970, is an
investment banking firm specializing in corporate advisory and restructuring
services, fair market value analysis and fairness opinions. The Company
selected Seidman to provide a fairness opinion with respect to the sale
based upon Seidman's long-term experience in these areas. Seidman will
receive $25,000 as compensation for its services to the Company.
Seidman has delivered its written opinion dated July 11, 2000 to the
Board of Directors to the effect that, as of the date of the opinion and
subject to the assumptions and limitations set forth in the opinion, the
consideration to be received by the Company in connection with the Sale was
fair to the Company from a financial point of view.
Seidman did not provide advice to the Company in connection with
negotiating the Sale; and the Company and the Buyer determined the amount
and form of consideration to be paid with respect to the Sale through arms-
length negotiations without reference to any recommendation of Seidman.
In providing its opinion, Seidman assumed and relied without
independent verification upon various matters, including the following:
* The accuracy and completeness of all of the financial and other
information provided to or discussed with Seidman or publicly
available;
* The reasonableness and accuracy of the financial projections,
forecasts and analyses provided to or discussed with Seidman, and
that these financial projections, forecasts and analyses were
reasonably prepared in good faith and on bases reflecting the
best currently available judgments and estimates of the
management of the Company; and
* That the transactions described in the Agreement would be
consummated without waiver or modification of any of the material
terms or conditions contained therein by any party thereto.
Seidman's analysis and opinion were subject to additional limitations,
including the following:
* Seidman expressed no opinion with respect to the projections,
forecasts, analyses and views or the assumptions upon which they
were made;
* Seidman did not review any of the books and records of the
Company;
* Seidman did not conduct a physical inspection of the properties
or facilities of the Company or obtain or make an independent
valuation or appraisal of the assets or liabilities of the
Company, and no valuation or appraisal of that type was provided
to Seidman; and
* Seidman expressed no opinion as to the potential tax consequences
of the Sale to the Company or its stockholders.
Seidman's opinion was necessarily based upon economic and market
conditions and other circumstances as they existed and could be evaluated by
Seidman as of the date of its opinion.
THE FULL TEXT OF SEIDMAN'S WRITTEN OPINION, DATED JULY 11, 2000, IS
ATTACHED TO THIS DOCUMENT AS APPENDIX B. STOCKHOLDERS ARE URGED TO READ THE
OPINION CAREFULLY IN ITS ENTIRETY. SEIDMAN'S OPINION DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER OF THE COMPANY AS TO HOW THE STOCKHOLDER
SHOULD VOTE WITH RESPECT TO THE SALE AND SHOULD NOT BE RELIED UPON BY ANY
STOCKHOLDER AS SUCH. THE SUMMARY OF SEIDMAN'S OPINION IN THIS DOCUMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION
ATTACHED AS APPENDIX B.
Use of Proceeds of the Sale; Expenses of the Sale
The Company intends to apply approximately $10,500,000 of the proceeds
of the Sale to repay outstanding loans. Approximately $1,000,000 of the Sale
proceeds will be applied to certain outstanding accounts payable of the
Company. And the remaining $500,000 of Sale proceeds received at Closing will
be applied to pay costs associated with the Sale and the Special Meeting,
ISRA compliance, other matters relating directly or indirectly to the Sale
and for other general corporate purposes. In addition, at Closing, the
Company will pay a $25,000 bonus to Fountain Agricounsel, LLC, the management
consultant that introduced the Buyer to the Company. To date, the Company has
paid $51,500.00 to Fountain Agricounsel, LLC as compensation for management
consulting services provided to the Company in connection with the
divestiture of the Business.
As described above, $500,000 of the cash purchase price for the
Business will be deposited into an Escrow Fund at Closing. Upon release to
the Company of any moneys remaining in the Escrow Fund, the Company will
apply such funds toward general corporate purposes.
Dissenters' Rights Not Available
The Company is organized under the corporate laws of the State of
Delaware. Delaware law does not provide for appraisal or other similar
rights for dissenting stockholders in connection with the Sale. Accordingly,
the Company's stockholders will have no right to dissent and obtain payment
for their shares.
Federal Income Tax Consequences; Accounting Treatment of the Sale
Consummation of the Sale will not be a taxable event for the Company's
stockholders. The Company will treat the Sale as a sale of the net assets
and liabilities of the Company's Vineland Laboratories division, which will
be accounted for as a discontinued operation. Consummation of the Sale will
result in a net gain after tax for the Company under both generally accepted
accounting purposes and applicable tax laws and rules.
Pro Forma Financial Information
The following unaudited Pro Forma Condensed Consolidated Balance Sheet
of the Company as of March 31, 2000, gives effect to the elimination of the
assets and liabilities of the Vineland Laboratories division of the Company
for the Sale and the related pro forma adjustments as described in the notes
to the Pro Forma Condensed Consolidated Financial Statements. The balance
sheet is presented as though the Sale occurred on March 31, 2000.
The following unaudited Pro Forma Condensed Consolidated Statements of
Operations for the three months ended March 31, 2000 and years ended
December 31, 1999, December 31, 1998 and December 31, 1997, give effect to
the elimination of results of operations of the Vineland Laboratories
division of the Company through the Sale and the related pro forma
adjustments as described in the notes to the Pro Forma Condensed
Consolidated Financial Statements. The unaudited Pro Forma Condensed
Consolidated Statement of Operations is presented as though the Sale
occurred on March 31, 2000.
The unaudited Pro Forma Condensed Consolidated Balance Sheet and
Statement of Operations of the Company should be read in conjunction with
the notes thereto and with the historical consolidated financial statements
of the Company and the notes thereto as included in the reports filed by the
Company with the Commission from time to time.
IGI, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
Historical Pro Forma Adjusted
At Adjustments Pro Forma at
March 31, For the Sale March 31,
2000 of Vineland 2000
------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 357 $ 1,000 (b) $ 1,357
Accounts receivable, less allowance for
doubtful accounts of $357 6,266 (3,986)(a) 2,280
Licensing and royalty receivable 606 606
Inventories, net 9,476 (4,993)(a) 4,483
Current deferred taxes, net 1,096 162 (a) 1,258
Prepaid expenses and other current assets: 1,060 (81)(a) 979
-------- -------- --------
Total current assets 18,861 (7,898) 10,963
Property, plant and equipment, net: 9,925 (4,331)(a) 5,594
Deferred income taxes, net 5,202 (a) 5,202
Deferred financing costs 1,596 (800)(b) 796
Investments 144 144
Other assets 386 386
-------- -------- --------
Total Assets $ 36,114 $(13,029) $ 23,085
======== ======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Revolving credit facility $ 6,990 $ (4,638)(b) $ 2,352
Current portion of long-term debt 700 (700)(b) -
Current portion of notes payable 961 961
Accounts payable 4,024 (1,730)(a) 2,294
Accrued payroll 492 (194)(a) 298
Accrued interest 341 (310)(b) 31
Other accrued expenses 1,909 (380)(a) 1,529
Income tax expense 10 10
-------- -------- --------
Total current liabilities 15,427 (7,952) 7,475
Long term debt, net of discount and current portion 10,884 (4,852)(b) 6,032
Deferred income 253 253
Detachable stock warrants 4,769 4,769
-------- -------- --------
Total Liabilities 31,333 (12,804) 18,529
Stockholders' equity:
Common stock 103 103
Additional paid-in capital 20,921 20,921
Accumulated deficit (14,602) (225)(c) (14,827)
Less treasury stock (1,641) (1,641)
-------- -------- --------
4,781 (225) 4,556
-------- -------- --------
Total Liabilities and Stockholders' Equity $ 36,114 $(13,029) $ 23,085
======== ======== ========
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements
IGI, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<FN>
<Fa> - Adjustments to reflect the sale of the Vineland Laboratories
division's assets and the liabilities assumed, and the reduction of
outstanding debt and extraordinary loss on the early extinguishment of
debt.
<Fb> - The proceeds on the sale of the Vineland Laboratories are estimated at
$12,500, of these proceeds, $10,500 will be utilitized to pay down bank
debt and accrued interest, $1,000 for transaction costs and professional
fees, and $1,000 to reduce accounts payable.
<Fc> - Comprises $300 after-tax gain on the sale of Vineland operations,
offset by the $525 after-tax loss on early extinguishment of debt.
</FN>
</TABLE>
IGI, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTED
RESULTS PRO FORMA PRO FORMA
FOR THE ADJUSTMENTS FOR THE
YEAR ENDED FOR THE SALE YEAR ENDED
DEC. 31, 1999 OF VINELAND DEC. 31, 1999
----------------------------------------------
<S> <C> <C> <C>
Revenues:
Sales, Net $ 32,725 $ 14,061 (a) $ 18,664
Licensing and royalty income 1,869 1,869
---------- -------- ----------
Total revenues 34,594 14,061 20,533
Cost and expenses:
Cost of sales 17,606 9,312 (a) 8,294
Selling, general and administrative expenses 14,064 5,081 (a) 8,983
Product development and research expenses 1,418 757 (a) 661
---------- -------- ----------
Operating profit (loss) 1,506 (1,089) 2,595
Interest expense, net (4,109) (1,231)(c) (2,878)
Other income (expense),net 31 31
---------- -------- ----------
Loss before benefit for income taxes and extraordinary gain (2,572) (2,320) (252)
Benefit for income taxes 601 789 (b) (188)
---------- -------- ----------
Loss before extraordinary item (1,971) (1,531) (440)
Extraordinary gain on early extinguishment of debt,
net of income tax expense of $224 387 387
---------- -------- ----------
Net loss $ (1,584) $ (1,531) $ (53)
========== ======== ==========
Loss per share:
Basic and diluted:
Loss before extraordinary gain $ (0.21) $ (0.05)
Extraordinary gain, net of tax 0.04 0.04
---------- ----------
Net loss $ (0.17) $ (0.01)
========== ==========
Average number of common shares:
Basic and diluted 9,604,768 9,604,768
========== ==========
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements
IGI, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
HISTORICAL ADJUSTED
RESULTS FOR PRO FORMA PRO FORMA
THE THREE ADJUSTMENTS FOR THE 3
MONTHS ENDED FOR THE SALE MONTHS ENDED
MAR. 31, 2000 OF VINELAND MAR. 31, 2000
----------------------------------------------
<S> <C> <C> <C>
Revenues:
Sales, Net $ 7,660 $ 3,189 (a) $ 4,471
Licensing and royalty income 794 794
---------- -------- ----------
Total revenues 8,454 3,189 5,265
Cost and expenses:
Cost of sales 4,317 2,169 (a) 2,148
Selling, general and administrative expenses 3,300 1,243 (a) 2,057
Product development and research expenses 432 212 (a) 220
---------- -------- ----------
Operating profit (loss) 405 (435) 840
Interest expense, net (1,899) (349)(c) (1,550)
---------- -------- ----------
Loss before benefit for income taxes (1,494) (784) (710)
Benefit for income taxes 448 267(b) 181
---------- -------- ----------
Net loss $ (1,046) $ (517) $ (529)
========== ======== ==========
Loss per share:
Basic and diluted net loss per common share $ (0.10) $ (0.05)
========== ==========
Basic and diluted weighted average number of
common shares outstanding 10,126,899 10,126,899
========== ==========
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements
IGI, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<FN>
<Fa> - To eliminate results of operations of the Vineland Laboratories
division for the entire period.
<Fb> - Calculated using the statutory tax rate of 34%.
<Fc> - The Pro Forma Adjustments columns of the unaudited Pro Forma Condensed
Consolidated Statements of Operations for the three months ended March
31, 2000 and year ended December 31, 1999 include adjustments to
reflect the reduction of indebtedness from the proceeds of the Vineland
operations. These adjustments are reflected as decreases to interest
expense of $311 and $1,193, respectively and decreases in amortization
of deferred financing costs of $38 and $94, respectively. Interest in
the Consolidated Statements of Operation for the three months ended
March 31, 2000 was based on cash proceeds of $10,500 and an effective
interest rate of 12%. Interest in the Consolidated Statements of
Operation for the twelve months ended December 31, 1999 was based on
cash proceeds of $11,500 and effective interest rate of 10.5%.
</FN>
</TABLE>
IGI, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTED
RESULTS PRO FORMA PRO FORMA
FOR THE ADJUSTMENTS FOR THE
YEAR ENDED FOR THE SALE YEAR ENDED
DEC. 31, 1998 OF VINELAND DEC. 31, 1998
----------------------------------------------
<S> <C> <C> <C>
Revenues:
Sales, Net $ 31,995 $ 14,843 (a) $ 17,152
Licensing and royalty income 1,200 1,200
---------- -------- ----------
Total revenues 33,195 14,843 18,352
Cost and expenses:
Cost of sales 17,321 9,224 (a) 8,097
Selling, general and administrative expenses 15,359 5,315 (a) 10,044
Product development and research expenses 1,425 821 (a) 604
---------- -------- ----------
Operating profit (loss) (910) (517) (393)
Interest expense, net (3,443) (3,443)
Other income (expense),net 33 33
---------- -------- ----------
Loss before benefit for income taxes (4,320) (517) (3,803)
Benefit for income taxes 1,291 176 (b) 1,115
---------- -------- ----------
Net loss $ (3,029) $ (341) $ (2,688)
========== ======== ==========
Loss per share:
Basic and diluted net loss per common share $ (0.32) $ (0.28)
Average number of common shares:
Basic and diluted 9,470,413 9,470,413
========== ==========
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements
IGI, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
HISTORICAL ADJUSTED
RESULTS PRO FORMA PRO FORMA
FOR THE ADJUSTMENTS FOR THE
YEAR ENDED FOR THE SALE YEAR ENDED
DEC. 31, 1997 OF VINELAND DEC. 31, 1997
----------------------------------------------
<S> <C> <C> <C>
Revenues:
Sales, Net $ 34,193 $ 16,644 (a) $ 17,549
Licensing and royalty income 150 - 150
---------- -------- ----------
Total revenues 34,343 16,644 17,699
Cost and expenses:
Cost of sales 17,653 9,515 (a) 8,138
Selling, general and administrative expenses 14,795 4,941 (a) 9,854
Product development and research expenses 1,675 986 (a) 689
---------- -------- ----------
Operating profit (loss) 220 1,202 (982)
Interest expense, net (1,853) (1,853)
Other income (expense),net (11) (11)
---------- -------- ----------
Gain/(Loss) before benefit for income taxes (1,644) 1,202 (2,846)
Benefit for income taxes 436 (409)(b) 845
---------- -------- ----------
Net loss $ (1,208) $ 793 $ (2,001)
========== ======== ==========
Loss per share:
Basic and diluted net loss per common share $ (0.13) $ (0.21)
Average number of common shares:
Basic and diluted 9,457,938 9,457,938
========== ==========
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements
IGI, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<FN>
<Fa> - To eliminate results of operations of the Vineland Laboratories
division for the entire period.
<Fb> - Calculated using the statutory tax rate of 34%.
</FN>
</TABLE>
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any proposal that a stockholder intends to present at the 2001 Annual
Meeting of Stockholders of the Company must be submitted to the Secretary of
the Company at its offices, Wheat Road and Lincoln Avenue, Buena, New Jersey
08310, no later than December 15, 2000, in order to be considered for
inclusion in the Proxy Statement relating to that meeting.
If a stockholder of the Company wishes to present a proposal before
the 2001 Annual Meeting and the Company has not received notice of such
matter prior to February 28, 2001, the Company shall have discretionary
authority to vote on such matter, if the Company includes a specific
statement in the proxy statement or form of proxy to the effect that it has
not received such notice in a timely fashion.
OTHER MATTERS
Management knows of no other matters to be brought before the Special
Meeting. However, should any other matter requiring a vote of the
stockholders properly come before the meeting, the persons named in the
enclosed proxy intend to vote the proxy in accordance with their best
judgment, discretionary authority to do so being included in the proxy.
By Order of the Board of Directors
Robert E. McDaniel
Secretary
July ___, 2000
ANNEX A
=====================================================================
ASSET PURCHASE AGREEMENT
Dated as of June 19, 2000
by and between
VINELAND INTERNATIONAL
and
IGI, INC.
=====================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.01 Purchase and Sale of Assets 1
Section 1.02 Purchase Price 6
Section 1.03 Payment of Purchase Price 10
Section 1.04 Allocation of Purchase Price 10
Section 1.05 Further Assurances 11
Section 1.06 Instrument of Assignment and Assumption 11
Section 1.07 Assignment and Assumption of Real Estate Leases 11
Section 1.08 Post Closing Adjustment. 11
ARTICLE II
CLOSING
Section 2.01 Closing Date. 14
Section 2.02 Instruments of Conveyance, Transfer, Assumption, Etc. 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Section 3.01 Organization, Standing and Power. 17
Section 3.02 Authority; Execution and Delivery; Enforceability. 17
Section 3.03 No Conflicts; Consents. 18
Section 3.04 Financial Statements; Undisclosed Liabilities. 18
Section 3.05 Absence of Certain Changes or Events. 19
Section 3.06 Taxes. 20
Section 3.07 Workers' Injuries. 21
Section 3.08 Litigation. 21
Section 3.09 Compliance with Applicable Laws. 21
Section 3.10 Environmental Matters. 21
Section 3.11 Intellectual Property. 23
Section 3.12 Contracts. 24
Section 3.13 Bonds. 26
Section 3.14 Accounts Receivable; Accounts Payable. 26
Section 3.15 Licenses; Permits. 27
Section 3.16 Suppliers. 27
Section 3.17 Customers. 27
Section 3.18 Distributors. 28
Section 3.19 Brokers. 28
Section 3.20 Title to Real Property; Entire Business. 28
Section 3.21 Tangible Personal Property. 31
Section 3.22 Transactions with Affiliates. 31
Section 3.23 Products. 31
Section 3.24 Employees and Benefit Plans. 32
Section 3.25 Inventory. 33
Section 3.26 Master and Production Seed Inventory. 33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Section 4.01 Organization, Standing and Power. 34
Section 4.02 Authority; Execution and Delivery; Enforceability. 34
Section 4.03 No Conflicts; Consents. 34
Section 4.04 Brokers. 34
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.01 Conduct of Business by the Seller. 35
Section 5.02 Other Actions. 36
Section 5.03 Release of Liens. 36
Section 5.04 Advise of Changes. 37
Section 5.05 Maintenance of Real Property. 37
Section 5.06 Revision of Vineland Laboratory Survey. 37
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01 Access to Information: Confidentiality. 38
Section 6.02 Commercially Reasonable Efforts. 38
Section 6.03 Fees and Expenses. 39
Section 6.04 Public Announcements. 39
Section 6.05 Advertising and Promotional Materials. 39
Section 6.06 Proxy Statement; Stockholders' Meeting. 39
Section 6.07 Affiliate Contracts. 40
Section 6.08 Nonsolicitation. 40
Section 6.09 Product Inventory. 40
Section 6.10 Transferred Employees; Employee Matters. 41
Section 6.11 Transfer Taxes and Fees. 41
Section 6.12 Intellectual Property Matters. 41
Section 6.13 ISRA Compliance. 42
Section 6.14 Accounts Receivable Collection. 42
Section 6.15 Confidentiality. 43
Section 6.16 Transition Services Agreement. 43
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.01 Conditions to Each Party's Obligation to
Effect the Closing. 43
Section 7.02 Conditions to Obligations of the Buyer. 44
Section 7.03 Conditions to Obligation of the Seller. 46
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 Termination. 47
Section 8.02 Effect of Termination. 47
Section 8.03 Extension; Waiver. 47
ARTICLE IX
INDEMNIFICATION
Section 9.01 Indemnification by the Seller. 48
Section 9.02 Indemnification by the Buyer. 48
Section 9.03 Losses Net of Insurance, etc. 49
Section 9.04 Termination of Indemnification. 49
Section 9.05 Procedures Relating to Indemnification for
Third Party Claims. 49
Section 9.06 Procedures Related to Indemnification for Other Claims. 50
Section 9.07 Exclusivity. 50
Section 9.08 Escrow Deposit. 51
ARTICLE X
GENERAL PROVISIONS
Section 10.01 Survival of Representations and Warranties. 51
Section 10.02 Notices. 51
Section 10.03 Definitions. 52
Section 10.04 Severability. 57
Section 10.05 Counterparts. 58
Section 10.06 Entire Agreement; No Third-Party Beneficiaries. 58
Section 10.07 Amendments 58
Section 10.08 Assignment; Successors in Interest. 58
Section 10.09 Governing Law. 59
Section 10.10 Arbitration. 59
Section 10.11 Interpretation. 60
Section 10.12 Waiver. 61
Section 10.13 Payments. 61
EXHIBITS
--------
Exhibit A Escrow Agreement
Exhibit B Instrument of Assignment and Assumption
Exhibit C Assignment of Real Estate Leases
Exhibit D Real Property Deeds
Exhibit E Building 27 Lease
Exhibit F Assignment of Proprietary Processes
Exhibit G Assignment of Trademarks
Exhibit H Bill of Sale
Exhibit I Non-Competition Agreement
Exhibit J Registrant Name Change Agreement
SCHEDULES
---------
Schedule 1.01(a)(iii) Machinery and Equipment
Schedule 1.01(a)(iv) Technology
Schedule 1.01(a)(vi) Assumed Contracts
Schedule 1.01(a)(vii) Permits
Schedule 1.01(a)(x) Artwork
Schedule 1.01(a)(xvii) Real Estate Leases
Schedule 1.01(b) (xii) Excluded Accounts Receivable
Schedule 1.02(c)(iii) Settlement Arrangement
Schedule 1.02(c)(xi) Accounts Payable and Accrued Expenses
Schedule 1.03 Purchase Price Payment
Schedule 1.04 Purchase Price Allocation
Schedule 1.08 Inventory Accounting Principles
Schedule 3.01 Organization, Standing and Power
Schedule 3.03 Consents and Filings - Seller
Schedule 3.04 Financial Statements
Schedule 3.05 Absence of Certain Changes or Events
Schedule 3.06 Taxes
Schedule 3.07 Workers' Injuries
Schedule 3.08 Litigation
Schedule 3.09 Compliance with Applicable Laws
Schedule 3.10 Environmental Matters
Schedule 3.11(a) Intellectual Property
Schedule 3.11(b) Other Intellectual Property Matters
Schedule 3.11(c) Agreements Affecting Intellectual Property
Schedule 3.11(d) Intellectual Property Applications; Limitations
Schedule 3.12 Contracts
Schedule 3.13 Bonds
Schedule 3.14(a) Accounts Receivable
Schedule 3.14(b) Accounts Payable
Schedule 3.15 Licenses; Permits and Product Registrations
Schedule 3.16 Suppliers
Schedule 3.17 Customers
Schedule 3.18 Distributors
Schedule 3.20 Title to Purchased Assets; Entire Business
Schedule 3.22 Transactions with Affiliates
Schedule 3.23 Products
Schedule 3.24(a) Employees
Schedule 3.24(b) Business Interruptions
Schedule 3.24(c) Employee Benefit Plans
Schedule 3.25 Inventory
Schedule 3.26(a) Master and Production Seed Inventory
Schedule 3.26(b) Master Seed Program
Schedule 4.03 Consent and Filings - Buyer
Schedule 5.01 Conduct of Business
Schedule 6.10 Transferred Employees
Schedule 10.11 Seller's Knowledge
ASSET PURCHASE AGREEMENT
------------------------
ASSET PURCHASE AGREEMENT (herein, together with the Annexes,
Schedules and Exhibits attached hereto, referred to as this "Agreement"),
dated as of June 16, 2000, by and between VINELAND INTERNATIONAL, a
Delaware general partnership (the "Buyer"), and IGI, INC., a Delaware
corporation (the "Seller"). Capitalized terms used in this Agreement are
defined or otherwise referenced in Section 10.03.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Seller, through its Vineland Laboratories division (the
"Division") and IGI Brazil, is in the business (the "Business") of
manufacturing, marketing, licensing and selling poultry vaccines and
related equipment (collectively, the "Products"); and
WHEREAS, the Seller desires to sell to the Buyer, and the Buyer
desires to purchase from the Seller, the Purchased Assets, and the Buyer
has agreed to assume the Assumed Liabilities, in each case upon the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual representations and
warranties and covenants made herein, the Buyer and the Seller, each
intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
---------------------------
Section 1.01 Purchase and Sale of Assets. (a) At the Closing
provided for in Section 2.01, on the terms and subject to the conditions
set forth in this Agreement, the Seller shall, or shall cause its
Subsidiaries to, sell, convey, transfer, assign and deliver to the Buyer,
free and clear of any and all Liens and Encumbrances (except for Permitted
Encumbrances), and the Buyer shall purchase and acquire from the Seller or
its Subsidiaries, as applicable, all of the right, title and interest of
the Seller or its Subsidiaries, as applicable, in and to the assets and
rights set forth below (collectively, the "Purchased Assets"):
(i) all inventories of the Business including, without
limitation, raw materials, work in progress, consigned goods,
finished goods, packaging and labels (including, without limitation,
any of the foregoing held for the benefit of the Seller or its
Subsidiaries and in the possession of third party manufacturers,
suppliers, dealers or others in transit) (the "Inventory");
(ii) all master seed and production seed inventory relating to
the Products or otherwise relating to the Business;
(iii) all machinery and equipment owned or used by the Seller
or any of its Subsidiaries in connection with the Business and all
usable spare parts relating thereto including, without limitation,
the machinery, equipment and usable spare parts set forth on Schedule
1.01(a)(iii);
(iv) all past, current and developmental formulations, forms,
specifications, processes, trade secrets, inventions for which no
patents are pending, industrial rights and technological know-how
owned or used by the Seller or any of its Subsidiaries relating to
the Products, any of the Purchased Assets, or the Business (the
"Technology") including, but not limited to, those set forth on
Schedule 1.01(a)(iv);
(v) all books, records, files and other data of the Seller or
any of its Subsidiaries (including those stored electronically)
relating to any of the Products, the Purchased Assets or the
Business, including, but not limited to, machinery and equipment
maintenance files, customer lists, customer purchasing histories,
price lists, distribution lists, supplier lists, raw material
supplier qualifications, inventory reports of raw materials,
packaging, goods in process and finished goods, production data,
manufacturing and quality control records and procedures (including,
but not limited to, all applicable Good Manufacturing Practices
("GMPs"), customer complaint and inquiry files, research and
development files, records, data and laboratory books, medical
reports, files relating to the safety and effectiveness of each of
the Products, adverse reaction reports, Product Registrations and
regulatory files (including, but not limited to, all correspondence
with any Governmental Entity), sales materials and records
(including, but not limited to, pricing history, total sales, terms
and conditions of sale, sales and pricing policies and practices),
strategic plans, internal financial statements, marketing and
promotional surveys, material and research, trademark and
Intellectual Property files and import and export records, in each
case relating to the Products, the Purchased Assets or the Business;
(vi) the agreements, contracts, licenses, leases, commitments,
understandings, instruments, binding obligations and arrangements
(oral or written) set forth (or, in the case of oral Contracts a
description of the material terms of which are set forth) in Schedule
1.01(a)(vi) (the "Assumed Contracts");
(vii) all approvals, consents, permits, licenses,
registrations, authorizations and clearances of any Governmental
Entity issued or granted to the Seller or any of its Subsidiaries
including, without limitation, all Product Registrations, USDA
licenses, product clearances and any other product registrations
relating, in each case, to any of the Products, the Purchased Assets
or the Business (the "Permits") including, but not limited to, the
Permits set forth on Schedule 1.01(a)(vii);
(viii) all current and historical sales and promotional
literature of the Seller or any of its Subsidiaries relating to the
Products, the Purchased Assets or the Business, including, but not
limited to, promotional pamphlets and brochures, historical and
current television, radio and other media advertising, historical and
current print advertising and all artwork relating to sales and
promotional literature;
(ix) all current and historical sales and promotional material
(other than sales and promotional literature) of the Seller or any of
its Subsidiaries relating to the Products, the Purchased Assets or
the Business, including, but not limited to, samples, premium and
promotional items;
(x) all labels, logos, graphics and associated artwork, all
current and historical packaging, and all litho screens, master silk
screens, printing plates and associated tooling and material, in each
case owned or used by the Seller or any of its Subsidiaries relating
to the Products, the Purchased Assets or the Business including, but
not limited to, those set forth on Schedule 1.01(a)(x);
(xi) all Intellectual Property including the goodwill
associated therewith, and the Seller's or its Subsidiaries' right to
sue for, and remedies against, past, present or future infringements
thereof, and rights of priority and protection of interest therein;
(xii) each and every parcel of real property or interests in
real property owned ("Owned Real Property"), held under lease
("Leased Real Property") or used by Seller or any of its Subsidiaries
in the conduct of the Business, including, without limitation, any
buildings, structures and improvements located thereon, all fixtures
attached thereto, all off street parking rights and spaces, all
fixtures, equipment and machinery attached thereto, all oil, gas and
mineral rights related to the foregoing, all rights in and to all
strips and gores, all alleys adjoining the land, and all right in and
to the land lying in the bed of any street, road or avenue, open or
proposed adjoining the land, all right, title and interest in and to
any condemnation award or to any payment in lieu thereof for any
taking or for any change in grade of any street, road or avenue
thereto and all easements, rights of way, reservations, privileges,
appurtenances and other estates and rights pertaining thereto held by
Seller and related to the Owned Real Property or the Leased Real
Property (collectively, the "Real Property");
(xiii) except as provided in Section 1.01(b)(xii) and Section
1.02(c)(xii), all accounts receivable of the Seller or any of its
Subsidiaries as of the Closing Date relating to the Business (whether
or not invoices have been issued), and any and all insurance policies
and letters of credit relating to the payment thereof or to customer
credit;
(xiv) all "other receivables" of the Seller or any of its
Subsidiaries as of the Closing Date relating to the Business, which
shall include all refunds, credits, allowances, rebates and other
debt items owing by suppliers, vendors and others furnishing goods or
providing services to the Business;
(xv) all prepaid expenses, advances or deposits with or paid
to third parties of the Seller or any of its Subsidiaries relating
primarily to the Business;
(xvi) all right, title and interest of the Seller or any of
its Subsidiaries in or to leases, subleases, licenses or other
agreements under which the Seller or any of its Subsidiaries use or
occupy or have the right to use or occupy, now or in the future, any
Real Property, including, without limitation, all modifications,
amendments and supplements thereto and any assignments thereof (the
"Real Estate Leases"), including, but not limited to those Real
Estate Leases set forth on Schedule 1.01(a)(xvii);
(xvii) all goodwill of the Seller and its Affiliates
associated with each of the Business, the Division and IGI Brazil;
and
(xviii) except as provided in Section 1.01(b)(xi), all claims,
causes of action, judgments, indemnity or other rights (collectively,
"Claims") arising out of or relating to (A) any of the Purchased
Assets arising before, on or after the Closing or (B) the conduct of
the Business to the extent arising after the Closing.
(b) Notwithstanding anything in this Agreement to the contrary,
specifically excluded from the Purchased Assets are the right, title and
interest of the Seller or any of its Subsidiaries in or to any of following
(collectively, the "Excluded Assets"):
(i) except to the extent incorporated in the Products as of
the Closing Date, all right, title and interest of the Seller or any
of its Subsidiaries in or to the Novasome(R) technology;
(ii) all machinery, equipment and other tangible property
owned or used by Seller or any of its Subsidiaries not used in
connection with the Business and not specifically set forth in
Schedule 1.01(a)(iii);
(iii) all cash, short term investments and cash equivalents
held by the Seller or any of its Subsidiaries;
(iv) all agreements, contracts, leases, licenses, commitments,
understandings, instruments or any other binding obligation or
arrangement (oral or written) to which the Seller or any of its
Subsidiaries is a party or by which any of the Purchased Assets is
bound or subject or which relates in any manner to the Business, in
each case not specifically set forth in Schedule 1.01(a)(vi);
(v) except as provided in Section 1.01(a)(xiii), all insurance
policies of the Seller or any of its Subsidiaries and any rights
thereunder;
(vi) all books, records, files and data (including those
stored electronically) of the Seller or any of its Subsidiaries (A)
not relating to any of the Products, the Purchased Assets or the
Business, or (B) prepared in connection with this Agreement or the
other Transaction Agreements or the transactions contemplated hereby
and thereby (including all minute books and corporate records of the
Seller and its Subsidiaries);
(vii) all claims, causes of action, judgments, indemnity or
other rights arising out of or relating to any of the Excluded Assets
or Retained Liabilities;
(viii) all refunds, credits or overpayments with respect to
Taxes;
(ix) all rights of the Seller and any of its Subsidiaries
arising under this Agreement or the other Transaction Agreements or
the transactions contemplated hereby and thereby;
(x) all approvals, consents, permits, licenses, registrations,
authorizations or clearances of the Seller or any of its Subsidiaries
from any Governmental Entity that relate primarily to any Excluded
Asset and are not set forth on Schedule 1.01(a)(vii);
(xi) all Claims arising out of or relating to former
directors, officers, employees, agents, advisors, consultants or
other representatives of the Seller;
(xii) all accounts receivable of the Seller set forth on
Schedule 1.01(b)(xii) and any and all accounts receivable due to the
Seller from any Governmental Entity;
(xiii) any asset, property, right, contract or other agreement
that is not included within the Purchased Assets; and
(xiv) all of the issued and outstanding capital stock of IGI
do Brasil Ltda., a corporation organized and existing under the laws
of the Federative Republic of Brazil ("IGI Brazil").
Section 1.02 Purchase Price (a) In consideration of the sale,
conveyance, transfer, assignment and delivery of the Purchased Assets by
the Seller or its Subsidiaries, as applicable, pursuant to Section 1.01(a),
the Buyer agrees to (i) pay to the Seller in accordance with Section 1.03
U.S. $12,500,000 (Twelve Million Five Hundred Thousand United States
Dollars) in the aggregate (subject to the adjustments, if any, contemplated
by Section 1.07, the "Purchase Price") in cash at Closing, and (ii)
undertake, assume and agree to perform, and otherwise pay, satisfy and
discharge, and to indemnify and hold harmless the Seller and its
Subsidiaries from and against the following liabilities, obligations,
claims, demands, expenses, damages or responsibilities, if any, of any of
the Seller or its Subsidiaries whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due (the "Assumed
Liabilities"):
(i) except as provided in Section 1.02(c)(xii), all accounts
payable and accrued expenses owed to any third party, of the Seller
or any of its Subsidiaries related to the Purchased Assets or the
Business;
(ii) all liabilities and obligations of the Seller or any of
its Subsidiaries under the Assumed Contracts, the Real Estate Leases
and the Permits to the extent included in the Purchased Assets and to
the extent arising and relating to any period after the Closing; and
(iii) all liabilities and obligations relating to the
Purchased Assets or the Business, in each case to the extent arising
out of and relating to any period after the Closing and not otherwise
included in the Retained Liabilities.
(b) On the terms and subject to the conditions set forth in this
Agreement, the Instrument of Assignment and Assumption and the Assignment
of Real Estate Leases, at the Closing, the Seller or its Subsidiaries shall
assign to the Buyer all of their rights under the Assumed Contracts, the
Real Estate Leases and the Permits and all of their obligations under the
Assumed Contracts, the Real Estate Leases and the Permits, in each case to
the extent such obligations arise after the Closing, and the Buyer shall
accept the assignment of all of the Seller's or its Subsidiaries' rights
thereunder and shall assume all of the Seller's or its Subsidiaries'
obligations thereunder, to the extent such obligations arise after the
Closing; provided, however, that the Seller or its Subsidiaries shall
assign such rights and obligations only to the extent that such rights and
obligations are assignable under such Assumed Contracts, Real Estate Leases
and Permits and Applicable Law, and no action hereunder shall constitute an
assignment thereof, except to such extent and provided, further, that to
the extent the consent of any Person to the assignment, or notice to a
third party of the assignment, is required pursuant to the terms of such
Assumed Contract, Real Estate Lease or Permit or Applicable Law, no
assignment or attempted assignment will be deemed to have been effected by
the provisions of this Agreement without such consent or notice. To the
extent that Applicable Law permits such an assignment and the notice to or
consent of any Person is required, the Seller or its Subsidiaries shall
deliver to, and obtain from, the applicable Person or Governmental Entity
the required consent or notice in accordance with the terms and conditions
of the applicable Assumed Contract, Real Estate Lease or Permit, and shall
use commercially reasonable efforts to obtain any required consents, upon
terms substantially similar to those enjoyed by the Seller or its
Subsidiaries under such Assumed Contract, Real Estate Lease or Permit,
prior to the Closing Date. To the extent that Applicable Law does not
permit the Seller or its Subsidiaries to assign any Assumed Contract that
would otherwise constitute a Purchased Asset, the Seller or its Subsidiary
that is a party to such Contract shall (i) provide to the Buyer, at the
request of the Buyer, the benefits of any such Contract, and (ii) enforce
and perform, at the request and reasonable expense of the Buyer, for the
account of the Buyer, any rights or obligations of the Seller or its
Subsidiaries arising from any such Contract against or in respect of any
third party, including the right to elect to terminate any Contract in
accordance with the terms thereof upon the advice of the Buyer, or
otherwise enter into with the Buyer such other arrangements sufficient to
provide equivalent benefits and burdens to the Buyer; provided that the
Buyer shall reimburse the Seller or its Subsidiaries for reasonable out-of-
pocket expenses incurred by the Seller or its Subsidiaries in connection
with entering into any such other arrangement.
(c) Notwithstanding anything in this Agreement to the contrary, the
Buyer shall not assume, and the Seller shall be responsible for the
payment, satisfaction, performance and discharge of, and shall indemnify
and hold harmless the Buyer and its respective Affiliates from and against
all liabilities, obligations, claims, demands, expenses, damages or
responsibilities of the Seller or any of its Subsidiaries other than the
Assumed Liabilities, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due including, but not
limited to, the following (collectively, the "Retained Liabilities"):
(i) any and all liabilities and obligations of the Seller or
any of its Subsidiaries for Taxes related to any of the Products, the
Purchased Assets or the Business that relate to any Pre-Closing Tax
Period;
(ii) any and all liabilities and obligations of the Seller or
any of its Subsidiaries relating to or arising out of the Excluded
Assets;
(iii) any and all liabilities and obligations of the Seller or
any of its Subsidiaries relating to any Proceeding or relating to or
arising out of any violation by the Seller or any of its Subsidiaries
or failure to comply by the Seller or any of its Subsidiaries with
any Applicable Law or any request of any Governmental Entity prior to
the Closing including, without limitation, any and all liabilities
and obligations relating to or arising out of the settlement
arrangement described on Schedule 1.02(c)(vii) (the "Settlement
Arrangement");
(iv) except for unpaid salaries shown in Accrued Liabilities
on the Final Statement of Working Capital, any and all liabilities
and obligations of the Seller or any of its Subsidiaries relating to
any current or former employees (including, but not limited to, the
Transferred Employees with respect to periods ending on or prior to
the Closing Date) of the Seller or any of its Subsidiaries including,
but not limited to, liabilities and obligations for payment of any
federal, state and local payroll Taxes or arising under or through
any collective bargaining agreement or any employment bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, workers' compensation, death
benefit, hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) providing benefits to
any of the Seller's or any of its Subsidiaries' current or former
employees, officers or directors (collectively, "Benefit Plans");
(v) any and all liabilities and obligations of the Seller or
any of its Subsidiaries arising out of or relating to the Assumed
Contracts, the Real Estate Leases and the Permits that are included
in the Purchased Assets, in each case to the extent arising out of or
relating to any period prior to the Closing;
(vi) any and all liabilities and obligations of the Seller or
any of its Subsidiaries in respect of any Product manufactured or
sold by the Seller or any of its Subsidiaries prior to the Closing
including, without limitation, any product liability claims or
litigation or any liabilities and obligations for refunds,
adjustments, allowances, exchanges, returns and warranty,
merchantability and other claims, in each case with respect to
Products manufactured or sold prior to the Closing, including,
without limitation, all Proceedings of any nature relating to any
such liability or obligation;
(vii) any and all liabilities and obligations of the Seller or
any of its Subsidiaries relating to any Proceeding or any other
claims whatsoever against or otherwise involving the Product, the
Business or any of the Purchased Assets arising on, prior to or after
the Closing which relate to the conduct of the Business on or prior
to the Closing including, but not limited to, the manufacture,
marketing, labeling or sale of the Products prior to the Closing;
(viii) any and all liabilities and obligations of the Seller
or any of its Subsidiaries to the extent arising out of or relating
to the conduct of the Business or any portion thereof prior to the
Closing, or the ownership, use, lease, or sale of any property or
assets (including, but not limited to, any of the Purchased Assets)
owned, used, leased or sold by the Seller or any of its Subsidiaries
prior to the Closing Date;
(ix) any and all liabilities and obligations of the Seller or
any of its Subsidiaries relating to indebtedness owed by the Seller
or any of its Subsidiaries to third parties (including, but not
limited to, banks, leasing companies or other financial
institutions);
(x) any and all liabilities and obligations of the Seller or
any of its Subsidiaries arising under any Environmental Law with
respect to any period on or prior to the Closing Date;
(xi) all accounts payable and accrued expenses owed to third
parties of the Seller or any of its Subsidiaries and all other
liabilities set forth on Schedule 1.02(c)(xi);
(xii) any and all liabilities and obligations of the Seller or
any of its Subsidiaries with respect to credit balances in the
account receivable of the Business as of the Closing Date; and
(xiii) any and all liabilities and obligations not
specifically assumed by the Buyer pursuant to Section 1.02(a).
(d) For purposes of the Assumed Liabilities and the Retained
Liabilities, whenever reference is made to liabilities and obligations,
such reference shall be deemed to include any liabilities, obligations,
claims, demands, expenses, damages or responsibilities pertaining thereto,
whether known or unknown, absolute, accrued, contingent or otherwise, and
whether due or to become due.
Section 1.03 Payment of Purchase Price. At the Closing, the Buyer
shall (a) deliver to the Seller U.S.$12,000,000 (Twelve Million United
States Dollars) (the "Closing Payment") in immediately available funds by
wire transfer to an account or accounts designated by the Seller or any of
its Subsidiaries at least three (3) business days prior to the Closing Date
and (b) deposit with The Chase Manhattan Bank (or another mutually
acceptable escrow agent) (the "Escrow Agent") U.S.$500,000 (Five Hundred
Thousand United States Dollars) by certified or official bank checks, or by
wire transfer of immediately available funds (the "Escrow Deposit") under
the terms of the Escrow Agreement (the "Escrow Agreement") to be executed
at the Closing in the form attached hereto as Exhibit A. Release of the
Escrow Deposit will be permitted only in accordance with the terms and
conditions of the Escrow Agreement.
Section 1.04 Allocation of Purchase Price. The Purchase Price
shall be allocated by the parties in accordance with the allocations set
forth in Schedule 1.04. Neither the Seller nor the Buyer shall take any
position on any return, declaration, report or information return or
statement relating to Taxes inconsistent with any allocation set forth in
Schedule 1.04, unless so required by Applicable Law. Notwithstanding any
other provision of this Agreement, the agreement set forth in this Section
1.04 shall survive the Closing Date indefinitely.
Section 1.05 Further Assurances. At the Closing and from time to
time after the Closing, at the reasonable request of the Buyer and without
further consideration, the Seller shall promptly execute and deliver, or
cause its Subsidiaries to promptly execute and deliver, to the Buyer such
agreements, certificates and other instruments of sale, conveyance,
assignment and transfer, and take such other action, as may be reasonably
requested by the Buyer (i) more effectively to sell, convey, assign and
transfer to and vest in the Buyer (or to put the Buyer in possession of)
any of the Purchased Assets (including, without limitation, the Assumed
Contracts, the Real Property, the Permits, the Product Registrations, the
Intellectual Property and the Technology) or (ii) to assist the Buyer in
registering the Intellectual Property with the appropriate Governmental
Entities in any jurisdiction requested by the Buyer. In addition, at the
Closing and from time to time after the Closing, at the reasonable request
of the Buyer and without further consideration, the Seller shall take, or
cause to be taken, all actions, and do, or cause to be done, and assist and
cooperate with the Buyer in doing, all things necessary, proper or
advisable in connection with the preparation and filing with the
appropriate Governmental Entities of all documents required to be prepared
and filed in connection with the transfer of the Permits and the Product
Registrations to the Buyer pursuant to this Agreement.
Section 1.06 Instrument of Assignment and Assumption. At the
Closing, the Buyer and the Seller shall execute and deliver, or the Seller
shall cause its Subsidiaries to execute and deliver, the Instrument of
Assignment and Assumption in the form attached hereto as Exhibit B (the
"Instrument of Assignment and Assumption").
Section 1.07 Assignment and Assumption of Real Estate Leases. (a)
At the Closing, the Buyer and the Seller shall execute and deliver, or the
Seller shall cause any Subsidiary holding a leasehold interest in any
portion of the Real Property to execute and deliver, the Assignment and
Assumption of Leases in the form attached hereto as Exhibit C (the
"Assignment of Real Estate Leases").
(b) Lease of Certain Portions of the Seller's Property. At the
Closing, the Buyer and Seller shall enter into a lease substantially in the
form attached hereto as Exhibit E (the "Building 27 Lease"), pursuant to
which Seller shall demise to Buyer, and Buyer shall lease from Seller, for
the term and otherwise upon the terms and conditions set forth in the
Building 27 Lease, certain portions of the corporate annex site of Seller,
which site is located at Lincoln Avenue and Wheat Road, Buena, New Jersey,
including but not limited to Building 27 of the corporate annex site
("Leased Premises").
Section 1.08 Post Closing Adjustment. (a) Preliminary Statement
of Working Capital. On or prior to the date which is sixty (60) days after
the Closing Date, the Buyer will prepare or cause to be prepared by its
independent accountant a preliminary statement of working capital (the
"Preliminary Statement of Working Capital") setting forth (i) the Current
Assets and Current Liabilities of the Business and (ii) the Net Working
Capital of the Business, in each case as of the Closing Date. For purposes
of this Agreement, (A) "Current Assets" shall mean the aggregate of
inventory (net of reserves) (the "Inventory Amount") and accounts
receivable (net of allowances) and, (B) "Current Liabilities" shall mean
the aggregate of accounts payable, accrued commissions, accrued distributor
commissions, accrued freight, accrued payroll and accrued royalties and (C)
"Net Working Capital" shall mean Current Assets minus Current Liabilities.
The Preliminary Statement of Working Capital shall be prepared in
accordance with U.S. GAAP applied on a basis consistent with those applied
by the Seller in connection with the Business prior to the Closing Date and
shall reflect the results of the physical inventory count to be performed
by or on behalf of the Buyer within three (3) Business Days prior to the
Closing Date. The Buyer agrees that the Seller and its representatives
shall have the right to observe the performance of the physical inventory
count contemplated by this Section 1.08(a). Without limiting any other
obligation of the Seller under this Agreement, the Seller will make
available or cause to be made available to the Buyer and its
representatives upon reasonable notice and at reasonable times all
personnel necessary to assist the Buyer and its representatives in
connection with the preparation of the Preliminary Statement of Working
Capital.
(b) Review of Preliminary Statement of Working Capital. On or prior
to the date on which the Preliminary Statement of Working Capital is due
(as contemplated by Section 1.08(a)), the Buyer shall deliver to the Seller
the Preliminary Statement of Working Capital. The Seller and its
independent accountant may review the Preliminary Statement of Working
Capital and may make inquiry of the Buyer and its representatives, and the
Buyer will make available to the Seller and its representatives, as
reasonably requested by the Seller, all books and records relating to the
Preliminary Statement of Working Capital deemed reasonably necessary by the
Seller in connection with their review thereof. The Preliminary Statement
of Working Capital shall be binding and conclusive upon, and deemed
accepted by, the Seller unless the Seller shall have notified the Buyer in
writing of any objections thereto consistent with the provisions of this
Section 1.08 within thirty (30) days after receipt thereof. The written
notice delivered by the Seller to the Buyer under this Section 1.08(b)
shall specify in reasonable detail each item on the Preliminary Statement
of Working Capital that the Seller disputes, a summary of the reasons for
such dispute and the portion of the Purchase Price Adjustment, if any,
which the Seller does not dispute.
(c) Disputes. Disputes between the Buyer and the Seller relating to
the Preliminary Statement of Working Capital that cannot be resolved by the
Buyer and the Seller within thirty (30) days after receipt by the Buyer of
the notice referred to in Section 1.08(b) may be referred thereafter for
decision at the insistence of either the Buyer or the Seller to one of the
U.S. "Big Five" accounting firms as agreed to by the Buyer and the Seller
(the "Arbiter"). If within 30 days of notice of objection by the Seller
pursuant to Section 1.08(b) the agreed upon accounting firm declines to
accept its appointment as Arbiter or the Buyer and the Seller are unable to
agree on the selection of an independent nationally recognized accounting
firm that will agree to act as Arbiter, then either the Buyer or the Seller
may request the American Arbitration Association to appoint such a firm,
and such appointment shall be conclusive and binding on all of the parties
hereto. Promptly, but no later than thirty (30) days after its acceptance
of its appointment as Arbiter, the Arbiter shall determine, based solely on
presentations by the Buyer and the Seller, and not by independent review,
those items in dispute on the Preliminary Statement of Working Capital and
shall render a written report as to the resolution of each dispute and the
resulting calculation of the Final Statement of Working Capital. The
Arbiter shall have exclusive jurisdiction over, and resort to the Arbiter
as provided in this Section 1.08(c) shall be the sole recourse and remedy
of the parties against one another or any other Person with respect to, any
disputes arising out of or relating to the Preliminary Statement of Working
Capital and/or the Final Statement of Working Capital; and the Arbiter's
determination shall be conclusive and binding on all of the parties hereto
and shall be enforceable in a court of law. The fee of the Arbiter shall be
borne fifty percent (50%) by the Seller and fifty percent (50%) by the
Buyer unless the Arbiter decides, based on its determination with respect
to the reasonableness of the respective positions of the Buyer and the
Seller that the fee shall be borne in unequal proportions. The Buyer will
make available to the Seller upon reasonable notice at reasonable times the
work papers used in preparing the Preliminary Statement of Working Capital
(to the extent the Buyer can afford the Seller with access to such
workpapers) in connection with (i) the review by the Seller of the
Preliminary Statement of Working Capital and (ii) the resolution by the
parties hereto of any disputes relating thereto.
(d) Final Statement. The Preliminary Statement of Working Capital
shall become final and binding upon the parties hereto upon the earlier of
(i) the failure by the Seller to object thereto within the period permitted
under, and otherwise in accordance with the requirements of, Section
1.08(b), (ii) the written agreement between the Buyer and the Seller with
respect thereto and (iii) the decision by the Arbiter with respect to
disputes under Section 1.08(c). The Preliminary Statement of Working
Capital, as adjusted pursuant to the written agreement of the parties
hereto or the decision of the Arbiter, when final and binding, is referred
to herein as the "Final Statement of Working Capital". The parties shall
deliver or cause to be delivered to the Escrow Agent a copy of the Final
Statement of Working Capital.
(e) Adjustments to Purchase Price. As soon as practicable (but not
more than five (5) Business Days) after the determination of the Final
Statement of Working Capital in accordance with this Section 1.08:
(i) there shall be an immediate downward adjustment in the
Purchase Price equal to the excess, if any, of (A) the Net Working
Capital of the Business as determined using the Reference Balance
Sheet over (B) the Net Working Capital of the Business as set forth
on the Final Statement of Working Capital; or
(ii) there shall be an immediate upward adjustment to the
Purchase Price equal to the excess, if any, of (A) the Net Working
Capital of the Business as set forth on the Final Statement of
Working Capital over (B) the Net Working Capital of the Business as
determined using the Reference Balance Sheet.
provided, however, that there shall be no adjustment to the Purchase Price
pursuant to Section 1.08(e)(i) or (ii) unless such excess amount exceeds
U.S.$100,000. The adjustment to Purchase Price provided for in this section
is hereinafter referred to as the "Purchase Price Adjustment."
(f) Undisputed Amounts. Notwithstanding anything to the contrary
set forth in this Section 1.08, pending resolution of all disputed items
with respect to the Preliminary Statement of Working Capital, that portion
of the Purchase Price Adjustment that is not in dispute, if any, shall be
paid to the Buyer or the Seller, as the case may be, within five (5) days
after the delivery by the Seller to the Buyer or the Seller, as the case
may be, of the notice described in Section 1.08(b).
(g) Interest. All payments required to be made pursuant to this
Section 1.08 shall be paid to the Buyer or the Seller, as the case may be,
together with any and all interest at a rate per annum equal to the "prime"
commercial lending rate quoted by the Escrow Agent as of the Closing Date
and accruing from the date which is thirty (30) days after the Closing Date
to the date of payment.
ARTICLE II
CLOSING
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Section 2.01 Closing Date. The closing of the transaction
contemplated hereby (the "Closing") shall take place at the offices of
Winthrop, Stimson, Putnam & Roberts, One Battery Park Plaza (24 Whitehall
Street), New York, New York, as soon as possible, but in no event later
than five (5) Business Days after satisfaction (or waiver) of the
conditions set forth in Article VII (except for the conditions which by
their terms are to be satisfied at or immediately prior to the Closing) or
such other time or date as the Buyer and the Seller agree in writing. The
time and date upon which the Closing occurs is herein referred to as the
"Closing Date."
Section 2.02 Instruments of Conveyance, Transfer, Assumption, Etc.
(a) The Seller shall execute and deliver, or cause its Subsidiaries,
mortgagees or lessees, as appropriate, to execute and deliver, to the Buyer
at the Closing:
(i) the Bill of Sale;
(ii) a receipt for the Purchase Price;
(iii) the Instrument of Assignment and Assumption;
(iv) the Assignment of Trademarks, and any and all documents,
agreements, certificates and other instruments as may be necessary to
register the Intellectual Property in the name of the Buyer in any
jurisdiction requested by the Buyer;
(v) an assignment of any Copyrights, and any and all
documents, agreements, certificates and other instruments as may be
necessary to transfer the copyrights to the Buyer;
(vi) the Assignment of Proprietary Processes, and any and all
documents, agreements, certificates and other instruments as may be
necessary to register the patents in the name of the buyer;
(vii) the Non-Competition Agreement;
(viii) the Registrant Name Change Agreement;
(ix) a Transition Services Agreement as mutually agreed;
(x) the Escrow Agreement;
(xi) the documents required to be filed with the appropriate
Governmental Entities in connection with the transfer to the Buyer of
the Product Registrations and the Permits;
(xii) with respect to each parcel of Owned Real Property, a
warranty deed with covenant against Seller's acts, in proper
recordable form and sufficient to vest in Buyer good, indefeasible
and marketable title to, and fee simple ownership of, each parcel of
Owned Real Property (the "Deed"), a form of which Deed is attached
hereto as Exhibit D, together with such affidavits as may be required
by Applicable Law, in proper form for recordation;
(xiii) with respect to that certain parcel of Leased Real
Property located at 1146 Airport Parkway, Gainesville, Georgia (the
"Georgia Leased Property"), a quitclaim deed in proper recordable
form and sufficient to vest in Buyer all of Seller's right, title and
interest in and to the Georgia Leased Property;
(xiv) the Building 27 Lease;
(xv) an affidavit, sworn to under penalty of perjury, setting
forth Seller's name, address and federal tax identification number
and stating that the Seller is not a "foreign person" within the
meaning of Section 1445 of the Internal Revenue Code of 1986, as
amended, and the decisions, regulations and rulings pertaining
thereto (the "Code");
(xvi) the Assignment of Real Estate Leases;
(xvii) appropriate state, county and city transfer tax returns
with respect to the Real Property;
(xviii) with respect to each Real Estate Lease, consents,
estoppel certificates and non-disturbance agreements from each
lessor, ground lessor, and/or sublessor, and the mortgagees or
lenders of such lessors, ground lessors or sublessors in form
reasonably satisfactory to Buyer;
(xix) with respect to each parcel of Owned Real Property, a
letter of zoning compliance from the appropriate county or other
governmental authority having jurisdiction over such parcel;
(xx) such other documents and certificates as the Title
Company (as hereinafter defined) may require to evidence the Seller's
authority, and the authority of the person or persons executing
documents on behalf of the Seller, to consummate the transactions
contemplated by this Agreement;
(xxi) a certificate of the Secretary of the Seller certifying
that the resolutions adopted by the Board of Directors (or the
equivalent thereof) attached thereto were duly and validly adopted
and are in full force and effect, and authorize the execution and
delivery by such Seller of this Agreement and the other Transaction
Agreements to which such Seller is a party, and the performance by
such Seller of its obligations hereunder and thereunder;
(xxii) a certificate of the Secretary of the Seller as to the
incumbency of certain of such Seller's officers and certifying that
the copies the Seller's articles and by-laws attached thereto are
true and correct;
(xxiii) each of the certificate and other documents
contemplated by Section 7.02 hereof; and
(xxiv) such other agreements, certificates and other
instruments required to be delivered by the Seller under this
Agreement or any of the other Transaction Agreements or as the Buyer
or its counsel may reasonably request to consummate the transactions
contemplated by this Agreement or the other Transaction Agreements.
(b) The Buyer shall execute and deliver to the Seller at the
Closing:
(i) by wire transfer in immediately available funds to the
account or accounts designated by the Seller, the Purchase Price;
(ii) the Escrow Agreement;
(iii) the Instrument of Assignment and Assumption;
(iv) the Assignment of Trademarks;
(v) the Assignment of Copyrights;
(vi) the Assignment of Proprietary Processes;
(vii) the Non-Competition Agreement;
[(viii) the Registrant Name Change Agreement;]
(ix) the Transition Services Agreement as mutually agreed;
(x) the Assignment of Real Estate Leases;
(xi) the Building 27 Lease;
(xii) a certificate of the Secretary of the Buyer certifying
that the resolutions adopted by the Buyer's Board of Directors
attached thereto were duly and validly adopted and are in full force
and effect, and authorize the execution and delivery by the Buyer of
this Agreement and the other Transaction Agreements to which it is a
party, and the performance by the Buyer of its obligations hereunder
and thereunder;
(xiii) a certificate of the Secretary of the Buyer as to the
incumbency of certain officers of the Buyer and certifying that the
copies of the Buyer's certificate of incorporation and by-laws
attached thereto are true and correct;
(xiv) each of the certificates and other documents
contemplated by Section 7.03 hereof; and
(xv) such other agreements, certificates and other instruments
required to be delivered by the Buyer under this Agreement or any of
the other Transaction Agreements or as the Seller or its counsel may
reasonably request to carry out the purpose of this Agreement or the
other Transaction Agreements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
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The Seller represent and warrant to the Buyer as follows:
Section 3.01 Organization, Standing and Power. The Seller and each
of its Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized (which
jurisdiction is listed opposite the Seller's or its Subsidiaries' name on
Schedule 3.01) and has full corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary or desirable to enable it to own, lease or otherwise hold its
properties and assets and to conduct its businesses as presently conducted.
The Seller and each of its Subsidiaries is duly qualified to do business in
each jurisdiction where the nature of its business or the ownership or
leasing of its properties make such qualification necessary or where the
failure to so qualify could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
Section 3.02 Authority; Execution and Delivery; Enforceability.
Subject to the receipt of the approval of the stockholders of the Seller as
contemplated by Section 6.06, (a) the Seller has all requisite power and
authority to execute this Agreement and the Seller and each of its
Subsidiaries has all requisite power and authority to execute this
Agreement and the Seller and each of its Subsidiaries has all requisite
power and authority to execute each of the other Transaction Agreements to
which the Seller and its Subsidiaries is (or will be) a party and to
consummate the transactions contemplated hereby and thereby, (b) the
execution and delivery by the Seller of this Agreement and by the Seller
and each of its Subsidiaries of each of the other Transaction Agreements to
which the Seller and its Subsidiaries are (or will be) a party and the
consummation by the Seller and each such Subsidiary of the transactions
contemplated hereby and thereby, has been duly authorized by all necessary
action on the part of the Seller and each such Subsidiary, and (c) the
Seller has duly executed and delivered this Agreement, and this Agreement
constitutes a legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms.
Section 3.03 No Conflicts; Consents. Except as set forth in
Schedule 3.03, the execution and delivery by the Seller of this Agreement
and by the Seller and each of its Subsidiaries of each of the other
Transaction Agreements to which the Seller or each such Subsidiary is (or
will be) a party does not, and the consummation of any transaction and
compliance with the terms hereof and thereof will not, conflict with, or
result in any violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation
or acceleration of any obligation or to loss of a benefit under, or to
increased, additional, accelerated or guaranteed rights or entitlements of
any Person under, or result in the creation of any Lien or Encumbrance upon
assets of the Seller or any of its Subsidiaries (including, without
limitation, the Purchased Assets) under, any provision of (i) the Seller's
or any of its Subsidiaries' articles or by-laws, (ii) any material
contract, lease (including, without limitation, the Real Estate Leases),
license, indenture, mortgage, note, bond, agreement, permit, concession,
franchise or other instrument to which the Seller or any of its
Subsidiaries is party or by which the Seller's or any of its Subsidiaries'
assets (including, without limitation, the Purchased Assets) is bound or
(iii) subject to the filings and other matters referred to in the following
sentence, (A) any judgment, order, injunction, award, decree or writ
("Judgment"), (B) any federal, state, local or foreign statute, law
(including, common law), code, ordinance, rule or regulation enacted,
adopted, issued or promulgated by any Governmental Entity ("Applicable
Law") applicable to the Seller or any of its Subsidiaries or any of their
assets (including, without limitation, the Purchased Assets) or (C) any
written or, to the best knowledge of the Seller, oral request of any
Governmental Entity. No consent, approval, license, permit, order or
authorization ("Consent") of, or registration, declaration or filing with,
or notice to ("Filing"), any federal, state, local or foreign government or
any court of competent jurisdiction, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign,
including, without limitation, the USDA (a "Governmental Entity") or any
Person party to any Assumed Contract, Real Estate Lease or other issuer of
any Permit, is required to be obtained or made by or with respect to the
Seller or any of its Subsidiaries in connection with the execution,
delivery and performance of any transaction contemplated by this Agreement
or any other Transaction Agreements, other than the Consents and Filings
set forth in Schedule 3.03.
Section 3.04 Financial Statements; Undisclosed Liabilities. (a)
Set forth as Schedule 3.04 are the following financial statements of the
Seller (the "Financial Statements"): (i) audited consolidated balance
sheets for each of the fiscal years ended December 31, 1997, 1998 and 1999,
respectively; (ii) audited consolidated statements of income; (iii) audited
consolidated statements of cash flows for each of the three fiscal years
ended December 31, 1997, December 31, 1998 and December 31, 1999; (iv) an
unaudited balance sheet of the Business for each of the fiscal years ended
December 31, 1998 and 1999; and (v) an unaudited balance sheet of the
Business for the three months ended March 31, 2000 (the "Reference Balance
Sheet"). Except as noted therein and except for normal year-end adjustments
with respect to the Financial Statements, all such Financial Statements
(including, without limitation, the Reference Balance Sheet) are true,
complete and correct, were prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP") consistently applied
throughout the periods indicated and present fairly the consolidated
financial position of the Seller and its Subsidiaries at and as of such
dates and the consolidated results of operations and consolidated cash
flows for the periods then ended.
(b) There are no liabilities, debts, obligations or claims relating
to the Business of any nature, absolute or contingent, except (i) as and to
the extent reflected or reserved against on the Reference Balance Sheet;
(ii) specifically described and identified as an exception to this
paragraph in any of the schedules delivered by the Seller to the Buyer
pursuant to this Agreement; (iii) incurred since the date of the Reference
Balance Sheet in the ordinary course of business consistent with prior
practice; or (iv) open purchase or sales orders or agreements for delivery
of goods and services in the ordinary course of business consistent with
prior practice, provided that, as of the Closing Date, neither the Seller
nor any Subsidiary shall be in default thereunder.
Section 3.05 Absence of Certain Changes or Events. Except as set
forth on Schedule 3.05, the Business has been conducted in the ordinary
course of business consistent with past practice, and there has not been
any:
(a) event, change, effect or development that, individually or
in the aggregate, has had or could reasonably be expected to have a
Material Adverse Effect on the Products, the Purchased Assets or the
Business;
(b) change in accounting methods, principles or practices by
the Seller or any its Subsidiaries affecting the assets (including,
without limitation, the Purchased Assets), liabilities or results of
operations of the Business;
(c) waiver of any right under any Assumed Contract or any
Permit;
(d) sale, lease, license or other disposition of or subjecting
to any Lien or Encumbrance any properties or assets of the Business
(including, without limitation, the Purchased Assets), except sales
of Inventory and excess or obsolete assets in the ordinary course of
business consistent with past practice;
(e) acquisition or agreement to acquire any assets for use in
connection with the Business that are material, individually or in
the aggregate, to the Business, except purchases of Inventory or
other assets in the ordinary course of business consistent with past
practice;
(f) (i) waiver of any claims or rights related to the Business
and included in the Purchased Assets or (ii) waiver of any benefits
of, or agreement to modify in any manner, any confidentiality,
standstill or similar agreement to which the Seller or any its
Subsidiaries is a party and relating to any of the Products, the
Purchased Assets or the Business; or
(g) termination or failure to renew any Assumed Contract, or
termination or failure to renew, or receipt of any written threat
(that was not subsequently withdrawn) to terminate or fail to renew,
any Permit.
Section 3.06 Taxes. (a) For purposes of this Agreement, (i) "Tax"
or "Taxes" shall mean all federal, state, local, provincial and foreign
taxes and similar assessments, including all interest, penalties and
additions imposed with respect to such amounts; (ii) "Pre-Closing Tax
Period" shall mean all taxable periods ending on or before the Closing Date
and the portion of any taxable period prior to the Closing Date of any
taxable period that includes (but does not end on) the Closing Date and
(iii) "Returns" shall mean returns, reports or forms, including information
returns.
(b) Except as set forth on Schedule 3.06, the Seller has filed or
caused to be filed in a timely manner (within any applicable extension
periods), all Tax Returns required to be filed by or on behalf of the
Seller or any of its Subsidiaries relating to the Business, or any of the
Purchased Assets required by applicable federal, state, local, provincial
or foreign tax laws to be filed by it prior to or as of the Closing Date,
and each such Return is true, complete and correct in all material
respects.
(c) Except as set forth on Schedule 3.06, the Seller or its
Subsidiaries has timely paid or accrued or has caused to be timely paid or
accrued all Taxes relating to the Business and each of the Purchased Assets
shown to be due on any such Return described in Section 3.06(b). No Tax
Liens have been filed and remain outstanding with respect to the Business
or any of the Purchased Assets and no claims are being asserted in a
writing received by the Seller or any its Subsidiaries with respect to any
such Taxes.
(d) Except as set forth in Schedule 3.06, neither the Seller nor any
of its Subsidiaries is bound by any agreement with respect to Taxes
relating to the Business or any of the Purchased Assets.
(e) Except for the Purchased Assets disclosed in this Agreement or
the Schedules hereto as leased to the Seller, the Seller owns for Tax
purposes all of the Purchased Assets.
(f) During the immediately preceding five (5) full years, with
respect to the Business and the Purchased Assets, there have not been (i)
any Tax audits of the Seller by any Tax authority and, to the knowledge of
the Seller, the Seller has not received any notice that any such audit will
be commenced, (ii) any rulings by any Tax authority requested by or issued
to the Seller or (iii) any elections filed by the Seller to change any Tax
accounting methods other than an election to change from "LIFO" to "FIFO"
with respect to inventory.
[(g) No election has been filed as to the classification of IGI
Brazil as a partnership, corporation or disregarded entity for any United
States Taxes, and the Seller has obtained (or will obtain prior to the
Closing) and provide to the Buyer evidence of payment (including, without
limitation, the amounts and dates of payment) of any Brazilian Tax paid on
or with respect to IGI Brazil on or before the Closing Date.]
Section 3.07 Workers' Injuries. Except as set forth in Schedule
3.07, there has not been during the past three (3) years, any actual or, to
the best knowledge of the Seller, threatened claims of past or present
employees of the Seller or any of its Subsidiaries employed in connection
with the Business (including, without limitation, the Transferred
Employees) for compensation for any material injury, disability or illness
arising out of or relating to their employment by the Seller or any its
Subsidiaries in connection with the Business.
Section 3.08 Litigation. Except as set forth and described in
detail on Schedule 3.08, there is (a) no outstanding Judgment of any
Governmental Entity against the Seller or any of its Subsidiaries relating
to the Business or any of the Purchased Assets, (b) no suit, action, claim,
dispute or legal, governmental, administrative, arbitration or regulatory
proceeding ("Proceeding") pending or, to the best knowledge of the Seller,
threatened against the Seller or any of its Subsidiaries relating to the
Business or any of the Purchased Assets, and (c) no investigation by any
Governmental Entity pending or, to the best knowledge of the Seller,
threatened against the Seller or any of its Subsidiaries relating to the
Business or any of the Purchased Assets. Except as disclosed on Schedule
3.08, none of the items set forth in Schedule 3.08, if adversely determined
against the Seller or any or its Subsidiaries, would be material to the
Business or any of the Purchased Assets or adversely affect the ability of
the Seller or any its Subsidiaries to consummate the transactions
contemplated by this Agreement or any of the other Transaction Agreements.
Section 3.09 Compliance with Applicable Laws. Except as set forth
in Schedule 3.09, the Business is (and during the past five (5) years has
been) conducted in compliance with all Applicable Laws, and with all
requests of all Governmental Entities. Except as set forth in Schedule
3.09, neither the Seller nor any of its Subsidiaries has received any
communication during the past five (5) years from a Governmental Entity
that alleges that the Business is not conducted in compliance with any
Applicable Law or with any request by such Governmental Entity. This
Section 3.09 does not relate to matters with respect to Taxes or
Environmental Laws, which are the subject of Sections 3.06 and 3.10,
respectively.
Section 3.10 Environmental Matters. (a) The Seller and each of
its Subsidiaries has heretofore provided the Buyer with all environmental
reports, assessments and audits prepared by or on behalf of Seller, any of
its Subsidiaries or any Governmental Entity at any time during the [five
(5)] year period immediately preceding the date hereof relating to the
Business, or otherwise relating to the operations at the Real Property or
any other manufacturing or other facility or property of the Seller or any
of its Subsidiaries used primarily in connection with the Business.
(b) Except as set forth in Schedule 3.10, (i) the Seller and each of
its Subsidiaries hold, and are in compliance in all material respects with,
all permits, licenses and governmental authorizations required for the
Seller and each of its Subsidiaries to conduct the Business under
Environmental Laws (as defined herein); (ii) neither the Seller nor any of
its Subsidiaries has received any written notice of a pending or threatened
action, demand, investigation or inquiry by any Governmental Entity or
other Person relating to any actual or alleged violations by the Business
or the Business of Environmental Laws or any actual or potential obligation
to investigate or take any other action relative to the Release (as defined
herein) or threatened Release of any Hazardous Materials (as defined
herein) generated, disposed of, treated, stored, shipped or otherwise
handled by the Business and the Business is (and during the past three (3)
years has been) conducted in compliance in all material respects with all
Environmental Laws; (iii) neither the Seller nor any of its Subsidiaries
has entered into or agreed to any court decree or order or is subject to
any Judgment relating to compliance by the Business with any Environmental
Law or to the investigation or cleanup by the Business of Hazardous
Materials; (iv) Hazardous Materials have not been generated, transported,
treated, stored, disposed of, arranged to be disposed of, Released or
threatened to be Released at, on, from or under the manufacturing
facilities or any other property or facility currently owned, leased or
otherwise operated by the Seller or any of its Subsidiaries primarily in
connection with the Business, except in compliance with all applicable,
Environmental Laws; (v) there are no underground storage tanks ("USTs")
presently located at, on or under the Real Property or any other property
or facility currently owned or operated by the Seller or any of its
Subsidiaries and used primarily in connection with the Business and no such
USTs have previously been removed or closed; and (vi) there is no asbestos,
PCB containing equipment or septic system located on any property or
facility currently owned or operated by the Seller or any of its
Subsidiaries. As used in this Agreement, the term "Environmental Laws"
means any and all applicable federal, state, local and foreign law, treaty,
regulation, ordinance, judicial decision, judgment, order, decree,
injunction, permit or agreement entered into, issued, or promulgated by any
Governmental Entity, relating to the environment, preservation or
reclamation of natural resources, or to the management, Release or
threatened Release of Hazardous Materials or to human health and safety. As
used in this Agreement, the term "Hazardous Materials" means any pollutant,
contaminant or waste, or any toxic, radioactive or hazardous substance,
chemical, material, petroleum product, constituent or waste regulated, or
classified as such, in each case under any Environmental Law. As used in
this Agreement, the term "Release" means any release, discharge, emission
or disposal to air, water, land or groundwater.
(c) Except as set forth in Schedule 3.10, no Environmental Law,
other than ISRA, imposes any obligation upon the Seller or any of its
Subsidiaries arising out of or as a condition to any transaction
contemplated by this Agreement or any of the other Transaction Agreements,
including, without limitation, any requirement to modify or to transfer any
Permit, any requirement to file any notice or other submission with any
Governmental Entity, or the modification of or provision of notice under
any agreement, consent order or consent decree. No Lien or Encumbrance has
been placed upon any of the Purchased Assets under any Environmental Law.
Section 3.11 Intellectual Property. (a) Schedule 3.11(a) sets
forth a true and complete list of all patents, design patents, trademarks,
trade names, domain names, Internet web sites, service marks, common law
marks, trade dress and copyrights and applications therefor, royalty rights
and other intellectual property and proprietary rights, whether or not
subject to statutory registration or protection, owned, used, filed by or
licensed to the Seller and any of its Subsidiaries that relate to the
Product or any other Purchased Asset, that are owned, used, filed by,
applied for or licensed to the Seller and any of its Subsidiaries in
connection with the Business or the Purchased Assets, or that relate in any
manner to the Product or the names set forth on Schedule 3.11(a) or are or
were otherwise used, previously used or created in contemplation of use for
the conduct of the Business (collectively, the "Intellectual Property").
With respect to registered Intellectual Property, Schedule 3.11(a) sets
forth a true and correct list of all jurisdictions in which such are
registered or applied for, classifications for all trademarks, service
marks and trade names, registration and application numbers, registration
dates, expiration dates and the registered owners thereof. Except as set
forth in Schedule 3.11(c), the Seller or its Subsidiaries own, and have the
right to use, execute, reproduce, display, perform, modify, enhance,
distribute, prepare derivative works of and sublicense, free and clear of
any pledges, liens, charges, encumbrances, usufructs, defects in title,
security interests and options, without payment of any kind to any other
Person, all Technology and all Intellectual Property and the consummation
of any transaction contemplated hereby or by any of the other Transaction
Agreements will not conflict with, alter or impair any such rights. All of
Intellectual Property set forth on Schedule 3.11(a) are valid and in full
force and effect, have not been abandoned or terminated, all renewals due
through the Closing Date have been filed and are not subject to any pending
cancellation or reexamination Proceeding or any other Proceeding
challenging their extent or validity. The Seller or its Subsidiaries own
and have all rights to the Intellectual Property as are necessary in
connection with the conduct of each of the Business as presently conducted.
(b) Except as set forth on Schedule 3.11(b) neither the Seller nor
its Subsidiaries own or have rights in any trademark, trade name, domain
name, Internet web site or service mark that is confusingly similar to
those set forth on Schedule 3.11(a).
(c) Except as set forth in Schedule 3.11(c) (or, in the case of oral
Intellectual Property Contracts, the material terms of which are described
in Schedule 3.11(c)), neither the Seller nor its Subsidiaries is bound by
or a party to any agreement, contract, lease, option, license, commitment,
instrument or any other binding obligation or arrangement (oral or written)
relating to the Intellectual Property or the Technology (the "Intellectual
Property Contracts"). Except as set forth in Schedule 3.11(c), the Seller
and its Subsidiaries (i) own all Intellectual Property and Technology free
and clear of any claims of others and of all Liens (other than the
Intellectual Property and Technology that is used pursuant to any
Intellectual Property Contract set forth in Schedule 3.11(c)) and (ii) have
the legal right to use all of the Intellectual Property and Technology that
is used pursuant to an Intellectual Property Contract set forth in Schedule
3.11(c). The Seller and its Subsidiaries have paid all required filing and
registration fees in connection with the Intellectual Property and the
Technology. None of the Intellectual Property or Technology violates,
conflicts with or infringes any patents, design patents, trademarks, trade
names, service marks, common law marks, domain names, trade dress,
industrial property and copyrights and any other Intellectual Property
rights and applications therefor of any other Person. Except as set forth
in Schedule 3.11(c), (i) no claims are pending or, to the best knowledge of
the Seller or any of its Subsidiaries, threatened, against the Seller by
any Person with respect to the ownership, validity, enforceability,
effectiveness or use of any Intellectual Property or Technology and (ii)
during the past three (3) years, neither the Seller nor any of its
Subsidiaries has received any written communications alleging that the
Seller or any of its Subsidiaries has violated any rights relating to any
patents, design patents, trademarks, trade names, service marks, common law
marks, domain names, trade dress, industrial property and copyrights and
any other Intellectual Property rights and applications therefor of any
Person or asserting any infringement, dilution, unfair competition or
conflict with the asserted rights of any other Person in connection with
the use by any of the Seller or any of its Subsidiaries of any of the
Intellectual Property or Technology.
(d) Except as set forth in Schedule 3.11(d), the Seller or any of
its Subsidiaries are the applicant of record in all pending patent
applications and applications for trademark, trade name service mark or
copyright registration related to the Business and no action of opposition
or interference or final refusal has been received by the Seller or any of
its Subsidiaries in connection with any such application. Except as set
forth in Schedule 3.11(d), neither Seller nor any of its Subsidiaries is a
party to or bound by any Contract or Judgment which limits the use by the
Seller of any of the Intellectual Property or Technology (other than the
Intellectual Property and Technology used pursuant to any Intellectual
Property Contract set forth in Schedule 3.11(d)).
(e) The Intellectual Property and the Technology has been maintained
in confidence in accordance with protection procedures customarily used in
the industries of the Seller and each of its Subsidiaries to protect rights
of like importance. No former or current officer or other employee of the
Seller or any of its Subsidiaries employed in connection with the Business,
including all former and current employees, agents, consultants and
independent contractors of the Seller or any of its Subsidiaries, has any
claim against the Seller or any of its Subsidiaries in connection with such
Person's involvement in the conception and development of any Intellectual
Property or Technology and no such claim has been asserted or is
threatened. None of the current officers and employees of the Seller or any
of its Subsidiaries have any patents issued or applications pending for any
device, process, design or invention of any kind now used or needed by the
Business, which patents or applications have not been assigned to the
Seller or its Subsidiaries.
Section 3.12 Contracts. Except as set forth in Schedule 3.12 (or,
in the case of oral Contracts, the material terms of which are described in
Schedule 3.12), neither of the Seller or its Subsidiaries is a party to or
bound by any agreement, contract, lease (including without limitation the
Real Estate Leases), option, license, commitment, instrument or any other
binding obligation or arrangement (oral or written) by or to which any of
the Purchased Assets are bound or subject or which are material to the
conduct of the Business (collectively, the "Contracts") including, without
limitation, any:
(a) covenant not to compete (other than pursuant to any radius
restriction contained in any lease, reciprocal easement or
development, construction, operating or similar agreement) or other
covenant of the Seller or any of its Subsidiaries (i) limiting or
restricting the development, manufacture, marketing, distribution or
sale of any of the Products or any future line extension of the
Products into other forms or (ii) limiting or restricting the ability
of the Seller or any of its Subsidiaries from entering into any
market or line of business or competing with any Person in connection
with the Business;
(b) Contracts with any Affiliate of the Seller or any of its
Subsidiaries or any director, officer, stockholder or employee of the
Seller or any of its Subsidiaries;
(c) advertising Contracts;
(d) continuing Contract for the future purchase or price of
raw materials, supplies or equipment;
(e) Contracts with distributors or other sales representative;
(f) Contracts with customers;
(g) management, employment, service, consulting, severance or
other similar type of Contract;
(h) Contracts relating in whole or in part to the Intellectual
Property or the Technology (including any Contract under which the
Seller or any of its Subsidiaries are licensees or licensors of any
such Intellectual Property or Technology) or to trade secrets,
confidential information or proprietary rights and processes of the
Business or any other Person;
(i) mortgage, pledge, security agreement, deed of trust, loan
agreement, credit agreement, indenture, conditional sale or title
retention agreement, equipment financing obligation or other
instrument, in any case, granting a Lien upon any of the Purchased
Assets;
(j) collective bargaining agreement or other Contract with any
labor union or association representing employees;
(k) Contracts for (i) the purchase or lease of any real or
personal property or (ii) the sale or lease by the Seller or any of
its Subsidiaries of any real or personal property (including, without
limitation, the Real Property);
(l) Contracts regarding the Release, transportation or
disposal of Hazardous Materials, or the clean-up, abatement or other
action relating to Hazardous Materials or Environmental Laws;
(m) Contracts establishing or creating any partnership, joint
venture, limited liability company, limited liability partnership or
similar entity;
(n) Contracts to make any capital expenditures or capital
additions or improvements;
(o) Contracts relating to the storage or warehousing of any
Inventory or Products, or the charter or purchase of transportation
or shipping services;
(p) guarantees or other Contracts in respect of any
Indebtedness of any Person; or
(q) any other Contract by or to which any of the Purchased
Assets are bound or subject.
Except as set forth or described in Schedule 3.12, each of the
Assumed Contracts is a valid and binding obligation of the Seller or its
Subsidiaries which is a party to such Assumed Contract and, to the best
knowledge of the Seller, of the other party thereto, and is in full force
and effect and is enforceable by the Seller or any of its Subsidiaries
which is a party to such Assumed Contract in accordance with its terms.
Except as set forth in Schedule 3.12, none of the Assumed Contracts shall
by its terms expire during the one hundred twenty (120) day period
immediately succeeding the Closing Date or shall be restricted in any
manner having a Material Adverse Effect. Except as set forth in Schedule
3.12, the Seller and each of its Subsidiaries has performed all obligations
required to be performed by it to date under the Assumed Contracts to which
the Seller or its Subsidiaries is a party and is not (with or without the
lapse of time or the giving of notice, or both) in breach or default
thereunder and, to the best knowledge of the Seller, no other party to any
of the Assumed Contracts is (with or without the lapse of time or the
giving of notice, or both) in breach or default thereunder. Except as set
forth in Schedule 3.12, there have been no oral or written modifications,
amendments or waivers with respect to of any of the terms of any Assumed
Contract. Except as set forth in Schedule 3.12, from December 31, 1998
through (and including) the date hereof, no other Person which is a party
to any Contract (including, without limitation, any Assumed Contract) has
informed the Seller that it intends to change its current relationship with
the Business, as the case may be, in any manner which adversely affects the
Business.
Section 3.13 Bonds. Schedule 3.13 contains a true, accurate and
complete description of all outstanding bonds and other surety arrangements
issued or entered into by the Seller or any of its Subsidiaries in
connection with the business and operations of the Business or any of the
Purchased Assets.
Section 3.14 Accounts Receivable; Accounts Payable. (a) Except as
set forth in Schedule 3.14(a), (i) all accounts receivable of the Business
as of the Closing Date, whether reflected on the Financial Statements or
subsequently created, have arisen from bona fide transactions in the
ordinary course of business; all such accounts receivable are good and
collectible at the aggregate recorded amounts thereof, net of any
applicable allowance for doubtful accounts reflected on the Financial
Statements or the; (ii) the Seller or its Subsidiaries have good and
marketable title to the accounts receivable of the Business arising on or
before the Closing Date, free and clear of all Liens; and (iii) since
[December 31, 1999] (the "Financial Statement Date"), there have not been
any write-offs as uncollectible of any notes or accounts receivable of and
material to (individually or in the aggregate) the Business. Schedule
3.14(a) sets forth a true and correct aged list of all accounts receivable
relating to the Business as of March 31, 2000.
(b) Except as set forth in Schedule 3.14(b), all accounts payable of
the Business, whether reflected on the Financial Statements or subsequently
created, have arisen from bona fide transactions in the ordinary course of
business. Schedule 3.14(b) sets forth a true and correct aged list of all
accounts payable relating to the Business and included in the Assumed
Liabilities as of March 31, 2000.
Section 3.15 Licenses; Permits. Schedule 3.15 sets forth a true
and complete list of all issued and pending product registrations, and any
and all applications therefor, relating to the Products (the "Product
Registrations") and all Permits, in each case issued or granted to the
Seller or any of its Subsidiaries by any Governmental Entity and used by
the Seller or any of its Subsidiaries at any time during the past [five
(5)] years in connection with the conduct of the Business, identifies the
Seller or its Subsidiary to which such Product Registration or Permit has
been issued or granted, sets forth the period of validity of each such
Product Registration and Permit, and the availability of masters seeds
relating thereto (where applicable). Except as set forth in Schedule 3.15,
each of such Product Registrations and each of such Permits has been
validly issued or granted and is in full force and effect, and may be
transferred to the Buyer to the extent such party meets the requirements of
Applicable Law. No other product registrations relating to the Product or
Permits are necessary in connection with the conduct of the Business as
presently conducted other than as set forth in Schedule 1.01(a)(vii) and
Schedule 3.15. Except as set forth in Schedule 3.15, each of the Product
Registrations and Permits listed in Schedule 3.15 are validly held by the
Seller or its Subsidiaries to which such Product Registration or Permit has
been issued or granted, and the Seller and each such Subsidiary has
complied with all terms and conditions thereof, and neither the Seller nor
any of its Subsidiaries has received any notice that the same are under
review by any Governmental Entity or subject to termination, suspension,
modification, revocation or non-renewal for any reason, or that they will
be subject to termination, suspension, modification, revocation or non-
renewal as a result of the execution, delivery and performance of this
Agreement or any of the other Transaction Agreements or for any other
reason.
Section 3.16 Suppliers. Schedule 3.16 is a true and complete list
of all material suppliers of raw materials, packaging materials, or any
other component of inventory of the Business as of the date hereof and sets
forth for each such supplier a description of the raw materials or other
supplies supplied to the Business, and the quantities of such raw materials
or other supplies purchased by the Seller or its Subsidiaries from such
supplier during the most recent full fiscal year. Except as set forth in
Schedule 3.16, from the Financial Statement Date through the date hereof,
no supplier of raw materials, packaging materials or any other component of
inventory has informed the Seller or any of its Subsidiaries that it
intends to change its current relationship with the Business in any manner
which adversely affects the Business.
Section 3.17 Customers. Schedule 3.17 is a true and complete list
of all material customers of the Business as of the date hereof which
purchase any of the Products directly from the Seller or its Subsidiaries.
Except as set forth in Schedule 3.17, since January 1, 1999 neither the
Seller nor any of its Subsidiaries has received any written or oral
complaint from any customer (not limited to those listed in Schedule 3.17)
regarding any of the Products or any services performed by the Business,
nor has it had any Products returned by a customer or subsequent purchaser
thereof. Except as set forth in Schedule 3.17, from the Financial Statement
Date through the date hereof, no customer has informed the Seller or any of
its Subsidiaries that it intends to change its current relationship with
the Business in any manner which adversely affects the Business.
Section 3.18 Distributors. Schedule 3.18 is a true and complete
list of all material distributors of the Business and sets forth the
percentage of the Products sold by the Business to such distributor during
the most recent full fiscal year. Except as set forth in Schedule 3.18,
from the Financial Statement Date through the date hereof, no distributor
has informed the Seller or any of its Subsidiaries that it intends to
change its current relationship with the Business in any manner which
adversely affects the Business.
Section 3.19 Brokers. No broker, investment banker, financial
advisor or other Person, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated hereby or by any of the other Transaction
Agreements based upon arrangements made by or on behalf of the Seller or
any of its Affiliates except for a fee to Fountain Agricounsel, LLC, which
Seller shall pay.
Section 3.20 Title to Real Property; Entire Business. (a)
Schedule 3.20 lists all Real Property, including a legal description of
each and every parcel of Owned Real Property, Leased Real Property and any
real property used or held by the Seller or any of its Subsidiaries in the
operation of the Business as presently conducted. Neither Seller nor any of
its Subsidiaries own, lease or sublease any real property or interests
therein used in connection with, or necessary for, the operation of the
Business as presently conducted, other than the Real Property. Neither the
Seller nor any of its Subsidiaries have granted to any third party a right
to use or occupy any portion of the Real Property. Seller has heretofore
delivered to the Buyer true, correct and complete copies of each of the
following in the possession of Seller or Seller's Subsidiaries: (i) title
reports, title binders, survey documents and data affording information or
opinions with respect to, certifying to, or evidencing the extent, current
title, title history, title marketability, use, possession, restriction or
regulation, if any (governmental or otherwise), and compliance of the Real
Property with Applicable Laws; (ii) deed or title-holding or trust
agreements, if any, under which any of the Real Property may have been
conveyed to Seller or under which the same may be held for the benefit of
Seller; and (iii) the Real Estate Leases, and all amendments thereto and
assignments thereof.
(b) The Seller (x) owns and has good, indefeasible and marketable
title in, and fee simple ownership of, the Owned Real Property and to all
the buildings, structures and other improvements located thereon and
fixtures attached thereto and (y) has good and valid leasehold interests in
all Leased Real Property, in each case, free and clear of all Liens and
Encumbrances, except Permitted Encumbrances. Schedule 3.20 lists all
Permitted Encumbrances with respect to the Real Property. The Seller has
paid, discharged or reserved for, all lawful claims which, if unpaid, could
become a Lien against the Real Property or any portion thereof.
With respect to each parcel of Real Property and the buildings,
structures, improvements and fixtures thereon:
(i) No condemnation of the Real Property, or any portion
thereof, has occurred. There is no pending, and to the knowledge of
Seller or Seller's Subsidiaries, threatened or contemplated,
appropriation, condemnation or like proceeding affecting the Real
Property or any part thereof or of any sale or other disposition of
the Real Property or any part thereof in lieu of condemnation.
(ii) Except for assessments occurring on a regular basis in
accordance with Applicable Laws, there is no pending or, to the
knowledge of Seller or Seller's Subsidiaries, contemplated
reassessment of any parcel included in the Real Property that is
reasonably expected to increase the real estate tax assessment for
such properties.
(iii) The Real Property and all buildings, structures and
improvements located thereon, including without limitation that
certain parcel of Owned Real Property located at 2285 East Landis
Avenue, Vineland, New Jersey and designated as Block 630 Lot 15 of
the Tax Map of the City of Vineland, Cumberland County, New Jersey
(the "Vineland Laboratory Site"), and that certain parcel of Owned
Real Property located at 485 East Grant Avenue, Vineland, New Jersey
and designated as Block 1027 Lot 12 of the Tax Map of the City of
Vineland, Cumberland County, is in compliance with all Applicable
Laws, including but not limited to, zoning ordinances, building and
health department regulations and ordinances, deed restrictions,
ordinances and rules. There is no pending, or to the knowledge of
Seller, contemplated proceeding to rezone any parcel of the Real
Property. The uses for which each parcel of the Real Property are
zoned do not restrict, or in any manner impair, the current use of
the Real Property or the proposed use by Buyer. Neither Seller nor
any of its Subsidiaries have received notice of any violation of any
applicable zoning law, regulation or other Applicable Law, related to
or affecting the Real Property.
(iv) All buildings, structures and other improvements on the
Real Property, including but not limited to driveways, garages,
landscaped areas and sewer systems, and all means of access to the
Real Property, are located completely within the boundary lines of
the Real Property and do not encroach upon or under the property of
any other person or entity. No buildings, structures or improvements
constructed on the property of any other person encroach upon or
under the Real Property.
(v) The use of the Real Property, or any portion thereof, does
not violate or conflict with (i) any covenants, conditions or
restrictions applicable thereto or (ii) the terms and provisions of
any contractual obligations relating thereto.
(vi) Each Real Estate Lease is valid, binding upon and
enforceable against the Seller, and, to the knowledge of the Seller,
each other party thereto, and is in full force and effect. All rent
and other sums and charges payable by the Seller as lessee or
sublessee thereunder are current. The Seller has complied in all
material respects with the terms of each Real Estate Lease and no
termination event or condition or uncured default exists under any
Real Estate Lease. No event has occurred and no condition exists
which, with the giving of notice or the lapse of time or both, would
constitute such a default or termination event or condition.
(vii) Except as disclosed on Schedule 3.20, there are no
restrictions of any nature on the Seller's ability to assign its
interest in the Real Estate Leases to the Buyer either by the terms
of such lease or by operation of law. Seller is in peaceful and
undisturbed possession of the space and/or estate it occupies under
each Real Estate Lease.
(viii) Except as disclosed on Schedule 3.20, and except for
normal wear and tear, all of the buildings, structures, improvements
and fixtures with respect to the Real Property are in a good state of
repair, maintenance and operating condition and there are no defects
with respect thereto which would impair the day-to-day use of any
such buildings, structures, improvements or fixtures or which would
subject the Seller or any of Seller's Subsidiaries to any material
liability under Applicable Law.
(ix) Seller has good and valid rights of ingress and egress to
and from all Real Property from and to the public street systems for
all usual street, road and utility purposes and other purposes
necessary or incidental to the operation of the Business.
(x) All utilities required for or useful in the operation of
the Business either enter the Real Property through adjoining public
streets, or if they pass through adjoining private land, they do so
in accordance with valid public easements. All necessary utilities
(including without limitation, water, sewer, electricity and
telephone facilities) are available to the Real Property and there
exists, to the knowledge of Seller, no proposed limitation in or
reduction of the quality or quantity of utility services to be
furnished to the Real Property. Permanent adequate sewage and water
systems and connections are available to the Real Property as
currently operated.
(xi) Except as set forth on Schedule 3.20, Seller has all
permits, licenses and approvals required under Applicable Law with
respect to the ownership, use and occupancy of the Real Property. The
current use and occupancy of the Real Property does not violate any
of such Permits, and no proceeding is pending or, to the knowledge of
Seller or its Subsidiaries, is threatened, to revoke, suspend, modify
or limit any of the Permits. No Permit will be subject to revocation,
suspension, modification or limitation as a result of this Agreement
or the consummation of the transactions contemplated hereby.
(xii) Upon consummation of the transactions contemplated
herein, Seller will have transferred, conveyed and/or assigned, and
Buyer will have acquired or assumed fee simple title to the Owned
Real Property and a valid leasehold interest in the Leased Real
Property free and clear of all Liens and Encumbrances other than
Permitted Encumbrances.
Section 3.21 Tangible Personal Property. The machinery and
equipment included in the Purchased Assets are in operating condition and
repair, ordinary wear and tear excepted, and are suitable for their current
use in the conduct of the Business. During the past five (5) years there
has not been any significant interruption of the operations of the Business
due to inadequate maintenance of any of the Purchased Assets. No machinery
or equipment other than that set forth in Schedule 1.01(a)(iii) is used in
connection with the Business.
Section 3.22 Transactions with Affiliates. Except as set forth or
otherwise described in Schedule 3.22 (or, in the case of oral Affiliate
Contracts, the material terms of which are described in Schedule 3.22),
there are no agreements, contracts, leases, options, licenses, commitments,
instruments or any other binding obligations or arrangements (oral or
written) (the "Affiliate Contracts") between the Seller, on the one hand,
and any of its Subsidiaries or Affiliates, on the other hand, relating to
the Products, the Purchased Assets or the Business. Except as set forth on
Schedule 3.22, all Affiliate Contracts between the Seller, on the one hand,
and any of the Seller's Subsidiaries or Affiliates, on the other hand,
relating to the Products, the Purchased Assets or the Business, will be
terminated as of the Closing Date and thereafter will be of no further
force or effect. Except as set forth in Schedule 3.22, after the Closing
neither the Seller nor any of the Seller's Subsidiaries or Affiliates will
own or have any interest in any assets, property (real or personal,
tangible or intangible) or contract or agreement used in, held by or
necessary or desirable for the conduct of the Business (other than the
Excluded Assets). Schedule 3.22 sets forth a description of all services
material to the conduct of the Business (including, without limitation,
administrative, warehousing, transportation, insurance, payroll,
information systems and other business support services in each case
material to the conduct of the Business), raw materials or supplies
(including types and quantities) provided directly or indirectly by any
Subsidiary or Affiliate of the Seller to the Business.
Section 3.23 Products. (a) Except as set forth in Schedule 3.23,
there are no statements, citations or decisions by any Governmental Entity
(including, without limitation, the United States Department of Agriculture
(the "USDA")) stating that any of the Products is defective or unsafe or
fails to meet any standards promulgated by any such Governmental Entity.
Except as set forth on Schedule 3.23, during the five (5) year period
immediately preceding the Closing Date, there have been no recalls ordered
by any Governmental Entity with respect to any of the Products. Except as
set forth on Schedule 3.23, neither the Seller nor any of its Subsidiaries
has received any written complaints of any injury or harm to any person
relating to the Product and there is no (i) fact relating to any of the
Products that may impose upon the Seller or any of its Subsidiaries a duty
to recall any of the Products or a duty to warn customers of a defect in
any of the Products, (ii) latent or overt design, manufacturing or other
defect in any of the Products or (iii) material liability for warranty
claims or returns with respect to any of the Products not fully reflected
on the Financial Statements. Schedule 3.23 sets forth a description of all
Product warranty claims for each of calendar years 1997, 1998 and 1999.
Except as set forth in Schedule 3.23, the Product formulations being sold
to the Buyer pursuant to Section 1.01(a)(iii), and each of the ingredients
therein, conform with all Applicable Laws and all requests of all
Governmental Entities, and such formulations and ingredients are safe and,
to the best knowledge of the Seller, do not pose any risk of injury or harm
to any person when used in accordance with applicable instructions.
(b) Except as set forth in Schedule 3.23, the Inventory meets and
conforms with all Applicable Laws and all requests of all Governmental
Entities, will be formulated, manufactured, packaged and labeled in
accordance with Applicable Laws and such requests of Governmental Entities,
will meet all quality assurance and quality control specifications
applicable to the Products and will be safe when used in accordance with
the applicable instructions. Neither the Seller nor any of its Subsidiaries
has any reason to believe that any of the Products is likely to result in
claims or litigation in respect of personal injury. The Inventory shall not
include any Products returned from customers, Products having a shelf life
of less than nine (9) months, or any obsolete, nonconforming, defective,
substandard, off specification, unsaleable or unusable Products.
(c) Except as set forth on Schedule 3.23, since January 1, 1995,
there has been no interruption in or disruption to the distribution or sale
of any of the Products by the Seller or any of its Subsidiaries as a result
of the failure by the Seller, its Subsidiaries or the Business to comply
with the formulation or labeling requests by or requirements of
Governmental Entities, and the Seller has no reason to believe that any
such interruption or disruption will occur from and after the date of this
Agreement.
Section 3.24 Employees and Benefit Plans. (a) Schedule 3.24(a)
sets forth the name, title, current annual salary or wages, current bonus
or commissions, and vacation entitlements of each employee of the Seller or
any of its Subsidiaries who is employed in connection with the Business
(each a "Business Employee").
(b) Except as set forth in Schedule 3.24(b), with respect to the
Business Employees, (i) there is no labor strike, dispute, slowdown or
stoppage actually pending or, to the Seller's best knowledge, threatened
against the Seller or its Subsidiaries; (ii) neither the Seller nor any of
its Subsidiaries has experienced any organized work stoppage in the last
five years; (iii) none of the Business Employees is a member of or
represented by any labor union and, to the Seller's best knowledge, there
are no attempts of whatever kind and nature being made to organize any of
such employees; (iv) no agreement (including any collective bargaining
agreement), arbitration or court decision, decree or order or governmental
order which is binding on the Seller or its Subsidiaries in any way limits
or restricts the Seller or any of its Subsidiaries from relocating or
closing any of its operations; and (v) there are no charges, administrative
proceedings or formal complaint of discrimination (including but not
limited to discrimination based upon sex, age, marital status, race,
national origin, sexual preference, handicap or veteran status) pending or,
to the Seller's best knowledge, threatened.
(c) Schedule 3.24(c) sets forth a true and complete list of each
Benefit Plan that covers any Business Employee. With respect to each
Benefit Plan that is intended to be a qualified plan under Section 401(a)
of the Code, the plan has received at least one favorable determination
letter as to its qualification under the Code (or such a letter has been or
will be applied for prior to expiration of the applicable remedial
amendment period) and nothing has occurred, whether by action or failure to
act, which would jeopardize such qualification.
Section 3.25 Inventory. Except as set forth on Schedule 3.25, all
of the Inventory is in good condition, conforms in all respects with the
Technology, all quality assurance and quality control specifications
applicable to the Products, the applicable warranties of the Business and
with all Permits, Applicable Laws and requests of all Governmental
Entities, is not obsolete, is useable or saleable in the ordinary course of
business and, if saleable, is saleable at values not less than the book
value amounts thereof. All work in progress and finished goods included in
the Inventory has been produced in compliance with the applicable quality
control procedures of the Business and with Applicable Law. The value of
all items of obsolete and of material of below standard quality has been
written down to the net realizable value or adequate reserves have been
provided therefor. The value at which the Inventory are carried is in
accordance with U.S. GAAP consistently applied. The amount and mix of the
items included in the Inventory is, and at the Closing Date will be,
consistent with the past business practices of the Seller and its
Subsidiaries relating to the conduct of the Business.
Section 3.26 Master and Production Seed Inventory. (a) Schedule
3.26(a) sets forth a description of the number, type, potency (titer),
passage history and age of master seeds and production seeds included in
the Purchased Assets. Except as set forth on Schedule 3.26(a), all of the
master seeds and production seeds included in the Purchased Assets are
viable and useable by the Business in the ordinary course, and comply in
all respects with all Permits, Applicable Laws and requests of all
Governmental Entities.
(b) The Seller is currently engaged in the master seed replenishment
program set forth on Schedule 3.26(b) (the "Master Seed Program"). The
Master Seed Program complies in all respects with the Permits and
Applicable Law (including, without limitation, 9 C.F.R.)and will result in
master seeds adequate for the continued conduct of the Business as to be
conducted by the Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
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The Buyer represents and warrants to the Seller as follows:
Section 4.01 Organization, Standing and Power. Each of the Buyer
and its general partners is duly organized, validly existing and in good
standing under the laws of its place of organization and has full corporate
power and authority to conduct its businesses as presently conducted. Each
of the Buyer and its general partners is duly qualified to do business in
each jurisdiction where the nature of its business or the ownership or
leasing of its properties make such qualification necessary or where the
failure to so qualify could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on the Buyer or any of
Buyer's general partners.
Section 4.02 Authority; Execution and Delivery; Enforceability.
Each of the Buyer and its general partners has all requisite corporate
power and authority to execute each of the Transaction Agreements to which
it is (or will be) a party and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by the Buyer of this
Agreement, and of each of the other Transaction Agreements to which it is
(or will be ) a party, and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Buyer and each of its corporate
partners. The Buyer has executed and delivered this Agreement, and this
Agreement constitutes a legal, valid and binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms.
Section 4.03 No Conflicts; Consents. The execution and delivery by
the Buyer of the Transaction Agreements to which it is a party, does not,
and the consummation of any transaction and compliance with the terms
hereof and thereof will not, conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a benefit under, or to increased, additional,
accelerated or guaranteed rights or entitlements of any Person under, or
result in the creation of any Lien upon any of its properties or assets
under, any provision of (a) the Buyer's organizational documents or the
certificate of incorporation or by-laws or statutes of Buyer's general
partners, (b) any material contract, lease, license, indenture, mortgage,
note, bond, agreement, permit, concession, franchise or other instrument to
which any of Buyer and its general partners is a party or by which any of
its properties or assets is bound or (c) subject to the filings and other
matters referred to in the following sentence, any Judgment or Applicable
Law applicable to any of Buyer and its general partners or the properties
or assets of any of them. No Consent of, or Filing with, any Governmental
Entity is required to be obtained or made by or with respect to the Buyer
in connection with the execution, delivery and performance the Agreement or
the consummation of the transaction, other than the Consents and Filings
set forth in Schedule 4.03.
Section 4.04 Brokers. Except for Ferghana Partners Limited, no
broker, investment banker, financial advisor or other Person is entitled to
any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby or by
any of the other Transaction Agreements based upon arrangements made by or
on behalf of the Buyer or any of its Affiliates. The Buyer shall be
responsible for the any and all fees payable to Ferghana Partners Limited
incurred by the Buyer and its Affiliates in connection with the
transactions contemplated by this Agreement.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
Section 5.01 Conduct of Business by the Seller. Except for matters
permitted or contemplated by this Agreement, from the date of this
Agreement to the Closing Date, the Seller agrees to conduct the Business in
the usual, regular and ordinary course in substantially the same manner as
previously conducted and, to the extent consistent therewith, to use
commercially reasonable efforts to preserve intact the current business
organization of the Business, keep available the services of the current
officers and employees employed in connection with the Business and keep
their relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with the Business to the
end that its goodwill and ongoing business shall be unimpaired at the
Closing Date. In addition, and without limiting the generality of the
foregoing, except for matters set forth in Schedule 5.01 or otherwise
permitted or contemplated by this Agreement, from the date of this
Agreement to the Closing Date, the Seller agrees that it shall not
undertake any of the following actions without the prior written consent of
the Buyer:
(a) acquire or agree to acquire any assets for use in
connection with the Business that are material, individually or in
the aggregate, to the Business, except purchases of Inventory or
other assets in the ordinary course of business consistent with past
practice;
(b) (i) grant to any of the Business Employees any material
increase in compensation, except to the extent required under written
employment agreements delivered to the Buyer or their
representatives, (ii) grant to any Business Employee any material
increase in severance or termination pay, except to the extent
required under any agreement delivered to the Buyer or their
representatives, (iii) enter into any employment, consulting,
indemnification, severance or termination agreement with any Business
Employee or (iv) substantially change or alter the job title or
duties and responsibilities of any officer or other Business employee
where such change would reasonably be expected to have an adverse
effect on the efforts or performance by such officer or other
employees of their duties and responsibilities as comprised as of the
date of this Agreement;
(c) make any change in accounting methods, principles or
practices affecting the reported combined consolidated assets,
liabilities or results of operations of the Business (including the
Purchased Assets);
(d) sell, lease, license, pledge or otherwise dispose of or
subject to any Lien or Encumbrance any properties or assets of the
Business (including, without limitation, the Purchased Assets,
including the leased real property), except sales of Inventory and
excess or obsolete assets in the ordinary course of business
consistent with past practice and except for terminating the
warehouse lease in Mississippi, or enter into a legally binding
commitment to do any of the foregoing;
(e) make any change, revision, amendment or other modification
to any Product labeling;
(f) make any change, revision or other modification to the
formulation of any of the Products;
(g) make any change (or announce any prospective change) in
prices, sales discounts or allowances or any other sales incentives
in connection with the sale of any of the Products to distributors or
customers of the Business;
(h) (i) waive any claims or rights related to the Business and
included in the Purchased Assets or (ii) waive the benefits of, or
agree to modify in any manner, any confidentiality, standstill or
similar agreement to which the Seller or any of its Subsidiaries is a
party and relating to the Business or any of the Products or the
Purchased Assets;
(i) sell or dispose of any master seed to any third party; or
(j) authorize any of, or commit or agree to take any of, the
foregoing actions.
Section 5.02 Other Actions. The parties hereto shall not, and
shall not permit any of their respective Affiliates to, take any action
that would, or that could reasonably be expected to, result in (a) any of
the representations and warranties of such party set forth in the Agreement
becoming untrue or inaccurate or (b) any condition set forth in Article VII
not being satisfied.
Section 5.03 Release of Liens. Any and all Liens and Encumbrances
recorded against or in any way affecting the Purchased Assets including,
but not limited to, the Real Property (including, without limitation,
mortgages, deeds of trust, leasehold deeds of trust, financing statements,
assignments and subordination agreements) granted by the Seller or any of
its Subsidiaries to Fleet Capital Corporation, American Capital Strategies
Ltd. or any other Person shall have been satisfied, the Buyer shall have
received satisfactory evidence thereof and the Seller shall have duly
executed and delivered for recordation all required releases of liens,
termination statements and satisfactions with respect to Liens and
Encumbrances being repaid on or before the Closing.
Section 5.04 Advise of Changes. The Seller shall promptly advise
the Buyer orally and in writing of any occurrence, change or event prior to
the Closing which, if it occurred or existed on or prior to the date
hereof, would have been required to have been disclosed on any of the
Schedules to be delivered by the Seller to the Buyer pursuant to Article
III.
Section 5.05 Maintenance of Real Property. The Seller agrees that
between the date of this Agreement and the Closing Date, the Seller shall
(a) maintain the Real Property in substantially the same condition as
exists on the date hereof, reasonable wear and tear excepted, (b) operate
the Business in compliance with all Applicable Laws in all material
respects, (c) maintain in full force and effect all property and liability
insurance policies on the Real Property in effect as of the date hereof,
(d) afford the Buyer and its representatives, full access during normal
business hours to the Real Property and all agreements, books, records and
other documents and data of the Seller and its Subsidiaries related
thereto, and (e) cooperate with and assist the Buyer in obtaining, in each
case at Buyer's cost, (i) a commitment from a title company acceptable to
Buyer ("Title Company") to issue on American Land Title Association's
("ALTA") current form an owner's title insurance policy on each parcel of
Owned Real Property and leasehold policies on each parcel of Leased Real
Property (collectively, the "Title Policy"), in form acceptable to the
Buyer, at standard rates, together with copies of all documents affecting
title to the Real Property and (ii) a survey of each parcel of Real
Property, as deemed necessary or advisable by the Buyer in its sole
discretion, certified to the Buyer, the Buyer's lender, if any, the Title
Company and to any other Person which the Buyer reasonably requests, in a
manner acceptable to the Buyer, prepared by a registered land surveyor
("Buyer's Surveys"), dated not more than thirty (30) days prior to the
Closing, and complying with the minimum detail requirements for land title
surveys as adopted by ALTA and the American Congress on Surveying and
Mapping ("ACSM"). The Seller shall promptly advise the Buyer orally and in
writing of any occurrence, change or event prior to the Closing which, if
it occurred or existed on or prior to the date hereof, would have been
required to have been disclosed on any of the Schedules to be delivered by
the Seller to the Buyer hereunder.
Section 5.06 Revision of Vineland Laboratory Survey. The Seller
agrees that between the date of this Agreement and the Closing Date, the
Seller shall, at its sole cost and expenses, (a) obtain and provide the
Buyer with a revision of that certain ALTA/ACSM Land Title Survey prepared
by Millennium Surveying & Mapping for Immunogenetics, Inc. and dated
October 29, 1999 of the Vineland Laboratory Site (the "Vineland Laboratory
Survey"), such revision to reconcile the legal description certified on
such survey with the legal description of the Vineland Laboratory Site
contained in that certain title commitment No. BT-9951 issued by Beacon
Title Services Agency, Inc. as agent for Chicago Title Insurance Company
and dated October 29, 1999 (such site identified in the title commitment as
Tract 1), and (b) cause each of its Subsidiaries holding a leasehold
interest in the Leased Real Property, including without limitation
Immunogenetics, Inc. and Vineland Laboratories, Inc., to duly transfer and
assign to the Seller, and the Seller shall assume, all of such
Subsidiaries' right, title and interest in such leasehold estate (the
"Assignment of Leases").
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
Section 6.01 Access to Information: Confidentiality. The Seller
shall afford the Buyer and its officers, employees, accountants, counsel,
financial advisors and other representatives, access during normal business
hours during the period prior to the Closing Date to all its properties,
books, contracts, commitments, personnel and records relating to the
Business, the Products or any of the Purchased Assets and, during such
period, the Seller shall furnish promptly the Buyer (a) a copy of each
report, schedule and other document filed by it during such period with any
Governmental Entity, (b) a copy of any and all correspondence to or from
any Governmental Entity relating to any of the Products, the Business or
any of the Purchased Assets, (c) detailed monthly sales data for the
Business (in any event not later than five (5) days after the close of such
month) and (d) all other information concerning the Business, the Products
or any of the Purchased Assets as the Buyer may reasonably request. No
investigation by the Buyer shall affect the representations and warranties
of any of the Seller. All information exchanged pursuant to this Section
6.01 also shall be subject to the confidentiality agreement dated October
26 and 28, 1999, between Lohmann & Co. AG and the Seller (the
"Confidentiality Agreement").
Section 6.02 Commercially Reasonable Efforts. Upon the terms and
subject to the conditions set forth in this Agreement, the Seller and the
Buyer shall use their commercially reasonable 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 and make effective, in the
most expeditious manner practicable, the transactions contemplated hereby
or by the other Transaction Agreements, including (i) the obtaining of all
necessary actions or non-actions, waivers, consents and approvals from
Governmental Entities and the making of all necessary Filings including,
without limitation, filings with Governmental Entities (including the FTC
and the DOJ) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by,
any Governmental Entity, (ii) the obtaining of all necessary consents,
approvals or waivers from third parties (including, without limitation, in
connection with any of the Assumed Contracts), (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or any other Transaction Agreement or the
consummation of the transactions contemplated hereby or thereby, including
seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (iv) the
execution and delivery of any additional instruments necessary to
consummate the transactions contemplated hereby or by the other Transaction
Agreements and to fully carry out the purposes of each of the Transaction
Agreements.
Section 6.03 Fees and Expenses. Except as otherwise provided in
this Agreement, all fees and expenses incurred in connection with the
transactions contemplated by this Agreement and the other Transaction
Agreements (including, without limitation, any fees and expenses payable to
Fleet Capital Corporation, American Capital Strategies Ltd. or any other
Person in connection with the matters contemplated by Section 5.03) shall
be paid by the party incurring such fees or expenses, whether or not the
transactions contemplated hereby or thereby are consummated.
Section 6.04 Public Announcements. The parties hereto agree that,
from the date of this Agreement through the Closing Date, no public
release, announcement or any other disclosure concerning any of the
transactions contemplated hereby or by any of the other Transaction
Agreements shall be made or issued by any party hereto without the prior
written consent of the other parties hereto (which consent shall not be
unreasonably withheld), except as such release, announcement or disclosure
may be required by Applicable Law, in which case the party required to make
the release, announcement or disclosure shall allow the other parties
hereto reasonable time to comment on such release, announcement or
disclosure in advance of such issuance or disclosure. Notwithstanding
anything in this Section 6.04 to the contrary, except as may be required by
Applicable Law and except for disclosure to such party's financial and
legal advisors and independent accountants or permitted pursuant to the
preceding sentence or in connection with the procedures contemplated by
Section 10.10, neither the Buyer, the Seller nor any of their respective
Affiliates or representatives will disclose to any Person the Purchase
Price.
Section 6.05 Advertising and Promotional Materials. (a) The Buyer
shall be permitted to use any and all advertising and promotional materials
included in the Purchase Assets bearing the Seller's or the Division's
corporate names, logos and product identification numbers until the earlier
of the date when such materials are exhausted or at the end of a period of
twelve (12) months after Closing or such shorter period of time if limited
by the requirements of Applicable Law or Governmental Entity. The Buyer
agrees to maintain quality standards for the substantially equal to those
maintained by the Seller at the time of Closing for so long as the Buyer
shall continue to use any advertising or promotional materials bearing the
Seller's or the Division's corporate names, logos, or product
identification numbers.
Section 6.06 Proxy Statement; Stockholders' Meeting. (a) Promptly
following the date of this Agreement, the Seller shall prepare a proxy
statement relating to, inter alia, the solicitation of votes of the
majority of the outstanding shares of the common stock of the Seller
approving this Agreement and the transactions contemplated hereby (the
"Proxy Statement"), and shall file the Proxy Statement with the U.S.
Securities and Exchange Commission (the "SEC") in accordance with
Applicable Law. The Seller shall use its best efforts to cause the Proxy
Statement to be mailed to the Seller's stockholders as soon as permitted
under Applicable Law. The information provided and to be provided by the
Seller and the Buyer, respectively, for use in the Proxy Statement shall
be, as of the date of the stockholders' meeting contemplated therein, true
and correct in all material respects and shall not omit to state any
material fact required to be stated therein or necessary in order to make
such information not misleading, and the Seller and the Buyer each agree to
correct any information provided by it for use in the Proxy Statement which
shall have become false or misleading.
(b) The Seller will as promptly as practicable notify the Buyer of
(i) the earliest date on which the Proxy Statement can be mailed to the
Seller's stockholders in compliance with Applicable Law, (ii) the receipt
of any comments from the SEC and (iii) any request by the SEC for any
amendments to the Proxy Statement or for additional information. All
filings by the Seller with the SEC, including, without limitation, the
Proxy Statement and any amendment thereto, and all mailings to the Seller's
stockholders, in each case in connection with this Agreement and the
transactions contemplated hereby shall be subject to the prior review and
comment of the Buyer and its representatives.
(c) The Seller shall, as promptly as practicable following the date
of this Agreement and in consultation with the Buyer, duly call, give
notice of, convene and hold a meeting of its stockholders for the purpose
of voting upon this Agreement and the transactions contemplated hereby. The
Seller, through its board of directors, shall recommend to its stockholders
approval of such matters and will coordinate and cooperate with the Buyer
with respect to the timing of such meeting and shall use its best efforts
to hold such meeting as promptly as practicable after the date of this
Agreement.
Section 6.07 Affiliate Contracts. Prior to the Closing, the Seller
shall terminate each of the Affiliate Contracts set forth or otherwise
described in Schedule 3.22, which termination shall not result in any
liability or obligation to the Buyer or result in any Lien on any of the
Purchased Assets.
Section 6.08 Nonsolicitation. From the date of this Agreement
through the Closing Date, neither the Seller nor any of its Affiliates
shall (i) solicit, initiate or encourage the submission of any Competing
Proposal (as defined below), (ii) enter into or agree to enter into any
Contract with respect to any Competing Proposal or (iii) participate 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 may reasonably
be expected to lead to, any Competing Proposal. "Competing Proposal" shall
mean any proposal for a transaction or series of transactions to acquire,
in any manner, any interest in, or a substantial portion of the assets of,
the Business or to merge or engage in other business combinations involving
the Division or the Business, other than the transactions contemplated by
the Transaction Agreements.
Section 6.09 Product Inventory. (a) At the Closing, all shall
comply in all respects with any and all requests of the USDA and all
requirements of Applicable Law including, without limitation, all rules and
regulations of the USDA, as such are applicable to the formulation,
manufacture, packaging, labeling and sale the Products.
(b) Any and all Products returned from customers, Products having a
shelf life of less than nine (9) months, obsolete, nonconforming,
defective, substandard, off specification, unsaleable or unusable Products,
and any other Products described on Schedule 3.23 shall be disposed of by
the Seller, at the Seller's sole cost and expense, prior to the Closing and
shall not be included in the Inventory.
Section 6.10 Transferred Employees; Employee Matters. (a) The
Buyer shall offer employment, commencing on the Closing Date, to each of
the Business Employees, and certain employees of the Seller, in each case
listed on Schedule 6.10 (the "Transferred Employees"). Such offers shall be
for employment at will, at the same base salaries or wages applicable to
each such Transferred Employee as set forth on Schedule 3.24(a). The Buyer
shall have no responsibility for severance pay or any other liability with
respect to Business Employees not listed on Schedule 6.10, or with respect
to any Transferred Employee who declines the Buyer's offer of employment.
The Seller and its Subsidiaries shall not attempt to retain any of the
Transferred Employees or in any way interfere with the Buyer's efforts to
employ such individuals.
(b) The Buyer shall provide to each Transferred Employee who
commences employment with the Buyer employee benefit plans and policies no
less favorable in the aggregate than those plans and policies the Buyer
currently provides to its own similarly situated employees ("Buyer Benefit
Plans"). For purposes of eligibility and vesting (but not pension benefit
accrual) under the Buyer Benefit Plans, the Buyer shall count all service
of the Transferred Employees that was counted for such purposes under the
corresponding Benefit Plans of the Seller and its Subsidiaries.
Section 6.11 Transfer Taxes and Fees. All transfer, stamp,
documentary, sales, use, registration, withholding and other similar Taxes
and related fees (including penalties, interest and additions to Tax)
required to be paid in connection with this Agreement or the transactions
contemplated hereby including, without limitation, all sales, transfer or
other conveyance taxes and fees of any kind payable by reason of the
conveyance of the title to the Real Property, shall be paid by the Seller.
Section 6.12 Intellectual Property Matters. (a) The parties
hereto agree that the Buyer, in its sole discretion, shall be entitled to
control the filing and recording of the assignments of the Intellectual
Property contemplated by this Agreement and by each of the Assignment of
Copyrights, Assignment of Proprietary Processes and the Assignment of
Trademarks, and the Seller hereby agrees to provide to the Buyer any such
information and documentation as may be reasonably necessary or desirable
to file or record such assignments in any and all countries and
jurisdictions requested by the Buyer.
(b) (i) The Buyer shall file, with an appropriate agency, an
application to become the registered owner (the "New Registrant's
Application") of the Division's internet domain "www. vinelandlabs.com"
(the "Domain Name") prior to the Closing Date; (ii) both the Buyer and the
Seller shall execute and deliver at the Closing the Registrant Name Change
Agreement whereby the Seller shall transfer all right, title and interest
in the Domain Name and its registration to the Buyer; (iii) the Seller
shall not, and shall not permit any of their respective Affiliates to,
apply for the use of, or use, throughout the world, the internet domain
name "www.vineland.com," any "vineland" level domain or any domain name
confusingly similar to the Domain Name in any level domain; (iv) the Seller
agrees to provide the Buyer with copies of any and all correspondence
received from the administrator of the Domain Name as soon as reasonably
possible upon the Seller's receipt thereof; (v) the Seller agrees to
execute at any time the documents reasonably required to transfer and
record the transfer of the Domain Name; and (vi) the Seller agrees to
cooperate with the Buyer and provide the Buyer with such assistance
necessary to transition seamlessly to the Buyer the operation of the
internet website located at the Domain Name.
Section 6.13 ISRA Compliance. The Seller shall as promptly as
practicable, but in no event later than the Closing Date, as to the
transactions contemplated by this Agreement, at its sole cost and expense,
(a) a no further action letter or similar approval by the New Jersey
Department of Environmental Protection or its successor ("NJDEP")
evidencing the Seller's full compliance with the New Jersey Industrial Site
Recovery Act, N.J.S.A. 13:1K, the regulations promulgated thereunder and
any successor legislation or regulations (collectively, "ISRA"); (b) a
Remediation Agreement (as defined by ISRA) or any similar document, order
or agreement pursuant to ISRA duly executed by the Seller and NJDEP, which
permits the Seller to remediate the Real Property after the Closing Date;
or (c) a Remedial Action Workplan (as defined by ISRA) approved by NJDEP
which addresses the areas of environmental concern identified at the Real
Property. If the Seller complies with this Section 6.14 by obtaining a
Remediation Agreement or a Remedial Action Workplan, the Seller shall be
solely responsible for obtaining NJDEP approval of a Remediation Funding
Source (as defined by ISRA).
Section 6.14 Accounts Receivable Collection. On the Closing Date,
the Seller and the Buyer shall jointly send a letter to each of the
obligors on the accounts receivable and other receivables included in the
Purchased Assets (the "Purchased Receivables") informing each such obligor
of the transfer of the Business contemplated hereby and instructing them to
remit all payments and other items in respect of the Purchased Receivables
and all future accounts receivable of the Business as directed in such
letter. After the Closing Date, the Buyer shall use efforts consistent with
the efforts used by the Buyer in the collection of its own accounts
receivable to collect the Purchased Receivables exclusive, however, of
Proceedings or other third party collection methods. For each of the
Purchased Receivables, any amounts received from the account customer shall
be applied first to reduce the Purchased Receivables and then to the other
amounts owed by such customer, except for amounts of any receivables as to
which the account customer is disputing. If the Buyer receives any payment
with respect to any accounts receivable not included in the Purchased
Assets, the Buyer shall reasonably promptly deliver such payment to the
Seller. If the Seller or any of its Subsidiaries receives any payment with
respect to any of the Purchased Receivables or any accounts receivable or
other receivable for Products sold or services rendered after the Closing
Date, the Seller shall reasonably promptly deliver such payment to the
Buyer.
Sectionn 6.15 Confidentiality. From and after the date of this
Agreement, the Seller shall not, and shall cause its Affiliates not to,
disclose, divulge, furnish or make accessible to any Person, any confidential
or proprietary information regarding the Business including, without
limitation, the Intellectual Property, the Technology, sales, profits,
markets, products, clients, key personnel, pricing policies, operation
methods, technical processes, designs, business affairs and methods, trade
secrets and any other information not readily available to the public
(collectively, the "Confidential Information"). The Seller agrees to keep, or
cause its Affiliates to keep, in strict confidence and not directly or
indirectly disclose, divulge, furnish, make accessible or use any of the
Confidential Information. The obligations of the Seller under this Section
6.16 are in addition to, and not in limitation or preemption of, all other
obligations of confidentiality which the Seller may have to the Buyer
pursuant to the Confidentiality Agreement or under any legal or equitable
principles.
Section 6.16 Transition Services Agreement. The Buyer and the
Seller shall enter into the Transition Services Agreement (the "Transition
Services Agreement") on mutually agreeable terms to provide for services
between Seller and Buyer for an interim period to facilitate adjustments for
Seller or Buyer in relation or the transfer of the Business to Buyer.
ARTICLE VII
CONDITIONS PRECEDENT
--------------------
Section 7.01 Conditions to Each Party's Obligation to Effect the
Closing. The respective obligation of each party to effect and complete
the Closing is subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by
any Governmental Entity or other legal restraint or prohibition
preventing the consummation of the transactions contemplated by this
Agreement or by the other Transaction Agreements; provided, however,
that, subject to Section 6.02, the Buyer and the Seller shall have
used their commercially reasonable efforts to prevent the entry of
any such injunction or other order and to appeal as promptly as
possible any such injunction or other order that may be entered.
(b) Transaction Agreements. All the Transaction Agreements
shall have been executed and delivered to the respective parties to
such agreements.
(c) Antitrust Approvals. The FTC and the DOJ shall not have
objected to the transactions contemplated by this Agreement or the
other Transaction Agreements prior to the expiration of the
applicable waiting period, or shall have otherwise approved the
transactions contemplated by this Agreement and the other Transaction
Agreements.
(d) Stockholders' Approval. This Agreement and the
transactions contemplated hereby shall have been approved and adopted
by the affirmative vote of holders of a majority of the outstanding
shares of capital stock present and entitled to vote at the meeting
of stockholders of the Seller contemplated by Section 6.06.
Section 7.02 Conditions to Obligations of the Buyer. The
obligations of the Buyer to effect and complete the Closing are further
subject to the following conditions:
(a) Representations and Warranties. All representations and
warranties of the Seller set forth in this Agreement qualified as to
materiality shall be true and correct, and those not so qualified
shall be true and correct in all material respects, in each case as
of the date hereof and as of the Closing Date as though made as of
the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties qualified as to materiality shall be
true and correct, and those not so qualified shall be true and
correct in all material respects, as of such earlier date). The Buyer
shall have received a certificate of the Seller signed on behalf of
such Seller by a duly authorized officer of such Seller to such
effect.
(b) Performance of Obligations of the Obligations of Other
Parties. The Seller shall have performed in all respects all of its
obligations required to be performed by it under this Agreement on or
prior to the Closing Date. The Buyer shall have received a
certificate of the Seller signed on behalf of the Seller by a duly
authorized officer of the Seller to such effect.
(c) Absence of Material Adverse Effect. Except as set forth in
Schedule 3.05, since the date of this Agreement there shall not have
been any event, change, effect or development that, individually or
in the aggregate, has had or could reasonably be expected to have a
Material Adverse Effect on the Business or the Real Property.
(d) Consents and Approvals. All Consents set forth in Schedule
3.03 shall have been obtained and be in full force and effect and all
Filings set forth in Schedule 3.03 shall have been made with the
appropriate Person, and all applicable waiting periods, including any
extension thereof, under the HSR Act shall have expired or
terminated, and the Buyer shall have been furnished with written
evidence satisfactory to it of the granting of such Consents or the
submission of such Filings, as the case may be.
(e) No Litigation. There shall not be pending or threatened
any suit, action or proceeding by any Governmental Entity or any
other Person, in each case that has a reasonable likelihood of
success, (i) challenging the purchase by the Buyer of any of the
Purchased Assets or seeking to restrain or prohibit the consummation
of the transaction contemplated hereby or by any of the other
Transaction Agreements or seeking to obtain from any of the parties
hereto any damages, (ii) seeking to prohibit or limit the ownership
or operation by the Buyer of the Business or any portion of the
Purchased Assets, or to compel the Buyer to dispose of or hold
separate any portion of the Purchased Assets, as a result of the
transaction contemplated hereby or by any of the other Transaction
Agreements, (iii) seeking to prohibit the Buyer from effectively
controlling any of the Purchased Assets, or (iv) which otherwise is
reasonably likely to have a Material Adverse Effect on the Business,
the Products or any of the Purchased Assets.
(f) Opinions of Counsel. The Buyer shall have received the
opinion of counsel to the Seller, dated the Closing Date, addressed
to the Buyer, in the form and substance reasonably acceptable to
Buyer.
(g) Title Policy. The Buyer shall have obtained a commitment
or commitments from the Title Company to issue the Title Policy in an
amount not less than the value (as reasonably determined by the
Buyer) of the Real Property insuring title of the Buyer thereto to be
good, indefeasible and marketable fee simple title in each parcel of
the Owned Real Property and good and marketable leasehold title in
each parcel of Leased Real Property, in each case free and clear of
all Liens and Encumbrances except Permitted Encumbrances. The Seller
shall have executed and delivered to the Buyer such affidavits (and
applicable supporting documentation) and/or indemnification
agreements, as the Buyer or the Title Company may request or as may
be necessary in order for the Title Company to omit all title
exceptions except those title exceptions acceptable to the Buyer. The
Title Policy shall contain extended coverage and, if required by the
Buyer, contain access, encroachment, easement, zoning, contiguity and
comprehensive endorsements and such other affirmative insurance as
the Buyer shall reasonably require and shall insure all appurtenant
easements or servitudes.
(h) Buyer's Surveys. The Buyer shall have obtained the Buyer's
Surveys in form acceptable to the Buyer, with no encroachments,
easements, discrepancies or conflicts in boundary lines, or shortages
in area other than Permitted Encumbrances.
(i) Landlord Consents and Estoppel Certificates. The Buyer
shall have received a certificate from each landlord under each Real
Estate Lease, dated during the month the Closing occurs, consenting
to the assignment of the applicable Real Estate Lease to the Buyer
and certifying (i) that the applicable lease with respect to each of
the Leased Real Properties is in good standing and full force and
effect in accordance with its terms and has not been modified (except
for modifications set forth therein), amended or assigned, (ii) the
date(s) to which rent and other charges thereunder have been paid,
(iii) that there is no default thereunder by either party thereto,
(iv) that all work required to be done under the applicable lease by
the Seller, as tenant, has been completed to the satisfaction of the
landlord, and (v) such further matters as may be reasonably requested
by the Buyer. The Seller shall be responsible for the costs and
expenses, including the reasonable costs and expenses of the Buyer
and any increase in rent payable by the Buyer, incurred in connection
with obtaining any such consent.
(j) The Buyer shall have received a consent and non-
disturbance agreement, in form and substance acceptable to the Buyer,
from any ground lessor, and the lender of any such ground lessor or
the Seller, holding an interest in any Real Estate Lease. The Seller
shall be responsible for the costs and expenses, including the
reasonable costs and expenses of the Buyer incurred in connection
with obtaining any such consent.
Section 7.03 Conditions to Obligation of the Seller. The
obligation of the Seller to effect and complete the Closing is further
subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Buyer set forth in this Agreement qualified as to
materiality shall be true and correct, and those not so qualified
shall be true and correct in all material respects, in each case as
of the date hereof and as of the Closing Date as though made as of
the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties qualified as to materiality shall be
true and correct, and those not so qualified shall be true and
correct in all material respects, as of such earlier date). The
Seller shall have received a certificate signed on behalf of the
Buyer by a duly authorized officer of the Buyer to such effect.
(b) Performance of Obligations of the Buyer. The Buyer shall
have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing
Date, and the Seller shall have received a certificate signed on
behalf of the Buyer by a duly authorized officer of the Buyer to such
effect.
(c) No Litigation. There shall not be pending or threatened
any suit, action or proceeding by any Governmental Entity or any
other Person, in each case that has a reasonable likelihood of
success, (i) challenging the purchase by the Seller of any of the
Purchased Assets or seeking to restrain or prohibit the consummation
of the transaction contemplated hereby or by any of the other
Transaction Agreements or seeking to obtain from any of the parties
hereto any damages, (ii) seeking to prohibit or limit the ownership
or operation by the Seller of the Business or any portion of the
Purchased Assets, or to compel the Seller to dispose of or hold
separate any portion of the Purchased Assets, as a result of the
transaction contemplated hereby or by any of the other Transaction
Agreements, (iii) seeking to prohibit the Seller from effectively
controlling any of the Purchased Assets, or (iv) which otherwise is
reasonably likely to have a Material Adverse Effect on the Business,
the Products or any of the Purchased Assets.
(d) Opinion of Counsel. The Seller shall have received the
opinion of counsel to the Buyer, dated the Closing Date, addressed to
the Seller, in form and substance reasonably acceptable to Seller.
(e) Fairness Opinion. The Board of Directors of the Seller
shall have received an opinion from Seidman & Company, Inc. dated the
approximate date the Proxy Statement is mailed to the stockholders of
the Seller to the effect that, as of such date, the consideration to
be received by the Seller pursuant to this Agreement is fair to the
Seller and its stockholders from a financial point of view, a copy of
which is to be delivered to the Buyer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual written consent of the Buyer and the Seller;
(b) by either the Buyer or the Seller:
(i) if the transactions contemplated hereby or by the
other Transaction Agreements are not consummated on or before
the date that is three (3) months after the date of this
Agreement (the "Outside Date"), unless the failure to
consummate the transactions contemplated hereby is the result
of a material breach of this Agreement by the party seeking to
terminate this Agreement; provided, however, that the passage
of such period shall be tolled for any part thereof (but not
exceeding ninety (90) days in the aggregate) during which any
party shall be subject to a non-final order, decree, ruling or
action restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby or by the
other Transaction Agreements;
(ii) if any Governmental Entity issues an order, decree
or ruling or takes any other action permanently enjoining,
restraining or otherwise prohibiting the transactions
contemplated hereby or by the other Transaction Agreements and
such order, decree, ruling or other action shall have become
final and non-appealable;
(iii) if the stockholders of the Seller do not approve
this Agreement and the transactions contemplated hereby.
Section 8.02 Effect of Termination. In the event of termination of
this Agreement by either the Buyer or the Seller as provided in Section
8.01, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of any party hereto other
than Section 3.19, Section 4.04, Section 6.01, Section 6.03, Section 6.04
and this Section 8.02 and except to the extent that such termination
results from the willful breach by a party of any covenant set forth in
this Agreement.
Section 8.03 Extension; Waiver. At any time prior to the Closing
Date, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in
the representations and warranties of the other party contained in this
Agreement or in any document delivered pursuant to this Agreement, (c)
waive compliance with any of the agreements of the other party contained in
this Agreement or (d) waive any condition to such party's obligation to
effect and complete the Closing . Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE IX
INDEMNIFICATION
Section 9.01 Indemnification by the Seller. The Seller shall
indemnify the Buyer and its Affiliates and their respective officers,
directors, employees, stockholders, agents and representatives against and
hold them harmless from any loss, liability, claim, damage or expense
(including legal fees and expenses) (collectively, a "Loss") suffered or
incurred by any such indemnified party to the extent arising from (a) any
breach of any representation or warranty of the Seller which survives the
Closing contained in this Agreement, (b) any breach of any representation
or warranty of the Seller which survives the Closing contained in the other
Transaction Agreements, (c) any breach of any covenant or agreement of the
Seller contained in this Agreement or the other Transaction Agreements
requiring performance after the Closing Date, (d) any of the Excluded
Assets and the Retained Liabilities, (e) any remediation, clean up or
removal of, or other remedial actions involving, Hazardous Materials
released, disposed of or discharged prior to or on the Closing Date (i) on,
beneath or adjacent to any property currently owned, operated or leased by
the Seller (including, without limitation, the Real Property) or (ii) at
any other location if such Hazardous Materials were generated, produced,
used, stored, treated, recycled, transported, discharged, emitted or
released by or on behalf of the Seller or any of its Subsidiaries or
Affiliates prior to or on the Closing Date, (f) any penalties or other
costs incurred as a result of a violation of any Environmental Law by the
Seller or any of its Subsidiaries or Affiliates prior to or on the Closing
Date, (g) the Settlement Arrangement and (h) any and all Proceedings
arising out of or relating to the legal and regulatory matters described or
referenced in Schedule 3.08 and in Item 3. "Legal Proceeding" in the 1998
Annual Report on Form 10-K of the Seller; provided that, except in the case
of fraud, (A) the Seller shall not be liable under Section 9.01(a) unless
and until the aggregate amount of Losses with respect to matters referred
to in Section 9.01(a) exceeds U.S.$150,000 (the "Threshold Amount") (and
thereafter shall be liable for any and all Losses under Section 9.01(a),
including, but not limited to, the Threshold Amount) and (B) the Seller's
maximum liability under Section 9.01(a) shall not exceed [the Purchase
Price].
Section 9.02 Indemnification by the Buyer. The Buyer shall
indemnify the Seller, its Affiliates and their respective officers,
directors, employees, stockholders, agents and representatives against and
hold them harmless from any Loss suffered or incurred by any such
indemnified party to the extent arising from (a) any breach of any
representation or warranty of the Buyer which survives the Closing
contained in this Agreement, (b) any breach of any representation or
warranty of the Buyer which survives the Closing contained in the other
Transaction Agreements, (c) any breach of any covenant or agreement the
Buyer contained in this Agreement or the other Transaction Agreements
requiring performance after the Closing Date and (d) any of the Assumed
Liabilities; provided that, except in the case of fraud, (A) the Buyer
shall not be liable under Section 9.02(a) unless and until the aggregate
amount of Losses with respect to matters referred to in Section 9.02(a)(i)
exceeds the Threshold Amount (and thereafter shall be liable for any and
all Losses under Section 9.02(a), including, but not limited to, the
Threshold Amount) and (B) the Buyer's maximum liability under Section
9.02(a) shall not exceed [the Purchase Price].
Section 9.03 Losses Net of Insurance, etc. The amount of any Loss
for which indemnification is provided under this Article IX shall be net of
any amounts recovered or recoverable by the indemnified party under
insurance policies with respect to such Loss and shall be (a) increased to
take account of any net Tax cost actually realized by the indemnified party
arising from the receipt of indemnity payments hereunder (grossed up for
such increase) and (b) reduced to take account of any net Tax benefit
(including as a result of any basis adjustment) actually realized by the
indemnified party arising from the incurrence or payment of any such Loss.
In computing the amount of any such Tax cost or Tax benefit, the
indemnified party shall be deemed to recognize all other items of income,
gain, loss, deduction or credit before recognizing any item arising from
the receipt of any indemnity payment hereunder or the incurrence or payment
of any indemnified Loss.
Section 9.04 Termination of Indemnification. The obligations to
indemnify and hold harmless a party hereto (a) with respect to Taxes, shall
terminate at the time the applicable statutes of limitations with respect
to the Tax liabilities in question expire (giving effect to any extension
thereof), (b) pursuant to Sections 9.01(a) and 9.02(a), shall terminate
when the applicable representation or warranty terminates pursuant to
Section 10.01 and (c) pursuant to the other clauses of Sections 9.01 and
9.02 shall continue indefinitely; provided, however, that as to clauses (a)
and (b) above such obligations to indemnify and hold harmless shall not
terminate with respect to any item as to which the Person to be indemnified
or the related party thereto shall have, before the expiration of the
applicable period, previously made a claim by delivering a notice of such
claim (stating in reasonable detail the basis of such claim) to the
indemnifying party.
Section 9.05 Procedures Relating to Indemnification for Third Party
Claims. In order for an indemnified party to be entitled to any
indemnification provided for under this Agreement in respect of, arising
out of or involving a claim or demand made by any Person (other than a
party hereto) against the indemnified party (a "Third Party Claim"), such
indemnified party must notify the indemnifying party in writing, and in
reasonable detail, of the Third Party Claim within twenty (20) Business
Days after receipt by such indemnified party of written notice of the Third
Party Claim; provided, however, that failure to give such notification
shall not affect the indemnification obligations set forth in this Article
IX except to the extent the indemnifying party shall have been actually
prejudiced as a result of such failure (except that the indemnifying party
shall not be liable for any expenses incurred during the period in which
the indemnified party failed to give such notice). Thereafter, the
indemnified party shall deliver to the indemnifying party, reasonably
promptly after the indemnified party's receipt thereof, copies of all
notices and documents (including court papers) received by the indemnified
party relating to the Third Party Claim.
If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof
and, if the indemnifying party so chooses and acknowledges its obligation
to indemnify the indemnified party therefor, to assume the defense thereof
with counsel selected by the indemnifying party; provided that such counsel
is not reasonably objected to by the indemnified party. Should the
indemnifying party so elect to assume the defense of a Third Party Claim,
the indemnifying party shall not be liable to the indemnified party for
legal expenses subsequently incurred by the indemnified party in connection
with the defense thereof. If the indemnifying party assumes such defense,
the indemnified party shall have the right to participate in the defense
thereof and to employ counsel (not reasonably objected to by the
indemnifying party), at its own expense, separate from the counsel employed
by the indemnifying party, it being understood that the indemnifying party
shall control such defense. The indemnifying party shall be liable for the
fees and expenses of counsel employed by the indemnified party for any
period during which the indemnifying party has failed to assume the defense
thereof (other than during the period prior to the time the indemnified
party shall have given notice of the Third Party Claim as provided above).
If the indemnifying party so elects to assume the defense of any
Third Party Claim, the indemnified party shall cooperate with the
indemnifying party in the defense or prosecution thereof. Such cooperation
shall include the retention and (upon the indemnifying party's request) the
provision to the indemnifying party of records and information which are
reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information
and explanation of any material provided hereunder. Whether or not the
indemnifying party shall have assumed the defense of a Third Party Claim,
neither the indemnifying party nor the indemnified party shall admit any
liability with respect to, or settle, compromise or discharge, such Third
Party Claim without the other party's prior written consent (which consent
shall not be unreasonably withheld).
Section 9.06 Procedures Related to Indemnification for Other Claims.
In the event any indemnified party should have a claim against any
indemnifying party under Section 9.01 or 9.02 that does not involve a Third
Party Claim being asserted against or sought to be collected from such
indemnified party, the indemnified party shall deliver notice of such claim
with reasonable promptness to the indemnifying party. The failure by any
indemnified party so to notify the indemnifying party shall not relieve the
indemnifying party from any liability which it may have to such indemnified
party under Section 9.01 or 9.02, except to the extent that the
indemnifying party demonstrates that it has been materially prejudiced by
such failure.
Section 9.07 Exclusivity. After the Closing, except in the case of
fraud by the breaching party, Sections 9.01, 9.02 and 10.10 shall provide
the exclusive remedy for any misrepresentation, breach of warranty,
covenant or other agreement (other than those set forth in Sections 6.01
and 6.04) or other claims arising out of this Agreement or the transactions
contemplated hereby.
Section 9.08 Escrow Deposit. The parties agree that, in addition to
the payments, if any, contemplated by Section 1.08, the Escrow Deposit
shall serve as security for the indemnification obligations of the Seller
under this Article IX, and any indemnity payment due to the Buyer under
this Article IX shall be paid by the Escrow Agent (on behalf of the Seller)
to the Buyer out of the Escrow Deposit, to the extent available, in
accordance with the terms of the Escrow Agreement; provided, however, that
to the extent that the amounts which become due and payable to the Buyer
under this Article IX exceed the amount of the Escrow Deposit then
available to pay such amounts, then the Seller shall pay such excess
amounts to the Buyer directly.
ARTICLE X
GENERAL PROVISIONS
Section 10.01 Survival of Representations and Warranties. The
representations and warranties in this Agreement or in any other document
delivered in connection herewith shall survive the Closing and shall
terminate as of the date which is two (2) years after the Closing Date
except for (i) Sections 3.06 and 3.10 which shall survive the Closing until
thirty (30) days after the expiration of the applicable statute of
limitations (giving effect to any extension thereof); (ii) the
representations and warranties set forth in Sections 3.01 and 3.02 which
shall not terminate. This Section 10.01 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after
the Closing Date.
Section 10.02 Notices. All notices, requests, claims, demands and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be delivered by hand or sent by confirmed
facsimile (with the original to follow by first class mail, postage
prepaid) or sent, postage prepaid, by registered or certified mail or
internationally recognized overnight courier service and shall be deemed
given when so delivered by hand or facsimile, or if mailed, five (5) days
after mailing (two (2) business day in the case of overnight courier
service) at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to the Buyer, to
Vineland International
1146 Airport Parkway
Gainesville, GA 30501
Attention: President
Telecopy: (207) 873-4975
with a copy to:
Lohmann & Co. AG
Postfach 460
27454 Cuxhaven
Federal Republic of Germany
Attention: Mr. Harm Specht
Telecopy: 011-47-21-74-73-56
and to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Attention: William L. Burke, Esq.
Telecopy: (212) 858-1500
(b) if to the Seller, to
IGI, Inc.
Wheat Road & Lincoln Avenue
P.O. Box 687
Buena, New Jersey 08310-0687
Attention: Robert E. McDaniel, Esq.
Telecopy: (856) 697-2259
with a copy to:
Devine, Millimet & Branch
11 Amherst Street
Manchester, NH 03105
Attention: Paul C. Remus, Esq.
Telecopy: (603) 669-1000
Section 10.03 Definitions. (a) For purposes of this Agreement:
"Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person.
"Assignment of Proprietary Processes" means the Assignment of
Patents, to be dated as of the Closing Date, each in the form
attached hereto as Exhibit F.
"Assignment of Trademarks" means the Assignment of Trademarks,
to be dated as of the Closing Date, in the forms attached hereto as
Exhibit G.
"Bill of Sale" means the bills of sale to be delivered by the
Seller to the Buyer on the Closing Date in the form attached hereto
as Exhibit H.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York are
authorized to close.
"Encumbrances" means all Liens, claims, rights of first
refusal, assignments, preemptive rights, rights-of-way, easements,
encroachments, restrictions, covenants, title retention agreements,
indentures, security agreements or any other encumbrances of any
kind.
"Indebtedness" means, with respect to any Person, without
duplication, (i) all obligations of such Person for borrowed money,
or with respect to deposits or advances of any kind, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, (iii) all obligations of such Person upon which
interest charges are customarily paid (other than trade payables
incurred in the ordinary course of business consistent with past
practice), (iv) all obligations of such Person under conditional sale
or other title retention agreements relating to property purchased by
such Person, (v) all obligations of such Person issued or assumed as
the deferred purchase price of property or services (excluding
obligations of such Person to creditors for raw materials, Inventory,
services and supplies incurred in the ordinary course of such
Person's business), (vi) all lease obligations of such Person
capitalized on the books and records of such Person, (vii) all
obligations of others secured by a Lien on property or assets owned
or acquired by such Person, whether or not the obligations secured
thereby have been assumed, (viii) all obligations of such Person
under interest rate or currency hedging transactions (valued at the
termination value thereof) (other than forward or spot foreign
currency exchange contracts entered into in the ordinary course of
business consistent with past practice), (ix) all letters of credit
issued for the account of such Person (excluding letters of credit
issued for the benefit of suppliers to support accounts payable to
suppliers incurred in the ordinary course of business) and (x) all
guarantees and arrangements having the economic effect of a guarantee
of such Person of any Indebtedness of any other Person.
"Lien" means, with respect to any property or asset (or any
income or profits therefrom) of any Person (in each case whether the
same is consensual or nonconsensual or arises by Contract, operation
of law, legal process or otherwise), (a) any mortgage, lien,
encumbrance, pledge, attachment, levy or other security interest of
any kind thereupon or in respect thereof, or (b) any other
arrangement, express or implied, under which the same is
subordinated, transferred, sequestered or otherwise identified so as
to subject the same to, or make the same available for, the payment
or performance of any Indebtedness, liability or obligation in
priority to the payment of the ordinary, unsecured liabilities of
such Person. For the purposes of this Agreement, a Person shall be
deemed to own subject to a Lien any asset that it has acquired or
holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"Material Adverse Effect" means (i) for any party, a material
adverse effect on the business, assets, condition (financial or
otherwise), or results of operations of such party, (ii) in the case
of the Business, also means a material adverse effect on the
operation or use of any of the Purchased Assets or the ability of the
Seller to perform its obligations under any of the Transaction
Agreements or on the ability of the Seller to consummate the
transactions contemplated hereby or by any of the other Transaction
Agreements and (iii) in the case of the Real Property, (A) the
impairment of, or interference with, the present or continued use of
the property subject thereto or affected thereby in any respect or
(B) a material decrease in the value of the Real Property.
"Non-Competition Agreement" means the Non-Competition
Agreement, to be dated as of the Closing Date, by and between the
Buyer and the Seller in the form attached hereto as Exhibit I.
"Permitted Encumbrances" means, with respect to the Real
Property, (a) Permitted Liens and (b) Encumbrances disclosed on
Schedule 3.20, provided, however, that such Encumbrances neither
individually or in the aggregate have had, and would not reasonably
be expected to have, a Material Adverse Effect on the operation of
the Business or the Real Property.
"Permitted Liens" means Liens for taxes, assessments or
governmental charges which are not yet due and payable or that,
subject to adequate security for payment, are being properly
contested in good faith by the Seller.
"Person" means any individual, firm, corporation, partnership,
company, limited liability company, trust, joint venture,
association, Governmental Entity or other entity.
"Registrant Name Change Agreement" means the Registrant Name
Change Agreement, to be dated as of the Closing Date, by and between
the Buyer and the Seller in the form attached hereto as Exhibit J.
"Republic of Brazil" means the Republic of Brazil.
"Subsidiary" (including "Subsidiaries") means any corporation,
joint venture, partnership, limited liability company or other entity
of which the Seller, directly or indirectly, owns or controls capital
stock or other equity interests representing more than fifty percent
(50%) of the general voting power of such entity under ordinary
circumstances.
"Transaction Agreements" means, collectively, this Agreement,
the Instrument of Assignment and Assumption, the Bills of Sale, the
Assignment of Copyrights, the Assignment of Proprietary Processes,
the Assignment of Trademarks, the Escrow Agreement, the Registrant
Name Change Agreement, the Non-Competition Agreement, the Assignment
and Assumption of Real Estate Leases, the Transition Services
Agreement and the Confidentiality Agreement.
(b) The following terms have the meanings set forth in the Sections
set forth below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
ACSM 5.05
Affiliate 10.03(a)
Affiliate Contracts 3.22
Agreement Preamble
ALTA 5.05
Applicable Law 3.03
Arbiter 1.08(c)
Arbitration Panel 10.10(c)
Assignment of Leases 5.06
Assignment of Patents 10.03(a)
Assignment of Real Estate Leases 1.07
Assignment of Trademarks 10.03(a)
Assumed Contracts 1.01(a)(vi)
Assumed Liabilities 1.02(a)
Benefit Plan 1.02(c)(iv)
Bill of Sale 10.03(a)
Business Preamble
Business Day 10.03(a)
Business Employee 3.24(a)
Buyer Preamble
Buyer Benefit Plans 6.10
Buyer's Surveys 5.05
Claims 1.01(a)(xix)
Closing 2.01
Closing Date 2.01
Closing Payment 1.03(a)
Code 2.02(a)(xiii)
Competing Proposal 6.08
Confidential Information 6.16
Confidentiality Agreement 6.01
Consent 3.03
Contracts 3.12
Corrective Deed 5.06
Current Assets 1.08(a)
Current Liabilities 1.08(a)
Deed 2.02(a)(xi)
Division Preamble
DOJ 6.11
Domain Name 6.13(b)
Encumbrances 10.03(a)
Environmental Laws 3.10(b)
Escrow Agent 1.03
Escrow Agreement 1.03
Escrow Deposit 1.03(b)
Excluded Assets 1.01(b)
Filing 3.03
Final Statement of Working Capital 1.08(d)
Financial Statement Date 3.14(a)
Financial Statements 3.04(a)
FTC 6.11
Georgia Leased Property 2.02(a)(xii)
GMPs 1.01(a)(v)
Governmental Entity 3.03
Hazardous Materials 3.10(b)
HSR Act 6.11
IGI Brazil 1.01(a)(xvi)
Indebtedness 10.03(a)
Instrument of Assignment and Assumption 1.06
Intellectual Property 3.11(a)
Intellectual Property Contracts 3.11(c)
Inventory 1.01(a)(i)
Inventory Amount 1.08(a)
ISRA 6.14
Judgment 3.03
Leased Real Property 1.01(a)(xii)
Lenders 5.03
Lien 10.03(a)
Loss 9.01
Master Seed Program 3.26(b)
Material Adverse Effect 10.03(a)
Net Working Capital 1.08(a)
New Registrant's Application 6.13(b)
NJDEP 6.14
Non-Competition Agreement 10.03(a)
Outside Date 8.01(b)(i)
Owned Real Property 1.01(a)(xii)
Permits 1.01(a)(vii)
Permitted Encumbrances 10.03(a)
Permitted Liens 10.03(a)
Person 10.03(a)
Pre-Closing Tax Period 3.06(a)
Preliminary Statement of Working Capital 1.08(a)
Proceeding 3.08
Product Registrations 3.15
Product Return Costs 1.02(e)
Products Preamble
Purchase Price 1.02(a)
Purchase Price Adjustment 1.08(e)
Purchased Assets 1.01(a)
Purchased Receivables 6.15(a)
Real Estate Leases 1.01(a)(xvii)
Real Property 1.01(a)(xii)
Reference Balance Sheet 3.04(a)
Registrant Name Change Agreement 10.03(a)
Release 3.10(b)
Remedial Action Workplan 6.14
Remediation Agreement 6.14
Remediation Funding Source 6.14
Republic of Brazil 10.03(a)
Retained Liabilities 1.02(c)
Returns 3.06(a)
Sales Price 1.02(e)
Seller Preamble
Settlement Arrangement 1.02(c)(iii)
Subsidiaries 10.03(a)
Tax and Taxes 3.06(a)
Technology 1.01(a)(iv)
Third Party Claim 9.05
Threshold Amount 9.01
Title Company 5.05
Title Policy 5.05
Transaction Agreements 10.03(a)
Transferred Employees 6.10(a)
Transition Services Agreement 6.17
Uncollected Receivables 6.15(b)
USDA 3.23(a)
U.S. GAAP 3.04(a)
USTs 3.10(b)
Vineland Laboratory Site 3.20(b)(iii)
Vineland Laboratory Survey 5.05
Section 10.04 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
Applicable Law, or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, such term or other provision will be
interpreted so as to best accomplish the intent of the parties within the
limits of Applicable Law.
Section 10.05 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
Section 10.06 Entire Agreement; No Third-Party Beneficiaries. (a)
Each of the representations, warranties, covenants and agreements of any
party hereto contained in any Schedule or Exhibit hereto or any certificate
delivered by or on behalf of such party pursuant to Sections 7.02 or 7.03
of this Agreement will be deemed incorporated and contained in this
Agreement and will constitute representations, warranties, covenants and
agreements of such party. This Agreement (including the Schedules and
Exhibits hereto), together with the Confidentiality Agreement, supersedes
any other agreement, whether written or oral, that may have been made or
entered into by any party or any of their respective Affiliates (or by any
director, officer or representative thereof) with respect to the subject
matter hereof. This Agreement (including the Schedules and Exhibits
hereto), together with the other Transaction Agreements, constitutes the
entire agreement by and among the parties hereto with respect to the
subject matter hereof and there are no agreements or commitments by or
among such parties or the Affiliates with respect to the subject matter
hereof except as expressly set forth herein. No investigation or receipt of
information by or on behalf of the Buyer will diminish or obviate any of
the representations, warranties, covenants or agreements of the Seller
under this Agreement or the conditions to obligations of the Buyer under
this Agreement. No investigation or receipt of information by or on behalf
of the Seller will diminish or obviate any of the representations,
warranties, covenants or agreements of the Buyer under this Agreement or
the conditions to the obligations of the Seller under this Agreement.
(b) Nothing in this Agreement, express or implied, is intended to
confer on any Person other than the parties hereto and their respective
permitted successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
Section 10.07 Amendments No modification or amendment of this
Agreement and no waiver of any of the terms or conditions hereof shall be
valid or binding unless made in writing and executed by all of the parties
hereto.
Section 10.08 Assignment; Successors in Interest. (a) Neither this
Agreement nor any of the rights, interests or obligations under this
Agreement shall be assigned, in whole or in part, by operation of law or
otherwise by any of the parties without the prior written consent of the
other parties, except that the Buyer may, in its sole discretion, assign
any of or all of its rights, interests and obligations under this Agreement
to any wholly owned subsidiary of Lohmann & Co. AG, a corporation organized
and existing under the laws of the Federal Republic of Germany and the
parent company of the Buyer, but no such assignment shall relieve the Buyer
of any of its obligations under this Agreement. Any purported assignment in
violation of this Section 10.08 shall be void. Subject to the preceding
sentences, this Agreement will be binding upon, inure to the benefit of,
and be enforceable by, the parties and their respective successors and
assigns.
(b) In the event that the Seller sells, transfers or leases all or
substantially all of its assets, or is not the surviving corporation in any
merger, consolidation or other business combination in which it may enter
with any Person, the Seller will cause such purchaser or surviving
corporation, as the case may be, to assume the Seller's obligations under
this Agreement upon the consummation of any such transaction, so long as
any of such obligations remain outstanding, unpaid or unperformed.
Section 10.09 Governing Law. Pursuant to Section 5-1401 of the New
York General Obligations Law, this Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
Section 10.10 Arbitration. (a) Except as otherwise provided in
Section 1.07, any dispute, controversy or claim arising out of or relating
to this Agreement or the other Transaction Agreements that cannot be
resolved between the Buyer and the Seller shall be resolved in accordance
with the procedures specified in this Section 10.10, which shall constitute
the sole and exclusive procedures for the resolution of such disputes.
(b) The Buyer and the Seller agree to use their commercially
reasonable efforts to settle promptly any disputes or claims arising out of
or relating to this Agreement or the Transaction Agreements through
negotiations conducted in good faith between representatives of each party
having authority to reach such a settlement. All negotiations pursuant to
this Section 10.10 shall be confidential and shall be treated as compromise
and settlement negotiations and shall not be admissible for any purposes in
any subsequent arbitration.
(c) Any dispute arising out of or relating to this Agreement or the
other Transaction Agreements which has not been resolved by negotiations as
provided in subsection (b) of this Section 10.10, within forty-five (45)
days from the date that such negotiations shall have been first requested
by any party hereto, shall be settled by arbitration before a panel of
three (3) independent and impartial arbitrators (the "Arbitration Panel")
in accordance with the then current commercial arbitration rules of the
International Chamber of Commerce, except to the extent such rules are
inconsistent with this Agreement, in which case the provisions of this
Agreement shall be followed. The Buyer and the Seller each shall select one
(1) member of the Arbitration Panel, who shall jointly select the third
member of the Arbitration Panel. In no case shall there be any ex parte
communications between any party hereto and any member of the Arbitration
Panel regarding any dispute between the parties. If the Buyer or the Seller
refuses to participate in good faith in negotiations as provided in
subsection (b) of this Section 10.10, the Buyer or the Seller, as the case
may be, may initiate arbitration at any time after such refusal without
waiting for the expiration of the forty-five (45) day period. Except as
provided in subject (d) of this Section 10.10, relating to provisional
remedies, the Arbitration Panel shall decide all aspects of any dispute
brought to them, including, but not limited to, attorney disqualification
and the timeliness of the making of any claim. The Arbitration Panel shall
have the discretion to order a pre-hearing exchange of information by the
parties, including, without limitation, the production of requested
documents, the exchange of testimony of proposed witnesses, and the
examination by deposition of parties. The Arbitration Panel shall not have
the authority to make any ruling, finding or award that does not conform to
the terms and conditions of this Agreement.
(d) The Buyer or the Seller may, without prejudice to any
negotiation or arbitration procedures, proceed to any court of competent
jurisdiction to obtain provisional judicial relief if, in the Buyer's or
the Seller's discretion, as the case may be, such action is necessary to
avoid imminent irreparable harm or to preserve the status quo pending the
conclusion of the dispute procedures specified in this Section 10.10.
(e) The site of any arbitration brought pursuant to this Agreement
shall be London, England, and the language in which the arbitration shall
be conducted, including all writings relating thereto (including, but not
limited to, the award of the Arbitration Panel), shall be in English. All
discovery activities shall be completed within sixty (60) days after the
initial meeting of the Arbitration Panel. The award of the Arbitration
Panel shall be (i) final and binding upon the parties, (ii) issued within
ninety (90) days after the initial meeting of the Arbitration Panel, (iii)
in writing and (iv) set forth the factual and legal bases for such award.
The Arbitration Panel is to award attorneys' fees and cost of the
arbitration to the prevailing party. Judgment on the award rendered by the
Arbitration Panel may be entered and enforced in any court having
jurisdiction thereof in accordance with the New York Convention on
Arbitration.
Section 10.11 Interpretation. (a) Unless the context otherwise
requires, (i) all references made in this Agreement to a Section, Schedule
or an Exhibit are to a Section, Schedule or an Exhibit of or to this
Agreement, (ii) each term defined in this Agreement has the meaning
ascribed to it, (iii) "or" is disjunctive but not necessarily exclusive,
(iv) words in the singular include the plural and vice versa, (v) the
phrase "to the best knowledge of the Seller" means to the best knowledge of
the of the individuals identified in Schedule 10.11, in each case after due
inquiry. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
(b) In the event of an ambiguity or question of intent or
interpretation, this Agreement shall be construed as if drafted jointly by
the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the extent to which any such party or
its counsel participated in the drafting of any provision hereof or by
virtue of the extent to which any such provision is inconsistent with any
prior draft hereof.
(c) All references to "$" or dollar amounts are to lawful currency
of the United States of America.
(d) All documents and correspondence relating to this Agreement and
the other Transaction Agreements shall be in the English language.
Section 10.12 Waiver. The failure of any of the parties to enforce
at any time any of the provisions of this Agreement or the other
Transaction Agreements shall in no way be construed to be a waiver of any
such provision, nor in any way to affect the validity of this Agreement or
any other Transaction Agreement or any part hereof or thereof or the right
of any party thereafter to enforce each and every such provision. No waiver
of any breach of or non-compliance with this Agreement or any other
Transaction Agreement shall be held to be a waiver of any other subsequent
breach or non-compliance.
Section 10.13 Payments. Unless otherwise provided, all payments
required to be made pursuant to this Agreement or the other Transaction
Agreements shall be made in U.S. Dollars in the form of cash or by wire
transfer or immediately available funds to an account designated by the
party receiving such payment.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, all as of the date first written above.
IGI, INC.
By: _______________________________
Name:
Title:
VINELAND INTERNATIONAL
By: Animal Health GmbH, a General partner
By: _______________________________
Name: Harm Specht
Title: President
By: Vineland Laboratories Inc., a General
Partner
By: _______________________________
Name: Dennis Guerrette
Title: Vice President
ANNEX B
[FORM OF SEIDMAN & CO., INC. LETTERHEAD]
July 11, 2000
The Board of Directors
IGI, Inc.
c/o Mr. Domenic Golato, Chief Financial Officer
Wheat Road & Lincoln Avenue
P.O. Box 687
Buena, New Jersey 08310-0687
Gentlemen:
You have requested the opinion of Seidman & Co., Inc. as to the
fairness, from a financial point of view, to the shareholders of IGI, Inc.
("IGI," "the Company"), of the proposed sale (the "Transaction") of IGI's
Vineland Laboratories Division ("Division") to Vineland International, a
Delaware general partnership, whose parent company is Lohmann & Co., AG,
Cuxhaven, Federal Republic of Germany. It is understood that Vineland
International is paying $12,500,000 in cash for the Division plus assumption
of approximately $2,300,000 of liabilities, principally payables, indicating
a total consideration for the sale of the Division approximating
$14,800,000.
The proposed acquisition, as provided for in the "Asset Purchase
Agreement Dated as of June 19, 2000 by and between Vineland International
and IGI, Inc.," would provide for Vineland International, a newly created
Delaware general partnership, to purchase all of the assets of the Division.
In reaching our fairness opinion, we have examined and considered all
available information and data which we deemed relevant to determining the
fairness of the subject Transaction from a financial point of view,
including:
1. The proposed asset acquisition by Vineland International of the
Vineland Laboratories Division of IGI, Inc. as delineated in the
"Asset Purchase Agreement Dated as of June 19, 2000 by and
between Vineland International and IGI, Inc.";
2. IGI's 10-K for December 31, 1999, IGI's 10-Q for March 31, 2000,
IGI's 8-K for June 13, 2000;
3. Historic and current operating data for the Vineland
Laboratories Division of IGI, with focus on sales, operating
costs and other charges against revenues, operating cash flow
and operating cash flow margins (that is, operating cash flow as
percent of revenues), operating income and operating income
margins, pre-tax income and pre-tax income margins;
4. Historic and current balance sheets for the Division, focusing
on analysis of assets and capital structure and on indices of
liquidity, activity and coverage, including current and long-
term debt to equity ratios;
5. Comparative statistical analysis of the operating performance
and balance sheets of selected companies comparable to the
Vineland Laboratories Division of IGI which have publicly traded
common stock, and, from this data, deriving financial and
capitalization ratios typical of companies producing animal
vaccines;
6. Financial and operating forecasts provided by IGI management for
the Vineland Laboratories Division;
7. Discounted cash flow analyses of five year projected net free
cash flows for the Vineland Laboratories Division;
8. Conditions in, and the outlook for the animal vaccine industry
in the United States;
9. Conditions in, and the outlook for the United States economy,
interest rates and financial markets;
10. Other studies, analyses, and investigations as we deemed
appropriate
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description.
Selecting portions of the analyses or of the summary set forth herein
without considering the analysis as a whole could create an incomplete view
of the processes underlying Seidman & Co. Inc.'s fairness opinion. This
letter is prepared solely for the purpose of Seidman & Co., Inc. providing
an outline of the opinion as to the fairness of the subject disposition, and
does not purport to be an appraisal or necessarily reflect the prices at
which businesses or securities actually may be sold. This letter only has
application as it is employed with reference to the full written analysis
and supporting research and tables.
During the course of our investigation, we conducted interviews with
persons who, in our judgment, were capable of providing us with information
necessary to complete the assignment, including members of management. We
have assumed that the information and accounting supplied by management and
others are accurate, and reflect good faith efforts to describe the current
and prospective status of both IGI, Inc., and the Vineland Laboratories
Division from an operational and financial point of view. We have relied,
without independent verification, upon the accuracy of the information
provided by these sources.
The valuation fairness tests include a matrix of fair market
valuations of the Vineland Laboratories Division of IGI, Inc., and the
comparison of these valuations with the total consideration to be paid IGI,
Inc. under the terms of the Transaction. Two generally accepted methods have
been employed in determining the Division's fair market value, the "market
comparable method" and the "discounted cash flow method." The market
comparable method of valuation relates to a subject company's operating and
balance sheet financial capitalizing multiples based on ratios derived from
a universe of publicly-traded market comparable companies. The discounted
cash flow method of valuation derives the present value of a company from a
future stream of free cash flows.
Based, therefore, on our analysis and consideration of the foregoing
market comparable and discounted cash flow valuations, it is our considered
professional judgment that the consideration in the proposed sale of IGI,
Inc.'s Vineland Laboratories Division is fair to the existing shareholders
of IGI, Inc. from a financial point of view.
Yours truly,
/s/ Seidman & Co., Inc.
-----------------------
Seidman & Co., Inc.
Seidman & Co., Inc.
July 14, 2000
IGI, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 28, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having received notice of the special meeting and
management's proxy statement therefor, and revoking all prior proxies,
hereby appoint(s) Edward B. Hager and Robert E. McDaniel, and each of them
singly, attorneys or attorney of the undersigned (with full power of
substitution in them and each of them) for and in the name(s) of the
undersigned to attend the Special Meeting of Stockholders of IGI, Inc. (the
"Company"), to be held on Monday, August 28, 2000 at 10:00 a.m. local time
at __________ ________________, Boston, Massachusetts, and at any adjourned
sessions thereof, and there to vote and act upon the following matters in
respect of all shares of stock of the Company which the undersigned will be
entitled to vote or act upon, with all the powers the undersigned would
possess if personally present.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY PROPOSAL, THIS
PROXY WIL BE VOTED FOR SUCH PROPOSAL.
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PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Please sign this Proxy exactly as your name appears on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign and, where more
than one name appears, a majority must sign. If a corporation, this
signature should be that of an authorized officer who should state his or
her title.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_________________________________ ____________________________________
_________________________________ ____________________________________
_________________________________ ____________________________________
_________________________________ ____________________________________
(Continued and to be completed on reverse side.)
-----------
SEE REVERSE
SIDE
-----------
The Board of Directors of IGI, Inc.
Recommends a Vote "FOR" the Sale Proposal
_____________________________________________
IGI, INC.
_____________________________________________
The Sale Proposal For Against Abstain
[ ] [ ] [ ]
To approve the sale by IGI, Inc. (the "Company") to Lohmann Animal Health
International, a general partnership, of certain of the assets associated
with the Company's poultry vaccine products line of business currently
operated by the Company's Vineland Laboratories division.
Mark box at right if an address change or comment
Has been noted on the reverse side of this card. [ ]
CONTROL NUMBER:
REDORD DATE SHARES:
___________________________________________ ________
Stockholder Signature Co-Owner Signature Date
PLEASE VOTE, SIGN DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
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