<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
--------------
Date of Report (Date of earliest event reported) July 20, 1994
<TABLE>
<CAPTION>
A. L. Laboratories, Inc.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<S> <C> <C>
Delaware I-8593 22-2095212
- - ------------------------ ---------------- -------------------
(Commission (IRS Employer
(State or other File Number) Identification
jurisdiction No.)
of incorporation)
</TABLE>
- - -------------------------------------------------------------------------------
One Executive Drive, Fort Lee, New Jersey 07024
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (ZipCode)
Registrant's telephone number, including area code (201) 947-7774
--------------
Not Applicable
- - --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 21, 1994, A.L. Laboratories, Inc. (the "Company") issued two press
releases announcing that it had acquired Wade Jones Company, Inc., a Texas
corporation ("Wade Jones"), a distributor of poultry animal health products that
is also actively involved in the development, manufacture and sale of its own
line of products including animal health pharmaceuticals and feed additives.
The Company consummated the acquisition of Wade Jones by acquiring all of the
outstanding capital stock of Mikjan Corporation, an Arkansas corporation
("Mikjan"), which is the parent of Wade Jones. The Mikjan capital stock was
acquired from Mick Wagner, Jan Powell and certain charitable trusts established
by Mr. Wagner and Mr. Powell. Prior to the acquisition, Wade Jones acted as a
distributor of the Company's poultry animal health products. The Company
intends to continue to operate Wade Jones as a stand-alone business maintaining
its historic operations while expanding the scope of such operations.
The Company paid aggregate consideration of $8,219,440 as the initial
purchase price for the Mikjan capital stock, subject to a potential purchase
price adjustment for which certain amounts were retained by the Company. The
Company will pay additional consideration specified in the Stock Purchase
Agreement (defined below) in the event that regulatory approval is obtained
permitting the marketing of certain development stage products and in the event
that such products are successfully marketed by Wade Jones. The Company
obtained funds for the acquisition from a lender through a line of credit. The
identity of such lender has been filed separately with the Securities and
Exchange Commission.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
1) Report of Independent Accountants (Page F-2)
i) Mikjan Corporation Consolidated Balance Sheets as of October 2,
1993 and October 2, 1992 (Page F-3).
ii) Mikjan Corporation Consolidated Statements of Income and Retained
Earnings (Accumulated Deficit) for the years ended October 2,
1993 and October 2, 1992 (Page F-5).
iii) Mikjan Corporation Consolidated Statements of Cash Flows for the
years ended October 2, 1993 and October 3, 1992 (Page F-6).
iv) Notes to the Mikjan Corporation Consolidated Financial Statements
for the years ended October 2, 1993 and October 3, 1992 (Page F-
7).
v) Mikjan Corporation Unaudited Consolidated Condensed Balance Sheet
as of June 30, 1994 (Page F-15).
vi) Mikjan Corporation Unaudited Consolidated Statement of Income for
the three month period and nine month period ended June 30, 1994
(Page F-16).
<PAGE>
vii) Mikjan Corporation Unaudited Consolidated Condensed Statement
of Cash Flows for the nine month period ended June 30, 1994 \
(Page F-17).
viii) Notes to the Mikjan Unaudited Corporation Consolidated
Condensed Financial Statements (Page F-18).
(b) Pro Forma Financial Information.
i) A.L. Laboratories, Inc. Proforma Combined Balance Sheet for the
period ended June 30, 1994 (Page F-19).
ii) A.L. Laboratories, Inc. Proforma Combined Statement of Income for
the year ended December 31, 1993 (Page F-20).
iii) A.L. Laboratories, Inc. Proforma Combined Statement of Income for
the six months ended June 30, 1994 (Page F-21).
iv) Notes to A.L. Laboratories, Inc. Unaudited Proforma Condensed
Combined Financial Statements (Page F-22).
(c) Exhibits.
2.1 Stock Purchase Agreement, dated as of July 20, 1994, by and among
Mikjan Corporation, Wade Jones Company, Inc., Mick Wagner, Jan
Powell, the Mick Wagner Charitable Remainder Unitrust, the Jan
Powell Charitable Remainder Unitrust, A.L. Laboratories, Inc. and
G.F. Reilly, Inc. (with respect to Section 9.12 thereof only)(the
"Stock Purchase Agreement").
99.1 Press Release, dated July 21, 1994 (A.L. Laboratories, Inc.).
99.2 Press Release, dated July 21, 1994 (A.L. Laboratories, Inc. -
Animal Health Division).
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
A. L. Laboratories, Inc.
By: /s/ Jeffrey E. Smith
------------------------------
Name: Jeffrey E. Smith
Title: Executive Vice President
and Chief Financial Officer
Dated: August 4, 1994
<PAGE>
MIKJAN CORPORATION
_______
REPORT ON AUDITS OF THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended October 2, 1993 and October 3, 1992
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Mikjan Corporation
We have audited the accompanying consolidated balance sheets of Mikjan
Corporation and subsidiary (the "Company") as of October 2, 1993 and October 3,
1992, the related consolidated statements of income and retained earnings
(accumulated deficit), and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Mikjan Corporation and subsidiary as of October 2, 1993 and October 3, 1992 and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand
Tulsa, Oklahoma
December 1, 1993
F-2
<PAGE>
MIKJAN CORPORATION
CONSOLIDATED BALANCE SHEETS
As of October 2, 1993 and October 3, 1992
<TABLE>
<CAPTION>
October 2, October 3,
ASSETS 1993 1992
------ ---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 86,597 $ 138,124
Accounts and notes receivable, less
allowance for doubtful accounts of
$23,345 and $24,500, respectively
Trade 2,277,459 2,338,078
Related party 10,455 114,132
Inventories 3,144,127 2,942,472
Prepaid and other 17,217 90,847
Income tax receivable - 185,171
Future income tax benefits 100,000 100,000
---------- ----------
Total current assets 5,635,855 5,908,824
---------- ----------
Property, plant and equipment:
Land 55,689 55,689
Buildings and leasehold improvements 1,217,369 938,137
Machinery and equipment 919,980 585,641
Furniture and fixtures 316,521 300,460
Transportation equipment 590,149 464,781
---------- ----------
3,099,708 2,344,708
Less accumulated depreciation and
amortization 1,193,769 916,426
---------- ----------
1,905,939 1,428,282
---------- ----------
Other assets:
Intangible assets, net 530,897 933,813
Future income tax benefits 177,054 205,429
---------- ----------
707,951 1,139,242
---------- ----------
Total assets $8,249,745 $8,476,348
========== ==========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY October 2, October 3,
1993 1992
---------- ----------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt
and other obligations $1,080,000 $ 956,365
Accounts payable 2,652,822 3,250,826
Accrued liabilities 107,119 510,983
Accrued income taxes 418,094 -
---------- ----------
Total current liabilities 4,258,035 4,718,174
---------- ----------
Long-term debt and other obligations 3,518,215 4,300,673
Commitments and contingencies (Notes 4,
6, 7 and 9)
Stockholders' equity:
Common stock, $1 par value, 2,000
shares authorized, 500 shares issued
and outstanding 500 500
Retained earnings (accumulated deficit) 472,995 (542,999)
---------- ----------
Total stockholders' equity (deficit) 473,495 (542,499)
---------- ----------
Total liabilities and stockholders'
equity $8,249,745 $8,476,348
========== ==========
</TABLE>
F-4
<PAGE>
MIKJAN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND
RETAINED EARNINGS (ACCUMULATED DEFICIT)
For the Years Ended October 2, 1993 and October 3, 1992
<TABLE>
<CAPTION>
October 2, October 3,
1993 1992
----------- -----------
<S> <C> <C>
Sales $25,907,570 $30,102,783
Cost of sales 21,762,205 26,748,337
----------- -----------
Gross profit 4,145,365 3,354,446
Selling, general and administrative 1,531,665 1,332,351
Depreciation and amortization 761,200 716,673
----------- -----------
Operating income 1,852,500 1,305,422
Interest expense 297,235 451,814
Other (income) expense (49,301) 68,359
----------- -----------
Income before income taxes 1,604,566 785,249
Income taxes 588,572 299,534
----------- -----------
Net income 1,015,994 485,715
Accumulated deficit (542,999) (1,028,714)
----------- -----------
Retained earnings (accumulated deficit) $ 472,995 $ (542,999)
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-5
<PAGE>
MIKJAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended October 2, 1993 and October 3, 1992
<TABLE>
<CAPTION>
October 2, October 3,
1993 1992
----------- ----------
<S> <C> <C>
Net income $1,015,994 $ 485,715
Deferred income tax provision 213,546 107,174
Depreciation and amortization 853,648 813,595
Other - 1,939
Changes in assets and liabilities:
Accounts and notes receivable 164,296 565,167
Inventories (201,655) (365,354)
Prepaid and other 73,630 (265,108)
Accounts payable (598,004) 151,755
Accrued liabilities 14,230 (395,700)
---------- ----------
Cash flows provided by operating
activities 1,535,685 1,099,183
---------- ----------
Cash flows provided by (used in)
investing activities:
Acquisition of property, plant
and equipment (885,074) (375,439)
Retirement of property, plant
and equipment 49,133 700
---------- ----------
Cash flows used in investing
activities (835,941) (374,739)
---------- ----------
Cash flows provided by (used in)
financing activities:
Proceeds from issuance of debt 844,469 477,029
Payments on debt (1,595,740) (1,355,143)
---------- ----------
Cash flows provided by (used in)
financing activities (751,271) (878,114)
---------- ----------
Net decrease (51,527) (153,670)
Cash and cash equivalents,
beginning of year 138,124 291,794
---------- ----------
Cash and cash equivalents,
end of year $ 86,597 $ 138,124
========== ==========
Cash paid during the year for:
Interest $ 297,235 $ 354,892
========== ==========
Income taxes $ 44,336 $ 435,730
========== ==========
</TABLE>
Supplemental non-cash transactions:
See Note 4 regarding assignment of the option to purchase the warehouse
facility to a shareholder.
The accompanying notes are an integral part
of the consolidated financial statements.
F-6
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the consolidated accounts of Mikjan Corporation and its wholly-owned
subsidiary, Wade Jones Company, Inc. (the "Company"). All significant
intercompany accounts and transactions have been eliminated.
NATURE OF BUSINESS - The Company is a manufacturer and distributor of
various feed additives, poultry medication and antibiotics for animals. The
Company extends credit to customers throughout the United States who serve
the poultry industry.
CONCENTRATIONS OF CREDIT RISK - Assets which potentially subject the Company
to a concentration of credit risk consist primarily of accounts receivable
and cash in financial institutions in excess of the federal deposit
insurance limits of $340,000 at October 2, 1993 and $377,000 at October 3,
1992. The Company generally does not require collateral from its customers.
FISCAL YEAR - The Company's fiscal year ends on the Saturday closest to
September 30.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents. Cash equivalents are stated at cost which approximates market
value. At October 2, 1993 and October 3, 1992, cash equivalents included
repurchase agreements of $440,000 and $477,000, respectively.
INVENTORY - Inventory is stated at the lower of cost, using the weighted
average cost method, or market.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
cost and are depreciated over their estimated useful lives. Leasehold
improvements are depreciated over the shorter of the lease term or the
estimated useful lives of the improvements. Annual depreciation is
primarily computed using the straight-line method. As assets are disposed
of, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is included in income.
F-7
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
INCOME TAXES - Deferred income taxes, reflecting timing differences in
recognizing income and expenses for tax and financial reporting purposes,
relate principally to depreciation, deferred compensation and accrued
liabilities.
AMORTIZATION - A covenant not to compete was being amortized over five years
and became fully amortized in 1993. A licensing agreement and the excess of
purchase price over the net assets at the acquisition date of Wade Jones
Company of Texas, Inc., is being amortized over a period of forty years.
Amortization is computed using the straight-line method.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
October 2, October 3,
1993 1992
---------- ----------
<S> <C> <C>
Raw materials $1,062,134 $ 847,125
Work in process - 124,164
Finished goods 2,081,993 1,971,183
---------- ----------
$3,144,127 $2,942,472
========== ==========
</TABLE>
3. LONG-TERM DEBT AND OTHER OBLIGATIONS
Long-term debt and other obligations consist of the following:
<TABLE>
<CAPTION>
October 2, October 3,
1993 1992
---------- ----------
<S> <C> <C>
Note payable (A) $2,337,163 $2,712,500
Other obligations (B) 1,240,101 1,733,630
Mortgage payable, bank (C) 174,299 186,299
Note payable (D) 199,594 319,594
Capital lease obligations
(Note 4) 226,081 245,170
Installment notes (E) 420,977 59,845
---------- ----------
4,598,215 5,257,038
Less current maturities 1,080,000 956,365
---------- ----------
$3,518,215 $4,300,673
========== ==========
</TABLE>
F-8
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. LONG-TERM DEBT AND OTHER OBLIGATIONS, Continued
Aggregate annual maturities of long-term debt and other obligations at
October 2, 1993 are as follows: $1,080,000 in 1994, $983,029 in 1995,
$693,528 in 1996, $1,071,059 in 1997, $131,610 in 1998 and $638,989
thereafter.
(A) Due June, 1997; payable approximately $40,000 monthly plus interest at
prime plus 1 1/2% (7.5% currently); collateralized by accounts
receivable, inventories, equipment, intangibles and an insurance
policy on the life of a stockholder in the face amount of not less
than $1,000,000.
(B) Due by various dates from December, 1993 through February, 2003,
payable approximately $30,000 monthly through February, 1996 and then
approximately $10,000 monthly through February, 2003 including
interest at 8 1/2%, collateralized by vehicles and secondary liens on
accounts receivable and inventories to the extent these assets are not
collateral for item (A).
(C) Due November, 2002, payable approximately $2,300 monthly, including
interest at prime plus 1% (8.75% currently) and collateralized by real
estate.
(D) Due February, 1998, payable $8,000 monthly, noninterest-bearing,
imputed at 8.5%, personally guaranteed by officers and stockholders.
(E) Various installment notes with interest rates ranging from 6% to 13%
and total monthly installments ranging from approximately $19,000 in
1994 to $750 in 1998, collateralized by vehicles and equipment.
At October 2, 1993 and October 3, 1992, the unamortized debt discount
on certain obligations was $495,768 and $672,577, respectively. Included in
interest expense is the amortization of debt discount of $92,448 and $96,922
during fiscal 1993 and 1992, respectively.
F-9
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LEASES
OPERATING - During 1993, the Company assigned its option to purchase a
warehouse facility to a shareholder which was exercised by such shareholder
prior to year end. The purchase price approximated $1.1 million and the
mortgage note is guaranteed by the Company. The Company also holds a second
mortgage on the property in the event of default. The Company signed a 7-
year lease with the related party providing for payments of $13,500 per
month.
The Company also leases tractors on a daily or monthly basis. The
leases require that the Company pay all repair costs associated with these
vehicles.
Total rent expense during 1993 was $242,348 and $191,415 during 1992.
Related party rental expense as discussed above totalled $54,000 during
1993.
Future lease payments under noncancellable operating leases (including
related parties) are as follows:
<TABLE>
<CAPTION>
<S> <C>
1994 $349,358
1995 325,826
1996 300,464
1997 279,372
1998 216,623
Thereafter 270,000
</TABLE>
CAPITAL - Capital leases included in long-term debt (Note 3), are leases
covering office and warehouse facilities, which expire in 2001.
Property, plant and equipment includes the following property under
capital leases:
Land $ 28,000
Buildings 378,693
--------
406,693
Less accumulated
amortization (62,098)
--------
$ 344,595
========
F-10
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LEASES, Continued
Future minimum lease payments as of October 2, 1993, were:
<TABLE>
<CAPTION>
<S> <C>
1994 $ 34,956
1995 34,956
1996 34,956
1997 34,956
1998 34,956
Later years 113,607
--------
Future minimum lease
payments 288,387
Less amount representing
interest (62,306)
--------
Present value of future
minimum lease payments 226,081
Less current maturities (22,682)
--------
Noncurrent portion $203,399
========
</TABLE>
5. INCOME TAXES
Prior to October 3, 1992, the Company and its affiliates filed
separate federal and state income tax returns. The Company currently files
a consolidated return. The Company's income tax provision consists of the
following:
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Current provision $375,026 $192,360
Deferred tax provision 213,546 107,174
-------- --------
Total $588,572 $299,534
======== ========
</TABLE>
6. PROFIT-SHARING PLAN
The Company has a profit-sharing plan covering substantially all
employees. The Company's contributions to the plan are determined annually
by the Board of Directors. Contributions are limited to 15% of total
compensation paid participants during the plan year. Participants vest over
a period from three to seven years of service. The Company contributed
$67,503 to the Plan during fiscal 1993 and $149,325 during fiscal 1992.
F-11
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. DEFERRED COMPENSATION AGREEMENTS
The Company has deferred compensation agreements with its officers
and certain key employees providing additional compensation upon death,
disability or retirement. Contributions to the plan are made at the
discretion of management. If the Company ceases operations, the employees
interest would vest immediately. The Company made contributions of
approximately $102,000 during 1993 and $71,000 during 1992.
8. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
October 2, October 3,
1993 1992
-------------- ------------
<S> <C> <C>
Covenant not-to-compete $ 2,803,264 $ 2,803,264
Excess cost over fair value of net
assets acquired 214,472 214,472
Government registrations 278,205 240,000
Other 99,236 98,556
----------- -----------
3,395,177 3,356,292
Less accumulated amortization (2,864,280) (2,422,479)
----------- -----------
$ 530,897 $ 933,813
=========== ===========
</TABLE>
9. CONTINGENCIES
During the months of July through September 1992, the Company allowed
certain wastewater from its operations to be dumped on its parking lot. The
Company is in direct communication with all appropriate authorities and is
engaged in expedited testing and remediation. The Company presently
projects approximately $5,000 to $75,000 in future costs, for which it may
become liable, relating to this matter.
F-12
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. FUTURE ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"): "Accounting for
Income Taxes" which is effective for fiscal years beginning after December
15, 1992. SFAS No. 109 requires that deferred tax liabilities and assets be
recognized for any difference between the tax basis of assets and
liabilities and their financial reporting amounts measured by using
presently enacted tax laws and rates. The Company has not yet determined
the impact of the adoption of SFAS No. 109.
F-13
<PAGE>
MIKJAN CORPORATION
Unaudited Consolidated Financial Statements
as of and for the period ended
June 30, 1994
F-14
<PAGE>
MIKJAN CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands of dollars)
<TABLE>
<CAPTION>
June 30,
1994 October 2,
(Unaudited) 1993
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 60 $ 87
Accounts receivable, net 2,427 2,288
Inventories 3,195 3,144
Other 115 117
------ ------
Total current assets 5,797 5,636
Property, plant and equipment, net 2,323 1,906
Intangible assets 534 531
Other assets and deferred charges 177 177
------ ------
Total assets $8,831 $8,250
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 946 $1,080
Accounts payable and accrued liabilities 3,351 2,760
Accrued and deferred income taxes 171 418
------ ------
Total current liabilities 4,468 4,258
Long-term debt 3,044 3,518
Stockholders' equity:
Common Stock, $1 par value
500 shares issued 1 1
Retained earnings 1,318 473
------ ------
Total stockholders' equity 1,319 474
------ ------
Total liabilities and
stockholders' equity $8,831 $8,250
====== ======
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
F-15
<PAGE>
MIKJAN CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- ------------------
1994 1993 1994 1993
------- ------ ------- -------
<S> <C> <C> <C> <C>
Total revenue $6,463 $5,879 $19,496 $19,555
Cost of sales 5,422 4,920 16,537 16,468
------ ------ ------- -------
Gross profit 1,041 959 2,959 3,087
Selling, general and
administrative expenses 519 635 1,455 1,726
------ ------ ------- -------
Operating income 522 324 1,504 1,361
Interest expense (103) (94) (226) (191)
Other, net 1 26 1 47
------ ------ ------- -------
Income before provision
for income taxes 420 256 1,279 1,217
Provision for income taxes 138 108 434 487
------ ------ ------- -------
Net income $ 282 $ 148 $ 845 $ 730
====== ====== ======= =======
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
F-16
<PAGE>
MIKJAN CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
-----------------
1994 1993
------ -------
<S> <C> <C>
Operating Activities:
Net income $ 845 $ 730
Adjustments to reconcile net
income to net cash provided
by operating activities, principally
depreciation and amortization 324 588
Changes in assets and liabilities,
net of effects from business
acquisition:
(Increase) Decrease in accounts receivable (139) 558
(Increase) in inventory (51) (299)
(Decrease)/increase in accounts
payable and accrued expenses 344 (424)
Other (124) (23)
------- ------
Net cash provided by
operating activities 1,199 1,130
------- ------
Investing Activities:
Capital expenditures, net (618) (647)
------- ------
Net cash used in investing
activities (618) (647)
------- ------
Financing Activities:
Reduction of long-term debt (608) (573)
------- ------
Net cash used in
financing activities (608) (573)
------- ------
Decrease in Cash (27) (90)
Cash and cash equivalents at
beginning of year 87 138
------- ------
Cash and cash equivalents at
end of period $ 60 $ 48
======= ======
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
F-17
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of dollars)
1. General
-------
The accompanying consolidated condensed financial statements include all
adjustments (consisting only of normal recurring accruals) which are, in the
opinion of management, considered necessary for a fair presentation of the
results for the periods presented. These financial statements should be read in
conjunction with the financial statements of Mikjan Corporation for the years
ended October 2, 1993 and October 3, 1992 included as an exhibit to the Form 8K.
The reported results for the nine month period ended June 30, 1994 are not
necessarily indicative of the results to be expected for the full year.
F-18
<PAGE>
<TABLE>
<CAPTION>
A.L. LABORATORIES, INC.
PRO-FORMA COMBINED BALANCE SHEET
FOR THE PERIOD ENDED JUNE 30, 1994
(In thousands of dollars)
A.L.
LABORATORIES MIKJAN PRO FORMA PRO FORMA
HISTORICAL CORPORATION ADJUSTMENTS COMBINED
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,676 $ 60 $ 6,736
Accounts receivable, net 77,312 2,427 (127) (A) 79,612
Inventories 82,053 3,195 85,248
Prepaid expenses and other current assets 6,956 115 (550) (B) 6,521
----------- --------- --------- -----------
Total current assets 172,997 5,797 (677) 178,117
Property, plant and equipment, net 133,707 2,323 1,000 (C) 137,030
Intangible assets, net 113,731 534 6,280 (C) 120,545
Other assets and deferred charges 12,242 177 (1,507) (B) 10,912
----------- --------- --------- -----------
Total assets $ 432,677 $ 8,831 $ 5,096 $ 446,604
=========== ========= ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 9,560 $ 946 ($550) (B) $ 9,956
Short-term debt 61,365 0 7,719 (C) 69,084
Accounts payable and accrued expenses 54,255 3,351 373 (A),(C) 57,979
Accrued and deferred income taxes 4,090 171 4,261
----------- --------- --------- -----------
Total current liabilities 129,270 4,468 7,542 141,280
Long-term debt 77,842 3,044 (1,507) (B) 79,379
Deferred income taxes 23,797 0 380 (C) 24,177
Other non-current liabilities 9,798 0 9,798
Stockholders' equity 191,970 1,319 (1,319) (C) 191,970
----------- --------- --------- -----------
Total liabilities and stockholders' equity $ 432,677 $ 8,831 $ 5,096 $ 446,604
=========== ========= ========= ===========
</TABLE>
F-19
<PAGE>
<TABLE>
<CAPTION>
A.L. LABORATORIES, INC.
PRO-FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(In thousands, except per share data)
A.L.
LABORATORIES MIKJAN PRO FORMA PRO FORMA
HISTORICAL CORPORATION ADJUSTMENTS COMBINED
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total revenue $ 338,230 $ 25,907 $ (1,568) (D) $ 362,569
Cost of sales 207,573 21,762 (3,963) (D),(H) 225,372
------------ ---------- ---------- -----------
Gross profit 130,657 4,145 2,395 137,197
Selling, general and administrative expenses 109,733 2,292 2,809 (D),(F),(H) 114,834
------------ ---------- ---------- -----------
Operating income 20,924 1,853 (414) 22,363
Interest expense (6,598) (297) (292) (E),(G) (7,187)
Other income (expense), net 498 49 (188) (E) 359
------------ ---------- ---------- -----------
Income before provision for income taxes 14,824 1,605 (894) 15,535
Provision for income taxes 6,203 589 (220) (F), (G) 6,572
------------ ---------- ---------- -----------
Net income $ 8,621 $ 1,016 $ (674) $ 8,963
============ ========= ========== ===========
Average common shares outstanding:
Primary 21,510 21,510
Fully diluted 21,581 21,581
Earnings per share:
Primary $ 0.40 $ 0.42
Fully diluted $ 0.40 $ 0.42
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
A.L. LABORATORIES, INC.
PRO-FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(In thousands, except per share data)
A.L.
LABORATORIES MIKJAN PRO FORMA PRO FORMA
HISTORICAL CORPORATION ADJUSTMENTS COMBINED
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total revenue $ 185,370 $ 13,033 $ (771) (D) $ 197,632
Cost of sales 114,591 11,115 (1,951) (D),(H) 123,755
------------ ----------- ----------- -----------
Gross profit 70,779 1,918 1,180 73,877
Selling, general and administrative expenses 59,018 936 1,387 (D),(F),(H) 61,341
------------ ----------- ----------- -----------
Operating income 11,761 982 (207) 12,536
Interest expense (3,666) (123) (175) (E),(G) (3,964)
Other income (expense), net (64) 0 (85) (E) (149)
------------ ----------- ----------- -----------
Income before provision for income taxes 8,031 859 (467) 8,423
Provision for income taxes 3,204 295 (118) (F),(G) 3,381
------------ ----------- ----------- -----------
Net income $ 4,827 $ 564 $ (349) $ 5,042
============ =========== =========== ===========
Average common shares outstanding:
Primary 21,554 21,554
Fully diluted 21,590 21,590
Earnings per share:
Primary $ 0.22 $ 0.23
Fully diluted $ 0.22 $ 0.23
</TABLE>
F-21
<PAGE>
A.L. LABORATORIES, INC.
Notes to Unaudited Pro Forma Condensed
Combined Financial Statements
(In thousands of dollars)
1. Basis of Presentation
---------------------
The unaudited pro forma condensed combined financial statements (pro forma
financials) are presented for illustrative purposes only, giving effect to the
acquisition, as described and therefore are not necessarily indicative of the
operating results and financial position that might have been achieved had the
combination occurred as of an earlier date, nor are they necessarily indicative
of operating results and financial position which may occur in the future.
On July 21, 1994, the Company acquired the stock of the Mikjan Corporation
(hereinafter referred to as "Wade Jones Company" or "Wade Jones".) The Wade
Jones Company is a major distributor of Poultry Animal Health products with
headquarters in Lowell, Arkansas and five other facilities. In addition, Wade
Jones manufactures and blends certain Animal Health products. The purchase
agreement required a purchase price of approximately $8,200 and provides for
contingent payments based on certain product approvals.
The acquisition will be accounted for in accordance with the purchase method.
The accompanying unaudited pro forma condensed combined financial statements
reflect the acquisition as if it occurred as of the beginning of the periods
presented for the income statements and as of June 30, 1994 for the balance
sheet presented. The Wade Jones Company presently has a fiscal year which ends
on the Saturday closest to September 30. Accordingly, the pro forma financials
consolidate the results of operations for the fiscal year ended October 2, 1993
with the Company's year ended December 31, 1993 and the results of operations
for the period October 3, 1993 to March 31, 1994 with the Company's six month
results of operations as of June 30, 1994.
For the pro forma balance sheet the unaudited Wade Jones balance sheet dated
June 30, 1994 has been consolidated with the balance sheet of the Company dated
June 30, 1994.
The actual results of Wade Jones will be consolidated with the Company from
the date of acquisition.
The pro forma balance sheet includes a preliminary allocation of the purchase
price which will be adjusted during the allocation period based on a detail
review of the assets and liabilities acquired.
F-22
<PAGE>
Transactions between the Company and Wade Jones Company
- - -------------------------------------------------------
The Company and Wade Jones Company have engaged in a number of transactions
during prior years including Wade Jones distributing the Company's primary
Animal Health products to the poultry industry and blending certain of the
Company's products.
In addition the Company has provided financing to the Wade Jones Company at
market interest rates.
In preparing the pro forma financials these transactions are designated
intercompany and eliminated.
Pro Forma Adjustments Balance Sheet June 30, 1994
- - -------------------------------------------------
The unaudited pro forma balance sheet gives effect to the acquisition as if it
had been consummated on June 30, 1994.
(A) To eliminate intercompany payables and receivables of $127.
(B) To eliminate intercompany loan of $2,057. (Current portion $550.)
(C) To record the purchase of Wade Jones and record a preliminary
estimated purchase price allocation:
<TABLE>
<CAPTION>
Purchase price: Recorded as
-----------
<S> <C> <C>
Paid in cash $7,719 Short term debt
Hold back amounts 500 Accounts payable
------
8,219
Wade Jones equity @ 6/30/94 1,319
------
Amount to be allocated $6,900
======
Allocated as follows:
Property, plant & equipment $1,000
Deferred tax (380)
Intangible assets/excess
of cost over net book value 6,280
------
$6,900
======
</TABLE>
F-23
<PAGE>
Pro forma adjustments - Income statements for the year ended December 31,
-------------------------------------------------------------------------
1993 and six months ended June 30, 1994.
- - ----------------------------------------
The unaudited pro forma income statements assume the purchase as of the
beginning of each period presented. The adjustments are as follows:
<TABLE>
<CAPTION>
December June 30
31, 1993 1994
-------- -------
<S> <C> <C> <C>
(D) Sales (1,568) (771)
Cost of sales (1,163) (551)
SG&A (405) (220)
To eliminate intercompany transactions.
(E) Interest income (188) (85)
Interest expense 188 85
To eliminate interest income
to A.L. and expense to Wade Jones
(F) Depreciation expense 100 50
Tax benefit @ 38% (38) (19)
Amortization of intangibles 314 157
To record depreciation on an
estimated fixed asset write up
based on a 10 year life.
To record amortization of intangibles
based on a 20 year life.
(Both are included in selling,
general and administrative expenses.)
(G) Interest expense
@ 6.0% 1993 (480)
@ 6.5% 1994 (260)
Tax benefit @ 38% (182) (99)
To record interest expense on
assumed average borrowings of $8,000
and related tax benefit.
For each 1/4% change in interest rates
interest expense would increase/decrease
by $20.
(H) Cost of goods sold (reduction) (2,800) (1,400)
Selling general & administrative
increase 2,800 1,400
To reclassify certain expenses between
cost of goods sold and SG&A to conform
Wade Jones classifications to the Company.
</TABLE>
F-24
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Document Page
- - ------------ --------------------------------- ----
<S> <C> <C>
2.1 Stock Purchase Agreement, dated
as of July 20, 1994, by and among
Mikjan Corporation, Wade Jones
Company, Inc., Mick Wagner, Jan
Powell, the Mick Wagner
Charitable Remainder Unitrust,
the Jan Powell Charitable
Remainder Unitrust, A.L.
Laboratories, Inc. and G.F.
Reilly, Inc. (with respect to
Section 9.12 thereof only).
99.1 Press Release, dated July 21,
1994 (A.L. Laboratories, Inc.).
99.2 Press Release, dated July 21,
1994 (A.L. Laboratories, Inc. -
Animal Health Division).
</TABLE>
<PAGE>
EXHIBIT 2.1
Stock Purchase Agreement
Among
A.L. LABORATORIES, INC.,
as Purchaser,
MICK WAGNER and JAN POWELL,
collectively, as Sellers,
with respect to Section 2.7 only,
the Mick Wagner Charitable
Remainder Unitrust and the
Jan Powell Charitable Remainder Unitrust
and
MIKJAN CORPORATION and WADE JONES COMPANY, INC.,
for the Common Stock of
Mikjan Corporation
July 20, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS........................ 1
1.1 Definitions; Interpretation........................... 1
ARTICLE II
PURCHASE AND SALE OF PURCHASED SHARES; CLOSING........ 5
2.1 Stock Purchase........................................ 5
2.2 Purchase Price........................................ 5
2.3 Net Book Value Adjustment Definition and Determination 5
2.4 Environmental Escrow.................................. 6
2.5 Closing............................................... 6
2.6 Additional Consideration.............................. 6
2.7 Substituted Seller.................................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS AND THE COMPANIES...................... 8
3.1 Existence; Qualification; Subsidiaries................ 8
3.2 Authorization and Enforceability; Issuance of Shares.. 8
3.3 Capitalization........................................ 8
3.4 Private Sale; Voting Agreements....................... 9
3.5 Financial Statements.................................. 9
3.6 Absence of Certain Changes............................ 9
3.7 Litigation............................................ 10
3.8 Licenses, Compliance with Law, Other Agreements, Etc.. 10
3.9 Third-Party Approvals................................. 11
3.10 No Undisclosed Liabilities............................ 11
3.11 Tangible Assets....................................... 11
3.12 Inventory............................................. 11
3.13 Owned Real Property................................... 12
3.14 Real Property Leases.................................. 12
3.15 Customers, Distributors and Suppliers................. 12
3.16 Agreements............................................ 12
3.17 Intellectual Property................................. 13
3.18 Employees............................................. 13
3.19 Employee Benefits..................................... 14
3.20 Environmental Matters................................. 15
3.21 Notes and Accounts Receivable......................... 16
3.22 Powers of Attorney.................................... 16
3.23 Guaranties............................................ 16
3.24 Transactions With Affiliates.......................... 16
- i -
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
3.25 Tax Matters........................................... 16
3.26 Insurance............................................. 17
3.27 Product Warranty; Product Liability................... 17
3.28 Brokers............................................... 17
3.29 Disclosure............................................ 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER....... 18
4.1 Authorization and Enforceability...................... 18
4.2 Government Approvals.................................. 18
4.3 Deferred Compensation................................. 18
ARTICLE V
COMPLIANCE WITH SECURITIES LAWS ....................... 18
5.1 Investment Intent of Purchaser......................... 18
5.2 Status of Purchased Shares............................. 19
ARTICLE VI
CONDITIONS PRECEDENT................................... 19
6.1 Conditions Precedent to Purchaser's Obligations........ 19
6.2 Conditions Precedent to Obligations of the Sellers and
the Companies......................................... 20
ARTICLE VII
SURVIVAL, INDEMNIFICATION AND TAX ALLOCATION........... 20
7.1 Survival............................................... 20
7.2 Indemnification........................................ 21
7.3 Indemnification Procedure.............................. 21
7.4 Special Indemnification................................ 22
7.5 Tax Matters............................................ 22
ARTICLE VIII
NON-COMPETITION........................................ 23
8.1 Confidential Information............................... 23
8.2 Inventions and Patents................................. 23
8.3 Non-Competition........................................ 23
ARTICLE IX
GENERAL PROVISIONS..................................... 24
- ii -
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
9.1 Successors and Assigns................................. 24
9.2 Entire Agreement....................................... 24
9.3 Notices................................................ 24
9.4 Amendment and Waiver................................... 26
9.5 Counterparts........................................... 26
9.6 Headings............................................... 26
9.7 Specific Performance................................... 26
9.8 Remedies Cumulative.................................... 26
9.9 Governing Law.......................................... 26
9.10 No Third Party Beneficiaries........................... 26
9.11 Severability........................................... 26
9.12 Supersedence........................................... 26
- iii -
<PAGE>
TABLE OF CONTENTS
(Continued)
Exhibit A.1 Certified Articles of Incorporation of Mikjan
Exhibit A.2 Certified Articles of Incorporation of the Company
Exhibit B.1 Certified Bylaws of Mikjan
Exhibit B.2 Certified Bylaws of the Company
Exhibit C.1 Form of Wagner Employment Agreement
Exhibit C.2 Form of Powell Employment Agreement
Exhibit D Financial Statements
Exhibit E Opinion of Counsel
- iv -
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "AGREEMENT") dated as of July 20, 1994 among
Mick Wagner ("WAGNER"), Jan Powell ("POWELL" and together with Wagner, the
"SELLERS"), Wade Jones Company, Inc., a Texas corporation (the "COMPANY"),
Mikjan Corporation, an Arkansas corporation ("MIKJAN"), the Mick Wagner
Charitable Remainder Unitrust (the "Wagner Trust"), the Jan Powell Charitable
Remainder Unitrust (the "Powell Trust" and, together with the Wagner Trust, the
"Trusts") and A.L. Laboratories, Inc. (the "PURCHASER"). Mikjan and the Company
are sometimes referred to herein as the "COMPANIES".
The Purchaser desires to purchase from the Sellers, and the Sellers desire
to sell to the Purchaser, all of the issued and outstanding Common Stock, par
value $1.00 per share, of Mikjan (the "PURCHASED SHARES").
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS; INTERPRETATION.
(a) For purposes of this Agreement, the following terms have the indicated
meanings:
"AFFILIATE" means (i) any shareholder, officer, director or employee of
Mikjan or the Company or any Subsidiary of either of them, (ii) any individual
related by blood, marriage or adoption to any shareholder, officer, director or
employee of Mikjan or the Company or any Subsidiary of either of them or (iii)
any Person in which any of the foregoing owns a beneficial interest.
"ANADA" means Abbreviated New Animal Drug Applications filed with the FDA.
"COMPANIES' ARTICLES OF INCORPORATION" means the Articles of Incorporation
of each of Mikjan and the Company as in effect on the date hereof, certified
copies of which are set forth as EXHIBIT A.1 and EXHIBIT A.2, respectively,
hereto.
- 1 -
<PAGE>
"COMPANIES' BYLAWS" means the Bylaws of each of Mikjan and the Company as
in effect on the date hereof, certified by the Secretary of Mikjan and the
Company, respectively, and set forth as EXHIBIT B.1 and EXHIBIT B.2,
respectively, hereto.
"COMMON STOCK" means the Common Stock of Mikjan, par value $1.00 per share.
"CLOSING" has the meaning set forth in Section 2.4.
"CLOSING BALANCE SHEET" has the meaning ascribed thereto in Section 2.3(c)
hereof.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CURRENT BALANCE SHEET" means the unaudited balance sheet of Mikjan dated
June 30, 1994.
"EMPLOYMENT AGREEMENTS" means those certain employment agreements, dated as
of the date hereof, between the Company and each of Wagner and Powell in the
forms of Exhibits C.1 and C.2 hereto, respectively.
"ENVIRONMENTAL, HEALTH AND SAFETY REQUIREMENTS" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transport, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any hazardous or otherwise
regulated materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or by-
products, asbestos, polychlorinated biphenyls, noise or radiation.
"ENVIRONMENTAL LIEN" shall mean a Lien, either recorded or unrecorded, in
favor of any governmental entity, relating to any Liability of the Companies
arising under Environmental, Health and Safety Requirements.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING ENVIRONMENTAL VIOLATIONS" means any event, condition or
occurrence referenced in that certain letter dated April 25, 1994 from the
United States Justice Department to the Company regarding settlement of certain
claims related to the Clean Water Act violations and Resource Conservation and
Recovery Act violations cited therein.
- 2 -
<PAGE>
"EXISTING ENVIRONMENTAL VIOLATIONS LIABILITIES" means any liability, loss,
cost or expense of whatsoever kind (including, without limitation, settlement
amounts, fines, civil monetary penalties and the like) arising from any Existing
Environmental Violation.
"FDA" means the United States Food and Drug Administration.
"FINANCIAL STATEMENTS" means (i) the audited balance sheet of Mikjan dated
October 2, 1993 and the related audited statements of income, changes in
shareholders' equity and cash flow for the twelve-month periods then ended and
(ii) the unaudited balance sheet of Mikjan dated June 30, 1994 and the Current
Balance Sheet and the related unaudited statements of income, changes in
shareholders' equity and cash flow for, respectively, the twelve-month and six-
month periods then ended, all of which are attached as EXHIBIT D hereto.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"GOVERNMENTAL AGENCY" means any federal, state, local, foreign or other
governmental agency, instrumentality, commission, authority, board or body.
"GROSS PROFIT" means, with respect to any product for any period, net sales
of such product (gross sales net of returns, freight, customary insurance and
other applicable selling and shipping related costs) for such period less
----
manufacturing costs allocable to such product, as determined in accordance with
GAAP consistently applied.
"INADA" means Investigational New Animal Drug Applications filed with the
FDA.
"INCLUDES" and "INCLUDING" mean includes and including, without limitation.
"INTELLECTUAL PROPERTY" means all patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not reduced
to practice); all trademarks, service marks, trade dress, trade names and
corporate names and all goodwill associated therewith; all copyrights; all
registrations, applications and renewals for any of the foregoing; all product
formulations, trade secrets, confidential information, ideas, know-how,
production processes and techniques, research information, drawings,
specifications, designs, plans, improvements, technical and computer data,
documentation and software, financial, business and marketing plans, customer
and supplier lists and related information and all other proprietary rights; and
all copies and tangible embodiments of the foregoing.
"IRS" means the Internal Revenue Service.
"LIABILITY" means any liability or obligation (whether absolute or
contingent, liquidated or unliquidated or due or to become due).
- 3 -
<PAGE>
"LIEN" means any lien, mortgage, pledge, security interest, restriction,
charge or other similar encumbrance.
"MATERIAL ADVERSE CHANGE" means any material adverse change in the
business, condition (financial or otherwise), results of operations, prospects
or customer, distributor or supplier relations of Mikjan or the Company.
"MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the
business, condition (financial or otherwise), results of operations, prospects
or customer, distributor or supplier relations of Mikjan or the Company or (ii)
the transactions contemplated hereby or by the Related Documents.
"NADA" means New Animal Drug Applications filed with the FDA.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past practice (including with respect to quantity, quality and
frequency).
"PERMITTED LIENS" means (i) liens for taxes not yet due and taxes for which
adequate provision is made in the Current Balance Sheet, (ii) purchase money
security interests in supplies and equipment, (iii) precautionary liens filed by
lessors with respect to leased equipment and (iv) encumbrances which are not
substantial in amount, do not materially detract from the value of the property
subject thereto and do not materially impair the use of the property subject
thereto or the operation of the Companies' business.
"PERSON" means any individual, partnership, joint venture, corporation,
trust, unincorporated organization or other entity.
"PLAN" means any (i) employee benefit plan (as defined in Section 3(3) of
ERISA), whether or not funded or terminated, (ii) employment agreement or (iii)
personnel policy, fringe benefit plan, program or arrangement, whether or not
subject to ERISA, funded or terminated, including any stock bonus, deferred
compensation, pension, severance, bonus, incentive and health, life, disability
or other welfare plan.
"POST-CLOSING TAX PERIOD" shall mean any Tax period (or portion thereof)
beginning after the Closing Date.
"PRE-CLOSING TAX PERIOD" shall mean any Tax period (or portion thereof)
ending on or before the Closing Date.
"PURCHASED SHARES" has the meaning set forth in the recitals hereto.
- 4 -
<PAGE>
"RELATED DOCUMENTS" means all documents and instruments to be executed by
either of the Sellers or either of the Companies in connection herewith,
including the Employment Agreements and the Wagner Lease.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBSIDIARY" of any Person means any corporation, partnership, association
or other business entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or (ii) if a partnership, association or other business entity, a
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by such Person. For
purposes hereof, such Person shall be deemed to have a majority ownership
interest in a partnership, association or other business entity if such Person,
directly or indirectly, is allocated a majority of partnership, association or
other business entity gains or losses, or is or controls the managing director
or general partner of such partnership, association or other business entity.
"TAX RETURNS" means all returns (including information returns),
declarations, reports, estimates and statements, regarding Taxes, required to be
filed under any United States federal, state or local law or any foreign law.
"TAXES" means all taxes, charges, fees, levies or other assessments,
including all net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupation, property or other taxes, customs
duties, fees, assessments or charges of any kind whatsoever, whether disputed or
not, together with any interest and any penalties, additions to tax or
additional amounts imposed by any Governmental Agency.
"WAGNER LEASE" means the lease between the Company and Wagner and Mabel
Wagner, dated as of July 1, 1993 as amended, regarding certain real property
located in Benton County, Arkansas.
(b) The words "HEREIN", "HEREOF" and "HEREUNDER" refer to this Agreement
as a whole and not to any particular article, section or other subdivision
of this Agreement.
- 5 -
<PAGE>
ARTICLE II
PURCHASE AND SALE OF PURCHASED SHARES; CLOSING
2.1 STOCK PURCHASE. Pursuant to the terms and conditions set forth in
this Agreement, and subject to the terms of Section 2.7 below, on the Closing
Date, Purchaser will purchase from each of Wagner and Powell and each of Wagner
and Powell will sell and transfer to Purchaser all of the Purchased Shares owned
by them as set forth on Schedule 2.1 attached hereto, free and clear of all
liens, charges, security interests and other encumbrances. Any amounts payable
to the Sellers pursuant to this Agreement shall be paid to each of Wagner and
Powell in the proportion that is equal to their respective pro rata ownership of
the Purchased Shares as reflected on Schedule 2.1 hereto.
2.2 PURCHASE PRICE. (a) The total purchase price to be paid to the
Sellers at Closing (the "Preliminary Purchase Price") will be $8,219,440 paid
--------------------------
as follows: (i) $150,000 of the Preliminary Purchase Price (the "Holdback")
--------
shall be retained by the Purchaser, (ii) $350,000 of the Preliminary Purchase
Price (together with any interest earned thereon, the "Environmental Escrow
--------------------
Amount") shall be retained by the Purchaser and (iii) $7,719,440 of the
- - ------
Preliminary Purchase Price (the "Cash Amount") shall be paid to the Sellers at
-----------
the Closing in immediately available funds. The Preliminary Purchase Price
shall be subject to adjustment as provided in Sections 2.2(b) and 2.3 below.
The Holdback will be available to satisfy any amounts payable to the Purchaser,
if any, pursuant to the Net Book Value Adjustment described in Section 2.2(b).
The Environmental Escrow Amount shall be available to satisfy any amounts
payable to the Company or any Indemnified Party (as defined in Section 7.2
hereof) pursuant to the special indemnification provisions set forth in Section
7.4 hereof. The Preliminary Purchase Price as adjusted pursuant to Sections
2.2(b) and 2.3 below is referred to herein as the "Purchase Price."
--------------
(b) As soon as practicable (but in no event later than ten days) after the
final determination of the Net Book Value Adjustment pursuant to Section 2.3
below, the Sellers shall pay to the Purchaser or the Purchaser shall pay to the
Sellers, as applicable, an amount equal to the Net Book Value Adjustment, if
any. Any amounts payable to the Purchaser pursuant to this Section 2.2(b) shall
first be paid from the Holdback amount, and any amount owing to the Purchaser in
excess of the Holdback amount (referred to herein as an "Excess Amount Owed to
---------------------
the Purchaser") shall be paid by the Sellers by wire transfer of immediately
- - -------------
available funds to an account specified by the Purchaser, together with an
amount equal to the interest on such Excess Amount Owed to the Purchaser at a
rate of 8% per annum (calculated from and including the Closing Date to and
including the date of payment of such Excess Amount Owed to the Purchaser based
on a 365 day year). Any amount owed to the Sellers as a result of the Net Book
Value Adjustment together with the Holdback amount or any excess of the Holdback
over the amounts to be received by the Purchaser pursuant to this Section 2.2(b)
(referred to herein as an "Excess Amount Owed to the Sellers") shall be paid to
---------------------------------
the Sellers by wire transfer of immediately available funds to such accounts as
is specified by the Sellers. Any Excess Amount Owed to the Sellers shall
- 6 -
<PAGE>
be paid together with an amount equal to the interest on such Excess Amount Owed
to the Sellers at a rate of 8% per annum (calculated from and including the
Closing Date to and including the date of payment of such Excess Amount Owed to
the Sellers based on a 365 day year).
2.3 NET BOOK VALUE ADJUSTMENT DEFINITION AND DETERMINATION.
(a) Net Book Value Definition. "Net Book Value" at any given time shall
------------------------- --------------
be equal to the excess of the consolidated assets of the Companies over the
consolidated liabilities of the Companies calculated in accordance with GAAP
applied on a basis consistent with the Current Balance Sheet at such time.
(b) Net Book Value Adjustment Definition. The "Net Book Value Adjustment"
------------------------------------ -------------------------
shall be equal to the amount, if any, by which the Net Book Value, as reflected
on the Closing Balance Sheet (the "Closing Date Net Book Value") is less than or
---------------------------
exceeds $1,319,440.
(c) Procedure for Determining the Net Book Value Adjustment. For the
-------------------------------------------------------
purpose of determining the Net Book Value Adjustment, within sixty days after
the Closing Date, the Purchaser will prepare or cause to be prepared in
accordance with GAAP, will cause Coopers and Lybrand to audit and will deliver
to the Sellers, the consolidated balance sheet as of July 22, 1994 (the "Closing
-------
Balance Sheet") and the related statements of income and cash flow for the
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period from the date of the Current Balance Sheet through the Closing Date (the
"Closing Financial Statements"), which will also set forth the Purchaser's
----------------------------
determination of the Closing Date Net Book Value and the Net Book Value
Adjustment, if any. Within five working days after the Purchaser's delivery of
its determination of the Closing Date Net Book Value and the Net Book Value
Adjustment the Sellers will deliver a detailed statement describing their
objections (if any) to the Purchaser's determination of the Closing Date Net
Book Value and the Net Book Value Adjustment. The Purchaser and the Sellers
will use reasonable efforts to resolve any disputes regarding the determination
of the Closing Date Net Book Value and the Net Book Value Adjustment. If a
final resolution of the Closing Date Net Book Value and the Net Book Value
Adjustment is not obtained within 30 days after the Sellers have delivered their
statement of objections, any remaining disputes will be resolved by an
independent accounting firm mutually acceptable to the Purchaser and the Sellers
(any accounting firm so selected or agreed upon shall be referred to as the
"Selected Accounting Firm"). The resolution of the remaining disputes, (and the
- - -------------------------
resulting determination of the Closing Date Net Book Value and the Net Book
Value Adjustment by the Selected Accounting Firm) will in each case be conducted
in accordance with the terms hereof and will be conclusive and binding upon the
parties. The fees and expenses of the Selected Accounting Firm shall be split
equally between the Purchaser and Sellers. In the event that the Net Book Value
Adjustment is negative (reflecting a decrease in the Net Book Value) Sellers
shall pay such amount to Purchaser in accordance with Section 2.2(b) above. In
the event that the Net Book Value Adjustment is positive (reflecting an increase
in Net Book Value) the Purchaser shall pay such amount (together with the
Holdback amount) to the Sellers in accordance with Section 2.2(b) above. In the
event that there is no Net
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Book Value Adjustment, Purchaser will pay to Sellers, within the time period
specified in Section 2.2(b) above the entire Holdback amount.
2.4 ENVIRONMENTAL ESCROW. The Environmental Escrow Amount shall be
available for and used to reimburse the Company and any Indemnified Party for
any amounts expended by any such Person in connection with any Existing
Environmental Violations Liabilities. Any amount remaining from the
Environmental Escrow Amount after all federal, state and local claims of any
nature relating to the Existing Environmental Violations have been settled or
otherwise satisfied , to the satisfaction of the Purchaser in its sole
discretion, will be paid over to the Sellers by the Purchaser.
2.5 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Kirkland & Ellis,
-------
153 East 53rd Street, New York, New York at 5:30 p.m. on July 20, 1994, or at
such other location, date or time as is mutually agreed upon by Purchaser and
Sellers. The date and time of the Closing are herein referred to as the
"Closing Date."
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2.6 ADDITIONAL CONSIDERATION.
(a) In the event that the FDA grants approval for the Company to market
the water soluble penicillin product (the "New Product") which is the
subject of INADA #200-122 (the "NADA #200-122 Approval"), the Purchaser will
pay to the Sellers as additional purchase price for the Purchased Shares the
amount of $500,000. Such amount will be paid in immediately available
funds, to such accounts as are specified by the Sellers, within thirty
calendar days following the unconditional grant of the NADA #200-122
Approval.
(b) In addition to the amount payable pursuant to Section 2.6(a) above,
the Company shall pay to the Sellers an amount which is equal to 40% of the
gross profit attributable solely to the New Product during each of the
calendar years (each an "ANNIVERSARY YEAR") ending on the second, third and
fourth anniversary of the date on which the first commercial sale of the New
Product occurs. The Purchaser shall provide written notice to each of the
Sellers of the first commercial sale of the New Product within 15 business
days following such sale. The gross profit attributable to the New Product
shall be determined by the Company in accordance with GAAP, consistently
applied, and shall be binding upon Wagner, Powell and the Purchaser absent
manifest error. Amounts due to the Sellers pursuant to this Section 2.6(b)
shall be paid by the Purchaser with respect to gross profits attributable to
sales of the New Product in the preceding Anniversary Year within 30
calendar days following the end of such Anniversary Year.
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2.7 SUBSTITUTED SELLER.
(a) Prior to the Closing, Wagner will transfer a portion of the Purchased
Shares held by him to the Wagner Trust and Powell will transfer a portion of
the Purchased Shares held by him to the Powell Trust. Pursuant to the terms
of this Agreement each of the Trusts shall convey to the Purchaser all
Purchased Shares held by such trust as of the Closing.
(b) Each of the Trusts shall receive a pro rata amount of the Preliminary
Purchase Price that is equal to such trust's pro rata ownership of the
Purchased Shares, subject to reduction for such trust's pro rata share of
the Holdback and Environmental Escrow Amount. Each of the Trusts shall also
receive a pro rata amount of any Excess Amount Owed to the Sellers and any
additional consideration payable by Purchaser pursuant to Section 2.6
hereof equal to such trusts's pro rata ownership of the Purchased Shares.
All amounts paid to the Trusts pursuant to this Section 2.7 shall be paid
directly to the Trusts as the Sellers shall direct the Purchaser in writing.
(c) The Trusts shall not be deemed to be Sellers for the purposes of the
warranties, representations or covenants made by the Sellers hereunder;
provided that the Trusts shall be liable for the Sellers' warranties,
representations and covenants hereunder to the extent, but only to the
extent, of the Trusts' pro rata portion of the Holdback and Environmental
Escrow Amount.
(d) Each Trust hereby severally represents and warrants to the Purchaser
that all of the Purchased Shares owned by such trust and transferred to the
Purchaser hereby, (i) have been duly authorized and when delivered in
accordance with the terms of this Agreement will be validly issued and
outstanding, fully paid and nonassessable, (ii) are owned by such trust and
may be transferred by such trust pursuant to the terms hereof free and clear
of all liens, charges, security interests and other encumbrances and such
trust has full power and authority, and has taken all necessary action to
permit such trust, to execute this Agreement and to make such transfer. In
no event shall the liability of either of the Trusts for breaches of
representations or warranties made by such trust herein exceed the amount
paid to such trust pursuant to this Section 2.7.
(e) Nothing contained in this Section 2.7 shall affect the warranties,
representations or covenants of the Sellers hereunder with respect to all of
the issued and outstanding common stock of Mikjan or this transaction.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS AND THE COMPANIES
Each of the Sellers and the Companies jointly and severally hereby
represents and warrants to the Purchaser as follows:
3.1 EXISTENCE; QUALIFICATION; SUBSIDIARIES. Each of the Companies is a
corporation duly organized, validly existing and in good standing under the laws
of the State of its incorporation and has full corporate power and authority to
conduct its business and own and operate its properties as now conducted, owned
and operated. The copies of the Companies' Articles of Incorporation and the
Companies' Bylaws are true, correct and complete copies of such documents.
Except as set forth on SCHEDULE 3.1, neither of the Companies is required to be
licensed or qualified as a foreign corporation in any jurisdiction, and each of
the Companies is so licensed or qualified and is in good standing in each
jurisdiction set forth on SCHEDULE 3.1. The Company has no Subsidiaries and
owns no capital stock or other securities of, and has not made any other
investment in, any other entity. Mikjan has no Subsidiaries other than the
Company and the Company is a wholly owned Subsidiary of Mikjan. Other than its
ownership of the capital stock of the Company, Mikjan has no operations,
conducts no business, has no employees and owns no other assets, nor has Mikjan
ever had any operations, conducted any business, had any employees or owned any
assets other than the ownership of the capital stock of the Company and the
Company's predecessors.
3.2 AUTHORIZATION AND ENFORCEABILITY; ISSUANCE OF SHARES.
(a) Each of the Sellers and each of the Companies has full power and
authority and has taken all required corporate and other action necessary to
permit such person to execute and deliver this Agreement and each the
Related Documents to which such person is a party and to carry out the terms
hereof and thereof and to deliver the Purchased Shares, and none of such
actions will violate any provision of the Companies' Articles of
Incorporation, the Companies' Bylaws, or of any applicable law, regulation,
order, judgment or decree, or result in the breach of or constitute a
default (or an event which, with notice or lapse of time or both would
constitute a default) under any agreement, instrument or understanding to
which any of the Sellers or the Companies is a party or by which any of them
is bound. This Agreement and each of the Related Documents, as applicable,
constitutes a legal, valid and binding obligation of each of the Sellers and
each of the Companies, enforceable against each of them, as applicable, in
accordance with its terms.
(b) The Purchased Shares have been duly authorized and when delivered in
accordance with this Agreement, will be validly issued and outstanding,
fully paid and nonassessable.
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Except as set forth on SCHEDULE 3.2, the sale and delivery of the Purchased
Shares is not subject to any right of first refusal or other similar right
in favor of any Person.
3.3 CAPITALIZATION. As of the Closing, (i) the authorized capital stock
of Mikjan shall consist of 2,000 shares of Common Stock, of which 500 shares are
issued and outstanding and (ii) the authorized capital stock of the Company
shall consist of 20,000 shares of common stock, par value $10.00 per share of
which 8,160 shares are issued and outstanding. All of the outstanding capital
stock of the Companies is validly issued, fully paid and nonassessable and has
been issued in compliance with all applicable securities laws. As of the
Closing, there shall be no existing options, convertible securities, warrants,
calls, pledges, transfer restrictions (except restrictions imposed by federal
and state securities laws), liens, rights of first offer, rights of first
refusal, antidilution provisions or commitments of any character relating to any
issued or unissued shares of capital stock of Mikjan or the Company other than
as set forth on SCHEDULE 3.3.
3.4 PRIVATE SALE; VOTING AGREEMENTS. Neither Mikjan nor the Company has
violated any applicable federal or state securities laws in connection with the
offer, sale and issuance of any of its capital stock. Subject to the accuracy
of Purchaser's representations contained herein, other than obtaining a formal
exemption from the Arkansas Securities Department, the offer, sale and issuance
of the Purchased Shares hereunder does not require registration under the
Securities Act or any state securities laws. Except as set forth in SCHEDULE
3.4, to the best of the Sellers' and each of the Companies' knowledge, there are
no agreements of any shareholders of Mikjan with respect to the voting or
transfer of shares of its capital stock.
3.5 FINANCIAL STATEMENTS. The Financial Statements (together with the
notes thereto, as applicable), (i) are true, correct and complete in all
material respects, (ii) are in accordance with the books and records of the
Companies and (iii) fairly present the financial condition and results of
operations of the Companies as of the dates and for the periods indicated, in
accordance with GAAP except that the unaudited Financial Statements for the
period ending June 30, 1994, do not contain footnotes and are subject to normal
year-end audit adjustments.
3.6 ABSENCE OF CERTAIN CHANGES.
(a) Except as set forth on SCHEDULE 3.6, since October 2, 1993, neither of
the Companies has:
(i) incurred any Liabilities other than current Liabilities
incurred, or obligations under contracts entered into, in the Ordinary
Course of Business and for individual amounts not greater than $5,000;
(ii) paid, discharged or satisfied any claim, Lien or Liability,
other than any claim, Lien or Liability (A) reflected or reserved
against on the Current Balance Sheet and paid, discharged or satisfied
in the Ordinary Course of Business since the date of the Current
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Balance Sheet or (B) incurred and paid, discharged or satisfied since
the date of the Current Balance Sheet, in each case in the Ordinary
Course of Business;
(iii) sold, leased, assigned or otherwise transferred any of its
assets, tangible or intangible (other than sales of inventory in the
Ordinary Course of Business and for a fair consideration and use of
supplies in the Ordinary Course of Business);
(iv) permitted any of its assets, tangible or intangible, to
become subject to any Lien (other than any Permitted Lien);
(v) written off as uncollectible any accounts receivable other
than in the Ordinary Course of Business and for amounts not greater than
$5,000;
(vi) terminated or amended, suffered the termination or
amendment of, failed to perform in all material respects all of its
obligations or suffered or permitted any material default to exist
under, any material agreement, license or permit;
(vii) suffered any damage, destruction or loss of tangible
property (whether or not covered by insurance) which in the aggregate
exceeds $10,000;
(viii) made any loan (including any intercompany advance) to any
other Person (other than advances to employees in the Ordinary Course of
Business which do not exceed $1,000 individually or $5,000 in the
aggregate;
(ix) cancelled, waived or released any debt, claim or right in
an amount exceeding $10,000 or otherwise of substantial value;
(x) paid any amount to or entered into any agreement,
arrangement or transaction with any Affiliate outside the Ordinary
Course of Business;
(xi) declared, set aside, or paid any dividend or distribution
with respect to its capital stock or redeemed, purchased or otherwise
acquired any of its capital stock;
(xii) entered into any transaction with any of its directors,
officers or employees outside the Ordinary Course of Business;
(xiii) granted any increase outside the Ordinary Course of
Business in the compensation of any officer or employee or made any
other change in employment terms of any officer or employee;
(xiv) suffered any labor difficulty;
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(xv) made any change in any method of accounting or accounting
practice;
(xvi) suffered or caused any other occurrence, event or
transaction outside the Ordinary Course of Business which could have a
Material Adverse Effect; or
(xvii) agreed, in writing or otherwise, to any of the foregoing.
(b) Except as set forth on SCHEDULE 3.6, since October 2, 1993 there
has been no Material Adverse Change.
3.7 LITIGATION. Set forth on SCHEDULE 3.7 is a list and description of
all claims, suits, proceedings or investigations pending or, to the knowledge of
the Sellers or the Companies, threatened against or affecting either of the
Companies, any officer or director thereof or either of the Companies' business.
Except as set forth on SCHEDULE 3.7, no such claim, suit, proceeding or
investigation, could have a Material Adverse Effect or a material adverse effect
on the ability of any officer or director to participate in the affairs of the
Companies, and neither the Sellers nor the Companies know of any basis for any
such claim, suit, proceeding or investigation.
3.8 LICENSES, COMPLIANCE WITH LAW, OTHER AGREEMENTS, ETC.
(a) Set forth on SCHEDULE 3.8 is a list of, and except as set forth on
such schedule, each of the Companies (i) has, all necessary franchises,
permits, licenses and other rights (including regulatory approvals such as
INADAs, ANADAs and NADAs) to allow it to conduct its business and is not in
violation of any order or decree of any court, or of any law, order or
regulation of any Governmental Agency, or of the provisions of any contract
or agreement to which it is a party or by which it is bound, and neither
this Agreement or the Related Documents nor the transactions contemplated
hereby or thereby will result in any such violation and (ii) is in
compliance with all representations (such as master file descriptions) that
have been made to governmental regulatory officials (whether foreign or
domestic) and upon which the compliance status of products made or sold by
the Companies are based. Except as set forth on SCHEDULE 3.8, the Company's
business has been conducted in compliance with all federal, state and local
laws, ordinances, rules and regulations except where such violations,
defaults or noncompliance in the aggregate would not have a Material Adverse
Effect.
(b) None of the Sellers nor the Companies is aware of any facts (i)
which could furnish the basis for a recall, withdrawal or suspension of any
approved new animal drug application (an ANADA or NADA) or other pre-market
product notification or approval, or any investigatory new animal drug
application (an INADA) or other application for exemption from pre-market
approval by the FDA or any other governmental regulatory agency (foreign or
domestic) or (ii) which might otherwise cause either of the Companies to
withdraw any product sold by it as of the date hereof from the market or to
change the marketing
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classification of any such product or to terminate or suspend clinical
testing of any such product (including, without limitation, with respect to
each of the foregoing clauses (i) and (ii), any pending or threatened safety
or efficacy hearing with respect to a product not required to have obtained
any such pre-market approval); except for such recalls, withdrawals,
suspensions, changes in marketing, terminations or pending or threatened
efficacy hearings which would not, individually or in the aggregate, have a
Material Adverse Effect.
(c) The Company has all rights in and to the soluble tetracycline
products TET-SOL 324 and SOLU-TET 324 and all FDA approvals and other
Governmental Agency approvals applicable thereto.
(d) The Company has taken all necessary actions and obtained all
necessary approvals, acknowledgements and clarifications to transfer to the
Company any INADAs, ANADAs or NADAs which were at any time held in the
Company's fictitious name "Arkansas Micro-Specialties."
3.9 THIRD-PARTY APPROVALS. Except as set forth on SCHEDULE 3.9, neither
the Sellers nor the Companies are required to obtain any order, consent,
approval or authorization of, or to make any declaration or filing with, any
Governmental Agency or other third party (including under any state securities
or "blue sky" laws) in connection with the execution and delivery of this
Agreement or any of the Related Documents, or the consummation of the
transactions contemplated hereby or thereby to occur on the date of the Closing.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE 3.10,
the Companies have no Liabilities except (i) as and to the extent of the amounts
reflected or reserved against on the Current Balance Sheet and (ii) liabilities
and obligations incurred in the Ordinary Course of Business since the date
thereof.
3.11 TANGIBLE ASSETS. Except as set forth on SCHEDULE 3.11, the
Companies own or lease all tangible assets used or reasonably necessary in
connection with the conduct of their business. Except as set forth on SCHEDULE
3.11, each such tangible asset is free from any Liens (other than Permitted
Liens), is free from any material defects, has been maintained in accordance
with normal industry practice and any regulatory standard or procedure to which
it is subject, is in good operating condition and repair (subject to normal wear
and tear) and is suitable for the purposes for which it is used or proposed to
be used.
3.12 INVENTORY. Except as set forth on SCHEDULE 3.12, all supply and
finished product inventory of the Company, whether reflected on the Current
Balance Sheet or otherwise, consist of a quality and quantity usable or salable
in the Ordinary Course of Business.
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3.13 OWNED REAL PROPERTY. Each of the Companies has, or, in the case
of any real property to be acquired by either of the Companies pursuant to any
option held by either of the Companies, will, upon acquisition of such real
property, have, good record and marketable title to each parcel of real property
owned by it. None of the real property owned by the Companies is, nor will any
real property acquired by the Companies pursuant to any option after such
acquisition be subject to any Lien, except for Permitted Liens.
3.14 REAL PROPERTY LEASES. Set forth on SCHEDULE 3.14 is a list of all
agreements pursuant to which real property is leased to the Companies (a copy of
each applicable lease has been delivered to the Purchaser). Except as set forth
on SCHEDULE 3.14, there exists no material event of default (nor any event which
with notice or lapse of time would constitute a material event of default) with
respect to any such agreement by any party thereto. Except as set forth on
SCHEDULE 3.14, all such agreements are in full force and effect and enforceable
against the lessor in accordance with their terms.
3.15 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. Set forth on SCHEDULE 3.15
is a list of the names and addresses of the ten largest customers (in dollar
amount) of the Companies' direct product sales, the distributors that
distributed in aggregate 75% (in dollar amount) of the Companies' products
distributed, and the ten largest suppliers (in dollar amount) of the Companies'
inventory (raw material and finished product), in each case since January 1,
1993. The Companies have not lost and have not been notified that either of
them will lose (i) any direct customer or any group of direct customers or any
distributor or group of distributors (whether related or unrelated) which
accounted for more than 10% of the aggregate sales of the Company's products
since January 1, 1993, or (ii) any supplier which accounted for more than 10% of
the aggregate supplies or equipment purchased by Seller since January 1, 1993.
3.16 AGREEMENTS.
(a) Set forth on SCHEDULE 3.16(A) is a list of each agreement,
arrangement or understanding to which either of the Companies is a party (a
copy or, if oral, a description of each of which has been delivered to the
Purchaser):
(i) for the lease of personal property from or to third parties
providing for annual lease payments to any single lessor or from any
single lessee in excess of $5,000;
(ii) for the purchase, distribution or sale of supplies,
products or other personal property or for the furnishing or receipt of
information or services, in each case calling for performance over a
period of more than one year or involving more than $5,000;
(iii) concerning any partnership or joint venture;
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(iv) under which it has created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $5,000 or pursuant to
which a Lien is or may be imposed on any of its assets, tangible or
intangible;
(v) concerning confidentiality or noncompetition;
(vi) with any director, officer or employee and involving
employment or severance;
(vii) the consequences of a default or termination of which
could have a Material Adverse Effect;
(viii) otherwise involving more than $5,000 or not entered into
in the Ordinary Course of Business; and
(ix) otherwise material to the Company's business.
(b) Except as set forth on SCHEDULE 3.16(B) neither of the Companies is
in default, to the knowledge of the Sellers or the Companies there is no
basis for any valid claim of default, and no event has occurred which, with
notice or lapse of time, would constitute a default, under any agreement,
arrangement or understanding set forth on SCHEDULE 3.16(A) and, except as
set forth on SCHEDULE 3.16(B), to the knowledge of the Sellers or the
Companies, no other Person is in default under any such agreement. No
defaults set forth on SCHEDULE 3.16(B), either individually or in the
aggregate, could have a Material Adverse Effect.
3.17 INTELLECTUAL PROPERTY.
(a) Set forth on SCHEDULE 3.17(A) is a list of all (i) patented and
registered Intellectual Property and pending patent applications and
applications for the registration of Intellectual Property, in each case
owned by either of the Companies; (ii) trade or corporate names used by
either of the Companies; (iii) computer software and databases created or
used by either of the Companies; (iv) material unregistered trademarks and
copyrights owned or used by either of the Companies; and (v) licenses and
other rights granted by either of the Companies to any third party or by any
third party to either of the Companies, in each case with respect to
Intellectual Property.
(b) Except as set forth on SCHEDULE 3.17(B), (i) each of the Companies
owns or has a valid license to use all Intellectual Property necessary for
the operation of its business as currently conducted or proposed to be
conducted, free and clear of any Liens or adverse claims; (ii) no claim by
any third party contesting the validity, enforceability, ownership or use of
any of the Intellectual Property owned or used by either of the Companies
has been
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made, is currently outstanding or is threatened, and there are no grounds
for the same; (iii) the loss or expiration of any individual Intellectual
Property right or related group of Intellectual Property rights owned or
used by either of the Companies would not have a Material Adverse Effect,
and no such loss or expiration is threatened, pending or reasonably
foreseeable; (iv) neither the Sellers nor the Companies have received any
notice of, is aware of any facts which indicate a likelihood of, any
infringement or misappropriation by, or conflict with, any third party with
respect to the Intellectual Property owned or used by either of the
Companies; (v) neither of the Companies has infringed, misappropriated or
otherwise conflicted with any Intellectual Property or other proprietary
right of any third party, and neither the Sellers nor the Companies is aware
of any infringement, misappropriation or conflict which will occur as a
result of the continued operation of its business as currently conducted or
proposed to be conducted and (vi) the Companies have taken all necessary
action to maintain and protect the Intellectual Property owned or used by
them and will continue to maintain and protect such Intellectual Property so
as not to affect adversely the validity or enforceability of such
Intellectual Property.
3.18 EMPLOYEES.
(a) Except as set forth on SCHEDULE 3.18, since March 31, 1993 no key
employees and no group of employees has terminated, or to the knowledge of
the Sellers or the Companies plans to terminate, employment with either of
the Companies. Neither of the Companies is a party to or bound by any
collective bargaining agreement, nor has it experienced any strike,
grievance, claim of unfair labor practice or other collective bargaining
dispute. To the knowledge of the Sellers or the Companies there is no
organizational effort being made or threatened by or on behalf of any labor
union with respect to its employees. Since March 31, 1993, neither of the
Companies have committed any unfair labor practice or materially violated
any federal, state or local law or FOR THE PERIOD ENDED JUNE 30, 1994
regulation regulating employers or the terms and conditions of its
employees' employment, including laws regulating employee wages and hours,
employment discrimination, employee civil rights, equal employment
opportunity and employment of foreign nationals. Set forth on SCHEDULE 3.18
is a list and summary description of all agreements between either of the
Companies and any employee thereof.
3.19 EMPLOYEE BENEFITS.
(a) Set forth on SCHEDULE 3.19 is a list of all Plans contributed to,
maintained or sponsored by either of the Companies, to which either of the
Companies is obligated to contribute or with respect to which either of the
Companies has any liability or potential liability, whether direct or
indirect, including all Plans contributed to, maintained or sponsored by a
member of a controlled group of companies, within the meaning of Section 414
of the Code (or with respect to which any such controlled group member has
any direct or indirect liability or potential liability), of which either of
the Companies is or was a
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member, to the extent either of the Companies has any liability or potential
liability with respect to such Plan.
(b) The Companies have no obligation to contribute to and no liability
or potential liability (including actual or potential withdrawal liability)
with respect to any "MULTIEMPLOYER PENSION PLAN", as such term is defined in
Section 3(37) of ERISA, or with respect to any employee benefit plan of the
type described in Section 4063 and 4064 of ERISA or in Section 413(c) of the
Code (and the regulations promulgated thereunder).
(c) None of the Plans is an employee pension benefit plan (as defined
in Section 3(2) of ERISA). The Companies do not contribute to and do not
have any liability or potential liability with respect to any Plan which
provides health, life insurance, accident or other "welfare-type" benefits
to current or future retirees or former employees or their spouses or
dependents, other than in accordance with Section 4980B of the Code or
applicable state continuation coverage law.
(d) None of the Plans obligates the Companies to pay separation,
severance, termination or similar benefits solely as a result of any
transaction contemplated by this Agreement or by the Related Documents.
(e) Each Plan and insurance contract has been maintained, funded and
administered in compliance in all material respects with its terms and all
applicable laws and regulations, including ERISA and the Code. The
Companies have complied with all applicable reporting and disclosure
requirements with respect to each Plan. Neither the Companies nor
administrator of any Plan nor other Person has engaged in any transaction
with respect to any Plan which could subject either of the Companies, the
Purchaser or any trustee or administrator of such Plan, or any party dealing
with such Plan, to any tax or penalty (civil or otherwise) imposed by ERISA
or the Code. No actions, suits, investigations or claims with respect to
the Plans (other than routine claims for benefits) or with respect to any
fiduciary or other person dealing with any Plan are pending or threatened
and, to the knowledge of Sellers or the Companies, there are no facts which
could give rise to or be expected to give rise to any such actions, suits,
investigations or claims.
(f) With respect to each Plan, the Companies have provided the
Purchaser with copies, to the extent applicable, of all documents pursuant
to which the Plans are maintained, funded and administered, and the most
recent IRS Form 5500 filed with respect to each Plan.
3.20 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 3.20, the Companies have complied
and are in compliance with all Environmental, Health and Safety
Requirements.
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(b) The Companies have obtained and complied with, and are in compliance
with, all permits, licenses and other authorizations that may be required
pursuant to Environmental, Health and Safety Requirements for the occupation
of their facilities and the operation of their business and such permits,
licenses and other authorizations may be relied upon for continued lawful
operation of the business of the Companies on and after the Closing without
transfer, reissuance, or other governmental approval or action.
(c) Neither the Sellers nor the Companies have received any claim,
complaint, citation, report or other written or oral notice regarding any
Liabilities, including any investigatory, remedial or corrective
obligations, arising under Environmental, Health and Safety Requirements.
(d) None of the following exists at any property owned or occupied by
either of the Companies:
1. Underground storage tanks or surface impoundments;
2. Asbestos-containing material in any form or condition; or
3. Materials or equipment containing polychlorinated biphenyls.
(e) No facts, events or conditions relating to the past or present
facilities, properties or operations of either of the Companies will
prevent, hinder or limit continued compliance with Environmental, Health and
Safety Requirements, give rise to any investigatory, remedial or corrective
obligations pursuant to Environmental, Health and Safety Requirements, or
give rise to any other Liabilities, including investigatory, remedial or
corrective obligations, pursuant to Environmental, Health and Safety
Requirements, including without limitation any relating to onsite or offsite
releases or threatened releases of hazardous or otherwise regulated
materials, substances or wastes, personal injury, property damage or natural
resources damage.
(f) Neither this Agreement nor the transaction that is the subject of
this Agreement imposes any obligations for site investigation or cleanup, or
notification to or consent of government agencies or third parties, pursuant
to any so-called "transaction triggered" Environmental and Safety
Requirement.
(g) The Companies have not, either expressly or by operation of law,
assumed or undertaken any liability or corrective or remedial obligation of
any other Person relating to Environmental, Health and Safety Requirements.
(h) No Environmental Lien has attached to any property owned, leased or
operated by either of the Companies.
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3.21 NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
of the Companies are reflected properly on the books and records of the
Companies, are current (according to the Companies' historical practices) and
valid receivables subject to no Liens (other than Permitted Liens), setoffs or
counterclaims. Uncollectible accounts receivable do not exceed by more than 2%
the reserve for bad debts set forth on the face of (and not in the notes to) the
Current Balance Sheet. Each of the Companies' aggregate reserves are, and have
been historically, approximately 2% of aggregate outstanding receivables.
3.22 POWERS OF ATTORNEY. Except as set forth on SCHEDULE 3.22, there
are no outstanding powers of attorney executed on behalf of either of the
Companies.
3.23 GUARANTIES. Except as set forth on SCHEDULE 3.23, neither of the
Companies is a guarantor and is not otherwise liable for any Liability
(including indebtedness) of any other Person.
3.24 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE
3.24, neither of the Companies has entered into any agreement, arrangement or
transaction with any Affiliate within the past twelve months, and other than the
property subject to the Wagner Lease, none of the Affiliates owns any property
or right, tangible or intangible, which is used in the Companies' business.
3.25 TAX MATTERS.
(a) Each of the Companies has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all material
respects. All Taxes owed by either of the Companies (whether or not shown on
any Tax Return) have been paid. Neither of the Companies is currently the
beneficiary of any extension of time within which to file any Tax Return. No
claim has been made by an authority in a jurisdiction where either of the
Companies does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction. There are no security interests on any of the assets of
either of the Companies that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) The Companies have withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party.
(c) Neither of the Sellers nor any director nor any officer (or employee
responsible for Tax matters) of the Companies expects any authority to assess
any additional Taxes for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax liability of the Companies
either (i) claimed or raised by any authority in writing or (ii) as to which any
of the Sellers and the directors and officers (and employees responsible for Tax
matters) of the Companies has knowledge based upon personal contact with any
agent of such authority. SCHEDULE 3.25(C) attached hereto lists all federal,
state, local, and foreign income Tax Returns filed
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with respect to the Companies for taxable periods ended on or after March 31,
1986, indicates any Tax Returns that have been audited, and indicates any Tax
Returns that currently are the subject of an audit. The Purchaser has received
correct and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by the
Companies since December 31, 1988.
(d) Neither of the Companies has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) Neither of the Companies has filed a consent under Code Sec. 341(f)
concerning collapsible corporations. Neither of the Companies has made any
payments, is not obligated to make any payments, nor is a party to any agreement
that under certain circumstances could obligate it to make any payments that
will not be deductible under Code Sec. 280G. Neither of the Companies has been
a United States real property holding corporation within the meaning of Code
Sec. 897(c)(2) during the applicable period specified in Code Sec.
897(c)(1)(A)(ii). The Companies have disclosed on their federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Sec. 6662.
Neither of the Companies is a party to any Tax allocation or sharing agreement
outside of the Company's present consolidated reporting group. The Company (i)
has not been a member of an Affiliated Group filing a consolidated federal
income Tax Return (other than a group the common parent of which was Mikjan) and
(ii) has no Liability for the Taxes of any Person (other than Mikjan and its
Subsidiaries) under Treas. Reg. (S) 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
(f) SCHEDULE 3.25(F) attached hereto sets forth the following
information with respect to each of the Companies as of the most recent
practicable date: (i) the basis of the Companies in their assets, (ii) the
amount of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable to the
Companies and (iii) the amount of any deferred gain or loss allocable to either
of the Companies arising out of any deferred intercompany transaction.
(g) The unpaid Taxes of the Companies (i) did not as of the date of the
Current Balance Sheet exceed the provision for Tax liability (rather than any
provision for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the Current Balance Sheet (rather
than in any notes thereto) and (ii) do not exceed that provision as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Companies in filing its Tax Returns.
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3.26 INSURANCE. Set forth on SCHEDULE 3.26 is a list and summary
description of all policies (including scope, duration and amount of coverage)
of fire, liability, product liability, worker's compensation, health and other
forms of insurance currently in effect with respect to the Companies, their
business and assets. All such policies are in full force and effect and
enforceable in accordance with their terms. The coverage provided by such
policies is of such types and in such amounts as are customary for corporations
of similar size engaged in similar lines of business and complies with the
requirements of the real property leases listed on SCHEDULE 3.14.
3.27 PRODUCT WARRANTY; PRODUCT LIABILITY. Each product manufactured,
sold, or distributed by the Companies has been in material conformity with all
applicable contractual commitments and all express and implied warranties. The
ingredients contained in the Companies' products is acceptable by the current
standards promulgated by the Food and Drug Administration and all other
applicable governmental regulations. Historically, liability for replacement or
refunds of products sold or distributed by the Companies has not exceeded, in
the aggregate, 0% of the Companies' sales on a monthly basis. Except as set
forth on SCHEDULE 3.27, no product manufactured, sold or distributed by the
Companies is subject to any guaranty, warranty or other indemnity. There is no
existing liability, claim or obligation arising from or alleged to arise from
any actual or alleged injury to persons or property as a result of the
ownership, possession or use of any product manufactured, sold or distributed by
the Companies.
3.28 BROKERS. Except as set forth on SCHEDULE 3.28, neither the
Sellers nor either of the Companies is obligated to pay, nor has retained any
broker or finder or other person who is entitled to, any broker's or finder's
fee or any other commission or financial advisory fee in connection with the
transactions contemplated hereby or by the Related Documents. Neither of the
Companies nor the Purchaser shall be liable for the payment of any fee or
commission set forth on SCHEDULE 3.28.
3.29 DISCLOSURE. Neither this Agreement, nor any Related Document, nor
any written statement made by any of the Sellers or the Companies in connection
herewith or therewith, or the transactions contemplated hereby or thereby
contains any untrue statement of any material fact or omits to state any
material fact necessary in order to make the statements contained herein or
therein complete and not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers and the Companies
as follows:
4.1 AUTHORIZATION AND ENFORCEABILITY. The Purchaser has taken all
action necessary to permit it to execute and deliver this Agreement and the
other documents and instruments to be executed by it pursuant hereto and to
carry out the terms hereof and thereof. This Agreement and each such other
document and instrument, when duly executed and delivered by the Purchaser, will
constitute a valid and binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with its terms.
4.2 GOVERNMENT APPROVALS. To the best of the Purchaser's knowledge, the
Purchaser is not required to obtain any order, consent, approval or
authorization of, or to make any declaration or filing with, any Governmental
Agency in connection with the execution and delivery of this Agreement and the
other documents and instruments to be executed by it pursuant hereto or the
consummation of the transactions contemplated hereby and thereby.
4.3 DEFERRED COMPENSATION. The Sellers have provided the Purchaser with
the agreements between the Company and certain employees of the Company and
copies of the life insurance policies, each set forth on Schedule 4.3 hereto,
regarding deferred compensation arrangements with such employees (collectively,
the "Deferred Compensation Plan"). Purchaser hereby agrees to maintain the
--------------------------
Deferred Compensation Plan in effect in accordance with the terms thereof
existing on the date hereof until such time as the Deferred Compensation Plan is
replaced with one or more alternative plans providing no less favorable benefits
to such employees.
The parties acknowledge that the provisions of this Section 4.3 are
solely for the benefit of the parties and are not intended to create rights in
any Person as a third party beneficiary hereunder. The parties further agree
that the determination regarding whether an alternative plan or plans provide
benefits which are no less favorable to the employees participating in the
Deferred Compensation Plan shall be made by the board of directors of the
Company, in good faith, and shall be binding for all purposes.
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ARTICLE V
COMPLIANCE WITH SECURITIES LAWS
5.1 INVESTMENT INTENT OF PURCHASER. The Purchaser represents and
warrants to the Sellers and the Companies that it is acquiring the Purchased
Shares for its own account, with no present intention of selling or otherwise
distributing the same to the public.
5.2 STATUS OF PURCHASED SHARES. The Purchaser has been informed by
Mikjan that the Purchased Shares have not been and will not be registered under
the Securities Act or under any state securities laws and are being offered and
sold in reliance upon federal and state exemptions for transactions not
involving any public offering.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. The obligations of
the Purchaser to consummate the transactions contemplated hereby are subject to
satisfaction (or written waiver) at or prior to the Closing of the following
conditions:
(a) Each Person with a right of first offer with respect to the
Purchased Shares shall have waived such right in form and substance
satisfactory to the Purchaser;
(b) The Purchaser shall be satisfied with the results of its due
diligence review of the Companies;
(c) The representations and warranties of the Sellers, the Trusts and
the Companies contained herein and in any writing delivered pursuant hereto
shall be true and correct when made and at and as of the time of the
Closing;
(d) No action, suit, investigation or proceeding shall be pending or
threatened before any court or Governmental Agency to restrain, prohibit,
collect damages as a result of or otherwise challenge this Agreement or any
Related Agreement or any transaction contemplated hereby or thereby;
(e) All acts or covenants required hereunder to be performed by any of
the Sellers, the Trusts or the Companies prior to the Closing shall have
been fully performed by such Person;
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<PAGE>
(f) The Companies shall have made all filings and received all consents,
approvals, permits and authorizations set forth on SCHEDULE 3.9, all of
which shall be in form and substance satisfactory to the Purchaser;
(g) No Material Adverse Change shall have occurred between October 2,
1993 and the date of the Closing and none of the Sellers nor the Companies
shall know of any set of facts which could result in a Material Adverse
Change;
(h) Each of the Sellers shall have entered into their respective
Employment Agreement with the Company;
(i) The Purchaser shall have received the written opinion of Davis Cox
& Wright, counsel for the Sellers and the Companies, in the form of EXHIBIT
E hereto;
(j) Mikjan and the Company shall have delivered to the Purchaser:
(i) certificates of a duly authorized officer of each of the
Companies dated as of the Closing Date (A) stating that the conditions
set forth in clause (a) and clauses (c) through (g) have been satisfied
and (B) setting forth the resolutions of the boards of directors of
Mikjan and the Company authorizing the execution and delivery of this
Agreement and the Related Documents, as applicable, and the consummation
of the transactions contemplated hereby and thereby and certifying that
such resolutions were duly adopted and have not been rescinded or
amended;
(ii) certified copies of the Companies' Articles of Incorporation
and the Companies' Bylaws, each as in effect as of the Closing; and
(iii) such other documents relating to the transactions
contemplated hereby as the Purchaser may reasonably request.
(k) The Company shall have settled all matters pending with any United
States federal agency or department regarding Environmental, Health and
Safety Requirement violations occurring before the Closing Date and such
settlement or settlements shall be acceptable to the Purchaser in its sole
discretion.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS AND THE
COMPANIES. The obligations of the Sellers and the Companies hereunder are
subject to satisfaction (or written waiver) at or prior to the Closing of the
following conditions:
(a) The representations and warranties of the Purchaser contained
herein and in any writing delivered pursuant hereto shall be true and
correct when made and at and as of the Closing;
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(b) All acts or covenants required hereunder to be performed by the
Purchaser at or prior to the Closing shall have been fully performed;
(c) All Persons with a right of first offer with respect to the
Purchased Shares shall have waived such right in form and substance
satisfactory to the Purchaser; and
(d) Each of the Sellers shall have entered into their respective
Employment Agreement with the Company.
ARTICLE VII
SURVIVAL, INDEMNIFICATION AND TAX ALLOCATION
7.1 SURVIVAL. Notwithstanding any examination made by or on behalf of
the Purchaser, the knowledge of any of its officers, directors, stockholders,
employees or agents, or the acceptance of any certificate or opinion, all
representations, warranties, covenants and agreements set forth in this
Agreement or in any writing delivered in connection with this Agreement shall
survive the Closing and, subject to the provisions of the following sentence,
shall be fully effective and enforceable until the fifth anniversary of this
Agreement. Notwithstanding the foregoing, the representations and warranties
set forth in (a) Sections 3.2, 3.3 and 3.20 shall survive indefinitely and (b)
Sections 3.19 and 3.25 shall survive until 30 days after the expiration of any
applicable statute of limitations.
7.2 INDEMNIFICATION.
Sellers jointly and severally agree to indemnify the Purchaser and any
of its officers, directors, stockholders, successors and assigns (the foregoing
persons, other than Sellers, are referred to individually as an "Indemnified
-----------
Party" and collectively as the "Indemnified Parties") and hold them harmless
- - ----- -------------------
against any loss, liability, deficiency, damage or expense (including legal
expenses and costs) (collectively, "Expenses") which any Indemnified Party may
--------
suffer, sustain or become subject to, as a result of (i) the breach by Sellers
or the Companies of any representation or warranty made by Sellers or the
Companies in this Agreement or in the Related Agreements or other document
executed in connection with the transactions contemplated hereby, (ii) the
breach by Sellers or the Companies of any covenant or agreement made by Sellers
or the Companies contained in this Agreement or any Exhibit or Schedule hereto,
(iii) any claims of any brokers or finders claiming by, through or under Sellers
or the Companies, (iv) any payments, including, without limitation, any
retroactive premium payments required to be made for workmen's compensation
insurance relating to the pre-Closing period in excess of amounts shown as a
provision for such payments on the Current Balance Sheet, and (v) the breach by
Sellers or the Company of any representation or warranty made by Sellers or the
Company in Section 3.20 of this Agreement, including without limitation those
arising from any fact, event or condition, which gives
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rise to any liability or corrective or remedial obligation under Environmental,
Health and Safety Requirements, whether or not disclosed to Buyer prior to the
Closing Date (whether on Schedule 3.20 or any other schedule to this Agreement,
by reference in Schedule 3.20 or otherwise) or identified by the Purchaser or
its agents or representatives through their due diligence investigations prior
to the Closing Date. In no event shall Mikjan, the Company or any Subsidiary of
either of them have any liability whatsoever for any breaches of the
representations and warranties of the Sellers or the Companies, and Sellers
shall in no event seek contribution from the Companies for any such breaches or
in respect of any other payments required to be made by Sellers pursuant to this
Agreement.
7.3 INDEMNIFICATION PROCEDURE.
(a) If an Indemnified Party seeks indemnification pursuant to Section
7.2, such party shall give written notice to the Sellers of the facts and
circumstances giving rise to the claim. Any Indemnified Party asserting a right
of indemnification provided for under this Agreement in respect of, arising out
of or involving a claim or demand made by any person, firm, governmental
authority or corporation against the Indemnified Party (a "Third Party Claim")
-----------------
shall notify the indemnifying party (the "Indemnifying Party") in writing of
------------------
such Third Party Claim. As part of such notice, the Indemnified Party shall
furnish the Indemnifying Party with copies of any pleadings, correspondence or
other documents relating thereto that are in the Indemnified Party's possession;
provided that, nothing in the foregoing shall preclude an Indemnified Party from
asserting any applicable privilege against disclosure with respect to such
material. The Indemnified Party's failure to notify the Indemnifying Party of
any such claim shall not release the Indemnifying Party, in whole or in part,
from its obligations under Section 7.2 to indemnify such Indemnified Party with
respect to such Third Party Claim except to the extent that the Indemnifying
Party's ability to defend against such claim is actually prejudiced thereby.
The Indemnifying Party shall have the right to elect to assume and control the
defense of any such Third Party Claims provided such Indemnifying Party
expressly acknowledges in writing its obligation to indemnify the Indemnified
Party. If the Indemnifying Party elects to assume and control the defense of the
Third Party Claim, the Indemnified Party shall have the right to employ counsel
separate from counsel employed by such Indemnifying Party in any such action and
to participate in the defense thereof. The fees and expenses of such counsel
employed by the Indemnified Party shall be at the expense of the Indemnified
Party unless (i) the employment thereof has been specifically authorized by such
Indemnifying Party in writing, (ii) the Indemnifying Party has failed to assume
the defense and employ counsel or the Indemnifying Party or its counsel has
failed to provide an adequate defense to such claim in a timely manner or (iii)
one or more of the Indemnifying Parties are a party to such claim and the
Indemnified Party has additional or separate defenses, or there is otherwise a
conflict of interest between the Indemnified Party and any Indemnifying Party,
then, in any such case, the fees and expenses of the Indemnified Party's Counsel
shall be paid by the Indemnifying Party. If the Indemnifying Party does not
elect to assume and control the defense of the Third Party claim, the
Indemnifying Party shall have the right to employ counsel separate from counsel
employed by such Indemnified Party in such action and to participate in the
defense thereof. The fees and
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expenses of such counsel employed by the Indemnifying Party shall be at the
expense of the Indemnifying Party.
(b) The foregoing provisions of this Article VII are in addition to, and
not in derogation of, any statutory or common law remedy any party may have for
misrepresentation, breach of warranty or breach of covenant.
7.4 SPECIAL INDEMNIFICATION. In addition to the provisions of Section
7.2 and 7.3 above, Wagner and Powell jointly and severally agree to indemnify
Mikjan, the Company and the Indemnified Parties and hold them harmless against
any Expenses which any of them may suffer, sustain or become subject to, as a
result of any and all Existing Environmental Violations Liabilities. In no
event shall Mikjan, the Company or any of their Subsidiaries have any liability
whatsoever for any Existing Environmental Violations Liabilities and neither
Wagner nor Powell shall seek contribution from Mikjan, the Company or any of
their Subsidiaries for any such liability or in respect of any payments made by
the Sellers in connection with any such liability.
7.5 TAX MATTERS. The following provisions shall govern the allocation
of responsibility as between the Purchaser and Sellers for certain Tax matters:
(a) Tax Returns Due After the Closing Date. The Purchaser will be
--------------------------------------
responsible for the preparation and filing of all Tax Returns for the Companies
for all Tax periods as to which returns are due after the Closing Date. Sellers
shall pay to the Purchaser within fifteen (15) days of the date on which each
such Tax Return is filed an amount equal to the excess, if any, of (i) the Taxes
shown on such Tax Return that are allocable to the Pre-Closing Tax Period over
(ii) the sum of such Taxes actually paid on or prior to the Closing Date plus
----
any provision for such Taxes shown on the Closing Balance Sheet. For purposes
of this Section 7.4(a), in the case of any Taxes that are payable for a period
that includes, but does not end on, the Closing Date, the Tax shown on such Tax
Return that are allocable to the Pre-Closing Tax Period shall be equal to the
product of (A) the total Taxes shown on such Tax Return multiplied by (B) a
fraction, the numerator of which is the Companies' taxable income or alternative
minimum taxable income, if any, for the portion of the Tax Period ending on the
Closing Date, and the denominator of which is the Companies' taxable income or
alternative minimum taxable income, if any, for the entire Tax period. The
Purchaser shall permit Sellers to review and comment on each such Tax Returns
described in this Section 7.4(a).
(b) Retention of Records. Each of the Purchaser, Sellers and the
--------------------
Companies will provide the other party (as well as its counsel and accountants)
such cooperation and information, as well as reasonable access during normal
business hours to such personnel and books, records and other data, as the other
party reasonably may require to facilitate (i) its preparation of Tax Returns
pursuant to this Section 7.4, (ii) its preparation for audit or administrative
or judicial review of Tax Returns, or (iii) its investigation, litigation and
final disposition of any claims of any nature concerning Taxes relating to the
operations of the Companies during the Pre-Closing Tax Period.
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Each party requesting such cooperation, information or access shall reimburse
the party furnishing access for its reasonable out-of-pocket expenses. The
Purchaser, the Companies and Sellers shall retain all books, records and other
data pertaining to Tax matters (including, without limitation, all Tax Returns,
schedules and work papers), and all material records and other documents
relating thereto for all open Pre-Closing Tax Periods until the expiration of
the statute of limitations (and, to the extent notified by Purchaser or Sellers,
any extensions thereof) of the respective Tax periods to which such Tax Returns
and other documents relate.
(c) Transfer Taxes. Sellers shall pay any transfer Taxes imposed as a
--------------
result of the purchase and sale of the Purchased Shares pursuant to this
Agreement (irrespective of whether such transfer Taxes are required to be
capitalized).
(d) Other Actions of Sellers. Sellers shall not take any action or
------------------------
allow any action to be taken, including, without limitation, by the Companies
which would cause the Companies to cease being a member of the Companies'
affiliated group prior to the Closing Date.
ARTICLE VIII
NON-COMPETITION
8.1 CONFIDENTIAL INFORMATION. Each Seller acknowledges that the
information, observations and data relating to the business of Mikjan and the
Company which each Seller has obtained as an employee, officer, director and
stockholder of Mikjan and/or the Company or will obtain during the course of his
association with the Company (whether prior to or subsequent to the date of this
Agreement) are the property of Mikjan or the Company (as the case may be). Each
Seller agrees that he will not use for his own purposes or disclose to any third
party any of such information, observations or data without the prior written
consent of the board of directors of Mikjan or the Company (as the case may be),
unless and to the extent that the aforementioned matters become generally known
to and available for use by the public other than as a result of such Seller's
acts or omissions to act. Each Seller agrees to deliver to Mikjan or the
Company at any time either of them may request, all memoranda, notes, plans,
records and other documentation (and copies thereof) relating to the business of
Mikjan or the Company which such Seller may then possess or have under his
control.
8.2 INVENTIONS AND PATENTS. Each Seller agrees that all inventions,
innovations or improvements in Mikjan's or the Company's method of conducting
their businesses (including new contributions, improvements, ideas and
discoveries, whether patentable or not) conceived or made by him while an
employee, officer, director or stockholder of Mikjan or the Company belong to
Mikjan or the Company (as the case may be).
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<PAGE>
8.3 NON-COMPETITION.
(a) Each Seller agrees that from and after the Closing Date and ending
on the fifth anniversary of the Closing Date (the "Non-Competition Period"), he
will not, directly or indirectly, either for himself or for any other person,
partnership, corporation or company, permit his name to be used by or
participate in any business or enterprise identical to or similar to any such
business which is engaged in by Mikjan or the Company as of the date of this
Agreement and which is located in any jurisdiction in which Mikjan or the
Company conducts business, or plans to conduct business as of the date of this
Agreement. For purposes of this Agreement, the term "participate" includes any
direct or indirect interest in any enterprise, whether as an officer, director,
employee, partner, sole proprietor, agent, representative, independent
contractor, consultant, franchisor, franchisee, creditor, owner or otherwise;
provided that the term "participate" shall not include ownership of less than
two percent of the stock of a publicly-held corporation in the over-the-counter
market. Each Seller agrees that this covenant is reasonable with respect to its
duration, geographical area and scope and acknowledges that the Purchaser would
not purchase the Purchased Shares without the benefit of this covenant.
(b) During the Non-Competition Period, neither Seller shall (i) induce
or attempt to induce any employee of Mikjan or the Company to leave their employ
or in any way interfere with the relationship between Mikjan or the Company and
any of their employees or (ii) induce or attempt to induce any supplier,
licensee, licensor, franchisee, or other business relation of Mikjan or the
Company to cease doing business with them or in any way interfere with the
relationship between Mikjan or the Company and any customer or business relation
thereof.
(c) The parties hereto agree that Mikjan and the Company would suffer
irreparable harm from a breach by either Seller of any of the covenants or
agreements contained herein.
(d) If, at the time of enforcement of any of the provisions of Section
8.3, a court holds that the restrictions stated therein are unreasonable under
the circumstances then existing, the parties hereto agree that the maximum
period, scope or geographical area reasonable under such circumstances will be
substituted for the stated period, scope or area.
ARTICLE IX
GENERAL PROVISIONS
9.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns,
including each subsequent holder of the Purchased Shares. Except as otherwise
specifically provided herein, this Agreement shall not be assignable by any
party without the prior written consent of the other parties hereto.
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9.2 ENTIRE AGREEMENT. This Agreement and the other writings referred
to herein or delivered pursuant hereto constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
arrangements or understandings.
9.3 NOTICES. All notices, requests, consents and other communications
provided for herein shall be in writing and shall be deemed to have been
delivered (i) when delivered if delivered in person, (ii) upon confirmation by
the receiving telecopier if transmitted by telecopy, (iii) one day following
dispatch if sent by reputable overnight carrier, fees prepaid, or (iii) three
days following dispatch if sent by first-class registered or certified mail,
postage prepaid, to the recipient at the address or telecopy number set forth
below, or such other address or telecopy number as may hereafter be designated
in writing by such recipient.
(a) If to Mikjan or the Company:
Highway 71 North
P.O. 309
Lowell, Arkansas 72745
Telecopy: (800) 433-0311
Attention: President
with a copy to:
Davis, Cox & Wright
P.O. Drawer 1688
Fayetteville, AR 72702-1688
Telecopy: (501) 521-7661
Attention: Wm. Jackson Butt II, Esq.
(b) If to Wagner:
126 Woodcliff Road
Springdale, Arkansas 72764
with a copy to:
Davis, Cox & Wright
P.O. Drawer 1688
Fayetteville, AR 72702-1688
Telecopy: (501) 521-7661
Attention: Wm. Jackson Butt II, Esq.
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(c) If to Powell:
406 East Main Street
Albertville, Alabama 35950
with a copy to:
Davis, Cox & Wright
P.O. Drawer 1688
Fayetteville, AR 72702-1688
Telecopy: (501) 521-7661
Attention: Wm. Jackson Butt II, Esq.
(d) If to the Purchaser:
A.L. Laboratories, Inc.
One Executive Drive
P.O. Box 1399
Fort Lee, NJ 07024
Telecopy: (201) 592-1481
Attention: David E. Cohen, President,
Animal Health Division and
Beth P. Hecht, Corporate Counsel & Secretary
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Telecopy: (212) 446-4900
Attention: Frederick Tanne, Esq.
9.4 AMENDMENT AND WAIVER. No amendment of any provision of this
Agreement shall be effective, unless the same shall be in writing and signed by
the Sellers, the Companies and the Purchaser. Any failure of the Sellers or the
Companies to comply with any provision hereof may only be waived in writing by
the Purchaser and any failure of the Purchaser to comply with any provision
hereof may only be waived in writing by the Sellers. No such waiver shall
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. No failure by any party to take any action against any breach of this
Agreement or default by any other party shall constitute a waiver of such
party's right to enforce any provision hereof or to take any such action.
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9.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one agreement.
9.6 HEADINGS. The headings of the various sections of this Agreement
have been inserted for reference only and shall not be deemed to be a part of
this Agreement.
9.7 SPECIFIC PERFORMANCE. The Sellers and the Companies acknowledge
that money damages would not be a sufficient remedy for any breach by any of
them of this Agreement and agree that the Purchaser shall be entitled to
specific performance and injunctive relief as remedies for any such breach.
9.8 REMEDIES CUMULATIVE. Except as otherwise provided herein, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by any party hereto of any other rights or the seeking of any other
remedies against any other party hereto.
9.9 GOVERNING LAW. THE CORPORATE LAW OF ARKANSAS SHALL GOVERN ALL
ISSUES CONCERNING THE RELATIVE RIGHTS OF MIKJAN AND ITS SHAREHOLDERS. ALL OTHER
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS
AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY THE
INTERNAL LAW OF THE STATE OF NEW JERSEY, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW JERSEY OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW JERSEY.
9.10 NO THIRD PARTY BENEFICIARIES. Except as specifically set forth or
referred to herein, nothing herein is intended or shall be construed to confer
upon any person or entity other than the parties hereto and their successors or
assigns, any rights or remedies under or by reason of this Agreement.
9.11 SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
9.12 SUPERSEDENCE. The parties acknowledge that G.F. Reilly Company
("REILLY") (a wholly owned subsidiary of the Purchaser), the Company, Mikjan,
Wagner and Powell are parties to that certain Option Agreement, dated as of
October 2, 1992, which provides for, among other things, Reilly's right to
purchase 100% of the shares of capital stock of Mikjan at any time during the
period commencing on July 1, 1994 and ending on July 1, 1997, on the terms and
conditions set forth in the Option Agreement. The parties hereto acknowledge
that this Agreement is in substitution of the Option Agreement and the parties'
rights thereunder and agree that upon
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execution of this Agreement and consummation of the transactions contemplated
hereby the Option Agreement shall terminate and be of no further force or
effect.
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MIKJAN CORPORATION
By:
-----------------------------------
Name:
Title:
WADE JONES COMPANY, INC.
By:
-----------------------------------
Name:
Title:
A.L. LABORATORIES, INC.
By:
-----------------------------------
Name:
Title:
----------------------------------------
Mick Wagner
----------------------------------------
Jan Powell
Solely with respect to the provisions of
Section 9.12 hereof,
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G.F. REILLY COMPANY
By:
------------------------------------------
Name:
Title:
and, with Respect to Section 2.7 only,
MICK WAGNER CHARITABLE REMAINDER
UNITRUST
By: ARVEST Trust Company,
Trustee:
By:
------------------------------------------
Name: Keith Lea
Title: Assistant Vice President and Trust
Officer
JAN POWELL CHARITABLE REMAINDER
UNITRUST
By: ARVEST Trust Company,
Trustee:
By:
------------------------------------------
Name: Keith Lea
Title: Assitant Vice President and Trust
Officer
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
A. L. LABORATORIES ANNOUNCES ACQUISITION OF
WADE JONES COMPANY, INC.
FORT LEE, N.J., July 21, 1994 -- A. L. Laboratories, Inc. (NYSE:BMD)
today announced that it has acquired the Wade Jones Company, Inc. ("Wade
Jones"), headquartered in Lowell, Arkansas. Terms of the transaction were not
disclosed.
Wade Jones is the major poultry animal health products distributor in the
United States, and is also actively involved in the development, manufacture and
sale of its own line of products including animal health pharmaceuticals and
feed additives. Approximately two-thirds of all products sold by A. L.
Laboratories to the poultry industry are distributed by Wade Jones.
The Company estimates that the acquisition will add at least $20 million
of revenue to A. L. Laboratories on an annualized basis, with approximately half
of that amount being derived from Wade Jones' animal health products which are
complementary to the Company's current poultry products line.
Commenting on the announcement, Einar W. Sissener, Chief Executive
Officer of A. L. Laboratories, Inc. said, "A large per-centage of our Animal
Health business is directed to the poultry industry. This strategic
acquisition significantly strengthens
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our position in, and our ability to serve that industry. In addition to
integrating forward toward the customer, which is particularly important to our
growth strategy, this acquisition also provides a number of interesting
complementary products, and will allow us greater flexibility in the types of
products we can offer our customers.
"While the full benefit of this acquisition will not be felt until 1995
and beyond, based on Wade Jones' historical performance and the terms of the
transaction, this acquisition will not be dilutive to the Company's earnings in
1994."
David E. Cohen, President of A. L. Laboratories' Animal Health Division
added, "Wade Jones has been an important element of our success and consistent
growth in the poultry market, and we are excited to have their capabilities now
directly available to us. Wade Jones brings a focused, energetic team, a
seasoned sales force and an efficient production and distribution operation.
Additionally, our present line of water-soluble pharmaceu-tical products
will be strengthened by Wade Jones' complementary FDA-approved medications, and
their new product pipeline should provide other profitable products in the
future," Mr. Cohen concluded.
A. L. Laboratories is an international pharmaceutical company developing,
manufacturing and marketing specialty generic and pro-prietary human
pharmaceuticals and animal health products with plant sites in Illinois,
Maryland, New Jersey, New York, North Carolina, Washington State, Denmark and
Indonesia.
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EXHIBIT 99.2
(ANIMAL HEALTH VERSION)
FOR IMMEDIATE RELEASE
A. L. LABORATORIES' ANIMAL HEALTH ACQUIRES
WADE JONES COMPANY, INC.
FORT LEE, N.J., July 21, 1994 -- A. L. Laboratories, Inc. (NYSE:BMD) today
announced that it has acquired the Wade Jones Company, Inc. ("Wade Jones"),
headquartered in Lowell, Arkansas which will become a part of its Animal Health
operations. Terms of the transaction were not disclosed.
Wade Jones is the largest poultry health products distributor in the
United States and also manufactures several generic animal health products.
Wade Jones' animal health product line includes feed additives, pharmaceuticals,
vaccines and sanitation products. Established more than 20 years ago, Wade
Jones operates 5 facili-ties across the country and employs 75 people, l4 of
which are in direct sales.
Commenting on the announcement, Einar W. Sissener, Chief Executive Officer
of A. L. Laboratories, Inc. said, "This acquisition is another example of our
aggressive efforts to find complementary acquisitions which enable us to expand
in our targeted markets and continue to broaden our specialty product line."
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David E. Cohen, President of A. L. Laboratories' Animal Health division
added, "Over the years, Wade Jones has been an important element of our
success and consistent growth in the poultry market through their distribution
and feed additive blending activities. With all of their capabilities now
available to us we can not only forward integrate our business towards the
customer enabling us to provide full service to the poultry industry, but also
to serve multiple levels of our existing customer base with an expanded product
line.
"Our present line of water-soluble pharmaceutical products will be
strengthened by the addition of complementary Wade Jones FDA-approved
medications, and their new product pipeline should provide other synergies in
the future.
"We are fortunate to be acquiring a focused, energetic team led by Mick
Wagner, who oversees a seasoned sales force and efficient production and
distribution operation. We plan to operate the Wade Jones Company as a stand-
alone business, maintain all of the existing supplier relationships, and enhance
the level of service being provided to them."
Mr. Wagner added, "Our focus on our customers has enabled us to become
number one in our business. To better serve our customers we have recently
begun installation of a state-of-the-art Quallcom satellite tracking system.
Most of our customers use 'Just in Time' inventory control. This system will
allow us to pinpoint shipments from the time an order leaves our dock to its
arrival at the customer's door.
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"We have also built a sales force that has succeeded in introducing and
gaining major market share with each of the 73 products in our line.
Additionally, an expansion that will more than double our manufacturing
capabilities is presently under way. We are excited that our activities will be
enhanced by A. L. Laboratories' expertise in quality control, regulatory affairs
and product development."
A. L. Laboratories is an international pharmaceutical company
developing, manufacturing and marketing specialty generic and proprietary human
pharmaceuticals and animal health products with plant sites in Illinois,
Maryland, New Jersey, New York, North Carolina, Washington State, Denmark and
Indonesia.
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