SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported)
September 17, 1999
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IVC INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-23624 22-1567481
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(Commission file number) (IRS employer identification number)
500 Halls Mill Road, Freehold, New Jersey 07728
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(Address of principal executive offices)
Registrant's telephone number: (732) 308-3000
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ITEM 5. OTHER EVENTS
On September 17, 1999, IVC Industries, Inc., ("IVC") entered into a
Settlement Agreement with Hoffman-La Roche Inc. and Roche Vitamins Inc.
(collectively, "Roche") in connection with Roche's alleged participation in an
unlawful conspiracy to raise, fix, maintain and/or stabilize the price of
vitamins in the United States and elsewhere in violation of Section 1 of the
Sherman Antitrust Act and other wrongful anti-competitive conduct in violation
of various federal and state laws.
Pursuant to the terms of the Settlement Agreement, IVC agrees to release
all claims it may have against Roche based on IVC's purchases of various
vitamins from Roche since 1990 and to opt out of any settlement in connection
with the class action, In re Vitamins Antitrust Litigation, Multi-District
Litigation No. 1285, pending in the United States District Court for the
District of Columbia (the "MDL Action").
In exchange for IVC's release and IVC's agreement to opt out of any
settlement in the MDL Action, IVC shall receive a settlement compensation
package comprised of the following: (i) a $10 million cash payment; (ii) a price
discount of 5% on future purchases by IVC from Roche up to $1 million per year
over three years; and (iii) an advance, refundable in cash or stock, of $2.7
million on any payments that may be due to IVC under a Most Favored Nations
Clause contained in the Settlement Agreement. Under the Most Favored Nations
Clause, in the event that the MDL Action is settled and the settlement amount
that IVC would have received thereunder exceeds $12.7 million, Roche agrees to
make additional payments to IVC based on, and subject to certain adjustments to,
the amounts recovered by the plaintiffs in the MDL Action.
Pursuant to the terms of the Settlement Agreement, within five business
days of its effective date (September 17, 1999), Roche shall pay to IVC $12.7
million, representing the $10 million cash payment and the $2.7 million advance
on additional payments, if any, to be made under the Most Favored Nations
Clause.
This summary of the Settlement Agreement is qualified in its entirety by
reference to the Settlement Agreement attached hereto as an exhibit.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, IVC
Industries, Inc. has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
IVC INDUSTRIES, INC.
By: /s/ E. Joseph Edell
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E. Joseph Edell
Chairman of the Board and
Chief Executive Officer
Date: September 24, 1999
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EXHIBIT INDEX
Exhibit Description
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99.1 Agreement, dated September 17, 1999, by and between
Hoffman-La Roche Inc. and Roche Vitamins Inc. and
IVC Industries, Inc.
Schedule A to the Agreement is omitted pursuant to Rule 601(b)(2) of
Regulation S-K. Schedule A sets forth the dollar amount of sales
from 1990 to 1998 by Roche to IVC of selected vitamins. This summary
is qualified in its entirety by reference to such schedule.
This Agreement is made and entered into this 17th day of September 1999,
by and between Hoffman-La Roche Inc., and Roche Vitamins Inc. (collectively
referred to herein as "Roche") and IVC Industries, Inc., formerly known as
International Vitamin Corporation (referred to herein as "IVC");
WHEREAS, IVC has purchased various vitamins directly from Roche and it
appears that IVC would be a purported class member as alleged in several
complaints filed and coordinated in In re Vitamins Antitrust Litigation,
Multi-District Litigation No. 1285, pending in the United States District Court
for the District of Columbia ("the MDL Action");
WHEREAS, IVC may have certain claims for damages against Roche in
conjunction with Roche's alleged participation in an unlawful conspiracy to
raise, fix, maintain and/or stabilize the price of vitamins in the United States
and elsewhere in violation of Section 1 of the Sherman Antitrust Act and other
wrongful anti-competitive conduct in violation of various federal and state laws
with respect to certain vitamins ("The Vitamin Claims");
WHEREAS, Roche would assert defenses and deny impact and damages in
response to IVC's claims;
WHEREAS, IVC has conducted an investigation into the facts and the law
regarding the Vitamin Claims and has concluded that a settlement pursuant to
which Roche will compensate IVC is in the best interest of IVC;
WHEREAS, Roche, despite its belief that it is not liable for the claims
asserted and has good defenses thereto, has nevertheless agreed to enter into
this Agreement to avoid further expense, inconvenience, and the distraction of
burdensome and protracted litigation;
WHEREAS, IVC has purchased the vitamins, listed in Schedule A, annexed
hereto, totaling, during the relevant time periods, approximately $99 million.
WHEREAS, the parties expressly intend, as further provided in paragraph 8
herein, that Roche's obligations to IVC pursuant to this Settlement Agreement
fully and completely satisfy any claims that IVC may have against other sellers
and manufacturer
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of Vitamins arising from the sales of Vitamins by Roche to IVC, and further
recognize that Roche may, in its sole discretion, seek reimbursement from other
sellers or manufacturers of Vitamins respecting such satisfied IVC claims.
NOW, THEREFORE, in consideration of the promises and covenants contained
herein, these recitals which are considered part of this Agreement, and other
good and valuable consideration, the receipt and sufficiency of which is
acknowledged by the parties, IVC and Roche agree as follows:
TERMS AND CONDITIONS
A. Definitions
As used in this Agreement only, the following terms shall have the
meanings set forth below in this Section 1 of the Agreement."
1. "Vitamins" is defined to mean any vitamins or vitamin
products, including but not limited to A, E, C, B1, B2, B6,
Calpan, Beta-Carotene, and H, which are the subject of the MDL
Action.
2. "Releasees" shall refer jointly and severally to Roche,
including Roche Vitamins Inc., Hoffmann-La Roche Inc., F.
Hoffmann-La Roche Ltd. and to their parents, subsidiaries,
affiliates, partners, insurers, and to their respective past
and present officers, directors, employees, agents,
stockholders, attorneys, servants, and representatives; and
the predecessors, successors, heirs, executors,
administrators, and assigns of each of the foregoing. As to
other manufacturers or sellers of Vitamins or any other
defendants that may be named in conjunction with the Vitamins
Claims, the term "Releasees" does not apply to them, their
related individuals, corporations, partnerships, limited
liability companies and other business entities.
3. "Releasors" shall refer jointly and severally to IVC and to
its parents, subsidiaries, affiliates, insurers, and all other
persons, partnerships or corporations with whom any of the
former have
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been, or are now, affiliated, and to their respective past and
present officers, directors, employees, agents, stockholders,
attorneys, servants, and representatives; and the
predecessors, successors, heirs, executors, administrators,
and assigns of each of the foregoing. The foregoing shall
include, but not be limited to Hall Laboratories Ltd.;
American Vitamin Products and International Vitamins Overseas
Corp.
4. Affected Sales shall mean those Affected Vitamins sold by
Roche to IVC during the Affected Period.
B. Agreement Not to Bring Claims Against Roche or Releasees
5. IVC agrees to opt out of any settlement or litigation class in
In re Vitamins Antitrust Litigation, MDL No. 1285 or in any
similar class litigation, involving Roche or the Releasees,
and IVC agrees not to bring any claims against Roche or the
Releasees related to the claims described in the Release in
Section C of this Agreement.
C. Release, Discharge and Covenant Not to Sue
6. Upon payment of the Settlement Fund, as specified in paragraph
9 of this Agreement, and for other valuable consideration, the
Releasees shall be completely released, acquitted and forever
discharged from any and all claims, demands, actions, suits,
causes of action, whether class, individual, or otherwise in
nature, that Releasors, or each of them, ever had, now has, or
hereafter can, shall, or may have on account of, or in any way
arising out of, any and all known and unknown, foreseen and
unforeseen, suspected or unsuspected injuries, damages, and
the consequences thereof in any way arising out of or
resulting from conduct concerning the pricing, selling,
discounting, marketing, or distributing of Vitamins by Roche
to IVC, up until and including the date of this Agreement,
including but no limited to any conduct alleged, and causes of
action asserted or that could have been alleged or
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asserted, in the prior-filed cases which have been coordinated
in the MDL Action, or which arise under any U.S. federal or
state antitrust, unfair competition, unfair practices, price
discrimination, unitary pricing, or trade practice law,
including without limitation, the Sherman Antitrust Act, 15
U.S.C.ss.1 et al., or arising under any foreign laws from the
beginning of time to the date of this Agreement (the "Released
Claims"). This Release expressly includes any and all
worldwide purchases of Vitamins by Releasors directly or
indirectly from Releasees. Releasors shall not, after the date
of this Agreement, seek to establish liability against the
Releasees based, in whole or in part, upon any of the Released
Claims.
7. Each Releasor hereby expressly waives and fully, finally, and
forever settles and releases, upon signature of this
Agreement, any known or unknown, suspected or unsuspected,
contingent or noncontingent claim with respect to the subject
matter of the provisions of paragraph 6 of this Agreement,
whether or not concealed or hidden, without regard to the
subsequent discovery or existence of such difference or
additional facts.
D. Set Off Against Other Judgments
8. IVC recognizes that by entering into this settlement with
Roche it has obtained full satisfaction of any and all claims
based on purchases of Vitamins A, E, C, B1, B2, B6, H, Premix,
Beta-Carotene, Riboflavin, Calpan, Canthaxanthin and
Astaxanthin ("Affected Vitamins") for the periods listed on
the attached Schedule A ("Affected Periods") from Roche.
Accordingly, IVC agrees that should it obtain a judgment for
joint and several liability against any other seller of
Affected Vitamins ("Non-Settling Sellers"), IVC shall exclude
from the amount collectable from such final judgment and shall
not collect on such final
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judgment, a percentage equal to the percentage that Roche's
sales to IVC of Affected Vitamins during Affected Periods
bears to the total sales of such vitamins for such periods to
IVC by all sellers of Affected Vitamins. This calculation
shall be performed on a vitamin-by-vitamin, period-by-period
basis. IVC further agrees that with respect to any judgment
obtained against Non-Settling Sellers, it will not seek to
hold any such Non-Settling Seller liable for a portion of any
judgment in excess of that Non-Settling Seller's proportionate
share of the sales by all sellers of Affected Vitamins during
Affected Periods to IVC, calculated on a vitamin-by-vitamin
and period-by-period basis. It is expressly understood and
agreed between IVC and Roche that Non-Settling Sellers shall
be third party beneficiaries of this Agreement.
E. Payments
9. Within five (5) business days of the effective date of this
Agreement, the Settlement Fund, as described in Paragraph 10,
shall be paid by Roche to IVC, via wire transfer to such
account or accounts as IVC shall designate in writing.
F. The Settlement Fund
10. "The Settlement Fund" shall be comprised of Ten Million
Dollars ($10,000,000) plus a separate advance of Two Million
Seven Hundred Thousand Dollars ($2,700,000) against an
anticipated adjustment to the Preliminary IVC Affected Sales
Percentage, as defined and described in paragraph 13 below,
which notwithstanding any other provision of this Agreement,
shall be applied as follows:
If "Facility B" remains outstanding under that Credit
Agreement between The Chase Manhattan
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Bank ("Chase") and IVC dated April 30, 1996, as amended,
and Roche is still guarantor thereof, then (I) the
Settlement Fund shall first be applied to pay to Chase
all amounts outstanding under Facility B, whether for
principal (originally $6,500,000), interest or other
amounts due from IVC thereunder and (ii) shall next be
applied to pay to Roche all trade receivables due in
excess of the trade terms extended (these past due
invoices now total approximately Four Million Dollars
($4,000,000), which amount shall be recalculated five
(5) business days prior to the payment as of the
expected payment date by Roche to IVC pursuant to
Section E above; (iii) Roche shall be released as such
guarantor; (iv) Roche shall have no obligation to
provide financing to IVC other than normal trade credit
and (v) any remaining balance shall be paid by Roche to
IVC.
11. Roche and IVC agree that in the event that the Settlement Fund
provided pursuant to Paragraph 10 of this agreement is
required to be allocated among the Vitamins by any subsequent
settlement agreement between Roche and the "Settling Sellers"
(as that term is defined in Paragraph 13 below), said
Settlement Fund shall be allocated among such Vitamins in the
same proportion as the hypothetical settlement that IVC would
receive based on its purchases of such Vitamins from Roche
pursuant to such "Settling Sellers" settlement agreement if
IVC were to remain as a member of such class.
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G. Product Discount
12. From the period beginning June 1, 1999 until May 31, 2002,
Roche agrees to grant to IVC a cash discount of five percent
(5%) per year on all of its vitamins purchases from Roche up
to a maximum of twenty million dollars ($20,000,000.00) per
year of such purchases. Such discount shall be separately
paid, on a per order basis, within ninety (90) days following
delivery of any such order by Roche to IVC, it being
understood that the aforementioned discount payment schedule
is contingent on IVC making their payments for such orders to
Roche within the above ninety (90) day period which represents
their current payment terms. In the event that IVC does not
make their payments to Roche for such orders within said
payment terms, payment by Roche of the aforementioned discount
payments shall be delayed until Roche's receipt from IVC of
payment due for such orders, after which such discount
payments shall be promptly paid to IVC.
H. Adjustment of Consideration
13. The consideration provided to IVC by Roche under this
Agreement (assuming that IVC takes maximum advantage of the
product discount provided in paragraph 12) represents 12.7% of
the Affected Sales of Vitamin Products to IVC by Roche
(Preliminary IVC Affected Sales Percentage). In the event that
the currently ongoing settlement negotiations between the MDL
Action plaintiffs and certain seller's of Affected Vitamins
during the Affected Period ("Settling Sellers") result in an
Affected Sales percentage for the plaintiff class (Plaintiff
Affected Sales Percentage) in the aggregate, or separately by
vitamin that exceeds the Preliminary IVC Affected Sales
Percentage, the Preliminary IVC Affected Sales Percentage
shall be adjusted as follows:
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a) The Plaintiff Affected Sales Percentage, as
reduced by the attorney's fees for the MDL Action
plaintiff's class (Adjusted Plaintiff Affected
Sales Percentage) shall be further reduced by ten
percent (10%), the result of which reduction shall
represent the total settlement amount agreed upon
between IVC and Roche (Total IVC Affected Sales
Percentage);
b) The Preliminary IVC Affected Sales Percentage
shall be compared to the Total IVC Affected Sales
Percentage with any differential-less the Two
Million Seven Hundred Thousand Dollars
($2,700,000) advance referred to in Paragraph 10
above-being paid to IVC by Roche (or by IVC to
Roche in the event that after application of said
advance the net differential results in IVC
returning all or a part of said advance to Roche)
following court approval of the settlement
agreement between the MDL action plaintiffs and
the Settling Sellers.
c) In the event that the Plaintiff Affected Sales
Percentage, in the aggregate, or separately by
vitamin is less, than the IVC Affected Sales
Percentage, then IVC shall return to Roche a
dollar amount equal to the differential between
such percentages plus the Two Million Seven
Million Dollars ($2,700,000) advance referred to
in paragraph 10 above within thirty (3) days
following court approval of the above-mentioned
settlement agreement (it being understood that the
ten percent (10%) reduction referred to in
subparagraph (b) shall not be applicable in this
instance). Any
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payment made pursuant to this subparagraph may be
made in the common stock of IVC Industries, Inc.
(NASDAQ Ticker: IVCO), or any of its successors
with the number of shares to be delivered to Roche
determined by dividing the amount due to be paid
to Roche by the average of the closing market
price for such shares for the thirty (3) business
days immediately prior to the business day before
the date of payment. The shared delivered to Roche
shall be duly authorized and validly issues, fully
paid and non-assessable and immediately tradable
subject only to restrictions imposed by Federal or
state law. IVC agrees, at its own expense, to take
all actions which are customary to insure that the
shares will be freely tradable upon and after
delivery to Roche including the filing of a
registration statement with the Securities and
Exchange Commission, and to enter into all
customary agreements, to expedite and facilitate
the disposition of such shares by Roche. Should
IVC or a successor company not have shares traded
on NASDAQ or a national stock exchange, this
payment option will not apply.
I. Confidentiality and Use of this Agreement
14. The parties agree not to reveal the terms and conditions of
this Agreement except as may be required: (a) for the
enforcement of this Agreement; (b) to comply with an order of
a court of competent jurisdiction; (c) for the purposes of
financial reporting, the preparation of financial records
(e.g. tax returns, financial statements, etc.) and/or review
in the course of business by lending institutions, potential
third-party investors, and/or actual third-party investors,
provided the disclosure to potential or actual third party
investors is made subject to a confidentiality agreement; (d)
as required by any class settlement agreement entered into by
Roche subsequent to the date of this Agreement;
(e) or as otherwise provided by law. In the event that
IVC receives a subpoenas or discovery request in a
civil action which would require production of
this Agreement or a disclosure of its terms to a
third party, IVC shall notify Roche and provide it
with copies of any such subpoena and/or discovery
request. Upon receipt thereof, Roche may in their
discretion request IVC in writing to oppose the
discovery request and/or move to quash the
subpoena, as the case may be, and shall fully
cooperate with IVC relating thereto. Roche shall
be solely responsible for any and all costs and
expenses incurred by IVC to oppose such discovery
request and/or move to quash a subpoena in
accordance with this Agreement, including without
limitation any and all filing fees, attorneys'
fees and costs/penalties assessed against IVC in
relation thereto. Roche shall reimburse IVC for
any and all such costs, expenses, fees and/or
sanctions within ten (1) days of receipt from IVC
of supporting documentation reflecting such costs,
expenses, fees and/or sanctions.
15. This Agreement and the fact of settlement of IVC claims,
including all negotiation and discussions leading up to the
settlement, shall not constitute any admission of liability or
other evidence of any violation of any statute or law or of
any liability or
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wrongdoing by any Releasee or of the trust of any of the
claims or allegations IVC may have against Releasee in the
Vitamin Claims.
16. Neither this Agreement, nor any of its terms or provisions,
nor any of the negotiations or proceedings connected with it,
nor any other action taken to carry out this Agreement by any
of the Settling Parties shall be referred to, offered as
evidence or received in evidence in any pending or future
civil, criminal, or administrative action or proceeding,
except in a proceeding to enforce this Agreement, or to defend
against the assertion of the Released Claims, or as otherwise
required by law.
J. Miscellaneous
17. Except as provided in paragraph 8 herein, this Agreement does
not settle, compromise, release and/or limit, in any way
whatsoever, any and all claims that IVC may have against any
individual, corporation, partnership, limited liability
company and/or other business entity other than the Releasees
named as a defendant in the MDL Action, named as a defendant
in any other civil action, whether or not currently pending,
and/or otherwise alleged to be a co-conspirator or other
participant with respect to the vitamin antitrust violations
and other wrongful anticompetitive conduct relating to the
sale, manufacturing, pricing, distribution and/or marketing of
vitamins, vitamin products and vitamin premixes, including,
without limitation, the antitrust violations and other alleged
wrongful conduct that was the subject of the investigation by
the United States Justice Department. All rights against such
other defendants or alleged co-conspirators are specifically
reserved by IVC.
18. This Agreement shall be governed by and interpreted according
to the substantive laws of the state of New Jersey without
regard to its choice of law or conflict of laws principles.
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19. This Agreement constitutes the entire agreement between IVC
and Roche pertaining to the settlement of the Vitamin Claims
against any Releasee, and supersedes all prior and
contemporaneous undertakings of IVC and any Releasee in
connection herewith. This Agreement may not be modified or
amended except in writing executed by IVC and Roche.
20. This Agreement shall be bending upon, and inure to the benefit
of, the successors and assigns of IVC and Releasee. Without
limiting the generality of the foregoing, each and every
covenant and agreement made herein by IVC shall be binding
upon all Releasors.
21. This Agreement may be executed in counterparts by IVC and
Roche and a facsimile signature shall be deemed an original
signature for purposes of executing this Agreement.
22. Neither IVC nor Roche shall be considered to be the drafter of
this Agreement or any of its provisions for the purposes of
any statute, case law, or rule of interpretation or
construction that would or might cause any provisions to be
construed against the drafter of this Agreement.
23. This Agreement shall be construed and interpreted to
effectuate the intent of the parties, which is to provide,
through this Agreement, for a complete resolution o the
Released Claims with respect to the Releasees.
24. Where this Agreement requires either party to provide notice
or any other communication or document to the other, such
notice, communication, or document shall be provided by
facsimile or letter by overnight delivery to Frederick Kentz
III, 340 Kingsland Street, Nutley, New Jersey 07110-1199,
973-235-2800 (facsimile) for Roche and E. Joseph Edell, 500
Halls Mill Road, Freehold, New Jersey 07728, (732) 761-2817
(facsimile) for IVC with copies
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to Diane Mulligan of Edell Associates, 1776 On The Green,
Morristown, New Jersey 07962, (973) 605-1812 (facsimile).
25. Each of the undersigned represents that resolution of this
matter has been approved by the Board of Directors of IVC and
the Leadership Board of Roche and that he or she is fully
authorized by each Board to enter into the terms and
conditions of, and to execute, this Agreement on behalf of IVC
and Roche.
26. The effective date of this Agreement shall be September 17,
1999.
Dated: September 17, 1999
BY: /s/ Frederick Kentz, III
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Frederick Kentz, III, Esq.
Vice President
Hoffmann-La Roche Inc.
Nutley, New Jersey
BY: /s/ E. Joseph Edell
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E. Joseph Edell
Chief Executive Officer
IVC Industries, Inc.
500 Halls Mill Road
Freehold, NJ 07728
