Item 1.01 Entry into a Material Definitive Agreement.
Acquisition Agreement
On January 27, 2022, Inotiv, Inc. (the "Company"), and Envigo Global Services
Inc., a wholly owned subsidiary of the Company (the "Purchaser"), entered into a
Stock Purchase Agreement (the "Purchase Agreement") with Orient Bio, Inc., a
corporation formed in the Republic of Korea ("Seller"), providing for the
acquisition by the Purchaser of all of the outstanding capital stock of Orient
BioResource Center, Inc. ("OBRC" and such acquisition, the "Acquisition"). OBRC
owns and operates a primate quarantine and holding facility located near Alice,
Texas. The Acquisition was consummated on January 27, 2022.
Consideration for the OBRC stock consisted of $28.2 million in cash, subject to
certain adjustments, and 677,339 of the Company's common shares. As part of the
purchase consideration, the Purchaser agreed to leave in place a payable owed by
OBRC to the Seller in the amount of $3.7 million. The payable will not bear
interest and is required to be paid to Seller on the date that is 18 months
after the Closing. Purchaser will have the right to set off against the payable
any amounts that become payable by the Seller on account of indemnification
obligations under the Purchase Agreement.
The Purchase Agreement contains customary representations, warranties, covenants
(including non-competition and non-solicitation covenants), indemnifications,
and agreements.
The representations and warranties contained in the Purchase Agreement were made
solely for purposes of the Purchase Agreement, were made solely for the benefit
of the parties to the Purchase Agreement, and may not have been intended to be
statements of fact but, rather, to be a method of allocating risk and governing
the contractual rights and relationships among the parties to the Purchase
Agreement. The assertions embodied in those representations and warranties may
be subject to important qualifications and limitations agreed to by the parties
in connection with negotiating their terms and may be subject to a contractual
standard of materiality that may be different from what may be viewed as
material to investors. For the foregoing reasons, the representations and
warranties contained in the Purchase Agreement should not be relied upon as
factual information at the time they were made or otherwise. Moreover,
information concerning the subject matter of such representations and warranties
may change after the date of the Purchase Agreement, which subsequent
information may or may not be fully reflected in the Company's public
disclosures.
The foregoing descriptions of the Purchase Agreement do not purport to be
complete and are qualified in their entirety by the terms and conditions of the
Purchase Agreement, a copy of which is filed as Exhibit 2.1 hereto.
First Amendment to Credit Agreement
On January 27, 2022, the Company, certain of subsidiaries of the Company (the
"Subsidiary Guarantors"), the lenders party thereto, and Jefferies Finance LLC,
as administrative agent, entered into a First Amendment ("Amendment") to its
existing Credit Agreement (the "Credit Agreement"). The Amendment provides for,
among other things, an increase to the existing term loan facility in the amount
of $40.0 million (the "Incremental Term Loans") and a new delayed draw term loan
facility in the original principal amount of $35.0 million, which amount is
available to be drawn up to 24 months from the date of the Amendment (the
"DDTL"). The Incremental Term Loans and any amounts borrowed under the DDTL are
referred to herein as the "Additional Term Loans". On January 27, 2022, the
Company borrowed the full amount of the Incremental Term Loans, but did not
borrower any amounts under the DDTL.
Amounts outstanding under the Additional Term Loans will accrue interest at an
annual rate equal to the LIBOR rate plus a margin of between 6.00% and 6.50%,
depending on the Company's then current Secured Leverage Ratio (as defined in
the Credit Agreement). The initial adjusted LIBOR rate of interest is the LIBOR
rate of 1.00% plus 6.25% for a total rate of 7.25%.
The Additional Term Loans require annual principal payments in an amount equal
to 1.0% of the original principal amount. Voluntary prepayments of the
Additional Term Loans will be subject to a 2% prepayment premium if made on or
prior to November 5, 2022 and a 1% prepayment premium if made on or prior to
November 5, 2023. Voluntary prepayments made after November 5, 2023 are not
subject to a prepayment premium.
Each of the Additional Term Loans require annual principal payments in an amount
equal to 1.0% of their respective original principal amounts. The Company shall
also repay the term loans on an annual basis in an amount equal to a percentage
of its Excess Cash Flow (as defined in the Credit Agreement), which percentage
will be determined by its then current Secured Leverage Ratio.
Under the Credit Agreement, the Company is required to maintain an initial
Secured Leverage Ratio of not more than 4.25 to 1.00. The maximum permitted
Secured Leverage Ratio shall reduce to 3.00 to 1.00 beginning with the Company's
fiscal quarter ending March 31, 2025. The Company is required to maintain a
minimum Fixed Charge Coverage Ratio (as defined in the Credit Agreement), which
ratio shall be 1.00 to 1.00 during the first year of the Credit Agreement and
shall be 1.10 to 1.00 from and after the Credit Agreement's first anniversary.
The Credit Agreement includes certain cure rights in the event the Company fails
to comply with these financial covenants for any fiscal quarter.
The Additional Term Loans are secured by all assets (other than certain excluded
assets) of the Company and each of the Subsidiary Guarantors. Repayment of the
. . .
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of the Registrant.
The information in Item 1.01 regarding the First Amendment to Credit Agreement
is incorporated by reference in response to this Item 2.03.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Change in Control Severance Plan
On January 25, 2022, the Board of Directors of the Company (the "Board")
approved the Inotiv, Inc. Executive Change in Control Severance Plan for certain
of its senior executives (the "CIC Plan"). The CIC Plan provides for certain
payments and the vesting of certain equity awards upon a termination of a
participant's employment by the Company without Cause or by the participant for
Good Reason (each a "Qualifying Termination") within 24 months following a
Change in Control of the Company. The definitions of "Cause" and "Change in
Control" in the CIC Plan are the same as the definitions of those terms in the
Company's Amended and Restated 2018 Equity Incentive Plan (the "Equity Plan").
"Good Reason" is defined in the CIC Plan as the occurrence of any of the
following without the consent of the affected participant, subject to certain
notice and cure rights: (i) a diminution of the participant's title, duties and
responsibilities, (ii) a reduction in base salary or target bonus opportunity,
and (iii) the relocation of the principal place of business where the
participant provides services to the Company by more than 50 miles. The
Compensation Committee of the Board determines which executives of the Company
become participants in the CIC Plan.
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The CIC Plan provides for the following benefits upon a Qualifying Termination
of a participant within 24 months following a Change in Control: (i) cash
severance to be paid in a lump sum within 45 days of a Qualifying Termination in
an amount equal to 1.0 to 3.0 times the participant's base salary and target
bonus for the year of termination (depending upon the CIC plan tier to which the
participant is assigned), plus a pro rata bonus for the year of termination;
(ii) continuation of health and welfare benefits for 18 months following
termination at the same cost to the participant as the participant paid prior to
termination; (iii) up to $50,000 of outplacement services for 12 months
following termination; and (iv) acceleration of vesting of all outstanding
equity awards (with the amount payable in respect of any performance awards
based on the greater of assumed target performance or actual performance through
the date of termination, if determinable) upon a Qualifying Termination or if a
successor in a Change in Control fails to assume or replace outstanding
non-vested equity awards. With respect to the cash severance described in clause
(i), the multipliers assigned to Tier I, Tier II and Tier III are 3.0 times, 2.0
times and 1.0 times, respectively. Receipt of severance benefits is conditioned
on the delivery of a release by the participant and the participant's agreement
to certain non-competition, employee and customer non-solicitation,
confidentiality and non-disparagement restrictive covenants. The amount of
severance benefits is subject to reduction in the event that the reduction would
result in a greater after-tax benefit than the participant would receive if the
participant received the full amount of the severance benefits and paid any
excise tax required by Section 280G of the Internal Revenue Code.
The Committee has designated Robert W. Leasure, Jr., the Company's President and
Chief Executive Officer, as a Tier I participant in the CIC Plan and has
designated Beth A. Taylor, the Company's Chief Financial Officer, and John
Sagartz, the Company's Chief Strategy Officer, as Tier II participants in the
CIC Plan.
The foregoing description of the CIC Plan does not purport to be complete and is
qualified in its entirety by reference to the full text of the CIC Plan which
will be filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2022.
Employment Agreement
On January 27, 2022, the Company entered into a new Employment Agreement (the
"Employment Agreement") with Robert W. Leasure, Jr. The Employment Agreement
replaces Mr. Leasure's existing employment agreement, dated December 29, 2020
(the "Existing Agreement").
Pursuant to the Employment Agreement, Mr. Leasure agrees to serve as the
President and Chief Executive Officer of the Company for a term ending on
January 27, 2027; provided that the term of the Employment Agreement will be
automatically extended for successive one-year terms after the expiration of the
initial term unless either party gives notice of termination of Mr. Leasure's
employment at least 90 days prior to the end of the then-current term.
Mr. Leasure will (i) be entitled to receive an annual base salary of $750,000,
(ii) have an annual target incentive opportunity of at least 100% of his base
salary, a maximum incentive opportunity of at least 200% of his target incentive
opportunity and a threshold incentive opportunity of at least 50% of his target
incentive opportunity and (iii) be entitled to vacation in accordance with
Company policy and reimbursement for ordinary and necessary business expenses.
Mr. Leasure will also be entitled to participate in the Company's benefit plans
and programs provided to Company executives generally, subject to eligibility
requirements and other terms and conditions of those plans.
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The Employment Agreement provides for certain non-competition, non-solicitation
and confidentiality undertakings. Should Mr. Leasure's employment be terminated
by reason of Mr. Leasure's death, by the Company without cause or in the event
of Mr. Leasure's disability (as defined in the Employment Agreement), or by
Mr. Leasure for good reason, Mr. Leasure or his estate would be entitled to his
base salary and a prorated portion of his annual incentive award for the year in
which termination occurs, in each case through the effective date of the
termination of his employment. If Mr. Leasure's employment is terminated by the
Company other than for cause, or by Mr. Leasure for good reason, in either case
within 24 months after a change in control (as defined in the CIC Plan)
Mr. Leasure will be entitled to severance benefits providied in the CIC Plan as
described above.
The foregoing summary of the Employment Agreement does not purport to be
complete and is qualified in its entirety by reference to the Employment
Agreement, a copy of which is filed as Exhbit 10.2 to this Current Report on
Form 8-K.
In conjunction with the Employment Agreement, the Board awarded Mr. Leasure
restricted stock units ("RSUs") under the Equity Plan to be granted and
effective on the third trading day following the release of the Company's
financial results for the first quarter of fiscal 2022 with a grant date fair
value of $3,500,000. The award will vest in three equal installments on the
first three anniversaries of the grant date based on continued employment,
subject to forfeiture or acceleration as provided in the Equity Plan and the CIC
Plan. The RSUs are not transferable and can be settled only in common shares of
the Company. Unvested RSUs will also be forfeited if Mr. Leasure engages in
certain activity in competition with the Company, solicits employees or
customers of the Company, improperly uses or discloses confidential information
of the Company or engages in material misconduct in the performance of his
duties, as determined by the Compensation Committee. In the event of a Change in
Control, unvested RSUs will vest as and to the extent provided in the CIC Plan
described above.
The RSUs granted to Mr. Leasure in conjunction with the Employment Agreement, to
. . .
Item 7.01 Regulation FD Disclosure.
On January 27, 2022, the Company issued a press release relating to the
Acquisition, a copy of which is attached to this Current Report on Form 8-K as
Exhibit 99.1 and is incorporated herein by reference. This information shall not
be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or incorporated by reference in any
filing under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are filed as part of this Current Report on Form 8-K.
Certain schedules and exhibits referenced in certain agreements filed as
exhibits hereto have been omitted in accordance with Item 601 (b)(2) of
Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished
supplementally to the Securities and Exchange Commission upon request.
2.1 Stock Purchase Agreement, dated January 27, 2022, by and among Envigo
Global Services Inc., Inotiv, Inc., and Orient Bio, Inc.
10.1 First Amendment to Credit Agreement, dated January 27, 2022
10.2 Employment Agreement between the Company and Robert W. Leasure, Jr.,
dated January 27, 2022
10.3 Form of Restricted Stock Unit Award Agreement under the Amended and
Restated 2018 Equity Incentive Plan
99.1 Press Release, dated January 27, 2022
104 Cover Page Interactive Data File (formatted as Inline XBRL)
Forward Looking Statements
This document contains "forward-looking statements" within the meaning of the
federal securities laws, including Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Exchange Act. In this context, forward-looking
statements may address expected future business and financial performance and
financial condition, and often contain words such as "expect," "anticipate,"
"intend," "plan," "believe," "seek," "see," "will," "would," "target," similar
expressions, and variations or negatives of these words. Forward-looking
statements by their nature address matters that are, to different degrees,
uncertain, such as statements about the consummation of the proposed
Acquisitions and the anticipated benefits thereof. Such statements involve
risks, uncertainties and assumptions. If such risks or uncertainties materialize
or such assumptions prove incorrect, the results of the Company and its
subsidiaries could differ materially from those expressed or implied by such
forward-looking statements and assumptions. All statements other than statements
of historical fact are statements that could be deemed forward-looking
statements, including any statements regarding the expected benefits and costs
of the Acquisitions contemplated by the Merger Agreement, the Purchase Agreement
or otherwise; the expected timing of the completion of the Acquisitions; the
ability of the parties to complete the Acquisitions; any statements of
expectation or belief; and any statements of assumptions underlying any of the
foregoing. Risks, uncertainties and assumptions include the possibility that
expected benefits may not materialize as expected; that either or both of the
Acquisitions may not be timely completed, if at all; that, prior to the
completion of the Acquisitions, the sellers' businesses may not perform as
expected due to transaction-related uncertainty or other factors; that the
parties are unable to successfully implement integration strategies; and other
risks that are described in the Company's latest Annual Report on Form 10-K and
its other filings with the SEC. The parties assume no obligation and do not
intend to update these forward-looking statements.
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