1
-------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BETWEEN
APPLIED ANALYTICAL INDUSTRIES, INC.,
KCAS ACQUISITION, INC.
AND
KANSAS CITY ANALYTICAL SERVICES, INC.
Dated as of September 2, 1998
-------------------------------------------------------------------------------
2
TABLE OF CONTENTS
Page
----
ARTICLE I........................................................................................5
DEFINED TERMS....................................................................................5
1.1 Definitions.............................................................................5
ARTICLE II......................................................................................10
THE MERGER......................................................................................10
2.1 The Merger.............................................................................10
2.2 Articles of Incorporation..............................................................10
2.3 Bylaws.................................................................................10
2.4 Directors and Officers.................................................................10
ARTICLE III.....................................................................................11
CONVERSION AND EXCHANGE OF SHARES...............................................................11
3.1 Shares.................................................................................11
3.2 Exchange and Conversion of Shares......................................................12
ARTICLE IV......................................................................................12
THE CLOSING.....................................................................................12
4.1 Effective Time and Closing.............................................................12
4.2 Deliveries by KCAS.....................................................................13
4.3 Deliveries by Merger Sub and AAI.......................................................13
3
ARTICLE V.......................................................................................13
REPRESENTATIONS AND WARRANTIES OF KCAS..........................................................13
5.1 Organization and Good Standing; Power and Authority: Qualifications....................13
5.2 Authorization of the Merger Documents..................................................14
5.3 Capitalization.........................................................................14
5.4 Financial Statements...................................................................14
5.5 Absence of Undisclosed Liabilities.....................................................15
5.6 Absence of Material Changes............................................................15
5.7 No Conflicts...........................................................................16
5.8 Agreements.............................................................................16
5.9 Intellectual Property Rights...........................................................17
5.10 Equity Investments; Subsidiaries.......................................................18
5.11 Corporate Minute Books.................................................................18
5.12 Suitability............................................................................18
5.13 Assets ................................................................................19
5.14 Employee Benefit Plans.................................................................19
5.15 Labor Relations; Employees.............................................................20
i
3
5.16 Litigation; Orders.....................................................................21
5.17 Compliance with Laws; Permits..........................................................21
5.18 Related Transactions...................................................................21
5.19 Disclosure.............................................................................21
5.20 Taxes .................................................................................22
5.21 Environmental Protection...............................................................22
5.22 Consents...............................................................................23
5.23 Insurance; Workers' Compensation.......................................................23
5.24 Brokers ...............................................................................24
5.25 Suppliers and Customers................................................................24
5.26 Previous Issuances Exempt..............................................................24
5.27 Real Property..........................................................................24
5.28 Accounts Receivable....................................................................25
5.29 Food and Drug Administration Matters...................................................25
5.30 Other Representations and Warranties...................................................26
ARTICLE VI......................................................................................26
REPRESENTATIONS AND WARRANTIES..................................................................26
6.1 Organization and Good Standing; Power and Authority: Qualifications....................26
6.2 Authorization of the Merger Documents..................................................26
6.3 Authorization and Issuance of Shares...................................................27
6.4 Public Documents.......................................................................27
6.5 No Conflicts...........................................................................27
6.6 Disclosure.............................................................................27
6.7 Brokers................................................................................28
ARTICLE VII.....................................................................................28
COVENANTS OF KCAS...............................................................................28
7.1 Ordinary Conduct.......................................................................28
7.2 No Solicitation........................................................................30
7.3 Access to Information..................................................................30
7.4 Schedules to Agreement.................................................................31
7.5 Maintenance of Corporate Existence.....................................................31
7.6 Termination of 401(k) Plan.............................................................31
ARTICLE VIII....................................................................................31
MUTUAL COVENANTS................................................................................31
8.1 Confidentiality........................................................................31
8.2 Consummation of Agreement..............................................................32
8.3 Publicity..............................................................................32
ii
4
ARTICLE IX......................................................................................33
CONDITIONS TO CLOSING...........................................................................33
9.1 Conditions to Each Party's Obligations to Effect the Transactions Contemplated
Hereby.................................................................................33
9.2 Conditions to the Obligations of Seller to Effect the Transactions Contemplated
Hereby.................................................................................33
9.3 Conditions to the Obligations of AAI and Merger Sub to Effect the Transactions
Contemplated Hereby....................................................................34
ARTICLE X.......................................................................................35
TERMINATION.....................................................................................35
10.1 Termination............................................................................35
10.2 Procedure and Effect of Termination or Failure to Close................................35
ARTICLE XI......................................................................................36
MISCELLANEOUS PROVISIONS........................................................................36
11.1 Survival of Representations; Indemnification...........................................36
11.2 Expenses ..............................................................................37
11.3 Waiver of Compliance; Consents.........................................................37
11.4 Amendment and Modification.............................................................37
11.5 Notices................................................................................37
11.6 Assignment.............................................................................38
11.7 Governing Law; Jurisdiction............................................................38
11.8 Jurisdiction and Venue.................................................................39
11.9 Counterparts...........................................................................39
11.10 Nouns and Pronouns.....................................................................39
11.11 Interpretation.........................................................................39
11.12 Parties in Interest....................................................................39
11.13 Employee Length of Service.............................................................39
11.14 Entire Agreement.......................................................................40
11.15 Release of Phoenix (IBRD)..............................................................40
iii
5
EXHIBITS
Exhibit A Form of Certificate of Merger
Exhibit B Form of Indemnification Agreement
Exhibit C Form Employee Nondisclosure Agreement
Exhibit D Form of Xx. Xxxxx Employment Agreement
Exhibit E Form of Dr. Fu Employment Agreement
Exhibit F Form of Election of Merger Consideration
Exhibit G Form of Transmittal Letter
Exhibit H Form of Opinion of AAI's Counsel
Exhibit I Form of Opinion of KCAS's Counsel
iv
6
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
September 2, 1998, is by and between APPLIED ANALYTICAL INDUSTRIES, INC., a
Delaware corporation ("AAI"), KCAS ACQUISITION, INC., a Kansas corporation and
a wholly owned subsidiary of AAI ("Merger Sub"), and KANSAS CITY ANALYTICAL
SERVICES, INC., a Kansas corporation ("KCAS").
BACKGROUND STATEMENT
The parties hereto desire to effect a merger of Merger Sub and KCAS
pursuant to which KCAS will be the surviving corporation, and the stockholders
of KCAS as of the Effective Time will receive as consideration for the Merger
at their election (i) cash in the amount of $6,060.61 per outstanding share of
common stock, $1.00 par value, of KCAS ("Common Stock") or (ii) shares of
common stock, $.001 par value, of AAI ("AAI Common Stock") based on a formula
set forth herein or (iii) a combination of cash and shares of AAI Common Stock
as set forth herein. Such merger shall be consummated pursuant to the terms and
conditions of this Agreement.
STATEMENT OF AGREEMENT
In consideration of the premises and the mutual covenants contained
herein, the parties hereto agree as follows:
ARTICLE I.
DEFINED TERMS
1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:
"AAI Common Stock" shall mean the common stock, $.001 par value, of
AAI.
"Acquisition Transaction" has the meaning given to it in SECTION 7.2.
"Action" has the meaning given to it in SECTION 11.2.
"Board of Directors" means the board of directors of a corporation or
any committee thereof legally authorized to act on its behalf.
7
"Benefit Plan" has the meaning given to it in SECTION 5.14.
"Certificate of Merger" means the Certificate of Merger substantially
in the form attached hereto as EXHIBIT A.
"Closing" means the closing of the transactions contemplated herein,
as identified more specifically in ARTICLE IV.
"Closing Date" means September 16, 1998, or such other date agreed to
by the parties hereto.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
shall be construed also to refer to any successor sections.
"Common Stock" shall mean the common stock, $1.00 par value, of KCAS.
"Contract" means any indenture, mortgage, guaranty, lease, license or
other contract, agreement or understanding, written or oral.
"Dissenting Shares" shall mean shares of Common Stock as to which a
Stockholder has properly asserted rights of dissent and appraisal pursuant to
Section 17-6712 of the Kansas Law.
"Effective Time" has the meaning given to it in SECTION 4.1.
"Employee" has the meaning given to it in SECTION 5.15(a).
"Employee Nondisclosure Agreements" means those certain Employee
Nondisclosure Agreements substantially in the form of EXHIBIT C.
"Employment Agreements" shall mean the Employment Agreement between
AAI and Xx. Xxxxxxx X. Xxxxx of the form attached hereto as EXHIBIT D and the
Employment Agreement between AAI and Xx. Xxxxxxxx X. Xx of the form attached
hereto as EXHIBIT E.
"Encumbrances" means any mortgages, claims, liens, security interests,
pledges, escrows, charges or other encumbrances of any kind or character
whatsoever.
"Environmental Costs" means, without limitation, any actual or
potential cleanup costs, remediation, removal, or other response costs (which,
without limitation, shall include costs to cause KCAS to come into compliance
with Environmental Laws), investigation costs (including, without limitation,
fees of consultants, counsel, and other experts in connection with any
environmental investigation, testing, audits or studies), losses, liabilities
or obligations (including, without limitation, liabilities or obligations under
any lease or other contract), payments, damages (including, without limitation,
any actual, punitive or consequential damages under any statutory laws, common
law cause of action or contractual obligations or otherwise,
6
8
including, without limitation, damages of third parties for personal injury or
property damage or damages to natural resources), civil or criminal fines or
penalties, judgments, and amounts paid in settlement arising out of or relating
to or resulting from any Environmental Matter.
"Environmental Laws" means, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. xx.xx. 9601,
et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. xx.xx. 11001, et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. xx.xx. 6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. xx.xx.
26019 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7
U.S.C. xx.xx. 136, et seq.; the Clean Air Act, 42 U.S.C. xx.xx. 7401 et seq.;
the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. xx.xx.
1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. xx.xx. 300f, et seq.; the
Occupational Safety and Health Act, 29 U.S.C. xx.xx. 641, et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. xx.xx. 1801, et seq.; as any
of the above statutes have been amended from time to time, all rules and
regulations promulgated pursuant to any of the above statutes, and any other
foreign, federal, state or local law, statute, ordinance, rule or regulation
governing Environmental Matters, as the same have been amended from time to
time, including any common law cause of action providing any right of remedy
relating to Environmental Matters, all indemnity agreements and other
contractual obligations (including leases, asset purchase and merger
agreements) relating to Environmental Matters, and all applicable judicial and
administrative decisions, orders, and decrees relating to Environmental
Matters.
"Environmental Matter" means any matter arising out of, relating to,
or resulting from pollution, contamination, protection of the environment,
human health or safety, health or safety of employees, sanitation, and any
matters relating to emissions, discharges, disseminations, releases or
threatened releases, of Hazardous Substances into the air (indoor and outdoor),
surface water, groundwater, soil, land surface or subsurface, buildings,
facilities, real or personal property or fixtures or otherwise arising out of,
relating to, or resulting from the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, handling, release or threatened
release of Hazardous Substances.
"Environmental Permits" has the meaning given to it in SECTION 5.21.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import in each case as in
effect from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"Financial Statements" means, with respect to KCAS and its
Subsidiaries, (a) the audited balance sheet at October 31, 1996 and 1997, (b)
the unaudited statements of income, stockholders' equity and cash flows for the
fiscal years ended October 31, 1996 and 1997, (c) the unaudited statements of
income, stockholders' equity and cash flows and the unaudited balance sheet for
and at the fiscal year ended October 31, 1995 and (d) the unaudited balance
sheet at March 31, 1998.
"Generally Accepted Accounting Principles" means generally accepted
accounting principles as recognized by the American Institute of Certified
Public Accountants, as in effect
7
9
from time to time, consistently applied and maintained on a consistent basis
for a Person on a consolidated basis throughout the period indicated and
consistent with such Person's prior financial practice.
"Hazardous Substance" means any substance or material meeting any one
or more of the following criteria: (i) it is or contains a substance designated
as a hazardous waste, hazardous substance, hazardous material, pollutant,
contaminant or toxic substance under any Environmental Law; (ii) its presence
at some quantity requires investigation, notification or remediation under any
Environmental Law; or (iii) it contains, without limiting the foregoing,
asbestos, polychlorinated biphenyls, petroleum hydrocarbons, petroleum derived
substances or waste, crude oil or any fraction thereof, nuclear fuel, natural
gas or synthetic gas.
"IRB Debt" means the debt of KCAS underlying or securing the
Industrial Revenue Bonds, Series 1985 (Xxxxx Xxxxxx Associates Project) in the
initial principal amount of $830,000 issued pursuant to that certain Trust
Indenture dated September 1, 1985, by and between the City of Shawnee, Kansas
and United Missouri Bank of Kansas City, N.A., as trustee.
"Indemnification Agreement" means that certain Indemnification
Agreement substantially in the form attached hereto as EXHIBIT B.
"Information" has the meaning given to it in SECTION 8.1.
"Intellectual Property" means (a) all world wide inventions and
discoveries (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names and corporate
names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith, (d) all mask works and all applications,
registrations and renewals in connection therewith, (e) all know-how, trade
secrets and confidential business information, whether patentable or
unpatentable and whether or not reduced to practice (including ideas, research
and development, know-how, formulas, compositions, manufacturing and production
process and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, (h) all copies and
tangible embodiments thereof (in whatever form or medium) and (i) all licenses
and agreements in connection therewith.
"Kansas Law" means the General Corporation Code of Kansas as amended,
and any successor statute of similar import, in each case as in effect from
time to time. References to sections of Kansas Law shall be construed also to
refer to any successor sections.
8
10
"Knowledge of KCAS" means the actual knowledge of any of the
following: Xxxxxxx X. Xxxxx, Ph.D., Xxxxxxx X. Xxxxx, Xxxxxxxx X. Xx, Ph.D. and
Xxxxxx Xxxxxxxx.
"Leased Real Properties" has the meaning given to it in SECTION 5.27.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), results of operations, business, prospects
or assets or liabilities of a Person.
"Merger" means the merger of KCAS with and into Merger Sub pursuant to
the terms and conditions of this Agreement.
"Merger Consideration" has the meaning given to it in SECTION 3.1(a).
"Merger Documents" means collectively this Agreement and the other
agreements and documents contemplated hereby, including any certificates or
filings required hereunder or thereunder.
"Permitted Encumbrances" means any of the following Encumbrances: (i)
Encumbrances in favor of carriers, warehousemen, mechanics, landlords and
materialmen and other similar persons incurred in the ordinary course of
business for sums not yet due and payable, and (ii) Encumbrances for current
taxes, assessments or other governmental charges incurred in the ordinary
course of business and that are not delinquent or remain payable without any
penalty.
"Person" means a corporation, a company, an association, a joint
venture, a partnership, an organization, a business, an individual, a trust or
a government or political subdivision thereof or any government agency or any
other legal entity.
"Real Properties" has the meaning given to it in SECTION 5.27.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor statute of similar import, in each case as in effect from time to
time.
"Stockholder" or "Stockholders" means one or more of the holders of
capital stock of KCAS immediately prior to the Effective Time, as the case may
be.
"Subsidiary" of a Person means a corporation or other Person of which
more than fifty percent (50%) of the outstanding securities having ordinary
voting power to elect a majority of the board of directors, in the case of a
corporation, or of the ownership or beneficial interests having ordinary voting
power, in the case of a Person not a corporation, is, directly or indirectly,
provided or controlled by such Person or any of its subsidiaries or a
combination thereof (irrespective of whether, at the time, securities of any
other class or classes of any such corporation or other Person shall have or
might have voting power by reason of the happening of any contingency).
"Surviving Corporation" has the meaning given to it in SECTION 2.1.
9
11
"Taxes" means any taxes, assessments, duties, fees, levies, imposts,
deductions, withholdings, including, without limitation, income, gross
receipts, ad valorem, value added, excise, real or personal property, asset,
sales, use, license, payroll, transaction, capital, net worth and franchise
taxes, estimated taxes, withholding, employment, social security, workers
compensation, utility, severance, production, unemployment compensation,
occupation, premium, windfall profits, transfer and gains taxes, or other
governmental charges of any nature whatsoever imposed by any government or
taxing authority of any country or political subdivision of any country and any
liabilities with respect thereto, including any penalties, additions to tax,
fines or interest thereon, and includes any liability of KCAS and its
Subsidiaries arising under any tax sharing agreement to which any of them is or
has been a party.
"Tax Return" means any report, return or other information required to
be supplied to a taxing authority in connection with Taxes.
"Transmittal Letter" has the meaning given to it in SECTION 3.2(a).
ARTICLE II.
THE MERGER
2.1 THE MERGER. On the terms and subject to the conditions of this
Agreement and Kansas Law, at the Effective Time, Merger Sub will merge with and
into KCAS, the separate existence of Merger Sub will cease and KCAS will be the
surviving corporation (the "Surviving Corporation").
2.2 ARTICLES OF INCORPORATION. The articles of incorporation of
KCAS in effect at the Effective Time shall be the articles of incorporation of
the Surviving Corporation which shall be amended and restated to be
substantially identical to the Articles of Incorporation of Merger Sub except
that Article I shall be amended to read as follows: "The name of the
corporation is Kansas City Analytical Services, Inc."
2.3 BYLAWS. The bylaws of Merger Sub in effect at the Effective
Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
2.4 DIRECTORS AND OFFICERS. From and after the Effective Time,
until successors are duly elected or appointed in accordance with applicable
law, the directors of Merger Sub at the Effective Time shall be the directors
of the Surviving Corporation and the officers of Merger Sub at the Effective
Time shall be the officers of the Surviving Corporation.
10
12
ARTICLE III.
CONVERSION AND EXCHANGE OF SHARES
3.1 SHARES. At the Effective Time, by virtue of the Merger and
without any action on the part of any Person:
(a) Each issued and outstanding share of Common Stock, other than
Dissenting Shares shall be converted into the right to receive, at the option
of each Stockholder, (i) an amount in cash, without interest, equal to
$6,060.61 (the "Cash Merger Consideration") or (ii) $6,888.89 worth of AAI
Common Stock at the AAI Valuation Price (as defined below) (the "Stock Merger
Consideration"; the Stock Merger Consideration and Cash Merger Consideration
are generally referred to as the "Merger Consideration"). As used herein, the
"AAI Valuation Price" shall mean (i) the average of the average of the high and
low trading prices per share for AAI Common Stock as reported on the Nasdaq
National Stock Market (as published in The Wall Street Journal, eastern
edition) for each trading day during the ten consecutive trading days during
which shares are traded on the Nasdaq National Stock Market ending on the fifth
trading day prior to the Effective Time (the "Average Trading Price"). No
fractional shares of AAI Common Stock shall be issued. In lieu thereof, each
Stockholder who would otherwise be entitled to a fraction of a share of AAI
Common Stock shall be entitled to receive an amount of cash (rounded to the
nearest whole cent) equal to the product of such fraction of a share of AAI
Common Stock multiplied by the Average Trading Price. No interest will accrue
or be paid on the cash payable in lieu of fractional shares. A Stockholder may
elect to receive Cash Merger Consideration for a portion of such Stockholder's
shares of Common Stock and Stock Merger Consideration for such Stockholder's
remaining shares of Common Stock. Elections to receive Cash Merger
Consideration, Stock Merger Consideration or a combination of both must be made
by written notice of the form attached hereto as EXHIBIT F by each Stockholder
delivered to AAI contemporaneously with the execution by KCAS of this
Agreement. If a Stockholder does not timely make the election required by the
immediately preceding sentence, then the Stockholder shall be deemed to have
elected to receive Cash Merger Consideration for each share of Common Stock
held by such Stockholder. At the Effective Time, all shares of Common Stock
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any
such shares of Common Stock shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration, without interest
or, with respect to holders of Dissenting Shares, rights provided under Section
17-6712 of the Kansas Law. In the event that at any time any holder of
Dissenting Shares shall cease to have the right to demand payment for the value
of such Dissenting Shares pursuant to Section 17-6712 of the Kansas Law, each
Dissenting Share shall be converted into the right to receive the Cash Merger
Consideration.
(b) Each issued and outstanding share of capital stock of Merger
Sub shall be converted into one fully paid and nonassessable share of common
stock, par value $0.01, of the Surviving Corporation.
11
13
3.2 EXCHANGE AND CONVERSION OF SHARES.
(a) At the Closing Date, each holder of shares of Common
Stock shall deliver to the Surviving Corporation a properly executed letter of
transmittal and instructions (together, a "Transmittal Letter"), the form of
which is attached hereto as EXHIBIT G, along with the certificate evidencing
such shares of Common Stock. Subject to any required backup withholding
obligations under the Code, at the Effective Time and upon surrender to the
Surviving Corporation of certificates representing shares of Common Stock,
together with a Transmittal Letter, the Stockholder of such certificates shall
receive in exchange therefor, and AAI shall issue and deliver to such
Stockholder, the Merger Consideration entitled to be received by such
Stockholder.
(b) From and after the Effective Time, there shall be no
transfers on the stock transfer books of KCAS in respect of stockholders of
record at the Effective Time. If after the Effective Time, certificates
representing shares of Common Stock are presented to the Surviving Corporation,
the Surviving Corporation shall cancel or exchange such certificates, and any
underlying shares of Common Stock represented thereby, as provided by this
ARTICLE III. AAI shall be obligated to issue Merger Consideration only to the
record holders of Common Stock.
(c) The Surviving Corporation shall not be liable to a
holder of shares of Common Stock for any property delivered to a public
official pursuant to applicable abandoned property laws, or for any interest
thereon. If certificates representing shares of Common Stock are not
surrendered prior to the date on which the consideration payable in respect of
the underlying shares would otherwise escheat to or become the property of any
governmental unit or agency, any consideration payable in respect of such
certificates, shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims of interest
of any person previously entitled thereto.
ARTICLE IV.
THE CLOSING
4.1 EFFECTIVE TIME AND CLOSING. On the Closing Date, assuming
satisfaction or, to the extent permitted hereunder, waiver, of all conditions
to the Merger set forth in ARTICLE IX, KCAS shall cause the Certificate of
Merger to be filed with the Secretary of State of the State of Kansas.
Additionally, KCAS and Merger Sub shall cause all other filings or recordings
to be made as required by applicable law in connection with the Merger. The
Merger shall be consummated and the Merger shall become effective upon the
filing of the Certificate of Merger with the Secretary of State of the State of
Kansas (such time, the "Effective Time"). The closing of the Merger shall take
place at the offices of Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A. in Charlotte, North
Carolina commencing at 10:00 a.m. local time on the Closing Date.
12
14
4.2 DELIVERIES BY KCAS. At or by the Closing, KCAS shall have
caused the following documents to be executed as contemplated thereby and
delivered to Merger Sub or AAI, or both, as the case may be:
(a) The Employee Nondisclosure Agreements executed by
each of the employees of KCAS listed on ANNEX 2;
(b) The Indemnification Agreement executed by each
Stockholder; and
(c) All other documents, certificates, instruments and
writings required hereunder to be delivered by KCAS, or as reasonably may be
requested by Merger Sub or AAI to consummate the transactions contemplated by
this Agreement or any of the other Merger Documents.
4.3 DELIVERIES BY MERGER SUB AND AAI. At or by the Closing, Merger Sub
and AAI shall have caused to be executed and delivered to the Stockholders:
(a) The Indemnification Agreement;
(b) the Employment Agreements;
(c) all other documents, certificates, instruments and
writings required hereunder to be delivered by Merger Sub or AAI, or as
reasonably may be requested by KCAS to consummate the transactions contemplated
by this Agreement or any other of the Merger Documents; and
(d) the Merger Consideration.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF KCAS
KCAS represents and warrants to Merger Sub and AAI as follows:
5.1 ORGANIZATION AND GOOD STANDING; POWER AND AUTHORITY:
QUALIFICATIONS. KCAS, (i) is a corporation duly incorporated, validly existing
and in good standing under the laws of Kansas, (ii) has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as presently conducted and as proposed to be conducted and (iii)
is qualified to transact business as a foreign corporation in, and is in good
standing under the laws of, those jurisdictions listed on SCHEDULE 5.1, which
jurisdictions constitute all of the jurisdictions wherein the character of the
property owned or leased or the nature of the activities conducted by it makes
such qualification necessary, except where the failure to be so qualified and
in good standing would not have a Material Adverse Effect on KCAS. KCAS has all
requisite corporate power and authority to enter into and perform its
obligations under the Merger Documents.
13
15
5.2 AUTHORIZATION OF THE MERGER DOCUMENTS. The execution, delivery
and performance by KCAS of each of the Merger Documents to which it is party
have been duly authorized by all requisite corporate action on the part of
KCAS, and each of the Merger Documents constitutes a legal, valid and binding
obligation of KCAS enforceable against it in accordance with its terms except
to the extent (a) that enforceability may be limited by bankruptcy, insolvency
or other similar laws affecting creditors' rights generally and (b) that the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to certain equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
5.3 CAPITALIZATION.
(a) The authorized equity capitalization of KCAS as of
the date of this Agreement consists entirely of 900 shares of Common Stock,
$1.00 par value per share, all of which shares are issued and outstanding. All
of such shares have been validly issued and are fully paid and nonassessable.
There are, and immediately after the Closing there will be, no outstanding
warrants, options, agreements, convertible securities or other commitments or
securities convertible into, or exchangeable or exercisable for, shares of
capital stock of KCAS pursuant to which KCAS is or may become obligated to
issue any shares of the capital stock or other securities of KCAS. There are,
and immediately after the Closing there will be, no rights, including
preemptive or similar rights, to purchase or otherwise acquire shares or sell
or otherwise transfer shares of the capital stock of KCAS pursuant to any
provision of law, KCAS's articles of incorporation or its bylaws, any agreement
to which KCAS is a party or otherwise.
(b) SCHEDULE 5.3(B) hereto contains a list of (i) all
holders of record of capital stock of KCAS, including the number of shares of
capital stock held by each such holder. Except as set forth on SCHEDULE 5.3(B),
there are no beneficial owners of shares of KCAS's capital stock or other
securities who are not otherwise holders of record. Except as set forth on
SCHEDULE 5.3(B), KCAS is not a party to, and there is, and immediately after
the Closing there will be, no agreement, restriction or encumbrance (such as a
right of first refusal, right of first offer, proxy, voting agreement, voting
trust, registration rights agreement, stockholders' agreement, or any other
similar agreement, whether or not KCAS is a party thereto) with respect to the
purchase, sale or voting of any shares of capital stock of KCAS (whether
outstanding or issuable upon conversion, exchange or exercise of outstanding
securities). Except as set forth in SCHEDULE 5.3(B) immediately prior to
Closing, no Person has the right to nominate or elect one or more directors of
KCAS other than through the right to vote its shares of Common Stock in an
election of directors.
5.4 FINANCIAL STATEMENTS. KCAS has furnished to Merger Sub its
Financial Statements. Except as set forth in SCHEDULE 5.4 all such Financial
Statements (i) which have been audited have been prepared in accordance with
Generally Accepted Accounting Principles (except that the unaudited financial
statements do not contain all of the footnotes required under Generally
Accepted Accounting Principles and the Financial Statements for any period
other than for a fiscal year or at a fiscal year end are subject to normal
year-end adjustments, none of which reasonably could be expected to result in a
Material Adverse Effect on KCAS) and
14
16
(ii) fairly present the financial position of KCAS as of the date thereof, and
the results of their operations for the periods indicated therein.
5.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on
SCHEDULE 5.5, KCAS does not have any liabilities or obligations (whether
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due) other than (i) liabilities or obligations reserved against or
otherwise disclosed in KCAS's Financial Statements or the footnotes thereto,
(ii) intercompany liabilities among KCAS and its Subsidiaries, (iii)
liabilities or obligations under Contracts listed on the Schedules to this
Agreement or under Contracts that are not required to be disclosed thereon (but
not liabilities for breaches thereof), (iv) trade accounts payable for goods
and services and wages and salaries, in each case, incurred after October 31,
1997, in the ordinary course of business consistent (in amount and kind) with
past practice, (v) other liabilities or obligations that were incurred after
October 31, 1997, in the ordinary course of business consistent (in amount and
kind) with past practice and that do not exceed $50,000 in the aggregate and
(vi) other liabilities disclosed or referred to elsewhere in this Agreement.
5.6 ABSENCE OF MATERIAL CHANGES. Except as set forth on SCHEDULE
5.6 and except as otherwise expressly contemplated by this Agreement, since
October 31, 1997, KCAS has conducted its business in the ordinary course,
consistent with past practice and there has not been (a) any event or condition
having a Material Adverse Effect on KCAS or any event or condition (other than
publicly reported events or conditions affecting KCAS's industry generally)
that reasonably could be expected to have a Material Adverse Effect, (b) any
waiver or cancellation of any right of KCAS to the extent such waiver or
cancellation has had or reasonably could be expected to have a Material Adverse
Effect on KCAS, or the cancellation of any material debt or claim held by KCAS,
(c) any payment, discharge or satisfaction of any claim, liability or
obligation of KCAS, other than trade payables paid in the ordinary course of
business, (d) any Encumbrance upon the assets of KCAS other than any Permitted
Encumbrance or Encumbrance disclosed on SCHEDULE 5.13(A), (e) any payment of
dividends on, or other distribution with respect to, or any direct or indirect
redemption or acquisition by KCAS of, any securities of KCAS, (f) any issuance
of stock, bonds or other securities of KCAS or any options or warrants or other
rights to acquire any such securities or the exercise of outstanding options or
warrants, (g) any sale, assignment or transfer of any tangible or intangible
assets of KCAS except in the ordinary course of business, (h) any loan by KCAS
to any officer, director, employee, consultant or shareholder thereof of an
amount in excess of $25,000 (other than advances to such persons in the
ordinary course of business in connection with travel and travel related
expenses), (i) any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the assets, property, financial
condition or results of operations of KCAS, (j) any increase, direct or
indirect, in the compensation paid or payable to any officer or director of
KCAS or, other than in the ordinary course of business, to any other employee,
consultant or agent of KCAS, (k) any change in the accounting methods,
practices or policies of KCAS, (l) any indebtedness incurred, except in the
ordinary course of business, for borrowed money by KCAS, (m) any amendment to
or termination of any material agreement to which KCAS is a party other than
the expiration of any such agreement in accordance with its terms, (n) any
change to the knowledge of KCAS with respect to the regulation of KCAS or their
respective activities by any administrative agency or governmental body to the
extent such change has had
15
17
or reasonably could be expected to have a Material Adverse Effect on KCAS, (o)
any material change in the manner of business or operations of KCAS or (p) any
agreement or commitment (contingent or otherwise) by KCAS to do any of the
foregoing.
5.7 NO CONFLICTS. Except as set forth on SCHEDULE 5.7, KCAS's
execution and delivery of, and performance of its obligations under, the Merger
Documents and the consummation by KCAS of the transactions contemplated thereby
will not (a) violate any provision of law, statute, rule or regulation, or any
ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body applicable to it, or any of
its properties or assets, (b) conflict with or result in any material breach of
any of the terms, conditions or provisions of, or constitute (with due notice
or lapse of time, or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any
Encumbrance upon any of its properties or assets under, any Contract to which
it is a party or (c) violate its articles of incorporation or bylaws.
5.8 AGREEMENTS.
(a) Except as set forth on SCHEDULE 5.8(A), KCAS is not
a party to any Contract other than any Contract that (i) pursuant to its terms,
has expired, been terminated or fully performed by the parties, and in each
case, under which KCAS does not have any liability, contingent or otherwise,
(ii) is cancelable by either KCAS on thirty (30) days' or less notice without
any penalty or other financial obligation and that involves payments to or from
KCAS of less than $2,000 in such 30-day period or (iii) involves annual
aggregate payments to or from KCAS of $25,000 or less, and in each case, is not
material to the business or financial condition of KCAS, individually or in the
aggregate.
(b) Complete copies (or, if oral, full written
descriptions) of all Contracts required to be listed hereby on SCHEDULE 5.8(A),
including all amendments thereto, have been delivered to AAI. To KCAS's
knowledge, each of such Contracts is legal, valid, binding, enforceable, and in
full force and effect against KCAS and against the other parties thereto. There
is no material breach, violation or default by KCAS, and no event that, with
notice or lapse of time or both, (A) would constitute a breach, violation or
default by such party under any such Contract or (B) would give rise to any
lien or right of termination, modification, cancellation, prepayment,
suspension, limitation, revocation or acceleration against such party under any
such Contract. Except as set forth on SCHEDULE 5.8(B), no other party to any of
such Contracts is in arrears in respect of the performance or satisfaction of
the terms and conditions on its part to be performed or satisfied under any of
such Contracts, no waiver or indulgence has been granted by any of the parties
thereto and no party to any of such Contracts has repudiated any provision
thereof.
5.9 INTELLECTUAL PROPERTY RIGHTS.
(a) KCAS owns or has the right to use pursuant to
license, sublicense, agreement or permission all Intellectual Property,
individually or in the aggregate, material to the operation of its business as
currently conducted; provided, however, KCAS's right to use such Intellectual
Property owned by third parties may be limited by nondisclosure obligations or
other
16
18
restrictions. Each item of Intellectual Property owned or used by KCAS
immediately prior to the Closing will be owned or available for use by the
Surviving Corporation on identical terms and conditions immediately subsequent
to the Closing.
(b) Except as set forth on SCHEDULE 5.9(B), (i) to best
knowledge of KCAS (A) KCAS has not interfered with, infringed upon or
misappropriated any Intellectual Property rights of third parties, and (B) the
business conducted by KCAS (which, in the case of the development, marketing
and licensing of proprietary products, shall be limited to the products set
forth on SCHEDULE 5.9(B)) will not interfere with, infringe upon or
misappropriate any Intellectual Property rights of third parties, and (ii) KCAS
has not received any charge, complaint, claim, demand or notice alleging any
such interference, infringement or misappropriation (including any claim that
it must license or refrain from using any Intellectual Property rights of any
third party). To KCAS's knowledge, no third party has interfered with,
infringed upon or misappropriated any Intellectual Property rights of KCAS.
(c) SCHEDULE 5.9(C) identifies each patent and each
pending patent application that KCAS has filed worldwide. With respect to each
such patent, to the best of KCAS's knowledge, there is no substantial
suggestion or assertion that any claim therein is invalid or unenforceable. The
patent applications identified on SCHEDULE 5.9(C) hereto have been properly
prepared and filed, and such applications are presently being diligently
pursued by the Person making such application.
(d) SCHEDULE 5.9(D) identifies (i) all registered or
unregistered trademarks of each KCAS and (ii) each license, agreement and other
permission that KCAS have granted to any third party with respect to any of
their respective Intellectual Property.
(e) KCAS has delivered to AAI correct and complete
copies of all registrations, patent applications, licenses, agreements and
permissions (as amended), identified in SCHEDULES 5.9(C) AND 5.9(D) hereto and
has delivered to AAI correct and complete copies of all other material written
documentation evidencing ownership and prosecution (including all papers filed
with or received from the United States Patent and Trademark Office of each
such item. With respect to each item of Intellectual Property required to be
identified in SCHEDULE 5.9(C) AND 5.9(D) and except as set forth in SCHEDULE
5.9(E):
(i) KCAS possesses all right, title and interest
in and to the item, free and clear of any encumbrance, license or other
restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge; and
(iii) KCAS has not agreed to indemnify any Person
for or against any interference, infringement, misappropriation or other
conflict with respect to the item.
(f) SCHEDULE 5.9(F) identifies each item of Intellectual
Property that any third party owns and that KCAS uses pursuant to license,
sublicense, agreement or permission except those products that are readily
available at retail market for $1,000 or less. KCAS has not granted
17
19
any sublicense or similar right with respect to any such agreements or
Intellectual Property. Each such item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling or change, and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim
or demand is pending or is threatened that challenges the legality, validity,
or enforceability of any such item of Intellectual Property.
(g) KCAS has not disclosed any of its proprietary
information other than (i) in the regular and ordinary course of business, (ii)
to representatives, agents, consultants, accountants, attorneys, financial
advisers of such Person, (iii) in connection with entering into this Agreement,
(iv) to governmental authorities as from time to time requested or (v) to other
persons subject to agreements regarding the confidential treatment thereof.
(h) KCAS has delivered to AAI copies of (i) all written
opinions of legal counsel issued to KCAS relating to Intellectual Property and
(ii) all correspondence KCAS has received from, or sent to, any third party
concerning or relating to any interference with, infringement upon or
misappropriation of their respective or any third party's Intellectual
Property.
5.10 EQUITY INVESTMENTS; SUBSIDIARIES. Except as disclosed on
SCHEDULE 5.10, KCAS has never had, nor does it presently have, any
Subsidiaries, nor has it owned, nor does it presently own, whether directly or
indirectly owned, any capital stock or other proprietary interest, directly or
indirectly, in any corporation, company, association, trust, partnership, joint
venture or other entity.
5.11 CORPORATE MINUTE BOOKS. Except as disclosed on SCHEDULE 5.11,
the corporate records of each of KCAS are correct and complete in all material
respects. True and correct copies of all minutes of meetings or other actions
by the directors, stockholders or incorporators of each such Person since their
respective inceptions have previously been provided to AAI.
5.12 SUITABILITY. To KCAS's knowledge, none of the events described
in Item 401(f) of Regulation S-K under the Securities Act, has occurred during
the last five years with respect to any director or officer of KCAS (other than
directors serving at the designation of Phoenix International Life Sciences
(IBRD) Inc. or its predecessor).
5.13 ASSETS.
(a) KCAS has good and marketable title to all of its
assets and properties, free and clear of any Encumbrances except (i) as
disclosed in SCHEDULE 5.13(A), or (ii) Permitted Encumbrances.
(b) Except as set forth on SCHEDULE 5.13(B), the
buildings, facilities, machinery, equipment, furniture, leasehold and other
improvements, fixtures, vehicles, structures, any related capitalized items and
other tangible property owned by, or leased to KCAS and material to their
respective operations, as of the date hereof, (i) are in all material respects
in good operating condition and repair (normal wear and tear excepted), (ii)
are in all
18
20
material respects subject to continued repair and replacement in accordance
with past practice and all applicable regulations, and (iii) are suitable for
their current use in all material respects.
(c) Except as set forth on SCHEDULE 5.13(C), KCAS has
not received notice of, or has knowledge of, any pending, threatened or
contemplated condemnation proceeding or similar taking affecting their
respective assets (including the Real Properties).
(d) KCAS has repaid in full the principal and accrued
interest of the IRB Debt and has taken or will promptly take all action
required by it to acquire the approximately 1.2 acres of real property located
at 00000 Xxxxxxx Xxxxx, Xxxxxxx, Xxxxxx upon payment by it of $100.00 pursuant
to the terms of the Lease Agreement, dated as of September 1, 1985, by and
between the City of Shawnee, Kansas, and Xxxxx Xxxxxx Associates, a Kansas
general partnership, as assigned to KCAS pursuant to that certain Assignment of
Lease Agreement, dated December 31, 1992 (the "Lease Agreement"). Upon its
acquisition of such real property pursuant to the Lease Agreement, KCAS shall
have good and marketable title to such real property, free and clear of any
Encumbrances except as disclosed on SCHEDULE 5.13(D) or Permitted Encumbrances.
5.14 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 5.14 hereto contains a true and complete
list of (i) each plan, program, policy, contract, agreement or other
arrangement providing for compensation, severance, termination pay, performance
awards, stock or stock-related awards, vacation, fringe benefits or other
employee benefits of any kind, whether funded or unfunded, written or oral,
which is now sponsored, maintained, contributed to or required to be
contributed to by KCAS or pursuant to which KCAS has any liability, contingent
or otherwise, including, but not limited to, any "employee benefit plan" within
the meaning of Section 3(3) of ERISA (each, a "Benefit Plan") and (ii) each
management, employment, bonus, option, equity (or equity related), severance,
consulting, noncompete, confidentiality or similar agreement or contract,
pursuant to which KCAS has any liability, contingent or otherwise, between, on
the one hand, KCAS, and on the other, any current, former or retired employee,
officer, consultant, independent contractor, agent or director of such Person
(an "Employee") (each, an "Employee Agreement"). Except as identified on
SCHEDULE 5.14, KCAS does not currently sponsor, maintain, contribute to, and is
not required to contribute to, nor has KCAS ever sponsored, maintained,
contributed to or been required to contribute to, or incurred any liability to,
(i) any "defined benefit plan" (as defined in ERISA Section 3(35)), (ii) any
"multiemployer plan" (as defined in ERISA Section 3(37)) or (iii) any Benefit
Plan that provides, or has any liability to provide, life insurance, medical,
severance or other employee welfare benefits to any Employee upon his or her
retirement or termination of employment, except as required by Section 4980B of
the Code.
(b) KCAS is not (i) a member of a "controlled group of
corporations," under "common control" or an "affiliated service group" within
the meaning of Sections 414(b), (c) or (m) of the Code, (ii) required to be
aggregated under Section 414(o) of the Code, or (iii) under "common control,"
within the meaning of Section 4001(a)(14) of ERISA, or any regulations
promulgated or proposed under any of the foregoing Sections, in each case with
any other entity.
19
21
(c) KCAS has delivered to AAI current, accurate and
complete copies of all documents embodying or relating to each Benefit Plan and
each Employee Agreement, including all amendments thereto, trust or funding
agreements relating thereto (if any), the two most recent annual reports
(Series 5500 and related schedules) required under ERISA (if any), the most
recent determination letter (if any) received from the Internal Revenue
Service, the most recent summary plan description (with all material
modifications) (if any), and all material communications to any Employee or
Employees relating to any Benefit Plan or Employee Agreement.
(d) Each Benefit Plan has been established and
maintained in accordance with its terms and in material compliance with all
applicable, laws, statutes, orders, rules and regulations, including but not
limited to ERISA and the Code; and each Benefit Plan intended to qualify under
Section 401 of the Code is, and since its inception has been, so qualified.
(e) The execution of, and performance of the
transactions contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under
any Benefit Plan or Employee Agreement that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligations to
fund benefits with respect to any Employee.
5.15 LABOR RELATIONS; EMPLOYEES.
(a) SCHEDULE 5.15 hereto lists all employees (each, an
"Employee") of KCAS as of the date hereof and their current annual salaries or
hourly wage rate. Except as set forth on SCHEDULE 5.15 hereto, (i) KCAS is not
delinquent in payments to any of its employees, for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
the date hereof or amounts required to be reimbursed by them to the date
hereof, (ii) KCAS is in material compliance with all applicable federal, state
and local laws, rules and regulations respecting employment, employment
practices, labor, terms and conditions of employment and wages and hours, (iii)
KCAS is not bound by or subject to (and none of its assets or properties is
bound by or subject to) any written or oral, express or implied, commitment or
arrangement with any labor union, and no labor union has requested or, to the
best of their knowledge has sought to represent any of the employees,
representatives or agents of KCAS, (iv) there is no labor strike, dispute,
slowdown or stoppage actually pending, or, to the best of KCAS's knowledge,
threatened against or involving KCAS, (v) to the best of KCAS's knowledge, no
salaried key Employee has any plans to terminate his or her employment with
KCAS.
(b) Each Employee listed on SCHEDULE 5.15(B) has
executed an Employee Nondisclosure Agreement.
5.16 LITIGATION; ORDERS. Except as set forth on SCHEDULE 5.16,
there is no civil, criminal or administrative action, suit, claim, notice,
hearing, inquiry, proceeding or investigation at law or in equity by or before
any court, arbitrator or similar panel, governmental instrumentality or other
agency now pending or, to the Knowledge of KCAS, threatened against KCAS or its
assets or business. Except as set forth on SCHEDULE 5.16, KCAS is not subject to
20
22
any order, writ, injunction or decree of any court of any federal, state,
municipal or other domestic or foreign governmental department, commission,
board, bureau, agency or instrumentality.
5.17 COMPLIANCE WITH LAWS; PERMITS. Except as provided in SCHEDULE
5.17 and subject to the limitations of more specific representations made in
this Agreement, in particular those set forth in Sections 5.21 and 5.29 hereof,
KCAS (a) has complied in all material respects with all federal, state, local
and foreign laws, rules, ordinances, codes, consents, authorizations,
registrations, regulations, decrees, directives, judgments and orders
materially applicable to it and its respective business and (b) has all
federal, state, local and foreign governmental licenses, permits and
qualifications required to conduct its business as currently conducted, such
licenses, permits and qualifications are in full force and effect, and no
violations (other than violations notice of which has not been received by
KCAS) have been recorded in respect of any such licenses, permits and
qualifications, and no proceeding is pending or, to the Knowledge of KCAS,
threatened to revoke or limit any such license, permit or qualification.
SCHEDULE 5.17 sets forth a list of all such licenses, permits and
qualifications, and the expiration dates thereof.
5.18 RELATED TRANSACTIONS. Except as set forth on SCHEDULE 5.18(A),
no current stockholder, director, officer or employee of KCAS, or any
"affiliate" or "associate" (as such terms are defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended) of any of the foregoing persons,
or KCAS, is presently, or during the past five years has been, directly or
indirectly, a party to any agreement, transaction or series of similar
transactions with KCAS other than in connection with any such Person's duties
as a director, officer or employee of KCAS.
5.19 DISCLOSURE.
(a) This Agreement and all certificates, instruments and
written materials furnished or made to AAI by or on behalf of KCAS in
connection with this Agreement do not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained herein and therein not misleading.
(b) There is no fact peculiar to KCAS, or its respective
business, of which KCAS is aware that KCAS has not disclosed to AAI that could
reasonably be expected (i) to have a Material Adverse Effect on KCAS or (ii) to
materially adversely affect the ability of KCAS to perform its obligations
under the Merger Documents.
5.20 TAXES.
(a) Except as set forth on SCHEDULE 5.20(A), KCAS has
filed all Tax Returns required by law to have been filed by it, and has paid
all Taxes required to be paid by it, prior to the date hereof, including,
without limitation, any Tax levied upon any of its properties, assets, income
or franchises. All Tax Returns filed by KCAS were complete and correct in all
material respects and, except as set forth in SCHEDULE 5.20(A), each such Tax
Return was timely filed. All amounts required to be collected or withheld by
KCAS have been collected or withheld and any such amounts that are required to
be remitted to any taxing authority prior to the date hereof have
21
23
been duly remitted. The accruals and reserves for Taxes in each of such balance
sheets that are part of the Financial Statements are adequate in all material
respects to cover any liability of KCAS for Taxes for periods through the dates
of such balance sheets. The accruals and reserves for deferred tax liability in
each of such balance sheets were adequate as of the date thereof. If KCAS files
its Tax Returns for its current taxable year, in conformity with its past
practices and tax reporting, there will be no basis for any material adverse
audit adjustments with respect to KCAS under any of the provisions of the Code,
or any provisions of state, local or foreign tax law, with respect to
operations and activities of KCAS during the period beginning on November 1,
1997 and ending on the date hereof.
(b) No taxing authority in a jurisdiction where KCAS
does not file Tax Returns has made a claim, assertion or, to the Knowledge of
KCAS, threat that such non-filing entity is or may be subject to taxation by
such jurisdiction. SCHEDULE 5.20(C) contains a list of states, territories and
jurisdictions (whether foreign or domestic) in which KCAS has filed any income,
franchise, sales and use tax return for taxable periods ending on or after
October 31, 1994. All taxable years of KCAS for federal, state and foreign
local income tax purposes for periods ended on or before October 31, 1994 have
been closed by expiration of the applicable statute of limitations (taking into
account waivers and extensions).
5.21 ENVIRONMENTAL PROTECTION. Except as set forth on SCHEDULE
5.21(A), KCAS has, at all times and in all material respects, operated, and in
all material respects is, in compliance with all Environmental Laws. Except as
set forth in SCHEDULE 5.21(B), KCAS has obtained, and is in material compliance
with, all material permits, licenses, authorizations, registrations and other
governmental consents required by applicable Environmental Laws ("Environmental
Permits"), including, without limitation, those regulating emissions,
discharges, or releases of Hazardous Substances, or the use, storage,
treatment, transportation, release, emission and disposal of raw materials,
byproducts, wastes and other substances used or produced by or otherwise
relating to its business. Except as set forth in SCHEDULE 5.21(C), there are no
claims, notices, civil, criminal or administrative actions, suits, hearings,
investigations, inquiries or proceedings pending or, to the Knowledge of KCAS,
threatened against KCAS that are based on or related to any Environmental
Matters or the failure to have any required Environmental Permits. Except as
set forth in SCHEDULE 5.21(D), there are no past or present conditions, events
or circumstances (i) that may interfere with or prevent continued compliance by
KCAS with Environmental Laws and the requirements of Environmental Permits,
(ii) that may give rise to any liability or other obligation under any
Environmental Laws that may require KCAS to incur any actual or potential
Environmental Costs, or (iii) that may form the basis of any claim, action,
suit, proceeding, hearing, investigation or inquiry against or involving any
KCAS based on or related to any Environmental Matter or that could require KCAS
to incur any Environmental Costs. Except as set forth in SCHEDULE 5.21(E),
there are no underground or aboveground storage tanks, incinerators or surface
impoundments at, on, or about, under or within any real property or tangible
assets owned, operated or controlled in whole or in part by KCAS. SCHEDULE
5.21(E) also lists all underground or aboveground storage tanks, incinerators
or surface impoundments that were removed from any such properties. Except as
set forth in SCHEDULE 5.21(F), KCAS has not received any written notice or
other communication that it is or may be a potentially responsible person or
otherwise liable in connection with any waste disposal site allegedly
containing any Hazardous Substances, or other location used for the disposal of
any Hazardous
22
24
Substances, or notice of any failure on its behalf to comply in any respect
with any Environmental Law or the requirements of any Environmental Permit.
Except as set forth on SCHEDULE 5.21(G), KCAS has not used any waste disposal
site, or otherwise disposed of, transported, or arranged for the transportation
of, any Hazardous Substances to any place or location, or in violation of any
Environmental Laws. Except as set forth in SCHEDULE 5.21(H), no lien exists,
and, to KCAS's knowledge, no condition exists which could result in the filing
of a lien, against any property of KCAS under any Environmental Law or relating
to any Environmental Matter. Except as set forth in SCHEDULE 5.21(I), there has
been no release or other dissemination at any time of any Hazardous Substances
at, on, or about, under or within any real property currently or formerly owned
or leased by KCAS or any predecessor thereof or any real properties operated or
controlled by KCAS (other than pursuant to and in accordance with permits held
by KCAS or its predecessor). Except as set forth in SCHEDULE 5.21(J), KCAS has
not been requested or required by any governmental authority to perform any
investigatory or remedial activity or other action in connection with any
Environmental Matter.
5.22 CONSENTS. Except as set forth on SCHEDULE 5.22, no permit,
authorization, consent or approval of or by, or any notification of or filing
with, any person (governmental or private) is required in connection with the
execution, delivery and performance by KCAS of the Merger Documents or the
consummation by KCAS of the transactions contemplated thereby (other than such
notifications or filings required under applicable federal or state securities
laws, if any, which shall be made on a timely basis and the filing of the
Certificate of Merger with the Secretary of State of the State of Kansas).
5.23 INSURANCE; WORKERS' COMPENSATION.
(a) SCHEDULE 5.23(A) lists each currently effective insurance
policy issued in favor of KCAS, setting forth the identity of the respective
insurance carriers and a description of the policy. All premiums due and
payable in respect of such policies have been paid, such policies are in full
force and effect and free from any right granted by KCAS of termination on the
part of the insurance carriers, except as provided in the respective policies.
SCHEDULE 5.23(B) sets forth a description, indicating dates and nature of
claims, of the workers' compensation experience through the date hereof of KCAS
since November 1, 1996, which description is true, complete and accurate in all
material respects.
(b) Except as set forth on SCHEDULE 5.23(B), KCAS has not received
any notice of cancellation with respect to any of its insurance policies within
the three years preceding the date hereof, and, within the three years
preceding the date hereof, KCAS has not been refused any insurance coverage
sought or applied for, in each case where such cancellation or refusal,
individually or in the aggregate, would have a Material Adverse Effect on KCAS.
5.24 BROKERS. Neither KCAS nor any of its officers, directors,
employees or stockholders has employed any broker or finder in connection with
the transactions contemplated by this Agreement.
5.25 SUPPLIERS AND CUSTOMERS. No supplier of materials or services
to KCAS in an amount in excess of $50,000 per year has during the last twelve
(12) months on such supplier's
23
25
initiative decreased materially or, to the Knowledge of KCAS, threatened to
decrease or limit materially its provision of services or supplies to KCAS, nor
expressed to KCAS material dissatisfaction with the business relationship
between such Person and the supplier. KCAS has provided to AAI a list of all
customers which accounted for 5% or more of KCAS's revenues for the fiscal year
ended October 31, 1997, indicating the revenues from each such customer. KCAS
has no knowledge of any termination, cancellation or threatened termination or
cancellation or limitation of, or any material modification or change in, or
expressed material dissatisfaction with the business relationship between KCAS,
on one hand, and any supplier or customer thereof, on the other hand, of
materials or services in an amount in excess of $50,000 per year received by
KCAS since October 31, 1996.
5.26 PREVIOUS ISSUANCES EXEMPT. All shares of capital stock and
other securities issued by KCAS prior to Closing have been issued in
transactions exempt from registration under the Securities Act and all
applicable state securities or "blue sky" laws. KCAS has not violated the
Securities Act or any applicable state securities or "blue sky" laws in
connection with the issuance of any shares of capital stock or other securities
prior to the Closing. KCAS has not offered any of its capital stock, or any
other securities, for sale to, or solicited any offers to buy any of the
foregoing from KCAS, or otherwise approached or negotiated with any other
person in respect thereof, in such a manner as to require registration under
the Securities Act.
5.27 REAL PROPERTY. SCHEDULE 5.27(A) lists all real property owned
by KCAS (the "Real Properties") and SCHEDULE 5.27(B) lists all real property
leased by KCAS, each of which has leasehold title to its respectively leased
real properties (collectively, the "Leased Real Properties"), in each case,
free and clear of all imperfections of title and all Encumbrances, except for
(i) Permitted Encumbrances, and (ii) Encumbrances listed on SCHEDULE 5.27(B).
To KCAS's knowledge, other than as described on SCHEDULE 5.27(B), there are no
intended public improvements that will result in any charge being levied
against, or in the creation of any Encumbrances upon, the Real Properties or
Leased Real Properties or any portion thereof. To KCAS's knowledge, except as
disclosed on SCHEDULE 5.27(B), there are no options, rights of first refusal,
rights of first offer or other similar rights with respect to the Real
Properties or Leased Real Properties.
5.28 ACCOUNTS RECEIVABLE. The accounts receivable reflected on the
Financial Statements and those accounts receivable of KCAS acquired or created
after October 31, 1997 through the date hereof (a) were and are, except to the
extent collected, bona fide accounts receivable created in the ordinary and
usual course of business in connection with bona fide transactions and
consistent with past practice and (b) are recorded net of discounts, if any,
provided to customers. To the Knowledge of KCAS, there are no matters that
would cause KCAS to believe that any outstanding account receivable is not
collectible in the ordinary course.
5.29 FOOD AND DRUG ADMINISTRATION MATTERS.
(a) Except as set forth on SCHEDULE 5.29, KCAS has not
received any communication (including, any warning letter) or is otherwise
aware of any action or proceeding pending or, to the best of their knowledge,
threatened, including, without limitation, warning
24
26
letter, prosecution, injunction, seizure, civil fine or recall, alleging that
such Person is not in compliance with any and all applicable laws, regulations
or orders implemented by the Food and Drug Administration, or implemented by
the relevant state, local or international agency responsible for regulating
the pharmaceutical industry, including but not limited to, allegations related
to (i) drug development establishments operated by KCAS or (ii) drug or product
license applications submitted directly by such Person or by a customer of such
Person that includes data generated by KCAS other than non-material
correspondence received from the Food and Drug Administration in connection
with the filing and review of applications. To KCAS's knowledge, no employee of
KCAS is or has been the subject of any similar pending or threatened action or
proceeding.
(b) To the best knowledge of KCAS after appropriate
inquiry, all consultants utilized by KCAS to generate information to be
submitted to the Food and Drug Administration, or any equivalent state, local
or international agency, including, but not limited to, contract research
organizations, pre-clinical testing laboratories, clinical investigators and
institutional review boards, are in compliance with all applicable Food and
Drug Administration requirements, as well as the applicable requirements of
relevant state, local and international agencies with regard to the development
of data to be utilized by KCAS as part of the relevant drug or product approval
process.
(c) Neither KCAS, nor any employee of KCAS, has received
any correspondence from the Food and Drug Administration or is aware of any
action or proceeding, pending or, to the best of KCAS's knowledge, threatened,
against KCAS or any such employee regarding any debarment action or
investigation undertaken pursuant to the Generic Drug Enforcement Act of 1992,
21 U.S.C. ss. 335, or any other similar regulation of the Food and Drug
Administration.
(d) Neither KCAS, nor any employee of KCAS, has been the
subject, officially or otherwise, of any investigation by the Food and Drug
Administration pursuant to its Fraud, Untrue, Statements of Material Facts,
Bribery, and Illegal Gratuities Final Policy.
(e) To KCAS's knowledge, no data generated by KCAS that
has been provided to clients of such Person is the subject, either pending or
threatened, of any regulatory or other action by the Food and Drug
Administration or by any state, local or international regulatory entity
relating to the truthfulness or scientific adequacy of such data.
(f) All drug and product license applications and
related filings to the Food and Drug Administration by KCAS, and all statements
furnished by KCAS to Merger Sub or AAI applicable to the status of all drug and
product license applications, pending and anticipated, are current and do not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained therein not misleading. With
regard to all drug and product license applications pending before the Food and
Drug Administration, except as set forth on SCHEDULE 5.29(F), there is no
correspondence or other communications from the Food and Drug Administration
questioning the approvability of such applications.
25
27
5.30 OTHER REPRESENTATIONS AND WARRANTIES. The representations and
warranties of KCAS set forth in any of the other Merger Documents other than
this Agreement are true and correct.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
OF
AAI AND MERGER SUB
AAI and Merger Sub represent and warrant to KCAS as follows:
6.1 ORGANIZATION AND GOOD STANDING; POWER AND AUTHORITY:
QUALIFICATIONS. Each of AAI and Merger Sub (i) is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and (ii) has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted and as proposed to be conducted. Each of Merger Sub and
AAI has all requisite corporate power and authority to enter into and perform
its obligations under the Merger Documents.
6.2 AUTHORIZATION OF THE MERGER DOCUMENTS. The execution, delivery
and performance by Merger Sub and AAI of each of the Merger Documents to which
it is party have been duly authorized by all requisite corporate action on the
parts of Merger Sub and AAI, and each of the Merger Documents constitutes a
legal, valid and binding obligation of Merger Sub and AAI, as appropriate,
enforceable against it in accordance with its terms, except to the extent (a)
that enforceability may be limited by bankruptcy, insolvency or other similar
laws affecting creditors' rights generally and (b) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to certain equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
6.3 AUTHORIZATION AND ISSUANCE OF SHARES. The authorization,
reservation, issuance, sale and delivery of the Stock Merger Consideration have
been duly authorized by all requisite corporate action on the part of AAI, and
when issued, sold and delivered in accordance with this Agreement, such Stock
Merger Consideration will be validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof,
free of all Encumbrances. Moreover, AAI has reserved a sufficient number of
shares of AAI Common Stock for issuance under this Agreement.
6.4 PUBLIC DOCUMENTS. AAI's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, as amended, and Quarterly Report on Form
10-Q for the period ended March 31, 1998, when filed with the Securities and
Exchange Commission did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
26
28
6.5 NO CONFLICTS. Merger Sub's and AAI's execution and delivery
of, and performance of their respective obligations under, the Merger Documents
and the consummation by each of them of the transactions contemplated thereby
(including, without limitation, the issuance, sale and delivery by AAI of AAI
Common Stock hereunder) will not (a) violate any provision of law, statute,
rule or regulation, or any ruling, writ, injunction, order, judgment or decree
of any court, administrative agency or other governmental body applicable to
AAI or any of its Subsidiaries, or any of such Person's properties or assets,
(b) conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute (with due notice or lapse of time, or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any Encumbrance upon any of
the properties or assets of AAI or any of its Subsidiaries under, any Contract
to which any of them is a party or (c) violate the certificate of incorporation
or bylaws of any such Persons.
6.6 DISCLOSURE.
(a) This Agreement and all certificates, instruments and
written materials furnished or made to KCAS by or on behalf of AAI or any of
its Subsidiaries in connection with this Agreement, taken as a whole, and
including any corrective materials furnished or made available to KCAS prior to
the date hereof, do not contain any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading.
(b) There is no fact peculiar to AAI or any of its
Subsidiaries, or their respective businesses, of which Merger Sub or AAI is
aware, that Merger Sub or AAI has not disclosed to KCAS that could reasonably
be expected (i) to have a Material Adverse Effect on AAI and its Subsidiaries
taken as a whole or (ii) to materially adversely affect the ability of Merger
Sub or AAI to perform its obligations under the Merger Documents.
6.7 BROKERS. Neither AAI nor any of its Subsidiaries, nor any
officer, director, employee or stockholder of any such Persons, has employed
any broker or finder in connection with the transactions contemplated by this
Agreement.
ARTICLE VII.
COVENANTS OF KCAS
KCAS covenants and agrees as follows:
7.1 ORDINARY CONDUCT. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Time, KCAS
will cause its business to be conducted in the ordinary course in substantially
the same manner as presently conducted and will make all reasonable commercial
efforts consistent with past practices to preserve its relationships with its
customers, suppliers and others with whom KCAS deals and to keep available the
services of its officers and employees. Additionally, except as otherwise
27
29
contemplated by this Agreement or as set forth on SCHEDULE 7.1, KCAS will not
do any of the following without the prior written consent of Merger Sub or AAI:
(a) Amend the articles of incorporation or bylaws of KCAS;
(b) Authorize for issuance, issue, sell, deliver or agree
or commit to issue, sell or deliver (whether through the issuance or granting
of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities or equity equivalents
(including, without limitation, any stock appreciation rights) of KCAS, or
amend any of the terms of any such securities or agreements outstanding as of
the date hereof, except as specifically contemplated by this Agreement;
(c) (i) Split, combine or reclassify any shares of
capital stock of KCAS, (ii) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of capital stock of KCAS or (iii) redeem or otherwise acquire any
securities of KCAS;
(d) (i) Incur or assume any long-term debt or issue any
debt securities or, except under existing lines of credit and in amounts not
material to KCAS, incur or assume any short-term debt other than in the
ordinary course of business, (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other Person except in the ordinary course of business
consistent with past practice and in amounts not material to KCAS, (iii) make
any loans, advances or capital contributions to, or investments in, any other
Person (other than to entities listed on SCHEDULE 7.1(D) pursuant to existing
agreements or customary loans or advances to employees in the ordinary course
of business consistent with past practice and in amounts not material to the
maker of such loan or advance), (iv) pledge or otherwise encumber shares of
capital stock of KCAS, or (v) except in the ordinary course of business
consistent with past practice, mortgage or pledge, any of its material assets,
tangible or intangible, or create or suffer to exist any material lien
thereupon, except (A) as may be required under existing agreements to which
KCAS is a party, (B) Permitted Encumbrances and (C) Encumbrances disclosed on
SCHEDULE 5.13(A);
(e) Except as may be required by law or as contemplated
or permitted by the Merger Documents, (i) enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment or other employee benefit agreement, trust, plan, fund
or other arrangement for the benefit or welfare of any director, officer or
employee of KCAS in any manner, (ii) except for (A) normal increases in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to KCAS and (B) as required under existing agreements or in the
ordinary course of business generally consistent with past practice, increase
in any manner the compensation or fringe benefits of any director, officer or
employee of KCAS, or pay any benefit to any such Persons not required by any
plan and arrangement as in effect as of the date hereof (including, without
limitation, the granting of stock appreciation rights or performance units), or
28
30
(iii) make any contributions to the Kansas City Analytical Services, Inc.
Profit Sharing 401(k) Plan, except for so-called employee 401(k) contributions
through withholding;
(f) (i) Acquire, sell, lease or dispose of any assets
outside the ordinary course of business or any other assets that in the
aggregate are material to KCAS, or (ii) enter into any commitment or
transaction outside the ordinary course of business consistent with past
practice;
(g) Except as may be required as result of a change in
law or in Generally Accepted Accounting Principles, change or modify any of the
accounting principles or practices used by KCAS;
(h) Except as may be required by applicable law or
Generally Accepted Accounting Principles, revalue in any material respect any
of its assets, including, without limitation, writing down the value of
inventory or writing off notes or accounts receivable other than in the
ordinary course of business;
(i) (i) Acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, company, partnership or other
business organization or division thereof or any equity interest therein; (ii)
enter into any contract or agreement other than in the ordinary course of
business consistent with past practice; (iii) enter into any contract or
agreement involving an amount in excess of $20,000; (iv) authorize any new
capital expenditure or expenditures that, individually or in the aggregate, are
in excess of $20,000; or (v) enter into or amend any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(j) Pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in, or
contemplated by, the Financial Statements of KCAS or on SCHEDULE 5.5 or
incurred in the ordinary course of business consistent with past practice,
including the payment of approximately $360,000 for purchase of two mass
spectrometers previously delivered to KCAS;
(k) Settle or compromise any pending or threatened suit,
action or claim relating to the transactions contemplated hereby;
(l) Take, or agree in writing or otherwise to take, any
action that would make any of the representations or warranties of KCAS
contained in this Agreement untrue or incorrect or would result in any of the
conditions set forth in this Agreement not being satisfied; or
(m) Agree, whether in writing or otherwise, to do any of
the foregoing.
7.2 NO SOLICITATION. KCAS agrees that, prior to the earlier of the
Effective Time and September 30, 1998, it shall not, and it shall use its best
efforts to cause its directors, officers, employees, agents or representatives,
not to, directly or indirectly, solicit, initiate or encourage (including by
way of furnishing non-public information) inquiries or proposals concerning any
merger, consolidation or acquisition or purchase with or by any third party
(other than the
29
31
Merger Sub or AAI) of all or any substantial portion of the assets or capital
stock of KCAS (an "Acquisition Transaction") or negotiate with any such third
party with respect to any Acquisition Transaction; provided that the foregoing
shall not prevent KCAS or its board of directors from taking or permitting any
action in connection with any such proposal on a third party if, based on the
written opinion of its outside counsel, the failure to do so would violate its
fiduciary duties to KCAS's stockholders under applicable law. KCAS shall
immediately advise Merger Sub of any inquiries or proposals that it receives or
attempts to negotiate relating to an Acquisition Transaction, and any such
notice shall include a description of the terms and conditions of any such
proposal, or the nature of any inquiry or attempts to negotiate.
7.3 ACCESS TO INFORMATION. Between the date of this Agreement and
the Effective Time, KCAS will (a) give AAI and Merger Sub (and their authorized
representatives) reasonable access, during normal business hours and upon
reasonable notice, to the books, records, offices and other facilities and
properties of KCAS (including, without limitation, for the purpose of
conducting such inspections, tests and sampling work as Merger Sub or AAI deems
advisable), and (b) cause its officers, agents or other appropriate officials
to furnish Merger Sub or AAI with such financial and operating data (including
accountants' work papers) and other information with respect to the business
operations of KCAS including, but not limited to, information relating to taxes
as Merger Sub or AAI may from time to time reasonably request; provided,
however, that any such investigation by Merger Sub or AAI shall be conducted in
such a manner as not to interfere unreasonably with the normal operations of
KCAS.
7.4 SCHEDULES TO AGREEMENT. KCAS shall promptly notify Merger Sub
of any event, fact or other circumstance arising after the date hereof that
would have caused the disclosure schedules delivered under this Agreement to be
untrue or misleading had such event, fact or circumstance arisen prior to the
delivery of such schedules.
7.5 MAINTENANCE OF CORPORATE EXISTENCE. KCAS shall maintain in
full force and effect its corporate existence.
7.6 CONTRIBUTIONS TO AND TERMINATION OF 401(K) PLAN.
Notwithstanding SECTION 7.1, at least 14 days prior to the Closing Date, KCAS
shall take such action as may be necessary to irrevocably terminate the Kansas
City Analytical Services, Inc. Profit Sharing 401(k) Plan ("Profit-Sharing
Plan") effective at least 14 days prior to the Closing Date and shall provide
AAI with evidence that the Profit Sharing Plan has been so terminated.
Notwithstanding SECTION 7.1, at or prior to the time KCAS takes action to
terminate the Profit Sharing Plan, KCAS may take action to authorize profit
sharing contributions and matching contributions to the Profit Sharing Plan for
the current plan year in the aggregate not exceeding the lesser of (i) $175,000
or (ii) one-third of KCAS's income before taxes for the eight-month period
ending June 30, 1998. In connection with the termination of the Profit Sharing
Plan, KCAS may amend the Profit Sharing Plan as reasonably necessary to provide
for the allocation of profit sharing and matching contributions for the period
ending immediately prior to the termination date, and shall amend the Profit
Sharing Plan to provide that distributions in liquidation of the terminated
Profit Sharing Plan shall be made only in single sum distributions.
30
32
ARTICLE VIII.
MUTUAL COVENANTS
OF
KCAS, MERGER SUB AND AAI
KCAS, Merger Sub and AAI covenant and agree as follows:
8.1 CONFIDENTIALITY. Each of the parties to this Agreement (a)
will hold, and will use its best efforts to cause each of its officers,
directors, employees, lenders, accountants, representatives, agents,
consultants and advisors to hold, in strict confidence all information (other
than such information as may be publicly available) furnished to it in
connection with the transactions contemplated by this Agreement, together with
all information concerning any of the parties hereto contained in any analyses,
compilations, studies or other documents prepared by or on behalf of any of the
parties hereto (collectively, the "Information") and (b) will not, without the
prior written consent of the party to whom any certain Information relates,
except as required by law, release or disclose that Information to any other
person, except to the officers, directors, employees, lenders, accountants,
representatives, agents, consultants and advisors of the parties hereto (i) who
need to know the Information in connection with the consummation of the
transactions contemplated by this Agreement, (ii) who have been informed by
either KCAS, on one hand, or AAI, on the other hand, of the confidential nature
of the Information and (iii) who are instructed to comply with the terms and
conditions of this SECTION 8.1. The parties hereto understand that all
Information is proprietary and that dissemination of any part thereof or the
use thereof for purposes other than the evaluation and consummation of the
transactions contemplated by this Agreement will cause irreparable harm to the
party hereto to whom the Information relates. In the event a party hereto or a
Person to whom such party transmits the Information in accordance with this
Agreement becomes legally compelled to disclose any of the Information, such
party will provide the party to whom the information relates with prompt notice
so that it may seek a protective order or other appropriate remedy or waive
compliance with the provisions of this SECTION 8.1. In the event that such
protective order or other remedy is not obtained, or that the party to whom the
Information relates waives compliance with the provisions of this SECTION 8.1,
such party will furnish only that portion of the Information that it believes,
after receiving advice from counsel reasonably experienced in such matters, may
be legally required. If the transactions contemplated by this Agreement are not
consummated, the Information, including all analyses, compilations, studies or
other documents prepared by or on behalf of any of the parties hereto based on
the Information, will be returned to the party to whom it relates.
8.2 CONSUMMATION OF AGREEMENT. Each of the parties hereto will use
its reasonable efforts to perform or fulfill all conditions and obligations to
be performed or fulfilled by it under this Agreement so that the transactions
contemplated hereby shall be consummated. If any event should occur, either
within or outside the control of the parties hereto that would materially delay
or prevent fulfillment of the conditions of the parties hereto to consummate
the transactions contemplated by this Agreement, each party will notify the
other of any such event, and the
31
33
parties hereto will use their respective reasonable, diligent and good faith
efforts to cure or minimize the same as expeditiously as possible.
8.3 PUBLICITY. Any press release or other public announcement of
the transactions contemplated hereby must be jointly approved by AAI and KCAS,
except as may otherwise be required under applicable laws. In the event AAI is
required by law to make a disclosure, it agrees to use its best efforts to
notify KCAS of such impending disclosure and the content thereof. Any
information contained in a required disclosure that is not mandated by law to
be included in such disclosure shall be included only with the consent of KCAS.
Phoenix International Life Sciences (IBRD), Inc. ("Phoenix (IBRD)"), or its
parent corporation, shall submit any press release or other publication to AAI
prior to releasing such document to the media, which release to the media shall
not be done prior to the Effective Time.
ARTICLE IX.
CONDITIONS TO CLOSING
9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
TRANSACTIONS CONTEMPLATED Hereby. The respective obligations of each party
hereto to effect the transactions contemplated hereby shall be subject to the
following condition, which may be waived upon mutual agreement of KCAS, AAI and
Merger Sub: Neither KCAS, AAI nor Merger Sub shall be subject on the Closing
Date to any order, decree or injunction of a court of competent jurisdiction
that enjoins or prohibits the consummation of this Agreement, nor shall there
be pending a suit or proceeding by any governmental authority that seeks
injunctive or other relief in connection with the transactions contemplated
hereby.
9.2 CONDITIONS TO THE OBLIGATIONS OF KCAS TO EFFECT THE
TRANSACTIONS CONTEMPLATED HEREBY. The obligations of KCAS to effect the
transactions contemplated hereby shall be further subject to the fulfillment of
the following conditions, any one or more of which may be waived by KCAS:
(a) Payment of the Merger Consideration at the Closing;
(b) All representations and warranties of Merger Sub and
AAI contained in this Agreement shall be true and correct as of the Closing
Date as though made as of such date (except as otherwise expressly contemplated
by this Agreement). Merger Sub and AAI shall have performed and complied with
all covenants and agreements contained in this Agreement required to be
performed and complied with by Closing. KCAS shall have received a certificate
to the matters set forth in this SECTION 9.2(A) in form reasonably satisfactory
to it signed and attested on behalf of Merger Sub and AAI by their authorized
officers;
(c) KCAS shall have received all of the documents,
appropriately executed as may be necessary, referenced in SECTION 4.3;
32
34
(d) KCAS shall have received an opinion rendered by
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A., counsel for Merger Sub and AAI, dated as of
the Closing Date substantially in the form attached hereto as EXHIBIT H hereto;
(e) KCAS shall have received a certificate executed by
the Secretary or Assistant Secretary of each of Merger Sub and AAI and attested
by the President or an Executive Vice President of each of Merger Sub and AAI
attaching and certifying the accuracy, truthfulness and completeness of the
following documents:
(i) A long-form certificate of good standing of
each of Merger Sub and AAI issued as of a recent date by the Secretary of
State, or similar official, of their respective states of incorporation;
(ii) A copy of the certificate or articles of
incorporation of each of Merger Sub and AAI certified as of a recent date by
the Secretary of State, or similar official, of each of their respective states
of incorporation;
(iii) A copy of the bylaws of each of Merger Sub
and AAI; and
(iv) A copy of the resolutions of each of Merger
Sub's and AAI's Board of Directors authorizing the execution of each of the
Merger Documents to which it is a party and authorizing the consummation of the
transactions contemplated thereby; and
(f) All other documents, appropriately executed as may
be necessary, required by the Merger Documents or reasonably required by KCAS
to have been delivered to it at or prior to Closing in order to consummate the
transactions contemplated hereby.
9.3 CONDITIONS TO THE OBLIGATIONS OF AAI AND MERGER SUB TO EFFECT
THE TRANSACTIONS CONTEMPLATED HEREBY. The obligations of AAI and Merger Sub to
effect the transactions contemplated hereby shall be further subject to the
fulfillment of the following conditions, any one or more of which may be waived
by AAI:
(a) All representations and warranties of KCAS contained
in this Agreement and all Schedules attached hereto shall be true and correct
in all material respects as of the Closing Date as though made as of such date.
KCAS shall have performed and complied with all covenants and agreements
contained in this Agreement required to be performed and complied with by it at
or prior to Closing. AAI shall have received a certificate certifying the
matters set forth in this SECTION 9.3(A) signed and attested on behalf of KCAS
by its authorized officers;
(b) AAI shall have received all of the documents,
appropriately executed as may be necessary, referenced in SECTION 4.2;
(c) AAI shall have received an opinion rendered by
Seigfreid, Bingham, Levy, Xxxxxx & Xxx, P.C., counsel to KCAS, dated the
Closing Date substantially in the form attached hereto as EXHIBIT I;
33
35
(d) AAI shall have received a certificate executed by
the Secretary or Assistant Secretary of KCAS and attested by the President or
Chief Executive Officer of KCAS attaching and certifying the accuracy,
truthfulness and completeness of the following documents:
(i) A long-form certificate of good standing of
KCAS and each of its Subsidiaries issued as of a recent date by the Secretary
of State, or similar official, of their respective states of incorporation;
(ii) A copy of the certificate or articles of
incorporation of KCAS and each of its Subsidiaries certified as of a recent
date by the Secretary of State, or similar official, of their respective states
of incorporation;
(iii) A copy of the bylaws of KCAS and each of its
Subsidiaries; and
(iv) A copy of the resolutions of KCAS's Board
of Directors authorizing the execution of each of the Merger Documents to which
it is a party and authorizing the consummation of the transactions contemplated
thereby;
(e) AAI shall have received all other documents,
appropriately executed as may be necessary, required by the Merger Documents or
reasonably required by Merger Sub or AAI to have been delivered to either of
them at or prior to Closing in order to consummate the transactions
contemplated hereby;
(f) AAI shall have received all consents referred to in
this Agreement; and
(g) KCAS shall not have received any notice from any
holder of Common Stock (who has not voted in favor of the Merger or consented
thereto in writing) of such holder's intent to demand appraisal for such shares
if the Merger is effective, in accordance with Kansas law.
ARTICLE X.
TERMINATION
10.1 TERMINATION. The obligations of the parties hereunder may be
terminated and the transactions contemplated hereby abandoned at any time prior
to the Closing Date:
(a) by mutual written consent of Merger Sub and KCAS;
(b) by any party hereto, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree permanently
enjoining any of the parties hereto from consummating the Merger is entered and
such judgment, injunction, order or decree shall become final and
non-appealable; and
34
36
(c) by any of the parties hereto if any condition to
such party's obligation contained in any of the Merger Documents (including all
such conditions set forth in ARTICLE IX hereof) to effect the Merger shall not
have been fulfilled or waived by September 30, 1998 (or shall have become
incapable of fulfillment) and if such party seeking termination is in material
compliance with all of its obligations under this Agreement.
10.2 PROCEDURE AND EFFECT OF TERMINATION OR FAILURE TO CLOSE.
(a) In the event of a termination by any party pursuant to SECTION 10.1, such
terminating party shall give prompt written notice thereof to the other party,
and the transactions contemplated hereby shall be abandoned, without further
action by either of the parties hereto. In such event:
(a) Merger Sub and AAI shall return to KCAS all
Information regarding KCAS and its Subsidiaries received by Merger Sub or AAI,
whether obtained before or after the execution hereof, and KCAS shall return or
cause to be returned to Merger Sub and AAI all Information regarding Merger Sub
or AAI received by KCAS, whether obtained before or after the execution hereof;
(b) All filings, applications and other submissions
relating to the Merger shall, to the extent practicable, be withdrawn from the
agency or other Person to which made; and
(c) None of the parties hereto nor any of their
partners, directors, officers, shareholders, employees, agents, or affiliates
shall have any liability or further obligation to the other party or any of its
partners, directors, officers, shareholders, employees, agents, or affiliates
pursuant to this Agreement, except (i) as stated in SECTION 8.1 (relating to
confidentiality) and SECTION 11.2 (relating to expenses) hereof and (ii) any of
the parties hereto nevertheless shall be entitled to seek any remedy to which
it may be entitled at law or in equity for the violation or breach by any other
party hereto of any agreement, covenant, representation or warranty contained
in this Agreement.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
11.1 SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.
(a) Survival. All representations, warranties and
agreements made by the parties to this Agreement to one another pursuant to any
of the Merger Documents shall survive for twenty-four months following the
Closing Date. No representation or warranty shall be deemed to be waived or
otherwise diminished as a result of any due diligence investigation by the
party to whom such representation or warranty was made or as a result of any
actual or constructive knowledge by such party with respect to any facts,
circumstances or claims or by the actual or constructive knowledge of such
Person that any representation or warranty was false or misleading at Closing.
All claims (except for claims of actual intentional fraud) made by virtue of
such representations, warranties and agreements shall be made under, and
subject to the limitations set forth in, this SECTION 11.1.
35
37
(b) Indemnification Agreement. Pursuant to that certain
Indemnification Agreement, as more specifically set forth therein, (i) the
Stockholders have agreed to indemnify, defend and hold harmless AAI and its
Subsidiaries (including Merger Sub), and (ii) AAI has agreed to indemnify,
defend and hold harmless each Stockholder, from and against all demands,
claims, actions, looses, damages, liabilities, costs and expenses (including,
without limitation, settlement costs, arbitration costs and any reasonable
legal and other expenses for investigating or defending any action or
threatened action) asserted against or incurred thereby arising out of or in
connection with or resulting from a breach of any covenant, agreement,
representation or warranty of KCAS, on one hand, and Merger Sub and AAI, on the
other, respectively, in the Merger Agreement.
11.2 EXPENSES. Whether or not the transactions contemplated hereby
are consummated, except as otherwise provided herein or in the Indemnification
Agreement, Merger Sub or AAI, on one hand, or KCAS, on the other, will pay all
of its own costs and expenses incurred by it in connection with this Agreement
and the transactions contemplated hereby; provided, however, that, in the event
of any litigation, dispute, suit, action or other proceeding between the
parties relating in any way to this Agreement and the transactions contemplated
hereby (an "Action"), the "prevailing party" shall be entitled to recover from
the other party, upon demand, all of its reasonable out-of-pocket costs and
expenses (including, without limitation, attorneys' fees and expenses) incurred
in connection with such Action. For purposes of the foregoing, the parties
agree that the judge or other trier of law assigned to any Action shall
determine which party is the "prevailing party" in such Action, and that there
shall be only one "prevailing party" in any Action.
11.3 WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise provided
in this Agreement, any failure of any of the parties to comply with any
obligation, representation, warranty, covenant, agreement or condition herein
may be waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, representation,
warranty, covenant, agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section.
11.4 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by written agreement of KCAS, AAI and Merger Sub
at any time prior to the Closing with respect to any of the terms contained
herein.
11.5 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered by hand or by facsimile
transmission or mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice; provided
that notices of a change of address shall be effective only upon receipt
thereof):
36
38
(a) If to KCAS, to:
Kansas City Analytical Services, Inc.
00000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
Copies to:
Seigfreid, Bingham, Levy, Xxxxxx & Xxx
2800 Commerce Tower
000 Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xx. Xxxxx X. Xxxxxx
Telecopy: (000) 000-0000
And
Phoenix International Life Sciences (IBRD), Inc.
0000 Xxxxx Xxxxxx
X0X0X0
Xxxxxxxx, Xxxxxx
Xxxxxx
Attention: Xxxx X. Xxxxxx, Ph. D., Chairman and CEO
Telecopy: (000) 000-0000
(b) If to AAI or to Merger Sub, to:
Applied Analytical Industries, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Mr. R. Xxxxxxx Xxxxxx
Telecopy: (000) 000-0000
Copies to:
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A.
1900 Independence Center
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
11.6 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted
37
39
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other party, nor is this Agreement intended to confer
upon any other person except the parties hereto any rights or remedies
hereunder.
11.7 GOVERNING LAW; JURISDICTION. The execution, interpretation and
performance of this Agreement shall be governed by the internal laws and
judicial decisions of the State of North Carolina except with respect to the
Merger which shall be governed by the internal laws and judicial decisions of
the State of Kansas.
11.8 JURISDICTION AND VENUE. In the event that KCAS commences a
lawsuit or other proceeding against either AAI or Merger Sub relating to or
arising from this Agreement, AAI and Merger Sub consent to and agree to submit
to the jurisdiction of the United States Court for the District of Kansas and
the District Court of Xxxxxxx County, Kansas and agree to accept service of
process to vest personal jurisdiction over them in any of these courts. In the
event that AAI or Merger Sub commences a lawsuit or other proceeding against
KCAS relating to or arising from this Agreement, the parties to this Agreement
agree that the United States District Court for the District of Kansas shall
have the sole and exclusive jurisdiction over any such proceeding. If such
court lacks federal subject matter jurisdiction, the parties agree that the
District Court of Xxxxxxx County, Kansas shall have sole and exclusive
jurisdiction. Any of these courts shall be proper venue for any such lawsuit or
judicial proceeding and the parties hereto waive any objection to such venue.
KCAS consents to and agrees to submit to the jurisdiction of any of the courts
specified in the foregoing two sentences and agrees to accept service of
process to vest personal jurisdiction over it in any of these courts.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 NOUNS AND PRONOUNS. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
11.11 INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
11.12 PARTIES IN INTEREST. Nothing in this Agreement, express or
implied, other than the right to receive the Merger Consideration pursuant to
ARTICLE III hereof, is intended to or shall confer upon any Person other than
the parties hereto any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
11.13 EMPLOYEE LENGTH OF SERVICE. AAI agrees that for the purposes
of determining an Employee's length of service for eligibility to participate
and resting under all AAI employee benefit plans, including vacation policy,
after the Merger, an Employee's prior service with KCAS shall be deemed to
constitute service with AAI.
38
40
11.14 ENTIRE AGREEMENT. This Agreement, including the Annexes,
Exhibits, Schedules and the other documents delivered pursuant hereto, embody
the entire agreement and understanding of the parties hereto in respect of the
subject matter hereof. The Exhibits and Schedules hereto are an integral part
of this Agreement and are incorporated by reference herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to the transactions contemplated by this Agreement, except with respect
to the Confidential Disclosure Agreement dated January 27, 1998 between AAI and
KCAS, the terms of which shall continue in effect to the extent not directly in
conflict with the terms of this Agreement.
11.15 RELEASE OF PHOENIX (IBRD). At the Effective Time, Phoenix
(IBRD) shall be released of all obligations it has to KCAS, Merger Sub, AAI and
all other persons to provide or guaranty any funding of capital improvements
for KCAS, or its successors, including the obligations set forth in Amendment
No. 1, dated March 10, 1995, by and among Xxxxxxx X. Xxxxx, Xxxxxx X. Xxxxxx,
Xxxxxxxx X. Xx, Institute for Biological Research and Development, Inc. and
KCAS, and the Purchase Option Agreement, dated March 10, 1995, by and among
Xxxxxxx X. Xxxxx, Xxxxxx X. Xxxxxx, Xxxxxxxx X. Xx, Institute for Biological
Research and Development, Inc. and KCAS.
39
41
IN WITNESS WHEREOF, KCAS, AAI and Merger Sub have caused this
Agreement to be signed and attested by their respective duly authorized
officers as of the date first above written.
APPLIED ANALYTICAL INDUSTRIES, INC.
Attest:
/s/ R. Xxxxxxx Xxxxxx By: /s/ Xxxxxx X. Xxxxx
---------------------------- ----------------------------------
R. Xxxxxxx Xxxxxx, Secretary Xxxxxx X. Xxxxx, Vice President
KCAS ACQUISITION, INC.
Attest:
/s/ R. Xxxxxxx Xxxxxx By: /s/ Xxxxxx X. Xxxxx
---------------------------- ----------------------------------
R. Xxxxxxx Xxxxxx, Secretary Xxxxxx X. Xxxxx, President
KANSAS CITY ANALYTICAL SERVICES, INC.
Attest:
/s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxx
---------------------------- ----------------------------------
Xxxxxxx X. Xxxxx, Secretary Xxxxxxx X. Xxxxx, Ph.D., President
40
