EXHIBIT 2.6
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
EMCON
(a California corporation);
ADVANCED ANALYTICAL SOLUTIONS DELAWARE, INC.
(a Delaware corporation);
ADVANCED ANALYTICAL SOLUTIONS INCORPORATED
(a Colorado corporation);
AND
THE SHAREHOLDERS OF ADVANCED ANALYTICAL SOLUTIONS INCORPORATED
(the Colorado Corporation)
April 3, 1998
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of April 3, 1998 by and among EMCON, a California corporation
("EMCON"), Advanced Analytical Solutions Delaware, Inc., a Delaware corporation
and wholly-owned subsidiary of EMCON ("Sub"), Advanced Analytical Solutions
Incorporated, a Colorado corporation ("A2S") and the Shareholders of A2S
(collectively, the "A2S Shareholders").
RECITALS
A. Pursuant to a statutory merger of A2S with and into Sub, with Sub
being the surviving corporation (the "Merger"), among other things, the
outstanding shares of A2S Common Stock ("A2S Common Stock") shall be converted
into the right to receive the Merger Consideration (as defined in Section 1.6)
upon the terms and subject to the conditions set forth herein.
B. A2S, EMCON and the A2S Shareholders desire to make certain
representations and warranties and other agreements in connection with the
Merger.
C. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a forward
triangular reorganization under the provisions of Section 368(a)(2)(d) of the
Code.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
1. The Merger.
1.1. The Merger. At the Effective Time (as defined in Section
1.2) and subject to and upon the terms and conditions of this Agreement, the
Certificate of Merger attached hereto as Exhibit A (the "Certificate of Merger")
and the applicable provisions of the Delaware General Corporation Law ("Delaware
Law" or "DGL") and the law of the State of Colorado ("Colorado Law"), A2S shall
be merged with and into Sub, the separate corporate existence of A2S shall cease
and Sub shall continue as the surviving corporation. Sub as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
1.2. Closing; Effective Time. The closing of the transactions
contemplated hereby (the "Closing") shall take place on April 3, 1998 (the
"Closing Date"). The Closing shall take place at the offices of Schlueter &
Associates, P.C., 1050 17th Street, Suite 1700, Denver, Colorado 80265, or at
such other location as the parties hereto agree. In connection with the Closing,
the parties hereto shall cause the Merger to be consummated by filing the
Certificate of Merger, together with the required officers' certificates, with
the Secretary of State of each of the states of Delaware and Colorado, in
accordance with the relevant provisions of Delaware Law and Colorado Law (the
time of such filing being the "Effective Time").
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1.3. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in this Agreement, the Certificate of Merger
and the applicable provisions of Delaware Law and Colorado Law. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
the property, rights, privileges, powers and franchises of A2S shall vest in the
Surviving Corporation, and all debts, liabilities and duties of A2S shall become
the debts, liabilities and duties of the Surviving Corporation.
1.4. Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of
Incorporation of Sub, as in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by Delaware Law and such Certificate of
Incorporation.
(b) At the Effective Time, the Bylaws of Sub,
as in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended.
1.5. Directors and Officers. At the Effective Time,
the directors and officers of Sub immediately prior to the Effective Time shall
be the directors and officers of the Surviving Corporation, until their
respective successors are duly elected or appointed and qualified.
1.6. Merger Consideration. By virtue of the Merger, EMCON
shall deliver the following consideration (the "Merger Consideration") to the
A2S Shareholders:
(a) Cash Consideration. At the Closing,
EMCON shall deliver to the A2S Shareholders an aggregate of Six Hundred Thousand
Dollars ($600,000) (the "Cash Consideration") as set forth in Schedule 1.7
hereto.
(b) EMCON Common Stock. At the Closing, EMCON
shall deliver to the holders of A2S Common Stock (the "A2S Capital Stock") an
aggregate of 123,077 shares of EMCON Common Stock as set forth in Section 1.7
hereof .
(c) Earnout Payments. During the first two years
following the Closing, the A2S Shareholders shall be eligible to earn Earnout
Payments (as defined in Section 6.1(b) hereof) up to an aggregate of $300,000,
subject to the terms and conditions of Section 6.1 hereof.
1.7. Effect on Capital Stock At the Effective Time, by virtue
of the Merger and without any action on the part of EMCON, A2S or the holders of
any of the following securities:
(a) Conversion of A2S Common Stock. Each share
of A2S Common Stock issued and outstanding immediately prior to the Effective
Time shall be converted and exchanged, without any action on the part of the
holders thereof, into the right to receive 1.8648 shares of EMCON Common Stock
and $9.0909 in Cash Consideration (the "Exchange Ratio"), as set forth in
Schedule 1.7 hereto.
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(b) Adjustments to Exchange Ratio. The Exchange
Ratio shall be adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into EMCON Common Stock or A2S Common Stock), reorganization,
recapitalization or other like change with respect to EMCON Common Stock or A2S
Common Stock occurring after the date hereof and prior to the Effective Time.
(c) Fractional Shares. No fraction of a share
of EMCON Common Stock will be issued, but in lieu thereof each holder of shares
of A2S Common Stock who would otherwise be entitled to a fraction of a share of
EMCON Common Stock (after aggregating all fractional shares of EMCON Common
Stock to be received by such holder) shall receive from EMCON an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) such fraction,
multiplied by (ii) the Fair Market Value of EMCON Common Stock. The term "Fair
Market Value" shall mean the closing price of EMCON Common Stock on the Closing
Date, as reported on the Nasdaq National Market (the "Fair Market Value"). The
fractional share interests of each A2S shareholder shall be aggregated, so that
no A2S shareholder shall receive cash in respect of fractional share interests
in an amount greater than the value of one full share of EMCON Common Stock.
(d) Certificate Legends. The shares of EMCON
Common Stock to be issued pursuant to this Section 1 shall not have been
registered and shall be characterized as "restricted securities" under the
federal securities laws, and under such laws such shares may be resold without
registration under the Securities Act or 1933, as amended (the "Securities
Act"), only in certain limited circumstances. Each certificate evidencing shares
of EMCON Common Stock to be issued pursuant to this Section 1 shall bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
WITHOUT AN EXEMPTION UNDER THE SECURITIES ACT OR AN OPINION OF
LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."
and any legends required by state securities laws.
1.8. Surrender of Certificates.
(a) EMCON to Provide Common Stock and Cash. At
the Closing, EMCON shall deliver to the A2S Shareholders certificates evidencing
the shares of EMCON Common Stock issuable pursuant to Section 1.7(a) in exchange
for shares of A2S Common Stock outstanding immediately prior to the Effective
Time, and (ii) cash in an amount sufficient to permit payment of cash in lieu of
fractional shares.
(b) Transfers of Ownership. At the Effective
Time, the stock transfer books of the A2S shall be closed and there shall be no
further registration of transfers of A2S Common Stock thereafter on the records
of the A2S. If any certificate for shares of EMCON Common Stock is to be issued
in a name other than that in which the Certificate surrendered in exchange
therefor is registered, it will be a condition of the issuance thereof that the
Certificate
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so surrendered will be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange will have paid to EMCON or
any agent designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of EMCON Common Stock in any name other
than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of EMCON or any agent designated by it that such
tax has been paid or is not payable.
1.9. No Further Ownership Rights in A2S Capital Stock. The
Merger Consideration delivered upon the surrender for exchange of shares of A2S
Capital Stock in accordance with the terms hereof (including any dividends,
distributions or cash paid in lieu of fractional shares) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of A2S
Capital Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of A2S Capital Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section 1.
1.10. Taking of Necessary Action; Further Action. Each of
EMCON and A2S will take all such reasonable and lawful action as may be
necessary or desirable in order to effectuate the Merger in accordance with this
Agreement as promptly as possible. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
A2S, the officers and directors of EMCON are fully authorized in the name of
their corporation or otherwise to take, and will take, all such lawful and
necessary action, so long as such action is not inconsistent with this
Agreement.
2. Conditions to the Merger.
2.1. Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to this Agreement to consummate
and effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by agreement of
all the parties hereto:
(a) Shareholder Approval. This Agreement and
the Merger shall be approved and adopted by all of the shareholders of the A2S.
(b) Board Approval. This Agreement and the
Merger shall be approved and adopted by the Board of Directors of EMCON and A2S.
(c) No Injunctions or Restraints; Illegality.
No temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Merger shall be and
remain in effect, nor shall any proceeding brought by an administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending, which would have a Material
Adverse Effect on either EMCON or on EMCON combined with the Surviving
Corporation after the Effective Time, nor shall there be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced
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or deemed applicable to the Merger, which makes the consummation of the Merger
illegal. In the event an injunction or other order shall have been issued, each
party agrees to use its reasonable diligent efforts to have such injunction or
other order lifted.
(d) Governmental Approval. EMCON and A2S and
their respective subsidiaries shall have timely obtained from each Governmental
Entity (as defined below) all approvals, waivers and consents, if any, necessary
for consummation of or in connection with the Merger and the several
transactions contemplated hereby, including such approvals, waivers and consents
as may be required under the Securities Act, under state Blue Sky laws, and
under HSR other than filings and approvals relating to the Merger or affecting
EMCON's ownership of A2S or any of its properties if failure to obtain such
approval, waiver or consent would not have a Material Adverse Effect on EMCON or
on EMCON combined with the Surviving Corporation after the Effective Time.
2.2. Additional Conditions to Obligations of A2S. The
obligations of A2S to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by A2S:
(a) Representations, Warranties and Covenants.
The representations and warranties of EMCON in this Agreement shall be true and
correct in all material respects (except for such representations and warranties
that are qualified by their terms by a reference to materiality which
representations and warranties as so qualified shall be true in all respects) on
and as of the Effective Time as though such representations and warranties were
made on and as of such time and EMCON shall have performed and complied in all
material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it as of the Effective
Time.
(b) Certificate of EMCON. A2S shall
have been provided with a certificate executed on behalf of EMCON by its
President and its Chief Financial Officer to the effect that, as of the
Effective Time:
(i) all representations and warranties
made by EMCON under this Agreement are true and complete in all material
respects (except for such representations and warranties that are qualified by
their terms by a reference to materiality which representations and warranties
as so qualified shall be true in all respects); and
(ii) all covenants, obligations and
conditions of this Agreement to be performed by EMCON on or before such date
have been so performed in all material respects.
(c) No Material Adverse Changes. Since the
Balance Sheet Date, there shall not have occurred any material adverse change in
the financial condition, properties, assets (including intangible assets),
liabilities, business, operations or results of operations of EMCON and its
subsidiaries, taken as a whole.
(d) Third Party Consents. A2S shall have
been furnished with evidence satisfactory to it of the consent or approval of
those persons whose consent or approval is required in connection with the
Merger.
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(e) Injunctions or Restraints on Conduct of
Business. No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal or
regulatory restraint provision limiting or restricting EMCON's conduct or
operation of the business of EMCON and its subsidiaries, following the Merger
shall be in effect, nor shall any proceeding brought by an administrative agency
or commission or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending.
(f) Legal Opinion. A2S shall have received a
legal opinion from EMCON's in house legal counsel in substantially the form of
Exhibit B-1.
2.3 Additional Conditions to the Obligations of EMCON. The
obligation of EMCON to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by EMCON:
(a) Representations, Warranties and Covenants.
The representations and warranties of A2S in this Agreement shall be true and
correct in all material respects (except for such representations and warranties
that are qualified by their terms by a reference to materiality which
representations and warranties as so qualified shall be true in all respects) on
and as of the Effective Time as though such representations and warranties were
made on and as of such time and A2S shall have performed and complied in all
material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it as of the Effective
Time.
(b) Certificate of A2S. EMCON shall have
been provided with a certificate executed on behalf of A2S by its President and
Treasurer to the effect that, as of the Effective Time:
(i) all representations and warranties
made by A2S under this Agreement are true and complete in all material respects
(except for such representations and warranties that are qualified by their
terms by a reference to materiality, which representations and warranties as so
qualified shall be true in all respects); and
(ii) all covenants, obligations and
conditions of this Agreement to be performed by A2S on or before such date have
been so performed in all material respects.
(c) Third Party Consents. EMCON shall have
been furnished with evidence satisfactory to it of the consent or approval of
those persons whose consent or approval is required in connection with the
Merger.
(d) Injunctions or Restraints on Conduct of
Business. No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal or
regulatory restraint provision limiting or restricting EMCON's conduct or
operation of the business of A2S and its subsidiaries, following the Merger
shall be in effect, nor shall any proceeding brought by an administrative agency
or commission or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending.
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(e) Legal Opinion. EMCON shall have received
a legal opinion from A2S's legal counsel in substantially the form of Exhibit
B-2.
(f) No Material Adverse Changes in Business.
Since the Balance Sheet Date, there shall not have occurred any material adverse
change in the financial condition, properties, assets (including intangible
assets), liabilities, business, operations or results of operations of A2S,
taken as a whole.
(g) Employment and Non-Competition Agreements.
Each of William J. Hengemihle and Christopher M. Wittenbrink (the "Key
Employees") shall have accepted employment with Sub pursuant to the terms of an
Employment and Non-Competition Agreement substantially in the form attached as
Exhibit C.
(h) Consulting Agreement. Timothy M. Keaten
shall have entered a short-term consulting agreement with the Surviving
Corporation in the form attached hereto as Exhibit D and a non-competition
agreement with terms substantially the same as those entered into by the Key
Employees.
(i) No Material Adverse Changes. Except for
the funds borrowed from Wells Fargo Bank, N.A. under the A2S line of credit to
purchase the promissory note issued by Marty Cuerdon to Bonnie Cuerdon dated
February 20, 1993 (the "Cuerdon Promissory Note") (which was disclosed to and
consented to by EMCON), there shall not have occurred any material adverse
change (including, but not limited to, cash distributions or decreases in net
assets) in the A2S Balance Sheet (as defined in Section 0 hereof) since February
28, 1998, other than in the ordinary course of business and consistent with past
practice.
(j) Release of Security Interests. Except for
the security interests that exist under the credit arrangements between A2S and
Well Fargo Bank, N.A., and leases or purchase money security interests in
certain equipment of A2S, the A2S Shareholders shall have delivered to EMCON
written evidence legally sufficient to terminate any and all security interests,
liens or other encumbrances on the outstanding shares of A2S Common Stock or the
assets of A2S.
3. Representations and Warranties of the A2S Shareholders. Except as
disclosed in a document of even date herewith and delivered by the A2S
Shareholders to EMCON prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "A2S
Disclosure Schedule"), each A2S Shareholder, as to himself, represents and
warrants to EMCON as follows (any representation or warranty of A2S herein shall
be deemed to be a representation and warranty of each A2S Shareholder):
3.1. Organization, Standing and Power. A2S is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization. A2S has the corporate power to own its properties
and to carry on its business as now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified and in good standing would have a Material Adverse Effect on A2S.
A2S has delivered a true and correct copy of the Articles of Incorporation and
Bylaws or other charter documents, as applicable, of A2S each as amended to
date, to EMCON. A2S is not in violation of any of the provisions of its Articles
of Incorporation or Bylaws or equivalent organizational documents. A2S does not
directly or indirectly own any equity or similar interest in, or any interest
convertible or exchangeable or exercisable for, any equity or similar interest
in, any corporation, partnership, joint venture or other business association or
entity.
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3.2. Authority. As of the Closing Date, A2S will have all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. As of the Closing Date, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will have been duly authorized by all necessary
corporate action on the part of A2S. The affirmative vote of the holders of a
majority of the shares of A2S Common Stock outstanding on the record date for
the written consent of shareholders relating to this Agreement is the only vote
of the holders of any of A2S's Capital Stock necessary under Colorado Law to
approve this Agreement and the transactions contemplated hereby. As of the
Closing Date, the Board of Directors of A2S shall have (i) unanimously approved
this Agreement and the Merger, (ii) determined that in its opinion the Merger is
in the best interests of the shareholders of A2S and is on terms that are fair
to such shareholders and (iii) recommended that the shareholders of A2S approve
this Agreement and the Merger. This Agreement has been duly executed and
delivered by A2S and constitutes the valid and binding obligation of A2S
enforceable against A2S in accordance with its terms, except that such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to creditors' rights generally, and is
subject to general principles of equity. The execution and delivery of this
Agreement by A2S does not, and the consummation of the transactions contemplated
hereby will not conflict with, or result in any violation of, or default under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss of
any material benefit under (i) any provision of the Articles of Incorporation or
Bylaws of A2S, as amended, or (ii) any material mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to A2S or any of its properties or assets. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority or
instrumentality ("Governmental Entity") is required by or with respect to A2S in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger, together with the required officers' certificates, as
provided in Section 0, (ii) filings required under Regulation D of the
Securities Act of 1933, (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign country; (iv) such
filings as may be required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended ("HSR"); and (v) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on A2S and would not prevent, or materially alter
or delay any of the transactions contemplated by this Agreement.
3.3. Governmental Authorization. A2S has obtained each
federal, state, county, local or foreign governmental consent, license, permit,
grant, or other authorization of a Governmental Entity (i) pursuant to which A2S
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of A2S's business or the holding of any such
interest and all of such authorizations are in full force and effect except
where the failure to obtain or have any such authorizations could not reasonably
be expected to have a Material Adverse Effect on A2S.
3.4. Title to Property. A2S has good and marketable title to
all of its properties, interests in properties and assets, real and personal,
reflected in the A2S Balance Sheet or acquired after the A2S Balance Sheet Date
(except properties, interests in properties and assets
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sold or otherwise disposed of since the A2S Balance Sheet Date in the ordinary
course of business), and with respect to leased properties and assets, valid
leasehold interests therein, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) the lien of current
taxes not yet due and payable, (ii) such imperfections of title, liens and
easements as do not and will not materially detract from or interfere with the
use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties and (iii) liens
securing debt which is reflected on the A2S Balance Sheet. The property and
equipment of A2S that are used in the operations of its businesses are in all
material respects in good operating condition and repair, subject to normal wear
and tear. All material properties used in the operations of A2S are reflected in
the A2S Balance Sheet to the extent generally accepted accounting principles
require the same to be reflected. All leases to which A2S is a party are in full
force and effect and are valid, binding and enforceable in accordance with their
respective terms, except as such enforceability may be limited by (i) bankruptcy
laws and other similar laws affecting creditors' rights generally and (ii)
general principles of equity, regardless of whether asserted in a proceeding in
equity or at law. True and correct copies of all such leases have been provided
to EMCON. A2S owns no real property. True and correct copies of all such real
property leases have been provided to EMCON.
3.5. Capital Structure. The authorized capital stock of A2S
consists of 200,000 shares of A2S Common Stock and 100,000 shares of A2S
Preferred Stock. As of the Closing Date, there will be issued and outstanding
66,000 shares of A2S Common Stock and no shares of A2S Preferred Stock. All
outstanding shares of A2S Common Stock are duly authorized, validly issued,
fully paid and non-assessable and are free of any liens or encumbrances other
than any liens or encumbrances created by or imposed upon the holders thereof,
and are not subject to preemptive rights or rights of first refusal created by
statute, the Articles of Incorporation or Bylaws of A2S or any agreement to
which A2S is a party or by which it is bound.
Except for the rights created pursuant to this
Agreement, there are no other options, warrants, calls, rights, commitments or
agreements of any character to which A2S is a party or by which it is bound
obligating A2S to issue, deliver, sell, repurchase or redeem or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of A2S Capital
Stock or obligating A2S to grant, extend, accelerate the vesting of, change the
price of, or otherwise amend or enter into any such option, warrant, call,
right, commitment or agreement. There are no other contracts, commitments or
agreements relating to voting, purchase or sale of A2S's capital stock (i)
between or among A2S and any of its shareholders and (ii) to A2S's knowledge,
between or among any of A2S's shareholders. All shares of outstanding A2S Common
Stock were issued in compliance with all applicable federal and state securities
laws.
3.6. Financial Statements. A2S has delivered to EMCON its
unaudited financial statements for each of the fiscal years ended December 31,
1997 and December 31, 1996, respectively, and interim financial statements for
the two month period ended February 28, 1998 (collectively, the "Financial
Statements"). The Financial Statements are complete and correct in all material
respects and have been prepared in accordance with generally accepted accounting
principles (except that the Financial Statements do not have notes thereto)
applied on a consistent basis throughout the periods indicated and with each
other. The Financial Statements fairly present the financial condition and
operating results of A2S as of the dates, and for the periods, indicated
therein, subject to normal end of period adjustments. A2S maintains and will
continue to maintain a standard system of accounting established and
administered in accordance with generally accepted accounting principles.
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3.7. Absence of Certain Changes. Since February 28, 1998 (the
"A2S Balance Sheet Date"), A2S has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect to A2S;
(ii) any acquisition, sale or transfer of any material asset of A2S other than
in the ordinary course of business and consistent with past practice; (iii) any
change in accounting methods or practices (including any change in depreciation
or amortization policies or rates) by A2S or any revaluation by A2S of any of
its assets; (iv) any declaration, setting aside, or payment of a dividend or
other distribution with respect to the shares of A2S or any direct or indirect
redemption, purchase or other acquisition by A2S of any of its shares of capital
stock; (v) any material contract entered into by A2S, other than in the ordinary
course of business and as provided to EMCON, or any material amendment or
termination of, or default under, any material contract to which A2S is a party
or by which it is bound; (vi) any amendment or change to the Articles of
Incorporation or Bylaws of A2S; (vii) any increase in or modification of the
compensation or benefits payable or to become payable by A2S to any of its
directors or employees; or (viii) any negotiation or agreement by A2S to do any
of the things described in the preceding clauses (i) through (vii) (other than
negotiations with EMCON and its representatives regarding the transactions
contemplated by this Agreement). At the Effective Time, there will be no accrued
but unpaid dividends on shares of A2S's capital stock.
3.8. Absence of Undisclosed Liabilities. A2S has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet for the period ended February 28, 1998 (the "A2S Balance Sheet"),
(ii) those incurred in the ordinary course of business and not required to be
set forth in the A2S Balance Sheet under generally accepted accounting
principles, (iii) those incurred in the ordinary course of business since the
A2S Balance Sheet Date and consistent with past practice; and (iv) those
incurred in connection with the execution of this Agreement.
3.9. Litigation. There is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of A2S, threatened
against A2S or any of their respective properties or any of their respective
officers or directors (in their capacities as such) that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
A2S. There is no judgment, decree or order against A2S, or, to the knowledge of
A2S, any of their respective directors or officers (in their capacities as
such), that could prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on A2S. All litigation to which A2S
is a party (or, to the knowledge of A2S, threatened to become a party) is
disclosed in the A2S Disclosure Schedule.
3.10. Restrictions on Business Activities. There is no
agreement, judgment, injunction, order or decree binding upon A2S which has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any current or future business practice of A2S, any acquisition of
property by A2S or the conduct of business by A2S as currently conducted or as
proposed to be conducted by A2S.
3.11. Intellectual Property.
(a) A2S owns and has good and marketable title
to, or is licensed or otherwise possesses legally enforceable rights to use, all
patents, patent applications, trademarks,
29
trade names, service marks, copyrights (whether
registered or unregistered), and any applications therefor, maskworks, maskwork
applications, net lists, schematics, technology, know-how, trade secrets,
inventory, ideas, algorithms, processes, computer software programs and
applications (in both source code and object code form), client lists and
tangible or intangible proprietary information and material ("Intellectual
Property") that are used or currently proposed to be used in the business of A2S
as currently conducted or as proposed to be conducted by A2S, except to the
extent that the failure to have such rights has not had and would not reasonably
be expected to have a Material Adverse Effect on A2S. A2S is the exclusive owner
of all Intellectual Property. A2S has not licensed any of the Intellectual
Property on an exclusive basis.
(b) All patents, registered trademarks, service
marks and copyrights held by A2S are valid and subsisting. A2S is not
infringing, misappropriating or making unlawful use of, and has not received any
notice or other communication (in writing or otherwise) of any actual, alleged,
possible or potential infringement, misappropriation or unlawful use of any
proprietary asset owned or used by any third party. A2S (i) has not been sued in
any suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party; and (ii) has not brought any
action, suit or proceeding for infringement of Intellectual Property or breach
of any license or agreement involving Intellectual Property against any third
party.
(c) All current and former officers, employees
and consultants of A2S have executed and delivered to A2S an agreement
(containing no exceptions or exclusions from the scope of its coverage)
regarding the protection of proprietary information and the assignment to A2S of
any Intellectual Property arising from services performed for A2S by such
persons, the form of which has been supplied to EMCON.
3.12. Interested Party Transactions. A2S is not indebted to
any director, officer, employee or agent of A2S (except for amounts due as
normal salaries and bonuses and in reimbursement of ordinary expenses), and no
such person is indebted to A2S.
3.13. Minute Books. The minute books of A2S made available to
EMCON contain a complete and accurate summary of all meetings of directors and
shareholders or actions by written consent since the time of incorporation of
A2S through the date of this Agreement, and reflect all transactions referred to
in such minutes accurately in all material respects.
3.14. Complete Copies of Materials. A2S has delivered or made
available true and complete copies of each document which has been requested by
EMCON or its counsel in connection with their legal and accounting review of
A2S.
3.15. Material Contracts. All the material contracts and
agreements to which A2S is a party are listed in Schedule 3.15 hereto. With
respect to each agreement so listed: (i) the agreement is legal, valid, binding
and enforceable and in full force and effect with respect to A2S, and to A2S's
knowledge is legal, valid, binding, enforceable and in full force and effect
with respect to each other party thereto, in either case subject to the effect
of bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity; (ii) the
agreement will continue to be legal, valid, binding and enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect prior to the Closing, subject to the effect of bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and except as the availability of equitable
30
remedies may be limited by general principles of equity; and (iii) neither the
A2S nor, to A2S's knowledge, any other party, is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
of default by A2S or, to A2S's knowledge, by any such other party, or permit
termination, modification or acceleration, under the agreement. A2S is not a
party to any material oral contract, agreement or other arrangement other than
as may be disclosed in Schedule 3.15 hereto.
3.16. Accounts Receivable. Subject to any reserves set forth
in the Financial Statements, the accounts receivable shown on the Financial
Statements represent and will represent bona fide claims against debtors for
sales and other charges, are collectible in accordance with their terms at their
recorded amounts and are not subject to discount except for normal cash and
immaterial trade discounts. The amount carried for doubtful accounts and
allowances disclosed in the Financial Statements is sufficient to provide for
any losses which may be sustained on revaluation of the receivables.
3.17 Customers and Suppliers. As of the date hereof, no
customer which individually accounted for more than 5% of A2S's gross revenues
during the 12 month period preceding the date hereof and no supplier of A2S, has
canceled or otherwise terminated, or made any written threat to A2S to cancel or
otherwise terminate its relationship with A2S or has at any time on or after
February 28, 1998 decreased materially its services or supplies to A2S in the
case of any such supplier, or its usage of the services or products of A2S in
the case of such customer, and to A2S's knowledge, no such supplier or customer
has indicated either orally or in writing that it will cancel or otherwise
terminate its relationship with A2S or to decrease materially its services or
supplies to A2S or its usage of the services or products of A2S, as the case may
be. A2S has not knowingly breached, so as to provide a benefit to A2S that was
not intended by the parties, any agreement with, or engaged in any fraudulent
conduct with respect to, any customer or supplier of A2S.
3.18. Employees and Consultants. The A2S Disclosure Schedule
or a letter delivered to EMCON by A2S contains a list of the names of all
employees and consultants of A2S, their respective salaries or wages, other
compensation and dates of employment and positions.
3.19. Environmental Matters
(a) The following terms shall be defined as follows:
(i) "Environmental Laws" shall mean
any federal, state or local laws, ordinances, codes, regulations, rules,
policies and orders that are intended to assure the protection of the
environment, or that classify, regulate, call for the remediation of, require
reporting with respect to, or list or define air, water, groundwater, solid
waste, hazardous or toxic substances, materials, wastes, pollutants or
contaminants, or which are intended to assure the safety of employees, workers
or other persons, including the public.
(ii) "Hazardous Materials" shall mean
any toxic or hazardous substance, material or waste or any pollutant or
contaminant, or infectious or radioactive substance or material, including
without limitation, those substances, materials and wastes defined in or
regulated under any Environmental Laws.
(b) A2S is not and has not been in violation of
any Environmental Law relating to the properties or facilities of A2S at which
any part of A2S's business is or has been
31
conducted. A2S has not used, generated, manufactured or stored on or under any
part of its properties or facilities at which any part of A2S's business is or
has been conducted, or transported to or from any part thereof, any Hazardous
Materials in violation of any applicable Environmental Laws. There has not been
any presence, disposal, or release of any Hazardous Materials on, from or under
any part of A2S's properties or facilities at which any part of A2S's business
is or has been conducted. No civil, criminal or administrative action,
proceeding or investigation is pending against A2S, or to A2S's knowledge,
threatened against A2S, and A2S is not aware of any facts or circumstances which
could form the basis for assertion of a claim or liability, regarding
non-compliance with Environmental Laws relating to A2S's business.
3.20. Taxes. As used in this Agreement, the terms "Tax" and,
collectively, "Taxes" mean any and all federal, state and local taxes of any
country, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(a) A2S has prepared and timely filed all
returns, estimates, information statements and reports required to be filed with
any taxing authority ("Returns") relating to any and all Taxes concerning or
attributable to A2S or its operations with respect to Taxes for any period
ending on or before the Closing Date and such Returns are true and correct in
all material respects and have been completed in all material respects in
accordance with applicable law or an adequate reserve has been made for such
Taxes on the A2S Balance Sheet.
(b) A2S, as of the Closing Date: (i) will have
paid all Taxes shown to be payable on such Returns covered by Section 3.20 (a)
and (ii) will have withheld with respect to its employees all Taxes required to
be withheld.
(c) There is no Tax deficiency outstanding or
assessed or, to the best of A2S's knowledge, proposed against A2S that is not
reflected as a liability on the A2S Balance Sheet nor has A2S executed any
agreements or waivers extending any statute of limitations on or extending the
period for the assessment or collection of any Tax.
(d) A2S has no material liabilities for unpaid
Taxes that have not been accrued for or reserved on the A2S Balance Sheet,
whether asserted or unasserted, contingent or otherwise.
(e) A2S is not a party to any tax-sharing agreement
or similar arrangement with any other party, or any contractual obligation
to pay any Tax obligations of, or with respect to any transaction relating
to, any other person or to indemnify any other person with respect to any Tax.
(f) A2S's Returns have never been audited by a
government or taxing authority, nor is any such audit in process or
pending, and A2S has not been notified of any request for such an audit or
other examination.
(g) A2S has never been a member of an affiliated
group of corporations filing a consolidated federal income tax return.
32
(h) A2S is not aware of any plan or intention
on the part of its shareholders to engage in any sale or sales of EMCON
Common Stock to be received pursuant to the Merger. For purposes of this Section
3.20 (h), the term "sale" shall include any sale, exchange, transfer,
distribution, redemption or reduction in any way of the risk of ownership (by
short sale or otherwise), or other disposition, whether direct or indirect.
(i) A2S has made available to EMCON copies of
all Returns filed for all periods since its inception.
(j) A2S has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(4) apply to any
disposition of assets owned by A2S.
(k) A2S has not been at any time a United States
Real Property Holding Corporation within the meaning of Section 897(c)(2) of the
Code.
(l) A2S is not a party to any contract, agreement,
plan or arrangement, including but not limited to the provisions of this
Agreement, covering any employee or former employee of A2S that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible by A2S as an expense under applicable law.
(m) A2S does not currently and has never met the
criteria of a Qualified Personal Service Corporation as defined in the Internal
Revenue Code Section 448(d)(2)and Treasury Regulations Section 1.448-1T(e)(3).
3.21. Employee Benefit Plans.
(a) Schedule 3.21 lists, with respect to A2S and
any trade or business (whether or not incorporated) which is treated as a
single employer with A2S (an "ERISA Affiliate") within the meaning of Section
414(b), (c),(m) or (o) of the Code, (i) all material employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), (ii) each loan to a non-officer employee in excess of
$10,000, loans to officers and directors and any stock option, stock purchase,
phantom stock, stock appreciation right, supplemental retirement, severance,
sabbatical, medical, dental, vision care, disability, employee relocation,
cafeteria benefit (Code Section 125) or dependent care (Code Section 129), life
insurance or accident insurance plans, programs or arrangements, (iii) all
bonus, pension, profit sharing, savings, deferred compensation or incentive
plans, programs or arrangements, (iv) other fringe or employee benefit plans,
programs or arrangements that apply to senior management of A2S and that do not
generally apply to all employees, and (v) any current or former employment or
executive compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of A2S of greater than $10,000 remain for the
benefit of or relating to, any present or former employee, consultant or
director of A2S (together, the "A2S Employee Plans").
(b) A2S has furnished to EMCON a copy of each
of the A2S Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, and, to the extent still in its
possession, any material employee communications relating thereto) and has, with
respect to each A2S Employee Plan which is subject to ERISA reporting
requirements, provided copies of the Form 5500 reports filed for the last three
plan years. Any A2S Employee Plan
33
intended to be qualified under Section 401(a) of the Code has either
obtained from the Internal Revenue Service a favorable determination letter as
to its qualified status under the Code, including all amendments to the Code
effected by the Tax Reform Act of 1986 and subsequent legislation, or has
applied to the Internal Revenue Service for such a determination letter prior to
the expiration of the requisite period under applicable Treasury Regulations or
Internal Revenue Service pronouncements in which to apply for such determination
letter and to make any amendments necessary to obtain a favorable determination,
or has been established under a standardized prototype plan for which an
Internal Revenue Service opinion letter has been obtained by the plan sponsor
and is valid as to the adopting employer. A2S has also furnished EMCON with the
most recent Internal Revenue Service determination or opinion letter issued with
respect to each such A2S Employee Plan, and nothing has occurred since the
issuance of each such letter which could reasonably be expected to cause the
loss of the tax-qualified status of any A2S Employee Plan subject to Code
Section 401(a).
(c) (i) None of the A2S Employee Plans promises
or provides retiree medical or other retiree welfare benefits to any
person; (ii) there has been no "prohibited transaction," as such term is defined
in Section 406 of ERISA and Section 4975 of the Code, with respect to any A2S
Employee Plan, which could reasonably be expected to have, in the aggregate, a
Material Adverse Effect; (iii) each A2S Employee Plan has been administered in
accordance with its terms and in compliance with the requirements prescribed by
any and all statutes, rules and regulations (including ERISA and the Code),
except as would not have, in the aggregate, a Material Adverse Effect, and A2S
and each subsidiary or ERISA Affiliate have performed all material obligations
required to be performed by them under, are not in any material respect in
default under or violation of and have no knowledge of any material default or
violation by any other party to, any of the A2S Employee Plans; (iv) neither A2S
or ERISA Affiliate is subject to any liability or penalty under Sections 4976
through 4980 of the Code or Title I of ERISA with respect to any of the A2S
Employee Plans; (v) all material contributions required to be made by A2S or
ERISA Affiliate to any A2S Employee Plan have been made on or before their due
dates and a reasonable amount has been accrued for contributions to each A2S
Employee Plan for the current plan years; (vi) with respect to each A2S Employee
Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 or ERISA has occurred; and (vii) no A2S
Employee Plan is covered by, and neither A2S or ERISA Affiliate has incurred or
expects to incur any liability under Title IV of ERISA or Section 412 of the
Code. With respect to each A2S Employee Plan subject to ERISA as either an
employee pension plan within the meaning of Section 3(2) of ERISA or an employee
welfare benefit plan within the meaning of Section 3(l) of ERISA, A2S has
prepared in good faith and timely filed all requisite governmental reports
(which were true and correct as of the date filed) and has properly and timely
filed and distributed or posted all notices and reports to employees required to
be filed, distributed or posted with respect to each such A2S Employee Plan. No
suit, administrative proceeding, action or other litigation has been brought, or
to the knowledge of A2S is threatened, against or with respect to any such A2S
Employee Plan, including any audit or inquiry by the IRS or United States
Department of Labor. Neither A2S or other ERISA Affiliate is a party to, or has
made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
(d) With respect to each A2S Employee Plan,
A2S and each of its United States subsidiaries have complied with (i) the
applicable health care continuation and notice provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA").
34
and the proposed regulations thereunder and (ii) the applicable
requirements of the Family Leave Act of 1993 and the regulations thereunder,
except to the extent that such failure to comply would not in the aggregate,
have a Material Adverse Effect.
(e) The consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee or other service provider of A2S or any other ERISA Affiliate to
severance benefits or any other payment (including, without limitation,
unemployment compensation, golden parachute or bonus), except as expressly
provided in this Agreement or (ii) accelerate the time of payment or vesting of
any such benefits, or increase the amount of compensation due any such employee
or service provider.
(f) There has been no amendment to, written
interpretation or announcement (whether or not written) by A2S or other
ERISA Affiliate relating to, or change in participation or coverage under, any
A2S Employee Plan which would materially increase the expense of maintaining
such Plan above the level of expense incurred with respect to that Plan for the
most recent fiscal year included in A2S's financial statements.
3.22. Employee Matters. A2S is in compliance with all
currently applicable laws and regulations respecting discrimination in
employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices, except for such noncompliance as has
not and would not reasonably be expected to have had a Material Adverse Effect
on A2S, and is not engaged in any unfair labor practice. There are no pending
claims against A2S under any workers' compensation plan or policy or for long
term disability. A2S has no material obligations under COBRA with respect to any
former employees or beneficiaries thereunder. There are no proceedings pending
or, to the knowledge of A2S, threatened, between A2S and its employees, which
proceedings have or could reasonably be expected to have a Material Adverse
Effect on A2S. A2S is not a party to any collective bargaining agreement or
other labor union contract nor does A2S know of any activities or proceedings of
any labor union to organize its employees. There has been no claim against A2S
based on actual or alleged race, age, sex, disability or other harassment or
discrimination, or similar tortious conduct, nor, to A2S's knowledge, is there
any basis for such claim. In addition, A2S has provided all employees with all
relocation benefits, stock options, bonuses and incentives, and all other
compensation earned up through the date of this Agreement.
3.23. Insurance. Schedule 3.23 lists each policy of insurance
and bonds held by A2S. A2S has policies of insurance and bonds of the type and
in amounts customarily carried by persons conducting businesses or owning assets
similar to those of A2S. There is no material claim pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid and A2S are otherwise in
compliance with the terms of such policies and bonds. A2S has no knowledge of
any threatened termination of, or material premium increase with respect to, any
of such policies.
3.24. Compliance With Laws. A2S has complied with, is not in
violation of and has not received any notices of violation with respect to, any
federal state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as could not be reasonably expected to
have a Material Adverse Effect on A2S.
35
3.25. Brokers' and Finders' Fees. A2S has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
3.26. Ownership of Shares and Options. Except as set forth in
the A2S Disclosure Schedule, each A2S Shareholder owns of record and
beneficially the number of shares of A2S Common Stock, indicated opposite such
A2S Shareholder's name in Schedule 1.7 hereto, as applicable, with full right
and authority to sell or exchange, as applicable, such securities hereunder, and
upon delivery of such shares hereunder, EMCON will receive good title thereto,
free and clear of all mortgages, pledges or security interests and not subject
to any agreements or understandings among any Persons with respect to the voting
or transfer of such securities other than those arising under agreements to
which EMCON is a party.
3.27. Execution, Delivery and Enforceability of Agreement; No
Violation. This Agreement has been duly executed and delivered by or on behalf
of each A2S Shareholder, and at the Closing any other documents required
hereunder to be executed and delivered by or on behalf of each A2S Shareholder
will have been duly executed and delivered. This Agreement constitutes the
legal, valid and binding obligation of each A2S Shareholder, enforceable against
such A2S Shareholder in accordance with its terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws affecting creditor's rights generally. Any
other agreements or documents required hereunder to be executed and delivered by
each A2S Shareholder at Closing will constitute the legal, valid and binding
agreements of each A2S Shareholder executing the same, enforceable against such
A2S Shareholder in accordance with their respective terms, except as enforcement
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws affecting creditor's rights generally.
Neither the execution of this Agreement nor the consummation of the transactions
contemplated by each A2S Shareholder will violate, or constitute a default
under, or permit the acceleration of maturity of, except to the extent waived,
and indentures, mortgages, promissory notes, contracts or agreements to which
such A2S Shareholder is a party or by which such A2S Shareholder or such A2S
Shareholder's properties are bound.
3.28. Information Supplied. To the Knowledge of each A2S
Shareholder, neither this Agreement, the A2S Financial Statements, the A2S
Disclosure Schedule, the Exhibits attached to this Agreement, nor any other
certificate or document furnished or to be furnished by A2S or the A2S
Shareholders pursuant to the terms of this Agreement, contains or will contain
any untrue statement of a material fact known to the A2S Shareholders or A2S,
respectively, or omits or will omit to state a material fact necessary to make
the statements contained in such information not misleading in light of the
circumstances under which such statements were made.
3.29. Residence and Domicile. Each A2S Shareholder is a
resident of, and domiciled in, the State indicated on Schedule 1.7 hereto, as
applicable, as being the residence of such A2S Shareholder.
3.30. Brokers or Finders. Neither the A2S Shareholders nor any
of such A2S Shareholders' agents have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement or the transactions
contemplated hereby.
36
3.31. Representations Complete. To A2S's knowledge, none of
the representations or warranties made by A2S herein or in any Schedule or
Exhibit hereto, including the A2S Disclosure Schedule, or certificate furnished
by A2S pursuant to this Agreement or any written statement furnished to EMCON
pursuant hereto or in connection with the transactions contemplated hereby, when
all such documents are read together in their entirety, contain, or will contain
at the Effective Time any untrue statement of a material fact, or omits or will
omit at the Effective Time to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading; provided, however, that for purposes of this
representation, any document attached hereto that provides information
inconsistent with or in addition to any other written statement furnished to
EMCON in connection with the transaction contemplated hereby, shall be deemed to
supersede any other document or written statement furnished to EMCON with
respect to such inconsistent or additional information.
4. Representations and Warrantees of EMCON and Sub. Except as disclosed
in a document of even date herewith and delivered by EMCON to A2S prior to the
execution and delivery of this Agreement and referring to the representations
and warranties in this Agreement (the "EMCON Disclosure Schedule"), each of
EMCON and Sub represents and warrants to A2S as follows:
4.1.Organization, Standing and Power. Each of EMCON and Sub is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. EMCON has the corporate power to own
its properties and to carry on its business as now being conducted and as
proposed to be conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified and in
good standing would have a Material Adverse Effect on EMCON. EMCON is not in
violation of any of the provisions of its Articles of Incorporation or Bylaws or
equivalent organizational documents.
4.2. Authority. EMCON and Sub each has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of EMCON and Sub. This
Agreement has been duly executed and delivered by EMCON and Sub and constitutes
the valid and binding obligation of EMCON and Sub. The execution and delivery of
this Agreement do not and the consummation of the transactions contemplated
hereby will not conflict with, or result in any violation of, or default under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss of
a material benefit under (i) any provision of the Articles of Incorporation or
Bylaws of EMCON or any of its subsidiaries, as amended, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to EMCON or any of its subsidiaries or
their properties or assets. No consent approval, order or authorization of or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to EMCON or any of its subsidiaries in connection with the
execution and delivery of this Agreement by EMCON or the consummation by EMCON
of the transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger, together with the required officers' certificates, as
provided in Section 0, (ii) the filing of a Form D with the Securities and
Exchange Commission in accordance with Regulation D following the Effective
Time, (iii) the filing of a Form 8-K with the Securities and Exchange Commission
("SEC") and National Association of
37
Securities Dealers ("NASD") within 15 days after the Closing Date, (iv) any
filings as may be required under applicable state securities laws and the
securities laws of any foreign country, (v) such filings as may be required
under HSR, (vi) the filing with the Nasdaq National Market of a Notification
Form for Listing of Additional Shares with respect to the shares of EMCON Common
Stock issuable upon conversion of the A2S Common Stock in the Merger, and (vii)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on EMCON and
would not prevent, materially alter or delay any of the transactions
contemplated by this Agreement.
4.3. SEC Documents: Financial Statements. EMCON has furnished
to A2S a true and complete copy of each statement, report, registration
statement (with the prospectus in the form filed pursuant to Rule 424(b) of the
Securities Act), definitive proxy statement, and other filing filed with the SEC
by EMCON since December 31, 1997, and, prior to the Effective Time, EMCON will
have furnished A2S with true and complete copies of any additional documents
filed with the SEC by EMCON prior to the Effective Time (collectively, the
"EMCON SEC Documents"). In addition, EMCON has made available to A2S all
exhibits to the EMCON SEC Documents filed prior to the date hereof and will
promptly make available to A2S all exhibits to any additional EMCON SEC
Documents filed prior to the Effective Time. All documents required to be filed
as exhibits to the EMCON SEC Documents have been so filed, and all material
contracts so filed as exhibits are in full force and effect except those which
have expired in accordance with their terms, and neither EMCON nor any of its
subsidiaries is in default thereunder. As of their respective filing dates, the
EMCON SEC Documents complied in all material respects with the requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
Securities Act and none of the EMCON SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed EMCON SEC Document prior to the date hereof.
The financial statements of EMCON, including the notes thereto, included in the
EMCON SEC Documents (the "EMCON Financial Statements"), complied as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto as of their
respective dates, and have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Qs, as permitted by Form 10-Q of the SEC). The EMCON
Financial Statements fairly present the consolidated financial condition and
operating results of EMCON and its subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring yearend adjustments). There has been no change in EMCON
accounting policies except as described in the notes to the EMCON Financial
Statements.
4.4. Absence of Certain Changes. Since December 31, 1997 (the
"EMCON Balance Sheet Date"), EMCON has conducted its business in the ordinary
course consistent with past practice and there has not occurred: (i) any change,
event or condition (whether or not covered by insurance) that has resulted in,
or might reasonably be expected to result in, a Material Adverse Effect to
EMCON; (ii) any acquisition, sale or transfer of any material asset of EMCON or
any of its subsidiaries other than in the ordinary course of business and
consistent with past practice; (iii) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by EMCON or any revaluation by EMCON of any of its assets; (iv) any
declaration, setting aside, or payment of a dividend or other distribution with
respect to
38
the shares of EMCON, or any direct or indirect redemption, purchase or
other acquisition by EMCON of any of its shares of capital stock; (v) any
material contract entered into by EMCON, other than in the ordinary course of
business and as provided to A2S or any material amendment or termination of, or
default under, any material contract to which EMCON is a party or by which it is
bound; (vi) any amendment or change to EMCON's Articles of Incorporation or
Bylaws; or (vii) any negotiation or agreement by EMCON or any of its
subsidiaries to do any of the things described in the preceding clauses (i)
through (vi) (other than negotiations with A2S and its representatives regarding
the transactions contemplated by this Agreement).
4.5. Absence of Undisclosed Liabilities. EMCON has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet included in EMCON's Annual Report on Form 10-K for the period
ended December 31, 1997 (the "EMCON Balance Sheet"), (ii) those incurred in the
ordinary course of business and not required to be set forth in the EMCON
Balance Sheet under generally accepted accounting principles, and (iii) those
incurred in the ordinary course of business since the EMCON Balance Sheet Date
and consistent with past practice.
4.6. Litigation. There is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of EMCON or any of
its subsidiaries, threatened against EMCON or any of its subsidiaries or any of
their respective properties or any of their respective officers or directors (in
their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on EMCON. There is no
judgment, decree or order against EMCON or any of its subsidiaries or, to the
knowledge of EMCON or any of its subsidiaries, any of their respective directors
or officers (in their capacities as such) that could prevent, enjoin, or
materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on EMCON.
4.7. Governmental Authorization. Except where the failure to
obtain or have any of such EMCON Authorizations could not reasonably be expected
to have a Material Adverse Effect on EMCON, EMCON and each of its subsidiaries
have obtained each federal, state, county, local or foreign governmental
consent, license, permit, grant, or other authorization of a Governmental Entity
(i) pursuant to which EMCON or any of its subsidiaries currently operates or
holds any interest in any of its properties or (ii) that is required for the
operation of EMCON's or any of its subsidiaries' business or the holding of any
such interest ((i) and (ii) herein collectively called "EMCON Authorizations"),
and all of such EMCON Authorizations are in full force and effect.
4.8. Broker's and Finders' Fees. EMCON has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
4.9. Compliance With Laws. Each of EMCON and Sub have complied
with, are not in violation of and have not received any notices of violation
with respect to, any federal state, local or foreign statute, law or regulation
with respect to the conduct of its business, or the ownership or operation of
its business, except for such violations or failures to comply as could not be
reasonably expected to have a Material Adverse Effect on EMCON or SUB.
39
4.10. Brokers' and Finders' Fees. EMCON has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
4.11. Execution, Delivery and Enforceability of Agreement; No
Violation. This Agreement has been duly executed and delivered by or on behalf
of each of EMCON and Sub, and at the Closing any other documents required
hereunder to be executed and delivered by or on behalf of each of EMCON and Sub
will have been duly executed and delivered. This Agreement constitutes the
legal, valid and binding obligation of each of EMCON and Sub, enforceable
against each of EMCON and Sub in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other laws affecting creditor's rights
generally. Any other agreements or documents required hereunder to be executed
and delivered by each of EMCON and Sub at Closing will constitute the legal,
valid and binding agreements of EMCON and Sub executing the same, enforceable
against each of EMCON and Sub in accordance with their respective terms, except
as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws affecting
creditor's rights generally. Neither the execution of this Agreement nor the
consummation of the transactions contemplated by each of EMCON and Sub will
violate, or constitute a default under, or permit the acceleration of maturity
of, except to the extent waived, and indentures, mortgages, promissory notes,
contracts or agreements to which each of EMCON and Sub is a party or by which
EMCON and Sub or EMCON's and Sub's properties are bound.
4.12. `Information Supplied. To the Knowledge of EMCON and
Sub, neither this Agreement, the Exhibits attached to this Agreement, nor any
other certificate or document furnished or to be furnished by each of EMCON and
Sub pursuant to the terms of this Agreement, contains or will contain any untrue
statement of a material fact known to EMCON or Sub, or omits or will omit to
state a material fact necessary to make the statements contained in such
information not misleading in light of the circumstances under which such
statements were made.
4.13. Representations Complete. To EMCON's knowledge, none of
the representations or warranties made by EMCON herein or in any Schedule
hereto, including the EMCON Disclosure Schedule, or certificate furnished by
EMCON pursuant to this Agreement, or the EMCON SEC Documents, or any written
statement furnished to A2S pursuant hereto or in connection with the
transactions contemplated hereby, when all such documents are read together in
their entirety, contains or will contain at the Effective Time any untrue
statement of a material fact or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading; provided, however, that for purposes of this representation, any
document attached hereto that provides information inconsistent with or in
addition to any other written statement furnished to A2S in connection with the
transactions contemplated hereby, shall be deemed to supersede any other
document or written statement furnished to A2S with respect to such inconsistent
or additional information.
5. Conduct Prior To The Effective Time.
5.1. Conduct of Business of A2S and EMCON. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, each of A2S and EMCON
agrees (except to the extent expressly contemplated by this Agreement or as
consented to in writing by the other), to carry on its and its subsidiaries'
40
business in the usual regular and ordinary course in substantially the same
manner as heretofore conducted; to pay and to cause its subsidiaries to pay
debts and Taxes when due subject (i) to good faith disputes over such debts or
Taxes and (ii) in the case of Taxes of A2S, to EMCON's consent to the filing of
material Tax Returns if applicable; to pay or perform other obligations when
due, and to use all reasonable efforts to preserve intact its present business
organizations, keep available the services of its and its subsidiaries' present
officers and key employees and preserve its and its subsidiaries' relationships
with customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it or its subsidiaries, to the end that its and its
subsidiaries' goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Each of A2S and EMCON agrees to promptly notify the other of (x)
any event or occurrence not in the ordinary course of its or its subsidiaries'
business, and of any event which could have a Material Adverse Effect and (y)
any material change in its capitalization as set forth in Sections 3.5. Without
limiting the foregoing, except as expressly contemplated by this Agreement or
the A2S Disclosure Schedule or the EMCON Disclosure Schedule, neither A2S nor
EMCON, respectively, shall do, cause or permit any of the following, or allow,
cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of the other:
(a) Charter Documents. Cause or permit any
amendments to its Articles of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock.
Except for (i) the purchase of the Cuerdon Promissory Note and the related
release of the 10,000 shares of A2S common stock delivered as security for the
Cuerdon Promissory Note, or (ii) as otherwise approved in writing by EMCON,
declare or pay any dividends on or make any other distributions (whether in
cash, stock or property) in respect of any of its capital stock, or split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to it or its
subsidiaries;
(c) Other. Take, or agree in writing or otherwise
to take, any of the actions described in Sections 5.1 (a) through (b)
above, or any action which would cause a material breach of its representations
or warranties contained in this Agreement or prevent it from materially
performing or cause it not to materially perform its covenants hereunder.
5.2. Conduct of Business of A2S. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, except as expressly contemplated by this
Agreement or the A2S Disclosure Schedule, A2S shall not do, cause or permit any
of the following, without the prior written consent of EMCON:
(a) Material Contracts. Enter into any material
contract or commitment, or violate, amend or otherwise modify or waive any
of the terms of any of its material contracts, other than in the ordinary course
of business consistent with past practice;
(b) Issuance of Securities. Issue, deliver or
sell or authorize or propose the issuance, delivery or sale of, or purchase
or propose the purchase of, any shares of its capital stock or securities
convertible into, or subscriptions, rights, warrants or options to acquire, or
41
other agreements or commitments of any character obligating it to issue any
such shares or other convertible securities;
(c) Intellectual Property. Transfer to any
person or entity any rights to its Intellectual Property other than in the
ordinary course of business consistent with past practice;
(d) Exclusive Rights. Enter into or amend any
agreements pursuant to which any other party is granted exclusive marketing
or other exclusive rights of any type or scope with respect to any of its
products or technology;
(e) Dispositions. Sell, lease, license or
otherwise dispose of or encumber any of its properties or assets which are
material individually or in the aggregate, to its business, except in the
ordinary course of business consistent with past practice;
(f) Indebtedness. Incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others;
(g) Agreements. Enter into, terminate or amend,
in a manner which will adversely affect the business of A2S (i) any
agreement involving an obligation to pay or the right to receive $10,000 or
more, (ii) any agreement relating to the license, transfer or other disposition
or acquisition of intellectual property rights or rights to market or sell A2S
products, or (iii) any other agreement which is material to the business or
prospects of A2S.
(h) Payment of Obligations. Pay, discharge or
satisfy in an amount in excess of $10,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business, other than
the payment, discharge or satisfaction of liabilities reflected or reserved
against in the A2S Financial Statements;
(i) Capital Expenditures. Make any capital
expenditures, capital additions or capital improvements except in the
ordinary course of business and consistent with past practice;
(j) Insurance. Materially reduce the amount of
any material insurance coverage provided by existing insurance policies;
(k) Termination or Waiver. Terminate or waive
any right of substantial value, other than in the ordinary course of business;
(l) Employee Benefit Plans; New Hires; Pay
Increases. Adopt or amend any employee benefit or stock purchase or option
plan, or hire any new employee, pay any special bonus or special remuneration
(except payments made pursuant to written agreements outstanding on the date
hereof), or increase the salaries or wage rates of its employees except in the
ordinary course of business in accordance with its standard past practice;
(m) Severance Arrangements. Grant any severance
or termination pay (i) to any director or officer or (ii) to any other
employee except (A) payments made pursuant to written agreements outstanding on
the date hereof or (B) grants which are made in the ordinary course of business
in accordance with its standard past practice;
42
(n) Lawsuits. Commence a lawsuit other than
(i) for the routine collection of bills, (ii) in such cases where it in
good faith determines that failure to commence suit would result in the material
impairment of a valuable aspect of its business, provided that it consults with
EMCON prior to the filing of such a suit, or (iii) for a breach of this
Agreement;
(o) Acquisitions. Acquire or agree to acquire
by merging or consolidating with, or by purchasing a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets which are material individually
or in the aggregate, to its business;
(p) Taxes. Other than in the ordinary course
of business, make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, file any material Tax
Return or any amendment to a material Tax Return, enter into any closing
agreement, settle any material claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
material claim or assessment in respect of Taxes;
(q) Revaluation. Revalue 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; or
(r) Other. Take or agree in writing or
otherwise to take, any of the actions described in Sections 5.2 (a) through
(q) above, or any action which would cause a material breach of its
representations or warranties contained in this Agreement or prevent it from
materially performing or cause it not to materially perform its covenants
hereunder.
6. Additional Agreements.
6.1 Payment of Additional Merger Consideration.
(a) In addition to the Merger Consideration to
be delivered the A2S Shareholders at the Closing pursuant to Sections 1.6
and 1.7 hereof, the A2S Shareholders will be eligible to earn as additional
consideration for the Merger, an aggregate earnout amount up to Three Hundred
Thousand Dollars ($300,000) in the form of cash and EMCON Common Stock (the
"Additional Consideration"), subject to the Surviving Corporation achieving the
milestones set forth below. The form of the aggregate Additional Consideration
to be paid to the A2S Shareholders (pro rata based on the total number of shares
of A2S Capital Stock held by each A2S Shareholder immediately prior to the
Effective Time) will be 50% in cash and 50% in shares of unregistered EMCON
Common Stock valued at the closing price of EMCON Common Stock as reported on
the Nasdaq National Market on the first business day following the end of an
Earnings Period (as defined below).
(b) In the event that the Surviving Corporation
achieves the pretax income milestones (the "Income Milestones"), subject to
the conditions set forth below, during the two twelve month periods following
the Effective Time (the "Earnings Period"), EMCON agrees to deliver to the A2S
Shareholders the aggregate earn-out payments (the "Earnout Payments") set forth
opposite each Earnings Period, all as set forth below.
43
Earnings Period Income Milestone Earnout Payments
Months 1-12 $500,000 $150,000
Months 13-24 $600,000 $150,000
The calculation of the Surviving Corporation's pretax income for
purposes of this Section 7.1 will be based on the application of Generally
Accepted Accounting Principles, consistently applied, including the use of
accrual accounting. For purposes of calculating the Income Milestones, EMCON
shall not allocate any portion of its general corporate overhead to the
Surviving Corporation. Notwithstanding the foregoing, to the extent EMCON incurs
expenses (e.g. insurance, legal, outside accounting, etc.) directly for the
benefit of the Surviving Corporation, or otherwise provides administrative
services for the benefit of the Surviving Corporation, the actual cost of such
items (i.e., without any markup) shall be charged to the Surviving Corporation
for purposes of such calculation.
6.2 Operation and Management of the Surviving Corporation.
(a) The parties to this Agreement agree that,
unless subsequently changed with the approval of the Board of Directors of
the Surviving Corporation, the Surviving Corporation will retain the name
"Advanced Analytical Solutions, Inc." While name retention is primarily for
client relation purposes, it symbolically signifies the reasonable operational
autonomy of the Surviving Corporation desired by the parties.
(b) Immediately following the Effective Time,
William J. Hengemihle ("Hengemihle") and Christopher M. Wittenbrink
("Wittenbrink") shall be elected to the offices of President and Vice President,
respectively, of the Surviving Corporation. Hengemihle will report directly to
Gene Herson in his role as the President of EMCON's Professional Services
Division.
(c) Immediately following the Effective Time,
the Board of Directors of Surviving Corporation shall consist of
Hengemihle, Wittenbrink, Gary McEntee and Michael Momboisse.
(d) The parties hereto agree that the Surviving
Corporation will have reasonable autonomy concerning its business affairs
as a manner of principle. However, the Surviving Corporation accepts and will
abide by EMCON's business and personnel policies. In this regard, the Surviving
Corporation agrees to at least meet the minimum standards established for all
EMCON operations with respect to EMCON's policies regarding human resources,
employee benefits, insurance coverage, accounting policies and procedures,
contract administration and risk management.
(e) EMCON will assist the Surviving Corporation
in setting up its accounting systems to comply with EMCON's standards. This
shall include accrual accounting, similar charts of accounts and integration
with EMCON's Sacramento Accounting Center.
(f) Following the Closing, EMCON may, at its sole
option, pay off all outstanding long term debt of the Surviving Corporation.
44
6.3. Future Grant of Options to Purchase Common Stock of EMCON
EMCON agrees to reserve options to purchase an aggregate of Fifty Thousand
(50,000) shares of EMCON Common Stock (the "Options") for issuance to Hengemihle
and Wittenbrink and other key managers of the Surviving Corporation Hengemihle
and Wittenbrink deem appropriate, if any. The parties hereto intend that the
Options will be incentive stock options granted pursuant to EMCON's new 1998
Stock Option Plan (the "Option Plan"). Such treatment however, will be
conditioned upon the formal approval of the Option Plan by EMCON's shareholders
at the annual meeting of shareholders to be held May 28, 1998 (the "Shareholder
Meeting"). In the event the shareholders do not approve the Option Plan, the
Options will be granted pursuant to a nonqualified plan and will, therefore,
qualify as nonqualified stock options. In any event, the Options granted will be
granted subject to the standard terms and conditions of the EMCON's existing
stock option plan and agreements which provides, among other things, for a five
year term and vesting in equal installments over a four year period. No Options
will be granted prior to the date of the Shareholder Meeting. The exercise price
of the Options will be set at the closing price of EMCON Common Stock as
reported on the Nasdaq National Market on the date of such grant.
6.4. Participation in Pay-for-Performance Program. The
executive officers and continuing managers of Surviving Corporation shall be
eligible to participate in EMCON's Pay-for-Performance program (the "Performance
Program"). For the twelve month period immediately following the Effective Time
(the "First Performance Period"), the amount accrued under the Performance
Program shall equal 50% of all pretax profits of the Surviving Corporation in
excess of $500,000. For the twelve month period following the First Performance
Period, the amount accrued under the Performance Program shall equal 50% of all
pretax profits of the Surviving Corporation in excess of $600,000. Allocation of
the respective bonus pools among the Surviving Corporation employees shall be at
the discretion of the executive officers of the Surviving Corporation, subject
only to general oversight and written consent of the Compensation Committee of
the Board of Directors of EMCON.
At the Closing, EMCON shall loan Timothy M. Keaten the sum
of Two Hundred Twenty-Five Thousand Dollars ($225,000) pursuant to the terms of
a three year full recourse promissory note (the "Note") and pledge agreement
("Pledge Agreement"), in the form attached hereto as Exhibit E, secured by the
EMCON Common Stock to be issued to Mr. Keaten as an A2S Shareholder in
connection with the Merger as set forth in Schedule 1.7 hereto. The Note shall
be due and payable in full after three years and shall bear interest payable
quarterly at the rate of 8% per annum, calculated on the basis of a 360 day
year.
6.6. Access to Information.
(a) A2S shall afford EMCON and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to (i) all of A2S's
properties, books, contracts, commitments and records, and (ii) all other
information concerning the business, properties and personnel of A2S as EMCON
may reasonably request. A2S agrees to provide to EMCON and its accountants,
counsel and other representatives copies of internal financial statements
promptly upon request. EMCON shall afford A2S and its accountants, counsel and
other representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (i) all of EMCON's and its subsidiaries'
properties, books, contracts, commitments and records, and (ii) all other
information concerning the business, properties and personnel of EMCON and its
subsidiaries as A2S may
45
reasonably request. EMCON agrees to provide to A2S and its accountants,
counsel and other representatives copies of internal financial statements
promptly upon request.
(b) Subject to compliance with applicable law,
from the date hereof until the Effective Time, each of EMCON and A2S shall
confer on a regular and frequent basis with one or more representatives of the
other party to report operational matters of materiality and the general status
of ongoing operations.
(c) No information or knowledge obtained in any
investigation pursuant to this Section 6.6 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
6.7. Confidentiality. The parties acknowledge that EMCON and
A2S have previously executed a non-disclosure agreement dated May 2, 1997 (the
"Non-Disclosure Agreement"), which Non-Disclosure Agreement is hereby
incorporated herein by reference and shall continue in full force and effect in
accordance with its terms.
6.8. Public Disclosure. Unless otherwise permitted by this
Agreement, EMCON and A2S shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange or with
the NASD.
6.9. Consents; Cooperation. Each of EMCON and A2S shall
promptly apply for or otherwise seek, and use reasonable best efforts to obtain,
all consents and approvals required to be obtained by it for the consummation of
the Merger, including those required under HSR, and shall use reasonable best
efforts to obtain all necessary consents, waivers and approvals under any of its
material contracts in connection with the Merger for the assignment thereof or
otherwise.
6.10. Legal Requirements. Each of EMCON and A2S will take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement and will promptly cooperate with and
furnish information to any party hereto necessary in connection with any such
requirements imposed upon such other party in connection with the consummation
of the transactions contemplated by this Agreement and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of or any registration,
declaration or filing with, any Governmental Entity or other person, required to
be obtained or made in connection with the taking of any action contemplated by
this Agreement.
6.11. Blue Sky Laws. EMCON shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the EMCON Common Stock in connection
with the Merger. A2S shall use its best efforts to assist EMCON as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of EMCON Common Stock in
connection with the Merger.
46
6.12. Nonaccredited Shareholders. Prior to the Closing, A2S
shall not take any action, including the granting of employee stock options,
that would cause the number of A2S shareholders who are not "accredited
investors" pursuant to Regulation D promulgated under the Securities Act of
1933, as amended, to increase to more than 35 during the term of this Agreement.
6.13. Listing of Additional Shares. Following the Effective
Time, EMCON shall file with the Nasdaq National Market a Notification Form for
Listing of Additional Shares with respect to the shares of EMCON Common Stock
issuable upon conversion of the A2S Common Stock in the Merger.
6.14. Expenses. The parties will each pay their own legal,
accounting and professional expenses ("Expenses") in connection with the
transactions contemplated hereby. In the event the Merger is consummated, the
Expenses incurred by A2S and/or its shareholders up to an aggregate total of
$20,000 shall be paid by EMCON.
6.15. Registration of Shares Issued in the Merger. At the
Closing, EMCON shall grant to the A2S Shareholders certain registration rights
set forth in the EMCON Registration Rights Agreement with respect to the shares
of EMCON Common Stock issued in the Merger.
6.16. Personal Guarantees. From and after the Closing Date,
EMCON agrees to work diligently to have each of William J. Hengemihle and
Timothy M. Keaten released from his obligations and liability under the Personal
Guarantees. The term "Personal Guarantee" shall mean the personal financial
guarantees given by each of William J. Hengemihle and Timothy M. Keaten in
connection with certain debt obligations of A2S as set forth on Schedule 6.16
hereto.
7. Termination, Amendment and Waiver
7.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Section 7.1(b) through Section
7.1(d), by written notice by the terminating party to the other party):
(a) by the mutual written consent of EMCON and
A2S;
(b) by either EMCON or A2S if the Merger shall
not have been consummated by April 11, 1998, provided, however, that the
right to terminate this Agreement under this Section 7.1 (b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date;
(c) by either EMCON or A2S if a court of
competent jurisdiction or other Governmental Entity shall have issued a
nonappealable final order, decree or ruling or taken any other action, in each
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, except, if the party relying on such order, decree or
ruling or other action has not complied with its obligations under this
Agreement;
(d) by either EMCON or A2S, if there has been
a breach of any representation, warranty, covenant or agreement on the part
of the other party set forth in this Agreement, which breach (i) causes the
conditions set forth in Section 2.2 (a) or (b) (in the case
47
of termination by EMCON) or Section 2.3 (a) or (b) (in the case of
termination by A2S) not to be satisfied and (ii) shall not have been cured
within ten (10) business days following receipt by the breaching party of
written notice of such breach from the other party
7.2. Effect of Termination. In the event of termination of
this Agreement as provided in Section 7.1, there shall be no liability or
obligation on the part of EMCON, A2S or their respective officers, directors, or
shareholders, except to the extent that such termination results from the
willful breach by a party of any of its representations, warranties or covenants
set forth in this Agreement; provided that the provisions of Section 0 shall
remain in full force and effect and survive any termination of this Agreement.
7.3. Amendment This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
7.4. Extension; Waiver At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
8. General Provisions.
8.1. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed duly delivered if delivered personally
(upon receipt), or three (3) business days after being mailed by registered or
certified mail, postage prepaid (return receipt requested), or one (1) business
day after it is sent by reputable nationwide overnight courier service, or upon
transmission, if sent via facsimile (with confirmation of receipt) to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
(a) if to EMCON, to:
EMCON
400 S. El Camino Real, Suite 1200
San Mateo, CA 94402
Attention: R. Michael Momboisse, Chief Financial Officer
Fax: (650) 375-0763
with a copy to:
Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, CA 94301
Attention: Eric J. Lapp, Esq.
Fax: (650) 328-6561
48
(b) if to A2S, to
Advanced Analytical Solutions, Inc.
1331 17th Street, Suite 600
Denver, CO 80202
Attention: William J. Hengemihle, President
Fax: (303) 295-2692
with a copy to:
Schlueter & Associates, P.C.
1050 Seventeenth Street, Suite 1700
Denver, Colorado 80265
Attention: Henry F. Schlueter
Fax: (303) 292-3883
(c) if to the A2S Shareholders:
William J. Hengemihle
51 Casselberry Drive
Audubon, Pennsylvania 19403
Christopher M. Wittenbrink
2715 South Pierce Street
Denver, Colorado 80227
Timothy M. Keaten
3048 East Clairton Drive
Highlands Ranch, Colorado 80126
Fax: (303) 703-0527
with a copy to:
Schlueter & Associates, P.C.
1050 Seventeenth Street, Suite 1700
Denver, Colorado 80265
Attention: Henry F. Schlueter
Fax: (303) 292-3883
8.2. Definitions. In this Agreement any reference to any
event, change, condition or effect being "material" with respect to any entity
or group of entities means any material event, change, condition or effect
related to the financial condition, properties, assets (including intangible
assets), liabilities, business, operations or results of operations of such
entity or group of entities. In this Agreement any reference to a "Material
Adverse Effect" with respect to any entity or group of entities means any event,
change or effect that is materially adverse to the financial condition,
properties, assets, liabilities, business, operations or results of operations
of such entity and its subsidiaries, taken as a whole. In this Agreement any
reference to a party's "knowledge" means such party's actual knowledge after
reasonable inquiry of officers, directors and other employees of such party
reasonably believed to have knowledge of such matters.
49
8.3. Counterparts This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
8.4. Entire Agreement; Nonassignability; Parties in Interest.
This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including the
Exhibits, the Schedules, including the A2S Disclosure Schedule and the EMCON
Disclosure Schedule (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof except for the Confidentiality Agreement, which shall
continue in full force and effect, and shall survive any termination of this
Agreement or the Closing, in accordance with its terms; (b) are not intended to
confer upon any other person any rights or remedies hereunder, and shall not be
assigned by operation of law or otherwise without the written consent of the
other party.
8.5. Severability. In the event that any provision of this
Agreement, or the application thereof becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
8.6. Remedies Cumulative. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
8.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of California that might otherwise govern
under applicable principles of conflicts of law. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction of any court located within
San Mateo County, State of California, in connection with any matter based upon
or arising out of this Agreement or the matters contemplated hereby and it
agrees that process may be served upon it in any manner authorized by the laws
of the State of California for such persons and waives and covenants not to
assert or plead any objection which it might otherwise have to such jurisdiction
and such process.
The parties hereto agree that they have been represented by
counsel during the negotiation, preparation and execution of this Agreement and,
therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
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IN WITNESS WHEREOF, A2S, EMCON and the Shareholders' Agent have caused
this Agreement to be executed and delivered by each of them or their respective
officers thereunto duly authorized, all as of the date first written above.
"EMCON"
EMCON
By: \o\ R. Michael Momboisse
----------------------------
Name: R. Michael Momboisse
----------------------------
Title: CFO and VP Legal
----------------------------
"SUB"
ADVANCED ANALYTICAL SOLUTIONS
DELAWARE , INC.,
a Delaware corporation
By: \o\ R. Michael Momboisse
----------------------------
Name: R. Michael Momboisse
----------------------------
Title: President
----------------------------
"A2S"
ADVANCED ANALYTICAL SOLUTIONS,
INCORPORATED,
a Colorado corporation
By: \o\ William J. Hengemihle
----------------------------
Name: William J. Hengemihle
----------------------------
Title: President
----------------------------
51
"A2S SHAREHOLDERS"
\o\ William J. Hengemihle
- ------------------------------
William J. Hengemihle
\o\ Christopher M. Wittenbrink
- ------------------------------
Christopher M. Wittenbrink
\o\ Timothy M. Keaten
- ------------------------------
Timothy M. Keaten
52
List of Exhibits
Exhibit A - Certificate of Merger
Exhibit B-1 - Legal Opinion of EMCON
Exhibit B-2 - Legal Opinion A2S
Exhibit C - Employment and Non-Competition Agreement
Exhibit D - Consulting Agreement
Exhibit E - Promissory Note and Pledge Agreement
Exhibit F - Registration Rights Agreement
53
Schedule 1.7
Merger Consideration
A2S SHAREHOLDER STATE OF NO. SHARES A2S CASH EMCON
RESIDENCE COMMON STOCK CONSIDERATION COMMON STOCK
--------------- -------- -------------- ------------- ------------
William J. Hengemihle Pennsylvania 30,000 $272,727 55,944
Timothy M. Keaten Colorado 30,000 $272,727 55,944
Christopher M. Colorado 6,000 $54,545 11,189
Wittenbrink
Total 66,000 $599,999 123,077
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