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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 31, 1996
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APPLIED ANALYTICAL INDUSTRIES, INC.
-----------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation or Organization)
0-21185 04-2687849
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(Commission File Number) (I.R.S. Employer Identification Number)
5051 New Centre Drive
Wilmington, North Carolina 28403
--------------------------------
(Address of Principal Executive Offices) (Zip Code)
(910) 392-1606
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(Registrant's Telephone Number, Including Area Code)
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APPLIED ANALYTICAL INDUSTRIES, INC.
FORM 8-K
(Any item which is not applicable or to which the answer is negative
has been omitted.)
Item 2. Acquisition or Disposition of Assets.
On December 31, 1996, Applied Analytical Industries, Inc. ("AAI"), through its
wholly-owned subsidiary, My Asset Management GmbH, exercised options to acquire
all of the outstanding ownership of L.A.B. Gesellschaft fur pharmakologische
Untersuchungen mbH & Co. ("L.A.B."). The controlling ownership interest was
acquired from Friedrich Herzog von Wurttemberg.
L.A.B. is a European contract research and development organization
headquartered in Neu-Ulm, Germany with operational units in Neu-Ulm, Stuttgart
and Munich, Germany as well as in France, Holland, England and Hungary. It
employs approximately 250 scientists, technicians and support personnel, 60 or
more with Ph.D. or M.D. degrees. L.A.B. focuses on both niche clinical and non-
clinical pharmaceutical product development and provides services that include
drug formulation development; chemical analysis; Phase I clinical studies;
bioanalytical testing; and European regulatory consulting. The firm also
provides controlled Phase II-A studies and multi-center trials focused in niche
therapeutic areas including hepatic disease, chemotherapeutics, and hormone
replacement therapy.
The acquisition will be accounted for using the purchase method of accounting.
The aggregate acquisition cost, including current and deferred payments to
former owners, amounts advanced to L.A.B. to retire existing bank debt and other
liabilities, contingencies and acquisition costs, is approximately $18 million.
The acquisition will be funded through the release of an escrow deposit; current
cash payments from existing cash balances of AAI, exclusive of any proceeds from
its recent initial public offering; with the remainder, including deferred
payments to former owners, payments on L.A.B. bank debt and other liabilities
and contingencies expected to be paid out over the next few years with working
capital from operations.
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Item 7. Financial Statements and Exhibits.
(a) Financial statements the business acquired:
The audited financial statements of the acquired business for the
periods specified in Rule 3-05(b) of Regulation S-X are not
available at this time. Such financial statements will be filed as
an amendment to this Form 8-K on or before March 17, 1997.
(b) Pro forma financial information:
The pro forma financial information specified in Article 11 of
Regulation S-X is not available at this time. Such information
will be filed as an amendment to this Form 8-K at the time the
above financial statements are filed.
(c) Exhibits:
Exhibit No. Description
2.1* Option Agreement between Applied Analytical
Industries, Inc. and My Asset Management
GmbH and Friedrich Herzog von Wurttemberg.
2.2* Purchase and Assignment Agreement between
Friedrich Herzog von Wurttemberg and My
Asset Management GmbH
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* Schedules and appendices to such documents have been omitted and will be
supplementally provided to the Securities and Exchange Commission upon request.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
APPLIED ANALYTICAL INDUSTRIES, INC.
Date: January 15, 1997 By: /s/ Frederick D. Sancilio
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Frederick D. Sancilio, Ph.D.
President and Chief Executive Officer
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APPLIED ANALYTICAL INDUSTRIES, INC.
EXHIBIT INDEX
Exhibit No. Description
2.1* Option Agreement between Applied Analytical
Industries, Inc. and My Asset Management
GmbH and Friedrich Herzog von Wurttemberg.
2.2* Purchase and Assignment Agreement between
Friedrich Herzog von Wurttemberg and My
Asset Management GmbH
- ------------------------------------
* Schedules and appendices to such documents have been omitted and will be
supplementally provided to the Securities and Exchange Commission upon request.
5
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EXHIBIT 2.1
English Translation
OPTION AGREEMENT
BETWEEN
Applied Analytical Industries, Inc.
1206 North 23rd Street
Wilmington, NC 28405
U.S.A.
("AAI")
and
My Asset Management GmbH
(Future name: Applied Analytical Industries Deutschland GmbH)
c/o Shearmen & Sterling
CouvenstraBe 8, 40211 Dusseldorf
Germany
("NewCo")
- ON THE ONE SIDE -
A N D
Friedrich Herzog von Wurttemberg
Schloss
88045 Friedrichshafen
Germany
(the "Hofkammer")
- ON THE OTHER SIDE -
(AAI, NewCo and the Hofkammer are hereinafter collectively referred to as the
"Parties".)
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4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Directory of Annexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1 Call Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2 Financial Commitments by the Hofkammer Towards NewCo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3 Financial Commitments by AAI Towards Hofkammer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4 Lease Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5 Prior Agreements; Distribution of Escrow Funds; Option Fee . . . . . . . . . . . . . . . . . . . . . . . . . 11
6 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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5
DIRECTORY OF ANNEXES
Annex 1.3 - Purchase Agreement
Annex 4.1 - Lease Agreement
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INTRODUCTION
A. Since May 10, 1995, the Hofkammer is holding a limited partnership
interest of DM 1,500,000 representing 75% of the limited liability
capital in L.A.B. Gesellschaft fur pharmakologische Untersuchungen mbH
& Co., Neu-Ulm ("L.A.B."). Since July 31, 1995, the Hofkammer is
holding three shares with an aggregate nominal value of DM 50,000 in
L.A.B. GmbH & Co. KG's general partner, L.A.B. Verwaltungsgesellschaft
mbH, Neu-Ulm (the Partner GmbH ), representing all of the share
capital of the Partner GmbH. Before that time the Hofkammer did not
hold any interest in either L.A.B. or the Partner GmbH. The
Hofkammer's sole aim in acquiring these interests was to secure for
the time being L.A.B. as a going concern including the preservation of
jobs and thereby avoiding the loss of its own claims against L.A.B.,
including payment of outstanding rent. Hofkammer was not active in the
business of L.A.B., nor will be in the future and wishes therefore to
sell its interests in L.A.B. and the Partner GmbH.
B. AAI is active in the same business as L.A.B. and intends to expand its
operations in Europe. AAI therefore is interested to purchase the
aforementioned interests of Hofkammer.
C. On May 28, 1996 the Parties entered into an Exclusive Option Agreement
which was notarized by Notary Dr. Patrick Wamister in Bale on July 8,
1996. This Exclusive Option Agreement granted AAI a six-month
exclusive option period which in the meantime was extended until
December 9, 1996. Under such agreement AAI was entitled to request
that Hofkammer sells its interests in the Partner GmbH and L.A.B.,
which interests at the time of such sale would represent all of its
interests in and to L.A.B. and the Partner GmbH (the "Transaction").
By letter agreement dated December 9, 1996, the Hofkammer granted to
AAI exclusivity for a period until December 24, 1996.
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7
In consideration thereof, the Parties agree as follows:
1 CALL OPTION
1.1 The Hofkammer hereby irrevocably grants to NewCo, subject to
the terms and conditions stated hereinafter, an option (the
"Call Option") to require the Hofkammer to sell to NewCo
(i) all outstanding shares in the Partner GmbH
representing a total nominal capital (Stammkapital)
of DM 50,000 (the "GmbH Shares") and,
(ii) all of Hofkammer's partnership interest in L.A.B.
representing today a 75% participation in L.A.B.,
with a registered limited liability amount
(Haftkapital) of DM 1,500,000 (the "L.A.B.
Partnership Interest"),
(The GmbH Shares and the L.A.B. Partnership Interest are
hereinafter collectively referred to as the "L.A.B.
Interests".)
1.2 NewCo may only exercise the Call Option until January 2, 1997
(the Call Option Period ). For the purpose of executing the
Call Option, the Hofkammer hereby irrevocably offers to NewCo
to sell the L.A.B. Interests within the Call Option Period by
accepting the offer of the Hofkammer by notarial deed. NewCo
shall give a notice to the Hofkammer promptly after having
accepted the offer.
1.3 The purchase of the L.A.B. Interests by NewCo pursuant to the
exercise of the Call Option shall take place pursuant to the
purchase agreement attached as Annex 1.3 (the "Purchase
Agreement"). Such Purchase Agreement shall become effective on
January 1, 1997, 00:00 o'clock or on December 31, 1996, 23:59
o'clock, at the choice of NewCo (the "Effective Date").
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8
1.4 Any exercise of the Call Option by NewCo shall in no way
constitute a waiver of any warranty rights or otherwise affect
any rights of NewCo under the Purchase Agreement unless
specifically otherwise stipulated.
2 FINANCIAL COMMITMENTS BY THE HOFKAMMER TOWARDS NEWCO
In case the Call Option is validly exercised and NewCo pays the
Purchase Price under clause 4.2 (i) of the Purchase Agreement, the
Hofkammer herewith agrees as part of a global finacial reorganization
(Sanierung)
(i) to waive all of its claims against L.A.B. or against
any other company of L.A.B. (the "L.A.B. Group")
with effect as of the day preceding the Effective
Date except for an amount of DM 2,928,000 plus V.A.T.
if applicable (the "Hofkammer Entitlement") which is
part of the Purchase Price under the Purchase
Agreement,,
(ii) that neither L.A.B. nor any other company of the
L.A.B. Group shall make any payments for outstanding
rent or otherwise to the Hofkammer after November 26,
1996, and that Hofkammer shall reimburse to NewCo any
excess payments received thereafter, if any, plus
interest in an amount of 5.5% p.a.
3 FINANCIAL COMMITMENTS BY AAI TOWARDS HOFKAMMER
In case the Call Option is validly exercised, AAI herewith guarantees
that NewCo will pay the full amount of the purchase price as stated in
clause 4 of the Purchase Agreement. Upon request AAI shall provide to
Hofkammer a bank guarantee of a German bank of Hofkammer's choice
securing outstanding payments of the Purchase Price, provided that
Hofkammer bears the cost of such a bank guarantee.
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9
4 LEASE AGREEMENT
4.1 If the Call Option is validly exercised and NewCo pays the
Purchase Price under clause 4.2 (i) of the Purchase Agreement,
the Hofkammer and NewCo will take responsibility that the
Hofkammer Grundstucksgesellschaft GBR mbH and L.A.B. shall
amend the current two lease agreements relating to the head
offices of L.A.B. (the "Property") which are attached as Annex
4.1 (the Lease Agreements) as follows with effect as of the
Effective Date (the "Lease Commencement Date"):
4.1.1 The term of the Lease Agreements shall unitarily end
five years after the Lease Commencement Date. L.A.B.
has an option to extend the Lease Agreements for one
additional period of five years. Such option to be
exercised by written notice to the Hofkammer
Grundstucksgesellschaft GBR mbH at least 18 months
before expiration of the first five-year term.
4.1.2 As of the Lease Commencement Date the aggregate
yearly rent due for the first three years under the
Lease Agreements shall amount to DM 1,000,000 plus
V.A.T., payable on a monthly basis not later than on
the 15th of each month. After the third anniversary
of the Lease Commencement Date, such rent shall be
adjusted to market conditions in the Ulm area, if
possible on the basis of comparable properties at
comparable locations. In determining such market rent
any structural measures and installations financed by
the lessor which increase the value of the Property
shall be taken into consideration when fixing the
rent, but it shall not include improvements financed
by the lessee. In each such case, any rent adjustment
will be implemented on a forward looking basis only.
In case L.A.B. and the Hofkammer
Grundstucksverwaltungsgesellschaft cannot agree on
such adjustment of the rent, the amount of the rent
shall be determined by a pub-
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10
licly sworn expert to be jointly commissioned by the
Parties who shall act as an appraiser
(Schiedsgutachter) in the meaning of sect. 317 Civil
Code (BGB). The appraiser's determination shall be
binding. If the Parties are unable to agree on such
an appraiser, then he/she shall be appointed by the
President of the Ulm Chamber of Industry and Commerce
after hearing of the parties. The costs of the
appraisal shall be borne by the Parties in accordance
with sect. 91 Civil Procedure Act (ZPO).
The rent adjusted as described shall be applicable
until the end of the first five-year term. If L.A.B.
exercises the option for another five-year term, the
rent for such additional term shall be determined by
the same procedure as described in clause 4.1.2,
second sentence, above, including a customary index
clause.
4.1.3 In case that more than 50% of the property is
destroyed or otherwise not useable as intended,
L.A.B. may terminate the Lease Agreements with
immediate effect and is in any case entitled to
reduce the rent adequately.
4.1.4 All other terms of the Lease Agreements shall remain
in full force and effect. In the event of differences
between the two lease agreements, the one dated
October 22, 1992/January 4, 1993 shall prevail.
4.2 Any rent owed by L.A.B. pursuant to clause 4.1 is herewith
guaranteed by NewCo. For this purpose AAI declares the
following:
NewCo is a wholly owned subsidiary of AAI. NewCo is entrusted
with all of the activities of AAI in Germany. AAI intends to
continue to control NewCo and to entrust NewCo with its future
business activities in Germany. If AAI decides to cause
changes with respect to the control of NewCo and/or NewCo's
entrustment with AAI's business activities in Germany, AAI
will give the Hofkammer prior written notice upon which the
Hofkammer and AAI will
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11
agree on a solution which is comparable for the Hofkammer with
the situation as mentioned in the first two sentences.
4.3 AAI and the Hofkammer shall procure that L.A.B. and Hofkammer
Grundstucksgesellschaft GBR mbH shall execute as soon as
possible a new lease agreement in due form reflecting the
terms of this clause 4. As part of such new lease agreement
the Hofkammer shall procure NewCo or its assignee one option
to acquire of the three buildings presently used by L.A.B. and
the underlying land. The conditions for such purchase shall
be based on market value; such option to be registered at the
land register (Grundbuch). In case the parties cannot agree on
market value, an independent expert acting as an appraiser
shall determine such market conditions. Until said option is
duly registered Hofkammer shall take responsibility that the
property will not be sold or otherwise transferred to a third
party.
5 Prior Agreements; Distribution of Escrow Funds; Option Fee
5.1 This Agreement supersedes in its entirety the Exclusive Option
Agreement, except for the Escrow Agreement which is part of
the Exclusive Option Agreement and which will remain in full
force and effect.
5.2 It is understood that in case the Call Option is not validly
exercised, the Hofkammer is obliged to agree that the Escrow
Fund as defined in the Escrow Agreement including interest
shall be distributed to AAI, except for an amount in the
equivalent of $15,000 (currency value as of the Effective
Date); such amount to be regarded as an option fee for the
Hofkammer as consideration for the granting of the Call Option
hereunder.
5.3 In case that the Call Option is validly exercised, AAI is
obliged to agree that the Escrow Fund shall be distributed to
the Hofkammer as satisfaction of the purchase price stated
under clause 4.2 (i) of the Purchase Agreement.
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6 MISCELLANEOUS
6.1 In case the Call Option is validly exercised, only NewCo is
entitled and obliged to inform the Partner GmbH about the
transfer of the GmbH Shares pursuant to sect. 16 (1) Limited
Corporation Act (GmbHG).
6.2 Each Party shall bear its own costs and expenses in connection
with the negotiation, preparation and implementation of this
Agreement with the exception of notarial and court costs and
similar charges which shall be shared equally between the
Parties. Transfer taxes will be borne by NewCo.
6.3 If any of the provisions contained in this Agreement are or
become invalid or impracticable for any reason, including by
virtue of the omission of any other provision, the validity of
the remaining provisions shall remain unaffected. The invalid
or impracticable provision shall be substituted or
supplemented by provisions that ensure the economic purpose of
the invalid or impracticable provision as far as possible.
6.4 Unless otherwise specified in this Agreement, all notices and
other communications hereunder shall be in writing and in
English.
IF TO THE HOFKAMMER:
Hofkammer des Hauses Wurttemberg
- Direktion -
SchloB
88045 Friedrichshafen
Fax (+49-7541) 307-126
IF TO NEWCO:
Applied Analytical Industries Deutschland GmbH
c/o Shearman & Sterling
CouvenstraBe 8
40211 Dusseldorf
Fax (+49-211) 1 78 88-88
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IF TO AAI:
Applied Analytical Industries, Inc.
attn. General Counsel
5051 New Centre Drive
Wilmington, NC 28403
U.S.A.
Fax: (+1-910) 392-6557
6.5 All Annexes in this Agreement are considered a part
hereof.
6.6 Each of the Parties shall execute and deliver all
such further documents and agreements and do such
further acts as are reasonably required hereby and
are not inconsistent with any other provisions of
this Agreement.
6.7 The Parties agree to keep confidential all
information obtained in connection with this
Agreement and its performance as long as and to the
extent that it has not been made known to the public
without fault of any of the Parties. If this
Agreement is terminated for any reason, this
confidentiality obligation shall remain in effect
indefinitely.
6.8 Neither this Agreement nor any right hereunder may be
assigned without the prior written consent of the
other Parties unless specifically stated otherwise.
Any attempt to assign any right hereunder without
such approval will be void unless it is an assignment
or transfer by operation of law. Subject to the
preceding sentence, this Agreement is binding upon,
inures to the benefit of, and is enforceable by the
Parties and their respective successors and
assignees.
6.9 Each Party shall execute any further legal acts which
are required to achieve the goal of this agreement.
This also includes that the Hofkammer, upon request,
will render all necessary statements so that for the
Buyer no undesirable consequences will result from
the exclusion of the Jaegers agreed on by the
shareholders' meeting. This clause 6.9 contains no
financial commitments for either Party.
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6.10 This Agreement shall be governed by the laws of the
Federal Republic of Germany. The exclusive place of
jurisdiction is Frankfurt am Main.
IN WITNESS THEREOF, this public deed and the Annexes have been read out in
their entirety in the presence of the appeared persons and in my presence.
After reading, this public deed and the Annexes have been found to be correct
and approved. After that the appeared persons have signed the public deed in my
presence, thereupon I, the notary public, have also signed this public deed and
affixed my official seal.
BALE, this 23rd (twenty-third) day of December 1996 (nineteen hundred and
ninety-six)
[Signatures and seal of notary public.]
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EXHIBIT 2.2
ENGLISH TRANSLATION
ANNEX 1.3
OF THE OPTION AGREEMENT
PURCHASE AND ASSIGNMENT AGREEMENT
BETWEEN
Friedrich Herzog von Wurttemberg
Schloss
88045 Friedrichshafen
Germany
(the "Hofkammer")
A N D
My Asset Management GmbH
c/o Shearman & Sterling
Couvenstr. 8
40211 Dusseldorf
Germany
("NewCo")
(The Hofkammer and NewCo are hereinafter collectively referred to as the
"Parties".)
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2
INTRODUCTION
Applied Analytical Industries, Inc. ("AAI"), being the sole shareholder of
NewCo, the Hofkammer and Baden-Wurttembergische Bank AG have entered into an
escrow agreement (the "Escrow Agreement") in July 1996 as stipulated in the
Exclusive Option Agreement (notarial deed Allg. Prot. No. 133 of the notary
public Dr. Patrick Wamister, Bale) which was entered into by AAI and the
Hofkammer.
AAI has deposited under the Escrow Agreement at Baden-Wurttembergische Bank AG
an amount of DM 1,575,000 (the "Escrow Fund") to be applied to any purchase of
L.A.B. by AAI or a subsidiary.
In consideration hereof, the Parties agree as follows:
1. FACTS AS OF THE EFFECTIVE DATE
1.1 The Hofkammer is a limited partner (Kommanditistin) of L.A.B.
Gesellschaft fur pharmakologische Untersuchungen mbH & Co. (
"L.A.B."). The Hofkammer's limited partnership interest (the
"Limited Partnership Interest") with a registered liability
amount of DM 1,500,000 has been fully paid in cash. L.A.B. is
registered at the commercial register of Amtsgericht Memmingen
under HR A 6951.
1.2 The Hofkammer is also the sole shareholder of L.A.B.
Verwaltungsgesellschaft mbH ( Partner GmbH ) and is holding
three shares, one share with a nominal value of DM 25,000 and
two shares each with a nominal value of DM 12,500 representing
100% of the stated capital (Stammkapital) in the amount of DM
50,000 of Partner GmbH (hereinafter the GmbH Shares ). The
Partner GmbH is registered at the commercial register of
Memmingen under HR B 6885.
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3
1.3 The Partner GmbH is the sole general partner (Komplementarin)
of L.A.B.
2. SALE AND ASSIGNMENT
2.1 The Hofkammer hereby sells to NewCo and NewCo hereby purchases
from the Hofkammer the GmbH Shares. The transfer of the GmbH
Shares shall have economic effect as of the Effective Date, as
defined hereinafter. NewCo shall be entitled to all dividend
rights and all other secondary rights of the Shares.
The Hofkammer hereby assigns to NewCo the GmbH Shares with
effect in rem as of the Effective Date, as defined hereinafter
and NewCo accepts such assignment.
2.2 The Hofkammer hereby sells to NewCo and NewCo hereby purchases
from the Hofkammer the L.A.B. partnership interest including
all capital accounts and any other rights the Hofkammer may
have in L.A.B. The transfer of the Limited Partnership
Interest shall have economic effect as of the Effective Date.
The Hofkammer hereby assigns to NewCo the Limited Partnership
Interest with effect in rem as of registration of NewCo in the
commercial register as successor in law
(Sonderrechtsnachfolgerin) of the Hofkammer.
3. EFFECTIVE DATE
The Effective Date of this Agreement is January 1, 1997, 0:00 o'clock
or December 31, 1996, 23:59 o'clock, at the choice of NewCo.
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4. PURCHASE PRICE
4.1 The purchase price owed by NewCo for the GmbH Share and the
L.A.B. Limited Partnership Interest amounts to DM 6,553,000
(in words: Deutsche Mark six million five hundred and
fifty-three thousand) (the "Purchase Price").
4.2 The Purchase Price is due and payable as follows:
(i) DM 4,503,000 15 banking days in Baden-Wurttemberg
after the Effective Date from a distribution of the
Escrow Fund plus additional cash;
(ii) DM 600,000 on January 2, 1998;
(iii) DM 700,000 on January 2, 1999;
(iv) DM 750,000 on January 2, 2000.
4.3 AAI may offset counterclaims against Hofkammer, whatever their
cause in law, only insofar as such counterclaims are finally
and absolutly judicially determined or are acknowledged by
Hofkammer. This also applies to counterclaims for warranty or
damages claims asserted on the basis of this Agreement.
5. HOFKAMMER'S REPRESENTATION AND WARRANTIES
5.1 The Hofkammer represents and warrants in form of an
independent guarantee (selbstandiges Garantieversprechen) as
of the Effective Date that:
5.1.1 it is the sole owner of the fully paid in GmbH Shares
and of the fully paid in Limited Partnership Interest
(hereinafter
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5
collectively the "L.A.B. Interests") and is entitled
to sell and transfer to NewCo the full legal and
beneficial ownership of the L.A.B. Interests, and
NewCo hereby will own such interests free and clear
from any encumbrances and will thereby become the
sole owner of the L.A.B. Interests;
5.1.2 no third party has any interest in the Partner GmbH
and in L.A.B., provided, however, that this
representation shall not apply to Ms. Jaeger's and
Dr. Jaeger's interests in L.A.B. with a registered
liability amount of DM 125,000 and DM 375,000,
respectively;
5.1.3 the Partner GmbH has a net equity (Eigenkapital in
the meaning of sect. 266 III A HGB) in the amount of
at least DM 50,000 notwithstanding any liabilities
connected with its position as a general partner of
L.A.B.;
5.1.4 the L.A.B. Interests are not subject to any
restrictions on disposition, any preemptive rights,
option rights, rights of first refusal or similar
rights of third parties;
5.1.5 the facts stated in clause 1 are true and correct;
5.1.6 the capital represented by the L.A.B. Interests have
not been paid back at any time after May 10, 1995,
and no additional contribution obligations in cash or
in kind (NachschuBpflichten) exist with respect to
the L.A.B. Interests;
5.1.7 there are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in
effect with respect to the voting or transfer of the
L.A.B. Interests except as provided for in the
articles of incorporation of the Partner GmbH and the
partnership agreement of L.A.B.; for the avoidance of
doubt: the purchase price in the amount of
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DM 5,000 paid by the Hofkammer to Dr. Jaeger for the
GmbH shares is not deemed to be a repayment as such;
5.1.8 the L.A.B. Interests do not constitute the entire
property of the Hofkammer within the meaning of sect.
419 of the Civil Code (BGB);
5.1.9 APPENDIX 5.1.9 contains a true and correct copy of
the articles of incorporation (Gesellschaftsvertrag)
of the Partner GmbH;
5.1.10 APPENDIX 5.1.10 contains a true and correct copy of
the partnership agreement of L.A.B.; this, however,
shall not be a guarantee that the changes to the
Partnership Agreement dated March 27, 1996, and
September 9, 1996, are effective and binding;
5.1.11 APPENDIX 5.1.11 contains a true and correct list of
all of the subsidiaries of L.A.B. and the Partner
GmbH including the amount of shareholding (the
"Subsidiaries");
5.1.12 except for the bonus entitlements
(Erfolgsbeteiligung) of Mr. Feichter and Dr. Kappler
and certain employees, all as further described in
Appendix 5.1.12, neither the Partner GmbH nor L.A.B.
is bound by any control, profit transfer or other
agreements of the type referred to in sect. 291, 292
et seq. of the Stock Corporation Act (Aktiengesetz),
and no silent participations (stille Beteiligungen),
profit participating loans (partiarische Darlehen),
profit participations of management or employees or
other similar obligations exist with respect to the
profits of L.A.B. and/or the Partner GmbH;
5.1.13 between the date of this notarial deed and the
Effective Date, the business will be conducted in the
ordinary course
<PAGE> 7
7
and consistent with past practice, and the Hofkammer
shall cause the Partner GmbH, L.A.B. and the
Subsidiaries not to enter into any transaction
outside the ordinary course of business without the
prior consent of NewCo. As amplification and not
limitation of the foregoing, the Partner GmbH, L.A.B.
and/or the Subsidiaries will not:
(i) make any loan to, guarantee any indebtedness
of or otherwise incur any indebtedness on
behalf of the Hofkammer or any third party or
assume any other unusual obligations;
(ii) redeem any of the capital or declare, make or
pay any profit distributions (whether in
cash, securities or other property);
(iii) enter into any arrangement under or similar
to the Transformation Law
(Umwandlungsgesetz);
(iv) purchase any assets or make any investments
in excess of DM 50,000 (in words: Deutsche
Mark fifty thousand), without the prior
written consent of NewCo;
(v) hire new employees;
clause 6.2, second half sentence, shall remain
unaffected.
5.1.14 neither L.A.B. nor any of its Subsidiaries has, or
will have, any liability (whether actual, contingent
or disputed and whether having arisen before or
arising after September 30, 1996) effectively
attributable to the period on or before September 30,
1996 (the "Unrecorded Liabilities"), except to the
extent reflected in the interim financial statements
as of
<PAGE> 8
8
September 30, 1996, contained in Appendix 5.2.3,
provided that Unrecorded Liabilities up to an amount
of DM 3,200,000 shall not constitute a breach of this
clause 5.1.14. Unrecorded Liabilities as used herein
do not include
(i) liabilities of L.A.B. connected with the law
suit filed by Apotex, Inc. against various
companies including L.A.B. and the Partner
GmbH, at the Ontario Court (General
Division), Canada, in an amount of
US$188,306.80 and Canadian $40,000,000 (Court
File No. 94-CQ-50477), and
(ii) tax liabilities of IPA-Internationale
Pharmaagentur GmbH and Inpharmco GmbH
Gesellschaft zur Vermarktung von
Arzneimitteln up to an amount of DM 1,300,000
in the aggregate for the business years up to
1992, regardless to which extent reflected in
the Reference Balance Sheet, and
(iii) any kind of liabilities other than tax
liabilities which AAI or any of the persons
who acted in the interest of AAI during the
negotiations and the due diligence have
knowledge of.
The Hofkammer shall not be liable for any of the
liabilities stated under (i) through (iii).
5.2 The Hofkammer herewith warrants and represents to its best
knowledge, whereby only the knowledge of Hofkammerprasident
Dr. Hans-Joachim Kay and of Dr. Martin Schockenhoff is
attributable to the Hofkammer, and provided that neither the
Hofkammer nor its officers, advisors or agents have any duty
to make affirmative inquiry into any facts or circumstances
except after due inquiry with Mr. Josef Feichter and Dr.
Joachim Kappler, both managing direc-
<PAGE> 9
9
tors of the Partner GmbH as of the date hereof and having
confirmed in writing that as of the date hereof
5.2.1 sufficient insurance policies have been concluded and
maintained to secure against risk arising in
connection with the business of L.A.B. and the
Subsidiaries until the Effective Date;
5.2.2 neither the execution, delivery and performance of
this Agreement by the Hofkammer nor the consummation
of the transactions contemplated hereby and thereby,
will
(i) violate or conflict with, result in a breach
of, or result in or permit the acceleration
or termination of or constitute a default
under (whether with notice or lapse of time
or both) any agreement, instrument,
indenture, mortgage, lien, lease or other
contract to which L.A.B. or the Partner GmbH
or a Subsidiary is a party or by which any of
them or their property or assets is bound,
provided such violation, conflict,
acceleration, termination of default
individually or in the aggregate would have a
material adverse effect on their business;
(ii) result in the creation of any lien, charge,
or encumbrance on any of the property or
assets of said companies which individually
or in the aggregate would have an adverse
effect on their business;
5.2.3 the financial statements contained in APPENDIX 5.2.3
fairly present the financial position and results of
operation of L.A.B. at the respective dates and for
the respective periods to which they apply;
<PAGE> 10
10
5.2.4 APPENDIX 5.2.4 completely and correctly identifies
all contracts with licensors, contracts with
licensees, leases and other contracts relating to
L.A.B., the Partner GmbH or the Subsidiaries (other
(i) than contracts with employeees of L.A.B. listed
in APPENDIX 5.2.14 (a), including the service
agreements with Dr. Kappler and Mr. Feichter, (ii)
the two lease agreements with the Hofkammer referred
to in clause 4.1 of the Option Agreement, and (iii)
contracts with a monthly payment obligation of no
more than DM 10,000 and a term of less than one
year). Except as disclosed in such Appendix, neither
the Partner GmbH nor L.A.B. nor any Subsidiary is a
party or otherwise subject to
(i) any contract, agreement or instrument
evidencing or relating to any material amount
of indebtedness for borrowed money or the
deferred purchase price of property, or any
direct or indirect guarantee of any such
indebtedness or deferred purchase price, or
(ii) any secrecy or other agreement or any
injunction, judgment, order or award that (x)
restricts the right of the Partner GmbH or
L.A.B. or any Subsidiary to engage in any
place in any line of business or (y) would
restrict the right of the Partner GmbH or
L.A.B. or any Subsidiary to engage in any
place in any line of business after the
Effective Date;
5.2.5 L.A.B. is the owner of the know-how incorporated in
the dossiers, listed in APPENDIX 5.2.5, all such
know-how is free and clear of any liens, pledges,
usufruct, and other encumbrances and L.A.B. can
freely dispose of such knowhow;
<PAGE> 11
11
5.2.6 the Partner GmbH, L.A.B. and the Subsidiaries are
each in compliance in all material respects with all
laws, regulations, orders, judgments and decrees of
any court or governmental or administrative authority
applicable to their business so that there will be no
material detrimental impact for said companies in the
future;
5.2.7 either L.A.B. or the Partner GmbH, as the case may
be, owns, leases or has the legal right to use all
the properties and assets, including, without
limitation, the intellectual property and the real
property, used or intended to be used in the conduct
of its business or otherwise owned, leased or used by
said companies and, with respect to contract rights,
is a party to and enjoys the right to the benefits of
all contracts, agreements and other arrangements used
or intended to be used by said companies (all such
properties, assets and contract rights being the
"Assets"). Either L.A.B. or the Partner GmbH, as the
case may be, has good and marketable title to, or, in
the case of leased or subleased Assets, valid and
subsisting leasehold interests in, all the Assets,
free and clear of all encumbrances;
L.A.B. has caused the Assets to be maintained in
accordance with good business practice, and all
the Assets are in good operating condition and repair
and are suitable for the purposes for which they are
used and intended;
5.2.8 neither L.A.B. nor the Partner GmbH nor any
Subsidiary has entered into any agreement with the
Hofkammer, Dr. Jaeger and/or Ms. Jaeger or with any
company, trust or other entity controlled by the
aforesaid persons, with the exception of a
transaction with L.A.B. Canada in the amount of
approximately DM 1,000,000 in 1996, from which
transaction, however, there are no open claims;
<PAGE> 12
12
5.2.9 neither L.A.B. nor the Partner GmbH nor any of its
Subsidiaries is a party to any contract in violation
of Section 1 of the Act Against Restraints on
Competition (Gesetz gegen Wettbewerbsbeschrankungen)
or respective foreign laws or requiring approval of
the Federal Cartel Office (Bundeskartellamt) or other
respective national authorities or the European
Commission without having duly filed a respective
application to receive such approval;
5.2.10 neither L.A.B. nor the Partner GmbH nor any of its
Subsidiaries has entered into any speculative
transactions including foreign exchange, options,
futures, or other derivative financial instruments;
5.2.11 other than normal salary there are no outstanding
amounts due to Mr. Feichter and Dr. Kappler except
for possible claims of Dr. Kappler for bonus payments
in the amount of approximately DM 220,000, for the
business years 1994, 1995, 1996, and for which an
accrual has been created in the interim balance sheet
of L.A.B.;
5.2.12 neither L.A.B. nor the Partner GmbH nor any of their
Subsidiaries is party to any proceeding pending or
threatened (including notification of customers for
malperformance) before any courts, government
agencies or arbitration courts; said companies are
not subject to, in violation of or in default with
respect to any judgment, order writ or injunction and
such companies have no knowledge of to potentially
becoming subject to any official investigation, claim
or action which might be detrimental to the business
(e.g., conditions (Auflagen) to or revocation of
permits), all except the Apotex claims
(US $ 188,306.80 and Can $ 40,000,000) and
any claims of the tax authorities;
<PAGE> 13
13
5.2.13 L.A.B. has paid all social contributions, V.A.T. and
trade tax when due except for health insurance
payments for November 1996 (amounting to
approximately DM 650,000) and possible tax
liabilities referred to in clause 5.1.14 (ii);
5.2.14 Appendix 5.2.14 (a) contains a true and complete list
of all employees of L.A.B., the Partner GmbH and
their Subsidiaries; none of the key employees listed
in Appendix 5.2.14 (b) have communicated that they
intend to leave;
5.2.15 neither L.A.B. nor the Partner GmbH nor any of their
Subsidiaries has sold since January 1, 1996, any
assets outside the ordinary course of business; for
the avoidance of doubt: L.A.B. KK (Japan) has been
shut down for tax purposes and all assets (book value
DM 1 in the balance sheet 1994) have been transferred
to the Japanese tax authorities;
5.2.16 the Hofkammer has disclosed all facts and
circumstances which can reasonably be expected to be
material to NewCo.
5.3 In case of a breach of any of the representations and
warranties under clause 5.1 and/or 5.2 the following applies:
5.3.1 In the event of an incorrect representation, the
Hofkammer is entitled to put NewCo in such position
as if the representation had been correct. If the
Hofkammer fails to cure the breach within a period of
three months after notification by NewCo, or if
immediate action is necessary (Gefahr im Verzug), the
Hofkammer shall refund to NewCo the damage in order
to establish the represented status. However, the
liability in case of a breach of a representation
shall be limited to DM 3,650,000, provided, that a
breach of the representation under clause 5.1.14
shall be limited to an amount of DM 1,575,000 with
prejudice to liabilities pursuant to the
<PAGE> 14
14
other representations. It is understood that the
Hofkammer is entitled to offset any remedies owed
hereunder against any installments of the Purchase
Price not yet due for payment.
5.3.2 Claims of NewCo pursuant to this clause 5 shall
become time-barred 15 months after the Effective
Date, except for breach of warranties in connection
with clause 5.1.14, which remedies become time-barred
6 months after final tax assessments for L.A.B., the
Partner GmbH and their Subsidiaries have been
rendered after a tax audit with respect to the tax
periods until and including 1996. The limitation
period stops running if claims are asserted in
writing by NewCo against the Hofkammer and if the
reasons on which such claim is based are reasonably
identified. On request by the Hofkammer NewCo shall
lodge an appeal against tax assessments. The Parties
shall mutually consent to the splitting of costs.
6. COVENANTS
6.1 Hofkammer agrees that neither it nor any of its associated
undertakings shall do business for a period of three years
after the Effective Date in the product or geographical
markets in which L.A.B. or any of its Subsidiaries operates at
the time of entry into this Agreement.
6.2 Between the date of this notarial deed and the Effective Date
the Hofkammer shall instruct Mr. Feichter and Dr. Kappler not
to file for bankruptcy, provided, that the Hofkammer shall
have no liability if such bankruptcy will be filed.
6.3 NewCo shall give the Hofkammer the opportunity to accompany
and have representatives at and participating in any tax
audits.
<PAGE> 15
15
7. MISCELLANEOUS
7.1 Each Party shall bear its own costs and expenses in connection
with the negotiation, preparation and implementation of this
Agreement with the exception of notarial and court costs and
similar charges which shall be shared equally between the
Parties. Transfer taxes will be borne by NewCo.
7.2 If any of the provisions contained in this Agreement are or
become invalid or impracticable for any reason, including by
virtue of the omission of any other provision, the validity of
the remaining provisions shall remain unaffected. The invalid
or impracticable provision shall be substituted or
supplemented by provisions that ensure the economic purpose of
the invalid or impracticable provision as far as possible.
7.3 Unless otherwise specified in this Agreement, all notices and
other communications hereunder shall be in writing and in
English.
IF TO THE HOFKAMMER:
Hofkammer des Hauses Wurttemberg
- Direktion -
SchloB
88045 Friedrichshafen
Fax (+49-7541) 307-126
IF TO NEWCO:
Applied Analytical Industries Deutschland GmbH
c/o Shearman & Sterling
CouvenstraBe 8
40211 Dusseldorf
Fax (+49-211) 1 78 88-88
<PAGE> 16
16
IF TO AAI:
Applied Analytical Industries, Inc.
attn. General Counsel
5051 New Centre Drive
Wilmington, NC 28403
U.S.A.
Fax: (+1-910) 392-6557
7.4 All Annexes in this Agreement are considered a part hereof.
7.5 Each of the Parties shall execute and deliver all such further
documents and agreements and do such further acts as are
reasonably required hereby and are not inconsistent with any
other provisions of this Agreement.
7.6 The Parties agree to keep confidential all information
obtained in connection with this Agreement and its performance
as long as and to the extent that it has not been made known
to the public without fault of any of the Parties. If this
Agreement is terminated for any reason, this confidentiality
obligation shall remain in effect indefinitely.
7.7 Neither this Agreement nor any right hereunder may be assigned
without the prior written consent of the other Parties unless
specifically stated otherwise. Any attempt to assign any right
hereunder without such approval will be void unless it is an
assignment or transfer by operation of law. Subject to the
preceding sentence, this Agreement is binding upon, inures to
the benefit of, and is enforceable by the Parties and their
respective successors and assignees.
7.8 Each Party shall execute any further legal acts which are
required to achieve the goal of this agreement. This also
includes that the Hofkammer, upon request, will render all
necessary statements so that for the Buyer no undesirable
consequences will result from the exclusion of the Jaegers
agreed on by the shareholders' meeting. This clause 7.8
contains no financial commitments for either Party.
<PAGE> 17
17
7.9 This Agreement shall be governed by the laws of the Federal
Republic of Germany. The exclusive place of jurisdiction is
Frankfurt am Main.
IN WITNESS THEREOF, this public deed and the Annexes have been read out in
their entirety in the presence of the appeared persons and in my presence.
After reading, this public deed and the Annexes have been found to be correct
and approved. After that the appeared persons have signed the public deed in my
presence, thereupon I, the notary public, have also signed this public deed and
affixed my official seal.
BALE, this 23rd (twenty-third) day of December 1996 (nineteen hundred and
ninety-six)
[Signatures and seal of notary public]
