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EXHIBIT 2(c)(1)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of February 17, 1997 by and among
Substance Abuse Technologies, Inc., a Delaware corporation ("SAT"), U.S. Drug
Acquisition Corp., a Delaware corporation ("Acquisition Corp."), and U.S. Drug
Testing, Inc., a Delaware corporation ("U.S. Drug").
WITNESSETH:
WHEREAS, of the 5,221,900 shares of the common stock, $.001 par value
(the "U.S. Drug Common Stock"), of U.S. Drug outstanding as of the date hereof,
SAT is the owner of 3,500,000 shares and 1,721,900 shares (the "Minority U.S.
Drug Common Stock") are owned by persons other than SAT (the "U.S. Drug Minority
Stockholders");
WHEREAS, the Board of Directors of each of SAT and Acquisition Corp.
have each adopted, approved and authorized the execution and delivery of this
Agreement and Plan of Merger (the "Agreement") so as to implement the subject
merger in compliance with the provisions of Section 251 of the General
Corporation Law of the State of Delaware (the "GCL") and Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, because of the relationships of all three of the directors of
U.S. Drug to SAT as current directors and/or officers thereof and as
securityholders thereof, the Board of Directors of U.S. Drug has only authorized
execution and delivery of the Agreement on the condition that approval of the
subject merger by U.S. Drug shall only be effected as a result of the obtaining
of consents thereto from the holders of more than 50% of the Minority U.S. Drug
Common Stock;
WHEREAS, the Board of Directors of U.S. Drug intends to, and shall,
submit this Agreement and the subject merger to the stockholders of U.S. Drug
for approval to the extent required by the applicable provisions of the GCL; and
WHEREAS, in connection with the subject merger and the solicitation of
stockholder consents thereto, SAT has filed a Registration Statement on Form
S-4, File No. 333-4790 (the "Registration Statement"), with the Securities and
Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), the Registration Statement to include as Part I
thereof the prospectus and consent solicitation statement to be transmitted to
the U.S. Drug Minority Stockholders (such prospectus and consent solicitation
statement, as from time to time amended and/or supplemented, hereinafter
referred to as the "Consent Solicitation Statement/Prospectus") (a) with respect
to the solicitation of consents from the U.S. Drug Minority Stockholders to the
subject merger pursuant to Section 228 of the GCL and Section
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14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and (b) with respect to the distribution of the shares of the SAT common stock,
$.01 par value (the "SAT Common Stock"), to the U.S. Drug Minority Stockholders
in exchange for their shares of the U.S. Drug Common Stock pursuant to the terms
of the Agreement, the subject merger, the Securities Act and the rules and
regulations promulgated thereunder;
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto do hereby agree as follows:
1. THE MERGER. Subject to the terms and conditions hereinbelow set
forth, on the Effective Date (as hereinafter defined in Section 11 hereof) U.S.
Drug shall be merged with and into Acquisition Corp. (the "Merger") and, in
connection therewith:
(a) except to the extent provided or permitted by applicable law,
the separate existence of U.S. Drug shall cease and terminate;
(b) Acquisition Corp. as the surviving corporation, shall continue
its corporate existence under the laws of the State of Delaware and shall
possess all of the rights, privileges, immunities, powers, franchises and
authority (both public and private) of, and be subject to all of the
restrictions, disabilities and duties of, U.S. Drug;
(c) all of the assets and property of U.S. Drug of every kind,
nature and description (real, personal and mixed and both tangible and
intangible) and every interest therein, wheresoever located, including, without
limitation, all debts or other obligations belonging or due to U.S. Drug, all
stock subscriptions, claims and chooses in action shall be, and be deemed to be,
vested, absolutely and unconditionally, in Acquisition Corp. (to the same
extent, degree and manner as previously vested in U.S. Drug); and
(d) all debts and obligations of U.S. Drug, all rights of creditors
of U.S. Drug and all liens or security interests encumbering any of the property
of U.S. Drug shall be vested in Acquisition Corp. and shall remain in full force
and effect without modification or impairment and shall be, and be deemed to be,
enforceable against Acquisition Corp. and its assets and properties with the
same full force and effect as if such debts, obligations, liens or security
interests had been originally incurred or created by Acquisition Corp. in its
own name and for its own behalf. Without limiting the generality of the
foregoing, Acquisition Corp. specifically assumes all continuing obligations
which U.S. Drug would otherwise have to indemnify its officers and directors, to
the fullest extent currently provided in Acquisition Corp.'s By-Laws and
pursuant to the GCL, with respect to any and all claims arising out of actions
taken or omitted by such officers and directors prior to the Effective Date.
2. INSTRUMENTS OF CONVEYANCE. Without limiting the generality of the
provisions of Section 1 hereof and/or the succession provisions of applicable
law, the officers and directors of
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U.S. Drug last in office shall (to the extent they, or any of them, possess
and/or may exercise the power to do so) execute, deliver and/or record such
deeds and/or other instruments of transfer and/or conveyance, and take or cause
to be taken, such other and further actions, as the case may be, as shall be
reasonably requested by Acquisition Corp. or SAT, or their legal counsel, to
vest, perfect, confirm, implement the transfer of, or establish in the name, on
behalf or for the account or the benefit of Acquisition Corp., title and/or
possession of any or all of the assets, property, property interests, rights,
privileges, immunities, powers and franchises owned and/or exercisable by U.S.
Drug (or in which U.S. Drug had an interest and/or the power to exercise
immediately prior to the Effective Date) and which was vested, or intended to be
vested, in Acquisition Corp. pursuant to the provisions of this Agreement and
the Merger.
3. CONSTITUTIONAL DOCUMENTS, DIRECTORS AND OFFICERS. On and as of the
Effective Date:
(a) The Certificate of Incorporation of Acquisition Corp. on such
date in full force and effect shall be the Certificate of Incorporation of
Acquisition Corp., as the surviving corporation, until the same shall be
altered, amended, modified, terminated or rescinded in the manner provided by
the GCL, which rights of alteration, amendment, modification, termination and/or
rescission are hereby expressly reserved by Acquisition Corp.;
(b) The By-Laws of Acquisition Corp. on such date in full force and
effect shall be the By-Laws of Acquisition Corp., as the surviving corporation,
until the same shall be altered, amended, modified, terminated or rescinded in
the manner provided in the Certificate of Incorporation of Acquisition Corp.
and/or the GCL, which rights of alteration, amendment, modification, termination
and/or rescission are hereby expressly reserved by Acquisition Corp.
(c) The members of the Board of Directors and the officers of
Acquisition Corp., the surviving corporation, shall consist of the persons
described on Exhibit "A" annexed hereto and made a part hereof, each of such
persons to hold such membership and/or officership as provided in the By-Laws
and/or the GCL.
(d) The Certificate of Incorporation of SAT on such date in full
force and effect shall be the Certificate of Incorporation of SAT until the same
shall be altered, amended, modified, terminated or rescinded in the manner
provided by the GCL, which rights of alteration, amendment, modification,
termination and/or rescission are hereby expressly reserved by SAT.
(e) The By-Laws of SAT on such date in full force and effect shall
be the By-Laws of SAT until the same shall be altered, amended, modified,
terminated or rescinded in the manner provided in the Certificate of
Incorporation of SAT and/or the GCL, which rights of alteration, amendment,
modification, termination and/or rescission are hereby expressly reserved by
SAT.
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4. CONVERSION RATES. On the Effective Date the shares of the U.S. Drug
Common Stock shall be converted and exchanged into shares of the SAT Common
Stock (and warrants exercisable with respect to shares of the U.S. Drug Common
Stock shall become exercisable with respect to shares of the SAT Common Stock)
in the following manner:
(a) Each issued and outstanding share of the U.S. Drug Common Stock
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted and exchanged into 1.62 shares of the SAT Common Stock,
provided however, that to the extent any holder of the U.S. Drug Common Stock
shall be entitled, as a result of the foregoing conversion and exchange, to
receive less than a whole share of the SAT Common Stock, then and in any such
event:
(i) no fractional share and/or fractional interest in a
whole share shall be issued and
(ii) the fractional interest of such holder shall be
liquidated for cash equivalent calculated on the basis of the closing sales
price of the SAT Common Stock on the Effective Date or on the first day
thereafter that such price is available.
The number of shares of the SAT Common Stock to be exchanged for each share of
U.S. Drug Common Stock was determined by dividing $2.625 (which is the value of
the shares of the SAT Common Stock to be exchanged for a share of the U.S. Drug
Common Stock) by an assumed market price of $1.625 (which was the closing sale
price reported by the American Stock Exchange on February 14, 1997, the last
trading date before the date of this Agreement).
(b) Each warrant expiring October 13, 1998 (the "Warrant") shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted and exchanged into a warrant (the "Merger Warrant") to purchase
shares of SAT Common Stock equal to the number of shares that the holder would
have received under Section 4(a) hereof had the Warrant been exercised
immediately prior to the Effective Date. The exercise price shall be adjusted to
the product of $7.50 and a fraction, the numerator of which shall be the number
of shares of the U.S. Drug Common Stock issuable upon exercise of the Warrant
prior to the Merger and the denominator will be the number of shares of the SAT
Common Stock issuable upon the exercise of the Merger Warrant. The expiration
date shall not be changed.
(c) Anything in this Section 4 to the contrary notwithstanding:
(i) Any and all issued shares of the U.S. Drug Common Stock
owned by U.S. Drug and held as treasury stock shall be cancelled and retired and
no shares of the SAT Common Stock shall be issued with respect thereto;
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(ii) Any and all issued shares of the U.S. Drug Common Stock
owned by SAT shall be cancelled and retired and no shares of the SAT Common
Stock shall be issued to SAT with respect thereto; and
(iii) Upon the issuance of shares of the SAT Common Stock to
the U.S. Drug Minority Stockholders in exchange for their shares of the U.S.
Drug Common Stock, there shall be credited to the capital account of SAT an
amount equal to $1.625 and, of the amount so credited, the portion thereof in
excess of the aggregate par value thereof shall be credited to the capital
surplus account.
5. APPOINTMENT OF EXCHANGE AGENT. Prior to the Effective Date SAT
shall, subject to the provisions of Paragraph 8 hereof:
(a) Designate U.S. Stock Transfer Corporation (the "Exchange Agent")
to implement the exchange (subsequent to the Effective Date) of certificates
representing shares of the U.S. Drug Common Stock (the "Old Certificates") for
certificates representing shares of the SAT Common Stock (the "New
Certificates");
(b) engage the Exchange Agent for a period of the lesser of (i) 12
consecutive months following the Effective Date and (ii) the date on which all
of the Old Certificates held by the U.S. Drug Minority Stockholders have been
surrendered for the New Certificates; and
(c) provide to the Exchange Agent sufficient supplies of New
Certificates so as to enable a holder of an Old Certificate(s) to surrender such
Certificate(s) and receive New Certificate(s).
6. CERTIFICATE EXCHANGE. Subsequent to the Effective Date the issuance
and distribution of New Certificates in exchange for Old Certificates shall be
implemented as follows:
(a) As promptly after the Effective Date as shall be reasonably
possible, the Exchange Agent shall be directed to, and shall, notify (the
"Notification") each holder of an Old Certificate of the consummation of the
Merger, the availability of New Certificates and a description of the procedure
to be followed (and documents to be executed and submitted) in connection with
the surrender of the Old Certificate and the issuance of the New Certificate.
Upon compliance by a holder thereof with the requirements for the certificate
surrender and issuance specified in the Notification, the Exchange Agent shall
be directed to, and shall, issue and transmit to such holder New Certificates
(representing that number of shares of the SAT Common Stock to which such holder
shall be entitled as herein provided). Until surrendered and replaced as
aforesaid:
(i) each Old Certificate shall, and be deemed to, represent
and evidence (for all corporate purposes other than the payment of dividends and
other distributions) that
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number of shares of the SAT Common Stock into which the shares of the U.S. Drug
Common Stock therein referred to are convertible and exchangeable as herein
provided and
(ii) each Old Certificate shall not be transferable on the
books and records of U.S. Drug and/or SAT.
(b) From and after the Effective Date any and all dividends and/or
distributions of every kind, nature or description declared and payable by SAT
on, or with respect to, the SAT Common Stock to any holder of an Old Certificate
(collectively "Distributions") shall be paid, retained, invested and paid over
as follows:
(i) Until such time as the Old Certificate is surrendered for
replacement by a New Certificate(s) as herein provided, no Distribution shall be
paid over by SAT and/or the Exchange Agent to such holder on, or with respect
to, the shares of the SAT Common Stock evidenced by such Old Certificate;
(ii) All Distributions payable on, or with respect to, shares
of the SAT Common Stock represented by Old Certificates shall be paid over by
SAT to the Exchange Agent and dealt in and with by the Exchange Agent as
follows:
(A) All Distributions in cash shall be deposited by the
Exchange Agent in an interest bearing account (the "Distribution Account") and
retained and disposed of as hereinbelow provided;
(B) Upon surrender by, or on behalf of, a holder of an Old
Certificate for surrender and replacement as hereinabove provided (or
satisfactory proof of loss and an indemnity in favor of, and acceptable to, SAT
and the Exchange Agent), the Exchange Agent shall pay over and/or deliver to
such holder (in addition to the New Certificate(s) to which such holder shall be
entitled) (y) the principal amount of any cash dividends and any property (other
than shares of the SAT Common Stock) previously received by the Exchange Agent
with respect to the shares of the SAT Common Stock evidenced by such Old
Certificate and (z) a certificate representing any shares of the SAT Common
Stock forming part of any Distribution made prior to the date of any such
surrender;
(C) Any and all interest earned and/or credited on, or with
respect to, Distributions shall be applied by the Exchange Agent to the payment
of its fees and disbursements and the remainder, if any, paid over to SAT upon
the termination of the engagement of the Exchange Agent.
(c) From and after the Effective Date the sole rights of the holders
of Old Certificates (except as otherwise provided by law or Section 4(a) hereof)
shall be those to which they are entitled as owners of the SAT Common Stock into
which the shares of the U.S. Drug Common Stock evidenced by such Old
Certificates shall have been converted as herein provided.
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(d) A holder of a Warrant shall, after the Effective Date, have no
obligation to exchange the holder's certificate evidencing the Warrant for a new
certificate evidencing the Merger Warrant. Whenever thereafter a holder wishes
to exercise his, her or its Warrant, the holder shall present the Warrant, with
the exercise form duly executed and with payment of the new exercise price per
share determined in accordance with Section 4(b) hereof, to SAT and not to U.S.
Drug or Acquisition Corp. SAT shall then cause the Exchange Agent as the
transfer agent for the SAT Common Stock to issue the shares of the SAT Common
Stock as to which the Warrant is exercised. To the extent that the Warrant is
not exercised for all of the shares of the SAT Common Stock subject thereto, SAT
will issue a new certificate evidencing a Merger Warrant for the balance.
7. TRANSFERS. If the holder of any Old Certificate desires that the New
Certificate to be issued in replacement therefor (as hereinabove provided) is to
be issued in a name other than that on the Old Certificate which it replaces,
any such issuance shall be subject to and conditioned upon:
(a) Delivery to the Exchange Agent of the Old Certificate duly
endorsed in blank or accompanied by a duly executed stock assignment power and
otherwise in form for transfer acceptable to the Exchange Agent; and
(b) Payment to SAT or the Exchange Agent of any and all transfer
and/or other taxes payable, in the opinion of the Exchange Agent, by reason of
the issuance and/or transfer of such New Certificate and/or the shares of the
SAT Common Stock evidenced thereby.
8. TERMINATION OF EXCHANGE AGENT. Upon the termination of the Exchange
Agent's engagement as hereinabove provided, the Exchange Agent shall deliver to
SAT the then balance of the Distribution Account and, upon such delivery, the
Exchange Agent shall have no further duties or obligations as exchange agent to
SAT, Acquisition, U.S. Drug or their respective stockholders. Thereafter, the
duties to be performed by the Exchange Agent as described in Sections 6 and 7
hereof shall be performed by SAT in lieu of, and instead of, the Exchange Agent.
All blank stock certificates evidencing the SAT Common Stock shall be retained
by the Exchange Agent for utilization by it in the performance of its duties as
transfer agent for, and with respect to, the SAT Common Stock.
9. SPECIAL PAYMENT. If U.S. Drug or, subsequent to the Effective Date,
Acquisition Corp. executes a definitive agreement (the "Marketing Agreement")
with an unaffiliated corporation to act as a marketing partner (the "Partner")
with respect to its drug testing products and if the Partner makes a cash
payment or payments to U.S. Drug, Acquisition Corp. or SAT upon the execution of
the Marketing Agreement (the "Special Payment"), then:
(a) SAT will calculate the percentage (to the nearest tenth) that
the outstanding shares of the Minority U.S. Drug Common Stock on the Effective
Date constitute
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of the outstanding shares of the U.S. Drug Common Stock on the Effective Date
(the "Percentage") and (i) if the Marketing Agreement is entered into on or
prior to the 180th day following the Effective Date, SAT or, if U.S. Drug or
Acquisition Corp. is the recipient of the Special Payment, Acquisition Corp.
shall pay to each of the former U.S. Drug Minority Stockholders his, her or its
pro rata share of one third of the Percentage of the Special Payment; (ii) if
the Marketing Agreement is entered into during the period after the 180th day
following the Effective Date and on or prior to the first anniversary of the
Effective Date, SAT or, if Acquisition Corp. is the recipient of the Special
Payment, Acquisition Corp. shall pay to each of the former U.S. Drug Minority
Stockholders his, her or its pro rata share of one sixth of the Percentage of
the Special Payment; and (iii) if the Marketing Agreement is entered into after
the first anniversary of the Effective Date, the former U.S. Drug Minority
Stockholders shall receive none of the Special Payment.
(b) If a cash payment is received from the Partner after execution,
but on or prior to the first anniversary of the Effective Date, and if such
payment is not based on sales effected by the Partner or some similar criteria,
SAT or Acquisition Corp. will treat any such payment or payments as a Special
Payment as if received on the execution of the Marketing Agreement.
(c) A loan or an equity investment made by the Partner shall not be
deemed to be part of the Special Payment.
(d) On computing the Special Payment, there shall be deducted from
the payment received from the Partner the amount of any finder's fee paid to
secure the Partner or other costs related to obtaining such payment.
(e) A transferee of the shares of the SAT Common Stock received as a
result of the Merger shall not be eligible to receive a proportionate share of
the Special Payment and SAT or Acquisition Corp. shall make such payments only
to the U.S. Drug Minority Stockholders as reflected on the stock books of U.S.
Drug on the Effective Date or, in the event of the death of the U.S. Drug
Minority Stockholder, his or her heirs or legal representatives, in the case of
the dissolution of a partnership, to its partners or, in the case of a
corporation, to its successor by merger or other operation of law.
(f) Because SAT intends to merge Acquisition Corp. with and into SAT
if the Merger is consummated and thereafter conduct the former operations of
U.S. Drug as a division of SAT, all references to Acquisition Corp. in this
Section 4 shall be deemed to refer to SAT after such merger.
10. THE CLOSING. The closing of the transactions contemplated by this
Agreement shall take place on such date, at such place and at such time within
five business days after the satisfaction or waiver of the last of the
conditions set forth in Sections 18 and 19 hereof as shall be designated by SAT.
The closing of such transactions shall be referred to herein as the
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"Closing;" the date of the Closing shall be referred to herein as the "Closing
Date"; and the Closing Date may be the same as the Effective Date.
11. THE EFFECTIVE DATE. Subject to the satisfaction and/or waiver of
the conditions herein described, the Merger shall become effective as at the
close of business on the date specified in the Certificate of Merger to be filed
in the manner required by the GCL or, if none, on the date of filing (the
"Effective Date"). Upon the receipt by U.S. Drug of consents from the holders of
more than 50% of the outstanding shares of the Minority U.S. Drug Common Stock
and of a consent from SAT to the Merger, U.S. Drug and Acquisition Corp. shall
cause to be filed the Certificate of Merger in the manner required by the GCL.
Subject to the provisions of Section 20 hereof, such filing shall be made on, or
as soon as practicable after, the Closing Date; and the parties hereto shall
thereafter execute, acknowledge, deliver and/or record such other and further
instruments, documents or certificates and/or take and perform such other and
further actions as may be required to effect and/or implement the Merger. If the
Merger is consummated, SAT will take such actions as are necessary to deregister
the U.S. Drug Common Stock pursuant to Section 12(b) of the Exchange Act and to
delist the U.S. Drug Common Stock from the Pacific Stock Exchange. The
Certificate of Merger shall provide for the change of name of Acquisition Corp.
to "U.S. Drug Testing, Inc."
12. THE REGISTRATION STATEMENT AND CONSENT SOLICITATION STATEMENT. In
connection with the preparation, utilization and/or distribution of the Consent
Solicitation Statement-Prospectus to be issued and distributed to the U.S. Drug
Minority Stockholders in connection with the Merger and the preparation and
utilization of the Registration Statement of which the Consent Solicitation
Statement/Prospectus constitutes Part I thereof, the parties shall follow the
procedures as provided in this Section 12.
(a) The parties hereto shall cooperate in the preparation thereof
consistent with the applicable requirements of the GCL, the Securities Act and
the Exchange Act and the rules and regulations promulgated under the Securities
Act and the Exchange Act by the SEC; and, without limiting the generality of the
foregoing, each of SAT and U.S. Drug shall promptly supply to the other any and
all information and material (relating to itself and/or the subject transaction)
as may be requested or required in connection with the preparation and filing of
the Registration Statement, including, without limitation, all information
concerning their respective officers, directors and principal stockholders that
is reasonably requested for inclusion in the Consent Solicitation
Statement/Prospectus; and each shall take and perform such other and further
acts and actions as shall be necessary or appropriate to cause the prompt
preparation, completion, filing, review, finalization and clearance of the
Registration Statement.
(b) Subject to the Registration Statement being declared effective
by the SEC, the Consent Solicitation Statement/Prospectus and any other
communication required by the Exchange Act or the rules and regulations
promulgated thereunder or reasonably requested by SAT shall be mailed by U.S.
Drug or its transfer agent to the U.S. Drug Minority Stockholders as soon after
such effective date as is reasonably possible. Subsequent thereto U.S. Drug
shall
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transmit to the U.S. Drug Minority Stockholders such amended and/or supplemental
consent solicitation materials as may be necessary, in light of subsequent
developments or otherwise, to render the Consent Solicitation
Statement/Prospectus, as so amended or supplemented, not false or misleading
with respect to any material fact and so as not to omit to state any information
necessary to make the statements made, within the context made, not misleading.
Prior to the Effective Date (or earlier termination of this Agreement) neither
party hereto shall distribute any material (other than the Consent Solicitation
Statement/Prospectus as herein provided) which might constitute, or be deemed to
constitute, a "prospectus" relating to the Merger within the meaning of the
Securities Act without the prior written consent of all of the parties hereto in
each instance.
(c) U.S. Drug hereby authorizes the utilization by SAT in the
Registration Statement or in any filing with a state securities administrator of
all information concerning U.S. Drug either provided to SAT by U.S. Drug in
connection with or contained in the Consent Solicitation Statement/Prospectus
and/or contained in any filings heretofore made by U.S. Drug pursuant to the
Securities Act and/or the Exchange Act. U.S. Drug shall promptly advise SAT if
at any time any of such information or material is or becomes incorrect,
inaccurate or incomplete in any material respect and, in connection therewith,
U.S. Drug shall provide SAT with such information and material as shall be
needed to correct any such inaccuracy or omission. SAT shall promptly advise
U.S. Drug if at any time any of the information or material contained in the
Registration Statement and supplied by SAT is or becomes incorrect, inaccurate
or incomplete in any material respect. SAT shall cause the preparation, review,
clearance, approval and distribution of such amended or supplemented material as
shall be necessary to correct or eliminate any such inaccuracies and/or
omissions as provided in this Section 12(c).
(d) Each of SAT and U.S. Drug covenants and warrants to the other
that any and all information and/or material supplied by it to the other and/or
in connection with the Registration Statement and/or the within transactions (i)
will, at the time made and at each Relevant Date (as hereinafter defined), be
true and correct in all material respects; (ii) will comply in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations promulgated thereunder by the SEC; and (iii) will not
contain any statement which, at the time, and at each Relevant Date and in light
of the circumstances under which it is made, is false or misleading with respect
to any material fact, or which omits to state any material fact necessary in
order to make the statements therein made not false or misleading. For the
purposes of this Agreement, the term "Relevant Date" shall be and mean each of
(x) the effective date of the Registration Statement, (y) the mailing date of
the Consent Solicitation Statement/Prospectus and (z) the Effective Date. Each
of SAT and U.S. Drug specifically agrees to indemnify and hold harmless the
other (and their respective officers, directors, employees, agents and
representatives) from and against any and all costs, expenses, losses, demands,
claims and liabilities of every kind, nature and description (including
reasonable attorneys' fees) arising out of, or relating to any breach or
anticipatory breach by it of its duties and obligations pursuant to this Section
12(d) hereof.
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(e) SAT does hereby agree to indemnify and hold harmless U.S. Drug
and each of its directors and officers, and each person, if any, other than SAT
who controls U.S. Drug within the meaning of Section 15 of the Securities Act,
from and against any and all losses, claims, damages, expenses or liabilities,
joint or several (including, without limitation, reasonable attorneys' fees as
herein provided), to which they or any of them may become subject under the
Securities Act, any other statute, common law or otherwise and, except as
provided below, shall reimburse U.S. Drug and each such director, officer or
controlling person for any legal or other expenses reasonably incurred by them
or any of them in connection with investigating or defending any actions and/or
claims, whether or not resulting in any liability, insofar as such losses,
claims, damages, expenses, liabilities or actions result from a breach or
alleged breach of the representations and warranties contained in Sections 14 or
15 hereof or are based upon any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or the Consent
Solicitation Statement/Prospectus or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only insofar as any such untrue statement or omission or alleged untrue
statement or omission is with respect to the description of SAT or as to the
terms of its offer. Promptly after receipt by a party to be indemnified pursuant
to this Section 12(e) (the "Indemnitee") of notice of the commencement of any
action in respect of which indemnity may be sought against SAT hereunder, the
Indemnitee will promptly notify SAT in writing of the commencement thereof and
SAT shall, subject to the provisions stated below, assume the defense of the
action (including the employment of counsel, who shall be counsel reasonable
satisfactory to U.S. Drug), and shall make payment of expenses (including
attorneys' fees as herein provided) insofar as such action shall relate to any
alleged liability in respect of which indemnity may be sought against SAT. The
Indemnitee or Indemnitees shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and expenses
of such separate counsel shall not be at the expense of SAT unless the
employment of such separate counsel has been specifically authorized by SAT or
there is a conflict of interest which under the canon of ethics requires the
employment of separate counsel. SAT shall not be liable to any Indemnitee for
any settlement of any action effected without SAT's consent. Notwithstanding any
provision of this Agreement to the contrary, the obligations of SAT hereunder
shall survive the consummation of the transactions contemplated by this
Agreement.
13. U.S. DRUG REPRESENTATIONS AND WARRANTIES. In order to induce SAT
and Acquisition to execute and perform this Agreement, U.S. Drug does hereby
represent, warrant, covenant and agree (which representations, warranties,
covenants and agreements shall be, and be deemed to be, continuing and survive
the execution and delivery of this Agreement, the Closing and the Effective
Date) as follows:
(a) U.S. Drug is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, with full power and
authority, corporate and otherwise, and with all licenses, permits,
certifications, registrations, approvals, consents and
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12
franchises necessary to own or lease and operate its properties and to conduct
its business as presently being conducted.
(b) Subject only to the consent of its stockholders as required by
the GCL: (i) U.S. Drug has the full power and authority, corporate and
otherwise, to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby; (ii) the execution, delivery and performance
of this Agreement, the consummation by U.S. Drug of the transactions herein
contemplated and the compliance by U.S. Drug with the terms of this Agreement
have been duly authorized by U.S. Drug; (iii) this Agreement is the valid and
binding obligation of U.S. Drug, enforceable in accordance with its terms,
subject, as to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and the discretion of courts in granting equitable remedies; (iv) the
execution, delivery and performance of this Agreement by U.S. Drug and the
consummation by U.S. Drug of the transactions herein contemplated do not, and
will not, with or without the giving of notice or the lapse of time, or both,
(A) result in any violation of the Certificate of Incorporation or By-Laws of
U.S. Drug or (B) result in a breach of, or a conflict with, any of the terms or
provisions of, or constitute a default under, or result in the modification or
termination of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of U.S.
Drug pursuant to, any indenture, mortgage, note, contract, commitment or other
agreement or instrument to which U.S. Drug is a party or by which it is, or any
of its respective properties or assets are, or may be, bound or affected.
14. SAT REPRESENTATIONS AND WARRANTIES. In order to induce U.S. Drug to
execute and perform this Agreement, SAT does hereby represent, warrant, covenant
and agree (which representations, warranties, covenants and agreements shall be,
and be deemed to be, continuing and survive the execution and delivery of this
Agreement, the Closing and the Effective Date) as follows:
(a) SAT is a corporation duly organized, validly existing and in
standing under the laws of the State of Delaware, with full power and authority,
corporate and otherwise, and with all licenses, permits, certifications,
registrations, approvals, consents and franchises necessary to own or lease and
operate its properties and to conduct its business as presently being conducted.
SAT is duly qualified to do business as a foreign corporation, and is in good
standing, in all jurisdictions, if any, wherein such qualification is necessary
and where failure so to qualify would have a material adverse effect on the
business, properties or financial conditions of SAT. SAT has no subsidiaries
other than as set forth on Exhibit "B" annexed hereto and made a part hereof
(the "Subsidiaries"). SAT owns and has and marketable title in and to 100% of
the issued and outstanding capital stock (of all classes) of each of the
Subsidiaries, free and clear of all liens, security interests, claims and
encumbrances and rights and options of others, except as set forth on Exhibit
"B".
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13
(b) Each of the Subsidiaries (other than U.S. Drug as to which SAT
makes no representation) is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, with full
power and authority, corporate and otherwise, and with all licenses, permits,
certifications, registrations, approvals, consents and franchises necessary to
own or lease and operate its properties and to conduct its business as presently
being conducted. Each such Subsidiary is duly qualified to do business as a
foreign corporation, and is in good standing, in all jurisdictions, if any,
wherein such qualification is necessary and where failure so to qualify would
have a material adverse effect on the business, properties or finances of such
Subsidiary.
(c) (i) SAT has the full power and authority, corporate and
otherwise, to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby; (ii) the execution, delivery and performance
of this Agreement, the consummation by SAT of the transactions herein
contemplated and the compliance by SAT with the terms of this Agreement have
been duly authorized by SAT; (iii) this Agreement is the valid and binding
obligation of SAT, enforceable in accordance with its terms, subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the rights of creditors generally and the
discretion of courts in granting equitable remedies; (iv) the execution,
delivery and performance of this Agreement by SAT and the consummation by SAT of
the transactions herein contemplated do not, and will not, with or without the
giving of notice or the lapse of time, or both, (A) result in any violation of
the Certificate of Incorporation (except possibly as indicated in Section 17(g)
hereof) or By-Laws of SAT, (B) result in a breach of, or a conflict with, any of
the terms or provisions of, or constitute a default under, or result in the
modification or termination of, or result in the creation or imposition of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of SAT pursuant to, any indenture, mortgage, note, contract, commitment
or other agreement or instrument to which SAT is a party or by which it is, or
any of its respective properties or assets are, or may be, bound or affected;
(C) to the best knowledge of SAT, after due investigation, violate any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over SAT and/or any of
the Subsidiaries (other than U.S. Drug as to which SAT makes no representation),
or any of their respective properties or businesses; or (D) have any effect on
any license, permit, certification, registration, approval, consent or other
authorization necessary for SAT and/or any of the Subsidiaries (other than U.S.
Drug as to which SAT makes no representation) to own or lease and operate any of
its respective properties and to conduct its businesses or the ability of SAT
and/or any of the Subsidiaries (other than U.S. Drug as to which SAT makes no
representation) to make use thereof. No consent, approval, authorization or
order of any court, governmental agency, authority or body (other than as
required pursuant to the Securities Act, the Exchange Act and/or state
securities or "take over" statutes and the rules and regulations promulgated
under any of the foregoing and/or any party to an agreement to which SAT is a
party and/or by which it is bound) is required in connection with the execution,
delivery and performance of this Agreement and/or the consummation by SAT of the
transactions contemplated by this Agreement.
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(d) Neither SAT nor any of the Subsidiaries (other than U.S. Drug as
to which SAT makes no representation) is in violation of, or in default under,
(i) any term or provision of its Certificate of Incorporation or By-Laws; (ii)
any material term or provision of any financial covenant of any indenture,
mortgage, contract, commitment or other agreement or instrument to which it is a
party or by which it or any or its properties or business is, or may be, bound
or affected; or (iii) any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over it or any of its properties or business, including, without
limitation, all reporting obligations pursuant to the Exchange Act and the rules
and regulations promulgated thereunder. SAT and each Subsidiary (other than U.S.
Drug as to which SAT makes no representation) owns, possesses or has obtained
all governmental and other licenses, permits, certifications, registrations,
approvals or consents and other authorizations necessary to own or lease, as the
case may be, and to operate its properties and to conduct its business or
operations as presently conducted and all such governmental and other licenses,
permits, certifications, registrations, approvals, consents and other
authorizations are outstanding and in good standing and there are no proceedings
pending or, to the best of its knowledge, threatened or any basis therefor
existing, seeking to cancel, terminate or limit such licenses, permits,
certifications, registrations, approvals or consents or authorizations.
(e) Prior to the date hereof SAT has delivered to U.S. Drug copies
of the audited consolidated financial statements (the "SAT Audited Financial
Statements") and the unaudited interim financial statements (the "SAT Interim
Financial Statements") described on Exhibit "C" annexed hereto and made a part
hereof (collectively the "SAT Financial Statements). The SAT Audited Financial
Statements fairly present the financial position of SAT and the Subsidiaries as
of the respective dates thereof and the results of operations, and the changes
in financial position of SAT and the Subsidiaries, for each of the periods
covered thereby. The SAT Audited Financial Statements have been prepared in
conformity with generally accepted accounting principles, applied on a
consistent basis throughout the entire periods involved. The SAT Unaudited
Financial Statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions to
Form 10-Q and Item 310 of Regulation S-K of the SEC. Accordingly, the interim
financial statements may not include all of the information and footnotes
required by generally accepted accounting principles. In the opinion of SAT's
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. As of the date
of any balance sheet forming a part of the SAT Financial Statements and, except
as and to the extent reflected or reserved against therein, neither SAT nor any
of the Subsidiaries (other than U.S. Drug as to which SAT makes no
representation) had any material liabilities, debts, obligations or claims
(absolute or contingent) asserted against it or them and/or which should have
been reflected in a balance sheet or the notes thereto; and all assets reflected
thereon are properly reported and present fairly the value of the assets therein
stated in accordance with generally accepted accounting principles.
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(f) The financial and other books and records of SAT and each of the
Subsidiaries (other than U.S. Drug as to which SAT makes no representation) are
in all material respects true, complete and correct and have, at all times, been
maintained in accordance with good business and accounting practices.
(g) SAT and the Subsidiaries (other than U.S. Drug as to which SAT
makes no representation) own and have good and marketable title in and to all of
their respective assets, properties and interests in properties (both real and
personal) which are reflected in the latest balance sheet included in the SAT
Financial Statements and/or are utilized in connection with the operation of the
business of SAT and such Subsidiaries as presently constituted and/or acquired
after that date (except to the extent any of the same were disposed of since
such date in the ordinary course of business), in all cases free and clear of
all liens, security interests, claims and encumbrances of every kind, nature and
description and rights and options of others except as expressly set forth in
such balance sheet.
(h) Except as is set forth on Exhibit "D" hereto, SAT and the
Subsidiaries (other than U.S. Drug as to which SAT makes no representation) own
all trademarks, service marks, tradenames, copyrights, similar rights and their
registrations, trade secrets, methods, practices, systems, ideas, know how and
confidential materials used or proposed to be used in the conduct of their
respective businesses as conducted as of the date hereof (collectively the
"Intangibles") free and clear of all liens, security interests, claims and
encumbrances and rights and options of third parties (including, without
limitation, former or current officers, directors, stockholders, employees and
agents); neither SAT nor any such Subsidiary has licensed or leased any of the
Intangibles and/or any interest therein to any person and/or entity except a
Subsidiary; neither SAT nor any such Subsidiary has infringed, nor is
infringing, upon the rights of others with respect to the Intangibles; neither
SAT nor any such Subsidiary has received any notice of conflict with the
asserted rights of others with respect to the Intangibles which could, singly or
in the aggregate, materially adversely affect its business as currently
conducted or prospects, financial condition or results of operations and SAT
knows of no basis therefor; and, to the best of the knowledge of SAT, no others
have infringed upon the Intangibles.
(i) Except as and to the extent reflected or reserved against in the
SAT Financial Statements and/or as set forth on Exhibit "E" annexed hereto and
made a part hereof, neither SAT nor any of the Subsidiaries (other than U.S.
Drug as to which SAT makes no representation) had, as at the respective date of
such SAT Financial Statements, any material liabilities, debts, obligations or
claims asserted against it, whether accrued, absolute, contingent or otherwise,
and whether due or to become due, including, but not limited to, liabilities on
account of due and unpaid taxes, other governmental charges or lawsuits.
(j) Since the date of the most recent balance sheet included in the
SAT Financial Statements, neither SAT nor any Subsidiary (other than U.S. Drug
as to which SAT makes no representation) has, except as set forth on Exhibit "F"
annexed hereto and made a part hereof, (i) incurred any obligation or liability
(absolute or contingent, secured or unsecured) except
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obligations and liabilities incurred in the ordinary course of the operation of
its business as carried on at and prior to such date; (ii) cancelled, without
payment in full, any notes, loans or other obligations receivable or other debts
or claims held by it other than in the ordinary course of business; (iii) sold,
assigned, transferred, abandoned, mortgaged, pledged or subjected to lien or
security interest any of its material properties, tangible or intangible, or
rights under any contract, permit, license, franchise or other agreement other
than sales or other dispositions of goods or services in the ordinary course of
business at customary prices; (iv) entered into any line of business other than
that conducted by it on such date or entered into any transaction not in the
ordinary course of its business; (v) conducted any line of business in any
manner except by transactions customary in the operation of its material
business as conducted on such date; or (vi) declared, made or paid, or set aside
for payment, any cash or non-cash dividends or other distribution on any shares
of its capital stock.
(k) Except as set forth on Exhibit "G" annexed hereto and made a
part hereof, neither SAT nor any of the Subsidiaries (other than U.S. Drug as to
which SAT makes no representation) is in default, in any material respect, under
the terms of any outstanding agreement which is material to the business,
operations, properties, assets or condition of SAT and/or the Subsidiaries
(other than U.S. Drug as to which SAT makes no representation); and there exists
no event of default or event which, with notice and/or the passage of time, or
both, would constitute any such default.
(l) Except as reported in the SAT Financial Statements and/or as set
forth on Exhibit "H" hereto and made a part hereof, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries before
any court or governmental agency, court or tribunal, domestic, or foreign, or
before any private arbitration tribunal, pending or, to the best of the
knowledge of SAT, threatened against SAT and/or any Subsidiary (other than U.S.
Drug as to which SAT makes no representation) or involving their respective
properties or businesses which, if determined adversely to SAT or such
Subsidiary, would, individually or in the aggregate, result in a material
adverse change in the financial position, stockholders' equity, results of
operations, properties, business, management or affairs of SAT or such
Subsidiary, or which question the validity of this Agreement or of any action
taken, or to be taken, by SAT pursuant to, or in connection with, this
Agreement; nor, to the best of the knowledge of SAT, is there any basis for any
such claim, action, suit, proceeding, arbitration, investigation or inquiry to
be made by any person and/or entity, including, without limitation, any
customer, supplier, lender, stockholder, former or current employee, agent or
landlord. There are no outstanding orders, judgments or decrees of any court,
governmental agency or other tribunal specifically naming SAT and/or any
Subsidiary (other than U.S. Drug as to which SAT makes no representation) and/or
enjoining SAT and/or any such Subsidiary from taking, or requiring SAT and/or
any such Subsidiary to take, any action and/or by which SAT and/or any such
Subsidiary is, and/or their respective properties or businesses are, bound or
subject.
(m) SAT and each of the Subsidiaries (other than U.S. Drug as to
which SAT makes no representation) has filed all federal, state, municipal and
local tax returns (whether
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relating to income, sales, franchise, withholding, real or personal property or
otherwise) required to be filed under the laws of the United States and all
applicable states and has paid in full all taxes which are due pursuant to such
returns or claimed to be due by any taxing authority or otherwise due and owing.
No penalties or other charges are, or will become, due with respect to the late
filing of any such return. To the best of the knowledge of SAT, after due
investigation, each such tax return heretofore filed by SAT and each of such
Subsidiaries correctly and accurately reflects the amount of its tax liability
thereunder. SAT has withheld, collected and paid all other levies, assessments,
license fees and taxes to the extent required and, with respect to payments, to
the extent that the same have become due and payable.
(n) The authorized and outstanding capitalization of SAT is as set
forth on Exhibit "I" annexed hereto and made a part hereof; as of the date
hereof and the Closing Date, there shall not be authorized and/or issued and
outstanding any shares of capital stock of SAT and/or rights to purchase shares
of capital stock of SAT except as set forth on Exhibit "I" or upon the exercise
of outstanding warrants or the conversion of outstanding shares of preferred
stock or convertible notes. The issued and outstanding shares of the SAT Common
Stock and outstanding warrants and other similar rights to purchase or convert
into the SAT Common Stock have been duly authorized and validly issued. All such
outstanding shares of the SAT Common Stock are fully paid and nonassessable. All
such outstanding warrants and similar rights to purchase or convert into the SAT
Common Stock constitute the valid and binding obligations of SAT, enforceable in
accordance with their respective terms, subject, as to enforcement of remedies,
to applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and the discretion of courts in
granting equitable remedies. There are no preemptive rights. SAT has no reason
to believe that any holder of such outstanding shares of the SAT Common Stock is
subject to personal liability solely by reason of being such a holder. The
offers and sales of such outstanding shares of the SAT Common Stock and
outstanding warrants and similar rights to purchase or convert into the SAT
Common Stock were, at all relevant times, either registered under the applicable
provisions of the Securities Act and the applicable state securities laws or
exempt from such registration or prospectus filing requirements pursuant to an
exemption for which SAT and/or such offering or sale fully qualified, or any
claim arising out of, or relating to, any such offering and/or sale are barred
by the statute of limitations. The authorized shares of the SAT Common Stock and
outstanding warrants and similar rights to purchase or convert into the SAT
Common Stock conform to the description thereof contained in the current filings
by SAT pursuant to the Exchange Act. No dividends or other distributions of the
assets of SAT have or will be declared and/or paid prior to the Closing Date on
or with respect to the SAT Common Stock.
(o) Except as is set forth on Exhibit "J" hereto, since the date of
the most recent balance sheet included in the SAT Financial Statements, there
has not been, with respect to SAT and/or the Subsidiaries (other than U.S. Drug
as to which SAT makes no representation), except as set forth in or permitted by
this Agreement, or, in the ordinary course of business:
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(i) Any change in their respective material business,
operations or financial condition, or the manner of managing or conducting their
respective business and operations; none of which changes, if any, has had a
material adverse effect on such business, operations or financial condition,
taken as a whole;
(ii) Any change in their respective accounting methods or
practices (including, without limitation, any change in depreciation,
amortization and/or good will policies or rates);
(iii) Any damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting their respective assets,
business, operations or financial condition;
(iv) Any declaration, setting, or payment of a dividend or
other distribution with respect to the SAT Common Stock or any direct or
indirect redemption, purchase or other acquisition by SAT of any of the shares
of the SAT Common Stock;
(v) Any issuance or sale of any shares of their respective
capital stock of any class or any other securities except for the exercise of
warrants to purchase shares of the SAT Common Stock outstanding prior to the
date hereof;
(vi) Any loan by any of them to any person or entity and/or
the issuance of any guaranty by any of them for or with respect to their own or
another's obligations;
(vii) Any waiver or release of any material right or claim;
(viii) Any sale, lease, abandonment, assignment, transfer,
license or other disposition (including any agreement and/or option for, or with
respect to, any of the foregoing) by any of them of any material real property
or tangible or intangible assets, property or rights (and/or interest therein);
(ix) Any incurrence of any material obligation or liability,
absolute or contingent;
(x) Any payment of any material obligation or liability,
absolute or contingent, except for current liabilities reflected in, or shown
on, the SAT Financial Statements and/or incurred subsequent to the date thereof
in the ordinary course of business and/or in connection with the transactions
contemplated by this Agreement;
(xi) Any labor problems and/or other events or conditions of
any character materially and/or adversely affecting, or which might materially
and/or adversely affect, the financial condition, business, assets or prospects
of any of them;
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(xii) Any amendment, termination or modification of any
material agreement or license to which any of them is a party which has or may
have a material affect on the financial condition, business, assets or prospects
of any of them; and
(xiii) Any agreement by any of them to do or perform any of the
things described in this Section 14(o).
(p) At the Closing, all of the shares of the SAT Common Stock to be
issued by SAT pursuant to this Agreement shall be, and be deemed to be, duly and
validly authorized and, when issued to the U.S. Drug Minority Stockholders in
exchange for their shares of the U.S. Drug Common Stock, duly and validly
issued, fully paid and nonassessable and free and clear of all federal and state
issuance, stock and/or company taxes, liens, security interests, claims,
encumbrances and charges.
15. ACQUISITION CORP. REPRESENTATIONS AND WARRANTIES. In order to
induce U.S. Drug to execute and perform this Agreement, Acquisition Corp. does
hereby represent, warrant, covenant and agree (which representations,
warranties, covenants and agreements shall be, and be deemed to be, continuing
and survive the execution and delivery of this Agreement, the Closing and the
Effective Date) as follows:
(a) Acquisition Corp. is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
power and authority, corporate and otherwise, and with all licenses, permits,
certifications, registrations, approvals, consents and franchises necessary to
own or lease and operate its properties and to conduct its business as presently
being conducted. Neither prior to the date hereof has Acquisition Corp. engaged,
nor prior to the Closing Date will Acquisition Corp. engage, in any business
activity of any kind nature or description except in connection with the
implementation of the transactions herein described. Acquisition Corp. has no
subsidiaries, nor, at the present time is it, or at the Closing will it be, a
partner or joint venturer with any other person or entity.
(b) (i) Acquisition Corp. has the full power and authority,
corporate and otherwise, to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby; (ii) the execution, delivery
and performance of this Agreement, the consummation by Acquisition Corp. of the
transactions herein contemplated and the compliance by Acquisition Corp. with
the terms of this Agreement have been duly authorized by Acquisition Corp.;
(iii) this Agreement is the valid and binding obligation of Acquisition Corp.,
enforceable in accordance with its terms, subject, as to enforcement of
remedies, to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the rights of creditors generally and the discretion of
courts in granting equitable remedies; (iv) the execution, delivery and
performance of this Agreement by Acquisition Corp. and the consummation by
Acquisition Corp. of the transactions herein contemplated do not, and will not,
with or without the giving of notice or the lapse of time, or both, (A) result
in any violation of the Certificate of Incorporation or By-Laws of Acquisition
Corp., (B) result in a breach of, or a conflict with, any of the terms or
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provisions of, or constitute a default under, or result in the modification or
termination of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of
Acquisition Corp. pursuant to, any indenture, mortgage, note, contract,
commitment or other agreement or instrument to which Acquisition Corp. is a
party or by which it is, or any of its respective properties or assets are, or
may be, bound or affected; or (C) to the best knowledge of Acquisition Corp.,
after due investigation, violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over Acquisition Corp. or its assets. No consent,
approval, authorization or order of any court, governmental agency, authority or
body (other than as required pursuant to the Securities Act, the Exchange Act
and/or state securities or "take over" statutes and/or any party to an agreement
to which Acquisition Corp. is a party and/or by which it is bound, is required
in connection with the execution, delivery and performance of this Agreement,
and/or the consummation by Acquisition Corp. of the transactions contemplated by
this Agreement.
(c) Acquisition Corp. is not in violation of, or in default under,
(i) any term or provision of its Certificate of Incorporation or By-Laws; (ii)
any material term or provision of any financial covenant of any indenture,
mortgage, contract, commitment or other agreement or instrument to which it is a
party or by which it or any or its properties is, or may be, bound or affected;
or (iii) any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over it or any of its assets.
(d) Acquisition Corp. was incorporated on December 18, 1995 and its
sole asset is the $1,000 which SAT paid in subscription for 100 shares of its
authorized 1,500 shares of common stock, without par value, and it has incurred
no liabilities other than its incorporation costs. Prior to the date hereof,
Acquisition Corp. has conducted no business operations and, prior to the
Effective Date, its sole activities will be in connection with the transactions
contemplated by this Agreement.
(e) The financial and other books and records of Acquisition Corp.
are in all material respects true, complete and correct and have, at all times,
been maintained in accordance with good business and accounting practices.
(f) Except as set forth on Exhibit "K" hereto and made a part
hereof, there are no claims, actions, suits, proceedings, arbitrations,
investigations or inquiries before any court or governmental agency, court or
tribunal, domestic, or foreign, or before any private arbitration tribunal,
pending or, to the best of the knowledge of Acquisition Corp., threatened
against Acquisition Corp. or involving its assets which, if determined adversely
to Acquisition Corp., would, individually or in the aggregate, result in a
material adverse change in the financial position, stockholders' equity, results
of operations, properties, business, management or affairs of Acquisition Corp.,
or which question the validity of this Agreement or of any action taken or to be
taken by Acquisition Corp. pursuant to, or in connection with, this Agreement;
nor, to the
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best of the knowledge of Acquisition Corp., is there any basis for
any such claim, action, suit, proceeding, arbitration, investigation or inquiry
to be made by any person and/or entity. There are no outstanding orders,
judgments or decrees of any court, governmental agency or other tribunal
specifically naming Acquisition Corp. and/or enjoining Acquisition Corp. from
taking, or requiring Acquisition Corp. to take, any action, and/or by which
Acquisition Corp. is, and/or its assets are, bound or subject.
16. U.S. DRUG COVENANTS, U.S. Drug shall, during the period commencing
on the date hereof and terminating immediately following the close of business
on the Effective Date (or earlier, upon the failure or refusal of the U.S. Drug
Minority Stockholders to approve this Agreement and/or the termination of this
Agreement as herein provided):
(a) Take and perform any and all actions necessary to render
accurate, and/or maintain the accuracy of, all of the representations and
warranties of U.S. Drug herein contained and/or satisfy each covenant or
condition required to be performed or satisfied by U.S. Drug at or prior to the
Closing and/or to cause or permit the implementation of the Merger;
(b) Not take or perform any action which would or might cause any
representation or warranty made by U.S. Drug herein to be rendered inaccurate,
in whole or in part, and/or which would prevent, inhibit or preclude the
satisfaction, in whole or in part, of any covenant required to be performed or
satisfied by U.S. Drug at or prior to the Closing and/or the implementation of
the Merger;
(c) Carry on and maintain its business in substantially the same
form, style and manner as heretofore operated by it; perform, in all material
respects, all of its respective obligations under all material agreements,
leases and documents relating to or affecting its respective assets, properties
and businesses; and use its best efforts to preserve intact its business
organization and the good will and relationships with its suppliers, customers
and others having business relations with it.
(d) Not make, or permit to be made on its behalf, any announcement
to the public in general and/or within its industry and/or otherwise with
respect to this Agreement, the Merger and the current or future business or
operations of any party hereto without the prior written consent of SAT or, in
the case of an announcement required by applicable securities laws, prior
consultation with SAT; and
(e) Immediately advise SAT of any event, condition or occurrence
which constitutes, or may, with the passage of time and/or giving of notice,
constitute, a breach of any representation or warranty of U.S. Drug herein
contained and/or which prevents, inhibits or limits or may prevent, inhibit or
limit U.S. Drug from satisfying, in full and on a timely basis, any covenant,
term or condition herein contained and/or implementing this Agreement.
▇-▇▇
▇▇
▇▇. SAT COVENANTS. SAT shall, during the period commencing on the date
hereof and terminating immediately following the close of business on the
Effective Date (or earlier, upon the failure or refusal of the U.S. Drug
Minority Stockholders to approve this Agreement and/or the termination of this
Agreement as herein provided):
(a) Take and perform any and all actions necessary to render
accurate, and/or maintain the accuracy of, all of the representations and
warranties of SAT herein contained and/or satisfy each covenant or condition
required to be performed or satisfied by SAT at or prior to the Closing and/or
to cause or permit the implementation of the Merger;
(b) Not take or perform any action which would or might cause any
representation or warranty made by SAT herein to be rendered inaccurate, in
whole or in part, and/or which would prevent, inhibit or preclude the
satisfaction, in whole or in part, of any covenant required to be performed or
satisfied by SAT at or prior to the Closing and/or the implementation of the
Merger;
(c) Carry on and maintain its business in substantially the same
form, style and manner as heretofore operated by it; perform, in all material
respects, all of its obligations under all material agreements, leases and
documents relating to or affecting its assets, properties and business; and use
its best efforts to preserve intact its business organization and the good will
and relationships with its suppliers, customers and others having business
relations with it;
(d) Not make any announcement to the public in general and/or within
its industry and/or otherwise with respect to this Agreement, the Merger and the
current or future business or operations of any party hereto without the prior
written consent of U.S. Drug or, in the case of an announcement required by
applicable securities laws, prior consultation with U.S. Drug;
(e) Immediately advise U.S. Drug of any event, condition or
occurrence which constitutes, or may, with the passage of time and/or giving of
notice, constitute, a breach of any representation or warranty of SAT herein
contained and/or which prevents, inhibits or limits or may prevent, inhibit or
limit SAT from satisfying, in full and on a timely basis, any covenant, term or
condition herein contained and/or implementing this Agreement;
(f) Subject to U.S. Drug's compliance with its obligations under
Section 12 hereof, use its best efforts to have the Registration Statement
declared effective under the Securities Act;
(g) Call a Special Meeting of Stockholders to approve an amendment
to SAT's Certificate of Incorporation to increase the authorized shares of the
SAT Common Stock in an amount sufficient to permit the Merger, the merger of
Good Ideas Acquisition Corp. with and into Good Ideas Enterprises, Inc., the
conversion of all outstanding convertible notes and shares of the preferred
stock and the exercise of all outstanding warrants; and
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(h) Extend the terms of the notes due to SAT from U.S. Drug, if and
only if the consent solicitation for the Merger is still in progress on April
30, 1997, to the earlier of (i) five business days after the results of the
solicitation are known and the results are that the Merger has not been approved
or (ii) the Effective Date.
18. SAT AND ACQUISITION CORP. CONDITIONS PRECEDENT. The obligations of
SAT and Acquisition Corp. to implement this Agreement and consummate the Merger
are, at their respective elections, subject to, and conditioned upon, the
satisfaction (and/or waiver except as to Sections 18(a), (b), (f) and (h)) of
each of the following conditions:
(a) Prior to the Closing Date the holders of more than 50% of the
shares of the Minority U.S. Drug Common Stock shall have adopted this Agreement
by consenting to the adoption of this Agreement pursuant to the Consent
Solicitation Statement/Prospectus.
(b) The Registration Statement shall have been declared effective by
the SEC and all appropriate state securities administrators and no "stop orders"
shall have been issued and/or be in effect or a proceeding for such purpose
shall have been instituted and be pending.
(c) The representations and warranties of U.S. Drug contained in
this Agreement shall be true and correct in all material respects as of the
Effective Date with the same effect as if made on and as of the Effective Date
and U.S. Drug shall have performed in all material respects all of its covenants
and obligations contemplated hereunder to be performed on or prior to the
Effective Date. At the Closing, SAT shall have received a certificate, executed
by the President and the Secretary of U.S. Drug (effective as of the Closing and
the Effective Date) and in form reasonably acceptable to SAT, certifying as of
both the date of this Agreement and the Closing Date, the truth and accuracy of
(and the remaking of) the representations and warranties of U.S. Drug herein
contained, including, without limitation, those set forth in Section 13 hereof.
(d) Prior to the Closing, there shall not have occurred any material
adverse change in the financial condition, business or operations of U.S. Drug,
nor shall any event have occurred or condition exist which, with the passage of
time or the giving of notice, may cause or create any such adverse material
change.
(e) Prior to the Closing, all corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be in form and
content reasonably satisfactory to SAT and its counsel and SAT and its counsel
shall have received all counterpart originals or certified or other copies of
such documents and instruments as they may reasonably request.
(f) No action or proceeding shall have been instituted and be
pending by any private party and/or governmental agency or authority challenging
the legality of this Agreement or the Merger and/or seeking to prevent or delay
consummation of the transactions herein
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contemplated, which action or proceeding shall have resulted in an order
granting preliminary or permanent injunctive relief prohibiting consummation of
this Agreement and/or the Merger and which order shall not have been vacated as
of the Closing.
(g) All statutory requirements for the valid consummation by U.S.
Drug of the transactions herein described shall have been fully and timely
satisfied; all authorizations, consents and approvals of all Federal, state and
local governmental agencies and authorities required to be obtained in order to
permit consummation by U.S. Drug of the transactions herein described and/or to
permit the businesses currently carried on by U.S. Drug to continue unimpaired
in all material respects immediately following the Effective Date shall have
been obtained and shall be in full force and effect; and no action or proceeding
to suspend, revoke, cancel, terminate, modify or alter any of such
authorizations, consents or approvals shall be pending or threatened.
(h) U.S. Drug shall have received a written opinion from Whale
Securities Co., L.P., satisfactory to SAT in form and content, regarding the
fairness, from a financial point of view, to the U.S. Drug Minority Stockholders
of the exchange ratio offered pursuant to the terms of the Merger.
19. U.S. DRUG CONDITIONS PRECEDENT. The obligation of U.S. Drug to
implement this Agreement and to consummate the Merger is, at its election,
subject to, and conditioned upon, the satisfaction (and/or waiver except as to
Section 19(a), (b), (c), (g) and (i)) of each of the following conditions:
(a) Prior to the Closing Date the holders of more than 50% of the
shares of the Minority U.S. Drug Common Stock shall have adopted this Agreement
by consenting to the adoption of this Agreement pursuant to the Consent
Solicitation Statement/ Prospectus.
(b) Prior to the Closing Date SAT shall have adopted this Agreement
by filing with U.S. Drug a consent to its adoption.
(c) The Registration Statement shall have been declared effective by
the SEC and all appropriate state securities administrators and no "stop orders"
shall have been issued and/or be in effect or a proceeding for such purpose
shall have been instituted and be pending.
(d) The representations and warranties of SAT and Acquisition Corp.
contained in this Agreement shall be true and correct in all material respects
as of the Effective Date with the same effect as if made on and as of the
Effective Date. At the Closing, U.S. Drug shall have received a certificate,
executed by the Chairman of the Board and the Secretary of SAT and Acquisition
Corp. (effective as of the Closing and the Effective Date) and in form and
content reasonably acceptable to U.S. Drug, certifying, as to both the date of
this Agreement and the Closing Date the truth and accuracy of (and the remaking
of) the representations and warranties
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of SAT and Acquisition Corp. herein contained, including, without limitation,
those set forth in Sections 14 and 15 hereof.
(e) Prior to the Closing, there shall not have occurred any material
adverse change in the financial condition, business or operations of SAT and the
Subsidiaries (excluding U.S. Drug) as a consolidated entity, nor shall any event
have occurred or condition exist which, with the passage of time or the giving
of notice, may cause or create any such adverse material change.
(f) Prior to the Closing, all corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be in form and
content reasonably satisfactory to U.S. Drug and its counsel and U.S. Drug and
its counsel shall have received all counterpart originals or certified or other
copies of such documents and instruments as they may reasonably request.
(g) No action or proceeding shall have been instituted and be
pending by any private party and/or governmental agency or authority challenging
the legality of this Agreement or the Merger and/or seeking to prevent or delay
consummation of the transactions herein contemplated, which action or proceeding
shall have resulted in an order granting preliminary or permanent injunctive
relief prohibiting consummation of this Agreement and/or the Merger and which
order shall not have been vacated as of the Closing.
(h) All statutory requirements for the valid consummation by SAT of
the transactions herein described shall have been fully and timely satisfied;
all authorizations, consents and approvals of all Federal, state and local
governmental agencies and authorities required to be obtained in order to permit
consummation by SAT of the transactions herein described and/or to permit the
businesses currently carried on by SAT to continue unimpaired in all material
respects immediately following the Effective Date shall have been obtained and
shall be in full force and effect; and no action or proceeding to suspend,
revoke, cancel, terminate, modify or alter any of such authorizations, consents
or approvals shall be pending or threatened.
(i) U.S. Drug shall have received a written opinion from Whale
Securities Co., L.P., satisfactory to U.S. Drug in form and content, regarding
the fairness, from a financial point of view, to the U.S. Drug Minority
Stockholders of the exchange ratio offered pursuant to the terms of the Merger.
20. TERMINATION.
(a) This Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Date, whether before or after submission to, or
approval by, the U.S. Drug Minority Stockholders as herein provided either: (a)
by mutual agreement of the Boards of Directors of U.S. Drug and SAT; or (b) by
the Board of Directors of either U.S. Drug or SAT if either (i) the Closing
shall not have taken place on or prior to September 30, 1997 (other than by
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reason of the default hereunder by the terminating party) or (ii) there is any
statute, rule or regulation which makes consummation of the Merger illegal or
otherwise prohibited or any order, decree, injunction or judgment enjoining SAT,
U.S. Drug or Acquisition Corp. from consummating the Merger is issued by a court
of competent jurisdiction and such order, decree, injunction or judgment has
become final and non-appealable; or (c) by the Board of Directors of SAT or U.S.
Drug if, based upon the opinion of its outside counsel, such Board of Directors
determines that making a recommendation to the U.S. Drug Minority Stockholders
to adopt the Merger Agreement could reasonably be deemed to cause the members of
such Board of Directors to breach their fiduciary duty under applicable law to
its respective stockholders.
(b) If this Agreement shall be terminated and/or the Merger
abandoned pursuant to the provisions of subsection (a) of this Section 20 hereof
(other than by reason of the default of any party hereunder), then and in that
event SAT shall bear all of the costs and its special expenses except for those
of Whale Securities Co., L.P. and of counsel to U.S. Drug and there shall be no
liability on the part of any party hereto (and/or their respective officers,
directors, agents and employees) to any other party hereto (and/or their
respective officers, directors, agents and employees).
21. COSTS AND EXPENSES. SAT shall pay all costs and expenses relating
to the transactions contemplated by this Agreement, including, without
limitation, the costs and expenses relating to the preparation of this Agreement
and the Registration Statement, such as attorneys' fees, accounting fees,
printing expenses and consent solicitation expenses, except that U.S. Drug will
pay all costs and expenses of Whale Securities Co., L.P. and of its special
counsel.
22. NOTICES. Any and all notices, requests or instructions desired to
be given by any party hereto to any other party hereto shall be in writing and
shall be either be hand delivered, delivered by express courier or mailed to the
recipient first class, postage prepaid, certified, return receipt requested at
the following respective addresses:
To: U.S. Drug
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
With a copy to:
Rosenman & Colin LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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To: SAT or Acquisition Corp.
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chairman of the Board
With a copy to:
Gold & ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
or to such other address as any party hereto shall designate in a writing
complying with the provisions of this Section 22.
23. WAIVER. Each of the parties hereto may, by written instrument, (a)
extend the time for the performance of any of the obligations or other acts of
any party hereto; (b) waive any inaccuracies of such other party in the
representations and warranties contained herein or in any document delivered
pursuant to this Agreement; (c) waive compliance with any of the covenants of
such other party contained in this Agreement; (d) waive such other party's
performance of any of such party's obligations set out in this Agreement; and
(e) waive any condition to its obligation to effect the Merger. Anything in this
Section 23 to the contrary notwithstanding, no party hereto may waive the
requirements that the holders of more than 50% of the shares of the Minority
U.S. Drug Common Stock must consent to the adoption of this Agreement and the
Merger, the fairness opinion be delivered as set forth in Section 18(h) or
Section 19(i) or the Registration Statement be effective as set forth in Section
18(b) or Section 19(c).
24. AMENDMENTS. This Agreement may be amended at any time prior to the
Effective Date (whether before or after the consent of stockholders of U.S. Drug
as herein provided) by a writing executed by an authorized officer of SAT, U.S.
Drug and Acquisition (upon due authorization by their respective Boards of
Directors); provided, however, that in no event may the provisions of Sections 4
and 9 hereof be altered, amended, modified, terminated or rescinded without the
approval of the U.S. Drug Minority Stockholders.
25. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware applicable to contracts
executed and to be fully performed therein and without regard to principles of
conflicts of laws.
26. EFFECTIVENESS. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and any controlling person of any party hereof
as provided in Section 15 of the Securities Act and their respective successors,
transferees, heirs, assigns and beneficiaries.
▇-▇▇
▇▇
▇▇. COUNTERPARTS. This Agreement may be executed in multiple copies,
each of which shall constitute an original, but all of which shall constitute
one and the same agreement.
28. PARTIAL INVALIDITY. If any term, covenant or condition in this
Agreement, or the application thereof to any person or circumstance, shall be
invalid or unenforceable, the remainder of this Agreement or the application of
such term, covenant or condition to persons or circumstances, other than those
as to which it is held invalid, shall be unaffected thereby and each term,
covenant or condition of this Agreement shall be enforced to fullest extent
permitted by law.
29. INTEGRATION. This Agreement (including the Exhibits hereto, the
documents and instruments delivered by the parties hereto and any other
documents executed and delivered and/or to be executed and delivered pursuant to
the provisions of this Agreement as herein provided) sets forth the entire
agreement among the parties hereto with respect to the subject matter herein
contained. There are no covenants, promises, agreements, conditions or
understandings, either oral or written, between or among the parties hereto with
respect to the subject matter hereof except as herein and in such ancillary
documents provided. This Agreement can only be altered, amended, modified,
terminated or rescinded by a writing executed by the party to be charged.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger as of the date first above written.
ATTEST: SUBSTANCE ABUSE TECHNOLOGIES, INC.
------------------------------------
By:
---------------------------------
Secretary, Chairman of the Board
U.S. DRUG ACQUISITION CORP.
------------------------------------
By:
---------------------------------
Secretary, Chairman of the Board
U.S. DRUG TESTING, INC.
------------------------------------
By:
---------------------------------
Secretary, President
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