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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
<TABLE>
<C> <S>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE
OCTOBER 7, 1996).
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>
COMMISSION FILE NUMBER 0-18938
SUBSTANCE ABUSE TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 22-2806310
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
4517 N.W. 31ST AVE.
FT. LAUDERDALE, FLORIDA
954-739-9600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
COMMON STOCK, PAR VALUE $.01, AND PREFERRED "A" STOCK, PAR VALUE $.01
(REGISTERED ON THE AMERICAN STOCK EXCHANGE);
PREFERRED "B" STOCK, PAR VALUE $.01
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of July 11, 1997, there were 36,030,591 shares of Common Stock
outstanding.
THE REGISTRANT HAS ONLY ONE CLASS OF VOTING STOCK OUTSTANDING, THE COMMON
STOCK, AND, AS OF JULY 11, 1997, THE AGGREGATE MARKET VALUE OF THE COMMON STOCK
HELD BY NON-AFFILIATES WAS $34,496,036 BASED ON THE CLOSING SALE PRICE OF SUCH
STOCK ON THAT DATE.
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PART II
ITEM 5. MARKET DATA FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
MARKET DATA
Between January 2, 1992 and October 23, 1996, the SAT Common Stock traded
on the American Stock Exchange under the symbol "AAA." Effective October 26,
1996, the SAT Common Stock traded under the symbol "SAU." The following table
sets forth the high and low sales prices for the shares of the SAT Common Stock
during the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal 1996
Quarter Ended
June 30, 1995.................................................. $2.1875 $1.625
September 30, 1995............................................. $2.9375 $1.875
December 31, 1995.............................................. $2.25 $1.875
March 31, 1996................................................. $3.375 $1.8125
Fiscal 1997
Quarter Ended
June 30, 1996.................................................. $3.625 $2.3125
September 30, 1996............................................. $3.00 $1.75
December 31, 1996.............................................. $2.3125 $1.375
March 31, 1997................................................. $1.4375 $1.375
</TABLE>
On July 11, 1997, the closing sales price of the SAT Common Stock was $1.00
per share.
HOLDERS
The holders of record of the SAT Common Stock on June 30, 1997 were 982 and
SAT estimates, based on the number of proxies mailed in connection with the two
Annual Meetings of Stockholders held in February and October 1996, that it has
approximately 8,200 stockholders, including holders in street name.
EXCHANGE LISTING
SAT's stockholders' equity as of March 31, 1997 was a negative $596,484 and
it has sustained losses since its incorporation. Pursuant to Section 1003(a) of
the American Stock Exchange Company Guide, the American Stock Exchange will
consider delisting of a listed company's listed security if (a) the company has
stockholders' equity of less than $4,000,000 if such company has sustained
losses from continuing operations and/or net losses in three of its four most
recent fiscal years or (b) the company has sustained losses from continuing
operations in its five most recent years. SAT, accordingly, does not currently
comply with such guidelines and, as a result, the SAT Common Stock may after a
hearing, be delisted unless SAT can demonstrate to the American Stock Exchange
reasons why such action should not be taken. SAT is seeking equity financing to
meet the stockholders' equity requirement and will file a Current Report on Form
8-K with a pro-forma balance sheet showing compliance upon the consummation of
such financing. In addition, SAT's management will attempt to demonstrate to the
American Stock Exchange that it has a reasonable opportunity to have the Company
begin to operate on a profitable basis on an on-going basis in fiscal 1998.
There can be no assurance that SAT will succeed in these efforts to persuade the
American Stock Exchange not to apply these guidelines, in which event the SAT
Common Stock will thereafter be delisted.
If the SAT Common Stock is delisted, it will become subject to Rule 15g-9
promulgated under the Exchange Act, which Rule imposes additional sales
practices requirements on a broker-dealer which sells Rule 15g-9 securities to
persons other than the broker-dealer's established customers and institutional
accredited investors (as such term is defined in Rule 501(a) under the
Securities Act). For transactions covered under Rule 15g-9, the broker-dealer
must make a suitability determination of the purchaser and
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receive the purchaser's written agreement to the transaction prior to the sale.
In addition, broker-dealers, particularly if they are market makers in the SAT
Common Stock, have to comply with the disclosure requirements of Rules 15g-2,
15g-3, 15g-4, 15g-5 and 15g-6 under the Exchange Act unless the transaction is
exempt under Rule 15g-1. Consequently, Rule 15g-9 and these other Rules may
adversely affect the ability of broker-dealers to sell or to make markets in the
SAT Common Stock and the ability of SAT to secure financing.
DIVIDENDS
No dividends on the SAT Common Stock have been declared by SAT's Board of
Directors through March 31, 1997 and, in view of the Company's cash
requirements, its history of operational losses and restrictions in its
outstanding Convertible Notes, Convertible Debentures and shares of Preferred
Stock, SAT's Board of Directors has no current intention to declare or pay
dividends on the SAT Common Stock in the foreseeable future. Dividends on the
Class A Preferred Stock are payable semi-annually cumulative from December 17,
1990 and all dividends have been paid timely. Dividends on the Class B Preferred
Stock are also payable semi-annually, but they first began to accrue on 62,500
shares on May 8, 1997.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation and certain other
components of the compensation of (1) James C. Witham who served as the Chairman
of the Board, the President and the Chief Executive Officer of SAT until April
18, 1996; (2) Robert M. Stutman who has been serving as the Chairman of the
Board and the Chief Executive Officer of SAT since April 18, 1996; and (3) the
three executive officers of SAT who were serving as of March 31, 1997 and who
received compensation in excess of $100,000 in fiscal 1997:
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------
ANNUAL COMPENSATION SECURITIES ALL
----------------------------- UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ------------------------------------- ---- -------- ------- --------- ------------
<S> <C> <C> <C> <C> <C>
James C. Witham(1)................... 1997 $ -- -- -- --
Chairman, President and 1996 $412,500(2) $50,000 -- --
Chief Executive Officer 1995 $301,154 $50,000 150,000(3) --
Robert M. Stutman(4)................. 1997 $260,809 $ -- --(5) --
Chairman and Chief 1996 -- -- -- --
Executive Officer 1995 -- -- -- --
Linda H. Masterson(6)................ 1997 $152,827 $ -- 600,000(7) --
President 1996 -- -- 10,000(7) --
1995 -- -- -- --
Brian Stutman (8).................... 1997 $152,385 $ -- --(9) --
Vice President, Sales and 1996 -- -- -- --
Marketing 1995 -- -- -- --
Steven J. Kline(10).................. 1997 125,000 -- 50,000 --
Vice President, Research 1996 117,000 -- 10,000 --
and Development 1995 63,231 -- 5,000 --
</TABLE>
- ---------------
(1) Mr. Witham served in these capacities until April 18, 1996 and as an
employee of SAT until May 31, 1996. For information as to his former
employment agreement with SAT, see the section "Employment and Severance
Agreements" under this caption "Executive Compensation."
(2) The amount in the table exceeds the salary amount shown below in the
section "Employment and Severance Agreements" as a result of March 1996
company-wide payments of several years of unused vacation accruals, of
which $95,192.25 was paid to Mr. Witham.
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(3) In August 1994, SAT granted non-qualified stock options expiring August 1,
2004 under the 1990 Restricted Stock, Non-Qualified Option and Incentive
Stock Option Plan to purchase an aggregate of 450,000 shares of the SAT
Common Stock at $2.375 per share, of which Mr. Witham received a stock
option to purchase 100,000 shares of the SAT Common Stock. The option
expired unexercised on November 3, 1996.
(4) Robert M. Stutman was elected as the Chairman of the Board and designated
as Chief Executive Officer of SAT on April 18, 1996. For information as to
his severance arrangement with SAT, see the section "Employment and
Severance Agreements" under this caption "Executive Compensation."
(5) Robert M. Stutman has received various Common Stock purchase warrants from
SAT as a result of his having been a consultant to SAT prior to his
officership, directorship and employment with SAT and as a result of the
acquisition by SAT of RSA. For information as to these
non-executive-compensation warrants, see "Business of the
Company -- Consulting Division" and "Security Ownership of Certain
Beneficial Owners and Management" elsewhere in this Report.
(6) Ms. Masterson became President of SAT effective May 13, 1996, having served
as a director since September 26, 1995. She resigned as the President
effective May 23, 1997 in order to become the Chief Executive Officer of
U.S. Drug (she was already its President) as part of the program to study
the feasibility of separating the interlocking relationships between SAT
and U.S. Drug.
(7) For information as to the Common Stock purchase warrant to purchase 600,000
shares of the SAT Common Stock received by Ms. Masterson as an inducement
to become the President and an employee of SAT, see the section "Employment
and Severance Agreements" under this caption "Executive Compensation" and
"Security Ownership of Certain Beneficial Owners and Management." For more
information as to her Common Stock purchase warrant to purchase 10,000
shares of the SAT Common Stock received as a director of SAT, see the
section "Directors' Compensation" under this caption "Executive
Compensation" and "Security Ownership of Certain Beneficial Owners and
Management."
(8) Brian Stutman was elected as Vice President, Sales and Marketing of SAT on
December 3, 1996. From May 21 until December 31, 1996, he served as Vice
President of Business Development for RSA.
(9) Brian Stutman has received various Common Stock purchase warrants from SAT
as a result of the acquisition by SAT of RSA. For information as to these
non-executive-compensation warrants, see "Business of the
Company -- Consulting Division" and "Security Ownership of Certain
Principal Owners and Management." He received his first executive
compensation Common Stock purchase warrant on June 24, 1997. For
information as to this warrant and his severance agreement, see the section
"Employment and Severance Agreements" under this caption "Executive
Compensation."
(10) Mr. Kline served as Vice President, Research and Development of SAT from
March 25, 1997 until May 23, 1997, when he resigned as part of the program
to study the feasibility of separating the interlocking relationships
between SAT and U.S. Drug. He has served as a Vice President of U.S. Drug
since July 1994.
OPTION/SAR GRANTS TABLE
During fiscal 1997, no stock options were granted by SAT, whether to the
individuals named in the Summary Compensation Table or otherwise, and none were
outstanding as of March 31, 1997. SAT has never granted any stock appreciation
rights.
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The following table sets forth certain information concerning Common Stock
purchase warrants granted during fiscal 1997 as executive compensation to the
individuals named in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------- POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED ALTERNATIVE TO
NUMBER OF OF TOTAL ANNUAL RATES OF (f) AND (g)
SECURITIES WARRANTS STOCK PRICE GRANT DATE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR VALUE
WARRANT EMPLOYEES OF BASE OPTION TERM ----------------
GRANTED IN FISCAL PRICE EXPIRATION ----------------------- GRANT DATE
NAME (#) YEAR ($/SH) DATE 5%($) 10%($) PRESENT VALUE($)
(a) (b) (c) (d) (e) (f) (g) (h)
- ------------------------ ---------- ---------- -------- ---------- ------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
James C. Witham......... -0- N/A N/A N/A N/A N/A N/A
Robert M. Stutman....... -0- N/A N/A N/A N/A N/A N/A
Linda H. Masterson...... 600,000 57.7% $2.125(1) (3) 894,000 2,142,000 1,338,000
Steven J. Kline......... 50,000 4.8% $2.125(2) (4) 40,500 123,500 100,500
Brian Stutman........... -0- N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------
(1) Initially $3.125, but lowered to $2.125 later by SAT's Board of Directors.
(2) Initially $3.50, but lowered to $2.125 later by SAT's Board of Directors.
(3) The last installment expires May 12, 2003.
(4) The last installment expires May 2, 2003.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1997
AND OPTION VALUES AT MARCH 31, 1997
As of March 31, 1997, there were no stock options outstanding and none had
been exercised during fiscal 1997 by the individuals named in the Summary
Compensation Table. SAT has never granted any stock appreciation rights.
The following table sets forth certain information concerning Common Stock
purchase warrants issued as executive compensation to the individuals named in
the Summary Compensation Table. No such warrants were exercised in fiscal 1997.
The table includes the number of shares covered by such warrants as of March 31,
1997. Also reported are the values for "in-the-money" executive compensation
warrants which represent the positive spread between the exercise price of any
such existing warrants and the closing market price of the SAT Common Stock at
March 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED WARRANTS WARRANTS AT
SHARES AT MARCH 31, 1997 MARCH 31, 1997
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------- ----------- -------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
James C. Witham................. -0- -0- -0- -0-
Robert M. Stutman............... -0- -0- -0- -0-
Linda H. Masterson.............. -0- -0- 50,000/550,000
Steven J. Kline................. -0- -0- 10,000/ 60,000
Brian Stutman................... -0- -0- -0- -0-
</TABLE>
OTHER COMPENSATION
SAT currently has no pension plan in effect and has no stock option plan,
restricted stock plan, stock appreciation rights nor any other long-term
incentive plan under which grants or awards may be made in fiscal 1998 or
thereafter. The Board is, however, considering adoption of a stock option plan
for directors, officers and key employees of the Company and implemented in
fiscal 1997 a 401(k) plan for all employees managed by Automated Data
Processing, Inc.
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EMPLOYMENT AND SEVERANCE AGREEMENTS
SAT had entered into employment agreements (the "Employment Agreements")
with each of James C. Witham, Karen B. Laustsen and Gary S. Wolff providing for
a three-year term commencing January 1, 1994 and terminating December 31, 1996.
On April 18, 1996, Mr. Witham and Ms. Laustsen resigned their directorships and
officerships, but agreed to continue to serve SAT as employees until May 31,
1996. Mr. Wolff resigned as Treasurer, Chief Financial Officer and the Chief
Accounting Officer of SAT, Good Ideas and U.S. Drug and as a director of Good
Ideas and U.S. Drug on July 3, 1996. The Employment Agreements terminated on May
31, 1996 as to Mr. Witham and Ms. Laustsen and on July 3, 1996 as to Mr. Wolff,
except that SAT made a $25,000 severance payment to Mr. Wolff and continued
medical benefits for the three former executive officers until December 31,
1996, the original expiration date of the Employment Agreements. Mr. Wolff
continued for a few months after July 3, 1996 to assist SAT in its efforts to
sell the stock or assets of Good Ideas.
Pursuant to his Employment Agreement, Mr. Witham was employed as the
President and Chief Executive Officer of SAT at an annual base salary of
$330,000. Pursuant to her Employment Agreement, Ms. Laustsen was employed as an
Executive Vice President at an annual base salary of $132,000. Pursuant to his
Employment Agreement, Mr. Wolff was employed as the Treasurer and Chief
Financial Officer at an annual base salary of $176,000 per year. Each of such
salaries reflected a 10% increase effective July 1, 1995, which increase was the
first in 18 months. Mr. Witham and Ms. Laustsen were each required to devote
substantially all of his or her time to the business of SAT, while Mr. Wolff was
only required to devote a majority of his time.
The Employment Agreements contained standard provisions for participation
by the executive in SAT's benefit programs, whether relating to the SAT Common
Stock, bonuses or medical, life and disability insurance or otherwise. Mr.
Witham and Ms. Laustsen were each provided with a company car, which have been
returned to SAT. The Employment Agreements also provided for termination in the
event of disability for six or more consecutive months and termination "for
cause" which meant conviction for embezzlement, theft or other criminal act
constituting a felony or failure to comply with the terms and conditions of the
Agreement if such breach was not cured within seven days after written notice
was given to the executive by the Board of Directors.
Effective April 18, 1996, Robert M. Stutman, the President and a principal
shareholder of RSA, became the Chief Executive Officer of SAT (also its Chairman
of the Board). From April 18, 1996 to May 20, 1997, Mr. Stutman's annual base
salary was $225,000; effective May 21, 1997, it became $350,000. The annual base
salary increases to (1) $400,000 upon the Company being profitable for a fiscal
year during the term of the Amended and Restated Severance Agreement dated May
21, 1997 (the "Restated Severance Agreement") between Mr. Stutman and SAT, a
copy of which is filed as an exhibit to this Report and is incorporated herein
by this reference, or any renewal thereof with sales equal to, or greater than,
$20,000,000 and (2) $500,000 upon the Company being profitable for a fiscal year
during the term of the Restated Severance Agreement or any renewal thereof with
sales equal to, or greater than, $40,000,000; provided that, in calculating
profitability and sales, the operations of U.S. Drug are excluded. He was
eligible to receive a cash bonus of $100,000 if the Company broke even or was
profitable in fiscal 1997 and an additional $150,000 if the Company had net
earnings of $2,000,040 in fiscal 1997. However, because SAT did not achieve
profitability in fiscal 1997, this term of employment became moot. Mr. Stutman
received a one-time cash bonus of $50,000 upon ProActive satisfying certain
performance standards in fiscal 1996. In subsequent years, commencing with
fiscal 1998, Mr. Stutman will receive an aggregate year-end cash bonus (the
"Annual Bonus") equal to the bonus percentage (as set forth hereinafter)
multiplied by Mr. Stutman's annual base salary as follows: (a) if the Company
achieves its financial objectives in such fiscal year, based upon a
Board-approved budget, commencing with fiscal year 1998, the bonus percentage
shall be 75%; (b) if the Company achieves 100% of its financial objectives and
up to 150% of its financial objectives for a fiscal year, then the bonus
percentage shall equal the product of 75% and a fraction, the numerator of which
shall be the percentage of the financial objectives actually achieved (e.g.,
150%), except that any amount in excess of 150% shall be deemed to be 150% for
the purposes of this calculation, and the denominator of which shall be 75%; (c)
if the Company achieves 80% or more of its financial objectives for a fiscal
year up to 100%, Mr. Stutman shall receive an
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Annual Bonus based upon a pro rata amount of the bonus percentage (e.g., if 90%
of the financial objectives are achieved, the bonus percentage shall be 37.5%);
and (d) if the Company achieves less than 80% of its financial objectives for a
fiscal year, Mr. Stutman shall not receive any Annual Bonus. Pursuant to the
Restated Severance Agreement, a bonus payment in the amount of $50,000 shall be
paid to Mr. Stutman upon the renewal thereof. Mr. Stutman shall be granted a
stock option to purchase a minimum of 50,000 shares of SAT Common Stock per year
at the end of each year during the term of the Restated Severance Agreement or
renewal thereof at an exercise price equal to the closing sale price, as
reported on AMEX or such other exchange or national securities association on
which the SAT Common Stock may then be regularly quoted or, if not so quoted, as
reported in the over-the-counter market at the time of such grant and if such
day shall be a day on which the AMEX shall be closed, the preceding day on which
the SAT Common Stock is traded (the "Closing Sales Price") and expiring three
years from the date of grant. Mr. Stutman shall also be awarded 150,000 shares
of the SAT Common Stock for each $.75 increase in the Closing Sales Price of the
SAT Common Stock above $1.375, with such increase to be determined by the
average of the Closing Sales Prices of the SAT Common Stock during any 90-day
period commencing with the fiscal year ending March 31, 1998; provided, however,
once the average of the Closing Sales Prices of the SAT Common Stock reaches an
award level (e.g., $2.125), no awards will be made again until the average of
the Closing Sales Prices of the SAT Common Stock during a 90-day period reaches
the next award level (e.g., $2.875 after $2.125). In the event that Mr. Stutman
is terminated without cause (as defined in the Restated Severance Agreement)
during the first five years (originally three years (i.e., through May 20, 2001
(originally 1999) that he is employed by SAT, he shall receive severance pay in
a lump sum amount equal to his annual base salary that would have been paid to
him after the date of termination had Mr. Stutman not been terminated and he had
been employed by SAT for a period of five (originally three) years.
Effective May 13, 1996, Linda H. Masterson, a member of SAT's Board of
Directors, was employed as the President and Chief Operating Officer of SAT. On
November 19, 1996, Ms. Masterson relinquished her duties as Chief Operating
Officer in order to devote more time to supervising the development program of
U.S. Drug and the operations of the Alcohol Products and BioTox Divisions of
SAT. Effective May 23, 1997, she resigned as the President of SAT in order to
become Chief Executive Officer of U.S. Drug (she was already its President) as
part of the program to study the feasibility of separating the interlocking
relationships between SAT and U.S. Drug. Ms. Masterson's annual base salary is
$175,000. Ms. Masterson was granted a Common Stock purchase warrant to purchase
600,000 shares of the SAT Common Stock. If SAT adopts a stock option plan, then
the Common Stock purchase warrant will be converted to a stock option subject to
such plan. In either case, the option or warrant was to become exercisable over
a four-year period as follows: 50,000 shares upon commencement of the term of
employment (i.e., May 13, 1996), 100,000 shares at the end of the first year,
150,000 shares at the end of the second year, 150,000 shares at the end of the
third year and 150,000 shares at the end of the fourth year. The expiration
dates of the stock option will be in accordance with the terms of the stock
option plan and the expiration dates of the warrant were four years from the
respective dates on which the warrant becomes exercisable. The initial exercise
price was $3.125 share. On December 6, 1996, the SAT Board of Directors, while
reducing the exercise price of Common Stock purchase warrants granted to other
employees from $3.50 to $2.125 per share, made the following adjustments to Ms.
Masterson's warrant: (a) the exercise price was also reduced to $2.125 per share
for the first 150,000 shares as to which the warrant was currently or became
exercisable on May 13, 1997 and (b) the warrant became exercisable on May 13,
1997 at the reduced exercise price with respect to 50,000 of the 150,000 shares
as to which the warrant was first to become exercisable in the fourth year. In
consideration of her assuming responsibility for U.S. Drug, on May 23, 1997, the
SAT Board of Directors reduced the exercise price on the remaining 400,000
shares from $3.125 to $2.125 and agreed that, if, as result of U.S. Drug ceasing
to be owned 50% or more by SAT, the restrictions on exercise terminate. A
discretionary cash and/or stock bonus may be paid commencing with the fiscal
year after the fiscal year in which the Company first has positive earnings. A
bonus in the form of stock options pursuant to an employee stock option plan or
warrants, if no such plan is adopted, was to be granted in respect of fiscal
1997 as follows: 33,000 shares if the Company broke even in fiscal 1997 and an
additional 50,000 shares if the Company had net earnings of $2,000,040 for
fiscal 1997. However, as indicated above for Mr. Stutman, this bonus arrangement
for fiscal 1997 became moot. In the event that Ms. Masterson is terminated
without cause (as defined), she shall be paid, pursuant to a Severance
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Agreement dated June 27, 1996 (the "Masterson Severance Agreement") between Ms.
Masterson and SAT, a copy of which is filed as an exhibit to this Report and is
incorporated herein by this reference, severance equal to her annual base
salary. In view of her acceptance of the position in U.S. Drug, the Compensation
Committee is currently working out a new severance arrangement with Ms.
Masterson to take effect in U.S. Drug when it is no longer at least a 50%-owned
subsidiary of SAT as a result of financings. In the interim the Masterson
Severance Agreement remains in effect.
Effective May 23, 1997, David L. Dorff was employed as the President and
Chief Operating Officer of SAT with an annual base salary of $120,000. The
annual base salary increases to (1) $275,000 upon SAT being profitable for two
consecutive calendar months during the term of the Severance Agreement dated
June , 1997 (the "Dorff Severance Agreement") between Mr. Dorff and SAT, a
copy of which is filed as an exhibit to this Report and is incorporated herein
by this reference, or any renewal thereof, (2) $325,000 upon SAT being
profitable for a fiscal year during the term of the Dorff Severance Agreement or
any renewal thereof with sales equal to, or greater than, $20,000,000 and (3)
$375,000 upon SAT being profitable for a fiscal year during the term of the
Dorff Severance Agreement or any renewal thereof with sales equal to, or greater
than $40,000,000; provided that, in calculating profitability and sales, the
operations of U.S. Drug are excluded. Mr. Dorff shall receive an Annual Bonus
equal to the bonus percentage (as set forth hereinafter) multiplied by his
annual base salary as follows: (a) if the Company achieves 100% of its financial
objectives in such fiscal year, based upon a Board-approved budget excluding the
operations of U.S. Drug, commencing with fiscal 1998, the bonus percentage shall
be 75%; (b) if the Company achieves greater than 100% of its financial
objectives and up to 150% of its financial objectives for a fiscal year, then
the bonus percentage shall equal the product of 75% and a fraction, the
numerator of which shall be the percentage of the financial objectives actually
achieved (e.g., 150%), except that any amount in excess of 150% shall be deemed
to be 150% for the purposes of this calculation, and the denominator of which
shall be 75%; (c) if the Company achieves 80% or more of its financial
objectives for a fiscal year up to 100%, Mr. Dorff shall receive an Annual Bonus
based upon a pro rata amount of the bonus percentage (e.g., if 90% of the
financial objectives are achieved, the bonus percentage shall be 37.5%); and (d)
if the Company achieves less than 80% of its financial objectives for a fiscal
year, Mr. Dorff shall not receive any Annual Bonus. A bonus payment in the
amount of $50,000 shall be paid to Mr. Dorff upon each renewal of the Dorff
Severance Agreement. Mr. Dorff shall be granted, at the end of each fiscal year
during the term of the Dorff Severance Agreement or any renewal thereof, a stock
option to purchase a minimum of 50,000 shares of SAT Common Stock at an exercise
price equal to the Closing Sale Price on the date of grant and expiring three
years from the date of grant. Mr. Dorff shall be awarded 125,000 shares of SAT
Common Stock for each $.75 increase in the Closing Sales Price of the SAT Common
Stock above $1.375, with such increase to be determined by the average of the
Closing Sales Prices of the SAT Common Stock during any 90-day period commencing
with fiscal 1998; provided, however, once the average of the Closing Sales
Prices of the SAT Common Stock reach an award level (e.g., $2.125), no awards
will be made again until the average of the Closing Sales Prices of the SAT
Common Stock during a 90-day period reaches the next award level (e.g., $2.875
after $2.125). All shares of the SAT Common Stock awarded shall be vested over a
three-year period. In addition, Mr. Dorff was awarded Common Stock purchase
warrants upon the execution of the Dorff Severance Agreement to purchase (a)
700,000 shares of the SAT Common Stock at an exercise price of $1.8125 per
share, (b) 300,000 shares of the SAT Common Stock at an exercise price of
$2.3125 and (c) 300,000 shares of the SAT Common Stock at an exercise price of
$2.8125 per share. One-third of each warrant becomes exercisable on June 1998,
June 1999 and June 2000, provided that Mr. Dorff is employed by SAT on such
dates. The warrants expire five years from the date of the Dorff Severance
Agreement. In the event that Mr. Dorff is terminated without cause (as defined)
during the first three years of his employment by SAT, he shall receive
severance pay in a lump sum amount equal to his annual base salary at the time
of his termination for the period from the date of his termination through June
2000.
Effective May 21, 1996, when RSA became a subsidiary of SAT, Brian Stutman
continued to serve as Vice President of Business Development for RSA. On
December 3, 1996, he was elected as Vice President, Sales and Marketing of SAT.
Mr. Stutman's annual base salary is $130,000. He was eligible for a bonus of
$30,000 for fiscal 1997 if his business plan goals were met and received a
one-time bonus of $30,000 upon ProActive satisfying certain performance
standards in fiscal 1996. On June 24, 1997, the Compensation
7
<PAGE> 9
Committee authorized an increase, effective with the next pay period, in Mr.
Stutman's base annual salary to $175,000 and that his bonus for fiscal 1998
would be an amount up to 30% of his annual base salary, one half of which would
be based on the financial results of the Company, as compared to a
Board-approved budget, and one half of which would be based on his performance
with respect to individual goals to be determined by the President of SAT. The
Board also granted him a Common Stock purchase warrant to purchase 15,000 shares
of the SAT Common Stock at $2.125 per share on the same terms as other employee
warrants (i.e., becoming exercisable over a four-year period and each
installment expiring three years from the date it becomes exercisable). In the
event Mr. Stutman is terminated without cause (as defined) during the first
three years (i.e., through May 20, 1999) that he is employed by SAT, then,
pursuant to a Severance Agreement dated May 21, 1996 between Mr. Stutman and
SAT, a copy of which is filed (by incorporation by reference) as an exhibit to
this Report and is incorporated herein by this reference, he shall receive
severance pay in an amount equal to the base salary that would have been paid to
him after the date of termination had Mr. Stutman not been terminated and had he
been employed by SAT for a period of three years.
DIRECTORS' COMPENSATION
On November 16, 1995, as modified on December 11, 1995 and December 3,
1996, the Board approved the following compensation arrangements for directors
who are not employees of the Company: (1) each year the director will receive a
SAT Common Stock purchase warrant to purchase 10,000 shares of the SAT Common
Stock excercisable at the closing sales price on November 16 or the preceding
business day if November 16 is a Saturday, Sunday or holiday (effective October
1, 1997, the date will become October 1) for a three-year period; (2) an annual
payment of $10,000 and (3) a quarterly payment of $2,500 provided that the
director attends at least 75% of the meetings during the year. The Board also
authorized an annual payment of $1,000 for a director serving as the Chairman of
a Board committee and $500 for serving as a member of a Board committee. All
annual cash payments are to be made as of October 1, commencing October 1, 1996.
Pursuant to the foregoing authority, Common Stock purchase warrants were granted
for 1995 to five directors (i.e., Alan I. Goldman, John C. Lawn, Peter M. Mark,
Linda H. Masterson and Lee S. Rosen) to purchase an aggregate of 50,000 shares
at $1.9375, the closing sales price on November 16, 1995 and for 1996 to five
directors (i.e., Alan I. Goldman, John C. Lawn, Peter M. Mark, Michael S. McCord
and Lee S. Rosen) at $1.8125, the closing sales price on November 15, 1996. The
Board approved the following compensation for all directors: the issuance of a
SAT Common Stock purchase warrant to purchase 10,000 shares of the SAT Common
Stock for each $1.00 rise over the closing sales price of the SAT Common Stock
on November 16th (October 1st commencing October 1, 1997) of each year (which
would be $1.9375 for November 16, 1995 and $1.8125 for November 15, 1996), the
rise to be calculated on the basis of the average of the closing sales prices
during the 90-day period preceding the 30th day after the date on which the
results of operations for the fiscal year are announced either through a press
release or the filing of the Annual Report on Form 10-K under Section 13 of the
Exchange Act. The exercise price will be the greater of the average of the
closing sales prices during the 90-day period or the closing sales price on
October 1 commencing October 1, 1997. Based on the fact that the results of
operations for fiscal 1996 were reported in a press release dated June 14, 1996,
each of the current directors did not receive a Common Stock purchase warrant in
1996 because the average sales price during the 90-calendar days prior to July
14, 1996 was $2.9308 per share or less than a $1.00 rise over $1.9375 per share.
It is also anticipated that the directors will not receive a Common
8
<PAGE> 10
Stock purchase warrant in 1997 because there was no $1.00 rise over $2.9308 per
share of the SAT Common Stock.
PERFORMANCE GRAPH
[PLOT POINTS TO COME]
TOTAL SHAREHOLDER RETURNS
(DIVIDENDS REINVESTED)
<TABLE>
<CAPTION>
ANNUAL RETURN PERCENTAGE
YEARS ENDING
COMPANY NAME/INDEX MAR 93 MAR 94 MAR 95 MAR 96 MAR 97
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBSTANCE ABUSE TECH............................ -62.07 63.64 -11.11 66.75 -67.42
S&P 500 INDEX................................... 15.23 1.47 15.57 32.10 19.82
NEW PEER GROUP.................................. -11.80 -0.16 31.90 -0.64 9.76
OLD PEER GROUP.................................. -2.14 22.03 0.76 50.70 -12.54
</TABLE>
9
<PAGE> 11
<TABLE>
<CAPTION>
INDEXED RETURNS
BASE YEARS ENDING
PERIOD
COMPANY NAME/INDEX MAR 92 MAR 93 MAR 94 MAR 95 MAR 96 MAR 97
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SUBSTANCE ABUSE TECH................. 100 37.93 62.07 55.17 93.10 39.84
S&P 500 INDEX........................ 100 115.23 116.93 135.13 176.51 213.89
NEW PEER GROUP....................... 100 86.20 88.06 116.15 115.41 126.87
OLD PEER GROUP....................... 100 97.68 119.42 118.51 214.15 123.06
</TABLE>
<TABLE>
<CAPTION>
NEW PEER GROUP COMPANIES OLD PEER GROUP COMPANIES
- --------------------------------------------------------------------------------------------
<S> <C>
EPITOPE, INC................................ AHOROS INC.
EQUIFAX, INC................................ IMO INDUSTRIES INC.
GLOBAL MED TECHNOLOGIES INC................. INPUTOUTPUT INC.
LABORATORY CP OF AMER. HLDGS................ INSTRON CORP.
LIBERTY TECHNOLOGIES INC.
MEASUREMENT SPECIALTIES INC.
MEDIA LOGIC INC.
MODERN CONTROLS INC.
MTS SYSTEMS CORP.
MDC AUTOMATION INC.
RHEOMETRICS SCIENTIFIC INC.
SUBSTANCE ABUSE TECH.
</TABLE>
10
<PAGE> 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements
The Company's financial statements appear in a separate section of this
Report commencing on the pages referenced below:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of the Independent Certified Public Accountants........................ F-1
Report of the Independent Certified Public Accountants........................ F-2
Consolidated Balance Sheets at March 31, 1997 and 1996........................ F-3
Consolidated Statements of Operations for the Years Ended March 31, 1997, 1996
and 1995.................................................................... F-4
Consolidated Statements of Stockholders Equity for the Years Ended
March 31, 1997, 1996 and 1995............................................... F-5
Consolidated Statements of Cash Flows for the Years Ended March 31, 1997, 1996
and 1995.................................................................... F-7
Notes to Consolidated Financial Statements.................................... F-9
</TABLE>
(a) 2. Financial Statement Schedules
The following financial statement schedule of Substance Abuse Technologies,
Inc. and subsidiaries are included herein.
Schedule II Valuation and qualifying accounts
All other schedules are omitted as they are not required, are inapplicable,
or the information is included in the financial statements or notes thereto.
(a) 3. Exhibits
All of the following exhibits designated with a footnote reference are
incorporated herein by reference to a prior registration statement filed under
the Securities Act of 1933, as amended (the "Securities Act"), or a periodic
report filed by SAT, Good Ideas or U.S. Drug pursuant to Section 13 of the
Exchange Act. An exhibit marked with an asterisk is filed with this Report.
<TABLE>
<CAPTION>
NUMBER EXHIBITS
- ------------- ------------------------------------------------------------------------------
<S> <C>
2(a) Copy of Exchange of Stock Agreement and Plan of Reorganization dated May 7,
1992 between Good Ideas Enterprises, Inc., a Texas corporation ("Good Ideas
Texas"), U.S. Alcohol & Drug Testing International N.V. and David Brooks.(1)
2(b) Copy of Agreement and Plan of Merger dated as of April 12, 1996 by and among
SAT, Good Ideas Acquisition Corp. and Good Ideas.(2)
2(b)(1)* Copy of Agreement and Plan of Merger dated as of February 17, 1997 by and
among SAT, Good Ideas Acquisition Corp. and Good Ideas.
2(c) Copy of Agreement and Plan of Merger dated as of April 23, 1996 by and among
SAT, U.S. Drug Acquisition Corp. and U.S. Drug.(3)
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
NUMBER EXHIBITS
- ------------- ------------------------------------------------------------------------------
<S> <C>
2(c)(1)* Copy of Agreement and Plan of Merger dated as of February 17, 1997 by and
among SAT, U.S. Drug Acquisition Corp. and U.S. Drug.
2(d) Copy of the Certificate of Merger of Good Ideas Texas with and into Good Ideas
as filed on December 17, 1992.(1)
3(a) Copy of Certificate of Incorporation of SAT as filed in Delaware on April 15,
1987.(4)
3(a)(1) Copy of Amendment to the Certificate of Incorporation as filed in Delaware on
July 10, 1989.(4)
3(a)(2) Copy of Amendment to the Certificate of Incorporation as filed in Delaware on
September 25, 1989.(4)
3(a)(3) Copy of Amendment to the Certificate of Incorporation as filed in Delaware on
October 5, 1990.(4)
3(a)(4) Copy of Amendment to the Certificate of Incorporation as filed in Delaware on
December 26, 1990.(5)
3(a)(5) Copy of Amendment to the Certificate of Incorporation as filed in Delaware on
November 1, 1991.(5)
3(a)(6) Copy of Amendment to the Certificate of Incorporation as filed in Delaware on
May 20, 1992.(6)
3(a)(7)* Copy of Amendment to the Certificate of Incorporation as filed in Delaware on
October 28, 1996.
3(b) Copy of By-Laws of SAT.(4)
4(a) Specimen of Common Stock certificate of U.S. Alcohol Testing of America,
Inc.(4)
4(a)(1)* Specimen of Common Stock certificate of SAT.
4(b) Specimen of Class "A" Cumulative and Convertible Preferred Stock certificate
of U.S. Alcohol Testing of America, Inc.(4)
4(b)(1)* Specimen of Class "A" Cumulative and Convertible Preferred Stock certificate
of SAT.
4(c) Specimen of Class "B" Non-Voting Preferred Stock certificate of U.S. Alcohol
Testing of America, Inc.(7)
4(d) Copy of Convertible Loan and Warrant Agreement dated November 8, 1996 by and
between SAT, S.A.C. Capital Associates, LLC and Steven A. Cohen.(13)
4(d)(1) Form of Registration Rights Agreement is Exhibit A to Exhibit 4(d) hereto.(13)
4(d)(2) Form of Convertible Senior Promissory Note due November 8, 1999 is Exhibit B
to Exhibit 4(d) hereto.(13)
4(d)(3) Form of Common Stock Purchase Warrant expiring June 30, 2000 is Exhibit C to
Exhibit 4(d) hereto.(13)
4(e) Copy of Convertible Debenture and Preferred Stock Purchase Agreement dated as
of May 8, 1997 between SAT and Southbrook International Investments, Ltd.
("Southbrook").
4(e)(1) Registration Rights Agreement dated as of May 8, 1996 between SAT and
Southbrook.
4(e)(2) Class B Exchange Agreement dated as of May 8, 1997 between SAT and Southbrook.
4(e)(3) 14% Convertible Debenture of SAT due May 8, 2000.
4(e)(4) Form of Common Stock Purchase Warrant expiring May 8, 2000.
10(a) Form of the Company's Indemnification Agreement with Officers and
Directors.(4)
10(b) Copy of License Agreement dated January 24, 1992 by and between the United
States Department of the Navy and SAT. (Confidential Treatment Requested for
Exhibit.)(8)
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
NUMBER EXHIBITS
- ------------- ------------------------------------------------------------------------------
<S> <C>
10(b)(1) Copy of Amendment dated March 15, 1994 to License Agreement filed as Exhibit
10(b) hereto.(3)
10(b)(2) Copy of Amendment dated June 16, 1995 to License Agreement filed as Exhibit
10(b) hereto.(3)
10(b)(3) Copy of Letter dated May 15, 1995 from the USN to SAT.(3)
10(c) Copy of Assignment dated as of January 1, 1993 between SAT and U.S. Drug of
the Licensing Agreement filed as Exhibit 10(b) hereto.(8)
10(c)(1) Copy of Amended Sublicense Agreement dated September 23, 1993 superseding the
Assignment filed as Exhibit 10(b) hereto.(3)
10(c)(2) Copy of Approval dated September 24, 1993 by the USN of Amended Sublicense
Agreement filed as Exhibit 10(b) hereto.(3)
10(d) Copy of Cooperative Research Agreement (the "CRDA Agreement") dated April 16,
1992 by and between Naval Research Laboratory Section, United States
Department of the Navy, and SAT.(8)
10(d)(1) Copy of Assignment of CRDA Agreement dated as of January 1, 1993 by and
between U.S. Drug and SAT.(8)
10(e) Copy of Management Agreement dated April 1, 1993 by and between U.S. Drug and
SAT.(8)
10(e)(1) Copy of Amendment dated July 20, 1993 to Management Services Agreement filed
as Exhibit 10(e) hereto.(8)
10(f) Copy of Management Services Agreement dated December 29, 1993 by and between
Good Ideas and SAT.(2)
10(g) Copy of Equipment, Licensing, Servicing and Maintenance Agreement dated as of
December 13, 1994 by and between SAT and METPATH, Inc.(7)
10(h) Copy of Equipment, Licensing, Servicing and Maintenance Agreement dated as of
December 22, 1994 by and between SAT and National Health Laboratories
Incorporated.(7)
10(i) Copy of Lease dated March 18, 1991 by and between Rancho Cucamonga Business
Park (now The Realty Trust) as landlord and SAT as tenant.(7)
10(j)(1) Copy of Lease Modification Agreement to Lease filed as Exhibit 10(o)
hereto.(7)
10(j)(2) Copy of Sub-Lease Agreement dated as of January 1, 1993 by and between SAT as
sublandlord and U.S. Drug as subtenant.(8)
10(j)(3)* Copy of Third Amendment dated January 2, 1997 to Lease filed as Exhibit 10(j)
hereto.
10(k) Copy of Lease dated December 9, 1992 by and between Melvin E. Evans as
landlord and Good Ideas as tenant.(1)
10(l) Copy of Lease expiring June 30, 1999 by and between Rancho Cucamonga Business
Park as landlord and U.S. Rubber Recycling, Inc. ("USRR") as tenant.(7)
10(m) Copy of Consulting and Royalty Agreement dated June 20, 1988 between Manley
Luckey and SAT.(4)
10(m)(1) Copy of Amendment dated August 1990 to Consulting and Royalty Agreement filed
as Exhibit 10(m) hereto.(4)
10(n) Form of Warrant Agreement dated December 17, 1990 between J. Gregory & Company
Inc. and SAT.(4)
10(n)(1) Form of Underwriter's Warrant expiring December 17, 1997 of SAT.(4)
10(o) Form of Common Stock purchase warrant expiring October 31, 1996 of SAT.(6)
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
NUMBER EXHIBITS
- ------------- ------------------------------------------------------------------------------
<S> <C>
10(p) Form of Common Stock purchase warrant.(5)
SAT's Common Stock purchase warrants expiring August 28, 1996, September 1,
1996, September 16, 1996, September 30, 1996, October 31, 1996, May 17, 1997,
September 16, 1997, November 1, 1997, December 17, 1997, December 31, 1997,
February 28, 1998, April 15, 1998, July 17, 1998, August 27, 1998, September
1, 1998, November 1, 1998, November 15, 1998, December 13, 1998, December 20,
1998, December 27, 1998, January 2, 1999, January 31, 1999, February 26, 1999,
February 28, 1999, March 31, 1999, April 14, 1999, April 17, 1999, May 12,
1999, July 17, 1999, July 19, 1999, August 11, 1999, December 31, 1999,
January 29, 2000, October 19, 2000, December 31, 2000 and December 31, 2001
are substantially identical to the form of Common Stock purchase warrant filed
(by incorporation by reference) as Exhibit 10(p) hereto except as to the name
of the holder, the expiration date and the exercise price and, accordingly,
pursuant to Instruction 2 to Item 601 of Regulation S-K under the Securities
Act are not individually filed.
10(q) Restricted Stock, Non-Qualified Option and Incentive Stock Option Plan of
SAT.(4)
10(q)(1) Form of Stock Option expiring August 1, 2004 issued pursuant to Exhibit 10(q)
hereto.(7)
10(r) Form of Common Stock purchase warrant expiring December 17, 1999.(9)
10(s) Form of Warrant Agreement by and between Good Ideas and Baraban Securities,
Incorporated.(1)
10(s)(1) Form of Common Stock purchase warrant expiring February 16, 1999 of Good
Ideas.(1)
10(s)(2) Form of Common Stock purchase warrant expiring February 16, 1999 of SAT to be
issued in lieu of the Common Stock purchase warrant of Good Ideas filed as
Exhibit 10(s)(1) hereto.
10(t) Copy of Agreement made as of December 14, 1995 by and between SAT, ProActive
Synergies, Inc., Robert Stutman & Associates, Inc. and Robert Stutman.(10)
10(u) Copy of Asset Purchase Agreement dated April 30, 1996 by and among USRR, SAT
and Reclamation Resources Inc.(11)
10(v) Copy of Stock Purchase Agreement dated as of May 21, 1996 by and among SAT,
Robert Stutman, Brian Stutman, Sandra DeBow, Michael Rochelle and Kimberly
Rochelle.(11)
10(v)(1) Form of Secured Promissory Note dated May 21, 1996 is Exhibit A to Exhibit
10(v) hereto.
10(v)(2) Form of Security Agreement dated May 21, 1996 by and among SAT, Robert Stutman
and Brian Stutman is Exhibit C to Exhibit 10(v) hereto.
10(v)(3) Form of SAT Warrant expiring May 20, 1999 is Exhibit B to Exhibit 10(v)
hereto.
10(v)(4) Form of Registration Rights Agreement dated as of May 21, 1996 by and between
SAT, Robert Stutman, Brian Stutman, Michael Rochelle, Kimberly Rochelle and
Sandra DeBow is Exhibit D to Exhibit 10(v) hereto.
10(w) Copy of Severance Agreement dated May 21, 1996 by and between SAT and Robert
Stutman.(11)
10(w)(1)* Copy of Amended and Restated Severance Agreement dated May 21, 1997 by and
between SAT and Robert Stutman.
10(x) Copy of Severance Agreement dated May 21, 1996 by and between SAT and Brian
Stutman.(11)
10(y)* Copy of Severance Agreement dated June 27, 1996 by and between SAT and Linda
H. Masterson.
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
NUMBER EXHIBITS
- ------------- ------------------------------------------------------------------------------
<S> <C>
10(z)* Copy of Form of Severance Agreement dated June , 1997 by and between SAT and
David L. Dorff.
10(aa)* Copy of Sublease dated as of June 20, 1996 by and between Lifecare
Investments, Inc. ("Lifecare"), Sublessor, and SAT, Sublessee.
10(aa)(1)* Copy of Wingate Commons Business Park Net Lease dated September 27, 1991 by
and between Reynolds Metals Development Company, Landlord, and Lifecare,
Tenant.
10(aa)(2)* Copy of First Addendum to the Lease filed as Exhibit 10(aa)(1) hereto.
10(aa)(3)* Copy of Second Addendum to the Lease filed as Exhibit 10(aa)(1) hereto.
10(bb) Copy of Demand Promissory Note dated March 31, 1995 executed by SAT in favor
of Good Ideas.(12)
10(bb)(1) Copy of Demand Promissory Note dated March 31, 1995 executed by USRR in favor
of Good Ideas.(12)
10(cc) Form of Warrant Agreement by and between U.S. Drug and Baraban Securities,
Incorporated.(8)
10(cc)(1) Form of Common Stock purchase warrant expiring October 13, 1998 of U.S.
Drug.(8).
10(cc)(2) Form of Common Stock purchase warrant expiring October 13, 1998 of SAT to be
issued in lieu of the Common Stock purchase warrant of U.S. Drug filed as
Exhibit 10(cc)(1) hereto (to be prepared on consummation of the U.S. Drug
Merger with the same terms as Exhibit 10(cc)(1) except for the name of the
issuer, number of shares and exercise price).
10(dd)* Form of Common Stock purchase warrant expiring November 15, 1999. SAT's Common
Stock purchase warrants expiring November 15, 1999, December 2, 1999 and three
years from the effective date of a registration statement under the Securities
Act are substantially identical to the form of Common Stock purchase warrant
filed as Exhibit 10(dd) hereto except as to the name of the holder, the
expiration date and the exercise price and, accordingly, pursuant to
Instruction 2 to Item 601 of Regulation S-K under the Securities Act are not
individually filed.
10(ee)* Form of Common Stock purchase warrant with deferred exercise.
SAT's Common Stock purchase warrants expiring three years from the effective
date of a registration statement under the Securities Act and those issued or
to be issued to employees, of which the currently outstanding warrants expire
between September 11, 2000 and June 23, 2004, are substantially identical to
the form of Common Stock purchase warrant filed as Exhibit 10(ee) hereto
except as to the name of the holder, the expiration date and the exercise
price and, accordingly, pursuant to Instruction 2 to Item 601 of Regulation
S-K under the Securities Act are not individually filed.
10(ff) Copy of Employment Agreement dated December 31, 1993 between SAT and James C.
Witham.(7)
10(gg) Copy of Employment Agreement dated December 13, 1993 between SAT and Karen B.
Laustsen.(7)
10(hh) Copy of Employment Agreement dated December 13, 1993 between SAT and Gary S.
Wolff.(7)
10(ii) Copy of Employment Agreement dated December 13, 1993 between SAT and Michael
J. Witham.(7)
10(jj)* Copy of Letter of Agreement dated July 16, 1997 by and between SAT and
National Review Medical Offices, Inc. ("NMRO").
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
NUMBER EXHIBITS
- ------------- ------------------------------------------------------------------------------
<S> <C>
10(jj)(1)* Assignment and Assumption of Interim Management Agreement dated July 15, 1997
by and between SAT and NMRO.
16 Copy of Letter dated November 16, 1995 from Wolinetz, Gottlieb & Lafazan, P.C.
to the Securities and Exchange Commission.(14)
21* Subsidiaries of SAT.
</TABLE>
- ---------------
(1) Filed as an exhibit to Good Ideas' Registration Statement on Form S-1, File
No. 33-73494, and incorporated herein by this reference.
(2) Filed as an exhibit to Good Ideas' Annual Report on Form 10-K for the
fiscal year ended March 31, 1996 and incorporated herein by this reference.
(3) Filed as an exhibit to U.S. Drug's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996 and incorporated herein by this reference.
(4) Filed as an exhibit to SAT's Registration Statement on Form S-18, File No.
33-29718, and incorporated herein by this reference.
(5) Filed as an exhibit to SAT's Registration Statement on Form S-1, File No.
33-43337, and incorporated herein by this reference.
(6) Filed as an exhibit to SAT's Registration Statement on Form S-1, File No.
33-47855, and incorporated herein by this reference.
(7) Filed as an exhibit to SAT's Annual Report on Form 10-K for the fiscal year
ended March 31, 1995 and incorporated herein by this reference.
(8) Filed as an exhibit to U.S. Drug's Registration Statement on Form SB-2,
File No. 33-61786, and incorporated herein by this reference.
(9) Filed as an exhibit to SAT's Current Report on Form 8-K filed on November
2, 1992 and incorporated herein by this reference.
(10) Filed as an exhibit to SAT's Registration Statement on Form S-8 filed on
March 5, 1996 and incorporated herein by this reference.
(11) Filed as an exhibit to SAT's Current Report on Form 8-K filed on June 5,
1996 and incorporated herein by this reference.
(12) Filed as an exhibit to Good Ideas' Annual Report on Form 10-K for the
fiscal year ended March 31, 1995 and incorporated herein by this reference.
(13) Filed as an exhibit to Amendment 2 to Schedule 13D filed by Steven A. Cohen
on November 12, 1996 and incorporated herein by this reference.
(14) Filed as an Exhibit to SAT's Current Report on Form 8-K/A filed on November
22, 1995 and incorporated herein by this reference.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended March 31,
1997.
16
<PAGE> 18
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on July 23, 1997.
SUBSTANCE ABUSE TECHNOLOGIES, INC.
(Company)
By: /s/ ROBERT M. STUTMAN
------------------------------------
Robert M. Stutman
Chairman and Chief Executive
Officer
17
<PAGE> 19
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Substance Abuse Technologies, Inc.
Fort Lauderdale, Florida
We have audited the accompanying consolidated balance sheets of Substance
Abuse Technologies, Inc. (formerly U.S. Alcohol Testing of America, Inc.) and
subsidiaries (the Company) as of March 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' (deficit) equity, and cash
flows for the years then ended. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Substance Abuse
Technologies, Inc. and subsidiaries at March 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements as a whole, present fairly in all material
respects the information set forth therein.
The accompanying financial statements have been prepared assuming that
Substance Abuse Technologies, Inc. will continue as a going concern. As more
fully described in Note 2, the Company has incurred recurring operating losses
and, at March 31, 1997, has a working capital deficiency and a deficiency in
stockholders' equity. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. The financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
/s/ ERNST & YOUNG LLP
Miami, Florida
July 3, 1997, except for Note 13,
as to which the date is July 7, 1997
F-1
<PAGE> 20
SUBSTANCE ABUSE TECHNOLOGIES, INC.
EXHIBIT INDEX
SUBSTANCE ABUSE TECHNOLOGIES, INC.
EXHIBITS FILED WITH ANNUAL REPORT ON FORM 10-K/A
FOR FISCAL YEAR ENDED MARCH 31, 1997
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2(b)(1) Copy of Agreement and Plan of Merger dated as of February 17, E-4
1997 by and among SAT, Good Ideas Acquisition Corp. and
Good Ideas.
2(c)(1) Copy of Agreement and Plan of Merger dated as of February 17, E-29
1997 by and among SAT, U.S. Drug Acquisition Corp. and U.S.
Drug.
3(a)(7) Copy of Amendment to the Certificate of Incorporation as filed E-58
in Delaware on October 28, 1996.
4(a)(1) Specimen of Common Stock certificate of SAT. E-59
4(b)(1) Specimen of Class "A" Cumulative and Convertible Preferred E-61
Stock certificate of SAT.
10(j)(3) Copy of Third Amendment dated January 2, 1997 to Lease E-63
filed as Exhibit 10(j)
10(w)(1) Copy of Amended and Restated Severance Agreement dated E-64
May 21, 1997 by and between SAT and Robert M. Stutman.
10(y) Copy of Severance Agreement dated June 27, 1996 by and between E-74
SAT and Linda H. Masterson.
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Number Exhibit Number
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10(z) Copy of Form of Severance Agreement dated June __, 1997 by and E-80
between SAT and David L. Dorff.
10(aa) Copy of Sublease dated as of June 20, 1996 by and between E-91
Lifecare Investments, Inc. ("Lifecare"), Sublessor, and SAT,
Sublessee.
10(aa)(1) Copy of Wingate Commons Business Park Net Lease dated E-97
September 27, 1991 by and between Reynolds Metals
Development Company, Landlord, and Lifecare, Tenant.
10(aa)(2) Copy of First Addendum to the Lease filed as Exhibit 10(aa)(1) E-116
hereto.
10(aa)(3) Copy of Second Addendum to the Lease filed as Exhibit E-120
10(aa)(1) hereto.
10(cc)(2) Form of Common Stock purchase warrant expiring October E- 13,
1998 of SAT to be issued in lieu of the Common Stock purchase
warrant of U.S. Drug filed as Exhibit 10(cc)(1) hereto (to be
prepared on consummation of the U.S. Drug Merger with the same
terms as Exhibit 10(cc)(1) except for the name of the issuer,
number of shares and exercise price).
10(dd) Form of Common Stock purchase warrant expiring November 15, E-122
1999.
SAT's Common Stock purchase warrants expiring November 15,
1999, December 2, 1999 and three years from the effective date
of a registration Statement under the Securities Act are
substantially identical to the form of Common Stock purchase
warrant filed as Exhibit 10(dd) hereto except as to the name
of the holder, the expiration date and the exercise price and,
accordingly, pursuant to Instruction 2 to Item 601 of
Regulation S-K under the Securities Act are not individually
filed.
10(ee) Form of Common Stock purchase warrant with deferred exercise. E-130
SAT's Common stock purchase warrants expiring three years
From the Effective date of a registration statement under the
Securities Act and those Issued or to be issued to employees,
of which the currently outstanding Warrants expire between
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Number Exhibit Number
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September 11, 2000 and June 23, 2004, are substantially
identical to the form of Common Stock purchase warrant filed
as Exhibit 10(ee) hereto except as to the name of the holder,
the expiration date and the exercise price and, accordingly,
pursuant to Instruction 2 to Item 601 of Regulation S-K under
the Securities Act are not individually filed.
10(jj) Copy of Letter of Agreement dated July 16, 1997 by and between E-138
SAT and National Review Medical Offices, Inc. ("NMRO").
10(jj)(1) Assignment and Assumption of Interim Management Agreement E-147
dated July 15, 1997 by and between SAT and NMRO.
21 Subsidiaries of SAT. E-154
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EXHIBIT 2(b)(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"), Good Ideas
Acquisition Corp., a Delaware corporation ("Acquisition Corp."), and Good Ideas
Enterprises, Inc., a Delaware corporation ("Good Ideas").
WITNESSETH:
WHEREAS, of the 3,948,680 shares of the common stock, $.001 par value
(the "Good Ideas Common Stock"), of Good Ideas outstanding as of the date
hereof, SAT is the owner of 2,400,000 shares and 1,548,680 shares (the "Minority
Good Ideas Common Stock") are owned by persons other than SAT (the "Good Ideas
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");
WHEREAS, because of the relationships of three of the four directors of
Good Ideas to SAT as current directors and/or officers thereof and of all four
directors of Good Ideas as securityholders of SAT, the Board of Directors of
Good Ideas has only authorized execution and delivery of the Agreement on the
condition that approval of the subject merger by Good Ideas shall only be
effected as a result of the obtaining of consents thereto from the holders of
more than 50% of the Minority Good Ideas Common Stock;
WHEREAS, the Board of Directors of Good Ideas intends to, and shall,
submit this Agreement and the subject merger to the stockholders of Good Ideas
for approval to the extent required by the applicable provision of GCL; and
WHEREAS, in connection with the subject merger and solicitation of
stockholder consent thereto, SAT has filed a Registration Statement on Form S-4,
File No. 333-3734 (the "Registration Statement"), 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 Good Ideas 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
Good Ideas Minority Stockholders to the subject merger pursuant to Section 228
of the GCL and Section 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 Good Ideas
Minority Stockholders in exchange for their shares of the Good Ideas Common
pursuant to the terms of this Agreement and the subject merger;
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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 10 hereof)
Acquisition Corp. shall be merged with and into Good Ideas (the "Merger") and,
in connection therewith:
(a) except to the extent provided or permitted by applicable law,
the separate existence of Acquisition Corp. shall cease and terminate;
(b) Good Ideas, 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, Acquisition Corp.;
(c) all of the assets and property of Acquisition Corp. 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 Acquisition
Corp., all stock subscriptions, claims and chooses in action shall be, and be
deemed to be, vested, absolutely and unconditionally, in Good Ideas (to the same
extent, degree and manner as previously vested in Acquisition Corp.); and
(d) all debts and obligations of Acquisition Corp., all rights of
creditors of Acquisition Corp. and all liens or security interests encumbering
any of the property of Acquisition Corp. shall be vested in Good Ideas and shall
remain in full force and effect without modification or impairment and shall be,
and be deemed to be, enforceable against Good Ideas 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 Good
Ideas in its own name and for its own behalf. Without limiting the generality of
the foregoing, Good Ideas specifically assumes all continuing obligations which
Acquisition Corp. would otherwise have to indemnify its officers and directors,
to the fullest extent currently provided in Acquisition Corp.'s By-Laws and/or
by resolution of its Board of Directors 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 Acquisition Corp. 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 Good Ideas 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
Good Ideas, 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 Acquisition Corp. (or in which Acquisition Corp. had an
interest and/or the power to exercise immediately prior
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to the Effective Date) and which was vested, or intended to be vested, in Good
Ideas 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 Good Ideas on such date in
full force and effect shall be the Certificate of Incorporation of Good Ideas,
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 Good Ideas;
(b) The By-Laws of Good Ideas on such date in full force and effect
shall be the By-Laws of Good Ideas, 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 Good Ideas and/or the GCL, which
rights of alteration, amendment, modification, termination and/or rescission are
hereby expressly reserved by Good Ideas.
(c) The members of the Board of Directors and the officers of Good
Ideas, 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.
4. CONVERSION RATES. On the Effective Date the shares of the Good Ideas
Common Stock shall be converted and exchanged into shares of the SAT Common
Stock (and warrants and similar rights exercisable with respect to shares of the
Good Ideas 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 Good Ideas Common Stock
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted and exchanged into .36 of a share of the SAT Common Stock;
provided, however, that to the extent any holder of the Good Ideas 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:
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(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 portion of a share of the SAT Common Stock to be exchanged for each share of
the Good Ideas Common Stock was determined by assuming that a share of the SAT
Common Stock has a market value of $1.625 per share (which was the closing sales
price reported by the American Stock Exchange on February 14, 1997, the last
trading date before the date of this Agreement) and that the Good Ideas Minority
Stockholder should receive between .25 of a share if the market value of the SAT
Common Stock was $2.50 per share and .375 of a share if the market value of the
SAT Common Stock was $1.50 per share for each share of the Minority Good Ideas
Common Stock.
(b) Each outstanding warrant expiring February 16, 1999 (the
"Warrant") to purchase shares of the Good Ideas Common Stock shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted and exchanged into a warrant to purchase shares of the Good Ideas
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 Good
Ideas Common Stock issuable upon the exercise of the Warrant prior to the Merger
and the denominator of which shall be the number of shares of the SAT Common
Stock issuable upon the exercise of the Merger Warrant. The expiration date of
the Warrant shall not be changed.
(c) Anything in this Section 4 to the contrary
notwithstanding:
(i) Any and all issued shares of the Good Ideas Common
Stock owned by Good Ideas and held as treasury stock shall be canceled and
retired and no shares of the SAT Common Stock shall be issued with respect
thereto;
(ii) Any and all issued shares of the Good Ideas Common
Stock owned by SAT, except for ten (10) shares, shall be canceled and retired
and no shares of the SAT Common Stock shall be issued to SAT with respect
thereto;
(iii) Upon the issuance of shares of the SAT Common Stock
to the Good Ideas Minority Stockholders in exchange for their shares of the Good
Ideas 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; and
(iv) Upon the issuance of shares of the SAT Common Stock
to the Good Ideas Minority Stockholders all shares of the Good Ideas Common
Stock shall be canceled except for the ten (10) shares held by SAT as described
in subsection (d)(ii) of this Section 4.
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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 Good Ideas 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 Good Ideas 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 number of shares of the SAT Common Stock into which
the shares of the Good Ideas 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 Good Ideas 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;
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(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) shall be those to
which they are entitled as owners of the SAT Common Stock into which the shares
of the Good Ideas Common Stock evidenced by such Old Certificates shall have
been converted as herein provided.
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 Corp., Good Ideas or their respective stockholders. Thereafter,
the duties to be performed by the Exchange Agent as described in
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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. 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 (5) business days after the satisfaction or waiver of the last of the
conditions set forth in Sections 17 and 18 hereof as shall be designated by SAT.
The closing of such transactions shall be referred to herein as the "Closing"
and 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.
10. THE EFFECTIVE DATE. Subject to the satisfaction and/or waiver of
the conditions herein described, the Merger shall become effective (the
"Effective Date") 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. Upon the receipt by Good Ideas of consents from the
holders of more than 50% of the outstanding shares of the Minority Good Ideas
Common Stock held by the Good Ideas Minority Stockholders and of a consent from
SAT to the Merger, Good Ideas 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 19 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 Good
Ideas Common Stock pursuant to Section 12(b) of the Exchange Act.
11. 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 Good Ideas
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 11.
(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 Securities and Exchange Commission (the "SEC");
and, without limiting the generality of the foregoing, each of SAT and Good
Ideas 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.
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(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 Good
Ideas or its transfer agent to the Good Ideas Minority Stockholders as soon
after such effective date as is reasonably possible. Subsequent thereto Good
Ideas shall transmit to the Good Ideas 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) Good Ideas hereby authorizes the utilization by SAT in the
Registration Statement or in any filing with a state securities administrator of
all information concerning Good Ideas either provided to SAT by Good Ideas in
connection with or contained in the Consent Solicitation Statement-Prospectus
and/or contained in any filings heretofore made by Good Ideas pursuant to the
Securities Act and/or the Exchange Act. Good Ideas 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,
Good Ideas shall provide SAT with such information and material as shall be
needed to correct any such inaccuracy or omission. SAT shall promptly advise
Good Ideas 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 11(c).
(d) Each of SAT and Good Ideas 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 made 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 Good Ideas 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 11(d).
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(e) SAT does hereby agree to indemnify and hold harmless Good Ideas
and each of its directors and officers, and each person, if any, other than SAT
who controls Good Ideas 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 Good Ideas 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 13 or
14 hereof or are based upon any untrue statement of alleged untrue statement of
a material fact contained in the Registration Statement or the Consent
Solicitation/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 11(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 Good
Ideas), 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.
12. GOOD IDEAS REPRESENTATIONS AND WARRANTIES. In order to induce SAT
and Acquisition Corp. to execute and perform this Agreement, Good Ideas 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) Good Ideas 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.
(b) Subject only to the consent of its stockholders as required by
the GCL: (i) Good Ideas has the full power and authority, corporate and
otherwise, to execute, deliver and
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perform this Agreement and to consummate the transactions contemplated hereby;
(ii) the execution, delivery and performance of this Agreement, the consummation
by Good Ideas of the transactions herein contemplated and the compliance by Good
Ideas with the terms of this Agreement have been duly authorized by Good Ideas;
(iii) this Agreement is the valid and binding obligation of Good Ideas,
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 Good Ideas and the consummation by Good Ideas
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 Good Ideas 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 Good Ideas pursuant to, any indenture,
mortgage, note, contract, commitment or other agreement or instrument to which
Good Ideas is a party or by which it is, or any of its respective properties or
assets are, or may be, bound or affected.
13. SAT REPRESENTATIONS AND WARRANTIES. In order to induce Good Ideas
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".
(b) Each of the Subsidiaries (other than Good Ideas 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.
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(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 16(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 Good Ideas 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 Good Ideas 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 Good Ideas 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.
(d) Neither SAT nor any of the Subsidiaries (other than Good Ideas
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 Good
Ideas 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,
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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 Good Ideas the
audited consolidated financial statements (the "SAT Audited Financial
Statements") and 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 Good Ideas 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.
(f) The financial and other books and records of SAT and each of the
Subsidiaries (other than Good Ideas 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 Good Ideas 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 Good Ideas 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
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<PAGE> 13
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 Good
Ideas 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 Good Ideas
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 obligations and
liabilities incurred in the ordinary course of the operation of its business as
carried on at and prior to such date; (ii) canceled, 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 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 Good Ideas 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 Good Ideas 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,
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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 Good Ideas 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 Good
Ideas 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 Good Ideas as to
which SAT makes no representation) has filed all federal, state, municipal and
local tax returns (whether 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 options, 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
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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 been 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 Good Ideas
as to which SAT makes no representation), except as set forth in or permitted by
this Agreement, or, in the ordinary course of business:
(i) Any change in their respective 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);
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(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;
(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 13(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 Good Ideas Minority Stockholders in
exchange for their shares of the Good Ideas 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, claims, encumbrances and charges.
14. ACQUISITION CORP. REPRESENTATIONS AND WARRANTIES. In order to
induce Good Ideas 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
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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 Corp. 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,
(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 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, 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 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 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, threatened against
Acquisition Corp. or involving its assets which, if determined adversely to
Acquisition, 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, or which
question
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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 best of the knowledge of Acquisition, 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 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.
15. GOOD IDEAS COVENANTS, Good Ideas 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
Good Ideas 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 Good Ideas herein contained and/or satisfy each covenant or
condition required to be performed or satisfied by Good Ideas 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 Good Ideas 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 Good Ideas at or prior to the Closing and/or the implementation of
the Merger;
(c) 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
(d) 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 Good Ideas herein
contained and/or which prevents, inhibits or limits or may prevent, inhibit or
limit Good Ideas from satisfying, in full and on a timely basis, any covenant,
term or condition herein contained and/or implementing this Agreement; and
(e) Extend the terms of the notes due from SAT to Good Ideas, 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.
16. 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 Good Ideas
Minority Stockholders to approve this Agreement and/or the termination of this
Agreement as herein provided):
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(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 Good Ideas or, in the case of an announcement required by
applicable securities laws, prior consultation with Good Ideas; and
(e) Immediately advise Good Ideas 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 Good Ideas' compliance with its obligations under
Section 11 hereof, use its best efforts to have the Registration Statement
declared effective under the Securities Act; and
(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
U.S. Drug Testing with and into U.S. Drug Acquisition Corp., the conversion of
all outstanding convertible notes and shares of the preferred stock and the
exercise of all outstanding warrants.
17. SAT AND ACQUISITION CORP. CONDITIONS PRECEDENT. The obligations of
SAT and Acquisition 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 Section 17(a), (b) and (g)) of each of
the following conditions:
(a) Prior to the Closing Date the holders of more than 50% of the
shares of the Good Ideas Common Stock owned by the Good Ideas Minority
Stockholders shall have adopted this
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<PAGE> 20
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 Good Ideas contained in
this Agreement shall be true and correct in all respects as of the Effective
Date with the same effect as if made on and as of the Effective Date and Good
Ideas 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 Good Ideas (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 Good Ideas herein
contained, including, without limitation, those set forth in Section 12 hereof.
(d) 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.
(e) 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.
(f) All statutory requirements for the valid consummation by Good
Ideas 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 Good Ideas of the transactions herein described and/or to
permit the businesses currently carried on by Good Ideas 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.
(g) Good Ideas 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 Good Ideas Minority
Stockholders of (i) the terms of the Merger and (ii) the agreements among SAT,
Good Ideas and Acquisition Corp. described in this Agreement.
18. GOOD IDEAS CONDITIONS PRECEDENT. The obligation of Good Ideas to
implement this Agreement and consummate the Merger is, at its election, subject
to, and conditioned upon, the
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<PAGE> 21
satisfaction (and/or waiver except as to Section 18(a), (c) and (i)) of each of
the following conditions:
(a) Prior to the Closing Date the holders of a majority of the
shares of Good Ideas Common owned by the Good Ideas Minority Stockholders shall
have adopted this Agreement by consenting to the adoption of this Agreement
pursuant to the Consent Solicitation/Prospectus.
(b) Prior to the Closing Date SAT shall have adopted this Agreement
by filing with Good Ideas 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, Good Ideas 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 Good Ideas, 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 of SAT and Acquisition Corp. herein
contained, including, without limitation, those set forth in Sections 13 and 14
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 Good Ideas) 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 Good Ideas and its counsel and Good Ideas 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
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<PAGE> 22
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) Good Ideas shall have received a written opinion from Whale
Securities Co., L.P., satisfactory to Good Ideas in form and content, regarding
the fairness, from a financial point of view, to the Good Ideas Minority
Stockholders of (i) the terms of the Merger and (ii) the agreements among SAT,
Good Ideas and Acquisition Corp. described in this Agreement.
19. 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 Good Ideas Minority Stockholders as herein provided either: (a)
by mutual agreement of the Boards of Directors of Good Ideas and SAT; or (b) by
the Board of Directors of either Good Ideas or SAT if either (i) the Closing
shall not have taken place by September 30, 1997 (other than by 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, Good
Ideas 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 either SAT or Good
Ideas if, based upon the opinion of its outside counsel, the Board of Directors
determines that making a recommendation to the Good Ideas Minority Stockholders
to adopt the Merger Agreement would reasonably cause the members of such Board
of Directors to breach their fiduciary duties under applicable law to their
respective stockholders.
(b) If this Agreement shall be terminated and/or the Merger
abandoned pursuant to the provisions of subsection (a) of this Section 19 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 special counsel to Good Ideas 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).
20. 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 Good Ideas will
pay all costs and expenses of Whale Securities Co., L.P. and of its special
counsel.
21. 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 or mailed to the recipient first class,
postage prepaid, certified, return receipt requested at the following respective
addresses:
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<PAGE> 23
To: Good Ideas Enterprises, Inc.
10410 Trademark Street
Rancho Cucamonga, California 91730
Attn: President
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attn: Edward H. Cohen, Esq.
To: SAT or Acquisition Corp.
4517 N.W. 31st Avenue
Fort Lauderdale, Florida 33309
Attn: Chairman of the Board
With a copy to:
Gold & Wachtel, LLP
110 East 59th Street
New York, New York 10022
Attn: Robert W. Berend, Esq.
or to such other address as any party hereto shall designate in a writing
complying with the provisions of this Section 21.
22. 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 22 to the contrary notwithstanding, no party hereto may waive the
requirement that the holders of a majority of the shares of the Good Ideas
Common owned by the Good Ideas Minority Stockholders must consent to the
adoption of this Agreement and the Merger.
23. AMENDMENTS. This Agreement may be amended at any time prior to the
Effective Date (whether before or after the consent of stockholders of Good
Ideas as herein provided) by a writing executed by the respective Presidents of
SAT, Good Ideas and Acquisition (upon due authorization by their respective
Boards of Directors); provided, however, that after the satisfaction of the
condition set forth in Sections 17(a) and 18(a) in no event may the amount or
the form of the
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<PAGE> 24
consideration to be received by the holders of the Good Ideas Minority
Stockholders be changed without the approval of the Good Ideas Minority
Stockholders.
24. 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.
25. 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.
26. 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.
27. 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.
28. 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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<PAGE> 25
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
GOOD IDEAS ACQUISITION CORP.
--------------------------------------------
By:
-----------------------------------------
Secretary, Chairman of the Board
GOOD IDEAS ENTERPRISES, INC.
-------------------------------------------
By:
-----------------------------------------
Secretary, President,
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<PAGE> 1
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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<PAGE> 2
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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<PAGE> 3
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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<PAGE> 4
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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<PAGE> 5
(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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<PAGE> 6
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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<PAGE> 9
"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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<PAGE> 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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(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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<PAGE> 18
(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.
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17. 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
10410 Trademark Street
Rancho Cucamonga, California 91730
Attn: President
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attn: Edward H. Cohen, Esq.
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To: SAT or Acquisition Corp.
4517 N.W. 31st Avenue
Ford Lauderdale, Florida 33309
Attn: Chairman of the Board
With a copy to:
Gold & Wachtel, LLP
110 East 59th Street
New York, New York 10022
Attn: Robert W. Berend, 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.
E-55
<PAGE> 28
27. 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.
E-56
<PAGE> 29
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
E-57
<PAGE> 1
EXHIBIT 3(a)(7)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
U.S. ALCOHOL TESTING OF AMERICA, INC.
---------------------------------------------------------------------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
--------------------------------------------------------------------------
It is hereby certified that:
FIRST: The name of the Corporation is U.S. ALCOHOL TESTING OF AMERICA,
INC.
SECOND: The Certificate of Incorporation of the Corporation is hereby
amended by striking out the whole of Article FIRST thereof as it now exists and
inserting in lieu and instead thereof a new Article FIRST, reading in its
entirety as follows:
"FIRST: The name of the Corporation is SUBSTANCE ABUSE TECHNOLOGIES,
INC. (hereinafter called the "corporation")."
THIRD: The amendment to the Certificate of Incorporation of the
Corporation has been duly adopted in accordance with the provisions of Section
242 of the General Corporation law of the State of Delaware.
Signed and attested to this 22nd day of October, 1996.
U.S. ALCOHOL TESTING OF AMERICA, INC.
By: /s/ Robert M. Stutman
----------------------------------
Robert M. Stutman
Chairman of the Board
Attest:
/s/ Robert W. Berend
- ----------------------------
Robert W. Berend
Secretary
E-58
<PAGE> 1
EXHIBIT 4(a)(1)
SUBSTANCE ABUSE TECHNOLOGIES, INC. COMMON STOCK
SHARES
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 864325 10 5
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN THE CITIES OF LOS ANGELES, CA
OR NEW YORK, NY
THIS CERTIFIES THAT
S P E C I M E N
IS THE RECORD HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
SUBSTANCE ABUSE TECHNOLOGIES, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid unless countersigned and registered by the Transfer Agent and
Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/s/ Robert W. Berend CORPORATE /s/ Robert M. Stutman
SECRETARY SEAL CHAIRMAN
Delaware
COUNTERSIGNED AND REGISTERED:
U.S. STOCK TRANSFER CORPORATION
TRANSFER AGENT AND REGISTRAR
BY
ISSUED IN NEW YORK CITY
COUNTERSIGNED AND REGISTERED:
REGISTRAR AND TRANSFER COMPANY
CO-TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED OFFICER
The Corporation will furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as through they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with rights of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT - ________________________ Custodian ____________________
(Cust) (Minor)
under Uniform Gifts to Minors
Act_____________________________________________________
(State)
UNIF TRF MIN ACT - _________________________Custodian (until age __________)
(Cust)
_____________________________ under Uniform Transfers
(Minor)
to Minors Act _____________________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________ shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_____________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated________________________
X________________________________
X________________________________
NOTICE: THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By____________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15
E-59
<PAGE> 1
EXHIBIT 4(b)(1)
SUBSTANCE ABUSE TECHNOLOGIES, INC. PREFERRED STOCK
SHARES
NUMBER
LU SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 864325 20 4
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN THE CITIES OF LOS ANGELES, CA
OR NEW YORK, NY
THIS CERTIFIES THAT
S P E C I M E N
IS THE RECORD HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE CUMULATIVE CONVERTIBLE PREFERRED
STOCK, $.01 PAR VALUE, OF
SUBSTANCE ABUSE TECHNOLOGIES, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid unless countersigned and registered by the Transfer Agent and
Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ Robert W. Berend CORPORATE /s/ Robert M. Stutman
SECRETARY SEAL CHAIRMAN
Delaware
COUNTERSIGNED AND REGISTERED:
U.S. STOCK TRANSFER CORPORATION
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
COUNTERSIGNED AND REGISTERED:
REGISTRAR AND TRANSFER COMPANY
CO-TRANSFER AGENT AND REGISTRAR
BY ISSUED IN LOS ANGELES
AUTHORIZED OFFICER
The Corporation will furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as through they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with rights of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT - ________________________ Custodian ____________________
(Cust) (Minor)
under Uniform Gifts to Minors
Act_____________________________________________________
(State)
UNIF TRP MIN ACT - _________________________Custodian (until age __________)
(Cust)
_____________________________ under Uniform Transfers
(Minor)
to Minors Act _____________________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________ shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_____________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated________________________
X________________________________
X________________________________
NOTICE: THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By____________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15
E-61
<PAGE> 1
EXHIBIT 10(j)(3)
THIRD AMENDMENT TO INDUSTRIAL LEASE
10400 AND 10410 TRADEMARK STREET, RANCHO CUCAMONGA, CA 91730
1. The terms of the industrial lease dated March 18, 1991 originally
between Rancho Cucamonga Business Park as Lessor and U.S. Alcohol Testing of
America as Lessee and currently by and between Substance Abuse Technologies,
Inc. (formerly U.S. Alcohol Testing of America) as Lessee and the Realty Trust
as Lessor is amended as follows:
2. The monthly rentals for the first option period exercised by Lessee
shall be amended as follows:
<TABLE>
<S> <C>
February 1, 1997 to January 31, 1998 $10,750.00
February 1, 1998 to January 31, 1999 $11,072.50
February 1, 1999 to January 31, 2000 $11,404.68
February 1, 2001 to January 21, 2002 $12,099.11
</TABLE>
3. All other terms and conditions of the original lease dated March 18,
1991 and its addendum and amendments shall remain in full force and effect.
4. This Third Amendment is executed in two (2) originals. One original
shall be held by the Lessor, the Realty Trust, and one original shall be held by
the Lessee, Substance Abuse Technologies, Inc.
Dated: January 2, 1997
SUBSTANCE ABUSE TECHNOLOGIES, INC.
By: /s/ Linda H. Masterson
---------------------------------
Linda H. Masterson, President
Dated: December 30, 1996
THE REALTY TRUST
By: /s/ Simi Dabah
---------------------------------
Simi Dabah, Trustee
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<PAGE> 1
EXHIBIT 10(w)(1)
AMENDED AND RESTATED SEVERANCE AGREEMENT
Amended and Restated Severance Agreement dated May 21, 1997 (the
"Restated Agreement") by and between Substance Abuse Technologies, Inc., a
Delaware corporation (the "Company"), and Robert Stutman (the "Executive")
restating the Severance Agreement (the "Severance Agreement") dated May 21,
1996 by and between the Company and the Executive.
W I T N E S S E T H:
WHEREAS, pursuant to a Stock Purchase Agreement dated May 21, 1996
(the "Stock Purchase Agreement") the Company purchased all of the issued and
outstanding shares of common stock of Robert Stutman Associates, Inc. ("RSA");
WHEREAS, the Executive was the majority shareholder of RSA and the
President of RSA;
WHEREAS, a condition of the Company's agreeing to purchase all of the
issued and outstanding shares of the common stock of RSA was the Executive
agreeing to become employed as the Chief Executive Officer of the Company;
WHEREAS, from April 18, 1996 to May 20, 1996, the Executive was
employed on an at-will basis as the Chief Executive Officer of the Company and,
from May 21, 1996 to May 20, 1997, the Executive was employed by the Company as
its Chief Executive Officer subject to the terms of the Severance Agreement;
WHEREAS, the Executive and the Company desire to amend and restate the
Severance Agreement on the terms and conditions set forth herein which provide
for the Executive's right to severance pay upon his termination as an employee
of the Company without cause as set forth in this Restated Agreement; and
WHEREAS, effective as of the date hereof, the compensation to be paid
to the Executive by the Company for the services to be performed is as follows:
(1) a base salary (the "Base Salary") of $350,000 per annum
and an annual review at the end of each fiscal year during the term of this
Restated Agreement by the Company's Compensation Committee, with a minimum raise
each year of three times the Consumer Price Index if the Executive's performance
is deemed satisfactory by the Compensation Committee. The annual minimum Base
Salary shall be increased (a) to $400,000 upon the Company being profitable for
a fiscal year during the term of this Restated Agreement or renewal hereof with
sales equal to, or greater than $20,000,000 and (b) to $500,000 upon the Company
being profitable for a fiscal year during the term of this Restated Agreement or
E-64
<PAGE> 2
renewal hereof with sales equal to, or greater than, $40,000,000; provided,
however, that in calculating profitability, the operations of U.S. Drug Testing,
Inc. shall be excluded;
(2) an aggregate year end bonus (the "Annual Bonus") equal to
the Bonus Percentage (as hereinafter defined) multiplied by the Executive's
annual Base Salary as follows: (a) if the Company achieves its financial
objectives in such fiscal year, based upon a Board-approved budget, commencing
with the fiscal year ending March 31, 1998, the Bonus Percentage shall be 75%;
(b) if the Company achieves 100% of its financial objectives and up to 150% of
its financial objectives for a fiscal year, then the Bonus Percentage shall
equal the product of 75% and a fraction, the numerator of which shall be the
percentage of the financial objectives actually achieved (e.g., 150%), except
that any amount in excess of 150% shall be deemed to be 150% for the purposes of
this calculation, and the denominator of which shall be 75%; (c) if the Company
achieves 80% or more of its financial objectives for a fiscal year up to 100%,
the Executive shall receive an Annual Bonus based upon a pro rata amount of the
Bonus Percentage (e.g., if 90% of the financial objectives are achieved, the
Bonus Percentage shall be 37.5%); and (d) if the Company achieves less than 80%
of its financial objectives for a fiscal year, the Executive shall not receive
any Annual Bonus. If the Company acquires a company or companies in a fiscal
year, 50% of the sales of such acquired a company or companies up to
$10,000,000, 33% of the sales above $10,000,000 and all losses of such acquired
Company shall count toward the Executive achieving any sales objectives in
determining the Annual Bonus in the year of acquisition.
(3) a bonus payment in the amount of $50,000 upon a renewal
of this Restated Agreement pursuant to Section 4(b) hereof;
(4) the grant of a stock option to purchase a minimum of
50,000 shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), per year at the end of each year during the term of this
Restated Agreement or renewal hereof at an exercise price equal to the closing
sale price, as reported on the American Stock Exchange, Inc. (the "AMEX") or
such other exchange or national securities association on which the Common Stock
may then be regularly quoted or, if not so quoted, as reported in the
over-the-counter market at the time of such grant and if such day shall be a day
on which the AMEX shall be closed, the preceding day on which the Common Stock
is traded (the "Closing Sales Price") and the expiration date of each such grant
shall be three years from the date of grant; and
(5) the award of 150,000 shares of the Common Stock for each
$.75 increase in the closing sales price of the Common Stock (as determined in
accordance with paragraph (4) of this WHEREAS clause) above $1.375, with such
increase to be determined by the average of the closing sales prices of the
Common Stock during any 90-day period commencing with the fiscal year ending
March 31, 1998; provided, however, once the average of the closing sales prices
of the Common Stock reaches an award level (e.g., $2.125), no awards will be
made again until the average of the closing sales prices of the Common Stock
during a 90-day period reaches the next award level (e.g., $2.875 after $2.125).
All shares of the Common Stock underlying the stock options granted under this
paragraph (5) shall be registered under the Securities Act of 1933, as amended,
as part of a pool of stock options to be registered in connection with a
currently proposed underwritten offering.
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<PAGE> 3
WHEREAS, in the event that this Restated Agreement is not renewed and
in consideration of the Executive's agreement not to compete as set forth in
Section 5 hereof, the Executive shall receive a one-time lump sum payment equal
to the annual Base Salary and car allowance at such time and the costs of the
benefits stated below;
WHEREAS, the employee benefits, vacation, life insurance and other
perquisites to be received by Executive during the term of this Restated
Agreement are as follows:
(i) participation in all employee pension and welfare benefit
plans and programs made available to the Company's senior level executives or to
its employees generally, as such plans or programs may be in effect from time to
time, including, without limitation, pension, profit sharing, savings and other
retirement plans or programs, medical, dental, hospitalization, short-term and
long-term disability and life insurance plans, accidental death and
dismemberment protection, travel accident insurance, and any other pension or
retirement plans or programs and any other employee welfare benefit plans or
programs that may be sponsored by the Company from time to time, including any
plans that supplement the above-listed types of plans or programs, whether
funded or unfunded;
(ii) five weeks vacation per year which, if not taken, will
accrue;
(iii) term life insurance coverage in the amount of $1,500,000
face value, the beneficiary of which shall be designated by the Executive;
(iv) a monthly automobile allowance of $1,000 which allowance
shall be reviewed a the end of each fiscal year during the term of this Restated
Agreement and any renewal hereof and adjusted to the market price;
(vi) an annual physical examination; and
(vi) an allowance for professional services of $7,500 for
each fiscal year during the term of this Restated Agreement and any renewal
hereof to be paid to the Executive.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the Company and the Executive hereby agree as
follows:
1. COMPANY'S RIGHT TO TERMINATE. Subject to the Company
fulfilling its obligations to the Executive relating to compensation and
benefits during the term of this Restated Agreement, the Executive agrees that
he will not voluntarily leave the employ of the Company and will continue to
perform the Executive's regular duties as Chief Executive Officer of the
Company. Notwithstanding the foregoing, the Company may terminate the
Executive's employment at any time, subject to providing the benefits
hereinafter specified in accordance with the terms hereof.
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<PAGE> 4
2. TERMINATION OF EMPLOYMENT. The termination of the
Executive as an employee of the Company for Disability or Cause shall be on the
following terms and conditions:
(a) Disability.
Termination by the Company of the
Executive's employment based on "Disability" shall mean termination (i) because
of the Executive's inability to perform his duties with the Company on a full
time basis for four consecutive months, or 180 days out of any twelve-month
period, as a result of the Executive's incapacity due to physical or mental
illness; or (ii) as a result of the Executive being certified incompetent by a
court of competent jurisdiction and all appeals from such certification having
expired.
(b) Cause.
Termination by the Company of the
Executive's employment for "Cause" shall mean termination because of: (i) the
Executive's conviction of a felony; (ii) any action by the Executive involving
dishonesty, fraud or gross or willful misconduct in connection with his
employment with the Company; (iii) the Executive's gross negligence in the
performance of his duties and obligations hereunder or habitual neglect of his
duties; (iv) the Executive's substance abuse, including, without limitation,
chronic alcoholism or drug addiction; (v) the Executive's intentional refusal
or failure to perform his duties as the Chief Executive Officer of the Company,
including, without limitation, the intentional disregard of a lawful directive
by the Board of Directors of the Company or any Committee thereof; (vi)
intentional conduct on the part of the Executive which is knowingly detrimental
to the best interests of the Company; or (vii) the Executive's failure to
perform in a competent manner his duties as the Chief Executive Officer of the
Company.
(c) Notice of Termination.
Any purported termination by the Company
pursuant to subsections (a) or (b) of this Section 2 or for any other reason
shall be communicated by written Notice of Termination to the Executive from
the President of the Company (or such other officer as may be designated) at
the direction of the Board of Directors of the Company. For purposes of this
Restated Agreement, a "Notice of Termination" shall mean a notice which shall
indicate that it is without Cause or shall indicate the specific termination
provision in this Restated Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
(d) Date of Termination.
"Date of Termination" shall mean (i) if the
Executive's employment is terminated for Disability, the date specified in the
Notice of Termination, (ii) if the Executive's employment is terminated for
Cause, the date specified in the Notice of Termination, (iii) if the
Executive's employment is terminated for death, the date of death, and
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<PAGE> 5
(iv) if the Executive's employment is terminated, without Cause, the date on
which a Notice of Termination is given.
3. CERTAIN BENEFITS UPON TERMINATION.
(a) Subject to Section 6(b) hereof, if the
Executive's employment is terminated by the Company other than for Cause,
Disability or death or Change in Control (as hereinafter defined in Section 6
hereof, then the Executive shall be entitled to the benefits provided below:
(i) the Company shall pay the Executive his
full Base Salary through the Date of Termination at the rate in effect at the
time the Notice of Termination is given plus credit for any vacation earned but
not taken and the amount, if any, of any bonus for a past fiscal year which has
not yet been awarded or paid to the Executive;
(ii) in lieu of any further salary, bonuses
or benefits payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance to the Executive on the 30th
day following the Date of Termination a lump sum amount equal to the total
amount of the Base Salary that would have been paid to the Executive had he not
been terminated during the period commencing on the Date of Termination and
ending on May 20, 2001; and
(iii) the Company shall maintain in full
force and effect, for the Executive's continued benefit until the earlier of
(A) May 20, 2001 or (B) the Executive's commencement of full time employment
with a new employer, his automobile allowance and all life insurance, medical,
health and accident, and disability plans, programs or arrangements in which
the Executive was entitled to participate immediately prior to the Date of
Termination, provided that the Executive's continued participation is possible
under the general terms and provisions of such plans and programs. In the event
that the Executive's participation in any such plan or program is barred, the
Company shall arrange to provide the Executive with benefits substantially
similar to those which the Executive was entitled to receive under such plans
and programs.
(b) If the Executive's employment is
terminated for Disability under Section 2(a), then the Executive shall be
entitled to the benefits provided below:
(i) the Company shall pay the Executive his
full Base Salary through the Date of Termination at the rate in effect at the
time the Notice of Termination is given plus credit for any vacation earned but
not taken and the amount, if any, of any bonus for a past fiscal year which has
not yet been awarded or paid to the Executive;
(ii) in lieu of any further salary, bonuses
or benefits payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance pay to the Executive on the
30th day following the Date of Termination a lump sum amount equal to the Base
Salary that would have been paid to the Executive had he not been
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<PAGE> 6
terminated during the period commencing on the Date of Termination and ending
on the earlier of four months after the Date of Termination or May 20, 2000;
and
(iii) the Company shall maintain in full
force and effect for the Executive's continued benefit, until the earlier of
four months after the Date of Termination and May 20, 2000, his automobile
allowance and all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which the Executive was entitled to
participate immediately prior to the Date of Termination, provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans and programs.
(c) If the Executive's employment is terminated for
Cause, Disability under Section 2(i)(a), death or the voluntary termination or
resignation of employment by the Executive, the Executive shall be paid his
full Base Salary through the Date of Termination at the rate in effect at the
time the Notice of Termination is given plus credit for any vacation earned but
not taken and the amount, if any, of any bonus for a past fiscal year which has
not yet been awarded or paid to the Executive.
(d) The Executive shall not be required to
mitigate the amount of any payment provided for in this Section 3 by seeking
other employment or otherwise, nor shall the amount of any payment provided for
in this Section 3 be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
4. TERM OF AGREEMENT.
(a) This Restated Agreement shall terminate May 20,
2000 subject to renewal in accordance with Section 4(b) below.
(b) The Company shall have two one-year options to
renew this Restated Agreement by notifying the Executive of such intention at
least three months prior to the end of the term of this Restated Agreement or
any renewal thereof.
5. COVENANT NOT TO COMPETE.
(a) In consideration of the consideration provided
in the Stock Purchase Agreement and the Company agreeing to the severance
arrangements and the Change in Control provisions set forth in this Restated
Agreement, the Executive shall be bound from May 21, 1997 through May 20, 2003
by the terms of Sections 6.1 and 6.2 of the Stock Purchase Agreement, except
that the term "Purchased Business" set forth in subsection 6.1.1 of the Stock
Purchase Agreement is hereby amended to mean the business of the Company as
conducted by the Company at the time his employment is terminated.
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<PAGE> 7
(b) Anything in this Section 5(a) to the contrary
notwithstanding, if the Company ceases to exist other than by reason of a
merger, consolidation, sale of assets or similar transaction, the Executive
shall no longer be bound by the terms of Sections 6.1 and 6.2 of the Stock
Purchase Agreement and the Executive shall have the right to use his name in
connection with any business he enters into.
(c) The parties hereto agree that the remedy at law
for any breach of Section 5(a) will be inadequate and that the Company shall be
entitled to injunctive relief to compel the Executive to perform or refrain
from action required or prohibited hereunder. The necessity of protection
against the competition of the Executive and the nature and scope of such
protection has been carefully considered by the parties hereto. The parties
hereby agree and acknowledge that the duration, scope and geographic area
applicable to the restrictions set forth in Section 5(a) are fair, reasonable
and necessary. The consideration provided for herein is sufficient and adequate
to compensate the Executive for agreeing to the restrictions contained in this
Section 5. If, however, any court determines that the foregoing restrictions
are not reasonable, such restrictions shall be modified, rewritten or
interpreted to include as much of their nature and scope as will render them
enforceable.
6. CHANGE IN CONTROL.
(a) In the event of a Change in Control, the
Executive shall have the right to terminate voluntarily his employment with the
Company, with or without reason, within six months after the occurrence of such
Change in Control by giving written Notice of Termination to the Company. A
Change in Control shall be deemed to occur upon (i) the election of one or more
individuals to the Board of Directors of the Company which election results in
one-third of the directors of the Company consisting of individuals who have
not been directors of the Company for at least two years, unless such
individuals have been elected as directors or nominated for election as
directors by three fourths of the directors of the Company who have been
directors for at least two years; (ii) the sale by the Company of all or
substantially all of its assets to any Person, the consolidation of the Company
with any Person, the merger of the Company with any Person as a result of which
merger the Company is not the surviving entity as a publicly held corporation
or the sale or transfer of shares of the Company by the Company and/or any one
or more of its stockholders, in one or more transactions, related or unrelated,
to one or more Persons under circumstances whereby any Person and his, her or
its Affiliates shall own, after such sales and transfers, at least one-fourth,
but less than one-half, of the shares of the Company having voting power for
the election of directors, unless, in any such case, such sale, consolidation,
merger or transfer has been approved in advance by three-fourths of the
directors of the Company who have been directors of the Company for at least
two years; or (iii) the sale or transfer of shares of the Company by the
Company and/or any one or more of its stockholders, in one or more
transactions, related or unrelated, to one or more Persons under circumstances
whereby any Person and its Affiliates shall own, after such sales and
transfers, at least one-half of the shares of the Company having voting power
for the election of directors. Nothing contained in this definition shall limit
or restrict the right of the Executive from participating in any discussions or
voting on any matter referred to in this definition at any meeting of the
Company's Board of Directors. For purposes of this Restated Agreement, the term
"Affiliate" shall mean a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, any other
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Person. For purposes of this Restated Agreement, the term "Person" shall mean
an individual, partnership, firm, trust, corporation, limited liability
corporation, limited liability partnership, limited partnership, association or
other similar entity. When two or more Persons act as a partnership, limited
partnership, syndicate, or other group for the purpose of acquiring, holding,
or disposing of securities of the Company, such partnership, limited
partnership, syndicate or other group shall be deemed a "Person" for the
purposes of this Restated Agreement.
(b) Upon the voluntary termination of employment
with the Company by the Executive within six months after the occurrence of a
Change in Control, or upon the involuntary termination of employment with the
Company of the Executive for any reason other than death, Disability or
termination for Cause within six months after the occurrence of a Change in
Control, the Company, or the consolidated, surviving or transferee Person in
the event of a consolidation, merger or sale of assets, shall pay to the
Executive, in a lump sum immediately subsequent to the date of such
termination, in addition to any compensation otherwise owed to the Executive at
the date of such termination, an amount equal to two times the total cash
compensation, including Base Salary, Annual Bonus and car allowance, paid to
the Executive during, or, in the case of the Annual Bonus, for, the prior
fiscal year; provided, however, that, if the Executive is terminated without
Cause, he may elect to receive either the severance under Section 3(a) hereof
or, if applicable, the payments set forth in this Section 6(b) and the benefits
set forth in Section 6(c) hereof.
(c) Upon the voluntary termination of employment
with the Company by the Executive within six months after the occurrence of a
Change in Control, or upon the involuntary termination of employment with the
Company by the Executive for any reason other than death, Disability or
termination for Cause within six months after the occurrence of a Change in
Control, the Company, or the consolidated, surviving or transferee Person in
the event of a consolidation, merger or sale of assets, shall also provide, for
a period of two years commencing on such termination of employment, medical,
dental, life and disability insurance coverage for the Executive and the
members of his family which is not less favorable to the Executive than the
group medical, dental, life and disability insurance coverage carried by the
Company for such Executive and the members of his family either immediately
prior to such termination of employment or on the occurrence of such Change in
Control, whichever is greater; provided, however, that the obligations set
forth in this sentence shall terminate to the extent the Executive obtains
comparable medical, dental, life and disability insurance coverage from any
other employer during such period, but the Executive shall not have any
obligation to seek or accept employment during such period, whether or not any
such employment would provide comparable medical, dental, life and disability
insurance coverage.
(d) Upon the voluntary termination of employment
with the Company by the Executive within six months after the occurrence of a
Change in Control, or upon the involuntary termination of employment with the
Company by the Executive for any reason other than death, Disability or
termination for Cause within six months after the occurrence of a Change in
Control, any Common Stock purchase warrant or stock option then held by the
Executive shall, anything to the contrary notwithstanding in the Common Stock
purchase warrant or stock option, become immediately exercisable.
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(e) In the event that, subsequent to a Change in
Control, the Executive incurs any costs or expenses, including attorneys fees,
in the enforcement of his rights under this Section 6, then, unless the
Company, or the consolidated, surviving or transferee Person in the event of a
consolidation, merger or sale of assets, is wholly successful in defending
against the enforcement of such rights, the Company, or such consolidated,
surviving or transferee Person, shall promptly pay to such Participant all such
costs and expenses.
7. SUCCESSORS; BINDING AGREEMENT. This Restated Agreement
shall be binding upon, and shall inure to the benefit of, the respective
successors, assigns, legal representatives and heirs of the parties hereto.
8. NOTICE. Any and all notices or other communications or
deliveries required or permitted to be given or made shall be in writing and
delivered personally, or sent by certified or registered mail, return receipt
requested and postage prepaid, or sent by overnight courier service as follows:
If to the Company, at:
Substance Abuse Technologies, Inc.
4517 NW 31st Avenue
Ft. Lauderdale, FL 33309
Attention: President
with a copy to:
Wachtel & Masyr, LLP
110 East 59th Street
New York, New York 10022
Attention: Robert W. Berend, Esq.
If to the Executive, at:
c/o Edward D. Feldstein, Esq.
Roberts, Carroll, Feldstein & Pierce
10 Weybosset Street
Providence, Rhode Island 02903-2808
or at such other address as any party may specify by notice given to such other
party in accordance with this Section 7. The date of giving of any such notice
shall be the date of hand delivery, two days after the date of the posting of
the mail or the date when deposited with the overnight courier.
9. WAIVER. No provisions of this Restated Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such officer as may be
specifically designated by the Board of Directors of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Restated Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
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10. VALIDITY. The invalidity or unenforceability of any
provision of this Restated Agreement shall not affect the validity or
enforceability of any other provision of this Restated Agreement, which shall
remain in full force and effect.
11. COUNTERPARTS. This Restated Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
12. GOVERNING LAW. This Restated Agreement shall be construed
(both as to validity and performance) and enforced in accordance with, and
governed by, the laws of the State of Florida applicable to contracts to be
performed entirely within that State, without giving effect to the principles of
conflicts of law. Any suit or proceeding arising out of this Restated Agreement
shall be brought only in a federal or state court located in the County of Palm
Beach, State of Florida; provided, however, that neither party waives its right
to request the removal of such action or proceeding from the state court to a
federal court in such jurisdiction. The parties hereto each waive any claim that
such jurisdiction is not a convenient forum for any such suit or proceeding and
the defense of lack of personal jurisdiction.
13. ENTIRE AGREEMENT. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Restated Agreement.
IN WITNESS WHEREOF, this Restated Agreement has been executed
on May 21, 1997.
SUBSTANCE ABUSE TECHNOLOGIES, INC.
By:
------------------------------
ROBERT STUTMAN
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EXHIBIT 10(y)
SEVERANCE AGREEMENT
This Agreement ("Agreement") date June 27, 1996 by and between U.S. Alcohol
Testing of America, Inc., a Delaware Corporation (the "Company") and Linda H.
Masterson (the "Executive").
WITNESSETH
WHEREAS, since May 13, 1996, the Executive has been employed on an at-will
basis by the Company and effective as of the date hereof is employed by the
Company on an at-will basis as its President and Chief Operating Officer.
WHEREAS, a condition subsequent to the Executive accepting the Company's offer
of employment was that the Company and the executive enter into this Severance
Agreement which provides for the Executive's right to severance pay upon her
termination as an employee of the Company without cause, and
WHEREAS, the compensation to be paid to the Executive by the Company for the
services to be performed is as follows:
(i) a base salary of One Hundred Seventy Five Thousand
($175,000) Dollars per annum (the "Base Salary");
(ii) grant to her (a) a stock option to purchase 600,000
shares of the Corporation's Common Stock, $.01 par value (the "Common Stock"),
at $3.125 per share pursuant to an employee stock option plan (the "Option
Plan") to be adopted by the Board of Directors of the Corporation or (b) a
Common Stock purchase warrant to purchase 600,000 share of the Common Stock also
at $3.125 per share if the Option Plan is not adopted, provided that (I) the
option or warrant shall become exercisable as follows: (A) as to 50,000 shares
upon the commencement of her employment, (B) as to 100,000 shares on the first
anniversary of such commencement of employment, (C) as to 150,000 shares on the
second anniversary of such commencement of employment, (D) as to 150,000 shares
on the third anniversary of such commencement of employment, and (E) as to
150,000 shares on the fourth anniversary of such commencement of employment,
(ii) the option, if granted, shall expire in accordance with the terms of the
Option Plan and (iii) the warrant, if granted, shall expire as to a specified
number of shares of the Common Stock four years from the respective date on
which the warrant becomes exercisable as to such shares. In the advent of the
acquisition, sale or relocation of the Company, or the elimination of the
position of President/COO, in Rancho Cucamonga, all stock option shares or
warrants will immediately be 100% vested and Registered within 60 days.
(iii) grant to her a bonus for the fiscal year ending March
31, 1997 ("fiscal 1997") in the form of a stock option pursuant to the Option
Plan, or a warrant if no Option Plan
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is adopted, to purchase (a) 33,000 shares of the Common Stock if the
Corporation and its subsidiaries operate without a net loss for fiscal 1997 and
(b) an additional 50,000 shares of the Common Stock if the Corporation and its
subsidiaries have net income of at least $.06 per share of the Common Stock for
fiscal 1997, the exercise price of the option or warrant to be the closing
sales price in the date of grant which shall be the date on which the results
of the operations for fiscal 1997 are reported and the expiration date of which
option or warrant shall be as set forth in the Option Plan if an option and
four years from the date of grant if a warrant.
(iv) bonuses in respect to subsequent fiscal years shall be
determined by the Company's Board of Directors or Compensation Committee.
NOW, THEREFORE, in consideration of the promises of the mutual
agreements contained herein, the Company and the Executive hereby agree as
follows:
1. COMPANY'S AND EXECUTIVE'S RIGHT TO TERMINATE. The Company may
terminate the Executive's employment at any time, subject to providing the
benefits hereinafter specified in the accordance with the terms hereof. The
Executive may terminate her employment at any time.
2. TERMINATION OF EMPLOYMENT. The termination of the Executive as an
employee of the Company for Disability or Cause shall be on the following terms
and conditions:
(i) Disability. Termination by the Company of the
Executive's employment based on "Disability" shall mean termination (a) because
of the Executive's inability to perform her duties with the Company on a full
time basis for four consecutive months or 180 days out of any twelve-month
period, as a result of the Executive's incapacity due to physical or mental
illness; or (b) as a result of the Executive being certified incompetent by a
court of competent jurisdiction and which appeals from such certification have
expired.
(ii) Cause. Termination by the Company of the Executive's
employment for "Cause" shall mean termination because of: (a) the Executive's
conviction of a felony; (b) any action by the Executive involving dishonesty,
fraud or gross or willful misconduct in connection with her employment with the
Company; (c) the Executive's gross negligence in the performance or her duties
and obligations hereunder or habitual neglect of her duties; (d) the Executive's
substance abuse, including, without limitation, chronic alcoholism or drug
addiction; (e) the Executive's intentional refusal or failure to perform her
duties as an employee of the Company, including, without limitation, the
intentional disregard of a lawful directive by the Board of Directors of the
Company or any committee thereof; (f) intentional conduct on the part of the
Executive which is knowingly detrimental to the best interests of the Company;
or (g) the Executive's failure to perform her duties in a competent manner.
(iii) Notice of Termination. Any purported termination by the
Company pursuant to Section (i) or (ii) above or for any other reason shall be
communicated by written Notice of Termination to the Executive from the Chief
Executive Officer at the direction of the Board of Directors of the Company. For
the purposes of this Agreement, a "Notice of Termination" shall mean a notice
such shall indicate that it is without cause or the specific
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termination provision in the Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
(iv) Date of Termination. "Date of Termination" shall mean (a)
if the Executive's employment is terminated for Disability, the date specified
in the Notice of Termination, (b) if the Executive's employment is terminated
for Cause, the date specified in the Notice of Termination, (c) if the
Executive's employment is terminated for death, the date of death, (d) if the
Executive's employment is terminated, without cause, the date on which a Notice
of Termination is given and (e) if the Executive's voluntary resigns his
employment, the effective date if such resignation.
3. CERTAIN BENEFITS UPON TERMINATION.
(i) If the Executive's employment is terminated by the Company
other than for Cause, Disability or death, then the Executive shall be entitled
to the benefits provided below:
(a) the Company shall pay the Executive her full
Base Salary through the Date of Termination at the rate in effect at the time
the Notice of Termination is given plus credit for any vacation earned but not
taken and the amount, if any, of any bonuses for a past fiscal year which has
not yet been awarded or paid to the executive.
(b) in lieu of any further salary, bonuses or
benefits payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance pay to the Executive on the
30th day following the Date of Termination a lump sum amount to equal one years
Base Salary that would have been paid to the Executive had she not been
terminated during the period commencing on the Date of Termination and ending
on May 13, 1999;
(c) the Company shall maintain in full force and
effect, for the earlier of A) one calendar year or B) the Executive's
commencement of full time employment with a new employer, her automobile
allowance and all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which the Executive was entitled to
participate immediately prior to the Date of Termination, provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans and programs;
(ii) If the Executive's employment is terminated for
Disability under Section 2(i)(b) the Executive shall be entitled to the benefits
provided below:
(a) the Company shall pay the Executive his full
Base Salary through the Date of Termination at the rate in effect at that time
the Notice of Termination is given plus credit for any vacation earned but not
taken and the amount, if any, of any bonus for a past fiscal year which has not
yet been awarded or paid to the Executive.
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(b) in lieu of any further salary, bonuses or
benefits payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance pay to the Executive on the
30th day following the Date of Termination a lump sum amount equal to the
annual Base Salary that would have been paid tot he Executive had he not been
terminated during the period commencing on the Date of Termination and ending
on the earlier of four months after the Date of Termination or May 13, 1999;
(c) the Company shall maintain in full force and
effect, the Executive's continued benefit for one year. Her automobile
allowance and all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which the Executive was entitled to
participate immediately prior to the Date of Termination, provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans and programs;
(iii) If the Executive's employment is terminated for Cause,
Disability under Section 2(i)(a) or death, the Executive shall be paid her full
Base Salary through the Date of Termination at the rate in effect at the time
the Notice of Termination is given plus credit for any vacation earned but not
taken and the amount, if any, of any bonus for a past fiscal year which has not
yet been awarded or paid to the Executive.
4. TERM OF AGREEMENT. This Agreement shall terminate May 13, 1999.
5. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding upon
and shall inquire to the benefit of the respective successors, assigns, legal
representatives and heirs of the parties hereto.
6. NOTICE. Any and all notices or other communications or delivered
required or permitted to be given or made shall be in writing and delivered
personally, or sent by certified or registered mail, return receipt requested
and postage prepaid, or sent by overnight courier service as follows:
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If to the Company, at:
U.S. Alcohol Testing of America, Inc.
10410 Trademark Street
Rancho Cucamonga, California 91730
Attention: President
With a copy to:
Gold & Wachtel, LLP
110 East 59th Street
New York, NY 10022
Attention: Robert Berend, Esq.
If to the Executive, at:
Linda H. Masterson
4321 N. Studebaker Road
Placerville, CA 95664
or at such other address as any party may specify by notice given to such other
party in accordance with this Section 6. The date of giving of any such notice
shall be the date of hand delivery, two days after the date of the posting of
the mail or the date when deposited with the overnight courier.
7. WAIVER. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by the Executive and such officer as may be specifically designated by
the Board of Directors of the Company. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the sale or at any prior or subsequent time.
8. ENTIRE AGREEMENT. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
9. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the Validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in or one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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11. GOVERNING LAW. This Agreement shall be construed (both as to
validity and performance) and enforced in accordance with, and governed by, the
laws of the State of California applicable to contracts to be performed entirely
within that State, without giving effect to the principles of conflicts of law.
Any suit or proceeding arising out of this Agreement shall be brought only in a
federal or state court located in the County of San Bernardino, State of
California; provided, however, that neither party waives its right to request
removal of such action or proceeding from the state court to a federal court in
such jurisdiction. The parties hereto each waive any claim that such
jurisdiction is not a convenient forum for any such suit or proceeding and the
defense of lack of personal jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed on June 27, 1996.
U.S. ALCOHOL TESTING OF AMERICA, INC.
By:
--------------------------------
Robert M. Stutman
Chairman, and Chief Executive Officer
-------------------------------
Linda H. Masterson
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EXHIBIT 10(z)
SEVERANCE AGREEMENT
Severance Agreement dated June , 1997 (the "Agreement") by and between
Substance Abuse Technologies, Inc., a Delaware corporation (the "Company"), and
David L. Dorff (the "Executive").
WITNESSETH:
WHEREAS, the Company has agreed to employ the Executive on an at-will
basis and the Executive has agreed to be so employed, as the President and Chief
Operating Officer of the Company subject to the terms of this Agreement;
WHEREAS, the Executive and the Company agree that the Executive's right
to severance pay upon his termination as an employee of the Company without
cause shall be as set forth in this Agreement; and
WHEREAS, effective as of the date hereof, the compensation to be paid
to the Executive by the Company for the services to be performed is as follows:
(1) a base salary (the "Base Salary") of $120,000 per annum and an
annual review at the end of each fiscal year during the term of this Agreement
by the Company's Compensation Committee, with a minimum raise each year of three
times the Consumer Price Index if the Executive's performance is deemed
satisfactory by the Compensation Committee. The annual minimum Base Salary shall
be increased to (a) $275,000 upon the Company being profitable for two
consecutive calendar months during the term of this Agreement or renewal thereof
with sales equal to or greater than $2,500,000 during such two month period and
(b) to $325,000 upon the Company being profitable for a fiscal year during the
term of this Agreement or renewal hereof with sales equal to, or greater than
$20,000,000 and (c) to $375,000 upon the Company being profitable for a fiscal
year during the term of this Agreement or any renewal hereof with sales equal
to, or greater than, $40,000,000; provided, however, that in calculating
profitability and sales, the operations of the U.S. Drug Testing, Inc. ("U.S.
Drug") shall be excluded;
(2) an aggregate year-end bonus (the "Annual Bonus") equal to the Bonus
Percentage (as hereinafter defined) multiplied by the Executive's annual Base
Salary as follows: (a) if the Company achieves 100% of its financial objectives
in such fiscal year, based upon a Board-approved budget excluding the operations
of U.S. Drug, commencing with the fiscal year ending March 31, 1998, the Bonus
Percentage shall be 75%; (b) if the Company achieves greater than 100% of its
financial objectives and up to 150% of its financial objectives for a fiscal
year, then the Bonus Percentage shall equal the product of 75% and a fraction,
the numerator of which shall be the percentage of the financial objectives
actually achieved (e.g., 150%), except that any
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amount in excess of 150% shall be deemed to be 150% for the purposes of this
calculation, and the denominator of which shall be 75%; (c) if the Company
achieves 80% or more of its financial objectives for a fiscal year up to 100%,
the Executive shall receive an Annual Bonus based upon a pro rata amount of the
Bonus Percentage (e.g., if 90% of the financial objectives are achieved, the
Bonus Percentage shall be 37.5%); and (d) if the Company achieves less than 80%
of its financial objectives for a fiscal year, the Executive shall not receive
any Annual Bonus. If the Company acquires a company or companies in a fiscal
year, 50% of the sales of such acquired company or companies up to $10,000,000,
33% of the sales above $10,000,000 and all profits and losses of such acquired
Company shall count toward the Executive achieving any sales and profit
objectives in determining the Annual Bonus in the year of acquisition.
(3) a bonus payment in the amount of $50,000 upon each renewal of this
Agreement pursuant to Section 4(b) hereof;
(4) the grant, at the end of each fiscal year during the term of this
Agreement or any renewal hereof, of a stock option to purchase a minimum of
50,000 shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), at an exercise price equal to the closing sale price on the
date of grant, as reported on the American Stock Exchange, Inc. (the "AMEX") or
such other exchange or national securities association on which the Common Stock
may then be regularly quoted or, if not so quoted, as reported in the
over-the-counter market at the date of such grant, and if such day shall be a
day on which the AMEX shall be closed, the preceding day on which the Common
Stock is traded and the expiration date of each such grant shall be three years
from the date of grant; and
(5) the award of 125,000 shares of the Common Stock for each $.75
increase in the closing sales price of the Common Stock (such closing sales
price to be determined in accordance with paragraph (4) of this WHEREAS clause)
above $1.375, with such increase to be determined by the average of the closing
sales prices of the Common Stock during any 90-day period commencing with the
fiscal year ending March 31, 1998; provided, however, once the average of the
closing sales prices of the Common Stock reach an award level (e.g., $2.125), no
awards will be made again until the average of the closing sales prices of the
Common Stock during a 90-day period reaches the next award level (e.g., $2.875
after $2.125). All shares of the Common Stock awarded under this paragraph (5)
shall be vested over a three-year period and shall be registered under the
Securities Act of 1933, as amended, as part of a pool of stock options to be
registered in connection with a currently proposed underwritten offering. Upon
the expiration of the initial term, if not renewed by the Company, upon the
death or disability of the Executive, upon the termination of this Agreement by
the Company without Cause and upon a Change in Control whenever the Executive's
Common Stock purchase warrants or stock options, if any, would become
immediately exercisable pursuant to Section 6(d) hereof, then, upon the
happening of any of the foregoing events, the awarded shares not then vested
immediately become vested.
(6) the award of warrants upon the execution hereof to purchase (a)
700,000 shares of the Common Stock at an exercise price of $1.8125 per share,
(b) 300,000 shares of the common stock at an exercise price of $2.3125 and (c)
300,000 shares of the common stock at an exercise price of $2.8125 per share.
One third of each warrant shall vest, on June , 1998, June , 1999
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and June , 2000, provided that the Executive is employed by the Company on such
date. The warrant shall expire five years from the date hereof.
WHEREAS, in the event that this Agreement is not renewed and in
consideration of the Executive's agreement not to compete as set forth in
Section 5 hereof, the Executive shall receive a one-time lump sum payment equal
to the annual Base Salary and car allowance at such time and the costs of the
benefits stated below.
WHEREAS, the employee benefits, vacation, life insurance and other
perquisites to be received by the Executive during the term of this Agreement
are as follows:
(i) participation in all employee pension and welfare benefit plans
and programs made available to the Company's senior level executives or to its
employees generally, as such plans or programs may be in effect from time to
time, including, without limitation, pension, profit sharing, savings and other
retirement plans or programs, medical, dental, hospitalization, short-term and
long-term disability and life insurance plans, accidental death and
dismemberment protection, travel accident insurance, and any other pension or
retirement plans or programs and any other employee welfare benefit plans or
programs that may be sponsored by the Company from time to time, including any
plans that supplement the above-listed types of plans or programs, whether
funded or unfunded.
(ii) five weeks vacation per year which, if not taken, will accrue;
(iii) term life insurance coverage in the amount of $1,500,000 face
value, the beneficiary of which shall be designated by the Executive;
(iv) a monthly automobile allowance of $1,000 which allowance shall be
reviewed at the end of each fiscal year during the term of this Agreement and
any renewal hereof and adjusted to the market price;
(v) an annual physical examination; and
(vi) an allowance for professional services of $5,000 for each fiscal
year during the term of this Agreement and any renewal hereof to be paid to, or
for the benefit of, the Executive.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the Company and the Executive hereby agree as
follows:
1. COMPANY'S RIGHT TO TERMINATE. Subject to the Company fulfilling its
obligations to the Executive relating to compensation and benefits during the
term of this Agreement, the Executive agrees that he will not voluntarily leave
the employ of the Company and will continue to perform the Executive's regular
duties as President and Chief Operating Officer of the Company. Notwithstanding
the foregoing, the Company may terminate the Executive's employment at any time,
subject to providing the benefits hereinafter specified in accordance with the
terms hereof.
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2. TERMINATION OF EMPLOYMENT. The termination of the Executive as an
employee of the Company for Disability or Cause shall be on the following terms
and conditions:
(a) Disability
Termination by the Company of the Executive's
employment based on "Disability" shall mean termination (i) because of the
Executive's inability to perform his duties with the Company on a full time
basis for four consecutive months, or 180 days out of any twelve-month period,
as a result of the Executive's incapacity due to physical or mental illness; or
(ii) as a result of the Executive being certified incompetent by a court of
competent jurisdiction and all appeals from such certification having expired.
(b) Cause
Termination by the Company of the Executive's
employment for "Cause" shall mean termination because of: (i) the Executive's
conviction of a felony; (ii) any action by the Executive involving dishonesty,
fraud or gross or willful misconduct in connection with his employment with the
Company; (iii) the Executive's gross negligence in the performance of his
duties and obligations hereunder or habitual neglect of his duties; (iv) the
Executive's substance abuse, including, without limitation, chronic alcoholism
or drug addiction; (v) the Executive's intentional refusal or failure to
perform his duties as the Chief Executive Officer of the Company, including,
without limitation, the intentional disregard of a lawful directive by the
Board of Directors of the Company or any Committee thereof; (vi) intentional
conduct on the part of the Executive which is knowingly detrimental to the best
interests of the Company; or (vii) the Executive's failure to perform in a
competent manner his duties as the Chief Executive Officer of the Company,
resulting in damage or detriment to the Company.
(c) Notice of Termination
Any purported termination by the Company pursuant to
subsections (a) or (b) of this Section 2 or for any other reason shall be
communicated by written Notice of Termination to the Executive from the Chief
Executive Officer of the Company (or such other officer as may be designated)
at the direction of the Board of Directors of the Company. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
that it is without Cause or shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
(d) Date of Termination
"Date of Termination" shall mean (i) if the
Executive's employment is terminated for Disability, the date specified in the
Notice of Termination, (ii) if the Executive's employment is terminated for
Cause, the date specified in the Notice of Termination, (iii) if the
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Executive's employment is terminated for death, the date of death, and (iv) if
the Executive's employment is terminated, without Cause, the date on which a
Notice of Termination is given.
3. CERTAIN BENEFITS UPON TERMINATION
(a) Subject to Section 6(b) hereof, if the Executive's
employment is terminated by the Company other than for Cause, Disability or
death, then the Executive shall be entitled to the benefits provided below:
(i) the Company shall pay the Executive his full
Base Salary through the Date of Termination at the rate in effect at the time
the Notice of Termination is given plus credit for any vacation earned but not
taken and the amount, if any, of any bonus for a past fiscal year which has not
yet been awarded or paid to the Executive, and the amount of the bonus for the
current fiscal year determined on a pro rata basis;
(ii) in lieu of any further salary, bonuses or
benefits payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance to the Executive on the 30th
day following the Date of Termination a lump sum amount equal to the total
amount of the Base Salary that would have been paid to the Executive had he not
been terminated during the period commencing on the Date of Termination and
ending on June , 2000; and
(iii) the Company shall maintain in full force and
effect, for the Executive's continued benefit until the earlier of (A) June ,
2000 or (B) the Executive's commencement of full time employment with a new
employer, his automobile allowance and all life insurance, medical, health and
accident, and disability plans, programs or arrangements in which the Executive
was entitled to participate immediately prior to the Date of Termination,
provided that the Executive's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Executive's participation in any such plan or program is barred, the Company
shall arrange to provide the Executive with benefits substantially similar to
those which the Executive was entitled to receive under such plans and
programs.
(b) If the Executive's employment is terminated for Disability
under Section 2(a), then the Executive shall be entitled to the benefits
provided below:
(i) the Company shall pay the Executive his full
Base Salary through the Date of Termination at the rate in effect at the time
the Notice of Termination is given plus credit for any vacation earned but not
taken and the amount, if any, of any bonus for a past fiscal year which has not
yet been awarded or paid to the Executive and the amount of the bonus for the
current fiscal year determined on a pro rata basis;
(ii) in lieu of any further salary, bonuses or
benefits payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance pay to the Executive on the
30th day following the Date of Termination a lump sum
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amount equal to the Base Salary that would have been paid to the Executive had
he not been terminated during the period commencing on the Date of Termination
and ending on the earlier of four months after the Date of Termination or June
, 2000; and
(iii) the Company shall maintain in full force and
effect for the Executive's continued benefit, until the earlier of four months
after the Date of Termination and June , 2000, his automobile allowance and all
life insurance, medical, health and accident, and disability plans, programs or
arrangements in which the Executive was entitled to participate immediately
prior to the Date of Termination, provided that the Executive's continued
participation is possible under the general terms and provision of such plans
and programs. In the event that the Executive's participation in any such plan
or program is barred, the Company shall arrange to provide the Executive with
benefits substantially similar to those which the Executive was entitled to
receive under such plans and programs.
(c) If the Executive's employment is terminated for Cause,
Disability under Section 2(I)(a), death or voluntary termination or resignation
of employment by the Executive, the Executive shall be paid his full Base Salary
through the Date of Termination at the rate in effect at the time the Notice of
Termination is given plus credit for any vacation earned but not taken and the
amount, if any, of any bonus for a past fiscal year which has not yet been
awarded or paid to the Executive.
(d) The Executive shall not be required to mitigate the amount
of any payment provided for in this Section 3 by seeking other employment or
otherwise nor shall the amount of any payment provided for in this Section 3 be
reduced by any compensation earned by the Executive as the result of employment
by another employer after the Date of Termination, or otherwise.
4. TERM OF AGREEMENT.
(a) This Agreement shall terminate June , 2000 subject to
renewal in accordance with Section 4(b) below.
(b) The Company shall have two one-year options to renew this
Agreement by notifying the Executive of such intention at least three months
prior to the end of the term of this Agreement of any renewal thereof.
5. COVENANT NOT TO COMPETE
(a) Executive recognizes that the services to be performed by
him hereunder are special, unique and extraordinary. The parties confirm that it
is reasonably necessary for the protection of the Company that Executive agree,
and accordingly, Executive does hereby agree, that in consideration of the
Company agreeing to the severance arrangements and the Change in Control
provisions set forth in this Agreement, he shall not, directly or indirectly, at
any time during the "Restricted Period" within the "Restricted Area" (as those
terms are defined in Section 5 (d) below):
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(i) engage in the business of the manufacture of,
or retail or wholesale marketing, sale or distribution of products or services
which the Company has marketed or is substantially planning to market during
the term of this Agreement, including, without limitation, single source
services to assist businesses in their hiring practices ranging from substance
abuse testing, background screening to total program management and related
services (the "Restricted Products") either on his own behalf or as an officer,
director, employee, stockholder, partner, consultant, associate, executive,
manager, member, owner, agent, creditor, independent contractor, or co-venturer
of any third party; or
(ii) employ or engage, or seek to employ or engage,
or assist anyone else to employ or engage or seek to employ or engage, any
person who is then or at any time during the preceding year was in the employ
of the Company or any of its affiliates, or an independent contractor who then
or any at ant time during the preceding two years provided design,
manufacturing, marketing or sales services in connection with the business of
the Company or any of its Affiliates.
(b) Executive hereby agrees that he will not, directly or
indirectly, for or on behalf of himself or any third party, at any time during
the term of this Agreement and during the Restricted Period and within the
Restricted Area (a) solicit any customers of the Company for the sale of the
Restricted Products, (b) persuade or seek to persuade any customer of the
Company or its affiliates to cease to do business or to reduce the amount of
business which any customer has customarily done or contemplates doing with the
Company, whether or not the relationship between the Company and such customer
was originally established in whole or in part through Executive's efforts; or
(c) interfere in any manner in the relationship of the Company with any of their
respective suppliers, whether or not the relationship between the Company and
such supplier was originally established in whole or in part by Executive's
efforts.
For the purposes of the provisions hereof, "customer" and
"supplier" shall include any individual, proprietorship, corporation, joint
venture, trust or any other form of business entity that is (x) then a customer
or supplier, as the case may be, of the Company or (y) a former customer or
supplier, as the case may be, or potential customer or supplier, as the case may
be, of the Company which the Company has solicited prior to or during the term
of this Agreement.
(c) This Section 5 shall not be construed to prevent Executive
from (a) owning, directly and indirectly, in the aggregate, less than one (1%)
percent of the issued and outstanding voting securities of any class of any
company whose voting capital stock is traded on a national securities exchange
or in the over-the-counter market, (b) having other investments and personal
ventures and (c) being a member of the board of directors of other entities and
industry groups and doing charity work, which, from time to time, may require
minimal portions of his time, but which ventures, investments, directorships,
charity work, and/or the time associated therewith shall not interfere or be in
conflict with his duties hereunder, be in competition with the business of the
Company or be in violation of or in conflict with any of the restrictions set
forth in this Section 5.
(d) The term "Restricted Period", as used in this Section 8,
shall mean the period of Executive's actual employment hereunder plus twelve
(12) months after the date the Executive is
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no longer actually employed by the Company for any reason other than as set
forth in Section 5(f) below, including, without limitation, as a consequence of
the Executive's resignation, or the termination of the Executive's employment
with "Cause" or as a result of the Executive being disabled (the "Restricted
Period"). The term "Restricted Area" as used in this Section 8 shall mean the
United States and its territories and possessions. The provisions of this
Section 8 shall survive the expiration or termination of Executive's employment
hereunder and until the end of the Restricted Period as provided in this
Section 5(d).
(e) Anything in this Section 5 to the contrary
notwithstanding, if the Executive is terminated without Cause during the term of
this Agreement or if the Company ceases to exist other that by reason of a
merger, consolidation, sale of assets or similar transaction, the Executive
shall no longer be bound by the terms of Section 5 of this Agreement.
(f) The parties hereto agree that the remedy at law for any
breach of Section 5 will be inadequate and that the Company shall be entitled to
injunctive relief to compel the Executive to perform or refrain from action
required or prohibited hereunder. The necessity of protection has been carefully
considered by the parties hereto. The parties hereby agree and acknowledge that
the duration, scope and geographic area applicable to the restrictions set forth
in Section 5 are fair, reasonable and necessary. The consideration provided for
herein is sufficient and adequate to compensate the Executive for agreeing to
the restrictions contained in this Section 5. If, however, any court determines
that the foregoing restrictions are not reasonable, such restrictions shall be
modified, rewritten or interpreted to include as much of their nature and scope
as will render them enforceable.
6. CHANGE IN CONTROL
(a) In the event of a Change in Control, the Executive shall
have the right to terminate voluntarily his employment with the Company, with or
without reason, within six months after the occurrence of such Change in Control
by giving written Notice of Termination to the Company. A Change in Control
shall be deemed to occur upon (I) the election of one or more individuals to the
Board of Directors of the Company which election results in one-third of the
directors of the Company consisting of individuals who have not been directors
of the Company for at least two years, unless such individuals have been elected
as directors or nominated for election as directors by three fourths of the
directors of the Company who have been directors for at least two years; (ii)
the sale by the Company of all or substantially all of its assets to any Person,
the consolidation of the Company with any Person, the merger of the Company with
any Person as a result of which merger the Company is not the surviving entity
as a publicly held corporation or the sale or transfer of shares of the Company
by the Company and/or any one or more of its stockholders, in one or more
transactions, related or unrelated, to one or more Persons under circumstances
whereby any Person and his, her or its Affiliates shall own after such sales and
transfers, at least one-fourth, but less than one-half, of the shares of the
Company having voting power for the election of directors, unless, in any such
case, such sale, consolidation, merger or transfer has been approved in advance
by three-fourths of the directors of the Company who have been directors of the
Company for at least two years; or (iii) the sale or transfer of shares of the
Company by the Company and/or any one or more of its stockholders, in one or
more transactions, related or unrelated, to one or more Persons under
circumstances
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whereby any Person and its Affiliates shall own, after such sales and
transfers, at least one-half of the shares of the Company having voting power
for the election of directors. Nothing contained in this definition shall limit
or restrict the right of the Executive from participating in any discussions or
voting on any matter referred to in this definition at any meeting of the
Company's Board of Directors. For purposes of this Agreement, the term
"Affiliate" shall mean a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, any other Person. For purposes of this Agreement, the term "Person" shall
mean an individual, partnership, firm, trust, corporation, limited liability
corporation, limited liability partnership, limited partnership, association or
other similar entity. When two or more Persons act as a partnership, limited
partnership, syndicate, or other group for the purpose of acquiring, holding,
or disposing of securities of the Company, such partnership, limited
partnership, syndicate or other group shall be deemed a "Person" for the
purposes of this Agreement.
(b) Upon the voluntary termination of employment with the
Company by the Executive within six months after the occurrence of a Change in
Control, or upon the involuntary termination of employment with the Company of
the Executive for any reason other than death, Disability or termination for
Cause within six months after the occurrence of a Change in Control, the
Company, or the consolidated, surviving or transferee Person in the event of a
consolidation, merger or sale of assets, shall pay to the Executive, in a lump
sum immediately subsequent to the date of such termination, an amount equal to
two times the total cash compensation, including Base Salary, Annual Bonus and
car allowance, paid to the Executive during, or, in the case of the Annual
Bonus, for, the prior fiscal year; provided, however, that, if the Executive is
terminated without Cause, he may elect to receive either the severance under
Section 3(a) hereof or, if applicable, the payments set forth in this Section
6(b) and the benefits set forth in Section 6(c) hereof.
(c) Upon the voluntary termination of employment with the
Company by the Executive within six months after the occurrence of a Change in
Control, or upon the involuntary termination of employment with the Company by
the Executive for any reason other than death, Disability or termination for
Cause within six months after the occurrence of a Change in Control, the
Company, or the consolidated, surviving or transferee Person in the event of a
consolidation, merger or sale of assets, shall also provide, for a period of two
years commencing on such termination of employment, medical, dental, life and
disability insurance coverage for the Executive and the members of his family
either immediately prior to Date of Termination or on the occurrence of such
Change in Control, whichever is greater; provided, however, that the obligations
set forth in this sentence shall terminate to the extent the Executive obtains
comparable medical, dental, life and disability insurance coverage from any
other employer during such period, but the Executive shall not have any
obligation to seek or accept employment during such period, whether or not any
such employment would provide comparable medical, dental, life and disability
insurance coverage.
(d) Upon the voluntary termination of employment with the
Company by the Executive within six months after the occurrence of a Change in
Control, or upon the involuntary termination of employment with the Company by
the Executive for any reason other than death, Disability or termination for
Cause within six months after the occurrence of a Change in
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Control, any Common Stock purchase warrant or stock option then held by the
Executive shall, anything to the contrary notwithstanding in the Common Stock
purchase warrant or stock option, become immediately exercisable.
(e) In the event that, subsequent to a Change in Control, the
Executive incurs any costs or expenses, including attorneys fees, in the
enforcement of his rights under this Section 6, then, unless the Company, or the
consolidated, surviving or transferee Person in the event of a consolidation,
merger or sale of assets, is wholly successful in defending against the
enforcement of such rights, the Company, or such consolidated, surviving or
transferee Person, shall promptly pay to such Participant all such costs and
expenses.
7. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding
upon, and shall inure to the benefit of, the respective successors, assigns,
legal representatives and heirs of the parties hereto.
8. NOTICE. Any and all notices or other communications or deliveries
required or permitted to be given or made shall be in writing and delivered
personally, or sent by certified or registered mail, return receipt requested
and postage prepaid, or sent by overnight courier service as follows:
If to the Company, at:
Substance Abuse Technologies, Inc.
4517 NW 31st Avenue
Ft. Lauderdale, FL 33309
Attention: Chief Executive Officer
with a copy to:
Wachtel & Masyr, LLP
110 East 59th Street
New York, New York 10022
Attention: Robert W. Berend, Esq.
If to the Executive, at:
or at such other address as any party may specify by notice given to such other
party in accordance with this Section 8. The date of giving of any such notice
shall be the date of hand delivery, two days after the date of the posting of
the mail or the date when deposited with the overnight courier.
9. WAIVER. No provisions of this Agreement may be modified, waived or
discharge unless such waiver, modification or discharge is agreed to in writing
signed by the Executive and such officer as may be specifically designated by
the Board of Directors of the Company. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other
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party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
10. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
12. GOVERNING LAW. This Agreement shall be construed (both as to
validity and performance) and enforced in accordance with, and governed by, the
laws of the State of Florida applicable to contracts to be performed entirely
within that State, without giving effect to the principles of conflicts of law.
Any suit or proceeding arising out of this Agreement shall be brought only in a
federal or state court located in the Counties of Broward or Palm Beach, State
of Florida; provided, however, that neither party waives its right to request
the removal of such action or proceeding from the state court to a federal court
in such jurisdiction. The parties hereto each waive any claim that such
jurisdiction is not a convenient forum for any such suit or proceeding and the
defense of lack of personal jurisdiction.
13. ENTIRE AGREEMENT. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed on June __, 1997.
SUBSTANCE ABUSE TECHNOLOGIES, INC.
By:
--------------------------------------
Robert Stutman, Chief Executive Officer
By:
--------------------------------------
David L. Dorff
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EXHIBIT 10 (aa)
SUBLEASE AGREEMENT
This Sublease is made as of the 20th day of June, 1996, by and between
LIFECARE INVESTMENTS, INC., a Delaware corporation ("Sublessor") and U.S.
ALCOHOL TESTING OF AMERICA, INC., a Delaware corporation ("Sublessee").
RECITALS AND REPRESENTATIONS
A. Sublessor is a Tenant under that certain lease agreement dated
September 27, 1991 by and between Reynolds Metals Development Company, a
Delaware corporation ("Landlord") and Sublessor as Tenant. The lease agreement
and existing rules and regulations, if any, are attached hereto and made a part
hereof as Exhibit A and referred to as the "Lease".
B. Sublessor represents and warrants to Sublessee that Exhibit A is a
true and complete copy of the Lease, as amended, and that the Lease is in full
force and effect; that Sublessor is not now in default under the Lease; and that
to the best of its knowledge no act has been committed by either Landlord or
Tenant which with the passage of time could lead to a lease default.
C. The Lease covers the space depicted on Exhibit B attached hereto
and made a part hereof being a total of 8,484 +/- square feet located at 4517
N.W. 31st Avenue, Fort Lauderdale, FL 33309.
D. That Sublessor desires to sublease and Sublessee desires to take
the premises covered by the Lease which is hereinafter referred to as the
Subleased Premises."
AGREEMENTS
IN CONSIDERATION OF the mutual promises contained herein, and other
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows with the intention of being legally
bound hereby:
1. Sublease. Sublessor hereby demises and leases unto Sublessee the
Subleased Premises together with all its rights and easements as described in
the Lease for a term commencing August 1, 1996 and ending November 30, 2001.
Upon sublease execution Sublessee may occupy the Subleased Premises at no cost
from August 1, 1996 through December 1, 1996 (the "Rent Free Period"). If the
Sublessor's Improvements described in Section 6 below are not completed by
December 1, 1996, the Rent Free Period shall be automatically extended to
January 1, 1997. Sublessor further assigns to Sublessee any rights to continue
as Tenant under the Lease from and after November 30, 2001, exercisable in the
absence of uncured monetary default under the Sublease by Sublessee.
2. Lease. Except as herein specifically provided, this Sublease is
subject to and Sublessee agrees to assume all of the terms and conditions of the
Lease and the terms of this Sublease, including such incorporated terms, shall
constitute all of the terms and conditions of
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this Sublease. In the event of any conflict between the terms of this Sublease
and the terms of the Lease, the Sublease shall be deemed to be controlling.
Sublessor shall have, as against Sublessee, all of the rights granted or
reserved in the Lease to the Landlord thereunder; Sublessee shall have, as
against Sublessor, all of the rights granted or reserved in the Lease to the
Tenant thereunder.
3. Rental. Except as otherwise provided above, throughout the term of
this Sublease, Sublessee agrees to pay to Landlord as its rental obligations for
the Subleased Premises those sums identified in the Lease as Monthly Rent,
Adjusted Monthly Rent, Common Area Maintenance Charges, Tenant's Share of Real
Property Tax, sales or use taxes or excise taxes imposed or levied against the
rent by any governmental authority having jurisdiction thereof all as described
in and to the extent required by the Lease. Sublessor represents that such
amounts, which are itemized on the attached Exhibit "C" currently total
$10,793.20 excluding sales taxes but including real estate taxes for the month
of June, 1996, and that no additional amounts are owed to Landlord under the
Lease. All payments shall be made in advance without deduction or setoff to
Reynolds Metals Development Company, 45O1 N.W. 31st Avenue, Fort Lauderdale,
Florida 33309, or as otherwise directed by Reynolds Metals Development Company
or successor.
4. Condition Of The Subleased Premises. Sublessee, except as described
elsewhere herein, agrees to accept the Subleased Premises in "as is" condition,
unfurnished and without telephone system. Sublessor hereby warrants, represents
and certifies that the nonstructural portions of the Premises and every part
thereof for which the Tenant is responsible pursuant to the first sentence of
Section 6.1(a) of the Lease are, and will be when the Sublessee takes possession
of the Premises, in good order, condition and repair.
5. Facilities. All building services and parking shall be provided by
the Landlord under the Lease. Sublessor assumes no obligations for providing
such services and Sublessee agrees to look solely to the Landlord for the
providing of such service. Sublessor hereby assigns to Sublessee any right it
may have against Landlord as a result of Landlord's default under the Lease;
provided, however, that Sublessor represents that to the best of its knowledge,
as of the date hereof, there is no such default presently in existence.
6. Sublessor Improvements. Sublessor, prior to July 29, 1996, subject
to Building Permit approval and issuance and subject to concurrence by the
Landlord where required by the Lease, shall provide the following improvements
in the Subleased Premises substantially completed so as to permit occupancy and
conduct of business by Sublessee:
(a) Install new commercial grade carpet throughout the Subleased
Premises except on marble floored central foyer in a single color and quality to
be selected by Sublessee.
(b) Paint ail currently painted walls and doors in a color to be
selected by Sublessee.
(c) Remove certain existing interior walls and repair ceilings, walls
and floors as needed as described on the Plan attached hereto as Exhibit "D" and
made a part hereof.
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(d) Provide a walkway from the parking area to the entrance on the
south side of the Subleased Premises per Code and replace the existing door with
a glass entrance door.
(e) Install a door between office currently occupied by Richard
Weissman and the office adjacent to the east.
Sublessor shall (i) complete Improvements described in 6(a) and 6 (b) not later
than July 29, 1996 in order to permit timely Sublessee occupancy and conduct of
business (For each day therefrom until they are completed, Sublessor hereby
gives Sublessee a per diem credit against its rental obligations pursuant to
Section 3 above in the amount of $365.00, commencing with the payments required
as of January 1, 1997 with Sublessor being responsible to the Landlord until
said credit is completely exhausted) and, (ii) complete Improvements described
in 6(c), 6(d), and 6(e) subject to application and issuance of Building Permit
but not later than November 30, 1996.
7. Insurance. Sublessee shall obtain and maintain insurance
with the same limits, terms and conditions as required of Tenant under the
Lease. Such insurance shall inure to the benefit of Landlord, Sublessor and
Sublessee.
8. Lease Termination. In the event the Lease terminates and this
Sublease terminates as a result thereof, then each party shall be released from
any liability or obligation under this Sublease arising thereafter except for
any amounts unpaid under the Lease as of such termination date. Notwithstanding
the foregoing, if the Lease is terminated as a result of a default by Sublessee
of any term of the Lease or of this Sublease, then Sublessee shall indemnify and
hold Sublessor free and harmless from any and all liability and damages
sustained by Sublessor as a result of the termination of the Lease or of this
Sublease. Likewise, Sublessor shall indemnify Sublessee for damages if the Lease
terminates through the fault of Sublessor.
9. Indemnification. Sublessor (and not Sublessee) shall be and remain
responsible to Landlord pursuant to the provisions of Section 7 of the First
Addendum to the Lease; provided, however, that Sublessee agrees to indemnify and
save Landlord and Sublessor harmless from and against any and all losses, etc.,
as described therein resulting from the use of the Common Areas (as also
described therein) by the Sublessee, its customers, employees and invitees.
10. Quiet Enjoyment. As long as Sublessee is not in default of any
provision of this Sublease and Sublessor is not in default under the Lease,
Sublessor represents and warrants that Sublessee shall and may peaceably and
quietly have, hold and enjoy the Subleased Premises during the Sublease term
pursuant to the terms hereof.
11. Notices. All notices required or permitted to be given hereunder,
shall be in writing and sent by United States registered or certified mail,
postage prepaid, return receipt request, or by personal delivery or nationally
recognized overnight delivery services addressed to the parties as follows:
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To Sublessor: LifeCare Investments, Inc.,
409 W. Hallandale Beach Boulevard
Suite 415
Hallandale, FL 33009
Attn: Michael Weissman, Chairman & CEO
To Sublessee: U.S. Alcohol Testing of America, Inc.
Attn: Robert M. Stutman, CEO
after occupancy: at the Premises
before occupancy: c/o Robert Stutman & Associates
450 Washington Street - Suite 302
Dedham, MA 02026
12. Broker. Except for Raintree Properties & Investments, Inc., whose
commission shall be paid by Sublessor, and Craig S. Wertkin of Towngrove Realty
of Boca, Inc., whose commission shall be paid by Sublessee, Sublessor and
Sublessee hereby warrant and represent each to the other that no broker was
involved in negotiating or consummating this Sublease and each party hereby
indemnifies and holds the other harmless from any and all claims for the
brokerage commissions arising out of any communications or negotiations had by
such party with any other broker(s) regarding the Subleased Premises and/or the
consummations of this Sublease.
13. Contingency. This Sublease is contingent upon execution of this
document by the Landlord consenting to the terms and conditions hereunder. If
such execution is not obtained within ten (10) business days after the date
hereof, either party can terminate this Sublease upon written notice to the
other party.
14. No Release. Nothing contained in this Sublease Agreement shall
relieve Sublessor of its responsibilities under the terms and conditions of
the Lease as amended.
15. Successor And Assign. This Sublease shall bind the parties and
their respective successors and assigns.
16. This Sublease shall be construed and interpreted in accordance with
Florida Law, and any disputes between the parties, if not resolved through
non-binding mediation before an independent qualified Mediator acceptable to the
parties at Fort Lauderdale, Florida with each party bearing their own costs,
shall be brought before the 17th Judicial Circuit Court for Broward County,
Florida without objection as to jurisdiction or venue by any party.
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IN WITNESS WHEREOF, the parties have executed this Sublease as of the
date and year first above written.
WITNESS LIFECARE INVESTMENTS, INC.
Sublessor
__________________________ By:_________________________
Name: Michael Weissman
__________________________ Title: Chairman & Chief
Executive Officer
WITNESS U.S. ALCOHOL TESTING OF AMERICA, INC.
Sublessee
__________________________ By:_________________________
Name: Robert M. Stutman
__________________________ Title: Chairman and CEO
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<PAGE> 6
LANDLORD'S CONSENT
Landlord hereby:
(a) Consents to the foregoing Sublease with the understanding that
pursuant to Section 12 (Assignment and Subletting), Section 12.1 (Landlord's
Consent Required), "Notwithstanding Landlord's consent to subletting, Tenant
shall remain fully liable on this Lease and shall not be released from
performing any of the terms, covenants and conditions of this Lease."
(b) Agrees and confirms that the attached Exhibit A constitutes
the entire Lease and there are no rules and regulations presently affecting the
Subleased Premises;
(c) Agrees that the Sublessee may continue as Tenant under the Lease
(in accordance with its terms and the terms of Paragraph 1 above) from and after
November 30, 2001, provided that if Sublessee does so continue, notwithstanding
the provisions of (a) above, Sublessor shall have no continuing responsibility
thereafter as Tenant under the Lease;
(d) Agrees that the attached Exhibit C accurately reflects amounts
currently owed by Tenant, and no additional amounts are currently owed to
Landlord, under the Lease;
(e) Acknowledges that Tenant is not presently in default under the
Lease;
(f) Expressly consents to the proposed Sublessor Improvements set forth
in Paragraph 6 and the provisions of Paragraph 9 above and does not object to
any of the other provisions of the foregoing Sublease Agreement; and
(g) Acknowledges there is no Security Deposit under the Lease
applicable to the Subleased Premises.
WITNESS: REYNOLDS METAL DEVELOPMENT
COMPANY
____________________________ By:_______________________
Name:_____________________
____________________________ Title:____________________
Date: June _____, 1996
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EXHIBIT 10(aa)(1)
WINGATE COMMONS BUSINESS PARK NET LEASE
1. Parties.
THIS LEASE, dated, for reference purposes only, September 27,
1991, is made between REYNOLDS METALS DEVELOPMENT COMPANY, a Delaware
corporation ("Landlord") and LIFECARE INVESTMENTS, INC. a Delaware corporation
("Tenant").
2. Premises.
Landlord hereby leases to the Tenant and Tenant leases from
Landlord for the term, at the rental, and upon all of the conditions set forth
herein, that certain real property situated in the County of Broward, State of
Florida, commonly known as Building C of Wingate Commons Business park, 4517
N.W. 31st Avenue, Ft. Lauderdale, Florida 33309, as indicated on Exhibit "A"
attached hereto and by reference made a part hereof (the "Premises").
3. Term.
3.1 Term. The term of this Lease is twenty (20) years
commencing on the date on which a certificate of occupancy for any portion of
the Premises is issued (the "Commencement Date") and ending at midnight, twenty
(20) years thereafter, unless sooner terminated pursuant to any provision
hereof.
3.2 Delay in Completion of Improvements. Landlord will take
all steps reasonably necessary in order to ensure that the Improvements, as that
term is hereinafter defined, are completed no later than , 1991; however, if the
completion of the Improvements shall be delayed due to (a) any act or omission
of the Tenant or any of its employees, agents or contractors (including, but not
limited to (i) any delays due to changes in or additions to the Improvements, or
(ii) any delays by Tenant in the submission of plans, drawings, specification,
or other information or in approving drawings or in giving any authorizations or
approvals); (b) any delays beyond control of Landlord including, but not limited
to, strikes, lockouts, civil commotion, warlike conditions, invasion, rebellion,
hostility, inclement weather, inability to obtain material or services and acts
of God; or (c) any delays caused by governmental regulations or controls,
Landlord shall not be subject to any liability therefore, nor shall such failure
affect the validity of the Lese or the obligations of Tenant hereunder, but in
such case, Tenant shall not be obligated to pay rent until possession of the
Premises is tendered to Tenant.
3.3 Early Possession. If Tenant occupies the Premises prior to
the Commencement Date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date, and Tenant shall pay rent
for such period at the initial monthly rates set forth below.
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<PAGE> 2
4. Rent/Security Deposit.
4.1 Rent.
(a) Tenant shall pay to Landlord annual rent for
the Premises in the amounts set forth below under the heading "Annual Rent." As
long as Tenant is not in default hereunder, rent may be paid in equal monthly
installments in the amounts set forth below under the heading "Monthly Rent,"
as adjusted by Subsection 4.1(b), in advance, on the tenth day of each month of
each Lease Year, as herein defined, during the term hereof. Rent shall be
prorated if the term does not commence on the first day of a calendar month or
expire on the last day of a calendar month. Rent shall be paid to Reynolds
Metals Development Company, 4501 N.W. 31st Avenue, Ft. Lauderdale, Florida
33309.
<TABLE>
<CAPTION>
Term Annual Rent Monthly Rent
- ---- ----------- ------------
<S> <C> <C>
First twelve months $ 99,698.75 $8,308.23
Second twelve months $103,941.25 $8,661.77
</TABLE>
(b) The term "Lease Year", as used herein, (i)
shall mean the twelve (12) month period beginning with the Commencement Date as
defined in Section 3.1 hereof, and each twelve (12) month period thereafter
occurring during the term of this Lease, and (ii) in the event the Lease expires
or terminates on a date other than the date set forth herein, then the term
"Lease Year" shall also mean the period from the end of the preceding Lease Year
to the date of said expiration or termination of this Lease. Landlord and Tenant
agree that subsequent to the end of each and every Lease Year the Monthly Rent,
or Adjusted monthly Rent, as herein defined, if applicable, which was payable
for the immediately preceding Lease Year shall be adjusted for payment during
the current Lease Year by an amount equal to the product of (i) the Monthly Rent
or adjusted Monthly Rent, if applicable, for the immediately preceding Lease
Year multiplied by (ii) the difference expressed as a percentage between the
Consumer Price Index, as herein below defined, published for the last month of
the immediately preceding Lease year and the Consumer Price Index for the
corresponding month one year prior thereto (i.e., the percentage change in said
Index over said year); provide, however, that such new Monthly rent shall in no
event be less than the Monthly Rent, or Adjusted Monthly Rent for the preceding
year. The monthly rental payment so adjusted by the Consumer Price Index shall
become the adjusted monthly rent (the "Adjusted Monthly Rent"). The initial
annual adjustment shall be computed based on the Monthly Rent and the next
annual adjustment shall be computed based on the Adjusted Monthly Rent with each
annual adjustment thereafter based on the Adjusted Monthly Rent for the
immediately proceeding year. As soon as practicable after the end of each Lese
Year, Landlord shall prepare and submit to Tenant a statement (the "Statement")
reflecting the Adjusted Monthly Rent which shall be paid commencing with the
next monthly installment of Rent and shall remain in effect until the next
annual adjustment is made. In addition, within twenty (20) days following
receipt of Landlord's Statement, Tenant shall pay to Landlord a sum equal to the
difference between the amount of monthly rental payments Tenant has paid
Landlord since the start of the current Lease Year, if any, and an amount
computed as follows: 1/12th of the total Adjusted Monthly Rent for the entire
current Lease Year multiplied by the
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<PAGE> 3
number of months which have fully or partially expired between the first day of
the current lease year and the date of the first payment of the Adjusted Monthly
Rent to be made subsequent to the date of the Statement.
Any Statement sent by Landlord to Tenant shall be
conclusively binding upon Tenant unless, within thirty (30) days after such
Statement is sent, Tenant shall send a written notice to Landlord objecting to
such Statement and specifying the respects in which such Statement is claimed to
be incorrect. If such notice is sent and the parties are unable to revolve the
issues, either party hereto may refer the matter to a reputable independent firm
of certified accountants selected by Landlord, and the decision of said
accountants shall be conclusively binding upon said parties. The fees and
expenses of the accountants shall be borne by the unsuccessful party unless both
parties are unsuccessful, then said expenses shall be apportioned between the
parties by the accountants based upon the degree of success of each party.
The term "Consumer Price Index," as used herein,
shall be the Consumer Price Index for All Urban Consumers based upon the U.S.
City Average (All Items Included, 1982-94 = 100) published by the Bureau of
Labor Statistics of the United States Department of Labor. If the Consumer Price
Index shall hereafter be converted to a different standard reference base or
otherwise revised, the determination of the percentage increase in the Consumer
Price Index shall be made with the use of such conversion factor, formula or
table for converting the Consumer Price Index as may be published by the Bureau
of Labor Statistics or, if said Bureau shall not publish the same, then with the
use of such conversion factor, formula or table as may be published by Prentice
Hall, Inc., or, failing such publication, by any other nationally recognized
publisher of statistical information. If the consumer Price Index shall become
unavailable to the public because publication is discontinued, or otherwise,
Landlord will substitute therefor a comparable index based upon changes in the
cost of living or purchasing power of the consumer dollar published by any other
governmental agency, or, if no such index shall be then available, a comparable
index published by a major bank or other financial institution or by a
university or a recognized financial publication, and the substituted index
shall be deemed the Consumer Price Index for the purposes of this Section.
(c) Tenant agrees that any adjustments to the base
monthly Rent and other sums due Landlord from Tenant under the tomboys of this
Lease shall be considered as additional rent from Tenant (the "Additional
Rent"). As used herein the term "Rent" shall include the Monthly Rent, Adjusted
Monthly Rent, Additional Rent and such other payments as are set forth herein.
(d) It is understood and agreed that Tenant's
obligation to pay the Additional Rent shall, for the purposes of the default
provision hereof, entitle Landlord to all remedies provided herein and at law or
equity on account of Tenant's failure to pay rent.
(e) In no event shall any adjustments made pursuant
to Section 4.1(b) result in the Landlord receiving an amount less than the
Monthly Rent or Adjusted Monthly Rent,if applicable for the immediately
preceding Lease Year.
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<PAGE> 4
(f) Any delay or failure of Landlord in computing
or billing for Additional Rent shall not constitute a waiver or in any way
impair the continuing obligation of the Tenant to pay such Additional Rent.
4.2 Security Deposit. Tenant shall deposit with Landlord on
the Commencement Date $8,308.23 as security for Tenant's faithful performance of
Tenant's obligations hereunder (the "Security Deposit"). If Tenant fails to pay
rent or other charges due hereunder, or otherwise defaults with respect to any
provision of this Lease, Landlord may use, apply or retain all or any portion of
the Security Deposit for the payment of any rent or other charge in default or
for the payment of any sum to which Landlord may become obligated by reason of
Tenant's default, or to compensate Landlord for any loss or damage which
Landlord may suffer thereby. If Landlord so uses or applies all or any portion
of the Security deposit, Tenant shall within fifteen (15) days after written
demand therefore, deposit cause with Landlord in an amount sufficient to restore
the Security Deposit to the full amount hereinabove stated and Tenant's failure
to do so shall be a material breach of this Lease. Landlord shall not be
required to keep said deposit separate from its general accounts. If Tenant
performs all of Tenant's obligations hereunder, the Security Deposit, or so much
thereof as has not theretofore been applied by Landlord, shall be returned
without payment of interest or other increment for its use to Tenant (or, at
Landlord's option, to the last assignee, if any, of Tenant's interest hereunder)
at the expiration of the term hereof, and after Tenant has vacated the Premises.
No trust relationship is created herein between Landlord and Tenant with respect
to the Security Deposit.
5. Use.
5.1 Use. The Premises shall be used by Tenant for offices and
for no other purposes, and Tenant further agrees to use the entire Premises as
herein above provided. Tenant agrees not to store any material, waste or other
products outside the Premises in any adjoining area. Tenant further agrees that
it will not store or dispose of hazardous materials in or about the Premises.
For the purposes of this Lease, "hazardous materials" includes any hazardous,
toxic or dangerous waste, substance or material defined as such in (or for
purposes of) the Comprehensive Environmental Response, Compensation and
Liability Act, any so-called "superfund" of "superlien" law, or any other
federal, state or local statute, law ordinance, code,rule, regulation, consent
agreement or other requirement of any governmental authority regulating,
relating to, or imposing liability or standards of conduct concerning, any
hazardous or toxic or dangerous waste. Tenant shall defend, indemnify and save
Landlord harmless from all costs and expenses (including consequential damages)
asserted or proven against Landlord by any party as result of Tenant's use,
storage or disposal of hazardous materials (as defined above) on the Premises.
The foregoing indemnity shall be a recourse obligation of Tenant which shall
survive termination or expiration of this Lease. In the event that any activity
of the Tenant causes an increase in the insurance rate on the building
containing the Premises as a whole, then Tenant shall pay this additional cost
of insurance as assessed by Landlord's insurer, which determination shall be
conclusive and binding upon Tenant.
5.2 Compliance with Law. Tenant shall, at Tenant's expense,
comply promptly with all applicable statutes, ordinances, rules, regulations,
orders, permits, covenants and restrictions of record, and requirements in
effect during the term or any part of their term
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<PAGE> 5
hereof, regulating the use or condition of the Premises, including but not
limited to, environmental matters and employee health and safety. Tenant shall
not use nor permit the use of the Premises in any manner that will tend to
create waste or a nuisance or, if there shall be more than one tenant in the
building containing the Premises, shall tend to disturb such tenants.
5.3 Condition of Premises. Tenant hereby accepts the Premises
in their condition existing as of the Commencement Date of the Lease, subject to
all applicable zoning, municipal, county and state laws, ordinances and
regulations governing and regulating the use and condition of the Premises and
any covenants or restrictions of record, and accepts this Lease subject thereto
and to all matters disclosed thereby. Tenant acknowledges that neither Landlord
nor Landlord's agent has made any representation or warranty as to the present
or future suitability of the Premises for the conduct of Tenant's business.
5.4 Common Areas. All areas and facilities that Landlord shall
from time to time designate as being for the mutual use of Tenant, its
customers, employees and other tenants, including but not limited to all parking
areas, sidewalks, driveways, roads and landscaped areas located in the business
park of which the Premises are a part, shall be known as the "Common Areas".
Tenant and its employees, customers and invites shall have the non-exclusive
right to use Common Areas together with Landlord and the other tenants of the
park, their customers, employees and guests and, subject to such reasonable
rules and regulations governing the use of the Common Areas as Landlord may from
time to time prescribe, such rules specifically to include but are not limited
to parking rules. Tenant shall not use the Common Areas for storage without the
prior written consent of Landlord or take any action which would interfere with
the rights of other persons to use the Common Areas. Landlord may temporarily
close any part of the Common Areas for such period of time as is reasonably
necessary to make repairs or alterations to the Common Areas.
6. Maintenance, Repairs and Alterations.
6.1 Tenant's Obligations.
(a) Tenant, at Tenant's expense, shall keep in good
order, condition and repair the nonstructural portions of the Premises and every
part thereof, including by way of illustration, all plumbing, heating, air
conditioning, ventilation, electrical and lighting facilities and equipment
located within the Premises, interior surfaces of exterior walls (including but
not limited to damage to such surfaces caused by etching or staining from
spilled or leaked materials), ceilings, windows, doors and plate glass and
Tenant's signs located on or about the Premises. Tenant shall be obligated to
make the repairs required hereunder whether or not such portion of the 'Premises
requiring repair, or the means of repairing the same are reasonably or readily
accessible to Tenant, and whether or not the need for such repairs occurs as a
result of Tenant's use, any prior use, th elements, or the age of such portion
of the Premises. All glass, both interior and exterior, is the sole risk of
Tenant and Tenant agrees to replace at Tenant's own expense any glass broken
during the term of this Lease and Tenant agrees to insure and to keep insured
all plate glass in the Premises and to furnish the Landlord with certification
of said insurance. In the event replacement is necessary, Tenant agrees to use
such insurance for the replacement of any broken glass. The term "repair" shall
be deemed to include replacements. In
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<PAGE> 6
addition to Tenant's obligations set forth herein, Tenant shall, at its expense,
repair and replace any and all portions of the Premises, structural and
onstructural, or any landscaping, damaged by Tenant's acts of omissions or the
acts or omissions of Tenant's employees, agents, contractors or any others for
whom Tenant may be responsible.
(b) If Tenant fails to perform Tenant's obligations
under this Section 6.1 within a reasonable time after receipt of written notice
of the need for such repairs, Landlord may at Landlord's option enter upon the
Premises (except in the case of emergency, in which case no notice shall be
required), perform such obligations on Tenant's behalf and put the Premises in
good order, condition and repair, and the cost thereof shall be due and payable
as additional rent to Landlord, together with Tenant's next rental installment.
(c) On the last day of the term thereof, or on any
sooner termination, Tenant shall surrender the Premises to Landlord in the same
condition as received, ordinary wear and tear excepted, and the Premises shall
be delivered to Landlord clean, uncontaminated and free of debris. Tenant shall
remove its trade fixtures, furnishings and equipment from the Premises and shall
repair any damage to the Premises occasioned by the installation or removal of
its trade fixtures, furnishings and equipment.
6.2 Landlord's Obligations. Landlord, at Landlord's
expense,shall keep in good order, condition and repair, all of the structural
portions of the Premises, including, without limiting the generality of the
foregoing, the roof, the exterior walls and the foundation of the Premises.
Landlord shall repair and replace if necessary any latent or other defects in
the Premises which arose during, or which are attributable to, construction of
the Premises; and Landlord shall maintain the Common Areas as described in
Section 5.4. Landlord shall have no obligation to make repairs under this
Subsection 6.2 until a reasonable time after receipt of written notice of the
need for such repairs.
6.3 Common Area Maintenance.
(a) Each month, Tenant shall pay to Landlord, in
addition to the rent due on the Premises, Tenant's Share (defined below) of the
cost of Common Area maintenance for the Premises or the business park of which
the Premises are a part. Common Area maintenance costs shall include all
expenses reasonably incurred and paid by Landlord in operating, managing and
maintaining the Common Areas of the Premises or the business park of which the
Premises are a part, including, without limiting the generality of the
foregoing, painting and cleaning of paved and unpaved surfaces, lighting,
landscaping, signage, trash collection and other similar items.
(b) Tenant's Share" shall be a fraction, the
numerator of which shall be Tenant's leased space in the building comprising a
portion of the Premises (8,485 square feet) and the denominator of which shall
be the total leasable space in the buildings in the business park of which the
Premises are a part (33,940 square feet) or twenty-five percent (25%).
(c) During the First Lease Year, the Tenant's Share
of Common area Maintenance and Real Property Tax, as the term is defined in
Subsection 10.2 of this Lease, shall
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<PAGE> 7
be $2.00 per square foot of leased space in the building (8,485 square
feet) comprising a portion of the Premises, which sum shall be adjusted annually
pursuant to this Subsection 6.3(c). Landlord shall prepare and submit to Tenant
a statement reflecting the Common Area expenses incurred during the prior year
and the projected Common Area expenses expected to be incurred during the
subsequent year, at which time the monthly amount to be paid by Tenant hereunder
shall be adjusted accordingly in order to pay any deficiency for the previous
year together with any increase or decrease in the projected Common Area
expenses expected to be incurred during the subsequent year over that which was
expected to be incurred during the prior year.
(d) Landlord, at Landlord's option or upon Tenant's
request, amy provide Tenant with a monthly written statement of Tenant's Share
of the Common area Maintenance costs.
6.4 Alterations and Additions.
(a) Tenant shall not make any alterations,
improvements or additions in, on or about the Premises without Landlord's prior
written consent, which consent shall not be unreasonably withheld.
(b) Any alterations, improvements or additions in
the Premises that Tenant shall desire to make shall be presented to Landlord in
written form with proposed detailed plans prepared by a professional architect
or engineer. If Landlord shall give its consent, the consent shall be deemed
conditioned upon Tenant acquiring a permit to do so from appropriate
governmental agencies, if required, furnishing a copy thereof to Landlord prior
to the commencement of the work and complying with all conditions of said permit
in a prompt and expeditious manner.
(c) Tenant shall pay, when due, all claims for
labor or materials furnished to or for Tenant at or for use in the Premises,
which claims are or may be secured by any mechanics' or materialmen's lien
against the Premises or any interest therein. Tenant shall give Landlord not
less than ten (10) days' notice prior to the commencement of any such work in
the Premise and Landlord shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Tenant shall, in
good faith, contest the validity of any such lien, claim or demand, then Tenant
shall, at is sole expense,defend itself and Landlord against the same and shall
pay and satisfy any such adverse judgement that my be rendered thereon before
the enforcement thereof against the Landlord or the Premises. Landlord may, at
its option, require Tenant to furnish to Landlord a surety bond satisfactory to
Landlord in an amount equal to 125% of the amount of such contested lien, claim
or demand indemnifying Landlord against liability for the same and holding the
Premises free from the effect of such lien or claim.
(d) Unless Landlord requires their removal, all
alterations, improvements and additions which may be made on the Premises shall
become the property of Landlord and remain upon and be surrendered with the
Premises at the expiration of the term. Notwithstanding the provisions of this
Section 6.4, Tenant's machinery and equipment, other than that which is affixed
to the Premises so that it cannot be removed without material damage
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<PAGE> 8
to the Premises, shall remain the property of Tenant and may be removed by
Tenant subject to the provisions of Subsection 6. (c).
7. Insurance; Indemnity.
7.1 Liability Insurance. Tenant shall, at Tenant's
expense,obtain and keep in force during the term of this Lease, comprehensive
general liability insurance with a combined single limit of not less than
$1,000,000.00 per occurrence for bodily injury and property damage insuring both
Landlord and Tenant against liability arising out of Tenant's use, occupancy and
maintenance of the Premises and all other area appurtenant thereto. Tenant shall
deliver to Landlord a certificate of insurance required under this Subsection,
which policy shall expressly name Landlord as an insured. No such policy shall
be cancelable or subject to reduction in coverage except after thirty (30) days'
prior written notice to Landlord.
7.2 Property Insurance. Landlord agrees that it will keep in
force during the term of this Lease insurance covering loss or damage to the
Premises (but not to Tenant's trade fixtures, furnishings, personal property or
improvements) providing protection against all perils included within the
classification of fire, lightning and extended coverage. Tenant shall pay the
cost of such insurance.
7.3 Waiver of Subrogation. Insofar as the following provision
may be effective without invalidating insurance coverage, Tenant and Landlord
each hereby release and relieve the other, and waive their entire right of
recovery against the other for loss or damage arising out of or incident to the
perils insured against under this Section 7, which perils occur in, on or about
the Premises, whether due to the negligence of Landlord or Tenant or their
agents, employees, contractors and/or invitees, but only to the extent that such
loss or damage is actually covered by insurance, and only to the extent that the
insured party has received proceeds of insurance therefore.
7.4 Indemnity. Tenant agrees to pay, and to defend, indemnify
and save harmless Landlord from and against any and all liabilities, losses,
damages, costs, expenses (including reasonable attorneys fees) in connection
with any injury to, or the death of, any person in, on or about the Premises or
any damage to or loss of property on the Premises, except any such liabilities,
losses, damages, costs, or expenses arising out of Landlord's negligence or
willful act. If any action or proceeding is brought against Landlord by reason
of any such claim, Tenant upon notice from Landlord shall defend the same at
Tenant's expense by counsel mutually satisfactory to Landlord and Tenant.
7.5 Exemption of Landlord From Liability. Tenant hereby agrees
that Landlord shall not be liable for injury to Tenant's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Tenant, Tenant's employees, invitees, customers, or any other person
in or about the Premises, not shall Landlord be liable for injury to the person
of Tenant, Tenant's employees, agents or contractors, whether such damage or
injury is caused by or results from fire, steam, electricity, gas, water or
rain, or from the breakage, leakage, obstruction or other defects of pipes,
sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures,or from any other cause, whether the said damage or injury
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<PAGE> 9
results from conditions arising upon the Premises or upon other portions of the
building of which the premises are apart, or from other sources or places and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Tenant except when such damage or injury
is caused by Landlord's negligence. Landlord shall not be liable for any damages
arising from any act or neglect of any other tenant, if any, of the business
park in which the Premises are located. Nothing contained herein shall be
construed as limiting the right of Tenant to proceed against other third parties
for any injury or damage caused to Tenant.
7.6
8. Damage or Destruction.
8.1 Definitions.
(a) "Partial Damage" means damage or destruction to
the Premises to the extent that the cost of repair is less than fifty percent
(50%) of the fair market value of the Premises immediately prior to such damage
or destruction.
(b) "Total Destruction" means damage or destruction
to the Premises to the extent that the cost of repair is fifty percent (50%) or
more of the fair market value of the Premises immediately prior to such damage
or destruction.
8.2 Partial Damage. If at any time during the term of this
Lease there is damage which falls within the classification of Partial Damage,
Landlord may, at Landlord's option, either (i) repair such damage, in which
event this Lease shall continue in full force and effect, or (ii) give written
notice to Tenant within thirty (30) days after the date of the occurrence of
such damage of Landlord's intention to terminate this Lease, which termination
shall be effective as of the date of the occurrence of such damage.
8.3 Total Destruction. If at any time during the term of this
Lease there is damage which falls into the classification of Total Destruction,
this Lease shall automatically terminate as of the date of such total
destruction.
8.4 Abatement of Rent. If Landlord repairs or restores the
Premises pursuant to the provisions of this Section 8, the rent payable
hereunder (including "Additional Rent") for the period during which such damage,
repair or restoration continues shall be abated in proportion to the degree to
which Tenant's use of the Premises is impaired. Except for abatement of rent, if
any, Tenant shall have no claim against Landlord as a result of any such damage.
Furthermore, notwithstanding anything above to the contrary, Tenant shall not be
entitled to any rent abatement if the Partial Damage is in any way caused by
Tenant.
9. Condemnation.
If the Premises or any portion thereof or other areas
appurtenant to the Premises are taken under the power of eminent domain, or sold
under the threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so
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taken as of the date the condemning authority takes title or possession,
whichever first occurs. If in the reasonable opinion of Tenant, the portion of
the Premises taken by condemnation materially adversely affects Tenant's
operations on the premises, Tenant may, at Tenant's option, to be exercised in
writing only within thirty (30) days after Landlord shall have given Tenant
written notice of such taking (or in the absence of such notice, within thirty
(30) days after the condemning authority shall have taken possession) terminate
this Lease as of the date the condemning authority takes such possession.
Landlord shall also have an option to terminate this Lease by notice to Tenant
given within the time limits set forth above if in Landlord's reasonable
opinion, it would not be economically feasible to continue leasing the Premises
to Tenant as a result of such condemnation. If this Lease is not terminated in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the rent shall be
reduced in the proportion that the square feet of the Premises which is taken
bears to the total square feet of the Premises. Any award for the taking of all
or any part of the Premises under the power of eminent domain or any payment
made under threat of the exercise of such power shall be the property of
Landlord, whether such award shall be made as compensation for diminution in
value of the leasehold, for the taking of the fee, or as severance damages;
provided, however, that Tenant shall be entitled to any award made specifically
for loss of or damage to Tenant's trade fixtures and removable personal
property. In the event that this Lease is not terminated by reason of such
condemnation, Landlord shall, at Landlord's expense, promptly repair any damage
to the Premises caused by such condemnation.
10. Taxes.
10.1 Payment of Real Property Taxes. Each month, Tenant shall
pay Tenant's Share of the real property taxes applicable to the Premises during
the term of this Lease. "Tenant's Share" shall be calculated as set forth in
Section 6.3(b). All such payments shall be made within ten (10) days after
receipt of a written statement from Landlord setting forth Tenant's Share of
such taxes and a copy of the applicable real estate tax bill or bills. If any
real property taxes paid by Landlord covers any period of time prior to or after
the expiration of the term hereof, Tenant's Share of such taxes shall be
equitably prorated to cover only the period of time within the tax fiscal year
during which this Lease shall be in effect.
10.2 Definition of "Real Property Tax". As used herein, the
term "real property tax" shall include any form of real estate tax or
assessment, general, special, ordinary or extraordinary, and any license fee,
commercial rental tax, improvement bond or bonds, levy or tax (other than
inheritance, personal income or estate taxes) imposed on the Premises by any
authority having the direct or indirect power to tax, including any city, state
or federal government, or any school, agricultural, sanitary, fire, street,
drainage or other improvement district thereof, as against any legal or
equitable interest of Landlord in the Premises or in the real property of which
the Premises are a part, as against Landlord's right to rent or other income
therefore, and as against Landlord's business of leasing the Premises. The
term"real property tax" shall also include any tax, fee, levy, assessment or
charge (i) in substitution of, partially or totally, any tax, fee levy,
assessment or charge hereinabove included within the definition of "real
property tax", or (ii) the nature of which was hereinbefore included within the
definition of "real property tax", or (iii) which is imposed by reason of this
transaction or any modifications or changes hereto.
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10.3 Joint Assessment. If the Premises are not separately
assessed, Tenant's liability shall be an equitable proportion of the real
property taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Landlord from the
respective valuations assigned in the assessor's work sheets or such other
information as may be reasonably available, and Landlord's reasonable
determination thereof, in good faith shall be conclusive.
10.4 Personal Property Taxes.
(a) Tenant shall pay, prior to delinquency,
all taxes assessed against and levied upon trade fixtures, furnishings,
equipment and all other personal property of Tenant contained in the Premises.
When possible, Tenant shall cause said fixtures, furnishings, equipment and all
other personal property to be assessed and billed separately from the real
property of Landlord.
(b) If any of the Tenant's personal property
shall be assessed with the Landlord's real property, Tenant shall pay Landlord
the taxes attributable to Tenant within twenty (20) days after receipt of a
written statement setting forth the taxes applicable to Tenant's property.
10.5 Sales and Use Tax. In addition to the annual rent
required hereunder, Tenant shall also be solely responsible for all sales tax
applicable thereon, or applicable to any other charges or payments due
hereunder.
11. Utilities and Services. Tenant shall pay for all water, gas,
heat, light, power, telephone and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such utilities are not
separately metered, Tenant shall pay a reasonable portion of the charges for
utilities jointly metered with other premises. Tenant shall provide, at its
expense, all janitorial and security services to the Premises.
12. Assignment and Subletting.
12.1 Landlord's Consent Required. Tenant shall not voluntarily
or by operation of law assign, transfer, mortgage, sublet, o otherwise transfer
or encumber all or any part of Tenant's interest in this Lease or in the
Premises, without Landlord's prior written consent, which consent shall not be
unreasonably withheld provided (i) such assignment is to an entity/individual(s)
whose financial integrity is at lease equal to that of Tenant; (ii) said
assignee has demonstrated prior experience in the management and operation of
its business in a similar setting and of the same magnitude; and (iii) proof
thereof satisfactory to Landlord has been delivered to Landlord at least ten
(10) days prior to the effective date of any such transfer. Any attempted
assignment, transfer, mortgage, encumbrance or subletting without such consent
shall be void, and shall constitute a breach of this Lease. Any sale, assignment
or other transfer of controlling stock interest in Tenant shall constitute an
"assignment" for purposes hereof.
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12.2 No Release of Tenant. Regardless of Landlord's consent,
no subletting or assignment shall release Tenant of Tenant's obligation or alter
the primary liability of Tenant to pay the rent and to perform all other
obligations to be performed by Tenant hereunder. The acceptance of rent by
Landlord from any person shall not be deemed to be a waiver by Landlord of any
provision hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent assignment or subletting. In the event of default by
any assignee of Tenant or any successor of Tenant, in the performance of any of
the terms hereof, Landlord may proceed directly against tenant without the
necessity of exhausting remedies against such successor. Landlord may consent to
subsequent assignments or subletting of this Lease or amendments or
modifications to this Lease with assignees of Tenant, without notifying Tenant,
or any successor of Tenant and without obtaining its or their consent thereto
and such action shall not relive Tenant of liability under this Lease.
12.3 Attorney's Fees. In the event Tenant shall assign or
sublet the Premises or request the consent of Landlord to any assignment or
subletting or if Tenant shall request the consent of Landlord for any act Tenant
proposes to do, then Tenant shall pay Landlord's reasonable attorney's fees
incurred in connection therewith, but Tenant shall be allowed to prepare all
necessary documents for the sublease at its own expense.
12.4 Landlord's Option to Terminate. Except as otherwise
specifically set forth herein, in the event that at any time during the term of
this Lease Tenant desire to assign this Lease or to sublet all or part of the
Premises, Tenant shall notify Landlord in writing of the terms of the proposed
assignment or subletting and the area so proposed to be sublet, and Landlord
shall have the option to terminate this Lease wholly in the event of a proposed
assignment or sublet of the whole Premises, or partially as to the portion of
the Premises proposed to be sublet, upon written notice to Tenant within 45 days
after receipt of notice of Tenant's intention to assign or sublet. If Landlord's
election to terminate involves only a portion of the Premises, the rent
specified in this Lease shall be adjusted proportionately on the basis of the
number of square feet retained by Tenant and this Lease shall continue in full
force and effect in all other respects.
13. Defaults; Remedies.
13.1 Defaults. The occurrence of any one or more of the
following events shall constitute a material default and breach of this Lease by
Tenant:
(a) The vacating or abandonment of the Premises by
Tenant.
(b) The failure by Tenant to make any payment of
rent or any other payment required to be made by Tenant hereunder, as and when
due, where such failure shall continue for a period of five (5) days after
Tenant's receipt of written notice thereof. In the event that Landlord serves
Tenant with a notice to pay rent or quit pursuant to applicable unlawful
detainer statues, such notice to pay rent or quit shall also constitute the
notice required by this Section.
(c) The failure by Tenant to observe or perform any
of the covenants, conditions or provisions of this Lease to be observed or
performed by Tenant, other than
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described in Section 13.1(b) above, where such failure shall continue for a
period of thirty (30) days after written notice thereof from Landlord to Tenant;
provided, however, that if the nature of Tenant's default is such that more than
thirty (30) days are reasonably required for its cure, then Tenant shall not be
deemed to be in default if Tenant commenced such cure within the 30-day period
and thereafter diligently prosecutes such cure to completion.
(d) (i) The making by Tenant of any general
arrangement or assignment for the benefit of creditors; (ii) Tenant becomes a
"debtor" as defined in 11 U.S.C. Section 101 or any successor statute thereto
(unless, in the case of a petition filed against Tenant, the same is dismissed
within 60 days); (iii) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where possession is not restored to Tenant
within thirty (30) days.
13.2 Remedies. In the event of any such material default or
breach by Tenant, Landlord may, at any time thereafter, with or without notice
or demand and without limiting Landlord in the exercise of any right or remedy
which Landlord may otherwise have under Florida law by reason of such default or
breach:
(a) Terminate tenant's right to possession of the
Premises by any lawful means and terminate this Lease, in which case Tenant
shall immediately surrender possession of the Premises to Landlord. In such
event Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default including, but not limited to, the cost
of recovering possession of the Premises; the expense of reletting, including
necessary renovation and alteration of the Premises, reasonable attorney's fees
(including costs), and any real estate commission actually paid; the worth at
the time of award by the court having jurisdiction thereof of the amount by
which the unpaid rent for the balance of the term after the time of such award
exceeds the amount of such rental loss for the same period that Tenant proves
could be reasonably avoided; and that portion of the leasing commission paid by
Landlord pursuant to Section 14 applicable to the unexpired term of this Lease.
(b) Maintain Tenant's right to possession in which
case this Lease shall continue in effect whether or not Tenant shall have
abandoned the Premises. In such event Landlord shall be entitled to enforce all
of Landlord's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder; provided, however, that Landlord
shall have the right to accelerate all amounts owed to Landlord by Tenant under
this Lease as due and payable immediately upon default.
(c) Terminate Tenant's right to possession of the
Premises without terminating this Lease and re-enter and take possession of the
Premises, in which case Landlord shall use reasonable efforts to relet the
Premises to another party for Tenant's account and Tenant shall remain liable
for all rent and other amounts due under this Lease and not paid by such other
party; provided, however, that Landlord shall have the right to accelerate all
amounts owed to Landlord by Tenant under this Lease as due and payable
immediately upon default.
(d) Pursue any other remedy now or hereafter
available to Landlord under the laws or judicial decisions of the state
wherein the Premises are located. Unpaid installments
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of rent and other unpaid monetary obligations of Tenant under the terms of this
Lease shall bear interest from the date due at the maximum rate then allowable
by law.
13.3 Default by Landlord. Landlord shall not be in default
unless Landlord fails to perform obligations required of Landlord within a
reasonable time, but in no even later than thirty (30) days after written notice
by Tenant to Landlord and to the holder of any first mortgage or deed or trust
covering the Premises whose name and address shall have theretofore been
furnished to Tenant in writing, specifying wherein Landlord has failed toper
form such obligation; provided, however, that if the nature of Landlord's
obligation is such that more than thirty (30) days are required for performance,
then Landlord shall not be in default if Landlord commences performance within
such 30-day period and thereafter diligently prosecutes the same to completion.
13.4 Late Charges. Tenant hereby acknowledges that late
payment by Tenant to Landlord of rent and other sums due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult to ascertain. Such costs include, but are not
limited to, processing and accounting charges, and late charges which may
imposed on Landlord by the terms of any mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from
Tenant shall not be received by Landlord or Landlord's designee within ten (10)
days after such amount shall be due then, without any requirement for notice to
Tenant, Tenant shall pay to Landlord a late charge equal to 5% of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the casts Landlord will incur by reason of late payment
by Tenant. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue amount, nor
prevent Landlord from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of rent, then rent shall
automatically become due and payable quarterly in advance, rather than monthly,
notwithstanding Section 4 or any other provision of this Lease to the contrary.
13.5 Impounds. In the event that a late charge is payable
hereunder, whether or not collected, for three (3) consecutive installments of
rent, Tenant shall pay to Landlord, if Landlord shall so request, in addition to
any other payments required under this Lease, a monthly advance installment,
payable at the same time as the monthly rent, as estimated by Landlord, for real
property tax and insurance expenses on the Premises which are payable by Tenant
under the terms of this Lease. Such fund shall be established to insure payment
when due, before delinquency, of any or all such real property taxes and
insurance premiums. If the amounts paid to Landlord by Tenant under the
provisions of this section are insufficient to discharge the obligations of
Tenant to pay such real property taxes and insurance premiums as the same become
due, Tenant shall pay to Landlord, upon Landlord's demand, such additional sums
necessary to pay such obligations. All moneys paid to Landlord under this
section may be intermingled with other moneys of Landlord and shall not bear
interest. In the event of a default in the obligations of Tenant to perform
under this Lease, then any balance reaming from funds paid to Landlord under the
provisions of this section may, at the option of Landlord, be applied to the
payment of any monetary default of Tenant in lieu of being applied to the
payment of real property taxes and insurance premiums.
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14. Broker's Fee.
Each party represents and warrants to the other that it has
not dealt with any broker, finder or similar agent in connection with any
transaction contemplated hereunder, other than Lehrer & Co. and In-Site Realty
Associates, Inc., whose fees shall be the sole responsibility of Landlord. Each
party hereto hereby covenants and agrees to defend, indemnify, hold harmless and
reimburse the other party for, from and against all claims of any kind of any
other broker, finder or similar agent purporting to represent the indemnifying
party in connection with any transaction contemplated hereunder.
15. Estoppel Certificate.
(a) Tenant shall at any time upon not less than ten (10) days'
prior notice from Landlord execute, acknowledge and deliver to Landlord a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modifications and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Premises.
(b) At Landlord's option, Tenant's failure to deliver such
statement within such time shall be a material default under this Lease or shall
be conclusive upon Tenant (i) that this Lease is in full force and effect,
without modification except as may be represented by Landlord, (ii) that there
are no uncured defaults in Landlord's performance, and (iii) that not more than
month's rent has been paid in advance or such failure may b considered by
Landlord as a default by Tenant under this Lease.
(c) If Landlord desires to finance, refinance, or sell the
Premises or any part thereof, Tenant hereby agrees to deliver to any lender or
purchaser designated by Landlord such financial statements of Tenant as may be
reasonably required by such lender or purchaser. such statements shall include
the past three years financial statements of Tenant. all such financial
statements shall be received by Landlord and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
16. Landlord's Liability.
The term "Landlord" as use herein shall mean only the owner or
owners at the time in questions of the fee title or a tenant's interest in a
ground lease of the Premises. In the event of any transfer of such title or
interest, Landlord herein named (and in case of any subsequent transfers, then
the grantor) shall be relieved from and after the date of such transfer of all
liability in respect of Landlord's obligations thereafter to be performed,
provided that any funds in the hands of Landlord or the then grantor at the time
of such transfer, in which Tenant has an interest, shall be delivered to the
grantee. The obligations contained in this Lease to be
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performed by Landlord shall, subject as aforesaid, be binding on Landlord's
successors and assigns, only during their respective periods of ownership.
17. Severability.
The invalidity of any provision of this Lease as determined by
a court of competent jurisdiction shall in no way affect the validity of any
other provision hereof.
18. Interest on Past-Due Obligations.
Except as expressly herein provided, any amount due to
Landlord not paid when due shall bear interest at the maximum rate then
allowable by law from the date due. Payment of such interest shall not excuse or
cure any default by Tenant under this Lease; provided, however, that interest
shall not be payable on late charges incurred by Tenant nor on any amounts upon
which late charges are paid by Tenant.
19. Additional Rent.
Any monetary obligations of Tenant to Landlord under the terms
of this Lease shall be deemed to be Additional Rent.
20. Incorporation of Prior Agreements; Amendments.
This Lease contains all agreements of the parties with respect
to any matter mentioned herein. No prior agreement or understanding pertaining
to any such matter shall be effective. This Lease may be modified in writing
only and signed by the parties in interest at the time of the modification.
Except as otherwise stated in this Lease, Tenant hereby acknowledges that
neither the real estate broker listed in section 14 hereof nor any cooperating
broker on this transaction nor the Landlord or any employees or agents of any of
said persons has made any oral or written warranties or representations to
Tenant relative to the condition or use by Tenant or said Premises.
21. Notices.
Any notice required or permitted to be given hereunder shall
be in writing and may be given by express courier, personal delivery or by
certified mail, and shall be deemed sufficiently given if addressed to Tenant at
the address of the premises or to Landlord at the address noted next to the
signature of the Landlord. Either party may, by notice to the other, specify a
different address for notice purposes, except that upon Tenant's taking
possession of the Premises, the Premises shall constitute Tenant's address for
notice purposes. A copy of all notices required or permitted to be given to
Landlord hereunder shall be concurrently transmitted to such party or parties at
such addresses as Landlord may from time to time hereafter designate by notice
to Tenant.
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22. Waivers.
No waiver by Landlord of any provision hereof shall be deemed
a waiver of any other provision hereof or of any subsequent breach by Tenant of
the same or any other provision. landlord's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Landlord's consent to
or approval of any subsequent act by Tenant. The acceptance of rent hereunder by
Landlord shall not be waiver of any preceding breach by Tenant of any provision
hereof, other than the failure of Tenant to pay the particular rent so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent.
23. Holding Over.
If Tenant, with Landlord's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month. Al provisions of this Lease
shall apply to the holdover period. Al options and rights of first refusal, if
any, granted under the terms of this Lease shall be deemed terminated and be of
no further effect during said month-to-month tenancy.
24. Cumulative Remedies.
No remedy or election hereunder shall be deemed exclusive but
shall, wherever possible, be cumulative with all other remedies at law or in
equity.
25. Covenants and Conditions.
Each provision of this Lease performable by Tenant or Landlord
shall be deemed both a covenant and condition.
26. Binding Effect; Choice of Law.
Subject to any provisions hereof restricting assignment or
subletting by Tenant, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State wherein the Premises are located.
27. Subordination.
(a) This Lease, at Landlord's option, shall be subordinate to
any ground lease, mortgage, deed of trust, or any other hypothecation or
security now or hereafter placed upon the real property of which the Premises
are a part and to any advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof. If any
mortgagee, trustee or ground landlord shall elect to have this Lease prior to
the lien of its mortgage, deed of trust or ground lease, and shall be deemed
prior to such mortgage, deed of trust, or ground lease, whether this Lease is
dated prior or subsequent to the date of said mortgage, deed of trust or ground
lease or the date of recording thereof.
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28. Attorney's Fees.
If either party named herein brings an action to enforce the
terms hereof or declare rights hereunder, the prevailing party in any such
action, on trial or appeal, shall be entitled to his costs and reasonable
attorney's fees, including all appeals, to be paid by the losing party as fixed
by the court.
29. Landlord's Access.
Landlord and Landlord's agents shall have the right to enter
the Premises at reasonable times for the purpose of inspecting the same, showing
the same to prospective purchasers, lenders or tenants, and making such
alterations, repairs, improvements or additions to the Premises as Landlord may
deem necessary or desirable. Landlord's right to inspect the Premises includes,
but is not limited to, the right to take samples and make such environmental
tests as Landlord may deem appropriate from time to time. Landlord may at any
time, place on or about the premises any ordinary "For Sale" signs and Landlord
may at any time during the last 120 days of the term hereof place on or about
the Premises any ordinary "For Lease" signs, all without rebate of rent or
liability to Tenant.
30. Auctions.
Tenant shall not conduct, nor permit to be conducted, whether
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Landlord's prior written consent. Notwithstanding anything to the
contrary in this Lease, Landlord shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
31. Signs.
Any and all signs placed on the exterior of the Premises,
including loading and unloading signs, name signs and number signs, shall be
provided by the Landlord at the Landlord's sole cost and expense and shall be in
such form, style and color as to conform to the standard used throughout the
business park of which the Premises are a part. Tenant is expressly prohibited
from displaying any signage not authorized by Landlord.
32. Merger.
The voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation thereof, or a termination by Landlord, shall not work a
merger, and shall, at the option of Landlord, terminate all or any existing
subtenancies or may, at the option of Landlord, operate as an assignment to
landlord of any or all such subtenancies.
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33. Quite Possession.
Upon Tenant paying the rent for the Premises and observing and
performing all of the covenants, conditions and provisions on Tenant's part to
be observed and performed hereunder, Tenant shall have quiet possession of the
Premises subject to all of the provisions of this Lease. Landlord represents and
warrants to Tenant that the individuals executing this Lease on behalf of
Landlord are fully authorized and legally capable of executing
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EXHIBIT 10 (aa)(2)
FIRST ADDENDUM TO WINGATE COMMONS
BUSINESS PARK NET LEASE
This First Addendum to that certain Wingate Commons Business
Park Net Lease (the "Lease") dated September 27, 1991 by and between REYNOLDS
METALS DEVELOPMENT COMPANY, a Delaware corporation ("Landlord"), and LIFECARE
INVESTMENTS, INC., a Delaware corporation ("Tenant"), hereby modifies and amends
the lease to include the following:
1. Notwithstanding anything to the contrary contained in Section
3.1 of the Lease, Tenant shall have the option of terminating
this Lease at the end of the tenth and the fifteenth Lease
Year by giving Landlord not less than ninety (90) days' prior
written notice.
2. Sections 3.2 and 4.2 of the Lease are hereby deleted.
3. Notwithstanding anything to the contrary contained in Section
3.3 of the Lease, Tenant shall not be required to pay Rent
until the Commencement Date.
4. Tenant shall have the option of purchasing the Premises during
the first five (5) Lease Years of the Lease at the purchase
price set forth below opposite the Lease Year in which the
purchase is made (the "Option Price"):
Lease Year 1 $ 1,185,150.00
Lease Year 2 $ 1,223,443.00
Lease Year 3 $ 1,284,700.00
Lease Year 4 $ 1,347,975.00
Lease Year 5 $ 1,351,241.00
Tenant shall exercise such option by giving written notice thereof to
Landlord. If Tenant exercises its option, closing shall occur within
sixty (60) days after the date of the exercise by Tenant of its option
and time is of the essence. Upon payment of the Option Price, Landlord
will convey the Premises to Tenant by warranty deed, subject to any
leases, easements, conditions and restrictions of record affecting the
Premises existing on the date of the exercise by Tenant of its option.
If Tenant does not exercise its option to purchase the Premises or
Tenant does not close the purchase within sixty (60) days after the
exercise by Tenant of its option to purchase the Premises because of
the fault of Tenant, Tenant's option to purchase the Premises pursuant
to this paragraph 4 shall expire and be of no further force and effect.
5.
Notwithstanding the provisions of paragraph 4 above, if Landlord,
during the first five (5) Lease Years, receives a boNa fide offer
to purchase the Premises from a third party (the "Third Party Offer"),
Landlord shall so advise Tenant by notice in writing setting forth
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the terms and conditions of the Third Party Offer. For a period of
ten (10) days Fafter receipt of said notice, Tenant shall have
the option of purchasing the Premises at the higher of the Option
Price or the price specified in the Third Party Offer by giving
written notice thereof to Landlord. If Tenant exercises its option
under this paragraph 5, closing shall occur within sixty (60) days
after the date of the exercise by Tenant of its option contained in
this paragraph 5 and time is of the essence. Upon payment of the
Option Price or the price set forth in the Third Party Offer,
whichever is applicable, Landlord will convey the Premises to Tenant
by warranty deed, subject to any leases, easements, conditions and
restrictions of record affecting the Premises existing on the date of
the exercise by Tenant of its option to purchase the Premises pursuant
to this paragraph 5. If Tenant does not exercise its option to
purchase the Premises pursuant to this paragraph 5 within such ten
(10) day period by written notice to Landlord or Tenant does not close
the purchase within sixty (60) days after the exercise by Tenant of
its option to purchase the Premises pursuant to this paragraph 5
because of the fault of Tenant, Tenant's option to purchase the
Premises pursuant to paragraph 4 above or this paragraph 5 shall
expire and shall be of no further force and effect and Landlord may
proceed to sell the Premises to such third party on the terms and
conditions set forth in the Third Party Offer.
6. Notwithstanding anything to the contrary contained in Section 4 of the
Lease, the following shall be applicable to the payment of Monthly Rent
and Additional Rent during the periods set forth below:
(a) During the first two (2) months of the term of the Lease,
Tenant shall not be required to pay Monthly Rent. From the
third month through the tenth month of the term of the Lease,
the Monthly Rent payable by Tenant shall be reduced by fifty
percent (50%).
(b) The Monthly Rent shall not be adjusted pursuant to the
provisions of Section 4.1(b) of the Lease until after the
second Lease Year. Thereafter the provisions of Section 4.1(b)
of the Lease shall be applicable; provided, however, that the
Adjusted Monthly Rent shall not be increased (i) by more than
twenty percent (20%) during the first five (5) Lease Years,
using the Monthly Rent of $8,308.23 for the first Lease Year
as the base, (ii) by more than twenty percent (20%) during the
second five (5) Lease Years, using the Adjusted Monthly Rent
for the sixth Lease Year as the base, (iii) by more than
twenty percent (20%) during the third five (5) Lease Years
using the Adjusted Monthly Rent for the eleventh Lease Year as
the base, and (iv) by more than twenty percent (20%) during
the last five (5) Lease Years, using the Adjusted Monthly Rent
for the sixteenth Lease Year as the base.
7. It is hereby understood and acknowledged by Tenant that the Premises
is part of a business park known as Wingate Commons Business
Park and that the other tenants of the said business park together
with their customers, employees and invitees have mutual use of the
Common Areas including but not limited to all parking areas, driveways
and roads located in the park of which the Premises are a part and
that Landlord has the right to temporarily close any part of said
Common Areas for such period of time as is
E-117
<PAGE> 3
reasonably necessary to make repairs or alterations to the
Common Areas or to the buildings located adjacent thereto.
Accordingly, Tenant agrees to indemnify and save Landlord harmless
from and against any and all liabilities, losses, damages, costs,
expenses (including reasonable attorneys' fees) in connection with any
injury to, or the death of, any person or any damage to or loss of
property resulting from the use of the aforesaid Common Areas by
others or the temporary closure of same by Landlord. Landlord will
give Tenant five (5) days' notice of any non-emergency repairs,
alterations or improvements and reasonable notice of emergency
repairs, alterations or improvements to be made to the Common Areas or
to the buildings located adjacent thereto which could restrict ingress
or egress to the Premises.
8. Notwithstanding anything to the contrary contained in Section 12 of the
Lease, Tenant shall have the right at the inception of the Lease to
sublease twenty-five percent (25%) of the Building to another third
party for use as executive offices. It is agreed that such third party
subleasing a portion of the Building for use as executive offices may
enter into additional subleases of parts of such portion with others.
Any other subleases not covered by this paragraph B shall be subject to
all the terms and provisions of Section 12 of the Lease.
9. For purposes of Section 18 of the Lease, the term "maximum rate then
allowable by law" shall mean eighteen percent (18%) per annum.
Except as otherwise modified herein, the terms and conditions
contained in the Lease are in full force and effect.
Capitalized term when used herein and not otherwise defined
herein shall have the meanings assigned to them in the Lease.
Except as otherwise modified herein, the terms and conditions
contained in the Lease, as amended, are hereby ratified, confirmed and approved.
Capitalized terms when used herein and not otherwise defined
herein shall have the meanings assigned to them in the Lease.
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<PAGE> 4
IN WITNESS WHEREOF the parties have executed this Second
Addendum on the dates specified immediately below their respective signatures.
Landlord:
WITNESS: REYNOLDS METALS DEVELOPMENT
COMPANY
By:
D. Paul Bohevac
Executive Vice President
Date:
WITNESS: Tenant:
LIFECARE INVESTMENTS, INC.
By:
Title:
Date:
E-119
<PAGE> 1
EXHIBIT 10(aa)3
SECOND ADDENDUM TO WINGATE COMMONS
BUSINESS PARK NET LEASE
This Second Addendum to that certain Wingate Commons Business
Park Net Lease, dated September 27, 1991 (the "Lease"), by and between REYNOLDS
METALS DEVELOPMENT COMPANY, a Delaware corporation ("Landlord), and LIFECARE
INVESTMENTS, INC., a Delaware corporation ("Tenant), as amended by the First
Addendum to the Lease, hereby modifies and amends the Lease, as amended, as
follows:
1. Notwithstanding anything to the contrary contained in
Paragraph 6 of the First Addendum to the Lease, as amended
hereby, Tenant shall be required to pay to Landlord Tenant's
Share of Common Area maintenance charges and Real Property
Taxes and any other payments constituting Additional Rent
payable by Tenant under the Lease beginning with the
Commencement Date.
2. Section 4.1(a) of the Lease is hereby amended by increasing
the Annual Rent for the second twelve months of the term of
the Lease from $103,941.25 to $106,062.50 and the Monthly Rent
from $8,661.77 to $8,838.54.
3. Paragraph 6(a) of the First Addendum to the Lease is hereby
amended to read as follows:
"(a) During the first two (2) months of the term of the Lease,
Tenant shall not be required to pay Monthly Rent. During the
third and fourth months of the term of the Lease, the Monthly
Rent payable by Tenant shall be reduced by fifty percent
(50%)."
4. Section 43(f) of the Lease is hereby amended by adding the
following two sentences at the end thereof:
"Upon final completion of the Improvements, occupancy of the
Premises by Tenant and full compliance with the conditions set
forth above, if the amount paid by Landlord to Contractor and/or
any lienor on behalf of Tenant is less than $271,520, Landlord
shall pay to Tenant an amount equal to the difference between
$271,520 and the amount previously paid by Landlord pursuant to
this Section 43(f), which amount shall be used by Tenant to pay for
other business expenditures of Tenant. In no event shall Landlord
be required to pay more than $271,520 pursuant to this Section
43(f)."
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<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this First
Addendum on the dates specified immediately below their respective signatures.
Landlord:
REYNOLDS METALS
DEVELOPMENT
COMPANY
By:
Witness D. Paul Bonevac
Executive Vice President
Date:
Witness
Tenant:
LIFECARE INVESTMENTS, INC.
By:
Witness
Title:
Date:
E-121
<PAGE> 1
EXHIBIT 10(dd)
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT OR LAWS, THE RULES OF THIS WARRANT.
WARRANT TO PURCHASE ____________ SHARES
OF COMMON STOCK OF
SUBSTANCE ABUSE TECHNOLOGIES, INC.
ISSUED TO
---------------------
DATED:
--------------
WARRANT NO.
----
(INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)
THIS CERTIFIES THAT _______________ (the "Warrant Holder") is the owner
of a Warrant, subject to adjustment as provided in Section 3 hereof, which
entitles the owner thereof to purchase, in whole or in part at any time, and
from time to time, during the period commencing on ______________ (the
"Commencement Date") and terminating at 5:00 P.M., New York Time, on
______________ (the "Expiration Date"), _____________ fully paid and
nonassessable shares of the Common Stock, no par value (the "Common Stock"), of
Substance Abuse Technologies, Inc., a Delaware corporation (hereinafter called
the "Company"), at the purchase price per share of $________ (the "Purchase
Price"), subject to adjustment as provided in Section 3 hereof, payable in
lawful money of the United States of America upon surrender of this Warrant and
payment of the Purchase Price in lawful money of the United States of America at
the principal office of the Company (currently 4517 NW 31st Avenue, Ft.
Lauderdale, Florida 33309) or at such other place as the Company may designate
by written notice to the Warrant Holder.
1. Exercise
The Warrant evidenced hereby may be exercised from time to time, in
whole or in part, from the Commencement Date until the Expiration Date, provided
that in no event may any fractional share of the Common Stock be issued. In the
event that a fractional share would otherwise be issued as a result of any
adjustment made pursuant to Section 3 hereof or otherwise, payment for such
fractional share shall be made on the basis of the Market Price on the date of
exercise. For the purpose of this Section 1, the term "Market Price" shall mean
(a) if the Common
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<PAGE> 2
Stock is traded on a national securities exchange or on the National Association
of Securities Dealers Automated Quotation ("NASDAQ") System, the closing sales
price (or, if no sales on that day, the high bid price) or (b) if the Common
Stock is not traded as provided in subsection (a), the closing bid price as
reported in the OTC Bulletin Board of the National Association of Securities
Dealers, Inc. (the "NASD") or in the pink sheets by the National Quotation
Bureau, Inc.
Upon any exercise of the Warrant evidenced hereby, the form of election
to purchase set forth as Exhibit A hereto shall be properly completed, executed
and delivered to the Company, together with full payment to the Company of the
Purchase Price for the shares as to which the Warrant is exercised by certified
check or bank draft. In the event that there is only a partial exercise of the
Warrant evidenced hereby, there shall be issued to the Warrant Holder a new
Warrant Certificate, in all respects similar to this Warrant Certificate,
evidencing the number of shares of the Common Stock still available for
exercise.
Upon receipt of full payment and properly completed documentation, the
Company shall then cause the Transfer Agent for the Common Stock to issue fully
paid and nonassessable shares of the Common Stock as are represented by the
exercise.
If this Warrant shall be surrendered upon exercise within any period
during which the transfer books for the Common Stock are closed for any purpose,
the Company shall not be required to make delivery of certificates for shares of
the Common Stock until the date of the reopening of said transfer books.
2. Expiration Date
The Warrant evidenced hereby may not be exercised before the
Commencement Date or after the Expiration Date with respect to the shares of the
Common Stock as to which the Warrant may be exercised and, to the extent not
exercised by the Expiration Date, the Warrant evidenced hereby shall become
void.
3. Adjustments
Subject to the provisions of this Section 3, the Purchase Price and the
shares of the Common Stock as to which the Warrant may be exercised shall be
subject to adjustment from time to time as hereinafter set forth:
(a) If at any time, or from time to time, the Company shall,
by subdivision, consolidation, or reclassification of shares, or otherwise,
change as a whole the outstanding shares of the Common Stock into a different
number or class of shares, the number and class of shares so changed shall
replace the shares outstanding immediately prior to such change and the Purchase
Price and the number of shares purchasable under the Warrant immediately prior
to the date on which such change shall become effective shall be proportionately
adjusted.
E-123
<PAGE> 3
(b) Irrespective of any adjustments or change in the Purchase
Price or the number of securities actually purchasable under the Warrant, the
Warrant theretofore and thereafter issued may continue to express the exercise
price and the number of securities purchasable thereunder as the Purchase Price
and the number of securities purchasable were expressed in the Warrant when
initially issued.
(c) If at any time while the Warrant is outstanding, the
Company shall consolidate with, or merge into, another corporation, firm or
entity, or otherwise enter into a form of business combination, the holder of
the Warrant shall thereafter be entitled upon exercise thereof to purchase, with
respect to each security purchasable thereunder immediately prior to the date on
which such consolidation or merger or other form of business combination shall
become effective, the securities or property to which a holder of one such
security would have been entitled upon such consolidation or merger or other
form of business combination, without any change in, or payment in addition to,
the Purchase Price in effect immediately prior to such consolidation or merger
or other form of business combination, and the Company shall take such steps in
connection with such consolidation or merger or other form of business
combination as may be necessary to assure that all the provisions of the Warrant
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any securities or property thereafter deliverable upon the exercise of the
Warrant.
(d) The Board of Directors of the Company, in its discretion,
may, at any time during the exercise period of the Warrant, extend the exercise
period or reduce the Purchase Price for all warrants then outstanding.
(e) Upon the happening of any event requiring the adjustment
of the exercise price hereunder, the Company shall forthwith give written notice
thereof to the registered holder of the Warrant stating the adjusted Purchase
Price and the adjusted number of securities purchasable upon the exercise
thereof resulting from such event and setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. The
certificate of the Company's independent public accountants shall be conclusive
evidence of the correctness of any computation made hereunder.
4. Notice to Warrant Holder
Nothing contained herein shall be construed as conferring upon the
Warrant Holder the right to vote or to consent or to receive notice as a
shareholder in respect of the meetings of shareholders for the election of
directors of the Company or any other matter, or any other rights whatsoever as
a shareholder of the Company; provided, however, that in the event that:
(a) the Company shall take action to make any distribution
(other than cash dividends payable out of earnings or earned surplus) on the
Common Stock;
E-124
<PAGE> 4
(b) the Company shall take action to offer for subscription
pro rata to the holders of the Common Stock any additional shares of stock of
any class or other rights or securities convertible into the Common Stock;
(c) the Company shall take action to accomplish any capital
reorganization, or reclassification of the capital stock of the Company (other
than a change in par value, or a change from par value to no par value, or a
change from no par value to par value, or a subdivision or combination of the
Common Stock), or a consolidation or merger of the Company into, or a sale of
all or substantially all of its assets to, another corporation; or
(d) the Company shall take action looking to a voluntary
dissolution, liquidation or winding up of the Company; then, in any one or more
of such cases, the Company shall, (x) at least 10 days prior to the date on
which the books of the Company shall close or a record date shall be taken for
such distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, cause notice thereof to be sent to
the Warrant Holder at the address appearing on the Warrant register of the
Company and, (y) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, cause at
least 10 days' prior written notice of the date when the same shall take place
to be given to the Warrant Holder in the same manner. Such notice in accordance
with the foregoing clause (x) shall also specify, in the case of any such
distribution or subscription rights, the date on which the holders of the Common
Stock shall be entitled thereto, and such notice in accordance with the
foregoing clause (y) shall also specify the date on which the holders of the
Common Stock shall be entitled to exchange their shares of the Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Failure to give such notice or any defect
therein shall not affect the legality or validity of any of the matters set
forth in this Section 5 inclusive.
5. Investment Representation
The Warrant Holder, by his, her or its acceptance of this Warrant,
acknowledges that neither the Warrant nor the shares of the Common Stock
issuable upon exercise thereof have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, represents and
warrants to the Company that he, she or it is acquiring the Warrant for
investment and not with a view to, or in connection with, any distribution
thereof. The holder further represents and warrants that, if a registration
statement under the Securities Act is not effective with respect to the
underlying shares at the time of exercise, the Warrant Holder will acquire the
shares of the Common Stock for investment and not with a view to, or in
connection with, any distribution thereof.
E-125
<PAGE> 5
6. Transfers and Exchanges
The Company shall transfer, from time to time, any outstanding Warrant
upon the books to be maintained by the Company for that purpose, upon surrender
thereof for transfer properly endorsed or accompanied by appropriate
instructions for transfer. Upon any such transfer, a new Warrant shall be issued
to the transferee and the surrendered Warrant shall be canceled by the Company.
The Warrant so canceled shall be delivered to the Company from time to time upon
request. Warrants may be exchanged at the option of the holder thereof, when
surrendered at the office of the Company, for another Warrant, or other Warrants
of different denominations, of like tenor and representing in the aggregate the
rights to purchase a like number of shares. Anything in this Section 6 to the
contrary notwithstanding, no transfer shall be made if such transfer would
violate Section 5 of the Securities Act.
7. Payment of Taxes
The Company will pay any documentary stamp taxes attributable to the
initial issuance of the Common Stock issuable upon the exercise of the Warrant;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue or
delivery of any certificates for the Common Stock in a name other than that of
the registered holder of the Warrant in respect of which such shares are issued,
and in such case the Company shall not be required to issue or deliver any
certificates for the Common Stock or any Warrant for remaining shares until the
person requesting the same has paid to the Company the amount of such tax or has
established to the Company's satisfaction that such tax has been paid.
8. Mutilated or Missing Warrant
In case the Warrant shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue and deliver in exchange and substitution
for, and upon cancellation of, the mutilated Warrant, or in lieu of, and in
substitution for, the Warrant lost, stolen or destroyed, a new Warrant of like
tenor and representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of such
Warrant. Applicants for such substitute Warrant shall also comply with such
other reasonable regulations and pay such reasonable charges as the Company may
prescribe.
9. Reserve
The Company covenants and agrees that, from time to time, there will be
authorized and available for delivery a sufficient number of its shares of the
Common Stock or other securities into which the Warrant is then exercisable to
permit the exercise of the Warrant at the time outstanding as and when the
certificates shall, from time to time, be deliverable in accordance with Section
1 hereof. In the event that there are insufficient shares or other securities
for such purpose, the Company shall use its best efforts to seek shareholder
approval for an Amendment to the
E-126
<PAGE> 6
Company's Certificate of Incorporation and/or to take such other action as is
necessary or appropriate to cause such shares or other securities to be
authorized.
10. Governing Law
The Warrant evidenced hereby shall be construed and enforced in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in that State, without giving effect to any principles of
conflicts of laws.
IN WITNESS WHEREOF, Substance Abuse Technologies, Inc. has caused this
Warrant to be signed manually by a duly authorized officer.
Dated: SUBSTANCE ABUSE TECHNOLOGIES, INC.
By
---------------------------------------
E-127
<PAGE> 7
EXHIBIT A
ELECTION TO PURCHASE
To Substance Technologies, Inc.
c/o
--------------------------------
--------------------------------
--------------------------------
The undersigned hereby irrevocably elects to exercise the Warrant
represented by the within Warrant Certificate to purchase shares of the
Common Stock issuable upon the exercise of the Warrant and requests that
certificates for such shares shall be issued in the name of
- -------------------------------------------------------------------------------
(Name)
- -------------------------------------------------------------------------------
(Address)
- -------------------------------------------------------------------------------
(Taxpayer number)
and be delivered
to
-----------------------------------------------------------------------------
(Name)
at
-----------------------------------------------------------------------------
(Address)
and, if said number of shares of the Common Stock shall not be all the shares of
the Common Stock evidenced by the within Warrant Certificate, that a new Warrant
Certificate for the balance remaining of such said shares be registered in the
name of
- -------------------------------------------------------------------------------
(Name)
- -------------------------------------------------------------------------------
(Address)
- -------------------------------------------------------------------------------
(Taxpayer number)
and delivered to the undersigned at the address below stated.
Dated:________________, 19__
E-128
<PAGE> 8
Name of holder of Warrant Certificate:
- ------------------------------------------------------------------------
(please print)
- ------------------------------------------------------------------------
(Address)
- ------------------------------------------------------------------------
(Signature)
Note: The above signature must correspond with the
name as written upon the face of this Warrant
Certificate in every particular, without
alteration or enlargement or any change
whatever.
E-129
<PAGE> 1
EXHIBIT 10(ee)
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT OR LAWS, THE RULES AND
REGULATIONS THEREUNDER AND THE PROVISIONS
OF THIS WARRANT.
WARRANT TO PURCHASE ____________ SHARES
OF COMMON STOCK OF
SUBSTANCE ABUSE TECHNOLOGIES, INC.
ISSUED TO
---------------------
DATED:
--------------
WARRANT NO.
-----
(INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)
THIS CERTIFIES THAT _______________ (the "Warrant Holder") is the owner
of a Warrant, subject to adjustment as provided in Section 3 hereof, which
entitles the owner thereof to purchase, in whole or in part, and from time to
time, as provided in Section 1 hereof, _____________ fully paid and
nonassessable shares of the Common Stock, no par value (the "Common Stock"), of
Substance Abuse Technologies, Inc., a Delaware corporation (hereinafter called
the "Company"), at the purchase price per share of $________ (the "Purchase
Price"), subject to adjustment as provided in Section 3 hereof, payable in
lawful money of the United States of America upon surrender of this Warrant and
payment of the Purchase Price in lawful money of the United States of America at
the principal office of the Company (currently 4517 NW 31st Avenue, Ft.
Lauderdale, Florida 33309) or at such other place as the Company may designate
by written notice to the Warrant Holder.
1. Exercise
The Warrant evidenced hereby shall become exercisable in installments
as follows: (1) as to ____________ shares of Common Stock on
_______________________and shall terminate at 5:00 P.M., New York Time, on
______________ , and (2) as to an additional ____________ shares of Common Stock
on each ____________ thereafter, and each such additional shares shall terminate
at
E-130
<PAGE> 2
5:00 P.M., New York Time, three years from their respective dates of
exercise; provided, that however, in no event may any fractional share of the
Common Stock be issued. In the event that a fractional share would otherwise be
issued as a result of any adjustment made pursuant to Section 3 hereof or
otherwise, payment for such fractional share shall be made on the basis of the
Market Price on the date of exercise. For the purpose of this Section 1, the
term "Market Price" shall mean (a) if the Common Stock is traded on a national
securities exchange or on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") System, the closing sales price (or, if no sales
on that day, the high bid price) or (b) if the Common Stock is not traded as
provided in subsection (a), the closing bid price as reported in the OTC
Bulletin Board of the National Association of Securities Dealers, Inc. (the
"NASD") or in the pink sheets by the National Quotation Bureau, Inc.
Upon any exercise of the Warrant evidenced hereby, the form of election
to purchase set forth as Exhibit A hereto shall be properly completed, executed
and delivered to the Company, together with full payment to the Company of the
Purchase Price for the shares as to which the Warrant is exercised by certified
check or bank draft. In the event that there is only a partial exercise of the
Warrant evidenced hereby, there shall be issued to the Warrant Holder a new
Warrant Certificate, in all respects similar to this Warrant Certificate,
evidencing the number of shares of the Common Stock still available for
exercise.
Upon receipt of full payment and properly completed documentation, the
Company shall then cause the Transfer Agent for the Common Stock to issue fully
paid and nonassessable shares of the Common Stock as are represented by the
exercise.
If this Warrant shall be surrendered upon exercise within any period
during which the transfer books for the Common Stock are closed for any purpose,
the Company shall not be required to make delivery of certificates for shares of
the Common Stock until the date of the reopening of said transfer books.
2. Expiration Date
The Warrant evidenced hereby may not be exercised after the expiration
dates set forth in Section 1 hereof, with respect to the shares of the Common
Stock as to which the Warrant may be exercised and, to the extent any such
shares are not exercised by such expiration dates, the Warrant evidenced hereby
shall become void.
3. Adjustments
Subject to the provisions of this Section 3, the Purchase Price and the
shares of the Common Stock as to which the Warrant may be exercised shall be
subject to adjustment from time to time as hereinafter set forth:
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<PAGE> 3
(a) If at any time, or from time to time, the Company shall,
by subdivision, consolidation, or reclassification of shares, or otherwise,
change as a whole the outstanding shares of the Common Stock into a different
number or class of shares, the number and class of shares so changed shall
replace the shares outstanding immediately prior to such change and the Purchase
Price and the number of shares purchasable under the Warrant immediately prior
to the date on which such change shall become effective shall be proportionately
adjusted.
(b) Irrespective of any adjustments or change in the Purchase
Price or the number of securities actually purchasable under the Warrant, the
Warrant theretofore and thereafter issued may continue to express the exercise
price and the number of securities purchasable thereunder as the Purchase Price
and the number of securities purchasable were expressed in the Warrant when
initially issued.
(c) If at any time while the Warrant is outstanding, the
Company shall consolidate with, or merge into, another corporation, firm or
entity, or otherwise enter into a form of business combination, the holder of
the Warrant shall thereafter be entitled upon exercise thereof to purchase, with
respect to each security purchasable thereunder immediately prior to the date on
which such consolidation or merger or other form of business combination shall
become effective, the securities or property to which a holder of one such
security would have been entitled upon such consolidation or merger or other
form of business combination, without any change in, or payment in addition to,
the Purchase Price in effect immediately prior to such consolidation or merger
or other form of business combination, and the Company shall take such steps in
connection with such consolidation or merger or other form of business
combination as may be necessary to assure that all the provisions of the Warrant
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any securities or property thereafter deliverable upon the exercise of the
Warrant.
(d) The Board of Directors of the Company, in its discretion,
may, at any time during the exercise period of the Warrant, extend the exercise
period or reduce the Purchase Price for all warrants then outstanding.
(e) Upon the happening of any event requiring the adjustment
of the exercise price hereunder, the Company shall forthwith give written notice
thereof to the registered holder of the Warrant stating the adjusted Purchase
Price and the adjusted number of securities purchasable upon the exercise
thereof resulting from such event and setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. The
certificate of the Company's independent public accountants shall be conclusive
evidence of the correctness of any computation made hereunder.
4. Notice to Warrant Holder
Nothing contained herein shall be construed as conferring upon the
Warrant Holder the right to vote or to consent or to receive notice as a
shareholder in respect of the meetings of shareholders
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<PAGE> 4
for the election of directors of the Company or any other matter, or any other
rights whatsoever as a shareholder of the Company; provided, however, that in
the event that:
(a) the Company shall take action to make any
distribution (other than cash dividends payable out of earnings or earned
surplus) on the Common Stock;
(b) the Company shall take action to offer for subscription
pro rata to the holders of the Common Stock any additional shares of stock of
any class or other rights or securities convertible into the Common Stock;
(c) the Company shall take action to accomplish any capital
reorganization, or reclassification of the capital stock of the Company (other
than a change in par value, or a change from par value to no par value, or a
change from no par value to par value, or a subdivision or combination of the
Common Stock), or a consolidation or merger of the Company into, or a sale of
all or substantially all of its assets to, another corporation; or
(d) the Company shall take action looking to a voluntary
dissolution, liquidation or winding up of the Company; then, in any one or more
of such cases, the Company shall, (x) at least 10 days prior to the date on
which the books of the Company shall close or a record date shall be taken for
such distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, cause notice thereof to be sent to
the Warrant Holder at the address appearing on the Warrant register of the
Company and, (y) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, cause at
least 10 days' prior written notice of the date when the same shall take place
to be given to the Warrant Holder in the same manner. Such notice in accordance
with the foregoing clause (x) shall also specify, in the case of any such
distribution or subscription rights, the date on which the holders of the Common
Stock shall be entitled thereto, and such notice in accordance with the
foregoing clause (y) shall also specify the date on which the holders of the
Common Stock shall be entitled to exchange their shares of the Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Failure to give such notice or any defect
therein shall not affect the legality or validity of any of the matters set
forth in this Section 5 inclusive.
5. Investment Representation
The Warrant Holder, by his, her or its acceptance of this Warrant,
acknowledges that neither the Warrant nor the shares of the Common Stock
issuable upon exercise thereof have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, represents and
warrants to the Company that he, she or it is acquiring the Warrant for
investment and not with a view to, or in connection with, any distribution
thereof. The holder further represents and warrants that, if a registration
statement under the Securities Act is not effective with respect to the
underlying shares at the time of exercise, the Warrant Holder will acquire the
shares of the
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Common Stock for investment and not with a view to, or in connection with, any
distribution thereof.
6. Transfers and Exchanges
The Company shall transfer, from time to time, any outstanding Warrant
upon the books to be maintained by the Company for that purpose, upon surrender
thereof for transfer properly endorsed or accompanied by appropriate
instructions for transfer. Upon any such transfer, a new Warrant shall be issued
to the transferee and the surrendered Warrant shall be canceled by the Company.
The Warrant so canceled shall be delivered to the Company from time to time upon
request. Warrants may be exchanged at the option of the holder thereof, when
surrendered at the office of the Company, for another Warrant, or other Warrants
of different denominations, of like tenor and representing in the aggregate the
rights to purchase a like number of shares. Anything in this Section 6 to the
contrary notwithstanding, no transfer shall be made if such transfer would
violate Section 5 of the Securities Act.
7. Payment of Taxes
The Company will pay any documentary stamp taxes attributable to the
initial issuance of the Common Stock issuable upon the exercise of the Warrant;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue or
delivery of any certificates for the Common Stock in a name other than that of
the registered holder of the Warrant in respect of which such shares are issued,
and in such case the Company shall not be required to issue or deliver any
certificates for the Common Stock or any Warrant for remaining shares until the
person requesting the same has paid to the Company the amount of such tax or has
established to the Company's satisfaction that such tax has been paid.
8. Mutilated or Missing Warrant
In case the Warrant shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue and deliver in exchange and substitution
for, and upon cancellation of, the mutilated Warrant, or in lieu of, and in
substitution for, the Warrant lost, stolen or destroyed, a new Warrant of like
tenor and representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of such
Warrant. Applicants for such substitute Warrant shall also comply with such
other reasonable regulations and pay such reasonable charges as the Company may
prescribe.
9. Reserve
The Company covenants and agrees that, from time to time, there will be
authorized and available for delivery a sufficient number of its shares of the
Common Stock or other securities into which the Warrant is then exercisable to
permit the exercise of the Warrant at the time outstanding as and when the
certificates shall, from time to time, be deliverable in accordance with Section
1
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<PAGE> 6
hereof. In the event that there are insufficient shares or other securities for
such purpose, the Company shall use its best efforts to seek shareholder
approval for an Amendment to the Company's Certificate of Incorporation and/or
to take such other action as is necessary or appropriate to cause such shares
or other securities to be authorized.
10. Governing Law
The Warrant evidenced hereby shall be construed and enforced in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in that State, without giving effect to any principles of
conflicts of laws.
IN WITNESS WHEREOF, Substance Abuse Technologies, Inc. has caused
this Warrant to be signed manually by a duly authorized officer.
Dated: SUBSTANCE ABUSE TECHNOLOGIES, INC.
By:________________________________
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<PAGE> 7
EXHIBIT A
ELECTION TO PURCHASE
To Substance Technologies, Inc.
c/o ___________________________________
___________________________________
___________________________________
The undersigned hereby irrevocably elects to exercise the Warrant
represented by the within Warrant Certificate to purchase shares of the
Common Stock issuable upon the exercise of the Warrant and requests that
certificates for such shares shall be issued in the name of
- -------------------------------------------------------------------------
(Name)
- -------------------------------------------------------------------------
(Address)
- -------------------------------------------------------------------------
(Taxpayer number)
and be delivered to
-----------------------------------------------------
(Name)
at
-----------------------------------------------------------------------
(Address)
and, if said number of shares of the Common Stock shall not be all the shares of
the Common Stock evidenced by the within Warrant Certificate, that a new Warrant
Certificate for the balance remaining of such said shares be registered in the
name of
- -------------------------------------------------------------------------
(Name)
- -------------------------------------------------------------------------
(Address)
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
(Taxpayer number)
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<PAGE> 8
and delivered to the undersigned at the address below stated.
Dated:________________, 19__
Name of holder of Warrant Certificate:
- -------------------------------------------------------------------------
(please print)
- -------------------------------------------------------------------------
(Address)
- -------------------------------------------------------------------------
(Signature)
Note: The above signature must correspond with the name
as written upon the face of this Warrant
Certificate in every particular, without
alteration or enlargement or any change whatever.
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<PAGE> 1
EXHIBIT 10(jj)
NATIONAL MEDICAL REVIEW OFFICES, INC.
CONFIDENTIAL
July 18, 1997
Robert Stutman, Chief Executive Officer
Substance Abuse Technologies, Inc.
4517 N.W. 31st Avenue
Ft. Lauderdale, Florida 33309
Re: Letter of Agreement re Affiliation and Acquisition
Dear Robert:
On behalf of National Medical Review Offices, Inc. ("NMRO"), we are pleased to
submit for your review and signature, this letter of agreement (the "Letter"),
between NMRO and Substance Abuse Technologies, Inc. ("SAT"), which describes
the terms of our understanding and agreement regarding our affiliation in
connection with the acquisition by SAT from NMRO, its successors or assigns
(the "SAT Acquisition"), of certain assets of DataMed International ("DMI"), a
division of Global Med Technologies, Inc. ("GMTI").
As you are aware, NMRO has entered into a letter of intent with GMTI dated June
20, 1997 (the "GMTI Letter"), which describes the terms of the proposed
acquisition by NMRO from GMTI of certain DMI assets (the "NMRO Acquisition").
The purpose of this Letter is to memorialize our agreement on the material terms
of the SAT Acquisition, which are set forth in the Term Sheet that is attached
to and forms a part of this Letter. In order to be sure that we all understand
and agree upon the basic terms of the SAT Acquisition, we ask that you carefully
review the Term Sheet. The ultimate success of our agreements will require that
certain other commitments also be made, including the following:
1. Exclusive Dealing. SAT acknowledges that NMRO has expended
substantial sums of time and money in connection with legal,
accounting, financial, and due diligence work performed in conjunction
with the NMRO Acquisition. Accordingly, for purposes of inducing NMRO
to execute this Letter, SAT agrees that during the period of ninety
(90) days from the effective date of this Letter (i.e., the date of
your execution of this Letter)(for purposes of this letter, we will
refer to the this ninety day period as the "Exclusive Dealing
Period"), SAT will not, and will not permit any of its agents or
employees to, directly or indirectly, initiate, encourage or hold
discussions or negotiations with, or submit or accept the submission
of any offers or proposals from, or provide any nonpublic information
to, any person or entity other than NMRO with respect to any
affiliation or arrangement similar to those arrangements described in
this Letter, or any
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purchase or lease of all or a material part of the assets or business
of DMI, whether by sale of assets, capital stock, merger or
consolidation, or otherwise, without the prior written consent of
NMRO, which consent NMRO may give or withhold in its sole discretion.
Without limiting the generality of the foregoing, SAT agrees to revoke
expressly any previous offer it may have made to GMTI regarding the
purchase of DMI, or any asset of DMI. SAT further agrees during the
Exclusive Dealing Period to promptly notify NMRO of, and also to
immediately reject, any proposal or offer that it may receive within
the scope of the foregoing exclusivity requirements. Notwithstanding
any of the foregoing provisions of this paragraph 1, NMRO agrees that
SAT shall be relieved of any further, executory obligations under this
paragraph 1, effective upon the occurrence of any of the following:
(i) on or before 5:00 p.m. (Pacific Time) on Friday, July 11, 1997,
NMRO notifies GMTI of NMRO's election not to proceed with the NMRO
Acquisition; or (ii) NMRO defaults in the performance of any material
obligation under this Letter, and such default continues uncured for a
period of ten (10) days following the receipt by NMRO from SAT of
written notice specifying any such default with particularity; or
(iii) NMRO defaults in the performance of any material obligation
under the GMTI Letter, and such default continues uncured and
uncontested by NMRO for a period of two (2) business days following
the receipt by NMRO from GMTI of written notice specifying any such
default with particularity.
2. Due Authorization. SAT represents and warrants that (i) all
approvals, authorizations, and actions or orders required of SAT for
the authorization, execution and delivery of this Letter, and for the
consummation of the SAT Acquisition contemplated by this Letter have
been obtained, and (ii) the execution and delivery of this Letter by
SAT, and the execution and delivery by SAT of the definitive
agreements contemplated by this Letter, do not and will not conflict
with or violate any contract to which SAT is a party. NMRO represents
and warrants that (i) all approvals, authorizations, and actions or
orders required of NMRO for the authorization, execution and delivery
of this Letter, and for the consummation of the SAT Acquisition
contemplated by this Letter have been obtained, and (ii) the execution
and delivery of this Letter by NMRO, and the execution and delivery by
NMRO of the definitive agreements contemplated by this Letter, do not
and will not conflict with or violate any contract to which NMRO is a
party.
3. Business in the Ordinary Course. During the Exclusive Dealing Period,
SAT agrees to operate its business only in the usual, regular and
ordinary course consistent with past practices. During the Exclusive
Dealing Period, NMRO agrees to operate its business only in the usual,
regular and ordinary course consistent with past practices.
4. Safeguarding Confidential Information. Each party agrees not to
disclose any confidential documents and information provided by the
other party pursuant to this Letter (the "Confidential Information"),
except as follows: (i) each party may disclose Confidential
Information when required by law to do so; (ii) each party may
disclose Confidential Information to its legal and financial
consultants, and employees for purposes of reviewing the proposed SAT
Acquisition; and (iii) Confidential Information does not include any
document or information which: (a) is, or hereafter becomes,
generally available to the public other than as a result of a
disclosure by a party, (b) was available to a party on a
non-confidential basis prior to such party's receipt thereof pursuant
to this
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<PAGE> 3
Letter, or (c) becomes available to a party on a non-confidential
basis from a source other than the other party. If this Agreement
terminates prior to completion of the SAT Acquisition, then each party
agrees to promptly return to the other party the originals and
all copies of any Confidential Information received from the other
party pursuant to this Letter.
5. Confidentiality of Acquisition. SAT and NMRO and their respective
representatives agree to keep this Letter, the Acquisition and the
matters contemplated herein confidential, except for disclosures that
are required by law, that receive the prior written consent of the
other party, or that are made by a party to its employees,
attorneys and financial advisors for purposes of reviewing the
proposed SAT Acquisition. NMRO and SAT agree not to make any public
pronouncement regarding the transactions contemplated herein without
the prior written consent of the other, except to the extent required
by law. For purposes of this paragraph, "public pronouncement" means
any statement, however communicated, intended for general
dissemination, including any press release, but does not include
materials used in connection with the filing with a regulatory body
(including the Secretary of State and federal and state securities
regulators) or any statement made for the legitimate business purposes
of the maker, intended for the internal use of the maker and not
likely to become available to the general public or any segment
thereof.
6. Cooperation. SAT and NMRO each agree to cooperate with the other,
and to execute such other documents and take such other actions as may
be reasonably necessary or desirable, in order to effect the
transactions contemplated by this Letter. Without limiting the
generality of the foregoing, SAT and NMRO agree to the following: (i)
the parties agree to coordinate all communications with GMTI regarding
the SAT Acquisition and the transactions contemplated herein; (ii)
each party agrees not to enter into any agreement with GMTI that is
binding on the other party, except with the prior written consent of
the other party; (iii) each party agrees to provide to the other, and
its representatives, with any and all information and records relating
to its business, properties and personnel, as may be reasonably
necessary and appropriate in connection with the NMRO Acquisition and
the SAT Acquisition; and (iv) each party agrees to cause its
accountants and financial advisors to cooperate with the other in
making available all such financial and tax information requested.
7. Expenses. SAT and NMRO agree that fees and out-of-pocket expenses
incurred by NMRO, including fees of NMRO's agents, advisers,
attorneys and accountants, with respect to the negotiation of this
Letter and the preparation and negotiation of definitive agreements
contemplated by this Letter (collectively, the "Transaction Costs"),
shall be paid and discharged in accordance with the following: (i)
SAT agrees to pay and discharge fifty percent (50%) of the Transaction
Costs incurred by NMRO during the period from and including June 20,
1997, through and including July 10, 1997; and (ii) if SAT does not
make any election in accordance with paragraph 8 below, then SAT
agrees to pay and discharge one hundred percent (100%) of the
Transaction Costs incurred by NMRO during the period from and
including July 11, 1997, through and including the closing of the SAT
Acquisition. SAT shall be obligated to pay and discharge the
foregoing Transaction Costs within thirty (30) days of NMRO's delivery
of reasonable documentation thereof.
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<PAGE> 4
8. Conditions to Closing of SAT Acquisition. SAT and NMRO agree that the
obligations and commitments of the parties set forth in this Letter and
the Term Sheet, are intended to create legally binding obligations
between the parties. SAT and NMRO further agree that the consummation
of the SAT Acquisition by the parties shall be subject to satisfaction
of the following two (2) conditions precedent: (i) completion by SAT of
its due diligence investigations of DMI prior to 5:00 p.m. (Mountain
Time) on Thursday, July 10, 1997 (the "Due Diligence Deadline"); and
(ii) the completion of the NMRO Acquisition.
9. Survival of Certain Obligations. Except as set forth in paragraph 1,
each party's obligations set forth in this Letter shall remain in full
force and effect during the entire Exclusive Dealing Period, and shall
survive the termination of this Letter, notwithstanding any failure by
either party to complete the SAT Acquisition.
10. Assignment. SAT may not assign any rights or delegate any duties
hereunder without receiving the prior written consent of NMRO, which
consent NMRO may not unreasonably withhold. Any sale, lease,
assignment, merger or other transfer, in a single transaction or a
series of transactions, of fifty percent (50%) or more of the assets,
ownership, or membership interests of SAT, shall constitute an
assignment that is subject to and prohibited by the provisions of this
paragraph 10. NMRO may not assign any rights or delegate any duties
hereunder without receiving the prior written consent of SAT, which
consent SAT may not unreasonably withhold. Any assignment permitted
hereunder shall be effective only if NMRO's or SAT's assignee agrees
in writing to assume all of the assigning party's obligations and
liabilities hereunder, and to be bound by all of the terms and
conditions of this Letter, as it may be amended or supplemented from
time to time.
If you wish to accept the proposal expressed in this Letter and the attached
Term Sheet, please so indicate by having an authorized SAT representative
countersign the enclosed duplicate copy and return it to NMRO, or its legal
counsel. This Letter may be signed in counterparts, and original signatures may
be transmitted by facsimile.
On behalf of NMRO, we would like to thank you for giving us an opportunity to
work with you in developing a mutually beneficial relationship. We encourage you
to contact us at any time if we can be of assistance.
Sincerely,
National Medical Review Offices, Inc.
By:
Its:
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<PAGE> 5
Accepted and Agreed to:
Substance Abuse Technologies, Inc.
By:
Its:
Date:
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<PAGE> 6
TERM SHEET
NATIONAL MEDICAL REVIEW OFFICES, INC.
SUBSTANCE ABUSE TECHNOLOGIES, INC.
ACQUISITION OF
DATAMED INTERNATIONAL, A DIVISION OF GLOBAL MED TECHNOLOGIES, INC.
I. PURCHASE CONSIDERATION
I.1 $1,600,000.00 payable in cash at closing
I.2 Assumption of all obligations assumed in NMRO Acquisition
II. INCLUDED ASSETS
II.1 all DMI assets included in NMRO Acquisition
II.2 except Excluded Assets
III. EXCLUDED ASSETS
III.1 all DMI assets excluded from NMRO Acquisition
III.2 all trade names, trade marks, service names and services marks
used in connection with provision by DMI of medical review
officer services, including, without limitation, the use of
"National MRO" and "MRO" and similar names
IV. ESCROW DEPOSIT
IV.1 SAT to pay to NMRO on Monday, July 7, 1997, the sum of
$600,000.00, in exchange for assignment by NMRO of its rights
under the Escrow Agreement among GMTI, NMRO and Tri-State Bank
(the "Escrow Agreement")
IV.2 deposit to be refundable on written instruction of SAT prior
to expiration of the Due Diligence Deadline, with such refund
to be made in accordance with the Escrow Agreement
IV.3 deposit to be refundable on joint written instruction of SAT
and GMTI after the expiration of the Due Diligence Deadline,
in accordance with the Escrow Agreement
IV.4 deposit to be held in interest bearing account, with interest
owned by SAT
IV.5 escrow agent fees paid by SAT up to $1,000; amount over
$1,000 paid by GMTI
IV.6 deposit to be applied against purchase price at closing
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<PAGE> 7
V. DUE DILIGENCE
V.1 SAT to complete all due diligence investigations of DMI prior
to Due Diligence Deadline
V.2 SAT to make best efforts to complete all due diligence as
soon as reasonably practical, but in no event later than the
Due Diligence Deadline;
V.3 SAT to provide written notice to NMRO prior to the Due
Diligence Deadline, of SAT's election to proceed, or not to
proceed, with the SAT Acquisition
VI. INTERIM MANAGEMENT AGREEMENT
VI.1 SAT to assume operations of DMI as of June 30, 1997, pursuant
to an Interim Management Agreement until approval of the NMRO
Acquisition by the shareholders of GMTI, and the closing of
the NMRO Acquisition
VI.2 Date of assumption of operations of DMI to be no later than
July 11, 1997 (with retroactive effect to June 30, 1997)
VI.3 SAT to assume all DMI accounts receivable as of June 30,
1997, (represented by GMTI to be approximately $900,000.00)
VI.4 SAT to assume all DMI accounts payable as of June 30, 1997,
(represented by GMTI to be approximately $410,000.00), and
accrued expenses (represented by GMTI to be approximately
$590,000.00)
VI.5 SAT to assume all risk of losses incurred in operation of DMI,
except if the GMTI shareholders fail to approve NMRO
Acquisition
VII. MRO SERVICES AGREEMENT
VII.1 SAT to enter into exclusive MRO services agreement with NMRO
VII.2 term of 5 years, with extension by mutual agreement
VII.3 NMRO to be sole and exclusive provider of all MRO Services for
all SAT customers, subject to termination by SAT due to a
default by NMRO that remains uncured for thirty (30) days
after notice
VII.4 MRO Services means and includes the services described in
addendum 1 attached hereto, including but not limited to,
receipt of all drug test results, processing, medical review,
and reporting of drug test results to SAT
VII.5 drug test results include all positive and all negative
results
VII.6 all drug test results, including both positive and negative,
to be processed by NMRO, including any SAT customer election
for positive reports only, and fee applies to each and every
test, both positive and negative
VII.7 SAT guarantees minimum volume of 400,000 tests per year,
beginning in calendar year 1998
VII.8 Fee for first 400,000 tests per year shall be $1.35 per test,
payable monthly
VII.9 Fee for each test in excess of 400,000 per year shall be
$1.25
VII.10 during period covered by minimum volume guaranty, NMRO to
bill and GMTI to pay minimum monthly amount of $45,000.00
VII.11 all fees payable monthly with thirty (30) days of invoice
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<PAGE> 8
VII.12 Fee for review of positive screening test other than a
laboratory test (e.g., an on-site test), shall be NMRO's usual
and customary fee, but not less than $49, and subject to the
most competitive price covenant as set forth below
VII.13 NMRO agrees to most competitive price covenant (most favored
nations clause) for its fees for substantially the same MRO
Services provided by NMRO to other TPAs, and other customers
(except for WAL MART and HSNA), for an initial period of 180
days, subject to: (i) SAT establishes computer interface and
download capability and provides direct customer service; (ii)
ultimate price to be based upon level/scope of service; (iii)
after first 180 days, the parties to renegotiate price based
on level/scope of service; and (iv) prices not to exceed $1.35
and $1.25 as set forth above
VII.14 NMRO to perform all billing services when requested by SAT
VII.15 NMRO to have the right to audit, at its expense, SAT books of
account and records relating to MRO Services and laboratory
services provided to SAT customers
VII.16 NMRO to provide 1 non-physician FTE in Florida to support
local MRO services
VIII. NON-COMPETITION AGREEMENT OF SAT
VIII.1 SAT agrees that during the term of the MRO Services Agreement,
SAT shall not directly or indirectly, without the prior
written consent of NMRO, which consent may be withheld by NMRO
in its sole and absolute discretion, (i) own, operate or
establish, provide services for or on behalf of, or otherwise
engage or participate in, or (ii) assist any other person or
entity in owning, operating, establishing, providing services
for or on behalf of or engaging or participating in, any
business or activity which is, or will become, competitive
with any MRO Services provided by NMRO under the MRO Services
Agreement with SAT.
IX. REFERRAL AND NON-SOLICITATION AGREEMENT OF NMRO
IX.1 NMRO agrees that during the term of the MRO Services
Agreement, SAT shall be its primary referral source for
prospective customers seeking full consulting for substance
abuse in the workplace (including employer drug testing policy
development), and background screens.
IX.2 NMRO agrees that during the term of the MRO Services
Agreement, NMRO shall not directly, without the prior
written consent of SAT, which consent may be withheld by SAT
in its sole and absolute discretion, solicit any then
existing or prospective SAT customer for the provision of any
of the following services, so long as such service continues
to be provided by SAT: (i) full consulting for substance
abuse in the workplace (including employer drug testing
policy development), and (ii) background screens. For
purposes of the foregoing, a person or entity shall be
considered to be a "prospective SAT customer" only if all of
the following apply: (i) NMRO has received notice from SAT
in writing that such person or entity has become a
prospective purchaser of services from SAT; (ii) NMRO is not
already engaged in discussions with such person or entity;
and
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<PAGE> 9
(iii) SAT and such person or entity are actively engaged in
negotiations for the provision of services by SAT.
X. COLLATERAL ASSIGNMENT
X.1 SAT agrees to collaterally assign to NMRO all MRO Services
Agreements between SAT and DMI Customers, and all of SAT's
rights and obligations thereunder, effective upon termination
of the MRO Services Agreement between SAT and NMRO due to a
default by SAT in the performance of its payment obligations
or non-compete obligations, that remains uncured for thirty
(30) days after notice
X.2 SAT agrees to use its best efforts to cause to be included in
each MRO Services Agreement between SAT and a DMI Customers, a
clause expressly permitting the assignment of such agreement
by SAT to NMRO
X.3 assignment to be effective upon written notice from NMRO
following SAT's failure to cure a covered default within
thirty (30) days after notice
X.4 assignment to be effective in addition to any other remedies
to which NMRO may be entitled as a result of SAT breach
XI ADDITIONAL AGREEMENTS
XI.1 Definitive agreements reflecting the SAT Acquisition will
include representations, warranties, conditions, and other
terms customary for transactions of this type
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<PAGE> 1
EXHIBIT 10(jj)(1)
ASSIGNMENT AND ASSUMPTION OF INTERIM MANAGEMENT AGREEMENT
This Assignment and Assumption of Interim Management Agreement
("Agreement") is made and entered into this 15th day of July, 1997, by and
between National Medical Review Offices, Inc., with offices at 5750 Wilshire
Boulevard, Suite 275, Los Angeles, California ("Assignor"), and Substance
Abuse Technologies, Inc., a corporation organized under the laws of the
State of Delaware, with offices at 4517 N.W. 31st Avenue, Ft. Lauderdale,
Florida 33309 ("Assignee"). Assignor and Assignee are collectively referred
to as the "Parties."
WITNESSETH
WHEREAS, Assignor entered into a letter of intent with Global Med
Technologies, Inc. ("GMTI"), dated June 20, 1997 (the "GMTI Letter")(the Parties
acknowledge that Assignor has not provided Assignee with a copy of the GMTI
Letter), which describes the terms of the proposed acquisition by Assignor from
GMTI (the "NMRO Acquisition") of the DataMed International Division of GMTI
("DataMed"), located at 12600 West Colfax, Suite A-500, Lakewood, Colorado
80215-3734 (the "Premises");
WHEREAS, pursuant to the GMTI Letter, Assignor and GMTI entered into an
Interim Management Agreement dated July 3, 1997 (the "Management Agreement"),
pursuant to which direction and control of the operations of DataMed have been
transferred from GMTI to NMRO as of June 30, 1997, on an interim basis until the
closing of the NMRO Acquisition;
WHEREAS, Assignor and Assignee entered into a Letter of Agreement (the
"Letter Agreement"), dated July 3, 1997, pursuant to which the Assignor agreed
to sell, and Assignee agreed to purchase, subject to certain conditions and
reservations, the assets of DataMed purchased by Assignor from GMTI, in
consideration of the payment by Assignee of $1,600,000.00 and the assumption by
Assignee of certain scheduled liabilities (the "SAT Acquisition");
WHEREAS, the Letter Agreement provides for Assignee to assume directly
the operations of DataMed no later than July 11, 1997 (with a retroactive effect
to June 30, 1997);
WHEREAS, Assignor announced its intention to assign the Management
Agreement to Assignee, and in response, GMTI stated that (i) GMTI adamantly
objected to any such assignment, and (ii) GMTI would not sign the final asset
purchase agreement with Assignor unless the asset purchase agreement contained a
provision amending the Management Agreement to make it non-assignable;
WHEREAS, Assignor has been managing DataMed pursuant to the Management
Agreement, and the Parties jointly elected to delay temporarily the assignment
of the Management Agreement by Assignor to Assignee, in order to allow the
Parties to be better positioned to take
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<PAGE> 2
immediate action in response to any action taken by GMTI that would obstruct or
otherwise interfere with the assignment and assumption of the Management
Agreement;
WHEREAS, Assignor now desires to assign all of its rights, title and
interests in and to the Management Agreement to Assignee, and Assignee now
desires to accept assignment and assume and perform the obligations of Assignor
under the Management Agreement, in accordance with the covenants, conditions and
restrictions of this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, conditions, and restrictions hereinafter set forth, the Parties
hereby agree as follows:
1. Assignment. Subject to the covenants, conditions, and restrictions
set forth herein, Assignor hereby unconditionally assigns and transfers to
Assignee, effective as of the 11th day of July, 1997 (the "Effective Date"), all
of Assignor's right, title and interest in and to the Management Agreement, a
copy of which is attached hereto as Exhibit A. Assignor represents and warrants
that (i) the Management Agreement attached hereto as Exhibit A constitutes the
entire agreement between Assignor and GMTI with respect to the management of
DataMed by Assignor, and (ii) the Management Agreement is in full force and
effect as of the date hereof.
2. Assumption. Subject to the covenants, conditions, and restrictions
set forth herein, Assignee hereby accepts the foregoing assignment and agrees
fully and faithfully to assume and perform each and every obligation, term,
condition and covenant to be performed by Assignor in accordance with and
subject to the covenants, conditions and restrictions set forth in the
Management Agreement, including, without limitation, the provisions creating a
retroactive effect to June 30, 1997. Notwithstanding the foregoing, the Parties
acknowledge and agree that Assignee shall not be liable to Assignor for failure
to perform any of the obligations required under the Management Agreement if and
to the extent that such performance by Assignee is prevented by the actions or
conduct of GMTI.
3. Withdrawal of Assignor on Future Date Certain. The Parties agree
that Assignor will withdraw from direct participation in the direction and
control of DataMed on a future date to which the Parties will hereafter agree.
The Parties agree that this date will be selected in order to maximize the
ability of the Parties to effectively oppose any action that GMTI may take to
obstruct or otherwise interfere with the assignment and assumption of the
Management Agreement in accordance with this Agreement, and the performance by
Assignee of the management functions thereunder. If GMTI takes any action that
obstructs or otherwise interferes with the assignment and assumption of the
Management Agreement, or the performance by Assignee of the management functions
thereunder, then the Parties agree that Assignor will continue to manage DataMed
in accordance with the following: (i) Assignor agrees to manage DataMed as SAT's
agent under the Management Agreement in accordance with the provisions of
Section 4 below; (ii) Assignee agrees to reimburse all of Assignor's labor and
expenses incurred in such management of DataMed; and (iii) Assignor's
obligations will terminate at such time as the Parties mutually agree, but not
later than termination of the Management Agreement.
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4. Relation Prior to Withdrawal by Assignor. Prior to the withdrawal by
Assignor from direct participation in the direction and control of DataMed on
the date set by the Parties in accordance with Section 3 above, Assignor will
continue to participate in the direction and control of DataMed at the Premises,
subject to the rights of Assignee hereunder and under the Management Agreement.
Assignor will not be a fiduciary or trustee, or have any fiduciary duty or
obligation to Assignee. Assignor's sole obligation shall be to maintain the
status quo of DataMed operations, except pursuant to the prior instruction or
authorization of Assignee. Assignor makes no warranties, express or implied, as
to the results of operation of DataMed, or the net book value, net worth,
liquidation value, or any other value of DataMed or any of its assets upon
withdrawal by Assignor as required hereunder, and in no event will Assignor be
liable to Assignee, or any person or entity engaged by or under contract with
Assignee, for any losses, liabilities, or damages, including, without
limitation, any lost profits, lost savings, or other incidental, special or
consequential damages, incurred by Assignee, its agents or employees, as a
result of Assignor's participation in the operation of DataMed as described
hereunder, even if Assignor has been advised of the possibility of such damages,
except for any such damages or liability caused by the unlawful conduct or gross
negligence of Assignor, its agents or employees.
5. Continuing Access to Information. During the term of this Agreement,
Assignor and its agents shall have the continuing right during DataMed's normal
business hours and upon reasonable prior notice, to inspect, copy and make
extracts from, DataMed's books of account and records, and GMTI's books of
account and records relating to the operations of DataMed and maintained by GMTI
during the period from and including June 20, 1997 through and including the
termination date of this Agreement, including specifically but without
limitation, records of billings, collections, expenses and disbursements,
records of meetings of GMTI's shareholders, board of directors and any and all
committees thereof, and records of agreements, instruments, judgments orders and
other written obligations of Company that materially affect Assignor's rights or
the performance of its duties hereunder.
6. Continuing Access to Premises. During the term of the Management
Agreement, Assignor and its agents shall have the continuing right to enter,
inspect, and use the Premises at such times as may be reasonably necessary and
appropriate under this Agreement and the Letter Agreement, including, but not
limited to, the right for Assignor's employees and agents, and any equipment,
inventory or other supplies or documents owned or leased by Assignor, to be in
such Premises.
7. Indemnity by Assignee. Assignee shall defend, indemnify and hold
Assignor harmless from and against all liability (statutory or otherwise)
claims, suits, demands, damages, judgments, costs, interests and expenses
(including reasonable attorneys' fees and disbursements incurred in the defense
thereof) which Assignor may incur (except if and to the extent that it arises
out of any error, act or omission of Assignor) as a result of any events that
occur after the Date established pursuant to Section 3, and that arise out of or
are connected with Assignee's performance or failure to perform under the
Management Agreement. The obligations of Assignee set forth in this paragraph
shall survive the expiration or earlier termination of the Management Agreement,
and any conveyance, assignment or other transfer of Assignee's rights
thereunder.
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8. Indemnity by Assignor. Assignor shall defend, indemnify and hold
Assignee harmless from and against all liability (statutory or otherwise)
claims, suits, demands, damages, judgments, costs, interests and expenses
(including reasonable attorneys' fees and disbursements incurred in the defense
thereof) which Assignee may incur (except if and to the extent that it arises
out of any error, act or omission of Assignee) as a result of any events that
occur on or prior to the Date established pursuant to Section 3, and that arise
out of or are connected with Assignor's performance or failure to perform under
the Management Agreement. The obligations of Assignor set forth in this
paragraph shall survive the expiration or earlier termination of the Management
Agreement, and any conveyance, assignment or other transfer of Assignee's rights
thereunder.
9. Further Assurances. Each Party hereto agrees to execute
such other documents and take such other actions as may be reasonably
necessary or desirable to confirm or effectuate the transfer, assignment and
assumption contemplated hereby.
10. Notices. All notices, demands or requests required or authorized
hereunder shall be deemed given sufficiently if in given in writing and sent by
nationally recognized overnight courier, registered mail or certified mail,
return receipt requested and postage prepaid, or by tested telex, telegram or
cable to:
In the case of NMRO:
National Medical Review Offices, Inc.
5750 Wilshire Blvd., Suite 275
Los Angeles, CA 90036
Attention: Murray Lappe M.D.
In the case of SAT:
Substance Abuse Technologies, Inc.
4517 N.W. 31st Avenue
Ft. Lauderdale, Florida 33309
Attention: Robert Stutman, Chief Executive
Officer
If such notice, demand or other communication is served personally, service
shall be conclusively deemed made at the time of such personal service. If such
notice, demand, or other communication is given by mail, service shall be
conclusively deemed given three (3) business days after the deposit thereof in
the United States Mail addressed to the party to whom such notice, demand, or
other communication is to be given, as hereinabove set forth. Any party hereto
may change his or its address for the purpose of receiving notices, demands, or
other communications provided herein by giving a written notice in the manner
stated above to the other party or parties stating such change of address.
11. Entire Agreement. This Agreement constitutes the entire agreement
of the parties with respect to the Management Agreement, and supersedes all
prior written or oral agreements,
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understandings, and negotiations, and all contemporaneous oral agreements,
understandings, and negotiations between the parties with respect to the
Management Agreement.
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<PAGE> 6
12. Severability. Except as provided herein, any portion or
provision of this Agreement which is deemed by law to be invalid, illegal,
or unenforceable shall be ineffective to the extent of such invalidity,
illegality, or unenforceability, without affecting in any way the remaining
portions or provisions hereof.
13. Attorneys' Fees. Attorneys' Fees. If any legal
action, arbitration or other proceeding is initiated for the enforcement of
this Agreement or any portion hereof, or because of any alleged dispute,
breach, or misrepresentation in connection with any of the provisions of this
Agreement, in addition to any other relief to which such party may be
entitled, the prevailing party in such action shall be entitled to recover
its reasonable attorneys' fees, as determined by the arbitrator or court,
and all other costs and expenses awarded in connection with such action or
proceeding.
14. Governing Law. The validity, interpretation and
construction of this Agreement and of each part hereof shall be governed by
the laws of the State of California, and this Agreement shall bind and
inure to the Parties hereto and their respective representatives, successors
and assigns.
15. Counterparts. This Agreement may be signed in one or more
counterparts, all of which when taken together shall constitute one
instrument. For convenience, original signatures may be transmitted by
facsimile.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment
and Assumption of Fund Management Agreement to be effective as set forth above.
ASSIGNEE:
SUBSTANCE ABUSE TECHNOLOGIES, INC.
By
Robert Stutman, Chief Executive Officer
ASSIGNOR:
NATIONAL MEDICAL REVIEW OFFICES, INC.
By
-----------------------------------
Murray Lappe, M.D., President
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<PAGE> 7
EXHIBIT A
Interim Management Agreement
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<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF SAT
<TABLE>
<CAPTION>
Jurisdiction of Percentage of
Name of Subsidiary Incorporation Ownership
- ------------------ --------------- -------------
<S> <C> <C>
Good Ideas Enterprises, Inc. Delaware 75%
U.S. Drug Testing, Inc. Delaware 75%
Good Ideas Acquisition Corp. Delaware 100%
U.S. Drug Acquisition Corp. Delaware 100%
</TABLE>
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