CATALYST RX, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of November 14, 2001
by and among
HEALTHEXTRAS, INC.
as the Purchaser,
CATALYST RX, INC.
and
▇▇▇▇▇ ▇. ▇▇▇▇▇
as the Seller
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS........................................................1
Section 1.01. Defined Terms.............................................1
Section 1.02 Other Defined Terms.......................................3
ARTICLE II. SALE AND PURCHASE OF COMMON STOCK.................................3
Section 2.01. Sale and Purchase..........................................3
Section 2.02. Obligation to Purchase Outstanding Interest................3
Section 2.03. The Closings...............................................4
Section 2.04. Calculation of HealthExtras Common Stock
as Consideration.......................................................5
ARTICLE III. ADDITIONAL AGREEMENTS............................................5
Section 3.01. Board of Directors.........................................5
ARTICLE IV. REPRESENTATIONS AND................................................5
WARRANTIES OF CATALYST.........................................................5
Section 4.01. Expertise..................................................5
Section 4.02. Organization and Good Standing.............................5
Section 4.03. Subsidiaries and Other Interests...........................5
Section 4.04. Capitalization.............................................6
Section 4.05. Authorization, Execution and Delivery......................6
Section 4.06. No Violation...............................................7
Section 4.07. Approvals..................................................7
Section 4.08. Financial Statements and Other Information.................7
Section 4.09. No Undisclosed Liabilities.................................8
Section 4.10. Corporate Action...........................................9
Section 4.11. Taxes......................................................9
Section 4.12. Litigation.................................................9
Section 4.13. Compliance with Laws.......................................9
Section 4.14. Title to Assets...........................................10
Section 4.15. Contracts.................................................10
Section 4.16. Employee Plans............................................10
Section 4.17. Labor Matters.............................................11
Section 4.18. Insurance Policies........................................11
Section 4.19. Records...................................................12
Section 4.20. Brokerage Fees............................................12
Section 4.21. Suppliers and Customers...................................12
Section 4.22. Licenses..................................................13
Section 4.23. No Illegal or Improper Transactions.......................13
Section 4.24. Restrictive Documents and Territorial Restrictions........13
Section 4.25. No Misleading Statements..................................13
ARTICLE V. REPRESENTATIONS AND................................................13
WARRANTIES OF SELLER..........................................................13
Section 5.01. Ownership.................................................14
Section 5.02. Authorization, Execution and Delivery.....................14
Section 5.03. Litigation................................................14
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................14
Section 6.01. Organization and Good Standing............................15
Section 6.02. Authorization, Execution and Delivery.....................15
Section 6.03. No Violation..............................................15
Section 6.04. Approvals.................................................15
Section 6.06. Purchase of Common Stock..................................16
Section 6.07. Sufficient Funds..........................................16
Section 6.09. Brokerage Fees............................................16
ARTICLE VII. COVENANTS........................................................17
Section 7.01. Conduct of Catalyst.......................................17
Section 7.02. Access to Records and Personnel...........................19
Section 7.03. Maintenance of Business...................................19
Section 7.04. Compliance with Obligations...............................19
Section 7.05. Advice of Changes.........................................19
Section 7.06. Regulatory Approvals......................................19
Section 7.07. Actions Contrary to Stated Intent.........................20
Section 7.08. Public Disclosure.........................................20
Section 7.09. Satisfaction of Conditions Precedent......................20
ARTICLE VIII. CONDITIONS OF CLOSING..........................................20
Section 8.01. Conditions to All Parties' Obligations....................20
Section 8.02. Conditions to the Obligations of Purchaser................20
Section 8.03. Conditions to the Obligations of Seller...................22
ARTICLE IX. TERMINATION, AMENDMENTS AND WAIVERS..............................23
Section 9.01. Termination...............................................23
Section 9.02. Effect of Termination.....................................24
ARTICLE X. GENERAL PROVISIONS.................................................24
Section 10.01. Taking of Necessary Action...............................24
Section 10.02. Successors and Assigns...................................24
Section 10.03. Entire Agreement.........................................24
Section 10.04. Survival of Representations and Warranties..............24
Section 10.05. Notices..................................................25
Section 10.06. Specific Performance.....................................25
Section 10.07. Applicable Law...........................................25
Section 10.08. No Third Party Beneficiaries.............................25
Section 10.09. Amendments and Waivers...................................25
Section 10.10. Severability.............................................26
Section 10.11. Construction.............................................26
Section 10.12. Counterparts.............................................26
Section 10.13. Headings.................................................26
Section 10.14. Consent to Jurisdiction; Receipt of Process..............26
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 14th day of November, 2001, by and among HealthExtras, Inc. (the
"Purchaser"), a Delaware corporation, Catalyst Rx, Inc., a Nevada Corporation
("Catalyst") and ▇▇▇▇▇ ▇. ▇▇▇▇▇, a natural person ("Common Stockholder" or
"Seller").
RECITALS
WHEREAS, the Common Stockholder desires to sell to Purchaser and Purchaser
desires to purchase an aggregate of 709 shares of Common Stock, no par value, of
Catalyst (the "Common Stock"); and
WHEREAS, Seller is willing to transfer the Common Stock to Purchaser;
NOW THEREFORE, in consideration of the premises, the mutual covenants and
agreements of the parties contained herein, and of other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
each of the parties, the parties do hereby represent, warrant, covenant and
agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01. Defined Terms.
"Affiliate" shall have the meaning provided in the Exchange Act.
"Catalyst" shall have the meaning set forth in the Recitals to this
Agreement.
"Closing" shall have the meaning provided in Section 2.03(a) of this
Agreement.
"Closing Date," "March 2003 Closing Date" and "November 2001 Closing Date"
shall have the meaning provided in Section 2.03(a) of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall have the meaning set forth in the Recitals to this
Agreement.
"Common Stockholder" shall have the meaning set forth in the Recitals to
this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"GAAP" shall mean General Accepted Accounting Principles.
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"Governmental Entity" shall mean any court, administrative agency or
commission or other federal, provincial, state, local, municipal or foreign
government or governmental authority or instrumentality.
"HealthExtras Closing Price" shall mean, the lesser of: a) the average 4:00
p.m. Eastern Time closing bid price per share of HealthExtras common stock as
reported on the Bloomberg Professional Service for the five trading days
preceding the November 2001 Closing Date or the March 2003 Closing Date, as
applicable; or b) the 4:00 p.m. Eastern Time closing bid price per share of
HealthExtras Common Stock as reported on the Bloomberg Professional Service on
the day preceding the November 2001 Closing Date or the March 2003 Closing Date,
as applicable.
"HealthExtras Common Stock" shall mean common stock issued by HealthExtras,
Inc. par value $0.01 per share.
"Laws" shall mean any foreign, Federal, state or local governmental law,
rule, regulation or requirement, including any rules, regulations or orders
promulgated thereunder and any orders, decrees, consents or judgments of any
governmental regulatory agencies and courts having the force of law.
"License" shall have the meaning set forth in Section 4.24 of this
Agreement.
"Lien" shall mean all liens, charges, security interests, pledges, rights or
claims of others, restraints on transfer or other encumbrances.
"Material Adverse Effect" shall mean, with respect to any Person, a material
adverse effect on the business, prospects, results of operations, financial
condition or assets of such Person and its subsidiaries, if any, taken as a
whole. In determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event does not of itself have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then existing events would result
in a Material Adverse Effect.
"Person" or "person" means any individual, corporation, partnership (limited
or general), limited liability company, joint venture, association, joint-stock
company, trust, any other unincorporated organization or entity, or government
or other agency or any other entity thereof.
"Purchase" means the purchase of the Common Stock contemplated by this
Agreement.
"Purchaser" shall have the meaning set forth in the Recitals to this
Agreement.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment.
"Regulatory Authority" shall mean any foreign, federal, provincial, state,
local or municipal government or governmental authority the approval of which,
or filing with, is legally required for consummation of the transactions
contemplated by this Agreement.
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"Resolution Period" shall have the meaning set forth in Section 7.05.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.
"Seller" shall have the meaning set forth in the Recitals to this Agreement.
"Third Party Suit" means a suit or proceeding by a third party with respect
to which a Claim is made.
Section 1.02 Other Defined Terms Other terms defined through this Agreement
shall have the meanings defined in this Agreement.
ARTICLE II. SALE AND PURCHASE OF COMMON STOCK
SECTION 2.01. SALE AND PURCHASE.
(a) COMMON STOCK. In November 2001, subject to the terms and conditions of
this Agreement, the Common Stockholder agrees to sell to Purchaser and
Purchaser agrees to purchase from the Common Stockholder the number of
shares of Common Stock indicated as owned by Stockholder on Schedule 2.01
of Exhibit A hereto for the amount and type of consideration set forth on
Exhibit A hereto.
b) MEMBERSHIP INCREASE. The payment of all consideration due in
January 2002 pursuant to this Agreement is contingent upon the overall
membership of Catalyst increasing by 5,000 members on or after January 1, 2002.
SECTION 2.02. OBLIGATION TO PURCHASE OUTSTANDING INTEREST.
(a) Subject to the terms and conditions of this Agreement, HealthExtras is
obligated to purchase the remaining issued and outstanding Common Stock of
Catalyst from Seller no later than March 15th 2003 as indicated on Schedule
2.02 of Exhibit A hereto for the amount and type of consideration set forth
on Exhibit A hereto, as calculated in Section 2.02(b).
(b) The total consideration for Common Stock purchased under Section 2.02
(a) shall be calculated as the sum of: (1) Eight (8) times the Catalyst Rx
and Catalyst Consultants calendar 2002 EBITDA, to the extent that the
Catalyst Rx and Catalyst Consultants calendar 2002 EBITDA is less than or
equal to $1,805,000.00; and (2) Ten (10) times Catalyst Rx and Catalyst
Consultants calendar 2002 EBITDA, to the extent Catalyst EBITDA exceeds
$1,805,000.00. This sum shall be multiplied by a fraction representing
Seller's proportional ownership of the issued and outstanding Common Stock
on the March 2003 Closing Date.
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Example: Assume the combined EBITDA of Catalyst Rx and Catalyst Consultants
is $2.0 million. Total compensation due in March 2003 will be $3,278,000
($2,622,400 in cash and $655,600 in HealthExtras Common Stock) for the
remaining 20% of Common Stock:
[(8 x $1,805,000) x .2] = $2,888,000; plus
[(10 x $195,000) x .2] = $390,000
(c) EBITDA for 2002 as reflected in the audited financial statements of
Catalyst Rx and Catalyst Consultants for that calendar year, shall be
adjusted to exclude the net financial affect of any business currently under
contract or letter of intent with HealthExtras Rx that is subsequently
accounted for within Catalyst Rx or Catalyst Consultants. In addition,
EBITDA for 2002 shall be adjusted upward for any specific net increases in
the operating expenses for 2002 for Catalyst Rx or Catalyst Consultants that
are attributable to their affiliation with HealthExtras, including in
specific, increases in employee benefit costs, management fees, consultant
fees or on-site HealthExtras employees. At the discretion of Seller all
calculations related to these provisions shall be subject to binding
independent third party verification should any dispute arise as to the
accounting for these adjustments. The cost of such verification shall be
shared equally by both parties.
(d) In addition, if Catalyst signs an agreement with any of the clients
listed on Exhibit B hereto ("Potential Clients") to provide pharmacy benefit
management services to Potential Clients, consideration for the remaining
securities shall be increased by an amount equal to four times EBITDA
attributable solely to the Potential Clients accounts. For purposes of this
paragraph, EBITDA attributable to Potential Clients shall be defined as net
revenue minus direct contract costs, such as the cost of any employees hired
expressly to service Potential Clients.
SECTION 2.03. THE CLOSINGS.
(a) Subject to the terms and conditions contained in this Agreement, the
closing of the sale to, and purchase by, Purchaser of the Common Stock
described in Section 2.01 shall occur at 10:00 a.m. on November 14, 2001, at
the offices of Purchaser at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ or at such other time and place mutually agreed upon by the
parties. Subject to the terms and conditions contained in this Agreement,
the closing of the sale to, and purchase by, the Purchaser of the Common
Stock described in Section 2.02 shall occur at 10:00 a.m. on March 14, 2003,
at the offices of Purchaser or at such other time and place mutually agreed
upon by the parties. Each closing shall be a "November 2001 Closing" or
"March 2003 Closing," as applicable, or collectively the "Closings." The
days on which the Closings occur shall be the "Closing Date(s)," "November
2001 Closing Date" or "March 2003 Closing Date," as applicable.
(b) At the Closings or such other dates as the parties may agree, the Common
Stockholder shall deliver to the Purchaser certificates, registered in the
name of the Purchaser, for the shares of Common Stock being sold to
Purchaser by the Common Stockholder as set forth on Exhibit A hereto,
against payments of the purchase price set forth on Exhibit A hereto. The
payments of the purchase
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prices will be by wire transfer, check, or other method acceptable to the
Common Stockholder.
(c) If at the Closings any of the conditions specified in Article VII as
condition to the obligations of a party shall not have been fulfilled, that
party at its election, shall be relieved of all its obligations under this
Agreement without thereby waiving any other rights it may have by reason of
such failure or such nonfulfillment.
SECTION 2.04. CALCULATION OF HEALTHEXTRAS COMMON STOCK AS CONSIDERATION.
The number of shares of HealthExtras Common Stock provided to Seller
under this Agreement shall be calculated by dividing the value of HealthExtras
Common Stock consideration listed in Exhibit A by the applicable HealthExtras
Closing Price.
ARTICLE III. ADDITIONAL AGREEMENTS
SECTION 3.01. BOARD OF DIRECTORS.
The Seller agrees to cause, at or prior to Closing, (i) an increase in the
size of the Board of Directors of Catalyst (the "Board") to three (3) members;
and (ii) to consent to the nominees of the Purchaser to fill the newly
created Board seats.
ARTICLE IV. REPRESENTATIONS AND
WARRANTIES OF CATALYST
The Seller hereby represents and warrants to Purchaser as or the date hereof
and as of the Closing Date as follows:
SECTION 4.01. EXPERTISE.
Catalyst claims to be an expert in the marketing and management of non-risk
related pharmacy management programs. Catalyst is specifically not an expert in
client contracts, accounting principles, employee agreements, ERISA, HIPAA,
corporate bylaws, and federal tax laws. Catalyst has made available all records
to Purchaser for its review.
SECTION 4.02. ORGANIZATION AND GOOD STANDING.
Catalyst is a corporation validly existing, in good standing and is duly
qualified or licensed to do business under the laws of the State of Nevada and
has full corporate power and authority to conduct its business as it is now
being conducted and to own, operate or lease the properties and assets it
currently owns, operates or holds under lease. Catalyst conducts or does
business in each of the jurisdictions listed in Section 4.01 of the Catalyst
Disclosure Schedule attached hereto. Catalyst has heretofore delivered to
Purchaser true and correct copies of its Certificate of Incorporation and Bylaws
as in effect on the date hereof.
SECTION 4.03. SUBSIDIARIES AND OTHER INTERESTS.
Except as described in Section 4.02 of the Catalyst Disclosure Schedule,
Catalyst does not have any subsidiaries or, directly or indirectly, any legal or
beneficial interest in any partnership, joint venture or other entity.
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SECTION 4.04. CAPITALIZATION.
(a) The authorized capital stock of Catalyst consists solely of 2500 shares
of Common Stock, no par value, 709 shares of which are issued and
outstanding. All of the issued and outstanding shares of Common Stock of
Catalyst are owned, of record and beneficially, by the Common Stockholder as
listed on Exhibit A hereto. No Persons other than the Common Stockholder, as
such, are or will be entitled to receive any payment with respect to any
shares of capital stock of Catalyst. The designations, powers, preferences,
rights, qualifications, limitations and restrictions in respect of each
class and series of authorized capital stock of Catalyst are as set forth in
its Certificate of Incorporation, and all such designations, powers,
preferences, rights, qualifications, limitations and restrictions are valid,
binding and enforceable and in accordance with all applicable corporate
laws. All outstanding shares of capital stock of Catalyst have been duly
authorized and validly issued and are fully paid and non-assessable. All of
the outstanding securities of Catalyst were issued in compliance with all
applicable securities (federal and state) and corporate laws. None of the
outstanding securities have been issued in violation of any preemptive
rights, rights of first refusal or similar rights. Except as set forth in
Section 4.03 of the Catalyst Disclosure Schedule, there are no outstanding
options, warrants, convertible securities, calls, rights, commitments,
preemptive rights or agreements or instruments or understandings of any
character to which Catalyst is a party or by which Catalyst is bound,
obligating Catalyst to issue, deliver or sell, or cause to be issued,
delivered or sold, contingently or otherwise, additional shares of its
capital stock or any securities or obligations convertible into or
exchangeable for such shares or to grant, extend or enter into any such
option, warrant, convertible security, call, right, commitment, preemptive
right or agreement.
(b) Except as set forth in Section 4.03 of the Catalyst Disclosure Schedule,
there are no outstanding obligations, contingent or other, of Catalyst or
Seller to purchase, redeem or otherwise acquire any shares of its capital
stock and there are no voting trust agreements or other contracts,
agreements, arrangements, commitments, plans or understandings restricting
or otherwise relating to voting (i) between or among Catalyst and any of its
stockholder or (ii) between or among any of Catalyst's Stockholder.
SECTION 4.05. AUTHORIZATION, EXECUTION AND DELIVERY.
Catalyst has all requisite corporate power and authority to execute and to
deliver this Agreement and to perform its obligations under this Agreement. The
execution and delivery of this Agreement, and the performance by Catalyst of its
obligations hereunder have been duly authorized by all necessary corporate
action. This Agreement has been duly executed and delivered by Catalyst and
constitutes the legal, valid and binding obligation of Catalyst, enforceable
against Catalyst in accordance with its terms (except as the enforceability
thereof may be limited by bankruptcy, insolvency, receivership, conservatorship,
liquidation, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally and by general principles of equity, regardless of
whether such enforceability is consistent in equity or at law).
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SECTION 4.06. NO VIOLATION.
To the best of Catalyst's knowledge, Catalyst is in compliance with all
applicable laws, rules or regulations relating to or affecting the operation,
conduct or ownership of its property or business, other than violations that
individually or in the aggregate do not and will not have a Material Adverse
Effect on Catalyst. To the best of Catalyst's knowledge, the execution and
delivery of this Agreement by Catalyst does not, and the consummation by
Catalyst of the transactions contemplated by this Agreement, and compliance with
the terms hereof will not, (a) conflict with, or result in any violation of or
default under, any provision of its Certificate of Incorporation or Bylaws; (b)
conflict with, or result in any breach or violation of or default or loss of any
benefit under, any License, or any statute, law, rule or regulation, or any
judgment, decree or order of any court or other governmental agency or
instrumentality to which Catalyst is a party or to which any its property is
subject; (c) conflict with, or result in a breach or violation of or default or
loss of any benefit under, or, except as set forth in Section 4.05 of the
Catalyst Disclosure Schedule, accelerate the performance required by, any
agreement (written or unwritten), understanding, arrangement, contract,
indenture or other instrument to which Catalyst is a party or to which any of
its property is subject, or constitute a default or loss of any right thereunder
or an event which, with the lapse of time or notice or both, will result in a
default or loss of any right thereunder or the creation of any Lien upon any of
the assets or properties of Catalyst; (d) result in any suspension, revocation,
impairment, forfeiture or nonrenewal of any License or (e) result in Catalyst
being required to pay any material amount or refund to any Affiliate or licensee
of Catalyst in respect of amounts received by Catalyst in advance of the
performance of services.
SECTION 4.07. APPROVALS.
To the best of Catalyst's and the Seller's knowledge, the execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement will not require the consent, approval, order or authorization
of any Governmental Entity or Regulatory Authority or any other Person under any
statute, law, rule, regulation, permit, license, agreement, indenture or other
instrument to which Catalyst or Seller are a party or to which its properties
are subject, and no declaration, filing or registration with any Governmental
Entity or Regulatory Authority is required in connection and with the execution
and delivery of this Agreement, the consummation of the transactions
contemplated by this Agreement, or the performance by Catalyst of its
obligations hereunder, except for registrations, declarations and filing as may
be required under the Exchange Act, the Securities Act, applicable state
securities laws and the securities laws of any foreign country; and such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Material Adverse Effect on Catalyst and would
not prevent, or materially alter or delay any of the transactions contemplated
by this Agreement.
SECTION 4.08. FINANCIAL STATEMENTS AND OTHER INFORMATION.
(a) Catalyst has delivered to Purchaser to the best of Catalyst's knowledge
true, correct and complete copies of the unaudited balance sheets of
Catalyst as of December 31, 1999, December 31, 2000 and October 31, 2001 and
the related unaudited statements of operations, statements of shareholders
equity (deficit), statements of cash flows (the "Financial Statements"). The
October 31, 2001 balance sheet constitutes the basis for the increase in the
sales price to reflect the agreed upon excess working capital.
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(b) The Financial Statements to the best of Catalyst's and the Seller's
knowledge are in accordance with the books and records of Catalyst, have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby and the balance
sheets included therein present fairly as of their respective dates the
financial condition of Catalyst. To the best of Catalyst's knowledge, all
material liabilities and obligations, whether absolute, accrued, contingent
or otherwise, whether direct or indirect, and whether due or to become due,
which existed at the date of such Financial Statements have been disclosed
in the balance sheets included in the Financial Statements or in notes to
the Financial Statements to the extent such liabilities were required, under
generally accepted accounting principles, to be so disclosed. To the best of
Catalyst's knowledge, the statements of operations, of shareholders' equity
(deficit), and of cash flows included in the Financial Statements present
fairly the results of operations, shareholders' equity (deficit) and cash
flows of Catalyst for the periods indicated. To the best of Catalyst's
knowledge, the statements of operations included in the Financial Statements
do not contain any material items of special or non-recurring income or
other income not earned in the ordinary course of business except as
expressly specified therein.
(c) To the best of Catalyst's knowledge, the accounts and notes receivable
of Catalyst listed on the latest balance sheet of Catalyst included in the
Financial Statements, are, net of reserves reflected on the balance sheet,
collectible in full over the period of usual trade terms (by use of
Catalyst's normal collection methods without resort to litigation or
reference to a collection agency), and there do not exist any defenses,
counterclaims and set-offs which could materially adversely affect such
receivables, and all such receivables are actual and bona fide receivables
representing obligations for the total dollar amount thereof shown on the
books of Catalyst. Catalyst has fully performed all obligations with respect
thereto which it was obligated to perform.
(d) Since October 31, 2001, to the best of Catalyst's knowledge, there has
been no Material Adverse Change in Catalyst, including whether as a result
of any legislative or regulatory change, revocation of any License or right
to do business, fire, explosion, accident, casualty, labor trouble, riot,
condemnation, or act of God.
SECTION 4.09. NO UNDISCLOSED LIABILITIES.
Except as set forth in the notes to the Financial Statements, the
liabilities on the latest balance sheet of Catalyst included in the Financial
Statements to the best of Catalyst's knowledge consist solely of accrued
obligations and liabilities incurred by Catalyst in the ordinary course of
business to Persons which are not Affiliates of Catalyst. There are no
liabilities of Catalyst of any kind whatsoever to the best of Catalyst's
knowledge, whether or not accrued and whether or not contingent or absolute,
including without limitation documentary or standby letters of credit, bid or
performance bonds, or customer or third party guarantees, other than (a)
liabilities disclosed in the Financial Statements, (b) liabilities for routine
pharmacy claims which have arisen after October 31, 2001 in the ordinary course
of Catalyst's business and consistent with past practice, (c) liabilities (other
than those covered by clause (b) above) which in the aggregate do not exceed
$25,000 and which have arisen after October 31, 2001 in the ordinary course of
business and consistent with past practice (none of which is a liability for
breach of contract, breach of warranty, tort, infringement claim or lawsuit or a
Page 8
liability to repay or refund to any Person any amounts previously received by
Catalyst) and (d) liabilities incurred in connection with the execution of this
Agreement which, individually or in the aggregate, do not have a Material
Adverse Effect. To the best of Catalyst's knowledge, there are no asserted
claims for indemnification by any Person against Catalyst under any law or
agreement or pursuant to Catalyst's Certificate of Incorporation or Bylaws, and
Catalyst is unaware of any facts or circumstances that might give rise to the
assertion of such a claim against Catalyst thereunder.
SECTION 4.10. CORPORATE ACTION.
All corporate action of the Board of Directors and of the Stockholder of
Catalyst taken on or prior to the date hereof have been duly authorized, adopted
or ratified in accordance with applicable law and Catalyst's Certificate of
Incorporation and Bylaws and have been duly recorded in Catalyst's corporate
minute books (true, correct and complete copies of which have been delivered to
or made available for inspection by Purchaser).
SECTION 4.11. TAXES.
Except for the possibility that Catalyst may need to file an amended federal
return for 2000 and may have underpaid its estimated tax payments for 2001, to
the best of Catalyst's knowledge: (i) Catalyst has prepared in a substantially
correct manner and has filed all federal, state, local, and foreign tax returns
and reports heretofore required to be filed by them and have paid all taxes
shown as due thereon; and (ii) no taxing authority has asserted any deficiency
in the payment of any tax or informed the Catalyst that it intends to assert any
such deficiency or to make any audit or other investigation of Catalyst for the
purpose of determining whether such a deficiency should be asserted against
Catalyst.
SECTION 4.12. LITIGATION.
Except as described in Section 4.12 of the Catalyst Disclosure Schedule,
there are no material actions, suits, proceedings, orders, investigations, or
claims pending or, to the best of the Sellers' and Catalyst's knowledge,
threatened against Catalyst or any property of either, at law or in equity, or
before or by any governmental department, commission, board, bureau, agency, or
instrumentality, or by on behalf of any person, group or class of persons,
corporation, partnership or other legal entity; Catalyst is not subject to any
arbitration proceedings under collective bargaining agreements or otherwise or,
to the best of the Seller's and Catalyst's knowledge, any governmental
investigations or inquiries; and, to the best knowledge of the Seller and the
Board of Directors and responsible officers of Catalyst, there is no basis for
any of the foregoing.
SECTION 4.13. COMPLIANCE WITH LAWS.
To the best of Catalyst's knowledge, Catalyst has substantially complied
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings and charges thereunder) of any
Governmental Entity relating to or affecting the operation, conduct or ownership
of its properties or businesses. To the best of Catalyst's knowledge, no
investigation or review by any Governmental Entity (including without limitation
any audit or similar review by any federal, foreign, state or local taxing
authority) with respect to Catalyst is pending or threatened, nor has any
Governmental Entity indicated to Catalyst an intention to conduct the same. To
the best of Catalyst's knowledge, neither Catalyst nor any director, officer,
consultant or employee of Catalyst (in all instances, in their capacity as
such), is in default with respect to any order, writ, injunction or decree known
Page 9
to or served upon Catalyst by any Governmental Entity. To the best of Catalyst's
knowledge, there is no existing law, rule, regulation or order, whether federal,
state, local, municipal or foreign, which would prohibit or materially restrict
Catalyst from, or otherwise materially adversely affect Catalyst in, conducting
its business in any jurisdiction in which it is now conducting business or in
which it currently proposes to conduct business.
SECTION 4.14. TITLE TO ASSETS.
To the best of Catalyst's knowledge, Catalyst has good and insurable title
to its properties and assets (including any intellectual property asset such as
any trademark, service ▇▇▇▇, trade name or copyright) and property acquired in a
judicial foreclosure proceeding or by way of a deed in lieu of foreclosure or
similar transfer whether real or personal, tangible or intangible, in each case
free and clear of any liens, security interests, encumbrances, mortgages,
pledges, restrictions, charges or rights or interests of others, except (i)
liens for taxes not yet due and payable, (ii) pledges to secure deposits and
other liens incurred in the ordinary course of business, and (iii) such
easements, restrictions and encumbrances, if any, as are not material in
character, amount or extent, and do not materially detract from the value, or
materially interfere with the present use of the properties subject thereto or
affected thereby. Each lease pursuant to which Catalyst is lessee or lessor is
valid and in full force and effect and neither Catalyst, nor to its knowledge,
any other party to any such lease is in default or in violation of any material
provisions of any such lease. To the best of Catalyst's knowledge, all material
tangible properties of Catalyst are in a good state of maintenance and repair
(normal wear and tear excepted), conform with all applicable ordinances,
regulations and zoning laws and are considered by Seller to be adequate for the
current business of Catalyst.
SECTION 4.15. CONTRACTS.
To the best of Catalyst's knowledge, the consummation of the Purchase or the
other transactions contemplated hereby will not result in any violation or
termination of, default or loss of benefit under, or give rise to a right of
termination under, the terms of any material contract. There are no negotiations
pending or in progress to revise, in any material respect, any material
contract, other than as has been disclosed to Purchaser.
Section 4.16. Employee Plans.
(a) To the best of Catalyst's knowledge, Section 4.16 of the Catalyst
Disclosure Schedule lists each of the plans, contracts, policies and
arrangements which is sponsored, maintained or contributed to by, or
otherwise binding upon Catalyst for the benefit of any current or former
employee, director or other personnel; including: (i) any personnel policy,
and (ii) any other employment, consulting (for annual compensation in excess
of $20,000), collective bargaining, stock option, stock bonus, stock
purchase, phantom stock, incentive, bonus, deferred compensation,
retirement, severance, vacation, dependent care, employee assistance, fringe
benefit, medical, dental, sick leave, death benefit, change in control,
golden parachute or other compensatory plan, contract, policy or arrangement
(each such plan, contract, policy and arrangement described in (i) and (ii)
above being herein referred to as an "Employee Benefit Plan").
Page 10
(b) With respect to those plans and arrangements outlined in Section
4.16(a), to the best of Catalyst's knowledge Catalyst has delivered to
Purchaser true and complete copies of each contract, plan document, policy
statement and other written material governing or describing the arrangement
(including, without limitation, any related trust agreement or insurance
company contract).
(c) To the best of Catalyst's knowledge, Catalyst does not have any Employee
Benefit Plan as defined under the Employee Retirement Income Security Act of
1974.
(d) Except as set forth on Section 4.16(d) of the Catalyst Disclosure
Schedule, Catalyst has the right to terminate all its employees and officers
on not more than one (1) month's notice without incurring any contractual
liability to such employee or officer or any other person.
(e) Expect as set forth in Section 4.16 of the Catalyst Disclosure Schedule,
to the best of Catalyst's knowledge the consummation of the transactions
contemplated by this Agreement will not (either alone or in conjunction with
another event, such as a termination of employment or other services)
entitle any employee or other person to receive severance or other
compensation which would not otherwise be payable absent the consummation of
the transactions contemplated by this Agreement or cause the acceleration of
the time of payment or vesting of any award or entitlement under any
Employee Plan, other than as may be made by Seller from his proceeds from
this Agreement.
SECTION 4.17. LABOR MATTERS.
Catalyst is not a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor, as of the date hereof, is Catalyst the subject of any
proceeding asserting that Catalyst has committed an unfair labor practice or is
seeking to compel it to bargain with any labor union or labor organization nor,
as of the date of this Agreement, is there pending or threatened, to the best of
Catalyst's knowledge, any material labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving Catalyst.
SECTION 4.18. INSURANCE POLICIES.
Section 4.18 of the Catalyst Disclosure Schedule contains a correct and
complete description of all insurance policies covering Catalyst, its
businesses, employees, agents and assets. To the best of Catalyst's knowledge,
each such policy is in full force and effect and Catalyst believes each such
policy is of the type and in the amount customarily carried by Persons
conducting businesses or owning assets similar to those of the Catalyst. To the
best of Catalyst's knowledge, such policies shall not, pursuant to their terms,
in any way be affected by, or terminate or lapse by reason of, this Agreement.
To the best of Catalyst's knowledge, all premiums with respect to such insurance
policies have been paid on a timely basis, and no notice of cancellation or
termination has been received with respect to any such policy. To the best of
Catalyst's knowledge, Catalyst has not failed to give any notice or present any
claim thereunder in due and timely fashion. To the best of Catalyst's knowledge,
there are no pending claims against such insurance by or on behalf of Catalyst
as to which the insurers have denied coverage or otherwise reserved rights.
Catalyst has not been refused any insurance with respect to its assets or
Page 11
operations, nor has their coverage been limited, by any insurance carrier to
which it has applied for any such insurance with which it has carried insurance
since the date of its inception.
SECTION 4.19. RECORDS.
To the best of Catalyst's knowledge, Catalyst has records that accurately
and validly reflect its transactions and accounting controls sufficient to
insure that such transactions are (a) in all material respects executed in
accordance with their respective management's general or specific authorization
and (b) recorded in conformity with generally accepted accounting principles.
SECTION 4.20. BROKERAGE FEES.
Neither Catalyst nor any of its Affiliates has retained any financial
advisor, broker, agent or finder or paid or agreed to pay any financial advisor,
broker, agent or finder on account of this Agreement or any transaction
contemplated hereby or any transaction of like nature that would be required to
be paid by Catalyst.
Section 4.21. Suppliers and Customers.
(a) Section 4.21 of the Catalyst Disclosure Schedule identifies all of
Catalyst's material customers and suppliers. To the best knowledge of
Catalyst or Seller no material customer or supplier intends to cease
purchasing from, selling to or dealing with Catalyst nor has any information
been brought to their attention which might lead them to believe any such
customer or supplier intends to alter in any material respect the amount of
such purchases, sales or the extent of dealings with Catalyst or to
materially alter such purchases, sales or dealings in the event of the
consummation of the Purchase. No customer has informed Catalyst in writing
that it intends to cancel outstanding or currently anticipated contracts
with Catalyst. Catalyst has notified Purchaser of all known potential
terminations.
(b) To the best of Catalyst's knowledge, neither Catalyst nor any of its
officers, directors or Affiliates, nor any entity controlled by one of more
of the foregoing:
(i) owns, directly or indirectly, any interest in (excepting less than
1% stock holdings for investment purposes in securities of publicly
held and traded companies), or is an officer, director, employee or
consultant of, any Person which is, or is engaged in business as, a
competitor, supplier or customer of Catalyst;
(ii) owns, directly or indirectly, in whole or in part, any material
tangible or intangible property that Catalyst uses in the conduct of
its business, except as disclosed in the Catalyst Disclosure Schedule;
or
(iii) has any cause of action or other claim whatsoever against, or
owes any amount to, Catalyst, except for claims in the ordinary course
of business such as for accrued vacation pay, accrued benefits under
employee benefit plans, and similar matters and agreements existing on
the date hereof.
Page 12
SECTION 4.22. LICENSES.
To the best of Catalyst's knowledge, Catalyst has all licenses, permits,
consents and other governmental certificates, authorizations and approvals
required by applicable federal, state and local Governmental Entity for the
conduct of its business and the use of its properties as presently conducted or
used, including, without limitation, all licenses required under applicable
federal, state, local or municipal law relating to public health and safety, or
employee health and safety except where the failure to have such license,
permit, consent, certificate, authorization or approval could not have a
Material Adverse Effect on Catalyst (collectively, "Licenses").
SECTION 4.23. NO ILLEGAL OR IMPROPER TRANSACTIONS.
To the best of Catalyst's knowledge, neither Catalyst nor any of its
directors, officers, employees, agents or Affiliates, has directly or indirectly
used funds or other assets of Catalyst or made any promise or undertaking in
such regard, for: (a) illegal contributions, gifts, entertainment or other
expenses relating to political activity; (b) illegal payments to or for the
benefit of governmental officials or employees, whether domestic or foreign; (c)
illegal payments to or for the benefit of any person, firm, corporation or other
entity, or any director, officer, employee, agent or representative thereof; or
(d) the establishment or maintenance of a secret or unrecorded fund; and there
have been no false or fictitious entries made in the books or records of
Catalyst with respect to any of the foregoing.
SECTION 4.24. RESTRICTIVE DOCUMENTS AND TERRITORIAL RESTRICTIONS.
To the best of Catalyst's knowledge, Catalyst is not subject to, or a party
to, any charter, by-law, mortgage, Lien, lease, license, permit, agreement,
contract, instrument, law, rule, ordinance, regulation, order, judgment or
decree, or any other restriction of any kind or character, which adversely
affects the business, prospects, operations or condition (financial or
otherwise) of its business or any of its assets or properties in any material
respect, or which would prevent consummation of the transactions contemplated
hereby, or the continued operation of its business after the date hereof on
substantially the same basis as heretofore operated or which would materially
restrict the ability of Catalyst to acquire any property or conduct business in
any area.
SECTION 4.25. NO MISLEADING STATEMENTS.
This Agreement, the information and schedules referred to herein and
provided to Purchaser in due diligence, when considered as a whole, and the
certificates that have been or will be furnished to Purchaser in connection with
the transactions contemplated hereby do not or will not include to the best of
Catalyst's and Seller's knowledge any untrue statement of a material fact and do
not omit to state any material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which they were made, not
misleading. To the best of Catalyst's knowledge, there is no fact known to
Catalyst, which materially adversely affects or could reasonably be expected to
materially adversely affect the business, condition (financial or otherwise),
property or assets of its business, which has not been set forth herein.
ARTICLE V. REPRESENTATIONS AND
WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as of the date hereof and
as of the Closing Date as follows:
Page 13
SECTION 5.01. OWNERSHIP.
The Seller individually represents and warrants that it holds of record and
owns beneficially the number of shares of Common Stock and the Common Warrants
set forth next to his name in Exhibit A hereto, free and clear of any Liens.
Except as provided in Section 5.01 of the Seller Disclosure Schedule hereto,
there are no outstanding options, warrants, convertible securities, calls,
rights, commitments, court orders, proceedings, preemptive rights or agreements
or instruments or understandings of any character to which Seller is a party or
by which he, she or it is bound, obligating him, her or it to deliver or sell,
or cause to be issued, delivered or sold, contingently or otherwise, any shares
of Common Stock owned by him or her or any securities or obligations convertible
into or exchangeable for such shares or to grant, extend or enter into any such
option, warrant, convertible security, call, right, commitment, preemptive right
or agreement. Seller is not a party to any voting trust, proxy, or other
agreement, commitment or understanding, or any court order proceeding, with
respect to the voting, dividend rights or disposition of any capital stock of
Catalyst, except as disclosed in Section 5.01 of the Seller Disclosure Schedule
hereto. At the Closing, good and marketable title to the shares of Common Stock
being sold by Seller will pass to Purchaser free and clear of all Liens.
SECTION 5.02. AUTHORIZATION, EXECUTION AND DELIVERY.
The Seller individually represents and warrants that he has full power and
authority or legal capacity, as applicable, to enter into this Agreement and
each of the other agreements contemplated hereby, and to carry out his
obligations under this Agreement. The execution and delivery by the Seller of
this Agreement, the consummation of the transactions contemplated hereby and the
performance by the Seller of his obligation hereunder have been duly authorized
by all necessary corporate, partnership, trust or analogous action on the part
of the Seller, if applicable. This Agreement has been duly executed and
delivered by the Seller and constitutes the legal, valid and binding obligation
of such Seller, enforceable against such Seller in accordance with its terms
(except the enforceability thereof as may be limited by bankruptcy, insolvency,
receivership, conservatorship, liquidation, reorganization, moratorium or
similar Laws relating to or affecting creditors' rights generally (including,
without limitation, fraudulent conveyance Laws) and by general principles of
equity, regardless of whether such enforceability is considered in equity or at
law).
SECTION 5.03. LITIGATION.
The Seller individually represents and warrants to the best of his knowledge
that there is no material claim, suit, action, proceeding or investigation
(whether at law or equity, before or by any Federal, state, foreign, local or
municipal commission, court, tribunal, board, agency or instrumentality, or
before any arbitrator) pending or threatened against or affecting such Seller,
the outcome of which would in any manner impair his ability to perform his
obligations hereunder or against the transactions contemplated by this
Agreement.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Seller as follows:
Page 14
SECTION 6.01. ORGANIZATION AND GOOD STANDING.
Purchaser is a corporation validly existing and in good standing under the
laws of the State of Delaware and has full corporate power and authority to
conduct its business as it is now being conducted and to own, operate or lease
the properties and assets it currently owns, operates or holds under lease and
is duly qualified to do business and is in good standing in the State of
Maryland.
SECTION 6.02. AUTHORIZATION, EXECUTION AND DELIVERY.
Purchaser has all full corporate power and authority to execute and deliver
this Agreement and to perform its obligations under this Agreement. The
execution and delivery of this Agreement, and the performance by Purchaser of
its obligations hereunder have been duly authorized by all necessary corporate
action. This Agreement has been duly executed and delivered by Purchaser and
constitutes the legal, valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms (except as the enforceability
thereof may be limited by bankruptcy, insolvency, receivership, conservatorship,
liquidation, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally (including, without limitation, fraudulent
conveyance laws) and by general principles of equity).
SECTION 6.03. NO VIOLATION.
The execution and delivery of this Agreement by Purchaser does not, and the
consummation by Purchaser of the transactions contemplated by this Agreement,
and compliance with the terms hereof will not, (a) conflict with, or result in
any violation of or default under, any provision of its Certificate of
Incorporation or Bylaws; (b) conflict with, or result in any breach or violation
of or default or loss of any benefit under, or accelerate the performance
required by, the terms of any agreement, contract, indenture or other instrument
to which Purchaser is a party or to which any of their respective properties are
subject, or constitute a default or loss of any right thereunder or an event
which, with the lapse of time or notice or both, might result in a default or
loss of any right thereunder or the creation of any Lien upon any of the assets
or properties of Purchaser.
SECTION 6.04. APPROVALS.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby will not require the consent,
approval, order or authorization of any Governmental Entity or Regulatory
Authority or any other Person under any statute, law, rule, regulation, permit,
license, agreement, indenture or other instrument to which Purchaser is a party
or to which any of its properties are subject, and no declaration, filing or
registration with any Governmental Entity or Regulatory Authority is required by
Purchaser in connection with the execution and delivery of this Agreement, the
consummation of the transactions contemplated by this Agreement or the
performance by Purchaser of its obligations hereunder, except for (a) compliance
with any applicable requirements under the Exchange Act, the Securities Act and
the Nasdaq National Market and state securities and "blue sky" laws, and (b)
such other filings or registrations with, or authorizations, consents or
approvals of, governmental bodies, agencies, officials or authorities the
failure of which to make or obtain would not have a Material Adverse Effect on
Purchaser, or would not materially adversely affect the ability of Purchaser to
consummate the transactions contemplated by this Agreement.
Page 15
SECTION 6.05. EFFECT OF DUE DILIGENCE.
During the course of the negotiation of this Agreement, the Purchaser has
had an opportunity to discuss and review Catalyst's business, operations,
prospects, assets, management and financial affairs with the Seller and
Catalyst's management and the opportunity to review Catalyst's financial
statements, books and records, facilities and business plan. The Purchaser has
also had an opportunity to ask questions of officers of Catalyst, which
questions were answered to the Purchaser's satisfaction.
SECTION 6.06. PURCHASE OF COMMON STOCK.
(a) The Common Stock are being acquired for the Purchaser's own account, not
as a nominee or agent for any other Person, and without a view to the
distribution of such securities or any interest therein in violation of the
Securities Act.
(b) The Purchaser (i) is an "accredited investor" within the meaning of Rule
501(a) under Regulation D promulgated under the Securities Act, (ii) has
such knowledge and experience in financial and business matters so as to be
capable of evaluating the merits and risks of its investment in the Common
Stock, and (iii) is capable of bearing the economic risks of such investment
(including the risk of complete loss of its investment in the Common Stock
and
(c) The Purchaser acknowledges that the Common Stock have not been
registered under the Securities Act and understands that the Common Stock
must be held indefinitely unless they are subsequently registered under the
Securities Act or such sale is permitted pursuant to an available exemption
from such registration statement.
SECTION 6.07. SUFFICIENT FUNDS.
The Purchaser has and shall at all times maintain sufficient cash and common
stock to enable it to fund the purchase price at the Closing, amounts due on
January 2, 2002 and meet its obligations with respect to the March 2003 Closing.
SECTION 6.08. LITIGATION.
There are no actions, suits, proceedings, or governmental investigations or
inquiries pending or, to the knowledge of the Purchaser, threatened against the
Purchaser or its properties, assets, operations, or businesses that might delay,
prevent, or hinder the consummation of this purchase.
SECTION 6.09. BROKERAGE FEES.
Neither Catalyst nor any of its Affiliates has retained any financial
advisor, broker, agent or finder or paid or agreed to pay any financial advisor,
broker, agent or finder on account of this Agreement or any transaction
contemplated hereby or any transaction of like nature that would be required to
be paid by Catalyst.
SECTION 6.10. TAX LIABILITY.
To the extent the Purchaser deems necessary, the Purchaser has reviewed with
the Purchaser's own tax advisors the federal, state, local and foreign tax
consequences of this investment and the transactions contemplated by this
Agreement. The Purchaser relies solely on such advisors and not on any
statements or representations of the Corporation or any of its agents. The
Purchaser understands that the Purchaser (and not the Corporation) shall be
responsible for the Purchaser's own tax liability that may arise as a result of
this investment or the transactions contemplated by this Agreement.
Page 16
ARTICLE VII. COVENANTS
SECTION 7.01. CONDUCT OF CATALYST.
From the date hereof until the Closing, Seller shall cause Catalyst to
conduct its business in the ordinary course, consistent with past practice, and
not enter into any transaction outside the ordinary course of business. Without
limiting the generality of the foregoing, from the date hereof until the
Closing, except as contemplated hereby, and except to the extent that Purchaser
gives prior written consent:
(a) Catalyst will not adopt or propose any change in its Certificate of
Incorporation or Bylaws or enter into any agreement or incur any obligation,
the terms of which would be violated by the consummation of the transactions
contemplated by this Agreement;
(b) Catalyst will not:
(i) enter into or amend any contract, agreement, plan or arrangement
covering any director, officer or employee of Catalyst that, other than
in the ordinary course of business, provides for the making of any
payments, the acceleration of vesting of any benefit or right or any
other entitlement contingent upon (A) the Purchase or (B) the
termination of employment after the Purchase;
(ii) except as otherwise provided in Section 3 of this Agreement, enter
into or amend any employment, consulting or similar agreement (oral or
written) to increase the compensation payable or to become payable by
it to, or otherwise materially alter its employment or consulting
relationship with, any of its officers, directors or consultants over
the amount payable as of the date hereof, or increase the compensation
payable to any other employees, unless in the ordinary course of
business, or adopt or, except as required by applicable law to maintain
a plan's tax-qualified status, amend any employee benefit plan or
arrangement (oral or written); or
(iii) loan or advance any money to any officer, director, employee,
shareholder or consultant of Catalyst other than advances in the
ordinary course of business which do not exceed $5,000 at any time
outstanding to any one person;
(c) Catalyst will not (i) purchase, acquire, issue, deliver, sell or
authorize the issuance, delivery or sale of any stock appreciation rights or
of any shares of its capital stock of any class or any securities
convertible into or exchangeable for, or rights, warrants or options to
acquire, any such shares or convertible or exchangeable securities, (ii)
make any changes in its capital structure or (iii) enter into any agreement
or understanding or take any preliminary action with respect to the matters
referred to in clause (i) or (ii) of this paragraph (c);
Page 17
(d) Catalyst will keep in full force and effect its existing insurance
policies and will not modify or reduce the coverage thereunder;
(e) Catalyst will not (i) pay any dividend or make any other distribution to
holders of its capital stock, (ii) split, combine or reclassify any of its
or their capital stock or propose or authorize the issuance of any other
securities in respect of or in lieu of or in substitution for any shares of
its capital stock, (iii) repurchase, redeem or otherwise acquire any shares
of its capital stock, or (iv) take any preliminary action with respect
thereto;
(f) Catalyst will not incur any additional indebtedness for borrowed money
(including, without limitation, by way of guarantee or the issuance and sale
of debt securities or rights to acquire debt securities), or incur any
account payable except in the ordinary course of business, or enter into or
modify any contract, agreement, commitment or arrangement with respect to
the foregoing;
(g) Other than sales of products and services in the ordinary course of
business and consistent with present practice, Catalyst will not (i) sell,
lease or otherwise dispose of any of its assets having a book or market
value in excess of $25,000 in the aggregate or that are otherwise material,
individually or in the aggregate, to the business, results of operations or
financial condition of Catalyst or (ii) enter into, or consent to the
entering into of, any agreement granting a preferential right to sell, lease
or otherwise dispose of any of such assets;
(h) Catalyst will not (i) enter into any new line of business; (ii) change
its investment, liability management and other material policies in any
material respect; (iii) other than entering into a fairly valued office
space lease as disclosed to Purchaser, incur or commit to any capital
expenditures, obligations or liabilities in connection therewith other than
capital expenditures, obligations or liabilities that (a) are listed on the
Catalyst Disclosure Schedule or (b) individually do not exceed $25,000 and
in the aggregate do not exceed $100,000; (iv) acquire or agree to acquire by
merging or consolidating with, or acquire or agree to acquire by purchasing
a substantial portion of the assets of, or in any other manner, any business
or Person; (v) otherwise, except as to the acquisition of materials and
supplies for its products, services and activities in the ordinary course of
business and consistent with past practices, acquire or agree to acquire any
assets for a total consideration in the aggregate in excess of $25,000; (vi)
make any investment in any Person; or (vii) enter into any license,
technology development or technology transfer agreement with any other
Person in excess of $25,000;
(i) Catalyst will not (i) change its methods of accounting as currently in
effect except as required by changes in generally accepted accounting
principles; (ii) change any of its methods of accounting for income and
deductions for income tax purposes from those employed in the preparation of
the income tax returns of Catalyst for the period ending December 31, 2000;
or (iii) change its fiscal year; and
Page 18
(j) Catalyst will not settle or compromise, or agree to settle or compromise
any suit or other litigation matter or matter in an arbitration proceeding
for any material amount (after taking into account any insurance proceeds to
which Catalyst is entitled) or otherwise on terms which would have a
Material Adverse Effect on Catalyst.
SECTION 7.02. ACCESS TO RECORDS AND PERSONNEL.
At all reasonable times from and after the date hereof until the Closing,
Seller shall cause Catalyst to afford Purchaser and its accountants, counsel,
financial advisor and other representatives full and complete access to the
properties, employees and officers of Catalyst and to all books, accounts,
financial and other records and contracts of every kind of Catalyst.
SECTION 7.03. MAINTENANCE OF BUSINESS.
Seller shall cause Catalyst to use its commercial best efforts to carry on,
preserve and maintain its business, preserve and retain its employees,
properties and goodwill, keep available the services of its officers and
employees and preserve its relationships with those of its customers, suppliers,
licensors, licensees and others having business relationships with it that are
material to its business in substantially the same manner as if it had prior to
the date hereof. If Catalyst becomes aware of a material deterioration or facts
which are likely to result in a material deterioration in the relationship with
any material customer, supplier, licensor, licensee or others having business
relationships with Catalyst, it will promptly bring such information to the
attention of Purchaser in writing.
SECTION 7.04. COMPLIANCE WITH OBLIGATIONS.
Prior to the Closing Date, Seller shall use his best efforts to cause
Catalyst to comply with (a) all applicable federal, state, local and foreign
laws, rules and regulations, (b) all material agreements and obligations,
including its Certificate of Incorporation, by which Catalyst, its properties or
its assets may be bound, and (c) all decrees, orders, writs, injunctions,
judgments, statutes, rules and regulations applicable to Catalyst, its
properties or its assets.
SECTION 7.05. ADVICE OF CHANGES.
Each party to the Agreement will promptly advise other parties in writing of
any event occurring subsequent to the date of this Agreement that would render
any representation or warranty of such party contained in this Agreement, if
made on or as of the date of such event or the Closing Date, untrue, inaccurate
or misleading in any material respect (other than an event so affecting a
representation or warranty which is expressly limited to a state of facts
existing at a time prior to the occurrence of such event) and any Material
Adverse Change in the business condition of Catalyst or the Purchaser.
SECTION 7.06. REGULATORY APPROVALS.
Prior to the Closing, each party shall execute and file, or join in the
execution and filing of, any application or other document that may be necessary
in order to obtain the authorization, approval or consent of any Governmental
Entity or Regulatory Authority which may be reasonably required, or that the
other party may reasonably request, in connection with the consummation of the
Purchase. Each party shall use its best efforts to obtain all such
authorizations, approvals and consents.
Page 19
SECTION 7.07. ACTIONS CONTRARY TO STATED INTENT.
Each party agrees that it shall not take any action that would, or
reasonably might be expected to, result in any of its representations and
warranties set forth herein being or becoming untrue in any material respect, or
in any of the conditions to the Purchase set forth in Article VIII hereof not
being satisfied.
SECTION 7.08. PUBLIC DISCLOSURE.
No press release or other announcement to the employees, customers, or
suppliers of the Corporation related to this Agreement or this purchase will be
issued without the joint approval of the parties, unless required by law, in
which case the Purchaser and the Seller will consult with each other regarding
the announcement.
SECTION 7.09. SATISFACTION OF CONDITIONS PRECEDENT.
Each of the parties will use their commercially reasonable efforts to
satisfy or cause to be satisfied all the conditions precedent that are set forth
in Article VIII hereof, as applicable to them, and to cause the transactions
contemplated by this Agreement to be consummated by November 14, 2001.
ARTICLE VIII. CONDITIONS OF CLOSING
SECTION 8.01. CONDITIONS TO ALL PARTIES' OBLIGATIONS.
The obligations of all the parties to this Agreement to effect the
transactions contemplated by this Agreement shall be subject to the following
condition or the mutual waiver by the parties.
(a) ILLEGALITY OR LEGAL CONSTRAINT. No temporary restraining order,
preliminary or permanent injunction or other order or restraint issued by
any court of competent jurisdiction, no statute, rule, regulation, order,
decree, restraint or pronouncement by any Governmental Entity, and no other
legal restraint or prohibition which would prevent or have the effect of
preventing the consummation of the transactions contemplated by this
Agreement shall have been issued or adopted or be in effect.
SECTION 8.02. CONDITIONS TO THE OBLIGATIONS OF PURCHASER.
The obligations of Purchaser under this Agreement to effect the transactions
contemplated by this Agreement are subject to the fulfillment or satisfaction of
the following conditions, unless waived by Purchaser in its sole discretion:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties set forth in Articles IV and V hereof that is expressly
qualified by a reference to materiality shall be true and correct in all
respects as so qualified, and each of the representations and warranties of
Catalyst to this Agreement set forth in Article IV hereof that is not so
qualified shall be true and correct in all material respects, each as of the
date when made and at and as of the Closing, except for such changes as are
permitted by this Agreement and except to the extent a representation or
warranty speaks only as of an earlier date.
Page 20
(b) COVENANTS AND AGREEMENTS. Catalyst and the Seller shall have duly
performed and complied with the covenants and agreements required by this
Agreement to be performed by or complied with by it prior to or at the
Closing. None of the events or conditions entitling Purchaser to terminate
this Agreement under Article IX hereof shall have occurred and be
continuing.
(c) CONSENTS. Any consent required for the consummation of the Purchase
under any material Contract or License or for the continued enjoyment by
Catalyst of the benefits of any such contract or license after the Purchaser
shall have been obtained.
(d) CERTIFICATE OF CATALYST. Purchaser shall have received a certificate of
Catalyst, executed on behalf of Catalyst by the President of Catalyst,
satisfactory in form and substance to Purchaser, as to compliance with the
matters applicable to Catalyst set forth in paragraphs (a), (b), (c) and (i)
of this Section 8.02.
(e) CERTIFICATE OF SELLER. Purchaser shall have received certificates of
Seller, satisfactory in form and substance to Purchaser, as to compliance
with the matters applicable to Seller, set forth in paragraphs (a) and (b)
of this Section 8.02.
(f) NO ADVERSE DECISION. There shall not be any action taken or threatened,
or any statute, rule, regulation or order enacted, entered, threatened, or
deemed applicable to the transactions contemplated hereby, by any foreign or
United States Federal or state government or Governmental Entity or
Regulatory Authority or court that, whether in connection with the grant of
a Requisite Regulatory Approval, any agreement proposed by any foreign or
United States Federal or state government or Governmental Entity or
Regulatory Authority, or otherwise, which (i) requires or could reasonably
be expected to require any divestiture of a portion of its business that
Purchaser in its reasonable judgment believes will have a Material Adverse
Effect on Catalyst or (ii) imposes any condition upon Catalyst that in
Purchaser's reasonable judgment (x) would be materially burdensome to
Catalyst or (y) would materially increase the costs incurred or that will be
incurred by Purchaser as a result of consummating the Purchase and the other
transactions contemplated hereby. There shall be no action, suit,
investigation or proceeding pending or threatened by or before any
Governmental Entity which (i) seeks to restrain, enjoin, prevent the
consummation of or otherwise materially affect the transactions contemplated
by this Agreement or (ii) questions the validity or legality of any such
transactions or seeks to recover damages or to obtain other relief in
connection with any such transactions.
(g) LITIGATION. There shall not have been any litigation or claim pending or
threatened against Catalyst as of Closing Date that could reasonably be
expected to have a Material Adverse Effect on Catalyst.
(h) PROCEEDINGS; RECEIPT OF DOCUMENTS. All corporate and other proceedings
taken or required to be taken in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to Purchaser and Purchaser's counsel, and
Purchaser and Purchaser's counsel shall have received all such information
Page 21
and such counterpart originals or certified or other copies of such
documents as Purchaser or its counsel may reasonably request. Purchaser
shall have received such other instruments, approvals and other documents as
it may reasonably request to make effective the transactions contemplated
hereby.
(i) ADVERSE CHANGE. From the date hereof through and including the Closing
Date, Catalyst shall not have suffered any Material Adverse Change in its
business, financial condition, assets, properties or prospects (whether or
not described in any supplement to a schedule hereto).
(j) SUPPORTING DOCUMENTS. Purchaser and its counsel shall have received
copies of the following documents:
(i) (A) the Certificate of Incorporation of Catalyst certified as of
a recent date by the Secretary of State of the State of Nevada
and (B) a certificate of said Secretary dated as of a recent date
as to the valid existence and good standing of Catalyst in the
State of Nevada;
(ii) a certificate of the Secretary or an Assistant Secretary (or
other officer or director executing such certificate) of Catalyst
dated the Closing Date and certifying that the attached thereto
is a true and complete copy of all resolutions adopted by the
Board of Directors of such company authorizing the execution and
delivery of this Agreement and the performanc eof the obligations
of Catalyst contemplated hereby, and that all such resolutions
are in full force and effect and are all the resolutions adopted
in connection with the transactions contemplated hereby.
(iii) such additional similar supporting documents and other
information with respect to the operations and affairs of
Catalyst as Purchaser or its counsel may reasonably request; and
(iv) an executed employment agreement between Seller and Purchaser in
a form agreeable to Purchaser.
(k) BOARD OF DIRECTORS. The size of the Board shall have been increased to
three (3) members, supported by a consent from the Common Stockholder to
such increase, and two (2) nominees of the Purchaser shall have been
appointed as Directors of Catalyst, all in a manner legally sufficient and
satisfactory to Purchaser.
SECTION 8.03. CONDITIONS TO THE OBLIGATIONS OF SELLER.
The obligations of Seller under this Agreement are subject to the
fulfillment or satisfaction, at or prior to the Closing, of the following
conditions, unless waived by Seller in his sole discretion:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties set forth in Article VI hereof that is expressly qualified by
a reference to materiality shall be true and correct in all respects as so
qualified, and each of the representations and warranties of Purchaser to
this Agreement set forth in Article VI hereof that is not so qualified shall
Page 22
be true and correct in all material respects, each as of the date when made
and at and as of the Closing, except for such changes as are permitted by
this Agreement and except to the extent a representation or warranty speaks
only as of an earlier date.
(b) COVENANTS AND AGREEMENTS. Purchaser shall have complied with the
covenants and agreements required by this Agreement to be performed or
complied with by it prior to or at the Closing. None of the events or
conditions entitling the Seller to terminate this Agreement under Article IX
hereof shall have occurred and be continuing.
(c) CERTIFICATE OF PURCHASER. Seller shall have received a certificate of
purchase in form and substance satisfactory to the Seller, as to compliance
with the matters set forth in paragraphs (a) and (b) of Section 8.03.
(d) LITIGATION. There shall not have been any litigation or claim pending or
threatened against the Purchaser as of Closing Date that could reasonably be
expected to have a Material Adverse Effect on the Purchaser.
ARTICLE IX. TERMINATION, AMENDMENTS AND WAIVERS
SECTION 9.01. TERMINATION.
This Agreement may be terminated at any time prior to the Closing:
(a) by the mutual consent of the Seller and Purchaser;
(b) by Purchaser, or Seller, if the Closing shall not have occurred on or
before the close of business on November 30, 2001 provided that the
terminating party is not at fault for the delay; (c) by Purchaser, if it is
not in material breach of its obligations under this Agreement, and if (i)
there has been a material breach by Catalyst or the other parties to this
Agreement (other than the Purchaser) of any of their respective
representations and warranties hereunder such that Section 8.02(a) will not
be satisfied, (ii) there has been a breach on the part of Catalyst or the
other parties to this Agreement (other than the Purchaser) of any of their
respective covenants or agreements contained in this Agreement such that the
first sentence of Section 8.02(b) will not be satisfied, and, in both case
(i) and case (ii), such breach has not been cured within ten (10) days after
notice to the other parties to this Agreement;
(d) by Seller, if he and Catalyst are not in material breach of their
obligations under this Agreement, and if (i) there has been a material
breach by Purchaser of any of its representations and warranties hereunder
such that Section 8.03(a) will not be satisfied or (ii) there has been a
breach on the part of Purchaser of any of its covenants or agreements
contained in this Agreement such that the first sentence of Section 8.03(b)
will not be satisfied, and, in both case (i) and (ii), such breach has not
been cured within ten (10) days after notice to Purchaser;
Page 23
(e) by Purchaser, if, after the date of this Agreement, there shall have
occurred a Material Adverse Change in the business of Catalyst or its
financial condition, assets, properties or prospects.
Section 9.02. Effect of Termination.
In the event of termination of this Agreement by a party to this Agreement
as provided in Section 9.01 hereof, this Agreement shall, except as provided in
this Agreement, forthwith become void and there shall not be any liability or
obligation with respect to the terminated provisions of this Agreement on the
part of the parties hereto or their respective officers or directors, except and
to the extent such termination results from the willful breach by a party of any
of its representations, warranties or agreements hereunder.
Section 9.03. Termination Procedure.
Any party having the right to terminate this Agreement may terminate this
Agreement by delivering to the other party written notice of termination, and
thereupon, this Agreement will be terminated without obligation or liability of
any party except as otherwise provided herein.
ARTICLE X. GENERAL PROVISIONS
Section 10.01. Taking of Necessary Action.
In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the parties
hereto agrees, subject to applicable laws, to use all reasonable efforts
promptly to take or cause to be taken all further action and promptly to do or
cause to be done all further things (including the execution and delivery of
such further instruments and documents) as any party reasonably may request.
Section 10.02. Successors and Assigns.
This Agreement will inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns, heirs, executors,
administrators and legal representatives. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties hereto.
Section 10.03. Entire Agreement.
This Agreement and the other documents referred to herein contain the entire
agreement among the parties hereto with respect to the transactions contemplated
hereby, and controls and supersedes any prior understandings, agreements or
representations by or between the parties, written or oral, which conflicts
with, or may have related to, the subject matter hereof in any way.
Section 10.04. Survival of Representations and Warranties.
All of the representations, warranties and agreements contained in this
Agreement shall survive the Closings and shall remain in full force and effect
until the March 2003 Closing Date and, thereafter, to the extent a claim is made
prior to such expiration with respect to any breach of such representation,
warranty or agreement, until such claim is finally determined or settled.
Page 24
Section 10.05. Notices.
All notices or other communications hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by telefax
communication, by recognized overnight courier marked for overnight delivery, or
by registered or certified mail, postage prepaid, addressed as follows:
(a) If to Catalyst, ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
(b) If to Purchaser, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, with a copy to: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(c) If to Seller, to ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
(d) Or such other addresses as shall be furnished by like notice by such
party. All such notices and communications shall, when telefaxed
(immediately thereafter confirmed by telephone), be effective when
telefaxed, or if sent by nationally recognized overnight courier service, be
effective one Business Day after the same has been delivered to such courier
service marked for overnight delivery, or, if mailed, be effective when
received.
Section 10.06. Specific Performance.
The parties hereto agree that irreparable damage would occur in the event
any provision of this Agreement were not performed in accordance with the terms
hereof and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or in equity.
Section 10.07. Applicable Law.
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of Nevada, without reference to or application of any
conflicts of laws principles.
Section 10.08. No Third Party Beneficiaries.
This Agreement shall not confer any rights or remedies upon any Person other
than the parties and their respective successors and permitted assigns.
Section 10.09. Amendments and Waivers.
No amendment of any provision of this Agreement shall be valid unless the
same shall be in writing and signed by each of the parties hereto. No waiver by
any party of any default, misrepresentation or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence. At any time prior to the Closing, the parties
hereto, by action taken by their respective Boards of Directors and, in the case
of the Seller by action taken by the holders of a majority of the outstanding
Common Stock, may (i) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (ii) waive any inaccuracies
in the representations and warranties of the other party hereto contained herein
Page 25
or in any document delivered pursuant hereto and (iii) waive compliance with any
of the agreements or conditions contained herein.
Section 10.10. Severability.
Any term or provision of this Agreement that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.
Section 10.11. Construction.
The parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
Section 10.12. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
Section 10.13. Headings.
The headings used in this Agreement are for convenience only and are not to
be considered in construing or interpreting any term or provision of this
Agreement.
Section 10.14. Consent to Jurisdiction; Receipt of Process.
Each party hereby consents to the jurisdiction of, and confers non-exclusive
jurisdiction upon, any federal or state court located in the State of Nevada,
and appropriate appellate courts therefrom, over any action, suit or proceeding
arising out of or relating to this Agreement, or any of the transactions
contemplated hereby. Each party hereby irrevocably waives, and agrees not to
assert as a defense in any such action, suit or proceeding, any objection which
it may now or hereafter have to venue of any such action, suit or proceeding
brought in any such federal or state court and hereby irrevocably waives any
claim that any such action, suit or proceeding brought in any such court or
tribunal has been brought in an inconvenient forum. Process in any such action,
suit or proceeding may be served on any party anywhere in the world, whether
within or without the State of Nevada provided that notice thereof is provided
pursuant to provisions for notice under this Agreement.
Page 26
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first written
above.
HEALTHEXTRAS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer and Director
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
CATALYSTRX, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
