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EXHIBIT 10.40
AGREEMENT AND PLAN OF MERGER
among:
XXXXXXX.XXX, INC.,
a Delaware corporation;
SAPPHIRE ACQUISITION CORP.
a Delaware corporation;
PREMIER HEALTH EXCHANGE LLC,
a Delaware limited liability company;
PREMIER PURCHASING PARTNERS, L.P.
a California limited partnership;
and
(for the limited purpose of Section 4.19)
PREMIER, INC.
a Delaware corporation.
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Dated as of March 6, 2000
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TABLE OF CONTENTS
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SECTION 1. THE MERGER....................................................................1
1.1 Merger of Merger Sub into the Company.........................................1
1.2 Effect of the Merger..........................................................1
1.3 Closing; Effective Time.......................................................1
1.4 Certificate of Formation; Directors and Officers of Parent....................2
1.5 Conversion of Shares..........................................................2
1.6 Company Options and Company Warrants..........................................3
1.7 Closing of the Company's Transfer Books.......................................4
1.8 Exchange of Company Membership Certificates...................................4
1.9 Sales Taxes...................................................................5
1.10 Further Action................................................................5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MAJOR MEMBER............6
2.1 Due Organization..............................................................6
2.2 Charter Documents; Records....................................................6
2.3 Capitalization, Etc...........................................................7
2.4 Financial Statements; Other Information.......................................7
2.5 Absence of Changes............................................................8
2.6 Title to Assets..............................................................10
2.7 Equipment; Leasehold.........................................................10
2.8 Company Proprietary Assets...................................................10
2.9 Contracts....................................................................12
2.10 Liabilities..................................................................14
2.11 Compliance with Legal Requirements...........................................14
2.12 Governmental Authorizations..................................................14
2.13 Tax Matters..................................................................14
2.14 Employee and Labor Matters; Benefit Plans....................................15
2.15 Environmental Matters........................................................16
2.16 Legal Proceedings; Orders....................................................17
2.17 Authority; Binding Nature of Agreement.......................................17
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TABLE OF CONTENTS
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2.18 Non-Contravention; Consents..................................................17
2.19 Full Disclosure..............................................................18
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB......................18
3.1 Due Organization.............................................................18
3.2 Certificate of Incorporation and Bylaws; Records.............................19
3.3 Capitalization, Etc..........................................................19
3.4 Financial Statements; Form S-1 Registration Statement........................20
3.5 Absence of Changes...........................................................21
3.6 Title to Assets..............................................................23
3.7 Equipment; Leasehold.........................................................23
3.8 Parent Proprietary Assets....................................................23
3.9 Contracts....................................................................24
3.10 Liabilities..................................................................25
3.11 Compliance with Legal Requirements...........................................25
3.12 Governmental Authorizations..................................................25
3.13 Tax Matters..................................................................26
3.14 Employee and Labor Matters; Benefit Plans....................................26
3.15 Environmental Matters........................................................27
3.16 Legal Proceedings; Orders....................................................28
3.17 Authority; Binding Nature of Agreement.......................................28
3.18 Non-Contravention; Consents..................................................28
3.19 Full Disclosure..............................................................29
SECTION 4. CERTAIN COVENANTS OF THE PARTIES.............................................29
4.1 Access and Investigation.....................................................29
4.2 Operation of the Company's Business..........................................30
4.3 Operation of Parent's Business...............................................31
4.4 Notification; Updates to Disclosure Schedules................................33
4.5 Company No-Shop..............................................................34
4.6 Parent No-Shop...............................................................35
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4.7 Registration Statement; Prospectus/Consent Solicitation......................35
4.8 Company Member Approval......................................................36
4.9 Filings and Consents; Regulatory Approvals...................................36
4.10 Public Announcements.........................................................37
4.11 Best Efforts.................................................................37
4.12 Ancillary Merger Documents...................................................37
4.13 Termination of Employee Plans; Other Employee Matters........................38
4.14 FIRPTA Matters...............................................................38
4.15 Indemnification of Company Officers and Directors............................38
4.16 Board Observation Rights.....................................................39
4.17 Parent Board Composition.....................................................39
4.18 Assignment of Outsourcing Agreement..........................................39
4.19 Covenant Not to Promote......................................................39
4.20 Legal Opinion of Paul, Hastings, Xxxxxxxx & Xxxxxx LLP.......................40
4.21 Legal Opinion of Xxxxxx Godward LLP..........................................40
4.22 Consulting Services..........................................................40
SECTION 5. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB.................41
5.1 No Restraints................................................................41
5.2 Listing......................................................................41
5.3 Effectiveness of Registration Statement......................................41
5.4 HSR Act......................................................................41
5.5 Company Status at Closing....................................................41
5.6 Audited Financial Statements.................................................42
5.7 e-Commerce Outsourcing Agreement.............................................42
5.8 Company Capitalization.......................................................42
5.9 Amendment to Parent Certificate of Incorporation.............................42
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY...........................42
6.1 No Restraints................................................................42
6.2 Listing......................................................................42
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6.3 Effectiveness of Registration Statement......................................42
6.4 HSR Act......................................................................43
6.5 Amendment to Investor Rights Agreement.......................................43
6.6 Capitalization of Parent.....................................................43
6.7 Parent Substituted Option....................................................43
6.8 Amendment to Parent Certificate of Incorporation.............................43
SECTION 7. TERMINATION..................................................................43
7.1 Termination Events...........................................................43
7.2 Termination Procedures.......................................................44
7.3 Effect of Termination........................................................44
SECTION 8. INDEMNIFICATION, ETC.........................................................44
8.1 Survival of Representations, Etc.............................................44
8.2 Indemnification by the Major Member..........................................45
8.3 Indemnification by Parent....................................................46
8.4 No Contribution..............................................................46
8.5 Threshold....................................................................46
8.6 Defense of Third Party Claims Brought Against Parent, etc....................47
8.7 Defense of Third Party Claims Brought Against the Major Member, etc..........48
8.8 Exercise of Remedies by Indemnitees Other Than Parent or Major Member........49
SECTION 9. MISCELLANEOUS PROVISIONS.....................................................49
9.1 Further Assurances...........................................................49
9.2 Fees and Expenses............................................................49
9.3 Attorneys' Fees..............................................................49
9.4 Notices......................................................................50
9.5 Confidentiality..............................................................51
9.6 Time of the Essence..........................................................51
9.7 Headings.....................................................................51
9.8 Counterparts.................................................................51
9.9 Governing Law................................................................51
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9.10 Successors and Assigns.......................................................51
9.11 Remedies Cumulative; Specific Performance....................................52
9.12 Waiver.......................................................................52
9.13 Amendments...................................................................52
9.14 Severability.................................................................52
9.15 Parties in Interest..........................................................52
9.16 Entire Agreement.............................................................52
9.17 Construction.................................................................53
Exhibit A Definitions
Exhibit B Managing Members of the Surviving Entity; Directors and Officers
of Parent
Exhibit C Form of Parent Substituted Option
Exhibit D Form of Lock-Up and Registration Rights Agreement
Exhibit E Form of Indemnification Agreement
Exhibit F Form of Paul, Hastings, Xxxxxxxx & Xxxxxx LLP Legal Opinion
Exhibit G [Reserved]
Exhibit H Form of Xxxxxx Godward LLP Legal Opinion
Exhibit I Parent Capitalization at Closing
Exhibit J Company Capitalization at Closing
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made and entered into
as of March 6, 2000, by and among: XXXXXXX.XXX, INC., a Delaware corporation
("Parent"); SAPPHIRE ACQUISITION CORP., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"); PREMIER HEALTH EXCHANGE LLC, a
Delaware limited liability company (the "Company"); PREMIER PURCHASING PARTNERS,
L.P., a California limited partnership (the "Major Member"); and, for the
limited purpose of Section 4.19, PREMIER, INC., a Delaware corporation
("Premier"). Certain capitalized terms used in this Agreement have the meanings
set forth in EXHIBIT A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger (the
"Merger") of Merger Sub into the Company in accordance with this Agreement and
the Delaware General Corporation Law (the "DGCL"). Upon consummation of the
Merger, Merger Sub will cease to exist, and the Company will be a wholly owned
subsidiary of Parent.
B. This Agreement has been approved by the respective boards of
directors of Parent and Merger Sub, the stockholder of Merger Sub and the
members of the management committee of the Company.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. THE MERGER
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement, and in accordance with the DGCL, at
the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with
and into the Company, and the separate existence of Merger Sub shall cease.
Following the Effective Time, the Company will continue as the surviving entity
in the Merger (the "Surviving Entity") and shall succeed to and assume all the
rights and obligations of Merger Sub in accordance with the DGCL.
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the DGCL.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxx Godward LLP, 0000 Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx
00000-0000 at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date") which shall be after the satisfaction or waiver of all of the conditions
set forth in Sections 5 and 6, but in any event, concurrently with the closing
of Parent's IPO (as defined in Section 3.4(c)). Contemporaneously with the
Closing, the parties shall file with the Secretary of State of the State of
Delaware a certificate of merger (the "Certificate of Merger") conforming to,
and executed in accordance with, the DGCL. The Merger shall become effective at
the time the Certificate of Merger is duly filed with the
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Secretary of State of the State of Delaware, which time shall be concurrent with
the Closing (or at such subsequent date or time as the parties shall mutually
agree and specify in the Certificate of Merger). The time the Merger becomes
effective is hereinafter referred to as the "Effective Time."
1.4 CERTIFICATE OF FORMATION; DIRECTORS AND OFFICERS OF PARENT. Unless
otherwise determined by Parent and the Company prior to the Effective Time:
(a) the Certificate of Formation of the Surviving Entity shall be
the Certificate of Formation of the Company as in effect immediately prior to
the Effective Time;
(b) the Operating Agreement of the Surviving Entity shall be the
Operating Agreement of the Company as in effect immediately prior to the
Effective Time; and
(c) the directors of Parent, the members of Parent's Board of
Directors' audit and compensation committees and the members of the management
committee of the Surviving Entity immediately after the Effective Time shall be
the individuals identified on EXHIBIT B.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.8(c), at the Effective Time, by virtue of
the Merger and without any further action on the part of Parent, Merger Sub, the
Company or any member of the Company:
(i) each Company Common Membership Unit outstanding
immediately prior to the Effective Time shall be converted into the right to
receive that fraction of a share of Parent Common Stock equal to the Exchange
Ratio (as defined in Section 1.5(b)); and
(ii) each share of the common stock, $.001 par value per share,
of Merger Sub outstanding immediately prior to the Effective Time shall be
converted into one Company Common Membership Unit of the Surviving Entity.
(b) As used in this Agreement, the term "Exchange Ratio" shall mean
0.299065421736.
(c) If, between the date of this Agreement and the Effective Time,
the outstanding shares of Parent Common Stock or Company Common Membership Units
are changed into a different number or class of shares or membership units by
reason of any stock or other split, stock or other dividend, reverse stock or
other split, reclassification, recapitalization or similar transaction, then the
Exchange Ratio shall be appropriately adjusted.
(d) If any Company Common Membership Units outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable purchase agreement or
other agreement with the Company or under which the Company has any rights, then
the shares of Parent Common Stock issued in exchange for such Company Common
Membership Units will also be unvested and subject to the same repurchase
option, risk of forfeiture or other condition, and the certificates representing
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such shares of Parent Common Stock may accordingly be marked with appropriate
legends. The Company shall take all action that may be necessary to ensure that,
from and after the Effective Time, Parent is entitled to exercise any such
repurchase option or other right set forth in any such purchase agreement or
other agreement.
1.6 COMPANY OPTIONS AND COMPANY WARRANTS.
(a) At the Effective Time, each option to purchase Company Common
Membership Units (a "Company Option") outstanding immediately prior to the
Effective Time, shall be substituted by Parent with an option to purchase Parent
Common Stock granted under Parent's 1999 Omnibus Equity Plan (the "Parent Plan")
substantially in the form attached as EXHIBIT C hereto (a "Parent Substituted
Option"). From and after the Effective Time, (a) each Parent Substituted Option
may be exercised solely for shares of Parent Common Stock, (b) the number of
shares of Parent Common Stock subject to each Parent Substituted Option shall be
equal to the number of Company Common Membership Units that were subject to the
substituted Company Option immediately prior to the Effective Time multiplied by
the Exchange Ratio, rounded down to the nearest whole number of shares of Parent
Common Stock, (c) the per share exercise price for the Parent Common Stock
issuable upon exercise of each Parent Substituted Option shall be determined by
dividing the exercise price per Company Common Membership Unit subject to the
substituted Company Option, as in effect immediately prior to the Effective
Time, by the Exchange Ratio, and rounding the resulting exercise price up to the
nearest whole cent, and (d) the Parent Substituted Option shall contain all, but
only, the restrictions on exercise that were contained in the substituted
Company Option; provided, however, that each such Parent Substituted Option
shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, reverse stock split, stock dividend,
recapitalization, reclassification or other similar transaction effected by
Parent after the Effective Time. The Company and Parent shall take all action
that may be necessary (under the option agreements and otherwise) to effectuate
the provisions of this Section 1.6. Following the Closing, Parent will send to
each holder of a substituted Company Option a stock option grant notice and
Stock Option Agreement containing the terms of the Parent Substituted Option for
execution by such holder. Parent shall take all actions necessary to ensure that
it has reserved sufficient shares of Parent Common Stock available for issuance
upon the exercise of Company Options and Company Warrants.
(b) At the Effective Time, each then outstanding warrant to purchase
Company Common Membership Units (a "Company Warrant") whether vested or
unvested, shall be assumed by Parent in accordance with the terms (as in effect
as of the date of this Agreement) of the warrant agreement by which such Company
Warrant is evidenced. All rights with respect to Company Common Membership Units
under outstanding Company Warrants shall thereupon be converted into rights with
respect to Parent Common Stock. Accordingly, from and after the Effective Time,
(a) each Company Warrant assumed by Parent may be exercised solely for shares of
Parent Common Stock, (b) subject to any adjustments contemplated by this Section
1.6, the number of shares of Parent Common Stock subject to each such assumed
Company Warrant shall be equal to the number of shares of Company Common
Membership Units that were subject to such Company Warrant immediately prior to
the Effective Time multiplied by the Exchange Ratio, rounded to the nearest
whole number of shares of Parent Common Stock, (c) the per share exercise price
for the Parent Common Stock issuable
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upon exercise of each such assumed Company Warrant shall be determined by
dividing the exercise price per Company Common Membership Unit subject to such
Company Warrant, as in effect immediately prior to the Effective Time, by the
Exchange Ratio, and rounding the resulting exercise price to the nearest whole
cent, and (d) all restrictions on the exercise of each such assumed Company
Warrant shall continue in full force and effect, and the term, exercisability,
vesting schedule and other provisions of such Company Warrant shall otherwise
remain unchanged; provided, however, that each such assumed Company Warrant
shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction effected by Parent after the
Effective Time.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time, all
Company Common Membership Units outstanding immediately prior to the Effective
Time shall automatically be canceled and shall cease to exist, and all holders
of certificates representing Company Common Membership Units that were
outstanding immediately prior to the Effective Time shall cease to have any
rights as members of the Company, and the Company Common Membership Units
transfer books of the Company shall be closed with respect to all Company Common
Membership Units outstanding immediately prior to the Effective Time. No further
transfer of any such Company Common Membership Units shall be made on such
transfer books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any Company Common Membership Units (a
"Company Membership Certificate") is presented to the Surviving Entity or
Parent, such Company Membership Certificate shall be canceled and shall be
exchanged as provided in Section 1.8.
1.8 EXCHANGE OF COMPANY MEMBERSHIP CERTIFICATES.
(a) At or as soon as practicable after the Effective Time, Parent
will cause to be sent to the holders of Company Membership Certificates (i) a
letter of transmittal in customary form and containing such provisions as Parent
may reasonably specify, and (ii) instructions for use in effecting the surrender
of Company Membership Certificates in exchange for certificates representing
Parent Common Stock. Upon surrender of a Company Membership Certificate to
Parent or to Parent's exchange agent (as specified in the letter of transmittal)
for exchange, together with a duly executed letter of transmittal and such other
documents as may be reasonably required by Parent, the holder of such Company
Membership Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common Stock that
such holder has the right to receive pursuant to Section 1.5 (and cash in lieu
of any fractional share of Parent Common Stock in accordance with Section
1.8(c)), and the Company Membership Certificate so surrendered shall be
canceled. Until surrendered as contemplated by this Section 1.8, each Company
Membership Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive upon such surrender a certificate
representing shares of Parent Common Stock (and cash in lieu of any fractional
share of Parent Common Stock in accordance with Section 1.8(c)) as contemplated
by this Section 1.8. If any Company Membership Certificate shall have been lost,
stolen or destroyed, Parent may, in its discretion and as a condition precedent
to the issuance of any certificate representing Parent Common Stock, require the
owner of such lost, stolen or destroyed Company Membership Certificate to
provide an appropriate affidavit and to deliver an appropriate indemnity
agreement (reasonably satisfactory to Parent) against any claim that may
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be made against Parent or the Surviving Entity with respect to such Company
Membership Certificate.
(b) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Company Membership Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional share shall be paid to any such holder, until
such holder surrenders such Company Membership Certificate in accordance with
this Section 1.8 (at which time such holder shall be entitled to receive all
such dividends and distributions and such cash payment).
(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, a holder of Company Common
Membership Units who would otherwise be entitled to receive a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock issuable to such holder) shall, upon surrender of such holder's
Company Membership Certificate(s), be paid in cash the dollar amount (rounded to
the nearest whole cent), without interest, determined by multiplying such
fraction by the fair market value per share of the Parent Common Stock as of the
Effective Time, as determined in good faith by Parent's board of directors.
(d) Neither Parent nor the Surviving Entity shall be liable to any
holder or former holder of Company Common Membership Units or other securities
of or ownership interests in the Company for any shares of Parent Common Stock
(or dividends or distributions with respect thereto), or for any cash amounts,
delivered to any public official pursuant to any applicable abandoned property,
escheat or similar law.
1.9 SALES TAXES. Parent and the Major Member shall each bear and pay for
fifty percent (50%) of any sales taxes, use taxes, transfer taxes, documentary
charges, recording fees or similar taxes, charges, fees or expenses that may
become payable in connection with the Merger or in connection with any of the
other transaction contemplated thereby.
1.10 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Entity or Parent with
full right, title and possession of and to all rights and property of Merger Sub
and the Company, the officers and directors of the Surviving Entity and Parent
shall be fully authorized (in the name of Merger Sub, in the name of the Company
and otherwise) to take such action.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MAJOR MEMBER
The Company and the Major Member, jointly and severally,
represent and warrant, to and for the benefit of the Parent Indemnitees, as
follows:
2.1 DUE ORGANIZATION.
(a) The Company is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware,
the Major Member is a limited partnership organized and existing under the laws
of the State of California, and the Company has all necessary limited liability
company power and authority and the Major Member has all necessary limited
partnership power and authority, in each case: (i) to conduct their respective
businesses in the manner in which their businesses are currently being
conducted, (ii) to own and use their assets in the manner in which their assets
are currently owned and used, and (iii) to perform their obligations under all
Company Material Contracts (as defined in Section 2.9).
(b) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1(b) of the
Company Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and will not have a Company
Material Adverse Effect. The Company is in good standing as a foreign
corporation in each of the jurisdictions identified in Part 2.1(b) of the
Company Disclosure Schedule, except where the failure to be in good standing
would not have a Company Material Adverse Effect.
(c) The Company has not agreed and is not obligated to make any
investment in or capital contribution to any Entity.
2.2 CHARTER DOCUMENTS; RECORDS. The Company has delivered to Parent
accurate and complete copies of: (1) the Company's charter documents (including
its Certificate of Formation and Operating Agreement), including all amendments
thereto; (2) the records of the Company reflecting the ownership of the Company
Common Membership Units and the holders of the Company Options and the Company
Warrants; and (3) the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the members of the Company, the management committee of the
Company and all committees of the management committee of the Company since the
Company's inception. There have been no formal meetings or other proceedings of
the members of the Company, the management committee of the Company or any
committee of the management committee of the Company that are not reflected in
such minutes or other records. There has not been any violation of any of the
provisions of the Company's charter documents (including its operating
agreement), and the Company has not taken any action that is inconsistent in any
material respect with any resolution adopted by the Company's members, the
Company's management committee or any committee of the Company's management
committee. The books of account, membership unit records, minute books and other
records of the Company are accurate, up-to-date and complete in all material
respects, and have been maintained in accordance with prudent business
practices.
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2.3 CAPITALIZATION, ETC.
(a) The authorized capital of the Company consists of 100,000,000
units of Company Common Membership Units, of which 63,375,000 Company Common
Membership Units have been issued and are outstanding as of the date of this
Agreement. Part 2.3(a) of the Company Disclosure Schedule sets forth the name of
each member of the Company and the number of Company Common Membership Units
held by such member as of the date of this Agreement. All of the outstanding
Company Common Membership Units have been duly authorized and validly issued,
and are fully paid and nonassessable.
(b) Part 2.3(b) of the Company Disclosure Schedule accurately sets
forth, with respect to each Company Option and Company Warrant that is
outstanding as of the date of this Agreement: (i) the name of the holder of such
Company Option or Company Warrant; (ii) the total number of Company Common
Membership Units that are subject to such Company Option or Company Warrant and
the number of Company Common Membership Units with respect to which such Company
Option or Company Warrant is immediately exercisable; (iii) the date on which
such Company Option or Company Warrant was granted and the term of such Company
Option or Warrant Company; (iv) the vesting schedule for such Company Option or
Company Warrant; and (v) the exercise price per Company Common Membership Unit
purchasable under such Company Option or Company Warrant. Except as set forth in
Part 2.3(b) of the Company Disclosure Schedule, there is no: (i) outstanding
subscription, option, call, warrant or other right (whether or not currently
exercisable) to acquire any membership interest (including any interest in the
profits or losses of the Company) or other ownership interest or other
securities of the Company; (ii) outstanding membership interest, security,
instrument, obligation that is or may become convertible into or exchangeable
for any interest in the profits or losses of the Company or other interest in
the Company; (iii) Contract under which the Company is or may become obligated
to sell or otherwise issue any membership or other ownership or any other
securities; or (iv) to the knowledge of the Company or the Major Member,
condition or circumstance that may give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is entitled to
acquire or receive any membership interest (including any interest in the
profits or losses of the Company) or other securities of the Company. As of
immediately prior to the Closing, the outstanding Company Common Membership
Units, Company Options and Company Warrants shall be as set forth on EXHIBIT J.
(c) All outstanding Company Common Membership Units, Company Options
and Company Warrants have been issued and granted in compliance with (i) all
applicable securities laws and other applicable Legal Requirements, and (ii) all
requirements set forth in applicable Contracts.
2.4 FINANCIAL STATEMENTS; OTHER INFORMATION.
(a) The Company has delivered to Parent the unaudited balance sheet
of the Company as of February 29, 2000 (the "Company Unaudited Balance Sheet")
and the related unaudited income statement and statement of cash flows of the
Company for the two (2) months then ended. (collectively, the "Company Financial
Statements"). The Company Financial Statements are accurate in all material
respects and present fairly the financial position of the Company as of the
respective dates thereof and the results of operations and cash flows of the
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Company for the periods covered thereby. The Company Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except that the
financial statements are subject to normal and recurring year-end audit
adjustments, which will not, individually or in the aggregate, be material in
magnitude).
(b) None of the information provided or to be provided to Parent by
or on behalf of the Company to be included in Parent's Form S-4 Registration
Statement (as defined in Section 4.7) shall contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the Company
Disclosure Schedule, since February 29, 2000:
(a) there has not been any material adverse change in the Company's
business, condition, assets, liabilities, operations, financial performance or
prospects, and, to the knowledge of the Company or the Major Member, no event
has occurred that will, or could reasonably be expected to, have a Company
Material Adverse Effect;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the Company's material assets
(whether or not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any Company Common
Membership Units, and has not repurchased, redeemed or otherwise reacquired any
Company Common Membership Units or other securities of the Company;
(d) the Company has not sold, issued or authorized the issuance of
(i) any Company Common Membership Units or other security of or ownership
interest in the Company, (ii) any option or right to acquire any Company Common
Membership Units or other security of or ownership interest in the Company, or
(iii) any instrument convertible into or exchangeable for any Company Common
Membership Units or other security of or ownership interest in the Company;
(e) the Company has not amended or waived any of its rights under,
or permitted the acceleration of vesting under any provision of any agreement
evidencing any outstanding Company Option;
(f) there has been no amendment to the Company's certificate of
incorporation or bylaws, and the Company has not effected or been a party to any
Company Acquisition Transaction, recapitalization, reclassification of Company
Common Membership Units or other ownership interests in the Company, split or
reverse split of the Company Common Membership Units or any other ownership
interest in the Company or similar transaction;
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(g) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
(h) the Company has not made any capital expenditure which, when
added to all other capital expenditures made on behalf of the Company, exceeds
Twenty-Five Thousand Dollars ($25,000.00);
(i) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Company Material Contract, or (ii) amended or prematurely
terminated, or waived any material right or remedy under, any such Company
Material Contract;
(j) the Company has not (i) acquired, leased or licensed any right
or other asset from any other Person, or (ii) sold or otherwise disposed of, or
leased or licensed, any right or other asset to any other Person, except, in
each case, for immaterial rights or immaterial assets acquired, leased,
licensed, sold or otherwise disposed of in the ordinary course of business and
consistent with the Company's past practices;
(k) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(l) the Company has not (i) lent money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money;
(m) the Company has not (i) established or adopted any employee
benefit plan, (ii) paid any bonus or made any profit-sharing or similar payment
to, or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors, officers
or employees other than in accordance with the Company's past practices, or
(iii) hired any new employee;
(n) the Company has not changed any of its methods of accounting or
accounting practices in any material respect;
(o) the Company has not made any material Tax election;
(p) the Company has not commenced or settled any material Legal
Proceeding;
(q) the Company has not entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(r) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(q)" above.
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2.6 TITLE TO ASSETS.
(a) The Company owns, and has good and valid title to, all assets
purported to be owned by it (other than Company Proprietary Assets, as to which
representations and warranties are set forth in Section 2.8), including: (i) all
assets reflected on the Company Unaudited Balance Sheet (other than assets
disposed of in the ordinary course of business consistent with past practice);
(ii) all of the Company's rights under the Contracts identified in Part 2.9 of
the Company Disclosure Schedule; and (iii) all other assets reflected in the
Company's books and records as being owned by the Company. Except as set forth
in Part 2.6 of the Company Disclosure Schedule, all of said assets are owned by
the Company free and clear of any liens or other Encumbrances, except for (x)
any lien for current taxes not yet due and payable, and (y) minor liens that
have arisen in the ordinary course of business and that do not (in any case or
in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of the Company.
(b) Part 2.6 of the Company Disclosure Schedule identifies all
assets that are material to the business of the Company (other than Company
Proprietary Assets) and that are being leased or licensed to the Company.
2.7 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets owned
by or leased to the Company are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Company's business in the manner in which such
business is currently being conducted.
(b) The Company does not own any real property or any interest in
real property, except for the leasehold created under the real property lease
identified in Part 2.9 of the Company Disclosure Schedule.
2.8 COMPANY PROPRIETARY ASSETS.
(a) Part 2.8(a)(i) of the Company Disclosure Schedule sets forth,
with respect to each Company Proprietary Asset registered with any Governmental
Body or for which an application has been filed with any Governmental Body, (i)
a statement identifying such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application. Part
2.8(a)(ii) of the Company Disclosure Schedule provides a statement identifying
all other Company Proprietary Assets (including the Company's Webcat system).
Part 2.8(a)(iii) of the Company Disclosure Schedule identifies each Proprietary
Asset licensed to the Company by any Person (except for any Proprietary Asset
that is licensed to the Company under any third party software license generally
available to the public at a cost of less than Ten Thousand Dollars
($10,000.00)), and identifies the license agreement under which such Proprietary
Asset is being licensed to the Company. Except as set forth in Part 2.8(a)(iv)
of the Company Disclosure Schedule, the Company has good and valid title to all
of the Company Proprietary Assets identified in Parts 2.8(a)(i) and 2.8(a)(ii)
of the Company Disclosure Schedule, free and clear of all liens and other
Encumbrances, and has a valid right to use all Proprietary Assets identified in
Part 2.8(a)(iii) of the Company Disclosure Schedule. Except as set forth in Part
2.8(a)(v) of the Company Disclosure Schedule, the Company is not obligated to
make any payment to any Person for the use of any Company Proprietary Asset.
Except as
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set forth in Part 2.8(a)(vi) of the Company Disclosure Schedule, the Company
has not developed jointly with any other Person any Company Proprietary Asset
with respect to which such other Person has any rights.
(b) The Company has taken reasonable measures and precautions
necessary to protect and maintain the confidentiality and secrecy of all Company
Proprietary Assets (except Company Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Company Proprietary Assets. Except as set forth in Part 2.8(b) of the
Company Disclosure Schedule, the Company has not (other than pursuant to license
agreements identified in Part 2.9 of the Company Disclosure Schedule) delivered
to any Person, or permitted the disclosure or delivery to any Person of, the
source code, or any portion or aspect of the source code, of any Company
Proprietary Asset. The Company has not delivered to any Person any object code
of any Company Proprietary Asset unless such Person entered into a license or
other similar agreement with the Company which restricts the use of such object
code and retains all ownership rights of such object code in the Company.
(c) To the knowledge of the Company or the Major Member, none of the
Company Proprietary Assets infringes or conflicts with any Proprietary Asset
owned or used by any other Person. To the knowledge of the Company or the Major
Member, the Company is not infringing, misappropriating or making any unlawful
use of, and the Company has not at any time infringed, misappropriated or made
any unlawful use of, or received any notice or other communication (in writing
or orally) of any actual, alleged, possible or potential infringement,
misappropriation or unlawful use of, any Proprietary Asset owned or used by any
other Person. To the knowledge of the Company or the Major Member, no other
Person is infringing, misappropriating or making any unlawful use of, and no
Proprietary Asset owned or used by any other Person infringes with, any Company
Proprietary Asset.
(d) Except as set forth in Part 2.8(d) of the Company Disclosure
Schedule: (i) each Company Proprietary Asset conforms in all material respects
with any written specification, documentation, performance standard,
representation or statement made or provided with respect thereto by the
Company, and (ii) there has not been any claim by any customer or other Person
alleging that any Company Proprietary Asset (including each version thereof that
has ever been licensed or otherwise made available by the Company to any Person)
does not conform in all material respects with any written specification,
documentation, performance standard, representation or statement made or
provided by the Company, and, to the knowledge of the Company or the Major
Member, there is no valid basis for any such claim.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business has been and is being conducted. Except as set forth in Part
2.8(e) of the Company Disclosure Schedule, (i) the Company has not licensed any
of the Company Proprietary Assets to any Person, and (ii) the Company has not
entered into any covenant not to compete or Contract limiting its ability to
exploit fully any of its Proprietary Assets or to transact business in any
market or geographical area or with any Person.
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(f) Except as set forth in Part 2.8(f) of the Company Disclosure
Schedule, (i) all current and former employees of the Company have executed and
delivered to the Company an agreement (containing no exceptions to or exclusions
from the scope of its coverage) that is substantially identical to the form of
Proprietary and Confidential Information Agreement previously delivered to
Parent, and (ii) all current and former consultants and independent contractors
to the Company have executed and delivered to the Company an agreement
(containing no exceptions to or exclusions from the scope of its coverage) that
is substantially identical to the form of Consultant Confidential Information
and Invention Assignment Agreement previously delivered to Parent.
2.9 CONTRACTS.
(a) Part 2.9 of the Company Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent contractor
in excess of Twenty-Five Thousand Dollars ($25,000.00) annually;
(ii) each Company Contract relating to the acquisition, transfer,
use, development, sharing or license of any material technology or any material
Company Proprietary Asset;
(iii) each Company Contract imposing any material restriction on
the Company's right or ability to (a) compete with any other Person, (b) acquire
any product or other asset or any services from any other Person, to sell any
product or other asset to or perform any services for any other Person or to
transact business or deal in any other manner with any other Person, or (c)
develop or distribute any technology;
(iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship that is not
cancelable according to its terms on thirty (30) days notice or less;
(v) each Company Contract relating to the acquisition, issuance
or transfer of any securities;
(vi) each Company Contract relating to the creation of any
Encumbrance with respect to any material asset of the Company;
(vii) each Company Contract involving or incorporating any
material guaranty, any pledge, any performance or completion bond, any indemnity
or any surety arrangement;
(viii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(ix) each Company Contract relating to the provision or receipt
of e-commerce services or products to or from any Person;
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(x) any other Company Contract that was entered into outside the
ordinary course of business or was inconsistent with the Company's past
practices or is subject to audit by any Governmental Body;
(xi) any other Company Contract that has a term of more than
thirty (30) days and that may not be terminated by the Company (without penalty)
within thirty (30) days after the delivery of a termination notice by the
Company; and
(xii) any other Company Contract that contemplates or involves
(a) the payment or delivery of cash or other consideration in an amount or
having a value in excess of Twenty-Five Thousand Dollars ($25,000.00) in the
aggregate, or (b) the performance of services having a value in excess of
Twenty-Five Thousand Dollars ($25,000.00) in the aggregate.
(Contracts in the respective categories described in clauses "(i)" through
"(xii)" above are referred to in this Agreement as "Company Material
Contracts.")
(b) The Company has delivered to Parent accurate and complete copies
of all written Company Material Contracts, including all amendments thereto.
Part 2.9(b) of the Company Disclosure Schedule provides an accurate description
of the terms of each Company Material Contract that is not in written form. Each
Company Material Contract is valid and in full force and effect, and, to the
knowledge of the Company or the Major Member, is enforceable by the Company in
accordance with its terms.
(c) Except as set forth in Part 2.9(c) of the Company Disclosure
Schedule:
(i) the Company has not violated or breached, or committed any
default under, any Company Material Contract, and, to the knowledge of the
Company or the Major Member, no other Person has violated or breached, or
committed any default under, any Company Material Contract;
(ii) to the knowledge of the Company or the Major Member, no
event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will, or could reasonably be expected to, (a)
result in a violation or breach of any of the provisions of any Company Material
Contract, (b) give any Person the right to declare a default or exercise any
remedy under any Company Material Contract, (c) give any Person the right to
accelerate the maturity or performance of any Company Material Contract, or (d)
give any Person the right to cancel, terminate or modify any Company Material
Contract;
(iii) since its inception, the Company has not received any
notice (or to the knowledge of the Company or the Major Member, any other
communication) regarding any actual or possible violation or breach of, or
default under, any Company Material Contract; and
(iv) the Company has not waived any of its material rights under
any Company Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms
of any Company Material Contract to renegotiate, any amount paid or payable to
the Company under
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any Company Material Contract or any other material term or provision of any
Company Material Contract.
(e) Part 2.9(e) of the Company Disclosure Schedule identifies
each currently effective proposed Company Material Contract as to which any bid,
offer, award, written proposal, term sheet or similar document has been
submitted or received by the Company.
2.10 LIABILITIES. The Company has no accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities" column of the Company
Unaudited Balance Sheet; (b) liabilities that have been incurred by the Company
since the date of the Company Unaudited Balance Sheet in the ordinary course of
business and consistent with the Company's past practices which (i) if the
Closing occurs on or prior to May 1, 2000, in the aggregate do not exceed Eight
Million Dollars ($8,000,000.00), and (ii) if the Closing occurs after May 1,
2000 but on or prior to June 30, 2000, in the aggregate do not exceed Sixteen
Million Dollars ($16,000,000.00); (c) liabilities under the Company Material
Contracts, to the extent the nature and magnitude of such liabilities can be
specifically ascertained by reference to the text of such Company Material
Contracts; and (d) the liabilities identified in Part 2.10 of the Company
Disclosure Schedule.
2.11 COMPLIANCE WITH LEGAL REQUIREMENTS. To the Company's knowledge, the
Company is, and has at all times since its inception been, in compliance with
all applicable Legal Requirements, except where the failure to comply with such
Legal Requirements has not had and could not reasonably be expected to have a
Company Material Adverse Effect. The Company has not received any notice or
other communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement.
2.12 GOVERNMENTAL AUTHORIZATIONS. The Company holds all Governmental
Authorizations necessary to enable the Company to conduct its business in the
manner in which its business is currently being conducted and all such
Governmental Authorizations are in full force and effect. To the knowledge of
the Company or the Major Member, the Company is, and at all times since its
inception has been, in substantial compliance with the terms and requirements of
all of its Governmental Authorizations. Since its inception, the Company has not
received any notice or other communication from any Governmental Body regarding
(a) any actual or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (b) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification of
any Governmental Authorization.
2.13 TAX MATTERS.
(a) The Company has not been required to file any Tax Returns
since its inception. The Company Financial Statements fully accrue all actual
and contingent liabilities for Taxes with respect to all periods through the
dates thereof in accordance with generally accepted accounting principles. The
Company will establish, in the ordinary course of business and consistent with
its past practices, reserves adequate for the payment of all Taxes for the
period from its inception through the Closing Date.
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(b) No claim or Legal Proceeding is pending or, to the knowledge of
the Company or the Major Member, has been threatened against or with respect to
the Company, in respect of any Tax. There are no unsatisfied liabilities for
Taxes (including liabilities for interest, additions to tax and penalties
thereon and related expenses) with respect to any notice of deficiency or
similar document received by the Company with respect to any Tax (other than
liabilities for Taxes asserted under any such notice of deficiency or similar
document which are being contested in good faith by the Company and with respect
to which adequate reserves for payment have been established). There are no
liens for Taxes upon any of the assets of the Company except liens for current
Taxes not yet due and payable. The Company has not entered into or become bound
by any agreement or consent pursuant to Section 341(f) of the Code.
(c) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code. The Company is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
Contract.
2.14 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.14(a) of the Company Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Company Plans")
sponsored, maintained, contributed to or required to be contributed to by the
Company for the benefit of any employee of the Company ("Company Employee"),
except for Company Plans which would not require the Company to make payments or
provide benefits having a value in excess of Twenty-Five Thousand Dollars
($25,000.00) in the aggregate. The Company has delivered to Parent an accurate
and complete copy of each Company Plan.
(b) The Company is not required to be, and, to the knowledge of the
Company or the Major Member, has never been required to be, treated as a single
employer with any other Person under Section 4001(b)(1) of ERISA or Section
414(b), (c), (m) or (o) of the Code. The Company has never been a member of an
"affiliated service group" within the meaning of Section 414(m) of the Code. The
Company does not maintain, sponsor or contribute to any pension benefit plan (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of Company Employees or
former Company Employees (a "Pension Plan"). The Company does not maintain,
sponsor or contribute to any welfare benefit plan (as defined in Section 3(1) of
ERISA, whether or not excluded from coverage under specific Titles or Merger
Subtitles of ERISA) for the benefit of Company Employees or former Company
Employees (a "Welfare Plan").
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(c) To the knowledge of the Company or the Major Member, each of
the Company Plans has been operated and administered in all material respects in
accordance with applicable Legal Requirements, including but not limited to
ERISA and the Code.
(d) Except as set forth in Part 2.14(d) of the Company Disclosure
Schedule, neither the execution, delivery or performance of this Agreement, nor
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or former Company Employee or
director of the Company (whether or not under any Company Plan), or materially
increase the benefits payable under any Company Plan, or result in any
acceleration of the time of payment or vesting of any such benefits.
(e) Part 2.14(e) of the Company Disclosure Schedule contains a list
of all salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of the Company
Employees. All Company Employees are "at will" employees.
(f) Part 2.14(f) of the Company Disclosure Schedule identifies each
Company Employee who is not fully available to perform work because of
disability or other leave and sets forth the basis of such leave and the
anticipated date of return to full service.
(g) To the knowledge of the Company or the Major Member, the
Company is in compliance in all material respects with all applicable Legal
Requirements and Contracts relating to employment, employment practices, wages,
bonuses and terms and conditions of employment, including employee compensation
matters.
(h) Except as set forth in Part 2.14(h) of the Company Disclosure
Schedule, the Company has good labor relations, and the Company no reason to
believe that (i) the consummation of the Merger or any of the other transactions
contemplated by this Agreement will have a material adverse effect on the
Company's labor relations, or (ii) any of the Company's employees intends to
terminate his or her employment with the Company.
2.15 ENVIRONMENTAL MATTERS. To the knowledge of the Company or the Major
Member, the Company is in compliance in all material respects with all
applicable Environmental Laws, which compliance includes the possession by the
Company of all permits and other Governmental Authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof. The Company has not received any notice or other communication (in
writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that the Company is not in compliance with
any Environmental Law, and, to the knowledge of the Company or the Major Member,
there are no circumstances that may prevent or interfere with the Company's
compliance with any Environmental Law in the future. To the knowledge of the
Company or the Major Member, no current or prior owner of any property leased or
controlled by the Company has received any notice or other communication (in
writing or otherwise), whether from a Governmental Body,
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citizens group, employee or otherwise, that alleges that such current or prior
owner or the Company is not in compliance with any Environmental Law.
2.16 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Legal Proceeding to which the Company is a
party and, to the knowledge of the Company or the Major Member, no Person has
threatened to commence any Legal Proceeding: (i) that involves the Company or
any of the assets owned or used by the Company or any Person whose liability the
Company has or may have retained or assumed, either contractually or by
operation of law, or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other transactions contemplated by this Agreement. To the
knowledge of the Company or the Major Member, except as set forth in Part 2.16
of the Company Disclosure Schedule, no event has occurred, and no claim, dispute
or other condition or circumstance exists, that will, or that could reasonably
be expected to, give rise to or serve as a basis for the commencement of any
such Legal Proceeding.
(b) There is no order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the Company, is
subject. To the knowledge of the Company or the Major Member, no officer or
other employee of the Company is subject to any order, writ, injunction,
judgment or decree that prohibits such officer or other employee from engaging
in or continuing any conduct, activity or practice relating to the Company's
business.
2.17 AUTHORITY; BINDING NATURE OF AGREEMENT. Each of the Company and the
Major Member has the absolute and unrestricted right, power and authority to
enter into and to perform its obligations under this Agreement; and the
execution, delivery and performance by each of the Company and the Major Member
of this Agreement have been duly authorized by all limited liability company
action or limited partnership action, as the case may be, on the part of the
Company and the Major Member, their respective members, partners or other
governing body, as the case may be. The affirmative vote of the holders of a
majority of the Company Common Membership Units is the only vote of the members
of the Company required to approve this Agreement and the Merger. This Agreement
constitutes the legal, valid and binding obligation of the Company and the Major
Member, enforceable against the Company and the Major Member in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
2.18 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.18 of
the Company Disclosure Schedule, neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any
of the provisions of the Company's charter documents (including its operating
agreement), or (ii) any resolution adopted by the Company's members, the
Company's management committee or any committee of the Company's management
committee;
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(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which the Company, or any of the assets owned or used by the
Company, is subject;
(c) contravene, conflict with or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
Company's business or to any of the assets owned or used by the Company;
(d) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Company Contract that is
or would constitute a Company Material Contract, or give any Person the right to
(i) declare a default or exercise any remedy under any such Company Contract,
(ii) accelerate the maturity or performance of any such Company Contract, or
(iii) cancel, terminate or modify any such Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company);
except, in the case of subparagraphs (b), (c), (d) and (e), such that would not
have a Company Material Adverse Effect.
Except as set forth in Part 2.18 of the Company Disclosure Schedule, the Company
is not and will not be required to make any filing with or give any notice to,
or to obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement, except for Consents which
the failure to obtain would not have a Company Material Adverse Effect or
prevent or delay the Merger or the other transactions contemplated hereby.
2.19 FULL DISCLOSURE. This Agreement (including the Company Disclosure
Schedule) does not (i) contain any representation, warranty or information that
is false or misleading with respect to any material fact, or (ii) omit to state
any material fact or necessary in order to make the representations, warranties
and information contained and to be contained herein and therein (in the light
of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, represent and warrant
to the Company Indemnitees as follows:
3.1 DUE ORGANIZATION.
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(a) Each of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all necessary corporate power and authority: (i) to conduct its business
in the manner in which its business is currently being conducted, (ii) to own
and use its assets in the manner in which its assets are currently owned and
used and (iii) to perform its obligations under all Parent Material Contracts
(as defined in Section 3.9).
(b) Parent is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 3.1(b) of the
Parent Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and will not have a Parent
Material Adverse Effect. Parent is in good standing as a foreign corporation in
each of the jurisdictions identified in Part 3.1(b) of the Parent Disclosure
Schedule, except where the failure to be in good standing would not have a
Parent Material Adverse Effect.
3.2 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. Parent has made
available to the Company accurate and complete copies of: (1) Parent's
certificate of incorporation and bylaws, including all amendments thereto; (2)
the stock records of Parent; and (3) the minutes and other records of the
meetings and other proceedings (including any actions taken by written consent
or otherwise without a meeting) of the stockholders of Parent, the board of
directors of Parent and all committees of the board of directors of Parent.
There have been no formal meetings or other proceedings of the stockholders of
Parent, the board of directors of Parent or any committee of the board of
directors of Parent that are not fully reflected in such minutes or other
records. There has not been any violation of any of the provisions of Parent's
certificate of incorporation or bylaws, and Parent has not taken any action that
is inconsistent in any material respect with any resolution adopted by Parent's
stockholders, Parent's board of directors or any committee of Parent's board of
directors. The books of account, stock records, minute books and other records
of Parent are accurate, up-to-date and complete in all material respects, and
have been maintained in accordance with prudent business practices.
3.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of Parent consists of fifty-five
million (55,000,000) shares of stock, forty million (40,000,000) shares are
designated Common Stock, $.001 par value, of which six million three hundred
seventy thousand nine hundred forty-nine (6,370,949) shares were issued and are
outstanding as of the date of this Agreement and fifteen million (15,000,000)
shares are designated Preferred Stock, $.001 par value, ("Parent Preferred
Stock") of which sixty-eight thousand one hundred (68,100) shares are designated
Series A Preferred Stock, all of which were issued and outstanding as of the
date of this Agreement, three hundred thirty-four thousand nine hundred seven
(334,907) shares are designated Series B Preferred Stock, all of which are
issued and outstanding as of the date of this Agreement, five million
(5,000,000) shares are designated Series C Preferred Stock, of which four
million four hundred fifty-eight thousand three hundred thirty-two (4,458,332)
shares are issued and outstanding as of the date of this Agreement, two million
eight hundred thousand (2,800,000) shares are designated Series D Preferred
Stock, of which two million four hundred twenty-three thousand six hundred
fifty-six (2,423,656) shares are issued and outstanding as of the date of this
Agreement, and four million nine hundred thousand (4,900,000) shares are
designated Series E
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Preferred Stock, of which three million two hundred eighty-one thousand five
hundred fifteen (3,281,515) shares are issued and outstanding as of the date of
this Agreement. Part 3.3(a) of the Parent Disclosure Schedule sets forth the
name of each stockholder of Parent and the number of shares of Parent Common
Stock held by such stockholder as of the date of this Agreement. All of the
outstanding shares of Parent Common Stock and Parent Preferred Stock have been
duly authorized and validly issued, and are fully paid and non-assessable and
have been issued in compliance with applicable federal and state securities
laws. The authorized capital stock of Merger Sub consists of one thousand
(1,000) shares of common stock, all of which shares are issued and outstanding
as of the date of this Agreement. All of the outstanding shares of Merger Sub
common stock have been duly authorized and are validly issued, and are
fully-paid and non-assessable and are owned of record and beneficially by
Parent. As of immediately prior to the Closing (assuming the conversion of all
outstanding shares of Parent Preferred Stock into shares of Parent Common Stock
which will occur upon the closing of Parent's IPO), the outstanding shares of
Parent Common Stock, Parent Options and warrants to purchase Parent Common Stock
shall be as set forth on EXHIBIT I.
(b) Except as contemplated in the Merger or as set forth in Part
3.3(b) of the Parent Disclosure Schedule as of the date hereof, there is no: (i)
outstanding subscription, option, call, warrant or right (whether or not
currently exercisable) to acquire any shares of the capital stock or other
securities of Parent or Merger Sub; (ii) outstanding security, instrument or
obligation that is or may become convertible into or exchangeable for any shares
of the capital stock or other securities of Parent or Merger Sub; (iii) Contract
under which Parent or Merger Sub is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities; or (iv) to the
knowledge of Parent, condition or circumstance that may give rise to or provide
a basis for the assertion of a claim by any Person to the effect that such
Person is entitled to acquire or receive any shares of capital stock or other
securities of Parent.
(c) All outstanding shares of Parent capital stock have been issued
and granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
Contracts. The consummation of the Merger and the transactions contemplated
thereby will not trigger or cause to become effective any antidilution rights
held by the holders of Parent Preferred Stock.
3.4 FINANCIAL STATEMENTS; FORM S-1 REGISTRATION STATEMENT.
(a) Parent has made available to the Company the following financial
statements and notes (collectively, the "Parent Financial Statements"):
(i) The audited balance sheet of Parent as of December 31, 1998,
and the related audited statement of operations, statement of stockholders'
equity and statement of cash flows of Parent for the period from August 18, 1998
to December 31, 1998, together with the notes thereto and the unqualified report
and opinion of PricewaterhouseCoopers LLP relating thereto; and
(ii) the unaudited balance sheet of Parent as of September 30,
1999 (the "Parent Unaudited Balance Sheet"), and the related unaudited statement
of operations for the nine (9) months then ended.
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(b) The Parent Financial Statements are accurate in all material
respects and present fairly the financial position of Parent as of the
respective dates thereof and the results of operations and cash flows of Parent
for the periods covered thereby. The Parent Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered (except that the financial
statements referred to in Section 3.4(a)(ii) do not contain footnotes and are
subject to normal and recurring year-end audit adjustments, which will not,
individually or in the aggregate, be material in magnitude).
(c) As of the time Parent's Form S-1 Registration Statement with
respect to Parent's underwritten initial public offering of Parent Common Stock
for a per share price of at least Twenty-Five Dollars ($25.00) (as adjusted for
stock splits, dividends, recapitalizations and the like effected after the date
of this Agreement) and yielding gross cash proceeds to Parent (before
underwriting discounts, commissions and fees) of at least Forty Million Dollars
($40,000,000.00) (such initial public offering being referred to herein as
"Parent's IPO," and such registration statement filed in connection therewith
being referred to herein as the "Form S-1 Registration Statement") is declared
effective, it will (i) comply in all material respects with the applicable
requirements of the Securities Act, and (ii) not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3.5 ABSENCE OF CHANGES. Except as set forth in Part 3.5 of the Parent
Disclosure Schedule, since September 30, 1999:
(a) there has not been any material adverse change in Parent's
business, condition, assets, liabilities, operations, financial performance or
prospects, and, to the knowledge of Parent, no event has occurred that will, or
could reasonably be expected to, have a Parent Material Adverse Effect;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of Parent's material assets
(whether or not covered by insurance);
(c) Parent has not declared, accrued, set aside or paid any dividend
or made any other distribution in respect of any shares of capital stock, and
has not repurchased, redeemed or otherwise reacquired any shares of capital
stock or other securities;
(d) Parent has not sold, issued or authorized the issuance of (i)
any capital stock (except for Parent Common Stock issued upon the exercise of
outstanding shares of Preferred Stock of Parent, stock options, warrants and
other rights to acquire capital stock of Parent); (ii) any option (except for
Parent Options issued in the ordinary course of business and consistent with
past practice) or right to acquire any capital stock or any other security;
(iii) any instrument convertible into or exchangeable for any capital stock or
other security;
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(e) Parent has not amended or waived any of its rights under, or
permitted the acceleration of vesting under any provision of any agreement
evidencing any outstanding Parent Option;
(f) Except as set forth on Part 3.5(f) of the Parent Disclosure
Schedule, there has been no amendment to Parent's certificate of incorporation
or bylaws, and Parent has not effected or been a party to any Parent Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(g) Parent has not formed any subsidiary, other than Merger Sub, or
acquired any equity interest or other interest in any other Entity;
(h) Parent has not made any capital expenditure which, when added to
all other capital expenditures made on behalf of Parent, exceeds Twelve Million
Dollars ($12,000,000.00);
(i) Parent has not (i) entered into or permitted any of the assets
owned or used by it to become bound by any Contract that is or would constitute
a material Contract, or (ii) amended or prematurely terminated, or waived any
material right or remedy under, any Parent Material Contract;
(j) Parent has not (i) acquired, leased or licensed any right or
other asset from any other Person, or (ii) sold or otherwise disposed of, or
leased or licensed, any right or other asset to any other Person, except in each
case, for any immaterial rights or immaterial assets acquired, leased, licensed,
sold or otherwise disposed of in the ordinary course of business and consistent
with Parent's past practices;
(k) Parent has not made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance, except for
pledges of immaterial assets made in the ordinary course of business and
consistent with Parent's past practices;
(l) Parent has not (i) lent money to any Person (other than pursuant
to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money in
excess of Seven Million Five Hundred Thousand Dollars ($7,500,000.00) in the
aggregate;
(m) Parent has not changed any of its methods of accounting or
accounting practices in any material respect;
(n) Parent has not made any material Tax election;
(o) Parent has not commenced or settled any material Legal
Proceeding;
(p) Parent has not entered into any material transaction or taken
any other
material action outside the ordinary course of business or inconsistent with its
past practices; and
(q) Parent has not agreed or committed to take any of the actions
referred to in clauses "(c)" through "(p)" above.
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3.6 TITLE TO ASSETS.
(a) Parent owns, and has good and valid title to, all assets
purported to be owned by it (other than Parent Proprietary Assets, as to which
representations and warranties are set forth in Section 3.8), including: (i) all
assets reflected on the Parent Unaudited Balance Sheet (other than assets
disposed of in the ordinary course of business consistent with past practices);
and (ii) all other assets reflected in Parent's books and records as being owned
by Parent. Except as set forth in Part 3.6 of the Parent Disclosure Schedule,
all of said assets are owned by Parent free and clear of any liens or other
Encumbrances, except for (x) any lien for current taxes not yet due and payable,
and (y) minor liens that have arisen in the ordinary course of business and that
do not (in any case or in the aggregate) materially detract from the value of
the assets subject thereto or materially impair the operations of Parent.
(b) Part 3.6 of the Parent Disclosure Schedule identifies all assets
that are material to the business of Parent (other than Parent Proprietary
Assets) and that are being leased or licensed to Parent.
3.7 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets owned
by or leased to Parent are adequate for the uses to which they are being put,
are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of Parent's business in the manner in which such
business is currently being conducted.
(b) Parent does not own any real property or any interest in real
property, except for the leasehold created under the real property leases.
3.8 PARENT PROPRIETARY ASSETS.
(a) Except as set forth in Part 3.8(a)(i) of the Parent Disclosure
Schedule, Parent has good and valid title to all of its Parent Proprietary
Assets, free and clear of all liens and other Encumbrances, and has a valid
right to use all Proprietary Assets. Except as set forth in Part 3.8(a)(ii) of
the Parent Disclosure Schedule, Parent is not obligated to make any payment to
any Person for the use of any Parent Proprietary Asset. Parent has not developed
jointly with any other Person any Parent Proprietary Asset with respect to which
such other Person has rights.
(b) Parent has taken reasonable measures and precautions necessary
to protect and maintain the confidentiality and secrecy of all Parent
Proprietary Assets (except Parent Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Parent Proprietary Assets. Except as set forth in Part 3.8(b) of the
Parent Disclosure Schedule, Parent has not delivered to any Person, or permitted
the disclosure or delivery to any Person of, the source code, or any portion or
aspect of the source code, of any Parent Proprietary Asset. Parent has not
delivered to any Person any object code of any Parent Proprietary Asset unless
such Person entered into a license or other similar agreement with Parent which
restricts the use of such object code and retains all ownership rights of such
object code in Parent.
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(c) To the knowledge of Parent, none of the Parent Proprietary
Assets infringes or conflicts with any Proprietary Asset owned or used by any
other Person. To the knowledge of Parent, Parent is not infringing,
misappropriating or making any unlawful use of, and Parent has not at any time
infringed, misappropriated or made any unlawful use of, or received any notice
or other communication (in writing or orally) of any actual, alleged, possible
or potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the knowledge of Parent, no other
Person is infringing, misappropriating or making any unlawful use of, and no
Proprietary Asset owned or used by any other Person infringes or conflicts with,
any Parent Proprietary Asset.
(d) Except as set forth in Part 3.8(d) of the Parent Disclosure
Schedule: (i) each Parent Proprietary Asset conforms in all material respects
with any specification, documentation, performance standard, representation or
statement made or provided with respect thereto by Parent; and (ii) there has
not been any claim by any customer or other Person alleging that any Parent
Proprietary Asset (including each version thereof that has ever been licensed or
otherwise made available by Parent to any Person) does not conform in all
material respects with any specification, documentation, performance standard,
representation or statement made or provided by Parent, and, to the knowledge of
Parent, there is no basis for any such claim.
(e) The Parent Proprietary Assets constitute all the Proprietary
Assets necessary to enable Parent to conduct its business in the manner in which
such business has been and is being conducted. Except as set forth in Part
3.8(e) of the Parent Disclosure Schedule, (i) Parent has not licensed any of the
Parent Proprietary Assets to any Person, and (ii) Parent has not entered into
any covenant not to compete or Contract limiting its ability to exploit fully
any of its Proprietary Assets or to transact business in any market or
geographical area or with any Person.
3.9 CONTRACTS.
(a) The following Contracts shall be deemed to be "Parent Material
Contracts": (i) the Contracts filed as exhibits to Parent's Form S-1
Registration Statement filed in connection with Parent's initial public offering
of Parent Common Stock (the "Form S-1 Registration Statement"), and (ii) each
Parent Contract of the type described in Section 2.9(a) that involve obligations
on behalf of Parent in excess of One Hundred Thousand Dollars ($100,000.00) and
set forth on Part 3.9(a) of the Parent Disclosure Schedule.
(b) Each Parent Material Contract is valid and in full force and
effect, and, to the knowledge of Parent, is enforceable by Parent in accordance
with its terms. Each Parent Material Contract filed as exhibits to Parent's Form
S-1 Registration Statement are all of the Parent Contracts required under the
Securities Act and the rules promulgated thereunder to be filed by Parent in
connection therewith.
(c) Except as set forth in Part 3.9(c) of the Parent Disclosure
Schedule:
(i) Parent has not violated or breached, or committed any
default under, any Parent Material Contract, and, to the knowledge of Parent, no
other Person has violated or breached, or committed any default under, any
Parent Material Contract;
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(ii) to the knowledge of Parent, no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will, or could reasonably be expected to, (a) result in a violation or breach of
any of the provisions of any Parent Material Contract, (b) give any Person the
right to declare a default or exercise any remedy under any Parent Material
Contract, (c) give any Person the right to accelerate the maturity or
performance of any Parent Material Contract, or (d) give any Person the right to
cancel, terminate or modify any Parent Material Contract;
(iii) since August 18, 1998, Parent has not received any notice
(or to the knowledge of Parent, any other communication) regarding any actual or
possible violation or breach of, or default under, any Parent Material Contract;
and
(iv) Parent has not waived any of its material rights under any
Parent Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms
of any Parent Material Contract to renegotiate, any amount paid or payable to
Parent under any Parent Material Contract or any other material term or
provision of any Parent Material Contract.
(e) Part 3.9(e) of the Company Disclosure Schedule identifies each
currently effective proposed Parent Material Contract as to which any bid,
offer, award, written proposal, term sheet or similar document has been
submitted or received by Parent.
3.10 LIABILITIES. Parent has no accrued, contingent or other liabilities
of any nature, either matured or unmatured (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities" column of the Parent
Unaudited Balance Sheet; (b) liabilities that have been incurred by Parent since
the Parent Balance Sheet Date in the ordinary course of business and consistent
with Parent's past practices which in the aggregate do not exceed Thirty Million
Dollars ($30,000,000.00); (c) liabilities under Parent Contracts to the extent
the nature and magnitude of such liabilities can be specifically ascertained by
reference to the text of such Parent Contracts; and (d) the liabilities
identified in Part 3.10 of the Parent Disclosure Schedule.
3.11 COMPLIANCE WITH LEGAL REQUIREMENTS. To Parent's knowledge, Parent
is, and has at all times since its inception been, in compliance with all
applicable Legal Requirements, except where the failure to comply with such
Legal Requirements has not had and could not reasonably be expected to have a
Parent Material Adverse Effect. Parent has not received any notice or other
communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement.
3.12 GOVERNMENTAL AUTHORIZATIONS. Parent holds all material Governmental
Authorizations necessary to enable Parent to conduct its business in the manner
in which its business is currently being conducted and such Governmental
Authorizations are valid and in full force and effect. To Parent's knowledge,
Parent is, and at all times since its inception has been, in substantial
compliance with the terms and requirements of the respective Governmental
Authorizations. Since its inception, Parent has not received any notice or other
communication
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from any Governmental Body regarding (a) any actual or possible violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (b) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorization.
3.13 TAX MATTERS.
(a) All Tax Returns (other than sales Tax Returns) required to be
filed by or on behalf of Parent with any Governmental Body with respect to any
taxable period ending on or before the Closing Date (the "Parent Returns") (i)
have been or will be filed on or before the applicable due date (including any
extensions of such due date), and (ii) have been, or will be when filed,
accurately and completely prepared in all material respects in compliance with
all applicable Legal Requirements.
(b) The Parent Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles. Parent will
establish in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period from
the filing of its last Tax return through the Closing Date.
(c) No claim or Legal Proceeding is pending or, to the knowledge of
Parent, has been threatened against or with respect to Parent in respect of any
Tax. There are no unsatisfied liabilities for Taxes (including liabilities for
interest, additions to tax and penalties thereon and related expenses) with
respect to any notice of deficiency or similar document received by Parent with
respect to any Tax (other than liabilities for Taxes asserted under any such
notice of deficiency or similar document which are being contested in good faith
by Parent and with respect to which adequate reserves for payment have been
established). There are no liens for Taxes upon any of the assets of Parent
except liens for current Taxes not yet due and payable. Parent has not entered
into or become bound by any agreement or consent pursuant to Section 341(f) of
the Code.
(d) Parent is not, and has never been, a party to or bound by any
tax indemnity agreement, tax sharing agreement, tax allocation agreement or
similar Contract.
3.14 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 3.14(a) of the Parent Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Parent Plans")
sponsored, maintained, contributed to or required to be contributed to by Parent
for the benefit of any employee of Parent ("Parent Employee"), except for Parent
Plans which would not require Parent to make payments or provide benefits having
a value in excess of Twenty-Five Thousand Dollars ($25,000.00) in the aggregate.
Parent has made available to the Company an accurate and complete copy of each
Parent Plan.
(b) Parent is not required to be, and, to the knowledge of Parent,
has never been required to be, treated as a single employer with any other
Person under
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Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code.
Parent has never been a member of an "affiliated service group" within the
meaning of Section 414(m) of the Code. Parent does not maintain, sponsor or
contribute to any Pension Plan. Parent does not maintain, sponsor or contribute
to any Welfare Plan.
(c) To the knowledge of Parent, each of the Parent Plans has been
operated and administered in all material respects in accordance with applicable
Legal Requirements, including but not limited to ERISA and the Code.
(d) Except as set forth in Part 3.14(d) of the Parent Disclosure
Schedule, neither the execution, delivery or performance of this Agreement, nor
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or former Parent Employee or
director of Parent (whether or not under any Parent Plan), or materially
increase the benefits payable under any Parent Plan, or result in any
acceleration of the time of payment or vesting of any such benefits.
(e) Part 3.14(e) of the Parent Disclosure Schedule contains a list
of all salaried employees of Parent as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. Parent is not a party to any collective bargaining contract or
other Contract with a labor union involving any of the Parent Employees. All
Parent Employees are "at will" employees.
(f) Part 3.14(f) of the Parent Disclosure Schedule identifies each
Parent Employee who is not fully available to perform work because of disability
or other leave and sets forth the basis of such leave and the anticipated date
of return to full service.
(g) To the knowledge of Parent, Parent is in compliance in all
material respects with all applicable Legal Requirements and Contracts relating
to employment, employment practices, wages, bonuses and terms and conditions of
employment, including employee compensation matters.
(h) Except as set forth in Part 3.14(h) of the Parent Disclosure
Schedule, Parent has good labor relations, and Parent no reason to believe that
(i) the consummation of the Merger or any of the other transactions contemplated
by this Agreement will have a material adverse effect on Parent's labor
relations, or (ii) any of Parent's employees intends to terminate his or her
employment with Parent.
3.15 ENVIRONMENTAL MATTERS. To the knowledge of Parent, Parent is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by Parent of all permits and other
Governmental Authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof. Parent has not received any
notice or other communication (in writing or otherwise), whether from a
Governmental Body, citizens group, employee or otherwise, that alleges that
Parent is not in compliance with any Environmental Law, and, to the knowledge of
Parent, there are no
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circumstances that may prevent or interfere with Parent's compliance with any
Environmental Law in the future. To the knowledge of Parent, no current or prior
owner of any property leased or controlled by Parent has received any notice or
other communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or Parent is not in compliance with any Environmental Law.
3.16 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Legal Proceeding to which Parent is a party
and, to the knowledge of Parent, no Person has threatened to commence any Legal
Proceeding: (i) that involves Parent or any of the assets owned or used by
Parent or any Person whose liability Parent has or may have retained or assumed,
either contractually or by operation of law, or (ii) that challenges, or that
may have the effect of preventing, delaying, making illegal or otherwise
interfering with, the Merger or any of the other transactions contemplated by
this Agreement. To the knowledge of Parent, no event has occurred, and no claim,
dispute or other condition or circumstance exists, that will, or that could
reasonably be expected to, give rise to or serve as a basis for the commencement
of any such Legal Proceeding.
(b) There is no order, writ, injunction, judgment or decree to which
Parent, or any of the assets owned or used by Parent, is subject. To the
knowledge of Parent, no officer or other employee of Parent is subject to any
order, writ, injunction, judgment or decree that prohibits such officer or other
employee from engaging in or continuing any conduct, activity or practice
relating to Parent's business.
3.17 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent has the absolute and
unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance by
Parent of this Agreement have been duly authorized by all necessary action on
the part of Parent and its board of directors. This Agreement constitutes the
legal, valid and binding obligation of Parent, enforceable against Parent in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.18 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 3.18 of
the Parent Disclosure Schedule, neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of Parent's certificate of incorporation or bylaws, or (ii) any
resolution adopted by Parent's stockholders, Parent's board of directors or any
committee of Parent's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement
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or any order, writ, injunction, judgment or decree to which Parent, or any of
the assets owned or used by Parent, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by Parent or that otherwise relates to Parent's business or to any
of the assets owned or used by Parent;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Parent Contract that is or
would constitute a material Contract, or give any Person the right to (i)
declare a default or exercise any remedy under any such Parent Contract, (ii)
accelerate the maturity or performance of any such Parent Contract, or (iii)
cancel, terminate or modify any such Parent Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by Parent (except
for minor liens that will not, in any case or in the aggregate, materially
detract from the value of the assets subject thereto or materially impair the
operations of Parent).
Except as set forth in Part 3.18 of the Parent Disclosure Schedule, Parent is
not and will not be required to make any filing with or give any notice to, or
to obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
3.19 FULL DISCLOSURE. This Agreement (including the Parent Disclosure
Schedule) does not (i) contain any representation, warranty or information that
is false or misleading with respect to any material fact, or (ii) omit to state
any material fact or necessary in order to make the representations, warranties
and information contained and to be contained herein and therein (in the light
of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading.
SECTION 4. CERTAIN COVENANTS OF THE PARTIES
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the earlier of the Effective Time or the termination of this
Agreement pursuant to Section 7.1 (the "Pre-Closing Period"), each of Parent and
the Company shall, and shall cause its respective Representatives to: (a)
provide to the other party and to the other party's Representatives reasonable
access to such party's Representatives, personnel and assets and to all existing
books, records, Tax Returns, work papers and other documents and information
relating to such party; and (b) provide to the other party and to the other
party's Representatives copies of such existing books, records, Tax Returns,
work papers and other documents and information relating to such party, and with
such additional financial, operating and other data and information regarding
such party as the other party may reasonably request.
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4.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing Period:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
(b) the Company shall use commercially reasonable efforts to
preserve intact its current business organization, keep available the services
of its current officers and employees and maintain its relations and goodwill
with all material suppliers, customers, landlords, creditors, employees and
other Persons having business relationships with the Company;
(c) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any Company Common
Membership Units or other security or ownership interest in the Company, and
shall not repurchase, redeem or otherwise reacquire any Company Common
Membership Units or other security or ownership interest in the Company;
(d) the Company shall not sell, issue or authorize the issuance of
(i) any Company Common Membership Units or other security or ownership interest
in the Company, (ii) any option or right to acquire any Company Common
Membership Units or other security or ownership interest in the Company, or
(iii) any instrument convertible into or exchangeable for any Company Common
Membership Units or other security or ownership interest in the Company (except
that the Company shall be permitted to issue those Company Common Membership
Units and other securities specifically set forth on Part 4.2(d) of the Company
Disclosure Schedule);
(e) the Company shall not amend or waive any of its rights under, or
permit the acceleration of vesting under any provision of any agreement
evidencing any outstanding Company Option;
(f) the Company shall not amend or permit the adoption of any
amendment to the Company's certificate of formation, operating agreement, or
effect or permit the Company to become a party to any recapitalization or
reclassification of Company Common Membership Units or other ownership interests
in the Company, split or reverse split of the Company Common Membership Units or
any other ownership interest in the Company or similar transaction;
(g) the Company shall not form any subsidiary or acquire any equity
interest in any other Entity;
(h) the Company shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of the Company during the Pre-Closing Period, do not exceed Twenty-Five
Thousand Dollars ($25,000.00) in the aggregate;
(i) the Company shall not (i) enter into, or permit any of the
assets owned or used by it to become bound by, any Contract that is or would
constitute a Company Material
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Contract, or (ii) amend or prematurely terminate, or waive any material right or
remedy under, any such material Contract;
(j) the Company shall not (i) acquire, lease or license any right or
other asset from any other Person, (ii) sell or otherwise dispose of, or lease
or license, any right or other asset to any other Person, or (iii) waive or
relinquish any right, except for assets acquired, leased, licensed or disposed
of by the Company pursuant to Contracts that are not Company Material Contracts;
(k) the Company shall not (i) lend money to any Person (except that
the Company may make routine travel advances to employees in the ordinary course
of business), or (ii) incur or guarantee any indebtedness for borrowed money;
(l) the Company shall not (i) establish, adopt or amend any Company
Plan, (ii) pay any bonus or make any profit-sharing payment, cash incentive
payment or similar payment to, or increase the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees, or (iii) hire any new employee;
(m) the Company shall not change any of its methods of accounting or
accounting practices in any material respect;
(n) the Company shall not make any Tax election;
(o) the Company shall not commence or settle any Legal Proceeding;
(p) the Company shall not agree or commit to take any of the actions
described in clauses "(c)" through "(o)" above.
Notwithstanding the foregoing, the Company may take any action described in
clauses "(c)" through "(p)" above if Parent gives its prior written consent to
the taking of such action by the Company, which consent will not be unreasonably
withheld.
4.3 OPERATION OF PARENT'S BUSINESS. During the Pre-Closing Period:
(a) Parent shall conduct its business and operations in the ordinary
course and in substantially the same manner as such business and operations have
been conducted prior to the date of this Agreement;
(b) Parent shall use commercially reasonable efforts to preserve
intact its current business organization, keep available the services of its
current officers and employees and maintain its relations and goodwill with all
material suppliers, customers, landlords, creditors, employees and other Persons
having business relationships with Parent;
(c) except as contemplated in Parent's Form S-1 Registration
Statement, Parent shall not declare, accrue, set aside or pay any dividend or
make any other distribution in respect of any shares of capital stock, and shall
not repurchase, redeem or otherwise reacquire any shares of capital stock or
other securities (except that Parent may repurchase Parent
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Common Stock from former employees pursuant to the terms of existing restricted
stock purchase agreements);
(d) Parent shall not sell, issue or authorize the issuance of (i)
any capital stock or other security, (ii) any option or right to acquire any
capital stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security (except that Parent shall
be permitted to (x) grant options to purchase up to five hundred thousand
(500,000) shares of Parent Common Stock to employees of Parent who are employees
as of the date of this Agreement and otherwise grant options to purchase Common
Stock of Parent to employees in accordance with its past practices, (y) issue
Parent Common Stock to employees upon the exercise of outstanding Parent Options
and (z) issue Parent Common Stock and/or warrants to purchase Parent Common
Stock that do not exceed ten percent (10%) of Parent's capital stock outstanding
as of the date of this Agreement) pursuant to strategic arrangements agreed upon
by Parent; provided that Parent shall provide to the Company not less than two
(2) business days' notice, and shall consult with the Company and in good faith
consider and discuss with the Company the views of the Company with respect to
such strategic arrangements, prior to entering into such strategic arrangements;
(e) Parent shall not amend or waive any of its rights under, or
permit the acceleration of vesting under, any provision of any agreement
evidencing any outstanding Parent Option;
(f) Parent shall not amend or permit the adoption of any amendment
to Parent's certificate of incorporation or bylaws, or effect or permit Parent
to become a party to any recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction, except as described in Part
4.2(f) of the Parent Disclosure Schedule and except as contemplated in Parent's
Form S-1 Registration Statement;
(g) Parent shall not form any subsidiary or acquire any equity
interest in any other Entity;
(h) Parent shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of Parent during the Pre-Closing Period, do not exceed Two Million Five
Hundred Thousand Dollars ($2,500,000.00) per month;
(i) Parent shall not (i) enter into, or permit any of the assets
owned or used by it to become bound by, any material Contract, or (ii) amend or
prematurely terminate, or waive any material right or remedy under, any Parent
Material Contract;
(j) Parent shall not (i) acquire, lease or license any right or
other asset from any other Person, (ii) sell or otherwise dispose of, or lease
or license, any right or other asset to any other Person, or (iii) waive or
relinquish any right, except for assets acquired, leased, licensed or disposed
of by Parent pursuant to Contracts that are not Parent Material Contracts;
(k) Parent shall not (i) lend money to any Person (except that
Parent may make routine travel advances to employees in the ordinary course of
business and may, consistent with its past practices, allow employees to acquire
Parent Common Stock in exchange
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for promissory notes upon exercise of Parent Options), or (ii) incur or
guarantee any indebtedness for borrowed money in excess of Seven Million Five
Hundred Thousand Dollars ($7,500,000.00);
(l) Parent shall not (i) establish, adopt or amend any Parent Plan,
(ii) pay any bonus or make any profit-sharing payment, cash incentive payment or
similar payment to, or increase the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of its
directors, officers or employees unless in the ordinary course of business and
consistent with past practices, or (iii) hire any new employee whose aggregate
annual base compensation is expected to exceed Two Hundred Fifty Thousand
Dollars ($250,000.00);
(m) Parent shall not change any of its methods of accounting or
accounting practices in any material respect;
(n) Parent shall not make any material Tax election;
(o) Parent shall not commence or settle any Legal Proceeding;
(p) Parent shall not agree or commit to take any of the actions
described in clauses "(c)" through "(o)" above.
Notwithstanding the foregoing, Parent may take any action described in clauses
"(c)" through "(p)" above if the Company gives its prior written consent to the
taking of such action by Parent, which consent will not be unreasonably
withheld.
4.4 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULES.
(a) During the Pre-Closing Period, the Company and the Major Member
shall promptly notify Parent in writing of:
(i) the discovery by the Company or the Major Member of any
event, condition, fact or circumstance that occurred or existed on or prior to
the date of this Agreement and that caused or constitutes an inaccuracy in or
breach of any representation or warranty made by the Company or the Major Member
in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
the Company or the Major Member in this Agreement if (a) such representation or
warranty had been made as of the time of the occurrence, existence or discovery
of such event, condition, fact or circumstance, or (b) such event, condition,
fact or circumstance had occurred, arisen or existed on or prior to the date of
this Agreement;
(iii) any breach of any covenant or obligation of the Company or
the Major Member; and
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(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 5 or
Section 6 impossible or unlikely.
(b) During the Pre-Closing Period, Parent shall promptly notify the
Company in writing of:
(i) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes an inaccuracy in or breach of any representation
or warranty made by Parent or Merger Sub in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
Parent or Merger Sub in this Agreement if (a) such representation or warranty
had been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance, or (b) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any breach of any covenant or obligation of Parent or
Merger Sub; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(c) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Sections 4.4(a) or 4.4(b) requires any change in the
Company's or Parent's Disclosure Schedule, as the case may be, or if any such
event, condition, fact or circumstance would require such a change assuming the
Company Disclosure Schedule or Parent Disclosure Schedule, as applicable, were
dated as of the date of the occurrence, existence or discovery of such event,
condition, fact or circumstance, then the Company or Parent, as applicable,
shall promptly deliver to Parent or the Company, as applicable, an update to the
Company Disclosure Schedule or Parent Disclosure Schedule specifying such
change. No such update shall be deemed to supplement or amend the Company
Disclosure Schedule or Parent Disclosure Schedule for the purpose of (i)
determining the accuracy of any of the representations and warranties made by
the Company or the Major Member or Parent or Merger Sub in this Agreement, or
(ii) determining whether any of the conditions set forth in Sections 5 or 6 have
been satisfied.
4.5 COMPANY NO-SHOP.
(a) During the Pre-Closing Period, the Company shall not, and shall
not permit any of its Representatives to, directly or indirectly:
(i) solicit or encourage the initiation or submission of any
expression of interest, inquiry, proposal or offer from any Person (other than
Parent) relating to a possible Company Acquisition Transaction;
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(ii) participate in any discussions or negotiations or enter
into any agreement with, or provide any non-public information to, any Person
(other than Parent) relating to or in connection with a possible Company
Acquisition Transaction;
(iii) entertain, consider, or accept any proposal or offer from
any Person (other than Parent) relating to a possible Company Acquisition
Transaction; or (IV) enter into any agreement or arrangement with any Person
(other than Parent) to provide electronic commerce services to the Major Member,
Premier, Inc. or any of their respective affiliates or members.
(b) The Company shall promptly notify Parent in writing of any
inquiry, proposal or offer relating to a possible Company Acquisition
Transaction that is received by the Company or any of the Company's
Representatives during the Pre-Closing Period.
4.6 PARENT NO-SHOP.
(a) During the Pre-Closing Period, Parent shall not, and shall not
permit any of its Representatives to, directly or indirectly:
(i) solicit or encourage the initiation or submission of any
expression of interest, inquiry, proposal or offer from any Person (other than
the Company or the Major Member) relating to a possible Parent Acquisition
Transaction;
(ii) participate in any discussions or negotiations or enter
into any agreement with, or provide any non-public information to, any Person
(other than the Company or the Major Member) relating to or in connection with a
possible Parent Acquisition Transaction; or
(iii) entertain, consider, or accept any proposal or offer from
any Person (other than the Company or the Major Member) relating to a possible
Parent Acquisition Transaction.
(b) Parent shall promptly notify the Company in writing of any
inquiry, proposal or offer relating to a possible Parent Acquisition Transaction
that is received by Parent during the Pre-Closing Period.
4.7 REGISTRATION STATEMENT; PROSPECTUS/CONSENT SOLICITATION.
(a) As promptly as practicable after the date of this Agreement, the
Company and Parent shall prepare and cause to be filed with the SEC a
Prospectus/Consent Solicitation and Parent shall prepare and cause to be filed
with the SEC a Form S-4 Registration Statement in which the Prospectus/Consent
Solicitation will be included as a prospectus (the "Form S-4 Registration
Statement" and collectively with the Form S-1 Registration Statement, the
"Registration Statements") and any other documents required by the Securities
Act or Exchange Act to be filed in connection with the Merger. The Company shall
promptly furnish to Parent all information concerning the Company, its
subsidiaries and its members as may be required or reasonably requested in
connection with any action contemplated by this Section 4.7(a). Each of
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Parent and the Company shall (1) notify the other promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff
for amendments or supplements to the S-4 Registration Statement or the
Prospectus/Consent Solicitation or for additional information and (2) shall
supply the other with copies of all correspondence with the SEC or its staff
with respect to the Form S-4 Registration Statement or the Prospectus/Consent
Solicitation. Neither Parent nor the Company shall file any amendment or
supplement to the Form S-4 Registration Statement or the Prospectus/Consent
Solicitation to which the other shall have reasonably objected. Whenever any
event occurs that should be set forth in an amendment or supplement to the Form
S-4 Registration Statement or the Prospectus/Consent Solicitation, Parent or the
Company, as the case may be, shall promptly inform the other of such occurrence
and shall cooperate in filing with the SEC or its staff, and, if appropriate,
mailing to the members of the Company, such amendment or supplement.
(b) Prior to the Effective Time, Parent shall use reasonable efforts to
obtain all regulatory approvals needed to ensure that the Parent Common Stock to
be issued in the Merger will be registered or qualified under the securities
laws of every jurisdiction of the United States in which any registered holder
of Company Common Membership Units has an address of record on the record date
for determining the members entitled to notice of and to vote on the Merger;
provided, however, that Parent shall not be required (i) to qualify to do
business as a foreign corporation in any jurisdiction in which it is not now
qualified, or (ii) to file a general consent to service of process in any
jurisdiction.
4.8 COMPANY MEMBER APPROVAL. As promptly as practicable after the Form
S-4 Registration Statement is declared effective by the SEC under the Securities
Act, the Company shall mail or otherwise deliver to the Company's members the
Prospectus/Consent Solicitation (and Parent shall make available to the Company
such number of copies of the Prospectus/Consent Solicitation as the Company
shall reasonably request), along with a written consent of the Company's members
requesting that they approve this Agreement, the Merger and the transactions
contemplated thereby. In accordance with the Company's Certificate of Formation
and Operating Agreement and in accordance with the DGCL, the Company shall use
its best efforts to cause the Company's members to execute and return all such
written consents to the Company as soon as possible (and in any event within
three (3) days of the date of the mailing or delivery of the Prospectus/Consent
Solicitation to the Company members).
4.9 FILINGS AND CONSENTS; REGULATORY APPROVALS. As promptly as
practicable after the execution of this Agreement, each party to this Agreement
(a) shall make all filings (if any) and give all notices (if any) required to be
made and given by such party in connection with the Merger and the other
transactions contemplated by this Agreement, and (b) shall use all commercially
reasonable efforts to obtain all Consents (if any) required to be obtained
(pursuant to any applicable Legal Requirement or Contract, or otherwise) by such
party in connection with the Merger and the other transactions contemplated by
this Agreement. Each party shall (upon request) promptly deliver to the other
parties a copy of each such filing made, each such notice given and each such
Consent obtained by such party during the Pre-Closing Period. The Company and
Parent shall use all reasonable efforts to file, as soon as practicable after
the date of this Agreement, all notices, reports and other documents required to
be filed with any Governmental Body with respect to the Merger and the other
transactions contemplated by this Agreement, and to submit promptly any
additional information requested by any such
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Governmental Body. Without limiting the generality of the foregoing, the Company
and Parent shall, promptly after the date of this Agreement, prepare and file
the notifications required under the HSR Act and any applicable foreign
antitrust laws or regulations in connection with the Merger. The Company and
Parent shall respond as promptly as practicable to (i) any inquiries or requests
received from the Federal Trade Commission or the Department of Justice for
additional information or documentation, and (ii) any inquiries or requests
received from any state attorney general, foreign antitrust authority or other
Governmental Body in connection with antitrust or related matters. Each of the
Company and Parent shall (1) give the other party prompt notice of the
commencement or threat of commencement of any Legal Proceeding by or before any
Governmental Body with respect to the Merger or any of the other transactions
contemplated by this Agreement, (2) keep the other party informed as to the
status of any such Legal Proceeding or threat, and (3) promptly inform the other
party of any communication to or from the Federal Trade Commission, the
Department of Justice or any other Governmental Body regarding the Merger.
Except as may be prohibited by any Governmental Body or by any Legal
Requirement, the Company and Parent will consult and cooperate with one another,
and will consider in good faith the views of one another, in connection with any
analysis, appearance, presentation, memorandum, brief, argument, opinion or
proposal made or submitted in connection with any Legal Proceeding under or
relating to the HSR Act or any other foreign, federal or state antitrust or fair
trade law. In addition, except as may be prohibited by any Governmental Body or
by any Legal Requirement, in connection with any Legal Proceeding under or
relating to the HSR Act or any other foreign, federal or state antitrust or fair
trade law or any other similar Legal Proceeding, each of the Company and Parent
will permit authorized Representatives of the other party to be present at each
meeting or conference relating to any such Legal Proceeding and to have access
to and be consulted in connection with any document, opinion or proposal made or
submitted to any Governmental Body in connection with any such Legal Proceeding.
4.10 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, no party to
this Agreement shall (and no party shall permit any of its Representatives to)
issue any press release or make any public statement regarding this Agreement or
the Merger, or regarding any of the other transactions contemplated by this
Agreement, without the other party's prior written consent, except as required
by law and except that Parent may disclose this Agreement in the
Prospectus/Consent Solicitation and file it as an exhibit to the Form S-4
Registration Statement (and the Form S-1 Registration Statement) in accordance
with applicable federal securities laws.
4.11 BEST EFFORTS. During the Pre-Closing Period, (a) the Company and
the Major Member shall use their best efforts to cause the conditions set forth
in Section 5 to be satisfied on a timely basis, and (b) Parent and Merger Sub
shall use their best efforts to cause the conditions set forth in Section 6 to
be satisfied on a timely basis.
4.12 ANCILLARY MERGER DOCUMENTS.
(a) At or prior to the date on which the Form S-4 Registration
Statement and the Form S-1 Registration Statement is declared effective by the
SEC (such date of effectiveness being referred to herein as the "Registration
Statements' Effectiveness Date"), each of the Company and the Major Member shall
use their best efforts to provide Parent with the following documents and other
instruments:
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(i) a confidential invention and assignment agreements,
reasonably satisfactory in form and content to Parent, executed by all employees
of the Company and by all consultants and independent contractors to the Company
who have not already signed such agreements;
(ii) a stock option agreement in the form of EXHIBIT C duly
executed by each holder of a Company Option who will receive a Parent
Substituted Option in connection with the Merger, which option will become
effective as of the Effective Time;
(iii) written resignations of all management committee members
and officers of the Company (other than those management committee members and
officers listed on EXHIBIT B, which shall have been duly appointed), effective
as of the Effective Time; and
(iv) all Consents set forth on Part 4.12(a)(iv) of the Company
Disclosure Schedule.
(b) At or prior to the Registration Statements' Effectiveness Date,
Parent shall use its best efforts to provide the Company with the following
documents and other instruments:
(i) an Indemnification Agreement in the form of EXHIBIT E duly
executed by Parent in favor of those management committee members and officers
of the Company whom will become directors and/or officers of Parent as of the
Effective Time, which Indemnification Agreement will become effective as of the
Effective Time; and
(ii) all Consents set forth on Part 4.12(c)(ii) of the Parent
Disclosure Schedule.
4.13 TERMINATION OF EMPLOYEE PLANS; OTHER EMPLOYEE MATTERS. At or prior
to the Closing, the Company shall terminate its Company Plan, and shall ensure
that no employee or former employee of the Company has any rights under such
plan and that any liabilities of the Company under such plan (including any such
liabilities relating to services performed prior to the Closing) are fully
extinguished at no cost to the Company or Parent. Parent agrees that all
employees of the Company shall be eligible to participate in Parent's health,
vacation and other employee benefit plans, to the same extent as employees of
Parent in similar positions and at similar grade levels. As soon as
administratively feasible following the Closing, Parent shall take whatever
action is necessary to transition Company employees into Parent's employee
benefit plans as contemplated by the immediately preceding sentence.
4.14 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Xxxxxxx 0.000 - 0(x)(0)
xx xxx Xxxxxx Xxxxxx Treasury Regulations.
4.15 INDEMNIFICATION OF COMPANY OFFICERS AND DIRECTORS. All rights to
indemnification and exculpation existing in favor of those Persons who are
members of the Company's management committee or who are officers of the Company
as of the date of this Agreement and the Effective Time for acts and omissions
occurring prior to the Effective Time,
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as provided in the Company's charter documents (as in effect as of the date of
this Agreement) shall survive the Merger and shall be observed by the Surviving
Entity to the fullest extent available under Delaware law for a period of six
(6) years from the Effective Time.
4.16 BOARD OBSERVATION RIGHTS. Except as otherwise set forth in this
Section 4.16, during the Pre-Closing Period, Parent shall provide the Major
Member with notice of, and with Board packages related to, meetings of the board
of directors of Parent that occur (or are scheduled to occur) during the
Pre-Closing Period. Parent shall provide such notice to the Major Member on
substantially the same basis, and the Board packages provided to the Major
Member will contain substantially the same information, as provided to Board
members in connection with such meetings. The Major Member shall have the right
to have Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxx (the "Major Member Representatives")
attend the meetings of Parent's board of directors that occur during the
Pre-Closing Period in a non-voting, observer capacity at the Major Member's own
expense. The Major Member shall have the right to have Xxxxxxx Xxxxxxx (and no
other Person) attend meetings of the audit committee or compensation committee
of Parent's board of directors. Notwithstanding the foregoing, the Major Member
shall not be entitled to receive information sent to the Parent's board of
directors and shall not be entitled to have the Major Member Representatives
attend any meeting of Parent's board of directors or any committee of Parent's
board of directors (including any audit or compensation committee meeting) to
the extent that either Parent's Chief Executive Officer or Parent's Chairman of
the Board determines, upon advice of counsel that there may exist a conflict of
interest or a potential compromise of the attorney-client privilege. The Major
Member shall promptly inform Parent of any potential conflicts of interest of
which the Major Member is aware that could be reasonably expected to be relevant
to Parent's decision to allow the Major Member Representatives to attend any
meeting of Parent's board of directors. The Major Member shall, and the Major
Member shall cause the Major Member Representatives to, keep all information
received by them in connection with the rights granted to the Major Member and
the Major Member Representatives under this Section 4.16 confidential and will
not disclose such information to any other Person (other than Premier, Inc.).
4.17 PARENT BOARD COMPOSITION. At or prior to the Closing, the Board of
Directors of Parent shall take all action necessary to reconstitute the Board of
Directors and the Audit and Compensation Committees of the Board of Directors of
Parent as contemplated by Section 1.4(c).
4.18 ASSIGNMENT OF OUTSOURCING AGREEMENT. Immediately after the
Effective Time, Parent shall cause the Surviving Entity to assign and otherwise
transfer the Outsourcing Agreement to Parent and Parent shall assume the
obligations of the Surviving Entity thereunder.
4.19 COVENANT NOT TO PROMOTE. Subject to Section 7.2 of the Outsourcing
Agreement, each of Major Member and Premier agree that, for a period of six (6)
years after March 6, 2000 and except in connection with Provider Select, Inc.
(provided that Provider Select, Inc. does not sell or allow the sale of
products, supplies or services for use by an acute care facility), it will not,
and that it will prevent any entity owned by, controlled by, or under common
control with it (collectively, the "Sellers' Affiliates"), from doing any of the
following: (i) advertising or promoting, directly or indirectly, access to or
use of any on-line commerce web site of a PHx Competitor for the procurement of
medical, pharmaceutical, surgical, dietary,
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dental, or veterinarian supplies or services, whether on-line or in off-line
media, or in any other communication made by or on behalf of Major Member or
Premier or such Sellers' Affiliates, including, without limitation, e-mail,
links, direct mail, press releases or advertising, (ii) offering, operating
and/or marketing an on-line marketplace for the sale or on-line sales of
medical, pharmaceutical, surgical, dietary, dental, or veterinarian supplies or
services directly to hospitals and health care organizations; (iii) integrating
their information systems with the information systems of any PHx Competitor;
(iv) providing integration services for any Participating Member (as defined in
the Outsourcing Agreement), Vendor (as defined in the Outsourcing Agreement) or
Distributor (as defined in the Outsourcing Agreement) with respect to any PHx
Competitor's electronic commerce system; or (v) providing direct access by PHx
Competitors to pricing information through Major Member or Premier related to
Contracted Products (as defined in the Outsourcing Agreement) and Services (as
defined in the Outsourcing Agreement). Such agreement not to promote and the
covenants in the preceding sentence are referred to herein as the "Covenant Not
to Promote." "PHx Competitor" means a third party having a principal business of
providing an on-line marketplace for the sale or on-line sales of medical,
pharmaceutical, surgical, dietary, dental, or veterinarian supplies or services
to hospitals and health care organizations, but excluding: (i) Provider Select,
Inc. (provided that Provider Select, Inc. does not sell or allow the sale of
products, supplies or services for use by an acute care facility); and (ii)
Distributors and Vendors with which Major Member or Premier has or will enter
into a formal agreement in the ordinary course of business (provided Major
Member and Premier shall refrain from promoting any electronic commerce
capabilities of such Distributors or Vendors to the extent such capabilities are
competitive with the PHx e-Commerce System). Upon the expiration of the Covenant
Not to Promote (or earlier waiver thereof by PHx in accordance with Section 12.4
of the Outsourcing Agreement), Major Member and Premier shall have the right to
promote to Participating Members up to two (2) additional providers of
electronic commerce solutions for medical, pharmaceutical, surgical, dietary,
dental, or veterinarian supplies or services (in addition to PHx).
Notwithstanding any other provision of this Agreement, the Covenant Not to
Promote shall cease to be enforceable against Major Member and Premier (i) when
the Covenant Not to Promote set forth in Section 7.2 of the Outsourcing
Agreement is no longer enforceable against Major Member or Premier pursuant to
the Outsourcing Agreement (including without limitation Section 7.2 thereof),
and (ii) if this Agreement is terminated pursuant to Section 7.
4.20 LEGAL OPINION OF PAUL, HASTINGS, XXXXXXXX & XXXXXX LLP The Company
shall use its best efforts to cause Paul, Hastings, Xxxxxxxx & Xxxxxx LLP to
deliver to Parent on the Closing Date the legal opinion of Paul, Hastings,
Xxxxxxxx & Xxxxxx LLP, dated as of the Closing Date, in the form of EXHIBIT F.
4.21 LEGAL OPINION OF COOLEY GODWARD LLP. Parent shall use its best
efforts to cause Xxxxxx Godward LLP to deliver to the Company on the Closing
Date the legal opinion of Xxxxxx Godward LLP dated as of the Closing Date in the
form of EXHIBIT H.
4.22 CONSULTING SERVICES. The Major Member agrees that, to the extent
that Xxxxx Xxxxxxxxx ("Xxxxxxxxx") ceases to provide employment or consulting
services on a full-time basis to the Company or Parent at any time during the
six (6) month period immediately following the Closing Date (the "Consulting
Period"), then (i) if Xxxxxxxxx becomes employed by the Major Member or any of
its affiliates during the Consulting Period, the Major Member
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shall, and shall cause its affiliates to, make Xxxxxxxxx available to Parent and
the Company on a full-time basis throughout the remaining term of the Consulting
Period in order to assist Parent and the Company with the integration of the PHx
e-commerce system (the "Consulting Services"), or (ii) if Xxxxxxxxx is not so
employed by the Major Member or any of its affiliates during any portion of the
Consulting Period, the Major Member shall, and shall cause its affiliates to,
make available to Parent and the Company on a full-time basis such Persons as
are reasonably acceptable to Parent to perform the Consulting Services
throughout the remaining term of the Consulting Period which Xxxxxxxxx otherwise
would have performed. The costs of the Consulting Services charged by the Major
Member to Parent in the event that the Major Member is required to make Persons
other than Xxxxxxxxx available to provide the Consulting Services as
contemplated by clause (ii) above, will, in no event, exceed that amount equal
to the monetary compensation to which Xxxxxxxxx would otherwise have been
entitled had he provided the Consulting Services to Parent or the Company.
SECTION 5. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions:
5.1 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
5.2 LISTING. The shares of Parent Common Stock to be issued in the
Merger shall have been approved for listing (subject to notice of issuance) on
the Nasdaq National Market.
5.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The Form S-4 Registration
Statement shall have become effective concurrently with the S-1 Registration
Statement in accordance with the provisions of the Securities Act, and no stop
order shall have been issued, and no proceeding for that purpose shall have been
initiated or be threatened, by the SEC with respect to the Form S-4 Registration
Statement or the Form S-1 Registration Statement and the Closing shall be
consummated concurrently with the consummation of Parent's IPO.
5.4 HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated and any similar
waiting period under any applicable foreign antitrust law or regulation shall
have expired or been terminated; and any Consent required under any applicable
foreign antitrust law or regulation shall have been obtained.
5.5 COMPANY STATUS AT CLOSING. As of the Closing, (a) the Company shall
have (i) cash and cash equivalents equal to at least (1) Thirty-Three Million
Dollars ($33,000,000.00) if the Closing occurs on or prior to May 1, 2000, and
(2) Twenty-Five Million Dollars ($25,000,000.00) if the Closing occurs after May
1, 2000 and on or prior to June 30,
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2000, and (ii) total liabilities (whether on or off balance sheet) not to exceed
Eight Million Five Hundred Dollars ($8,500,000.00) (regardless of the date of
the Closing), and (b) there will be no surviving intercompany debt remaining
between the Company and the Major Member or any of the Company's affiliates.
5.6 AUDITED FINANCIAL STATEMENTS The Company shall deliver to Parent
audited balance sheets as of February 29, 2000 and as of December 31, 1999 and
the related statements of income and cash flows for the two (2) month period
then ended and the twelve (12) month period then ended, respectively (as well as
the notes related thereto) and a copy of the unqualified opinion of Ernst &
Young LLP related thereto.
5.7 E-COMMERCE OUTSOURCING AGREEMENT. No modifications, amendments or
other changes shall have been made to that certain e-Commerce Outsourcing
Agreement dated as of March 4, 2000 between Premier Health Exchange, Inc. and
Premier Purchasing Partners, L.P. (the "Outsourcing Agreement") without the
prior written consent of Parent and such agreement shall be in full force and
effect
5.8 COMPANY CAPITALIZATION. The capitalization of the Company shall be
as set forth in EXHIBIT J.
5.9 AMENDMENT TO PARENT CERTIFICATE OF INCORPORATION. Parent's Amended
and Restated Certificate of Incorporation shall have been amended to the extent
necessary to authorize a sufficient number of shares of Parent Common Stock to
enable Parent to consummate the Merger.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
6.1 NO RESTRAINTS. No temporary restraining order preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.2 LISTING. The shares of Parent Common Stock to be issued in the
Merger shall have been approved for listing (subject to notice of issuance) on
the Nasdaq National Market.
6.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The Form S-4 Registration
Statement shall have become effective concurrently with the Form S-1
Registration Statement in accordance with the provisions of the Securities Act,
and no stop order shall have been issued, and no proceeding for that purpose
shall have been initiated or be threatened, by the SEC with respect to the Form
S-4 Registration Statement or the Form S-1 Registration Statement and the
Closing shall be consummated concurrently with the consummation of Parent's IPO.
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6.4 HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated and any similar
waiting period under any applicable foreign antitrust law or regulation shall
have expired or been terminated; and any Consent required under any applicable
foreign antitrust law or regulation shall have been obtained.
6.5 AMENDMENT TO INVESTOR RIGHTS AGREEMENT. That Second Amended and
Restated Investor Rights Agreement dated January 7, 2000 between Parent and
certain of its stockholders shall have been amended, or appropriate consents
shall have been obtained, in order to allow for the registration rights
contemplated by the Lock-Up Agreement.
6.6 CAPITALIZATION OF PARENT The capitalization of Parent shall be as
set forth on EXHIBIT I.
6.7 PARENT SUBSTITUTED OPTION Parent shall have delivered to the Company
a stock option agreement in the form of EXHIBIT C duly executed by Parent in
favor of each holder of a Company Option who will receive a Parent Substituted
Option in connection with the Merger.
6.8 AMENDMENT TO PARENT CERTIFICATE OF INCORPORATION. Parent's Amended
and Restated Certificate of Incorporation shall have been amended to the extent
necessary to authorize a sufficient number of shares of Parent Common Stock to
enable Parent to consummate the Merger.
SECTION 7. TERMINATION
7.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Registration Statements' Effectiveness Date:
(a) by mutual written consent of Parent and the Company;
(b) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 5 has become impossible
(other than as a result of any failure on the part of Parent or Merger Sub to
comply with or perform any covenant or obligation of Parent or Merger Sub set
forth in this Agreement);
(c) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 6 has become
impossible (other than as a result of any failure on the part of the Company or
the Major Member to comply with or perform any covenant or obligation of the
Company or the Major Member set forth in this Agreement);
(d) by Parent or the Company if the Merger shall not have been
consummated by June 30, 2000 (unless the failure to consummate the Merger is
attributable to a failure on the part of the party seeking to terminate this
Agreement to comply with or perform any covenant or obligation of such party set
forth in this Agreement);
(e) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or
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shall have taken any other action, having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger;
(f) by the Company, if Parent shall have failed to deliver to the
Company, not later than one (1) day prior to the Registration Statements'
Effectiveness Date, a Lock-Up and Registration Rights Agreement in the form of
EXHIBIT D (the "Lock-Up Agreement) executed by Parent with respect to each
Person to receive Parent Common Stock in the Merger pursuant to Section 1.5 or
who will be entitled to acquire Parent Common Stock upon the exercise of a
Parent Substituted Option or Company Warrant assumed by Parent pursuant to
Section 1.6(b);
(g) by Parent, if Parent shall have failed to receive, not later
than one (1) day prior to the Registration Statements' Effectiveness Date, a
Lock-Up Agreement duly executed by each Person to receive Parent Common Stock in
the Merger pursuant to Section 1.5 or who will be entitled to acquire Parent
Common Stock upon the exercise of a Parent Substituted Option or Company Warrant
assumed by Parent pursuant to Section 1.6(b); or
(h) by either Parent or the Company if there shall be pending any
Legal Proceeding brought by a Governmental Body against any of the parties to
this Agreement challenging or seeking to restrain or prohibit the consummation
of the Merger or any of the transactions contemplated by this Agreement.
7.2 TERMINATION PROCEDURES. If Parent wishes to terminate this Agreement
pursuant to Section 7.1(b), Section 7.1(d), Section 7.1(e), Section 7.1(g) or
Section 7.1(h), Parent shall deliver to the Company a written notice stating
that Parent is terminating this Agreement and setting forth a brief description
of the basis on which Parent is terminating this Agreement. If the Company
wishes to terminate this Agreement pursuant to Section 7.1(c), Section 7.1(d),
Section 7.1(e), Section 7.1(f) or Section 7.1(h), the Company shall deliver to
Parent a written notice stating that the Company is terminating this Agreement
and setting forth a brief description of the basis on which the Company is
terminating this Agreement.
7.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 7.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) none of the Company, the Major Member,
Parent or Merger Sub shall be relieved of any obligation or liability arising
from any prior breach by such party of any provision of this Agreement; (b) the
parties shall, in all events, remain bound by and continue to be subject to the
provisions set forth in Section 9; and (c) the parties shall, in all events,
remain bound by and continue to be subject to Section 4.10.
SECTION 8. INDEMNIFICATION, ETC.
8.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties made by the Company and the
Major Member in this Agreement (including the representations and warranties set
forth in Section 2) shall survive the Closing and shall expire on the first
anniversary of the Closing Date (the "Expiration Date"); provided, however, that
if, at any time prior to the Expiration Date, any Parent Indemnitee (acting in
good faith) delivers to the Major Member a written notice alleging the existence
of an inaccuracy in or a breach of any of the representations or warranties made
44.
51
by the Company or the Major Member (and setting forth in reasonable detail the
basis for such Parent Indemnitee's belief that such an inaccuracy or breach may
exist) and asserting a claim for recovery under Section 8.3 based on such
alleged inaccuracy or breach, then the claim asserted in such notice shall
survive the Expiration Date until such time as such claim is fully and finally
resolved.
(b) The representations and warranties made by Parent and Merger Sub
in this Agreement (including the representations and warranties made in Section
3) shall survive the Closing and shall expire on the Expiration Date; provided,
however, that if at any time prior to the Expiration Date, any Company
Indemnitee (acting in good faith) delivers to Parent a written notice alleging
the existence of an inaccuracy in or a breach of any of the representations or
warranties made by Parent or Merger Sub (and setting forth in reasonable detail
the basis for such Company Indemnitee's belief that such an inaccuracy or breach
may exist) and asserting a claim for recovery under Section 8.3 based on such
alleged inaccuracy or breach, then the claim asserted in such notice shall
survive the Expiration Date until such time as such claim is fully and finally
resolved.
(c) The representations, warranties, covenants and obligations of
the Company and the Major Member, and the rights and remedies that may be
exercised by the Parent Indemnitees, shall not be limited or otherwise affected
by or as a result of any information furnished to, or any investigation made by
or knowledge of, any of the Parent Indemnitees or any of their Representatives.
The representations, warranties, covenants and obligations of Parent and Merger
Sub, and the rights and remedies that may be exercised by the Company
Indemnitees, shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or knowledge of, any of
the Company Indemnitees or any of their Representatives.
8.2 INDEMNIFICATION BY THE MAJOR MEMBER.
(a) From and after the Effective Time (but subject to Section 8.1(a)
and Section 8.4), the Major Member shall hold harmless and indemnify each of the
Parent Indemnitees from and against, and shall compensate and reimburse each of
the Parent Indemnitees for, any Damages which are directly or indirectly
suffered or incurred by any of the Parent Indemnitees or to which any of the
Parent Indemnitees may otherwise become subject (regardless of whether or not
such Damages relate to any third party claim) and which arise from or as a
result of, or are directly or indirectly connected with: (i) any inaccuracy in
or breach of any representation or warranty made by the Company or the Major
Member in this Agreement (without giving effect to any "Material Adverse Effect"
or other materiality qualification or any similar qualification contained or
incorporated directly or indirectly in such representation or warranty); (ii)
any inaccuracy in or breach of any representation or warranty made by the
Company or the Major Member in this Agreement (without giving effect to any
"Material Adverse Effect" or other materiality qualification or any similar
qualification contained or incorporated directly or indirectly in such
representation or warranty, and without giving effect to any update to the
Company Disclosure Schedule delivered by the Company to Parent prior to the
Closing) as if such representation or warranty were made on and as of the
Closing Date; (iii) any breach of any covenant or obligation of the Company or
the Major Member (including the covenants of the Company and the Major Member
set forth in Section 4); or (iv) any Legal
45.
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Proceeding relating to any inaccuracy or breach of the type referred to in
clause "(i)," "(ii)" or "(iii)" above (including any Legal Proceeding commenced
by any Parent Indemnitee for the purpose of enforcing any of its rights under
this Section 8).
(b) The Major Member acknowledges and agrees that, if the Surviving
Entity suffers, incurs or otherwise becomes subject to any Damages as a result
of or in connection with any inaccuracy in or breach of any representation,
warranty, covenant or obligation of the Company or the Major Member, then
(without limiting any of the rights of the Surviving Entity as a Parent
Indemnitee) Parent shall also be deemed, by virtue of its ownership of the stock
of the Surviving Entity, to have incurred Damages as a result of and in
connection with such inaccuracy or breach.
8.3 INDEMNIFICATION BY PARENT. From and after the Effective Time (but
subject to Section 8.1(a) and Section 8.4), Parent shall hold harmless and
indemnify each of the Company Indemnitees from and against, and shall compensate
and reimburse each of the Company Indemnitees for, any Damages which are
directly or indirectly suffered or incurred by any of the Company Indemnitees or
to which any of the Company Indemnitees may otherwise become subject (regardless
of whether or not such Damages relate to any third party claim) and which arise
from or as a result of, or are directly or indirectly connected with: (i) any
inaccuracy in or breach of any representation or warranty made by Parent or
Merger Sub in this Agreement (without giving effect to any "Material Adverse
Effect" or other materiality qualification or any similar qualification
contained or incorporated directly or indirectly in such representation or
warranty); (ii) any inaccuracy in or breach of any representation or warranty
made by Parent or Merger Sub in this Agreement (without giving effect to any
"Material Adverse Effect" or other materiality qualification or any similar
qualification contained or incorporated directly or indirectly in such
representation or warranty, and without giving effect to any update to the
Parent Disclosure Schedule delivered by Parent to the Company prior to the
Closing) as if such representation or warranty were made on and as of the
Closing Date; (iii) any breach of any covenant or obligation of Parent or Merger
Sub (including the covenants of Parent or Merger Sub set forth in Section 4); or
(iv) any Legal Proceeding relating to any inaccuracy or breach of the type
referred to in clause "(i)," "(ii)" or "(iii)" above (including any Legal
Proceeding commenced by any Parent Indemnitee for the purpose of enforcing any
of its rights under this Section 8).
8.4 NO CONTRIBUTION. The Major Member waives, and acknowledges and
agrees that it shall not have and shall not exercise or assert (or attempt to
exercise or assert), any right of contribution, right of indemnity or other
right or remedy against the Surviving Entity in connection with any
indemnification obligation or any other liability to which the Major Member may
become subject under or in connection with this Agreement.
8.5 THRESHOLD. Neither Parent nor the Major Member shall be required to
make any indemnification payment pursuant to Section 8.2(a) or Section 8.3, as
applicable, for any inaccuracy in or breach of any of the Company's or the Major
Member's or Parent's or Merger Sub's representations or warranties set forth in
Section 2 or Section 3, as the case may be, or the noncompliance by Parent or
Merger Sub or by the Company or the Major Member of their respective covenants
until such time as the total amount of all Damages (including the Damages
arising from such inaccuracy, breach or noncompliance and all other Damages
arising from any
46.
53
other inaccuracies in or breaches of any representations or warranties or other
acts of noncompliance with covenants) that have been directly or indirectly
suffered or incurred by any one or more of the Parent Indemnitees or Company
Indemnitees, as the case may be, or to which any one or more of the Parent
Indemnitees or Company Indemnitees, as the case may be, has or have otherwise
become subject, exceeds Two Hundred Fifty Thousand Dollars ($250,000.00) in the
aggregate (the "Threshold Amount"). If the total amount of such Damages exceeds
the Threshold Amount, then the Parent Indemnitees or Company Indemnitees, as the
case may be, shall be entitled to be indemnified against and compensated and
reimbursed only for the portion of such Damages that exceed the Threshold
Amount.
8.6 DEFENSE OF THIRD PARTY CLAIMS BROUGHT AGAINST PARENT, ETC.
(a) In the event of the assertion or commencement by any Person of
any claim or Legal Proceeding (whether against the Surviving Entity, against
Parent or against any other Person) with respect to which the Major Member may
become obligated to hold harmless, indemnify, compensate or reimburse any Parent
Indemnitee pursuant to this Section 8, Major Member shall have the right, at its
election, to assume the defense of such claim or Legal Proceeding. All expenses
incurred by the Major Member in defending such claim or Legal Proceeding shall
be borne by the Major Member. If the Major Member so elects to assume the
defense of any such claim or Legal Proceeding:
(i) the Major Member shall proceed to defend such claim or Legal
Proceeding in a diligent manner with counsel reasonably satisfactory to Parent;
(ii) the Major Member shall keep Parent informed of all material
developments and events relating to such claim or Legal Proceeding;
(iii) Parent shall have the right to participate in the defense
of such claim or Legal Proceeding, at its own expense; and
(iv) the Major Member shall not settle, adjust or compromise
such claim or Legal Proceeding without the prior written consent of Parent,
which will not be unreasonably withheld.
(b) If the Major Member does not elect to assume the defense of any
such claim or Legal Proceeding, Parent may proceed with the defense of such
claim or Legal Proceeding on its own, with counsel selected by Parent and
reasonably satisfactory to the Major Member. If Parent so proceeds with the
defense of any such claim or Legal Proceeding:
(i) all reasonable expenses relating to the defense of such claim
or Legal Proceeding shall be borne by the Major Member;
(ii) the Major Member shall make available to Parent any
documents and materials in its possession or control that may be necessary to
the defense of such claim or Legal Proceeding; and
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(iii) Parent shall have the right to settle, adjust or compromise
such claim or Legal Proceeding with the consent of the Major Member; provided,
however, that such consent shall not be unreasonably withheld.
(c) Parent shall give the Major Member prompt notice of the
commencement of any such Legal Proceeding against Parent or the Surviving
Entity; provided, however, that any failure on the part of Parent to so notify
the Major Member shall not limit any of the obligations of the Major Member
under this Section 8 (except to the extent such failure materially prejudices
the defense of such Legal Proceeding).
8.7 DEFENSE OF THIRD PARTY CLAIMS BROUGHT AGAINST THE MAJOR MEMBER, ETC.
(a) In the event of the assertion or commencement by any Person of
any claim or Legal Proceeding (whether against the Major Member or against any
other Person) with respect to which Parent may become obligated to hold
harmless, indemnify, compensate or reimburse any Company Indemnitee pursuant to
this Section 8, Parent shall have the right, at its election, to assume the
defense of such claim or Legal Proceeding. All expenses incurred by Parent in
defending such claim or Legal Proceeding shall be borne by Parent. If Parent so
elects to assume the defense of any such claim or Legal Proceeding:
(i) Parent shall proceed to defend such claim or Legal
Proceeding in a diligent manner with counsel reasonably satisfactory to the
Major Member;
(ii) Parent shall keep the Major Member informed of all material
developments and events relating to such claim or Legal Proceeding;
(iii) the Major Member shall have the right to participate in
the defense of such claim or Legal Proceeding, at its own expense; and
(iv) Parent shall not settle, adjust or compromise such claim or
Legal Proceeding without the prior written consent of the Major Member, which
consent will not be unreasonably withheld.
(b) If Parent does not elect to assume the defense of any such claim
or Legal Proceeding, the Major Member may proceed with the defense of such claim
or Legal Proceeding on its own, with counsel selected by the Major Member and
reasonably satisfactory to Parent. If the Major Member so proceeds with the
defense of any such claim or Legal Proceeding:
(i) all reasonable expenses relating to the defense of such
claim or Legal Proceeding shall be borne by Parent;
(ii) Parent shall make available to the Major Member any
documents and materials in its possession or control that may be necessary to
the defense of such claim or Legal Proceeding; and
(iii) the Major Member shall have the right to settle, adjust or
compromise such claim or Legal Proceeding with the consent of Parent; provided,
however, that such consent shall not be unreasonably withheld.
48.
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(c) The Major Member shall give Parent prompt notice of the
commencement of any such Legal Proceeding against the Major Member or any other
Company Indemnitee; provided, however, that any failure on the part of the Major
Member to so notify Parent shall not limit any of the obligations of Parent
under this Section 8 (except to the extent such failure materially prejudices
the defense of such Legal Proceeding).
8.8 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PARENT OR MAJOR
MEMBER. No Parent Indemnitee (other than Parent or any successor thereto or
assign thereof) shall be permitted to assert any indemnification claim or
exercise any other remedy under this Agreement unless Parent (or any successor
thereto or assign thereof), shall have consented to the assertion of such
indemnification claim or the exercise of such other remedy. No Company
Indemnitee (other than the Major Member or any successor thereto or assign
thereof) shall be permitted to assert any indemnification claim or exercise any
other remedy under this Agreement unless the Major Member (or any successor
thereto or assign thereof), shall have consented to the assertion of such
indemnification claim or the exercise of such other remedy.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 FURTHER ASSURANCES. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
9.2 FEES AND EXPENSES. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Parent and its Representatives with
respect to the Company's business (and the furnishing of information to Parent
and its Representatives in connection with such investigation and review), (b)
the negotiation, preparation and review of this Agreement (including the
Disclosure Schedules) and all agreements, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with the
transactions contemplated by this Agreement, (c) the preparation and submission
of any filing or notice required to be made or given in connection with any of
the transactions contemplated by this Agreement, and the obtaining of any
Consent required to be obtained in connection with any of such transactions, and
(d) the consummation of the Merger; provided, however, that, to the extent the
total amount of all such fees, costs and expenses incurred by or for the benefit
of the Company (including all such fees, costs and expenses incurred prior to
the date of this Agreement) exceeds Six Million Dollars ($6,000,000.00) in the
aggregate, such fees, costs and expenses shall be borne and paid by the Major
Member and not by the Company.
9.3 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
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9.4 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
IF TO PARENT:
xxxxxxx.xxx, Inc.
Attn: Chief Financial Officer
00000 Xxxxxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Telephone Number: (000) 000-0000
Facsimile: (000) 000-0000
WITH A COPY TO (WHICH SHALL NOT CONSTITUTE NOTICE):
Cooley Godward LLP
Attn: Xxxxxx X. Xxxxxx, Esq.
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Telephone Number: (000) 000-0000
Facsimile: (000) 000-0000
IF TO THE COMPANY:
Premier Health Exchange, LLC
Attn: Chief Executive Officer
00000 Xx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
Telephone Number: (000) 000-0000
Facsimile: (000) 000-0000
WITH A COPY TO (WHICH SHALL NOT CONSTITUTE NOTICE):
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
Attn: Xxxxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Telephone Number: (000) 000-0000
Facsimile: (000) 000-0000
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IF TO THE MAJOR MEMBER:
Premier Purchasing Partners, L.P.
C/O Premier Plans, Inc.
Attn: General Counsel
00000 Xx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
Telephone Number: (000) 000-0000
Facsimile: (000) 000-0000
9.5 CONFIDENTIALITY. Without limiting the generality of anything
contained in Section 4.10, on and at all times after the Closing Date, the each
party hereto shall keep confidential, and shall not use or disclose to any other
Person, any nonpublic document or other non-public information in such party's
possession that relates to the business of the Company or Parent; provided,
however, that the Company and the Major Member consent to the filing by Parent
of this Agreement and the Outsourcing Agreement with the SEC in connection with
the filing of Parent's Form S-4 Registration Statement and/or Form S-1
Registration Statement so long as Parent seeks confidential treatment of certain
agreed upon terms and conditions of the e-Commerce Agreement; and provided
further that any description of the e-Commerce Agreement, or any redacted
version of the e-Commerce Agreement, intended to be filed or attached to any
publicly filed document by Parent shall be submitted to the Company for review
and input prior to filing.
9.6 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
9.7 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
9.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
9.9 GOVERNING LAW. Except with respect to the effect of the Merger,
which shall be governed by Delaware law, this Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the State
of California (without giving effect to principles of conflicts of laws).
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Major Member and its
successors and assigns (if any); Parent and its successors and assigns (if any);
and Merger Sub and its successors and assigns (if any). This Agreement shall
inure to the benefit of: the Company; the Major Member; Parent; Merger Sub; the
other Parent Indemnitees and Company Indemnitee (subject to Section 8.7); and
the respective successors and assigns (if any) of the foregoing. Notwithstanding
anything herein to the contrary, the provisions of Section 4.19 shall only be
assignable to the extent Section 7.1 of the Outsourcing Agreement is assignable.
51.
58
9.11 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
9.12 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
9.13 AMENDMENTS. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
9.14 SEVERABILITY. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
9.15 PARTIES IN INTEREST. Except for the provisions of Sections 1.6,
4.13, 4.15 and 8, none of the provisions of this Agreement is intended to
provide any rights or remedies to any Person other than the parties hereto and
their respective successors and permitted assigns (if any).
9.16 ENTIRE AGREEMENT. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
52.
59
9.17 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
53.
60
The parties hereto have caused this Agreement to be executed and
delivered as of the date first set forth above.
XXXXXXX.XXX, INC.,
a Delaware corporation.
By: /s/ XXXXXX XXXXXX
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: CEO
SAPPHIRE ACQUISITION CORP.,
a Delaware corporation.
By: /s/ XXXXXX XXXXXX
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: CEO
PREMIER HEALTH EXCHANGE LLC,
a Delaware limited liability
company.
By: /s/ XXXXX XXXXXXXXX
----------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: President
PREMIER PURCHASING PARTNERS, L.P.
BY: PREMIER PLANS, INC.
Its General Partner
By: /s/ XXXXXXX X. NORLINO
----------------------------------------
Name: Xxxxxxx X. Norlino
Title: President & CEO
Solely for the Purposes of Section 4.19:
PREMIER, INC.
By: /s/ XXXXX XXXXXX
----------------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Financial Officer
SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
61
EXHIBIT A
DEFINITIONS
For purposes of the Agreement the following terms shall have the
meanings specified below:
AGREEMENT. "Agreement" shall mean this Agreement and Plan of Merger
(including the Company Disclosure Schedule and the Parent Disclosure Schedule),
as it may be amended from time to time.
COMPANY ACQUISITION TRANSACTION. "Company Acquisition Transaction" shall
mean any transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the business or assets of the Company or any direct or
indirect subsidiary or division of the Company;
(b) except for the issuance of the Company Common Membership
Units set forth on Part 4.2(d) of the Company Disclosure Schedule, the issuance,
grant, disposition or acquisition of (A) any Company Common Membership Units or
other security of the Company or other ownership interest in the Company, (B)
any option, call, warrant or right (whether or not immediately exercisable) to
acquire any Company Common Membership Units or other security of the Company or
other ownership interest in the Company; or (C) any security, instrument or
obligation that is or may become convertible into or exchangeable for any
Company Common Membership Units or other security of the Company or other
ownership interest in the Company; or
(c) any merger, consolidation, business combination, share or
other security exchange, reorganization or similar transaction involving the
Company;
COMPANY COMMON MEMBERSHIP UNITS. "Company Common Membership Units" shall
mean the certificated membership units of the Company representing a Person's
interest in the profits or losses of the Company.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets is
or may become bound or under which the Company has, or may become subject to,
any obligation; or (c) under which the Company has or may acquire any right or
interest.
COMPANY DISCLOSURE SCHEDULE. "Company Disclosure Schedule" shall mean
the schedule (dated as of the date of the Agreement) delivered to Parent on
behalf of the Company.
COMPANY INDEMNITEES. "Company Indemnitees" shall mean the following
Persons: (i) the Company, (ii) the Company's current and future affiliates,
(iii) the respective Representatives of the Persons referred to in clauses (i)
and "(ii)", and (iv) the respective successors and assigns of the Persons
referred to in clauses "(i)", "(ii)", and "(iii)".
A-1.
62
COMPANY MATERIAL ADVERSE EFFECT. A matter will be deemed to have a
"Company Material Adverse Effect" if such matter would have a material adverse
effect on the Company's business, condition, assets, liabilities, operations,
financial performance or prospects, taken as a whole.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written or oral agreement, contract,
subcontract, lease, understanding, instrument, note, warranty, insurance policy,
benefit plan or legally binding commitment.
DAMAGES. "Damages" shall include any loss, damage, liability, claim,
demand, settlement, judgment, award, fine, penalty, Tax, fee (including
reasonable attorneys' fees), charge, cost (including costs of investigation) or
expense of any nature.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement, option,
right of first refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
ENVIRONMENTAL LAW. "Environmental Law" shall mean any federal, state,
local or foreign Legal Requirement relating to pollution or protection of human
health or the environment (including ambient air, surface water, ground water,
land surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
A-2.
63
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; or (c) governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other tribunal).
HSR ACT. "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
MATERIALS OF ENVIRONMENTAL CONCERN. "Materials of Environmental Concern"
include chemicals, pollutants, contaminants, wastes, toxic substances, petroleum
and petroleum products and any other substance that is now or hereafter
regulated by any Environmental Law or that is otherwise a danger to health,
reproduction or the environment.
PARENT ACQUISITION TRANSACTION. "Parent Acquisition Transaction" shall
mean any transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the business or assets of Parent or any direct or indirect
subsidiary or division of Parent;
(b) except as set forth below, the issuance, grant, disposition
or acquisition of (A) any capital stock or other equity security of Parent or
any direct or indirect subsidiary of Parent, (B) any option, call, warrant or
right (whether or not immediately exercisable) to acquire any capital stock or
other equity security of Parent or any direct or indirect subsidiary of Parent,
or (C) any security, instrument or obligation that is or may become convertible
into or exchangeable for any capital stock or other equity security of Parent or
any direct or indirect subsidiary of Parent; or
(c) any merger, consolidation, business combination, share
exchange, reorganization or similar transaction involving Parent or any direct
or indirect subsidiary of Parent;
provided, however, that (A) the grant of stock options by Parent to its
officers, directors, employees and consultants in the ordinary course of
business will not be deemed to be a "Parent Acquisition Transaction" if such
grant is made pursuant to Parent's existing stock option plans and is consistent
with Parent's past practices, (B) the issuance of stock and/or warrants
(provided
A-3.
64
that such stock and/or warrants do not exceed ten percent (10%) of Parent's
outstanding capital stock) pursuant to strategic arrangements with third parties
will not be deemed to be a "Parent Acquisition Transaction," provided that
Parent provides to the Company not less than two (2) business days notice prior
to entering into such strategic arrangements, and (C) Parent's initial public
offering of Parent Common Stock will not be deemed to be a "Parent Acquisition
Transaction".
PARENT COMMON STOCK. "Parent Common Stock" shall mean the common stock,
$.001 par value per share, of Parent.
PARENT CONTRACT: "Parent Contract" shall mean any Contract: (a) to which
Parent is a party; (b) by which Parent or any of its assets is or may become
bound or under Parent has, or may become subject to, any obligation; or (c)
under which Parent has or may acquire any right or interest.
PARENT DISCLOSURE SCHEDULE. "Parent Disclosure Schedule" shall mean the
schedule (dated as of the date of the Agreement) delivered to the Company on
behalf of Parent and Merger Sub.
PARENT INDEMNITEES. "Parent Indemnitees" shall mean the following
Persons: (i) Parent, (ii) Parent's current and future affiliates, (iii) the
respective Representatives of the Persons referred to in clauses (i) and "(ii)",
and (iv) the respective successors and assigns of the Persons referred to in
clauses "(i)", "(ii)", and "(iii)"; provided, however, that no members of the
Company shall be deemed to be a Parent Indemnitee.
PARENT MATERIAL ADVERSE EFFECT. A matter will be deemed to have a
"Parent Material Adverse Effect" if such matter would have a material adverse
effect on Parent's business, condition, assets, liabilities, operations,
financial performance or prospects, taken as a whole.
PARENT PROPRIETARY ASSET: "Parent Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to Parent or otherwise used by Parent.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (b) right to use or exploit any of the
foregoing.
REPRESENTATIVES. "Representatives" of any specified Person shall mean
the officers, directors, employees, agents, attorneys, accountants, advisors and
representatives of such Person.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
A-4.
65
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
A-5.
66
EXHIBIT B
MANAGEMENT OF THE SURVIVING ENTITY
AND PARENT POST-CLOSING
Directors of Parent Post-Closing:
Xxxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxx Xxxxxxx
Xxxx Xxxxxx
Xxxx Xxxxxxx
Xxxxxxx Xxxxxxx
Xxxx Xxxxx
Three additional persons to be designated by the Company prior to Closing
One additional person to be designated by Consorta
Members of the Audit Committee of the Board of Directors of Parent:
To be determined by mutual agreement of the parties prior to closing, but will
be constituted of an equal number of designees of Parent and designees of the
Company
Members of the Compensation Committee of the Board of Directors of Parent:
To be determined by mutual agreement of the parties prior to closing, but will
be constituted of an equal number of designees of Parent and designees of the
Company
Members of the Management Committee of the Surviving Entity:
Xxxxxx Xxxxxx
Xxxxxx Xxxxxxxx
67
EXHIBIT C
FORM OF PARENT SUBSTITUTED OPTION
68
EXHIBIT D
FORM OF LOCK-UP AND REGISTRATION RIGHTS AGREEMENT
69
EXHIBIT E
FORM OF INDEMNIFICATION AGREEMENT
70
EXHIBIT F
FORM OF PAUL, HASTINGS, XXXXXXXX & XXXXXX LLP
LEGAL OPINION
71
EXHIBIT G
IDENTIFIED COMPANY EMPLOYEES
[Reserved]
72
EXHIBIT H
FORM OF XXXXXX GODWARD LLP LEGAL OPINION
73
EXHIBIT I
PARENT CAPITALIZATION AT CLOSING
As of immediately prior to the Closing, the outstanding capital stock and other
outstanding securities of Parent shall be as follows(1):
Common Stock 20,564,522
Stock Options 4,910,935
Warrants 689,984
TOTAL 26,165,441(2)
----------
(1) To the extent that options or warrants to purchase shares of Parent Common
Stock are exercised during the Pre-Closing Period, the number of shares of
Common Stock will increase and the number or stock options and/or warrants will
decrease on a one-for-one basis; provided that the "Total" shall in any event
remain 26,165,441.
(2) In addition to the foregoing, Parent and the Company have agreed that, prior
to the Closing, Parent shall issue warrants to purchase up to one hundred fifty
thousand (150,000) shares of Parent Common Stock (as calculated prior to the
stock split of Parent's Common Stock contemplated in connection with Parent's
IPO and determined prior to the consummation of Parent's IPO) and up to two
hundred thousand (200,000) shares of Parent Common Stock (as calculated after
the stock split of Parent's Common Stock contemplated in connection with
Parent's IPO and determined after the consummation of Parent's IPO). The
Exchange Ratio set forth in Section 1.5(b) of the Merger Agreement shall remain
unchanged and shall not be affected by the issuance of the warrants contemplated
by this footnote (2).
74
EXHIBIT J
COMPANY CAPITALIZATION AT CLOSING
As of immediately prior to the Closing, the outstanding capitalization of the
Company shall be as follows:
Company Common Membership Units 66,875,000
Company Options 4,180,625
Company Warrants 16,435,068
TOTAL 87,490,693
75
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (the "Amendment")
is dated as of March 15, 2000 (the "Amendment Date"), and is entered into by and
among xxxxxxx.xxx, Inc., a Delaware corporation ("Parent"), Sapphire Acquisition
Corp., a Delaware corporation and wholly owned subsidiary of Parent ("Merger
Sub"), Premier Health Exchange LLC, a Delaware limited liability company (the
"Company"), Premier Purchasing Partners, L.P., a California limited partnership
("Major Member") and Premier, Inc., a Delaware corporation ("Premier").
RECITALS
WHEREAS, Parent, Merger Sub, the Company, Major Member and Premier are
parties to that certain Agreement and Plan of Merger dated as of March 6, 2000
(the "Merger Agreement") whereby, among other things, Merger Sub shall be merged
with and into the Company.
WHEREAS, Parent, Merger Sub, the Company, Major Member and Premier wish
to amend certain exhibits to the Merger Agreement and certain of the related
Disclosure Schedules
AGREEMENTS
NOW THEREFORE, in consideration of the premises and mutual agreements
and covenants set forth herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
SECTION 1. DEFINED TERMS. Capitalized terms used herein and not
otherwise defined shall have the meanings given to such terms in the Merger
Agreement.
SECTION 2. AMENDMENT TO EXHIBIT B - MANAGEMENT OF THE SURVIVING ENTITY
AND PARENT POST-CLOSING. Exhibit B to the Merger Agreement is hereby amended by
deleting the last line under the heading of "Directors of Parent Post-Closing"
which reads "One additional person to be designated by Consorta" and adding the
sentence "One additional person to be designated by mutual agreement of Parent
and the Company."
SECTION 3. AMENDMENT TO EXHIBIT I - PARENT CAPITALIZATION AT CLOSING.
Exhibit I to the Merger Agreement is hereby amended by deleting it in its
entirety and substituting in its place the following:
"EXHIBIT I
PARENT CAPITALIZATION AT CLOSING
As of immediately prior to the Closing, the outstanding capital stock and other
outstanding securities of Parent shall be as follows(1):
Common Stock 20,564,522
Stock Options 4,910,935
1.
76
Warrants 239,984
TOTAL 25,715,441(2)
(1) To the extent that options or warrants to purchase shares of Parent Common
Stock are exercised during the Pre-Closing Period, the number of shares of
Common Stock will increase and the number or stock options and/or warrants will
decrease on a one-for-one basis; provided that the "Total" shall in any event
remain 25,715,441.
(2) In addition to the foregoing, Parent and the Company have agreed that, prior
to the Closing, Parent shall issue warrants to purchase up to one hundred fifty
thousand (150,000) shares of Parent Common Stock (as calculated prior to the
stock split of Parent's Common Stock contemplated in connection with Parent's
IPO and determined prior to the consummation of Parent's IPO) and up to two
hundred thousand (200,000) shares of Parent Common Stock (as calculated after
the stock split of Parent's Common Stock contemplated in connection with
Parent's IPO and determined after the consummation of Parent's IPO). The
Exchange Ratio set forth in Section 1.5(b) of the Merger Agreement shall remain
unchanged and shall not be affected by the issuance of the warrants contemplated
by this footnote (2)."
SECTION 4. AMENDMENT TO EXHIBIT J - COMPANY CAPITALIZATION AT CLOSING.
Exhibit J to the Merger Agreement is hereby amended by deleting it in its
entirety and substituting in its place the following:
"EXHIBIT J
COMPANY CAPITALIZATION AT CLOSING
As of immediately prior to the Closing, the outstanding capitalization of the
Company shall be as follows:
Company Common Membership Units 66,875,000
Company Options 4,180,625
Company Warrants 14,930,381
TOTAL 85,986,006"
SECTION 5. AMENDMENTS TO COMPANY DISCLOSURE SCHEDULES. The Company
Disclosure Schedules shall be amended as follows:
(a) The first sentence of Schedule 2.3(b)(ii) shall be amended to
read in its entirety as follows: "The Company issued a warrant (the "Warrant"),
dated March 1, 2000, to the Major Member to purchase up to an aggregate of
14,930,381 of Company Common Membership Units at an exercise price of $.01 per
Common Membership Unit."
(b) The second sentence of Schedule 2.9(a)(v) shall be amended to
read in its entirety as follows: "The Company issued a warrant (the "Warrant"),
dated March 1, 2000, to the Major Member to purchase up to an aggregate of
14,930,381 of Company Common Membership Units at an exercise price of $.01 per
Common Membership Unit."
2.
77
(c) The second sentence of Schedule 4.2(d) shall be amended to
read in its entirety as follows: "The Company issued a warrant (the "Warrant"),
dated March 1, 2000, to the Major Member to purchase up to an aggregate of
14,930,381 of Company Common Membership Units at an exercise price of $.01 per
Common Membership Unit."
SECTION 6. EFFECT OF AMENDMENT. Except as and to the extent expressly
modified by this Amendment, the Merger Agreement, the Exhibits thereto, the
Company Disclosure Schedules and the Parent Disclosure Schedules shall remain in
full force and effect in all respects. The terms of this Amendment shall be
applied retroactively for purposes of Sections 5, 6 and 8 of the Merger
Agreement, such that the Exhibits, the Company Disclosure Schedules and the
Parent Disclosure Schedules shall be deemed to have read, as of March 6, 2000,
as amended herein. In the event of a conflict between this Amendment and the
Merger Agreement, the Exhibits thereto, the Company Disclosure Schedules or the
Parent Disclosure Schedules, this Amendment shall govern.
SECTION 7. COUNTERPARTS. This Amendment may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
SECTION 8. GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the State
of California (without giving effect to principles of conflicts of laws).
[Remainder of this page intentionally left blank]
3.
78
The parties hereto have caused this Amendment to be executed and
delivered as of the date set forth above.
XXXXXXX.XXX, INC.,
a Delaware corporation.
By: /s/ XXXXXX X. XXXXXXXX
---------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chief Financial Officer, Executive
Vice President and Secretary
SAPPHIRE ACQUISITION CORP.,
a Delaware corporation.
By: /s/ XXXXXX X. XXXXXXXX
---------------------------------------------
Name: XXXXXX X. XXXXXXXX
Title: Chief Financial Officer, Executive
Vice President and Secretary
PREMIER HEALTH EXCHANGE LLC,
a Delaware limited liability
company.
By: /s/ XXX X. XXXXXX
----------------------------------------
Name: Xxx X. Xxxxxx
Title:
PREMIER PURCHASING PARTNERS, L.P.
BY: PREMIER PLANS, INC.
Its General Partner
By: /s/ XXXXX XXXXXXXX
----------------------------------------
Name: Xxxxx XxXxxxxx
Title: Assistant Treasurer
PREMIER, INC.
By: /s/ XXXXXXX X. XXXXXXX
----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Secretary
4.
