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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
January 31, 2000
HEALTHEON/WEBMD CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-24975 94-3236644
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
400 The Lenox Building
3399 Peachtree Road, NE
Atlanta, GA 30326
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code: (404) 495-7600
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
On January 31, 2000, Healtheon/WebMD Corporation ("Healtheon/WebMD")
acquired all of the outstanding membership interests of Kinetra LLC, a Delaware
limited liability company from Electronic Data Systems Corporation, a Delaware
corporation, Eli Lilly and Company ("Lilly"), an Indiana corporation and
Integrated Medical Systems, Inc., a Colorado corporation and a wholly-owned
subsidiary of Lilly, in exchange for an aggregate of 7,437,248 shares of
Healtheon/WebMD's common stock and an aggregate of $1,000.00 cash.
Item 7. Financial Statements and Exhibits
(c) Exhibits
The following exhibits are filed herewith:
2.1 Purchase Agreement dated as of December 20, 1999 by
and among Electronic Data Systems Corporation, Eli
Lilly and Company, Integrated Medical Systems, Inc.,
Kinetra LLC and Healtheon/WebMD Corporation.*
99.1 Text of Press Release, dated February 2, 2000, titled
"Healtheon/WebMD Announces Closing of Previously
Announced Agreement to Acquire Kinetra"
* Certain exhibits to, and schedules delivered in
connection with, the Purchase Agreement have been
omitted pursuant to Item 601(b)(2) of Regulation S-K.
Registrant agrees to supplementally furnish to the
Commission a copy of any such exhibit or schedule
upon request.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HEALTHEON/WEBMD CORPORATION
Date: February 10, 2000 By: /s/ Jack Dennison
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Jack Dennison
Executive Vice President and
General Counsel
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EXHIBIT INDEX
2.1 Purchase Agreement dated as of December 20, 1999 by and among
Electronic Data Systems Corporation, Eli Lilly and Company, Integrated
Medical Systems, Inc., Kinetra LLC and Healtheon/WebMD Corporation.
99.1 Text of Press Release, dated February 2, 2000, titled "Healtheon/WebMD
Announces Closing of Previously Announced Agreement to Acquire Kinetra"
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EXHIBIT 2.1
PURCHASE AGREEMENT
BY AND AMONG
ELECTRONIC DATA SYSTEMS CORPORATION,
ELI LILLY AND COMPANY,
INTEGRATED MEDICAL SYSTEMS, INC.,
KINETRA LLC
AND
HEALTHEON/WEBMD CORPORATION
DATED AS OF DECEMBER 20, 1999
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF LLC....................................................1
1.1. Purchase Transaction......................................................1
1.2. Purchase Price............................................................1
1.3. Closing...................................................................2
1.4. Ancillary Agreements......................................................2
1.5. Deliveries................................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY..............3
2.1. Representations and Warranties of Sellers.................................3
2.2. Representations and Warranties of Sellers and the Company.................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER..............................17
3.1. Organization of Purchaser................................................18
3.2. Purchaser Capital Structure..............................................18
3.3. Obligations With Respect to Capital Stock................................19
3.4. Authority; Non-Contravention.............................................19
3.5. SEC Filings; Purchaser Financial Statements..............................20
3.6. Absence of Certain Changes or Events.....................................21
3.7. Brokers' and Finders' Fees...............................................21
3.8. Year 2000 Compliance.....................................................21
3.9. Board Approval...........................................................21
3.10. Purchase for Investment..................................................21
ARTICLE IV COVENANTS.................................................................22
4.1. Cooperation and Access...................................................22
4.2. Conduct of Business......................................................22
4.3. Governmental and Other Approvals.........................................24
4.4. Employee Matters.........................................................25
4.5. Supplemental Disclosure..................................................25
4.6. Other Transactions.......................................................26
4.7. Cooperation..............................................................26
4.8. Use of Name..............................................................26
4.9. Further Assurances.......................................................27
4.10. Confidentiality..........................................................27
4.11. Public Disclosure........................................................27
4.12. Third Party Consents.....................................................27
4.13. California 3(a)(10) Proceeding...........................................27
4.14. Nasdaq Listing...........................................................28
4.15. Rule 145.................................................................28
4.16. Confidential Information.................................................28
</TABLE>
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<TABLE>
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ARTICLE V TAX MATTERS................................................................30
5.1. Tax Returns..............................................................30
5.2. Liability for Taxes and Related Matters..................................30
5.3. Refunds..................................................................32
5.4. Adjustment to Purchase Price.............................................33
5.5. Assistance and Cooperation...............................................33
5.6. Survival, Etc............................................................33
5.7. Taxable Treatment........................................................33
ARTICLE VI CONDITIONS TO CLOSING.....................................................34
6.1. Conditions to the Obligations of the Parties.............................34
6.2. Conditions to the Obligations of Purchaser...............................34
6.3. Conditions to the Obligations of the Sellers.............................36
ARTICLE VII TERMINATION..............................................................37
7.1. Termination..............................................................37
7.2. Notice of Termination; Effect of Termination.............................37
ARTICLE VIII INDEMNIFICATION.........................................................38
8.1. Indemnification Obligations of the Sellers...............................38
8.2. Indemnification Obligations of Purchaser.................................39
8.3. Third-Party Claims; Procedures...........................................39
8.4. Survival.................................................................41
8.5. Tax Losses...............................................................41
8.6. Exclusive Remedy.........................................................41
ARTICLE IX DEFINITIONS...............................................................41
9.1. Certain Definitions......................................................41
ARTICLE X MISCELLANEOUS..............................................................48
10.1. Amendments...............................................................48
10.2. Assignment...............................................................48
10.3. Notices..................................................................48
10.4. Severability.............................................................49
10.5. Counterparts.............................................................49
10.6. Governing Law............................................................49
10.7. Interpretation...........................................................49
10.8. Entire Agreement.........................................................49
10.9. Expenses.................................................................50
10.10. No Third Party Beneficiaries.............................................50
</TABLE>
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PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of December 20, 1999, by and among Electronic Data Systems Corporation, a
Delaware corporation ("EDS"), Eli Lilly and Company, an Indiana corporation
("Lilly"), Integrated Medical Systems, Inc., a Colorado corporation and a
wholly-owned subsidiary of Lilly ("IMS" and, collectively with Lilly, the "Lilly
Sellers" and, collectively with Lilly and EDS, the "Sellers"), Kinetra LLC, a
Delaware limited liability company (the "Company"), and Healtheon/WebMD
Corporation, a Delaware corporation ("Purchaser").
WHEREAS, EDS owns 510 Class A Units of the Company (the "EDS Membership
Interest"), IMS owns 490 Class A Units of the Company (the "IMS Membership
Interest"), and Lilly owns 1,000 Class B Units of the Company (the "Lilly
Membership Interest" and, together with the EDS Membership Interest and the IMS
Membership Interest, the "Membership Interests"), which represent all of the
issued and outstanding membership interests in the Company;
WHEREAS, Purchaser desires to purchase the Membership Interests, and
the Sellers desire to sell the Membership Interests to Purchaser, in each case
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the parties hereto intend each Seller's transfer of its
Membership Interest to Purchaser in exchange for the consideration set forth
below to be treated as a taxable exchange with respect to all Membership
Interests pursuant to Section 1001 of the Internal Revenue Code for income tax
purposes; and
WHEREAS, capitalized terms used herein without definition have the
respective meanings set forth in Article IX;
NOW, THEREFORE, in consideration of the premises, the terms and
conditions set forth herein, the mutual benefits to be gained by the performance
thereof and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF LLC
1.1. Purchase Transaction. Upon the terms and subject to the conditions
of this Agreement, at the Closing the Sellers shall sell, transfer and deliver
to Purchaser, and Purchaser shall acquire from Sellers, the respective
Membership Interests of Sellers.
1.2. Purchase Price.
(a) Subject to adjustment in accordance with the provisions of Sections
1.2(b) below, at the Closing Purchaser shall deliver (i) to EDS, in
consideration of the sale, transfer and delivery of the EDS Membership Interest
2,570,466 shares of Common
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Stock, $.0001 par value per share, of Purchaser ("Purchaser Common Stock") and
$346 in cash, (ii) to Lilly, in consideration of the sale, transfer and delivery
of the Lilly Membership Interest, 878,072 shares of Purchaser Common Stock and
$118 in cash, and (iii) to IMS, in consideration of the sale, transfer and
delivery of the IMS Membership Interest, 3,988,710 shares of Purchaser Common
Stock and $536 in cash (collectively, the "Purchase Price").
(b) The number of shares of Purchaser Common Stock to be issued at the
Closing shall be adjusted to reflect appropriately the effect of any stock
split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Purchaser Common Stock),
reorganization, recapitalization, reclassification or other like change with
respect to the Purchaser Common Stock occurring on or after the date hereof and
prior to the Closing.
1.3. Closing. The closing (the "Closing") of the transactions to be
consummated at the Closing in accordance with the terms of this Agreement shall
take place at the offices of Wilson Sonsini Goodrich & Rosati, Palo Alto,
California, no later than the second Business Day after the satisfaction or
waiver of the conditions set forth in Article VI, or at such other time and date
as shall be mutually agreed to by the parties. The date on which the Closing
occurs in accordance with this Section 1.3 is hereinafter referred to as the
"Closing Date."
1.4. Ancillary Agreements. At the Closing, (i) EDS and Purchaser shall
have entered into a Joint Marketing Agreement in substantially the form of
Exhibit A hereto (the "Joint Marketing Agreement"), (ii) the Sellers and the
Company shall have entered into the Termination of Formation Agreement in
substantially the form of Exhibit B hereto (the "Termination Agreement"), (iii)
EDS and the Company shall have entered into the Amendment to Agreement for
Information Technology Services in substantially the form of Exhibit C hereto
(the "IT Amendment"), (iv) Lilly and Purchaser shall have entered into a
Committed Purchase Agreement in substantially the form of Exhibit D hereto (the
"Lilly Agreement") and (v) in the event the election contemplated by Section
4.13 is made by Sellers, Purchaser and Sellers shall enter into the Registration
Rights Agreement in substantially the form of Exhibit E hereto (the
"Registration Rights Agreement" and, together with the Lilly Agreement, the IT
Amendment, the Termination Agreement and the Joint Marketing Agreement, the
"Ancillary Agreements").
1.5. Deliveries.
(a) At the Closing, EDS shall deliver, or cause to be delivered, to
Purchaser each of the following:
(1) a membership interest power in respect of the EDS Membership
Interest duly executed in the name of Purchaser;
(2) each Ancillary Agreement to which EDS is a party, duly executed
by EDS; and
(3) the officers' certificates referred to in Section 6.2(a) and
(b)
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(b) At the Closing, Lilly shall deliver, or cause to be delivered, to
Purchaser each of the following:
(1) a membership interest power in respect of the Lilly Membership
Interest duly executed in the name of Purchaser;
(2) each Ancillary Agreement to which Lilly is a party, duly
executed by Lilly; and
(3) the officers' certificates referred to in Section 6.2(a) and
(b).
(c) At the Closing, IMS shall deliver, or cause to be delivered, to
Purchaser each of the following:
(1) a membership interest power in respect of the IMS Membership
Interest duly executed in the name of Purchaser;
(2) each Ancillary Agreement to which IMS is a party, duly executed
by IMS;
(3) the officers' certificates referred to in Section 6.2(a) and
(b).
(d) At the Closing, Purchaser shall deliver, or cause to be delivered,
each of the following:
(1) to each Seller, a certificate representing the shares of
Purchaser Common Stock to be delivered to such Seller in respect of the
Purchase Price, registered in the name of such Seller;
(2) to the other parties to each Ancillary Agreement, such
Ancillary Agreements to which Purchaser is a party, duly executed by
Purchaser; and
(3) to each Seller, the officers' certificates referred to in
Section 6.3(a) and (b) hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS AND THE COMPANY
2.1. Representations and Warranties of Sellers. As of the date hereof
and, except for those representations and warranties that address matters only
as of a certain date (which shall be true and correct as of such date), as of
the Closing Date as though made on the Closing Date, each Seller represents and
warrants, severally with respect to itself and not jointly, to Purchaser and to
the other Sellers as follows:
(a) Organization and Authority of Sellers. Such Seller is duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Such Seller has all necessary corporate power
and authority to execute,
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deliver and perform this Agreement and any Ancillary Agreement to which it is a
party and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by such Seller of this Agreement and any
Ancillary Agreement to which it is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of such Seller. This Agreement has been,
and any Ancillary Agreement to which such Seller is a party will at the Closing
be, duly executed and delivered by such Seller and, assuming due execution and
delivery by the other parties, this Agreement constitutes, and at the Closing
such Ancillary Agreements will constitute, the legal, valid and binding
obligation of such Seller, enforceable against such Seller in accordance with
their respective terms (excluding the indemnification and contribution
provisions of the Registration Rights Agreement), subject to applicable
bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or
similar laws affecting creditors' rights generally and to general equitable
principles.
(b) Noncontravention. The execution, delivery and performance by such
Seller of this Agreement and any Ancillary Agreement to which it is a party and
the consummation of the transactions contemplated hereby and thereby will not
(i) conflict with, or result in any violation or breach of, any provision of the
Charter or Bylaws of such Seller, (ii) conflict with, result in any violation or
breach of, constitute a default under, result in a forfeiture, reduction or
other modification of the rights under or give rise to any right of termination
or acceleration (with or without notice or the lapse of time or both) pursuant
to any term or provision of any note, bond, mortgage, indenture, lease, Permit,
Contract or other instrument or document to which such Seller is a party or by
which its properties or assets are bound or (iii) conflict with, or result in
any violation of, any law, ordinance, statute, rule or regulation of any
Governmental Entity or any order, writ, injunction, judgment or decree of any
court, arbitrator or other Governmental Entity applicable to such Seller or its
properties or assets, except, in the case of clauses (ii) and (iii) above, for
conflicts, violations, breaches or other events which would not reasonably be
expected to have a Material Adverse Effect with respect to the Company or
adversely affect the ability of any of the parties to comply with their
obligations under this Agreement or consummate the transactions contemplated
hereby.
(c) No Governmental Consent or Approval Required. No Consent or Permit
of, declaration to, or registration, qualification, designation or filing with,
any Governmental Entity is required for or in connection with the execution,
delivery and performance by such Seller of this Agreement and any Ancillary
Agreement to which it is a party or the consummation of the transactions
contemplated hereby and thereby, other than (i) the filing of a notification
under the HSR Act and the expiration or early termination of the applicable
waiting period thereunder, (ii) such filings as are required to permit the
public sale by Sellers of Purchaser Common Stock, as contemplated by this
Agreement or the Registration Rights Agreement, and (iii) other Consents,
Permits, declarations, registrations, qualifications, designations and filings,
the failure of which to be made or obtained would not reasonably be expected to
have a Material Adverse Effect with respect to the Company or adversely affect
the ability of any of the parties to comply with their obligations under this
Agreement or consummate the transactions contemplated hereby.
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(d) Ownership of LLC Interest. Such Seller holds its Membership
Interest of record and beneficially free and clear of any and all Liens.
2.2. Representations and Warranties of Sellers and the Company. As of
the date hereof and, except for those representations and warranties that
address matters only as of a certain date (which shall be true and correct as of
such date), as of the Closing Date as though made on the Closing Date, Sellers
and the Company, each for itself and not for any other party, represent and
warrant to Purchaser as follows, provided that any representation or warranty
herein qualified by the Knowledge of a party is deemed to be made only by such
party and only with respect to the Knowledge of that party:
(a) Organization and Authority of the Company. The Company is a limited
liability company duly organized, validly existing and in good standing under
the laws of Delaware and has the requisite power and authority to own, lease and
operate its properties, to carry on its business as presently conducted, to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The Company is qualified to do business and in good
standing as a foreign limited liability company or organization in each
jurisdiction in which the nature of its activities or the character of the
properties it owns, leases or operates makes such qualification necessary,
except where the failure to be so qualified would not reasonably be expected to
have a Material Adverse Effect with respect to the Company or adversely affect
the ability of any of the parties to comply with their obligations under this
Agreement or consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company. This Agreement has been duly executed and delivered by the
Company and, assuming due execution and delivery by the other parties,
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, moratorium, reorganization or similar laws
affecting creditors' rights generally and to general equitable principles.
(b) Noncontravention; No Governmental Consent or Approval Required. The
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby will not (i) conflict with,
or result in any violation or breach of, any provision of the organizational
documents of the Company or any of its Subsidiaries, (ii) except as set forth in
Schedule 2.2(b), conflict with, result in any violation or breach of, constitute
a default under, result in a forfeiture, reduction or other modification of the
rights under or give rise to any right of termination or acceleration (with or
without notice or the lapse of time or both) pursuant to any term or provision
of any note, bond, mortgage, indenture, lease, Permit, Contract or other
instrument or document to which the Company or any of its Subsidiaries is a
party or by which its properties or assets are bound or (iii) conflict with, or
result in any violation of, any law, ordinance, statute, rule or regulation of
any Governmental Entity or any order, writ, injunction, judgment or decree of
any court, arbitrator or other Governmental Entity applicable to the Company or
its properties or assets, except, in the case of clause (iii) above, for
conflicts, violations, breaches or other events which would not reasonably be
expected to have a Material Adverse Effect with respect to the Company or
adversely
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affect the ability of any of the parties to comply with their obligations under
this Agreement or consummate the transactions contemplated hereby.
No Consent or Permit of, declaration to, or registration,
qualification, designation or filing with, any Governmental Entity is required
for or in connection with the execution, delivery and performance by the Company
of this Agreement and any Ancillary Agreement to which it is a party or the
consummation of the transactions contemplated hereby and thereby, other than (i)
the filing of a notification under the HSR Act and the expiration or early
termination of the applicable waiting period thereunder, (ii) such filings as
are required to permit the public sale by Sellers of Purchaser Common Stock, as
contemplated by this Agreement or the Registration Rights Agreement, and (iii)
other Consents, Permits, declarations, registrations, qualifications,
designations and filings, the failure of which to be made or obtained would not
reasonably be expected to have a Material Adverse Effect with respect to the
Company or adversely affect the ability of any of the parties to comply with
their obligations under this Agreement or consummate the transactions
contemplated hereby.
(c) Subsidiaries; Investments.
(i) Schedule 2.2(c)(i) identifies each Subsidiary of the Company
and states whether it is a corporation, limited liability company or
other entity. Each Subsidiary of the Company that is a corporation is
duly incorporated, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all necessary power
and authority to own, lease and operate its properties and to carry on
its business as presently conducted. Each Subsidiary of the Company
that is a partnership or limited liability company is duly formed,
validly existing and (if applicable) in good standing under the laws of
the jurisdiction of its formation and has all necessary power and
authority to own, lease and operate its properties and to carry on its
business as presently conducted. Each Subsidiary of the Company is duly
qualified to do business and in good standing as a foreign corporation,
foreign limited partnership or a foreign limited liability company, as
the case may be, in each jurisdiction in which the nature of its
activities or the character of the properties it owns, leases or
operates makes such qualification necessary, except where the failure
to be so qualified would not reasonably be expected to have a Material
Adverse Effect with respect to the Company or adversely affect the
ability of any of the parties to comply with its obligations under this
Agreement or consummate the transactions contemplated hereby.
(ii) Schedule 2.2(c)(ii) identifies each corporation, partnership,
limited liability company or other entity that is not a Subsidiary but
with respect to which the Company holds or has the right to acquire at
any time by any means, directly or indirectly, any capital stock,
equity securities or other ownership interest.
(d) Capitalization. The Membership Interests constitute all of the
issued and outstanding membership interests in the Company. The introductory
paragraphs to this Agreement set forth the holders of the membership interests,
together with their type of
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membership interest and number of membership interests held by such holder.
Except as set forth in Schedule 2.2(d), there are no equity securities,
partnership interests or similar ownership interests of any class of equity
security of the Company, or any securities exchangeable or convertible into or
exercisable for such equity securities, membership interests, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding and neither the members of the Company nor any of its Subsidiaries
have authorized any of the foregoing. Except as indicated on Schedule 2.2(c),
except for securities the Company owns free and clear of all Liens, directly or
indirectly through one or more Subsidiaries, and except for any shares of
capital stock or other similar ownership interests of certain subsidiaries of
the Company owned by certain nominee equity holders as required by the
applicable law of the jurisdiction of organization of such Subsidiaries (which
shares or other interests do not materially affect the Company's control of such
Subsidiaries), there are no equity securities, membership interests, partnership
interests or similar ownership interests of any class of equity security of any
Subsidiary of the Company, or any security exchangeable or convertible into or
exercisable for such equity securities, membership interests, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding and neither the members of the Company nor any of its Subsidiaries
have authorized any of the foregoing. Except as set forth in Schedule 2.2(d),
there are no subscriptions, options, warrants, equity securities, membership
interests, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements or any character to
which the Company or any of its Subsidiaries is a party or by which it is bound
obligating the Company or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any shares of
capital stock, membership interests, partnership interests or similar ownership
interests of the Company or any of its Subsidiaries or obligating the Company or
any of its Subsidiaries to grant, extend, accelerate the vesting of or enter
into any such subscription, option, warrant, equity security, call, right,
commitment or agreement, nor have the members of the Company nor any of its
Subsidiaries authorized any of the foregoing. Except as contemplated by this
Agreement and except as set forth in Schedule 2.2(d), there are no registration
rights and there is no voting agreement, voting trust, proxy, rights plan,
antitakeover plan or other agreement or understanding to which the Company or
any of its Subsidiaries is a party or by which it is bound with respect to any
equity security of any class of the Company or any of its Subsidiaries. At the
Closing, each Seller shall deliver to Purchaser good and marketable title to its
respective Membership Interest, free and clear of all Liens.
(e) Financial Statements. Schedule 2.2(e) sets forth (i) the audited
balance sheet of the Company and its Subsidiaries on a consolidated basis as of
December 31, 1998 and the audited statement of operations for the Company and
its Subsidiaries on a consolidated basis for the period from February 12, 1998
to December 31, 1998 (the "Audited Financial Statements") and (ii) the unaudited
balance sheet of the Company and its Subsidiaries on a consolidated basis as of
November 30, 1999 (the "Balance Sheet") and the unaudited statement of
operations for the Company and its Subsidiaries on a consolidated basis for the
eleven month period then ended (the "Interim Financial Statements" and,
collectively with the Audited Financial Statements, the "Financial
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Statements"). Except as set forth in Schedule 2.2(e), the Financial Statements
have been prepared in accordance with GAAP consistently applied throughout the
period covered thereby (subject to the exceptions noted therein), are in
accordance with and based upon the books and records of the Company and its
Subsidiaries, and fairly present the financial position of the Company and its
Subsidiaries as of the date thereof and the results of operations of the Company
and its Subsidiaries, in each case for the periods covered thereby, except as
set forth in the Notes thereto and that the Interim Financial Statements do not
contain notes and are subject to normal recurring year-end adjustments.
(f) Undisclosed Liabilities. Except (i) as set forth on Schedule
2.2(f), (ii) for liabilities reflected or reserved for on the Balance Sheet,
(iii) for liabilities to vendors, service providers, suppliers, and lessors, and
obligations for payroll and benefits (including reimbursement of expenses to
employees in the ordinary course of business) to employees, under agreements or
arrangements entered into on or prior to November 30, 1999 which would not have
been prohibited by Section 4.2 had they been entered into after the date hereof,
and (iv) for liabilities in respect of executory Contracts to which the Company
or a Subsidiary is a party and which are disclosed in the Schedules to this
Agreement or are entered into after November 30, 1999 with the written consent
of Purchaser or in accordance with Section 4.2 hereof, neither the Company nor
any Subsidiary of the Company has any liabilities (absolute, accrued, contingent
or otherwise) other than liabilities incurred in the ordinary course since
November 30, 1999 not exceeding one million dollars ($1 million) individually or
in the aggregate.
(g) Absence of Certain Changes. Except as set forth in Schedule 2.2(g),
since November 30, 1999 and through the date hereof, the Company has conducted
its business only in the ordinary course consistent with past practice and, to
the Knowledge of Sellers, there has not been any occurrence or event that
individually or in the aggregate has had or would reasonably be expected to have
a Material Adverse Effect with respect to the Company; and since November 30,
1999, and to the date hereof, the Sellers, the Company and the Subsidiaries of
the Company have not taken or failed to take any action the taking of which or
failure of which to take, as the case may be, would have violated any of the
provisions of Section 4.2 if they had then been applicable during such period.
(h) Assets; Real Property.
(i) Except as disclosed in the Financial Statements, each of the
Company and each Subsidiary of the Company has good and marketable
title to, or holds valid leasehold interests in, all of the material
personal properties and assets held or used by it, in each case free
and clear of all Liens other than Permitted Liens.
(ii) Neither the Company nor any Subsidiary of the Company owns any
real property. Schedule 2.2(h)(ii) lists all material real properties
currently leased or subleased by the Company or a Subsidiary of the
Company (the "Material Real Property"). The Company or such Subsidiary
has a valid leasehold or subleasehold interest in all such Material
Real Property, free and
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clear of all Liens other than Permitted Liens. Each such lease or
sublease is legal, valid, binding, enforceable against the Company or
its Subsidiary and, to the Knowledge of the Company and the Sellers,
the other party or parties thereto, and in full force and effect,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
moratorium, reorganization or similar laws affecting creditors' rights
generally and to general equitable principles. Neither the Company (or
its Subsidiary, as the case may be) nor, to the Knowledge of the
Company and the Sellers, any other party is in default, violation or
breach in any material respect under any such lease or sublease, and no
event has occurred and is continuing that constitutes or with notice or
passage of time or both, would constitute a default, violation or
breach by the Company (or its Subsidiary, as the case may be) in any
respect under such lease or sublease except such as would not
reasonably be expected to have a Material Adverse Effect with respect
to the Company.
(i) Material Contracts. Part A of Schedule 2.2(i) is a complete and
accurate list of Material Contracts. Except as disclosed in Part B of Schedule
2.2(i), each Material Contract: (a) is the legal, valid and binding obligation
of the Company or Subsidiary of the Company and to the Knowledge of the Company
is the legal, valid and binding obligation of the other parties thereto and in
full force and effect, and (b) upon consummation of the transactions
contemplated by this Agreement, except to the extent that any consents set forth
in Part B of Schedule 2.2(i) are not obtained, shall continue in full force and
effect in accordance with the terms thereof under the terms thereof without
penalty solely as a consequence of the consummation of such transactions. None
of the Company nor any Subsidiary of the Company is in material breach of, or
default under, any Material Contract and, to the Knowledge of the Company, no
other party thereto is in material breach thereof or default thereunder.
(j) Litigation. Except as disclosed in Schedule 2.2(j), there is no
claim, arbitration, action, suit or proceeding pending or, to the Knowledge of
the Company, threatened, and to the Knowledge of the Company there is no
grievance or investigation pending or threatened, in each case by or before any
Governmental Entity or arbitration tribunal against the Company or any
Subsidiary of the Company or any of their respective properties, assets or
operations involving an amount greater than $15,000. Except as set forth in
Schedule 2.2(j), neither the Company nor any Subsidiary of the Company is in
violation of, or default under, any judgment, order, injunction, writ or decree
of any Governmental Entity or arbitration tribunal applicable to it or any of
its material assets, properties or operation, or since the Formation Date has
received any written notice of any material violation of, or default under, any
such judgment, order, injunction, writ or decree.
(k) Taxes. Except as set forth on Schedule 2.2(k):
(i) All material Tax Returns required to be filed by the Company
and each of its Subsidiaries on or prior to the Closing Date have been
or will be timely filed, and all amounts shown to be due by the Company
and each of its Subsidiaries on each of such Returns have been paid or
will be paid when due.
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(ii) There are no Liens on any of the assets of the Company and
each of its Subsidiaries arising out of any unpaid Taxes, other than
Permitted Liens.
(iii) There is no action or proceeding or unresolved claim for
assessment or collection, pending or, to the Knowledge of Sellers or
the Company, threatened by any Governmental Entity for assessment or
collection of any material Taxes affecting the Company and each of its
Subsidiaries. Neither the Company nor any of its Subsidiaries has been
delinquent in the payment of any material Tax nor is there any material
Tax deficiency outstanding, proposed or assessed against the Company or
any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has executed any waiver or extension of the statute of
limitations for the assessment or collection of any material Tax.
(iv) Neither the Company nor any of its Subsidiaries is a party to
any tax sharing or tax indemnity or tax allocation agreement or
arrangement.
(v) No adjustment relating to any Returns filed by Company or any
of its Subsidiaries has been proposed in writing by any Tax authority
to the Company or any of its Subsidiaries or to Sellers or any
representative thereof.
(vi) Neither the Company nor any of its Subsidiaries has any
liability for unpaid Taxes that has not been accrued for or reserved on
the Balance Sheet, whether asserted or unasserted, contingent or
otherwise, which is material to the Company or any of its Subsidiaries
other than any liability for unpaid Taxes that may have accrued since
November 30, 1999 in connection with the operation of the Company's
business in the ordinary course.
(vii) The Company and each of its Subsidiaries as of the Closing
Date will have withheld with respect to its employees all federal and
state income taxes, Taxes pursuant to the Federal Insurance
Contribution Act, Taxes pursuant to the Federal Unemployment Tax Act
and other Taxes required to be withheld, except such Taxes which are
not material to the Company or its Subsidiaries.
(viii) There is no contract, agreement, plan or arrangement to
which the Company or any of its Subsidiaries is a party as of the date
of this Agreement, including but not limited to the provisions of this
Agreement, covering any employee or former employee of the Company or
any of its Subsidiaries that, individually or collectively, could give
rise to the payment of any amount that would not be deductible pursuant
to Sections 280G, 404 or 162(m) of the Code. There is no contract,
agreement, plan or arrangement to which the Company or any of its
subsidiaries is a party or by which it is bound to compensate any
individual for excise taxes paid pursuant to Section 4999 of the Code.
(ix) None of the Company's or its Subsidiaries' assets are tax
exempt use property within the meaning of Section 168(h) of the Code.
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<PAGE> 14
(x) None of the Company or its Subsidiaries is, nor has any of them
been at any time, a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code.
(xi) None of the Company's Subsidiaries have filed any consent
agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as defined in Section 341(f)(4) of the Code) owned by any
Subsidiaries.
(xii) At all times on and prior to the Closing Date, the Company
has been considered a partnership for U.S. federal income tax purposes.
(xiii) None of the Company's Subsidiaries have constituted either a
"distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section
355 of the Code (x) in the two years prior to the date of this
Agreement or (y) in a distribution which could otherwise constitute
part of a "plan" or "series of related transactions (within the meaning
of Section 355(e) of the Code) in conjunction with the transactions
contemplated herein.
(l) Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
worldwide common law and statutory rights in, arising out of, or
associated therewith: (i) patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations
and continuations-in-part thereof ("Patents"), (ii) inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and
customer lists, and all documentation relating to any of the foregoing,
(iii) copyrights, copyrights registrations and applications therefor,
and all other rights corresponding thereto throughout the world, (iv)
domain names and uniform resource locators ("URLs") and other names and
locators associated with the Internet ("Domain Names"), (v) industrial
designs and any registrations and applications therefor, (vi) trade
names, logos, common law trademarks and service marks, trademark and
service mark registrations and applications therefor, (vii) all
databases and data collections and all rights therein, (viii) all moral
and economic rights of authors and inventors, however denominated, and
(ix) any similar or equivalent rights to and of the foregoing (as
applicable).
"Company Intellectual Property" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, the Company and it
Subsidiaries.
"Registered Intellectual Property" means all Intellectual Property that
is the subject of an application, certificate, filing, registration or
other comparable document issued, filed with, or recorded by any State,
government or other legal authority.
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"Company Registered Intellectual Property" means all of the Registered
Intellectual Property owned by the Company or any of its Subsidiaries.
(1) Schedule 2.2(l)(1) is a complete and accurate list of all
Company Registered Intellectual Property as of the date hereof and
specifies, where applicable, the jurisdictions in which each such item
of company Registered Intellectual Property has been issued or
registered and lists, to the Knowledge of the Sellers, any proceedings
or actions before any court or tribunal (including the United States
Patent and Trademark Office or equivalent authority anywhere in the
world) to which any of the Company Registered Intellectual Property is
subject.
(2) Schedule 2.2(l)(2) is a complete and accurate list of the
product offerings of the Company and its Subsidiaries as of the date
hereof that have been distributed since January 1, 1999 ("Company
Products").
(3) Except in the ordinary course of business and pursuant to the
terms of the Contracts described on Schedule 2.2(l)(3), to the
Knowledge of the Sellers no Company Intellectual Property owned by the
Company or a Subsidiary of the Company is subject to any proceeding or
outstanding decree, order, judgment, contract, license, agreement, or
stipulation restricting in any material manner the current use,
transfer, or licensing thereof by Company or any of its Subsidiaries
and, to the Knowledge of the Company, no Company Intellectual Property
licensed by the Company or a Subsidiary of the Company is subject to
any such proceeding or outstanding decree, order, judgment, contract,
license, agreement, or stipulation.
(4) Each material item of Company Registered Intellectual Property
is valid and subsisting, all registration, maintenance and renewal fees
currently due in connection with such Company Registered Intellectual
Property have been made and all documents, recordations and
certificates deemed desirable by the Company in connection with such
Company Registered Intellectual Property have been filed with the
relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the
purposes of maintaining such Company Registered Intellectual Property.
(5) Company owns and has good and exclusive title to each material
item of Company Registered Intellectual Property owned by it, free and
clear of any lien or encumbrance (excluding non-exclusive licenses and
Contracts described in Schedule 2.2(l)(3)). Without limiting the
foregoing, (i) the Company is the owner of all registered trademarks
and trade names used in the operation or conduct of the business of the
Company and its Subsidiaries, including the sale, distribution or
provision of any Company Products by the Company or its Subsidiaries
and (ii) the Company owns exclusively, or has the right to use, all
copyrighted works that are Company Products or which the Company or any
of its Subsidiaries otherwise purport to own and which are material to
the Company.
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(6) Except as set forth in Schedule 2.2(l)(6), to the extent that
any work, material or invention that is material to the Company has
been developed or created independently or jointly by a third party for
the Company or any of its Subsidiaries or is incorporated into any of
the Company Products, other than "off the shelf" technology, software
or Intellectual Property, the Company has a written agreement with such
third party with respect thereto and either (i) has obtained ownership
of or (ii) has obtained a license with respect thereto sufficient for
the conduct of the Company's business as currently conducted.
(7) Except in the ordinary course of business and except pursuant
to the Contracts described on Schedule 2.2(l)(3), neither the Company
nor any of its Subsidiaries has transferred ownership of, or granted
any exclusive license to any third party with respect to, any Company
Intellectual Property which is material to the Company, or knowingly
permitted the Company's rights in such material Company Intellectual
Property to lapse or enter the public domain.
(8) Schedule 2.2(l)(8) lists all material contracts, licenses and
agreements to which Company or any of its Subsidiaries is a party, (i)
with respect to Company Intellectual Property licensed or transferred
to any third party (other than non-exclusive end-user licenses in the
ordinary course of business and licenses described in Schedule
2.2(l)(3)) or (ii) pursuant to which a third party has licensed or
transferred any material Intellectual Property to the Company.
(9) All material contracts, licenses and agreements relating to
either (i) Company Intellectual Property, or (ii) Intellectual Property
of a third party licensed to Company or any of its Subsidiaries, are in
full force and effect to the Knowledge of the Company. Neither the
Company nor any of its Subsidiaries has received notice that it is not
in material compliance with, or has materially breached any term of,
any such contracts, licenses and agreement and, to the Knowledge of
Sellers, all other parties to such contracts, licenses and agreements
are in compliance with, and have not materially breached any term of,
such contracts, licenses and agreements.
(10) The operation of the business of the Company and its
Subsidiaries as such business currently is conducted, including (i) the
Company's and its Subsidiaries' design, development, manufacture,
distribution, reproduction, marketing or sale of Company Products and
(ii) the Company's and its Subsidiaries' use of any product, device or
process, does not materially infringe or misappropriate the
Intellectual Property of any third party. The operation of the business
of the Company and its Subsidiaries immediately following the Closing
in substantially the same manner as it is currently conducted, and, to
the Knowledge of the Company, such operation following the Closing,
including (i) the Company's and its Subsidiaries' design, development,
manufacture, distribution, reproduction, marketing or sale of Company
Products and (ii) the Company's and its Subsidiaries' use of any
product, device or process, will not materially infringe or
misappropriate the Intellectual Property of any third party.
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(11) None of the Deconsolidated Ventures owns or exclusively
licenses any Intellectual Property used by or necessary for the
business of the Company or any of it Subsidiaries.
(12) Neither this Agreement nor the transaction contemplated
hereby, will, as a result of any contracts or agreements to which the
Company and its Subsidiaries are a party, result in (i) the grant by
Purchaser to any third party any right to or with respect to any
material Intellectual Property owned by, or licensed to, it; or (ii)
Purchaser's being obligated to pay any royalties or other material
amounts to any third party in excess of those payable by Purchaser
prior to Closing.
(m) ERISA. Except for the Employee Plans identified in Schedule 2.2(m),
neither the Company nor any Subsidiary of the Company maintains or contributes
to any Employee Plan. For purposes of this Section, "Employee Plan(s)" shall
mean any pension, retirement, profit-sharing, severance, termination, deferred
compensation, bonus or other incentive plan, stock option or stock purchase
plan, medical, retiree medical, vision, dental or other health plan, or life
insurance plan, or any other employee benefit plan, program, employment
agreement, arrangement, agreement or understanding, including, without
limitation, any "employee benefit plan" as defined in section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that
provides benefits to any current or former employees, officers, directors or
managers of the Company or a Subsidiary of the Company. The Company has provided
Purchaser with correct and complete copies of all Employee Plans, summary plan
descriptions thereof (to the extent required by ERISA), and all trust agreements
or funding agreements including insurance contracts and all amendments thereto
and the most recently received IRS determination letter, the most recently filed
IRS Form 5500 and the most recently prepared actuarial valuation. The execution,
delivery and performance of this Agreement will not result in any payment
(whether of severance pay or otherwise) becoming due to any current or former
employees of the Company or any Subsidiary of the Company. Each such Employee
Plan that is a "pension plan" (as defined in section 3(2) of ERISA) is
tax-qualified under section 401(a) of the Code. Except as set forth in Section
2.2(m), each Employee Plan has been established and maintained in all material
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including ERISA and the Code.
Neither the Company nor any Subsidiary of the Company has in any material
respect violated the health care continuation requirements of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, the requirements of the
Family Medical Leave Act of 1993, as amended, the requirements of the Health
Insurance Portability and Accountability Act of 1996, the requirements of the
Women's Health and Cancer Rights Act, the requirements of the Newborns' and
Mothers' Health Protection Act of 1996, or any amendment to any such act, or any
similar provisions of state law applicable to any employee or former employee of
the Company or any of its Subsidiaries. Since the Formation Date, neither the
Company nor any Subsidiary of the Company has maintained, contributed to or been
required to contribute to (A) any Employee Plan under which more than one
employer makes contributions (within the meaning of Section 4064(a) of ERISA)
(B) any Employee Plan that is a "multiemployer plan" (as defined in section
3(37)(A) or (D) of
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<PAGE> 18
ERISA, as amended by the Multiemployer Pension Plan Amendments Acts of 1980), or
(c) any "multiple employer" plan as described in Section 413(c). No Employee
Plan provides for or promises retiree medical, disability or life insurance of
the Code benefits to any current or former officer, director, manager or
employee of the Company or any Subsidiary of the Company; and there has been no
prohibited transaction (within the meaning of section 406 of ERISA or Section
4975 of the Code) with respect to any Employee Plan that could subject the
Company or a Subsidiary of the Company or any Employee Plans (or their trusts,
trustees or administrators) to any tax or penalty imposed under section 4975 of
the Code or section 502(i) or ERISA. Neither the Company nor any Subsidiary of
the Company is or will be subject to any liability on account of the Company
having been affiliated, prior to the Closing, directly or indirectly, with any
other entity or person under Code section 414, ERISA section 4001 or any similar
foreign law.
(n) Personnel and Labor Matters. The Company has furnished Purchaser a
list of the names and annual rates of compensation of the employees and sales
representatives of the Company and its Subsidiaries whose annual rates of
compensation during the year ended December 31, 1998 (including base salary,
bonus, commissions, and incentive pay) exceeded $100,000. The Company has
delivered to the Purchaser accurate and complete copies of all employment
agreements to which it or any of its Subsidiaries is a party and the Company's
401(k) Plan. The Company has delivered to Purchaser a copy or description of all
other agreements, plans, and other instruments to which the Company or a
Subsidiary of the Company is a party and under which its employees and/or sales
representatives are entitled to receive benefits of any nature. There is no
pending or, to the Knowledge of the Sellers and the Company, threatened labor
dispute or union organization campaign. Neither the Company nor any Subsidiary
of the Company has any labor contract or collective bargaining agreement, there
is no unfair labor practice complaint pending against the Company or a
Subsidiary of the Company; there is no labor strike, dispute, slowdown or
stoppage pending or, to the Knowledge of the Sellers, threatened against or
affecting the Company or a Subsidiary of the Company; and there are no material
charges or claims pending or, to the Knowledge of Sellers, threatened against
the Company or a Subsidiary of the Company before the Equal Employment
Opportunity Commission or the National Labor Relations Board.
(o) Environmental Matters. Each of the Company and its Subsidiaries has
been, since the Formation Date, and is now in material compliance with (i) all
Legal Requirements relating to pollution, protection of the environment or
health and safety (collectively, "Environmental Laws"), and (ii) all
requirements of permits, licenses, approvals and other authorizations required
under Environmental Laws. All emission control equipment installed at the
Material Real Properties pursuant to the requirements of Environmental Laws or
of permits, licenses, approvals and other authorizations required under
Environmental Laws is operated, in all material respects, in accordance with the
requirements of the Environmental Laws and the manufacturer's specifications.
Since the Formation Date, neither the Company nor any Subsidiary of the Company
(i) has received any notification that it is or could be, and, to the Knowledge
of Company, there is no reasonable basis for the Company or any Subsidiary of
the Company to become, subject to any claim, action, obligation, proceeding,
investigation or evaluation,
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directly or indirectly relating to any of its current or past operations or any
of its currently or formerly owned, leased or operated properties, arising under
or pursuant to Environmental Laws or principles of common law which address
pollution or protection of the environment, or (ii) has entered into any
agreement with any Governmental Entity or other person by which responsibility
was assumed by it, either directly or indirectly, for the conduct of any
investigation or remediation of environmental conditions.
(p) Insurance. Excluding insurance policies which have expired and been
replaced, no insurance policy for the Company or a Subsidiary of the Company has
been canceled since the Formation Date and, to the Knowledge of Sellers, no
threat has been made to cancel any such insurance policy of the Company or a
Subsidiary of the Company since such date.
(q) Compliance with Law. The Company and each of its Subsidiaries hold,
and are in compliance with, all material licenses, permits and authorizations
necessary for the lawful conduct of its business, and has complied and is in
compliance with all applicable material Legal Requirements. No claim has been
made by any Governmental Entity (and no such claim is anticipated) to the effect
that the businesses conducted by the Company and its Subsidiaries fail to
comply, in any material respect, with any Legal Requirement.
(r) Brokers' and Finders' Fees. Except for fees payable to Merrill
Lynch & Co. pursuant to an engagement letter dated March 12, 1999, which Sellers
hereby agree are solely their responsibility and not the responsibility of the
Company, the Company has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
(s) Year 2000 Compliance. Except as set forth in Schedule 2.2(s), all
of the Company Products (i) will record, store, process, calculate and present
calendar dates falling on and after (and if applicable, spans of time including)
January 1, 2000, and will calculate any information dependent on or relating to
such dates in the same manner and with the same functionality, data integrity
and performance as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates (collectively, "Year 2000 Compliant") and
(ii) will lose no material functionality with respect to the introduction of
records containing dates falling on or after January 1, 2000. Except as set
forth in Schedule 2.2(s) and except to the extent that any failure of the
Company's or its Subsidiaries Information Technology (as defined below) to be
Year 2000 Compliant would not materially impact the operations of the Company,
such Information Technology is Year 2000 Compliant, and will not cause an
interruption in the ongoing operations of the Company's or any of its
subsidiaries' business on or after January 1, 2000. For purposes of the
foregoing, the term "Information Technology" shall mean and include all
software, hardware, firmware, telecommunications systems, embedded systems and
other systems, components and/or functions (excluding in each case general
utility and public infrastructure systems and services including without
limitation gas, electric, telephone, postal and other items which may be
considered public infrastructure)
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that are owned or used by the Company or any of its Subsidiaries in the conduct
of their business.
(t) Change of Control Payments. Schedule 2.2(t) sets forth each plan or
agreement pursuant to which any amounts may become payable (whether currently or
in the future) to employees, directors or managers of the Company or a
Subsidiary of the Company directly as a result of the purchase and sale of the
Membership Interests contemplated hereby.
(u) Guaranties, Intercompany Debt. Neither the Company nor any of
Subsidiary of the Company is a party to any guaranty of the obligations of any
other party with respect to indebtedness for money borrowed. Schedule 2.2(u)
sets forth a complete and accurate list of all Contracts currently in effect
between the Company and each Seller.
(v) Restrictions on Business Activities. Except as set forth in
Schedule 2.2(v), neither the Company nor any Subsidiary of the Company, nor any
of the Deconsolidated Ventures, is a party to any Contract, and to the Knowledge
of the Company there is no judgment, injunction, order or decree binding upon
Company or its Subsidiaries or any Deconsolidated Venture which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of Company or any of its Subsidiaries, any acquisition of
property by Company or any of its Subsidiaries or the conduct of business by
Company or any of its Subsidiaries as currently conducted.
(w) Deconsolidated Ventures. Neither the Company nor any Subsidiary of
the Company (i) has any liabilities in respect of the operations of the
Deconsolidated Ventures, (ii) is responsible for, or has agreed to be
responsible for, now or in the future, any liabilities of the Deconsolidated
Ventures, or (iii) has any commitment or obligation to make or guarantee now or
in the future any payment by or to a Deconsolidated Venture, in each case other
than (A) as set forth in the Financial Statements, (B) pursuant to the terms of
the joint venture agreements listed on Schedule 2.2(d) and the related
management and network services agreements and software licenses listed on
Schedule 2.2(i), which agreements are the only material agreements of the
Company and its Subsidiaries relating to their joint ventures, and (C)
liabilities for Taxes in respect of the operation of the Deconsolidated Ventures
in the ordinary course of business.
For purposes of the representations and warranties contained in this Article II,
any item or matter required to be set forth on a Schedule will be deemed to be
adequately disclosed thereon if such Schedule provides an appropriate
cross-reference to information set forth on another Schedule or if the
information set forth thereon is clearly disclosed as relating to the items or
matters required to be set forth on one or more enumerated Schedules.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As of the date hereof and, except for those representations and
warranties that address matters only as of a certain date (which shall be true
and correct as of such date),
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<PAGE> 21
as of the Closing Date as though made on the Closing Date, Purchaser represents
and warrants to the Sellers as follows:
3.1. Organization of Purchaser.
(a) Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all necessary 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 Contracts by which it is bound.
(b) Purchaser is qualified to do business as a foreign
corporation, and is in good standing, under the laws of all jurisdictions where
the nature of its business requires such qualification and where the failure to
so qualify would have a Material Adverse Effect on Purchaser.
(c) Purchaser has delivered or made available to the Sellers a
true and correct copy of the Certificate of Incorporation and Bylaws of
Purchaser, each as amended to date (collectively, the "Purchaser Charter
Documents"), and each such instrument is in full force and effect. Purchaser is
not in violation of any of the provisions of Purchaser Charter Documents.
3.2. Purchaser Capital Structure.
(a) As of the date of this Agreement, the authorized capital
stock of Purchaser consists of: (i) 600,000,000 shares of Purchaser Common
Stock, of which 151,769,186 shares were issued and are outstanding as of
December 15, 1999; and (ii) 5,000,000 shares of Preferred Stock, $0.0001 par
value per share, none of which shares have been issued or are outstanding as of
the date of this Agreement. All of the outstanding shares of Purchaser Common
Stock have been duly authorized and validly issued, and are fully paid and
nonassessable.
(b) As of December 15, 1999: (i) 26,364,104 shares of Purchaser
Common Stock were subject to issuance pursuant to outstanding options to
purchase Common Stock under Purchaser's stock option plans; (ii) 10,433,416
shares of Common Stock were reserved for future issuance under Purchaser's stock
plans; and (iii) 1,364,799 shares of Common Stock are reserved for issuance
under Purchaser's employee stock purchase plans. (Stock options granted by
Purchaser pursuant to Purchaser's stock option plans are referred to in this
Agreement as "Purchaser Options"). All shares of Purchaser Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable.
(c) As of the date of this Agreement, 35,602,352 shares of
Purchaser Common Stock are subject to issuance pursuant to outstanding warrants
to purchase Common Stock.
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<PAGE> 22
(d) All outstanding shares of Purchaser Common Stock, all
outstanding Purchaser Options, and all outstanding shares of capital stock of
each Subsidiary of Purchaser 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, except in each case as would
not have a Material Adverse Effect on Purchaser.
3.3. Obligations With Respect to Capital Stock. Except as set forth in
Schedule 3.3 and as set forth in Section 3.2 above, as of the date of this
Agreement there are no equity securities, partnership interests or similar
ownership interests of any class of Purchaser equity security, or any securities
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. Except as set forth in Schedule 3.3 or Section 3.2
above, as of the date of this Agreement there are no subscriptions, options,
warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Purchaser is a party or by which it is
bound obligating Purchaser to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of Purchaser or obligating
Purchaser to grant, extend, accelerate the vesting of or enter into any such
subscription, option, warrant, equity security, call, right, commitment or
agreement. As of the date of this Agreement, except as contemplated by this
Agreement and except as set forth in Schedule 3.3, there are no registration
rights and there is no voting trust, proxy, rights plan, antitakeover plan or
other agreement or understanding to which Purchaser is a party or by which it is
bound with respect to any equity security of any class of Purchaser.
3.4. Authority; Non-Contravention.
(a) Purchaser has all requisite corporate power and authority to
enter into this Agreement and the Ancillary Agreements to be executed and
delivered by it and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and such Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of Purchaser. This Agreement has been, and the Ancillary Agreements to be
entered into by Purchaser will be, duly executed and delivered by Purchaser and,
assuming due execution and delivery by the other parties, constitute the valid
and binding obligations of Purchaser, enforceable against Purchaser in
accordance with their respective terms (excluding the indemnification and
contribution provisions of the Registration Rights Agreement), subject to
applicable bankruptcy, insolvency, fraudulent conveyance, moratorium,
reorganization or similar laws affecting creditors' rights generally and to
general equitable principles. The execution and delivery by Purchaser of this
Agreement and the Ancillary Agreements to which it is a party does not, and the
performance of this Agreement and such Ancillary Agreements by Purchaser will
not, (i) conflict with the Purchaser Charter Documents, (ii) subject to
compliance with the requirements set forth in Section 3.4(b) below, conflict
with or result in any violation of any law, ordinance, statute, rule or
regulation of any Governmental Entity applicable to
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Purchaser or any of its Subsidiaries or by which Purchaser or any of its
Subsidiaries or any of their respective properties are bound or affected, or
(iii) result in any material breach or material violation of or constitute a
material default under, result in a forfeiture, reduction or other modification
of the rights under or give rise to any right of termination or acceleration
(with or without notice or lapse of time or both) pursuant to any term or
provision of any material note, bond, mortgage, indenture, Contract, lease,
Permit, or other instrument or document to which Purchaser or any of its
Subsidiaries is a party or by which Purchaser or any of its Subsidiaries or
their respective assets are bound, except in the case of clauses (ii) and (iii)
above, for conflicts, violations, breaches, or other events which would not
reasonably be expected to have a Material Adverse Effect with respect to
Purchaser or adversely affect the ability of any of the parties to comply with
their obligations under this Agreement or to consummate the transactions
contemplated hereby. Neither the performance by Purchaser of its obligations
under the Registration Rights Agreement nor the exercise by any Seller of its
rights thereunder at any time during the term thereof will conflict with or
violate the terms of any registration, shareholders or similar agreement to
which Purchaser or any of its Subsidiaries is a party, and no Person will have
any "piggyback" registration rights in connection with the shelf registration
contemplated by the Registration Rights Agreement.
(b) No Consent or Permit of, declaration to, or registration,
qualification, designation or filing with, any Governmental Entity is required
for or in connection with the execution, delivery and performance by Purchaser
of this Agreement or the Ancillary Agreements to which it is a party or the
consummation of the transactions contemplated hereby and thereby, other than (i)
the filing of a notification under the HSR Act and the expiration or early
termination of the applicable waiting period thereunder, (ii) such filings as
are required to permit the public sale by Sellers of Purchaser Common Stock as
contemplated by this Agreement or the Registration Rights Agreement, and (iii)
other Consents, Permits, declarations, registrations, qualifications,
designations and filings, the failure of which to be made or obtained would not
reasonably be expected to have a Material Adverse Effect on Purchaser or
adversely affect the ability of any of the parties to comply with their
obligations under this Agreement or consummate the transactions contemplated
hereby.
3.5. SEC Filings; Purchaser Financial Statements.
(a) Purchaser has filed all forms, reports and documents required
to be filed by Purchaser with the Securities and Exchange Commission ("SEC")
since January 1, 1999. All such required forms, reports and documents (referred
to herein as the "Purchaser SEC Reports"). As of their respective dates (or, if
amended, as of the respective dates of such amendments), Purchaser SEC Reports
(i) complied as to form in all material respects with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Purchaser SEC Reports and
(ii) did not at the time they were filed 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. None of Purchaser's
Subsidiaries is required to file any forms, reports or other documents with the
SEC. Since the date of the filing of
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Purchaser's most recent SEC Report until the date hereof, there has not been a
Material Adverse Effect on Purchaser.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in Purchaser SEC Reports (the
"Purchaser Financials"), including each Purchaser SEC Report filed after the
date hereof until the Closing, (i) complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto, (ii)
was prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (iii) fairly presented the consolidated
financial position of Purchaser and its Subsidiaries as at the respective dates
thereof and the consolidated results of Purchaser's operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements may not contain footnotes and were or are subject to normal and
recurring year-end adjustments. The balance sheet of Purchaser contained in
Purchaser's quarterly report on Form 10-Q for the quarter ended September 30,
1999 is hereinafter referred to as the "Purchaser Balance Sheet."
3.6. Absence of Certain Changes or Events. Except as set forth in
Schedule 3.6, from the date of the Purchaser Balance Sheet to the date of this
Agreement, there has not been: (i) any Material Adverse Effect on Purchaser,
(ii) any declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, any of
Purchaser's capital stock, or (iii) any material change by Purchaser in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP.
3.7. Brokers' and Finders' Fees. Except for fees payable to Morgan
Stanley, which are the responsibility of Purchaser, Purchaser has not incurred,
nor will it incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
3.8. Year 2000 Compliance. Purchaser's business operations will not be
materially interrupted as a result of any failure of its products or Information
Technology to be Year 2000 Compliant.
3.9. Board Approval. The Board of Directors of Purchaser has, as of the
date of this Agreement, approved the issuance of shares of Purchaser Common
Stock in respect of the Purchase Price.
3.10. Purchase for Investment. Purchaser is purchasing the Membership
Interests for its own account for investment and not with a view to, or in
connection with, the distribution thereof. Purchaser acknowledges that the
Membership Interests are not being registered under the Securities Act or any
applicable state or provincial securities laws and, accordingly, may not be
transferred or sold except in compliance with the registration requirements of
the Securities Act and the registration or qualification
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requirements of applicable state or provincial securities laws or as permitted
under an available exemption therefrom. Purchaser is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act.
For purposes of the representations and warranties contained in this Article
III, any item or matter required to be set forth on a Schedule will be deemed to
be adequately disclosed thereon if such Schedule provides an appropriate
cross-reference to information set forth on another Schedule or if the
information set forth thereon is clearly disclosed as relating to the items or
matters required to be set forth on one or more enumerated Schedules.
ARTICLE IV
COVENANTS
4.1. Cooperation and Access. From and after the date hereof, the
Sellers and the Company shall permit Purchaser and its representatives to have
reasonable access, during regular business hours, to the assets, books and
records of the Company, and shall furnish, or cause to be furnished, to
Purchaser and its representatives such financial, tax and operating data and
other available information with respect to the Company as Purchaser shall from
time to time reasonably request and which Sellers and the Company shall have the
right to disclose; provided, however, that all information received by Purchaser
and its Affiliates shall be subject to the terms of the Confidentiality
Agreement.
4.2. Conduct of Business. From the date hereof until the Closing,
except as Purchaser shall otherwise consent, which consent shall not be
unreasonably withheld or delayed, and except as contemplated by the express
provisions of this Agreement, the Sellers and the Company agree that the Company
and its Subsidiaries shall conduct their business in the ordinary and usual
course consistent with past practice, and use their reasonable efforts to
preserve intact their business and related relationships with customers,
suppliers and other third parties with whom they deal. From the date hereof
until the Closing, except as Purchaser shall otherwise consent, which consent
shall not be unreasonably withheld or delayed, and except as contemplated by the
express provisions of this Agreement, the Sellers and the Company agree that the
Company and its Subsidiaries shall not:
(a) issue or transfer any capital stock or membership or other
ownership interest of any of the Company or any Subsidiary of the Company or any
security convertible into or exchangeable for, or any other right to acquire,
any such capital stock or membership or other ownership interest, or pay any
dividend or make any distribution to Sellers, redeem a Membership Interest or
make any call for capital contributions to the Company or any of its
Subsidiaries;
(b) amend or make any change to its organizational documents, Charter,
Bylaws or equivalent governing instruments;
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(c) sell, transfer, lease or license or sublicense or otherwise dispose
of any of its material assets other than non-exclusive licenses in the ordinary
course of business consistent with past practice;
(d) incur or assume any Debt;
(e) consolidate with, or merge with or into, any Person;
(f) increase the salary, bonus, commission or other direct or indirect
compensation payable or to become payable to any of their respective officers,
directors, managers, or employees, or make any declaration or payment, or incur
any commitment or obligation, of any kind for the payment of additional salary,
bonus, commission or other direct or indirect compensation to any such person,
except increases for non-executive employees occurring in the ordinary course of
business consistent with past practice, or grant any severance or termination
benefit to any officer, director or employee, other than severance to any
non-executive employee in the ordinary course of business and consistent with
the Company's current policy, or adopt any new severance plan;
(g) increase the benefits payable under any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option, stock purchase or other employee benefit plan, program or arrangement
made to, for or with any of the directors, managers, officers or employees of
the Company or any Subsidiary of the Company, other than any increases required
under the existing terms thereof;
(h) acquire all or substantially all of the assets, business or
properties of any Person, or acquire the securities of any Person;
(i) enter into any lease of real property, except renewals of existing
leases at the end of the terms thereof in the ordinary course of business
consistent with past practice;
(j) create or incur any Liens upon any material properties or assets of
the Company or any Subsidiary of the Company, other than Permitted Liens;
(k) enter into any customer Contract obligating the Company or a
Subsidiary to deliver services valued at greater than $200,000;
(l) engage in any new transaction with any Affiliate (other than
transactions contemplated by this Agreement);
(m) cancel or compromise any material claim, waive or release any
material rights, or change in any material respect or terminate any material
Contract (except for terminations, replacements or modifications of contractual
relationships with customers, dealers, retailers, suppliers, insurers, lessors
and licensees in the ordinary course of business consistent with past practice);
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(n) (i) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or litigation (whether or not commenced prior to the date of this
Agreement) other than the payment, discharge, settlement or satisfaction, in the
ordinary course of business consistent with past practice or in accordance with
their terms, or liabilities recognized or disclosed in the Financial Statements
(or the notes thereto), or (ii) waive the benefits of, agree to modify in any
manner, terminate, release any person from or knowingly fail to enforce any
confidentiality or similar agreement to which Company or any of its Subsidiaries
is a party or of which the Company or any of its Subsidiaries is a beneficiary;
(o) commence litigation;
(p) make any individual or series of related payments outside of the
ordinary course of business in excess of $50,000;
(q) modify, amend or terminate any Material Contract to which the
Company or any Subsidiary thereof is a party or waive, delay the exercise of,
release or assign any material rights or claims thereunder;
(r) enter into, renew or materially modify any contracts, agreements,
or obligations relating to the distribution, sale, license or marketing by third
parties of the Company's products or products licensed by the Company;
(s) except as required by GAAP, revalue any of its assets or make any
change in accounting methods, principles or practices;
(t) incur or enter into any agreement, contract or commitment requiring
the Company or any of its Subsidiaries to pay in excess of $100,000;
(u) make any tax election that, individually or in the aggregate, is
reasonably likely to adversely affect in any material respect the tax liability
or tax attributes of Company or any of its Subsidiaries or settle or compromise
any material income tax liability of the Company;'
(v) operate the Company such that its working capital (including
intercompany payables) are operated and conducted only in the ordinary course of
business as if the Company were not affiliated with the Sellers;
(w) enter into any joint ventures, strategic partnerships or strategic
alliances; or
(x) agree or commit, whether in writing or otherwise, to do any of the
foregoing.
4.3. Governmental and Other Approvals. Upon the terms and subject to
the conditions herein provided, each of the parties hereto agrees to use
commercially reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to
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consummate and make effective the transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, each of the parties hereto
shall execute and deliver, or cause to be executed and delivered, all reasonable
agreements, certificates and other instruments and shall use its reasonable best
efforts to obtain promptly any Consent, authorization, order or approval of, or
any exemption by, any Governmental Entity, including the filing of a
notification and report form and related materials required under the HSR Act,
or other Person which is required to be obtained or made or is advisable to
obtain or make in connection with the transactions contemplated by this
Agreement.
4.4. Employee Matters.
(a) During the one-year period following the Closing, Purchaser shall,
or shall cause the Company to, provide employees of the Company and its
Subsidiaries immediately prior to the Closing (the "Company Employees") with
employee benefits plans, programs and arrangements that in the aggregate are
substantially similar to the employee benefit plans, programs and arrangements
provided from time to time to similarly situated employees of Purchaser.
(b) After the Closing, Purchaser shall, to the extent permitted under
its plans as now in effect, recognize, or cause to be recognized, the service of
the Company Employees with the Company and its Subsidiaries (including any
service by such persons with a Seller or its Affiliates to the extent such
service has been recognized by the Company or its Subsidiaries) for purposes of
eligibility to participate and vesting of benefits under each employee benefit
plan, program and arrangement and any vacation plan, program or policy
maintained by Purchaser, the Company or a Subsidiary of the Company (excluding
any sabbatical program) for such employees on or after the Closing Date.
(c) With respect to any welfare benefit plans maintained for the
benefit of Company Employees on and after the Closing Date, to the extent
permitted under such plans as now in effect Purchaser shall, or shall cause the
Company and its Subsidiaries to, (i) cause there to be waived any eligibility or
pre-existing condition limitations that would not have been applicable to the
Company Employees prior to the Closing Date and (ii) give effect, in determining
any deductible and maximum out-of-pocket limitations, to claims incurred and
amounts paid by, and amounts reimbursed to, such employees with respect to
similar plans maintained by the Company or the Sellers for their benefit
immediately prior to the Closing Date.
4.5. Supplemental Disclosure.
(a) The Company and each Seller shall give prompt notice to each other
and to Purchaser of any representation or warranty made by it contained in this
Agreement becoming untrue or inaccurate, or any failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, in each case, such that
the conditions set forth in Section 6.2(a) or (b) would not be satisfied,
provided, however, that no such notification shall affect the
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representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(b) Purchaser shall give prompt notice to the Sellers and the Company
of any representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate, or any failure by it to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.3(a) or (b) would not be satisfied, provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
4.6. Other Transactions. From the date of this Agreement to the
Closing, each of the Sellers and the Company agrees that it shall not, nor shall
it permit any of its officers, directors, managers, advisors or other
representatives to, directly or indirectly, encourage, solicit, initiate or
participate in discussions or negotiations with, or provide any information or
assistance to, any person or group (other than the Purchaser and its
representatives) concerning any amalgamation, merger, sale of securities, sale
of substantial assets or similar transaction involving the Company.
4.7. Cooperation. Each of Purchaser and the Sellers shall use its
reasonable best efforts, and shall cause its respective officers, employees,
agents, auditors and representatives, as applicable, to use their reasonable
best efforts after the Closing to effect the orderly transition of ownership of
the Company from the Sellers to Purchaser. After the Closing, upon reasonable
written notice, Purchaser and each Seller agrees that it shall furnish or cause
to be furnished to each other and to its employees, counsel, auditors and
representatives, as applicable, access, during normal business hours, to such
information and assistance relating to the Company as is reasonably necessary
for financial reporting, accounting and other legal matters. No party shall be
required by this Section 4.7 to take any action that would unreasonably
interfere with the conduct of its business or unreasonably disrupt its normal
operations.
4.8. Use of Name. Except as expressly provided in this Section 4.8, no
rights are granted pursuant to this Agreement, and neither the Company nor any
of its subsidiaries shall have any rights from and after the Closing, to use the
tradenames or trade marks of the Sellers, including the "EDS" or "Electronic
Data Systems Corporation" names and marks (the "Sellers' Marks"). Following the
Closing, the Company shall have the right to continue to use products, labeling,
packaging materials, promotional materials, business cards, schedules,
stationery, displays, signs, promotional materials, manuals, forms and other
materials in existence and in the possession of the Company on the Closing Date
which use any Sellers' Marks until the earlier of (i) depletion of existing
inventories of such materials or (ii) 90 days from the Closing Date. As promptly
as practicable following the Closing, Purchaser shall cause the Company and its
subsidiaries to commence efforts (which efforts shall be completed no later than
90 days after the Closing) to remove, strike over or otherwise obliterate any
Sellers' Marks from all materials constituting, and cease using such names or
marks in connection with, their properties and assets, including any products,
labeling, packaging materials, business
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cards, schedules, stationery, displays, signs, promotional materials, manuals,
forms and other materials.
4.9. Further Assurances. Each party shall execute and deliver both
before and after the Closing such further certificates, agreements and other
documents and take such other actions as the other parties may reasonably
request which are necessary or appropriate to consummate or implement the
transactions contemplated hereby.
4.10. Confidentiality. The parties acknowledge that the Sellers and
Purchaser have previously executed the Confidentiality Agreement, which will
continue in full force and effect in accordance with its terms.
4.11. Public Disclosure. Each of Purchaser and the Sellers shall
consult with each other, and to the extent practicable, agree, before issuing
any press release or otherwise making any public statement with respect to this
Agreement and will not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or any
listing agreement with a national securities exchange, in which event a party
shall use reasonable efforts to consult with the other parties regarding the
content of any such release or statement.
4.12. Third Party Consents. As soon as practicable following the date
hereof, Purchaser and the Company will each use its commercially reasonable
efforts to obtain any consents, waivers and approvals under any of its or its
subsidiaries' respective agreements, contracts, licenses or leases required to
be obtained in connection with the consummation of the transactions contemplated
hereby.
4.13. California 3(a)(10) Proceeding. As soon as reasonably practicable
following the execution of this Agreement, Purchaser and Sellers shall prepare
the necessary documents and Purchaser shall apply to obtain a permit (a
"California Permit") from the Commissioner of Corporations of the State of
California (the "Commissioner") (after a hearing before such Commissioner)
pursuant to Section 25121 of the California Corporate Securities Law of 1968
("Section 25121"), so that the issuance of Purchaser Common Stock pursuant to
Article I hereof shall be exempt from registration under Section 3(a)(10) of the
Securities Act. Purchaser and Sellers will respond to any comments from the
California Department of Corporations and use their commercially reasonable
efforts to have the California Permit granted as soon as practicable after such
filing. As promptly as practicable after the date of this Agreement, Purchaser
shall prepare and make such filings as are required under applicable Blue Sky
laws relating to the transactions contemplated by this Agreement. Sellers shall
use reasonable and good faith efforts to assist Purchaser as may be necessary to
comply with the securities and blue sky laws relating to the transactions
contemplated by this Agreement.
Notwithstanding the foregoing, after January 31, 2000 and until the
notice of hearing is mailed to the Sellers in accordance with the procedures to
obtain a California Permit, the Sellers, acting together, may elect to cause the
Purchaser to withdraw the application for the California Permit and receive
"restricted securities" within the meaning of Rule 144 of the Securities Act
issued in a private placement transaction in
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compliance with Section 4(2) of the Securities Act and Regulation D promulgated
thereunder. In addition, in the event that, after the notice of hearing is
mailed to the Sellers pursuant to Section 25121, the Commissioner makes a final
determination to deny the California Permit, Sellers shall receive "restricted
securities." Each Seller hereby represents and warrants, which representation
and warranty is conditional on the issuance of the Purchaser Common Stock as
"restricted stock" under the election contemplated by this paragraph, as
follows:
(i) Such Seller is acquiring Purchaser Common Stock solely for its
own account and will not sell, offer to sell or otherwise dispose of or
distribute any of the Purchaser Common Stock in any transaction other
than a transaction complying with the registration requirements of the
Securities Act and applicable state securities or "Blue Sky" laws, or
pursuant to an exemption therefrom.
(ii) Such Seller is an "accredited investor" as defined in
Regulation D promulgated under the Securities Act.
(iii) Such Seller understands that all certificates representing
the Purchaser Common Stock which are "restricted securities" as
contemplated by this paragraph shall have endorsed thereon the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM."
Such Seller acknowledges that the legend contained in this Section 4.13
shall be removed from a certificate in connection with any sale in compliance
with the terms of this Section 4.13 and pursuant to a Registration Statement,
but shall not be removed in any other circumstance without Purchaser's prior
written consent, which consent shall be exercised in its sole discretion.
Purchaser shall cooperate with such requirements as may be imposed by its
transfer agent in connection with a transfer of any shares of Purchaser Common
Stock in accordance with Rule 144 promulgated under the Securities Act,
including, if requested by such transfer agent, the delivery of an opinion of
counsel to Purchaser. Such cooperation by Purchaser shall be generally
consistent with the assistance Purchaser provides other similarly situated
shareholders of Purchaser. Sellers agree to provide Purchaser and its counsel
any supporting materials reasonably requested by Purchaser, its counsel or
Purchaser's transfer agent in connection with such transfer.
4.14. Nasdaq Listing. Purchaser agrees to use commercially reasonable
efforts to authorize for listing on Nasdaq the shares of Purchaser Common Stock
issuable in connection with the transactions contemplated hereby, upon official
notice of issuance.
4.15 Rule 145. Each Seller acknowledges that the shares to be issued by
the Company in connection with the transactions contemplated by this Agreement,
assuming such shares are issued pursuant to the California Permit, are issued in
a transaction subject to Rule 145 promulgated under the Securities Act and
accordingly may be
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transferred only in accordance with Rule 145 promulgated under the Securities
Act. Accordingly, assuming such shares are issued pursuant to the California
Permit, such Seller understands that the shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, APPLIES AND MAY ONLY BE TRANSFERRED IN CONFORMITY WITH RULE
145(d) UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933."
Sellers further agree that Purchaser shall be entitled to enter
"stop-transfer" orders with its transfer agent with respect to transfers not in
compliance with this Section 4.15. Seller acknowledges that the legend contained
in this Section 4.15 shall be removed from a certificate in connection with any
sale in compliance with the terms of this Section 4.15 (provided the recipient
of the shares in the sale is not also subject to Rule 145 promulgated under the
Act), but shall not be removed in any other circumstance without Purchaser's
prior written consent, which consent shall be exercised in its sole discretion.
Purchaser shall cooperate with such requirements as may be imposed by its
transfer agent in connection with a transfer of any shares of Purchaser Common
Stock in accordance with Rule 145 promulgated under the Act, including, if
requested by such transfer agent, the delivery of an opinion of counsel to
Purchaser. Such cooperation by Purchaser shall be generally consistent with the
assistance Purchaser provides other similarly situated shareholders of
Purchaser. Sellers agree to provide Purchaser and its counsel any supporting
materials reasonably requested by Purchaser, its counsel or Purchaser's transfer
agent in connection with such transfer.
4.16 Confidential Information. From and after the Closing Date, each
Seller agrees not to use for any purpose or disclose to any third party any
Confidential Information disclosed to such Seller, in such Seller's possession
or known to such Seller. Each Seller agrees that it shall take all reasonable
measures to protect the secrecy of and avoid disclosure and unauthorized use of
the Confidential Information. Without limiting the foregoing, each Seller shall
take at least those measures that such Seller takes to protect its own most
highly confidential information. No Seller shall make any copies of Confidential
Information. Each Seller shall immediately notify Purchaser in the event of any
unauthorized use or disclosure of the Confidential Information.
Each Seller acknowledges that it does not have any rights or claims
to any patent, mask work or copyright of the Company or any of its Subsidiaries
or any Confidential Information. Each Seller agrees that any violation or
threatened violation of this Section 4.16 will cause irreparable injury to
Purchaser, entitling Purchaser to obtain injunctive relief in addition to all
legal remedies.
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ARTICLE V
TAX MATTERS
5.1. Tax Returns.
(a) The Sellers shall prepare (or cause to be prepared) and timely file
all Tax Returns that are required to be filed by or with respect to the Company
and its Subsidiaries for taxable years or periods ending on or before the
Closing Date. All such Tax Returns shall be prepared in a manner consistent with
the past practices of the Company and its Subsidiaries. Purchaser shall be
responsible for the filing of all Tax Returns required to be filed by or with
respect to the Company and its Subsidiaries for the Straddle Period (each a
"Straddle Period Return"). Purchaser shall prepare or cause to be prepared the
Straddle Period Returns on a basis consistent with the past practices of the
Company and its Subsidiaries and Purchaser shall deliver such Tax Returns to the
Sellers at least 14 days before such return is due to be filed (taking into
account any extensions of time to file such return that have been properly
obtained) for the Sellers' review and comment. At least 3 days prior to the due
date for the filing of any Purchaser Return, the Sellers shall each pay to
Purchaser its respective portion (if any) of Taxes due for which the Sellers are
liable pursuant to Sections 5.2(a) and (c), and Purchaser shall remit such
amounts, together with any Taxes for which Purchaser is liable pursuant to
Sections 5.2(c), with the filing of such Straddle Period Return. Purchaser shall
prepare and file or cause to be prepared and filed any Tax Return relating to
the Company and its Subsidiaries for any taxable periods that begin after the
Closing Date.
(b) The Sellers shall cause to be prepared any amended Tax Return or
claim for Tax refund with respect to taxable years or periods ending on or
before the Closing Date on a basis consistent with the past practices of the
Company and its Subsidiaries. Purchaser shall cause the appropriate officer of
the Company and its Subsidiaries to sign all amended Tax Returns or claims for
Tax refunds prepared by Sellers and to promptly file such returns and claims for
Tax refunds.
5.2. Liability for Taxes and Related Matters.
(a) Liability of Sellers for Taxes. The Sellers shall be liable for,
and shall indemnify and hold Purchaser harmless from and against, (i) all Taxes
imposed on the Company and its Subsidiaries or the Sellers for any taxable year
or period that ends on or before the Closing Date and, with respect to any
Straddle Period, for the portion of such Taxes attributable to such portion of
the Straddle Period determined pursuant to Section 5.2(c), and (ii) any breach
of the representations set forth in Section 2.2(k) or any of the covenants or
obligations of the Sellers contained in Article V. Notwithstanding the
foregoing, the Sellers shall not indemnify and hold harmless Purchaser for (i)
Taxes to the extent of any accrual established therefor on the Financial
Statements; (ii) Taxes of the Company or its Subsidiaries that are directly
attributable to (A) any change to a Tax election or change in Tax accounting
method of the Company or its Subsidiaries after the Closing Date or (B) the
filing of any amended Tax Return relating to the Company or its Subsidiaries, in
each case, if such actions are taken by Purchaser or its Affiliates (including
the Company and its Subsidiaries) after the Closing Date, unless such change,
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adoption or filing is required by law or consented to in writing by the Sellers;
(iii) any Taxes of the Company or its Subsidiaries that are directly
attributable to actions taken by Purchaser or its Affiliates (including the
Company and its Subsidiaries) after the Closing Date or on the Closing Date
after the Closing that are outside of the ordinary course of business; (iv) any
Taxes imposed as a result of a breach by Purchaser of the covenants contained in
Article V, or (v) Taxes that have been paid on or before the Closing Date and
are either reflected on the Financial Statements or are non-material Taxes
incurred in the ordinary course of business since the date of the Financial
Statements.
(b) Purchaser's Liability for Taxes. Purchaser shall be liable for, and
shall indemnify and hold the Sellers harmless from and against, (i) all Taxes of
the Company, or its Subsidiaries for any taxable year or period that begins
after the Closing Date and, with respect to any Straddle Period, for the portion
of such Taxes attributable to such portion of the Straddle Period determined
pursuant to Section 5.2(c), and (ii) any breach of any of the covenants or
obligations of Purchaser contained in Article V.
(c) Determination of Liability for Straddle Period Taxes. The Sellers
and Purchaser shall, to the extent permitted by applicable law and except as
otherwise provided herein, elect with the relevant Taxing Authority to close the
taxable period of the Company and each Subsidiary as of the Closing Date. With
respect to any Taxes for any taxable period that includes but does not end as of
the Closing Date (a "Straddle Period"), the amount of Taxes for which a party is
liable or which is subject to indemnification hereunder attributable to
pre-Closing and post-Closing Tax periods shall be calculated as if such taxable
period ended as of the close of business on the Closing Date, except that
property, ad valorem, and similar Taxes and exemptions, allowances or deductions
that are calculated on an annual basis shall be prorated based on the number of
days in the annual period elapsed through the Closing Date compared to the
number of days in the annual period elapsing after the Closing Date,
respectively.
(d) Notice and Payment Requirements. The party seeking indemnification
for any Tax (the "Tax Indemnitee") agrees to give prompt notice to the party
from whom indemnification is sought (the "Tax Indemnitor") of the assertion or
payment of any claim, or the commencement of any suit, action or proceeding, in
respect of which indemnity may be sought hereunder and will give the Tax
Indemnitor factual information (to the extent known to the notifying party)
describing the asserted Tax liability in reasonable detail and shall include
copies of any notice or other document received from any taxing authority in
respect of such asserted Tax liability. The failure of the Tax Indemnitee to
exercise promptness in such notification shall not amount to a waiver of such
claim except to the extent the resulting delay results in a material detriment
to the Tax Indemnitor with respect to the claim. On or after payment of any
Taxes or other amounts by the Tax Indemnitee, the Tax Indemnitee shall submit an
invoice to the Tax Indemnitor stating that such Taxes or such other amounts have
been paid and giving in reasonable detail the particulars relating thereto.
Within 30 days of receipt of such notice, the Tax Indemnitor shall remit payment
for such Taxes or other amounts to the Tax Indemnitee, provided, that the Tax
Indemnitor shall not be required to make any payment earlier than three (3) days
before it is due to the appropriate taxing authority. In the case of a Tax that
is contested, payment of the Tax to the appropriate tax authority
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will not be considered to be due earlier than the date a final determination
(within the meaning of Section 1313(a) of the Code) to such effect is made by
the appropriate taxing authority or court. Any payment required under this
Section 5.2 that is not made when due shall bear interest (beginning on the 30th
day after receipt of the written notice) at the rate per annum determined, from
time to time, under the provisions of Section 6621(a)(2) of the Code.
(e) Control of Proceedings. In the case of an audit or administrative
or judicial proceeding that relates to a period ending on or before the Closing
Date, the Sellers shall have the sole right, at their expense, to control the
conduct of such audit or proceeding, provided, however, that the Sellers shall
not, without the written consent of Purchaser (which consent shall not be
unreasonably withheld) consent or otherwise concede any proposed adjustment that
may have a material adverse effect on the Taxes of the Purchaser for the taxable
period ending on or before the Closing Date. Purchaser shall control the defense
and settlement of any contest relating to taxable periods or portions thereof
that begin on or after the Closing Date, provided, however, that Purchaser shall
not, without the written consent of the Sellers (which consent shall not be
unreasonably withheld) consent or otherwise concede any proposed adjustment that
may have a materially adverse effect on the Taxes of a Seller for taxable
periods beginning before the Closing Date. With respect to any Straddle Period
(i) each party may participate in any audit or proceeding which relates to any
such period and (ii) such audit or proceeding shall be controlled by that party
which would bear the burden of the greater portion of the sum of the adjustment;
provided that neither party shall settle any such audit or proceeding without
the consent of the other, which consent shall not be unreasonably withheld. The
principles set forth in the preceding sentence shall govern also for purposes of
deciding any issue that must be decided jointly (in particular, choice of
judicial forum) in situations in which separate issues are otherwise controlled
hereunder by Purchaser and Sellers.
(f) Sales, Use and Value-added Taxes. The parties hereto believe, based
on their independent analysis, that the transfer of the Membership Interests
pursuant to this Agreement does not result in the imposition of any sales, use,
value-added and similar Taxes and shall act in a manner consistent with such
belief. If, contrary to the judgment of the parties, any sales, use, value-added
or similar Taxes are imposed by any taxing authority, tax or revenue service, or
tax tribunal, the party upon which such Taxes are legally imposed shall pay such
Taxes and any related interest, penalty, etc. to the applicable taxing authority
and the other party shall promptly pay to, indemnify and hold the paying party
harmless from and against 50% of such Taxes and any related interest, penalty,
etc., provided, however, that such Taxes are not recovered by the other party.
5.3. Refunds. Purchaser shall promptly pay to the Sellers (which
payment shall be pro-rated based on the Membership Interests of the Sellers) the
amount of any Tax refund, credit or offset (including any interest paid or
credited with respect thereto but reduced by any Taxes that Purchaser, the
Company or its Subsidiaries shall be required to pay with respect thereto)
received, or utilized in the case of a credit or offset, by Purchaser, the
Company or its Subsidiaries, to the extent such refund, credit, or offset
relates to taxable periods or portions thereof ending on or before the Closing
Date
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(including any Taxes allocated to such period under Section 5.2(c) hereof). The
amount of any Tax refunds, credits or offsets (including any interest paid or
credited with respect thereto) received by Purchaser, the Company or its
Subsidiaries, or the Sellers (which amount shall be promptly paid to Purchaser)
shall be for the account of Purchaser if the Tax refund, credit, or offset
relates to taxable periods or portions thereof that begin after the Closing Date
(including any Taxes allocated to such period under Section 5.2(c) hereof).
5.4. Adjustment to Purchase Price. For Tax purposes, any payment by
Purchaser or the Sellers under this Article V and Article VIII will be treated
as an adjustment to the purchase price.
5.5. Assistance and Cooperation. After the Closing Date, each of the
Sellers and Purchaser shall reasonably (i) assist (and cause their respective
Affiliates to assist) the other party in preparing any Tax Returns or reports
which such other party is responsible for preparing and filing in accordance
with this Article V, (ii) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns of the Company or
its Subsidiaries, (iii) make available to the other and to any taxing authority
as reasonably requested all information, records, and documents relating to
Taxes of the Company or its Subsidiaries, (iv) provide timely notice to the
other in writing of any Tax audits or assessments of the Company or its
Subsidiaries for taxable periods for which the other may have a liability under
this Article V, and (v) furnish the other with copies of all material
correspondence received from any taxing authority in connection with any Tax
audit or information request with respect to any such taxable period.
5.6. Survival, Etc. Notwithstanding anything to the contrary contained
in this Agreement, the representations and warranties, covenants and
indemnification obligations set forth in this Article V and in Section 2.2(k)
shall survive the Closing and shall remain in effect until the expiration of the
applicable statute of limitations for assessment of the particular Taxes in
question. For purposes of this Article V, any payments required to be made by or
to Sellers hereunder shall be allocated between the Lilly Sellers, on the one
hand, and EDS, on the other hand, in a manner consistent with Section 8.1(b)
hereof.
5.7. Taxable Treatment. Each Seller and Purchaser agree to treat the
transfer of Membership Interests from such Seller to Purchaser as a taxable
exchange with respect to all Membership Interests pursuant to Section 1001 of
the Code for income tax purposes. Each Seller and Purchaser will report such
transfer as a taxable exchange with respect to all Membership Interests pursuant
to Section 1001 of the Code on all income tax returns, will take the position
that such transfer is a taxable exchange with respect to all Membership
Interests pursuant to Section 1001 of the Code in any income tax audit or
similar proceeding and will not take any action reasonably likely to cause such
transfer not to be fully taxable for income tax purposes. Without limiting the
foregoing sentence, IMS will not liquidate or distribute to its stockholder(s)
any Purchaser Common Stock received in exchange for its Membership Interests in
connection with the sale of its Membership Interest or during the two year
period beginning on the Closing Date.
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ARTICLE VI
CONDITIONS TO CLOSING
6.1. Conditions to the Obligations of the Parties. The obligations of
each of the parties to consummate the transactions contemplated hereby are
subject to the fulfillment at or prior to the Closing of the following
conditions:
(a) Certain Orders. No statute, rule, regulation, executive order,
decree, temporary restraining order, preliminary or permanent injunction or
other order shall have been enacted, entered, promulgated, enforced or issued by
any Governmental Entity having jurisdiction over the parties which prohibits the
consummation of the transactions contemplated hereby on the terms contemplated
hereby or makes the transaction contemplated hereby on terms contemplated hereby
illegal.
(b) HSR Act. All waiting periods, if any, under the HSR Act relating to
the transactions contemplated hereby will have expired or terminated early.
(c) Nasdaq Listing. The shares of Purchaser Common Stock to be issued
at Closing shall have been authorized for listing on Nasdaq, subject to notice
of issuance.
(d) California Permit. A California Permit with respect to the
acquisition of the Membership Interests and the issuance of the shares of
Purchaser Common Stock to be issued to the Sellers hereunder shall have been
issued by the Commissioner of the Department of the State of California, or
Sellers shall receive "restricted stock" as contemplated by Section 4.13 hereof.
6.2. Conditions to the Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated hereby are subject to the
fulfillment (or waiver in writing by Purchaser) at or prior to the Closing of
the following conditions:
(a) Accuracy of Representations. The representations and warranties of
the Sellers and the Company made in this Agreement (i) shall have been true and
correct as of the date of this Agreement and (ii) shall have been true and
correct at and as of the Closing Date with the same force and effect as if made
on the Closing Date, except (A) as does not constitute a Material Adverse Effect
with respect to the Company (B) for those representations and warranties that
address matters only as of a certain date, which shall be true and correct as of
such date except to the extent such failure does not constitute a Material
Adverse Effect with respect to the Company. For purposes of clause (A) above the
representations and warranties shall be read without the qualifications
material, materiality, in all material respects, Material Adverse Effect and
other similar qualifications. In addition, Purchaser shall have received
certificates, dated as of the Closing Date, executed by an executive officer,
vice president or the chief financial officer of each of the Sellers to the
effect set forth in the immediately preceding sentence.
(b) Performance of Covenants. The Sellers and the Company shall have
performed and complied in all material respects with all covenants and
agreements contained in this Agreement which are required to be performed or
complied with by them at or prior to the Closing. In addition, Purchaser shall
have received certificates,
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dated as of the Closing Date, executed by an executive officer, vice president
or the chief financial officer of each of the Sellers and the Company to the
effect set forth in the immediately preceding sentence.
(c) Certain Proceedings. There shall not be pending or threatened by
any Governmental Entity having jurisdiction over the parties any suit, action or
proceeding (i) challenging or seeking to restrain, delay or prohibit the
transactions contemplated hereby or seeking to recover or obtain any material
monetary damages from Purchaser or the Company in connection therewith, (ii)
seeking to prohibit or limit in any materially restrictive manner the ownership
or operation by Purchaser or the Company of any material portion of the business
of the Company, or (iii) seeking to prohibit or restrict the Purchaser or the
Company from effectively controlling the business of the Company in any material
respect.
(d) Material Adverse Effect. There shall not have occurred an event or
development that has had or is reasonably likely to have a Material Adverse
Effect with respect to the Company since the date of this Agreement.
(e) Agreements executed by EDS. EDS shall have executed and delivered
to the other parties thereto each of (i) the Joint Marketing Agreement and (ii)
the Termination Agreement, and each of such agreements shall be in full force
and effect.
(f) Agreements executed by Lilly. Lilly shall have executed and
delivered to the other parties thereto each of (i) the Termination Agreement and
(ii) the Lilly Agreement, and each of such agreements shall be in full force and
effect.
(g) Agreements executed by IMS. IMS shall have executed and delivered
to the other parties thereto the Termination Agreement, and such agreement shall
be in full force and effect.
(h) Agreements executed by the Company. The Company and EDS shall have
executed and delivered to each other the IT Amendment, and such agreement shall
be in full force and effect.
(i) Registration Rights Agreement. In the event the Sellers shall
receive "restricted stock" as contemplated by Section 4.13, each of the Sellers
shall have executed and delivered to the other parties thereto the Registration
Rights Agreement at or prior to the Closing, and such agreement shall be in full
force in effect.
(j) Repayment of Indebtedness to the Company. Each of the Sellers shall
have repaid all indebtedness to the Company and no indebtedness to the Company
from the Sellers shall be outstanding.
(k) Membership Interests. Concurrently with the Closing, each Seller
shall execute and deliver to Purchaser a Bill of Sale or other instrument
evidencing the transfer of the Membership Interest by Seller to Purchaser in
accordance with Section 1.2 hereof.
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6.3. Conditions to the Obligations of the Sellers. The obligations of
the Sellers to consummate the transactions contemplated hereby are subject to
the fulfillment (or waiver in writing by each of the Sellers) at or prior to the
Closing of the following conditions:
(a) Accuracy of Representations. The representations and warranties of
Purchaser made in this Agreement (i) shall have been true and correct as of the
date of this Agreement and (ii) shall have been true and correct at and as of
the Closing Date as if made on such date with the same force and effect as if
made on the Closing Date, except (A) as does not constitute a Material Adverse
Effect with respect to Purchaser and (B) for those (representations and
warranties that address matters only as of a certain date, which shall be true
and correct as of such certain date). For purposes of clause (A) above the
representations and warranties shall be read without the qualifications
material, materiality, in all material respects, Material Adverse Effect and
other similar qualifications. In addition, Sellers shall have received a
certificate, dated as of the Closing Date, executed by an executive officer,
vice president or the chief financial officer of Purchaser to the effect set
forth in the immediately preceding sentence.
(b) Performance of Covenants. Purchaser shall have performed and
complied in all material respects with all covenants and agreements contained in
this Agreement that are required to be performed or complied with by it at or
prior to the Closing, and the Sellers shall have received a certificate, dated
as of the Closing Date, executed by an executive officer, vice president or the
chief financial officer of Purchaser to that effect.
(c) Certain Proceedings. There shall not be pending or threatened by
any Governmental Entity having jurisdiction over the parties any suit, action or
proceeding (i) challenging or seeking to restrain, delay or prohibit the
transactions contemplated hereby or seeking to recover or obtain any material
monetary damages from Sellers in connection therewith or (ii) seeking to
prohibit or limit in any materially restrictive manner the ownership of the
Purchaser Common Stock (except as specifically contemplated in Sections 4.13 or
4.15 hereof).
(d) Material Adverse Effect. There shall not have occurred an event or
development that has had or is reasonably likely to have a Material Adverse
Effect with respect to Purchaser since the date of this Agreement.
(e) Agreements executed by Purchaser. Purchaser shall have executed and
delivered (i) to EDS, the Joint Marketing Agreement, (ii) to Lilly, the Lilly
Agreement, and (iii) in the event the Sellers shall receive "restricted stock"
as contemplated by Section 4.13, to each of the Sellers the Registration Rights
Agreement, and each of such agreements shall be in full force and effect.
(f) Purchase Price. The Purchase Price shall be delivered to Sellers in
accordance with Section 1.2 concurrently with the Closing, including the
issuance of certificates representing the Purchaser Common Stock duly registered
in the names of the respective Sellers.
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ARTICLE VII
TERMINATION
7.1. Termination. This Agreement may be terminated at any time prior to
Closing as follows:
(a) Mutual Agreement. By the mutual written agreement of Purchaser and
the Sellers;
(b) Expiration. By the Purchaser or a Seller if the Closing shall not
have occurred prior to or on March 31, 2000 unless the failure of the Closing to
have occurred by such date shall be due in whole or in part to a material breach
by the party or parties seeking to terminate this Agreement of its obligations
under this Agreement;
(c) Final Order. By either Purchaser, on the one hand, or both Lilly
and EDS, on the other hand, if any court or other Governmental Entity of
competent jurisdiction shall have issued or entered an order, writ, injunction
or decree which shall have the effect of prohibiting or making illegal the
transactions contemplated hereby and such order, writ, injunction or decree
shall have become final and nonappealable; or
(d) Breach. By the Purchaser or a Seller if there shall have occurred a
breach of any representation, warranty, covenant or agreement contained in this
Agreement that would give rise to the failure of the conditions to the
obligations of such party or parties set forth in Section 6.2 or 6.3 (as the
case may be) and such breach shall not have been cured within 30 days after the
giving of written notice thereof to the breaching party or parties, except that
such party or parties or shall only be entitled to terminate this Agreement
pursuant to this Section 7.1(d) if such party or parties are not in breach in
any material respect in the performance of its obligations under this Agreement.
7.2. Notice of Termination; Effect of Termination. Any termination of
this Agreement under Section 7.1 above will be effective immediately upon the
delivery of a valid written notice of the terminating party or parties to the
other parties hereto. In the event of the termination of this Agreement as
provided in Section 7.1, this Agreement shall be of no further force or effect,
except (i) as set forth in Sections 4.10 or 4.11, this Section 7.2 and Article X
(miscellaneous), each of which shall survive the termination of this Agreement,
and (ii) nothing herein shall relieve any party from liability for any willful
breach of this Agreement. No termination of this Agreement shall affect the
obligations of the parties contained in the Confidentiality Agreement, which
obligations shall survive termination of this Agreement in accordance with their
terms.
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ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification Obligations of the Sellers.
(a) In accordance with and subject to the provisions of this Article
VIII, each Seller shall indemnify Purchaser and each of its Affiliates and their
respective officers, directors, employees, representatives and agents, against
and hold them harmless from all Losses sustained or incurred arising out of,
relating to or in respect of (i) any breach of any of the representations or
warranties of the Sellers or the Company contained in Sections 2.1 or 2.2 of
this Agreement or in any certificate, instrument or other document delivered by
the Sellers or the Company to Purchaser pursuant to the terms of this Agreement
or (ii) any breach of any of the covenants or obligations of such Seller or
(with respect to covenants or obligations to be performed prior to the Closing)
the Company contained in this Agreement. For purposes only of this Article VIII,
each Seller will be deemed attributed with the Knowledge of the other Sellers
and the Company. No claim for indemnification with respect to any breach of any
representations or warranties of Sellers or the Company contained in this
Agreement shall be brought under this Section 8.1(a) except to the extent that
the aggregate amount of all claims for indemnification against the Sellers
(disregarding the pro-ration provided for by Section 8.1(b) below) under this
Section 8.1(a) exceeds $4,500,000 (the "Loss Minimum"). In addition, the
aggregate indemnification obligations of the Sellers under this Section 8.1(a),
other than with respect to a breach of the representations and warranties set
forth in Sections 2.1(d) and 2.2(d), shall be limited to a maximum aggregate
amount of $50,000,000 (disregarding the pro-ration provided for by Section
8.1(b) below). For purposes of this Article VIII, any qualification set forth in
any representation or warranty to the effect that the impact of the matter
described therein (or omitted from disclosure thereunder) shall be material to
the Company or a Subsidiary (whether "material in all respects" or otherwise) or
have a Material Adverse Effect with respect to the Company in order for such
representation or warranty to be breached shall be disregarded. Notwithstanding
the foregoing, no claim for indemnification with respect to the representation
and warranty in Section 2.2(s) shall be made except to the extent that the
aggregate amount of Losses with respect thereto exceeds $100,000, at which point
such claim for indemnification shall be subject to the other provisions of this
Section 8.1(a) (including the Loss Minimum).
(b) The indemnification obligations of the Lilly Sellers, on the one
hand, and EDS, on the other hand, under Section 8.1(a) are several and not
joint, provided that the indemnification obligations of the Lilly Sellers, which
are considered as one Seller for purposes of this Article VIII, are joint and
several. Notwithstanding anything to the contrary contained in this Agreement or
otherwise, the indemnification obligations of the Sellers to Purchaser set forth
in Section 8.1(a) shall be allocated 60% to the Lilly Sellers, on the one hand,
and 40% to EDS, on the other hand, provided that if the breach of representation
or warranty, or failure to perform a covenant or obligation, to which such
indemnification obligation relates is with respect to either a Lilly Seller, on
the one hand, or EDS, on the other hand, but not both (the Seller[s] to which
such obligation relates being referred to herein as the "Indemnifying Seller"),
then the other Seller[s] shall have
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no indemnification obligations in connection therewith under this Article 8 and
such obligation shall not be allocated between the Lilly Sellers and EDS as set
forth above, but shall be the responsibility of the Indemnifying Seller, subject
to the limitations set forth in Section 8.1(a).
(c) The Sellers shall have no contribution, indemnity or similar right
against the Company with respect to any claim by Purchaser for indemnification
pursuant to this Article 8.
8.2. Indemnification Obligations of Purchaser.
(a) In accordance with and subject to the provisions of this Article
VIII, Purchaser shall indemnify the Sellers and each of their Affiliates and
their respective officers, directors, employees, representatives and agents
against (i) any breach of any of the representations or warranties of Purchaser
contained in this Agreement or (ii) any breach of any of the covenants or
obligations of Purchaser or (with respect to covenants or obligations to be
performed after the Closing Date) the Company under this Agreement.
(b) No claim for indemnification with respect to any breach of any
representations or warranties of Purchaser or (after the Closing) the Company
contained in this Agreement shall be brought under this Section 8.2 except to
the extent that the aggregate amount of all claims for indemnification under
this Article VIII against Purchaser exceeds $4,500,000. In addition, the
indemnification obligations of Purchaser under this Section 8.2 shall be limited
to a maximum aggregate liability of $50,000,000.
8.3. Third-Party Claims; Procedures. The obligations of the parties
provided for under Sections 8.1 and 8.2 in respect of any claims made or
asserted by a third party ("Third-Party Claims") shall be performed in
accordance with the following procedures:
(a) Each Person entitled to indemnification under Section 8.1 or 8.2
hereof (each, an "Indemnified Party") shall give the party or parties from whom
it is seeking indemnification hereunder (collectively, the "Indemnifying Party")
written notice as promptly as reasonably practicable after the written assertion
of any Third-Party Claim or commencement of any action, suit or proceeding in
respect thereof; provided, however, that, if an Indemnified Party fails to give
the Indemnifying Party written notice as provided herein, the Indemnifying Party
shall not be relieved of its obligations under this Article VIII in respect of
such Third-Party Claim except to the extent that the Indemnifying Party is
materially prejudiced thereby (whether as a result of the forfeiture of
substantive defenses or otherwise).
(b) Promptly after receipt of written notice of a Third-Party Claim as
contemplated by Section 8.3(a), the Indemnifying Party shall be entitled to
assume the defense of such Third-Party Claim with counsel reasonably
satisfactory to the Indemnified Party; provided, however, that (i) if the
Indemnifying Party fails, within a reasonable time after receipt of written
notice of such Third-Party Claim, to assume the defense thereof with counsel
reasonably satisfactory to the Indemnified Party, the
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Indemnified Party shall have the right to undertake the defense of such
Third-Party Claim on behalf of and for the account and risk of the Indemnifying
Party (including the reasonable fees and expenses of counsel for the Indemnified
Party) with counsel reasonably satisfactory to the Indemnifying Party, subject
to the right of the Indemnifying Party (upon notifying the Indemnified Party of
its election to do so) to assume the defense of such Third-Party Claim with
counsel reasonably satisfactory to the Indemnified Party at any time prior to
the judgment or other final determination thereof (in which event the
Indemnifying Party shall have the right to participate and be informed with
respect to such defense), (ii) if a direct or indirect conflict of interest
exists between the Indemnified Party and the Indemnifying Party in respect of
the Third-Party Claim or any other fact, condition or circumstance exists such
that the Indemnified Party reasonably determines, in each case upon the advice
of counsel, that the assumption of the defense of such Third Party Claim by the
Indemnifying Party would adversely affect the Indemnified Party, the Indemnified
Party shall (upon written notice to the Indemnifying Party of its election to do
so) have the right to undertake the defense of such Third-Party Claim on behalf
of and for the account and risk of the Indemnifying Party (including the payment
of fees and expenses of counsel for the Indemnified Party) with counsel
reasonably satisfactory to the Indemnifying Party (it being understood and
agreed that the Indemnifying Party shall not be entitled to assume the defense
of such Third-Party Claim), (iii) if the Third Party Claim involves a pleading
for injunctive relief, the Indemnified Party shall have the right to undertake
the defense thereof, but only to the extent such defense relates directly to the
injunctive relief, on behalf of and for the account and risk of the Indemnifying
Party (including the reasonable fees and expenses of counsel for the Indemnified
Party), and the Indemnified Party shall cooperate with the Indemnifying Party so
as to allow it to participate in the defense with respect to such injunctive
relief, and (iv) if the Indemnified Party in its sole discretion so elects, it
shall be entitled to employ separate counsel and to participate in the defense
of such Third-Party Claim (and the Indemnifying Party shall cooperate with the
Indemnified Party so as to allow it to participate in the defense thereof), but
the fees and expenses of counsel so employed shall (except as otherwise
contemplated by clauses (i) (ii) and (iii) above) be borne solely by the
Indemnified Party.
Notwithstanding the foregoing, the Indemnifying Party shall not (A)
settle or compromise any Third-Party Claim, or consent to the entry of any
judgment relating thereto, that does not include as an unconditional term
thereof the grant by the claimant or plaintiff to each Indemnified Party of a
release from any and all liability in respect thereof or (B) settle or
compromise any Third-Party Claim, or consent to the entry of any judgment
relating thereto, that would materially and adversely affect the Indemnified
Party other than as a result of money damages or other money payments to be
fully paid by the Indemnifying Party, without the prior written consent of the
Indemnified Party, which shall not be unreasonably withheld or delayed. In
addition, notwithstanding the foregoing, to the extent that the Indemnified
Party shall be permitted to assume the defense of a Third Party Claim under the
provisions of this paragraph, the Indemnified Party shall not settle or
compromise such Third-Party Claim, or consent to the entry of any judgment
relating thereto, without the consent of Sellers, which consent shall not be
unreasonably withheld or delayed.
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8.4. Survival.
(a) Except as provided in paragraph (b) below, the representations and
warranties of the parties contained in this Agreement shall survive the Closing
until the first anniversary of the Closing Date; provided, however, that (i) the
representations and warranties of Sellers contained in Sections 2.2(k) and
2.2(m) shall survive the Closing until the expiration of the applicable statute
of limitations under which the Purchaser, the Company or the Sellers may be
liable or suffer loss or damage in the event of the breach or inaccuracy
thereof, (ii) the representations and warranties contained in Sections 2.1(d)
and 2.2(d) shall survive the Closing without limitation, and (iii) the
representations and warranties contained in Section 2.2(s) shall survive the
Closing until the six-month anniversary of the Closing Date.
(b) Notwithstanding anything in this Agreement to the contrary, all
indemnification obligations under Sections 8.1 or 8.2 with respect to the breach
of any representations or warranties contained in this Agreement shall terminate
and expire on, and no action or proceeding seeking damages or other relief for
breach of any part thereof shall be commenced after, the expiration of the
applicable period for the survival of such representations and warranties set
forth in paragraph (a) above; provided, however, that any claim that has been
asserted by notice to the other party or parties that is pending or unresolved
at the end of the applicable period set forth in paragraph (a) above shall
continue to be covered by this Article VIII notwithstanding any applicable
expiration of the indemnification obligations set forth in Article VIII until
such matter is finally terminated or otherwise resolved by the parties or by a
final and nonappealable judgment of a court of competent jurisdiction and any
amounts payable hereunder are finally determined and paid.
8.5. Tax Losses. Losses for which indemnification is provided in
Article V of this Agreement are expressly excluded from this Article VIII and
shall instead be governed by the provisions of Article V.
8.6. Exclusive Remedy. From and after the Closing Date, the provisions
of this Article VIII shall constitute the exclusive remedy on the part of any
party to this Agreement for monetary damages in respect of a breach by any of
the other parties of the representations, warranties and covenants made by such
other parties hereunder. The foregoing shall not restrict a Seller from
exercising the rights generally available to any holder of Purchaser Common
Stock under applicable securities or state corporate law (to the extent such
exercise shall not result in duplicate recovery by a Seller).
ARTICLE IX
DEFINITIONS
9.1. Certain Definitions. In addition to the other terms defined in
this Agreement, the following terms, as used herein, shall have the respective
meanings set forth below:
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"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, a specified Person. For the purposes of this definition, the term
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise.
"Agreement" means this Agreement, as the same may be amended or
supplemented, together with all Exhibits and Schedules attached hereto.
"Ancillary Agreement" shall have the meaning as set forth in Section
1.4.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks in New York are authorized or obligated by law or executive order
to close.
"Bylaws" means, with respect to any corporation, the bylaws of such
corporation, as in effect from time to time.
"California Permit" has the meaning set forth in Section 4.13.
"Charter" means, with respect to any corporation, the certificate or
articles of incorporation or formation (or similar governing document) of such
corporation, as in effect from time to time.
"Closing" has the meaning set forth in Section 1.3.
"Closing Date" has the meaning set forth in Section 1.3.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
"Commissioner" has the meaning set forth in Section 4.13.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Confidential Information" means any confidential information of, or
known to, the Company or any of its Subsidiaries, including trade secrets, and
information embodied in any writing or tangible objects, including without
limitation documents, business plans, source code, documentation, financial
analysis, marketing plans, customer names, customer list or customer data.
Confidential Information may also include information disclosed by third
parties. Confidential Information shall not, however, include any information
which is publicly known and made generally available in the public domain by the
Company without restriction.
"Confidentiality Agreement" means the Confidentiality Agreement, dated
April 1999 among EDS, Lilly and Purchaser.
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"Consents" means consents, waivers, licenses, permits, clearances,
approvals and other authorizations.
"Contract" means any contract, agreement, understanding, lease,
sublease, license, sublicense, distribution agreement, promissory note, evidence
of indebtedness, indenture, instrument, mortgage, insurance policy, annuity or
other binding commitment, whether written or oral.
"Debt" means all indebtedness for borrowed money as evidenced by notes,
bonds, debentures or similar instruments and all guarantees of any such
indebtedness.
"Deconsolidated Ventures" shall mean (i) Illinois Medical Information
Network, Inc., an Illinois corporation; (ii) IMS-Net of Arkansas, Inc., an
Arkansas corporation, and (iii) IMS-Net of Central Florida, Inc., a Colorado
corporation.
"EDS" has the meaning set forth in the first paragraph of this
Agreement.
"EDS Membership Interest" has the meaning set forth in the recitals to
this Agreement.
"Employee Plan[s]" has the meaning set forth in Section 2.2(m).
"Environmental Laws" means all federal, state, local and foreign laws,
statutes, codes, ordinances, orders, judgments, decrees, rules and regulations
relating to pollution or protection of human health or the environment
(including, but not limited to, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, those relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
"ERISA" has the meaning set forth in Section 2.2(m).
"Exchange Act" means the Exchange Act of 1934, as amended.
"Formation Date" shall mean February 12, 1998, the date of formation of
the Company.
"GAAP" means generally accepted accounting principles in the United
States as in effect at the time of the application thereof.
"Governmental Entity" means any domestic or foreign, national, federal,
provincial, state, municipal or other local government or body and any division,
agent, commission, board or authority of any quasi-governmental or private body
exercising any statutory, regulatory, expropriation or taxing authority under
the authority of any of the foregoing, and any domestic, foreign, international,
judicial, quasi-judicial, arbitration or administrative court, tribunal,
commission, board or panel acting under the authority of any of the foregoing.
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"HSR Act" means Section 7A of the Clayton Act (Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976), as amended (including any
successor statute).
"Hazardous Materials" means (i) any substance, material or waste
defined or characterized as hazardous, extremely hazardous, toxic or dangerous
within the meaning of any Environmental Law, (ii) any substance, material or
waste classified as a contaminant or pollutant under any Environmental Law or
(iii) any other substance (including, but not limited to, petroleum), material
or waste, the manufacture, processing, distribution, use, treatment, storage,
placement, disposal, removal or transportation of which is subject to regulation
under any Environmental Law.
"Indemnified Party" has the meaning set forth in Section 8.3.
"Indemnifying Party" has the meaning set forth in Section 8.3.
"IT Amendment" has the meaning set forth in Section 1.4.
"Joint Marketing Agreement" has the meaning set forth in Section 1.4.
"Knowledge" of a party to this Agreement shall mean the actual
knowledge of the Chief Executive Officer, President, Chief Financial Officer,
Controller or General Counsel of that party and in addition, for purposes of
Section 2.2 with respect to the Company, it shall also include those employees
of EDS and Lilly who are on the Board of Directors of the Company.
"Legal Requirements" means 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 Entity
"Lien" means (i) any mortgage, pledge, security interest, lien, charge,
encumbrance, privilege, deposit, easements, reserves, conditional sale
contracts, ownership or title retention agreements, equity, claim, option,
easement, right of way, right of refusal, encroachment, restrictive covenant,
title defect, tenancy, right or restriction on transfer of any nature whatsoever
and (ii) any arrangement or condition that in substance secures payment or
performance of an obligation.
"Lilly" has the meaning set forth in the first paragraph of this
Agreement.
"Lilly Agreement" has the meaning set forth in Section 1.4."Lilly
Membership Interest" has the meaning set forth in the recitals to this
Agreement.
"IMS" has the meaning set forth in the first paragraph of this
Agreement.
"IMS Membership Interest" has the meaning set forth in the recitals to
this Agreement.
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"Losses" means any and all fines, liabilities, judgments, claims,
losses, costs, expenses, or damages, including in each case, interest,
penalties, reasonable attorneys' fees and costs of investigations and
litigation.
"Material Adverse Effect" with respect to an entity means any material
adverse effect on the operations, assets, properties, business, condition
(financial or otherwise) or results of operations of that entity taken as a
whole with its Subsidiaries, except for any such effect that is attributable
primarily or exclusively to changes in prevailing interest rates, in general
economic conditions affecting the industries in which that entity or its
Subsidiaries operate or in rules or principles of accounting.
"Material Contracts" shall mean the following Contracts of the Company
and its Subsidiaries in effect as of the date hereof:
(i) any Contract for the purchase of personal property from any
supplier or for the furnishing of services to the Company or any Subsidiary of
the Company or otherwise related to the business of the Company or any
Subsidiary of the Company under the terms of which the Company or such
Subsidiary (A) is likely to pay or otherwise give consideration of more than $1
million in the aggregate during the calendar year ending December 31, 1999 or
(B) is likely to pay or otherwise give consideration of more than $5 million in
the aggregate over the remaining term of such Contract, in each case which
Contract cannot be cancelled by the Company or such Subsidiary without penalty
or further payment and without more than 90 days' notice;
(ii) each Contract for the sale of products or services of the Company
or any Subsidiary of the Company which: (A) is one of the top 30 customer
contracts of the Company and its Subsidiaries based on their consolidated
revenues through the eleven months ended November 30, 1999, (B) is reasonably
likely to involve consideration of more than $1 million in the aggregate during
the calendar year ending December 31, 1999 if not terminated, modified or
extended, or (C) is likely to involve consideration of more than $5 million in
the aggregate over the remaining term of the Contract if not terminated,
modified or extended;
(iii) any broker, distributor, dealer, or agency Contracts, or other
agreement for the distribution of products or services of the Company or its
Subsidiaries, to which the Company or any Subsidiary of the Company is a party
and under which it recognized revenues during the eleven months ended November
30, 1999 or which cannot be cancelled by the Company or such Subsidiary without
penalty or further payment and without more than 90 days' notice;
(iv) any management Contracts or Contract with independent contractors
or consultants (or similar arrangements) to which the Company or any Subsidiary
of the Company is a party likely to involve the payment by the Company or such
Subsidiary during the calendar year ending December 31, 1999 in excess of
$250,000;
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(v) all Contracts that will limit or purport to limit the ability of
the Company or any Subsidiary of the Company to compete in any line of business
or with any Person or in any geographic area or during any period of time
following the Closing;
(vi) all Contracts between or among the Company and a Seller, including
any shareholder agreements;
(vii) any mortgages, indentures, guaranties, loans or credit
agreements, or other agreements or instruments relating to the borrowing of
money or extension of credit by the Company or any of its Subsidiaries;
(viii) any settlement agreement with respect to material pending or
threatened litigation entered into since January 1, 1999; and
(ix) any agreement, contract or commitment currently in force relating
to the disposition or acquisition by the Company or any of its subsidiaries
after the date of this Agreement of a material amount of assets not in the
ordinary course of business or pursuant to which the Company has any material
ownership interest in any corporation, partnership, joint venture or other
business enterprise other than the Company's Subsidiaries.
"Material Real Property" has the meaning set forth in Section 2.2(h).
"Membership Interests" has the meaning set forth in the recitals to
this Agreement.
"Permit" means any license, permit, franchise, certificate of authority
or order, or any waiver of the foregoing, required to be issued by any
Governmental Entity.
"Permitted Liens" means the following types of Liens: (a) immaterial
statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen and
materialmen and other like statutory Liens, in each case incurred in the
ordinary course of business consistent with past practice (i) for amounts not
yet overdue or (ii) for amounts that are being contested in good faith by
appropriate proceedings, so long as such reserves or other appropriate
provisions, if any, as shall be required by GAAP shall have been made for any
such contested amounts; (b) easements, rights-of-way, restrictions,
encroachments, and other minor defects or irregularities in title, in each case
which do not and will not impair in any material respect the operations
conducted by means of the properties and assets affected thereby; (c) any
immaterial zoning or similar law or right reserved to or vested in any
Governmental Entity to control or regulate the use of any real property; (d)
Liens for taxes not yet due and payable or, if due (i) not delinquent or (ii)
being contested in good faith by appropriate proceedings during which collection
or enforcement against the property is stayed; and (e) immaterial undetermined
or immaterial inchoate Liens incidental to current construction or current
operations and statutory Liens claimed or held by any Governmental Entity which
have not at the time been filed or registered against the title to the asset or
which relate to obligations not due or delinquent.
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"Person" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, an unlimited liability company, a
trust, an unincorporated organization, a joint venture, a Governmental Entity or
any other entity.
"Purchase Price" has the meaning set forth in Section 1.2(a).
"Purchaser" has the meaning set forth in the first paragraph of this
Agreement.
"Purchaser Common Stock" shall have the meaning set forth in Section
1.2.
"Registration Rights Agreement" has the meaning set forth in Section
1.4.
"Schedule" means a disclosure schedule delivered by the Sellers and the
Company to the Purchaser, on the one hand, or the Purchaser to the Sellers, on
the other hand, as required under the terms of this Agreement.
"Section 25121" has the meaning set forth in Section 4.13.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" has meaning set forth in the first paragraph of this
Agreement.
"Straddle Period" shall have the meaning set forth in Section 5.2(c).
"Straddle Period Return" shall have the meaning set forth in Section
5.1(a).
"Subsidiary" of a Person means (i) a corporation or other entity in
which that Person owns, directly or indirectly, 50% or more of the shares of
capital stock or other securities having ordinary voting power to elect the
board of directors or any similar governing body or (ii) any partnership,
limited liability company or other unincorporated entity of which that Person is
the general partner or of which it owns, directly or indirectly, securities or
other ownership interests which entitle them to receive more than 50% of the
distributions made by such partnership, limited liability company or other
entity. For purposes of this Agreement, the Deconsolidated Ventures are not
Subsidiaries of the Company, and the Company is not a Subsidiary of EDS, Lilly
or IMS.
"Tax" or "Taxes" mean all taxes, charges, fees, levies or other like
assessments imposed or assessed by any Governmental Entity, including without
limitation income, profits, windfall profit, employment (including FICA,
Medicare and unemployment insurance), withholding, payroll, franchise, gross
receipts, sales, use, transfer, stamp, occupation, real or personal property, ad
valorem, value added, premium, and excise taxes, and any other like Government
charges, and includes all penalties, fines, assessments, additions to tax, and
interest resulting from, attributable to, or incurred in connection with such
Taxes or any contest or dispute thereof, and any liability for the Taxes of
another Person whether by contract, as a transferee, successor or otherwise.
"Tax Indemnitee" has the meaning set forth in Section 5.2(d).
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"Tax Indemnitor" has the meaning set forth in Section 5.2(d).
"Tax Return" of a Person means all returns, declarations, reports,
estimates, information returns and statements required to be filed with a
Governmental Entity by or with respect to that Person in respect of any Taxes.
"Termination Agreement" has the meaning set forth in Section 1.4.
"Third Party Claim" has the meaning set forth in Section 8.3.
ARTICLE X
MISCELLANEOUS
10.1. Amendments. This Agreement may not be amended or modified except
by a written instrument executed by each of the parties hereto.
10.2. Assignment. None of the parties hereto may assign this Agreement
or its rights or obligations hereunder to any third party without the prior
written consent of the other parties hereto. Any attempted assignment in
violation of this Section 10.2 shall be void.
10.3. Notices. All notices or communications required or permitted to
be given hereunder shall be in writing and shall be delivered by hand or sent by
telefax or sent, postage prepaid, by registered, certified or express mail or
reputable overnight courier service and shall be deemed given when so delivered
by hand, or telefaxed, or if mailed, three days after mailing (one Business Day
in the case of express mail or overnight courier service), as follows (or such
other address as such party may designate in writing):
If to the Sellers:
Electronic Data Systems Corporation
5400 Legacy Drive, Mail Stop H3-3A-05
Plano, Texas 75024
Attention: General Counsel
Facsimile: 972-605-5610
and
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, Indiana 46285
Attention: Charles E. Schalliol Executive Director,
Corporate Finance and Investment Banking
Facsimile: 317-276-5996
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If to Purchaser:
Healtheon/WebMD Corporation
4600 Patrick Henry Drive
Santa Clara, California 95054
Attention: Jack Dennison - General Counsel
Facsimile: 408-876-5450
with a copy to:
Wilson Sonsini Goodrich & Rosati Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Daniel R. Mitz
Facsimile: 650-493-6811
10.4. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or in any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
10.5. Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same
instrument.
10.6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
10.7. Interpretation. When a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference is to an Article or
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" and
"including" are used in this Agreement, they are deemed to be followed by the
words "without limitation." For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the terms
defined include the plural as well as the singular, and the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision.
10.8. Entire Agreement. This Agreement, together with the Schedules and
Exhibits attached hereto and the Confidentiality Agreement, constitutes the
entire
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agreement among the Purchaser, the Sellers and the Company with respect to the
subject matter hereof. This Agreement supersedes all prior agreements between
the parties with respect to the subject matter hereof.
10.9. Expenses. Except as specifically set forth in Sections 2.2(r) and
3.7, each party shall pay its own expenses incident to the negotiation,
preparation and performance of this Agreement and the transactions contemplated
hereby, including but not limited to the fees, expenses and disbursements of
their respective investment bankers, accountants and counsel.
10.10. No Third Party Beneficiaries. Except for Article VIII, nothing
in this Agreement, expressed or implied, is intended to confer upon any person,
other than the parties hereto or their respective successors, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the date first above written, by the duly authorized representatives of the
parties hereto.
ELECTRONIC DATA SYSTEMS CORPORATION
By: /s/ Jeff Kelly
-------------------------------
Name: Jeff Kelly
Title: Vice President
Delivery, Information Systems
ELI LILLY AND COMPANY
By: /s/ Charles E. Golden
-------------------------------
Name: Charles E. Golden
Title: Executive Vice President
INTEGRATED MEDICAL SYSTEMS, INC.
By: /s/ Charles E. Golden
-------------------------------
Name: Charles E. Golden
Title: President
KINETRA LLC
By: /s/ Jeff Kelly
-------------------------------
Name: Jeff Kelly
Title:
HEALTHEON/WEBMD CORPORATION
By: /s/ Jack Dennison
-------------------------------
Name: Jack Dennison
Title: Executive Vice President
51
<PAGE> 1
EXHIBIT 99.1
HEALTHEON/WEBMD ANNOUNCES CLOSING OF PREVIOUSLY ANNOUNCED
AGREEMENT TO ACQUIRE KINETRA
ATLANTA (February 2, 2000) - Healtheon/WebMD (Nasdaq: HLTH), the first
end-to-end Internet healthcare company connecting physicians and consumers to
the entire healthcare industry, today announced that is has completed its
acquisition of Kinetra LLC, which was previously announced on December 21, 1999.
Kinetra, a joint venture between Electronic Data Systems Corp. (EDS) and Eli
Lilly and Co., is a leading provider of clinical document distribution solutions
- - - - - - such as laboratory and radiology reports - and administrative transactions to
Integrated Delivery Networks (IDNs), large hospitals and payors.
The Kinetra acquisition provides Healtheon/WebMD with access to 200 healthcare
organizations and 50,000 physician users that generate more than 50 million
clinical transactions annually. By acquiring Kinetra's existing relationships
and migrating its current hospital, IDN and payor connectivity to
Healtheon/WebMD's Internet-based transactions, Healtheon/ WebMD is accelerating
the growth of its electronic clinical transactions. The acquisition also boosts
Healtheon/WebMD's clinical transaction revenue and provides the company with the
opportunity to sign up Kinetra's physicians as subscribers to its professional
portal, WebMD Practice(SM).
Coincident with the announcement of the Kinetra acquisition on December 21,
1999, Healtheon/WebMD also announced that Lilly had agreed to a multi-media
alliance using Healtheon/WebMD's Internet content and services, and EDS and
Healtheon/WebMD had formed a strategic relationship integrating
Healtheon/WebMD's suite of provider and consumer Internet offerings with EDS'
healthcare solutions, including integrating EDS' MetaVance(TM) product into
WebMD Practice and promoting WebMD Practice to EDS' customers.
ABOUT HEALTHEON/WEBMD
Healtheon/WebMD (Nasdaq: HLTH) is the first end-to-end Internet healthcare
company connecting physicians and consumers to the entire healthcare industry.
Healtheon/WebMD is using the Internet to facilitate a new system for the
delivery of healthcare, resulting in a single, secure environment for all
communications and transactions that will enable a more efficient and cost
effective healthcare system. With corporate headquarters in Atlanta and
technology headquarters in Silicon Valley, the company was formed in November
1999 as a result of the merger of Healtheon Corporation, WebMD Inc., MEDE
America and Medcast. For more information, visit http://www.webmd.com.
Other than historical information set forth herein, this announcement contains
forward-looking statements that involve risks and uncertainties, including those
relating to the ability of Healtheon/WebMD's services to decrease costs and
improve patient care. Actual results could be materially different from those
discussed in this announcement. Factors that could cause actual results to
differ include, among others: Healtheon/WebMD's limited operating history,
continued growth in the use of the Internet, and acceptance of the Internet as a
secure medium over which to conduct transactions. Additional risks associated
with Healtheon/WebMD's business can be found in its recent Registration
Statement on Form S-4 and other periodic filings with the SEC.
CONTACTS:
Media Relations:
Dave Faupel
404/897-2300
[email protected]
Investor Relations:
John Runningen
404/495-7680
[email protected]
