ASSET PURCHASE AGREEMENT
BY AND AMONG
HEALTHEON CORPORATION
METIS ACQUISITION CORP.
AND
METIS, LLC
DATED AS OF JUNE 25, 1998
TABLE OF CONTENTS
PAGE
ARTICLE I - THE ASSET PURCHASE . . . . . . . . . . . . . . . . . . 1
1.1 Purchase of Assets . . . . . . . . . . . . . . . . . . . 1
1.2 Retained Assets. . . . . . . . . . . . . . . . . . . . . 3
1.3 Assumed Liabilities. . . . . . . . . . . . . . . . . . . 3
1.4 Retained Liabilities . . . . . . . . . . . . . . . . . . 3
1.5 Purchase Price . . . . . . . . . . . . . . . . . . . . . 4
1.6 Cash Payment . . . . . . . . . . . . . . . . . . . . . . 4
1.7 Closing. . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 Execution and Delivery of Documents of Title by the
Company; Further Assurances . . . . . . . . . . . . . . 4
1.9 Tax Free Reorganization. . . . . . . . . . . . . . . . . 4
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . 5
2.1 Organization of the Company. . . . . . . . . . . . . . . 5
2.2 Company Capital Structure. . . . . . . . . . . . . . . . 5
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Financial Statements . . . . . . . . . . . . . . . . . . 6
2.6 No Undisclosed Liabilities . . . . . . . . . . . . . . . 6
2.7 No Changes . . . . . . . . . . . . . . . . . . . . . . . 7
2.8 Tax and Other Returns and Reports. . . . . . . . . . . . 8
2.9 Restrictions on Business Activities. . . . . . . . . . . 9
2.10 Title to Properties; Absence of Liens and Encumbrances .10
2.11 Intellectual Property. . . . . . . . . . . . . . . . . .10
2.12 Agreements, Contracts and Commitments. . . . . . . . . .11
2.13 Interested Party Transactions. . . . . . . . . . . . . .13
2.14 Compliance with Laws . . . . . . . . . . . . . . . . . .13
2.15 Litigation . . . . . . . . . . . . . . . . . . . . . . .13
2.16 Insurance. . . . . . . . . . . . . . . . . . . . . . . .13
2.17 Minute Books . . . . . . . . . . . . . . . . . . . . . .13
2.18 Environmental Matters. . . . . . . . . . . . . . . . . .13
2.19 Brokers' and Finders' Fees; Third Party Expenses . . . .14
2.20 Employee Matters and Benefit Plans . . . . . . . . . . .14
2.21 Representations Complete . . . . . . . . . . . . . . . .17
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF HEALTHEON
AND ACQUISITION SUB . . . . . . . . . . . . . . . . . . . . .17
3.1 Organization of Healtheon and Acquisition Sub. . . . . .17
3.2 Healtheon and Acquisition Sub Capital Structure. . . . .18
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . .18
3.4 Authority. . . . . . . . . . . . . . . . . . . . . . . .18
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TABLE OF CONTENTS
(CONTINUED)
PAGE
3.5 Financial Statements . . . . . . . . . . . . . . . . . .19
3.6 No Undisclosed Liabilities . . . . . . . . . . . . . . .19
3.7 No Changes . . . . . . . . . . . . . . . . . . . . . . .19
3.8 Tax and Other Returns and Reports. . . . . . . . . . . .21
3.9 Restrictions on Business Activities. . . . . . . . . . .22
3.10 Title to Properties; Absence of Liens and Encumbrances .22
3.11 Intellectual Property. . . . . . . . . . . . . . . . . .22
3.12 Agreements, Contracts and Commitments. . . . . . . . . .23
3.13 Interested Party Transactions. . . . . . . . . . . . . .24
3.14 Compliance with Laws . . . . . . . . . . . . . . . . . .25
3.15 Litigation . . . . . . . . . . . . . . . . . . . . . . .25
3.16 Insurance. . . . . . . . . . . . . . . . . . . . . . . .25
3.17 Minute Books . . . . . . . . . . . . . . . . . . . . . .25
3.18 Environmental Matters. . . . . . . . . . . . . . . . . .25
3.19 Brokers' and Finders' Fees; Third Party Expenses . . . .26
3.20 Employee Matters and Benefit Plans . . . . . . . . . . .26
3.21 Representations Complete . . . . . . . . . . . . . . . .28
ARTICLE IV - CONDUCT PRIOR TO THE CLOSING. . . . . . . . . . . . .29
4.1 Conduct of Business of the Company . . . . . . . . . . .29
4.2 No Company Solicitation. . . . . . . . . . . . . . . . .31
ARTICLE V - ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . .31
5.1 Company Member Approvals . . . . . . . . . . . . . . . .31
5.2 Access to Information. . . . . . . . . . . . . . . . . .32
5.3 Confidentiality. . . . . . . . . . . . . . . . . . . . .32
5.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . .32
5.5 Public Disclosure. . . . . . . . . . . . . . . . . . . .32
5.6 Consents . . . . . . . . . . . . . . . . . . . . . . . .33
5.7 Reasonable Efforts . . . . . . . . . . . . . . . . . . .33
5.8 Notification of Certain Matters. . . . . . . . . . . . .33
5.9 Certain Benefit Plans. . . . . . . . . . . . . . . . . .33
5.10 Additional Documents and Further Assurances. . . . . . .33
5.11 Company's Auditors . . . . . . . . . . . . . . . . . . .33
5.12 Mutual Release . . . . . . . . . . . . . . . . . . . . .33
ARTICLE VI - CONDITIONS TO THE ASSET PURCHASE. . . . . . . . . . .34
6.1 Conditions to Obligations of Each Party to Effect
the Asset Purchase . . . . . . . . . . . . . . . . . . .34
6.2 Additional Conditions to Obligations of the Company. . .34
6.3 Additional Conditions to the Obligations of Healtheon
and Acquisition Sub. . . . . . . . . . . . . . . . . . .35
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TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE VII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW .36
7.1 Survival of Representations and Warranties . . . . . . .36
7.2 Escrow Arrangements and Indemnification. . . . . . . . .37
7.3 Indemnification by Healtheon and Acquisition Sub . . . .42
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER . . . . . . . . .43
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . .43
8.2 Effect of Termination. . . . . . . . . . . . . . . . . .44
8.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . .44
8.4 Extension; Waiver. . . . . . . . . . . . . . . . . . . .44
ARTICLE IX - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . .44
9.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . .44
9.2 Interpretation . . . . . . . . . . . . . . . . . . . . .45
9.3 Counterparts . . . . . . . . . . . . . . . . . . . . . .45
9.4 Transfer Taxes . . . . . . . . . . . . . . . . . . . . .45
9.5 Entire Agreement; Assignment . . . . . . . . . . . . . .46
9.6 Severability . . . . . . . . . . . . . . . . . . . . . .46
9.7 Other Remedies . . . . . . . . . . . . . . . . . . . . .46
9.8 Governing Law. . . . . . . . . . . . . . . . . . . . . .46
9.9 Rules of Construction. . . . . . . . . . . . . . . . . .46
9.10 Specific Performance . . . . . . . . . . . . . . . . . .46
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
Exhibit A Assignment and Assumption Agreement
Exhibit B Bill of Sale
Exhibit C Legal Opinion of Counsel to Healtheon
Exhibit D Legal Opinion of Counsel to the Company
Exhibit E Noncompetition Agreement
INDEX OF SCHEDULES
Schedule Description
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of June 25, 1998 among Healtheon Corporation, a Delaware corporation
("HEALTHEON"), Metis Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Healtheon ("ACQUISITION SUB"), Metis, LLC, a
California limited liability company (the "COMPANY"), and, with respect to
Article VII, Edward J. Fotsch, M.D., as Securityholder Agent and U.S. Bank
Trust National Association, as Escrow Agent.
RECITALS
A. The Boards of Directors of each of the Company, Healtheon and
Acquisition Sub believe it is in the best interests of each organization and
their respective securityholders that Healtheon acquire certain assets and
assume certain liabilities of the Company (the "ASSET PURCHASE") and, in
furtherance thereof, have approved the Asset Purchase.
B. A portion of the shares of Healtheon Common Stock otherwise
issuable by Healtheon in connection with the Asset Purchase shall be placed
in escrow by Healtheon, the release of which amount shall be contingent upon
certain events and conditions, all as set forth in Article VII hereof.
C. The Company, Healtheon and Acquisition Sub desire to make certain
representations and warranties and other agreements in connection with the
Asset Purchase.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, intending to be legally bound hereby the parties agree as
follows:
ARTICLE I
THE ASSET PURCHASE
1.1 PURCHASE OF ASSETS. Upon the terms and subject to the conditions
contained in this Agreement, at the Closing (as defined in Section 2.7
below), the Company shall sell, assign, transfer and convey to Buyer, and
Buyer shall purchase, acquire and accept from the Company, the assets
comprising the Healthcare Internet/Intranet business of the Company (the
"Business"), including all of the Company's assets of every kind and
description relating to the Business (other than those assets included in
the Retained Assets as defined in Section 2.2 below) (the "Purchased
Assets"), and subject only to the liabilities and obligations of the Company
which are defined in Section 2.3 (the "Assumed Liabilities"). The Purchased
Assets include, without limitation, the following assets and properties
(other than those assets included in the Retained Assets as defined in
Section 2.2):
(a) all trade and other accounts receivable and other
Indebtedness owing to the Company with respect to the Business and including
the benefit of all collateral, security, guaranties, and similar undertakings
received or held in connection therewith (the "Accounts Receivable");
(b) all inventories with respect to the Business wherever
located, including raw materials, goods consigned to vendors or
subcontractors, work in process, finished goods and goods in transit;
(c) all prepaid expenses, deposits and rights to refunds from
customers and suppliers with respect to the Business;
(d) all machinery, equipment, fixtures and furniture used in
the Business and identified on Schedule 1.1
(e) all motor vehicles;
(f) all supplies owned by the Company;
(g) all rights and interests of the Company in and to any
leases, subleases, licenses, loan agreements, mortgages, notes, indentures,
restrictions, wills, trusts, commitment obligations or other contracts,
agreements or instruments, whether written or oral or other similar
agreements ("Contracts"), and rights thereunder, including without
limitation, the designated Contracts relating to the Company set forth on
Schedule 2.12 including contracts for the purchase of materials, supplies and
services and the sale of products and services, equipment leases, and any
other contract of the Company relating to the Business;
(h) all business and financial records, books, ledgers, files,
plans, documents, correspondence, lists, plots, architectural plans,
drawings, notebooks, specifications, creative materials, advertising and
promotional materials, marketing materials, studies, reports, equipment
repair, maintenance or service records of the Company, whether written or
electronically stored or otherwise recorded in each case, relating to the
Business;
(i) all of the Company's goodwill, dealer and customer lists
and all other sales and marketing information, and all knowhow, technology,
drawings, engineering specifications, bills of materials, software and other
intangible assets of the Company in each case, relating to the Business;
(j) all patents, patent applications, copyrights, trademarks,
service marks, trade names, trade secrets, proprietary information,
technology rights and licenses, proprietary rights and processes, know-how,
research and development in progress, and any and all other intellectual
property including, without limitation, the Company Intellectual Property
Rights, the Company's name, all things authored, discovered, developed, made,
perfected, improved, designed, engineered, devised, acquired, produced,
conceived or first reduced to practice and that pertain to or are used in the
Business or that are relevant to an understanding or to the development of
the Business or to the performance by the products of the Business of their
intended functions or purposes, whether tangible or intangible, in any stage
of development, including without limitation, enhancements, designs,
technology, improvements, inventions, works or authorship, formulas,
processes, routines, subroutines, techniques, concepts, object code, flow
charts, diagrams, coding sheets, source code, listings and annotations,
programmers' notes, information, work papers, work product and other
materials or any types whatsoever, and all rights of any kind in or to any of
the foregoing including all goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto, and rights thereunder,
remedies against infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions;
(k) all permits, licenses, orders, ratings and approvals of
all federal, state, local or foreign governmental or regulatory authorities
or industrial bodies that are held by the Company and relate to the Business,
to the extent the same are transferable;
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(l) all rights of the Company to causes of action, lawsuits,
judgments, claims and demands of any nature which would relate to the
Business or constitute counterclaims, rights of setoff, and affirmative
defenses to any claims brought against Buyer by third parties relating to the
Business;
(m) all present and future insurance proceeds which may be
payable under the insurance policies listed on Schedule 2.16 attached hereto
to the extent that such proceeds relate to the future loss of asset value of
the Purchased Assets;
(n) except for Retained Assets described in Section 1.2 below,
all other items of property, real or personal, tangible or intangible,
including, without limitation, all restrictive and negative covenant
agreements with employees and others, including, without limitation,
nondisclosure agreements, computer programs, tapes, discs and timesharing
files, owned, used by or accruing to the benefit of the Company in each case,
used in the Business; and
(o) Intellectual property and associated html code that is
transferable by the Company, as well as the exclusive rights to operate the
Company's website located at www.metisllc.com.
1.2 RETAINED ASSETS. The Company will retain ownership of the assets
of the Company listed on Schedule 1.2 attached hereto (collectively, the
"Retained Assets").
1.3 ASSUMED LIABILITIES. The Acquisition Sub shall assume and agree
to pay, perform and discharge only the Assumed Liabilities, and will pay,
perform and discharge the Assumed Liabilities as they become due. The
Assumed Liabilities shall consist of only those liabilities of the Company
listed on Schedule 1.3 attached hereto or otherwise specifically provided for
in this Agreement.
1.4 RETAINED LIABILITIES. The liabilities and obligations which
shall be retained by the Company (the "Retained Liabilities") shall consist
of all liabilities of the Company other than Assumed Liabilities, including,
without limitation, the following:
(a) all liabilities of the Company relating to indebtedness
for borrowed money;
(b) all liabilities of the Company resulting from,
constituting or relating to a breach of any of the representations,
warranties, covenants or agreements of the Company under this Agreement in
accordance with the indemnification provisions of this Agreement;
(c) all liabilities of the Company for federal, state, local
or foreign Taxes, including Taxes incurred in respect of or measured by the
income of the Company earned on or realized prior to the Closing Date,
including any gain and income from the sale of the Purchased Assets and other
transactions contemplated herein;
(d) all liabilities for all environmental, ecological, health
or safety claims to the extent arising out of the operation of the Business
or the Purchased Assets by the Company on or before the Closing Date;
(e) all liabilities of the Company arising in connection with
its operations unrelated to the Business except as otherwise specifically
provided in Schedule 1.3;
(f) any liability of the Company based on its tortious or
illegal conduct;
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(g) any liability or obligation incurred by the Company in
connection with the negotiation, execution or performance of this Agreement
and the transactions contemplated hereby, including, without limitation, all
legal, accounting, brokers', finders' and other professional fees and
expenses other than through Healtheon's or Acquisition Sub's breach of this
Agreement;
(h) any liability or obligation incurred by the Company in
connection with the negotiation, execution or performance of, and settlement
of any claims pertaining to, the Netsource Agreement (as defined herein) and
the transactions contemplated thereby, including, without limitation, all
legal, accounting, brokers', finders' and other professional fees and
expenses; and
(i) all liabilities incurred by the Company after the Closing
Date other than through Healtheon's or Acquisition Sub's breach of this
Agreement (except to the extent such liability is specifically assumed by
Acquisition Sub); and
1.5 PURCHASE PRICE. Upon the terms and subject to the conditions
contained in this Agreement, in reliance upon the representations, warranties
and agreements of the Company contained herein, and in consideration of the
sale, assignment, transfer and delivery of the Transferred Assets and the
Noncompetition Agreements received from the Company, Acquisition Sub will
assume the Assumed Liabilities and Healtheon will deliver (a) (i) to the
Company, a stock certificate representing 1,400,000 shares of Healtheon
Common Stock, (ii) the Cash Payment, and (b) to the Escrow Agent, for the
benefit of the Company, a stock certificate representing 200,000 shares of
Healtheon Common Stock (the "Escrow Amount").
1.6 CASH PAYMENT. In the event that on the Closing Date, the Company
shall have a cash balance that is less than $654,112, Healtheon shall pay to
the Company on the Closing Date, as additional consideration, an amount of
money (the "Cash Payment") equal to (a)$654,112, LESS (b) such cash balance.
Notwithstanding the foregoing, in the event that the Company shall have
failed to conduct its business in the ordinary course and in compliance with
the provisions of this Agreement, including without limitation, Section 4.1,
an adjustment shall be made to the purchase price to reflect the extent to
which the Company's cash and accounts receivable balance is less than
$654,112 on the Closing Date.
1.7 CLOSING. Unless this Agreement is earlier terminated pursuant to
Section 8.1, the closing of the Merger (the "CLOSING") will take place as
promptly as practicable, but no later than five (5) business days, following
satisfaction or waiver of the conditions set forth in Article VI, at the
offices of Wilson Sonsini Goodrich & Rosati ("WSGR"), 650 Page Mill Road,
Palo Alto, California, unless another place or time is agreed to by Parent
and the Company. The date upon which the Closing actually occurs is herein
referred to as the "CLOSING DATE." The parties currently intend that the
Closing Date will occur on or prior to August 15, 1998.
1.8 EXECUTION AND DELIVERY OF DOCUMENTS OF TITLE BY THE COMPANY;
FURTHER ASSURANCES. At the Closing, the parties hereto shall have entered
into the Assignment and Assumption Agreement in the form attached hereto as
Exhibit A and the Company shall execute and deliver to Buyer the Bill of Sale
in the form attached hereto as Exhibit B and such deeds, conveyances, bills
of sale, certificates of title, assignments, assurances and other instruments
and documents as Buyer may reasonably request in order to effect the sale,
conveyance, and transfer of the Purchased Assets from the Company to the
Buyer. Such instruments and documents shall be sufficient to convey to Buyer
good and merchantable title in all of the Purchased Assets. The Company
will, from time to time after the Closing Date, take such additional actions
and execute and deliver such further documents as Buyer may reasonably
request in order more effectively to sell, transfer and convey the Purchased
Assets to Buyer and to place Buyer in position to operate and control all of
the Purchased Assets. To
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the extent any of such assets are, by nature or terms, not transferrable, the
Company shall hold, provide, and make such assets available for the use and
benefit of Buyer as Buyer's agent.
1.9 TAX FREE REORGANIZATION. The parties hereto intend that this
Agreement shall constitute a plan of reorganization pursuant to the Section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended, and agree to
report the transactions contemplated by this Agreement as such for all
purposes. Each party has consulted with its own tax advisors as to the tax
consequences of the transactions contemplated by this Agreement and no party
makes any representation or warranty with respect to such consequences.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Healtheon and Acquisition
Sub, subject to such exceptions as are specifically disclosed in the
disclosure letter (referencing the appropriate section number or subsection,
as the case may be) supplied by the Company to Healtheon (the "COMPANY
SCHEDULES") and dated as of the date hereof, as follows:
2.1 ORGANIZATION OF THE COMPANY. The Company is a limited liability
company duly organized, validly existing and in good standing under the laws
of the State of California. The Company has the power to own its properties
and to carry on its business as now being conducted. The Company is duly
qualified to do business and in good standing as a foreign limited liability
company in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on the business, assets (including intangible
assets), financial condition or results of operations of the Company
(hereinafter referred to as a "COMPANY MATERIAL ADVERSE EFFECT"). The
Company has delivered a true and correct copy of its Organizational
Documents, each as amended to date, to Healtheon.
2.2 COMPANY CAPITAL STRUCTURE.
(a) The authorized capitalization of the Company consists of
183,050 authorized Class A units (the "Class A units"), of which 183,050
units are issued and outstanding, and 300,000 authorized Class B units (the
"Class B units", and together with the Class A units, the Company Capital
Stock), of which 225,123 units are issued and outstanding. The Company
Capital Stock is held of record by the persons, with the addresses of record
and in the amounts set forth on Schedule 2.2(a). With respect to each holder
of Class B Units, Schedule 2.2(a) contains an identification of each such
holder's vesting provisions and vesting start date. All outstanding Company
Capital Stock is duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by statute, the
First Amended and Restated Operating Agreement of Metis, LLC and the Articles
of Organization (together, the "Organizational Documents) of the Company or
any agreement to which the Company is a party or by which it is bound. All
of the Company Capital Stock has been issued in compliance with the terms of
the Company's Organizational Documents.
(b) There are no options, warrants, calls, rights, commitments
or agreements of any character, written or oral, to which the Company is a
party or by which it is bound obligating the Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any ownership interests of the Company (each, a "Company Capital
Stock Equivalent") or obligating the Company
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to grant, extend, accelerate the vesting of, change the price of, otherwise
amend or enter into any such Company Common Stock Equivalent.
2.3 SUBSIDIARIES. The Company does not have and has never had any
subsidiaries or affiliated organizations and does not otherwise own and has
never otherwise owned any shares of capital stock or any interest in, or
control, directly or indirectly, any other corporation, partnership, limited
liability company, association, joint venture or other business entity.
2.4 AUTHORITY. Subject only to the requisite approval of the Asset
Purchase and this Agreement by the Company's Members, the Company has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The vote required of the
Company's Members to duly approve the Asset Purchase and this Agreement is a
Majority in Interest of the Members (as defined in the Organizational
Documents) and a Majority in Interest of the Class A Members (as defined in
the Organizational Documents). The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Company, subject only
to the approval of the Asset Purchase by the Company's Members. The
Company's Board of Directors has unanimously approved the Asset Purchase and
this Agreement. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms. Except as set forth on Schedule
2.4, subject only to the approval of the Asset Purchase and this Agreement by
the Company's Members, the execution and delivery of this Agreement by the
Company does not, and, as of the Closing, the consummation of the
transactions contemplated hereby (including the Asset Purchase) will not,
conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (any such event, a "COMPANY CONFLICT") (i) any provision of the
Organizational Documents of the Company or (ii) any mortgage, indenture,
lease, Contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or its properties or assets. No
consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other federal, state, county, local or foreign governmental authority,
instrumentality, agency or commission ("GOVERNMENTAL ENTITY") or any third
party (so as not to trigger any Company Conflict) is required by or with
respect to the Company in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and (ii) such other consents, waivers,
authorizations, filings, approvals and registrations which are set forth on
Schedule 2.4.
2.5 FINANCIAL STATEMENTS. Section 2.5 sets forth the Company's
audited balance sheets as of December 31, 1997 and the related audited
statement of income and cash flow for the period from inception to December
31, 1997 (the "COMPANY AUDITED FINANCIALS") and the Company's unaudited
balance sheet as of May 31, 1998 and the related unaudited statements of
income and cash flow for the five months then ended (the "COMPANY UNAUDITED
FINANCIALS") (collectively, such financial statements are sometimes referred
to herein as "COMPANY FINANCIAL STATEMENTS"). The Company Audited Financials
and the Company Unaudited Financials are correct in all material respects and
have been prepared in accordance with GAAP applied on a basis consistent
throughout the periods indicated and consistent with each other (except that
the Company Unaudited Financials do not contain all the notes that may be
required by GAAP). The Company Audited Financials and Company Unaudited
Financials present fairly the financial condition, operating results and cash
flows of the Company as of the dates and during the periods indicated
therein, subject in the case of the Company Unaudited Financials,
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to normal year-end adjustments, which will not be material in amount or
significance. The Company's unaudited balance sheet dated as of May 31, 1998
shall be referred to as the "COMPANY CURRENT BALANCE SHEET". The Company's
cash and accounts receivable balance as of May 15, 1998 was $654,112, and the
Company's accounts receivable are fully collectible. Since December 31,
1997, the Company has not changed its methodology for valuation of accounts
receivable.
2.6 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 2.6,
the Company does not have any liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, whether accrued,
absolute, contingent, matured, unmatured or other (whether or not required to
be reflected in financial statements in accordance with generally accepted
accounting principles), which individually or in the aggregate, (i) has not
been reflected in the Company Current Balance Sheet, or (ii) has not arisen
in the ordinary course of the Company's business since the date of the
Company Current Balance Sheet, consistent with past practices.
2.7 NO CHANGES. Except as set forth in Schedule 2.7, since the date
of the Company Current Balance Sheet, there has not been, occurred or arisen
any:
(a) transaction by the Company except in the ordinary course
of business as conducted as of the date of the Company Current Balance Sheet
and consistent with past practices;
(b) amendments or changes to the Organizational Documents of
the Company;
(c) capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding $25,000;
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or
other distribution with respect to any units of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of
its units;
(i) increase in the salary or other compensation payable or to
become payable to any of its officers, directors, employees or advisors, or
the declaration, payment or commitment or obligation of any kind for the
payment of a bonus or other additional salary or compensation to any such
person except as otherwise contemplated by this Agreement;
(j) sale, lease, license or other disposition of any of the
assets or properties of the Company, except in the ordinary course of
business as conducted on that date and consistent with past practices;
-7-
(k) any Lien placed on any of the Transferred Assets which
remains in existence on the date hereof;
(l) amendment or termination of any material contract,
agreement or license to which the Company is a party or by which it is bound;
(m) loan by the Company to any person or entity, the
incurrence by the Company of any indebtedness, the guaranty by the Company of
any indebtedness, issuance or sale of any debt securities of the Company or
the guaranty of any debt securities of others, except for advances to
employees for travel and business expenses in the ordinary course of
business, consistent with past practices;
(n) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company;
(o) any contingent liabilities incurred by the Company with
respect to the obligations of any other person that would be assumed
hereunder;
(p) commencement or notice or threat of commencement of any
lawsuit or proceeding against or investigation of the Company or its affairs;
(q) notice of any claim of ownership by a third party of the
Company's Intellectual Property (as defined in Section 2.11 below) or of
infringement by the Company of any third party's Intellectual Property rights;
(r) issuance or sale by the Company of any of its shares of
capital stock, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;
(s) change in pricing or royalties set or charged by the
Company to its customers or licensees or in pricing or royalties set or
charged by persons who have licensed Intellectual Property to the Company;
(t) event or condition of any character that has or could be
reasonably expected to have a Company Material Adverse Effect on the Company;
or
(u) any postponement or delay in payment of any accounts
payable or other liability of the Company that will be included as Assumed
Liabilities;
(v) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses
(a) through (r) (other than negotiations with Healtheon and its
representatives regarding the transactions contemplated by this Agreement).
2.8 TAX AND OTHER RETURNS AND REPORTS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement,
"TAX" or, collectively, "TAXES", means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts
-8-
and any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes of
a predecessor entity.
(b) TAX RETURNS AND AUDITS. Except as set forth in Schedule 2.8:
(i) The Company as of the Closing will have prepared
and filed all required federal, state, local and foreign returns, estimates,
information statements and reports ("RETURNS") relating to any and all Taxes
concerning or attributable to the Company or its operations and such Returns
are true and correct and have been completed in accordance with applicable
law.
(ii) The Company as of the Closing: (A) will have paid
or accrued all Taxes it is required to pay or accrue and (B) will have
withheld with respect to its employees all federal and state income taxes,
FICA, FUTA and other Taxes required to be withheld.
(iii) The Company has not been delinquent in the payment
of any Tax nor is there any Tax deficiency outstanding, proposed or assessed
against the Company, nor has the Company executed any waiver of any statute
of limitations on or extending the period for the assessment or collection of
any Tax.
(iv) No audit or other examination of any Return of the
Company is currently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) The Company does not have any liabilities for
unpaid federal, state, local and foreign Taxes which have not been accrued or
reserved against on the Company Current Balance Sheet, whether asserted or
unasserted, contingent or otherwise, and the Company has no knowledge of any
basis for the assertion of any such liability attributable to the Company,
its assets or operations.
(vi) The Company has made available to Healtheon copies
of all federal and state income and all state sales and use Tax Returns for
all periods since the date of Company's incorporation.
(vii) There are (and as of immediately following the
Effective Date there will be) no liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("LIENS") on the assets of the
Company relating to or attributable to Taxes.
(viii) The Company has no knowledge of any basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(x) As of the Closing, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions
of this Agreement, covering any employee or former employee of the Company
that, individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to Section 280G or 162 of the
Code.
-9-
(xi) The Company has not 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 the Company.
(xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xiii) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(xiv) The Company's tax basis in its assets for purposes
of determining its future amortization, depreciation and other federal income
tax deductions is accurately reflected on the Company's tax books and records.
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree
to which the Company is a party or otherwise binding upon the Company which
has or reasonably could be expected to have the effect of prohibiting or
impairing the ability of Acquisition Sub to operate the Business after the
Closing Date, any acquisition of property (tangible or intangible) by the
Company or the conduct of the Business. Without limiting the foregoing, the
Company has not entered into any agreement under which the Company is
restricted from selling, licensing or otherwise distributing any of its
products to any class of customers, in any geographic area, during any period
of time or in any segment of the market that would be applicable to the
Business after the Closing Date.
2.10 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company owns no real property, nor has it ever owned
any real property. Schedule 2.10(a) sets forth a list of all real property
currently, or at any time in the past, leased by the Company, the name of the
lessor, the date of the lease and each amendment thereto and, with respect to
any current lease, the aggregate annual rental and/or other fees payable
under any such lease and any security interest in the Company's assets
created by such lease. All such current leases are in full force and effect,
are valid and effective in accordance with their respective terms, and there
is not, under any of such leases, any existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
default). All such current leases will be assigned by the Company to
Acquisition Sub as of the Closing Date.
(b) The Company has good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of the
Purchased Assets, real, personal and mixed, used or held for use in the
Business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in the Company Financial Statements or in Schedule
2.10(b) and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the
value, or materially interfere with the present use, of the property subject
thereto or affected thereby.
2.11 INTELLECTUAL PROPERTY.
(a) The Company owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights, and any applications therefor, maskworks, net
lists, schematics, technology, know-how, computer software programs or
applications (in both source code
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and object code form), and tangible or intangible proprietary information or
material that are used in the Business as currently conducted and as proposed
to be conducted by the Company (the "COMPANY INTELLECTUAL PROPERTY
RIGHT(S)"). Schedule 2.11(a) sets forth a complete list of all patents,
registered and material unregistered trademarks, registered copyrights, trade
names and service marks, and any applications therefor, included in the
Company Intellectual Property Rights, and specifies, where applicable, the
jurisdictions in which each such Company Intellectual Property Right has been
issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners.
(b) Schedule 2.11(b) sets forth a complete list of all
licenses, sublicenses and other agreements as to which the Company is a party
and pursuant to which the Company or any other person is authorized to use
any Company Intellectual Property Right (excluding object code end-user
licenses granted to end-users in the ordinary course of business that permit
use of software products without a right to modify, distribute or sublicense
the same ("END-USER LICENSES")) or trade secret of the Company, and includes
the identity of all parties thereto, a description of the nature and subject
matter thereof, the applicable royalty or other fees and the term thereof.
Each license, sublicense and other agreement will be transferred or assigned
to Acquisition Sub as of and effective upon the Closing. The execution and
delivery of this Agreement by the Company, and the consummation of the
transactions contemplated hereby, including, without limitation, the transfer
or assignment of the Company Intellectual Property Rights, will neither cause
the Company to be in violation or default under any such license, sublicense
or agreement, nor entitle any other party to any such license, sublicense or
agreement to terminate or modify such license, sublicense or agreement.
Except as set forth in Schedules 2.11(a) or 2.11(b), the Company is the sole
and exclusive owner or licensee of, with all right, title and interest in and
to (free and clear of any liens or encumbrances), the Company Intellectual
Property Rights, and has sole and exclusive rights (and is not contractually
obligated to pay any compensation to any third party in respect thereof) to
the use thereof or the material covered thereby in connection with the
services or products in respect of which the Company Intellectual Property
Rights are being used.
(c) No claims with respect to the Company Intellectual
Property Rights have been asserted or are, to the Company's knowledge,
threatened by any person, nor are there any valid grounds for any claims, (i)
to the effect that the manufacture, sale, licensing or use of any of the
products of the Company infringes on any copyright, patent, trade mark,
service mark, trade secret or other proprietary right, (ii) against the use
by the Company of any trademarks, service marks, trade names, trade secrets,
copyrights, maskworks, patents, technology, know-how or computer software
programs and applications used in the Business as currently conducted or as
proposed to be conducted by the Company, or (iii) challenging the ownership
by the Company, validity or effectiveness of any of the Company Intellectual
Property Rights. All registered trademarks, service marks and copyrights
held by the Company are valid and subsisting. The Company has not infringed,
and the Business as currently conducted or as proposed to be conducted does
not infringe, any copyright, patent, trademark, service mark, trade secret or
other proprietary right of any third party. There is no material
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee or
former employee of the Company. No Company Intellectual Property Right or
product of the Company or any of its subsidiaries is subject to any
outstanding decree, order, judgment, or stipulation restricting in any manner
the licensing thereof by the Company. Each current and former employee,
consultant or contractor of the Company has executed a proprietary
information and confidentiality agreement substantially in the Company's
standard forms. All software included in the Company Intellectual Property
Rights is original with the Company and has been either created by employees
of the Company on a work-for-hire basis or by consultants or contractors who
have created such software themselves and have assigned all rights they may
have had in such software to the Company.
-11-
2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth on
Schedule 2.12(a), the Company does not have, is not a party to nor is it
bound by, and neither Healtheon nor the Acquisition Sub will be bound, by
virtue of the transactions contemplated hereby, by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements,
(iv) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or any
consulting or sales agreement, contract or commitment under which any firm or
other organization provides services to the Company,
(v) any operating agreement or other agreement relating
to the operations of any business organization, including the Company,
(vi) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting
of benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement,
(vii) any fidelity or surety bond or completion bond,
(viii) any lease of personal property having a value
individually in excess of $15,000,
(ix) any agreement of indemnification or guaranty,
(x) any agreement, contract or commitment containing
any covenant limiting the freedom of the Company to engage in any line of
business or to compete with any person,
(xi) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $15,000,
(xii) any agreement, contract or commitment relating to
the disposition or acquisition of assets or any interest in any business
enterprise outside the ordinary course of the Company's business,
(xiii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating
to the borrowing of money or extension of credit, including guaranties
referred to in clause (viii) hereof,
(xiv) any purchase order or contract for the purchase of
raw materials involving $15,000 or more,
-12-
(xv) any construction contracts,
(xvi) any distribution, joint marketing or development
agreement,
(xvii) any agreement pursuant to which the Company has
granted or may grant in the future, to any party, a source-code license or
option or other right to use or acquire source-code, or
(xviii) any other agreement, contract or commitment
that involves $15,000 or more or is not cancelable without penalty within
thirty (30) days.
Except for such alleged breaches, violations and defaults, and events that
would constitute a breach, violation or default with the lapse of time,
giving of notice, or both, as are all noted in Schedule 2.12(b), the Company
has not breached, violated or defaulted under, or received notice that it has
breached, violated or defaulted under, any of the terms or conditions of any
agreement, contract or commitment required to be set forth on Schedule
2.12(a) or Schedule 2.11(b) (any such agreement, contract or commitment, a
"COMPANY CONTRACT"). Each Company Contract is in full force and effect and,
except as otherwise disclosed in Schedule 2.12(b), is not subject to any
default thereunder of which the Company has knowledge by any party obligated
to the Company pursuant thereto.
2.13 INTERESTED PARTY TRANSACTIONS. Except as set forth on Schedule
2.13, no officer, director or Member of the Company (nor any ancestor,
sibling, descendant or spouse of any of such persons, or any trust,
partnership or corporation in which any of such persons has or has had an
interest), has or has had, directly or indirectly, (i) an economic interest
in any entity which furnished or sold, or furnishes or sells, services or
products that the Company furnishes or sells, or proposes to furnish or sell,
(ii) an economic interest in any entity that purchases from or sells or
furnishes to, the Company, any goods or services or (iii) a beneficial
interest in any contract or agreement set forth in Schedule 2.12(a) or
Schedule 2.11(b); provided, that ownership of no more than one percent (1%)
of the outstanding voting stock of a publicly traded corporation shall not be
deemed an "economic interest in any entity" for purposes of this Section
2.13. Except as disclosed on Schedule 2.13, all interested party
transactions were made on terms no more favorable to such interested party
than could have been obtained on an arms'-length basis.
2.14 COMPLIANCE WITH LAWS. To the Company's knowledge, it has
complied in all material respects with, is not in material violation of, and
has not received any notices of violation with respect to, any foreign,
federal, state or local statute, law or regulation.
2.15 LITIGATION. Except as set forth in Schedule 2.15, there is no
action, suit or proceeding of any nature pending or to the Company's
knowledge threatened against the Company, its properties or any of its
officers or directors, in their respective capacities as such. Except as set
forth in Schedule 2.15, to the Company's knowledge, there is no investigation
pending or threatened against the Company, its properties or any of its
officers or directors (in their respective capacities as such) by or before
any governmental entity. Schedule 2.15 sets forth, with respect to any
pending or threatened action, suit, proceeding or investigation, the forum,
the parties thereto, the subject matter thereof and the amount of damages
claimed or other remedy requested. No Governmental Entity has at any time
challenged or questioned the legal right of the Company to manufacture, offer
or sell any of its products in the present manner or style thereof.
-13-
2.16 INSURANCE. Set forth on Schedule 2.16 is a list of all of the
Company's insurance policies and fidelity bonds. With respect to the
insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of the
Company, there is no claim by the Company pending under any of such policies
or bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under
all such policies and bonds have been paid and the Company is otherwise in
material compliance with the terms of such policies and bonds (or other
policies and bonds providing substantially similar insurance coverage). The
Company has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies.
2.17 MINUTE BOOKS. The minute books of the Company made available to
counsel for Healtheon are the only minute books of the Company and contain a
reasonably accurate summary of all meetings of directors (or committees
thereof) and Members or actions by written consent since the time of
organization of the Company.
2.18 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. The Company has not operated any
underground storage tanks, and has no knowledge of the existence, at any
time, of any underground storage tank (or related piping or pumps), at any
property that the Company has at any time owned, operated, occupied or
leased. The Company has not released any amount of any substance that has
been designated by any Governmental Entity or by applicable federal, state or
local law to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment, including, without limitation, PCBs, asbestos, oil and
petroleum products, urea-formaldehyde and all substances listed as a
"hazardous substance," "hazardous waste," "hazardous material" or "toxic
substance" or words of similar import, under any law, including but not
limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended; the Resource Conservation and Recovery Act
of 1976, as amended; the Federal Water Pollution Control Act, as amended; the
Clean Air Act, as amended, and the regulations promulgated pursuant to said
laws, (a "HAZARDOUS MATERIAL"). No Hazardous Materials are present as a
result of the actions or omissions of the Company, or, to the Company's
knowledge, as a result of any actions of any third party or otherwise, in, on
or under any property, including the land and the improvements, ground water
and surface water thereof, that the Company has at any time owned, operated,
occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect
on or before the Closing Date, nor has the Company disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any or all
of the foregoing being collectively referred to as "HAZARDOUS MATERIALS
ACTIVITIES") in violation of any rule, regulation, treaty or statute
promulgated by any Governmental Entity in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Hazardous
Material Activity.
(c) PERMITS. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "ENVIRONMENTAL
PERMITS") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and
businesses are currently being conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding,
revocation proceeding, amendment, procedure, writ, injunction or claim is
pending, or to the Company's knowledge, threatened concerning any
Environmental Permit, Hazardous Material or any Hazardous Materials Activity
of the Company. The Company
-14-
is not aware of any fact or circumstance which could involve the Company in
any environmental litigation or impose upon the Company any environmental
liability.
2.19 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Except as set
forth on Schedule 2.19, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees,
investment banking fees, consulting fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby. Schedule 2.19 sets forth the principal terms and
conditions of any agreement, written or oral, with respect to such fees.
Schedule 2.19 also sets forth the Company's current reasonable estimate of
all Company Third Party Expenses (as defined in Section 5.4) expected to be
incurred by the Company in connection with the negotiation and effectuation
of the terms and conditions of this Agreement and the transactions
contemplated hereby.
2.20 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of
"Affiliate" set forth in Section 2.20(a)(i) below (which definition shall
apply only to this Section 2.20), for purposes of this section, the following
terms shall have the meanings set forth below:
(i) "COMPANY AFFILIATE" shall mean any other person or
entity under common control with the Company within the meaning of Section
414(b), (c), (m) or (o) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(iii) "COMPANY EMPLOYEE PLAN" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, unit or
unit related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, funded or unfunded and
whether or not legally binding, including without limitation, each "employee
benefit plan", within the meaning of Section 3(3) of ERISA which is or has
been maintained, contributed to, or required to be contributed to, by the
Company or any Company Affiliate for the benefit of any "Company Employee"
(as defined below), and pursuant to which the Company or any Company
Affiliate has or may have any material liability contingent or otherwise;
(iv) "COMPANY EMPLOYEE" shall mean any current, former,
or retired employee, officer, or director of the Company or any Company
Affiliate;
(v) "COMPANY EMPLOYEE AGREEMENT" shall refer to each
management, employment, severance, consulting, relocation, repatriation,
expatriation, visas, work permit or similar agreement or contract between the
Company or any Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan"
(as defined below) which is a "multiemployer plan", as defined in Section
3(37) of ERISA; and
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(viii) "COMPANY PENSION PLAN" shall refer to each Company
Employee Plan which is an "employee pension benefit plan", within the meaning
of Section 3(2) of ERISA.
(b) SCHEDULE. Schedule 2.20(b) contains an accurate and
complete list of each Company Employee Plan and each Company Employee
Agreement, together with a schedule of all liabilities, whether or not
accrued, under each such Company Employee Plan or Company Employee Agreement.
The Company does not have any plan or commitment, whether legally binding or
not, to establish any new Company Employee Plan or Company Employee
Agreement, to modify any Company Employee Plan or Company Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Company Employee Agreement to the requirements of any applicable law,
or as required by this Agreement), or to enter into any Company Employee Plan
or Company Employee Agreement, nor does it have any intention or commitment
to do any of the foregoing.
(c) DOCUMENTS. The Company has made available to Healtheon
(i) correct and complete copies of all documents embodying or relating to
each Company Employee Plan and each Company Employee Agreement including all
amendments thereto and written interpretations thereof; (ii) the most recent
annual actuarial valuations, if any, prepared for each Company Employee Plan;
(iii) the most recent annual report (Series 5500 and all schedules thereto),
if any, required under ERISA or the Code in connection with each Company
Employee Plan or related trust; (iv) if the Company Employee Plan is funded,
the most recent annual and periodic accounting of Company Employee Plan
assets; (v) the most recent summary plan description together with the most
recent summary of material modifications, if any, required under ERISA with
respect to each Company Employee Plan; (vi) all IRS determination letters and
rulings relating to Company Employee Plans and copies of all applications and
correspondence to or from the IRS or the Department of Labor ("DOL") with
respect to any Company Employee Plan; (vii) all communications material to
any Company Employee or Company Employees relating to any Company Employee
Plan and any proposed Company Employee Plans, in each case, relating to any
amendments, terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which would
result in any material liability to the Company; and (viii) all registration
statements and prospectuses prepared in connection with each Company Employee
Plan.
(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth on Schedule
2.20(d), (i) the Company has performed in all material respects all
obligations required to be performed by it under each Company Employee Plan,
and each Company 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 but not
limited to ERISA or the Code; (ii) no "prohibited transaction", within the
meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred
with respect to any Company Employee Plan; (iii) there are no actions, suits
or claims pending, or, to the knowledge of the Company, threatened or
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan; and (iv)
each Company Employee Plan can be amended, terminated or otherwise
discontinued after the Closing in accordance with its terms, without
liability to the Company, Healtheon or any of its Affiliates (other than
ordinary administration expenses typically incurred in a termination event);
(v) there are no inquiries or proceedings pending or, to the knowledge of the
Company or any affiliates, threatened by the IRS or DOL with respect to any
Company Employee Plan; and (vi) neither the Company nor any Affiliate is
subject to any penalty or tax with respect to any Company Employee Plan under
Section 402(i) of ERISA or Section 4975 through 4980 of the Code.
-16-
(e) PENSION PLANS. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA,
Title IV of ERISA or Section 412 of the Code.
(f) MULTIEMPLOYER PLANS. At no time has the Company
contributed to or been requested to contribute to any Multiemployer Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in
Schedule 2.20(g), no Company Employee Plan provides, or has any liability to
provide, life insurance, medical or other employee benefits to any Company
Employee upon his or her retirement or termination of employment for any
reason, except as may be required by statute, and the Company has never
represented, promised or contracted (whether in oral or written form) to any
Company Employee (either individually or to Company Employees as a group)
that such Company Employee(s) would be provided with life insurance, medical
or other employee welfare benefits upon their retirement or termination of
employment, except to the extent required by statute.
(h) EFFECT OF TRANSACTION.
(i) Except as set forth on Schedule 2.20(h)(i), the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company
Employee Plan, Company Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Company Employee.
(ii) Except as set forth on Schedule 2.20(h)(ii), no
payment or benefit which will or may be made by the Company or Healtheon or
any of their respective affiliates with respect to any Employee will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
(i) EMPLOYMENT MATTERS. The Company (i) to its knowledge, is
in compliance in all material respects with all applicable foreign, federal,
state and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each
case, with respect to Company Employees; (ii) has withheld all amounts
required by law or by agreement to be withheld from the wages, salaries and
other payments to Company Employees; (iii) is not liable for any arrears of
wages or any taxes or any penalty for failure to comply with any of the
foregoing; and (iv) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Company Employees (other than routine payments to be made in
the normal course of business and consistent with past practice).
(j) LABOR. No work stoppage or labor strike against the
Company is pending or, to the best knowledge of the Company, threatened.
Except as set forth in Schedule 2.20(j), the Company is not involved in or,
to the knowledge of the Company, threatened with, any labor dispute,
grievance, or litigation relating to labor, safety or discrimination matters
involving any Company Employee, including, without limitation, charges of
unfair labor practices or discrimination complaints, which, if adversely
determined, would, individually or in the aggregate, result in liability to
the Company. Neither the Company nor any of its subsidiaries has engaged in
any unfair labor practices within the meaning of the National Labor Relations
Act which would, individually or in the aggregate, directly or indirectly
result in a liability to the Company. Except as set forth in Schedule
2.20(j), the Company is not presently, nor has it been in the past, a party
to, or bound by, any collective
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bargaining agreement or union contract with respect to Company Employees and
no collective bargaining agreement is being negotiated by the Company.
2.21 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Company (as modified by the Company Schedules), nor
any statement made in any schedule or certificate furnished by the Company
pursuant to this Agreement, or furnished in or in connection with documents
mailed or delivered to the shareholders of the Company in connection with
soliciting their consent to this Agreement and the Asset Purchase, contains
or will contain at the Closing, any untrue statement of a material fact, or
omits or will omit at the Closing to state any material fact necessary in
order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HEALTHEON AND ACQUISITION SUB
Healtheon and Acquisition Sub hereby represent and warrant to the
Company, subject to such exceptions as are specifically disclosed in the
disclosure letter (referencing the appropriate section number or subsection,
as the case may be) supplied by the Healtheon and Acquisition Sub to the
Company (the "HEALTHEON AND ACQUISITION SUB SCHEDULES") and dated as of the
date hereof, as follows:
3.1 ORGANIZATION OF HEALTHEON AND ACQUISITION SUB. Healtheon is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Acquisition Sub is a corporation duly
organized and in good standing under the laws of the State of Delaware.
Healtheon has the corporate power to own its properties and to carry on their
business as now being conducted. Healtheon is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would have a material adverse effect on the
business, assets (including intangible assets), financial condition or
results of operations of Healtheon (hereinafter referred to as a "HEALTHEON
MATERIAL ADVERSE EFFECT"). Healtheon has delivered a true and correct copy of
its Certificate of Incorporation and Bylaws, each as amended to date, to the
Company. Acquisition Sub has delivered a true and correct copy of its
Certificate of Incorporation and Bylaws, each as amended to date, to the
Company.
3.2 HEALTHEON AND ACQUISITION SUB CAPITAL STRUCTURE.
(a) The authorized capital stock of Healtheon consists of
75,000,000 shares of authorized Common Stock, of which 49,774,826 shares are
issued and outstanding. The shares of the capital stock of Healtheon are
held of record by the persons, with the addresses of record and in the
amounts set forth on Schedule 3.2(a). All outstanding shares of Healtheon
capital stock are duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by statute, the
Certificate of Incorporation or Bylaws of Healtheon or any agreement to which
Healtheon is a party or by which it is bound.
(b) The authorized capital stock of Acquisition Sub consists
of 1,000 shares of authorized Common Stock, all of which are issued and
outstanding and held of record by Healtheon. All outstanding shares of the
capital stock of Acquisition Sub are duly authorized, validly issued, fully
paid and non-assessable and not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of Acquisition Sub or any
agreement to which the Acquisition Sub is a party or by which it is bound.
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(c) Healtheon has reserved 10,000,000 shares of Common Stock
for issuance to employees and consultants pursuant to Healtheon's 1996 Stock
Plan ("HEALTHEON STOCK PLAN"), of which 6,464,426 shares are subject to
outstanding, unexercised options ("HEALTHEON OPTIONS") and 52,023 shares
remain available for future grant. Schedule 3.2(b) sets forth for each
outstanding Healtheon Option the name of the holder of such option, the
domicile address of such holder, the number of shares of Common Stock subject
to such option, the exercise price of such option and the vesting schedule
for such option, including the extent vested to date and whether the
exercisability of such option will be accelerated and become exercisable by
reason of the transactions contemplated by this Agreement. Except as set
forth in Schedule 3.2(b), there are no options, warrants, calls, rights,
commitments or agreements of any character, written or oral, to which
Healtheon is a party or by which it is bound obligating Healtheon to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of Healtheon or
obligating Healtheon to grant, extend, accelerate the vesting of, change the
price of, otherwise amend or enter into any such option, warrant, call,
right, commitment or agreement.
3.3 SUBSIDIARIES. Other than Acquisition Sub, Healtheon does not
have any subsidiaries or affiliated companies and does not otherwise own and
has never otherwise owned any shares of capital stock or any interest in, or
control, directly or indirectly, any other corporation, partnership, limited
liability company, association, joint venture or other business entity.
3.4 AUTHORITY. Each of Healtheon and Acquisition Sub has all
requisite corporate power and authority to enter into this Agreement and to
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 and Acquisition Sub. Each of Healtheon's Board of
Directors and Acquisition Sub's Board of Directors have unanimously approved
the Asset Purchase and this Agreement. This Agreement has been duly executed
and delivered by Healtheon and Acquisition Sub and constitutes the valid and
binding obligation of Healtheon and Acquisition Sub, enforceable in
accordance with its terms. Except as set forth on Schedule 3.4, the
execution and delivery of this Agreement by Healtheon and Acquisition Sub
does not, and, as of the Closing, the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of,
or default under (with or without notice or lapse of time, or both), or give
rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under (any such event, a "HEALTHEON
CONFLICT") (i) any provision of the Certificate of Incorporation or Bylaws of
Healtheon, (ii) any provision of the Certificate of Incorporation or Bylaws
of Acquisition Sub, or (iii) any mortgage, indenture, lease, contract, or
other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Healtheon or its properties or assets. No consent, waiver,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity or any third party (so as not to trigger any
Healtheon Conflict) is required by or with respect to Healtheon or
Acquisition Sub in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and (ii) such other consents, waivers,
authorizations, filings, approvals and registrations which are set forth on
Schedule 3.4.
3.5 FINANCIAL STATEMENTS. Section 3.5 sets forth the Healtheon's
audited balance sheets as of December 31, 1996 and draft balance sheets as of
December 31, 1997 and the related audited and draft statement of income and
cash flow for the twelve-month periods ended December 31, 1996 and December
31, 1997 (the "HEALTHEON AUDITED FINANCIALS") and Healtheon's unaudited
balance sheet of May 31, 1998 and the related unaudited statements of income
and cash flow for the five months then ended (the "HEALTHEON UNAUDITED
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FINANCIALS") (collectively, such financial statements are sometimes referred
to herein as "HEALTHEON FINANCIAL STATEMENTS"). The Healtheon Audited
Financials and the Healtheon Unaudited Financials are correct in all material
respects and have been prepared in accordance with GAAP applied on a basis
consistent throughout the periods indicated and consistent with each other
(except that the Healtheon Unaudited Financials do not contain all the notes
that may be required by GAAP). The Healtheon Audited Financials and
Healtheon Unaudited Financials present fairly the financial condition,
operating results and cash flows of Healtheon as of the dates and during the
periods indicated therein, subject in the case of the Healtheon Unaudited
Financials, to normal year-end adjustments, which will not be material in
amount or significance. Healtheon's unaudited balance sheet dated as of May
31, 1998 shall be referred to as the "HEALTHEON CURRENT BALANCE SHEET".
3.6 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 3.6,
Healtheon does not have any liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, whether accrued,
absolute, contingent, matured, unmatured or other (whether or not required to
be reflected in financial statements in accordance with generally accepted
accounting principles), which individually or in the aggregate, (i) has not
been reflected in the Healtheon Current Balance Sheet, or (ii) has not arisen
in the ordinary course of Healtheon's business since the date of the
Healtheon Current Balance Sheet, consistent with past practices.
3.7 NO CHANGES. Except as set forth in Schedule 3.7 or in the
ordinary course of its business, since the date of the Healtheon Current
Balance Sheet, there has not been, occurred or arisen any:
(a) transaction by Healtheon except in the ordinary course of
business as conducted as of the date of the Healtheon Current Balance Sheet
and consistent with past practices;
(b) amendments or changes to the Certificate of Incorporation
or Bylaws of Healtheon;
(c) capital expenditure or commitment by Healtheon, either
individually or in the aggregate, exceeding $25,000;
(d) destruction of, damage to or loss of any material assets,
business or customer of Healtheon (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by Healtheon;
(g) revaluation by Healtheon of any of its assets;
(h) declaration, setting aside or payment of a dividend or
other distribution with respect to the capital stock of Healtheon, or any
direct or indirect redemption, purchase or other acquisition by Healtheon of
any of its capital stock;
(i) increase in the salary or other compensation payable or to
become payable to any of Healtheon's officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment of a bonus or other additional salary or compensation to any
such person except as otherwise contemplated by this Agreement;
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(j) sale, lease, license or other disposition of any of the
assets or properties of Healtheon, except in the ordinary course of business
as conducted on that date and consistent with past practices;
(k) amendment or termination of any material contract,
agreement or license to which Healtheon is a party or by which it is bound;
(l) loan by Healtheon to any person or entity, incurring by
Healtheon of any indebtedness, guaranteeing by Healtheon of any indebtedness,
issuance or sale of any debt securities of Healtheon or guaranteeing of any
debt securities of others, except for advances to employees for travel and
business expenses in the ordinary course of business, consistent with past
practices;
(m) waiver or release of any right or claim of Healtheon,
including any write-off or other compromise of any account receivable of
Healtheon;
(n) commencement or notice or threat of commencement of any
lawsuit or proceeding against or investigation of Healtheon or its affairs;
(o) notice of any claim of ownership by a third party of
Healtheon's Intellectual Property (as defined in Section 3.11 below) or of
infringement by Healtheon's of any third party's Intellectual Property rights;
(p) issuance or sale by Healtheon of any of its shares of
capital stock, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;
(q) change in pricing or royalties set or charged by Healtheon
to its customers or licensees or in pricing or royalties set or charged by
persons who have licensed Intellectual Property to Healtheon;
(r) event or condition of any character that has or could be
reasonably expected to have a Healtheon Material Adverse Effect on Healtheon;
or
(s) negotiation or agreement by Healtheon or any officer or
employees thereof to do any of the things described in the preceding clauses
(a) through (r) (other than negotiations with the Company and its
representatives regarding the transactions contemplated by this Agreement).
3.8 TAX AND OTHER RETURNS AND REPORTS.
(a) TAX RETURNS AND AUDITS. Except as set forth in Schedule
3.8:
(i) Healtheon as of the Closing will have prepared and
filed all required Returns relating to any and all Taxes concerning or
attributable to Healtheon or its operations and such Returns are true and
correct and have been completed in accordance with applicable law.
(ii) Healtheon as of the Closing: (A) will have paid or
accrued all Taxes it is required to pay or accrue and (B) will have withheld
with respect to its employees all federal and state income taxes, FICA, FUTA
and other Taxes required to be withheld.
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(iii) Healtheon has not been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding, proposed or assessed
against Healtheon, nor has Healtheon executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of
any Tax.
(iv) No audit or other examination of any Return of
Healtheon is currently in progress, nor has Healtheon been notified of any
request for such an audit or other examination.
(v) Healtheon does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been accrued or
reserved against on the Healtheon Current Balance Sheet, whether asserted or
unasserted, contingent or otherwise, and Healtheon has no knowledge of any
basis for the assertion of any such liability attributable to the Company,
its assets or operations.
(vi) Healtheon has provided to the Company copies of all
federal and state income and all state sales and use Tax Returns for all
periods since the date of Healtheon's incorporation.
(vii) There are (and as of immediately following the
Effective Date there will be) no Liens on the assets of Healtheon relating to
or attributable to Taxes.
(viii) Healtheon has no knowledge of any basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of Healtheon.
(ix) None of Healtheon's assets are treated as
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(x) As of the Closing, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions
of this Agreement, covering any employee or former employee of Healtheon
that, individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to Section 280G or 162 of the
Code.
(xi) Healtheon has not 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 Healtheon.
(xii) Healtheon is not a party to a tax sharing or
allocation agreement nor does Healtheon owe any amount under any such
agreement.
(xiii) Healtheon is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(xiv) Healtheon's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income
tax deductions is accurately reflected on the Healtheon's tax books and
records.
3.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree
to which Healtheon is a party or otherwise binding upon Healtheon which has
or reasonably could be expected to have the effect of prohibiting or
impairing any business practice of Healtheon, any acquisition of property
(tangible or intangible) by Healtheon or the conduct of business
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by Healtheon. Without limiting the foregoing, Healtheon has not entered into
any agreement under which Healtheon is restricted from selling, licensing or
otherwise distributing any of its products to any class of customers, in any
geographic area, during any period of time or in any segment of the market.
3.10 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) Healtheon owns no real property, nor has it ever owned any
real property. Schedule 3.10(a) sets forth a list of all real property
currently, or at any time in the past, leased by Healtheon, the name of the
lessor, the date of the lease and each amendment thereto and, with respect to
any current lease, the aggregate annual rental and/or other fees payable
under any such lease and any security interest in Healtheon's assets created
by such lease. All such current leases are in full force and effect, are
valid and effective in accordance with their respective terms, and there is
not, under any of such leases, any existing default or event of default (or
event which with notice or lapse of time, or both, would constitute a
default).
(b) Healtheon has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for
use in its business, free and clear of any Liens, except as reflected in the
Healtheon Financial Statements or in Schedule 3.10(b) and except for liens
for taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent,
and which do not materially detract from the value, or materially interfere
with the present use, of the property subject thereto or affected thereby.
3.11 INTELLECTUAL PROPERTY.
(a) Healtheon owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights, and any applications therefor, maskworks, net
lists, schematics, technology, know-how, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material that are used in the business
of Healtheon as currently conducted or as proposed to be conducted by
Healtheon (the "HEALTHEON INTELLECTUAL PROPERTY RIGHTS"). Schedule 3.11(a)
sets forth a complete list of all patents, registered and material
unregistered trademarks, registered copyrights, trade names and service
marks, and any applications therefor, included in the Healtheon Intellectual
Property Rights, and specifies, where applicable, the jurisdictions in which
each such Healtheon Intellectual Property Right has been issued or registered
or in which an application for such issuance and registration has been filed,
including the respective registration or application numbers and the names of
all registered owners.
(b) Schedule 3.11(b) sets forth a complete list of all
licenses, sublicenses and other agreements as to which Healtheon is a party
and pursuant to which Healtheon or any other person is authorized to use any
Healtheon Intellectual Property Right (excluding End-User Licenses) or trade
secret of Healtheon, and includes the identity of all parties thereto, a
description of the nature and subject matter thereof, the applicable royalty
or other fees and the term thereof. The execution and delivery of this
Agreement by Healtheon, and the consummation of the transactions contemplated
hereby, will neither cause Healtheon to be in violation or default under any
such license, sublicense or agreement, nor entitle any other party to any
such license, sublicense or agreement to terminate or modify such license,
sublicense or agreement. Except as set forth in Schedules 3.11(a) or
3.11(b), Healtheon is the sole and exclusive owner or licensee of, with all
right, title and interest in and to (free and clear of any liens or
encumbrances), the Healtheon Intellectual Property Rights, and has sole and
exclusive rights (and is not contractually obligated to pay any compensation
to any third party in respect thereof) to the use
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thereof or the material covered thereby in connection with the services or
products in respect of which the Healtheon Intellectual Property Rights are
being used.
(c) No claims with respect to the Healtheon Intellectual
Property Rights have been asserted or are, to Healtheon's knowledge,
threatened by any person, nor are there any valid grounds for any claims, (i)
to the effect that the manufacture, sale, licensing or use of any of the
products of Healtheon infringes on any copyright, patent, trade mark, service
mark, trade secret or other proprietary right, (ii) against the use by
Healtheon of any trademarks, service marks, trade names, trade secrets,
copyrights, maskworks, patents, technology, know-how or computer software
programs and applications used in Healtheon's business as currently conducted
or as proposed to be conducted by Healtheon, or (iii) challenging the
ownership by Healtheon, validity or effectiveness of any of the Healtheon
Intellectual Property Rights. All registered trademarks, service marks and
copyrights held by Healtheon are valid and subsisting. Healtheon has not
infringed, and the business of Healtheon as currently conducted or as
proposed to be conducted does not infringe, any copyright, patent, trademark,
service mark, trade secret or other proprietary right of any third party.
There is no material unauthorized use, infringement or misappropriation of
any of the Healtheon Intellectual Property Rights by any third party,
including any employee or former employee of Healtheon. No Healtheon
Intellectual Property Right or product of Healtheon or any of its
subsidiaries is subject to any outstanding decree, order, judgment, or
stipulation restricting in any manner the licensing thereof by Healtheon.
Each employee, consultant or contractor of Healtheon has executed a
proprietary information and confidentiality agreement substantially in the
Healtheon's standard forms. All software included in the Healtheon
Intellectual Property Rights is original with Healtheon and has been either
created by employees of Healtheon on a work-for-hire basis or by consultants
or contractors who have created such software themselves and have assigned
all rights they may have had in such software to Healtheon.
3.12 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth on
Schedule 3.12(a) or in the ordinary course of its business, Healtheon does
not have, is not a party to nor is it bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements,
(iv) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or any
consulting or sales agreement, contract or commitment under which any firm or
other organization provides services to Healtheon,
(v) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting
of benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement,
(vi) any fidelity or surety bond or completion bond,
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(vii) any lease of personal property having a value
individually in excess of $25,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment containing
any covenant limiting the freedom of Healtheon to engage in any line of
business or to compete with any person,
(x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $25,000,
(xi) any agreement, contract or commitment relating to
the disposition or acquisition of assets or any interest in any business
enterprise,
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating
to the borrowing of money or extension of credit, including guaranties
referred to in clause (viii) hereof,
(xiii) any purchase order or contract for the purchase of
raw materials involving $25,000 or more,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development
agreement,
(xvi) any agreement pursuant to which Healtheon has
granted or may grant in the future, to any party, a source-code license or
option or other right to use or acquire source-code, or
(xvii) any other agreement, contract or commitment that
involves $25,000 or more or is not cancelable without penalty within thirty
(30) days.
Except for such alleged breaches, violations and defaults, and events that
would constitute a breach, violation or default with the lapse of time,
giving of notice, or both, as are all noted in Schedule 3.12(b),Healtheon has
not breached, violated or defaulted under, or received notice that it has
breached, violated or defaulted under, any of the terms or conditions of any
agreement, contract or commitment required to be set forth on Schedule
3.12(a) or Schedule 3.11(b) (any such agreement, contract or commitment, a
"HEALTHEON CONTRACT"). Each Healtheon Contract is in full force and effect
and, except as otherwise disclosed in Schedule 3.12(b), is not subject to any
default thereunder of which Healtheon has knowledge by any party obligated to
Healtheon pursuant thereto.
3.13 INTERESTED PARTY TRANSACTIONS. Except as set forth on Schedule
3.13, no officer, director or shareholder of Healtheon (nor any ancestor,
sibling, descendant or spouse of any of such persons, or any trust,
partnership or corporation in which any of such persons has or has had an
interest), has or has had, directly or indirectly, (i) an economic interest
in any entity which furnished or sold, or furnishes or sells, services or
products that Healtheon furnishes or sells, or proposes to furnish or sell,
(ii) an economic interest in any entity that purchases from or sells or
furnishes to, Healtheon, any goods or services or (iii) a beneficial interest
in any contract or agreement set forth in Schedule 3.12(a) or Schedule
3.11(b); provided, that ownership of no more than one percent (1%) of the
outstanding voting stock of a publicly traded corporation shall not be deemed
an "economic interest in any entity" for purposes of this Section 3.13.
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3.14 COMPLIANCE WITH LAWS. Healtheon has complied in all material
respects with, is not in material violation of, and has not received any
notices of violation with respect to, any foreign, federal, state or local
statute, law or regulation.
3.15 LITIGATION. Except as set forth in Schedule 3.15, there is no
action, suit or proceeding of any nature pending or to Healtheon's knowledge
threatened against Healtheon, its properties or any of its officers or
directors, in their respective capacities as such. Except as set forth in
Schedule 3.15, to the Healtheon's knowledge, there is no investigation
pending or threatened against Healtheon, its properties or any of its
officers or directors (in their respective capacities as such) by or before
any governmental entity. Schedule 3.15 sets forth, with respect to any
pending or threatened action, suit, proceeding or investigation, the forum,
the parties thereto, the subject matter thereof and the amount of damages
claimed or other remedy requested. No Governmental Entity has at any time
challenged or questioned the legal right of Healtheon to manufacture, offer
or sell any of its products in the present manner or style thereof.
3.16 INSURANCE. Set forth on Schedule 3.16 is a list of all of
Healtheon's insurance policies and fidelity bonds. With respect to the
insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of
Healtheon, there is no claim by Healtheon pending under any of such policies
or bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under
all such policies and bonds have been paid and Healtheon is otherwise in
material compliance with the terms of such policies and bonds (or other
policies and bonds providing substantially similar insurance coverage).
Healtheon has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies.
3.17 MINUTE BOOKS. The minute books of Healtheon made available to
counsel for the Company are the only minute books of Healtheon and contain a
reasonably accurate summary of all meetings of directors (or committees
thereof) and stockholders or actions by written consent since the time of
incorporation of Healtheon.
3.18 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Healtheon has not operated any
underground storage tanks, and has no knowledge of the existence, at any
time, of any underground storage tank (or related piping or pumps), at any
property that Healtheon has at any time owned, operated, occupied or leased.
Healtheon has not released any amount of any substance that has been
designated by any Governmental Entity or by applicable federal, state or
local law to be a Hazardous Material. No Hazardous Materials are present as
a result of the actions or omissions of Healtheon, or, to Healtheon's
knowledge, as a result of any actions of any third party or otherwise, in, on
or under any property, including the land and the improvements, ground water
and surface water thereof, that Healtheon has at any time owned, operated,
occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. Healtheon has not engaged
in any Hazardous Materials Activities in violation of any rule, regulation,
treaty or statute promulgated by any Governmental Entity in effect prior to
or as of the date hereof to prohibit, regulate or control Hazardous Materials
or any Hazardous Material Activity.
(c) PERMITS. The Company currently holds all Environmental
Permits necessary for the conduct of Healtheon's Hazardous Material
Activities and other businesses of Healtheon as such activities and
businesses are currently being conducted.
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(d) ENVIRONMENTAL LIABILITIES. No action, proceeding,
revocation proceeding, amendment, procedure, writ, injunction or claim is
pending, or to Healtheon's knowledge, threatened concerning any Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of Healtheon.
Healtheon is not aware of any fact or circumstance which could involve
Healtheon in any environmental litigation or impose upon Healtheon any
environmental liability.
3.19 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Except as set
forth on Schedule 3.19, Healtheon has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees,
investment banking fees, consulting fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby. Schedule 3.19 sets forth the principal terms and
conditions of any agreement, written or oral, with respect to such fees.
Schedule 3.19 also sets forth Healtheon's current reasonable estimate of all
Third Party Expenses (as defined in Section 5.4) expected to be incurred by
Healtheon in connection with the negotiation and effectuation of the terms
and conditions of this Agreement and the transactions contemplated hereby.
3.20 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of
"Affiliate" set forth in Section 3.20(a)(i) below (which definition shall
apply only to this Section 3.20), for purposes of this Agreement, the
following terms shall have the meanings set forth below:
(i) "HEALTHEON AFFILIATE" shall mean any other person
or entity under common control with Healtheon within the meaning of Section
414(b), (c), (m) or (o) of the Code and the regulations thereunder;
(ii) "HEALTHEON EMPLOYEE PLAN" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, funded or unfunded and
whether or not legally binding, including without limitation, each "employee
benefit plan", within the meaning of Section 3(3) of ERISA which is or has
been maintained, contributed to, or required to be contributed to, by the
Company or any Healtheon Affiliate for the benefit of any "Healtheon
Employee" (as defined below), and pursuant to which Healtheon or any
Healtheon Affiliate has or may have any material liability contingent or
otherwise;
(iii) "HEALTHEON EMPLOYEE" shall mean any current,
former, or retired employee, officer, or director of Healtheon or any
Healtheon Affiliate;
(iv) "HEALTHEON EMPLOYEE AGREEMENT" shall refer to each
management, employment, severance, consulting, relocation, repatriation,
expatriation, visas, work permit or similar agreement or contract between
Healtheon or any Healtheon Affiliate and any Healtheon Employee or consultant;
(v) "HEALTHEON PENSION PLAN" shall refer to each
Healtheon Employee Plan which is an "employee pension benefit plan", within
the meaning of Section 3(2) of ERISA.
(b) SCHEDULE. Schedule 3.20(b) contains an accurate and
complete list of each Healtheon Employee Plan and each Healtheon Employee
Agreement, together with a schedule of all liabilities, whether or not
accrued, under each such Healtheon Employee Plan or Healtheon Employee
Agreement. Healtheon does not
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have any plan or commitment, whether legally binding or not, to establish any
new Healtheon Employee Plan or Healtheon Employee Agreement, to modify any
Healtheon Employee Plan or Healtheon Employee Agreement (except to the extent
required by law or to conform any such Healtheon Employee Plan or Healtheon
Employee Agreement to the requirements of any applicable law, in each case as
previously disclosed to Healtheon in writing, or as required by this
Agreement), or to enter into any Healtheon Employee Plan or Healtheon
Employee Agreement, nor does it have any intention or commitment to do any of
the foregoing.
(c) DOCUMENTS. Healtheon has provided to Company (i) correct
and complete copies of all documents embodying or relating to each Healtheon
Employee Plan and each Healtheon Employee Agreement including all amendments
thereto and written interpretations thereof; (ii) the most recent annual
actuarial valuations, if any, prepared for each Healtheon Employee Plan;
(iii) the three most recent annual reports (Series 5500 and all schedules
thereto), if any, required under ERISA or the Code in connection with each
Healtheon Employee Plan or related trust; (iv) if the Healtheon Employee Plan
is funded, the most recent annual and periodic accounting of Healtheon
Employee Plan assets; (v) the most recent summary plan description together
with the most recent summary of material modifications, if any, required
under ERISA with respect to each Healtheon Employee Plan; (vi) all IRS
determination letters and rulings relating to Healtheon Employee Plans and
copies of all applications and correspondence to or from the IRS or the
Department of Labor ("DOL") with respect to any Healtheon Employee Plan;
(vii) all communications material to any Healtheon Employee or Healtheon
Employees relating to any Healtheon Employee Plan and any proposed Healtheon
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments
or vesting schedules or other events which would result in any material
liability to Healtheon; and (viii) all registration statements and
prospectuses prepared in connection with each Healtheon Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth on Schedule
3.20(d), (i) Healtheon has performed in all material respects all
obligations required to be performed by it under each Healtheon Employee
Plan, and each Healtheon 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 but not
limited to ERISA or the Code; (ii) no "prohibited transaction", within the
meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred
with respect to any Healtheon Employee Plan; (iii) there are no actions,
suits or claims pending, or, to the knowledge of Healtheon, threatened or
anticipated (other than routine claims for benefits) against any Healtheon
Employee Plan or against the assets of any Healtheon Employee Plan; and (iv)
each Healtheon Employee Plan can be amended, terminated or otherwise
discontinued after the Closing in accordance with its terms, without
liability to the Company, Healtheon or any Healtheon Affiliates (other than
ordinary administration expenses typically incurred in a termination event);
(v) there are no inquiries or proceedings pending or, to the knowledge of
Healtheon or any affiliates, threatened by the IRS or DOL with respect to any
Healtheon Employee Plan; and (vi) neither Healtheon nor any Healtheon
Affiliate is subject to any penalty or tax with respect to any Healtheon
Employee Plan under Section 402(i) of ERISA or Section 4975 through 4980 of
the Code.
(e) PENSION PLANS. Healtheon does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA,
Title IV of ERISA or Section 412 of the Code.
(f) MULTIEMPLOYER PLANS. At no time has Healtheon contributed
to or been requested to contribute to any Multiemployer Plan.
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(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in
Schedule 3.20(g), no Healtheon Employee Plan provides, or has any liability
to provide, life insurance, medical or other employee benefits to any
Healtheon Employee upon his or her retirement or termination of employment
for any reason, except as may be required by statute, and Healtheon has never
represented, promised or contracted (whether in oral or written form) to any
Healtheon Employee (either individually or to Employees as a group) that such
Healtheon Employee(s) would be provided with life insurance, medical or other
employee welfare benefits upon their retirement or termination of employment,
except to the extent required by statute.
(h) EFFECT OF TRANSACTION.
(i) Except as set forth on Schedule 3.20(h)(i), the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Healtheon
Employee Plan, Healtheon Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Healtheon Employee.
(ii) Except as set forth on Schedule 3.20(h)(ii), no
payment or benefit which will or may be made by Healtheon or Company or any
of their respective affiliates with respect to any Employee will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
(i) EMPLOYMENT MATTERS. Healtheon (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Healtheon Employees; (ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and other payments to
Healtheon Employees; (iii) is not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Healtheon Employees (other than routine payments to be made in the normal
course of business and consistent with past practice).
(j) LABOR. No work stoppage or labor strike against Healtheon
is pending or, to the best knowledge of Healtheon, threatened. Except as set
forth in Schedule 3.20(j),Healtheon is not involved in or, to the knowledge
of Healtheon, threatened with, any labor dispute, grievance, or litigation
relating to labor, safety or discrimination matters involving any Healtheon
Employee, including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in liability to Healtheon. Neither
Healtheon nor any of its subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act which would,
individually or in the aggregate, directly or indirectly result in a
liability to Healtheon. Except as set forth in Schedule 3.20(j),Healtheon is
not presently, nor has it been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to Healtheon
Employees and no collective bargaining agreement is being negotiated by
Healtheon.
3.21 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Healtheon or Acquisition Sub (as modified by the Healtheon
and Acquisition Sub Schedules), nor any statement made in any schedule or
certificate furnished by Healtheon or Acquisition Sub pursuant to this
Agreement, or furnished in or in connection with documents mailed or
delivered to the stockholders of Healtheon or Acquisition Sub in
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connection with soliciting their consent to this Agreement and the Asset
Purchase, contains or will contain at the Closing, any untrue statement of a
material fact, or omits or will omit at the Closing to state any material
fact necessary in order to make the statements contained herein or therein,
in the light of the circumstances under which made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING
4.1 CONDUCT OF BUSINESS OF THE COMPANY.
During the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement and the Closing, the
Company agrees (except to the extent that Healtheon shall otherwise consent
in writing) to carry on its business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted, to pay its
debts and Taxes when due, to pay or perform other obligations when due, and,
to the extent consistent with such business, to use all reasonable efforts
consistent with past practice and policies to preserve intact its present
business organization, keep available the services of its present officers
and key employees and preserve their relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with
it, all with the goal of preserving unimpaired its goodwill and ongoing
businesses at the Closing. The Company shall promptly notify Healtheon of
any event or occurrence or emergency not in the ordinary course of its
business, and any material event involving or adversely affecting the Company
or its business. Except as expressly contemplated by this Agreement, the
Company shall not, without the prior written consent of Healtheon:
(i) Enter into any commitment, activity or transaction
not in the ordinary course of business.
(ii) Transfer to any person or entity any rights to any
Company Intellectual Property Rights (other than pursuant to End-User
Licenses in the ordinary course of business);
(iii) Enter into or amend any agreements pursuant to
which any other party is granted manufacturing, marketing, distribution or
similar rights of any type or scope with respect to any products of the
Company;
(iv) Amend or otherwise modify (or agree to do so),
except in the ordinary course of business, or violate the terms of, any of
the agreements set forth or described in the Company Schedules;
(v) Commence any litigation;
(vi) Declare, set aside or pay any dividends on or make
any other distributions (whether in cash, equity interests or property) in
respect of any of its units or other evidences of ownership, or split,
combine or reclassify any of its units or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for units
or other evidences of ownership of the Company, or repurchase, redeem or
otherwise acquire, directly or indirectly, any Company Capital Stock (or
Company Capital Stock Equivalents);
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(vii) Issue, grant, deliver or sell or authorize or
propose the issuance, grant, delivery or sale of, or purchase or propose the
purchase of, any units or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating it to issue any such units or other convertible
securities;
(viii) Cause or permit any amendments to its
Organizational Documents;
(ix) Acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or equity securities of, or
by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of the Company;
(x) Sell, lease, license or otherwise dispose of any of
its properties or assets, except in the ordinary course of business and
consistent with past practice;
(xi) Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of the
Company or guarantee any debt securities of others;
(xii) Grant any severance or termination pay to any
director, officer, employee or consultant, except payments made pursuant to
standard written agreements outstanding on the date hereof (which such
agreements are disclosed on Schedule 4.1(a)(xii));
(xiii) Adopt or amend any employee benefit plan, program,
policy or arrangement, or enter into any employment contract, extend any
employment offer, pay or agree to pay any special bonus or special
remuneration to any director, employee or consultant, or increase the
salaries or wage rates of its employees (other than the two employees of the
Company currently under review);
(xiv) Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or
accounts receivable in excess of $10,000 in the aggregate;
(xv) Pay, discharge or satisfy, in an amount in excess
of $10,000, in any one case, or $25,000, in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction
in the ordinary course of business of liabilities reflected or reserved
against in the Company Financial Statements;
(xvi) Make or change any material election in respect of
Taxes, adopt or change any accounting method in respect of Taxes, enter into
any closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(xvii) Enter into any strategic alliance, joint
development or joint marketing arrangement or agreement;
(xviii) Fail to pay or otherwise satisfy its
monetary obligations as they become due, except such as are being contested
in good faith;
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(xix) Waive or commit to waive any rights with a value
in excess of $10,000, in any one case, or $25,000, in the aggregate;
(xx) Cancel, materially amend or renew any insurance
policy other than in the ordinary course of business;
(xxi) Alter, or enter into any commitment to alter, its
interest in any corporation, association, joint venture, partnership or
business entity in which the Company directly or indirectly holds any
interest on the date hereof; or
(xxii) Take, or agree in writing or otherwise to take, any
of the actions described in Sections 4.1(i) through (xxii) above, or any
other action that would prevent the Company from performing or cause the
Company not to perform its covenants hereunder.
4.2 NO COMPANY SOLICITATION. Until the earlier of the Closing and
the date of termination of this Agreement pursuant to the provisions of
Section 8.1 hereof, the Company will not (nor will the Company permit any of
the Company's officers, directors, Members, agents, representatives or
affiliates to) directly or indirectly, take any of the following actions with
any party other than Healtheon and its designees: (a) solicit, initiate,
entertain, or encourage any proposals or offers from, or conduct discussions
with or engage in negotiations with, any person relating to any possible
acquisition of the Company or any of its subsidiaries (whether by way of
Merger, purchase of capital stock, purchase of assets or otherwise), any
material portion of its or their capital stock or assets or any equity
interest in the Company or any of its subsidiaries, (b) provide information
with respect to it to any person, other than Healtheon, relating to, or
otherwise cooperate with, facilitate or encourage any effort or attempt by
any such person with regard to, any possible acquisition of the Company
(whether by way of Merger, purchase of capital stock, purchase of assets or
otherwise), any material portion of its or their capital stock or assets or
any equity interest in the Company or any of its subsidiaries, (c) enter into
an agreement with any person, other than Healtheon, providing for the
acquisition of the Company (whether by way of Merger, purchase of capital
stock, purchase of assets or otherwise), any material portion of its or their
capital stock or assets or any equity interest in the Company or any of its
subsidiaries, or (d) make or authorize any statement, recommendation or
solicitation in support of any possible acquisition of the Company or any of
its subsidiaries (whether by way of Merger, purchase of capital stock,
purchase of assets or otherwise), any material portion of its or their
capital stock or assets or any equity interest in the Company or any of its
subsidiaries by any person, other than by Healtheon. The Company shall
immediately cease and cause to be terminated any such contacts or
negotiations with third parties relating to any such transaction or proposed
transaction. In addition to the foregoing, if the Company receives prior to
the Closing or the termination of this Agreement any offer or proposal
relating to any of the above, the Company shall immediately notify Healtheon
thereof, including information as to the identity of the offeror or the party
making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be, and such other information related thereto as
Healtheon may reasonably request. Except as contemplated by this Agreement,
disclosure by the Company of the terms hereof (other than the prohibition of
this section) shall be deemed to be a violation of this Section 4.2.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 COMPANY MEMBER APPROVALS. As promptly as practicable:
(a) Prior to the execution of this Agreement, Healtheon and
the Company have prepared the necessary documentation for, and as soon as
reasonably practicable following the execution of this Agreement they shall
apply to obtain, a permit (a "CALIFORNIA PERMIT") from the Commissioner of
Corporations of the State of California (after a hearing before the
California Department of Corporations) pursuant to Section 25121 of the
California Corporate Securities Law of 1968, so that the issuance of
Healtheon Common Stock in the Asset Purchase shall be exempt from
registration under Section 3(a)(10) of the Securities Act of 1933, as amended
(the "SECURITIES ACT") and California blue sky laws. The Company and
Healtheon will respond to any comments from the California Department of
Corporations and use their commercially reasonable effort to have the
California Permit granted as soon as practical after such filing. As
promptly as practical after the date of this Agreement, Healtheon shall
prepare and make such filings as are required under applicable Blue Sky laws
relating to the transactions contemplated by this Agreement.
(b) As promptly as practicable after the receipt of a
California Permit, the Company shall submit this Agreement and the
transactions contemplated hereby, including without limitation the sale, to
the Company's Members for approval and adoption as provided by California
Corporate Code and the Company's Organizational Documents. The materials
submitted to the Company's Members shall be subject to review and approval by
Healtheon and include information regarding Healtheon and the Company, the
terms of the Asset Purchase and this Agreement and the unanimous
recommendation of the Board of Directors of the Company in favor of the Asset
Purchase, this Agreement and the transactions contemplated hereby.
5.2 ACCESS TO INFORMATION. Each party shall afford the other and its
accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to the Closing to (a) all of
its properties, books, contracts, commitments and records, and (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of it as the others may reasonably
request, subject, in the case of Healtheon, to reasonable limits on access to
its technical and other nonpublic information. No information or knowledge
obtained in any investigation pursuant to this Section 5.2 shall affect or be
deemed to modify any representation or warranty contained herein.
5.3 CONFIDENTIALITY. Each of the parties hereto hereby agrees to
keep the terms of this Agreement (except to the extent contemplated hereby)
and such information or knowledge obtained in any investigation pursuant to
Section 5.2, or pursuant to the negotiation and execution of this Agreement
or the effectuation of the transactions contemplated hereby, confidential;
PROVIDED, HOWEVER, that the foregoing shall not apply to information or
knowledge which (a) a party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by the other party, (b) is
generally known to the public and did not become so known through any
violation of law, (c) became known to the public through no fault of such
party, (d) is later lawfully acquired by such party without confidentiality
restrictions from other sources, (e) is required to be disclosed by order of
court or government agency with subpoena powers (provided that such party
shall have provided the other party with prior notice of such order or
subpoena and an opportunity to object or take other available action) or (f)
which is disclosed in the course of any litigation between any of the parties
hereto.
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5.4 EXPENSES. Whether or not the Asset Purchase is consummated, all
fees and expenses incurred in connection with the Asset Purchase including,
without limitation, all legal, accounting, financial advisory, consulting and
all other fees and expenses of third parties ("THIRD PARTY EXPENSES")
incurred by a party in connection with the negotiation and effectuation of
the terms and conditions of this Agreement and the transactions contemplated
hereby, shall be the obligation of the respective party incurring such fees
and expenses.
5.5 PUBLIC DISCLOSURE. Unless otherwise required by law (including,
without limitation, federal and state securities laws) prior to the Closing,
no disclosure (whether or not in response to an inquiry) of the subject
matter of this Agreement shall be made by any party hereto unless approved by
Healtheon and the Company prior to release.
5.6 CONSENTS. Healtheon and the Company shall use commercially
reasonable efforts to obtain the consents, waivers, assignments and approvals
under any of the Healtheon Contracts and Company Contracts as may be required
in connection with the Asset Purchase (all of such consents, waivers and
approvals are set forth in the Company Schedules and Healtheon and
Acquisition Sub Schedules) so as to preserve and transfer all rights of and
benefits to Acquisition Sub thereunder.
5.7 REASONABLE EFFORTS. Subject to the terms and conditions provided
in this Agreement, each of the parties hereto shall use its reasonable
efforts to ensure that its representations and warranties remain true and
correct in all material respects, and to take promptly, or cause to be taken,
all actions, and to do promptly, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated hereby, to obtain all necessary
waivers, consents, assignments and approvals, to effect all necessary
registrations and filings, and to remove any injunctions or other impediments
or delays, legal or otherwise, to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to
the parties hereto the benefits contemplated by this Agreement; PROVIDED,
that Healtheon shall not be required to agree to any divestiture by Healtheon
or the Company or any of Healtheon's subsidiaries or affiliates of equity
interests or of any business, assets or property of Healtheon or its
subsidiaries or affiliates or the Company or its affiliates, or the
imposition of any material limitation on the ability of any of them to
conduct their businesses or to own or exercise control of such assets,
properties and stock.
5.8 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Healtheon, and Healtheon shall give prompt notice to the Company,
of (i) the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely to cause any representation or warranty of
the Company, Healtheon or Acquisition Sub, respectively, contained in this
Agreement to be untrue or inaccurate at or prior to the Closing and (ii) any
failure of the Company or Healtheon, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant
to this Section 5.9 shall not limit or otherwise affect any remedies
available to the party receiving such notice.
5.9 CERTAIN BENEFIT PLANS. Healtheon shall take such reasonable
actions as are necessary to allow eligible employees of the Company to
participate in the benefit programs of Healtheon, or alternative benefits
programs substantially comparable to those applicable to employees of
Healtheon on similar terms, as soon as practicable after the Closing.
5.10 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto,
at the request of the other party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as
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may be necessary or desirable for effecting completely the consummation of
this Agreement and the transactions contemplated hereby.
5.11 COMPANY'S AUDITORS. The Company will use its commercially
reasonable efforts to cause its management and its independent auditors to
facilitate on a timely basis (i) the review of any Company audit or review
work papers for up to the past three years, including the examination of
selected interim financial statements and data and (ii) the delivery of such
representations from the Company's independent accountants as may be
reasonably requested by Healtheon or its accountants to enable Healtheon's
accountants to render the opinion called for by Section 6.3(j) hereof.
5.12 MUTUAL RELEASE. The Company shall use its commercially
reasonable best efforts with and Netsource Communications, Inc. ("Netsource")
to enter into a mutual settlement and release with Netsource relating to any
and all disputes arising from or related to the transactions contemplated by
the Asset Purchase Agreement among Netsource, the Company and Edward Fotsch,
M.D. dated March 20, 1997.
ARTICLE VI
CONDITIONS TO THE ASSET PURCHASE
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE ASSET
PURCHASE. The respective obligations of each party to this Agreement to
effect the Asset Purchase shall be subject to the satisfaction at or prior to
the Closing of the following conditions:
(a) COMPANY MEMBER APPROVAL. This Agreement and the Asset
Purchase shall have been approved and adopted by the Members of the Company
by the requisite vote under applicable law and the Company's Organizational
Documents.
(b) CALIFORNIA PERMIT. The Commissioner of Corporations for
the State of California shall have approved the terms and conditions of the
transactions contemplated by this Agreement, and the fairness of such terms
and conditions pursuant to Section 25142 of the California Corporations Code
("CALIFORNIA CODE") following a hearing for such purpose, and shall have
issued a Permit under Section 25121 of the California Code.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal or regulatory restraint
or prohibition preventing the consummation of the Asset Purchase shall be in
effect.
(d) TAX OPINIONS. Healtheon and the Company shall each have
received substantially identical written opinions from their counsel in form
and substance reasonably satisfactory to them, to the effect that the Asset
Purchase will constitute a reorganization within the meaning of Section
368(a) of the Code. The parties to this Agreement agree to make reasonable
representations as requested by such counsel for the purpose of rendering
such opinions.
(e) PERMITS. All approvals from government authorities,
including any requisite Blue Sky approvals, which are appropriate or
necessary for the consummation of the Asset Purchase, shall have been
obtained.
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(f) LITIGATION. There shall be no BONA FIDE action, suit,
claim or proceeding of any nature pending, or overtly threatened, against
Healtheon or the Company, their respective properties or any of their
officers or directors, arising out of, or in any way connected with, the
Asset Purchase or other transactions contemplated by the terms of this
Agreement.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Asset Purchase and the
transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions,
any of which may be waived, in writing, exclusively by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Healtheon and Acquisition Sub contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date,
except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such date), with the same
force and effect as if made on and as of the Closing Date, except, in all
such cases, for such breaches, inaccuracies or omissions of such
representations and warranties which have neither had nor reasonably would be
expected to have a Material Adverse Effect on Healtheon; and the Company
shall have received a certificate to such effect signed on behalf of
Healtheon by a duly authorized officer of Healtheon.
(b) AGREEMENTS AND COVENANTS. Healtheon and Acquisition Sub
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by
them on or prior to the Closing, and the Company shall have received a
certificate to such effect signed by a duly authorized officer of Healtheon.
(c) THIRD PARTY CONSENTS. The Company shall have been
furnished with evidence satisfactory to it that Healtheon has obtained the
consents, approvals, assignments and waivers set forth in Schedule 6.2(c).
(d) LEGAL OPINION. The Company shall have received a legal
opinion from Wilson Sonsini Goodrich & Rosati, Professional Corporation,
counsel to Healtheon, in substantially the form attached hereto as EXHIBIT C.
(e) MATERIAL ADVERSE CHANGE. There shall not have occurred
any material adverse change in the business, assets (including intangible
assets), liabilities, financial condition or results of operations of
Healtheon since the date of the Balance Sheet.
(f) HEALTHEON CAPITALIZATION. At the Closing, Healtheon shall
have only a single class of Common Stock outstanding and shall have no other
class or series of capital stock issued or outstanding.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF HEALTHEON AND
ACQUISITION SUB. The obligations of Healtheon and Acquisition Sub to
consummate the Asset Purchase and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by Healtheon:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date, except for
changes contemplated by this Agreement and except for those representations
and warranties which address
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matters only as of a particular date (which shall remain true and correct as
of such date), with the same force and effect as if made on and as of the
Closing Date, except, in all such cases, for such breaches, inaccuracies or
omissions of such representations and warranties which have neither had nor
reasonably would be expected to have a Material Adverse Effect on the Company
or Healtheon; and Healtheon and Acquisition Sub shall have received a
certificate to such effect signed on behalf of the Company by the chief
executive officer and chief financial officer of the Company;
(b) AGREEMENTS AND COVENANTS. The Company shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it
on or prior to the Closing, and Healtheon and Acquisition Sub shall have
received a certificate to such effect signed by a duly authorized officer of
the Company;
(c) THIRD PARTY CONSENTS. Healtheon shall have been furnished
with evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 6.3(c).
(d) LEGAL OPINION. Healtheon shall have received a legal
opinion from Cooley Godward LLP, legal counsel to the Company, in
substantially the form attached hereto as EXHIBIT D.
(e) MATERIAL ADVERSE CHANGE. There shall not have occurred
any material adverse change in the business, assets (including intangible
assets) financial condition or results of operations of the Company since the
date of the Company Balance Sheet.
(f) NONCOMPETITION AGREEMENTS. Each of the persons listed on
Schedule 6.3(g) shall have executed and delivered to Healtheon a
Noncompetition Agreement in substantially the form of EXHIBIT E, and all of
the Noncompetition Agreements shall be in full force and effect.
(g) NO DISSENTERS. Holders of more than 10% of the
outstanding units of Company Capital Stock shall not have exercised, nor
shall they have any continued right to exercise, appraisal, dissenters' or
similar rights under applicable law with respect to their shares by virtue of
the Asset Purchase.
(h) EMPLOYMENT AGREEMENTS. Edward J. Fotsch, M.D., Deb Del
Guidice, Fel Bautista, Jeff Nelson and Terry McMann shall have entered into
an Employment Agreement in form and substance reasonably satisfactory to
Healtheon.
(i) MEMBER LOANS. At the Closing, all loans from Members of
the Company ("Member Loans") shall have been repaid or canceled.
(j) STOCK TRANSFER AGREEMENTS. The Company and each Member of
the Company shall have entered into an agreement providing for the
restriction on sales of Healtheon Common Stock received in connection with
this transaction until 180 days after completion of a public offering of
Healtheon Common Stock pursuant to a registration statement filed with and
declared effective by the Securities and Exchange Commission; provided,
however, that no Member shall be required to sign such agreement unless
Healtheon's executive officers and directors sign similar agreements.
(k) BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT. The
Company shall have delivered the Bill of Sale and the parties hereto shall
have entered into the Assignment and Assumption Agreement.
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ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Company, Healtheon and Acquisition Sub
contained in this Agreement or in any instrument delivered pursuant to this
Agreement (each as modified by the corresponding Schedules thereto) shall
survive the Asset Purchase and continue until 5:00 p.m., California time, on the
date which is one year following the date of this Agreement (the "EXPIRATION
DATE").
7.2 ESCROW ARRANGEMENTS AND INDEMNIFICATION.
(a) ESCROW FUND AND INDEMNIFICATION. At the Closing, the Company
will be deemed to have received and deposited with the Escrow Agent (as defined
below) the Escrow Amount (plus any additional shares as may be issued upon any
stock split, stock dividend or recapitalization effected by Healtheon after the
Closing). As soon as practicable after the Closing, the Escrow Amount will be
deposited with U.S. Bank Trust National Association, (or other institution
acceptable to Healtheon and the Securityholder Agent (as defined in
Section 7.2(g) below)) as Escrow Agent (the "ESCROW AGENT"), such deposit to
constitute an escrow fund (the "ESCROW FUND") to be governed by the terms set
forth herein and at Healtheon's cost and expense. The Escrow Fund shall be
available to compensate Healtheon, Acquisition Sub and their affiliates for any
claims, losses, liabilities, damages, deficiencies, costs and expenses,
including reasonable attorneys' fees and expenses, and expenses of investigation
and defense (hereinafter individually a "LOSS" and collectively "LOSSES")
incurred by Healtheon, Acquisition Sub, their officers, directors, or affiliates
directly or indirectly as a result of (a) any inaccuracy or breach of a
representation or warranty of the Company contained in Article II herein (as
modified by the Company Schedules), or any failure by the Company to perform or
comply with any covenant contained herein and (b) any Loss arising out of a
claim by Netsource or any trustee in bankruptcy or creditor relating the Asset
Purchase Agreement dated March 20, 1997 (the "Netsource Agreement"). Healtheon
and the Company each acknowledge that such Losses, if any, would relate to
unresolved contingencies existing at the Closing, which if resolved at the
Closing would have led to a reduction in the aggregate consideration. Nothing
herein shall limit the liability of the Company for any breach of any
representation, warranty or covenant if the Asset Purchase does not close.
Healtheon may not receive any shares from the Escrow Fund unless and until
Officer's Certificates (as defined in paragraph (d) below) identifying Losses,
the aggregate amount of which exceed $50,000, which, for purposes of aggregating
such amount, shall not include the value of any Healtheon shares transferred to
Netsource, have been delivered to the Escrow Agent as provided in paragraph (e);
in such case, Healtheon may recover from the Escrow Fund the total of its
Losses, including the first $50,000; provided, however, in the event that such
Losses arise from, or relate to, Retained Liabilities of the Company, Healtheon
shall be entitled to immediate indemnification from the Company without regard
to such $50,000 threshold. The indemnification provisions in this Section 7.2
shall be the sole remedy and recourse of Healtheon against the Company or any of
its respective directors, officers, representatives, agents or Members for any
Losses incurred by Healtheon; PROVIDED, HOWEVER, that nothing herein shall limit
any remedy for fraud.
(b) ESCROW PERIOD; DISTRIBUTION UPON TERMINATION OF ESCROW
PERIODS. Subject to the following requirements, the Escrow Fund shall be in
existence immediately following the Closing and shall terminate at 5:00 p.m.,
California time, on the later to occur of (i) the first anniversary of the
Closing and (ii) [the final resolution of all claim, made by or on behalf of
Netsource and relating to the Netsource Agreement] (the "ESCROW PERIOD");
PROVIDED, that the Escrow Period shall not terminate with respect to such amount
(or some portion thereof), that together with the aggregate amount remaining in
the Escrow Fund is necessary in the
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reasonable judgment of Healtheon, subject to the objection of the
Securityholder Agent and the subsequent arbitration of the matter in the
manner provided in Section 7.2(f) hereof, to satisfy any unsatisfied claims
concerning facts and circumstances existing prior to the termination of such
Escrow Period specified in any Officer's Certificate delivered to the Escrow
Agent prior to termination of such Escrow Period. As soon as all such claims
have been resolved, the Escrow Agent shall deliver to the Company, or its
transferees, the remaining portion of the Escrow Fund not required to satisfy
such claims. Deliveries of Escrow Amounts to the Members of the Company
pursuant to this Section 7.2(b) shall be made in proportion to their
respective original contributions to the Escrow Fund.
(c) PROTECTION OF ESCROW FUND.
(i) The Escrow Agent shall hold and safeguard the Escrow
Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Healtheon
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Healtheon Common Stock or other equity
securities issued or distributed by Healtheon (including shares issued upon a
stock split) ("NEW SHARES") in respect of Healtheon Common Stock in the Escrow
Fund which have not been released from the Escrow Fund shall be added to the
Escrow Fund and become a part thereof. New Shares issued in respect of shares
of Healtheon Common Stock which have been released from the Escrow Fund shall
not be added to the Escrow Fund but shall be distributed to the recordholders
thereof. Cash dividends on Healtheon Common Stock shall not be added to the
Escrow Fund but shall be distributed to the recordholders thereof.
(iii) The Company shall have voting rights with respect to
the shares of Healtheon Common Stock contributed to the Escrow Fund (and on any
voting securities added to the Escrow Fund in respect of such shares of
Healtheon Common Stock).
(d) CLAIMS UPON ESCROW FUND.
(i) Upon receipt by the Escrow Agent at any time on or
before the last day of the Escrow Period of a certificate signed by any officer
of Healtheon (an "OFFICER'S CERTIFICATE"): (A) stating that Healtheon has paid
or properly accrued or reasonably anticipates that it will have to pay or accrue
Losses, and (B) specifying in reasonable detail the individual items of Losses
included in the amount so stated, the date each such item was paid or properly
accrued, or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant to which such item is related,
the Escrow Agent shall, subject to the provisions of Section 7.2(e) hereof,
deliver to Healtheon out of the Escrow Fund, as promptly as practicable, shares
of Healtheon Common Stock held in the Escrow Fund in an amount equal to such
Losses.
(ii) For the purposes of determining the number of shares
of Healtheon Common Stock to be delivered to Healtheon out of the Escrow Fund
pursuant to Section 7.2(d)(i) hereof, the value of the shares of Healtheon
Common Stock shall be deemed to be equal to $5.20 per share of Healtheon Common
Stock.
(e) OBJECTIONS TO CLAIMS. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Securityholder Agent and for a period of thirty (30)
days after such delivery, the Escrow Agent shall make no delivery to Healtheon
of any Escrow Amounts pursuant to Section 7.2(d) hereof unless the Escrow Agent
shall have received written authorization from the Securityholder Agent to make
such delivery. After the expiration of such thirty (30) day period, the Escrow
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Agent shall make delivery of shares of Healtheon Common Stock from the Escrow
Fund in accordance with Section 7.2(d) hereof; PROVIDED, that no such payment or
delivery may be made if the Securityholder Agent shall object in a written
statement to the claim made in the Officer's Certificate, and such statement
shall have been delivered to the Escrow Agent prior to the expiration of such
thirty (30) day period.
(f) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case the Securityholder Agent shall so object in
writing to any claim or claims made in any Officer's Certificate, the
Securityholder Agent and Healtheon shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Securityholder Agent and Healtheon should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on
any such memorandum and distribute shares of Healtheon Common Stock from the
Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Healtheon or the Securityholder Agent may demand arbitration
of the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration conducted by three
arbitrators. Healtheon and the Securityholder Agent shall each select one
arbitrator, and the two arbitrators so selected shall select a third arbitrator.
The arbitrators shall set a limited time period and establish procedures
designed to reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrators, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The arbitrators shall rule upon motions to compel or limit discovery
and shall have the authority to impose sanctions, including attorneys' fees and
costs, to the extent as a court of competent law or equity, should the
arbitrators determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of a majority of the three arbitrators as to the
validity and amount of any claim in such Officer's Certificate shall be binding
and conclusive upon the parties to this Agreement, and notwithstanding anything
in Section 7.2(e) hereof, the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold payments out of the Escrow
Fund in accordance therewith. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set forth the
award, judgment, decree or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Santa Clara County, California under the rules then in effect of the
American Arbitration Association. For purposes of this Section 7.2(f), in any
arbitration hereunder in which any claim or the amount thereof stated in the
Officer's Certificate is at issue, Healtheon shall be deemed to be the
Non-Prevailing Party in the event that the arbitrators award Healtheon less than
the sum of one-half (1/2) of the disputed amount plus any amounts not in
dispute; otherwise, the Members of the Company as represented by the
Securityholder Agent shall be deemed to be the Non-Prevailing Party. The
Non-Prevailing Party to an arbitration shall pay its own expenses, the fees of
each arbitrator, the administrative costs of the arbitration and the expenses,
including without limitation, reasonable attorneys' fees and costs, incurred by
the other party to the arbitration.
(g) SECURITYHOLDER AGENT OF THE MEMBERS; POWER OF ATTORNEY.
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(i) In the event that the Asset Purchase is approved,
effective upon such vote, and without further act of any Member, Edward Fotsch,
M.D. shall be appointed as agent and attorney-in-fact (the "SECURITYHOLDER
AGENT") for the Company to give and receive notices and communications, to
authorize delivery to Healtheon of shares of Healtheon Common Stock from the
Escrow Fund in satisfaction of claims by Healtheon, to object to such
deliveries, to agree to, negotiate, enter into settlements and compromises of,
and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of Securityholder Agent for the accomplishment of
the foregoing. Such agency may be changed by the Company from time to time upon
not less than thirty (30) days prior written notice to Healtheon; PROVIDED that
the Securityholder Agent may not be removed unless holders of a two-thirds
interest of the Escrow Fund agree to such removal and to the identity of the
substituted agent. Any vacancy in the position of Securityholder Agent may be
filled by approval of the holders of a majority in interest of the Escrow Fund.
No bond shall be required of the Securityholder Agent, and the Securityholder
Agent shall not receive compensation for his or her services. Notices or
communications to or from the Securityholder Agent shall constitute notice to or
from the Company.
(ii) The Securityholder Agent shall not be liable for any
act done or omitted hereunder as Securityholder Agent while acting in good faith
and in the exercise of reasonable judgment. The Members of the Company and the
Company shall severally indemnify the Securityholder Agent and hold the
Securityholder Agent harmless against any loss, liability or expense incurred
without negligence or bad faith on the part of the Securityholder Agent and
arising out of or in connection with the acceptance or administration of the
Securityholder Agent's duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by the Securityholder Agent.
(h) ACTIONS OF THE SECURITYHOLDER AGENT. A decision, act,
consent or instruction of the Securityholder Agent shall constitute a decision
of the holders in interest in the Escrow Fund and shall be final, binding and
conclusive upon each of each such holder, and the Escrow Agent and Healtheon may
rely upon any such decision, act, consent or instruction of the Securityholder
Agent as being the decision, act, consent or instruction of each and every such
holder. The Escrow Agent and Healtheon are hereby relieved from any liability
to any person for any acts done by them in accordance with such decision, act,
consent or instruction of the Securityholder Agent.
(i) THIRD-PARTY CLAIMS. In the event Healtheon becomes aware of
a third-party claim which Healtheon believes may result in a demand against the
Escrow Fund, Healtheon shall notify the Securityholder Agent of such claim, and
the Securityholder Agent, as representative for the Company, shall be entitled,
at their expense, to participate in any defense of such claim. Healtheon shall
have the right in its sole discretion to settle any such claim; PROVIDED,
HOWEVER, that except with the consent of the Securityholder Agent, no settlement
of any such claim with third-party claimants shall alone be determinative of the
amount of any claim against the Escrow Fund. In the event that the
Securityholder Agent has consented to any such settlement, the Securityholder
Agent shall have no power or authority to object under any provision of this
Article VII to the amount of any claim by Healtheon against the Escrow Fund with
respect to such settlement.
(j) ESCROW AGENT'S DUTIES.
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Healtheon and the Securityholder Agent, and may rely and shall be protected in
relying or refraining from acting on any instrument
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reasonably believed to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be liable for any act
done or omitted hereunder as Escrow Agent while acting in good faith and in
the exercise of reasonable judgment, and any act done or omitted pursuant to
the advice of counsel shall be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to
comply with and obey orders, judgments or decrees of any court of law,
notwithstanding any notices, warnings or other communications from any party or
any other person to the contrary. In case the Escrow Agent obeys or complies
with any such order, judgment or decree of any court, the Escrow Agent shall not
be liable to any of the parties hereto or to any other person by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the
Escrow Agent shall not be liable to any party for damages, losses, or expenses,
except for gross negligence or willful misconduct on the part of the Escrow
Agent. The Escrow Agent shall not incur any such liability for (A) any act or
failure to act made or omitted in good faith, or (B) any action taken or omitted
in reliance upon any instrument, including any written statement or affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with the legal counsel in connection
with Escrow Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or permitted by him/her in good faith in accordance
with the advice of counsel. The Escrow Agent is not responsible for determining
and verifying the authority of any person acting or purporting to act on behalf
of any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and shares of Healtheon Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Escrow Agent's discretion, the Escrow Agent may be
required, despite what may be set forth elsewhere in this Agreement. In such
event, the Escrow Agent will not be liable for damage. Furthermore, the Escrow
Agent may at its option, file an action of interpleader requiring the parties to
answer and litigate any claims and rights among themselves. The Escrow Agent is
authorized to deposit with the clerk of the court all documents and shares of
Healtheon Common Stock held in escrow, except all cost, expenses, charges and
reasonable attorney fees incurred by the Escrow Agent due to the interpleader
action and which the parties jointly and severally agree to pay. Upon
initiating such action, the Escrow Agent shall be fully released and discharged
of and from all obligations and liability imposed by the terms of this
Agreement.
(vii) The parties and their respective successors and
assigns agree jointly and severally to indemnify and hold Escrow Agent harmless
against any and all losses, claims, damages, liabilities, and
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expenses, including reasonable costs of investigation, counsel fees, and
disbursements that may be imposed on Escrow Agent or incurred by Escrow Agent
in connection with the performance of his/her duties under this Agreement,
including but not limited to any litigation arising from this Agreement or
involving its subject matter.
(viii) The Escrow Agent may resign at any time upon giving at
least thirty (30) days written notice to the parties; PROVIDED, HOWEVER, that no
such resignation shall become effective until the appointment of a successor
escrow agent which shall be accomplished as follows: the parties shall use
their best efforts to mutually agree on a successor escrow agent within thirty
(30) days after receiving such notice. If the parties fail to agree upon a
successor escrow agent within such time, the Escrow Agent shall have the right
to appoint a successor escrow agent authorized to do business in the State of
California. The successor escrow agent shall execute and deliver an instrument
accepting such appointment and it shall, without further acts, be vested with
all the estates, properties, rights, powers, and duties of the predecessor
escrow agent as if originally named as escrow agent. The Escrow Agent shall be
discharged from any further duties and liability under this Agreement.
(k) FEES. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Healtheon. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this Agreement. In the
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to this escrow or its subject matter, the Escrow Agent
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or litigation. Healtheon promises to pay these sums upon demand.
7.3 INDEMNIFICATION BY HEALTHEON AND ACQUISITION SUB.
(a) SCOPE OF INDEMNIFICATION. Subject to the limitations set
forth in this Section 7.3, Healtheon will indemnify and hold harmless for any
Losses (as defined in Section 7.2(a) above) incurred by the Company directly or
indirectly as a result of any inaccuracy or breach of a representation or
warranty of Healtheon or Acquisition Sub contained in Article III herein (as
modified by the Healtheon and Acquisition Sub Schedules), or any failure by
Healtheon or Acquisition Sub to perform or comply with any covenant contained
herein. Healtheon and the Company each acknowledge that such Losses, if any,
would relate to unresolved contingencies existing at the Closing, which if
resolved at the Closing would have led to an increase in the aggregate Asset
Purchase consideration. Nothing herein shall limit the liability of the
Healtheon for any breach of any representation, warranty or covenant if the
Asset Purchase does not close. The indemnification provisions in this
Section 7.3 shall be the sole remedy and recourse of the Company against
Healtheon or any of its respective directors, officers, representatives, agents,
shareholders or subsidiaries for any Losses incurred by such Indemnified
Members; PROVIDED, HOWEVER, that nothing herein shall limit any remedy for
fraud.
(b) LIMITATION OF LIABILITY. The maximum aggregate liability of
Healtheon with respect to the indemnification provided in this Section 7.3 shall
be limited solely to the number of newly issued shares of Healtheon Common Stock
equal to the Escrow Amount. Healtheon shall not be obligated to issue any
shares of Healtheon Common Stock to the Company unless and until the
Securityholder Agent, on behalf of the Company, delivers a certificate
("SECURITYHOLDER CERTIFICATE") that identifies Losses, the aggregate amount of
which exceed $50,000; in such case, the Company shall be entitled to shares of
Healtheon Common Stock for the total of its Losses, including the first $50,000.
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(c) PROCEDURE FOR INDEMNIFICATION. The Company shall give
written notice to Healtheon of its claim for indemnification as promptly as
practicable whenever the Securityholder Agent shall have determined that there
are facts or circumstances which render or would reasonably and forseeably
render Healtheon liable for indemnification under this Section 7.3; PROVIDED,
HOWEVER, that the failure to give a timely notice of a claim for indemnification
shall not limit the indemnification obligations of Healtheon. The notice shall
set forth in reasonable detail the basis for the claim, the nature of the Losses
and the monetary amount thereof.
(d) VALUE OF HEALTHEON COMMON STOCK. For the purposes of
determining the number of shares of Healtheon Common Stock to be delivered to
the Company in satisfaction of Healtheon's indemnity obligations under this
Section 7.3, the value of the shares of Healtheon Common Stock shall be deemed
to be $5.20 per share of Healtheon Common Stock.
(e) THIRD-PARTY BENEFICIARY. Each of the parties to this
Agreement specifically intends that the benefits of the indemnification
provisions of this Section 7.3 shall accrue to the Company and that the Company
and its authorized representatives shall be entitled to take any necessary
action to enforce the remedy set forth in this Section 7.3.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Except as provided in Section 8.2 below, this
Agreement may be terminated and the Asset Purchase abandoned at any time prior
to the Closing:
(a) by mutual consent of the Company and Healtheon;
(b) by Healtheon or the Company if: (i) the Closing has not
occurred before 5:00 p.m. (Pacific time) on August 15, 1998 (provided that the
right to terminate this Agreement under this clause 8.1(b)(i) shall not be
available to any party whose willful failure to fulfill any obligation hereunder
has been the cause of, or resulted in, the failure of the Closing to occur on or
before such date); (ii) there shall be a final nonappealable order of a federal
or state court in effect preventing consummation of the Asset Purchase; or
(iii) there shall be any statute, rule, regulation or order enacted, promulgated
or issued or deemed applicable to the Asset Purchase by any governmental entity
that would make consummation of the Asset Purchase illegal;
(c) by Healtheon if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Asset Purchase, by any Governmental Entity, which would: (i)
prohibit Healtheon's or the Company's ownership or operation of all or any
portion of the business of the Company or (ii) compel Healtheon or the Company
to dispose of or hold separate all or a portion of the business or assets of the
Company or Healtheon as a result of the Asset Purchase;
(d) by Healtheon if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Company and (i) such breach has not been cured within five (5)
business days after written notice to the Company (provided that, no cure period
shall be required for a breach which by its nature cannot be cured), and (ii) as
a result of such breach the conditions set forth in Section 6.3(a) or 6.3(b), as
the case may be, would not then be satisfied; or
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(e) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Healtheon or Acquisition Sub and (i) such breach has not been cured
within five (5) business days after written notice to Healtheon (provided that,
no cure period shall be required for a breach which by its nature cannot be
cured), and (ii) as a result of such breach the conditions set forth in Section
6.2(a) or 6.2(b), as the case may be, would not then be satisfied.
Where action is taken to terminate this Agreement pursuant to this Section 8.1,
it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Healtheon,
Acquisition Sub or the Company, or their respective officers, directors,
shareholders or Members; PROVIDED, that each party shall remain liable for any
breaches of this Agreement prior to its termination; and PROVIDED FURTHER, that,
the provisions of Sections 5.3 and 5.4 and Article VIII of this Agreement shall
remain in full force and effect and survive any termination of this Agreement.
8.3 AMENDMENT. Except as is otherwise required by applicable law after
the Members of the Company approve this Agreement, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of the parties hereto.
8.4 EXTENSION; WAIVER. At any time prior to the Closing, Healtheon and
Acquisition Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(i) if to Healtheon or Acquisition Sub, to:
Healtheon Corporation
4600 Patrick Henry Drive
Santa Clara, CA 95054
Attention: W. Michael Long
Telephone No.: (408) 876-5000
Facsimile No.: (408) 876-5010
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with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Steven E. Bochner, Esq.
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(ii) if to the Company, to:
Metis, LLC
444 Spear Street, Suite 205
San Francisco, CA 94105
Attention: Edward Fotsch, M.D.
Telephone No.: (415) 537-7400
Facsimile No.: (415) 357-5919
with a copy to:
Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Attention: Peter M. Wong
Telephone No.: (415) 693-2198
Facsimile No.: (415) 951-3699
(c) if to the Securityholder Agent:
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(d) if to the Escrow Agent:
U.S. Bank Trust National Association
San Francisco, CA
Attention: Cora Murphy
Telephone No.: (415) 273-4534
Facsimile No.: (415) 273-4593
9.2 INTERPRETATION. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." 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.
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9.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 TRANSFER TAXES. The Company shall pay all real property transfer
Taxes, sales Taxes, stock transfer Taxes, documentary stamp Taxes, recording
charges and other similar Taxes resulting from, arising under or in connection
with the transfer of the Purchased Assets or any other related transaction under
the Agreement.
9.5 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided, except
that Healtheon and Acquisition Sub may assign their respective rights and
delegate their respective obligations hereunder to their respective affiliates;
PROVIDED, that such affiliates agree to be bound by the terms hereof, including
without limitation, the provisions of 6.3(k) hereof.
9.6 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.7 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
9.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.10 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to
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prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
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IN WITNESS WHEREOF, Healtheon, Acquisition Sub and the Company and, with
respect to Article VII, the Securityholder Agent and Escrow Agent, have caused
this Agreement to be signed by their duly authorized respective officers and
representatives, all as of the date first written above.
METIS, LLC HEALTHEON CORPORATION
By: /s/ Edward Fotsch By: /s/ W. Michael Long
----------------------------- -------------------------
Name: Name:
Title: Title:
SECURITYHOLDER AGENT: METIS ACQUISITION CORP.
By: /s/ Edward Fotsch By: /s/ W. Michael Long
---------------------------- -------------------------
Name: Name:
Title:
ESCROW AGENT
By: /s/ Ann Gadsby
----------------------------
Name: Ann Gadsby
Title: Vice President
***ASSET PURCHASE AGREEMENT***
Asset Purchase Agreement - Healtheon Corp. and Metis LLC
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