Accolade(ACCD) - 2025 Q3 - Quarterly Results

Merger Details - Merger between Accolade, Inc. and Transcarent, Inc. to be completed on January 8, 2025, with Merger Sub merging into Accolade[15][17] - Each share of Accolade Common Stock to be converted into $7.03 in cash at the Effective Time[28] - Merger Sub shares to be converted into shares of the Surviving Corporation at a 1:1 ratio[29] - Merger Consideration subject to adjustment for stock splits, dividends, or other similar transactions[30] - Closing to occur remotely at 8:00 a.m. Eastern time on the third business day after conditions are met[25] - Certificate of merger to be filed with the Secretary of State of Delaware to finalize the Merger[26] - Surviving Corporation's certificate of incorporation and bylaws to be amended and restated at the Effective Time[27] Board Recommendations and Voting Agreements - Company Board recommends adoption of the Agreement and approval of the Merger[18] - Parent and Merger Sub Board also recommend the Merger[19] - Certain Company Stockholders have entered into Voting Agreements to support the Merger[21] Payment and Conversion Details - Parent will deposit sufficient cash with the Paying Agent to cover the aggregate Merger Consideration, with investments limited to U.S. government obligations, high-rated commercial paper, or bank instruments from banks with capital exceeding$1 billion[31] - Holders of Certificates must surrender them to the Paying Agent to receive the Merger Consideration, while Book-Entry Shares will automatically receive payment upon receipt of an "agent's message"[32] - Payment of Merger Consideration for Certificates requires proper endorsement and payment of transfer taxes if the recipient is not the registered holder[34] - Unclaimed funds in the Payment Fund will be returned to the Surviving Corporation after 12 months, and holders will become general creditors for any unpaid amounts[35] - Dissenting Shares will not receive Merger Consideration but will be entitled to appraisal rights under Section 262 of the DGCL[40] Equity and Stock Options - Vested Company Options with an exercise price below the Merger Consideration will be canceled and converted into cash payments equal to the excess of the Merger Consideration over the exercise price[41] - Vested Company RSUs will be canceled and converted into cash payments equal to the Merger Consideration, less applicable tax withholdings[42] - Unvested Company Options and RSUs will be canceled without payment at the Effective Time[41][42] - Vested Company Option and RSU payments will be made through payroll or the Payment Fund, depending on the holder's employment status[45] - The Company Equity Plans and all awards will terminate at the Effective Time[46] Capital Structure and Shares - The Company has 500,000,000 authorized shares, with 81,678,821 shares issued and outstanding as of the Reference Date[58] - 5,881,600 shares are subject to issuance under Company Options, 4,897,178 shares under Company RSUs, and 1,179,210 shares under Company PSUs as of the Reference Date[60] - 1,886,666 shares are reserved for future issuance under the Company ESPP, and 4,180,469 shares are reserved for issuance pursuant to the Indenture[60] - The Company has no outstanding shares of Company Preferred Stock as of the Reference Date[58] Financial Reporting and Compliance - The Company has maintained a system of internal controls over financial reporting since January 1, 2022, with no significant deficiencies or material weaknesses identified[69] - The Company's consolidated financial statements comply with GAAP and fairly present the financial position of the Company and its subsidiaries[68] - The Company has filed all required SEC documents since January 1, 2022, with no material misstatements or omissions[67] - The company maintains disclosure controls and procedures to ensure timely and accurate reporting of required information under the Exchange Act[70] - The company is not involved in any off-balance sheet arrangements or securitization transactions that would avoid disclosure of material liabilities[71] - There are no outstanding SEC comments or ongoing investigations regarding the company's accounting practices as of the agreement date[72] Assets and Intellectual Property - The company and its subsidiaries hold valid title to all tangible assets necessary for their business operations, free of encumbrances, except for assets sold in the ordinary course of business[76] - The company does not own any real property but leases all real property used in its operations, with no material defaults under any leases[77][78] - The company owns all intellectual property rights free of encumbrances and has obtained valid assignments for any acquired IP[82] - The company has not used government or educational institution resources to create IP that would grant ownership or royalty rights to third parties[83] - The company has taken commercially reasonable steps to protect its confidential information and trade secrets[87] - The company maintains policies and procedures to protect the confidentiality and security of its data and systems, addressing all material security vulnerabilities[91] - The company is in compliance with all applicable privacy, data protection, and security legal requirements since January 1, 2022[92] Contracts and Liabilities - The company has contracts with third-party resellers where amounts in excess of $1,000,000 were received in the most recently completed fiscal year[97] - The company has contracts requiring payment or delivery of cash or other consideration in excess of$1,000,000 for the fiscal year ending February 29, 2024, or the nine-month period ended November 30, 2024[97] - The company has contracts relating to indebtedness in excess of $1,000,000[97] - The company has contracts with government bodies under which payments in excess of$1,000,000 were received in the most recently completed fiscal year[98] - The company has a list of top 20 customers by revenues generated in 2023 and the nine-month period ended September 30, 2024[102] - The company has a list of top 10 suppliers by dollar volume of sales and purchases for 2023 and the nine-month period ended September 30, 2024[103] - The company has no material liabilities except those disclosed in the balance sheet or incurred in the ordinary course of business[104] Legal and Regulatory Compliance - The company is in compliance with all applicable legal requirements and has not received any written notice alleging violations since January 1, 2022[105] - The company has conducted export transactions in compliance with all applicable export, re-export, and anti-boycott legal requirements[106] - The company has established compliance programs and internal controls to ensure adherence to anti-corruption laws[110] - The Company and its Subsidiaries are in compliance with all applicable Environmental Laws since January 1, 2022[147] - All material insurance policies of the Acquired Companies are in full force and effect, with no claims denied as of the date hereof[148] Tax Matters - All material Tax Returns filed by the Acquired Companies are accurate and complete, and all material Taxes have been paid or adequately provisioned in accordance with GAAP[114] - No material Tax deficiencies have been proposed or assessed against any Acquired Company that remain unpaid or unresolved[115] - Each Acquired Company has withheld and paid all material Taxes required for employees, contractors, and other parties[116] - No Acquired Company has material liability under any Tax sharing or indemnification agreements that would continue after the Closing Date[117] - No Acquired Company has been part of an affiliated group filing consolidated U.S. federal income Tax Returns, except for groups where the Company was the common parent[118] - No Acquired Company has been involved in a tax-free stock distribution under Section 355 of the Code in the past two years[119] - No Acquired Company is a tax resident in any country other than its country of organization due to permanent establishments or offices[120] - The Company will not face material income inclusion or deduction exclusion post-Closing Date due to prior accounting changes or agreements[122] Healthcare Compliance - The Acquired Companies have complied with all applicable Healthcare Laws since January 1, 2022, and maintain policies for compliance[135] - No Acquired Company or its personnel have been debarred, excluded, or suspended from participating in any Federal Healthcare Program since January 1, 2022[137] - All claims submitted by Acquired Companies since January 1, 2022, were for services actually performed and supported by sufficient documentation[138] - Acquired Companies have operated in compliance with federal health care program anti-kickback statutes and Stark Law since January 1, 2022[140] - Acquired Companies maintain HIPAA-compliant privacy and security plans, policies, and procedures since January 1, 2022[142] - No breaches of individually identifiable health information have been reported by the Company or any Acquired Company since January 1, 2021[142] - Acquired Companies have created de-identified health information in compliance with HIPAA requirements[143] - Acquired Companies are in material compliance with all applicable Managed Care Laws and licensing requirements[144] - The top five Third-Party Payors for 2023 and the nine-month period ended September 30, 2024, have not terminated or materially modified their relationships with Acquired Companies[146] - No material claims or disputes with Material Payors have occurred in the last three years[146] Fairness Opinion and Financial Advisors - Morgan Stanley provided a Fairness Opinion stating the Merger Consideration is fair to shareholders from a financial perspective[157] - No other financial advisors or brokers are entitled to fees or commissions related to the Transactions except Morgan Stanley[158] Parent and Merger Sub Financials - Parent and Merger Sub have sufficient funds to consummate the Merger, including paying the Required Amount and other obligations[170] - Parent has unrestricted cash on hand equal to the Parent Termination Fee with no conditions preventing payment[171] - Parent and Merger Sub have all necessary corporate authority to execute and perform obligations under the Agreement[164] - The Parent SPA is in full force and effect, with no amendments or withdrawals of commitments as of the date hereof[168] - No pending legal proceedings against Parent or Merger Sub are expected to have a Parent Material Adverse Effect[167] - Parent and Merger Sub have made all necessary filings and obtained approvals required for the Transactions[165] - The Proxy Statement contains no material misstatements or omissions regarding Parent or Merger Sub[166] - Parent and Merger Sub are not party to any arrangements with Company stockholders or management beyond the Voting Agreements[172] - The Surviving Corporation and its Subsidiaries will have sufficient capital to meet their liabilities, including contingent liabilities, as they mature, ensuring solvency post-Merger[173] - Parent and its controlled Affiliates do not own any shares of the Company's capital stock or convertible securities, and no 10b5-1 plan has been enacted for stock purchases[174] - No broker or financial advisor is entitled to fees or commissions related to the Transactions, except for those paid by Parent[175] - Purchaser is not classified as a "foreign person" under the Defense Production Act of 1950, ensuring compliance with CFIUS regulations[176] - Parent and Merger Sub disclaim reliance on any representations or warranties beyond those explicitly stated in the Agreement[177][178] - Parent and Merger Sub conducted an independent investigation of the Acquired Companies and discussed business matters with Company management[179] Pre-Closing Period and Integration - During the Pre-Closing Period, the Company will provide Parent with reasonable access to its properties, books, and records for integration purposes[182] - The Company will deliver a Fairness Opinion to Parent for informational purposes following the execution of the Agreement[183] - The Company will operate its business in the ordinary course during the Pre-Closing Period, preserving assets, contracts, and key relationships[184] - The company may provide salary or wage increases not exceeding 3.5% in aggregate of total base pay for the 2025 fiscal year, excluding Specified Employees with annual base salaries over $250,000[185] - Capital expenditures are capped at$5,000,000 in aggregate during any fiscal year[187] - The company may sell or dispose of assets individually for consideration not exceeding $1,000,000 or in aggregate not exceeding$2,000,000, except for ordinary course transactions[187] - The company may settle legal proceedings involving payments not exceeding $1,000,000 individually or$2,000,000 in aggregate, without imposing injunctive or equitable relief[188] - The company is restricted from entering into new lines of business unrelated to its current operations or forming new subsidiaries[191] Acquisition Proposals and Notifications - The company may engage in discussions with parties making unsolicited acquisition proposals to clarify terms and inform them of the agreement's conditions[196] - The company must notify the parent within 24 hours of receiving any acquisition proposal or inquiry, including details of the proposer and material terms[197] - The company is required to keep the parent informed of the status and developments of any acquisition proposal or inquiry on a prompt basis[197] - The company must provide the parent with copies of any written counterproposals or related documents within 24 hours of delivery or receipt[197] - The company is prohibited from entering agreements that restrict providing information to the parent regarding acquisition proposals[197] - The company may disclose positions or make required disclosures to stockholders under applicable legal requirements without constituting a breach[198] - Actions taken by acquired companies or their representatives that breach the agreement will be deemed a breach by the company[199]