ALLIANCE AGREEMENT
This ALLIANCE AGREEMENT (this “Agreement”) is made as of August 1, 2017, by and between STRATIS HEALTH (“Stratis Health”), a Minnesota nonprofit corporation that is exempt from federal income taxation pursuant to Section 501(c)(3) of the Code, and Minnesota Alliance for Patient Safety (“MAPS”), a Minnesota nonprofit corporation that is exempt from federal income taxation pursuant to Section 501(c)(3) of the Code. The parties may be referred to in this Agreement individually as a “Party” and collectively as the “Parties.”
RECITALS
A.Stratis Health is an independent nonprofit organization that leads collaboration and innovation in health care quality and patient safety.
B.MAPS is a nonprofit partnership that aims to promote patient safety by encouraging collaboration between participants of the Minnesota health care system.
C.Stratis Health and MAPS share a common vision for safe care and have a mutual interest in elevating the voice of patients.
D. The Board of Directors of Stratis Health (“Stratis Health Board”) and the Board of Directors of MAPS (“MAPS Board”) have each approved a strategic alliance between the Parties, wherein Stratis Health will become the sole voting member of MAPS.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein by reference, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows:
Article 1
NATURE AND SCOPE OF ALLIANCE
1.1Sole Voting Member. The Parties agree that as of the Closing, Stratis Health shall be the sole voting member of MAPS.
1.2Financial Commitment. Except for Stratis Health’ current financial commitment of $20,000 USD (twenty thousand US dollars) per calendar year for 2017 and 2018, no other consideration will be exchanged between the Parties as a condition to closing or throughout the term of this Agreement.
1.3The Closing. The closing and the other transactions relating thereto (the “Closing”) is taking place concurrently with the execution and delivery of this Agreement on the date hereof to the Board Secretary (authorized signer) of both Stratis Health and MAPS. Each organization has responsibility to deliver executed Agreement and all its attachments to their legal representatives. The Closing will be effective at 12:01 AM Central Time on the date hereof “July 31, 2017.”
1.4Deliveries of MAPS on or before the Closing Date. MAPS hereby delivers to Stratis Health the following items:
(a)a secretary’s certificate from MAPS, in form and substance satisfactory to Stratis Health, dated as of the Closing Date, certifying its:
(i)amended and restated articles of incorporation, attached hereto as Exhibit A, as filed by MAPS on or before the Closing Date;
(ii)amended and restated bylaws, attached hereto as Exhibit B, as adopted by the MAPS Board effective as of the Closing Date; and
(iii)resolutions approving this Agreement, the amended and restated articles of incorporation and the amended and restated bylaws.
(b)a termination agreementtoStratis Healthterminating MAPS’ current agreement with the Minnesota Medical Joint Services Organization; and
(c)one or more documents evidencing that MAPS has obtained adequate insurance contemplated under Section 5.1(c)(i) herein.
1.5Deliveries of Stratis Healthon or before theClosing Date. Stratis Health hereby delivers to MAPS the following item:
(a)a secretary’s certificate from Stratis Health, in form and substance satisfactory to MAPS, dated as of the Closing Date, certifying its:
(i)amended and restated articles of incorporation, attached hereto as Exhibit C, on or before the Closing Date;
(ii)amended and restated bylaws, attached hereto as Exhibit D, as adopted by the Stratis Health Board effective as of the Closing Date; and
(iii)resolutions approving this Agreement, the amended and restated articles of incorporation and the amended and restated bylaws.
Article 2
REPRESENTATIONS AND WARRANTIES of maps
MAPS hereby represents and warrants to Stratis Health that the following representations and warranties are true and correct as of the Closing Date.:
2.1Organization, Power and Authorization. MAPS is a nonprofit corporation that is exempt from federal income taxation pursuant to Section 501(c)(3) of the Code, and is validly existing and in good standing under the Laws of the State of Minnesota.
2.2Binding Effect and Noncontravention.
(a)MAPS has all necessary power and authority to enter into this Agreement and the Transaction Documents to which it is a party.
(b)This Agreement and the Transaction Documents have been duly executed and delivered by MAPS and constitute legal, valid and binding obligations of MAPS, enforceable against MAPS in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Law affecting creditors’ rights generally and by general principles of equity.
(c)The execution, delivery and performance by MAPS of this Agreement or any of the Transaction Documents to which MAPS is a party do not (i) violate the Constituent Documents or any Law applicable to MAPS, (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which MAPS is a party or by which MAPS is bound or to which its assets are subject, (iii) result in the creation of any Lien on any assets of MAPS, or (iv) require any authorization, consent, approval or notice by or to any Person.
2.3Capitalization. As of the Closing, no other Person with the exception of Stratis Health has any rights or privileges that would allow such Person to be the sole voting member of MAPS.
2.4Financial Statements. MAPS has furnished to Stratis Healthcomplete copies of its audited financial statements for each of the years 2014, 2015 and 2016 and the most recent interim statements as of the Closing Date.
2.5Liabilities. MAPS does not have any Liabilities except for Liabilities (a) adequately reflect or reserved against in the Balance Sheet as of the Balance Sheet Date or (b) incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date and which are not, individually or in the aggregate, material in amount.
2.6ComplianceWith Laws. MAPS has complied, and is in compliance, in all material respects with all applicable Laws. MAPS has not received any written notice of or been charged with the violation of any Law and there are no facts or circumstances that could lead to MAPS receiving written notice of or being charged with the violation of any Law.
2.7Tax Matters. MAPS has furnished to Stratis Health all IRS Form 990s, timely filed all returns required, provided all correspondence with tax authorities, and has not had any audit findings that require future action.
2.8.Litigation. There are no (a) outstanding injunctions, judgments, orders, decrees, rulings or charges against or related to MAPS or (b) Proceedings to which MAPS is a party or, to MAPS’ Knowledge, threatened to be made a party.
2.9Employment Matters. MAPS has no, and since January 1, 2015 has not had any, employees. MAPS has provided Stratis Health a true and correct (a) list of the names, positions, and compensation rates for each independent contractor engaged by MAPS since January 1, 2015, and (b) copy of each agreement with any such independent contractor. None of the independent contractors of MAPS has informed MAPS that he, she or it intends to terminate its relationship with MAPS.
2.10Employee Benefits. MAPS does not now maintain, contribute to or have an obligation to contribute to any Benefit Plans, and has never maintained, contributed to or had an obligation to contribute to any Benefit Plans.
2.11Affiliate Transactions. Neither MAPS nor any director, officer, manager or Affiliate of MAPS or MAPS is a party to any agreement, contract, commitment or transaction with MAPS or has any interest in any property used by MAPS in the Business that has not been disclosed to Stratis Health.
2.12Brokerage. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of MAPS.
2.13Service Liability.
(a)MAPS has furnished to Stratis Healthall pertinent information and conditions for each service provided by MAPS.
(b)MAPS has no Liability, whether based on strict liability, negligence, breach of warranty (express or implied), breach of contract or otherwise, in respect of any service rendered prior to the Closing Date by or on behalf of MAPS that is not covered by MAPS’ policies of insurance or by indemnity.
2.14No Guaranties. None of the obligations of MAPS are guaranteed by, or subject to a similar contingent Liability of any Person, and MAPS has not guaranteed, or otherwise become contingently liable for, any Liability of any Person.
2.15Outstanding Indebtedness. MAPS has previously delivered to Stratis Health true, complete and correct copies of any debt obligations. Full Disclosure. MAPS has disclosed to Stratis Health all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a material adverse effect on MAPS or the Business. Neither this Agreement, nor any Transaction Document, schedule, exhibit or certificate attached hereto or delivered pursuant hereto or any document or statement in writing that has been supplied by or on behalf of MAPS in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact, or omits any statement of a material fact, necessary to make the statements contained herein or therein not misleading. To MAPS’ Knowledge, there are no facts that could have a material adverse effect on the assets, business, prospects, financial condition or results of operation of MAPS.
Article 3
REPRESENTATIONS AND WARRANTIES OF Stratis Health
Stratis Health hereby represents and warrants to MAPS that the following representations and warranties are true and correct as of the Closing Date:
3.1Organization, Power and Authorization. Stratis Health is a nonprofit corporation that is exempt from federal income taxation pursuant to Section 501(c)(3) of the Code, and is validly existing and in good standing under the Laws of the State of Minnesota. Stratis Health has the requisite power and authority necessary to enter into, deliver and perform its obligations pursuant to this Agreement and each of the Transaction Documents to which it is a party. Stratis Health’ execution, delivery and performance of this Agreement and each Transaction Document to which it is a party has been duly authorized.
3.2Binding Effect and Noncontravention.
(a)This Agreement and each Transaction Document to which Stratis Health is a party have been duly and validly executed and delivered by Stratis Health and constitute the valid and binding obligations of Stratis Health, enforceable against Stratis Health in accordance with their terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Law affecting creditors’ rights generally and by general principles of equity.
(b)The execution, delivery and performance by Stratis Health of this Agreement and the Transaction Documents to which it is a party do not (i) violate any material Law to which Stratis Health is subject or its certificate of formation, (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any material agreement, contract, lease, license, instrument or other material arrangement to which Stratis Health is a party or by which Stratis Health is bound or to which Stratis Health’ assets are subject, (iii) result in the creation of any Lien on any assets of Stratis Health, or (iv) require any authorization, consent, approval or notice by or to any Person.
3.3Liabilities. Stratis Health does not have any Liabilities except for Liabilities (a) adequately reflect or reserved against in the Balance Sheet as of the Balance Sheet Date or (b) incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date and which are not, individually or in the aggregate, material in amount.
3.4Compliance With Laws. Stratis Health has complied, and is in compliance, in all material respects with all applicable Laws. Stratis Health has not received any written notice of or been charged with the violation of any Law and there are no facts or circumstances that could lead to MAPS receiving written notice of or being charged with the violation of any Law.
3.5Service Liability.
(a)Stratis Health has furnished to Stratis Health all pertinent information and conditions for each service provided by Stratis Health.
(b)Stratis Health has no Liability, whether based on strict liability, negligence, breach of warranty (express or implied), breach of contract or otherwise, in respect of any service rendered prior to the Closing Date by or on behalf of Stratis Health that is not covered by Stratis Health’s policies of insurance or by indemnity.
3.6Brokerage. MAPS will not have any obligation to pay any broker’s, finder’s, investment banker’s, financial advisor’s or similar fee in connection with this Agreement or the transactions contemplated by this Agreement by reason of any action taken by or on behalf of Stratis Health.
3.7Litigation. Stratis Health is not (a) subject to any outstanding injunction, judgment, order or decree, or (b) party to or, to Stratis Health’ knowledge, threatened to be made a party to, any Proceeding that would reasonably be expected to have an adverse effect on Stratis Health’ ability to consummate the transactions contemplated by this Agreement or otherwise perform its obligations under this Agreement and any Transaction Document to which it is a party.
Article 4
COVENANTS
4.1Covenants of MAPS. MAPS agrees as follows with respect to the period following the Closing:
(a)Governance Covenants.
(i)MAPS will retain its own board nominating process, but will develop policies and practices through which coordination with Stratis Health will occur.
(ii)Three positions on the MAPS Board will be voting members from Stratis Health, without increasing the number of MAPS Board members. Two members will be from the Stratis Health Board, and the third voting position will be held by the President/CEO of Stratis Health as a voting ex officio member of the MAPS Board. While Stratis Health has the ultimate legal authority to approve the slate of MAPS directors, in practice, Stratis Health’ Nominating Committee will make a recommendation to the MAPS Board for its review and approval of Stratis Health’ members to serve on the MAPS Board.
(iii)The MAPS Board will continue to emphasize leadership engagement in its strategic planning and implementation by planning and implementing its annual budget, and carrying its own assets and liabilities, but will be part of a consolidated financial statement of Stratis Health.
(iv)The MAPS Board will hire, supervise and evaluate the performance of its Executive Director. Stratis Health will participate in these management processes through its voting memberships on the MAPS Board.
(v)The MAPS Board will propose its bylaws, governance policies, and procedures.
(vi)The MAPS Board does not have the authority to change its articles of incorporation or bylaws as related to Stratis Health.
(b)Financial Covenants.
(i)MAPS will continue to be a membership organization (i.e., it will continue to have non-voting members) into the foreseeable future, funded by sponsors and partners, which is important for community and leadership engagement. Each MAPS founding and strategic partner has been asked to extend their annual membership fee commitment to MAPS for 2017 and 2018.
(ii)In the event that MAPS experiences an operating loss due to a decrease in membership contributions or other causes, the MAPS Board will draw upon its organizational reserves to subsidize a MAPS operating loss. MAPS agrees to develop a reserves policy, with reserves defined as the accumulation of unrestricted surpluses that are liquid and available for use at the discretion of the MAPS Board
(c)Operational Covenants.
(i)MAPS will either maintain its own insurance policies, at its own expense or, alternatively, come under the Stratis Health’ policies, with appropriate accounting of their costs. As appropriate MAPS will purchase tail coverage on its Directors & Officers insurance policy which is to be effective with the date of the Closing.
(ii)The MAPS Executive Director will continue to report to the MAPS Board. Importantly, the MAPS Executive Director and other staff will be integrated with the Stratis Health staff by physical proximity and formal and informal communication and meetings.
4.2Covenants of Stratis Health. Stratis Health agrees as follows with respect to the period following the Closing:
(a)Governance Covenants.
(i)Stratis Health will retain its own board nominating process, but will develop policies and practices through which coordination will occur.
(ii)Two voting positions on the Stratis Health Board will be held by members of the MAPS Board. The MAPS Governance Committee will recommend the two MAPS designees to the Stratis Health Board at the appropriate time in the Stratis Health nomination cycle. It is the ultimate authority of Stratis Health whether or not the MAPS designees are approved and appointed to serve on the Stratis Health Board.
(iii)One additional ex-officio non-voting position will be held on the Stratis Health Board for the Executive Director of MAPS.
(b)Financial Covenants.
(i)Stratis Health, as a founding partner of MAPS, is committed to maintaining its current financial commitment of $20,000 per year to MAPS for calendar years 2017 and 2018.
(ii)Stratis Health will support MAPS to broaden its revenue base to include grants and contracts, the result being a balanced source of revenue between membership support and grant/contract support, anticipated after approximately a two-year transition time
(iii)In supporting MAPS’ ongoing success as a part of Stratis Health, the Stratis Health Board will be open to utilizing its reserves in support of MAPS, in keeping with its reserves policy. For example, part of Stratis Health’ reserves policy allows for an Opportunity Fund which provides resources for targeted growth and development; and MAPS will be part of the annual Opportunity Fund planning cycle.
(c)Operational Covenants. Stratis Health intends to create an environment for MAPS in which the administrative activities needed to support MAPS programmatic success are seamless and integrated, with the costs of such administrative support allocated or charged minimally but in such a way to be compliant with Generally Accepted Accounting Principles and Stratis Health’ accounting system. The intended outcome is that the MAPS staff can focus their time and attention on patient safety initiatives and programs to achieve safe care everywhere.