Item 1.01. Entry into a Material Definitive Agreement.
On September 30, 2019, Q2 Holdings, Inc., a Delaware corporation (the "Company"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), by and among the Company, Lender Performance Group, LLC, a Delaware limited liability company, also doing business as PrecisionLender ("Target"), Lender Performance Group Blocker, LLC, a Delaware limited liability company ("Blocker A"), LPGB, Inc., a Delaware corporation ("Georgian Blocker"), Insight (Delaware) PL Blocker Corporation, a Delaware corporation ("Insight Blocker A"), Insight (Cayman) PL Blocker Corporation, a Delaware corporation ("Insight Blocker B" and together with Blocker A, Georgian Blocker and Insight Blocker A, each a "Blocker" and collectively the "Blockers"), Arrow Company Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of Company (the "Target Merger Sub"), Arrow Blocker Merger Sub 1, LLC, a Delaware limited liability company and wholly owned subsidiary of Company ("Blocker Merger Sub 1"), Arrow Blocker Merger Sub 2, Inc., a Delaware corporation and wholly owned subsidiary of Company ("Blocker Merger Sub 2"), Arrow Blocker Merger Sub 3, Inc., a Delaware corporation and wholly owned subsidiary of Company ("Blocker Merger Sub 3"), Arrow Blocker Merger Sub 4, Inc., a Delaware corporation and wholly owned subsidiary of Company ("Blocker Merger Sub 4" and together with Blocker Merger Sub 1, Blocker Merger Sub 2, and Blocker Merger Sub 3, each a "Blocker Merger Sub" and collectively the "Blocker Merger Subs"), and Insight Venture Partners, LLC, a Delaware limited liability company, solely in its capacity as the representative for the members of the Target (the "Member Representative"). Pursuant to the Merger Agreement, (i) Target will be merged with and into Target Merger Sub, with Target surviving as a wholly owned subsidiary of the Company (the "Company Merger"), and (ii) each Blocker will be merged with and into a Blocker Merger Sub, with the Blockers surviving as wholly owned subsidiaries of the Company (the "Blocker Mergers" and together with the Company Merger, the "Mergers"). Upon the respective times of each of the Mergers, each unit of equity in Target or the Blockers, as applicable, will be converted into a right to receive the applicable portion of the merger consideration of $510,000,000 (the "Merger Consideration"). The Merger Consideration is subject to adjustment based on Target's net working capital amount and other customary adjustments at closing. In addition, a portion of the Merger Consideration ($4,785,000) will be placed into escrow pursuant to an escrow agreement (the "Escrow Agreement") to secure certain post-closing indemnification obligations in the Merger Agreement. To supplement the potential post-closing indemnification obligations for breaches of Target's or any of the Blockers' representations and warranties and certain other matters, the Company has obtained a representation and warranty insurance policy (the "RWI Policy"), the costs and expenses of which will be paid 50% by the Company and 50% by the Target. The policy is subject to a retention amount, exclusions, policy limits and certain other terms and conditions.
The closing is currently expected to occur in the fourth quarter of 2019 and is subject to customary closing conditions including: (1) the approval of the Merger Agreement and the transactions contemplated therein by the requisite equity holders of the Target and the Blockers; (2) the entry of the parties into the Escrow Agreement; (3) the effectiveness of the RWI Policy; (4) the absence of any injunction or order issued by any court or other governmental authority of competent jurisdiction that enjoins, prevents or prohibits completion of the Mergers; (5) the obtaining of all required consents, approvals and other authorizations of any governmental entity, as described in the Merger Agreement; (6) the entering into by certain officers or directors of the Target of employment agreements or separation agreements, as applicable; (7) the accuracy of the other party's representations and warranties, subject to certain materiality standards set forth in the Merger Agreement; and (8) the fulfillment of each party's pre-closing obligations under the Merger Agreement.
The Mergers are not subject to any financing conditions. The Company plans to fund the Merger Consideration and transaction expenses with cash on hand.
The Merger Agreement contains customary termination rights for the parties thereto, including (1) the right of the Company or the Target to terminate the Merger Agreement if the Mergers are not consummated on or before January 30, 2020 and (2) the right of the Company or the Target to terminate (subject to certain conditions and cure periods) if the other party is in breach of the Merger Agreement and the breach would cause the applicable closing condition related to accuracy of that party's representations and warranties or the performance of that party's obligations under the Merger Agreement to not be met.
Each of the Company, Merger Sub, Target, each of the Blockers and each of the Blocker Merger Subs in the Merger Agreement made customary representations and warranties and agreed to customary covenants, including, among other things, to conduct the Target's and its subsidiaries' businesses prior to the closing of the Mergers in the ordinary course consistent with past practices. The assertions and implications embodied in those representations and warranties and covenants were made solely for purposes of the contract among the parties and may be subject to important qualifications and limitations agreed to by the parties in connection with the negotiated terms. Moreover, some of those representations and warranties (a) may not be accurate or complete as of any specified date, (b) may be subject to a contractual standard of materiality different from those generally applicable to stockholders or (c) may have been used for purposes of allocating risk among the parties rather than establishing matters as facts. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with any factual information regarding the Company, Target, Merger Sub, the Blockers, the Blocker Merger Subs or their respective businesses. Investors should not
rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Target or any of their respective subsidiaries or affiliates.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 and is incorporated into this report by reference.