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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): NOVEMBER 8, 1999
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FIRST CONSULTING GROUP, INC.
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(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-23651 95-3539020
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
111 W. OCEAN BLVD., 4TH FLOOR, LONG BEACH, CALIFORNIA 90802
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (562) 624-5200
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ITEM 5. OTHER EVENTS.
On November 8, 1999, FCG Management Services, LLC (FCGMS), a subsidiary of First
Consulting Group, Inc. (FCG), and New York and Presbyterian Hospital, doing
business as NewYork-Presbyterian Hospital (NYPH), entered into an information
technology outsourcing agreement pursuant to which FCGMS will manage NYPH's
information technology and telecommunications functions. The following is a
summary of certain of the terms and conditions of this transaction. Please refer
to the exhibits attached to this Form 8-K for a more detailed description of the
transaction.
The agreement provides for an initial seven-year term, subject to the right of
the parties to terminate the agreement prior to the end of the initial term
under certain circumstances, including (i) termination by either party upon
material breach of the other party or (ii) subject to the payment of termination
fees by NYPH, by NYPH either following a change in control of FCGMS or FCG or
for convenience at any time following the third year of the agreement. The value
of the agreement is an aggregate of $228 million over the seven-year initial
term, subject to increase or decrease in that amount depending on the level of
services provided by FCGMS to NYPH during the term of the agreement.
In connection with the transaction, NYPH has acquired a 15% interest in FCGMS,
with FCG (through its wholly owned subsidiary, FCG Management Holdings, Inc.)
holding the remaining 85% of FCGMS.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS. The following exhibits are attached to this Current
Report on Form 8-K:
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<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE START
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99.1 ** Master Information Technology Services Agreement 4
dated November 1, 1999, between FCG Management
Services, LLC (FCGMS) and New York and Presbyterian
Hospital (NYPH)
99.2 FCG Management Services, LLC Unit Purchase 51
Agreement dated November 8, 1999, between FCGMS
and NYPH
99.3 Investor Rights Agreement dated November 8, 1999, 64
among FCGMS, FCG Management Holdings, Inc. and
NYPH
99.4 ** Amended and Restated Operating Agreement of FCG 84
Management Services, LLC
99.5 Press Release entitled "First Consulting Group and 120
NewYork-Presbyterian Hospital Announce $228 Million
Outsourcing Agreement"
** Confidential treatment has been requested over portions of these exhibits.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
FIRST CONSULTING GROUP, INC.
(Registrant)
Date: November 22, 1999 By: /s/ Robert R. Holmen
---------------------------
Vice President and General
Counsel
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EXHIBIT 99.1 PORTIONS HEREIN DENOTED WITH [**] HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE SEC UNDER A CONFIDENTIAL TREATMENT REQUEST
This MASTER INFORMATION TECHNOLOGY SERVICES AGREEMENT, dated
as of November 1, 1999, is between New York and Presbyterian Hospital (doing
business as NewYork-Presbyterian Hospital) and FCG Management Services, LLC.
W I T N E S S E T H:
WHEREAS, NYPH (as defined below) and Vendor (as defined below)
have engaged in extensive negotiations and discussions that have culminated in
the formation of the relationship described in this Agreement; and
WHEREAS, Vendor desires to provide to the NYPH (as defined
below), and the NYPH desires to obtain from Vendor, the information technology
services and related services described in this Agreement on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the agreements set
forth below, NYPH and Vendor agree as follows:
ARTICLE 1 DEFINITIONS AND CONSTRUCTION.
1.01 DEFINITIONS. The following defined terms used in this
Agreement shall have the meanings specified below:
"AFFECTED EMPLOYEES" shall mean those NYPH employees
identified in EXHIBIT 7.
"AFFILIATE" shall mean, as to any entity, any other entity that,
directly or indirectly, Controls, is Controlled by or is under common
Control with such entity.
"AGREEMENT" shall mean this Master Information Technology Services
Agreement between NYPH and Vendor.
"BANKRUPTCY LAWS" shall have the meaning set forth in SECTION 25.05.
"BASE FEES" shall mean the fees payable by NYPH to Vendor with respect
to each Contract Year as set forth in EXHIBIT 9, as adjusted each
Contract Year as described in EXHIBIT 9.
"BENCHMARKER" shall mean the third party designated by NYPH from time
to time upon 30 days' notice to Vendor to conduct the Benchmarking
Process.
"BENCHMARKING PROCESS" shall mean the objective measurement and
comparison process (utilizing baselines and standards agreed upon by
NYPH and Vendor) established by NYPH and Vendor, which shall include an
audit of the Service Levels to verify that the Service Levels measure
the applicable performance criteria that the Parties intended to
measure and that the Service Levels are being achieved.
"BENCHMARK RESULTS" shall mean the final results of the Benchmarking
Process delivered by the Benchmarker in a written report to each of
NYPH and Vendor, including any supporting
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documentation requested by NYPH or Vendor to analyze the results of the
Benchmarking Process.
"BENCHMARK REVIEW PERIOD" shall mean the 30 day period following
receipt by NYPH and Vendor of the Benchmark Results.
"CENTURY COMPLIANT" shall mean, with respect to Software, Tools and
Machines, that such Software, Tools and Machines shall be capable of
accounting for all calculations using a century and date sensitive
algorithm for the year 2000 notwithstanding the fact that the year 2000
is a leap year.
"CHANGE(S)" shall mean any change to the Services, the Software used to
provide the Services or the Machines used to provide the Services that
would materially alter the functionality, performance standards or
technical environment of the Software used to provide the Services or
the Machines used to provide the Services, the manner in which the
Services are provided, the composition of the Services or the cost to
NYPH of the Services.
"CHANGE CONTROL PROCEDURES" shall mean the written description of the
change control procedures applicable to any Changes under this
Agreement.
"CHANGE IN CONTROL" shall mean, with respect to any entity, the (1)
consolidation or merger of such entity with or into any third party
(other than the consolidation or merger of such entity with a third
party in which such entity is the survivor), (2) sale, transfer or
other disposition of all or substantially all of the assets of such
entity, (3) acquisition by any other party, or group of other parties
acting in concert, including any acquisition pursuant to any
consolidation or merger, of beneficial ownership of (a) 50 percent or
more (or such lesser percentage that constitutes Control) of the
outstanding voting securities or other ownership interests of such
entity or (b) 30 percent or more of the outstanding voting securities
or other ownership interests of such entity, if within one year after
such acquisition there is a change in at least 50% of the members of
the board of directors or similar governing body of such entity.
"COMMENCEMENT DATE" shall mean November 16, 1999.
"CONFIDENTIAL INFORMATION" of the NYPH Group or Vendor shall mean all
information and documentation of the NYPH Group and Vendor,
respectively, whether disclosed to or accessed by the NYPH Group or
Vendor in connection with this Agreement, including (1) with respect to
the NYPH Group, all NYPH Data and all information of the NYPH Group or
its patients, personnel, customers, suppliers, contractors and other
third parties doing business with the NYPH Group, (2) with respect to
NYPH and Vendor, the terms of this Agreement and (3) any information
developed by reference to or use of the NYPH Group's or Vendor's
information; provided, however, that except to the extent otherwise
provided by Law, the term "Confidential Information" shall not include
information that (a) is independently developed by the recipient, as
demonstrated by the recipient's written records, without violating the
disclosing Party's proprietary rights, (b) is or becomes publicly known
(other than through unauthorized disclosure), (c) is disclosed by the
owner of such information to a third party free of any obligation of
confidentiality, (d) is already
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known by the recipient at the time of disclosure, as demonstrated by
the recipient's written records, and the recipient has no obligation of
confidentiality other than pursuant to this Agreement or any
confidentiality agreements between NYPH and Vendor entered into before
the Commencement Date or (e) is rightfully received by a Party free of
any obligation of confidentiality, provided that (i) such recipient has
no knowledge that such information is subject to a confidentiality
agreement and (ii) such information is not of a type or character that
a reasonable person would have regarded it as confidential.
"CONSENTS" shall mean the NYPH Consents and the Vendor Consents,
collectively.
"CONTRACT YEAR" shall mean, in the case of the first Contract Year, the
period from the Commencement Date until December 31, 2000, and
thereafter each 12-month period commencing upon the completion of the
immediately preceding Contract Year.
"CONTROL" shall mean, with respect to any entity, the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of such entity, whether through the
ownership of voting securities (or other ownership interest), by
contract or otherwise.
"CRITICAL MILESTONES" shall have the meaning set forth in SECTION
18.07.
"CRITICAL MILESTONE CREDIT" shall have the meaning set forth in SECTION
18.07.
"CRITICAL SERVICES" shall mean those services described as Critical
Services in EXHIBIT 4.
"DATA SAFEGUARDS" shall have the meaning set forth in SECTION 10.03.
"DEDICATED PROJECT STAFF" shall mean the members of the Project Staff
who (a) immediately prior to the Commencement Date were NYPH employees
or (b) whose primary job responsibilities prior to the date of any
determination consist of providing Services to the NYPH Group under
this Agreement, except in the case of clause (b), any member of the
Project Staff who (1) will be assigned to the NYPH Group account on a
temporary basis or for project specific Services and (2) is identified
to and approved by NYPH prior to the assignment.
"DEFAULT CURE PERIOD" shall have the meaning set forth in SECTION
25.03.
"DEFAULT NOTICE" shall mean the NYPH Default Notice or the Vendor
Default Notice, as applicable.
"DEFERRAL MILESTONES" shall have the meaning set forth in SECTION
18.07.
"DEFERRAL MILESTONE AMOUNT" shall have the meaning set forth in SECTION
18.07.
"DESIGNATED SERVICE LEVELS" shall mean the service levels and standards
for the performance of the Designated Services as described in EXHIBIT
10.
"DESIGNATED SERVICES" shall have the meaning set forth in SECTION 3.01.
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"DISCRETIONARY CAPITAL FEES" shall mean the fees payable by NYPH to
Vendor with respect to each Contract Year as set forth in EXHIBIT 9 for
projects to be performed during such Contract Year as identified in
ATTACHMENT A of EXHIBIT 1, as such schedule may be amended with respect
to each Contract Year in accordance with EXHIBIT 1.
"DRP" shall mean a disaster recovery plan (also referred to in EXHIBIT
25 as the business recovery plan).
"END DATE" shall have the meaning set forth in SECTION 27.02.
"END-USERS" shall mean users of the Services, as specified by NYPH.
"EXTENSION PERIOD" shall have the meaning set forth in SECTION 2.02.
"FCG" shall mean First Consulting Group, Inc., a Delaware corporation.
"FCG HOLDINGS" shall mean FCG Management Holdings, Inc., a Delaware
corporation and wholly-owned subsidiary of FCG.
"FEES" shall mean the Base Fees, the Out-of-Scope Fees, the
Discretionary Capital Fees, the Transition Fees and any other amounts
payable by NYPH to Vendor pursuant to this Agreement.
"FORCE MAJEURE EVENT" shall have the meaning set forth in SECTION
17.02.
"GOVERNMENTAL APPROVALS" shall mean the NYPH Governmental Approvals and
the Vendor Governmental Approvals, collectively.
"GOVERNMENTAL AUTHORITY" shall mean any Federal, state, municipal,
local, territorial, or other governmental department, regulatory
authority, judicial or administrative body, whether domestic, foreign
or international.
"GOVERNANCE MODEL" shall mean the governance model set forth in EXHIBIT
11.
"IMPROVED TECHNOLOGY" shall mean any information processing technology
developments, including new developments in Software and Machines, that
could reasonably be expected to have an impact on the NYPH Group's
business, to the extent known and made available within or by Vendor.
"INDEMNIFIED PARTY" shall have the meaning set forth in SECTION 28.03.
"INDEMNIFYING PARTY" shall have the meaning set forth in SECTION 28.03.
"INITIAL AGREEMENT EXPIRATION DATE" shall mean December 31, 2006.
"INITIAL CUSTOMER SATISFACTION SURVEY" shall have the meaning set forth
in SECTION 9.01.
"INITIAL TERM" shall have the meaning set forth in SECTION 2.01.
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"INSOLVENCY EVENT" shall have the meaning set forth in SECTION 25.05.
"INTEREST" shall mean the rate of interest from time to time announced
by The Wall Street Journal as the prime rate plus 2 percent, but in no
event to exceed the highest lawful rate of interest.
"KEY PERSONNEL" shall mean the Vendor Account Manager and such other
individuals specified in EXHIBIT 12 who are operational direct reports
to the Vendor Account Manager.
"LAW" shall mean any declaration, decree, directive, legislative
enactment, order, ordinance, regulation, rule or other binding
restriction of or by any Governmental Authority.
"LOSSES" shall mean any and all damages, fines, penalties,
deficiencies, losses, liabilities (including settlements and judgments)
and expenses (including interest, court costs, reasonable fees and
expenses of attorneys, accountants and other experts and professionals
or other reasonable fees and expenses of litigation or other
proceedings or of any claim, default or assessment).
"MACHINES" shall mean computers and related equipment, including
central processing units and other processors, controllers, modems,
communications and telecommunications equipment (voice, data and
video), cables, storage devices, printers, terminals, other peripherals
and input and output devices, and other tangible mechanical and
electronic equipment intended for the processing, input, output,
storage, manipulation, communication, transmission and retrieval of
information and data.
"MANAGED AGREEMENT INVOICE(S)" shall mean any invoice submitted by
third parties in connection with the Managed Agreements.
"MANAGED AGREEMENTS" shall mean the third party agreements for which
NYPH retains financial responsibility and that are set forth in EXHIBIT
3, as may be amended from time to time by NYPH.
"MILESTONES" shall have the meaning set forth in SECTION 18.07.
"NEW EQUIPMENT" shall mean any Machines or Software obtained by Vendor
on behalf and at the expense of NYPH, as requested by NYPH pursuant to
SECTION 3.08.
"NEW INTELLECTUAL PROPERTY" shall mean the NYPH New Intellectual
Property and the Vendor New Intellectual Property, collectively.
"NYPH" shall mean New York and Presbyterian Hospital (doing business as
NewYork- Presbyterian Hospital), a New York not-for-profit corporation.
"NYPH AGENTS" shall mean the agents, subcontractors and representatives
of the NYPH Group, other than Vendor and Vendor Agents.
"NYPH BUDGET" shall mean the NYPH operating budget and capital budget
for information technology services set forth in EXHIBIT 8, as updated
by NYPH from time to time.
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"NYPH COMPETITOR" shall mean those entities listed in EXHIBIT 24, as
may be amended from time to time by NYPH; provided that if Vendor
objects to the addition of any new entity to such list, the Parties
shall negotiate in good faith an appropriate resolution addressing the
objections of Vendor.
"NYPH CONSENTS" shall mean all licenses, consents, permits, approvals
and authorizations that are necessary to allow (1) Vendor and Vendor
Agents to use (a) the NYPH Group's owned and leased assets, (b) the
services provided for the benefit of the NYPH Group under the NYPH
Group's third party services contracts and (c) the NYPH Software and
(2) Vendor to manage and administer the Managed Agreements pursuant to
ARTICLE 7.
"NYPH CONTRACT MANAGER" shall have the meaning set forth in SECTION
6.01.
"NYPH DATA" shall mean all data and information (1) submitted to Vendor
or Vendor Agents by or on behalf of the NYPH Group, (2) obtained,
developed or produced by Vendor or Vendor Agents in connection with
this Agreement (other than data relating solely to Vendor's business or
employees), or (3) to which Vendor or Vendor Agents have access in
connection with the provision of the Services.
"NYPH GOVERNMENTAL APPROVALS" shall mean all licenses, consents,
permits, approvals and authorizations of any Governmental Authority, or
any notice to any Governmental Authority, the granting of which is
required by Law, relating to the NYPH Group's business or receipt of
the Services.
"NYPH GROUP" shall mean NYPH, Affiliates of NYPH and any of NYPH's
sponsored and affiliated hospitals and other entities set forth in
EXHIBIT 21, as such Exhibit may be updated by NYPH from time to time.
"NYPH NEW INTELLECTUAL PROPERTY" shall mean (1) any Software or Tools,
modifications or enhancements to Software or Tools and Related
Documentation and any processes, methodologies, procedures and trade
secrets developed pursuant to this Agreement by or on behalf of (a)
Vendor and any member of the NYPH Group or NYPH Agents jointly, (b)
Vendor Agents and any member of the NYPH Group or NYPH Agents jointly,
(c) Vendor, Vendor Agents, any member of the NYPH Group and NYPH Agents
jointly or (d) Vendor and/or Vendor Agents, if in the case of (d), such
item was specifically commissioned for development by the NYPH Group
pursuant to this Agreement and (2) Work Product.
"NYPH PROPRIETARY SOFTWARE" shall mean the Software, including the
Software set forth in EXHIBIT 5, and Related Documentation owned,
acquired or developed by or on behalf of the NYPH Group, excluding in
each case the Vendor New Intellectual Property, and used in connection
with the provision of the Services.
"NYPH PROPRIETARY TOOLS" shall mean the Tools and Related Documentation
owned, acquired or developed by or on behalf of the NYPH Group,
excluding in each case the Vendor New Intellectual Property, and used
in connection with the provision of the Services.
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"NYPH SERVICE LOCATION(S)" shall mean any NYPH Group service location
set forth in EXHIBIT 6 and any other service location owned or leased
by any member of the NYPH Group for which Vendor has received NYPH's
approval in accordance with SECTION 10.01.
"NYPH SOFTWARE" shall mean the NYPH Proprietary Software and the NYPH
Third Party Software.
"NYPH THIRD PARTY SOFTWARE" shall mean the Software, including the
Software set forth in EXHIBIT 5, and Related Documentation that is
licensed or leased by the NYPH Group from a third party and used in
connection with the provision of the Services.
"NYPH THIRD PARTY TOOLS" shall mean the Tools and Related Documentation
licensed or leased by the NYPH Group from a third party, and used in
connection with the provision of the Services.
"NYPH TOOLS" shall mean the NYPH Proprietary Tools and NYPH Third Party
Tools.
"OPERATING AGREEMENT" shall mean the Amended and Restated Operating
Agreement of FCG Management Services, LLC dated November 8, 1999.
"OUT-OF-SCOPE FEES" shall mean the fees for the Out-of-Scope Services
as determined in accordance with SECTION 5.01.
"OUT-OF-SCOPE SERVICE(S)" shall mean any service that is outside the
scope of the Designated Services.
"OUT-OF-SCOPE SERVICE LEVEL(S)" shall mean any service level
established by Vendor and NYPH in connection with an Out-of-Scope
Service.
"PARTIES" shall mean NYPH and Vendor.
"PARTY" shall mean either NYPH or Vendor, as the case may be.
"PERFORMANCE CREDITS" shall mean the performance credits set forth in
EXHIBIT 10.
"PROCEDURES MANUAL" shall have the meaning set forth in SECTION 13.02.
"PROJECT STAFF" shall mean the personnel of Vendor and Vendor Agents
who provide the Services.
"REGULATORY REQUIREMENTS" shall mean the Laws to which the NYPH Group
is required to submit or voluntarily submits from time to time.
"RELATED DOCUMENTATION" shall mean, with respect to Software and Tools,
all materials, documentation, specifications, technical manuals, user
manuals, flow diagrams, file descriptions and other written information
that describes the function and use of such Software or Tools, as
applicable.
"RESIDUALS" shall have the meaning set forth in SECTION 14.05.
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"SERVICE LEVELS" shall mean the Designated Service Levels and the
Out-of-Scope Service Levels, collectively.
"SERVICE LOCATION(S)" shall mean any NYPH Service Location or Vendor
Service Location, as applicable.
"SERVICES" shall mean, collectively, the Designated Services, the
Out-of-Scope Services and the Transition Services being provided by
Vendor pursuant to this Agreement, and, during the Termination
Assistance Period, the Termination Assistance Services.
"SITE AGREEMENT" shall mean an agreement substantially in the form of
EXHIBIT 2 relating to the provision of Services by Vendor to NYPH or
other member of the NYPH Group.
"SOFTWARE" shall mean the source code and object code versions of any
applications programs, operating system software, computer software
languages, utilities, other computer programs and Related
Documentation, in whatever form or media, including the tangible media
upon which such applications programs, operating system software,
computer software languages, utilities, other computer programs and
Related Documentation are recorded or printed, together with all
corrections, improvements, updates and releases thereof.
"STATEMENT OF WORK" shall mean the Statement of Work set forth in
EXHIBIT 1.
"SYSTEMS" shall mean the Software and the Machines, collectively, used
to provide the Services.
"TERM" shall mean the Initial Term and any renewal or extension of the
Initial Term pursuant to SECTION 2.02.
"TERMINATION ASSISTANCE PERIOD" shall mean a period of time designated
by NYPH in the termination notice to Vendor, commencing on the date a
determination is made by NYPH that there will be an expiration or
termination of this Agreement and continuing for up to 12 months after
the expiration or termination of this Agreement, during which Vendor
shall provide the Termination Assistance Services in accordance with
ARTICLE 27.
"TERMINATION ASSISTANCE SERVICES" shall mean (1) the Services (and any
replacements or substitutions therefor), to the extent NYPH requests
such Services during the Termination Assistance Period, (2) Vendor's
cooperation with the NYPH Group or another service provider designated
by NYPH in the transfer of the Services to the NYPH Group or such other
service provider in order to facilitate the transfer of the Services to
the NYPH Group or such other service provider and (3) any Out-of-Scope
Services requested by NYPH in order to facilitate the transfer of the
Services to the NYPH Group or another service provider designated by
NYPH.
"TOOLS" shall mean any Software development and performance testing
tools, know-how, methodologies, processes, technologies or algorithms
and Related Documentation.
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"TRANSITION FEES" shall mean the fees payable by NYPH to Vender over
the Term as set forth in EXHIBIT 9.
"TRANSITION KEY PERSONNEL" shall have the meaning set forth in SECTION
4.01.
"TRANSITION PLAN" shall mean the transition plan set forth in EXHIBIT
13.
"TRANSITION SCHEDULE" shall mean the schedule for the transition of
services and functions to Vendor from the NYPH Group, as set forth in
the Transition Plan.
"TRANSITION SERVICES" shall have the meaning set forth in SECTION 4.01.
"USE" shall mean the right to load, execute, store, transmit, display,
copy, maintain, modify, enhance, create derivative works, make and have
made.
"VENDOR" shall mean FCG Management Services, LLC, a Delaware limited
liability company.
"VENDOR ACCOUNT MANAGER" shall have the meaning set forth in SECTION
12.01(1).
"VENDOR AGENTS" shall mean the agents, subcontractors and
representatives of Vendor.
"VENDOR CONSENTS" shall mean all licenses, consents, permits, approvals
and authorizations that are necessary to allow (1) Vendor and Vendor
Agents to use (a) the Vendor Software and Tools, (b) any assets owned
or leased by Vendor and (c) any third party services retained by Vendor
to provide the Services during the Term and the Termination Assistance
Period, (2) Vendor and Vendor Agents to assign to the NYPH Group the
New Intellectual Property and (3) the NYPH Group and NYPH Agents to Use
the Vendor Third Party Software and Vendor Third Party Tools (except in
each case, the Vendor Excluded Products) after the expiration or
termination of this Agreement.
"VENDOR EXCLUDED PRODUCTS" shall mean the Vendor Software, Vendor Tools
and Vendor Machines identified as Vendor Excluded Products on EXHIBIT
19, as may be amended by the Parties from time to time.
"VENDOR NEW INTELLECTUAL PROPERTY" shall mean any Software or Tools,
modifications or enhancements to Software or Tools and Related
Documentation and any processes, methodologies, procedures and trade
secrets developed solely by Vendor and/or Vendor Agents pursuant to
this Agreement, excluding the NYPH New Intellectual Property.
"VENDOR EMPLOYMENT DATE" shall have the meaning set forth in EXHIBIT
18.
"VENDOR GOVERNMENTAL APPROVALS" shall mean all licenses, consents,
permits, approvals and authorizations of any Governmental Authority, or
any notice to any Governmental Authority, the granting of which is
required by Law, relating to Vendor's business or the provision of the
Services.
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"VENDOR MACHINES" shall mean those Machines leased or owned by Vendor
and Vendor Agents that are used by Vendor and Vendor Agents to provide
the Services, including those Machines set forth on EXHIBIT 19.
"VENDOR PROPRIETARY SOFTWARE" shall mean the Software and Related
Documentation owned, acquired or developed by or on behalf of Vendor,
excluding in each case the NYPH New Intellectual Property, and used in
connection with the Services or with any NYPH Software.
"VENDOR PROPRIETARY TOOLS" shall mean the Tools and Related
Documentation owned, acquired or developed by or on behalf of Vendor,
excluding in each case the NYPH New Intellectual Property, and used in
connection with the provision of the Services.
"VENDOR SERVICE LOCATION(S)" shall mean any Vendor service location set
forth in EXHIBIT 6 and any other service location approved by NYPH
pursuant to SECTION 10.01.
"VENDOR SOFTWARE" shall mean the Vendor Proprietary Software and the
Vendor Third Party Software.
"VENDOR THIRD PARTY SOFTWARE" shall mean the Software and Related
Documentation licensed, leased or otherwise obtained by Vendor from a
third party that is used in connection with the Services or with any
NYPH Software.
"VENDOR THIRD PARTY TOOLS" shall mean the Tools and Related
Documentation licensed, leased or otherwise obtained by Vendor from a
third party and used in connection with the provision of the Services.
"VENDOR TOOLS" shall mean the Vendor Proprietary Tools and Vendor Third
Party Tools.
"WORK PRODUCT" shall mean literary works or other works of authorship
created under this Agreement, including manuals, training materials and
documentation, but excluding Software, Tools and Related Documentation.
1.02 INCORPORATION AND REFERENCES. In this Agreement and the Exhibits
to this Agreement:
(1) the Exhibits to this Agreement are hereby incorporated into and deemed
part of this Agreement and all references to this Agreement shall
include the Exhibits to this Agreement;
(2) references to an Exhibit, Section or Article shall be to such Exhibit
to, or Section or Article of, this Agreement unless otherwise provided;
(3) references to any Law shall mean references to such Law in changed or
supplemented form or to a newly adopted Law replacing a previous Law;
and
(4) references to and mentions of the word "including" or the phrase "E.G."
shall mean "including, without limitation."
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1.03 HEADINGS. The Article and Section headings, Table of Contents and
Table of Exhibits are for reference and convenience only and shall not be
considered in the interpretation of this Agreement.
1.04 INTERPRETATION OF DOCUMENTS. Except as otherwise expressly set
forth in the body of this Agreement or in any of the Exhibits, in the event of a
conflict between the provisions in the body of the this Agreement and the
Exhibits, the provisions in the body of this Agreement shall prevail.
ARTICLE 2 TERM.
2.01 INITIAL TERM. The initial term of this Agreement shall commence
on the Commencement Date and continue until 23:59 (Eastern Time) on the Initial
Agreement Expiration Date, or such earlier date upon which this Agreement may be
terminated in accordance with its terms (the "INITIAL TERM").
2.02 RENEWAL AND EXTENSION. Unless this Agreement is terminated
earlier pursuant to ARTICLE 25, NYPH shall notify Vendor at least 180 days prior
to the Initial Agreement Expiration Date or the end of the applicable Extension
Period, as the case may be, as to whether NYPH desires to renew this Agreement.
If NYPH provides Vendor with notice that it does not desire to renew this
Agreement, this Agreement shall expire on the Initial Agreement Expiration Date
or the end of the applicable Extension Period, as the case may be. If NYPH
provides Vendor with notice that it desires to renew this Agreement and the
Parties have not agreed on the terms and conditions applicable to the renewal of
this Agreement 60 days prior to the Initial Agreement Expiration Date or the end
of the applicable Extension Period, as the case may be, then the term of this
Agreement shall extend, at the option of NYPH, for up to three additional terms
of 12 months per term (each such additional 12-month term, an "EXTENSION
PERIOD"), at the charges, terms and conditions in effect as of the Initial
Agreement Expiration Date or the end of the applicable Extension Period, as the
case may be, subject to an appropriate cost of living adjustment to the Fees as
agreed to by the Parties.
ARTICLE 3 SERVICES, ETC.
3.01 DESIGNATED SERVICES. Commencing on the Commencement Date and
continuing throughout the Term, Vendor shall be responsible pursuant to Site
Agreements for providing to NYPH and the members of the NYPH Group, as directed
by NYPH:
(1) the services, functions and responsibilities described in this
Agreement (including the services, functions, responsibilities and
projects described in the Statement of Work but excluding any services,
functions, responsibilities and projects identified as being provided
by third parties who are not Vendor Agents);
(2) the services, functions and responsibilities being performed prior to
the Commencement Date by the Affected Employees, even if such services,
functions or responsibilities are not specifically described in this
Agreement; provided that any such service, function or responsibility
is similar or related to the services, functions and responsibilities
described in the Statement of Work; and
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(3) any services, functions or responsibilities not specifically described
in this Agreement, but which are required for the proper performance
and delivery of the Services (clauses (1) through (3) of this Section,
collectively, the "DESIGNATED SERVICES").
Subject to the provisions of SECTION 3.07, ARTICLE 18 and SECTION 25.01, Vendor
shall increase or decrease the amount of the Services according to the NYPH
Group's request for the Services.
3.02 IMPROVED TECHNOLOGY. In providing the Services to the NYPH Group,
Vendor shall (1) jointly with NYPH, identify the least cost/highest benefit
methods to implement technology changes and proven methodologies and, upon
NYPH's approval and at NYPH's expense, implement technology changes and proven
methodologies, (2) maintain a level of technology at the NYPH Group that allows
the NYPH Group to take advantage of technological advances in order to remain
competitive in the markets which the NYPH Group serves consistent with the Fees
and the NYPH Budget, (3) provide to NYPH Improved Technology for NYPH's
evaluation in connection with the Services and (4) meet with NYPH at least once
during every 60 day period during the Term in accordance with the procedures
agreed upon by the NYPH Contract Manager and the Vendor Account Manager to
inform NYPH of any new information processing technology Vendor is developing or
information technology trends and directions of which Vendor is otherwise aware
that could reasonably be expected to have an impact on the NYPH Group's
business.
3.03 LICENSES AND PERMITS. Vendor shall obtain and maintain all Vendor
Governmental Approvals. NYPH shall obtain and maintain all NYPH Governmental
Approvals.
3.04 CHANGES IN LAW AND REGULATIONS.
(1) Each Party shall promptly identify and notify the other of any changes
in Law, including, in the case of NYPH, Regulatory Requirements, that
may relate to the NYPH Group's use of the Services or Vendor's delivery
of the Services. Vendor and NYPH shall work together to identify the
impact of such changes on how the NYPH Group uses, and Vendor delivers,
the Services. Each Party shall be responsible for any fines and
penalties arising from its own noncompliance with any Law relating to
the delivery or use of the Services.
(2) Subject to the provisions of this Section, Vendor's obligations to
perform the Services under this Agreement shall apply even in the event
of any changes in Law, including Regulatory Requirements. If such
changes prevent Vendor from performing its obligations under this
Agreement, Vendor shall develop and, upon NYPH's approval, implement a
suitable workaround until such time as Vendor can perform its
obligations under this Agreement without such workaround; provided,
however, that if such workaround results in an increase in the charges
to NYPH under this Agreement or a material increase in any retained
costs or expenses of NYPH, then NYPH shall have the right to terminate
the affected portion of the Services without regard to SECTION 25.03
and SECTION 25.04. Upon the implementation of such workaround, the
Parties shall negotiate and implement an appropriate adjustment to the
applicable Fees.
3.05 TECHNICAL ARCHITECTURE AND PRODUCT STANDARDS. Vendor shall comply
with NYPH's information management technical architecture and product standards
set forth in EXHIBIT 14, which shall be updated in accordance with the Statement
of Work.
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3.06 KNOWLEDGE SHARING. Upon NYPH's request, Vendor shall meet with
representatives of the NYPH Group in order to (1) provide information and
training to the NYPH Group with respect to the Systems and Services in
accordance with the Statement of Work, (2) explain how the Systems work and
should be operated, (3) explain how the Services are provided and (4) provide
such documentation as is reasonably available for the NYPH Group to understand
and operate the Systems and understand and provide the Services after the
expiration or termination of this Agreement.
3.07 INSOURCING. Upon at least 60 days' notice to Vendor and subject to
the applicable provisions of ARTICLE 18, NYPH may insource, obtain from a third
party or otherwise reduce all, or any portion, of the Services; provided that in
no event shall the Base Fees payable in any Contract Year as a result thereof be
less than (1) the lesser of (a) 90% of the Base Fees for the first Contract Year
and (b) 90% of the Base Fees for the Contract Year immediately preceding the
Contract Year in which the reduction of Services will take place or (2) 75% of
the Base Fees for the First Contract Year. No action taken by NYPH permitted by
this SECTION 3.07 shall be considered a termination, in whole or in part, of
this Agreement.
3.08 PROCUREMENT. At NYPH's request and in accordance with the
Procedures Manual, Vendor shall obtain on behalf of NYPH any New Equipment.
Vendor shall (1) use commercially reasonable efforts to identify suppliers with
the most favorable terms (including the lowest cost) available to Vendor for any
New Equipment and (2) upon NYPH's request, acquire the New Equipment on NYPH's
behalf. Vendor shall, upon NYPH's request, (a) purchase the New Equipment on
behalf of NYPH, (b) lease, or arrange for a third party to lease such New
Equipment to NYPH or (c) license, or arrange for a third party to license such
New Equipment to NYPH. NYPH shall pay to Vendor, the supplier, third party
lessor or third party licensor, as applicable, the purchase, lease or license
fees, as applicable, in respect of the New Equipment. Except as otherwise agreed
in writing by the Parties or as otherwise provided in this Agreement all rights
in and title to any New Equipment purchased by Vendor on behalf of NYPH and paid
for by NYPH shall belong to NYPH.
3.09 REPORTS. Vendor shall provide to NYPH, in a form
acceptable to NYPH, the on-line, graphical performance, utilization and status
reports set forth in EXHIBIT 16.
ARTICLE 4 TRANSITION.
4.01 TRANSITION SERVICES. Vendor shall perform all functions and
services necessary to accomplish the transition of the NYPH Group's information
technology operations and capabilities to Vendor on or before the applicable
dates set forth in the Transition Plan (the "TRANSITION SERVICES"). The
Transition Services shall be performed in accordance with the Transition Plan
and without causing a material disruption to the NYPH Group's business. Within
10 days of the Commencement Date, Vendor shall designate an individual for each
of the NYPH Group's facilities and functions being transitioned in accordance
with this Agreement who shall be responsible for managing and implementing the
Transition Services with respect to such functions or services (the "TRANSITION
KEY PERSONNEL"). Until the completion of the applicable Transition Services,
each Transition Key Personnel shall review with the NYPH Contract Manager the
status of the Transition Services for which that individual is responsible as
often as may be reasonably requested by the NYPH Contract Manager. Vendor shall
not replace or reassign any Transition Key Personnel prior to completion of the
applicable Transition Services unless NYPH consents to
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such reassignment or replacement or such Transition Key Personnel (i)
voluntarily resigns from Vendor, (ii) is dismissed by Vendor, (iii) fails to
perform his or her duties and responsibilities pursuant to this Agreement or
(iv) dies or is unable to work due to his or her disability. If NYPH decides
that any Transition Key Personnel should not continue in that position, then
NYPH may in its sole discretion and upon notice to Vendor, subject to applicable
Law, require removal of such Transition Key Personnel from the Project Staff.
Vendor shall, as soon as reasonably practicable, replace such Transition Key
Personnel.
4.02 EXTENSIONS TO THE TRANSITION SCHEDULE.
(a) In the event NYPH and Vendor agree to extend the Transition Schedule,
NYPH and Vendor may negotiate an appropriate adjustment to the Fees.
(b) In the event NYPH or Vendor incurs costs in connection with the
extension of the Transition Schedule for which the other Party is
responsible pursuant to this Section, the Party incurring the costs
shall be obligated to use all commercially reasonable efforts to
minimize such costs.
4.03 SHUT-DOWN SERVICES. Upon NYPH's request and the consent of the
applicable member of the NYPH Group, Vendor shall administer and manage the
closing of any NYPH Group facilities or disposal of any NYPH Group assets in
connection with the functions and services being transitioned to Vendor in
accordance with this Agreement. In connection with such disposal, Vendor shall,
upon NYPH's request, identify and solicit, upon terms and prices no less
favorable to NYPH than Vendor would obtain for its own account, purchasers of
NYPH Group's assets used in connection with the applicable functions or
services. All proceeds from assets disposed of pursuant to this Section shall be
paid to NYPH.
ARTICLE 5 OUT-OF-SCOPE SERVICES.
5.01 OUT-OF-SCOPE SERVICES. NYPH may from time to time during the Term
request that Vendor perform an Out-of-Scope Service. Upon receipt of such a
request from NYPH, Vendor shall provide NYPH with a written proposal for such
Out-of-Scope Service which shall include: (1) a description of the services,
function and responsibilities Vendor anticipates performing in connection with
such Out-of-Scope Service; (2) a schedule for commencing and completing such
Out-of-Scope Service; (3) Vendor's prospective fees for such Out-of-Scope
Service, including a detailed breakdown of such fees; (4) when appropriate, a
description of any new Software or Machines to be provided by Vendor in
connection with such Out-of-Scope Service; (5) when appropriate, the Software
and Machines and run-time requirements necessary to develop and operate any new
Software; (6) a description of the human resources necessary to provide the
Out-of-Scope Service; (7) when appropriate, a list of any existing Software or
Machines included in or to be used in connection with such Out-of-Scope Service;
(8) when appropriate, acceptance test criteria and procedures for any new
Software or any products, packages or services; and (9) such other information
requested by NYPH. Vendor shall not begin performing any Out-of-Scope Service
until NYPH Contract Manager has provided Vendor with authorization to perform
the Out-of-Scope Service from the NYPH Contract Manager and the Parties have
amended the applicable Site Agreement, if appropriate, or with respect to any
new member of the NYPH Group, have executed a new Site Agreement.
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5.02 THIRD PARTY SERVICES. Notwithstanding any request made to Vendor
by NYPH pursuant to SECTION 5.01 or any other provision in this Agreement, NYPH
shall have the right to contract with a third party to perform any Out-of-Scope
Service. Upon NYPH's request, Vendor shall assist NYPH in identifying qualified
third party suppliers to provide Out-of-Scope Services. In the event NYPH
contracts with a third party to perform any Out-of-Scope Service, Vendor shall
cooperate in good faith with the NYPH Group and any such third party, to the
extent reasonably required in good faith by NYPH.
5.03 ADDITIONAL BUSINESS UNITS. NYPH reserves the right to add business
units to this Agreement. NYPH shall share such information with Vendor as may be
necessary for Vendor to determine which resources will be required to meet the
NYPH Group's needs. NYPH shall not be obligated to obtain the Services from
Vendor with respect to any additional entity or business unit or pursuant to an
acquisition.
ARTICLE 6 NYPH RESPONSIBILITIES.
6.01 NYPH CONTRACT MANAGER. NYPH shall appoint an individual (the "NYPH
CONTRACT MANAGER") who from the date of this Agreement shall serve as the
primary NYPH representative under this Agreement. The NYPH Contract Manager
shall (1) have overall responsibility for managing and coordinating the
performance of NYPH's obligations under this Agreement and (2) be authorized to
act for and on behalf of the NYPH Group with respect to all matters relating to
this Agreement. Notwithstanding the foregoing, the NYPH Contract Manager may,
upon notice to Vendor, delegate such of his or her responsibilities to other
NYPH employees, as the NYPH Contract Manager deems appropriate.
6.02 NYPH OBLIGATIONS. Commencing on the Commencement Date and
continuing throughout the term, NYPH shall be responsible for (a) fulfilling the
duties, functions and responsibilities expressly identified as NYPH
responsibilities in this Agreement (including those expressly identified as NYPH
responsibilities in the Statement of Work), and (b) advocating that other
members of the NYPH Group fulfill their respective duties, functions and
responsibilities under this Agreement (including the Statement of Work). In the
event any member of the NYPH Group does not fulfill its respective duties,
functions or responsibilities under this Agreement, the Parties will negotiate
in good faith to make appropriate changes to this Agreement
6.03 NYPH RESOURCES. Commencing on the Commencement Date and continuing
for so long as Vendor requires the same for the performance of the Services, the
NYPH Group shall provide to Vendor, at no charge to Vendor and subject to
SECTION 6.04, the following:
(1) the use of the space in the NYPH Group's premises that was utilized by
the Affected Employees as of the Commencement Date and any additional
space in the NYPH Group's premises that Vendor may from time to time
reasonably require in connection with the performance of the Services
(in accordance with each member of the NYPH Group's respective policy
and past practices), together with office furnishings, telephone
equipment and services, janitorial services, utilities (including air
conditioning), maintenance services and any additions or modifications
to such (in accordance with each member of the NYPH Group's respective
policy and past practices) as reasonably required by Vendor from time
to time in order to perform the Services in accordance with the Service
Levels in connection with the performance of the Services; provided
that (a) the Parties shall review and adjust the space provided to
Vendor as appropriate from time to time based upon the size of
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Project Staff among other appropriate factors and (b) the members of
the NYPH Group shall retain the right to allocate the use of space on
such members' premises, including that used by Vendor, in accordance
with its overall institutional needs and requirements; and
(2) for use by the Project Staff on the NYPH Group's premises, those
personal computers, workstations, terminals, printers and other
equipment utilized by the Affected Employees as of the Commencement
Date. All equipment provided by the NYPH Group shall remain the
property of the NYPH Group or its lessor and the NYPH Group shall be
financially responsible for maintaining such equipment as reasonably
required. NYPH approved upgrades for such equipment recommended by
Vendor will be funded by NYPH in accordance with the NYPH Budget.
Vendor shall be responsible for maintaining the Vendor Machines.
6.04 USE OF NYPH FACILITIES. Except as expressly provided in this
Agreement, Vendor shall use the NYPH Service Locations for the sole and
exclusive purpose of providing the Services. Use of such facilities by Vendor
does not constitute a leasehold interest in favor of Vendor or any of Vendor's
customers.
(1) Vendor shall use the NYPH Service Locations in a reasonably efficient
manner. Vendor shall not operate the space in a manner that
unnecessarily increases facility costs incurred by the NYPH Group.
(2) Vendor and Vendor Agents shall keep the NYPH Service Locations in good
order, not commit or permit waste or damage to such facilities, not use
such facilities for any unlawful purpose or act and comply with all of
NYPH's standard policies and procedures as in effect from time to time,
including and procedures for the physical security of the NYPH Service
Locations.
(3) Vendor shall permit NYPH and NYPH Agents to enter into those portions
of the NYPH Service Locations occupied by Vendor's staff at any time.
(4) Vendor shall not make any improvements or changes involving structural,
mechanical or electrical alterations to the NYPH Service Locations
without NYPH's approval.
(5) When the NYPH Service Locations are no longer required for performance
of the Services, Vendor shall return such locations to NYPH in
substantially the same condition as when Vendor began using such
locations, ordinary wear and tear and NYPH approved alterations
excepted.
ARTICLE 7 CONTRACT ADMINISTRATION.
7.01 MANAGED AGREEMENTS.
(1) Vendor shall manage, administer and maintain the Managed Agreements.
Vendor shall provide NYPH with reasonable notice of any renewal,
termination or cancellation dates and fees with respect to the Managed
Agreements. Vendor shall not renew, modify, terminate or cancel, or
request or grant any consents or waivers under, any Managed Agreements
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without the consent of the appropriate member of the NYPH Group. Any
fees or charges or other liability or obligation imposed upon NYPH in
connection with (a) any such renewal, modification, termination or
cancellation of, or consent or waiver under, the Managed Agreements,
obtained or given without NYPH's consent, or (b) Vendor's failure to
comply with the terms of the Managed Agreements shall be paid or
discharged, as applicable, by Vendor unless, in each case, NYPH
subsequently ratifies Vendor's actions with respect to the Managed
Agreements.
(2) The Parties shall use commercially reasonable efforts to secure, as
soon as reasonably practicable, copies of the Managed Agreements. NYPH
shall reimburse Vendor for any material incremental third party costs
incurred by Vendor and not otherwise contemplated by the Base Fees with
respect to (i) any Managed Agreements for which the Parties are unable
to obtain copies, to the extent such incremental costs are a result of
such failure to obtain copies or (ii) any third party agreement added
to EXHIBIT 3 after the date hereof, to the extent such incremental
costs are a result of the failure of the Parties to include such
agreement on EXHIBIT 3.
7.02 MANAGED AGREEMENT INVOICES. Vendor shall (1) receive all Managed
Agreement Invoices, (2) review and correct any errors in any such Managed
Agreement Invoices in a timely manner and (3) submit such Managed Agreement
Invoices to NYPH within a reasonable period of time following receipt by Vendor
of such Managed Agreement Invoices. NYPH shall pay the Managed Agreement
Invoices received and approved by Vendor. NYPH shall only be responsible for
payment of the Managed Agreement Invoices and shall not be responsible to Vendor
for any management, administration or maintenance fees of Vendor in connection
with the Managed Agreement Invoices. NYPH shall be responsible for any late fees
in respect of the Managed Agreement Invoices, provided that Vendor submitted the
applicable Managed Agreement Invoices to NYPH for payment within a reasonable
period of time following receipt by Vendor of such Managed Agreement Invoices.
If Vendor fails to submit a Managed Agreement Invoice to NYPH for payment in
accordance with the preceding sentence, Vendor shall be responsible for any
discount not received or any late fees in respect of such Managed Agreement
Invoice.
7.03 PERFORMANCE UNDER MANAGED AGREEMENTS. Each party shall promptly
notify the other Party of any breach of, or misuse or fraud in connection with,
any Managed Agreements of which the notifying Party becomes aware and shall
cooperate with the other Party to prevent or stay any such breach, misuse or
fraud. Each Party shall pay all amounts due for any penalties or charges
(including amounts due to a third party to the extent caused by such Party's
failure to promptly notify the other Party pursuant to the preceding sentence),
associated taxes, legal expenses and other incidental expenses incurred by such
Party as a result of such Party's non-performance of its obligations under this
Agreement with respect to the Managed Agreements.
ARTICLE 8 SERVICE LEVELS.
8.01 DESIGNATED SERVICE LEVELS. Vendor shall perform the Designated
Services in accordance with the Designated Service Levels and in accordance with
EXHIBIT 10. The Designated Service Levels shall be established and measured by
the applicable dates set forth in EXHIBIT 10.
8.02 OUT-OF-SCOPE SERVICE LEVELS. Vendor shall provide the Out-of-Scope
Services at least at the Out-of-Scope Service Levels applicable to such
Out-of-Scope Services.
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8.03 ADJUSTMENT OF SERVICE LEVELS. The Parties (1) shall review the
Service Levels for the preceding 12 months during the last calendar quarter of
every Contract Year, (2) with respect to any Service Levels that require
periodic adjustment pursuant to this Agreement or are no longer appropriate
because of an increase, decrease or change to the Services, shall adjust the
Service Levels for the subsequent Contract Year and (3) with respect to all
other Service Levels, may adjust the Service Levels for the subsequent Contract
Year. In addition, either Party may, at any time upon notice to the other Party,
initiate negotiations to review and, upon agreement by the Parties, adjust any
Service Level which such Party in good faith believes is inappropriate at the
time.
8.04 ROOT-CAUSE ANALYSIS. With respect to Vendor's failure to provide
the Services in accordance with the applicable Service Levels, Vendor shall, as
soon as reasonably practicable, (1) perform a root-cause analysis to identify
the cause of such failure, (2) provide NYPH with a report detailing the cause
of, and procedure for correcting, such failure, (3) upon NYPH's approval of such
procedure, implement such procedure and (4) provide NYPH with assurance
satisfactory to NYPH that such failure will not recur following the completion
of the implementation of the procedure.
8.05 MEASUREMENT AND MONITORING TOOLS. As of the Commencement Date, or
such later dates set forth in the Transition Plan, and in accordance with
EXHIBIT 10, Vendor shall implement the measurement and monitoring Tools and
procedures required to measure and report (as contemplated by SECTION 3.09)
Vendor's performance of the Services against the applicable Service Levels. Such
measurement and monitoring and procedures shall (1) permit reporting at a level
of detail sufficient to verify compliance with the Service Levels and (2) be
subject to audit by NYPH or its designee. Vendor shall provide NYPH and its
designees with information concerning access to such measurement and monitoring
Tools and procedures upon request, for inspection and verification purposes.
8.06 CONTINUOUS IMPROVEMENT AND BEST PRACTICES. Vendor shall, on a
continuous basis (1) identify ways to improve the Service Levels and (2)
identify and apply proven techniques and Tools, consistent with the Fees and the
NYPH Budget, from other installations within its operations that would benefit
NYPH's information services organization or End-Users either operationally or
financially. Vendor shall, from time to time, include updates with respect to
such improvements, techniques and Tools in the reports provided to NYPH pursuant
to SECTION 8.05.
8.07 PERFORMANCE CREDITS. In the event of a failure to provide the
Services in accordance with the applicable Service Levels, Vendor shall incur
the Performance Credits identified in and according to the schedule to be agreed
upon in accordance with EXHIBIT 10. The Performance Credits shall not limit
NYPH's right to recover, in accordance with this Agreement, and without
duplication, other Losses incurred by the NYPH Group as a result of such
failure. If the Performance Credits incurred exceed the amount agreed to by the
Parties in accordance with EXHIBIT 10, NYPH may, upon notice to Vendor,
terminate this Agreement, in whole or in part, without regard to SECTION 25.03.
Nothing in this Section shall be deemed to limit or obviate NYPH's right to
terminate this Agreement pursuant to SECTION 25.03.
ARTICLE 9 CUSTOMER SATISFACTION AND BENCHMARKING.
9.01 INITIAL CUSTOMER SATISFACTION SURVEY. Prior to the Commencement
Date, Vendor shall submit to NYPH, for NYPH's approval, the identity of the
unaffiliated third party that
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shall conduct an initial customer satisfaction survey. Upon NYPH's approval of
such third party, Vendor shall engage such third party to conduct an initial
customer satisfaction survey for affected End-Users (the "INITIAL CUSTOMER
SATISFACTION SURVEY"). The Initial Customer Satisfaction Survey shall be (1) of
a content and scope acceptable to NYPH, (2) administered in accordance with
procedures approved by NYPH and (3) otherwise mutually acceptable to the
Parties. The Initial Customer Satisfaction Survey shall be completed within 90
days of the Commencement Date. The results of the Initial Customer Satisfaction
Survey shall be the baseline for measurement of the performance improvements
described in SECTION 9.02. The fees and expenses for the Initial Customer
Satisfaction Survey and all subsequent customer satisfaction surveys shall be
paid by NYPH.
9.02 CUSTOMER SATISFACTION SURVEY. Vendor shall, upon NYPH's request
not more than once every Contract Year following the preparation of the Initial
Customer Satisfaction Survey, engage an unaffiliated third party to conduct a
customer satisfaction survey in respect of those aspects of the Services
designated by NYPH. The survey shall, at a minimum, cover a representative
sampling of End-Users and senior management of the NYPH Group. The timing,
content, scope and method of the survey shall be consistent with the Initial
Customer Satisfaction Survey and shall be subject to NYPH's approval. Vendor
agrees that customer satisfaction shall be measured as a Service Level pursuant
to SECTION 8.01.
9.03 BENCHMARKING OVERVIEW. The Benchmarking Process shall be conducted
by the Benchmarker. In the event (1) a Benchmarker is no longer providing the
services required to conduct the Benchmarking Process, (2) NYPH and Vendor agree
that the Benchmarker should be replaced or (3) NYPH and Vendor determine that
another Benchmarker would be needed to take advantage of another system or
methodology utilized by such Benchmarker to conduct the Benchmarking Process,
NYPH shall promptly designate a replacement Benchmarker. The fees and expenses
charged by the Benchmarker shall be paid by NYPH.
9.04 BENCHMARKING PROCESS. At the option of NYPH, the Benchmarker shall
conduct the Benchmarking Process annually in respect of each Contract Year.
Within 30 days after the beginning of each Contract Year for which NYPH
determines the Benchmarking Process shall be conducted, or such later date
agreed upon by the Parties, NYPH and Vendor shall (1) agree upon the period
during which the Benchmarking Process shall be conducted in such Contract Year
and (2) review the Benchmarking Process used during the preceding Contract Year
and adjust the Benchmarking Process as may be agreed upon by the Parties for the
current Contract Year. Any adjustment to the Benchmarking Process that causes a
material increase or decrease in the costs of such Process shall be considered
in periodic negotiations of and adjustments to the Base Fees.
9.05 BENCHMARK RESULTS REVIEW PERIOD AND ADJUSTMENTS. NYPH and Vendor
shall review the Benchmark Results during the Benchmark Review Period. The
Benchmark Results shall be used by the Parties in connection with NYPH's annual
budget setting process and the annual review of Service Levels described in
EXHIBIT 10.
ARTICLE 10 SERVICE LOCATIONS.
10.01 SERVICE LOCATIONS. The Services shall be provided to the NYPH
Group from (1) the NYPH Service Locations, (2) the Vendor Service Locations and
(3) any other location for which Vendor has received NYPH's approval, to be
given in NYPH's sole discretion. Any incremental expenses incurred by a Party
and not otherwise contemplated by the Base Fees as a
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result of a relocation to, or use of, any location other than the locations set
forth on EXHIBIT 6 requested or made by the other Party shall be the
responsibility of the Party making the request or taking the applicable action.
Vendor and Vendor Agents may not provide or market services to a third party
from a NYPH Service Location without NYPH's consent.
10.02 PHYSICAL SAFETY AND SECURITY PROCEDURES. Vendor shall maintain
and enforce at the Vendor Service Locations safety and security procedures that
are at least equal to the most stringent of the following: (1) industry
standards for locations similar to the Vendor Service Locations; (2) those
procedures applicable to the NYPH Service Locations as may be reasonably amended
by NYPH from time to time during the Term; and (3) any higher standard otherwise
agreed upon by the Parties. Vendor shall comply with the safety and security
procedures that are applicable to the NYPH Service Locations, as may be
reasonably amended by NYPH from time to time during the Term, including the
safety and security procedures set forth in EXHIBIT 17.
10.03 DATA SECURITY. Vendor shall establish and maintain safeguards
against the destruction, loss, alteration or unauthorized access of NYPH Data in
the possession of Vendor (the "DATA SAFEGUARDS") that shall be no less rigorous
than those data security policies set forth in EXHIBIT 17. Vendor shall revise
and maintain the Data Safeguards at NYPH's request. In the event Vendor intends
to implement a change to the Data Safeguards (including pursuant to NYPH's
request), Vendor shall notify NYPH and, upon NYPH's approval, implement such
change. In the event either Party or its Agents discovers or is notified of a
breach or potential breach of security relating to NYPH Data, such Party shall
immediately (1) notify the NYPH Contract Manager or the Vendor Account Manager,
as applicable, of such breach or potential breach and (2) if the applicable NYPH
Data was in the possession of Vendor or Vendor Agents at the time of such breach
or potential breach, Vendor shall (a) investigate and remediate the effects of
the breach or potential breach and (b) provide NYPH with assurance satisfactory
to NYPH that such breach or potential breach will not recur.
10.04 SECURITY RELATING TO COMPETITORS. If (1) Vendor intends to
provide the Services from a Service Location that is shared with a third party
or third parties or (2) any part of the business of Vendor or any such third
party is now or in the future competitive with the NYPH Group's business, then,
prior to providing any of the Services from such a Service Location, Vendor
shall develop a process, subject to NYPH's prior approval, to restrict access in
any such shared environment to the NYPH Group's Confidential Information so that
Vendor's employees or Vendor Agents providing services to such competitive
business do not have access to the NYPH Group's Confidential Information.
ARTICLE 11 HUMAN RESOURCES.
Transitioning of employees of NYPH to Vendor shall be effected in
accordance with the terms and conditions set forth in EXHIBIT 18.
ARTICLE 12 VENDOR STAFF.
12.01 VENDOR ACCOUNT MANAGER. Vendor shall appoint an individual (the
"VENDOR ACCOUNT MANAGER") who from the date of this Agreement shall serve, on a
full-time basis, as the primary Vendor representative under this Agreement.
Vendor's appointment of any Vendor Account Manager shall be subject to NYPH's
prior approval. The Vendor Account Manager shall
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(1) have overall responsibility for managing and coordinating the performance of
Vendor's obligations under this Agreement and (2) be authorized to act for and
on behalf of Vendor with respect to all matters relating to this Agreement.
12.02 KEY PERSONNEL. With respect to the Key Personnel set forth in
EXHIBIT 12, the Parties agree as follows:
(1) All Key Personnel shall be dedicated to the NYPH Group account on a
full-time basis for so long as they remain an employee of Vendor,
unless such employee is replaced, removed or reassigned in accordance
with (3) or (4) below. The achievement of the Service Levels by Vendor
will be a key element in the compensation of the Key Personnel.
(2) Vendor shall consult with NYPH prior to assigning an individual to a
Key Personnel position.
(3) Vendor shall not replace or reassign (a) the Vendor Account Manager for
two years from the Commencement Date or (b) the other Key Personnel for
18 months from the Commencement Date, unless NYPH consents to such
reassignment or replacement or such Key Personnel (i) voluntarily
resigns from Vendor, (ii) is dismissed by Vendor, (iii) fails to
perform his or her duties and responsibilities pursuant to this
Agreement or (iv) dies or is unable to work due to his or her
disability.
(4) If NYPH decides that any Key Personnel should not continue in that
position, then NYPH may in its sole discretion and upon notice to
Vendor, subject to applicable Law, require removal of such Key
Personnel from the Project Staff. Vendor shall, as soon as reasonably
practicable, replace such Key Personnel.
(5) Vendor shall maintain backup procedures and conduct the replacement
procedures for the Key Personnel in such a manner so as to assure an
orderly succession for any Key Personnel who is replaced.
12.03 PROJECT STAFF. Vendor shall appoint individuals with suitable
training and skills to the Project Staff. Upon the request of NYPH, Vendor shall
provide NYPH with a list of all Vendor personnel dedicated full-time to the
Project Staff. Except as otherwise approved by NYPH (in its sole discretion),
those Vendor personnel located on the NYPH Group's premises may only provide
services on such premises which support the NYPH Group's operations. Vendor
shall not reassign any Dedicated Project Staff to other positions within Vendor,
FCG or any Affiliate of either without the consent of NYPH. The foregoing shall
not limit the right of Vendor to dismiss any member of the Project Staff. Vendor
shall notify NYPH as soon as possible, but no event later than 3 business days,
after dismissing or reassigning any member of the Project Staff whose normal
work location is at a NYPH Service Location.
12.04 SUBCONTRACTORS. Prior to engaging any subcontractor to perform
any of the Services, Vendor shall notify NYPH of the identity of the proposed
subcontractor and shall obtain NYPH's approval of such subcontractor. Prior to
amending, modifying or otherwise supplementing any subcontract relating to the
Services, Vendor shall notify NYPH of the proposed amendment, modification or
supplement and shall obtain NYPH's approval thereof.
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(1) No subcontracting shall release Vendor from its responsibility for its
obligations under this Agreement. Vendor shall be responsible for the
work and activities of each of the Vendor Agents, including compliance
with the terms of this Agreement. Vendor shall be responsible for all
payments to its subcontractors.
(2) Vendor shall promptly pay for all services, materials, equipment and
labor used by Vendor in providing the Services and Vendor shall keep
the NYPH Group's premises free of all liens.
12.05 CONDUCT OF VENDOR PERSONNEL. While at the NYPH Service Locations,
Vendor and Vendor Agents shall (1) comply with the requests, standard rules and
regulations of the NYPH Group regarding safety and health, personal and
professional conduct (including adhering to general safety practices or
procedures) generally applicable to such NYPH Service Locations and (2)
otherwise conduct themselves in a businesslike manner. Vendor shall cause the
Project Staff to maintain and enforce the confidentiality provisions of this
Agreement. If NYPH notifies Vendor that a particular member of the Project Staff
is not conducting himself or herself in accordance with this Section, Vendor
shall promptly investigate the matter and take appropriate action which may
include (a) removing the applicable person from the Project Staff and providing
NYPH with prompt notice of such removal and replacing the applicable person with
a similarly qualified individual or (b) take other appropriate disciplinary
action to prevent a recurrence. In the event of multiple violations of this
Section by a particular member of the Project Staff, Vendor shall promptly
remove the individual from the Project Staff.
12.06 NON-COMPETITION. Neither Vendor nor any of its Affiliates shall
assign any Key Personnel or member of the Dedicated Project Staff to the account
of any NYPH Competitor without NYPH's prior consent (a) while such Key Personnel
or member of the Dedicated Project Staff, as the case may be, is assigned to the
NYPH Group account and (b) for a period of two years following the date that
such Key Personnel or member of the Dedicated Project Staff, as the case may be,
is removed from, or ceases to provide services in connection with, the NYPH
Group account, unless in the case of (b) above, such assignment is after the
Term and (i) such Key Personnel or member of the Dedicated Project Staff
executes a confidentiality agreement in a form acceptable to NYPH naming the
members of the NYPH Group as third party beneficiaries or (ii) Vendor provides
NYPH assurance satisfactory to NYPH that the confidentiality of the NYPH Group
Confidential Information will be preserved.
ARTICLE 13 MANAGEMENT AND CONTROL.
13.01 GOVERNANCE MODEL. The NYPH Group and Vendor shall interact in
accordance with the procedures set forth in EXHIBIT 11.
13.02 PROCEDURES MANUAL. Within 120 days after the Commencement Date,
Vendor shall develop and deliver to NYPH, in the form and scope agreed upon by
NYPH and Vendor, a management procedures manual (the "PROCEDURES MANUAL"). The
Procedures Manual shall include the topics set forth in EXHIBIT 22. Vendor shall
periodically prepare and provide to NYPH updates to such Procedures Manual to
reflect any changes in the procedures described therein as soon as practicable
after such changes are made.
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13.03 CHANGE CONTROL PROCEDURES. Within 90 days after the Commencement
Date, Vendor shall deliver to NYPH, for its review and approval, the Change
Control Procedures. The Change Control Procedures shall provide, at a minimum,
that:
(1) No Change shall be implemented without NYPH's approval, except as may
be necessary on a temporary basis to maintain the continuity of the
Services.
(2) With respect to all Changes, Vendor shall (a) other than those Changes
made on a temporary basis to maintain the continuity of the Services,
schedule Changes so as not to unreasonably interrupt the NYPH Group's
business operations, (b) prepare and deliver to NYPH each month a
rolling schedule for ongoing and planned Changes for the next
three-month period and (c) monitor the status of Changes against the
applicable schedule.
(3) With respect to any Change made on a temporary basis to maintain the
continuity of the Services, Vendor shall document and provide to NYPH
notification of the Change no later than the next business day after
the Change is made.
Vendor shall update the Change Control Procedures as necessary and shall provide
such updated Change Control Procedures to NYPH for its approval.
ARTICLE 14 PROPRIETARY RIGHTS.
14.01 NYPH SOFTWARE AND NYPH TOOLS. NYPH hereby grants to Vendor,
during the Term and the Termination Assistance Period and solely to provide the
Services, a non-exclusive, non-transferable, limited right to have access to and
(1) Use the NYPH Proprietary Software and NYPH Proprietary Tools, (2) Use, to
the extent permissible under the applicable third party agreements, the NYPH
Third Party Software and NYPH Third Party Tools and (3) Use, to the extent
permissible under the applicable third party agreements, any Related
Documentation in NYPH's possession on or after the Commencement Date. Vendor may
sublicense, to the extent permissible under the applicable third party
agreements, to Vendor Agents the right to have access to and Use the NYPH
Software and the NYPH Tools solely to provide those Services that such Vendor
Agents are responsible for providing.
14.02 VENDOR SOFTWARE AND TOOLS. Vendor shall provide the NYPH Group
with access to the Vendor Software and Vendor Tools during the Term and during
the Termination Assistance Period. NYPH shall have the right to approve any
Vendor Software and Vendor Tools prior to Vendor's use of such Vendor Software
and Vendor Tools to provide the Services. Vendor hereby grants to the NYPH Group
a global, perpetual, irrevocable, fully paid-up, non-exclusive, non-transferable
license to Use, and sublicense and to permit a third party to Use solely in
connection with providing goods or services to or purchasing goods or services
from the NYPH Group, (1) the Vendor Proprietary Software and Vendor Proprietary
Tools, excluding in each case the Vendor Excluded Products, and (2) to the
extent permissible under the applicable third party agreements, the Vendor Third
Party Software and Vendor Third Party Tools being used to provide the Services
as of the date of expiration or termination of this Agreement. Upon NYPH's
request, Vendor shall provide NYPH with a list of all Vendor Software and Vendor
Tools being used to provide the Services as of the date of such request.
14.03 NEW INTELLECTUAL PROPERTY.
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(1) All NYPH New Intellectual Property shall be owned by the applicable
member of the NYPH Group. The applicable member of the NYPH Group shall
have all right, title and interest, including worldwide ownership of
copyright and patent, in and to the NYPH New Intellectual Property and
all copies made from it. Subject to SECTION 14.04 below, to the extent
permitted by applicable Laws, Vendor hereby irrevocably assigns,
transfers and conveys, and shall cause Vendor Agents to assign,
transfer and convey, to the applicable member of the NYPH Group without
further consideration all of its right, title and interest in and to
such NYPH New Intellectual Property, including all rights of patent,
copyright, trade secret or other proprietary rights in and to such
materials. Vendor acknowledges that the NYPH Group and the successors
and permitted assigns of the NYPH Group shall have the right to obtain
and hold in their own names any intellectual property rights in and to
the NYPH New Intellectual Property. Vendor agrees to execute any
documents or take any other actions as may reasonably be necessary, or
as NYPH may request, to perfect the NYPH Group's ownership of any such
NYPH New Intellectual Property. NYPH hereby grants to Vendor, solely to
provide the Services, a non-exclusive, non-transferable, limited right
to have access to and Use the NYPH New Intellectual Property. Vendor
may sublicense to Vendor Agents the right to have access to and Use the
NYPH New Intellectual Property solely to provide those Services that
such Vendor Agents are responsible for providing and as may otherwise
be agreed to by the Parties.
(2) All Vendor New Intellectual Property shall be owned by Vendor. Vendor
shall have all right, title and interest, including worldwide ownership
of copyright and patent, in and to the Vendor New Intellectual Property
and all copies made from it. NYPH acknowledges that Vendor and the
successors and permitted assigns of Vendor shall have the right to
obtain and hold in their own names any intellectual property rights in
and to the Vendor New Intellectual Property. Vendor hereby grants to
the NYPH Group a global, perpetual, irrevocable, fully paid-up,
non-exclusive, transferable license to Use and sublicense, and to
permit a third party to Use, the Vendor New Intellectual Property.
14.04 RESIDUALS. Neither Party shall be restricted pursuant to this
Agreement from using any general information technology ideas, concepts,
know-how or techniques that are mentally retained in the unaided memories of a
Party's employees (and not intentionally memorized for the purpose of later
recording or use) ("RESIDUALS"); provided that (1) in the case of Vendor, such
Residuals do not include any patient, personnel, financial, or other business
information or other Confidential Information of the NYPH Group, (2) in the case
of NYPH, such Residuals do not include any Confidential Information of Vendor,
and (3) the use of such Residuals does not misappropriate trade secret rights or
infringe upon the copyright, patent or other proprietary rights of the other
Party.
14.05 LIMITATION ON RIGHTS. Any intellectual property rights granted or
maintained pursuant to this Agreement are subject to the requirements of 35
U.S.C. Sections 200 ET SEQ., as amended, and implementing regulations and
policies, to the extent applicable.
14.06 NYPH GROUP'S INTELLECTUAL PROPERTY. The Parties acknowledge that
the NYPH Data, the NYPH Software, the NYPH Tools and the Related Documentation
include intellectual property of members of the NYPH Group other than NYPH.
Except with respect to the NYPH Software set forth on EXHIBIT 5 and the NYPH
Data, NYPH Software, NYPH Tools and Related Documentation specifically set forth
in the Site Agreements, no license or other right to use
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such intellectual property is granted by this Agreement and Vendor will not
administer or Use any such intellectual property of any NYPH Group member
without that NYPH Group member's consent.
ARTICLE 15 DATA.
15.01 OWNERSHIP OF NYPH DATA. All NYPH Data is, or will be, and shall
remain the property of the applicable member of the NYPH Group. Without NYPH's
approval (in its sole discretion), NYPH Data shall not be, (1) used by Vendor or
Vendor Agents other than in connection with providing the Services, (2)
disclosed, sold, assigned, leased or otherwise provided to third parties by
Vendor or Vendor Agents or (3) commercially exploited by or on behalf of Vendor
or Vendor Agents. Vendor hereby irrevocably assigns, transfers and conveys, and
shall cause Vendor Agents to assign, transfer and convey, to the applicable
member of the NYPH Group without further consideration all of its and their
right, title and interest in and to NYPH Data. Upon request by NYPH, Vendor
shall execute and deliver, and shall cause Vendor Agents to execute and deliver,
any financing statements or other documents that may be necessary or desirable
under any Law to preserve, or enable the NYPH Group to enforce, its rights with
respect to NYPH Data.
15.02 CORRECTION OF ERRORS. Vendor shall promptly correct any errors or
inaccuracies in NYPH Data and the reports delivered to NYPH under this
Agreement, to the extent caused by Vendor or Vendor Agents.
15.03 RETURN OF DATA. Upon request by NYPH at any time during the Term
and upon expiration or termination of this Agreement, Vendor shall (1) promptly
return to NYPH, in the format and on the reasonably available media requested by
NYPH, all or any part of NYPH Data and (2) erase or destroy all or any part of
NYPH Data in Vendor's possession, in each case to the extent so requested by
NYPH. Any archival tapes containing NYPH Data shall be used by Vendor and Vendor
Agents solely for back-up purposes.
ARTICLE 16 CONSENTS.
Vendor, at its own expense, shall obtain, maintain and comply
with the Vendor Consents. NYPH, at its own expense, shall obtain, maintain and
comply with the NYPH Consents.
ARTICLE 17 CONTINUED PROVISION OF SERVICES.
17.01 DISASTER RECOVERY PLAN.
(1) Vendor shall implement each DRP upon the declaration of a disaster (as
defined in the DRP) by NYPH and shall reinstate the Critical Services
within the time periods set forth in the DRP after the occurrence of
such disaster. In the event the Critical Services are not reinstated
within the time periods set forth in the DRP after the occurrence of a
disaster as a result of a breach of this Agreement by Vendor, NYPH may
terminate this Agreement, in whole or in part, without regard to
SECTION 25.03. In the event of a disaster, Vendor shall not increase
its Fees under this Agreement.
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(2) Vendor shall develop, submit to NYPH for NYPH's review, and upon NYPH's
approval implement a revised DRP with respect to the Services under
each Site Agreement as provided in the Statement of Work. Until such
time as the revised DRP is approved by NYPH in accordance with this
Section, Vendor shall comply with and implement upon the declaration of
a disaster (as defined in EXHIBIT 25) the DRP set forth in EXHIBIT 25.
17.02 FORCE MAJEURE. If and to the extent that a Party's performance of
any of its obligations pursuant to this Agreement is prevented, hindered or
delayed by fire, flood, earthquake, elements of nature or acts of God, acts of
war, terrorism, riots, civil disorders, rebellions or revolutions, or any other
similar cause beyond the reasonable control of such Party (each, a "FORCE
MAJEURE EVENT"), and such non-performance, hindrance or delay could not have
been prevented by reasonable precautions, then the non-performing, hindered or
delayed Party shall be excused for such non-performance, hindrance or delay, as
applicable, of those obligations affected by the Force Majeure Event for as long
as such Force Majeure Event continues and such Party continues to use its best
efforts to recommence performance whenever and to whatever extent possible
without delay, including through the use of alternate sources, workaround plans
(including the DRP to the extent not affected by the Force Majeure Event) or
other means. The Party whose performance is prevented, hindered or delayed by a
Force Majeure Event shall immediately notify the other Party of the occurrence
of the Force Majeure Event and describe in reasonable detail the nature of the
Force Majeure Event.
17.03 ALTERNATE SOURCE. If any Force Majeure Event prevents, hinders or
delays performance of the Services for 36 hours, in the case of Critical
Services, or more than three days, in the case of all other Services, NYPH may
procure such Services from an alternate source without regard to SECTION 3.07.
In the event that Vendor fails to provide such Services as a result of a breach,
or a failure to perform, any of its obligations under this Agreement, Vendor
shall reimburse NYPH for the costs and expenses incurred by the NYPH Group in
procuring such Services, to the extent that those costs and expenses exceed the
Fees for such Services. If the Force Majeure Event continues to prevent, hinder
or delay performance of the Services for more than five days, in the case of
Critical Services, or more than 14 days, in the case of all other Services, NYPH
may terminate this Agreement, in whole or in part, as of a date specified by
NYPH in a termination notice to Vendor, without regard to SECTION 3.07 or
SECTION 25.03.
17.04 NO PAYMENT FOR UNPERFORMED SERVICES. Except as provided in
SECTION 17.03, nothing in this Article shall limit NYPH's obligation to pay any
Fees; provided, however, that if Vendor fails to provide the Services in
accordance with this Agreement due to the occurrence of a Force Majeure Event,
the Fees shall be adjusted in a manner such that NYPH is not responsible for the
payment of any Fees for Services that Vendor fails to provide.
17.05 ALLOCATION OF RESOURCES. Whenever a Force Majeure Event or a
disaster causes Vendor to allocate limited resources between or among Vendor's
customers, Vendor shall not provide to any other customers of Vendor priority
over NYPH. In addition, in no event shall Vendor redeploy or reassign any Key
Personnel to another account in the event of a Force Majeure Event.
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ARTICLE 18 PAYMENTS AND INVOICING.
18.01 FEES. In consideration of Vendor providing the Designated
Services, NYPH shall pay to Vendor the Fees. Except as expressly set forth in
this Agreement, there shall be no charge or fees payable by NYPH in respect of
Vendor's performance of its obligations pursuant to this Agreement.
18.02 PAYMENT OF FEES. Vendor shall invoice NYPH for the Designated
Services and the Fees shall be due and payable to Vendor in accordance with
EXHIBIT 9.
18.03 TIME OF PAYMENT. Any sum due Vendor pursuant to this Agreement
for which payment is not otherwise specified shall be due and payable 90 days
after receipt by NYPH of an invoice from Vendor.
18.04 DETAILED INVOICES. Vendor shall provide invoices with varying
degrees of detail (E.G., per End-User, department, project, site), as requested
by NYPH.
18.05 ADJUSTMENTS TO FEES. Except as set forth in EXHIBIT 9, there
shall be no periodic adjustments to the Fees.
18.06 EXPENSES. Except as expressly set forth in this Agreement, all
costs and expenses relating to the Services are included in the Fees and shall
not be charged to or reimbursed by NYPH.
18.07 CRITICAL MILESTONES. In connection with the development of the
Transition Plan, by no later than December 31 1999, NYPH and Vendor shall
develop a list of deferral milestones (the "DEFERRAL MILESTONES") and critical
milestones (the "CRITICAL MILESTONES", together with the Deferral Milestones,
the "MILESTONES") relating to Vendor's obligations pursuant to ARTICLE 4 and,
for each Milestone, (1) a description of the applicable triggering event from
which achievement of that Milestone shall be measured, (2) the duration of time
from the triggering event for the completion of that Milestone, (3) in the case
of the Deferral Milestones, an amount of the Base Fees that NYPH may defer with
respect to that Deferral Milestone in the event Vendor fails to meet such
Deferral Milestone (the "DEFERRAL MILESTONE AMOUNT") and (4) in the case of the
Critical Milestones, an amount of money that Vendor will provide as a credit in
the event Vendor fails to meet such Critical Milestone (the "CRITICAL MILESTONE
CREDIT"). EXHIBIT 13 contains lists of events and related information, including
Milestone dates, that NYPH and Vendor agree shall be included in the final list.
After development of the final list, if, as a result of Vendor's failure to
perform its obligations pursuant to this Agreement, Vendor fails to complete (a)
any Critical Milestone by the specified completion date, Vendor shall incur the
Critical Milestone Credit associated with such Critical Milestone and shall
provide NYPH with a credit in the amount of such Critical Milestone Credit on
the invoice immediately following the incurrence of such Critical Milestone
Credit or (b) any Deferral Milestone by the specified completion date, NYPH may
defer payment of the applicable Deferral Milestone Amount until such Deferral
Milestone has been completed. NYPH's rights described in this Section shall not
limit NYPH's right to recover other Losses incurred by the NYPH Group as a
result of such failure or to terminate this Agreement pursuant to SECTION 25.03.
18.08 RIGHTS OF SET-OFF. With respect to any amount that (1) should be
reimbursed to a Party or (2) is otherwise payable to a Party pursuant to this
Agreement, such Party may deduct the entire amount owed to the other Party
against the amounts owed by such Party to the other Party under this Agreement.
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18.09 PRORATION. All periodic Fees under this Agreement are to be
computed on a calendar month basis and shall be prorated on a per diem basis for
any partial month.
18.10 REFUNDABLE ITEMS; PREPAID EXPENSES. In the event Vendor receives
during the Term any refund, credit or other rebate (including deposits) in
connection with a Managed Agreement that is attributable to periods prior to the
Commencement Date or for which NYPH retained financial responsibility after the
Commencement Date, then Vendor shall promptly (1) notify NYPH of such refund,
credit or rebate and (2) pay to NYPH the full amount of such refund, credit or
rebate. Vendor shall reimburse NYPH for all prepaid amounts related to the
Services to the extent such Services were not provided to the NYPH Group.
18.11 UNUSED CREDITS. Any unused credits against future payments owed
to either Party by the other pursuant to this Agreement shall be paid to the
applicable Party within 30 days after the earlier of the expiration or
termination of this Agreement.
18.12 MOST FAVORED CUSTOMER. The Fees for any Out-of-Scope Service
shall be at least as low as Vendor's lowest charges for similar services to
Vendor's best customer, including any divisions or Affiliates of Vendor. Upon
NYPH's request, Vendor shall notify NYPH that this Section has not been
contradicted with respect to any given Out-of-Scope Service by any transaction
entered into by Vendor during the period in which such Out-of-Scope Service is
provided to the NYPH Group. If Vendor is unable to provide such notice because
of a transaction entered into by Vendor contradicting this Section, Vendor shall
offer to NYPH a reduction in the Fees, including, if appropriate, the lowest
charges included in any such transaction.
ARTICLE 19 TAXES.
(1) The Fees paid to Vendor are inclusive of any applicable sales, use,
gross receipts, excise, value-added, withholding, personal property or
other taxes attributable to periods on or after the Commencement Date
based upon or measured by Vendor's cost in acquiring or providing
equipment, materials, supplies or services furnished or used by Vendor
in performing or furnishing the Services, including all personal
property and sales or use taxes, if any, due on the Vendor Machines. In
the event that a sales, use, excise, gross receipts or services tax is
assessed on the provision of the Services by Vendor to the NYPH Group
or on Vendor's charges to NYPH under this Agreement, however levied or
assessed, Vendor shall bear and be responsible for and pay the amount
of any such tax; provided that in the event any such tax increases
after the Commencement Date as a result of any change in Law or a
change in the tax status of NYPH, the Parties shall discuss in good
faith appropriate changes to this Agreement to address such changes. To
the extent that any sales, use, gross receipts, excise, value-added or
services tax is required by Law to be separately identified in Vendor's
billings to NYPH, Vendor shall separately identify the tax and assume
any and all responsibility for any non-compliance, including tax,
interest and penalty assessments except for any non-compliance
attributable to the failure of NYPH to provide any information with
respect to its tax status or business that is reasonably requested by
Vendor.
(2) Any taxes assessed, as determined by NYPH, including a gross-up
thereon, on the provision of the Services for a particular site
resulting from Vendor's relocating or rerouting the delivery of
Services for Vendor's convenience to, from or through a location other
than the
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Service Location used to provide the Services as of the Commencement
Date shall be paid by NYPH and NYPH shall receive a credit with respect
to the Fees invoiced under this Agreement equal to such payments made
pursuant to this subsection. Any taxes assessed, as determined by
Vendor, including a gross-up thereon, on the provision of the Services
for a particular site resulting from NYPH's relocating or rerouting the
delivery of Services for NYPH's convenience to, from or through a
location other than the Service Location used to provide the Services
as of the Commencement Date, shall be paid or reimbursed by NYPH.
(3) NYPH and Vendor shall each bear sole responsibility for all taxes,
assessments and other real property-related levies on its owned or
leased real property. Further, NYPH and Vendor shall each bear sole
responsibility for all taxes and other levies, if any, based on its net
income.
(4) NYPH and Vendor shall cooperate to segregate the Fees into the
following separate payment streams: (a) those for taxable Services; (b)
those for nontaxable Services; (c) those for which a sales, use or
other similar tax has already been paid; and (d) those for which Vendor
functions merely as a paying agent for NYPH in receiving goods,
supplies or services (including leasing and licensing arrangements)
that otherwise are nontaxable or have previously been subject to tax.
In addition, each of NYPH and Vendor shall reasonably cooperate with
the other to more accurately determine a Party's tax liability and to
minimize such liability, to the extent legally permissible. Each of
NYPH and Vendor shall provide and make available to the other any
resale certificates, information regarding out-of-state sales or use of
equipment, materials or services, and any other exemption certificates
or information requested by a Party.
ARTICLE 20 AUDITS.
20.01 SERVICES. Upon notice from NYPH, Vendor and Vendor Agents shall
provide the NYPH Group, NYPH Agents, and any of the NYPH Group's regulators,
including the U.S. Department of Health and Human Services, the U.S. Controller
General and their representatives, with access to and any assistance that they
may require with respect to the Service Locations and the Systems for the
purpose of performing audits or inspections of the Services and the business of
the NYPH Group relating to the Services. If any audit by an auditor designated
by the NYPH Group, a NYPH Agent or a regulatory authority results in Vendor
being notified that Vendor or Vendor Agents are not in compliance with any Law
or audit requirement, Vendor shall, and shall cause Vendor Agents to, promptly
take actions to comply with such Law or audit requirement. Vendor shall bear the
expense of any such response that is (1) required by a Law or audit requirement
relating to Vendor's business or (2) necessary due to Vendor's noncompliance
with any Law or audit requirement imposed on Vendor. To the extent the expense
is not payable by Vendor pursuant to the preceding sentence, NYPH shall bear the
expense of any such compliance that is (a) required by any Law or audit
requirement relating to the NYPH Group's business or (b) necessary due to the
NYPH Group's noncompliance with any Law or audit requirement imposed on the NYPH
Group. NYPH shall provide reasonable advance notice of any audit, shall perform
such audit only during regular business hours and shall conduct audits in such a
way as to minimize interference with Vendor's business or the provision of
Service by Vendor.
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20.02 FEES. Upon notice from NYPH, Vendor shall provide NYPH and NYPH
Agents and any of NYPH's regulators, including the U.S. Department of Health and
Human Services, the U.S. Controller General and their representatives, with
access to such financial records and supporting documentation as may be
requested by NYPH and NYPH and NYPH Agents may audit the Fees charged to NYPH to
determine if such Fees are accurate and in accordance with this Agreement.
(1) If, as a result of such audit, it is determined that Vendor has
overcharged NYPH, NYPH shall notify Vendor of the amount of such
overcharge and Vendor shall promptly pay to NYPH the amount of the
overcharge, plus Interest calculated from the date of receipt by Vendor
of the overcharged amount until the date of payment to NYPH.
(2) In addition to NYPH's rights set forth in SECTION 20.02(1), in the
event any such audit reveals an overcharge to NYPH of five percent or
more of a particular fee category, Vendor shall, at NYPH's option,
issue to NYPH a credit against the Base Fees or reimburse NYPH for the
cost of such audit up to an amount equal to 35 percent of such
overcharge.
20.03 RECORD RETENTION. Vendor shall retain records and supporting
documentation sufficient to document the Services and the Fees paid or payable
by NYPH under this Agreement in accordance with NYPH's then-current record
retention procedures, as in effect from time to time, in each case that have
been provided to Vendor or to which Vendor otherwise has access.
20.04 FACILITIES. Vendor shall provide to the NYPH Group and NYPH
Agents, on Vendor's premises (or, if the audit is being performed of a Vendor
Agent, the Vendor Agent's premises if necessary), space, office furnishings
(including lockable cabinets), telephone and facsimile services, utilities and
office-related equipment and duplicating services as the NYPH Group or such NYPH
Agents may reasonably require to perform the audits described in this Article to
the extent reasonably available.
ARTICLE 21 CONFIDENTIALITY.
21.01 GENERAL OBLIGATIONS. All Confidential Information relating to or
obtained from the NYPH Group or Vendor shall be held in confidence by the
recipient to the same extent and in at least the same manner as the recipient
protects its own confidential information. Neither NYPH nor Vendor shall
disclose, publish, release, transfer or otherwise make available Confidential
Information of, or obtained from, the other in any form to, or for the use or
benefit of, any person or entity without the disclosing Party's consent. Each of
the NYPH Group and Vendor shall, however, be permitted to disclose relevant
aspects of the other's Confidential Information to its officers, directors,
agents, professional advisors, contractors (including the Benchmarker),
subcontractors and employees and to the officers, directors, agents,
professional advisors, contractors, subcontractors and employees of its
affiliates, to the extent such disclosure is not restricted under any Managed
Agreements, any Consents or any Governmental Approvals and only to the extent
that such disclosure is reasonably necessary for the performance of its duties
and obligations or the determination, preservation or exercise of its rights and
remedies under this Agreement; provided, however, that the recipient shall take
all reasonable measures to ensure that Confidential Information of the
disclosing Party is not disclosed or duplicated in contravention of the
provisions of this Agreement by such officers, directors, agents, professional
advisors,
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contractors, subcontractors and employees. The obligations in this Section shall
not restrict any disclosure pursuant to any Law (provided that the recipient
shall give prompt notice to the disclosing Party of any disclosure required by
Law and shall reasonably cooperate with any efforts by the disclosing Party to
limit or seek a protective order over the required disclosure).
21.02 PATIENT INFORMATION. Vendor recognizes that during the course of
this engagement it may have access to Confidential Information relating to NYPH
Group patients. Vendor agrees to be bound by and comply with all applicable Laws
governing issues of confidentiality of patient records and other information
(which Laws shall supersede any applicable provisions hereof), including
restricting access to such Confidential Information only to the Project Staff
with a need to know such Confidential Information. Vendor further agrees to
notify NYPH of any and all requests by any source whatsoever to release
Confidential Information relating to NYPH Group patients prior to its release by
Vendor.
21.03 UNAUTHORIZED ACTS. Without limiting either Party's rights in
respect of a breach of this Article, each Party shall:
(1) promptly notify the other Party of any unauthorized possession, use or
knowledge, or attempt thereof, of the other Party's Confidential
Information by any person or entity that may become known to such
Party;
(2) promptly furnish to the other Party full details of the unauthorized
possession, use or knowledge, or attempt thereof, and assist the other
Party in investigating or preventing the recurrence of any unauthorized
possession, use or knowledge, or attempt thereof, of Confidential
Information;
(3) cooperate with the other Party in any litigation and investigation
against third parties deemed necessary by the other Party to protect
its proprietary rights; and
(4) promptly use its best efforts to prevent a recurrence of any such
unauthorized possession, use or knowledge, or attempt thereof, of
Confidential Information.
Each Party shall bear the cost it incurs as a result of compliance with this
Section.
ARTICLE 22 REPRESENTATIONS AND WARRANTIES.
22.01 BY NYPH. NYPH represents and warrants that:
(1) NYPH is a not-for-profit corporation, duly incorporated, validly
existing and in good standing under the Laws of New York;
(2) NYPH has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement;
(3) the execution, delivery and performance of this Agreement by NYPH (a)
has been duly authorized by NYPH and (b) will not conflict with, result
in a breach of or constitute a default under and other agreement to
which NYPH is a party or by which NYPH is bound;
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(4) NYPH is duly licensed, authorized or qualified to do business and is in
good standing in every jurisdiction in which a license, authorization
or qualification is required for the ownership or leasing of its assets
or the transaction of business of the character transacted by it,
except where the failure to be so licensed, authorized or qualified
would not have a material adverse effect on NYPH's ability to fulfill
its obligations under this Agreement;
(5) NYPH is in compliance in all material respects with all Laws applicable
to NYPH and has obtained all applicable permits and licenses required
of NYPH in connection with its obligations under this Agreement,
including the NYPH Consents and the NYPH Governmental Approvals; and
(6) there is no outstanding litigation, arbitrated matter or other dispute
to which NYPH is a party which, if decided unfavorably to NYPH, would
reasonably be expected to have a material adverse effect on Vendor's or
NYPH's ability to fulfill their respective obligations under this
Agreement.
22.02 BY VENDOR. Vendor represents and warrants that:
(1) Vendor is a limited liability company, duly formed, validly existing
and in good standing under the Laws of Delaware;
(2) Vendor has all requisite power and authority to execute, deliver and
perform its obligations under this Agreement;
(3) the execution, delivery and performance of this Agreement by Vendor (a)
has been duly authorized by Vendor and (b) will not conflict with,
result in a breach of or constitute a default under and other agreement
to which Vendor is a party or by which Vendor is bound;
(4) Vendor is duly licensed, authorized or qualified to do business and is
in good standing in every jurisdiction in which a license,
authorization or qualification is required for the ownership or leasing
of its assets or the transaction of business of the character
transacted by it, except where the failure to be so licensed,
authorized or qualified would not have a material adverse effect on
Vendor's ability to fulfill its obligations under this Agreement;
(5) Vendor is in compliance in all material respects with all Laws
applicable to Vendor and has obtained all applicable permits and
licenses required of Vendor in connection with its obligations under
this Agreement, including the Vendor Consents and the Vendor
Governmental Approvals; and
(6) there is no outstanding litigation, arbitrated matter or other dispute
to which Vendor is a party which, if decided unfavorably to Vendor,
would reasonably be expected to have a material adverse effect on
NYPH's or Vendor's ability to fulfill their respective obligations
under this Agreement.
22.03 DISCLAIMER. EXCEPT AS SPECIFIED IN THIS AGREEMENT, NEITHER
NYPH NOR VENDOR MAKES ANY OTHER WARRANTIES WITH RESPECT TO THE SERVICES OR
THE SYSTEMS AND EACH EXPLICITLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING THE
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IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A SPECIFIC PURPOSE.
ARTICLE 23 ADDITIONAL COVENANTS.
23.01 BY NYPH. NYPH covenants and agrees with Vendor that during the
Term and the Termination Assistance Period:
(1) NYPH shall comply with all Laws applicable to NYPH and the standards of
the Joint Commission on Accreditation of Healthcare Organizations.
Except as otherwise provided in this Agreement, NYPH shall obtain all
applicable permits and licenses required of NYPH in connection with its
obligations under this Agreement, including the NYPH Consents and the
NYPH Governmental Approvals; and
(2) the NYPH Proprietary Software set forth in EXHIBIT 5, along with any
enhancements, additions or modifications thereto performed by NYPH or
obtained by NYPH from a third party shall not infringe upon the
proprietary rights of any third party (except such infringement as may
have been caused by (a) Vendor's or Vendor Agents' misuse or
modification thereof or (b) Vendor's or Vendor Agents' use thereof in
combination with any product not furnished by a member of the NYPH
Group).
23.02 BY VENDOR. Vendor covenants and agrees with NYPH that during the
Term and the Termination Assistance Period:
(1) Vendor shall comply with all Laws applicable to Vendor and the
standards of the Joint Commission on Accreditation of Healthcare
Organizations. Vendor shall obtain all applicable permits and licenses
required of Vendor in connection with its obligations under this
Agreement, including the Vendor Consents and the Vendor Governmental
Approvals;
(2) none of the Services, the New Intellectual Property, the Vendor
Software, the Vendor Tools, the Vendor Machines, any enhancements or
modifications to the NYPH Software performed by Vendor or Vendor Agents
or any other resources or items provided to NYPH by Vendor or Vendor
Agents shall infringe upon the proprietary rights of any third party
(except such infringement as may have been caused by (a) the NYPH
Group's or NYPH Agents' misuse or modification thereof, (b) the NYPH
Group's or NYPH Agents' use thereof in combination with any product not
furnished by Vendor or (c) in the case of the NYPH New Intellectual
Property, the NYPH Group or NYPH Agents in connection with the
development of such New Intellectual Property);
(3) Vendor shall use commercially reasonable efforts to ensure that no
viruses or similar items are coded or introduced into the Systems.
Vendor agrees that, in the event a virus or similar item is found to
have been introduced into the Systems, Vendor shall assist the NYPH
Group in reducing the effects of the virus or similar item and, if the
virus or similar item causes a loss of operational efficiency or loss
of data, to assist the NYPH Group to the same extent to mitigate and
restore such losses;
(4) without the consent of NYPH, Vendor shall not insert into the Software
used to provide the Services any code that would have the effect of
disabling or otherwise shutting down all or
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PORTIONS HEREIN DENOTED WITH [**] HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE SEC UNDER A CONFIDENTIAL TREATMENT REQUEST
any portion of the Services. Vendor further represents and warrants
that, with respect to any disabling code that may be part of the
Software used to provide the Services, Vendor shall not invoke such
disabling code at any time, including upon expiration or termination of
this Agreement, without NYPH's consent;
(5) the Vendor Software, the Vendor Tools, the New Intellectual Property
and the Vendor Machines shall be Century Compliant, except, in the case
of NYPH New Intellectual Property, any failure of such NYPH New
Intellectual Property to be Century Compliant which is caused by the
NYPH Group or NYPH Agents in connection with the development of such
NYPH New Intellectual Property. All New Equipment shall be Century
Compliant. Upon NYPH's request, Vendor shall provide NYPH with test
scripts to validate that the Vendor Software, the Vendor Tools, the New
Intellectual Property and the Vendor Machines are Century Compliant and
determine the latest future date such Software is able to process;
(6) [**].
(7) [**].
ARTICLE 24 DISPUTE RESOLUTION.
24.01 NYPH CONTRACT MANAGER AND VENDOR ACCOUNT MANAGER. Any dispute
arising under this Agreement shall be considered in person or by telephone by
the NYPH Contract Manager and the Vendor Account Manager within seven business
days after receipt of a notice from either Party specifying the nature of the
dispute; provided, however, that a dispute relating to SECTION 15.03, ARTICLE 21
or ARTICLE 27 shall not be subject to this Section. Unless the NYPH Contract
Manager and the Vendor Account Manager otherwise agree in writing, either Party
may pursue its rights and remedies under this Agreement after the occurrence of
such meeting or telephone conversation. The Parties may mutually agree to
arbitrate any dispute arising under this Agreement.
24.02 CONTINUITY OF SERVICES. Vendor acknowledges that the timely and
complete performance of its obligations pursuant to this Agreement is critical
to the business and operations of the NYPH Group. Accordingly, in the event of a
dispute between NYPH and Vendor, Vendor shall continue to so perform its
obligations under this Agreement in good faith during the
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resolution of such dispute unless and until this Agreement is terminated in
accordance with the provisions hereof. In the event of such dispute, NYPH shall
continue to pay, in accordance with this Agreement, any outstanding, undisputed
Fees.
24.03 EXPEDITED DISPUTE RESOLUTION. Notwithstanding anything to the
contrary contained in this Agreement, in the event of a dispute relating to or
arising out of a Default Notice, the dispute resolution process described in
this Article must be commenced and completed within the applicable Default Cure
Period.
ARTICLE 25 TERMINATION.
25.01 TERMINATION FOR CONVENIENCE. NYPH may terminate this Agreement,
in whole or in part, for convenience effective as of any time after the third
anniversary of the Commencement Date by giving Vendor notice of the termination
at least 180 days prior to the termination date specified in the notice.
25.02 TERMINATION FOR CHANGE IN CONTROL OF VENDOR. In the event of a
Change in Control of Vendor, FCG or FCG Holdings, NYPH may terminate this
Agreement by giving Vendor notice of the termination at least 90 days prior to
the termination date specified in the notice.
25.03 TERMINATION FOR CAUSE.
(1) If either Party defaults in the performance of any of its material
obligations (or repeatedly defaults in the performance of any of its
other obligations) under this Agreement and, except as provided in
SECTION 25.04, does not cure such default within 30 days after receipt
of a notice of default (or a longer period, not to exceed 60 days, if
such default is not reasonably curable within such 30-day period and
the defaulting Party commences to cure such default upon receipt of
notice and diligently pursues a cure for such default) (the "DEFAULT
CURE PERIOD"), then the non-defaulting Party may, by giving notice to
the defaulting Party, terminate this Agreement, in whole or in part, as
of the termination date specified in the notice.
(2) If FCG Holdings (a) is in breach of any of its material obligations (or
repeatedly defaults in the performance of any of its other obligations)
under the Operating Agreement, (b) such breach or breaches has had or
could reasonably be expected to have a material effect on the Services
or the Service Levels, and (c) does not cure such default within 60
days after receipt of a notice of default, then NYPH may, by giving
notice to Vendor, terminate this Agreement, in whole or in part, as of
the termination date specified in the notice.
25.04 TERMINATION FOR FAILURE TO PROVIDE CRITICAL SERVICES. If Vendor
fails to provide (1) any Critical Service and does not, within 72 hours after
receipt of a notice from NYPH with respect to such failure, cure such failure
or, if such failure cannot be cured within 72 hours, provide the NYPH Group with
a workaround that allows the NYPH Group to receive such Critical Service or (2)
any Critical Service and such failure causes a material disruption to the
Services or the Service Levels more than 2 times in any consecutive 30 day
period during the Term, then NYPH may, upon notice to Vendor, terminate this
Agreement, in whole or in part, as of the termination date specified in the
notice.
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25.05 TERMINATION FOR INSOLVENCY. This Agreement shall terminate
automatically and immediately upon notice by a Party upon the occurrence of an
Insolvency Event with respect to the other Party. An "INSOLVENCY EVENT" shall
have occurred with respect to a Party if a receiver, liquidator or trustee of
such Party is appointed by court order and such order remains in effect for more
than 30 days, or receivership, insolvency or bankruptcy proceedings are
commenced or a petition is filed against such Party under any applicable
liquidation, conservatorship, bankruptcy, moratorium, insolvency, reorganization
or similar laws (collectively, "BANKRUPTCY LAWS") for the relief of debtors from
time to time in effect and generally affecting the rights of creditors, and such
proceedings or such petition has not been dismissed or stayed within 30 days of
the commencement or filing thereof; or such Party commences a voluntary case
under any Bankruptcy Law or voluntarily seeks, consents to or acquiesces in the
benefit of any provision of any Bankruptcy Law, consents to the filing of any
petition against it under any Bankruptcy Law, makes an assignment for the
benefit of its creditors, admits in writing its inability to pay its debts
generally as they become due or consents to the appointment of a receiver,
trustee, liquidator or conservator for it or any part of its property.
25.06 TERMINATION UPON DISSOLUTION. This Agreement shall terminate
automatically and immediately upon notice by a Party if proceedings are
commenced for the dissolution, winding-up or liquidation of the other Party,
other than any such proceeding commenced in connection with a corporate
reorganization, recapitalization, reincorporation or similar event of such
Party.
25.07 OTHER TERMINATIONS. In addition to the provisions of this
Article, this Agreement may be terminated as provided in SECTION 8.07, SECTION
17.01 and SECTION 17.03.
ARTICLE 26 TERMINATION FEES.
26.01 CALCULATION OF TERMINATION FEES. Set forth in EXHIBIT 20 are the
only termination fees that would be payable to Vendor if this Agreement is
terminated pursuant to SECTION 17.03, SECTION 25.01 or SECTION 25.02. Except as
otherwise set forth on EXHIBIT 20, any termination fees payable in accordance
with this Article shall be due and payable on the End Date.
26.02 PARTIAL TERMINATION FEE ADJUSTMENT. If NYPH terminates a portion
of the Services pursuant to SECTION 25.01 or any other provision of this
Agreement, then the Base Fees shall be appropriately adjusted. In the event the
Agreement is partially terminated pursuant to SECTION 25.01, NYPH shall pay a
partial termination fee in accordance with EXHIBIT 20.
26.03 TERMINATION FEES. Except as otherwise specifically set forth in
this Article, no termination fee shall be payable by NYPH in connection with the
termination of this Agreement. The payment by NYPH of termination fees pursuant
to this Agreement shall not limit NYPH's obligation to pay any unpaid
outstanding amounts otherwise due hereunder at the time of such payment.
ARTICLE 27 TERMINATION ASSISTANCE.
27.01 TERMINATION ASSISTANCE SERVICES.
(1) Vendor shall, upon NYPH's request during the Termination Assistance
Period, provide the Termination Assistance Services at Vendor's rates
then in effect for such services
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immediately prior to the expiration or termination of this Agreement,
except to the extent that resources included in the Base Fees being
paid by NYPH to Vendor after such expiration or termination can be used
to provide the Termination Assistance Services. The quality and level
of performance during the Termination Assistance Period shall not be
degraded. After the expiration of the Termination Assistance Period,
Vendor shall (1) answer questions from NYPH regarding the Services on
an "as needed" basis at Vendor's then standard billing rates, (2)
deliver to NYPH any remaining NYPH Group owned reports and
documentation still in Vendor's possession and (3) return to NYPH all
property of the NYPH Group being used by the Project Staff.
(2) As part of the Termination Assistance Services, at the request of NYPH,
Vendor shall (a) develop and submit to NYPH a transition back plan
setting forth the respective tasks to be accomplished by each Party in
connection with the termination; (b) provide NYPH with detailed
specifications (including without limitation the names and model
numbers, where applicable) for all Machines which the NYPH Group will
require to properly perform the Services and, to the extent applicable,
assist the NYPH Group in the installation of any such Machines in
connection with the transition; (c) cooperate with the NYPH Group's
employees and NYPH Agents in performing such tests of the Systems as
are reasonably necessary to ensure that the transition is being
effectively accomplished; and (d) provide appropriate training for the
individuals who will be assuming responsibility for operation of the
Systems following the transition, which training shall be sufficient to
allow a reasonable skilled information technology professional,
generally familiar with the documentation delivered to the NYPH Group,
to properly and effectively operate and maintain the Systems.
(3) During the Termination Assistance Period, Vendor shall not terminate,
reassign or otherwise remove any member of the Dedicated Project Staff
without providing NYPH 30 days' prior notice (or such lesser notice as
may be reasonable under the circumstances) of such termination,
reassignment or removal. At NYPH's request at any time during the
Termination Assistance Period in respect of each member of the
Dedicated Project Staff who had performed work on the NYPH Group
account during the previous six months, Vendor shall, to the extent not
prohibited by applicable Law, (a) provide NYPH with the resume of, and
any other information NYPH may request concerning such member of the
Dedicated Project Staff and (b) allow NYPH and its designees to meet
with, solicit and hire such member of the Dedicated Project Staff.
Vendor shall waive any restrictions or other provisions that may hinder
or prevent any such member of the Dedicated Project Staff from being
hired by NYPH or its designees pursuant to this Section.
27.02 EXIT RIGHTS. Upon the later of (1) the expiration or termination
of this Agreement and (2) the last day of the Termination Assistance Period (the
"END DATE"):
(a) The rights granted to Vendor and Vendor Agents in SECTION 14.01 and
SECTION 14.03(1) shall immediately terminate and Vendor shall, and
shall cause Vendor Agents to, (i) deliver to NYPH, at no cost to NYPH,
a current copy of the NYPH Software, NYPH Tools and NYPH New
Intellectual Property in the form in use as of the End Date and (ii)
destroy or erase all other copies of the NYPH Software, NYPH Tools and
NYPH New Intellectual
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Property in Vendor's or Vendor Agents' possession. Vendor shall, upon
NYPH's request, certify to NYPH that all such copies have been
destroyed or erased.
(b) Vendor shall deliver to NYPH a copy of the (i) Vendor Software, (ii)
Vendor Tools and (iii) Vendor New Intellectual Property, except in each
case, the Excluded Vendor Products, in the form in use as of the End
Date, and the NYPH Group shall have the rights described in SECTION
14.02 and SECTION 14.03(2).
(c) Upon NYPH's request, with respect to the Vendor Third Party Software
and Vendor Third Party Tools that Vendor has licensed or purchased and
is using to provide the Services as of the End Date, except in each
case, the Excluded Vendor Products, Vendor shall transfer, assign or
sublicense such Vendor Third Party Software and Vendor Third Party
Tools to NYPH or its designee, subject to the applicable third party
agreements.
(d) Upon NYPH's request, with respect to any agreements for maintenance,
disaster recovery services or other third party services or any Vendor
Machines not owned by Vendor being used by Vendor or Vendor Agents to
provide the Services as of the End Date, Vendor shall, and shall cause
Vendor Agents to, transfer or assign such agreements to NYPH or its
designee, on terms and conditions acceptable to all applicable parties.
(e) Upon NYPH's request, Vendor shall sell to NYPH or its designee the
Vendor Machines being used by Vendor or Vendor Agents to perform the
Services as of the End Date, free and clear of all liens, security
interests or other encumbrances at the lesser of the fair market value,
as shall be determined by an agreed-upon appraisal, and the book value.
ARTICLE 28 INDEMNITIES.
28.01 INDEMNITY BY NYPH. NYPH shall indemnify Vendor, its Affiliates
and Agents from, and defend and hold Vendor harmless from and against, any
Losses suffered, incurred or sustained by Vendor or to which Vendor becomes
subject, resulting from, arising out of or relating to any claim:
(1) that the NYPH Software infringes upon the proprietary or other rights
of any third party (except such infringement as may have been caused by
(a) Vendor's or Vendor Agents' misuse or modification thereof or (b)
Vendor's or Vendor Agents' use thereof in combination with any product
not furnished by NYPH);
(2) relating to the inaccuracy, untruthfulness or breach of any
representation or warranty made by NYPH under this Agreement;
(3) relating to NYPH's failure to obtain, maintain or comply with the NYPH
Consents or the NYPH Governmental Approvals;
(4) relating to (a) a violation of Law for the protection of persons or
members of a protected class or category of persons by NYPH or NYPH
Agents, including unlawful discrimination, (b) work-related injury or
death caused by NYPH or NYPH Agents, except as may be covered by NYPH's
or Vendor's workers' compensation plan, or death caused by NYPH or NYPH
Agents, (c) accrued employee benefits not expressly assumed by Vendor,
(d) any representations, oral or written, made by NYPH or NYPH Agents
to the Affected Employees and (e) any other aspect of the Affected
Employees' employment relationship
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with NYPH prior to their Vendor Employment Date or termination of such
employment relationship with NYPH (including claims for breach of an
express or implied contract of employment);
(5) relating to any amounts, including taxes, interest and penalties,
assessed against Vendor which are the obligation of NYPH pursuant to
ARTICLE 19;
(6) relating to personal injury (including death) or property loss or
damage resulting from NYPH's or NYPH Agents' acts or omissions;
(7) relating to a breach of ARTICLE 21; and
(8) relating to a breach of any of the covenants in SECTION 23.01.
NYPH shall indemnify Vendor from any costs and expenses incurred in connection
with the enforcement of this Section.
28.02 INDEMNITY BY VENDOR. Vendor shall indemnify the NYPH Group from,
and defend and hold the NYPH Group harmless from and against, any Losses
suffered, incurred or sustained by the NYPH Group or to which the NYPH Group
becomes subject, resulting from, arising out of or relating to any claim:
(1) that the Services, the New Intellectual Property, the Vendor Software,
the Vendor Tools, the Vendor Machines, any enhancements or
modifications to the NYPH Software performed by Vendor or Vendor Agents
or any other resources or items provided to NYPH by Vendor or Vendor
Agents infringe upon the proprietary or other rights of any third party
(except such infringement as may have been caused by (a) the NYPH
Group's or NYPH Agents' misuse or modification thereof or (b) the NYPH
Group's or NYPH Agents' use thereof in combination with any product not
furnished by Vendor);
(2) relating to any duties or obligations of Vendor or Vendor Agents to a
third party or any subcontractor of Vendor;
(3) by a third party arising from services or systems provided to such
third party by Vendor or Vendor Agents from a Service Location;
(4) relating to the inaccuracy, untruthfulness or breach of any
representation or warranty made by Vendor under this Agreement;
(5) relating to Vendor's failure to obtain, maintain or comply with the
Vendor Consents and Vendor Governmental Approvals;
(6) relating to (a) a violation of Law for the protection of persons or
members of a protected class or category of persons by Vendor or Vendor
Agents, including unlawful discrimination, (b) work-related injury or
death caused by Vendor of Vendor Agents, except as may be covered by
NYPH's or Vendor's workers' compensation plan, or death caused by
Vendor or Vendor Agents, (c) accrued employee benefits not expressly
retained by NYPH, (d) any representations, oral or written, made by
Vendor or Vendor Agents to the NYPH Group's employees, including the
Affected Employees and (e) any other aspect of
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the Affected Employees' employment relationship with Vendor or the
termination of the employment relationship with Vendor (including
claims for breach of an express or implied contract of employment);
(7) relating to Vendor's breach of SECTION 10.03;
(8) relating to any amounts, including taxes, interest and penalties,
assessed against the NYPH Group that are the obligation of Vendor
pursuant to ARTICLE 19;
(9) relating to personal injury (including death) or property loss or
damage resulting from Vendor's or Vendor Agents' acts or omissions;
(10) relating to a breach of SECTION 15.01 or SECTION 15.03;
(11) relating to a breach of ARTICLE 21; and
(12) Relating to a breach of any of the covenants in SECTION 23.02.
Vendor shall indemnify the NYPH Group from any costs and expenses incurred in
connection with the enforcement of this Section.
28.03 INDEMNIFICATION PROCEDURES. If any third party claim is commenced
against a party entitled to indemnification under SECTION 28.01 or SECTION 28.02
(the "INDEMNIFIED PARTY"), notice thereof shall be given to the Party that is
obligated to provide indemnification (the "INDEMNIFYING PARTY") as promptly as
practicable. If, after such notice, the Indemnifying Party shall acknowledge
that this Agreement applies with respect to such claim, then the Indemnifying
Party shall be entitled, if it so elects, in a notice promptly delivered to the
Indemnified Party, but in no event less than 10 days prior to the date on which
a response to such claim is due, to immediately take control of the defense and
investigation of such claim and to employ and engage attorneys reasonably
acceptable to the Indemnified Party to handle and defend the same, at the
Indemnifying Party's sole cost and expense. The Indemnified Party shall
cooperate, at the cost of the Indemnifying Party, in all reasonable respects
with the Indemnifying Party and its attorneys in the investigation, trial and
defense of such claim and any appeal arising therefrom; provided, however, that
the Indemnified Party may, at its own cost and expense, participate, through its
attorneys or otherwise, in such investigation, trial and defense of such claim
and any appeal arising therefrom. No settlement of a claim that involves a
remedy other than the payment of money by the Indemnifying Party shall be
entered into without the consent of the Indemnified Party. After notice by the
Indemnifying Party to the Indemnified Party of its election to assume full
control of the defense of any such claim, the Indemnifying Party shall not be
liable to the Indemnified Party for any legal expenses incurred thereafter by
such Indemnified Party in connection with the defense of that claim. If the
Indemnifying Party does not assume full control over the defense of a claim
subject to such defense as provided in this Section, the Indemnifying Party may
participate in such defense, at its sole cost and expense, and the Indemnified
Party shall have the right to defend the claim in such manner as it may deem
appropriate, at the cost and expense of the Indemnifying Party.
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ARTICLE 29 DAMAGES.
29.01 DIRECT DAMAGES. Each of the Parties shall be liable to the other
for any direct damages arising out of or relating to its performance or failure
to perform under this Agreement; provided, however, that the liability of a
Party to the other Party, whether based on an action or claim in contract,
equity, negligence, tort or otherwise, for all events, act and omissions shall
not exceed an amount equal to the aggregate amount of Fees paid or payable by
NYPH under this Agreement during the 12 months immediately preceding the
occurrence of the event, act or omission, provided that if 12 months have not
elapsed since the Commencement Date, such total aggregate liability shall not
exceed 12 times the average monthly Fees for the elapsed period of the Term.
29.02 CONSEQUENTIAL DAMAGES. Neither NYPH nor Vendor shall be liable
for, nor will the measure of damages include, any indirect, incidental,
punitive, special or consequential damages arising out of or relating to its
performance or failure to perform under this Agreement.
29.03 EXCLUSIONS. The limitations or exculpations of liability set
forth in SECTION 29.01 and SECTION 29.02 shall not apply to (1) the failure of
(a) NYPH to make payments or (b) Vendor to issue credits (including Performance
Credits) or accept deferrals of payments or otherwise make payments due under
this Agreement, (2) indemnification claims, as set forth in ARTICLE 28, (3)
breaches of ARTICLE 21 or (4) liability resulting from the gross negligence or
intentional acts of a Party.
29.04 GROSS-UP. Any indemnification, damages or other similar payment
by Vendor to NYPH pursuant to this Agreement shall include an additional amount
so that NYPH does not, directly or indirectly, bear any portion of such payment
made by Vendor with respect to such payment on account of NYPH's investment in
Vendor.
ARTICLE 30 INSURANCE.
30.01 VENDOR INSURANCE. During the Term, Vendor shall obtain and
maintain at its own expense, and require Vendor Agents to obtain and maintain at
their own expense or Vendor's expense, insurance of the type and in the amounts
set forth below:
(1) statutory workers' compensation in accordance with all Federal, state
and local requirements;
(2) employer's liability insurance in an amount not less than $5,000,000
per occurrence, covering bodily injury by accident or disease,
including death;
(3) commercial general liability (including contractual liability
insurance) in an amount not less than $2,500,000 per claim;
(4) comprehensive automobile liability covering all vehicles that Vendor
owns, hires or leases in an amount not less than $3,000,000 (combined
single limit for bodily injury and property damage); and
(5) business interruption insurance in an amount not less than $5,000,000.
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30.02 NYPH INSURANCE. During the Term, NYPH shall obtain and maintain
at its own expense insurance of the type and in the amounts set forth below:
(1) employer's liability insurance in an amount not less than $5,000,000
per occurrence, covering bodily injury by accident or disease,
including death; and
(2) commercial general liability (including contractual liability
insurance) in an amount not less than $2,500,000 per claim.
30.03 INSURANCE DOCUMENTATION.
(1) To the extent third party insurance is obtained or maintained pursuant
to SECTION 30.01, Vendor shall, upon NYPH's request, furnish to NYPH
certificates of insurance or other appropriate documentation (including
evidence of renewal of insurance) evidencing all coverages referenced
in SECTION 30.01 and, if and to the extent applicable, naming the NYPH
Group members as additional insureds. Such certificates or other
documentation shall include a provision whereby 30 days' notice must be
received by NYPH prior to coverage cancellation or material alteration
of the coverage by either Vendor or Vendor Agents or the applicable
insurer. Such cancellation or material alteration shall not relieve
Vendor of its continuing obligation to maintain insurance coverage in
accordance with this Article.
(2) To the extent third party insurance is obtained or maintained pursuant
to SECTION 30.02, NYPH shall, upon Vendor's request, furnish to Vendor
certificates of insurance or other appropriate documentation (including
evidence of renewal of insurance) evidencing all coverages referenced
in SECTION 30.02 and, if and to the extent applicable, naming the
Vendor as an additional insured. Such certificates or other
documentation shall include a provision whereby 30 days' notice must be
received by Vendor prior to coverage cancellation or material
alteration of the coverage by NYPH. Such cancellation or material
alteration shall not relieve NYPH of its continuing obligation to
maintain insurance coverage in accordance with this Article.
30.04 RISK OF LOSS. Vendor is responsible for the risk of loss of, or
damage to, any property of the NYPH Group at a Vendor Service Location, unless
such loss or damage was caused by the acts or omissions of NYPH or a NYPH Agent.
NYPH is responsible for the risk of loss of, or damage to, any property of
Vendor at a NYPH Service Location, unless such loss or damage was caused by the
acts or omissions of Vendor or a Vendor Agent.
ARTICLE 31 MISCELLANEOUS PROVISIONS.
31.01 ASSIGNMENT.
(1) Neither Party shall, without the consent of the other Party, assign
this Agreement or any amounts payable pursuant to this Agreement,
except that (a) NYPH may assign this Agreement and any rights or
obligations under this Agreement, in whole or in part, to any member of
the NYPH Group or another entity or business unit of NYPH or pursuant
to a reorganization or Change in Control of NYPH without such consent
and (b) Vendor may assign this Agreement and any rights or obligations
under this Agreement with the consent
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of NYPH to FCG or any Affiliate of Vendor that is a subsidiary of FCG;
provided that no such assignment shall relieve the assigning Party of
any of its obligations or liabilities hereunder. The consent of a Party
to any assignment of this Agreement shall not constitute such Party's
consent to further assignment. This Agreement shall be binding on the
Parties and their respective successors and permitted assigns. Any
assignment in contravention of this subsection shall be void.
(2) In the event that NYPH or any member of the NYPH Group divests an
entity or business unit, Vendor shall, for a period of up to two years
from the effective date of such divestiture, at NYPH's request,
continue to provide the Services to such divested entity or business
unit at the applicable Fees then in effect, subject to the third party
for whom Vendor will perform the Services agreeing to any applicable
terms and conditions as if such third party was receiving services
under this Agreement.
31.02 NOTICES. Except as otherwise specified in this Agreement, all
notices, requests, consents, approvals, agreements, authorizations,
acknowledgements, waivers and other communications required or permitted under
this Agreement shall be in writing and shall be deemed given when sent by
telecopy to the telecopy number specified below or delivered by hand to the
address specified below. A copy of any such notice shall also be sent by express
air mail on the date such notice is transmitted by telecopy to the address
specified below:
In the case of NYPH:
NewYork-Presbyterian Hospital
525 East 68th Street
New York, New York 10021
Attention: Louis F. Reuter IV
Telephone: (212) 746-1432
Telecopy: (212) 305-0292
With a copy to:
NewYork-Presbyterian Hospital
525 East 68th Street
New York, New York 10021
Box 88
Attn: Maxine Fass
Telephone: (212) 746-6500
Telecopy: (212) 746-8460
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In the case of Vendor:
FCG Management Services, LLC.
111 West Ocean Boulevard, 4th Floor
Long Beach, CA 90802-5676
Attn: Steven Heck, President
Telephone: (562) 624-5200
Telecopy: (562) 432-1932
With a copy to:
FCG Management Services, LLC.
111 West Ocean Boulevard, 4th Floor
Long Beach, CA 90802-5676
Attn: General Counsel
Telephone: (562) 624-5200
Telecopy: (562) 983-9384
Either Party may change its address or telecopy number for notification purposes
by giving notice of the new address or telecopy number and the date upon which
it will become effective.
31.03 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which taken
together shall constitute one single agreement between the Parties.
31.04 RELATIONSHIP. The Parties intend to create an independent
contractor relationship and nothing contained in this Agreement shall be
construed to make either NYPH or Vendor partners, joint venturers, principals,
agents (except as expressly set forth in ARTICLE 7) or employees of the other.
No officer, director, employee, agent, affiliate or contractor retained by
Vendor to perform work on the NYPH Group's behalf under this Agreement shall be
deemed to be an employee, agent or contractor of the NYPH Group. Neither Party
shall have any right, power or authority, express or implied, to bind the other.
31.05 CONSENTS, APPROVALS AND REQUESTS. Except as specifically set
forth in this Agreement, all consents and approvals to be given by either Party
under this Agreement shall not be unreasonably withheld or delayed and each
Party shall make only reasonable requests under this Agreement.
31.06 SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be contrary to Law, then the remaining
provisions of this Agreement, if capable of substantial performance, shall
remain in full force and effect.
31.07 WAIVERS. No delay or omission by either Party to exercise any
right or power it has under this Agreement shall impair or be construed as a
waiver of such right or power. A waiver by any Party of any breach or covenant
shall not be construed to be a waiver of any succeeding breach or any other
covenant. All waivers must be signed by the Party waiving its rights.
31.08 REMEDIES CUMULATIVE. No right or remedy herein conferred upon or
reserved to either Party is intended to be exclusive of any other right or
remedy, and each and every right and remedy shall be cumulative and in addition
to any other right or remedy under this Agreement, or under applicable Law,
whether now or hereafter existing.
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31.09 ENTIRE AGREEMENT. This Agreement and the Exhibits to this
Agreement represent the entire agreement between the Parties with respect to its
subject matter, and there are no other representations, understandings or
agreements between the Parties relative to such subject matter.
31.10 AMENDMENTS. No amendment to, or change, waiver or discharge of,
any provision of this Agreement shall be valid unless in writing and signed by,
in the case of NYPH, the NYPH Contract Manager, and in the case of the Vendor,
the Vendor Account Manager.
31.11 SURVIVAL. The terms of SECTION 12.06, ARTICLE 14, SECTION 15.01,
SECTION 15.03, ARTICLE 21, ARTICLE 22, ARTICLE 24, ARTICLE 27, ARTICLE 28,
ARTICLE 29, SECTION 31.02, SECTION 31.05, SECTION 31.06, SECTION 31.07, SECTION
31.08, this SECTION 31.11, SECTION 31.12, SECTION 31.13, SECTION 31.14, SECTION
31.15, SECTION 31.16, SECTION 31.18 and SECTION 31.20 shall survive the
expiration or termination of this Agreement. In addition, NYPH's obligation to
pay to Vendor all Fees accrued but unpaid as of the expiration or termination of
this Agreement shall survive such expiration or termination.
31.12 THIRD PARTY BENEFICIARIES. Each Party intends that this Agreement
shall not benefit, or create any right or cause of action in or on behalf of,
any person or entity other than the Parties and the members of the NYPH Group.
31.13 GOVERNING LAW. This Agreement and the rights and obligations of
the Parties under this Agreement shall be governed by and construed in
accordance with the Laws of the State of New York, without giving effect to the
principles thereof relating to the conflicts of Laws.
31.14 SOLE AND EXCLUSIVE VENUE. Each Party irrevocably agrees that any
legal action, suit or proceeding brought by it in any way arising out of this
Agreement must be brought solely and exclusively in the United States District
Court for the Southern District of New York or in the state courts of the State
of New York and irrevocably accepts and submits to the sole and exclusive
jurisdiction of each of the aforesaid courts in personam, generally and
unconditionally with respect to any action, suit or proceeding brought by it or
against it by the other Party; provided, however, that this Section shall not
prevent a Party against whom any legal action, suit or proceeding is brought by
the other Party in the state courts of the State of New York from seeking to
remove such legal action, suit or proceeding, pursuant to applicable Federal
Law, to the district court of the United States for the district and division
embracing the place where the action is pending in the state courts of the State
of New York, and in the event an action is so removed each Party irrevocably
accepts and submits to the jurisdiction of the aforesaid district court. Each
Party hereto further irrevocably consents to the service of process from any of
the aforesaid courts by mailing copies thereof by registered or certified mail,
postage prepaid, to such Party at its address designated pursuant to this
Agreement, with such service of process to become effective 30 days after such
mailing.
31.15 COVENANT OF FURTHER ASSURANCES. NYPH and Vendor covenant and
agree that, subsequent to the execution and delivery of this Agreement and,
without any additional consideration, each of NYPH and Vendor shall execute and
deliver any further legal instruments and perform any acts that are or may
become necessary to effectuate the purposes of this Agreement.
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31.16 NEGOTIATED TERMS. The Parties agree that the terms and conditions
of this Agreement are the result of negotiations between the Parties and that
this Agreement shall not be construed in favor of or against any Party by reason
of the extent to which any Party or its professional advisors participated in
the preparation of this Agreement.
31.17 EXPORT. NYPH and Vendor shall not knowingly export or re-export
any personal computer system, part, technical data or sub-elements under this
Agreement, directly or indirectly, to any destinations prohibited by the United
States Government. The term "technical data" in this context, means such data as
is defined as technical data by applicable United States export regulations.
31.18 NON-SOLICITATION. Except as contemplated by ARTICLE 11, during
the Term and the Termination Assistance Period, Vendor shall not solicit any
individual while that individual is an employee of the NYPH Group.
31.19 CONFLICT OF INTEREST. Vendor shall not pay any salaries,
commissions, fees or make any payments or rebates to any employee of the NYPH
Group, or to any designee of such employee, or favor any employee of the NYPH
Group, or any designee of such employee, with gifts or entertainment of
significant cost or value or with services or goods sold at less than full
market value. Vendor agrees that its obligation to the NYPH Group under this
Section shall also be binding upon Vendor Agents. Vendor further agrees to
insert the provisions of this Section in each contract with a Vendor Agent.
31.20 PUBLICITY. Each Party shall (1) submit to the other all
advertising, written sales promotions, press releases and other publicity
matters relating to this Agreement in which the other Party's name or mark is
mentioned or which contains language from which the connection of said name or
mark may be inferred or implied and (2) not publish or use such advertising,
sales promotions, press releases or publicity matters without the other Party's
consent. Notwithstanding the foregoing, either Party may make any announcement
or disclosure required by Law, subject to providing as much prior notice to the
other Party as is reasonably practicable, and either Party may repeat or
republish any information regarding this Agreement previously approved for
release by the other Party or already in the public domain.
ARTICLE 32 GUARANTY AND SECONDMENT AGREEMENT.
As a condition to the effectiveness of this Agreement, prior to the
Commencement Date, FCG shall have executed and delivered to NYPH a guaranty in
the form of EXHIBIT 23 and the Parties shall have executed and delivered a
Secondment Agreement in the form of EXHIBIT 26.
* * * *
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IN WITNESS WHEREOF, each of NYPH and Vendor has caused this
Agreement to be signed and delivered by its duly authorized representative.
NEW YORK AND PRESBYTERIAN HOSPITAL
By: /s/ Louis F. Reuter IV
-----------------------------
Name: Louis F. Reuter IV
Title: Executive Vice President
FCG MANAGEMENT SERVICES, LLC
By: /s/ Luther J. Nussbaum
--------------------------------
Name: Luther J. Nussbaum
Title: Chief Executive Officer
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EXHIBIT 99.2
UNIT PURCHASE AGREEMENT
UNIT PURCHASE AGREEMENT dated as of November 8, 1999 ("Effective Date")
by and between FCG MANAGEMENT SERVICES, LLC, a Delaware limited liability
company ("COMPANY"), and NEW YORK AND PRESBYTERIAN HOSPITAL (doing business as
New York-Presbyterian Hospital), a New York not-for-profit corporation
("PURCHASER").
RECITALS:
WHEREAS, Company intends to engage in the "Business" as defined in the
Restated Operating Agreement;
WHEREAS, FCG Management Holdings, Inc. ("FCG Holdings"), a Delaware
corporation and wholly-owned subsidiary of First Consulting Group, Inc., a
Delaware corporation, owns all of the issued and outstanding units of Company
immediately prior to the Effective Date;
WHEREAS, Company proposes to issue and sell One Hundred Fifty (150) of
its unissued Class B Units (the "PURCHASED UNITS") to Purchaser on the terms set
forth in this Agreement; and
WHEREAS, Purchaser desires to purchase the Purchased Units on the terms
set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. The following terms, as used herein, have the
following meanings:
"AGGREGATE PURCHASE PRICE" shall have the meaning set forth in
Section 2.4.
"AGREEMENT" means this Unit Purchase Agreement, including all
Schedules and Exhibits referenced herein.
"AFFILIATE" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person; PROVIDED, HOWEVER, that notwithstanding the foregoing,
the Company shall not be considered an Affiliate of Purchaser and Purchaser
shall not be considered an Affiliate of the Company. For the
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purposes of this definition, "CONTROL," when used with respect to any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"ANCILLARY AGREEMENTS" means: (i) the Restated Operating Agreement
and (ii) the Investor Rights Agreement.
"ASSOCIATES" means:
(I) Affiliates, stockholders, directors, officers, employees,
agents, attorneys, accountants and representatives of a Person; and
(II) all stockholders, directors, officers, employees, agents,
attorneys, accountants and representatives of each Affiliate of a Person.
"CLOSING" shall have the meaning set forth in Section 2.5.
"CLOSING DATE" shall have the meaning set forth in Section 2.5.
"CONSENT" means any third party (including any governmental
agency) consent, authorization, approval or waiver required for the consummation
of the transactions set forth in this Agreement and the Ancillary Agreements.
"CONVERSION" means the conversion of the Company from a limited
liability company to a corporation pursuant to the Restated Operating Agreement.
"EFFECTIVE DATE" shall have the meaning set forth in the preamble
to this Agreement.
"FCG HOLDINGS" shall mean FCG Management Holdings, Inc., a
Delaware corporation.
"FULLY DILUTED BASIS" shall mean the calculation of the proportion
of Units held based on all Units outstanding.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"INVESTOR RIGHTS AGREEMENT" means the Investor Rights Agreement by
and among Company, Purchaser and FCG Holdings to be entered into as of the
Closing Date , as the same may be amended and in effect from time to time.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, option, right of first refusal, easement,
restriction (including transfer restriction) or other similar encumbrance of any
kind in respect of such asset.
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"MATERIAL ADVERSE EFFECT" means, with respect to any Person, a
material adverse effect on the business, assets, financial condition or results
of operations of such Person.
"PERSON" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association or organization,
joint venture, government or department or agency thereof, or other entity of
whatever nature.
"PURCHASED UNITS" shall have the meaning set forth in the
Recitals.
"RESTATED OPERATING AGREEMENT" means the Amended and Restated
Operating Agreement, to be entered into between Company, Purchaser and FCG
Holdings as of the Closing Date, in the form previously delivered and agreed to
by the parties thereto, as the same may be amended and in effect from time to
time.
"SECURITIES ACT" shall have the meaning set forth in Section 4.7.
"UNITS" means all issued and outstanding limited liability company
units of the Company.
ARTICLE 2
SALE AND TRANSFER OF UNITS; CLOSING
2.1 AUTHORIZATION. All action on the part of Company and the Members
(as defined in the Restated Operating Agreement) of Company necessary for the
authorization, execution, delivery and performance of this Agreement by Company
and the admittance of Purchaser as a Member and the issuance of the Purchased
Units in connection therewith has been taken or will be taken prior to the
Closing (as defined in Section 2.5).
2.2 OPERATING AGREEMENT. As of the Closing, the Purchased Units shall
have the rights, preferences, privileges and restrictions set forth in the
Restated Operating Agreement.
2.3 PURCHASE AND SALE OF PURCHASED UNITS. At the Closing, Company will
sell and transfer the Purchased Units to Purchaser, and Purchaser will purchase
the Purchased Units from Company on the terms and subject to the conditions set
forth in this Agreement.
2.4 PURCHASE PRICE. The purchase price for the Purchased Units will be
$100.00 per unit. The aggregate purchase price for the Purchased Units will be
$15,000.00 (the "AGGREGATE PURCHASE PRICE").
2.5 CLOSING. The closing of the sale of the Purchased Units to
Purchaser (the "CLOSING") shall take place at the offices of Purchaser, 161 Fort
Washington Ave., Room 1410, New York, New York at 3:00 p.m. (New York time) on
the Effective Date. For purposes of this Agreement, "CLOSING DATE" shall mean
the time and date as of which the Closing actually takes place.
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2.6 DELIVERY. At the Closing, subject to the terms and conditions
hereof, Purchaser shall make the payment to Company of the Aggregate Purchase
Price by check or federal funds wire transfer made payable to the order of
Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company represent and warrant to Purchaser the following:
3.1 ORGANIZATION AND STANDING. Company is a limited liability company
duly organized, validly existing and in good standing as a limited liability
company under the laws of Delaware. Company is duly qualified and authorized to
do business and is in good standing in all jurisdictions in which the nature of
its activities and of its properties makes such qualification necessary, except
for those jurisdictions in which failure to do so would not have a Material
Adverse Effect on Company. Company has made available to Purchaser or its
counsel prior to the Effective Date complete and correct copies of the
organizational documents of Company and any amendments thereto.
3.2 POWER AND AUTHORIZATION. Company has all requisite power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement and the Ancillary Agreements to which it is a party, to issue and
sell the Purchased Units and to carry out the provisions of this Agreement and
the Ancillary Agreements to which it is a party and to carry on its business as
currently conducted and as currently proposed to be conducted. The execution,
delivery and performance by Company of this Agreement and each of the Ancillary
Agreements to which it is a party, and the consummation by Company of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action on the part of Company.
3.3 CAPITALIZATION.
(a) Immediately following the Closing, the issued and
outstanding Units shall be as specified in SCHEDULE A to the Restated
Operating Agreement. All issued and outstanding Units on the Closing Date:
(i) will have been duly authorized and validly issued; and (ii) will be fully
paid and non-assessable. The rights, preferences, privileges and restrictions
of the outstanding Units will be as stated in the Restated Operating
Agreement. Except as may be granted pursuant to the Ancillary Agreements, (x)
there are no outstanding options, warrants, subscriptions, calls or
commitments of any character relating to or entitling any Person to purchase
or otherwise acquire any interests or other securities of Company; (y) there
are no obligations or securities convertible into or exchangeable or
exercisable for any interests or other securities of Company or any
commitments of any character relating to or entitling any Person to purchase
or otherwise acquire any such interests or other securities; and (z) there
are no preemptive or similar rights to subscribe for or to purchase any
interests or other securities of Company.
(b) When issued in compliance with the provisions of this
Agreement and the Restated Operating Agreement, the Purchased Units will be
duly and validly issued, fully paid
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and nonassessable, and will be free of any Liens other than those provided in
this Agreement or the Ancillary Agreements and under applicable state and
federal securities laws as set forth herein or as otherwise required by such
laws at the time the transfer is proposed.
3.4 GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance
by Company of this Agreement and each of the Ancillary Agreements does not
require any action by or in respect of, or filing with, any governmental body,
agency, official or authority by Company, including any filings or other
requirements pursuant to the HSR Act, other than any such action or filing the
failure to obtain or complete which would not have, individually or in the
aggregate, a Material Adverse Effect on Company or which would not materially
and adversely affect Company's ability to consummate the transactions
contemplated hereby and thereby and other than: (i) such filings as have been
made prior to the Closing; and (ii) such post-Closing filings as may be required
under applicable state securities laws, which will be timely filed within the
applicable periods therefor. Company has obtained or will obtain prior to the
Closing any necessary consents, authorizations, approvals and orders, and has
made all registrations, qualifications, designations, declarations or filings
with all federal, state, or other relevant governmental authorities required on
the part of Company in connection with the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements.
3.5 NON-CONTRAVENTION. The execution, delivery of and consummation of
the transactions contemplated by this Agreement (including the transactions
contemplated by the Ancillary Agreements) do not and will not, with notice or
lapse of time or both, conflict with, or result in any breach or violation of or
constitute grounds for the occurrence of a declaration of a default or
termination of (i) Company's certificate of formation or other organizational
documents (including the Restated Operating Agreement), (ii) any contract,
agreement, undertaking, commitment or instrument to which Company is a party or
by which it or either of them or their respective properties are bound or (iii)
any license, judgment, order, injunction, decree, statute, law, rule or
regulation, domestic or foreign, applicable to Company, or their respective
properties or assets.
3.6 CONSENTS. There are no agreements, contracts or other instruments
binding upon Company that require a Consent as a result of the execution,
delivery and performance of this Agreement or any of the Ancillary Agreements,
or the consummation of the transactions contemplated hereby and thereby.
3.7 COMPLIANCE WITH LAWS. Company is not in violation of any statutes,
laws, ordinances, governmental rules or regulations or any judgment, order or
decree (federal, state, local or foreign) to which it is subject, nor has it
failed to obtain any licenses, permits, franchises or other governmental
authorization necessary to the ownership or operation of its properties or the
conduct of its business as intended to be conducted, which violations or
failures would be reasonably likely to have a Material Adverse Effect on
Company.
3.8 LITIGATION. There is no action, proceeding or investigation pending
against Company in any court or before any governmental authority or arbitration
board or tribunal, foreign or domestic, and, to the best knowledge of Company,
there is no such action, proceeding or investigation threatened.
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3.9 FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Company who might be entitled to any fee or commission upon consummation of
the transactions contemplated by this Agreement and each of the Ancillary
Agreements.
3.10 NO OPERATIONS. Prior to the Effective Date, the Company has not
conducted any operations or incurred any liability or obligation other than
those expressly set forth in the Company's Certificate of Formation and original
Operating Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Company that:
4.1 ORGANIZATION AND STANDING. Purchaser is a not-for-profit
corporation duly incorporated, validly existing and in good standing under the
laws of New York. Purchaser is duly qualified and authorized to do business and
is in good standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties makes such qualification
necessary, except for those jurisdictions in which failure to do so would not
have a Material Adverse Effect on Purchaser.
4.2 CORPORATE POWER AND AUTHORIZATION. Purchaser has all requisite
corporate power and authority to own and operate its properties and assets, to
execute and deliver this Agreement and the Ancillary Agreements to which it is a
party and to carry out the provisions of this Agreement and the Ancillary
Agreements to which it is a party and to carry on its business as currently
conducted and as currently proposed to be conducted. The execution, delivery and
performance by Purchaser of this Agreement and each of the Ancillary Agreements
to which it is a party, and the consummation by Purchaser of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of Purchaser. This Agreement and each of the Ancillary
Agreements to which it is a party constitute, or upon execution and delivery
will constitute, valid and binding agreements of Purchaser enforceable in
accordance with their terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; (ii) as general principles of equity
restrict the availability of equitable remedies; and (iii) to the extent that
the enforceability of the indemnification provisions contained in the Ancillary
Agreements may be limited by applicable laws.
4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance
by Purchaser of this Agreement and each of the Ancillary Agreements to which it
is a party does not require any action by or in respect of, or filing with, any
governmental body, agency, official or authority by Purchaser, including any
filings or other requirements pursuant to the HSR Act, other than any such
action or filing the failure to obtain or complete which would not have,
individually or in the aggregate, a Material Adverse Effect on Purchaser or
which would not materially and adversely affect Purchaser's ability to
consummate the transactions contemplated hereby and thereby, and other than: (i)
such filings as have been made prior to the Closing; and
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(ii) such post-closing filings as may be required under applicable state
securities laws, which will be timely filed within the applicable periods
therefor.
4.4 NON-CONTRAVENTION. The execution, delivery and performance by
Purchaser of this Agreement and each of the Ancillary Agreements to which it is
a party do not and will not (i) contravene or conflict with the organizational
documents of Purchaser, and (ii) assuming compliance with the matters referred
to in Section 4.3, contravene or conflict with or constitute a material
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to Purchaser, which violation would have a
Material Adverse Effect on Purchaser.
4.5 CONSENTS. There are no agreements, contracts or other instruments
binding upon Purchaser which require a Consent as a result of the execution,
delivery and performance of this Agreement or any of the Ancillary Agreements,
or the consummation of the transactions contemplated hereby and thereby.
4.6 FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Purchaser who might be entitled to any fee or commission upon consummation of
the transactions contemplated by this Agreement and each of the Ancillary
Agreements.
4.7 INVESTMENT REPRESENTATIONS. Purchaser understands that the
Purchased Units have not been registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT"). Purchaser also understands that the Purchased
Units are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon Purchaser's representations
contained in this Agreement. Purchaser hereby represents and warrants as of the
date hereof and as of the Closing Date as follows:
(a) ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(b) PURCHASER BEARS ECONOMIC RISK. Purchaser must bear the
economic risk of this investment indefinitely unless the Purchased Units are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that Company has no present intention of
registering the Purchased Units. Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow Purchaser to
transfer all or any portion of the Purchased Units or under the circumstances,
in the amounts or at the times Purchaser might propose.
(c) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Purchased Units for Purchaser's own account for investment only, and not with a
view towards their distribution.
(d) INVESTMENT EXPERIENCE. Purchaser represents that by reason of
its, or of its management's, business or financial experience, Purchaser has the
capacity to protect its own interests in connection with the transactions
contemplated in this Agreement.
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(e) REVIEW OF COMPANY INFORMATION. Purchaser has had an
opportunity to discuss Company's business, management and financial affairs with
directors, officers and management of Company and has had the opportunity to
review Company's operations and facilities. Purchaser has also had the
opportunity to ask questions of and receive answers from, Company and its
management regarding the terms and conditions of this investment.
(f) RESTRICTED SECURITIES. Purchaser acknowledges and agrees that
the Purchased Units must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available.
(g) LEGENDS. Each certificate representing the Purchased Units
shall be stamped or otherwise imprinted with a legend substantially similar to
the following (in addition to any legend required under applicable state
securities laws or as provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS COMPANY HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO COMPANY AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
Subject to any restrictions to the contrary in the Restated Operating Agreement,
Company shall be obligated to reissue promptly unlegended certificates at the
request of any holder thereof if the holder shall have obtained an opinion of
counsel (which counsel may be counsel to Company) reasonably acceptable to
Company to the effect that the securities proposed to be disposed of may
lawfully be so disposed of without registration, qualification or legend. Any
legend endorsed on an instrument pursuant to applicable state securities laws
and the stop-transfer instructions with respect to such securities shall be
removed upon receipt by Company of an order of the appropriate blue sky
authority authorizing such removal.
(h) Notwithstanding anything to the contrary contained herein,
nothing in this Section 4.7 shall be deemed to constitute a waiver of the rights
hereunder by or on behalf of Purchaser, including, without limitation, any
rights to indemnification based on the representations and warranties set forth
in this Agreement or any Ancillary Agreement. The validity of the
representations and warranties shall not be affected by any investigation made
by or on behalf of Purchaser.
ARTICLE 5
POST-CLOSING COVENANTS OF COMPANY AND PURCHASER
Company and Purchaser agree that:
5.1 FURTHER EFFORTS. Subject to the terms and conditions of this
Agreement, each party will use commercially reasonable efforts to take, or cause
to be taken, all actions and to do,
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or cause to be done, all things necessary or desirable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement and
the Ancillary Agreements. Company and Purchaser each agree to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be necessary or desirable in order to consummate
or implement expeditiously the transactions contemplated by this Agreement and
the Ancillary Agreements.
5.2 CERTAIN FILINGS. Company and Purchaser shall cooperate with one
another (a) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required,
including any filings or other requirements pursuant to the HSR Act, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements and (b)
in taking such actions or making any such filings, in furnishing such
information as may be required in connection therewith, and in seeking timely to
obtain any such actions, consents, approvals or waivers.
5.3 PUBLIC ANNOUNCEMENTS. The parties agree not to issue any press
release or make any public statement with respect to this Agreement and the
Ancillary Agreements or the transactions contemplated hereby and thereby and,
except as may be required by applicable law or any listing agreement with any
national securities exchange, will not issue any such press release or make any
such public statement, in each case without the other party's prior consent.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATION OF PURCHASER. The obligation of Purchaser
to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of the
Closing.
(b) Company shall have executed and delivered each of the
Ancillary Agreements to be executed and delivered by it, in each case
substantially in the form previously delivered and agreed to by the parties
thereto.
(c) Company shall have received any Consents relating to the
execution, delivery and performance by such party of this Agreement and the
Ancillary Agreements to be executed by them, except any such Consents where the
failure to obtain would not have a Material Adverse Effect on Company or
adversely and materially affect the ability of Purchaser to consummate the
transactions contemplated hereby, and all such Consents shall be in full force
and effect on and as of the Closing Date.
(d) The representations and warranties of Company contained in
this Agreement shall be true in all material respects, in each case as of the
date hereof and as of the Closing Date.
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(e) Company shall have performed in all material respects all
of its obligations hereunder required to be performed by it at or prior to the
Closing Date.
(f) Purchaser shall have received all documents it may
reasonably request relating to the authority of Company and FCG Holdings to
enter into and perform this Agreement and the Ancillary Agreements, all in form
and substance reasonably satisfactory to Purchaser.
(g) All actions, proceedings, instruments and documents
required to carry out this Agreement and the Ancillary Agreements shall be
reasonably satisfactory in form and substance to counsel for Purchaser.
6.2 CONDITIONS TO OBLIGATIONS OF COMPANY. The obligation of Company to
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of the
Closing.
(b) Purchaser shall have executed and delivered each of the
Ancillary Agreements to be executed by them, in each case substantially in the
form previously delivered and agreed to by the parties thereto.
(c) Company and Purchaser shall have received all Consents
relating to the execution, delivery and performance by Company and Purchaser of
this Agreement and the Ancillary Agreements to be executed by them, except any
such Consents where the failure to obtain would not have a Material Adverse
Effect on Company or adversely and materially affect the ability of Purchaser to
consummate the transactions contemplated hereby, and all such Consents shall be
in full force and effect on and as of the Closing Date.
(d) The representations and warranties of Purchaser contained
in this Agreement shall be true in all material respects, in each case as of the
date hereof and as of the Closing Date.
(e) Purchaser shall have performed in all material respects
all of its obligations hereunder required to be performed by it at or prior to
the Closing Date.
(f) Company shall have received all documents they may
reasonably request relating to the authority of Purchaser to enter into and
perform this Agreement and the Ancillary Agreements, all in form and substance
reasonably satisfactory to Company.
(g) All actions, proceedings, instruments and documents
required to carry out this Agreement and the Ancillary Agreements shall be
reasonably satisfactory in form and substance to counsel for Company.
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ARTICLE 7
MISCELLANEOUS
7.1 NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given,
if to Purchaser, to:
NewYork-Presbyterian Hospital
525 East 68th Street
New York, New York 10021
Attention: Louis F. Reuter, IV
Telecopy: (212) 746-1432
with a copy to:
NewYork-Presbyterian Hospital
525 East 68th Street
New York, New York 10021
Attention: Maxine FassTelecopy: (212) 746-8460
if to Company, to:
FCG Management Services, LLC
c/o First Consulting Group, Inc.
111 W. Ocean Blvd. 4th Floor
Long Beach, CA 90802
Attention: General Counsel
(562) 624-5200
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Patrick A. Pohlen, Esq.
Telecopy: (650) 857-0663
Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effective (i) if
personally delivered, at the time delivered by hand, (ii) if delivered by
facsimile transmission, upon confirmation of transmission, (iii) if by courier,
on the business day such courier guarantees delivery, and (iv) if delivered by
first class U.S. Mail, seven business days after deposit in the U.S. Mail,
postage prepaid.
7.2 AMENDMENTS AND WAIVERS.
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(a) Any provisions of this Agreement may be amended or waived
prior to the Closing Date if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by Purchaser and Company, or in
the case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by either party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
7.3 EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
7.4 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns.
7.5 APPLICABLE LAW. This agreement is made under, and shall be
construed and enforced in accordance with, the laws of the state of Delaware
applicable to agreements made and to be performed solely therein, without giving
effect to principles of conflicts of law.
7.6 COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other party hereto.
7.7 ENTIRE AGREEMENT. This Agreement and the Ancillary Agreements
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter hereof. No representation, inducement, promise, understanding,
condition or warranty not set forth herein or therein has been made or relied
upon by either party hereto. None of this Agreement or the Ancillary Agreements,
nor any provision hereof or thereof, is intended to confer upon any person other
than the parties hereto rights or remedies hereunder or thereunder.
7.8 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
7.9 HEADINGS; PRONOUNS. The section headings used in this Agreement are
for convenience of reference only and are not to be considered in construing or
interpreting this Agreement. All pronouns contained herein and any variations
thereof shall be deemed to refer to the masculine, feminine or neuter, singular
or plural, as the identity of the parties hereto may require.
7.10 SURVIVAL. The representations and warranties made by any party
herein shall survive any investigation made by Purchaser and the closing of the
transactions contemplated
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hereby for a period of the later of eighteen (18) months or the date of the
Company's first audit following the Closing.
IN WITNESS WHEREOF, the parties hereto here caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
FCG MANAGEMENT SERVICES, LLC
By: /s/ Luther J. Nussbaum
--------------------------
Printed Name: Luther J. Nussbaum
----------------------
Title: Chief Executive Officer
-----------------------------
NEW YORK AND PRESBYTERIAN HOSPITAL
By: /s/ Louis F. Reuter IV
----------------------------
Printed Name: Louis F. Reuter IV
-----------------------
Title: Executive Vice President
----------------------------
<PAGE>
EXHIBIT 99.3
FCG MANAGEMENT SERVICES, LLC
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "AGREEMENT") is entered into as of
the 8th day of November, 1999, by and among FCG MANAGEMENT SERVICES, LLC, a
Delaware limited liability company (the "COMPANY"), FCG MANAGEMENT HOLDINGS,
INC., a Delaware corporation ("FCG HOLDINGS"), and NEW YORK and PRESBYTERIAN
HOSPITAL (doing business as NewYork-Presbyterian Hospital), a New York
not-for-profit corporation (hereinafter referred to as "NYPH").
RECITALS
WHEREAS, the Company proposes to sell and issue Class B Units pursuant
to the Unit Purchase Agreement by and between the Company and NYPH dated as of
the date hereof (the "Unit Purchase Agreement"); and
WHEREAS, as a condition of entering into the Unit Purchase Agreement,
NYPH has requested that the Company extend to it registration rights and other
rights as set forth below.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Unit Purchase Agreement, the parties mutually agree as
follows:
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"AFFILIATE" of any Person shall mean any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such Person; PROVIDED, HOWEVER, that notwithstanding the foregoing,
the Company shall not be considered an Affiliate of NYPH and NYPH shall not be
considered an Affiliate of the Company. For the purposes of this definition,
"CONTROL," when used with respect to any Person means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities,
by contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have
meanings correlative to the foregoing.
"AGREEMENT" shall have the meaning set forth in the preamble
to this Agreement.
"APPRAISER" shall mean any Person who shall be experienced in
the valuation of businesses (e.g. a business appraiser, investment banker, or
venture capitalist) and (a) is mutually selected by NYPH and the Company or (b)
if NYPH and Company cannot agree on the selection of an appraiser, is selected
as follows: NYPH and Company shall each select a qualified appraiser and the two
appraisers shall select a third appraiser who shall perform the appraisal.
1.
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"CAPITAL ACCOUNT" shall have the meaning set forth in Article
I of the Operating Agreement.
"CLASS A HOLDER(S)" shall mean the holder or holders of Class
A Units.
"CLASS B HOLDER(S)" shall mean the holder or holder of Class B
Units.
"CLASS A UNITS" shall mean the Class A Units of the Company.
"CLASS B UNITS" shall mean the Class B Units of the Company.
"COMPANY" shall have the meaning set forth in the preamble to
this Agreement.
"CONVERSION" shall mean the conversion of Company from a
limited liability company to a corporation pursuant to the Operating Agreement.
"CONVERTIBLE SECURITIES" shall mean (i) any security
convertible, with or without consideration, into any Units or Underlying Units
(including any option to purchase such a Convertible Security) or (ii) any
warrant or right to subscribe to or purchase any Units or Underlying Units.
"DEMAND EVENT" shall mean the exercise of certain registration
rights by any Holder or its assignee of record as provided in Section 2.1 of
this Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"FAIR MARKET VALUE" shall mean as of any date of determination
with respect to any Unit, the fair market value as mutually determined by the
NYPH and the Company or if the NYPH and the Company are unable to agree, the
fair market value of such Unit as determined by an Appraiser. The determination
of Fair Market Value shall be binding on all parties and the costs of obtaining
the Fair Market Value, including the costs of any Appraiser, shall be shared
equally by the NYPH and the Company. The determination of Fair Market Value
shall not take into account any discount relating to minority interests or the
lack of liquidity of the Units.
"FORM S-3" shall mean such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
"GAAP" shall mean generally accepted accounting principles as
in effect at the time of application to the provision hereof.
"HOLDER" shall mean any person owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Section 2.9 hereof.
"INITIATING HOLDER" shall have the meaning set forth in
Section 2.1.
2.
<PAGE>
"INITIAL OFFERING" shall mean the Company's first firm
commitment underwritten public offering of its Common Stock registered under the
Securities Act.
"NET BOOK VALUE" shall mean as of any date of determination,
the net book value of the Company at such date as determined in accordance with
GAAP.
"NYPH" shall mean New York and Presbyterian Hospital (doing
business as NewYork-Presbyterian Hospital), a not-for-profit corporation.
"OPERATING AGREEMENT" shall mean the Amended and Restated
Operating Agreement of Company, dated as of the date hereof, as the same may be
amended and in effect from time to time.
"OUTSOURCING AGREEMENT" shall mean that certain Information
Technology Outsourcing Service Agreement by and between the Company and NYPH
dated as of November 1, 1999, including any and all amendments thereto.
"PARTIES" shall mean the parties to this Agreement and "PARTY"
shall mean any one of them.
"PERSON" shall mean an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association or
organization, joint venture, government or department or agency thereof, or
other entity of whatever nature.
"PURCHASE NOTICE" shall have the meaning set forth in Section
3.1.
"PURCHASE PRICE" shall have the meaning set forth in Section
3.1.
"PURCHASE RIGHT" shall have the meaning set forth in Section
3.1.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" shall mean (a) Underlying Shares,
including any Underlying Shares issued or issuable upon conversion of any
Convertible Securities; and (b) any Underlying Shares issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, such above-described securities. Notwithstanding the
foregoing, Registrable Securities shall not include any securities sold by a
Person to the public either pursuant to a registration statement or Rule 144 or
sold in a private transaction in which the transferor's rights under Section 2
of this Agreement are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number
of shares determined by calculating the total number of shares of the Company's
common stock or other Underlying Shares that are Registrable Securities and
either (a) are then issued and outstanding or (b) are issuable pursuant to
Convertible Securities which are then exercisable or convertible.
3.
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"REGISTRATION EXPENSES" shall mean all expenses, except as
otherwise stated below, arising from, or incident to, the performance of or
compliance with Section 2, including, hereof, without limitation, (i) all
registration, qualification and filing fees, (ii) all word processing,
duplicating and printing expenses, (iii) any escrow fees, (iv) all fees and
disbursements of counsel for the Company, and of the Company's independent
public accountants and any other accounting and legal fees and expenses incurred
by the Company, (v) all fees and expenses incurred in complying with securities
or blue sky laws (including fees and disbursements of counsel to the
underwriters or the Holders in connection with blue sky qualification of the
Registrable Securities and determination of their eligibility for investment
under the laws of the various jurisdictions), (vi) the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company), (vii) the reasonable fees and disbursements of one
counsel for the Holders, (viii) all transfer taxes, and (ix) all fees and
disbursements of underwriters; PROVIDED HOWEVER, that all Selling Expenses are
excluded from the definition of the Registration Expenses.
"SEC" or "COMMISSION" shall mean the Securities and Exchange
Commission.
"SECURITIES" shall mean any (i) Units, (ii) Underlying Shares
and (iii) Convertible Securities.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"SPECIAL EVENT" shall mean a Termination Event or a Demand
Event.
"SPECIAL PERIOD" shall mean the period commencing on the date
of a Special Event and ending (i) on the earlier of 90 days following the Demand
Notice or effectiveness of a registration statement (as described in Section 2
hereof), with respect to a Demand Event and (ii) 90 days following the date of
termination of the Outsourcing Agreement, with respect to a Termination Event.
"TERMINATION EVENT" shall mean the termination of the
Outsourcing Agreement prior to the Initial Agreement Expiration Date (as defined
in Section 2.01 therein) at the election of NYPH under Sections 25.01 (for
convenience) or 25.02 (on change of control) or at the election of the Company
under Section 25.03 (for cause).
"UNDERLYING SHARES" shall mean the shares of common stock or
other securities issued or issuable to any Party at any time, in exchange for
Units in connection with a Conversion or after a Conversion.
"UNIT PURCHASE AGREEMENT" shall have the meaning set forth in
the Recitals to this Agreement.
"UNITS" shall mean collectively, (i) Class A Units, (ii) Class
B Units and (iii) any other class of units of Company hereafter issued and
outstanding.
4.
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SECTION 2. REGISTRATION
2.1 DEMAND REGISTRATION.
(A) Subject to the conditions of this Section 2.1, if the Company
shall receive a written request from (i) any Class A Holder or (ii) from the
Holder or Holders of at least a majority of the Registrable Securities then
outstanding, excluding Class A Units (in each case, the "INITIATING HOLDERS")
that the Company file a registration statement under the Securities Act covering
either (i) twenty-five percent of the Class A Units or (ii) twenty-five percent
of the Registrable Securities then outstanding, excluding Class A Units (a
"QUALIFIED PUBLIC OFFERING"), then the Company shall, within thirty (30) days of
the receipt thereof, give written notice of such request to all Holders, and
subject to the limitations of this Section 2.1, use commercially reasonable
efforts to effect, as soon as practicable, the registration under the Securities
Act of such Registrable Securities.
(B) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.1
and the Company shall include such information in the written notice referred to
in Section 2.1(a). In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.1, if the underwriter advises the Company that marketing factors require a
limitation of the number of securities to be underwritten (including Registrable
Securities) then the Company shall so advise all Holders of Registrable
Securities which would otherwise be underwritten pursuant hereto, and the number
of shares that may be included in the underwriting shall be allocated to the
Holders of such Registrable Securities on a PRO RATA basis based on the number
of Registrable Securities held by all such Holders (including the Initiating
Holders). Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from the registration.
(C) The Company shall not be required to effect a registration
pursuant to this Section 2.1:
(I) prior to the earlier of (A) the seventh anniversary of the
date of this Agreement or (B) one hundred eighty (180) days following the
effective date of the registration statement pertaining to the Initial Offering;
(II) after the Company has effected a registration pursuant to
this Section 2.1, and such registration has been declared or ordered effective;
(III) during the period starting with the date of filing of, and
ending on the date one hundred eighty (180) days following the effective date of
the registration statement
5.
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pertaining to a public offering; PROVIDED that the Company makes reasonable good
faith efforts to cause such registration statement to become effective;
(IV) if within thirty (30) days of receipt of a written request
from Initiating Holders pursuant to Section 2.1(a), the Company gives notice to
the Holders of the Company's intention to make a public offering within ninety
(90) days;
(V) if the Company has previously included the Registrable
Securities in an effective registration statement pursuant Section 2.2 below; or
(IV) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.1, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for each registration statement to be effected at such time, in
which event the Holders shall have the right to renew their request for
registration one hundred eighty (180) days after delivery of such certificate
with the Company retaining its right to again defer such registration by
delivering a subsequent notice pursuant to this subclause; PROVIDED HOWEVER,
that the Company may only exercise such right once in any twelve (12) month
period.
(V) A registration shall not constitute a registration for
purposes of Section 2.1 (i) until it has become effective and remains
continuously effective for a period of not less than 180 days or such shorter
period which will terminate when all Registrable Securities covered by such
registration statement have been sold, (ii) if, after it has become effective,
such registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court for
any reason not attributable to the Holders whose securities are covered by such
registration statement and has not thereafter been removed, (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not satisfied or waived, or (iv)
if, pursuant to Section 2.1(b), the amount of securities of the Holders included
in such registration is less than twenty-five percent (25%) of the Registrable
Securities covered by the written request by the Initiating Holders.
2.2 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of Underlying Shares (including, but not limited to, registration
statements relating to secondary offerings of Underlying Shares, but excluding
registration statements relating to employee benefit plans or with respect to
corporate reorganizations or other transactions under Rule 145 of the Securities
Act) and will afford each such Holder an opportunity to include in such
registration statement all or part of such Registrable Securities held by such
Holder. Each Holder desiring to include in any such registration statement all
or any part of the Registrable Securities held by it shall, within fifteen (15)
days after the above-described notice from the Company, so notify the Company in
writing. Such notice shall state the intended method of disposition of the
Registrable Securities by such Holder. If a Holder decides not to include all of
its Registrable Securities in any registration statement thereafter filed by the
Company, such Holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
registration
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statements as may be filed by the Company during the term of this Agreement with
respect to offerings of its securities, all upon the terms and conditions set
forth herein.
(A) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.2 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a PRO RATA
basis based on the total number of Registrable Securities held by the Holders;
and third, to any shareholder of the Company (other than a Holder) on a PRO RATA
basis. No such reduction shall (i) reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting,
or (ii) reduce the amount of securities of the selling Holders included in the
registration below twenty-five percent (25%) of the total amount of securities
included in such registration, unless such offering is the Initial Offering and
such registration does not include shares of any other selling shareholders, in
which event any or all of the Registrable Securities of the Holders may be
excluded in accordance with the immediately preceding sentence. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership or corporation, the partners, retired partners and
shareholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing person shall be deemed to be a single "HOLDER", and any PRO RATA
reduction with respect to such "Holder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "Holder," as defined in this sentence.
(B) RIGHT TO TERMINATE REGISTRATION. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 2.2
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.4 hereof.
2.3 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
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(A) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
(B) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
PROVIDED, HOWEVER, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.3:
(I) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(II) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than seven hundred fifty thousand dollars
($750,000), or
(III) if within thirty (30) days of receipt of a written request
from any Holder or Holders pursuant to this Section 2.3, the Company gives
notice to such Holder or Holders of the Company's intention to make a public
offering within ninety (90) days, or
(IV) if the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company for such Form S-3 registration to be
effected at such time, in which event the Company shall have the right to defer
the filing of the Form S-3 registration statement for a period of not more than
ninety (90) days after receipt of the request of the Holder or Holders under
this Section 2.3; PROVIDED, that such right to delay a request shall be
exercised by the Company not more than once in any twelve (12) month period, or
(V) if the Company has already effected three (3)
registrations on Form S-3 for the Holders pursuant to this Section 2.3, or
(VI) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(C) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 2.3 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.1 or 2.2, respectively.
2.4 EXPENSES OF REGISTRATION. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance
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pursuant to Section 2.1 or any registration under Sections 2.2 and 2.3 herein
shall be borne by the Company. All Selling Expenses incurred in connection with
any registrations hereunder, shall be borne by the holders of the securities so
registered PRO RATA on the basis of the number of shares so registered. The
Company shall not, however, be required to pay for expenses of any registration
proceeding begun pursuant to Sections 2.1 and 2.3, the request of which has been
subsequently withdrawn by the Initiating Holders or Holders unless (a) the
withdrawal is based upon material adverse information concerning the Company of
which the Initiating Holders were not aware at the time of such request or (b)
the Holders of a majority of Registrable Securities agree to forfeit their right
to one requested registration pursuant to Sections 2.1 and 2.3, as applicable,
in which event such right shall be forfeited by all Holders). If the Holders are
required to pay the Registration Expenses, such expenses shall be borne by the
holders of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which registration was
requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (b) above, then the Holders shall not
forfeit their rights pursuant to Sections 2.1 and 2.3 to a demand or S-3
registration, respectively.
2.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(A) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use commercially reasonable efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety (90)
days or, if earlier, until the Holder or Holders have completed the distribution
related thereto. The Company shall not be required to file, cause to become
effective or maintain the effectiveness of any registration statement that
contemplates a distribution of securities on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act.
(B) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(C) As soon as reasonably possible, furnish to the Holders
participating in such registration and to any underwriters of the securities
being registered such number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as such Holder
or underwriter may reasonably request in order to facilitate the public offering
of such securities. If any registration statement refers to any Holder
participating in such registration by name or otherwise as the holder of any
securities of the Company but such reference is not required by the Securities
Act, then the Holder shall have the right to require the deletion of such
reference.
(D) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; PROVIDED that the Company shall not be required
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in connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.
(E) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement. Promptly notify each Holder of Registrable
Securities covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing and, as promptly as practicable thereafter, prepare
and file with the Commission an amendment or supplement to the registration
statement or the prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company shall further advise each Holder participating
in such registration in writing, promptly after the occurrence of any of the
following, (i) of the filing of the registration statement or any prospectus, or
any amendment thereof or supplement thereto, with the Commission, (ii) the
effectiveness of the registration statement and any post-effective amendment
thereto, (iii) the receipt by the Company of any communication from the
Commission with respect to the registration statement or the prospectus, or any
amendment thereof or supplement thereto, including, without limitation, any stop
order suspending the effectiveness of the registration statement thereof, any
comments with respect thereto and any requests for amendments or supplements,
and (iv) the receipt by the Company of any notification with respect to the
suspension of the qualification of Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose.
(F) Use commercially reasonable efforts to furnish or cause to be
furnished, on the date that such Registrable Securities are delivered to the
underwriters for sale, if such securities are being sold through underwriters,
(i) an opinion, dated as of such date, of the counsel representing the Company
for the purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and (ii) a letter dated as of such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering addressed to the underwriters.
(G) From and after the date of any registration, use its commercially
reasonable efforts to cause the Registrable Securities being registered to be
listed on a national securities exchange or to be included in the
NASDAQ/National Market System or the NASDAQ/Small Cap Market, if the listing or
inclusion of underlying shares is permitted under the rules of such national
securities exchange or the NASD, as the case may be.
(I) In the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related
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prospectus or suspending the qualification of any underlying shares included in
such registration statement for sale in any jurisdiction, use its commercially
reasonable efforts promptly to obtain the withdrawal of such order.
2.6 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect five
(5) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if (a) the Company has completed its
Initial Offering and is subject to the provisions of the Exchange Act, and (b)
all Registrable Securities held by and issuable to such Holder (and its
affiliates, partners, former partners, members and former members) may be sold
under Rule 144 during any ninety (90) day period.
2.7 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(A) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.1, 2.2 and 2.3 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(B) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.1 and 2.3 if, due to the operation
of subsection 2.1(b) and 2.3(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.1 and 2.3.
2.8 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 2.1, 2.2 and 2.3:
(A) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers, directors, employees, agents,
affiliates and advisors of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"VIOLATION") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay as incurred to
each such Holder, partner, officer, director, underwriter or controlling person
for
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any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
PROVIDED, HOWEVER, that the indemnity agreement contained in this Section 2.8(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(B) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers and each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors, officers,
employees, affiliates, agents, advisors or any person who controls such Holder,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, underwriter or
other such Holder, or partner, director, officer or controlling person of such
other Holder may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder under an instrument duly executed by such Holder and
stated to be specifically for use in connection with such registration; and each
such Holder will pay as incurred any legal or other expenses reasonably incurred
by the Company or any such director, officer, controlling person, underwriter or
other Holder, or partner, officer, director or controlling person of such other
Holder in connection with investigating or defending any such loss, claim,
damage, liability or action if it is judicially determined that there was such a
Violation; PROVIDED, HOWEVER, that the indemnity agreement contained in this
Section 2.8(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
PROVIDED FURTHER, that in no event shall any indemnity under this Section 2.8
exceed the net proceeds received by such Holder from the offering giving rise to
such liability.
(C) Promptly after receipt by an indemnified party under this Section
2.8 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.8 deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such
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counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 2.8 but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.8.
(D) If the indemnification provided for in this Section 2.8 s held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
PROVIDED, that in no event shall any contribution by a Holder hereunder exceed
the net proceeds received by such Holder from the offering to which such
registration statement relates.
(E) The obligations of the Company and Holders under this Section 2.8
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
(F) Indemnification Payments. The indemnification and contribution
required by Section 2.8 will be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred; PROVIDED, HOWEVER,
that if an Indemnified Party is adjudged to be not entitled to such payments in
a final non-appealable judgment of a court of competent jurisdiction, it shall
promptly return such payments to the Indemnifying Party.
2.9 ASSIGNMENT OF REGISTRATION RIGHTS. Subject to the applicable
provisions of the Operating Agreement, the rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which is (i) an
Affiliate or (ii) a transferee or assignee of more than ten percent (10%) of the
Registrable Securities; PROVIDED, HOWEVER, (i) the transferor shall, within ten
(10) days after such transfer, furnish to the Company written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned and (ii) such transferee shall
agree to be subject to all restrictions set forth in this Agreement.
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2.10 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company, the Holders of at least fifty percent (50%) of
the Class A Units and the Holders of at least fifty percent (50%) of the
Registrable Securities, other than Class A Units, then outstanding. Any
amendment or waiver effected in accordance with this Section 2.10 shall be
binding upon each Holder and the Company. By acceptance of any benefits under
this Section 2, Holders of Registrable Securities hereby agree to be bound by
the provisions hereunder.
2.11 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. The Company hereby
represents and warrants that there are no agreements currently in effect other
than this Agreement, granting any holder or prospective holder of any securities
of the Company registration rights with respect to any securities of the
Company. The Company shall not enter into any agreement granting any holder or
prospective holder of any securities of the Company registration rights senior
to those granted to the Holders hereunder unless approved in writing by the
Holders of a majority of the Class B Units.
2.12 "MARKET STAND-OFF" AGREEMENT; AGREEMENT TO FURNISH INFORMATION. Each
Holder hereby agrees that such Holder shall not sell, transfer, make any short
sale of, grant any option for the purchase of, or enter into any hedging or
similar transaction with the same economic effect as a sale, any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act.
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Holder shall provide,
within ten (10) days of such request, such information as may be reasonably
required by the Company or such representative in connection with the completion
of any public offering of the Company's securities pursuant to a registration
statement filed under the Securities Act. The obligations described in this
Section 2.12 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or similar forms that may be promulgated in the future.
The Company may impose stop-transfer instructions with respect to the shares of
Common Stock (or other securities) subject to the foregoing restriction until
the end of said one hundred eighty (180) day period.
2.13 INSPECTION RIGHTS. The Company shall make available for inspection by
each Holder participating in the registration, each underwriter of Registrable
Securities owned by such Holder and their respective accountants, counsel and
other representatives all financial and other records, pertinent corporate
documents and properties of the Company as shall be reasonably necessary to
enable them to exercise their due diligence responsibilities in connection with
each registration of Registrable Securities owned by such Holder, and shall
cause the Company's
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officers, directors and employees to supply all information reasonably requested
by any such person in connection with such registration.
2.14 RULE 144 REPORTING. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its commercially reasonable efforts to:
(A) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(B) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
(C) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
2.15 CERTIFICATES. In connection with the offering of any Registrable
Securities registered pursuant to this Agreement, the Company will promptly
after the sale of such Registrable Securities (a) facilitate the timely
preparation and delivery to the Holders and the underwriters, if any,
participating in such offering of certificates, representing ownership of such
Registrable Securities being sold in such denominations and registered in such
names as requested by such Holders or such underwriters and (b) instruct any
transfer agent and registrar of such Registrable Securities to release any stop
transfer orders with respect to any such Registrable Securities.
SECTION 3. SPECIAL EVENT
Upon the occurrence of a Special Event and during the Special Period,
the Company (or any assignee) may purchase, and upon the Company's decision to
purchase such Holder shall sell, all, or less than all, of the Units held by
Holder upon twenty (20) days prior written notice to the Holder (the "Purchase
Notice") in accordance with the terms described in this Section 4 (the "Purchase
Right"). The purchase price for each Unit purchased by the Company pursuant to
this Purchase Right shall be an amount equal to the Fair Market Value per Unit
(the "Purchase Price"). The closing of the purchase of the Units pursuant to
this Section 3 shall take place on the date designated by the Company in the
Purchase Notice, which date shall not be more than sixty (60) days nor less than
twenty (20) days after the delivery of the Purchase Notice. The Company will pay
for the Units to be purchased pursuant to the Purchase Right by delivery of a
certified check or wire transfer of funds in the amount of the aggregate
Purchase Price. The Company will be entitled to receive customary
representations and warranties as to title from the Holder
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regarding such sale and to require signatures to be guaranteed. Any assignee of
the Company shall have the same rights and obligations as the Company under this
Section 3.
SECTION 4. ACTIONS REQUIRING APPROVAL OF THE CLASS B DIRECTOR
4.1 Notwithstanding any other provisions of this Agreement or the
Operating Agreement to the contrary, the Company shall not, and the Class A
Holders shall not cause the Company to, without the approval of a majority of
the Board of Directors, including the Class B Director, take any of the
following actions:
(A) effect a Conversion;
(B) merge or consolidate with or into any other entity or sell all or
substantially all of its assets;
(C) liquidate, dissolve, or commence bankruptcy, liquidation or
similar proceedings;
(D) issue any Units or other securities of the Company or purchase or
redeem any Units or other securities (excluding the issuance of additional Units
to an Outsourcing Member (as such term is defined in the Operating Agreement));
(E) amend the Operating Agreement in a manner which adversely affects
the Class B Units disproportionately to the other Units or adversely affects any
of the rights of the Class B Units or Class B Director granted under this
Agreement;
(F) admit any new Member (excluding a new Member who is an
Outsourcing Member); or
(G) conduct any business other than (i) the Business (as defined in
the Operating Agreement), and (ii) services similar to or which are a logical
extension of the Business.
4.2 Notwithstanding anything to the contrary in the Outsourcing Agreement,
NYPH shall not have the right to terminate the Outsourcing Agreement under
Section 25.02 thereof on a Change in Control (as defined in the Outsourcing
Agreement) of the Company if the Class B Director nominated by NYPH or NYPH as a
Member approves the event or transaction giving rise to the Change in Control of
the Company.
SECTION 5. PREEMPTIVE RIGHT.
5.1 PREEMPTIVE RIGHTS. Holders of Class B Units shall have a preemptive
right to (i) purchase their pro rata share of all Units that the Company may,
from time to time, propose to sell and issue after the date of this Agreement,
other than the securities excluded by Section 5.5 hereof (the "Additional
Units") and (ii) contribute their pro rata share of additional Capital
Contributions requested by the Company from the Class A Holders from time to
time (the "Additional Capital"). The pro rata share is equal to the ratio of (a)
the number of Class B Units of the Company which such Holder is deemed to own
immediately prior to the issuance of such
16.
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Additional Units or contribution of Additional Capital to (b) the total number
of Units of the Company outstanding immediately prior to the issuance of
Additional Units or contribution of Additional Capital.
5.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Additional
Units or requests contribution of Additional Capital, it shall give the Holders
of Class B Units written notice of its intention, describing the price and the
terms and conditions upon which the Company proposes to issue the same, in the
case of Additional Units, or the requested amount of Additional Capital. The
Holders of Class B Units shall have fifteen (15) days (or, in the case of a
request for Additional Capital, such shorter period if fifteen (15) days is not
reasonably practicable) from the giving of such notice to (a) in the case of
Additional Units, agree to purchase its pro rata share of the Additional Units
for the price and upon the terms and conditions specified in the notice by
giving written notice to the Company and stating therein the quantity of
Additional Units to be purchased or (b) in the case of Additional Capital, agree
to contribute its pro rata share of Additional Capital. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Additional
Units to Holders of Class B Units if it would cause the Company to be in
violation of applicable federal securities laws by virtue of such offer or sale.
5.3 TERMINATION AND WAIVER OF PREEMPTIVE RIGHTS. The preemptive rights
established by this Section 5 shall not apply to, and shall terminate upon the
effective date of the registration statement pertaining to the Initial Offering.
The preemptive rights established by this Section 5 may be amended, or any
provision waived with the written consent of Holders of a majority of Class B
Units.
5.4 TRANSFER OF PREEMPTIVE RIGHTS. The preemptive rights under this
Section 5 may be transferred to the same parties, subject to the same
restrictions as any transfer of registration rights pursuant to Section 2.9.
5.5 EXCLUDED SECURITIES. The preemptive rights established by this Section
5 shall have no application to any of the following issuances:
(A) any securities (and/or options, warrants or other purchase rights
issued pursuant to such options, warrants or other rights) issued or to be
issued after the date of this Agreement to employees, officers or directors of,
or consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements;
(B) any securities issued for consideration other than cash pursuant
to a merger, consolidation, acquisition or similar business combination;
(C) securities issued in connection with any split, dividend or
recapitalization by the Company;
(D) securities issued upon a Conversion;
(E) any securities issued pursuant to loan arrangement or debt
financing from a bank or similar financial or lending institution;
17.
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(F) any securities that are issued by the Company pursuant to a
registration statement filed under the Securities Act; and
(G) any securities issued in connection with strategic transactions
involving the Company and other entities, including (i) joint ventures,
manufacturing, marketing or distribution arrangements, (ii) technology transfer
or development arrangements or (iii) outsourcing agreements.
SECTION 6. MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of Delaware.
6.2 SURVIVAL. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of Registrable Securities from time to time; PROVIDED, HOWEVER, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and any schedules
hereto, the Unit Purchase Agreement and the other documents delivered pursuant
thereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein and therein.
6.5 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
6.6 AMENDMENT AND WAIVER. Except as otherwise expressly provided, this
Agreement may be amended or modified only upon the written consent of the
Company, the holders of at least two-thirds (66 2/3%) of the Class A Units and
the holders of at least two-thirds (66 2/3%) of the Registrable Securities,
other than Class A Units.
18.
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(A) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the Registrable Securities.
(B) Notwithstanding the foregoing, this Agreement may be amended with
only the written consent of the Company to include additional purchasers of
Units as "Holders" and parties hereto.
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
6.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
6.9 ATTORNEYS' FEES. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
6.10 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.11 ADDITIONAL PARTIES. Notwithstanding anything to the contrary contained
herein, if the Company shall issue additional Units pursuant to the Unit
Purchase Agreement, any purchaser of such Units may become a party to this
Agreement by executing and delivering an additional counterpart signature page
to this Agreement.
6.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
19.
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IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR
RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.
FCG MANAGEMENT SERVICES, LLC
By: /s/ Luther J. Nussbaum
-----------------------
Printed Name: Luther J. Nussbaum
-------------------
Title: Chief Executive Officer
------------------------
FCG MANAGEMENT HOLDINGS, INC.
By: /s/ Luther J. Nussbaum
-----------------------
Printed Name: Luther J. Nussbaum
-------------------
Title: Chief Executive Officer
------------------------
NEW YORK AND PRESBYTERIAN HOSPITAL
By: /s/ Louis F. Reuter IV
-----------------------
Printed Name: Louis F. Reuter IV
-------------------
Title: Executive Vice President
-------------------------
20.
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EXHIBIT 99.4 PORTIONS HEREIN DENOTED WITH [**] HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE SEC UNDER A CONFIDENTIAL TREATMENT REQUEST
FCG MANAGEMENT SERVICES, LLC
AMENDED AND RESTATED
OPERATING AGREEMENT
THIS AMENDED AND RESTATED OPERATING AGREEMENT (the "OPERATING
AGREEMENT") of FCG MANAGEMENT SERVICES, LLC, a Delaware limited liability
company (the "COMPANY"), is made as of November 8, 1999 (the "EFFECTIVE DATE"),
by and among the Members listed on SCHEDULE A hereto.
WHEREAS, the Company was formed pursuant to the provisions of the
Delaware Limited Liability Company Act, 6 Del. C Sections 18-101 ET SEQ., as
amended from time to time (the "ACT"), upon the filing of Certificate of
Formation (the "CERTIFICATE") with the Delaware Secretary of State on October 5,
1999;
WHEREAS, this Operating Agreement amends and restates, in its entirety,
that certain operating agreement of the Company made as of October 5, 1999 (the
"INITIAL OPERATING AGREEMENT"), by the Initial Member (as defined below);
NOW, THEREFORE, in consideration of mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. The following terms used in this Operating Agreement
shall have the following meanings (unless otherwise expressly provided herein):
(a) "ACCOUNTING PERIOD" shall be (i) the Company's Fiscal Year
if there are no changes in the Members' respective interests in Company income,
gain, loss or deductions during such Fiscal Year except on the first day thereof
or (ii) any other period beginning on the first day of a Fiscal Year, or any
other day during a Fiscal Year upon which occurs a change in such respective
interests, and ending on the last day of a Fiscal Year, or on the day preceding
an earlier day upon which any change in such respective interests shall occur.
(b) "ACT" shall mean the Delaware Limited Liability Company
Act, 6 Del. C Sections 18-101 ET SEQ., as amended.
(c) "ADDITIONAL UNITS" shall have the meaning set forth in
Article XVII.
(d) "ADDITIONAL MEMBER" shall mean any Person who or which,
with respect to an issuance of Units by the Company, is admitted to the Company
as an Additional Member pursuant to Article XIII hereof.
1.
<PAGE>
(e) "ADJUSTED ASSET VALUE" with respect to any Company
Property shall be the Company Property's adjusted basis for federal income tax
purposes, except as follows:
(i) The initial Adjusted Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market value of
such asset at the time of contribution, as specified in this Operating Agreement
or as determined by the contributing Member and the Board of Directors.
(ii) The Adjusted Asset Values of all Company Property
shall be adjusted to equal their respective gross fair market values, as
determined by the Board of Directors, and the resulting unrecognized profit or
loss allocated to the Capital Accounts of the Members pursuant to Article X, as
of the following times: (A) the acquisition of additional Units in the Company
by any new or existing Member; (B) the distribution by the Company to a Member
of more than a DE MINIMIS amount of Company Property, unless all Members receive
simultaneous distributions of either undivided interests in the distributed
property or identical Company Property in proportion to their interests in
Company distributions; and (C) the liquidation of the Company within the meaning
of Treasury Regulation ss.1.704-1(b)(2)(ii)(g).
(iii) The Adjusted Asset Values of the Company Property
shall be increased (or decreased) to reflect any adjustments to the adjusted
basis of such Company Property pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m).
(f) "ADJUSTED CAPITAL ACCOUNT," with respect to any Member,
shall mean the Member's Capital Account as adjusted by the items described in
Sections 1.704-2(g)(1), 1.704-2(i)(5) and 1.704-1(b)(2)(ii)(d)(4), (5) and (6)
of the Treasury Regulations.
(g) "ADJUSTMENT PERIOD" shall mean the eighteen (18) months
after the admission of NYPH as a Member, as extended for an additional ninety
(90) days if, as of the end of such eighteen (18) month period, the Company is
then party to a letter of intent or similar agreement for the admission of an
Outsourcing Member (other than NYPH) but the admission of such Outsourcing
Member has not been completed within such eighteen (18) month period.
(h) "ADMINISTRATOR" shall have the meaning set forth in
Section 16.1.
(i) "AFFILIATE" of any Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "CONTROL," when
used with respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
(j) "ANNUAL BUDGET" shall have the meaning set forth in
Section 5.2(a).
2.
<PAGE>
(k) "BOARD OF DIRECTORS" shall mean the group of Directors
designated or elected pursuant to the terms of this Operating Agreement, who
shall act as the Directors of the Company subject to and in accordance with the
terms of this Operating Agreement.
(l) "BUSINESS" shall have the meaning provided in Section 3.1
below.
(m) "CAPITAL ACCOUNT" as of any given date shall mean the
Capital Account of each Member as specified in Section 10.3.
(n) "CAPITAL CONTRIBUTION" shall mean the amount of cash and
the initial Adjusted Asset Value of any property contributed to the Company by a
Member whenever made, net of any liability of such Member assumed by the Company
and any liability secured by property contributed by such Member; provided that
any contribution of property must be specifically approved by the Company as a
Capital Contribution. Any reference to a Capital Contribution of a Member shall
include the Capital Contribution made by a predecessor holder of any Units held
by such Member with respect to such Units. The agreed net value of the non-cash
Capital Contribution of the Initial Member immediately prior to October 5, 1999,
was zero dollars in the form of business assets of the Company as described on
SCHEDULE B hereto.
(o) "CAPITAL TRANSACTIONS" shall mean (i) a sale and any other
disposition, including a merger, other than in the ordinary course of business
of any substantial Company Property and (ii) any borrowing of the Company other
than for purposes, as reasonably determined by the Board of Directors in
accordance with this Operating Agreement, of operating, developing, and
maintaining the Company and its business.
(p) "CERTIFICATE" shall mean the Certificate of Formation of
the Company filed with the Delaware Secretary of State on October 5, 1999.
(q) "CLASS B ADJUSTMENT UNITS" shall have the meaning set
forth in Article XVI.
(r) "CODE" shall mean the Internal Revenue Code of 1986, as
amended, or corresponding provisions of subsequent superseding federal revenue
laws.
(s) "COMPANY" shall refer to FCG MANAGEMENT SERVICES, LLC.
(t) "COMPANY MINIMUM GAIN" shall have the meaning ascribed to
the term "Partnership Minimum Gain" in Treasury Regulation Section 1.704-2(d).
(u) "COMPANY NONRECOURSE DEDUCTIONS" shall have the meaning
ascribed to the term "Nonrecourse Deductions" in Treasury Regulation Section
1.704-2(b)(1).
(v) "COMPANY NONRECOURSE LIABILITIES" shall mean "nonrecourse
liabilities" as characterized under Section 1.704-2(b)(3) of the Treasury
Regulations. Subject to the foregoing sentence, Company Nonrecourse Liabilities
means liabilities of the Company (or a portion thereof) with respect to which
none of the Members bears the Economic Risk of Loss (other than through the
Member's indirect interest as a Member in the Company Property subject to the
liability). Any liability of the Company to a Member and any liability
guaranteed by a
3.
<PAGE>
PORTIONS HEREIN DENOTED WITH [**] HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE SEC UNDER A CONFIDENTIAL TREATMENT REQUEST
Member or with respect to which a Member has pledged personal assets (to the
extent the Member may bear the burden of an economic loss attributable to the
liability) shall not be classified as a Company Nonrecourse Liability.
(w) "COMPANY PROPERTY" shall mean any tangible and intangible
property now owned or hereafter acquired by or contributed to the Company,
including, without limitation, all cash, cash equivalents, deposits, accounts
receivable, work-in-progress, inventory, equipment, materials, supplies,
prototypes, vehicles, real property, fixtures, permits, approvals, licenses,
patents, consents, contracts, agreements, applications for permits, approvals,
licenses, development rights, development agreements, trade names and
warranties, or any other property.
(x) "DIRECTOR" shall mean the persons designated or elected to
serve on the Board of Directors pursuant to the terms of this Operating
Agreement.
(y) "DISSOLUTION EVENT" shall have the meaning set forth in
Section 14.1.
(z) "DISTRIBUTABLE CASH" shall mean for any period all cash
and cash equivalents of the Company on hand from time to time (including without
limitation bank accounts and short-term cash investments), excluding any portion
thereof, as reasonably determined by the Board of Directors in accordance with
this Operating Agreement, necessary to pay expenses or liabilities or establish
reserves, for purposes of operating, developing and maintaining the Company and
its business as now existing and proposed to be conducted.
(aa) "ECONOMIC RISK OF LOSS" shall have the meaning defined in
Treasury Regulations Section 1.752-2.
(bb) "EFFECTIVE DATE" shall have the meaning set forth in the
preamble of this Operating Agreement.
(cc) "ESTIMATED CONTRACT REVENUE" shall mean the Company's
good faith estimate of the revenue that will be received by the Company during
the initial term of an outsourcing agreement to be entered into with an
Outsourcing Member.
(dd) "EXCLUSIVE BUSINESS" shall mean the Business, but not
including any of the following: (A) providing services consisting of or similar
to information technology outsourcing services, if such services are provided
under an agreement (or series of related agreements) with annual revenues from
one client of under [**], (B) providing information technology implementation
services or (C) providing consulting services to the extent such consulting
services do not involve management and control of customer assets or hiring or
substitution of customer employees. Notwithstanding the foregoing, Exclusive
Business shall specifically include information technology outsourcing services
relating to [**] to health care delivery systems in the State of New York.
(ee) "FISCAL YEAR" shall mean the Company's fiscal year. The
Company's fiscal year shall be the calendar year.
4.
<PAGE>
(ff) "FCG HOLDINGS" shall mean FCG Management Holdings, Inc.,
a Delaware corporation.
(gg) "FUNDS FROM OPERATIONS" shall mean all Distributable Cash
held by the Company which results from the operation of the business of the
Company from whatever source, except for Funds From Capital Transactions.
(hh) "FUNDS FROM CAPITAL TRANSACTIONS" shall mean all
Distributable Cash or other property held by the Company which results from
Capital Transactions.
(ii) "GAAP" shall mean generally accepted accounting
principles as in effect at the time of application to the provision hereof.
(jj) "INITIAL CAPITAL CONTRIBUTION" shall mean the aggregate
initial contribution to the capital of the Company by each Member.
(kk) "INITIAL MEMBER" shall mean FCG Holdings, as successor to
the interest of First Consulting Group, Inc., a Delaware corporation.
(ll) "INITIAL OPERATING AGREEMENT" shall have the meaning set
forth in the second "Whereas" clause above.
(mm) "INITIAL PLAN" shall have the meaning set forth in
Section 5.2(a).
(nn) "INTEREST" shall mean, with respect to a Member, the
proportion that such Member's Units bears to the aggregate outstanding Units of
all Members.
(oo) "MEMBER" shall mean each of the Members listed on
SCHEDULE A hereto, any Additional Member and any Substitute Member which is, as
of a given time, a member of the Company. Each Member shall hold Units of the
class designated on SCHEDULE A as indicated on SCHEDULE A. Any Member holding:
Class A Units shall be referred to as "CLASS A MEMBER," Class B Units shall be
referred to as a "CLASS B MEMBER," and upon creation and issuance of new classes
of Units pursuant to this Operating Agreement, holders of such Units shall be
referenced in like manner without further amendment to this definition.
(pp) "MEMBER MINIMUM GAIN" shall mean, with respect to each
Member Nonrecourse Debt, an amount equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Company Nonrecourse
Liability, determined in accordance with Treasury Regulations Section
1.704-2(i).
(qq) "MEMBER NONRECOURSE DEBT" shall mean any nonrecourse debt
of the Company for which any Member bears the Economic Risk of Loss.
(rr) "MEMBER NONRECOURSE DEDUCTIONS" shall mean, with respect
to a Member Nonrecourse Debt, the excess, if any, of the net increase, if any,
in the amount of Member Minimum Gain attributable to such Member Nonrecourse
Debt during an Accounting Period over the aggregate amount of any distributions
during such Accounting Period to such Member that bears the Economic Risk of
Loss for such Member Nonrecourse Debt to the extent
5.
<PAGE>
such distributions are from the proceeds of such Member Nonrecourse Debt and are
allocable to an increase in Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(2).
(ss) "NET BOOK VALUE" shall mean as of any date of
determination, the net book value of the Company at such date as determined in
accordance with GAAP.
(tt) "NET PROFIT" or "NET LOSS" shall be an amount computed
for each Accounting Period as of the last day thereof that is equal to the
Company's taxable income or loss for such Accounting Period, determined under
the accrual method of accounting in accordance with Section 703(a) of the Code
(for this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(i) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net Profit or Net
Loss pursuant to this definition shall be added to such taxable income or loss;
(ii) Any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise
taken into account in computing Net Profit or Net Loss pursuant to this
definition shall be subtracted from such taxable income or loss;
(iii) In the event of any adjustment to the Adjusted Asset
Value of any Company Property pursuant to Section 1.1(e), the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
an asset for purposes of computing Net Profit or Net Loss;
(iv) Gain or loss resulting from any disposition of a
portion of Company Property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Adjusted Asset
Value of the Company Property disposed of rather than its adjusted tax basis;
(v) In lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account book depreciation, amortization, and
cost recovery deductions for such Accounting Period, computed in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv)(g).
(vi) In the event of a distribution in kind of Company
Property to the Members, the gain or loss that would result from a sale of such
Company Property at fair market value shall be added to such taxable income or
loss; and
(vii) Notwithstanding any other provision of this
definition, any items that are specially allocated pursuant to Section 11.2
hereof shall not be taken into account in computing Net Profit or Net Loss. The
amounts of the items of Company income, gain, loss or
6.
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PORTIONS HEREIN DENOTED WITH [**] HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE SEC UNDER A CONFIDENTIAL TREATMENT REQUEST
deductions available to be specially allocated pursuant to Section 11.2 shall be
determined by applying rules analogous to those set forth in (i) through (vi)
above.
(uu) "NYPH" shall mean New York and Presbyterian Hospital
(doing business as New York Presbyterian Hospital), a New York not-for-profit
corporation.
(vv) "OPERATING AGREEMENT" shall mean this Operating Agreement
as originally executed and as amended in accordance with the terms of this
Operating Agreement from time to time.
(ww) "OPERATING PLAN" shall have the meaning set forth in
Section 5.2.
(xx) "OUTSOURCING AGREEMENT" shall mean that certain
Outsourcing Agreement by and between the Company and NYPH dated as of November
1, 1999, including any and all amendments thereto.
(yy) "OUTSOURCING MEMBER" shall mean a Member with whom the
Company has entered into an outsourcing arrangement whereby the Company provides
services to such Member similar to those provided under the Outsourcing
Agreement and (i) such outsourcing arrangement has a term of at least [**] and
provides for annual fees to the Company of at least [**] and (ii) such Member is
either (A) [**] or (B) such other healthcare institution that, as reasonably
determined by the Company, (1) has a strong interest in and commitment to
utilizing information technology in its operations and the willingness to
invest, deploy and measure information technology related activities, (2) is
recognized as a market leader in terms of image, quality and market share and
(3) is financially viable and can sustain its information technology commitments
during the terms of such outsourcing agreement.
(zz) "PERSON" shall mean any individual or corporation,
partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or other entity, including any
government or political subdivision or any agency or instrumentality thereof and
the heirs, executors, administrators, legal representatives, successors, and
permitted assigns of such "Person" where the context so admits.
(aaa) "PREFERRED RETURN" shall mean an amount computed for
each Accounting Period equal to the balance of a Member's Adjusted Capital
Contributions multiplied by the Preferred Return Rate. The Adjusted Capital
Contribution of each Member shall be the greater of Zero or the total cash
Capital Contributions contributed by such Member reduced by distributions
pursuant to Section 11.4(c)(ii) (including any amounts deemed distributed
pursuant to Section 11.4(c)(ii) under the last sentence of Section 11.4(a)) and
Section 14.3.
(bbb) "PREFERRED RETURN RATE" shall mean an annual rate or
rates announced by the Wall Street Journal as the prime rate plus two percent
(2%).
7.
<PAGE>
(ccc) "PROPOSED TRANSFEROR" shall have the meaning set forth
in Section 12.2(a).
(ddd) "REGULATORY ALLOCATIONS" shall have the meaning set
forth in Section 11.2(g).
(eee) "SUBSTITUTE MEMBER" shall mean any Person who or which,
with respect to a permitted transfer of an interest in the Company by a Member,
is admitted to the Company as a Substitute Member pursuant to Article XIII.
(fff) "TAX MATTERS PARTNER" shall have the meaning set forth
in Section 11.10(b).
(ggg) "TAX PERCENTAGE" shall have the meaning set forth in
Section 11.4(a).
(hhh) "TERMINATION NOTICE" shall have the meaning set forth in
Section 7.6.
(iii) "TREASURY REGULATIONS" shall mean the Income Tax
Regulations, including temporary regulations, promulgated under the Code, as
amended from time to time.
(jjj) "UNITS" shall mean the units issued by the Company to
its Members, which entitle the Members to certain voting and other rights as set
forth in this Operating Agreement. Units shall be denominated by class as
specified in SCHEDULE A. "Class A Units" shall mean any Unit denominated as
"Class A", "Class B Units" shall mean any Units denominated as "Class B," and
any new denominations of Units issued pursuant to this Operating Agreement shall
be referenced in like manner without further amendment to this definition.
ARTICLE II
FORMATION OF COMPANY
2.1 FORMATION. On October 5, 1999, the Company was organized as a
Delaware limited liability company under and pursuant to the Act.
2.2 NAME. The name of the Company is FCG MANAGEMENT SERVICES, LLC.
2.3 PRINCIPAL PLACE OF BUSINESS. The Company may locate its places of
business and registered office at any place or places as the Board of Directors
may from time to time deem advisable.
2.4 REGISTERED OFFICE AND REGISTERED AGENT. The Company's registered
office in the state of Delaware shall be at the office of its registered agent
for service of process. The name and address of its initial registered agent for
service of process is Corporation Service Trust Company at 1013 Centre Road in
the City of Wilmington, County of New Castle, Delaware, 19801. The Board of
Directors may change the Company's agent for service of process from time to
time.
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2.5 TERM. The term of the Company commenced on October 5, 1999 upon the
filing of the Certificate of Formation with the Delaware Secretary of State and
shall be of continuing duration, unless the Company is dissolved in accordance
with the provisions of this Operating Agreement or the Delaware Act.
2.6 TERMINATION OF INITIAL OPERATING AGREEMENT. This Operating
Agreement hereby amends and restates, in its entirety, the Initial Operating
Agreement. As of the Effective Date, the Initial Operating Agreement is
terminated and of no further force or effect, and FCG Holdings acknowledges and
agrees on behalf of itself and its Affiliates that there is no liability
thereunder.
ARTICLE III
PURPOSES OF COMPANY
3.1 COMPANY PURPOSES. The purpose of the Company is to engage in the
business of providing information technology outsourcing services to healthcare
institutions in the United States and Canada (the "Business") or any other
lawful act or activity for which a limited liability company may be organized
under the laws of the State of Delaware and approved by the Board of Directors,
including, without limitation, acts and activities necessary, advisable or
desirable to carry out the foregoing. The Company shall have all powers
available to limited liability companies under the Act to make and perform all
contracts and to engage in all actions and transactions necessary or advisable
to carry out the purposes of the Company.
ARTICLE IV
MANAGEMENT OF COMPANY
4.1 GENERALLY. Except as specifically set forth in this Operating
Agreement, the Members hereby delegate all power and authority to manage the
business and affairs of the Company to the Directors, who shall act as the
Company's "managers" (within the meaning of the Act) subject to and in
accordance with the terms of this Operating Agreement (including, without
limitation, Section 5.1). Such Directors shall constitute the "Board of
Directors" and such term may be used in this Operating Agreement to refer to
such Directors. Such term is used for convenience only and is not intended by
the parties to confer to the Board of Directors any additional power or
authority other than that expressly and specifically conferred pursuant to and
in accordance with the terms of this Operating Agreement. Any power not
otherwise delegated pursuant to this Operating Agreement or by the Board of
Directors in accordance with the terms of this Operating Agreement shall remain
with the Board of Directors. A Director may appoint a person to act as proxy on
the Director's behalf by an instrument in writing, a copy of which shall be
given to the other Directors.
4.2 NUMBER OF DIRECTORS. The number of Directors of the Company shall
be determined by a majority vote of the Board of Directors with the initial
number fixed at five (5) Directors.
4.3 TENURE, ELECTION AND QUALIFICATIONS.
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(a) For so long as the total number of Class B Units
outstanding equals or exceeds ten percent (10%) of the total outstanding Units,
the holders of the outstanding Class B Units shall be entitled to elect one (1)
Director (the "Class B Director"). The holder or holders of the outstanding
Class A Units shall be entitled to elect the balance of the authorized Directors
(the "Class A Directors") at each annual meeting of the Members (or by written
consent as set forth in Section 4.7(g)), to hold office until such next annual
meeting, or as otherwise provided below. Each Director shall serve until the
earliest of (i) the election of such Director's successor, (ii) the removal of
such Director in accordance with the terms of this Operating Agreement, (iii)
such Director's resignation, and (iv) such Director's death. Voting for
Directors shall be calculated on a noncumulative basis.
(b) A Director may, but need not, be a Member.
(c) The individuals set forth on SCHEDULE C hereto shall serve
as the Directors, until their successors are duly elected and have qualified or
their earlier resignation.
4.4 RESIGNATION. A Director may resign at any time by giving written
notice to the Board of Directors. The resignation of a Director shall take
effect upon receipt of notice thereof or at such later time as shall be
specified in such notice; unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
4.5 REMOVAL. Subject to the terms of any agreement between the Members
with respect to voting for Directors, (i) all Class A Directors or any Class A
Director may be removed at any time, with or without cause, by the affirmative
vote of the Members holding a majority of the outstanding Class A Units and (ii)
the Class B Director may be removed at any time, with or without cause, by the
affirmative vote of the Members holding a majority of the outstanding Class B
Units.
4.6 VACANCIES. Subject to the terms of any agreement between the
Members with respect to voting for Directors, any vacancy occurring in the
office of a (i) Class A Director shall be filled by the affirmative vote (or
written consent) of the Members holding a majority of the outstanding Class A
Units and (ii) Class B Director shall be filled by the affirmative vote (or
written consent) of the Members holding a majority of the outstanding Class B
Units.
4.7 MEETINGS.
(a) Regular meetings of the Board of Directors shall be held
at least quarterly at such times, mutually convenient places and dates as
determined by the Board of Directors. The officers and other executives of the
Company may attend meetings of the Board of Directors with the prior approval of
the Board of Directors.
(b) Any Director may participate in a meeting through use of
conference telephone or similar communication equipment, so long as all
Directors participating in such meeting can hear one another. Such participation
constitutes presence in person at such meeting.
(c) Special meetings of the Board of Directors for any purpose
may be called by the President, Chief Executive Officer, a majority of the
Directors or the Class B Director.
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(d) Each Director shall receive notice of all meetings of the
Board of Directors, stating the place, day and hour of the meeting and the
purpose or purposes for which the meeting is called and providing telephone
contact information for any Director who chooses to participate in the meeting
through use of conference telephone or similar communication equipment, at least
one (1) business day before the date of the meeting. Such notice may be given by
the Secretary of the Company or by the person or persons who called the meeting.
Notice of any meeting of the Board of Directors need not be given to any
Director who signs a waiver of notice of such meeting or a consent to holding
the meeting, either before or after the meeting, or who attends the meeting
without protesting prior to such meeting or at the commencement thereof. All
such waivers, consents and approvals shall be filed with the records of the
Company.
(e) Meetings of the Board of Directors may be held at any
place that has been designated in the notice of the meeting.
(f) Any meeting of the Board of Directors, whether or not a
quorum is present, may be adjourned to another time and place by the affirmative
vote of a majority of the Directors present. If the meeting is adjourned for
more than twenty-four (24) hours, notice of such adjournment to another time or
place that satisfies the notice requirements of Section 4.7(d) shall be given
prior to the time of the adjourned meeting to the Directors who were not present
at the time of the adjournment.
(g) Any action required or permitted to be taken by the Board
of Directors may be taken without a meeting of the Board of Directors, if all
the Directors unanimously consent in writing to such action. Such unanimous
written consent or consents shall be filed with the records of the Company.
4.8 QUORUM AND TRANSACTION OF BUSINESS. The number of Directors that
constitutes a quorum for the transaction of business at a properly noticed
meeting of the Board of Directors shall be a simple majority of the number of
Directors then in office. Except as required by the Act or as otherwise set
forth in this Operating Agreement, every act or decision done or made by at
least a simple majority of the Directors present at a meeting duly held and at
which a quorum is present shall be the act of the Board of Directors.
4.9 DIRECTORS HAVE NO EXCLUSIVE DUTY TO COMPANY. The Directors shall
not be required to manage the Company as their sole and exclusive function and
may have other business interests and may engage in other activities in addition
to those relating to the Company and may engage in the ownership, operation and
management of businesses, including First Consulting Group, Inc., and activities
including serving on one or more Board of Directors, for its their account and
for the account of others, and no other provision of this Agreement shall be
deemed to prohibit any such Person from conducting such other businesses or
activities; provided that no such business shall compete with the Company.
Neither the Company nor any Member shall have any right, by virtue of this
Operating Agreement, to share or participate in such other investments or
activities of the Directors or to the income or proceeds derived therefrom.
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4.10 NON-COMPETITION AND EXCLUSIVITY. FCG Holdings agrees on behalf of
itself and its Affiliates that the Exclusive Business shall be conducted
exclusively through the Company. FCG Holdings agrees that neither it nor any of
its Affiliates shall engage in or compete with the Exclusive Business.
ARTICLE V
POWERS OF AND RESTRICTIONS ON THE DIRECTORS
5.1 MANAGEMENT. Each Director shall participate in the direction,
management and control of the business of the Company to the best of such
Director's ability. The Directors shall in all cases act as a group and shall
have no authority to act individually. The Board of Directors may appoint one
(1) or more officers to manage the day-to-day operations of the Company. The
initial officers shall be as designated in Section 6.1 below and shall have the
duties set forth in Section 6.2 below. The Board of Directors may adopt such
rules and regulations for the management of the Company not inconsistent with
this Operating Agreement or the Act. Except as otherwise provided in the Act or
authorized pursuant to the terms of this Operating Agreement, no debt shall be
contracted or liability incurred by or on behalf of the Company except by the
Company's Board of Directors.
5.2 OPERATING PLAN. On an annual basis, the management of the Company
shall prepare an operating plan (the "OPERATING PLAN") and the Board of
Directors shall operate the Company in a manner consistent with the adopted
Operating Plan. The Operating Plan shall consist of an annual budget (the
"ANNUAL BUDGET"), which shall be comprised of projected statements of revenues
and expenses for the succeeding calendar year.
5.3 ADDITIONAL CAPITAL. The Members' rights and obligations with
respect to additional Capital Contributions are set forth in Section 10.1.
5.4 DEALINGS WITH AFFILIATED PARTIES. Upon majority approval of the
Board of Directors, the Company may enter into transactions including, without
limitation, any loans or financing arrangements with any Director, Member or
Affiliate of such Director or Member, PROVIDED, HOWEVER, that (i) any such
arrangements shall be on terms no less favorable to the Company than can be
reasonably obtained from an unaffiliated third party and (ii) in the case of any
borrowings by the Company the interest rate on such loans shall not exceed the
rate or rates announced by The Wall Street Journal as the prime rate plus two
percent (2%) unless, in addition to the majority approval of the Board of
Directors, the Class B Director has approved such borrowing.
5.5 ACTIONS REQUIRING MAJORITY APPROVAL. Without limiting the
generality of Section 5.1 or the obligation of the Board of Directors to operate
the Company in accordance with the Operating Plan as set forth in Section 5.2,
the Members desire to affirmatively set forth certain actions which may be taken
by a majority of the Board of Directors without further consent of or action by
the Members, including:
(a) Election of a Chairman of the Board of Directors;
(b) Appointment or removal of any officers of the Company; and
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(c) Causing the Company to convert, by merger or otherwise,
into a Code Subchapter C Corporation or any other type of entity.
5.6 POWERS OF DIRECTORS. Without limiting the generality of Section 5.1
or the obligation of the Board of Directors to operate the Company in accordance
with the Operating Plan as set forth in Section 5.2, and subject to any
limitation set forth in this Operating Agreement, the Board of Directors shall
have power and authority on behalf of the Company to manage the business and
affairs of the Company.
ARTICLE VI
OFFICERS; COMMITTEES
6.1 APPOINTMENT OF OFFICERS. The Board of Directors may appoint
officers of the Company which may include, but shall not be limited to: (a)
Chairman of the Board of Directors; (b) chief executive officer; (c) president;
(d) one or more executive vice presidents or vice presidents; (e) secretary; and
(f) treasurer or chief financial officer. The Board of Directors may delegate
their day-to-day management responsibilities to any such officers, and such
officers shall have the authority to contract for, negotiate on behalf of and
otherwise represent the interests of the Company as authorized by the Board of
Directors in any job description approved by the Board of Directors.
6.2 TENURE AND DUTIES OF OFFICERS. All officers shall hold office at
the pleasure of the Board of Directors and until their successors shall have
been duly elected and qualified, unless sooner removed. Any officer may be
removed at any time by the Board of Directors. If the office of any officer
becomes vacant for any reason, the vacancy may be filled by the Board of
Directors.
(a) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of
members and the Board of Directors. The Chairman of the Board of the Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time.
(b) DUTIES OF CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer shall preside at all meetings of Members and at all meetings of the
Board of Directors, unless the Chairman of the Board of Directors has been
appointed and is present. The Chief Executive Officer shall, subject to the
control of the Board of Directors, have general supervision, direction and
control of the business and officers of the Company. The Chief Executive Officer
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time.
(c) DUTIES OF PRESIDENT. The President may assume and perform
duties of the Chief Executive Officer in the absence or disability of the Chief
Executive Officer or whenever the office of Chief Executive Officer is vacant.
The President shall perform other duties commonly incident to his office and
shall also perform such other duties and have such other
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powers as the Board of Directors or the Chief Executive Officer shall designate
from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents, in the
order of their seniority, may assume and perform the duties of the President in
the absence or disability of the President or whenever the office of President
is vacant. The Vice Presidents shall perform other duties commonly incident to a
vice president of a Delaware corporation and shall also perform such other
duties and have such other powers as the Board of Directors shall designate from
time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the Members, and shall record all acts and proceedings thereof in
the minute book of the Company. The Secretary shall give notice in conformity
with this Operating Agreement of all meetings of the Members requiring notice.
The Secretary shall perform all other duties given him or her in this Operating
Agreement and other duties commonly incident to a secretary of a Delaware
corporation and shall also perform such other duties and have such other powers
as the Board of Directors shall designate from time to time. The President may
direct any Assistant Secretary to assume and perform the duties of the Secretary
in the absence or disability of the Secretary, and each Assistant Secretary
shall perform other duties commonly incident to the office of assistant
secretary in a Delaware corporation and shall also perform such other duties and
have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER OR TREASURER. The Chief
Financial Officer or Treasurer shall keep or cause to be kept the books of
account of the Company in a thorough and proper manner, and shall render
statements of the financial affairs of the Company in such form and as often as
required by this Operating Agreement, the Board of Directors or the President.
The Chief Financial Officer or Treasurer, subject to the order of the Board of
Directors, shall have the custody of all funds and securities of the Company.
The Chief Financial Officer or Treasurer shall perform other duties commonly
incident to the office of Chief Financial Officer or Treasurer in a Delaware
corporation and shall also perform such other duties and have such other powers
as the Board of Directors or the President shall designate from time to time.
The President may direct any Assistant Treasurer to assume and perform the
duties of the Chief Financial Officer or Treasurer in the absence or disability
of the Chief Financial Officer or Treasurer, and each Assistant Treasurer shall
perform other duties commonly incident to the office the Chief Financial Officer
or Treasurer of a Delaware corporation and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
6.3 CREATION OF COMMITTEES. The Board of Directors may create
committees to assist the Board of Directors and the officers in the governance
of areas of importance to the Company. Subject to the terms of this Operating
Agreement, such committees shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees. The
Class B Members shall have the right to appoint a member to each such committee
as long as the Class B Members have the right to appoint a Class B Director.
6.4 ADVISORY BOARD. The Board of Directors may appoint an Advisory
Board to assist the Board of Directors in the operation of the Company. The
Advisory Board shall have
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the powers and duties assigned to it by the Board of Directors. The Class B
Member shall have the right to appoint a member to the Advisory Board so long as
the Class B Members have the right to appoint a Class B Director.
6.5 TENURE OF OFFICERS, COMMITTEE MEMBERS AND ADVISORY BOARD MEMBERS.
The Officers, Committee Members and Advisory Board Members shall hold office at
the pleasure of the Board of Directors.
6.6 THE OFFICERS HAVE NO EXCLUSIVE DUTY TO THE COMPANY. The Officers,
Committee Members and Advisor Board Members shall not be required to serve the
Company as their sole and exclusive function and may have other business
interests and may engage in other activities, including such interests and
activities relating to FCG Holdings and its Affiliates, in addition to those
relating to the Company; provided that no such interest or activity shall
compete with the Company. Neither the Company nor any Member shall have any
right, by virtue of this Operating Agreement, to share or participate in such
other investments or activities of the Officers, Committee Members and Advisory
Board Members or to the income or proceeds derived therefrom.
ARTICLE VII
RIGHTS AND OBLIGATIONS OF MEMBERS
7.1 LIMITATION OF LIABILITY. Each Member's liability shall be limited
as set forth in the Act and other applicable law. Except as otherwise provided
by the Act, the debts, obligations and liabilities of the Company, whether
arising in contract, tort or otherwise, shall be the debts, obligations and
liabilities solely of the Company, and the Members of the Company shall not be
obligated personally for any of such debts, obligations or liabilities solely by
reason of being a Member of the Company.
7.2 NATURE OF RIGHTS AND OBLIGATIONS. Except as otherwise expressly
provided herein, nothing contained in this Operating Agreement shall be deemed
to constitute a Member an agent or legal representative of the other Members. A
Member shall not have any authority to act for, or to assume any obligation or
responsibility on behalf of, any other Member or the Company.
7.3 VOTING RIGHTS. Members shall be entitled to vote based on the
number of Units held by them. Each Class A Unit and Class B Unit shall entitle
the holder thereof to one (1) vote. Except as otherwise provided in this
Operating Agreement, all Units shall vote together as a single class.
7.4 OUTSIDE ACTIVITIES. Each Member and each Affiliate of each Member
shall be entitled to and may have business interests and engage in business
activities in addition to those relating to the Company, and may engage in the
ownership, operation and management of businesses and activities including
serving on one or more Board of Directors, for its own account and for the
account of others, and may own interests in the same properties as those in
which the Company or the other Members own an interest, without having or
incurring an obligation to offer any interest in such properties, businesses or
activities to the Company or any
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other Member, and no other provision of this Agreement shall be deemed to
prohibit any such Person from conducting such other businesses or activities;
provided that no such business or activity shall compete with the Company's
Business.
ARTICLE VIII
CERTAIN MATTERS CONCERNING
MEMBERS, DIRECTORS AND EXECUTIVE OFFICERS
8.1 LIABILITY OF MEMBERS, DIRECTORS AND OFFICERS; INDEMNIFICATION.
(a) Subject to Section 8.1(d) hereof, no former, current or
future Member, Director or officer of the Company shall be liable, in damages or
otherwise, to the Company or any Member for any act or omission performed or
omitted to be performed by it in good faith pursuant to the authority granted to
such Member, Director or officer of the Company by this Operating Agreement or
by the Act.
(b) Subject to Section 8.1(a), to the fullest extent permitted
by the laws of Delaware, as the same may be amended from time to time (but only
to the extent that such amendment permits the Company to provide broader
indemnification rights than the laws of Delaware permitted prior to adoption of
such amendment), the Company shall indemnify and hold harmless each former,
current and future Member and its respective officers, Directors, shareholders,
members or partners, Director and officer of the Company (each, an
"INDEMNITEE"), from and against any and all losses, claims, demands, costs,
damages, liabilities (joint or several), expenses of any nature (including
reasonable attorneys' fees and disbursements), judgments, fines, settlements and
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
an Indemnitee may be involved, or threatened to be involved, as a party or
otherwise, arising out of or incidental to the business of the Company,
regardless of whether an Indemnitee continues to be a Member, an officer,
Director, shareholder, member or partner of such Member, Director or an officer
of the Company at the time any such liability or expense is paid or incurred.
(c) Expenses (including reasonable attorneys' fees and
disbursements) incurred in defending any claim, demand, action, suit or
proceeding, whether civil, criminal, administrative or investigative, subject to
Sections 8.1(b) and 8.1(d) hereof, may be paid (or caused to be paid) by the
Company in advance of the final disposition of such claim, demand, action, suit
or proceeding.
(d) No indemnity pursuant to this Section 8 hereof shall be
paid by the Company:
(i) on account of Indemnitee's conduct that was knowingly
fraudulent or deliberately dishonest or that constituted willful misconduct;
(ii) on account of Indemnitee's conduct that constituted a
breach of Indemnitee's duty of loyalty to the Company or resulted in any
personal profit or advantage to which Indemnitee was not legally entitled;
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(iii) for which payment is actually made to Indemnitee
under a valid and collectible insurance policy or under a valid and enforceable
indemnity clause, or agreement, except in respect of any excess beyond payment
under such insurance, clause, or agreement;
(iv) if indemnification is not lawful (and, in this
respect, both the Company and Indemnitee have been advised that the Securities
and Exchange Commission believes that indemnification for liabilities arising
under the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(v) in connection with any proceeding (or part thereof)
initiated by Indemnitee, or any proceeding by Indemnitee against the Company or
its Directors, officers, Members or partners, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board, or (iii) such indemnification is provided by the Company, in its sole
discretion, pursuant to the powers vested in the Company under the Act.
(e) The indemnification provided by Section 8.1(b) hereof
shall be in addition to any other rights to which an Indemnitee may be entitled
under any agreement or vote of the Members or Board of Directors, as a matter of
law or otherwise, both (i) as to action in the Indemnitee's capacity as a
Member, as an officer, Director, shareholder, member or partner of a Member, as
a Director or as an officer of the Company, and (ii) as to action in another
capacity, and shall continue as to an Indemnitee who has ceased to serve in such
capacity and shall inure to the benefit of the heirs, successors, assigns,
administrators and personal representatives of the Indemnitee.
(f) Any indemnification hereunder shall be satisfied only out
of the Company Property, and the Members shall not be subject to personal
liability by reason of these indemnification provisions.
(g) The Company may purchase and maintain insurance on behalf
of one (1) or more Indemnitees and other Persons against any liability which may
be asserted against, or expense which may be incurred by, any such Person in
connection with the Company's activities, whether or not the Company would have
the power to indemnify such Person against such liability under the provisions
of this Agreement.
(h) An Indemnitee shall not be denied indemnification in whole
or in part under this Section 8.1 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Operating Agreement.
(i) The provisions of this Section 8.1 are for the benefit of
each Indemnitee and its heirs, successors, assigns, administrators and personal
representatives, and shall not be deemed to create any rights for the benefit of
any other Persons.
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8.2 OTHER MATTERS CONCERNING THE MEMBERS, DIRECTORS AND OFFICERS OF THE
COMPANY.
(a) Each Member, Director and officer of the Company may rely
on, and shall be protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture or other paper or document reasonably
believed by it to be genuine and to have been signed or presented by the proper
party or parties.
(b) For purposes of this Operating Agreement, each Member,
Director and officer of the Company may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, other consultants and
advisers reasonably selected by it and any written advice or written opinion of
any such Person as to matters which such Member, Director and officer of the
Company reasonably believes to be within such Person's professional or expert
competence, and any act or omission, if done or omitted to be done in good faith
reliance upon any such advice or opinion, will be conclusively presumed not to
constitute fraud, gross negligence or willful or wanton misconduct.
ARTICLE IX
MEETINGS OF MEMBERS
9.1 MEETINGS. Meetings of the Members shall be held at such date and
time as the Board of Directors may fix from time to time. The annual meeting of
the Members of the Company, for the purpose of election of Directors and for
such other business as may lawfully come before it, shall be held on such date
and at such time as may be designated from time to time by the Board of
Directors. Additionally, unless otherwise prescribed by statute, a special
meeting may be called by any Member or Members holding at least twenty-five
percent (25%) of the outstanding Units.
9.2 PLACE OF MEETINGS; TELEPHONIC MEETINGS. The Board of Directors may
designate any place, as the place of meeting for any meeting of the Members. If
no designation is made, or if a special meeting is called by any Member or
Members pursuant to Section 9.1, the place of meeting shall be the principal
executive office of the Company. Any Member may participate in a meeting of the
Members through use of conference telephone or similar communication equipment,
so long as all Members participating in such meeting can hear one another. Such
participation constitutes presence in person at such meeting.
9.3 NOTICE OF MEETINGS. Except as provided in Section 9.4, written
notice of all meetings of Members, stating the place, day and hour of the
meeting and the purpose or purposes for which the meeting is called and
providing the telephone contact information for any Member that chooses to
participate in the meeting through use of conference telephone or similar
communication equipment, shall be delivered not less than three (3) nor more
than sixty (60) days before the date of the meeting, either personally or by
mail, by or at the direction of the Board of Directors or Person calling the
meeting, to each Member entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered as provided in Section 17.1.
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9.4 MEETING OF ALL MEMBERS. If all of the Members holding Units
entitled to vote at a meeting consent to the holding of the meeting at such time
and place, such meeting shall be valid without call or notice, and at such
meeting lawful action may be taken.
9.5 RECORD DATE. In order to make a determination of Members for any
purpose, including for the purpose of determining Members entitled to notice of
or to vote at any meeting of Members or any adjournment thereof, or Members
entitled to receive payment of any distribution, the date on which notice of the
meeting is mailed or the date on which the resolution declaring such
distribution is adopted, as the case may be, shall be the record date for such
determination of Members. When a determination of Members entitled to vote at
any meeting of Members has been made as provided in this Section 9.5, such
determination shall apply to any adjournment thereof.
9.6 QUORUM. Members holding a majority of the Units entitled to vote,
present in person or represented by proxy, shall constitute a quorum at any
meeting of Members. In the absence of a quorum at any such meeting, Members
holding a majority of the Units entitled to vote so represented may adjourn the
meeting from time to time for a period not to exceed sixty (60) days without
further notice. However, if the adjournment is for more than sixty (60) days, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting which satisfies the notice requirements of
Section 9.3 shall be given to each Member of record entitled to vote at the
meeting. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed. The Members present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal during such meeting of Members holding Units whose absence would
cause less than a quorum.
9.7 MANNER OF ACTING. The affirmative vote of Members holding a
majority of the Units represented in person or by proxy at the meeting and
entitled to vote shall be the act of the Members unless the vote of a greater or
lesser proportion or number of Units is otherwise required by the Act or this
Operating Agreement.
9.8 PROXIES. At all meetings of Members, a Member may vote in person or
by proxy executed in writing by the Member or by a duly authorized
attorney-in-fact. Such proxy shall be filed with the Board of Directors of the
Company before or at the time of the meeting. No proxy shall be valid after
eleven (11) months from the date of its execution, unless otherwise provided in
the proxy.
9.9 ACTION BY MEMBERS WITHOUT A MEETING. Action required or permitted
to be taken at a meeting of Members may be taken without a meeting if the action
is evidenced by one (1) or more written consents describing the action taken,
signed and delivered to the Secretary within sixty (60) days of the record date
for that action, by Members having not less than the minimum number of votes
that would be necessary to authorize or take that action at a meeting at which
all Members entitled to vote on that action were present and voted. All such
consents shall be delivered to the Secretary of the Company for inclusion in the
minutes or for filing with the Company records. Action taken under this Section
9.9 is effective when such number of consents required to authorize the proposed
action shall have been received by the Secretary unless the consent specifies a
different effective date. Any Member giving a written consent
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may revoke the consent by a writing received by the Secretary before written
consents representing the number of votes required to authorize the proposed
action have been received by the Secretary. The record date for determining
Members entitled to take action without a meeting shall be the date the first
such Member signs a written consent. The consents of all Members entitled to
vote shall be solicited in writing, on at least a five (5) days' advance notice
to the extent practicable, and if the unanimous written consent of all such
Members shall not have been received, the Secretary shall give prompt notice of
any action approved by the Members without a meeting to those Members entitled
to vote on such matters who have not consented thereto in writing.
9.10 WAIVER OF NOTICE. When any notice is required to be given to any
Member, a waiver thereof in writing signed by the Member entitled to such
notice, whether before, at or after the time stated therein, shall be equivalent
to the giving of such notice.
ARTICLE X
CONTRIBUTIONS TO THE COMPANY,
UNITS AND CAPITAL ACCOUNTS
10.1 CAPITAL CONTRIBUTIONS.
(a) INITIAL CAPITAL CONTRIBUTIONS. Each Member shall have
contributed such Member's Initial Contribution, as set forth in SCHEDULE B
hereto, in exchange for such Member's Units upon such Member's admission to the
Company.
(b) CAPITAL CONTRIBUTIONS. The Class A Members may, but shall
not be required to, make subsequent Capital Contributions as provided for in the
Operating Plan in addition to the Initial Contributions set forth in Section
10.1(a). Members who hold Units other than Class A Units shall not be required
to make Capital Contributions, other than the Initial Contribution set forth in
Section 10.1(a).
10.2 UNITS. As of the Effective Date, each Member's Interest in the
Company shall be represented by Units of membership interest, with the
appropriate Class denoted as set forth on SCHEDULE A. Additional Units
(including new classes of Units) may from time to time be issued in accordance
with this Operating Agreement.
10.3 CAPITAL ACCOUNTS.
(a) A separate Capital Account will be maintained for each
Member.
(i) Each Member's Capital Account shall initially have a
zero balance which is the agreed net present fair market value of the non-cash
contributions described on SCHEDULE B hereto.
(ii) To each Member's Capital Account there shall be
credited (A) the amount of any cash capital contributions and the fair market
value of any additional non-cash capital contributions of the Members to the
Company; (B) such Member's distributive share of Net Profits and any items in
the nature of income or gain which are specially allocated pursuant
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to Section 11.2 hereof; and (C) the amount of any Company liabilities assumed by
such Member or which are secured by any Company Property distributed to such
Member. The principal amount of a promissory note which is not readily traded on
an established securities market and which is contributed to the Company by the
maker of the note (or a Member related to the maker of the note within the
meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(c)) shall not be
included in the Capital Account of any Member until the Company makes a taxable
disposition of the note or until (and to the extent) principal payments are made
on the note, all in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(d)(2);
(iii) To each Member's Capital Account there shall be
debited (A) the amount of money and the fair market value of any Company
Property distributed to such Member pursuant to any provision of this Agreement,
(B) such Member's distributive share of Net Losses and any items in the nature
of expenses or losses which are specially allocated pursuant to Section 11.2
hereof, and (C) the amount of any liabilities of such Member assumed by the
Company or which are secured by any property contributed by such Member to the
Company.
(iv) As of the Effective Date, the Capital Accounts of the
Members are as set forth on SCHEDULE A.
(b) In the event of a permitted sale or exchange of all or
part of a Member's Interest in the Company, the Capital Account of the
transferor shall become the Capital Account of the transferee to the extent it
relates to the transferred Interest.
(c) Immediately prior to any distribution described in
Sections 11.4 or 14.3, there shall be allocated, or deemed to be allocated, as
of the record date of such distribution, to the Capital Accounts of all Members
amounts required to be allocated, or expected to be allocated for the current
Accounting Period, pursuant to Section 10.3(a) and Article XI.
(d) The manner in which Capital Accounts are to be maintained
pursuant to this Section 10.4 is intended, and shall be construed so as, to
comply with the requirements of Code Section 704(b) and the Treasury Regulations
promulgated thereunder.
10.4 WITHDRAWAL OF CAPITAL.
(a) Except as otherwise provided in the Operating Agreement or
separate agreement among the Members, a Member shall not be entitled to demand
or receive from the Company the liquidation of its Interest in the Company
unless and until the Company is dissolved in accordance with the provisions
hereof and other applicable provisions of the Act, PROVIDED HOWEVER, that in the
event the Outsourcing Agreement is terminated prior to the Initial Agreement
Expiration Date (as defined in the Outsourcing Agreement) , the Class B Member
may, at its option, withdraw from the Company and receive from the Company in
exchange for all Units held by the Class B Member including any Additional Units
issued under Section 17.1 hereof, the lesser of (i) Net Book Value of the Units
and (ii) the Capital Account held by the Class B Member, both determined at the
time of the termination of the Outsourcing Agreement
(b) Notwithstanding the foregoing, subsequent to Initial
Agreement Expiration Date, the Class B Member shall have the right to withdraw
from the Company and to
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receive the balance, if any, in the Capital Account of the Class B Member at the
time of such withdrawal in exchange for all Units held by the Class B Member.
ARTICLE XI
ALLOCATIONS, INCOME TAX, ELECTIONS AND REPORTS
11.1 ALLOCATION OF PROFITS AND LOSSES.
(a) ALLOCATION OF NET PROFITS. After giving effect to the
special allocations set forth in Section 11.2, Net Profits of the Company for
any Accounting Period shall be allocated to the Members in the following order
and priority:
(i) First, Net Profits shall be allocated to each Member
to the extent of and in the reverse order of the aggregate amount of Net Losses
previously allocated to such Member, with respect to which Net Profits have not
been previously allocated pursuant to this Section 11.1(a)(i).
(ii) Second, Net Profits shall be allocated to the Members
in proportion to their respective cash Capital Contribution until the aggregate
Net Profits allocated pursuant to this Section 11.1(a)(ii) for the current
Accounting Period and all prior Accounting Periods equals the aggregate sum of
all Preferred Returns for the current Accounting Period and all prior Accounting
Periods, and then;
(iii) The balance, if any, of the Net Profits shall be
allocated to the Members in proportion to their respective Interests.
(b) ALLOCATION OF NET LOSSES. Subject to Section 11.1(c)
and after giving effect to the special allocations set forth in Section 11.2,
Net Losses of the Company for any Accounting Period shall be allocated to the
Members in the following order and priority:
(i) First, Net Losses shall be allocated to each Member to
the extent and in the reverse order of the aggregate amount of Net Profits
previously allocated to such Member with respect to which Net Losses have not
previously been allocated pursuant to this Section 11.1(b)(i).
(ii) Second, an amount of Net Losses equal to the
aggregate positive balances in the Members' Capital Accounts shall be allocated
to the Members in proportion to the positive balance in each Member's Capital
Account.
(iii) The balance, if any, of the Net Losses shall be
allocated to the Members in proportion to their respective Interests.
(c) DEFICIT IN ADJUSTED CAPITAL ACCOUNT. An allocation of Net
Losses under Section 11.1(b) shall not be made to the extent it would create or
increase a deficit in an Adjusted Capital Account for a Member or Members at the
end of any Accounting Period. Any Net Losses not allocated because of the
preceding sentence shall be allocated to the other Member or Members in
proportion the positive balances in to such Members' respective
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Adjusted Capital Account; provided, however, that to the extent such allocation
would create or increase a deficit in an Adjusted Capital Account for another
Member or Members at the end of any Accounting Period, such allocation shall be
made to the remaining Member or Members in proportion to the respective Adjusted
Capital Account of such Member or Members.
11.2 SPECIAL ALLOCATIONS. Notwithstanding Section 11.1:
(a) COMPANY NONRECOURSE DEDUCTIONS. Any Company Nonrecourse
Deductions for any Accounting Period shall be allocated to the Members in
accordance with their respective Interests.
(b) MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse
Deductions for any Accounting Period shall be specially allocated to the Member
who bears the Economic Risk of Loss with respect to the Member Nonrecourse Debt
to which such Member Nonrecourse Deductions are attributable in accordance with
Treasury Regulations Section 1.704-2(i).
(c) COMPANY MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Treasury Regulations Section 1.704-2(f), notwithstanding any other
provision of this Article XI, if there is a net decrease in Company Minimum Gain
during any Accounting Period, each Member shall be specially allocated items of
Company income and gain for such Accounting Period (and, if necessary,
subsequent Accounting Periods) in an amount equal to such Member's share of the
net decrease in Company Minimum Gain, determined in accordance with Treasury
Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Treasury Regulations Sections 1.704-2(f)(6) and
1.704-2(j)(2). This Section 11.2(c) is intended to comply with the minimum gain
chargeback requirements set forth in Treasury Regulations Section 1.704-2(f) and
shall be interpreted consistently therewith.
(d) MEMBER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Treasury Regulations Section 1.704-2(i)(4), notwithstanding any
other provision of this Article XI (except Section 11.2(c), which shall be
applied first), if there is a net decrease in Member Minimum Gain attributable
to a Member Nonrecourse Debt during any Accounting Period, each Member who has a
share of the Member Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Treasury Regulations Section 1.704-2(i)(5), shall
be specially allocated items of Company income and gain for such Accounting
Period (and if necessary, subsequent Accounting Periods) in an amount equal to
such Member's share of the net decrease in Member Minimum Gain attributable to
such Member Nonrecourse Debt, determined in accordance with Treasury Regulations
Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be determined in
accordance with Treasury Regulations Section 1.704-2(i)(4) and 1.704-2(j)(2).
This Section 11.2(d) is intended to comply with the minimum gain chargeback
requirements set forth in Treasury Regulations Section 1.704-2(i)(4) and shall
be interpreted consistently therewith.
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(e) QUALIFIED INCOME OFFSET. In the event any Member
unexpectedly receives any adjustments, allocations or distributions described in
Section 1.704-l(b)(2)(ii)(d)(4), (5) or (6) of the Treasury Regulations, items
of Company income and gain shall be specially allocated to each such Member in
an amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the deficit balance of the Adjusted Capital Account of
such Member as quickly as possible, provided that an allocation pursuant to this
Section 11.2(e) shall only be made if and to the extent such Member would have a
deficit balance in its Adjusted Capital Account after all other allocations
provided for in this Article XI have been tentatively made as if this Section
11.2(e) were not in this Operating Agreement.
(f) GROSS INCOME ALLOCATION. In the event any Member has a
deficit Capital Account at the end of any Accounting Period which is in excess
of the sum of (i) the amount such Member is obligated to restore pursuant to any
provision of this Operating Agreement, if any, and (ii) the amount such Member
is deemed to be obligated to restore pursuant to the penultimate sentences of
Treasury Regulations Sections l.704-2(g)(1) and 1.704-2(i)(5), each such Member
shall be specially allocated items of Company income and gain in the amount of
such excess as quickly as possible, provided that an allocation pursuant to this
Section 11.2(f) shall only be made if and to the extent that such Member would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Article XI have been made as if Section 11.2(e) hereof and
this Section 11.2(f) were not in this Operating Agreement.
(g) CURATIVE ALLOCATIONS. The allocations set forth in
Sections 11.1(c) and 11.2(a) through (f) (the "REGULATORY ALLOCATIONS") are
intended to comply with certain requirements of the Treasury Regulations. It is
the intent of the Members that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory Allocations or with
special allocations of other items of Company income, gain, loss or deduction
pursuant to this Section 11.2(g). Therefore, notwithstanding any other provision
of this Article XI (other than the Regulatory Allocations), the Company shall
make such offsetting special allocations of Company income, gain, loss or
deduction in whatever manner the Board of Directors determines appropriate so
that, after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of the
Agreement and all Company items were allocated pursuant to Sections 11.1(a) and
11.1(b). In exercising its discretion under this Section 11.1(g), the Board of
Directors shall take into account any future Regulatory Allocations under
Sections 11.2(c) and 11.2(d) that, although not yet made, are likely to offset
other Regulatory Allocations previously made under Sections 11.2(a) and 11.2(b).
11.3 TAX ALLOCATIONS.
(a) CODE SECTION 704(c) ALLOCATIONS. The allocations specified
in this Operating Agreement shall govern the allocation of items to the Members
for Code Section 704(b) book purposes, and the allocations of items to the
Members for tax purposes shall be in accordance with such book allocations,
except that solely for tax purposes and in accordance with Code Section 704(c)
and the Treasury Regulations thereunder:
(i) Income, gain, loss, and deduction with respect to any
property contributed to the capital of the Company shall be allocated among the
Members so as to take
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account of any variation between the adjusted basis of such property to the
Company for Federal income tax purposes and its initial Adjusted Asset Value.
Such allocation shall be made in accordance with the traditional method with
curative allocations described by Section 1.704-3(c) of the Treasury
Regulations, unless a different method is selected by a majority vote of the
Class A Member.
(ii) In the event the Adjusted Asset Value of any Company
Property is adjusted pursuant to Section 1.1(e)(ii) hereof, subsequent
allocations of income, gain, loss, and deduction with respect to such Company
Property shall take account of any variation between the adjusted basis of such
Company Property for Federal income tax purposes and its Adjusted Asset Value in
the same manner as under Code Section 704(c) and the Treasury Regulations
thereunder.
(b) TAX CREDITS. Any credit available for income tax purposes
shall be allocated to the Members in proportion to their respective Interests.
11.4 DISTRIBUTIONS.
(a) MANDATORY DISTRIBUTIONS. Subject to applicable law and any
limitations contained elsewhere in this Operating Agreement, the Board of
Directors shall, within ninety (90) days after the Fiscal Year end, distribute
cash to the Members pro rata based on the allocation of the Company's taxable
income among the Members' for such Fiscal Year in an amount equal to the product
of (i) the Tax Percentage and (ii) the Company's estimated taxable income for
such Fiscal Year determined in accordance with Section 703(a) of the Code
(reduced by distributions made to such Members during such Fiscal Year). The
foregoing distribution shall be adjusted to reflect any discrepancies in the
Company's estimated taxable income and the final amount as reflected on the
Company's information return as filed for Federal income tax purposes within
thirty (30) days of the filing of such information return. For purposes hereof,
"TAX PERCENTAGE" shall mean initially forty-five percent (45%) and shall be
adjusted from time to time by the Board of Directors in response to changes in
the tax rates applicable to corporations under the Code and under the state
income tax laws of the State of California and in response to any other factors
which cause the distributions under this Section 11.4(a) to be less than a
Member's tax liability in respect of each Unit. Distributions to a Member under
this Section 11.4(a) shall be made in, and charged against, the priorities
specified in Sections 11.4(b) and (c) below, as the case may be.
(b) DISTRIBUTIONS OF FUNDS FROM OPERATIONS. Subject to
applicable law and any limitations contained elsewhere in this Operating
Agreement, the Board of Directors may from time to time, in the sole discretion
of the Board, distribute Funds From Operations to the Members, and such
distributions shall be allocated among the Members (i) first, in an amount equal
to the amount of Net Profits allocated pursuant to Section 11.1(a)(ii) and not
previously distributed, pro rata in accordance with such allocation, and (ii)
then pro rata in proportion to their respective Interests as of the record date
of the distribution.
(c) DISTRIBUTIONS OF FUNDS FROM CAPITAL TRANSACTIONS. Subject
to applicable law and any limitations contained elsewhere in this Operating
Agreement, the Board
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of Directors shall distribute as soon as practicable Funds from a Capital
Transaction to the Members in the following order and priority:
(i) First, to the Members that have Unpaid Preferred
Returns in proportion to their Unpaid Preferred Return until each Member's
Unpaid Preferred Return shall equal zero. The Unpaid Preferred Return of each
Member shall be the greater of Zero or the total Preferred Return of such Member
for the portion of the Accounting Period in which the distribution occurs that
precedes the distribution and all prior Accounting Periods reduced by
distributions pursuant to this Section 11.4.1(c)(i) (including distributions
deemed to be pursuant to this Section 11.4(c)(i) under the last sentence of
Section 11.4(a)) and pursuant to Section 14.3.
(ii) Second, the Members that have made Capital
Contributions in proportion to their Unreturned Capital Contributions until each
Member's Unreturned Capital Contributions shall equal zero. The Unreturned
Capital Contribution of each Member shall be greater of Zero or the total cash
Capital Contributions contributed by such Member reduced by distributions
pursuant to this Section 11.4(c)(ii) (including distributions deemed to be
pursuant to this Section 11.4(c)(ii) under the last sentence of Section 11.4(a))
and pursuant to Section 14.3.
(iii) Third, the balance, if any, to the Members in
proportion to their respective Interests.
(d) TAX WITHHOLDING. The Company shall comply with withholding
requirements under federal, state and local law and shall remit amounts withheld
to, and file required forms with, the applicable jurisdictions. To the extent
the Company is required to withhold and pay over any amounts to any authority
with respect to distributions or allocations to any Member, the amount withheld
shall be treated as a distribution in the amount of the withholding to that
Member. If the amount of withholding tax paid by the Company was not withheld
from actual distributions, the Company may, at its option, (i) require the
Member to promptly reimburse the Company for such withholding or (ii) reduce any
subsequent distributions by the amount of such withholding. Each Member agrees
to furnish the Company with any representations and forms as shall reasonably be
requested by the Company to assist it in minimizing or eliminating and in
determining the extent of, and in fulfilling, its withholding obligations.
11.5 LIMITATION UPON DISTRIBUTIONS.
(a) No distribution shall be declared and paid to a Member in
violation of the Act.
(b) A Member who receives a distribution in violation of the
Act shall be liable to the Company for the amount of the distribution to the
extent provided in the Act.
11.6 ACCOUNTING PRINCIPLES. For financial accounting purposes, the
profits and losses of the Company shall be determined in accordance with
generally accepted accounting principles applied on a consistent basis under the
accrual method of accounting.
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11.7 INTEREST ON AND RETURN OF CAPITAL CONTRIBUTIONS. No Member shall
be entitled to interest on its Capital Contribution or to return of its Capital
Contribution. In addition, no Member shall have the right to withdraw any
portion of such Member's Capital Account except as otherwise provided herein.
Except as required by this Operating Agreement, no Member shall be personally
liable to any other Member for the return of any Capital Contributions (or any
additions thereto), it being agreed that any distribution as may be made from
time to time shall be made solely from the Company Property and only in
accordance with the terms of this Operating Agreement.
11.8 RETURNS AND OTHER ELECTIONS. The Board of Directors shall cause
the preparation and timely filing of all tax returns required to be filed by the
Company pursuant to the Code and all other tax returns deemed necessary and
required in each jurisdiction in which the Company does business. Copies of such
returns, or pertinent information therefrom, shall be furnished to the Members
within a reasonable time after the end of the Company's Fiscal Year. All
elections permitted to be made by the Company under federal or state laws shall
be made by the Board of Directors in its discretion, subject to the provisions
of this Operating Agreement.
11.9 RECORDS AND REPORTS; INSPECTION RIGHTS.
(a) The Company shall maintain the following records and
reports:
(i) A current list of the full name and last known
business address of each Director and each Member;
(ii) Copies of the Company's federal, foreign, state and
local income tax returns and reports, if any, for the six (6) most recent years;
(III) Copies of the Operating Agreement and all amendments thereto; and
(iv) True and full information regarding the status of the
business and financial condition of the Company, including financial statements
of the Company for the three (3) most recent years.
(b) Each Member shall have the right to visit and inspect any
of the properties of the Company, and to discuss the affairs, finances and
accounts of the Company with its officers, and to review such information as is
reasonably requested, all at such reasonable times and as often as may be
reasonably requested.
(c) The Company shall furnish to each Member the following:
(i) as soon as available but in any event within 45 days
after the end of the first, second and third quarterly accounting periods in
each fiscal year, unaudited consolidated statements of income and cash flows and
changes in equity of the Company for such quarterly period and for the period
from the beginning of the fiscal year to the end of such quarterly period and
balance sheet of the Company as of the end of such quarterly period, setting
forth in each case comparisons to the corresponding period in the preceding
fiscal year and, in the case of the statement of income, comparison to the
budget for such period, all prepared in
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accordance with generally accepted accounting principles consistently applied
(subject to normal year-end audit adjustments);
(ii) as soon as practicable and in any event within 90
days after the end of each fiscal year, (A) unaudited consolidated statements of
income and cash flows and changes in equity of the Company for such fiscal year
and balance sheet of the Company as of the end of such fiscal year, setting
forth in each case comparisons to the preceding fiscal year and, in the case of
the statement of income, comparison to the annual budget, all prepared in
accordance with generally accepted accounting principles consistently applied,
plus (B) a statement certified by the Chief Financial Officer of the Company,
certifying that the financial statements referred to in clause (A) are presented
fairly and have been prepared in accordance with generally accepted accounting
principles consistently applied; and
(iii) from the date the Company becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended,
promptly upon becoming available, copies of all financial statements, reports,
press releases, notices, proxy statements and other documents sent by the
Company to its stockholders or released to the public and copies of all regular
and periodic reports filed by the Company with the Securities and Exchange
Commission.
11.10 TAX MATTERS.
(a) TAXATION AS PARTNERSHIP. Subject to Section 5.4(c), the
Members and Board of Directors shall use their best efforts to cause the Company
to be treated as a partnership for federal tax purposes and, except with respect
to a state or other jurisdiction that does not provide for such treatment, all
state and other tax purposes. The Company shall avail itself of any election or
procedure available under the Code or the Treasury Regulations and under state
and local tax law, including any "check-the-box" election, for purposes of
having an entity classified as a partnership for tax purposes, and the Members
shall cooperate with the Company in connection therewith and hereby authorize
the Board of Directors to take whatever actions and execute whatever documents
are necessary or appropriate to effectuate the foregoing.
(b) TAX MATTERS PARTNER. The Initial Member is hereby
designated the Tax Matters Partner of Company for purposes of Chapter 63 of the
Code and the Treasury Regulations thereunder. The Tax Matters Partner shall keep
the Members informed of all administrative and judicial proceedings, as required
by Section 6223(g) of the Code, and shall furnish to each Member, if such Member
so requests in writing, a copy of each notice or other communication received by
the Tax Matters Partner from the Internal Revenue Service, except such notices
or communications as are sent directly to such requesting Member by the Internal
Revenue Service. The Company will bear all expenses incurred by the Tax Matters
Partner in carrying out his duties as such. To the fullest extent permitted by
law, the Company agrees to indemnify the Tax Matters Partner and its agents and
save and hold them harmless, from and in respect to all (i) fees, costs and
expenses in connection with or resulting from any claim, action or demand
against the Tax Matters Partner or the Company that arise out of or in any way
relate to the Tax Matters Partner's status as Tax Matters Partner for the
Company, and (ii) all such claims, actions, and demands and any losses or
damages therefrom, including amounts paid in settlement or compromise of any
such claim, action or demand; provided that this indemnity
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shall not extend to conduct by the Tax Matters Partner adjudged (i) not to have
been undertaken in good faith the Company or (ii) to have constituted
recklessness, gross negligence or intentional wrongdoing by the Tax Matters
Partner. The Tax Matters Partner may be changed by the Board of Directors.
ARTICLE XII
TRANSFERABILITY
12.1 RESTRICTIONS ON TRANSFERABILITY.
(a) Except as provided in Section 12.2(f), and notwithstanding
Section 12.1(c) below or any other provision of this Agreement, during the seven
(7) year period commencing on November 16, 1999, no Class B Member shall sell,
assign, pledge, mortgage, or otherwise dispose of or transfer its interest in
the Company without the prior written consent of the Board of Directors.
(b) Except as provided in Section 12.2(f) and notwithstanding
Section 12.1(c) below or any other provision of this Agreement, no Member
(excluding any Class A Member or Class B Member) shall sell, assign, pledge,
mortgage, or otherwise dispose of or transfer its interest in the Company
without the prior written consent of the Board of Directors (including the Class
B Director).
(c) Each Member agrees not to make any disposition of all or
any portion of any Units except in accordance with this Article XII and:
(i) if there is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) the transferee has agreed in writing to be bound
by the terms of this Agreement, (B) such Member shall have notified the Company
of the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Member which is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a corporation
to its shareholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, or (D) with respect to
transferees to affiliates, PROVIDED that in each case the transferee will be
subject to the terms of this Agreement to the same extent as if he were an
original Member hereunder.
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(d) Each certificate representing Units shall (unless
otherwise permitted by the provisions of the Agreement) be stamped or otherwise
imprinted with a legend substantially similar to the following (in addition to
any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
(e) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(f) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
12.2 RIGHT OF FIRST REFUSAL.
(a) If at any time after November 16, 2006, a Member
(excluding the Class A Member), after receiving a written bona fide offer to
purchase all, or a portion of, the Units held by such Member, wishes to transfer
its interest, in whole or in part, such Member (the "Proposed Transferor") shall
send a written notice (the "Transfer Notice") of such proposed transfer to the
Board of Directors and the Class A Member (as reflected on SCHEDULE A hereto),
which Transfer Notice shall describe all material terms of the proposed transfer
including, without limitation, the name of the proposed transferee, the
percentage and class of Units proposed to be transferred (the "Offered Units"),
the proposed purchase price per Unit, the terms of payment, and the time,
location and closing date for the closing of the proposed transfer, which date
for the closing shall not be less than forty (40) days after the date of such
Transfer Notice. In the event of a transfer upon the death of a Member or
transfer by gift, property settlement or otherwise where the proposed transferee
is not paying full fair market value in cash, the price shall be deemed to be
the fair market value of the Proposed Transferor's interest in the Company
payable in cash.
(b) The Board of Directors may elect to cause the Company to
accept the offer set forth in the Transfer Notice in whole, or in part, and
purchase the Offered Units within twenty (20) days after receipt of the Transfer
Notice by giving notice (a "Purchase Notice") to the Proposed Transferor. At the
closing specified in the Transfer Notice, the Company shall make payment of the
purchase price specified in the Transfer Notice to the Proposed Transferor and
the Board of Directors shall amend the Company's Unit register and SCHEDULE A to
reflect
30.
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such transfer. The rights of the Company set forth under this Section 12.2(b)
may be assigned by the Company to any transferee or assignee; PROVIDED, HOWEVER,
that such transferee or assignee shall agree to be subject to all restrictions
set forth in this Section 12.2.
(c) If the Board of Directors does not submit to the Proposed
Transferor a Purchase Notice covering the purchase of all the Offered Units upon
the terms specified in the Transfer Notice within twenty (20) days after receipt
of the Transfer Notice, then the Class A Member, within the period beginning on
the earlier of (i) twenty-one (21) days after receipt of the Transfer Notice and
(ii) receipt of notice by the Class A Member that the Company elects not to
purchase all the Offered Units, and ending ten (10) days thereafter, may elect
to accept the offer set forth in the Transfer Notice in whole, or in part, and
purchase the Offered Units by giving a Purchase Notice to the Proposed
Transferor as described above. If the Class A Member does not submit to the
Proposed Transferor a Purchase Notice covering the purchase of all of the
Offered Units upon the terms specified in the Transfer Notice within such
period, then the Proposed Transferor shall be permitted, during the ninety (90)
day period thereafter, to sell all of the Offered Units for a price equal to or
higher than, and upon terms the same as or more favorable to the Proposed
Transferor than the price and terms specified in the Transfer Notice. Copies of
all notices under this Section 12.2 shall also be sent to the Company.
(d) Upon the closing of a sale of Offered Units in accordance
with the terms of this Operating Agreement and the execution by the purchaser of
such Offered Units of a counterpart of this Operating Agreement, such purchaser
shall become an assignee of the Proposed Transferor's economic interest in the
Company but shall not be admitted as a Substitute Member of the Company pursuant
to Article 13 below without the consent of the Board of Directors and the Board
of Directors shall amend SCHEDULE A to reflect such transfer.
(e) The provisions of this Section 12.2 may be waived by the
affirmative vote of the Board (including the Class B Director).
(f) Anything to the contrary herein notwithstanding, the
following transactions shall be exempt from the right of first refusal provided
for in this Section 12.2 and the restriction on transfer provided in Section
12.1(a):
(i) Any transfer by a Member to the Company or a Class A
Member.
(ii) Any transfer by a Member to an Affiliate of such
Member.
12.3 OBLIGATIONS OF TRANSFEREES. In any such case, the transferee shall
receive and hold such interest subject to the provisions of this Operating
Agreement, including Section 12.2.
ARTICLE XIII
ADDITIONAL AND SUBSTITUTE MEMBERS
13.1 ADMISSION OF ADDITIONAL MEMBERS AND SUBSTITUTE MEMBERS. Subject to
the terms of this Operating Agreement, any Person acceptable to the Board of
Directors may become an Additional Member of the Company by the purchase of new
Units for such consideration as the Board of Directors shall determine in
accordance with the terms of this Operating
31.
<PAGE>
Agreement. Each Additional Member shall: (i) agree to be bound by the provisions
of this Agreement; (ii) execute and deliver such documents as the Board of
Directors deem appropriate in connection therewith; and (iii) contribute to the
Company the agreed upon Member Contribution in exchange for the Units purchased
by such Additional Member. No Member may, voluntarily or involuntarily sell,
assign, transfer, hypothecate, pledge or otherwise encumber or dispose of any
Units and no Substitute Member shall be admitted without the affirmative vote of
the Members.
13.2 ALLOCATIONS TO ADDITIONAL MEMBERS AND SUBSTITUTE MEMBERS. No
Additional Member or Substitute Member shall be entitled to any retroactive
allocation of Net Profits, Net Losses, or items of income, gain, loss or
deduction of the Company. The Net Profits, Net Losses, or items of income, gain,
loss and deduction of the Company for each Accounting Period shall be allocated
among the Members in proportion to their respective Interests, or as otherwise
specified in this Operating Agreement, with the Accounting Period being subject
to adjustment pursuant to Section 1.1(a) upon the addition of an Additional
Member or Substitute Member.
13.3 ADMISSION. Each Additional Member shall have all the rights and
obligations of a Member holding the class of Units purchased by such Additional
Member as specified on SCHEDULE A. The admission of Additional Members shall not
be a cause for dissolution of the Company. Upon the admission of any Additional
Members pursuant to this Article XIII, SCHEDULE A hereto shall be appropriately
amended.
ARTICLE XIV
DISSOLUTION AND TERMINATION
14.1 DISSOLUTION. The Company shall be dissolved upon the occurrence of
any of the following events (a "Dissolution Event"):
(a) the favorable vote of a majority of the Board of
Directors; or
(b) the entry of a decree of judicial dissolution under the
Act.
14.2 EFFECT OF FILING OF CERTIFICATE OF CANCELLATION. The Company shall
cease to carry on its business, except insofar as may be necessary for the
winding up of its business, upon the occurrence of a final Dissolution Event,
but its separate existence shall continue until a Certificate of Cancellation
has been filed with the Secretary of State of Delaware or until a decree
dissolving the Company has been entered by a court of competent jurisdiction.
14.3 DISTRIBUTION OF COMPANY PROPERTY UPON DISSOLUTION. In settling
accounts after dissolution, the liabilities of the Company shall be entitled to
payment in the order of priority as provided by law in satisfaction of all
liabilities and obligations of the Company whether by payment or the
establishment of reasonable reserves therefor. The non-cash assets described on
SCHEDULE B hereto shall be returned to the Member initially contributing the
asset. The remaining Company Property shall be distributed to the Members in
accordance with their respective positive Capital Account balances.
32.
<PAGE>
14.4 WINDING UP. Except as provided by law, upon dissolution, each
Member shall look solely to the Company Property for the return of its Capital
Contribution. If the Company Property remaining after the payment or discharge
of the debts and liabilities of the Company is insufficient to return the
Capital Contribution of each Member, such Member shall have no recourse against
any other Member. The winding up of the affairs of the Company and the
distribution of the Company Property shall be conducted exclusively by the Board
of Directors, who subject to the terms of this Operating Agreement, are hereby
authorized to take all actions necessary to accomplish such distribution,
including without limitation, selling any Company Property the Board of
Directors deems necessary or appropriate to sell.
14.5 FILING OF CERTIFICATE OF CANCELLATION.
(a) When all debts, liabilities and obligations have been paid
and discharged or adequate provisions have been made therefor and all of the
remaining Company Property has been distributed to the Members, a Certificate of
Cancellation shall be executed and filed with the Delaware Secretary of State,
which certificate shall set forth the information required by the Act.
(b) Upon the acceptance of the Certificate of Cancellation,
the existence of the Company shall cease, except for the purpose of suits, other
proceedings and appropriate action as provided in the Act.
ARTICLE XV
INCORPORATION
15.1 INCORPORATION. Upon the affirmative vote of the Board pursuant to
Section 5.5(c) hereof, approving the decision to convert the Company into a Code
Subchapter C Corporation and without further consent of or action by the
Members, the Company shall convert from an LLC to a Code Subchapter C Delaware
corporation by whatever method the Board of Directors deems best.
ARTICLE XVI
CLASS B ADJUSTMENT
16.1 CLASS B ADJUSTMENT. Upon admission of any Outsourcing Member
(other than NYPH) during the Adjustment Period, NYPH shall receive additional
Class B Units (the "Class B Adjustment Units") in an amount necessary to
maintain the Interest of NYPH at 15%. Upon expiration of the Adjustment Period,
NYPH shall receive additional Class B Adjustment Units in an amount, if any,
necessary to increase NYPH's Interest as of the date of their issuance, but not
retroactively, to 19.9% less the sum of the Interests granted to Outsourcing
Members (other than NYPH) admitted during the Adjustment Period, and to reduce
the Class A Member's Interest to 80.1%. The Capital Account balances of each
Member immediately before the issuance of the Class B Adjustment Units shall be
the same immediately after the issuance of the Class B Adjustment Units.
33.
<PAGE>
PORTIONS HEREIN DENOTED WITH [**] HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE SEC UNDER A CONFIDENTIAL TREATMENT REQUEST
16.2 LIMITATION ON INTEREST OF OUTSOURCING MEMBER. If the Company
admits one or more Outsourcing Members (other than NYPH) during the Adjustment
Period, the Interests, if any, granted to such Outsourcing Members shall be
subject to the following limitations (unless otherwise approved by the Class B
Director): (i) the aggregate Interests granted to the Outsourcing Members (other
than NYPH) during the Adjustment Period shall not exceed [**] and (ii) the
Interest granted to any one Outsourcing Member shall not exceed the lesser of
(A) [**] and (B) a percentage equal to (x) the Estimated Contract Revenue
divided by (y) [**], with the quotient of (x) and (y) multiplied by (z) [**].
Each of the percentages referenced in this Article XVI shall be fully diluted
percentages calculated as of the end of the Adjustment Period.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1 NOTICES. Any notice, demand or communication required or permitted
to be given by any provision of this Operating Agreement shall be in writing and
shall be deemed effectively given or delivered upon receipt. Any such notice,
demand or communication may be given: (a) by personal delivery to the party to
be notified; (b) by confirmed telex, telegraph or facsimile; or (c) by mail or
courier. All communications shall be delivered to a Director, a Member or the
Company, as appropriate, to such Director's, such Member's or the Company's
address or facsimile number as such appears in the Company's records as of the
date hereof or to such other address or facsimile number as such Member, such
Director or the Company may designate by ten (10) days advance written notice to
the other parties hereto.
17.2 APPLICATION OF DELAWARE LAW. This Operating Agreement, and the
application or interpretation hereof, shall be governed exclusively by its terms
and by the laws of the State of Delaware (without giving effect to principles of
conflicts of laws).
17.3 WAIVER OF ACTION FOR PARTITION. Each Member irrevocably waives
during the term of the Company any right that it may have to maintain any action
for partition with respect to the property of the Company.
17.4 AMENDMENTS. Any amendment to this Operating Agreement may be
proposed to the Members by the Board of Directors or the Members holding at
least a majority of the outstanding Units entitled to vote. A vote on an
amendment to this Operating Agreement shall be taken within sixty (60) days
after notice thereof has been given to the Members unless such period is
otherwise extended by applicable laws, regulations, or agreement of the Members.
17.5 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
17.6 CONSTRUCTION. Whenever the singular number is used in this
Operating Agreement and when required by the context, the same shall include the
plural, and the masculine gender shall include the feminine and neuter genders
and vice versa.
34.
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17.7 HEADINGS. The headings in this Operating Agreement are inserted
for convenience only and are in no way intended to describe, interpret, define,
or limit the scope, extent or intent of this Operating Agreement or any
provision hereof.
17.8 WAIVERS. The failure of any party to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
Operating Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.
17.9 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided
by this Operating Agreement are cumulative, and the use of any one (1) right or
remedy by any party shall not preclude or waive the right to use any or all
other remedies. Such rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise.
17.10 SEVERABILITY. If any provision of this Operating Agreement or the
application thereof to any person or circumstance shall be invalid, illegal or
unenforceable to any extent, the remainder of this Operating Agreement and the
application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.
17.11 HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the parties hereto and, to the extent permitted by this
Operating Agreement, their respective heirs, legal representatives, successors
and assigns.
17.12 CREDITORS. None of the provisions of this Operating Agreement
shall be for the benefit of or enforceable by any creditor of the Company.
17.13 COUNTERPARTS. This Operating Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one (1) and the same instrument.
17.14 NO THIRD PARTY BENEFICIARIES. It is understood and agreed among
the parties that this Operating Agreement and the covenants made herein are made
expressly and solely for the benefit of the parties hereto, and that no other
Person, other than an Indemnitee under Article VIII hereof (but only in respect
of the rights under such Article VIII), shall be entitled or be deemed to be
entitled to any benefits or rights hereunder, nor be authorized or entitled to
enforce any rights, claims or remedies hereunder or by reason hereof.
35.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this OPERATING
AGREEMENT to be duly executed by their respective authorized officers as of the
day and year first above written.
CLASS A MEMBER:
FCG MANAGEMENT HOLDINGS, INC.
By: /s/ Luther J. Nussbaum
------------------------------
Name: Luther J. Nussbaum
------------------------------
Title: Chief Executive Officer
------------------------------
CLASS B MEMBER:
NEW YORK AND PRESBYTERIAN HOSPITAL
By: /s/ Louis F. Reuter IV
------------------------------
Name: Louis F. Reuter IV
------------------------------
Title: Executive Vice President
------------------------------
36.
<PAGE>
EXHIBIT 99.5 For more information contact:
Luther J. Nussbaum
Chairman and CEO
First Consulting Group
562-624-5220
[email protected]
Steven Heck
President
First Consulting Group
972-869-9977
FOR IMMEDIATE RELEASE [email protected]
Louis F. Reuter IV
Executive Vice President
Administration
NewYork-Presbyterian Hospital
212-305-0278
[email protected]
FIRST CONSULTING GROUP AND NEWYORK-PRESBYTERIAN HOSPITAL ANNOUNCE
$228 MILLION OUTSOURCING AGREEMENT
CREATES FCG MANAGEMENT SERVICES, LLC, A NEW UNIT SERVING THE
GROWING DEMAND FOR HEALTHCARE INFORMATION TECHNOLOGY (IT) OUTSOURCING.
NEW YORK CITY, New York. (November 9, 1999) - First Consulting Group,
Inc. (NASDAQ: FCGI) and NewYork-Presbyterian Hospital (NYPH), today announced
the signing of an estimated $228 million long term IT outsourcing agreement. For
the seven year term of the agreement, FCG will manage NYPH's information
technology and telecommunications functions. The parties said that the
foundation of the contract is a shared trust and a shared understanding that the
future of
<PAGE>
First Consulting Group
NYPH
Page 2 of 5
healthcare technology lies in the skilled and enlightened management of
information and people. Intellectual capital, experience, and access to skilled
resources are the future currency of information management. FCG brings more
than 1,700 people, a clear IT value proposition, experience from hundreds of
clients and thousands of engagements and ever increasing economic leverage. NYPH
brings a world class health delivery system, a talented IT organization, and a
shared view of the future.
Under the Agreement, the newly formed FCG Management Services, LLC,
will hire 432 of NYPH's current information services staff and assume
responsibility for managing NYPH's information technology and telecommunications
functions. The contract is estimated to be worth $39 million in the first year
of the agreement.
Louis F. Reuter, IV, NYPH executive vice president administration,
commented, "Despite revenue pressures which all hospital and academic programs
face, we must continually improve patient care. FCG has exceptional depth and
breadth of talent and experience in crafting IT solutions with high value and
high return that solve healthcare information problems. By having an external,
highly experienced presence when IT investment decisions are made, we expect to
dramatically impact the value proposition of IT."
"We believe this is a landmark information systems agreement in the
field of not-for-profit, academic healthcare", said Steve Heck, president of
FCG. "NewYork-Presbyterian Hospital has one of the finest Information System
departments in the industry and thus is an ideal partner with whom to build a
new model of information management for the healthcare industry.
<PAGE>
First Consulting Group
NYPH
Page 3 of 5
Together we will use leading edge technology including e-Health coupled with
pragmatic decision-making about IT investments and deployment."
Indicating the importance of outsourcing to FCG's future plans, FCG
Management Services will be headed by FCG president Steven Heck. Guy Scalzi,
formerly NYPH's chief information officer, will manage the Information Services
unit as a vice president in FCG Management Services. Mr. Scalzi will work
closely with Mr. Reuter and other members of the newly created NYPH Office of
the CIO, which will provide leadership and direction for the Information
Services operation.
In addition, FCG intends to contribute its existing healthcare IT
outsourcing contracts to FCG Management Services and seek future healthcare IT
outsourcing business through the new company. FCG Management Services will
market IT outsourcing services to integrated delivery networks, hospitals,
clinics and academic medical centers in the United States and Canada. Under the
terms of the agreement, FCG and NYPH will form FCG Management Services, each
initially owning 85% and 15%, respectively.
Commenting on the agreement, FCG CEO Luther Nussbaum said, "As cost and
efficiency pressures continue to change the healthcare IT landscape, we've
identified outsourcing as a service that capitalizes on our strengths in
healthcare process and IT. We are delighted to enter into this relationship with
NYPH, one of the most acclaimed healthcare delivery systems in the world."
Working in close collaboration with physician leaders and clinical informatics
professionals from Columbia and Weill Cornell medical schools, NYPH has long
been
<PAGE>
First Consulting Group
NYPH
Page 4 of 5
recognized as a leader in teaching, medical research and clinical computing.
"This emerging business line is directly addressing the industry's need to gain
more value from IT investments and operations," continued Nussbaum. "Health
related organizations must improve their IT operations to support their key
objectives of improved quality, service, and reduced cost. As a result we are
beginning to see an acceleration of interest in IT outsourcing and expect it to
represent a rapidly increasing percentage of our revenues," concluded Nussbaum.
Guy Scalzi, noted, "NYPH has spent the last year carefully analyzing
various outsourcing options, focusing on organizations that offered the most
relevant skills. FCG was chosen because it understands that the new outsourcing
model is all about people. Skill aggregation and the effective deployment of
resources will offer leverage and economics that could not be obtained
otherwise. The parties jointly developed an approach to combine the best IT
resources to carry out the hospital's mission of patient care, teaching and
research," he concluded.
ABOUT THE COMPANIES:
FCG provides consulting, integration and management services to
healthcare, pharmaceutical and other life sciences organizations in North
America and Europe. The firm's services are designed to increase its clients'
operations effectiveness, resulting in reduced costs, improved customer service,
enhanced quality of patient care and the more rapid introduction of new
pharmaceutical compounds. More information about FCG is available through the
FCG World Wide Web site at www.fcg.com, or by calling the toll free number
800-345-0957.
<PAGE>
First Consulting Group
NYPH
Page 5 of 5
NewYork-Presbyterian Hospital - created from the merger between The New
York Hospital and The Presbyterian Hospital - provides state-of-the-art
inpatient, ambulatory, and preventive care in all areas of medicine at five
major centers; New York Weill Cornell Center, Columbia Presbyterian Center,
Babies & Children's Hospital, The Allen Pavilion, and the Westchester Division.
One of the largest and most comprehensive healthcare institutions in the world,
the Hospital is committed to excellence in patient care, research, education and
community service. NewYork-Presbyterian Hospital's full-service Network - which
includes acute-care and community hospitals, long-term care facilities,
home-health agencies, ambulatory sites and specialty institutions - provides
high-quality, cost-effective, and conveniently accessible care for communities
throughout the tri-state metropolitan region. The Hospital has academic
affiliations with two of the country's leading medical colleges; the Joan and
Sanford Weill Medical College of Cornell University and Columbia University
College of Physicians & Surgeons.
This release contains forward looking statements including estimates of
the future value and duration of the outsourcing agreement between FCG and NYPH
and the potential effects of such agreement on FCG and NYPH. These forward
looking statements involve known and unknown risks which may cause FCG's actual
results and performance to be materially different from the future results and
performance stated or implied by the forward looking statements. Some of the
risks that should be considered include whether the outsourcing agreement may be
amended, modified or terminated early by the parties, the potential effect of
the year 2000 issue on computer software applications and service providers, how
FCG manages growth and integration of acquired businesses and personnel, and
other factors referenced in the Company's most recent Forms 10-K, 10-Q and other
periodic reports filed with the Securities and Exchange Commission.
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